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Speaker 1: All right, Emily grad Fai, thank you so much for
Speaker 1: giving getting us up to date on those markets. Let's
Speaker 1: talk about China here, Secretary Yellen there, four day visit.
Speaker 1: Let's get the latest reporting. We've got a couple of
Speaker 1: smart voices here, Eddie Vanderwaldt, Deputy Managing editor of the
Speaker 1: Market's Live team with Bloomberg News, and Chris Condon, US
Speaker 1: Treasury reporter with Bloomberg News. Hey, Chris, I know you
Speaker 1: joined Secretary Yellen on the trip to China.
Speaker 3: What's the takeaway from from ground zero there that you have?
Speaker 4: Well, I apologize quick correction there, our colleague Victoria Dendron.
Speaker 4: It was actually on the trip.
Speaker 1: Oh.
Speaker 4: I got to travel with her on her next trip,
Speaker 4: but very good. But I've obviously been keeping close tabs
Speaker 4: on this trip. It was I have to say first
Speaker 4: and foremost, there were low expectations in terms of what
Speaker 4: they call deliverables from this trip. The main goal was
Speaker 4: to kind of stabilize the relationship and how the two
Speaker 4: countries deal with each other on economic issues and re
Speaker 4: establish regular lines of communication. You know, if you go
Speaker 4: back before the Trump administration, US and China kept a
Speaker 4: sort of pace of regular phone and in person meetings
Speaker 4: with high level Chinese staffers on economic issues, and that
Speaker 4: really fell apart due first of all to the more
Speaker 4: confrontational tone of the Trump administration and then second just
Speaker 4: because of COVID, and it's taken a long time to
Speaker 4: re establish regular ties, and Yellen has been personally really
Speaker 4: eager to get those reconnected, and I think on that front,
Speaker 4: it was a pretty successful trip. From what I understand,
Speaker 4: she and her staff were very pleased with the way
Speaker 4: meetings went. They were a bit more informal as time
Speaker 4: went on. They weren't as scripted as they thought they
Speaker 4: might be, so that was a good thing, and she
Speaker 4: does expect from here her staff will have that kind
Speaker 4: of regular pace of contexts re established where high level
Speaker 4: people can get on the phone with each other and
Speaker 4: discuss concerns or just hit regular agenda items and discuss
Speaker 4: them and that's a pretty healthy set of steps.
Speaker 5: All right, Well, Eddie, I want to bring you in
Speaker 5: and Eddie rementioning, you are our debuty managing editor of
Speaker 5: the Markets Live team have all of the best quotes
Speaker 5: that I steal throughout the day to say on air
Speaker 5: to sound smart. So thank you for that, Eddie. But
Speaker 5: I want to talk to you about some of this
Speaker 5: soft economic data that we got out of China, looking
Speaker 5: like that stimulus urgency is just increasing for the mainland there, Eddie,
Speaker 5: What is that sort of doing in terms of the
Speaker 5: impact on US markets this week?
Speaker 6: Yeah, Look, these were really really soft numbers that we
Speaker 6: saw from China. You know, globally, it's quite surprising to see,
Speaker 6: you know, with inflation around the world running so much
Speaker 6: above expectations and so much higher than most central bankers
Speaker 6: would like to see it. In China, they had zero inflation,
Speaker 6: literally nothing over the last year. Number came in a
Speaker 6: zero percent flat, core inflation flowed to zero point four percent,
Speaker 6: and producer prices were in retreat. Now, yes, I mean
Speaker 6: a lot of central bankers would probably look at that
Speaker 6: with envy, but it shows just how difficult the situation
Speaker 6: in China is and just how much, you know, there
Speaker 6: is maybe a need to start the economy because remember,
Speaker 6: they only recently came out of lockdown, and it was
Speaker 6: when the rest of the world came out of lockdown
Speaker 6: that we had that really strong demand that fired inflation
Speaker 6: across the globe. But we're just not seeing that and
Speaker 6: that's feeding through the market. It's sort of certainly adding
Speaker 6: a little bit of a headwind to risk assets.
Speaker 1: More broadly, Hey, Chris, you know how important is it?
Speaker 1: I mean, I guess you know, covering the Treasury there,
Speaker 1: Secretary of yell and being in China is certainly important.
Speaker 1: Talk to us about how it kind of works the
Speaker 1: under the you know, when you get down into the
Speaker 1: makings of the sausage. Is there that much interaction between
Speaker 1: members of the staff the Treasury and counterparts in China.
Speaker 1: Is this something that really needs to be nurtured.
Speaker 4: Well, it certainly does need to be nurtured. It's something,
Speaker 4: as I said, that that deteriorated over the last few
Speaker 4: years and is expected to restart now. And this can
Speaker 4: have a couple of different benefits. First of all, you know,
Speaker 4: Eddie was just talking about what we know about the
Speaker 4: Chinese economy. Well, the information coming out of China is
Speaker 4: not always believable or reliable, and those types of contacts
Speaker 4: help the Treasury at least gather more information, gives them
Speaker 4: a better read about what Chinese officials think is going
Speaker 4: on in their own economy. In fact, from these meetings,
Speaker 4: one thing that was taken away is that Chinese officials
Speaker 4: are concerned about growth and certain pockets of bubbles in
Speaker 4: their economy, but not overly so they feel they have
Speaker 4: it under control. So that's the kind of insider understanding
Speaker 4: that Treasury is always looking for more of. And second
Speaker 4: of all, it's beneficial in the sense that it might
Speaker 4: help prevent certain contentious issues from escalating in a sort
Speaker 4: of retaliatory cycle. It gives each side a chance to
Speaker 4: kind of communicate, intervene, talk things over, and prevent perhaps
Speaker 4: a more severe escalation of issues that begin as small
Speaker 4: economic concerns and could escalate.
Speaker 5: Well, Jennet Yalen kind of echoed the idea that it
Speaker 5: could escalate, sa that she wouldn't rule out the threat
Speaker 5: of a US recession, and it's appropriate and normal for
Speaker 5: growth to moderate as inflation remains too high, So Eddie,
Speaker 5: given that that kind of seems a little bit hotish,
Speaker 5: and we're heading into this next FED meeting here likely
Speaker 5: to see another hike. To what extent is that move
Speaker 5: from the US potentially going to impact China.
Speaker 6: Yeah, Look, there's definitely divergence of monetary policy around the globe.
Speaker 6: Right when we came out of COVID, everybody was in
Speaker 6: the same situation. You know, growth was very strong and
Speaker 6: we had fast inflation, and now we're starting to see
Speaker 6: real divergence. The US is kind of in the middle
Speaker 6: of the road. It's inflation is starting to come down,
Speaker 6: but it's not like it's not where it would like
Speaker 6: to see it. In China, you know, the numbers are
Speaker 6: much lower now. The I think there's a disconnect here
Speaker 6: because in the US we're starting to see wages and
Speaker 6: the services sick to driving that, whereas in China it's
Speaker 6: very much the manufacturies that is at fault. And I
Speaker 6: think as long as China's you know, as long as
Speaker 6: it's services sectors stay stay strong, then I think they
Speaker 6: will be they will be shy of providing further stimulus.
Speaker 6: But I think there is definitely a f two between
Speaker 6: the two economies for sure.
Speaker 3: All right, Eddie, thank you so much for joining us.
Speaker 1: Eddie Vanderwaldt, Deputy Managing editor of the Market's Live team,
Speaker 1: joining us from London, and Chris Condon, your treasury reporter
Speaker 1: with Bloomberg News.
Speaker 7: You're listening to the team. Ken's are live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot com,
Speaker 7: the iHeartRadio app and the Bloomberg Business APPM or listen
Speaker 7: on demand wherever you get your podcast.
Speaker 1: All right, nobody covers the Fed, I think any better
Speaker 1: or any more intensely than Bloomberg News. But one thing
Speaker 1: that's fallen through the cracks from just for me as
Speaker 1: a reader, is like.
Speaker 8: What's going on?
Speaker 3: Quantitative tightening?
Speaker 1: The QT thing? Isn't Is it still a thing? I
Speaker 1: don't know, but I know somebody does know this stuff.
Speaker 1: It's Lis McCormick's. She's a chief correspondent Macro Markets with
Speaker 1: Bloomberg News Check.
Speaker 3: She follows this stuff.
Speaker 1: I don't know why, but she joined us actually here
Speaker 1: in studio. Liz talk to me about and talk to
Speaker 1: us about quantitative tightening? Is the FED still doing it?
Speaker 1: How are they doing it? Is it important? What's it
Speaker 1: mean for the economy and tell us how they kind
Speaker 1: of screwed up maybe a couple of years ago.
Speaker 9: Yeah, I'm going to tell you all that. But fun fact,
Speaker 9: Liz Capo McCormick's brother used to work at Bloomberg Sports
Speaker 9: years ago.
Speaker 1: Later.
Speaker 9: Yeah, but yeah, QT is still we kind of got
Speaker 9: out off the limelight with that, but it's still going on.
Speaker 9: In fact, in full force. It's going to be about
Speaker 9: a trillion a year that'll come off the Fed's balance sheet.
Speaker 9: And it was so interesting. I mean, maybe I'm just
Speaker 9: a nerd, but listening to Chairman Palell speak on Capitol
Speaker 9: Hill recently and he you know, politicians really don't like
Speaker 9: all the debt on the Fed's balance sheet. I think
Speaker 9: they feel like it takes too much, you know, sway
Speaker 9: in the market. And they were kind of saying to him, hey,
Speaker 9: you're going to get the balance sheet down, and Chairman Pale,
Speaker 9: like you're alluding to, Paul, said, we are, but we
Speaker 9: were going to be careful. Lat you know, in twenty
Speaker 9: nineteen kind of we didn't see it coming that there
Speaker 9: was scarcity in the banking system for reserves, which created problem.
Speaker 1: So the FED had to.
Speaker 9: Quickly reverse course, remember the repo blow up and add reserves,
Speaker 9: So they're they're doing their job. They want to get
Speaker 9: the balance sheet down, but they're being very careful to
Speaker 9: not make reserves too scarce in the system. And it's
Speaker 9: not so easy, right, So I think Pal, I mean,
Speaker 9: I give them credit, was saying like, hey, we learned
Speaker 9: from the last time. We're trying to avoid it. But yeah,
Speaker 9: it's going on in the background. It's the second tool
Speaker 9: of their tightening.
Speaker 5: So in terms of that being the second tool of
Speaker 5: their tightening, do you think that the FED is secretly
Speaker 5: a little bit excited when bad eco news comes out
Speaker 5: and they have an excuse to raise rates again because
Speaker 5: it helps them with their balance sheet if rates are higher.
Speaker 1: Yeah, that's funny, right.
Speaker 9: They would never say that, right, but I mean they would, like,
Speaker 9: you know, on everything to when you kind of go
Speaker 9: one way, you want to go back the other way
Speaker 9: so you have some ammo for the next crisis.
Speaker 1: Right.
Speaker 5: So it's it's tough.
Speaker 9: If you start, you know, every new crisis with an
Speaker 9: even bigger balance sheet, even though you've done some quantitative
Speaker 9: tightening bringing it down. So I think the FED would
Speaker 9: really love, like Janet Yellen, I think was famous for
Speaker 9: saying we want QT to run in the background like
Speaker 9: paint drying.
Speaker 5: Which doesn't always work.
Speaker 9: But I really do think they I mean, they're in
Speaker 9: a new regime. Well, they'll never have the uber small
Speaker 9: balance sheet though, and we all saw years and decades ago.
Speaker 9: But yeah, they would like to get it down a
Speaker 9: little maddie, right, So they if we god willing, we don't.
Speaker 9: But if we go in another crisis, they have the
Speaker 9: AMMO with the ability to cut rates and then jack
Speaker 9: up the balance sheet again. So it's a little bit
Speaker 9: of a tricky, tricky wicket I call it for them.
Speaker 1: Yeah, help, does a central bank actually do quantitative tightening?
Speaker 3: How does it work?
Speaker 1: Yeah?
Speaker 9: So you know the central bank like, it's easy. When
Speaker 9: we know they're buying kuy, they just go in there
Speaker 9: and buy, right. But the quantitative tightening, let's talk about
Speaker 9: the treasury side. So what happens is they have treasury
Speaker 9: debt that mature, Say they haveure debt maturing middle of
Speaker 9: this month. What they'll do is say, hey, we're gonna
Speaker 9: let that mature. Normally, if they're leaving their balance sheet stable,
Speaker 9: then they buy the same amount that matures, and now
Speaker 9: they're saying, hey, we're gonna let x billion mature and
Speaker 9: not buy more, So that kind of whittles down how
Speaker 9: much treasuries they have on their balance sheet. The mortgages
Speaker 9: are a little more convoluted because it's depends on refi
Speaker 9: rates and things like that, but that's what they do,
Speaker 9: kind of not keep rolling into new debt.
Speaker 5: And what does the impact of that look like in
Speaker 5: terms of overall liquidity.
Speaker 9: Yeah, so it's interesting because QI the buying was really
Speaker 9: and is used to kind of help lower long rates.
Speaker 9: It's felt to help juice the housing market and things,
Speaker 9: so QT in essent should go the other way. It's
Speaker 9: a little less clear, but what it does on the
Speaker 9: short end, like we're talking about in this story, is
Speaker 9: what it does is you know, kind of the way
Speaker 9: all the mechanics work on the Fed's balance sheet is
Speaker 9: if they let the asset side roll down, then a
Speaker 9: liability has to roll down. So that's either in bank
Speaker 9: reserves or this facility. They have reverse repos where money
Speaker 9: market funds can put money with the FED. So that's
Speaker 9: where manny, if we get too tight, then that liquidity
Speaker 9: is sucking out of the short end, and that's kind
Speaker 9: of what turns. You know the financial system, right, you know,
Speaker 9: banks having enough liquidity to do their operations. So that's
Speaker 9: where you know, on the exit side of QT that
Speaker 9: you have to worry about liquidity in the repo market
Speaker 9: and things like that.
Speaker 1: So, Liz, how about let's just assume I'm on the
Speaker 1: FED and at the end of this month, I argue
Speaker 1: to my fellow folks on the Fed, Hey, we raised
Speaker 1: rates five one hundred basis points.
Speaker 3: Inflation's coming down. We just saw a three percent headline print.
Speaker 3: We're done.
Speaker 1: Let's just sit on the sidelines. Why don't we have
Speaker 1: to do anything? It's actually working. Why don't we just
Speaker 1: do that? What would happen if I.
Speaker 3: Made that pitch?
Speaker 9: Well, on the rate side, I think that's what they're
Speaker 9: going to eventually get to. Let's just say they hike
Speaker 9: in July. You know, I can't remember if that was
Speaker 9: in your scenario.
Speaker 3: Well, no, my scenariy was don't do anything.
Speaker 9: We're done, well, right, So okay, so say they don't,
Speaker 9: which is possible right now. That's the one tool of
Speaker 9: their policy, the rates. So in that scenario, what the
Speaker 9: FED has been saying is like QT is going to
Speaker 9: keep going right where it gets tricky is the FED
Speaker 9: has always said we don't I'm sorry, I'm telling you
Speaker 9: about my hands. We don't like our tools to be
Speaker 9: moving in opposite direction. So say which we're far away
Speaker 9: from that? The FED started lowering its benchmark rate. Then
Speaker 9: if QT is going on, it's like one hand of
Speaker 9: the FED is easing and the other is tightening. And
Speaker 9: most people say the FED won't want to do that,
Speaker 9: Like the folks at TD who see easing later this year, say,
Speaker 9: the Fed's going to stop the QT because it doesn't
Speaker 9: make sense to be going in opposite directions. But there's
Speaker 9: a lot of variables, so we don't know. So it's
Speaker 9: going to be interesting to see what happens in July.
Speaker 9: I'm already thinking about August and Jackson Hole. What guidance
Speaker 9: dos Sherman Pal give us, h Let's go.
Speaker 1: Of course you should go.
Speaker 3: I'll put a ticket in for that. See how that works.
Speaker 5: What are you anticipating that in terms of FED moves,
Speaker 5: It feels like July is a definite. Do you have
Speaker 5: a take on September?
Speaker 8: Yeah?
Speaker 9: I think that's the wildcard. Now we're already kind of
Speaker 9: like looking through into September and there's a mix. There's
Speaker 9: a lot of economists on Wall Street who say one
Speaker 9: more July and we're done. Then there's others saying, hey,
Speaker 9: the Fed has more to go. You know, we're not
Speaker 9: seeing policy really be that restricted because look at the
Speaker 9: stock market, look at the housing market. So some are saying,
Speaker 9: you know, terminal rate has to be even higher, maybe
Speaker 9: over sixty percent. So I think I was talking to
Speaker 9: you know, the folks around my desk today and we
Speaker 9: were saying it really it sounds boring, but it's going
Speaker 9: to be data dependent. Like if it's like you were saying,
Speaker 9: the data if we start getting another strong jobs, if
Speaker 9: CPI misses to the upside, we have a lot of
Speaker 9: data between now and September, the FED kind of has
Speaker 9: to do if inflation is not coming down, they're going
Speaker 9: to have to do it. So I feel like, oh
Speaker 9: my god, well we ever get a.
Speaker 5: Break, it's not going to be calm right, you know.
Speaker 1: So again it seems like we were just getting some
Speaker 1: data passed around the newsroom here talking about used car
Speaker 1: prices coming down. I mean, there's so many data points
Speaker 1: that you can look at here, But does a FED
Speaker 1: feel like in order from a credibility perspective, they need
Speaker 1: to hike one more time?
Speaker 3: Is that kind of where we are?
Speaker 9: Well? You know, an analysis on Wall Street goes that
Speaker 9: the FED doesn't like to surprise the market, and when
Speaker 9: the market, like the futures in the short term overnight
Speaker 9: interest rate swaps are pricing in like a near certainty
Speaker 9: that they hike in July, FED doesn't like to surprise.
Speaker 9: So I think, I don't know if it's credibility, but
Speaker 9: I don't think they want to upend the market. We're
Speaker 9: so close to that meeting, right, I Mean, I could
Speaker 9: be wrong, but I suspect that they kind of have
Speaker 9: it priced in already. It's almost like a done deal. Look,
Speaker 9: let's just do it, right, yep.
Speaker 1: And if you look at the warp function which Liz
Speaker 1: is referring to, it's almost a ninety percent expectation that
Speaker 1: rates will be hiked in July, so to the extent
Speaker 1: you don't want to upset the apple cart. There we go,
Speaker 1: all right, Liz McCormick, thanks so much for joining us
Speaker 1: here in our Bloomberg Interactive Broker studio.
Speaker 3: Always good to see it in the office.
Speaker 1: Here, Lis McCormick, Chief corresponding covering the global macro markets
Speaker 1: for Bloomberg News again. So we'll have some economic data
Speaker 1: this week, some inflation data this week CPI, so be
Speaker 1: really interesting. PPI as well get a good read on inflation,
Speaker 1: which the Fed will certainly need prior to meeting at
Speaker 1: the end of this month, because we'll get an announcement
Speaker 1: on July the twenty sixth.
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Speaker 1: All right, we're just talking about threads one hundred million users.
Speaker 3: That gets my attention.
Speaker 1: Let's see what it means for Meta, Let's see what
Speaker 1: it means for Twitter. Let's see what it means for
Speaker 1: just people's spare time, spending more time on social I'm
Speaker 1: gonna blame Man Deep Sing for all of that stuff.
Speaker 1: He covers the technology for Bloomberg Intelligence. He joins us
Speaker 1: here in our Bloomberg Interactive Broker Studio. I mean Zuck
Speaker 1: comes on and says, geos more than our expectations. One
Speaker 1: hundred million signups for threads. Is that number men anything
Speaker 1: to you?
Speaker 8: It does? I mean, look, this is the fastest growing
Speaker 8: app ever. It surpassed chat GPT, which was the craze
Speaker 8: so far. So I think clearly they have a great momentum.
Speaker 8: And what it shows is the creators are seeking an
Speaker 8: alternative here. I mean that is really the crux of it.
Speaker 8: That everyone wants something that is similar to Twitter where
Speaker 8: they can build their network, and they think this is
Speaker 8: a viable platform. Blue Sky, Macedon and the others didn't
Speaker 8: take off because they didn't have that scale.
Speaker 5: Well what do you make of the scale? And it's
Speaker 5: so funny, Mandy, because on Friday we talked about how
Speaker 5: over the weekend we might get that surpassing of chat
Speaker 5: gpt in terms of signups, and I think it happened
Speaker 5: like right after you got off the air with us.
Speaker 5: So you are a leading indicator when it comes to
Speaker 5: the metastory. But why are they able to convert active
Speaker 5: users so quickly?
Speaker 8: I mean, look, it's social media. It's like you have
Speaker 8: those network effects, and in the case of meta, they
Speaker 8: have the three billion users across their family of apps.
Speaker 8: Right they can promote stuff on their app. Look at
Speaker 8: how TikTok grew back.
Speaker 3: In the day.
Speaker 8: They were one of the heaviest advertisers on Facebook on Instagram.
Speaker 8: In this case, I mean, Meta owns all these properties,
Speaker 8: so they can promote their Threads app. And right now
Speaker 8: I feel they have gone with a very niche focused approach,
Speaker 8: text based format. They will keep layering more photos, more
Speaker 8: videos on Threads over time, but what they want to
Speaker 8: make sure is there's a clear value proposition for Threads
Speaker 8: and it doesn't end up cannibalizing Instagram or Blue App.
Speaker 5: Well that's a great point. Do you think that Threads
Speaker 5: is going to be a legitimate competitor to a TikTok?
Speaker 8: I think so over time, I can see Threads having
Speaker 8: a messaging tab. So think of all the things that
Speaker 8: Meta does of features. They're using a very narrow subset
Speaker 8: of that for Threads because they want it to rival Twitter.
Speaker 8: Get those users on board, and then iterate and add
Speaker 8: more features to drive engagement. And look, at the end
Speaker 8: of the day, it's about average time spent on the platform.
Speaker 8: So compare that Instagram average time spent it's around like
Speaker 8: seventy to eighty minutes per daily active user. Twitter is
Speaker 8: around twenty five minutes, and they try to pivot to
Speaker 8: subscriptions too early. I mean, this is still an adriven model,
Speaker 8: and in an adriven model, it's all about engagement and
Speaker 8: time spent on the platform.
Speaker 3: I'm not buying it? Are you on? Are you're a threader?
Speaker 8: Wait?
Speaker 5: Why are you not buying it?
Speaker 1: I don't know, I'm just you know, how many these
Speaker 1: do we need? But all right, let's go to the
Speaker 1: impact on Twitter. Is this a zero sum game? If
Speaker 1: if they sign up one hundred million people to threads,
Speaker 1: do you think a lot of them came from Twitter?
Speaker 3: Or do you think it's going to be a zero
Speaker 3: sum game here?
Speaker 8: Absolutely? I mean again, I go back to that three
Speaker 8: billion daily active users across the family of apps, that
Speaker 8: includes all the Twitter users and for the one hundred
Speaker 8: million that they have signed up, Remember, they haven't launched
Speaker 8: in Europe, so it's right. Once you launch in Europe
Speaker 8: and they'll figure out a way to work with the
Speaker 8: regulators they have the sign ups. In the end, it's
Speaker 8: always about engagement. That's what TikTok got it right, and
Speaker 8: That's why Facebook had to play catch up once they
Speaker 8: saw the viral adoption of TikTok. In this case, they
Speaker 8: have the sign ups, can they keep up the engagement?
Speaker 8: And over there the algorithm, the content recommendation algorithm, matters
Speaker 8: a great deal because what Twitter did wrong was they
Speaker 8: screwed up the algorithm. Right now, if I go on
Speaker 8: my home feed, I don't see any of the people
Speaker 8: I follow. I see feeds from people who are paying
Speaker 8: Twitter eight dollars a month. That's not what I want
Speaker 8: to see.
Speaker 5: And that's very random content, Like I'm only on Twitter
Speaker 5: for eco and finance news, and then I just see
Speaker 5: completely random tweets constantly. So threads the capability to get
Speaker 5: that algorithm play back in and also potentially get advertisers
Speaker 5: in who were spooked by Elon Musk.
Speaker 3: Yeah, it's pretty eirz.
Speaker 1: So when are they going to start putting as madisine suggesting?
Speaker 1: What do they can start loading ads on there?
Speaker 8: I hope they don't do it this year. You really
Speaker 8: need the engagement going. Until the engagement hits like twenty
Speaker 8: five thirty minutes are day per daily active users, I
Speaker 8: mean it would be I think two premature to layer
Speaker 8: ads and I really hope they don't do that.
Speaker 10: So what else is this?
Speaker 1: I mean, the meta story is up at conjillion one
Speaker 1: hundred and forty percent this year basically on cost cuts.
Speaker 1: I hate to ask what's next? But what's next here?
Speaker 1: I mean I'm looking at the stock at two hundred
Speaker 1: ninety bucks. The all time high was back in about
Speaker 1: a year two years ago in twenty twenty one at
Speaker 1: three hundred.
Speaker 3: And eighty bucks. What's the bull case to get us
Speaker 3: back there?
Speaker 8: Well, so think of why people became negative on meta
Speaker 8: it was because the blue app was losing engagement. They
Speaker 8: had to find the next growd driver for engagement. They
Speaker 8: thought Meta Worse was the one. Obviously that didn't work out.
Speaker 8: Now they have found something that can add to the engagement.
Speaker 1: So where are we on the metaverse discussion? I think
Speaker 1: that's a side story really that was going to change
Speaker 1: the world.
Speaker 8: And I mean they still are selling hardware, but in
Speaker 8: terms of engagement, they're not getting engagement on the Meta
Speaker 8: Worse app that they have created. So engagement is coming
Speaker 8: from threads or what they're doing on Instagram.
Speaker 5: Are we going to start to see a roll off
Speaker 5: in threads users? As the parents get on there. That
Speaker 5: was one of the viral threads posts over the weekend
Speaker 5: that the parents are starting to come and therefore it's
Speaker 5: not going to be cool in the next week.
Speaker 8: I think ultimately it comes down to future features and algorithms.
Speaker 8: Look how engaging the algorithm is in terms of the
Speaker 8: content you're seeing, That to me is the key whether
Speaker 8: or not you know your parents are there or your
Speaker 8: relatives are there.
Speaker 5: That second, the demographic is not consideration for you when
Speaker 5: it comes to the success of the platform, because that's
Speaker 5: part of what makes TikTok so great is people feel
Speaker 5: like they can really be themselves on there because their
Speaker 5: parents aren't on there yet, which I'm using as a
Speaker 5: catch all phrase for like the people who would catch you.
Speaker 8: What it does is it makes the other platforms vulnertable.
Speaker 8: Why can't Meta come up with a Pinterest.
Speaker 5: Copycat now right right right?
Speaker 8: So it just opens a lot of doors in terms
Speaker 8: of what the mode is for smaller platforms. I mean, Google,
Speaker 8: I think will come up with something. In terms of
Speaker 8: social media. They have to. They have, you know, over
Speaker 8: a billion, two billion daily active users across the family
Speaker 8: of apps. They don't have a social media app but
Speaker 8: when you look at Google and you know maps and
Speaker 8: all the things they have, they probably should think of
Speaker 8: coming up with something that can rival not Twitter, but
Speaker 8: maybe Pinterest visual search. Why can't they that right?
Speaker 5: And with maps that could be a cool.
Speaker 3: Men, deep Seek, thanks so much for joining us.
Speaker 1: Man Deep Seeing, he's a senior technology channelst for Bloomberg Intelligence.
Speaker 1: We pre him coming into the Bloomberg Interactive Broker Studio.
Speaker 7: You're listening to the team Ken's are live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com,
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Speaker 7: on demand wherever you get your podcasts.
Speaker 1: Well, one of the bigger questions I think for global
Speaker 1: economics is what's the outlook for China both as a
Speaker 1: consumer and as a supplier. You got to get that right,
Speaker 1: and there's a lot of challenging data points coming out
Speaker 1: from China, so we want to kind of get the
Speaker 1: latest on that. Hans Dal joins us. He's the CEO
Speaker 1: of Mitchell Madison Group. He's done a bunch in his career,
Speaker 1: but he went to business school at one of my
Speaker 1: favorite business schools, that's the Tuch School of Business at Dartmouth.
Speaker 1: A lot of really smart people that I know went
Speaker 1: to talk.
Speaker 3: And here's the thing about TUCH school.
Speaker 1: They are by far the most loyal alumni anywhere. I'm
Speaker 1: talking well, more than HBS and more than Duke. And
Speaker 1: we don't know how they do it. Hans, Why are
Speaker 1: you guys so loyal to Tuck.
Speaker 10: I think it's the size of the class.
Speaker 1: In the cold weather, you guys have nothing else to do,
Speaker 1: but you might as well become.
Speaker 3: Friendly, right exactly. Yeah, it's great.
Speaker 1: Where you're gonna go and hand over in New Hampshire,
Speaker 1: you might as well stay together.
Speaker 3: Hans.
Speaker 1: Talk to us about China here. Do you have a
Speaker 1: view of what's going on there?
Speaker 3: How?
Speaker 1: How how weak is that economy? Is fiscal stimulus the answer?
Speaker 3: Where are we there?
Speaker 10: I think it's pretty weak. I think it's weaker than
Speaker 10: anybody thinks. It's funny you mentioned Tacket, you know, as
Speaker 10: I was sitting there in the nineties. Uh, you know,
Speaker 10: the ball telling us about the uniqueness of the Japanese
Speaker 10: business model and how that's going to change everything, and
Speaker 10: it didn't happen. Right at the same time, you know,
Speaker 10: all this talk about you know, the government directed economy
Speaker 10: koretsu meti and now it's a Belton road in China Rea. Right,
Speaker 10: there's a lot of parallels. But back to China, I
Speaker 10: think then in a bit of a trouble. Right, So
Speaker 10: we have Western demand weakening because of you know, recessions
Speaker 10: or semi recessions whenever will happen, but it's going to
Speaker 10: hit China first at the margin. Lack of demand is
Speaker 10: going to hit that marginal producer and that's China. So China,
Speaker 10: you can see this already has very weak producer prices
Speaker 10: and has resulted in consumer prices being you know, inflation
Speaker 10: being next to zero. You guys reported that that could
Speaker 10: be a parallel to what happened in Japan, where it
Speaker 10: also started with you know, lack of demand, trade tensions.
Speaker 10: The United States stock market property boom followed by bust,
Speaker 10: same kind of thing, high public sector debt, and you
Speaker 10: ended up getting you know, liquidity trap, really long term
Speaker 10: lost decade inflation. That is something that could truly happen
Speaker 10: in China as well.
Speaker 5: Well. Talk to me about what some of the moves
Speaker 5: are from the Chinese government to try and revive a
Speaker 5: little bit of the economy over there, particularly when it
Speaker 5: comes to stimulus in the real estate sector. How do
Speaker 5: you rate the moves that we're seeing from the Chinese
Speaker 5: government in terms of trying to shore up that space.
Speaker 10: I mean, there's only so much they can do, right.
Speaker 10: I mean, again, it's the parallel to what happened in Japan.
Speaker 10: It's it's almost scary how similar these things are. Once
Speaker 10: you lower interest rates in a zero inflation or deflation environment,
Speaker 10: there's nothing you can do right. You can't lower interest
Speaker 10: rates to negative points, right, So when you reach that
Speaker 10: point and consumers have lost a lot of money in
Speaker 10: the stock market and in the property market. Don't forget
Speaker 10: stock market is down fifty percent or so from this
Speaker 10: peak in two thousand and seven. It's been a long time.
Speaker 10: A lot of people have lost a lot of money
Speaker 10: in China, and what are they going to do?
Speaker 6: Right?
Speaker 10: In cash, at least you don't lose it, right, So
Speaker 10: that that's the dynamic that's going on there. And I
Speaker 10: think there's a lot of things that are outside of
Speaker 10: the control of the Chinese government as well. Right that
Speaker 10: the West is really diversifying. I mean, some people call
Speaker 10: it diversification, decoupling, whatever you want to call it yell
Speaker 10: and call the diversification, which I think makes sense, but
Speaker 10: that is demand that's going to be lacking, and these
Speaker 10: factories in China cannot easily be you know, retooled to
Speaker 10: anything other than supplying the West with goods, and I
Speaker 10: think they really don't have a lot of options. On
Speaker 10: top of that, you have, you know, negative demographic trends,
Speaker 10: and this is always something that is accompanied these women
Speaker 10: bus cycles in Japan, in Taiwan, Korea, you know where
Speaker 10: the working age population peaks and then it declines, and
Speaker 10: that really leads to really two things. One is the
Speaker 10: innovation and spirit and the willingness to invest declines. You know,
Speaker 10: when you're older, you're not going to take a lot
Speaker 10: of risks. At the same time, you're fear workers. So
Speaker 10: these are all highly negative trends that are very very
Speaker 10: hard to change. And on top of that, what you
Speaker 10: have that you didn't have in Japan is an extremely
Speaker 10: negative perception of China in the West. I mean, you
Speaker 10: look at the poles, right, and this could be driven
Speaker 10: by spy balloons that you know, Cuba spy stations, all
Speaker 10: this kind of stuff, all these various scandals, but people
Speaker 10: have a more negative perception of China now than in
Speaker 10: the middle of the pandemic, and that's pretty scary. So
Speaker 10: that limits what policy makers can do in the US
Speaker 10: to help China.
Speaker 1: You know, in hindsight, I'm still not sure why the
Speaker 1: Chinese government cracked down on what was arguably one of
Speaker 1: their most biggest success stories in the last decades, which
Speaker 1: is their technology space with Ali Baba and JD dot Com.
Speaker 1: Is it anything more than is it nothing more than
Speaker 1: just we're reasserting government control over you guys that have
Speaker 1: just gotten too big for your bridges.
Speaker 10: I think so certainly not a smart move, right, that
Speaker 10: sense of real chilling method nested to the entrepreneurial community.
Speaker 10: You're not going to invest if you know, in the
Speaker 10: US you can become a billionaire and people might give you,
Speaker 10: you know, a bad pr but if you end up
Speaker 10: in jail, that's a whole another thing, right, So I
Speaker 10: think that was a terrible mistake, and I think they're
Speaker 10: going to pay for that as well with economic growth.
Speaker 5: Last week, Hans, you gave me a little bit of
Speaker 5: a preview on our politics show about what Yellen's trip
Speaker 5: to China could look like, and you basically said that
Speaker 5: we would not be getting any big headlines out of
Speaker 5: that trip. Following the trip now and looking at some
Speaker 5: of the news to come out of it, did anything
Speaker 5: surprise you?
Speaker 10: Not really. I mean it was a lot of talk
Speaker 10: pop and I don't expect any policy changes cutting out
Speaker 10: of that. She talked about setting up guardrails to competition.
Speaker 10: She mentioned the word diversification, and I think that's not
Speaker 10: particularly good for the Chinese. But I just think the
Speaker 10: degrees of freedom for action are just very limited on
Speaker 10: both sides, just not a whole lot that can be done.
Speaker 1: So but it seems like the Chinese are pulling back,
Speaker 1: and I know a lot of people are saying, hey,
Speaker 1: what's bad for China is good for India to the
Speaker 1: extent that if you think China had a great two
Speaker 1: decade run, maybe if China's closing itself off, India represents
Speaker 1: maybe a China like opportunity over the next twenty years.
Speaker 1: Is that something you think has some ingredience.
Speaker 10: I mean, I don't have a lot of insights into
Speaker 10: India itself as a destination or as a source of production.
Speaker 10: I mean, they've certainly always had issues with the government,
Speaker 10: red tape bureaucracy, those types of things, all the negatives
Speaker 10: that come with with the democracy, right. But what's interesting
Speaker 10: is that I think next year or so, the non China,
Speaker 10: low cost Asian countries, sort of all the countries except
Speaker 10: Japan and Korea will be more than fifty percent of
Speaker 10: US imports. So it may be the smaller countries like
Speaker 10: you know, Vietnam and Indonesia, but certainly also India if
Speaker 10: they can get their act together on the infrastructure side,
Speaker 10: that could really replace that.
Speaker 6: You know.
Speaker 10: At the same time, Mexico is setting export records to
Speaker 10: the US. So I think the private sector has really
Speaker 10: stepped up and kind of pre solved the problems that
Speaker 10: published politicians are working on.
Speaker 1: You know, all right, you gotta be kidding me here,
Speaker 1: Jackson white Owming, you set up your firm in Jackson
Speaker 1: or white Owming, Are you kidding me?
Speaker 8: So?
Speaker 3: Like, if you guys have a.
Speaker 1: Good powder day, do you just shut up and just
Speaker 1: go close up shop, go skiing.
Speaker 10: Store of So yesterday I said about thirteen hours of
Speaker 10: rock climbing, and I'm pretty tired. I might have a
Speaker 10: little sunburn here, but it is a beautiful place and
Speaker 10: I recommend everybody as the Chinese visitors by the way on,
Speaker 10: way down. Yes, the last few years, you've noticed that.
Speaker 3: Do you expect it?
Speaker 1: And that's kind of the government with restrictions on the flights, right,
Speaker 1: Is that the primary issue?
Speaker 3: We've got about twenty seconds.
Speaker 10: No, I don't. I don't actually don't know, but it's noticeable.
Speaker 1: Yes, yeah, we've noticed that here in New York City.
Speaker 1: The European tourism seems like it's back in force. But
Speaker 1: I can't say the same for the Chinese. So Hans
Speaker 1: Du from Jackson Hole, Wyoming, which is a scam in
Speaker 1: and of itself. I don't know how he did that,
Speaker 1: but he's the CEO of Mitchell Madison Group. We appreciate
Speaker 1: getting some of his insights heres we try to parse
Speaker 1: through the economic forecast for China.
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Speaker 3: All right, Charlie Pellow, thank you so much.
Speaker 1: We appreciate that Madison Mills, Paul Sweeney boiling in here
Speaker 1: in our Bloomberg Interact Workers studio. We're also on that
Speaker 1: YouTube thing, right, that's the streaming thing. Yeah, all right,
Speaker 1: just go to YouTube and you can search Bloomberg at
Speaker 1: Global News and you'll find us there. Let's talk ETFs.
Speaker 1: There seems like there's an ETF out there for everything.
Speaker 1: How about the Procure Disaster Recovery Strategy ETF.
Speaker 3: I want to talk about that. We can do that
Speaker 3: with the.
Speaker 1: Andrew Channet, CEO of Procure a M. He joins us
Speaker 1: here in our studio. Andrew talk to us about this fund.
Speaker 1: What's the focus of this fund and kind of how
Speaker 1: did it come about.
Speaker 11: So natural disasters have been something you know, that have
Speaker 11: been around well before humans came to this planet. But
Speaker 11: as we start to increase population centers and increase the
Speaker 11: amount of assets and valuables that we have in these
Speaker 11: in these areas, many of them happen to be in
Speaker 11: very high risk areas for extreme weather. And you know,
Speaker 11: whether you're someone that's pushing for climate change, transition, renewable energy,
Speaker 11: whatever that is. At the end of the day, there's
Speaker 11: technologies that people are trying to do to help us
Speaker 11: go more green or lower emissions. But there are companies
Speaker 11: that actually help us prepare for natural disasters and help
Speaker 11: save us when we need them the most. And that's
Speaker 11: been an area that's been really underfocused on, and we
Speaker 11: think that this is an industry that many people are
Speaker 11: actually looking for the exposures and we wanted to provide
Speaker 11: that fund for them.
Speaker 5: Is it specific to companies that help with the aftermath
Speaker 5: of a natural disaster or is it also prevention as well?
Speaker 3: It is the full life cycle.
Speaker 11: So you have those construction consulting and engineering companies that
Speaker 11: come in and tell you how to better build out
Speaker 11: your infrastructure and what where your risks are so you
Speaker 11: can build more confidently. And then the companies that are
Speaker 11: used during natural disasters. So you think of the wildfires
Speaker 11: and you need fire equipment. You know, MSA Safety is
Speaker 11: a company that's out there that's making respirators and hoods
Speaker 11: for firefighters, and then you know, combating a wildfire, you
Speaker 11: need helicopters and fire retardant and chemicals like that. And
Speaker 11: then rebuilding so you know, when you have a flood
Speaker 11: like we just saw, you know, right up in Hudson Valley,
Speaker 11: there's really important companies for dredging, rebuilding, for construction as well,
Speaker 11: and so it really looks at the full life cycle
Speaker 11: of natural disasters.
Speaker 3: How many names are in this ETA roughly fifty.
Speaker 11: It's an equally aweighted basket as well.
Speaker 3: And what's the assets under management? So the fund's been out.
Speaker 11: For a little over a year and we're a little
Speaker 11: over four million in assets.
Speaker 1: Okay, interesting, okay, And so these types of companies, I mean,
Speaker 1: it seems like that's a theme that has a long
Speaker 1: term tail, I would think, right.
Speaker 11: We certainly believe. So the White House came out a
Speaker 11: little over a year ago saying that they believe by
Speaker 11: the end of this century, the cost to the federal
Speaker 11: budget alone from natural disasters maybe roughly two trillion dollars.
Speaker 11: And that's just saying the US federal budget. Natural disasters
Speaker 11: are a global phenomenon and they can happen at any time.
Speaker 11: So whether you're trying to spend money on prevention or
Speaker 11: you're spending money recovering, this is a really important industry
Speaker 11: that should be championed.
Speaker 5: And you also have some of the big names that
Speaker 5: or our listeners are a little bit more familiar with,
Speaker 5: like an Nvidia in this basket because you talk about
Speaker 5: how their AI helps identify areas that are at risk
Speaker 5: for natural disaster. Are there any other big kind of
Speaker 5: household tech names in the ETF basket that you have
Speaker 5: as well?
Speaker 11: There are some, but really a lot of these companies
Speaker 11: are more of the infrastructure type, building, consulting, engineering. There
Speaker 11: are a couple of technology plays. I mean even water technology,
Speaker 11: whatter is a huge part of natural disasters, whether that's
Speaker 11: the cleaning up, the building of these centers, the transportation.
Speaker 11: So a company like Xylum, which maybe many people may
Speaker 11: know from the water technology side, has a place in
Speaker 11: this fund currently as well.
Speaker 1: You're wearing a shirt with kind of a Space shuttle
Speaker 1: thing on there, so this NASA theme shirt, why is that?
Speaker 11: So we also have a UFO, which is the world's
Speaker 11: first pure place space ETF and there also is a
Speaker 11: lot of overlap between space and believe it, natural disasters.
Speaker 1: All right, give me that pitch, Give me that pitch.
Speaker 11: So there actually was a name that was in both funds, Maxar,
Speaker 11: which got taken private fairly recently, a satellite manufacturer and
Speaker 11: operator company.
Speaker 3: Satellites help us do a lot.
Speaker 11: From detect where you have storms, sea level rises, emissions
Speaker 11: even you're able to track emissions from space now, so
Speaker 11: whether it be climate change or what we can be
Speaker 11: doing and carbon footprints and whatnot, a lot of this
Speaker 11: can be monitored from space. So you know a lot
Speaker 11: of what we know about climate change is made possible
Speaker 11: by satellites.
Speaker 5: This is for Paul here the Space ETF. The biggest
Speaker 5: chunk of that that you have is media at almost
Speaker 5: twenty percent. What does that look like.
Speaker 11: Yes, So when you look at the space industry today,
Speaker 11: you know, roughly a third of it is communications. So
Speaker 11: whether that's Internet or in broadband five g's a huge
Speaker 11: area that people have been talking about and investing in
Speaker 11: for several years now. But when people talk about the
Speaker 11: future growth of the space industry, a lot of the
Speaker 11: experts believe that roughly half of the growth over the
Speaker 11: next ten twenty years may be from the communication side.
Speaker 11: So media communications, you know, there's a lot of overlap
Speaker 11: but in many of these companies nowadays, and satellite communications
Speaker 11: is a very undercovered area in most funds, but one
Speaker 11: that has a large representation in the UFO.
Speaker 1: Just broadly speaking, on the ETF space is it just
Speaker 1: full steam ahead in terms of fun flows in the
Speaker 1: ETFs is because that's been the story for years now.
Speaker 11: It seems like, yeah, you know, as far as as
Speaker 11: a product wrapper, ETFs have been getting you know, a
Speaker 11: ton of attention and inflows. When I first started bringing
Speaker 11: out my first ETFs well over a decade ago, the
Speaker 11: idea is that the ETF industry would be eating the
Speaker 11: mutual fund industry's launch. And we've seen, you know, slowly,
Speaker 11: the ETF industry globally has been getting a lot of presents.
Speaker 11: You know, there are other types of products and vehicles
Speaker 11: that may be competition to ETFs, but when you look
Speaker 11: at flows, it's not just everything gets you know, x
Speaker 11: percent per year. It's always typically pockets. Whether inflation is
Speaker 11: the topic du jour or or you name it, whatever
Speaker 11: that is. There are ETFs for the most part to
Speaker 11: play that. And you know, when there are certain areas
Speaker 11: that are in demand, ETFs do tend to get a
Speaker 11: lot of those flows.
Speaker 5: And in your ETFs specifically, how do you hedge against
Speaker 5: some of the volatility that happens when you do prioritize
Speaker 5: and focus on some of those smaller names.
Speaker 11: So all the funds that I've been bringing out have
Speaker 11: been passive, so they do track an index, so it's
Speaker 11: not running and scampering and doing things as something happens.
Speaker 11: We want to make sure that when we're working with
Speaker 11: index providers that they have a lot of intelligence built
Speaker 11: into them, so we're not throwing on hedges and quickly
Speaker 11: selling positions when some major event happens. These are passive strategies,
Speaker 11: rules based, rebalance, reconstitution depending on the funds, semiannually or
Speaker 11: annually for the reconstitution, so names can get added and removed.
Speaker 11: But really what we're looking at is how those companies
Speaker 11: play into those various themes.
Speaker 3: All right, Andrew, always.
Speaker 1: Interesting stuff talking about ETFs, talk about a fast growing
Speaker 1: part of the market.
Speaker 3: ETFs are just.
Speaker 1: Been really an amazing story here, and if you're in
Speaker 1: a traditional mutual fund business, I'm just not sure where
Speaker 1: that gets positioned. I know they say in retirement accounts
Speaker 1: and other things like that, but boy, it's been a
Speaker 1: big change.
Speaker 3: Andrew Chenn and CEO Procure am.
Speaker 1: Joining us live here in our very toasty Bloomberg Interactive
Speaker 1: Broker Studio.
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can
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Speaker 2: at Matt Miller nineteen seventy three can.
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