WEBVTT - Surveillance: Investors Eye U.S. Stimulus 0:00:06.320 --> 0:00:12.639 Ye, Welcome to the Bloomberg Surveillance Podcast and I'm Tom 0:00:12.720 --> 0:00:17.560 Keane Jaily. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.160 Bloomberg dot Com, and of course on the Bloomberg. Joining 0:00:27.200 --> 0:00:30.800 us now is Christian Below of Autonomous Research, Senior analyst 0:00:30.960 --> 0:00:32.800 Christie Great to catch up. Just run me three your 0:00:32.880 --> 0:00:36.680 first take please, Yeah, it's it's a morning guys that 0:00:36.760 --> 0:00:39.080 thanks for having me on. Um. Look, it's it's a 0:00:39.080 --> 0:00:42.279 pretty strong set of results. UM. At this point we're 0:00:42.320 --> 0:00:46.199 really accustomed to Goldman are generally doing quite well relative 0:00:46.200 --> 0:00:49.440 to expectations and to do it again, UM, you know, 0:00:49.520 --> 0:00:53.760 really strong numbers and equities, investment, banking and UM and 0:00:53.800 --> 0:00:57.200 also on the efficiency front. So as I think all in, um, 0:00:57.240 --> 0:01:00.240 all in, a really strong set of results is on in. 0:01:00.560 --> 0:01:03.440 When it comes to Goldman Sachs, people talk about strategy. Yes, 0:01:03.480 --> 0:01:06.480 they did beat on trading overall that was driven by equities. 0:01:06.480 --> 0:01:08.800 They had a miss in debt trading. What are you 0:01:08.840 --> 0:01:11.320 looking for in terms of how they're guiding their strategy 0:01:11.360 --> 0:01:14.080 going forward as they try to shift from just investment 0:01:14.200 --> 0:01:19.399 banking centric place to something that includes more lending. Yeah, 0:01:19.720 --> 0:01:21.920 so I think you have to understand the strategy in 0:01:22.240 --> 0:01:25.440 the broader context. They've been growing the banking business, if 0:01:25.440 --> 0:01:28.000 you like the traditional banking business for quite a while. 0:01:28.000 --> 0:01:31.199 It's almost a ticcade now UM, and you see really 0:01:31.200 --> 0:01:34.160 strong growth in in in the net interest income and 0:01:34.280 --> 0:01:36.440 in the loan in the loan book. But but I 0:01:36.480 --> 0:01:39.479 think as we go forward that will play an increasingly 0:01:39.520 --> 0:01:43.320 important part in the story UM in terms of building 0:01:43.319 --> 0:01:47.600 out you know, far more predictable revenue sources. So lending 0:01:47.640 --> 0:01:50.840 will be one, but the asset management business, the private 0:01:50.840 --> 0:01:54.400 wealth business, alternative asset management business, and even in the 0:01:54.440 --> 0:02:00.200 traditional UM you know, core investment banking M and A M, 0:02:00.200 --> 0:02:02.440 A d C M type businesses. I think these are 0:02:02.480 --> 0:02:05.920 the businesses they have to grow. They are focused on 0:02:06.000 --> 0:02:08.840 growing and will ultimately drive the voluation of the company 0:02:08.880 --> 0:02:11.280 going forward. Christian and your research, you know, you always 0:02:11.320 --> 0:02:13.359 do a great job if you compare even put a 0:02:13.440 --> 0:02:17.720 slash market at the g s MS combine. I'm fascinated 0:02:17.760 --> 0:02:20.320 by what you think we see Frazier at City Group 0:02:20.400 --> 0:02:23.600 trying to do a Gorman and increase wealth management. We've 0:02:23.639 --> 0:02:26.880 got others as well. What is the Pixie does that 0:02:27.040 --> 0:02:31.040 James Gorman has in wealth management that everybody else in 0:02:31.120 --> 0:02:36.000 asset management, that everybody else wants to copy. Yeah, it's 0:02:36.000 --> 0:02:38.240 it's a great point. Look, I think James Gorman's daughter 0:02:38.240 --> 0:02:40.960 and absolutely unelievable job. But Morgan Stanley, UM, you know, 0:02:41.040 --> 0:02:42.960 you know this one time because you've been here for 0:02:42.960 --> 0:02:45.440 a long time and you know Morgan Stanley was more 0:02:45.480 --> 0:02:48.720 or less basket case UM a decade ago, and they've 0:02:48.760 --> 0:02:51.120 turned out really to be I think UM almost op 0:02:51.160 --> 0:02:54.120 posted a child of how you do a a a 0:02:54.200 --> 0:02:57.520 corporate restructure in UM. Look, I think they've really done 0:02:57.560 --> 0:03:02.480 a good job in in focusing the wealth management business 0:03:02.680 --> 0:03:06.959 around efficiency over the last decade and lending, which is 0:03:07.040 --> 0:03:10.720 boosted pretax margins almost double with pretext margins UM since 0:03:10.760 --> 0:03:13.919 they are quired UM Smith Bonney from City. I think 0:03:13.960 --> 0:03:16.920 going forward the key for that business will be growth. 0:03:17.480 --> 0:03:20.320 UM growth has been sowhat slower as you see the 0:03:20.400 --> 0:03:23.960 migration of advisors away from the white Houses to the 0:03:24.000 --> 0:03:26.519 likes of a Schwab and the regional broken like a 0:03:26.639 --> 0:03:29.760 Raymond James. I think going forward for Morgan Stanley, a 0:03:29.919 --> 0:03:32.400 key part of the growth has to be pivoting that 0:03:32.520 --> 0:03:35.280 wealth business to growth UM and I think the eater 0:03:35.400 --> 0:03:39.440 acquisition and ultimately eating vents um will be will be 0:03:39.520 --> 0:03:41.840 very helpful in achieving that. If you're just joining us 0:03:41.840 --> 0:03:45.160 on Bloomberg Radio, Bloomberg Television worldwide, Christian Blue with this 0:03:45.280 --> 0:03:48.960 autonomous research after years with Bernstein and Credit SUAE, as 0:03:49.000 --> 0:03:51.600 we look at the state of global Well Street, Christian, 0:03:51.680 --> 0:03:54.240 we've seen enough come in. I love your broker centric view, 0:03:54.600 --> 0:03:57.560 but we've seen enough coming in from these banks. How 0:03:57.560 --> 0:04:02.440 do they prosper five years out? Everybody can't win at 0:04:02.480 --> 0:04:05.680 the same thing, So what is the sense of prosperity 0:04:05.840 --> 0:04:11.160 you see for major bank American Wall Street? Yeah, look, 0:04:11.240 --> 0:04:14.520 look at look It's it's a good question. Ultimately, um. Look, 0:04:14.560 --> 0:04:17.040 I think that the health of banks will will depend 0:04:17.080 --> 0:04:20.320 on the health of economies over time. So so I 0:04:20.360 --> 0:04:23.520 do think like economic prospects are a really big driver 0:04:23.760 --> 0:04:26.760 of of of of bank outlook. But also the reality 0:04:26.800 --> 0:04:29.479 is today's there's a lot of innovation out there, and 0:04:29.640 --> 0:04:31.640 you know, some of the smaller FinTechs have a lot 0:04:31.680 --> 0:04:34.000 of capital and the market is willing to give them 0:04:34.000 --> 0:04:36.760 even more capital to go innovate. So I think your 0:04:36.760 --> 0:04:39.600 ability to invest in technology, you ability to be nimble 0:04:39.880 --> 0:04:44.200 around how you um service customer focused on customer service, 0:04:44.279 --> 0:04:46.680 that's going to be very very important going forward, you know. 0:04:46.720 --> 0:04:49.599 But ultimately, you know, the banking business is really about 0:04:50.040 --> 0:04:53.200 you know, economic prospects and and and sort of like 0:04:53.440 --> 0:04:56.239 responsible lending. So those two were probably play a bigger 0:04:56.240 --> 0:04:59.800 path of parts. This whole digital thing, underscored by the 0:04:59.800 --> 0:05:02.520 eight thousand shares of a firm you've got on your sabbatical, 0:05:02.680 --> 0:05:06.560 I mean, John, to me, the great January issue of 0:05:06.640 --> 0:05:11.200 two thousand twenty one is the slash fintech digital banking 0:05:11.320 --> 0:05:15.400 thing and how all these companies are dept to it. Yeah, 0:05:15.440 --> 0:05:18.840 I'm did so well. I considered not coming back, and 0:05:18.880 --> 0:05:20.880 that's why I've had the last four weeks after and 0:05:21.040 --> 0:05:25.799 enjoying myself on those mega gains in Finns. Christian build 0:05:25.839 --> 0:05:29.680 on that for a seriously, the conversation going forward and 0:05:29.720 --> 0:05:35.039 how much some of these names have got to spend. Yeah, look, look, look, 0:05:35.160 --> 0:05:37.880 you know the dollars you spend is one thing. How 0:05:37.960 --> 0:05:40.120 you spend it is another. Right, Clearly, if it was 0:05:40.200 --> 0:05:43.719 just about dollars, the biggest and best, the biggest banks 0:05:43.720 --> 0:05:46.760 would would would stream away so how you spend it, 0:05:46.880 --> 0:05:50.760 what you spend it on. UM, you know, your technology stack. 0:05:50.839 --> 0:05:54.040 All these things matter. But but look, make no mistake 0:05:54.080 --> 0:05:56.920 about it. UM. You know, banks are have a lot 0:05:56.920 --> 0:05:59.360 of complation on their hand with some of these very 0:05:59.440 --> 0:06:03.479 nimble and forward thinking fin techs. And it's no surprise that, UM, 0:06:03.680 --> 0:06:06.800 you hear on the banks focus a lot on the 0:06:06.839 --> 0:06:09.080 tech spending need to put in place to to be 0:06:09.120 --> 0:06:12.000 able to compete. Christian, we're getting bank earnings on a 0:06:12.120 --> 0:06:13.960 changing of the guard kind of day. We're going to 0:06:14.040 --> 0:06:17.520 get the last day of President Trump's presidency, and we 0:06:17.600 --> 0:06:20.880 have Janet Yellen testifying to the Senate Banking Committee, to 0:06:20.880 --> 0:06:24.800 Finance Committee to talk about her nomination as Treasury Secretary. 0:06:24.960 --> 0:06:29.200 She has in the past expressed some desire to regulate banks. 0:06:29.200 --> 0:06:31.240 This will be something that will follow under her purview. 0:06:31.600 --> 0:06:34.160 What are you looking forward to hear from her today 0:06:34.560 --> 0:06:36.840 in terms of how she will approach the banking sector 0:06:36.920 --> 0:06:40.640 in her tenure if she is confirmed. Yeah, Look, it's 0:06:40.640 --> 0:06:44.160 a good question. Look, I think the broader picture around UM, 0:06:44.200 --> 0:06:47.280 the regulatory and political climate around banks, I think is 0:06:47.760 --> 0:06:51.080 important context. I think coming into this crisis, for the 0:06:51.160 --> 0:06:54.479 most part part, banks have been part of the solution, 0:06:54.560 --> 0:06:58.479 quite frankly, and not the problem UM. So from the 0:06:58.520 --> 0:07:02.720 latest capital UH sort of seeker results that banks were 0:07:02.760 --> 0:07:06.279 able to get back to returning capital and it speaks 0:07:06.279 --> 0:07:09.880 to really the strength of um of of of the 0:07:10.000 --> 0:07:12.680 capital basis, and quite frankly, I think regularly should pack 0:07:12.720 --> 0:07:14.920 themselves on the back they did. They did a very 0:07:14.960 --> 0:07:20.000 good job post the financial crisis to show banks capital 0:07:20.640 --> 0:07:24.240 improve their um their risk management. And I think it's 0:07:24.240 --> 0:07:27.800 showed very well in the COVID crisis how resilientos banks are. 0:07:28.080 --> 0:07:30.360 And I think that's the broader context in terms of 0:07:30.360 --> 0:07:33.160 how um UM not just scaled, but I think how 0:07:33.240 --> 0:07:36.680 generally um the political climate will will deal with banks. 0:07:36.880 --> 0:07:39.280 They've been more of the solution than than part of 0:07:39.280 --> 0:07:42.240 the problem um And and you know, for the most part, 0:07:42.280 --> 0:07:47.000 you do need a strong bank to to sustain recoveries. Christiane, 0:07:47.040 --> 0:07:49.040 thank you. Always great to catch up, so come back. 0:07:49.040 --> 0:07:54.800 So in Christian Baldy, there of autonomous research. I don't 0:07:54.800 --> 0:07:57.000 think I want off check changes that I think it 0:07:57.040 --> 0:07:58.920 needs something else I want to check. Won't do it 0:07:59.000 --> 0:08:02.000 for branch shooting. He's Northwestern Mutual and of course they're 0:08:02.000 --> 0:08:05.720 looking at actual assumptions they're looking at long term investment 0:08:05.800 --> 0:08:10.200 is he provides investment guidance as their chief investment strategies. Brent, 0:08:10.360 --> 0:08:14.640 what is your line right now on investing for five years? 0:08:14.720 --> 0:08:17.200 I don't care about the here and now. I care 0:08:17.240 --> 0:08:20.920 about a more long term northwestern view. Is it a 0:08:20.960 --> 0:08:25.040 single digit return or can we do better? Yeah? I 0:08:25.040 --> 0:08:27.119 think it's a single digit return. But you mentioned something 0:08:27.120 --> 0:08:30.000 really important, because I think people get caught up phenomenal returns. 0:08:30.280 --> 0:08:32.439 It's only real returns that matter. And so within that 0:08:32.760 --> 0:08:35.199 real return being in the single digits is assumed to 0:08:35.200 --> 0:08:37.920 be in the lower inflation rate of inflation is higher. Certainly, 0:08:38.120 --> 0:08:40.720 um there is a revisiting of those estmates that you have, 0:08:41.520 --> 0:08:44.200 But in general I think people should just focus on 0:08:44.320 --> 0:08:46.959 real returns, and if returns on the single digits, it 0:08:47.040 --> 0:08:50.000 is likely that inflation will be low and so all 0:08:50.040 --> 0:08:54.400 in all, consumers and citizens will still be fine. Brent, 0:08:54.480 --> 0:08:56.880 you don't want to find amazing looking at markets right 0:08:56.880 --> 0:08:59.160 now and just going through a long list of research 0:08:59.240 --> 0:09:01.800 notes that reflect don valuations and say, you can only 0:09:01.920 --> 0:09:05.480 really develop an argument on valuations by looking at where 0:09:05.520 --> 0:09:09.800 valuations are relative to interest rates and returns. Therefore, are 0:09:09.800 --> 0:09:11.760 going to be great for the next several years because 0:09:11.800 --> 0:09:15.520 rates are going to stay so low. My difficulty with 0:09:15.559 --> 0:09:17.400 that brand is that we've all seen the last ten 0:09:17.480 --> 0:09:20.000 years in Europe in Japan where rates have been ultra 0:09:20.080 --> 0:09:24.080 low for a very long time and markets just have 0:09:24.240 --> 0:09:28.120 not returned big gains over the last several years. In Europe, 0:09:28.160 --> 0:09:30.360 low rates don't always get it done. Brand, Why is 0:09:30.400 --> 0:09:33.280 the United States any different? I just think because of 0:09:33.320 --> 0:09:35.480 the minetary policy that we've had and promising to do 0:09:35.559 --> 0:09:37.480 more in the fact that our long term growth rate 0:09:37.559 --> 0:09:40.040 is above those places that you mentioned because of demographics, 0:09:40.080 --> 0:09:42.559 because of productivity, so there is a little bit better 0:09:42.559 --> 0:09:44.800 of an outwork here in the US based upon that. 0:09:44.880 --> 0:09:46.640 I think one of the commentaries that you guys kind 0:09:46.640 --> 0:09:48.400 of missed in the beginning is that productivity is actually 0:09:48.520 --> 0:09:50.920 rising in the US and so perhaps our long term 0:09:50.920 --> 0:09:53.800 growth rate is inching up if you think about productivity 0:09:53.880 --> 0:09:57.000 finally coming back after being dormant for some time with 0:09:57.080 --> 0:10:00.480 the technology boom that we've had in the US, and 0:10:00.520 --> 0:10:02.360 so I would focus more on that. I think you're 0:10:02.360 --> 0:10:05.040 a correct. I mean that the risk to me is 0:10:05.080 --> 0:10:08.000 still and this probably combines into your earlier talk about 0:10:08.000 --> 0:10:10.439 there being no fiscal hawks. I mean to me, right now, 0:10:10.480 --> 0:10:12.760 the central banks around the globe, especially in the US, 0:10:12.800 --> 0:10:15.880 are going to do more until one of three things happens. 0:10:16.400 --> 0:10:19.400 Either the dollar falls too much, inflation rises too high, 0:10:19.800 --> 0:10:22.920 or perhaps people start demanding a real return on their 0:10:22.920 --> 0:10:25.440 fixed income because the stock market is built on the 0:10:25.480 --> 0:10:28.840 bond market. And so until those three things occur, and 0:10:28.880 --> 0:10:30.880 actually two of the three are considered positive right now, 0:10:31.360 --> 0:10:35.359 until they occur, then I think we continually have the 0:10:35.400 --> 0:10:38.560 market moving higher because right now the cost for policy 0:10:38.559 --> 0:10:40.560 makers on the other side is zero. There's nothing for 0:10:40.600 --> 0:10:43.000 them to contemplate. Um. They're actually trying to get a 0:10:43.040 --> 0:10:45.439 couple of those things to happen. And so until that changes, 0:10:45.520 --> 0:10:48.120 until this debt comes due, I think the market moved higher, 0:10:48.160 --> 0:10:51.200 all right, So, Brent, Implicit in John's question, and it's 0:10:51.200 --> 0:10:54.320 an important one, is this idea that perhaps there is 0:10:54.360 --> 0:10:59.120 a fundamental inconsistency between rates remaining so low and growth 0:10:59.160 --> 0:11:02.840 being sufficient and to justify equity valuations where they are. 0:11:03.280 --> 0:11:05.719 At what point does one of them have to give? 0:11:05.800 --> 0:11:07.600 Do we have to either get higher rates in the 0:11:07.600 --> 0:11:10.560 heels of more inflation, or stock valuations have to go 0:11:10.640 --> 0:11:13.080 down because people have been pricing in just too much growth. 0:11:14.160 --> 0:11:16.000 I think it's probably a combination of both. Right, So 0:11:16.160 --> 0:11:18.480 if people lose hope in the future, then certainly I think, 0:11:18.840 --> 0:11:21.760 or our growth rate dramatically slows, then I think the 0:11:22.280 --> 0:11:25.960 first part that you mentioned is certainly true and so um. 0:11:26.000 --> 0:11:27.880 The other side, which I still think is the bigger risk, 0:11:27.960 --> 0:11:30.280 is that rates do rise and you actually have the 0:11:30.280 --> 0:11:32.520 stock market having to reprice because now bonds are more 0:11:32.559 --> 0:11:35.280 attractive because I do view valuation, and this is where 0:11:35.320 --> 0:11:37.440 I think people miss the boat. Valuation to me as 0:11:37.440 --> 0:11:40.200 a relative tool, not an absolute tool. Money has to 0:11:40.240 --> 0:11:42.680 go somewhere. When our advisors sit down with the clients, 0:11:42.760 --> 0:11:46.280 they decide stocks or bonds, not not not not neither 0:11:46.320 --> 0:11:49.480 of each. This is so so important, folks, bred it's brand. 0:11:49.520 --> 0:11:51.280 It's right where I wanted to go, which is the 0:11:51.320 --> 0:11:55.439 idea of absolute and relative. The Nastaic one twelve months 0:11:55.480 --> 0:11:59.480 trailing t m T s up, the Russell two thousand 0:11:59.640 --> 0:12:04.120 out of nowhere is up twenty is well. I mean 0:12:04.160 --> 0:12:07.679 to polarities, if you will, in terms of factor analysis. 0:12:07.679 --> 0:12:11.880 In such do you sell those to get an absolute 0:12:12.000 --> 0:12:14.640 return on the other stuff, or do you do it 0:12:14.679 --> 0:12:17.680 on a relative basis and use new cash to go 0:12:17.840 --> 0:12:21.000 someplace else. Well, for the past six to nine months, 0:12:21.000 --> 0:12:22.520 have been coming on this show and others and talking 0:12:22.559 --> 0:12:24.920 about moving into cyclic glass, that's moving into small caps, 0:12:24.960 --> 0:12:27.120 things that are more leveraged to global growth or even 0:12:27.200 --> 0:12:29.520 just broadening US growth. And so if I take you 0:12:29.520 --> 0:12:32.679 back to a lot of these charts went completely off 0:12:32.720 --> 0:12:35.520 the rails um so tech started out performing everything else. 0:12:35.520 --> 0:12:38.880 Growth did better than value, small cap dramatically underformed large cap. 0:12:39.080 --> 0:12:41.160 And if you think back then, we were first introduced 0:12:41.200 --> 0:12:44.240 the trade war, which was designed to knock out levers 0:12:44.280 --> 0:12:46.400 of growth around the globe, and it had a pullback 0:12:46.440 --> 0:12:48.720 in the US also, it knocked our cyclical side out. 0:12:49.200 --> 0:12:51.040 The US pushed higher because we do have that big 0:12:51.040 --> 0:12:54.560 tech sector, especially in large cap stocks. And now you're 0:12:54.559 --> 0:12:57.640 starting to see the economy broadened back out. Even before 0:12:57.679 --> 0:13:00.880 COVID hopefully releases its grip, you're seeing manufacturing do well. 0:13:01.200 --> 0:13:04.880 We think that continues into and that broader inclusive growth 0:13:04.920 --> 0:13:07.440 means that the stock market will be broader and more inclusive, 0:13:07.600 --> 0:13:09.880 and so it is branching out into things like value. 0:13:10.200 --> 0:13:12.760 M is branching out into things like small caps, even 0:13:12.800 --> 0:13:17.720 emerging markets, and we think that continues in Brent conash 0:13:17.720 --> 0:13:21.440 you with philosophical question. Just to wrap things up, We've 0:13:21.480 --> 0:13:24.280 had so many times on programs like this people lining 0:13:24.360 --> 0:13:27.320 up to say they think we're in a bubble by definition? 0:13:27.360 --> 0:13:29.440 Can we be in a bubble if a majority of 0:13:29.400 --> 0:13:32.240 people that come on programs like this and think valuations 0:13:32.240 --> 0:13:35.600 are close to bubble territory? Look, I think there are 0:13:36.040 --> 0:13:37.880 there are parts of the market that are expensive, that 0:13:37.920 --> 0:13:40.080 are built upon dreams that may not come to fruition. 0:13:40.520 --> 0:13:41.920 I think there's a whole lot of parts of the 0:13:41.960 --> 0:13:44.120 market that will do well in the coming environment. And 0:13:44.160 --> 0:13:46.839 if I take you back, yes, there were parts of 0:13:46.880 --> 0:13:48.840 the market done that were expensive, and people talked about 0:13:48.840 --> 0:13:51.439 a lost decade, but the decade was really only lost 0:13:51.480 --> 0:13:54.080 in those expensive parts of the market. Things that hadn't 0:13:54.120 --> 0:13:57.480 done so well in the small caps, like value stocks, 0:13:57.760 --> 0:14:00.280 actually did well up until two seven and when the 0:14:00.320 --> 0:14:02.560 world fell apart of the seams, but they actually had 0:14:02.559 --> 0:14:04.440 a good run during the two thousands, and I suspect 0:14:04.760 --> 0:14:07.280 this time will be very similar. Things other than the 0:14:07.280 --> 0:14:09.360 things that have done well because of the narrowness of 0:14:09.360 --> 0:14:11.719 the market will actually perform into the future. And I 0:14:11.720 --> 0:14:13.480 guess that's the good news. By diverse locations, that you 0:14:13.520 --> 0:14:16.040 will have parts of your portfolio that will pull along 0:14:16.080 --> 0:14:17.920 the rest of the parts that may underperform. And I 0:14:17.920 --> 0:14:19.400 think they've kind of switched from what they were to 0:14:19.440 --> 0:14:22.560 what they will be. Branching of Northwestern brand Grites to 0:14:22.560 --> 0:14:28.120 catch up said thank you. This is without question my 0:14:28.320 --> 0:14:33.640 China conversation of the day. Leland Miller is different. Besides 0:14:33.680 --> 0:14:38.080 being exceptionally competent on Asia and on China for years, 0:14:38.120 --> 0:14:41.880 he's taken a different tact of looking at China data. 0:14:42.440 --> 0:14:46.560 No one I know digs deeper on China than Mr Miller. 0:14:46.600 --> 0:14:49.720 He joins us right now, Leland, your note is very strong. 0:14:50.240 --> 0:14:56.080 You speak of deceptive data out of China. What is deceptive? Well, 0:14:56.120 --> 0:14:59.880 I think if you focus only on headline gross numbers, 0:15:00.000 --> 0:15:01.920 we're gonna get a very cheery story coming out of 0:15:01.960 --> 0:15:04.280 China right now, because their recovery is better than any 0:15:04.280 --> 0:15:07.520 other major economy in the world. But the true question, 0:15:07.560 --> 0:15:09.640 for Mark it should not be whether China can nail 0:15:09.680 --> 0:15:12.160 a certain GDP number in a particular quarter or a year. 0:15:12.520 --> 0:15:15.280 It should be how healthy is the growth? What is 0:15:15.320 --> 0:15:18.240 the composition of the growth, is its sustainable going forward, 0:15:18.520 --> 0:15:21.880 and when you look at the consumption economy, it's by 0:15:21.920 --> 0:15:24.600 far the weakest part of this recovery. And you see 0:15:24.600 --> 0:15:26.160 it in the retail data, you see it in the 0:15:26.200 --> 0:15:29.720 services data, and it's it's the real question mark looking forward, 0:15:29.800 --> 0:15:32.320 both in our data and in government data. You and 0:15:32.360 --> 0:15:35.280 I have talked for years about this about deceptive data 0:15:35.760 --> 0:15:38.920 in China. Do you look at the vector of which 0:15:38.960 --> 0:15:41.720 way they're moving or is it so messed up now 0:15:41.840 --> 0:15:46.040 even the vector the trend is deceptive. Well, you know, 0:15:46.160 --> 0:15:49.440 it's it's funny because during this recovery from a COVID 0:15:49.680 --> 0:15:53.840 virtual standstill last you know, last winter, we have seen 0:15:54.120 --> 0:15:56.800 very much the same thing as official data. We just 0:15:56.840 --> 0:16:00.000 haven't seen as intensive recovery. So we saw the beginning 0:16:00.000 --> 0:16:02.600 of the recovery. It was manufactured driven, then it was 0:16:02.640 --> 0:16:06.880 property driven, based basically the industrial economy, the supply elements 0:16:06.880 --> 0:16:10.240 of the economy driving driving China back to growth, but 0:16:10.440 --> 0:16:14.920 lagging behind consumption. Households are much more tame in their behavior. 0:16:15.440 --> 0:16:18.680 Retail services again, those those parts of the economy have 0:16:18.760 --> 0:16:21.120 not bounced back as much. So it's not that we're 0:16:21.160 --> 0:16:23.640 seeing a different picture. Sometimes we do. Sometimes we're totally 0:16:23.640 --> 0:16:27.400 diametric to to what to what the government's reporting right now, 0:16:27.400 --> 0:16:29.640 we're seeing a similar picture. We're just not seeing the 0:16:29.680 --> 0:16:33.080 intensity of the recovery that the Beijing is claiming. So, Leland, 0:16:33.080 --> 0:16:34.960 can you put this in the context of the U 0:16:35.040 --> 0:16:36.760 S GDP, Because a lot of people have said that 0:16:36.800 --> 0:16:39.680 the faster than expected growth in China puts it on 0:16:39.840 --> 0:16:43.640 track to exceed the US economy much sooner. Do you 0:16:43.680 --> 0:16:46.440 think that that's been overstated based on what you're seeing 0:16:46.440 --> 0:16:49.240 on the ground. Yeah, I know people care about this, 0:16:49.320 --> 0:16:51.400 but but the question I think is is not what 0:16:51.440 --> 0:16:54.120 we should be focusing on. If China wants to beat 0:16:54.160 --> 0:16:57.000 the U S and GDP, it could simply by building 0:16:57.040 --> 0:17:00.200 a endless bridge from from Beijing to Californi. In you 0:17:00.560 --> 0:17:02.600 the bridge would fall in the water, but by along 0:17:02.640 --> 0:17:05.240 the way you get enough aggregate growth, not productive growth, 0:17:05.280 --> 0:17:08.040 but aggregate growth to to to ramp up GDP levels 0:17:08.040 --> 0:17:11.439 into stratosphere. When you're looking at this, much more important 0:17:11.480 --> 0:17:13.920 would be p GDP per capita. I think the US 0:17:14.080 --> 0:17:17.760 GDP per capita six times or so greater than China. 0:17:18.280 --> 0:17:21.960 Household income, household wealth is more important. These are the 0:17:21.960 --> 0:17:24.879 things that make a country great and and it's it's 0:17:24.920 --> 0:17:27.320 I think a complete distraction to be looking just at 0:17:27.320 --> 0:17:30.320 the GDP number, which can be manufactured the short term 0:17:30.320 --> 0:17:33.159 but lead to serious long term problems if you do that, 0:17:33.320 --> 0:17:35.680 perhaps leland. At the same time, you see an increasing 0:17:35.680 --> 0:17:38.080 amount of foreign investment into China, people saying that the 0:17:38.119 --> 0:17:41.520 government will support the economy, that will support asset prices 0:17:41.600 --> 0:17:43.399 going forward, and will continue to do so as they 0:17:43.440 --> 0:17:46.440 try to give the appearance at least of faster than 0:17:46.520 --> 0:17:50.879 expected growth. Are you making an argument against those investments 0:17:50.920 --> 0:17:53.960 or perhaps against some of the enthusiasm that we're seeing 0:17:54.200 --> 0:17:58.560 somewhat on bridles from across the world. Not really, because look, 0:17:58.600 --> 0:18:00.560 if you're if you're investing in China right now, you're 0:18:00.600 --> 0:18:04.520 doing it probably for two major reasons. The first diversification purposes. 0:18:04.560 --> 0:18:06.440 You want to put more money into a growing economy. 0:18:06.720 --> 0:18:08.320 The second thing is you look around the world and 0:18:08.520 --> 0:18:11.359 a lot of things look really bad right now. China 0:18:11.400 --> 0:18:13.960 has had the top COVID recovery, and so there's a 0:18:14.040 --> 0:18:16.840 lot of reason to put to put more money into 0:18:16.920 --> 0:18:19.600 China with all the opportunities there. I think where people 0:18:20.000 --> 0:18:22.399 fall short in their analysis is they look at China 0:18:22.440 --> 0:18:24.280 and they say Wow, there's this gross story. You've got 0:18:24.280 --> 0:18:27.000 one point three billion consumers. They must be buying a 0:18:27.040 --> 0:18:29.680 lot of things. There's gonna be this linear growth pattern. 0:18:30.280 --> 0:18:33.240 Let's let's just go in blind and and and you 0:18:33.240 --> 0:18:35.119 know you can see right now in the consumption data 0:18:35.240 --> 0:18:37.560 there's a lot of problems with what's happening in China 0:18:37.640 --> 0:18:39.360 right now. It just happens to look a lot better 0:18:39.400 --> 0:18:41.879 than a lot of other places. Leland. The other issue 0:18:41.920 --> 0:18:44.800 that we've seen this year has been the divergence in 0:18:45.000 --> 0:18:47.919 exports and imports, and we've seen a real increase in 0:18:48.040 --> 0:18:50.720 exports from China to the US and around the world. 0:18:51.280 --> 0:18:54.359 Do you expect the stronger un to really hamper that? 0:18:54.400 --> 0:18:56.600 I mean, how much do you expect that to become 0:18:56.640 --> 0:18:59.560 a headwind for the nation? I think Beijing is in a 0:18:59.520 --> 0:19:02.119 a bit of a pickle. They've allowed the REM and 0:19:02.200 --> 0:19:05.480 B to appreciate this year because they don't have much 0:19:05.520 --> 0:19:08.440 of a choice with the trade surplus hitting record highs recently. 0:19:08.520 --> 0:19:10.960 But they don't want to see a skyrocketing you want. 0:19:11.040 --> 0:19:12.360 What they want to do is they want to keep 0:19:12.359 --> 0:19:17.919 it relatively stable with a slight appreciation towards strength against 0:19:17.920 --> 0:19:20.760 the U. S dollar. So I think what they like 0:19:21.040 --> 0:19:23.480 is just this beautiful stability. But because China is a 0:19:23.480 --> 0:19:26.520 more attractive destination right now because of the COVID recovery 0:19:27.240 --> 0:19:30.120 being so being so well done. Uh you know, you've 0:19:30.119 --> 0:19:32.280 got these you've got these real pressures. So they're not 0:19:32.320 --> 0:19:34.879 in a danger area right now. But I guarantee you 0:19:34.920 --> 0:19:36.879 it's causing a lot of sleepless nights thinking where this 0:19:36.920 --> 0:19:38.640 could go if the US keeps going in the other 0:19:38.680 --> 0:19:41.680 direction and they're forced to keep making this currency go up, 0:19:42.640 --> 0:19:47.240 or face the political problems with not doing that beautiful stability. 0:19:47.400 --> 0:19:49.400 That's what we all want. Lan great and catch up 0:19:49.600 --> 0:19:57.000 lean the mid of that of the China basebook. Grastly 0:19:57.240 --> 0:20:00.560 is it the Packard Hospital of Stanford University, their school 0:20:00.600 --> 0:20:04.000 of medicine, I should say, and the Stanford Children's Hospital 0:20:04.040 --> 0:20:07.720 after tour of duty at the acclaimed Boston Children's Hospital 0:20:07.840 --> 0:20:10.720 and out of Pennsylvania medicine. And we're thrilled that she 0:20:10.720 --> 0:20:13.560 could join us right now. Dr Lee, Those of us 0:20:13.600 --> 0:20:17.080 of a certain age have the giving of a vaccine 0:20:17.119 --> 0:20:20.040 as being a doctor's office with a cold thing in 0:20:20.080 --> 0:20:22.720 the corner, or maybe not, or maybe it was drops 0:20:22.720 --> 0:20:28.119 of polio. How do you envision the vaccination of those 0:20:28.280 --> 0:20:33.399 younger in the coming months. Well, we're really looking forward 0:20:33.400 --> 0:20:37.159 to having the ability to have information around the safety 0:20:37.200 --> 0:20:40.439 and efficacy of at least are our teenagers, you know, 0:20:40.480 --> 0:20:44.240 twelve and older. UM. Currently we're able to vaccinate those 0:20:44.320 --> 0:20:47.800 who are sixteen and older when those phays has become 0:20:47.840 --> 0:20:50.280 available to us to be able to vaccinate at a 0:20:50.320 --> 0:20:53.440 local level. UM, but imagine that we're going to need 0:20:53.480 --> 0:20:56.679 to continue to push for vaccine clinical trials in the 0:20:56.760 --> 0:20:59.720