Speaker 1: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.
Speaker 1: As we get set to wrap up the trading week
Speaker 1: in the Apac Region, it's a good time to take
Speaker 1: a look at some of the driving forces. We are
Speaker 1: joined now by Taosha Wang, portfolio manager at Fidelity International.
Speaker 1: Taosha joins us from our studios in Hong Kong. Thanks
Speaker 1: for being with us. Can we begin by getting your
Speaker 1: take on the reaction that you're hearing from a lot
Speaker 1: of the people in the Apac Region clients that you're
Speaker 1: interacting with on the outcome of the US election. What
Speaker 1: has it been like.
Speaker 2: I mean, the red sweet outcome wasn't exactly the expected
Speaker 2: base case. So people are sort of, you know, gathering,
Speaker 2: coming to their conclusion as to what this means from
Speaker 2: the market. And this is happening in the context that
Speaker 2: US exceptionalism is already quite strong, both from a top
Speaker 2: down data perspective as well as from a bottom up
Speaker 2: earning perspective. But I think that you know, with the
Speaker 2: strong mandate for the coming government, the there's greater potential
Speaker 2: for structural reform, which adds to the further upside skill
Speaker 2: to you know, how the US growth story is going
Speaker 2: to pan out. We typically talk about structural reform in
Speaker 2: the emergent market sense. You know, China does structural reform,
Speaker 2: India structural reform. Indonesia do structural reform. But sometimes people
Speaker 2: forget that developed market, a big developed market like the
Speaker 2: US can have structural reform as well. And if you
Speaker 2: mathematically think about you know, government efficiency, which you know
Speaker 2: is being talked about a lot these days, you think about,
Speaker 2: you know, the enumerator is the expenditure, and denominator is GDP,
Speaker 2: and the structural reform should probably worth work on both numbers.
Speaker 2: So it should you know, boost GDP by you know,
Speaker 2: reducing the regulatory red taps, boosting animal spirit, so in
Speaker 2: enlarge the GDP pie, whereas on the enumerator possibly you know,
Speaker 2: reducing some costs here and there, an alating in a
Speaker 2: more sensible way, so I think, and it's hard to
Speaker 2: necessarily gauge the magnitude of that. So that's why we say,
Speaker 2: you know, US exceptionalism continues, but you know, the structural
Speaker 2: reform is most likely upside surprise.
Speaker 1: That's a big part of the story, clearly, But the
Speaker 1: other seems to be the risk that we will have
Speaker 1: persistently high inflation in the US as a result of this.
Speaker 1: I mean that seems to be one of the concerns
Speaker 1: that the bond market has been grappling with right now,
Speaker 1: and the Fed seems to be communicating a slight adjustment.
Speaker 1: Maybe there'll be less aggressive in ease and going forward.
Speaker 1: Do you think that in any way complicates the story?
Speaker 2: Well, certainly. I think inflation has been a very important
Speaker 2: part of you know, the market rhetorics for quite a
Speaker 2: few years. Right now, I think we've decidedly left the
Speaker 2: period in Taiwan inflation was out of control. I mean,
Speaker 2: there's a clear trajectory of inflation coming down to a
Speaker 2: more normalized level, not to two percent, but a non
Speaker 2: normalized level. Looking forward, I think there is a risk
Speaker 2: that you know, stays slightly elevated, but I would say
Speaker 2: the chance of it becomes disorderly is not significant over
Speaker 2: the near term. But yes, I mean, lack of fiscal
Speaker 2: discipline can be a problem.
Speaker 1: A centerpiece of the Trump economic policy is the teriff
Speaker 1: issue that obviously has inflationary implications. But from your point
Speaker 1: of view in Hong Kong, trying to look at opportunities
Speaker 1: in the Asia Pacific against the backdrop of the potential
Speaker 1: for much higher tariffs, how does it shape or reshape
Speaker 1: your thinking?
Speaker 2: I think that is certainly a tail risk to bear
Speaker 2: in mind. I mean, we don't have a crystal ball
Speaker 2: on exactly the shape and form of how the tariff,
Speaker 2: you know, how and when will that tariff take place.
Speaker 2: One of the ways is to actually gain exposure in
Speaker 2: countries that are a little bit more inward focused in
Speaker 2: terms of its capital market.
Speaker 1: Give me a couple of point. I was going to
Speaker 1: ask for an.
Speaker 2: Example, Indonesia in the big domestic market, young population, high
Speaker 2: natural growth rate, and relatively insulated from you know this
Speaker 2: terrriorf impact thats potentially coming out of the US. So
Speaker 2: those are the ways for us to sort of think
Speaker 2: holistically of the you know, the emerging markets in this region.
Speaker 1: You were talking about US exceptionalism. Can we talk about
Speaker 1: a strong dollar? We kind of indicated that the bond
Speaker 1: market's been struggling with what has the potential to be
Speaker 1: maybe stubborn inflation, if we can describe it that way.
Speaker 1: Higher yields have certainly been allowing the dollar to remain
Speaker 1: firm at the expensive currencies in the APEC region. I'm
Speaker 1: curious about your thinking on on the currency component in
Speaker 1: all of this.
Speaker 2: I think it's that higher dollars a direct byproduct or
Speaker 2: direct product of US. It grows exceptionalism because this is
Speaker 2: the reserve currency still of the world. Now. Normally in
Speaker 2: a non reserve currency environment, and you have a country
Speaker 2: where inflation is running truly quite high, that's usually actually
Speaker 2: negative for the for the currency, but US is different.
Speaker 2: How sustainable is this? I mean, the effects tend to
Speaker 2: the effects. Trends tend to hold for take a long
Speaker 2: time to correct. So even if you say, Okay, the
Speaker 2: dollar is too expensive, inflation is very high, and you
Speaker 2: add that dollar strengths on top of it, everything in
Speaker 2: the US is getting really expensive compared to the rest
Speaker 2: of the world. It doesn't necessarily correct itself over a
Speaker 2: short term horizon. So this trend can you continue for
Speaker 2: quite some time?
Speaker 1: Can we talk a little bit about what you perceive
Speaker 1: to be the changes in China and whether or not
Speaker 1: they're going to be effective in regenerating or rejuvenating economic growth.
Speaker 1: I mean, they've been coming out in these kind of
Speaker 1: small incremental stages. We've been getting a lot more in
Speaker 1: a way of clarity. The market seems to be accepting this.
Speaker 1: Maybe there's been a little bit of impacie that there
Speaker 1: hasn't been more more or greater communication. How do you
Speaker 1: understand what's been rolled out by Beijing and the likely
Speaker 1: impact that it's going to have in the economy.
Speaker 2: I think the good news is that we're seeing flows
Speaker 2: of you know, positive policy initiatives. That is so incredibly important.
Speaker 2: I think the economy still needs a lot of support,
Speaker 2: but the repairment is not going to happen overnight. It's
Speaker 2: not like a new policy comes and ban tomorrow. You know,
Speaker 2: earnings goes up. If a business sentiment goes up, everything
Speaker 2: bounces back. It takes time to repair that, to to
Speaker 2: improve that, to regain the strengths in the economy and
Speaker 2: confidence in the business community. And now that we have
Speaker 2: seen a series of positive policy initiatives, we're more watchful
Speaker 2: than ever on. You know, how business community respond to
Speaker 2: that and how does that actually translate into earnings earning guidance.
Speaker 1: Give me the way in which you understand that to
Speaker 1: translate into an investment strategy. What areas of the the
Speaker 1: Chinese market, Let's say, would you be interested in building
Speaker 1: positions in.
Speaker 2: Well, I think there are a lot of that the idios
Speaker 2: in credit. We're focused on the idiosyncratic opportunities there, you know,
Speaker 2: the areas that has For example, you know, we've talked
Speaker 2: about AI as a global trend. I mean, China is
Speaker 2: certainly forced to come up with you know, its own
Speaker 2: solutions at this at this very big trend. So there's
Speaker 2: you know, a large cohorta technology companies working on this
Speaker 2: as well. I mean, the export oriented companies are looking
Speaker 2: for looking to diversify their destination, you know, where the
Speaker 2: product can be and you know, anecdotally AI is helping
Speaker 2: that because previously they're much more focused on the English
Speaker 2: speaking export destinations. But right now you can simultaneously, you know,
Speaker 2: enter a whole lot of different markets in the world
Speaker 2: with the help of you know, language based AI. So really,
Speaker 2: I think we're looking more idiosyncratically, more bottom up at
Speaker 2: you know, companies with good potential.
Speaker 1: Does that extend into kind of the realm of semiconductors?
Speaker 1: Is that what we're talking about? Are you focused more
Speaker 1: on the software side companies that have been putting together
Speaker 1: these artificial intelligence models, which is it is the hardware
Speaker 1: the software side, or maybe it's a combination of both.
Speaker 2: I think it will always have to be a combination
Speaker 2: of both. One of the globally, one of the questions
Speaker 2: about you know, investing area is that you know, there's
Speaker 2: been a lot of investment at the hardware, at the
Speaker 2: semiconductor level, at the data center level, but we're still
Speaker 2: eager to see more applications, you know, new applications and
Speaker 2: solve problems in direct verticals. You know of specific application scenarios,
Speaker 2: some of them very professional, in very professional specific settings.
Speaker 2: So the application really needs to kick in and start
Speaker 2: generating positive free cash flow to enable a sustained sort
Speaker 2: of investment cycle, because if you make mon money, then
Speaker 2: you'll invest more. If you don't make money from application,
Speaker 2: the whole value chain does not sort of does not
Speaker 2: fund itself, then you have a problem of you know,
Speaker 2: investment potentially you know, starting to to to to come
Speaker 2: down a little bit. I think similar. I mean, every
Speaker 2: every country or every business community trying to solve this problem,
Speaker 2: they have to tackle it from the hardware side of
Speaker 2: things as well as the software side of things, So
Speaker 2: meaning both the investment side of things as well as
Speaker 2: the application side of things.
Speaker 1: When you look at the consumer in China right now.
Speaker 1: Are you seeing a resilient consumer maybe that that would
Speaker 1: be leaning into trying to maybe to increase a little
Speaker 1: bit more spending, or are things still too conservative, that
Speaker 1: sentiment is still so weak that maybe that aspect of
Speaker 1: the domestic economy is going to take a while to recover,
Speaker 1: even though parts of the export economy continue to seem
Speaker 1: to be robust.
Speaker 2: I think, I think we need to consider the households
Speaker 2: willingness spent, a willingness to spend from a you know,
Speaker 2: a few perspectives. There's the job market side of things.
Speaker 2: There's also the Wells effect. For example, where housing price
Speaker 2: is going and where the stock market is going, and
Speaker 2: you know, they're moving differ different directions. I mean a
Speaker 2: lot of us might not have might have noticed that.
Speaker 2: You know, there has been a recent and sudden boom
Speaker 2: in the Chinese stock market responding to some of the
Speaker 2: policy initiatives. Right, So that adds to the Weals effect,
Speaker 2: and the housing market needs to be stabilized for people
Speaker 2: to feel a little bit more comfortable because that is
Speaker 2: a big, big part of the overall household balance sheet.
Speaker 2: Interest rate payment, uh, that is also a big part
Speaker 2: of the housing household expenses and also the domestic prices,
Speaker 2: you know, the general living expense. So I think a
Speaker 2: lot of moving parts are at play. I don't think
Speaker 2: there's a sharp it's a net net. I don't think
Speaker 2: there's a sharp rebound in the consumer spending in China
Speaker 2: per se, but that is, you know, taking time to
Speaker 2: play out.
Speaker 1: Thank you so much for making time to chat with us.
Speaker 1: I really enjoyed the conversation with Taosha Wang, portfolio manager
Speaker 1: at Fidelity International, joining us up from Hong Kong here
Speaker 1: on the Daybreak Asia podcast. Welcome back to the Daybreak
Speaker 1: Asia podcast. I'm Doug Prisner. We're tracking market action today
Speaker 1: on this the final day of the trading week in
Speaker 1: the APEC region. And joining me now from our studios
Speaker 1: in Singapore is Mary Nicola, Bloomberg m Live Strategist. You
Speaker 1: and I were talking a moment ago about the dollar
Speaker 1: strength and a lot of the end weakness that's been
Speaker 1: created as a consequence of that. Earlier in the week,
Speaker 1: didn't we break to the week side of one fifty
Speaker 1: six against the greenback, Yeah.
Speaker 3: We did, and then we saw a bit of a
Speaker 3: retlacement because the Central Bank governor came out and said
Speaker 3: from the BOJ, he said that it's hard to predict
Speaker 3: the outcome for the December meeting, so I always put
Speaker 3: December back on the table, which something wasn't even on
Speaker 3: anyone's radar screen at this point. So it looks like
Speaker 3: it's more of a live meeting now and now everyone's
Speaker 3: just looking for ques as to anything from the on
Speaker 3: the wires. Is he going to say something to signal December?
Speaker 3: But the yen is really struggling. The yen is struggling
Speaker 3: to break higher. It's really held back, especially because it's
Speaker 3: been a very strong dollar environment. So you need a
Speaker 3: clearer signal from the BOJ to say, Okay, we're actually
Speaker 3: going to continue normalizing rates.
Speaker 1: So I saw earlier today that we had some inflation
Speaker 1: data for Japan core consumer prices in October up at
Speaker 1: an annual rate of two point three percent, a bit
Speaker 1: above what the market was looking for. But that's not
Speaker 1: going to move the needle, will it? When it comes
Speaker 1: to the BOJ.
Speaker 3: I mean, they keep talking about we're going to change
Speaker 3: policy if our outlook is realized. Your every data point
Speaker 3: brings you closer to that outlook being realized. But in
Speaker 3: many ways they continue to drag their feet, and so
Speaker 3: the market is just getting a little bit impatient. So
Speaker 3: you're seeing that rate differentials, for example, on some of
Speaker 3: the crosses moving in the end's favor, but the yen
Speaker 3: isn't going along with it, and that's because traders aren't
Speaker 3: really fully buying it and they're not fully convinced. Because
Speaker 3: every single time the BOJ comes up with a different excuse, Oh,
Speaker 3: the outlook in the US, Oh, the domestic politics, Oh
Speaker 3: it's now US politics. So there always seems to be
Speaker 3: a reason for it.
Speaker 1: So we can assume then, based on what I'm hearing,
Speaker 1: is that December is not going to be the meeting
Speaker 1: where they hike interest rates? Could January be that meeting?
Speaker 3: January seems to be a little bit more likely. But
Speaker 3: I think a lot of what's happening in the US
Speaker 3: on the political side really muddies the waters for a
Speaker 3: lot of central banks, especially in this region. Not only
Speaker 3: do you have dollar strength, but also the fear of
Speaker 3: more protectionist policies are really coming through. So there's a
Speaker 3: lot of fear on that sense. So for example, Bank
Speaker 3: of Korea next week, they're likely to remain cautious even
Speaker 3: though the expectation was that they would continue cutting, and
Speaker 3: you're going to see a lot of that momentum shifting.
Speaker 3: But if the yen really needs to get a clear
Speaker 3: break and actually break higher, it still needs the BOJ
Speaker 3: to push hard.
Speaker 1: So what does that mean in terms of the equity
Speaker 1: market in Tokyo.
Speaker 3: Yeah, I mean there has been this Obviously, this relationship
Speaker 3: between a weaker yen drives the equity markets higher, especially
Speaker 3: because a lot of the major companies, so let's say
Speaker 3: the top ten by market cap, really do depend on
Speaker 3: the en weakness and they do better, profits do better
Speaker 3: as a result. But also there is a clear sticking
Speaker 3: point for the markets, and that's also because of their
Speaker 3: reliance on the US. So again, these protectionist policies will
Speaker 3: come into play if they actually do come to fruition.
Speaker 3: So you could get a number of headwinds accumulating for
Speaker 3: Japanese equities. Whether it's these protectionist policies or the stronger
Speaker 3: end that will all weigh on the equity markets, especially
Speaker 3: if domestic consumption isn't doing its job.
Speaker 1: I'm going to mix it up a little bit. Can
Speaker 1: we talk about crypto, because today during the New York session,
Speaker 1: we had bitcoin break in above ninety nine thousand for
Speaker 1: the first time. Some of this may have been linked
Speaker 1: to the fact that Gary Gensler, the head of the
Speaker 1: SEC essentially indicated that he is going to be leaving
Speaker 1: on January the twentieth. We know he's talked tough when
Speaker 1: it comes to regulating crypto, and if you can accept
Speaker 1: the fact that with the incoming administration, maybe we get
Speaker 1: an office at the White House that oversees crypto, maybe
Speaker 1: we get a Securities and Exchange Commission chair that is
Speaker 1: a lot more crypto friendly. Is anyone in your neck
Speaker 1: of the woods buying into this rally? Do they believe
Speaker 1: in it?
Speaker 3: I mean, the market is very clear that they buy
Speaker 3: into this rally. I think that's probably the clearest Trump
Speaker 3: trade that we've seen in terms of the expectation of
Speaker 3: deregulation is likely to come through. So, you know, people
Speaker 3: are now talking about one hundred thousand, right, and it
Speaker 3: seemed long ago it seems unattainable, But now it seems
Speaker 3: more than attainable within the very near future. So I
Speaker 3: think there's a lot of support, especially on the hopes
Speaker 3: that deregulation is going to come that there's going to
Speaker 3: be support from this new administration for cryptocurrencies, so it's
Speaker 3: hard to see the end of the rally coming through.
Speaker 1: Before I let you go, I want to ask about
Speaker 1: the view from overseas on the FED. It seems increasingly
Speaker 1: as though the market is backing away from the idea
Speaker 1: that the FED is going to be aggressive, and now
Speaker 1: even a conversation around the fact that maybe the FED
Speaker 1: will be on hold at the December meeting. To the
Speaker 1: point that we were making earlier about dollar strength, this
Speaker 1: is only going to underpin that right.
Speaker 3: Yeah, absolutely, and I think that's what makes it a
Speaker 3: little bit more are difficult for central banks in this region.
Speaker 3: We've already seen it from Bank Indonesia. They've taken on
Speaker 3: a little bit more cautious approach, especially because we've seen
Speaker 3: that their currency has weakened. Bank of Korea next week
Speaker 3: we'll probably toe the same line. So it's about the
Speaker 3: fact that if they take on a cautious approach, everyone
Speaker 3: in this region is going to do the same because
Speaker 3: they're frankly just worried about more currency weakness.
Speaker 1: We'll leave it there, Mary, thank you so much for
Speaker 1: making time. Thank you to chat with us. Mary Nicola
Speaker 1: Bloomberg m Live strategist joining us here on the Daybreak
Speaker 1: Asia podcast from our studios in Singapore. Welcome back to
Speaker 1: the Bloomberg Daybreak Asia Podcast. I'm Doug Prisner. Joining us
Speaker 1: for a look at market action is Chris Zacarelli. He
Speaker 1: is the chief investment officer at north Light Asset Management,
Speaker 1: joining us today from Charlotte, North Carolina. Chris, thanks for
Speaker 1: joining us. One of the things that struck me today
Speaker 1: when you look at market action, the rally that we
Speaker 1: had in small caps, the so called Trump trade seem
Speaker 1: to have resurfaced in a big way. We're talking a
Speaker 1: lot here about pro growth policies. Are you a buyer?
Speaker 4: Yeah, We've been interested in small caps for quite some time,
Speaker 4: and we think there's it is a game changer in
Speaker 4: terms of the red sweep in terms of potentially lower
Speaker 4: less or more regulation, lower taxes, and so we think
Speaker 4: that will benefit a lot of the smaller companies which
Speaker 4: are more levered to the tax code.
Speaker 5: But also as the country looks to be a.
Speaker 4: Little bit more domestically focused and potentially see some headwinds internationally,
Speaker 4: we think small caps will also benefit because predominantly they
Speaker 4: have a lot less sales that are overseas in the
Speaker 4: small cap space versus large caps, is.
Speaker 1: There a risk that a number of these companies may
Speaker 1: be struggling to pay their debt and they may see
Speaker 1: a little bit of subdued earnings growth. Could that potentially
Speaker 1: spoil this trade a little bit?
Speaker 4: Yeah, I mean, I think when you look at the trade,
Speaker 4: you know, obviously, if you're looking at small caps across
Speaker 4: the board, if you look at let's say, the Rustle
Speaker 4: two thousand, you know at least a third of those
Speaker 4: are not profitable. And so you know, for those companies
Speaker 4: which are struggling from a cashlow point of view, absolutely,
Speaker 4: if they have high debt loads and interest rates as
Speaker 4: saying higher for longer, that could be a challenge.
Speaker 5: We definitely think, you know, you have to pick your spots.
Speaker 4: You'll have to look for companies with more manageable debt
Speaker 4: loads or ones that have pushed out their maturity dates,
Speaker 4: as well as companies that are already casual positive, not
Speaker 4: necessarily cash flow positive in the future. So that is
Speaker 4: a possibility for the sector as a whole.
Speaker 5: Absolutely.
Speaker 1: The other thing, obviously that the market's been struggling to
Speaker 1: deal with is what appears to be an adjustment from
Speaker 1: the FED moderating the pace of rate cuts. Maybe we're
Speaker 1: dealing with a situation where higher for longer is going
Speaker 1: to be kind of the mantra, Is that fair?
Speaker 4: I think that's definitely the change that we've seen, you know,
Speaker 4: since the election, the idea that potentially we'll see more inflation.
Speaker 4: Whether that's because pro growth policies will lead to a
Speaker 4: little bit of a hotter economy, or whether tourists get
Speaker 4: introduced next year and that leads to a inflation, there's
Speaker 4: a lot more. I think there's a wider range of
Speaker 4: outcomes at this point in terms of higher and lower.
Speaker 4: And I think, you know, if you're looking at a
Speaker 4: situation where the FED was looking to cut rates pretty
Speaker 4: aggressively last year, and I think if you look even
Speaker 4: at the end of October, maybe there was five or
Speaker 4: six rate cuts priced in. And now when I look
Speaker 4: at my Bloomberg terminal before this interview, you know, using
Speaker 4: the WIIRP function, it's less than three. So I think
Speaker 4: the market's already taken out some of the potential FED
Speaker 4: rate cuts. Obviously that really depends on policy, depends on
Speaker 4: the path of the economy, but for now, I think,
Speaker 4: you know, one big change you can say, at least
Speaker 4: in the last couple of weeks post election, is that
Speaker 4: most people are expecting fewer rate cuts versus even just
Speaker 4: a few weeks.
Speaker 1: Ago, higher for longer rates. Was a big question mark
Speaker 1: over the commercial real estate market, and I was struck
Speaker 1: today by a piece that we had on the Bloomberg Terminal.
Speaker 1: Carson Block was saying that apartment complexes are expected to
Speaker 1: be the next major source of problems in the commercial
Speaker 1: real estate market, particularly in the Sun Belt. Does he
Speaker 1: have a point there?
Speaker 5: I think he does.
Speaker 4: And again, you know, when you're looking at real estate
Speaker 4: in general, and even commercial real estate, you know clearly
Speaker 4: it's a it's a very very broad sector, not just geographically,
Speaker 4: but also the quality of the of the you know,
Speaker 4: of the buildings.
Speaker 5: And so I think just like you're going to see.
Speaker 4: Within within office, I think you'll say the same thing
Speaker 4: within residential. You know, those those buildings that are in
Speaker 4: great locations, potentially Class A and are really going to
Speaker 4: be a place where people want to come back to.
Speaker 4: I think you'll see the same thing on on the
Speaker 4: residential side for those for those places where you're you've
Speaker 4: got a lot of demand and and and the equality
Speaker 4: is high, I imagine you won't have much trouble. But
Speaker 4: for those properties that are below below A or or
Speaker 4: that are basically you know, in some of those less
Speaker 4: desirable geographies, you could see some issues. So I think,
Speaker 4: I think he's got a point. But again I wouldn't
Speaker 4: I wouldn't paint with a broad brush. I would I
Speaker 4: would look a little bit more specifically within within various
Speaker 4: geographies and various qualities even with in those geographies.
Speaker 1: So we talked about the Trump trade a moment ago.
Speaker 1: In some of those pro growth policies, tariffs obviously are
Speaker 1: the big centerpiece here of the Trump economic plan. How
Speaker 1: has that changed your thinking on putting money to work
Speaker 1: in public markets these days? Whether you're talking about US
Speaker 1: companies that are exposed to international trade flow, the multinationals,
Speaker 1: or let's say markets offshore like in Asia, Hong Kong
Speaker 1: for example, or even China.
Speaker 4: It's definitely made us marginally less likely to go international,
Speaker 4: whether that's looking at actual ordinaries or ADRs, so you know,
Speaker 4: looking at international companies. But we've also moved down the
Speaker 4: cap structure as well, or moved down the capitalization structure,
Speaker 4: moving more from large caps relatively speaking to mid caps
Speaker 4: and small caps specifically, because we wanted to have a
Speaker 4: little bit less international exposure even within our revenues, and
Speaker 4: so that's that's been a change that we've made at
Speaker 4: the margins, I would say, like everything else, it remains
Speaker 4: to be seen what will happen over the next year
Speaker 4: or two, and we don't know to what degree we'll
Speaker 4: see tariffs, whether the tariffs will be a little bit
Speaker 4: more surgical in nature, whether they'll be across the board,
Speaker 4: or whether the tariff rates will be much higher than expected.
Speaker 5: I think it's a big unknown, and so there is
Speaker 5: some uncertainty. But at the.
Speaker 4: Margins, we've definitely been a little bit more domestic focus,
Speaker 4: and we've moved down a little bit in terms of
Speaker 4: market capitalization versus where we were about a month ago.
Speaker 1: The President elect has also put a lot of focus
Speaker 1: on expanding production of domestic crude oil. How are you
Speaker 1: feeling generally about the energy complex?
Speaker 5: And they're just pretty complicated.
Speaker 4: And the reason I say that is, you know, all
Speaker 4: things being equal, you would expect a lot more supply
Speaker 4: to potentially drive down the price of oil, and that
Speaker 4: could make things a little bit more challenging for energy companies.
Speaker 5: However, we also think if you look at the stocks within.
Speaker 4: The energy sector, it's been one of the more challenged sectors,
Speaker 4: definitely in the bottom quartile in terms of SOTCK returns
Speaker 4: at least prior to the election.
Speaker 5: So we think it's a more complicated picture.
Speaker 4: We think deregulation and we think the ability to make
Speaker 4: higher revenues is definitely a factor.
Speaker 5: And one that we think is a positive for the sector.
Speaker 5: On the other hand, we think if there's.
Speaker 4: Too much supply, that can drive down the price of
Speaker 4: oil and potentially reduce some of the profitability. So at
Speaker 4: the margin, we're really looking at it being a net
Speaker 4: positive for companies in general. And then because the stock
Speaker 4: valuations had been a lot lower and pretty depressed heading
Speaker 4: into the election, we think the energy sector is a
Speaker 4: good place to look for opportunities more because of valuation,
Speaker 4: not necessarily because we think expanding production dramatically is going
Speaker 4: to be good for profitability, because we think that'll be
Speaker 4: more ahead when the people are expecting.
Speaker 1: Well, I'm glad you mentioned the issue of deregulation. Today
Speaker 1: we learned that the chair of the SEC, Gary Gensler,
Speaker 1: is planning to step down as of January twentieth, and
Speaker 1: there are a lot of folks saying that his departure
Speaker 1: will likely lead to an unwinding of regulation and maybe
Speaker 1: a little bit more friendly approach when it comes and
Speaker 1: maybe a little friendlier approach when it comes to cryptocurrencies.
Speaker 1: Earlier today, bitcoin broke above ninety nine nine thousand for
Speaker 1: the first time. How do you feel about cryptocurrencies?
Speaker 4: I mean, in general, our stance has always been cryptocurrencies
Speaker 4: are pretty speculative in nature. We treat them as commodities
Speaker 4: in the sense of it's really hard to get a
Speaker 4: fundamental value.
Speaker 5: So for the most part, we've we've.
Speaker 4: Really stayed away from cryptocurrencies as far as something that
Speaker 4: we would invest in and put part of our client's portfolios,
Speaker 4: as far as.
Speaker 5: From more retirement point of view.
Speaker 4: But we have a lot of questions about it, clearly
Speaker 4: with a lot of price movement, and to your point,
Speaker 4: you know, you've seen the price of bitcoin really explode.
Speaker 4: Not only does it look like Trump Trump was likely
Speaker 4: to win the election, but post election as well. So
Speaker 4: we've had a lot of questions about it, and again
Speaker 4: we really put it into that speculative bucket, not something
Speaker 4: that we have within our within our general portfolios, but
Speaker 4: something that we get a lot of questions about, and
Speaker 4: we really think about.
Speaker 5: It as something that has, you know, supply and.
Speaker 4: Demand characteristics similar to what you'd see with gold or
Speaker 4: precious metals. So for now, we're not using it within
Speaker 4: our portfolios, but we are getting a lot of questions
Speaker 4: about it, and I'm sure when and if we cross
Speaker 4: that one hundred thousand dollars mark, the questions will only increase.
Speaker 1: Yeah, and I'm wondering whether the strategy is not to
Speaker 1: be long bitcoin per se, but maybe to invest directly
Speaker 1: in an ETF. Does that make sense?
Speaker 4: Yeah, I mean we know as financial advisors it would
Speaker 4: be pretty difficult for us to help people invest in
Speaker 4: bitcoin directly. We're definitely set up if we were to
Speaker 4: have exposure bitcoin to use it through et apps for
Speaker 4: etns or other financial instruments, So that's really how we
Speaker 4: would access it. But I'm sure there's plenty of our
Speaker 4: clients who are accessing it directly.
Speaker 5: It's just not something that we would be helping them with.
Speaker 1: Chris, thanks so much for joining us. Chris Zaccarelli there.
Speaker 1: He is the chief investment officer at north Light Asset Management,
Speaker 1: joining from Charlotte, North Carolina here on the Daybreak Asia Podcast.
Speaker 1: Thanks for listening to today's episode of the Bloomberg Daybreak
Speaker 1: Asia Edition podcast. Each weekday, we look at the story
Speaker 1: shaping markets, finance, and geopolitics in the Asia Pacific. You
Speaker 1: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,
Speaker 1: or anywhere else you listen. Join us again tomorrow for
Speaker 1: insight on the market moves from Hong Kong to Singapore
Speaker 1: and Australia. I'm Doug Prisoner and this is Bloomberg