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Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim

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Speaker 1: Fox along with my co host Lisa A. Bramowitz. Each

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Speaker 1: day we bring you the most important, noteworthy, and useful

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Speaker 1: interviews for you and your money, whether you're at the

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Speaker 1: grocery store or the trading floor. Find the Bloomberg P

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Speaker 1: and L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com.

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Speaker 1: Let's bring Ariel Cohen back in here, senior fellow at

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Speaker 1: the Atlantic Council. What stuck out to you? First of all,

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Speaker 1: this was a very strong message against what I would

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Speaker 1: call the globalists. Uh, this is the world of the

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Speaker 1: mosaic of independent nations. I think Steve Bannon would have

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Speaker 1: been proud of this speech. Um. The President is strengthening

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Speaker 1: the sovereignty against global government. He says, the United States

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Speaker 1: does not recognize the International Criminal Court, we will not

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Speaker 1: join the International the UN Compact, and refugees, et cetera.

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Speaker 1: He is not against cooperating with the United Nations, He

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Speaker 1: just wants America to do it on our own terms.

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Speaker 1: Arial Other topics include OPEC and oil prices, as well

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Speaker 1: as China and trade negotiations. I wonder if you could

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Speaker 1: comment on the relationship that the President is setting out

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Speaker 1: between the United States and OPEC as a organization that

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Speaker 1: he describes as controlling oil prices. Absolutely. I had the

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Speaker 1: privilege to testify before the US Congress on the legislation

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Speaker 1: called NOPECK no opec UH and this is something that

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Speaker 1: is encouraged by the White House. Apparently the President you

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Speaker 1: OPEC for what it is, the cartel that by opening

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Speaker 1: or closing this spigot can regulate the prices, and OPEC

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Speaker 1: is now expanding. Russia and Saudi Arabia are working closely together,

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Speaker 1: and this was interesting because he mentioned um the Russian

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Speaker 1: pipeline that goes into Germany, the natural gas pipeline, but

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Speaker 1: he did not mention Russia. Contrasted what was going on

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Speaker 1: in Germany and their energy policy with the energy policy

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Speaker 1: that exists in Poland. He spoke about how OPEC is

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Speaker 1: ripping off the rest of the world. Well, let's distinguish

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Speaker 1: between gas and oil. Russia is corporating with ope in

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Speaker 1: Saudi Arabia on oil. And it was interesting that he

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Speaker 1: mentioned Saudi Arabia amongst very few US allies. You mentioned India,

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Speaker 1: you mentioned Israel. No surprises here. He mentioned Poland which

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Speaker 1: is an important in the election with the ethnic and

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Speaker 1: Polish American vote. But he did mention Saudi Arabia as

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Speaker 1: an ally at the same time nashing OPEC and Saudia,

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Speaker 1: of course is the founding member and the market maker

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Speaker 1: in Ope. That there was a dichotomy and a paradox

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Speaker 1: right there. Um I think he will push Opic not

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Speaker 1: to um diminish oil production. He wants oil prices lower

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Speaker 1: than they are now. So Ariel, I want to go

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Speaker 1: back to something that you said initially, that that that

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Speaker 1: Steven would be proud of this speech and that it

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Speaker 1: was rejection of globalism. And I'm just wondering if you

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Speaker 1: can sort of put historic perspective on u N Assembly

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Speaker 1: addresses by presidents. How instructive have they been about policies

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Speaker 1: and sort of how seminal are they in signaling sort

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Speaker 1: of complete see change in in in policies versus just

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Speaker 1: sort of pomp and circumstance. I think that in this speech,

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Speaker 1: in particular, we see the strongest language possible about Iran.

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Speaker 1: The president is hoping that on the fourth of November,

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Speaker 1: when the sanctions on Iran kick in the second round

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Speaker 1: of sanctions uh and Iran is driven to lose its

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Speaker 1: oil exporting opportunities. UM, we will move towards UH. Possibly.

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Speaker 1: I think they're not saying that, but they're thinking about it,

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Speaker 1: regime changing Iran because that regime will have UM will

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Speaker 1: run out of money, and people are already sending a

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Speaker 1: very strong signal to Tehran that they do not want

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Speaker 1: to continue like that. So that's the main message UM.

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Speaker 1: In terms of other things, the terror forwards China, I

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Speaker 1: think this was very important again in the context of

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Speaker 1: the elections, to the President's UM core vater base. He's saying,

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Speaker 1: you lost jobs, Steel industry lost one whatever jobs US

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Speaker 1: lost sixty seconds. So this is a core UM voter

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Speaker 1: based message to the American voters. Thank you so much

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Speaker 1: for being with us, Aero Cohen. We really appreciate your insights,

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Speaker 1: Aero Cohen. So you're fellow at the Atlantic Council joining us.

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Speaker 1: Following the speech of President Trump delivered at the UN

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Speaker 1: General Council, we're broadcasting live from the Bloomberg Interactor Broker's Studios.

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Speaker 1: I'm Pim Fox along with my co host Lisa Abramowitz.

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Speaker 1: Our topic now is emerging markets. Our guest Phil Taures,

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Speaker 1: Global co head of emerging markets at Agon Asset Management.

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Speaker 1: He joins us here in our eleven three oh studios.

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Speaker 1: Phil Tours, thank you very much for coming in. Argentina's

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Speaker 1: paso taking a tumble this coming after the president of

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Speaker 1: the country's central Bank, Luis ca Puto, resigned. They have

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Speaker 1: tapped a economist for a replacement. Why would you still

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Speaker 1: be bullish if indeed you are on Argentina. Great to

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Speaker 1: be here with you. UM, it's obviously breaking news. We're

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Speaker 1: trying to figure out exactly what the implications are at

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Speaker 1: the moment, but markets seem to be taking in stride

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Speaker 1: at least on the external credit UH and the and

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Speaker 1: the currency. Again, still trying to figure out exactly implications

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Speaker 1: and UH and the policy changes that they might come back.

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Speaker 1: So when you're investing Phil in this market Argentina, Brazil, UH,

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Speaker 1: how do you factor in the liquidity issues? Because this morning,

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Speaker 1: right after the announcement came out about the Argentinian Central bankhead,

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Speaker 1: there was zero trading in the local Argentinian peso market.

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Speaker 1: That's concerning It's an a liquid market in general, so

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Speaker 1: this is something we think is generally factored into the prices.

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Speaker 1: So as investors that take medium to long term, we

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Speaker 1: can absorb some of the liquidity in some of these markets.

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Speaker 1: But we try to look through a lot of the

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Speaker 1: the ups and downs, and this was this was a

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Speaker 1: steep drop that that the markets reacted. Just to go

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Speaker 1: back to what you talked about with Argentina, are you

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Speaker 1: really looking for the International Monetary Fund to come in

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Speaker 1: with some extra money and then that will help everybody's

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Speaker 1: investment thesis. No, I think what we're really looking for

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Speaker 1: is policy change and in a continuation of good ideas,

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Speaker 1: and if they can deliver on primarily getting to a

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Speaker 1: balanced budget in the next year, we think that goes

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Speaker 1: a long way to securing the investment thesis of most

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Speaker 1: people that like this market. So I want to talk

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Speaker 1: about what you're buying currently. What was the most recent

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Speaker 1: sort of position that you took with conviction in emerging markets?

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Speaker 1: So I'll just rattle off a couple of our of

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Speaker 1: our favorite trades UM and let's say the last month. UM,

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Speaker 1: we've liked Senegal, We've liked Ivory Coast, Turkey, Argentina, have

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Speaker 1: been some some favorites. Those those A've been buying Turkey

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Speaker 1: over the summer. That was that was one of our

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Speaker 1: our more interesting favorite traits. Yeah. Interesting. I just have

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Speaker 1: to wonder, as a company that over sees more than

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Speaker 1: a hundred billion dollars of assets and you have a

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Speaker 1: lot of money to deploy, how much can you really

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Speaker 1: go into a place like Senegal or some of the

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Speaker 1: countries with less dead or less you know, sort of

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Speaker 1: smaller markets, considering that you'll be a dominant player potentially. Well, first,

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Speaker 1: a hundred billion dollars is not our total allocation to

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Speaker 1: emerging markets, so we're not trying to deploy all of that.

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Speaker 1: But some of these markets have some reasonable liquidity we

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Speaker 1: can put We can put money to work fairly easily.

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Speaker 1: Just looking at, for example, one of the Senegal government bonds,

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Speaker 1: they are down about six and a quarter percent since

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Speaker 1: the beginning of the year. Are you buying these things

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Speaker 1: for yield or for capital appreciation? Capital appreciation, although yield

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Speaker 1: is going to be a big part of it. UM.

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Speaker 1: So we got involved in Senegal sometime late summer after

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Speaker 1: a lot of that, after a lot of that decline,

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Speaker 1: they had issued some new debt. The market did received

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Speaker 1: that terribly well. UM as a mix of adding new

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Speaker 1: debt stock and it was just an unfavorable time for

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Speaker 1: markets in general. Primarily, what we thought was, it's a

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Speaker 1: value situation, good economy, stable, kind of a model democracy,

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Speaker 1: and it got cheap. So I have to wonder. It

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Speaker 1: sounds like you're taking risk and you're somewhat optimistic about

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Speaker 1: emerging markets generally. How does the FED play into this,

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Speaker 1: especially as they prepared to raise rates possibly tomorrow. Yeah,

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Speaker 1: the Fed historically at least our our view on how

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Speaker 1: the emerging markets have reacted to FED hiking cycle. If

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Speaker 1: it's matched with growth, then the emerging markets can typically

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Speaker 1: do pretty well. If not sideways, which with high yield

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Speaker 1: is just a fine market. UM. To the extent that

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Speaker 1: the FED is hiking um too to cut growth right,

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Speaker 1: to put it into a recession or environment because they're

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Speaker 1: concerned but inflation, then that's bad. Um. We think we're

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Speaker 1: in the former ironment and UH and maintain a reasonably

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Speaker 1: optimistic feed on most of these markets. Really interesting, Phil Torres,

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Speaker 1: thank you so much for being with us. Philterress, Global

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Speaker 1: cohead of Emerging Markets and Director of Emerging Markets Research

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Speaker 1: at a GUN USA Asset Management with a hundred billion

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Speaker 1: dollars under management three hundred billion dollars under management worldwide

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Speaker 1: at the Global firm. We are broadcasting live from the

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Speaker 1: Bloomberg Interactor Broker's Studios. I'm Pim Fox along with Lisa Abramowitz.

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Speaker 1: Earlier today, President Donald Trump, speaking before the UN General Assembly,

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Speaker 1: said that China is taking advantage of the US on trade.

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Speaker 1: Here to tell us more about how companies are responding

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Speaker 1: to the situation is Richard Chambers. He is the president

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Speaker 1: and the chief executive of the Institute of Internal Auditors.

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Speaker 1: They're based in Altamont Springs, Florida. He joins us here

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Speaker 1: in our eleven three oh studios. Richard Chain, thank you

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Speaker 1: very much for being here. You've written that US corporations

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Speaker 1: may have as a false sense of security regarding the

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Speaker 1: effects of trade uh confrontation between the United States and China.

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Speaker 1: Explain why you believe that to be so well, you know,

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Speaker 1: as we've been first of all, thank you for having

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Speaker 1: me uh today. It's it's great to be here. As

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Speaker 1: we so often comment, when these risks start to emerge, UH,

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Speaker 1: there's a there's sort of an initial sense of of

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Speaker 1: denial that is, oh, this can't possibly get that bad,

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Speaker 1: and it's not going to create problems for us. Unfortunately,

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Speaker 1: sometimes that ends up happening. So as we've been surveying

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Speaker 1: at the heads of internal audit and publicly trading companies

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Speaker 1: and and other organizations, we're sort of seeing some of

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Speaker 1: that initial sense of denial, like, oh, well, this is

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Speaker 1: not going to really have a significant impact on our company,

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Speaker 1: so we're not gonna worry too much about it. And

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Speaker 1: that's the problem a lot of times is that you

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Speaker 1: see the storm approaching, but you don't respond until the

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Speaker 1: winds are picking up. What gives you confidence that the

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Speaker 1: storm is picking up in a way that companies are

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Speaker 1: not recognizing, well, I think there have been plenty of

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Speaker 1: There's been plenty of articles and other publications in the

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Speaker 1: past week that have pointed out that, particularly in consumer

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Speaker 1: products and retail, the the impact of the tariffs on

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Speaker 1: all the products that are going to be imported are

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Speaker 1: going to UH have an impact in terms of the

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Speaker 1: cost of the products. UH will likely impact demand. As

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Speaker 1: refrigerators get more expensive or dishwashers get more expensive, that's

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Speaker 1: going to have an impact on the demand. So, particularly

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Speaker 1: in industries like retail and consumer products, there's certainly plenty

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Speaker 1: of evidence that this is going to have an impact

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Speaker 1: and you're not seeing that reflected by the CEOs, right, Yeah.

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Speaker 1: What we're seeing at this point is, uh, you know,

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Speaker 1: when we ask chief audit executives, heads of internal audit,

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Speaker 1: is this a significant risk for your company, we're still

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Speaker 1: giving an overwhelming response, No, we don't see this as

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Speaker 1: a significant risk at this point. Now, when when we

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Speaker 1: ask what what does your company think the risk of

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Speaker 1: the overall economy would be, almost sixty percent of them

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Speaker 1: responded to a survey last week that their companies think

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Speaker 1: there would be a significant risk of the overall economy.

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Speaker 1: But it seems to be one of those yeah, but

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Speaker 1: it's not gonna affect me kind of denials. I think,

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Speaker 1: do they understand that there's a contradiction and trying to

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Speaker 1: hold those two positions, or do you believe that, perhaps

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Speaker 1: for competitive reasons, they're just not willing to disclose to

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Speaker 1: you how worried or concerned or prepared they are. I

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Speaker 1: think it may be. I think it may be the former,

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Speaker 1: because we see this. I think one of the last

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Speaker 1: me too movement and how slow companies were to recognize

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Speaker 1: the risk that that presents. I see a common thread

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Speaker 1: downstream impact of this risk. So if if in fact

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Speaker 1: the tariffs are implemented to the extent that it appears

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Speaker 1: then what could happen after that? And oh, by the way,

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Speaker 1: how could that impact our company, our workforce, our investment um.

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Speaker 1: And that's what I think happens all too often, is

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Speaker 1: that when it comes to risk management, there's a slow

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Speaker 1: reluctance to accept that a risk may be very, very detrimental.

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Speaker 1: I want to shift gears a little bit. We were

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Speaker 1: current market resembles something of a bubble in terms of

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Speaker 1: sentiment anyway, that is when accounting shenanigans are more likely

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Speaker 1: to happen when capital is flowing freely. To what degree

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Speaker 1: are you concerned that that is currently going on, where

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Speaker 1: perhaps when sort of the tide rolls back and credit

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Speaker 1: isn't as free flowing, we could see some serious problems. Well,

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Speaker 1: we've seen in the past when the economy started to

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Speaker 1: show signs of some sort of upheave. Uh, that there

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Speaker 1: is a lot of pressure and analyst expectations are put

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Speaker 1: out there. Companies have to meet those analyst expectations where

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Speaker 1: they get punished in the market. That's when we see

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Speaker 1: the risks start to rise of perhaps fraudulent financial reporting.

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Speaker 1: I think since the last major round of scandals where

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Speaker 1: fraudulent financial reporting was at the route back in the

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Speaker 1: early two thousand's, we have a lot more regulation and

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Speaker 1: control in place, but I still wouldn't say that are

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Speaker 1: still wouldn't put it out of the realm of possibility.

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Speaker 1: And so once again, when likelihood starts to go up,

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Speaker 1: that's one of the components of risk assessment. That's when

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Speaker 1: you need to start getting concerned. Are you at all

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Speaker 1: concerned about the tone that is reflected by the behavior

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Speaker 1: of people in Congress? And I'm talking about the House

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Speaker 1: of Representatives as well as senators and even those people

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Speaker 1: each other and using those as examples, you know, it's

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Speaker 1: it's interesting. I posted a blog last week about civility

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Speaker 1: in the boardroom. Uh, it seems to be the only place,

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Speaker 1: perhaps where there's still a lot of civility. Maybe too much,

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Speaker 1: and that board members don't challenge each other. But the

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Speaker 1: point I made is we're living in a society today

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Speaker 1: where civility seems to be held in much less high regard.

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Speaker 1: If if, if you can um and so I do think,

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Speaker 1: and I spent quite a bit of time in Washington

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Speaker 1: during my days as a federal employee. I do think

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Speaker 1: that the tone in Washington has definitely deteriorated in the

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Speaker 1: last few years, and and that comes from all sides.

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Speaker 1: I don't think that any one party or anyone group

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Speaker 1: that we face in society. Just real quick. When you

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Speaker 1: talk to auditors who are going around and checking out corporations,

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Speaker 1: is there anything that you've been hearing from them that

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Speaker 1: we haven't discussed that surprised you ums in terms of

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Speaker 1: like reviewing companies and sort of their position and whether

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Speaker 1: they're stronger than they seem or weaker than they seem

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Speaker 1: or No. I don't think that I've I've I've gotten

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Speaker 1: any indication from the internal auditors that there's a lot

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Speaker 1: of miss there. I do think that the internal auditors

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Speaker 1: sometimes are uh, they get caught up in the culture

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Speaker 1: of their organization maybe and they're a little slower to

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Speaker 1: recognize emerging risk. And it's one of the things that

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Speaker 1: we're always coaching them is that they have to be

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Speaker 1: able to detect the thunder before the storm, because if

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Speaker 1: they don't, then once once the real risks emerge, it's

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Speaker 1: going to be well, where were the internal auditors? And

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Speaker 1: it's very, very important that they get on in front

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Speaker 1: of these risks. Richard Chambers, thank you so much for

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Speaker 1: being with us. Thank you Richard Chambers as President chief

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Speaker 1: executive of the Institute of Internal Auditors. We are broadcasting

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Speaker 1: live from the Bloomberg Interactive Studios here at Bloomberg's World

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Speaker 1: headquarters in New York City. Facebook what is going on there?

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Speaker 1: Down at three quarters of one percent today after Instagram's

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Speaker 1: founders left the firm citing disagreements, with Facebook's leader joining

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Speaker 1: us now Shara Ovid, Bloomberg opinion columnists covering all things tech, Shira,

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Speaker 1: how bad is this for Facebook? Because frankly, actually, stock

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Speaker 1: traders are taking it relatively and stride, considering the Instagram

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Speaker 1: really is a profit engine or potential one for Facebook. Yeah,

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Speaker 1: I'm a little bit surprised at the relatively modest stock

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Speaker 1: declined to be honest. The look, the truth is, it's

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Speaker 1: gonna be hard to know how big a deal this

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Speaker 1: really is because it's going to be measured in what

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Speaker 1: doesn't Instagram do or what opportunities this Instagram miss if

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Speaker 1: it's distracted for a while by this leadership vacuum, or

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Speaker 1: as in fact, it loses some of its kind of

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Speaker 1: essential essence of Instagram nous. Well, sure, what exactly is

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Speaker 1: the problem with the two founders leaving. They've been there

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Speaker 1: for six years. What do they do on a day

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Speaker 1: to day basis that someone else can't do? Yeah? Fair enough.

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Speaker 1: I mean, look it, it's not uncommon right for a

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Speaker 1: company to acquire another company and then for the CEOs

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Speaker 1: or the founders of those acquired companies to eventually leave. Um. So,

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Speaker 1: I don't want to say this is some kind of

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Speaker 1: you know, criminal matter and things like that, but um,

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Speaker 1: it's true that both Instagram founders were had leadership positions

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Speaker 1: inside of Instagram. They had set up Instagram as this

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Speaker 1: kind of semi autonomous unit inside of Facebook, which I

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Speaker 1: think was important to the product independence of Instagram. Um,

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Speaker 1: and you know, they had leadership roles in Shepherd ng

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Speaker 1: Instagram through this kind of important period of growth for

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Speaker 1: the company. So yeah, there are plenty of executives at

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Speaker 1: Facebook who can fill the void. But I don't want

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Speaker 1: to downplay the importance of of Kevin Susterman Mike Krieger,

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Speaker 1: the two founders who at least until now had important

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Speaker 1: leadership roles and Instagram as well. Him is your daughter

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Speaker 1: on Facebook? Is your daughter on Instagram? Oh? Your strike

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Speaker 1: two strike too? That means that you're a better parents.

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Speaker 1: And I I found out the other night that my

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Speaker 1: son had signed up for Instagram. Who he's nine, um,

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Speaker 1: and he is not signed up for Facebook. Um. But

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Speaker 1: he was out there liking photographs and having followers, etcetera

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Speaker 1: very alarming whole host of other issues. But Sira, it

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Speaker 1: is notable to me that he signs up for Instagram,

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Speaker 1: and that's where that's where the actions act. Can you

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Speaker 1: give as a sense of just how much faster it's

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Speaker 1: growing and how much more dominant it's becoming as far

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Speaker 1: as a revenue driver than Facebook's really uh eponymous platform. Well,

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Speaker 1: we don't exactly know how fast it's growing because Facebook

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Speaker 1: keeps that data uh private, but it's certainly growing much

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Speaker 1: faster than the main Facebook social network cap which has

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Speaker 1: more than two billion users every month. So is there

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Speaker 1: is a limit to growth when you have you know,

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Speaker 1: a significant chunk of the world's population already using Facebook.

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Speaker 1: But it's clear that Instagram is an important growth trajectory,

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Speaker 1: both in terms of users. UM. We see in North

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Speaker 1: America the number of daily users on Facebook main Facebook

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Speaker 1: has flatlined recently, and that's a dangerous development for Facebook.

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Speaker 1: North America is not where the majority of users are,

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Speaker 1: but it is where the majority of ad revenue is,

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Speaker 1: and that's important for Facebook. And we've also seen that

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Speaker 1: as Facebook Facebook has some user growth issues, Facebook has

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Speaker 1: dialed up the number of advertisements on Instagram and pointed

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Speaker 1: a lot of advertisers too, the migration of users to

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Speaker 1: Instagram and their embrace of this relative still relatively novel

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Speaker 1: format that's popular on Instagram called stories, which is this

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Speaker 1: um kind of ephemeral diaries um composed of videos, short videos,

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Speaker 1: and photos. So Facebook is enormously important to the growth

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Speaker 1: strategy at Facebook, and losing these founders is not great

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Speaker 1: for what's been the most important growth asset at Facebook. Okay,

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Speaker 1: just to set the record right, I mean the two

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Speaker 1: founders sold Instagram to Facebook six years ago. Facebook paid

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Speaker 1: seven hundred and fifteen million dollars. At the time, the

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Speaker 1: company had thirteen employees and thirty million registered users. Now

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Speaker 1: they've got a billion people using Instagram each month, and

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Speaker 1: Bloomberg Intelligence analysis said that Instagram is worth more than

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Speaker 1: a hundred billion dollars. So it's not the same company

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Speaker 1: they sold to Facebook anymore. It's definitely not the same company.

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Speaker 1: And look both sides, both Facebook and the Instagram founders

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Speaker 1: deserve credit for that huge jump in in in assumed

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Speaker 1: valuation for Instagram. There's no way. Well, I can't say

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Speaker 1: that for sure. It would have been hard, I think

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Speaker 1: for Instagram to become such a valuable company outside of

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Speaker 1: Facebook's corporate umbrella. But at the same time, it wasn't

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Speaker 1: like Facebook's credit for the growing usage and evaluation of

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Speaker 1: Instagram under its auspices. Well done. Thank you very much.

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Speaker 1: Shira over Day are Bloomberg opinion columnists for all things

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Speaker 1: related to the world of technology. Thanks for listening to

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Speaker 1: the Bloomberg P and L podcast. You can subscribe and

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Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast

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Speaker 1: platform you prefer. I'm Pim Fox I'm on Twitter at

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Speaker 1: pim Fox. I'm on Twitter at Lisa Abramo. It's one

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Speaker 1: before the podcast. You can always catch us worldwide on

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Speaker 1: Bloomberg Radio