1 00:00:02,480 --> 00:00:10,440 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 2 00:00:10,520 --> 00:00:13,720 Speaker 1: Daybreak Asia podcast. I'm Doug Krisner. You can join Brian 3 00:00:13,800 --> 00:00:16,640 Speaker 1: Curtis and myself for the stories, making news and moving 4 00:00:16,680 --> 00:00:19,560 Speaker 1: markets in the APAC region. You can subscribe to the 5 00:00:19,600 --> 00:00:23,080 Speaker 1: show anywhere you get your podcast and always on Bloomberg Radio, 6 00:00:23,320 --> 00:00:28,000 Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app. Jason Shenker 7 00:00:28,160 --> 00:00:31,760 Speaker 1: is with us. Jason is the president of Prestige Economics. 8 00:00:32,000 --> 00:00:34,560 Speaker 1: He joins us from our studios here in New York City. 9 00:00:35,000 --> 00:00:36,479 Speaker 1: Good to see you, Thanks for stopping by. 10 00:00:36,760 --> 00:00:37,320 Speaker 2: Thanks Doug. 11 00:00:37,400 --> 00:00:39,400 Speaker 1: Can we start with a PPI data I'd like to 12 00:00:39,440 --> 00:00:41,800 Speaker 1: get your take on what you make of this report. 13 00:00:41,960 --> 00:00:44,640 Speaker 2: Yeah, absolutely, Doug. Well, I think there's a couple of things. 14 00:00:44,680 --> 00:00:49,400 Speaker 2: You know, while that year on your rate slowed significantly 15 00:00:49,600 --> 00:00:53,159 Speaker 2: to that two point two percent, I think there are 16 00:00:53,159 --> 00:00:56,120 Speaker 2: a couple things in the report that are disconcerting for me. 17 00:00:56,200 --> 00:00:59,360 Speaker 2: If we're looking for easing inflation. If you look at 18 00:00:59,680 --> 00:01:04,959 Speaker 2: the whore PPI where that's excluding food, energy and trade, 19 00:01:05,240 --> 00:01:09,440 Speaker 2: that actually accelerated modestly to three point three percent from 20 00:01:09,480 --> 00:01:13,560 Speaker 2: three point two. We look at goods PPI that accelerated 21 00:01:13,600 --> 00:01:16,520 Speaker 2: from one percent to one point seven. If we look 22 00:01:16,560 --> 00:01:21,120 Speaker 2: at the intermediate stages of processed and unprocessed goods, all 23 00:01:21,160 --> 00:01:24,080 Speaker 2: of those major categories were up month on month and 24 00:01:24,480 --> 00:01:27,760 Speaker 2: up year on year, And that plus the month on 25 00:01:27,840 --> 00:01:31,120 Speaker 2: month increases of both the total and the core PPI 26 00:01:31,319 --> 00:01:34,280 Speaker 2: make me concern about what we're going to see in 27 00:01:34,319 --> 00:01:38,520 Speaker 2: tomorrow's CPI report, where I think there's a lot of 28 00:01:38,560 --> 00:01:42,120 Speaker 2: hope for easing inflation, so the Fed can do quick cuts, 29 00:01:42,200 --> 00:01:46,520 Speaker 2: deep cuts, and markets might be cruising for a bruis 30 00:01:46,560 --> 00:01:48,360 Speaker 2: in if inflation doesn't ease. 31 00:01:48,680 --> 00:01:50,559 Speaker 1: But if it's stable right now, if we can agree 32 00:01:50,600 --> 00:01:53,080 Speaker 1: to that much and we're seeing a deterioration in the 33 00:01:53,120 --> 00:01:56,240 Speaker 1: labor market, maybe the focus in terms of the mandate 34 00:01:56,520 --> 00:01:59,840 Speaker 1: shifts from the inflation side to the labor market side. 35 00:02:00,080 --> 00:02:02,840 Speaker 1: The Fed goes ahead to kind of get out in 36 00:02:02,880 --> 00:02:06,040 Speaker 1: front of what could be meaningful contraction in the economy. 37 00:02:06,560 --> 00:02:08,400 Speaker 2: I mean it might be, but if we look at 38 00:02:08,400 --> 00:02:10,920 Speaker 2: the labor market day to the latest jobs report, the 39 00:02:11,000 --> 00:02:14,200 Speaker 2: total number of non farm payrolls is now at an 40 00:02:14,240 --> 00:02:18,280 Speaker 2: all time record high, the labor force size is at 41 00:02:18,320 --> 00:02:21,080 Speaker 2: an all time record high. The reason the unemployment rate 42 00:02:21,120 --> 00:02:23,399 Speaker 2: went up isn't because the number of employed people went 43 00:02:23,480 --> 00:02:25,799 Speaker 2: down in the latest month. It's just because the number 44 00:02:25,840 --> 00:02:28,320 Speaker 2: of unemployed people went up faster than the number of 45 00:02:28,360 --> 00:02:31,880 Speaker 2: employed people. Like both of those series increased for the month. 46 00:02:32,360 --> 00:02:35,680 Speaker 2: So you know, I to be at a record high 47 00:02:35,680 --> 00:02:37,960 Speaker 2: of payrolls and think it's catastrophic in a month that 48 00:02:38,120 --> 00:02:42,680 Speaker 2: was positive but not significantly positive, with still almost eight 49 00:02:42,720 --> 00:02:45,280 Speaker 2: point two million open jobs in the JOLTS data, jobless 50 00:02:45,280 --> 00:02:47,320 Speaker 2: claims that are only about one point one percent of 51 00:02:47,360 --> 00:02:51,320 Speaker 2: the total labor force show me the horrible justification for 52 00:02:53,000 --> 00:02:56,200 Speaker 2: an intermeding emergency rate cut. I just don't see it. 53 00:02:56,200 --> 00:02:59,000 Speaker 1: It was a disappointing read the July figure, right, and 54 00:02:59,040 --> 00:03:02,640 Speaker 1: that triggered kind of ructions in the markets globally and 55 00:03:02,760 --> 00:03:06,120 Speaker 1: a big unwind in the carry trade. It really is 56 00:03:06,160 --> 00:03:09,000 Speaker 1: instructive about the degree to leverage that we have seen 57 00:03:09,200 --> 00:03:11,919 Speaker 1: in the system for some time. First of all, as 58 00:03:11,960 --> 00:03:13,960 Speaker 1: it relates to the end carry trade. Are we through 59 00:03:13,960 --> 00:03:14,519 Speaker 1: with this now? 60 00:03:15,639 --> 00:03:18,480 Speaker 2: I don't necessarily think we are, because you know that 61 00:03:18,600 --> 00:03:21,079 Speaker 2: we could see some further moves here, right. This can 62 00:03:21,080 --> 00:03:24,160 Speaker 2: be a very jerky process, and I think we're going 63 00:03:24,240 --> 00:03:28,640 Speaker 2: to see various surprises going forward. I don't necessarily think 64 00:03:28,680 --> 00:03:30,440 Speaker 2: all the data is going to come out in a 65 00:03:30,480 --> 00:03:34,480 Speaker 2: clean way. And if we see inflation data not ease 66 00:03:34,600 --> 00:03:37,720 Speaker 2: in a significant way, again, like FED chair pals said 67 00:03:37,920 --> 00:03:42,120 Speaker 2: at the July thirty first decision, not that long ago, right, 68 00:03:43,160 --> 00:03:46,360 Speaker 2: you know, they're looking at the totality of the data, 69 00:03:46,720 --> 00:03:49,560 Speaker 2: and if inflation doesn't ease that much, the Fed's hands 70 00:03:49,560 --> 00:03:51,480 Speaker 2: are tied. And if the Fed's not going to be 71 00:03:51,560 --> 00:03:55,240 Speaker 2: able to ease as significantly as summer hoping fifty bases 72 00:03:55,240 --> 00:03:58,800 Speaker 2: point cuts in September, emergency cuts before, then if these 73 00:03:58,840 --> 00:04:01,320 Speaker 2: things don't happen and more people are excited that they 74 00:04:01,360 --> 00:04:05,920 Speaker 2: will happen, you know, expectations minus reality equals disappointment, and 75 00:04:05,960 --> 00:04:10,920 Speaker 2: then that could cause more volatility in the FX markets 76 00:04:10,920 --> 00:04:11,840 Speaker 2: and equities as well. 77 00:04:11,840 --> 00:04:13,800 Speaker 1: What about the bond market? Does the bond market have 78 00:04:13,840 --> 00:04:16,040 Speaker 1: it wrong? With rates coming down as much as we 79 00:04:16,080 --> 00:04:16,720 Speaker 1: have seen. 80 00:04:18,040 --> 00:04:22,479 Speaker 2: For the bond market. It's very interesting because whether you 81 00:04:22,600 --> 00:04:25,400 Speaker 2: believe the FED won't be able to cut rates that much, 82 00:04:25,520 --> 00:04:28,440 Speaker 2: which means maybe growth slows a lot more, well, that's 83 00:04:28,760 --> 00:04:31,840 Speaker 2: bullish for bonds, right, bond prices upfields down, or whether 84 00:04:31,920 --> 00:04:33,680 Speaker 2: you believe, all right, the Fed's going to be able 85 00:04:33,760 --> 00:04:37,960 Speaker 2: to cut more quickly. Again you get bond yields down. 86 00:04:37,960 --> 00:04:42,440 Speaker 2: Prices not right. So for bonds and for the dollar directionally, 87 00:04:42,560 --> 00:04:46,880 Speaker 2: there's actually more bias that maybe you can make cases 88 00:04:46,960 --> 00:04:52,080 Speaker 2: in either scenario rapid significant rate cuts or slower growth 89 00:04:52,080 --> 00:04:54,400 Speaker 2: in order to get those rate cuts, bond yields and 90 00:04:54,480 --> 00:04:59,240 Speaker 2: dollars down. You can make those arguments. But for industrial 91 00:04:59,240 --> 00:05:03,640 Speaker 2: commodities or for equities, it's a different story because if 92 00:05:03,680 --> 00:05:05,760 Speaker 2: it takes longer to get to the cuts and growth 93 00:05:05,839 --> 00:05:10,039 Speaker 2: hurts more first, that that can have a much more 94 00:05:10,040 --> 00:05:12,800 Speaker 2: negative impact on equities and industrial metals in the short term. 95 00:05:12,960 --> 00:05:14,839 Speaker 1: What are you hearing from your clients these days? What 96 00:05:14,880 --> 00:05:15,600 Speaker 1: are they telling you? 97 00:05:15,920 --> 00:05:18,120 Speaker 2: Yeah, what I'm hearing. Most of my clients are corporate. 98 00:05:18,160 --> 00:05:20,880 Speaker 2: They work in the physical part of the economy. You know. 99 00:05:20,920 --> 00:05:24,000 Speaker 2: We see especially on the manufacturing cybe material handling, other 100 00:05:24,040 --> 00:05:27,760 Speaker 2: physical industries. We see new orders are down. Shipments are 101 00:05:27,760 --> 00:05:30,560 Speaker 2: still pretty good because companies had big backlogs in the 102 00:05:30,560 --> 00:05:33,440 Speaker 2: wake of COVID. They're still burning off so unfilled orders 103 00:05:33,440 --> 00:05:37,280 Speaker 2: are falling, inventories are falling, shipments are still solid, but 104 00:05:37,360 --> 00:05:39,400 Speaker 2: new orders have been falling a lot. By the way, 105 00:05:39,400 --> 00:05:43,080 Speaker 2: for GDP standpoints, shipments finish goods, that's what's important for GDP. 106 00:05:43,640 --> 00:05:46,720 Speaker 2: But new orders are under pressure, which means looking at 107 00:05:46,760 --> 00:05:50,560 Speaker 2: what will next year's shipments be. That's important for GDP growth. 108 00:05:50,800 --> 00:05:52,960 Speaker 2: If new orders remain under pressure and they don't get 109 00:05:52,960 --> 00:05:56,360 Speaker 2: a bump, that could hurt shipments next year. And I 110 00:05:56,440 --> 00:05:58,479 Speaker 2: think between now and the end of the year you 111 00:05:58,560 --> 00:06:01,880 Speaker 2: may have this weird incentive of where if companies think 112 00:06:02,360 --> 00:06:05,280 Speaker 2: interest rates will be lower next year, and they think 113 00:06:05,360 --> 00:06:08,240 Speaker 2: if we get a change of administration, that's if we 114 00:06:08,240 --> 00:06:11,040 Speaker 2: get a Harris administration, then you're going to get potentially 115 00:06:11,080 --> 00:06:13,599 Speaker 2: higher corporate tax rates, you might have an incentive to 116 00:06:13,680 --> 00:06:16,599 Speaker 2: wait to make your expenses next year because you'll have 117 00:06:16,600 --> 00:06:19,360 Speaker 2: both lower interest rates and maybe higher corporate tax rates. 118 00:06:19,600 --> 00:06:21,719 Speaker 2: Let's just wait till after the new year to buy stuff. 119 00:06:22,000 --> 00:06:24,839 Speaker 2: So then you could have companies holding off on those 120 00:06:24,920 --> 00:06:29,200 Speaker 2: purchases until after the new year. That wouldn't be great 121 00:06:29,200 --> 00:06:31,120 Speaker 2: for growth in the early part of twenty twenty five. 122 00:06:31,160 --> 00:06:34,720 Speaker 1: So you mentioned the domestic political scene here in the US. 123 00:06:34,800 --> 00:06:39,200 Speaker 1: Does geopolitical topics come up at all in your conversation. 124 00:06:38,760 --> 00:06:42,760 Speaker 2: With clients, Absolutely, in every single conversation. This is a 125 00:06:42,800 --> 00:06:45,600 Speaker 2: really big concern. What we've trademarked as Cold War two 126 00:06:45,880 --> 00:06:48,440 Speaker 2: is something that's been going on for years. The conflict 127 00:06:48,560 --> 00:06:51,479 Speaker 2: risks are accelerating. We see it in the higher oil 128 00:06:51,520 --> 00:06:54,160 Speaker 2: prices going on right now, which, by the way, if 129 00:06:54,160 --> 00:06:56,400 Speaker 2: the FED is looking at the totality of the data, 130 00:06:57,000 --> 00:07:01,240 Speaker 2: persistently higher oil prices really not good. If you want 131 00:07:01,240 --> 00:07:03,760 Speaker 2: inflation to go down and to be able to cut rates, 132 00:07:03,920 --> 00:07:07,520 Speaker 2: that's going to be really tough. So if oil prices 133 00:07:07,520 --> 00:07:10,320 Speaker 2: remain higher longer, that's inflationary. And by the way, all 134 00:07:10,360 --> 00:07:15,000 Speaker 2: the trade risk around Cold War II, the supply disruption risk, everything, 135 00:07:15,080 --> 00:07:18,640 Speaker 2: we see container rates, how much those have risen in 136 00:07:18,720 --> 00:07:20,880 Speaker 2: the last year because of what's going on with the 137 00:07:20,920 --> 00:07:23,600 Speaker 2: Hooties and their terrorist harassment of shipping lanes in the 138 00:07:23,640 --> 00:07:27,560 Speaker 2: Red Sea. All of those things are inflationary, and that's 139 00:07:27,600 --> 00:07:30,080 Speaker 2: not good. These are part of the factors that have 140 00:07:30,160 --> 00:07:33,840 Speaker 2: driven up those intermediate goods series in the PPI report. 141 00:07:34,440 --> 00:07:37,600 Speaker 2: None of it's deflationary, and all of it threatens to 142 00:07:37,640 --> 00:07:39,360 Speaker 2: potentially get worse going forward. 143 00:07:39,400 --> 00:07:40,960 Speaker 1: What about the tariff story. 144 00:07:42,160 --> 00:07:44,600 Speaker 2: No matter who wins the election this fall, you're going 145 00:07:44,640 --> 00:07:47,400 Speaker 2: to get more tariffs. Right, So, I'm one of the 146 00:07:47,520 --> 00:07:50,520 Speaker 2: hundred CEOs on the Texas Business Leadership Council that is 147 00:07:50,560 --> 00:07:55,040 Speaker 2: the non partisan, nonprofit state affiliate of the Business Roundtable 148 00:07:55,080 --> 00:07:58,200 Speaker 2: in DC. The Roundtable in DC is one hundred CEOs 149 00:07:58,240 --> 00:08:01,720 Speaker 2: of some of the biggest companies advising policymakers of both 150 00:08:01,760 --> 00:08:08,120 Speaker 2: parties on non red meat issues, think of trade, workforce development, 151 00:08:08,440 --> 00:08:10,880 Speaker 2: bipartisan immigration reform, stuff like that. So I'm one of 152 00:08:10,880 --> 00:08:13,560 Speaker 2: those hundred CEOs in Texas and we go up to 153 00:08:13,640 --> 00:08:15,760 Speaker 2: DC every year meet with both our senators, most of 154 00:08:15,760 --> 00:08:19,239 Speaker 2: our congressmen, both parties, the administration, and think tanks and others. 155 00:08:19,640 --> 00:08:23,600 Speaker 2: And you know, as we have looked at these problems, 156 00:08:23,640 --> 00:08:26,480 Speaker 2: We've met with the Biden administration in the past, and 157 00:08:26,480 --> 00:08:28,480 Speaker 2: then we met in the Trump administration. You know, we 158 00:08:28,640 --> 00:08:31,000 Speaker 2: met with with both of these administrations, and there was 159 00:08:31,160 --> 00:08:34,400 Speaker 2: very little daylight between the Trump administration the Biden administration, 160 00:08:34,760 --> 00:08:38,960 Speaker 2: and Bloomberg's had some great data about the tariff and 161 00:08:39,080 --> 00:08:42,800 Speaker 2: trade restrictions have been put on China going forward. What 162 00:08:42,960 --> 00:08:45,880 Speaker 2: happened and started under the Trump administration has continued under 163 00:08:45,880 --> 00:08:49,120 Speaker 2: the Biden administration, and whatever happens this fall, the next 164 00:08:49,160 --> 00:08:53,720 Speaker 2: administration will still be faced with more trade restrictions. Likely 165 00:08:53,800 --> 00:08:57,600 Speaker 2: on China, So that trend I think is going to continue. 166 00:08:58,320 --> 00:09:05,640 Speaker 2: It's potentially inflationary, it's potentially also beneficial for domestic manufacturing, reshoring, 167 00:09:05,720 --> 00:09:08,680 Speaker 2: on shoring also for then after region. There are economic 168 00:09:08,679 --> 00:09:10,960 Speaker 2: benefits that will come with that. But I don't think 169 00:09:11,559 --> 00:09:15,240 Speaker 2: we're going to wake up January twenty twenty five and 170 00:09:15,960 --> 00:09:20,400 Speaker 2: Putin and she and Zelenski and whoever are our next 171 00:09:20,400 --> 00:09:22,520 Speaker 2: president will be Harris or Trump. They're not going to 172 00:09:22,559 --> 00:09:25,280 Speaker 2: be sitting around a campfire making smorores, singing Kumba Yak. 173 00:09:25,320 --> 00:09:27,880 Speaker 2: There's still going to be a push for China to 174 00:09:27,920 --> 00:09:31,400 Speaker 2: go after Taiwan. The coalition of the post Cold War 175 00:09:31,480 --> 00:09:35,560 Speaker 2: disgruntled is not going away and threatens to get bigger. 176 00:09:36,600 --> 00:09:38,560 Speaker 1: Thirty seconds, What does that mean for the US? 177 00:09:39,520 --> 00:09:42,480 Speaker 2: I think for the US, the most important thing right 178 00:09:42,520 --> 00:09:46,120 Speaker 2: now is that we have a good jobs market still, 179 00:09:46,480 --> 00:09:50,720 Speaker 2: we have a lot of capital formation here and you know, 180 00:09:50,800 --> 00:09:53,079 Speaker 2: I think things in the economy have still been pretty good. 181 00:09:53,120 --> 00:09:55,160 Speaker 2: You look at the GDP numbers. I think things are 182 00:09:55,200 --> 00:09:57,800 Speaker 2: still pretty good here. And that's why even when there 183 00:09:57,840 --> 00:10:00,320 Speaker 2: was market volatility over the past week, emerging mark it's 184 00:10:00,960 --> 00:10:03,080 Speaker 2: got hit at the beginning of the month worse than 185 00:10:03,120 --> 00:10:06,320 Speaker 2: the US. US markets have since rebounded. I think this 186 00:10:06,440 --> 00:10:08,000 Speaker 2: is still the best game in town. We have some 187 00:10:08,000 --> 00:10:10,720 Speaker 2: of the fastest GDP in the United States of any 188 00:10:10,760 --> 00:10:12,400 Speaker 2: developing an advanced economy in the world. 189 00:10:12,480 --> 00:10:15,160 Speaker 1: You sound like you're in the soft landing camp, Am 190 00:10:15,160 --> 00:10:15,520 Speaker 1: I right? 191 00:10:15,679 --> 00:10:18,800 Speaker 2: I mean I think it's the jobs numbers are still 192 00:10:18,840 --> 00:10:21,240 Speaker 2: pretty good. We have record high payrolls. Things look pretty 193 00:10:21,240 --> 00:10:21,800 Speaker 2: good right now. 194 00:10:21,840 --> 00:10:23,840 Speaker 1: All right, Jason, always a pleasure. Thanks so much for 195 00:10:23,920 --> 00:10:34,000 Speaker 1: joining us. Jason Schenker from Prestige Economics. We had some 196 00:10:34,080 --> 00:10:37,400 Speaker 1: late breaking news in the US today New York Time, 197 00:10:37,480 --> 00:10:42,120 Speaker 1: the Justice Department considering a breakup of Alphabet's Google. Let's 198 00:10:42,240 --> 00:10:44,240 Speaker 1: learn a little bit more as to what's happening here 199 00:10:44,280 --> 00:10:48,319 Speaker 1: with our own Anna Edgerton, Bloomberg Seattle Bureau chief, who 200 00:10:48,320 --> 00:10:52,080 Speaker 1: obviously joins us from the City of the Space Needle. 201 00:10:52,120 --> 00:10:53,640 Speaker 1: It's good to see you. How you doing? 202 00:10:53,880 --> 00:10:55,000 Speaker 3: Good to see you. I'm doing well. 203 00:10:55,040 --> 00:10:58,400 Speaker 1: How are you? It's remarkable that we're talking about this story. 204 00:10:58,440 --> 00:11:00,320 Speaker 1: I'm doing okay, But I want to know how we 205 00:11:00,360 --> 00:11:03,040 Speaker 1: got here. Why are we talking about a breakup right now? 206 00:11:04,000 --> 00:11:05,960 Speaker 3: Yeah? So kind of where we are at this case is, 207 00:11:06,000 --> 00:11:09,080 Speaker 3: you know, the judge had this landmark ruling finding that 208 00:11:09,120 --> 00:11:11,240 Speaker 3: Google was in fact a monopolist, and so now we're 209 00:11:11,320 --> 00:11:13,679 Speaker 3: kind of moving into the remedy phase of this. So 210 00:11:13,720 --> 00:11:16,040 Speaker 3: what that means is the Justice Department is going to 211 00:11:16,679 --> 00:11:19,760 Speaker 3: suggest what they think the judge should the punishment that 212 00:11:19,960 --> 00:11:22,720 Speaker 3: the judge should impose on Google. Now, from people that 213 00:11:22,760 --> 00:11:25,439 Speaker 3: are familiar with this case, we have found that they 214 00:11:25,480 --> 00:11:29,160 Speaker 3: are including a structural remedy in that discussion, and so 215 00:11:29,240 --> 00:11:31,880 Speaker 3: they are looking at several different units that could be 216 00:11:31,920 --> 00:11:34,320 Speaker 3: broken off and it would be up to the judge 217 00:11:34,360 --> 00:11:37,600 Speaker 3: to decide whether or not to choose that as remedy. 218 00:11:37,800 --> 00:11:40,679 Speaker 1: But I'm wondering if this is a little bit premature. 219 00:11:40,800 --> 00:11:45,200 Speaker 1: Could the case be appealed the decision by the federal court, 220 00:11:45,240 --> 00:11:47,239 Speaker 1: Could that be overturned in any way? 221 00:11:47,520 --> 00:11:50,199 Speaker 3: That's a really good question. We definitely expect Google to 222 00:11:50,240 --> 00:11:53,599 Speaker 3: appeal this. Now. The question the most mediate question is 223 00:11:53,640 --> 00:11:56,200 Speaker 3: whether they will be allowed to appeal before we get 224 00:11:56,240 --> 00:11:58,480 Speaker 3: to the remedy phase of the trial, or if the 225 00:11:58,600 --> 00:12:03,040 Speaker 3: judge will require that their appeal wait until after the 226 00:12:03,160 --> 00:12:06,120 Speaker 3: remedy is already discussed. So that is going to make 227 00:12:06,160 --> 00:12:08,200 Speaker 3: a huge difference, and kind of the strategy from the 228 00:12:08,400 --> 00:12:11,360 Speaker 3: Justice Apartment, and also the timeline, because if Google is 229 00:12:11,400 --> 00:12:16,840 Speaker 3: allowed to appeal this liability ruling before they talk about 230 00:12:16,840 --> 00:12:19,760 Speaker 3: the remedy, that could push the remedy trial out a 231 00:12:19,840 --> 00:12:23,079 Speaker 3: year maybe two. So that is a really good question. 232 00:12:23,520 --> 00:12:25,760 Speaker 1: And I'm wondering from the point of view of the company, 233 00:12:26,120 --> 00:12:29,200 Speaker 1: in some cases like this, where you would be betting 234 00:12:29,240 --> 00:12:32,160 Speaker 1: on a change in administration, perhaps because there would be 235 00:12:32,480 --> 00:12:36,559 Speaker 1: some sort of policy shift in Washington, is that likely 236 00:12:36,600 --> 00:12:39,400 Speaker 1: in this case? It doesn't seem no matter who would 237 00:12:39,400 --> 00:12:42,760 Speaker 1: be elected as president, that the DOJ would necessarily be 238 00:12:42,840 --> 00:12:45,120 Speaker 1: more friendly to a company like Google. Am I wrong? 239 00:12:46,240 --> 00:12:48,960 Speaker 3: No, You're absolutely right. And this case was actually filed 240 00:12:49,040 --> 00:12:51,679 Speaker 3: during the Trump administration. It was filed in twenty nineteen. 241 00:12:52,200 --> 00:12:54,400 Speaker 3: And you know, one thing that we've written about is 242 00:12:54,720 --> 00:12:59,080 Speaker 3: Trump picking jd Vance as his running mate definitely looks 243 00:12:59,120 --> 00:13:03,959 Speaker 3: like he is going to kind of keep a heavy 244 00:13:03,960 --> 00:13:07,400 Speaker 3: hand on the anti trust enforcement. Jd Vance has spoken 245 00:13:07,400 --> 00:13:10,240 Speaker 3: favorably about Lena Kahan, the chair of the FTC, who's 246 00:13:10,280 --> 00:13:13,480 Speaker 3: very much aligned with Jonathan Canter at the Assistant Attorney 247 00:13:13,480 --> 00:13:16,640 Speaker 3: General the Justice Apartment, who's in charge of anti trust 248 00:13:16,800 --> 00:13:20,560 Speaker 3: and was in charge of this case. So you know, 249 00:13:20,960 --> 00:13:23,880 Speaker 3: that is maybe less of a consideration for this case. 250 00:13:24,120 --> 00:13:27,040 Speaker 3: But we do know that the DOJ has also filed 251 00:13:27,040 --> 00:13:29,640 Speaker 3: another case, another complaint against Google, this one looking at 252 00:13:29,640 --> 00:13:32,400 Speaker 3: their ad tech business. So it could be the next 253 00:13:32,480 --> 00:13:36,000 Speaker 3: administration's DOJ that ends up prosecuting that case. 254 00:13:36,440 --> 00:13:39,080 Speaker 1: So a breakup may be a little bit draconian. Are 255 00:13:39,120 --> 00:13:41,920 Speaker 1: there less severe options that the company might have to 256 00:13:42,600 --> 00:13:44,920 Speaker 1: if they were to try to reach a settlement, let's say, 257 00:13:44,920 --> 00:13:46,079 Speaker 1: with a Department of Justice. 258 00:13:47,000 --> 00:13:48,640 Speaker 3: Yeah, I mean, first of all, this is not just 259 00:13:48,760 --> 00:13:52,280 Speaker 3: a punishment that the judge is going to impose willy nilly. 260 00:13:52,360 --> 00:13:55,880 Speaker 3: It's something that would seek to address the harm that 261 00:13:56,040 --> 00:13:59,000 Speaker 3: was found. So if it comes to a structural remedy 262 00:13:59,040 --> 00:14:03,000 Speaker 3: to a breakup, or at units like the Android operating system, 263 00:14:03,120 --> 00:14:06,400 Speaker 3: which is on two point five billion mobile devices worldwide, 264 00:14:06,720 --> 00:14:10,040 Speaker 3: maybe the Chrome web browser, which was involved in some 265 00:14:10,080 --> 00:14:14,160 Speaker 3: of the alleged behavior here, and also probably AdWords, which 266 00:14:14,200 --> 00:14:17,559 Speaker 3: is the platform that Google uses to sell text ads. 267 00:14:17,920 --> 00:14:20,040 Speaker 3: If we're going to stop short of a structural remedy, 268 00:14:20,080 --> 00:14:22,800 Speaker 3: we're looking at things like a prohibition on the kind 269 00:14:22,840 --> 00:14:27,360 Speaker 3: of agreement that Google would sign with mobile device makers 270 00:14:27,640 --> 00:14:32,840 Speaker 3: to make Google's web browser and search engine the default 271 00:14:32,960 --> 00:14:36,000 Speaker 3: on mobile devices. That's probably kind of the baseline that 272 00:14:36,040 --> 00:14:39,080 Speaker 3: we expect the judge to accept, and then we'll see 273 00:14:39,080 --> 00:14:41,360 Speaker 3: what this Justice Department asks for beyond that. 274 00:14:41,600 --> 00:14:44,080 Speaker 1: I'm young enough to remember when the government went after 275 00:14:44,200 --> 00:14:48,200 Speaker 1: Microsoft that was unsuccessful in terms of trying to find 276 00:14:48,200 --> 00:14:51,760 Speaker 1: a way to get the company to maybe have less 277 00:14:51,800 --> 00:14:54,880 Speaker 1: dominance in the market for operating systems and the web 278 00:14:54,920 --> 00:14:58,680 Speaker 1: browser as well. Did the government learn anything from that case? 279 00:14:59,720 --> 00:15:01,720 Speaker 3: Yeah, yeah, I think they did. And I think one 280 00:15:01,760 --> 00:15:04,320 Speaker 3: thing we'll see from the Justice Apartment and whatever remedy 281 00:15:04,400 --> 00:15:08,200 Speaker 3: they they suggest, is that, you know, part of the 282 00:15:08,280 --> 00:15:10,520 Speaker 3: argument to the judge will be, you know, what are 283 00:15:10,560 --> 00:15:13,360 Speaker 3: we going to want to enforce? You know, because once 284 00:15:13,400 --> 00:15:15,240 Speaker 3: there's a remedy, there has to be kind of a 285 00:15:15,320 --> 00:15:17,640 Speaker 3: monitoring of the company and of their behavior to make 286 00:15:17,680 --> 00:15:20,200 Speaker 3: sure that they're complying with the remedy. So something like 287 00:15:20,240 --> 00:15:22,960 Speaker 3: a divestiture, if you're saying you have to sell this unit, 288 00:15:23,480 --> 00:15:26,760 Speaker 3: that is not something that the government has to continuously 289 00:15:26,800 --> 00:15:30,720 Speaker 3: monitor because it's a business, a business decision, something that happens. 290 00:15:31,000 --> 00:15:33,960 Speaker 3: So I think that'll be a part of the Justice 291 00:15:33,960 --> 00:15:34,960 Speaker 3: Department's argument in this. 292 00:15:35,680 --> 00:15:39,520 Speaker 1: So much of what we talk about around technology involves 293 00:15:39,600 --> 00:15:42,480 Speaker 1: artificial intelligence, and I'm wondering whether or not that's a 294 00:15:42,520 --> 00:15:44,040 Speaker 1: component in this conversation. 295 00:15:44,200 --> 00:15:47,160 Speaker 3: Is it absolutely? And I think you know, one thing 296 00:15:47,400 --> 00:15:51,200 Speaker 3: the Justice Department is looking at is how dominant Google 297 00:15:51,400 --> 00:15:54,640 Speaker 3: is in the current iteration on the web and Web 298 00:15:54,680 --> 00:15:58,280 Speaker 3: two point zero, let's call it, and looking at what 299 00:15:58,480 --> 00:16:02,160 Speaker 3: needs to change and order to make sure that Google's 300 00:16:02,200 --> 00:16:06,520 Speaker 3: not using their current standing as a monopolist to dominate 301 00:16:07,000 --> 00:16:10,400 Speaker 3: the next iteration of the web, including AI. So that's 302 00:16:10,440 --> 00:16:13,880 Speaker 3: where we could see some data sharing agreements, which Google 303 00:16:13,960 --> 00:16:17,280 Speaker 3: says could raise privacy concerns. But you know, we've seen 304 00:16:17,320 --> 00:16:21,960 Speaker 3: this in previous cases, you know, at and T, you 305 00:16:21,960 --> 00:16:26,960 Speaker 3: know from decades ago, requiring a company like Google to 306 00:16:27,760 --> 00:16:31,080 Speaker 3: license or share its data with competitors so that they 307 00:16:31,200 --> 00:16:34,680 Speaker 3: have access to that to that data to power their 308 00:16:34,680 --> 00:16:37,080 Speaker 3: own search competitors to Google's products. 309 00:16:37,320 --> 00:16:39,680 Speaker 1: Good stuff and always a pleasure. Thanks for making time 310 00:16:39,720 --> 00:16:43,440 Speaker 1: for us tonight to enter Edgerton Bloomberg, Seattle Bureau Chief, 311 00:16:43,480 --> 00:16:47,240 Speaker 1: helping us understand the story on Google. The Department of 312 00:16:47,480 --> 00:16:51,520 Speaker 1: Justice considering a breakup of the company, one option being 313 00:16:51,560 --> 00:17:02,680 Speaker 1: looked at right now, we are told Rahul Chatta Cio 314 00:17:02,880 --> 00:17:06,280 Speaker 1: at Chakara Investment Management. Joining us on the line from 315 00:17:06,520 --> 00:17:09,880 Speaker 1: here in New York City, Raoul, thank you so much 316 00:17:09,920 --> 00:17:12,520 Speaker 1: for being with us. Are you generally constructive when it 317 00:17:12,560 --> 00:17:15,280 Speaker 1: comes to the inflation story? It looks outike, a lot 318 00:17:15,280 --> 00:17:17,240 Speaker 1: of the readings are trending lower. 319 00:17:18,240 --> 00:17:20,679 Speaker 4: We have no clearly dog. Our sense was, look at 320 00:17:20,720 --> 00:17:22,720 Speaker 4: things are getting softer in the economy and here in 321 00:17:22,880 --> 00:17:26,400 Speaker 4: US you see that. We've seen that in the commentary 322 00:17:26,400 --> 00:17:28,360 Speaker 4: which came out of the marth quarter and even more 323 00:17:28,400 --> 00:17:31,439 Speaker 4: so in the June quarter. So the middle class, the 324 00:17:31,440 --> 00:17:33,840 Speaker 4: lower middle class was feeling the squeeze, and I think 325 00:17:33,880 --> 00:17:37,240 Speaker 4: the squeeze has got problem. So that's reflected in the 326 00:17:37,280 --> 00:17:39,159 Speaker 4: PPI numbers you talked about. 327 00:17:40,320 --> 00:17:44,359 Speaker 1: So in terms of what to expect tomorrow consumer prices, 328 00:17:44,400 --> 00:17:46,360 Speaker 1: are we going to get another cool reading? Do you think? 329 00:17:47,440 --> 00:17:52,840 Speaker 4: I think there are large part of the index or 330 00:17:52,880 --> 00:17:55,680 Speaker 4: confidence which are going to show us softer reading. Where 331 00:17:55,720 --> 00:17:59,880 Speaker 4: one has seen things in chop is all this energy side, 332 00:18:00,080 --> 00:18:02,840 Speaker 4: the utility pricing. So what we've seen in the last 333 00:18:02,880 --> 00:18:06,920 Speaker 4: twelve months as these utilities pass on higher tariffs, which 334 00:18:06,920 --> 00:18:08,879 Speaker 4: is a function of them being under invested for the 335 00:18:08,920 --> 00:18:12,000 Speaker 4: last decade, that's causing inflation. But the hope is that 336 00:18:12,119 --> 00:18:15,399 Speaker 4: FED sees through this. They clearly see that, look, the 337 00:18:15,480 --> 00:18:18,440 Speaker 4: high rates have done their job, which has slowed the economy, 338 00:18:18,640 --> 00:18:21,639 Speaker 4: and if they wait for too long, they turn turning 339 00:18:21,640 --> 00:18:24,439 Speaker 4: this soft landing into a recession. So hopefully they come 340 00:18:24,480 --> 00:18:27,320 Speaker 4: to neutral rate fairly quickly over the next twelve months. 341 00:18:27,440 --> 00:18:30,040 Speaker 1: So the bond market then has it right if treasure 342 00:18:30,119 --> 00:18:32,520 Speaker 1: yields move lower In New York, we've been trending down 343 00:18:32,520 --> 00:18:35,159 Speaker 1: a bit. I mean, we're stable here in the Japanese session, 344 00:18:35,200 --> 00:18:38,320 Speaker 1: but the bond market seems to have this all figured out, 345 00:18:38,359 --> 00:18:40,720 Speaker 1: wouldn't you say absolutely? 346 00:18:40,760 --> 00:18:44,400 Speaker 4: I think here our senses, the yields go lower next 347 00:18:44,400 --> 00:18:47,200 Speaker 4: six to twelve months and probably mid of next year. 348 00:18:47,280 --> 00:18:50,320 Speaker 4: Then again the worry comes on the usted boring program, etc. 349 00:18:51,240 --> 00:18:53,719 Speaker 4: So because those are reality, and if you're not cutting 350 00:18:53,760 --> 00:18:57,000 Speaker 4: down these high peace time deficits and we don't have 351 00:18:57,080 --> 00:18:59,359 Speaker 4: the buyers like what happened in the last two decades, 352 00:18:59,400 --> 00:19:01,800 Speaker 4: the Japanese of the Chinese by in treasuries, we'll have 353 00:19:01,840 --> 00:19:02,959 Speaker 4: another problem on hands. 354 00:19:03,160 --> 00:19:05,639 Speaker 1: I understand that. But let's focus a little bit on 355 00:19:06,320 --> 00:19:08,439 Speaker 1: the macro view before we get to some of the 356 00:19:08,440 --> 00:19:12,360 Speaker 1: fiscal policy and how that would influence the market. Are 357 00:19:12,400 --> 00:19:14,880 Speaker 1: you in the camp that we're going to avoid recession 358 00:19:14,960 --> 00:19:15,360 Speaker 1: right now? 359 00:19:16,240 --> 00:19:18,560 Speaker 4: Yeah, clearly we're at the soft lending camp. And our 360 00:19:18,600 --> 00:19:20,760 Speaker 4: point is, look if we see what you've Ben Paul 361 00:19:20,760 --> 00:19:24,240 Speaker 4: has been say saying from last November he was nubvish 362 00:19:24,560 --> 00:19:27,960 Speaker 4: and look at our senses, he's eaching to cut rates. Unfortunately, 363 00:19:28,040 --> 00:19:30,640 Speaker 4: data for the first six months was not so favorable 364 00:19:30,680 --> 00:19:33,520 Speaker 4: on inflation. But as we see clear signs of softening 365 00:19:33,560 --> 00:19:35,880 Speaker 4: in the economy. We've seen softening in the labor markets. 366 00:19:35,920 --> 00:19:38,320 Speaker 4: People are laying of some of the temp workers, etc. 367 00:19:39,320 --> 00:19:41,840 Speaker 4: So I think clearly that would give a lot more 368 00:19:41,840 --> 00:19:44,800 Speaker 4: confidence to fit to quickly come down to neutral rate. 369 00:19:44,880 --> 00:19:47,760 Speaker 4: So our view is look, unlike the past recessions two 370 00:19:47,800 --> 00:19:50,159 Speaker 4: thousand and two thousand and eight, they're not last scale 371 00:19:50,240 --> 00:19:53,320 Speaker 4: excessis in the economy. The real wages are still positive, 372 00:19:53,320 --> 00:19:56,920 Speaker 4: the pay rules are still positive, the IP is positive. 373 00:19:57,000 --> 00:19:59,560 Speaker 4: So I think we would be in a soft lending camp. 374 00:20:00,040 --> 00:20:02,160 Speaker 4: Our siences next six months. We feel like an air 375 00:20:02,200 --> 00:20:04,760 Speaker 4: pocket because look, the economy is coming down from a 376 00:20:04,800 --> 00:20:08,119 Speaker 4: seven percent nominal GDP to four person normal GDP. It 377 00:20:08,160 --> 00:20:11,800 Speaker 4: will seem like you're hitting a stall, but it would 378 00:20:11,840 --> 00:20:12,400 Speaker 4: be soft. 379 00:20:12,200 --> 00:20:16,159 Speaker 1: Land nothing that could kind of interfere with the current 380 00:20:16,280 --> 00:20:19,080 Speaker 1: environment as we get closer to that November or election. 381 00:20:19,160 --> 00:20:22,640 Speaker 1: Though you don't see anything a meaningful downshift between now 382 00:20:22,680 --> 00:20:23,200 Speaker 1: and then, do. 383 00:20:23,200 --> 00:20:26,760 Speaker 4: You see unless or until the things of the situation 384 00:20:26,840 --> 00:20:30,520 Speaker 4: and Middle East escalates significantly, or unless or until we 385 00:20:30,640 --> 00:20:34,960 Speaker 4: have whatever fed deciding to wait for more data, then 386 00:20:35,040 --> 00:20:38,199 Speaker 4: it may just risk pushing the economy or tipping it 387 00:20:38,280 --> 00:20:41,359 Speaker 4: over into recession. So it's like getting webs oed on 388 00:20:41,400 --> 00:20:43,640 Speaker 4: both sides that they missed on inflation and then when 389 00:20:43,640 --> 00:20:45,679 Speaker 4: things were slowing down, they made it too longer. 390 00:20:46,080 --> 00:20:48,639 Speaker 1: So let's go back to politics and address the issue 391 00:20:48,640 --> 00:20:51,320 Speaker 1: that you brought up earlier, which is the deficit here, 392 00:20:51,359 --> 00:20:53,760 Speaker 1: and I think we're looking at something through the end 393 00:20:53,960 --> 00:20:57,879 Speaker 1: of this month, last month, I should say July at 394 00:20:57,880 --> 00:21:01,159 Speaker 1: around one point five trillion. That's big number. And the 395 00:21:01,280 --> 00:21:05,400 Speaker 1: number on just debt service I think was was over 396 00:21:05,520 --> 00:21:08,119 Speaker 1: nine hundred billion dollars. I mean, it's staggering when you 397 00:21:08,160 --> 00:21:11,120 Speaker 1: look at at kind of what's at stake here. If 398 00:21:11,160 --> 00:21:15,320 Speaker 1: those Trump tax cuts are allowed to expire, assuming that 399 00:21:15,400 --> 00:21:19,119 Speaker 1: we have a new administration that would allow that, and 400 00:21:19,160 --> 00:21:22,640 Speaker 1: maybe a configuration in Congress that would support that wouldn't 401 00:21:22,680 --> 00:21:24,720 Speaker 1: that be a net positive for the deficit. 402 00:21:26,520 --> 00:21:30,480 Speaker 4: Maybe somewhat positive. But look, we don't get signs from 403 00:21:30,680 --> 00:21:34,720 Speaker 4: the Democrats also that they're looking to significantly bring down deficit, 404 00:21:35,320 --> 00:21:37,920 Speaker 4: and I think that has a risk of crowding out. Look, 405 00:21:37,960 --> 00:21:40,920 Speaker 4: you've got all kinds of estimates over there that goes 406 00:21:40,960 --> 00:21:43,679 Speaker 4: to twenty percent plus of the government revenues will go 407 00:21:43,720 --> 00:21:46,520 Speaker 4: towards interest payments. So clearly that has a fair bit 408 00:21:46,560 --> 00:21:49,160 Speaker 4: of a crowding out effect, that has a fair bit 409 00:21:49,160 --> 00:21:51,560 Speaker 4: of a fiscal drag coming in the coming years. 410 00:21:51,960 --> 00:21:54,480 Speaker 1: A lot of what we focus on this program RA 411 00:21:54,520 --> 00:21:57,879 Speaker 1: whole has to do with Asia. Let's talk about China 412 00:21:57,960 --> 00:22:02,399 Speaker 1: right now. This economy seems meyer in deflation and subpar growth. 413 00:22:02,440 --> 00:22:04,800 Speaker 1: I doubt very much, at least in the view of 414 00:22:04,840 --> 00:22:09,240 Speaker 1: the people that we speak with frequently here, that Beijing 415 00:22:09,320 --> 00:22:11,000 Speaker 1: is going to be able to reach that five percent 416 00:22:11,040 --> 00:22:13,040 Speaker 1: growth target. Would you say that's a fair bet that 417 00:22:13,119 --> 00:22:15,960 Speaker 1: will fail or China will fail on that front. 418 00:22:16,680 --> 00:22:18,520 Speaker 4: Yeah, I think numbers are going to be soft. See 419 00:22:18,960 --> 00:22:22,600 Speaker 4: what we've seen is anytime large scale excesses happen, whether 420 00:22:22,640 --> 00:22:26,000 Speaker 4: it's a study of Japan, whether what happened in the US, 421 00:22:26,040 --> 00:22:28,360 Speaker 4: in the two thousand. It takes time. So what you've 422 00:22:28,400 --> 00:22:31,040 Speaker 4: seen price correction in the Chinese stock market happen. What 423 00:22:31,080 --> 00:22:33,399 Speaker 4: we need is time, and time typically is five to 424 00:22:33,480 --> 00:22:36,240 Speaker 4: six is for those excesses to be digested in the economy. 425 00:22:36,480 --> 00:22:39,600 Speaker 4: So that's where somewhere those excesses are digested. So growth 426 00:22:39,680 --> 00:22:41,320 Speaker 4: is going to be slow. But what we are looking 427 00:22:41,440 --> 00:22:44,600 Speaker 4: in China is this margin resilience which is going to 428 00:22:44,640 --> 00:22:48,400 Speaker 4: come through. What you've seen competition is significantly over last 429 00:22:48,400 --> 00:22:52,920 Speaker 4: couple of quarters. So what is visible in the leading 430 00:22:52,920 --> 00:22:56,760 Speaker 4: companies in China is some somewhat this pricing power, somewhat 431 00:22:56,800 --> 00:22:59,600 Speaker 4: this margin resilience. These guys are doing fair bit of 432 00:22:59,600 --> 00:23:02,480 Speaker 4: a buy bags different payouts, so obviously one has to 433 00:23:02,640 --> 00:23:06,480 Speaker 4: moderate written expectations. But look, the sentiment is very negative. 434 00:23:06,720 --> 00:23:09,360 Speaker 4: It's almost at a panic level for China. And typically 435 00:23:09,600 --> 00:23:12,800 Speaker 4: what we've seen is those are good entry points because 436 00:23:12,840 --> 00:23:17,119 Speaker 4: the expectations are low and won't be surprised if some 437 00:23:17,200 --> 00:23:19,400 Speaker 4: of the leading Chinese companies give us fifteen to twenty 438 00:23:19,400 --> 00:23:21,480 Speaker 4: percent returns in twelve months from now. 439 00:23:21,520 --> 00:23:23,760 Speaker 1: So panic maybe where markets are concerned, but I think 440 00:23:23,800 --> 00:23:28,240 Speaker 1: we can agree lackluster sentiment where consumers are concerned in China, 441 00:23:28,240 --> 00:23:32,760 Speaker 1: and I'm wondering whether that creates a risk of sustained 442 00:23:32,880 --> 00:23:36,080 Speaker 1: deflation and a trap that is not unlike what happened 443 00:23:36,119 --> 00:23:37,880 Speaker 1: to Japan more than thirty years ago. 444 00:23:38,920 --> 00:23:41,160 Speaker 4: So I think what you've said here is a fair point, 445 00:23:41,200 --> 00:23:44,160 Speaker 4: and that's a risk everybody is watching closely, and which 446 00:23:44,200 --> 00:23:46,159 Speaker 4: is why when we look at China, what we're playing 447 00:23:46,440 --> 00:23:49,520 Speaker 4: is this value maximization story. We've got a looking at 448 00:23:49,560 --> 00:23:52,679 Speaker 4: the local Chinese company which are offering a superior value 449 00:23:52,680 --> 00:23:55,760 Speaker 4: proposition through the consumer and getting shared from the multinationals. 450 00:23:55,800 --> 00:23:59,560 Speaker 4: We are playing the global champions from China companies which 451 00:23:59,560 --> 00:24:02,200 Speaker 4: are making in roads globally, the likes of Ping Do 452 00:24:02,359 --> 00:24:04,080 Speaker 4: Do or the BDS. 453 00:24:03,600 --> 00:24:04,040 Speaker 1: Et cetera. 454 00:24:04,440 --> 00:24:06,840 Speaker 4: But I think the Chinese government is aware of that, 455 00:24:07,119 --> 00:24:10,320 Speaker 4: which is where what you see in last one or 456 00:24:10,320 --> 00:24:12,800 Speaker 4: two months is they're using more of the central Bank's 457 00:24:12,800 --> 00:24:15,879 Speaker 4: balance sheet to give this fiscal handouts. So in the 458 00:24:15,960 --> 00:24:18,280 Speaker 4: past it was left to the local governments. Look, they 459 00:24:18,280 --> 00:24:21,080 Speaker 4: realized that local governments don't have much revenues now because 460 00:24:21,080 --> 00:24:24,760 Speaker 4: the land sales have plummeted significantly, So clearly the onus 461 00:24:24,800 --> 00:24:27,600 Speaker 4: is now on the central bank to kind of an 462 00:24:27,720 --> 00:24:31,200 Speaker 4: expand this firepower of incentives, and they're moving in the 463 00:24:31,240 --> 00:24:33,680 Speaker 4: right direction. They want to get the animal spirits, both 464 00:24:33,920 --> 00:24:38,480 Speaker 4: from a business and consumer back, and clearly it's going 465 00:24:38,560 --> 00:24:40,280 Speaker 4: to take its own sweet time. Is going to take 466 00:24:40,320 --> 00:24:43,400 Speaker 4: a couple of quarters before things come back. And look, 467 00:24:43,480 --> 00:24:46,159 Speaker 4: they're not going to go back to the times we 468 00:24:46,200 --> 00:24:48,040 Speaker 4: saw five years back. Chan's not going to go back 469 00:24:48,080 --> 00:24:50,919 Speaker 4: to ten to twelve percent normally GDP, but seven to 470 00:24:50,920 --> 00:24:52,960 Speaker 4: ten percent should be a good number in next two years. 471 00:24:53,000 --> 00:24:55,919 Speaker 1: Before we let you go, Rahul the situation in Japan, 472 00:24:56,000 --> 00:24:58,879 Speaker 1: I mean, we saw what happened in markets as a 473 00:24:58,920 --> 00:25:02,560 Speaker 1: result of that a and carry trade unwinding. We know 474 00:25:03,160 --> 00:25:04,639 Speaker 1: some of this has to do with the FED, to 475 00:25:04,680 --> 00:25:06,399 Speaker 1: be sure, but we can't ignore the fact that the 476 00:25:06,400 --> 00:25:09,640 Speaker 1: boj has made a pivot in terms of its monetary policy. 477 00:25:10,200 --> 00:25:12,959 Speaker 1: Thirty seconds, what is your outlook for Japan going forward? 478 00:25:14,080 --> 00:25:17,800 Speaker 4: Clearly, I think I think the market offers value and 479 00:25:18,000 --> 00:25:22,320 Speaker 4: as investors get confidence on the soft landing and the 480 00:25:22,320 --> 00:25:24,840 Speaker 4: FED easy coming through, they would be interested in the market. 481 00:25:24,880 --> 00:25:27,480 Speaker 4: It was just that it was such a crowded trade, 482 00:25:27,640 --> 00:25:30,119 Speaker 4: liked both by the quant funds and the big pods, 483 00:25:30,359 --> 00:25:32,879 Speaker 4: and these these these both these parties who account for 484 00:25:32,880 --> 00:25:35,320 Speaker 4: fifty percent of the market. Town we have limited receipt time, 485 00:25:35,640 --> 00:25:38,320 Speaker 4: so when everybody was rushing for the door, suddenly people 486 00:25:38,359 --> 00:25:40,480 Speaker 4: realized the door was way too narrow for everybody to 487 00:25:40,520 --> 00:25:41,480 Speaker 4: exit at the same time. 488 00:25:42,160 --> 00:25:44,840 Speaker 1: Boy, that is so true, Raoul. Thank you so much, 489 00:25:44,880 --> 00:25:47,520 Speaker 1: Chev for joining us. A great conversation with Rahul Shada 490 00:25:47,840 --> 00:25:54,160 Speaker 1: Cio at Shikara Investment Management. This has been the Bloomberg 491 00:25:54,240 --> 00:25:57,480 Speaker 1: Daybreak Asia podcast, bringing you the stories making news and 492 00:25:57,560 --> 00:26:01,480 Speaker 1: moving markets in the Asia Pacific. The Bloomberg Podcast channel 493 00:26:01,560 --> 00:26:04,640 Speaker 1: on YouTube. To get more episodes of this and other 494 00:26:04,680 --> 00:26:08,760 Speaker 1: shows from Bloomberg, subscribe to the podcast on Apple, Spotify, 495 00:26:09,000 --> 00:26:12,000 Speaker 1: or anywhere else you listen and always on Bloomberg Radio, 496 00:26:12,080 --> 00:26:14,640 Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app.