WEBVTT - Global Bond Anxiety Builds on Long-Term Debt Cost Increase 0:00:02.520 --> 0:00:10.480 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.480 --> 0:00:14.400 Week Daily reporting from the magazine that helps global leaders 0:00:14.400 --> 0:00:18.320 stay ahead with insight on the people, companies, and trends 0:00:18.360 --> 0:00:23.360 shaping today's complex economy. Plus global business, finance and tech 0:00:23.440 --> 0:00:27.280 news as it happens. The Bloomberg Business Week Daily Podcast 0:00:27.640 --> 0:00:31.720 with Carol Masser and Tim Stenebeck on Bloomberg Radio. 0:00:32.040 --> 0:00:34.199 Let's get to what is top of mind for a 0:00:34.240 --> 0:00:37.919 lot of the Bloomberg terminal readers. Sovereign borrowing rates are 0:00:37.960 --> 0:00:40.360 surging around the world, with yields on thirty year US 0:00:40.400 --> 0:00:42.680 treasuries rising to the hya since two thousand and seven. 0:00:43.040 --> 0:00:45.199 We talked about. You say, two thousand and seven you 0:00:45.320 --> 0:00:45.960 kind of perk. 0:00:45.840 --> 0:00:48.520 Up, you have to perk up, Yeah, you do. 0:00:49.360 --> 0:00:51.680 There are domestic factors right that have a role in 0:00:51.720 --> 0:00:54.280 each market around the globe, no doubt about it. The 0:00:54.280 --> 0:00:57.120 structural forces driving up yields are global in nature, though 0:00:57.400 --> 0:01:01.240 one fear is that persistent geopolitical turmoil will make economies 0:01:01.280 --> 0:01:05.200 more prone to supply shocks and inflationary pressures. Bondholders are 0:01:05.200 --> 0:01:08.560 also worried that governments will fail to rein in spending 0:01:08.680 --> 0:01:11.920 that is certainly a global thing pressuring fiscal health. Meantime, 0:01:12.160 --> 0:01:15.880 changes in market structure and demographics are resulting in waiting 0:01:15.920 --> 0:01:18.640 demand from once steady buyers. So there's a lot going on. 0:01:18.760 --> 0:01:21.800 Let's get to our rates roundtable. It's a killer duo. 0:01:22.200 --> 0:01:25.800 Ara Jersey, Bloomberg Intelligence Chief US Interest rates strategist, he's 0:01:25.800 --> 0:01:28.880 in our Bloomberg Princeton Bureau. And then David Day Babusha, 0:01:29.000 --> 0:01:31.680 he is Bloomberg News corporate finance reporter on set here 0:01:31.720 --> 0:01:35.120 in New York. Ira, David Day, Welcome, Welcome. I should 0:01:35.160 --> 0:01:37.720 point out a story too that has been on our minds. 0:01:38.000 --> 0:01:40.800 Came out yesterday. We're a little obsessed with it. Davia 0:01:40.880 --> 0:01:43.039 Day was part of it, and it was yesterday's Bloomberg 0:01:43.040 --> 0:01:45.720 reporting on how AI is driving up treasury yields. It 0:01:45.840 --> 0:01:47.680 just touches everything. We're going to dig into that in 0:01:47.760 --> 0:01:50.279 just a moment. Ira, I want to come though first 0:01:50.280 --> 0:01:53.160 with you your read on what's happening in the US 0:01:53.280 --> 0:01:56.800 rates market, in the global rates market, and how connected 0:01:56.840 --> 0:01:57.880 they really are. 0:01:57.960 --> 0:02:01.400 Or not while the extremely connected, and I would say 0:02:01.400 --> 0:02:03.440 that one of the big reasons why we do have 0:02:03.520 --> 0:02:07.560 this rise in thirty year US treasuries is there's alternatives 0:02:07.600 --> 0:02:12.280 now for people to buy buy other bonds. So Japanese 0:02:12.320 --> 0:02:15.320 government bonds, when you hedge it back into certain currencies, 0:02:15.639 --> 0:02:18.800 winds up yielding more than US treasuries. So now there's 0:02:19.440 --> 0:02:22.880 the treasury yields have to compete with yields from other countries. 0:02:22.919 --> 0:02:26.480 So that creates this very high correlation between a lot 0:02:26.520 --> 0:02:29.400 of the developed market government bonds and a lot of 0:02:29.400 --> 0:02:31.120 the things that you just said, Carol, you know, things 0:02:31.200 --> 0:02:34.160 like fiscal issues not only here but abroad as well, 0:02:34.240 --> 0:02:37.679 right in Japan, Germany, the UK in particular. Now right, 0:02:37.880 --> 0:02:40.440 you wind up having the situation where people are worried 0:02:40.480 --> 0:02:43.640 about the long term health of these developed bond markets. 0:02:43.639 --> 0:02:47.720 And that's all feeding in to this frenzy of I'm 0:02:47.760 --> 0:02:49.800 not going to say long and selling because I have 0:02:49.880 --> 0:02:52.160 yet to meet anyone who I talked to anyone who's 0:02:52.200 --> 0:02:56.240 actually selling, not necessarily buying, which means that you know, 0:02:56.280 --> 0:02:59.040 the governments who are selling just have to attract people 0:02:59.240 --> 0:03:00.520 by issuing it yield. 0:03:01.000 --> 0:03:03.360 Devina, let's bring you in here. Do you want to 0:03:03.360 --> 0:03:03.919 build on that? 0:03:04.400 --> 0:03:07.560 Yeah, because the interestingly, competition is coming also from the 0:03:07.600 --> 0:03:10.600 corporate side. Now that's the that's what's happening with the 0:03:10.639 --> 0:03:13.800 AI sort of financing wave, right, So we're seeing like 0:03:13.919 --> 0:03:17.639 a lot of corporates issuing tons of that on the 0:03:17.639 --> 0:03:20.560 long end of the curve, so essentially long term maturities, 0:03:20.960 --> 0:03:23.000 which is providing competition to the long end of the 0:03:23.040 --> 0:03:26.480 treasury curve. Essentially perform managers have more to choose from, 0:03:26.760 --> 0:03:29.359 and that leads to sometimes you know, selling treasures to 0:03:29.360 --> 0:03:29.960 buy corporates. 0:03:30.160 --> 0:03:35.440 What's the comp in corporate bonds that we've seen, Like 0:03:35.520 --> 0:03:36.839 this is there a camp? 0:03:37.680 --> 0:03:40.600 I think this is unprecedented quite frankly, like that we 0:03:40.640 --> 0:03:43.080 are seeing like record levels in terms of issuance, Like 0:03:43.200 --> 0:03:45.400 we are at one point five trillion only in the 0:03:45.400 --> 0:03:49.280 investment grade market so far, and that's already like thirty 0:03:49.280 --> 0:03:53.320 percent more than last year. We're going to there's wide expectations. 0:03:53.000 --> 0:03:55.040 Thirty percent more than last year go ahead. 0:03:55.440 --> 0:03:59.760 There's a wide expectation of like essentially record issuance levels this year, 0:03:59.840 --> 0:04:01.840 more than even in twenty twenty. 0:04:02.160 --> 0:04:02.960 It's very low. 0:04:03.040 --> 0:04:04.760 So, yes, it's unprecedented. 0:04:04.960 --> 0:04:07.040 I don't know, you know, iras all right, if they're 0:04:07.040 --> 0:04:10.520 not selling but they're not buying, that's still a problem. 0:04:10.880 --> 0:04:11.800 Yeah, it is. 0:04:11.840 --> 0:04:13.520 And I just want to go back to say that 0:04:13.560 --> 0:04:16.840 you know that in terms of the long investment grade 0:04:16.839 --> 0:04:19.800 corporate bonds, which you know are competing, and certainly the 0:04:19.839 --> 0:04:24.200 AI issuance and other long bond issuance is certainly competing 0:04:24.240 --> 0:04:25.800 at some level. And there are people who want to 0:04:25.800 --> 0:04:28.200 hedge their interest rate risks, so that is people you know, 0:04:28.320 --> 0:04:32.159 selling long ultra bond futures or shorting treasuries against it 0:04:32.200 --> 0:04:35.280 as well. We have seen this type of issuance as 0:04:35.360 --> 0:04:37.279 terms of percentage of the market before. If you go 0:04:37.400 --> 0:04:40.719 back to the telecom boom in the late nineties early 0:04:40.760 --> 0:04:44.400 two thousands, you saw a lot of long term corporate bonds. 0:04:44.440 --> 0:04:46.640 But I was a corporate bond stata just you know, 0:04:46.720 --> 0:04:50.360 several decades ago. Now I hate to say, but and when. 0:04:50.200 --> 0:04:52.120 You we've all been doing this a long time, IRA 0:04:52.520 --> 0:04:54.640 yet we yet oh yeah. 0:04:54.760 --> 0:04:57.400 So when when you have a lot of issuance, and 0:04:57.440 --> 0:05:01.320 particularly when it changes quickly, right so, and in terms 0:05:01.320 --> 0:05:03.320 of you know, people you know selling a lot of 0:05:03.320 --> 0:05:05.720 five and ten year debt and then suddenly they decide 0:05:05.760 --> 0:05:08.080 to go out the curve because they either have a 0:05:08.080 --> 0:05:10.360 funding need to go out that far or they don't 0:05:10.360 --> 0:05:12.400 want to have a maturity wall in a couple of years. 0:05:13.279 --> 0:05:17.279 You know, that can change the tone certainly, but when 0:05:17.279 --> 0:05:19.880 it comes to treasuries, it's you know, it's not only AI, right, 0:05:19.920 --> 0:05:22.240 we have to make sure that we understand that there's 0:05:22.240 --> 0:05:25.159 a multitude of factors that are driving this that all 0:05:25.440 --> 0:05:28.520 happen to be coming together at the same time, including 0:05:28.560 --> 0:05:31.960 things like Kevin Warsh, you know, not necessarily having the 0:05:31.960 --> 0:05:35.320 confidence of the market, so that has to increase risk premium. 0:05:35.320 --> 0:05:37.880 And you've seen that throughout most of the treasury curve, 0:05:37.920 --> 0:05:39.960 in particular the ten and thirty year part of the 0:05:39.960 --> 0:05:42.560 curve where you've seen those yields rise just on the 0:05:42.600 --> 0:05:45.279 back of you know, people not knowing if the Fed's 0:05:45.360 --> 0:05:47.600 going to be able to you know, control the economy 0:05:47.640 --> 0:05:48.120 the way you use. 0:05:48.080 --> 0:05:50.320 Are what do you blame the most? Is it, mister Warsh? 0:05:50.680 --> 0:05:52.680 Is it the AI issuance? Is it? 0:05:52.720 --> 0:05:52.800 Like? 0:05:52.800 --> 0:05:53.800 What do you blame the most? 0:05:53.839 --> 0:05:54.000 Here? 0:05:54.760 --> 0:05:58.240 There is no most, So it's a little bit of everything. 0:05:58.320 --> 0:06:02.119 And and here's the thing. The AI story wouldn't matter 0:06:02.240 --> 0:06:04.440 if you didn't have these other things going on, right, 0:06:04.440 --> 0:06:06.400 people would just be like, okay, it'd be worth ten 0:06:06.480 --> 0:06:08.279 or twelve basis points right. It would be like a 0:06:08.279 --> 0:06:11.560 blip and a couple of days of reasonably sized moves. 0:06:11.839 --> 0:06:14.760 But the fact that you have now, you know, fears 0:06:14.800 --> 0:06:18.200 of the fiscal situation in the UK, you have fears 0:06:18.200 --> 0:06:22.800 about you know, the boj raising rates even further and 0:06:22.839 --> 0:06:25.159 seeing their yields above four percent for the first time 0:06:25.200 --> 0:06:27.680 in decades as well. Right, all of those things are 0:06:27.680 --> 0:06:29.560 feeding onto this and then you add on to that 0:06:29.880 --> 0:06:32.800 the AI supply story, and it just makes it much worse. 0:06:32.839 --> 0:06:36.040 Hey, guys, I want to bring into the conversation. Edward 0:06:36.080 --> 0:06:38.120 Denny and his team put out a research note. Of course, 0:06:38.120 --> 0:06:41.640 he coined the term bond vigilant vigilantes, and so we 0:06:41.800 --> 0:06:44.880 listened to what mister yard Denny has to say. He 0:06:45.160 --> 0:06:48.400 in the note it said, we aren't pushing the panic button. However, 0:06:48.440 --> 0:06:51.520 we are closely monitoring whether the bond vigilantes might do so. 0:06:51.560 --> 0:06:53.320 We are sticking with our view that the US bond 0:06:53.360 --> 0:06:56.279 yield should continue to trade in a normal range of 0:06:56.320 --> 0:06:59.760 four to five percent without causing any adverse consequences for 0:06:59.800 --> 0:07:03.400 the economy and corporate earnings. Nevertheless, now that the yield 0:07:03.800 --> 0:07:05.799 is approaching the top of this range, we are monitoring 0:07:05.800 --> 0:07:10.440 the activities of the bond vigilantes more closely. We've been here. 0:07:10.560 --> 0:07:12.840 I feel like David Ay before, we've talked about the 0:07:12.840 --> 0:07:16.440 bond vigilantes. We all get crazy and then we settle down. 0:07:16.560 --> 0:07:18.320 Is this just a case of watching or are there 0:07:18.400 --> 0:07:21.800 signs that there is a problem and world get ready 0:07:21.840 --> 0:07:24.080 for higher interest rate costs across the board? 0:07:24.240 --> 0:07:26.880 Well, I mean, like the PUSHI in sort of risk 0:07:26.920 --> 0:07:29.160 premiums is across the board. So in that sense we're 0:07:29.160 --> 0:07:32.320 seeing bond vigilati is also in the corporate bond market, 0:07:32.640 --> 0:07:36.320 where essential investors are asking for higher spreads and higher 0:07:36.320 --> 0:07:40.320 returns on the on corporate bonds, we're seeing investment grade 0:07:40.320 --> 0:07:46.200 bonds basically trading at junk level yields. So yeah, the 0:07:46.240 --> 0:07:47.720 pushire is across the board. 0:07:47.760 --> 0:07:50.440 That's a sign, right, Well. 0:07:50.280 --> 0:07:53.000 It's a sign of investors demanding more because they expect 0:07:53.040 --> 0:07:56.280 so much supply essentially, right, Yeah, I. 0:07:56.280 --> 0:07:59.360 Just can't help it. Turn back to the backdrop of 0:07:59.400 --> 0:08:02.920 the FED, and you know, Iira, you mentioned just kind 0:08:02.920 --> 0:08:05.800 of the confidence of the market in the new FED chair. 0:08:06.360 --> 0:08:08.400 Could you impact that a little bit because you know, 0:08:08.920 --> 0:08:10.280 I think a few of us have lit through a 0:08:10.280 --> 0:08:13.720 different FED share changes. Why would this one be any 0:08:13.760 --> 0:08:14.720 different than the others? 0:08:15.920 --> 0:08:20.240 Well, I think because the changing communication wasn't incremental at all, right, 0:08:20.280 --> 0:08:22.400 it wasn't just a little bit of a slowdown. We're 0:08:22.440 --> 0:08:25.160 going to reduce the amount of forward guidance we give, 0:08:25.240 --> 0:08:26.600 and we're not. We're not going to you know, we're 0:08:26.640 --> 0:08:28.320 going to give just a little bit less information in 0:08:28.360 --> 0:08:33.160 the statement. Look, the the Fed's post meeting statement went 0:08:33.160 --> 0:08:35.839 from about four hundred words to one hundred words in 0:08:35.880 --> 0:08:39.720 one meeting. And so we need good words. One hundred 0:08:39.840 --> 0:08:43.480 good words. Not no, they didn't say it doesn't say 0:08:43.480 --> 0:08:46.320 anything now right as no forward guidance, it has no 0:08:46.559 --> 0:08:49.640 reason of expectation. And here here's the thing, like Kevin Worrish, 0:08:49.720 --> 0:08:52.920 I think so far had you know, kind of misread 0:08:52.960 --> 0:08:55.600 what the market wants and needs. And you know, yes 0:08:55.640 --> 0:08:57.880 he has the communications task force. I put out a big, 0:08:57.920 --> 0:09:00.880 deep dive report on that yesterday where we're you know, 0:09:00.920 --> 0:09:03.000 looking at all of the task forces and the big 0:09:03.000 --> 0:09:06.320 one is communications. Because so far Kevin wosh has to 0:09:06.679 --> 0:09:09.440 you know, hasn't given the market any indication of what's 0:09:09.480 --> 0:09:13.200 coming next or what will come next given any given 0:09:13.240 --> 0:09:16.079 economic outcome. So unless you do one of those two 0:09:16.120 --> 0:09:18.520 things right, either give for your guidance or say, okay, 0:09:18.760 --> 0:09:21.240 here's the five things that might happen, and we'll do 0:09:21.840 --> 0:09:23.760 you know, this, that or the other thing, depending on 0:09:23.800 --> 0:09:26.600 which outcome occurs. He has to do one of those 0:09:26.640 --> 0:09:29.440 two things, and he hasn't. So the market's confused and 0:09:29.480 --> 0:09:32.560 we priced higher risk premium like the other guests mentioned. 0:09:32.600 --> 0:09:34.720 Okay, so a lot of uncertainty about certainly the FED share. 0:09:34.760 --> 0:09:36.600 We need a little bit more specificity. One thing we 0:09:36.640 --> 0:09:38.679 know real quickly. Twenty seconds, David Day, We're going to 0:09:38.720 --> 0:09:42.400 get more credit or bond issuance from all these hyper 0:09:42.440 --> 0:09:44.280 skeles and so and so forth. It's going to keep coming. 0:09:44.360 --> 0:09:48.080 I mean it's relentless. Yes, when we're looking like, you know, 0:09:48.240 --> 0:09:50.320 school trillion over the next couple of years in terms 0:09:50.320 --> 0:09:53.040 of estimates. So yes, just in the investment grade market. 0:09:53.120 --> 0:09:54.439 So it's a lot to come yet. 0:09:54.440 --> 0:09:56.200 All right, good stuff, guys, Thank you so much. This 0:09:56.280 --> 0:09:58.640 is what we were hoping to do. David A. Barbusha. 0:09:58.640 --> 0:10:00.640 He is Bloomberg News Corporate Finding It's reporter and of 0:10:00.640 --> 0:10:04.679 course Ira Jersey, Bloomberg Intelligence Chief US interest rate strategist, 0:10:05.080 --> 0:10:05.680 joining us. 0:10:06.679 --> 0:10:09.560 Stay with us. More from Bloomberg Business Week Daily coming 0:10:09.640 --> 0:10:10.559 up after this. 0:10:14.480 --> 0:10:18.320 You're listening to the Bloomberg Business Week Daily podcast. Catch 0:10:18.400 --> 0:10:21.080 us live weekday afternoons from two to five e's during 0:10:21.280 --> 0:10:24.520 Listen on Apple Karplay and Android Auto with the Bloomberg 0:10:24.559 --> 0:10:27.280 Business app, or watch us live on YouTube. 0:10:28.240 --> 0:10:30.160 We're gonna talk a little bit about China. There's stuff 0:10:30.200 --> 0:10:30.559 going on. 0:10:30.720 --> 0:10:33.800 Let's do it. We have a very highly anticipated summit 0:10:33.840 --> 0:10:37.760 between Chinese President Hi Jinping and US President Donald Trump. 0:10:38.240 --> 0:10:40.400 There's many people who've been watching this, many more people 0:10:40.480 --> 0:10:43.079 who have not, and that's why we're bringing in Shazad 0:10:43.160 --> 0:10:45.920 Kazi to discuss that. He's the COO and managing director 0:10:45.920 --> 0:10:48.640 of the China Beaige Book International Space here in New York. 0:10:48.760 --> 0:10:51.640 He joins us in the studio. Hizat, thanks for joining us. 0:10:51.760 --> 0:10:52.719 Thank you, good to see you. 0:10:52.760 --> 0:10:53.400 Great to see you. 0:10:53.920 --> 0:10:57.240 I would like to start at the summit you had 0:10:57.280 --> 0:11:01.240 in a recent note, some very detailed back and forth, 0:11:01.280 --> 0:11:04.760 the pluses and minuses and what may actually not get 0:11:04.800 --> 0:11:07.760 taken care of in September. Could we start there for 0:11:07.880 --> 0:11:10.599 investors who may be thinking too much of this meeting. 0:11:10.360 --> 0:11:12.040 And this is a summit between President and g and 0:11:12.080 --> 0:11:12.679 President Trump. 0:11:12.720 --> 0:11:14.199 Correct, that's right, that's right. 0:11:14.240 --> 0:11:17.400 I mean I think once again expectations should be very 0:11:17.480 --> 0:11:19.160 very low for what's about to happen. I think where 0:11:19.160 --> 0:11:21.440 we need to get a day long summit. It looks 0:11:21.480 --> 0:11:26.880 like at most this time around, and both sides are 0:11:27.120 --> 0:11:29.600 trying to talk about deliverables. The Chinese side wants us 0:11:29.640 --> 0:11:33.160 to be superscripted and are very frustrated. The US side 0:11:33.360 --> 0:11:36.440 doesn't understand why the Chinese side is so frustrated. But 0:11:36.480 --> 0:11:38.640 at the same time they both agree there's not going 0:11:38.679 --> 0:11:42.520 to get a whole lot done at this meeting. You know, 0:11:42.720 --> 0:11:45.600 the big deliverable that might come out of it are 0:11:45.640 --> 0:11:48.200 details in some finalization of what that so called Board 0:11:48.240 --> 0:11:50.880 of Trade needs to look like. Don't expect much beyond that. 0:11:51.000 --> 0:11:52.920 What do you mean, what is the Board of Trade 0:11:52.960 --> 0:11:53.720 walk us through that? 0:11:54.200 --> 0:11:58.280 So the USRA representative famously says, I am the Board 0:11:58.320 --> 0:12:01.480 of Trade. And what that means is that Ambassador Greer 0:12:01.800 --> 0:12:04.720 has agreed with this counterparts that we're going to pick 0:12:05.040 --> 0:12:07.640 about roughly thirty billion dollars worth of things that we 0:12:07.679 --> 0:12:09.559 are happy to import from you we consider to be 0:12:09.600 --> 0:12:12.200 non strategic. You'll do the same, and we're going to 0:12:12.360 --> 0:12:15.360 manage trade between us. So unlike what we've thought of 0:12:15.400 --> 0:12:17.800 trade deals as saying, look, we're going to open up 0:12:17.800 --> 0:12:20.000 free flow of trade. This is more about actually saying 0:12:20.000 --> 0:12:22.280 we're going to decide what's truly free and the rest 0:12:22.280 --> 0:12:23.960 of the stuff we're going to slap on tariffs. 0:12:24.080 --> 0:12:24.840 Is that a good thing? 0:12:25.720 --> 0:12:30.280 It's driven by a national security imperative from that standpoint 0:12:30.400 --> 0:12:33.080 on both sides, from both sides, certainly from our side, 0:12:33.080 --> 0:12:35.120 and I think the Chinese side will determine what their 0:12:35.160 --> 0:12:38.679 national security priorities are. So it is there are positives 0:12:38.679 --> 0:12:41.560 to it. I don't know how much it'll do in 0:12:41.559 --> 0:12:43.640 the long run though, to take care of things like 0:12:43.800 --> 0:12:46.599 supply chain dependency on China and so forth, because it 0:12:46.600 --> 0:12:48.920 doesn't address the other critical issues like transcriptment, which is 0:12:48.920 --> 0:12:50.280 a big one staring us. 0:12:50.320 --> 0:12:52.800 Can you clarify how much we still rely on China 0:12:52.840 --> 0:12:54.719 in terms of supply chains, global supply. 0:12:54.559 --> 0:12:56.680 Chains immense amount? 0:12:56.720 --> 0:12:59.720 Right? There really isn't anything in our homes, in our 0:12:59.760 --> 0:13:03.560 and ustrial centers and our data centers, really even factories 0:13:03.600 --> 0:13:06.640 that is not coming our hospitals is not coming by 0:13:06.640 --> 0:13:07.680 and large from China. 0:13:08.120 --> 0:13:09.800 What they did with rare earth metals. 0:13:09.600 --> 0:13:12.679 Really scared us because I think it created this other 0:13:12.679 --> 0:13:14.480 discussion said, think about what if they did that with 0:13:14.520 --> 0:13:18.960 pharmaceuticals and surgical supplies and medical goods, forget about everything else. Yeah, 0:13:19.000 --> 0:13:20.280 so a ton and. 0:13:20.240 --> 0:13:22.760 She's just I mean, that's why we're kind of here 0:13:22.840 --> 0:13:25.640 right now. Right we have the export controls that China 0:13:25.640 --> 0:13:28.319 puts in place on critical minerals and permanent magnets. The 0:13:28.400 --> 0:13:30.400 United States says we're going to do the same thing 0:13:30.440 --> 0:13:33.600 on chip technology, and ultimately the two sides, who are 0:13:33.679 --> 0:13:36.800 you know, heavy hitters in the world economy, say okay, okay, 0:13:36.800 --> 0:13:39.600 we got to reach some sort of truth here to 0:13:39.640 --> 0:13:42.600 calm markets down globally and also to calm this diplomatic 0:13:42.679 --> 0:13:43.520 relationship down. 0:13:44.160 --> 0:13:48.240 Yeah, and I think one idea was really the predominant idea, 0:13:48.360 --> 0:13:50.720 was that if the two leaders keep meeting each other, 0:13:51.280 --> 0:13:54.320 then the truth continues. Now everybody realizes the truth is 0:13:54.360 --> 0:13:56.560 because we need the truth because we can't we don't 0:13:56.600 --> 0:13:59.480 have the rarers and the magnets were wholly depending. 0:13:59.200 --> 0:13:59.960 On gener have a choice. 0:14:00.240 --> 0:14:02.240 We don't have a choice. And the Chinese won the 0:14:02.280 --> 0:14:04.880 truth because that's the best way to keep kicking this 0:14:04.960 --> 0:14:06.960 thing down the road, to push off tariffs for as 0:14:07.000 --> 0:14:10.000 long as possible, run out the clock on Trump, and then. 0:14:09.880 --> 0:14:11.600 You deal with whoever the next president is. 0:14:11.679 --> 0:14:14.800 Has China feeling about the United States? And I bring 0:14:14.880 --> 0:14:17.880 that up because Chinese Foreign minister when you will visit 0:14:17.920 --> 0:14:20.360 South Korea for two days from Wednesday to talk about 0:14:20.400 --> 0:14:23.200 North Korean bilateral and global issues with South Korean Foreign 0:14:23.200 --> 0:14:26.680 Minister A choky On, And this is coming after President 0:14:26.680 --> 0:14:29.480 Trump ordered the Pentagon to reduce joint exercises with South 0:14:29.560 --> 0:14:32.560 Korea citing their cost and his relationship with the North 0:14:32.640 --> 0:14:35.640 Korean leader. And there was also some connection with orn 0:14:35.720 --> 0:14:40.800 and supporting and the nuclearization. What's your read political read 0:14:40.880 --> 0:14:41.240 on that. 0:14:42.000 --> 0:14:45.080 So I don't necessarily align myself with the idea that 0:14:45.120 --> 0:14:48.440 wherever the US tries to withdraw from a geogeography or something, 0:14:48.520 --> 0:14:51.080 China will try to step in. Necessarily by the same 0:14:51.080 --> 0:14:54.640 time China is in them, I think it can certainly 0:14:54.680 --> 0:14:58.680 embolden them. Even if they don't want to take action immediately, 0:14:59.040 --> 0:15:01.840 Certainly they may fee like they could, and potentially the 0:15:01.920 --> 0:15:05.280 probability success goes up if you will. So they're doing 0:15:05.280 --> 0:15:07.840 all of this, I think, on the other hand, even 0:15:07.880 --> 0:15:10.760 the United States, though on the other hand, even when 0:15:10.760 --> 0:15:13.040 they're showing up here, they are taking an aggressive tact 0:15:13.040 --> 0:15:15.760 they're saying, look, we're watching what's happening in Congress. 0:15:15.880 --> 0:15:16.600 We're watching that. 0:15:16.800 --> 0:15:18.280 You know, you guys are not blaming us for an 0:15:18.400 --> 0:15:20.760 election of difference, and we don't like this. Don't try 0:15:20.800 --> 0:15:23.360 to threaten the truth. So apparently the tough talk is 0:15:23.360 --> 0:15:24.360 happening behind the scenes. 0:15:24.560 --> 0:15:27.360 I think oftentimes all of us kind of look at 0:15:27.360 --> 0:15:29.720 this from the perspective of the US, and what's the US, 0:15:29.760 --> 0:15:32.720 haven't it? But maybe we could bring you in to 0:15:32.960 --> 0:15:35.480 look from the vantage point of the China right now? 0:15:35.600 --> 0:15:40.000 Right there are economic pressures internally. How do those play 0:15:40.240 --> 0:15:43.280 in this broader discussion? Yeah, I mean, in. 0:15:43.200 --> 0:15:46.520 Some ways this really is I think she's, you know, 0:15:46.560 --> 0:15:48.240 the genius move, I can call it. 0:15:48.320 --> 0:15:50.800 That the economy internally is pretty weak. 0:15:52.040 --> 0:15:54.880 Not only is the consumption side week, the household side week, 0:15:54.920 --> 0:15:57.360 and not only are they completely sort of failing to 0:15:57.640 --> 0:16:00.160 embark upon this economic transition that they've been talking. 0:16:00.160 --> 0:16:02.360 About for a decade and a half. 0:16:02.440 --> 0:16:04.960 Really, certainly at least the last five six years in earnest, 0:16:05.280 --> 0:16:07.880 they are feeling on all those accounts. Yet they are 0:16:07.960 --> 0:16:11.640 able to because the expert machinery is running, they're able to, 0:16:12.160 --> 0:16:14.160 you know, show up at the table and deal with 0:16:14.240 --> 0:16:18.160 not with the US, not just as competitors and equals, 0:16:18.160 --> 0:16:20.360 but you know ones that oftentimes look like they have 0:16:20.360 --> 0:16:20.720 the cards. 0:16:20.800 --> 0:16:23.120 Right, does it ever matter because we always talk about 0:16:23.200 --> 0:16:25.280 Chinese deep pockets, right, and the governments always they are 0:16:25.400 --> 0:16:28.160 to either boost up a company or boost up a sector. 0:16:28.680 --> 0:16:30.080 Those pockets are still pretty deep. 0:16:30.160 --> 0:16:33.440 Right, The pockets are still pretty deep. And where is 0:16:33.480 --> 0:16:36.000 their traditional way of doing stimulus isn't working? We have 0:16:36.040 --> 0:16:39.440 to remember they haven't really attempted household style style side 0:16:39.480 --> 0:16:42.800 stimulus at all. So that's a whole other playbook that 0:16:42.840 --> 0:16:46.920 they could resort to. They just don't ideologically like to 0:16:46.920 --> 0:16:49.520 do that. It is, it is ironic. It's a communist party. 0:16:49.640 --> 0:16:52.200 They don't like to do welfare, but they quite if 0:16:52.200 --> 0:16:53.480 they wanted to push company show. 0:16:53.800 --> 0:16:56.000 I mean, all of this comes down to job. That's 0:16:56.080 --> 0:16:58.480 that's the power that the poulap burrow that the Communist 0:16:58.560 --> 0:17:01.240 Party has within China. Of course, I mean the growing 0:17:01.280 --> 0:17:04.280 middle class since dunkshell Ping I mean just speaks volumes 0:17:04.320 --> 0:17:08.280 to that. But as you embark on this AI transition, like, 0:17:08.920 --> 0:17:12.240 what what does that do to what is still a 0:17:12.359 --> 0:17:14.960 very deeply industrial based jobs economy. 0:17:15.280 --> 0:17:17.800 Yeah, I think that is a big, big challenge for them. 0:17:17.840 --> 0:17:19.640 They do not have an answer for this as yet. 0:17:19.960 --> 0:17:23.399 They're already staring at obviously a very large youth unemployment problem. 0:17:23.520 --> 0:17:26.159 These young people will eventually become older, so you have 0:17:26.200 --> 0:17:28.960 to do something about them. Plus the new entrance, the 0:17:28.960 --> 0:17:31.440 Communist Party certainly has a big challenge out of itself 0:17:31.440 --> 0:17:31.719 from them. 0:17:31.800 --> 0:17:34.240 Yeah, where are they in this transformation? We talk about 0:17:34.240 --> 0:17:37.639 whether it's EVS or you know, pick even AI, like 0:17:37.920 --> 0:17:41.960 how advanced they are certainly when it comes to robotics 0:17:42.320 --> 0:17:44.200 and so and so far, so it sounds like they're 0:17:44.200 --> 0:17:46.919 so advanced and that we should be worried. But is 0:17:46.960 --> 0:17:47.600 that true? 0:17:48.320 --> 0:17:50.080 They are advanced, and we have to remember that we're 0:17:50.080 --> 0:17:50.560 talking and a. 0:17:50.640 --> 0:17:53.199 Risk to the US in terms of high tech and 0:17:53.240 --> 0:17:53.600 so on. 0:17:53.680 --> 0:17:56.239 Well, certainly, I mean, we can't compete with them at 0:17:56.240 --> 0:17:58.080 this point when it comes to things like robotics, right, 0:17:58.200 --> 0:18:00.360 there's no factory in America that could just say, oh, yeah, 0:18:00.359 --> 0:18:02.200 we're competing with the Chinese when it comes to automation 0:18:02.280 --> 0:18:04.280 and products and such. And you have to remember we're 0:18:04.280 --> 0:18:06.280 talking about AI related job losses a lot in this 0:18:06.359 --> 0:18:09.720 country now that transition to automation, especially in the manufacturing 0:18:09.720 --> 0:18:12.040 side has been happening for a long time in China, 0:18:12.080 --> 0:18:13.679 So they have this they sort of know how to 0:18:13.720 --> 0:18:15.560 deal with it by now a little bit also compared 0:18:15.560 --> 0:18:18.560 to maybe other economies, but they are certainly very far 0:18:18.760 --> 0:18:22.200 ed's it's incredible. 0:18:22.400 --> 0:18:24.960 So what should investors be thinking about? You know, we've 0:18:24.960 --> 0:18:27.520 been talking about China forever and for such a long time. 0:18:27.560 --> 0:18:30.560 I know when I started my career like decades ago, 0:18:30.880 --> 0:18:32.919 you know, it was all about having access to the 0:18:33.000 --> 0:18:37.200 Chinese market. That's what was important to every global multinational company. 0:18:38.240 --> 0:18:43.160