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Speaker 1: Good morning. I'm Brian Curtiz.

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Speaker 2: And I'm Paul Allen. Here are the stories we have

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Speaker 2: following today. A soft Bank has lined up some of

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Speaker 2: I'm Limited's biggest customers as strategic investors for the chip

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Speaker 2: company's USIPO. We've got more from Bloomberg's Steve Rappaport.

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Speaker 3: We're told Apple, Nvidia, Intel, and Samsung will back the

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Speaker 3: ARM IPO, and other investors include Advanced micro Devices and

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Speaker 3: Alphabet's Google. We hear investors will put in amounts ranging

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Speaker 3: from twenty five to one hundred million dollars. SoftBank has

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Speaker 3: been in discussions with ARMED customers and partners for months,

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Speaker 3: but the plans are just being finalized now. Still, the

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Speaker 3: specifics could change as the company gets closer to the IPO.

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Speaker 3: ARM is considering pricing its shares on September thirteenth, and

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Speaker 3: the stock would start trading the next day. I'm Steve Rappaport,

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Speaker 3: Bloomberg Daybreak Asia China.

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Speaker 1: Next Chinese developer, Country Garden is said to have wired

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Speaker 1: a coupon payment coming due on a ringet denominated bond.

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Speaker 1: Bloombergs Chuan Wong has the story from Hong Kong.

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Speaker 4: The Ring of Boni question is a five point seven

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Speaker 4: percent note that was issued in twenty twenty. The six

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Speaker 4: hundred and thirteen thousand dollar coupon is effectively due September fourth.

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Speaker 4: The latest news comes after Country guarden one approval to

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Speaker 4: extend a separmature in yuan bond. The clock is ticking

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Speaker 4: to mix those payments before a grace period that ends

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Speaker 4: in the next two days or risk default. Recently, Country

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Speaker 4: Garden posted an unprecedented net loss of six point seven

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Speaker 4: billion dollars. It also said it still faces nearly two

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Speaker 4: billion dollars worth of note obligations for the rest of

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Speaker 4: this year in Hong Kong and joined Wan Bloomberg.

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Speaker 2: Dear Bregaisia, Let's move on to US. COMMAS Secretary Gino

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Speaker 2: Ramondo says visit to China last week produced a great

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Speaker 2: deal of progress, but she said there can be no

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Speaker 2: trust unless Beijing has more predictable regulations. Here is Raymondo

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Speaker 2: speaking on CBS's face the nation.

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Speaker 5: Trust is probably not the word I would use. We

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Speaker 5: need to see action, and until we see action, there

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Speaker 5: can be no trust. You know, hacking my account eroads trust,

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Speaker 5: Undermining American workers by over subsidizing certain industries, EROADS trust

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Speaker 5: treating American businesses unfairly on the ground, eroads trust.

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Speaker 2: That's Gina Ramando heard here on Bloomberg and during her

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Speaker 2: visit Washington and Beijing did restore the kind of formal

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Speaker 2: communication channels that have been severed over the past few years.

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Speaker 2: She said. Both sides agreed to share information about export controls,

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Speaker 2: and they'll also open dialogue on commercial issues and have

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Speaker 2: an exchange around trade secrets.

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Speaker 1: BMW has presented a prototype of its future electric vehicle lineup.

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Speaker 1: The Vision Noier class concept car will be on display

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Speaker 1: at next week's IAA Auto show in Munich. BMW hopes

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Speaker 1: its next generation EV will help with its fight to

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Speaker 1: compete with Tesla and BYD, particularly in China. The automaker

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Speaker 1: touted the vehicle's digital display as well as soft where

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Speaker 1: that can process voice commands and hand gestures. BMW hopes

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Speaker 1: this will attract customers in China. We heard from CEO

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Speaker 1: Oliver Zipsey.

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Speaker 6: China has the largest car market in the world, and

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Speaker 6: that there is an industry developing to supply that market,

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Speaker 6: which at some point in time also goes on a

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Speaker 6: global scale, just like we do. That is not a surprise,

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Speaker 6: So let's embrace them and let's try to have a

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Speaker 6: fair and competition to build ever better products for our customers.

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Speaker 1: Separately, Mercedes Benz unveiled an electric vehicle with a longer

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Speaker 1: range than any Tesla model on the market. The automaker

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Speaker 1: is looking to bolster its lineup after disappointing sales in China.

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Speaker 2: We're back in the US. August Jobs Dater offered a

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Speaker 2: mixed picture of both resilience and moderation in the labor market.

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Speaker 2: Question now is whether the Fed will hold interest rates

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Speaker 2: at a twenty two year high this month and potentially

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Speaker 2: leave them there for a while. Cleveland Fed President Loretta

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Speaker 2: mestas inflation remains too high. Despite recent improvements.

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Speaker 7: The FMC is committed to moving inflation down to two percent.

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Speaker 7: The monetary policy questions or whether the current level of

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Speaker 7: the Fed fund rate is sufficiently restrictive and how long

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Speaker 7: policy will need to remain restrictive to keep inflation moving

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Speaker 7: down in a sustain one timely way to our goal

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Speaker 7: of two percent.

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Speaker 2: Mister did not specify whether she thinks another interest rate

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Speaker 2: hike is needed, but she said future policy decisions will

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Speaker 2: be about managing the risks the fed's next policy meetings

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Speaker 2: September nineteen and twenty Bryant.

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Speaker 1: In a few moments, we'll be speaking with Adam Kuhne's

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Speaker 1: chief portfolio manager at Winthrop Capital Management, and another story

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Speaker 1: that will take a closer look at all throughout the morning.

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Speaker 1: In China, policymakers have been keeping at it on the

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Speaker 1: stimulus front. Stocks had a little bounce late last week,

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Speaker 1: but they are down about six percent almost six percent

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Speaker 1: over the past month or so. And we'll have the

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Speaker 1: trade and inflation data this week that will likely to

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Speaker 1: show that the recovery in China remains fragile, although deflation

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Speaker 1: may have ease. So that's all coming up. Now it's

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Speaker 1: time for global news. Ukraine is replacing its defense minister

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Speaker 1: or on that from Dan Schwarzman in the Bloomberg Newsroom.

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Speaker 8: Dan, Yeah, that's correct. Brian President Vladimir Zelenski will be

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Speaker 8: replacing Alexi Resnikoff. Financial implications had recently come to light

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Speaker 8: in the defense ministry, with the government having started several

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Speaker 8: corruption investigations. Resnikov though has not been implicated in any investigation,

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Speaker 8: especially into the military overpaying for food and uniforms. The

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Speaker 8: minister has been widely hailed, though for the transition of

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Speaker 8: the military away from Soviet era weaponry to Western systems

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Speaker 8: during the war. Zelensky has nominated the head of the

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Speaker 8: State Property Fund Rustem Umirov as Resnigkhov's replacement. Umirov has

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Speaker 8: been widely hailed as a guy trying to rid corruption.

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Speaker 8: Ukraine's parliament. Parliament must approve the change in leadership. China

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Speaker 8: and Australia are set to resume high level talks in

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Speaker 8: Beijing starting on Thursday, after a three year hiatus. The

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Speaker 8: Australia China High Level Dialogue will be a platform for

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Speaker 8: senior representatives from government, industry, academia and other areas to

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Speaker 8: discuss issues from trade, international security. China's Code Chair will

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Speaker 8: be foreign former Foreign Minister Lee Zao Shing, while Australia's

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Speaker 8: Code Chair will be former Trade Minister Craig Emerson. Relations

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Speaker 8: between the two countries have been thawing since Albanizi government

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Speaker 8: to go over last year and China lifted some restrictions

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Speaker 8: on Australian goods. Albinizi has also been invited to visit

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Speaker 8: Beijing later this year. President Biden was in Florida this

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Speaker 8: weekend surveying damage caused by Hurricane Adahlia. Biden, though did

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Speaker 8: not meet with Governor and Republican presidential candidate Ron DeSantis

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Speaker 8: while touring devastated areas. The White House has suggested that

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Speaker 8: DeSantis had backed out of a joint tour, while the

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Speaker 8: governor spokesman said there wasn't a plan to tour together. Biden, though,

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Speaker 8: did take part in a briefing with Republican Senator Rick Scott,

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Speaker 8: who thanked the President for doing a quote great job

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Speaker 8: in preparing the federal government's relief efforts following on the

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Speaker 8: heels at Typhoon Soola, which hit Hong Kong on Friday.

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Speaker 8: Typhoon Haikui is making landfall today, with Taiwan bracing for

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Speaker 8: direct hit. The typhoon's radius envelopes much of the island nation,

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Speaker 8: bringing heavy rains and high winds which have so far

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Speaker 8: disrupted power to forty thousand households. Authorities had already shuttered

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Speaker 8: offices and canceled schools and flights today as a typhoon

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Speaker 8: near the island. Taiwan has not been directly hit by

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Speaker 8: a cyclone since Typhoon by Lu struck the island that

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Speaker 8: was back in twenty nineteen, Global News twenty four hours

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Speaker 8: a day, power by more than twenty seven hundred journalist

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Speaker 8: and analysts and more than one hundred and twenty countries.

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Speaker 8: I'm Dan Schwartzman. This is Bloomberg.

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Speaker 1: This is Bloomberg Daybreak, Geisha. I'm Brian Curtis along with

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Speaker 1: Paul Allen in Sydney, and our guest is Adam Koons,

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Speaker 1: chief portfolio manager at Winthrop Capital Management. So you might

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Speaker 1: have heard me mention there the way traders are looking

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Speaker 1: at what the FED is doing here, Adam, But more

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Speaker 1: and more financial institutions broadly are betting that the FED

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Speaker 1: is done this year. I know you acknowledge that, but

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Speaker 1: you say, higher for longer will take a toll. What

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Speaker 1: is that toll?

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Speaker 5: Yeah?

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Speaker 9: So I think the point here is that just because

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Speaker 9: the FED pauses doesn't mean there's not going to be

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Speaker 9: a continued effect from the lack of liquidity in markets.

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Speaker 9: And just you know, when you look at higher interest rates,

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Speaker 9: what really hasn't flowed through is this large floating rate

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Speaker 9: corporate debt problem that we have.

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Speaker 10: So a lot of companies.

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Speaker 9: Can survive for you know, three six, maybe even twelve months,

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Speaker 9: but if we go another.

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Speaker 10: Sticks to twelve months.

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Speaker 9: At this high of interest rates, it's going to begin

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Speaker 9: to really take a toll on earnings. I think a

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Speaker 9: lot of people kind of forget the fact that a

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Speaker 9: lot of corporate debt and then a lot of commercial

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Speaker 9: real estate debt is floating rate, meaning that their debt

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Speaker 9: service payments.

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Speaker 10: Have doubled or tripled over the last year. So that

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Speaker 10: is a real economic hit.

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Speaker 2: So how does that INFOLM your investing strategy. If you

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Speaker 2: think that those chickens are kind of come to roost

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Speaker 2: in about a year's time, what are you exiting?

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Speaker 9: So for us, you kind of hit it out the beginning.

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Speaker 9: I think the first step here is taking a hard

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Speaker 9: look at China that is just a story and frank

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Speaker 9: we got it wrong. The opening was disappointing, and then

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Speaker 9: seeing how that will begin to bleed and have contagion

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Speaker 9: within the rest of the emerging market. So that's the

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Speaker 9: first thing where we're looking to exit, and part of

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Speaker 9: that is also lower in beta.

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Speaker 10: Just generally speaking, as we see.

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Speaker 9: Kind of this economic dark cloud ahead, we want to

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Speaker 9: at least.

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Speaker 10: Start to dial back risk.

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Speaker 9: So that starts with reducing volatility, which is for us

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Speaker 9: the first part is taking China and emerging markets out

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Speaker 9: of portfolios.

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Speaker 10: The second piece is that we are growing.

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Speaker 9: More and more concerned about both valuations and concentration risk

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Speaker 9: in US indexes. So when you look at the S

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Speaker 9: and P five hundred and the type of companies that

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Speaker 9: are really making up those you know, top five to

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Speaker 9: ten names within the index that.

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Speaker 10: Are really the movers this year, what are you dropping

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Speaker 10: a lot of the performance.

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Speaker 9: They're high beta, high volatility, very rich valuations in companies

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Speaker 9: like Tessela and Nividia. So for US, the second move

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Speaker 9: there is to begin to move towards equal weight indexes.

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Speaker 10: So we're not taking large moves out of.

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Speaker 9: Equities, we're just kind of shifting how we're allocating our

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Speaker 9: risk with in equities into what we call, you know,

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Speaker 9: better valuation, lower beta type strategies.

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Speaker 1: Let's go back to China and then we can circle

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Speaker 1: back if we want to valuations in US stocks on China.

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Speaker 1: It seems like there's two big buckets to be concerned about.

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Speaker 1: Geopolitics is one, and also then just the policy making.

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Speaker 1: And I saw from the Bloomberg terminal that Nancy Pelosi

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Speaker 1: said over the weekend that one of the big issues

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Speaker 1: between the US and China is that we just don't

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Speaker 1: have shared values. Does that feed through to the investment

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Speaker 1: front a lot for you or you worried more about

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Speaker 1: general policy making.

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Speaker 10: No, it does matter. This is actually something we've been

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Speaker 10: talking about probably.

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Speaker 9: For the last year, is that our thesis was that

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Speaker 9: this form of capitalism we're going to call it that

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Speaker 9: in China is a different version, and I think a

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Speaker 9: lot of investors originally thought that they were going to

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Speaker 9: conform to, you know, the western US style capitalist type economy.

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Speaker 9: But we saw it differently. We saw them moving in

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Speaker 9: their own direction, their own version of capitalism that would

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Speaker 9: compete directly with the US. So we do think that

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Speaker 9: it matters that it's the term usman's values.

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Speaker 10: That's fair.

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Speaker 9: It's really just the version for them is a different

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Speaker 9: form of competition, and it will matter because they will

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Speaker 9: be able to compete on price in a way that

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Speaker 9: US companies that do not have any sort of federal backing,

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Speaker 9: you know, they won't have the advantage.

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Speaker 10: That the companies have. So we do think that will matter,

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Speaker 10: but not in the near term.

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Speaker 9: We see that as an issue, you know, tenures down

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Speaker 9: the road, as this kind of global economy begins to shift.

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Speaker 2: Do you think the Chinese version of capitalism includes the

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Speaker 2: idea of creative destruction? And I'm thinking of a few

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Speaker 2: teetering properties developers here.

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Speaker 9: I mean, I think that is that is something near

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Speaker 9: term that that they're going to have to deal with

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Speaker 9: because they the reality is they're trying to become.

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Speaker 10: A economic power within capital markets.

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Speaker 9: That's taken seriously, and I think letting some of these

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Speaker 9: companies actually fail is part of becoming a.

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Speaker 10: Healthy part of the economic system.

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Speaker 9: It will create some short term pain for many different people,

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Speaker 9: but I think long run, to show seriousness within the

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Speaker 9: global economy, I think I think that they're going to

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Speaker 9: have to let some of these, you know, just defunt

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Speaker 9: companies actually go.

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Speaker 1: All right, let's go back to the valuation story in

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Speaker 1: the US. You mentioned equal weight that that's a good target.

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Speaker 1: Do you find tune within that or do you buy

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Speaker 1: some of these ETFs that reflect the equal weight S

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Speaker 1: and P as a whole.

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Speaker 9: Well, I think if you're you know, if you're more

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Speaker 9: of a path that investor, and you're not you're not

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Speaker 9: able to take some specific bets, then then that's a

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Speaker 9: way to do it. For us. We use that as

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Speaker 9: a as a mechanism in the short term. But really

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Speaker 9: what we're doing is we're waiting individual companies. And so

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Speaker 9: what that can look like is the first part, companies that.

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Speaker 10: The valuation that these are companies that have wagged.

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Speaker 9: We do like a defense and aerospace as an example

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Speaker 9: within that. And then when we look at in the

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Speaker 9: technology space, a company like Octa that has UH has.

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Speaker 10: Lagged overall markets in the overall tech sector, but we

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Speaker 10: do still like some of the you know, I'm going

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Speaker 10: to say it's just.

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Speaker 9: You know, very boring names like Alphabet Microsoft because they

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Speaker 9: are so defensive in their large cast positions.

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Speaker 10: They're low debt. So so it's a mixed bag.

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Speaker 9: It's it's a little bit of valuation, it's a little

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Speaker 9: bit of really high quality, low debt type tech companies.

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Speaker 9: So just because a company is in that you know,

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Speaker 9: top five, does not mean that there's something wrong with it.

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Speaker 10: Well, we're really to remove.

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Speaker 9: From that are the high beta, high volatility stocks that

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Speaker 9: we just cannot justify valuation. And like I said at

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Speaker 9: the beginning, one of the poster childs of this when

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Speaker 9: I'm gonna I'm gonna put out there is you know,

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Speaker 9: an artificial intelligence bubble.

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Speaker 1: Is in the video.

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Speaker 10: There's just no way.

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Speaker 9: That we can come up with evaluation with everything we

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Speaker 9: know about, you know, the hardware market within artificial intelligence

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Speaker 9: to justify the price right now moment it's hard to

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Speaker 9: get out of the.

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Speaker 10: Way of momentum. Momentum is very strong. It just doesn't

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Speaker 10: make sense.

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Speaker 1: Is non profitable tech another part of that thesis.

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Speaker 10: Absolutely.

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Speaker 9: Yeah, so you know you'll hear the term, you know,

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Speaker 9: zombie companies, but yeah, but yes, we are getting out

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Speaker 9: of nonprofitable tag.

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Speaker 10: Absolutely.

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