WEBVTT - This Has Been a Shakespearean Market, Sinche Says 0:00:06.320 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm term Keene 0:00:13.480 --> 0:00:17.560 jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.000 Bloomberg dot Com, and of course on the Bloomberg. All 0:00:33.040 --> 0:00:36.040 it took was for Larry Caudlow to remind us, of course, 0:00:36.120 --> 0:00:38.839 to the White House any seat director, thanks the following. 0:00:39.080 --> 0:00:41.560 Remember none of these tarists have been put in place yet. 0:00:41.840 --> 0:00:44.600 These are all proposals. We're putting it out for comment 0:00:44.640 --> 0:00:47.320 there at least two months before any actions are taken. China, 0:00:47.400 --> 0:00:49.879 by the way, did not enact the tariffs. It's not 0:00:49.960 --> 0:00:53.960 a trade war. It's a negotiating position. But since joining 0:00:54.040 --> 0:00:57.600 us in the studio Amherst Peer Point Securities Global strategist, Bob, 0:00:57.600 --> 0:00:59.720 why did we need Larry Cutlow to tell us that? 0:01:00.040 --> 0:01:02.840 Wasn't it obvious this time yesterday morning? I would have 0:01:02.880 --> 0:01:05.240 thought so. But you know it, uh, I think the 0:01:05.240 --> 0:01:08.240 international community probably reacts to these things more than we 0:01:08.280 --> 0:01:11.560 do here in the US. And look, this whole scenario 0:01:11.680 --> 0:01:14.480 of taking extreme position and then and then work it 0:01:14.560 --> 0:01:18.040 back is not unique. I mean, we're at a point 0:01:18.120 --> 0:01:21.720 right now where NAFTA six months ago. Uh, there are 0:01:21.720 --> 0:01:23.760 many people who thought NAFTA was going to be the 0:01:24.000 --> 0:01:27.399 risk of two thousand and eighteen. And now we have 0:01:27.480 --> 0:01:31.320 the President pushing for an agreement, you know, compromising auto 0:01:31.440 --> 0:01:35.640 content and parts content and pushing toward an agreement by 0:01:35.720 --> 0:01:38.880 a you know, an America's conference in mid April. So 0:01:39.319 --> 0:01:41.800 so suddenly we've gone from you know, we're gonna tear 0:01:41.800 --> 0:01:45.080 it up. Uh, this this migration that's coming towards the 0:01:45.240 --> 0:01:49.600 US suddenly towards a compromised position, which looks like maybe 0:01:49.640 --> 0:01:51.640 it will come to fruition. So what should the plant 0:01:51.640 --> 0:01:54.760 book be for an investor? Because clearly investors are having 0:01:54.760 --> 0:01:56.880 a pretty tough time in the equity market, at least 0:01:56.880 --> 0:01:59.200 because the other asset classes yesterday morning seemed to have 0:01:59.640 --> 0:02:02.520 got the picture that this was a proposal and negotiation 0:02:02.920 --> 0:02:04.760 and not the end of the world. What an equity 0:02:04.800 --> 0:02:08.880 investors need to get right next time around fundamentals? Fundamentals, fundamentals. 0:02:08.919 --> 0:02:11.760 I think that that investors really need to look at 0:02:11.800 --> 0:02:16.880 what's happening in terms of individual companies. Um, you know, 0:02:16.960 --> 0:02:18.720 I think if you look at a broader picture, what 0:02:18.760 --> 0:02:21.880 we're seeing as a US economy that's performing quite well 0:02:22.560 --> 0:02:25.160 UM in the early part of two thousand and eighteen. 0:02:25.639 --> 0:02:27.720 I was looking yesterday, you know that we look at 0:02:27.720 --> 0:02:31.760 the manufacturing and the services indexes from the I s M. 0:02:31.800 --> 0:02:33.960 They actually have a blended index, which is an all 0:02:34.000 --> 0:02:37.760 economy p M. I waited uh p M I. The 0:02:37.840 --> 0:02:41.639 three month average UM just hit a twenty year high. 0:02:41.720 --> 0:02:43.960 It's the highest since it was introduced. The series was 0:02:44.000 --> 0:02:47.760 introduced in So the economy is doing very well, and 0:02:47.800 --> 0:02:49.720 I think part of that is a reaction to the 0:02:49.760 --> 0:02:53.399 weaker dollar over the last year. We we normally say 0:02:53.440 --> 0:02:56.880 there's about a twelve to eighteen month lag between movements 0:02:56.919 --> 0:03:00.079 and the dollar and its economic impact, and guests, what 0:03:00.280 --> 0:03:02.639 twelve months out from the peak and the dollar, We're 0:03:02.680 --> 0:03:07.640 seeing US manufacturing start to outperform. We're seeing Eurozone manufacturing 0:03:07.760 --> 0:03:12.080 underperforming during the first quarter. I think the part of 0:03:12.120 --> 0:03:15.160 this UH, this adjustment process to the dollar is now 0:03:15.200 --> 0:03:17.960 taking hold, and I think it actually boilds pretty well 0:03:18.000 --> 0:03:19.720 for the U s economy as we go forward. So 0:03:19.760 --> 0:03:22.440 it raises the question why we're failing to recognize the 0:03:22.480 --> 0:03:25.839 decent fundamentals that you observe, and something that marked our 0:03:25.840 --> 0:03:28.079 fund manager on the West Coast said last year is 0:03:28.120 --> 0:03:30.320 really stuck with me, and I think it continues to 0:03:30.360 --> 0:03:33.520 be something we need to think about this market. A 0:03:33.520 --> 0:03:36.640 lot of people are struggling to divorce their political biases 0:03:37.000 --> 0:03:42.200 from their real analysis, whether it's economic analysis or market analysis. 0:03:42.520 --> 0:03:45.800 Why are we still struggling to do that? Quite clearly yesterday, 0:03:46.120 --> 0:03:48.640 people's views about what is happening with trade or what 0:03:48.840 --> 0:03:52.880 isn't happening with trade is shaped by almost exclusively their 0:03:52.880 --> 0:03:55.480 distaste of the President of the United States, and that 0:03:55.640 --> 0:03:58.280 is actually really sort of warping their view of what 0:03:58.440 --> 0:04:01.320 is actually happening in terms of the negotiations of a 0:04:01.400 --> 0:04:04.600 trite and the fundamentals of the U. S. Economy. You know, 0:04:04.720 --> 0:04:07.360 I can't disagree the way I've described it is we 0:04:07.400 --> 0:04:09.480 need to listen to the message and not the messenger, 0:04:10.240 --> 0:04:14.320 right and so, Um, you know, as we know that 0:04:14.440 --> 0:04:18.400 the president is not experienced in politics, UM, I think 0:04:18.400 --> 0:04:21.440 he probably doesn't want to become experienced in politics. He 0:04:21.440 --> 0:04:24.320 he wants to take his own road. Um. He put 0:04:24.360 --> 0:04:29.040 stakes out what he thinks are rational, somewhat extreme positions 0:04:29.600 --> 0:04:32.479 and then gets brought back within the construct of how 0:04:32.520 --> 0:04:35.760 the government operates, how the Post Office operates how trade 0:04:35.800 --> 0:04:41.120 negotiations operate, but in general he is pushing in a 0:04:41.200 --> 0:04:44.839 direction um that I think, you know, makes some sense 0:04:44.839 --> 0:04:48.279 for the economy. And I you know, having having worked 0:04:48.279 --> 0:04:51.800 with Larry Cutlow for forty years, UM, I still believe 0:04:51.880 --> 0:04:55.279 Larry is very much a free trader UM and I 0:04:55.320 --> 0:04:59.640 think he believes that the way this hopefully works out 0:04:59.720 --> 0:05:03.760 is we expand US markets into China, that that trade 0:05:03.800 --> 0:05:07.080 and tariff and non tariff barriers come down, and then 0:05:07.120 --> 0:05:10.560 in fact we expand the pie not contracted by you 0:05:10.560 --> 0:05:13.200 are a cross asset. I wanted to take you away 0:05:13.360 --> 0:05:17.200 from your hyper detailed notes at the embers Pierrepont, your 0:05:17.279 --> 0:05:19.440 elegant charts, and I just want you to speak to 0:05:19.480 --> 0:05:24.200 the listener whose whipsode by this every day. The only 0:05:24.279 --> 0:05:27.120 solution is to expand your X axis, and that the 0:05:27.160 --> 0:05:30.160 person that was investing for seven weeks has to start 0:05:30.200 --> 0:05:33.200 thinking seven months, and the person that was investing for 0:05:33.279 --> 0:05:36.160 eighteen months has to really start with a three or 0:05:36.200 --> 0:05:39.720 four year view. That's the only solution, isn't it. I 0:05:40.240 --> 0:05:42.640 think it is, and I think that you know, as 0:05:42.680 --> 0:05:45.039 I've described, this has been a bit of a in 0:05:45.080 --> 0:05:47.120 the last couple of months, a bit of a Shakespearean 0:05:47.200 --> 0:05:50.479 market full of sound and fury signifying nothing. You know, 0:05:50.560 --> 0:05:52.400 you look at the year to date. You know, you 0:05:52.400 --> 0:05:54.160 can put up w E I what's the year to 0:05:54.240 --> 0:05:55.920 day performance of the S and P. I think it's 0:05:55.960 --> 0:05:58.280 down one percent year to date. So you kind of 0:05:58.320 --> 0:06:00.200 look at the first quarter you say, what are we 0:06:00.279 --> 0:06:04.080 getting so excited about? But in fact, we've had daily 0:06:04.200 --> 0:06:07.280 movements that dwarf the year to date movements, which is 0:06:07.440 --> 0:06:09.719 exactly the opposite of what we had last year. So 0:06:09.760 --> 0:06:13.080 we're going through an adjustment process. I think the things 0:06:13.120 --> 0:06:17.000 that we would focus on, our earnings momentum is still 0:06:17.000 --> 0:06:19.800 good in the US. We'll see how much of a 0:06:19.880 --> 0:06:23.200 response we get in terms of capital formation as a 0:06:23.200 --> 0:06:26.800 result of the tax adjustments, and deal with the fact 0:06:26.880 --> 0:06:29.080 that interest rates are probably going higher, both at the 0:06:29.120 --> 0:06:30.640 short and the long end of the yield curve. But 0:06:30.760 --> 0:06:32.320 I think it's really important to point out that this 0:06:32.400 --> 0:06:35.200 isn't abnormal. What this is is it's goetting back to normal. 0:06:35.480 --> 0:06:38.919 Last year was abnormal. This is kind of normal. And 0:06:38.960 --> 0:06:41.000 the idea that the trait that worked, which was just 0:06:41.120 --> 0:06:45.000 short vol and long momentum, is broken down over the 0:06:45.080 --> 0:06:46.760 last couple of months. That's what we're seeing. And I 0:06:46.800 --> 0:06:48.760 guess I assume, Bob, and you can correct me if 0:06:48.760 --> 0:06:51.119 I'm wrong. That's why we're seeing it isolated to one region, 0:06:51.120 --> 0:06:54.880 the United States, and one class US equities. Would that 0:06:54.920 --> 0:06:59.320 be right? Yes, I think so, and I think that that. UM. 0:06:59.360 --> 0:07:03.200 You know, part this is to a global liquidity environment 0:07:03.200 --> 0:07:06.839 which has been extremely accommodative. Remember the beginning of the year, 0:07:06.880 --> 0:07:10.080 the ECB cut their rate of asset purchases in half, 0:07:10.080 --> 0:07:12.880 from sixty billion euros to thirty billion euros a month. 0:07:13.520 --> 0:07:16.360 The b o J has shifted their target. It looks 0:07:16.400 --> 0:07:19.760 like they're buying fewer assets as they go forward. UM. 0:07:19.920 --> 0:07:23.520 The Fed is beginning to normalize interest rates, though UM, 0:07:24.040 --> 0:07:25.880 I would argue that they still have a long way 0:07:25.880 --> 0:07:27.480 to go. At the front end of the yelkerve, the 0:07:27.560 --> 0:07:32.240 real FED funds rate is just barely creeping into positive territory. 0:07:32.720 --> 0:07:36.480 So UM, Yes, you have uncertainty about the global growth 0:07:36.560 --> 0:07:40.440 environment UM coming through. And I think again, particularly in Europe, 0:07:40.920 --> 0:07:45.240 and you have a less aggressive liquidity environment UM. And 0:07:45.280 --> 0:07:48.280 the two of those create a new level of volatility, 0:07:48.320 --> 0:07:52.200 which which many people talked about being a characteristic of 0:07:52.240 --> 0:07:54.560 two thousand eighteen. So, Bob, coming forward from here, I 0:07:54.640 --> 0:07:57.680 assume there's going to be more days like yesterday, and 0:07:57.720 --> 0:08:00.000 they're going to present a lot of opportunities for our listeners. 0:08:00.000 --> 0:08:01.840 And can you give us a sense an idea of 0:08:02.080 --> 0:08:04.760 how you should best take advantage of those opportunities on 0:08:04.880 --> 0:08:07.480 days like yesterday if we want to see more as 0:08:07.480 --> 0:08:13.840 the year progresses. You know, it's hard to to uh. 0:08:13.880 --> 0:08:16.640 You know, I think about what I'm doing myself right 0:08:16.800 --> 0:08:19.800 as an investor, and I think this is a year 0:08:19.880 --> 0:08:22.760 where equity returns probably are going to be somewhere in 0:08:22.760 --> 0:08:26.840 the five to eight percent range um. You know, if 0:08:26.880 --> 0:08:29.840 you're up five percent year to date, it's probably time 0:08:29.880 --> 0:08:33.560 to take some some risk off the table. Conversely, if 0:08:33.559 --> 0:08:35.800 you get to be down five percent year to day, 0:08:36.480 --> 0:08:39.120 that probably gives you a pretty good opportunity to increase 0:08:39.160 --> 0:08:42.680 some risk exposure. So I think it's it's leaning against 0:08:42.720 --> 0:08:46.480 this extreme volatility. You know, there are times where you 0:08:46.520 --> 0:08:49.079 can take advantage of of of volatility, but I think 0:08:49.080 --> 0:08:51.960 you have to be very disciplined about it and and 0:08:51.960 --> 0:08:55.120 and react to the volatility in a disciplined way as 0:08:55.120 --> 0:08:58.480 opposed to being frightened by it. Thank you so much 0:08:58.480 --> 0:09:02.040 with the amorous Pierpine greatly shoot that uh this morning, 0:09:17.360 --> 0:09:19.839 Richard Greenfield with us. Now you could talk for two hours. 0:09:19.840 --> 0:09:21.840 There's so much going on in the world of media, 0:09:22.280 --> 0:09:25.520 but let us start with I guess John Chryl Sandberg 0:09:25.600 --> 0:09:27.800 to speak to Bloomberg today in the three o'clock hour 0:09:27.960 --> 0:09:30.880 three pm Eastern time. Looking forward to that conversation. The 0:09:30.920 --> 0:09:33.040 good news, the good news for investors at least, is 0:09:33.080 --> 0:09:36.439 that Facebook is saying the recent data crisis over the 0:09:36.480 --> 0:09:38.680 last couple of weeks hasn't hurt the business. The bad 0:09:38.679 --> 0:09:41.079 news is that dates from most of its two bid 0:09:41.120 --> 0:09:43.560 in news as could have been accessing properly. I want 0:09:43.559 --> 0:09:45.800 to bring in rich Greenfeld boot t i G Media 0:09:45.920 --> 0:09:49.439 and technology analyst. It's the good and the bad. Um, 0:09:49.480 --> 0:09:53.559 what do you take more notice of? Rich? I mean, look, 0:09:53.600 --> 0:09:55.640 at the end of the day, there's no doubt that 0:09:55.760 --> 0:09:59.320 Facebook didn't have the proper controls in place, and certainly 0:09:59.360 --> 0:10:03.360 didn't didn't give consumers probably all the information that they 0:10:03.400 --> 0:10:06.439 clearly needed to have, or even the controls they needed 0:10:06.480 --> 0:10:09.680 to have to manage their privacy. That being said, I 0:10:09.720 --> 0:10:16.120 don't see users abandoning Facebook or Instagram or What's App 0:10:16.840 --> 0:10:19.440 and I think that's the key point, right is users 0:10:19.440 --> 0:10:23.840 aren't abandoning, advertisers aren't abandoning. Facebook's gotta gotta fix things. 0:10:23.880 --> 0:10:26.120 I mean, look, Google head its own issues. Remember, you know, 0:10:26.520 --> 0:10:30.320 isis videos being next to you know, you know, kind 0:10:30.320 --> 0:10:34.000 of professional content in the US like a lot of 0:10:34.040 --> 0:10:36.160 the Internet. I mean, the Internet is a pretty scary place. 0:10:36.440 --> 0:10:38.800 There's a lot that these companies have to quote unquote 0:10:38.800 --> 0:10:42.280 grow up and you know better deal with their platforms 0:10:42.280 --> 0:10:44.840 and how they interact with consumers. But I think the 0:10:44.960 --> 0:10:49.840 key for your listeners is these are the two dominant platforms. 0:10:50.360 --> 0:10:52.600 If you're an advertiser, first of if you're a consumer, 0:10:52.840 --> 0:10:54.960 what's your alternative in terms of a service. It's not 0:10:55.000 --> 0:10:57.839 like there's an alternative to Instagram that's sitting out there 0:10:57.840 --> 0:11:00.679 that you're switching to and from an advertising their standpoint, 0:11:00.800 --> 0:11:03.280 and I think Facebook did twelve billion dollars of advertising 0:11:03.360 --> 0:11:05.600 last quarter. It's not like you can take twelve billion 0:11:05.640 --> 0:11:08.280 dollars of advertising and just move it someplace else. The 0:11:08.320 --> 0:11:11.720 world is moving to mobile. These are the two dominant platforms. 0:11:11.760 --> 0:11:15.560 They are certainly committing to getting better and improving and 0:11:15.679 --> 0:11:18.120 fixing their mistakes, But I just don't. I think at 0:11:18.160 --> 0:11:20.560 the end of the day, the pressure on the stock 0:11:20.679 --> 0:11:23.079 is overdone because at the end of the day, these 0:11:23.120 --> 0:11:25.280 are the platforms people want to use. These are the 0:11:25.280 --> 0:11:28.319 platforms advertisers want to advertise on, and that's going to 0:11:28.400 --> 0:11:30.640 make for a good stock. So in a material way 0:11:30.720 --> 0:11:32.960 rich so far, the consumer hasn't voted with their feet 0:11:33.000 --> 0:11:35.600 by moving away from the platform. To your point, there 0:11:35.640 --> 0:11:38.200 is an optimistic view about the advertising base not having 0:11:38.200 --> 0:11:40.960 anywhere to go. But Congress and the government is still 0:11:40.960 --> 0:11:43.360 going to go after Mark Zuckerberg and grill him hard 0:11:43.440 --> 0:11:46.120 next week. What is the area of weakness that you 0:11:46.240 --> 0:11:48.920 see in the CEO of Facebook that leaves him quite 0:11:49.000 --> 0:11:51.640 vulnerable as he goes in front of Congress next week. 0:11:55.320 --> 0:11:59.000 You know, Look, I think if you listen to you know, 0:11:59.040 --> 0:12:01.640 I listened to market an interview on Vox the other day, 0:12:01.640 --> 0:12:05.560 and I think he was pretty pragmatic about being honest 0:12:05.559 --> 0:12:08.560 and open about the mistakes made and how difficult it 0:12:08.640 --> 0:12:11.440 is to fix some of the challenges. You know, talk 0:12:11.480 --> 0:12:13.920 about fake news and the impact on elections, and these 0:12:13.960 --> 0:12:18.880 are not easy things to handle for any company. Um. Look, 0:12:19.000 --> 0:12:21.800 I'm sure they're gonna grill him. There's no doubt about it. 0:12:22.720 --> 0:12:26.319 I think that is a given. I think the reality 0:12:26.720 --> 0:12:29.360 is the threat and the pressure you're seeing on the 0:12:29.400 --> 0:12:33.680 stock has been fear of regulation, and the question is, 0:12:33.720 --> 0:12:35.720 I mean, look, we can't get anything done in this country. 0:12:35.760 --> 0:12:38.280 I think you know, the real view that there's gonna 0:12:38.320 --> 0:12:42.480 be some heavy handed internet regulation I find very hard 0:12:42.520 --> 0:12:44.920 to believe. But but even so, even if you believe 0:12:44.920 --> 0:12:47.040 that there's gonna be even greater walls that go up 0:12:47.080 --> 0:12:50.800 around data and privacy, that's probably far more negative for 0:12:50.880 --> 0:12:54.520 all of Netflix, sorry, all of Facebook and Google's competitors 0:12:54.720 --> 0:12:57.000 than it is for Facebook and Google. The two companies 0:12:57.000 --> 0:12:59.840 that are the strongest are actually probably gonna get stronger 0:13:00.160 --> 0:13:03.040 if you put up high walls around data. Rich You 0:13:03.080 --> 0:13:06.520 were courageous advantage years ago it was a busted I 0:13:06.679 --> 0:13:11.240 p O. You lead with responsible coverage of the disaster 0:13:11.360 --> 0:13:15.840 known advantage. Your note on Spotify was brilliant. How hard 0:13:15.920 --> 0:13:19.080 was it to value Spotify? And what should the street 0:13:19.240 --> 0:13:24.480 learn from this unique transaction? You know, look, I think 0:13:24.480 --> 0:13:26.120 we're still trying to figure out. You know, there's been 0:13:26.160 --> 0:13:28.360 a lot of trading volatility out of the out of 0:13:28.360 --> 0:13:31.520 the box around Spotify. Um, you know, no one's ever 0:13:31.520 --> 0:13:34.280 done a direct listing before. But I think what is 0:13:34.320 --> 0:13:38.280 fascinating about Spotify is that there really aren't a lot 0:13:38.360 --> 0:13:43.640 of global scaled platforms. Mobile platforms, I think is the 0:13:43.640 --> 0:13:45.800 critical piece here. You know, if you if you were 0:13:45.800 --> 0:13:48.880 to draw a circle around things that are on people's 0:13:48.920 --> 0:13:53.200 home screen, meaning on mobile views, on mobile home screen, 0:13:53.240 --> 0:13:56.960 worthy that you love using, that have a credit card 0:13:57.000 --> 0:14:00.240 billing relationship on a monthly basis that you like paying for, 0:14:01.000 --> 0:14:04.520 that list of companies would be an incredibly small list. 0:14:04.559 --> 0:14:07.120 But Spotify is one of them. They hit all of 0:14:07.240 --> 0:14:09.800 or check all of those boxes. And I think the 0:14:09.880 --> 0:14:15.000 question that investors are struggling with is is music in 0:14:15.080 --> 0:14:17.800 and of itself enough? Like can they really get scale 0:14:17.920 --> 0:14:21.160 in music? You know, Netflix has proven that exclusive content 0:14:21.520 --> 0:14:25.400 that they can differentiate themselves from HBO from network television. 0:14:25.600 --> 0:14:27.720 If you want to watch Stranger Things, the only place 0:14:27.760 --> 0:14:30.840 to do it on Netflix. Okay, Rich Greenfield, we gotta 0:14:30.880 --> 0:14:34.440 leave it there, Sorry to to short today, Rich Greenfield 0:14:34.920 --> 0:14:36.760 would b T. I G we didn't even get a 0:14:36.840 --> 0:14:39.160 chance to get the Disney and what's going on with 0:14:39.240 --> 0:14:41.040 Sky and of course Time Warner A T and T. 0:14:54.200 --> 0:14:57.920 Let's talk about China, The White Houses National Economic Council 0:14:57.960 --> 0:15:02.360 Director Larry Cudlow saying on Bloomberg having to do with 0:15:02.440 --> 0:15:05.760 the China's response to US proposed tariffs and the sell 0:15:05.800 --> 0:15:08.400 off in the stock market yesterday. Remember, none of the 0:15:08.440 --> 0:15:10.720 tariffs have been put in place yet, he said. He 0:15:10.760 --> 0:15:13.040 emphasized that it would take at least two months before 0:15:13.080 --> 0:15:18.120 any action is taken on what are still only proposals. Well, 0:15:18.240 --> 0:15:20.680 maybe this is the way Mr Cutlo sees it, it 0:15:20.720 --> 0:15:22.600 may not be the way that the Chinese see it. 0:15:22.680 --> 0:15:26.280 Here to tell us more, is Miranda car High Tongue Securities, 0:15:26.320 --> 0:15:30.960 head of China Thematic Research, joining us from London. Miranda, 0:15:30.960 --> 0:15:33.120 thank you very much for being with us. So is 0:15:33.160 --> 0:15:36.080 this really just part of a negotiating tactic that is 0:15:36.120 --> 0:15:40.000 really leading to a confrontation over intellectual property? Or is 0:15:40.040 --> 0:15:43.440 it really a trade war? Um? I think this is 0:15:43.480 --> 0:15:48.360 the starting um, starting round in a much wider negotiation. Um. 0:15:48.520 --> 0:15:51.600 You've obviously had the US coming out, but then the 0:15:51.800 --> 0:15:55.360 China came out very quickly afterwards, Um, and and quite 0:15:55.360 --> 0:15:59.040 aggressively in order to set a sort of fairly hard 0:15:59.080 --> 0:16:01.440 tone for the seat your negotiations. Will you say, come 0:16:01.440 --> 0:16:04.280 out very aggressively? What do you mean by that, well, 0:16:04.280 --> 0:16:07.560 it came out straight away with immediate tariffs, um, you know, 0:16:07.720 --> 0:16:12.360 saying that it wouldn't go into negotiating on America's terms, 0:16:12.360 --> 0:16:17.240 but it wanted to impose immediately its own tasks in response. 0:16:17.600 --> 0:16:19.720 So so this means that, you know, if you compare 0:16:19.760 --> 0:16:24.240 to how the US tackled Japan back in the es UM, 0:16:24.400 --> 0:16:27.760 then China's arguably trying to play a stronger position here 0:16:28.080 --> 0:16:32.560 um and not give so much ground. I I look 0:16:32.600 --> 0:16:34.440 at this and I want to know how all the 0:16:34.520 --> 0:16:37.880 festivities of the last forty eight hours plays in Shanghai 0:16:38.040 --> 0:16:41.040 and in China. You're in London, But what does your 0:16:41.040 --> 0:16:43.680 take on how this place? I mean, I understand the 0:16:43.720 --> 0:16:46.280 government angle and that if Pim and I were having 0:16:46.280 --> 0:16:48.840 a beverage of our choice at the jazz bar of 0:16:48.960 --> 0:16:51.840 the Fair Amount Peace Hotel on the Bond, what would 0:16:51.880 --> 0:16:56.280 the people next to us say? Well, they obviously they're 0:16:56.320 --> 0:17:01.280 concerned about what the the US. It's going to hit 0:17:01.400 --> 0:17:05.159 their markets um pretty badly. Um. But the thing is 0:17:05.320 --> 0:17:08.520 it's it's about It's not just about dominance in the 0:17:08.560 --> 0:17:12.240 trade um or or just about the surplus. This is 0:17:12.240 --> 0:17:15.880 about sort of the Chinese competing on a global basis 0:17:16.080 --> 0:17:19.919 with US manufacturers. And this is why we call it 0:17:19.960 --> 0:17:22.680 sort of more of an intellectual property war. It's it's 0:17:22.680 --> 0:17:26.680 about who's going to dominate the next five to twenty 0:17:26.760 --> 0:17:29.920 years in terms of things like you know, telecommunications, five 0:17:30.000 --> 0:17:33.680 g AI and the future sort of technology race UM. 0:17:33.960 --> 0:17:37.399 And now China wants to be a leading part of 0:17:37.440 --> 0:17:40.439 that is you know, hence why the US targets are 0:17:40.440 --> 0:17:44.520 made in China twenty five sectors and not things like 0:17:44.960 --> 0:17:47.760 widgets and some of the sort of lower end textiles 0:17:47.800 --> 0:17:51.119 and the lower and goods. China manufacturers and are also 0:17:51.200 --> 0:17:55.280 a key part of them the China's trade surplus. So 0:17:55.440 --> 0:17:57.760 China knows it's in a it's in a long term 0:17:57.800 --> 0:18:01.520 war um in terms of mobal dominance. It's not just 0:18:02.240 --> 0:18:04.959 it's not just a little bit of arguments about you know, 0:18:05.080 --> 0:18:08.960 soybeans and and and textiles anymore. This is a much 0:18:09.040 --> 0:18:13.399 bigger picture, Miranda car based on your conversations with people 0:18:13.600 --> 0:18:18.199 in China over the last several months, do you sense 0:18:18.400 --> 0:18:22.360 a difference in the way they perceive President Donald Trump 0:18:22.840 --> 0:18:27.560 versus former President Barack Obama. Is there a level of 0:18:28.160 --> 0:18:31.960 response and perspective that is different now than it was 0:18:32.800 --> 0:18:37.200 two three years ago. Well, most definitely. I mean, the 0:18:37.359 --> 0:18:42.560 the way that Trump is dealing with China is very, 0:18:42.640 --> 0:18:46.280 very different, and it's it's a much more adversary adversarial 0:18:46.359 --> 0:18:50.359 to the Chinese respect hardball and what they do. But 0:18:50.440 --> 0:18:54.560 they also in some ways taking it slightly cynically because 0:18:54.560 --> 0:18:57.200 if you think of where instead of sort of hitting 0:18:57.200 --> 0:19:01.520 directly back at some of the um UM the key 0:19:02.600 --> 0:19:06.440 imports that would would affect the US, they're going after 0:19:06.680 --> 0:19:11.439 the places where they know that the voters, the Trump voters, 0:19:11.480 --> 0:19:13.840 will be particularly badly hit, so particularly sort of the 0:19:13.920 --> 0:19:16.879 agricultural UM sector and the sort of the sect in 0:19:16.920 --> 0:19:19.320 the rural area. So it's it's a it's a fairly 0:19:19.359 --> 0:19:24.520 cynical um negotiating tactic because, to be honest, UM is 0:19:24.680 --> 0:19:28.679 they limit um imports of soybeans. It's going to badly 0:19:28.720 --> 0:19:31.280 affect China more than it does the US. They can't 0:19:31.280 --> 0:19:34.720 get soybeans from anywhere else. It raises food prices UM 0:19:34.840 --> 0:19:37.840 and and it's something they lack. So this is a 0:19:37.920 --> 0:19:41.760 fairly sort of cynical negotiating tactic. It's not a it's 0:19:41.800 --> 0:19:45.640 not a real a real threat, but obviously that they 0:19:45.680 --> 0:19:48.600 don't see UM you know, we're now into a stage 0:19:48.600 --> 0:19:54.639 where it's much more umu competitive and in terms of 0:19:54.840 --> 0:19:58.520 because what's changed, it's not just the Trump administration's change, 0:19:58.520 --> 0:20:03.359 but obviously she's vision for China has changed significantly as well, 0:20:03.840 --> 0:20:06.680 and saying that China is going to reclaim it some 0:20:07.200 --> 0:20:10.919 you know, rightful state in the global affairs means that 0:20:10.960 --> 0:20:13.720 they're taking a much more aggressive stunt as well. So 0:20:13.840 --> 0:20:16.159 it's changes on both sides. You have to leave with 0:20:16.200 --> 0:20:18.000 their Miranda car thank you so much. With high Ton 0:20:18.080 --> 0:20:35.080 Securities in London. The strength of Bloomberg Surveillance is our 0:20:35.080 --> 0:20:38.160 effort to go out across this nation and actually find 0:20:38.160 --> 0:20:40.399 people that know what they're talking about other than what 0:20:40.480 --> 0:20:43.440 Pim Fox and I put up with seven and three 0:20:43.520 --> 0:20:45.959 zip codes in New York City, and maybe we can 0:20:46.040 --> 0:20:48.840 drag l A or San Francisco into it. Here's what 0:20:48.920 --> 0:20:51.880 you need to know about Ames Iowa. The world ended 0:20:51.880 --> 0:20:58.120 on February when Iowa claboard Iowa State in wrestling. That's 0:20:58.200 --> 0:21:03.040 all that matters out in Iowa. Is Iowa crushed Iowa 0:21:03.119 --> 0:21:07.720 State in wrestling thirty five six except for soybeans. That's 0:21:07.760 --> 0:21:11.000 actually worse right now in wrestling, joining US truly one 0:21:11.000 --> 0:21:14.760 of the nation's experts on the dynamics of Iowa agriculture 0:21:14.800 --> 0:21:19.240 and soybeans. Chat Heart is at Iowa State University. Chad, 0:21:19.320 --> 0:21:22.000 wonderful to have you with us. What will a given 0:21:22.080 --> 0:21:27.240 farmer do eighties seven miles south of Ames, Iowa? What 0:21:27.240 --> 0:21:30.359 would have given farmer do eighty seven miles south of me? 0:21:30.440 --> 0:21:32.960 And aims here? Well, you're talking about their south of 0:21:33.000 --> 0:21:35.200 Des Moines as well, and so what they're probably doing 0:21:35.320 --> 0:21:37.439 right now is trying to figure out when is it 0:21:37.440 --> 0:21:40.199 going to get warm enough to plant well within the 0:21:40.240 --> 0:21:42.919 weather and the dynamic of planning. I read the Des 0:21:42.960 --> 0:21:45.920 Moines Register. I believe it was yesterday, I can't remember exactly. 0:21:46.320 --> 0:21:49.879 Which is the China tariff angle takes seven dollars a 0:21:49.960 --> 0:21:54.000 pig off that pig Can you do that marginal math 0:21:54.119 --> 0:21:58.480 to know what the various threats will cost the nation 0:21:58.960 --> 0:22:03.080 or that farmer eighty seven miles south of Domine names Well, 0:22:03.080 --> 0:22:05.640 what we've been working on here is we've already seen 0:22:05.800 --> 0:22:09.240 within the lean hag futures market that with the announcement 0:22:09.280 --> 0:22:12.560 of the Chinese tariffs there we saw those markets back 0:22:12.640 --> 0:22:16.400 off by about six dollars per hundredweight or per hundred pounds. 0:22:16.720 --> 0:22:18.840 They recovered about a dollar and a half that so 0:22:18.880 --> 0:22:22.200 they're still down four dollars and fifty cents per hundred pounds. 0:22:22.280 --> 0:22:26.159 We've also seen the soybean market react to the announced 0:22:26.400 --> 0:22:29.600 you know, potential tariffs there. They backed off about twenty 0:22:29.680 --> 0:22:32.920 cents from where they were pre announcement there. So we're 0:22:32.960 --> 0:22:37.679 already watching these impacts hitting the various crops and livestock 0:22:37.760 --> 0:22:41.080 markets where the tariffs are being announced, and it's translating 0:22:41.119 --> 0:22:46.640 directly into the prices that producers are receiving for their products. Today, 0:22:47.440 --> 0:22:50.200 Chad hart I was looking at the Des Moines Register 0:22:50.320 --> 0:22:52.560 and there's a quote from the president of the American 0:22:52.600 --> 0:22:58.320 Soybean Association and he says Mr Historfers. Dorfers says, farmers 0:22:58.320 --> 0:23:00.959 are feeling a real pin. If we can't get these 0:23:01.040 --> 0:23:04.280 commodity prices up, we are going to start losing farmers 0:23:04.400 --> 0:23:08.000 and there's no way of getting around it. Is that accurate? 0:23:08.720 --> 0:23:11.200 That is accurate. Actually what we've seen over the past 0:23:11.240 --> 0:23:14.880