WEBVTT - A Million Miles From the Memes 0:00:13.800 --> 0:00:17.439 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:17.520 --> 0:00:20.840 I'm Mike Reagan, a senior editor at Bloomberg, and this 0:00:20.920 --> 0:00:22.720 week on the show, it was sort of a week 0:00:22.720 --> 0:00:25.680 of deja vu. Meme. Stocks are back in the headline, 0:00:25.720 --> 0:00:28.200 as shares of the movie theater chain a MC got 0:00:28.240 --> 0:00:32.000 pumped to the moon, and the markets oriented geopolitical tensions 0:00:32.040 --> 0:00:34.720 are making news again as the Biden administration looks to 0:00:34.800 --> 0:00:38.240 potentially expand the number of Chinese companies that are blacklisted 0:00:38.240 --> 0:00:41.640 for US investors. What should we make of all these flashbacks. 0:00:41.960 --> 0:00:44.120 We'll get into it with the chief investment officer for 0:00:44.159 --> 0:00:48.800 a hedge fund firm that manages nine billion dollars. But first, 0:00:48.960 --> 0:00:53.440 Charlie Pellett Tallusue. This week's mystery co host is. This 0:00:53.520 --> 0:00:57.960 week's mystery co host is Claire Ballantine. Claire as a 0:00:58.040 --> 0:01:00.840 reporter for Bloomberg in New York, but gused on e 0:01:01.040 --> 0:01:03.920 t f s. She hails from the same town in 0:01:04.040 --> 0:01:08.440 Tennessee as Dolly Parton. She's licensed to marry couples in 0:01:08.480 --> 0:01:15.600 New York, and she has a collection of alpaca paraphernalia. Claire, 0:01:15.640 --> 0:01:19.560 there's lots unpacked in that introduction that Charlie Pellet introduction 0:01:19.680 --> 0:01:22.080 of you. Mainly I wanted to get Charlie Pellett to 0:01:22.120 --> 0:01:25.000 say the words I'll pack up paraphernalia. I don't think 0:01:25.040 --> 0:01:27.080 I could say that five times best. But you gotta 0:01:27.080 --> 0:01:30.600 explain how does one collect Well, first of all, what 0:01:30.680 --> 0:01:33.720 the heck is alpaca paraphernalia? And how does one become 0:01:33.720 --> 0:01:36.200 a collector? And what's the market like? Is it? Is 0:01:36.240 --> 0:01:38.520 it a hot market right now? What are prices going 0:01:38.560 --> 0:01:41.440 for in the I'll pack a paraphernalia market? You know, 0:01:41.520 --> 0:01:43.520 I've been doing it for so long that I can't 0:01:43.560 --> 0:01:47.880 even remember the origin of it. Um. It just sort 0:01:47.880 --> 0:01:51.000 of became a thing. And then what happens is when 0:01:51.000 --> 0:01:54.800 you have a thing, people always get you stuff like 0:01:54.880 --> 0:01:58.520 that for your birthday or for Christmas. So even long 0:01:58.640 --> 0:02:01.080 past when this would have died down, eventually it just 0:02:01.160 --> 0:02:05.360 kept going because people kept giving me towels and mugs 0:02:05.400 --> 0:02:09.799 and rugs. And suddenly my apartment is overtaken by alpacas. 0:02:10.400 --> 0:02:13.440 That's hilarious. That's hilarious. Is that? Have you ever owned 0:02:13.440 --> 0:02:16.800 an actual alpaca? Or no? No, I want to. I 0:02:16.840 --> 0:02:21.240 want to get a standard poodle, the dog because I 0:02:21.240 --> 0:02:23.200 think it looks a bit like an alpaca, but you 0:02:23.200 --> 0:02:25.480 can walk it on the street without getting weird looks. 0:02:27.800 --> 0:02:29.440 All right. I don't know if you'd got a weird 0:02:29.480 --> 0:02:31.080 luck with an alpaca. I don't know. There's only one 0:02:31.080 --> 0:02:33.320 way to find out. We'll have to test that thesis 0:02:33.360 --> 0:02:36.200 sometimes we should. I did one time see a guy 0:02:36.320 --> 0:02:40.680 in the East village walking a pig. So anything in 0:02:40.680 --> 0:02:44.360 New York goes, that's true, that's true. All right, Well 0:02:44.480 --> 0:02:46.079 do you think goes? On this show? And we're very 0:02:46.120 --> 0:02:49.520 lucky this week to have a really interesting guest someone 0:02:49.520 --> 0:02:51.880 I've read a lot about over the years. Uh. He 0:02:52.120 --> 0:02:55.639 is the chief investment officer at UBS O'Connor, which is 0:02:55.720 --> 0:02:59.399 the hedge fund division at UBS Asset Management. His name 0:02:59.440 --> 0:03:02.640 is Kevin, So Kevin, welcome to the show. Thank you, 0:03:03.040 --> 0:03:06.080 great to be here. Kevin. Let's start with this whole 0:03:06.919 --> 0:03:08.960 revenge of the meme stocks that we're seeing in the 0:03:09.000 --> 0:03:13.680 market again, AMC, particularly just going doubling on one session 0:03:13.760 --> 0:03:16.519 during the week. I mean, for for a hedge fun 0:03:16.600 --> 0:03:20.200 guy like yourself with a lot of assets to sort 0:03:20.240 --> 0:03:23.079 of puts work this see, these type of things seem 0:03:23.320 --> 0:03:26.040 like kryptonite to me, especially obviously on the short side. 0:03:26.040 --> 0:03:27.800 I mean, we've we've heard a lot of widow maker 0:03:27.840 --> 0:03:30.440 trades on the short side. But I'm wondering for you, 0:03:30.440 --> 0:03:33.359 you know, are there opportunities here for the I mean, obviously, 0:03:33.400 --> 0:03:36.760 with the volatility and these eye popping moves we've seen, 0:03:37.080 --> 0:03:38.440 it's hard to ignore it for a guy like you. 0:03:38.440 --> 0:03:40.920 I'm just wondering if, if there are opportunities in the space, 0:03:41.000 --> 0:03:43.360 is there anyway we're for you to put money to 0:03:43.400 --> 0:03:46.960 work in this type of environment? Yeah? Uh yeah, So, 0:03:47.000 --> 0:03:50.280 I mean I tried, We tried to be about as 0:03:50.400 --> 0:03:54.520 far from these types of situations in the market as 0:03:54.560 --> 0:03:57.240 we possibly can. I I talked to one of our 0:03:57.280 --> 0:03:59.120 pms this morning and I said, I'd like to be 0:03:59.240 --> 0:04:01.800 roughly a million and miles away from this, and he's like, well, 0:04:01.800 --> 0:04:07.000 you realize we're probably like thousand miles away because there's 0:04:07.000 --> 0:04:09.880 correlations with these stocks and other stocks that were evolved 0:04:09.880 --> 0:04:13.480 in so so I kind of I kind of acknowledge that. 0:04:14.080 --> 0:04:18.200 But you know, to me, anytime you have a stock 0:04:18.240 --> 0:04:24.000 price moves that are divorced from economic reality or corporate 0:04:24.040 --> 0:04:29.520 finance changes, that's like a flashing warning side warning signed 0:04:29.520 --> 0:04:33.040 to us to really be cautious around it. And you know, 0:04:33.040 --> 0:04:35.360 I don't know if you followed some of the stats 0:04:35.400 --> 0:04:39.599 on AMC, I'm drawn to it not dissimilar to rubber 0:04:39.640 --> 0:04:44.120 necking an accident on the freeway. Um, but the numbers 0:04:44.160 --> 0:04:47.320 I saw, we're just amazing. You know, we had more 0:04:47.800 --> 0:04:53.160 AMC volume on Wednesday than we had in Tesla, in Nvidia, 0:04:53.400 --> 0:04:58.320 Apple and Amazon combined. On one day, we had more 0:04:59.200 --> 0:05:03.360 AMC op trading. Then we had this little index called 0:05:03.360 --> 0:05:07.159 the SP five hundred Index options trading. So you know, 0:05:07.200 --> 0:05:11.480 the volume is is alarming. And listen, I think there's 0:05:11.480 --> 0:05:16.320 this temptation to just completely dismiss this type of activity 0:05:16.640 --> 0:05:22.440 as irrational and illogical and a casino or mm stock, 0:05:22.560 --> 0:05:25.760 and I think that's true at all, you know, I uh, 0:05:25.800 --> 0:05:28.600 you know, to me, you really have to pay close 0:05:28.640 --> 0:05:31.200 attention to some of these phenomenons. And for for a 0:05:31.240 --> 0:05:35.320 long time, you know, we analyze companies, we analyze fundamental 0:05:35.920 --> 0:05:39.359 changes at companies, we analyze what's going on the economy. 0:05:39.680 --> 0:05:42.240 But we're we're we're honest, and we're saying, you know, 0:05:42.320 --> 0:05:47.479 sometimes price performance securious performances a function of investors psychology 0:05:47.480 --> 0:05:50.880 and position and positioning, and you know when you have 0:05:50.920 --> 0:05:54.279 a situation like this, you know, you really cannot take 0:05:54.320 --> 0:05:59.200 an aggressive stand one way or another. You can't dismiss uh, 0:05:59.240 --> 0:06:01.359 you know, the stock moves one way or another. You 0:06:01.400 --> 0:06:03.600 just have to be cautious and realize this has become 0:06:03.800 --> 0:06:07.320 a purely technical event. There's a whole bunch of investors 0:06:07.320 --> 0:06:10.680 here with different perspectives and psychologies. There's investors who are 0:06:10.680 --> 0:06:15.479 getting free popcorn at AMC theaters. By the way, Um, 0:06:15.520 --> 0:06:18.440 that's a motivation. So I wondered if that's subject to 0:06:18.480 --> 0:06:21.200 the dividend tax. I don't know. You gotta gotta give 0:06:21.200 --> 0:06:23.400 a p for some of your popcorn back to the government. 0:06:23.680 --> 0:06:26.120 Probably is probably a slight mark up at the at 0:06:26.120 --> 0:06:29.719 the counter. I agree with you. Well, and then while 0:06:29.760 --> 0:06:32.640 this is all happening, I mean, are there any opportunities 0:06:32.680 --> 0:06:35.960 that you see for you all? Or are there opportunities 0:06:35.960 --> 0:06:40.080 that maybe are getting overlooked because everyone is so focused on, 0:06:40.279 --> 0:06:44.080 you know, watching the meme stocks go up and down. Yeah, 0:06:44.120 --> 0:06:49.040 so that's one of the that's my nine thousand mile analogy, 0:06:49.160 --> 0:06:53.400 because you know, when stocks, whether it's an AMC or 0:06:54.520 --> 0:06:57.880 bed bass in beyond, go up. Um, we see things 0:06:57.920 --> 0:07:01.680 that go up in sympathy with that UM philosopher. For example, 0:07:01.839 --> 0:07:04.680 if people think that A m C and Bed Bath 0:07:04.720 --> 0:07:07.520 and Beyond are doing well, they get excited about mall 0:07:07.600 --> 0:07:12.560 owners or strip mall operators. And the reality is the 0:07:12.680 --> 0:07:16.120 dynamics of people going to malls and going to you know, 0:07:16.120 --> 0:07:19.200 strip centers is not changing. It's not changing based on 0:07:19.520 --> 0:07:23.280 overnight price action in bed Bathroom Beyond or a MC. 0:07:24.040 --> 0:07:26.440 So we do see some of the stocks that are 0:07:26.480 --> 0:07:30.240 related UM react and that's where we tend to look 0:07:30.280 --> 0:07:33.840 for opportunities to take advantage of the dislocation. So, you know, 0:07:34.000 --> 0:07:36.640 one of our core disciplines and and and this has 0:07:36.680 --> 0:07:38.320 been you know, for as long as I've been in 0:07:38.360 --> 0:07:41.800 the business. You have to be very mindful of how 0:07:41.840 --> 0:07:45.240 big the short base is in any stock. I always 0:07:45.280 --> 0:07:49.640 tell people stocks are a log normally distributed, which is, 0:07:49.760 --> 0:07:52.520 you invest a hundred dollars UH and you can lose 0:07:52.560 --> 0:07:55.680 a hundred dollars, but you can make ten x or 0:07:55.800 --> 0:07:59.120 twenty extra your money. And and subsequently, you have to 0:07:59.160 --> 0:08:02.120 be very mind full of the size and nature of 0:08:02.160 --> 0:08:06.280 your short positions. UM and and so we're we're always 0:08:06.280 --> 0:08:08.040 on top of that, but we're looking for things that 0:08:08.080 --> 0:08:11.280 are one or two steps removed from these stories take 0:08:11.320 --> 0:08:14.840 advantage of those dislocations. It always amazes me to you know, 0:08:14.880 --> 0:08:20.400 if some stocks short interest, who's the one going in 0:08:20.400 --> 0:08:22.640 and turn it in a fifty one or fifty that 0:08:22.880 --> 0:08:25.720 just seems like playing with fire. You know what I 0:08:25.960 --> 0:08:29.880 gotta tell you, I I totally agree with that. And listen, 0:08:29.920 --> 0:08:33.040 I think I I learned this literally about two weeks 0:08:33.040 --> 0:08:36.679 into my job when I started twenty years ago, which is, 0:08:36.800 --> 0:08:39.920 don't short too much of anything because it can be 0:08:40.080 --> 0:08:42.000 very technical. And so I think it's just a matter 0:08:42.040 --> 0:08:44.959 of um of of hubrists. In a lot of cases, 0:08:45.000 --> 0:08:48.400 people like well, listen, um, you know, the evaluation these 0:08:48.400 --> 0:08:50.719 companies doesn't make sense. So I can be comfortable at 0:08:50.720 --> 0:08:53.320 carrying a heat short and you know, when you have 0:08:53.400 --> 0:08:56.920 something that can be so technical, evaluation just doesn't matter. Um. 0:08:57.120 --> 0:08:59.360 And so we're always cautious with that. We we we 0:08:59.480 --> 0:09:03.240 watch short interest ratios call used old fashioned. We look 0:09:03.240 --> 0:09:05.719 at the short based relative to daily volume. We look 0:09:05.760 --> 0:09:08.400 at the short based relative to the free flowed, and 0:09:08.440 --> 0:09:11.080 if he gets above these you know, sort of certain metrics, 0:09:11.120 --> 0:09:21.760 we just try to avoid them. Kevin, to move on 0:09:22.080 --> 0:09:25.040 to something, I know you guys were involved with at 0:09:25.080 --> 0:09:28.640 least earlier in the year, you were very bullish on China. 0:09:28.800 --> 0:09:30.440 I think one of the funds had was something like 0:09:30.480 --> 0:09:36.200 exposure to China. I'm wondering, you know, do the sort 0:09:36.200 --> 0:09:41.080 of the sort of geopolitical sword rattling, the Biden blacklist 0:09:41.720 --> 0:09:48.479 um possibly being expanded to to not just military linked firms. Um, 0:09:48.520 --> 0:09:50.040 what do you make of all that? Is it kind 0:09:50.080 --> 0:09:51.560 of is it kind of just that? Is it a 0:09:51.600 --> 0:09:54.760 bit of saber rattling? Do do you see any real 0:09:54.840 --> 0:09:58.280 risk there of of sort of a worsening relationship with 0:09:58.360 --> 0:10:01.800 China and an outright band of more stocks for US 0:10:01.840 --> 0:10:07.120 investors in China. Yeah, so listen, I think big picture, Uh, 0:10:07.400 --> 0:10:10.920 there's a more constructive dialogue between the US and China happening, 0:10:10.960 --> 0:10:14.800 happening now than under the prior administration. And even though 0:10:14.880 --> 0:10:19.240 there's potentially a broader list of stocks that are going 0:10:19.320 --> 0:10:23.120 to be banned, there's potentially a tightening of existing bands 0:10:23.240 --> 0:10:26.280 and limiting bands to some of the specific subsidiaries. So, 0:10:26.559 --> 0:10:30.800 you know, big picture, I think relations between the two 0:10:30.840 --> 0:10:34.320 countries from a trade and cooperation perspective are going to 0:10:34.400 --> 0:10:37.880 be improving. Um. But you know, to the extent that 0:10:37.880 --> 0:10:40.839 that there are these bands. You know, I think this, 0:10:41.200 --> 0:10:43.920 I think they create opportunity more than risk. You know, 0:10:44.000 --> 0:10:47.120 I think if you're sitting here, you're sitting in the US, 0:10:47.200 --> 0:10:50.559 you're sitting in Western Europe. You unfortunately tend to think 0:10:50.600 --> 0:10:54.400 about this from a European or US perspective, like, you know, 0:10:54.480 --> 0:10:58.040 the US government is going to discipline you know, the Chinese. 0:10:58.559 --> 0:11:03.320 But the reality is, uh, there's always a corollary a 0:11:03.520 --> 0:11:07.240 Chinese perspective on these stories that creates, you know, an 0:11:07.240 --> 0:11:09.920 equally investable seamen. And I'll just give you an example. 0:11:09.960 --> 0:11:12.960 So you know, under the Trump administration, there was this 0:11:13.280 --> 0:11:21.000 real aggressive pressure on reducing higher end semiconductor equipment materials 0:11:21.240 --> 0:11:24.560 and and telecom equipment in stocks to to to the Chinese. 0:11:25.160 --> 0:11:29.160 UM So with the Chinese government did is react uber 0:11:29.240 --> 0:11:31.920 rationally and said, Okay, I get this. If there's some 0:11:32.280 --> 0:11:34.800 risk that I'm not going to be able to buy 0:11:35.120 --> 0:11:38.840 high quality intellectual property from the US, I'm going to 0:11:39.000 --> 0:11:43.080 build my own technology supply chain. And so while most 0:11:43.120 --> 0:11:46.480 people sat there in and said, wow, this is this 0:11:46.640 --> 0:11:49.760 uncertainty about US China trade and tech supply chain makes 0:11:49.800 --> 0:11:52.760 me nervous, some of the best performing stocks in the 0:11:52.840 --> 0:11:58.000 world were some of the domestically focused Chinese small and 0:11:58.080 --> 0:12:02.280 MidCap technology and semiconductor stocks. So we always tell our 0:12:02.320 --> 0:12:05.360 investors like, you know, don't use your don't look at 0:12:05.360 --> 0:12:08.360 everything from your U S lens, uh, you know, put 0:12:08.360 --> 0:12:11.200 on your you know, your China hat and interpret what 0:12:11.240 --> 0:12:13.600 this local corollarya is going to be because it's going 0:12:13.679 --> 0:12:16.200 to create an investable theme on the other side. And 0:12:16.240 --> 0:12:18.600 how do you go about gauging that or trying to 0:12:18.600 --> 0:12:22.000 make predictions on what international relations are going to be 0:12:22.080 --> 0:12:24.840 like I mean, you know, talking about how this administration 0:12:25.360 --> 0:12:29.480 seems like it will be UM have a more amenable 0:12:29.559 --> 0:12:32.360 relationship with China, how how do you go about sort 0:12:32.360 --> 0:12:35.120 of engauging that and then also the time horizon for 0:12:35.200 --> 0:12:39.880 that well, and so there's a bunch of UM consultants, 0:12:40.240 --> 0:12:47.480 there's UH political research firms, there's UH analysts, there's policy analysts. 0:12:48.040 --> 0:12:51.240 You know, we talked to government officials as well. We 0:12:51.240 --> 0:12:53.120 can get you know, I think a really good sense 0:12:53.240 --> 0:12:56.240 for for the direction of travel and and and in 0:12:56.280 --> 0:13:01.839 particular on on China where every our local presence. I mean, 0:13:01.880 --> 0:13:03.960 you know, this is why I would I would never 0:13:04.040 --> 0:13:07.160 think about investing, you know in Asia from sitting here 0:13:07.160 --> 0:13:10.160 in the US. We have a team that's local that's 0:13:10.640 --> 0:13:13.480 very plugged into what's going on in the regulatory landscape 0:13:13.480 --> 0:13:16.240 and economic policy landscape in China, and the teams in 0:13:16.559 --> 0:13:20.080 Hong Kong and Singapore. There's resources in Shanghai as well. 0:13:20.840 --> 0:13:23.319 UM and you you you can get a really good 0:13:23.360 --> 0:13:26.600 sense for what, um, what the policy agenda there is, 0:13:26.760 --> 0:13:29.240 and and and likely that the changes that are coming. 0:13:29.280 --> 0:13:31.000 So it's something you can you can get a pretty 0:13:31.000 --> 0:13:34.640 good handle one, you know, Kevin. For years now, I 0:13:34.640 --> 0:13:37.679 guess the one of the main bullish teams for China 0:13:37.720 --> 0:13:41.440 has been sort of this transition from a manufacturing dominated 0:13:41.480 --> 0:13:46.640 economy to potentially a more consumer dominated economy. UM. And 0:13:46.920 --> 0:13:50.120 some of the interesting interesting developments in China this year 0:13:50.120 --> 0:13:54.359 in late last year has been UM sort of an 0:13:54.400 --> 0:13:57.600 attempt to tame the credit markets in China, you know, 0:13:57.679 --> 0:14:02.160 corporate credits especially, and and prevent them from getting out 0:14:02.160 --> 0:14:05.080 of hand, getting a little too frothy. So I'm just going, 0:14:05.200 --> 0:14:07.280 you know, with those two things in mind and whatever 0:14:07.320 --> 0:14:09.200 else you're looking at in China, just what are sort 0:14:09.200 --> 0:14:12.200 of the main themes, the main kind of sectors and 0:14:12.320 --> 0:14:14.960 is it is it equities and credit or a little both. 0:14:15.040 --> 0:14:18.800 What kind of things are really drawing you into China. 0:14:19.240 --> 0:14:22.000 And so one of the things that we're the makes 0:14:22.080 --> 0:14:25.520 us the most excited about China, that that I'm you know, 0:14:25.680 --> 0:14:28.880 puzzled because it feels like not enough people are talking 0:14:28.920 --> 0:14:34.400 about is the aggressive market reform agenda passed by China 0:14:34.480 --> 0:14:36.640 late last year. That's, you know, the q FE and 0:14:36.720 --> 0:14:39.800 r q F reform. And you know, as you as 0:14:39.840 --> 0:14:42.760 you well know, historically when we want to access the 0:14:42.800 --> 0:14:45.440 onshore market in China, we have to trade via the 0:14:45.480 --> 0:14:49.480 connect system in Hong Kong. But what the QF and 0:14:49.520 --> 0:14:51.560 r q F reforms are going to allow us allow 0:14:51.640 --> 0:14:55.320 us to do is to is to trade directly in 0:14:55.360 --> 0:14:59.359 the onshore market with Chinese banks and broker dealers. Additionally, 0:15:00.120 --> 0:15:03.480 is going to be a borrow market that develops in 0:15:03.520 --> 0:15:06.720 the onshore market that's going to allow us to short 0:15:07.200 --> 0:15:10.920 stocks in the onshore market. So, you know, against all 0:15:10.960 --> 0:15:16.960 this anxiety about China about essentially planned economy, about trade friction, 0:15:17.600 --> 0:15:20.560 people are missing what we see as a watershed event 0:15:20.960 --> 0:15:24.760 of the market opening up and becoming more efficient and 0:15:24.800 --> 0:15:29.360 more accessible to international investors and all of the same 0:15:29.440 --> 0:15:32.400 principles that we use to invest on a long short 0:15:32.440 --> 0:15:37.040 basis fundamentally uh in the US or in Europe, well, 0:15:37.120 --> 0:15:42.240 they hold also in China, it's just a lot less competitive, 0:15:42.360 --> 0:15:46.200 you know, Chinese. In the Chinese market, less than about 0:15:46.400 --> 0:15:48.960 just about ten percent of the of the market cap 0:15:49.040 --> 0:15:53.400 is is owned by hedge funds. The onshore market approximately 0:15:53.520 --> 0:15:56.480 eighty percent of the volume, and the onshore market is 0:15:56.560 --> 0:16:00.000 retail investors. Uh. And so we just have a market 0:16:00.000 --> 0:16:01.760 it that's you know, we think going to become a 0:16:01.800 --> 0:16:06.000 lot more efficient, a lot more conducive to relative value 0:16:06.040 --> 0:16:09.160 investing in the market wheld. We don't think enough institutional 0:16:09.160 --> 0:16:12.960 investors are paying close enough attention. So for us, we 0:16:13.040 --> 0:16:16.040 we like to think of it as China transitioning from 0:16:16.040 --> 0:16:19.800 a beta story to an alpha story, where it's gonna 0:16:19.840 --> 0:16:23.760 matter the subsector as you pick, it's gonna matter the 0:16:23.920 --> 0:16:27.560 management teams, the products, the sectors that you pick. It's 0:16:27.600 --> 0:16:30.280 not just going to be China as a beta trade anymore. 0:16:30.360 --> 0:16:33.920 And that just you know, for us, is superrational and 0:16:34.000 --> 0:16:38.720 it's a really healthy growth in that market from you know, 0:16:38.760 --> 0:16:42.720 from a subsector perspective, you know, where we um you know, 0:16:42.720 --> 0:16:47.560 there's very clearly a tightening of the regulatory environment happening 0:16:47.560 --> 0:16:51.760 in China. There's some tightening of regulation on fin techs. 0:16:51.760 --> 0:16:55.280 There's a tightening of regulation on some of the internet 0:16:55.360 --> 0:17:00.360 and larger media companies. Now that's having a pretty meaningful impact. 0:17:00.400 --> 0:17:05.080 That's creating I think, big opportunities in the financial services sector. Uh. 0:17:05.119 --> 0:17:07.399 You know, we see big opportunities and more of the 0:17:07.520 --> 0:17:13.639 cyclical industrial and machinery and material spaces uh in China. 0:17:13.760 --> 0:17:16.520 So it's it's kind of a rotation, not dissimilar to 0:17:16.520 --> 0:17:18.560 the rotation we're seeing everywhere else in the world where 0:17:18.560 --> 0:17:21.800 you're going from, you know, from tech and growth to 0:17:21.960 --> 0:17:25.480 more value and cyclical sectors. But that's happening against a 0:17:25.520 --> 0:17:28.040 backdrop of a market getting more efficient. You know, for us, 0:17:28.840 --> 0:17:31.199 we see China as the biggest alpha opportunity in the 0:17:31.240 --> 0:17:34.159 world over the next really five to seven years, and 0:17:34.200 --> 0:17:36.399 it's mostly to do with the fact that the markets 0:17:36.440 --> 0:17:39.760 are becoming more efficient. Is there anything that's um that's 0:17:39.760 --> 0:17:43.160 surprised you in terms of your stance on China and 0:17:43.720 --> 0:17:47.479 um sort of these these positions that either um this 0:17:47.560 --> 0:17:51.879 year or even more recently that you maybe didn't expect. Yeah, well, 0:17:52.000 --> 0:17:54.160 I mean it just uh, you know, so the feedback 0:17:54.200 --> 0:17:56.760 that we that we get out talked to investors, UM 0:17:56.800 --> 0:18:00.520 a lot, We talked to UM you know, obviously our 0:18:00.560 --> 0:18:04.560 counterparties a lot. Yeah, I think people's eyes are just 0:18:04.600 --> 0:18:06.520 off the ball here. I mean again, I think they 0:18:06.960 --> 0:18:10.399 just have it in there head that you know, China 0:18:10.480 --> 0:18:13.879 is highly you know, highly regulated, closed economy. There's a 0:18:14.000 --> 0:18:19.280 very standoff dynamic between between the US and China from 0:18:19.280 --> 0:18:22.640 a political or trade perspective. But again, it's it's not 0:18:22.720 --> 0:18:26.760 what's happening in reality. The market is undergoing this massive 0:18:27.280 --> 0:18:30.840 opening up, and it's to meet people are just kind 0:18:30.880 --> 0:18:33.520 of ignoring it, and they're they're getting caught in these 0:18:33.560 --> 0:18:36.360 headlines and they're not they're not paying close enough attention 0:18:36.400 --> 0:18:40.040 to the reality of what's happening. And I'll, i'll, I'll 0:18:40.080 --> 0:18:41.760 give you a stat that I think it's pretty interesting. 0:18:41.840 --> 0:18:47.560 Right now, we estimate that you can short approximately fifty 0:18:47.600 --> 0:18:52.879 billion dollars in aggregate of Chinese equities right now through 0:18:53.160 --> 0:18:58.919 current inventory and the connect mechanism. If this onshore borrow 0:18:58.960 --> 0:19:02.000 market develops as we expect, that number is going to 0:19:02.080 --> 0:19:04.400 go up by a factor of you know, at least 0:19:04.520 --> 0:19:08.280 five x, maybe ten x. And what that means is, 0:19:08.480 --> 0:19:11.359 you know, China's already outstanding from a liquidity perspective. If 0:19:11.400 --> 0:19:13.919 you get if you get that borrow market developing and 0:19:13.960 --> 0:19:16.080 it gets more efficient, it is just going to be 0:19:16.119 --> 0:19:21.080 a terrific place for dynamic relative value investers to deploy capital. 0:19:21.160 --> 0:19:23.640 And and and we think we're there sooner than most, 0:19:23.720 --> 0:19:25.480 but I think we're gonna see a lot of people 0:19:25.480 --> 0:19:28.840 go in that direction. Yeah, it's interesting. You often read 0:19:28.880 --> 0:19:33.280 about these sort of valuation discrepancies caused by the ontore connect. 0:19:33.359 --> 0:19:36.240 You know, there's there's a lot of money flowing in 0:19:36.400 --> 0:19:39.119 South and north, and you know, it causes you know, 0:19:39.200 --> 0:19:42.320 stocks to be trading it wildly different valuations depending on 0:19:42.359 --> 0:19:45.760 you know, where they're listed. I imagine that's a pretty 0:19:45.760 --> 0:19:49.240 fleeting opportunity, but a big one when it happens for 0:19:49.240 --> 0:19:51.240 for like you said, the people that are there, they're 0:19:51.280 --> 0:19:53.960 in place ready to take advantage of it. Yeah, listen, 0:19:53.960 --> 0:19:56.680 it's a it's a huge opportunity. Uh. You know, and 0:19:57.160 --> 0:20:00.960 I think you have to again resist the temptation of 0:20:01.000 --> 0:20:05.040 a lot of professional investors, you know, dismiss retail flows 0:20:05.080 --> 0:20:08.320 at your own peril, you know. Um, we say, and 0:20:08.480 --> 0:20:10.440 it's not just similar to the to the MEM's talks. 0:20:10.520 --> 0:20:15.280 You know, the Chinese retail investors have a heavy momentum 0:20:15.359 --> 0:20:19.760 quality um and you will see things overreact both directions. 0:20:20.320 --> 0:20:22.800 You need to follow it, you need to respect it. 0:20:22.840 --> 0:20:25.840 But it also creates a lot of dislocation and relative 0:20:25.920 --> 0:20:29.240 value investment opportunities for for funds like US to to 0:20:29.280 --> 0:20:33.680 capitalize on. Yeah, I have a colleague you she at Bloomberg, 0:20:33.720 --> 0:20:37.400 who you know, follows the Chinese social media very carefully. 0:20:37.400 --> 0:20:40.840 He said. One of the jokes going around when all 0:20:41.240 --> 0:20:43.479 Game stop and now AMC, when all that was going on, 0:20:43.600 --> 0:20:47.160 is that, well, here, America, you've turned into the Chinese 0:20:47.160 --> 0:20:51.440 market now with this heavy dominance of retail participation. So 0:20:51.480 --> 0:20:53.639 it's gonna be interesting. I think when all of a 0:20:53.640 --> 0:20:56.160 sudden there is an opportunity to borrow a lot more 0:20:56.200 --> 0:20:58.680 of these names. Um well, I don't know, I don't 0:20:58.680 --> 0:21:01.960 know if Reddit is uh published in Mandarin yet or not, 0:21:02.040 --> 0:21:10.240 but an interesting dynamic. There's undoubtedly a you know exactly, 0:21:10.240 --> 0:21:14.600 there's undoubtedly that that sort of same chat room mentality. 0:21:27.840 --> 0:21:30.480 I guess, just just sort of relating to that, I mean, 0:21:30.840 --> 0:21:33.080 do you think that there are any any lessons from 0:21:33.200 --> 0:21:35.560 that that you know can be applicable to the US 0:21:35.640 --> 0:21:38.720 market just in terms of the of the retail presence, 0:21:38.720 --> 0:21:41.840 what you're seeing either in the two markets or um 0:21:41.880 --> 0:21:45.639 a need similarities or differences. You know. I mean, maybe 0:21:45.960 --> 0:21:48.480 you can call me a little bit old fashioned, but 0:21:48.760 --> 0:21:51.040 you know, we believe in being in being a little 0:21:51.040 --> 0:21:55.720 bit paranoid, paranoid about you know, making sure we know 0:21:55.800 --> 0:21:59.200 what we know, paranoid about what we don't know. UM. 0:21:59.280 --> 0:22:06.560 And anytime you see stock prices or moves that look irrational, um, 0:22:06.600 --> 0:22:09.720 you know, that's just something to draw your interest in. 0:22:09.880 --> 0:22:11.879 You know, you've got to do a lot more work 0:22:12.080 --> 0:22:15.320 again on the on the technicals, on the positioning, on 0:22:15.400 --> 0:22:19.320 the expectation before you can become you be prepared to 0:22:19.359 --> 0:22:21.880 come in and fade some of these moves and listen. 0:22:21.880 --> 0:22:26.040 If I had one recommendation, you know for people, it's 0:22:26.320 --> 0:22:30.640 to not dismiss these flows, uh, to understand what that's 0:22:30.680 --> 0:22:35.199 telling you about MARKETR participants. What's that telling you about psychology? 0:22:35.400 --> 0:22:37.520 And then just be humble about it and say like, Okay, 0:22:37.560 --> 0:22:39.520 when I'm on the other side of these trades, where 0:22:39.560 --> 0:22:41.000 I want to take the other side of these trades 0:22:41.040 --> 0:22:44.480 because I don't think you know, a m C h 0:22:44.720 --> 0:22:47.000 is worth its current market cap, Well, I guess what, 0:22:47.760 --> 0:22:50.639 the people buying AMC have no opinion on its market cap. 0:22:50.800 --> 0:22:53.800 So my assessment of coming in and looking at the 0:22:53.880 --> 0:22:58.040 value of AMC on a market cap relative to earnings power, 0:22:58.160 --> 0:23:00.960 which maybe is how we think it should be valued, 0:23:01.160 --> 0:23:03.080 it's just not relevant. So you just have to have 0:23:03.200 --> 0:23:08.320 this inherent paranoia or skepticism that there could be something 0:23:08.359 --> 0:23:11.439 else driving stock rights performance, and then you should be 0:23:11.440 --> 0:23:15.720 cautious about it. Kevin I was reading about I guess 0:23:15.720 --> 0:23:18.359 it was the first half of last year. You guys 0:23:18.359 --> 0:23:21.760 had a really strong run than during the pandemic. And 0:23:21.920 --> 0:23:23.719 one of the things I thought was really interesting was 0:23:24.520 --> 0:23:27.440 it sounds like he did some pear trades where you 0:23:27.480 --> 0:23:31.000 would short the stocks of some of the companies getting 0:23:31.000 --> 0:23:33.520 really hit hard by the pandemic, but then go along 0:23:33.560 --> 0:23:37.679 the credit of the same companies UM. And it to me, 0:23:37.760 --> 0:23:40.720 I mean, it makes total So I don't think I granted, 0:23:40.720 --> 0:23:41.920 I don't think I ever would have thought of that 0:23:42.040 --> 0:23:44.680 at the time, but it makes total sense given the 0:23:44.760 --> 0:23:47.560 dynamics at play at the time, with the FED basically 0:23:47.760 --> 0:23:50.400