WEBVTT - Crackdown on China Tech Could Create Two 5G Markets (Podcast) 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.279 at Bloomberg dot com. Trade talks are continuing between the 0:00:23.400 --> 0:00:27.120 US and China as we head closer to the March deadline. 0:00:27.200 --> 0:00:29.920 Joining us here in our Bloomberg inactivist Broker Studios and 0:00:30.080 --> 0:00:34.120 Stevenson Yang, co founder and research director at JA Capital Research, 0:00:34.440 --> 0:00:37.519 also a Bloomberg Opinion contributor, and thank you so much 0:00:37.560 --> 0:00:41.240 for being here today. Let's just start with a state 0:00:41.280 --> 0:00:43.960 of play. Where are we in the trade negotiations between 0:00:44.000 --> 0:00:47.280 the US and China? To be honest, it looks like 0:00:47.320 --> 0:00:50.640 the US is just about to capitulate. Um. But we're 0:00:50.760 --> 0:00:55.880 in the in the last last lap. It looks like 0:00:55.880 --> 0:01:00.400 the US is about to capitulate. How so? Uh, you know, 0:01:00.560 --> 0:01:03.880 March was the what was was the delayed date for 0:01:03.960 --> 0:01:07.319 the implementation of the higher tariffs? Should should China not 0:01:07.440 --> 0:01:10.399 agree to a number of conditions. The conditions that were 0:01:10.440 --> 0:01:14.600 set for China were conditions that really could not be 0:01:14.800 --> 0:01:18.560 made be met. They were too vague, too broad. They 0:01:18.600 --> 0:01:22.360 meant basic restructuring of the economy and the political system. 0:01:22.400 --> 0:01:26.919 And I think that Trump and his administration don't really 0:01:27.000 --> 0:01:29.959 want to walk off that ledge, and so they're preparing 0:01:30.080 --> 0:01:32.920 to de find a face saving method to back down. 0:01:33.200 --> 0:01:35.280 What do you think that face saving method is in 0:01:35.400 --> 0:01:38.880 terms of acudan? Who knows? Last time it was Fentinel, 0:01:38.959 --> 0:01:41.640 which came right out of left field, so it could 0:01:41.680 --> 0:01:44.240 be anything this time. How about some of the more 0:01:44.240 --> 0:01:48.600 more substantive issues like technology and intellectual property or any 0:01:48.640 --> 0:01:52.720 of those really tough topics going to be addressed. Look, 0:01:52.760 --> 0:01:55.200 those are the issues that really need to be addressed. 0:01:55.200 --> 0:01:57.880 The question is how so the US has been going 0:01:57.920 --> 0:02:01.000 around to allies and asking them to you to drop 0:02:01.200 --> 0:02:04.600 Huawei from the from the five G network construction, and 0:02:04.720 --> 0:02:08.200 that could actually happen. There's a meeting in uh in 0:02:08.320 --> 0:02:11.960 Spain of the EU Committee on G S M Technologies 0:02:12.000 --> 0:02:14.000 at the end of the month where people are going 0:02:14.040 --> 0:02:18.560 to discuss that. I'm just wondering Huawei. Huawei, we were 0:02:18.560 --> 0:02:23.000 talking about the proscently the charges that the US levied 0:02:23.120 --> 0:02:27.160 against Huawei UH and and how this would be read politically. 0:02:27.160 --> 0:02:30.560 The US taking the stances is a completely separate legal 0:02:30.639 --> 0:02:34.080 action that has nothing to do with trade negotiations. Originally, 0:02:34.200 --> 0:02:36.280 China seemed to make noise saying that that you know, 0:02:36.480 --> 0:02:39.000 this is absolutely part of trade negotiations. We're not buying 0:02:39.000 --> 0:02:42.079 the U s S line. But recently they've got a 0:02:42.120 --> 0:02:44.960 little dark on that. What's the latest there? They've gone 0:02:45.080 --> 0:02:47.320 a little dark on that, but they're still holding in 0:02:47.400 --> 0:02:52.880 detention three Canadians as really naked leverage against Canada in 0:02:52.919 --> 0:02:56.800 hopes that Canada will not extradite among to the United States. 0:02:56.800 --> 0:02:59.239 And this is so so it really is clearly viewed 0:02:59.280 --> 0:03:01.840 in China, and all of the press coverage and Global 0:03:01.880 --> 0:03:04.680 Times and so forth is all about how how long 0:03:04.840 --> 0:03:09.160 is upon? So are we is the Lawwei situation? I e. 0:03:09.280 --> 0:03:13.400 You mentioned Barcelona, maybe you know asking our European UH 0:03:13.560 --> 0:03:15.640 countries not to use that technology. Are we creating a 0:03:16.600 --> 0:03:20.519 kind of a bifurcated technology market where the Chinese companies 0:03:20.560 --> 0:03:23.200 will supply Belt and Road countries and Western companies will 0:03:23.240 --> 0:03:26.200 supply Western technologies. And the reason I asked that I'm 0:03:26.200 --> 0:03:29.240 thinking about the global five G build out and rollouts 0:03:29.280 --> 0:03:31.920 could be the next mega trend in text spending. I 0:03:31.960 --> 0:03:35.200 wonder from creating kind of as a segregated market being developed. Yeah, 0:03:35.240 --> 0:03:38.000 I think of it as sort of a bamboo technology curtain. 0:03:38.080 --> 0:03:40.800 It's it's an interesting thing because the five G network 0:03:40.920 --> 0:03:45.920 is the thing that will really UH manage smart appliances, 0:03:46.040 --> 0:03:50.960 self driving cars, UH, power networks, all of those things 0:03:51.440 --> 0:03:54.280 and um and you can imagine some of the security 0:03:55.000 --> 0:04:00.000 uh issues that could arise from that. And so excluding UH, 0:04:00.040 --> 0:04:04.360 Huawei and Zte and Chinese providers from that network, I 0:04:04.360 --> 0:04:06.760 think is a key goal of the United States right 0:04:06.760 --> 0:04:09.120 now and you can you can understand why, but it 0:04:09.160 --> 0:04:13.240 would create a very interesting bifurcation. Yes, So we're speaking 0:04:13.240 --> 0:04:16.000 with and Stevenson Yang, co founder and research director at 0:04:16.080 --> 0:04:19.799 Jake Capital Research, also a Bloomberg opinion columnist. We're talking 0:04:19.839 --> 0:04:22.920 about China and U and US relations as well as 0:04:22.960 --> 0:04:24.520 the build out of five G, which is sort of 0:04:24.560 --> 0:04:27.039 integral in this whole issue. As we've been talking about 0:04:27.600 --> 0:04:30.800 for the past few weeks. How does the slowdown in 0:04:30.920 --> 0:04:34.680 China's economy affect the five G build out plan? If 0:04:34.720 --> 0:04:38.320 at all, well, I think what it really affects is 0:04:38.480 --> 0:04:44.320 the is the view internationally by investors of China. Formerly, 0:04:44.440 --> 0:04:48.719 you had companies like like Cisco which sued Huawei back 0:04:48.720 --> 0:04:51.919 in two thousand three, Motorola with sued Huawei, and I 0:04:51.920 --> 0:04:56.000 think it was you had them come to settlements because 0:04:56.000 --> 0:04:58.240 they were concerned about being shut out of the market. 0:04:58.520 --> 0:05:00.800 I think that there's much less of that concern now 0:05:00.839 --> 0:05:04.400 and more of a more of a combative stance. So 0:05:04.800 --> 0:05:07.680 the U S technology companies again, my my sense will 0:05:07.680 --> 0:05:10.760 be boy, China is a huge market to sell into 0:05:10.800 --> 0:05:12.320 on the one hand. On the other hand, we need 0:05:12.360 --> 0:05:14.640 some protection from China. So what are we hearing from 0:05:14.680 --> 0:05:17.240 Silicon Valley and some of the leaders about how they 0:05:17.240 --> 0:05:21.640 would like to see policy developed. You know, they've been 0:05:21.720 --> 0:05:25.680 surprisingly quiet. They used to be really strong supporters of 0:05:26.040 --> 0:05:30.680 accommodation with China, trying not to uh to to to 0:05:30.760 --> 0:05:34.800 make these issues tremendously public, trying not to embarrass China. 0:05:35.279 --> 0:05:38.440 Now you find that they're very quiet. So you said that, 0:05:38.960 --> 0:05:41.880 if I'm understanding you correctly, the US companies are becoming 0:05:41.920 --> 0:05:45.839 more combative and international companies are becoming more combative when 0:05:45.839 --> 0:05:51.159 negotiating with Chinese tech giants. First of all, how is 0:05:51.160 --> 0:05:54.520 this manifesting and why does this slowdown give them that 0:05:54.800 --> 0:05:59.279 sort of confidence. Well, because the slowdowns suggests that that 0:05:59.360 --> 0:06:02.520 the market is really not quite as promising as they thought, 0:06:03.000 --> 0:06:06.279 and that they may not after all, build billion or 0:06:06.279 --> 0:06:10.159 two billion dollar businesses in China, and therefore they're able 0:06:10.200 --> 0:06:13.560 to defend their interests or you know, in a more 0:06:13.600 --> 0:06:18.000 strident manner, does does China still need our technology? Or 0:06:18.040 --> 0:06:21.640 if they developed skills in court technology, but whether it's 0:06:21.680 --> 0:06:24.360 chips or software or hardware, they really don't need us 0:06:24.440 --> 0:06:26.640 or Western technology as much as I used to. Well, 0:06:26.680 --> 0:06:30.240 apparently they do. I mean. The thing that struck me, 0:06:30.520 --> 0:06:33.960 really bowled me over about the Huawei indictment, the Washington 0:06:34.040 --> 0:06:39.280 State indictment for its attempt to to steal Tappy technology 0:06:39.320 --> 0:06:42.239 from T Mobile was how, you know, the the US, 0:06:42.360 --> 0:06:45.280 the North American market is huge for Huawei, and its 0:06:45.320 --> 0:06:48.600 reputation in North America is also really important. So the 0:06:48.640 --> 0:06:51.320 idea that they would risk all these things in order 0:06:51.400 --> 0:06:54.840 to steal a technology that's really kind of hum drum, 0:06:54.880 --> 0:06:58.000 and that that a lot of other companies had developed 0:06:58.000 --> 0:07:01.360 in different ways um is really kind of stunning and 0:07:01.400 --> 0:07:04.520 suggest that there that there's been some myth making about 0:07:04.600 --> 0:07:07.800 Huawei's capabilities. Do you think there's been myth making overall 0:07:07.920 --> 0:07:11.720 in terms of China's technological prowess? Look, I do. I 0:07:11.760 --> 0:07:14.400 mean this is not to say at all that that 0:07:14.400 --> 0:07:19.480 that you know, extremely extreme competence doesn't exist in China's 0:07:19.520 --> 0:07:22.320 tech industry and that they're not inventing things all the time. 0:07:22.680 --> 0:07:25.200 But the fact is that the companies that get to 0:07:25.360 --> 0:07:30.000 scale and manage to uh to achieve big sales are 0:07:30.080 --> 0:07:32.800 not the companies that are innovative. You can't do that 0:07:32.880 --> 0:07:35.920 in China's economy. And Stevenson Yang, thank you so much 0:07:35.920 --> 0:07:38.360 for being with us. We really appreciate it. And Stevenson 0:07:38.400 --> 0:07:41.680 Yang co founder and research director at j Capital Research, 0:07:42.000 --> 0:07:46.440 also a Bloomberg opinion columnist, and she is normally based 0:07:46.640 --> 0:07:48.920 in Washington, d C. In Hong Kong, but joining us 0:07:48.960 --> 0:08:06.720 here in our eleven three our studios. It is the 0:08:06.920 --> 0:08:11.080 end of an era. Bill Gross, the erstwhile bond king 0:08:11.200 --> 0:08:14.360 of PIMCO, who went to Janice, said he was retiring 0:08:14.600 --> 0:08:18.760 after a period of mixed performance. If you want to 0:08:18.760 --> 0:08:20.720 hear what he had to say, let's listen to Bill 0:08:20.760 --> 0:08:23.440 Gross in his own word. Speaking with Bloomberg's Tom Keene 0:08:23.440 --> 0:08:26.000 earlier this morning about his performance, and you know, I 0:08:26.040 --> 0:08:28.480 look back on it um and the performance on the 0:08:29.200 --> 0:08:31.720 constrained fund in the past four years with Jannis has 0:08:31.960 --> 0:08:37.680 H has been unsatisfactory, no doubt, but still positively um 0:08:38.360 --> 0:08:42.080 positive and normal and nominal terms. Joining us now in 0:08:42.240 --> 0:08:45.440 our Bloomberg and Directive Broker Studios is Peggy Collins, investing 0:08:45.480 --> 0:08:49.680 team leader for Bloomberg News. Uh, Peggy really interesting. He 0:08:49.760 --> 0:08:54.280 had an amazing run at Pimco, falling out went to Janice. 0:08:54.640 --> 0:08:58.840 Since then his performance highly underwhelming, that's right, and also 0:08:59.040 --> 0:09:01.600 not a lot of money followed him to Janice. So 0:09:01.640 --> 0:09:04.920 when he left, I remember the morning he left Pimco September. 0:09:06.040 --> 0:09:09.640 People were shocked. We were scrambling around the newsroom trying 0:09:09.679 --> 0:09:12.719 to put the story out fast, and he basically at 0:09:12.720 --> 0:09:15.880 that time jumped to Janice, where he had been longtime 0:09:15.920 --> 0:09:18.120 friends with Dick Wild who was running Janie at the 0:09:18.120 --> 0:09:21.120 time out of Colorado. A couple of years later, Janice 0:09:21.200 --> 0:09:23.959 merged with Henderson Group in London, and so now it's 0:09:23.960 --> 0:09:26.600 a big London based firm that he's a part of. 0:09:26.640 --> 0:09:29.920 But Bill Gross maintained kind of a solo act um 0:09:30.080 --> 0:09:32.880 in Newport Beach for a long time over the last 0:09:32.880 --> 0:09:35.520 few years, and we've just seen the assets in the 0:09:35.520 --> 0:09:38.280 fund really deplete, the dip below one billion at the 0:09:38.360 --> 0:09:40.920 end of last year, and his performance, as you said, 0:09:40.960 --> 0:09:44.640 has really lagged about less than one percent over the 0:09:44.679 --> 0:09:48.000 annualizes four years, so it's been it's been a struggle 0:09:48.080 --> 0:09:51.600 since he left PIMCO. So Peggy is yet another example 0:09:51.880 --> 0:09:55.640 in the decline of the active manager. I will say 0:09:55.720 --> 0:09:58.680 it is it is a signal in terms of how 0:09:58.720 --> 0:10:01.800 difficult it is to be an active manager. Um. I 0:10:01.800 --> 0:10:06.600 think in general bond funds have had fewer outflows than 0:10:06.960 --> 0:10:10.080 equity funds. We've really seen a lot of investors pour 0:10:10.280 --> 0:10:14.280 into particularly US S stock funds on the passive side 0:10:14.360 --> 0:10:17.040 rather than active, but bond fund managers, in part because 0:10:17.080 --> 0:10:19.280 there's not as much of a delta between the expense 0:10:19.400 --> 0:10:22.520 ratios on bond funds passive or active, they have held 0:10:22.600 --> 0:10:25.600 up somewhat. But to your point, it is an indication 0:10:25.640 --> 0:10:27.439 of how hard it can be to do well in 0:10:27.520 --> 0:10:31.480 an active fund. It's interesting because he was known as 0:10:31.559 --> 0:10:35.600 a bond king, the bond king. Is there another bond 0:10:35.720 --> 0:10:39.440 king that has taken Bill Gross's place. You know, I 0:10:39.480 --> 0:10:41.480 think it's hard to say right now. I mean, he 0:10:41.559 --> 0:10:45.440 certainly was the person who built up the bond industry 0:10:45.440 --> 0:10:48.320 in terms of the total return fund at Pimco. PIMPO 0:10:48.480 --> 0:10:52.439 became the world's largest mutual fund manager while he was there. 0:10:52.520 --> 0:10:56.400 It reached a three hundred billion in assets by at 0:10:56.400 --> 0:10:58.679 the peak. So I think he really became the face 0:10:58.720 --> 0:11:00.920 of bond funds and in testing, and he was on 0:11:00.960 --> 0:11:03.439 TV a lot, he did investor letters. Tons of people 0:11:03.480 --> 0:11:05.600 had the total return fund at him go in there 0:11:05.600 --> 0:11:07.920 for oh one k plans, But I don't think we 0:11:08.000 --> 0:11:10.680 have someone to that degree, and in part because it 0:11:10.760 --> 0:11:13.920 was something new at the time. In hindsight, Peggy, what 0:11:14.400 --> 0:11:16.920 is probably the call here about what happened to Bill Gross? 0:11:16.960 --> 0:11:18.839 In terms of performance? He had such a good run there, 0:11:18.840 --> 0:11:21.439 as you mentioned then, the most more recent performance has 0:11:21.480 --> 0:11:24.360 been underwhelming at best. Did he just did the market 0:11:24.360 --> 0:11:25.760 just kind of move away from him? Did he just 0:11:25.840 --> 0:11:28.720 missed the evolution of the fixed income market. I think 0:11:28.800 --> 0:11:30.560 one of the things that may have happened was he 0:11:30.640 --> 0:11:33.040 changed his strategy, and he noted this today to Tom 0:11:33.120 --> 0:11:36.080 Keane on the interview with Bloomberg Radio and TV that 0:11:36.360 --> 0:11:38.280 he wished in some ways that he might have stuck 0:11:38.320 --> 0:11:41.320 with his total return strategy, which he really pioneered a 0:11:41.360 --> 0:11:44.280 bit more and Ben a little bit more constrained. Lisa, 0:11:44.320 --> 0:11:46.680 you know these funds really well. But these unconstrained bond 0:11:46.720 --> 0:11:49.439 funds which Bill Gross ran one at Janice, they were 0:11:49.480 --> 0:11:51.959 really un vogue after the financial crisis, and lots of 0:11:52.000 --> 0:11:54.240 bond managers said they're going to be the greatest thing 0:11:54.280 --> 0:11:56.679 because we can go anywhere and when interest rate starts 0:11:56.679 --> 0:11:59.440 to rise, we'll be able to move and groove. And well, 0:11:59.559 --> 0:12:01.440 it turned out to be a little bit more difficult 0:12:01.440 --> 0:12:05.280 than that. They had higher fees than other bond funds, 0:12:05.400 --> 0:12:08.120 and the whole argument was predicated on this idea of 0:12:08.240 --> 0:12:11.800 rising rates, of rising benchmark yields, which Bill grow subscribed to. 0:12:11.880 --> 0:12:14.839 He thought that, you know, he shorted tenure treasuries when 0:12:14.840 --> 0:12:17.120 the yields were three three and a half present. That 0:12:17.240 --> 0:12:20.080 was not right. But I do have to wonder, you know, 0:12:20.200 --> 0:12:23.960 how much of the active model is broken Bill Gross 0:12:24.000 --> 0:12:27.400 in particular, uh, you know, homing in on hedge funds 0:12:27.520 --> 0:12:29.440 and saying that that model is broken. Take a listen 0:12:29.440 --> 0:12:31.720 to what he had to say. Obviously, the hedge fund 0:12:31.800 --> 0:12:34.800 concepts suggested long and short, but it was really one 0:12:34.800 --> 0:12:38.920 in which managers took a lot of risk. So when 0:12:38.920 --> 0:12:42.720 you speak to diversification, you know, perhaps most of those 0:12:43.240 --> 0:12:46.440 hedge funds were non diversified in terms of the risk 0:12:46.559 --> 0:12:48.760 that they were taking. They were taking levered risk and 0:12:48.800 --> 0:12:51.880 still are. So he was talking about hedge funds Bill 0:12:51.920 --> 0:12:55.400 Gross this morning in a conversation with Bloomberg's Tom Keane. 0:12:55.920 --> 0:13:00.439 Of course he himself also took unlevered risk, but in 0:13:00.559 --> 0:13:03.960 mutual fun format, right and again, on this uncontrained bond fund, 0:13:04.000 --> 0:13:06.800 they had a lot more latitude and versus the total 0:13:06.880 --> 0:13:09.800 return fund that had a lot had to stay more 0:13:09.840 --> 0:13:12.679 constrained and take more measured risks. So when you have 0:13:12.800 --> 0:13:16.240 the ability to take big risks, sometimes it goes very 0:13:16.240 --> 0:13:19.360 well and sometimes it goes very sharply down the other way. 0:13:19.360 --> 0:13:22.400 And we saw Bill Gross's fund in the spring of 0:13:22.480 --> 0:13:24.520 last year really take a dive on a couple of 0:13:24.520 --> 0:13:26.320 bad bets that he had made in relation to the 0:13:26.360 --> 0:13:28.640 German bunds. So, and I think on hedge funds, you know, 0:13:28.679 --> 0:13:30.439 he makes a good point that a lot of we've 0:13:30.440 --> 0:13:32.720 seen a lot of the hedge funds kind of heard 0:13:32.760 --> 0:13:36.360 together into long bets with with the fang stocks, and 0:13:36.400 --> 0:13:38.480 then when things turned the other way kind of they 0:13:38.520 --> 0:13:41.760 go go in tandem downwards. So I think his point 0:13:41.840 --> 0:13:43.560 is made. But I do think he you know, he 0:13:43.600 --> 0:13:45.800 struggled over the last few years. We saw a lot 0:13:45.880 --> 0:13:49.560 of investor redemptions. He did say on the interview today 0:13:49.600 --> 0:13:52.000 on Bloomberg Radio and TV that he believes his legacy 0:13:52.080 --> 0:13:55.079 stands because for his over his four decade more than 0:13:55.120 --> 0:13:58.560 four decade career in the investment market, he certainly had 0:13:58.760 --> 0:14:02.120 great returns at Pimco. Peggy cons thank you very much 0:14:02.160 --> 0:14:04.520 for bringing us up to date on really momentous news 0:14:04.559 --> 0:14:06.880 in the fixed income world. Here Peggy Collins, investing team 0:14:06.920 --> 0:14:10.080 leader Bloomberg News, joining us live in a Bloomberg Interactive 0:14:10.120 --> 0:14:12.360 broker studio. And I think I have to agree with 0:14:12.360 --> 0:14:14.600 with Peggy that and with Bill that, you know, over 0:14:14.640 --> 0:14:19.440 his forty year career, just outstanding performance for his investors 0:14:19.480 --> 0:14:22.600 in the fixed income market. Uh, and he clearly was 0:14:22.680 --> 0:14:41.360 the bond king. You know, if we want to take 0:14:41.440 --> 0:14:43.960 a look at what's going on with the global economy, 0:14:44.000 --> 0:14:46.720 there is no better place to look than the shipping industry. 0:14:46.720 --> 0:14:48.560 And so we're very lucky to have Ian Webber with 0:14:48.640 --> 0:14:51.680 us here, chief executive officer of Global ship Leaves, normally 0:14:51.720 --> 0:14:53.680 based in London, but here with us in our New 0:14:53.720 --> 0:14:57.240 York studios today. Global ship Leaves actually just merged with 0:14:57.320 --> 0:15:00.760 Beside Containers late last year, now has point three billion 0:15:00.960 --> 0:15:05.280 dollars worth of ships as well as thirty eight modern 0:15:06.120 --> 0:15:09.280 fleet of thirty eight So, Ian, thank you so much 0:15:09.280 --> 0:15:12.400 for being here. Do you think the concern from your 0:15:12.440 --> 0:15:16.080 perspective of seeing ships in the water, the concern about 0:15:16.080 --> 0:15:20.560 trade tensions has been overplayed or underblown? Firstly, thanks for 0:15:20.600 --> 0:15:23.800 inviting me. It's good to be here again. Um. Yeah, 0:15:24.160 --> 0:15:28.200 trade wars and tariffs and and and the uncertainty that 0:15:28.200 --> 0:15:32.960 that creates never good for business, but it does create opportunities. Now, 0:15:33.040 --> 0:15:35.520 for for my business, you have to take a step 0:15:35.560 --> 0:15:38.320 back and look at the global container fleet and look 0:15:38.320 --> 0:15:41.120 at very big ships and then the rest medium sized 0:15:41.160 --> 0:15:43.200 and smaller. The very big ships are the ones that 0:15:43.240 --> 0:15:47.000 are deployed on trades between China and North America and 0:15:47.120 --> 0:15:49.800 China and Europe. They're the ones that are going to 0:15:49.840 --> 0:15:54.040 be most affected directly by tariffs and trade wars, at 0:15:54.080 --> 0:15:57.280 least until something is resolved. The midsize and smaller fleet 0:15:57.680 --> 0:16:01.400 is out with that. That's global contain a trade. That's 0:16:01.440 --> 0:16:04.920 where my company, Global Ship Leases is focused. There will 0:16:04.960 --> 0:16:08.480 be an indirect effects, of course, but the direct effect 0:16:08.680 --> 0:16:12.440 on global trade flows for US we expect to be negligible. 0:16:12.800 --> 0:16:15.480 That's interesting when you raise that seventy number, because when 0:16:15.520 --> 0:16:17.400 I think of global shipping, I think of the big 0:16:17.440 --> 0:16:20.680 monster container ships sitting in the harbor and Singapore, you know, 0:16:20.680 --> 0:16:22.920 in Bayo, New Jersey, getting loaded and offload of these 0:16:22.920 --> 0:16:26.080 monster things. But global trade is with the medium and 0:16:26.680 --> 0:16:29.720 smaller ships. As you say, what are the drivers of 0:16:29.760 --> 0:16:32.040 that business if it isn't the global trade that we're 0:16:32.040 --> 0:16:35.640 talking about China, Europe, China, US local local economies. These 0:16:35.680 --> 0:16:40.400 are trade lanes that connect the Indian Subconsinan and Australasia, 0:16:40.800 --> 0:16:44.720 Australasia and South America, North America and South America, Europe 0:16:44.720 --> 0:16:48.560 and South America. So it's everything else, and it's it's 0:16:48.560 --> 0:16:52.240 consumer products, it's some manufactured products, it's raw materials, it's 0:16:52.760 --> 0:16:56.080 frozen lamb, it's butter, it's wine, it's water, it's beer, 0:16:56.200 --> 0:16:59.280 it's shoes, it's all of these things that emerging economies, 0:16:59.320 --> 0:17:02.520 particularly in Okay so what changes have you seen in 0:17:02.560 --> 0:17:06.119 the past six months that sort of very indicative of 0:17:06.160 --> 0:17:10.400 either the global economy or the changing trade routes emerging 0:17:10.440 --> 0:17:13.520 from the tech Continued growth in demand in these non 0:17:13.560 --> 0:17:17.199 mainline trades, so we've got three or four demand growth. 0:17:17.920 --> 0:17:21.040 Where is it something from in particular, it's broadly spread, 0:17:21.400 --> 0:17:24.040 so you know, it's across the whole world, which is 0:17:24.040 --> 0:17:26.439 great because our ships are built to be able to 0:17:26.760 --> 0:17:29.680 be deployed around the world. On the other side of 0:17:29.720 --> 0:17:33.199 the occasion, the supply side, the order book ships that 0:17:33.240 --> 0:17:36.600 are contracted to be built for midsize and smaller container 0:17:36.640 --> 0:17:39.879 ships is tiny in flank. The supply of midsizing and 0:17:39.960 --> 0:17:42.960 smaller ships has contracted over the last half a dozen years. 0:17:43.280 --> 0:17:47.560 So we've got demand growth and supply contraction which will 0:17:47.920 --> 0:17:51.359 lead to increase in price charter rates for US rental 0:17:51.400 --> 0:17:54.800 income and ultimately asset values. So our ships that are 0:17:54.800 --> 0:17:57.000 coming open in the market later this year into two 0:17:57.000 --> 0:17:59.960 thousand and twenty, we're hoping to renew at higher rate 0:18:00.119 --> 0:18:02.919 driven by these economic fundamentals. What are you doing with 0:18:02.960 --> 0:18:06.000 your fleet right now? At least mentioned thirty eight ships, 0:18:06.000 --> 0:18:08.119 I believe are you adding to the fleet? How do 0:18:08.119 --> 0:18:11.639 you think about that capital expenditure as it related to 0:18:11.720 --> 0:18:16.000 the maybe the visibility you may have on your upcoming business. Sure, 0:18:16.040 --> 0:18:17.640 I mean, we've just double the size of the fleet. 0:18:17.640 --> 0:18:20.879 You're kind enough to observe that we've reduced the average 0:18:20.920 --> 0:18:23.480 age of the vessels. Who improve the quality of the ships. 0:18:23.280 --> 0:18:26.879 It's it's a great transaction. More than doubling the size 0:18:26.920 --> 0:18:30.600 of the business. Going forward, we still see opportunities to 0:18:30.640 --> 0:18:35.439 add selectively to the fleet second hand vessels, five ten 0:18:35.520 --> 0:18:38.679 year old vessels with a charter with a rental stream 0:18:38.960 --> 0:18:42.360 attached to it, when asset values are still relatively low. 0:18:42.440 --> 0:18:44.680 We're still it's a cyclical industry. We're still at the 0:18:44.720 --> 0:18:47.840 bottom of the cycle, and therefore there are good investment 0:18:47.840 --> 0:18:50.520 opportunities for those who have the appetite and the capital, 0:18:50.560 --> 0:18:53.600 which which we do. How does the growth that you're 0:18:53.600 --> 0:18:56.840 seeing right now in demand compared to the past few years, 0:18:57.880 --> 0:19:00.280 It's it's steady and wan it flucture. It's from me 0:19:00.440 --> 0:19:02.639 to you, we are cyclical. Not every trade lane is 0:19:02.640 --> 0:19:05.359 going gangbusters all at the same time. There are there 0:19:05.400 --> 0:19:08.040 are more prosperous economies and less prosperous, but on average 0:19:08.400 --> 0:19:11.119 three or four percent. The reason why I ask is 0:19:11.160 --> 0:19:14.639 because people are talking about this sort of global deceleration. 0:19:14.800 --> 0:19:18.080 I'm just wondering if your empirical evidence bears that out. 0:19:18.440 --> 0:19:22.280 Really is difficult to tell, but with no new ships 0:19:22.280 --> 0:19:27.360 being built in our sector um and positive demand growth 0:19:28.080 --> 0:19:30.359 even if it's three percent rather than four percent, and 0:19:30.400 --> 0:19:32.359 that's a great position for us to be in. So 0:19:32.440 --> 0:19:35.240 your company's interesting. You you own the ships and then 0:19:35.240 --> 0:19:38.200 you lease them to the large, larger container ship companies 0:19:38.200 --> 0:19:41.800 from maris them about the world. Um, so I would send, 0:19:41.800 --> 0:19:43.240 I would get it. I would sense that you would 0:19:43.240 --> 0:19:46.480 probably be a very you know, a high delta indicator 0:19:46.520 --> 0:19:48.359 to what is really going on in terms of demand 0:19:48.359 --> 0:19:51.879 in terms of global shipping. So do you have it? 0:19:51.920 --> 0:19:54.520 What's the average tenure of your contract? You have contracts 0:19:54.600 --> 0:19:56.880 rolling over, and what can you tell us about kind 0:19:56.880 --> 0:20:00.720 of the renegotiation rates you're currently seeing? I'm sure. I mean, 0:20:00.800 --> 0:20:03.160 if you were renewing a ship in today's market, you'll 0:20:03.200 --> 0:20:07.280 be looking at a new lease, a new charter of six, nine, twelve, 0:20:07.400 --> 0:20:10.280 maybe eighteen months, relatively short term, which is fined by 0:20:10.359 --> 0:20:12.879 us because we expect rates to continue to rise, so 0:20:12.920 --> 0:20:15.560 we'll then release again and an improving market but we 0:20:15.640 --> 0:20:18.600 have a mixture of long and short term charters. We 0:20:18.640 --> 0:20:22.160 have seven fifty million dollars of contracted revenue on average. 0:20:22.160 --> 0:20:24.080 Our charters run for two and a half years, So 0:20:24.119 --> 0:20:27.359 we've got a great mixture of a bedrock of of 0:20:27.400 --> 0:20:30.760 cash flow and then some short term charters renewing soon 0:20:30.800 --> 0:20:33.359 that we hope to be able to renew an improved market. 0:20:33.640 --> 0:20:36.960 So the supply demand dynamic really favors you in terms 0:20:36.960 --> 0:20:39.439 of being able to raise rates. For the marisks of 0:20:39.480 --> 0:20:42.399 the world, how much do they push back at a 0:20:42.480 --> 0:20:46.119 time when people all talk about margin compression, Uh, you know, 0:20:46.680 --> 0:20:49.960 inflation around the edges and the inability to pass it 0:20:50.040 --> 0:20:52.760 along to consumers. Oh, it's a it's a tough negotiation. 0:20:52.880 --> 0:20:54.359 You know, you've got a buyer and a seller and 0:20:54.359 --> 0:20:57.280 you're trying to come up with a price. Our our 0:20:57.359 --> 0:21:02.440 industry is very liquid. However, there are professional shipbrokers out there. 0:21:02.440 --> 0:21:07.040 Information flows extremely quickly, um and very broadly, so we 0:21:07.119 --> 0:21:10.200 kind of know what market rates are. But there is 0:21:10.240 --> 0:21:13.160 inevitably a bit of a tussle between owner and charter 0:21:13.280 --> 0:21:14.800 and you end up with something that you agree in 0:21:14.960 --> 0:21:17.399 terms of rate and duration. So who do you compete 0:21:17.400 --> 0:21:22.000 against every other container ship that's that's that's out there, 0:21:21.760 --> 0:21:23.600 but other people in your business that are in that 0:21:23.720 --> 0:21:26.640 leasing business, that are kind of in the flex business 0:21:26.640 --> 0:21:29.280 that that you're in. Yes, I mean there are just 0:21:29.359 --> 0:21:33.080 over five thousand container ships in the world. Roughly half 0:21:33.119 --> 0:21:35.040 of them are owned by owners like us, so two 0:21:35.080 --> 0:21:37.760 and a half thousand broadly spread. Some are on very 0:21:37.760 --> 0:21:40.400 long term charters, some are on short term charters. So 0:21:40.440 --> 0:21:43.840 it's a pretty fragmented industry, hence the availability of decent 0:21:43.880 --> 0:21:47.280 market information. So just real quick here in thirty seconds, 0:21:47.280 --> 0:21:49.800 what are you most concerned about with respect to global 0:21:49.800 --> 0:21:51.800 growth or do you think it's just smooth sailing ahead 0:21:51.920 --> 0:21:54.320 so to speak. Pardon my plan. It won't be smooth 0:21:54.320 --> 0:21:57.320 sailing for twenty years in the industry. I've known that. 0:21:58.560 --> 0:22:00.600 But we're looking forward. We came and it's there will 0:22:00.640 --> 0:22:02.879 be hiccups. Um you know, we're we're in a bit 0:22:02.920 --> 0:22:04.960 of a seasonal down to now. We expect things to 0:22:04.960 --> 0:22:08.680