WEBVTT - Argentina Selloff Is A Buying Opportunity, Turkey Not So Much 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.720 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Let's 0:00:32.720 --> 0:00:36.160 turn our attention now to Argentina or the central Bank 0:00:36.240 --> 0:00:39.680 has risen interest rates three times in the past week 0:00:40.400 --> 0:00:44.440 just to support its currency. The result it is not working. 0:00:44.520 --> 0:00:47.680 Joining us now, Paul McNamara, investment director for Emerging Markets 0:00:47.720 --> 0:00:51.519 at gam UK Limited, overseeing about eleven billion dollars in 0:00:51.720 --> 0:00:55.040 developing world assets. Paul, thank you so much for being here. 0:00:55.480 --> 0:00:58.200 We're looking at a lira that is tanking. We're looking 0:00:58.320 --> 0:01:04.959 at that yields are absolutely skyrocketing on Argentinean bonds. Is 0:01:04.959 --> 0:01:09.720 this a buying opportunity? We think it is. Sorry you 0:01:09.760 --> 0:01:12.679 said lira. The lira is the one that we don't 0:01:12.680 --> 0:01:16.880 think is buying opportunity. Turkey has quite similar problems to Argentina. Sorry, 0:01:17.160 --> 0:01:20.120 I'm getting my troubles back. Confused, Sorry, no, no, the 0:01:20.160 --> 0:01:24.480 different the differences really favor Argentina. Argentina is a much 0:01:24.560 --> 0:01:28.920 less indebted economy. So you know, the the Argentines did 0:01:29.080 --> 0:01:32.200 three percent last Friday, they did three percent yesterday, they 0:01:32.240 --> 0:01:35.000 did six and three quarter percent today. But you know, 0:01:35.040 --> 0:01:37.280 this is an economy with a very low level of leverage, 0:01:37.360 --> 0:01:41.000 where the burden of hiking rates is much less severe 0:01:41.040 --> 0:01:43.880 on the real economy. Um, it's you know, it's something 0:01:43.920 --> 0:01:48.520 that can translate relatively smoothly to currency strength, unlike you know, 0:01:48.560 --> 0:01:51.400 most countries in the developed world, almost countries in e M, 0:01:51.840 --> 0:01:54.560 where you know, obviously the conflicts between the damage done 0:01:54.560 --> 0:01:57.200 by higher rates and the damage done by a weaker currency. 0:01:57.560 --> 0:02:01.160 In Argentina, I think it's fairly here that that all 0:02:01.240 --> 0:02:03.360 the all the burden, all the damage comes from a 0:02:03.360 --> 0:02:07.360 weaker paco. Um, so everything favors that the the the 0:02:07.480 --> 0:02:10.440 Argentine authorities doing everything they possibly can to keep the 0:02:10.440 --> 0:02:13.280 paco in place. Well, just to push back a little bit, 0:02:13.280 --> 0:02:15.960 because if you see, this is a buying opportunity for 0:02:16.080 --> 0:02:18.600 the Argentine paco or perhaps some of the debt that's 0:02:18.600 --> 0:02:21.480 selling off. I'm just wondering about the root of the 0:02:21.480 --> 0:02:24.560 weakness here, which is the fear that the right leaning 0:02:24.639 --> 0:02:26.960 leadership isn't doing as much as it needs to be 0:02:27.040 --> 0:02:31.400 doing to support the nation's economy and its finances. What's 0:02:31.400 --> 0:02:34.280 your take on that. No, I mean, you know, we've 0:02:34.280 --> 0:02:37.320 got right wing governments or populist governments all over the 0:02:37.360 --> 0:02:40.760 world sort of not supporting the economy. The economy, you know, 0:02:40.760 --> 0:02:42.520 if you look at Russia, if you look at Poland, 0:02:42.560 --> 0:02:46.320 if you look pretty much everywhere. I mean, the reason 0:02:46.840 --> 0:02:50.640 that Argentina and again Turkey are getting hammered is not 0:02:50.720 --> 0:02:52.640 so much to do with economic strength. It's to do 0:02:52.680 --> 0:02:56.240 with the external balances. These are both countries where imports 0:02:56.240 --> 0:02:58.960 are are rising much faster than exports. You know, that 0:02:59.000 --> 0:03:02.840 the currency has become competitive, um, you know, and the 0:03:02.880 --> 0:03:04.560 way to address that is to you know, is to 0:03:04.600 --> 0:03:06.960 bring import demands down a bit and give people a 0:03:07.000 --> 0:03:10.640 reason to hold their money in local currency, which I 0:03:10.639 --> 0:03:14.160 think higher rates will help with. Um. You know, growth 0:03:14.240 --> 0:03:18.440 growth in Argentina is respectable. It's you know, it's not 0:03:18.520 --> 0:03:21.519 outrageously high, but I think it's you know, it's it's 0:03:21.560 --> 0:03:24.400 positive that the authorities are willing to hike rates and 0:03:24.480 --> 0:03:27.800 looking for stability ahead of a dash for growth. Paul, 0:03:28.040 --> 0:03:30.800 why did this happen. I mean, what's the reason. Doesn't 0:03:30.840 --> 0:03:35.040 this go back to something that happened in December? I 0:03:35.520 --> 0:03:37.160 think the rate hikes at the end of last year 0:03:37.200 --> 0:03:38.920 and the start of this year. Yes, that that that 0:03:38.960 --> 0:03:42.760 there was a perception that the you know that that 0:03:42.840 --> 0:03:46.040 the Argentines were kind of engaging in this dash for growth, 0:03:46.080 --> 0:03:48.560 that you know that stability and lower inflation had taken 0:03:48.600 --> 0:03:51.960 second place. But you know, the rate cuts that they did, 0:03:52.240 --> 0:03:53.880 you know, across the turn of the year have been 0:03:53.920 --> 0:03:57.480 more than reversed since then. So I think it would 0:03:57.520 --> 0:03:59.000 be fair to say that the Argentines has got the 0:03:59.040 --> 0:04:02.280 message gay. So you think it's a buying opportunity, what's 0:04:02.280 --> 0:04:05.320 the best opportunity? Is it the paco? Is it a 0:04:05.360 --> 0:04:09.840 certain bond issuance? I mean, you know, as ever, if 0:04:09.880 --> 0:04:12.080 you say something something is a buy, I mean, as 0:04:12.080 --> 0:04:14.600 somebody who's running an e M portfolio, we think relative 0:04:14.640 --> 0:04:18.120 to other emerging markets, it looks like goodbye. We think 0:04:18.320 --> 0:04:20.480 you know that the pacer has overshot here, that you're 0:04:20.520 --> 0:04:25.440 getting an interest interest rates up at around on Argentine 0:04:25.480 --> 0:04:29.360 paco assets. We prefer paco assets here. Yes, okay, what 0:04:29.480 --> 0:04:33.159 about let's talk about Turkey because that's the other big, 0:04:33.320 --> 0:04:35.400 big name in the news, and you're saying that you 0:04:35.480 --> 0:04:39.440 are not positive on the lira there, which is tanking. 0:04:39.480 --> 0:04:43.480 I believe in some measures to its weakest levels, uh 0:04:43.800 --> 0:04:48.440 in near history. What's your take on what's happening there? Well, 0:04:48.800 --> 0:04:52.000 I beat the problems in Turkey look to us fairly severe. 0:04:52.120 --> 0:04:54.720 You know. Above all, you know, the one thing you 0:04:54.760 --> 0:04:57.200 don't want to see an emerging market is a huge 0:04:57.240 --> 0:05:01.560 build up of foreign debt to support ought activity, which 0:05:01.600 --> 0:05:04.160 only generates local currency. You know, we saw its an Asia, 0:05:06.000 --> 0:05:08.280 We've seen it in lots of countries along the way, 0:05:08.360 --> 0:05:12.120 because what happens is as the currency falls, the ability 0:05:12.400 --> 0:05:15.720 of the banks and the core protector to to pay 0:05:15.800 --> 0:05:21.320 that debt falls um. You know. And unlike Argentina, you know, 0:05:21.360 --> 0:05:25.240 the level of foreign debt in Turkey is extremely high 0:05:25.640 --> 0:05:30.000 and at the same time activity in business activity in 0:05:30.040 --> 0:05:33.799 Turkey is falling very slowly. Plus you have political changes 0:05:33.839 --> 0:05:36.520 which I think militates in favor of capital flight and 0:05:36.600 --> 0:05:39.160 moving money out of the country, and a very low 0:05:39.240 --> 0:05:43.160 level of foreign exchange reserves. If you take that mix together, uh, 0:05:43.200 --> 0:05:45.359 you know, we think that there's a real possibility of 0:05:45.360 --> 0:05:48.200 a major economic crisis in Turkey this year, So what 0:05:48.240 --> 0:05:51.360 would you do? Go short Turkey, go along Argentina. Would 0:05:51.400 --> 0:05:55.240 that be a good trade? I think we'd find it 0:05:55.240 --> 0:05:58.719 an attractive trade. But it's it's definitely one for the brave, 0:06:00.480 --> 0:06:02.160 you know, this is this is not one for widows 0:06:02.160 --> 0:06:06.159 and orphans. Just really quick. I'm wondering just in general, 0:06:06.200 --> 0:06:09.159 we've seen two weeks of outflows from emerging market funds, 0:06:09.600 --> 0:06:13.640 the most since December. Are you concerned about general broader 0:06:13.640 --> 0:06:17.600 weakness due to the stronger dollar? M Well, yeah, I 0:06:17.640 --> 0:06:19.880 mean if somebody, you know, kind of makes their living 0:06:19.880 --> 0:06:23.200 in this market, I think we have to be concerned. 0:06:23.480 --> 0:06:25.880 I mean, what we've seen is, you know, after two 0:06:25.960 --> 0:06:28.320 years of quite a week dollar, we've seen the dollars 0:06:28.360 --> 0:06:30.960 snap back. And it's always been the case that, you 0:06:30.960 --> 0:06:33.560 know that when the dollar rallies against d M, it 0:06:33.680 --> 0:06:37.160 rallies stronger against EM and everything we've seen since then 0:06:37.200 --> 0:06:40.480 has been in line with that. Unlike you know, say 0:06:40.520 --> 0:06:42.680 two thousand and thirteen or two thousand and eight, we 0:06:42.720 --> 0:06:45.599 don't see weakness in EM We're not seeing external deficits, 0:06:45.920 --> 0:06:48.120 so we think that the fundamentals in them this time 0:06:48.839 --> 0:06:52.720 are much more supportive. Thanks very much. Paul McNamara, Investment 0:06:52.720 --> 0:06:56.679 director for Emerging Markets for gam UK, helping to manage 0:06:56.800 --> 0:07:00.480 about eleven billion dollars in developing world assets, earning us 0:07:00.480 --> 0:07:17.240 on the phone from London. Right now, let's turn our 0:07:17.280 --> 0:07:20.520 attention to the jobs data that we got out from 0:07:20.960 --> 0:07:24.120 the US this morning. Yes, we saw the jobless rate 0:07:24.160 --> 0:07:26.840 fall to three point nine percent, the lowis and April 0:07:26.880 --> 0:07:31.120 two thousand, but wages did not increase as much as 0:07:31.280 --> 0:07:33.960 many people had expected. Tom Gimble joins US now. He 0:07:34.000 --> 0:07:38.480 is founder and chief executive officer of LaSalle Network. And Tom, 0:07:38.520 --> 0:07:40.640 I'm really glad you're here. You're the person I want 0:07:40.680 --> 0:07:43.080 to speak with. I want to talk about why we 0:07:43.120 --> 0:07:48.680 are not seeing bigger increases in what we earn. Well. 0:07:48.800 --> 0:07:52.840 Right now, we've got a labor market that um is, 0:07:53.000 --> 0:07:55.720 as you said, the best labor market we've had since 0:07:55.840 --> 0:07:59.280 two thousand, with unemployment below four. So the question is 0:07:59.640 --> 0:08:03.520 we're bringing in the hourly wages reflecting the service wages. 0:08:03.560 --> 0:08:07.440 So we haven't seen the influx from the municipalities increasing 0:08:07.480 --> 0:08:09.880 minimum wage, and I think we'll start to see that 0:08:10.160 --> 0:08:13.000 as that minimum wage continues to grow, But the service 0:08:13.040 --> 0:08:16.720 positions are still not are still driving the unemployment ranked down, 0:08:17.240 --> 0:08:19.600 and what we're not seeing is when people get hired 0:08:19.600 --> 0:08:22.760 in white collar jobs and someone goes from making fifty 0:08:22.760 --> 0:08:26.280 thousand to sixty thousand, they're also being replaced by people 0:08:26.320 --> 0:08:29.920 coming in at lower salaries. So it's not as easy 0:08:29.960 --> 0:08:33.679 as saying, oh, well, if unemployments low, then everybody's making 0:08:33.679 --> 0:08:36.280 more money. That's not where the markets at right now. 0:08:36.320 --> 0:08:38.760 And that's because of the global economy in a sense 0:08:38.800 --> 0:08:42.120 as well, that we can there's so much production being 0:08:42.160 --> 0:08:45.600 done around the globe that we're not competing against the 0:08:45.600 --> 0:08:47.880 neighbor and that we're not getting more money tomorrow than 0:08:47.880 --> 0:08:50.480 we were yesterday. That's the channel. But the good news 0:08:50.559 --> 0:08:53.160 is there's more jobs, but there's there's no one should 0:08:53.160 --> 0:08:55.240 be out of work right now. Well okay, but but Tom, 0:08:55.280 --> 0:08:57.200 I want to push back a little bit because you're 0:08:57.240 --> 0:09:00.800 saying that that basically people don't have to pay more. 0:09:00.840 --> 0:09:03.199 Companies don't have to pay more unless the minimum wage 0:09:03.280 --> 0:09:07.000 rules are are changed. But aren't a lot of ceo 0:09:07.080 --> 0:09:10.320 is saying that they have trouble finding qualified workers right now, 0:09:10.360 --> 0:09:12.360 and wouldn't they have an easier time if they just 0:09:12.440 --> 0:09:17.000 offered more money. No, So, so paying more doesn't get 0:09:17.040 --> 0:09:20.160 somebody more qualified, So to pay more with the vision 0:09:20.200 --> 0:09:22.280 of most CEOs and CFOs are not the vision. The 0:09:22.320 --> 0:09:26.160 reality is they're not going to pay more for the 0:09:26.240 --> 0:09:29.760 exact same person they can get. This is what happened 0:09:30.120 --> 0:09:33.240 in two thousand and two until two thousand and eight, 0:09:33.600 --> 0:09:37.320 is that that boom was fueled by companies were paying 0:09:37.400 --> 0:09:40.080 more for people just for the sake of saying we 0:09:40.120 --> 0:09:43.079 need more people, We're gonna pay outrageous amounts of money, 0:09:43.280 --> 0:09:45.360 and it didn't work. Right now, I'm not saying that 0:09:45.400 --> 0:09:48.000 the housing market wasn't the driver for that crash, but 0:09:48.240 --> 0:09:50.880 we have now is a more responsible group of lead 0:09:50.960 --> 0:09:54.079 corporate leaders, and they're saying that we're not going to 0:09:54.240 --> 0:09:57.640 pay more just for the sake of paying more unemployment 0:09:57.679 --> 0:10:01.160 at three point to go hire some who's unemployed and 0:10:01.200 --> 0:10:06.120 just pay them more, that doesn't make fiscal sense. Tom uh. 0:10:06.160 --> 0:10:09.320 There are five point nine million open jobs in the 0:10:09.400 --> 0:10:14.560 United States at least that's according to Lasal Network. Right, Okay, 0:10:14.559 --> 0:10:17.679 where are the most Where's the most demand? And I 0:10:17.679 --> 0:10:20.880 mean demand, not that you need a PhD in you know, 0:10:20.920 --> 0:10:25.440 astrophysics or mathematics. Where's the biggest demand? Right now? So 0:10:25.480 --> 0:10:30.600 the biggest demand is in sales in computer and technology developers, 0:10:30.640 --> 0:10:34.160 coders and programmers, and then in healthcare, right and that's 0:10:34.160 --> 0:10:36.880 been the same way going on for half a decade. 0:10:36.880 --> 0:10:39.760 Now that those are the drivers sales really more in 0:10:39.800 --> 0:10:43.280 the past three years. To keep fueling this economy, corporations 0:10:43.280 --> 0:10:45.600 want to increase revenue. Where I think we're gonna get 0:10:45.600 --> 0:10:48.600 at births. I think the July numbers and the August 0:10:48.679 --> 0:10:50.960 numbers are going to be really good because you're gonna 0:10:50.960 --> 0:10:53.840 see it's a great time to be graduating college right now, 0:10:54.000 --> 0:10:56.040 all right, And that's why, Well, I'm glad you mentioned 0:10:56.080 --> 0:11:00.240 graduating college because I'm wondering these entry level positions or 0:11:00.280 --> 0:11:02.760 these positions for which you need a lot of experience, 0:11:02.840 --> 0:11:06.640 or would even internships qualify you. Yeah, no, it's it's 0:11:06.679 --> 0:11:08.720 it's it's for all of the above. And so that's 0:11:08.760 --> 0:11:11.400 the big difference is that companies would love to hire 0:11:11.440 --> 0:11:15.120 some experienced people. However, the ones who are unemployed, that's 0:11:15.160 --> 0:11:18.400 where the skills gap exists. The long term unemployed don't 0:11:18.440 --> 0:11:20.320 have the skills to be hired in this market. So 0:11:20.360 --> 0:11:23.840 what companies do is they hire younger people out of college, 0:11:24.000 --> 0:11:26.960 and that doesn't increase the wages because those people are 0:11:27.000 --> 0:11:29.560 coming in at entry level salaries, and so we'll see 0:11:29.559 --> 0:11:32.679 as a boost. My guess is July, August, September numbers 0:11:32.679 --> 0:11:34.720 are gonna be well over two hundred thousand a month 0:11:34.960 --> 0:11:37.280 because this economy engine is gonna keep going, and you're 0:11:37.320 --> 0:11:40.160 gonna see higher volumes of people being hired because they're 0:11:40.160 --> 0:11:43.839 more available. So what do you think the unemployment rate 0:11:43.880 --> 0:11:46.000 will be by the end of the year. I think 0:11:46.040 --> 0:11:49.640 it stays around the same. It really the Even if 0:11:49.640 --> 0:11:53.120 the FED raises interest rates by another quarter of a point, 0:11:53.120 --> 0:11:55.400 I don't think that moves the needle on hiring. I 0:11:55.440 --> 0:11:57.679 think it can't really get much lower. What what used 0:11:57.679 --> 0:12:00.160 to be a rule of thumb twenty years ago that 0:12:00.240 --> 0:12:02.439 two and a half to three percent was the acceptable 0:12:02.480 --> 0:12:05.520 unemployment rate. That's that there's just a certain number of 0:12:05.520 --> 0:12:08.160 people that are unemployable. I think that number today is 0:12:08.200 --> 0:12:11.160 probably right around three to three and a half. So 0:12:11.320 --> 0:12:13.440 I don't think we get much lower than three nine, 0:12:13.440 --> 0:12:17.040 maybe three eight. Tom. The cover story of Bloomberg Business 0:12:17.040 --> 0:12:19.920 Week this week, Just Out, is about the workplace. It 0:12:19.960 --> 0:12:23.880 says the workplaces complicated the business of equality. What a 0:12:23.960 --> 0:12:28.200 graduates want out of their jobs. The number one thing 0:12:28.280 --> 0:12:30.600 that it's really been a change is that and this 0:12:30.679 --> 0:12:33.240 is one thing that will probably they could go counter 0:12:33.280 --> 0:12:35.600 to what I just said, is that graduates now are 0:12:35.640 --> 0:12:38.440 seeing the market and they're seeing that they can probably 0:12:38.480 --> 0:12:42.040 get a higher wage. So more than ever before since 0:12:42.120 --> 0:12:45.360 pre crash in two thousand and eight, you're seeing graduates 0:12:45.400 --> 0:12:48.520 not accepting jobs early into their senior year. So they're 0:12:48.520 --> 0:12:51.600 waiting until after graduation and see how the market. The 0:12:51.600 --> 0:12:55.439 market checks out, so they want compensation, They want location, 0:12:55.559 --> 0:12:58.480 so they want to work in cities, major metropolitan areas 0:12:58.679 --> 0:13:00.440 of where they want to go. So death the Nation 0:13:00.520 --> 0:13:03.920 is number two. And really culture continues to be. They 0:13:03.960 --> 0:13:06.680 want to work in a plant that the company appreciates 0:13:06.679 --> 0:13:09.280 the employees, We appreciate you being with us. Tom Gimble, 0:13:09.360 --> 0:13:11.760 the founder, the chief executive a list solum that we're 0:13:11.800 --> 0:13:30.840 talking about today's non farm paywall report. Two days of 0:13:31.160 --> 0:13:36.959 US and China trade discussions ended in Beijing with little accomplished. 0:13:36.960 --> 0:13:40.400 Here to talk about the sort of escalating rhetoric between 0:13:40.559 --> 0:13:42.839 the US and China, at what point it will tip 0:13:42.960 --> 0:13:46.760 into a more severe trade war is Mike McDonough, chief 0:13:46.800 --> 0:13:51.640 economist for Financial Products here at Bloomberg LP. Mike, you 0:13:51.640 --> 0:13:54.839 you pend an opinion piece that I thought was fascinating 0:13:55.080 --> 0:13:59.880 looking at how a bankruptcy of a major tech company 0:14:00.000 --> 0:14:03.720 in China could be the real tipping point for a 0:14:03.880 --> 0:14:06.680 true trade war. Can you explain? Yeah, I think you know, 0:14:06.760 --> 0:14:11.160 every everyone's focusing on the trade delegation that just visited Beijing, 0:14:11.240 --> 0:14:14.680 and I think very few people thought we would get 0:14:14.720 --> 0:14:17.960 something meaningful out of this visit. Right, at best, you 0:14:17.960 --> 0:14:20.760 would get an agreement to keep talking, and that's more 0:14:20.840 --> 0:14:23.080 or less what we got, UH. And I think everyone's 0:14:23.080 --> 0:14:26.400 missing the real front line of a potential trade war, 0:14:26.480 --> 0:14:29.720 which was the decision the US government made UH in 0:14:29.800 --> 0:14:32.920 mid April to ban the exports of any US products 0:14:32.960 --> 0:14:35.840 to z T the telecommunications maker. It's one of the 0:14:35.840 --> 0:14:38.680 biggest telecommunications equipment makers and it's definitely one of the 0:14:38.680 --> 0:14:42.240 biggest in China, and it's a very important, very important company. Now. 0:14:42.560 --> 0:14:45.640 You know, if you know the U S World implements, 0:14:45.720 --> 0:14:49.560 you know there's some tariff and tariffs on alluminum and steel. 0:14:49.760 --> 0:14:52.920 They're mostly inconsequential in the global scheme of things, especially 0:14:52.920 --> 0:14:55.840 when you look at all the countries that had gotten exemptions. UM, 0:14:55.880 --> 0:14:57.800 there's a list of tariffs that could be put on 0:14:57.800 --> 0:15:00.480 on Chinese goods. They're a bit more meaningful, but again 0:15:00.520 --> 0:15:04.320 in the scheme of things, not not that pertinent. Where 0:15:04.400 --> 0:15:07.200 China is going to be troubled is if U S 0:15:07.280 --> 0:15:12.080 policy leads to the bankruptcy of a Chinese technology company. 0:15:12.120 --> 0:15:15.040 This is a critical sector in China. They have big 0:15:15.080 --> 0:15:18.000 plans for the technology sector. It's an important part of 0:15:18.040 --> 0:15:21.360 the future. So if if the US government starts implementing 0:15:21.360 --> 0:15:25.080 policy that's going to bankrupt these companies or meaningfully disrupt 0:15:25.120 --> 0:15:28.680 these companies, that is what could actually trigger a trade ward, 0:15:28.680 --> 0:15:33.880 not these tariffs. Mike McDonough looking at the most recent 0:15:33.960 --> 0:15:38.040 issue of China Daily dot Com, one of the stories 0:15:38.160 --> 0:15:43.320 is headlined China US agree on some trade issues. Indeed, 0:15:43.320 --> 0:15:47.520 they even mentioned ZTE Corps. They say China made solemn 0:15:47.560 --> 0:15:50.360 representations to the U S side regarding the case of 0:15:50.480 --> 0:15:53.400 z t E and that the U S side expressed 0:15:53.400 --> 0:15:56.200 that they will pay attention to these representations and will 0:15:56.280 --> 0:16:00.000 report China's position to the President of the United States. 0:16:00.240 --> 0:16:02.640 That sounds a little bit concilius, where it doesn't. I 0:16:02.640 --> 0:16:05.160 I the first headline I saw about the trade talks 0:16:05.160 --> 0:16:08.000 where they agreed on some things and disagreed on other things, 0:16:08.000 --> 0:16:12.600 which is not incredibly useful. UH. You know, sure, if 0:16:12.640 --> 0:16:15.760 they go back to the President and the President changes 0:16:15.800 --> 0:16:18.840 as rhetoric or or they change the ruling on ZT, 0:16:19.040 --> 0:16:21.360 that would be quite positive. But at the same time, 0:16:21.360 --> 0:16:24.680 there's UH it's been reported that they're working on executive 0:16:24.760 --> 0:16:27.760 orders that would ban the sale of telecom equipment in 0:16:27.800 --> 0:16:30.560 the US by other Chinese firms. UH. And the most 0:16:30.600 --> 0:16:34.640 important telecom communications maker in China is Hawei. UH. And 0:16:34.960 --> 0:16:37.520 there's I think the Wall Street Journal first reported that 0:16:37.560 --> 0:16:41.400 they have opened a similar investigation against Hawei that they 0:16:41.560 --> 0:16:44.560 had on ZT that led to this band UH. A 0:16:44.760 --> 0:16:48.520 similar move against Hawei would have I think pretty significant repercussions. 0:16:48.560 --> 0:16:51.240 I mean. The other thing to think about is it's 0:16:51.280 --> 0:16:54.480 an important part of China's economy. China is leading the 0:16:54.520 --> 0:16:57.440 world right now when it comes to mobile payments these 0:16:58.280 --> 0:17:01.320 you know, this telecom equipment is an important part of that. UH. 0:17:01.400 --> 0:17:04.800 So this could be very disruptive for the entire Chinese economy, 0:17:05.040 --> 0:17:07.919 which has the UH. You know, you could see a 0:17:08.040 --> 0:17:12.080 rise in sort of nationalistic tendencies against the US. When 0:17:12.119 --> 0:17:15.200 when you do have this disruption the ZT stock, for example, 0:17:15.600 --> 0:17:17.800 has been I halted I believe in Hong Kong and 0:17:17.800 --> 0:17:21.160 Shenzen since April seventeen. So if you're a shareholder of ZT, 0:17:21.400 --> 0:17:23.119 you right now don't know what's going on and you 0:17:23.160 --> 0:17:25.880 can't get out, and that's the US fault. Well, that's 0:17:25.880 --> 0:17:27.560 exactly what I was going to ask about. I mean, 0:17:27.720 --> 0:17:30.080 using z T E as sort of a poster child 0:17:30.119 --> 0:17:31.880 of what could happen, and just give a little more. Caller, 0:17:31.960 --> 0:17:35.159 we were talking. You said, uh that the ban on 0:17:35.400 --> 0:17:38.040 their gun selling goods to them and selling their goods 0:17:38.160 --> 0:17:42.080 came from they're providing goods North Korean arm. They are 0:17:42.160 --> 0:17:44.520 not an innocent victim, right, Okay, So this is this 0:17:44.560 --> 0:17:46.720 is part of what's going on. But do we have 0:17:46.840 --> 0:17:50.639 any sense of the financial impact on z T E 0:17:50.960 --> 0:17:54.280 so far and whether they have any recourse to overturn 0:17:54.320 --> 0:17:57.520 this ban? Uh? You know, one of the recourses they 0:17:57.520 --> 0:18:00.399 had the conversation with the trade delegation to bring message 0:18:00.440 --> 0:18:03.000 to the president. Uh, you know, in terms of long 0:18:03.119 --> 0:18:05.160 term health, I can't speak to that as well. There's 0:18:05.240 --> 0:18:08.040 various reports of like ranging from they'll be okay, so 0:18:08.119 --> 0:18:11.399 they could potentially go bankrupt to I think they have 0:18:11.480 --> 0:18:13.760 some loans that are are coming due in the near future. 0:18:13.760 --> 0:18:15.800 But can you give a sense of just how vast 0:18:15.840 --> 0:18:18.760 this band is and who it could affect the US? Well, 0:18:18.800 --> 0:18:21.640 I mean, you know, Intel is a big provider, Micron 0:18:21.760 --> 0:18:25.199 Technologies is a big provider. Microsoft. Um, there's one company 0:18:25.240 --> 0:18:28.600 I'm not sure how to pronounce it as communication about 0:18:28.680 --> 0:18:32.360 forty of their revenue comes from ZT. So this does 0:18:32.440 --> 0:18:36.000 have a pretty big impact on this. You know, I 0:18:36.200 --> 0:18:38.280 don't know the full number. I think there's something like 0:18:38.440 --> 0:18:41.240 fifties fifty or so suppliers that we have on the 0:18:41.240 --> 0:18:45.000 Bloomberg Terminal SPLC go for anyone listening where you could 0:18:45.000 --> 0:18:47.720 actually go see all those suppliers UH and and their 0:18:47.760 --> 0:18:50.200 exposure to ZT. So you get an idea. And then 0:18:50.280 --> 0:18:52.280 that's on the input side. And then of course there's 0:18:52.320 --> 0:18:55.920 the UH stores that sell ZT equipment, right, that actually 0:18:55.960 --> 0:18:58.400 sell their phones UH and sell the phones of other 0:18:58.720 --> 0:19:01.760 Chinese technology company is that pending how this goes could 0:19:01.760 --> 0:19:05.359 also be impacted just quickly, you go to China, you 0:19:05.480 --> 0:19:07.760 don't use your own mobile phone, and you don't use 0:19:07.800 --> 0:19:12.000 your corporate laptop, right, I use my my corporate lab 0:19:12.160 --> 0:19:13.720 I have my phone in my laptop. When I go 0:19:13.760 --> 0:19:15.679 to China and you use it, I use it and 0:19:15.720 --> 0:19:18.160 you don't worry about it being hacked. I'm not I'm 0:19:18.160 --> 0:19:21.359 not doing anything that I'm okay. I'm just saying because 0:19:21.400 --> 0:19:23.679 you know, no, no, but I'm serious. I mean, pretty 0:19:23.760 --> 0:19:28.800 substantial corporate policy is around the United States. Beware when 0:19:28.800 --> 0:19:31.480 you go to places like that and be careful with 0:19:31.520 --> 0:19:35.240 your I try to remain aware everywhere honestly nowadays. All right, 0:19:35.640 --> 0:19:38.960 we'll leave it there. Well done. Mike McDonough he's an 0:19:38.960 --> 0:19:42.600 expert in all things economic, chief economist Financial Products for 0:19:42.680 --> 0:19:46.520 Bloomberg LP. Check out his column about the trade in 0:19:46.680 --> 0:20:03.520 China how China has a decided advantage. The value of 0:20:03.560 --> 0:20:07.160 gold has dropped about four percent since mid April. Indeed, 0:20:07.160 --> 0:20:10.199 at thirteen hundred and eleven dollars an ounced, gold is 0:20:10.560 --> 0:20:13.800 pretty where near it was at the beginning of the year. 0:20:13.880 --> 0:20:16.080 Here to tell us about the precious metal and more 0:20:16.080 --> 0:20:18.720 commodities is Will Ryan. He is the founder and the 0:20:18.800 --> 0:20:21.520 chief executive of Granite Chairs. He joins us here in 0:20:21.560 --> 0:20:24.439 our eleven three oh studios. Well, thanks for coming in. 0:20:24.480 --> 0:20:28.840 Why has gold fallen in value since so, let's say 0:20:28.880 --> 0:20:32.120 mid April. Is it because of dollar strength? Primarily from 0:20:32.119 --> 0:20:34.920 the dollar strength, yes, um, there there haven't really been 0:20:35.800 --> 0:20:38.800 any catalysts to speak of that would have driven the 0:20:38.800 --> 0:20:44.520 price higher. You know, the potential geopolitical tensions that people 0:20:44.560 --> 0:20:46.439 were expecting to blow up have actually gone in the 0:20:46.480 --> 0:20:49.960 other direction, namely North Korea, and so the Korean penincia 0:20:50.000 --> 0:20:53.080 now looking to be much safer than a proposition than 0:20:53.119 --> 0:20:55.320 it was a year ago. So that that's sort of 0:20:55.320 --> 0:20:57.560 taken the shine off gold a little bit. How about 0:20:57.560 --> 0:21:01.280 the fact that inflation expectations also have kind of tempered 0:21:01.320 --> 0:21:03.000 a little bit, given the fact that we haven't seen 0:21:03.000 --> 0:21:05.920 the wage increases that many people were expecting. I think 0:21:05.920 --> 0:21:07.960 a little bit. But there's still kind of bubbling under 0:21:08.000 --> 0:21:11.240 the surface that you know, we have the strongest inflationary 0:21:11.240 --> 0:21:14.399 platform for last ten years, and so while in the 0:21:14.440 --> 0:21:17.240 short term, you know, the numbers off of you know, 0:21:17.280 --> 0:21:20.080 the February numbers weren't as strong as as people expected, 0:21:20.080 --> 0:21:23.440 there are more kind of forces at work that are 0:21:23.600 --> 0:21:27.240 giving people pause on the inflation side. So is there 0:21:27.240 --> 0:21:30.000 a bullish case to be made for goal at eleven 0:21:30.000 --> 0:21:33.840 dollars an ounce? I think yes, because in my view, 0:21:34.080 --> 0:21:37.240 this the dollar strength is temporary. Um that this is 0:21:37.240 --> 0:21:40.000 not a longer term thing. UM. I think that you know, 0:21:40.080 --> 0:21:42.919 in an environment of rising interest rates and you know, 0:21:43.119 --> 0:21:48.040 increasing inflation expectations UM, plus the higher volatility, the gold 0:21:48.080 --> 0:21:51.359 and commodities more broadly are a a place to be. 0:21:51.640 --> 0:21:54.920 And you know, people are looking at uncorrelated or low 0:21:54.960 --> 0:21:58.440 correlated assets right now in order to take some risk 0:21:58.920 --> 0:22:01.080 out of the equity or bomb market, and gold is 0:22:01.240 --> 0:22:04.240 one of those places. I want to shift focus to 0:22:04.440 --> 0:22:07.159 oil simply because prices there have risen to the highest 0:22:07.160 --> 0:22:11.920 since and there's a big question of how much higher 0:22:11.960 --> 0:22:15.639 they can possibly go, nearly at the seventy barrel mark. 0:22:16.320 --> 0:22:19.119 What's your taken on that, well, I mean this is 0:22:19.160 --> 0:22:24.040 a very interesting story. And you know, if you go 0:22:24.119 --> 0:22:27.560 back to last summer when I launched granite shares in 0:22:27.600 --> 0:22:30.600 the market, I mean some of our ETFs have oil exposure, 0:22:30.840 --> 0:22:33.520 and a common thing I would hear from people as 0:22:33.560 --> 0:22:35.760