Latest / The Financial Exchange Show / JPMorgan CEO Jamie Dimon has another dire warning

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JPMorgan CEO Jamie Dimon has another dire warning · The Financial Exchange Show

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Speaker 2: Good morning, Happy Tuesday here on the Financial Exchange, day
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after markets hit new all time highs yesterday and a
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lot of different items to cover this morning. One. You
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had several different Federal Reserve members speaking yesterday, so we'll
1:31
be covering some of the commentary from the likes of
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Austin Goulsby and others before dozens more, maybe a dozen
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more speak later this week. You had Consumer Confidence come
1:41
out at ten am this morning. But we're starting off
1:46
the show with the I guess useless Warning of the Week.
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Speaker 3: I like where you're going with this. Yeah, I was
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on a similar page.
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Speaker 2: Useless Warning of the Week, which you know happens to
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be totally true and there's just absolutely nothing that I
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think you can do with it. But JP Morgan's CEO,
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Jamie Diamond now off his warning about economic headwinds and
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hurricanes on the horizon. He needed something else to get
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everyone to worry about it, so is now warning that
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geopolitics is getting worse and quote geopolitics, geopolitics is getting worse,
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they are not getting better, and considers it to be
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the world's biggest risk.
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Speaker 3: So Captain Obvious has spoken.
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Speaker 2: I guess that we should all head to the voting
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booth in November and vote to make geopolitics better. Maybe
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we'll write that in as like a request please improve
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the geopolitical situation.
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Speaker 3: Thanks his track record, he's one of the most impressive
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bank executives this country has seen. I'm almost in history.
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He ranks up there really high.
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Speaker 2: So I'm the only big bank executive left who is
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gone through the Great Financial Crisis and still managing a bank. Look,
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the guy's incredibly intelligent and runs, like you said, probably
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the most successful bank that in today's numbers by really
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any way you look at it, constantly avoids risks that
3:22
other banks fall into. But I just find his guidance
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and commentary to be somewhat laughable in terms of usefulness.
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Speaker 3: Yeah, it's someone who whenever he comes across the headlines,
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and the reason that we even would leave the show
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with it is because of his pedigree that I'm often
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looking to see what he has to say. But I
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found myself over the course of the last year to
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year and a half sort of fading away from looking
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at this type of commentary. Just because this isn't instructive
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at all. I could have told you this. I'm not
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nearly as smart as Jamie Diamond. That there are geopolitical
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concerns out there, and the commentary that he's had regarding
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the US about a recession, it seems like he's been
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saying that for two years now, since twenty two, that
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this is a potential concern. Not to say that he
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won't be right at some point. I mean, my dad
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was saying since two than twelve that the market was
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going to go down, and eventually it did. But I
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would say I would say if he studied the tent
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twelve year return of the markets, that overall sentiment wouldn't
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be entirely right. And the same thing applies here when
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you're mentioning geopolitics. At some point, he's going to be right.
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There's likely going to be a concern that emerges from
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all of these issues percolating. But this idea of just
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saying that it's out there is really not something that
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is relatively astute at this point.
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Speaker 2: Yeah, and look, sometimes I think the way in which
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these commentaries get framed by the press it might not
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be terribly helpful too. It's not like he just went.
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Speaker 3: We don't have two context.
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Speaker 2: He didn't go to elector and and say geopolitics is
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getting worse and then walk away.
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Speaker 3: And I'm sure he's answering questions.
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Speaker 2: It was part of a larger interview, is part of
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a larger discussion. And he was specifically asked presumably, hey,
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what do you look at as the biggest risks facing
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the economy. He wasn't asked just generally speaking, Hey tell
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us about the economy, and he replied, well, geopolitics is
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getting worse. And to some extent, as a CEO of
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a bank, you do constantly want them looking out and
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rather than focusing solely on the potential upside to looking
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for the biggest risks that are out there and trying
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to find them. The banks are by definition kind of
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risk managers. And so the larger contact of the quote
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geopolitics is getting worse, They're not getting better. There's chance
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for accidents and energy supply, god knows of other countries
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get involved. You have a lot of war taking place
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right now. Before referencing Yemen's Huthy rebel attacks that have
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taken place in the Red Sea recently, here's where I
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have a tough time. I think that I would probably
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acknowledge that geopolitical tensions seem higher than many points over
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the last few decades. You have the war in Russian
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and Ukraine. You have the war in Israel that's you know,
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floating over to new borders. You have all sorts of
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migrant and crises and wars in Africa that are by
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and large not being reported on because they never are.
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The tough time that I have is does that represent
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a bigger risk than a few years ago when North
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Korea was doing much more constant nuclear testing or i be,
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you know, interplistic missile testing. Does it represent a higher
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or lower risk than a few years ago when you know,
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we were considering sanctioning Iran but hadn't yet and they were,
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you know, ramping up their nuclear you know, nuclear capabilities there. Like,
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Does this represent a big, worse or better geopolitical risk
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than you know, Brexit or Greece going through a currency crisis,
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or you know, any number of things that we have
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lived through. Is it, you know, more or less geopolitical
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tension than right after nine to eleven? Like a number
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of these different things have been out there historically, and
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some of them have floated over to markets, right. I
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think we can all point to food prices a result
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of the Russian War in Ukraine. Certainly they all have impacts.
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But simply stating that geopolitical tensions seem high right now, well,
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I mean they've seen they seemed high several times over
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the last several decades, and we have by and large continued.
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I guess my point would be companies, specifically, you have
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buy and large still found ways to make money over time,
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and that's kind of what the stock market is all about.
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So I guess that's where I don't find this stuff
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to be particularly useful. And I admittedly have a tough
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time determining right in the moment because it's not my
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air of expertise, and I don't think there's a good
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way of measuring it whether today's geopolitical times represent a
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bigger or lesser risk than other points of high tension
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in the past.
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Speaker 3: Yeah, I'm in the same camp. We're on a daily basis,
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you and I focused largely on the economy and the markets,
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and assessing all the geopolitical conflicts out there would just
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make my head's been trying.
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Speaker 2: To keep up with all, right, Like you know, do
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we feel more nervous about geopolitics today than we did
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in the nineteen seventies when we were building nuclear bunkers
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in elementary schools. I don't know, maybe we do. I'm
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genuinely unsure, but it just fail. It's always a point
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in time when geopolitics seem like they are dominating. Every
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single year, you have people telling you that the biggest
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risk of the stock market is geopolitics, and reliably, it's
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almost never what the actual risk to markets are. So
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plenty of risks. I mean, if I'm looking at the
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immediate term, the biggest risk that I can think of
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right now for the US economy happens to be employment
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and the consumer. If they lose their job, they're not
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going to spend as much money. If unemployment rates continue
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to tick up, we're in a recession. And so the
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immediate that's what I'm focused on. I'm not really focused
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on all the geopolitical tensions because they've always existed in
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the background.
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Speaker 3: Yeah, it's interesting you point that out. Breaking news, we
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had the September confidence data come out on the US
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where it tumbled to its lowest level in more than
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three years. According to the conference board here sliding down
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to ninety eight point seven, down from one oh five
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point six in August. It's the biggest one month declient
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since August of twenty twenty one.
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Speaker 2: Let's go ahead and take a quick break here. When
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we come back, we'll revisit that consumer confidence reading because,
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like you pointed out, biggest miss in three years, a
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pretty significant hit at the same time that some other
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consumer signals seem to be flashing positive. What does it
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all mean? We'll cover that next on the Financial Exchange.
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Speaker 2: As Paul was mentioning, at ten am this morning, the
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Conference Board released their monthly data on consumer confidence. This
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is one of several different surveys we get of the consumer.
11:13
The University of Michigan does a separate consumer sentiment index
11:16
that's been longer ongoing. I think that one started in
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the sixties. This one started in nineteen eighty five. The
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Consumer Confidence index fell in September to ninety eight point seven.
11:27
That was from an upwardly revised one oh five point six.
11:31
So again, the way they do this measure is kind
11:34
of finicky, but they basically said, okay, consumer confidence was
11:38
one hundred in nineteen eighty five, and so if you
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get readings above one hundred, it's generally considered historically fairly confident,
11:44
and if you get in below one hundred, it's generally
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considered fairly negative. And for some context, for most of
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the late twenty tens, really starting in mid twenty seventeen
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right through the end of twenty nineteen or beginning of
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twenty twenty, you had consumer confidence bouncing around one twenty
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to one high one thirties. Since COVID you had to
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dip well into the low eighties and kind of bouncing
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around the one hundred to one hundred and fifteen range
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and slowly seeing some persistent declines recently. Further context, in
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the bottom of the stock market of oh nine, you
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had this thing reading around thirty. So you do get
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a lot worse than what we've seen over the last
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few years as well when sentiment really shifts. But a
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few things about this one. It's a fairly volatile gauge.
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It is a survey piece of data, and so you
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see it bounce around quite a bit as we're seeing
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like in August, the reader, is it August or July
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that this reading was as of so when we were
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at one hundred and five point six, that was yeah,
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one hundred five point six in August, where as September
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fell to ninety eight point seven. Paul, is there anything
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you can point to specifically that would explain to me
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why confidence would fall by some seven ish points August
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to September, because I struggle to come up with anything specific.
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Speaker 3: It seems like gleaning through this report, and again this
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is just kind of hot off the presses, so trying
13:15
to digest this relatively quickly here, but it seems like
13:18
labor market conditions are something that was at least mentioned
13:21
by some of the survey participants. This comes off the
13:24
heels of some relatively weak jobs reports that we've digested
13:28
over the course of the last couple months, So to me,
13:30
that would be the prevailing takeaway that labor market conditions
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are concerned. It's worth noting that this data was compiled
13:39
prior to the fifty basis point cut that we saw
13:43
from the Federal Reserve on the eighteenth here, so perhaps
13:48
that change has people more optimistic when we see the
13:52
next round of data coming through. But like you said, Mike,
13:55
it's just a data point. It's worth just discussing, but
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not necessary sssarily something that should be overly alarming.
14:04
Speaker 2: Yeah, you know other things here, like the assessment of
14:07
the labor market. The big labor market myths that we
14:11
had was actually recorded in very early August, so this
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first report back in August would have accounted for that.
14:17
And sentiment was up in August, whereas now it's down.
14:20
So I don't have a great means of figuring out
14:23
what this might mean for the overall economy, other than
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better readings would seem to be better for the outlook.
14:30
Consumers were less optimistic about the business conditions in September.
14:33
Eighteen and a half percent of consumers expected conditions to improve.
14:36
That's down from nineteen percent in August. Sixteen point six
14:40
percent expected business conditions to worsen. That's up from fourteen
14:43
and a half percent. The labor market where I think
14:46
this is particularly interesting. Consumers were basically flat on their
14:51
expectations for the labor market. So sixteen point four percent
14:54
of consumers expected more jobs to be available. It's actually
14:58
up slightly from the reading in August, but eighteen point
15:01
three percent and anticipated fewer jobs, which is higher reading
15:06
on that. Finally, on income prospects, eighteen percent of consumers
15:10
expected their incomes to increase, that was down from eighteen
15:13
point six percent last month, and thirteen percent expected their
15:17
incomes to decrease, which is a more significant upward revision
15:20
of eleven point seven percent on the previous month. So again,
15:24
what do you read of this? Well, directionally, consumers felt
15:27
a little bit worse than they did in September than
15:29
they did in August. I wouldn't go so far as
15:33
to read this to say and it means we're heading
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for a recession. There's almost no indicators that you know,
15:38
turn so dramatically quickly that you can say, oh, yeah,
15:41
that's clearly recession indicator. But you know, you get a
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few of these that stack up, and it starts to
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make you scratch your head a little bit to say,
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what's going to be the thing that changes people's minds?
15:52
Peace in Bloomberg from Tyler Cowan that by American policies
15:56
don't help Americans. So, you know, I think I can
16:00
think of a few ways in which they would be
16:03
more costly for Americans, where they would add, you know,
16:07
perhaps the best in class product to the American you know,
16:14
the American market, and get an unfair advantage here. What
16:17
does Tyler lay out here in terms of his argument
16:20
of why this doesn't work.
16:21
Speaker 3: I thought this was a compelling piece. It's basically discussing
16:24
this idea that the bi American Act is as an
16:27
act that was around with Herbert Hoover in nineteen thirty three,
16:31
and our economy has shifted dramatically as most developed countries
16:34
do over the years, where if you look at the
16:37
manufacturing sector back in nineteen seventy nine, twenty two percent
16:41
of non farm workers we're working in the manufacturing space.
16:45
That number sits at eight percent today. There's not nearly
16:48
as many manufacturing jobs. However, the point that he makes
16:52
is that it's not as if the United States in
16:55
general is lagging in terms of its manufacturing capabilities. There's
16:59
messaging out there by politicians that the US, you know,
17:03
needs to bring back jobs domestically, that there needs to
17:05
be more production here. However, if you read many different
17:09
economic pieces, we are the fourth largest steel producer, we
17:13
are the second largest automaker. Sixteen percent of global manufacturing
17:17
output in twenty twenty one was done by the US,
17:19
only surpassed by China. So I think those things are
17:22
important to keep in context. This idea that is not
17:25
always so black and White that you know, the US
17:28
is lagging from a manufacturing standpoint. The other point that
17:32
he makes there is that when you manufacture in the US,
17:35
it's more costly than doing it worth foreign firms. And
17:38
certainly a lot of US understand the national security concerns
17:42
that come into place working with countries like China and Russia.
17:45
I'm not sure encouraging that, but there are many allies
17:49
of the US that can manufacture things cheaply and more
17:52
efficiently that could end up, you know, being benefit beneficial
17:57
to the US when it's doing these infra structure products.
18:00
That's really the point of this piece.
18:02
Speaker 2: Yeah, and you know, there's some compelling arguments there, and
18:06
I can see how, yeah, we might not have the
18:10
best manufacturing skill set to I don't know, manufacture bridges
18:15
that need to be repaired throughout the United States, and
18:17
that could probably get done a lot more cost effectively
18:20
in South Korea, for example. I think this is quite nuanced,
18:25
and obviously you have to draw a line somewhere in
18:27
terms of what you're going to do. But for example,
18:30
should the United States be manufacturing its own subway cars?
18:35
Do we really have the skill set to be doing
18:37
that here? As it really necessary that we do, or
18:40
could you use trade policy in a way that encourages
18:44
our allies to do certain things right, Like, hey, we're
18:47
only going to accept bids from NATO member countries that
18:52
you know, meet our goals in terms of defense spending.
18:56
I'm kind of spitballing here, but there are other ways
19:00
to do this that don't require everything to be manufactured
19:03
here in the United States. And while I do attempt
19:07
to buy things made in America on the consumer level,
19:09
we know how difficult that is there you extrapolate that
19:14
out to massive government projects where billions in taxpayer money
19:19
is going to it becomes a little bit tougher to
19:23
justify at the end of the day. Let's take a
19:26
quick break. When we come back full market recap with
19:28
Wall Street Watch.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter. Act
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TFE show breaking business news is always first right here
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on the Financial Exchange Radio Network. Time now for Wall
19:53
Street Watch a complete look at what's moving markets so
19:56
far today right here on the Financial Exchange Radio Network.
20:02
Speaker 4: After yesterday resulting in yet another record high cloes for
20:05
the Dow in SMP five hundred, markets today are relatively
20:09
quiet and in mixed territory. The Dow is up by
20:12
only twelve points, mostly flat, sm P five hundred down
20:16
about a quarter percent, or thirteen points, and the Nasdaq
20:19
is down by over a third of a percent. RUSS
20:21
two thousand is edging three points higher. Ten year treasureeled
20:26
up by three basis points at three point seven five percent,
20:29
and crude oil up nearly two percent higher training at
20:33
seventy one dollars and sixty two cents a barrel. Several
20:37
Chinese stocks, including Ali, Baba, JD, dot Com, Baidu, and others,
20:41
are seeing gains this morning after China's Central Bank announced
20:44
a new round of stimulus measures to help boost its
20:46
struggling economy. Global mining stocks, including Freeport Macmaran and Southern
20:51
Copper are also seeing gains in reaction to the stimulus announcement,
20:55
seeing that China is one of the world's largest consumers
20:57
of copper and other commodities, while Visa shares retreating by
21:02
four percent after Bloomberg reported that the Justice Department is
21:05
planning to file a monopoly lawsuit against the payment network
21:10
firm over its debit card business. Elsewhere, Deer shares are
21:15
flat after Donald Trump said at a presidential campaign event
21:19
that if elected, he would slap two hundred percent tariffs
21:22
on the farm equipment maker if it sold products made
21:25
in Mexico. Starbucks was downgraded by Jeffries to underperform from
21:30
hol citing low visibility in the US and China in
21:33
the near term. The firm also expects near and medium
21:36
term estimate reductions. Starbucks shares off by about a third
21:40
of a percent, and Lows was upgraded to outperform from
21:43
perform by Oppenheimer, noting that demand should improve as the
21:47
FED cuts rates and seas compelling longer term fundamentals. Lows
21:52
up by one percent. I'm Tucker Silva and that's Wall
21:55
Street Watch.
21:56
Speaker 2: Folks want to talk to you about the live broadcast
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23:53
Speaker 2: H Tucker mentioned a choice by John Deere and then
23:57
a mention by Donald Trump at a campaign rally. Rec
24:00
The Illinois based company announced in June that they're going
24:03
to be moving the production of some models of small
24:06
and medium sized construction loaders to their plants in Mexico
24:11
from where they're currently made in Dubuque, Iowa. In twenty
24:15
twenty two, they decided to move some cabs for large
24:17
farm tractors to Mexico from Waterloo, Iowa. So definitely not
24:21
the first time something like this has happened, and it's
24:23
scheduled to be completed this year. When asked, Deer executive
24:27
said the moves were intended to free up manufacturing space
24:30
and employees at US plants for other models. No way
24:33
to really prove out whether or not that's true, but
24:35
the companies said it would start assembling its new nine
24:38
RX tractor in that Waterloo space that was currently occupied
24:42
or formerly occupied. But again interesting timing here, saying that, yeah,
24:47
we move these jobs back in twenty twenty two and
24:49
just now we're going to start manufacturing this new tractor
24:52
line there. Deer also pointed out, hey, we've invested over
24:56
two and a half billion dollars in its US factories
24:58
over the past four years, and that, you know, the
25:01
United States is Deer's largest market. In response, canadidate Donald
25:05
Trump has said that he would levy two hundred percent
25:08
tariffs on any of those goods that moved manufacturing from
25:11
the United States to Mexico. Whether or not that's realistic
25:16
or can be done given the free trade agreements with
25:19
the unit US, Mexico, and Canada, it's all interesting questions.
25:23
But you know, obviously the White House has proven that
25:25
they have pretty vast power when it comes to tariffs
25:29
on different items. Paul, your initial thoughts.
25:32
Speaker 3: It seems like from a political rhetoric standpoint that the
25:35
idea of tariffs have really been central as Donald Trump
25:39
has gone around the campaign trail where he's discussed about
25:43
the tariff's success to China. I believe a sixty percent
25:46
one was mentioned there, as well as ten to twenty
25:49
percent to other countries in terms of imports. I've vocalized
25:53
before that as much as I felt that the Tax
25:57
and Jobs Cut Act was echelin economically stimulative, these types
26:02
of measures, I don't feel as if would be to
26:05
our country that it's coming off the heels of inflation
26:07
that we hadn't seen in thirty forty years. So I
26:12
wonder how much of this is posturing. You know, going
26:14
through the campaign trails, it's certainly from a messaging standpoint
26:19
strong to go out there and say that you're going
26:21
to bring a lot more manufacturing or jobs to the
26:24
United States. But I don't know economically if necessarily that
26:27
is the best course of action, particularly because you risk
26:31
retaliatory efforts by a lot of these countries. And then
26:34
specific to this one, there is an agreement in place
26:37
that Trump actually put together during his first term with
26:40
the US Mexico and Canada that you alluded to earlier.
26:43
That allows for a tear free agreement amongst the three countries,
26:47
which has certainly been beneficial to the United States with
26:50
all the issues that's gone on in Russia and Ukraine
26:53
and some of the issues in China as well, to
26:55
be able to utilize Mexico and Canada as imports.
26:58
Speaker 2: Yeah. I mean, look, you can make an argument that
27:01
obviously the US relationship with Mexico has deteriorated somewhat over
27:04
the last few years with migration and things along those lines.
27:07
But I really do struggle with policies that are intended
27:11
to slap tariffs on arguably one of our top five
27:15
closest allies in the world. M not I mean, you know, Canada, Australia,
27:21
United Kingdom, maybe France, anybody else take the place of Mexico.
27:26
There not many that I and so I do struggle
27:31
with that. I'm not saying that we should just ignore
27:33
this fact, like I would want to know, Hey, John Dear,
27:36
why are you choosing to manufacture this stuff in Mexico
27:39
instead of the United States. Is it purely just labor costs?
27:41
Are there other things that the United States isn't doing
27:44
that Mexico is doing? Is it taxes, is it a
27:46
number of other things, because so far a carrot plus
27:51
stick approach has been far more successful than just the
27:54
stick approach to trade policy and keeping jobs here. And
28:00
then where I worr is you just get to this
28:02
tit for tat level of tariffs where we know that
28:05
we don't really manufacture everything that we produce here in
28:09
the United States. And while that might be the appropriate
28:11
policy for a country like China that very clearly cheats
28:15
on trade policy, I can't point to Mexico and say
28:20
that the same thing is happening. I don't think that
28:23
Mexico's government is offering massive subsidies for Deer to manufacture there. Instead.
28:29
I don't think that they are artificially keeping labor costs down.
28:32
I don't think that they're doing currency manipulation or trying
28:35
to rip off the technology that John Deer creates. So
28:38
all those same accusations that I think you can levy
28:40
on China and create a successful argument for unfair trade practices,
28:44
I just don't think it applies to Mexico. And so
28:47
then my question is, Okay, what's the response from the
28:50
Mexican government if that happens, because them, I would find
28:53
a way to respond. Sure. Sure, let's take a quick
28:56
break when we come back. Time for a bit of
28:58
China talk now that we've started to alluding to it.
29:00
There's been some policy shifts from Chinese officials. What will
29:05
they mean for those Chinese citizens? And then also what
29:09
might they mean for markets there? And US investors will
29:12
cover that next on the Financial Exchange.
29:15
Speaker 1: Missed one of our shows. Catch up anytime by asking
29:18
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29:21
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29:25
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Like us on YouTube and get caught up on anything
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and everything you might have missed. This is the Financial
29:35
Exchange Radio Network.
29:52
Speaker 2: Taking a look around here at markets. We have the
29:55
Shanghai Stock Exchange in particular up over four percent. They're
29:59
notching their best day in four years on easing policy
30:04
coming out of China to I don't know, try and
30:07
shake things up in a way that their industrial policy
30:10
hasn't been able to so far this year. What are
30:13
we seeing, and I guess as importantly, what are we
30:16
not seeing? In terms of policy shifts from the Chinese
30:19
government with these updates and changes.
30:21
Speaker 3: Here Paul so Mike a couple of these stimulative measures
30:24
that the Chinese government took included lowering their seven day
30:28
interest rate benchmark interest rate from one point seven percent
30:31
to one point five percent, so lowering interest rates. Also
30:36
trying to make it a little bit more incentive for
30:40
people to purchase homes by lowering the down payment requirement
30:44
for second homes from twenty five percent down to fifteen
30:47
percent down. And then you also had a cut of
30:50
rates on existing mortgages. So unlike the US market for
30:54
listeners out there, where we can refinance our mortgages, that
30:57
is not applicable in China, but they are applying this
31:00
rate cut to trickle out across all existing mort mortgages
31:04
out there. And then lastly, the initiative that they took
31:07
with their local governments is a little bit more easing
31:11
on the bank requirements in terms of what needs to
31:13
be held for cash reserves. All these measures that I
31:18
just mentioned, while stimulive in nature in terms of how
31:22
they're defined, I don't necessarily and the skepticism is shared
31:26
in the Wall Street Journal think that this is enough
31:29
and many don't think that this is enough to stimulate
31:32
the Chinese economy, where really the stimulation needs to be
31:35
focused on trying to bolster and boost Chinese consumption, which
31:39
has just been a really difficult thing to try and
31:42
do post pandemic. There is a lot of We talked
31:46
about consumer confidence early in the show. There is extremely
31:50
record low levels of consumer confidence in China at the moment.
31:54
Speaker 2: Yeah, and I think there would be really two ways
31:59
of addressing that, neither of which the Chinese government seems
32:03
to have any interest in. One would be addressing some
32:09
of the concerns consumers seem to have there about financial
32:12
stability and safety nets. There aren't many, you know, there's
32:17
not a strong social security program, pension program, there's not
32:21
a strong you know, medicaid government insurance equivalent type program.
32:27
There's no real assurances that, hey, if I become injured
32:30
on the job, I'm going to be able to support
32:33
my family or feed myself.
32:34
Speaker 4: There.
32:34
Speaker 2: I mean, perhaps some of the worn't about worries about
32:37
starving to death are no longer the case like they
32:39
were in China in the nineteen sixties, but it is
32:42
not the type of social net that you have here
32:45
in the United States. Now, I think there could be
32:46
plenty of criticism that we've gone exorbitantly too far in
32:50
some of the safety nets here in the United States,
32:52
and those costs need to be paired back in some ways,
32:56
although we're not talking about that in this presidential election,
32:59
but I know that doesn't exist, and I think when
33:03
you combine that with a it's tough to see how
33:09
much of this exists. But like a genuine maybe distrust
33:13
of information coming out of your government, I think that
33:18
would be, you know, a general conclusion that a lot
33:20
of Chinese citizens have is I'm not sure that I
33:23
can trust that the policy that exists today will exist tomorrow,
33:28
or that I have any real I don't know due process,
33:34
if I need to assume my employer or something along
33:37
those lines. With the absence of you know, that combination
33:40
of mistrust as well as lack of a safety net,
33:43
you can see why it's pretty difficult to stimulate demand here. Really, really,
33:47
the only cause for stimulating demand is if you convinced
33:51
the public that, hey, the assets that you invest in
33:53
today or the stuff that you buy today might be
33:56
worth more in the future. And you have a really
33:59
tough time doing that given what has happened to the
34:01
real estate sector over there over the last few years.
34:03
Speaker 3: The real estate market is the crux of the issues
34:06
that they're dealing with there. It accounted for twenty five
34:08
percent of their economic activity and it's been an area
34:12
that just has been so beleaguered over the last three
34:15
or four years. Barclays has estimated that since twenty twenty one,
34:19
eighteen trillion of household net worth has been wiped out.
34:23
That's approximately sixty thousand per family over that period of
34:27
time that has been wiped out. If you look at
34:28
the way the Chinese economic structure was based on pre pandemic,
34:33
a lot of middle class families would utilize their savings
34:37
to purchase real estate or purchase investment properties, and the
34:40
backlog of unfinished homes that they have now has been
34:44
a drag on the economy and the Chinese government for
34:47
the last several years. So it's mentioned here that perhaps
34:50
if they're able to clear out some of those backlog
34:52
of unfinished homes, and we talked about all the profit
34:55
developers that went under there too, maybe that would restore
34:58
some confidence. Otherwise, as you're talking about similar measures of
35:03
you know, influencing or unleashing a lot of cash reserves
35:08
and barring it. And that's not something that the Chinese
35:10
government is necessarily going to do, just you know, stoke
35:13
in tons of cash into the system to try and
35:15
increase consumption. Yeah, I don't think.
35:17
Speaker 2: Yeah, I mean, and we've talked at length about similar
35:20
types of policies that are being talked about, Like, you know,
35:23
the type of stuff on real estate that's being discussed
35:25
here shouldn't sound like a foreign concept, like it kind
35:28
of mirrors policies that we're talking about here domestically, Hey,
35:30
should we give twenty five thousand dollars to first time
35:33
home buyers as a credit? It may drive up housing
35:37
prices in China, but it doesn't actually do anything to
35:42
get at the value of homes. It just makes it
35:45
easier and cheaper to buy them in China if you're
35:47
lowering the down payment requires.
35:50
Speaker 3: And they have the reverse supply problem where we are
35:52
undersupplied and underdeveloped over the last fifteen years, they're in
35:55
the you know, opposite situation where they've overdeveloped and to
36:00
the point that they can't even finish the homes that
36:01
they've set out to build in the first place. So
36:04
that just leaves them in a really difficult spot from
36:07
an economic standpoint. I'm I'm sure they'll try and hit
36:10
their five percent economic growth figure that they have.
36:13
Speaker 2: Well, they still will, don't worry, always do. In somewhat
36:18
related news and definitively related to the point that I
36:23
made to my wife, which is we are definitely not
36:25
going on a family vacation to China anytime in our future,
36:28
a prominent economist at one of China's top think tanks,
36:31
and I believe a member of the Communist Party his
36:34
name is Zu Heng Peng, has been disappeared. I think
36:39
is the best way to describe it, so as I
36:43
think most no under she the party has directed a
36:45
far reach and clamp down on any forms of dissent,
36:49
and Zu, who turns fifty five this month, was detained
36:52
in the spring after he allegedly made some impolitic remarks.
36:55
This is a quote from the Wall Street Journal in
36:57
a private group chat on weich, which is a mobile
37:01
messaging platform. It was These are not comments that he
37:05
made on like the equivalent of Twitter or Facebook or
37:08
anything like this. This was a private group chat that
37:12
you know, I'm sure is supposed to be allegedly encrypted
37:15
and not monitored by your government. His remarks included comments
37:19
about China's flagging economy and veiled criticism of she that
37:23
referred to his mortality. One of the people said, you know,
37:27
I doubt that that was a statement like, oh, we
37:29
should take out she. I would just imagine it was
37:31
a statement of like, he can't live forever, can he? Nonetheless,
37:35
it couldn't really be determined which offenses Zoo was guilty of,
37:39
but he was removed from all of his positions at
37:42
the Cast Institute of Economics. His name disappeared from the
37:46
online list of personnel at a think tank affiliated with them,
37:50
and hasn't really been heard from since. So that's what
37:56
happens in China. When you open your mouth about the
38:00
errors of hu Jinpings, I bring it up. I bring
38:04
this stuff up when we can, because it's just such
38:06
a foreign concept to us these days in the United
38:09
States that it bears reminding quick break A lot more
38:13
to cover in the second hour the Financial Exchange. Stay tuned, folks,