Latest / Bloomberg Intelligence / Eaton Vance Head of Fixed Income: Keyed on Cyclical Rotation Trade

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Eaton Vance Head of Fixed Income: Keyed on Cyclical Rotation Trade · Bloomberg Intelligence

• 0:01
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
• 0:04
  Speaker 1: with my co host of Bonnie Quinn. Every business day
• 0:06
  Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
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  Speaker 1: along with essential market moving news. Find the Bloomberg Markets
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  Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot com. If we're gonna take a
• 0:19
  Speaker 1: look at the bond markets, we're gonna do that with
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  Speaker 1: Eric Stein, chief investment officer for fixed income at Eaton Vance. Eric,
• 0:26
  Speaker 1: thanks so much for joining us here. We had some
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  Speaker 1: pretty big political news that we're digesting today. It appears
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  Speaker 1: it's not already called, but it appears that the Democrats
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  Speaker 1: will win both seats uh Senate seats in Georgia. Um,
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  Speaker 1: what does that mean do you think for markets? We're
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  Speaker 1: seeing a big move in the treasury market here with
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  Speaker 1: a tenure trading above one, you know, above one percent,
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  Speaker 1: close to one point zero five percent. What's it mean
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  Speaker 1: to you as it relates to the bond markets and
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  Speaker 1: a Democrat in the White House and perhaps controlling the Senate. Yeah, well,
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  Speaker 1: first off, thanks thanks for having me on. I guess
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  Speaker 1: you know, before the presidential election and the congressional election.
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  Speaker 1: We had an early November, everyone was talking about a
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  Speaker 1: blue wave and it didn't happen. And now it's you know,
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  Speaker 1: I'd say we're kind of having a blue wave light
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  Speaker 1: if you will. Uh So, certainly, you know, if you
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  Speaker 1: look at the market reaction today, the selloff and Treasury
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  Speaker 1: is the steepening of the yield curve, sectors like the
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  Speaker 1: banking sector, you know, outperforming. I think, you know, markets
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  Speaker 1: are focused on the potential for more fiscal stimulus coming
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  Speaker 1: from the Democrats, you know, assuming that that the second
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  Speaker 1: race you know, holds and off Off wins with thet
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  Speaker 1: split and Kemla Harris having the tie breaking vote control
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  Speaker 1: of the Senate. And you know, to me, the real
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  Speaker 1: question is, you know, how much should markets and focus
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  Speaker 1: on the fiscal stimulus versus the potential for higher taxes
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  Speaker 1: and more regulation. And my prior would be it's probably
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  Speaker 1: gonna be more of the fiscal stimulus, which is more
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  Speaker 1: of a positive than the regulation and tax increases, just
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  Speaker 1: because of the razor thin margin UH in both the
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  Speaker 1: House and UH and certainly in the Senate. But you know,
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  Speaker 1: I think that's what markets are focused on. That's why
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  Speaker 1: we have the steeping of the yield curve, you know
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  Speaker 1: right now. So what's the next move for the yield curve?
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  Speaker 1: Would be time to load the vote on ten years
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  Speaker 1: and beyond or or look, I know to me, this
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  Speaker 1: is where you know, what the FED does is going
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  Speaker 1: to be particularly interesting. So if you think about the
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  Speaker 1: FED policy, and we saw it, you know, over the
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  Speaker 1: summer with the virtual Jackson hole and then more comments
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  Speaker 1: from Powell and the rest of the FOMC, if this
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  Speaker 1: average inflation targeting concept where the Fed, you know, it
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  Speaker 1: is kind of committed to not let bygones be bygones.
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  Speaker 1: So if they're missing to the downside, which they have
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  Speaker 1: been on their inflation target, to run easy policy and
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  Speaker 1: so you know, I think we're assuming all holds with
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  Speaker 1: with the vaccine rollout and we get this cyclical recovery
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  Speaker 1: that I think very likely will happen, but you don't
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  Speaker 1: know what until it really happens and you get more
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  Speaker 1: fiscal stimulus, you'll have some pressure on the back end
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  Speaker 1: of the curve, and I think the FED will be
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  Speaker 1: okay with that if it's because of recoveries, recovering the
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  Speaker 1: economy and because higher inflation, So real rates aren't going
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  Speaker 1: up a lot. Where I think the FED might step
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  Speaker 1: in and buy more bonds, you know, would be if
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  Speaker 1: real rates are going up and if financial conditions are
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  Speaker 1: getting tighter preemptively in their view. So I think it's
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  Speaker 1: gonna be really important to watch the Fed's reaction going
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  Speaker 1: forward and how that interacts with both fiscal policy and
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  Speaker 1: you know, hopefully a cyclical recovery you know, post the
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  Speaker 1: vaccine rollout. So ered, what what is your view on
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  Speaker 1: inflation here? We're seeing a tick up a little bit recently.
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  Speaker 1: What are your what are you thinking? Is you think
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  Speaker 1: about your I think there's a lot of conditions in
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  Speaker 1: place for an increase in inflation. Um, you know, as
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  Speaker 1: I said, you mentioned before, the whole the point of
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  Speaker 1: FED policy right now, you know, the FED policy over
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  Speaker 1: the past you know, six months or so, as we've
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  Speaker 1: had this recovery uh in markets. But obviously the economy
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  Speaker 1: things are a little better, but still mostly on hold
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  Speaker 1: with with covid um. The Feds you know, been at
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  Speaker 1: zero and not doing much, which isn't you know and
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  Speaker 1: say is doing so much for the economy, but it's
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  Speaker 1: doing something. When the economy starts to take off. If
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  Speaker 1: the FED really does keep rates at low and you know,
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  Speaker 1: at zero and tries to stay behind the curve, that's
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  Speaker 1: an impulse for inflation. If there's a cyclical pickup, that's
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  Speaker 1: an impulse for inflation. Even you know, forgetting the FED
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  Speaker 1: policy which is which is going to be easier, and
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  Speaker 1: then you get fiscal and potentially more more government spending
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  Speaker 1: and you see commodity prices and other things start to
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  Speaker 1: go up. I think there's a lot of things lining
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  Speaker 1: up to get more inflation, and we're starting to see
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  Speaker 1: that priced into two various asset markets. How is the
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  Speaker 1: weakening dollar index changing how you're looking at bond markets
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  Speaker 1: around the world argon and where you're placing your bets. Yes,
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  Speaker 1: so you know, I certainly think that you know, we
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  Speaker 1: will continue to see a weakening dollar, you know from here.
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  Speaker 1: You know, if you're a U. S. Dollar based investor,
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  Speaker 1: it makes non non dollar assets, you know, more attractive.
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  Speaker 1: So you know, I think you know, in our let's say,
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  Speaker 1: advanced global macro strategy, looking for non dollar currencies going
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  Speaker 1: along currencies against the the US dollar, And you know,
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  Speaker 1: coronavirus is all over the world and you can't discount yeah, correct,
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  Speaker 1: And you know there's there's there's there's some places that
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  Speaker 1: are you know, more more attractive than than others, you know,
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  Speaker 1: for for sure. Um, you know, I think of you know,
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  Speaker 1: one place from both a bond and a currency perspective,
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  Speaker 1: I'll say is China. And you talk about the place
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  Speaker 1: that that has had the corona even the coronavirus originated there,
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  Speaker 1: certainly has had it more under control. You know, you
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  Speaker 1: have significantly more attractive government bond yield stuff. Then you
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  Speaker 1: get in the US and frankly, you know a lot
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  Speaker 1: of other places not only developed but the emerging world,
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  Speaker 1: and you know, to some extent, and we'll have to
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  Speaker 1: see how you know, US policy is visa vach China
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  Speaker 1: with the Biden administration, I think that's you probably do
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  Speaker 1: the whole whole segment on that. But I think you know,
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  Speaker 1: the Chinese are okay with with running a fairly strong
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  Speaker 1: uan policy. And so if you have a uh, you know,
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  Speaker 1: week dollar environment, which I think we're in and we'll
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  Speaker 1: continue to be in. Uh And you also have the
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  Speaker 1: Chinese policymakers that are okay with the yuan getting stronger. Uh.
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  Speaker 1: You know, I think being invested in Chinese government bonds
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  Speaker 1: both from an interest rate perspective quite attractive, but also
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  Speaker 1: from a US dollar investment perspect div I think the
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  Speaker 1: Uan will will appreciate versus the US dollar. ERED love
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  Speaker 1: to get your thoughts on kind of the credit quality
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  Speaker 1: out there you're seeing perhaps in your portfolio. I mean, we're,
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  Speaker 1: you know, ten eleven months into this pandemic and the
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  Speaker 1: economic fallout. Are you starting to really see it in
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  Speaker 1: credit quality? Yeah? You know, Look, look when we talk,
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  Speaker 1: you know, I think of you know, eating vance fixed income.
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  Speaker 1: Really it's our our bread and butter. Is our you know,
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  Speaker 1: bank loan and high yield, investment grade credit or credit shop.
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  Speaker 1: And you also sovereign a musicipal credit, uh, you know
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  Speaker 1: as well. And you know, I certainly think in the
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  Speaker 1: more leverage parts of the market and bank loans and
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  Speaker 1: high yield. For sure, you've had higher default rates, you know,
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  Speaker 1: the past twelve months, and then you had you know,
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  Speaker 1: the previous twelve months in two thousand nineteen, But a
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  Speaker 1: lot of those default rates aren't nearly as high as
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  Speaker 1: as beefore. Certainly thinking about March of last year in
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  Speaker 1: the kind of heart of the of the pandemic, and
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  Speaker 1: we you know, we started to see recovery and more
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  Speaker 1: of the COVID sensitive names, and so I think the
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  Speaker 1: best thing, um, you know, for for credit markets right now,
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  Speaker 1: you know, it's really two things. One is if the
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  Speaker 1: economy picks up, that helps you cash flows for businesses
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  Speaker 1: and it makes them um more credit worthy. But you
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  Speaker 1: know the other thing we're seeing is the bond markets
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  Speaker 1: are just open for issuance. I mean you get emails
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  Speaker 1: record issuance, and the investment grade market kind of markets
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  Speaker 1: off and off and running with you know, with lots
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  Speaker 1: of issuance. And so capital markets are open. Uh. And
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  Speaker 1: if companies or or sovereigns or municipalities can take advantage
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  Speaker 1: of those, that kind of by construction makes them better
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  Speaker 1: credits because they're they're paying relatively low interest rates and
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  Speaker 1: have you know, you know, relatively good terms to issue debt.
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  Speaker 1: So I think we're certainly kind of in this sweet spot, uh,
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  Speaker 1: in that regards with capital markets open and with the
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  Speaker 1: economy hopefully it looks like but again very vaccine dependent. Uh,
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  Speaker 1: you know, about to take a cyclical increase, you know
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  Speaker 1: at some point once once the rolla happens. Eric, how
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  Speaker 1: disciplined have you been how much drive powder or easily
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  Speaker 1: accessible powder. Let's say, do you have at your disposal
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  Speaker 1: percentage wise? Yeah, there was a great question, I'd say,
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  Speaker 1: you know, to me. To me, the great thing about
• 7:57
  Speaker 1: how we're structured to eat advance is all of our
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  Speaker 1: differ and investment teams invest differently. So there's not there's
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  Speaker 1: not one particular number. You know, we have multiple different
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  Speaker 1: funds on multiple different teams. Um you know where where
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  Speaker 1: cash is different, you know, percentages across those, So there's
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  Speaker 1: not there's not one you know, perfect answer to that.
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  Speaker 1: But but i'd say, you know, in general, you know,
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  Speaker 1: we're a place looking for kind of relative value across
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  Speaker 1: markets as opposed to just timing markets with with having
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  Speaker 1: cash and and and dry powder. Although that you know,
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  Speaker 1: certainly various strategy by strategy. Eric, you know, we've seen
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  Speaker 1: in the equity markets a rotation trade, if you will,
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  Speaker 1: from some of the tried and true high growth tech
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  Speaker 1: names into some of the more cyclical areas of the market,
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  Speaker 1: anticipating you know, the other side of this pandemic and
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  Speaker 1: economic reopening and rebound beginning arguably some time in the
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  Speaker 1: middle of this year. Have you been doing something similar
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  Speaker 1: with your fixed income portfolios. Yes, so I think it's
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  Speaker 1: a great question. To me, it's it's the number one
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  Speaker 1: thing I'm I'm watching from a you know, from a
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  Speaker 1: financial market perspective, is does this rotation trade that you
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  Speaker 1: know kind of started, uh you November of last year
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  Speaker 1: kind of post election, post those two mondays that that
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  Speaker 1: we had the good vaccine news. Uh. And you know,
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  Speaker 1: obviously I think it's it's you know, growth stocks to cyclical,
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  Speaker 1: but it's also you know, US to non us um.
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  Speaker 1: But I think it's you know, a setonymous from a
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  Speaker 1: bond market perspective, with with a steeper yield curve with
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  Speaker 1: COVID credits, um, you know, the COVID hit credits outperforming
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  Speaker 1: and things like that. And so I think when you
• 9:25
  Speaker 1: look at broad markets, obviously, you know, broad market valuations,
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  Speaker 1: pe ratios, spreads and whatnot, you know, could look fairly stressed,
• 9:32
  Speaker 1: you know, stretched or at least fully valued. But I
• 9:35
  Speaker 1: think the you know, that cyclical trade, I think is
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  Speaker 1: probably where there's still some value left across financial markets.
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  Speaker 1: And assuming again assuming I'll reiterate this again, that the
• 9:43
  Speaker 1: vaccine rollout goes well, I expect money to continue to
• 9:46
  Speaker 1: flow there. So yeah, I think, you know, selectively, we've
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  Speaker 1: been adding in some of the COVID related credits and
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  Speaker 1: also you know, inflation break evens and they used to
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  Speaker 1: continue to go up. But I think, you know, markets
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  Speaker 1: that will benefit from um, you know, inflation going up,
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  Speaker 1: so inflation break even trades or other you know types
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  Speaker 1: of trades that will benefit from a steeper reel curve.
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  Speaker 1: You know we have we do have some of those
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  Speaker 1: in our portfolios for sure. Alright, I'm sure you how
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  Speaker 1: to call this morning. Was there any sort of target
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  Speaker 1: on the tenure yield? I don't have a particular call,
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  Speaker 1: you know on the tenure. Yeah, I would think that
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  Speaker 1: it you know, it probably goes up a little bit
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  Speaker 1: from here. To me, the most important thing will be,
• 10:21
  Speaker 1: you know, what is the what is the FED respond
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  Speaker 1: How does the FED respond to it? And again I
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  Speaker 1: think if it's if it's because we're getting cyclical growth,
• 10:28
  Speaker 1: it's because we're getting higher inflation, they're okay with it.
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  Speaker 1: If real rates start to go up a lot and
• 10:33
  Speaker 1: that tightens financial conditions, then I think the Fed, the
• 10:36
  Speaker 1: FED jumps in. So to me, that's the most important
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  Speaker 1: thing to watch when thinking about the ten year treasury.
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  Speaker 1: But my bias would be that it probably goes up
• 10:43
  Speaker 1: a little bit from here. So, Eric, where is the
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  Speaker 1: best value that you're seeing in the market right here? Yeah?
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  Speaker 1: So I think you know a couple of places, you know,
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  Speaker 1: emerging market local currencies I think are good value. I
• 10:56
  Speaker 1: think bank loans are good value. I think parts of
• 10:59
  Speaker 1: the you know, securitized market clos are good value. UM.
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  Speaker 1: And I think they're they're certainly selective opportunities, you know,
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  Speaker 1: across across those uh, those markets, you know, as well
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  Speaker 1: as trades that have been on a steeper yield curve
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  Speaker 1: or better been on higher inflation, so things in the
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  Speaker 1: recovery UM kind of bucket. I would think that, you know,
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  Speaker 1: there's probably the best value out there, but again, nothing
• 11:23
  Speaker 1: is the value of what it was, you know, post
• 11:25
  Speaker 1: that mark sell off, even back the summer markets have
• 11:28
  Speaker 1: moved a lot. But but I still think there's there's
• 11:30
  Speaker 1: some selective areas of opportunity for sure. All right, Eric,
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  Speaker 1: thank you so much for joining today, and excellent day
• 11:37
  Speaker 1: to be speaking with us, and for us to be
• 11:38
  Speaker 1: speaking with you, I should say rather. Eric Stein is
• 11:41
  Speaker 1: chief investment officer for fixed income at the massive, humongous
• 11:46
  Speaker 1: Boston based to eat in Vans. The calculus could potentially
• 11:53
  Speaker 1: be changing given induction results in Georgia. We haven't got
• 11:57
  Speaker 1: the absolute final figures yet, but one thing we did
• 12:01
  Speaker 1: have today was a DP employment change which showed a
• 12:03
  Speaker 1: drop of one three thousand private sector payrolls. Economists were
• 12:08
  Speaker 1: looking for that to be a positive figure of seventy.
• 12:11
  Speaker 1: So let's bring in Carl Weinberger finder and High Frequency
• 12:15
  Speaker 1: Economics chief economists to explain to us how the calculus
• 12:19
  Speaker 1: for him has changed over the last twenty four hours. Literally,
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  Speaker 1: Carl Vannie, good morning. Um, yeah, it's an exciting night
• 12:27
  Speaker 1: overnight for anyone watching the US economic and budget prospects.
• 12:32
  Speaker 1: We see likely wins, although still not confirmed by Democratic candidates,
• 12:37
  Speaker 1: and um, the Georgia runoff. Everybody knows that already. That
• 12:41
  Speaker 1: opens up the door to getting more done under the
• 12:43
  Speaker 1: Biden administration, probably not a full blown new green economic deal,
• 12:49
  Speaker 1: but putting together a package that can appeal to most
• 12:53
  Speaker 1: of the center of the road Democrats and maybe drawing
• 12:55
  Speaker 1: some of the center of the road Republicans and pulled
• 12:58
  Speaker 1: together a coalition and to send it to enable Biden
• 13:02
  Speaker 1: to realize some of his goals. That probably means some
• 13:05
  Speaker 1: reversal of some of the Trump tax increases. It probably
• 13:08
  Speaker 1: means more support for incomes of people. UH. And again
• 13:13
  Speaker 1: tweaks here and there on the Trump program to bring
• 13:16
  Speaker 1: up more inline democratic thinking. I don't think we get
• 13:19
  Speaker 1: radical results out of it, but we will see change. Carl,
• 13:23
  Speaker 1: what kind of spending bill do you believe UH has
• 13:27
  Speaker 1: perhaps the most bipartisan support in what looks like to
• 13:31
  Speaker 1: be this new Congress, and and and what will have
• 13:34
  Speaker 1: the biggest impact on the economy. Yeah, so I think
• 13:38
  Speaker 1: that the first word that comes to mind his income support.
• 13:41
  Speaker 1: And we're going to get some increase in the package
• 13:44
  Speaker 1: that that we've seen UH that was put out so far.
• 13:48
  Speaker 1: The American households need that kind of support right now,
• 13:51
  Speaker 1: and this is the time to go to the trenches
• 13:53
  Speaker 1: and get it. Number two infrastructure, all right, great depression alright,
• 13:57
  Speaker 1: ifd are sending people out to dig dig is in
• 14:00
  Speaker 1: the build ugly roads in New Jersey and ugly bridges
• 14:03
  Speaker 1: that are still standing today out of concrete. Um, we
• 14:05
  Speaker 1: have to put people to work, and infrastructure projects or
• 14:08
  Speaker 1: a way to do that. I think that infrastructure is
• 14:11
  Speaker 1: something that even Republicans who are trying to get themselves
• 14:13
  Speaker 1: reelected and as soon as two years have to be
• 14:17
  Speaker 1: able to agree with the Democrats on and number three,
• 14:19
  Speaker 1: I think taxes. I think this is a big cry
• 14:21
  Speaker 1: among the Democrats. We're going to see some unrolling at
• 14:25
  Speaker 1: least of some of the higher income tax breaks that
• 14:27
  Speaker 1: came out of the Trump administration's tax efforts. We'll see
• 14:32
  Speaker 1: probably a restoration of the state and local tax deductions, um,
• 14:36
  Speaker 1: and things like that. Yeah, I mean, that's a huge
• 14:40
  Speaker 1: agenda if Chuck Schumer does actually display Republican leader Mitch
• 14:44
  Speaker 1: McConnell of the centers thereby deciding on what can come
• 14:47
  Speaker 1: before the chamber for a full vote. And you know,
• 14:51
  Speaker 1: Joe Biden has Kamala Harris to sort of cast a
• 14:54
  Speaker 1: tie breaking vote. Just how to the left will Joe
• 14:58
  Speaker 1: Biden go with as legislation. And I mean a lot
• 15:01
  Speaker 1: of Democrats that are elected are pretty moderate too. Yeah, well, Bunnie,
• 15:06
  Speaker 1: let's remember how we got the president stimulus bill done
• 15:09
  Speaker 1: just to look for a third way. Um, if I
• 15:11
  Speaker 1: can borrow that phrase from somebody else. Um. We saw
• 15:15
  Speaker 1: moderate Republicans joined together with moderate Democrats to get fifty
• 15:19
  Speaker 1: one votes in the Senate to bring the bill to
• 15:21
  Speaker 1: the floor, going around Mitch McConnell's view that objections to
• 15:26
  Speaker 1: bringing it to the floor at all. And this is
• 15:28
  Speaker 1: another way that this can move forward, alright, movement towards
• 15:31
  Speaker 1: the center on ideas that appeal to both moderate Democrats
• 15:34
  Speaker 1: and moderate Republicans. This is the way things used to
• 15:37
  Speaker 1: work in Congress. You know, we'd find a place in
• 15:39
  Speaker 1: the middle that everybody could get to with each side
• 15:42
  Speaker 1: is being willing to make compromises. I think you can't
• 15:45
  Speaker 1: rule that out as a way that this is going
• 15:47
  Speaker 1: to go, that it's going to be the center as
• 15:50
  Speaker 1: much as the majority leader who's going to be driving
• 15:53
  Speaker 1: the agenda in the Senate. Corl Let's switch gears a
• 15:56
  Speaker 1: little bit to China. We've had some news today about
• 15:58
  Speaker 1: the delisting appears to be off on some of these
• 16:01
  Speaker 1: China telecom names. What do you what is your expectation
• 16:05
  Speaker 1: for um trade under a Biden administration? How do you
• 16:10
  Speaker 1: expect this administration will uh address a trade and just
• 16:14
  Speaker 1: broad at tensions issues with China? Paul, I thought you
• 16:18
  Speaker 1: were going to ask me about inflation on China. All Right,
• 16:21
  Speaker 1: We're going to see I think not such a big
• 16:26
  Speaker 1: We'll see a change in attitude and an approach, but
• 16:29
  Speaker 1: not such a big series of concessions coming right out
• 16:32
  Speaker 1: of the gun. The Trump administration has left a lot
• 16:35
  Speaker 1: of chips on the table for the Biden administration to play.
• 16:39
  Speaker 1: I think the Biden administration will be tough on China,
• 16:41
  Speaker 1: although perhaps coming at it from a more balanced point
• 16:44
  Speaker 1: of view, and they're not going to unwind tariffs and
• 16:47
  Speaker 1: sanctions unless they get something back for it. The test
• 16:50
  Speaker 1: of that theory will be whether the Chinese think it's
• 16:52
  Speaker 1: important anymore to play cade American interest, but whether they're
• 16:56
  Speaker 1: completing a pivot toward Europe that gives Europe a role
• 16:59
  Speaker 1: on China, this geo strategy that the US might have
• 17:02
  Speaker 1: had but now won't have. So there's a lot of
• 17:04
  Speaker 1: potential dynamics there. But I don't think the Biden administration
• 17:07
  Speaker 1: is going to come out making nice nice with the
• 17:10
  Speaker 1: government in China. I think that any rolling back of
• 17:14
  Speaker 1: trade restrictions is going to be um uh sast over time.
• 17:18
  Speaker 1: One other point, despite all the sanctions and all the
• 17:21
  Speaker 1: other things, goodness gracious, China book the record trade surface
• 17:26
  Speaker 1: with the United States on record exports in the last
• 17:28
  Speaker 1: monthly report. It's not killing them. What the Trump administration
• 17:32
  Speaker 1: has been doing. Hey, Carl, thanks so much for joining us.
• 17:35
  Speaker 1: We always appreciates your thoughts. UH and out LA Carl Winberg,
• 17:39
  Speaker 1: founder and chief International Economists for High Frequency Economics, based
• 17:43
  Speaker 1: in New York City. Another fascinating story we've been following
• 17:47
  Speaker 1: for the last several days is the New York Stocks
• 17:49
  Speaker 1: Change UH and its dealings with some of these Chinese
• 17:53
  Speaker 1: telecom companies and the n y SC surprise markets. Again
• 17:56
  Speaker 1: today it's reverting to its original plan to de lish
• 18:00
  Speaker 1: shares of three Chinese companies. From where we bring advance
• 18:03
  Speaker 1: reporter Lenan Newon in New York. Lennon, I've been getting
• 18:07
  Speaker 1: whip sale, like I'm sure many investors have by the
• 18:11
  Speaker 1: New York Soacker Change and it's listing delisting of these
• 18:14
  Speaker 1: Chinese companies. What's the latest. So, the latest, Paul, which
• 18:18
  Speaker 1: is something that we um we're reporting on sources yesterday,
• 18:21
  Speaker 1: is that NYC will go ahead with the listing through
• 18:25
  Speaker 1: the Chinese companies. Now, what it has done is gotten
• 18:28
  Speaker 1: specific guidance from the Treasury Department that these companies and
• 18:32
  Speaker 1: those securities are in scope, and so it's decided to
• 18:35
  Speaker 1: proceed again with the listing right so you know, you
• 18:40
  Speaker 1: you sort of answer my next question to certain extend
• 18:43
  Speaker 1: Treasury Secretary Steven Mnuchen calling on n YSC President Stacy
• 18:47
  Speaker 1: Conningham to say he opposed the Shock announcements to grant
• 18:51
  Speaker 1: the company's a reprieve. So how much do pause explain
• 18:55
  Speaker 1: to the saga how much are they allowed to? I
• 18:58
  Speaker 1: think there's a lot of politics already embedded in that question, body,
• 19:02
  Speaker 1: And this is a highly highly political story here. So
• 19:06
  Speaker 1: obviously we can't look at this without looking at the
• 19:09
  Speaker 1: context of the U. S. And China trade tensions and
• 19:12
  Speaker 1: you know, trade war that we're in Wisconsin right now,
• 19:15
  Speaker 1: and so obviously, um, you know, a U S Stock
• 19:19
  Speaker 1: exchange deciding to delist securities of Chinese companies is highly political,
• 19:24
  Speaker 1: highly contentious. Obviously, it was criticized in China. Those companies
• 19:29
  Speaker 1: are kind of watching the situation closely, and also it's
• 19:31
  Speaker 1: being watched very closely by the US business community as well.
• 19:35
  Speaker 1: Many US firms, including the biggest US banks, are trying
• 19:39
  Speaker 1: to expand in China, and so you know, this kind
• 19:41
  Speaker 1: of puts things in a sort of contentious um and
• 19:45
  Speaker 1: and tense environment. So I kind of was surprised. I
• 19:50
  Speaker 1: guess it was most surprising was yesterdays announcement or they
• 19:53
  Speaker 1: announced by the n y s E to uh suspend
• 19:56
  Speaker 1: the delisting if you will. Did they kind of go
• 19:59
  Speaker 1: row there yesterday? It's very unclear. A lot of our
• 20:05
  Speaker 1: sources are still scratching their heads. There are a lot
• 20:08
  Speaker 1: of questions about what happened behind the scenes here, Paul,
• 20:11
  Speaker 1: So unfortunately I can't answer that question too directly, but
• 20:14
  Speaker 1: what I can say is that, um, you know, it
• 20:16
  Speaker 1: sounds like this was messy on both sides. It sounds
• 20:19
  Speaker 1: like it was messy in terms of, um, you know,
• 20:21
  Speaker 1: how how it was handled and decided within government and
• 20:24
  Speaker 1: also how it was rolled out by NYC. Obviously, big
• 20:28
  Speaker 1: U S companies don't tend to you know, take action,
• 20:32
  Speaker 1: reverse and then reverse again. Um. And so obviously there
• 20:35
  Speaker 1: there's going to be some soul searching about what what
• 20:37
  Speaker 1: exactly happened here. So it's pretty messy, um, and we're
• 20:41
  Speaker 1: still trying to figure out exactly what went wrong. Have
• 20:43
  Speaker 1: you been watching the market today, lan R, A d
• 20:47
  Speaker 1: R is reacting, Yeah, Well, A d R s have
• 20:50
  Speaker 1: reacted throughout this whole process. They kind of went went,
• 20:53
  Speaker 1: you know, fell when the listeners were announced and then
• 20:56
  Speaker 1: went back up when they were pulled back, and so
• 20:58
  Speaker 1: I think it's a bit of a roller coaster. But
• 21:00
  Speaker 1: what's key here is that it looks like these securities
• 21:04
  Speaker 1: are you know, in scope of the executive order, and
• 21:07
  Speaker 1: it means that investors do have to get rid of
• 21:09
  Speaker 1: them my next week. So what's the you know, speaking
• 21:14
  Speaker 1: to some observers here and more from a geopolitical perspective,
• 21:17
  Speaker 1: is maybe the concern that perhaps China will retaliate against
• 21:22
  Speaker 1: the US and maybe some US companies. Is that a
• 21:25
  Speaker 1: realistic concern from the folks you talked to. Definitely a
• 21:29
  Speaker 1: realistic concern for sure. Um. And again these are subtle, um,
• 21:33
  Speaker 1: this is a nuanced situation. Pause though it's not as
• 21:36
  Speaker 1: if you know, we're hearing about any kind of tit
• 21:39
  Speaker 1: for tat threats. But you know, the US business community
• 21:42
  Speaker 1: does want to have a good relationship with China, and
• 21:44
  Speaker 1: so the escalating trade war um, you know, particularly in
• 21:48
  Speaker 1: the financial community is not looked upon well here. So
• 21:52
  Speaker 1: I do think whether you know, US companies are talking
• 21:56
  Speaker 1: to their Chinese base or talking to their Chinese context, well,
• 22:00
  Speaker 1: whether they're just anticipating um, you know, negative blowback. UM.
• 22:04
  Speaker 1: I think that's a very real concern. What does the
• 22:07
  Speaker 1: financial community tell you about how much work will need
• 22:09
  Speaker 1: to be done by a Biden administration to improve the relationship,
• 22:12
  Speaker 1: and whether they feel like that's what the Biden administration
• 22:15
  Speaker 1: will even try to do. Well. I think first of all,
• 22:19
  Speaker 1: they want to sift through the issues that are in
• 22:23
  Speaker 1: front of them right now, which is how to um,
• 22:25
  Speaker 1: you know, help the trading of the securities that are
• 22:27
  Speaker 1: affected by this executive order. UM. And then you know,
• 22:30
  Speaker 1: see what happens in the next couple of weeks as
• 22:33
  Speaker 1: the Trump administration leaves, whether there are any other you know,
• 22:36
  Speaker 1: trade related issues that could come up in the next
• 22:39
  Speaker 1: couple of weeks. Obviously it's very unpredictable time. Uh. And
• 22:42
  Speaker 1: then going forward, yes, I think the business community is
• 22:44
  Speaker 1: very very interested in trying to rebuild and repair relationships
• 22:47
  Speaker 1: with China. UM. And it's you know, it's not exactly
• 22:51
  Speaker 1: clear how the Biden administration will react to this, but
• 22:54
  Speaker 1: there is obviously a lot of legislative UM sort of
• 22:57
  Speaker 1: hawkishness around China as well. So it's not just about
• 23:00
  Speaker 1: the administration, it's also about what's happening in Congress, all right,
• 23:04
  Speaker 1: so lean's assuming we don't get any new wrinkles in
• 23:08
  Speaker 1: the story, and that's a big assumption. I guess what
• 23:11
  Speaker 1: is the expected timing here? If I own these stocks,
• 23:15
  Speaker 1: I guess I have to sell them? And when do
• 23:17
  Speaker 1: I have to sell them? And what's the timing there?
• 23:19
  Speaker 1: So the industry is really looking at Monday as being
• 23:23
  Speaker 1: a key date because that's when you are not allowed
• 23:25
  Speaker 1: to trade the securities anymore, either buy or sell kind
• 23:28
  Speaker 1: of like actively, um you know, transact them. So that
• 23:31
  Speaker 1: means all of the indexes, for instance, are going to
• 23:34
  Speaker 1: have to sort of remove these securities, and the exchanges
• 23:37
  Speaker 1: are going to have to remove them, and so there
• 23:39
  Speaker 1: are a lot of kind of follow on effects if
• 23:41
  Speaker 1: you have a kind of passive holding in your portfolio
• 23:43
  Speaker 1: that has to be divested by November. But um, you know,
• 23:47
  Speaker 1: everyone else in the markets, the real kind of day
• 23:50
  Speaker 1: to day people are looking at Monday as the real
• 23:53
  Speaker 1: stop dead date. And why three telecommunications companies in particular,
• 23:59
  Speaker 1: There are plenty to have other Chinese companies listed. Will
• 24:02
  Speaker 1: they be next? Or is is the impetus specifically telecoms? Well,
• 24:08
  Speaker 1: I think one of the things that the industry is
• 24:10
  Speaker 1: kind of signed with release today is that it got
• 24:13
  Speaker 1: specific guidance from the Treasury as to which entities were
• 24:17
  Speaker 1: sort of viewed as you know, being linked to the
• 24:20
  Speaker 1: Chinese military. So that's that's the move, right that it
• 24:23
  Speaker 1: originates with the executive order, and it originates with the administration.
• 24:27
  Speaker 1: So you know, one of the things that the industry
• 24:29
  Speaker 1: has been clamoring for is clarity around which securities, not
• 24:33
  Speaker 1: just which kind of over overarching companies, but also which subsidiaries,
• 24:37
  Speaker 1: which kickers, et cetera. And they were looking for details, um.
• 24:40
  Speaker 1: And so that that is one question that has been
• 24:43
  Speaker 1: at least put to rest today, UM in terms of
• 24:46
  Speaker 1: you know, which companies were selected. Again that's to do
• 24:49
  Speaker 1: with the links to the you know, Chinese government and
• 24:52
  Speaker 1: its military. So that was the call by the administration.
• 24:57
  Speaker 1: And then and just finally, I think about some other
• 24:59
  Speaker 1: big Chinese cup It is list to hear, you know,
• 25:01
  Speaker 1: the Ali Bobbs of the world that j DS dot com.
• 25:03
  Speaker 1: These are huge companies as well. I wonder if there're
• 25:06
  Speaker 1: at risk. Well, I think there has been a ratcheting
• 25:10
  Speaker 1: up of executive orders in recent days, and obviously the
• 25:15
  Speaker 1: outgoing administration is um you know, making taking action on China. Um.
• 25:21
  Speaker 1: We will see whether that is continued extended once the
• 25:24
  Speaker 1: new administration comes in or not. But certainly, you know,
• 25:27
  Speaker 1: in these last couple of weeks of the Trump administration,
• 25:30
  Speaker 1: we are seeing a ratcheting up of sort of tensions
• 25:33
  Speaker 1: with China on multiple fronts. Lanan, thank you so much
• 25:38
  Speaker 1: for jumping on the phone. There her wonderful story to day,
• 25:40
  Speaker 1: and we'll see reverses again with plants list China teleconference.
• 25:44
  Speaker 1: She's written a few of those in the last two days,
• 25:46
  Speaker 1: but she has not felt confused. Laana Nuian covering stocks
• 25:50
  Speaker 1: and all sorts of stories and and UH finance reporter.
• 25:54
  Speaker 1: More broadly for us at Bloomberg, we are awaiting comments
• 25:59
  Speaker 1: from President Trump is he delivers remarks at the Women
• 26:02
  Speaker 1: for America First March to Save America rally in Washington,
• 26:07
  Speaker 1: d C. Let's get a little preview what we might
• 26:09
  Speaker 1: hear and kind of what's going on at the White House.
• 26:12
  Speaker 1: We can do that with Josh wind Grove. He's a
• 26:13
  Speaker 1: White House correspondent for Bloomberg News. Josh, thanks so much
• 26:17
  Speaker 1: for joining us here. We're waiting comments from President Trump
• 26:20
  Speaker 1: in Washington. Do you expect anything new today or will
• 26:24
  Speaker 1: this be some of his speaking points as it relates
• 26:26
  Speaker 1: to the election. Yeah, good morning. I think it will
• 26:30
  Speaker 1: be a greatest hits album. For lack of a better phrase.
• 26:33
  Speaker 1: He's been tweeting through last night and in the morning
• 26:36
  Speaker 1: urging Mike Pants to reject the results today in Congress,
• 26:40
  Speaker 1: which mc pence doesn't have the power to do, and
• 26:43
  Speaker 1: it's given no signal that he's willing to do, but
• 26:45
  Speaker 1: it's kept quiet on. So I suppose those room for
• 26:48
  Speaker 1: a surprise on that Trump is discrediting the results, uh,
• 26:52
  Speaker 1: you know, over the objections of the Republican state officials
• 26:55
  Speaker 1: who are running this election. But it's also tacitly acknowledged
• 26:58
  Speaker 1: that they've lost the Senate and is using it as
• 27:01
  Speaker 1: a motivation for Republican senators and members of members of
• 27:06
  Speaker 1: the House to overturned biden victory and keep him in
• 27:10
  Speaker 1: the presidency so that he can veto things. So, you know,
• 27:13
  Speaker 1: Trump has been fundraising office office, He's been a font
• 27:16
  Speaker 1: of misinformation. H he has been stoking the anger of
• 27:20
  Speaker 1: his supporters. It's very unclear how the air will come
• 27:23
  Speaker 1: out of this balloon. Yeah, I mean, Nathan Hayar just
• 27:26
  Speaker 1: played some sound from a woman at today's pro Trump
• 27:29
  Speaker 1: Riley saying that they weren't going to go down easily.
• 27:31
  Speaker 1: What does that mean, Josh? What I mean is there
• 27:33
  Speaker 1: is there a lot of security in Washington, d C.
• 27:36
  Speaker 1: And And and is anybody concerned huge security, tons of
• 27:42
  Speaker 1: road closures. No one I know living in Washington is
• 27:45
  Speaker 1: going anywhere near that part of town right now if
• 27:48
  Speaker 1: they don't have to, um, we don't know. Like fighting,
• 27:51
  Speaker 1: Is this like animating language of the Republican Party right now?
• 27:54
  Speaker 1: If you had to, like look for one quality that
• 27:56
  Speaker 1: people want Republicans, it's fighting. But right now it's sort
• 27:59
  Speaker 1: of performance art more than any sort of out of options.
• 28:02
  Speaker 1: And in particular, Trump looks like he's lost the Senate majority.
• 28:06
  Speaker 1: It's too early to call it, but John Ausus is
• 28:09
  Speaker 1: leading for that because in part, he told people the
• 28:13
  Speaker 1: election was ragged. In other words, the Republican voters in
• 28:16
  Speaker 1: Georgia were told that this is all a sham, it's
• 28:18
  Speaker 1: all ragged, but they should take time to vote anyway.
• 28:20
  Speaker 1: You can appreciate why some of them. Maybe he didn't
• 28:22
  Speaker 1: do that. And so, I mean, you know, Trump four
• 28:25
  Speaker 1: years ago swept power on the strength of the electoral College.
• 28:28
  Speaker 1: What he's urging people to do today is essentially kneecap
• 28:32
  Speaker 1: the electoral college by cherry picking which states to accept
• 28:36
  Speaker 1: in which states did not. Of course, two years ago
• 28:39
  Speaker 1: he lost the House. It looks like now he loses
• 28:43
  Speaker 1: the Senate and he is departing message, assuming he actually
• 28:47
  Speaker 1: physically departs the White House is to his supporters that
• 28:50
  Speaker 1: this was all ragged. Josh, how small is the inner
• 28:55
  Speaker 1: circle around the president right now here? Because his behavior
• 28:58
  Speaker 1: obviously is as a relates to the election in the
• 29:01
  Speaker 1: viability the election and has been so odd. I guess
• 29:05
  Speaker 1: is a word can be used, How much support does
• 29:08
  Speaker 1: he still have within the White House? It is unclear.
• 29:12
  Speaker 1: It's smaller than ever though. I mean, it just seems
• 29:16
  Speaker 1: to a shrunk, you know, by the day, the number
• 29:19
  Speaker 1: of people willing to put their names on statements. Trump
• 29:22
  Speaker 1: put out a pretty explosive statement last night. Didn't even
• 29:24
  Speaker 1: put it out through the White House. He put it
• 29:26
  Speaker 1: out through the campaign. Um, so you know, it looks
• 29:28
  Speaker 1: to be down to just a handful of folks, including
• 29:31
  Speaker 1: rue Di Giuliani, who just spoke at this rally as
• 29:35
  Speaker 1: we wait for President Trump to arrive and talked about
• 29:37
  Speaker 1: doing trial by combat. So you know, we're using these
• 29:40
  Speaker 1: really loaded language that of course has raised security concerns
• 29:44
  Speaker 1: many of the people attending the rally, addressing sort of
• 29:46
  Speaker 1: like quasi militia type gear. So you know, take that
• 29:50
  Speaker 1: for what it is. But you know, right now, Donald Trump,
• 29:54
  Speaker 1: I think it's an open question as to what his
• 29:56
  Speaker 1: legacy is in the party and the House of Representatives.
• 29:58
  Speaker 1: It seems pretty strong. We're gonna like a hundred or
• 30:00
  Speaker 1: more members of the House object today, and in part
• 30:05
  Speaker 1: that's because they are scared of primary challenges. Eric Trump,
• 30:08
  Speaker 1: the president's son, threatened yesterday to help primary any Republican
• 30:13
  Speaker 1: Congressman who did not object to the results. Senators, on
• 30:16
  Speaker 1: the other hand, are a little less exposed to primary
• 30:18
  Speaker 1: challenges longer terms early up every six years, and so
• 30:21
  Speaker 1: that's why we're only seeing thirteen Republican Senators object in
• 30:26
  Speaker 1: the same way as supposed to as to say a
• 30:27
  Speaker 1: hundred or more Republican House members. Yeah, that is phenomenal.
• 30:31
  Speaker 1: I mean, the theater of this is just something else, Josh.
• 30:33
  Speaker 1: But I mean common inauguration night, will that theater all stop? Um?
• 30:40
  Speaker 1: I don't think so Trump as a showman, I mean
• 30:42
  Speaker 1: the official like you know, most very few people think
• 30:45
  Speaker 1: that Donald Trump will still be in the White House,
• 30:47
  Speaker 1: you know, as a the end of January. But he
• 30:50
  Speaker 1: will go down or he's telegraphing at least if you
• 30:54
  Speaker 1: will go down, continuing to say it's rigged, you will
• 30:56
  Speaker 1: never admit it's not. He's fundraising off of it. He's
• 30:59
  Speaker 1: a mass quite a war chest in his pack from
• 31:02
  Speaker 1: doing so. This will allow him to direct the money
• 31:06
  Speaker 1: more or less whatever he wants politically, including whatever candidate
• 31:09
  Speaker 1: he wants. We will continue to see him flex his muscles,
• 31:12
  Speaker 1: and you know, we'll see what happens. What the yesterday
• 31:15
  Speaker 1: it might have shown is similar to what two eighteen showed,
• 31:18
  Speaker 1: which is that Trump has his supporters clearly, but when
• 31:21
  Speaker 1: he is not on the ballot physically, like if you know,
• 31:25
  Speaker 1: people aren't showing up to vote for him, they don't
• 31:26
  Speaker 1: show up in the same numbers, and that hurt them
• 31:28
  Speaker 1: yesterday in the runoff, that hurt them in It remains
• 31:32
  Speaker 1: to be seen what that will mean in the mid
• 31:34
  Speaker 1: terms and heading into four. Of course, the big question
• 31:37
  Speaker 1: is Trump hasn't wanted to talk about four in terms
• 31:40
  Speaker 1: of his own ambitions. Will he run again? This is
• 31:43
  Speaker 1: one of the open ones and so you know, the
• 31:45
  Speaker 1: betting odds kind of depend on who you ask, but
• 31:49
  Speaker 1: that might be the next shoe to draw. The rhetoric
• 31:51
  Speaker 1: from Joe Biden and company will have to be extremely
• 31:54
  Speaker 1: extremely important in the next few days, right, Josh, You
• 31:58
  Speaker 1: know Joe Biden will probably speak more than a very
• 32:02
  Speaker 1: early in his term president normally would. Yeah. I think
• 32:07
  Speaker 1: in some ways the pandemic will give them a chance
• 32:10
  Speaker 1: to redirect focus. They've said that that is priority number one.
• 32:14
  Speaker 1: We've seen a little bit of waffling actually today on
• 32:17
  Speaker 1: the issue of checks. Remember Joe Biden went to Georgia
• 32:19
  Speaker 1: and told everyone Bover, John Assu and Michael uh Warren,
• 32:24
  Speaker 1: Reverend Warnock, and you will get two checks. And today
• 32:28
  Speaker 1: Warnock is saying that, whereas Biden ally, Chris Coons is
• 32:33
  Speaker 1: not really saying that. He's saying checks will move more
• 32:35
  Speaker 1: quickly but not necessarily immediately. And John Auso didn't put
• 32:39
  Speaker 1: a dollar value on how much you think people should
• 32:40
  Speaker 1: get when he spoke today. So a little bit of
• 32:42
  Speaker 1: muddied water already beginning. But I think we'll see Biden
• 32:45
  Speaker 1: put a unrelenting focus on the virus early on and
• 32:49
  Speaker 1: maybe hope that that will take the temperature down a
• 32:51
  Speaker 1: little bit. Hey, Josh, we had President George W. Bush
• 32:56
  Speaker 1: announced that he will and his wife will attend uh
• 33:00
  Speaker 1: the inauguration. What do we know about President Trump? Will
• 33:03
  Speaker 1: he attend? We don't know. And Jim Cliburn Yesterday's want
• 33:07
  Speaker 1: to buy them top allies in Congress said that they're,
• 33:11
  Speaker 1: you know, budgeting for a lot of what if they
• 33:13
  Speaker 1: do not know whether Temple want to go or not go,
• 33:15
  Speaker 1: they kind of have to plan for both scenarios. One
• 33:17
  Speaker 1: other thing that they don't know really right now is, uh,
• 33:21
  Speaker 1: you know, whether it'll be safe for Biden to, for instance,
• 33:24
  Speaker 1: walk down Pennsylvania Avenue, which is normally you know, what
• 33:27
  Speaker 1: happens during an inauguration. They say Trump might put out
• 33:31
  Speaker 1: a call for a supporters to do what they're doing today,
• 33:32
  Speaker 1: come out and protest, in which case maybe the Secret
• 33:35
  Speaker 1: Service might not love the idea of Bidom walking down Pennsylvania.
• 33:38
  Speaker 1: So it's all up in the air. But yeah, George W.
• 33:41
  Speaker 1: Bush continuing to send signals to the party on this.
• 33:44
  Speaker 1: He was very early to recognize Biden's victory on November three. Trump,
• 33:48
  Speaker 1: of course, has never done that. He's conceded and now
• 33:51
  Speaker 1: you know, him, thank you'll attend the inauguration. I think
• 33:54
  Speaker 1: it's to sort of move the party past where we're at.
• 33:57
  Speaker 1: And as I say, in the Senate, we're seeing some
• 33:59
  Speaker 1: of that. Right. We've got thirteen or so who are objecting.
• 34:02
  Speaker 1: That means the vast majority thirty seven whatever it is,
• 34:05
  Speaker 1: or so are not. Many of them are pretty staunch
• 34:08
  Speaker 1: Trump supporters, but they're saying, hey, it's not in the
• 34:10
  Speaker 1: constitution for us to just like pick and choose who
• 34:13
  Speaker 1: we want to win elections. Yeah, I mean, I was
• 34:15
  Speaker 1: just gonna say, an absolute nightmare for the Secret Service
• 34:18
  Speaker 1: preparing for literally every eventuality, so many permutations and combinations. Josh,
• 34:23
  Speaker 1: thank you. I know you'll keep us up to date
• 34:24
  Speaker 1: throughout the day. That is Josh wind Grove, our White
• 34:26
  Speaker 1: House correspondent who is in Washington, d C. Thanks for
• 34:32
  Speaker 1: listening to Bloomberg Markets podcast. You can subscribe and listen
• 34:36
  Speaker 1: to interviews at Apple Podcasts or whatever a podcast platform
• 34:39
  Speaker 1: you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn,
• 34:43
  Speaker 1: and I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
• 34:45
  Speaker 1: Before the podcast, you can always catch us worldwide at
• 34:48
  Speaker 1: Bloomberg Radio