Latest / Bloomberg Intelligence / Rekindled China Trade Uncertainty Amps Flight To Gold

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Rekindled China Trade Uncertainty Amps Flight To Gold · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg PENL podcast. I'm Paul swing you
• 0:05
  Speaker 1: along with my co host Lisa Brahma Wicks. Each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
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  Speaker 1: you and your money. Whether at the grocery store or
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
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  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. I'm looking at my commodity screen
• 0:21
  Speaker 1: on my Bloomberg terminal. That would be g L CEO
• 0:23
  Speaker 1: for your terminal users out there. I see a lot
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  Speaker 1: of red across the screen. Concerns about global growth stock
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  Speaker 1: by the coronavirus, certainly, but the couple of areas that
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  Speaker 1: really stand out on the positive side would be spot
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  Speaker 1: gold up ten point four percent year today. To get
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  Speaker 1: a sense of what's going on in the world of
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  Speaker 1: precious and base metals, we welcome Everett Millman, precious metal
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  Speaker 1: specialist at Gainesville Coins based in gains Will, Florida, but
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  Speaker 1: joining us here in our Bloomberg Interactive Broker studio. Everett,
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  Speaker 1: thanks so much for joining us here in our studio.
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  Speaker 1: Let's start with gold, and we're just talking about before
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  Speaker 1: going on air, and Lisa was pointing out the nice
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  Speaker 1: run gold has had. What's kind of your sense for
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  Speaker 1: what's really driving it and kind of where can this
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  Speaker 1: thing go? Thanks Paul. Obviously the coronavirus is having a
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  Speaker 1: major effect. You can't deny that the damage to global
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  Speaker 1: supply chains is layering on top of what was already
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  Speaker 1: a slowing global economy. People are fearful, and gold is
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  Speaker 1: definitely absorbing that safe haven flight. We're seeing a lot
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  Speaker 1: of flight to quality and that means gold treasuries and
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  Speaker 1: the US dollar. But we still haven't had a lot
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  Speaker 1: of resolution in the trade war. I think that what's
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  Speaker 1: interesting about the impact of the coronavirus is that it's
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  Speaker 1: causing some pullback on the agreement, the Phase one agreement
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  Speaker 1: that China and the US came to. That China, because
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  Speaker 1: their economy is at a standstill, they really can't meet
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  Speaker 1: any of the UH stipulations that they agreed to. They're
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  Speaker 1: not going to be able to increase their agricultural purchases,
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  Speaker 1: They're not going to be able to um be that
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  Speaker 1: bedrock for the global economy right now. So I think
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  Speaker 1: that gold is the obvious place for investors to go
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  Speaker 1: when there is so much uncertainty still around this trade
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  Speaker 1: dispute that has gone on for many, many months before
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  Speaker 1: or the coronavirus even broke out. So let's dig a
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  Speaker 1: little bit deeper into some of the technicals here, because,
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  Speaker 1: as you mentioned, uncertainty really is the prevailing word of
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  Speaker 1: the day. And I think, Paul, it's really interesting to
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  Speaker 1: see the size and scope for so many markets today
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  Speaker 1: is two thousand sixteen, right as Brexit was really front
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  Speaker 1: and center and kind of driving a lot of market action,
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  Speaker 1: another time of significant uncertainty. If you strip that away,
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  Speaker 1: and today's moves which are perhaps going to be portrayed
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  Speaker 1: as knee jerk removes moves, in hindsight, we shall see
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  Speaker 1: what is the momentum in general for gold, you know,
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  Speaker 1: just generally, given where we're at economically, given the fact
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  Speaker 1: that all things being equal to US and China have
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  Speaker 1: come to some sort of trade trus right, And I
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  Speaker 1: think that that positive momentum is undeniable, So it's still
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  Speaker 1: there even without this knee jerk reaction. Correct, And I
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  Speaker 1: think that there was a similar sort of dynamic during
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  Speaker 1: the Iran crisis that gold jumped right after the news
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  Speaker 1: and everyone expected to see a sell off following that,
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  Speaker 1: and we really didn't get it. We have climbed higher
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  Speaker 1: from that fifteen hundred dollar range since then. Um From
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  Speaker 1: a technical perspective, gold certainly appears to be overbought right now.
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  Speaker 1: The r s I is very high. It's well above
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  Speaker 1: it's fifty day moving average and it's two in day
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  Speaker 1: moving average, so I think we could see some profit taking,
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  Speaker 1: but the general narrative is still certainly in place that
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  Speaker 1: gold looks like it could test as high as seventeen
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  Speaker 1: fifty in the coming months, and the I guess the
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  Speaker 1: all time high back in was seventeen seventy, so we're
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  Speaker 1: pretty close to that. I mean, I'm also looking at
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  Speaker 1: silver again, Gold up about ten percent year to date,
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  Speaker 1: silver only up about five percent. Is that under performance
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  Speaker 1: for silver? Is that? Should I take note of that
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  Speaker 1: at all? Sure? I mean, here's you four. Silver has
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  Speaker 1: been lagging gold, partly because it relies so much on
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  Speaker 1: industrial demand. So everything with the coronavirus and the slowing
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  Speaker 1: of the Chinese economy has dragged silver lower. It's been
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  Speaker 1: much more sensitive to what's been going on with the
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  Speaker 1: base metals like copper, but it did take out it's
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  Speaker 1: September high from last year. It's well above eighteen fifty,
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  Speaker 1: and I think that allows for some positive momentum for
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  Speaker 1: silver to play catch up with gold, because the gold
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  Speaker 1: of silver ratio is still extremely elevated, and I would
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  Speaker 1: expect to see that correct, especially if there continues to
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  Speaker 1: be safehaven flight into the medals generally. All right, So
• 4:18
  Speaker 1: you mentioned copper and dr Copper usually has thought of
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  Speaker 1: as an economic gauge where it goes so to goes
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  Speaker 1: the economy. Interesting to see that it's not lower today,
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  Speaker 1: or it's not declining more in this knee jerk risk
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  Speaker 1: off move. You can see, Uh, it's declining one point
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  Speaker 1: three percent materially behind oil, which is falling out of bed.
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  Speaker 1: Why the resilience. That's a bit surprising. I would expect
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  Speaker 1: copper to respond similarly to oil, and we've seen this
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  Speaker 1: widening gold to copper ratio, which is usually not a
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  Speaker 1: very bullish sign for the broader economy. Um, I think
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  Speaker 1: that copper really has a lot of headwinds against it.
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  Speaker 1: I don't see it continuing to to rally because, um,
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  Speaker 1: the stock aisles in London are rather high right now.
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  Speaker 1: I've heard a lot of people point to this gap
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  Speaker 1: between gold and copper. Can you walk us through why
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  Speaker 1: this is such an important metric that people watch? Sure, because,
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  Speaker 1: as you said, Dr, copper kind of is the bell
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  Speaker 1: weather for the commodities and manufacturing sector. And although we
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  Speaker 1: lump gold in with the other commodities, it has this
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  Speaker 1: unique monetary uh property to it, and so comparing gold
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  Speaker 1: to copper is really looking at that divergence between what
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  Speaker 1: is going on in the real economy and manufacturing and
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  Speaker 1: then what is the sentiment in financial markets. So when
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  Speaker 1: gold is higher obviously means that fear and uncertainty are
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  Speaker 1: usually high. Um if copper is coming along with it,
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  Speaker 1: then that shows that manufacturing and mining are all expecting
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  Speaker 1: to see the commodities complex rise along with it, and
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  Speaker 1: right now we're seeing the opposite of that. So that's
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  Speaker 1: why it's such a key indicator. So again, gold here
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  Speaker 1: up one point eight point one point eight four percent
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  Speaker 1: today sixteen dollars seventy three dollars dollars announce Are you
• 6:00
  Speaker 1: send you when you talk to your clients speculation creeping
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  Speaker 1: into the market. Are people speculating on gold saying what
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  Speaker 1: this thing is running, I gotta get gotta get into it?
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  Speaker 1: Um more so. Now, yes, there's definitely a bit of
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  Speaker 1: bleed over of fomo um like we saw in the
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  Speaker 1: equity market earlier this year, that's now kind of been
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  Speaker 1: transferred over to gold. But I think another reason that
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  Speaker 1: you're seeing sort of a speculative fervor for gold is
• 6:23
  Speaker 1: the expectation that central banks are going to continue to
• 6:26
  Speaker 1: ease policy and step in when necessary. Um. Those tools
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  Speaker 1: are going to be tested in central banks, not just
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  Speaker 1: the FED, but globally, as we've seen with the PBOC
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  Speaker 1: has also stepped in with more stimulus. So that is
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  Speaker 1: the narrative I'll be watching for the rest of the year,
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  Speaker 1: and I think it's going to cause quite a bit
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  Speaker 1: of volatility on top of that. Thank you so much,
• 6:45
  Speaker 1: Everett Melbourne. Thank you so much for being with us.
• 6:47
  Speaker 1: Everett Melmann, precious Metals specialist at Gainesville Coins, joining us
• 6:51
  Speaker 1: here in our interactive broker studios. On the one side
• 6:58
  Speaker 1: of markets today, you have these spreading of the coronavirus
• 7:01
  Speaker 1: and all of the fear of economic slowdown that ensues
• 7:05
  Speaker 1: from that. On the other side, you have political risk
• 7:08
  Speaker 1: political discussions going on as the Democratic Convention looks toward
• 7:14
  Speaker 1: South Carolina Tuesday, the debates happen, uh, and we are
• 7:18
  Speaker 1: getting a sense Bernie Sanders is the front runner that
• 7:21
  Speaker 1: needs to be beaten for any of the other candidates
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  Speaker 1: to really emerge in a competitive way. Joining us now
• 7:27
  Speaker 1: is Chris Lew, former Deputy Secretary of Labor and senior
• 7:30
  Speaker 1: Fellow at the University of Virginia Miller Center. Also someone
• 7:33
  Speaker 1: who has spent decades in public service, working for the
• 7:37
  Speaker 1: Obama administration and beyond. Chris, thank you so much for
• 7:41
  Speaker 1: being with us. I want to just start with Bernie
• 7:44
  Speaker 1: Sanders and his acceptance or lack thereof among the sort
• 7:48
  Speaker 1: of more conventional Democratic Party. Are people starting to accept
• 7:52
  Speaker 1: him more or people really pushing back within the Democratic
• 7:55
  Speaker 1: Party on his nomination. Well, I think you see both.
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  Speaker 1: But I would also call and people, look, we have
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  Speaker 1: three states that have voted, three relatively small states, and yes,
• 8:05
  Speaker 1: Senator Sanders has a huge amount of momentum right now,
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  Speaker 1: especially as early voting goes on for Super Tuesday, which
• 8:10
  Speaker 1: is next Tuesday. But we've got a long way to go.
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  Speaker 1: You know, as I always point out to people, more
• 8:15
  Speaker 1: delicates are going to be allocated April, May and June
• 8:19
  Speaker 1: than on Super Tuesday. Next week. And so look, I
• 8:22
  Speaker 1: think this is still a pretty fluid race. And as
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  Speaker 1: we saw from last week's debate, um, you know, things
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  Speaker 1: can still change. So Chris, there's actually some growing concern
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  Speaker 1: that we've heard just recently that with Bernie Sanders in
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  Speaker 1: the league that were he to be the nominee, he
• 8:36
  Speaker 1: would actually cause perhaps you know, the Democrats to lose
• 8:39
  Speaker 1: seats in Congress. Is that avoid concern? It is? Look,
• 8:44
  Speaker 1: I yeah, and I think this is a concern for
• 8:45
  Speaker 1: I think all all when you look at any of
• 8:47
  Speaker 1: the candidates, not how well you do in terms of
• 8:50
  Speaker 1: winning the White House, and I and I'm I am
• 8:53
  Speaker 1: confident that any of them has a pretty decent chance
• 8:55
  Speaker 1: of beating Donald Trump. But it's what you do down ballot.
• 8:58
  Speaker 1: I think part of the challenges what we don't know
• 9:00
  Speaker 1: is what's the theory of the case. Is the theory
• 9:03
  Speaker 1: of the case the Democrats need a nominee that attacks
• 9:06
  Speaker 1: to the center to try to pick them pick up
• 9:08
  Speaker 1: some independence and never trump Trumpers, Or is the theory
• 9:11
  Speaker 1: of the case to expand the electorate and can somebody
• 9:15
  Speaker 1: like a uh, Bernie Sanders bring in young voters, people
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  Speaker 1: of color. A lot of the people that voted for
• 9:21
  Speaker 1: Barack Obama two thousand and eight but sat out in Chris,
• 9:25
  Speaker 1: you said you think that any of the candidates have
• 9:28
  Speaker 1: a good chance of beating President Trump. Do you think
• 9:31
  Speaker 1: that there is too much being made that Senator Sanders
• 9:35
  Speaker 1: has a terrible chance or the worst chance against President
• 9:38
  Speaker 1: Trump of all of the candidates. You know, Look, I mean,
• 9:42
  Speaker 1: if you base it simply on a pose right now, um,
• 9:46
  Speaker 1: you would be hard pressed to say that Sanders is
• 9:48
  Speaker 1: any less selectable than any of the other candidates. In fact,
• 9:51
  Speaker 1: he polls quite well. I would also caution people, I
• 9:53
  Speaker 1: think those head to head match ups are a little
• 9:55
  Speaker 1: misleading this early. You really have to look down at
• 9:58
  Speaker 1: the battleground states and we are long way. I mean,
• 10:00
  Speaker 1: once this um, this nomination battle gets settled, no matter
• 10:04
  Speaker 1: who it is, how well does the party come together,
• 10:07
  Speaker 1: what does the convention look like? And then a lot
• 10:10
  Speaker 1: of this, frankly, is about money. And I think what
• 10:12
  Speaker 1: people should be impressed by if you on Democrats, if
• 10:16
  Speaker 1: you're concerned about Sanders, is his ability to raise money
• 10:19
  Speaker 1: without holding fundraisers is actually pretty extraordinary. So, Chris, we've
• 10:23
  Speaker 1: heard some discussion kind of ramping up recently about a
• 10:26
  Speaker 1: brokered convention. You define what a brokered convention is and
• 10:30
  Speaker 1: how it might play out this time around. Well, and
• 10:33
  Speaker 1: I have a special perspective on this. I'm a d
• 10:35
  Speaker 1: n C super delegate as well, so at some point
• 10:37
  Speaker 1: in the process I will get to stay on the nominee.
• 10:40
  Speaker 1: So essentially, what it means is that if no one
• 10:42
  Speaker 1: can get a majority of the delegates on the first
• 10:45
  Speaker 1: ballot um, and then by the time you get to
• 10:48
  Speaker 1: the second ballot, we should say on the first ballot
• 10:51
  Speaker 1: you are pledged to vote for the candidates who you know,
• 10:54
  Speaker 1: who you supported. By the second ballot um, you know,
• 10:57
  Speaker 1: candidates can cut deals with other ones, they can be
• 11:00
  Speaker 1: their delegates. Super delegates don't get a chance to vote
• 11:02
  Speaker 1: until the second ballot um. And again I don't want
• 11:06
  Speaker 1: to go down that road because I'm still not sure
• 11:08
  Speaker 1: we're going to get there right now. But you could
• 11:10
  Speaker 1: basically have you know, multiple voting where you know, different
• 11:14
  Speaker 1: candidates drop out in um, you have different coalitions formings.
• 11:17
  Speaker 1: I don't think we've had one since nineteen fifty two
• 11:20
  Speaker 1: or so. There's a huge risk here. I mean, this
• 11:23
  Speaker 1: is what happened with Hillary Clinton and Bernie Sanders the
• 11:25
  Speaker 1: last time around, in a lot of people felt like
• 11:28
  Speaker 1: the establishment, to use President Trump's word, really hijacked Bernie
• 11:32
  Speaker 1: Sanders campaign, and that you know, there's a risk that
• 11:35
  Speaker 1: there's going to be a repeat of that. I mean,
• 11:38
  Speaker 1: how worried are you that that is sort of going
• 11:40
  Speaker 1: to be the impression? Yeah, you know, and this is
• 11:43
  Speaker 1: part of why, you know, as a DNC superdelegate, I'm
• 11:46
  Speaker 1: not endorsing anybody. I'm not. I look, my view is
• 11:50
  Speaker 1: we're Democrats. Let Democrats believe everyone should vote. Let's let
• 11:54
  Speaker 1: everyone in all fifty states and the you know, the
• 11:57
  Speaker 1: seven territories vote and then let's see what happens or
• 12:00
  Speaker 1: that um because I think there there's a concern that
• 12:03
  Speaker 1: if you try to put your thumb on the scale
• 12:05
  Speaker 1: too much, either for against Bernie Sanders, that just you know,
• 12:08
  Speaker 1: upsets you know, people on one side. You know, we've
• 12:10
  Speaker 1: only worked freaked states into this. Let's let the other
• 12:14
  Speaker 1: you know, fifty sum go ahead and vote first. Chris,
• 12:16
  Speaker 1: is there a sense within the Democratic um power structure,
• 12:20
  Speaker 1: if you will, the party, the national Committee, who actually
• 12:24
  Speaker 1: is the best candidate against President Trump? Well, and that's hard,
• 12:29
  Speaker 1: you know, for most of last year we thought it
• 12:30
  Speaker 1: was a Joe Biden, and you know, he still pulls
• 12:33
  Speaker 1: pretty well. But obviously, you know, we've seen, you know,
• 12:35
  Speaker 1: with mayor Bloomberg coming up. And you know what's interesting, however,
• 12:38
  Speaker 1: is that when you look at the public opinion polls,
• 12:41
  Speaker 1: President Trump basically gets about forty four percent against every
• 12:46
  Speaker 1: Democrat and reminder, reminder, he got forty six percent a
• 12:49
  Speaker 1: on Hillary Clinton. So he basically is hitting where his
• 12:52
  Speaker 1: feeling is right now. So from my perspective as a
• 12:54
  Speaker 1: Democratic strategist, um, the key is that they're not the
• 12:58
  Speaker 1: a third party candidate and that the Democrats come in
• 13:01
  Speaker 1: relatively united. And I think that's possible even after what
• 13:04
  Speaker 1: happened in which was pretty contentious on the Democratic side,
• 13:08
  Speaker 1: you largely had people you know, in the Sanders camp
• 13:10
  Speaker 1: sort of fold back together and vote for Hillary Clinton.
• 13:14
  Speaker 1: So on Tuesday's debate, Tomorrow's debate, we are going to
• 13:16
  Speaker 1: see the second performance from Michael Bloomberg, who is the
• 13:19
  Speaker 1: founder and majority owner of Bloomberg Elpa and the owner
• 13:21
  Speaker 1: of this radio station. Uh should get that in there.
• 13:24
  Speaker 1: Also Tom Steyer, another billionaire, is going to be on
• 13:27
  Speaker 1: the stage there, and I'm wondering what would you like
• 13:30
  Speaker 1: to see how much would you like to see the
• 13:31
  Speaker 1: field contract in order to create momentum behind one candidate
• 13:36
  Speaker 1: in the near term. Yeah, and I would like to
• 13:38
  Speaker 1: see the field contract. I think that's the important thing.
• 13:41
  Speaker 1: And I take nothing away from Senator Standers performance in Nevada.
• 13:44
  Speaker 1: He did incredibly well far stated expectations. But there's still,
• 13:48
  Speaker 1: you know, well over let's say six people in the
• 13:51
  Speaker 1: Democratic primary or caucus in Nevada who voted for somebody else.
• 13:55
  Speaker 1: And I just don't think we have a great sense
• 13:57
  Speaker 1: of who is really the person that is after the
• 14:00
  Speaker 1: broadest coalition until we see the field shrink down. The
• 14:03
  Speaker 1: problem is you've got, you know, candidates who can self
• 14:06
  Speaker 1: fund who don't answer to party establishment, or you've got
• 14:10
  Speaker 1: candidates who can largely raise money through small dollars who
• 14:14
  Speaker 1: don't answer to party officials as well. So it is
• 14:17
  Speaker 1: kind of the wild West, and this is just the
• 14:19
  Speaker 1: way we are right now in Chris, thanks so much
• 14:22
  Speaker 1: for joining us. We always appreciate your thoughts. Chris Lew
• 14:25
  Speaker 1: Senior Fellow at the University of Virginia Miller Center, former
• 14:27
  Speaker 1: Deputy Secretary of Labor under President Obama. Joining us on
• 14:31
  Speaker 1: the phone the sentiment this morning very much being driven
• 14:46
  Speaker 1: by a spread of the coronavirus outside of China, where
• 14:49
  Speaker 1: the number of cases appears to be stabilizing to some degree. However,
• 14:53
  Speaker 1: the focus very much turning to Italy, where a number
• 14:56
  Speaker 1: of towns are seeing the cases arise exponentially. Joining us
• 15:00
  Speaker 1: now from Milan is Fernando Fernando Giuliano. He's an editor
• 15:05
  Speaker 1: for Bloomberg Opinion, and Fernando, we're really glad to have
• 15:08
  Speaker 1: you to give us a sense of what is actually
• 15:11
  Speaker 1: happening on the ground, how significant and prevailing is the
• 15:15
  Speaker 1: threat and the fear of the coronavirus there. Well, it
• 15:19
  Speaker 1: is real. I mean, remember there are now around fifty
• 15:23
  Speaker 1: people in lockdown in southern Lombardy that's just south of Milan.
• 15:28
  Speaker 1: That's the area where the first cases were registered. And
• 15:33
  Speaker 1: actually you cannot get out or coming to the area
• 15:36
  Speaker 1: Monstery and you can't get out. And now there is
• 15:39
  Speaker 1: a other other regions quite you know, basically the whole
• 15:43
  Speaker 1: of northern Italy. So regions like Benetto or Lambardy where
• 15:46
  Speaker 1: they've been cases are not in lockdown, but school are closed,
• 15:52
  Speaker 1: they're canceling major events, social events like the carnival or
• 15:57
  Speaker 1: you know the football matches. Um, where we're all so canceled,
• 16:01
  Speaker 1: and a lot of people are working from home. Lots
• 16:03
  Speaker 1: of companies are encouraging people to you know, the smart
• 16:06
  Speaker 1: work from home. Then it really depends on people kind
• 16:09
  Speaker 1: of wander around and go for a walk and I'm
• 16:11
  Speaker 1: not particularly bothered. Others are terrified and stay at home
• 16:15
  Speaker 1: and I don't want to get out. So it's uh,
• 16:18
  Speaker 1: it's really that it's very very uncertain. People don't really
• 16:21
  Speaker 1: know how much to fear what to fear exactly, and
• 16:25
  Speaker 1: it's also not clear what the you know, how what
• 16:28
  Speaker 1: are the consequences of this virus. Some people have already
• 16:31
  Speaker 1: already died in easily six people. They were all quite
• 16:35
  Speaker 1: old and some had previous condition conditions. But you know,
• 16:39
  Speaker 1: it's still you know, what's happening in China's pretty terrifying
• 16:42
  Speaker 1: and for everyone to see so Um, clearly a lot
• 16:45
  Speaker 1: of people are very mindful of what's happening. So for anoder,
• 16:48
  Speaker 1: is there a sense of how it got to Italy?
• 16:52
  Speaker 1: Oh no, that's the possibly the most frightening part of
• 16:55
  Speaker 1: it all. Um. We had a few cases in towards
• 17:00
  Speaker 1: the end of last week mid last week in in
• 17:02
  Speaker 1: these two areas in Benetto and in Lombardy. But it's
• 17:06
  Speaker 1: not clear how. God is not that there was like
• 17:10
  Speaker 1: an obvious connection to China. And it's not even clear
• 17:13
  Speaker 1: how these two separate areas of the country, which are
• 17:17
  Speaker 1: close but not to close, both became infected at the
• 17:22
  Speaker 1: same time. So the authorities are still scrambling to to
• 17:25
  Speaker 1: find these patient zero as they call it. At the moment,
• 17:30
  Speaker 1: no success. Fernando, It's interesting to see right now the
• 17:34
  Speaker 1: reaction in the bond and stock markets in Italy suffering
• 17:38
  Speaker 1: some of the biggest moves since two thousand and sixteen,
• 17:41
  Speaker 1: and they're borrowing costs jumping. I'm just wondering, can you
• 17:44
  Speaker 1: speak to the fundamental picture of the Italian government? How
• 17:49
  Speaker 1: how much do they have to withstand a potential disruption
• 17:52
  Speaker 1: and financial markets from a financial perspective, Well, look, I
• 17:57
  Speaker 1: think in terms of government bonds, yes, they spike this morning,
• 18:01
  Speaker 1: but there are ten years bonds for Italy are still
• 18:04
  Speaker 1: below one percent. The one needs to keep some perspective.
• 18:06
  Speaker 1: You know, there's a country which has been seeing you know,
• 18:09
  Speaker 1: bond deals at ten years for ten years at six
• 18:11
  Speaker 1: seven percent during the crimeroson crisis because still very very
• 18:15
  Speaker 1: low level and also equity levels. You know, we're pretty
• 18:19
  Speaker 1: high anyway, but you know that the real war is
• 18:21
  Speaker 1: over the really column. You know, you have some of
• 18:24
  Speaker 1: the most richest and most industrialized parts of Italy which
• 18:28
  Speaker 1: are now in the usual lockdown. You know, the consequences
• 18:31
  Speaker 1: for supply are going to be big and same with
• 18:34
  Speaker 1: demand and the tourist industry is bound to software as
• 18:37
  Speaker 1: well as people cancel their holidays. So I think the
• 18:41
  Speaker 1: government is looking at putting together a package of the
• 18:45
  Speaker 1: economic help for you know, the affected industry, but you know,
• 18:49
  Speaker 1: the impact is going to be very severe. So for another,
• 18:53
  Speaker 1: is there a sense that from a health perspective that
• 18:57
  Speaker 1: the government is doing everything at needs to do. What's
• 19:00
  Speaker 1: kind of the feeling on the ground. Well, you know,
• 19:03
  Speaker 1: there are questions where you know, the the initial outbreak
• 19:06
  Speaker 1: would have been prevented or not. There are lots of
• 19:09
  Speaker 1: theories going around. Some people say that this flight ban,
• 19:13
  Speaker 1: which the Italian government alone or you know, was one
• 19:16
  Speaker 1: of very few countries Europe to implement, may have actually
• 19:19
  Speaker 1: worsened the situation because it made it harder for people
• 19:22
  Speaker 1: to uh, you know, for the authorities to keep track
• 19:24
  Speaker 1: of people coming from China. This was a flight plan
• 19:26
  Speaker 1: from China. Um um. But at the same time, you know,
• 19:30
  Speaker 1: now the response has been very forceful. There are some
• 19:34
  Speaker 1: people who fear it's a little bit exaggerate or too little,
• 19:37
  Speaker 1: too late. But actually, you know, if you talk too
• 19:40
  Speaker 1: many experts, they are being very complementary of these very
• 19:43
  Speaker 1: tough measures for Coonian measures which are being implemented, and
• 19:46
  Speaker 1: say it's exactly what one needs to happen. Um As
• 19:50
  Speaker 1: I say, you know, it's all very uncertain, so we
• 19:52
  Speaker 1: don't know, but you know, certainly the measures are being
• 19:56
  Speaker 1: implemented in a very forceful manner at the moment. Fernando,
• 19:59
  Speaker 1: just real quickly. Here you are currently in Naples, your
• 20:02
  Speaker 1: wife is in Milan. When is the next time you
• 20:04
  Speaker 1: guys will be able to travel to see each other? Well,
• 20:07
  Speaker 1: I don't know. I mean, I'm kind of looking at
• 20:09
  Speaker 1: the news myself on a daily basis to understand, you know,
• 20:13
  Speaker 1: when I when I'm going to move back. Um, you know,
• 20:16
  Speaker 1: one thing is shut is certain. I'm going to travel
• 20:18
  Speaker 1: back car this time rather than taking the train, because
• 20:20
  Speaker 1: you know, the trains are not too you know, are
• 20:22
  Speaker 1: not exactly the kind of place where you want to
• 20:24
  Speaker 1: be right now, whereas you know, at least your own car.
• 20:26
  Speaker 1: It's just you, So I don't think you know, one
• 20:30
  Speaker 1: one should exaggerate what's going on. We're gonna see each
• 20:32
  Speaker 1: other very soon. You know, I'm gonna be mindful of
• 20:35
  Speaker 1: how I get there right, all right, Fernando, you'd be safe, okay,
• 20:38
  Speaker 1: and your wife as well. Fernando Giuliano, Editor Bloomberg Opinion
• 20:42
  Speaker 1: in Naples, Uh, Italy, right now, give you us the
• 20:45
  Speaker 1: latest on the coronavirus uh there, which is you know,
• 20:48
  Speaker 1: really kind of change the tone of how the market's
• 20:51
  Speaker 1: perception of this virus as it now is firmly entrenched
• 20:54
  Speaker 1: on the European continent. In northern Italy, European stocks had
• 21:04
  Speaker 1: their worst day since in the US, who had all
• 21:07
  Speaker 1: major US indices starting to open down more than three percent.
• 21:12
  Speaker 1: Over in China, however, the share price has been muted,
• 21:16
  Speaker 1: actually with declines that are much smaller than what we're
• 21:20
  Speaker 1: seeing over in Europe and here in the US. Joining
• 21:22
  Speaker 1: us out to talk about what to expect going forward.
• 21:24
  Speaker 1: Brendan to Herne, chief investment officer a Crane Shares based
• 21:27
  Speaker 1: in New York, focused on China stocks in particular, and
• 21:30
  Speaker 1: I'm wondering, Brendan, from your perspective, is what we're seeing
• 21:34
  Speaker 1: in Chinese equities just a big bet that the People's
• 21:37
  Speaker 1: Bank of China will come in with any kind of
• 21:40
  Speaker 1: stimulus to stave off steeper declines. Well, and I think
• 21:44
  Speaker 1: that's certainly a factor. Lisa. You also have not just
• 21:47
  Speaker 1: the pd o C, but you have fiscal policy, you
• 21:51
  Speaker 1: have stimulus from the Ministry of Transportation. You know, you
• 21:55
  Speaker 1: have really a consensus to offset the weakness we're going
• 21:59
  Speaker 1: to have in you one, We're gonna make it up
• 22:01
  Speaker 1: in Q two, Q three, and Q four. So, Brendan,
• 22:05
  Speaker 1: that scenario suggests that the markets discounting that this thing
• 22:08
  Speaker 1: is at or near peaking in terms of severity. Is
• 22:12
  Speaker 1: there any real evidence to back that up? In China, Paul,
• 22:17
  Speaker 1: the cases appear to have PLATEAD, and that that was
• 22:21
  Speaker 1: the bottom that we saw back with stars going back
• 22:24
  Speaker 1: to uh, you know, almost twenty years ago. So so
• 22:27
  Speaker 1: the market is forward looking is saying the actual cases
• 22:31
  Speaker 1: have plateaud and China's going back to work in a
• 22:35
  Speaker 1: very significant fashion. Therefore, you're starting to see a pick
• 22:39
  Speaker 1: up in some of the high frequency economic data and
• 22:42
  Speaker 1: that's part of the reason you're seeing the markets respond
• 22:45
  Speaker 1: in a positive fashion. UM. What's important though, that this
• 22:48
  Speaker 1: is mainly in China. Uh. If your definition of China
• 22:52
  Speaker 1: is Hong Kong or stocks or US list of Chinese companies,
• 22:57
  Speaker 1: those are predominantly owned by foreign investors. They're selling, but
• 23:01
  Speaker 1: the actual mainland Chinese investors are buying an important disparity. Yeah,
• 23:06
  Speaker 1: looking at the at the Hang Seng Index in Hong Kong,
• 23:09
  Speaker 1: which was down one point eight percent overnight, which was
• 23:12
  Speaker 1: much more than the Shanghai Stock Exchange Composite, for example,
• 23:15
  Speaker 1: which was down just about three tenths of a percent.
• 23:18
  Speaker 1: That said, I mean you talked about stars. It is
• 23:21
  Speaker 1: a very different period of time than stars, and this
• 23:23
  Speaker 1: is a very different illness than stars. Given how contagious
• 23:26
  Speaker 1: it is, I'm wondering, as an investor in Chinese equities,
• 23:30
  Speaker 1: how worried are you that as people within China start
• 23:34
  Speaker 1: going back to work, start going to the factories, we
• 23:37
  Speaker 1: get a re emergence of the coronavirus and it causes
• 23:41
  Speaker 1: a much longer term disruption. Who may providence, UM, where
• 23:47
  Speaker 1: the city of Wuhan is located, is is disproportionately a
• 23:52
  Speaker 1: very large percentage of the cases in China that remains
• 23:56
  Speaker 1: in quarantine. So so, I think that the view is
• 24:00
  Speaker 1: other parts of the country have not had very significant
• 24:03
  Speaker 1: levels of of this infectious disease, and therefore it's time
• 24:08
  Speaker 1: it's time to go back to work. You know that
• 24:09
  Speaker 1: they've kind of quarantined and contained, but the rest of
• 24:13
  Speaker 1: the country it's time to get back to work. So Brentan,
• 24:15
  Speaker 1: give us a sense of, um, how much of the
• 24:17
  Speaker 1: country and production is shut down. We've heard numbers as
• 24:20
  Speaker 1: high as maybe forty or fifty percent. What do you
• 24:22
  Speaker 1: think that is at the moment it's coming back? Paul
• 24:27
  Speaker 1: Um that that's certainly the Hubei providence itself big producer
• 24:32
  Speaker 1: of fish, shrimp, crabs, auto parts, textiles, cement, but but
• 24:37
  Speaker 1: less than five percent of China's aggregate GDP. So so
• 24:40
  Speaker 1: so you you have companies that are within the supply
• 24:45
  Speaker 1: chains within Whobei, but but it's not it's not a
• 24:47
  Speaker 1: massive amount. Aggregate utilization is picking up, so I would agree,
• 24:53
  Speaker 1: you know, probably about half to six is coming back online. Um,
• 24:58
  Speaker 1: and it's coming in incrementally week by week, or you know,
• 25:00
  Speaker 1: we're going to see an improvement. So Brendan. Given the
• 25:03
  Speaker 1: fact that you seem optimistic about a stabilization here and
• 25:07
  Speaker 1: are ramping up of business within China, are you buying
• 25:11
  Speaker 1: so on? On a personal basis, I am, I'll be
• 25:14
  Speaker 1: buying UH today. UM. I don't think you can plant
• 25:18
  Speaker 1: the flag and say this is the bottom, but I
• 25:20
  Speaker 1: think there's opportunities over the next several weeks. Remove this Friday.
• 25:22
  Speaker 1: We have China p m I numbers for the month
• 25:25
  Speaker 1: of February and we kind of know they're going to
• 25:27
  Speaker 1: be a disaster. Um So, so I think the headlines
• 25:30
  Speaker 1: around Friday UH could weigh on the markets a little bit,
• 25:33
  Speaker 1: but we know it's going to be bad, and that's
• 25:34
  Speaker 1: why I'm not saying that this is the bottom. But
• 25:37
  Speaker 1: over the next several weeks, I think there is a
• 25:38
  Speaker 1: great opportunity. But what are you buying? So? I eat
• 25:42
  Speaker 1: my own cooking. So I am a big investor in
• 25:44
  Speaker 1: our crane sharres ETFs. I love today our M S
• 25:48
  Speaker 1: c I China A E T F K B A
• 25:51
  Speaker 1: um US investors have sold it down almost three percent
• 25:55
  Speaker 1: below what it's worth. UM. Literally, it's it's it's trading down. UM.
• 26:01
  Speaker 1: I think mainland markets will be up tomorrow, So I'm
• 26:04
  Speaker 1: going to be a buyer of our k B a
• 26:06
  Speaker 1: UM And then I love our obviously our internet strategy
• 26:10
  Speaker 1: around the broader E m uh K Web and k
• 26:14
  Speaker 1: m Q are other big holdings of mine, and I
• 26:15
  Speaker 1: love those funds as well. I mean, these are like
• 26:17
  Speaker 1: my kids. But but I I'm heavily invested in in
• 26:21
  Speaker 1: the crane shares et f s, and I think as
• 26:23
  Speaker 1: a long term investor, I think this is a you know,
• 26:25
  Speaker 1: you know, when people puke things up, they give it
• 26:27
  Speaker 1: away for free. You know, as a long term investor,
• 26:29
  Speaker 1: why would I not buy? Are you seeing other buying
• 26:32
  Speaker 1: activity from US investors? You know, the data looks like
• 26:38
  Speaker 1: that you're seeing selling from US investors. I mean, and
• 26:42
  Speaker 1: we're in a massive risk off day, so it's not
• 26:44
  Speaker 1: it's not just China, it's e m um, you know,
• 26:47
  Speaker 1: and anything that's beta is down. I think the important
• 26:52
  Speaker 1: disparity is what we're seeing from data from what mainland
• 26:56
  Speaker 1: investors are doing. They're buying mainland Chinese equities, they're actual
• 27:00
  Speaker 1: buying Hong Kong stocks um, and I just think China's
• 27:04
  Speaker 1: maybe a little bit more forward along in this unfortunate epidemic. Um.
• 27:09
  Speaker 1: But in aggregate, you know this this, these numbers are
• 27:13
  Speaker 1: very very low. I mean my guess is more people
• 27:16
  Speaker 1: were killed in car crashes over the last last twenty
• 27:19
  Speaker 1: four hours then Corona in you know, in aggregate. Got it?
• 27:24
  Speaker 1: Brennan and her and thanks so much for joining us.
• 27:26
  Speaker 1: Brennan's a chief investment officer for Crane Shares based in
• 27:28
  Speaker 1: New York City. Lots of experience investing in China. He
• 27:31
  Speaker 1: is buying today, buying the dip. I'm just looking at
• 27:34
  Speaker 1: you know, kind of one of the names that gets
• 27:35
  Speaker 1: bandied about us, a play on China, which is Ali Baba.
• 27:37
  Speaker 1: The stock is down three point two today. This is Bloomberg.
• 27:42
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 27:45
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 27:47
  Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on
• 27:51
  Speaker 1: Twitter at pt Sweeney and Lisa A. Bram Woy. It's
• 27:53
  Speaker 1: I'm on Twitter at Lisa Bramwoit's one before the podcast.
• 27:56
  Speaker 1: You can always catch us worldwide on Bloomberg Radio.