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Hong Kong Is Destined To Be Another Mainland City · 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 Waits. 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
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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. Casting live from the BNY Melon
0:22
Speaker 1: Pershing Insight twenty nineteen conference. Our focus is on the
0:27
Speaker 1: US largely, but China has taken front and center here,
0:31
Speaker 1: particularly with the protests that have been ongoing in Hong Kong.
0:34
Speaker 1: There's been a bit of a reprieve with some of
0:37
Speaker 1: the calm being sort of inserted over some of the protests.
0:42
Speaker 1: But yesterday, UH the Chief Executive of Hong Kong, Carrie Lamb,
0:47
Speaker 1: was speaking about this issue. Listen to what she said
0:50
Speaker 1: about the controversial law that spurred all of the protests.
0:53
Speaker 1: Take a listen. I will not shy away from my
0:56
Speaker 1: responsibility in introducing a piece of legislation. We are very
1:00
Speaker 1: convinced of the justifications at causing this public outcry and
1:04
Speaker 1: all these devisitives in society but sometimes as a political leader,
1:09
Speaker 1: you cannot shy away from difficult decisions, not backing down
1:14
Speaker 1: from this extradition a law that is what is causing
1:17
Speaker 1: the unrest. Joining us now and Stevenson and Stevenson Yang,
1:21
Speaker 1: co founder and research director at J Capital Research, also
1:25
Speaker 1: a Bloomberg Opinion contributor, and thank you so much for
1:29
Speaker 1: being with us. First of all, I just want to
1:31
Speaker 1: get your take on sort of Hong Kong's chief executives
1:37
Speaker 1: reluctance to back away from this controversial legislation. Hi, so
1:42
Speaker 1: thanks for having me. Yeah, I think that I think
1:45
Speaker 1: that we've known for thirty years now that the chief
1:49
Speaker 1: executive of Hong Kong is essentially, I hate to say
1:53
Speaker 1: it so bluntly, but a Chinese puppet. But the but
1:56
Speaker 1: the the real shocker here is that the Hong Kong
2:00
Speaker 1: LegCo and police have been so turned by the by
2:04
Speaker 1: the Chinese interests. What do you mean by that, Well,
2:09
Speaker 1: that that the Hong Kong police have reacted with a
2:12
Speaker 1: level of violence that they never had used before. Um yeah,
2:18
Speaker 1: and um uh, and and you know, sprang pepper spray
2:22
Speaker 1: directly into people's faces. I think all of these things
2:25
Speaker 1: really surprised Hong Kong people and dismayed them because you know,
2:29
Speaker 1: this was a peaceful protest um and it was surprising
2:33
Speaker 1: to see from Hong Kong police. As for the leg CO,
2:36
Speaker 1: you know, to push through this incredibly unpopular law and
2:39
Speaker 1: now they're now they're delaying the debate on it, but
2:43
Speaker 1: probably we'll bring it up at you know, midnight when
2:46
Speaker 1: there are no protesters around. Okay. Well, so you started
2:49
Speaker 1: by saying that Hong Kong's chief executive has always been,
2:53
Speaker 1: in your words, a puppet of Beijing. If that's the case,
2:58
Speaker 1: then why is Jumping pushing this law now? Given what
3:01
Speaker 1: it's what he's dealing with with respect to tariffs from
3:03
Speaker 1: the US. Um. You know, I don't think he's the
3:08
Speaker 1: most deft politician. I think it's an awkward time to be, uh,
3:12
Speaker 1: to be seeing such huge protests in Hong Kong, particularly
3:15
Speaker 1: with the taiwan Is primary and elections coming up, and
3:19
Speaker 1: with the June fourth anniversary and with the trade talks.
3:22
Speaker 1: You know, it wasn't a good time. I'm sure they
3:24
Speaker 1: didn't anticipate it. Okay, So you think it was just
3:29
Speaker 1: a mistake, a sort of political miscalculation, perhaps given the
3:33
Speaker 1: fact that it's probably going to be get another complication
3:36
Speaker 1: he's gonna have to deal with probably, Yeah, okay, Um, well,
3:40
Speaker 1: I guess that then. I'm wondering what your perspective is
3:43
Speaker 1: when it comes to the investment aspect of this, because
3:47
Speaker 1: we already saw one property developer uh delay or or
3:51
Speaker 1: withdraw from plans in Hong Kong due to the increasing
3:55
Speaker 1: control of Beijing over the territory. Are you hearing about
4:00
Speaker 1: there investment firms that say are are pulling back or
4:04
Speaker 1: being a little more hesitant in their expansion plans in
4:07
Speaker 1: the territory as a result of this idea that it
4:09
Speaker 1: wouldn't necessarily be treated special from the mainland, I not really, Um.
4:17
Speaker 1: You know, people are talking about it, but that's very
4:19
Speaker 1: different from making plans corporate plans. I do think that
4:23
Speaker 1: it adds to the general sense of of instability and
4:27
Speaker 1: volatility and unpredictability with both Mainland and Hong Kong operations,
4:31
Speaker 1: and so you will see a lot of companies that
4:33
Speaker 1: are able to decamped to Singapore to do that instead. Okay,
4:37
Speaker 1: So I guess that one question that I have is
4:40
Speaker 1: how special is Hong Kong at this point from Beijing,
4:43
Speaker 1: Given the fact that Jijian Ping of China has made
4:48
Speaker 1: a concerted effort to open up markets to more international
4:52
Speaker 1: firms in the mainland. See. I would disagree with that point.
4:57
Speaker 1: I think that actually things have gone quite in the
4:59
Speaker 1: other direction um since twelve when she didn't think took
5:03
Speaker 1: over um. But as for as for Hong Kong's independence,
5:07
Speaker 1: you know, there's a there's a very clear trend line,
5:09
Speaker 1: and Hong Kong is destined to become just another mainland city.
5:14
Speaker 1: The question is, you know, the future of the party,
5:16
Speaker 1: the future of the Chinese economy, all those normal considerations.
5:20
Speaker 1: But if if, if the Chinese mainland, if nothing else changes,
5:25
Speaker 1: then Hong Kong will be sort of Shenjen in another
5:30
Speaker 1: few years. I'm surprised to hear that you say things
5:33
Speaker 1: have moved in the opposite direction, because so many big
5:36
Speaker 1: for example banks, international banks have been expanding their arms
5:41
Speaker 1: in China, and we've seen a number of distress debt investors,
5:45
Speaker 1: for example, including Howard Marks in his firm, going into
5:50
Speaker 1: China to invest more because they have more confidence that
5:53
Speaker 1: they'll be able to be supported by the laws, etcetera.
5:57
Speaker 1: There doesn't see, I mean, first of all, I would
6:00
Speaker 1: point out that distress. Debt is about distress, it's not
6:04
Speaker 1: it's not necessarily about the laws. Um. You know, ask
6:07
Speaker 1: particularly why they go in and I think it's it's
6:10
Speaker 1: much more about distress than about being supported by the laws.
6:13
Speaker 1: But otherwise, let's just look at the macro numbers. There's
6:16
Speaker 1: been an increase in public ownership or state ownership of
6:21
Speaker 1: of asset, of key assets, and all sorts of industries.
6:24
Speaker 1: Private ownership has declined. Uh F d I numbers are
6:29
Speaker 1: very small compared to what they used to be. UM.
6:34
Speaker 1: On the portfolio front, there are still you know, portfolio investment,
6:38
Speaker 1: there's still increase in in money raised through I p
6:43
Speaker 1: o s, but overall investment flows are starting to move
6:47
Speaker 1: the other direction. This is really interesting to me. It's
6:50
Speaker 1: also interesting that you say that Hong Kong is destined
6:52
Speaker 1: to become another just outpost of the mainland. And I'm
6:56
Speaker 1: wondering how far along in that evolution you think it
7:00
Speaker 1: already is. UM. I would say that, um, you know,
7:05
Speaker 1: things were fairly we're quite stable. Um. While the Chinese
7:09
Speaker 1: economy was still sort of sailing along and then began
7:12
Speaker 1: to get rocky and and getting rocky because because who
7:17
Speaker 1: didn't tell and engaged in such a massive stimulus. Getting
7:21
Speaker 1: rocky part really began with Sheeting Ping, so who also
7:25
Speaker 1: has the most authoritarian and I would say politically clumsy
7:28
Speaker 1: instincts of any of the leaders of the past two decades.
7:32
Speaker 1: So it's I think it's coeval with with Sheding Ping's ascension.
7:36
Speaker 1: I don't think it's necessarily his fault, although I do
7:40
Speaker 1: think he has a tenere for politics. And Stevenson Yang,
7:43
Speaker 1: thank you so much for for your comments. It's really
7:46
Speaker 1: UH jarring to see these images of what I've heard
7:51
Speaker 1: is hundreds of thousands of protesters in Hong Kong. UH.
7:54
Speaker 1: Certainly yesterday we saw those coming out protesting this UH,
7:59
Speaker 1: this extradition law that Hong Kong Chief Executive is still
8:02
Speaker 1: doubling down on UH and saying she will not shy
8:05
Speaker 1: away from controversial legislation. And Stevenson Yang is co founder
8:08
Speaker 1: and research director at j Capital Research. She is also
8:12
Speaker 1: a Bloomberg opinion contributor. Err In a Lovely Phoenix at
8:30
Speaker 1: the Convention Center and I am here because I'm attending
8:33
Speaker 1: the b n y Melon Pershing Insight Conference, which is
8:38
Speaker 1: focused on reimagining business in particular for registered advisors. UH
8:44
Speaker 1: and brokers as at cater to individuals trying to figure
8:48
Speaker 1: out the landscape here at a time of incredible uncertainty.
8:51
Speaker 1: I'm very lucky to have Jim Crowley with me, who
8:54
Speaker 1: will become the chief executive officer of Pershing, which is
8:57
Speaker 1: a b n Y melon company, come July first. Jim,
9:01
Speaker 1: first of all, congratulations, Thank you very much. UM. I
9:04
Speaker 1: wanted to start with your clients. Are more than two
9:07
Speaker 1: thousand people here and I'm trying to figure out as
9:09
Speaker 1: they try to reimagine themselves in a world with new
9:12
Speaker 1: technologies and a great deal of uncertainty on the policy front,
9:16
Speaker 1: what's their biggest concern Well, there are several You mentioned technology.
9:20
Speaker 1: That's one. So the complexity of the technology environment and
9:24
Speaker 1: the new technology that's coming to the financial services industry
9:28
Speaker 1: is very disruptive. The regulatory change that's happening across the industry,
9:32
Speaker 1: both in the advisory marketplace as well as the purple
9:35
Speaker 1: dealer marketplace. And then the third thing is reimagining what
9:38
Speaker 1: that client experience can be in the future, because consumers
9:42
Speaker 1: have become so accustomed to a different kind of behavior,
9:46
Speaker 1: a different kind of experience working with the fintech community.
9:49
Speaker 1: So what does an experience today look like or or
9:52
Speaker 1: or perhaps tomorrow look like? Uh from your point of view,
9:56
Speaker 1: So experience for us means how well we get the
9:59
Speaker 1: work done and how quickly we get it done. Was
10:02
Speaker 1: the experience good? Did people leave the process feeling good
10:06
Speaker 1: about what just happened? Was it easy to complete? The
10:10
Speaker 1: financial services industry has long been an industry with very
10:14
Speaker 1: complex regulations around it, many requirements around in terms of
10:17
Speaker 1: data gathering and information about investors. And it is a
10:21
Speaker 1: complex process, and so how can we simplify that all?
10:24
Speaker 1: That's what we're really focused on. But is that different
10:26
Speaker 1: than it's always been. No, it's not different than it's
10:30
Speaker 1: always been. But the investors experience with other fintech providers
10:35
Speaker 1: or other consumer businesses has changed what their expectation is. So,
10:40
Speaker 1: how can we make it easier to um move money around?
10:45
Speaker 1: How simple it is to make a purchase on Amazon
10:49
Speaker 1: or on eBay? Can we move money as quickly and
10:52
Speaker 1: as easily from a bank account to an investment account?
10:55
Speaker 1: Those are the things that they expect us to do.
10:57
Speaker 1: One thing that I'm wondering is if you could put
11:00
Speaker 1: with some of the changes that the industry is facing
11:03
Speaker 1: into perspective, because I know you've been You've been doing
11:05
Speaker 1: this for a while, um, and I think that there
11:09
Speaker 1: have always been sort of see changes over time, uh
11:13
Speaker 1: in the financial industry, and a lot of people are
11:15
Speaker 1: talking now about the sort of movement online and the
11:19
Speaker 1: movement to people who are more accustomed to, uh interface
11:22
Speaker 1: with with the web. How different is it? I mean,
11:25
Speaker 1: is this is this a radical shift or is this
11:28
Speaker 1: sort of in line with the evolutions that you've seen
11:30
Speaker 1: over years? Well, what has happened over the time and
11:34
Speaker 1: what has come with the whole online experiences what I
11:37
Speaker 1: would describe as the digitization of the business. And so
11:41
Speaker 1: a business that has long been driven by paper and
11:44
Speaker 1: wet signatures, Now people expect to do it on their iPhone.
11:49
Speaker 1: They don't expect to have to receive a piece of
11:51
Speaker 1: paper in the mail and sign it and return it
11:54
Speaker 1: and have it take a matter of days. That they
11:56
Speaker 1: want things done in a matter of minutes, okay, And
11:59
Speaker 1: so that that changes it. But what about from an
12:01
Speaker 1: actual investment standpoint, because a lot of people talk about
12:04
Speaker 1: millennials to the point where you know, people roll their
12:07
Speaker 1: eyes at a certain point on all sides because you
12:10
Speaker 1: can't talk to a group of people within a broad
12:13
Speaker 1: range of ages as a monolith. But are there trends
12:17
Speaker 1: in the way that they invest money that your clients
12:20
Speaker 1: are increasingly dealing with it and trying to address. Well.
12:23
Speaker 1: I think that there definitely is. People are very focused
12:26
Speaker 1: on the costs of investing now, they're very focused on
12:30
Speaker 1: social responsibility and having a real community around what they're
12:34
Speaker 1: trying to do and how they're trying to invest. So
12:37
Speaker 1: there are nuances to what people are doing and it
12:40
Speaker 1: is impacting how assets are flowing through the different product
12:43
Speaker 1: platforms that are out there today. And it's something that
12:47
Speaker 1: you know, we don't have a direct at person, We
12:49
Speaker 1: don't have a direct access to the market. Our job
12:53
Speaker 1: is to help our clients, these advisory firms and businesses
12:56
Speaker 1: to run their businesses more efficiently so they can serve
13:00
Speaker 1: advisors more effectively. And so we have to have a
13:02
Speaker 1: platform that allows for the different types of product choices
13:06
Speaker 1: that these investors and advisors want in this new world.
13:10
Speaker 1: When you talk about social responsibility, people talk about, you know,
13:14
Speaker 1: a variety of schif funds. How are you seeing this
13:17
Speaker 1: manifested Because a lot of E s G funds haven't
13:19
Speaker 1: necessarily seen the degree of money to come in the
13:24
Speaker 1: sort of his commensurate with the amount that it's talked about. Yeah, well,
13:27
Speaker 1: I think, um, you know, a lot of these things
13:30
Speaker 1: take longer to develop than you would necessarily think. I
13:34
Speaker 1: think the marketing is perhaps sometimes ahead of the actual results.
13:39
Speaker 1: But over well, I think that, um, you know, whether
13:43
Speaker 1: it's whether you're an asset manager or whether you're any
13:46
Speaker 1: one of the forty business providers that are here, I
13:50
Speaker 1: think many times it takes longer to sort of realize
13:53
Speaker 1: what you're trying to achieve. We had Ala Mallali here
13:56
Speaker 1: yesterday from Ford. He made a great comment about profitable,
13:59
Speaker 1: profitable old growth for all. I thought it was a
14:01
Speaker 1: great comment because it really does get everyone aligned and
14:05
Speaker 1: what we're trying to do and make certain that everyone
14:08
Speaker 1: is a participant in the process. And I just thought
14:11
Speaker 1: it was a wonderful comment and it really sort of
14:13
Speaker 1: resonates with what the spirit is of this event to
14:16
Speaker 1: bring all these business partners together, all the different clients
14:19
Speaker 1: together to talk about reimagining the future. Thank you so
14:23
Speaker 1: much for for hosting us, and thank you for being here.
14:26
Speaker 1: Uh and uh wish you the best of luck surviving.
14:30
Speaker 1: I think it's going to be hundred and ten today.
14:31
Speaker 1: It was a hundred and eighteen at one point. Yes,
14:33
Speaker 1: well let's stay inside and stay cool. Yeah, it's definitely
14:36
Speaker 1: a nice and cool and a lot of really important
14:38
Speaker 1: and interesting conversations take place here in the Phoenix conventions.
14:42
Speaker 1: That are Jim Crowlett Crowley chief executive Officer, come to live.
14:46
Speaker 1: One of Pershing, which is a b n Y Melon company,
14:50
Speaker 1: joining us here in Phoenix hosting uh the b n
14:53
Speaker 1: Y Melon Pushing Insight Conference. Of we are broadcasting from
15:15
Speaker 1: the b n Y Melon Pershing Insight Conference. One question
15:20
Speaker 1: people have is about President Trump and heading into the
15:24
Speaker 1: elections of Democratic candidates. President Trump sat down with ABC
15:27
Speaker 1: News Chief anchor George Stephanopolis yesterday. UH. He said that
15:33
Speaker 1: it would he would take foreign information on opponents, saying
15:37
Speaker 1: it's not an interference. If they have information, I think
15:41
Speaker 1: I'd take it. If I thought there was something wrong,
15:44
Speaker 1: I'd maybe go to the FBI if I thought there
15:46
Speaker 1: was something wrong. Joining me now is Clint Watts, Distinguished
15:50
Speaker 1: Research Fellow for the Foreign Policy Research Institute, also Senior
15:54
Speaker 1: Fellow at the Center for Cyber and Homeland Security at
15:57
Speaker 1: the George Washington University he is outside the capital in Washington,
16:02
Speaker 1: d C. Currently, Clinton, what did you make of those
16:04
Speaker 1: comments that President Trump made yesterday on ABC News. It
16:09
Speaker 1: seems to affirm what we've always suspected is that the
16:12
Speaker 1: president isn't worried about foreign interference in our elections. Uh.
16:16
Speaker 1: He might even welcome uh opposition research as he calls it,
16:20
Speaker 1: or what we would call data dumps hack can release.
16:23
Speaker 1: And so when we look at it looks like we
16:26
Speaker 1: might look to a replay of ten. It sends a
16:29
Speaker 1: signal to adversaries that they can pretty much maneuver in
16:33
Speaker 1: the way that Russia did. I think for allies now
16:37
Speaker 1: they have to question should they start backing candidates uh
16:40
Speaker 1: that they prefer in an election, but they want to
16:42
Speaker 1: provide opposition research. It's also dangerous because the president hasn't
16:47
Speaker 1: entirely divested from his businesses. And so if you're a
16:50
Speaker 1: foreign adversary or an ally, or just want to influence
16:53
Speaker 1: the election, uh, you know, information about the presidents of
16:56
Speaker 1: business is, uh, what his relationships are overseas with other
17:00
Speaker 1: uh entities? Why not dump that out of the open
17:03
Speaker 1: or try and influence the election towards whichever candidate to
17:06
Speaker 1: one and I think the final big thing is the
17:09
Speaker 1: FBI has gone to great measures with the Foreign Influenced
17:11
Speaker 1: Task Force to try and go out to democratic campaigns
17:14
Speaker 1: and and brief them, give him a counter intelligence brief
17:16
Speaker 1: and tell them what the rules of the road are
17:19
Speaker 1: heading into The President basically said that, uh, the FBI
17:23
Speaker 1: director was wrong and that he didn't necessarily think he
17:26
Speaker 1: needed to do that. So it puts it puts our
17:28
Speaker 1: entire election in the weird context where it seems that
17:32
Speaker 1: everything's out the window, anything could go, and our institutions
17:35
Speaker 1: are really incapable of protecting us because even at the
17:38
Speaker 1: leadership level, they're getting mixed messages. Was was President Trump
17:43
Speaker 1: saying this in that format somehow a signal or recognition
17:49
Speaker 1: that there is a foreign entity or more than one
17:53
Speaker 1: that is looking to have one of these data dumps
17:57
Speaker 1: and have perhaps him on the receiving end. I don't
18:00
Speaker 1: think it was a clear invite. I mean, my contacts
18:04
Speaker 1: were why I came up yesterdays because his son was
18:06
Speaker 1: at the Senate committee, you know, behind closed doors, talking
18:09
Speaker 1: about what was his contacts, what was his relationship, what
18:13
Speaker 1: was the information he'd relayed based on that Trump Tower meeting,
18:17
Speaker 1: and so I think he was trying to rationalize what
18:19
Speaker 1: his son did, what he might do, UH, to try
18:22
Speaker 1: and essentially exonerate themselves for many scrutiny. But at the
18:26
Speaker 1: same time it does speG the question is the president
18:29
Speaker 1: opening up to anyone out there that might want to
18:31
Speaker 1: help him. Hey, I'm open for business. I would love
18:33
Speaker 1: any research on my my opponents. And it really just
18:37
Speaker 1: puts American a position of weaken weakness to any authoritarian
18:42
Speaker 1: adversary that wants to hack a candidate, or hack an institution,
18:45
Speaker 1: maybe even hack one of our our intel agencies, and
18:49
Speaker 1: try and drive a narrative that undermines the greater good
18:52
Speaker 1: of the contract. So Clinton, you're a former FBI special agent,
18:57
Speaker 1: You've worked in the U. S. Army, You've been when
19:00
Speaker 1: you were in the FBI, you're part of the Joint
19:02
Speaker 1: Terrorism Task Force. You've written this book messing with the enemy,
19:05
Speaker 1: surviving in a social media world of hackers, terrorists, Russians,
19:08
Speaker 1: and fake news. And I'm wondering whether there's any precedent
19:13
Speaker 1: for a president of the United States to accept information
19:19
Speaker 1: on perhaps an opponent, a political opponent, from foreign governments.
19:23
Speaker 1: Is there a precedent history not that I'm aware of,
19:26
Speaker 1: and it is violating the law. It was something that
19:30
Speaker 1: came up in the Muller reports specifically said that the
19:33
Speaker 1: only reason that they did not pursue charges against some
19:36
Speaker 1: of the Trump campaign members was because they were unaware,
19:38
Speaker 1: basically of what the stipulation is that you can't take
19:41
Speaker 1: foreign help or foreign contributions UH in order to win
19:44
Speaker 1: the election. This clearly seems to suggest that the president
19:48
Speaker 1: does know this but doesn't care, you know, and is
19:51
Speaker 1: willing to violate that. And it's it is without president.
19:55
Speaker 1: And I also think it speaks to the degradation of
19:57
Speaker 1: norms where, if you remember back out or received a
20:01
Speaker 1: briefing book, which George Stephanopolis actually brings up in that
20:04
Speaker 1: discussion with the president, Al Gore's campaign called the FBI
20:08
Speaker 1: because they knew it was either stolen or pill from
20:11
Speaker 1: materials and that was kind of the rules of the
20:13
Speaker 1: road that everyone accepted. It just shows how far we've
20:17
Speaker 1: changed in terms of our country about what we see
20:20
Speaker 1: is acceptable in order to win an election, and by winning,
20:24
Speaker 1: what are we really saying about our country as a whole.
20:27
Speaker 1: So Clinton, just to just to sort of push back here,
20:30
Speaker 1: what would you say to someone who said, well, what
20:32
Speaker 1: does it matter, right, I mean, more information is better.
20:35
Speaker 1: And you know, why should we self censor regardless of
20:38
Speaker 1: what the sources of the information, If it's accurate, why
20:42
Speaker 1: shouldn't it be a go. Because in the case of
20:45
Speaker 1: foreign anversaries, they are trying to pursue something inside the
20:48
Speaker 1: United States. So let's look back to they gave us
20:52
Speaker 1: information about one candidate to distract from one candidate. We
20:56
Speaker 1: don't really know the full spectrum of it. And the
20:58
Speaker 1: goal was essentially the advanced Russian interests inside the United
21:01
Speaker 1: States and abroun and they were successful in that. They've
21:05
Speaker 1: been quite successful. Barring sanctions relief, Russia has gotten most
21:09
Speaker 1: of the what they've wanted internationally. So this incentivizes every
21:13
Speaker 1: country around the world to do criminal activity against the
21:16
Speaker 1: United States in the form of hacking, to go at
21:20
Speaker 1: political candidates and to even link up to political candidates
21:23
Speaker 1: and possibly give them false information to create chaos inside
21:26
Speaker 1: of our country, which suits their need. Really sets this
21:29
Speaker 1: up in a position of weakness rather than a position
21:32
Speaker 1: of strength with visa vir adversaries. So clin just real
21:35
Speaker 1: quick here. Since you do specialize in UH hackers and
21:39
Speaker 1: terrorists and and fake news. What are you expecting heading
21:42
Speaker 1: into the elections. I mean, we're getting any indications of
21:45
Speaker 1: just how rampant fake news and some mo the foreign
21:49
Speaker 1: interference might be. The big change is really that most
21:54
Speaker 1: of the authentic accounts and information I'm seeing pop up
21:57
Speaker 1: right now, I think domestic and origin, pant foreign and
22:00
Speaker 1: what what you're really going to see? I think from
22:02
Speaker 1: Russia and others as a cost benefit calculation, they will
22:06
Speaker 1: try and edge forward and push forward the candidates that
22:08
Speaker 1: they prefer, which are largely populous candidates whether you're on
22:12
Speaker 1: others either side of the political aisle, and they're probably
22:17
Speaker 1: waiting to see how aggressive to be because they also
22:20
Speaker 1: don't want to provoke a negative reaction from Afar. So
22:23
Speaker 1: if you're China, uh Iran, Russia, which are the big
22:26
Speaker 1: ones way always talking about, but even other countries like
22:28
Speaker 1: Saudi and Israel that want to influence uh US politics,
22:32
Speaker 1: they're making calculations right now. Going and doing offensive hacking
22:36
Speaker 1: the way the Russian gr you did in sixteen could
22:39
Speaker 1: provoke or even force like a President Trump to take
22:42
Speaker 1: a retaliatory action, to have to mobilize to do something,
22:45
Speaker 1: and they may not see the need to go that
22:47
Speaker 1: far this time. If they think you're getting the outcome
22:49
Speaker 1: they want, they're pretty happy right now about us fighting
22:52
Speaker 1: each other. Clint Watts, thank you so much for being
22:54
Speaker 1: with us. Clint Watts is Distinguished Research Fellow at the
22:57
Speaker 1: Foreign Policy Research Institute. Is also see your fellow at
23:00
Speaker 1: the Center for Cyber and Homeland Security at the George
23:03
Speaker 1: Washington University. From Phoenix, Arizona. This is Bloomberg. Thank you
23:24
Speaker 1: so much, Greg Jared Well. Yesterday on Bloomberg Television and
23:28
Speaker 1: Bloomberg Radio, Paul Tutor Jones Uh, the co chair and
23:31
Speaker 1: chief investment officer and of course founder of Tutor Investment Corp.
23:35
Speaker 1: Was speaking on Bloomberg Radio and Bloomberg Television advising people
23:40
Speaker 1: that they should pull out their playbook for when the
23:43
Speaker 1: Fed cuts rates. So there's no playbook for this. The
23:46
Speaker 1: only thing is is that because the Federal Reserve is
23:49
Speaker 1: going to cut rates, he advises people go into stocks,
23:52
Speaker 1: going to go long rates, go short the dollar, but
23:56
Speaker 1: go along goal Joining me now, Matt Forrester, chief investment
24:00
Speaker 1: officer at b N Y Melon's Lockwood Advisors, here at
24:03
Speaker 1: the b N Y Melon Pershing Insight Conference of Do
24:07
Speaker 1: you think that that's the way to go go along
24:09
Speaker 1: stocks because if it's gonna cut rates, um, I think
24:12
Speaker 1: it's going to depend on why the Fed ends up
24:15
Speaker 1: communicating why they're cutting rates. I think that's going to
24:18
Speaker 1: be a big part of how markets react to this.
24:21
Speaker 1: I think it's an argument that you might want to
24:23
Speaker 1: sell the first rate cut in terms of equities. The
24:25
Speaker 1: other pieces of this I think are you know fully
24:27
Speaker 1: intact and we've seen a pretty strong gold market. Um,
24:31
Speaker 1: I think the bond trade is really interesting here, and
24:34
Speaker 1: um that's the pieces that I think are going to
24:35
Speaker 1: be We've had such a big decline in interest rates,
24:39
Speaker 1: so I think I would want to make sure that
24:41
Speaker 1: the fixed income portion of your portfolio is set up
24:45
Speaker 1: properly in case the recessionary kind of forces continue to build.
24:50
Speaker 1: We've seen so many different models quant models, whether it's
24:53
Speaker 1: based on the yield curve or other measures that are
24:56
Speaker 1: really warning that the probability of recession sometimes in the
25:00
Speaker 1: in the market's time frame twelve to eighteen months is
25:03
Speaker 1: really rising. So you know, in that environment, I think
25:06
Speaker 1: it might be harder for stocks and they might react
25:09
Speaker 1: well to an initial rate cut on you know, or
25:12
Speaker 1: the prospect of some rate cuts. The question is how
25:14
Speaker 1: they would react, you know, soon after that if it
25:16
Speaker 1: looked like some of the recessionary forces were starting to build.
25:20
Speaker 1: One thing that we neglect to talk about enough when
25:23
Speaker 1: we talk about the FED cutting rates is the consequence
25:27
Speaker 1: of a really long period of mirror zero rates. I mean,
25:31
Speaker 1: we used to talk about this, but with retirees for example,
25:35
Speaker 1: And I'm just wondering if you could give us a
25:37
Speaker 1: sense of the scope of that problem. I wouldn't want
25:40
Speaker 1: to say problem, but yeah, problem, because there's all these
25:42
Speaker 1: people who are preparing to retire and they're struggling to
25:45
Speaker 1: find a place to get income. Yeah, for sure. I
25:47
Speaker 1: mean this is a really interesting uh you know, part
25:50
Speaker 1: of the market is just retirees that are struggling with
25:53
Speaker 1: this annuitization of all the funds that they have accumulated
25:58
Speaker 1: over their lifetime. And so one of the stats that
26:01
Speaker 1: isn't quite as well known. You hear a lot people
26:04
Speaker 1: saying that, oh, well, there's ten thousand retirees per day,
26:09
Speaker 1: you know, turning people turning sixty five in the United States.
26:12
Speaker 1: Not all those people are retiring. But the interesting thing
26:15
Speaker 1: about that, there's a researcher the st Louis Fed who
26:17
Speaker 1: was who was calculated that that actual number is going
26:20
Speaker 1: to rise between here and three or twenty four and
26:24
Speaker 1: it's going to get close to twelve thousand a day.
26:27
Speaker 1: So this is a really monumental demographic see change. Um.
26:32
Speaker 1: You know, on top of fascinating statistics like we have
26:35
Speaker 1: the lowest birth rate in thirty two years in the
26:38
Speaker 1: United States. So you know, the the question is what
26:41
Speaker 1: is the seed corn for future greath of growth going
26:44
Speaker 1: to be, you know, and is the FED going to
26:46
Speaker 1: be going to get out of this operating monetary policy
26:49
Speaker 1: at a zero bound on you know, inflation and interest rates.
26:53
Speaker 1: I think it is your really important questions. Does it
26:55
Speaker 1: mean that sixty five really isn't the time for people
26:57
Speaker 1: to retire it's more like eighty three? Well, that's only
27:00
Speaker 1: what we've seen. Or if you look at the labor market,
27:02
Speaker 1: the labor partition patient rate amongst older workers are fifty
27:05
Speaker 1: five is one of the fastest growing parts of labor participation,
27:09
Speaker 1: whereas the rest of the labor pool you know, continues
27:12
Speaker 1: to shrink in terms of labor participation. UM. So clearly
27:15
Speaker 1: there is some pressure on older workers to continue to
27:18
Speaker 1: stay in the workforce. In order to continue to build
27:20
Speaker 1: that retirement nesting so as people get older. One question
27:25
Speaker 1: I have is what do they do in this environment
27:26
Speaker 1: given a time of great uncertainty on a policy front,
27:29
Speaker 1: where you have terrific you know, as Paultier Jones was saying,
27:32
Speaker 1: could ship the United States into recession in his view,
27:35
Speaker 1: you've got a FED that is poised to cut rates
27:37
Speaker 1: at least based on market expectations. With someone with only
27:41
Speaker 1: ten years left to say before they're supposed to retire,
27:44
Speaker 1: what are they supposed to do with their allocations? I
27:46
Speaker 1: think right now at this point in the cycle. Uh,
27:49
Speaker 1: one of the things that we see a lot at
27:50
Speaker 1: Lockwood is advisors may be reaching for a little bit
27:53
Speaker 1: of yield, and I think that might be more dangerous trade. Again,
27:56
Speaker 1: if we start seeing in a recessionary pressures build and
27:59
Speaker 1: hopefully we're wrong, hopefully have more time to make these
28:02
Speaker 1: kind of adjustments. But you know, if the recessionary forces
28:05
Speaker 1: come faster than what markets expect, you know, some of
28:09
Speaker 1: these credit porces in that their portfolio places where people
28:11
Speaker 1: have reached to get that extra yield, you know, could
28:14
Speaker 1: be could be really challenging. The other thing I needed
28:17
Speaker 1: to think about it in terms of terms of a
28:18
Speaker 1: global context. You know, we have you know, nearly eleven
28:22
Speaker 1: trillion dollars globally and negative yielding debt and that's astonishing.
28:26
Speaker 1: I mean, for here, Jim Crowley, you know, our CEO
28:29
Speaker 1: CEO talk about there's only seven trillion dollars in the
28:32
Speaker 1: wealth and that industry. Here in the United States, there's
28:34
Speaker 1: almost eleven trillion dollars in UH, negative yielding debt. You know,
28:38
Speaker 1: US rates don't look so bad, you know, when you
28:41
Speaker 1: compare it in this kind of global context. Matt Forrester,
28:44
Speaker 1: thank you so much as always for being with us.
28:46
Speaker 1: Matt Forrester, chief Investment Officer at B and Y Melons
28:49
Speaker 1: Lockwood Advisors. With a stunning statistic, UH that it's going
28:53
Speaker 1: to be potentially in the near future, twelve thousand people
28:57
Speaker 1: every day in the United States turning sixty five. I've
29:00
Speaker 1: been entering at that retirement age. Thanks for listening to
29:03
Speaker 1: the Bloomberg P and L podcast. You can subscribe and
29:05
Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
29:09
Speaker 1: you prefer. I'm Paul Sweeney, I'm on Twitter at pt Sweeney.
29:12
Speaker 1: I'm Lisa abram Woh. It's I'm on Twitter at Lisa
29:14
Speaker 1: Abram woits one before the podcast, you can always catch
29:17
Speaker 1: us worldwide. I'm Bloomberg Radio