China's Crackdown on Tech a Headache for Investors

Business Week and iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Global News. So we mentioned some of the COVID headlines, and our news team has certainly been covering them. And among the COVID headlines also new coronavirus cases in the U s surging to the highest weekly level since early February, fueled by that highly transmissible delta variant. Charlie

was just talking about it, death rows By. That's the biggest weekly increase in December. And China is punishing dozens of local officials for failing to curb that COVID nineteen outbreak in that country, and so the country's former health chief they're saying the idea of quote living with the virus is unacceptable. We've got a great voice to bring in. He is back with us, Dr Jacob B. Kraft. He's a biologist. He is CEO and co founder of the

privately held biopharmaceutical company Strand Therapeutics. He joins us on the phone from Boston, Massachusetts. Dr b. Craft, good to have you back here on Bloomberg Radio. How are you. I'm fantastic, Carol. How are you doing? Doing well? Doing well? Trying to manage through and filter through some of the headlines the current round of virus headlines cases surging, especially for those not vaccinated. What needs to be top of mind for our audience and the general public in your view,

I think two things. One is, domestically, we need to make sure that we're getting vaccines out as quickly as we as we possibly can. I think see I think now. Finally, the BIDO administration is also taking the correct stuff, pressuring the FDA to prioritize the you know, the full review UH and approval of the COVID vaccine um. And internationally, we need to be getting vaccines out to the developing nations.

The Delta variant was first picked up in India during their UH during their major outbreak recently um or months ago, and that likely lead to a huge international spread of it, which is now threatening you know, kind of the return

to normal say that we saw right now. The Welcome Trust is reporting that one in two people in wealthy nations is vaccinated, but only one in seventy four are vaccinated in the developing world, and in the developing world, where sanitation is often you know, not as as well, and people are living in much tighter quarters in a lot of these areas, major cities in places like India.

It further increases our our risk of spread. And so it's just unacceptable that we still haven't been able to get the vaccines out into these UH developing areas because every single day that goes by, we risk vaccine fully vaccine sort of resisted virus emerging either here or abroad.

How tricky do you think it become, especially as people start to talk about, including Dr FACCI, about giving out boosters already, and how do we balance the developing world where some of them haven't even gotten their first vaccine individuals there and now we're talking about boosters potentially for those in the developed world. Right now, we have a

bigger problem than than just the boosters. We have a problem of not enough people getting vaccinated in the United States, with which, honestly, while I respect everyone's right to choose themselves, when you live in a society, there is a certain amount of of of societal duty and and let's face it, patriotism that you should have to protect those Americans around you. This outbreak of the new variant is due to uh super spreader events happening, mostly driven by the unvaccinated population.

Of course, now we're seeing them jump into the vaccinated population and it's it's it's very sad to see. But meanwhile, I think it was the state of Alabama. I saw recently how seventy four thousand vaccines expire while they help them as people did not take them. And so the idea here, and it's been the entire time that we have enough vaccines here state side, we should probably be doing more to get vaccines out to the developing world before they expire as well, um and continuing to just

incentivize the massive manufacturing of these vaccines. I think that at this point, um, it's more of a logistical and a prioritization issue of getting vaccines where the most needed than it is of just not simply having enough. I mean, if you're going to say there's not enough for the developing world, but then Alabama's gonna less seventy four thousand vaccines expire in a freezer, I think that that's also unacceptable. It feels like a crime. Many would argue, what are

you doing for your own employees. There's increasingly we're seeing employee employers another institutions saying if you want to work with us, you've got to be vaccinated. UM. You know, we we looked at and talked with a lot of other executives in the industry about this. I think we're very less both as a five set company and as a messenger RNA company to have, uh, you know, without any prompting from US, a hundred percent vaccine adherents. UM.

Just you know. I think that people when they are educated about the science and understand how how safe and effective and impactful these vaccines are. UM, it wasn't something that really came up as a as a general issue. UM. I think that it's nice actually to see that some of the larger players of Southern Military recently UM saying that they're going to be starting to mandate the vaccines.

I mean, I think that a lot of these employers should should you really incent to buy their employees to get these vaccines, especially people that work at tech and biotech companies. It's you know, it's clearly what's going to save us from from a vaccine resistant mutation. And while I think m R and A is a is an absolutely miracle of a of a platform in terms of

how quickly it could be repurpose. Sefon den Cell and Ugo Sawhan from Maderna and Violent Tech of talk at length about making new vaccines against the new variants to be more effective against new sort of mutations that may arise. But sect of the matter is we have an effected vaccine that we just need to get into people's arms immediately,

and it should be on employers. Really, I'd like to see the US government really step up and start to mandate if if people really want to return to a masthless life, we have to have a way to actually verify that people have in bad dr B Kraft, we talked about the US backing uh waiving patents on COVID vaccines. You know, a lot of researchers thought that was terrific that they thought that that was a good thing. A

lot of drug makers didn't think. So what's your perspective on this and what does it mean in terms of drug development creating new vaccines for the next mutation? Uh and so on. I just don't think it's fundamentally helpful. Um. And I think I used this analogy before, maybe even last time I was on here. But these therapy its at so new, they're so cutting edge that a lot of the innovation that's there's actually in in the manufacturing tide.

And so you can waive Madernast patents, but you won't be able to access all of their interior secrets to how they make those vaccines and and the the the actual sort of even reading through the patents that I think the best analogy that I that I had come up with was, you know, if you had Gordon Ramsay's ingredients in front of you and his recipe in front of you, could you cook like him? And the answer is of course no, right, And that's kind of what

we're looking at here. It's so I just don't believe it's helpful, and I felt like in the Binding administration did that, UM, and they washed the hands of this vaccine issue and said, well, we've done all the help we can and walked away. And we're still sitting with one out of seventy four people in developing countries with vaccines.

And I think that's just an absolute shame. To the point is by not just you're saying that even if we just opened this up, it doesn't mean all of a sudden we'd be able to produce tons and tons of vaccines easily and readily, so that we could vacciny basically everybody very much more quickly. They waived those patents three months ago, four months ago, and please point me to the to the example of what country then spun up their manufacturing and magically had COVID vaccine is ready

to go. It was just the the obvious thing, of course, would have been to go back to year and start investing in the infrastructure of these vaccines and we can start making those infrastructure investments. We're seeing people like Anthony Faucine now UM, echoing some statements that I've made before, which is we need to double down on both manufacturing infrastructure of these next generation therapeutics, and we need to start thinking about how are we better prepared for pandemics

in general. But further than that, I think that we just need better manufacturing infrastructure. We should have. It's true we should have made that that those investments a year ago when it looked like the Almannay vaccines were going to be a promising way out of this, we didn't make those investments. And so now now that I just feel like the administration seemed to want to waive the patents as if that was going to fix the problem. It didn't take the problem, and then here we are,

um with without the problem being fixed. I'm not worried about the patents as a drug company or and I don't think Stefan dem cell or talking or worried about it either, but it's just fundamentally not helpful. Well, so we've gone through a lot, to say, understatement of the year of the decade, UH, in terms of the last year and a half, are we you know, you understand this world. You're on the cutting edge in terms of looking at new science and developing UH new methodologies, if

you will. So have we learned anything in terms of being ready for the next pandemic in your view, I think that we had the technology right the m R and A technology was already being progressed by by the n I H by turning actually by all the people who are there. What we really needed was public and legislative support to invest in these things, to understand that

these were issues. Right the people at the d D, people at DARK, people at the CDC, everyone has been screaming about the fact that we are at risk for a new pandemic for decades. I've heard it my entire professional life, almost to where you stop thinking about it

even as a professional in the space. And now I think where we're sitting at is we have a very full public understanding of what a pandemic looks like in a modern age that nineteen twenty, but in a day where you can you can be in Wuhan, China one day, step on a plane, and fourteen hours later be walking out in to the middle of New York City, and that is a can be a very scary place for the propensitive of a pandemic. So I think now we have the understanding of the economic and personal toll that

these sorts of things can take. And I hope I really do hope that it means that we can get the public and the legislative support to actually make real, bold investments into the future of defense. I'm gonna leave it on that note. Thank you so much. I always appreciate when you join us and find some time for us. Dr Jake Becraft he is the co founder and chief executive officer of Strength Therapeutics, joining us on the phone from Boston. Well online at Bloomberg business Week dot Com.

A story on a topic that may make your make you roll your eyes a little bit or possibly glaze over, But it's something that always seems to indicate another crisis moment in Washington, until it doesn't, and then until it rears its ugly head again. It's about the debt ceiling. So let's get more from Bloomberg News Head of US Rates and f X Benjamin Purvis. He is here in our interactive broker studio in New York City along with Bloomberg Business Week editor Joe Weber on the remote access

in Massachusetts. Is it fair to say, like your eyes glaze over, or you shake your head, you roll your head, You're like, okay, it's a story that's going to pass and then all of a sudden it shows up again, Joel uh and I was like, wait, what, it's back? And of course it is, um And it's been a little bit since we we've had to play this game of chicken, but it is, it is back, and you know it will have repercussions and been our How are those starting to already show up? What? What has investors

and traders um freaking out? I I think you know, investors are sick of this thing, to be honest, I mean you know, I think you make the point that you know it comes up got your eyes glaze over. But it is important. Is at once ridiculous and and u afterally important. Um, it's ridiculous in the sense that you know, these folks are voting on increasing a limit for debt that they've already you know, increased the spending

bills for so they've already approved the spending. Yet now we have to go out and improve the debt to to to finance it. But at the same time, you know, this is having real world impacts, and this is part of what we were we've been writing about recently, is the real world impacts on on borrowing costs, The real world impacts on distorting things just because of some of the ins and outs and the arcane rules surrounding it.

So what is this thing we call debt ceiling because we throw it around and assume everybody knows what we're talking about, But I mean, what is it really? I mean, essentially, it's the it's the amount the credit card limit, if you will, of the US government, And you know, the Congress sets what it allows the government to borrow and then periodically has to raise that limit because America's debt

pile is is not getting any smaller. It's you know, ballooned and ballooned even more in this sort of post COVID crisis to around twenty eight trillion, So you know, this isn't getting any smaller. And the spending bills that allow this, that that require this spending, this borrowing, you know, they've already been passed. This has already happened. So it's literally just saying I'm going to agree to pay off the credit card bill for all this stuff that I

bought from Macy's or whatever. Um. And I could get a lot of stuff at Macy's, could buy Macs, you probably could a few times over. But I mean, you know, as part of all of this, you know, we end up with a partisan wrangle each time, and it's something that happens under administrations of both parties. You know, it happened under Barack Obama, it happened under Donald Trump, It's happening again under Joe Biden. And one party holds the

other too, you know, to account. They like to describe it, but it's really just holding them hostage to what is fundamentally, you know, a superfluous thing because we know they're going to find the money. Correct, Is that a stupid assumption? Or know everyone everyone bet you know, everyone is essentially betting on the fact that you know, somehow or another, you know, they'll come up with a with a fix

on it. And and that's one of the other ludicrous elements of this is that, you know, the debt limit is now back in place. It came back in place at the beginning of this month. Yet America is continuing to borrow because they've got so called extraordinary measures, which allows them to wangle a few things here to a few nips and tucks there, do a few accounting maneuvers somewhere else. And all of this has an impact. Um.

You know, it's sort of underscores how ludicrous it is. Um. On. One element that really underscores that we we we talk about is this idea that you know, as part of the whole mechanics of it, they have to get the pile of cash that America has down. Um. The essential reason being this is to stop them going out and say, issuing five trillion dollars worth of debt just before the ceiling comes into place, and then just using that to pay their bills at their leisure without having to do it.

This time around, everyone was talking about, oh, we have to get the cash pile down. We have to get it down to about a hundred and thirty billion dollars, which isn't chicken feed, but is not a huge amount in the grand scheme of things for Uncle Sam and then lo and behold. At some point in that process the Treasury says, actually that ms alright, for those of you whose eyes are glazing over, stay with us, right chel.

Not only that, because I think this is the other element that comes into play here is that there's an anniversary. This is ten years ago that the US actually uh you know, went through this whole song and dance and snpeak with a decision that stripped the US of its triple A creator credit rating, which been would have been the repercussions of that decision ever since and what kind of bearing might that have on on the conversations this

time around? Well, I mean the cynics would say that, you know, America has only gone from you know, strength to strength in terms of what it can borrow and how it's being able to borrow since then. The debt pile is you know, exploded since then. Interest rates have actually been lower since then, So in real world terms, it hasn't affected the ability of the borrower to borrow. But you know, it did cause some major eructions within markets.

It caused some major troubles and and you know it under underscores how fragile, you know, some of these things are, and that this isn't really a plaything that that Washington folks should be you know, messing around with for partisan politics. Because you're write about that to get the cash balanced down, correct, that the Treasury does affect markets because it's not borrowing as many t bells. So this you know, supplied tom

Right things happen. Yeah, I mean, it's it's you know, it's one of it's the biggest, baddest debt market on the planet. It you know, dictates the cost of every you know, of everything that sort of people overlay over it. And you know, even minor changes that affect the interest rates on say you're a three month bill or a six month bill can have repercussions down the line. And you know, the Treasury deciding to issue half as much as it did that will have a major impact on

the costs. So when we think about how this could come to ahead, what are you going to be watching, Ben, Well, Unfortunately, it's that good old waiting game of of looking at what Mitch mcconnald's doing, what Chuck Schumer's doing, and all the all the usual suspects in Washington. Um. You know, we've just seen today, um the latest in the wrangling

over over this UM topic. And obviously it's it's being interspersed with wrangling over other spending type priorities, over the infrastructure bill we've got in Washington, over the broader spending agenda the Biden administrations looking to pursue, and these are all being counterbalanced as part of some you know, we would like to say it's some big chess game, but maybe it's not so so well thought out. I love how you end that. It's not to say that debt

and deaf as it's don't matter. But the way the u S thinks and legislates on the topic needs to change. And I think most of us have been following this, or like you, who have been watching this over and over again, things need to change. Say all right, Benjamin, purpose thank you so much. It's an important story to understand what keeps coming round and round when it comes to government negotiations on spending and how to pay for it.

Benjamin of course, Benna's head of US Rates and f X at Bloomberg News, and of course Joe Weber, our editor of Bloomberg Business Week, fun at online at Bloomberg dot com. This is Bloomberg Business Week with Carol Masser

and Bloomberg Quick Takes Tim Stinovik on Bloomberg Radio. You are on a seed to Bloomberg Business Sweek on Bloomberg Radiom Carol Master, Tim Stanovic is off Bloomberg Business Week brought to by s c I. Today's competitive marketplace requires asset managers to become more operationally a deep see how you can transform your business with SEIS Global Platform at

se i C dot com slash. I m s, Well, it's been chronic the flow of headlines out of China, in particular crackdowns on the country's big tech companies and more. But what's really going on here? Well, let's find out, and he writes about it in his weekly column Bloomberg New Economy Editorial Director Andy Brown. He notes that there is something much bigger going on. He joins us in our Bloomberg Interactive Broker studio. So you and I've talked a lot about the headlines, and I feel like they

are fast and furious, NonStop, um, very thoughtful column. And you look at it in a different way. What's what do you see is really going on here? So the question everybody wants the answer to is why on arth a Chinese authorities going after the most dynamic, the most profitable part of their comm me, which of course is the tech sector and particularly consumer tech at a crackdown by the way that has cost listed Chinese companies in

excess of one trillion dollars. And I happen to think that the most popular explanation for this is also the most unlikely. And the explanation everybody is coming up with

is this is this is sort of benign. This is President Shi jim paying looking at rising prices in China and saying this is exacerbating inequality and we have to do something about it, and that will that involves cracking down on tech companies who are allegedly building monopolies and underpaying their gig workers and abusing consumer data and so on. And so I haven't to think this is a fig leaf that actually this is all about a monumental struggle

for power and control in China. And the giveaway, the giveaway here is the fact that the sharp end of this crackdown and you're seeing it now, particularly last week, is led by ideologues in the party and including in the propaganda agencies, which really are core to power in China. Well, right, and that I mean if you think about impacting people right in terms of how they're thinking about it. So so you're basically saying, Andy, the Chinese government's all that

worried about losing its power of controlling its people. Is that it I think they look it's not it's certainly not the full story, but it's a much more likely explanation than going after tech moguls because that's their pathway for reducing inequality. If that really was what they had in mind, they would be doing something about public policy, because it's public policy that shapes education, shapes healthcare, um you know, shapes shapes housing markets, which are the three

biggest drivers of inequality in China today. Right. And what's interesting is you talk about I mean, the government controls so many of these different markets right already. So it's like, well white right, well, so you take so they closed down the entire hundred billion dollar tech sector, right, Okay, then you ask yourself why is how how did this

sector come into being? Well, you know, it's a market response to a brutally, brutally competitive education system, which, by the way, in rural areas of China is chronically underfunded. Parents will pay anything to get their kids through examinations, particularly the gal call examination that gets you into good colleges and is the it is the pathway to social mobility in China. That's why you haven't it now. If you want to fix your your your problem, you do

something about the structure of education. And it's a similar story in healthcare. The same story in housing, because if you control it or shut it down, it just becomes even more accessible, right right, Well that's the crazy thing. Now Now, if if you're not going to be very expensive to go online, uh, you're basically forcing forcing poorer family, middle class families to do except one on one home tutoring. And do we have these conversations often with you and

just generally because it's been impacting also financial markets. I mean, where does it go? How do you see it playing out? You understand obviously having spent time there, kind of how they think and how they approach things. So where does this go? How do you think this ultimately plays out? I think this this, this is by no means the end of the story. I think we're at the beginning of an almighty struggle, uh for for power and control

in China. And this this is Ji Jimping and the Party saying, you know, we've identified the one part the the the one class of people in China that can rival us the Party in influence. They have the wealth, they have the social standing, and they have the strategic resources big data. And the Party is saying, we want that, we want to clawback control and power. What could big tech. Ultimately, if they have their way and they're able to kind of keep running with it, how could that really change

the power structure. I mean, I understand how it can influence thought right, but I mean in terms of actually changing the Chinese government, could it? No? You not, No, I mean nobody, nobody is talking about overthrowing but people.

But the question, and you know from from Si Ching Pings point of view, is we're about to go into we are in approach where now in a period of extreme competition with the United States, Essentially they've decided that the US wants to contain China wants rise, wants to take it down. They want the data, they need power, they need to consolidate their control. Uh, they want to

have a top down economy. They believe actually the big data will be able to guide a high tech authoritarian regime and it will be much much more successful than the US model. So for I know, I always bring it back to you for this because and forgive my ignorance in terms of kind of understanding, but I do think about investors because I don't feel like I know Kathy would and ARC they've kind of pulled back a little bit, but not every investor has just got about

thirty seconds left here. Do investors need to be increasingly nervous? They do need to be increasingly nervous because because there is no way of divining where this thing is going to play out once it enters the period, once it enters the realm of ideology and politics, there is no model that can predict where this is going, no matter what Chinese regulators say, all right, going to leave it on that. I know you sent us a lot more stories,

so we'll have to get to them next time. So I apologize, but I love I'm glad that we were able to dig into this. Andy, thank you appreciate it. Andy Brown, He's editorial director at Blomberg New Economy. In our interactive broker studio, this is the big Day, the best of Bloomberg's in depth original reporting from around the globe. What we actually make sure we do, as the economy covers is look at the data kind of broken down

a bit. It's fun to becoming more and more expensively to be looking at the shifting billion dollars for the red entry level. There's been ways of immigration that have faced a lot of resistance, a lot of color behind the scenes in a great untold story. How did Bezos really come out on top? As the cover says, Jeff wins, he always seems to win the big take on Bloomberg Radio. All right, well, the Bloomberg Big Take happens to be

also the most read story on the Bloomberg today. It's about the little known hedge fund and it's manager that blew up to the tune of twenty billion, making both the fun and the individual behind it household names just a few months ago. Let's get more on this story, Bloomberg hedge fund reporter Kathy Burton. She's with us in our Interactor Broker studio in New York. There was a period where like every day, this is what we talked about.

We're talking about our keegos, right, so remind our audience in case they forgot, because it really was this individual and fund that we never talked about. Really well, yes, the thing is that's it's actually a family office um for a guy named Bill Huong who used to be a hedge fund manager. He got into a little bit of legal issues with the SEC and then he turned

into a family office of several years ago. That's right, I forgot he went through a couple of iterations, so remind us though that, you know, then it blew up right to the tune of twenty billion dollars spectacularly. Yes, no one realized that he had amassed an amazing fortune of more than twenty billion dollars. And then in two days it disappeared. And we're still trying to You and I were talking before we got going. There's still so

many questions out there about kind of what happened. Yes, exactly, there was a big report that came out from Credit Suite several days ago, and in that report they said that our kid goes the family office likely lied about to the bank, but they provided no other details of exactly what that means. And they did say that they were going to go after Urchgos to try and get

some money back. Well, and to be fair, there are obviously a lot of litigation going on at this point, uh yet, but we expect that yes, there will be. I mean, what's interesting, listen, Kathy, you follow Wall Street,

the financial community, the hedge fund industry. I mean, we want to kind of know what happened, right, because this is one of those stories that we think there's a fair amount of transparency right in the financial markets, and all of a sudden, something like this blows up and you're reminded that, wait a minute, something can happen to

the tune of twenty billion dollars kind of from nowhere. Yes, And in that Credit Swiss report which people can see, um, there are many examples of in which the bank actually said, our kids sort of told us that they had similar positions at other banks. Uh, And then it's really hard to imagine that they were allowed to build up a portfolio that was worth about a hundred and twenty billion

dollars including leverage, which is pretty remarkable. Okay, So and transparency maybe would have helped prevent that from all from happening. What's great about this story is, as I said to you, you know, there was a period where we were talking about this constantly as as it unwound in the financial markets, and just kind of getting a grasp of who this

individual was. Um, he's still around. He's still around, he said, Um in New Jersey, that's where he lives right and before and where he lived before, and he's uh, just trying to work through this big fiasco that's happened to him and there's a SEC is looking into it, the d o J is looking into it. He has employees who are angry at him because they lost all their deferred comp when the firm blew up. And he has some employees that are hopening to start their own hedge funds,

and is he supportive of that? As far as we can tell, he is, although we don't know if that support extends to giving them money or not. And that's I guess one of the questions. As you said, there's still a lot of questions out there. I mean, he um, you know, lives in an expensive place in New Jersey, right, I mean he's not somebody though that was really flashy. Right. No? Not. I mean the house is nice, but it's not Steve Cohen nice or Ray Dalio nice. It's it's just a

nice house, right exactly. And and we don't still know what money he's got left right personally. No, his employees speculate that he is still a billionaire. But because um, we're told that he has investments outside of our caghos. He was, for example, an early investor in Cathy Woods um et F, although we don't know if he still has that or not. We also know that and a final week, he took about two billion dollars an excess margin from Credit Sweez, But we don't know what happened

to that money. We don't know if if he put it someplace out or if he used it to pay off margin calls from other banks. We don't know. Um, just got about forty five seconds left here, Kathy, UM, and I do highly recommend, as I said, it's a most read store, the most read on the Bloomberg in doing this and kind of doing this update update on kind of you know where he is, how he's doing. What's your big takeaway right now on either him and just kind of where this story sits right now. Uh,

mostly that there's just a lot more to come. We'll probably see some sort of suit or something from Credit Sweee and which we'll be able to get more information maybe from the other banks too, we don't know. Uh. And it's it's just really an ongoing tail and it's going to be interesting to see where if he's still tries to come out and have a new family office for exact right right, I mean we've seen people right doesn'min come back. UM, And it's just a reminder that

this is evolving and more to come out. It's a must read. I'll put it out on Twitter. There's so much great detail in it. Kathy, thank you so much. I really appreciate it. Kathy Burton, hedge fund reporter at Bloomberg News in our Interactive Broker studio. As I said, it is the Bloomberg Big take on this Monday, I'm broc journal now. But you let me drive. Oh no, no, no no, no home honey, please, I'll do the righting ravel Let me. I want to drive, Just drive, baby,

it's the questions trying. This is the drive to the globe commune. Thanks, we'll try us. Dawn on Bloomberg Radio. All right, just about ten and a half minutes left in today's trading day. It is time for the drive to the close back with us. It's got QB's chief investment officer, Carson Group. He is with us on the phone from Omaha, Nebraska. He's got good to have you back here on Bloomberg. How are you great? And thanks for having me back. Carroll. What's good to have you here.

How do you see the market environment right now? You know we're seeing this as a market that's obviously rallied a lot. We've had some great earnings news that I think is pretty much fully reflected in market prices. Uh And and so from that standpoint, I don't think we're

expecting super large, exorbitant games from this point forward. But at the same time, I don't see that there's a lot of pressure against the market sending it lower with a couple I think major risk factors out there, UM, COVID and some other ones that we can dive into as well. But we always seem a market that's reflected.

A lot of the good news is out there, and we don't really want to encourage people not to chase after markets that have already run from from some news is very much fully reflected in it all right, So a lot of good news out there reflected in the prices existing already in the financial markets, the equity markets. And yet you're not necessarily saying that we now deserve a pullback either. No. I think that the valuations are are in a reasonable stage, and we've also got a

tremendous amount of momentum going in the market. One of the things I think we've learned from the corporate earnings news that came out this quarter, but actually, even going back to two periods about a year ago, when things were obviously uh during the greater degrees of lockdown and challenges, this Corporate America's ability to produce profits, it's really an

amazing factor. It really starts to show one of those longer term reasons about why we take risk in our portfolios, why we invest in the markets, why capitalism works for people, It is because it generates returns and the people are managing the business is very well and whether it's smaller profits but more than expected during COVID or really large rebounds, what we've really seen is that being participating as an owner in Corporate America has been a great, great proposition

for investors for really especially the lie this year and a half. All Right, So, having said that, are there particular parts of the market that you would prefer being in right now? Yeah? I think one of the areas that we continue to see some opportunities in the technology space,

especially in the security spot. One of the areas that we risk, you know, from our macro perspectives, we look we look at a number of major risks that are out there, and one of them we've identified is these these attacks on companies um that are you know, where they're held hostage with their computer networks and those that sort of attack is something that hasn't hit us real hard.

It's been more of a minor irritant, but we raped that as one of our top risks out there, and I think that one of the beneficiaries of that are going to be technology companies, especially those who provide security to corporations, especially those really vital to our system. And so that's one of those longer term trends at from a risk standpoint that we think people will rally to. And that's one of the areas that we're looking for for investments in is in the in in the technology

security area, right. And if you think about it, companies increasingly they can't ignore it, right because their business is put at risk if they're not making sure that their business and certainly as things are much more online and digital, like, you've got to just make sure it's protected. UM. China something we just talked about with Andy Brown a little while ago of our Bloomberg New Economy about what's going

on in China. How do you see it? What are the implications for investors as a result, You know, China has been another one of those risks that's been on our top five for really a while. We see a number of big trends that are negative, like the U S and China butting heads on a lot of different areas.

Partly from the Chinese perspective, it feels like the US is shutting them out of the value added technology space just when their economy needs higher paying jobs because they don't have the same population growth as they used to in the shorter term, I think what we've really seen is that China is becoming much more negative in its efforts to try to control the capitalist tendencies that were

so successful within the economy. That clearly is a very very bad sign for for investors, and that's been very much heavily reflected in prices. And I think there's also that we haven't seen much movement on trade or any other issues that have been rollbacks of some of the Trump policies have been a few minor adjustments, but basically, even though we had a change in administrations, I would said that that overall system from the US investor standpoint

is probably more more concerning than it was before. And therefore that's one of the big risk points that we've identified. All right, that is interesting. What about the FED as a another risk, Yeah, I think that's definitely one that we see policy risk, partly on the fiscal side, but really with the FED side. And I think that people are overplaying the risk of FED to too much. To

one side. There's the idea that to the negative, yeah, but there's also you know, in the sense that they could be too hawkish and they can also be too debblish. I think the FEDS had a fairly I think they had a great response initially in COVID. They've had a pretty easy run. I mean, what are they going to

do next meeting? Pretty much the same thing they've been doing for a while, meeting after meeting after meeting, not going to do anything to shock the world, Right, Like, we know, if anything we've learned, we understand policy will change, But we also know that the FED isn't going to all of a sudden just go take a one eighty. That's just not how it happens. And I think one of the things that you raise there is a really

good point. I think investors are still concerned about going back to periods where the FED had problems communicating well. I really think that the FED, the last few FED chairs have done a much better job of communicating what their intentions were the market. And so I see that sort of taper tantrum risk where the market gets surprised to be much lower, and I think JAF Powell and his team have done a great job of signaling what that is. And so that's the risk that we don't

see as high, being that the Federal surprises. I don't think the Fed's got a big surprise built in their system. And that's one of the things that when we look at why we continue to invote, why we aren't so negative or is concerned as some people are, is this because we just don't see that risk as being particularly material. I think they're tougher. One is how soon do they

start tapering and do they push it too hard? I think the last time when they tighten policy, I think an eight consecutive meetings and they rolled back some other policies in another one that we're loosers, so basically tighten

monetary policy meeting after meeting after meeting. That was too fast, and I think that's the harder thing for the FED is to say, how do we do it, what paste do we do it so we don't get too far behind, But also in the Calas case that they got too far ahead and had to roll some of those backs even before the pandemic started, and really had a tighter moletary policy than the U S could really handle. Commodity

move today significant in your view, um. I thought the gold move was interesting because it represented a deviation from where really you real yields are. It's it's it's tied very careously. I suspect that's a supply and demand something different by investor moves. I think that. I also think when I look at oil prices, my expectation is that there's some degree of supply that is out there that is available to move in. The producers in the US are trying to be more discipline, but in the end

there's going to be more well drilled. I think the other respect is concern about how the delta storing might slow down demand in China more lockdowns essentially rolling through. And that's something important for us to investors to know, is is that we're not the biggest demander of most commodities. Most of the time, the Chinese are, and actions that they take can actually directly affect our markets pretty severely because of the prices. I think that's a good today,

a good reminder of what we're seeing. My expectation as oil will drift down lower, partly from supply and partly from some of the demand on COVID until we start to see those next ways of booster shots come out. So you will see some tightening of policy as far as lockdowns, but but not a ton. Uh. Dave Wilson, or Bloomberg Stocks calumnist and editor, pointed out that when you take a look at the tenure yielded at one thirty two s and P dividend yield is at one

point thirty two, what does that say to you? And just got about twenty five seconds here. Uh, that yield on the tenure is not offer a really good return compared to especially compared to where inflation patations are and where they're going. And so that's a tough space, but it's so good for risk reduction. But yeah, longer term bonds, we would expect to see yields drift up some overtime, but it is interesting to see them both right there smack on the same. Hey, Scott good to check in

with you. Scott Kobe, he is senior investment strategist at the Carston Group, on the phone from Omaha, Nebraska. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News