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We've got to check out the worst performer in the S and P five hundred, and that would be super Micro Computer shares absolutely cratering after Ernst and Young resigned as the auditor ceting concerns about the company's governance and transparency. We got with us Caroline Hye. She's co host of Bloomberg Technology on Bloomberg TV eleven Wall Street Time each day. She joins us here in the Bloomberg BusinessWeek studio. Bailey Lipschultz also with us. He's Bloomberg News equities reporter. He
joins us from our Chicago bureau. Caroline, I want to start with you because I want to remind everyone, or I want you to remind everyone how we got here today with super Micro, because it's not the first time that smci's accounting practices have been under scrutiny.
No, that was in twenty twenty. In fact, if you look back as to when the last time the shares fell as much as they have today, well that was back in twenty eighteen, when a Business Week report was out that they'd been had seen their motherboards and their servers hacked by the Chinese. They're not unaccustomed to controversy, shall we say. But twenty twenty was when they actually paid a fine seventeen million dollar penalty to end the
investigation of the SEC into concerns about accounting. At that point, it was alleged that they'd been basically seeing their revenue come in faster than naturally it had been. Now we fast forward, and now it seems to be that we go back two months in August, we get the Hindenburg report that is citing in particular an ex employee who worries about accounting. Again, Hindenburg puts out a short report saying that we're worried about the accounting red flags. They
call it the stock tumbles. Then we get a DOJ reports of a DOJ investigation into all of this. And now finally Ey not wanting their name to be associated with these financial reports. I mean, that is the last thing you ever want to hear about an accounting firm involved in a company that you have, Chaz and.
Yeah, pretty us stunning culmination of that timeline here. Shares currently down about thirty two percent right now.
And Billy Lipschel's cone in on the.
Fact that Nate Anderson, of course of Hindenburn Research, he must be having a pretty good day today.
He must be having a good day, Kitty.
He's having really a good few years, depending what timeframe you want to use, whether you go back to the Nicola fraud that he called out or a number of his other big time hits. When you look at the report from Hindenburg really kind of laying out those red flags to Caro's point, But the big thing is that was the day before they delayed their ten K filing, So it has been a flurry of issues for the company.
And I know this is a name that Hindenburger in a number of other investors both on the long end short side, have been keeping a close eye on. Again, just given the ascent, the rapid ascent that we saw over the last few years and what we've seen really play out even back since March when it hit its all time high, baily.
Hard to answer counterfactule here, But you know, Katie and I were kind of talking about this ahead of the interview when we were preparing for this, in the idea that shorts certainly play an important role here, even though they're heavily criticized. Do you think we'd be talking about this or do you think Ey would have resigned today had that Hindenberg report not come out?
I think it's impossible to note tim But when you look at it just chronologically, Hindenberger report comes out, the next day, they come back and say, all right, we're going to delay our filings because we need a little bit more time to go through them.
Fast forward a month to Caro's point.
Then you have the reports of the DOJ in query and investigation, and now ultimately Ey resigning, and you look at the letter that Ey wrote. Whether or not Hindenburg kick started this, I think can be debated, But if you look at the kind of outlay and how those events have played out, whether it was a short report or whether this would have eventually gotten out, it does seem at least on the margin to point towards Nate Anderson's we're actually kickstarting what we've seen play out.
Carolyn, remind us where SMCI is in the chip ecosystem here, because I mean, whenever talk about these companies, I feel like I need some sort of like whiteboard that where they play me both is TSMC.
Well, just think of them as encapsulating in video. They basically take the Invidia chips, they circulate them in metal, and they help install your server into your data center. So ultimately a lot of companies and clients go to a super Micro rather than directly to an Nvidia to get all of their computes sorted out. They're in the same lane as Dell. And that is why we're seeing Dell shoot higher today because analysts saying that this is their moment to take market share from the likes of
super Micro. And to Bailey's point, this is why it
hit an all time high earlier this year. This is why we saw the shares at one point up fourfold because they were integral to this whole AI Darling, Searge and now well we're only up about what's I think, sixteen percent year to date if you're looking at it, and ultimately, with to see them trying to fight against this narrative, we've got to go and make clear that the company is saying it doesn't expect the issues will lead to a revision and previously issued financials, and they
have begun to look for another auditor. But the share price tells at all. And if you're looking at certain things, we're down thirty two percent, with the lowest since January the eighteenth of twenty twenty fourth who basically erased all of this ye's games.
Yeah, big time and great point on Dell. You take a look at shares right now, up about seven point seven percent, and Bailly, you think about, of course, this enormous I'm not gonna call it a bubble, but all of this enthusiasm around some of these AI names, obviously that's CATENIV for some of these short sellers. I want to talk a little bit about Luhman because we're talking about this great year that Nate Anderson is having over at Hindenburg Research.
Then you think about Luhman.
Of course you had who was It was Caersdale who took a short position in Luhmen a couple months ago. And Luhman has really defied that. They just signed another partnership today with AWS. The shares have done incredible over the past couple months. So even if you have some of these big run ups, I guess it just speaks to how difficult a business short selling is.
Exactly, Katie.
But the one thing to keep in mind, and this is kind of the hot debate around short sellers, is we don't know when these active as short sellers actually cover their positions, and we don't know whether they're taking out and betting against the company via put options and set about right shorting the stocks.
So it's hard to be.
Able to say whether or not, even with a super micrown mind, Handenberg actually maximized their potential return because for all intentsive purposes, they could have covered immediately after and
that would not be disclosed. But to your point with Luman, with a company like Symbotic, with all of these other AI flavors, if you will, that have drawn the ire of short sellers, whether they're quiet investors betting against a company, or activists who come out with these lengthy reports with a number of allegations, it does speak back to to your point, the difficulty for the long term short seller to be successful, because if you go back just a
little while ago, you look at a company like Herbal Life, that actman versus Icon narrative and how that played out, and you kind of can ascribe that, at least at some level to a number of these other companies that have drawn scrutiny of those activists.
Someone's shorlting this stock, though it's twenty percent of the outside float, is currently shulted. Someone out there is still wedding against it head.
And they're probably feeling pretty good today. It is a good reminder though that who knows, of course, is Hindenberg.
Is still in this stock.
But Carolin, when it comes to super Micro, you know, as you mentioned, this timeline of these sort of accounting questions goes back to at least twenty twenty.
What is next for this story? What should we keep an eye on from here?
Because I don't know, you think about the reputational damage that this company is going.
Through right now, it seems like a rocky road ahead.
November fifth, same day as then, is when they're coming out with an updated business report. So ultimately it can't be their financials because they're delaying their financials, but they are going to come to the market to their investors and give an update on November the fifth, So all eyes on that, all eyes on whether they get another accountant.
They're trying to bury that news with the election.
Would you dare say such thing, Katie?
I know, let's not forget that this company was added to the S and P five hundred this year, so you know, which is a very prestigious thing, and you know, it gets into it.
Was delisted previously, so that on its old accounting issues. And actually that is something that's being brought up again by analysts. I think Wujinhome over Bloomberg Intelligence is saying, look, they need to focus on great corporate governance. We may require a leadership change. And they're also saying, look, maybe we will start to see an issue of delisting once again.
That's what I'm wondering if those folks over at S and P are having like second guesses about adding it to the S.
And P three nineteen billion dollar valuation.
Still even after today. Yeah, all right, a big thank you to Caroline Hydeen Bailey Lipsheltz.
You're listening to Bloomberg Business Week with Carol Messer and Tim Steneveek on Bloomberg Radio and tele.
It is Bloomberg Business Week. That's Katie greifeld in for Carol Nasser this afternoon. As we mentioned earlier, as slew of economic data today showed that the economy expanded at a robust pace in the third quarter. Inflation adjusted GDP increased at a two point eight percent annualized rate. A big part of that has to do with small business.
The US Chamber of Commerce reminding us that small businesses are responsible for employing close to half of the workers in the US and they represent more than forty percent of GDP. Needless to say, super important to our economy. For a temperature check of small business, we welcome back Sharon Miller. She's president and co head of Business Banking at Bank of America. She joins us from San Antonio.
Always good to check in with you, Sharon. You guys do this report over at Bank of America about small business. You get into the demographic details of how small business owners are feeling, how they're doing, what they see coming up ahead. Looking through the data, seems to me people are pretty optimistic right now.
They are mean, they did maintain a very positive outlook. I mean, as we surveyed the clients, seventy eight percent told us that they expect their revenue to increase over the next twelve months. So to me, that is a good sign and there is a positive sentiment out there.
And Sharon I also thought it was interesting that, you know, within this positive sentiment you think about what is still an issue, and topics such as inflation, such as supply chain issues come up, and especially with supply chain chains. We still talk about inflation all the time, but supply chain issues. It's a good reminder that a lot of small business owners are still struggling with that.
They are I mean, inflation does remain the number one concern in our survey of small business owners at baut nine and ten told us that they saw inflation as an issue for their business. Your right, supply chain does pop up there, although it has gone down in the list of concerns, but there are still concerns around supply chain. And I'd also say to the political environment that came
in number two, which makes sense. We're in the middle of an election year, and in fact, next week, you know, we will know the election results and so from there we normally see this. I mean, we've been doing this survey over ten years and every election cycle there seems to be you know, concern and then post that regardless of who wins, there's certainty and people seem to move on with their business.
So I mentioned that there's really interesting demographic information in the survey. You guys break it down. You look at Black and Latino business owners, you look at women business owners. How do business owners vary based on their demographic data.
Well, I mean when we talk about women business owners, for example, I mean they are implementing expansion strategies at a high rate, with sixty five percent focusing on growing their customer base. When you talk about Hispanic Latino business owners, their confidence in the economy despite labor shortages, encourage to obtain funding. In fact, ninety four percent of Hispanic Latinos survey respondents told us that they expect to obtain funding
for their business to grow. And so, you know, there are some differences, but certainly there's definitely some optimism out there, especially in Hispanic Latino communities and also Black African American communities.
And there's also optimism in local economies. One of the takeaways that I found interesting was that sixty six percent that their local economy will improve, compared to sixty percent believing that the national economy will improve. Those numbers are fairly close sixty six to sixty percent, but still an interesting difference there it is.
And I think, you know, as you think about smaller businesses, and I heard as we let into this segment, just thinking about how important small business is to the US economy. But generally speaking, I mean, small businesses are in our local communities and so you know, they're very close to their local communities. I think it's important that we support small businesses. And when you think about, you know, what
they have more control over. I do think that we tend to see more optimism in local economies and in their own ability to grow their business than maybe that they think about the national or the worldwide landscape.
And Sharon put some of these numbers into historical context for us, like you said, you know, you've been doing the survey for about ten years. Now, how do the numbers this year compared to the past several years.
Well, we've seen, you know, I think that the revenue expectations, I mean, business owners in general are more optimistic, and this year we did find a slight uptick as you think about their plans for hiring. In fact, over half plan to hire over the next twelve months, which is an increase. Despite labor shortages, despite finding the right skilled labor,
people are still hiring for their business. They are expanding and those numbers have increased, and so you know, we have seen an uptick in the optimism of business owners and I do think that this year's report is really a good sign for the next twelve months to come.
Sharon Miller, President, co head of Business Banking at Bank of America, joining us from San Antonio. A lot of optimism coming out of that survey.
A lot of optimism. Yeah, definitely interesting to hear about some of the nitty gritty, especially I really love the point on the local economy versus the national economy.
You're listening to the Bloomberg Business Week podcast. Can't Us Live weekday afternoons from two to five pm Eastern Listen on Apple car Play and and brout Auto with a Bloomberg Business app or want us Live on YouTube?
Well, full disclosure. People who know me, you know I ride bikes a lot.
You certainly do.
I'm a big swift too. Zwift is well known among cyclists as a way to train or compete when it's too cold or rainy to go on your bike outside, or if you want to get a quick workout. In the Appcnnect, cyclists riding their bikes inside to real time races and virtual worlds through a mobile device, a computer or an Apple TV. Think about it like kind of
like gaming with your bike. The company is raised six hundred and twenty million dollars from backers including KKR, Premiere Holdings, Amazon's Alexa Fund, and more, giving it a market value of more than a billion dollars. We've got with us Eric min the co founder and CEO of Swift. He joins us here in the Bloomberg Interactive Broker's studio. Welcome, How are you?
Yeah?
Good, thank you for having me. Good to have you back. A lot has happened since you last joined us on Bloomberg, Katie. I don't know if you saw this, we got to do this virtual ride together.
No, I remember it well. It was pretty cool. Yeah, I thought you were going to wear the outfit.
I'm not wearing.
You got your helmet over there.
I got to helmet here. Don't need that for Swift. But there's a lot has happened. There was a there was a round of layoffs earlier this year a big hardware pivot, but I think you being back as sole CEO of the company is sort of among the biggest news. Give us an update. How's the business going.
The business is doing really well. I mean it's it's it's doing better than we expected. We've had some change earlier this year and we've pivoted, and really the focus for the business has been really around like what can we do to supercharge our community, I think, which is the most valuable asset that we have. So we are a leaner team and we're finding that we're moving faster. Of course we're doing less, but we're you know, we get to focus on the things that I think we'll
really move the needle for us. So the business is doing great, and you know, we launched new hardware this year and it's it's surprisingly doing very very well, and you know, over the next few months is really the height of our season.
I do want to explain to people who might not know what Swift is. When Eric says new hardware, we're talking about an actual like bike that Zwift has released. It's called the Swift Ride smart bike, and typically the way that people use Swift as they hook up their own bike to what's called a virtual or what's called a trainer, and one that can be hooked up to a virtual world using Bluetooth or another type of connection. So instead of using or you're using a you're still
using a trainer with the smart bike. But what's the idea behind a thirteen hundred dollars bike?
Yeah, I mean the price point is an important one. It's probably less than half or third of what you would typically pay for a smart bike, So we've i think innovated on price. We've also developed and designed it in a way that you can leverage existing hardwad that you've already invested in. So what you have is essentially a bike frame that slides onto a trainer that you probably already purchased. The other piece of innovation that we pushed about a year ago is what we call the ziftcog.
And you know, for non cyclis, it's very complicated to understand, like what kind of gears you need to put on these trainers.
We got rid of all that.
With a single cog, and then what we layered on top of that is a a little device that can control and create the gears virtually. And you know, Our goal is to of course bring down the cost of the hardware to get onto is with, but also just to simplify the onborne experience, and that is how we open up the market. All our studies have suggested that those are the two drivers for holding us back from growing even more.
Well, let's talk a little bit more about your business. I assume you make money off of a subscription based sort of membership. There Where are you when it comes to membership. I think the last time you guys spoke, you said around a million members. How has that number changed?
We're over a million. I think the pandemic that wonders for us. It also had it was a double edged sword because you know, of course, like many companies, we thought the growth would continue forever. But what we're finding today is that it's these these are we're growing. We're certainly growing on a number of different levels, both revenue and and subscribers. But I think, you know, to double your business like we did during the pandemic is just
an unrealistic expectation. So we've adjusted our business to that.
One thing that you've also done within the last year is actually increased prices. I believe since the first time since twenty seventeen, So for years it costs about fifteen bucks a month. Now it's twenty dollars per month. If not an annual membership, that's a monthly membership. How did members respond? What has churn been like?
Well, you know, I don't think anyone likes price increases, let's be honest, right, But I think I certainly we feel very good about it. The value that we offer to our community at twenty dollars a month and two hundred for the year, is is really good value given you know, all the other products that are out there and the experiences that we offer. But you know, look, things have gotten more expensive since since twenty seventeen. We've not raised the prices, and I remember reading from community
members saying, hey, you should have just increased prices incrementally. Well, we would have actually collected more revenues had you done that. But we felt that the timing was right for us to increase the price. And I think the customers have largely voted with their wallets.
Any more price shikes on the horizon.
Look, you know, things, I would never say that there will never be future price hikes, you know, I think the five dollars move on a relative basis is big. If we do have future price PRIs I think we should do it more incrementally, like I see from Netflix almost every year.
Well, i'd love to talk about, you know what went into that, Like Tim mentioned first price sikes since twenty seventeen, what did that decision.
Try look like?
Because you think about everything that's happened since twenty seventeen, it's exhausting and it's been a really strange economic moment.
Well, we delayed and delayed our price increase, and I we've done this twice before. Every time we've done a price increase. The you know how we feel about it is we should have done it much earlier. And you know, look, things do get more expensive. Our costs have gone up, and we haven't passed that on to our customers. The product is vastly improved since twenty seventeen, So we feel really good about it and we stand behind it when we you know, we were committed to making that change.
Yeah, that's actually one thing that I that I haven't talked about the heads of display the world. There's been a lot of changes to the gaming environment since I started swifting, which was during the pandemic. Personally, I don't see myself. That's the main way I actually ride and get exercised because I have two little kids and going on a five hour bike ride on a Saturday like I used to do.
Your wife isn't into that.
She's just not feasible right now. So swift is where I do it. You run a lot here I do. Are you a Strava person? No, okay, that's interesting, she's a garment person.
I feel like I killed a line of questioning. You were about to go.
That's fine, I'm going to turn this way. I'll talk about it. You did. One thing I noticed recently with Strava is that an AI sort of integration that they're experimenting with. How are you using AI? You recently launched for me recently virtual Ride Partners, which I find a really helpful thing for me. So this is like a pacer that will kind of go at a specific speed that you can keep up with, and it's really helpful for training and for riding. How are you thinking about AI?
So we already use AI in our engineering development, so that's already been happening. I think in terms of how we can expose these types of technology for consumer related features. We're absolutely thinking about that, and the two obvious places will be the conversational you know AI experience that you know, for example, Strava is doing, and I think that's going to be table stakes for many many products. You know, it's not going to be something you know, so innovative,
we have to offer it. And I think the other opportunity for us and others is just using machine learning to to figure out exactly what to offer in terms of content and when and with whom. That I think is the next innovation.
That's more like an Instagram timeline approach, where it like serves you what you think you are yes.
Yes, yes, And I think you know it can factor into you know, your usage behavior, who your friends are, when you know, what kind of events you like, what kind of fitness you have today, and we can serve up the right content at the right time. I think that that is innovation that no one has really you know, produced yet, but that's an exciting opportunity for us.
What about AI and coaching, I asked, because I think about myself, you know, my world revolves around me, and the thing that I miss about college is having a coach and I was part of a running club, but it was just too much, so I sort of like making up my own training plans. I could see a lot of value in having an AI coach be able to see your stats, see what you're doing, and suggest workouts.
Let's face it, if you can afford it, you'd rather have a human coach right right, because they will motivate you more than any any tool that you have in
front of you. But I think the two pieces that I just mentioned to you, which is like a conversation about how you did with your workout, and then the AI to tell you exactly what you should recommend next, those two pieces should in theory represent you know, a replacement for an expensive coach, and that I think is a solution for you know, the ninety five percent of the customer base. Yeah, the five percent should and will continue to invest in, you know, human coaches.
Two hundred to two hundred and fifty dollars three hundred dollars a month more by the way, for a coach, a coach that you've never met. And just like puts, you know thatts in.
Swift and so I mean I just I you know, I'm not like I'm not going to the Olympics.
You did go to the Olympics.
There, I did not.
I didn't compete at I'm devastated to say. It feels like a steep bill for my ambitions.
Eric, I'm wondering about competition here because you guys were pretty much the only game in town for a while with what you did. At least Copy Trainer was around before. But just this week, Training Peaks bought Indie Vello and now they have Training Peaks Virtual. I remember before I joined Strava, I used Training Peaks and I quit Training Peaks during the pandemic to go to Swift excuse me, not Strava. How are you thinking about competition right now.
Well, we have a lot of competition. It's not surprising and we've had it all along. I think the Training Peaks and indievelop makes absolute sense for Training Peaks. I mean, we are partners with many different training platforms that are out there. We launched something called the Training API, and
we've onboarded multiple training apps. So we continue to will continue to be a platform where coaches and these coaching apps can push activities and event you know, activities where you can actually do the event on swift, so that won't change. It'll be really and I don't know the strategy behind training peaks and what they'll do with in development doesn't really change what we need to focus on and our focus is really to do everything to continue
to add value and features for a community. That's really the important asset that we have.
Wellt's talk a little bit more about the future. This is something I love to ask private companies. Are you thinking about IPO? Would you be open to either acquiring a business or being acquired? What are you thinking about along those lines?
I think we should always look at opportunities to acquire merge. Those are opportunities we should be looking at all the time. In terms of you know, you know, what is our end goal in terms of like a liquidity event, I think that just will take some time. But I think we all have aspirations of being a public listic company. Whether that happens you know, in three years or five years, I don't know whether you know, we do that alone
or we do it with with others. You know, these are all I think things time will only tell and how that unfolds. But absolutely our board, my co founders, my management team, and investors have big aspirations for this business, so that hasn't changed. It's just timing, is everything right.
I mentioned that you raised more than six hundred million dollars since inception. Last time you and I spoke, you said you didn't need to raise money in the near future. Yeah, how's the cash balance looking right now?
We're very fortunate. We we we didn't spend all that capital, so we have a pretty strong balance sheet. I don't think we need to raise any more capital. That's helpful, and that gives us ever ever, I just don't yeah ever, which is great. It gives us a lot of optionality. But you know, look, having just a lot of cash doesn't help either. We need to deploy it and smartly, and we need to think of how we can leverage that to build a business.
Last question, how do you you know the cycling business? There's a ceiling there. There are only so many people who want to be riding bikes in their basement. How do you get people like Katie?
Well, first you have to get rid of the basement or the garage thing. And that's why we launched the ride. It's beautiful, it's in white. We deliberately picked white instead of black because in our testing it resonated really well with the with women.
It's interesting.
Yeah, and I think you know, we're not just going after cyclists. We're going after people who want to exercise and who want to get fit and cycling the indoor bike and cycling in general happens to be just a great activity. You can do it for a long time. It's low impact, and you have access with your hands, and you can get engaged with an experience like Swift, So it's not just for cyclist. We hope that the bike really opens up the addressable.
Market for us. Eric Min always good to see you.
Yeah, thank you for coming.
By when you're in New York. Really appreciated. Eric Min is the co founder and CEO of Swift. He joins us here in the Bloomberg Interactive Brokers studio. All right, Well, one person who didn't expect to be talking to the CEO of Swift when she came on our program today is Amanda Robello. She's head of Extrackers Sales over at US on Shores over at DWS Group. She normally focuses on China, but I found out from Eric that you're actually a swifter too.
I'm gonna convert Katie.
Oh yeah, yeah, it's for women as well.
It's fantastic and I definitely had some really wonderful experiences during the pandemic. I was already into cycling. It helped me train for a ride from London to Paris when I was sure shut time. So yeah, I'm all for it.
That is so cool.
You never know who you're going to meet in the green room, you.
Never know, the interactive broker studio, you never know.
You never know. Amanda, Let's talk a little bit about what's going on in China. You were on with us, or I should say with Carol and Barry at future Proof back in September, and a lot has changed in terms of how investors are thinking about China, how the Chinese government is using stimulus money or not using stimulus money to stimulate different parts of the economy. What's your view on investing in China right now.
Yeah, it's incredible the tailwinds that we've seen in China over the past couple of weeks. So we've actually been very fortunate to see one point six billion dollars worth of AUM go into our asher ETF It's kind of a price discovery tool in the market for lack of like a decent future basically. But what's interesting is that we haven't just seen fast money you go into the ETF.
Really it's down to the fact that you know, I think in the year we did see some of the wire houses, for example, maybe neutralize their bullish tone on China. The Chinese government has been very aware and has continued, you know, over the past decade with things like the Connect program to while it doesn't really need foreign investment, you know, to try and stimulate that a little bit more.
And so in light of the fact that they have been like outflows internationally for internationally from Chinese equities, you know, very aware of maybe some of the cynicisms that they have been amongst Western investors in China. We all know that the GDP growth rate had beforehand been six point five percent. That was reduced down to five percent, and there were some concerns about whether the five percent was achievable. So these stimulus measures are very much about confirming to
the market that that is feasible. That started off about three weeks ago at the you know, prior to the Golden Week where we had cuts on the reserve requirement ratio and then also the seven days repo rate as well. And so what that did was that freed up about one trillion new one of bank capital. What's been really interesting is that that's not just been about corporate lending for example, or you know, commercial real estate lending. It's
also trickled down to the retail market. And so what you've seen then is that mortgage rates ended up being cut typically by around fifty basis points or so, and that had freed up about one hundred and fifty billion U one for the retail investor ultimately spend.
So, well, let's talk a little bit about China in the context of the US election.
Yeah, just six days away.
Uh, the countdown.
I know, I've been counting down since like forty seven days.
So yeah, for some reason, this week just seems really long.
It does.
It's only Wednesday.
It does feel like a long week. Next week is going to feel long as well. And you think about, of course, these two parties. It's pretty you know, across the aisle, this sort of haarkish tone on China, and from the perspective of the Western investor coming into the Chinese market, I wonder how that factors in.
Yeah, it's super interesting because you know, especially always in these weeks in the run up to election, you start to see these kind of dichotomized views basically. And what's been really interesting about China. You would think, you know, if we were speaking six months ago, that you know, being long China might be a more pro Harris kind of stance, and then you know, being short China would be more a pro Trump stance. But in reality, actually we've not seen too much wavering in terms of those
flows that we've been seeing, which which is surprising. Touchwood that continues over the next few days. But I think that even you know, Trump came out with this comment about you know that she respects him because he knows he's crazy kind of right, So either way, it was like a positive tone really on China, his words, not yours.
Yes, Yeah, So I was thinking about this recently because Elon Musk has turned into this figure in the Republican Party, especially over the last few weeks. Yeah, giving so much money to the Superpack doing the sweepstakes in Pennsylvania, and he has a unique relationship with China because of Tesla's
operations in China. Yeah, and I find that sort of adding to the story of him and Trump being kind of strange bedfellows because Elon has to stay on China's good side, and I'm wondering if having him as a voice close to the former president and perhaps future president might be a bullish sign for China.
I think that what Mask kind of understands is that, you know, in the past year, basically we've seen like sanctions not just from the US but also from Europe as well in terms of Chinese goods, and so most likely understands that if China's antagonized, there could be like further sanctions on like selling US evs into China, which is still a big market. Right. We talk about declining population, but it's still over a billion, right, still three times bigger than in the US. That's still a lot of
consumers that you know are a target market. I think then perhaps supplicate this a little bit. We do have like some conversations with clients about thinking about DMX China. We've been speaking a lot about EMX China, and so we are very aware of the fact that a lot of US equity names, a lot of DEVELOPM market global equity names have this intrinsic link to revenues from China too, you know, supply chains from China which Musk is reliant on.
And so if you do have this very strong view tim of like, you know what, if the pipe gets cut right, then CRTC is probably our best solution for that.
When it comes to investing in China though, you know, I think about twenty twenty two and the narrative there was that you were going to have this fantastic reopening in China. It's going to lift their markets, their risk assets. It did not turn out that way. You take a look at what the CSI three hundred did in twenty twenty two, down nearly twenty eight percent, down down another fourteen teen percent in twenty twenty three, and I just when it comes to investors, do they feel burned by
that experience? Do they feel shy about that experience because you just saw a massive inflows into Chinese ETFs that year, and then it took a long time to see the flows start coming in in this current episode of optimism.
Yeah, that's absolutely a fair comment. We did see short positions earlier on in the year, but what's been fantastic to see is that actually the CSI three hundred year to date is up fifteen percent, and actually from the lows of February it's up thirty percent. So we do see that the market is having conviction in the Chinese economy again, at least bringing it back to a neutral position rather than an overweight position.
And just quickly here, we don't have much time left, but I do want to broaden out. I do want to talk a little bit about the bond market because I'm taking a look at your notes. You make the case for high yield bond. What is the case for high yield bonds?
Yeah, so we know that the FOMC is meeting next week, we will have an invasion of what's going to happen in the direction of travel five percent, That kind of five handle became like, you know, the norm for us for a little while, right in terms of yield in portfolios just from having a cash allocation, and so clearly
that's not you know, reliable anymore. And so what we see with investors on the insurance side, on the pension fund side in particular where there's liability management to consider, but also within retail searching for income is moving down the credit spectrum and we do actually think that high quality high yield makes sense just in light of the fact that you've basically seen a harving of default rates over the last eighteen months.
High quality, high yield, It's no naximorantem.
Okay, I'll take it. There you go, Amanda Rabello, thanks for stopping by, Thank you for having me. Good to see you. Amanda's head of X Trackers Sales US on shore over at DWS Groups. She joins us here in the Bloomberg Interactive Brokers Studio.
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