U.S.-Iran Pistachio War, China’s ‘Big Sickness’ Problem

on iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show weekdays at two pm Eastern only on Bloomberg Radio. Well the risk trade, as you just heard from Charlie All thanks to the rapid increase of the coronavirus and cases specifically outside of China, questions continue to linger about how exactly the viruses spread. Infections are now emerging in people who have not traveled to

China or come into contact with confirmed cases. So we want to have some clarity about where we are in the virus and what the outbreak and the continued outbreak of cases outside of China, what it all means. Let's bring back Dr Jennifer Nozzo, Senior Scholar at Johns Hopkins Center for Health Security, at the Bloomberg School of Public Health. Of course, the Bloomberg Public School of Health is UM supported by Michael R. Bloomberg, founder, Bloomberg ALP, and Bloomberg Philanthropies.

Michael Bloomberg, of course to a Democratic presidential candidate. So Dr Nes, nice to have you back here on Bloomberg Radio. So how do you read this news and what it says about where we are in the spread of the virus. Yeah. I think the reports that we heard over the weekend of UM rise in cases outside in countries outside of

China and among people who haven't traveled to China. UM, while obviously worry I'm from a public health standpoint, are not unexpected given what we've learned about the virus so far. We have known for a while now that this virus is capable of spreading quite quickly and quite silently, which makes it difficult to know at any one point where in the world it's transmitting. So that we're seeing UH cases in new countries UM kind of tracks with what we've expected. And so when do you start to get

more worried at this point? Doctor knows so because I have to say, you know, these Italian cases and everything that's going on in in South Korea. I do think that is giving people a little bit more pause. And as you say, sort of new countries, not a strong link maybe any link with some of these cases directly back

to China or to to Wuhan. What's the next sort of worrisome step, just to be honest, Yeah, Well, I think one of the things that we've long suspected is that a virus like this, it spreads as quickly as it does and as silently as it does, that it would likely turn up in many parts of the globe. And that's why you'll probably hear a lot of discussion as of late as to whether or not we're in

a pandemic. There's a bit of a disagreement among public health officials as to whether we're in one now, but I think it's hard to argue that we won't be in one at one point, regardless if you want to call what we're seeing uh now a pandemic. And so what that means is that countries should expect to see cases. And what that will also mean is that they will need to shift their focus from just trying to stop the virus at their borders of thinking about how best

to protect their people from the virus that they will experience. UM. This situation is obviously quite worrisome given the large numbers of deaths that were reported. One of the things I think we still need to work out is how many infections are out there and then to hold that m in balance with the deaths that are reported. It could very well be that there are many many more infections out there which would bring down our death rate calculations UM.

But nonetheless, it's a situation that warrants concern and preparedness by a government. Well. And what's interesting though, and I want to just challenge a little bit if I made doctor Noso, is that you know, the markets and investors are certainly reading this is something much worse than they had thought, maybe on Saturday or on Friday, even though we did see stocks flower on Friday, but that wasn't surprising ahead of the weekend. So are we missreading this?

This spread? Is this? You know from a medical perspective, did you expect that it was going to spread like it is at this point? Yeah? I did, And UM, I have long thought that there has been a lot of hope UM. And I think some of this hope has been echoed by government leaders that this virus could be stopped. Um that you know that China's very drastic actions would stop transmission there and that countries would respond by preventing people from traveling for China and that would

just put an end to the virus. Those were methods that worked, um in two thousand three when we have the Stars epidemic. But this virus is quite different than Stars, and it's spreading much more quickly and um with mild many milder cases, which for me has always signified that it would be very difficult to contain. That means stopping the spread of the virus entirely. I have long thought that we would likely see global spread and that we should be putting our emphasis on how best to minimize

the impacts of it from the virus. Well, and DR knows that you're you're bringing up a really interesting point that that candidly I had I had not really thought through and in all these discussions, which is I guess if there are many more k is, then then maybe previously anticipated, maybe it's not as dangerous and in a way that we look at it not as you know, this sort of deadly thing that's sweeping across countries, but as something that people can be treated for, and that,

as you say, sort of countries need to get their arms around treating rather than containing. Yeah, I think we need to get our arms around this because I will determine what measures we take. For instance, China has taken very aggressive measures which UM and my view has potentially exacerbated the toll of the epidemic. They're just in terms

of the social and economic impacts of it. But obviously populations willingness to be um uh subjected to those measures might be higher if we thought the violence the virus were as deadly as it just seems to be just based on the raw numbers that are reported UM. But anyway, regardless of what the true you know case UM fatality percentages wind up being, UM, just the fact that there are so many deaths reported and so many hospitalizations and critically ill people that will be a struggle for a

number of countries. Uh. We know that every flu season, hospitals you know across the world are are stressed. And then layering on top of this a virus that could produce significant levels of UM severe illness, critical illness and deaths that will be quite challenging. All right, We're gonna leave it on that note. Dr Noso, thank you so much.

Jennifer nosoh Uh, doctor Senior Scholar at the Johns Hopkins Center for Health Security at the Bloomberg School of Public Health, joining us on the phone from Baltimore, and of course the Bloomberg School of Public Health supported by Michael R. Bloomberg, Founder, Bloomberg LP, Bloomberg Philanthropies of course, all of that home to Bloomberg News, Bloomberg Radio, Bloomberg TV. Michael Bloomberg, of course a candidate as well for the Democratic presidential nomination.

You're listening to Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. Steep Losses indeed definitely though off our loads of the session so far, and it all has to do with those increasing concerns about the coronavirus. Uh. The worry of course, as we've just heard from Charlie,

impacting the financial markets. Always great though, to check in with members of the corporate community when we have a situation like this, especially one that is very much involved in the global supply chain, including the Apple supply chain. In fact, roughly two thirds of this company's revenues come from Apple. Dr Jelal bag Early is CEO at Dialogue Semiconductor. He joins us on the phone from London. Dr Ba Gearley, Great to have you here with Jason Kelly and myself. UM,

I do want to start. We know you did a deal recently, Hi, and we'll get to that in a moment, But talk to us about this virus and how it's changing and impacting what's going on at your company. UM So, I think I'll make comments about what we see so like pretty much all semiconductor companies, the supply chain UM for us and UH customers that we supply tends to

go through Asian particularly China. So so it's no great surprise that these are affected, UM in terms of you know, capacity and an operation UM and I think you know it is it is a tragic event in terms of the effect on people and and the whole area. UM and from a disease point of view, but from a business and the operation point of view, I think we see UM, we've seen um um number of manufacturing contact manufacturers of you know, phones and electronic products are gradually

operating back. But maybe capacity but much reduced people that don't have all their workers back at the factories. Um, but you have all your workings? Do do you have all your workers at your factories? As a results manufacturer, we don manufacturer we we are we are We do design and marketing and being manage our my infactoring throughout sourcings.

So we don't have direct so factory operation. But but we deal with factories all the time every day and uh and BC the capacities are coming back, uh in terms of our customers factories, um, every every week we see improvement. So so I think in a few weeks, my guess is from a business operation point of view,

those factors will be getting way close to normal operation. Alright, So dr Big earlier, let's talk about the deal that you did, because obviously amidst all of this, UH, you're still creating partnerships and and uh and doing some some M and A work. What is this deal with a Desto do for you? Right? So that's still is it? UM list of company on AZDAG They are a IoT

pure play IoT business play. So what it does for us is UM increase our exposure to the very attractive industrial market for US We've been UM entering this market recently about a few months ago with a small acquisition

of a company called Creative Chips. So a Deskto gives a scale in that market UM and providing us with technology for UH Internet of Things as as it relates to industrial building, smart building, small cities type application, both in terms of silicon chips as well as cloud connectivity solution platforms that they can offer our customs and some more deals to come. Do you think are you in a mode where you want to be more aggressive on

the combination front. I think, you know, we have always UM a pipeline of targets that is under under review, and we look at the number of angles clearly before we make any move on a target, you know, from a from a fit, strategic fit, shareholder value, you culture, a bunch of other items that they look at. So we do have other targets to look at. But you know, currently we just closed down a desk To. We're very pleased with that and very excited about integrating that company

when the deal actually closes. So one last question just got about thirty seconds, so I have to ask you to be quick, and I just want to go back to the virus. So based on what you're seeing, because I'm assuming that you saw obviously a little bit of an impact as the virus got worse, you're saying you would you would make the conclusion that things are getting better because you're seeing kind of business pick up again in terms of some of your clients, you manufacturer, and

just got about thirty seconds here. Yes, I think they see over the next few weeks, you know, more and more factories are telling us that they have more people coming back, and they're opening more of their branches. You know. Sometimes they have multiple factories. Some of them have been open, some have been shot so far, but as they get decontaminated and the work has come back from other parts of China, they add more capacity. Alright, Gonna leave it

on that note. Um, we really appreciate it. Dr bag Geary, Dr Jalal Bagearley, he is chief executive officer at Dialogue Semiconductor, joining us on this Monday on the phone from London and of course giving us some great insight in terms of the virus. When you feel like your flavors. Alright, so this next story is a little bit different. We've been talking a lot about the virus and will continue to but a fascinating feature in the upcoming edition of

Bloomberg Business Week. You can read it online on Bloomberg dot Com and via the Bloomberg terminal. A pistachio war between the US and Iran. Mark Champion joins us. He's a senior reporter for international affairs for Bloomberg, joining us on the phone from London. We appreciate him giving us a long day, and Joel Weber, the editor Bloomberg Business Week,

back in our Bloomberg Interactor Burker Studio. So, Mark, this is a little bit, as Carol Master might say, of like, wait, what kind of story tell us what's going on in the world of pistachios? Well, yeah, I mean the the US. You know, we all know that the US and Iran have been at each other for decades, basically since the

Revolution in nine in ninety seventy nine UM. But perhaps a little less known is that the one aspect of that contest has been over the pistachio nuts, which Iran for literally thousands of years, more than a thousand years, perhaps more than two was basically the monopoly producer of um and it exported them and then at the time of the revolution saw this as a big source of hard currency and very successfully developed a big industry exporting

you know, this is a billion dollar plus industry exporting nuts to the rest of the world. But the US got into the act in you know, the first crop in nineteen seventies x um and since then California has been you know, expanding its production enormously with the help of you know, bands, variously bands and heavy duties of two on pistachio nuts from Iran at various times um And has an now overtaken. Iran is the largest producer in the world. What's gone wrong for Iran on this front? Mark, Well,

all kinds of things. I mean, first, you know, one, there's no doubt that the sanctions policy, you know, broader financial sanctions that made it difficult to invest. You know that these things had an impact. Secondly, um you have climate change, no different for Iran and California, except that Iran has been relied even in you know, the the

earliest days. It relied on an ancient form of underground canal ng to bring the water to the pistachio fields which tend to be the growth which tend to be in in very arid areas that needs a hot climate, it needs cool winters um but as you have very specific climate conditions needed and tends to be dry in those areas, and so they always brought the water from underground.

But since the revolution, one of the promises of the revolution was that, you know, ordinary farmers would be able to have access to as much water as they wanted. And they've been drilling wells, you know, unregistered wells across the country and sucking out with electric pumps instead of the old systems, as much water as they can. So that's you know, that's the second item, and then the third is simply a failure of governance and planning and

just general efficiency. So that you know, since you know, the the US aren't producing they both used to yield about the same amount of pistacia's per hector back in the seventies, but now the US produces more than three times as many pistachios hector. Then the Iranians haven't improved at all. Mark, did you do taste testing as part

of your reporting for this article. Well, every time I have gone to Iran, I've you know, I've eaten a lot of pistachios they are fantastic, and the Iranian pistachios were really really very good. So it was, you know, really striking to me that last year, the last sort of growing year which goes across it was would have been um. Their crops simply collapsed. It was a result

of four years of drought and it virtually disappeared. UM. And you know, this year they've had heavy rains, floods and so on, and they've got a crop back, but it's a rather poor quality. And in the past the Uranians are enormously proud that their pistachio and they thought were better than those produced by Alfornia. But this year at least not true. Well, and I feel like Mark, you know, somewhere Sean Don in our trade guru is is smiling because it's like this is the trade ward.

You know that this is sort of global trade at its best and worst to some extent. Where does it go from here? Well, that's a really good question. I mean, basically, uh, there's no reason to think that Iran is going to turn this around. They you know, the climate change isn't gonna get any better. Um, the governance doesn't look like getting any better. Um. And certainly U S sanctions aren't going to get any better for any time soon, so

there's no reason to think that's going to turn around. UM. And as a result of that, there's there's a global trade organization for nott and and they believe that there's about a ten fift shortage in of supply in the market for global demand, in part because the Iranians simply

haven't been able to grow their crops. So uh, now what you see is a lot of primarily Iranian farmers, exiles and someone who have experience of growing pistonageos from Iran going to different countries, new countries to see if they can develop crops in these other countries. I spoke went to visit a farm in in in Georgia where Uh an Iranian, you know, someone who left after the revolution UM is now developing a big farm. But it's also happening in UH in Ukraine and as bai Jian

in uh you know, in Central Asia. So you know, the people are in Australia to Spain, they're all trying to develop. Well, it's one of those great Business Week stories where you really, you know, just kind of take it for granted. Something like Pistachio's, but you realize that there's a lot more as you dig into it in terms of what's going on in the market, and certainly

when it comes to trade. Mark Champion, Thank you so much, Senior reporter for International Affairs at Bloomberg News on the phone from London, Joel Weber, Thank you as well, Editor Bloomberg Business Week. In our Interactive broker studio here in New York, you're listening to Bloomberg Business Week with Carol Masser and Jason Kelly on Bloomberg Radio. Now, the coronavirus, it has spread to more than thirty countries, South Korea reporting a jump in infections, and Italy locking down an

area of fifty people near Milan. And yet the most reported cases and death still in China, which has many asking questions about the state of healthcare in China. Andy Brown is Bloomberg New Economy editorial director. He has seen it firsthand and he writes about it this week. He joins us in our Bloomberg Interactive Broker studio. And you have seen it firsthand years ago and also have an idea of what's going on currently, So give us some perspective. Is it better than it used to be. Is it

still not great? So the Chinese healthcare system is in crisis. Uh it was in crisis even before the coronavirus hit, and the coronavirus has exacerbated all of the strain intentions in the system and in some places stretched the system to breaking point. And that is a big political problem for the regime. Well and Andy, you know, one of the things you point out in your column is these

structural problems with the Chinese medical system. You know, right down to there's a shortage of general practitioners, you know, the sort of doctor that you need on an ongoing basis.

Help us understand some of what's underneath this. Yeah, So if to to to wind back a little further, you know, the the legitimacy and credibility of the Chinese Communist Party has long rested to quite some considerable extent on its boast that it uh it nursed back to health the sick man of Asia, as China was once cool, and the most visible representation of that sickness was disease and poverty.

Um and in the early years of the Communist rage seam, they had a system of armies of barefoot doctors who went out and fought infectious diseases and fought very successfully. Uh Infant mortality went down, life expectancy rose, and then in the nineties the system collapsed. And the big problem now is that you don't have those general practitioners who

stand really at the front lines of preventative healthcare. So when people in China get sick, they go straight to the hospital, which often means it's too late or the disease has progressed to the point where it requires heavy and expensive intervention and big sickness. Even though now of the population of China has some form of healthcare coverage. Nevertheless, DA being big sickness as people in China call cancer,

stroke and so on, can ruin a family and often does. So. What does it mean in a case like with the virus in terms of how people deal with it and China's ability to contain it, well, it means that the the I mean to go to what Chinese and you have to see it is to believe it. I mean the chaos that is a you know, the Chinese emergency ward in in big cities with people from all over the countryside, you know, flooding in because the best hospitals. Of course, they're in the big cities and have a

very few good hospitals in rural areas. So everybody piles into Beijing, Shanghai, Wuhan, all of these big cities, and so the hospital system is already completely overwhelmed. What's happening now in Wuhan is a people with other sicknesses, not coronaviruses, aren't getting treatment, and this is causing huge amounts of public anxiety, out and and outrage. This is literally life

and death. You know, Andy, you have a great anecdote in your story, very heartwarming anecdote in many ways, especially for US journalists, about the power of journalism. And and you know, very briefly, you're writing a story about this child who I was being treated for leukemia basically couldn't afford it. Out ring of donations come from all over the world, including the United States. You tie that back to what is now quite a fractious relationship, to say

the least. We've talked to you so many times about this between the U. S and China and between China and other countries in the world. This decoupling that we've seen that is economic in some ways, but it extends beyond that in the case of this virus, help us understand the context there. Yes, So I wrote about this kid with leukemia seven years old in the Beijing Children's hospital. His mother was camped out in the waiting room paying off the bill, which is pretty much a full time job.

Dad was back home in a mongolia is selling off all of the family's possessions until it was nothing left to sell. Parents end up going to see a doctor in the Beijing Children's Hospital. I was in the room, and she said to the both of them, she said, you've been very foolish. You've blown through all of your life savings, and now your son is going to die.

And so they went into the emergency care ward, picked up their son, walked out, And I wrote a story about this, which appeared on the front page of the World Street Journal, and donations came flooding in. I mean, it touched the hearts of so many thousands and thousands of readers. Of course, the newspaper we couldn't take donations, but a hospital very kindly set up a charity to

to channel these these these donations. Um and I was reflecting on, you know, the kindness of particularly American donors to procure the save the life of this young child, and comparing and contrasting now with this coronaviruses which has you know, yet again exacerbated the differences between the US and China, where now China accuses the United States of spreading panic, of overreacting with the travel band, and so instead of collaborating on what is a global healthcare challenge,

this is driving the US and China even further apart. Yeah, just one more thing right after so many other things between trade and other issues. Um, Eddie Brown, thank you so much, always Shaded Andy Brown, editorial director at Bloomberg New Economy in our interactive broker studio, I'm brooom macal Journal. Yeah, but you let me drive. No, no, no no home honey please, I'll do the riding drivel. I want to drive, just drive the question trying this is the drive to the globe. Gimmu. Thanks,

We'll drying us down on Bloomberg Radio. It just got about eleven minutes left in today's trading session. Equity is definitely down off their loads of this session, but nonetheless a sell off on this Monday. Ready Watts so delighted to have him back with US executive vice president, chief investment strategist at William O'Neil and Company. He's back in our Bloomberg Interactive Broker studio right here in New York. So, Randy, Um, you know it's funny, Jason. I have to just tell you.

I kind of freaked Randy out because I said, how you and I've had these conversation that there's going to be some supervirus that ultimately like is a doomsday for the world and you know, ends up unfortunately taken out a lot of people. But so Randy's kind of like, aren't you, like, you know, Susie Sunshine today? Um, and you say I'm gonna go I'm gonna like go go hide my bunker now thet you guys just keep going. And I should make a joke about it, because the

virus is a serious situation. I do wonder, um, Randy, how you see it from a market perspective, because it does feel like there's a different tone, um, a different emotion in the trade today. How do you see it?

So a couple of things. The first is that the market was already worried about earnings estimates for twenty before the coronavirus started right, estimates had been coming down in the second half of the year for the first half of and while this earning season that's just completing right now for Q four, two and nineteen has gone better

than expected, estimates continue to fall. People are now expecting Q one to be down year to year, and they're looking for about seven point nine percent earnings growth for all That number was nine and a half percent at the start of earning season, and I think what people are realizing today is that earnings could actually be a lot worse if the coronavirus keeps spreading and lasts longer

than they thought. So that means maybe earnings growth for this year is more like five percent, And I think people are rerating the market as they adjust those earnings and estimates down in their head. So is that I mean, But it's the virus that set it off, right, because you and I were talking before we got going about, you know, getting the news out of Italy and Milan specifically. That's puts the virus kind of on a different scale, if you will. I think the Italian news was a

game changer. I think they've got fifty thou people under basically kind of curfew or locked down over there in in northern Italy. You know, it's right near Milan, obviously, the business capital of Italy. Uh it's spreading in Europe in a way. They are not really sure how that cells started. And so I think now people are saying, wow, this could be not just an Asia issue, maybe this is your European issue, and then they wonder if it's

going to get over here to our shores. Alright, So how do you synthesize this into a market outlook where you're actually having to pick some stocks and and recommend what people have in their portfolio. Randy, So, a couple of things. The first is the technical damage done to the market today is significant. The markets moved through its fifty day moving average, which was at three thousand, two hundred and seventy six on the SMP. We're gonna look

like we're gonna close below that. That's an important technical break. I think the market will hopefully be trying to bother either at the hundred day, which is around fifty or maybe all the way back to the two hundred day, which is around three thousand, forty. Uh So I do think this is this damage is gonna take some time to correct. I don't think this is going to be a one day type scenario. You said we're going back down to three thousand forty. I'm not saying that, but

I think we are headed lower from here. I don't think this was a one day experience, and I think again, people are gonna have to get cust comfortable with what earnings are going to be this year. I think longer term, though, with the tenure at one spot three seven, UH, stocks are still the only game in town, and so I think I think if you own stocks a year from now, you're going to be happy. I think the market was extended, it had moved away a lot from its moving averages.

It was due to correct, and this is an obvious reason to correct right the tenure now Jason net one thirty six. Right, it is all about yield, and when you talk about markets, the US market compared to elsewhere

still looks better. It does, and the reason is that what investors are most focused on right now is trying to find a steady and growing cash stream that has a high duration, and one of the places they've found that over the last year or so are in the very large US stocks, and I think as things get, as people get more afraid with the virus, I think the US is still gonna be the most favored market. Also, if you look at the dollar today, you know it's

it's very strong. It's up four percent already year to date. It's at its highest level since April of two thousand and seventeen. So I do think the US is still a place capital is coming to. But until we can get a sense of how big a hit the virus is gonna gonna cause the economy, people are going to be uncertain and they're going to err on the side of safety and safety in big cap stocks. It sounds

like yes. Though. The thing that's unusual about the US big cap stocks is if you look at the top twenty stocks in the US market and you compare them to the top twenty stocks of all of the different developed world markets. Over the last five years, the top twenty stocks in the US market have grown faster than any other developed world market. They're also tied for the highest projected growth rate for twenty twenty if you look at the developed world. So there is it does make

sense why investors have come into these stocks. It's not just fundamental reasons. There's fundamental reasons. It's not simply a momentum trade. And I do think the US equity market can carry a pretty hefty price earnings multiple because of how low rates are. The problem is we've got to figure out what the E is going to be for. You know, we've been sitting around this table and just kind of talking off air a little bit about, you know, trying to get an idea of maybe what the rest

of the week will be like. Because here we have a market that's sold off, we bounced off our loads, we were starting to trend higher. You know, we're we're bouncing around. And I do wonder in a market where there's so much computerized trading and algorithms that kick in, I mean, how do you see that? Is there a point where you know, I have had people on Twitter, you know, Randy saying, I'm glad we're going to have I'm going to get in because it's gonna be five

percent cheaper than it was. And I do wonder how you factor or if you factor in some of those computerized programs that just kick in at levels. I don't see it prolonged. I don't see a prolonged bear market here. Could I see a correction all the way back to the two hundred, You know, I definitely could. The market usually has at least one move from peak to trough every year. That would be that would be normal. But we've seen that and and we've seen that, and so

that would not be uncommon. I do think eventually this will be an opportunity for to investors, for investors to buy stocks. I don't think it's right now, though, it's gold to buy here. Uh, gold looks great technically, It's obviously been very strong over the last year. We think this is kind of an ongoing secular move with regards to it. Gold is a store of value versus fiat currencies. Uh. It's probably a little bit overbought in the short run right now, but I do think gold is held it

headed higher over the next couple of years. And thirty seconds left, Randy. How much pressured does this put on the Federal Reserve in the United States? Well, the market believes they're going to cut the markets now, dialing in two interest rate cuts, one by June and one another one by the end of the year. I think the market is going to force the Fed to take rates down.

It's doing it right now. If you look at where where to five and ten yure yields are, so I would expect another cuts this year, just quickly, twenty seconds. I mean, that's what everyone has been saying that finally the equity markets are catching up with what the bond market has been telling us for some time. Do you agree with that? I do agree with it. But the news has also changed, right, It has gotten more negative. The virus is having a bigger impact than we thought

it would. I always love having year. I mean, we worked out so well in terms of the market action. You wats thank you, his executive vice president, chief investment strategist at William O'Neil and Company in our Interactive broker studio. Thanks for listening to Bloomberg Business Week. You can subscribe to the podcast on iTunes, SoundCloud, or Bloomberg dot com. You can also listen to our radio show every weekday at two pm Eastern only on Bloomberg Radio