Argentina Has ’Passed The EM Test’ While Turkey Fails

will the pain in developing markets stop? Right now, we're looking at the ms c I Emerging Markets Currency Index dropping to a new low since two thousand seventeen in May, as people start to think what's next. We've got India, We've got Indonesia. Well, China go joining us now? Eric Fine, very pleased to say portfolio manager focusing on emerging markets, particularly fixed didn't come dear to my heart at Vaneck

Global here with us in our eleven three oh studios. Eric, thank you so much for being here in your quarter century of experience with developing markets from Morgan Stanley and at Vanak. What period are we in right now? What period is analogous to it in history? Sure? Well, first of all, we're in an experimental period, right so quantitative

easing is an experiment UM and so uh. Referring back to history is tricky, but UM my short answer is it feels like a lot like UM that there was a period of leverage that um um an unwanted or a tightening and policy began with the FED. It began to have repercussions around the world. Some of them didn't seem major, didn't seem that important at the time, Mexico or UH. In the case of ninety seven Thailand, Thailand's really not that important a place, and yet it cascaded

and didn't stop until the FED back down. So if you see a cascading pain, I mean, are we a quarter of the way through here? Or are we three quarters of the way through? What do you think? Yeah? Quarters are not? You know, I think right now is observing and storytelling time, right. I mean, I was a south side economist, so I can get into numbers if you want to. So I'm more comfortable saying we're still

in the first half of this UM. And So, for example, in Turkey, UM after the big it was about a month ago, the big eight percent ten percent sell off in the lira. Positioning into that was unchanged, right, so people hadn't really reacted to that and there and still to this day, I don't think a lot of volume has gone through the numbers on the screen on a

name like Turkey. Maybe spot effects, but there's a lot of those interest rate levels you see, not a lot of transacting, so it looks like a thing, but um, it's a we're in a we're in a different world. So not a lot of people sold despite this, which is why I think the pressures are still there. You owned no Turkey, correct we You know, I'm an old style guy. If I don't if we don't like something, if our process tells us not to own it, we don't.

We don't own it um because we think the losses can be significantly around research more Sandy Argentina was of the hard Currency Index, and that sounds crazy from today's perspective, but that was a fact. That's what you know. The industries were small, ast and new. We we thought that they were default. That was interesting, but not a really unique view. A few other people thought, but we zero weighted it. That was very formative to me. If you think if we if we don't like something, and there

you're really faced with capital losses. We think the buyer should be to really avoid it and not worry that it's a big part of an index. Okay, so if that is the case, I mean the way you're talking about I'm old school that way. The one reason perhaps that you're saying that is because indexing has absolutely exploded and a lot of people have gotten into emerging markets, have done so through E t F and other index strategies, and they own a lot of things that they may

not believe in. How will that change the dynamic in this emerging markets sell off? Yes, well, indexing his First of all, it's given investors access to things two products that they haven't had, and in general average US pension fund has three percent allocating emerging markets bonds. If you look back where it's just the dollar index, you're supposed to have a lot more. So it's served a real purpose.

But I think in terms of market structure, what it will mean for specific countries like a Turkey, is when things seem as if they've gone bad, but you look on the screen and it doesn't look that bad, don't think it's over. That's my main message. It's not that they're bad, it's just that for specific countries it can create an appearance that things have stabilized when they really haven't. And so in a country like Turkey, I think there's

a real chance that we get to capital controls. If you get to capital controls, the numbers on the screens right now, which I'm saying should be a doubted um um, all of a sudden become undoubted because there's essentially nothing on there and you have to So that's the real concern. It's not an overall process. They're providing real opportunities for people wouldn't access great things like in general emerging market bonds have done well. Um, it's that for specific countries

that can create complacency, uh when when it's unwarranted. I think it's very much the case in Turkey. Interesting, so do invest in emerging markets? So it sounds like you do have a somewhat negative view of the asset class that you focus on. Where are you positive? Sure? Well, So when I say that it's well for a big part of the reason why I'm cautious right now is the names that I see adversity where I'm expecting adversity

happen to be big names. So when people ask about quote unquote emerging markets, they're not asking me about my view of Mongolia or Armenia or b l a Ruse or Argentina, and sometimes on Argentina, they're asking me about big names like Mexico. Well they had an election. We think Omlo needs to be tested as new president. Um uh does that mean you're I don't have a lot of explosion and I'm looking to get exposure there um Um Russia economic policy is great, but sanctions risk is there?

Um A Turkey. I've already explained our view on Turkey. Those are big names, so to be. So that's once the spirit in which I'm answering it. So what are we what are we excited about? Um? Argentina, Argentina government, Argentina. You could describe what's happening to merging markets as a test. Some countries are passing, some countries are failing. Now the test is not just one test. You take a few of them, but every single test, in my opinion, that

Turkey has taken in this they failed. They are not looking like their their prospects are not looking good. Argentina, in our opinion, has passed all these tests. They floated the exchange right, not enough, But you know what, I just don't invest too much in the exchange rate if that's your concern, if you think it needs to go more. But they've tried to quasi float the exchange. They've hiked interest rates to double the inflation rate, Turkeys contemplating hiking

interest rates to the inflation rate. Um. And they've invited the i m F, which means dollar funding is really just not the risk. So I'm not at I'm not saying Argentina currency is out of the woods. And but when you're under an i m F program and you're committed and you're reacting the right way, yields for government bonds and dollars is too high, and higher for provinces that haven't had a head track record of defaulting is too high. So Argentina, we're very excited about year Argentina

and funds too much spread duration. You're not trading Argentina there So as bullish as I am on Argentina, when you get into spread duration, you're trading a whole bunch of other things that are not the original thing. Um um. I'd also say Chinese property right people are worried. You know, it's not this general e m thing we have been We have not avoided China because we thought there was

going to be a disaster that we avoided China. We didn't see value there Now due to these pressures, some of their property names corporates have are very yielding now and a lot of them have high cash to short term liabilities. So that's an attractive sector where you might see negative news about, but we're excited by because they're responding positively, the government's responding positively, and the companies have buffers these high cash So we're not afraid of risk.

We're we're We're just saying that a lot of things that get associated with quote unquote emerging markets UM happen to be vulnerable. And the fact that in the old days under not liking something meant not owning. In these days not liking it ment, well, I have to have some because it's yield. We're in a quee environment UM means that there can be some complacency in certain names. So don't get comforted by O. G. Turkey look stable. I wouldn't get comforted by that. Eric Fine, you'll have

to come back a pleasure speaking with you. Eric Fine, portfolio manager focusing on emerging markets fixed income strategy for Van Eck Global here in our eleven three oh studios, fantastic inside at a time when a lot of people are trying to figure out just where we are in this emerging markets sell off, how pervasive will be? How

tied is it to the Federal Reserve. CBS shares down more than three percent today after less Moonvest, the longtime chief executive officer and kingpin of the media industry, was ousted after sexual harassment claims. What will be the future of this company? Who will be the leader to really take the place of less Moon Vest? Joining us now? Porter bib managing partner at Media Tech Capital Partners, also the first publisher of Rolling Stone magazine in New York. Porter,

thank you so much for being with us. So how big of a blow is this to CBS. Well, it's a very big blow to less Moon Viz. But it's very little to CBS in the bigger picture of things, because Uh National Amusement and the Redstone Interest control both Vehicom and CBS and have indicated for several years that they want to sell both companies. Sherry Rhodes Spreadstone obviously

tried to put them together. Less Moon Viz fought that because she would not commit to have him run the combined companies, which interestingly as as a single entity put back together the way they were before Sumner Redstone split them up eight years ago. Um, they would be worth twenty to more than they are worth individually a standalone. So really he was on the right trail. Becau is there's so much redundancy, duplication of efforts and initiatives and

organizational structures. And what the CBS doesn't have Vehacom does, what Vehcom doesn't have CBS does. CBS has no real international presence, It has no real movie studio or very significant motion picture library that Paramount Pictures of in Vehcom offers. UH. CBS has the broadcast networks, the broadcast content and archives and less moons has been very effective. Moving the company into over the top and streaming and CBS All Access CBS News UH has been quite successful. Well, what I

guess that that I'm wondering. I'm looking at Viacom shares and they're little change today after being down for the two sessions prior, and CBS shares, as we said, are down more than three What is the market missing that you're seeing with respect to the added value that these combined companies will have. Well, I I think what what is happening today in the market is shareholders are are saying, we're losing one of the best, uh and most effective

managers in the media business. Ever, less Moonvous has done an incredible job in the fifteen years since he's been the senior executive at at CBS. He's really uh fought the transition and landscape earthquakes that have been going on in legacy media companies. He's kept CBS on top of all the broadcast networks for a long time. And they're saying without less Uh, they don't know Joe Ianello, who's

been less his right hand man for almost a decade. UM, they don't know what's going to happen to the company, and they're they're not looking at it as a takeover target. That's what Sherry Redstone has had that in her mind for the last several years, cleaned house at AT with Phil Domont and others who left UM, put Bob Pacissions in charge, and prepared for a takeover of the combined companies.

Nobody's focusing on that right now because curiously, one of the board decisions that came out last night when they decided made the announcement about less Moon Voo's departure. They announced that Sherry Redstone has agreed to a two year hiatus and won't push combining vih Com and CBS. I don't know if that's enforceable. The bottom line, the asterisk on that whole announcement was, but if anybody else wants to promote a combine vehicle CBS, you do, there will

need still be no objection by the board. Um almost trying to say, please come in here and rescue me so that I can stay out of it, right, instead of avoid the political fallout, I guess that I'm wondering when you talk about the vision of lesser moonvest is the vision that is required from your perspective for CBS over the upcoming decade or so during a nearly unprecedented shift transformation of the entire media industry. Right. Well, there's

one word that answers your question. It's called scale. CBS and Viacom, neither of them, individually or collectively combined, has the scale to compete with the the tech giants, with Amazon, with Google, with Facebook, with Microsoft, um or or with Disney now, which is with with their acquisition of twenty one century Foxes entertainment assets, They're they're going after Sky and they will end up getting Sky in the UK.

UM they're going to be a major streaming factor along with the tech giants, and CBS and Viacom individually or collectively cannot compete in that market. Who is going to be in a position to take up Sherry Redstone's suggestion and try to push for this merger sooner than later. Well, it's curious Verizon has already articulated an interest in CBS. One of the board members right now, Bruce Gordon, is a former senior Verizon executive, and I'm sure they are.

He's talking to Verizon assiduously and figuring out whether or not this is the right time. Verizon claims that they're focused on developing five G, the new um streaming service that's going to revolutionize wireless communications and the Internet, but they don't have any content, and their competition at over at A T and T bought Time Warner and does

have content. So I think that Verizon is in first position to combine with CBS and or Vehicom Porter BIB, thank you so much for being with us today, definitely important to follow what's happening with this media saga that has entered a new phase without Blessed Moon. Vest Apple shares down today for a fourth straight day, the biggest

four day slump since April. This comes after the company said that it would have to raise prices on certain products in response to the additional tariffs at President Trump has proposed on Chinese goods joining us now. David Garty, I'm very pleased to say, Chief executive officer of g v A Research, David, what do you take away from Apple's announcement about having to raise prices on certain products?

Most is that Apple did not in those list of products include the iPhone, which says, I mean, here's the company, the product the iPhone provides the bulk of the company's revenues and profits. They said it wasn't going to be impacted by tariffs, which to me, I read that as saying that they're going to eat the higher costs that the tariffs would impact. The tariff effect would have on Apple in terms of its manufacturing. As you know, Apples,

a global company, has substantial operations in China. The Trump administration coming out and levying tariffs on almost all the imports that are coming into the US from China. This is an effect that you know, manufacturers that use global supply chains like Apple can't offset overnight. And as a result, Apple is saying that with respect to the iPhone and the higher tariffs, they're going to eat the costs, which

means that they won't pass through these costs to their consumers. However, in other cases where the company is said in the case of iPods, in the case of accessories, prices will be going up. So but here's what I'm struggling with. I mean iPods. Who has an iPod these days? Right? These are all sort of the peripheral products of Apples.

What does it say about their confidence levels that they is it perhaps that they don't have the pricing power to to do that with the iPhone, or that that they, uh say, are feeling more vulnerable in a time of increasing competition with smartphones that they don't want to touch that. Well, you are in a situation where in the smartphone market growth has essentially plateaued. Uh, there is a battle for

market share. Don't forget Samsung is out there. Uh, Samsung itself with very large operations in Korea, not necessarily in China. Apple has to consider what's its competitive positioning, and obviously iPhone sales drive the sales of many other products for Apple. So for Apple to say essentially, look, we're going to eat the costs on this so we can hold onto

our market share, this is what they're doing. I think the bigger picture, though, that we have to take away from looking at what Apple is saying and what Ford Motor Company are saying, is that they have optimized their operations to operate in a global market. Imposing tariffs um requires changes in supply chains that can't be made overnight. These require substantial capital investments, which are done over years.

What it really means at the end of the day is that if probably are going up so much, these companies are going to limit what consumer choices. Look at what Ford Motor Company did in terms of saying, we're not selling passenger cars in the US anymore. The costs are too high. Tariffs are making it worse Oracle and

Hewlett Packard enterprises in the common period. President Trump about some of these tariffs, said that if they go through, it would impede America's leadership when it comes to creating a five GEN network. Do you think that's true. I would argue that again, global supply chains matter, and in this case, we have components that are important for the adoption of things like five G. Five G as a wireless broadband protocol arguably is going to usher in a

new generation of services. If the US wishes to fall further behind in terms of being technologically competitive, fine go ahead. Delay the implementation of five G will only all suffer as a result. So you don't think this is just an issue of the company is throwing threats out there in order to get their wish, which is to get these tariffs taken off the table. I don't believe the

companies make idle threats. I mean, companies are talking about capital planning processes that again take years to implement, and for an administration to come out and expect that companies at the not the drop of a hat, are going to be able to turn around and reconfigure themselves. That's just blatantly unrealistic. So how much do you think that big tech in the U s would sell off if

these tariffs go through as promised? Well, I mean we're already looking in a situation where people are saying that Apple probably from about two seventeen a share right now probably pulls back maybe below two hundred dollars a share. UM, so you're probably looking at something in the order of maybe about a ten to fifteen percent correction, potentially depending upon the company and depending upon how exposed they are

relative to their supply chains in China. I have to wonder how people are gonna start talking about peak tech, especially now. If you look at for example, Snap, one of the hottest I p O s of last year, declining shares reaching a low. You smile a little bit because putting Apple ins Snap in the same sentence as sort of a little bit ridiculous. But their chief strategy officers leaving, who really helped, you know, create this company. Do you think that's significant or do you think this

is just a company that's sort of out there? And I mean Snap is a company that obviously Facebook wanted to emulate all their features, uh, and I would argue that there is greater competition taking place there. But in terms of talking about peak tech, I mean the fact that the stock market, now ten years after the collapse of Lehman Brothers, is up off it's two thousand seven highs. A big portion of that has been due to tech. And to the extent if we're calling peak tech, are

we really calling peak stock market? Well, what's the answer. It's something that we're going to have to contend with. And the extent that the administration decides to take on China and put the tech industry in the crosshairs certainly puts the stock market at risk. And lord knows, the President is someone who likes to trumpet the fact that there are a new stock market high intended as your

eyes told me so. In other words, you do think that should these tariffs go through, if I'm reading through the through the lines, if these tariffs go through, there's a good chance that tech will sell off in a meaningful way and lead to sort the end of this equity rally. I mean, there are other data data points that are out there. Golden Sacks last week come out and said that their bear market warning indicator is at

the highest level we've seen since nineteen. They said it may not necessarily lead to an immediate crash, but expect a flattening of returns from equities. Certainly, these tariffs are going to contribute to that, David Garretty, always a pleasure having you on. Thank you so much for being with me. Thank you, David Garretty, chief executive of g v A Research. Depending on how you measure the world of cryptocurrencies, they have lost hundreds of billions of dollars of market value

over the past six seven eight months. Joining us now to talk about this is Aaron Brown, columnist with Bloomberg Opinion, also former managing director and head of Financial market Research at a q R Capital Management. Aaron, I'm so pleased you could join us today. I would love to get your take on the sell off that we've been seeing

in cryptocurrencies. Do you think that this is sort of marking the end of the fad of bitcoin and other cryptocurrencies or it's just another hiccup that it will that that will see in the rear view mirror in a couple of years. Um. What's really puzzling about this sell off is why it's a big news story, why we're even having this interview. UH crypto fail from an intra day high to an inter day low six last week, and the average it does in an average week is

fourteen percent. This is a security with a six percent daily standard deviation. So it's roughly six times as volatile as the spire and we wouldn't be talking about the SMP five Hendred going down two or three percent in a week as a falling off a cliff for its testing new loads. We're not testing new loads. For the year we had bigger selloffs and lower prices every single month.

I'm sorry, we've had bigger selloffs every single month this year, and we've had lower prices every year, every every month since April um. I think this is a non story. I think somehow people who were paying a lot of attention to bitcoin and cryptocurrencies took a look and said, my gosh, this is volatile. It's a lot more volatable in the stock market. That's true. That's been truson as

they were introduced in two thousand nine. You know, I think that you raise an interesting point, which is these are volatile. They will continue to be volatile. Uh So why do we talk about the volatility? And I think that it comes as the Securities and Exchange Commission in

particular goes after an increasing number of crypto companies. I want to just use a pretty broad term here, the latest being that they temporarily suspended treading in the Bitcoin Tracker one and ether Tracker one, these two cryptocurrencies on yesterday. This was so this I think people are looking at perhaps regulators taking a stronger stance with this. Mean, what do you say about that? Yeah? I think, um, there

were two So there was that SEC. There was also an SEC shutting down the Frost Penny stock pump and dump. Neither of these actions have anything to do with cryptocurrencies other than or anything essential. The penny stock was a classic penny stock pump and dump. It just happened that it was run by some people who were strong bitcoin bowls.

And the two funds that were shut down or suspended, they weren't shut down had nothing to do with the fact they had crypto h It had everything to do with the fact that their legal documentation conflicted with their offering documents, and the offering documents and legal documentation conflicted

with what the brokers were representing them as. This was pure legal sloppiness on the part of the issuers hopefully won't turn out to have been criminality, just sloppiness, and it would have been shut down if they had been olding goal their stocks or anything else. It was doing was pure infect What's amazing about pet story is that these things created since two thousands fifteen and got up an as deck uh without somebody actually reading and noticing

these major discrepancies in the documentation. I guess that the other thing that sort of got my attention this morning and why I did sort of pay a little bit more notice to the sell off was that the founder co founder of Ethereum of Metallic Boudin, was speaking with Bloomberg and said, you know, we may have seen the days of explosive growth in the blockchain industry. We may have seen those already, and going forward, this is going to be a much slower grind with a lot less hype.

And you know, how does that affect an industry that has been driven by hype? Um, Okay, the industry is not driven by hypes. I want to correct that the actual code base and UH and and UH data that are driving the blockchain that has been grown going steadily and quality and quantity by developers who are not looking at the daily price charts. It's true, two thousands seventeen was a year of hype, and we've had we had

them before. Also in two thousand twelve and two thousand thirteen. UM. And the hype was driven, in my opinion, primarily by the idea that institutional investors and retail investors were just waiting for some regulatory and infrastructure changes and they would pour billions and billions, hundreds of billions of dollars into crypto. And I turned on to be true. The legal barriers were uh fixed, and the infrastructures built, and nobody came to put in any anywhere near that kind of money.

But that has nothing to do with the long term economic case for bitcoin, the five ten year idea that cryptocurrencies are going to be a very important part of the economy to come. UM. The ethereum comments that that we're not going to see another thousand percent increase. Uh, that's you know, not too unreasonable giving the size of

the crypto market. UM. I think that's what if you're a bull, you're saying, okay, we got another thousand percent tog, we got another ten time increase, and that would bring crypto to sort of what seems like a reasonable part of the economy on fundamental grounds. UM. So if you're hoping for ten thousand or a hundred thousand percent return and that's probably out of the question, but it always likes Aaron Brown. Love having your real speak. Thank you

so much for joining me today. Aaron Brown is a columnist for Bloomberg Opinion. He's also a former managing director and head of Financial market Research at a q R Capital Management. Helping to put the bitcoin sell off into some perspective, also bringing down a whole bunch of other crypto assets with it. Definitely a volatile asset class that continues to see a lot of volatility. Thanks for listening

to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio.