Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moving news.
I'm the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. All right, Emily grad Fai, thank you so much for giving getting us up to date on those markets. Let's talk about China here, Secretary Yellen there, four day visit. Let's get the latest reporting. We've got a couple of smart voices here, Eddie Vanderwaldt, Deputy Managing editor of the Market's Live team with Bloomberg News, and Chris Condon, US
Treasury reporter with Bloomberg News. Hey, Chris, I know you joined Secretary Yellen on the trip to China.
What's the takeaway from from ground zero there that you have?
Well, I apologize quick correction there, our colleague Victoria Dendron. It was actually on the trip.
Oh.
I got to travel with her on her next trip, but very good. But I've obviously been keeping close tabs on this trip. It was I have to say first and foremost, there were low expectations in terms of what they call deliverables from this trip. The main goal was to kind of stabilize the relationship and how the two countries deal with each other on economic issues and re
establish regular lines of communication. You know, if you go back before the Trump administration, US and China kept a sort of pace of regular phone and in person meetings with high level Chinese staffers on economic issues, and that really fell apart due first of all to the more confrontational tone of the Trump administration and then second just because of COVID, and it's taken a long time to re establish regular ties, and Yellen has been personally really
eager to get those reconnected, and I think on that front, it was a pretty successful trip. From what I understand, she and her staff were very pleased with the way meetings went. They were a bit more informal as time
went on. They weren't as scripted as they thought they might be, so that was a good thing, and she does expect from here her staff will have that kind of regular pace of contexts re established where high level people can get on the phone with each other and discuss concerns or just hit regular agenda items and discuss them and that's a pretty healthy set of steps.
All right, Well, Eddie, I want to bring you in and Eddie rementioning, you are our debuty managing editor of the Markets Live team have all of the best quotes that I steal throughout the day to say on air to sound smart. So thank you for that, Eddie. But I want to talk to you about some of this soft economic data that we got out of China, looking like that stimulus urgency is just increasing for the mainland there, Eddie, What is that sort of doing in terms of the impact on US markets this week?
Yeah, Look, these were really really soft numbers that we saw from China. You know, globally, it's quite surprising to see, you know, with inflation around the world running so much above expectations and so much higher than most central bankers would like to see it. In China, they had zero inflation, literally nothing over the last year. Number came in a zero percent flat, core inflation flowed to zero point four percent,
and producer prices were in retreat. Now, yes, I mean a lot of central bankers would probably look at that with envy, but it shows just how difficult the situation in China is and just how much, you know, there is maybe a need to start the economy because remember, they only recently came out of lockdown, and it was when the rest of the world came out of lockdown that we had that really strong demand that fired inflation across the globe. But we're just not seeing that and
that's feeding through the market. It's sort of certainly adding a little bit of a headwind to risk assets.
More broadly, Hey, Chris, you know how important is it? I mean, I guess you know, covering the Treasury there, Secretary of yell and being in China is certainly important. Talk to us about how it kind of works the under the you know, when you get down into the makings of the sausage. Is there that much interaction between members of the staff the Treasury and counterparts in China. Is this something that really needs to be nurtured.
Well, it certainly does need to be nurtured. It's something, as I said, that that deteriorated over the last few years and is expected to restart now. And this can have a couple of different benefits. First of all, you know, Eddie was just talking about what we know about the
Chinese economy. Well, the information coming out of China is not always believable or reliable, and those types of contacts help the Treasury at least gather more information, gives them a better read about what Chinese officials think is going on in their own economy. In fact, from these meetings, one thing that was taken away is that Chinese officials are concerned about growth and certain pockets of bubbles in their economy, but not overly so they feel they have
it under control. So that's the kind of insider understanding that Treasury is always looking for more of. And second of all, it's beneficial in the sense that it might help prevent certain contentious issues from escalating in a sort of retaliatory cycle. It gives each side a chance to kind of communicate, intervene, talk things over, and prevent perhaps a more severe escalation of issues that begin as small economic concerns and could escalate.
Well, Jennet Yalen kind of echoed the idea that it could escalate, sa that she wouldn't rule out the threat of a US recession, and it's appropriate and normal for growth to moderate as inflation remains too high, So Eddie, given that that kind of seems a little bit hotish, and we're heading into this next FED meeting here likely to see another hike. To what extent is that move from the US potentially going to impact China.
Yeah, Look, there's definitely divergence of monetary policy around the globe. Right when we came out of COVID, everybody was in the same situation. You know, growth was very strong and we had fast inflation, and now we're starting to see real divergence. The US is kind of in the middle of the road. It's inflation is starting to come down, but it's not like it's not where it would like to see it. In China, you know, the numbers are
much lower now. The I think there's a disconnect here because in the US we're starting to see wages and the services sick to driving that, whereas in China it's very much the manufacturies that is at fault. And I think as long as China's you know, as long as it's services sectors stay stay strong, then I think they will be they will be shy of providing further stimulus. But I think there is definitely a f two between the two economies for sure.
All right, Eddie, thank you so much for joining us.
Eddie Vanderwaldt, Deputy Managing editor of the Market's Live team, joining us from London, and Chris Condon, your treasury reporter with Bloomberg News.
You're listening to the team. Ken's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business APPM or listen on demand wherever you get your podcast.
All right, nobody covers the Fed, I think any better or any more intensely than Bloomberg News. But one thing that's fallen through the cracks from just for me as a reader, is like.
What's going on?
Quantitative tightening?
The QT thing? Isn't Is it still a thing? I don't know, but I know somebody does know this stuff. It's Lis McCormick's. She's a chief correspondent Macro Markets with Bloomberg News Check.
She follows this stuff.
I don't know why, but she joined us actually here in studio. Liz talk to me about and talk to us about quantitative tightening? Is the FED still doing it? How are they doing it? Is it important? What's it mean for the economy and tell us how they kind of screwed up maybe a couple of years ago.
Yeah, I'm going to tell you all that. But fun fact, Liz Capo McCormick's brother used to work at Bloomberg Sports years ago.
Later.
Yeah, but yeah, QT is still we kind of got out off the limelight with that, but it's still going on. In fact, in full force. It's going to be about a trillion a year that'll come off the Fed's balance sheet. And it was so interesting. I mean, maybe I'm just a nerd, but listening to Chairman Palell speak on Capitol Hill recently and he you know, politicians really don't like all the debt on the Fed's balance sheet. I think they feel like it takes too much, you know, sway
in the market. And they were kind of saying to him, hey, you're going to get the balance sheet down, and Chairman Pale, like you're alluding to, Paul, said, we are, but we were going to be careful. Lat you know, in twenty nineteen kind of we didn't see it coming that there was scarcity in the banking system for reserves, which created problem.
So the FED had to.
Quickly reverse course, remember the repo blow up and add reserves, So they're they're doing their job. They want to get the balance sheet down, but they're being very careful to not make reserves too scarce in the system. And it's not so easy, right, So I think Pal, I mean, I give them credit, was saying like, hey, we learned from the last time. We're trying to avoid it. But yeah, it's going on in the background. It's the second tool of their tightening.
So in terms of that being the second tool of their tightening, do you think that the FED is secretly a little bit excited when bad eco news comes out and they have an excuse to raise rates again because it helps them with their balance sheet if rates are higher.
Yeah, that's funny, right.
They would never say that, right, but I mean they would, like, you know, on everything to when you kind of go one way, you want to go back the other way so you have some ammo for the next crisis.
Right.
So it's it's tough.
If you start, you know, every new crisis with an even bigger balance sheet, even though you've done some quantitative tightening bringing it down. So I think the FED would really love, like Janet Yellen, I think was famous for saying we want QT to run in the background like paint drying.
Which doesn't always work.
But I really do think they I mean, they're in a new regime. Well, they'll never have the uber small balance sheet though, and we all saw years and decades ago. But yeah, they would like to get it down a little maddie, right, So they if we god willing, we don't. But if we go in another crisis, they have the AMMO with the ability to cut rates and then jack up the balance sheet again. So it's a little bit of a tricky, tricky wicket I call it for them.
Yeah, help, does a central bank actually do quantitative tightening?
How does it work?
Yeah?
So you know the central bank like, it's easy. When we know they're buying kuy, they just go in there and buy, right. But the quantitative tightening, let's talk about the treasury side. So what happens is they have treasury debt that mature, Say they haveure debt maturing middle of this month. What they'll do is say, hey, we're gonna
let that mature. Normally, if they're leaving their balance sheet stable, then they buy the same amount that matures, and now they're saying, hey, we're gonna let x billion mature and not buy more, So that kind of whittles down how much treasuries they have on their balance sheet. The mortgages are a little more convoluted because it's depends on refi rates and things like that, but that's what they do, kind of not keep rolling into new debt.
And what does the impact of that look like in terms of overall liquidity.
Yeah, so it's interesting because QI the buying was really and is used to kind of help lower long rates. It's felt to help juice the housing market and things, so QT in essent should go the other way. It's a little less clear, but what it does on the short end, like we're talking about in this story, is what it does is you know, kind of the way all the mechanics work on the Fed's balance sheet is if they let the asset side roll down, then a liability has to roll down. So that's either in bank
reserves or this facility. They have reverse repos where money market funds can put money with the FED. So that's where manny, if we get too tight, then that liquidity is sucking out of the short end, and that's kind of what turns. You know the financial system, right, you know, banks having enough liquidity to do their operations. So that's where you know, on the exit side of QT that you have to worry about liquidity in the repo market and things like that.
So, Liz, how about let's just assume I'm on the FED and at the end of this month, I argue to my fellow folks on the Fed, Hey, we raised rates five one hundred basis points.
Inflation's coming down. We just saw a three percent headline print. We're done.
Let's just sit on the sidelines. Why don't we have to do anything? It's actually working. Why don't we just do that? What would happen if I.
Made that pitch?
Well, on the rate side, I think that's what they're going to eventually get to. Let's just say they hike in July. You know, I can't remember if that was in your scenario.
Well, no, my scenariy was don't do anything.
We're done, well, right, So okay, so say they don't, which is possible right now. That's the one tool of their policy, the rates. So in that scenario, what the FED has been saying is like QT is going to keep going right where it gets tricky is the FED has always said we don't I'm sorry, I'm telling you about my hands. We don't like our tools to be moving in opposite direction. So say which we're far away
from that? The FED started lowering its benchmark rate. Then if QT is going on, it's like one hand of the FED is easing and the other is tightening. And most people say the FED won't want to do that, Like the folks at TD who see easing later this year, say, the Fed's going to stop the QT because it doesn't make sense to be going in opposite directions. But there's a lot of variables, so we don't know. So it's going to be interesting to see what happens in July.
I'm already thinking about August and Jackson Hole. What guidance dos Sherman Pal give us, h Let's go.
Of course you should go.
I'll put a ticket in for that. See how that works.
What are you anticipating that in terms of FED moves, It feels like July is a definite. Do you have a take on September?
Yeah?
I think that's the wildcard. Now we're already kind of like looking through into September and there's a mix. There's a lot of economists on Wall Street who say one more July and we're done. Then there's others saying, hey, the Fed has more to go. You know, we're not seeing policy really be that restricted because look at the stock market, look at the housing market. So some are saying, you know, terminal rate has to be even higher, maybe
over sixty percent. So I think I was talking to you know, the folks around my desk today and we were saying it really it sounds boring, but it's going to be data dependent. Like if it's like you were saying, the data if we start getting another strong jobs, if CPI misses to the upside, we have a lot of data between now and September, the FED kind of has to do if inflation is not coming down, they're going to have to do it. So I feel like, oh my god, well we ever get a.
Break, it's not going to be calm right, you know.
So again it seems like we were just getting some data passed around the newsroom here talking about used car prices coming down. I mean, there's so many data points that you can look at here, But does a FED feel like in order from a credibility perspective, they need to hike one more time?
Is that kind of where we are?
Well? You know, an analysis on Wall Street goes that the FED doesn't like to surprise the market, and when the market, like the futures in the short term overnight interest rate swaps are pricing in like a near certainty that they hike in July, FED doesn't like to surprise. So I think, I don't know if it's credibility, but I don't think they want to upend the market. We're so close to that meeting, right, I Mean, I could be wrong, but I suspect that they kind of have
it priced in already. It's almost like a done deal. Look, let's just do it, right, yep.
And if you look at the warp function which Liz is referring to, it's almost a ninety percent expectation that rates will be hiked in July, so to the extent you don't want to upset the apple cart. There we go, all right, Liz McCormick, thanks so much for joining us here in our Bloomberg Interactive Broker studio.
Always good to see it in the office.
Here, Lis McCormick, Chief corresponding covering the global macro markets for Bloomberg News again. So we'll have some economic data this week, some inflation data this week CPI, so be really interesting. PPI as well get a good read on inflation, which the Fed will certainly need prior to meeting at the end of this month, because we'll get an announcement on July the twenty sixth.
You're listening to the tape can's our live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
All right, we're just talking about threads one hundred million users.
That gets my attention.
Let's see what it means for Meta, Let's see what it means for Twitter. Let's see what it means for just people's spare time, spending more time on social I'm gonna blame Man Deep Sing for all of that stuff. He covers the technology for Bloomberg Intelligence. He joins us here in our Bloomberg Interactive Broker Studio. I mean Zuck comes on and says, geos more than our expectations. One hundred million signups for threads. Is that number men anything to you?
It does? I mean, look, this is the fastest growing app ever. It surpassed chat GPT, which was the craze so far. So I think clearly they have a great momentum. And what it shows is the creators are seeking an alternative here. I mean that is really the crux of it. That everyone wants something that is similar to Twitter where they can build their network, and they think this is a viable platform. Blue Sky, Macedon and the others didn't take off because they didn't have that scale.
Well what do you make of the scale? And it's so funny, Mandy, because on Friday we talked about how over the weekend we might get that surpassing of chat gpt in terms of signups, and I think it happened like right after you got off the air with us. So you are a leading indicator when it comes to the metastory. But why are they able to convert active users so quickly?
I mean, look, it's social media. It's like you have those network effects, and in the case of meta, they have the three billion users across their family of apps. Right they can promote stuff on their app. Look at how TikTok grew back.
In the day.
They were one of the heaviest advertisers on Facebook on Instagram. In this case, I mean, Meta owns all these properties, so they can promote their Threads app. And right now I feel they have gone with a very niche focused approach, text based format. They will keep layering more photos, more videos on Threads over time, but what they want to make sure is there's a clear value proposition for Threads and it doesn't end up cannibalizing Instagram or Blue App.
Well that's a great point. Do you think that Threads is going to be a legitimate competitor to a TikTok?
I think so over time, I can see Threads having a messaging tab. So think of all the things that Meta does of features. They're using a very narrow subset of that for Threads because they want it to rival Twitter. Get those users on board, and then iterate and add more features to drive engagement. And look, at the end of the day, it's about average time spent on the platform. So compare that Instagram average time spent it's around like
seventy to eighty minutes per daily active user. Twitter is around twenty five minutes, and they try to pivot to subscriptions too early. I mean, this is still an adriven model, and in an adriven model, it's all about engagement and time spent on the platform.
I'm not buying it? Are you on? Are you're a threader?
Wait?
Why are you not buying it?
I don't know, I'm just you know, how many these do we need? But all right, let's go to the impact on Twitter. Is this a zero sum game? If if they sign up one hundred million people to threads, do you think a lot of them came from Twitter?
Or do you think it's going to be a zero sum game here?
Absolutely? I mean again, I go back to that three billion daily active users across the family of apps, that includes all the Twitter users and for the one hundred million that they have signed up, Remember, they haven't launched in Europe, so it's right. Once you launch in Europe and they'll figure out a way to work with the regulators they have the sign ups. In the end, it's always about engagement. That's what TikTok got it right, and That's why Facebook had to play catch up once they
saw the viral adoption of TikTok. In this case, they have the sign ups, can they keep up the engagement? And over there the algorithm, the content recommendation algorithm, matters a great deal because what Twitter did wrong was they screwed up the algorithm. Right now, if I go on my home feed, I don't see any of the people I follow. I see feeds from people who are paying Twitter eight dollars a month. That's not what I want to see.
And that's very random content, Like I'm only on Twitter for eco and finance news, and then I just see completely random tweets constantly. So threads the capability to get that algorithm play back in and also potentially get advertisers in who were spooked by Elon Musk.
Yeah, it's pretty eirz.
So when are they going to start putting as madisine suggesting? What do they can start loading ads on there?
I hope they don't do it this year. You really need the engagement going. Until the engagement hits like twenty five thirty minutes are day per daily active users, I mean it would be I think two premature to layer ads and I really hope they don't do that.
So what else is this?
I mean, the meta story is up at conjillion one hundred and forty percent this year basically on cost cuts. I hate to ask what's next? But what's next here? I mean I'm looking at the stock at two hundred ninety bucks. The all time high was back in about a year two years ago in twenty twenty one at three hundred.
And eighty bucks. What's the bull case to get us back there?
Well, so think of why people became negative on meta it was because the blue app was losing engagement. They had to find the next growd driver for engagement. They thought Meta Worse was the one. Obviously that didn't work out. Now they have found something that can add to the engagement.
So where are we on the metaverse discussion? I think that's a side story really that was going to change the world.
And I mean they still are selling hardware, but in terms of engagement, they're not getting engagement on the Meta Worse app that they have created. So engagement is coming from threads or what they're doing on Instagram.
Are we going to start to see a roll off in threads users? As the parents get on there. That was one of the viral threads posts over the weekend that the parents are starting to come and therefore it's not going to be cool in the next week.
I think ultimately it comes down to future features and algorithms. Look how engaging the algorithm is in terms of the content you're seeing, That to me is the key whether or not you know your parents are there or your relatives are there.
That second, the demographic is not consideration for you when it comes to the success of the platform, because that's part of what makes TikTok so great is people feel like they can really be themselves on there because their parents aren't on there yet, which I'm using as a catch all phrase for like the people who would catch you.
What it does is it makes the other platforms vulnertable. Why can't Meta come up with a Pinterest.
Copycat now right right right?
So it just opens a lot of doors in terms of what the mode is for smaller platforms. I mean, Google, I think will come up with something. In terms of social media. They have to. They have, you know, over a billion, two billion daily active users across the family of apps. They don't have a social media app but when you look at Google and you know maps and all the things they have, they probably should think of coming up with something that can rival not Twitter, but
maybe Pinterest visual search. Why can't they that right?
And with maps that could be a cool.
Men, deep Seek, thanks so much for joining us.
Man Deep Seeing, he's a senior technology channelst for Bloomberg Intelligence. We pre him coming into the Bloomberg Interactive Broker Studio.
You're listening to the team Ken's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Well, one of the bigger questions I think for global economics is what's the outlook for China both as a consumer and as a supplier. You got to get that right, and there's a lot of challenging data points coming out from China, so we want to kind of get the latest on that. Hans Dal joins us. He's the CEO of Mitchell Madison Group. He's done a bunch in his career, but he went to business school at one of my favorite business schools, that's the Tuch School of Business at Dartmouth.
A lot of really smart people that I know went to talk.
And here's the thing about TUCH school.
They are by far the most loyal alumni anywhere. I'm talking well, more than HBS and more than Duke. And we don't know how they do it. Hans, Why are you guys so loyal to Tuck.
I think it's the size of the class.
In the cold weather, you guys have nothing else to do, but you might as well become.
Friendly, right exactly. Yeah, it's great.
Where you're gonna go and hand over in New Hampshire, you might as well stay together.
Hans.
Talk to us about China here. Do you have a view of what's going on there?
How?
How how weak is that economy? Is fiscal stimulus the answer?
Where are we there?
I think it's pretty weak. I think it's weaker than anybody thinks. It's funny you mentioned Tacket, you know, as I was sitting there in the nineties. Uh, you know, the ball telling us about the uniqueness of the Japanese business model and how that's going to change everything, and it didn't happen. Right at the same time, you know, all this talk about you know, the government directed economy koretsu meti and now it's a Belton road in China Rea. Right,
there's a lot of parallels. But back to China, I think then in a bit of a trouble. Right, So we have Western demand weakening because of you know, recessions or semi recessions whenever will happen, but it's going to hit China first at the margin. Lack of demand is going to hit that marginal producer and that's China. So China, you can see this already has very weak producer prices and has resulted in consumer prices being you know, inflation
being next to zero. You guys reported that that could be a parallel to what happened in Japan, where it also started with you know, lack of demand, trade tensions. The United States stock market property boom followed by bust, same kind of thing, high public sector debt, and you ended up getting you know, liquidity trap, really long term lost decade inflation. That is something that could truly happen in China as well.
Well. Talk to me about what some of the moves are from the Chinese government to try and revive a little bit of the economy over there, particularly when it comes to stimulus in the real estate sector. How do you rate the moves that we're seeing from the Chinese government in terms of trying to shore up that space.
I mean, there's only so much they can do, right. I mean, again, it's the parallel to what happened in Japan. It's it's almost scary how similar these things are. Once you lower interest rates in a zero inflation or deflation environment, there's nothing you can do right. You can't lower interest rates to negative points, right, So when you reach that point and consumers have lost a lot of money in
the stock market and in the property market. Don't forget stock market is down fifty percent or so from this peak in two thousand and seven. It's been a long time. A lot of people have lost a lot of money in China, and what are they going to do?
Right?
In cash, at least you don't lose it, right, So that that's the dynamic that's going on there. And I think there's a lot of things that are outside of the control of the Chinese government as well. Right that
the West is really diversifying. I mean, some people call it diversification, decoupling, whatever you want to call it yell and call the diversification, which I think makes sense, but that is demand that's going to be lacking, and these factories in China cannot easily be you know, retooled to anything other than supplying the West with goods, and I
think they really don't have a lot of options. On top of that, you have, you know, negative demographic trends, and this is always something that is accompanied these women bus cycles in Japan, in Taiwan, Korea, you know where the working age population peaks and then it declines, and that really leads to really two things. One is the innovation and spirit and the willingness to invest declines. You know, when you're older, you're not going to take a lot
of risks. At the same time, you're fear workers. So these are all highly negative trends that are very very hard to change. And on top of that, what you have that you didn't have in Japan is an extremely negative perception of China in the West. I mean, you look at the poles, right, and this could be driven by spy balloons that you know, Cuba spy stations, all this kind of stuff, all these various scandals, but people have a more negative perception of China now than in
the middle of the pandemic, and that's pretty scary. So that limits what policy makers can do in the US to help China.
You know, in hindsight, I'm still not sure why the Chinese government cracked down on what was arguably one of their most biggest success stories in the last decades, which is their technology space with Ali Baba and JD dot Com. Is it anything more than is it nothing more than just we're reasserting government control over you guys that have just gotten too big for your bridges.
I think so certainly not a smart move, right, that sense of real chilling method nested to the entrepreneurial community. You're not going to invest if you know, in the US you can become a billionaire and people might give you, you know, a bad pr but if you end up in jail, that's a whole another thing, right, So I think that was a terrible mistake, and I think they're going to pay for that as well with economic growth.
Last week, Hans, you gave me a little bit of a preview on our politics show about what Yellen's trip to China could look like, and you basically said that we would not be getting any big headlines out of that trip. Following the trip now and looking at some of the news to come out of it, did anything surprise you?
Not really. I mean it was a lot of talk pop and I don't expect any policy changes cutting out of that. She talked about setting up guardrails to competition. She mentioned the word diversification, and I think that's not particularly good for the Chinese. But I just think the degrees of freedom for action are just very limited on both sides, just not a whole lot that can be done.
So but it seems like the Chinese are pulling back, and I know a lot of people are saying, hey, what's bad for China is good for India to the extent that if you think China had a great two decade run, maybe if China's closing itself off, India represents maybe a China like opportunity over the next twenty years. Is that something you think has some ingredience.
I mean, I don't have a lot of insights into India itself as a destination or as a source of production. I mean, they've certainly always had issues with the government, red tape bureaucracy, those types of things, all the negatives that come with with the democracy, right. But what's interesting is that I think next year or so, the non China, low cost Asian countries, sort of all the countries except Japan and Korea will be more than fifty percent of
US imports. So it may be the smaller countries like you know, Vietnam and Indonesia, but certainly also India if they can get their act together on the infrastructure side, that could really replace that.
You know.
At the same time, Mexico is setting export records to the US. So I think the private sector has really stepped up and kind of pre solved the problems that published politicians are working on.
You know, all right, you gotta be kidding me here, Jackson white Owming, you set up your firm in Jackson or white Owming, Are you kidding me?
So?
Like, if you guys have a.
Good powder day, do you just shut up and just go close up shop, go skiing.
Store of So yesterday I said about thirteen hours of rock climbing, and I'm pretty tired. I might have a little sunburn here, but it is a beautiful place and I recommend everybody as the Chinese visitors by the way on, way down. Yes, the last few years, you've noticed that.
Do you expect it?
And that's kind of the government with restrictions on the flights, right, Is that the primary issue?
We've got about twenty seconds.
No, I don't. I don't actually don't know, but it's noticeable.
Yes, yeah, we've noticed that here in New York City. The European tourism seems like it's back in force. But I can't say the same for the Chinese. So Hans Du from Jackson Hole, Wyoming, which is a scam in and of itself. I don't know how he did that, but he's the CEO of Mitchell Madison Group. We appreciate getting some of his insights heres we try to parse through the economic forecast for China.
You're listening to the tape catch Are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
All right, Charlie Pellow, thank you so much.
We appreciate that Madison Mills, Paul Sweeney boiling in here in our Bloomberg Interact Workers studio. We're also on that YouTube thing, right, that's the streaming thing. Yeah, all right, just go to YouTube and you can search Bloomberg at Global News and you'll find us there. Let's talk ETFs. There seems like there's an ETF out there for everything. How about the Procure Disaster Recovery Strategy ETF.
I want to talk about that. We can do that with the.
Andrew Channet, CEO of Procure a M. He joins us here in our studio. Andrew talk to us about this fund. What's the focus of this fund and kind of how did it come about.
So natural disasters have been something you know, that have been around well before humans came to this planet. But as we start to increase population centers and increase the amount of assets and valuables that we have in these in these areas, many of them happen to be in very high risk areas for extreme weather. And you know, whether you're someone that's pushing for climate change, transition, renewable energy,
whatever that is. At the end of the day, there's technologies that people are trying to do to help us go more green or lower emissions. But there are companies that actually help us prepare for natural disasters and help save us when we need them the most. And that's been an area that's been really underfocused on, and we think that this is an industry that many people are actually looking for the exposures and we wanted to provide that fund for them.
Is it specific to companies that help with the aftermath of a natural disaster or is it also prevention as well?
It is the full life cycle.
So you have those construction consulting and engineering companies that come in and tell you how to better build out your infrastructure and what where your risks are so you can build more confidently. And then the companies that are used during natural disasters. So you think of the wildfires and you need fire equipment. You know, MSA Safety is a company that's out there that's making respirators and hoods for firefighters, and then you know, combating a wildfire, you
need helicopters and fire retardant and chemicals like that. And then rebuilding so you know, when you have a flood like we just saw, you know, right up in Hudson Valley, there's really important companies for dredging, rebuilding, for construction as well, and so it really looks at the full life cycle of natural disasters.
How many names are in this ETA roughly fifty.
It's an equally aweighted basket as well.
And what's the assets under management? So the fund's been out.
For a little over a year and we're a little over four million in assets.
Okay, interesting, okay, And so these types of companies, I mean, it seems like that's a theme that has a long term tail, I would think, right.
We certainly believe. So the White House came out a little over a year ago saying that they believe by the end of this century, the cost to the federal budget alone from natural disasters maybe roughly two trillion dollars. And that's just saying the US federal budget. Natural disasters are a global phenomenon and they can happen at any time. So whether you're trying to spend money on prevention or you're spending money recovering, this is a really important industry that should be championed.
And you also have some of the big names that or our listeners are a little bit more familiar with, like an Nvidia in this basket because you talk about how their AI helps identify areas that are at risk for natural disaster. Are there any other big kind of household tech names in the ETF basket that you have as well?
There are some, but really a lot of these companies are more of the infrastructure type, building, consulting, engineering. There are a couple of technology plays. I mean even water technology, whatter is a huge part of natural disasters, whether that's the cleaning up, the building of these centers, the transportation. So a company like Xylum, which maybe many people may know from the water technology side, has a place in this fund currently as well.
You're wearing a shirt with kind of a Space shuttle thing on there, so this NASA theme shirt, why is that?
So we also have a UFO, which is the world's first pure place space ETF and there also is a lot of overlap between space and believe it, natural disasters.
All right, give me that pitch, Give me that pitch.
So there actually was a name that was in both funds, Maxar, which got taken private fairly recently, a satellite manufacturer and operator company.
Satellites help us do a lot.
From detect where you have storms, sea level rises, emissions even you're able to track emissions from space now, so whether it be climate change or what we can be doing and carbon footprints and whatnot, a lot of this can be monitored from space. So you know a lot of what we know about climate change is made possible by satellites.
This is for Paul here the Space ETF. The biggest chunk of that that you have is media at almost twenty percent. What does that look like.
Yes, So when you look at the space industry today, you know, roughly a third of it is communications. So whether that's Internet or in broadband five g's a huge area that people have been talking about and investing in for several years now. But when people talk about the future growth of the space industry, a lot of the experts believe that roughly half of the growth over the next ten twenty years may be from the communication side.
So media communications, you know, there's a lot of overlap but in many of these companies nowadays, and satellite communications is a very undercovered area in most funds, but one that has a large representation in the UFO.
Just broadly speaking, on the ETF space is it just full steam ahead in terms of fun flows in the ETFs is because that's been the story for years now.
It seems like, yeah, you know, as far as as a product wrapper, ETFs have been getting you know, a ton of attention and inflows. When I first started bringing out my first ETFs well over a decade ago, the idea is that the ETF industry would be eating the mutual fund industry's launch. And we've seen, you know, slowly, the ETF industry globally has been getting a lot of presents.
You know, there are other types of products and vehicles that may be competition to ETFs, but when you look at flows, it's not just everything gets you know, x percent per year. It's always typically pockets. Whether inflation is the topic du jour or or you name it, whatever that is. There are ETFs for the most part to play that. And you know, when there are certain areas that are in demand, ETFs do tend to get a lot of those flows.
And in your ETFs specifically, how do you hedge against some of the volatility that happens when you do prioritize and focus on some of those smaller names.
So all the funds that I've been bringing out have been passive, so they do track an index, so it's not running and scampering and doing things as something happens. We want to make sure that when we're working with index providers that they have a lot of intelligence built into them, so we're not throwing on hedges and quickly
selling positions when some major event happens. These are passive strategies, rules based, rebalance, reconstitution depending on the funds, semiannually or annually for the reconstitution, so names can get added and removed. But really what we're looking at is how those companies play into those various themes.
All right, Andrew, always.
Interesting stuff talking about ETFs, talk about a fast growing part of the market.
ETFs are just.
Been really an amazing story here, and if you're in a traditional mutual fund business, I'm just not sure where that gets positioned. I know they say in retirement accounts and other things like that, but boy, it's been a big change.
Andrew Chenn and CEO Procure am.
Joining us live here in our very toasty Bloomberg Interactive Broker Studio.
Thanks for listening to the Bloomberg Markets podcasts. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three can.
I'm fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio