China's Crackdown On Crypto Continues

and John is great to have you back on this morning. Um, we were almost caught off guard by a p d o C headline saying that all bitcoin, all crypto transactions in China will henceforth be considered illegal. What exactly does that mean? Everything having to do with crypto except for just holding it is against the law, Hi, Paulhaim Matt.

So it is not clear how they define transactions, and a lot of this is actually left as a signal so that people realize that they don't like this stuff and that you should be wary as opposed to having specifics out. But really this is nothing new from what they've been doing all year in terms of what they were doing with technology and um what they've done in crypto Basically in thirteen they restricted banks from handling bitcoin,

seventeen they banned exchanges. Nineteen and twenty they were even the same thing to bitcoin mining. What they are against is basically losing control of their monetary system and worried about capital flight. All right, John, how should we really step back and think about this here? Uh? Anytime China, you know, makes a move, it has global repercussions. What do you think I know we have a lot of time to really ponder this, but what do you think

this means for just the crypto space in general? If China is going to be perhaps way more restricted than we thought, there's a lot of resilience in the crypto space. When they were banning China was banning mining UM in nineteen and two thousand twenty, their mining in China was about seventy s the global mining for bitcoin it is down to but nothing is slowed down because a lot

of that is now in West Texas. So the US we have benefited from some of their authoritative actions, if you will, and even locally, individual China nationalists have found ways to ultimately be involved in the space whether as a developer or as an investor in various uh you know tokens. They've all of every resilient users and developers and miners ultimately find some way to do it properly and hopefully we in the US can continue to benefit

from their harsh rules. What is the problem? I mean, are they concerned that too many people are going to speculate and may um, you know, lose their savings. Are the concerned that wealthy people are going to use crypto to move assets out of the country. Why is China so veriantly anti anti bitcoin, anti crypto? So that's the last point is correct in my opinion, they're worried about capital flight. Don't forget they actually love the technology there.

I mean, people forget there is a Chinese central bank back digital you want that, There are CBD you know wallets, central bank wallets that they have air drop and distributed the digital you want to individuals. They love the technology. They are just against loose and control of the monitoring system and giving up too much freedom. Well, I mean, Johnny, are you should chinying to be concerned that they will lose their ability if they're not really part of the

crypto market, they might lose their positioning in there. They should and we should, um. And this is why you know, decentralization is so powerful in this world of blockchain and crypto. Investors, developers, users are all able to find a way to continue to grow the ecosystem and the ecosystems at the point now where it's not just about capital in the sense of bitcoin, the way China is looking at bitcoin and as a possible digital flight mechanism or store value or

medium exchange. There's actually real utility now, utility in terms of a decentralized finance system. I've been on talking to you guys about n f t s and it's utilization of not just cryptal native people, but also traditional people, artists, entertainers, and financial services professionals. Interesting, all right, John, It was great to get you on. Here are lots of news shaping this space right now. John Wu, President of Ava

Labs based in New York. We have been talking a little bit about the infrastructure build, the possibility that that gets past or maybe watered down a little bit. Let's bring in someone who um relies on knowledge of this for his living. Josh Diets, a senior portfolio manager over at Aberdeen Standard Investments and he is specifically the manager of the Aberdeen Standard Global Infrastructure Income Fund. So, Josh, what do you know about where we stand in regards

to Biden's spending plans. It seems like right now, um, you know, a lot of discussions take place next week on it, and they're trying to group the three point five trillion new plan with the one point to trillion true infrastructure plan. Now, we view at one point two trillion as a true infrastructure plan with spending on important infrastructure assets for the future, such as the power grid

for broadband. The three point five trillion we don't really view as infrastructure, and that's really to me much more uh typical on spending package. Right then infrastructure? All right, josh I, I personally went down to d C and made my pitch for the gateway plan that is so critical for the metro New York area. So beside the gateway, what are some of the interesting areas you're looking at

in this bill? Again, it's the new tunnel underneath the Hudson River to replace the one year old railway tunnels for Amtrak and New Jersey Transit. You know, like people a day and go through. So they built like three in the last hundred years, don't I don't know. I don't know. It's New Jersey, New York. That's all you need to know. So, um, Josh, So beside my beloved gateway, what else is in this bill that you're focusing on?

So there's two areas that we think are prying for growth and are happening with or without the bill, but it's just really a catalyst. On one is a sixty billion dollars for the power grid, and that we need an updated power grid because of all the renewable energy we're starting to produce here in the United States. Last year, for example, we spent about twenty five billion dollars just

on wind alone. Solar makes up about three of our US production that could grow at about so we need an updated power grid for the transmission lines to transmit that energy produced. The other part is for the broadband.

Were spent about sixty billion dollars extremely important to make sure that rural areas, low income communities have access to four and then five j So we we really believe that's the two areas of growth for infrastructure, one on the renewable side and two in towers four five G. So who makes money off this or what what are you investing in UM? Who do you think the winners

are going to be? The winners are to be clear as day for when we talk about the transformation from four to G to five G, we should invest in the towers. We've seen percent data growth. It's only going to accelerate when we have five G. Just as a data point, if we get to autonomous vehicles and they're gonna generate as much data per hour as the equivalent of an iPhones used over three thousand years. So we

need UM more dense, more dense towers globally. So we like companies like ant here in the U S and c c I in Europe. We like companies like some big, big beneficiaries going forward up for five G, and we think we're in the early stages of that growth. It's gonna last a decade or so. In order to identify the towers. The other side, as I mentioned on the renewable energy, we're spending more and more, not only here

in the United States but also in Europe. In Europe they spend fifty billion dollars on building wind last year. That's only going to accelebrate, accelerate. If you look at the EU, they proposed a fit for fifty five, which basically means that there are two thousand in the emissions to arguts are going from. Beneficiaries of that are next terror here in the United States, are WU in Europe, Email in Europe, so we think there's a lot of

beneficiaries for that. Matt I worked on those I p O s of Crown Castle in American Tower and those are which is really awesome. Uh, companies, awesome businesses. Man, It's just a nice It's almost like a real estate play and the driver is five G and just increasing use of data. So how is the sector performed in general? Josh, I'm just talking infrastructure. How is your sector over the last several years performed. So we have one fund that's been around for thirteen years, a s g I, and

that's performed extremely well, roughly twelve and it returns. Infrastructure is fairly wide. So when you ask how the infrastructure sector has performed as a fund, it's performed well. There's different sectors within infrastructure. There's the communications sector, as we mentioned,

the towers have done extremely well. Renewable energy plays within utilities have done well in the in the transport fector that's not done as well because, especially because of COVID, when we've seen people not flyings we own airports and roads globally, that hasn't performed as well recently. Hey, Josh, thanks so much for joining us. Really appreciated great timing here with this infrastructure bill winding its way through Congress. To kind of get your thoughts here, Josh Deed's senior

portfolio manager for Aberdeen Standard Investments. He specific portfolio manager the Aberdeen Standard Global Infrastructure Income Fund, so he knows a thing or two about what's happening there on infrastructure. And again, that bill winding its way through Congress, a lot of pieces surrounding whether it's gonna be tied to the Greater Spending bill uh, and that may slow it down, but the expectation is that bill is bipartisan support and

we'll get through well. The whole concept of a globalization, at least my mind, seems to maybe have lost some momentum over the last were five years as many countries look more inward. Uh. Maybe perhaps led by the United States itself. Let's check in with Tracy McMillan, head of Global asset Allocation Strategy for the Wells Fargo Investment Institute. They've got a new report out that looks at globalization. So, Tracy, again, maybe it's just me, but it feels like it's lost

a little bit of momentum. You know, America first, all that kind of thing, lots of nationalism across Europe and Brexit Brexit, thank you very much. Uh what do you think, Tracy? What did you find? Yes? And thank you for having me today. So what we found was that globalization is definitely changing, but we don't think that it's ending. You know.

We we don't think that all production of goods for US consumers will return to the United States, and we don't think that all good ideas um are located within uh certain geographic border. But we do think that countries are going to continue to trade and the cost of that trade, though, it's going to include more than just

the pure cost of the goods. So in in other words, you know, some of those um, some of those things that are blocking globalism, populist sentiment, separatist movements, internet control, media censorship, you know, some of the things you're alluding to their are are definitely going to add costs to globalization as we know it. I mean, the President of the United States, Great Britain. These are things that we're block globalization as well, right, But now you can add

supply chain issues. Are aren't more companies trying to bring their production home or make it local to where they sell their goods? Yeah, you're you're exactly right about that. Supply chains are definitely evolving. And you know the admented supply chains that we've grown accustomed to, you know, those that are across a lot of different low wage producers um production centers, those are becoming more concentrated. We think, we think they are going to be more high tech

and more regionalized. And we think a great example of that is clothing. So you think about how uh, you know, the fibers used to be put together in material and a certain group of countries, and then that fabric would be sent to China, China would construct the garment, and

then it would be sent to the United States. And so now we think that those supply chains um that created vulnerabilities and dependencies are are going to start to coalesce around the major consumption centers of the world and that's going to be the US and China in India. So, Tracy, how much does it's It seems really over the last twenty five years that globalization has just been a just a given and it's technology. It's just how businesses are evolving,

are becoming more interconnected. Can that be stopped? I mean, it just seems like it's just a natural evolution, even if for a period of time the United States doesn't want to lead, or even if the UK doesn't want to be part of a bigger EU, is it something that's just natural? Yeah? So, um, you know, one of the things we observed is that trade of goods as

a percent of global GDP has been falling. So if you think about you know, manufactured goods, that's what most of us think about when we think about globalization, but that has indeed been falling as a percent of GDP since two thousand and eight, and that's as those production facilities do start to locate closer to the end market. But the interesting thing here is that digital technology are

spurring future trade growth and that's mostly in services. And the services you know, include things um that are you know, considered anything as a service, so you know, we're looking at things like UH people and companies that purchase capital resources and then loan out. The UM productive capacity of those UH capital resources. Trade in services is twenty three times higher since Steen seventy six, and it's doubling every five years. So by some estimates are that services could

represent fifty per cent of globalized trade. So it's really all about digital then, I mean not all, but the lion share of what you see as the future of globalization depends on the Internet. A lot of it does, yes, UM, so it will depend on information technology. We think consumer discretionary companies and healthcare companies are also poised well to benefit UM from this evolving trend. And we think that US companies are poised well to benefit from this UM.

You know, US companies benefit from UM having different differentiation UM. They are also very innovative, and they are prepared for a world where we think that there could be big shifts and production centers and they'll need to have a deeper knowledge of local consumers. So that's where that digitalization information that instantaneously crosses borders all come into play. How

about China, I'm sorry, how about India? Because it seems like China perhaps isn't necessarily going to be as welcoming as perhaps some business leader's thought over the last decade or so. Is India the next big thing? So we do think that India is going to play a significant role in globalization going forward. They already have a competitive advantage and services, whereas you know, China may have that

competitive vantage in production. We think that India has the competitive advantage and services and will continue to have that. Um We also think that because the population in India is young and growing, and they also have a growing middle class, that there are quite a bit uh of investment opportunities associated with India. Alright, very cool stuff, really cool report. Tracy McMillan, thanks so much for your time.

Tracy McMillan is the head of Global Asset Allocation Strategy at the Wells Fargo Investment Institute, and she's talking to us about the Investment Institutes Globalization report, which is I mean, it's suffered I think to some extent under President Trump and and Brexit and the nationalism that we see across Europe. But then again, obviously because of the coronavirus pandemic, maybe even worse because of the supply chains that were tripped

up amidst lockdowns globally. This is Bloomberg. Kind of a mixed morning here, but coming off of some of those early trading session lows, let's get a sense of where we are here when this market tremendous amount of volatility this week. Welcome Dave Harden. He's a CEO and chief investment officer of Summit Global Investments. They have approximately one point eight billion dollars in assets under management, So Dave,

kind of a wild week here. We started off with a big, big sell off, maybe a little contagion coming out of China some of those fears. But boy, this market has bounced back and the by the dip folks seem to have won the day. What do you make of this week in this market? Well, thanks for having me, glad to be here, and it has been a very volatile week, right, and I think the volatility continues, and so yes, by the dip one. But the story is

not written yet. It's we're not over yet, and you saw the wall of worry just getting higher now with China and the crackdown in crypto. Um, I don't think the evergreendly is over yet. The technically, conditions are extremely high right now, um, and so I think there's a

lot more volatility to come. So if you're holding a stock and it's not where you wanted to have it, just wait a little while a might get there right total um, which is by the way, I guess in China, if you're holding bigcoin, that's your only choice right now because you can't make any transactions in terms of the evergrand issue. What are your big concerns? Well, contagious going to HSBC, going to other stocks that have the exposure over into China. Um, you know, nights down today, but

it's really not the same situation. It's the Vietnam issue. So what I'm worried about is the contagion of other issues coming into stocks that have no play whatsoever in that area. That's what I'm worried about. So all right, Dave, where you know, there's a lot of people that are, in fact, we're concerned about this market kind of you know, whether it's evaluation concern, whether it's just a frothiness concern

when they look at certain segments of the market. And we saw that on Monday, perhaps in some of that trading, certainly early in the day, where do you feel comfortable deploying capital? Uh in markets today? It just feels like, even with the tenure at one point four percent and change, that's not the place where are you thinking about your allocation? Well that's a really good point. And it's funny how finally investors are carrying about risk. No one cared about

risk for a long time. And so when you think of risk management and deploying capital right now, you know, some of the things that come right in my mind is like Costco. So Costco here's a very fine stock. Everybody knows about it, or if not, they're members of the stock that you know, members of themselves and shopping there. But it's a stock that's done tremendously well. If you look over the last year, it's basically been the same return as the SMP five hundreds, but it's a significant

less risk. We're talking about a sixty eight beta, so a lot less volatility, good equity returns, and moving forward, I would say outperforms the market going forward. Domestic, so we we know the domestic situation extremely well. With COVID. You think emerging markets, Vietnam, you know, China, we don't know those situations as well. So you understand this very very well. You shop there. This is a very good stock to own. Right now, what about consumer um? We've

seen consumer confidence fall drastic. I'm not saying that's going to hit cost code necessarily, maybe even a boon to a company like Costco. But what what about the effects on the economy. Are you concerned? Well, yes we are, but I think that people there's still money that's being spent, and that money that's being spent I think has to be smarter. I think it has to go online, and so they have great numbers um. I think their online

presence continues to grow. They have a loyal membership as well. So I see the same thing out of Target. Even though worried about retail, yes, worried again about consumer confidence, yes, but they have a history of beating their earnings, earnings top and bottom line. The back to school looked good. I really think that. You know, that's another good place to put money. You understand the story. Don't have to

worry about unforeseen risks and downside risks. Just watch COVID and continue to do what you do, which is the consumer shops David. In these two faces, I feel comfortable. A couple places you seem less comfortable, and that would be kind of what I would call kind of reopening trades. You have cells on Southwest and Zoom. Is that just a call that, hey, Delta is here and you better put the brakes on the reopening trade. Not really. I

think there's some more of that in Zoom. I think it continues to struggle with growth because of the EU opening trade, but more competitors come into play. Microsoft teams is is used heavily and is rolling out new webinar features and rolling out new conference call features, and so I see go to Connect and Google and other players there that I don't see them that gross story. Everybody was buying them for really turning out and let's face it, it's underperformed the S and P FI Earth in this

case the Russell too. But you know the index if you will, by about over the last one year, and I don't see that bouncing back. That's not the right time. Southwest a little bit different. Yeah, there's a COVID story with all airlines, and all airlines have struggled over the last three months. Recently, over the last maybe two or three, eek is doing okay. But Southwest here you have an abrupt quick from senior management. Uh, you have some business

travel extreme going on that's not coming back. So I think that over the long term, I'm not negative on airlines are reopening there as much as I would say Southwest with the downside risk, I'd rather own Delta. I actually traveled for business recently. It was the worst experience I have ever had. I never want to do it again, but you're probably gonna have to. I will do it one more time when I moved back to New York. Until airlines just generally improved, Like, is there any mode

of transportation that's worse than an airline? I would rather ride this subway than an airline. Just subway rocks. Yeah, especially I love the four five all right, David, You've got to buy on on Exon here? Is this a dividend play because I mean again looking at the ten year one point four or five. Yes, that's higher than what we've seen recently, but still a very low yield and energy. You know, we've got w t I crude oil up at seventy three. It's been ripping. What's your

call there on XX? Yeah, I'm very positive on Xon. You have a yield that's hide like you mentioned six point six percent, what have you plus, so you're getting paid all in the stock. I don't see crude going low work because the supply issues and other things. It's up about over the SMPI over the last year and so though it's cool about the last little while with oil, and it does trade in coinsidne there with oil, the reality is is x ON I feel like is a

very good performer, especially for the risk you're taking. Again, what's the downside risk here to x On? It's really just oil. There's not much. Governance is great. What they're doing is good um. And if we ever get control of this stupid virus um, the reality is is that there's going to be more demand. So long term, I think this is a really good stalk to home. What do you make of the big moves and rates, uh Dave that we've seen the ten uere yesterday was up

ten BIFs and today another five. Well, I think it goes to show the concern that investors have, especially the institutional investors. Right, so we believe that there is a shift going to the early deceleration. It's under way. UM, if you're not looking at your portfolio right now and saying how do I manage risk? Then I don't think you're making your portfolio better for tomorrow because risk is here, and it's coming um in greater amounts in the future,

and the volatility is going to continue. So I think you have to look at what wins in the future, not necessarily what's win one in the past. All Right, David, thank you so much for chatting with us with us. We really appreciate it. David Harden, CEO and chief investment officers Summit Global Investments one point eight billion dollars in assets on their management. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews that

Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller, three pt on Fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast. You can always catch us worldwide at Bloomberg Radio.