Things Are Really Bad Today In Argentina: BI's Sassower

currently the weakest on record record versus the dollar. You have a hundred year bonds also absolutely falling out of bed. Joining us now Damien sass Our, chief Emerging markets credit strategist for Bloomberg Intelligence and Damien, how big of a potential negative is this for the Argentina economy and frankly for its access to international markets at this point? Well, I'll start with the ladder there um, because that's an

easy one. This is bad from an external perspective. I mean, if you're an investor that technical view, yeah, I mean if you're a dollar investor and you're looking at the prince this morning, I mean in just about every um dollar denominated a d R that's attached to you know, an Argentina a st B at YPF or POMP or even the global x ms C I E t F, which is the largest DTF that focuses on Argentine equities.

They're all off today, which is in line with with the dollar RG cross rate, which is now at sixty, which is yes, quite high and quite painful for a lot of investors who have who have investments. They're just taking a step back. I mean, what happened overnight. We saw that the Argentine primaries UM basically handed a much bigger victory to Fernandez, who is um as Kirshner, the former president, as his running mate, and um you know, the market's perception of that is quite negative, you know,

to return to currency and capital controls. I mean, Fernandez is already on the tape is saying he might not pay uh interest on all the leak te bows that offer creditors now own. And so look, as the fifth largest issuer of UM of US dollar denominated sovereign debt, Argentine is a pretty big position and a lot of emerging market investor portfolios, and so there's some pain here and I'm sure we're going to be seeing that before

the end of today. I wonder what the application is for companies in Argentina that have borrowed debt externally, because the depreciation in the PASO is killer for them. I think it's a great point. I mean, SMP actually just came out last week on the tape and said they don't see real refight pressure on those uh issuers and of of externally denominat external debt. Okay, wait and slow downs.

In other words, these companies that have borrowed money in dollars or euros, they've pushed out the maturity so far that they won't have to necessarily refinance or pay it back any time in the near future, so that relieves some of the pressure. Not the near future. One was the years, so they bought themselves about a year and a half to two years, let's call it, according to S ANDPS calculations. So it's still the net in the next week. Yeah, right, exactly. So it's not that far out,

is the point. And you know, look, I mean you've got a car account deficit that's narrowed, albeit on the back of r g PA so weakness, so it's four point six percent of GDP. This is an economy now in the longest recession and at least fifteen years. We're hoping to get a positive print for the second corner. We very well made yet that. But I mean, my goodness, in the first quarter GDP was off five point eight percent year over year, and consensus is calling for negative

one point four for this full year. So things are bad on the ground in Argentina. And look, I mean, despite the fact that they had an absolutely wonderful harvest, certainly relative to last year. Just for full disclosure, Argentina is a very big exporter of soybeans and agricultural products globally, and so one would have thought that might have been a bullish uh you know, would have been good for the economy. But my goodness, things are really, really really

bad today. And um, you know, if this um, if this is any indication of how the elections go on the October UM. Yeah, returned to the Pernis Kushner ways would not be good from the perspective of an off shore investor. So aside from Argentina, which is defaulted on its debt what five times in the past hundred years, serial defaulter, yes, serial defaulter. Yet they still were able to borrow money for a hundred years and the people who bought that debt really regretting it today with those

prices on those bonds in free fall. Aside from our Argentina, how idiots and credit I know Jonathan Farroll hates his word, but how specific to Argentina are these issues versus endemic within the emerging market space? Yeah? So, I mean I think, you know, I mean, to that point, we have to take a step back because it's all about us China. And you know, if you just look at some of

the data that came out of China overnight. I mean they released their total social financing data, which is all about credit extension that they kind of injected into their economy, and it was bad. I mean, given the word of the day, by the way, bad, it was bad. I mean, we basically were expecting something on the order of one point six trillion of credit being extended I'm talking in

you on terms into the local China economy. It was only one trillion un which is way less than expected and certainly less than the two point three trillion we saw in June. And really what this is is new loans are down, tighter, property market financing. You know, as we know in China, the real estate markets a very big portion of about economy. And with credit growth weak, especially in light of US trade for US China trade friction escalating, it's just not gonna It just means that

things are gonna get much worse. Oh and by the way, the protests in Hong Kong, and we see I P and retail sales coming on Wednesday, which is also expected to be weak. It's just not gonna be a good week for emerging markets. So Jamian, here's the weird thing. All that sounds so bad. I'm looking at the ms c I Emerging Markets f X index. It's the lowest levels of the year, all really bad. I'm looking at emerging markets funds not doing badly. They're not seeing big withdrawals,

and emerging markets debt is actually outperforming US credit. So what gives? Okay, So, well, you know E M dollar debt tends to be driven by the U. S. Treasury market effectively, and spreads within the U S. Treasury market, all of which yields have been coming down. Spreads are still tight around the year, or maybe they're about break even but all of that has been fueling the roughly

double digit gains we've seen an e M dollar debt. Know, hey, by the way, you make a really good point, because I just looked at the constituent breakdown in e M B which is the largest um um emerging market dollar bond e t F. It's the largest e M e t F you know, in existence, and Argentine is really only a small portion of that, despite the fact that it's five five percent of most benchmark industry, it's only two percent of that e t F. So you know, by hook or by crook, you know, maybe that's got

a little bit of a positive overlay too. But yeah, no, I M. Dollward jets done well, will continue to do well so long as US treasure yields are declining and spreads remain benign, if that's if that's true. So yeah, that's kind of what we're looking at. I mean, you know, I mean, look, Mexico, Russia, Brazil, it's all been doing

pretty well. Yeah, the emerging market conundrum, lots of bad news you can hook into, and yet and yet the FED keeps cutting rates and that's typically a technical positive. Damian SASA are Chief Emerging Markets Credit Strategies for Bloomberg Intelligence,

joining us here in our interactive broker studios. Behind the wall of worry that we have today in markets is what is happening between the US and China, and just not only what is happening between them when it comes to trade, but what is happening in each of the economy is when it comes to growth. We're so lucky to have Leland Miller here with us who tracks all of the economic data coming out of China. He's a chief executive officer of China beige Book International. Joining us

here in our interactive broker Studios. Leland, it really struck me that there was data showing slowing credit growth UH for the month of June overnight. This was interesting because it doesn't necessarily stem from a crackdown on leverage ratios. Does this indicate a slowdown in growth to you? Not yet, So there's a lot to be figured out over the

next several weeks. The first thing to know is that the first quarter, our first month out of every quarter, we typically see less lending, So you get the narrative things are slowing down. The end of the quarter, they pump more stuff in, so we'll have to see this over the course of several months. But the second thing is you've got these new tariffs hanging over, uh, hanging

over the Chinese economy. But you've also ut the party's seventih anniversary in the PRC seventith anniversary in October, so the Chinese are gonna want to boost the economy for that. So a lot of this is timing. When are they going to start pumping things in When do they want to improve uh, the optics around the economy. So I think it's too early to say that things are slowing down quite yet. Okay, so right now, where are we when it comes to the trade war and the ammunition

that both sides have to deploy? Well, this this was really interesting what happened in August because you know, as we've said for a long time, when you leave Osaka and you basically say we are have a deadline at the end of the year, so six months and of the year you don't even announce. If you imply that you're not doing anything until the end of the year, it's very hard to get the parties focused on doing anything substitutive. The Chinese don't want to talk about the text.

They want to talk about how to get to November when they can restart discussions. So all the discussion lately had been over Huawei on the U S side and agricultural buys on the Chinese side. And the Chinese got through the last media and thought they had done promised just enough to get what they wanted and have sort of a smooth fall. And the President didn't like that, and he ratchet up tensions. And then the Chinese did what they did with the yuan, which was overdue but

seen as a poke in the eye. And now we're at this position where we could see anything. We could see this coming week. We could see tensions relaxed because of the Huawei General License is extended, or some sort of concessions are done in Huawei, or we could see the exact opposite. The President does nothing in Huawei. You see tariffs go up to ten percent or even September one, and this thing's um, you know, breaking down quite quickly.

What about on the Chinese side, aside from the yuan peg And it's not necessarily a depreciation as much as allowing the currency to weaken perhaps to its market it's actual market weight Aside from that, are you expecting China to go after US companies that are doing business in China? Not yet. Uh, it doesn't mean that they're not being uh messed with on the margins. But right now, I think that China's goal is to just stop the nightmare scenario from occurring. So they don't want tariffs on all

their goods. They don't want Trump to come even harder at Huawei and the other tech companies, some of whom are on lists that have not been announced yet and would be if things really broke down. Uh. She is obviously very happy the President. Trump hasn't said much about Hong Kong to the extent he said anything, it's almost been encouraging. You've got South China. See, you've got Taiwan arms sales. So things aren't good right now, but the

Chinese are very motivated not to let them fall apart. Meanwhile, I was reading an article over the weekend that I thought was really interesting about Jiji and Ping's challenge right now, and that he faces this really difficult move in trying to take this very quickly growing economy and shift it to a more middle class, lower growth, but more stable developed market of sorts, and I'm wondering where it is on that progression, how far along has it gotten, and

sort of whether you view this as sort of the albatross that Jim Pig needs to cross. Well, he has a lot of he has a he has a lot of challenges coming up. I'm not sure which one I would take, you know, the I think that if you if we take it back up to fet what what we're seeing since was a lot of progress on certain things, like they cracked down on shadow finance. They didn't do as much on leveraging as they claimed, but they did

a little bit. There was some restructuring about to go on, and then they saw the Trump trade war hit in twenty eighteen, and everything they started they began to reverse. And now it's totally reversed. So this hasn't hit official day yet, so it's not believed by a lot of people. But we saw a major resurgence in shadow banking in the second quarter, so it's back. You know, they said that they were going to deal with it. No that got scared about what was happening in the trade war,

and they brought shadow banking back. You're not seeing restructuring, and I seeing reform. We're not seeing evidence of rebalancing in our numbers, and so I think what the Chinese have done once again is reverted to the short term to deal with their short term problems and said, you know, we're gonna kick the can down road, as everyone seems to do these days, and deal with the problems next

year or the year after that. So what's the consequence of that, Well, what it means is they can they can defy expectations of a more dramatic slowdown in the short term by by using their various levers to boost growth, but it means the medium term and the long term are gonna be much more difficult. The Chinese have an advantage in that they have a non commercial financial system. It's one of the reasons things that haven't fallen apart the way they did in the US with Lehman and

and and in Europe as well. Chinese can just swish huge amounts of capital from one side of the systems the other, plugging holes, fixing problems. But that means they're essentially chasing good money after bad and it's gonna hit, it's gonna stagnate the economy over time. It's gonna it's gonna hit their return on investment because they're constantly pumping new money into bad projects, so it'll have a long term hit when and a long term slowdown is basically

in the cards. So just to sort of put a bow on all of this, this is a really important point. If China has demonstrated it is willing to sacrifice the longer term for the short term boost that it can get by reversing some of the de leveraging, etcetera measures from earlier, then how is the trade war pressuring them? Because they're showing that they are willing to use this ammunition now regardless of the longer term consequences. I think

that's the problem if you're in the White House. The Chinese have the ability because they don't have to worry about the politics the way that a democracy would, and they don't have to worry about a Congress that doesn't like certain things. They are just going to fix problems that clear the way for the party in the short term. That's what they've always done and that's what they'll continue

to do. And so the difficulty in causing problems for China is that they always have a quicker response mechanism and a more effective one because they don't have to answer to anyone. Real quick, here, what year will the slow down in China be felt? The slowdown that will necessarily come despite the stimulus that the PBOC is willing to put in. Look, I would think that within five years you're gonna start seeing much slower growth, the questions

of the Chinese gonna admit it. I mean, if you you're already seeing slower growth and people were predicting a few years ago, it just hasn't been enough to to really shake the shape markets. I think over the next five years, you're gonna start seeing a more precipitous decline that they're not gonna be able to do much about. Leland Miller so wonderful to get your perspective. As always,

thank you for being here. Uh And honestly, Leland, you guys have data that is really spectacular because it shows what's actually going on, and there's so much question around the credibility of the official data. To get other measures to get a sense of what's going on on the ground is really important. Leland Miller is chief executive officer of China beige Book International, weighing in on both sides here. Jeffrey Epstein, the financier who was accused of sex trafficking,

was found dead in his jail cell over the weekend. Now, there are many questions around the circumstances of his death. It has been established as a suicide. Questions though about how he was surveiled by the jail staff. Joining us now is Chris Dolmets. He's a Bloomberg legal reporter joining us from the courthouse. Chris, We're now getting word from Attorney General Bill Barr that there were some serious irregularities with the manner in which Jeffrey Epstein was held. Can

you elaborate, Do we know anything more? No, that's just recently come out. He's he said, you know, they're serious regularities over the weekend. He has vowed to investigate, get to the bottom of what happened. Um. You know, it's a pretty secure facility and a lot of people are asking questions as to how this could happen, um in a federal prison that's held you know el Chapo for

for example. So what is the concern here, Because if I understand correctly, it has been established as a suicide, even though there have been a number of conspiracy theories that it was murder. I mean, has it been established a suicide? So? UM, you know, the only thing we've been told, um by the Bureau Prisons that he was found unresponsive, jail staff tried to revive him, someone emergency medical personnel, and that he was pronounced dead UM at

the hospital. UM, ABC and others you know reported that he that he hung himself, and there has been an autopsy performed. That medical examiner verified that, but hasn't officially determined the cause of debt. UM. There has been a city official that told the New York Times that UM, that the medical examiner is pretty confident that it is suicide, UM, but needs you know, to complete the autopsy to make

that determination. So what's the key question here when it comes to the serious irregularities that Attorney General bar was talking about. Well, there's you know, there's questions about um, you know, staff overtime, whether staff were overworked, UM, you know, what the conditions that the prison were like. UM, whether or not he was on a suicide watch. We've been told that he was not, even though he was recently

on one after previous attempts apparently to kill himself. UM, so some of the you know, the investigation is going to revolve around that who was watching him, um when they were supposed to um be checking on him. Uh, what was in his cell, how he was able to get something that allowed him to hang himself. UM, it's going to be a pretty comprehensive investigation, and that's kind of launched every time there is a suicide in a

federal prison. Chris, I'm wondering what his death means for the prosecution and for the investigation into the nature of some of the crimes, which included trafficking young girls who were under the legal age of consent. Sure, that's so this ends the criminal prosecution as because he's dead, the case just ends, and that kind of ends the attempts by prosecutors to kind of seize his assets, um to

compensate his victims through criminal proceedings. But that doesn't mean that they can't go um in civil proceedings to seize individual assets, including his mansion, UM, his playing other things to attempt to compensate victims. Obviously, there's going to be a pretty complicated um state scenario that comes out after his autopsy has finished, and UM, you know, we we don't know whether he has a will. You know, we we would assume with somebody with his number of assets

would have a will. Um. So it's a question of who would the executor would be, where it might be filed. I mean, he has homes in New York, in the Virgin Islands, in New Mexico. Uh So any of those places are potential for him to have his will filed and as a state divvied up there though certainly states and you know, we'll want to get a piece of the tax bill. So there's a question about the assets.

There's also a question about the tentacles of this case that had ensnared at least in the court documents, very high profile individuals who are friends with him, from the political to the legal to the business world. What is going on with that? I mean, are those kinds of reaches of the investigation going to be shot at this point or going to be ongoing? No, so, other prosecutors have told me that the prosecutors here in Manhattan will

almost certainly continue their investigation with the evidence they've gathered. Obviously, there's a conspiracy count here which implicates other people, um, and there should certainly could be other charges brought against UM other members of that conspiracy. UM, we wouldn't doubt that they were. That they're indeed doing that right now. So this could definitely ensnare other people UM as it moves forward, UM, which will probably take a little while

as they go through the evidence. So is there any concerned Chris about finding all of Jeffrey Epstein's assets considering the rather secretive nature in which they were all kept. I'd say there's definitely a concern through that. I mean, even the prosecutors have been unable to determine exactly where all his assets are, and UM says they've been secured away in trust, and you know that there's several layers of secrecy that have to be gone through before we

can they can determine exactly what he has. Crystal Match, thank you so much much for being with us. He's a Bloomberg legal reporter joining us from the courthouse. The latest being Attorney General William Barr coming out and saying that the prison where Jeffrey Epstein died has quote serious irregularities.

He vowed to pursue justice for the financiers victims. As Chris was talking about, there is some question about seizing the assets of Jeffrey Epstein and doling out the proceeds to the victims, as might have happened under a successful prosecution, But now that he's dead, raises some questions about whether they can do that. Time to get us check on what's going on with the price of oil, where it's headed,

and what it means for Saudi Arabia in particular. Joining us now, Dr ellen Wald, president of Transversal Consulting and a Bloomberg opinion contributor, Ellen thank you so much for being with us. I want to start with Saudia. Amco Is reported its earnings and there were a couple of surprises there. Yes they did. They indicated a twelve drop in revenues because of the decline in oil prices. But was that what really caught your eye? Uh? No, I

think that the drop in revenue and in profit was expected. Uh. And it's really not that bad, considering that oil prices have been lower and also that a ram coast producing less oil as a result of its agreements with OPEC. But it's really interesting in Uh. The numbers that the company did release are the dividends that it's giving to the Saudi government. So even though revenue and net profit

is down, the dividends were really up. Uh and a ram coast seems to divide this into two different kinds, ordinary dividends and special dividends. And ordinary dividends were about the same, but special dividends group by fourteen billion dollars. And this is really an area that investors need to keep an eye on, particularly if they're interested in uh an a Ramco I e O, which is still forthcoming,

but it could be an area of concern. So just to sort of flesh that out a little bit, because I thought this was really interesting, and you pointed it out in a note where you were talking about how people are concerned. There is discretion at Saudi Aramco about how much of their profits they give to the Saudi Arabian government, and this becomes a problem for people who might want to invest in the equity of this company because they don't know how much they will be left with.

What does it indicate to you that that special dividend increased at a time of declining profits and revenue. What does it indicate about Saudi Aramco and the message they're setting to shareholders or potential shareholders. To me, it indicates that the government is still Saudi government says it wants to wean itself off of oil revenue, of off of its dependency on oil, and that's a very very good goal for them to have, but it's still not there,

and in fact it's actually needing more and more. UH they've really still find their relationship in terms of income taxes and exactly how much they're going to be reimbursing

a ramco for the cost of fuel. But they still have to really flesh out this dividend relationship because it does mean that in the end, despite all of the safeguards and the procedures that they've put it put in place, it doesn't mean that in the end the government is still still really holding the purse strings for a Ramco and if it needs more money for whatever it is that it's doing that year, it's going to take it

in a dividend. So the other interesting aspect of the Saudi Aramco earnings was their announcement that they're planning by a stake and they're finding a chemicals business of India's Reliance Industries, which is UH chemicals business. It's not an oil and gas business, and this is I assume, a way for them to continue to diversify away from away from crude. Correct. Yes, it's definitely part of their long running strategy to increase their downstream capabilities to diversify away

from just upstream and crude productions. But there's there's something very interesting here, which is that when a RAMCO goes in to a foreign market, particularly in Asian market. UH China and South Korea are really good examples of this, but India, I think it's going to be one not it doesn't just invest in chemicals or refinery business, but

it also secures an outlet for its own crude. And what was kind of hidden in this deal, which by the way, is still in its very early stages, is the fact that Reliance agrees that it's going to double its crude imports from a Ramco to bring that up to I think five hundred thousand barrels per day. So a RAMCO is not just investing in a company that it thinks will do well, it's also securing an outlet for its crude. I want to broaden out just a

little bit. The price of oil has been whipped around in part due to Saudi Arabia or Saudi Arabia's attempts to do whatever it can to support prices, or least that's what they were. They were making noise about what can Saudi Arabia do at this point further and what are they likely to do to keep prices from going

down further? You know, this is the big question that's on everyone who follows the market's mind because prices have really seemed to be disconnected from supply and demand, or particularly from supply, and there's really this focus on, uh, the future of demand, so this focus on what demand could be in the future based on forecasts about the economy. And so Saudi Arabia is looking at this and they're saying, the price of oil is going down, down, down, and

going all over the place. But there's no indication from a supply perspective or even really from a current demand perspective that this should be happening. So they admit this and then they say, well, we're going to do what we can. They had planned to increase production in September, they've decided they're not going to do They're going to hold off on that production increase, and but really, what

more can they do? It's a big question, and some people are saying, well, OPEC is a whole quick cut production by a million barrels a day, and that might lift prices a bit. But when prices are so disconnected from supply, it's really unclear that there's anything they can do short of just writing it out. Dr ellen Wald, thank you so much. It's always a pleasure speaking with you. Dr ellen Wald is a Bloomberg Opinion contributor. She's president

of Transversal Consulting. You can read her columns on the Bloomberg at O P I n go or Bloomberg dot com slash Opinion on the internets if you will see the really interesting perspective. She's also, by the way, a nonresident Senior Fellow at the Atlantic Council's Global Energy Center. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on

Twitter at pt Sweeney. I'm Lisa bram Woyds. I'm on Twitter at Lisa A. Bram Woyd's one before the podcast, you can always catch us worldwide. I'm Bloomberg Radio