We Have All The Elements Of EM Contagion: Bill Rhodes

Podcast on Apple Podcasts, SoundCloud and Bloomberg dot com. Well, the story may be the same across the emerging markets, that debts are owed in dollars while revenue for a variety of companies is actually received in devalued emerging markets currencies. Here to tell us more about the situation and its potential ramifications is Bill Rhodes. He's the president and the chief executive of William R. Rhodes Global Advisors. He is also the author of Banker to the World, Leadership Lessons

in Global Finance. Bill Rhodes, thank you very much for coming into the studio. This issue of debts odin dollars but companies earn in local currency. How bad is it going to get? Well? As you know, you have my oup ed that I did for Reuters on June twenty two, where I forecast the situation getting worse in Argentina, although people at that point we're optimistic because they had just gotten a loan from the I m F, a record

loan of fifty billion dollars. And also predicted at that point because the election hadn't taken place yet in UH in Turkey that Van would win and it was going to be a disaster. I went into his interest rate policy because he thinks the best way to fight inflation is to drop interest rates. Its unique vision of the world, and he put his son in law in his Ministry

of Treasury and Finance to implement his program. So what are we saying in the case of Turkey UH In addiction into the Argentine problem, UH, we see a country like Argentina who has tremendous indebtedness in dollars UH. And also the banking system in Turkey is having problems because of the build up in nonperforming because the companies in

UH in Turkey have barred very heavily in dollars. And you have now a depreciation of the currency of some forty three percent since the beginning of the year, inflation reaching eighteen percent, and it's not clear what Turkey is going to do at least in the case of Argentina, they say they finally will get away from their gradual list program, which they call gradualismo UH and put in somewhat of a shock program. And the I m F says that they will be dispersing additional money from the

fifty billions. So that's going on, but you have problems elsewhere. South Africa also has heavy borrowings in foreign currencies, both dollars and euros, and they're in the first recession in nine years UH, and their currency is also reaching record lows. And then we go back to Indonesia shades of the Asian financial crisis, and and the value of the ruby is UH has reached visa e the dollar, the lowest rates in the Asian financial crisis. So we see a

lot of spreading problems. And then of course we have the big elections in Brazil UH, you know, which is the biggest economy of all the ones I've mentioned, And there you have an absolute mess as to who will emerge as a winner. The extreme right Bosonaro x army captain who says that he's really going to basically put the troops on the streets there permanently, or the extreme left UH, the successor to Lula and the People's Party and the Workers Party, and so it's very unclear what

the situation is in Brazil. So you have all the elements of contagion. Now I'm not saying that we're looking at two thousand seven UH or we're looking at the Asian financial crisis, but I think we have to remember that emerging markets can drag developed markets into the tank.

And I think the markets here in the United States, with all this liquidity still slashing around, have not taken into consideration that our friend Powell at the FED is going to raise interest rates two more times this year and we'll continue next year, and this of course puts more pressure on the currencies and the ability of these countries to pay. That was the origin of the eighty

two Latin American debt crisis, the Asian financial crisis. And so I'm saying, we've seen this movie each time it's different, but we ought to take it seriously. At what point will it kind of hit a crucial point where there's sort of a denue mall of some of these pressures. I think that as you see the FED raising interest rates and remember the running down your quantitative easing uh in uh in your up. Uh. Droggy is restated he's going to stop the quantitative easing by the end of

the year. So I think that people will start reflecting that we're nine years going into ten years since the Great Recession, and I think that maybe you might see people starting to pull back somewhat by the end of the year. Now. Uh. You know, the Trump administration says Fagett about that we're onto nirvana for the next four at least till two thousand twenty when the presidential election will go on. But they're not taking into account some of the the the the events and actions which I'm

talking about. So people are still out there buying stocks, a record high of the doo, the dollars, a record high. Unemployments a record low, could go lower. But we have to remember that that was a similar situation at the time of the Asian financial crisis, and it was a similar situation. Of course, we had runaway inflation of the in the Latin American debt crisis and were inflation so

far is very very tame. But I don't think that the Powell Chairman Powell is going to take into consideration what's going on in the emerging markets because his primary responsibilities the United States of America. Yeah, this could be a warning shot that we have much more with Bill Rhodes coming up. Stick with us. Bill Rhodes, President, chief executive of William R. Rhodes Global Advisors, author of the book Banker to the World. It's a wonderful read. I

recommend you get it. He has a former senior advisor for City Current and he helped restructure the debt of a number of sovereign entities over the years. So fantastic insight. We're gonna head to China next. We're waiting, uh, the potential tariffs that could come out this week. It is the opinion piece heard around the worlds in New York Times op ed that was penned by an anonymous author titled I Am part of the Resistance inside the Trump Administration.

Here to talk about the potential fallout from this is Al Hunt, columnist with Bloomberg Opinion. Well, thank you so much for being with us. You know, this is seemingly a bombshell in terms of the potential effects and the potential crisis within the White House, in terms of being able to trust one another. What's your big takeaway, And do you think that we're going to find out who authored this piece? I think here's a bombshell almost every hour, Lisa,

So we've almost debased the term. But you're right, it's huge. I've never I've been in Washington, I will confess to you for almost half a century, I've never seen anything quite like this these last couple of weeks. I think it was an extraordinary column. One can argue about whether it should have been written or not, but I have no doubt in the New York Times editorial page editor

that it was. It was modified, But it's also not surprising. Uh. It conforms with what Bob Woodward has written, has come out this week. It conforms that what's been reported by major news organization. It conforms that what we know about Donald Trump. And the other point I would make me say is it's hard to imagine these series of inside revelations from any other president. For a simple reason, they commanded some loyalty. Trump commands no loyalty. For a very

simple reason. He gives no loyalty. Al Hunt. All right, you've been at it for, as you said, almost half a century. I was going to ask you what it was like to cover the administration of Woodrow Wilson. Uh. Well, the McKinley years were the best, Yeah, weren't they. The reason I bring up Woodrow Wilson is because the substance of the op ED makes it clear that there's a cadre of officials who are working behind the scenes in order to restrain the president or guide the president, whoever

you want to describe it. But we've had situations like this before, haven't we. Yeah, we have. When Wilson was incapacitated, that was the case. Um. But but that was in nineteen nineteen twenty. It was before the nuclear age. It was easier to do that in those times. There was a sense that the people that we're doing it were generally reflecting Wilson's policies wishes. He also was very much of a of a lame duck president. He couldn't get

the Liga Nations through or any of that. I think this is different and it's more serious because I think you have you know a man who is um I want to say, psychologically unsuited for the job. That's not my expertise, but certainly he is substantially in temperamentally and emotionally unfit for the job, and that makes him dangerous and I think people around him know that. And secondly, with a couple exceptions, and I would point out Jim

Mattis certainly as one. There aren't a whole lot of really good people around me, So I have to wonder. I mean, markets have treated what you're describing. Uh, They've simply shrugged it off. And any turmoil seen in the White House hasn't necessarily bled out into the markets at all.

That might change when it comes to the mid term elections, and that is where the focus is right now, and especially as we see these contentious hearings going on in the Senate right now with Brett kavanaught to become the next Supreme Court member. Do you think that pieces like what we saw in the New York Times weaken Republican power more generally or just go after President Trump himself

and his leadership. Well, I think it's hard to divorce the popularity in the standing of a present from that of his party in the mid term elections. There are other factors, but I would be I would be stunned if the Democrats don't have a pretty big night in November. I think they'll take back the half. Probably not the Senate, but the Republicans won't make the kind of games they once expected in the Senate. Democrats probably win. I don't

know seven eight ten governorships, including some big ones. I don't know how the market will react to that. I do have a feeling that Trump won't react well to that al hunt. We've been monitoring the hearings that are currently taking place before the Senate Judiciary Committee. The hearings to speak to an illicit information from Judge Brett Kavanaugh, appointed to the U. S. Supreme Court. The senators that are on the committee, they've been in the Senate a

long time. So does the argument that O G. It used to be collegial in the past, does that really hold any water. It's exaggerated. I think it's worse today, but it's exaggerated. Don't forget the board hearings. Uh, you know, don't forget that there was a time back in the sixties where Republicans were trying to impeach a Supreme Court Justice William O. Douglas. So the idea that it was all these come by I moments before and now it's really nasty and ugly is exaggerated, but it certainly there

was more comedy. Uh, there was more collegiality than there was less, less bitterness than there was before. I think there really the Democrats know they're almost certainly going to lose this one. I think what really embitters them though, is how really unconsciably h Merrick Garland was treated in two thousand sixteen by Mitch McConnell and the Republicans. He should said, the should have been a vote on Judge Garland, just as there should be a vote on Judge Kavanall.

I think that bitterness is carried over and they're fighting a losing battle, but they really feel aggrieved. Do you think that there will be any blowback when Mitch McConnell maybe takes the Senate floor, if indeed the Democrats are in the majority in the House after the midterm elections, as you describe, well, he's got a he's got a very difficult act because he's going to have to deal with Trump, he's going to have to deal with his caucuss, and he's gonna have to deal with the likelihood of

a Democratic speaker and majority leader. And he's up for reelection in two thousand and twenty. And as we say, he ain't a spring chicken, so he's got he You know, Mitch McConnell is going to have a lot of conflicts come next January. All right, we're gonna leave it there,

but thanks very much. Bloomberg opinion columnist Al Hunt on the ins and outs and ups and downs in Washington, d C. Ostensibly the tech hearings on Capitol Hill this week, or to assess the national security concerns, especially given the foreign interference in domestic elections. What we got wasn't necessarily that joining us now to talk about what that means

going forward in terms of oversight and NASH security. As Clint Watts, Senior Fellow at the Foreign Policy Research Institute, also a Senior Fellow at the Center for Cyber and Homeland Security at the George Washington University, UH he has served in the U. S. Army, the FBI, the Joint Terrorism Task Force, as well as a number of other agencies. Clint, thank you so much for being with us. So what's

the big takeaway from these hearings. The big takeaway, I think is that social media is in trouble, but it's not necessarily with the government meaning that. I think what we saw in the Senate yesterday was the social media companies have moved faster than the regulators. I'll give you one example, the Honest Ads Act, which was essentially the way we have political advertising on print, radio, and television

should be in social media as well. Social media companies have already kind of done that on their own, you know, they've moved to match these and yet Congress hasn't passed these very simple laws from two years ago. At the same point, when we saw in the House as this sort of bickering around politics, it was like a politics show, and the social media companies were there. It was rather silly to watch. So I I think the regulation is not going to come from the US. With the social

media company sphere is the EU. They have moved much more aggressively about data privacy, and I think there was a pure research report that talked about how young people have marched away from Facebook, you know, deleting the app, not willing to be on the platform anymore. That is the big fear I think for social media. It's going

to come from outside the government. Now do we all need to go and rewatch the movie with Scarlett Johansson and Joaquin Phoenix called her and which she has he has a relationship with what is ostensibly an artificially intelligence powered personality. Yeah, I I worry about three audiences for different reasons. In foreign influence, I'm most worried about the Third world countries that are coming online. They've never really been on newspapers. Their first experience with the Internet is

through a social media app. They don't say let's Google something, they say let's Facebook something. You are in a bubble. The second one is actually the older generation in America. If you look at the people that have stayed on the plant forms it, they are inexperience with it. They don't know when they're getting duped. They're not used to these digital communications, and they're the most aggressive about their

political views and kind of corrodes the environment. The third one is young people who are marching away in some respects from social media and moving to what you talked about, these apps or artificial intelligence. And I like to say, were we were worried about the matrix overtaking our young people are young people will enlist in the matrix, They will love it. They want to be in the matrix because it's more satisfying than the real world. That's what

I'm really concerned about for the next generation that moves up. So, Clint, given what we saw from the Senate yesterday and given the fact that we didn't get a lot of hard questioning on the actual national security aspects of this, what's your feeling about how we're going to address this, especially in light of the discord that we're seeing in the White House right now. I mean, is this concerning to you? Yeah?

I think Well, we'll see over time as a fragmentation of social media into apps that is similar to the way we saw a television sort of breakdown in cable TV news, meaning that people will start to move to platforms based on whether they satisfy their political views, and this will harden us into I call them preference bubbles. It's part the algorithm which feeds you things you want and part your own choices. You continue to choose things you like and you get more of what you like.

And so this sort of breakdown is troubling for democracy because if you don't agree on facts, which is critical you can have in foreign policy debate, you get gridlock in Congress, much like we've already seen. You see sort of see flip flopping back and forth between political parties around the world, in democracies where it's right then left, and right and left and you really can't secure the country. It becomes uh for those that can manipulate the platforms,

those that can manipulate people's minds. I really think we're entering an area where authoritarians have figured out, after open media, how to control it and and really how to dominate it. Messing with the enemy surviving in a social media world of hackers, terrorists, Russians and fake news. This is your latest book, What do you recommend people do? I think the big thing we can do is get back to

picking good filters. We have gone through this era over the last thirty years that unfiltered is better and that goes for everything. If you remember movies, the unrated, the un conversion, and that we actually know what's good for no brokers, no middlemen, middle women, and this raw reporting, raw feeds. If I see the actual emails, I'll be able to know the context of everything. Actually is a true know when you're an expert, and know when you're not.

We believe that if we have a connection to the Internet. We're just as smart as everybody else. And there's a guy named Tom Nichols. It talks about the death of expertise. We need to recognize when we are strong and when we're not, and when we're not what filters to gravitate towards.

And I think ultimately moving back to having responsible journalism, responsible news outlets, going to information sources that have an editorial process is a good thing, not a bad thing, and that people need to realize sometimes they are misleading themselves and they have no one else to blame but themselves for doing that. Clint, we just have about a minute here, but I'd love to get your thoughts on the anonymous op ed that was published the New York Times.

I We'm wondering, you know, President Trump said that this is a national security concern. Is it? I think he has a a small part of truth possibly in it, which is consistent with his rhetoric. But what if we have officials in the executive branch that aren't following orders, are not following procedures, are not following laws, and that is a soft revolt in some ways, it can be

viewed that way. At the same point, we're seeing someone who's leading the White House in many ways, breaking political norms and testing things that our Constitution really did never think would happen. Right, We we have gaps in our laws essentially. So yeah, I'm concerned. You know, if everybody does their job and follows the constitution. I like to look at Rod Rosenstein. I think that's a great example

over the last year. Someone who follows procedure, knows the roles in regardless of political parties, stands as the ground. If we have people like that, I think the country is fine. But if we don't, if we start breaking into this separate competing polls, then I'm going to get a little bit concerned. Thanks very much for being with us. Clint Watts is a senior Fellow at the Foreign Policy

Research Institute. He's also a senior Fellow at the Center for Cyber and Homeland Security at the George Washington University. You can follow him on Twitter at Selected Wisdom. His new book, Messing with the Enemy. You know, so when you think of biotechnology companies, you think of Cambridge, Massachusetts. You think of Silicon Valley San Diego in California, of course, but you don't necessarily think of China, and that is changing.

One of the reasons that's changing is that Chinese authorities, the government there has actually stipulated that the biotechnology sector should account for in excess of four percent of gross domestic product by twenty twenty and that there should be between ten to twenty life science parks that are dedicated for bio medicine. And here to tell us more about this particular aspect of the industry is Brad long Car. He is the chief executive of Long Car Investments. They're

based in Lenexa, Kansas. He's also the index provider for a new E t F. It is called the Long Car China bio Pharma E t F. The symbolist C H and A and he joins us here in studio. Brad, thank you very much for being here. Did I describe that correctly visa v. The Chinese government and what their plans are for the biotech sector in China. Absolutely, thanks for having me. You hit the nail right on the head. There's four or five elements that are making this happen.

In the government is a big one. They have a program called Made in China and the goal behind that program is to upgrade their economy to hire value sectors. Everyone of course thinks of China is a manufacturing based economy. They want to be leaders in tech and biotech, and so they're putting a lot of effort behind that. But that's really just one element. It's obviously an important one, but you know, until today, China didn't really even have

a biotech sector. For example, the Hong Kong Stock Exchange had a rule that said, if you don't earn revenue, you can't list on our exchange. And so if you think about it, most biotech companies are conducting science and developing new things and don't earn revenue. And so the exchange realized that innovation is what drives a global economy, just like the government, and on April thirty, they instituted a new rule specifically for biotech companies that allow biotech

companies to list there for the very first time. Already ten have signed up to I p O and two have happened, a company called ask Leidas and another one by jen which already trades here on the NASTAC. And we think there may be dozens and dozens over the coming year, and so I think this is an exciting moment because it may be just the very start of

their biotech sector. I'm struck by the concept of trying to craft an index select stocks on Chinese indexes to put into your e t F for the the index that that sort of creates the benchmark for the e t F. How concerned are you about transparency and a lack of it that is traditionally endemic in China, especially as it relates to the incredible, already volatile industry of biotechnology. Yeah,

that's an excellent question. So that's certainly an issue that you have to be very aware of, and in terms of our thinking on that, when we crafted the index, UM, we only allow companies that are listed in Hong Kong or here on naz back. We don't allow companies that are only listed in mainly in China, and the reason for that is those are global exchanges, and we're not just looking for companies that want to be leaders in China domestically. We're looking for Chinese companies that want to

be global leaders in this industry. And we think those types of companies are signing up for those two exchanges because they're outward facing and UM they have a higher degree of investor sophistication and scrutiny, and in terms of the actual selection, we're not picking our favorite stocks or anything. We're just trying to represent the entire industry. So if you're a true biotech or pharmaceutical company listed on those

two exchanges, you're included. And then we give extra waiting for larger companies to give them credit for their size and stability. Now you need to make the distinction between companies that are offering biotechnology solutions in China and they be foreign based as opposed to those that are domestically based. Correct, that's right, that's right. We have two criteria. You either have to have your headquarters in China or you have to drive fifty one percent of either your revenue or

your pipeline value. So if it's just like the US company that's dabbling in the region, it wouldn't be included in this. We only want companies that are focused or based in um in that geography. One thing that I'm struck by is if you're targeting companies with global ambitions, how do the recent trade tensions factor in, if at all? Given the fact that the U S and China appear to be in an escalating spat. It's affected the valuations a lot. So, um the stocks are down about thirty

percent over the last two months for that reason. And also there's a vaccine scandal issue that's going on there right now. Um, so it's affected sentiment a lot. But I actually don't think it will hurt this industry fundamentally. I think both the United States and China see this sector something that affects hugh and health and they don't

want to use that as a bartering tool. So, for example, a couple of weeks before the trade war started, China completely eliminated tariffs on cancer medicines to zero, and they said they want to do that for other types of innovative medicines. And I don't think the timing of that was accidental. I think they did that as a message to say, we don't really want to, you know, do something that's going to affect the you know, the health

and well being of the citizens. And so it's affected stocks from a sentiment standpoint, and will you know, while this is still an issue, but fundamentally, at least I hope it won't you know, affect actual investment or drug development. Hutchinson China Meditech The company is listed both in London and in New York. Tell us about this company and how it helped China celebrate a landmark Yeah, so this

just happened yesterday. So this company, their executive offices are based in Hong Kong and all their R and D takes place in Shanghai. People might be familiar with a billionaire named Lee Ka Shing. He's kind of the Warren

Buffet of that region. This company was founded, it's part of the Hutchinson one POA group, and they developed a correctal cancer drug called threw quittin eb um that was approved yesterday, and we view it as a landmark watershed event because it's the first innovative cancer medicine to be entirely discovered and developed and approved within China. For example, it succeeded in a large phase three trial and the results of that were published in the Journal of American

Medical Association. That was the first um. So this is as high quality as it gets. And that's the whole idea here is that their companies there now conducting world class science and developing drugs that are at the cutting edge, and this was just the first of that happening. Specifically in cancer, and we hope that you know it's gonna be a recurring story over the coming years. There's more companies like that developed drugs, not just for the China region.

You may see that drug here on the market in the United States one day. It's in trials right now. Brad Lon Card, thank you so much for being with us. Brad Loncard, chief executive of Lon Car Investments, based in Lenexa, Kansas. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.

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