How Chinese Debt & Business in China Have Evolved (w/ Fraser Howie)


FRASER HOWIE: My name’s Fraser Howie. I’m an independent analyst on China. And author of a number of books on the Chinese
financial system, in particular, Red Capitalism, and then before that, Privatizing China. So I’ve been in Asia for about 25 years, primarily
working in the financial sector– Hong Kong, Beijing, Hong Kong, again, and now I’m based
in Singapore. But always with a big focus on China, in terms
of my day job, but also my writing and commentary. It was actually myself, and a co-author, and
a colleague at a company called CITIC, which was the first Sino jointventure securities
company set up in China. About 15 years ago, we started writing about
the Chinese financial system, simply because we saw what was being written by China back
then, and this was in the late ’90s, 2000 or so. And frankly, we thought it was nonsense. We were on the ground in China. We saw what the securities markets were like. We saw what the stock market was like. And it was clear that the pundits in Hong
Kong were just far too optimistic about what China was. And then we thought, there’s a story to tell. That got us writing. It was actually on the back of a report we
wrote for the CICC at the time. And we wrote Privatizing China, which was
based on a look at what was then about 15 years of the stock markets in China. And really, just going right back to basics–
really in the late 70s, when reform started in China, fair share issuance in ’79, and
then the development of 4trading through the ’80s, listings– And they say that was privatizing
China. But then as the knot progressed, we realized
that we had more to say, and in particular, in the banking sector because if you remember–
go back to that time when we were writing Privatizing China and riding on the stock
markets. The Chinese banking system was basically bankrupt. In 1999 Zhu Rongji, the Premier at the time,
started a big bailout program where they set up bad banks, asset management companies in
China, and we saw that happening real time. It was a very long process. And so by ’05-’06 you started seeing these,
what were just previously, bankrupt banks being listed, raising multi-billions of dollars. And we thought, this is nonsense. These are Chinese banks. These aren’t Western banks. And they aren’t banks in the way we understand
them in the west. And we thought there’s a story there. So that was the genesis of Red Capitalism. And in Red Capitalism, which was eventually
published in late 2010, beginning of 2011, we went through that history of how banks
were reformed in China, how you took a bank or banking system and you made it into what
was, at the time, basically, the world’s most expensive banks. Valuation– I think it was something like
a quarter of a trillion dollars, $250 billion with all the Chinese banks. That’s an incredible figure remembering that
day declaring the system was bankrupt. So that was the genesis of Red Capitalism. Interestingly, the bulls thought it supported
their case, the bears thought it supported their case. We didn’t write it with any case in mind. We wanted to tell a story because we felt
that, again, so much of the hype, so much of the headline in China is superficial. In understanding China, you’ve got to get
away from the facade, the face of China. China is great at telling a story about how
it sees itself. And a lot of people buy into that because
China can be a very opaque and difficult place. But especially in the stock markets and then
in the capital markets in general, that almost certainly what it says on the tin isn’t what’s
in the tin. And so therefore, it’s important to understand
the background to these things, to understand the accountancy behind it, and this chicanery,
quite frankly, in a lot of the financial system. I think it’s really important if you want
to understand where we are in China now. It’s what I call the Olympic cycles. If you look back to the ’08 Beijing Olympics,
I would still maintain, although the economy was probably less than half the size it notionally
is now, I would say that’s the modern high point of China, frankly. That If you look before– the Beijing Olympics,
they put on this incredible show. They built so many subway lines. They did so many things which no other country
allegedly could do. It was a great catalyst for building across
the country. The economy was booming. Everything seemed to be going. Everyone was pandering to China. And I think that really was a high point. Of course, that was August in ’08. And then, of course, global financial crisis
and we all remember– or maybe we don’t remember now, but that last quarter of ’08 really was
dreadful. Things, literally, just fell off a cliff in
that last quarter. And that was very important in China’s case
as well because China was hugely affected by that. I think that everyone, of course, remembers
the output or the response to ’08, by the Chinese government, this huge stimulus program,
which started off a whole series of events, which we’ll come to. But I think, remember, before that, and the
real reason for that was not simply to keep global growth going, but China had, was it,
the headlines, 20, 30 million people unemployed, these migrant workers. This was the mainstay of the Chinese economy
that this migrant population was working in factories along the coast, and that just the
downturn in exports, the downturn in the global economy really impacted China. And so what you saw there– and this again
was absolutely central to why we wanted to tell the bank story– was because the response
of this stimulus was basically you turn on the credit taps. That after spending the better part of a decade
trying to reform the banking system, trying to make it into something that was something
at least approaching a market-based system where there was some degree of risk control,
some oversight, you basically had the rulers in Beijing reverting to their old practice
of using the banks as a piggy bank to basically fund growth. And so you turn on these credit taps, and
literally any warm body could get money in ’09. And so you had this huge expansion of credit. And of course you saw, guess what, a big rebound
in growth, which should not surprise anybody. Growth’s an output, not an input into these
models. And so you had this huge expansion of credit. But I think that was the start of something
that has taken China, as I say, before those Olympics, before that last quarter of ’08,
China was a growth story. There’s no question about it. It had been 20 years by then of double digit
growth. China could continue to grow for another two
decades, three decades, whatever it may be. And yet, that was a real turning point because
China’s gone from a debt story– or from a growth story to a debt story, which is just
staggering. And I think we forget about this because the
growth numbers have still remained high. And people say, yes, they’ve fallen from their
highs, but hey, they’re still doing 6 and 1/2% or 7% if you believe in those numbers. They say, it’s still much better than what
the West’s doing. But that’s incidental, because the real story
in China now is that the reason you’re still getting that growth is because credit is growing
at double the rate of GDP growth. And so that ’08, that response, that ’09 stimulus,
the early stimulus to keep growth going really set in motion an addiction to debt, and took
China– and let’s remember, well, there was clearly an impact from the global economy. It wasn’t necessarily a crisis per se. And so it’s interesting now that you look
and you compare Chinese growth numbers and the growth, particularly the build up of gross
debt in the economy, it gets compared to what the US is or what the UK is or Japan is or
Greece or whatever. You can take any of these countries. But these are all countries that have clearly
gone through crises. In China’s case, I don’t see there’s a crisis. Yes, there’s slowing growth. There’s lots of problems with their economy. There’s many areas in China you can look at
and say there’s real problems. But in terms of actual real fundamental financial
crisis, there isn’t one. There’s no real panic there. There’s still a lot of faith in the government. There’s still a lot of resources and capacity
of the government they can put to work. And so, you’ve had that huge credit build
up in spite of a real problem, which really makes me wonder when I think about future
issues, when you think, if a crisis does come in China, and given what’s happening in the
States with the new president, you can certainly see scenarios where you are going to get crises
coming, then will China have the wherewithal and resources? But coming back to that stimulus. So you had a positive response from China
in ’09. That obviously was lauded at the time that
this would support global growth, support global demand. At the same time, you also had a government
who started to acknowledge that there was fundamental imbalances in their economy, and
that this needed to be reformed. And of course there was lots of nice words
and nice talk about this, how we’re going to restructure, we’re going to move away from
this dependence on fixed asset investment. and we’re going to move more towards a consumer-driven
economy. And here we’re eight years on, an Olympic
cycle– two Olympic cycles later, and you think, this really is quite horrible. You’ve effectively had the growth rate halved
and the debt double, which hardly is really a successful formula in many ways. I think whether China becomes the world’s
largest economy is almost frankly irrelevant, because that’s just– that’s like just weighing
the health or measuring the health of your kids based on their weight. There are many other factors that are far
more important to think about than simply, are they simply getting bigger? Are they growing? And I think China has continually failed over
this past eight years or so to really grasp that reform process. And again, this isn’t just something from
the new leadership. This is something if you go back to about
five or six years, there was a big report from the World Bank, done in conjunction with
the Chinese government, called– I think it was China 2030, but need to restructure their
economy, move away from fixed asset investment. And it laid out a whole series of reforms
and steps to try and remove this dependency. But guess what? As the global economy has failed to recover,
as China’s own economy has started to stutter in many ways, there has been a continual dependency
on debt. And so what you’ve seen in China, you’ve seen
incredible innovation, but in the worst possible way. That instead of, whereas at the start of this
crisis in ’08 you still had 60% of debt in their economy- – or probably higher, certainly
a decade more or so ago, you had 80% of debt in China basically being from bank loans,
very simple. You can look at the amount of deposits they
had, and you looked at their bank loans, and you control that through a loan to deposit
ratio. So it was very easy to literally turn the
tap on and off. But what you’ve seen is a proliferation, over
the past eight years or so, of broadly called shadow banking. And I think that doesn’t even come close to
describing it, because it’s such a murky term by definition. But you have had incredible innovation, as
it were, of bankers and entrepreneurs and businessmen figuring out ways to get around
systems which are put in place by bureaucrats to try and limit credit. And the difficulty is that returns for much
of China’s business is low, and therefore they’re desperately trying to look for new
inventive ways. At the same time, as rates have fallen in
China, you’ve also got depositors who are saying, I want better returns. And so you’ve had this springing up of– and
we talked about this when we wrote Privatizing China. This was really just the start of this process,
of these wealth management products, short term products, guaranteeing better rates which
got immediate deposits, which weren’t necessarily carrying it under the loan to deposit ratio. But again, got around that, that lending restriction. We got depositors’ funds into the hands of
those who wanted it. And in some ways, it’s a good sign. It’s a liberalization of the currency or of
the interest rate market, which is always a very important thing in China. But effectively what’s happened is that much
of that control over the banking system has been lost. And where we had highlighted this at the end
of Red Capitalism, the system now has become so much more complex. Whereas you really could think previously
of a dozen banks or so controlling the bulk of the loans, you knew exactly where they
were going, and it was very manageable, you now have a highly opaque system of banks,
of shadow banks, of wealth management products, of trust funds, of corporate lending of what’s
called entrusted loans– it’s just loans being siphoned through banks– wealth management
products created by securities companies. And then mix into that guarantee companies,
which have sprouted up to try and guarantee these loans. You have then also things being sold on the
internet. You have pawn shops where– it’s almost endless. And I keep thinking, I should write down and
try and map this whole system out. And then I though, it’s like trying to map
the brain, that there’s almost so many connections and nodes that have appeared. And the difficulty is you don’t actually know
the connections from one to the other. And you’re so, am I double counting this debt? Is this a chain of debt that’s growing? Is this new debt? And so you can actually– and I read some
reports about estimating the size of debt in China. And I think, I have absolutely no idea if
that’s true or not. These are huge numbers. And again, argued that there must be some
double counting there. Clearly what you see when you actually speak
to our entrepreneurs, when you speak to businessmen on the ground, when you speak to banks, there
is, without question, an A lending to B lending to C lending to D, and this chain and this
node of connections. And then you think, this is clearly worrying. And it is worrying. But what no one seems to have any idea about,
including myself is, when is too much too much? And this is the real problem. We can talk about this problem. We can talk about this growing problem in
China. But frankly, I have no idea when the party
stops. And again, you can look back in history. A lot of cases, you know, the Ottomans probably
peaked in the 17th century and they were still going up until the end of the Second World
War. Things can go on– bad things can go on for
a long time. I think also that the greatest comfort that
China should take in its current debt situation is that Japan still exists. For my 25 years in finance, I started following,
like many, the Japanese warrant market. And you know, Japan had problems. Japan was falling. And then people thought, there was even people
in the early ’90s who thought the Nikkei was going back to 40,000. But it was actually on the way to 7,000. And Japan has largely been in recession for
the best part of 20 years or more. And you think, well, why can’t China pull
off a similar trick- – a different sort of trick. It’s clearly not as rich, clearly not as developed,
but you are ultimately still underpinning so much of this in China, even if you can
map this highly complicated system, which you can’t. Because into that you’ve got, is it local
government financing? Is it, like I said, the wealth management
products? Is it the regular bank business? Is it rich individuals? Is it overseas funding? OK, so let’s see you map it all. But who’s actually going to be the person
to pull their fingers out of the dyke and let the water fall through? Because in China, there is this continued
belief still that the government will underpin everything. And to some extent as a working model, I think
that probably makes sense. And again, anyone who is predicting the collapse
of China– first of all, I have no idea what that means. If your debt’s doubled and your growth’s halved,
that looks pretty much like a collapse in some ways already. The bullish case in China has now become it’s
not collapsing, which is a big turnaround from where we were five or six years ago. So, even if you can map all that, I still
think, yeah, you’ve got to look at the politics here as well. You’ve got to look at the mindset, the control
of information. So someone goes bankrupt? Why should I care about someone else’s bankruptcy? My wealth management paid back. Wealth management product is very difficult
to get someone out in the street protesting or really causing a stink for someone else’s
misfortune. And so therefore I think, how does this really
become a systemic crisis? And it’s not clear to me that it does. Telling me the numbers are getting bigger
still doesn’t tell me how you get a systemic crisis. What staggers me is that there are so many
people– and again, clever people, lots of smart people. And whether it be economists, hedge fund managers,
whatever, lots of smart people who will go on TV and talk about the economics of the
debt issues, et cetera. And I think, can’t really argue with any of
that. I’m not a trained economist. I may be right, may be wrong. But what does stagger me is that there is
often a willingness or a willful blindness on the politics of it. And I think nothing in China– you simply
cannot divorce economics from politics in China. And certainly if you’re worried about debt
situations, and from big picture– so if you’re looking at the stability of the banking system,
if you’re talking about the currency, if you’re talking about government debt, if you’re talking
about local government financing vehicles, bank bailouts, however you want to propose
it, the politics is absolutely essential. And to think that it’s somehow China– I would
say the law of economics works just as well– if they work at all, they work just as well
in China as they do outside of China. They don’t stop at the border. So in that sense, economics, yes, does work
in China. But at times people think, oh, somehow the
Chinese have got their own economics or it works differently. I say, well that’s because you’re not accounting
for it probably, because much of that other accounting is effectively the politics, and
you’ve got basically the government is standing there. And without question, I think that the right
view to take, certainly for the moment, is that the government will stand by. It’s certainly going to stand by the banks. You’re not going to get a Lehman Brothers
moment. One of the big banks, one of the big– I think
they technically have four and then seven what they call systemically important banks
in China. So none of those big banks are going under. Smaller rural banks, yeah, that’s possible,
but they will be merged in something else. But politics and political support is absolutely
essential. And to ignore that, you do so at your peril. I think the trouble there is though, I think
it was Churchill who said about Chinese politics, “It’s like two dogs fighting under a carpet.” You frankly got no idea what’s going on at
any given time. And I think the very rise of Xi Jinping, where
you may take the positive stance that this is a strong, powerful leader consolidating
power, and so can push through reform– you say, well frankly, that means we had everything
wrong about Chinese politics before. Because before he came into power, the consensus
across the board– there was just no.. China was now a consensus driven leadership
by committee type of model. There was not going to be a strongman again. That was not going to be a strong political
leader. So basically we have either completely misunderstood
things previously to allow Xi Jinping to come into place, or we just were just simply ignorant
of the fact in the first place. I think the mistake is that, to almost give
too much credibility to Chinese political institutions, that we have seen certain things
happen over and over since Tiananmen Square, so over the past 20 years. And we have assumed that these are institutionalized
processes of smooth transfer of power. And frankly they weren’t. There was a lot more fighting behind the scenes. Bo Xilai is an obvious example like that you
know. 2011, people were talking about Bo Xilai,
as of 2010, as a possible next leader. Very few people saw the Bo Xilai issue coming. Those that did were roundly abused to be certain. No, no, this could never happen in China. There is no sort of coup coming. There’s nothing like this. And clearly the behind the scenes machinations
were very active. So while I may say, the politics is important,
I’m also going to admit somewhat contradictory as well, I have no idea what’s going on in
politics half the time. And as I say, I think Xi Jinping, by the analysis
of five years ago, should never have come to power. His consolidation of so many titles– how
much power he’s got, there’s probably some debate. But certainly of titles, again, should never
have happened either. That was not supposed to be able to happen
in this consensus model. And so, you think, but even with that power,
what does he really want? I come back to even why we started writing. Even that phrase reformer in China– he’s
a reformist. He’s a reformer. I have no idea what that means in the Chinese–
I do have a– but what I tell you, it doesn’t mean what we think it means in a Western sense. And again, it’s not just like the Chinese
have their own way of doing things. But these names, just these labels have such
different meanings. And so when Xi Jinping wants reform in the
sense that he wants things to run better, he wants the Communist Party to run better,
he wants state-owned enterprises to be more efficient, he wants less dependency certainly
on the US dollar, certainly on the States. He wants less dependency on foreigners. He doesn’t want Western ideas seeping into
Chinese education, and so things like that. So if that’s reform, it’s reform. It’s a self-sufficiency that he wants. But the idea that he wants to embrace free
markets in any way, or even embrace the market as a decisive factor– which his own documents
have said– I think is highly misleading. This is a person who wants it– Reform so
often in the West is understood to be economic reform with the government pulling back, of
the markets taking a bigger hold and market forces taking a bigger hold, of bankruptcy
coming to the fore. Hey, your business is bankrupt. We’re going to bankrupt your business. We’re going to close this. We’re going to sell these assets. That’s not what the Chinese mean by reform. They’re talking about administrative reform. They don’t necessarily want to face all those
arbitrary things. And so when you look at what happens in the
markets, I think this is a classic. It’s, let’s go back. So we’re at the end of 2016. Let’s go back 10, 11 months and we saw the
renminbi collapsing. It moved a few percent, if that. It’s hardly a collapse. The renminbi in the past 18 months have moved
10%. I think the yen did it in about six weeks
recently, and sterling did it in about six hours. So this is hardly major market moves. But of course for China, these are are major
market moves. And I think if you go back to the beginning
of the year, January, February, when the currency started to get very weak, the panic in Beijing
simply wasn’t lower currency levels. It wasn’t that the moves had been so significant. They’re all well within any bands they themselves
have set. They’re well within historic ranges. But what they didn’t like was they didn’t
like the market pulling them. And this, I think, is the real fear. Because if you start having a market fall,
as the stock market did in 2015, as the currency started to do then later in the year and beginning
this year, as anyone who’s spent any time in a market knows, that takes on a dynamic
of its own and so on that forces people to come out and do something. They have to act because it will be even worse
tomorrow. And that’s of unexpected or that unknown reaction,
that being forced by the market to do something is what really worries the Chinese. Now we’re nearly touching seven. We’ve already had a PBOC fixing of 6.95 in
the past few weeks. And so in that sense, it’s not simply the
lower level which is the worry, but it’s the unexpected and the volatile nature of markets
that forces people to do things. Chinese leaders don’t like to be forced to
do anything. They certainly like to give the impression
they’re very much in control. And they themselves– This idea, I think one
of the things that sticks– there’s a number of things from, let’s say, the past 20 or
30 years in China that stick– or in Asia that stick with the Chinese leaders. 1997, the Asian financial crash really stuck
with them. I think they looked at Hong Kong. They looked at Thailand. And these sort of headlines, whether they
were true or not that a New York hedge fund manager presses a button and a billion dollars
leaves Thailand, and Thailand is decimated and people are unemployed and factories are
closing– very simple, very tabloid type of headline, but that’s exactly the type of thing
the Chinese government are desperate to avoid. And so that volatility of markets, the unexpected
nature of markets is something that they recoil against. So, where does that leave the currency? It’s going to get weaker. I don’t think that’s really any surprise. But do I see a great devaluation? No I don’t, because I don’t see how that plays
into the government’s favor. This idea of taking sort of tough medicine
early, getting the worst over with, I think sadly that’s passed. I think that’s the difficulty, that that time
has now passed for them. I think if they were to do that– And again,
we know markets overshoot. And again, if you were to say if the currency
is overvalued– and I don’t really care if it is overvalued or undervalued, I just know
it’s not market-driven. And I’m pretty big on market-driven forces. So, in that sense, I don’t know what the right
level is. But should you devalue 5%? Is 5% enough? Well, why 5.0%, 4.9%– well, 5.1%? Be a numbers snob, go for 9.9%. You know, is it 10%, 11%, 12%, 13%? I don’t know, is it 15%? Maybe it should go to 20%. Maybe it should go to 8.5%. I don’t know, what’s enough? What’s enough and what are you guys trying
to signal there? Because certainly if you were to go back to
8.3, where we were for best part of 15 years or so, then that sends a very bad signal of
course. That basically almost wipes out the past 11
years of currency movements and currency strength. And then you think, oh my God, China is like,
it’s really going back to some almost prehistoric economic environment as it were. So I don’t see them doing that because I think
it sends such a destabilizing signal. I think instead they’re going to waste more
reserves, waste a lot of time, a lot of effort by this slow depreciation. And it’ll come in fits and starts. It’s not going to be a straight line. But there’s going to be some fits and starts
on the way down. The argument that somehow they’re wasting
reserves, the Communist party has never been efficient. They’ve been– it’s efficacy, not efficiency. They achieve what their goal is. They’ve got lots of people. Their entire history is about wasting resources
to achieve some arbitrary goal they set on one day that the next day was no longer important. My God, this was a country that sent out schoolchildren
to clap all day to ensure that sparrows couldn’t land so they would die, thinking that that
would improve public health in Beijing. So in that sense, I get that somehow they’re
wasting resources. I don’t think that matters to them, because
what they’re focused on is maintaining control, and not necessarily being exposed to that
market volatility and that whiplash. Because goodness knows where that could take
you. Because if you lose confidence in the government–
and again, this is what underpins so much of what goes on in China. You can talk that, oh yes, they’re rebalancing. The growth rate’s coming down. You could argue their debt’s not too high. But everyone basically falls back on, but
the government’s in control. They’re still in control of all those levers,
whether it’s fiscally, whether it’s socially, whether it’s the internet, information flow,
whatever. And if you have that sort of shock to the
system, then I think that becomes highly destabilizing. When you’re talking about politics and risks
of China in the coming years, I think the risks are ultimately political, not actually
economic. Because the politics– and again, how can
anyone be sitting here at the end of 2016, while thinking ahead to next year, without
thinking about Donald Trump, because the rhetoric there, that relationship– which has always
been a bit of a love and hate relationship, going back for centuries– clearly will change. It’s already started to change. For better or for worse, we’ll find out. I think though what’s very clear is that Trump
is clearly going to take a much tougher stand on China. He’s certainly talking tougher on China. What his stand is on China when he’s in power
and we’ve been through six months, a year, then I’ll tell you what it is, because frankly
I have no idea what it’s going to be now. But you know he’s going to certainly try and
be tougher on China. I think there are a number of things that
are worrying about that though. Not that being tougher on China is a bad thing,
because I think if my complaint– and I’ve often been called about, I’ve been bearish
on China. And I think that’s a dreadful term. I think bulls and bears exist in the stock
market. I think they’re dreadful terms with trying
to talk about countries or bigger picture things. I’ve always seen myself as a realist in China
because I’ve spent a long time there. I’ve worked with Chinese companies. And I’m very realistic about the real limitations
of China, often that China, because of its sheer size of population, of financial reserves,
or whatever it may be, seems to be this behemoth which seems unstoppable. And yet the reality of dealing with Chinese
companies and often individual Chinese, or even the Chinese government, is much more
fractious and nowhere near as successful as the big picture would be. And so when I’ve been sort of negative and
critical in China, it’s because I think one of the first things is to start talking truthfully
to China about China and about your relationship with it. So in that sense, tough talking does no harm. I think because much of what China– I think
the frustration that people have often with China is that China doesn’t even live up to
its own promises, of whether it be reform, of market opening, market access, and things
like that. So in that sense, there’s lots of reasons
to be tougher with China. And that’s the good side, if you like, of
Trump. Although, is that what he’s going to do? I don’t know. What worries me more with Trump is that there
seems to be– he’s fighting the wrong battle. He’s fighting a battle from a decade ago or
from two decades ago, that somehow that the very basic model of American jobs moves somehow
direct from America straight to China, and that if only we are tough on China, put tariffs
on Chinese goods, that those jobs will come back. Well, if that simplistic picture was ever
true, it’s certainly not true now. And simply putting tariffs on Chinese goods
doesn’t solve that problem. So I’m worried that the– and certainly his
economic adviser Navarro, whether his economics even holds up, many economists would argue. But certainly his China policy doesn’t necessarily
seem to hold up. He seems to paint China as the great evil
in the world that’s responsible for all ills. And certainly China has a role to play in
many of those ills. And certainly Chinese policy has certainly
contributed to many of those apparent ills. And there’s things we should be tough on China
about. But simply this rather belligerent attitude
I don’t think is very conducive. Not that I’m annoyed or worried about upsetting
the Chinese. That’s almost an argument for saying those
things if you’re just upsetting the Chinese Communist Party. I have no problems with that at all. But you’re not necessarily going to achieve
the goals you want. I think that’s what you’re– Trump’s wanting–
needs wins, and he needs wins against China. The approach he’s taken, I’m not convinced
he’s going to be able to do that. What you have seen as well of course– and
this plays into Trump’s worldview, and others– is it China of course themselves have become
more and more belligerent over the past five years or so. And this has certainly increased under Xi
Jinping. It’s partly been to support their own economy. And this has come across a wide range of issues. One of course is of economic and the greater
focus on domestic production of certain goods, of restricting fair competition from foreign
companies or forcing foreign companies to onsource certain activities into China, particularly
in the technology space, which is obviously very worrying given the tight control that
China has over technology, et cetera. So there’s those sorts of aspects. But you’ve also seen them being nationalistically
much more belligerent. Obviously we’ve seen that in the East China
Sea. You’ve seen that in the South China Sea. And it’s China as the bully, China as the
big country and you’re the small country, get used to it type of model. Which, ultimately I think will backfire on
China. yes, we all know China’s a big country. We all know that all the countries in Asia
are very dependent on it. Economically they’re very linked with it. But China is– I’m not quite sure what it
thinks it’s setting itself up for, because it has no friends. I was once giving a talk in Europe and I said
that China has no friends. And a lady from the Chinese embassy came up
afterwards and say, “But that’s not true. We do have friends.” I said, “Well name one.” “We have a friendship treaty with Pakistan.” I went, “Ah, anyone else?” And she said, “Singapore.” I said, “Sorry, is that a question or a statement?” And so China doesn’t have friends. It goes out almost out of its way to alienate
countries in the region, certainly countries it should be cooperating with, countries that
have large Chinese diaspora as well. So they have natural affinities with them,
but they seem to be unable to build an inclusive type of model. And it becomes a very Han chauvinistic model. And this, I think, is ultimately an underlying
weakness in the politics in China. So, you look at those domestic sort of political
issues, that domestic inability to build friendships and alliances, even within Asia, its natural
community. You then bring into this Trump, who has almost
alienated everybody he meets. And then you think, this is clearly going
to be volatile for the coming years. Being tougher on China, not a problem. Is Trump the person to do it? I really have to doubt, because I can’t see–
he’s a man who revels in his own ignorance, and seems to have surrounded himself with
people who, again, are not necessarily think that simple solution to complex problems are
the way forward. I don’t think that’s necessarily is going
to be– it may be good for markets. There certainly will be volatility, as many
of my friends would say. But it’s not necessarily going to be good
outcomes I think. What is interesting– and obviously I work
in finance and I write about the Chinese financial system, but I don’t manage money. I thankfully don’t need to give people advice
to what to invest in China, although my default answer is, I’m sure there’s lots of good of
good business to invest in China. But I think what’s interesting or when I think
about China or how I think about it differently from others, or many of the people who would
be my peers or the readers of Red Capitalism, that I came to China because I was interested
in China. I didn’t come to China for the market because
it was a big market or there was a big stock market or there was business opportunities. And so I’ve often thought that’s given me
some advantage, perhaps, of trying to understand China or trying to just, maybe, just accept
some of the frustrations there. And I think of this particularly over the
past– since that Asian– or since the global financial crisis. So you look at over that long eight years,
those two Olympic cycles as I talk about, and you think about, lots of people have done
lots of work on debts and whatever, and this growing network of debt and all these notes
and look at these empty apartment buildings and whatever. And I said yes, that’s true, that’s very nice. And then they automatically then sort of jump
through on to, well this must stop, that this must come to an end, that default beckons
or whatever. And I think, that’s sort of true. Of course it’s true, and ultimately there
is a price to be paid. But I think in China, two of the things that
I always think about China– this is because I’ve been interested in China long before
the economics of it as it were– is that China is the land of the absurd and the arbitrary. And I think unless you understand or appreciate
that China is this absurd country in some ways that’s struggling to become modern, then
you come too quickly to these conclusions. Oh the bank’s accounting’s all hocus pocus. The bank must therefore go bust and I’m shorting
the banks. Well why would you do that? There’s no evidence banks are going to go
to zero. There’s no short sell report that’s going
to show– expose all. And so you’re almost looking for the wrong
sort of outcome. And I think it’s understanding this, of the
absurdity and the arbitrariness of it, that you simply, when you do your China analysis,
you are left with a lot of unanswered questions. You are left almost in dead ends. You think, but surely the next step means–
I say, well it does. I’m not saying it doesn’t. But who’s going to take that next step? Who’s going to force the bankruptcy? Who’s going to ask the difficult question? In Chinese, when you raise these types of
points, Chinese will say to you, semi-apologetically, but also in earnestness about just apologizing,
In China it’s like this. And you think, not again. And you know it’s true. But this, sadly, is– and I think if you’re
an investor, at all sorts of levels, not just whether you’re picking stocks or whether you’re
doing real business– and clearly people have made a lot of money in China. So it’s not as if it’s just a complete fiction
or fraud. But you simply end up with a lot of these,
like I say, loose ends and unfinished stories, that often sort of fizzle out in some way,
and it doesn’t come to a clean bankruptcy or something. But what you find is that the loss has been
socialized in some ways, that someone else bailed somebody else our or they borrowed
from here, and the story morphs into something else. And that’s very difficult, I think, to explain
a lot of the time. It’s a bit like the politics we talked about,
the politics and economics being tied up. But it’s often very difficult. If you focus just on the numbers, yes, the
numbers can expose a lot of sort of malfeasance or wrongdoing. But that’s only part of the story, because
there’s also then another parallel track of almost like back as it were or state support
or local support that carries on in the background that allows things to continue. And everyone sort of plays along with the
game. It’s in nobody’s interest to pull the rug
away in that sense. So I think once you understand that about
China, I think, does it make you a better investor? Maybe– maybe you get a bit less frustrated. Because again, people– even though I’m in
sort of financial markets, I was authorized. So I consult with various people on all sorts
of China topics. And I remember somebody came here doing a
big project, a big property deal, with a big blue chip Chinese name. And I was advising him over a glass of wine
as you do. And he said something like, “So, what did
you think of my Chinese partner?” And I said, “Well the first thing you need
to understand is that all Chinese partners are bad partners.” And he said, “Well what did you mean?” I said, “Well it’s not necessarily they’re
out to defraud you, but they’re almost certainly not what you think they are. And so even though this is a blue chip name
and they’re saying they’re going to invest X hundreds of millions of dollars with your
property project, do they have approval to bring the money out of the country?” “Well they’re a big Chinese name.” I said, “Do they have approval to bring–”
“We’ve not asked, but surely they’ll be able to get it.” “Why would they be able to get it? Aren’t you watching the news? Don’t you know how difficult it’s getting
money out of the country? Have they got approval to do the project in
the first place?” “Oh? You mean they may not?” “Well why would there? You cannot assume that.” So it’s not that they’re necessarily lying
to you. They may be very honest about doing this project. They may have the money in China. But you don’t need the money in China. You need it somewhere else. And so I think understanding the framework
in which China operates, partly you could argue is a good deal due diligence. But it’s also understanding how China operates,
how entities, how individuals operate, that will often speak well beyond their capabilities
because they’ll think something will turn up, that oh, we’ll figure out a way to do
it. And often, of course, they won’t figure out
a way to do it, which makes it very frustrating because you think, I’m dealing with a blue
chip Chinese name here. And then actually they are just as beholden
to the arbitrary regulations of the government as anyone else.

GoBearTV Ep 24 | Know the Market Forces at Work


A volatile market is inevitable. With various market forces at work, how does one identify and be prepared for moments that move markets? In this episode of GoBearTV, we’re chatting with CMC Markets’ analyst Margaret Yang to understand what market-defining moments are and how traders can stay ahead. Hello Margaret. Hello Garima. Can you just help me understand what are the recent market movements that we’ve seen? Well, the most iconic market movements I can recall are the EU Referendum back in June 2016 and also the US Presidential Election, the latest one, in November of the same year. So during those two days, markets suffered huge volatility and we saw that sterling tumbled over 12% in the same day and the US futures tumbled more than 5% during Asia trading hours. So these two scenarios were never seen for the last decade, and it was probably a once-in-a-decade opportunity for many traders whereas the rest lost their entire portfolio because the volatility kicked them out of the market. So what was it like over here on the trading floor during that time, seeing it all happen real-time? I can still recall what happened in June 2016 during the EU Referendum. The result was totally unexpected by anybody and the investors globally were just panic-selling their sterling, and because there was suddenly so much of uncertainty surrounding Brexit and also the EU and UK’s future, everybody seemed to be selling sterling at one moment. And when the currency market suffers such huge volatility, the selling force can become self-reinforcing. So initially, the speculators were selling, after that more people came in and took the opportunity to sell off. However at the same time, on the other side of the trading, those people who were taking long positions on sterling, who were buying sterling, they were forced to close their positions, so they also went in to sell. So everybody in the market was selling, and that resulted in a 12% drop in sterling versus the US dollar. Let’s talk a little bit more about the US Election. Donald Trump was elected to become the president of the United States. This outcome was totally unexpected by many people, and because the result came out during Asia trading hours, we saw that the futures of S&P, Dow Jones and NASDAQ tumbled as much as 5% during Asia trading hours. And it even triggered a circuit breaker by the futures exchange because this kind of movement is very unusual, so they had to stop trading for a short period of time. Till now, today, I think Donald Trump still has a very big influence on financial markets and even his Twitter will affect the movement of US dollars as well as crude oil. He has started a trade war with China, which led to global sell off in equities and risk assets from May 2018. And still now we are facing a lot of political and foreign uncertainties because of Donald Trump’s presidential election. So that is the most significant political event that moved the market in recent years. So, of course, as you said, some people lost a lot of money. So how can traders protect themselves from such losses in a volatile market? Well, in CMC Markets we offer a very unique tool to help traders mitigate such huge downside risks, which is called Guaranteed Stop-Loss Order or in a short form, GSLO. This order, once placed, will guarantee that the client’s position will be closed at a specific, pre-described level. So no matter how much the market is moving, or if there is a gap up or down, there will be zero slippage and your order will be guaranteed to be executed at the set level. So the guaranteed stop loss is a very important tool for traders to mitigate those downside risks. But of course the GSLO comes with a premium. It’s just like someone who is buying insurance. The GSLO premium will be fully refunded if the trade is never executed or the trade is withdrawn. It will only be deducted when the trade is executed at that level. So in the trading world, I think the traders should better manage their portfolio, balance the risk and return, and for those big political events, they have to be very clear of the upside and downside of their underlying tradable markets. And they need to analyse the potential best and worst scenarios and protect their positions from incurring those unexpected market volatilities. Thank you Margaret, thank you for your insights, it was great talking to you. Thank you. If you’d like to learn more about market forces or trading in general, visit cmcmarkets.com to find out about CMC Markets’ upcoming webinars and events. This is Garima from GoBearTV and we’ll see you next time.

Working with Segregationists Comments Don’t Hurt Joe Biden’s Popularity


-Let’s get to the news. According to a new poll,
the controversy surrounding former Vice President
Joe Biden’s recent comments about working
with segregationists had no impact on his popularity. Here’s what his popularity
looks like. [ Laughter ] Party officials have released
the ground rules for this week’s
Democratic primary debates, and candidates will have
60 seconds to answer questions and 30 seconds to respond
to follow-ups. Follow-ups like, “I’m sorry.
What was your name again?” [ Laughter ] “No, no, not you, the other one
who looks like you.” President Trump today bragged
about Wall Street performance, tweeting,
“Stock market is headed for one of our best months
in the history of our country. Thank you, Mr. President.” [ Laughter ] Is he thanking himself
in his own tweet? That’s like leaving yourself
a voicemail the morning after you masturbate
to say you had a good time. [ Cheers and applause ] “Anyway, call me back. You know the number
because it’s this number.” [ Laughter ] First Lady Melania Trump
announced today that her director of
communications will shift over and become the next
White House press secretary. It turns out
you don’t really need your own communications director when you never actually,
you know, communicate. [ Laughter ] Boeing is currently
in possession of so many malfunctioning
737 MAX jets that they have started
storing the planes in their employee parking lot. Either that
or Jerry in marketing finally got that raise. [ Cheers and applause ] “Wow. Wow, Jerry, looking good.” “Yeah, thank you.” The LEGOLAND amusement park
in New York has constructed the world’s
smallest pride parade made exclusively
out of toy bricks. “Oh, no, ours is smaller,” said Alabama. [ Laughter and applause ] IKEA has begun testing
its own food-delivery service. Unfortunately,
it also comes unassembled. [ Laughter ] Federal officials today
announced the launch of a program
to combat robocalls, which they are calling
Operation Call it Quits. “Sorry, that name
is already taken,” said Trump’s personal trainer. [ Laughter ] [ Cheers and applause ] Disneyland this week opened
its new “Star Wars”-themed park. The park has nine sections, but it’s only worth
seeing the first three. [ Audience groans ] [ Cheers and applause ] [ Laughter ] You didn’t love it. But it doesn’t matter,
’cause this next one… [ Laughter ] It was reported —
[ Laughs ] [ Laughter ] It was reported today that Cuba
will open its first sex shop. It’s called Fideldo’s. [ Laughter ] [ Cheers and applause ]

Ellis talks applying pressure on China, Trump meeting with GM CEO


WE’LL SEE WHAT HAPPENS. EDWARD, THANKS, MAN. WITH INSIGHT TO THE WHITE HOUSE’S THINKING AS THE MEETING SOLIDIFIED I WOULD LIKE TO BRING IN FORMER TRUMP TRADE ADVISOR CURTIS ELLIS. IN THE SPAN OF COUPLE DAYS CHINA MAKING MANY MOVES PEOPLE A WEEK AGO SAID WOULDN’T HAPPEN. WE SAW IN HONG KONG, POTENTIALLY WITHDRAWAL OF EXTRADITION ORDER. AGREEING WE DO WANT TO MEET, WE WANT TO TAMP THINGS DOWN. WHAT DO YOU MAKE OF IT?>>CHINA IS UNDER A LOT OF PRESSURE. THEY’RE RATIONING PORK IN THE MARKETPLACE IN CITIES IN CHINA. INFLATION ON FOOD IS OUT OF CONTROL. REMEMBER TARIFFS AND SANCTIONS THEY PUT ON AMERICAN FARM PRODUCTS ARE AFFECTING CHINESE CONSUMERS. YOU SEE THIS WITHDRAWAL OF THE LEGISLATION IN HONG KONG, THEY KNOW THAT THEY CAN’T REVERT TO FORM, JUST BRUTALIZE PEOPLE AND EXPECT TO GET ANY KIND OF TRADE AGREEMENT WITH THE U.S. SO THEY’RE UNDER A LOT OF PRESSURE AND PRESIDENT TRUMP MADE IT VERY CLEAR THIS IS ABOUT MORE THAN THE ECONOMY. THIS IS NOT ABOUT THE DOW FUTURES, ABOUT THE FUTURE OF OUR COUNTRY. THEY MAY HAVE UPS AND DOWNS HERE AND THERE AND PAIN HERE AND THERE AND WE HAVE TO HAVE A COUNTRY. WE HAVE TO MAKE SURE CHINA DOES NOT CONTINUE STEALING OUR PROPERTY, SELLING DRUGS INTO OUR COUNTRY WHOLESALE AND BASICALLY UNDERMINING OUR SYSTEM OF FREE ENTERPRISE. NEIL: WHAT IS THE, TO BORROW WALL STREET PARLANCE WHAT IS THE EXIT STRATEGY? CHARLES: IN OTHER WORDS WHEN THESE THINGS HAPPEN, PRESIDENT TRUMP TWEETS HEY, THIS IS A VICTORY, WE’RE BEATING THEM. WE KEEP HEARING CHINA WANTS TO SAVE FACE WHERE DOES THE ADMINISTRATION LET UP A LITTLE BIT ON THE PUBLIC FIGHT FOR THE CONSUMPTION OF THE PUBLIC AND ALLOW PRESIDENT XI AND COMPANY MAYBE TO COME UP WITH SOME SORT OF A RESOLUTION THAT ALLOWS THEM TO GRACEFULLY LOSE?>>ARE YOU ASKING ME THAT? CHARLES: YEAH.>>OH. YOU SEE CHINA CAN START BEHAVING AND ACTING LIKE THE MAJOR POWER THAT IT IS. IT WANTS TO BE A RESPECTED MEMBER OF THE TRADING COMMUNITY LET’S ACT THAT WAY. THAT IS FACE SAVING. WE TREAT YOU LIKE A BIG BOY, LIKE ONE OF THE GANG. NOW YOU CAN ACKNOWLEDGE THAT THE WAY YOU ARE GOING TO ACT, WE’LL ACCEPT THAT. CHARLES: CURTIS, LET ME ASK YOU, CHARLES EVANS, ONE OF THE VOTING MEMBERS OF THE FED, SORT OF DISSED THE TRADE WAR, SAYING THEY DON’T WORK FOR ANYONE. SUGGESTED THAT GLOBAL TRADING CREATES INNOVATION. I GOT TO TELL YOU, IT SOUNDS CLICHE BECAUSE I SEE NOTHING INNOVATIVE ABOUT CHEAP LABOR, STEALING AMERICAN KNOW HOW, BUT WHEN YOU HAVE ALL THE POWERFUL FORCES AGAINST THE PRESIDENT AND HIS TRADE FIGHT, HOW MUCH HARDER DOES IT MAKE FOR US TO WIN THIS THING?>>IT CERTAINLY DOESN’T HELP WHEN LEADING VOICES IN THE MEDIA, I’M NOT TALKING ABOUT YOU, THIS MEDIA, FELLOW YOU MENTIONED ACTING LIKE TOKYO ROSE BASICALLY TAKING THE OTHER SIDE APPEASEMENT, GIVE IN, SURRENDER. THERE IS FORCES GREATER THAN AMERICA THAT WE HAVE TO ACCOMMODATE THIS IS NOT HELPFUL AT ALL. PEOPLE ARE ON THE PRESIDENT’S SIDE. LATEST HARVARD “HARRIS POLL” SAID 67% OF AMERICANS SAY WE NEED TO CONFRONT CHINA OVER THE TRADE PRACTICES EVEN PAYING MORE AT THE MALL. CHARLES: A LOT OF CRITICS ACCEPT THAT CHINA IS CHEATING BUT STILL DISPUTE WHETHER WE SHOULD HAVE BONN THIS WAY. I DO WANT TO ASK ABOUT PRESIDENT TRUMP. HE IS MEETING GENERAL MOTORS CEO MARY BARRA, DISCUSSING TRADE. THEY’RE DISCUSSING AMERICAN JOBS. WHAT KIND OF A LINE DOES HE HAVE TO WALK, A PRESIDENT TELLING AMERICAN BUSINESS HOW TO RUN THEIR COMPANY.>>THEY GOT A HUGE TAXPAYER-FUNDED BAILOUT. THEY GOT A HUGE BAILOUT FROM AMERICAN TAXPAYERS. GM STILL OWES THE AMERICAN TAXPAYERS $10 BILLION. YET THEY ARE CLOSING PLANTS IN AMERICA AND DOING PRODUCTION IN CHINA. LOOK, CHINA SAID TO GM, YOU WANT TO SELL CARS HERE, YOU HAVE TO MAKE THEM HERE. GM SAID YES, SIR, BOB. BUT THEY ARE MAKING BUICK ENVISION SUV 100% IN CHINA, IMPORTING IT TO AMERICA. WHAT IS GOOD FOR THE GOOSE IS GOOD FOR THE GANDER HERE. THEY HAVE GOT A LOT TO TALK ABOUT AND THE PRESIDENT WANTS TO MAKE SURE THAT THE WORKERS OF GM

Markets predict slow growth, not recession: Ed Lazear


ARE KICKING OFF WITH TOP STORY RALLYING MARKETS, AFTER A DISMAL DAY YESTERDAY ON TUESDAY, THE MARKETS THIS MORNING ARE UP BETTER THAN 200 POINTS, COMING BACK, FROM THAT BIG SELL-OFF YESTERDAY WEAKER THAN EXPECTED MANUFACTURING DATA SECTOR SHRINKINGH FIRST TIME SINCE 2016S BLAMING HEIGHTENED UNCERTAINTY IN GLOBALING MANUFACTURING TO HEIGHTENED TRADE TENSIONS WITH CHINA FORMER ECONOMIC ADVISORY TO HE GEORGE W. BUSH THANKS SO MUCH FOR BEING HERE.>>NICE TO BE WITH YOU.>>BACK-AND-FORTH EVERY DAY, WITH MARKETS, AS INVESTORS REACT, EVERY WORD COMING OUT OF CHINA OR U.S. HOW DO YOU SEE THINGS?>>WELL, YOU KNOW, IF YOU LOOK AT WHERE WE ARE RIGHT NOW, COMPARED TO WHERE WE WERE A YEAR AGO I MEAN THE REALITY IS THE NUMBERS ALMOST ALL THE NUMBERS ARE WEAKER TODAY THAN A YEAR AGO SO YOU KNOW, IT IS — IT IS NOT QUITE AS ROSY A SCENARIO AS IT WAS — IN 2017, BUT WE’RE NOT IN DISASTER SITUATION RIGHT NOW. WHAT THE MARKET IS BASICALLY TELLING US IS AND, BY THE WAY, WHEN I SAY THE MARKET THERE ARE A COUPLE MEASURES WHAT MARKET IS SEEKING PEOPLE HAVE BEEN TALKING ABOUT YIELD CURVE A WHOLE LOT PAST FEW WEEKS, BUT NIGS TO IT YIELD CURVE YOU SIMPLY WANT TO LOOK AT STOCK MARKET, THAT IS FORECASTING NOT RECESSION JUST FORECASTING SLOW GROWTH. RIGHT NOW IF YOU USE THE S&P 500 WHICH IS ONE THAT I USE, THAT IS THE BEST INDICATOR OF WHERE WE’RE GOING NEXT FOUR QUARTERS SHOWING SOMEWHERE AROUND ONE AND ONE HALF TO 2% GROWTH NOT RECESSION, BUT NOTE SPECTACULAR BREAKOUT GROWTH. WANT THE YIELD CURVE AGAIN, YOU KNOW SOMEWHAT MORE PROBLEMATIC, BUT — THAT IS SOMETHING THAT USUALLY FORECASTERS UP TO TWO YEARS IN ADVANCE NOT CLEAR TELLING US WE ARE IN IMMINENT DANGER.>>LOOK AT DOLLAR, TOUCHING THE HIGHEST LEVEL MORE THAN TWO YEARS CONSTANT GLOOMY OUBLT OUTLOOK ABOUT ECONOMY UNCERTAINTY OVER TRADE IS THIS CUTING INTO EARNINGS ECONOMIC GROWTH ONE MORE PRESSURE ON — ON OVERALL ECONOMIC ACTIVITY?>>WELL, I THINK IT IS, AND I THINK, ALL OF OF THESE THINGS ARE AGAIN LOOKING AT THINGS SLOWING DOWN SO REMEMBER WHAT IS A RECESSION MEAN 2 RECESSION SIMPLY MEANS WE’VE PASSED THE PEAK THE QUESTION IS ARE WE GOING TO HIT A PEAKS SOMETIME OVER THE NEXT TWO YEARS? AND THE CHANCES THAT WE ARE, ARE YOU KNOW PROBABLY 15 ARE YOU KNOW PROBABLY 50-50, WHAT YOU ARE BASICALLY SEEING SLOWING AS YOU GET CLOSE TO THE TOP OF THE PEAK YOU SEE THAT IN A NUMBER OF INDICATORS, LOOK AT LABOR MARKET LAST YEAR CREATING ABOUT 225,000 JOBS, NOW DOWN TO 150, 170 STILL NOT BAD STILL IN ON A RECOVERY PACE, BUT SLOWER THAN WE WERE LAST YEAR, LOOK AT INVESTMENT INVESTMENT HAS SLOWED LOOK AT MANUFACTURING, YOU HAVE BEEN MENTION THAT A GOOD BIT IN YOUR PROGRAM THIS MORNING, MANUFACTURING, HAS SLOWED, ONE OF THE THINGS THAT IS IMPORTANT TO RECOGNIZE, BY THE WAY, IS THAT MANUFACTURING RETAILING AND CONSTRUCTION ACCOUNT FOR 150% OF THE JOB LOSS WHEN YOU GO INTO RECESSION, SO IT IS IMPORTANT TO KEEP WATCHING THOSE SECTORS BECAUSE THEY DO FORETELL THE FUTURE.>>CENTRAL BANKS ACROSS THE WORLD ARE STIMULATE WE GO KNOW EUROPEAN CENTRAL BANK IN FAVOR OF A STIMULUS PACKAGE COULD TRUE RATE CUT NEW GUIDANCE ECB PRESIDENT TOLD US THAT THAT THEY ARE LOOKING FOR MORE STIMULUS, BOSTON FEDERAL RESERVE PRESIDENT ERIC SAID HE DOESN’T THINK AN INTEREST RATE CUT IS NEED, IN THE UNITED STATES, AT THE MOMENT SO WHEN YOU LOOK ACROSS THE WORLD YOU SEE ALL THESE A CENTRAL BANKS STIMULATING. YOU SEE THE 10 YEAR IN U.S. AT BELOW 1.5%, IT IS A BIG MONTH CENTRAL BANKS THIS MONTH WHAT SHOULD WE EXPECT WHAT IS THE IMPACT?>>WELL, YOU KNOW WHEN YOU LOOK AT — YOU MENTIONED THE 10-YEAR RATE SO LET’S THINK ABOUT THE YIELD CURVE FOR A MOMENT YOU BASICALLY HAVE TWO SIDES TO THE YIELD CURVE RIGHT YOU HAVE THE LONG-TERM RATES AND YOU HAVE THE SHORT-TERM RATES, AND WHAT THE LONG-TERM RATES GENERALLY INDICATE IS EXPECTATIONS ABOUT THE FUTURE, SO WHEN LONG-TERM RATES ARE LOW ESSENTIALLY WHAT THAT IS TELLING YOU IS THAT PEOPLE DON’T THINK THAT THE FUTURE IS QUITE AS ROSY AS IT WAS YOU KNOW, AS I SAID MAYBE A YEAR AGO. WHEN YOU LOOK AT SHORT END OF IT WHAT THAT IS TELLING YOU THAT IS THE FED IS IN A CON TRACK SHUNRY MODE IF YOU LOOK BACK TO REPRIEVE, PREVIOUS TWO RECESSIONS WHAT HAPPENED LONG-TERM RATES NOT LOW THEY WERE PRETTY HIGH BUT THE SHORT-TERM RATES EVEN HIGHER SO RIGHT NOW IN A WAIGS WHERE LONG-TERM RATES ARE LOW, IN ABSOLUTE TERMS BUT AS YOU POINTED OUT THEY ARE NOT LOW RELATIVE TO THE WORLD CAPITAL MARKETS 10 YEAR ONE 1/2% HERE LOOK WHERE IT IS IN GERMANY NEGATIVE .7%. MARIA: RIGHT.>>SO IN RELATIVE TERMS WE ARE STILL PRETTY HIGH ON THOSE LONG-TERM RATES SO THE QUESTION IS YOU KNOW WHERE SHOULD WE BE GOING FROM HERE INTERESTING THE FED IS HAVING THE DEBATE RIGHT NOW, AND NOT ALL PLAYERS ARE THE ONES THAT I’D PREDICTED ACTUALLY BEING ON THE DIFFERENT SIDES OF IT SO IT IS QUITE INTERESTING TO BE AN WATCHING THIS. MARIA: YOU ARE RIGHT A DIVISION BETWEEN FEDERAL RESERVE EVEN BILL DUDLEY FORMER PRESIDENT NEW YORK FED ANSWERING BACKLASH ON SCATHING OP-ED LAST UNIQUE WITH NEW ONE IN BLOOMBERG THIS MORNING HERE IS WHAT HE IS SAYING, WHAT I MEANT WHEN I SAID DON’T-ABLE TRUMP WRITES DUDLEY AS I SAW IT BINGES OF THE TRADE WAR PRESIDENT’S TAX ON FED THREATENED TO BUT CENTRAL BANK IN UNTENABLE POSITION PRESIDENT TRUMP SHIFTING RESPONSIBILITY FROM DOWNSIDE RISKS FROM TRIED WAR ON TO FED I THOUGHT AN IMPORTANT ISSUE WORTHS EXPLORING WRITES DAY GOT SO MUCH BACKLASH ON THAT OP-ED HE WROTE LAST WEEK. YOUR REACTION TO WHAT BILL DUDLEY IS TRYING TO SAY.>>WELL, YOU KNOW I MEAN IN TERMS OF HIS PRINCIPLE SITUATION PRIVATE INDIVIDUAL NOW HE CAN SAY WHAT HE WANTS. THE FED SHOULD NOT BE THINKING IN TERMS OF POLITICS CERTAINLY IN TERMS OF OF AFFECTING ELECTIONS WOULD BE TERRIBLE PRECEDENT. IF I AM CHAIRMAN RIGHT NOW LOOKING AT THE SITUATION, AND I AM SAYING YOU KNOW WHAT SHOULD WE BE DOING, THEY ARE BASICALLY TWO KINDS OF MISTAKES THAT THE FED CAN MAKE THE FIRST IS CUTTING RATES, AND THEN AFTER THE FACT WISH IT HADN’T OR OPPOSITE IS REFUSING TO CUT RATES THEN AFTER THE FACT WISH THAT YOU HAD IT IS PROBABLY THIS COULD THE SECOND ENDANGERING IS MORE PRONOUNCED THAN THE FIRST ONE DOWNSIDE ASSOCIATED WITH SECOND ONE IS PROBABLY MORE SIGNIFICANT IF I WERE CHAIRMAN POWELL I THINK THAT IS HOW WOULD I BE THINKING ABOUT IT TRADING OFF TWO KINDS OF MISTAKES THAT YOU CAN MAKE, AND THINKING ABOUT WHEN ONE IS GOING TO BE MORE DETRIMENTAL TO THE ECONOMY OBVIOUSLY, YOU DON’T WANT TO MAKE EITHER MISTAKE IF GOING ONE WAY OR THE OTHER MY GUESS IS THAT THEY ARE THBDZ TOWARDS BEING A LITTLE BIT MORE LENIENT RIGHT NOW AND THEY ARE NOT WORRIED ABOUT POLITICS OF THE ELECTION.>>WHERE IS THIS HEADEDED? YESTERDAY WE A HAD FACTORY DATA OBVIOUSLY, SHOWED MANUFACTURING IN FAIR AND ACCURATE TO SAY SHRANK FIRST TIME IN THREE YEARS THEN YOU’VE GOT CONSUMER TWO-THIRDS ECONOMIC GROWTH SEAMS DOING VERY WELL ASK CONSUMER SPENDING SENTIMENT IS UPSET HOW WOULD YOU CHARACTERIZE THINGS RIGHT NOW AND ARE YOU EXPECTING A RECESSION AT SOME POINT.>>WELL ALL RIGHT –>>IN YOUR TERMS NOT –>>KWLAE LET’S TAKE THAT PIECE BY PIECE YOU SAID CONSUMERS ARE SPENDING I THINK SPENDING BY THE CONSUMERS REFLECTS WHAT WE ARE SEEING IN LABOR MARKETS LABOR MARKETS STILL SLOWING, UNEMPLOYMENT IS VERY LOW. EMPLOYMENT IS RELATIVELY HIGH EVEN WAGE GROWTH LOOKS PRETTY GOOD, SO ALL OF THOSE THINGS FEED DIRECTLY INTO CONSUMER SPENDING AND I THINK THAT IS WHEN WE’RE SEEING. IF YOU ARE THINKING ABOUT THE FUTURE, THE NUMBERS THAT YOU TALKED ABOUT THIS MORNING, THE ISM, THEY ARE NOT THEY DON’T NECESSARILY PREDICT WHAT IS GOING ON, THEY ARE INDICATORS OF A SLOWDOWN, AND TO MY MIND, THE MOST IMPORTANT INDICATOR THAT I HAVE SEEN OVER THE PAST COUPLE OF QUARTZ, IS INVESTMENT SO WE HAD, YOU KNOW, A COUPLE OF VERY GOOD INVESTMENT QUARTERS IN 2017 NOT QUITE THERE RIGHT NOW IF I AM THIS COULD ABOUT THE FUTURE THOSE TO ME ARE THE MOST IMPORTANT INDICATORS NOW YOU SAID ARE WE GOING TO HAVE A RECESSION, AGAIN I GO BACK TO WHAT I SAID EARLIER WE KNOW WE’RE GOING TO HAVE A RECESSION AT SOME POINT BECAUSE RECESSION JUST MEANS WE HAVE PEAKED WE ARE PAST THE PEAK WE KNOW WE ARE GOING TO HAVE A RECESSION AT SOME POINT I DON’T THINK MARKETS ARE TELLING THAT RECESSION IS IMMINENT THE NEXT TWO TO THREE YEARS I WOULD SAY CERTAINLY 50%>>WE ARE ON YEAR 11 OF THIS EXPANSION I GET THAT, QUICK WE GOT JOB NUMBER ON FRIDAY A FED MEETING ON THE 18TH. THIS MONTH, WHAT ARE YOUR EXPECTATIONS FOR THE JOB NUMBER AND DO YOU THINK THE FED HE CUTS RATES? ON THE 8 ON THE 18TH?>>I AM TERRIBLE AT PREDICTING IF I HAVE TO GIVE A PREDICTION WOULD I SAY SOMEWHERE IN 150,000 RANGE ABOUT WHERE WE SHOULD BE RIGHT NOW. MARIA: YEAH, THAT IS PRETTY MUCH WHERE THE ECONOMISTS ARE 158.>>YEAH, YOU KNOW BUT WE’RE — WE’RE MAYBE SLIGHTLY WORSE THAN WEATHERMAN, BUT, YOU KNOW, I AM NOT SURE HOW WE ARE IN TERMS OF.>>WHAT ABOUT THE FED.>>IN TERMS OF CUTTING CUTTING RATES, YOU KNOW, I WOULD BE VERY SURPRISED IF THEY DON’T CUT AT THIS POINT. ALL THE NUMBERS SEAM TO BE MOVING IN THAT DIRECTION SO I WOULD AND THEY ARE GOING TO CUT. MARIA: ALL RIGHT. WE WILL SEE IF 25 BASE POINTS PRESIDENT TALKING ABOUT ONE POINT OVER TIME. ED GREAT TO SEE YOU.

GM CEO says meeting with Trump was ‘productive and valuable’


MORE FROM BOTH OF YOU IN A MOMENT. MELISSA: MARY BARRA GOES TO WASHINGTON. THE GENERAL MOTORS CEO MEETING WITH PRESIDENT TRUMP IN THE OVAL OFFICE LESS THAN A WEEK AFTER THE PRESIDENT TOOK TO TWITTER TO LAMENT GM’S SIGNIFICANT RACES IN CHINA. BLAKE BURMAN LIVE FROM THE WHITE HOUSE WITH DETAILS. BLAKE? REPORTER: EVERY NOW AND THEN THE PRESIDENT TAKES TO TWITTER TO GIVE A AN OPINION ON GENERAL MOTORS. HE GOT TO SIT DOWN FACE-TO-FACE IN THE OFFICE OFFICE TO SPEAK WITH CHIEF EXECUTIVE MARY BARRA. THE WHITE HOUSE NOT PROVIDING A READOUT WHAT THE TWO TALKED ABOUT CITING PRIVATE CONVERSATIONS. THERE ARE A HOST OF ISSUES FOR THE AUTOMAKER. AMONG THEM NEGOTIATING A NEW CONTRACT FROM THE UAW AND THE CLOSURE OF PLANTS. THEY STAND AS AN INTERESTED PARTY TO THE PRESIDENT’S TRADE WAR WITH CHINA, A BATTLE OVER FUEL EFFICIENCY STANDARDS FOR VEHICLES. YOU’RE LOOKING OF VIDEO OF BARRA AS SHE LEFT THE WHITE HOUSE THIS AFTERNOON, A VERY, VERY SHORT COMMENT FROM HER AS SHE FACED THE CAMERAS AFTER MEETING WITH THE PRESIDENT. LISTEN.>>WHAT DID YOU HEAR FROM THE PRESIDENT TODAY?>>WE HAD A PRODUCTIVE AND VALUABLE MEETING. THANK YOU. REPORTER: PRODUCTIVE AND CASUAL MEETING, THANK YOU. YOU MENTIONED THE PRESIDENT AND HIS COMMENTS ABOUT GENERAL MOTORS. JUST LAST WEEK HE SUGGESTED THAT GM SHOULD MOVE FACTORIES BACK FROM CHINA TO THE U.S. HOW GM’S WORKFORCE IN THE U.S. IS SMALLEST OF THE BIG THREE, SAYING QUOTE, NOW ONE OF THE SMALLEST AUTO MANUFACTURERS OUT THERE, AT LEAST THAT WAS HIS TAKE ON TWITTER. LAST WEEK, GOT TO IMAGINE, MELISSA, THEY TOUCHED ON SEVERAL OF THOSE TOPICS IN THE OVAL EARLIER TODAY. MELISSA: NO DOUBT, BLAKE, THANK YOU. OKAY, LET’S BRING PAUL AND SARA BACK TO REACT. PAUL, I ALMOST FEEL LIKE THE PRESIDENT TAKES TO TWITTER TO TRASH TALK ABOUT YOU. MAYBE IT DOESN’T HAVE THE, NOT YOU IN PARTICULAR.>>ME? MELISSA: I HAVEN’T SEEN THAT YET. ABOUT ONE, AND PERHAPS IT DOESN’T HAVE THE SAME IMPACT THAT DID IT BEFORE. I DON’T KNOW THAT PEOPLE STILL PANIC. HE IS KIND OF TRASHING SOMEONE NEW EVERY DAY. YOU GO, ALL RIGHT, WHAT IS HE UPSET ABOUT? LET’S GO TALK. THAT IS SORT OF WHAT SHE LOOKED LIKE. I DON’T KNOW WHAT IS YOUR TAKE?>>I THINK YOU’RE RIGHT TO A CERTAIN EXTENT, IT HAS BEEN WATERED DOWN A LITTLE BIT, PEOPLE HAVE GOTTEN USED TO IT. SARAH TOUCHED ON IT IN HER EARLIER COMMENTS. I REFER TO THE WORLD AS A VORTEX OF VOLATILITY FOR SEVERAL YEARS NOW AND VOLATILITY AROUND THE WORLD IS NOT JUST LIMITED TO THE ECONOMY, ECONOMIC EVENTS OR EVEN GEOPOLITICAL. THINGS SUCH AS CLIMATE CHANGE. THINGS SUCH AS HURRICANE DORIAN. THESE THINGS ALL HAVE AN IMPACT AND CREATE TREMENDOUS VOLATILITY IN THE MARKETS. TRUMP’S TWITTER FEED IS JUST ANOTHER ONE OF THOSE ITEMS IN THE VORTEX OF VOLATILITY AS FAR AS I’M CONCERNED.>>SARAH, LET ME TAKE YOU BACK TO THE POINT YOU MADE BEFORE HOW THE PRESIDENT CAN GET UP AND TWEET AT ANY MOMENT. PAUL SAYS THE VORTEX OF VOLATILITY I WILL PUT ANOTHER V TO THAT. HOW ABOUT VICTORY? HE COULD DECLARE VICTORY WITH CHINA AS MUCH AS MANY PEOPLE COME OUT OF THE WOODWORK WHATEVER DEAL HE MADE IS NOT ENOUGH WASN’T WORTH WAITING FOR THAT TIME, IT STILL IS TRUE THE MARKET WOULD TAKE OFF, THE ECONOMY WOULD EXPAND. HE COULD DECLARE VICTORY AT ANY MOMENT. ARE YOU PREPARED FOR THAT?>>THAT’S RIGHT. WE HAVE TO LOOK AT THE UNDERLYING SITUATION HERE. WITH THE U.S.’S TRADING RELATIONSHIP WITH CHINA THAT IN ITSELF REGARDLESS WHAT THE PRESIDENT TWEETS POSES DEEP RISKS AND DEEP CHALLENGES IN THE WAY OUR ECONOMY IS STRUCTURED OVERTIME. OUR ORGANIZATION, OPEN MARKETS LOOKS AT MARKET POWER, LOOKS FRAGILITY FROM THIS SENSE. SO WE HAVE SEEN A LOT, A LOT OF OUR KIND OF ECONOMIC AGENCY OUTSOURCED TO CHINA, INCLUDING REALLY CRITICAL NATIONAL SECURITY COMPONENTS, THINGS OF THAT NATURE. WE’RE TAKING A LONG VIEW. THAT, THAT SORT OF ACKNOWLEDGEMENT AND WORK NEEDS TO BE DONE TO REALLY CREATE SUSTAINABLE U.S. ECONOMY OVER

China deal could boost Dow 10,000 points: Art Laffer


LATEST 15% TARIFFS ON CHINESE GOODS TOOK FEATHSUNDAY PRESIDENT TRUMP SPOKE ABOUT LATEST NEGOTIATIONS WITH CHINA YESTERDAY AT THE WHITE HOUSE.>>LET ME TELL YOU IF I WANT TO DO NOTHING WITH CHINA, MY STOCK MARKET OUR TO BEING MARKET WOULD BE 10,000 POINTS HIGHER. THAN IT IS RIGHT NOW. BUT SOMEBODY HAD TO DO THIS TO ME THIS IS MUCH MORE IMPORTANT THAN THE ECONOMY. SO WE WILL SEE WHAT HAPPENS IF THEY WANT TO MAKE A DEAL WE THEY WILL MAKE A DEAL IF THEY DON’T WANT TO MAKE A DEAL THAT’S FINE I CAN TELL YOU THEY’RE HAVING ONE OF THE WORST I GUESS WORSE ON RECORD, AND THEY WANT TO MAKE A DEAL. IF I WERE THEM WOULD I WANT TO MAKE A DEAL TOO BUT WE WILL SEE WHAT HAPPENS.>>LAVER ASSOCIATES CHAIRMAN START LAFFER A PLEASURE TO SEE YOU THANKS FOR JOINING ME.>>MY PLEASURE THANKS.>>NOT JUST WHAT NO DEAL HAS DONE TO THE MARKET, YOUR EXPECTATIONS ARE IF WE DO GET A DEAL, GOING TO BE HUGE FOR THE MARKET WHAT ARE YOU EXPECTING?>>I THINK HE IS RUNNING ABOUT 10,000 ON DOW PULLED OUT OF THE HAT FRANKLY A HUGE THING FOR THAT BECAUSE, IT STARTS HAVING A DYNAMIC CONSEQUENCE WITH THE REST OF THE WORLD JAPAN, SOUTH KOREA EUROPE EVERYWHERE IN THE WORLD WILL START DOING DEALS LIKE THE TARIFF NEGOTIATIONS THAT WAS ONE OF THE MOST SPECTACULAR POLICY EVENTS EVER, IT ROCKETED U.S. ECONOMY DURING KENNEDY ERA, THIS IS SAME TYPE OF THING WITH TRUMP.>>SO YOU THINK THE DOW IS AT 26,625 YOU THINK IF WE GET DEAL WITH CHINA COULD SEE THIS MARKET GO ALL THE WAY UP TO 36,000? ANOTHER 10,000 POINTS ON THE DOW?>>REMEMBER I PULLED IT OUT OF THE HAT HE YES, I DO REALLY POSITIVE, IT WILL BE WONDERFUL FOR THE PRESIDENT FOR THE COUNTRY, FOR EVERYTHING FOR POLITICS IT WILL TAKE A LOT OF THE NASTINESS OUTS OF THE WORLD PEOPLE LOVE WORKING LIKE BEING RICH, IT REALLY MAKES LIFE A LOT MORE PLEASANT, AND I THINK THAT WILL BE PART OF THE CASE, CHINA WE NEED CHINA VERY MUCH, MARIA, THEY NEED US, VERY MUCH, I MEAN A PERFECT MATCH OF COMPARATIVE ADVANTAGE BETWEEN COUNTRIES ONLY THING GET IMPEDIMENTS OUT OF THE RAY STEALING INTELLECTUAL PROPERTY TRANSFER OF TECHNOLOGY ALL OF THIS I AM SURE A COUPLE THINGS WE NEED TO DO TO MAKE IT BETTER FOR US AND THEM AS WELL I AM EXCITED I AM EXCITED WHAT THEY DID WITH HONG KONG WITHDREW LEGACY, EXTRACTION TAX WHATEVER IT WAS FOR EXTRADITION –>>EXTRADITION BILL THAT WOULD HAVE MADE ANYBODY — IN HONG KONG YOU HAVE TO FACE TRIAL IN CHINA –>>YES, THAT IS THE THAT IS NOT TRUE I THINK LAM WITHDREW IT.>>SHE DID.>>WONDERFUL. MARIA: SPARKED A BIG RALLY YESTERDAY BUT LET’S YOU THE P CHINA ASIDE FOR A SECOND ART I WANT YOUR TAKE ON REALLY WHERE WE ARE, IN THE ECONOMY, TODAY. THERE IS THE DEBATE RIGHT NOW, WHEN YOU LOOK AT JOBS IN AMERICA WE JUST HAD ADP OUT, AND THAT WAS 195,000 JOBS, ADDED TO ECONOMY LAST MONTH, WE ALSO HAVE ESTIMATES THIS MORNING, THAT SHOW THE AUGUST REPORT OUT OF LABOR TENT WILL BE RELEASED TOMORROW, SHOW THAT 158,000 JOBS ARE EXPECTED TRIBE ADD TO TH TRIBE ADD IN TH TRIBE ADD IN MH TRIBE ADD IN MONTH UNEMPLOYMENT RATE STEADY 3.7% HOW DO YOU CHARACTERIZE THINGS TODAY.>>THAT IS VERY, VERY NICE WHAT IS HAPPENING IN THE U.S. IS RELATIVE TO THE RECENT PAST SLOWING DOWN A LITTLE BIT, AND I STRESS A LITTLE BIT. BUT WHAT IS REALLY AMAZING MARIA NO ONE TALKS ABOUT, IS IN 2016, 2017 WE WERE VIRTUALLY OF EUROPE MOVED WITH THEM IN GROWTH RATED GDP ALL OF A SUDDEN IN THIRD AND FOURTH QUARTER OF 2017 LINE TO ’18 HALF OF ’19 SEPARATED OURSELVES FROM EUROPE BY A ABOVE IT IF WE HAD GROWN EUROPEAN RATE OF GROWTH WE HAVE BEEN BEFORE IF WE HAD WE WOULD HAVE 750 BILLION DOLLARS CUMULATIVE LESS GDP THAN WE HAVE TAX CUTS WORKED DEREGULATION WORKED WAY TO COMPARE U.S. NOT WITH PAST BUT THE REST OF THE WORLD TURNING DOWN REMAI RAPIDLY AND WE ARE NOT THAT IS MOST THING GOOD XH I CAN SEE.>>SEEM TO HAVE IMPACTED BUSINESS MANAGERS DECISIONS IN TERMS OF CAPEX UNCERTAINTY AROUND CHINA UNKNOWN.>>THAT IS RIGHT.>>GO AHEAD.>>YEAH, THAT IS WHAT THEY SAY BUT IF YOU LOOK AT NUMBERS IF YOU LOOK AT REAL GDP GROWTH RIPE THING THE MEASURE, IT IS LOOKING VERY GOOD RELATIVE TO THE REST OF THE WORLD ALSO IF YOU LOOK AT STOCK MARKET, U.S. STOCK MARKET IS LOOKING VERY GOOD RELATIVE TO EUROZONE ANY OTHER PLACES CHINA, I MEAN WE ARE DOING VERY WELL IN THE SEA OF NATIONS THAT IS DOING VERY BADLY. AND THAT IS WHEN YOU REALLY NEED GOOD ECONOMICS WHEN EVERYONE AROUND YOU DOING BADLY KEEPS FROM YOU SUFFERING THE WAY THEY SUFFER.>>GOOD FAITH YOU GO ART WHAT IS YOUR REACTION TO THESE ROCK-BOTTOM RATES WHERE WE SEE IT INVERSION STILL, WITH THE THREE MONTH AND 10 YEAR, YIELD, AND HAVING, YOU’VE GOT THE DEMOCRATS THAT CONTENDERS FOR PRESIDENT’S JOB, TALKING ABOUT RECESSION. ON THE HORIZON, HOW DO YOU SEE IT.>>YEAH WELL — WHAT — WHAT THEIR SEEING THEY ARE SEEING THE REST OF THE WORLD GERMANY HAS NEGATIVE REAL YIELDS YOU HAVE TO PAY GERMAN GOVERNMENT MONEY TO LEND TO THEMTH THAT’S CRAZY, WHAT HAS HAPPENED THE FED HAS BEEN VERY TIGHT ON MONEY KEPT INTEREST RATES WAY TOO HIGH DISCOUNT RATE, AND IF TO LOWER DISCOUNT RATE AS MUCH AS 100 BASIS POINTS WOULD PUT IT JUST SLIGHTLY BELOW THE 5 YEAR TBONDED YIELD WHICH IS STILL VERY HIGH YOU WOULD HAVE I THINK VERY NICE MARKET HERE, THE REASON PEOPLE ARE GOING INTO GOLD IS BECAUSE THERE IS NO RETURN ANYWHERE ELSE THE STOCK MARKET WE HAVE IS A STRONG DOLLAR WITH STRONG DOLLAR U.S. INTEREST RATES SHOULD BE MUCH LOWER THAN THE REST OF THE WORLD NOT HIGHER. BUT WE ARE MUCH, MUCH HIGHER THAN THE REST OF THE WORLD, BECAUSE OF THE BAD ECONOMIC CONDITIONS ABROAD SO I AM VERY BULLISH ON AMERICA I DON’T SEE A RECESSION I DON’T SEE ANYTHING LIKE THAT COMING THERE ARE NO POLICIES THAT WOULD LEAD ME TO BELIEVE THAT, THAT CAN ALL CHANGE QUICKLY BUT I AM VERY BULLISH MARIA I THINK IT IS GOOD RIGHT NOW SO THAT. MARIA: WE LIKE TO HEAR THAT FOR SURE ART GREAT TO SEE YOU –>>I LOVE BEING ON WITH YOU WHEN MARKET IS UP PITCHER YOU DON’T HAVE YOU PUMPS YOU

Chatting with a 23-year-old Stock Trading Millionaire


Hey, I made her Hales welcome to another edition of chatting with I’m here with Umar. Hey, how you doing guys My name is omar ashraf and i’m a stock trader. Thank you so much for being here. Thank you for having me man Let’s see stock trader. Is that different from stock broker? Yeah, it’s a lot of people get that idea very confused. They Confuse me with the stock broker But there’s a huge difference between them a stock broker somebody that allows that kind of purchases shares for you You give them a call they purchase itself for you and stock traders somebody who does it themselves, you know for him or herself Yeah, you’re like buying and selling stocks like the same day, right? Ah, not not always I’m sometimes buying it and holding for two three weeks. Sometimes I’m buying it and Buying the same day selling it the same day. It’s just different strategy some days. I’m day trading some days I’m swing trading it just it all depends. How old are you? I’m 23. Oh Wow So this could be 23 year old. Are you a millionaire? Yeah Yeah, this would be the title then. So basically I started trading when I was 18 That’s when I first got into the market and when I first started I literally had no idea What I was doing was just like hey, I want to dabble into stocks I want to make money and I know so many people make money off stocks. Hmm So I was like, let me jump into it I had about 20 grand saved up at the time and the money I had saved up What I did was I put all of it into the market without having any knowledge. So I took all my monies rusty Yeah, but at the time, you know, you’re young you kind of wanna you think you know it all mmm So I’m like, oh, I know everything I know what I’m doing Let me just take all my money and dump it into the market Okay I dumped in too much was that how much is what how much did you have that you 2010? That was all the money. I had to put one every day exactly everything Wow. So now once I put everything into the market Next thing, you know is I made a few trades. I remember the first stock I bought was JCPenney So the first trade I made was around It was it was a January because that’s when my birthday is and I turned 18 I opened up a brokerage account and I bought JCPenney and I made 25 hundred on that trade so now After that, I kept taking all my money and dumping it into one stock. No risk management not okay. Hold on Why did you choose JCPenney? Absolutely, no reason I just saw the stock and I was like, oh, I think it’s a good buy and I bought you spam Why did you think it was a good buy? I I just looked at the charts and I had no idea what he was telling me but I just felt like it was a good Buy and I and I put money into it anyone else. Yeah, like with me not knowing anything I see like what it’s normally and if it’s low then I’m like, alright, it will probably go back up It was something like that because I know retail at that at the time was having a huge problem Retail was falling. So I was like aha JC Penney. They’re never gonna go down. Let me buy them So I bought them and next thing, you know They went up two days later and I made about twenty five hundred bucks and you sold it Yeah, and I sold that made twenty five hundred bucks now Oh you put 20k into one stock Wow and it went up I think interesting new percentage and As they went up it might might before you when I’m twenty-five hundred bucks is the the fee what were you doing etrade? what I Scottrade Scottrade Okay, that’s like one of the many yeah Scottrade They got bought out by teaching now, but at the time, you know, it’s like $15 per traders It was seven seven dollars of trades 7 2 by 7 to sell. Okay, no percentages or anything. No, no, no. No, okay There’s no just seven seven seven four. Yeah, that’s about us when you’re 18 Yeah, so I’m in high school right now. Cuz I like I said, I have a early birthday So I just made 2500 off one trade. Yeah, so now I’m like, wow, I’m in high school. I made 2500 Oh man. This is it This is what I’m gonna do for the rest of my life and it kept going well for me. It was all beginner’s luck So my account went from the 20 grand to 35. Okay a matter of two months Then you put 35 into one thing everything into one thing. I knew no risk management. I’d had no idea what I was doing So it was working for me right like every book I’ve read on it says don’t do that don’t Exactly, but I didn’t read anything. I just dumped my money into into that one stock over and over again The sun’s like too good to be true. Yeah, and then I mean obviously everything that’s too good to be true goes downhill Okay, so now once I built my count to thirty five thousand in two months What do you think happened? Next you the loss at all? I lost it. All everything went down everything everything went downhill in a matter of six months bad trade here bad trade there bad trade here bad trade there and Everything just went down and my account finally hit about 2000 bucks. Okay in a matter of four or five months Mm-hmm and now once that happened I took a step back and everyone around me was like stocks or risky stocks at gambling and don’t touch stock. Stay away from stocks So I’ve started you know, it kind of got to me. I’m like, ah man maybe stocks isn’t the right way to go It’s something I should stay away from. Mm-hmm. But uh, I was like, you know what? I know so many people that actually make money off stocks So let me actually keep focusing on this. I didn’t know what I was doing So now let me take a step back and actually try to learn the right way Because in the stock market, there’s always a winner and there’s a loser. So if I lose 2,000 you made two thousand So it’s like you’re kind of taking my two thousand from me and the broker just makes his or her Commission. Mm-hmm So I was like, okay. I lost it. Somebody beat me they beat me at the game. So I just need to get better Yeah, so now long story short. I for the next six seven months All I did was I was focused price Li just on the market. Okay, I just focus Directly in the stock market how it’s moving. I was watching youtube videos, whatever. I was watching. I would apply it with real money So yeah, you got down to two thousand. You’re like 19 or still 18 still 18. Okay. Um, did you ever have a job? Uh, yeah, I was doing delivery at the time. Okay, so starting from 2000 you worked way back Oh, yeah, so starting from 2000. I worked my way back up, but I Started my account in the next January when I was 19. Hmm. But now when I restarted my account I started with started with 5,000 okay, so I saved the money I had 5,000 and now when I had 5,000 I kept trading and he put it all into what Now I was a little little bit smarter. Okay. Now I knew what I was doing, huh? So instead of me putting all 5,000 into a trade, whatever what I was doing was I was taking smaller positions Hmm, the purpose of that was for me to learn I was like, okay You know instead of me putting 5,000 and losing five six percent Let me only put a thousand now if every five six percent on a thousand fifty sixty bucks But I’m getting the learning learning experience, okay? so now once I started doing that I gave that about two three months and I would learn so many new things on my own like, oh, wow when this line crosses that line the stock moves up Yeah, when this goes here the stock goes down So I started picking up all these things as I was reading books because I was reading and then I would apply it Wow Now as that started going more and more I was like I need more money Hmm. So the best one of the best things I ever did was I open up a credit card when I was 18, so When I opened up the credit card, they allowed you to have balance transfers. Mm-hmm So what I did was I took a cash advance check which it’s only a 3% fee. It’s not like 25% fee There’s a three percent fee. You don’t pay for 18 months. So I took that and I had a twenty thousand limit So I took fifteen thousand out of that and put it up my bumhole To put it into the market Okay, because I was like I was like I need more money. I five thousand is enough I need to diversify our map my account and things like that So once I took all of that amount, I just started training my first year wasn’t the greatest I made money But I think it was maybe I made around 20-some thousand. It wasn’t this is all short-term stuff all short-term Yeah, all short-term and now you’re a millionaire. Yeah, it took me Three years by twenty twelve million. Was there any big break like where like Yeah, I have you a good I had big breaks with gold last year gold Yeah in 2017. Ah gold this ETF for gold. Mmm. They were spiking up like crazy I remember it went from like 18 bucks to 80 dollars in a matter of a month So every day I would be trading it Wow It would go up and I was margining the whole trade margin is when you borrowed the brokers money Why was it going up? You thing? I it was going up at the time. I don’t remember I know the US dollar was taking a hit I don’t remember the exact reason it was I was going it was going up But I know the US dollar was taking a hit There’s a lot of stuff going on with the feds and and yelling and interest rates, which was so many factors There’s a lot of factors. Yeah, but it was just on a solid uptrend So I was like just buy buy buy buy it is always a gamble at the end of the day. Not really It’s not a gamble. That’s where a lot of people are wrong They think stocks are gambling but the way you have to look at it is you have to look at it from An aspect where how much you’re looking to lose and how much you’re looking to make? Right. So now think of it like this, let’s say you make 10 trades, right? You make the total 10 trades each trade. You have a ratio of three to one Meaning you make 3,000 you’re right and you lose $1 when you’re wrong Okay. So now then out of those 10 trades, even if you’re right only three times you make nine And usual if you’re wrong, I mean you lose seven you see what Wall Street. Yeah. Yeah. Yeah, that’s broken, right? Wolf of Wall Street is yeah. They’re brokers. And oh, yeah. Yeah, they just They don’t care whether it goes up or down there. They just get the Commission exactly like that That was how they made McConaughey part. Yeah. Yeah Yeah, but yeah, he so but he you know, he claims no one can knows whether it’s up or down It’s relatively impossible for you. Don’t know if it stocks when we go up or down Yeah, so the whole concept of it is to manage your trade. Yeah What do you think of Bitcoin I? Think personally, I think it has it has long-term potential. Mmm. I just think right now Crypto is being used more. So as a way to make money Yeah, and as a form of currency, of course, you know, so with that being said there’s too much fluctuation is going on but I do think crypto itself will be big and I think one of the biggest reasons is blotching. Blockchain is is enormous. Yeah. Yeah. Well Do you think Bitcoin will eventually replace the dollar? I don’t know if there will be Bitcoin cuz I don’t see anything special about Bitcoin, but I do believe Long run crypto will have a place in the market. I don’t know if it’s gonna replace it I think it should because the dollar just value just keeps going down So it’s it’s relatively that’s where the dollar keeps going dollars value keeps going down inflation If you look at what what the relic could have got gotten you a hundred years ago poster now again, it’s insane. Yeah, interesting Do you think the banks will regulate Bitcoin banks That’s the biggest problem banks don’t want Bitcoin or crypto to be a big thing. Right? But I Personally feel like it just eliminates so much stuff like paying fees it’s like you have to pay fees to take your own money out and Banks don’t have control which is the biggest thing that they’re facing which is why they will try to regulate Yeah, but it’s just tough to see how they’re gonna regulate it. Yeah. Yeah because it’s blocked chance. It’s like that’s the weight of the other way exactly the way they did I know change try to Regulated was they weren’t allowing any transactions to Cohen base go through them. Mm-hmm. So they have they have contact So if coinbase is one of the brokers to you know, buy bitcoin and stuff So if you made a transaction to put money into coinbase, they would block it. Hmm I don’t know if they’re doing that now, but I know they did that a few months ago. Hmm Do you own a Bitcoin? No, I have like coin I have ripple and I have you doing Bitcoin I don’t have any Bitcoin one week. I’m not a big fan of Bitcoin bitcoins the rock star, isn’t it? It is the rock star but a long term, I don’t see anything special in it. Hmm. I Feel like the biggest ones probably gonna make it. It’s like, oh not in the long run it’s it’s probably I personally feel like it’s probably gonna keep going up and then You know eventually once it does come become a form of quantity, I don’t see anything special in Bitcoin Well, what difference does it make it’s all electronic, right? Yeah, but some of them is some of them are quicker Some of them have more features more benefits things along along the lines of that. Mm-hmm. What’s the best book? For someone just getting in for them to start one of the dead folks I read was Trading for a living. I don’t remember the author’s name. Okay Trading for a living. Yeah, I think that’s that’s actually a very good book I’ll link that in the description is actually my very good book with my Amazon link Yeah, that’s that’s actually a very good book train : you have a million dollars in cash or assets or now stocks right now my brokerage account I have 600 in my brokerage account from building that up and I I constantly keep taking it out now I have other cash that I’m sitting on. Mm-hmm where I’m looking to invest but now this is my dilemma with investing right now I personally feel like the markets going to crash well within the next year or two Doing all right, and I feel like it’s very extended So what I want to do is I’m trying to accumulate a lot of cash. Yeah, and Save it purchased, you know a lot of stuff at that time How why do you think is gonna crash? I just feel like it’s very extended it’s it’s for extending yourself out like it’s it’s kind of like a Extent, what’s I mean? so we we we’ve went through we went through cycles in the market where You know when the market runs for a very long time it needs to pull back or come into recovery mode recession But not a session, but it needs it needs to come into mode for recovery mode that hasn’t happened but now the factors I think that’s going to drive us into hitting recession or – one is Student loans. Yeah student loans are it’s a very high and they’re not. Yeah, I don’t see them getting paid back There’s no jobs out there for them to get paid back Yeah, and second auto loans auto you can literally anyone can go buy any car without having any proof It’s the same thing that happened with the housing market in Oh seven, you know you don’t need to provide proof of income and proof of employment anything. So people are You know putting on more depth on them and they’re they’re purchasing these vehicles which is kind of out of their reach So I feel like that market is kind of Oversaturated so then we’re gonna need another bailout from the government. Uh, We got to see what’s gonna happen, I just feel like it’s everything is building up And as soon as one thing is pulled out anything’s gonna fall anything. That’s like I Ivan We’re so a year two years and this is a crazy part. I think the only reason it hasn’t happened sooner it’s because of Trump Wow, I think Trump has been doing a great job with the Like Peter car. Yeah. No, I don’t know agree with a lot of stuff he does but with the economy I think he has been bringing it up You know, if you look if you know this with the market and housing market, everything’s been going up. That’s a great office. Yeah Hmm. What are some I guess techniques So some techniques that I feel like a lot of people mess up on. Mm-hmm is people go right into indicators Such as the RSI MACD and they look at that to buy or sell stock I think you should gather as much as information as you can from the chart. Mm-hm and see the trend Stop see what direction the stock is going yet, like did a feeling so it’s kind of like this It’s kind of like this. Right and this is like the easiest to explain it So think about it as in you’re driving from here to New York Right, so if you’re driving from here to New York You’re gonna take breaks, right? You’re gonna you’re gonna because it takes for three days, I think Mm-hmm, right, so you’re gonna take gas stops. You’re gonna start to sleep and things of that nature. I Stock is very similar You have to understand where it’s headed. You have to know. Hey the stocks headed from here to Miami here to California I mean here to New York here to Philadelphia. Whatever. What is the trend? What is the direction the stocks going yet? How do you know where it’s hurting? All right, when you look at the chart it shows you if it’s going up or down so there’s really three directions There’s an uptrend meaning starts going up There’s a downtrend meaning the stock is on its way down and there’s a sideways trend and use trading between a range Okay. So once you understand the overall Trend of the stock. Mm-hmm. Now your job is to focus on when it’s gonna take a break. Yeah When is it gonna pull over for a gas stop when is again? Uh, but when is the person gonna sleep when is when it’s stopping to sleep for quite some time? Mmm That’s the next step. You have to look at What people do is they look at look at the RSI or MACD or technical indicators, but they don’t know the trend They don’t know where the car is going Yeah, if you know where the car is going It makes the whole process that much easier you think Tesla will keep going up Tesla’s very tricky Yeah, very tricky very tricky because um Elon was very tricky. Yeah. He just started some shit like a week ago Yeah, he made that he made the tweet. Yeah, the tweet is uh, He’s gonna get in trouble for that. I feel like he shouldn’t he can’t really make that tweet. He couldn’t put that tweet out I didn’t even see the tweet. I just saw like an article He just wants to go private private But you can’t announce it because now what if they really are going private let you say hmm It’s gonna boost up the stock price to four or fifteen or whatever. He’s taking in private at so now Anyone can literally buy the stock and make money off it if they go private Wow, which is why he shouldn’t have made that tweet Yeah, it goes against SEC rules for him to do so SCC SEC there, they’re like the cops of the stock market Wow What are some no nose for SEC like insider trading? I had biggest one insider trading, uh People get two people to do it people get away with it. Well, that’s a big no-no Yeah, you can go to like prison. Yeah, a lot of people have you done any shady shit. I Don’t know Yeah, great. Great place to ask that. Yeah a lot of ah No, I’ve gotten there’s actually a funny story about that There’s actually a funny story about about that thing with the company. I’ll talk about it right now. Mmm-hmm So, yeah, actually I didn’t do anything shady, but I did get into trouble for something. So this was two years ago and There’s a company called Sun works right there. They they work with solar solar panels and snoring so what I did was I was invested into a stock and the company was getting a project from Fresno a ten million dollar project Mm-hmm, but nobody knew about the project. How did you know, so now I knew that they’re bidding with the city They’re bidding with the state. So if you’re bidding with the state or city, it’s available to the residents Right, so I figured that out that it has to be somewhere out there So I kept digging digging digging I made accounts in this and that to you know Get access to the bidding portal and I finally got access Right and I saw that they actually benefit ten million and they had the job Where I messed up was I actually posted it on StockTwits so StockTwits is a Twitter for stocks, stock trade Yeah, so I posted it on StockTwits. Now what happened the people on StockTwits started calling him Fresno They started saying hey when we’re not there gonna win the job When are they gonna get the project bla bla bla and now they got fed up with it Because they’re dealing with the public company so they cancelled the contract Now as they cancel the contract the stock plummeted. Yeah, and now I get a call one day from this CEO of the company Right his name was Jim. He… and I remember I was driving and I get a call from like a California number and I’m like California and I pick up he’s like hey This is Jim. Is this Umar speaking? This is Jim from Sunworks Yeah. Hey Jim. He’s lke yeah how you doing? How’s everything? I just wanted to update you about Fresno You know, we’re still working with them, but you know, please stop posting stuff It’s like it’s really getting to them and they’re there. They’re probably not gonna give us the project if they keep getting bothered So, please stop putting information out there and please don’t tell anyone I even called you so That was really it but that that wasn’t anything with SEC but uh that that turned out to be a huge thing How did you first hear about some words? I was just trading it just popped up you scanned So you do something called scanning when you scan you’re looking for certain indicators certain stocks? So when I was scanning some Brooks popped up. Yeah as it popped up was it kind of like a penny stock? No it was This is thing with penny stocks lot. Uh The the actual term of penny stocks or any stocks under $5, right, right I look at penny stocks anything under a dollar. So it just depends on where you’re going And with the stop is priced around 250 280 at the time So technically yes, it was a penny stock. But in my book it wasn’t couldn’t you like post like, oh, I think So and so is going down on stock twits and be like not a better sell like people do that Try to get people people do that. That’s why if you’re somebody that gets influenced by others easily Yeah, stay away from stock – it’s okay. Because now if you’re going to stop – it’s you’re gonna see crazy comments Hey, the stocks can go to 10. The stock can go – ah, yeah, so anyone can say sure Yeah, so what’s the point of stock twists? There or there is that 10% Of stuff that that is valuable out of the hundred Yeah, there’s very few stuff that is value like somebody does research and they find something so they post it But it’s very little little stuff. So it sometimes what did you go through it with your knowledge. You can come. Yeah Yeah filter out all the bad stuff. You have any other investments? Uh I have stock market lab I am working on an app I do have money, you know into tech stuff that I don’t make no I really can’t speak about right now Okay, they are like I’m trying to get into tech industry. It’s related to investing know It’s it’s it’s yeah, it’s a game. Yeah I want to make it like it just a simple like yeah Yeah blowing up insane I have like a like eight youtuber friends that have their own like a little game app Yeah, there’s this that app call. What’s that? What’s that company called? Twitch. Twitch is blowing off Yeah, but just blown up. I’d still need to get into that which is it’s insane for unit. Twitch man. That’s that’s something else Hmm, you have some stalking twitch note Which is owned by I believe Twitter know Amazon Amazon owns him Amazon owns twitch, okay They the Amazon bought at twitch. So Amazon owns. And so if you own twitch you own Amazon. Yeah Amazon I heard took him like 10 years to be profitable No, they were profitable all the time. Only thing is they would take the profits and reinvest it right all in a research and development You have some stock in Amazon. I traded it, but I’m not really I don’t long-term I’m not I’m not even anything long time right now. How did you find me through just three? I actually yeah III was watching YouTube and and you came up and I saw you into because I remember I saw you and YouTube Three years ago. Yeah, ah, are you doing something completely different new pranks? Yeah pranks and stuff and then I I saw you on YouTube for you were doing interviews and then I saw with real estate and this and that and I was like, oh Let me reach out to you cool, right? That’s how I can cause you yeah, I appreciate it. No, I appreciate you man Thank you. Um, I need any last words anything you want. Shout out your Instagram uh, yeah if you guys have any questions about stocks or you know, I want to ask me anything you guys can my Instagram is Omar uh sure if you ma are a sh RAF or almost Yeah so you guys can DM me ask me any questions you guys have about stocks and I’ll To help you guys out as much as I can sweet Well, yeah, that was totally wraps it up. Yeah. Thank you so much Thanks for watching. Thanks for subscribing. Let us know what you think of everything we talked about here and I will see you next week

Why The US Has No High-Speed Rail


China has the fastest and largest
high-speed rail network in the world. The country has more than 19,000
miles of high-speed rail, the vast majority of which was built
in the last decade. Japan’s bullet trains can reach speeds
of almost 200 miles per hour. And date back to the 1960s. They’ve become a staple for domestic travel
and have moved more than 9 billion people without a
single passenger casualty. France began service of the high-speed TGV
train in 1981 and the rest of Europe quickly followed. And high-speed rail is quickly expanding all
over the world in places like India, Saudi Arabia, Russia
Iran and Morocco. And then there’s the U.S. The U.S. used to be one of the world’s global
leaders in rail but after World War II there was a massive shift. If you look at the United States prior
to 1945, we had a very extensive rail system everywhere. It all was working great except a number
of companies in the auto and oil industries decided that for them to
have a prosperous future they really needed to basically help phase out all the
rail and get us all into cars. The inflexible rails permanently embedded
in cobblestones were paved over to provide smooth, comfortable transportation
via diesel motor coach. General Motors, Firestone Tire, Standard Oil
and a few other companies that got together and they were able to
buy up all the nation’s streetcar systems and then quickly start
phasing out service and literally dismantling all the systems over
about a 10-year span. In the 1950s, President Dwight Eisenhower
signed a bill to create the National Interstate System. It allocated about $25 billion dollars
to build 41,000 miles of highways. The federal government paid for 90% of
that, the states covered the final 10 and rail fell by the wayside. Can’t you see that this highway means a
whole new way of life for the children? And a way of life that we have
a chance to help plan and, and to build. We dedicated a huge amount of
dollars to building automobile infrastructure in the middle of the 20th century and
we’re still kind of attached to that model of development. We went from a rail-served country to
a auto-dependent nation by the 1960s. We’ve become a car culture and it’s
hard to break out of that cycle. Not to mention the fact that in
our political system we have very powerful oil lobbies, car manufacturing lobbies,
aviation lobbies, all the entities that the high-speed rail would
have to compete with. This is the American dream
of freedom on wheels. We average some 850 cars per
thousand inhabitants in the U.S., in China it’s only 250. And we’ve never gone back. But according to some this
country’s transportation ecosystem is reaching a tipping point. When you look at what’s happening
with the corridor development, again states across the U.S. who are recognizing they are running out
of space to expand their highways or interstates. There are limits at airports, there
is aviation congestion, so what are the options? A better rail system is one
and could come with significant benefits. It’s largely an environmental good to
switch from air traffic and car traffic to electrified
high-speed rail. That’s a much lower
emission way of traveling. When the high-speed rail between Madrid
and Barcelona in Spain came into operation, I mean air travel just
plummeted between those cities and everyone switched over to high-speed
rail which was very convenient. People were happier. They weren’t forced to switch, they did
it because it was a nicer option to take high-speed rail. There’s a sort of a rule of thumb
for trips that are under three or four hours in trip length from city to city,
those usually end up with about 80 or 90 percent of the
travel market from aviation. Where rail exists and it’s convenient
and high-speed, it’s very popular. America I think is waking up to this
idea that rail is a good investment for transportation infrastructure. One survey showed 63% of Americans would
use high-speed rail if it was available to them. Younger people want it even more. Right now the main passenger
rail option in the U.S. is Amtrak. It’s operated as a for-profit company
but the federal government is its majority stakeholder. Train systems reaching top speeds of over
110 to 150 miles per hour are generally considered high-speed and only one
of Amtrak’s lines could be considered as such. That’s its Acela line in the
Northeast Corridor running between D.C., New York and Boston. One of the challenges we face is that
the Northeast Corridor has a lot of curvature, a lot of geometry. We really operate Acela Express on an
alignment that in some places was designed back in the nineteen hundreds and
so it really was never designed for high-speed rail. And while the Acela line can reach up
to 150 miles per hour, it only does so for 34 miles of its 457 mile span. Its average speed between New York and
Boston is about 65 miles per hour, which is in stark contrast to
China’s dedicated high-speed rail system which regularly travels at over
200 miles per hour. But some people are
trying to fix that. In 2008 California voted
yes on high-speed rail. Now, a decade later, construction is underway
in the Central Valley of the state. And right now it is the
only truly high-speed rail system under construction in the U.S. Ultimately high-speed rail is a 520
mile project that links San Francisco to Los Angeles and
Anaheim, that’s phase one. And it’s a project that’s
being built in building blocks. So the one behind me is the
largest building block that we’re starting with, this 119 mile segment. This segment will run
from Bakersfield to Merced. Eventually the plan is to build a
line from San Francisco to Anaheim, just south of L.A. But as it stands the state is almost
$50 billion short of what it needs to actually do that. The current project as planned would
cost too much and, respectfully, take too long. There’s been too little oversight
and not enough transparency. We do have the capacity to complete
a high-speed rail link between Merced and Bakersfield. After Gavin Newsom made that speech
President Trump threatened to pull federal funding for the project. We will continue to
seek other funding. We hope the federal government will
resume funding the, contributing new funds to the project. I think in the future, as
the federal government has funded major construction of infrastructure over time
they’ll again direct money to high-speed rail because in fact it’s
not just California but other states are also interested in
high-speed rail systems. To complete the entire line as planned,
the official estimate is now over $77 billion and it’s unclear where
the money will come from. So why is it so expensive? Part of the problem in California, the
big price tag is getting through the Tehachapi, very expensive tunneling, or over
the Pacheco Pass to get into San Jose from the Central Valley. You know, Eastern China, the flatlands
of Japan where they’ve built the Shinkansen, all of those are settings
where they have, didn’t incur the very high expense of boring and tunneling
that we face so the costs are different. And a lot of the money is
spent before construction can even begin. Just in this little segment here
alone we’re dealing with the private property owner, we’re dealing with a
rail company, we’re dealing with the state agency and so
just the whole coordination. Then we’re dealing with a utility
company, just in this very small section; we had to relocate two miles
of freeway and that was roughly $150 million per mile. So there’s a lot of moving pieces
to, you know, anywhere we start constructing. China is the place
that many folks compare. They have like 29,000 kilometers of high-speed
rail and 20 years ago they had none. So how have they been able
to do it so quickly? And part of it is that the state
owns the land, they don’t have private property rights like we
have in the U.S. You don’t have the regulations we have
in terms of labor laws and environmental regulations that
add to cost. It also delays the projects. For some reason and I’ve never really
quite seen an adequate explanation as to why costs to build transit or
many big infrastructure projects are just dramatically higher than in other parts
of the world, including in other advanced countries. But the bottom line is we’re really
bad at just building things cheaply and quickly in the U.S. in general. So it’s not just rail infrastructure
that is expensive, all transportation infrastructure is. Just the physical investment in the freeway usually
will be 5 to 8 to 10 million per mile but if you add
seismic issues and land acquisition and utilities and environmental mitigation and
remediation of soils and factors like that it can become as high
as 100 or 200 million a mile. The numbers for high-speed rail can vary
anywhere from 20 to 80 million per mile. The big reason why America is behind
on high-speed rail is primarily money. We don’t commit the dollars needed to
build these systems, it’s really as simple as that. And it’s largely a political issue. We don’t have political leaders who
really want to dedicate the dollars needed. There’s a lot of forces in America
that really don’t want to see rail become our major mode of transportation
especially because it will affect passenger numbers on airplanes, it’ll
affect the use of autos. So you have the politics, the
message shaping and then the straight advertising and all three of those
coordinate and work together to keep America kind of focused on cars
and not focused on rail. Some of the earliest support for
rail came from the Nixon administration. Some of the original capital subsidies
and operating subsidies for urban transit came from the Republican party, so
I think it’s only more recently that maybe this has shifted that more
liberal leaning folks who care about climate and a whole host of urban
issues have really argued for investing very heavily in rail. If you had Democratic leadership on the
Senate and a different president or potentially some leverage for a president to
sign a new budget bill with some dollars for high-speed rail,
that could override those objections from Republicans in Congress. But I think it’s mostly ideological. They’re big on highways. They’re big on things
like toll roads. They just, they don’t want the government
spending dollars on this kind of project and they see it as
something those socialist European countries do but not something that should be
done in, you know, car-loving America. In my judgment, it would take a
very strong federal commitment, almost sort of a post-Second World War interstate
highway kind of large scale national commitment. This is why some high-speed rail
projects are trying to avoid public funding altogether. One company, Texas Central, plans to build
a bullet train from Houston to Dallas without using a
dime of taxpayer money. We’re taking what is laborious, unreliable
four-hour drive if you’re lucky and turning that into a
reliable, safe 90 minutes. And when you look at that as a
business plan being driven by data, this is the right place to build the first
high-speed train in the United States. The Texas project is backed by investors
motivated to make a profit and will use proven
Japanese rail technology. Texas Central’s goal is to
complete the project by 2025. Another private company is even further
along with its rail system, in Florida. It’s expanding its higher-speed
train from Miami to Orlando. Orlando’s the most heavily visited
City the United States. Miami is the most heavily visit
international city in the United States. It’s too far to drive, it’s too short
to fly, we had the rail link and that was really the
genesis of the project. Wes Edens has invested heavily in Florida’s
rail project which used to be called Brightline. Brightline recently rebranded to Virgin
Trains as the company partnered with Richard Branson’s Virgin Group. The team at Brightline, which is now
called Virgin Trains, has proven that it can work. The people actually want to get out of
their cars and they’d love to be on trains. In order to reach profitability, the
company sacrificed speed to save money. If you want to really go
high-speed you have to grade separate. So you basically have to build a bridge
for 250 miles that you then put a train on. That sounds hard, and it sounds expensive
and it’s both of those things. So a huge difference in cost, a huge
difference in time to build and not that much of a reduction in service. And now tech companies are
getting involved with infrastructure projects. In the Pacific Northwest a high-speed
rail plan is underway to connect Portland, Seattle and Vancouver. Microsoft contributed $300,000 towards
research for the project. Our number one priority from Microsoft as
well it to really see and pursue this high-speed rail effort happen. If you look around the United States
and where all of the Fortune 500 companies are located they all are
in a similar situation to Microsoft. The housing is unaffordable,
traffic congestion is epic. It’s too hard to get
anywhere and to get employees. So high-speed rail can solve this
same exact problem in numerous regions around the United States. So is the private sector the answer
to bringing high-speed rail to the U.S.? If the private sector wants to invest
in transportation and as long as it’s not impinging on the public taxpayers I
don’t see a problem with private sector moving forward. And I think there is some truth that
the private sector is gonna have much more of an incentive to hurry up
on the construction and get things done more quickly, more cheaply. That said, the private sector still has
to operate with the oversight and regulatory responsibilities of
the public sector. So for example environmental review doesn’t
go away just because it’s a private sector project. Labor standards don’t go away. The difference is that they don’t have to
keep trying to sell a project to the public for a vote to
raise taxes or sell bonds. Some people remain optimistic
that the U.S. can catch up to the rest of the
world and have a robust, high-speed rail system. We’re building that right
now behind us. This 119 mile segment that we want
to expand with the money we already have to 170 miles, it’s going to serve
a population of 3 million people in the Central Valley. So it’s, not only do I
believe, but it’s under construction. A lot of activity is now taking
shape, state rail authorities have been shaped in four or five states, so
they’re actually taking these on now as a legitimate project
and moving forward. I think the future is very bright
for train travel in the United States. There’s broad consensus with our policy
leaders in industry that it’s time to move an infrastructure bill and
that will certainly help kickstart U.S. rail. Others are much less confident. I wish I were
a little more optimistic. It’s just very difficult to
make the economics work here. No one has embraced it as a
strong part of their political platform. There’s just too many other
tough pressing problems we’re facing. I don’t see us catching up
to where the world is. It would take such a massive infusion
of dollars for that to happen in California and probably waving a
number of environmental requirements and some other government regulations that
hinder the quick deployment of these projects in favor
of other values. My own instincts are that it’s going
to be decades and decades of decades before you’ll be able to go a
one-seat trip from San Diego to Sacramento or San Francisco. It’d be nice if there was just
one simple answer, it’s this litany of factors that collectively add up that make this
so hard to pull off in the United States.

Gold, Bitcoin surge in wake of economic uncertainty


STUART: THEY ARE SELLING STOCKS AND GETTING INTO REAL ESTATE AND KEEPING CASH.>>>LET’S CHECK THE PRICE OF GOLD. THAT IS A TRADITIONAL SAFE HAVEN. IT’S UP ANOTHER $8, $1484 ON GOLD. AT LEAST A SIX-YEAR HIGH.>>>BITCOIN, THAT SPIKED YESTERDAY WHEN WALL STREET, THE STOCK MARKET WAS SELLING OFF. RIGHT NOW IT’S AT $11,700 PER COIN. I WANT TO BRING IN RON PAUL, FORMER TEXAS CONGRESSMAN, FRIEND OF THE SHOW. SIR, I ALWAYS THINK OF GOLD AS THE GO-TO SAFE HAVEN. WOULD YOU ACCEPT BITCOIN AS THE NEW GOLD?>>I DOUBT THAT. I THINK THAT IT SHOULD BE MADE AVAILABLE AND WHAT I WORK ON IS MAKING SURE THAT IT IS LEGAL BUT I THINK ITS HISTORY IS SHORT-TERM SO YOU DON’T KNOW. GOLD HAS A LONGER HISTORY LIKE 4,000, 5,000, 6,000 YEARS PEOPLE HAVE DEPENDED ON IT TO MAINTAIN WEALTH. IT IS DIFFICULT. THE BIGGEST PROBLEM PEOPLE HAVE IN MAINTAINING THEIR WEALTH IS NOT WHETHER YOU HAVE GOLD OR STOCKS OR BONDS OR WHATEVER. IT’S WHETHER OR NOT YOU HAVE YOUR FREEDOM. BECAUSE JUST THINK OF IN THE DEPRESSION, PEOPLE THOUGHT GOLD MIGHT BE A GOOD THING TO HOLD SO THE GOVERNMENT TOOK IT AWAY FROM THEM AND MADE IT ILLEGAL. [ SPEAKING SIMULTANEOUSLY ] STUART: YOU DON’T THINK WE’RE FREE? I CAME TO AMERICA AND REVELED IN THE FREEDOM I FOUND HERE. YOU DON’T THINK WE’RE FREE?>>WELL, COMPARED TO OTHERS, YES, WE’RE DOING PRETTY WELL. BUT I DON’T CONSIDER US A CONSTITUTIONAL SYSTEM OF GOVERNMENT THAT WAS DESIGNED MANY YEARS AGO. I DON’T CONSIDER IT A LIBERTARIAN SYSTEM. THERE STILL IS RESPECT FOR PROPERTY BUT THERE IS WAY TOO MUCH GOVERNMENT INTERVENTION. MAYBE MOST OF OUR PROSPERITY IS DEPENDENT ON DEBT. HERE WE ARE LIVING IN A SYSTEM WHERE YOU CAN ENDLESSLY PRINT MONEY, TAKE INTEREST RATES BELOW ZERO, THEN BORROW MONEY AT TRILLION DOLLARS A YEAR. SOMEBODY HAS TO PAY. WHEN YOU ARE VERY MUCH IN DEBT YOU ARE REALLY NOT FREE. YOU SHOULD BE FREE FROM DEBT. THAT’S WHEN INDIVIDUALS FEEL BETTER WHEN THEY DON’T OWE A LOT OF MONEY. STUART: I’M GOING TO READ A TWEET THE PRESIDENT PUT OUT ABOUT THE FED WHICH OF COURSE, YOU ARE VERY INTERESTED IN. I’M SURE YOU HAVE SEEN THIS BUT I WILL READ IT FOR THE VIEWERS. CHINA DROPPED THE PRICE OF THEIR CURRENCY TO AN ALMOST HISTORIC LOW. IT’S CALLED CURRENCY MANIPULATION. ARE YOU LISTENING, FEDERAL RESERVE. THIS IS A MAJOR VIOLATION WHICH WILL GREATLY WEAKEN CHINA OVER TIME. YOU HAVE NO TIME FOR THE FEDERAL RESERVE AT ALL. DOES THE PRESIDENT HAVE A POINT?>>VERY WEAK ONE, BECAUSE YES, THE CHINESE ARE MANIPULATORS BUT WHAT ABOUT QE? DIDN’T WE MANIPULATE OUR CURRENCY? DON’T WE MANIPULATE WHEN WE BADGER THE FEDERAL RESERVE TO LOWER THE INTEREST RATE NO MATTER WHAT THEY REALLY THINK? THEN THEY COME ALONG AND LOWER IT A QUARTER OF A POINT AND EVERYBODY GETS HYSTERICAL AND THE MARKETS CRASH BECAUSE IT WASN’T A WHOLE HALF A POINT? YES, WE MANIPULATE JUST LIKE EVERYBODY BUT IT’S DIFFERENT BECAUSE WE AS THE RESERVE CURRENCY, WE ARE THE BIGGEST MANIPULATOR BECAUSE WE GET TO PRINT AS MUCH AS WE WANT AT WILL, AND LICENSE OUR CONGRESS TO RUN UP DEFICITS OF A TRILLION DOLLARS A YEAR. THERE’S TREMENDOUS MANIPULATION. YOU HAVE TO COMPARE SOMEBODY THAT’S RUNNING A RESERVE CURRENCY TO SOMEBODY THAT DOES NOT HAVE A RESERVE CURRENCY. I WOULD SAY THERE’S WAY TOO MUCH INTERFERENCE AND RIGHT NOW, WHEN YOU’RE DEMANDING THAT INTEREST RATES GO LOWER, WHICH IS WHAT OUR ADMINISTRATION IS DOING, YOU ARE MANIPULATING THE CURRENCY. YOU ARE SAYING LOAN THAT MONEY OUT VERY CHEAP. I WOULD QUESTION THIS WHOLE THING SO I WOULD SAY CHINA PROBABLY IS A MANIPULATOR, THEY PROBABLY ARTIFICIALLY KEPT THEIR YUAN TOO HIGH FOR A LONG TIME. NOW THEY ARE SORT OF MAKING UP FOR LOST TIME. STUART: RON PAUL, YOU JUST MADE