Entering the Fall 2024 | Alarming Signs? - Fireside Chat with Scott Bessent

all right like everyone else is simplify I just want to say thank you so much for joining us today this is our fourth annual entering the fall conference it feels like yesterday we did the very first one which very much felt like it was pulled together with chewing gum and bailing wire and as I like to joke more and more responsibility is being taken away from me in this process which is inevitably a good thing um one of the things that I still get to do though are interview some of the smartest and favorite people

in the industry Scott bessent is the CIO and founder of key Square as well as the former CIO at Soros Foundation um and Scott you and I have known each other for a very what feels like a very long time now lot of mileage there's a lot of mileage there everyone knows about Stan D and Miller and breaking the pound you played a really critical role there and I want to drag back to the start there so you were working with Stan and George at that time and you were the key analyst doing the analysis

on that if I remember correctly yeah so the sort of the Mantra at Soros or Duan uh which is stands firm my firm key square is that the micro drives the macro we have no advantage in predicting non-farm payrolls the the revision in the pce deflator but what we do have an advantage and is persistence in talking to the real world and understanding so we we had what I would call barbell strategy we have the real world so we're talking to lots of companies how are monetary and fiscal exchange rate policies political regulatory affecting businesses

and households and then the other understanding how Financial Plumbing Works m so U and the with the pound trade it it was this Confluence of events um the UK had gone into the European exchange rate mechanism they had to stay in a band versus the Deutsch Mark to do that the bank of England had to buy an unlimited amount of pounds if it started moving out of the ban uh but you my what I would say small contribution uh was that the UK and Germany are very different economies the Germans are renters the UK or

British are the largest homeowners in Europe uh Margaret Thatcher had just done a massive privatization program made every one a homeowners it's called the Lawson boom uh but the key the key thing that I realized was that 85 to 92% of UK mortgages were floating rate but not floating rate like we think of them where you reset every two years they reset every Friday when the bank of England raised rates so Bank of England raises on Wednesday mortgages went up so as we started selling pounds and pressuring the bank of England to buy pounds one

of the ways to make it uncomfortable for us was to raise the cost of borrowing the pounds so the they pushed the cost up from 7% to 9% to 11% to 12% and my analysis was able to give us the competence to keep selling because I knew that you know finally I I think their penultimate or ultimate the rate hike got him to about 14% short-term rates and I knew that they would bankrupt UK homeowners so and I knew I was right when they went to 14% And The Pound started dropping yeah right so it

it was that inflection point and so that's actually a fantastic place to kind of launch into a discussion of the world that we see today right which is one of we've had very low rates a relatively available dollar certainly here in the United States excessively available it feels like for portions of the past couple of years you are very critical of Powell for being late to the rate hiking cycle and one of the reasons why that you thought that was occurring was because of political pressure can you expand on that yes so J J Pal's

reappointment in 2021 was the latest reappointment of this Century U and it was clear if if we go back and look at the FED minutes June July of 2021 uh Fed was starting to contemplate in their meetings and inflation's picking up Jackson hle speech by J Powell in August of 21 inflation is on his mind it's clearly hot but nothing's happening and the White House is not reappointing him or announcing his reappointment and I still to this day I had had a dinner the other night small group dinner and I bounced this Theory off of

CC Ralph who was the head of the Council of economic advisor had her Brookings and she just started smiling I said well I can't tell you why they didn't do it I said well I I have two theories of the case one not so benign U but it was because they couldn't decide between Le Brainard and J poell who to nominate the more nefarious case was they didn't want poell to raise rates so they didn't give him the certainty but my criticism of poell is that if he thought inflation was hot he could have been

a good Patriot maybe risk his job and done the right thing and spared the American people a lot of problems so what happened was he was ultimately reappointed November 2021 confirmed 22 the FED doesn't start raising rates until March 23 22 no reappointed December 21 or confirmed December 21 they start raising rates March of 22 amazingly they were still doing QE up until full-blown QE up until February of 22 and I I think that that 69 Monon delay really the the the lit fuse got towards the bomb pretty quickly yeah I I think that's definitely

a component and the other thing I would just highlight is as late as November of 21 right it was we never see raising rates right we this is this it's going to be a long time before we do that there's no question in my mind that that could contributed to Silicon Valley Bank and all the other components yeah and and look and the I'm sure you think the same thing maybe in a different form um I never use two words in the investment business never MH and always yeah and so when you think about the

idea that inflation is always a monetary phenomenon do you think ultimately it was the FED that caused the inflation or do you think it was a combination of factors how do you think about it yeah well I I look the FED could have stopped it instead the FED had monetized the someone asked me yesterday uh about mmt and I said no we've had MMP we've had modern monetary practice MH so the the FED actually engaged in modern monetary practice so I I think it it was a a a bad Nexus of U the the the

US Larry summers in his faux Precision said oh they're overspending by 900 billion that will cause an excess demand shock but you know it it's some amount of the four trillion in spending that came um with the American Recovery Act and the inflation reduction act so the the Fed was complicit if if not completely determinative so when you think about the solution set right so they started hiking in March 22 if we actually look at the pattern of inflation basically June 22 was the you know invasion of Ukraine by Russia and the spike in gasoline

prices up The Invasion happened slightly before but that was kind of like the end of the inflation so do you think the interest rate hikes really stand at the center of we've had persistent components to it since but yeah do you think that the rate policy was the cause of the inflation Retreat or do you again think that there are multiple factors that played through yeah look I I think there are multiple equilibrium it's that you to stop to to reverse something you got to first stop so um I you know this idea of Team

transitory inflation is going to be transitory Maybe the Skyhigh level was transitory but you we're we're still seeing as you said that this persistent level of inflation and as somebody who studies a lot of history that we kept getting the what I call recursive inflation back in the 60s and 70s because you know this anxiety to declare Victory I mean I I was being interviewed by Bloomberg in July and I I think the the fellow interviewing me got a little irritated and he said well you know Scott maybe running monetary policy just really hard and

I said well you know Eric you know what's not hard having a little humility yeah so this idea when J Powell says we're going to engineer selft Landing when the vice chair of the FED comes out and says we think that we are going to pull off a 1995 uh Immaculate disinflation that that's like Mike myself saying like we're going to go up to Yankee Stadium and we're going to be better than the 1927 Yankees like why take the greatest team of all time maybe it's starting inflation we might be but definitely not playing baseball

right um so you know you've you and I have talked about this a few times but there's a couple of things that you've said to me over the years that have really inspired some my work one of which actually just pop back to me as you were bringing up that point which is back in 2015 when you and I were working together you highlighted the fact that interest rates had become so low that people effectively had to save in alternative areas and they had to dramatically increase their savings because their assets were not earning what

they would have historically expected we saw this in Asia particularly in places like Korea Taiwan uh Japan where interest rates fell far more rapidly than we'd seen in Prior Cycles right we were 9% in Korea I think as recently 2003 then we're at 1% by 2015 you pretty much predicted what was going to end up happening once interest rates started to go higher which is suddenly people are earning much more on those assets and income has actually increased do you put much stock on the idea that what we're seeing in part is an increase in

return on assets it's leading to particularly the upper class being extraordinarily well off in this cycle well I I think you touched on it we're we're in in this bifurcated equilibrium which I think is very distributionally unhealthy um and to me it looks like an em style equilibrium and everyone that I've seen blow up in 35 years you have asset inflation in the form of equities and home prices you have a 6.77% of GDP budget deficit that that's fueling that and then you you have treasury moving the funding of the deficit massively to the short

end so you know I I go back to the math physics problem I call it the three body problem you you can you you can predict two objects you can't predict how three are going to behave and you know when I when I think we have everyone in this room top 10 or 20% we are 4 or 50% of consumption so the aggregate numbers uh in the economy look pretty good but the bottom 50% is getting crushed you know I mean if if you go and look at University of Michigan consumer inflation expectations they published

the median number the bottom quintiles inflation expectations are 2x the medium number because that's been their inflation experience because their basket of goods and services very different than ours yeah so I mean this is one of the things that I think is actually really powerful about what's transparent is we have seen a very severe bifurcation in the economy I would describe it not only as the bottom quintile that's suffering but also that it's effectively a a bifurcation between those who already have their assets or who generate income off of assets and those who need to

acquire assets to get started in life we see this in particular amongst young people who can't afford homes and are struggling to afford cars and struggling to repay loans on cars they took out and and that's what what that's why you see is um I I live down in South Carolina and the largest subprime lender is my neighbor uh so I have good I have uh good visibility into what is happening to the bottom quintile and you know up up to the bottom 50th percentile and it's pretty clear in America today either you own assets

or you don't yeah or you have parents who can help you own assets and it's a real problem that but to the point that what his company is seeing it it's lower-end borrowers but it's also young people who are now the moving up toward record defaults on credit cards on autos and then you the whole student loan morass now you've been linked with speculation to the Trump Administration we talked a little bit about treasur you talked a little bit about Janet yellen's activist policy to switch financing towards the front of the curve effectively removing a

burden that could otherwise show up in financial markets and risk management how do how how can we change this is there a prospect that we can reverse that or how would you think about that problem particularly from the perspective of a new Administration coming in yeah look I I think you'd have to do it very slowly uh and I I also think you have to create create a a lot of confidence um I have Financial views I have political views I will tell you today which is which uh my financial view being inside the political

machine is that any notion that Donald Trump would be inflationary is absurd okay and the policies are just deflationary disinflationary the the first I I'm not going to include Co because that's not a fair number I I don't include it with age with I I don't include it with a deficit blowout I don't include it with the inflation but inflation average 2.1% so if we we can get a meaningful decrease in Energy prices if we can get meaningful deregulation maybe there's a one-time Upper price adjustment at some amount of the tariffs but I think that

that looks like something that's two or sub two in in inflation and as you know the the biggest component of consumer inflation expectation is energy so if energy were to go down uh so I I think it starts with that I think it re-anchoring and keeping inflation expectations down and then slowly turn turning out the debt and also um some regulatory changes that allow you let Well Fargo out of the penalty box that's a huge amount the of Government Bond buying there there are a lot of regulatory things that can be done to make the

the banking system a bigger buyer of us bonds so you mentioned this what you let Wells Fargo out of the Penalty Box this is primarily a response of the limitations around Wells Fargo because of various abuses that have occurred through the time period you're highlighting that they have been restricted in their ability to buy treasuries to the they would want is that unique to to Wells Fargo you referring to no it's very unique to Wells Fargo you they've had a consent decree and and look I I believe like all the banks there there's some horrendous

Behavior around the GFC lack of risk management but like probably for old guys like us um it seems like yesterday but we're 16 years away yeah from the GFC yeah time time uh time to parole them yeah that's a an interesting point that I hadn't heard mentioned before when we think about being behind the curve right so the Fed was behind the curve in 20 late 20 and 21 sort of things certainly by the time we got to 22 you've mentioned to me and we've talked about in the past the bank of Japan and how

they might be behind the curve Japan's a place where I think inflation is currently running like 3% how much of that do you think is a function of the Yen how much of that do you think is the incipient inflation pressure that you're highlighting yeah um well they they wanted to get behind the curve they have but the problem with being behind the curve is you got to get back to the curve you got to get back and it's it's like I said at the grants conference yesterday George Soros has this great saying you're never

equilibrium is an academic concept you're never at equilibrium you're either moving towards it or you're moving away from it and they have got to start moving back towards equilibrium because just like with the pound trade my my Divergent view with the Japanese and what whatever however you expect the Japanese public the government the markets are going to react they never react the way we think they're going to or the way you maybe some historical Western analoges would say but I I believe that the bank of Japan is actually going to stoke growth when they raise

rates and like this could really surprise them because households are net Savers corporations are net Savers and you know there's this famous the line that Ben banki talked about well we could just drop money from a helicopter well raising rates is like a transfer from the bank of Japan into household and corporate accounts so you and again every everything I do is probabilistic I never say never I never say always um just trying to get to the other side of 50% confidence and then scale a position from there U but you know I I think

we cannot dismiss the idea that the economy actually accelerates as they raise rates well it's very similar to the model we were just talking about with the United States right I mean assets have not earned an adequate return in Japan for very very long time dividend yields on the N were low even as prices had retreated from a you know 40-year bare market right um now suddenly there's a return available to a certain extent TR and even if it is a negative real one right and you know so back to back to your question too

uh on was part of it the Yen I think part of it was the Yen but what we were seeing everywhere whether it's in Europe whether it's in Japan we've seen it in Ems for years now we've seen it in the US inflation is very unpopular probably more unpopular than recession and that's what pushed prime minister kashida out I I saw him he was in this building on about this day two years ago and somebody who's done this a long time I'm always very Leary of foreign officials who speak beautiful English so he grew up

he spent part of his childhood in Queens he he can do a Queens accent he unfortunately is a Mets fan and he um and so everyone was very impressed with him except the Japanese people he was despised it was just amazing his popularity kept going down and down well you so you bring up something that you know one you have a lot of connections with companies in different regions around the world and what they're hearing what what are you hearing out of Japan no there there is is a corporate change the the Japanese really on

once they get on board and it's fascinating to see I I think I went to Japan for the first time in 1990 it was kind of not as humble as I am now at age 28 and you I went in and that it was explaining these Japanese companies what they needed to do for shareholder value the uh that they have this word when they don't want to talk to you or this phrase that they say the it's called the sis which means very difficult and said oh that's son you don't understand we we have and

I'll come back to I I'm shocked that nipon steel whiffed this us steel bed because normally they're they're so you know what what we would call stakeholders they're so stakeholders but in 1990 I was told you know bestan we have our customers our community our workers our banks and then the shareholders are last and now it's a complete turn yeah so it's a complete turn in culture business is good I've been surprised how strong the Japanese economy is with um China in recession maybe depression next door so with with these steps that China's taking you

could actually see an acceleration in Japan so that was one of the questions I wanted to ask you about this because one of the things that I see as I look around the globe is the disinvestment from China and very similar in a lot of ways so that we talked about this earlier as to the pressure that came on Japan in the late 1980s right particularly as they began to export Autos to Europe that brought additional trade pressure on them the US effectively catalyzed that into requiring the development of Japanese Auto plants in the United

States we tend to forget the tariffs that we were putting on the Japanese and the late 1980s that led to the development of Springfield Tennessee and Parts South Carolina Etc um is there as we look at disinvestment from China is the rest of the world going to see the proverbial rstar rise as suddenly they need to reinvest reindustrialize Japan may be less so but they've done an in they're probably the largest country in the world in terms of FDI and to China yeah um well we we'll see where it goes like I have a very

open mind on AI and what its effect on the real economy is going to be um and it's I I am a big believer and you it It's always darkest before Dawn so we we may continue seeing this deflationary glut come from China and then at a point and I don't know it's because of tariffs I I don't know if it's because of some boycott on Chinese products that the rest of the world is just going to say no Moss that you can't have 133% of the population and 30% of the exports yeah I mean

that that policy of what's you know neomercantilism right effectively we're going to capture resources from the rest of the world is clearly running out of adherence and the rest of the world even as China doesn't seem to have an alternative do you think that's something unique to China because of their demographic features do you think it's Unique to the CCP CPP I'm sorry uh CCP um that well I I think other other countries try it at a different level but there are a couple things with China first its size one one thing to think about

I study a lot of historical analogues and when you're thinking about the the great power struggle between the US and China it's very unique because in the 1980s our economic Rivals were West Germany East Germany wasn't even there yet and Japan so we could have an economic negotiation with them we could have a military negotiation with the Soviet Union and the the Soviet we never would have traded with the Soviet it was trading with the Enemy it was a big deal when we eventually started were able to buy Soviet grain or Soviet um so you

know what's unusual about China is its size in the trading scheme of the world it's um policies but the the real policy with China is what they call the military civil fusion and I'm forgetting the Mandarin phrase from it for it uh but and it's always always military first mhm so this is a military buildout plan by the CCP that they can only accomplish with the gigantic current account Surplus because you know if if they didn't do the gigantic current account Surplus the savings of the Chinese people are not enough to to finance this so

you I think it's going to be different difficult for the rest of the world because they don't have current account surpluses of this size and I don't know where they're going to get the dollar fund to do the buildout so so so the the the best outcome would be you know for some kind of advanced Manufacturing in the US to be able to replicate and you know I I'm a big believer like you know I I think unfortunate as the co experience was it was a good warning shot that who knew that 70 80 90%

of ingredients for our medicines came from China I I I had uh young woman who they stopped working for me and you know she actually predict she actually predicted the the pandemic so in 2014 she was just she was sure a pandemic was coming this and she went out and founded a mass company the got a factory in New Hampshire there's only one problem there was no pandemic yet no 70% of the comp components for the M were from China oh my God yeah when I was working for Peter teal one of the things that

we looked at was this issue of you know what China's exports actually look like to the US right and it was remarkable the degree of concentration that we would get in certain areas even as the number was not that crazy overall right like we have no Imports of Chinese autos for all intents purposes but 95% of the baseball caps in the United States come from China right likewise the ingredients for lots of stuff the further you go back the value chain the kind of more dominant they become yeah look I'm less concerned about Nikes and

more more concerned about insulin yeah no I think that's absolutely correct you know you you brought up this distinction that we had in the 70s and 80s where we had a military adversary and we had a trade adversary right and in many cases our trade adversaries were our closest allies we had bases in both Japan and Germany um I kind of joke that the reason George Bush threw up on prime minister teada in in Tokyo was because he could um that Japan had effectively rolled over at that point on the trade negotiations and that Japan

had decided or recognized that it was a client State you had a very interesting experience yesterday at the grants conference where you were sharing some of your thoughts on some of these economic policies in particular talking about the Trump Administration and you had a very couple of actually very vocal audience members stand up and say are I think the paraphrase would be are you crazy um clearly you're not my great uncle who had dementia had what's called Sunset syndrome so late in the day people get very angry yeah I think that's what happened yesterday it

was pretty incredible actually there were some some angry people but um one of the points that was actually raised was from an Australian who said we rely on you for our defense how would you think about that in the context of US policy with allies and the fear that a trump Administration could drive our allies away well I I think that in the history of res so president Trump's very fixated on reserve currency U us keeping his reserve currency status um you know he's publicly said he likes a weak dollar you know which which aren't

mutually exclusive um but if you look at the history of Reserve currencies uh the world's on its sixth Reserve currency now so there's Portugal Spain Holland France UK now the us and what do they have in common they were also the greatest military power at this time at that time so Reserve currency is really a security zone so I I actually view it as kind of the this the symbiotic relationship and I I mentioned it yesterday my friend Kevin warsh who former Governor fed Governor he calls it the commons I like to be a little

more dramatic and call it the Federation but I I think you can do this statecraft with a group of likeminded people and you know I I've suggested maybe with teror but it's some combination and this came from Jared Bernstein who is the current chair of the Council of economic advisors gave a speech at Council on Foreign Relations about nine months ago and after he'd spoken woman from a European Think Tank stood up and said you've used the word friend Shoring seven times but you've never told us what it takes to be a friend so Mike

to your point I think we established criteria you you can call it you ABC the green yellow red and these are our real allies like Australia this is how you get in the green box this is how you stay in the green box if you're India you want to have 20% tariffs you want to buy sanction Russian oil you're in the yellow box and by the way you keep buying that oil you're moving toward the red box and you know so you know I I think you have criteria people can move move and the the

green box is is shared shared values shared economy shared defense shared currency goals yeah I mean one of the things that I found remarkable about that individual standing up and saying that is actually just that pure admission right we r on you for our defense right coming from an ally that's not actually an ally right that's a client State y um well then at that point why shouldn't we you if you want to take it one step further the the Japanese were very good in their last budget they did what they were supposed to do

they did a substantial hike in military spending but they did it in Yen so then the Yen depreciated and in dollars they actually I think may have gone down a little on a on a 12-month basis so you know also is there some kind of statecraft to do especially with NATO because the the the Germans seem to have this lingering um insecurity from World War II is there something to do where you go to them and say look we have these 40 or 50e military bonds we want you to buy these we will do an

unlimited repo at the FED on them it's at a good rate for the us and we're the military Shield same with the Saudis same with you like codify it a bit more but also in instead of President Trump it's saying oh we're going to pull out of NATO if they don't pay just make give them a mechanism to pay make make them pay and pay in advance is don't do buy now pay later they they do a layaway plan well the funny part is that was actually how we did the uh financing of World War

II right was you know the lend lease program we're going to give it to you first and you're going to pay us for it over time yep um interesting that's a really interesting point so I rarely hear you emotional in the context of saying something um but when we were outside we were talking about that bottom 50% and how hard it is I think a lot of the dialogue that would exist today around things like tariffs is well wait a second that's a regressive tax that impacts the low-end consumer far more so on a relative

basis than it does the high-end consumer how would you think about responding to that and the impact of that observation well I I think a couple of things I I think that I was surprised yesterday some someone came up to me afterwards much more civil and wanted to have a discussion on tariffs and I said well you know historically for 40 to 50% of the Tariff is recovered in currency appreciation MH then there are elasticities preferences that also get factored in and the the export country consumer can decide um or the export company can decide

that they want to cut price to keep market share so I it it it is far from one for one and you know I I think that the interesting thing about tariffs to me is something that got put away for a long time and I I think like T tariffs for the sake of tariffs aren't interesting but there's an old Soviet nuclear strategy called escalate to deescalate and fortunately it was never or so far hasn't been used um but I think with tariffs you can escalate to you you can put tariffs on with the idea

of getting rid of all the tariffs that um tariffs are like sanctions why why does the US impose sanctions because we want to have extra ter because of our financial might and the um widespread use of the US dollar we are able to put on sanctions and the US gets EXT territorial control but it's not it's not over Iran we can tell the French you can't trade with Iran because we control this but over time people can leave the dollar if if you keep firing that weapon too much with tariffs everyone wants access to the

US market so what are we trying to do we're trying to make China and this a long answer your question we are trying to make China rebalance China over manufacturers and they deprive the household sector they under consume yeah they underc consume so if you push them to rebalance then the identity of that is more us manufacturing and on both sides my my of trigger happy tariff friends or you know the reshoring and the you know we've got to Def financialized the US and I tell like this is a tenure project and You' got two

patients you got the the US and China and you got two 350 lb two pack a day smokers up on the table and you're not going to throw them on the treadmill like this is a all right let's let's do this slowly but you know again you want to start moving toward equilibrium and you know I I think the rebalancing could be good for everybody so one of the ideas that you mentioned before was this idea of a gradual tariff right so first month two and a half% second month 2 and a half% etc effectively

trying to force that change but the way you just laid this out is I mean it's it's just flipping the mfn script from 2000 and saying well we tried being really nice to get you to change and that didn't work and so now we're going to start you know sending you to your room or penalizing your behavior you also brought up something that Echoes well it's it's like with my son I the I I gave him this credit card but I having keep having to wretch it down that one there's always there's always an exception

every oh yeah my kids are pretty good about that although my daughter is in the audience and she she's had a few errors on that too um the so I I want to open it up for questions actually had five minutes cuz I monopolized your time but as always this is absolutely fantastic are there questions from the audience would anyone like to to toss in we can do five minutes or I can keep going Jack Farley what do you think about Chinese stocks uh I I I'm not going to buy them uh I I think

that we don't know yet whether this is a tactical move um so I I would say most of my career has been made off of um assuming if someone is driving 90 mph at a brick wall that they will put on brakes couple of times I've been in the car when they didn't and uh but this time they were driving 90 M hour at a brick wall they saw that how terrible the economy was I was telling Mike earlier a friend of mine was over there it was in shinen and it was in nuclear winter

in terms of the economy so I I think we have the components for tactical bounce whether that turns into into something that is more uh sustained we'll see I actually think the better way to play all of this especially you have more of a medium-term horizon what what what are the spillover effects or the spillover effects into Japanese Industrials into Japanese um financials the Australian dollar copper so I I I prefer going to the the things that will be more effective which is different for me because usually I'm friends with Pat Riley the Miami Heat

former coach now the president of the team and his saying is keep the main thing the main thing but in this instance I'm a little afraid of the main thing and just just to expand on that your your fear of the main thing really boils under property right like you just don't know what you own yeah I I don't I don't want to have a Down 93% day like people had with Russian equities yeah yeah I think that makes sense um if it does resolve right if we are able to see a push towards not

just stimulus but a rapos bon right would that change your perception on Chinese equities at this point yeah look you know like I I think about the Chinese currency it's in three different equilibrium you have on a PPP purchase power parody basis it's very cheap they've done Massive Internal uh devaluation property prices are down Labor's down uh the second equilibrium they have one you have 1.4 billion people who want to take all their money out of China yeah but they're not allowed to and then the third one that I referred to what's the chance that

in five years with within a fiveyear span you're not going to get your money back so you you move that number around so if you could take that number in my mind right now is just but say 20% if you could take that 20% up to an 85% competence ratio that you are going to get your money back that they're just going to grind out Taiwan and wait for the ball to come to them then they'd be very interesting Mike Taylor question China Mike and I follow closely do you to come to the table with

what you two were discussing TS and adjusting 350 chain smokers into doing something moreal because as you know China a command economy that functions on invest this is what they do movings that would be reallying them to end that invest because you're talking about essentially pressure on their currency yeah well look when you read we we we have a consultant who just reads like all the central planning meetings and monetary policy meetings in Mandarin and then pushes them to us and they know that the problem's there like they are begrudgingly they begrudgingly slammed on brakes

on the brakes like the stimulus that they doing they know that they are taking on more debt they know that they are further polluting the financial system it it's just a quick fix but the the will isn't there right now so uh a lot of times uh I've found over the years that it takes an external Force to to do that so and that that's why I like the idea I I if you'll notice Donald Trump never says a bad word about Xi Jinping he will talk about the CCP but he will never so he

always wants to be able to negotiate uh and you know I I think we could probably even pull back a little more and just look we're doing this say when but but don't embarrass them publicly they Nota well they know it that's why they're not doing it yeah yeah yeah I mean that's been one of the key things we're actually out of time um unfortunately which I would I could keep you up here all day as I have in your office and many times in the past um I did want to actually give you a

shout out while you were still on stage there I mentioned that there was a couple of things that you said to me one of the things that you said to me way back in 2015 was maybe the S&P is just unable right it seems to have all the character istics wanted to say thank you for that because among other things that was actually one of the things that led to the impetus of my work around passive and so it's it's always been a pleasure to have even just the little nuggets that you toss out over

the years you get very generous with 45 minutes of it for the audience thank you again Scott good thanks Mike [Music]