Trade Tensions: The US is currently in a trade war with China, with discussions around extending the pause on tariffs in exchange for China delaying its rare earth export restrictions.
Australia's Role: Australia, with its vast rare earth mineral reserves, is a key player in potential US-Australia deals to counter China's control over these critical resources.
Investment in Rare Earths: Australian mining companies, such as Australian Strategic Minerals and Linus, are seeing stock price increases due to the demand for critical minerals, despite challenges in refining capacity.
Market Performance: The US equity market showed positive signs with unexpected growth in New York State's factory activity and strong earnings from major banks like Bank of America.
Regional Banks: Concerns exist about regional banks' performance, as they are more exposed to net interest income fluctuations compared to larger money center banks.
AI Investment Caution: There is caution around the AI sector's valuation, with comparisons to the dot-com bubble, although current investments are seen as hitting corporate cash flows.
Retail Investor Influence: Retail investors are increasingly influencing market dynamics, with record trading volumes and a tendency to "buy the dip," which could pose inherent market risks.
Consumer Strength Concerns: There are concerns about the American consumer's financial health, highlighted by rising underwater car loans and potential impacts from a widening income gap.
Transcript
[Music] Bloomberg Audio Studios, podcasts, radio, news. Welcome to the Daybreak Asia podcast. I'm Doug Krishnner. Today, President Trump said the US is in a trade war with China. Earlier in the day, Treasury Secretary Scott Besson proposed extending the pause on increased US tariffs on those Chinese goods. Besson said it would be done in exchange for Beijing putting off its recently announced plan to tighten limits on rare earth elements and the exportation of those out of China. Now, these minerals are critical to many industries as we know. Here is Treasury Secretary Bessant. >> Right now, we are currently in a 90-day roll on the tariffs. So, is it possible that we could go to a longer role uh in return for a delay? Perhaps. But, you know, all all that's going to be uh negotiated in the coming weeks. >> Now, this week in Washington, G7 finance ministers will consider a joint response to discourage Beijing's planned move to control those rare earth minerals. And the timing is interesting, too, because next week, Australian Prime Minister Anthony Albanzi is set to meet with President Trump in Washington. Perhaps the most important topic is critical minerals. For a closer look now, I'm joined by Bloomberg's Paul Allen, who is in Sydney. Paul, thanks for making time. You and I have talked in the past about Australia's vast supply of rare earths. So, if you had to kind of gauge what a deal between the US and Australia would look like in terms of rare earth minerals, give me a sense of what that might look like. >> Well, there's certainly a lot of speculation around this, Doug. Uh the prospect of a deal around critical minerals because we've heard President Trump talking in the past about ideas like, well, where maybe we could take over Greenland or involvement in Ukraine. And at the core of a lot of these statements is these uh countries and nations critical mineral reserves. And Australia, depending on how you slice and dice it, has either the largest or the second largest critical minerals deposits in the world. But the limitation here is the refining of those uh deposits. Australia's got the mines. It certainly has the scope for plenty more critical minerals mines, but all of the processing happens offshore, mostly in China. Some of it happens in Korea as well. So, any discussion around a potential deal likely to focus in on on how these minerals get processed. And there's been some speculation in the media that there could be some sort of deal with the US in the range of 7 to $800 million, but beyond that, we don't know anything. The government's been very tight lipped about this which again leads to future speculation that we very well could see something get announced when Anthony Albanesei meets President Trump. >> So what's holding Kber from building up refining capacity in Australia when it comes to the processing of these rare earths? >> Well certainly the political will exists. I think the question is more a commercial one. I can give you an example of one company. It's a small company called Australian Strategic Minerals. Uh it's seen a very healthy runup in its stock price on the ASX. So this is despite the fact that it doesn't actually have a mine in Australia for as long as I can remember working for Bloomberg in Australia. Uh ASM has been talking about starting a mine in a town near a town called DO in New South Wales. It's still about to start its prefeasibility stage. So it's taking a long long time. Um there's certainly a desire to get this done, but critical minerals processing very energyintensive generates a lot of toxic waste as well. So putting together these things uh seems to be the major hiccup. The biggest mineral critical minerals miner listed on the ASX is Linus. Uh but it does all of its refining in Malaysia for example. Uh but it does have a mine here in Australia. So it does speak to this broader problem of the the cost uh the pollution uh the regulation uh of getting processing underway in Australia. >> So how have these stocks and these Australian mining companies been performing lately? Have they been advancing? >> Yes, they have been advancing um without I can't give you too many details on the movements today because they're all so volatile. Uh they do shift around a lot. But the the overwhelming theme has been one of optimism, a sense of opportunity for Australian critical minerals miners. And some of the big players are involved in it as well. Riotinto is a a major minor of critical minerals. Uh so is South 32 which was spun out of BHP uh some time ago. There is another company called Aluca as well. They've all seen uh healthy rallies in their stock price inspired by this need for critical minerals. uh but as I say this uh issue's been around for probably a decade or more. The need to diversify where these come from uh it seems getting that diversification to happen that's the difficult part. >> So I mentioned a moment ago that President Trump was saying earlier that the US is in fact in a trade war with China. How is this being viewed in Australia right now? The tension between Washington and Beijing. It has forever been a very very difficult tightroppe for Australia to walk because on the one hand uh China is Australia's largest trade partner by some considerable distance and it was not that long ago uh when Scott Morrison was prime minister that the country was reeling under trade strikes from China for all sorts of things from uh coal to wine to barley and when the new government got elected here uh four years ago the Albanese government that was seen as something of a reset and those trade strikes have since been wound back and the relationships improved again. But it's well known that China is no fan of the Orcus agreement between the United States and the United Kingdom. The United States is Australia's most important ally. The relationship there is very very close as well on a diplomatic level. uh we heard from uh the prime deputy prime minister Richard Miles saying that no country is closer to the US than Australia in terms of how we engage in the level of trust that is there. So navigating that tight rope particularly when your closest ally is calling saying it's in a trade war with your closest trading partner it's a really difficult foreign policy balancing act. So, I know you talk daily about the weakness of the Chinese economy, and I'm curious about the current trade relation right now between Australia and China and the degree to which Australia's exports, particularly of things like iron ore, have been kind of stymied a bit by some of the struggles that China is enduring right now. >> Yeah, somewhat. Uh life has not been as great for Australia's big miners as it has been in the past. And you know, even though I mentioned those trade strikes have been wound back, we still see evidence of tension bubbling up from time to time. Uh BHP, the world's biggest minor, for example, that's uh the one of the biggest uh well often depending on the fluctuations in market cap, the biggest listed company on the ASX at the moment, having difficulty getting its iron ore into China over a pricing dispute. So that's still getting ironed out. Uh but we had another uh listed company, Treasury Wine Estates, um announcing uh not that long ago, a few days ago, that it was abandoning its 2026 guidance against the backdrop of this tension. You know, its two biggest markets are the United States and China. They're in a trade war in the words of President Trump at the moment. So, Treasury Wine Estates said, "Look, we can't give reliable guidance at the moment." and we saw the stock price falling 11% this week and over the course of this year its values dropped by about half and if you're going to point the finger of blame what caused this the catalyst it's that trade tension Paul we'll leave it there thank you so very much Bloomberg's Paul Allen in Sydney joining us here on the Daybreak Asia podcast [Music] welcome to the Daybreak Asia podcast I'm Doug Krishnner in the US. The equity market closed mostly higher in the last session given upbeat signs on the American economy. Factory activity in New York State unexpectedly expanded. And at the same time, Bank of America reported third quarter earnings and revenue above expectations. For closer look now at the US price action, I'm joined by Keith Buchanan. He is senior portfolio manager at Global. Keith is on the line from Atlanta, Georgia. Keith, thank you so much. Can we begin by kind of summarizing what you heard from the big bank? Some record-breaking numbers for the fourth quarter. Obviously, a lot of deal activity, trading revenue was very strong as well. What's your takeaway? >> Jar and thanks again for having me, Doug. What we our biggest takeaway thus far this earning season when it comes to larger money center banks is, you know, things are really just chugging along at a pace that honestly we feel like it's being somewhat not appreciated on the larger scale of what the market's focused on. I think the the lack of of data from the government from a macroeconomic standpoint possibly could kind of clear the way for some of the readroughs from the larger banks to really hit home with the marketplace. and they're really hammering home the fact that a the macroeconomic environment is is really growing at a clip that um really doesn't um you know really doesn't vibe with what some of the negative rhetoric we've seen um in the in the labor market particularly um but also the consumer environment and what they've seen as far as the consumer behavior and um the lack of deterioration on the consumer's part in a way that also vibes with the jobs reports that we've seen recently um really has us focus on uh the spending that the economy is needs at this moment and the consumer is pitching in its more than its fair share. >> So tomorrow we'll begin hearing from some of the regional banks and a few analysts were saying today if there is trouble ahead beyond the shutdown or beyond US China trade tensions. The regionals really are the place to look. I thought it was interesting today that the KBW regional bank index was down about 2.3%. How do you feel about the regional banks right now? Sure. And in the the larger scale, the larger money standing banks have more levers to pull in order to drive earnings growth um just in a general sense. And the regionals are more um more dependent on uh just net interest income and the drivers of loan growth and being able to make that spread of of lending on the long end and borrowing on the short end. So that the pure banking aspect of of how banks have traditionally made uh made earnings is is more you know kind of at focus with the larger uh regional banks than it is with some of the money center banks that have trading um and other aspects and investment banking that can really smooth out earnings. Uh regionals are more cyclical and you kind of can have a better read through as to the demand for money and the demand from consumers also small businesses as well. It's interesting today too, we heard some commentary from leadership at some of the money center banks uh talking about the exuberance in AI. Cityroup CFO Mark Mason was saying some sectors are likely frothy and overvalued and David Solomon, the CEO of Goldman Sachs alluded to the dot bubble. How is your shop viewing the AI trade right now? We feel like there's a while to go before we can really put it up against what happened in the late 90s. We we don't think that that's impossible. But right now when we are in the cycle, we feel like the the some of the stories of, you know, selling the pickaxes and shovels of this new, you know, gold era of um AI investing that investing is real. It's it's hitting the the top line and bottom line of some of these corporations that are able to transfer that into cash flow. We feel like the on the front end of that investment phase is is real and is hitting the ground right now. But as far as what the market's pricing in going forward, we we really are conscious of um how the the exuberance and the behavioral mechanisms of market participants particularly since our environment now is more a little more retail oriented as far as the day-to-day trading. how that can get out of hand very quickly and and almost um you know have a circular logic as to the justification of valuations is the the hype and the hype justifies the valuations and that um leads to a a phase of investing and and and sentiment that we feel like is is not quite where we are right now. We're really conscious of the concentration of of hype and valuation and market cap and those names that could potentially lead in that direction if the there's ever a hiccup in the investment or ever a doubt as we saw a couple of years ago about how quickly those um those investments can really turn to cash flow for some of these corporations. It's interesting that you make the point about the retail crowd because today in the US the S&P 500 was in the red for less than 30 minutes and it really points to this idea that retail continued to buy the dip. Cityroup was saying today that retail investor trading volume increased to an all-time high defying a typically weak October when you look at things seasonally. And I'm wondering whether or not this speaks to some type of inherent risk in the overall market when you have that type of retail psychology taking hold. >> Yes. And that's one of the things that we we feel like is more akin to what we saw in the '9s is just how pervasive it's become. um as well as the the the flow into ETFs and how those trade on a day-to-day basis also um really causes a lot of changing dynamics as as to what really drives day-to-day movements as far as technicals and sentiment as well. Um so we we really are we think that's a fascinating part of how the market is evolving right now and we don't think it's necessarily something that will we will shift back in any violent way. So, we want to make sure we get our arms around how the the market perceives those changes as well as how our clients can benefit frankly from some of those shifts and how markets move because of what we feel like is driving markets whether than the institutional space really doing that is more than the retail space and that's almost inevitable at this point. >> Keith, I'd like to get your take on this debasement trade. We have both gold and silver trading at record levels here. Are you participating in this at all? How do you view this? >> Sure. We have our clients with positions in um in silver and and gold and we've uh come at it from a a few different angles. It it captures a lot of risk that we felt like were clear and present um more than more than a year ago. So we've been there for a while now. Um that we before it was coin debasement debasement trade and what we're looking at now is the we're short um underweight uh um fixed income as well. kind of in that same theme of the the budget situation not only here in the US but globally causes a lot of concern on our part but also we're looking at safe havens that aren't typical of of this type of um cycle as again we've seen things shift from how the consumers uh retailer crowd is involved in market conditions as well as um you know just how sovereign governments have started to grapple with some of the concerns that we are grappling with here as as as global investors Um, so we we participated there and we feel like that's a place that we want to continue being. We've trimmed some very recently in gold, but we still feel like that offers a good riskreward even at these levels for our client's portfolio. >> So, we have a Fed meeting around the corner. Market is expecting right now, I think a 25 basis point rate cut. A lot of concern about the weakness in the labor market. A couple of Fed officials have really spoken to that quite succinctly. And there are maybe some questions around the strength of the American consumer. I know that's a big kind of category and there are different segments along that spectrum, but today I was struck by the fact that edmmonds.com reported the level of underwater car loans now at a 4-year high. So just over 28% of tradeins toward the purchase of a new vehicle carried negative equity. Are you concerned about the strength of the American consumer? We're we're absolutely u laser focused on the the this the strength or lack thereof in different parts of the spectrum of the consumer experience as well. um the the higher income earners have obviously driven spending um more higher proportion they have in in recent history as well as the the lower end of the consumer has has whether a lot more layoffs um in this in this economic phase that we're in whether it's AIdriven or just more productivity on on the part of corporations as well. We feel like they're they're that gap is widening in a way that's concerning us as far as the the balance of of spending and and and and therefore an inherent risk of of a downturn in markets affecting that spending more so than it has in the past. We feel like that correlation or relationship between those two um shouldn't be discounted because of just how how much of the earnings and the the uh stock returns can benefit those with with those portfolios that that they can spend from um and and those that don't have those those means. Those um more blue collar wage earners don't have that luxury. So we we're really concerned with just how that really manifests itself given the labor environment that we feel like is is starting to soften in different areas of our marketplace as well as you know stock market that's trading at valuations that are that are historically high. So that those two ends of that conversation you know cause um some risk in our in our opinion of where the market can go from here. >> Keith before I let you go I want to get your view on the government shutdown. We are now at day 15. Today, a federal judge in California paused what the administration was attempting to do in terms of the layoff of federal workers. To what extent is this noise or do you think it represents something that the market really needs to be focused on maybe a little bit more than it is? Well, the most immediate impacts that we see are of course the spending that stops whether it's um not only direct payments to those employees that that earn a wage but also the um you know those ancillary businesses that are dependent on that spending from those consultants and lobbyists and those employees as well. So that's the most direct very real-time impact that this undeniable and that will come we feel like will come through the data as as being somewhat looked through and somewhat transitory if I can use that word. Um but as we go forward how how much more often will these happen? I think the political environment of um less um you know less um collaboration and cooperation on Capitol Hill poses a risk that things just don't get done in a way that appeases what the market demands of um the largest economy and the the government that controls largest economy in the world. So that that's one of the larger concerns for us is just what does this mean? We're going from a from a nation and and a and a u from Capitol Hill as far as being able to get things done in a way that we can be rest easy and that those decisions will be made in a way that investors can invest with with clear conscious of um you know the more of the animal spirits driving those valuations and those um you know landscape of investing rather than the puts and takes of of each political week to week. >> Okay Keith, we'll leave it there. Thank you so much uh Keith Buchanan. He is senior portfolio manager at Globalt joining from Atlanta, Georgia here on the Daybreak Asia podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia edition podcast. Each weekday we look at the stories shaping markets, finance, and geopolitics in the Asia-Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Krer and this is Bloomberg. [Music]
Bessent Floats Longer-Term China Truce, Trump – Albanese Meeting Preview | Bloomberg Daybreak:…
Summary
Transcript
[Music] Bloomberg Audio Studios, podcasts, radio, news. Welcome to the Daybreak Asia podcast. I'm Doug Krishnner. Today, President Trump said the US is in a trade war with China. Earlier in the day, Treasury Secretary Scott Besson proposed extending the pause on increased US tariffs on those Chinese goods. Besson said it would be done in exchange for Beijing putting off its recently announced plan to tighten limits on rare earth elements and the exportation of those out of China. Now, these minerals are critical to many industries as we know. Here is Treasury Secretary Bessant. >> Right now, we are currently in a 90-day roll on the tariffs. So, is it possible that we could go to a longer role uh in return for a delay? Perhaps. But, you know, all all that's going to be uh negotiated in the coming weeks. >> Now, this week in Washington, G7 finance ministers will consider a joint response to discourage Beijing's planned move to control those rare earth minerals. And the timing is interesting, too, because next week, Australian Prime Minister Anthony Albanzi is set to meet with President Trump in Washington. Perhaps the most important topic is critical minerals. For a closer look now, I'm joined by Bloomberg's Paul Allen, who is in Sydney. Paul, thanks for making time. You and I have talked in the past about Australia's vast supply of rare earths. So, if you had to kind of gauge what a deal between the US and Australia would look like in terms of rare earth minerals, give me a sense of what that might look like. >> Well, there's certainly a lot of speculation around this, Doug. Uh the prospect of a deal around critical minerals because we've heard President Trump talking in the past about ideas like, well, where maybe we could take over Greenland or involvement in Ukraine. And at the core of a lot of these statements is these uh countries and nations critical mineral reserves. And Australia, depending on how you slice and dice it, has either the largest or the second largest critical minerals deposits in the world. But the limitation here is the refining of those uh deposits. Australia's got the mines. It certainly has the scope for plenty more critical minerals mines, but all of the processing happens offshore, mostly in China. Some of it happens in Korea as well. So, any discussion around a potential deal likely to focus in on on how these minerals get processed. And there's been some speculation in the media that there could be some sort of deal with the US in the range of 7 to $800 million, but beyond that, we don't know anything. The government's been very tight lipped about this which again leads to future speculation that we very well could see something get announced when Anthony Albanesei meets President Trump. >> So what's holding Kber from building up refining capacity in Australia when it comes to the processing of these rare earths? >> Well certainly the political will exists. I think the question is more a commercial one. I can give you an example of one company. It's a small company called Australian Strategic Minerals. Uh it's seen a very healthy runup in its stock price on the ASX. So this is despite the fact that it doesn't actually have a mine in Australia for as long as I can remember working for Bloomberg in Australia. Uh ASM has been talking about starting a mine in a town near a town called DO in New South Wales. It's still about to start its prefeasibility stage. So it's taking a long long time. Um there's certainly a desire to get this done, but critical minerals processing very energyintensive generates a lot of toxic waste as well. So putting together these things uh seems to be the major hiccup. The biggest mineral critical minerals miner listed on the ASX is Linus. Uh but it does all of its refining in Malaysia for example. Uh but it does have a mine here in Australia. So it does speak to this broader problem of the the cost uh the pollution uh the regulation uh of getting processing underway in Australia. >> So how have these stocks and these Australian mining companies been performing lately? Have they been advancing? >> Yes, they have been advancing um without I can't give you too many details on the movements today because they're all so volatile. Uh they do shift around a lot. But the the overwhelming theme has been one of optimism, a sense of opportunity for Australian critical minerals miners. And some of the big players are involved in it as well. Riotinto is a a major minor of critical minerals. Uh so is South 32 which was spun out of BHP uh some time ago. There is another company called Aluca as well. They've all seen uh healthy rallies in their stock price inspired by this need for critical minerals. uh but as I say this uh issue's been around for probably a decade or more. The need to diversify where these come from uh it seems getting that diversification to happen that's the difficult part. >> So I mentioned a moment ago that President Trump was saying earlier that the US is in fact in a trade war with China. How is this being viewed in Australia right now? The tension between Washington and Beijing. It has forever been a very very difficult tightroppe for Australia to walk because on the one hand uh China is Australia's largest trade partner by some considerable distance and it was not that long ago uh when Scott Morrison was prime minister that the country was reeling under trade strikes from China for all sorts of things from uh coal to wine to barley and when the new government got elected here uh four years ago the Albanese government that was seen as something of a reset and those trade strikes have since been wound back and the relationships improved again. But it's well known that China is no fan of the Orcus agreement between the United States and the United Kingdom. The United States is Australia's most important ally. The relationship there is very very close as well on a diplomatic level. uh we heard from uh the prime deputy prime minister Richard Miles saying that no country is closer to the US than Australia in terms of how we engage in the level of trust that is there. So navigating that tight rope particularly when your closest ally is calling saying it's in a trade war with your closest trading partner it's a really difficult foreign policy balancing act. So, I know you talk daily about the weakness of the Chinese economy, and I'm curious about the current trade relation right now between Australia and China and the degree to which Australia's exports, particularly of things like iron ore, have been kind of stymied a bit by some of the struggles that China is enduring right now. >> Yeah, somewhat. Uh life has not been as great for Australia's big miners as it has been in the past. And you know, even though I mentioned those trade strikes have been wound back, we still see evidence of tension bubbling up from time to time. Uh BHP, the world's biggest minor, for example, that's uh the one of the biggest uh well often depending on the fluctuations in market cap, the biggest listed company on the ASX at the moment, having difficulty getting its iron ore into China over a pricing dispute. So that's still getting ironed out. Uh but we had another uh listed company, Treasury Wine Estates, um announcing uh not that long ago, a few days ago, that it was abandoning its 2026 guidance against the backdrop of this tension. You know, its two biggest markets are the United States and China. They're in a trade war in the words of President Trump at the moment. So, Treasury Wine Estates said, "Look, we can't give reliable guidance at the moment." and we saw the stock price falling 11% this week and over the course of this year its values dropped by about half and if you're going to point the finger of blame what caused this the catalyst it's that trade tension Paul we'll leave it there thank you so very much Bloomberg's Paul Allen in Sydney joining us here on the Daybreak Asia podcast [Music] welcome to the Daybreak Asia podcast I'm Doug Krishnner in the US. The equity market closed mostly higher in the last session given upbeat signs on the American economy. Factory activity in New York State unexpectedly expanded. And at the same time, Bank of America reported third quarter earnings and revenue above expectations. For closer look now at the US price action, I'm joined by Keith Buchanan. He is senior portfolio manager at Global. Keith is on the line from Atlanta, Georgia. Keith, thank you so much. Can we begin by kind of summarizing what you heard from the big bank? Some record-breaking numbers for the fourth quarter. Obviously, a lot of deal activity, trading revenue was very strong as well. What's your takeaway? >> Jar and thanks again for having me, Doug. What we our biggest takeaway thus far this earning season when it comes to larger money center banks is, you know, things are really just chugging along at a pace that honestly we feel like it's being somewhat not appreciated on the larger scale of what the market's focused on. I think the the lack of of data from the government from a macroeconomic standpoint possibly could kind of clear the way for some of the readroughs from the larger banks to really hit home with the marketplace. and they're really hammering home the fact that a the macroeconomic environment is is really growing at a clip that um really doesn't um you know really doesn't vibe with what some of the negative rhetoric we've seen um in the in the labor market particularly um but also the consumer environment and what they've seen as far as the consumer behavior and um the lack of deterioration on the consumer's part in a way that also vibes with the jobs reports that we've seen recently um really has us focus on uh the spending that the economy is needs at this moment and the consumer is pitching in its more than its fair share. >> So tomorrow we'll begin hearing from some of the regional banks and a few analysts were saying today if there is trouble ahead beyond the shutdown or beyond US China trade tensions. The regionals really are the place to look. I thought it was interesting today that the KBW regional bank index was down about 2.3%. How do you feel about the regional banks right now? Sure. And in the the larger scale, the larger money standing banks have more levers to pull in order to drive earnings growth um just in a general sense. And the regionals are more um more dependent on uh just net interest income and the drivers of loan growth and being able to make that spread of of lending on the long end and borrowing on the short end. So that the pure banking aspect of of how banks have traditionally made uh made earnings is is more you know kind of at focus with the larger uh regional banks than it is with some of the money center banks that have trading um and other aspects and investment banking that can really smooth out earnings. Uh regionals are more cyclical and you kind of can have a better read through as to the demand for money and the demand from consumers also small businesses as well. It's interesting today too, we heard some commentary from leadership at some of the money center banks uh talking about the exuberance in AI. Cityroup CFO Mark Mason was saying some sectors are likely frothy and overvalued and David Solomon, the CEO of Goldman Sachs alluded to the dot bubble. How is your shop viewing the AI trade right now? We feel like there's a while to go before we can really put it up against what happened in the late 90s. We we don't think that that's impossible. But right now when we are in the cycle, we feel like the the some of the stories of, you know, selling the pickaxes and shovels of this new, you know, gold era of um AI investing that investing is real. It's it's hitting the the top line and bottom line of some of these corporations that are able to transfer that into cash flow. We feel like the on the front end of that investment phase is is real and is hitting the ground right now. But as far as what the market's pricing in going forward, we we really are conscious of um how the the exuberance and the behavioral mechanisms of market participants particularly since our environment now is more a little more retail oriented as far as the day-to-day trading. how that can get out of hand very quickly and and almost um you know have a circular logic as to the justification of valuations is the the hype and the hype justifies the valuations and that um leads to a a phase of investing and and and sentiment that we feel like is is not quite where we are right now. We're really conscious of the concentration of of hype and valuation and market cap and those names that could potentially lead in that direction if the there's ever a hiccup in the investment or ever a doubt as we saw a couple of years ago about how quickly those um those investments can really turn to cash flow for some of these corporations. It's interesting that you make the point about the retail crowd because today in the US the S&P 500 was in the red for less than 30 minutes and it really points to this idea that retail continued to buy the dip. Cityroup was saying today that retail investor trading volume increased to an all-time high defying a typically weak October when you look at things seasonally. And I'm wondering whether or not this speaks to some type of inherent risk in the overall market when you have that type of retail psychology taking hold. >> Yes. And that's one of the things that we we feel like is more akin to what we saw in the '9s is just how pervasive it's become. um as well as the the the flow into ETFs and how those trade on a day-to-day basis also um really causes a lot of changing dynamics as as to what really drives day-to-day movements as far as technicals and sentiment as well. Um so we we really are we think that's a fascinating part of how the market is evolving right now and we don't think it's necessarily something that will we will shift back in any violent way. So, we want to make sure we get our arms around how the the market perceives those changes as well as how our clients can benefit frankly from some of those shifts and how markets move because of what we feel like is driving markets whether than the institutional space really doing that is more than the retail space and that's almost inevitable at this point. >> Keith, I'd like to get your take on this debasement trade. We have both gold and silver trading at record levels here. Are you participating in this at all? How do you view this? >> Sure. We have our clients with positions in um in silver and and gold and we've uh come at it from a a few different angles. It it captures a lot of risk that we felt like were clear and present um more than more than a year ago. So we've been there for a while now. Um that we before it was coin debasement debasement trade and what we're looking at now is the we're short um underweight uh um fixed income as well. kind of in that same theme of the the budget situation not only here in the US but globally causes a lot of concern on our part but also we're looking at safe havens that aren't typical of of this type of um cycle as again we've seen things shift from how the consumers uh retailer crowd is involved in market conditions as well as um you know just how sovereign governments have started to grapple with some of the concerns that we are grappling with here as as as global investors Um, so we we participated there and we feel like that's a place that we want to continue being. We've trimmed some very recently in gold, but we still feel like that offers a good riskreward even at these levels for our client's portfolio. >> So, we have a Fed meeting around the corner. Market is expecting right now, I think a 25 basis point rate cut. A lot of concern about the weakness in the labor market. A couple of Fed officials have really spoken to that quite succinctly. And there are maybe some questions around the strength of the American consumer. I know that's a big kind of category and there are different segments along that spectrum, but today I was struck by the fact that edmmonds.com reported the level of underwater car loans now at a 4-year high. So just over 28% of tradeins toward the purchase of a new vehicle carried negative equity. Are you concerned about the strength of the American consumer? We're we're absolutely u laser focused on the the this the strength or lack thereof in different parts of the spectrum of the consumer experience as well. um the the higher income earners have obviously driven spending um more higher proportion they have in in recent history as well as the the lower end of the consumer has has whether a lot more layoffs um in this in this economic phase that we're in whether it's AIdriven or just more productivity on on the part of corporations as well. We feel like they're they're that gap is widening in a way that's concerning us as far as the the balance of of spending and and and and therefore an inherent risk of of a downturn in markets affecting that spending more so than it has in the past. We feel like that correlation or relationship between those two um shouldn't be discounted because of just how how much of the earnings and the the uh stock returns can benefit those with with those portfolios that that they can spend from um and and those that don't have those those means. Those um more blue collar wage earners don't have that luxury. So we we're really concerned with just how that really manifests itself given the labor environment that we feel like is is starting to soften in different areas of our marketplace as well as you know stock market that's trading at valuations that are that are historically high. So that those two ends of that conversation you know cause um some risk in our in our opinion of where the market can go from here. >> Keith before I let you go I want to get your view on the government shutdown. We are now at day 15. Today, a federal judge in California paused what the administration was attempting to do in terms of the layoff of federal workers. To what extent is this noise or do you think it represents something that the market really needs to be focused on maybe a little bit more than it is? Well, the most immediate impacts that we see are of course the spending that stops whether it's um not only direct payments to those employees that that earn a wage but also the um you know those ancillary businesses that are dependent on that spending from those consultants and lobbyists and those employees as well. So that's the most direct very real-time impact that this undeniable and that will come we feel like will come through the data as as being somewhat looked through and somewhat transitory if I can use that word. Um but as we go forward how how much more often will these happen? I think the political environment of um less um you know less um collaboration and cooperation on Capitol Hill poses a risk that things just don't get done in a way that appeases what the market demands of um the largest economy and the the government that controls largest economy in the world. So that that's one of the larger concerns for us is just what does this mean? We're going from a from a nation and and a and a u from Capitol Hill as far as being able to get things done in a way that we can be rest easy and that those decisions will be made in a way that investors can invest with with clear conscious of um you know the more of the animal spirits driving those valuations and those um you know landscape of investing rather than the puts and takes of of each political week to week. >> Okay Keith, we'll leave it there. Thank you so much uh Keith Buchanan. He is senior portfolio manager at Globalt joining from Atlanta, Georgia here on the Daybreak Asia podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia edition podcast. Each weekday we look at the stories shaping markets, finance, and geopolitics in the Asia-Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Krer and this is Bloomberg. [Music]