Jason Hartman discusses his preparation for Meet the Masters being a virtual event this year. He goes through economic headlines, specifically discussing the US-China trade war and what that means globally. Then he hosts Brendan Ahern to continue the conversation. They talk about the Chinese economy and China’s efforts to reestablish global trust.
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Jason Hartman 0:53
Welcome to Episode 1515 1515. Thanks for joining me today. We are getting excited. about our upcoming meet the Masters conference. And so many of you have been supporting our first virtual event. But the 22nd anniversary of this event, we thank you for getting your tickets at Jason Hartman comm slash masters, and really look forward to seeing you at the event. We are strategizing. And we’ve been in meetings today. Last week, the team has been meeting we’ve been meeting with our virtual events expert and really just ironing out an awesome, awesome experience for you. We’re so excited about this. And there are so many things you can do with a virtual event you cannot do with a live event. By the way, if you don’t have tickets yet, watch our live stream events because we do offer a coupon code for you to get a discount on the tickets and we are having a special live stream tomorrow. That’s Tuesday evening, July 28. And that’ll be at five o’clock Pacific, 8pm Eastern and we are going to Talk about the history of bubbles. Thank you to all of those who joined us for our live stream yesterday, or normal coffee talk. That’s tea. Okay. Coffee talk live stream. And that was really good. We had Carrie and our client, Kristen, join us investment counselor Carrie and our client, Kristen. We are going to have the other carry on tomorrow night for a special live stream to talk about the history of bubbles. Are we in a bubble now? Well, probably, I’d say so. I’d say there are many bubbles popping all around. And if you want to make sure you can anticipate bubbles, look at history. Look at the Mississippi land deal. Look at the tulip bulb craze. Look at all of these bubbles throughout history. So we’re going to be talking about that tomorrow night on a special live stream. Five o’clock Pacific, eight o’clock and that’s of course in the evening, Eastern Time. And I will have two guests joining me for that one. And that’ll be on the YouTube channel and on several Facebook locations, okay, so it’s on the Jason Hartman comm Facebook page. On my personal page, if you’re friends with me, one of the 5000 of you were friends with me on Facebook, you can just see it on my personal page. And that’s going to be a really fun livestream. This was a speech that was given Well, it’s an updated version of the speech that was given two years ago at our prophets and paradise event in Hawaii. And it was just a really excellent talk. I don’t know about you, but I’m a bit of a history buff. And like the old saying goes, those who don’t learn from history are doomed to repeat. Yes, they are doomed to repeat it, aren’t they? So you don’t want to be one of those people. I know you want to learn from history so that you will make good decisions. In the present and in the future, so, bubbles tomorrow night special livestream discount code for those last minute tickets stragglers for upcoming meet the Masters event this Friday, starting off with Sharon lechter. Saturday morning, Harry dent Saturday afternoon George gammon, of course, there’s a bunch of stuff in between their market profiles local market specialist property managers, we are demonstrating two new calculators we’ve developed that I think you’ll really like one that was inspired by our client Ross, who was on the show but I don’t think we aired his episode yet. You know why? Because the calculator wasn’t ready. So we were kind of waiting for that. So we’re gonna debut this calculator at meet the Masters on Saturday. It is a portfolio acquisition calculator.
Jason Hartman 4:49
And it is so cool.
Jason Hartman 4:51
I mean, Ross, you will hear his episode coming up. But the calculator that he developed and then we improved on a little bit is basically showing How he is a young guy is planning to have 90 I believe it was on his what I think was 93 properties and the kind of income that’ll generate the kind of wealth it’ll generate. This is awesome. And we’re going to demonstrate that calculator on Saturday at meet the masters. So really, really cool. So we’ve developed two new calculators for you. And we’re debuting those that meet the masters. What else expect some emails about meet the Masters? We are doing for the first time? A community Yes, we have our own virtual community for this meet the Masters where you can go and you can network with other investors, other clients, you can ask questions, answer questions, and it’s a it’s a forum. It’s a private forum. It’s not Facebook because you know, Facebook is evil. I say that about everybody. No offense, Mark, you and all the other big tech. But anyway, and that was Zach. I was just referring But yeah, it’s a private network. And it’s really awesome. So this event will have a private network. And you’ll be invited to that for those of you who purchase tickets. And in there, you will see the links for the online event. And we are going to have two stages in this virtual event. So not just a mainstage, but also a second stage for breakout sessions. And for networking, it’s kind of a networking lounge as well. So we’re doing some cool virtual stuff. I’m super excited about it. And I really want to just say thank you, thank you. Thank you. All you know, I didn’t know how this would go. But I’m, I’m so grateful. Because so many of you have purchased tickets. I mean, wow, just overwhelming response. So we really appreciate it and we’re going to do our best to deliver an awesome, awesome event for you starting Friday evening. And then we’ll have Ken McElroy Sunday morning kicking us off. Ken McElroy. The multiple rich book author, and you heard him speak at two of our previous events before, and it’s just gonna be a great time. But today, our show we are going to talk about a very important part of the global economy, a part of the global economy that is controversial, that is often vilified, but often credited in many ways to it. It’s, it’s good and bad. It’s both it’s both at the same time, can’t live with it can’t live without it, as the saying goes, and that is China, China, China, China, and now in the wake of covid 1984. Yeah, I’m not doing 19 I’m doing 1984 because a lot of Orwellian stuff coming out of this COVID thing. Just wait. It’s it’s not pretty what’s happening, but we will keep reviewing it and of course, trying to share with you good ideas to cope with the COVID-19 84. But yeah, that’ll be today’s topic. So let’s get to our guests. But be sure to join us tomorrow night for the live stream, Facebook, YouTube, it’s on both. That will be at five o’clock Pacific 8pm. Eastern. And we’re talking about the history of bubbles on the live stream tomorrow with a discount code to meet the masters. And without further ado, know one more thing. One more thing. If you didn’t register for meet the Masters yet. Jason Hartman comm slash masters, I would be remiss if I didn’t give you that link. I don’t think I did. So here is our guest, and let’s talk about the number two economy in the entire world. It’s my pleasure to welcome Brendan Ahern. He is the Chief Investment Officer of crane shares, and they specialize in China. So there’s a lot to talk about with what’s going on with China nowadays. We had a brewing trade negotiation, as I call it, everybody wants to call it a trade war. I think it’s a negotiation And then of course, we had sadly had Coronavirus. So lots to talk about there, Brendan, welcome. How are you? I’m doing fine. Thank you, Jason. Thanks for having me on. It’s good to have you. So first, I’d like to talk about where is China Now, obviously, a lot of their factories were shut down. They’re getting back into business. They have had some news of second waves of infections. What’s the vibe on the China side right
Brendan Ahern 9:25
now? So we didn’t in mainland China, they are back to work 100% I think countries in Asia and in Asia have had to deal with similar pandemics in the past if it’s SARS, or MERS, or H one n one. And because of the strength of the quarantine in China, that they feel they’ve stamped it out. And so people are back at work, people are traveling domestically again. And we’re seeing you know, from an economic perspective of a serious rebound happening, and I think it’s not just China. You know, if you look at Vietnam, South Korea, Japan, Taiwan, you can see the strength of the quarantine you know, Vietnam 100 million people under 400 cases of coronavirus. Yeah. Well,
Jason Hartman 10:11
those are pretty strong numbers in South Korea did a pretty good job. It seems like with everything, you know, the way they handled, it seemed like they were pretty successful. So you’re saying China’s back 100%, the supply chain has still got definitely some lag in it. We’re all seeing that. I mean, I’m just seeing as a consumer, and I buy something online, a lot of stuffs not available, a lot of stuffs more expensive because of the lack of availability. And it’s been pretty surprising. But what about the trust aspect? There’s been some talk I don’t want to say it’s a lot but it’s certainly out there that China can’t be trusted on the world stage anymore and other nations feel like they they misled the world in terms of numbers, the severity etc network going back a few months here from when those thoughts were developed, I guess, what are your thoughts about that? Is that fair or unfair to China?
Brendan Ahern 11:07
I mean, I think it’s easy to Monday morning quarterback things and say should have would have could have. I think that’s true. You know, here in the United States where I always kind of give people you know, give our government a pass that, you know, we haven’t had a pandemic here in 100 years. But when you hear that the head of the CDC spoke to the head of the CDC, China on January 2, that you know, people in you know, very high levels of government knew by mid January that this was a very serious situation and they let me get on an airplane and fly into China at that time period, you know, knowing that something was happening and you know, from being in China at that time period, I attended a very large financial conference to almost 2500 people. I can tell you Coronavirus was not discuss the people when made. So this was like call it like around January 10. You know, not quite this year, these were financial professionals. These are, you know, the rich people of China and they would never have gone to a conference with so many people if they knew something was there. So I think there’s a lot of Monday morning quarterbacking that can be done from the China side from the US side from any any country. If you look at what’s happening in Brazil right now. And to some degree, I think it just shows you why we need high levels of communication and dialogue to try to try to do a better job the next time to prevent this from having the incredibly negative effects on the US population, as well as the US economy. Okay, So
Jason Hartman 12:52
bottom line, then your take is maybe people are being overly critical of China. Would that be fair? winner.
Brendan Ahern 13:01
I mean, I thought, you know, coming up in the New York area, you know, you had a 911 commission put together after the fact to go through and say, This is what, you know how we prevent this from happening. And clearly, that 911 commission was did a very good job because we’ve not had a serious incident here in the US and this time around. So we’re just going to point the finger over there. There’s not going to be any sort of leadership accountability, there’s not going to be any reflecting and looking in the mirror. If anything, we seem to want to separate ourselves from the World Health Organization, you know, which was built to try to prevent this sort of situation from occurring. But then bipartisan, it looks like we’re just going to point the finger over there and not do any self reflection. I think that’s a very misguided strategy.
Jason Hartman 13:51
So talk to us about the trade negotiations. Don’t like it. I don’t think it’s a trade war. It’s a negotiation. You know, it’s Before COVID, and asked her has it changed? And if so how?
Brendan Ahern 14:06
Well I think the originally the trade war, the art of the deal was driven by the White House. And now it’s become somewhat more bipartisan to try to punish China because of COVID. Certainly the luck and coffee fraud, which was, you know, a terrible disgraceful, has only exacerbated these animal this kind of frenzy on who can outdo themselves. And it can come in some ways the Constitution was written to provide checks and balances to try to keep the kind of madness of crowds from overextending themselves. And to some degree, I think, you know, we’re not seeing that happening. You know, ultimately, China is the third largest recipient of US exports, US multinationals doing exceedingly well in China. But none of that has a voice in this current frenzy environment.
Jason Hartman 15:00
Okay, so where do we go from here though? Are we going to have better relations with China going forward? Or are they going to be a Cold War of sorts,
Brendan Ahern 15:10
and believe that ultimately, the economic relationship is much stronger. And I kind of agree with your point, Jason, that this is this is a negotiation. And I think there is recognition that going into the election that you want the economy, to have a very strong robust q3 rebound, and that would be much, much harder to do if you really turn the screws on the trade war neoconservatives especially in light of the fragile nature of the global and US economy today.
Jason Hartman 15:44
Okay, so that means that Trump is going to play the game with a softer hand.
Brendan Ahern 15:50
It’ll be a lot of bark, but I don’t think there’ll be as much as that I think, you know, again, you have it’s our third largest risk. cypionate US exports, so hurt fat or diminished that, you know, would be very, I think very problematic for for the US economy. So, but when you flip that the other way around, we’re the largest importer. So we’re their biggest customer, right? For sure, for sure. You know, and then that’s where we do this is takes two to tango. I mean, I don’t I don’t. I mean, I think there’s a lot of things that China can do to show some empathy and sympathy for what’s happening here to be a little more conciliatory. It takes two to tango, and unfortunately, we’re seeing a little bit of the primal human flight or fight or flight instinct. So you know, I think this is where it’s 2020 like, you know, you pick up the phone, you get an airplane, you work it out, you know, it’s not, it’s not Sparta versus Athens, or Partridge versus Rome. I mean, you know, the means dialogue and communication have never been more but it takes it takes both sides. So I don’t I’m not being critical of just one side or the other. Yeah.
Jason Hartman 17:04
Well, what do you think about you seem very diplomatic? Maybe to myself, it’s hard for me to get an answer out of you. I want you to take a side. Come on, man. Give us some give us some sensationalism here.
Brendan Ahern 17:20
I guess from and, you know, as an investor, I mean, that’s that’s kind of what I’m compensated to do. And you I call it almost, you know, there’s ESG investing and now I kind of call it P SG, where even investing become political size. But as an investor, I mean, I mean, I we see great growth opportunities in China. I mean, in terms of these Chinese internet and e commerce names, we’re invested in Chinese healthcare has performed exceedingly well and we’ve had you know, knock on wood, we’ve had some very strong returns in our portfolios. And I think that’s, that’s where, you know, we love to talk about Do you see these incredible opportunities, these great dynamic companies and you hate to see that, you know, people are not investing in them, because those are Chinese companies when you say that
Jason Hartman 18:12
that’s what you mean.
Brendan Ahern 18:13
Yes, the Alibaba and Tencent and so
Jason Hartman 18:17
so there’s been there’s been an American capital flight from those companies or Americans just aren’t willing to invest in them as much as that is that
Brendan Ahern 18:27
well, over the last two years, the fundamentals of the companies have improved very dramatically, and yet the stock prices haven’t moved. So one of the things that’s happening Jason is that the companies are actually relisting in Hong Kong. So in November, Alibaba relisted shares in Hong Kong and they basically said, you know, US investors, they they treat our stock as like it’s some sort of China US trade war proxy. You know, they have nothing to do with the trade war. The company’s revenues and for Alibaba have doubled in the last two years, why hasn’t the stock so they went back to Asia where they don’t have to explain themselves. And we’re seeing netease jd Badu, the sea trip, these companies are all going back and are going to relist in Hong Kong. Those share classes are fungible, we can convert us shares into Hong Kong shares. So we will benefit from that.
Jason Hartman 19:29
Well, let’s make sure we talk about Hong Kong. But you know, to really answer that question that you’ve raised about the stock prices, I mean, you would have to ask the question, compared to what and is the capital feel, does that capital feel that there’s better deals on US companies or companies elsewhere? You know, and I don’t know, that’s such a complicated equation. That’s way above my paygrade. So I don’t know the answer, but I do know the question, because money always goes where it’s treated best. And we hope we know that for sure. But I want to make sure we get to Hong Kong and the recent changes there. And what that means, because I think that’s hugely significant, especially with pump pails, recent comments about Hong Kong. But first, let’s go back to Peter Schiff. I don’t know if you know who that is, but maybe you do. He’s owns a brokerage company. And he’s quite outspoken. He’s been on the show before. And, you know, he’s quick with a sound bite but often wrong. And years ago, maybe back in 2005 or so is when I first became aware of this theory that he kept promoting, saying that China is going to create their own middle class, they’re going to decouple from the US, they won’t need us anymore as a customer to buy their exports. And if they don’t need us anymore as a customer, they’re going to stop buying our treasury bills and our dollar is going to collapse. Obviously he was glorious thing wrong in like every way. I mean, you couldn’t, you couldn’t have been more wrong. Any of those statements, right? But is that ever going to happen? You know, maybe he’s just 15 years late? I don’t know. Right? What do you say? Well, I do believe he’ll after the global financial crisis, China realize that being export dependent made them made them very susceptible to downturns. So China’s exports as a percentage of GDP is fall, fallen from 35% to 18%. And that’s kind of manufacturing, as a percentage of GDP in China resembles the United States, you know, where over half of GDP is from the service sector today. So it has become
Brendan Ahern 21:40
become a much more consumption dependent, despite all the headlines around exports. I mean, obviously, exports are very important still, but it has diminished and I think they do want to move make themselves less reliant not not just in the United States is just in general. Yeah.
Jason Hartman 21:58
I don’t doubt that. I mean, any country would want that naturally. But can they is another quite another question. I mean, I, you know, I guess every country would want that, right. It’s not surprising. We want to be less reliant. Everybody wants to be less reliant on a trading partner. But can they do it? I mean, they’ve got a long way to go. wages have been going up. But it’s not even close to to the US in terms of the consumer class. No,
Brendan Ahern 22:26
no, no, definitely not. I mean, I mean, they’ve made over the last 40 years incredible strides in terms of raising hundreds of millions of people out of poverty and urbanizing in a very dramatic fashion. But certainly to there’s an element of China is very rich, but broadly speaking, they’ve got a ways to go. So yeah, I think that’s part of you know, the tactics from the US side is that decoupling from the China side isn’t feasible, but I think the same does work in reverse. Also
Jason Hartman 23:00
Well, as you see now the US not wanting to be so dependent for masks ventilators, other PP, we’ve really seen that it’s pretty dangerous to have your supply chain dependent on another country. And I think the US has woken up to that, and probably many other countries have to. So do you see a lot of onshoring I mean, this is all really seems like it’s just playing into the Trump narrative. When he was candidate Trump, this was the stuff he he was promising, and it seems to all be coming true. And it seems like he’s been right get like that he was right about how we need to bring these jobs back into the US we need to bring some of this manufacturing back to the US. And he’s he’s really championed a lot of this blue collar work and this vocational type work, you know, love them or hate him. I’m not it’s not a political statement. I’m just saying that was his narrative. And it all seems to be coming true. And, you know, it all seems to have been a valid narrative. At the same time, right?
Brendan Ahern 24:01
I think, broadly speaking, the factories are over there, not just because of cheap labor, but you know, there’s 4 billion people live in Asia versus under 400 million here. So, so the factories are there, because you can make it inexpensively and then sell to a huge market, you know, take India and China combined, right, but throwing the rest of Asia, 4 billion people so so the factories are there for a reason. And part of that is, you know, again, to make things inexpensively, but second is to sell it to the local market. So, I think in terms of the healthcare I mean, that isn’t a sector that we do like, not just China health care, but em healthcare, now self serving and highly biased. I mean, we have investments in both of those in Sector funds on both of those segments. They’ve performed exceedingly well for obvious reasons. I think ultimately, you’re this 13 million Americans work in management. Factoring versus 100 million Chinese in manufacturing. So you know, this idea of you’re gonna bring the jobs back, every American would have to go work in a factory.
Jason Hartman 25:11
Well, you don’t need to bring that many jobs back. You just need to it’s proportionate to the size of the American population. So if you have 100 and 50 million adults in the labor force in America, roughly 320 7 million people, then it’s just a percentage equation, right? I mean, there’s obviously a lot of people out of work, especially now, a few million manufacturing jobs wouldn’t hurt anybody.
Brendan Ahern 25:37
It’s almost like why why does us farming need migrant labor?
Jason Hartman 25:41
Well, it didn’t before. I mean, only, it’s only been because Americans got rich and scaled and didn’t want to pick strawberries, or at least not. Yeah, some wage is being offered and correct. The immigrants came in and undercut the market and pay capitalism works great. You know, everybody just goes for the best deal. And so why wouldn’t they hire the low cost immigrants? Right? They just won’t pay American wages for those types of jobs because the employers have been spoiled to.
Brendan Ahern 26:10
Yeah, no, that’s I mean, I agree 100% that some element is just caught labor costs are so inexpensive and it’s not even, you know, China is gotten richer. So the real low labor in Asia is Malaysia, Indonesia, you really want to go down, you know, clothing, you know, Bangladesh, so, so to some degree, I agree that I think, you know, some element is these manufacturing jobs and a lot of cases are very, very low skill set. And you just you can’t replace that here just as picking strawberries you like you got to bring people up from Latin America to do it because Americans won’t do it, you know, for a certain so so I would have you know, I think some element does come back I think you’re having we have a Strategic Petroleum Reserve having a strategic healthcare Reserve makes makes a world of sense to me. But to say we’re going to force something back here for something that happens. It’s happened once in 100 years. I mean, I mean, what’s the irony is like after SARS in 2009, or I’m sorry, h one n one in 2009. You know, they actually built a stockpile, and they just let it go. They never replenished it. The government had this stuff and didn’t replenish it but but the local factories they can’t exist unless you want to subsidize it, you know, do you want to stay on enterprise you know, an American state owned enterprise You know, that’s that’s, that opens up a whole nother
Jason Hartman 27:40
whole nother discussion of course. Yeah. Okay. Well, what else do you want people to know?
Brendan Ahern 27:45
Hong Kong mean, beautiful city and we will hopefully be able to visit again soon. But no, I think my take on the nerve you you know, you kind of hear our view on Hong Kong. Some degree I think the you know, a lot of the local Business has been disrupted by the local protests. Really, tourism is stopped not just in Hong Kong and Macau. So, you know, I think this bill was an attempt to try to to obviously tighten the security from the perspective of, you know, these protests have had a adverse effect on their local economy. But obviously, if you extrapolate out, you know, where, where that law can be applied, it makes, you know, obviously, makes a lot of people very, very nervous, you know, from the China side, you know, they knew what they were doing. So, you know, you know, for us, it’s more of the local Hong Kong economy has really suffered for really the last two years, you know, well before going into the Coronavirus,
Jason Hartman 28:52
obviously, everybody’s already forgotten about the civil unrest there and the protests and you know, everything that was going on there that just shut down Immediately with Corona for sure, that was pretty convenient for the government. But now, China has really exerted their authority over Hong Kong rather than treating this sort of loose region like they were and being a little bit lazy fair about it. So things are changing and I see a mass exodus out of Hong Kong, I see a max as mass exodus out of cities in general, because of the virus fears. I mean, certainly New York were your offices, that things are changing and but then you you take China and and they’re exerting more control over things. I mean, people are gonna want to leave and money will flee as much as possible. Of course, there are capital controls. But
Brendan Ahern 29:41
yeah, I mean, surely we know Singapore and Tokyo are actively lobbying the financial community to relocate and it’s hard to say, you know, Hong Kong has, you know, for expats and a beautiful place to live. My view is Hong Kong has an underlying issue which is income And housing inequality or housing affordability that you’ve got your seven and a half million people in a very very small space you know apartments tend to be quite small because of so many people there’s no wage growth there’s no job security so Hong Kong for the expats it’s a great place to be I think it’s very difficult place for a lot of the locals you know, we kind of fly in go to nice hotels and
Jason Hartman 30:29
it’s like going to Dubai. Same idea, you know?
Brendan Ahern 30:31
Yeah.
Jason Hartman 30:34
Yeah. And people live in mostly crappy conditions except for the, the rich, you know, yeah. Okay. Well, what else do you want people to know? And let’s wrap it up, give out your website.
Brendan Ahern 30:44
Yeah. So crane shares calm is our website where we list our exchange traded funds we provide a daily blog on called China last night calm. So just an overview of what happened last night in China F in terms of Economics, stock markets. But certainly Yeah, we know. I mean stepping back, we just had MSCI semiannual index rebalance. What is this? Now
Jason Hartman 31:11
what is this?
Brendan Ahern 31:12
So MSC has the big Index Provider for a lot of index funds and ETFs. So so they refreshed or index kind of twice a year for emerging markets now China’s just about 42% of the weight, but it’s numerically it’s over 700 it’s more than 50% of US stocks in emerging markets. So So ultimately, you know, China, as the trade war proved, China is an important trade partner. And we believe that we want to provide a balanced perspective on what’s happening there.
Jason Hartman 31:45
Good to know. Well, Brendan, thank you so much for sharing your knowledge about this very important market and the relationships between the countries and the world. And we appreciate having you on.
Brendan Ahern 31:56
No thank you very much, Jason.
Jason Hartman 32:02
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