The Dividend Cafe - A Final Touch on China

Episode Date: September 3, 2021

I have been surprised by the level of interest in my treatment of the “China investment” subject in recent weeks. I kicked things off at the beginning of August with this piece, presenting the background around the tensions between U.S. investment in Chinese equity vs. Chinese fixed income. I followed up with this piece making the case that the Chinese perception of U.S. global economic intentions (primarily around our use of the dollar as the world’s reserve currency to facilitate large twin deficits) is at the heart of Chinese beliefs and agendas with their own currency. None of this has been for the purpose of mere armchair theorizing or navel-gazing. While high level takeaways in the discussion of China’s place on the global economic stage can be interesting and even provocative, our agenda is investment-specific. We may or may not have an investment thesis to act upon around Chinese financial markets. And we certainly believe the entire discussion is highly relevant for all investors in terms of how the geopolitical and monetary components play themselves out. This week I bring in some reinforcements. Louis Gave of Gavekal Research, one of the foremost economists in the world when it comes to China, Hong Kong, the Pacific Rim, and global fiscal dynamics joins me for a podcast/video discussion on this entire subject. His own views help shine a light on what the fundamental question is we must answer. I will leave you in suspense as to what that is. Once again, all free people can conclude different things about these subjects. But choosing to ignore the entire topic is not an option. History is being made right before our eyes, and our portfolios are asking us to understand it. To that end we work. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Well, this week I'm going to be doing something a little different here at Dividend Cafe, and some of you may really like it because you're not going to hear from me a bunch. We're going to go right now to my interview with Louis Gove, who is the chief economist at GovCal Research. He's been based out of Hong Kong for the better part of 20 years. He's a French-born economist with deep and multi-generational, by the way. His father, Charles, is an utterly brilliant economist. But deep economic study in the European region and Asian region, and has himself, I think,

become one of the foremost experts on economic growth cycles and what's taking place right now, not just in China, but in the greater Asian territory. And I've learned a great deal from him about particularly the subject I've been writing about lately regarding China's sovereign debt market and their currency, contra policies, and trends in the United States. I think you're going to enjoy this conversation. Let me get right into my interview with Louis Gove, and we'll take it from there. So let's use this as a sort of break point in our chat to transition from the equity side to the debt and, by implication, the currency side. Your father wrote an absolutely tremendous piece, kind of a two-parter, but the second part of it, I think, really crystallized a lot of what's going on right now in China's perception of what the US is doing by nature of running a current account deficit and having the world's reserve currency, the ability to cheat the system that way, where the mutual and reciprocal benefits of that

have now worn off, where we previously needed to buy their stuff and they needed to sell us the stuff and we needed them to fund our deficits. We now find ourselves in a different position where regardless of what one thinks about the Chinese equity outlook that we've been spending time on, it's entirely possible that one could say the risk reward calculus of the equity side and the potential for CCP interventions, whether or not that makes it uninteresting. But one may say that they agree or not on your U.S. conclusions, the cultural trends that are disconcerting, the things we've seen over the last 18 months, what it means for valuations in the American technology sector, something I completely agree with you on. one's viewpoint on US investing equity or debt. We do find ourselves with this situation where I'm increasingly coming to the belief that Chinese debt and the objectives of those who issue it are aligned with Western investors who may want to buy it. A store of value, stability,

a yield premium. I think this is your thesis too, but I'd love for you to unpack this more. Well, it's very much my thesis. And look, it's a theme of the book I wrote two years ago called The Clash of Empires. But look, I think you always have to start off walking a mile in somebody else's shoes, right? First, because when they realize that you have their shoes you're a mile away but secondly you know if you put yourself into Xi Jinping's shoes today your view is the U.S. is out to get me right you they've taken down my biggest company they they're out to get me and I have three big weaknesses the The first is the semiconductor industry. So I'm going to plow money and I'm going to coerce my tech sector into solving that vulnerability. My second big vulnerability is energy.

And we can talk about that if you want. And my third big vulnerability is my dependency on the US dollar. Most of my trade is settled. Too much of my capital spending still occurs in US dollars, et cetera. And if tomorrow the US wants to do to me what it did to Russia, what it did to Sudan, what it did to Iran or Venezuela

and cut me off the US dollar, my economy risks imploding. Now, granted, for the US to do that would mean triggering a global depression. So it might be cutting their nose to spite their face, For the US to do that would mean triggering a global depression. So it might be cutting their nose to spite their face. But if you're Xi Jinping, you have to hope for the best and plan for the worst. The worst is I get cut off from the dollar funding.

And anybody doing business with China is not allowed to use the US dollar anymore. So if that's my big risk, the solution is I have to transfer my trade from US dollar to renminbi. I don't have a choice. Geostrategically, geopolitically, I do not have a choice. But again, I think your argument still holds without the most extreme concern of the US literally cutting it off. It's just the US can, between cutting it off and putting pressure, like restricting access, et cetera. There's, there's many, you know, well, there's many shades of gray, et cetera. But basically if, if the U S is no longer a friendly nation to me, if I'm China, again, I'm working a mile in their shoe. This is no longer a friendly nation to me. Why would I want to be dependent on the dollar? Why would I want to be dependent on the willingness and ability of American banks to fund my trade? It's not a

healthy or stable situation. It's like a Damocles sword that's over my head at all times. So if that's my starting point, I have no choice now. so I have to transform the renminbi into a trade and reserve currency. Now, the only way I can do that, the only way I can transform the renminbi into a trade and reserve currency is if the renminbi is a structurally strong currency. Now, if you look at the past 10 years, the past five years, the past three years, the past 18 months, the past 12 months, the renminbi is the world's strongest major trading currency. This is not a coincidence. And if I'm going to basically tell South Korea, tell Indonesia, tell Thailand, look, from now on, we're trading in renminbi. I need to give them a strong and stable bond market that they can invest in. And lo and behold, the renminbi bond market is the

best performing bond market over the past 18 months, three years, five years, 10 years, et cetera. So, yes, to your point, that's where we stand. And I know I'm long-winded, but I'll conclude with a very simple anecdote. But my very first client was a gentleman called Beat Notts. And he ran a firm called Notts Juki in Geneva. He's now passed away, unfortunately. And when I started the business, he said, look, Louis, it's an easy business.

You have to remember, when you're not certain of what to do, when it's crisis time, when low visibility of what's happening, you have to remember that US policymakers and the Fed especially will always follow policies to make shareholders whole. Meanwhile, the Bundesbank, I guess I'm showing my age because I was still at Bundesbank. The Bundesbank and German policymakers will always follow policies to make German bondholders whole.

So when you don't know what to do, you buy bonds in Germany and you buy stocks in the US. And by the way, if I'd followed that advice, I'd be a lot wealthier today. And the reality is there is no more Bundesbank. It's been absorbed within ECB that now has different set of priorities. The new Bundesbank is the people's bank of China because they need the strong currency. the People's Bank of China because they need the strong currency. They need the high real rates to transform their currency from a never-was currency into a reserve currency. And that's the global landscape today. And by the way, for the past 10 years, if you own Chinese bonds and US equities, that

was basically the best portfolio you could have. It delivered the best risk-adjusted returns. And because both sets of policies still today in China, everything is done to make sure that the currency stays strong. Look at the past few weeks as an example. When they took down the education stocks, the stock market tanked. It was down 5% two days in a row. On the first day, foreigners sold, the renminbi went down 50 basis points.

On the second day, while the stocks were down another 5%, the renminbi went back up 60 basis points. That could only be government intervention. It could only be. As all the foreigners were leaving, they stepped into the market. So you buy your bonds in China, you buy your stocks in the US. And so let me get you to answer this for listeners so that I don't have to, but it is essentially going to unpack this distinction that I was struggling with before. One of the arguments on the equity side is that the Chinese authorities have an incentive to disrupt what's been taking place with the red-hot growth sector because they don't want to be reliant on Western capital. They don't want to be reliant on Western technology, Western customers. They certainly don't want to be reliant on Western social structures. And so the aftermath of what's happened, the bloodletting in the Chinese

tech internet sector is perfectly aligned with their policy and their strategic objectives. And so yet I saw initially an inerrant contradiction in saying that they didn't want to be dependent on Western capital in the equity side, but why would they want to be dependent on Western capital in the debt side? And what I believe you have concluded is that they would in no way be reliant on Western capital. In fact, what they're simply doing is fortifying their own currency and bond market for Asian investors. And we're just simply trying to look

for a way for Western investors to take advantage of this. Is this a better restatement? The aim, look, China doesn't want to be dependent on Western investors for its debt markets. You know, it's opening its debt markets to foreigners. But let's face it, it's not URI that is targeted. It's the Thais. It's the Koreans. It's the Indonesians. It's all of Africa.

It's the Middle East. It's Saudi Arabia, the message isn't to CalPERS or to- Or to the Bonson Group. Or to the Bonson Group. It's not you. They're not knocking on your door saying, hey, look, instead of buying US Treasuries, this is a better return. They're knocking on the door of the Southern Wealth Fund of Saudi Arabia and saying, look,

instead of being in US Treasuries, why aren't you in Renminbi? And by the way, why don't you start pricing your oil in Renminbi instead of pricing it in US dollars? And if you price it in Renminbi, then you can earn Renminbi and then you can place those Renminbis into bonds that are going to give you much higher real and nominal returns than you are going to get in US treasuries. That's the goal. Getting the money off the Banson Group, than you are going to get in US treasuries. That's the goal. Getting the money off the Banson Group, it's not even on the priority list. Yeah. And so then for those US investors that are worried about capital controls, governance, these things that have happened with that rideshare company and with the afterschoolschool tutoring companies. The reason they can't do that to U.S. investors that sneak in the back door to own sovereign debt

is because it would be totally contradictory to their trillion-dollar objectives with Saudi, with Malaysia, with other neighboring countries and their geopolitical strategic initiatives. Exactly. I think if you have to worry about capital controls, it's not going to be that China tells you, David, you can't buy the Chinese bonds because if they do, they kill all the work they've done in the past 10 years to transform the renminbi into a reserve currency. So they're not going to do that. The risk is that it's actually the US government that tells you, David, can't buy into it. The risk on the capital controls is not on the Chinese side.

China had capital controls, and it keeps gradually reducing them. The question, and again, here going back to the Western world moving more and more Chinese, the risk is actually the Western world imposing more and more capital controls, saying you can't invest in this, you can't invest in that. If it produces oil, you can't produce it, you can't invest in this. If it, if it, you know, is cruel to animals, you can't, if it doesn't have so many women on its board, you can't invest in it, etc. It's, it's the Western world where the capital controls are growing. It's in China that they're easing up. Is it fair to say, honestly, Lewis, to unpack your ideology here, that you're not merely favorable to some of the Asian economic circumstances for investment but bearish on the US? Or is it a better way to put it, you're bearish on the trajectory of US, which is not a short-term comment one way or the other?

Look, Warren Buffett said never sell short the US, right? I'm definitely bearish on the US dollar. I'm definitely bearish on the US dollar. I'm bearish on the US dollar. And I look at the growth rate of monetary aggregates. I think the US dollar and the growth rate of government spending and budget deficits in the US, which is outsized relative to the US's own history, outsized relative to, frankly, anybody's history or anybody else doing in the world right now. You know, last year, in 2020, the U.S. increased its debt per American by $13,000, the U.S. government. You know, in Europe, which was also following crazy policies, it was between $4,000 and $6,000 per person.

In China, it was just marginally above $1,000 per person. So, you know, this is, you know, marginally above $1,000 per person. So this is the increase in debt that we're all funded. I think I would push back in this sense, though. The debt per person growth, it doesn't change the fact that the debt to GDP ratios still are what they are. The Europeans still have us beat by a lot a large portion and japan's crushing everybody well actually if you look at uh debt debt to gdp by the end of this year i think the u.s will be topping japan um are you talking about on an annual deficit or or total credit card balance total the balance i'll send you i think we'll end up the year at 150 and they'll end up the year at $150,000 and they'll end up the year at $230,000.

Okay. Now you net it out? Because a lot of the government debt in Japan, they owe to themselves. And so do we. I'm doing the same. So you're right. The entitlement thing, if that's what you mean, gets trickier. But technically, you include central bank,

then yeah, all the countries have a lot of debt that could be netted out. Yeah. But in Japan, the big difference is most of Japan's debt now is actually owned by the central bank. And pretty much all the Japanese debt is owned by the Japanese. The big difference from the US, and there's very few countries that have as much external debt as the US, and that have net external, deeply negative net external investment positions. Japan receives money from abroad every year because of its very positive internal investment positions. The U.S. sends out money every year. Now, I think when you look at the amount, and that amount of money that the U.S. needs to send out to the rest of the world keeps on increasing.

So every year you sell more of this family silver. And the beauty of the U.S., the strength of the U.S. is its ability to create new assets to sell to foreigners, whether it be Google shares or Apple shares or buildings in Miami. But it's productivity. I mean, I don't want to short sell it. What they're selling is not just always overpriced Pebble Beach and Rockefeller Center to Japanese in 1987, there is also a legitimately more robust growth engine. That's the real key differential is excessive and surprising statism

in the U.S. and New Zealand is reasonably surprising. And statism in China of that nature is priced. It's priced. And I would say, you know, the big question- Price and equity risk premium and in bond yield? I think it's in the, well, yeah, bond yield. China's the only place in the world offering positive real rates.

So it sits in this little, you guys put a chart out. It wasn't a report that you had written, but some of your colleagues, which is fascinating to me how China's like in this perfect little sweet spot where we know how developed of a country it truly is. And they don't obviously have the 9% or 11% yields that like Turkey or South Africa may have, but they're not sitting there at the zero bound like US and Italy. And so you're just in this little sweet spot of like a soft EM yield with a DM economic safety. And I think you just saw that in recent weeks, right? When equities in China got crushed,

usually in emerging markets, if your equity market gets crushed, you also get crushed on the bonds. If tomorrow the Indonesian stock market goes down 25% for whatever reason, you'll also lose money on your Indonesian bonds. Here, you had Chinese stocks got crushed for a bolt out of the blue, right? The government deciding we're going to kill the educational stocks. So all the stocks got crushed on the back of it. The bonds went up. Which is the way treasuries used to function for us as a tail risk hedge until we got to the lower bound. It's harder for them to do that. But there could be a legitimate tail risk hedge for US investors with Chinese debt. I think Chinese gum and bonds are

the new anti-fragile asset class of choice. To go back to Taleb's notion of things that thrive in adversity. And yes, you're absolutely right. Treasuries were that for our entire generation, because you and I are more or less the same age, our entire generation. And then even people who are 10 years older than us, US treasuries were the ultimate anti-fragile edge. They haven't really been in the past 18 months or so. Is it the euthanization of the US dollar that takes away the anti-fragility or is it the zero bound? I think the zero bound is a lot to do with it. But look, I think as a bond investor, you want to own bonds in a strong currency, right? And, you know, when you have central banks that come out, every chance they get, say, look, we want to get higher inflation. We're not worried about it. We want to get higher inflation.

We're not worried about inflation. They're, in essence, saying, you know, if a central bank says we want to get higher inflation, they're, in essence, saying we want a weak currency. Like, that's the other side of the same coin. We want your money to buy less is when they say we want higher inflation. That's a weak currency. That's the other side of the same coin. We want your money to buy less is when they say we want higher inflation. That's a weak currency, whether it's domestically or internationally. When a central bank says, I want higher inflation, they say, I want a weaker currency. And my argument for a long time has been, yeah, the US is saying all that, but then Europe is saying it too, and Japan is saying it too. And Japan is saying it too. And China's saying the opposite. And China's saying the opposite. So China in a lot of ways becomes

not just an anti, a sort of contrary US story, but contrary Euro, contrary Brussels, contrary Tokyo. So look, I, you know, I think the, which is going to be weaker between the US, the Euro, the yen, et cetera, it all becomes a muck's game. It's all a race for the bottom. So if you have four guys on your starting block, the four big economic zones, Japan, Europe, US, China, the one that stands apart is China saying, I don't want a weak currency. I want a strong currency. And all the other three are saying, well, I want a weak currency. To me, you don't need to be a rocket scientist to say, okay, I'm going to go with that guy.

I'm going to go with the guy who says I want a strong currency. And they are saying they want it, and it's in their strategic imperative to do so. I think you could get any number of U.S. presidents, including one who can get elected, that can say the same thing. including one who can get elected that can say the same thing. That was one thing that was funny about Trump's relative economic ignorance is he actually kind of said he wanted a weaker dollar because no one told him you're not supposed to say that. That's right. But,

but I think that, but it's not like Biden's come out and said he wants a strong dollar either. No, he hasn't necessarily said it, but he, but he couldn't necessarily say the opposite. And he kind of, you know,

there, I think that the U S still has the Bob Rubin school and that, look, at the end of the day, you want to talk like you're forking dollar, even while your debt profile requires you to want to inflate away a lot of the impact of your debt. And that's, to me, the big distinction of what you're describing. Japan, Europe, and America are aligned at the hip. And regardless of what the exact numbers are, debt to GDP is untenable. China is not facing that same position. And Larry Summers, as a sort of, you know, right, you know, Robin to Rubin's Batman, has been bitching about the, you know, the inflationary position of the Fed. and started following guns and butter policies. What part of U.S. policy making, they might say they're for a strong dollar,

but it's what you say and what you do. What have they done to show that they are for a strong dollar? Let me suggest this. What do you think moved the dollar up so substantially 2014 to 18? Very simple. The U.S. went from producing 5 million barrels of oil per day to 12 million barrels per day. So it's entirely a petro story. Yeah. The U.S. basically stopped exporting $150 to $200 billion a year to buy its energy from abroad.

Yeah. And the U.S. added basically almost to Saudi Arabia. added basically almost to Saudi Arabia. Now, that's an economic transformation that is, frankly, fairly unprecedented, adding a Saudi Arabia to your economy in just four years. And I wrote a book about that back in 2011 called Two Different for Comfort. It's highlighting, look, the shale oil revolution is massively US dollar bullish. Most economic activity is energy transformed.

The fact that the US moved from being the world's largest energy importer to basically roughly flat on its energy trade balance in the space of seven or eight years, again, it's unprecedented in the history of of the world and that much and and but so now the question you know that was a huge tailwind for the us dollar that tailwind has now disappeared or it's been cashed in um so unless you think the us now goes from producing 12 million barrels per day to 19 which given the level of CapEx unfolding in the energy industry would, so either that or somehow we invent a new way of energy, right, and that the U.S. gets to lead that. Unless that happens, that's behind us. And the odds are that that's behind us.

I would agree, and I would actually argue paradoxically that the weaker dollar that you forecast, I think, would end up being bullish to the U.S. energy industry going forward. And so you would get a chicken or egg. Those things will kind of teeter-totter with each other. But the reality is we're not going to get to 19 million a day. And even apart from ESG and greenies and all the other political aspects, the economic structure, the capex in shale cannot finance 19 million a day. And so I agree, it removes a tailwind for dollar and kind of reverses that to some degree. But at the end of the day, we still do not count in China in the list. We still

have a sort of race to the bottom dynamic where we're not going to go to negative yields. Now, you may disagree with that. And maybe a future central banker says, no, I changed my mind. But it doesn't seem to me, even apart from the ideological statements that Appel and others, I think, rightly make that, no, we won't go negative yields. Our banking system is such that I just don't simply understand how they could do it. And so the amount of debt that has been able to trade negative yields in Europe and Japan doesn't seem that that can happen in the US. And as long as they stay at the zero bound or below the zero bound in Japan and Europe, it still seems it puts a bit of a floor in on the dollar. And yet I don't exactly say that as a bullish statement.

So personally, after the past 18 months we've had, when it comes to policymaking, I've got a sign on my desk that says, strike can't happen from your vocabulary. Because after the 18 months we've had, who knows? Now, having said that, I agree with you that negative interest rates are highly unlikely to happen. And the experience of Europe, the experience of Japan is negative interest rates serve no purpose but decimating the banks. I mean, by and large, intertrade served no purpose but decimating the banks. I mean, by and large, they really haven't triggered anything except crushing the bank's margins. And that's the problem when I say something like what I said is I'm not saying it because they would never do it. I'm saying that they have actually got to learn, they would do it,

but then they saw others do it and it didn't work. And so now they don't have to do it. No, no. And like the Swedish Central Bank is walking it back, right, they've come out and they said, look, we did it. They were the first ones to do it. They've come out and they said, look, it's, it's, it's stupid, et cetera. And that brings me to another point. I think when we look at foreign exchanges, you know, you and I, we've been trained our whole lives to think of exchange rate as against the Euro and the yen, right? Those were the big ones. But there's a lot of other currencies out there. And today you have already central banks that are signaling they're already tightening. So Those were the big ones. But there's a lot of other currencies out there. And today, you have already central banks that are signaling they're already tightening.

So the UK, they're going to be tightening soon. The UK is one of them. Canada is another. A lot of emerging markets, currencies. And the world in 10, 20, 30 years' time, emerging markets will continue to be bigger, et cetera. So I tend to think the euro is increasingly irrelevant. Europe is slipping. Europe will become an open-air museum over time and slipping into irrelevance. That's not where the excitement is. So if you're an American, you think, okay, my currency is going down, but I don't want to buy the Euro. Sure. But there's other things you can buy. You can

buy sterling. You can buy the Canadian dollar. You can buy the renminbi. You can buy a lot of emerging market currencies that are today being beaten up and where you're getting higher yields. And so if you take the difference in yield, for example, between Indonesia and the US today, Indonesia and the US today. For you to lose money, given the compounding of interest rates over a period of 10 years, for you to lose money over 10 years, if you compound, let's say, a 6% interest rate differential, over 10 years, the Indonesian currency would have to fall by more than half for you to lose money. I'm not saying it can't happen, but it was Einstein who said, compounding is the most powerful force in the universe. If you're compounding in high-yielding currencies that are today very undervalued,

that have just begun beating like a redhead stepchild, forget the euro and the yen. That's not where the excitement is going to be. That's for sure. Well, I think the Red Mimby story is a little more compelling than the Indonesian one, even apart from the compounding of the yield. Okay, hold on to this. Hold on to this thought. Because let me throw an argument where Indonesia, I'm a big bowl of Indonesian government bonds.

But let me give you the reason. I think China is trying to do to Asia what Germany did to Europe, really. In the 1970s, Treasury Secretary Connolly told the Americans, look, the US dollars are currency in your problem. And the Europeans said, okay, fine. Then we're going to start trading in Deutsche Mark rather than US dollars. And the Deutsche Mark became the currency of reference in Europe. And initially, you made the most money on German bunds. But through 30 years, you actually made the most money on Italian bonds because Italian

bond yields were so high. And then they started moving towards the German bund yields. And so German bond yields went down, but Italian bond yields went down a whole lot more. And as the German currency became the anchor for Europe, the Italian lira started to basically behave like the Deutsche Mark. If you start seeing things fairly similar in Asia, where today China goes to Indonesia and said, look, stop being dependent on the dollar. And don't worry, we'll backstop you. I'll give you swap lines with my central banks. And if ever there's whatever hit,

we're not going to pull the rug underneath you like US banks did in 1998 and in 2008. We'll always be there to back you up, et cetera. Then all of a sudden, the Indonesian rupee starts being so volatile, at least against the renminbi, which is what's happening. And then over time, the Indonesian bond yields fall down to the level of Chinese bond yields. So you actually make more money into Indonesian government bonds and you don't have to deal with the human rights issues. So you get a more positive contagion effect, but maybe adding a bit to your standard deviation. Definitely higher volatility, higher volatility. But, you know, for the period, basically in the 30 years that preceded the European crisis of 2012,

Italian bonds was one of the very best performing asset classes in the world. It actually outperformed the S&P 500, even though the S&P 500 was in a roaring bull market. All right. S&P 500 was in a roaring bull market. All right. So now we have teed up what will be the third appearance for Mr. Gov, a full podcast dedicated to discussing Indonesian debt. There we go. But I sort of see your point. And I think that there is, in all seriousness, a sort of regional story behind the narrative you're describing in China, that if everything we're saying about China's best interest is true, and I think it is, then it does stand to reason that there would be regional and neighboring impacts. And so that's something to think about.

We've got to cut it off there. We've gone on long enough, but it is the kind of thing where I think I could just sit here and keep talking to you for a couple more hours. So I very much appreciate your time and your insights. I certainly hope that for listeners right now, you can appreciate that there's little areas in which you may have found disagreement or have a different conclusion. You can at least see the incredible thoughtfulness and consistency across the argument that Louie's making. I believe that we are facing, as we were, and this is something that frustrates me as someone who's lived through some of these most significant events, is I get to look back on some of these moments, such as China entering WTO, and view it as this rather significant moment in global economic history that I was completely, totally unaware of

at the time when it was happening. And I believe that is something that we're talking about now. What are the things happening now that are going to be the moments we talk about in 10 and 20 and 25 years, the way we can talk about some of these events with the euro, with China entering the developed trade world, things of that nature. And I believe if we're trying to skate to where the puck is going, to use the overused cliche, would behoove us to incorporate, at least in the thought process, regardless of the decisions that we make out of it, to consider the very, I think, cogent argument that China's best interests are aligned with a more stable currency for them and therefore a more stable debt market,

and that the best interests of many competitive countries are the exact opposite. And therefore, that needs to play into how investors think about their bond investing and currency positioning. Lewis, thanks again for your time. My pleasure. I do. Good to see you.

Well, hopefully you see what I mean about Lewis's remarkable intelligence. He has a lot to say. There's a lot I'm wrestling with in this subject still. Some of his writing, it's institutional research. It's an absolutely vital part of our research and discovery process at the Bonson Group. We've been institutional subscribers to GovCal for about six and a half, seven years now. institutional subscribers to GovCal for about six and a half, seven years now. But I think that you hopefully see that there is a compelling case to be made here for what is unfolding on the world stage.

And that this is not about participating in it or not participating in it, following it or not following it, being invested in it or not being invested in it. This is happening whether people want to or not. And what it means and how it plays out and what the various exposures are is the stuff we have to unpack. But I absolutely believe we live in a territory here in the United States where it's a stated policy objective. Maybe the stated part is somewhat nuanced, but it is a policy objective to weaken the currency and that there exists a region of the world where it is very much a policy objective to strengthen the currency and try to normalize access to their currency by creating stable, organic interest rates and stable medium of value

for the purpose of their own strategic ends. And investors would be very wise to understand the repercussions of both sides of this, East and West. So that's what my conversation with Mr. Gob was intended to do. And I really hope that you will read the entire DividendCafe.com this week to let this be unpacked more. And we will take it from there as the Bonson Group continues its study in this great subject. We're prepared to wrap up here in another month, month and a half. With that said, thank you for listening to and watching the Dividend Cafe. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC. This is not an offer to buy or sell securities. No investment process is free of risk.

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