What happened? I think what happened was initially. People were wondering. Was this a risk to the financial system? The way lehman was, and the answer to that is no were talking about properties in china. You cant even own a property. You lease it from the government for 70 years and then it goes back to the government so and then you think about whos financing it and again its a lot of state owned or primarily state owned enterprise banks. So the problem is: is containable within china? Thats? Not the real risk, the real risk is the risk to global growth. If you look at china real estate as a sector, it comprises 29 of chinese gdp. Music. China in turn is 18 of global gdp, and so the chinese real estate sector comprises six percent of global gdp, and so, if china has now taken the turn and decided, they no longer want to support all these over indebted property developers and they are going to Cool their real estate market, thats, a risk to the global economy, and so i think of this as contagion in the old fashioned way more like in 1997, when i was living in hong kong during the asian financial crisis and less of a 2008 lehman moment. So the risk here is that property development goes from being a driver of chinese gdp to a drag on gdp um, and so i think i think, thats really really um underestimated still and it doesnt matter if theyre, making their bond payments or not theyre, clearly going To be some write, downs, but the risk is to global growth, and when you look at a market that is on a 38 times, cyclically adjusted pe.

That number has only ever been higher once, which was during the dot com crisis. Any risk to growth is a risk to earnings and multiples, and so when markets are expensive, you want to think about what can go wrong and not focus on what can go right. So i dont think were through the ever grand scenario yet, and you know in if you have a slowing of global growth, you are going to have increased quantitative easing in 1997. What greenspan did was he lowered interest rates and while the contagion went through powell, doesnt have that option. So the two most important words from the fed this week were if and may, and i think their estimates for seven percent growth in q4 are are really high. I mean you thats what we experienced in in q2, when you know the quantity, the fiscal spigots were open. So i i think the risk is growth here. So gershon lets go over you on the fixed income side. If we could, if it was ever grounded in the equity side, that people were worried about, people were pretty worried. I think about the tapering here and yet the bond market just took it in stride. Despite the fact that j paul, i thought pretty much said, yeah were going to taper – were going to taper like november december. Why isnt there the same fear of a tapered tantrum this time? Well, i think its important to focus on what what really matters here.

Yes, the chair powell surprised us by being a little bit more transparent it. It seems like theyre, going to taper start tapering absent something crazy happening in november, but thats, actually not that important whats much more important is when are they going to finish? When are they going to stop buying assets, if you think about it at this point, the economic cycle, its not the buying of assets, that is impacting the economy that much its the forward guidance that it that its signaling, the fed, is not going to raise rates Until theyre done buying assets, so they actually have to stop – and you know you read between the lines – were forecasting that theyre going to end up tapering a lot quicker than they did in the 13 14 time frame um this time, then they were doing about 10 Tapering about 10 billion of treasuries and 5 billion of mortgage backed securities per fed meeting. We think its more likely to be per month now, which means it would wrap up uh sometime in the middle of next year and the key there is. It gives the fed optionality. You know. Barbaras point is exactly right: we dont know what the fed, when theyre honest, doesnt, know when theyre going to start raising rates and how fast what they want to set themselves up to do is to look at what happens over the next few months. You know theres still, some two very big questions, probably more, but the two very big questions that are unresolved are one is this: inflation were seeing persistent, thats, still open for debate and uh.

You know whats the impact of growth going to be from the delta variant from china from all the other things going on, and you know, based on how that that set of data comes in in the state of the world. Theyll either be in a position where they wont do anything for the remainder of 22 and theyll kind of push off, starting to raise rates or theyll, be able to start and maybe be very aggressive, its its very dependent. So i think, for a change. I actually think the feds being pretty transparent and keeping their options open, which is the most important thing to be flexible, to see what happens. Uh coming forward, barbara and beyond uh the evergrand situation and the fear of tampering tapering theres. Another risk that got injected into the marketplace and it came once again from beijing and some of the regulatory authority at the very end of the week, beijing said no more trading in cryptocurrency at all. It didnt seem to have a big effect on the markets. Overall. Did hit cryptocurrency with bitcoin down over five percent? I think, but what does it tell investors about china right now, because it seems to be almost capricious coming out of president g these days? I think its really interesting. This is probably the seventh time uh china has banned crypto. You can only actually ban something once so. What it really proves, how difficult it is to ban anyone who has access to the internet has access to the bitcoin network and bitcoin is the currency of the internet.

You know when they banned mining 47 of all bitcoin mining was taking place in china, and if i talk to people that own these um exchanges, they actually think it was great because it increased network resiliency, because bitcoin miners had to leave china and now looking at Texas and canada and norway, and places that have cheap energy right, um, so um i i was surprised that bitcoin was not down more um it it. It actually proves how resilient um bitcoin is right now gershon. Let me ask you the blunt question: are we paying so much attention to crypto because its just fun to talk about its kind of sexy as it were, or is it because theres so much liquidity in the marketplace because of the fed, because the ecb, the money, Has to have somewhere to go and thats really really juiced the cryptocurrency craze yeah. I i think that there look theres a lot more than just talk about it like there are um asset managers, other investors looking to offer products uh through blockchain uh, particularly in the offshore market. So it is a real thing. I i think, look that the i i dont have a im, not an expert in in bitcoin itself, so i dont know whether the self date was appropriate or not. I do think that the there are a couple of other issues that brings to the forefront of todays news. One is: does the fact chinas doing this, make it more or less likely that the sec is going to start to regulate.

Theres been a lot of memories around that, and the second thing is just a reminder to us that china can and will do unpredictable things, not just as it relates to bitcoin. But you know what theyre going to do in terms of the ever grand situation. Is. I agree with barbara said before i dont think evergrant itself is systematic.

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