Transcription
Seven or eight years ago, you had a massive, massive shock to the Chinese economy. Essentially, the US imposed a semiconductor embargo on China, and the leadership felt, "Okay, the US just declared economic war on us." Starting in 2018, you see this very clearly in the lending data. The banks are essentially told by the government, "Guys, no more loans to real estate, no more loans to the consumer. All the money has to go into industry." BYD has 120,000 engineers in their R&D department. Now, to put things in context, Tesla has 85,000 workers. Not in their R&D department, just 85,000 workers.
China today is where the US was in 2009. You guys were around then. You'll remember in 2009, everybody was going around saying, "Oh my god, it's uh, it's going to be a new normal. It's going to be low returns for a decade." Who's got access to electricity? Who's got access to energy? If in 2009 it was the US, today it's China. China's cost of energy is a fraction of the United States. China today produces more electricity than the US and Europe combined.
You're watching Excess Returns. I'm Matt Ziggler. I've got Jack Forehand beside me today. I mean, am I Batman? Is he Boy Wonder? You know, if he's here on Boy Wonder. We're very excited about this, mostly because this guest's name has been mentioned multiple times in a couple of our most recent episodes. Rupert Mitchell, Blind Squirrel Macro, I think, most recently said, "I am so excited right now because I just spent time with this guest." So, he's the guy I look to whenever I really want to know what's going on with international markets, especially China. Louis Gave of Gavekal Research. Welcome to Excess Returns.
"Thanks. Uh, thanks for having me, guys. It's a real pleasure to be here. Long time coming. Super excited for this."
Straight into the deep end. What do you think us folks in the West get most wrong when we're looking at China, their economy, and markets?
"Oh, podcast. We can find this and then leave."
"How much, how much time do you have?"
"Yeah. You want to, are you sure you want to put a coin in that jukebox?"
"Uh, yes. Yes, I do."
"All right. Um, look, I, I think the first thing people get wrong is they look at China like a command economy. Uh, because they see the name, you know, Chinese Communist Party on the wall. Um, and, uh, they assume this is a command economy and therefore it can't work. Uh, so, you know, the, the assumption of, of most foreign investors is that, A, if you argue that something is working in China, that must mean that you believe in, you know, command and control economies, uh, and B, uh, you're obviously wrong because command economies don't work, and so it's all going to implode and blow up in your face. Uh, and I think, you know, this is a fairly Manichean approach, sort of black and white, um, which doesn't really correspond to an underlying economic reality. Uh, there's no doubt that China was that 50 years ago, you know, when, when China was under Mao rule, uh, you couldn't even decide what you were going to wear in the morning. Everybody had to wear the same thing. Uh, you couldn't decide where you were going to work, you couldn't decide, you know, it was a total command and control economy. But, but the story really of the past 40, 50 years has been by and large a story of gradual deregulation. Uh, you know, first you deregulate labor, then you deregulate land, then, then you deregulate, uh, natural resources, and now we're going through the phase of, of the deregulation of the world of capital, which, uh, you know, it's, these things, it's, it's never a straight line. It's always sort of three steps forward, two steps back. Um, but, uh, so I think that's, that's the first thing people get wrong. Um, I think the, the other thing, uh, people get wrong is they underestimate the, the level of competition that is prevalent around China. Uh, essentially, um, you know, competition at, at all levels, including very importantly, between local governments, um, which is how you end up in the situation like you have right now, where if you look at China, I think you've got like a hundred EV makers. Uh, because what happens is, at the very top, Xi Jinping says, "Hey guys, you know, we need to be the biggest EV producer in the world." And if I'm the mayor of Shanghai, or the provincial governor of Guangdong, or the party secretary in Zhejiang, you know, I go home and I say, "Okay, if I want to get the next job, I got to, the big boss told me I need to produce electric cars." And so I turn around and I call Tesla, if I'm the mayor of Shanghai, and I say, "Hey Tesla, why don't you come here? I'll give you some free land and I'll give you some free electricity." Um, and then, you know, the state next door, the province next door, Zhejiang says, "Oh, well, that worked out well for them. Let's, let's do some of this." And so you end up in situations where, uh, you know, as soon as you have a successful business model, you might have a hundred competitors, uh, funded by a hundred different local authorities. And deep down, um, that's actually quite good for the consumer. You know, today in China, you can buy a great BYD car with full self-drive for $7,500. And so for the, for the end consumer, it's a good deal. For the shareholders, it can be tough because, you know, as soon as you have a, what you think is a pretty unique business, there's actually a competitor that gets subsidized right next door. Um, and so, you know, these are the, the sort of unique characteristics of, of Chinese capitalism that I think most people who say, "Oh, well, everything is controlled by the central government who allocates resources, etc." just get completely wrong. Uh, it's, uh, it's, it's a very, very different competitive and domestic economic landscape over there."
You mentioned the economic reality now in China. Can you talk a little bit about that, right? What it looks like right now on the ground in China, like how strong the economy is, how things are going.
"So, I think to understand where you are today, you actually have to go back seven or eight years. Uh, because seven or eight years ago, you had a massive, massive shock to the Chinese economy. Essentially, the US imposed a semiconductor embargo on China, and the leadership felt, okay, uh, the US just declared economic war on us. Um, you know, they, they transformed what was a trade war into a tech war, saying, look, we just don't want you to move up the value chain, and so we're going to block you from having access to the high-end semiconductors. Now, the government's reaction to this was essentially to say, okay, if they're blocking us from semiconductors today, tomorrow it could be chemical products, it could be auto parts, it could be anything. We have to totally, and it's not just the US, because the US can tell ASML not to sell us machines, it can tell TSMC not to sell us chips. So we have to totally de-Westernize our supply chains. And so starting in 2018, you see this very clearly in the lending data. Uh, the banks are essentially told by the government, guys, normal loans to real estate, normal loans to the consumer, all the money has to go into industry, because we have to move up the industrial value chain much quicker than we thought we did before. Uh, it's, it's a question of economic survival that we need to build resiliency and independence in our industrial supply chains. And so you had a period for seven years where all of China's savings, and those savings are massive, all of China's savings essentially went into industry. Now, this represented a massive deflationary shock for China and for the world. Uh, it was actually a twin deflationary shock. The first shock was, as, as you starve real estate of capital, real estate prices went down, consumers tightened their belt, property developers went bust, commodity prices went down. Uh, this was the balance sheet recession that, you know, everybody wrote about for, for seven years. You couldn't pick up a copy of the Wall Street Journal or the Financial Times without being told of this balance sheet recession. But the conclusion people took from it was the wrong one. Everybody looked at this and said, "Oh, this is Japan all over again." Except that it's not. Uh, except that it's not, because in Japan, bank lending totally collapsed. In China, bank lending all went into industry. And what I think most people missed during those seven years is how quickly China was moving up this value chain. Now, first, because it had unlimited access to capital, but also, and I think this is the part that everybody underestimates, is over that period, the Chinese workforce dramatically changed. Um, what do I mean? I went to China to university in the mid-90s, and back then, China was graduating 350,000 university students a year. Today, China graduates 12 million university students a year. I mean, no, no country has gone in one generation, because I'm 52, has gone from 350 to, um, to 12 million. It's, it's mind-boggling. So, what you had, and by the way, roughly half of these guys are engineers and like science and science graduates. So, just at the time when money was pouring into industry, essentially, China was also producing just an insane number of engineers. So, um, you know, you mentioned Rupert in the intro. Um, I was with Rupert visiting BYD, I think two or three weeks ago. I can't remember. Three weeks ago, maybe. Um, BYD has 120,000 engineers in their R&D department. Now, to put things in context, Tesla has 85,000 workers. Not in their R&D department, just 85,000 workers, including the guys on the factory chain, you know, tightening the bolts, etc. So BYD in their R&D department is 50% more workers than Tesla. Um, you know, it's, so anyway, so money absolutely poured into industry, and I think what the world missed was, as all this money, as all these human resources poured in, China very rapidly moved up the value chain. Um, you know, if I told you in 2020, guys, by 2023, China will be exporting, uh, more cars than any other country, you would have laughed in my face. And if I had said, by 2025, you'll visit BYD and you'll wish you could buy those cars in your country, you would have been like, you know, uh, you would have kicked me out of the room and called me ridiculous. Uh, but yet, here we are. Um, and so what you've seen on cars, and I think people now realize it, because as soon as you travel, if you go to Brazil, if you go to South Africa, if you go to Saudi Arabia, you see the Chinese cars everywhere. What you've seen on cars, it's the same thing for tractors, it's the same thing for ships, it's the same thing for turbines, it's the same thing for nuclear power plants. It's essentially anything linked to automation and robotics, anything linked to transportation outside of jet planes, anything linked to energy storage, energy, uh, transmission, energy generation. By now, China has actually leapfrogged the West, where it's producing, thanks to all these people and all this money that's gone into it, it's producing better products at a cheaper price. So that was the, I think, the second big deflationary shock. So that brings you to today. Um, sorry, it's a long-winded answer to your question, but that brings you to today. You have to understand where you are today. You've had this balance sheet recession, this deflationary shock for China, for the world, that was a direct result of essentially a geostrategic imperative. Uh, a geostrategic imperative of, we need to cushion our economy against US attacks. Um, so, you know, 2018, the US punches China in the face. China has no choice but to take the punch. So, it takes the punch. 21, Biden comes, comes back to power. China thinks this is going to be better. It's actually worse. So China gets punched in the face again. Can't do anything except go to the gym, get jacked, get strong. So that by 25, when Trump comes back in, and this time Trump is pissed when he comes back in, and he doesn't just punch China, he punches Canada, he punches Mexico, he punches Europe, punches absolutely everybody because he's angry. The one country that is able to stand up because they've spent the past seven years getting fit in the gym is China. So, you know, US goes to punch China, says, "Okay, you want to go? Let's go. Gloves off. Let's go. Let's, let's do this. You tariff me, I tariff you. You embargo me, I embargo you." And that brings you to the meetings in Geneva, Kuala Lumpur, Seoul that we just had, where essentially the US is forced to back off. The US is forced to back off because you have the CEO of Raytheon that says, "In three weeks, I can't produce missiles." You have Ford shutting down factories because they don't have access to rare earths. Um, and so all of a sudden, you know, the, and, you know, the main method of pressure that the US has is high-end semiconductors. And China, with DeepSeek and with Quanzhi, has shown that actually we can do AI without the high-end semiconductors. Um, that brings me to one of my favorite quotes, uh, and I've written a piece about this. It's people, your listeners who follow me on Twitter can get that piece off my, I've unlocked it. It's free distribution on my, on my Twitter. Um, you know, it's, if you go back to World War II, Rommel, the famous German tank commander, would say, "Our Tiger tanks is worth four of their Sherman tanks." Um, the problem is the Americans always show up with five. Um, and this is where China is today. Today, everybody's running around saying, "Yeah, you know, at, at AI, China can't compete because it doesn't have the Nvidia chips." That's like saying the US can't compete with Germany because it can't produce as good a tank as the Sherman tank. You know, when it comes to conflict, when it comes to challenges, there's a beauty in volume. Um, and this is China's comparative advantage. The, the US's comparative advantage of World War II, which was essentially being the, the world's leading industrial power and being able to produce 10 tanks, 10 Sherman tanks for every one Tiger Tank, German Tiger tank, that has now shifted to, to China. And so the US now essentially has no choice but to back down, which allows China to now embrace completely different sets of policies. Sorry, it's very long, and we didn't answer again, but it's very important to understand this. That five years ago, seven years ago, if you were Xi Jinping, before you put on your pants in the morning, your concern was, how do I cushion my economy from US attacks? That, that was your number one concern. Today, you no longer worry about this. That ship has sailed. Uh, in fact, now it's the US that has to worry. You know, how can I get rare earths? How do I make sure that my car plants don't shut down? How do I make sure that I can still produce missiles for Ukraine, for Israel? Um, that is now, you know, the concern has shifted. Um, instead, if you're China now, the concern is, my people aren't getting married anymore. They're not having kids. My birth rate is collapsing. Uh, because, you know, the balance sheet recession has hit the millennials. You know, your 25 to 40 year olds. It's hit the millennials really, really hard. Uh, they've been the bagholders in the balance sheet recession. And so now you have to, to essentially help those guys out. Uh, and so now you, you know, if you look at the five-year plan of five years ago, it was all about increasing supply. Now the five-year plan is all about, um, increasing demand. Um, and so today, you turn around and China is now running budget deficits of 10% of GDP. You know, second biggest economy in the world. And I think this matters not just for China, of course, you know, consequences, China's having a bull market, etc. But globally, you know, even if you say, I don't care about what's happening in China, I don't want to hear about it, I hate the place, you know, like even if you're the most neoconservative of neoconservatives, the reality remains that for, you know, seven years, China was a huge deflationary drag for the world. Uh, it followed a very deflationary policy, which allowed the US, Europe, Japan to follow very easy fiscal, very easy monetary policies, because China was such a deflationary drag. The days of China being that deflationary drag are now going to be behind us. Now, I'm not saying, you know, that China is going to be this big inflationary shock, but at the margin, China's deflationary impact is now abating. They're following much more reflationary policies, and as they follow reflationary policies, you are seeing the impact on the market. You're seeing the impact on the market through the outperformance of emerging market debt, the outperformance of emerging market equities, the outperformance of metals, the outperformance of miners. The, the one reflationary trade that hasn't really worked yet is energy. Um, you know, but if, if that does, then, you know, then we move into a very, very different investment environment."
Part of what's fascinating about that response is within a day of when we put this interview out, we're going to put one out with Ben Hunt on his note about World War AI. And one of the things that's through that piece is this idea of after a period of easy money, which China and the US both had a different version of making access to capital easier through the pandemic period and and everything that went on there. Is that energy, labor, time, those are the scarce assets.
"Yep. And I'm curious, contrast maybe the US and the US and China, but give us that on the ground view for the scarcity of energy, labor, and time as it's being viewed in China right now."
"So, uh, to, to be clear, capital was scarce in China, depending on who you were. Like, if you wanted to build a car plant, here's some money. If you wanted to build, you know, a battery plant, solar panel plant, anything, you, you had money. If you were a consumer, if you were a, um, if you were into real estate, if you're a property developer, you did not have access to capital. Uh, so this is what's shifting now. Uh, this is what's shifting now. You know, the, the government through its anti-involution campaign has essentially told the banks, guys, go out and lend to the consumer, go out and lend to the real estate, and you're done lending to industry. So, uh, the access to capital in China, capital was cheap, but it was not available to everybody. Um, contrary indeed to the Western world, where capital was, was cheap and and very, very available. Um, so look, to, to answer your question, you know, contrast and compare access to labor, access to capital, access to, to cheap energy. Um, you know, one, one of my core beliefs is that China today is where the US was in 2009, 2010. Um, you guys were around then. You'll remember in 2009, everybody was going around saying, "Oh my god, it's, uh, it's going to be a new normal. It's going to be low returns for a decade. Uh, it's going to be a lost decade." You remember all this, right?"
"I was born in 2012. I mean,"
"Okay. So, yeah. Okay. So, there you go. Well, you, you can read about it in the history books."
"I'll read about it. But that new normal, all those pitches, all those low returns, all those, there's no way we can grow coming out of the,"
"Yeah, the crisis. Exactly."
"Yeah. No, no, no. That was that was the core, that was the core belief. And in fairness, in fairness, GDP growth and employment growth was weak from 2009 to 2016. It, it really was, like, if you go back and look at the numbers."
"Reinhart and Rogoff didn't even have AI."
"That's right. Um, but so if you go back, if you go back to then, essentially there were no constraints to US policy, right? There were no constraints to, to US policy, uh, because there was no inflation in the system. And back then, the US had a super cheap currency. The US dollar was super, super cheap. Uh, it had the cheapest cost of energy thanks to the shale revolution. Price of natural gas had collapsed, etc. Um, and, you know, with the cheap currency, it had a cheap cost of labor. So, you go back to 2009, the US had cheap cost of labor, cheap cost of currency, cheapest cost of energy, and, uh, basically unlimited government support. The, the Fed would do QE1, QE2, QE3, push money into the, the economy. The economy didn't really need that money because it was growing pretty slowly. The real estate didn't really need that money because the real estate market was on its back. So, the money naturally flowed into equities, who rerated. This is exactly what you're seeing in China today. So, if in 2009, the cheapest cost of energy, to answer, you know, Ben Hunt's point of who's got access to electricity, who's got access to energy, if in 2009 it was the US, today it's China. Like, China's cost of energy is a fraction of the United States. China today produces more electricity than the US and Europe combined. You take a province like Shandong. Shandong is, to put things in perspective, it's like the Michigan of China, if you want. It's sort of, it's a northeast rust belt province. Lot of steel production, a lot of rubber, lot of sort of old industry. Well, between May and September in Shandong, electricity is, uh, during the daytime, electricity is essentially free. Um, because they put in so much solar capacity that they, they can't store it. Um, so this is, you know, uh, what's fascinating to me is, if you go back to 2006, 2007, so 20 years ago, the natural gas price in the US was around $10. The, in the past 20 years, the natural gas price has gone from $10 down to $2. And the electricity price over the same period has gone up 50%. Um, now, why is that? Because the US has not invested in its grid. Because the grid you have today is the same grid you had 20 years ago. Uh, and, you know, grids deteriorate, you lose efficiency over the grid, etc. Now, China's grid is brand new. Um, and China's nuclear power plants are brand new, and solar panels are brand new, and, and so today, China's cost of electricity, because of the investments of the past decade, investments incidentally that we forced them to make, we being the Western world, we forced them to make because they were so worried of essentially being cut off by, by the Western world, that we forced them to up their game. Um, so today, you know, where is there plentiful electricity and cheap electricity? It's in, in China. Where is there plentiful and cheap labor? If in 2009 it was the US, you know, today it is in China. Uh, my, my, we wrote a piece, it's also unlocked on, on my Twitter, actually wrote a piece on productivity. You, you take the best example of productivity for me is comparing the Shanghai Tesla factory to the Fremont Tesla factory. They produce the same cars. They produce twice as many cars per worker in Shanghai than they do in the US. And the worker in Shanghai costs a fifth of the cost as the workers in the US. Um, and that's for salaries. Forget throwing healthcare costs on top of it. So the bottom line is that, you know, in China today, everybody's running around saying it's uninvestable. But to Ben Hunt's point, where do you have cheap labor? Where do you have cheap electricity? Where do you have the cheapest cost of capital and where do you have the cheapest currency in the world? Uh, and where do you have now active government support for the markets? Because you have a government that's actively pushing reflation. So, I, I, you know, to me, China looks like the US did in 2009, 2010. Everybody's going around saying, you know, it's, it's a short-term rally at best. It's going to be a lost decade. Japan, etc., etc. Meanwhile, the market grinds higher every day."
One of the things we've been seeing in the media, and this gets back to Ben's point as well, is this idea. The idea of Ben's article was if, you know, AI is not going to be as beneficial to the average person as we think, well, the US is going to need a war basically to justify what's going on, and that war would be with China. So, how does China view this whole idea of, do they view like AI is a winner-take-all battle with the United States?
"So, I don't think that's how it's framed, uh, in China, to be honest. Um, but I do think the US and China are on totally different paths, uh, when it comes to AI, again, partly because of the restrictions we, we, the Western world, imposed on China. Uh, I think what we've done in the Western world, uh, when you look at ChatGPT, Anthropic, you know, all, all those guys, is they've looked back at the past 15 years and essentially concluded the big winner of the past 15 years is Apple, because they had a closed-end system where they control their, their customers, uh, and they can, you know, gradually always increase prices on their customers. Some may drop off, but, but, you know, the Apple ecosystem is an absolute wonder to behold, right? Uh, and as it became clear that Apple had this wonderful ecosystem, you know, the stock price got rerated from eight times earnings to 35 times earnings. All this to say that in the US, the, the push of the OpenAI's, the ChatGPTs, the, the Anthropic's, etc., has been to try to create closed-end systems where I create a closed-end system and, you know, I sell it to big corporates, and essentially they're, they're hostage to, to my, to my AI solution. China, because it never had the option of throwing computing power on top of computing power to solve problems, because we denied it to them, we, the Western world, denied it to them, had no choice but to embrace open AI solutions. Um, so it's actually ironic because the US is called Open, the main player in the US is called OpenAI, but is anything but, it's a closed-end system. Meanwhile, DeepSeek, Quanzhi, are very much open-ended systems. Um, and again, I, I don't think this was a necessarily a policy choice by China. It was just what came out of necessity. But what you're now seeing is, you know, I don't know if you guys saw, but Andreessen Horowitz recently declared, you know, the big, one of the biggest VC firms in the world. They recently declared that 80% of the startups that come to knock on their door to ask for money now use Chinese LLMs. And they do so not so much because of the cost, although that might be part of it, but very much because it's an open-ended solution. So, you can take the Chinese platform and modify it to your needs. While if you try to do that with ChatGPT, it's going to cost you an absolute bomb because you have to ask them. Takes time. They go back and forth, back and forth. Um, this is essentially what the Airbnb, uh, boss also said. The Airbnb, at the last earnings results, the CEO said, "Look, we used to use ChatGPT. We've now switched to Quanzhi, the, the Alibaba platform, because we take the Alibaba platform, we got, you know, 10 software guys internally who can modify it to our tail, you know, tailor it to our needs, and off we go." Um, and so, you know, for me, the, the, the AI war, to use your term, is, is not a war between, say, US and China. It's a war between conceptualization as to how we're going to use AI. Um, and is it going to be a closed-ended system where security is absolutely paramount, which, which you can have on a closed-end system, or is it going to be an open-ended system in which functionality, uh, is paramount? Uh, I think this is the battle line, and most users won't care whether it comes from China or the United States."
Makes for a really interesting angle. I want to take it here too because this is something that Rupert made very, very clear when we were talking to him. I think he called it full-contact capitalism. I think you've talked about it in the terms of their China's industrial policy is Hunger Games capitalism.
"Yeah. It's a different. It's just a different approach."
Can you explain what you meant by that and what the advantages and disadvantages are?
"Well, the advantage to the consumer is you get better products at a cheaper price. You know, when, when I was with, uh, Rupert and my buddy and my buddy CPY and, uh, Shrub and, uh, Paulo, and, you know, all, all of us were, were together in Shenzhen, and we went out and we rode out on the BYD cars, which was a lot of fun. And they all walked out saying, you know, like, we rode the car that goes 495 kilometers an hour, and we rode the car that can spend 30 minutes as a hovercraft going across a river or a lake. We also rode the $7,500 BYD, um, um, uh, you know, car that's that's full self-driving. We, we rode the car, my favorite personally was the one with the drone inside, um, that, you know, you plug in on your GPS where you're going, and the drone goes about 50 yards ahead of you to warn you in case there's like deers on the road or a tractor or, or anything like that. So, you know, it's, um, you, you, the end consumer from all this competition benefits through lower prices and better products. Um, the, for the investors, it's tougher. It's a much, you know, Hunger Games of Capitalism is, is no fun. So today, BYD is producing great cars, but it's got 99 companies nipping at its heels, crushing its margins. So, you know, as an investor in BYD, you might not love that. Um, so it's, it's actually funny because everybody thinks, oh, China is this communist country, etc., where really capitalism is on steroids, um, and where the competition is, you know, non-stop. Meanwhile, you look at most Western countries, and essentially what we have is, is corporatism on steroids, where it increasingly feels like governments have been captured by corporate lobbies. So you have, you know, three auto producers, and you have, you know, you know, one big software company, and one big consumer product company, and etc., etc. And they make sure that they write regulations to, and and tax, and frankly tax laws when you look at how Facebook, Alphabet, etc., book all their profits in Ireland, uh, and tax laws that benefit them. Um, so it's, you know, it's a very different concept of how an economy should work. Now, the end result, the end result, I think, is the Western consumer gets screwed. You end up with weaker, weaker products, that the Western shareholders make out like bandits, and the Western consumers get screwed."
So then talk about the Chinese shareholders because obviously you can't take CPY and his event-driven monitor over there to look at these things. You can't take Shrub over there to look at these things or Rupert and look at that from the trading versus investing angle of how we even think about this.
"Shrub might, it's, you know, investing through memes might work very well in China. So, Shrub, Shrub, Shrub may do fine. Shrub may still do, Shrub may still crush it. He seems to crush it wherever he goes anyway."
"So, uh, clearly."
"So, uh, Shrub, Shrub may still be be doing fine. No, to your point, look, I think, uh, investing in China's been a very tough place to deploy capital. Uh, partly because, you know, there's, there's a lot of capital there. They've got a high savings rate. They don't necessarily need your money. Um, so, you know, for somebody like, like CPY, who indeed likes to provide money, uh, to people who have access to none, like right now, it's actually, there are things to do, uh, and, because you've had a lot of people, whether in real estate, but even in some of the consumer names, etc., that have been deprived of capital. So for a guy like CPY, this, there is now actually things to do, and there wasn't before. Um, the way I look at it personally is, yeah, it's, it's, it's a tough place to invest. What you have to do is try to, this, you have to look for niches. So, either you look for a niche of a company that is, uh, advanced enough that it'll be very hard for anybody else to compete. And you historically, you never really had those in China because they were always at the low end of the manufacturing scale. So if you could throw money at it, you could always replicate. But you are now starting to see companies that are genuinely, um, genuinely, uh, original. I, I'll give you an example of a company I went to visit actually after all those guys had left. I went up to Shanghai. Um, I met up with a company called Hesai. Now, they're, they're the biggest, well, they're pretty much the only LiDAR producer that matters in the world now. Now, you know, there's a big debate around self-drive cars, autonomous driving, whether you should go with cameras or you should go with LiDAR. And Elon Musk keeps saying, "Oh, LiDARs are useless, cameras are the future." But so, so that, that essentially is the debate. Now, I think part of the reason Elon Musk was against LiDAR was that five years ago, equipping a car with LiDAR would cost over $35,000. So you could see how it's like, okay, that's going to double the price of my car. Um, and nobody's going to want to buy that. Um, now Hesai comes along. They now have this, uh, uh, factory outside of Shanghai, you know, and it's not the kind of factory that you, you imagine in your head being a Chinese factory, you know, with like a bunch of five-year-olds on an assembly chain. It's anything but that. It's literally 50 engineers."
"See this engineering point you said about the ratios before, cuz this is this is going to stick with me for a long time."
"Yeah. This is it. It's like 50 engineers, and it's like all, all automated. You know, the joke in China is that the factory of the future has one guard dog and one guard, and the guard, the guard is there to feed the guard dog, and the guard dog is there to bite the man if he tries to touch the machines. And, um, so the factories have have changed dramatically. So you look at a company like Hesai, you know, it used to be $35, $40 grand to equip a car with LiDAR five years ago. Guess what it is today?"
"It's $200."
"200 bucks. 200, 200 bucks, 200 bucks. So, so now actually, so Hesai's pitch now, and so they've signed contracts with Mercedes, with BMW, obviously with BYD, with Li Auto, with all the Chinese guys, but the pitch now no longer is, oh, you need this for autonomous driving. The pitch is, with LiDAR, fatality rates in accidents go down 90%. Um, so just like every car has to have an airbag because it reduces the fatality rate, uh, actually for safety reasons, every car should have a LiDAR. Um, now, if you think that's a possibility that this happens. So that's how they're lobbying now in Washington, in Brussels, etc. If that happens, essentially by now, they control 75% of the global market, uh, and they're such an efficient producer that they'll control 90% of the market, and nobody, you know, to like, given the patents that they have, given it's going to be very hard to compete with them. And all this to say that in China, you're starting to get these kinds of companies that you didn't have in the past that can own a niche, uh, that is a very high-end technical precision niche, which again, like five years ago, 10 years ago, those kinds of companies would have been a Japanese company or a German company. And now you are getting them in China. So, so that's one path that's very exciting because that's new. The other path of investing in China is you either invest in the companies that are, you know, so big that nobody can compete with them, the Tensents, the Alibabas, etc. So, a bit the same story, you know, you own Facebook because, and you own Google because, yeah, you kind of have to. So, so that's one path. Uh, and to be very clear, Tencent is my single biggest position. It's, uh, I think it's an absolute world-class company that essentially makes pennies on every single Chinese person out there. Um, so, so, you know, you can go down that path. And the third path is to say, okay, I'm going to invest in parts of the markets that are highly regulated so that there can't be too much competition, but parts that still have growth. So, for example, Macau casinos, uh, or, for example, um, uh, life insurance companies. Uh, you know, it's, there's essentially three major players, and you're not going to get new ones. So, so that, you know, that, that's how you look at it. But yeah, let's not kid around. It's been a tough place to make money."
One of the things we're seeing in the US a lot is this whole idea of the AI capex spend. And, you know, is this, is this stuff going to actually produce money? Is it going to be worth it in the long run? And China seems to be taking the exact opposite approach to that. It seems to be a much more capital-light approach to AI. So, can you just talk about that a little bit, like the differences in the two approaches and why they're doing what they're doing?
"Yeah. Know, I'm laughing. I'm laughing because indeed, like historically through my career, um, China, when there was an opportunity to set capital on fire, China would like jump on it. Historically, that's, that's just what they did because they were always in a capital-rich environment. Um, and this, this time it is the US that is going down the path of, you know, let's throw money at this. Uh, we'll figure out later if there's any returns, whatever. We need to be number one, so we'll just absolutely plow money. It's such a Chinese approach to, to the world. And yes, to your point, China never had that option. Uh, not because it didn't have the money, but because it couldn't buy the chips to, uh, to, to do this. Um, and so, you know, for, for whatever reason, like they've all gone, the US, China's been, you know, capital-smart about the AI development. Um, but also perhaps in fairness, China had another alternative, which was to throw bodies at this. You know, you look at DeepSeek, they could just throw thousands and thousands of, of, uh, engineer hours onto this in a way that it would have been very costly if you were trying to do that in San Francisco, right? Um, so you could replace the, "I'm going to plow money into this" with, "I'm going to plow man-hours" into this, because my man-hours are nowhere near as expensive as your man-hours. So, uh, but, but the bottom line indeed is very much that this time around, uh, it is the US that is proving, uh, extremely, extremely capital, capital-intensive. Is in the US that growth is now proving capital-intensive. And, and on this, I, you know, one of my favorite quotes about markets is that, um, you know, in, in a bull market, um, companies get rewarded for, for, uh, spending capital aggressively. And in a bear market, they get rewarded for getting rid of the things they bought in the, the bull markets. Um, and I'm wondering whether right now we're not seeing that transition, because you look at Oracle. Oracle announces, hey, I'm going to spend $300 billion on data centers, and the share price rips. But then so do the CDS spreads and the cost of funding for Oracle, as everybody's like, "Hold on, how are you going to fund this?" And then the share price collapses. So, you know, when it comes to AI in the US, you've gone through three years where you were always rewarded for throwing more money at the problem. You know, the more money you could spend at the problem, the more your share price went up. And this may now be ending in front of our eyes. This may, like, it feels like we're transitioning from, all of a sudden, the market is no longer rewarding you for, for being stupid with capital."
How do you characterize or how do you think about another sort of like western projection on this is it's the US and Europe and then it's China and Russia and we have to think about the world this way still. Is that an outdated way of thinking about this stuff or is there some truth to it? Give me an explanation.
"Well, look, I think when 80% of the US startups that go knock on, uh, Marc Andreessen's door for money tell you, I'm using a Chinese AI, I think it, it's a statement in itself, right? It tells you that this, this approach of, oh, we're dividing the world between the, you know, the good guys who wear white hats and who ride the white horses, um, and who are called democracies, and the black hats who are, you know, the evil autocracies. Uh, that, that's completely obsolete. Uh, it's completely obsolete because it also doesn't correspond at all to trade flows, to investment flows. They tried to make it correspond to trade flows and investment flows, and it's been a massive flop. And they're now having to, to walk it back very aggressively because you've got the CEO of Ford and the CEO of Raytheon and the CEO of Lockheed that says, "This doesn't work for us." Like, you know, we're now, let's be very honest here. You know, I, I said everything started seven or eight years ago when China had to confront the fact that it had to de-Westernize its supply chain. And China took huge sacrifices to de-Westernize its supply chain. The real estate market went down by a third. The stock markets went down by two-thirds. The, uh, consumption took a huge hit. And government debt went up a lot. And budget deficits that were essentially zero are now 10% of GDP. Okay. Now, can the US do this? Like, the, China went through it and said, "I'm going to de-Westernize my supply chain." The US is now saying, "Oh, we need to de-Sinify our supply chain." That's total wishful thinking. Do you think you could take a third down on real estate, two-thirds down on on stock market, a big hit to consumption, there'll be revolution in the streets? There will be, like, they will hang the lawmakers and and burn down the Congress if if that happens. Um, there's no way this, you know, there's no way the US can do this. The people won't stand for it, uh, and they won't, because you're also starting from a very different position. You're starting from a position of an economy that's hyper-financialized, where, um, people's leverage on asset prices is enormous, um, and where you're already starting with a budget deficit of 6% of GDP and 120% government debt to GDP. So the room to say, "Okay, we're going to spend all this money to re-industrialize. We're going to spend trillions to build up a, a, an aluminum supply chain which will allow us to have a rare earth supply chain." Um, we're going to, it's, it's, it's not true. It's not possible. Like the numbers are just too big. So it's not going to happen. Um, and so already, I think, you know, the days of, "Oh, we're all splitting into, you know, good guys versus bad guys," those days are now behind us. Um, and, you know, I think that's why essentially Trump is now pushing a peace plan onto Ukraine that is nothing short of a massive, massive, uh, admission of failure. U, you know, the, the peace plan that Zelensky's asked to endorse is much, much worse than the peace plan that was on the table in April 2022. Uh, he loses more land. It's financially ruinous for his country. U, and so he'll have fought three years for this. This is a, you know, this is abdication. Um, and so, which incidentally, to your point, it puts on the one hand, you know, the US and, uh, Europe against Russia and China. The Ukraine peace, if it goes through, is going to create a huge split within Europe. It's going to tear Europe apart, because what's going to happen in Europe is you have countries that are very eager to work with Russia again. Your Hungaries, your Slovaks, your Czechs, your Germanies, your Austrias, they want to work with Russia again. They, they want to get the cheap Russian energy. They want to sell cars to Russia. They want to, like, they just want to pretend this never happened and let's go back to where we were."
Um, and then you have the Poles, the Balts, the Scandinavians. Uh, you know, for them, the idea of doing business with Russia is like doing business with Hitler. Uh, it's it's complete anathema. Um, and and so, you know, this is going to tear Europe apart. Um, so the idea that, you know, you have on the one side the nice democracies and on the other side the the bad autocracies, and this is how the world will now work, I think is about to get disproven in a massive way by how Europe is going to deal with the end of this Ukraine war and how Europe is going to get split down the middle.
When we take this back to markets, what do you think this means in terms of going forward? I mean, we're used to as as Americans here, we're used to our American exceptionalism where our market outperforms every year, and and that seems to be shifting. And you know, you talked about China taking a hit to the future. I mean, are you pretty optimistic then that as we go forward in the next decades, China's very well set up from a market standpoint in terms of market performance versus something like the US?
So, decades is a long time. Um, but I definitely think we've started a bull market in China. Like I said, I think China is where the US was in in 2010, and I think we've started a longer-term bull market. Um, look, uh, I I think when I look at the world today, if if I think of prices that are completely wrong, like prices are a total anomaly, the the biggest anomaly for me is the price of the renminbi. You know, I mentioned the Tesla example, but uh, you know, that week where I was with with the boys in Shenzhen and then in Shanghai, then I went up to Beijing. Um, you know, it and then from there I actually flew to the US, and it feels like very often it feels like one renminbi equals one US dollar. I mean, you stay in great hotel rooms for five or 600 renminbi, you stay in shitty hotel rooms in New York for 600 bucks. You know, the taxi from the airport, which takes about just as long in in China, is going to cost you 70 renminbi, um, and so on and so forth. Uh, food, uh, car prices, phone prices, the the ratio is completely wrong. Uh, and and you see this in the trade numbers, right? That you see this in the the China today, you know, five years ago, China was running a trade surplus of 20 billion, uh, US dollars. Now, you know, five years into the trade war, China's running a trade surplus of 100 billion, uh, US dollars. I mean, it's it's ludicrous. A 100 billion trade surplus is absolutely absolutely stupid. So for me, this is the number one anomaly in the world today is the renminbi is so stupidly undervalued. Uh, it it has to shift.
Now, one of the reasons it managed to stay so undervalued is the mantra between 2022 to roughly six months ago of "China is uninvestable." So, foreign investors kept leaving China, kept leaving China. This put pressure on the downward pressure on the renminbi. The central bank had to step in to prevent the renminbi from falling. Um, but now, essentially, that narrative has changed, and by and by now, all the foreigners who were going to sell the renminbi have sold. Uh, the the foreigners who were going to leave China, by now they're gone. So now you're left with 100 billion coming in every month. Um, and so that leaves you with uh a fairly easy bifurcation. The the first is, as all this money continues to come in, the renminbi has to start drifting higher. Uh, and as it starts drifting higher, Chinese savings, which for now has accumulated into gold, it's accumulated into uh into US dollar assets, it's accumulated to the extent that it could, it's accumulated into uh US dollar bank accounts in Hong Kong or in Singapore, all of a sudden, if your renminbi currency starts to go up, say five, 6% a year, you start thinking, hold on, I can buy PetroChina for a 6% dividend yield, I can buy China Mobile for a 6% dividend yield, I can buy um, you know, any number of SOEs for five, 6% dividend yields, companies that aren't going bust, meanwhile, the currency is also going up five or 6%. So that's a 10 to 12% return with very low volatility. Um, so that's uh, you know, that's if they allow the currency to go up.
If they don't allow the currency, and they being the central bank, if the central bank fights the upward pressure on the currency, that means that they have to to print a lot of money. Uh, you know, as as the 100 billion come in every month, they got to print the renminbi on the other side. Uh, and as they print the renminbi on the other side, uh, remember that money that in the past would have gone into real estate, would have gone into economic activity, now has nowhere else to go but the stock market. And that's why I think when you look at the Chinese stock market, you have to build, and it's already looking that way, a sort of barbell strategy where if the renminbi goes up, you want to own anything with a high dividend yield or a high bond yield. And if the renminbi doesn't go up, you're going to own the aggressive growth stuff because you'll have so much liquidity creation that it will flow into the uh, you know, it'll flow into the Tencents of this world, into the Alibabas of this world, uh, and so on and so forth. So the barbell strategy for me, because the R&B is the most mispriced asset out there today, uh, you have to have a barbell strategy of owning Chinese growth stocks and high high dividend yield payers.
So, we hear over and over again about the demographic story, and I always shut it because it's it's not it's not good on especially for as a short-term indicator, and the stats are ugly themselves. You're talking about the next 10 years for China. What's the tea up? Where do they start now? Does that can that story get better for China in the next decade?
So, I think that the demographic picture, if you go back to pre-COVID, China was having roughly 17, 18 million births a year. Um, last year, China had 9 and a half million births. This is an epic demographic collapse. You know, it's um, now structurally, you know, the trend had been going down, and this is a trend that you see all across Asia. You see it in Korea, you see it in Taiwan, you see it in Singapore, Thailand, Malaysia. You know, even Malaysia, which is a Muslim country, has a ratio of 1.5 children per woman today. Even India is actually below two now. So it's it's everywhere around Asia, and it corresponds to urbanization. You know, people in cities have fewer kids than than if they live in the countryside. It corresponds to women having career choices now, to people staying at university longer. So lots and lots of factors. The fact remains that since China's balance sheet recession, uh, the deterioration in China has been much faster than everybody else. Within the sort of structural downward trend, China's done much worse. Uh, and I think that's why the government is shifting course on the the whole "we need to increase supply" to "we need to increase demand." That's why the government is actively trying to push up equity prices because uh it's trying to repair the balance sheets of the millennials. Essentially, you know, the millennials, your 26 to 45 year olds, those guys have been the they've been the bag holders in the in the real estate bust, and they're no longer getting married, they're no longer having kids. Uh, so this is what you have to to fix for, and you know, the way you fix for this, they hope, is, you know, you create an equity bull market and you create animal spirits, and you um, and in so doing, uh, you repair balance sheets and hopefully people get married and have kids. Now, I don't know if it's going to work to answer your question, but I also don't care that much. I mean, this sounds really cynical, and I'm sorry, but I'm not in the baby clothes business. I'm in the making money out of stocks business.
Not yet. You're not.
Not yet. No. No. Yeah. I'm not I'm not I don't think I'll be in the baby clothes business or the baby shoe business.
Famous last words.
So, if if I was in the baby clothes business, I'd be worried. Uh, I'd be very worried. But, uh, you know, right now the policy is, we're going to crank up stock markets so that people get married and have kids. Uh, the part of that equation that matters to me is, we're going to crank up the stock market. Uh, whether you succeed on the second part, getting people married and have kids, very happy if you do. Good for you. For the next few years, what matters to me is the cranking up the stock market bit.
The other big risk you hear with China, which you talked about earlier, is Taiwan. Like, how much of a risk do you think that is? Like, if you go on Twitter, you'll have see people all the time saying, you know, in the next five years they're going to invade, and this is going to be a catastrophe for the world. Like, do do you think that's overblown?
Yes, massively. My go-to line is the the closer you live to Taiwan, the less you worry about it. Uh, you'll find that all all the guys who tell you, "Oh, worry about Taiwan, worry about Taiwan," usually live in, you know, Frankfurt, Dallas, or uh, or Toronto. Um, uh, you you won't find a lot of people from Taiwan, uh, or from living on the east coast of China worried about it, because by the way, uh, you know, partly because if China, you know, if you're living in, you know, in Fujian province or Zhejiang, or along the eastern coast, which is where most of China's economic activity happens today, that means you're in direct range of Taiwanese missiles should anything happen. So, you know, perhaps you should be worried as well.
Now, I'll give you the main reasons. You don't you don't need to worry about it. Um, the main reasons have everything to do with uh, with Taiwan's political uh, frame, uh, backdrop today. Um, essentially, what you have in Taiwan, the DPP, which is the pro-independence party, which is currently in power and has been in power for the past 12 years, uh, is polling in the low 20s. Uh, it's never been this unpopular. Um, so if you're China today, you're looking at this and you think, okay, uh, you know, the election has to happen between now and May 2028, uh, and at the next election, the DPP, which is the party that obviously the the the CPC in Beijing absolutely loathes, is going to get obliterated. It it might not even survive the election. Uh, it'll capture so few seats that it it might be the end of it. The the only way these guys get to survive is if we rattle the cage. Um, and so China has every incentive to not rattle the cage for the next 2 and a half years. Then the KMT comes back to power, and once the KMT is in power, you open the checkbook, uh, you sign lots of deals, lots of tourism deals, lots of this, lots of that, um, and and you start negotiating, uh, in good faith with um, uh, with the DPP. Um, and remember what the Chinese leadership wants is some kind of deal that puts a date, uh, and a transition. You know, when when they did Hong Kong in 1992 and they agreed on 1997 as well, 1997 was the date where the New Territories had to go back. But, you know, the reality was that all of the water and pretty much all the food for Hong Kong was coming from the mainland. So, in 1949, if the communists had wanted to take Hong Kong, they could have, uh, but but but they didn't. They never forcefully tried to take Hong Kong. It was always through negotiations.
Now, when it comes to Taiwan, I think ultimately what will happen is you'll get some kind of a deal where the Chinese will tell the KMT, uh, but they'll only tell the KMT if the KMT gets two-thirds of parliament, because to change the constitution, you need two-thirds of parliament. But if you get two-thirds of parliament in the upcoming election, then China says, "Okay, look, for the next 50 years, you get to stay like you are. You get to stay, uh, you keep your army, you keep your police, you keep your currency, everything stays the same. Then the following 50 years, so first 50 years, basically status quo. Next 50 years, you move to the one country, two systems like Hong Kong. So you keep your parliament, your elections, your currency, your police. You just don't have your army anymore. So that brings you to 100 years. And then in a 100 years, we merge. And who knows what China looks like in 100 years. And whoever signs up on this deal, anyway, is long gone, long dead. Um, and so I'm absolutely not worried about Taiwan. Uh, and I'm not worried about it because unlike say the Russia-Ukraine situation, there is no bad blood. You know, if you look at the Donbas between 2014 and 2022, you had 10,000 dead. Uh, so every day when he was waking up, Putin was getting reports of, oh, you know, they ban Russian Orthodox churches, or they uh, they banned the speaking of Russian, or such and such school has been shelled, or such and such hospital has been put on fire. Um, and then he'd have a whole, his whole right wing saying, what are you doing about this? You know, we need to intervene. We need to do something. There was a lot, a lot of bad blood. There's nothing like that in in Taiwan. Like Xi Jinping doesn't wake up every morning to news reports and part of his party saying, "What are we doing about this?" Because nothing bad is happening in Taiwan. It's not like the Chinese language is being banned. It's not like religious ceremonies are being banned. It's not like people are getting killed. There is absolutely absolutely no bad blood. Um, there's so little bad blood, in fact, that more than a fifth of Taiwanese male passport holders aged between 25 and 65 actually work on the mainland, uh, and very often are married to Chinese women and have Chinese families. So it is such uh, for me, the Taiwanese issue is this sort of red herring that is brought up by, to be honest, the US military-industrial complex to justify the buying of the next aircraft carrier or the next nuclear submarine or the next, you know, fleet of F-35s. Um, you know, it, if you're the US, you have to justify a trillion dollars in military spending when no one can invade you. And you know, how do you justify this? Oh, because Russia's going because China's going to invade Taiwan. So, you know, anyways, um, I'm not worried about it.
All right. Before we ask you the standard closing questions here, the bull case, how how could you be wrong? What worries you where you could be wrong, besides, you know, you didn't get long baby shoe manufacturers or whatever the
The most insulting trade would be?
Uh, look, there's many ways, uh, many ways you can uh, you can be wrong in China. You know, the um um but right now, you're still left with, you know, foreign investors that that that aren't interested, um, and that aren't there. So for the market to go down, you have to have essentially local consumers that are really down and out, um, and that aren't that exposed to stocks. You know, today, China households have 170 trillion in R&B at the bank against a market cap of 100 trillion, when in the US, you have a market cap of 70 trillion and 9 trillion in cash at the bank. Um, 170 trillion is in renminbi. So, you know, in in China, you have a cash to to the market ratio of 170%, and in the US, it's it's about 15%. So, you know, when I look at overall exposure, I'm I'm not that worried that things are going to go collapsing in China.
Now, bull markets in China typically end when, uh, the governments decide, okay, this has gone on too much. We're going to change the rules on on uh, reserve requirements. We're going to change the rules on margin lending, etc. So far, there's no sign of that. Um, if that happens, then you change your mind. You're like, "Okay, the government is no longer pushing the stock market higher. They're trying to push it down. I'm done." You know, you cash in your chips and you you walk away. Um, so far, like I said, I don't see that shift in policy from the government, but what do I know? They could shift in three months and six months for whatever reason. But again, so far, so far, I don't see it. Um, so so that was, yeah, that, you know, that for me, I would really change my mind if there was an important shift in Chinese government policy.
Well, our first standard closing question, I feel like we could probably come up with 20 things from this interview that you could answer, but, uh, I'll ask it anyway. Which is, what is one thing you believe about investing that the majority of your peers would disagree with you about?
I don't know if they'll disagree. It's just like I one of my starting points, um, and I'm not sure this is controversial and they disagree with it, but, um, one of my starting points is that exchange rates and the cost of energy matter tremendously. Um, and so I spent a lot of time looking at exchange rates, looking at purchasing parities. Uh, and I I do like buying undervalued assets and undervalued currencies because I think you get a twin protection. Um, and now, to be very fair, this has not been a very successful strategy in recent years where the US dollar was overvalued and US assets were overvalued, but they they kept outperforming. Um, but so, um, you know, for me, and again, I'm not sure they people would disagree with me if I said, look, I think currencies matter a lot, and you know, the undervaluation of a currency is going to end up being a big driver of return for for forthcoming years. I don't think anybody would stand up and say, "Well, that's and that's stupid, etc." They'll just quietly ignore it. Um, but but that is one of my core beliefs.
And if there's one thing you could teach the average investor, what lesson would you like to teach them?
I I don't know if I'm any position to teach anybody anything. Um, they look, I I think what the main thing about investing, there's there's no right or wrong way to go about investing, right? There's many, many different ways, and you have to find the way that sort of fits your your personality, fits your your weakness. Um, the tough part, I think, when you start when you're young, is you don't really know where your weaknesses are. You you find out your weakness by doing it. Um, and and obviously, what you need to try to do is avoid putting yourself in positions where your weaknesses are found out. Um, and, you know, one of the best ways to do this, I find, and I I do this and I recommend it to to young people that I meet, is actually to keep a diary. Uh, and not just to keep a diary, but to reread your diary. Uh, so that you you can put yourself back into the, you know, the mindset you were in, the decisions you took, why you took them. Um, and uh, so, uh, so I'm not sure it's a great piece of advice, but it worked for me.
I I'll say so. I'm gonna take that as a great piece of advice. Louis Gav, we want to thank you for your time. If people want to read more online, I know. Plug the Twitter handle, plug the website. Where can we send people?
Yeah. Uh, the best is actually the website. I I don't tweet that much. Uh, most of what I tweet is stupid jokes, uh, that make me laugh, but very often very few other people. Um, but uh, so my Twitter handle is Gav Vincent, which is my uh, my middle name. Uh, but um, the uh, the best place to find us is actually on through our website. So gaffcal.com, gavvk.com.
Well, I think you know you might not get invited for the uh, the Chinese factory tour next time, but you want to follow along with Louis' work. So you can get all these insights because not too many people are talking this way. And if the returns in the last year are any indication, if we're off to something, you got to find somebody who gets this. Louie, thank you so much for joining us today.
Thanks a bunch, guys. It was a pleasure to be here. Thank you for tuning in to this episode. If you found this discussion interesting and valuable, please subscribe on your favorite audio platform or on YouTube. You can also follow all the podcasts in the Excess Returns network at excessreturnspod.com. If you have any feedback or questions, you can contact us at excessreturnspod@gmail.com. No information on this podcast should be construed as investment advice. Securities discussed in the podcast may be holdings of the firms of the hosts or their clients.