YouSaid · the spoken record

Ben Harburg

lines on the record: 90
first: 2024-07-08
most recent: 2024-07-08
sittings or episodes: 1
sources: podcast

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“I don't think we have any state owned enterprises in there. These are all private companies. And again, we're trying to do find businesses that have as little government involvement as possible, even in terms of downstream customers.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“But when you dig down four or five layers, you see that they're using their geospatial data to aid the PLA, the Chinese military, where some other, they've been accused of using that technology in Xinjiang or something like that. So we are filtering our names for layers down to ensure, if at all possible, that they're not infringing on Pawn, both American national security nor American values. And so the way we look at it is we're outperforming our competitors on kind of just performance, but we're also kind of doing well by doing good in the sets that we are not investing in names that a portfolio manager or an RIA is going to be hauled out in front of their constituents or investment committee because they're in those names.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“On gray lists, on whitelists, watch lists. And we're also spending a huge amount of time in Washington talking to people on both sides of the political aisle and to the committees and to the different kind of ministries, I guess you call them, but the commerce guys or the whatever, and understanding where are they going to be regulating, what sectors are they going to be coming down hard on, what names specifically, and then we're usually six, 12 months ahead of time in terms of getting out of those names or steering clear of them. And so we engaged what we call our kind of our political risk board. And those are composed of ex-military officials, congressmen, members of different government agencies in America. And then we use them to kind of filter our names and look back, you know, like an example would be a name that on the surface looks okay.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Endowment, and one day you find out that you've invested in a manager and that manager has invested in a Chinese defense sector business. Ultimately, if there ever were a conflict between the United States and China, that company could be making some kind of a weapon that's responsible for the deaths of American soldiers. You do not want to have that risk to be hauled out in front of the board of trustees of Princeton or wherever else about that, about being invested in that name. Likewise, you don't want to be in any names that have any other negative noise risk around them. So maybe a clothing company that's sourcing material from Xinjiang or that's been threatened or said that it's using slave labor or some other kind of risks. So what we did as our third differentiator, and we realized this again because we looked at some of our competitors and we noticed that they had names in their portfolio that were on blacklists in Washington.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“And we've been really effective at that. For instance, as a firm, we didn't invest into any of these companies or sectors that saw significant regulatory interventions. We weren't invested in the financial services and that peer-to-peer lending space. We weren't invested in the gaming space. We weren't invested particularly in the education technology space, which saw huge regulatory interventions. And we did so thoughtfully and systematically. We did so because we heard the regular say they were going to be coming into those verticals. So that's kind of differentiator too. The third differentiator for us is why we use the word core values and why we really use kind of an American lens through which to view the Chinese market. One of the things I think that scared a lot of investors, and I mentioned it on the private side away from China, were geopolitics. And the fear that you could be investing in a company that you could be the Princeton University.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“And to your question, I forgot to mention before there is kind of stimulus coming in other ways. It's not going to consumers, but the Chinese government has very clear sectors that they're very supportive of, what we would call kind of like the regulatory slipstream. Those sectors are seeing huge investment from the government. So whereas historically, we might have invested in like a Chinese rocket business and then Sequoia and Lightspeed and Matrix and other kind of global VC names would have invested into it afterwards. Today it's the Guangzhou City development fund that's investing where the Shenzhen Economic Stimulus Fund. So China government has their own investment funds through different provinces, financial institutions, whatever is their investing in these tech companies to that they believe to be sectorally correct. And so we need to use that on the ground treatment and constant engagement with the regulators.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Market, what the Chinese government is saying on the ground here, how consumers are reacting. This is not something where you can just buy a benchmark and go to sleep. You really need to move in and out of positions. And we do adjust probably once every week or so. So it's not day to day, not in procession, but it's certainly on a weekly basis. We're changing our portfolio, moving out of names or concentrating into positions that we think are really starting to open up and run. So I think that active designation alone already differentiated ourselves from most of the other managers in the market. The second differentiation that we had is we were on the ground in China. Most of the guys we were shocked to find that we were competing against. We're sitting in London or New York or at best Hong Kong, which is a world away from Beijing. We have 30 people sitting on the ground here in Beijing, and we're listening every day again to what the Chinese government is saying in terms of where they're going to regulate, where they're going to stipulate.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Sure. So to your point about our timing, so we identify that the Chinese market was at an irrational low. So we entered at a very specific time. And we've been in the black since launch. We've obviously had some volatility, but overall we've made money. And we're up from launch and have performed better over particularly over the last month or two from all the kind of benchmark indices or the bigger name of passive managers. So our rationale for coming into the market beyond what we just felt was a clear opportunity were that we felt we could differentiate ourselves from the other names in the market. So the first was by being active. My perception is that China is a market where you have to move in and out of names and consolidate positions or be a bit more spread out depending on the nature of the”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Well, the problem we have is not the on side, it's the overproduction side, right? So we've got so much oversupply. The factories in China were built for a world that was just going to be consuming their products and mass. And so they ramped up production so high. And it's very hard to kind of turn that off or even to sell their existing inventory. And so, and that's where we're seeing now stimulus that's coming up against the dumping of those products into international markets. The way the Chinese government would describe it is they've got to stimulate local consumption in order to absorb a lot of that overcapacity. So that goes back to getting China right, not getting the currency right for outbound or offshore sales. So I think they'll focus more on that. And the key is then being able to have people buy more cars to Mexico, more handsets to me.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“A weaker domestic currency typically is stimulated to the economy, although it is inflationary because you can produce goods cheaper that other countries than want. So a weaker Chinese yuan would net net probably be somewhat stimulative. Do you expect the yuan to weaken?”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Complicated in China, you need, you basically need a working permit and almost like an ID and a visa to work in the big cities. So if you live outside the big cities, you can't just walk into Chicago one day and start working there. You need Chicago to issue a work permit to you and a living permit. So by bringing more consumers into the cities, that will help, I think, stimulate buying as well. So some of those types of measures that are a little bit more sustainable and had been restrictive covenants around consumption surprisingly that they're pulling down the barriers to consumption.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“It could be measures around consumer lending, so again, lowering interest rate on consumer loans, lowering the threshold of forgetting a consumer loan, lowering the ratio of collateral around consumer or small business loans, something like that to pump more money into the economy through those measures. Obviously, we have, as you said, much lower inflation, but that means we also have much lower interest rates here in China. So it's a much healthier environment again today to take on debt rather than seeking some kind of equity funding for a lot of the types of activities that we're engaged with every day. I think you'll see, again, continued effort to stabilize these head name banks, head name real estate or property developers so that there's just not the silver perception of collapse. There will be an expansion of rights. We call it the Huco system.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“You said you don't expect that there will be widespread consumer stimulus from the government in the same way that America handed out checks during 2020 and parts of 2021. So some aspect of the stimulus is coming from the People's Bank of China, the Chinese Central Bank, where they've lowered interest rates in the prime rate. What sort of other types of stimulus can we expect or is there none coming?”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“It will, but these I think I don't know the numbers, so I'll be talking out of school, but most of these startups are nowhere near the kind of economic impact that you would think they would be. The really big, big name guys are already public and they all got public during that first wave of the cycle. So maybe some of them are laying off people, maybe like I say, the 10 cents alibas of the order are laying off people. But a lot of the text, you know, I don't know what the aggregate number is of employee through the tech startups, but China has always been a market that historically was more dependent on labor going into manufacturing, going into the state-owned enterprises, going into government itself. And so I think those sectors are still going to make up a bulk of jobs for new entrants. And it's the same environment we face in the West now where people are maybe less likely to leave their job at an existing company to start a new.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Very challenged. So the reason why we built the ETF was specifically to take advantage of what we thought were irrationally depressed valuations and again this information arbitrage on the public side. The private side is in much many ways much less healthy with much less light at the end of the tunnel. And that's because you had so many Western investors that has historically invested in Chinese venture capital, private equity, growth equity funds that have pulled their money from the market. A lot of it, again, for non-fundamental”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Just private, so these are complementary strategies. So on the MSA side in China, we have venture funds and we have growth funds investing kind of from Series C to B on the venture side, B to pre-IPO on the growth side, and then ostensibly the public equity fund would take over in names that aren't in our private portfolio. So we are not able to overlap and have names that are coming out of the private portfolio, but we have huge information and usually we're distributing our shares a six months after lockup on the private side. So then we come back into these companies once we're out of them through the private funds.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Got it. So just to be so, ETF is obviously investing in publicly traded companies, but MSA Capital where you're managing partner at, is that exclusively VC in private markets or do you do stock publicly traded securities there? Just pri”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Become Gen Z's credit card, so to speak. We don't have that here in China. So there's much less consumer debt, which means we're a healthier market and there's more spending that can be unlocked through opening that up”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“It was some murder, suicide, or something like that. I mean, that's headline news in China when something like that happened. Someone who's stressed out because of debt. And the Chinese government were actively taking measures to curb consumer debt a few years ago when they cut down on the what was highly predatory peer-to-peer lending space in China. This is where we were giving people very high double digit interest rate or even triple digit interest rates on micro loans. And they saw that as predatory anti-consumer health. So they cracked down on it, which by the way, the same reason why they cracked down on the tutoring and education technology space. It was a nasty, nasty space. But they did that for consumer protection. There's huge opportunity to be unlocked in consumer spending. We don't have buy now pay later here in the middle in China. One of our best investments in the Middle East is now the leader and buy now paid later in the Middle East. Claren on these companies.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“It should. And, you know, again, we were not so we're the opposite to your point about Americans are spending above their means. And this is, again, why I'm worried about the state of the American economy, looking at student debt, looking at credit card debt, looking at any form of household debt. America is not a healthy economy by any means. I mean, I don't know why I have to be kind of the chicken little, right? And people think we're crazy that we would be putting money into China right now that in many ways, in my opinion, has a lot more negative noise around it, but is more fundamentally sound. The American state of the American economy is scary. So to that point, there wasn't very much consumer credit or consumer debt here. In fact, when someone has a situation in China and I hear about it like once a month where a taxi driver took out a loan on top of a loan and couldn't repay it and so eventually he”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Meant that Got it. And I believe Tencent and Financial are not banks. They are the pipelines to banks, but the institutions making the loans are banks, given that so much of bank credit over the past two decades has gone to real estate development, do you think that the government will take a look fondly upon the growth in consumer credit away from real estate credit?”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Things carved off and love licenses taken away from it. And I think that's by Western standards the right thing to do. But it meant that we had nothing to invest in and the fixing.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Basis. Actually, up until 2020, 2021 in China, we were living in kind of a laissez-faire law of the jungle environment. It was nothing like you expect from this authoritarian communist kind of command and control economy. People were doing whatever they wanted. And so you had all kinds of unnatural monopolies. I mean, it was America during the Age of Standard Oil. And so they're breaking apart the standard oil of China right now, which is Alibaba and to some degree tense. And they should do so because it killed all the competition and it made it so the consumers had essentially zero choice. And so in the financial services space, I think you're going to start to see an unlocking of opportunities. We just saw yesterday one of the Alibaba companies is being forced to spin off out of Ant Financial. I think eventually Ant Financial will list something, but it'll be a far smaller, simpler platform than it was with a lot of those.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Consumer lending, point of sale lending, education financing, money transfer, whatever it is. All of these are already included within the 10 cents and particularly in the AliPay app. And now China is actually going through a process of, and this was part of the reason why the financial IPO was scuttled. And I believe it should have, but should have been, by the way. This is, you know, we don't hold China to the same standards that we do Western companies. These Chinese companies that were under fire from the Chinese regulators are under fire because they were monopol, unnatural monopolies. And the same type of antitrust measures that are being taken against companies like Apple, Google, Meta, Microsoft every day, and particularly European regulatory markets, are happening in China on a belated basis.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“We have never invested in the Chinese fintech space, and I was actually doing an article with the economist yesterday, and Xi Jinping himself raised this issue of why are there not more unicorns being minted in China today. And there's all kinds of structural and evolutionary reasons for that. But in one vertical, like the one you bring up, FinTech, we've essentially lived under a duopoly for the last couple decades between 10 cent and Alibaba, and there's never been any FinTech to invest in, to speak of, because I do all of my financial services activities that are at least technology and kind of mobile-based through my phone, through my Tencent WeChat pay app or through the Ollipay app. And the Ollipay, if you've seen the kind of web of services it provides, you can do everything. So you think of any American technology company, be it buy now, pay later, mass, you know.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Foreign labor into the domestic market in the United States. So, no, I think it's possible. And again, their price point and their quality is so great and their price point is so low that they can stomach a lot of tariffs.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Possible have already started their encroachment in towards the West, so they've opened up showrooms in Norway, they've opened up in Germany, so they're kind of making their way towards the US. What you'll probably get is you'll get like a NEO or a BYD car that's largely assembled in say Mexico. I mean, you've seen this huge transplant now of Chinese manufacturing to Mexico. So actually, I'd be bullish on the Mexican economy right now as well as a result of that displacement. But I think ultimately, you know, if you have kind of a meeting of minds, the Chinese could also open factories in the US and start selling these things there. But the simple, just as we're seeing the Taiwanese having to come to America and go to Arizona and open up chip fabs there as opposed to in Taiwan and importing all of their domestic.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“That we're in an interesting environment now where we could see some binary outcomes on the political front, but yeah, the sanctions will continue unabated until that time.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Maybe continued encroachment in terms of more sanctions and more restrictions. So nothing good, all kind of negative. But with Trump, actually, the Chinese could do a deal and see significant improvements because they know what he likes. They know he likes to open factories and show he's brought jobs home. And they can find ways to make that happen for him. I think their biggest frustration with the current Biden administration is they feel almost powerless. There's nothing they can do. There's nothing they can offer to Biden that will improve the current economic picture, the way that the Americans are managing them, be it in terms of the sanctions on Chinese companies, restrictions on technology coming into China. I think Trump will certainly become concerned with America winning and ensuring that we're extending our advantage and not giving over our IP to the Chinese and our best researchers of the Chinese. So all that's to say, I think.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Broad scale projects like China 2025 and made in China and the Belt and Road Initiative and other things like that. And so I think they were much less willing to come to the negotiating table and kowtow to the demands of the Trump negotiators. This time around, I think they are much more humbled and weakened relative to their have had a lot of their vulnerabilities exposed. So actually Our bet is if Trump is elected president, you should see a significant spike in Chinese equities, which goes back to why we're bullish with our kind of basket, our very specific basket in this environment. We think that the Trump presidency would actually have a pitch for a binarily vastly improved outcome with the Chinese. If it's another four years of Biden, it's going to be very flat, same dynamic.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“As would most of the people in most of the markets that I deal with. So the Middle East would prefer Trump. I'm not even sure if India wouldn't necessarily prefer Trump. The Europeans certainly won't, but the Chinese do. And the Chinese would prefer Trump because he's transactional and because he's not concerned with a lot of the intractable issues that the Democrat administrations typically are when it comes to China around human rights and Xinjiang and a lot of those buzzwords that you hear mentioned a lot. They're not part of Trump's vocabulary. And last time around, I think Trump did try to do a deal with the Chinese that was in many ways in the best interest of American businesses and consumers. And at the time that he tried to do it, China was kind of reaching its economic apex in recent memory, right? So that was when we reached some of the highest levels of foreign capital coming into China, equities were at some of their highest levels. China was announcing these”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“So the tariffs are inevitable. We heard more tariffs coming through this week. I think they'd already been priced into a lot of the companies so that you didn't see a huge correction on the stock market. The political side of things is very interesting. And you mentioned Trump. We listen for anything that China related that comes out of the US election. And we obviously expected a fair degree of China bashing going into the election cycle with each political party trying to kind of outdo the other on who was tougher on China. And you had during the debate last week, you heard Trump say that China wants Biden as the president because he's shaky and he's soft and he's easier going. Ironically, that's not true. That he was playing koi with that statement. The reality is the Chinese would much prefer Trump.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“How high do you think that the tariffs in Europe and the US will get against China? And I mean, you can make an argument about, well, economically it doesn't make sense or the German automakers have partnered in a joint venture with the Chinese original equipment manufacturers OEMs. I would argue that the reality is if politically people, politicians are going to pass tariffs and it's popular, it's probably going to happen regardless of if it not makes economic sense. I mean, Trump, if he just elected re-elected president, definitely would enact quite harsh tariffs. Biden also has enacted tariffs against China. How big of a threat is this to the notion that China is just going to dominate and export export manufactured of high value goods?”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“World and offering products that are on par or better speced than their Western or American competitor at You know, a fifth to a tenth of the price. And so I think these guys are going to do phenomenally well, even if there are sanctions, which are anticipated to come.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Room, the quality of the interior not feeling like I'm not feeling like I'm in a creaky kind of plastic car. It is a huge, huge, huge deviation in terms of quality. And it's not what you expected. And we're seeing the Chinese do this across verticals. It's not just in electric vehicles where there's been probably the most noise. It's also in spaces like handsets where China is dominating handsets. I mean, Apple has priced itself out of the emerging consumer world years ago, right? So today, if you're in Africa, no one owns an Apple. They own OPO, Vivo, Xiaomi, and then another company called Transien, which many Americans have never heard of. They make a phone called Techno, which just dominates with the smart and feature phone markets in Africa. It's another name that's in our portfolio. So there are so many hardware. And the Chinese are doing it across the world.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“An almost exact replica Range Rover Defender. The Range Rover Defender in the UAE right now retails at about $80,000. Their car sells for $18,000, and it is on par or better on spec. And even affluent Emiratis who have plenty of discretionary income, no reason to scrimp and save. They're not facing the same types of downward economic trends a lot of us are in the rest of the world. They're buying the jet tour over the Range Rover. And whenever I talk to people in the Middle East about their experience looking at Chinese cars, they're just shocked by the quality of them. I'm someone that owns both a NEO and we were early on our venture son side. We were early investors in Neo and the largest investors in the first kind of institutional funding round there. And then I also have a Tesla. The quality of the NEO to the Tesla is vastly superior.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“It's crazy. We also have a home and we have our kind of H22 and Abu Dhabi. And I was at a conference last week where they showed a chart that showed that in 2018, and forget about just electric vehicles, let's talk about just Chinese cars, combustion engines as well. In 2018, the amount of Chinese cars sold in the Middle East was 1%, where they made up 1% of the Middle Eastern car market in terms of place of origin. Today, they're about 22%. So in four or five years, I think that's right. I think it was even later, might have been 2019 or 2020. So they basically grown to be 20% of the Middle East car market in a very short period of time. And what you have today is not just BYDs. Let's talk about conduction engine like the car like Jettour, J-E-T-O-U-R. These guys.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Tell us a little bit more about Chinese production and just how cheap they can make it. I mean, BYD, one of your holdings, owned by the late and great Charlie Munger, is creating electric vehicle that's $15,000. Can you just speak to just how cheap that is?”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Oh, absolutely. I mean, you know, so when we deconstruct someone like a Tincent, we're not just looking at those low teams. The reality is if you strip out their, you know, the numbers are even crazier if you strip out their investment holdings. 10 cent more investors in NEO. They're investors in Maituan. They're investors in Pindule Duo. Their investors in just about every one of the leading Chinese technology companies are a better investor than I think any venture growth fund could ever claim to be. And so we strip out, we do look at the composite parts of each one of these businesses. We think they're undervalued. And if someone does, I mean, there's a few times, for instance, where we de-risked off of a name like Pindo Duo because in spite of all the negative noise, jumped up. And so we're moving in and out of these positions too is we think that they cross some of the barriers that we've placed for them on the price to earnings or price to revenue.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“So macro fundamentals, in other words, you're bullish on these particular names because you're bullish on you. You've done the work on these individual names, not the basket. But what do you say valuation plays in reasonable why you are bullish? I mean, 10 cent is something like 15 times earnings, which I'm sure is in a very, very cheap percentile relative to its history. Does that part of the reason?”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“So first I'd qualify that. I'm not a China bull across the board, and I'm certainly not a China economy. Apologist or a cheerleader. I think that there are many flaws within the Chinese growth model, within the Chinese economy, within many Chinese corporates. My job isn't to be a Chinese market bull. My job is to selectively pick a few names that I think are going to do really well and that are mispriced today and that are primed for significant growth, even on a purely fundamentals basis if there's no improvement in kind of all these other levels around the economy, but if there is that we think are going to be set to rock it. And so for us, we focus on a few key trends rather than, because to your question, and I'm not trying to avoid it, price-to-earnings, it's kind of gone out the window. And I can't use a quantitative approach to evaluating Chinese.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“So now let's turn to the investment side. People can't tell already you are a bull on China secularly, but it sounds like you think that the valuations are attractive now. What kind of price to earnings ratios are you seeing and how attractive are they historically?”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“I'm just telling you what I'm feeling on the ground here as we talk and talk with large enterprises. Again, on an overall quantitative basis, on an aggregate basis, perhaps you're not seeing as many jobs being shed and manufacturing and a lot of the kind of long tail businesses. But when we talk to kind of the blue chip, white-collar employers here amongst the banks, financial institutions, technology companies, you're seeing more layoffs. But again, it's not overwhelming and it's not something that where you have people in the street picketing because they're unemployed and not able to eat. It's still a pretty, it's a stable market.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Every business line you can imagine from operating restaurants to oil refineries and financial institutions. So they have the ability to kind of play with those levers and bring people back and forth into the labor market. But it is not a healthy labor market, but it's one that I think will be positively impacted as equity prices improve and the real estate picture stabilizes.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Benchmark for the entire market. And so they do that over and over. Back to your question, though, on the labor side, it is not a healthy labor market. I would never portend that it is. We're seeing, again, a lot of layoffs around the market. We're seeing salary decreases. We're seeing people being forced to give back their bonuses. But it's all part of the same vicious cycle, which is stock prices are going down. Companies have less equity, have less kind of capital to spend on growth. And so everyone is kind of battening down the hatches right now. To your point, the growth picture is still not dire at all. And the Chinese government always has the ability to kind of provide for other employment opportunities by bringing people into civil jobs and the government created jobs. The government here has a whole web of what we call SOE, sovereign-owned enterprises that operate across”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Running to the Ecuadorian embassy in London, thinking that by being inside of the embassy he would be safe. And they thought by running to the American Exchange they would be safe from the regulators and safe from intervention. But obviously the Chinese didn't care and they still cracked down and essentially are forced to delisting. I think they did so for correct rounds. They never explained why. They never forecasted it. They never said these are all the different rules they broke. They just kind of went and did it. And then they did so also kind of thinking that the world would interpret it that they were on the right side of the argument and therefore not wouldn't have kind of the ripple effects that it did. In reality what happened was the whole world looked at the DD case as kind of the hallmark for doing business in China. And we saw huge stock market corrections off the back of that. And it kind of caught the Chinese regulars off guard and they were like, what's going on? How is this happening? We thought we were doing the right thing. Why is everyone acting like this is the”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“They were justified in doing it. Didi went public without having a correct set of operating licenses here in China. And there was a whole bunch of different gray zones where they weren't properly recording and delineating between revenue and commissions and take rate. And I don't know how much have you looked into there, but if they'd gone public in Hong Kong versus the West, actually, their share price would have been significantly lower because they wouldn't have been able to use a lot of the money that they were recording as revenue because it was kind of like rides, you know, kind of gross merchandising value. It wasn't actual revenue for the business. So I say this all to say they were a bad actor. They rushed to go public in New York along the same lines as someone like one of these WikiLeaks guys like Julian Assange.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“So then you've seen the same numbers I have, you know, it was high double digit. We're talking like 20%, 30% youth unemployment that you mentioned at the point when they stopped reporting it, which I think was a really bad move. I mean, I don't, I don't know why. And I have, I met with Xi Jinping last November, and I delivered to him the same message that I deliver publicly, which is you need to do a better job with all of your data and all of your policy measures of foreshadowing, forecasting, and explaining to people while you're doing this. And there's this odd kind of petulance amongst the Chinese. And I don't know if it grows out of one child policy or what kind of cultural driver it is, but they have this perception that they don't need to explain themselves to the world. The world should kind of understand why they're doing what they're doing. And so, for instance, even the delisting of DD, in my mind, actually.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“Which to me doesn't sound terribly high. In the US, it's 4%, which is quite low. And then I also know the youth unemployment rate stopped being reported, but some people think that was just data. So how do you as an economic observer of China observe the labor market? I mean, maybe it's the”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT
“If it isn't, it's interesting. I'll have to go back and check that one. It should be one of the smaller ones. But Baca is not a real estate company as much as it's a marketplace. So it's not taking ownership of the properties themselves. I'm trying to, like the Western equivalent would be like maybe Zillow or something like that. So it's a marketplace. And when there's churn and there's a lot going through the system, then you'll see volume coming through it. And so we think that there's still some interesting opportunities within it. But it's not a real estate company per se.”
2024-07-08 · Forward Guidance · Why The Chinese Real Estate Downturn Won’t Sink The Chinese Economy | Ben Harburg · IDENTIFIED FROM THE TRANSCRIPT