Market Watch Ep.28: Tech earnings & China's long-term problem

Hello and welcome to episode 28 of the Market Watch. It's Friday the 30th of July and it's been a super busy week in markets, so I'm actually quite glad to have half an hour out to just have a chat with Piers away from the coalface for a moment. But Piers, you're away last week, how was that?

Yeah, good, bit of, uh, bit of sunshine staycation down in Cornwall. Beautiful part of the world. That's, that's something that's come out of COVID for me. I've discovered my own country, um, having never been to Cornwall. Basically, I think I've been there, I don't know, like 3 or 4 times now in the last 12 months and love it. But I do have— I listened in on, on last week's, um, part where you got Tim on. I thought it was fantastic, really interesting. Uh, so anybody who hasn't listened to that go back and check it out if you're interested in crypto. One thing I was quite upset about, I'm not sure I've recovered from it yet, but right at the start of that podcast, you said, you know, we've got Tim on this week, we've upgraded, and, you know, implying that Tim's an upgrade from me. And I, you know, I really— that was like an arrow through my heart. I thought we were tight, but obviously you've moved on.

I thought we were Batman and Robin, but we've split ways. But no, it's, you know, I just say my goal here as the host is to make my guest speaker feel great so they deliver a great podcast. So Piers, of course you're the man.

Okay, good. I feel good now.

Okay, and with that, let's go. So Before we begin, just to give a front run to the content we're going to cover, it's going to be two main sections. Going to talk about the tech, mega-cap tech earnings. You've had all of them this week. And right on cue, Amazon has come in last night and they're down 7.5% in aftermarket trade. But we'll talk about that. And then the other big thing is what's happening in China. That's a real seesaw price movement. Really got hammered at the beginning of the week. I think I read at 1.10 cent, one of the largest technology names is down about almost 25% in the month alone. But they have rallied back a good 7 to 10%, I think, in the last 48 hours after the government has come out and looked to kind of intervene to some respect. But they're the two topics we're going to go into. So I'm going to kick it off with the tech earnings. And I'll give you a bit of an overview to set the scene, because I'm conscious of not everyone's looking at these numbers maybe as as closely as we do. So let's talk about Facebook. So Facebook actually dropped about 4% after their earnings. Their daily and monthly active users were below expectations. They said they expect increased ad targeting headwinds in 2021 from regulatory and platform changes. Notably, there's— I think we talked about this in a previous podcast episode about Apple's iOS updates. And how that could have an impact on the firm. So Facebook generally were down. I'm talking about the immediate reactions here and the main headlines. Apple guided Q4 revenue growth of double digits, but below the Q3 growth of 36%. And they expect supply constraints in Q4 actually to be greater than Q3, which will primarily impact their kryptonite product, which is so important for them, their iPhone. And iPads, although they've done a pretty decent job about diversifying out some of their other revenue streams in recent years. Then Alphabet. Alphabet was actually the real winner. They came out and moved up about 4% after their earnings earlier in the week. Their advertising business rebounded, buoyed by marketers spending more on search to convince consumers to travel, shop in stores again. So it's all hell for leather. People, businesses trying to get back into into gear again. And then 3 more. Microsoft— Microsoft actually was a negative response after they came out. Investor optimism tempered by concerns about slowing growth in their Azure cloud computing division. Steep competition, of course, there. AWS, they're the big boy in town. They dominate that space. And then also Google, another key competitor. I think they're way back in third spot, but they're really pumping investing a lot of money into that division, which is obviously making a few people a bit apprehensive on Microsoft having another key competitor in that space. And then Tesla, another one, first time in history profitable with the exclusion of regulatory credits for the firm. So that was Tesla. And then Amazon last night. So Amazon smashed EPS, revenues though missed. I thought it was so interesting. We're talking about revenue in a quarter of plus $100 billion and the shares sink. So they actually had revenue figure of $113.1 billion. The Street was hungry for more. They were looking for $115. And then the big point here was their outlook. And this really leads us into our discussion and good to get your take on. Their outlook for Q3 was for a range of $106 to $112 billion. Previously, Wall Street was looking for $119. So that outlook is bad. The CFO said sees a step down in revenue growth continuing for the next quarters, with an S, so not singular, for the next quarter due to lapping growth and pandemic and additional mobility among customers returning. Meaning that they're just out doing other stuff instead of just looking at Amazon and buying everything under the sun through that one app. I guess, yeah, quite a mixed bag overall. One thing for context from a price reaction point of view before we all panic about Amazon, Amazon have actually only retraced the last pretty much 5 weeks of gains that they've had. In retrospect, on a higher timeframe, they're still way up there. 7.5% is a big figure, but they've rallied a lot recently. So what's your take? And they obviously, a lot of these companies you've just mentioned, they all benefited, Amazon in particular, hugely during the pandemic. But where do we go from here as economy starts to reopen and behavioral patterns start to somewhat normalize?

Yeah. I think it's interesting when all these tech giants report their earnings. I don't know if the listeners have really delved into it. I think it's always a good measure, well, firstly, just to see how big these things are, but actually also to remember that they're different businesses in many respects, although they are competing in certain elements like that AWS versus Azure kind of thing. But they are very different businesses at heart. Therefore, you're definitely going to have some of them doing well and geared towards, let's say, COVID, like Amazon, and actually some not, like Google perhaps may well have been hurt initially from COVID as advertising budgets got slashed, as companies got massively hit by that initial wave and the first lockdowns. It's quite interesting. I think Just looking at revenues before, before we discuss the details, um, Amazon over $100 billion in one quarter is just quite extraordinary. I mean, that is— I know it was worse than expected, but $113 billion in 3 months, that actually puts it easily the biggest revenue generator out of these tech giants. Um, Apple $81.4 billion. Then actually, when you step down, Google is then $61.8 billion, and actually little old Microsoft only clocking— only clocking in at $46 billion. I mean, what have they been doing? So, you know, Amazon almost— it's not far off 3 times that kind of revenue. Of course, that's just looking at top-line sales. Obviously, when you drill down into the bottom-line profits, I mean, Amazon, whilst they've got the biggest revenue, certainly have the smallest margins, smallest profit margins. So all of that big cash coming in doesn't necessarily translate through to the same profits that some of these other big techs are producing. But yeah, it was a mixed bag when you're looking through it. I mean, I think if we take Amazon then, I think there was a— as you say, these earnings, it's funny. And actually, I got asked yesterday, I think it was, or was it the day before, by some of the students on our Summer Analyst Program. And they were asking, hang on a minute. This was before Amazon result. So looking at all the others, and they were like, hang on a minute. Everyone's beaten their revenue expectations. Everyone's beaten their earnings per share revenues. And yet the share prices went down.

The stat is actually 90% of the S&P 500 has exceeded on EPS and revenues.

90%. Wow, okay, yeah, that's much higher than— what's the average? The average is pretty high looking back over quarterly earnings, right?

Mid-70s.

Mid-70s, okay. So 90s, yeah, that's— it's a great earnings season from the point of view of beating expectations. Obviously Amazon has bucked that, that trend here. We'll talk about that, um, in a sec. But yeah, that, that whole point around how does the share price go down in response to top line and bottom line numbers, revenue and profit numbers beating expectation. And the point here is two things. Firstly, investors are buying into these stocks in advance of the earnings announcements. And I mean days, weeks, obviously sometimes also months beforehand, right? And so we often say buy the rumor, sell the facts. This is about you're buying the stock because you think their earnings will beat expectations. And so you see the share prices rally ahead of the actual earnings announcement. So actually, the rally on good news has already happened. And then the announcement comes out. And yeah, it's good news. But I bought on that basis a few days ago, so now I'm selling and booking profit. So it's profit taking off the good news event. And so this is why you get that sort of counterintuitive response where share prices drop even their numbers beat. That's the first point. But actually, the second point is perhaps more important, and that is when that earnings report is hitting the newswires. We're not, you know, yes, that historical data is definitely important and interesting, that historical data being how much money did you make in the quarter that's now ended. But it's actually the future that we're more interested in when it comes to, right, where's the share price going to go now? Where's it going to go over the next few months? And this is where we're looking at then their guidance. So these companies will release their guidance. So not only are they giving us Q2 data, they're then updating their forecast for what they think their Q3 numbers are going to look like. So they're updating their revenue and their, their profit forecast for Q3, and let's say full year 2021 as well. And, and often the share price reaction of these earnings results will be more based on what those forecasts look like. And, and that I think was particularly notable for Amazon last night, where their forecasts were particularly bad, bad relative to what was expected. So I think on their revenue side, we were expecting basically $119 billion for Q3, okay? But actually Amazon's forecast updated was they think they're going to deliver between $106 and $112 billion. So they've basically revised down their Q3 forecast. So this is kind of what's hit their, their kind of share price, and that's why there's been some profit taking off what's been a huge rally. And look, it kind of makes sense, doesn't it, for Amazon that they— whilst they benefited going into COVID, well, obviously naturally then they're not going to benefit when economies unlock. And so, you know, clearly it makes sense, right? And actually, when it comes to Amazon particularly, if you're kind of trading Amazon or interested in investing in Amazon, you're— every single person listening to this, I imagine, has an Amazon account. You are a customer. You individually have data that you can analyze to make decisions on how you think Amazon are going to perform as a company. Where's that data? It's on your Amazon account. Go and have a look at your order book. Go and have a look at your last orders. Go and see. For me, and I'm sure it's the case for you, I've ordered a— there's a downward trend of stuff I've been ordering on Amazon. Over the last few months compared to 2020. And so if that's the case for you, well, most likely that's going to be the case for everyone else as well. So you've actually got data that you can access here to kind of make decisions on Amazon. I think Amazon perhaps are the only one out of these big guns that you can kind of do that. I mean, I think if you think about Facebook or Google, well, obviously their revenues are coming from businesses paying to advertise. So unless you run a business and you have an advertising budget, then of course you're not, you're not really As a consumer, you're not going to have that access to some actual meaningful data on that front.

So what's interesting then is I absolutely agree, there is a downward trend. I know certainly speaking for myself, that is the case. But the inversion of that graphic would be the total amount of employees at Amazon, which is now clocking in at near 1.4 million. It literally jumped. They've employed really since the onset of the pandemic, probably an extra— just looking at the graphics now— half a million people. And their operating margins and free cash flow, I was looking at in some of the graphics this morning or charts. What's your take on that? Is that just a matter of they had to make these changes? I remember we were sat here a year ago having a conversation and people were worrying about the amount that they were spending to realize the potential of the opportunity that the pandemic brought. And so isn't this just expected when you look at some of these charts about squeeze on margins and things like that?

Yeah, I think that's an amazing stat that Amazon employ nearly 1.4 million people. That's crazy, right? And as you say, it's gone from about 800,000— sorry, yeah, 800,000 before the pandemic, right? Obviously, their cost base has massively increased in order, as you say, to take advantage of the COVID situation that saw their sales go through the roof. Obviously, all these purchases require delivering and the logistics that goes behind that. For you, clicking a button and then the doorbell rings, that's great convenience. That's why it's such an amazing, life-changing business and products. Obviously, the logistics behind that are huge. The logistics logistical costs for Amazon have gone up massively. I'd say that they're building their platform. It's always been Amazon's model to have a low margin. They've purposely been a very low margin business because it's always been about plowing it back in, plowing the money back in to make that service to your consumer even better. That's things like speed of delivery, getting warehouse facilities close to the high population areas where real estate's expensive. But they've invested in this infrastructure, which is what makes them so powerful. And look, we'll talk about in a minute when we get onto China. We won't talk about it now. But this whole story around tech domination and these— a small number of tech giant tech firms now becoming all powerful. On the hand— on one hand, that's a real negative, and we're going to talk about it. But actually, there are counterarguments to reining in these giant tech firms. And that is just on that point, they employ 1.4 million people. If you start reining them in and chopping them up, well, then how many of those 1.4 million people are going to lose their job? Well, probably quite a lot. And actually, for all that's bad about giant tech and market domination, and, you know, for all that's bad, they— it brings massive benefit.

And also as well, see, the decision makers on, on Capitol Hill, there's also the implication of the value of the data, surely, that these companies possess for national security, for example. And so breaking them up and making them lesser effective does have other knock-on subsequent effects, I feel. As well.

Yep, yep, absolutely.

But yeah, yeah, so you go first, and I've got a good summary here from the CEO of Microsoft who I think summed it up quite nicely.

But okay, yeah, I mean, yeah, just in general, and these tech earnings, I mean, I think obviously tech has been, uh, you know, through COVID has been one of the absolute outperforming sectors, of course. And you know, that's not going to change. I mean, whilst You're getting short-term volatility. Yeah, Amazon's share price down 7%, but it's doubled since COVID started. So it's just a small little blip. And obviously Amazon are here to stay. And they'll continue— I'm sure in the long term, they'll continue their growth trajectory for sure until the regulators come in and break them up, whenever that might be. But until that moment, these guys are super safe in terms of investments, and you're going to see, you know, their, their kind of revenue growths, you know, continue, I'd say.

Well, actually, um, and maybe a quick, um, word on this point. I'm pretty sure I saw Apple come to market straight away this week offering a whole new batch of bonds to the marketplace, right? Exactly what Amazon did last quarter as well. Yeah, sign of the times.

Yeah, it's free money, isn't it? It's free money. And then whilst that— this is the irony— Apple have $200 billion cash, and yet they raise capital through the bond markets. And a lot of that is because a lot of that cash is offshore, and if they bring it back, you know, they're going to get taxed on it. So it's actually cheaper for them to raise capital via the bond markets rather than— so to borrow money, even though they've got a load of cash sat over there. So it's a very strange world that we've— we find ourselves in.

Well, look, this is what the Microsoft, uh, chief exec said. So Satya Nadella predicted this week that the growth in consumer demand for technology after getting a one-off lift would normalize. Makes sense. But he also claimed that the massive dislocation from the pandemic has made all companies realize that they need to overhaul their operations to make them more resilient in future. If that is right, then the tech boom has got a lot further to run. Personally, I think he's right on the money with that latter statement. If anything, it's almost like, what do we learn in all walks of markets, but in general as a society, it takes a crisis to readjust and learn and be better for the future, right? As much as I'm not belittling the situation, it's obviously a horrendous humanitarian crisis we've had, but in terms of the ways of which our— hopefully businesses are set up is to be more robust, because there's always the threat of this recurring in the future, isn't there?

Yeah. And you know, it's a classic— crisis forces change, doesn't it? It forces you to change. And then once you've changed, you're like, ah, okay, why didn't we do this before? And the benefits are so then, like, amazing. You're like, okay, Great. Well, obviously, let's maintain this change. And yeah, of course, the tech, you know, the kind of long-term secular, you know, technology boom has definitely not— is definitely not coming to an end, obviously. And, you know, there's years left in that story. Um, yeah, so they'll be fine. These lot will be fine, you know, even though Microsoft, gah, only $46 billion. Yeah. They'll be all right.

Cool. Well, look, let's move on and let's talk about China, because I know talking offline you've got some interesting— an interesting take about the longer-term implications what have been happening. So short-term, what we've seen is, um, to summarize it, China are not happy about how big some of these, these firms are getting, and particularly because a lot of them are technology-oriented, and it then is evolving around data and the accumulation of data. And data is, as we know, is the commodity of power in many respects. And so China don't want that going to private companies. And so they've been doing this big crackdown in technology. And this week, the introduction of education, and also the property sector was under pressure midweek. Until then, obviously it destabilizes markets to the point where they then come out and it's almost what we refer to in markets as slang terms as the plunge protection team get the green light to come out in force. Really, China do not mess about when they want to really turn the tide on a market move. The state-run media comes out and starts basically publishing a series of articles talking about the rout is overdone, the government will do what is necessary. Some analysts also speculated that there was government-linked funds who actually were physically intervening in the market to prop it up as well. So just your take really on this. And I know there's a short-term and long-term way to look at this. So good to get your take.

Yeah. God, the Plunge Protection Team. That's got to be the best name for a team. I want to be in that team.

We only get called upon every now and again though.

We're the hit team.

We're the hit squad.

I think this is— yeah, I guess there's so many elements to this story, the general story of China, of the Chinese Communist Party beginning to kind of slap down tech, and as you said, now education. There's so many different angles to it. But I think maybe to start with, it's interesting to compare the situation of China and the US. In one way, because in, in one respect, both have the same problem, and that is that there's a handful of tech giants in each company— sorry, country— different tech giants. I mean, now, so you've got your US ones, and then you've got your China, Czech giants, but they've both got like 4 or 5 tech giants that have become monsters. They're so huge. And they've become so huge, and they've got so much power, and they've got so much data that governments are sitting up and going, hang on a minute, this is unhealthy long term. We're going to need to start thinking about dealing with this problem. So they've both got the same problem. It's just really interesting to see how a communist regime versus a democratic economy and society and government— it's really fascinating to see how they approach it differently. And I think I think in the short term, China's got the advantage, because they can just do whatever they want, whenever they want. And that means they can address the problem way faster compared to the US. But actually, I think in the long term, it's actually really negative for China. But so really, this is China basically saying, no more, like, devolution of power, right? We're the Communist Party. We are in control. We need to be in control of our economy, of our country, of our, you know, you know, the, the distribution of content and controlling the media and people's data. We're in control. And hang on a minute, you lot, you tech lot, you're getting too big. You now have too much control. Get back into line. They're just waving their stick and beginning to address this issue where they now think they've lost— they don't have the control that they need to do what they want. It's basically taking operational control back of data, of these big sectors. Basically, they're saying that we, as in the Communist Party, we we'll control how money is made, and we will control who makes that money. We are in control of wealth creation, and it's going to happen, you know, under the terms that we define. Okay, so this is their message, and you know, that, that, that's happened, and you've seen that. I don't think it's necessarily a surprise on one hand, because that risk has always been there. We know that. They're a Communist Party. And they've done other stuff where they can just do what they want when they want. And that's how it works. And so we know that risk has always been there for investors. It's just that people have, I think, had forgotten about it, or had just put it under the carpet and ignored it. Well, now it's here. Now it's back. And so it is a massive wake-up call for international investors when you start investing in Chinese companies It's a huge wake-up call to say there is a very big risk that you can't control that can happen at any moment.

Yeah, because it kind of felt like over recent years, at least, perhaps somewhat destabilized through the Trump era, but China had been really making a conscious effort to improve their global kind of PR. I remember seeing, I think it might have been Davos, several years ago, and President Xi was headlining about environmental change.

Yeah.

And then France didn't attend. I was like, what is going on? Have I woken up in a parallel universe or something? And obviously China has, as people know, this kind of longer-term ambition with being this global dominant economic force, and with that being the de facto lead trade partner in the world to long-term see the transition of power from America to China. But I mean, how do you navigate them trying to fulfill the objectives of the Communist Party, but at the same time have that ability, have foreign investors feel confident to invest and to trade with this nation?

Yeah. I mean, I think one long-term— yeah, okay, the Communist Party long-term, fine. Obviously, they want to become the biggest and most powerful country in the world. And I think that over the— I think 10 years ago, people's opinion on that was, yeah, that's going to happen, it's inevitable. 10 years ago. I actually think now the chances of that happening have reduced. And I think this is all due to the demographics of that country and the demographics, uh, crisis. And this is their one-child policy from back in the '70s that has now meant that they've got, uh, an aging population with a really low retirement age, by the way, which is in the 50s, which is a big problem, plus a birth rate that's 1.3. So that means each female is on average giving birth to 1.3 babies— on average, obviously. But of course, you need a male to have a baby with a female, so that means for every couple, for every 2 people, you're getting 1.3 produced. So that production rate means that the population is— has peaked. And it's interesting because they issued their census data. They do a census once a decade. And so the census data for between 2010 and 2020, right? So in 2020, they measured the population and it came in at 1.41 billion. Okay, it's the official figures. And that compares to 1.34 billion in 2010. So the population has grown. There's definitely speculation that they've massaged these numbers and they're not right, but let's just leave that for a second. So that's a 5.38% population growth rate in that decade, okay, which is the slowest growth rate that we've seen ever since we've been measuring the size of the Chinese economy. So it's slowing, and I would say it's, it's going— the size of their population will peak this decade. It might already have peaked. Now the problem is that they're not— even though they've scrapped the one-child policy now, they scrapped that a few years ago, um, they scrapped it way too late, but anyway, at least they scrapped it. But the problem is, even though they've scrapped it, that, you know, people aren't having children, and that's because it's super expensive. And this ties in, by the way, to what's happened this week on education. I'll come to that. It's so expensive to have children, and actually it's quadrupled. They reckon on average the cost of having a child has quadrupled in the last 10 years for Chinese couples. Also, women and the way the Chinese— you know, the way the labor market works and the way the workforce works and the kind of hierarchical system of the workforce in a Chinese company— women are really scared of having children too young because it will have a devastating impact on their career potential. So there's a, there's a real problem here because, fine, scrap the one-child policy. It hasn't, it hasn't worked in terms of getting that birth rate. They need the birth rate back above 2, and it's at 1.3, which is as bad as Japan, by the way, which has the worst demographics on the planet. So, um, they've got a real problem here, and And if it carries on, I mean, here's a great stat, right? So they've got 1.4 billion people. If the demographics don't improve in terms of birth rates and so on, by the end of this century, their population would have dropped to 700 million. Wow.

That's crazy.

Yeah. So this is a big problem for the Communist Party in their objective of trying to become the biggest and best, because they've got an aging population. And how are they going to afford to maintain this aging population? And I think what's happened in the last few months, and what's happening again this week with China slapping down big tech— now it's on to education. On the one hand, I think it's the very beginning of what will be a, you know, a long-term project, which will essentially be to renationalize their economy. Take back control because they're going to need all of the profits that these amazing businesses that have been built, these profits they're generating, they need it to actually afford to finance this, this economy that's evolving. Secondly, with that child, with, with the fertility rate problem, why do you think they've— yeah, tech has— that's the number one, right? They've taken down tech, or taking down tech. Education is number two. Why do you think? Because education is so expensive. It's so competitive. Everyone in China is spending loads of money for private tutoring for their children in school because basically it's your end of school results that determine what university you get to. What university you get to definitely then determines what type of job you can get. There's, you know, we have a similar but much more diluted problem in the West. You know, if you went to Cambridge, great, you might have better opportunities to get jobs at Goldman Sachs. But actually, Goldman Sachs are now employing people from, you know, no disrespect, but Bangor University, right, which isn't as good as Cambridge. But actually, you can still, you can still make it, right? But in China, you can't. So they're spending so much money on tutoring their kids. This is what's led to the cost of having a child being so astronomical, which is preventing people or deterring people from having children. So it's kind of all tied in.

Um, well, you know, being, being half Chinese, I can only produce quarter Chinese children, so I'm gonna have to knock out 8 of these. Is that what you're telling me? So just help the national, national team out?

Absolutely. Plunge, Plunge Protection.

Okay, after this podcast then, I'll tell my wife we need to have another 7 children, by the way, just because to do our part.

But, uh, I'd like to see her reaction to that. But I think there's a short-term and a long-term thing here. From an investor's point of view, short-term just highlights the massive risk that China's— the Chinese government can do whatever they want, whenever they want. And if it happens to be involving the companies or the sector that you're invested in, you know, you mentioned Tencent, I mean, dropped whatever— what was it, $100 billion in market cap or something? $150 billion. Well, there's a company called Gao Tu, which is one of the education— big education giants. Their share price went from $142 to $3.

Ouch.

So if you think the Tencent share price drop is big, well, that's nothing, right? But then this is all short-term stuff, right? I mean, I think long term This is about renationalization. It's about, I guess, again, comparing it to the US. The US are going through this process of reshoring. So we used to have offshoring, where companies would— like Apple— would go, well, hang on, why are we messing about manufacturing our products here in the US paying US salaries? Let's manufacture it in China, where we can pay Chinese salaries that are a fraction of the cost. Offshoring. Well, now it's reversing, and reshoring is the thing. And if you like, here, China are doing the same thing. They're reshoring with all this clampdown on tech firms IPOing on the New York Stock Exchange. I mean, they don't want that. Now, their tech sector's become— they see it more as a source of— it's a security risk problem. It's a source of social problems. So they're reshoring their their IPO process, right? And they want companies in China to IPO in China. It's almost like there's a decoupling, if you like. It's the start of a decoupling between these two financial systems. Not that they coupled particularly well, but, you know, in the last couple of decades, it's all been about China opening up, Chinese markets opening up. And I think now we've seen the end of that, and we'll see them march ship back. I think in the long term, this is really bad for China. Because if everything goes nationalized, well, you're going to kill innovation. What's the point in being an entrepreneur in China if in the end you're not going to benefit from it? I think it will suppress innovation in the long term. I think actually, ironically then, this will mean they're less likely to achieve their goal. Of having the best and biggest economy, right? Because if you renationalize it, you're gonna— you're gonna stifle innovation, and in the end, that's— that's— that'll come back to haunt them. But they're forced into it because of the demographic crisis.

Yeah, I mean, it's fascinating to like think of the— how multi-layered this— this is. And I guess bringing it back to the 6 months ahead, because this incorporates some of the questions that we've had in our community, which is people— for a lot of people, this has just come out of nowhere because there's a lot of new market participants. They're like, wow, what's happening in China? And they see these dramatic falls. But is there any risk of implication of Fed normalizing over the period of the next 6 to 12 months, I guess the initiation of tapering and timing around that? Or is this just a very short-term episode that we look back on that was the first of this process you're describing and actually, no, this isn't really going to be a global issue to confront in the short term?

Yeah, I don't think it's a global issue to confront in the short term. I don't think this will have any impact on the Fed's taper timing. What's way more important for the Fed will be, well, the fact the GDP figure that got announced yesterday was quite a bit lower than expected. You know, they're hoping inflation's transitory and it's going to start to come back down. And, you know, that's why I think markets in a way— well, you know, you still got the S&P made a new all-time high yesterday, and that's because, you know, there's the— we're starting to now see beyond the, um, that initial sharp post-COVID rebound. We're now seeing beyond that transitory inflation spike. And what we can see is that actually growth rates are going to slow here. Growth rates have 100% peaked. Now they're going to slow. So actually the Fed may well have to just keep going a little bit longer. And so they, you know, if anything, tapering will be delayed, um, because of those economic factors in the US. I don't think at this point anything the Chinese government are doing will have any impact on the timing of the Fed.

Yep. And on that point, then, I think that's a good way to conclude with that matter-of-fact statement. That's what we like from the head of trading. But look, let's wrap it up there. Hope you enjoyed that episode. I don't normally ask this, but if you're listening and you made it through to the end, thanks for sticking with us. But it would be really great if you could leave us a rating. If you're listening on Apple, a review. If it's Spotify, then just hit the follow or subscribe button. It's slightly different on each platform depending on where you listen. But, you know, we'd really love and appreciate if you could do that and get the channel out to as many people as possible. Our aim is to help you guys, and so feel free to get in contact. You know, we're on Twitter or other social media if you have any requests of content, things like that. We're absolutely happy to tackle stuff you guys want to hear. So with that, Piers, thank you as ever, and have a good weekend, everyone.

Yep, thanks guys, bye.