Bill on Secure Freedom Radio 1/11/22

Frank Gaffney (00:00):

We’re back, and as is our privilege each week, we are featuring our guest next, Bill Walton, the host of The Bill Walton Show, a terrific television podcast. He is also the former chairman of Allied Capital Corporation, a major Wall Street player, knows his way around the financial sector. He has been a leader of the conservative movement now in recent years as the past president at this point of the Council for National Policy, which I’m proud to be a member. He is also just a fabulous guest here, and we’re always delighted to welcome him back. Bill, it’s good to have you, sir.

Bill Walton (00:39):

Frank, great to be here.

Frank Gaffney (00:40):

I want to talk with you about several issues involving China, Bill, because you’re following that story closely now, both with your television program and your other good works. China has increasingly been buffeted in international capital markets with the seeming bloom coming off the rose shall we say of those investments in China that had been, well, tractor beams is the way I think of it for a lot of Wall Street mavens like yourself. What is going on and why with respect to these Chinese financial instruments, stocks and bonds of companies controlled by the Chinese Communist Party?

Bill Walton (01:32):

Well, there’s been a fascinating divergence this year. If you look at Chinese companies and the ones that are traded internationally, New York Stock Exchange, et cetera, versus the Chinese companies that are traded domestically, the companies trading off-shore have plummeted, fallen almost over 42% in the last year to 2021, while Chinese companies listed domestically have risen by that 20, 22%, which more or less tracks what the S&P 500 did in 2021. And what’s happening with the off-shore companies is that they’re getting clobbered on two sides. One, they’re getting clobbered by Xi. Most of the companies are the tech companies, the sexier companies that would be appealing to international investors and Xi cracked down on them, both in terms of governance and what they can do and where they can be listed.

Frank Gaffney (02:26):

That would be, of course, Xi Jinping, the dictator of China you’re speaking of.

Bill Walton (02:30):

Gosh, I thought everybody … Yeah.

Frank Gaffney (02:33):

I think in this audience, that’s the case, but just to be careful.

Bill Walton (02:38):

I think most of us would. Anyway, yeah, Xi is the guy. So his crackdown is getting very heavy-handed and there are a couple things. One is that the government interventions make investors worry a lot about the unpredictability of how the business models can change. The tutoring companies last year, Xi decided that they didn’t think they should be for-profit, and he essentially just shut them down. And if you had shares in it, you saw them go to zero. So on the one hand, you’ve got what Xi is doing. And then on the other hand, I think investors are waking up. And a lot of the work we’ve done here to put on notice that if you’re investing in a Chinese company that’s listed on the New York Stock Exchange, they probably have not been audited properly.

And we now have rules in place, which is going to force all of them to comply with US audit standards within the next three years. And in China, the Chinese Communist Party does not want to see that happen. So they’re withdrawing from the US international capital markets. There’s the other thing that’s going on, the Chinese companies listed in China are pretty much the construction companies, the boring cement companies, the food companies, things like that, which don’t have much sex appeal. Nevertheless, they went up 20, 25% in last years. So there’s something that we need to watch.

Frank Gaffney (04:00):

So you’re saying that because the Chinese tech companies are not so prominent in the Chinese market and the boring companies are simply beavering away, that Chinese investors who presumably are basically picking up the slack for the international investing community are doing so without the same concerns about the Chinese government’s unpredictable manipulation or other predations with respect to these more high flying companies. Have I got that right?

Bill Walton (04:37):

I think that’s right. The thing we need to keep in mind about China is they have 400, 450 million middle-class families or investors and they’ve been primarily focused on the real estate market, the property market, or bank accounts in China and they’ve had no place else to go. And one of the reasons the Chinese Communist Party wants to bring a US securities firm into China is to modernize their capital markets and give investors someplace else to go. And that’s beginning to have some effect. And so if you’re Chinese, you’re investing in a Chinese company, you’re investing something you know, a cement company, a food company, something like that versus a high flying tech company, which you may not understand as well. So there’s some of that going on as well.

But China overall is trying to disengage from the international capital markets where they’ve been heavily dependent on it for the last couple of decades. And this is a piece of engineering that Xi is endeavoring to do and he’s in uncharted water. I mean, DiDi, the ride-sharing company where he demanded that they de-list from the New York Stock Exchange, seen its value fall by 40, 50%, and it’s still falling. And so even if you’re Chinese investor, you look at DiDi and you see that it’s subject to all of the security issues that Xi’s raising, and you say, I’m not going to put money there.

Frank Gaffney (06:03):

But you touched on something, Bill that underscores a concern we’ve had for some time on our Committee on the Present Danger: China, for example, of which are a member, namely that our masters of the universe, your colleagues on Wall Street are determined to enable the Chinese Communist Party in its various ambitions. And whether it’s putting American investors’ funds at risk in China, as they have been doing now for decades, or whether it’s this new prospect that they’re going to try to help the Chinese Communist Party overhaul their own capital markets and create a mechanism for funding, their ambitions as I say, domestically, it’s not in the interest of the United States, either of those, it seems to me. And we have guys like Larry Fink, the CEO of BlackRock, the largest investment company in the world, all in on these agendas. And he got a little bit of well, press about what he’s up to in terms of his own global ambitions. Talk a little bit about what they are and whether they should be of concern to us.

Bill Walton (07:18):

Well, Larry Fink runs BlackRock. BlackRock manages almost $10 trillion of pension fund money, endowments, individuals, companies. And put the 10 trillion in context, that’s about 10% of the world’s gross domestic product in 2020, so it is significant. And because of the shareholdings that they have, BlackRock and the other two big money managers, they’re the largest shareholders in more than 80% of the companies traded on the S&P 500. And so they have real clout, and Larry, really along with the other CEOs of the investment managers who are big proponents of the climate change agenda and ESG investing, which we’ve talked about, but there’s beginning to get a lot of pushback because there’s not a lot of evidence that ESG investing or climate change investing is really promoting a high returns in the portfolio.

And then there’s also just the arrogance factor. Sam Zell, who’s a very colorful guy, real estate developer from Chicago, a billionaire himself, he said on CNBC, “I didn’t know that Larry Fink had been made God.” And then Larry presides over all this and, of course, Larry’s lives well. He’s got a huge horse farm up in Westchester County, but I think he sees himself living in the United States, but he sees his platform as global. And he’s probably more at home there in Davos than anyplace else.

Frank Gaffney (08:48):

Citizen of the world, as they call him.

Bill Walton (08:50):

Yeah. Well, unfortunately, we have way too many of those.

Frank Gaffney (08:53):

We do. And unfortunately, as you say, Bill, they’re using their clout to try to affect the global reset that they’ve put [crosstalk 00:09:02].

Bill Walton (09:02):

But here’s a question. Here’s something. There’s subject matter expertise. There’s circles of competence. And Larry Fink got his start at First Boston. He ran a desk that put together mortgages and loans and sold off pieces of the business. I’ve actually been in that business. It’s a pretty good business. It’s arcane. But your ability to package bonds together and sell them off, I don’t think gives you any special insights into climate change or being able to dictate the social agenda of companies. And there, they’re seeing a lot of pushback. I think most investors or most Americans, he’s not alone among the woke CEOs. There are many of them, Delta, Major League Baseball, Pepsi, all those have been pushing various progressive agendas. Americans don’t like it. There’s a poll recently, came out 65% of Americans think they ought to stick to selling Pepsi and stay out of the social change business.

Frank Gaffney (10:02):

Well, those are presumably shareholders, not stakeholders. And this is part of that progressive agenda. You called it ESG, environment, social justice, governments. It’s about giving people who aren’t actually part of the company the benefits of the company, and not so much people who are.

Bill Walton (10:20):

Here’s a question. Next time we go to an investor conference, let’s ask them to define what a stakeholder is. You get into that and it ends up the blurriest definition imaginable.

Frank Gaffney (10:27):

It can be anybody you wanted it to be, I think. Yeah. Exactly right. Hey, Bill, I was talking with Gordon in the previous segment about a problem with respect to China that has truly global implications, namely food shortages and what China is doing to corner the market as it is want to do on rare earth minerals and lots of other things on food as well. And it’s taken huge positions on grains and corn and other commodities that would be in very short supply if it turns out it’s not just China that is short of food, but others of us as well. You have called my attention, an article about what may be a driving factor in that food shortage in China and one that has repercussions again, far beyond China’s borders, particularly in Asia, and namely the shortage of water and what the Chinese are doing to deprive people downstream on rivers that flow through China of water they desperately need as well. What can you tell us about that?

Bill Walton (11:44):

Well, let’s give some credit to Hal Brands at AEI who was writing a book about this issue. It’s called The Danger Zone. He wrote it with Michael Beckley. And we think of there’s a tendency if you’re not too close to it, to think of China as inevitable, massive land area, huge population, 1.4 billion, and they’ve successfully implemented some capitalist reforms. They played the global trade system effectively. And the fact is they are not inevitable. China is now the world’s largest energy importer. It buys almost three-quarters of its oil abroad. And this is at the same time Donald Trump was making the United States a net importer. And it has 20% of the world’s population, but only 7% of its freshwater. And food shortage is in part due to the water problem. And we also need to step back and see how polluted China really is. Its rivers and lakes are incredibly toxic. And there’s estimates that some 80, 90% of its groundwater and half its river water is too dirty to drink.

And so they’re now beginning to adjust. And of course, in typical Chinese Imperial fashion, they’re deciding, well, if they build some dams on the Mekong River, they can preserve water for the Chinese. But what that does is it beggars the country’s downstream, Thailand, Laos, really devastating effects on the rest of Central Asia. And they’re also going to dam some rivers that lead into India and Bangladesh. And so China in solving parochially its water problem is creating just more and more enemies around its border. I mean, they already don’t like China very much for a lot of other reasons. But when you start damming the river upstream, it’s sort of like the old west, that’s a fighting word or fighting, whatever my term is here. Let’s get out our six-guns and go after them.

Frank Gaffney (13:48):

Well, and Tibet is a place where this is being particularly egregiously felt because the headwaters of whatever it is, seven or nine of the world’s most important rivers, I believe come out of that watershed, and the Chinese are busily despoiling that land with dams and other water projects to divert the water to China from what would otherwise [crosstalk 00:14:14].

Bill Walton (14:14):

Yeah, Tibet’s sort of the epicenter poster child for this phenomenon.

Frank Gaffney (14:18):

The mother of all rivers.

Bill Walton (14:19):


Frank Gaffney (14:19):

Yeah. No, you’re exactly right. And they’ve treated the Tibetans very badly for a long time, but this is taking it to a whole new level, I’m afraid. Bill, lastly, let me just ask you about the Genocide Games if I could. We have been told for some time now that they’re inevitable as well, that the Chinese are going to have their way, that the United States government may or may not even diplomatically boycott them, but certainly there’s not going to be any chance that the athletes will forego the opportunity to compete in Beijing. And in the process, as Gordon was noting, legitimate arguably the most horrific regime on the planet in the midst of its genocide, no less, yet there do seem to be developments including this burgeoning outbreak of COVID and perhaps other diseases, hemorrhagic fever among them, that are now, as Gordon has pointed out, not simply elsewhere in China, they’re in close proximity to Beijing and will almost certainly be evident at least some of these problems of the pandemic in close proximity to the Olympic Games.

My personal view is that the athletes are at risk if they go, I think from perhaps other ploys that the Chinese may pull like using quarantine to diminish their preparedness to compete. But apart from that, just simply the likelihood that they will be exposed to one or the other of these possibly life-threatening diseases would seem to be a pretty compelling reason for them not to participate, let alone become part of perhaps China’s next athlete-driven super-spreader event. Your thoughts.

Bill Walton (16:13):

Well, if these Olympics, which are just about a month away, if these Olympics were held in any other country with this list of problems that you just cited, there’d be an international cry to move it or postpone it and to dodge this impending catastrophe. But it’s not just another country, it’s China. And China has so many deep relationships with US people involved in that world, the NBA, Disney, Nike. I mean a lot of the sports world, athletic world, the networks, they’re all making a fortune from their business with China. And the Chinese are very aggressive about saying if you go against us on anything, we’re going to come back at you and hurt your profitability, or maybe toss you out of the country, or shut you down. And so this is an interesting test of the international community. And so far, the international community is flunking it. And I’ve got a dissonant, Chen Guangcheng coming on my show later on this week, and hopefully, we’ll get the show out this weekend or Monday.

Frank Gaffney (17:22):

He was with our friend Reggie Littlejohn, as well as I understand it.

Bill Walton (17:26):

With the wonderful Reggie Littlejohn, who’s been fighting this fight forever. And we’ll be talking about this. And of course, Chen has been inside Chinese prisons. He knows firsthand what this is like to be a Chinese dissonant or to be caught in the web of being opposed to the Chinese Communist Party. And he’s got a long list of abuses. And it’ll be interesting to hear from him. It’ll be fascinating TV because Chen is blind and doesn’t speak much English, so we’ll have an interpreter.

Frank Gaffney (17:58):

But he influences [crosstalk 00:18:00].

Bill Walton (18:00):

That last time you had him on, he was so compelling, you almost understood him in Chinese.

Frank Gaffney (18:05):

Well, good. We all should understand him because he’s speaking an international language, that’s for sure, that of human rights and freedom and how it is being imperiled by the Chinese Communist Party. Bill, I salute you for that focus of your program. It is a terrific one. Please follow Bill Walton’s television program and other works. And of course, follow him here. And, Bill, we look forward to visiting with you again next week. Same time, same station. Until then, stay well, my friend. Thank you for joining us. Sam Faddis is up next, completing our trifecta for Monday, right after this.


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