Bill on Secure Freedom Radio 11/29/21
Frank Gaffney (00:00):
Welcome to Secure Freedom Radio. This is Frank Gaffney, your host and guide for what I think of as an intelligence briefing on the war for the free world. We are always privileged to have with us, a man who has been in a number of interesting trenches in that war for some time. His name is Bill Walton. He is a former financial maven on Wall Street. He has also been leader of the conservative movement at the Council for National Policy, which he’s now as president, I’m a member. He is also the host of a terrific TV podcast, the Bill Walton show, which I strongly commend to you all. He’s also one of our regulars and we’re always delighted to catch up with him and usually kick off the week with Bill’s insights. It’s good to have you with us, sir. Welcome back.
Bill Walton (00:42):
Great talking with you, Frank. You’re talking to a healthy and happy survivor of the Wuhan virus.
Frank Gaffney (00:46):
Bill Walton (00:47):
Which I can report [crosstalk 00:00:50] is not that big deal. It’s pretty cool.
Frank Gaffney (00:51):
There’s a new strain headed our way. And so I hope you are well positioned with your natural immunities to stave that off. Let me ask you Bill, we’re going to be doing speaking of China, a webinar about the extraordinary, indeed almost I think unprecedented degree to which one country’s financial sector is underwriting the threat posed to that country by another, in this case Wall Street’s use of our pension funds and other index funds, 401k plans, the like, mutual funds, to especially enable all of the various things the Chinese communist party is doing to threaten this country. You are going to be participating in a webinar on this subject, I’m very pleased to say on Thursday of this week from 1:00 to 2:30 Eastern time brought to us by the Committee on the present Danger of China, of which you and I are members. I wanted just to get your thoughts on specifically the topic we’ve asked you to address, which is what an earth are these masters of the universe on Wall Street thinking as they engage in this obviously self destructive behavior.
Bill Walton (02:07):
Well, it’s self destructive to us maybe, but they don’t see that as self destructive to them. Well, most if not all of our financial institutions, major financial institutions seem to be proceeding if there’s nothing amiss. We have BlackRock, we have Vanguard, we have JP Morgan, we have Bridgewater Associates, all pushing to do more and more business inside China. In the meantime, there’s securities operations, at least those of JP Morgan and Goldman Sachs have been raising money for US or Chinese companies in the US capital markets. And maybe to the tune of a trillion dollars of money that’s going to fund Chinese aggressions. And a lot of us are saying, “Okay, this has got to stop.” And we’ve got to have the people like Jamie Dimon who runs JP Morgan tell us what he thinks he’s doing as an America’s interest.
Frank Gaffney (03:01):
Well, speaking of Jamie Dimon, what we saw him do recently after a trip to Hong Kong and I believe other parts of China as well was crack a joke. But by the time he got back to the United States, he thought not only better of it, but he decided that he was going to in the most craven way, prostrate himself as the Chinese like to say kowtow before Emperor Xi to apologize for suggesting Jamie Dimon’s JP Morgan might outlast the Chinese communist party. What did that tell us, that episode about the relative power dynamic and also the subservience now of these companies to the Chinese communist party?
Bill Walton (03:47):
One of the reasons we like Jamie is he’s unlike most CEOs able to try to use some humor to make his point. And he was making a point that JP Morgan had been around for a hundred years and so has the Chinese communist party. And he bragged that JP Morgan would outlast the Chinese communist party. That was not well received in Beijing. And so, he [crosstalk 00:04:11].
Frank Gaffney (04:11):
No sense of humor, those chi coms.
Bill Walton (04:14):
Nah, no, that’s not the wrong suit. I don’t know. They’re not doing a lot of standup in Beijing. So anyway, he went back and he apologized and he regrets that should not have made that comment of trying to emphasize the strength and longevity of our company. And then he said something else that was even, he didn’t mean to denigrate any group of people, whether it’s a country, the usual grovel, but the Chinese official response to this is delicious. They called it, “We welcome his sincere reflection on his remarks.”
Frank Gaffney (04:49):
Sincere reflection that apparently wasn’t sufficiently sincere the first time he did it, so he had to do it again, apparently with even more groveling.
Bill Walton (04:58):
He did it twice.
Frank Gaffney (04:59):
Very, very sincere.
Bill Walton (05:02):
JP Morgan has roughly $20 billion of exposure to China. I think it’s probably more than that. That’s the number I’ve seen. And in terms of it’s footing, which are trillion dollars plus, it’s not that big a deal, but strategically JP Morgan, Steve Sinos the second largest market in the world, with all those consumer savings dollars that it wants to be managing and he wants to make nice with the Chinese communist party because he likes their position there.
Frank Gaffney (05:31):
Well, this is, I guess what we’re going to be exploring with you among others in our webinar, from the Committee on the Present Danger of China on Thursday, 2nd of December from 1:00 to 2:30, please register for it at the presentdangerchina.org website, because we’d love to have you on the question of are you investing in our destruction? Let me turn to another topic, not unrelated that I’m not quite sure what to pick of. A couple of companies in China that have been undergoing considerable turmoil, reinforcing the general point that maybe investing in these companies, especially without getting the full audits and the transparency that say American companies are obliged to provide under Sarbanes Oxley sweetheart arrangement that Joe Biden actually was responsible for negotiating back in May of 2013 when he was vice president.
One is DiDi, a ride sharing app that had a very hot IPO on Wall Street. And then almost immediately went cratering because of Xi Jinping’s machinations, as I understand it, Bill. Then the other is Evergrande, the real estate company that seems to be defining a bubble in a whole new dimension. Talk about those two companies, if you would and what is happening to them and what it might mean for investors, whether it’s the BlackRock types or us.
Bill Walton (07:11):
Well, let me take Evergrande first because it relates to the earlier point I made about China welcoming US securities firm into the country. China has a very primitive investment sector. And if you’re a Chinese investor or retail investor, your primary way to invest has been real estate. And specifically there’s a lot of speculation in single family housing and they’ve tremendously over invested in this. And the biggest player is company called Evergrande. We’ve talked about that before and Evergrande is in a situation now where its assets or its debt is equal to about 150% of its assets. It’s interest coverage is negative, which means it doesn’t have enough cash to pay interest on the debt outstanding, let alone the tens of billions of dollars it owes its suppliers. And then, as an ex banker, you say, “Okay, well their assets, what’s the coverage?”
Well, turns out all the assets are mainly, 90% of their assets are unfinished residential housing, which if you had to take it out and sell it in a market would fetch almost nothing. And so what the Chinese are doing here is they’re orchestrating a government sponsored bankruptcy, and they’re going to be taking these assets from Evergrande and putting them into quote state sponsored entities. And this is another big problem with the Chinese capital markets is they never admit failure, nothing goes bankrupt. Everything goes into a new entity. And so they’ve got a lot of dead assets and thousands of companies in the country and the Chinese communist party is going to work to spend these plates. And it’s not just Evergrande that’s in trouble. They’ve also got issues with many of the other smaller real estate developers, all their financials all look pretty much the same. It’ll be interesting to see how Beijing manages through this mess.
Frank Gaffney (09:19):
But the bottom line, Bill is if you wound up putting money into Evergrande or your pension fund manager did, or your index fund BlackRock or somebody else manager did, you have lost presumably your shirt. And it doesn’t sound as though you’re going to benefit from a bankruptcy arrangement. Do you think?
Bill Walton (09:45):
Well, it gets back to relaying our first point, Ray Dalio, who runs Bridgewater is plunging ahead with yet another fund in China. And he still thinks Americans ought to be diversified into Chinese and add all Chinese companies in their portfolio. Well, let’s talk about the fact that the Chinese communist party basically put the private sector tutoring businesses out of business. So if you had an investment there, it was a wipe out. Yet, Mr. Dalio thinks he’s got profound insights the rest of us don’t have, and he says, “Western observers have missed out on what’s going on in China and probably will continue to miss out.” Sounds pretty honest.
Frank Gaffney (10:33):
And quickly, what have we missed out on in DiDi?
Bill Walton (10:37):
Well, DiDi, it’s China’s equivalent of Uber. It’s a ride sharing company and against the wishes of the Chinese government, they went public in the US last year or maybe earlier this year, and it’s a $38 billion company. And 58% of the share holdings owned by the two founders. And of course, China’s also cracking down on their self-made billionaires. And what China’s done is they’ve ordered Beijing, or not Beijing, DiDi to delist from the New York Stock Exchange, in effect doing what we would like them to do. But anyway, they are concerned. And this order came from the cyberspace administration of China. And they’re concerned about leakage of sensitive data, which I find and you must find amusing because they’ve been mining our data in our countries for years. They’re going to try to re list it in Hong Kong.
It’s unclear whether that will even satisfy some desire to reduce its exposure to data security concerns. But this is all also linked to Xi’s vision of sharing the wealth and common prosperity. And he wants the owners of DiDi to be a symbol of how you can’t get out over your skis and make too much money because it’s not being fair to the rest of the Chinese. This is a really chilling signal to American investors. If you think you’re a New York stock exchange company, $38 billion market cap, and then the Chinese government orders it out of the country, what does that mean for any one of your other investments?
Frank Gaffney (12:25):
Precisely the question we will be exploring in our webinar on Thursday. And I thank you very much for teeing it up so nicely. Bill, let me quickly, before we run out of time with you just ask you, we’re having in the next couple of weeks, the drama in Washington play out in which democratic legislators working with the Biden team are going to try to ram through the Senate this so called build back budget reconciliation bill, it goes by various names, but it has as a common motif, it will be staggeringly expensive, far more so than is advertised. And it will set in motion a whole new host of major entitlement programs and otherwise increased government spending. And I just would ask you as a student of these matters, what is the likely implication of for wealth, our budget, for our economy and for our policy?
Bill Walton (13:30):
Well, there are a lot of implications for the Build Back Better bill and one of the first takeaways is that almost no Americans really know what’s going on with these bills. In fact, many of them don’t even know they exist and that’s a function the mainstream media not covering what’s in them on purpose because what they’re posing to do is the bill concludes things like increasing the IRS agents, audit agents by 80,000 people. They want a tax credit of up to $50,000 for journalists. There’s a big provision in there for payments to illegal immigrants. Plan encourages quote, a rapid transition to electric vehicles even though we do not have the batteries to support an electrical vehicle fleet in America. And it goes on and on and on, and the implications are terrible because it’s not paid for.
It can’t be paid for and will have to mean it means that we’ll be adding more and more debt to the $28 to 30 trillion of debt we currently have outstanding. And just to put that in perspective, that’s roughly 130% of the, maybe 140% of the US gross domestic product, GDP. And that’s an historical measurements higher than it was during World War II, when we were fighting the Germans and the Japanese, and really mortgaged our country to protect our freedom. Now we’re mortgaging our country to basically pay off all the wishlist of the progressive Democrats.
Frank Gaffney (15:09):
To protect Joe Biden, I think is what it comes down to. Bill Walton, this is an ominous prospect, needless to say, we’ll be watching closely whether one or two democratic members of the Senate will stand up against this insistent pressure to give the American people all kinds of free stuff, as they say, only to have it re down terribly to, I think both in the end, those people, but also the rest of us as well. And we’ll be looking to you for continuing reportage on all of that, as well as the products of your terrific television program, the podcast.
Bill Walton (15:55):
Three words, Frank, three words. Kill the bill.
Frank Gaffney (15:58):
Kill the bill.
Bill Walton (15:59):
This can’t see the light of day. We’ve got to be all in on killing this bill.
Frank Gaffney (16:03):
From your lips to God’s ears. Thank you, my friend. Good to talk with you. We’ll do it again next week. Meantime, stay well, Bill. Next up, we’ll speak with Elaine Donley about what is being put into the National Defense Authorization Act before the Senate this week. That and more right after this.