Hi, it's Bridget. Welcome to Sunday Morning Coffee with Bridget. I'm actually on location. I'm at the lake not too far from my house. I wanted to share this energy with you today. We're gonna channel and get some inspiration from the lake. She is, she is the soft and gentle beauty of a warm tub filled with water. I am comforted by her as she surrounds me. She invites me to slip in, yet I am not prepared at all to enter her waters. Instead, I stand on the shoreline and I watch mesmerized as the wind tickles the top of the surface, rippling, moving, caressing. Amplifying the energy of the vibrancy and the vitality of life itself. All of my senses are alive because of her. The lake, she is divine feminine. She is divine woman. She is embodied in her fullness. In her fullest expression, she knows who she is and who she is not. The depths of her only reveal to those who are brave enough to journey in deep inside. She will protect you in her womb. She will encompass and enfold you and create a sacred space for you like none other. This is the lake. Feel the rhythm of the water as it flows and moves. Sometimes she is rough. She is purposeful and with intention, she will rock the sandy shore of the beach. And she will pull whatever is there in toward her center when she is in need, when she wants the connection. Are you brave enough? Are you released enough?  Are you afraid of her power? Her ferocity, does it scare you? Does she scare you? Does she remind you of parts of yourself that are in darkness in the depths of your soul and the ache of the pain of your womb? Does she remind you of the wound? Does her promise of pure love and fullness seem impossible to you? The lake, she is vast. She is effervescent. She is ascended. A god is chosen to be held on earth through the element of water defined only by what you see and more so feel. Is she cold? Is she warm? Is she smooth? Is she rough? What relationship will you have with this beautiful element? This goddess, lake, energy. The earth and all of her natural beauty and her surroundings, the trees, the rocks, the plants, the sky and the clouds, the water and the rain, the fire, and the night. All of these elements light up your way. They are here to support you and surround you with what is needed for your spirit energetically to thrive in your human life experience. The expression of life is in part for you to awaken your senses. What sensory needs do you have? What do you hold back or keep away from that you want or need to know in this lifetime? These are big questions, but the lake she asks you to know yourself deeper, broader, more expanded, limitless, boundless, uninhibited, in your knowing, embodied by trust. These are the messages and the wisdom. Of the lake. So this is Bridget. I recognize that this divine feminine energy is quite powerful and it is profound and I am recording this Sunday morning coffee episode on the fall equinox, which is a connection for me to the essence of who I am in this embodiment of my lifetime, which is a woman. And I feel the connection to the lake today as I am out walking on a nature walk and I wanted to embody and share that with you and feel all the essence of her energy of this element of water, which is commonly associated with the heart water for many is commonly associated with emotion. Water is a tool for the empath and that my friend is exactly what you are in all of the ways in all of the phases in all of the cycles of life in this one here at the autumn equinox at the beginning of the fall you are invited to recognize your natural nature surroundings just as though you have been accessing your human surroundings and all of the inputs and the sensory overloads and all that overwhelm of all the heart stuff you've been feeling you are invited now to feel it with intention feel it the nature of things the nature of things the green lush foliage the trees as they're turning into the autumn colors just the tips right now are yellow and golds just starting to get a little bit of orange and red just tiny little tips for the gentle natural transition of the change process as you shift into this new part of your life no big boisterous entrance no parades no fanfare no intensity is required or needed here just to be recognizing and connecting to your natural nature surroundings connecting to the elements connecting to the sky noticing the sky the clouds noticing if there's wind on your face watching the trees dance and move and sway as the leaves softly catch air and gently ever so gently float to the ground to touch the earth at home to return home to the home base of the earth that is what this is about the returning home the connection of the support that you have all around you not through people through presence through the essence of the energy of nature of your natural surroundings empath hear me now tap in to the natural surroundings feel the energy here right now i'm sitting at the lake it is very calm and still today and it is still moving the wind is causing ripples to move through in beautiful patterns in a sweet rhythm and the sun is beaming down acknowledging the light element the element of light so we have earth we have air we have water we have light and we also have fire the element of fire is at the core of your being your solar plexus your spirit for many of us the energy in the solar plexus is your spirit your intuition that is guiding you navigating for you this is the part of you that is so mysterious that you want to trust you want to be in relationship with but sometimes you find it hard to be that's normal that's natural so use the elements start with the senses the sensory inputs of nature notice the color notice the feeling of the wind notice the feeling of the earth as you walk notice through your physical senses so that energetically your essence can be rejuvenated and recharged with energy that's positive and pure nature natural pure nature natural pure the divine feminine energy of that fire that solar plexus is held and supported for you right here and right now and as i am recording this you will hear a boat go flying through the scene looks like a fishing boat do you hear the motor what is this metaphor or symbolism there will be disruption there will be distraction you know it you know it it doesn't have to wreck your focus or change your energy we allow it allow others to flow and move and go about their business and then notice the ripples of the water she's not upset the lake is not angry she provides a safe passage for the boat to move through she is not responsible for the journey or the thoughts or the feelings of the boat occupants or of the vessel itself she just provides the space so that the people the machine can move through safe passage allow yourself to take in with intention nature and natural energy of light of water of air of earth of fire light a candle to connect with that fire energy we could have a whole conversation about fire we should do a sunday morning coffee about fire have you listened to the shakti sunday morning coffee check that one out that's a little fiery and in the beginning of this sunday morning coffee when i was channeling with the lake energy the balancing factor the alignment factor is the fire with the water they are both divine feminine energy they are both connected and united they're both different aspects and attributes of you as a person they are nurturing loving and supportive of your life experience and they have very different uses in many different ways and they're for you all of it nature exists for you the clouds in the sky are for you the wind in the trees it's for you the waves on the water the sound of the waves hitting the shore that's for you it's all for you so let's take a nice breath in big exhale out thank you so much for listening to this sunday morning coffee with bridget i hope you've enjoyed it and i hope you continue to feel this inspired energy throughout the transition and change of this fall season


Hello and welcome to episode 90 of the market maker podcast. I'm going to have to start thinking about the 100th anniversary here. Yeah, some sort of competition or something, but look, we'll part that for now, but we're getting close. Three things just quickly before we kick off peers one. If you are a subscriber to this podcast channel you would have seen that there was an episode I put out midweek a chat with a certain Bilal Hafiz who if you haven't heard of him before. He gave up some of his time to chat to me about an article he's put out about 25 lessons he's learned in 25 years in finance and it's fascinating because he literally came from working class background. He did well at school, managed to get a scholarship into Cambridge, then went to JP Morgan worked his way up. He was then at the top table reporting into the CEO of Deutsche Bank as an MD before he was 30. So pretty incredible story. But he puts out some really great advice and that's advice not just for students. It's advice for entrepreneurs because he now runs his own research company. It's advice for people in leadership positions within their organization, big and small. Yeah, check, check that out. But the other two things were after last week's episode, I said to myself, never again will I allow peers to have me record a podcast session at the end of the day. I'm pretty frazzled by the end of the day. And here we are, again, because of your packed schedule. I've got to squeeze you in at the end of Thursday instead of our normal Friday morning slot so if I slow my words again I apologize in advance. Yeah but something so much has happened already. There's just no point waiting till Friday. Let's just go. So then my third point before we talk about, you know, Fed Pivot US inflation, Elon, Liverpool up for sale, Binance crypto and everything in between. The other thing is, I was just catching up with the team and pretty crazy week for really so just a quick mission status update. So we have delivered to over 1000 students with the finance accelerator that we do. It was our partners Morgan Stanley being at universities of Nottingham, Birmingham, Loughborough, LSE, being out in Vienna at their business school, one for you peers. I know you weren't there in person but we were in Monaco. Yeah. And then Steven, our head of schools who joined us on an episode, a few, few episodes ago, he's been out running his finance for good sessions he's done 11 schools this week talking to super keen 1617 year olds. And then working directly with business schools, Asada in Spain, back to Newcastle down to London at Imperial and then back over to Dubai for an energy trading company so it's been a pretty crazy week, not just in markets. Yeah, you know, just an average week here at Amplify. You know what's happening next week. Yeah, step up again actually so yeah busy times. Yeah, got to earn that pay. So here we go into the, the main stories of this week then and first one we'll kick off with is one that's just happened I mean I've got the charts up in front of me at the moment, and everything has catapulted Yeah, I'm talking US stocks, US T notes, gold. So, if you're thinking about what's just happened then you're thinking about correlations the dollar is sharply lower. And of course back in business, not, not a Rishi rally again but by back to the dollar weakening, and all of this has come after the back of US CPI has just come out for the months of October and it came in at 7.7% year on year. And in fact that's the lowest year on year pace since January. It was below expectations, the core reading, ex food and energy, also below expectations 6.3% against 6.5 I think also compounding perhaps the knee jerk intraday reaction was just last week. We were saying all pals hawkish, and the markets reacted accordingly and yet here we are, like a week down the track. And the opposite data to probably where the market was leaning in its positioning has kind of exacerbated some of the moves. Last I saw which the pricing on probability for the thing is the 14th of deck next meeting is 80% for 50, and it was 50 50 between 50 and 75 basis points with me. Yeah, a lot of 50s going on but 50 is the new call now, as far as the markets are concerned after those figures but yeah your initial take I know it's just come out but thought yeah. Well yeah I mean, it's a very good news inflation report, which has been a long time coming. I guess we kind of had one. Yeah, did we have one back in June. Sorry, July was it we had inflation prints that were lower than expected. Anyway, then the core readings just been ramping up and that. Yeah I guess we reached. Wow, it's early days, obviously this is one month data for just one month but right now you could sit here and say maybe the peak of the inflation crisis is behind us. Maybe we'll have to see for the obviously for the months to come but I think there's a stronger case than we've had all year to put that point forward but the inflation peak is behind us and given that this whole the whole year has been about inflation is dominated everything. And it's controlled everything it's controlled what central banks have been doing it's controlled what governments have been doing it's controlled therefore what markets have been doing and so markets have generally been lower all year. So yeah, it's, I think quite a significant moment in the the story of 2022. I was looking at the monthly movers on the breakdown food rose 0.6% smallest game this year. Apparel fell 0.7% biggest decline since April household furnishings fell 0.2% the most since the beginning of 2021 health insurance decreased a record 4% overall medical care services fell by 0.6% most since 1971 use cars decreased 2.4% most since March and airfares were down just over a percent as well the one that did stick out shelter costs. Yeah, you've spoken about this number of times before the biggest services component makes up around a third of the overall CPI index that actually increased 0.8% last month the most since 1990. However, the acceleration was looking at it was fueled by the biggest jump in cost of hotel stays in more than a year, though private sector data points to a stabilization or even decline in rents in a range of cities across the country. There is a lag between real time changes and when those are reflected in this report the Labor Department's report. Yeah, I spoke about exactly that point when we had the inflation data. A month ago. So the key thing about pretty much the only thing that's driving inflation up is that shelter costs and the problem with the way that's that that's computed it's lagging so it's taking the rental costs over the last 12 months but if you look at more sort of current measures that's looking at new new rental deals that are getting signed off like now, and they are beginning to show signs of weakness. So the one big component of the inflation basket is continue to drive things up is very lagging. If you look at the near term stuff is turned over. So that's why I'm saying, I'm pretty confident that inflation has peaked, and it's now going to start to decline and probably faster than. I was going to say faster than markets were expecting but a markets have just exploded to the upside so that markets are repricing their inflation expectations right now, as I speak. So the big question then. Have you been picking bottoms again. Well, I mean, yes, is the answer to that. Last week, I said the bombs. You miss last episode that's what that's why if you don't already do so you need to hit that subscribe and turn on notification button because you just missed the call. You know you could you could have been up here. I mean I was looking at the Google shares. I think I've gone to 80 something like that. 93 already. Right. Yeah, thanks, Pierce. Thanks for that. But look, the NASDAQ looking at the NASDAQ's up. It's getting towards 6% on the day here. I mean, we'll have to we'll have to see where we end up at the end of the session maybe the heat might come out of it a little bit but we're looking at this will be the best day for many a long time. So yeah, markets are loving the US inflation report. Okay, so if the if the bottom's in and the Fed pivot is back on. What about what's happening in China right now. Could that disrupt this one dimensional US focus where new COVID cases in Beijing jumped to their highest level and more than five months. The Chinese government have come out and now being crystal. We're definitely not moving away from zero tolerance approach to COVID lockdown. Yeah, it just feels this year just feels like one, like as soon as it looks like you're getting over one thing you just get smashed in the face by something else so. Yeah, obviously we'll have to monitor it. China had, well I guess April was the last sort of really significant kind of lockdown period where you know it wasn't just Beijing but actually it was more so Shanghai and Shanghai is a big hub for shipping. So a lot of the exports coming out of China Shanghai is critical Beijing less so from that kind of exports point of view but yeah it's definitely a risk but I think. I think right now. The positive force from the idea that inflation has peaked is a larger positive force than the negative risks of what might happen in China with regards to restriction of movement and lockdowns. That's the feeling right now obviously that could change. I mean, you might have to wait a few weeks, but it could be that China locked down more aggressively. Who knows it could be that the inflation report that we get for November which will be in the middle of December. Maybe that shows inflation going back up and all of what I've said is entirely incorrect. Then you got to kind of just change your opinion again but right now. That's the that's the feeling. So while we're picking bottoms. How about Bitcoin. Because Bitcoin has got slammed in the last 48 hours and one of the latest major headlines that has captured attention is that Binance has abandoned a deal to rescue. This crypto currency exchange society concerns about its business practices and investigations by US financial regulators. Bitcoin was trading up. What 22s now it dropped to nearly 15,000 at one point has bounced to 17 and a half at last print so yeah. Perhaps you could explain a little bit about what's going on. Why has there been a shake up in the crypto space, because it's not just Bitcoin it's everything. Significantly. So why first and then we'll talk about levels. All right.  Next then which is a crypto exchange and one of the great things about this story is the, the name of the guy who founded FTX. His name is bank man fried.  Bank man. Bankman one word hyphen fried. So he has been fried. Well you were telling me his, his net worth. Like last week. Right so Bloomberg have a Bloomberg have a billionaire tracker, as you did. Yeah. And basically it's the biggest one day loss for a billionaire in history. And I believe this, the percentage that they had was that he lost.  Your man bank and fried, fried, freed fried as apparently lost 94% of his wealth in one day on that, that drop that happened midweek. Yeah. And broadly, first of all, it's another episode in the crypto journey, looking back over the years, you know, it's definitely another massive, massive episode that undermines the whole house. And then crypto across the absolutely across the piece collapsed sharply yesterday I'm talking about Bitcoin and all of the others.  Anyway, here's the story and I'm going to talk through it. The FT did a good, good effort on this. It's so complicated this kind of stuff, but the FT did a good, good effort at it I'm just going to kind of list off some of the bullets in terms of the step by step kind of what happened so last Wednesday. Right this is where it kind of all kind of started coin desk published an article. It's a conversation about Almeida. Now, your man bank, Sam bankman freed, not only is he the founder of FTX but Almeida is his kind of hedge fund, right. So coin desk did an article and they said the crypto hedge fund and market maker basically had 14.6 billion of assets on its balance sheet. 5.8 billion of that was made up of a crypto token called FTT. FTT is the in house currency for trading on FTX, the exchange. So, Sam bankman freed owns both right he owns the exchange he owns the hedge fund is hedge fund terms of capital on its balance sheet like 40% of it is FTT tokens. So, okay, right well, what's that worth because, whilst it was printing and marked to market at $5.8 billion. It turns out that maybe it's not worth that and actually it's a phenomenally illiquid asset. So basically customers who use FTT, they kind of that's the token they use it as a medium of trade right and on the exchange and for using it they get discounts on exchange fees and other goodies if you like right. And so basically it using FTT kind of they encourages trading and obviously the more trading the more fees are generated by the exchange and so on but essentially I bet in in kind of the real world. So what are what are these tokens it's like the best analogy the FT came up with and I really liked it is that like their Carnival tickets.  It's the same thing with these tokens and this exchange if you want to trade on the exchange you've got to trade in the medium of FTT tokens and you've got to buy these tokens before you're allowed into the exchange. Okay, the only difference being that the FTT token value. So your Carnival ticket, I guess is a fixed value, you've paid 10 quid for 10 tickets fine they're one pound each. So you pay these tokens you pay 10 quid for 10 tokens, but then the value of those tokens, it's not fixed it can fluctuate it's a tradable asset right and it can go up and down. Now, the problem here was the Almeida the hedge fund holding so much FTT token on its balance sheet is basically three problems with that. So first of all, the hedge fund solvency should not depend on essentially a Carnival ticket. Right, because it's not the tier one asset. It's incredibly illiquid. And what's the value of it anyway. And so for the huge portion which balance sheet to me made up of this is incredibly which is not sustainable, right. Secondly, the FTT token derives its value from trade on an exchange that's owned by the same person who owns the hedge fund so it's incredibly incestuous and dodgy and. This is why all of this is being questioned by the regulators now and there's a lot of, and I was just saying to you before it's like this is one of the biggest crypto exchanges on the planet. This guy, Sam bankman free is some kind of celebrity. He's this amazing guy apparently who's done amazing things. And yet, there's just schoolboy dodginess going on in the background. How is it. How is it that this isn't known about before now. And, you know, I think your point was kind of correct. Very, very correct. And that is that people were making so much money so quickly. 2021 was the bubble. Yeah, and in a bubble. Everyone's making a fortune. I want to pile my cashing because I want to fortune. Do I want to do any due diligence on what it is I'm getting myself into. I haven't got time because if I wait to do my due diligence I'm going to miss the gravy train and I won't make the fortune that everyone else is making. That's the bubble mindset right and when it all bursts. You know, this is where it kind of all comes out in the wash when the tide goes out. You see who's not wearing any swimming trucks. I think it was Buffett who won't set that anyway. Right, the second reason so 2.2 billion of our made as FTT. 2.2 billion dollars worth of our made as FTT tokens was pledged as collateral against loans. And then thirdly, here's the great one, the market value of FTT tokens that are actually used for trading is 3 billion. Roughly. And then thirdly, here's the great one, the market value of FTT tokens that are actually used for trading is 3 billion. Roughly. Right, so our made as holdings were much bigger than the entire traded market. So basically, it's all a bit of a Ponzi scheme. In short, and this coin desk issued this report. Right. And after the report, we now bring in Binance and your man Changpeng Zhang or CZ. Yeah, another guy's been abbreviated. So he's the Binance King. Right. So he tweeted over the weekend due to recent revelations. We as in Binance have decided to take a look at this. He said that they would try and do it in a way that would minimize market impact. But basically when you got one of the biggest holders of FTT going right now. And it's incredibly interesting. So he's the Binance King. Right. So he tweeted over the weekend due to recent revelations. We as in Binance have decided to liquidate any remaining FTT on our books. And by the way, they hold a lot. And it's incredibly illiquid anyway. Well, then we spoke about this when Luna went through this when you've got an illiquid market. Which just means there aren't many buyers or sellers any moment moment in time. And suddenly you have a massive player that comes in with a single direction trade as in a seller in this case. If you have a massive seller come in and they just aren't many buyers. Well, then the markets price collapses. Then panic ensues. So when it all when it's collapsing and unraveling everyone else just other people who have got deposits in this exchange they want out. And now you have a run, right?  If you smell, if you smell smoke, right, we're out. And so this is what's happened. And all of a sudden the FTX exchange has been left now with an $8 billion hole in terms of cash they owe to their customers versus cash they've got available. The $8 billion short. The finance were going to rescue the deal here and ride to the rescue and buy out FTX, which would have made the biggest exchange on the planet by the way, but CZ as the finance guy basically has pulled out basically saying after after 48 hours of due diligence. And he was doing some due diligence. We've concluded the scale of the financial problems and the potential ROM doing FTX make the deal impossible. There's a great, great marketing opportunity for Binance. Like the way he's played that. He's like, yeah, I'll come in. I'll rescue it.  I'm going to dump it. And I get even I'm going to consume all power. Yeah, the marketplace. Right. So it's one way to get rid of your rivals because not only is he not bailing them out, you could argue. He forced the run on them anyway by saying, you know, I'm selling all my FTX guys. Yeah.  I'm not going anywhere near it. That's the kind of, I guess, the contrarian view. So what part of me is thinking, well, as you said, this is one of the milestones in the history of crypto. So part of me thinks, well, this is a this is a good thing, not for not for Sam. But this is a good thing because it's like another lesson learned. Another thing comes to the forefront to adapt and change and try and work out the process better. Yeah. The other part of me thinks then that your man CZ is now like a single dominant player in the market. And how can that, that's just, you know, if there's any monopoly type role, then what? And he's just, he's just dominating that space making every decision and knew the barrier now to market gets even harder. But doesn't that counteract the whole point of crypto in the first place where it's decentralized. Right. So now he is your like Lord savior crypto king. Yeah. And anyone who comes in, I will crush them. So now it's centralized. But there's a lot. I mean, when I say people didn't do their due diligence, I'm not talking about just retail traders who perhaps don't have access to the nation to do proper due diligence or on educated or skilled enough to be able to do it or whatever. Right. I'm not talking about people like that. And of course there are many of those but the FTX is backed by some of the biggest institutions in the world, such as black rock, such as soft bank such as Sequoia. These are some of the most sophisticated investors on the planet. And yet they've been hoodwinked. I mean, Sequoia capital, one of the biggest kind of venture capital firms in the world today. They have marked down their investment in FTX. They invested $240 million.  Today. They're, you know, such as life, right?  We're still wooed by a good looking opportunity. That's it. They wanted a piece of that action as well. Like you were saying earlier, and they've just taken that right down. That's just that was that was the cost of doing business, I guess.  In January, they raised $32 billion. Well, like you said, he did. He did put out a good piece around himself, I think. So I think that's part of the attraction, right? For any startups got to have a frontman. Absolutely.  He was a Jane Street. So, like I said to you before, before this call, he's what is he 30 years old? There will be another SBF. Mark to FTX. Come and a few years from now. So, you know, he's had a rough week. He'll be back. I have no doubt in some shape or form. So, but tell me about Bitcoin. I put a poll out. Okay. So the result of this poll, I haven't seen the results. I'm interested. Yeah, I put a poll out on our LinkedIn, amplify me on LinkedIn. And there's not too many votes 300. It's only been up for an hour or so. But I put there has Bitcoin already bottoms. I think we hit like just below 16 last night. Yeah. And then the options were the bottom's already in. Yeah. 15,000. 12 and a half thousand. 10,000. So the bottom for this recent dip. And the order. So the least popular choice was that we've already bottoms. And so anyone who took that, if they were talking about a short-term little intraday pop, they're feeling some pain right now because we're training back nearly at 18,000 right now as we speak. Yeah. The next popular choice was 15,000 at 14% of the choices from the community. Then 32% had 12 and a half thousand, but almost 50%. So by far the largest choice was that 10 K was the call. Hmm. Can I go contrary? Yep. The bottom's in. Two reasons. So I'll tell you the first one already. I was monitoring some of the order flow and I saw a big clip come in and I thought that is the crypto whale. Here's current. Hoovering up 15,800 last night. I saw you on the tape. I know that everyone like the hysteria around FTX is obviously very live. It's very raw. It's super current, right? But look, just step back out of this kind of super current situation and what's been going on with crypto in 2022? Well, it's been trending all year. And the reasons are the kind of macro reasons about inflation. So back to my earlier point, if inflation has peaked, if we've, if the feds peak hawkishness is behind us, then that's a very powerful force to say all assets are bottomed, including crypto, right? Now I know, unfortunately for the crypto community, it's just coincided. This FTX thing is coincided with this inflation report.  So I think the bigger force on Bitcoin is the inflation story, not the FTX storm that's currently raging. So it's for that reason that I think 15 was the luck. Also as well, I do feel like the crypto market's a little, it's been desensitized because of the Terra Luna situation. And if that hadn't happened, this would must have, would have been a bigger event. Yeah. All right, well, let's move on because I'm, there's a couple of other things I want to do a quick take from Pierce Curran on what's happening at Metta where Mark Zuckerberg fired 11,000 employees from the Facebook parent Metta to give some context. That's about 13% of their workforce. However, I've got a friend at Salesforce. She called me earlier today. There's a little bit nervous on the phone. And I was like, why are you so nervous? And Salesforce is job cuts are far bigger. So these big tech companies, I mean, it's brutal right now. I'd say job cuts in the range of 10 to 25% of companies that employed tens of thousands of people. This is pretty large, but not a surprise. I mean, Facebook shares down 70 plus percent on the year. This is necessary. Yeah, I mean, this is why the hell didn't you do that six months ago kind of thing specifically talking about Metta. Their costs are out of control. And, you know, their revenue model heavily rely on advertising still is under threat because of the macro forces. It's under threat because of Apple's change on their security settings. And they're a bit of a dinosaur with that old revenue model. Sorry, advertising revenue kind of format. So yeah, I mean, why, why wait until now to do it? I think it's the bigger question for Metta. I think for the others like Salesforce, I mean, you could mean tech is, well, this is the recession starting. Let's put it like that. Another reason why inflation's peaked. If you've now got hundreds of thousands of people being laid off. This is demand destruction engineered by the Fed. That is now going to see inflation drop. And so again, this is a lead indicator, right? Because people get made redundant, but they'll get a redundancy pay out, right? So they still got some money and that's not going to last for long. And of course, now they've lost their job. They're obviously going to be super prudent on how they spent that. But this is a lead indicator towards future demand and therefore lead indicators towards what might happen with inflation. But I think that, you know, with these big giant companies like Salesforce, then, then, then, yeah, these SaaS companies, let's say, when you're running a business and you've got to tighten the belt, then it's often these SaaS products. So as you're advertising budget and it's your SaaS products that you're starting to go, well, hang on a minute. I've been taking on all these SaaS products without really thinking about it because they sound cool and they make my business operate more efficiently. Oh yeah, we'll have that. Yeah, we'll have that. Well, that one looks good. You know, a manager comes and goes, well, have you seen this? It's going to able us through this. Oh yeah, we'll take that on. And all of a sudden, before you know it, your monthly SaaS spend is like actually something quite significant.   You realize we're paying that much. And then you go, right, well, we can lose that one. Let's lose that. And so you start trimming them off. And so these SaaS businesses are going to start to lose customers. And therefore they're going to need to tighten their belts on their side. So job losses are coming. Secondly, for the smaller or, well, not necessarily small, those tech businesses that aren't yet profitable, then they've got a massive problem. So if they're reliant on your Series A funding, Series B, Series C, Series D, Series E, Series Z, this is funding your way to profitability at some point in the distant future. But in the near term, and like 2020, 2021, it's been all about, I don't care how long that future is until we make any money. Let's pump this thing with cash because it's growing so fast. Interest rates were zero. Cash was free. It's all changed. Interest rates are really high. Cash is really expensive. We've got a recession. Investors are having to write down the valuations of these holdings. Companies raising money in 2022 are having to raise money at valuations less than half of the valuations they were getting last year. And all of a sudden the story shifted. And investors are now saying, I'm not going to give you money unless you reduce your cash burn. Forget about growth, no matter what at all costs. It's now actually let's just tighten our belt. Let's just review what we're spending here. Let's just get that cash burn down. Let's tighten up. Let's run a tight ship. Let's not die in this recession. Let's see if we can get through it and raise money when the macro climate shifts. But if companies don't reduce their cash burn, they're going to get killed in this recession. So it's now about survival rather than growth. And so job losses are coming. You could argue that Elon at Twitter, what he's just done, I mean, could be the playbook that others use where he's just gone, you know what? I mean, I'm a new guy. I'm looking at this business from an entirely new perspective. We don't need half of the people who work here. See it. I mean, that's how you cut costs, right? I mean, I know that's super brutal, but it's not going to be the last person to cut his workforce in half in the tech industry in the coming months. Do you think it's time for Zuckerberg to go? I read a piece and it was talking about a parallel universe and it had some suggested points about what if Mark did the following. And one of the final points was he assumes a chairman position, so still acts as a visor. So when we shift, he does a complete shift away, obviously still long-term to meta, but in a less aggressive fashion. So it just allows the company to breathe under a new perception of a new structure and order. Do you think that would be more, provide some more longevity to the belief of the pivot that's happening or that Facebook's trying to engineer? Yeah, maybe. How important is someone like Zuckerberg? I mean, Bezos managed to step away. Yeah. Gates, all the rest. I think the difference is that the business model has failed. And so the new plan is let's spend more money than anybody's ever spent to try and win the market share of this virtual world that might exist in 10 years time. Okay, so let me rephrase the question. If this was a regular CEO, which you brought in and not a founding member or the founder, Mark Zuckerberg, would he not be fired by now? Yeah, I would say so.  But then, yeah, I mean, then do what? I mean, I think they, they're just all in on this meta thing. I do think they need to radically reduce the crazy spend that they've outlaid. Now, either he needs to finally take that point on board and act, or he needs to get out.  So, yeah, well, he's just cut 11,000 staff. So maybe he's got the point now. And maybe he's going to start to reduce spend.  Yeah, it's interesting, actually, the different personalities at these big tech firms. Because you'll get someone like Zuckerberg, and he'll apologize, take, take accountability. Yeah, he made the wrong call, which you would never get from a Bezos or from an Elon Musk. And then you've got Nardelli, is it the head of Microsoft?  It's funny how like these different organizations are run from a leadership visibility perspective quite, quite differently. But that probably speaks a lot to the volatility as well, to a certain degree. I suppose that could be wrong, though. Tim Cook's quite visible, isn't he? He is. But these bit like Apple, Amazon, Google, Microsoft, these are businesses that are behemoths with momentum. You just can't stop. And they've got business models that are bulletproof and are future proof. So the big difference with Facebook is that's not true. They kind of have peaked in with business idea number one, which was phenomenal. It's just now it's a bit outdated. And he's just decided to, A, go for the super long shot. But B, spend more than anyone's ever spent in history to try and get there. And it's just too much. It's too risky. The shareholders have spoken. Wow. Sorry. The market has spoken because the share price has collapsed. Yeah. Well, let's move on to the final two ones. I'm going to swerve Elon. And I'm going to jump straight to a quick take on the midterm elections. And then we'll talk a little bit of football. So Joe Biden says he wants to run for a second term in the White House. And we'll make a final decision earlier next year about his political prospects. If he's still alive. Well, he was boosted by the Democrats who, it's a weird situation, effectively still lost, but didn't lose as bad as people thought the red wave never materialized, essentially. Democrats avoided sweeping defeats in Congress, but still risk losing control of both chambers, essentially. There's still quite a few that are yet to come through that will be decisive for that matter. Did deal a big blow, though, to your man, Donald, who was obviously counting on victories of Republican candidates. He endorsed to kind of power his way back through into a run on the White House for the 2024. So markets haven't even blinked at this event. One thing I did read from some bank research was talking about beyond the short term, what was going to be interesting potentially is about the ability to deploy further fiscal policy, the implication for the economy, and thus then influencing the fed's rates path, essentially. But yeah, I guess near term that hasn't been, I mean, definitely not in the midst of a week of a US inflation report like what we've just seen. That's much more long term thinking, but yeah, any thoughts on the terms? Again, it's deflationary. I mean, what on the one hand, whilst the Republicans didn't have that massive win they were hoping for, it's still the case that the Democrats will lose control of the House of Representatives. What happens in Congress? We're not quite sure yet, but it doesn't matter because now the Democrats don't have the clean sweep. And so for Biden to get policy through Congress is now basically blocked, meaning no more stimulus because the Republicans will block it in the House. So that's deflationary. Biden cannot pump in any more money. That's number one. Was it a victory for the Democrats? I mean, they lost, but was it a victory? I would say it's more of a resounding, well not resounding, but a fail by the Republicans. And I think that, what was it, the Pennsylvania race John Fetterman, who the Democrat senator who won in Pittsburgh, he was the guy who had a stroke six months ago. And then it was all about, is he fit in terms of health wise to do the job? And then the Republican guy, I can't remember his name now, but he was going to ride in and win the seat, right? But he had an anti-abortion mandate. And so actually there was a massive female vote against the Republican candidate, which meant that the Democrat Fetterman who'd had a stroke with big health issues still won. And I think that was the seat that said maybe Trump and the Republicans have gone too far right. And now actually voters are beginning to say, you know what, stop. And so actually, I think that's the most interesting takeaway from this. And it might mean that, yeah, Donald, we will not be seeing him back in the White House in two years time. Big cool. It's two years of long time in the world of politics, Piers. I may remind you. But look, I know it's going to be a painful conversation to finish because we're going to talk about the mighty Liverpool FC. But why are we talking about that? Well, to give it a bit of a corporate finance finish, Goldman Sachs and Morgan Stanley are working with Fenway Sports Group to sound out potential interest in the English Premiership Football Club, Liverpool. To give it a bit of background, Fenway Sports took over Liverpool for about 344 million pounds in 2010. Analysts are suggesting the club could fetch north of five billion recent precedents being Chelsea. Just wanted to get your your feelings about maybe the deal and perhaps you could explain about the bank's involvement from a technicality point of side for education about the roles, but more so about how do you feel about the fact that high profile takeovers of English Premiership Clubs. I mean, you've got what, Newcastle with the Saudis, Chelsea with the US, and private equity firm Clearlake Capital Group. Yeah. Well, are you implying that the ownership of English football clubs are now moving into foreign hands? Testaments are the beautiful game of English football and it creates such worldwide viewership and therefore money. Yeah, except that, I mean, I agree with that, except that Chelsea was owned by a Russian dude. And it was sold to some Americans. Liverpool's owned by Americans. And who's it going to get sold to? Almost certainly an international buyer. I can't see a UK buyer being able to afford five billion. Maybe I'm wrong. Newcastle's the only one that went from English ownership. Mike Ashley, who's JD Sports guy, he's going to be kicking himself. October 2021, so 13 months ago, he sold Newcastle United $409 million. The Chelsea deal this summer has changed the game because that's why Liverpool are up to sale. Because Chelsea went and got a price tag of 4.2 billion pounds. And that was like, what's insane valuation? So Liverpool, the owners who bought the club, what did you say, 300 million, wasn't it? 300 million pounds in 2010. Then I like Ka-ching. We can flog this north of five billion. We bought it for 300 million. And I guess there's two things here. Maybe they're thinking, has the Klopp, that's Jürgen Klopp, he's the manager of Liverpool. As a non-football man, filling you in. I feel offended. I mean, I'm not that bad. It's the Klopp era. How's it peaked? I mean, they've obviously had phenomenal success in the last five years. But this year, it's just all the wheels have come off a bit. They're kind of down. I don't even know, seventh, eighth in the league.  So maybe there's something in that. But I think it's more the Chelsea deal that got done in the summer. But Fenway Sports went, oh, yeah. OK. Well, if it's going to be worth that much, I'm interested. Yeah. So now they've taken the much more proactive step of going, look, not just I'm interested. Let's instruct some banks to actually get this show on the road. So Goldman and Morgan Stanley. And the way this works is Fenway Sports will be, once they've made that decision, right, let's try and run a process. Let's try and sell. Right. And if you want to sell anything, well, obviously you want to sell for the highest price. Well, how do you get the highest price? Well, we need the most potential buyers we can find. The more bidders we have, the higher the price is going to be. How are we going to get more bidders? Right. Well, let's speak to people who know how to do these processes and get the banks involved. So what will happen is then they'll either go directly to a bank or two that they know already. Maybe they've dealt with them in the past. Fenway Sports have bought a load of. Clubs on their own. What is it? Baseball American football clubs out in the U.S. hockey clubs in Canada or whatever, right? So they've done a lot of deals. I'm not sure who worked on their previous deals, but I'm guessing probably Goldman and Morgan Stanley. So it could be they're returning to their banking partners they've used in the past. It could be they're going, you know what? Who wants to win this mandate? And they get the banks to come and pitch to them. Right. So for these investment banks, then, I mean, actually, this is a bit of a saving grace, surely, because I read this week that Barclays and Citi, I think their IBD fees were down something like 60 and 45% respectively.   But then you've got a five billion plus deal that could be on the table here. Yeah, it's huge. I mean, think about this year. The Porsche IPO is pretty much it, right? On the sort of, well, on the IPO side, this would be an acquisition, right? But yeah, this is like, it's like Hens Teeth in terms of big deals in 2022. So banks will be desperate for this kind of thing. Desperate, desperate. So I don't know if they said, right, let's get banks into pitch and they've got to win the mandate or whether they've used Goldman's and Morgan Stanley in the past, I'm not sure. Normally they'd run a process, right? They choose a bank or two. This is obviously going to be a monster deal. So you need more than one. And then these banks who will have teams that have worked on sports club kind of M&A deals in the past, through those deals in the past, they'll have formed relationships with investors who are interested in this type of asset. So basically they've got their black book of clients and this is what Fenway Sports wants to tap into. So Goldman's and Morgan Stanley will now get out there and start raising a bit of informal awareness as to whether or not there's demand to snap up Liverpool along the kind of valuation minds that Chelsea saw back in the summer. Yeah. So don't fancy it yourself then. Just stepping in? No. And then you could just basically stop running the club. Just put them away. Oh, that's not a bad shame. A bit like your Binance, dude. Do you want to get rid of your challenges? We're going to be the seed of the English Premiership. You're going to come in.  What would be hilarious? Buy Liverpool and then the first 11, you feel a team of... Well, you feel the Amplify five-aside team. What are you talking about? We might just go and win the Premiership. That would be funny. If only I was a crypto exchange, 10, 20 billion billionaire and I'd probably go for it. I saw you at 15,000. We'll wrap it up there. Thanks for ever for listening. If you don't already do so, because I did look at the stats the other day. I think a lot of people listen, who are new, who don't subscribe to the channel. I think you can do so on Spotify and Apple. So please do because then you get notified as soon as the latest episode goes out. Check out the show notes for links for our daily newsletter and also our free finance accelerator simulation. Everyone and anyone is always welcome. But Piers, thanks very much. I'll see you for the next episode. Thanks.


What makes for excellence in hard care? It starts with one of the most amazing teams of heart surgeons and cardiologists that I've seen assembled under one roof and the region's leading technology in a new $40 million facility. This is the nationally recognized Heart and Vascular Institute of Eastern Kentucky at Pikeville Medical Center. Artist Collaborative Theater will be holding auditions for the stage adaptation of Stephen King's Misery. This is an open call. We're casting Annie Wilkes, Paul Sheldon and Buster in the play Misery and we're looking for a woman within her 30s to 50s and a man within 40s to 60s and then any age for Buster. But yeah, we're just going to come in and we're going to do cold reads and see who we get. The play follows novelist Paul Sheldon who is rescued from a car crash by his deranged number one fan, Annie Wilkes, who forces him to write a new Misery novel. To prepare, they just need to show up and have their personal schedules in their mind of what dates they could be available for rehearsals and if they're going to be able to make it to all the performance dates, things like that. But as far as like preparing any material, it's just a cold read so they really don't have to come in with anything. Auditions for the play will be held at the Pike County Extension Office at 3 p.m. on Saturday, January 14th. For more information, you can visit the artist's collaborative theater, Inc. Facebook page. For Mountain Top News, I'm Kelsey Dean.


Well, good morning, everyone. I'm Stephen Flanagan, the Henry Kissinger Chair in National Security and Diplomacy here at the Center for Strategic and International Studies, and it's a pleasure to welcome a number of good friends and former colleagues and those many good quality people interested in Taiwan and security relations in East Asia. We're also delighted to have as our speaker today a good friend of CSIS and many of us in the room, Mr. Andrew Nenzu Yang, who is, of course, the Vice Minister for Policy at the Ministry of Defense in Taiwan, a position that he has held since just celebrating his second anniversary, a little over his second anniversary in that job since September of 2009. Vice Minister Yang, as many of you know, has been an influential scholar and advisor to policy makers on defense strategy, on cross-strait and regional security issues. He's perhaps best known in this audience for his work as Secretary General of the Chinese Council of Advanced Policy Study CAPS for nearly two decades. He's, of course, also held a number of faculty appointments at the Sun Yat-sen University, where he also worked as a research associate earlier in his career. He has, of course, been an influential advisor to policy makers in the Ministry of National Defense, the Mainland Affairs Council, and the Ministry of Foreign Affairs over these many years, and as I said, a good friend to many people in this room. His education earlier was at Fujian University in sociology, quite diverse, then going into a master's degree in industrial sociology, and then a master's degree also in economics at the London School of Economics, and he was also a research associate in political economy at Wilson College at Oxford University. Vice Minister Yang is going to talk about the security situation in the Asia-Pacific region and on elements of Taiwan's defense strategy and defense transformation efforts. This address is on the record. He will speak for about 30 minutes, and then we will turn the floor over to discussion, which will be moderated by my colleague, Bonnie Glazer, a senior fellow with the Freeman Chair here at CSIS. So without further ado, let me welcome to the floor Admiral, I mean, Vice Minister. I'm sorry, we also have an Admiral and the Vice Minister, Andrew Yang. Thank you, Stephen, for your such a gracious introduction. Good morning, ladies and gentlemen, and my good friends over here. This is my fifth visit to CSIS, out of my 11th visit to Washington, D.C. for the last two years. When I joined the MND as Vice Defense Minister, it's a very, very precious experience for me, and I also personally witnessed very strong ties between the United States and Republic of China on Taiwan. My visits also symbolize we have very robust, very productive, and very strong relations for the last couple of years. I want to address some of the issues which I personally involved and give you some of the perspectives about what should be done in terms of continued to consolidate and to strengthen ties between the U.S. and Taiwan. I think in terms of the strong and robust relations that we have experienced for the last couple of years, which symbolize this close and strong relations was based on a shared, the same values of upholding democracy and freedom, not only in Taiwan, but also in terms of U.S. conduct of its foreign policies. Secondly, it is also a symbol of U.S. strong commitment to Taiwanese security codified by the Taiwan Relations Act and continuously supporting Taiwan to strengthen its self-defense. It is also symbolizing we have received strong executive branch and by the partisan congressional support over Taiwanese defense needs in the past couple of years. We also continuously conduct very productive, robust interactions at the policy level, at the working level, and at the service level throughout the years. In all those kind of very close and strong ties, we have achieved, I think, these four several things. Number one, enhancing mutual trust between MND and Panagong in terms of looking at and identifying some of the needed areas for strengthening our defense in the past. It also identify the areas of corporations and continuous corporations down the road as well. It is also a symbol of abundant mutual trust between both sides. It is also a symbol of strong support for our course of national policies in terms of conducting peaceful cross-strait interactions, assisting Taiwanese participation in many international activities. It also helping Taiwan to conduct its necessary defense transformations so that we can continue to strengthen our self-defense. So it is not only about ourselves in terms of U.S. Taiwan needs to defense ties. It is very much a comprehensive mutual relations covering not only national security issues, but also issues involving regional peace and stability as well. If we look at the situation in the Western Pacific Ocean areas, we're still facing a number of challenges down the road, not only in terms of the traditional security challenges in those disputes in the Korean Peninsula, in terms of Chinese continuous military modernization and its power projection. But also we also witness there is dynamic and potentially complex situation in the South China Sea and also in the East China Sea as well. So there are elements of uncertainties in terms of security challenges in the future. However, I think that the weak also continuously conduct robust interactions and exchanges to share our perceptions and assessments over the regional security issues and to address areas of mutual interest and continuous cooperation in order to continue to preserve peace and stability in those regions. In addition to that, we also enter into the discussions how to address the challenges emerging in terms of unconventional security issues. Such as climate change and humanitarian and disaster relief, which are badly needed for not only countries in the region, but also for Taiwan as well. We also have to address the issue of preventing weapons of mass destruction and proliferation. We certainly have putting a lot of effort to address those mutual cooperation in this WMD proliferation issue here. We also continue to share information in terms of preventing piracy at sea. This is also another area for our concern as well. In terms of addressing unconventional security challenges, in the past we already show some benefits and effects in terms of addressing the humanitarian and disaster relief operations, such as our efforts to conduct relief operations and disaster relief operations to assist Haitian earthquakes after mass rescue operations. This is the example of close cooperation between the United States and our Air Force in terms of assisting this long-range voyage to provide necessary help to Haitian earthquakes, disaster relief operations. We also witness there is cooperation in terms of addressing the needs and helps as a result of a type of monocard taking place in Taiwan and US Marine and Navy providing necessary humanitarian assistance to assist our aftermath damage control in Taiwan as well. These are the two examples to show that there are areas for our cooperation in the future so that we can work together to prevent and address needs to prevent the unconventional security challenges as well. In the meantime, we also have very proactive interactions in terms of addressing our future defense transformation needs. The emphasis is how to assist Taiwan to acquire asymmetrical capabilities and advanced technologies so that we can continue to strengthen our self-defense to support our peaceful approach to mainland China. I think the congressional hearings conducted in September, late September and both Peter Lavoie, Assistant Secretary for Defense and also Dr. Kirk Campbell, Assistant Secretary of State, attended the hearing and gave a very, very comprehensive and detailed remarks to address why Taiwan is important and why Taiwan is still in need of US defense support. The message are on the wall, abundantly clear that the United States' support for Taiwan is to enhance our self-confidence to conduct necessary policies to strengthen the peace and stability environment in this area. I think it shows that the United States and Taiwan share the same values, share the same concerns, and share the same interests, not only to preserve peace and stability, but also to help countries in the neighborhood to conduct their identical imperial peace and freedom and democracy in order to upgrade their nation in a more stable road down the road. So in that case, I think US-Taiwan security cooperation is vitally important, a very strong pillar to support the entire Asian Pacific region's future peace and stability and also continue to conduct economic modernization so that we can also share the accomplishments as a result of this effort. Recently, Secretary Clinton repeated the address that US will continue to commit its support for Asia and also continue to show US strength to support Asian development as well. I think this message is well received at home. We will continue to go close ties with the United States and work closely with US government and also Pentagon in terms of not only to continue to strengthen our self-defense, but also to share common objectives and views to address the security needs in this region. As for Taiwan, there are some areas for our concerns in our future continuous efforts to strengthen our self-defense. The number one concern is we want to get as much resources and support for our efforts at home. In terms of defense modernization and transformation, it is necessary to provide sufficient resources and support for this effort. This will be the task not only for MND to convince the legislators and cabinet to give us necessary support. We also want to alert the public that security should be the priority for our concern in the course of developing peace and stability in the region. Secondly, we have to pay attention to the demographic changes and the shortage of manpower in our society as well because that also related to the implementation of our volunteer system in the future. In terms of upgrading the quality of our personnel and manpower and in terms of getting the right people to cope with the necessary defense transformation in Taiwan, it's also very vital for our policy and policy implementation in the future. Last but nonetheless, we have to pay great attention and all the complex issues in terms of how to achieve our asymmetrical capability in the future. This will be the area for continuous discussions between my department and Pentagon in the future. I think we have to address the needs, how to enhance the quality of our defense, not only the quantity issue. We appreciate that the United States Defense Department has produced its air defense review report and submitted to the Congress in September. In fact, this report is very much based on a continuous discussion between Pentagon and MND in the last couple of years. We have actually examined the areas for our air defense requirements in the future and we will continue to discuss some of the priorities so that the air defense issue can be met in our discussion and acquisition in the future. What I want to say in the last few couple of minutes is that my own personal experience has shown we maintain strong ties between the ROC, MND and Pentagon in the last couple of years. This is the result not only of mutual trust but also surprise free. We continue to conduct this robust and trustworthy interactions both at a policy level and at a working level and continue to address issues so that we will fulfill our objectives and with the U.S. assistance and commitments for our security and defense. Thank you. Thank you very much Vice Minister Young. Always a pleasure to have you back here at CSIS. We will now take questions from the floor and please wait for the microphone and identify yourself before asking your question. Thank you. I'm Tom Rekford with the World Affairs Council. Vice Minister, you referred slightly to issues in the South China Sea. We've heard a lot lately about claims from Beijing for the the Spratly Islands. We know that Taiwan has similar claims but hasn't been talking so much about them. What is Taiwan's position on the South China Sea? Perhaps I could add to that question a little bit. There has been some discussion in the press about the possibility of Taiwan reinforcing its weapons on a typing island which it occupies. It belongs to the to the claim by the Republic of China as well as claimed by some other countries and last year or earlier this year I think there were reports about the possibility of replacing the Coast Guard forces that is deployed there with Marines and I know there have been some denials issued from your defense ministry but perhaps you can clarify that as well. Thank you. Thank you for the question and thanks for Bonnie's for the elaboration of the situation. First of all our policy in terms of the area of South China Sea is very much holding the position that we protecting our sovereignty in this area and we continue to address issues of cooperation and sitting aside the disputes and emphasizing areas of mutual interest and seeking cooperation to resolve the problems and the sparkly disputes and we also urging the regional multilateral mechanisms inviting Taiwan to be part of a process so that we can achieve peaceful code of conduct to manage the sea lanes of communication in this area so our policy remain intact and still very much seeking cooperation and setting aside the disputes. With regard to the troop stations in the Sprati Islands we haven't changed opposition since the beginning of this administration. That is we continue to support the current Coast Guard stations at the Sprati Islands so that they will regulate the area to conduct judicial operations and defending the territory as well. We have no plan to replace Coast Guards by the armed forces. We have no plan to reinforce the island security and defense by introduction of further high-tech weapon systems or troops stationed on the island. We still maintain the policy we will support the Coast Guards and improving their abilities so that they can conduct their defense on the island and also regulating the sea areas surrounding the island. Richard Bush. You mentioned the creation of a volunteer force and you mentioned a couple of external challenges manpower and budget. I wonder if you could talk a little bit about the challenges that you've identified internally when you make a transition from a conscript force to a volunteer force and what are the lessons you're learning. Thank you. Thank you Richard for the question. With regard to the internal challenges that we are facing in terms of replacing or not replacing reinforcing the volunteer forces instead of emphasizing the construction that we have in the current day. There are three areas internal challenges. Number one legislative support for a necessary amendment of the military laws and regulations, organization laws and regulations to assist the implementation of this transformation. Not only the increasing the volunteers for our armed forces but also to address the need for further defense restructuring organizational changes as well. So these two or three pieces of legislation are vitally important for the success of assisting the volunteer systems to be enacted in the near future. That's number one. Number two we need to convince the cabinet and also the OY to give us to provide us with sufficient resources, adequate increase in our budget to pay for the necessary cost for the introduction of the volunteer system in the future. Number three is the proper support for the volunteer system. So that requires a lot of education not only from the M&D's point of view but also in terms of the overall support from the grassroots. We need to enhance the educational systems to educate our youngsters what are the areas of necessities and importance so that the volunteer systems can actually helping us to conduct necessary transformation in the future. So those are the three major internal challenges that I can identify so far. John-San with CTI TV High Minister Yan. Good to see you again here in DC. During your visit this time have you heard any clarification from the Pentagon about Secretary Panetta's remarks that the US gave Beijing heads up before the arms sales announcement and have you heard any new movement on Taiwan's continuing request for the F-16 CDs and also you spoke of the asymmetric capabilities in what particular or specific areas would you like the United States to help Taiwan develop? Thank you very much. Thank you John. As far as I know we haven't get a public announcements or statements regarding the issue you mentioned the heads up issues that Secretary Panetta made the remarks during his visit to Asia but we actually receive private explanations of what's the situation in the course of conducting those remarks and fully understand the remarks made in his talk was not related to anything that US commitment to Taiwanese defense so it's abundantly clear there's no direct relations between those remarks and US commitment for our defense. That's number one. Number two with regard to the F-16 CD issue mentioned I think Assistant Secretary of State and Assistant Secretary of Defense they made those remarks at the congressional hearings already emphasizing this will be the issue under consideration by the US government in the future as well. We will continue to discuss the issue with US side to see what should be done in terms of handling the issue so we have no further reports so far regarding the F-16 you mentioned. Asymmetric capability this is a priority and vitally important for our continuous defense modernization and transformation. We take this issue very seriously and we continue to discuss with the US side with Pentagon what should be done and what are the priorities in terms of enhancing our asymmetrical capabilities. We keep an open mind and there are many areas and opportunities to address the issue in the future. Thank you Alan Romberg Stimson Center. I had it. Good to see you. Taking advantage of John's precedent of asking two questions I'm gonna do that. Okay one is to follow up on Tom Rekford's question about the South China Sea. The PRC is very unclear shall we say about the significance of the Nine-Dash line but since it's a line that was drawn when the ROC was sitting on the mainland I wonder if you could give us some help in understanding Taipei's understanding of what it means. Does it mean sovereignty over all the waters, over the land features? What about the possibility of territorial waters or EEZ? Do you have something you can help us understand Taipei's perspective since the claim is for the same set of islands reefs and so on as Beijing claims and yet their claim about the line itself is not very clear. The second is while I would welcome having you address political issues my sense is you'll want to stay away from them like the plague but I but the issue of a peace accord is on the table since President Ma raised it on October 17th. My question is from an MND perspective although obviously this is an issue for the future and not something that anybody has sort of figured out what should be and what shouldn't be and so on and so forth but have you thought about conceptually what you would be concerned to be included in any peace accord and what you would be concerned should be excluded again from an MND perspective? The first question is much easier than the second one. Comparities for speaking. Yes. Well in fact you mentioned PRC is unclear about its nine-dash claim. In reality we call it a historical waters in our perspective. So PRC just succeeded they took over our claims as their claims so they don't have a position for it because so long as it's a historical water as far as the ROC is concerned and for Beijing I mean PRC government they consider they are the only legitimate government representing entire China so they spontaneously you know without asking our consent or whatever take over the claim by themselves that's my understanding so we call it our historical water we don't have a you know a clear definition of body-in-body international code of conduct but it's as a result of post World War II events you know accumulated you know afterwards that we have explored the area and we considered this is our historical water so PRC simply follow or to take over this claim by themselves so if they are not clear that's their business it's not our business so we still consider that so long as this historical issue it can not be resolved and we set aside those disputes and the seeking corporations and and and peaceful resolutions for this area so we are not enforcing as far as our policy is concerned we are not enforcing this historical claims we only address this is the historical issue but we we have one typing island which is under our control in our sovereignty in a sprawdy area so we certainly have to do something about it this is our position right now I've mentioned the second question will be very difficult it's hypothetical area you never ask hypothetical question in the past but but I will not speak for the M&D's position it's my own personal position here I think one thing should be included if should there be a piece of court in the future there's no time time table for it I think Beijing has must make it make it abundantly clear that they were not referred the use of force against Taiwan abandoning the use of force not only against Taiwan abandoning use of force in their foreign policies for example or at least abandoning the use of force against Taiwan I think that's that's the the must without those terms how can you secure there's a piece based on this peace accord and they have to honor it renouncing the use force is vital for Beijing's approach short of that my personal opinion is that you cannot guarantee there's a piece even you sign agreement with with Beijing don't quote it as about government policy it's my own personal opinion well maybe I can build on that and ask you your personal opinion on a topic that we have talked about a great deal which is a cross-strait confidence building measures in the military sphere and what the prerequisite for CBMS would be and I know that your ministry has done a great deal of research on military confidence building measures and even in the absence of it a formal agreement there are some search and rescue type activities that are underway not between militaries but between the local law enforcement agencies my view is as you well know that there is there could be significant benefits to both sides in pursuing military CBMS particularly increasing the predictability of the security environment and creating communication mechanisms between the two sides that could be useful potentially in a crisis to deescalate and manage a situation so my question is whether you think that there is some kind of an organic relationship between a peace accord and beginning a discussion and on military CBMS is there one that is required before the other do they go in parallel do you have any sense as to what you think in your personal view would make sense in terms of the sequencing and my assumption of course is no timetable so we're not talking about today or tomorrow or any time soon thank you Bonnie for the question I think over the time gradually within my government there is a process of consensus building right now that the situation between two sides of the time is quite unique it's difficult to adopt the experiences in other regions or other countries regarding building CBMS to be applied or to be imposed in the situation of the Thomas tree area as a result of very complex historical issues on both sides so I think the consensus building in recent months and and over the year or so is that we should achieve political trust I mean CBM is predicated on a bound and insufficient political mutual trust between two sides that's the kind of a notion and perception we have developed in our domestic at least at a policy level short of a bound and insufficient political trust is it will be difficult to to to put forward military to military competence building measures so I think that president Ma also made it a bound and clear that to you to pursue economic and easy parts in the first place and institutionalizing mutual agreement sign over the years regarding economic and investments between two sides and that symbolize this accumulated process to enhance mutual trust so it's not in reverse that we should go for a meal meal CBM in the first place and seeking peaceful co in the future so I think that probably will be the the general consensus in Taiwan right now that doesn't necessary to say that we're not seeking in a possible CBM there's one area I think that it certainly was considering that is can either side to make efforts to think about how to make a unilateral declaration over certain issues for example the issues I mentioned that if Beijing consider continuous peaceful engagement with Taiwan is beneficial to Beijing's interests and they already achieve abundant confidence in conducting peaceful engagement with Taipei can Beijing you know simply renounce the use force can they simply says that we are in a very solid peaceful position right now and we cherish this accomplishment made by both sides in the past and we want to continue to go for it so the element to use force certainly will be a strong and big obstacles to handicap the process so we'll be Beijing willing to renounce the use of force or to consider to renounce this force for example so either side can do unilateral declaration in order to enhance mutual trust so that we can achieve more peaceful elements to assist this process to resolve the difficult political issues in the future so that that's the kind of thinking I'm thinking about still my personal opinion wait for your mic please thank you Mr. Minister a draft report of the US China Economic Security and Review Commission has found that the contracting for and delivery of some of the arms that Taiwan was seeking and that have been notified to Congress has been very slow it said that four of sixty black Hawk helicopters notified in January 2010 only had been placed on order and I think only 9% of Apache helicopters notified in October 2008 had been placed on order similarly it raised the possibility that no orders or few orders had been placed for Patriot PAC three fire control units notified in January 2010 I wonder if in line with your remark that you have to discuss the needs of quality not only quantity Taiwan is in fact reducing its plan to purchase any or all of those systems and others for funding reasons or others can you can you clarify where that situation stands Jim you know better than I do that US China Economic and Security Commission is established by the Congress to look into the issues concerns US economic and security interests and making recommendations to the government US government to adjust the policies or their policy implementation to protect US interest in that regard so the question you raised should be the concern from the Congress towards the US government not directly towards our government as far as I can see in fact our relations conducted between MND and Pentagon is very much based on the Taiwan Relations Act and the issues regarding arms sales and positions very much based on the code of conduct signed by US government and Taiwan for the 40 minute sales arrangements so far as I can see we haven't actually faced the concerns or problems or delays or you know shortages you mentioned by the draft report published or you know deliberated by USCC because we have no received no direct information or responses from our counterpoint at the Pentagon so as far as I can see that things are going in accordance with the plan with a schedule even the issues raised by the USCC was very much in control by the US Defense Department and their conduct with the US defense industries well that's what I say in terms of addressing how to reinforce the asymmetrical capability in the future because there are issues need to be addressed so that we will enhance our defense capabilities based on the asymmetrical you know perception I just to drill down a bit if I may on that asymmetrical issue that you raise you cited the the report to Congress in September on air power issues air defense issues and as we've since learned the report shows concern for whether further investments in new F 16s makes good sense given the threat to Taiwan's runways in any crunch and so one of the asymmetric solutions might be something like the F 35 short take off and vertical landing aircraft I wonder whether you're interested in exploring with the United States the possibility of acquiring the Stovall version of the F 35 perhaps either in addition to the F 16 or as a substitute for the F 16 specifically because of the threat to Taiwan's runways as I mentioned earlier our position is quite open and we welcome any kind of meaningful discussions or suggestions in the process of identifying adequate and suitable and effective asymmetrical capability in the future as I mentioned as I mentioned we are quite open and waiting for interesting introductions interesting suggestions other questions Andrew I did have a question if we could come back to the earlier question about unconventional threats to Taiwan security and to global security really and and that is the whole question of cyber defense in fact we had a very interesting conference here at CSIS on Monday on that question and looking more globally and also relations with our allies and partners on cyber defense I wondered obviously that as you know the debate here in the US has been partly around the whole question of who's in charge of cyber defense should it be a military lead a military and elements of this of the intelligence and security services and and how do we integrate all of the elements including engaging the private sector in ineffective cyber defenses and I wondered if you could describe how the Ministry of Defense has in Taipei has looked at this how your plans have evolved in terms of thinking about this challenge and and what is what is the state of your coordination with other agencies of government and the private sector in Taipei and Taiwan more broadly about plans to deal with the potential disruption of of critical communications and command control systems and critical infrastructure through cyber means thank you dr. Flanagan indeed this is the vitally a vital important issue as far as MND is concerned in I would describe our current cyber defense situation in two parts one we have isolated the military information systems you know which is different from the non-military information system currently in in Taiwan so we sort of this is the very rudimentary way to prevent and any intrusion into the military information systems by simply isolating from the civilian use only in recent months actually a government has put in great emphasis on setting up a national level of cyber and information security systems on it within the executive end this is a coordination commission involving both military and non-military and other civilian departments to look into the areas should be strengthened in terms of protecting governments and civilian information systems that's one system I mean the newly created echelons under the executive end the other one is created by the National Security Council in that cyber and information security task force MND has actively participating in assisting the National Security Council to set up this task group to look into the areas needed to be strengthened both in the military sector and non-military sectors and then they will make recommendations to the president and also to the cabinet in terms of how to combine this national security cyber security task force and the executive branch commission to coordinate with each other and setting up the priorities for the improvements of the security apparatus here so it's still in the very beginning of putting extra efforts and resources to consolidate this issue we haven't decided yet who's in charge but military tech the lead to protect our military information system in the first place and then lesson learned I mean for other implications they needed our assistance to provide the our experiences to set up the cyber security for non-military use as well so maybe in time we would decide who is going to lead the this this effort or not so I cannot give you the definition right now Mike Fonte doc young good to see you Mike Fonte I'm the Washington liaison for the Democratic Progressive Party you mentioned that the good relations between Taiwan and the United States during the mod administration based on no surprises is one element of it I think a lot of people in Washington though are have been surprised by the defense budget numbers going down rather significantly over the last two years and I wonder if you could explain that a bit for us and how you indicated that you had a from MND's perspective you had to convince both the L.Y. and the executive branch to put money in the pot and seems a little strange with the KMT controlling both both of those institutions that you're having so much trouble with defense budget so I wonder if you would explain why the defense budget has gone down to 2.2 percent or something like that of GDP thanks thank you Mike yes this is indeed the fact that the year we having the chief department's 3% GDP of a national defense budget in the past couple years but if you look at the actual defense budget which obviously has been affected by the government's concern for their priority spending which is abundantly clear I don't have to explain why the resources allocation you know decision-making adopted by by the government of course we continue to make efforts to address the importance of adequate and sufficient defense resources allocation so that we can continue to conduct our defense transformation and implementing major defense policies in the future governments are aware of that they consider there's a need for more resources allocation for defense however due to the constraint of the national budget and due to the priorities we can it cannot achieve our objectives in the past two years but if you look at the next year's budget we are making effort even though there is a slightly increase for our national defense budget but it is a result of very intensive effort made by the MND and convincing not only the cabinet but also ALY to give us money because we have a major task ahead at hand for example implementing the volunteer system for that's number one and also necessary acquisition in down the road as well so next year if the budget can be approved by ALY before mid-december then we will have a more budget for 2012 that's a step forward but if you look down in the future I'm confident that we will get more resources allocation given the fact we already received approval from the US to provide F16 AB retrofit that certainly requires sufficient money to put into it and if ALY can assist MND to implement volunteer system then we will get the more budget for personal cost in the future as well so that will add up to the defense spending for the following years so I'm sure there are more resources available in terms of our future defense budgets and so consensus building and continuous effort to convince the cabinet and ALY that this is the priority for our country it's important thank you. My name is Adam Carrington I'm a contractor with my name is Adam Carrington I'm a contractor with DOD I was wondering if you could address some of the policy shifts that MND has undertaken because of the general low fallout and also has there been any type of concurrent interface with DOD because of the fallout we're experiencing from the WikiLeaks case and maybe the two are interacting with one another to address the problems from insider threats thank you. As far as I can see Adam those two cases has not direct impact over our policies we still very much putting efforts to continue our current and future efforts to meet out this defense trip of transformation objectives so so far there's no impact over our policy. Let me ask another question several months ago President Ma talked about the need to establish some kind of a code of conduct that would guide the interaction between retired military officers in Taiwan and their counterparts on the mainland as a result of some cases and the large growing number of retired military officers that are visiting the mainland so I'm wondering if you could talk about what the progress has been in that regard and what such a code of conduct might might look like and it's my understanding that it would not be legally binding so how would it actually be implemented thank you. Thank you Bonnie in fact there's no written code of conduct or any verbal code of conduct to be addressed to this issue the only thing I can see is that there are moral persuasions there were continuous moral persuasions conducted to convince those retired senior officers to pay great attention to our national interests we are not prohibiting their visits to men in China but simply aware alert those those senior retired officers in the course of conducting their visit always address the needs to protect our national interests so I call it as a moral persuasion and it is taking effect as well thank you. Other questions? So you guys are very satisfied. Well it seems like you have answered all of our questions and probably solved all of the problems that Taiwan faces as well so we would like to very much thank you for coming today and talking to us and hope that she'll come back soon. Thank you. Thank you all.