Trade war with china. We work snow show. We will review the week in tech. But first to our top story, the Trump Administration is weighing a new weapon in the trade war with china. Bloomberg says officials are discussing ways to limit portfolio flows into china. A move that could include delisting Major ChineseCompanies Like alibaba from u. S. Exchanges. The move could impact of billions in the markets and the nasdaq s p 500 and dow were all in the red following the report. Joining us to discuss in los angeles is bloombergs sarah is whos been covering the trade war. Sarah, what is the goal of u. S. Policymakers here . Are they trying to punish or just protect u. S. Investors . Sarah its interesting that with the trade war this is not meant to be provocative or to push china into the corner and remind them of the leverage the u. S. Has. That said, this capital, these talks in the capital restrictions on china are not part of the trade talks and theyre trying to keep them separate. I think if we look at the marco rubios of the world, whove been trying to push for this kind of thing in the past, it is more of a moral or ethical argument. Theyre saying, do we really want American Investment funding a nondemocratic government . They alleged human rights issues in china and other things. And i think they believed that they do not want to give money to this rising strategic and economic power to the u. S. Brad so sarah, alibaba listed on the new york stock exchange. Baidu is on the nasdaq. What does this mean for those companies . Sarah as you said in the opening, brad, this is very much in the beginning stages and trump has not approved it. Its serious but its not going to be put into place tomorrow or anything. Its the delisting of these Chinese Companies and some data shows that there are 156 Chinese Companies on the three biggest exchanges in the u. S. This isnt small changes were talking about. For some of these companies, it has been a huge win for them to get into the u. S. Market. Theyve seen a rulesbased approach and ways for these companies to expand themselves. It would obviously be a pretty big move for these companies and it wouldnt be taken lightly. Brad sarah, tell us a little bit about Peter Navarro, the white house trade advisor and one of the primary sources behind this thinking. Sarah so, all along in the trade war, the question is who has trumps ear . Theres always a lot of speculation. With a proposal like this, its clear that advocates like Peter Navarro and outside advisors like steve bannon are behind it. They are some of the key advocates. They are very hawkish on china. As i said earlier, they really see a decoupling of the u. S. And in china, whether its a markets or otherwise as a key of punishing china cutting them off. They see china as a bad actor in the world and a very big threat technologically economically to the u. S. Something of this extremely it wouldnt be surprising that Peter Navarro would be an advocate of it. Brad weve heard now for many months that the primary goals of the trade dispute has been to over the markets to allow more access to those markets into Chinese Companies. So wouldnt this move be contrary to that goal . When move goal . Absolutely, these tariffs are predicated on the belief that the u. S. Wants a trade deal and increase transparency three at the same time, to make sure thes a level weighing real for American Companies to compete better. But then we see these moves that are completely against odds like the proposal and the capital restraints. We see section against Companies Like huawei that total u. S. Suppliers. Currency manipulation. Some of the actions seem at odds and could make you believe perhaps that the trump is using the Trump Administration is using some of this leveraged in ways that run against what it says its stated trade policy is which is to make everything better for u. S. Companies, a global, level playing field. I think it leaves a lot of people in a fit of a confusion about what really is the goal of the Trump Administration. Brad so, last question, ill make it a quick one. On one hand, we could have a trade resolution and on the other hand is the prospect of a fallout decoupling from the chinese economy. Which way are we heading right now . Sarah thats the milliondollar question. I think we have some talks coming in the next few weeks. At this point, it would be small wins. The two sides came out of the meeting saying china has agreed to agriculture purchases and the u. S. , maybe to really move forward on granting these huawei licenses as promised, for instance, i think that would defuse the situation even a little bit. Worse case scenario, with the these capital restraints. Theres sort of multiple ways this trade war can go. Thats why its so important as we look ahead to the trade meetings between top officials, we can really get a sense of where is this headed now . Whats the latest direction . Brad ok, bloombergs Sarah Mcgregor joining us in los angeles. Thank you for joining us. While the u. S. And china remain far apart when it comes to trade, the u. S. And japan sealed the deal this week. The agreement between tokyo and washington ensures tariff free crossborder data transfers. That includes videos and video games, ebooks and software. So, what does that mean to the u. S. Industry . Earlier today, i asked martin schroeder. Martin well, its a really important agreement because digital trade is a component of the economy is growing much faster than the rest of the economy. Its the growth of jobs which are now digital focus. Its important for the entire digital economy. Whats really important within this agreement, this really sets the Gold Standard for what we think these digital trade agreements should really look like. It has the components, the elements that we have been strong proponents for. Brad its part of a larger agreement that includes reduction of tariffs on farm goods. The u. S. Chamber of commerce says it doesnt go far enough. And it actually raises the specter of u. S. Property to go further. Does this go as far as it needs to go . Martin believe me, this is absolutely the Gold Standard in digital trade. Let me walk you through a few pieces. The things that the International Community can now look to as they think about how they enter into these kinds of agreements. So first, there is free data flow. Obviously, there is privacy and security, but also free flow of data across all industries. In an industry where data needs to be kept for security reasons, that will get covered but by and large, data across all industries can move freely. Very important. Secondly, it doesnt have any data localization mandates. So, neither of the two governments are going to force a company or force any participants to store their data in a particular place. Its very unproductive and it doesnt achieve what they are trying to achieve. And then thirdly, to your question on intellectual property, this agreement does two things that make it the Gold Standard. One, it protects your source code. Neither country will force you to give up your source code. We have never given up our source code and we never would. But it goes another step, as well. It also protects the algorithms that you use in your software. When you think about the source code and the algorithms, thats the Critical Design elements of the next century of the software driven economy. Brad so martin, what does that mean to glencore a company like ibm that has a sizable business in japan . Martin it gives us a framework by which we can be very confident as we build our business in japan erie it that business in japan. That these two economies are going to operate in a digital way that we think is the right way to do it. More importantly, as we are out talking about digital trade with all of the other places we do business, its very clear and we can point to the Gold Standard. Standard exists in the usmca agreement. Weve been very active promoting usmca from a digital trade perspective. Now we have two good examples. Challenge now is we have to get many more countries to adopt these digital trade standards. Brad we are very far from any kind of trade agreement with one of those, china. Perhaps we can dream. What would a digital trade agreement with china look like . Martin input only, ill do them in reverse order because i think there are elements of this that will be important in that discussion. Thats all about protecting intellectual property and protecting algorithms. Any regional trade agreement between any countries needs to protect source code and algorithms. There is obviously an element to this that says we cant make anyone store their data in a particular place. Data localization mandates should be removed from these. That would be a big component of something that we would want to see. Then again, just the idea that data can flow freely. Thats the way the world supply chains work. Thats the way the Banking Systems work. And any country that wants to be integrated into this Global Supply chains or Global Banking system really needs to recognize those three principles because i really think thats how the rest of the world is going to be thinking about digital trade. Brad martin, a quick last question. What does this agreement mean for the u. S. Technology consumer . Martin this is a big help. When you think about the digitization of the world, any discussion we have going on with our clients, were an enterprise focused business that our enterprise clients are serving consumers. This allows our enterprise clients to digitize their processes and offerings in whole new ways. Weve seen a lot of innovation coming out of technology. That innovation and this agreement between the u. S. And japan can continue and now we have to make it much more widespread. Brad that was martin schroeter, Senior Vice President of ibm global markets. Coming up, micron has a very bad day. The rest of the industry follow suit. Thats next. This is bloomberg. Brad micron is having its worst day in the year. Shares tumbled on the heels of micron giving a forecast that was below expectations on thursday. But some analysts say the worst may not be over for the company. Lets bring in bloombergs ian king to discuss. Ian, i think of it as a bedrock. What could they possibly say to instigate such a selloff . Ian you are vesely pointed at the numbers, not really that scary, 11 down scary. Really, what was happening was a Common Thread that was going on. That was, they were pressing the red panic buttons for chip investors. Theres been some upticks, but that might be inventory build, not related to demand. And inventory is absolutely the worst thing you can say in the chip business. Brad so what im hearing is that this could be a problem for the Semi Conductor industry and tech overall. The trade war hangs over everything right now. Ian youre absolutely right. Stocks say everything is fine. Memory chip market is very volatile market. Micron is one of those companies that says they can go and buy stuff from wherever they want, they can buy from samsung, wherever they want. Why are you hurting us . Thats the most representative of this kind of conundrum that a lot of Tech Companies are facing. Brad most people probably havent heard of micron that and recently the president of the United States went to the uns General Assembly and talked about micron. Lets listen. President trump a Company Owned by the Chinese State allegedly stole microns designs, valued at up to 8. 7 billion. Soon, the Chinese Company obtains patents for nearly an identical product. And micron was banned from selling its own goods in china. Brad ian, what is the president talking about here . Ian well, some of those references im not 100 sure with. There was a case here and its an ongoing case that started an investigation in taiwan. Na is trying to build Taiwanese Company was allegedly facilitating the theft of microns designs to take them to china which as you know is trying to build its own memory chip business thats an ongoing situation and something the doj has looked at and lauded the taiwanese for trying to do something about. Brad now, theres an entirely separate tradeoff between south korea and japan. I would imagine that would help microns prospect because then samsung have limited interest to the interest market. But that does not seem to be the case here. Ian yeah, the idea is that the japanese and koreans are angry with each other and the japanese have threatened to cut off crucial supplies to make memory chips. That would not be good for micron because where else are you going to go in get chips . To go get chips . It turns out the answer is that the chinese are the biggest market for this thing and they have gone ahead and bought a load of these things in advance to forestall a possible benefit, any switch in market share. That wasnt taken too well when they talked about that. Brad ian, last question, is there a chance were going to look at this week and what has happened to micron as the canary in the coal mine for the Semiconductor Industry or tech in general . Ian thats absolutely the concern. When you look at the money that has come into the stock and in chips in general, what they are saying is its hard to see that right now. Brad ok, well see what happens. Thank you very much. Coming up, Unprofitable Companies are raising the most cash since the dot com era. Whats the risk . Thats next. This is bloomberg. Brad now to the story were following, the continuing black eye for the ipo market. Shares of balaton fell for the second straight day of trading. The startup has dropped by double digits since it went public this week. The poor debut is adding to a year of lackluster ones, which included the likes of uber, lyft, and wework. Its been a banner year for Tech Companies, yet its gotten really ugly lately. Whats happening . Is this just one of those imperceptible shifts in market psychology . Guest no, i dont think so. Thats extreme. What were seeing is a moment of recognition. The private markets, the bankers and Public Markets have to come to terms with how the private shares are valued. Overall, its been great. 50 billion raised so far. Exits are important. Everything is fine. Weweork is an outlier. Its getting a hit because of wework and the issues right now. But overall, i think the ipo process is alive. The pipeline is robust. Everything is going great. It just needs to we need to tweak the model and the valuation is whats broken at this point. But overall, i think the ipo process is still alive and doing very well. I hear youo what saying is that the markets have been able to accommodate the valuations set by these private markets. Whats the role of the investment banks . What should they be doing as they ushered these companies down the runway and recently to try to disastrous ipo offerings . Guest yeah, so i follow this market very closely. I think whats going to happen is, in the early stages, i can understand that you need proof of concept, the revenue so the valuations reflect that. I think expectations have to be managed and bankers have to play a big role saying this is and this is what the Public Markets are expecting. And so, i think bankers will play a very big role in getting this over. Its important that if they play a big role in this. Ipos are very important and the majority of them are doing well. You have to give them some room. And finally i want to add, how do you value a company . Thats not easy. With lyft and uber, transportation companies. These are excellent companies, by definition. Theyre disruptive. Surprise discoveries going to be tough. You need to come to terms with that and understand let them grow. Let them be. We need them. Wework has shelved its ipo. Theres still over 100 startups that have filed to go public that are on the runway including some of yours at manhattan ventures. How do you advise them . Is the ipo door still open right now . Guest its wide open. I think youll see them come to market. The valuations are going to be more rational. Thats the biggest thing. I think everything is going to be more rational. Thats good. It needs to come down, let it be more rational. Let there be a path to profitability, even if youre not there, explain it very well. Get there and thats what we do. When we invest in these companies we look for that unless we have that, we tell our investors that you have to be careful. All thats factored in thats the right way to invest. Dont just throw money at an any ipo. Look at it. Look at the Corporate Governance structure then enter the market. Brad two of your Companies Went public this year, lyft and pinterest. Both of those are laboring under a dark cloud. What do those Companies Need to do in this market environment to change the perception that they went public at a difficult time . Guest we are very happy with both investments. Theyre doing very well. Lyft is getting tethered to uber and ubers problems. Lyft is a very good investment. Its a very good entry at this point. Lyft on ak at longterm basis. We didnt expect it to just take off. Theres a huge market of ondemand transportation. Transportation as a service is going to be huge. Lyft, in particular, this is why is a pured in lyft, play focus in north america , where the economics are the best. They have a path to profitability. They already said that 2019 is there peak investment year. Optician and pricing is getting more ra