Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: Search Bloomberg glovel News with us right now in the
Speaker 1: Bloomberg Interactive Brooker Studio. We got Credy Gupta, anchor and
Speaker 1: markets correspondent for Bloomberg also joining us. We got read Picker.
Speaker 1: She's US economy reporter for Bloomberg News. She's joining us
Speaker 1: via zoom from Washington, d C. So if you are
Speaker 1: watching us right now on YouTube or on Bloomberg dot com,
Speaker 1: you can see all of us this afternoon. Credy, I
Speaker 1: want to start with you because kind of a pustling
Speaker 1: trade going on at first stuck for higher and now
Speaker 1: they have moved lower. You know, it's interesting they I
Speaker 1: feel like the narrative shifted midday. Um, and you would
Speaker 1: have thought it would have shifted about eight thirty am
Speaker 1: this morning with the jobs report of course coming in
Speaker 1: hotter to sixty one thousand relative to I believe in
Speaker 1: exactly flat. Sorry, I just wanted to. I know, it's
Speaker 1: like why even why even bother showing up to work,
Speaker 1: But this is like there was a narrative shift. Could
Speaker 1: just let me. Uh. We started off with this idea
Speaker 1: of what kind of pricing in a higher terminal rate.
Speaker 1: Remember we have had that narrative going in post Powell
Speaker 1: on Wednesdays Thursday as well. But we actually look at
Speaker 1: some of the pricing here, nothing has really changed that much.
Speaker 1: We're talking about a five percent terminal rate. The highest
Speaker 1: that you saw on FED swaps pricing was five point
Speaker 1: one or five and a quarter percent. That's not a
Speaker 1: massive change enough to change the dynamic that's in the
Speaker 1: stock market. And one of the bull cases for the
Speaker 1: stock market is that the terminal rate is going to
Speaker 1: stall out and that is as high as if FED
Speaker 1: is going to go. Once that's priced in, there's no
Speaker 1: reason for the stock market to continue selling off because
Speaker 1: once again it's been priced in. Then you have this
Speaker 1: dollar move, which I think is the real catalyst of
Speaker 1: the turnaround that you saw. I want to say out
Speaker 1: around eleven a m where you had the SMP five
Speaker 1: and make a complete flip, because the Bloomberg Dollar Index,
Speaker 1: if you look, is actually having its weakest day going
Speaker 1: all the way back to March. And it's something that's
Speaker 1: been powering the commodities market from the beginning of the
Speaker 1: trading session overnight. What it wasn't doing is uh necessarily
Speaker 1: showing up in the dollar. Now you're seeing the SMP
Speaker 1: five hundred, it feels like getting more of its que
Speaker 1: from the Fed swaps pricing, whereas the dollar still moving
Speaker 1: the commodity market. That's a lot of information to say
Speaker 1: the market doesn't quite have one single narrative. There's so
Speaker 1: many factors that play right now. Um, but I would
Speaker 1: say the biggest move to be conscious of is this
Speaker 1: dollar move. Okay, let's rewind though we're looking at the
Speaker 1: SMP five hundred that's exactly flat. But let's go back
Speaker 1: to eight thirty am this morning. Read when I look
Speaker 1: at the Bloomberg news story describing the numbers we got
Speaker 1: for October payrolls. Uh, the lead sentences that tiny cracks
Speaker 1: are beginning to emerge in the US labor markets resilience read.
Speaker 1: I thought this was a super hot print. It is
Speaker 1: that when we think about the jobs report, you have
Speaker 1: to remember that there's two surveys beneath it, and today
Speaker 1: was a good reminder that sometimes those surveys don't point
Speaker 1: in the same direction. So on one side, you had
Speaker 1: the Survey of Businesses, which what is what informs that
Speaker 1: payroll's print, and you saw that really stronger, strong, you know,
Speaker 1: two hundred and sixty thousand print come in on that side,
Speaker 1: and that was broad faced. It was stronger than books
Speaker 1: were expecting. Um. And then on the flip side you
Speaker 1: had the household survey, which is what informs things such
Speaker 1: as the unemployment rate, the participation rate, and those wage numbers.
Speaker 1: And from that survey you saw a bit more weakness
Speaker 1: in terms of seeing the unemployment rate rise more than
Speaker 1: folks were expecting, and then seeing wages continue to keep rising.
Speaker 1: And like a lot of things, the truth is probably
Speaker 1: somewhere in the middle. But I think when you put
Speaker 1: the whole thing together, it paints this picture of an
Speaker 1: economy in a labor market, well, a labor market that's
Speaker 1: just proven to be resilient. It's still really strong, and
Speaker 1: though it's showing some hints of softening um, it certainly
Speaker 1: has a long way to go before the type of
Speaker 1: you know, coming into balance that federals or officials are
Speaker 1: hoping to see. If you're J. Powell read picker and
Speaker 1: you see a print like this, what are you thinking.
Speaker 1: I think they're still thinking that the labor market is
Speaker 1: is too hot. I mean when you see a wage
Speaker 1: number come in so on a year or year basis,
Speaker 1: wages decelerated a little bit, but on a month over
Speaker 1: month basis, that wage print came in strong yet again.
Speaker 1: And that adds to several other prints that we've gotten
Speaker 1: in recent weeks where it shows that wage wage growth,
Speaker 1: while showing some signs of deceleration in some pockets, is
Speaker 1: still really strong. And you know, from the Fed's perspective,
Speaker 1: that means that you still have you know, something like
Speaker 1: that putting upward pressure on lation. I love the question
Speaker 1: to like, if you were JR. Own pal, what would
Speaker 1: you do? If I was your own pal? I would retire,
Speaker 1: you know, seen off to the sunset. But I'm already
Speaker 1: thinking about next week. There is a lot going on
Speaker 1: this week, there's somehow arguably as much happening next week.
Speaker 1: What is the biggest catalyst when you boil it all down? Well,
Speaker 1: you're just gonna make me say that next economic table point.
Speaker 1: Him has already shamed me for Well, let's come on
Speaker 1: like as the CPI report. No surprise there, But I
Speaker 1: think it's more of going to be a question of
Speaker 1: do we continue to see the marginal deceleration we need
Speaker 1: to the problem with the last couple of CPI reports
Speaker 1: is that they've actually missed the economist estimates, which we're
Speaker 1: getting lower and lower to begin with, So the bar
Speaker 1: kept getting lower, and even then the data was missing
Speaker 1: the bar, and I think that's something that certainly hurt
Speaker 1: the markets quite a bit. There's also already some commentaries
Speaker 1: and FED speak and here I'm just looking at some
Speaker 1: comments made earlier this morning. I could perhaps be responsible
Speaker 1: for the equity turnaround coming from Boston FED presidents Susan
Speaker 1: Collins saying that it might just make a lot of
Speaker 1: sense to shift to smaller rate hikes. I wonder how
Speaker 1: many of people in that camp kind of eat their
Speaker 1: words if they see a CPI number that just isn't
Speaker 1: coming down fast enough. All right, well that's the question.
Speaker 1: I mean, we're going to get that inflation data and
Speaker 1: the Fed has its work cut out a mid terms,
Speaker 1: oh those things. Yeah. I'm going to Arizona, not for
Speaker 1: mid terms, but it would be a good place if
Speaker 1: I were not going on vacation and going at some
Speaker 1: rocks or something that's I'm going to touch some grass
Speaker 1: and yeah, yeah, I do some hiking. Big thank you
Speaker 1: to read Picker U s. Economy reporter for Bloomberg News,
Speaker 1: joining U S. V A Zum from Washington. Also Creedy Gupta,
Speaker 1: anchor and markets correspondent for Bloomberg. She's with us in
Speaker 1: the Bloomberg Interactive at Broker's Studio. This is Bloomberg Business
Speaker 1: Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic
Speaker 1: on Bloomberg Radio. Well, we've been talking about it all day.
Speaker 1: Payrolls increasing by higher than expected two sixty one thousand
Speaker 1: last month. That beat almost every estimate in the Bloomberg
Speaker 1: survey of economists. The figure compares with an upwardly revised
Speaker 1: two hundreds of teen thousand, four September. So it turns
Speaker 1: out the FED still has quite a bit of work
Speaker 1: to do. Let's not turn to Amy Glazer, senior vice
Speaker 1: president at the staffing firm A Deco. It's one of
Speaker 1: the biggest staffing firms in the entire world. So Amy
Speaker 1: and the crew at A Deco have a great idea
Speaker 1: of what's happening, not just here in the US, but
Speaker 1: globally too. She joins us this afternoon on the on
Speaker 1: via zoom from Florida. So if you are watching us
Speaker 1: on YouTube or streaming us on Bloomberg dot com, you
Speaker 1: can see the interview there. Amy, good to have you
Speaker 1: with us this afternoon. This number surprised a lot of
Speaker 1: people on the upside. Did it surprise you, Hi, great
Speaker 1: to be here to him, Thanks so much. Frankly, it
Speaker 1: didn't surprise me, and mirrors what we're seeing on the
Speaker 1: field and on the ground. Demand is still hot, it's
Speaker 1: still a candidate driven market, and there's still almost two
Speaker 1: jobs for every job seeker. And so Amy, it's interesting
Speaker 1: to hear you say that and to square that with
Speaker 1: sort of the corporate news that we've gotten this week.
Speaker 1: When you think about Amazon, for example, news that they're
Speaker 1: going to pause at new corporate workers. We heard some
Speaker 1: similar things from Apple. Twitter is its own special story,
Speaker 1: but laying off half of its workforce. I believe Twitter
Speaker 1: laying off half exactly. So when do we start to
Speaker 1: see that come into these big headline figures and when
Speaker 1: have you seen any indication of that in your work
Speaker 1: at a deco. Yeah, that's a really good question. Right now,
Speaker 1: although there are a lot of announcements with a lot
Speaker 1: of big names, we're really not seeing that demand ship.
Speaker 1: Whether it's being picked up by some small and medium
Speaker 1: sized companies from some different sectors. Um, we're seeing puts
Speaker 1: and takes right now in the market. So I think
Speaker 1: we'll continue to watch. I don't have a crystal ball,
Speaker 1: but frankly, I don't anticipate a great deal of change
Speaker 1: throughout the remainder of the year. This is really remarkable, Amy,
Speaker 1: because and I want to follow up on Katie's great
Speaker 1: question about about Twitter, because I've actually before the jobs
Speaker 1: report came out, I was had this like really nerdy
Speaker 1: group of friends and we we text about this type
Speaker 1: of stuff, and we were talking about the layoffs of Twitter,
Speaker 1: and he was saying that he feels bad for all
Speaker 1: the people who've been laid off from Twitter because it's
Speaker 1: a really tough job market right now. And I pushed back,
Speaker 1: and I said, look, everybody we talked to say says
Speaker 1: that for tech workers specifically, because every company is pretty
Speaker 1: much a tech company right now, it is not that
Speaker 1: difficult for people with those engineering backgrounds to go out
Speaker 1: and find another job. Is that true. That's absolutely the
Speaker 1: case right now, Tim, we're seeing the opportunities still exist
Speaker 1: and and really it's actually creating a cool opportunity where
Speaker 1: folks in the driver's seat can really drive their own
Speaker 1: destiny and decide what their future work looks like, whether
Speaker 1: it be the company, the flexibility of hours they're looking for.
Speaker 1: So I still continue to see those candidates, you know,
Speaker 1: driving what's going to happen in the future. Let me
Speaker 1: just say that my group chats don't look like Tim's. Uh,
Speaker 1: we were not discussing, sorry, the labor market. But that's
Speaker 1: really cool, Tim. But Amy, a narrative that I hear
Speaker 1: specifically when we talk about these tech sector layoffs is that, oh, well,
Speaker 1: these companies way overstaffed over the past two and a
Speaker 1: half years during the pandemic. Is that a theory that
Speaker 1: holds water with you. Yeah, I think that's part of it.
Speaker 1: I think, you know, it's really more of a right
Speaker 1: sizing and a market that has been so white hot
Speaker 1: over the last two years. Interesting. Okay, So here's the thing,
Speaker 1: and I kind of pose this question to read Picker
Speaker 1: it a little earlier about J. Powell. This just means
Speaker 1: the FED has so much more work to do because
Speaker 1: for the months the FED share has been talking about
Speaker 1: an overheated labor market and we're still continuing to see that.
Speaker 1: So I know you're don't You're not focused on the FED.
Speaker 1: You're focused on employment. But does it show you that
Speaker 1: the FED has a long way to go in order to,
Speaker 1: I don't know, try to attempt this soft landing to
Speaker 1: bring inflation under control, because if people can get jobs
Speaker 1: so easily at this point, then could lead to higher
Speaker 1: wages and that could lead to higher inflation. Right. You know,
Speaker 1: it's interesting. We just released our Global Workforce of the
Speaker 1: Future report. We surveyed US workers global workers, and we
Speaker 1: found that wages, although they're increasing, are still concerned to candidates.
Speaker 1: And in fact, our data showed us the two thirds
Speaker 1: of the U S workers don't feel like any wage
Speaker 1: gains have been enough to heat and eat this winner.
Speaker 1: So as a result of us, workers right now are
Speaker 1: actually saying they're open to a second job. So I
Speaker 1: think we'll continue to see some interesting trends and and
Speaker 1: some folks looking to pick up additional work to kind
Speaker 1: of offset it. So I think we do our ways
Speaker 1: to go there looking to pick up additional work. I
Speaker 1: think that leads nicely into a question about what could
Speaker 1: we expect to see this holiday season. You know, when
Speaker 1: a lot of especially retailers, try to staff up for
Speaker 1: some temporary roles, do you expect the same sort of
Speaker 1: seasonal swing there? Absolutely, and we're in the throes of
Speaker 1: it right now. In fact, we've got a national road
Speaker 1: show with a lot of job mobiles out on the
Speaker 1: streets in these communities. They're hiring seasonally, really going to
Speaker 1: where the candidates reside to make it easy for them
Speaker 1: to apply. We're still seeing considerable demand. On one unique
Speaker 1: aspect we're seeing a little bit is the shift in
Speaker 1: retail from the e commerce world to the brick and
Speaker 1: mortar stores and pop up shops. So seasonal hiring, although
Speaker 1: still strong, looks a little bit different this year. It
Speaker 1: may not be quite as heavy in the warehouse sector
Speaker 1: as it is in some of those in person shopping experiences.
Speaker 1: I mean that comes as no surprise, Amy, given what
Speaker 1: Amazon said about the holiday quarter being its slowest growth,
Speaker 1: uh that it's ever that it's ever seen at this point.
Speaker 1: So yeah, Hey, Amy, it's always good to check in
Speaker 1: with you. Really appreciate you taking the time and joining
Speaker 1: us on a Bloomberg Business Week, especially on Job's Day.
Speaker 1: Amy Glazier, senior vice president at the staffing firm A Deco.
Speaker 1: It's a worldwide staffing from among the biggest in the world.
Speaker 1: She joined us this afternoon via zoom from ponte Vedra Beach, Florida.
Speaker 1: Check him out at a Deco USA. On Twitter, you're
Speaker 1: listening to Bloomberg Business Week Tim Stanovik and Katie Graeifeld
Speaker 1: and we're just getting started. You're listening to Bloomberg Business
Speaker 1: Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic
Speaker 1: on Bloomberg Radio. Well in the new issue of Bloomberg
Speaker 1: Business Week. It's the new Economy issue of Business Week magazine.
Speaker 1: It's available now on news stands, on the Bloomberg Terminal
Speaker 1: and at Bloomberg Dot com there's a piece by Tom Orlick,
Speaker 1: He's chief economists for Bloomberg Economics. It's all about how
Speaker 1: national security hawks are muscling aside economists when it comes
Speaker 1: to set policy direction. We got Tom with us on
Speaker 1: the line right now. He joins us from Washington, d C.
Speaker 1: Also joining us as Joel Weber. He is the editor
Speaker 1: of Bloomberg Business Week. He joins us this afternoon on
Speaker 1: the access line. Joel, I want to start with you because,
Speaker 1: as Tom writes in this piece, there are two different
Speaker 1: types of policymakers in the world. That's what we have
Speaker 1: to imagine. Essentially, those who are looking to increase the
Speaker 1: size of the pie and then those who are looking
Speaker 1: for their own share of it. How are we now
Speaker 1: in this world where it's sort of a zero sum
Speaker 1: game rather than a rising tide lifting all boats. At
Speaker 1: the risk of mixing metaphors, here a few things going
Speaker 1: on there. But UM, I like the pie part um,
Speaker 1: So so what we um what we kind of talked
Speaker 1: about with Tom here was something that um we wanted
Speaker 1: to be on the other side of China's recent Communist
Speaker 1: Party congress and talk about because ultimately the story is
Speaker 1: a US China one here, UM, and those being sort
Speaker 1: of the global superpowers that are vying for superior superiority.
Speaker 1: And obviously that dynamic is changing and has changed dramatically
Speaker 1: over the past UM, even within the past decade. UM.
Speaker 1: And what Tom Um I thought, did a really interesting
Speaker 1: job pointing out here was the new leadership in China
Speaker 1: looks dramatically different and whereas the prevailing UM you know,
Speaker 1: for decades, the prevailing UH kind of priority on both
Speaker 1: sides was to expand that pie and that is just
Speaker 1: no longer the case. So so Tom is a great
Speaker 1: China watcher, had been UM. When I first met him,
Speaker 1: he was actually in Beijing, UM, and so I'm really
Speaker 1: I was really curious to get his perspective on on
Speaker 1: what the recent moves within China look like. And of
Speaker 1: course he didn't even bigger step backstory connecting all those doubts.
Speaker 1: So Tom talked to us about what what stuck out
Speaker 1: to you Um in this leadership change in China? Thanks
Speaker 1: Joel UM. So if we focus on the China piece
Speaker 1: of it for a moment, the focus has been on
Speaker 1: Hijin Ping securing a third term as the General Secretary
Speaker 1: of the Communist Party, and so also China's great leader, China,
Speaker 1: China's top leader. Um lost in the sort of lost
Speaker 1: in the kind of headlines, there was something else really
Speaker 1: important which was going on, which is the retirement of
Speaker 1: a whole generation of pro reform economic policy officials. Leka Chang,
Speaker 1: the Premier, E Gang and gorse Hu Ching at the
Speaker 1: Central Bank, leoher Shi Jimping's top economic advisor, all heading
Speaker 1: for retirement and no one really with the same pro
Speaker 1: reform credentials to replace them. So within China you've got
Speaker 1: this transition where policy is being set by economists focus
Speaker 1: on development, to policy being set by really communist party
Speaker 1: appara chicks without that pro market vision. Now at the
Speaker 1: same time, and this is where the kind of step
Speaker 1: back US China perspective that Joel was mentioning comes in.
Speaker 1: We've seen a changing of the guard in the United States.
Speaker 1: Back in the ES, it was the economists at the
Speaker 1: Treasury who were calling the shots on US China policy, saying, yeah,
Speaker 1: let's be friends, let's expand global markets, let's grow the
Speaker 1: pie together. Now Here in Washington, d C. There's a
Speaker 1: strong sense that that was a mistake, that the US
Speaker 1: was kind of hoodwinked. They were tricked by the Chinese.
Speaker 1: And so it's no longer the economists who are calling
Speaker 1: the shots here, it's the national security hawks. And that
Speaker 1: means within China and on US China policy, the focus
Speaker 1: has really shifted away from growing the pie and sharing
Speaker 1: the pie and towards securing whatever is ours. And that's
Speaker 1: a very different world. Well, tom, if we are further
Speaker 1: that metaphor about pies and now we're fighting over slices,
Speaker 1: or the U S and China are if you take
Speaker 1: score right now, who do you think is winning. So look,
Speaker 1: this is a very very challenging moment for China. They
Speaker 1: continue to wrestle with COVID zero. Some hopeful signs um
Speaker 1: on social media and in the press in the last
Speaker 1: few days that maybe the exit from COVID zero might
Speaker 1: come a little bit ler than expected, but still a
Speaker 1: huge challenge for China there, and of course they've got
Speaker 1: all of the problems that come from the massive slump
Speaker 1: in their real estate sector, once the biggest driver of growth,
Speaker 1: now a huge drag. So China right now this is
Speaker 1: a very stressed position, and that makes the US look
Speaker 1: relatively strong. But I think if we throw the calendar
Speaker 1: forward a few years, or maybe even just a few months.
Speaker 1: I think the I think the relative position might look
Speaker 1: very different. China that's exited from COVID zero, a China
Speaker 1: that's found a bit more stability after its property slump.
Speaker 1: I think that's going to be a China which looks
Speaker 1: more formidable again. And we're going to be looking in
Speaker 1: another assessment of the sort of relative balance of power
Speaker 1: between Beijing and d c Um Tom, So, what about
Speaker 1: the new leadership that's surrounding g What what can we
Speaker 1: expect from from them in regards to policy? So I
Speaker 1: think there's been a change on a couple of dimensions, right, um.
Speaker 1: So the first dimension, which we already discussed, is the
Speaker 1: kind of the exit of the pro reform economists from
Speaker 1: the leadership. I think that's important. We'll have to see
Speaker 1: what impact that has. The second is the sort of
Speaker 1: shift away from a leadership based on collective responsibility and
Speaker 1: different factions having a voice in the standing committee, to
Speaker 1: a leadership where she Jim Paying is very much the
Speaker 1: paramount leader and he's surrounded by well, if we're unkind,
Speaker 1: we'd say his cronies. If we're being kind, we'd say
Speaker 1: his friends, his allies, and his supporters. M Now, the
Speaker 1: hope there is, well, if you've got someone in charge
Speaker 1: who's surrounded by people they trust and who makes good decisions,
Speaker 1: you can get a lot of good stuff done. The risk,
Speaker 1: of course, is that if there's no one there who
Speaker 1: can say no to the top leader, if there's no
Speaker 1: one they're offering a divergent point of view, then the
Speaker 1: risk of significant policy missteps increases. Hey, Tom, before we
Speaker 1: let you go, Um, we just have about forty seconds
Speaker 1: left here. What does all of this mean for US
Speaker 1: companies that are trying to do business in China? I
Speaker 1: mean Starbucks, Nike, Disney, an organization like the NBA. The
Speaker 1: list goes on. So I was actually hoping if we're
Speaker 1: going to conclude by identifying our favorite types of pie
Speaker 1: minus minus cherry, I'll go with Apple. But for US businesses, UM,
Speaker 1: I think the challenge remains. Right. Um, You've got COVID zero,
Speaker 1: which just makes it very hard to operate, tough to
Speaker 1: get executives in and out of the country. You've got
Speaker 1: mounting hostility between China and the United States, which means
Speaker 1: the risk of embargoes, the risk of tariffs, other kind
Speaker 1: of political risks which could upset the kind of corporate dynamic.
Speaker 1: Um So hopefully there's better times for China ahead. Hopefully
Speaker 1: they exit COVID zero, Hopefully get they get through their
Speaker 1: property slump. Operating them, Tom Morelick, we unfortunately have to
Speaker 1: leave it there, Tom Moorelick, Chief economist for Bloomberg Economics.
Speaker 1: Joel Webber also joining us, the editor of Bloomberg Business Week.
Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio. Let's talk
Speaker 1: about crypto right now. You know it's been about in
Speaker 1: our and twenty minutes of the show. We haven't talked
Speaker 1: about crypto once. I did say Crypto I r l
Speaker 1: our new episode. That's true, it's on tonight. So we
Speaker 1: got to mention we didn't get a discussion. We're going
Speaker 1: to do that now with Mike Bell. She He is
Speaker 1: chief executive officer of Bickgo. He joins us on Zoom
Speaker 1: from Palo Alto Mike, it's great to have you with
Speaker 1: us for our audience who might not be familiar with Biko.
Speaker 1: Tell us what you do and also how that's changed.
Speaker 1: Over the past few months that we've had in the
Speaker 1: crypto industry. Sure, thanks for having me here. So Bicko
Speaker 1: is one of the veterans of the crypto space. We
Speaker 1: build the walls as a service platform and a custodian.
Speaker 1: We serve as institutions and uh, you know, generally delivering
Speaker 1: towards more trust in the digital space. Well, let's talk
Speaker 1: about custodians because I know you saw the recent news
Speaker 1: Mike about b n Y Melon getting in on holding
Speaker 1: clients crypto, which was a really big story just in
Speaker 1: the last few weeks. Talk to us about competition here,
Speaker 1: like why would somebody choose bit go over you know,
Speaker 1: one of the oldest banks in the country like b
Speaker 1: and Y Melon. Well, if it were apples to apples,
Speaker 1: of course you would would take BNY Like first, um
Speaker 1: I and I think everyone in the digital asset and
Speaker 1: crypto space is excited that bing and Y is here. UM,
Speaker 1: so be and Y along with Fidelity, you know, both
Speaker 1: participating heavily and crypto on a go forward basis. UM
Speaker 1: is a fantastic validator for everything we've been working on
Speaker 1: for the last ten years. So UM I feel very
Speaker 1: grateful that they're here. Now, if you want to talk
Speaker 1: about custodians, you know, custodians in the traditional world are
Speaker 1: a bit of a commodity. Um. You know, their their
Speaker 1: viewed is very similar in State Street and Being Y
Speaker 1: and JP Morgan is the three are just custodians of
Speaker 1: the world are often fairly interchangeable. We live in the
Speaker 1: world's most dynamic, most innovative software industry ever, and so
Speaker 1: there's a lot to be done. And while you know,
Speaker 1: the traditional guys are starting to figure out how to
Speaker 1: handle Bitcoin a little bit and then ethereum, there's a
Speaker 1: tremendous amount of work to be done with the hundreds
Speaker 1: of block chains and tokens and staking services and liquidity
Speaker 1: and building market structure on top of it, which is
Speaker 1: where Bigo continue to have great business, you know, And
Speaker 1: we're really welcoming BE and Y to be part of
Speaker 1: the part of the force. Well, when we talk about
Speaker 1: the traditional guys, the institutional players that you would be
Speaker 1: working with, I mean, have you seen a similar draw
Speaker 1: down to activity among that subset that we've seen in
Speaker 1: the broader crypto market? I mean, has that impacted demanded
Speaker 1: all Well, all markets are down, so there's not a
Speaker 1: crypto winter this time. We've had crypto winters in the past,
Speaker 1: but we have right now is a macro winter where
Speaker 1: all asset types are struggling in different ways in terms
Speaker 1: of institutional demand, you know, investor, And actually it hasn't
Speaker 1: it hasn't deteriorated at all. Um. There's definitely a lot
Speaker 1: of speculation around what's happening in the markets, but the
Speaker 1: the folks that have been participating in bitcoin and digital
Speaker 1: assets are just as big a believers now as they were,
Speaker 1: you know last year, Um, And you know, you saw
Speaker 1: the coin based report today, So sure they saw a
Speaker 1: big downturn on their on their business overall, but retail
Speaker 1: was much much more down than the institutional side. What
Speaker 1: do you see institutions doing in the crypto space moving forward?
Speaker 1: If if some of the froth has been wiped out
Speaker 1: of the industry with the downturn that we've seen this year,
Speaker 1: what's what's institutions role. Well, institutions for the most part
Speaker 1: aren't participating yet in in digital assets. I mean now
Speaker 1: at at the retail level. You know, we've had significant
Speaker 1: penetration both in the US and globally where people have
Speaker 1: started to hold bitcoin in particular, but other assets as
Speaker 1: well as the institutions come in. It's pretty much all
Speaker 1: green field um and they are responding to their clients
Speaker 1: that want better products, they want better service, they want
Speaker 1: to tap into better yields, they want the transparency that
Speaker 1: comes with bitcoin. And frankly, I believe the world is
Speaker 1: still convinced that there is a decoupling that will happen
Speaker 1: from bitcoin and the rest of the market, and we
Speaker 1: haven't seen it yet because you know, the bitcoin market
Speaker 1: is very small, but if that decoupling occurs, you know,
Speaker 1: we're going to see a tremendous boon for you know,
Speaker 1: digital assence and really proving the thesis behind it. But Mike,
Speaker 1: what could potentially cause that decoupling? I think it's just
Speaker 1: amount of time. So what causes it is when we
Speaker 1: get to a level of volume where you know, we're
Speaker 1: no longer just kind of a risk asset among among
Speaker 1: many Why did crypto have such a good year, you
Speaker 1: know last year on the backdrop of COVID and monetary
Speaker 1: policies across the globe that are questionable at best, It's
Speaker 1: clear that, you know, like the stock market is is
Speaker 1: headed for more rocky times last year the bond market
Speaker 1: was at zero to negative. If you're in Europe now,
Speaker 1: obviously the bondmari is a a little bit different right now
Speaker 1: because of what's going on with the rapid change of
Speaker 1: monterary policy to to uh deflect inflation. But you know,
Speaker 1: bitcoin is really the one asset that's they're that's like, look,
Speaker 1: it's a deflationary currency, it's not an inflation currency, and
Speaker 1: you want to correct against bad monetary policy. You know,
Speaker 1: having bitcoin in your portfolio, even if it's only three
Speaker 1: to five percent, can have a dramatic uh impact on
Speaker 1: what your returns are going to be just a few
Speaker 1: years down the road. Hey, Mike, you guys were acquired
Speaker 1: a little over Wow, it's spent almost two years uh
Speaker 1: by Galaxy Digital back in May of UM. We did
Speaker 1: find earlier this week that Galaxy Digital is exploring eliminating
Speaker 1: as much as of its workforce against the backdrop of
Speaker 1: this digital asset market downturn. What are you seeing inside
Speaker 1: bit go though, when it comes to how you're thinking
Speaker 1: about the economy and three and changes that you've had
Speaker 1: to make a CEO. Sure, just a slight correction. We
Speaker 1: weren't acquired by Galaxy there had been in an effort
Speaker 1: to do that, but we called that off this year.
Speaker 1: Thank you. Apologies for the air. Yeah, but anyway, just correct.
Speaker 1: So Becose completely independent, were the most regulated and compliant,
Speaker 1: you know, custodian in the space. Um, the wall as
Speaker 1: a platform service, you know, still powers of all the
Speaker 1: Bitcoin transactions, and and the business is very healthy. Um
Speaker 1: in terms of the layoffs, and you're not not talking
Speaker 1: about Galaxy specifically, but look, you're seeing layoffs across America,
Speaker 1: across corporate America, right, So we saw it from Stripe
Speaker 1: and you know there's been literally every day another announcement
Speaker 1: of of who's laying off. So it's not surprising at
Speaker 1: all to see this inside of crypto as well. Um.
Speaker 1: And when you've got your asset and so your revenue
Speaker 1: is tied to asset prices, and asset prices are are declining,
Speaker 1: it makes a challenging business environment. No, Biko was profitable
Speaker 1: last year. So um, you know we've we've managed I
Speaker 1: think pretty well. We've been through three of the crypto winters.
Speaker 1: This one's a macro winter, but we'll continue to manage it.
Speaker 1: And look, every business you know has to figure out
Speaker 1: how to make both the top line and the bottom
Speaker 1: line come together well. Zooming out and looking at an
Speaker 1: industry wide level. As to mention, I mean there's been
Speaker 1: layoffs at crypto companies. We've seen a lot of turnover
Speaker 1: at the c suite level at crypto companies. Would you
Speaker 1: expect to see broadly a wave of consolidation coming to
Speaker 1: the crypto industry next I think it's quite likely, um So,
Speaker 1: Like especially on the smaller companies that are out there,
Speaker 1: UM that are trying to get first you know, product
Speaker 1: market fit and then some scale. It's a rough time
Speaker 1: to do so if you especially if you've got limited financing.
Speaker 1: Um I would expect that, you know, early next year
Speaker 1: we could see some some real consolidation that COO could
Speaker 1: be participating in. That there's a number of adjacent businesses
Speaker 1: around what we do that we can add into the
Speaker 1: into the mix. You talk a little bit about that,
Speaker 1: like what kind of businesses. Well, so today, if you
Speaker 1: look at custody in crypto, uh, the custodians are all
Speaker 1: different Unlike traditional custodians where I mentioned earlier that they're
Speaker 1: a bit commoditized. In the digital assets space, everybody's got
Speaker 1: a different product offering. So first off at the base
Speaker 1: layer of which coins are you supporting? Which layer two's
Speaker 1: are you supporting? Do you have staking capabilities, cold storage capabilities,
Speaker 1: can you trade straight out of cold storage? Things like that.
Speaker 1: These are all vary across the different custodians. So I
Speaker 1: think right now there's an opportunity to consolidate in the space,
Speaker 1: kind of fill those gaps and really come out of
Speaker 1: this recessionary period as a very very strong custodian. Well, Mike,
Speaker 1: let's zoom back in and talk about Bickco. Are you
Speaker 1: thinking about acquiring or looking to be acquired at this point? Well, uh, not,
Speaker 1: not really looking to be acquired right now, and spent
Speaker 1: a lot of time on that in the past, and
Speaker 1: I think right now we just want to go build,
Speaker 1: and so I just literally we're looking around and we've
Speaker 1: had a number of companies that have been close to us,
Speaker 1: and yes, we we will be inquisitive when the opportunities
Speaker 1: present themselves over the next six to nine months. Hey, Mike, um,
Speaker 1: what kind of cash do you guys have to make
Speaker 1: acquisitions right now? We don't publicly state our balance sheet,
Speaker 1: but you know, like I said, we've been profitable since
Speaker 1: last year. We might have put a fair amount of
Speaker 1: our treasury and the bitcoin so number of years ago,
Speaker 1: and that's put us in good stead for the go
Speaker 1: forward basis. Um So we we put our money where
Speaker 1: our mouth is, I guess you could say, and we're
Speaker 1: in good shape. You know, we're not we're not as
Speaker 1: big as a coin base, but what we've got we've
Speaker 1: got our own our own benefits. Well, coin bases getting smaller.
Speaker 1: But like you said, that it's time to build. You know,
Speaker 1: I've heard that a few different times on crypto Twitter specifically.
Speaker 1: What does that mean in because uh context, Well, like
Speaker 1: I mentioned earlier, you know, this industry change is super fast.
Speaker 1: And when we started, it was about what's the technology
Speaker 1: to secure the asset? And we spent the first three
Speaker 1: years of our existence really solving that problem. You know,
Speaker 1: we've we've got multi say, we've got MPC capabilities. Um
Speaker 1: so we've got a tremens amount of technology that solves
Speaker 1: the security problem. Then we grew into compliance and regulatory
Speaker 1: We built out trust companies now in four different regions.
Speaker 1: We've got them here in the US, we've got Germany,
Speaker 1: we've got them Switzerland with more coming. And then on
Speaker 1: the go forward, basis the technology continuous evolve. You know
Speaker 1: a lot of our clients are now becoming are now
Speaker 1: coming from the like the Fortune One corporates and corporates
Speaker 1: have not really embraced cryptocurrency per se, but all of
Speaker 1: a sudden, with n f T s and digital property ownership,
Speaker 1: they're coming and they're saying, hey, can you help us.
Speaker 1: It's very much the same conversation that we had in
Speaker 1: where they were companies financial institutions that wanted to participate
Speaker 1: in cryptocurrencies with private keys. Now we've got corporates coming
Speaker 1: and saying, hey, can can you help us with our
Speaker 1: digital property which has got a private key ease and
Speaker 1: overlaps with money. So anyway, the time to build. You know,
Speaker 1: there's a DeFi out there, there's Web three out there. Um,
Speaker 1: we now have the ability to build amazing smart contracts
Speaker 1: to take on amazing functionality. It's going to continue to
Speaker 1: shift and change, and BIKO builds a ton of infrastructure
Speaker 1: that helps companies that are building. Mike Bellshi really appreciate
Speaker 1: you taking the time and joining us this afternoon on
Speaker 1: Bloomberg Business Week. Mike is CEO of Bitco joining us
Speaker 1: this afternoon via zoom from Palo Alto, California, ROC Journal. Yeah,
Speaker 1: but you let me drive? Oh no, no, no, no,
Speaker 1: who's going home? Please? I'll do the ride gravels. I
Speaker 1: want to drive. It's good question drive. This is the
Speaker 1: drive to the clothes commun effect well briar up on
Speaker 1: Bloomberg Radio. It is already time pretty drive to the close. Wow, Katie. Yeah,
Speaker 1: time plus when you're having Hey very pleased right now
Speaker 1: to be joined once again by Alan Zaffron. He's founding
Speaker 1: partner in co CEO of i Q Capital. He joins
Speaker 1: us once again, at this time via zoom from Foster City, California.
Speaker 1: So if you're watching us on YouTube or at Bloomberg
Speaker 1: dot Com slash qt, you can see Allen's interview in
Speaker 1: addition to hearing it. Allen, good, have you back with us?
Speaker 1: How are you doing? Great? Tim? And Katie? Thanks for
Speaker 1: having me on again. Yeah, thanks so much for joining us. Hey,
Speaker 1: I wanted to start with what we heard from the
Speaker 1: fed chair on Wednesday. He was asked about the possibility
Speaker 1: of still pulling off a soft landing, and he answered
Speaker 1: that he thought it was still possible to The path
Speaker 1: has since narrowed over the last few months. Is it
Speaker 1: possible to avoid a recession at this point, it is possible,
Speaker 1: but it's getting harder and harder avoid that recession. In effect,
Speaker 1: we've kind of had a rolling recession which started at
Speaker 1: the beginnings of this year, rolling through different sectors of
Speaker 1: the economy. And so what's happening is you still have
Speaker 1: an incredibly strong labor market, and it's inevitable that these
Speaker 1: rate hikes are going to take six to twelve months
Speaker 1: to work their way through the economy. It's gonna be
Speaker 1: difficult to see how it's all gonna work out. However,
Speaker 1: to the extent that investors, individuals, and businesses had strong
Speaker 1: balance sheets and refinanced themselves long before the rate hikes started,
Speaker 1: a couple of the fact to degree that some of
Speaker 1: these jobs are going to hold, we might might make
Speaker 1: our way through this despite all the pessimism that's out there.
Speaker 1: N we can just leave it there. Not such a
Speaker 1: pipe dream after all. But I make one Can I
Speaker 1: make another comment? I would love for you went back,
Speaker 1: if you went back to that FED meeting. Okay, if
Speaker 1: you read the statement, it was pretty debbish. If you
Speaker 1: hiss it, listen to the press conference. Powell is hawkish
Speaker 1: and so you saw a reversal in the market intra
Speaker 1: day sharply, I believe Katie, you called it. What did
Speaker 1: you call it? A bait and switch? Baby, I'm gonna
Speaker 1: give you a different answer. That was the FED depending
Speaker 1: defending its independence and it's um unwillingness to bend to
Speaker 1: political pressures. So, if you go back to if you
Speaker 1: go back to two thousand eighteen, President Trump at the
Speaker 1: time is trying to push the FED to be more accommodative,
Speaker 1: and an upset the FED, and so they pushed back
Speaker 1: in the press conference, were um more more demanding this
Speaker 1: time around. I think perception from the FED is that
Speaker 1: they're being encouraged by certain politicians to show some semblance
Speaker 1: of being accommodative, and they want to ensure their mandate
Speaker 1: is to keep inflation at a moderate, hopeful and eventually
Speaker 1: two percent annualized level, as well as keeping full employment.
Speaker 1: And I feel like they were put in a box
Speaker 1: and Powell how to get to defend the credibility. And
Speaker 1: in fact, I think the FED has been put in
Speaker 1: a difficult position, has done quite a good job to
Speaker 1: maintain the sense it's got independence and credibility and that
Speaker 1: alone is enough to calm the markets and prevent a
Speaker 1: much worse financial outcomes. So you get short term pain,
Speaker 1: you get the stock market correction, potentially a modest recession,
Speaker 1: but you avoid the cataclysm of an inflation rate that's
Speaker 1: out of control, which would cause much greater and much
Speaker 1: longer term harm. And that's what I think happened on Wednesday.
Speaker 1: And I mean, at the end of the day, what
Speaker 1: does a central bank have other than its inflation fighting credibility.
Speaker 1: We know that the FED definitely that's a priority for them.
Speaker 1: But I'd love to hear your thoughts on when we
Speaker 1: do eventually get a pivot. And the market has made
Speaker 1: a run at this trade over and over again, keeps
Speaker 1: getting their heartbroken. But when there is a pivot, do
Speaker 1: you think that's a bigger bullish catalyst for stocks or
Speaker 1: for bonds. No, it's a bigger bullish catalyst, I think
Speaker 1: for stocks because I think it's a signal that they're
Speaker 1: going to ease up conditions and stocks are just a
Speaker 1: higher beta asset class. But I will also make the
Speaker 1: argument that it's becoming evident the FED is signally despite
Speaker 1: the hawkish press conference, we're getting closer to the end
Speaker 1: game of the tightening, and you're seeing that because the
Speaker 1: bond markets already inverted, and it's telling you it's time
Speaker 1: to start thinking about extending durations or buying longer term bonds,
Speaker 1: because long term bonds are nothing more than the summation
Speaker 1: of short term rates over long time frame. If you
Speaker 1: buy a ten year treasury bond, it's like buying forty
Speaker 1: three month treasury bills if the three month treasury bills
Speaker 1: tied to a Fed funds rate. If the Feds are
Speaker 1: actually gonna pivot and lower that rate down, the average
Speaker 1: over next ten years is the Fed funds rates gonna
Speaker 1: average a lot less than four and a quarter percent.
Speaker 1: So you have to start thinking the bond market is
Speaker 1: pretty attractive and that can happen before the Fed actually
Speaker 1: does the pivot itself. Okay, you said the p word
Speaker 1: pivot a couple of times there, Alan, so I gotta
Speaker 1: ask you to you know exactly when that's gonna happen.
Speaker 1: You said the Fed's gonna pivot eventually. When is that eventually?
Speaker 1: And also and also what is that pivot? Is that
Speaker 1: just stopping to raise rates or does that mean that
Speaker 1: it actually starts to lower rates or a pause just
Speaker 1: to put in another, but you have it. You have
Speaker 1: a nuanced pivot. In the real pivot, the one that
Speaker 1: people care about most is probably the first one where
Speaker 1: they said, well, they're more or less done with rate
Speaker 1: hikes subject to data, and that's probably happening when inflation
Speaker 1: data is showing three consecutive months of decelerating. What we
Speaker 1: are fearful of. And if your barish is that the
Speaker 1: FED is only going to pivot when the p m
Speaker 1: I is the Purchasing Manager Index, which is a broad
Speaker 1: measure of economic activity, if it were to really plummet,
Speaker 1: the FED would have no choice but to do so,
Speaker 1: and that probably only happens coincidentally with the labor markets
Speaker 1: starting to get out of control. If that were to happen,
Speaker 1: that's gonna probably not happen until the middle of next year,
Speaker 1: because in this strong labor market, it's going to take
Speaker 1: time for job to meaningfully drive the unemployment rate higher.
Speaker 1: We're hearing snippets of firings, but we're not nearly at
Speaker 1: the level yet where the FED is going to fill
Speaker 1: that it needs to pivot to equal to mandate on employment. Katie,
Speaker 1: look at this morning's numbers that we can look at
Speaker 1: this morning's number. Yeah, not not much to uh to
Speaker 1: argue with. But Alan, before we get to the pivot um,
Speaker 1: maybe we get mild recession. What do you do in
Speaker 1: the meantime, What is your highest conviction right now in
Speaker 1: your portfolio? Well, let me give it to answer. What
Speaker 1: you do is you stay well diversified. When uncertainty comes,
Speaker 1: you have to be more diversified. And you also have
Speaker 1: to elongate the time frame into which to invest, because
Speaker 1: although you and I on this call even want to
Speaker 1: find the pivot and the bottom, we can't time it perfectly.
Speaker 1: So as an example, if you want to be a
Speaker 1: buyer of high quality stocks, it's a great time to
Speaker 1: begin to all use the word nibble, but you slowly
Speaker 1: dollar cost average over a much longer time frame because
Speaker 1: you don't know where that bottom is. It might be
Speaker 1: next week, but it could be three, six, or twelve
Speaker 1: months from now. Highest conviction ideas are twofold. One is
Speaker 1: short drate. It looks like we lost Alan's he froze
Speaker 1: for just a second, but we do, unfortunately have to
Speaker 1: wrap up there. And so because I think you're just
Speaker 1: going to say short duration and that's like catinet for me. Yeah,
Speaker 1: I'm sorry, Alan, are you still there? We just lost
Speaker 1: you for a second. H So you short term bonds
Speaker 1: not a bad place in Shorn However, I also think
Speaker 1: for those that can do so buying secondary investments, those
Speaker 1: handfuls of people that can buy other people's illiquid positions
Speaker 1: who are over leveraged and need to sell, I think
Speaker 1: it's a fantastic opportunity. Alan Zaffron, founding partner and co
Speaker 1: CEO i e Q Capital on zoom from Foster City, California. Allen,
Speaker 1: always great to chat with you. Thanks so much for
Speaker 1: joining us on Bloomberg Business Week. Thanks for listening to
Speaker 1: Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or
Speaker 1: Bloomberg dot com, and you can also listen to our
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