WEBVTT - Bloomberg Wall Street Week: Bhansali, Rogoff, McNamee 0:00:00.240 --> 0:00:05.000 This is Bloomberg Wall Street Week. Market shruggle, higher consumer prices. 0:00:05.040 --> 0:00:07.400 The economy is in the process of rebounding. Will the 0:00:07.400 --> 0:00:10.479 futteral reserve have its own digital currency? The financial stories 0:00:10.520 --> 0:00:12.879 that cheap hard work. Many people think the eels are 0:00:12.880 --> 0:00:15.080 just going to keep marching up. We have more spending 0:00:15.120 --> 0:00:17.160 coming out of Congress. One of the big questions I 0:00:17.200 --> 0:00:19.880 think on investor's minds inflation through the eyes of the 0:00:19.880 --> 0:00:23.560 most influential voices. Larry Summer is the former Treasury Secretary 0:00:23.640 --> 0:00:26.759 Bryan Wynahan back of America, Will Smart, CEO of Charlie 0:00:26.920 --> 0:00:31.560 Sharp Bloomberg wool Street Week with David Weston from Bloomberg Radio. 0:00:32.200 --> 0:00:35.800 Strong earnings. Trump fears that the variant will slow down 0:00:35.800 --> 0:00:39.400 the recovery, and so we continue on our upward path. 0:00:40.080 --> 0:00:43.279 This is Bloomberg Wall Street Week. I'm David Weston. And 0:00:43.400 --> 0:00:46.200 that near panic attack from the first part of the week, 0:00:46.400 --> 0:00:50.040 along with the quick midweek recovery, were reflected in equity markets, 0:00:50.040 --> 0:00:52.640 where the SMP on Monday dropped the most in two months, 0:00:52.880 --> 0:00:55.040 only to recover to reach for new highs ending the 0:00:55.080 --> 0:00:59.560 week over and the NASDAK reaching towards fifteen thousand, while 0:00:59.560 --> 0:01:01.840 the flight is safety early in the week led to 0:01:01.920 --> 0:01:04.959 the ten year yield treasury yield dropping below one and 0:01:05.080 --> 0:01:07.880 fifteen basis points and then climbing back to end the 0:01:07.880 --> 0:01:10.600 week a bit higher actually than it was back on Monday. 0:01:10.840 --> 0:01:13.240 Todays through the drama of the week, we welcome now 0:01:13.280 --> 0:01:17.280 RuPaul bin Sally. She's Aerial Investments, chief investment officer of 0:01:17.319 --> 0:01:20.959 International and Global Equities and author of non Conventional Investing, 0:01:21.200 --> 0:01:24.320 Being Right when everyone Else is Wrong, and my colleague 0:01:24.360 --> 0:01:28.280 Gina Martin Adams. She's chief equity strategist for Bloomberg Intelligence. 0:01:28.319 --> 0:01:30.320 So welcome to both of you. Gina, let me start 0:01:30.360 --> 0:01:32.759 with you explained to me what happened this week, because 0:01:32.760 --> 0:01:35.640 it was pretty dramatic. It was a relatively volatile week, 0:01:35.680 --> 0:01:38.920 particularly after you know, six months of pretty much continuous 0:01:38.959 --> 0:01:40.760 games in the equity market. To have a little bit 0:01:40.760 --> 0:01:44.600 of volatility felt a bit uncomfortable for many investors. That's 0:01:44.600 --> 0:01:47.120 certainly what we did see. I think you accurately captured, 0:01:47.200 --> 0:01:51.240 David is the market and gyrating around the delta variant, 0:01:51.280 --> 0:01:54.160 as well as inflation expectations. Maybe a little bit of 0:01:54.200 --> 0:01:56.960 worries carry over from last week, which was more about 0:01:57.320 --> 0:02:02.440 global central banks earnings playing a part of the story. 0:02:02.520 --> 0:02:04.720 But when we when we really dig into the details, 0:02:04.720 --> 0:02:07.720 we actually find the companies that reported earnings over the 0:02:07.720 --> 0:02:11.079 course of the last week have not received derived any 0:02:11.120 --> 0:02:14.800 benefit from those reports. So certainly we are in the 0:02:14.800 --> 0:02:18.200 midst of a lot of mayhem, I would say, in 0:02:18.200 --> 0:02:20.920 the market where investors seem to have kind of lost 0:02:20.960 --> 0:02:23.800 their footing. I think it's a continuation. Frankly, it's what's 0:02:23.800 --> 0:02:27.760 been happening since May, when inflation expectations peaked, When we 0:02:27.760 --> 0:02:30.720 started to price in peak growth coming over the summer, 0:02:31.240 --> 0:02:33.400 we lost a lot of leadership on the index, and 0:02:33.440 --> 0:02:36.000 that really took hold over the course of the last 0:02:36.000 --> 0:02:38.200 couple of weeks with a lot of get on again, 0:02:38.200 --> 0:02:41.519 off again trading. So, RuPaul, you wrote the book non 0:02:41.560 --> 0:02:45.160 Conventional Investing, explain the non conventional approach to what's going 0:02:45.160 --> 0:02:47.400 on right now, because the conventional wisdom, I think is 0:02:47.600 --> 0:02:49.040 we thought we were all going to rush back in 0:02:49.080 --> 0:02:51.200 a lot of fears about inflation. Now I think we're 0:02:51.200 --> 0:02:54.160 not quite as sure. But what's the non conventional take 0:02:54.200 --> 0:02:56.560 on what's happening? David, thank you for that, And just 0:02:56.639 --> 0:03:00.240 to correct you, it's non consensus investing. Uh and known 0:03:00.280 --> 0:03:02.760 to be a contrarian. So here's I think a couple 0:03:02.760 --> 0:03:06.760 of things to note. One is that equity markets, I 0:03:06.800 --> 0:03:09.520 think are paying more attention to the credit markets, and 0:03:09.639 --> 0:03:12.960 rightly so, because the credit markets tend to be much 0:03:13.000 --> 0:03:16.960 more prescient about you know, future economic outlook, which ultimately 0:03:17.000 --> 0:03:19.800 then drives profit outlook for the equities. And the big 0:03:19.880 --> 0:03:23.359 dichotomy that's occurred in the last couple of weeks in 0:03:23.400 --> 0:03:26.360 the indust rate environment, where the tenure bond rate has 0:03:26.400 --> 0:03:31.360 been correcting against all expectations and against all punditory views, 0:03:31.639 --> 0:03:33.600 which I'm going to call, you know, all the consensus 0:03:33.639 --> 0:03:37.800 views that industrates would rise, they actually did the opposite. 0:03:37.920 --> 0:03:42.800 They fell, And frankly, inflation has not been higher than 0:03:42.840 --> 0:03:46.040 the statistics have reported. CPO was over five percent. So 0:03:46.160 --> 0:03:50.000 you have a record level of negative real rates and 0:03:50.040 --> 0:03:52.880 that's putting a bid onto equity markets, which is why 0:03:52.920 --> 0:03:55.080 every time you see any kind of pullback, they go 0:03:55.200 --> 0:03:57.440 right back up. And also, I think, you know, to 0:03:57.560 --> 0:04:00.600 Gina's point, it's also caused for rotation in the market. 0:04:01.400 --> 0:04:05.200 People who all gung ho about value making big comeback 0:04:05.680 --> 0:04:09.360 that was the consensus reflation trade. Well, guests, what that's 0:04:09.360 --> 0:04:12.840 been put to pay with what the industrates are telling 0:04:12.920 --> 0:04:15.880 us that inflation is not likely to get out of control, 0:04:16.279 --> 0:04:21.200 and that also caused rotation into group stocks versus value stocks. 0:04:21.400 --> 0:04:23.640 So let's come back to you on this and I 0:04:23.680 --> 0:04:26.159 take the points non consensus. I beg your partner on 0:04:26.200 --> 0:04:29.640 the non conventional non consensus. But but how much of 0:04:29.640 --> 0:04:31.880 the equity valuation right now is just supported by the 0:04:31.920 --> 0:04:34.040 interest rates being so terribly low? I mean, we a 0:04:34.080 --> 0:04:35.839 lot of people are saying we're going towards the to 0:04:35.920 --> 0:04:38.680 the two level on the ten year yield, and instead we, 0:04:38.760 --> 0:04:40.839 as I said, drip that down below a hundred fifteen 0:04:40.839 --> 0:04:43.719 basis points. I think we're about now. Well, I think 0:04:43.720 --> 0:04:45.960 you have to think about equities relative to bonds in 0:04:46.000 --> 0:04:48.480 a longer term scope. I mean, we got the point 0:04:49.040 --> 0:04:51.800 back in May where the equity risk premium relative to 0:04:51.880 --> 0:04:55.200 bonds had fallen out of its fourth quintile really for 0:04:55.200 --> 0:04:58.000 the first time in more than a decade, which said 0:04:58.080 --> 0:05:00.280 to a lot of investors, hey, look at but he's 0:05:00.320 --> 0:05:03.520 relative to bonds are no longer offering us quite as 0:05:03.600 --> 0:05:07.240 extreme value as they did. At the same time, inflation 0:05:07.360 --> 0:05:11.400 expectations started started to turn over, and then the story 0:05:11.480 --> 0:05:16.320 was written from there right by Monday's clothes, that equity 0:05:16.360 --> 0:05:19.240 risk premium relative to bonds had finally reached back into 0:05:19.279 --> 0:05:23.520 the fourth quintile, offering investors an opportunity to buy into 0:05:23.720 --> 0:05:25.720 a dip in the equity market for the first time 0:05:25.720 --> 0:05:28.280 in quite a while. And I think we did see that. 0:05:28.440 --> 0:05:30.880 Now the question remains as to how much we should 0:05:30.880 --> 0:05:33.320 be paying for equities globally, how much we should be 0:05:33.360 --> 0:05:36.200 paying for US equities relative to rest of world equities 0:05:36.240 --> 0:05:39.520 and the like. But I think that fundamental shift is 0:05:39.560 --> 0:05:42.400 important to note that. You know, we've been sitting in 0:05:42.440 --> 0:05:44.960 this fourth quintele for so long, and the relative value 0:05:44.960 --> 0:05:48.479 of equities in comparison to bonds is has been incredibly compelling, 0:05:48.480 --> 0:05:50.720 But we lost a little bit of that in that 0:05:50.839 --> 0:05:54.640 really strong rip into May. Now it came back with 0:05:54.720 --> 0:05:57.279 the sell off that we that we've seen, and investors 0:05:57.279 --> 0:06:00.200 took advantage all. One of the things I took away 0:06:00.200 --> 0:06:03.680 from your book, the non consensus investing book, was you 0:06:03.800 --> 0:06:06.760 like to manage risk rather than return. You focused on 0:06:06.839 --> 0:06:09.000 not losing money as much or more than you do 0:06:09.040 --> 0:06:12.080 on making money. So in this world, what is the 0:06:12.240 --> 0:06:15.040 risk we need to avoid as an investor? Spot on 0:06:15.160 --> 0:06:18.120 David Uh. You know, to Gina's point, I think a 0:06:18.120 --> 0:06:20.520 lot of investors are thinking about putting money to work 0:06:20.520 --> 0:06:25.240 in equities simply based on a relative valuation trade. I 0:06:25.279 --> 0:06:29.320 think they should look at absolute value, intrinsic value, not relative. 0:06:29.600 --> 0:06:32.920 I think both equity and credit markets are quite overvalued, 0:06:33.279 --> 0:06:36.800 and frankly, instead of just looking at the earnings multiples 0:06:36.839 --> 0:06:39.680 on stocks, which is what most equity investors do, they 0:06:39.680 --> 0:06:42.880 should actually stop being attention to the debt multiple. Thanks 0:06:42.880 --> 0:06:45.960 to rupap and Sally of Aerial Investments and Gina Martin 0:06:46.000 --> 0:06:50.240 Adams from Bloomberg Intelligence. Coming up, Treasury Secretary Janet Yellen 0:06:50.320 --> 0:06:53.560 had her eye on cryptocurrencies this week, even as bitcoin 0:06:53.680 --> 0:06:57.599 dip back below thirty dollars. We talk with economists Ken 0:06:57.720 --> 0:07:00.560 Rogoff of Harvard about the future of crypto and what 0:07:00.680 --> 0:07:04.000 regulators are likely to do about it. That's next on 0:07:04.080 --> 0:07:12.520 Wall Street Week on Bloomberg. This is Bloomberg Wall Street 0:07:12.520 --> 0:07:17.080 Week with David Weston from Bloomberg Radio. Thirty thousand dollars. 0:07:17.400 --> 0:07:20.160 That was the level in focus for bitcoin this week. 0:07:20.480 --> 0:07:23.720 The cryptocurrency fell along with equities early in the week 0:07:23.760 --> 0:07:27.520 as concerns of the spread of the delta variant rattled investors. 0:07:27.760 --> 0:07:31.520 Here's FED chair J. Powell. We see bitcoin going up 0:07:31.560 --> 0:07:33.600 in value and down in value, so it's it's a 0:07:33.680 --> 0:07:36.720 you know, it's a at times, it's felt like a 0:07:36.760 --> 0:07:40.920 somewhat frothy market. Bitcoin is down about fift from the 0:07:41.000 --> 0:07:44.360 April peak, a sign that the bubble may be deflating. 0:07:44.880 --> 0:07:48.720 I think something in the neighborhood of fifteen thousand dollars 0:07:48.800 --> 0:07:51.440 is where we're going to end up. And uh, you know, 0:07:51.560 --> 0:07:54.840 given all the uncertainty and the new competition from new 0:07:54.880 --> 0:07:58.400 coins and everything else, Uh, you know, I think that 0:07:58.800 --> 0:08:02.720 there's more downside to go. That's Scott Minored of Guggenheim. 0:08:03.080 --> 0:08:07.760 Crypto speculators are losing steam. Volumes for cryptocurrency spots and 0:08:07.760 --> 0:08:11.720 derivatives have slipped to their lowest since December. Here's JP 0:08:11.880 --> 0:08:18.960 Morgan's Mary Callaghan urdos. Digital currencies are new, and in general, 0:08:19.080 --> 0:08:22.240 digital currencies are being debated as to whether they're an 0:08:22.240 --> 0:08:25.400 asset class or not. But the volatility that you see 0:08:25.400 --> 0:08:28.680 in it today it is just has to play itself 0:08:28.720 --> 0:08:31.760 out over time. Elon Musk gave bitcoin a temporary boost 0:08:31.800 --> 0:08:34.560 at the b Word conference hosted this week by the 0:08:34.600 --> 0:08:39.439 Crypto Council for Innovation, saying he personally owns bitcoin, Ethereum 0:08:39.520 --> 0:08:44.400 and dogecoin, while Tesla and SpaceX both own bitcoin. Cryptocurrencies 0:08:44.440 --> 0:08:48.120 plunged in May after Musk said Tesla would stop accepting 0:08:48.120 --> 0:08:50.840 bitcoin as a form of payment because of the energy 0:08:50.960 --> 0:08:53.720 used to mine bitcoin. And we wonder a little bit 0:08:53.720 --> 0:08:57.679 more diligence. UM, so you can quote uh, that's the 0:08:58.640 --> 0:09:03.000 concom with deep so of renewable entine usage is most 0:09:03.080 --> 0:09:07.840 likely UH are sort of or above designs UM, and 0:09:08.000 --> 0:09:11.800 that there is that that that there is a friend 0:09:12.040 --> 0:09:15.840 towards increasing that number UM and if so then tells 0:09:15.840 --> 0:09:19.400 it we'll resume bitcoin accepting bitcoin. Bitcoin status is a 0:09:19.440 --> 0:09:22.199 store of value is one of the things that separates 0:09:22.200 --> 0:09:26.080 bitcoin believers from skeptics. I don't completely buy the whole thing. 0:09:26.600 --> 0:09:29.160 You're essentially saying that we're going to create a store 0:09:29.160 --> 0:09:32.839 of value and a medium of exchange around something that 0:09:32.880 --> 0:09:35.840 only exists inside of a computer somewhere. It's not a 0:09:35.880 --> 0:09:40.280 physical asset that Steve Rattner of will It Advisers. Treasury 0:09:40.320 --> 0:09:45.000 Secretary Yelling is among those who wants more scrutiny of cryptocurrencies. 0:09:45.480 --> 0:09:48.559 This week, she convened a meeting of regulators and policymakers 0:09:48.760 --> 0:09:51.760 to discuss the growth of stable coins and the potential 0:09:51.880 --> 0:09:56.600 risks to consumers. I think cryptocurrencies we don't really have 0:09:57.240 --> 0:10:02.559 an adequate framework to deal with different issues that they 0:10:02.800 --> 0:10:08.600 um pose from a regulatory perspective. One of those who's 0:10:08.640 --> 0:10:11.320 raised at least some questions about the future of cryptocurrencies 0:10:11.320 --> 0:10:13.640 and whether regulators in the long run can just let 0:10:13.679 --> 0:10:16.640 them run is Ken Rogoff. He's professor of public policy 0:10:16.679 --> 0:10:19.520 and of economics at Harvard University. So, professor, thank you 0:10:19.559 --> 0:10:21.160 so much for being with us. As I say, I 0:10:21.200 --> 0:10:23.480 don't want to put working without. You've expressed some skepticism. 0:10:23.520 --> 0:10:25.360 But where this all is going. One of the things 0:10:25.360 --> 0:10:28.480 we just heard there is there's just so much volatility involved. 0:10:28.720 --> 0:10:30.840 On the other hand, there's something called stable coin. I 0:10:30.840 --> 0:10:34.080 guess stable coin is tethered to specific fiat currencies to 0:10:34.120 --> 0:10:38.520 try to eliminate some of that volatility. Yeah, there are 0:10:38.520 --> 0:10:40.440 a lot of different kinds of stable points, but the 0:10:40.480 --> 0:10:45.000 basic idea is something that you can exchange for a 0:10:45.080 --> 0:10:47.880 dollar and fiat currency, just like you used to be 0:10:47.920 --> 0:10:51.400 able to exchange gold. Of course, then you're not speculating 0:10:51.440 --> 0:10:54.079 on it in the same way, but the ideas to 0:10:54.240 --> 0:10:57.840 try to get stable coins some of the attractive pseudo 0:10:57.920 --> 0:11:01.960 anonymous properties that bitcoin nows, which is I think a 0:11:01.960 --> 0:11:05.520 lot of the underlying appeal at the same time. And 0:11:05.600 --> 0:11:08.920 my understanding is theoretically stable coins says, whoever is issuing 0:11:08.920 --> 0:11:13.320 these has those dollars or yen or whatever reserved against 0:11:13.360 --> 0:11:15.199 those to tie to them. How do we make sure 0:11:15.240 --> 0:11:17.280 that happens? And is that really what Janet Yell is 0:11:17.280 --> 0:11:20.920 concerned about, is she meets with regulators. Well, I don't 0:11:20.920 --> 0:11:23.240 think that's the only thing she's concerned about. I mean, 0:11:23.280 --> 0:11:26.120 I think regulators are very late to the game here 0:11:26.240 --> 0:11:30.199 in general and thinking about cryptocurrencies. They should have been 0:11:30.240 --> 0:11:35.120 thinking about it years ago. Uh. Certainly the stable coins 0:11:35.120 --> 0:11:38.280 are not necessarily stable. That's a long history of fixed 0:11:38.320 --> 0:11:41.840 exchange rates. It's the same thing. Uh, you make money 0:11:42.360 --> 0:11:46.440 by using the money that you're supposedly holding an escoro 0:11:46.880 --> 0:11:50.080 and speculating. It doesn't always go well. It leaves you 0:11:50.160 --> 0:11:53.160 vulnerable to attack. I actually think in the very long run, 0:11:53.520 --> 0:11:57.480 if stable coins UH persist, and I think the central 0:11:57.520 --> 0:12:01.439 banks are more sympathetic to them than anything else, they 0:12:01.440 --> 0:12:04.640 probably will need access to the central banks balance sheet, 0:12:04.920 --> 0:12:09.439 just like banks do to deal with runs. So give 0:12:09.520 --> 0:12:12.680 us this perspective. The spectrum here from bitcoin to stable 0:12:12.720 --> 0:12:16.440 coin to a central bank digital currency is that is 0:12:16.440 --> 0:12:20.400 it inevitable we're heading towards central bank digital digital currency. 0:12:21.000 --> 0:12:24.040 I think it's inevitable we're heading towards central bank digital currency. 0:12:24.040 --> 0:12:27.080 But it's not the same thing. And I've heard Governor 0:12:27.640 --> 0:12:31.000 Powell say, well, we want to take away, you know, 0:12:31.040 --> 0:12:34.839 some of the appeal of bitcoin. No, you won't, um yes, 0:12:35.000 --> 0:12:38.880 for doing certain digital transactions. It may be more convenient 0:12:39.320 --> 0:12:42.480 than using master card or you know, other things, and 0:12:42.600 --> 0:12:45.480 we may be headed that way. But obviously, if it's 0:12:45.520 --> 0:12:48.200 issued by the central bank, it's very hard to have 0:12:48.320 --> 0:12:52.319 the same kind of pseudonymity that you can get with bitcoins. 0:12:52.360 --> 0:12:57.400 So I mean, I think they I believe they need 0:12:57.440 --> 0:13:02.079 to sharply regulate the anonymous cryptocurrencies. I know a lot 0:13:02.080 --> 0:13:05.720 of people in the cryptocurrency world probably hate me for 0:13:05.840 --> 0:13:09.160 saying that, but I do think it's coming, and we're 0:13:09.160 --> 0:13:13.640 probably headed towards some world in which, at least under duress, 0:13:14.200 --> 0:13:18.880 the government can fairly easily find out about transactions, even 0:13:18.920 --> 0:13:22.160 if it's not monitoring them constantly. Well, I wonder about 0:13:22.320 --> 0:13:24.679 just the mechanics that regulation, because I think a lot 0:13:24.800 --> 0:13:28.120 of transactions in bitcoin or another cryptocurrency are done offshore, 0:13:28.240 --> 0:13:31.560 they're done through corporations that are not US corporations, and 0:13:31.600 --> 0:13:34.640 they're done, as you say, pseudonymously. So how do you 0:13:34.679 --> 0:13:38.720 regulate that? Is it possible? Well, it's a good question. 0:13:38.960 --> 0:13:42.360 I've been thinking about it a lot for a long time. Uh. 0:13:42.400 --> 0:13:45.440 You know, you can't totally shut it down. If North 0:13:45.520 --> 0:13:48.880 Korea and Russia and Iran decide they're going to use it, 0:13:48.960 --> 0:13:51.720 that provides a home for it. What you can do 0:13:52.280 --> 0:13:54.600 is make it much harder to you, say, to buy 0:13:54.679 --> 0:14:00.200 tesla uh in advanced countries, probably in China, that that 0:14:00.320 --> 0:14:03.480 prevents it from having the same value. I've actually always 0:14:03.480 --> 0:14:06.480 been careful not to say bitcoin is going to zero 0:14:06.760 --> 0:14:11.520 like many people nor over Bini for example, has you know, emphatically, 0:14:11.720 --> 0:14:14.280 because I don't think it's I don't think that's going 0:14:14.360 --> 0:14:19.760 to happen. But I think as the guard rails tighten, uh, 0:14:19.920 --> 0:14:22.920 its appeal is going to go down. Maybe its value 0:14:22.960 --> 0:14:25.120 is going to go down. Who knows. Thanks to Ken 0:14:25.200 --> 0:14:28.440 Rogoff of Harvard coming up, we look at the Robin Hood, 0:14:28.480 --> 0:14:30.760 I p O with the former CEO of E Trade, 0:14:30.920 --> 0:14:34.800 Carl Rossner. That's next on Wall Street Week on Bloomberg. 0:14:40.480 --> 0:14:44.440 This is Bloomberg Wall Street Week with David Weston from 0:14:44.560 --> 0:14:48.160 Bloomberg Radio. Robin Hood's Reddit Army will soon be able 0:14:48.160 --> 0:14:50.560 to own a piece of the retail trading app, as 0:14:50.560 --> 0:14:52.760 the company plans to list on the NASDAC under the 0:14:52.800 --> 0:14:56.320 ticker h O O D and says it's market cap 0:14:56.400 --> 0:14:59.960 may reach as high as thirty five billion dollars. Here 0:15:00.040 --> 0:15:03.240 is Robin Hood, CEO of Vlad Tennis. I think you 0:15:03.280 --> 0:15:08.800 can look at our our vision broadly and say that 0:15:09.400 --> 0:15:12.520 right now about half of US households invests. We'd like 0:15:12.600 --> 0:15:17.120 to get that number up to plus percent. Investing should 0:15:17.200 --> 0:15:20.960 be as ubiquitous as shopping online. It should just be 0:15:21.080 --> 0:15:23.960 something that people do. Robin Hood will join the ranks 0:15:23.960 --> 0:15:27.000 of coin Base, worth about forty seven billion dollars and 0:15:27.080 --> 0:15:30.880 Charles Schwab, which bought competitor t d Ameritrade and has 0:15:30.880 --> 0:15:34.840 a market value of about one billion dollars. The most 0:15:34.840 --> 0:15:38.520 important lesson is just we're seeing what technology is doing 0:15:38.680 --> 0:15:43.120 in terms of transforming the markets. Access to information, um 0:15:43.160 --> 0:15:46.960 the ability to trade, empowering smaller investors is something that 0:15:47.080 --> 0:15:51.000 is very real. That's Brady Dugan of Exos Financial. Robin 0:15:51.040 --> 0:15:54.400 Hood boom during the pandemic by providing easy access to 0:15:54.520 --> 0:15:58.240 retail investors, playing a starring role in the meme stock 0:15:58.320 --> 0:16:01.840 frenzy that took off in Annuary. Here's Robin and CEO 0:16:01.880 --> 0:16:05.800 of lad Tenef being questioned by New York Congresswoman Alexandria 0:16:05.920 --> 0:16:10.080 Akazia Cortez. Robin Hood is a for profit business. Doesn't 0:16:10.080 --> 0:16:12.400 that mean that trading on robin Hood isn't actually free 0:16:12.400 --> 0:16:15.240 to begin with? I think we've proven that otherwise by 0:16:15.280 --> 0:16:19.160 making this the standard model by which brokerage is operate now. 0:16:19.440 --> 0:16:22.480 It's monthly active users have more than doubled in the 0:16:22.480 --> 0:16:25.880 past year, with seventeen point seven million as of the 0:16:25.880 --> 0:16:28.920 first quarter, up from eight point six million in the 0:16:28.960 --> 0:16:32.040 same period. In the robin Hood I p O comes 0:16:32.080 --> 0:16:34.920 just a month after FINRA imposed a nearly seventy million 0:16:34.920 --> 0:16:37.800 dollar fine in the company. That's a record for the watchdog. 0:16:38.160 --> 0:16:41.720 FINRA claims the trading app mislaed its customers about margin 0:16:41.800 --> 0:16:45.120 trading and had lapses in its oversight of technology and 0:16:45.200 --> 0:16:50.360 approvals for options traders. Take us through the phenomenon that 0:16:50.560 --> 0:16:52.360 is robin Hood and how it fits into the much 0:16:52.440 --> 0:16:55.680 larger picture of retail investing. Welcome now, Karl Rossner. He's 0:16:55.720 --> 0:16:58.560 former CEO of E Trade. So Carl, thank you so 0:16:58.640 --> 0:17:01.320 much for being with us. Really a pre created without 0:17:01.360 --> 0:17:03.920 regard to the specifics of robin Hood, because we don't 0:17:03.920 --> 0:17:05.840 know what's gonna happen exactly're gonna go public, We don't 0:17:05.840 --> 0:17:08.480 know the circumstances. Give us a sense of this robber, 0:17:08.600 --> 0:17:12.200 this retail trade phenomenon. Is it here to stay? It's exploded? 0:17:12.240 --> 0:17:16.000 Has it not? It has? And and thanks for having me, David. 0:17:16.080 --> 0:17:18.119 I think the way that I look at it, I mean, 0:17:18.160 --> 0:17:21.080 Gina just said it on the last segment. The retail household, 0:17:21.280 --> 0:17:24.320 you know, during the pandemic and otherwise was flushed with cash. 0:17:24.480 --> 0:17:26.320 So what what do you start to do? You say, Okay, 0:17:26.440 --> 0:17:28.280 I'm gonna get in on some of the stock trading 0:17:28.320 --> 0:17:30.840 and I'm gonna understand how to do it. And robin 0:17:30.880 --> 0:17:35.120 Hood has created a phenomenal customer acquisition machine. The way 0:17:35.160 --> 0:17:37.119 that they put the app together, how easy they make 0:17:37.160 --> 0:17:39.000 it to trade, how easy they make it to open 0:17:39.040 --> 0:17:42.400 an account. It's seamless, you know, it's very well done 0:17:42.440 --> 0:17:45.520 in terms of having that beginner trader really have the 0:17:45.520 --> 0:17:48.879 opportunity to go in and buy some shares. So you know, 0:17:48.920 --> 0:17:50.879 there is some there are some different things that you know, 0:17:50.920 --> 0:17:54.119 we should talk about in terms of the risks involved 0:17:54.119 --> 0:17:56.320 to the you know, to that first time investor. But 0:17:56.480 --> 0:17:58.120 you know, I plaud them in terms of the customer 0:17:58.119 --> 0:18:00.960 acquisition and just the explosive growth they've demonstrated over the 0:18:01.000 --> 0:18:02.879 past two years. So I want to talk about the 0:18:02.920 --> 0:18:04.320 risk which just before we get to that, to pick 0:18:04.359 --> 0:18:05.720 up on what you just said, how much of this 0:18:05.800 --> 0:18:07.840 is because we were trapped at home and a lot 0:18:07.920 --> 0:18:10.480 of people, particularly frankly maybe some younger people got some 0:18:10.560 --> 0:18:13.399 checks from the government they wanted to put him somewhere. Ye. 0:18:13.960 --> 0:18:15.879 So I think it's to be seen in terms of 0:18:15.920 --> 0:18:18.560 how many stick around and how many continue to do 0:18:18.600 --> 0:18:22.400 this post pandemic. But I do believe that it's here 0:18:22.400 --> 0:18:25.359 to stay. And once you show individuals and you start 0:18:25.400 --> 0:18:28.600 to educate them on dealing with their finances and how 0:18:28.640 --> 0:18:30.720 simple it can be once you start with a bank 0:18:30.760 --> 0:18:34.360 account and budgeting, and then understanding where stocks and bonds 0:18:34.400 --> 0:18:38.240 and other asset classes can fit. As you continue to 0:18:38.320 --> 0:18:41.840 grow and become a more savvy investor. I think places 0:18:41.880 --> 0:18:44.040 like robin Hood have really open doors for people, so 0:18:44.080 --> 0:18:46.320 I do expect a great deal of that to stick around. 0:18:46.640 --> 0:18:48.560 So give us a minuteor two on the risks. And 0:18:48.600 --> 0:18:50.239 as we talk about the risk, one thing I'd like 0:18:50.280 --> 0:18:52.720 to focus on is it a risk to the investor, 0:18:52.840 --> 0:18:54.639 which is serious we want to take about. Or is 0:18:54.680 --> 0:18:56.760 there a larger risk to the system that goes beyond 0:18:56.760 --> 0:19:00.040 the individual investor who might lose their money. So so 0:19:00.080 --> 0:19:02.560 I think there are both actually, so just taking the 0:19:02.560 --> 0:19:05.600 the individual investor first, which has always been, you know, 0:19:05.720 --> 0:19:08.359 my focus, I think that first and foremost, there has 0:19:08.400 --> 0:19:11.520 to be the education they have to understand that when 0:19:11.520 --> 0:19:13.879 you invest in stocks, when you invest in crypto or 0:19:13.920 --> 0:19:17.199 other asset classes, there's a complete risk of loss. Right 0:19:17.240 --> 0:19:19.240 over the past couple of years, and and sort of 0:19:19.240 --> 0:19:21.720 the growth that we've seen some of the meme stocks, 0:19:21.720 --> 0:19:23.720 the amount of money that can be made on trades, 0:19:24.240 --> 0:19:27.879 it's been rather fantastic upside for everyone involved. So you 0:19:27.920 --> 0:19:29.600 see your friend makes some money, what are you gonna do. 0:19:29.720 --> 0:19:32.120 You take that stimulus check, you take the extra dollars, 0:19:32.440 --> 0:19:34.159 you open up a robin Hood account, and you get 0:19:34.200 --> 0:19:36.880 on the train right and you continue to make money, 0:19:36.920 --> 0:19:39.959 but there is that downside risk, and it's that downside 0:19:39.960 --> 0:19:41.880 that I think it's incumbent upon all of us work 0:19:41.880 --> 0:19:45.400 in financial services to really help that new retail investor 0:19:45.560 --> 0:19:48.800 understand what it is that you're doing, Understand the options 0:19:48.840 --> 0:19:52.440 that they have to invest to trade. Does that fit 0:19:52.480 --> 0:19:55.320 with their overall profile? Is that part of their budget? 0:19:55.560 --> 0:19:58.240 Can they actually afford to lose the money they just 0:19:58.280 --> 0:20:01.359 put in the stock market? And we've all seen indications 0:20:01.440 --> 0:20:04.280 of those dollars turning very quickly from the profit to 0:20:04.280 --> 0:20:07.280 a serious loss, and that can be very damaging if 0:20:07.320 --> 0:20:08.959 those are the only funds that you have in your 0:20:09.000 --> 0:20:12.240 bank account. So so that that's sort of the individual side, 0:20:12.280 --> 0:20:14.240 and I just hope that we continue as as a 0:20:14.280 --> 0:20:18.480 group to focus on on education more so than gamification. 0:20:18.640 --> 0:20:21.760 Thank you, Carl. That's former E tre CEO Carl Rossner. 0:20:22.160 --> 0:20:25.040 Coming up. Does Netflix keep on going now that we're 0:20:25.080 --> 0:20:27.520 able to get out of our living rooms again? We 0:20:27.640 --> 0:20:31.040 talked with tech investor Roger mcnabie about why he is 0:20:31.080 --> 0:20:35.119 still a believer. That's next on Wall Street Week on Bloomberg. 0:20:40.760 --> 0:20:44.720 This is Bloomberg Wall Street Week with David Weston from 0:20:44.880 --> 0:20:48.080 Bloomberg Radio. Netflix was out with its earnings this week, 0:20:48.200 --> 0:20:52.680 and it under impressed investors because the growth pattern didn't 0:20:52.720 --> 0:20:55.360 look quite as robust as it has in recent quarters, 0:20:55.560 --> 0:20:58.520 but also raises questions about these big tech companies have 0:20:58.560 --> 0:21:01.399 come from almost nowhere, but what their future is in 0:21:01.480 --> 0:21:04.440 terms of growth, but also frankly in terms of government 0:21:04.480 --> 0:21:08.800 regulation potentially. We're welcome now somebody who comes from this industry. 0:21:08.840 --> 0:21:11.720 He is Roger mcnamei. He is a co founder of 0:21:11.800 --> 0:21:14.679 Elevation Partners, and of course he is the author of 0:21:14.680 --> 0:21:17.720 the famous book Is Sucked about his experience with Facebook, 0:21:17.760 --> 0:21:19.440 and yes, I think it's fair to say some questions 0:21:19.480 --> 0:21:22.480 he raises about Facebook. Thank you, Roger very much for 0:21:22.520 --> 0:21:24.520 being with us. First, let's start with Netflix, and I 0:21:24.600 --> 0:21:27.560 understand you actually own some Netflix. You like the company, 0:21:27.800 --> 0:21:30.240 so give us your sense about where a Netflix is 0:21:30.320 --> 0:21:33.240 and where it's going. So, David, I think the big 0:21:33.240 --> 0:21:37.359 issue for Netflix is that they won round one of 0:21:37.400 --> 0:21:41.960 the streaming wars, and that has forced every major media 0:21:42.040 --> 0:21:46.320 company into the marketplace. And as I think investors, no, well, 0:21:46.800 --> 0:21:51.920 Disney and Apple, HBO have come in with really strong offerings, 0:21:51.960 --> 0:21:55.480 and Hulu and others are coming up as well, and 0:21:55.560 --> 0:21:58.480 so from Netflix point of view, they've gone from having 0:21:58.480 --> 0:22:01.720 the space to themselves to having to compete against people 0:22:01.800 --> 0:22:06.040 who have real libraries, real content, and are generally speaking, 0:22:06.200 --> 0:22:11.240