Speaker 1: This is Bloomberg Business Week. I'm Karl Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanavak. We're here every day bringing
Speaker 1: you the latest news from the world of business and finance,
Speaker 1: clus technology, politics, economics, all partnising the power of Business
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Speaker 1: Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot com.
Speaker 1: You can also listen to our radio show at two
Speaker 1: pm Eastern Time on Bloomberg Radio, or watch us on
Speaker 1: YouTube search Bloomberg Global News. At the start of the year,
Speaker 1: Bloomberg reported on how the global cloud computing market is
Speaker 1: expected to reach approximately when and a half trillion by
Speaker 1: so growing at a compound annual growth rate of nearly
Speaker 1: sixteen percent. This according to a study by grand View Research.
Speaker 1: Really pleased to have with us this afternoon, Hillary Hunter,
Speaker 1: Chief technology Officer at IBM Cloud. Hillary joins us via
Speaker 1: zoom from New York City. This afternoon, Hillary, how are you.
Speaker 1: I am great, Thanks for having me. Thanks so much
Speaker 1: for joining us. Hey, before you get into the nitty
Speaker 1: gritty of this report, that you guys did with Harris Poll,
Speaker 1: which I think is really interesting. I want to get
Speaker 1: an idea of the landscape right now because Caroline I
Speaker 1: talk a lot about you know, cloud spending and tech spending,
Speaker 1: and I'm wondering, is the volatility that companies are facing
Speaker 1: higher input costs is that right now affecting their cloud spending. Yeah,
Speaker 1: you know, I think it's driving a really important conversation
Speaker 1: that relates to this pole we're going to talk about,
Speaker 1: which is really looking for value stream generation out of
Speaker 1: a cloud transformation. UM. Folks are looking because of the
Speaker 1: factors you indicated to do something other than just stick
Speaker 1: the website on a cloud or run the HR application
Speaker 1: on the cloud. They're looking for where can cloud actually
Speaker 1: help me address elasticity and grow my business faster and
Speaker 1: save costs. And that has to do with moving more
Speaker 1: substantive pieces of a business to the cloud. So, you know,
Speaker 1: it's interesting. I just want to kind of push a
Speaker 1: little bit out on Hillary if I can um on
Speaker 1: what tim ass because I think one of the things
Speaker 1: we're trying to figure out where this economy, this global
Speaker 1: economy goes next, is you know, technology spending so important
Speaker 1: to companies because I have to, and also it's a
Speaker 1: great way in terms of productivity gains. So are you
Speaker 1: seeing though before we get a little bit deeper into
Speaker 1: this report, are you guys seeing any slow down or
Speaker 1: push back UM when it comes to companies and their
Speaker 1: willingness to spend on anything and everything to do with
Speaker 1: the cloud. Yeah. Actually, you know, we continue to see
Speaker 1: strong glow growth and cloud consumption because it is that
Speaker 1: part of transformation. It's a part of being able to
Speaker 1: change a business reach more customers, and so actually, I
Speaker 1: think in most cases it can actually be a solution
Speaker 1: to those types of optimizations and cost savings that enterprises
Speaker 1: are looking to find these days. So interesting, I mean,
Speaker 1: is it is it seen as like, is it seen
Speaker 1: is essential rather than discretionary? Yeah? You know, you you
Speaker 1: spend to keep the lights on, You spend to address,
Speaker 1: you know, in a regulated industry what the regulators need
Speaker 1: you to do, and you spend to continue to run
Speaker 1: your business efficiently. UM find opportunities for automation and other
Speaker 1: things like that, and so it really is critical to
Speaker 1: continue to modernized it in order to be able to
Speaker 1: address times like these. When it comes to security, though,
Speaker 1: I think there is you know, as we've seen some
Speaker 1: really massive security lapses UM globally over the last few years.
Speaker 1: How much is being maybe pulled off the cloud and
Speaker 1: rather keeping you know, being kept more close to home. UM,
Speaker 1: what are you seeing between that mix of up in
Speaker 1: the cloud versus you know, on home territory in your
Speaker 1: own kind of hardware. Yeah, you know, it's it's such
Speaker 1: an important question, and it's actually relates to this this
Speaker 1: pool that we just put out this transformation in Ducks
Speaker 1: because over of participants and respondents to this pool said
Speaker 1: that hybrid cloud, which is actually a little bit different
Speaker 1: than how you just maybe accidentally described cloud. A lot
Speaker 1: of people think of cloud as this this place that
Speaker 1: you have to move things to UM, and that can
Speaker 1: sometimes be scary. We need to really seriously think about
Speaker 1: the security, the compliance, the data privacy, data protection in
Speaker 1: that place when you're moving things to a cloud. But
Speaker 1: hybrid cloud technologies that we do now we we have
Speaker 1: over four thousand customers with IDMS hybrid cloud approach. Hybrid
Speaker 1: cloud enables you also to use the efficiency of cloud
Speaker 1: and the deployment optimizations and even the operating model of
Speaker 1: cloud on your own premises, so you don't have to
Speaker 1: move the data in order to benefit from everything from
Speaker 1: automation to AI technologies to the efficient development mechanisms that
Speaker 1: cloud brings in place. And so hybrid cloud is now
Speaker 1: increasingly being viewed as a solution to that that challenge
Speaker 1: that you mentioned around data protection. So is it about
Speaker 1: data protection or is more so than it is about
Speaker 1: speed or latency? I mean, is it is it all
Speaker 1: because of data protection? Yeah? You know, it's interesting. We
Speaker 1: see also with public cloud UM that data protection is
Speaker 1: an increasing topic. Even though you might say, oh, cloud
Speaker 1: is about elasticity or optionality or global expansion. UM. The
Speaker 1: data protection factor here is really important because every enterprise
Speaker 1: has a responsibility to steward their data. You know, you
Speaker 1: and I as as as consumer as UH as customers
Speaker 1: of a bank or retail organization. We want our data protected.
Speaker 1: And in many jurisdictions, UM organizations have an obligation legally
Speaker 1: to protect their clients data, not just the reputation with
Speaker 1: the clients, but also legal and from a regulatory perspective.
Speaker 1: And when we look at this then in a cloud conversation,
Speaker 1: it's important both to have hybrid cloud where you can
Speaker 1: choose to continue to consume cloud technologies while the data
Speaker 1: remains on premises as well as what we referred to
Speaker 1: as industry clouds, where in the public cloud, like with
Speaker 1: IBMS Cloud for financial services, you can have industry leading
Speaker 1: data protection and data privacy policies even when deploying in
Speaker 1: the public cloud. So then you really have optionality. You
Speaker 1: can have cloud on premises or you can have it
Speaker 1: safely in public cloud as well. Hey, you know, in
Speaker 1: your role as chief Technology Officer at IBM, I do
Speaker 1: under Hillary too. Though, Like kind of going back to
Speaker 1: where we started a little bit of macro um what
Speaker 1: kind of environment are you guys getting ready for them?
Speaker 1: I know we talked a little bit about what you're
Speaker 1: seeing from your customers, but it is kind of a
Speaker 1: tricky time, uh. And you know, we see inflation continuing
Speaker 1: to be persistent, Supply chains have gotten better, but we
Speaker 1: still hear about component problems in various industries, worried about
Speaker 1: a global economic slowdown. How would you best describe kind
Speaker 1: of our environment? Yeah, you know, I think it's an
Speaker 1: environment with a lot of opportunity. Like we're talking about
Speaker 1: at the beginning, UM cloud in technology, everything from you know,
Speaker 1: AI technologies to business process automation to the elasticity of cloud.
Speaker 1: You know, if you don't want to run a business anymore,
Speaker 1: scale down on the consumption of the I t you
Speaker 1: you didn't invest in it on your premises, you can
Speaker 1: scale it down in the cloud. UM as well as
Speaker 1: continuing also on premises to adopt, you know, faster, more
Speaker 1: efficient technologies. All these things are key parts of you know,
Speaker 1: addressing you know, where enterprises need to be thinking these days.
Speaker 1: And I think we're just continuing to invest in those
Speaker 1: those core technologies that are going to help folks UM,
Speaker 1: you know, go through this this period that we have
Speaker 1: coming up successfully. I'll also comment you mentioned supply chain UM.
Speaker 1: The topic of risk in the supply chain also from
Speaker 1: a cybersecurity perspective UM is one that definitely came up
Speaker 1: in this this index that we just released UM, and
Speaker 1: I think there's there's a lot of really important work
Speaker 1: going on in that area as well. Hey, Hillary, before
Speaker 1: we let you go, I mean, you know, we hear
Speaker 1: from a lot of different companies about the cloud, about
Speaker 1: the hybrid cloud. When a company is considering who to
Speaker 1: go with, an IBM IS is one of those choices.
Speaker 1: What are the competitive advantages that you offer, Like why
Speaker 1: choose you rather than you know, another service provider. Yeah,
Speaker 1: you know this, This index that we just released of
Speaker 1: over three thousand global leaders cited skills, cited security, and
Speaker 1: cited compliance as three of the top areas for consideration.
Speaker 1: And at IBM, that's really what we're trying to address.
Speaker 1: It's a journey. It's a journey to get to the cloud.
Speaker 1: Need to partner with someone who, like IBM Consulting, has
Speaker 1: in house skills to both look at transformation, find those
Speaker 1: high value applications and get you to the cloud. You
Speaker 1: need to partner with someone who both in on premises UM,
Speaker 1: you know, with with heritage environments as well as with
Speaker 1: cloud environments, is focused on security and compliance and data protection.
Speaker 1: And you need to partner with someone that knows your industry.
Speaker 1: IBM has long been the I T provider to you know, banks,
Speaker 1: insurance companies, Tauco's, you name it, healthcare, government UM and
Speaker 1: so as we work at this next generation of I T,
Speaker 1: we're also that partner. All right, good to check in
Speaker 1: with you, and here about your report. We got around
Speaker 1: Hillary Hunter, chief technology officer at IBM Cloud with us
Speaker 1: via zoom from New York City. You're listening to Bloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim
Speaker 1: Stinovic on Bloomberg Radio. So there's a story on the
Speaker 1: Bloomberg Today about how climate change made Hurricane Ian's most
Speaker 1: extreme rainfall about ten percent worse than would have been
Speaker 1: without two centuries two centuries of greenhouse gas pollution. This
Speaker 1: is according to a first take analysis of the storm
Speaker 1: by two US climate researchers. Their rapid analysis, which they
Speaker 1: shared on Twitter, looked only at rainfall and not other
Speaker 1: critical climate metrics related to hurricanes, such as strength and toesifications,
Speaker 1: sea level rise. But you know, we know that these
Speaker 1: storms may be not more frequent, but their intensity has
Speaker 1: definitely wrapped out because of climate change, and that's something
Speaker 1: that we obviously need to think about. We've got somebody
Speaker 1: with us who thinks about this stuff a lot, and
Speaker 1: Jason Few is CEO of fuel Cell Energy. It's a
Speaker 1: publicly traded company. Uh. He joins us this afternoon on
Speaker 1: the phone from Danbury, Connecticut. Jason, how are you? I
Speaker 1: am good, Thank you very much. How are you doing?
Speaker 1: To him, We're doing pretty well. Um. Can you explain
Speaker 1: how fuel cells work? Because I think a lot of people. Um,
Speaker 1: you know, we understand batteries, we understand internal combustion, but
Speaker 1: fuel cells it's something that I think is not necessarily
Speaker 1: on all of our radar. It's certainly not on mine. Sure,
Speaker 1: So I think if you think about it and its
Speaker 1: most simple terms, and we just use batteries as an analogy, Uh,
Speaker 1: you know, batteries you put energy in and then you
Speaker 1: drain it and then you need to recharge the battery.
Speaker 1: The way you can think about a fuel cell is
Speaker 1: that we use an input feedstock for the fuel cell,
Speaker 1: and that allows the fuel cell to run and operate
Speaker 1: on a continual basis, you know, seven days a week,
Speaker 1: twenty four hours a day, without the need to recharge
Speaker 1: the battery. And because it's a fuel cell, it actually
Speaker 1: uses a chemical reaction to actually take a fuel and
Speaker 1: air and effectively make hydrogen and then to use that
Speaker 1: hydrogen to produce power. And so it works very different
Speaker 1: than a traditional combustion engine that you know takes and
Speaker 1: and basically combust the fuel. With a fuel cell, the
Speaker 1: fuel is not combusted, so you don't produce things like
Speaker 1: socks and knox and other particulars that play very heavily
Speaker 1: on you know climate as well as air quality, what
Speaker 1: are the byproducts that it does end up releasing that
Speaker 1: it does produce, So it really depends on what is
Speaker 1: the actual feedstock that you're using. So in a case
Speaker 1: where you know, we're working to commercialize our solid oxide
Speaker 1: fuel cell, and in that case, we could use hydrogen,
Speaker 1: and that hydrogen could be made from all renewable energy sources.
Speaker 1: So in that case, there are no byproducts that are
Speaker 1: produced other than water, you know, from the hydrogen. The
Speaker 1: second way we're if we're using a traditional fuel, let's
Speaker 1: say a biofuel or renewable natural gas or even um
Speaker 1: uh natural gas, then the byproduct is you do have
Speaker 1: some carbon emissions. But if you're using biofuels are R
Speaker 1: and G right, that's considered carbon neutral, and again there's
Speaker 1: no combustion of the fuel uh. And then we also
Speaker 1: have the ability to do things like carbon capture or
Speaker 1: what we refer to as well as carbon separation to
Speaker 1: significantly reduce or eliminate those carbon emissions. And when you
Speaker 1: think about it in total, when you when you look
Speaker 1: at fuel cells versus renewable energy sources, let's say like
Speaker 1: wind and solar, because the fuel cells are more efficient
Speaker 1: and they run twenty four by seven, and you think
Speaker 1: about just overall avoided emissions because you know, you actually
Speaker 1: end up with greater emission reductions with fuel cells in
Speaker 1: most cases than you do when you're using renewable energy
Speaker 1: because you may only be getting twenty to thirty percent
Speaker 1: efficiency from those resources and then you need to get
Speaker 1: power from somewhere else. So, you know, it's interesting we
Speaker 1: all have a lot of conversations about what is ultimately
Speaker 1: the solution um to climate change, and as we move
Speaker 1: towards an alternative energy you know, uh, world if you will,
Speaker 1: and hydrogen doesn't. It doesn't it feel like there's momentum
Speaker 1: building um in general. But talk to us about some
Speaker 1: of the concerns when it comes to fuel cells, and
Speaker 1: some of it is the cost, the durability, some of
Speaker 1: it is concerns about flammability. Feel so, what what is
Speaker 1: it the thing, the nut that you feel like we
Speaker 1: still have to crack before we get kind of mass adoption. Well,
Speaker 1: that's a great question, and I feel cell Energy we
Speaker 1: do two things as a company. We decarbonized power and
Speaker 1: we produce hydrogen. Those are the two things we do
Speaker 1: with our platform technology. When you think about some of
Speaker 1: those concerns or areas that you raise. You know, we've
Speaker 1: had commercial available products since two thousand and three, and
Speaker 1: in fact, our first commercial fuel cell was sold actually
Speaker 1: in Japan to the Cairn and Beer Company using biofuels,
Speaker 1: So you know, it just shows the fuel flexibility of
Speaker 1: the platform when it comes to hydrogen and some of
Speaker 1: the concerns that you know get raised around hydrogen. You know,
Speaker 1: hydrogen is used widely, you know, around the world. You know,
Speaker 1: ninety minute metric tons of year of hydrogen are used.
Speaker 1: There's some forecast that suggests that you know, of the
Speaker 1: world's energy will ultimately come from hydrogen, if not greater
Speaker 1: than that. We tend to think that hydrogen is going
Speaker 1: to be an important part of the solution, the same
Speaker 1: way we think carbon capture will be an important part
Speaker 1: of the solution to achieving the one and a half
Speaker 1: degree scenario in terms of climate change itself. And and
Speaker 1: from a safety standpoint, like I said, you know, hydrogen
Speaker 1: widely used today, it's very safe and unlike a battery,
Speaker 1: which contains everything that you need inside the battery to
Speaker 1: actually start a fire, that's not the case with hydrogen.
Speaker 1: So it's actually quite today. So why isn't adopted more widespread?
Speaker 1: Why will it maybe only of energy um production in
Speaker 1: the years to come, Why not more Well, I think
Speaker 1: part of it is, UH, there's a cost question right
Speaker 1: in terms of this this desire to have green hydrogen.
Speaker 1: One of the things that I'm really excited about is
Speaker 1: the move not only in the United States, but I'm
Speaker 1: I'm seeing in countries around the world and the conversations
Speaker 1: we're having and in the conversation I actually just got
Speaker 1: to participate in UH in Pittsburgh with Secretary Grant Home
Speaker 1: and energy ministers from around the world at a CEO
Speaker 1: Hydrogen roundtable. The conversation is shifted from using colors to
Speaker 1: really talk about carbon intensity, and I think that's one
Speaker 1: big change that's going to help drive accelerated adoption. Another
Speaker 1: change or thing that's happening that's going to help drive
Speaker 1: adoption is the work that you're seeing that's going to
Speaker 1: get done as a result of the i ra A
Speaker 1: in the United States. You have similar legislation in markets
Speaker 1: like Korea and Japan and across the EU. And we've
Speaker 1: seen this movie play out before. We saw how incentives,
Speaker 1: whether it's I T C production, tax credits, those kind
Speaker 1: of things really help drive the cost curve down. We're
Speaker 1: gonna see that same thing happen with fuel cells and
Speaker 1: with hydrogen as an effective way to get us to
Speaker 1: the cost that everyone's targeting, you know, which is you know,
Speaker 1: as low as a dollar a telegram for hydrogen, and
Speaker 1: that's going to make it highly competitive. And I think
Speaker 1: as you look around the world to day and you're
Speaker 1: seeing increased energy prices, those sparks spreads are narrowing. Uh
Speaker 1: and and so I think you're going to see adoption
Speaker 1: start to accelerate with hydrogen as one of the answers
Speaker 1: to solving this climate crisis we have today. From an
Speaker 1: infrastructure perspective, when it comes to generating power, explained to
Speaker 1: us how you take a facility and allow it to
Speaker 1: create power using hydrogen using fuel cells versus using fossil fuels. Yeah,
Speaker 1: So when you think about um an input fuel, and
Speaker 1: you think about hydrogen, hydrogen just becomes the input fuel
Speaker 1: that we would be using with our solid oxide platform
Speaker 1: for instance, in which we would take that hydrogen and
Speaker 1: we use that hydrogen as the feedstock to create electricity.
Speaker 1: That hydrogen interacts with the fuel cell right, and and
Speaker 1: the chemistry that we use in this case of solid
Speaker 1: oxide technology to produce that power. And if that hyd
Speaker 1: ygen was produced by you know, a zero carbon source
Speaker 1: of electricity. Let's say you're using electrolysis, so you're taking
Speaker 1: electricity and water and you're converting at the hydrogen, then
Speaker 1: you're using that hydrogen to produce power. That hydrogen has
Speaker 1: zero carbon intensity, then the power being produced from our
Speaker 1: platform is zero carbon. But we also have the ability
Speaker 1: to use blended hydrogen and natural gas for example, which
Speaker 1: even lowers you know, the carbon intensity of the fuel
Speaker 1: in that case. But in all cases, whether it's hydrogen, renewval,
Speaker 1: natural gas, or bio fuels, that serves as the input
Speaker 1: fuel that the fuel cell needs to then convert that
Speaker 1: to power, whether it's for the grid or for a
Speaker 1: commercial industrial customer. Uh and delivering that power as a
Speaker 1: as a product. Hey, I'm curious, Jason um about the
Speaker 1: business and the business outlook and the growth. And I
Speaker 1: know earlier this month you came out with your latest
Speaker 1: update quarterly update. I think there was a wider than
Speaker 1: expected loss for the quarter, strongest quarterly revenue in five years. Um,
Speaker 1: and you guys talked about an increase in marketing and
Speaker 1: consulting costs because you had raised headcount for rebranding, accelerated
Speaker 1: and accelerating your sales and commercialization efforts. Give us some
Speaker 1: more color, if you will, in terms of the business
Speaker 1: who's buying um You guys have you know customers, certainly
Speaker 1: in the energy space and the corporate space, But give
Speaker 1: us an idea of where the growth is coming from
Speaker 1: from your business. Sure, so are the customers that we
Speaker 1: target largely cut across the utility sector where we're providing
Speaker 1: grid based power, and we might be providing that power
Speaker 1: purely is just a power resource on the grid, or
Speaker 1: we might be providing that power and using the thermal
Speaker 1: energy where we might be connected to a district heating
Speaker 1: system and we're providing that thermal energy in addition to
Speaker 1: the power. Or we might be an in a microgrid
Speaker 1: configuration where we're providing power to the grid and in
Speaker 1: the power outage, we go into what we refer to
Speaker 1: as island mode and we provide power to a dedicate
Speaker 1: a set of resources, keeping those critical resources powered while
Speaker 1: the grid is down. We also serve commercial and industrial customers,
Speaker 1: and in many of those cases we're providing power to
Speaker 1: those customers, and again we might be providing the thermal
Speaker 1: energy such that they're using steam from our platform in
Speaker 1: their manufacturing process. Uh. And we also have the ability
Speaker 1: to do things like provide carbon to those customers. So
Speaker 1: when you think about carbonated beverage companies, are you think
Speaker 1: about food processing where carbon is really important to not
Speaker 1: only processing proteins, but then extending shelf life by keeping
Speaker 1: those proteins chilled. Uh. Those are always in which we
Speaker 1: leverage our platforms to deliver value to our customers. In addition,
Speaker 1: the hydrogen and we're going to projects for Toyota today
Speaker 1: we will deliver hydrogen to Toyota Power and water all
Speaker 1: from the same platform at the Port of Long Beach
Speaker 1: in California. Go go ahead. A very quick question. I
Speaker 1: just want to know about price increases, Jason. When it
Speaker 1: comes to the commodities that you actually use, are you
Speaker 1: seeing the prices come down at all? We were seeing
Speaker 1: different reactions to different commodities. So for example, if you
Speaker 1: take nickel as a commodity, we've seen price decreases there.
Speaker 1: We're seeing obviously price increases for natural gas. So as
Speaker 1: we look across our supply chain. We've had a very
Speaker 1: focused approach on managing those price increases to minimize the
Speaker 1: impacts for us in terms of pricing to our customers.
Speaker 1: But we are seeing some price improvements across the supply chain. Well.
Speaker 1: Really great to check in with you and really appreciate
Speaker 1: your time. Jason, take care of Jason fu chief executive
Speaker 1: officer at fuel Cell Energy. They are a one point
Speaker 1: for a billion dollar market cap company and great to
Speaker 1: have him join us from I believe their corporate offices
Speaker 1: in Connecticut. You're listening to Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.
Speaker 1: We talked about earlier how we buried the lead at
Speaker 1: the top of the show because Kim Kardashian it is
Speaker 1: among the most red storaking news. We talked about with
Speaker 1: our TV colleagues recently about her one point three million
Speaker 1: dollar SEC fine. Uh. We also know the chairman of
Speaker 1: the SEC weighed in on it earlier, but we'll get
Speaker 1: to that in just a moment. The medtime, we want
Speaker 1: to talk to our own Scarlet Food. She is a
Speaker 1: Bloomberg Business of Sports host. You also know her as
Speaker 1: a Bloomberg Quick Take correspondent. She's with us right now
Speaker 1: in the Bloomberg Interactive a broker's studio. Scar Uh, what
Speaker 1: do we need to know about this fine? Because you know,
Speaker 1: I hear one point three million dollars in the context
Speaker 1: of any Kardashian and I think to myself, that's like
Speaker 1: the change, That's like the change they find in the couch. Well, yes,
Speaker 1: and she also did not admit or deny any wrong,
Speaker 1: but she paid, she did pay up, and she's cooperating
Speaker 1: with the sec. What's significant here is that she got
Speaker 1: paid two hundred fifth eight thousand dollars by theorym of
Speaker 1: Max to tout emacs tokens, and so this fine is
Speaker 1: five times what she got paid. So it's significant in
Speaker 1: that regard. We have a question for all of you,
Speaker 1: both of your have you heard have you heard of
Speaker 1: this spoken before? Carol? You know I had neither. So
Speaker 1: I'm thinking to myself, this was not money well spent
Speaker 1: because we didn't even hear about this. That's a good point,
Speaker 1: and she posted this on Instagram to her many millions
Speaker 1: of followers. But what's interesting here is that's a big spack.
Speaker 1: Go back to that you said she was paid two
Speaker 1: dollars and she's now paying a fine at one point
Speaker 1: there one point to six millions, so five times the
Speaker 1: amount she got paid. But what's interesting when I talked
Speaker 1: to Bloomberg Intelligence's senior policy analyst Nathan Dean about this
Speaker 1: is the way that the SEC made this announcement, because
Speaker 1: they often will penalize someone or um accused someone of
Speaker 1: touting something like a cryptocurrency and announces enforcement actions on
Speaker 1: their Twitter feed. But they did this with a lot
Speaker 1: of splash. They did it on a Monday morning before
Speaker 1: the market opened. They had like a splash here than
Speaker 1: usual Twitter post with a video on YouTube that went
Speaker 1: along with it, explaining why investors need to be protected.
Speaker 1: So they kind of went out of their way. Interesting, okay,
Speaker 1: but there's a distinction here. I think that's important. This
Speaker 1: was UM she was pushing a security or what. I
Speaker 1: don't know. I mean, it wasn't a lipliner or something exactly.
Speaker 1: I think, you know, Caroline made that point on on
Speaker 1: our simulcast earlier, and I think it's an important distinction,
Speaker 1: right because she's not you know, we see, we see
Speaker 1: I don't know. Depending on who you guys follow on Instagram.
Speaker 1: But it's like anyone who has a following of like
Speaker 1: twenty or thirty thousand or more can participate in these
Speaker 1: programs where you know they're essentially being paid to post
Speaker 1: something and at the end they say hashtag AD. Well
Speaker 1: she did do hashtag AD, I believe, but she needed
Speaker 1: to say that she was being paid for this promotion
Speaker 1: and that's what was missing here. Gary Ganser is all
Speaker 1: about transparency and disclosure, especially when it comes to crypto assets.
Speaker 1: And you mentioned a good thing an important point which
Speaker 1: is is it a security? Is it a not a security?
Speaker 1: Because bitcoin and ethereum ether sorry, are not securities. There
Speaker 1: are commodities, but these other digital assets, the SEC argues
Speaker 1: our securities, which means it falls under the SEC's purview.
Speaker 1: I know we're getting really technical, rain hurt, No, but
Speaker 1: it's interesting, especially when you start to get into you know,
Speaker 1: people will follow, you know, celebrities who are tatting certain
Speaker 1: financial investments, and you want to make sure the disclosures
Speaker 1: are very, very and that's what Gary Gunstler is saying.
Speaker 1: They're doing by making sure that celebrity pitchmen and pitch
Speaker 1: women know that they are influencing Uh, investors, ordinary investors
Speaker 1: who may not have all the information that others do.
Speaker 1: The sophisticated investors, they need to make really clear. Hey,
Speaker 1: by the way, I'm getting paid for this, so you know,
Speaker 1: you move forward, be careful, and you know, move forward
Speaker 1: with caution. Okay, another important distinction here. We're not talking
Speaker 1: to Matt Damon. What was did he do? Crypto dot Com?
Speaker 1: I don't remember which, Yeah, for an exchange Larry David
Speaker 1: during the Super Bowl, you know, all these celebrities. That
Speaker 1: wasn clearly different than then what the SEC alleges that
Speaker 1: Kim Kardashian did. Yes, that was different because I mean,
Speaker 1: I think we get really technical here, and I wouldn't
Speaker 1: be surprised if lawsuits start popping up with all of this,
Speaker 1: because we've already seen lawsuits with the SEC versus Ripple.
Speaker 1: But what the SEC is alleging here is that all
Speaker 1: she needed to do was say that she was paid
Speaker 1: to promote this, And I think if you look at
Speaker 1: an ad with Matt Damon, it'll be clear that he
Speaker 1: was paid to to promote something. So she, when she
Speaker 1: posts on Instagram maybe made it look like, Hey, a
Speaker 1: friend told me about this. I just want you to
Speaker 1: know right right, I feel like socialists a weird space.
Speaker 1: It's very the lines are blurred, yes, and people play
Speaker 1: on that exactly. And I am curious about the momentum
Speaker 1: that this token god as a result, like we I
Speaker 1: don't know if we know that or you know, yeah. No,
Speaker 1: it did get a bit of a pop after she
Speaker 1: published her post, and then it continued to fall, So
Speaker 1: it's it's not as if this was a sound investment,
Speaker 1: if people were investing in it. So the big question
Speaker 1: is what what does this mean moving forward for the
Speaker 1: SEC and for celebrities endorsing things right now? This was
Speaker 1: definitely a shot across about from the SEC from Gary Gunsler.
Speaker 1: It was a sign that the SEC intends to crackdown
Speaker 1: on crypto. And what Nathan Dean of b I told
Speaker 1: me is that, um, what Gary ginst are saying to
Speaker 1: the crypto world is you need to come in and register.
Speaker 1: You need to register as an exchange or a broker,
Speaker 1: and then we can move forward. But the crypto world
Speaker 1: is very resistant to doing that. They feel that today's
Speaker 1: regulations do not work for the crypto, which is decentralized
Speaker 1: bitcoin and ether commodities. That's a done deal. You know,
Speaker 1: we're not securities either, so we shouldn't have to play
Speaker 1: by these rules. Um and in fact, we should be
Speaker 1: treated as commodities where enforcement is a different beast completely.
Speaker 1: It's the wild, wild West, and we see regulators continue
Speaker 1: to try and figure this out, right, and you just
Speaker 1: want to make and it's a it's a mess because
Speaker 1: you look all over the world and it's just as
Speaker 1: patchworky as it is here. Kim Kay, I think she
Speaker 1: had a bad day because of this. No, I don't
Speaker 1: think one point three million dollars matters at all. I mean,
Speaker 1: she her lawyer said that she's cooperating and they're doing
Speaker 1: everything they can to move forward. Yeah. I'm not a lawyer, Yeah,
Speaker 1: but I feel like we need to be when we
Speaker 1: talk about this. No, I need to disclaim it that
Speaker 1: I'm not a lawyer, and there's a responsibility to people,
Speaker 1: especially when you talk about any kind of investment, right
Speaker 1: or investment. I mean again, Matt Damon clear that he
Speaker 1: got paid right, Yeah, yeah, yeah, all right. I can't
Speaker 1: talk enough about kim Ka scarlet food. Thank you so much,
Speaker 1: Bloomberg Business of Sports host on Blomberg Radio, Bloomberg Quick
Speaker 1: Take correspondent and anchor here in our studio room a journal. Yeah,
Speaker 1: but you let me drive? No, no, no no, honey, please,
Speaker 1: I'll do I want to drive. It's a good question.
Speaker 1: D This is the Drive to the Globe up on
Speaker 1: Bloomberg Radio. All right, we are counting down at the
Speaker 1: clothes was on this Monday, the first trading day of
Speaker 1: the fourth quarter, October two, and we've just got about
Speaker 1: ten minutes left to today's trading session. So let's talk
Speaker 1: about the markets. Let's get to our drive to the closed. Guest,
Speaker 1: we've got Abbe Deshpondi with us, the founder and a
Speaker 1: chief investment officer at center Stone Investors. Abbe joins us
Speaker 1: once again on the phone from New York City. Abbey,
Speaker 1: it's been a while. It's good to have you back
Speaker 1: with us. How are you. I'm doing great, Thanks for
Speaker 1: having me good? Is um? Are we out of the woods?
Speaker 1: I mean, today's trade certainly seems to think that. Uh yeah,
Speaker 1: investors are pretty happy today. Yeah, we're picking above the
Speaker 1: trees today. Um. But if you know, if we kind
Speaker 1: of look back at the starting conditions for two, you had, um,
Speaker 1: the was you know, more overvalued versus its intrinsic value.
Speaker 1: Since before the global financial crisis, you had fundamentals kind
Speaker 1: of weakening, and you had the catalyst, which you know,
Speaker 1: for many years now it has just been monetary policy
Speaker 1: working against the market and continuing to do so. Right now,
Speaker 1: with a decline that we've had, valuations obviously that it
Speaker 1: looks better, but the fundamentals are still deteriorating, and despite
Speaker 1: the um optimism from today's economic reports, the monetary policy
Speaker 1: is likely not to change anytime soon. So I don't know,
Speaker 1: I'd say we're still in the woods. Well, especially if
Speaker 1: you listen to and believe kind of the consensus that
Speaker 1: we are hearing, you know, from FED policymakers, despite maybe
Speaker 1: similarly signs of something like your vice chairman, little Brian Brainard,
Speaker 1: you know, watching kind of some of the broader impacts
Speaker 1: maybe of the tightening that we're getting here in the
Speaker 1: United States, but in general, everybody is saying, right that, okay,
Speaker 1: we're gonna get high rates, We're gonna get igh rates.
Speaker 1: It's all we're hearing. And at that point that's really
Speaker 1: truly what the market has to be understanding, Yeah, higher rates,
Speaker 1: and of course you know, no one really knows. I
Speaker 1: mean a little over a year ago that we thought
Speaker 1: that interest rates going to stay We're gonna stay low
Speaker 1: for you know, an extended period of time. Um. And
Speaker 1: so the next big question mark is one, does inflation
Speaker 1: you know, get to a point where the Fed can
Speaker 1: stop raising rates or even reverse And that's you know,
Speaker 1: just doesn't look like that happen anytime. I mean, inflation
Speaker 1: did peak according to the PC number that the Fed
Speaker 1: looks like inflation peaked in February and the core rate.
Speaker 1: So I mean, one could argue that you know you're
Speaker 1: you're having that disinflation. Um. The big question mark is, well,
Speaker 1: words it go. And so the stickiness of rents and
Speaker 1: some of these underlying kind of you know, uh inflation
Speaker 1: factors that don't really move that much, UM, suggests that
Speaker 1: you know you're going to have a pretty you know,
Speaker 1: an interest rate policy. It's gonna be fairly restrictive for
Speaker 1: for you know, at least another six months. But that's
Speaker 1: just my guess. No one, like I said, no one
Speaker 1: really knows. Hey, Listen, we've often talked small cap space
Speaker 1: with you. UM. I was looking at the Russell two
Speaker 1: thousand and it is down about from that high back
Speaker 1: in November eight or Gina Martin Adams talking a little
Speaker 1: bit about UM maybe some more downside, I believe she said,
Speaker 1: for that space in particular, how do you see the
Speaker 1: small caps which are so closely, of course tied the
Speaker 1: Russell two thousand, tied to the US domestic economy. Yeah,
Speaker 1: it's tied to domestic economy. It tends to be a
Speaker 1: little bit more cyclical. There's more banks. There's a lot
Speaker 1: of banks in there, UM and financials. So really I
Speaker 1: think that um it will continue to you know, soften.
Speaker 1: I guess the indexes. I don't expect any a huge
Speaker 1: run up until the US market kind of you know,
Speaker 1: show some signs of stabilization or contradicts the worst case
Speaker 1: scenarios that people are trying to or seeming to factor
Speaker 1: in now. And that's that's the good news, which is
Speaker 1: that as you know, recessions their markets, it's it's just
Speaker 1: part of the landscape. They happen frequently, and you know,
Speaker 1: we survived and we get through it. The big um,
Speaker 1: you know, the big event that we don't want to
Speaker 1: see is a financial crisis. UM. And right now the
Speaker 1: banking system is in very good shape in the United States. UM.
Speaker 1: You have loan loss provisions are an excessive loan losses
Speaker 1: and people and here and you in your end in Europe,
Speaker 1: the banking you know, I guess executives are taking some
Speaker 1: precautions now so that there's not such volatility in their
Speaker 1: and their earnings UM and their capital positions. So the fundamentals,
Speaker 1: as far as um, the groundwork for a new bull
Speaker 1: market are there, you just don't have I don't think
Speaker 1: the valuations are quite there yet. And he's certainly don't
Speaker 1: know the catalyst yet. But I don't see. I don't
Speaker 1: see you know, a huge collapse or a calamity or
Speaker 1: anything like that. Like I said, this to me, just
Speaker 1: looks well, partly it's just a um, you know, we're
Speaker 1: still in the after shocks of the COVID responses, and
Speaker 1: beyond that it looks sort of running the mill to me. Interesting.
Speaker 1: So so the people who say this time is different,
Speaker 1: you say it's not. Well, it's always different that I mean,
Speaker 1: you know, this time is very different because we have
Speaker 1: so many of these external factors that are not related
Speaker 1: to you know, just a normal economic cycle, right, I mean,
Speaker 1: the feder Reserve at this point, they're just they're correcting
Speaker 1: for the previous corrections, you know, pilot induced oscillation, and
Speaker 1: that that can create its own unintended consequences, like it
Speaker 1: has inflation, for instance. But um, you know, the economy,
Speaker 1: it's a dynamic organism and it's adaptable and it will
Speaker 1: adapt to whatever the conditions are and it'll it'll go
Speaker 1: beyond that, but it takes time. But you said, fundamentals
Speaker 1: are there for a new bowl market, we just don't
Speaker 1: have the catalyst. And what else, don't we have evaluation?
Speaker 1: You know? No, In other words, you don't have the
Speaker 1: situation where like financial crisis, where you have massive amounts
Speaker 1: of you know, leverage, you don't have. Corporations aren't massively leverage.
Speaker 1: I mean, there are leverage, of course from all the
Speaker 1: buy backs, but not to not to a point where
Speaker 1: they're at major risk. They've distributed their maturities across times,
Speaker 1: so there's not a you know, it's even though interest
Speaker 1: rates are up right now, it's not going to kill
Speaker 1: us corporations. And there's certainly going to be some you know,
Speaker 1: some roadkill, but um, not the entire economy. So the
Speaker 1: you know, the basics are there, and of course you
Speaker 1: still have fairly strong um if you look at the
Speaker 1: industrial sector pretty I mean pretty record, pretty close to
Speaker 1: record backlogs and orders. But even if there is a
Speaker 1: reduction in economic growth, there's there's a year at least
Speaker 1: of orders that they have to work through just to
Speaker 1: get back to UM like a normal supply demand. You
Speaker 1: look at cars with at airplanes and the boats, like
Speaker 1: the high ticket items. Um, you know, So that that's
Speaker 1: what I mean by the fund amount was like, I
Speaker 1: don't see over supply of something. I don't you know,
Speaker 1: if anything, you just saw too much demand too quickly,
Speaker 1: and that's what needs to get UM pulled back a
Speaker 1: little bit. And that's what's happening. So that to me
Speaker 1: just looks like an EBB and flow. Um. You know. Granted,
Speaker 1: the pod reserve can all the screw things up they
Speaker 1: have in the past, right, but yeah, um, but I
Speaker 1: think there's a way to go for that still. Just
Speaker 1: in the last twenty seconds that we have with you,
Speaker 1: can you give us a pick a place where you
Speaker 1: have invested during this tumultuous time. You know, um, we
Speaker 1: continue to move off shore as much as the US,
Speaker 1: the fun evaluations aren't there. The non US markets, Europe,
Speaker 1: you know, Asia, the valuations they are approaching another decliner,
Speaker 1: so which is you know, it wouldn't be totally surprising
Speaker 1: would put those markets that close to nineteen seventies valuations.
Speaker 1: You know you're getting through, if you can look through
Speaker 1: the next six months and the kind of volatility, you're
Speaker 1: getting to a point where you're able to price in
Speaker 1: and capture long term double digit returns between the stock
Speaker 1: prices and currency. All Right, we've got to run forgive us, um,
Speaker 1: but good to check in with you as Bonde, founder
Speaker 1: and chief investment officer of Centerstone Investors joining us on
Speaker 1: the phone from New York City. 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
Speaker 1: radio show at two pm East in on Bloomberg Radio,
Speaker 1: or watch us on YouTube search Bloomberg Global News. H