Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business
Speaker 1: Weekdaily reporting from the magazine that helps global leaders stay
Speaker 1: ahead with insight on the people, companies, and trends shaping
Speaker 1: today's complex economy. Plus global business finance and tech news
Speaker 1: as it happens. The Bloomberg Business Week Daily Podcast with
Speaker 1: Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2: We're going to stay tim on the US economy.
Speaker 3: We're going to broaden out as well, especially when it
Speaker 3: comes to geopolitics and the global economy, something we talked
Speaker 3: about with our Stu Paul yesterday.
Speaker 4: We got a great voice to do this, Doctor Adam
Speaker 4: Posen joins US, President of the Peterson Institute for International Economics,
Speaker 4: joining us this afternoon from Washington, DC. Before we broaden out,
Speaker 4: doctor Posen, want to talk about the US economy coming
Speaker 4: off of that inflation print that we just talked about
Speaker 4: with Mike McKee. Where do you see the US economy?
Speaker 5: Well, thank you for having me back, Tim, and I
Speaker 5: agree with a lot of what Mike said about what
Speaker 5: was under the hood. But the main thing I think
Speaker 5: your investor listeners should be thinking about is that if
Speaker 5: your plus or minus zero point one zero point two
Speaker 5: from expectation on any given months print. It's not worth
Speaker 5: real information. I mean, nobody has their expectations that precise.
Speaker 5: So you have to look at the bigger stories. And
Speaker 5: to me, the bigger stories in the US are that
Speaker 5: we have a labor market that isn't cratering as people
Speaker 5: used to worry about, that has solid retention of employment,
Speaker 5: not huge employment growth, but solid retention. We have potentially
Speaker 5: some very stimulative fiscal policies coming down the pike in
Speaker 5: that the Republican majorities in the Congress may give President
Speaker 5: Trump checks to hand out ahead of the midterm elections
Speaker 5: in November. They may, I hope they will restore some
Speaker 5: of the funding for Obamacare insurance subsidies that we're taken
Speaker 5: out in last year's bill. And we've got in the
Speaker 5: end a bunch of things on the tara front and
Speaker 5: even more so on the anti migration front that are
Speaker 5: percolating through the economy. And people were premature to say, oh,
Speaker 5: it all must have happened by now, or it won't happen.
Speaker 5: That's not right. It takes time for businesses and households
Speaker 5: and migrants to make decisions. So I'm with Mike, I'm
Speaker 5: with a lot of people. I think the pricing of
Speaker 5: three FED cuts this year is much too many.
Speaker 3: So this explains, or I'm assuming this kind of explains,
Speaker 3: doctor Posen, that you and Lazard CEO Peter Orzag of course,
Speaker 3: formerly director of the Office of Management and Budget and
Speaker 3: director of the CBO. You guys put out a column
Speaker 3: in January that the Fed's two percent inflation target could
Speaker 3: be totally left in the dust. You think inflation could
Speaker 3: quote surprise to the upside, potentially exceeding four percent sent
Speaker 3: by the end of twenty twenty six. Is it because
Speaker 3: of what you just laid out in terms of you know,
Speaker 3: tax cuts, federal government spending.
Speaker 2: These are things that are going to be stimulative.
Speaker 5: Stimulation carols exactly and Peter and I And I was
Speaker 5: glad to co author with Peter because he knows the
Speaker 5: fiscal stuff. So if he and I agree that these
Speaker 5: are real likely risks to more stimulus out of fiscal
Speaker 5: I'm willing to buy it or willing to sell it.
Speaker 2: Actually.
Speaker 5: But I think the other things that we're talking about
Speaker 5: is the lagged effect of tariffs and anti migration. I
Speaker 5: wrote about this in a column for Business Week magazine
Speaker 5: earlier this month. I think we're talking about in Peter
Speaker 5: points too from his Purchaselizard, various corporate CEOs I at Amazon,
Speaker 5: and or the beige books from the FED that say
Speaker 5: companies are only just now passing through some of these adjustments.
Speaker 5: I think there's also just the bottom line that the
Speaker 5: labor market, it is more solid, and so if we
Speaker 5: get any inflation, it's in a more tidy economy. And
Speaker 5: then finally, whether or not we get into the new
Speaker 5: leadership at the FED. After all the attacks on the
Speaker 5: FED over the last year since President Trump came back
Speaker 5: into office, you have to be a little more worried
Speaker 5: that the FED will not react quickly if there is inflation,
Speaker 5: and that to some degree becomes self fulfilling. So I
Speaker 5: think there's a lot of things going on now. It
Speaker 5: could be a recession. It could be that the migrants
Speaker 5: really haven't left yet. They could be that the government
Speaker 5: breaks down and doesn't pass these stimulus, in which case
Speaker 5: inflation won't be that high. But I think each of
Speaker 5: these is pretty darn likely, and cumulatively they get you
Speaker 5: up to high inflation by end of the year.
Speaker 4: Well, you mentioned the FED, so I want to go
Speaker 4: there then, and then I want to do some demographic
Speaker 4: stuff because there's a lot of questions about what the
Speaker 4: economy looks like in the next few years with the
Speaker 4: decline and immigration. On the FED, you said if the
Speaker 4: FED is less react moving forward. Is that a result
Speaker 4: you think of Kevin Walsh being nominated as Chair of
Speaker 4: the FED?
Speaker 5: I think it's a result of the desires expressed so
Speaker 5: strongly by President Trump and by Secretary Dissent, and by
Speaker 5: not just Kevin worsh to the nominee, but all the
Speaker 5: shortlisted people who would be FED Chair in favor of
Speaker 5: loosening policy quite a bit, and doing so in the
Speaker 5: face of data which the vast majority of the Federal
Speaker 5: Open Market Committee has publicly said leads them to want
Speaker 5: to pause. I think should give people pause. So I
Speaker 5: think there is a real issue there. I think there's
Speaker 5: also genuine debate to be had. Nominee Warsh, Governor Waller
Speaker 5: and others have said that some of these tariff and
Speaker 5: other effects are one time shocks are not going to
Speaker 5: be passed on We'll see that would be very unusual.
Speaker 5: But maybe they've also said or started to say that
Speaker 5: productivity growth will bail us out, we'll be able to
Speaker 5: have more growth with less inflation. That's more plausible to me.
Speaker 5: But even there that's by no means for sure. There
Speaker 5: was a nice piece by Jason Furman and the Wall
Speaker 5: Street Journal discussing this. The angle I would take is,
Speaker 5: just as Governor Waller or Kevin worsh says, with the tariffs,
Speaker 5: you get a real income shock, in this case positive
Speaker 5: from AI. It's indeterminate ahead of time, to use a
Speaker 5: fancy word, how much of that shows up as income
Speaker 5: and how much of that shows up as price disinflation.
Speaker 5: And my reading of the historical evidence is when you
Speaker 5: get a new technology, most of the disinflation stuff comes
Speaker 5: with a lag, because that only comes when companies start restructuring,
Speaker 5: changing their workforces, figure out how to use this stuff.
Speaker 5: Whereas some of the income growth, the productivity growth you
Speaker 5: get upfront just because we've all got a new toy.
Speaker 5: So I think there's room for me to be plenty wrong.
Speaker 5: But I think we're going to end up pretty high
Speaker 5: inflation fed that's behind the curve.
Speaker 3: So is that the biggest realistic risk to the US economy.
Speaker 3: I wanted to insert that word realistic because I think
Speaker 3: we talk about risks all the time, and there's a list,
Speaker 3: you know, as long as my arm and then some.
Speaker 3: But I'm just curious. Is it higher inflation? Is a
Speaker 3: higher interest rates? Is it demographics and older population folks
Speaker 3: not having babies. Is it less immigration? Is it rising debt?
Speaker 3: Is it China? US tech? What do you think is
Speaker 3: the biggest realistic risk to the US economy, maybe to
Speaker 3: the global economy.
Speaker 5: Yeah, well, thank you for putting it that with, Carol.
Speaker 5: I would sort the risks by two categories, the realistic
Speaker 5: and unrealistic, as you said, but then at what time
Speaker 5: frame they hit. I think the realistic risk for the
Speaker 5: US in the next three to twelve months is probably
Speaker 5: inflation is the biggest risk. And I'm not that worried
Speaker 5: about a downside unemployment. I'm not that worried about trade
Speaker 5: wars turning into hot wars with China. I mean, I'm
Speaker 5: worried about it. It'd be terrible, but I'm not that
Speaker 5: worried it's likely. But if we start looking out one
Speaker 5: two years, then to me, the realistic risk starts to
Speaker 5: get into some of those demographic issues you and Tim
Speaker 5: just mentioned, because we are cutting off a lot of
Speaker 5: people from the workforce by excluding or deporting migrants. And
Speaker 5: there's a lot of things that happen, for example, the
Speaker 5: female labor force participation in prime AH women if you
Speaker 5: don't have cheap available healthcare and cheap available childcare and
Speaker 5: the budget doesn't support that out of the federal government,
Speaker 5: and healthcare is cut back if they don't pass the
Speaker 5: subsidies for Obamacare, and even if they do, it's still
Speaker 5: cut back. So those are the things in the next
Speaker 5: couple of years. But then when we think beyond that,
Speaker 5: then you've got a tug of war between the positive
Speaker 5: impact of AI and the potential for large scale unemployment
Speaker 5: as people adjust to AI. And there I got to say,
Speaker 5: not only I, but the economics profession has no clear idea.
Speaker 5: There are a few people out there a very strong opinions,
Speaker 5: but there's no consensus and we're still working on that.
Speaker 4: What's your best bet there? What's there's no consensus. We
Speaker 4: don't know what's going to happen. We can't see the future.
Speaker 4: But what's realistic.
Speaker 5: What's realistic is productivity growth stays up as high as
Speaker 5: it's now starting the trend, maybe even goes a little
Speaker 5: higher and unemployment shoots up in a couple of years,
Speaker 5: but doesn't shoot up enormously, and it is disproportionately on
Speaker 5: younger people, and that you get some decline in labor
Speaker 5: force participation because people figure out different ways of living
Speaker 5: their lives, and so the unemployment number understates how many
Speaker 5: people feel displaced?
Speaker 3: Yeah, gosh, a million questions. I want to ask you,
Speaker 3: when do we are we seeing kind of the fruits
Speaker 3: of the gaps in wealth playing out globally?
Speaker 2: And is it kind of where we are?
Speaker 3: It's amazing to me where people point to stock market highs.
Speaker 3: We've talked about the K shaped economy a lot, but
Speaker 3: how many conversations I have on a regular basis with
Speaker 3: so many Americans that just find it difficult and ones
Speaker 3: that I wouldn't even think so, that are probably in
Speaker 3: a decent income bracket, but it's just doesn't feel so good.
Speaker 6: Now.
Speaker 5: I think as economists, you all are anchors. You cover everything,
Speaker 5: but as economists have got to be a little bit
Speaker 5: modest that sometimes when people don't feel so good, it's
Speaker 5: not about the economic numbers. They may say it's about that,
Speaker 5: but it's about their relative position in life. It's about uncertainty.
Speaker 5: It's about through an ideological lens. Is their party in power?
Speaker 5: Not in power? Are their kids? So it's not that
Speaker 5: people's feelings are unimportant, but obviously not. They can vote,
Speaker 5: they can choose. But the connection, and there's very clear
Speaker 5: data on this, the connection between surveys of how good
Speaker 5: people feel, how confident people feel, has become much more
Speaker 5: tenuous in terms of linking it to actual economic outcomes
Speaker 5: than it used to be. That's interesting what I would say, Carol.
Speaker 2: We have to run though yet quickly.
Speaker 5: Yeah, no, no, no, sorry, just to just to say
Speaker 5: that the global situation is similar to the US. There's
Speaker 5: a lot of youth unemployment in China and in Europe,
Speaker 5: and that we got to think about.
Speaker 3: Just means you want to have you come back real soon,
Speaker 3: doctor Posen be well, have a great weekend.
Speaker 7: Stay with us.
Speaker 4: More from Bloomberg Business Week Daily coming up after this.
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Speaker 3: Hey, consumer spending on Valentine's Day expected to reach a
Speaker 3: record twenty nine point one billion dollars according to an
Speaker 3: annual survey that was released by the National Retail Federation
Speaker 3: and Prosper Insights and Analytics. Now that amount surpasses the
Speaker 3: previous record of twenty seven point five billion that was
Speaker 3: last year. Shoppers budgeting a record almost two hundred dollars
Speaker 3: on average for gifts, and increase from one hundred and
Speaker 3: eighty nine dollars last year and surpassing the previous record
Speaker 3: of one hundred and ninety six dollars spent in twenty twenty.
Speaker 4: So basically, people are going to send two hundred bucks.
Speaker 7: Is that how you're talking? Yeah, Okay, that seems like
Speaker 7: a lot.
Speaker 2: It seems like a lot. Like I love, I love, Yeah,
Speaker 2: but but it's like I don't know. Yeah, it's sweet, Okay,
Speaker 2: I do love.
Speaker 7: Let's ask Christina Stembull.
Speaker 4: She's got her CEO of farm Girl Flowers Hates, a
Speaker 4: firm she built from the ground up. She strapped it
Speaker 4: starting back in twenty ten, making booquets from her San
Speaker 4: Francisco apartment. She's in Gig Harbor, Washingtonday at what the
Speaker 4: company calls the farm Quarters, which I'm guessing is like
Speaker 4: you know, there's a headquarters.
Speaker 7: There's a farm headquarters. This is the farm quarters. Where
Speaker 7: are you exactly?
Speaker 8: Yeah, we're about an hour south of Seattle.
Speaker 7: And what's going on there?
Speaker 9: Lots of lots of busyness here going on, just like
Speaker 9: Valentine's DA and Mother's Day. As you know, I've been
Speaker 9: on here many times with you. Thank you for having
Speaker 9: me back by the way, but just a lot of busyness,
Speaker 9: a lot of forecasting, making sure that orders are coming in,
Speaker 9: we're taking care of our customers. Well, the normal Valentine's
Speaker 9: Day hubbub.
Speaker 7: Well yeah.
Speaker 4: What we do know though, is that people think Valentine's
Speaker 4: Day is the busiest day for you, but it's not.
Speaker 4: Mother's Day is a busier holiday, right, Yeah.
Speaker 9: This is our like warm up to motas. So it's
Speaker 9: good to have this one. First Mother's Day is about
Speaker 9: double the size Valentine's Day.
Speaker 3: Fir tell us about like kind of what's going on
Speaker 3: behind the scenes, And I am curious.
Speaker 2: We are curious.
Speaker 3: Is a ber than last year or you know? No,
Speaker 3: you are always such a great read on the consumer
Speaker 3: because I think about things like holidays, is when okay,
Speaker 3: we can find the money to spend so give us
Speaker 3: an idea of what the consumer's doing this year, what
Speaker 3: they're buying, how much they're spending.
Speaker 9: Yeah, yeah, it kind of falls in line with what
Speaker 9: you just said. We are seeing that people are spending
Speaker 9: a little bit more this year. Orders are up a
Speaker 9: little bit as well year every year, which we're really
Speaker 9: happy about.
Speaker 8: And they're spending more this year, which is also a
Speaker 8: great thing.
Speaker 9: Valentine' Day has always been kind of a high average
Speaker 9: order value, high high ticket.
Speaker 8: Item holiday for us. Mother's Day tends to be a
Speaker 8: little bit less.
Speaker 9: We get a lot more orders, you know, but people
Speaker 9: spend a little bit less on their moms unfortunately.
Speaker 8: Than their lovers.
Speaker 7: What are they buying this year.
Speaker 8: Yeah, they're buying. You know, we did survey again.
Speaker 9: We hadn't done any surveying of our customers since before COVID,
Speaker 9: so we did a great survey this year that totally
Speaker 9: you know, kind of give us more insights.
Speaker 10: You know.
Speaker 9: Everything's kind of you know, changed a lot since COVID,
Speaker 9: so we wanted to see if if we were still
Speaker 9: providing what customers wanted, and we found a lot of
Speaker 9: the same from before COVID and a.
Speaker 8: Little bit different. So it's a thought that counts.
Speaker 9: You know, our customers want their loved ones to really
Speaker 9: think about what they what they like, to know what
Speaker 9: flower like, their favorite flower like instead of a red rose.
Speaker 9: We did find, just like before COVID, not many women
Speaker 9: want true just standard red roses.
Speaker 3: Yeah, we don't want it, guys, get the message.
Speaker 9: Sorry, most totally. You're so right, Carol. Women want a bright, mixed,
Speaker 9: beautiful bouquet. So that's what we're giving our customers a
Speaker 9: lot of options on bright, beautiful bouquets. But since men
Speaker 9: are the consumer for this holiday, we also have to
Speaker 9: keep them happy. We found this many many years ago,
Speaker 9: over a decade ago, you know, when I was just
Speaker 9: kind of stumped with like why the senders were not happy,
Speaker 9: but the recipients were. And so that was the first
Speaker 9: survey ever did over a decade ago and found that
Speaker 9: just what women and what men want are very different.
Speaker 9: So men want a red rose. So we're mixing red
Speaker 9: roses in with a lot of other flowers to give
Speaker 9: women they want and men what they want when they order.
Speaker 9: But the main thing from our survey showed us that
Speaker 9: women really and you know everyone really, not just women,
Speaker 9: want their partner to really think about the gifts they're giving.
Speaker 9: So if their favorite flower is a renucular, don't send
Speaker 9: a mixed Okay, send you know the forty stems of
Speaker 9: beautiful Hanoi rinuculars that we have on our site. So
Speaker 9: they just don't really want to feel like the person
Speaker 9: that they're with knows them really well.
Speaker 3: What does it mean when there's a Saturday delivery? Like
Speaker 3: I think about that a lot. Is it better?
Speaker 2: Is it easier? Is it harder?
Speaker 11: Like?
Speaker 2: How do and how do consumers think about it?
Speaker 9: Yeah, it's horrible, so you know, I'll just give it
Speaker 9: two straight. It's really bad. The only day worse is Sunday.
Speaker 9: So next year is going to be great. So you know,
Speaker 9: when you're a company our size, which is small, we're
Speaker 9: small business. You know, we don't have the buying power
Speaker 9: that some of the giant companies have that if made
Speaker 9: consumers think that deliveries happen at you know, eleven pm
Speaker 9: on a Sunday, even like that doesn't happen for companies
Speaker 9: outside of those you know, goliaths, companies that you think
Speaker 9: of with that, So you know, we can't get Sunday
Speaker 9: deliveries and Saturday deliveries are tough, so not everybody lives
Speaker 9: in an urban enough place to receive deliveries on Saturdays,
Speaker 9: but the senders don't know that necessarily, so you know,
Speaker 9: we offer Saturday delivery. It's we have it at right now.
Speaker 9: It's the same price as is during the week, but
Speaker 9: there's a lot more risk on Saturday. It's that they're
Speaker 9: not going to make it there in time. So another
Speaker 9: thing we found in our survey is that this surprised us. Actually,
Speaker 9: women don't want to get the flowers on Saturday. They
Speaker 9: want to get them earlier in the week so they
Speaker 9: can enjoy them. And on the weekends they have very
Speaker 9: full schedules, so they don't want to have to like
Speaker 9: worry that they're sitting on their front porch freezing somewhere.
Speaker 9: If you're in parts of the United States where it's
Speaker 9: freezing right now, and the flowers aren't going to look
Speaker 9: good when they get home. So we found that most
Speaker 9: people wanted to get them early. We saw that in
Speaker 9: the orders too, most people selected Friday for delivery, So
Speaker 9: now that timings up, so now we're getting the people
Speaker 9: that might have might have slipped their minds and are
Speaker 9: ordering for Saturday delivery, but there were always on pins
Speaker 9: and needles like, oh, you know, it's going to be
Speaker 9: a higher percent that don't make it in time on
Speaker 9: a Saturday.
Speaker 4: Yeah, the last minute folks out there making the calls
Speaker 4: right now, Christina. In the past year when we have
Speaker 4: you on, you've spoken about tariffs because a lot of
Speaker 4: the what ends up in these bouquets comes from outside
Speaker 4: of the United States. Just give us an update there
Speaker 4: and the way that you've shifted your supply chain or not,
Speaker 4: and how the bottom line has been affected.
Speaker 9: Yeah, tariffs are definitely impacting a lot this year in
Speaker 9: ways that people don't think about.
Speaker 8: And I wouldn't have.
Speaker 9: Thought about either, So I'm this is no shade on anybody.
Speaker 9: I wouldn't have thought about this if I didn't have
Speaker 9: a flower company. But you know, flowers, they cost a
Speaker 9: lot more in the United States. So you know, all
Speaker 9: the tariffs on encouraging to bring back manufacturing and agriculture
Speaker 9: to the United States, it just doesn't have that impact.
Speaker 9: I understand the intention is there, but the impact isn't
Speaker 9: that way because what happens are it's not just you know,
Speaker 9: the flowers themselves. So like when you're bringing in flowers
Speaker 9: from Europe or South America.
Speaker 8: Which is a tremendous amount.
Speaker 9: I think the stat this year is eighty percent of
Speaker 9: the exports from Columbia came to the United States.
Speaker 8: I just saw this morning.
Speaker 9: So you know, that's a lot are imported and you
Speaker 9: pay more for those imported flowers. But for US grown flowers,
Speaker 9: you have all of the materials to grow those flowers.
Speaker 9: So the bulb prices have gone up so much, the fertilizers,
Speaker 9: everything that you're bringing in still to grow them here.
Speaker 9: And then on top of that, the land, the labor,
Speaker 9: everything here costs so much more. The insurance, the legals,
Speaker 9: you know, everything here in the US costs more. So
Speaker 9: you know, for instance, a good example, just to kind
Speaker 9: of break it down and.
Speaker 2: Just quickly, yeah, a tulip.
Speaker 9: A tulip is you know, three times three to four
Speaker 9: times more expensive to buy it here in the US.
Speaker 9: We're still making that choice to buy tulips here here
Speaker 9: in the US to support the farms that we have
Speaker 9: that we've worked us for a long time, but we
Speaker 9: could get them significantly cheaper if we imported them, even
Speaker 9: with the tariffs. Because of what the farmers here are experiencing.
Speaker 3: Yeah, no, you like you really kind of like open
Speaker 3: a window for us in terms of what it means
Speaker 3: in terms of farming here in the United States. Happy
Speaker 3: Valentine's Day, Good luck. I know it's a crazy time
Speaker 3: for you, but always fun to check in with you. That,
Speaker 3: of course, is Christina Stembel, founder and CEO of farm
Speaker 3: Girl Flowers.
Speaker 7: Stay with us.
Speaker 4: More from Bloomberg Business Week Daily coming up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
Speaker 1: us live weekday afternoons from two to five eas during
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Speaker 4: You know what is one of the most read stories
Speaker 4: on the Bloomberg Anything related to Jeffrey Epstein.
Speaker 7: Yeah, yeah, it's.
Speaker 2: An interesting story about gloomc Sachs that regards.
Speaker 4: Yeah, from a resignation of the top lawyer there to
Speaker 4: the resignation of one of the most powerful figures in
Speaker 4: the Middle East. We are all over the fallout from
Speaker 4: the latest batch of the Epstein files. Todd Gillespie's here.
Speaker 4: We have Jason Leopold next hour to really tell us
Speaker 4: what the steady outflow of information has been from these
Speaker 4: files and potential repercussions moving forward.
Speaker 7: All right.
Speaker 3: Also, I'm holding this up because this is Bloomberg Markets Magazine.
Speaker 3: It's a February March issue and it is out. It
Speaker 3: asked should we be afraid of the big boom in
Speaker 3: private credit? The asset class is the subject of the
Speaker 3: latest issue of Bloomberg Markets Magazine. The editor is going
Speaker 3: to join us in just a few minutes. I do
Speaker 3: feel like credit, in all its twists and turns, is
Speaker 3: certainly top of mine for everybody.
Speaker 4: Okay, champagne haad of Valentine's Day? That sounds nice, Yeah,
Speaker 4: all right, could cost you more due to those tariffs.
Speaker 4: The founder and CEO of one champagne company. Yeah, chocolate
Speaker 4: covered anything.
Speaker 2: No, but they go, you know with oh, I don't know,
Speaker 2: have you not some pretty one?
Speaker 4: Okay, I'm trying to stay on track here, right. This
Speaker 4: company is suing the Trump administration for what the founder
Speaker 4: and ceo says is seventy eight thousand dollars she is
Speaker 4: owed that she spent on tariffs last year.
Speaker 2: Well, Supreme Court might remember who's staying.
Speaker 7: For that tariffs.
Speaker 2: Supreme Court though, Yeah, totally, that's where it's going. All right,
Speaker 2: lots to come over the next two hours. Do not
Speaker 2: go anywhere.
Speaker 3: First up, though, check on that trading day. Here's Amy
Speaker 3: Morrison for Charlie Pellett.
Speaker 10: All right, thank you, Carol sources telling Bloomberg that SpaceX
Speaker 10: is pursuing a dual class share structure in its planned
Speaker 10: IPO this year. A two tier structure would give select
Speaker 10: shareholders stock with extra voting power, allowing them to dominate
Speaker 10: decision making, but it would also allow insiders like Elon
Speaker 10: Musk to maintain control of the company even with a
Speaker 10: minority stake.
Speaker 2: And you're right.
Speaker 10: Tamer than expected inflation numbers spurred bigger bets on fed
Speaker 10: rate cuts, moving markets into the green. But just a
Speaker 10: little bit, just a little bit, peering back some of
Speaker 10: those gains from earlier Today. Right now, s and P
Speaker 10: five hundred up a quarter percent, NASDAK little changed on
Speaker 10: the upside, the Dow up about two tens seven percent,
Speaker 10: tenure treasury yield at four percent, the two year yield
Speaker 10: at three point four percent. Let's check bitcoin now, Oh,
Speaker 10: it's fine, up almost five percent around sixty nine thousand dollars.
Speaker 10: Traders now pricing a fifty percent chance of a third
Speaker 10: rate cut this year. CPI fell to a nearly five
Speaker 10: year low last month as apartment rental price growth slowed
Speaker 10: and gas prices fell. That offered some relief to Americans
Speaker 10: who are still dealing with sharp increases and costs of
Speaker 10: the past five years. Consumer prices are about twenty five
Speaker 10: percent higher than they were five years ago. Efan Devit
Speaker 10: is global more market strategist at Monetta Group Investment Advisors.
Speaker 8: Cuarently not just noise.
Speaker 9: We have to look at how this is cascading through
Speaker 9: different sectors.
Speaker 8: It hit our sector just this week, Private wealth.
Speaker 9: There is definitely a sell first, to ask questions later
Speaker 9: type of mentality.
Speaker 10: Money Ifinns Devitz was on Bloomberg Open interest for on
Speaker 10: demand news twenty four hours a day. Subscribe to Bloomberg
Speaker 10: News Now wherever you get your podcasts.
Speaker 2: I'm Amy Morris. That's a Bloomberg Business Flash.
Speaker 10: We go back to Bloomberg Business Week Daily with Carol
Speaker 10: Masser and Tim Stineviek.
Speaker 7: He thanks for that update. Do appreciate it well.
Speaker 4: One of the most read stories on the Bloomberg Kathy
Speaker 4: Rumler leaving our position as Goldman Sachs top lawyer, drawing
Speaker 4: to a closing month on Saga that saw the investment
Speaker 4: bank staunchly defend her over previous associations with Jeffrey Epstein.
Speaker 7: We've got Todd Gillespie with us. He's Bloomberg News banking reporter.
Speaker 4: He joins us here in the Bloomberg Interactive Brokers studio.
Speaker 4: So her name has been associated with Jeffrey Epstein for
Speaker 4: months at this point, but the bank changed its tune
Speaker 4: after the latest batch.
Speaker 11: Well apparently noted him. And in fact, that's actually one
Speaker 11: of the most interesting things about this. David Solomon was
Speaker 11: on CNBC this morning. She said fully supported her right right,
Speaker 11: and she offered her resignation. And this is actually one
Speaker 11: of the things that is quite incredible to a lot
Speaker 11: of the partners and senior executives at Goldman is how
Speaker 11: staunchly the leadership continues to defend her. And there was
Speaker 11: in fact no contrition, no you know, no acknowledgment of
Speaker 11: any wrongdoing at all about Rumor's behavior from David Solomon
Speaker 11: this morning when he spoke on TV. Just before, by
Speaker 11: the way, he went to play golf alongside Ronda Santis
Speaker 11: at Pebble Beach. So some people are suggesting that perhaps
Speaker 11: Goldman's response to this whole crisis, And you know, the
Speaker 11: two weeks or so that David Solomon has been battling
Speaker 11: this out essentially against the media and internally and perhaps
Speaker 11: even against his own psyche. Who knows, really when it
Speaker 11: comes to David Hollomon, sometimes you know, some are really
Speaker 11: asking questions about his judgment now, and really that's where
Speaker 11: people in the next few days are going to start
Speaker 11: to turn their attention.
Speaker 7: Who asking those questions?
Speaker 4: I mean, are there are employees internally Did it become
Speaker 4: difficult for her internally because of this?
Speaker 7: Yeah?
Speaker 11: I mean, I mean suddenly employees internally felt a lot
Speaker 11: of them couldn't necessarily raise their concerns to David Solomon.
Speaker 11: Bearing in mind, you know, he's someone who has consolidated
Speaker 11: power at this firm over the past few years, away
Speaker 11: from its partnership structure and much more towards a sort
Speaker 11: of traditional top down CEO environment. You also have a
Speaker 11: management committee that he's expanded dramatically, which now has forty
Speaker 11: six people on it, way more than any other Wall
Speaker 11: Street bank, which essentially, you know, when you talk about
Speaker 11: collaboration and everything, actually, in the end one might argue
Speaker 11: it ends up consolidating power in the hands of you know,
Speaker 11: the one CEO who's essentially the top of that all.
Speaker 3: Right, devil's advocate for a moment, like some would say,
Speaker 3: what what did she legally do wrong? Like did she
Speaker 3: provide him any legal advice?
Speaker 7: She certainly did. Cal Yeah.
Speaker 11: And in fact, one of the most incredible things this
Speaker 11: week that came out was revelations about emails in this
Speaker 11: drop that showed how she essentially helped him suppress the
Speaker 11: media strategy and legal fight by Virginia Dufrey, who we
Speaker 11: all know, one of the most vocal defenders, sorry, vocal
Speaker 11: accusers of Jeffrey Epstein who committed suicide last year. Bear
Speaker 11: in mind the story that we love. Sorry she didn't
Speaker 11: write a book, Yeah, there was posthumously published then, right,
Speaker 11: and she you know, and throughout all of this you
Speaker 11: can see these emails that show actually that how Rumler
Speaker 11: talks about relishing the potential opportunity if only she could
Speaker 11: have been the lawyer to depose her at the stand.
Speaker 11: She helps advise lawyers of Epstein on how to wage
Speaker 11: that campaign to stop her interview with Good Morning America
Speaker 11: from airing, which famously never aired and has still never aired.
Speaker 11: You know, before she died. And so there are these
Speaker 11: moments here where people are starting to see these emails
Speaker 11: and then question more deeply at the firm, in particular
Speaker 11: why Goldman was continuing to stand by her and also
Speaker 11: what came up in this due diligence process that they
Speaker 11: said they conducted and that led them to such confidence
Speaker 11: in her.
Speaker 4: What do we know about her relationship with Jeffrey Epstein?
Speaker 4: Why was she so close to him?
Speaker 11: Well, one thing that's cleared throughout the emails is that
Speaker 11: he consistently started leaning on her for years for informal
Speaker 11: legal advice for media strategy. She was also receiving things
Speaker 11: in return, right, He was introducing her to people, he
Speaker 11: was advising her on, you know, getting a new job
Speaker 11: for instance. She was he was giving referrals to people
Speaker 11: like Larry Summers, you know, who was close to Cheryl
Speaker 11: Sandberg at Facebook when she was looking for a potential
Speaker 11: job there. And all through this you see this like
Speaker 11: very transactional reciprocal relationship between these two people who you know,
Speaker 11: as lots of people who have been troubled throughout these files.
Speaker 11: This is you know, and you know many people have
Speaker 11: mentioned in this case in particular, you know, the plutocratic
Speaker 11: class that sort of comes and you know that they're intimate.
Speaker 11: Levels of behavior that come out within these files are
Speaker 11: quite something, and I mean it's important to say, you
Speaker 11: know that she you know, she says she's never done
Speaker 11: anything wrong, she's never done anything illegal. She says she's
Speaker 11: never represented Epstein in court or advocated on his behalf
Speaker 11: to the press or to any government officials.
Speaker 3: And yet, as we all remind that, in two thousand
Speaker 3: and eight is when he did the plea agreement, and
Speaker 3: he was a registered sex offender. So at that point,
Speaker 3: anything that anybody does in terms of a relationship is
Speaker 3: with that knowledge.
Speaker 7: Yeah.
Speaker 11: Absolutely, And I mean one of the things that you know,
Speaker 11: there's an op ed, for instance, that he was trying
Speaker 11: to get published in the Washington Post that she helped
Speaker 11: edit that basically defended, you know, the strength of the
Speaker 11: plea agreement and the federal investigation that he was under
Speaker 11: back in two thousand and eight. She entered this relationship
Speaker 11: with him. In around twenty fifteen US, she entered this
Speaker 11: friendship with him. She calls it a friendship, you know,
Speaker 11: and says that she wants to get help him get
Speaker 11: rid of his legal troubles, and this continues and persists
Speaker 11: even after the twenty eighteen Miami Herald investigation which released,
Speaker 11: you know, accusations of abuse by sixty women. She ended
Speaker 11: up at his in court standing behind his lawyers during
Speaker 11: his arraignment.
Speaker 2: Yeah, so some would say judgment comes into Carl certainly.
Speaker 3: Todd, thank you so much for keeping us up to
Speaker 3: speed on this banking reporter at Bloomberg News. This is
Speaker 3: one of the most right, if not the most red
Speaker 3: story on the Bloomberg Ternal today.
Speaker 4: Also one of the most red stories has to do
Speaker 4: with SpaceX considering a dual class share structure in its
Speaker 4: planned IPO this year with us with what you need
Speaker 4: to know is Bloomberg Tech co host ed Ludlow. He
Speaker 4: joins us from San Francisco and the dual class share
Speaker 4: structure nothing uncommon about that in Silicon Valley and you
Speaker 4: know in media companies too. To be fair, is this
Speaker 4: all about Elon maintaining control?
Speaker 12: It's all about Elon maintaining control, right, I mean, it's
Speaker 12: not surprising that this would be something SpaceX is considering.
Speaker 12: You know what I understand from sources, and we did
Speaker 12: this story of Ryan Gould, right, is that it's being considered. Like,
Speaker 12: I don't think they're as far as having decided the
Speaker 12: structure of an IPO. But the state of play with
Speaker 12: SpaceX anyway is that, you know, it's kind of already
Speaker 12: structured that way. Musk has a lot of like the
Speaker 12: majority of influence and control, but he doesn't have a
Speaker 12: financial majority. So the cat table's quite diversified among all
Speaker 12: the names you know, like Google and Fidelity and Founder's Fund,
Speaker 12: But within that in terms of power, in terms of
Speaker 12: votes as a private company, must's already there. And I
Speaker 12: just point out finally that you know, he tried to
Speaker 12: do that previously with Tesla and it didn't work, And
Speaker 12: so I think there had been an underlying assumption that
Speaker 12: they would at least try with SpaceX.
Speaker 3: If you were sitting down, I don't know, with the Elon,
Speaker 3: what would you ask him about this?
Speaker 12: Oh goodness, if I was sitting down with Elon, I mean,
Speaker 12: it's something I think about day and night.
Speaker 8: Well, you know, as it.
Speaker 12: Relates to voting control. The one reason it's not surprising
Speaker 12: is if you think about Elon musk stated motivations with
Speaker 12: Tesla and the compensation package. Right, so we when the
Speaker 12: compensation package for Tesla. And again people are going to
Speaker 12: get confused because we're jumping from SpaceX Tesla. Are they
Speaker 12: one and the same? Who knows? He always framed this
Speaker 12: as being not about money. He didn't care how much
Speaker 12: he was paid. In the end, he wanted to have
Speaker 12: enough voting power so that he could execute on what
Speaker 12: he thought his vision for the company was in the
Speaker 12: AI context, and with SpaceX, like the logic's very much
Speaker 12: the same. You have a company that's doing really well
Speaker 12: at launching rockets and payload for customers and has got
Speaker 12: a very successful so far constellation based internet service in Starlink.
Speaker 12: But he's like ripping up the script right. The future
Speaker 12: is space based data centers, and so the control part
Speaker 12: is for him to be able to do it.
Speaker 4: A catapult to the moon, that's what he wants. I'd
Speaker 4: love low from Bloomberg Tech. That was Mars Moon and
Speaker 4: then Mars.
Speaker 7: Okay, yeah, that's what we do.
Speaker 4: Just check out story, Ryan gold story and more on
Speaker 4: the Bloomberg terminal. You're listening to and watching Bloomberg BusinessWeek Daily.
Speaker 7: Stay with us.
Speaker 4: More from Bloomberg Business Week Daily coming up after this.
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Speaker 4: The best performer in the S and P five hundred
Speaker 4: coin base up sixteen point eight percent as we speak.
Speaker 4: Volume is actually triple the average company posted week results.
Speaker 4: Yet people are buying. I want to bring in Stacy
Speaker 4: Marie ishmel Hi, Bloomberg News executive for Crypto, Payments and
Speaker 4: Digital Finance. Is this a signal, Yeah, I'm.
Speaker 7: Gonna do this. I'm gonna put you on the spot.
Speaker 4: Is this a signal that people think this is the bottom.
Speaker 6: I think it's a signal that people will hope it's
Speaker 6: the bottom. So one of the interesting things that we've
Speaker 6: been keeping an eye on is, you know, we talked
Speaker 6: the last time that I was here, thanks for having
Speaker 6: me back up there.
Speaker 7: It was just a week ago, and things have changed
Speaker 7: a lot since then.
Speaker 2: A lot of crypto stuff.
Speaker 6: Folks really are looking for signs that even if it's
Speaker 6: not going to get better, it's not going to get worse.
Speaker 6: And one of the interesting things about the coin based
Speaker 6: results yesterday was that there was this feeling of like, okay,
Speaker 6: like that was they had a rough quarta.
Speaker 2: Everybody else had a rough quarta.
Speaker 6: A lot of the you know, loss that they reported
Speaker 6: was based on like the mark to market value of bitcoin,
Speaker 6: and so maybe you know, coming into Q one and
Speaker 6: Q two, that's as low as we're going to see
Speaker 6: it for the foreseeable future. And so even though you
Speaker 6: had various analysts and you know, different folks on the
Speaker 6: cell side adjusting their price targets, it was still very
Speaker 6: much kind of like, okay, we think now we're at
Speaker 6: a level that stuff may be over sold, and so
Speaker 6: let's like let's not get out of control here.
Speaker 3: I'm glad you went there, because I mean you go
Speaker 3: back to the October high and we saw, i mean
Speaker 3: coinbase has fallen as crypto has fallen, right, and I
Speaker 3: mean it's down about sixty percent since then. So there's
Speaker 3: a lot of bad news factored in at this point.
Speaker 3: And it's not like this these results were terrible, right,
Speaker 3: So that's just okay.
Speaker 6: Like you said, maybe the worst is the results were
Speaker 6: kind of you know, they missed some estimates, but like
Speaker 6: not buy a huge amount, and there was some like
Speaker 6: optimism about what might be coming in the next closas
Speaker 6: And I think one of the things, interestingly, you know,
Speaker 6: FinTechs and digital asset companies aren't being punished by the
Speaker 6: market because they are a little bit outside of the
Speaker 6: AI narrative. They're a little bit outside of the why
Speaker 6: do you need billions of dollars in capital expenditure? And
Speaker 6: so you know, they're really kind of benefiting from this
Speaker 6: idea of if you think that bitcoin has had a
Speaker 6: rough time, but the road ahead looks more positive, it's
Speaker 6: time to buy up some of these stocks.
Speaker 3: Well, can I just say in the press release there
Speaker 3: was optimism from the coin based team about regulation and things,
Speaker 3: and are they kind of right that that's going to
Speaker 3: make it better for anybody or can we not make
Speaker 3: that assumption.
Speaker 6: I think there is very much the a sense within
Speaker 6: the digital asset industry that there is a one remaining
Speaker 6: key piece of legislation that they are really desperately looking
Speaker 6: forward to, and that is what's been called the Clarity Act,
Speaker 6: which would you know, codify some elements of market structure
Speaker 6: and also make some final adjustments to how stable coins
Speaker 6: are regulated and legislated. The problem for the digital asset
Speaker 6: industry is the banks and the crypto companies do not
Speaker 6: agree on how to move forward with some of those provisions,
Speaker 6: and that's been a real drag on both sentiment and
Speaker 6: prices across the market.
Speaker 4: When there is agreement, If there is agreement, does that
Speaker 4: change things markedly absolutely?
Speaker 6: I mean, our own analysts on BI have said that,
Speaker 6: you know, companies like Coinbase and Robinhood will really benefit
Speaker 6: from like this this agreement to go forward because one
Speaker 6: of the things that it removes is the uncertainty that
Speaker 6: if there's a change of administration, if Democrats retact the
Speaker 6: White House, then you know, they'll just undo the executive
Speaker 6: orders and everything else. So having things like actually codified
Speaker 6: into legislation really provides a much clearer path for the
Speaker 6: digital asset companies.
Speaker 4: So on back to Coinbase, and then we can branch
Speaker 4: out a little bigger. If we think about Coinbase, can
Speaker 4: we think about Coinbase like we think about Intercontinental Exchange
Speaker 4: or the Nasdaq?
Speaker 3: Uh?
Speaker 6: I mean, I would say that Coinbase, much like robin Hood,
Speaker 6: has demonstrated a real commitment to like diversifying in some
Speaker 6: of the ways that these other like you know, traditional
Speaker 6: exchanges have. I think they are doing some really interesting
Speaker 6: things around the fact that they are like, oh okay,
Speaker 6: Like how are we thinking about tokenization, how are we
Speaker 6: thinking about custody of different kinds of digital assets? Like
Speaker 6: what are our relationships with the ETF providers in that
Speaker 6: particular vein so from you know, the analysts who are
Speaker 6: more bullish on the stock are really looking in like
Speaker 6: that forward looking direction of digital asset companies. Don't only
Speaker 6: think of them as a proxy for bitcoin, think of
Speaker 6: them as like FinTechs in that broader sense.
Speaker 4: Because if you know, this is a company where transaction
Speaker 4: revenue accounts for the majority of revenue, and then subscription
Speaker 4: and services is the minority of revenue, and there are
Speaker 4: different segments and lines within each of those segments. But
Speaker 4: if we think about it, if they're making money from transactions,
Speaker 4: people are buying and selling crypto no matter what the
Speaker 4: price of bitcoin is, So they're still making money even
Speaker 4: if the price of bitcoin is going down because those
Speaker 4: transactions are happening. Do more transactions happen when prices rise.
Speaker 6: Really depends, So you know, one of the things you
Speaker 6: sometimes see is that when prices are falling, you might
Speaker 6: have like more selling or people kind of sitting out
Speaker 6: on the sidelines or exiting completely. The bigger risk from
Speaker 6: some of the analysts that we've been talking to to
Speaker 6: crypto companies is people spending less money on transacting on
Speaker 6: crypto exchanges and more money on the prediction rights. Right.
Speaker 6: So again it's this idea of if you're a person
Speaker 6: who used to trade like meme stocks, or you're into
Speaker 6: sports gambling, and you're like, oh, like bitcoin and dogecoin
Speaker 6: and meme coins, this seems fun, and now you're like,
Speaker 6: or I could be putting some money on polymer that
Speaker 6: I putting some money on calshi. So it's you know,
Speaker 6: like the competition is not so much. Is this person
Speaker 6: interested in like crypto for the sake of crypto. It's
Speaker 6: more like they have some discretionary income, right, and there
Speaker 6: are more ways that you could be, you know, spending
Speaker 6: that than their world previous lies.
Speaker 3: So then how do you think about this? Because I
Speaker 3: feel like you and I have these conversations tim a
Speaker 3: lot do. But I mean, are we still like, what
Speaker 3: will cryptocurrencies really be in terms? Are they going to
Speaker 3: be this thing that totally changes how everybody and everything transacts?
Speaker 2: Are not necessarily.
Speaker 6: Deep existential questions in a front.
Speaker 2: Sorry, it's we do have champagne later to make up
Speaker 2: for it.
Speaker 3: But like, do you know what I'm saying, Like I
Speaker 3: just I still don't know, you know, do we have
Speaker 3: to have the like what does it mean for them,
Speaker 3: the big banks or the big financial firms or I
Speaker 3: don't know, just all the financial infrastructure that we have today,
Speaker 3: Does that mean they will likely be all a part
Speaker 3: of this too?
Speaker 6: So there's absolutely a version of what you are describing,
Speaker 6: which is in fact the version that banks are preparing
Speaker 6: for in a lot of ways, which is that crypto
Speaker 6: becomes a traditional financial payments rail alongside like the swifts
Speaker 6: and the hs and everything else where. It's just like
Speaker 6: so normalized that it's a way of either transacting or
Speaker 6: moving money across borders or trading certain types of assets
Speaker 6: and you don't even think about it, and it's just
Speaker 6: like built into the system. And one of the great
Speaker 6: ironies of that is it's like absolutely the opposite of
Speaker 6: what the people who came up with crypto.
Speaker 3: Wants to exactly, because to me, that sounds like a
Speaker 3: lot of oversight and a lot of regulation and.
Speaker 6: So then what but also potentially like way more volume right,
Speaker 6: like way like different kinds of use cases, And yeah,
Speaker 6: I think that that is to me what makes this
Speaker 6: beat so interesting. It's you can either have this perception
Speaker 6: that you are betting on bitcoin because you think all
Speaker 6: of the world's governments are going to fail, or you
Speaker 6: could have this perception that you think things like stable
Speaker 6: coins are interesting because governments are going to need more
Speaker 6: ways to like monitor financial transactions across borders.
Speaker 7: This is why she is the best I know.
Speaker 2: Oh my gosh.
Speaker 4: Faith and Maria Mel, executive editor for Crypto, Payments and
Speaker 4: Digital Finance for Bloomberg News. In here in our Bloomberg
Speaker 4: Interactive Brokers studio. Check out what she and the team
Speaker 4: do on the terminal.
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