WEBVTT - $800 Million Crypto Fund Sees A Revolution in Finance: Masters 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.080 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Our 0:00:33.120 --> 0:00:37.040 next guest ran JP Morgan's New York energy trading business. 0:00:37.120 --> 0:00:41.040 In the nineties, set up his own commodities fund and 0:00:41.120 --> 0:00:45.400 now is investing in crypto assets. Daniel Masters Joins is 0:00:45.479 --> 0:00:49.479 now Chief Investment Officer of Global Advisors, also chairman of 0:00:49.680 --> 0:00:52.280 coin Shares Group. He manages about eight hundred million dollars 0:00:52.280 --> 0:00:56.320 of assets, including crypto assets. Danielle, thank you so much 0:00:56.320 --> 0:00:59.920 for being with us. UM. In an interview last month, 0:01:00.040 --> 0:01:02.360 you said, for us, it is abundantly clear that we 0:01:02.400 --> 0:01:05.600 are in the midst of a true financial revolution. You're 0:01:05.600 --> 0:01:11.280 referring to cryptocurrencies. What makes you so confident about that? Yes, 0:01:11.360 --> 0:01:15.080 good a good morning, and thanks very much for having 0:01:15.120 --> 0:01:22.280 me back. UM. The distributed ledger technology that's being pioneered 0:01:22.520 --> 0:01:27.520 by in development surrounding bitcoin and other cryptocurrencies is really 0:01:27.680 --> 0:01:32.960 the democratization of transactions in the same way as when 0:01:33.040 --> 0:01:39.160 the Internet appeared, we saw the news and information traveling 0:01:39.160 --> 0:01:43.200 around without the necessity for big organizations centers for distribution 0:01:43.240 --> 0:01:47.000 of that information. So blockchains, bitcoin and other such crypto 0:01:47.040 --> 0:01:52.920 assets are democracyizing the transactional interaction between individuals. That's at 0:01:52.960 --> 0:01:56.200 the core of what makes us a revolution. Can you 0:01:56.240 --> 0:01:58.760 tell us what is How do you describe coin shares? 0:01:58.840 --> 0:02:01.760 What what does coin shore is do for for customers? 0:02:03.000 --> 0:02:07.840 Coin Shares is a nascent digital investment bank. Many of 0:02:07.880 --> 0:02:10.720 the things we do are an analog and parallel to 0:02:10.800 --> 0:02:14.680 what happens in the legacy financial services industry. So we 0:02:14.720 --> 0:02:20.560 provide investment entry points for people to come into crypto 0:02:20.600 --> 0:02:23.519 assets without having to own them directly, and we take 0:02:23.520 --> 0:02:27.679 care of that hedging and replication. We provide services to 0:02:27.800 --> 0:02:31.560 people within the crypto community, and this is you know, 0:02:31.600 --> 0:02:34.440 at the peaks of the December prices approaching a trillion 0:02:34.440 --> 0:02:38.359 dollar ecosystem. We provide a treasury and assets and liability 0:02:38.440 --> 0:02:42.960 management type of services, hedging services, and some advisory. We 0:02:43.040 --> 0:02:47.880 also deploy proprietary capital within that ecosystem, funding these small 0:02:47.919 --> 0:02:51.639 companies and participating in some of the initial coin offering 0:02:51.680 --> 0:02:54.760 type of activity that I'm sure you're aware of. Okay, 0:02:54.800 --> 0:02:57.720 The reason I want just to set that in some 0:02:57.800 --> 0:03:00.240 contexts is because my next thought it has to do 0:03:00.360 --> 0:03:03.679 with what's known as leakage. Right, this is the lead 0:03:03.760 --> 0:03:08.799 the financial the rather the fractional reserve banking system, and 0:03:08.840 --> 0:03:13.440 the leverage that you have in that system is the 0:03:13.560 --> 0:03:19.720 use of cryptocurrencies. Is this causing a leakage in that leverage? Well, 0:03:19.840 --> 0:03:23.400 that's a great question, and you know, I mean, I 0:03:23.440 --> 0:03:26.280 think what is clear is that there was a kind 0:03:26.320 --> 0:03:30.000 of a regulatory sandbox in which digital assets of all 0:03:30.080 --> 0:03:33.400 kinds existed all the way from back when we started 0:03:33.440 --> 0:03:37.640 in right through the third or fourth quarter of last year. 0:03:38.080 --> 0:03:40.400 You know, when when an ecosystem is a billion or 0:03:40.440 --> 0:03:43.800 five billion or ten billion, it's almost experimental in the 0:03:43.880 --> 0:03:47.520 scope of the main financial system. But you know, once 0:03:47.560 --> 0:03:51.080 you start rapidly approaching a trillion, and with the associated 0:03:51.160 --> 0:03:54.320 media hype around it, this all of a sudden became 0:03:54.400 --> 0:03:59.600 something that regulators, banks, authorities of various kinds of central 0:03:59.600 --> 0:04:04.360 bank governments decided that it could no longer be ignored. So, 0:04:04.800 --> 0:04:07.480 you know, I don't think there's any concern from that 0:04:07.680 --> 0:04:10.760 community at the moment that there's lead kids, as you 0:04:10.840 --> 0:04:14.120 put it, but I think they're beginning to realize that 0:04:14.320 --> 0:04:18.440 there is potential for that in the future. I've never 0:04:18.480 --> 0:04:20.760 thought that it would be a sort of a fight 0:04:20.839 --> 0:04:23.599 to the death between you know, crypto and and the 0:04:23.960 --> 0:04:26.520 the dollar or the pound or the legacy financial system. 0:04:26.720 --> 0:04:29.120 To me, it's always been a question of what portion 0:04:29.760 --> 0:04:34.719 of the total financial ecosystem a cruise to cryptocurrencies. And 0:04:34.760 --> 0:04:37.680 I think, you know, even if it's only five at 0:04:37.680 --> 0:04:39.920 the end of the day, that market will then still 0:04:39.960 --> 0:04:42.360 be much bigger than this right now, Danny, how much 0:04:42.360 --> 0:04:44.920 of the eight million dollars that you manage, how much 0:04:45.000 --> 0:04:48.599 is in crypto assets? All of it? All of it? Okay? 0:04:48.680 --> 0:04:51.000 So how do you go about determining how to invest 0:04:51.040 --> 0:04:52.440 that money? I mean, is you just sort of invest 0:04:52.480 --> 0:04:55.720 in bitcoin or sort of? Oh? No, we do a 0:04:55.800 --> 0:04:57.680 range of things. So, first of all, the largest bulk 0:04:57.680 --> 0:04:59.880 of our assets are from one of our companies we 0:05:00.000 --> 0:05:03.520 own called xpt Provider. An xpt Provider provides bitcoin and 0:05:03.520 --> 0:05:06.920 the etherorium certificate, the track the price of those assets 0:05:07.000 --> 0:05:10.720 on Nastack nastack coaxin Stockholm. That is by far our 0:05:10.839 --> 0:05:15.200 our largest product pool, and let's call that a passive strategy. 0:05:15.320 --> 0:05:19.040 Then we have active strategies. And the active strategies are 0:05:19.120 --> 0:05:23.040 essentially funds of various kinds. Um. We currently have two 0:05:23.240 --> 0:05:26.159 hour soon to be four, and um, you know, I 0:05:26.160 --> 0:05:31.320 can describe them generically as multi currency multi strategy in 0:05:31.400 --> 0:05:34.719 one bucket and index based in another bucket. So in 0:05:34.760 --> 0:05:36.960 the in the in the the interesting part is the 0:05:36.960 --> 0:05:40.240 active funds, the multi strap multi coin funds, and there 0:05:40.240 --> 0:05:43.880 will do anything from protocol coins so the mainstream bitcoin, 0:05:43.960 --> 0:05:47.839 etherorium z cash, from narrow uh you name it down 0:05:47.880 --> 0:05:52.080 to you know, small boutique niche type of initial coin 0:05:52.120 --> 0:05:54.760 offerings and everything in the middle. So how do you 0:05:54.839 --> 0:06:00.160 just in just real quick, how do you prevent fraud? Uh? Well, 0:06:00.160 --> 0:06:06.640 we have a very very a very very detailed screening system. Um. 0:06:06.720 --> 0:06:10.160 The there are pros and cons to digital finance, and 0:06:10.400 --> 0:06:13.360 you know, one of the cons is chaos. Um, one 0:06:13.400 --> 0:06:15.960 of the pros is in that chaos, there is some 0:06:16.080 --> 0:06:19.440 rich information. It's almost as though, you know the concept 0:06:19.680 --> 0:06:24.200 of stock analysts stocks analyzing stocks has gone back to 0:06:24.200 --> 0:06:27.080 where it was before. We have perfect information. So we 0:06:27.160 --> 0:06:30.320 have a multi stage screening process. I would say of 0:06:30.440 --> 0:06:33.920 the small initial coin offering type of things we get 0:06:34.480 --> 0:06:37.800 coming across our desk. Fewer than three percent make it 0:06:37.839 --> 0:06:40.800 through that filter. So there is a process to it, 0:06:40.880 --> 0:06:43.440 and and that's what we have to go through in 0:06:43.520 --> 0:06:46.000 order to get comfortable. I want to thank you very 0:06:46.040 --> 0:06:49.320 much for joining us. Daniel Master's chief investment officer for 0:06:49.320 --> 0:06:53.520 Global Advisors. He is also the chairman of coin Shares, 0:06:53.720 --> 0:06:58.080 a group Global Advisors on a seventy interest in a 0:06:58.200 --> 0:07:15.400 coin shares. I want to bring in Ira Jersey, or 0:07:15.400 --> 0:07:19.720 interest rate strategist for Bloomberg Intelligence. Uh, Ira, what if 0:07:19.720 --> 0:07:25.720 you could comment on Richard Clarenda, the number two pick 0:07:25.960 --> 0:07:30.240 for the Federal Reserve. He is um a respected economist 0:07:30.240 --> 0:07:35.000 at Columbia University, professor and also a lot of experience 0:07:35.120 --> 0:07:39.040 in the world of markets asset manager at pimco UM. 0:07:39.080 --> 0:07:40.400 What if you could tell us what are your thoughts 0:07:40.440 --> 0:07:43.000 about Mr Clarenda and what do you think he's going 0:07:43.040 --> 0:07:45.680 to bring to the Federal Reserve. Yeah, so I think 0:07:45.760 --> 0:07:51.040 Mr claren is a mainstream pick. Uh just like quite frankly, 0:07:51.080 --> 0:07:54.760 like J. Powell wasn't even even Governor Quarrels, who's right 0:07:54.800 --> 0:07:57.280 in front of the House Financial Services Committee as as 0:07:57.320 --> 0:08:00.760 we speak. Um. You know, Donald Trump has has not 0:08:00.840 --> 0:08:02.760 gone outside the box. So he's done a lot of 0:08:02.800 --> 0:08:04.600 other things that are outside the box with who he 0:08:04.640 --> 0:08:07.000 picked for some cabinet posts and the like, but when 0:08:07.040 --> 0:08:10.000 it comes to the Fed, um uh, the FED governors, 0:08:10.000 --> 0:08:13.040 he's really been more or less mainstream. Certainly, you know, 0:08:13.080 --> 0:08:15.400 he had certain litmus tests that things like, you know, 0:08:15.440 --> 0:08:19.800 people who are for modesty regulation and even quarrels. Today, 0:08:19.840 --> 0:08:23.480 in his prepared remarks is saying that he uh um, 0:08:23.560 --> 0:08:27.040 that he favors most of the basis of of the 0:08:27.080 --> 0:08:30.200 post crisis of financial regulations, but that he wants to 0:08:30.480 --> 0:08:32.560 you know, scale scale some of them back. And I 0:08:32.600 --> 0:08:35.960 think most people would see that that that's probably not 0:08:36.080 --> 0:08:38.920 a bad thing for the economy or or markets in general. 0:08:39.000 --> 0:08:41.400 And Richard Clarenda is just within that same kind of mold. 0:08:42.040 --> 0:08:45.199 So iro this is FED Speak week. They're about four 0:08:45.280 --> 0:08:48.360 hundred thousand speeches by different FED officials this week, more 0:08:48.440 --> 0:08:51.920 or less roughly. Um. One of them caught my attention, 0:08:51.960 --> 0:08:55.880 John Williams, speaking in Madrid, uh just a bit ago, 0:08:56.480 --> 0:09:01.480 addressing the flattening US yield curve, saying so far it's normal. Uh. 0:09:01.720 --> 0:09:04.600 That said, he said if the yield curve were to invert, 0:09:04.640 --> 0:09:06.480 they would take it seriously and it would be a 0:09:06.520 --> 0:09:09.520 sign of a recession. What do you make of that, 0:09:09.600 --> 0:09:12.120 given the fact that the gap between ten and two 0:09:12.200 --> 0:09:14.560 year yields right now is that it's narrowest since two 0:09:14.600 --> 0:09:18.400 thousand seven and steadily narrowing a short term rates rise. Yeah, 0:09:18.480 --> 0:09:20.840 and we think we'll continue to narrow further. We actually 0:09:20.840 --> 0:09:24.120 think another fifteen basis points are so in the two's 0:09:24.160 --> 0:09:28.640 tens treasury curve for the for the course of the year. Um. 0:09:28.720 --> 0:09:31.440 So you know that we we we don't have a 0:09:31.440 --> 0:09:33.600 lot of experience with this. You know, we have to 0:09:33.400 --> 0:09:36.000 take into account that we've only had, you know, a 0:09:36.000 --> 0:09:39.240 limited number of recessions over the past fifty years, and 0:09:39.240 --> 0:09:42.560 and in more than half of them we certainly saw 0:09:42.720 --> 0:09:45.800 when yield curves got to got to zero or or 0:09:45.840 --> 0:09:48.840 inverted that at some point in the future you had 0:09:49.240 --> 0:09:51.600 you had a recession. But but those legs tend to 0:09:51.600 --> 0:09:53.160 take a very long time, So I don't think it's 0:09:53.160 --> 0:09:55.640 a foregone conclusion. I think what what it tends to 0:09:55.679 --> 0:09:58.120 happen is the yield curve gets too flat, but the 0:09:58.160 --> 0:10:01.520 fed continues to hike after that and when they continue 0:10:01.520 --> 0:10:04.640 to hike after that, they basically, um, they basically clamp 0:10:04.720 --> 0:10:07.640 down too far in financial conditions, interest rates, the whole 0:10:07.800 --> 0:10:11.040 entire yield curves goes up too far, and that's when 0:10:11.080 --> 0:10:13.240 you end up getting recession. Now, can they can they 0:10:13.240 --> 0:10:15.720 stop that this time? They They probably can. And one 0:10:15.760 --> 0:10:17.480 of the ways that they can do that is as 0:10:17.520 --> 0:10:20.760 you approach that zero, stop hiking, right, just just let 0:10:20.800 --> 0:10:22.959 the market be for a while. See if the yield 0:10:22.960 --> 0:10:25.560 curve starts to steep in a little bit, which implies 0:10:25.559 --> 0:10:27.959 that you're going to have faster inflation in the future 0:10:28.000 --> 0:10:30.920 and better growth in the future as opposed to you know, 0:10:31.000 --> 0:10:33.400 continuing to hike to kind of clamp down on on 0:10:33.440 --> 0:10:36.480 that growth and inflation. So um, so you have to 0:10:36.520 --> 0:10:38.160 be you know, the fit has to be very careful. 0:10:38.160 --> 0:10:40.080 And I think now that we've had kind of these 0:10:40.200 --> 0:10:43.000 three distinct periods over the last thirty years or so 0:10:43.000 --> 0:10:46.440 where that's all happened, maybe they've they've learned their lesson. 0:10:46.559 --> 0:10:48.800 And you know, Richard Clarada is one of those people 0:10:48.840 --> 0:10:51.679 who I think understands us as an economic historian as 0:10:51.760 --> 0:10:54.160 monetary policy person. It's good to have him in that 0:10:54.280 --> 0:10:57.080 vice chair seat. Because he brings that historical perspective that 0:10:57.440 --> 0:11:00.000 maybe a few other folks on the Board of Governors 0:11:00.120 --> 0:11:04.480 doesn't have to follow up on on a Leasta's comment 0:11:04.480 --> 0:11:06.840 about the four thousand speeches that we're going to have 0:11:06.920 --> 0:11:09.960 to digest, you can add to that tweets from the 0:11:10.000 --> 0:11:12.920 President of the United States having to do with currencies 0:11:13.240 --> 0:11:18.120 and specifically the US dollar. Is that having any effect 0:11:18.240 --> 0:11:20.080 on on the value of the U S Dollar? I 0:11:20.160 --> 0:11:22.959 was noting, for example, stronger at least against the Canadian 0:11:23.000 --> 0:11:26.800 dollar and just a little bit move lower against the 0:11:26.800 --> 0:11:29.800 euro today. Yeah, not not huge moves in in the 0:11:29.800 --> 0:11:32.160 euro from from the tweets. I think, you know, the 0:11:32.200 --> 0:11:36.240 market at some level is um uh. I don't want 0:11:36.240 --> 0:11:38.679 to say getting numb to tweets, but you know they 0:11:39.160 --> 0:11:42.559 they know that that. I think the president only can 0:11:42.559 --> 0:11:46.640 control markets so much and and and it's things like uh, 0:11:46.720 --> 0:11:50.720 fiscal policy that he'll wind up impacting significantly more or 0:11:50.720 --> 0:11:53.440 what he does things in trade policy and the like 0:11:53.559 --> 0:11:57.120 that he can control directly. Um, you know, tweets about 0:11:57.240 --> 0:11:59.560 you know, interest rates and things like that. Given who 0:11:59.600 --> 0:12:03.160 he's he's appointed, probably are going to have a huge effect. 0:12:03.240 --> 0:12:06.439 And you haven't seen huge moves in the end, for example, 0:12:06.720 --> 0:12:10.839 or or the euro today, it's been very modest. Um. Yeah, 0:12:10.920 --> 0:12:13.720 after after some of those tweets, A Jersey thank you 0:12:13.760 --> 0:12:15.880 so much for being with us. Our Jersey chief US 0:12:16.000 --> 0:12:36.960 interest rate strategist for Bloomberg Intelligence. It has over twenty 0:12:37.000 --> 0:12:40.560 four billion dollars in assets. It's the second largest credit 0:12:40.640 --> 0:12:43.640 union in the United States. Pen FED and our and 0:12:43.720 --> 0:12:46.440 the chief executive and the president joins us. Now this 0:12:46.520 --> 0:12:50.200 is the Pentagon Federal Credit Union, James Skank, thanks very 0:12:50.240 --> 0:12:54.559 much for being with us. Based in Alexandria, Virginia. Mr Skank, 0:12:54.720 --> 0:12:57.120 maybe just tell us a little bit about pen FED 0:12:57.160 --> 0:13:00.040 and what you're doing with a new program entitled the 0:13:00.880 --> 0:13:04.920 Entrepreneur Investment Program. Great. You know pen FED has been 0:13:04.960 --> 0:13:08.200 serving our community for over eighty three years, and we're 0:13:08.240 --> 0:13:10.520 as a credit union founded on the principle of people 0:13:10.559 --> 0:13:13.400 helping people and as a defense credit union, we think 0:13:13.440 --> 0:13:16.560 it's very important to continue to create jobs across America. 0:13:17.200 --> 0:13:20.480 And each year over two hundred thousand veterans leave the service, 0:13:20.520 --> 0:13:23.040 and about a quarter of them plan to start their 0:13:23.080 --> 0:13:26.240 own business. So pen FED, several years ago has created 0:13:26.240 --> 0:13:29.280 a foundation in which we pay a hundred percent of 0:13:29.360 --> 0:13:32.199 the foundation operating costs, so all the money the foundation 0:13:32.320 --> 0:13:35.440 raises goes back to support our programs. The one we're 0:13:35.520 --> 0:13:39.160 very excited about announcing is a program in which donors 0:13:39.200 --> 0:13:42.320 can donate to the pen Fed Foundation and we're going 0:13:42.400 --> 0:13:44.840 to invest in startup companies. And so this is going 0:13:44.880 --> 0:13:47.199 to be a gift that keeps on given because if 0:13:47.240 --> 0:13:50.320 we can invest in the right startups, help these veterans 0:13:50.360 --> 0:13:54.320 that bring some incredible leadership and technical skills, give them capital, 0:13:54.440 --> 0:13:57.760 and give them a network to succeed, that money will 0:13:57.800 --> 0:14:00.000 come back to the foundation allows to continue to create 0:14:00.000 --> 0:14:02.480 eight jobs and invest in more startup companies. So we're 0:14:02.480 --> 0:14:05.480 pretty excited about this new initiative through the pen Fet Foundation. 0:14:05.720 --> 0:14:10.520 Just to clarify, these are not loans, their gifts correct, 0:14:10.520 --> 0:14:13.000 We actually it'll be these will be loans, this will 0:14:13.000 --> 0:14:17.559 be investments in so in other words, donate correctly seed 0:14:17.559 --> 0:14:20.040 capital okay. So okay, So potentially you'll get the money 0:14:20.040 --> 0:14:23.320 back with dividends, but you're providing it as sensibly at 0:14:23.320 --> 0:14:26.320 a lower rate, that's correct, and bringing an incredible network. 0:14:26.360 --> 0:14:29.800 So pen FET has over business partners, We have relations 0:14:29.840 --> 0:14:32.880 across all fifty states. We think we can identify the 0:14:33.000 --> 0:14:36.200 right veterans and what a veterans need. What all entrepreneurs need. 0:14:36.200 --> 0:14:38.600 They need capital, and they need a powerful network. We 0:14:38.680 --> 0:14:41.680 think bringing these things together can help really create jobs 0:14:41.680 --> 0:14:44.120 across America. James, I want to talk to us generally 0:14:44.160 --> 0:14:47.040 about the idea of a credit union today, at a 0:14:47.080 --> 0:14:51.560 time when credit availability is uh pretty pretty rampant. I mean, 0:14:51.600 --> 0:14:54.760 you can get a loan pretty easily. Why is a 0:14:54.840 --> 0:14:58.520 credit union better, especially when there's a certain sort of 0:14:58.880 --> 0:15:01.880 advantage to having scale and a bank beside you, and 0:15:02.200 --> 0:15:05.400 other sorts of advantages that say Bank of America and 0:15:05.520 --> 0:15:10.240 uh well Struggle might have. It's about corporate structure. Nothing 0:15:10.240 --> 0:15:13.120 wrong with the banking industry, but it's a different structure. 0:15:13.240 --> 0:15:17.480 Of bank. CEO's primary purpose is to return value to 0:15:17.560 --> 0:15:20.280 the shareholder, So they want to pay their depositors, the 0:15:20.400 --> 0:15:23.960 lease charge their commercial loan customers the most, to increase 0:15:24.000 --> 0:15:27.720 their spread margin, provide return to their shareholders. A credit 0:15:27.800 --> 0:15:30.760 union is a whole different corporate structure. The whole reason 0:15:30.800 --> 0:15:33.880 a credit union exists is a service specific field of 0:15:33.920 --> 0:15:37.080 membership and to provide the value back to the consumer. So, 0:15:37.160 --> 0:15:40.000 as a credit union CEO, my job is to pay 0:15:40.040 --> 0:15:43.280 the absolute highest rate fund deposits, for example two oh 0:15:43.320 --> 0:15:46.080 seven on a one year CD right now market leader, 0:15:46.400 --> 0:15:48.800 and the lowest rates on our loans to our member 0:15:48.800 --> 0:15:52.400 owners run at the lowest spread margin possible to give 0:15:52.400 --> 0:15:55.000 the value back to our owners, which is the members. 0:15:55.000 --> 0:15:58.120 I don't have shareholders, I have the members by giving 0:15:58.160 --> 0:16:02.360 them a lower loan rate or higher dividend rate. By structure, 0:16:03.120 --> 0:16:05.480 is a better value for the consumer. But at the 0:16:05.520 --> 0:16:08.280 same time, as the CEO of a large financial institution 0:16:08.560 --> 0:16:11.160 as pen Mention twenty four billion, I have to run 0:16:11.240 --> 0:16:14.800 extremely operationally efficient. The one thing that surprises me here 0:16:14.800 --> 0:16:16.880 in America is that more banks don't want to convert 0:16:16.920 --> 0:16:19.520 to become a credit union to align with the structure 0:16:19.560 --> 0:16:22.080 for the consumer who they're trying to help. Talked a 0:16:22.080 --> 0:16:24.480 little bit about the members that may try to do 0:16:24.560 --> 0:16:27.880 business with you in Puerto Rico and what you're doing there. Yeah, 0:16:28.040 --> 0:16:30.560 we've been in Puerto Rico for over a decade. We 0:16:30.680 --> 0:16:33.320 merged with the Fort Buchanan Federal Credit Union about a 0:16:33.320 --> 0:16:36.000 decade ago. At the time we had just under eighteen 0:16:36.000 --> 0:16:39.920 thousand members. Today we're one of the largest financial institutions 0:16:39.920 --> 0:16:43.040 in Puerto Rico with two hundred thousand members. They've come 0:16:43.080 --> 0:16:46.280 to Penn FED for trust and commitment. We've been there 0:16:46.440 --> 0:16:49.280 with them through hard times. I've been there twice this year, 0:16:49.480 --> 0:16:52.560 right after the hurricane, and I've been back in early March. 0:16:52.600 --> 0:16:55.080 I bought Gary Sinise back to do a free concert. 0:16:55.400 --> 0:16:57.920 We opened up the military base Fort Buchanan to the 0:16:57.960 --> 0:17:01.239 San Juan community and the Greater Island to one show 0:17:01.280 --> 0:17:04.840 that we appreciate the hardship in the struggle they've been through, 0:17:05.080 --> 0:17:07.400 but at the same time, to continue to raise awareness. 0:17:07.440 --> 0:17:10.920 There's Americans in Puerto Rico that need our help. Just 0:17:10.960 --> 0:17:13.719 like we helped the victims of the storms in Texas, Florida, 0:17:13.800 --> 0:17:16.800 New Jersey. These are fellow Americans that continue to need 0:17:16.840 --> 0:17:19.280 the leadership of the private sector in the public sector 0:17:19.640 --> 0:17:23.159 to help close gaps to bring life back to stability 0:17:23.160 --> 0:17:27.520 and normal. They're still over eighty thousand individuals without power 0:17:27.680 --> 0:17:30.120 six months into it. Can you imagine if a loved 0:17:30.119 --> 0:17:32.040 one that you knew here in the States, you know 0:17:32.080 --> 0:17:34.159 in New York or New Jersey or Connecticut or here 0:17:34.160 --> 0:17:37.280 in Virginia went a week without power. Imagine going six 0:17:37.320 --> 0:17:40.480 months without power and fresh water in your home. It's 0:17:40.520 --> 0:17:44.200 it's Americans need our help, you know, James, I'm struck 0:17:44.240 --> 0:17:47.840 by the idea that pen fed is trying to serve 0:17:48.240 --> 0:17:51.040 a specific group of clients. It's a nonprofit. It's trying 0:17:51.119 --> 0:17:53.679 to be run up by the people. I'm trying to 0:17:53.720 --> 0:17:56.200 square that with making sure that you're you know, fiscally 0:17:56.320 --> 0:17:58.879 responsible and catering to clients at a time when to 0:17:58.960 --> 0:18:02.000 false are starting to up. How how do you sort 0:18:02.040 --> 0:18:04.120 of manage that and what do you see as far 0:18:04.160 --> 0:18:07.560 as the consumer credit landscape goes. Given the fact that 0:18:07.560 --> 0:18:11.760 we are seeing delinquencies and defaults increase, we still see 0:18:11.960 --> 0:18:16.240 amazing demand for our business. The the administration's tax cuts 0:18:16.240 --> 0:18:19.560 have been very bullish. Uh. I think we have historically 0:18:19.600 --> 0:18:24.320 low unemployment right now. We're seeing demand for consumer loans, automobiles, 0:18:24.560 --> 0:18:27.960 our market leading credit card products, and home mortgages above 0:18:28.000 --> 0:18:31.040 the norm. We've grown over forty thousand new members the 0:18:31.040 --> 0:18:34.679 first quarter of eighteen alone, So we're seeing great demand 0:18:34.680 --> 0:18:37.880 for consumer products. But like all CEOs within the finance 0:18:38.160 --> 0:18:41.119 financial services sector, we have to make good loans. We 0:18:41.160 --> 0:18:42.919 need to make full doc loans, we need to make 0:18:42.920 --> 0:18:45.600 sure we know who the consumer is. So we're seeing 0:18:45.680 --> 0:18:48.679 really strong demand for our products and services. We had 0:18:48.680 --> 0:18:51.080 a record year in twenty seventeen. We grew one point 0:18:51.080 --> 0:18:54.080 seven billion. We've grown five dred million in assets the 0:18:54.119 --> 0:18:58.359 first quarter. So the current administration policies, low unemployment, is 0:18:58.440 --> 0:19:02.040 still historically low interest rate cycle. We're seeing great demand 0:19:02.080 --> 0:19:04.919 for consumer lending. Even though we're late in the cycle 0:19:04.960 --> 0:19:07.080 as you would think, we still think there's a few 0:19:07.119 --> 0:19:09.720 years left to run because of a strong demand and 0:19:09.720 --> 0:19:13.119 with these recent tax cuts. Last year, you opened something 0:19:13.200 --> 0:19:16.879 called the Availability Command Center. Tell us what it is 0:19:16.920 --> 0:19:19.600 and why you decided that this was worth your time, 0:19:19.760 --> 0:19:22.880 energy and money. Definitely worth our time, energy and money. 0:19:22.880 --> 0:19:25.840 Because we're an online firm. Pen Fed by Design does 0:19:26.880 --> 0:19:33.320 percent of our business remotely, phones, mobile web. Of our 0:19:33.320 --> 0:19:37.040 transactions are done remotely. We do a hundred million transactions 0:19:37.040 --> 0:19:41.119 a month. Our Availability Command Center insures our systems are 0:19:41.240 --> 0:19:43.960 up running twenty four hours a day, seven days a 0:19:43.960 --> 0:19:47.480 week to do real time processing, not batch processing, real 0:19:47.520 --> 0:19:51.280 time processing anywhere in the world. For our customers are 0:19:51.280 --> 0:19:54.359 consumers what we call pen Fed members. With that said, 0:19:54.400 --> 0:19:56.840 we could also from a forensis perspective, we can track 0:19:56.920 --> 0:20:00.480 back any one of a hundred million transactions. Look for trends, 0:20:00.520 --> 0:20:04.040 look for cyber hacked trends. We have really good visibility 0:20:04.040 --> 0:20:06.720 and everything flowing into and out of our network real time. 0:20:06.800 --> 0:20:10.159 So in financial services, like in all industries today, UM 0:20:10.320 --> 0:20:13.280 making the investment and information technology and infrastructure is worth 0:20:13.320 --> 0:20:15.879 every penny. James Kank, thank you so much for joining us. 0:20:15.960 --> 0:20:20.240 James Kink, President, chief executive officer of Pentagon. Federal Credit 0:20:20.320 --> 0:20:24.359 Union is Penn FED, which is based in Alexandria, Virginia, 0:20:24.480 --> 0:20:28.440 talking about a new program for veterans who are opening 0:20:28.600 --> 0:20:47.639 new businesses as well as credit unions. China and the 0:20:47.680 --> 0:20:52.199 automobile industry, it is lifting a nearly twenty year restriction 0:20:52.400 --> 0:20:57.560 on foreign ownership of local jet is Chinese operations. Here 0:20:57.600 --> 0:21:00.320 to tell us more. Kevin Tynan, Senior Auto zanns for 0:21:00.520 --> 0:21:04.960 Bloomberg Intelligence, and you can follow Kevin on Twitter at 0:21:05.119 --> 0:21:09.040 keV Tyne and ten And alright, keV Tyne and ten. 0:21:09.160 --> 0:21:13.480 Why is China doing this well? I think they there's 0:21:13.520 --> 0:21:17.480 a little bit of of the feeling that they want 0:21:17.480 --> 0:21:20.760 to penetrate some markets outside of their own. UH. You know, 0:21:20.800 --> 0:21:25.040 it's been very difficult to get Chinese manufacturers established in 0:21:25.119 --> 0:21:27.919 Europe or in the US. UH. And the feeling is 0:21:27.960 --> 0:21:30.320 that if they open up a little bit more, will 0:21:30.320 --> 0:21:32.920 reciprocate and and get some of their brands in here. 0:21:33.560 --> 0:21:36.880 So let's talk about exactly what China was doing. They 0:21:36.880 --> 0:21:41.160 basically are saying that foreign automakers can own more than 0:21:41.280 --> 0:21:45.000 fifty percent of local venturers. This would remove a two 0:21:45.000 --> 0:21:50.040 decade restriction UH that had prevented some companies, including Tesla, 0:21:50.520 --> 0:21:55.520 from going to China. Is Tesla the biggest potential beneficiary 0:21:55.560 --> 0:21:57.600 of this or can you point to another company that 0:21:58.200 --> 0:22:01.080 might see a bigger boon from this? Well, I think 0:22:01.280 --> 0:22:03.639 from where we are now, he said, that would be 0:22:03.680 --> 0:22:07.040 the idea that Tesla probably is the biggest beneficiary. Right, 0:22:07.240 --> 0:22:11.679 All the other automakers have established partnerships UH that probably 0:22:11.720 --> 0:22:14.800 don't expire for ten years at a minimum. VW and 0:22:14.960 --> 0:22:19.600 f A W probably double that twenty five years. Um, 0:22:19.640 --> 0:22:22.520 you know, and and and and those are gonna those 0:22:22.560 --> 0:22:25.160 are gonna remain in place. So Tesla sort of coming 0:22:25.160 --> 0:22:28.359 in as a new entrant into the market probably can 0:22:28.480 --> 0:22:32.240 establish something, UH in these terms, a little bit more beneficial. 0:22:32.280 --> 0:22:34.879 But I'm just not sure that you really want to 0:22:34.880 --> 0:22:37.719 be that involved in the Chinese market without a local partner. 0:22:37.800 --> 0:22:39.800 I think that would be very difficult to do as well. 0:22:40.119 --> 0:22:42.639 So the idea that that Tesla walks in and can 0:22:42.680 --> 0:22:46.800 be independent uh in that marketplace and just gained huge 0:22:46.800 --> 0:22:49.800 amount of market share I think is unrealistic. Well, Kevin, 0:22:49.800 --> 0:22:51.280 can you just give us a sense of what the 0:22:51.280 --> 0:22:56.280 objection to this fifty type of ownership structure is. Well, 0:22:56.280 --> 0:22:58.199 that that's a huge market and there's a lot more 0:22:58.240 --> 0:23:00.439 money to be made and you're basically sharing it with 0:23:00.520 --> 0:23:03.600 your with your venture partners. I've always said, you know, 0:23:03.760 --> 0:23:06.199 and we hear all the time about, you know, the 0:23:06.280 --> 0:23:09.400 largest automotive market in the world. But when you look 0:23:09.440 --> 0:23:13.800 back at at you know, General Motors income statement, Um, 0:23:13.920 --> 0:23:17.840 you know, the the revenue contribution that is brought back 0:23:18.000 --> 0:23:20.720 into the income statement is just it's it's pennies on 0:23:20.760 --> 0:23:23.800 the dollar compared to what they generate here in North America. 0:23:24.280 --> 0:23:26.960