WEBVTT - Breaking Down Bank Earnings, Feed Changes at Facebook, Blockchain Grows 0:00:02.800 --> 0:00:05.080 This is Coast to Coast. I'm Carol Masser and I'm 0:00:05.120 --> 0:00:07.680 Corey Johnson. We're here every day bringing the latest news 0:00:07.680 --> 0:00:09.719 in the world of business and finance and the most 0:00:09.760 --> 0:00:13.480 interesting stories in global technology from Silicon Valley and beyond, 0:00:13.600 --> 0:00:16.119 powered by our more than twenty seven hundred journalists and 0:00:16.200 --> 0:00:18.880 analysts in more than one hundred twenty countries. You can 0:00:18.880 --> 0:00:21.920 download Coast to Coast on iTunes, sound Clondo Bloomberg dot com. 0:00:22.000 --> 0:00:23.880 You can also listen to our radio show weekdays at 0:00:23.880 --> 0:00:33.839 two o'clock Eastern only from Bloomberg Radio. We're talking a 0:00:33.880 --> 0:00:36.800 lot about some of the big banks today. Understandably so 0:00:36.880 --> 0:00:40.400 shares of JP Morgan Chase their higher following earnings also 0:00:40.479 --> 0:00:43.760 had a Wells Fargo out as well, their earnings taking 0:00:44.120 --> 0:00:47.360 another big litigation hits. So let's break it down. Let's 0:00:47.360 --> 0:00:49.520 start with JP Morgan. Here to go over the quarter, 0:00:49.640 --> 0:00:52.920 Arnold Cucuta, banking and credit analyst at our in house 0:00:52.960 --> 0:00:55.240 research group. They're known as Bloomberg Intelligence. He's in our 0:00:55.240 --> 0:00:57.640 Bloomberg eleven three oh studio on the phone in New 0:00:57.720 --> 0:01:00.440 York City, Ken Leon Equity Alice at cf are a 0:01:00.640 --> 0:01:03.520 research Arnold, I do want to start with you. Let's 0:01:03.560 --> 0:01:05.839 go to JP Morgan. The quarter, the stocks up about 0:01:05.840 --> 0:01:08.440 a percent. How would you sum up the quarter? What 0:01:08.480 --> 0:01:10.800 are the key points? Yeah, I know it's um, I 0:01:10.840 --> 0:01:12.800 guess you know, it's all about the taxes and you 0:01:12.840 --> 0:01:14.600 know how it kind of muddy the quarter. I guess 0:01:14.800 --> 0:01:16.360 you know it's it's raining in New York today, and 0:01:16.400 --> 0:01:18.679 I guess you know the tax impacts is similar. You know, 0:01:18.680 --> 0:01:21.840 it kind of dampens everything. You're you're all walking, it's 0:01:21.880 --> 0:01:23.920 kind of muddy. You're trying to get through it. It's annoying. 0:01:24.200 --> 0:01:26.360 But what it does is it clears late for next year. 0:01:26.720 --> 0:01:29.360 So um. You know, so taxes had like a two 0:01:29.360 --> 0:01:32.000 and a half billion impact, um, but you know next year, 0:01:32.280 --> 0:01:34.400 you know, profits should be hired because the lower tax rate. 0:01:34.480 --> 0:01:36.560 But are we just hearing about taxes a lot because 0:01:36.560 --> 0:01:39.520 we had the overhaul? Correct? Yep. And then but looking 0:01:39.520 --> 0:01:41.680 at the fundamental though, it's it's kind of the continuation 0:01:41.680 --> 0:01:44.560 of what we've seen from the prior quarter. So you know, um, 0:01:44.600 --> 0:01:47.640 you know, consumer like kind of the boring banking stuff. Consumer, 0:01:47.840 --> 0:01:50.520 you know banking as well as you know, lending to 0:01:50.760 --> 0:01:53.240 two commercial clients. You know, that's been going pretty well. 0:01:53.480 --> 0:01:56.240 Asset management, you know on fire, Um, but you know 0:01:56.360 --> 0:01:58.320 the real kind of the the weak spot you know 0:01:58.360 --> 0:02:01.000 again was in the trading area. So fixed income down, 0:02:01.720 --> 0:02:03.680 which is uh, you know a little bit worse than 0:02:03.720 --> 0:02:06.000 kind of what analysts expected. And and that that you know, 0:02:06.040 --> 0:02:08.200 that low volatil environment, you know, it looks to continue. 0:02:08.440 --> 0:02:10.760 Kenny Lee on what's up with the big loss that 0:02:10.840 --> 0:02:14.480 Jporgan in the trading? Uh? What do we tell me? 0:02:14.520 --> 0:02:16.760 What tell me? For our listeners are onto the story, 0:02:16.800 --> 0:02:18.520 tell it, tell us the story and then giving your 0:02:18.520 --> 0:02:23.119 speculation what might have happen. So since the financial crisis, 0:02:23.280 --> 0:02:27.079 it's always been the debate of is this weaker secular 0:02:27.400 --> 0:02:31.080 or cyclical? And I think analysts are getting more comfortable 0:02:31.160 --> 0:02:34.560 that it's something that structurally could be more permanent. We 0:02:34.680 --> 0:02:39.080 got low volatility, tighter credit spreads. Uh, depending on the 0:02:39.120 --> 0:02:42.480 makeup of the trading products and fixed income, currency and 0:02:42.560 --> 0:02:46.679 commodities or their customer base. But thirty four percent down 0:02:46.720 --> 0:02:50.799 for JP Morgan was a disappointment. Um, hopefully, But there 0:02:50.880 --> 0:02:53.160 was one bad deal in the right the one deal 0:02:53.240 --> 0:02:56.360 had one deal had to be marked to market. That 0:02:56.360 --> 0:02:59.079 that was of look like it was just they backed 0:02:59.080 --> 0:03:04.120 one traders thus far really bad loss. Yeah, that's I mean, 0:03:04.160 --> 0:03:09.000 that's part of it. But I think, UM, the willingness 0:03:09.000 --> 0:03:14.760 to put risk capital on the desk for derivatives, UM 0:03:15.000 --> 0:03:17.640 is there's not that kind of appetite for the major 0:03:17.720 --> 0:03:23.800 banks and the tax reform at really doesn't help further 0:03:23.840 --> 0:03:28.239 on that, especially on cross border derivatives. So where should 0:03:28.360 --> 0:03:32.480 in your view, UM, can JP Morgan be spending the 0:03:32.520 --> 0:03:35.720 big windfall that they're going to have by a lower 0:03:35.800 --> 0:03:42.560 tax rate. So the overall businesses did well in the 0:03:42.640 --> 0:03:45.680 fourth quarter, UM, and that's going to give runway for 0:03:45.720 --> 0:03:51.160 two thousand eighteen. Uh. They're going to be investing globally 0:03:51.680 --> 0:03:56.680 where there's opportunities for profitable market share gains. An area 0:03:56.720 --> 0:03:59.800 that didn't get a lot of attention on the calls, 0:04:00.040 --> 0:04:03.280 but it's a big rebound from eighteen months ago. Is 0:04:03.360 --> 0:04:06.560 Europe and the US banks are much stronger like JP 0:04:06.720 --> 0:04:11.200 Morgan today versus the European banks that have retrenched investment, 0:04:11.240 --> 0:04:17.520 banking and trading. Arnold come on in on the conversation again, UM, 0:04:17.600 --> 0:04:20.080 JP Morgan. They also had a conference calling. There a 0:04:20.160 --> 0:04:22.600 lot of questions that that was peppered. What in particular 0:04:22.640 --> 0:04:25.479 did animals want to know about well, yeah, you know, 0:04:25.640 --> 0:04:28.040 I think it's you know, just really about the taxes. 0:04:28.080 --> 0:04:30.600 And you know when when you know, if you look 0:04:30.640 --> 0:04:34.640 at it, you know, this year's um prof um earnings 0:04:34.880 --> 0:04:36.520 and if you kind of backed in the tax and 0:04:36.560 --> 0:04:38.360 new tax rate, you have an extra three and a 0:04:38.400 --> 0:04:40.760 half billion. So would that really fall straight to the 0:04:40.760 --> 0:04:43.559 bottom line or you know, is that gonna be competed away. 0:04:43.800 --> 0:04:45.599 You know, people wanted to get get engaged on you know, 0:04:45.640 --> 0:04:48.039 what would happen there, but um, you know, it was 0:04:48.080 --> 0:04:49.840 kind of like maybe in the first year you might 0:04:49.920 --> 0:04:51.680 have that a lot of that fall into the bottom line, 0:04:51.680 --> 0:04:53.920 but over time and that's going to get computed away 0:04:53.960 --> 0:04:55.719 either to you know, you have to give your lower 0:04:55.800 --> 0:04:59.400 level employees raises. Um, you might have to do more 0:04:59.400 --> 0:05:01.359 for the community, need to make you know, the president 0:05:01.400 --> 0:05:03.520 happy as well as you know kind of maybe the 0:05:03.520 --> 0:05:05.160 the you know, loan pricing and stuff. You can get 0:05:05.160 --> 0:05:06.720 a little bit more aggressive. There's a fun story on 0:05:06.760 --> 0:05:08.400 the Bloomberg. I'm gonna put it out on Twitter at 0:05:08.400 --> 0:05:10.279 Carol mass at Corey TV, and it just says the 0:05:10.279 --> 0:05:12.480 fight begins at JP Morgan and Wells Fargo over the 0:05:12.520 --> 0:05:15.719 surprise tax bananza and It's just exactly what you just 0:05:15.760 --> 0:05:17.560 said is does it go to employees, does it go 0:05:17.720 --> 0:05:21.920 to buy backs and dividends? Does it go to better deals, um, 0:05:21.960 --> 0:05:25.679 you know, better pricing when it comes to borrowers and loans, 0:05:25.880 --> 0:05:28.120 or does it get invested in communities Corey, There's a 0:05:28.160 --> 0:05:31.320 lot of stuff. Yeah, And and I guess that's a question. 0:05:31.480 --> 0:05:33.720 I wonder Ken, what what you expect them to do 0:05:33.760 --> 0:05:34.919 in terms of you know, what we know from the 0:05:35.000 --> 0:05:37.600 last tax repages and holiday is money goes right into 0:05:37.600 --> 0:05:40.720 buy backs and dividends and not into paying employees. Well, 0:05:40.760 --> 0:05:43.560 that's right, and that's where I'm going because you know 0:05:43.600 --> 0:05:45.760 the large banks are going to be following with the 0:05:45.760 --> 0:05:48.960 Federal Reserve. There are two thousand eighteen capital plans for 0:05:49.000 --> 0:05:52.960 the stress tests, and it's better, as Jamie Diamond said, 0:05:53.240 --> 0:05:56.600 to hold on to these went full earnings into capital 0:05:57.160 --> 0:05:59.360 um and I would say at least half or more 0:05:59.400 --> 0:06:03.120 will be a win for on dividend growth and buy backs. 0:06:03.160 --> 0:06:05.840 Those would be announced by the banks wants to find 0:06:05.839 --> 0:06:08.960 approves these plants in June, so that would be in 0:06:08.960 --> 0:06:11.839 the August September period. That's where I would be looking 0:06:11.880 --> 0:06:14.560 as an investor. Wells Fargo. We really haven't talked too 0:06:14.640 --> 0:06:17.280 much about Wells Fargo, um Arnold, what do we need 0:06:17.360 --> 0:06:20.640 to know about that? That stocks down about one percent? Yeah, 0:06:20.680 --> 0:06:23.000 I mean it's it's really just the continuation of you know, 0:06:23.240 --> 0:06:25.839 when can we get over this account account scandal thing? 0:06:26.360 --> 0:06:29.120 And uh, I mean this was the perfect quarter to 0:06:29.200 --> 0:06:32.000 do so in terms of just throw it in. Yeah. Well, 0:06:32.080 --> 0:06:35.479 because unlike other banks, um well As Fargo is unique 0:06:35.480 --> 0:06:38.640 in that it has a differ tax liability. So other 0:06:38.680 --> 0:06:41.120 tanks that other banks have a deferred tax asset because 0:06:41.120 --> 0:06:43.240 they had big losses during the financial crisis. Well As 0:06:43.240 --> 0:06:45.680 Fargo is profitable. So when you when you just not 0:06:45.760 --> 0:06:49.240 for the tax new tax rate, they actually recognized the 0:06:49.320 --> 0:06:51.719 gain of three and a half billion. So you look 0:06:51.720 --> 0:06:53.760 at the kind of litigation of cruel that they did 0:06:54.320 --> 0:06:56.600 magically three and a half billion, so you know that 0:06:56.600 --> 0:06:58.640 that litigation are cruel and most of that is for 0:06:58.640 --> 0:07:01.320 the kind of the legacy mortgage of things. But then 0:07:01.320 --> 0:07:03.159 and also you know they also threw in some stuff 0:07:03.200 --> 0:07:06.000 for kind of a continued kind of um, you know, 0:07:06.040 --> 0:07:08.200 sales practice issues. So this is a great quarter to 0:07:08.279 --> 0:07:10.680 kind of take that expense. All right, interesting, just the 0:07:10.720 --> 0:07:12.520 beginning to a big banks. We'll get more next week 0:07:12.560 --> 0:07:16.040 including Goldman, Sachs and a few others. Arnold Cacuda, He's 0:07:16.040 --> 0:07:18.920 are banking and credit to analysts Bloomberg Intelligence or in 0:07:18.960 --> 0:07:22.080 house group of analysts in our New York studio. And 0:07:22.160 --> 0:07:24.120 Ken Leonard thanks to you as well, equity analyst at 0:07:24.160 --> 0:07:28.960 CFR A research on the phone in New York store. 0:07:34.400 --> 0:07:38.160 A Big changes a foot at Facebook, a comic post 0:07:38.200 --> 0:07:41.520 by Mark Zuckerberg, CEO and founder of the company suggesting 0:07:41.560 --> 0:07:44.640 big changes in the Facebook feed that cond amentifications across 0:07:45.120 --> 0:07:48.800 the world of advertising and certainly at Facebook itself. Joined 0:07:48.840 --> 0:07:50.800 us to discuss this right now. Scott Devon and media 0:07:50.800 --> 0:07:55.640 analysts Stephle and the tender Wall Bloomberg Intelligence global Internet 0:07:55.680 --> 0:07:58.680 analysts back from a global adventure of his own. Uh, Jay, 0:07:58.760 --> 0:08:00.800 glad to have you back. Let me start, Scott, Scott. 0:08:00.920 --> 0:08:05.440 What did Mark Zuckerberg say? Well, you know the company 0:08:05.520 --> 0:08:08.040 is going to be I think going back to its 0:08:08.120 --> 0:08:13.600 roots and focusing on connecting users to friends and family, um, 0:08:13.640 --> 0:08:15.960 which is what the service was originally intended to do, 0:08:16.160 --> 0:08:23.240 and removing focus on amplification and in integration into the 0:08:23.240 --> 0:08:27.280 news feed of of of media content. Video is another 0:08:27.360 --> 0:08:31.200 more commercial content. The the effects of this, you know, 0:08:31.720 --> 0:08:35.160 likely could mean lower levels of engagement for a period 0:08:35.160 --> 0:08:38.760 of time and potentially lower levels of monetization. And that's 0:08:38.760 --> 0:08:41.000 why I think you've seen the response in the stock 0:08:41.080 --> 0:08:43.160 the way you have, right, and we should point that 0:08:43.200 --> 0:08:45.360 out that the stock is down more than eight bucks 0:08:45.360 --> 0:08:48.839 a d seventy nine dollars about thirty cents of share 0:08:48.880 --> 0:08:52.079 here um to Chandra, come on in on this, because 0:08:52.080 --> 0:08:56.080 I've been looking at to investor commentary on Facebook's news 0:08:56.120 --> 0:08:58.040 and some of them are saying, you know, I expect 0:08:58.040 --> 0:09:00.720 the time that people spent on Facebook and some measures 0:09:00.720 --> 0:09:04.760 of engagement will go down. Is this potentially a big 0:09:05.240 --> 0:09:09.920 hit to Facebook's model and how it all works. Actually, 0:09:10.280 --> 0:09:13.480 what they're trying to do is solve this long term 0:09:13.480 --> 0:09:15.800 problem of like the last couple of years, you've seen 0:09:15.800 --> 0:09:18.760 the total time spent on the network come down, and 0:09:18.840 --> 0:09:21.960 that's happening in part due to you know, more content 0:09:22.040 --> 0:09:26.439 coming from businesses and news stories and also more Instagram usage. 0:09:26.760 --> 0:09:29.600 So the steps that they're taking should actually help them 0:09:29.600 --> 0:09:31.360 in the long term, but in the near term there 0:09:31.520 --> 0:09:35.360 might be a sales impact well, and and that impact 0:09:35.520 --> 0:09:38.240 on sales at Facebook. I mean is Facebook is not 0:09:38.280 --> 0:09:41.880 deriving revenue from these media placements, are they No, But 0:09:42.000 --> 0:09:45.679 it's it's more about engagement at inventory and things like that. 0:09:45.760 --> 0:09:49.240 So the offsets over here is Instagram, whose revenues are 0:09:49.240 --> 0:09:52.040 expected to about double uh this year. They have more 0:09:52.120 --> 0:09:55.439 leverage leverage over there at pricing that's been going up 0:09:55.679 --> 0:09:58.920 um and and more pushed towards the videos. So more 0:09:59.000 --> 0:10:02.760 quality time could lead to more art pricing and the 0:10:02.760 --> 0:10:07.960 odd inventory that might train, which may slightly impact revenues. 0:10:08.000 --> 0:10:10.520 But I think the bigger problem is for the ecosystem 0:10:10.559 --> 0:10:12.920 than it is for Facebook. Scott talked to us a 0:10:12.920 --> 0:10:15.680 little bit about your call today on Facebook. You've got 0:10:15.679 --> 0:10:19.480 a hold rating on the name, Yeah we did. We 0:10:19.559 --> 0:10:22.040 downgraded to hold today on the back of this news. 0:10:22.080 --> 0:10:25.560 But you have been focused on this actually in front 0:10:25.559 --> 0:10:28.800 of Mr Zuckerberg's post as well, and that Look, this 0:10:28.840 --> 0:10:32.600 is the first crisis this company has faced in the 0:10:32.640 --> 0:10:36.880 public markets since the mobile monetization transition. I mean, what 0:10:36.920 --> 0:10:40.640 about the crisis about privacy or the crisis about the 0:10:40.679 --> 0:10:43.360 fake news itself and testifying before Congress, and you know, 0:10:43.640 --> 0:10:45.800 I feel like the companies actually bene got up against 0:10:45.840 --> 0:10:48.280 it a few times Corey. It's it's all, it's all, 0:10:48.920 --> 0:10:50.840 it's all one and the same. They're all connected, and 0:10:50.880 --> 0:10:54.280 I think fake news, Congress and this it's it's all 0:10:54.559 --> 0:10:58.480 culminated in this moment where the company has finally been 0:10:58.600 --> 0:11:02.200 forced to acknowledge that there's problem. And so you know, 0:11:02.679 --> 0:11:04.840 if there weren't a problem, none of this would be 0:11:04.880 --> 0:11:07.520 going on. And the question I think that some some 0:11:07.559 --> 0:11:11.719 investors should ask, is this all being organically generated that 0:11:11.760 --> 0:11:14.079 the company is coming in and fixing the business, or 0:11:14.160 --> 0:11:17.000 is it because these external entities have come at them? 0:11:17.040 --> 0:11:18.760 You know that they've been forced to do it. And 0:11:18.840 --> 0:11:21.200 so when I when I talk about a crisis, I'm 0:11:21.240 --> 0:11:24.800 speaking to those events collectively relatives to when the company 0:11:24.840 --> 0:11:27.559 went through that mobile monetization transition back in two thousand 0:11:27.600 --> 0:11:31.439 and twelve. Right, and you've got right folks, representatives of Facebook, 0:11:31.440 --> 0:11:35.720 I think Google, UM and Twitter going before Congress again 0:11:35.800 --> 0:11:38.240 is it next week to talk about terrorism? Right? So 0:11:38.280 --> 0:11:41.120 they continue to be in the spotlight, Um Scott about 0:11:41.120 --> 0:11:44.000 their role at all of this. That's right, and you 0:11:44.000 --> 0:11:47.080 know these are not all self inflicted wounds. But but 0:11:47.280 --> 0:11:49.400 I think that you know, one could make the case 0:11:49.520 --> 0:11:52.400 that is the company did begin to grow up in 0:11:52.440 --> 0:11:56.240 the public markets, it started to focus more on ad 0:11:56.240 --> 0:11:59.440 products and add monetization, as you do when you shift, 0:11:59.520 --> 0:12:02.400 you know, is a for profit from merchant missionary to 0:12:02.480 --> 0:12:06.640 mercenary over time, and with that lost some focus on product. 0:12:06.679 --> 0:12:08.960 And I think at the core of what's happening here 0:12:10.040 --> 0:12:12.640 is a doubling back down on product, which has been 0:12:12.679 --> 0:12:15.280 said is likely good for the franchise long term. It 0:12:15.360 --> 0:12:17.880 sustains the terminal value of the company, but it can 0:12:17.880 --> 0:12:20.520 certainly be problematic when investors look at on the short 0:12:20.600 --> 0:12:23.600 term earnings impact. We won't really have any assessment of 0:12:23.640 --> 0:12:25.920 that until the company speaks again on its earning call 0:12:26.040 --> 0:12:30.360 on January one. Uh, tender, you're taken on this sort 0:12:30.360 --> 0:12:32.559 of focus on product. I mean, I've seen other analysts 0:12:32.600 --> 0:12:34.600 out there say there's actually be good for Facebook a 0:12:34.640 --> 0:12:37.720 better user engagement going forward. Yeah, I think long term 0:12:38.320 --> 0:12:41.320 it should be. And um, you know, some of the 0:12:41.320 --> 0:12:43.840 other properties also give them some leverage. You know what 0:12:43.960 --> 0:12:47.040 you have WhatsApp Messenger is still not yet figured out 0:12:47.080 --> 0:12:49.160 how to monetize that, but they can pull some of 0:12:49.200 --> 0:12:53.480 these levers hopefully. But Instagram is still sort of underestimated 0:12:53.520 --> 0:12:56.000 in terms of how much it can expand quickly given 0:12:56.040 --> 0:12:58.920 the engagement there. What's your expectation for Instagram and say 0:12:58.920 --> 0:13:03.080 three years out it should be significantly bigger than what 0:13:03.120 --> 0:13:05.040 it is right now. In fact, you know, one interesting 0:13:05.120 --> 0:13:07.800 thing that's happening with these new phones that are coming out. 0:13:07.880 --> 0:13:11.360 The camera quality has improved so much. Uh, it's like 0:13:11.400 --> 0:13:14.439 it's making everybody a photographer and posts more on Instagram 0:13:14.480 --> 0:13:17.840 and things like that. So, uh, continue tailman for them, Scott, 0:13:17.840 --> 0:13:20.439 what's the one question you'd be asking Mark Zuckerberg a 0:13:20.480 --> 0:13:22.880 Facebook right now? We've got about thirty seconds left here. 0:13:24.920 --> 0:13:28.200 I think that that ultimately it would it will be 0:13:28.240 --> 0:13:32.319 important for investors to understand, you know, exactly the changes 0:13:32.360 --> 0:13:35.320 that are going to be made and what that's going 0:13:35.360 --> 0:13:37.960 to lead to in terms of improvement over time and 0:13:38.080 --> 0:13:40.800 the experience that consumers have or as he says, making 0:13:40.840 --> 0:13:43.800 them happy. And then and then secondly, you know, truly 0:13:43.840 --> 0:13:45.840 what the what the you know you said one, but 0:13:45.920 --> 0:13:49.240 truly what the longer term you know implications are on 0:13:49.400 --> 0:13:52.440 the business model from an economic standpoint, which we may 0:13:52.520 --> 0:13:55.959 likely more here from from a financial officer than Mr 0:13:56.040 --> 0:13:58.640 Zuckerberg themselves. But but I think those are the two 0:13:58.679 --> 0:14:01.000 topics that are of critical and apartments at the moment. 0:14:01.200 --> 0:14:02.880 All right, we're gonna leave it on that note, gentlemen, 0:14:02.920 --> 0:14:06.880 thank you so much. Scott Devitt, lead Internet and media 0:14:06.920 --> 0:14:09.679 analysts at Steple Financial, on the phone in New York 0:14:09.720 --> 0:14:12.559 City to tender a world global Internet and consumer Electronics 0:14:12.600 --> 0:14:25.840 analyst a Bloomberg Intelligence Boo Radio. Everyone loves blockchain right now. 0:14:25.880 --> 0:14:28.480 That's a chain that seems unbreakable, Edge Sims, the founder 0:14:28.520 --> 0:14:32.080 Bold Star Adventures, And that's gonna look with us at 0:14:32.120 --> 0:14:34.320 what's going on in the world of blockchain. Certainly lots 0:14:34.320 --> 0:14:37.680 of excitement ed as we see companies talk about partnerships 0:14:37.720 --> 0:14:40.720 with with companies that are doing blockchain things or bitcoin 0:14:40.840 --> 0:14:43.920 like things and are redubbing themselves blockchain companies in the 0:14:44.000 --> 0:14:47.320 stocks accelerate. But you know, we had the case this 0:14:47.360 --> 0:14:51.680 week of Kodak, of the serious year old company involved 0:14:51.760 --> 0:14:55.640 in technology from day one that sees blockchain. I talked 0:14:55.640 --> 0:14:57.240 to the CEO on the phone yesterday we tried to 0:14:57.280 --> 0:14:58.680 get to the show before the power went out of 0:14:58.720 --> 0:15:01.880 see s and he said, this is a serious technology. 0:15:01.880 --> 0:15:03.760 It solves a problem for us, and we're going to 0:15:03.840 --> 0:15:08.760 put this to use within the next ninety days. It's 0:15:08.800 --> 0:15:12.680 pretty incredible. I put a tweet out yesterday on added 0:15:12.720 --> 0:15:16.360 sim and has said the rule for from a venture 0:15:16.400 --> 0:15:19.600 perspective and even now a public company perspective is what 0:15:19.800 --> 0:15:23.200 can be blockchain will be blockchain, and that it doesn't 0:15:23.240 --> 0:15:25.960 necessarily mean it's all a good thing. I do believe 0:15:26.040 --> 0:15:28.240 that fundamentally in the next five to ten years, it's 0:15:28.320 --> 0:15:30.760 it's almost like a new Internet, like a distributed Internet. 0:15:31.080 --> 0:15:32.440 But at the same time, I think there's a lot 0:15:32.480 --> 0:15:35.560 of garbage and noise out there, so companies like Kodak 0:15:35.680 --> 0:15:37.880 you are taking the example from Long Island Iced Tea. 0:15:38.280 --> 0:15:41.200 I think it's definitely exciting, but I still have a 0:15:41.200 --> 0:15:43.680 lot of questions and I'm quite skeptical about it. You know, 0:15:43.720 --> 0:15:46.600 how is a company that has no software experience, you know, 0:15:46.640 --> 0:15:48.840 building on the blockchain and launching out this new I 0:15:48.920 --> 0:15:50.840 c L So, you know, I think it's gonna be 0:15:50.880 --> 0:15:53.400 very important for investors, whether your public investors or even 0:15:53.440 --> 0:15:56.640 venture capital investors, to try to find the signal from 0:15:56.640 --> 0:15:59.440 the noise and all of this excitement. Our thinks the 0:15:59.680 --> 0:16:03.880 moving a little fast when it comes to valuations of 0:16:03.920 --> 0:16:09.040 digital currencies UH and futures when it comes UH digital 0:16:09.200 --> 0:16:11.520 digital currencies and so on. Do you feel like it's 0:16:11.520 --> 0:16:14.760 moving a little too fast without us really as investors 0:16:14.880 --> 0:16:19.240 understanding it completely. I think that's a great question, and 0:16:19.640 --> 0:16:22.760 it's it's a parallel in my own mind to the nineties. 0:16:22.760 --> 0:16:24.880 I've been a DC for every twenty years, and do 0:16:24.880 --> 0:16:26.720 you remember just kind of the insanity of all the 0:16:26.720 --> 0:16:29.720 ideas back in the day? Yes, and the only Yeah. 0:16:29.880 --> 0:16:31.960 The big difference though, is that you know you own 0:16:32.000 --> 0:16:34.560 stock or equity and it could be worth something or nothing. 0:16:34.920 --> 0:16:37.720 And if you think about Amazon as an example, Amazon 0:16:37.800 --> 0:16:40.240 was a darling and then was garbage, and then now 0:16:40.240 --> 0:16:43.480 look at Amazon today. I feel the same way about 0:16:43.480 --> 0:16:46.360 cryptocurrency today, is that there's a lot of people that's 0:16:46.400 --> 0:16:48.080 going to make money for the next kind of you know, 0:16:48.120 --> 0:16:50.400 eighteen months kind of day trading and jumping in and out. 0:16:50.680 --> 0:16:53.560 It's almost like that whole a trade day trading phenomenon. 0:16:53.640 --> 0:16:56.880 You've got all these younger folks who never invested in 0:16:56.960 --> 0:16:59.000 stocks that are all of a sunnen excited. I have 0:16:59.040 --> 0:17:00.680 a high school or that I know that started a 0:17:00.760 --> 0:17:04.120 hedge fund, a hedge fund for crypto. It's insane right now. 0:17:04.160 --> 0:17:06.960 So yes, the answers, it's crazy, but I like to 0:17:07.000 --> 0:17:10.920 separate it out because we're enterprise investors. Is the underlying 0:17:10.960 --> 0:17:14.000 technology of the blockchain I think is transformative, and that's 0:17:14.040 --> 0:17:18.040 why we partnered with IBM and Comcast Ventures to create 0:17:18.040 --> 0:17:22.119 our own kind of accelerator around enterprise blockchain adoption, separate 0:17:22.160 --> 0:17:25.080 from cryptocurrency. So we brought in the seasoned operator named 0:17:25.160 --> 0:17:27.400 Rob Bailey, who you know, ran a company called Data 0:17:27.440 --> 0:17:29.560 Sift and was CEO of one of our company's customer. 0:17:29.840 --> 0:17:34.000 And we're helping entrepreneurs who have phenomenal ideas understand and 0:17:34.040 --> 0:17:37.480 how to engage with the fortune and fundamentally, five years 0:17:37.480 --> 0:17:38.920 from now, we want to make sure that these are 0:17:39.000 --> 0:17:42.800 the underlying new businesses, the underlying new infrastructure business for 0:17:42.840 --> 0:17:46.879 the future. ED, how do you see the practical uses 0:17:46.920 --> 0:17:51.720 of something like blockchain kind of playing out potentially? Yeah, 0:17:51.720 --> 0:17:54.440 I'll give you some great example. So if you look 0:17:54.480 --> 0:17:56.679 at kind of what IDM has been doing with you know, 0:17:56.720 --> 0:18:00.000 hyper Ledger Fabric, which is their open source blockchain UM. 0:18:00.080 --> 0:18:03.520 They they announced kind of a food tracking initiative from 0:18:03.920 --> 0:18:06.639 source of food all the way to shelf. And I 0:18:06.680 --> 0:18:09.960 think they've partnered with Kroger and maybe next Lee, Walmart 0:18:10.000 --> 0:18:12.960 and some others. So I think it's an amazing opportunity 0:18:13.200 --> 0:18:16.440 for supply chain to track and trace kind of UM 0:18:16.840 --> 0:18:20.240 goods from creation all the way down to authenticity to 0:18:20.240 --> 0:18:23.120 where it's located. That's an example. The other example could 0:18:23.119 --> 0:18:26.000 be back office kind of payment systems look at look 0:18:26.000 --> 0:18:28.879 at Ripple for example. Ripple allows you to kind of 0:18:28.920 --> 0:18:32.639 transfer currencies cross border on the back end without actually holding, 0:18:33.359 --> 0:18:36.520 so it speeds up the whole process into seconds instead 0:18:36.560 --> 0:18:40.520 of days. So those tremendous amount of opportunity kind of 0:18:40.520 --> 0:18:42.880 if you if you dig in correctly and right now. 0:18:43.040 --> 0:18:46.800 The problem is that the crypto perspective, the financial perspective 0:18:46.840 --> 0:18:50.600 has way overtaking kind of what's needed to understand what's 0:18:50.680 --> 0:18:53.960 driving the you know, these these triptos with the technology itself. 0:18:54.600 --> 0:18:57.199 It seems to me that that a lot of the 0:18:57.680 --> 0:19:00.440 discussion is about sort of c o s and and 0:19:00.440 --> 0:19:04.520 and cryptocurrencies that will be good for one singular purpose. Right, 0:19:04.520 --> 0:19:07.639 So Kodak will have a cryptocurrency that's good for monitoring 0:19:08.160 --> 0:19:10.600 of photos now, and I should say the CEO imagines 0:19:10.680 --> 0:19:14.240 other uses for this as well, but monitoring the the 0:19:14.280 --> 0:19:17.680 replication of and usage of the payment for photos that 0:19:18.040 --> 0:19:19.760 there are lots of other i CEOs that are sort 0:19:19.760 --> 0:19:22.679 of vertically focused in individual industries, And it seems to 0:19:22.720 --> 0:19:26.080 me that that there's a counter argument for UM at 0:19:26.160 --> 0:19:29.239 one or two really big widely used currencies that can 0:19:29.280 --> 0:19:30.520 so you can take the money you make in a 0:19:30.520 --> 0:19:34.280 photo and spend it to get a pizza. Yeah. So, 0:19:34.280 --> 0:19:35.800 so I think those are all great points. I mean, 0:19:35.840 --> 0:19:38.119 Kodak is not the only one tracking and tracing kind 0:19:38.160 --> 0:19:40.600 of ownership of photos. And there are other companies out 0:19:40.600 --> 0:19:42.560 there right now, there's like three or four. And what 0:19:42.680 --> 0:19:45.800 happens if like a shutter Stock decides to kind of 0:19:45.840 --> 0:19:48.080 do something with the blockchain. So just because you're on 0:19:48.119 --> 0:19:50.679 the blockchain doesn't mean Codak should be up. They have 0:19:50.680 --> 0:19:52.399 a lot of work to do. And in fact, if 0:19:52.400 --> 0:19:53.800 you look at a lot of the I c o s, 0:19:54.240 --> 0:19:57.359 most of them have no product, just an eighteen page 0:19:57.359 --> 0:20:00.360 white paper talking about what the token provides you, talking 0:20:00.359 --> 0:20:02.280 about what the incentives are. I think it's very important 0:20:02.320 --> 0:20:05.720 for investors to understand. The first thing is who is 0:20:05.760 --> 0:20:09.000 the founding team? Are they absolutely incredible? Are they absolutely 0:20:09.040 --> 0:20:12.040 credible UM? Is it an idea or is it or 0:20:12.080 --> 0:20:15.280 is there a product? UM? Are there any customers? And 0:20:15.320 --> 0:20:17.359 what are the token incentives? Are they doing this just 0:20:17.400 --> 0:20:19.359 because they want to make money? Are they doing it 0:20:19.400 --> 0:20:21.560 because it makes fundamental sense for the business and you, 0:20:21.600 --> 0:20:23.760 as the end user, get to participate. So I think 0:20:23.800 --> 0:20:26.439 a lot of these actually don't answer all of these questions, 0:20:26.440 --> 0:20:27.800 which is why I think they'll be a lot of 0:20:27.920 --> 0:20:31.600 kind of people losing money as well. And Sam's founder 0:20:31.720 --> 0:20:35.080 Bold Star Adventures, based right here in New York City. 0:20:35.119 --> 0:20:37.960 Listen to Bloomberg Markets and Bloombergradam Cory Johnson at Corey TV. 0:20:38.240 --> 0:20:40.960 She's at Carol mass on Twitter, Carol Masser in real life, 0:20:40.960 --> 0:20:53.679