WEBVTT - FTX, Meta, Disney, Midterms, and COP27 (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.520 with essential market moving news on the Bloomberg Markets Podcast, 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:23.759 at Bloomberg dot com slash podcast. So Matt again, you 0:00:23.800 --> 0:00:27.360 were still on Sombaticway yesterday. Um, it was a I 0:00:27.400 --> 0:00:29.360 think a seminal day in the world of crypto. It 0:00:29.360 --> 0:00:31.159 was insane. Don't you bring us in and let me 0:00:31.160 --> 0:00:36.040 just tell you down here? Okay, September two eight, I'm 0:00:36.080 --> 0:00:40.839 on a flight from Cologne to New York via Shannon. 0:00:40.920 --> 0:00:43.720 We had to sort landing. It's no, it's not part 0:00:43.720 --> 0:00:45.960 of the story, but it just so. We land at 0:00:46.040 --> 0:00:49.479 JFK and I turned on my BlackBerry right and I 0:00:49.520 --> 0:00:52.760 see the Leading Brothers news. Everybody on the plane they're like, 0:00:52.800 --> 0:00:55.400 oh my God, like everyone no one knew. You know, 0:00:56.040 --> 0:00:58.920 the same thing happened to me yesterday. I'm coming back 0:00:59.000 --> 0:01:03.840 from Indonesia via Tokyo, and I turned on my phone 0:01:04.480 --> 0:01:06.680 and I see the ft X news and I'm just 0:01:06.800 --> 0:01:10.280 like chills, going down my spine because this is such 0:01:10.319 --> 0:01:13.399 a big deal. Sam Bankman Freed, I think of him 0:01:13.400 --> 0:01:17.880 as like the richest, smartest guy in crypto and trustworthy. 0:01:17.920 --> 0:01:23.120 He's pushing for regulation, he you know, champions transparency and 0:01:23.200 --> 0:01:26.160 all of a sudden anyway, let's bring in uh. Well, 0:01:26.200 --> 0:01:28.440 we have Katie Greifeld here in the studio, thrilled to 0:01:28.480 --> 0:01:33.000 see her. We have Joanna awesonger Um out in. She's 0:01:33.000 --> 0:01:35.839 probably closer to where I was yesterday out in Singapore, 0:01:36.160 --> 0:01:39.000 and I read her work all the time to get 0:01:40.240 --> 0:01:42.640 to get the latest on crypto, so I'm glad to 0:01:42.680 --> 0:01:45.280 have her. And then Nick Carter from cass Island Ventures 0:01:45.680 --> 0:01:48.040 voice that you know, we all listen to this guy's 0:01:48.080 --> 0:01:52.160 podcast every week on the Brink Baby Brink Nation UM 0:01:52.400 --> 0:01:54.480 to learn what we can as well about the industry. 0:01:54.560 --> 0:01:56.800 So I think a pretty excellent panel. Nick. Let me 0:01:56.840 --> 0:02:00.400 start with you, UM, were you as shocked I know 0:02:00.480 --> 0:02:04.440 that this played out over you know, Friday, uh with 0:02:04.520 --> 0:02:07.080 concerns about liquidity and then on the weekend with c 0:02:07.280 --> 0:02:09.680 Z just dumping f t T, which is the ft 0:02:09.960 --> 0:02:14.600 X native token. Um. But man, if anyone had prepared 0:02:14.639 --> 0:02:19.880 for the crypto winter, I thought it was Sam Bankman freed. Yeah, 0:02:19.919 --> 0:02:23.240 I was Flabbergas said, I think even the most seasoned 0:02:23.240 --> 0:02:26.639 industry participants were completely taken aback by the f t 0:02:26.840 --> 0:02:30.520 X was considered extremely credible. A lot of my friends 0:02:31.160 --> 0:02:34.840 had capital on that exchange, including people that had dodged 0:02:34.880 --> 0:02:38.399 all the previous exchange hacks and solvencies, wrong bulls, etcetera, 0:02:38.840 --> 0:02:41.600 were stung by this. One. Is really one of the 0:02:41.600 --> 0:02:45.040 most shocking exchange collapses in the history of the industry, 0:02:45.520 --> 0:02:47.399 one of the worst days in the history of the industry. 0:02:48.680 --> 0:02:51.360 Joanna want to bring you in here. I mean, for 0:02:51.560 --> 0:02:55.800 the skeptics of all things crypto, I just think of 0:02:55.800 --> 0:02:59.040 a Jamie Diamond type. Does this give them more ammunition 0:02:59.080 --> 0:03:01.880 to say this isn't really an asset class, This is 0:03:01.960 --> 0:03:07.000 just a speculative kind of side to the market. At 0:03:07.080 --> 0:03:11.360 the very least, it gives people like regulators who say 0:03:11.400 --> 0:03:14.320 we need more guardrails in the crypto industry a lot 0:03:14.440 --> 0:03:20.160 of ammunition because it does show that somebody can be 0:03:20.400 --> 0:03:23.840 flying high one day. I mean, I think Bloomberg wealth 0:03:23.880 --> 0:03:28.960 did this. He lost of his fortune in one day. 0:03:29.000 --> 0:03:32.840 I mean, how much money is that in terms billions? 0:03:33.440 --> 0:03:38.960 I think sixteen billion dollars he lost in one day. 0:03:39.000 --> 0:03:41.200 I mean, that's just nuts. And I say I had 0:03:41.200 --> 0:03:44.560 a pretty good tweet. If you won the powerball, on paper, 0:03:44.840 --> 0:03:48.760 you're worth more than Sam BigMan freed, which was two billions, 0:03:48.920 --> 0:03:54.040 but you know, after taxes maybe and also if well, 0:03:54.200 --> 0:03:56.240 at one point I think he was worth like forty 0:03:56.240 --> 0:04:00.000 billion all in. And I hope you know, if you're 0:04:00.040 --> 0:04:02.640 worth forty billion, hopefully you take a billion and bury 0:04:02.680 --> 0:04:05.720 it somewhere, right, Yeah, you get some liquidity somewhere. Hey, Nick, 0:04:05.800 --> 0:04:08.120 so where do you think? I mean, you've been in 0:04:08.160 --> 0:04:11.680 this space since the beginning. You're one of the trusted 0:04:11.760 --> 0:04:16.120 voices there. What are you and your colleagues in the 0:04:16.200 --> 0:04:23.279 space saying today? We're um bracing ourselves for the for 0:04:23.320 --> 0:04:26.760 the real fallout today. So yesterday sort of events came 0:04:26.800 --> 0:04:28.640 to a head, but today now we expect to see 0:04:28.640 --> 0:04:31.279 the knock on effects. We look to see the lenders 0:04:31.360 --> 0:04:33.640 which are exposed to Alimato, which is a lot of them. 0:04:34.040 --> 0:04:37.560 We look for that next light down. Uh, yesterday was 0:04:37.600 --> 0:04:39.640 kind of the red wedding, but today is we're taking 0:04:39.640 --> 0:04:44.920 out the bodies. We also, I mean there's a letter 0:04:44.920 --> 0:04:48.240 of intent for finance to buy f t X, but 0:04:48.279 --> 0:04:51.560 it's non binding, right, and you said your friends had 0:04:51.920 --> 0:04:55.280 capital on the ft X platform. I'm assuming they've taken 0:04:55.320 --> 0:04:59.120 it off. No, I mean, you know, withdrawals were suspended. 0:04:59.240 --> 0:05:01.920 We don't currently, we don't believe that f t X 0:05:02.040 --> 0:05:05.279 can make depositors whole. It appears now that there was 0:05:05.320 --> 0:05:09.680 some funny business going on with Alameda potentially gambling with 0:05:09.839 --> 0:05:12.440 deposits on the platform. That's kind of my best explanation 0:05:12.560 --> 0:05:15.840 for what went on. I believe there's a whole and um, 0:05:16.360 --> 0:05:19.760 you know, depositors, whether retail or institutional, will not be 0:05:19.880 --> 0:05:22.839 made whole at this point. Nick, First of all, let 0:05:22.880 --> 0:05:25.040 me say there's no one I'd rather be talking with 0:05:25.200 --> 0:05:28.040 right now. You mentioned this was like the red wedding. 0:05:28.040 --> 0:05:30.279 Now we're going to see the bodies get taken out. 0:05:30.720 --> 0:05:33.560 Let's talk about what that fallout looks like. Obviously, some 0:05:33.600 --> 0:05:37.960 big headlines today from novograts is Galaxy saying that you 0:05:37.960 --> 0:05:41.000 know they had exposure to ft X. They have somewhere 0:05:41.080 --> 0:05:45.560 close to fifty million dollars of withdrawals being processed. Salana 0:05:45.600 --> 0:05:49.240 obviously has really taken a brunt of selling here. When 0:05:49.240 --> 0:05:53.039 you think about how SPF backed Salana But where else 0:05:53.080 --> 0:05:56.000 should we look for the contagion for the fallout from here? 0:05:56.839 --> 0:05:59.080 Look at the lenders that I mean, alimated was the 0:05:59.080 --> 0:06:02.640 biggest bar or there's lenders left still after three hours, 0:06:03.240 --> 0:06:07.520 not for long, not for long. Unfortunately, this is pains 0:06:07.560 --> 0:06:10.800 me to say this is the death noel for Block five. Believe, Um, 0:06:11.040 --> 0:06:13.080 I don't. I don't know if Genesis so apparently they 0:06:13.080 --> 0:06:17.120 didn't have residual exposure here, but there's actual defied lenders 0:06:17.160 --> 0:06:20.440 to the head exposure. Yeah, this will be the sort 0:06:20.440 --> 0:06:24.320 of like final blow that basically kills off the crypto 0:06:24.360 --> 0:06:28.600 lending space for now. Joanna, is this going to be 0:06:28.760 --> 0:06:33.760 a period where now regulators will take maybe a more 0:06:33.839 --> 0:06:36.520 intense review of the kind of they were supposed to 0:06:36.560 --> 0:06:41.360 be doing that already? Sam bankman Free was a champion 0:06:41.400 --> 0:06:44.200 of that, right. I mean, the question is are we 0:06:44.200 --> 0:06:46.440 going to get this is like climate right, there's so 0:06:46.560 --> 0:06:51.400 much talk and no follow through. Is anybody gonna demand 0:06:51.800 --> 0:06:57.839 transparency from these big multibillion dollar businesses? Well, the interesting 0:06:57.880 --> 0:06:59.880 thing is they are kind of trying to do it 0:07:00.000 --> 0:07:04.000 themselves to an extent. Finance has talked about actually putting 0:07:04.000 --> 0:07:08.120 out some numbers publicly, and some other exchanges are now 0:07:08.360 --> 0:07:12.920 saying that they'll follow that standard, So the industry may 0:07:13.120 --> 0:07:16.640 start to do some of that itself, but it is 0:07:17.200 --> 0:07:20.000 hard to do the regulation. This is such a fast 0:07:20.080 --> 0:07:22.720 moving industry that to try to get ahead of it, 0:07:22.800 --> 0:07:25.640 to try to work things out about how something should 0:07:25.640 --> 0:07:29.760 be regulated is pretty tricky. But it is also true 0:07:29.840 --> 0:07:33.080 that there aren't a whole lot of jurisdictions at this 0:07:33.160 --> 0:07:36.040 point that you can point to and say, you know, 0:07:36.160 --> 0:07:39.840 they really have a solid balance where they're you know, 0:07:40.080 --> 0:07:43.520 they're kind of helping the industry thrive, but also really 0:07:44.680 --> 0:07:48.200 you know, regulating solidly. So you know a lot of 0:07:48.200 --> 0:07:51.240 people in regulations still trying to work this out. Nick, 0:07:51.320 --> 0:07:53.680 let's put this more firmly into your world and talk 0:07:53.720 --> 0:07:57.360 about the crypto venture space. Uh, it feels like just 0:07:57.400 --> 0:07:59.400 if you look at crypto Twitter, everyone is so shell 0:07:59.560 --> 0:08:02.480 shocked about this moment that that hasn't really been discussed. 0:08:02.520 --> 0:08:07.560 But what's your best guess on what happens to crypto venture? 0:08:07.640 --> 0:08:11.480 I mean, how how do you even go about finding 0:08:11.560 --> 0:08:14.720 deals in this sort of environment. It'll be an enormous 0:08:14.800 --> 0:08:19.360 recording for all of the funds that were effectively copy 0:08:19.440 --> 0:08:22.120 trading Sam bankmun Freed which was a lot of the 0:08:22.720 --> 0:08:26.000 successful funds in the last two years. Those those were 0:08:26.040 --> 0:08:30.840 the best trades f t T, f t X, Slona, Sarah, 0:08:31.520 --> 0:08:37.160 everything under Sam's nuclear umbrella. That was the trade of 0:08:37.240 --> 0:08:42.400 the last two years. Those funds will struggle now. Undoubtedly 0:08:42.880 --> 0:08:46.160 also the growth funds that did that thirty two billion 0:08:46.160 --> 0:08:48.840 dollar round for f t X last year. Those are 0:08:48.840 --> 0:08:51.079 some of the best and most respected funds in the world. 0:08:51.840 --> 0:08:53.760 There's gonna be a huge amount of scrutiny there. The 0:08:53.880 --> 0:08:57.360 question will be did they fail to do diligence or 0:08:57.559 --> 0:09:00.640 did Sam lie to them? Uh? And if actively commit 0:09:00.679 --> 0:09:04.040 fraud during that round. I don't know what the answer is, 0:09:04.480 --> 0:09:06.680 but you have to imagine if they knew the truth 0:09:07.080 --> 0:09:10.360 of FX's business at that point, there's no way they 0:09:10.400 --> 0:09:12.319 would have done that deal. Again, these are some of 0:09:12.360 --> 0:09:16.040 the most credible and respected, not just crypto but generalist 0:09:16.120 --> 0:09:18.640 funds in the world. That round and then the lack 0:09:18.679 --> 0:09:22.079 of governance over there will also be severely scrutinized. Now, 0:09:22.880 --> 0:09:25.679 what about retail traders, I mean, aren't they gonna want 0:09:25.760 --> 0:09:32.000 to see um some sort of guarantee that these exchanges 0:09:32.040 --> 0:09:33.600 are going to be able to make them whole or 0:09:33.640 --> 0:09:38.199 else not leave any money on the platform. Yeah, I mean, 0:09:38.600 --> 0:09:42.600 retail has been kind of very skeptical the centralized exchanges 0:09:42.679 --> 0:09:45.520 ever since the events of the summer. This is going 0:09:45.559 --> 0:09:48.319 to make it worse again. F t X was considered 0:09:48.360 --> 0:09:52.080 one of the most credible exchanges top three, really most 0:09:52.080 --> 0:09:55.480 credible in the world. Now, um, we are seeing some 0:09:55.520 --> 0:09:59.199 efforts that reform, like joint and mentioned exchanges doing proof 0:09:59.200 --> 0:10:02.440 of reserve. I'm really hardened to see a lot of 0:10:02.480 --> 0:10:05.600 exchanges announcing they're going to do that. That's probably not 0:10:05.600 --> 0:10:08.240 going to be enough to rebuild confidence at this point. 0:10:08.320 --> 0:10:10.400 F t X, really one of the biggest and most 0:10:10.440 --> 0:10:14.240 visible public facing exchanges in the world, going down is 0:10:14.280 --> 0:10:17.400 just gonna shatter industry confidence. Well that's kind of what 0:10:17.480 --> 0:10:19.160 I wanted to pick up on what I was thinking 0:10:19.200 --> 0:10:21.400 about coin Base yesterday. If you're an f t X 0:10:21.480 --> 0:10:25.240 user and suddenly perhaps if this deal closes, you're going 0:10:25.280 --> 0:10:29.520 to be a binance user, would maybe you rather be 0:10:29.559 --> 0:10:31.679 with a coin base. Wouldn't you rather be with the 0:10:31.840 --> 0:10:35.400 US publicly listed company that's under the purview of the 0:10:35.520 --> 0:10:38.400 US government. Is that too naive for me to think? 0:10:38.400 --> 0:10:40.679 And I see coin Base today, it's just down another 0:10:40.720 --> 0:10:43.520 six percent. The stock has been doing terribly, so maybe 0:10:43.520 --> 0:10:46.719 no one agrees with me. I have no reason a 0:10:46.800 --> 0:10:50.160 question coin basis solvency. I think they've been really well 0:10:50.480 --> 0:10:53.320 behaved throughout their entire history. But also a lot of 0:10:53.360 --> 0:10:56.640 these users are offshore. Maybe they you know, don't have 0:10:56.800 --> 0:11:00.560 access to a lot of ft X users were users 0:11:00.640 --> 0:11:04.120 because they didn't have access to other exchanges, whether Body 0:11:04.160 --> 0:11:10.160 and stor point base. Actually, so, yeah, the US exchange 0:11:10.200 --> 0:11:12.880 is not part of this deal. Also. I mean the 0:11:12.920 --> 0:11:15.040 other thing I'll say is, since it is non binding, 0:11:15.480 --> 0:11:18.480 you talked about this deal closing. I mean, I think 0:11:18.559 --> 0:11:21.400 that's really up in the air at this point. I mean, 0:11:21.600 --> 0:11:23.520 I would say that the general feeling is that it 0:11:23.559 --> 0:11:27.280 probably isn't going to happen. Um. You know, it sounds 0:11:27.320 --> 0:11:30.840 like CZ has put out some stuff talking about doing 0:11:30.840 --> 0:11:33.079 the deal and this sort of thing, and they've they're 0:11:33.080 --> 0:11:37.920 obviously um looking at it. But I think there's a 0:11:38.040 --> 0:11:44.079 big sentiment that this this may not actually happen just ahead. 0:11:44.880 --> 0:11:48.480 I just think actually the liability that Finance would be 0:11:48.520 --> 0:11:52.079 inheriting here is astronomical. I think I would say, very 0:11:52.080 --> 0:11:55.520 low probability that the deal actually closes. Wow, alright, real quick, 0:11:55.600 --> 0:11:58.080 Nick thirty seconds, what happens to Sam Bank ben Free? 0:11:58.120 --> 0:12:02.120 Do you think in the next day's weeks? I wouldn't 0:12:02.120 --> 0:12:04.600 want to be in issues, man, Um. I think the 0:12:04.720 --> 0:12:08.560 question is is whether there's criminal liability. I would say 0:12:08.840 --> 0:12:14.400 likelihood of yes. Oh boy, alright, and Nicko down in 0:12:14.440 --> 0:12:16.160 Miami stay safe down there. I know we get a 0:12:16.200 --> 0:12:18.280 little bit of a weather event come in your way. 0:12:18.320 --> 0:12:19.960 But you guys are used to with Nick Carter founding 0:12:19.960 --> 0:12:24.440 partner Castle Castle Island Adventures, Joanna Osinger, and Katie Greifeld, 0:12:24.480 --> 0:12:27.480 a cross asset reporter. So we had it just circled here, 0:12:28.200 --> 0:12:31.040 a big, big day in crypto yesterday. We're gonna be 0:12:31.120 --> 0:12:37.040 dealing with this for the days and weeks to come. Alright. 0:12:37.080 --> 0:12:40.600 So the red wave that was kind of expected with 0:12:40.679 --> 0:12:44.120 his mid term elections coming in more like a red ripple, 0:12:44.360 --> 0:12:46.160 I think, is what I've read the term I've been 0:12:46.200 --> 0:12:49.320 hearing this. I go with that. Um. Nathan Dean, he's 0:12:49.360 --> 0:12:52.240 a senior policy analyst for the US and Latin America 0:12:52.240 --> 0:12:55.400 Bloomberg Intelligence for better worse. He's located in d C. 0:12:55.679 --> 0:12:59.000 He's one of those d C policy wants that you 0:12:59.240 --> 0:13:01.079 don't necessarily want to go hang out with at a 0:13:01.120 --> 0:13:03.320 cocked up party. But the man we might like to 0:13:03.400 --> 0:13:05.960 hang out with Nathan, but boy does he know what's 0:13:05.960 --> 0:13:08.599 going on down there. So Nathan, We're so lucky to 0:13:08.640 --> 0:13:10.480 get a couple of minutes of your time. What do 0:13:10.559 --> 0:13:13.720 you take away from what we know so far about 0:13:13.760 --> 0:13:16.920 these mid term elections? So last night was a shock. 0:13:17.000 --> 0:13:19.640 I mean, I don't think any many people were anticipating 0:13:19.679 --> 0:13:21.760 that the Democrats were going to perform as most they 0:13:21.760 --> 0:13:23.600 did in the House. It's almost like the New York 0:13:23.720 --> 0:13:26.280 Jets beating but the Buffalo bills last week. It was feasible, 0:13:26.960 --> 0:13:29.079 but you know, it was still a shock. And so, 0:13:29.280 --> 0:13:32.360 you know, going into the election, there was this anticipation 0:13:32.400 --> 0:13:35.080 that the Republicans are going to have thirty seats, forty seats. 0:13:35.240 --> 0:13:37.400 The latest projection I'm seeing from Bloomberg right now is 0:13:37.440 --> 0:13:39.400 maybe about two to three seats, and so that's a 0:13:39.520 --> 0:13:42.880 very tight margin in the House. In the Senate, you know, 0:13:42.960 --> 0:13:46.040 I think there was more anticipation that the Democrats would 0:13:46.040 --> 0:13:49.400 perform well there. Uh, if you see what's happening in Georgia, Nevada, 0:13:49.520 --> 0:13:52.640 and Arizona, it looks like the Georgia runoff is going 0:13:52.679 --> 0:13:55.360 to be the most important thing to determine in the 0:13:55.400 --> 0:13:58.440 Senate control. But you know, I will say the thing 0:13:58.520 --> 0:14:00.920 that we're telling our clients right now is that if 0:14:00.920 --> 0:14:03.200 the Democrats win the House and they keep the Senate, 0:14:03.640 --> 0:14:06.720 it brings back reconciliation, and that brings back the ability 0:14:06.760 --> 0:14:09.600 to do broad corporate tax increases if they wanted to 0:14:09.679 --> 0:14:12.760 fiscal stimulus. That's the one scenario that I don't think 0:14:12.760 --> 0:14:15.480 the markets have really looked at. So that's the one 0:14:15.480 --> 0:14:17.280 thing that we're telling people to watch for right now. 0:14:17.880 --> 0:14:20.240 All I care about is the salt deduction? Is it 0:14:20.280 --> 0:14:23.440 ever coming back? Nathan? Well, you know there, you know, 0:14:23.520 --> 0:14:26.160 Carl Smith at Bloomberg Opinion wrote a great calm this 0:14:26.200 --> 0:14:30.800 week about how tax bipartisanship could play out in three 0:14:31.240 --> 0:14:34.520 and salt deduction is one of those things. And unfortunately 0:14:34.600 --> 0:14:36.000 for the people that are living in New York and 0:14:36.040 --> 0:14:38.320 New Jersey at the moment, you know, the thought is 0:14:38.440 --> 0:14:42.000 that salt deduction may go away in its entirety. Now, Uh, 0:14:42.000 --> 0:14:43.720 you know, it's way too soon to tell. I mean, 0:14:43.760 --> 0:14:47.200 taxes probably uh one of the two or three top 0:14:47.240 --> 0:14:50.440 issues they're gonna play out in three no matter the election, 0:14:50.520 --> 0:14:53.200 because the Trump bear at tax cuts are eventually going 0:14:53.280 --> 0:14:57.520 to expire for the consumers, and so uh, you know, 0:14:57.600 --> 0:14:59.600 I'm not feeling very good about it at the moment. 0:14:59.640 --> 0:15:02.440 But Andrew Silverman, our tax analysts, is certainly looking at it, 0:15:02.520 --> 0:15:05.640 and it's going to come back up next year. All right, Nathan, 0:15:05.640 --> 0:15:08.040 your policy geek. We love talking to you to get 0:15:08.040 --> 0:15:11.040 to the real details here. Over the next two years, 0:15:12.000 --> 0:15:15.360 what happens in Washington? Can anything really get done? Or 0:15:15.520 --> 0:15:18.120 is it the veto pen from the president gonna sty 0:15:18.240 --> 0:15:21.400 me what could be a Republican controlled Congress. So you 0:15:21.400 --> 0:15:23.720 know you hear grid luck. Grid luck is going to increase. Well, 0:15:23.720 --> 0:15:26.320 grid luck is the new normal. I mean, things happen 0:15:26.400 --> 0:15:29.240 in gridlock. It's just instead of going through this process 0:15:29.280 --> 0:15:31.360 where you have big bills and debates and so forth, 0:15:31.680 --> 0:15:34.040 it all gets bunched up into government shutdown fights or 0:15:34.080 --> 0:15:37.000 dead sealing fights. It's a perfect opportunity for Republicans to 0:15:37.000 --> 0:15:40.360 try and use leverage. This happens if the Republicans control 0:15:40.480 --> 0:15:43.280 the House, now the Senate side, if the Republican if 0:15:43.280 --> 0:15:45.920 the Democrats control the Senate, you're going to see certain 0:15:45.920 --> 0:15:49.880 bills move faster through uh and so forth. But Ultimately, 0:15:49.920 --> 0:15:52.000 there are a couple of things. One, the president is 0:15:52.000 --> 0:15:55.000 still the president, which means anything that he signs has 0:15:55.000 --> 0:15:57.720 to be bipartisan. There's no way the filibuster is going 0:15:57.720 --> 0:15:59.440 away in the next two years, so again it has 0:15:59.480 --> 0:16:02.720 to be by partisan. So rather than these broad economic 0:16:02.760 --> 0:16:05.720 fiscal stimulus bills, the debates and the fights get down 0:16:05.760 --> 0:16:07.640 to the sector level. So if you're in things like 0:16:07.720 --> 0:16:10.960 marijuana or cryptocurrencies or drug pricing, you know, this is 0:16:11.000 --> 0:16:13.280 where you actually have to start looking at the legislations 0:16:13.320 --> 0:16:17.080 that maybe don't you know, materially change your portfolio, but 0:16:17.240 --> 0:16:21.440 certainly would increase sales, increase revenue, increased costs, etcetera. And 0:16:21.480 --> 0:16:24.520 it happens. So that reminds me of the Safe Banking Act, 0:16:24.600 --> 0:16:27.840 which is something that um, I don't think anyone has 0:16:27.880 --> 0:16:34.600 been particularly optimistic about allowing cannabis, allowing keys companies to bank, 0:16:34.800 --> 0:16:38.200 and to allowing them to be advised by Wall Street 0:16:38.240 --> 0:16:41.920 on m and a, etcetera. Is that still not gonna 0:16:41.920 --> 0:16:44.600 happen anytime soon? Actually we're fairly bullsh on it. I 0:16:44.880 --> 0:16:46.800 actually think that there is a decent chance that could 0:16:46.800 --> 0:16:49.080 pass in the lame Duck. For those of you listening, 0:16:49.120 --> 0:16:51.480 you know, at State Banking Act allows banks to service 0:16:51.520 --> 0:16:55.240 marijuana businesses. Now, the potstocks react almost time any time 0:16:55.280 --> 0:16:58.480 a policymaker mentions this. But the Safe Banking Act is 0:16:58.520 --> 0:17:02.120 currently attached to the House for the National Defense Authorization Act. 0:17:02.560 --> 0:17:06.080 And because we think that, you know, the Senate Democrats 0:17:06.200 --> 0:17:08.399 want this issue done, they want to pass on it 0:17:08.480 --> 0:17:11.200 and so forth like that, Ultimately I think it will pass. 0:17:11.520 --> 0:17:13.960 The most important thing to keep keep in mind is 0:17:13.960 --> 0:17:18.560 that these potstocks react almost when this news like happens, 0:17:18.600 --> 0:17:22.359 but then once they realize that decriminalization illegalizations not going occur, 0:17:22.680 --> 0:17:24.919 they decline the next day. So certainly be careful of 0:17:24.920 --> 0:17:28.760 watching this in the lame duck period. Nathan, what question 0:17:29.200 --> 0:17:31.000 are Matt and I not smart enough to ask you 0:17:31.080 --> 0:17:34.680 that we should be asking you this morning? You know everything, man, 0:17:35.320 --> 0:17:38.800 what's the most important issue that we're that us layman, 0:17:38.840 --> 0:17:41.240 are are missing out on here? So you know, I 0:17:41.320 --> 0:17:43.480 would just say, just the death ceiling is coming back, 0:17:43.560 --> 0:17:46.240 and the dead ceiling fight is coming back, and you 0:17:46.240 --> 0:17:48.240 know what what does that mean? Remind us of what 0:17:48.280 --> 0:17:50.399 that means, because it's been a while. Okay, so you know, 0:17:50.440 --> 0:17:52.680 the dead ceiling is essentially the limit that the U. S. 0:17:52.720 --> 0:17:54.720 Treasury is allowed to borrow up to to pay our 0:17:54.800 --> 0:17:57.840 debts and so forth like that, and every few years 0:17:58.000 --> 0:18:00.880 or every six months as it was early or Congress 0:18:00.880 --> 0:18:03.640 needs to approve the limit. Now, in the last death 0:18:03.640 --> 0:18:07.440 ceiling debate, uh, the Democrats were able to unilarially raise 0:18:07.520 --> 0:18:09.760 the debt ceiling by a dollar amount as opposed to 0:18:09.840 --> 0:18:13.080 a data amount. And essentially the United States will run 0:18:13.080 --> 0:18:16.040 out of money to pay its debts sometime in the 0:18:16.080 --> 0:18:18.560 first half of next year. Now they can use what 0:18:18.680 --> 0:18:22.280 is known as extraordinary measures to use other funds and 0:18:22.320 --> 0:18:25.399 the ultimate go no go deadline is probably sometime in 0:18:25.440 --> 0:18:27.960 the third quarter. That's what Ira Jersey, are chief right strategist, 0:18:28.080 --> 0:18:32.080 is is predicting. So the death ceiling is this really 0:18:32.119 --> 0:18:34.400 bad time for markets in terms of do you see 0:18:34.440 --> 0:18:37.320 lots of headlines political brickman ship, you know, the end 0:18:37.320 --> 0:18:40.080 of the world is coming. Fixed income certainly reacts to it, 0:18:40.160 --> 0:18:43.880 Equity strategy certainly, fixed too reacts to it. But ultimately 0:18:43.920 --> 0:18:47.240 Congress kick the can down the road at the last minute. Now, 0:18:47.320 --> 0:18:49.560 if Kevin McCarthy does become the Speaker of the House, 0:18:49.560 --> 0:18:52.119 he said he wants to use this as leverage to 0:18:52.160 --> 0:18:54.680 potentially get in some deficit reductions or something like that, 0:18:55.440 --> 0:18:57.600 but ultimately we think it's going to just play out 0:18:57.640 --> 0:19:00.200 the same way, really painful headlines. Folks in the sixth 0:19:00.200 --> 0:19:03.040 think of market night liking what they're seeing. But ultimately 0:19:03.119 --> 0:19:04.719 there's a deal and then it gets done. It's just 0:19:04.760 --> 0:19:07.119 pain for all of us in the markets. Dead ceiling 0:19:07.119 --> 0:19:09.720 is a bit like my spending budget at home. I 0:19:09.760 --> 0:19:11.800 just raise it whenever I need to eat. Why not? 0:19:11.960 --> 0:19:14.679 You can handle it, Nathan Dean, You are too good 0:19:14.720 --> 0:19:17.800 at this stuff. I mean, it's serious policy. Geek. We 0:19:17.880 --> 0:19:21.760 love getting your guy. Oh yeah, cool guy, but again 0:19:21.840 --> 0:19:25.600 cock part better word, better than geek. He's the senior 0:19:25.640 --> 0:19:32.320 policy analysts for bloom. I know boiler makers as whear 0:19:32.320 --> 0:19:35.040 as fast food burgers go, Matt, Wendy's are one of 0:19:35.080 --> 0:19:37.560 my all time face. Oh dude, Wendy's is the best 0:19:38.200 --> 0:19:40.480 in terms of the major change there. I think there's 0:19:40.520 --> 0:19:44.080 no comparison that if you just put up you know 0:19:44.119 --> 0:19:48.800 the main burgers of Wendy's, McDonald's and Burger King. Clearly 0:19:48.840 --> 0:19:54.280 Wendy's is geting away. Yeah, I'm with you there, fresh ingredients, delicious, 0:19:53.640 --> 0:19:57.800 the numbers just this morning. Soon to check in with that. 0:19:57.880 --> 0:19:59.200 I want to check in with just what's going on 0:19:59.200 --> 0:20:02.280 with the fast food bisines in general the restaurant business. 0:20:02.280 --> 0:20:04.800 We do that with Mike Halen. He's a senior restaurant 0:20:04.840 --> 0:20:08.119 analyst at Bloomberg Intelligence. So Mike, uh, Wendy's. I'm all 0:20:08.160 --> 0:20:10.480 into Wendy's. How did they do with their results here? 0:20:11.480 --> 0:20:14.000 And I'm with you guys, Wendy's. Wendy's has a great product. 0:20:15.000 --> 0:20:18.000 Wendy's similar to a lot of the quick service chains 0:20:18.000 --> 0:20:20.760 and restaurant chains that we covered. They did better than 0:20:20.840 --> 0:20:24.320 expected on the sales side. Um, you know, three year 0:20:24.400 --> 0:20:27.760 trends accelerated, so so the trends in the third quarter 0:20:27.800 --> 0:20:30.679 were better than they were in the second quarter, but 0:20:30.840 --> 0:20:35.560 margins took a hit, right, Restaurant level margins contracted again 0:20:35.600 --> 0:20:40.840 pretty significantly. You know, things we've passed peak inflation, so uh, 0:20:40.880 --> 0:20:44.840 they should improve next year. But they're also expecting some 0:20:44.840 --> 0:20:48.080 some significant Morgin margin pressure in the fourth quarter as well, 0:20:48.440 --> 0:20:51.280 which I mean from a consumer perspective, that's a good 0:20:51.280 --> 0:20:53.840 thing because you know that they're not going to skimp 0:20:54.119 --> 0:20:58.280 on the ingredients, um that make their products so good. 0:20:58.800 --> 0:21:03.080 I guess they have to raise prices, right yeah, right 0:21:03.080 --> 0:21:06.560 now they're running at about ten percent, which is uh, 0:21:06.600 --> 0:21:10.080 you know, it's typically the high end of what consumers 0:21:10.160 --> 0:21:16.240 will expect will accept in the quick service realm Um. 0:21:16.280 --> 0:21:18.359 You know. Uh, they said for next year, looking at 0:21:18.400 --> 0:21:22.560 more like mid single digit price increases. Um. You know, 0:21:22.600 --> 0:21:26.200 inflation should ease to about that level as well. Um. 0:21:26.320 --> 0:21:28.560 So yeah, I mean what they said on the call, 0:21:28.640 --> 0:21:31.320 and what a few other companies have mentioned is that 0:21:31.359 --> 0:21:35.560 the consumers earning seventy thousand a year and less are 0:21:35.640 --> 0:21:38.520 cutting back on their spending. So they're they're visiting less, 0:21:38.600 --> 0:21:42.080 they're ordering more off the value menu, uh, and less 0:21:42.119 --> 0:21:46.119 off the regular menu. Um, you know. And does the 0:21:46.160 --> 0:21:49.640 lowering I mean, let's say we go into a recession, right, 0:21:49.840 --> 0:21:52.120 I mean like a real recession, not just the two 0:21:52.200 --> 0:21:56.760 quarters of contraction that we've already seen. Um, does the 0:21:56.800 --> 0:22:02.560 lowering cancome consumer eat less at fast food or does 0:22:02.600 --> 0:22:06.080 a lower consumer go more to the you know, the 0:22:06.160 --> 0:22:08.639 value menu because it seems like it is cheaper to 0:22:08.760 --> 0:22:10.680 get a value menu at a fast food place and 0:22:10.760 --> 0:22:14.359 it is to make a good healthy meal at home. Yeah. 0:22:14.400 --> 0:22:16.560