WEBVTT - BofA Expected to Pay $200 Million Device Fine 0:00:01.800 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanibek. We're here every day bringing 0:00:07.280 --> 0:00:09.799 you the latest news from the world of business and finance, 0:00:09.840 --> 0:00:13.640 plus technology, politics, economics, all partnising the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.160 --> 0:00:19.599 analyst in more than one and twenty countries. You can 0:00:19.640 --> 0:00:23.239 download Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.400 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.160 --> 0:00:27.840 pm Eastern Time on Bloomberg Radio, or watch us on 0:00:27.880 --> 0:00:31.600 YouTube search Bloomberg Global News. Well, another batch of Wall 0:00:31.640 --> 0:00:34.000 Street big banks reporting today the news giving well it 0:00:34.200 --> 0:00:36.720 was giving a lift, another lift to the trade. We're 0:00:36.720 --> 0:00:39.160 talking about Goldman, Saxon, Bank of America. Thank you Apple 0:00:39.200 --> 0:00:43.440 for breaking the markets down. Yeah, as we said, uh, well, 0:00:43.479 --> 0:00:45.839 there's a lot going on, Carold, but let's stick with 0:00:45.880 --> 0:00:48.479 Bank of America. Excuse me, because that's a really important one. 0:00:48.479 --> 0:00:50.879 We got Katherine Doherty joining us now financi Report fort 0:00:50.880 --> 0:00:53.479 Bloomberg News. She's been in since the wee hours of 0:00:53.479 --> 0:00:56.560 the morning covering these companies, among them Bank of America. 0:00:56.640 --> 0:00:58.880 She's with us now in the Bloomberg Interactive Broker Studio. 0:00:59.000 --> 0:01:02.400 So Bank America is reaping the benefits of a rate rise, 0:01:02.800 --> 0:01:05.039 but they're also having to pay up for the use 0:01:05.040 --> 0:01:08.200 of unapproved personal devices. Give us the big takeaway from 0:01:08.240 --> 0:01:11.880 today's report. So big takeaway, it's actually reflective in Bank 0:01:11.880 --> 0:01:14.720 of America and then across Wall Street. We started to 0:01:14.720 --> 0:01:19.080 see this last week when first Morgan Stanley JP Morgan 0:01:19.120 --> 0:01:22.399 we're reporting, and then when Wells and City came out 0:01:22.440 --> 0:01:26.520 on Friday. We expected that the focus which it was 0:01:26.640 --> 0:01:29.360 today with Bank of America would be on an I 0:01:29.440 --> 0:01:34.160 I growth. So every time yes, net interest incomes. So 0:01:34.280 --> 0:01:37.640 now that rates have have risen, the banks are able 0:01:37.720 --> 0:01:42.560 to take in their their lending practices are becoming more profitable. UM, 0:01:42.720 --> 0:01:47.680 and we the estimates across the major banks for Morgan Stanley, 0:01:47.680 --> 0:01:52.680 Bank of America, JP, Morgan, they all exceeded analyst expectations. However, 0:01:53.720 --> 0:02:00.600 they've been impacted by expenses and fines. So you referenced UM. 0:02:00.680 --> 0:02:05.400 It really is particular to Bank of America, and the 0:02:05.480 --> 0:02:09.240 other banks have either already disclosed a two million dollar 0:02:09.360 --> 0:02:15.160 fine or they're starting to reference this probe with regulators 0:02:15.200 --> 0:02:18.840 with regards to device use. What the heck is this about? 0:02:18.880 --> 0:02:20.560 Just tell me because it's been coming across and we're like, 0:02:20.600 --> 0:02:23.399 what don't freaking text your friends about what you're doing 0:02:23.400 --> 0:02:28.320 at work from your mobile? Simply the use of personal devices? Yes, 0:02:28.400 --> 0:02:31.359 your cell phone, um, and if they're not disclosed or 0:02:31.400 --> 0:02:33.920 if it's outside of your your work phone. Um. So 0:02:34.360 --> 0:02:36.800 this is across all the banks, um. But we're just 0:02:36.880 --> 0:02:40.200 starting to see it really be talked about, and um 0:02:40.480 --> 0:02:44.200 that we're expecting a full settlement to come with the 0:02:44.240 --> 0:02:46.520 big number. Okay. What's surprising to me is that this 0:02:46.600 --> 0:02:50.480 is happening versus right, because it's not like you know, 0:02:50.600 --> 0:02:53.560 people were using We're talking like what's app signal? Any 0:02:53.560 --> 0:02:56.320 messaging service that we used to send messages to one another? Right? 0:02:56.600 --> 0:02:58.800 This is the same apps? So why why is this 0:02:58.840 --> 0:03:01.040 an issue now? And it was an issue seven years ago, 0:03:01.080 --> 0:03:02.880 but it was I thought it's such also a clampdown 0:03:02.960 --> 0:03:07.400 following the financial meltdown. The this SEC and the CFTC 0:03:07.720 --> 0:03:11.480 are are both. This is I think the closure of 0:03:11.520 --> 0:03:15.440 it all. They're just really honing in. And it was 0:03:16.120 --> 0:03:19.200 after Archegos we started to hear it talked about a 0:03:19.240 --> 0:03:21.960 little bit more that brought this back into the attention 0:03:21.960 --> 0:03:24.600 of regulators. Um so they basically went back to all 0:03:24.639 --> 0:03:26.840 the banks, saw that it was still a practice they 0:03:26.840 --> 0:03:29.239 need to clamp down on, and this is the end result. 0:03:29.320 --> 0:03:31.320 Does this also include when you guys talk with like 0:03:31.360 --> 0:03:34.760 folks in the financial community that they can't be talking 0:03:34.800 --> 0:03:38.800 to you on their cell phones and stuff like what like? Where? 0:03:38.840 --> 0:03:41.600 Does what does this encompass? Who are your sources? Cat? 0:03:42.440 --> 0:03:43.760 You know what I'm saying? Does that mean to in 0:03:43.880 --> 0:03:46.440 terms of how they communicate? Because that's an interesting area. 0:03:46.600 --> 0:03:49.400 It's full on communication. But I believe that the communication 0:03:49.720 --> 0:03:52.720 is with regards to deals that they are working on 0:03:52.760 --> 0:03:55.119 and if they're talking to you know, if it has 0:03:55.880 --> 0:03:57.760 it really depends on the party. There have to be 0:03:57.760 --> 0:04:02.320 a potential for like a possible financial payoff and not payoff, 0:04:02.320 --> 0:04:04.040 but you know what I mean, benefit or something. We 0:04:04.080 --> 0:04:07.000 haven't seen anything come out to to say that there 0:04:07.000 --> 0:04:10.160 has been instances that the regulators are going to point out. 0:04:10.240 --> 0:04:15.640 But perhaps in the future when a settlement is publicly 0:04:15.720 --> 0:04:18.279 disclosed and the regulators come out and say this is 0:04:18.279 --> 0:04:21.360 our findings, that's something we'll be looking for. It's so funny, Carrol, 0:04:21.400 --> 0:04:23.040 because if you think about just the way you know anectotally, 0:04:23.080 --> 0:04:24.880 the way that you and I interact. For example, sometimes 0:04:24.880 --> 0:04:26.400 I'll text you, sometimes I'll send you an I B. 0:04:26.560 --> 0:04:28.760 Sometimes I'll call you on your cell phone. And it's like, 0:04:29.000 --> 0:04:31.120 you know, if we were working at a bank, how 0:04:31.200 --> 0:04:33.400 might that be different? And we're always talking about the show, 0:04:33.720 --> 0:04:36.800 right exactly exactly, like couldn't you be having a meeting 0:04:36.839 --> 0:04:40.080 with somebody and put something on a napkin? So like 0:04:40.120 --> 0:04:41.880 you know what I'm saying, Like that's interesting. Then do 0:04:42.240 --> 0:04:44.120 people go back to those kinds of ways of commuting 0:04:44.120 --> 0:04:48.600 because compute I mean communicating, because it's you're never gonna 0:04:49.600 --> 0:04:52.719 You're never going to capture all communication, right, But I 0:04:52.760 --> 0:04:55.440 think that the main focus here is are you communicating 0:04:55.480 --> 0:04:58.359 on your work devices or your personal devices? And the 0:04:58.360 --> 0:05:00.839 regulators are concerned that they were seeing more use of 0:05:00.839 --> 0:05:04.000 the personal devices. Um that maybe it wasn't even you 0:05:04.040 --> 0:05:06.320 were doing something bad, they were just seeing that the 0:05:06.480 --> 0:05:09.640 use was up and that it was find work related. 0:05:10.040 --> 0:05:13.000 It was starting, I believe with some of these previous 0:05:13.279 --> 0:05:16.440 a year ago, two years ago probes that they started 0:05:16.480 --> 0:05:20.600 to see communication go offline. Okay, we only have thirty 0:05:20.600 --> 0:05:22.599 seconds left. What do we learn about the American consumer 0:05:22.600 --> 0:05:26.400 from Bank of America. They say the consumer is resilient. Okay, yes, 0:05:27.279 --> 0:05:31.000 that's good. We're printing up consumers are resilient T shirts. Yeah, 0:05:31.000 --> 0:05:33.279 but do not send messages that to the consumer is 0:05:33.279 --> 0:05:36.280 resilient on your personal consumers are resilient. And then you 0:05:36.320 --> 0:05:37.840 go on the back and the like. But for how long? 0:05:38.040 --> 0:05:40.760 R right? No, that's what we're watching for next. This 0:05:40.839 --> 0:05:43.719 is just the data from this this past three months. 0:05:43.760 --> 0:05:45.480 But we'll see what the second half of the year 0:05:45.520 --> 0:05:48.159 has to bring. This is fine, get some sleep, I know. 0:05:48.320 --> 0:05:51.320 Do you get some sleep tonight? Okay? Well, alright, Cat Doherty, 0:05:51.360 --> 0:05:53.800 she's finance reporter at Bloomberg News. I love our finance 0:05:53.880 --> 0:05:57.479 team all across Bloomberg. Man, you're listening to Bloomberg Business 0:05:57.520 --> 0:06:01.880 Week with Carol Messer and Bloomberg Takes Tim Stinovic on 0:06:02.080 --> 0:06:05.480 Bloomberg Radio among the most right on the Bloomberg terminal. 0:06:05.480 --> 0:06:07.560 It's also a story that will be featured the upcoming 0:06:07.560 --> 0:06:10.159 issue of Bloomberg Business Week, which is do out later 0:06:10.160 --> 0:06:12.800 this week on newsstands already, though, as we said on 0:06:12.880 --> 0:06:15.440 the Bloomberg Terminal and at Bloomberg dot com, slash business 0:06:15.440 --> 0:06:18.640 Week such a relevant story to our world. Tim It's 0:06:18.640 --> 0:06:22.760 about how the US is exporting inflation, and it's probably 0:06:22.760 --> 0:06:25.200 going to get worse because the Fed hikes Carol ben 0:06:25.200 --> 0:06:27.720 Holland writes all about it with our other colleagues, Ender 0:06:27.800 --> 0:06:31.120 Current and Alexander Webber. Ben joins us this afternoon from 0:06:31.320 --> 0:06:34.080 the economics editor for Bloomberg News. He's on the phone 0:06:34.120 --> 0:06:37.080 from our Washington d C. Bureau. Ben, what does it 0:06:37.120 --> 0:06:40.279 mean when you write that the US is exporting inflation? 0:06:40.320 --> 0:06:43.320 What does that mean? Well, so, I think it's happening 0:06:43.360 --> 0:06:45.640 in two ways. So the first thing is that all 0:06:45.640 --> 0:06:47.960 over the world and the pandemic, you had this kind 0:06:47.960 --> 0:06:51.279 of change in what people were buying. Right, So people 0:06:51.320 --> 0:06:54.479 weren't buying JIM memberships, they weren't buying restaurant meals, they 0:06:54.520 --> 0:06:56.680 weren't going on vacations so much as they were buying goods. 0:06:57.279 --> 0:07:00.320 They're buying exercise bikes and TV sets. But a ship 0:07:00.400 --> 0:07:03.320 was much bigger in the United States than in other countries. 0:07:03.400 --> 0:07:06.120 And it's the last seper longer. And it's been amplified 0:07:06.160 --> 0:07:08.240 by the way that some of the big U S 0:07:08.320 --> 0:07:11.440 resailers have been behaving because we know now that people 0:07:11.440 --> 0:07:15.320 a Walmart and Target built up huge inventories of staff, 0:07:15.400 --> 0:07:18.360 so they were basically buying even more stuff than American 0:07:18.440 --> 0:07:21.560 consumers wanted to buy, which was already a lot. Because 0:07:21.600 --> 0:07:24.440 supplies of all these goods, which were traded on global 0:07:24.480 --> 0:07:28.600 markets were constrained by COVID. The effect of Americans buying 0:07:28.640 --> 0:07:30.960 so much of them was to push their prices up 0:07:31.200 --> 0:07:35.480 for other countries to also joining us. Of course, is 0:07:35.560 --> 0:07:37.880 Joe Webber, editor Bloomberg Business Week, and he's here in 0:07:37.920 --> 0:07:41.120 our interactive broker studio. Hey, Joel hi so Ben, I 0:07:41.120 --> 0:07:43.920 wanted to ask you, you know, how is this manifesting itself. 0:07:43.960 --> 0:07:46.800 You know, we've seen what happens when you know, we 0:07:46.880 --> 0:07:49.120 get a glood of inventory in America, and if this 0:07:49.200 --> 0:07:51.880 is getting pushed out, like, how is it showing up elsewhere? 0:07:53.240 --> 0:07:55.480 So it does show up in the inflation numbers in 0:07:55.640 --> 0:07:57.800 other countries, but if you look at a place like Europe, 0:07:57.880 --> 0:08:00.520 then of course in the headline numbers it's this effect 0:08:00.520 --> 0:08:03.160 is swamp because you know, the biggest driver of higher 0:08:03.200 --> 0:08:06.440 inflation is energy and food, you know, a lot of 0:08:06.440 --> 0:08:08.760 which is the result of the Ukraine War. But you 0:08:08.800 --> 0:08:12.400 are seeing higher prices of important goods by comparison with 0:08:13.040 --> 0:08:16.520 goods that are produced domestically in European countries. And then 0:08:16.520 --> 0:08:18.240 the new side of it that we're starting to see now, 0:08:18.240 --> 0:08:21.040 of course, is that the fix to this, you know, 0:08:21.200 --> 0:08:24.400 this problem if you want a very strong American demand, 0:08:24.520 --> 0:08:27.520 is higher American interest rates. Well, that is knocking the 0:08:27.520 --> 0:08:31.280 dollar much higher. We now have like a very very 0:08:31.280 --> 0:08:34.120 strong dollar, and that makes the inflation problem for other 0:08:34.120 --> 0:08:36.160 countries even worse in a way because it means that 0:08:36.480 --> 0:08:39.480 stuff they buy from America, or stuff that is priced 0:08:39.480 --> 0:08:42.520 in dollars like oil and other commodities, also become more 0:08:42.520 --> 0:08:44.959 expensive for them. And I feel like, you know, this 0:08:45.040 --> 0:08:47.440 is not something that it's a touch and go ban ah. 0:08:47.440 --> 0:08:49.559 And this is why we continue to see the inflationary 0:08:49.640 --> 0:08:53.040 problems globally, you know, sticking with us even longer than 0:08:53.120 --> 0:08:56.320 maybe we had all hoped. Yeah, I think so, because 0:08:56.320 --> 0:08:58.680 this is something that could outlast some of the other 0:09:00.200 --> 0:09:03.439 causes of inflation. So even if europe European energy and 0:09:03.440 --> 0:09:05.679 food problems were to sort of magically disappear, or if 0:09:05.720 --> 0:09:08.360 they were you know that that inflation was to fade away, 0:09:08.920 --> 0:09:11.080 this other stuff caused by a strong dollar, for example, 0:09:11.160 --> 0:09:13.880 might still be around. And it might still keep inflation 0:09:14.040 --> 0:09:17.520 higher than the central magazine Europe would be comfortable with. Okay, 0:09:17.559 --> 0:09:20.800 so the Fed pretty much going to keep raising rereaths 0:09:20.800 --> 0:09:23.280 for a while. So how much worse is this, this 0:09:23.360 --> 0:09:27.240 is gonna this problem gonna get then, I mean, it 0:09:27.360 --> 0:09:30.680 could potentially get worse. I mean the caveat, of course 0:09:30.800 --> 0:09:33.160 is that you know, as I said, that the headline 0:09:33.160 --> 0:09:35.440 inflation in places like Europe is really is really an 0:09:35.520 --> 0:09:37.840 energy story. But it could be that even when that 0:09:37.880 --> 0:09:40.120 goes away, that they are still left with a problem 0:09:40.120 --> 0:09:43.400 which is caused by first strong American demand and then 0:09:43.440 --> 0:09:46.560 second the very strong dollar. That makes their life harder. 0:09:46.800 --> 0:09:48.920 And the thing to another thing to think about here 0:09:49.040 --> 0:09:51.160 is that it also makes the job of a central 0:09:51.160 --> 0:09:53.520 banker harder, because if you're the American, if you're the 0:09:53.520 --> 0:09:55.320 fair if you're the American central back, and you think 0:09:55.400 --> 0:09:58.199 that American inflation is at least partly being caused by 0:09:58.400 --> 0:10:01.200 strong American demand, while there's something you can do something 0:10:01.240 --> 0:10:04.079 about when you raise interest rates, you'll be addressing that. 0:10:04.440 --> 0:10:06.720 But it leaves the European Central Bank, for example, in 0:10:06.720 --> 0:10:10.480 the situation where their inflation is not being caused by 0:10:11.080 --> 0:10:14.160 America European consumers going out and buying lots of stuff, 0:10:14.920 --> 0:10:16.720 and yet they still feel like they have to raise 0:10:16.800 --> 0:10:19.199 rates and the result might be that they just slow 0:10:19.280 --> 0:10:22.920 their economy down without really doing much to address the 0:10:23.000 --> 0:10:25.640 root of the problem. Why did Americans buy stuff at 0:10:25.679 --> 0:10:29.560 a different rate than other countries during the pandemic? Ben? 0:10:29.679 --> 0:10:31.800 Is it? I mean, look, we know Americans love their stuff. 0:10:32.120 --> 0:10:33.880 We know we have different lifestyles in terms of the 0:10:33.880 --> 0:10:35.720 type of houses that we live in and what we 0:10:35.760 --> 0:10:38.120 have inside those houses. But was it was it a 0:10:38.120 --> 0:10:41.480 function of the length of lockdowns or changing demographic patterns 0:10:41.480 --> 0:10:43.640 here in the US? Is there any explanation for it, 0:10:43.640 --> 0:10:47.320 because we're really good at delivery, sometimes we're not going 0:10:47.360 --> 0:10:51.920 to delivery startups. Well, I think, you know, as you said, 0:10:51.960 --> 0:10:53.840 part of it is just that the patterns of what 0:10:53.920 --> 0:10:56.760 people buy a different in different countries to start before 0:10:56.800 --> 0:11:00.360 the pandemic, but I think in the pan they make 0:11:00.520 --> 0:11:03.760 the Probably the biggest reason why that shift was, you know, 0:11:03.800 --> 0:11:07.240 it was bigger and longer lasting in America, was that 0:11:07.320 --> 0:11:10.559 the United States did a big episcal stimulus than the 0:11:10.679 --> 0:11:13.959 European countries, for example, Because it wasn't really it couldn't 0:11:14.040 --> 0:11:15.920 really have been that the other side of it, the 0:11:16.240 --> 0:11:20.000 supply staff. What's harder to do here because because you know, 0:11:20.400 --> 0:11:24.040 more restaurants proposed in Europe than the United States. Right, So, yeah, 0:11:24.080 --> 0:11:26.400 it's a really good point. And the differences, I mean, 0:11:26.400 --> 0:11:28.240 this is why we watch kind of global central bank 0:11:28.280 --> 0:11:30.199 policy right now, Like the differences that we will see 0:11:30.200 --> 0:11:33.680 around the world is going to create problems and certainly 0:11:33.720 --> 0:11:37.000 different investing environments as a result. One of the things 0:11:37.000 --> 0:11:39.960 I love in your stories you talk about the two economies, 0:11:40.480 --> 0:11:43.480 um may have similar rates of inflation you're talking about 0:11:43.520 --> 0:11:45.400 Europe and the US, but they have different kinds with 0:11:45.480 --> 0:11:49.280 major implications again for how the banks tackle the problem. 0:11:49.280 --> 0:11:51.839 But you talk about, you know, the distinction boiling down 0:11:51.880 --> 0:11:54.480 to how bigger share of price pressures is home grown 0:11:54.520 --> 0:11:57.400 and we really need to look at internally where the 0:11:57.480 --> 0:12:02.200 inflationary pressures are within each country. Yeah, and what you 0:12:02.280 --> 0:12:04.200 see when you do look at that, I think is 0:12:04.440 --> 0:12:08.200 really reinforces the point that you know, more of it 0:12:08.320 --> 0:12:11.240 is homegrown in the United States than Europe, and that 0:12:12.040 --> 0:12:14.439 you know, in a way that makes the job of 0:12:14.480 --> 0:12:16.920 the FED easier I think compared with the job or 0:12:16.960 --> 0:12:20.640 the central banks, because as I said, if If you 0:12:20.679 --> 0:12:22.720 think the part of your high inflation in America is 0:12:22.760 --> 0:12:25.880 caused by strong American demand, well that's something the American 0:12:25.920 --> 0:12:28.400 Central Bank can do something about. They can raise interest 0:12:28.520 --> 0:12:30.520 rates and they can cool down that demand. If you're 0:12:30.600 --> 0:12:33.720 Europe and none of your inflation is really being caused 0:12:33.720 --> 0:12:37.240 by strong European demand, but you still have very high 0:12:37.280 --> 0:12:39.600 inflation and you want to do something about it, and 0:12:39.600 --> 0:12:43.079 you're worried about expectations getting entrenched, the risk is that 0:12:43.120 --> 0:12:45.080 you raise interest rates, but all you're a really doing 0:12:45.160 --> 0:12:47.720 is slowing down your own economy and you're not really 0:12:47.840 --> 0:12:50.959 addressing any of the root causes of high prices. Did 0:12:50.960 --> 0:12:52.719 you just say the Fed has it easy? I love 0:12:52.800 --> 0:13:00.000 that they would. You spoke to a lot of an 0:13:00.000 --> 0:13:03.080 I think people here. Jason Furman at Harvard was one 0:13:03.160 --> 0:13:05.400 name that jumped out at me, who's an economics professor. 0:13:05.400 --> 0:13:07.200 They're just wondering, like, of all the people you spoke 0:13:07.240 --> 0:13:09.640 to on this one, what what really pupped for you? 0:13:09.760 --> 0:13:12.400 What was an insight that you didn't know going in. 0:13:12.960 --> 0:13:15.320 I think something that really jumped out of me was 0:13:15.360 --> 0:13:18.840 what Jason Furman said about the way that the world 0:13:18.880 --> 0:13:22.760 economy has kind of flipped. Um in the pandemic. So 0:13:22.840 --> 0:13:26.360 the problem used to be the you know, there used 0:13:26.400 --> 0:13:28.600 to be an abundance of goods. There were plenty of goods, 0:13:28.600 --> 0:13:30.600 and the problem that countries have was to find buyers 0:13:30.640 --> 0:13:34.200 for those goods, to find demand for it um And 0:13:34.280 --> 0:13:36.240 so you know, in that story, the bad guys are 0:13:36.280 --> 0:13:39.000 countries like Germany, for example, in China that we're running 0:13:39.000 --> 0:13:42.160 big trade surpluses and sort of piggybacking off of other 0:13:42.200 --> 0:13:46.160 people's demand. But in the pandemic this has kind of 0:13:46.160 --> 0:13:48.600 been flipped because now goods are not abundant, you know, 0:13:48.679 --> 0:13:52.160 they are scars. And in that world, the American trade deficit. 0:13:52.840 --> 0:13:55.120 You know, it used to be that the US was 0:13:55.160 --> 0:13:57.240 the kind of world's consumer of last resort and other 0:13:57.800 --> 0:14:00.200 when America ran a trade deficit. This help of Rick, 0:14:00.920 --> 0:14:03.440 and now that's kind of been turned on its head 0:14:04.679 --> 0:14:08.199 applies a lot more stuff in the rest of the world. Right, Yeah, 0:14:08.360 --> 0:14:10.440 it's makes you wonder how it plays out. Till Webber, 0:14:10.559 --> 0:14:12.400 Ben Holland, thank you so much. Check this out in 0:14:12.400 --> 0:14:17.200 the new issue upcoming issue a Business Week. This is 0:14:17.240 --> 0:14:21.160 Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes, 0:14:21.240 --> 0:14:25.280 Tim Stinovic on Bloomberg Radio. There's a story we wanted 0:14:25.320 --> 0:14:28.760 to bring you since it hit the Bloomberg terminal last week. 0:14:28.800 --> 0:14:30.800 It's about the noted short seller Carson Block. And I 0:14:30.840 --> 0:14:33.560 gotta say it's very telling and a very revealing story. 0:14:34.120 --> 0:14:36.280 And perhaps that's why I mentioned that, you know, quote 0:14:36.320 --> 0:14:38.640 unquote broke Twitter, of course, an expression meaning you know, 0:14:38.680 --> 0:14:40.160 when I log into Twitter in the morning and see 0:14:40.200 --> 0:14:42.440 what people are are writing about. This was certainly one 0:14:42.480 --> 0:14:45.840 of those things. Katia Portnski is US News Legal Team 0:14:45.880 --> 0:14:47.920 reporter for Bloomberg News. She joins us on the phone 0:14:47.960 --> 0:14:50.680 from New York City. Katya, Um, I want to get 0:14:50.680 --> 0:14:53.560 to the just the crazy anecdote in this story that 0:14:53.680 --> 0:14:56.720 I think you know is one that certainly needs to 0:14:56.720 --> 0:14:59.800 be explained. But but first off, we're talking about Muddy 0:14:59.800 --> 0:15:04.520 water 's founder, Carson Block. Who is he? So Carson 0:15:04.840 --> 0:15:08.600 is a really interesting character on UM. I wouldn't say 0:15:08.600 --> 0:15:10.960 he's on Wall Street because he's in Austin, Texas. But 0:15:11.760 --> 0:15:14.840 he he's a short seller, meaning like he's known for 0:15:14.880 --> 0:15:19.920 putting out parish reports on companies and he has delisted 0:15:20.120 --> 0:15:23.080 um or his reports have gotten eight companies delisted over 0:15:23.120 --> 0:15:25.239 the course of his career. He has a legal background, 0:15:25.800 --> 0:15:29.920 UM finance background. He's really well known because he he 0:15:30.600 --> 0:15:33.960 made his name going after Chinese frauds, a space that 0:15:34.000 --> 0:15:36.040 not many people were looking at, and there were a 0:15:36.080 --> 0:15:38.400 lot of Chinese frauds and so he was right about 0:15:38.440 --> 0:15:41.200 a lot of these UM and he's just become really 0:15:41.320 --> 0:15:44.480 famous in the space over the last ten years, UM 0:15:44.520 --> 0:15:47.440 making his firm, which started as a research shop now 0:15:47.480 --> 0:15:49.440 into a hedge fund. Right, And I feel like he's 0:15:49.520 --> 0:15:51.880 very well known to the Bloomberg audience. And when he 0:15:52.040 --> 0:15:55.000 often writes about something or put up some research, you know, 0:15:55.040 --> 0:15:57.480 you often see a name move UM. You mentioned he's 0:15:57.520 --> 0:16:00.200 been right about a lot of names. Has he been 0:16:00.680 --> 0:16:03.680 more right than wrong in his trades? Because I feel 0:16:03.680 --> 0:16:05.360 like when we you know this cat, when we talk 0:16:05.400 --> 0:16:07.960 about a short cellars, feels like everybody gets so nervous, 0:16:08.000 --> 0:16:11.040 But it's another side of the trade. So bottom line, 0:16:11.040 --> 0:16:13.160 has he been right in a lot of his research 0:16:13.200 --> 0:16:17.000 and his calls? He has UM, But it's it's there's 0:16:17.880 --> 0:16:21.400 it's complicated, it's complicated, and there's different types of short 0:16:21.440 --> 0:16:24.840 reports right that that exists. There are ones that UM 0:16:25.200 --> 0:16:27.880 are saying that the a company is overvalued, and then 0:16:27.880 --> 0:16:30.520 there are ones that say this company is a fraud. 0:16:30.640 --> 0:16:33.200 And what he and his firm do specifically is they 0:16:33.240 --> 0:16:35.560 really try to go afterwards. I mean, they go through 0:16:35.920 --> 0:16:37.640 a lot, they do a lot of different types of 0:16:37.640 --> 0:16:40.400 short reports, but they're well known because they pick out 0:16:40.440 --> 0:16:42.680 frauds and they have UM you know, they do this 0:16:43.520 --> 0:16:46.480 like forensic analysis, and they go through all the struggle 0:16:46.560 --> 0:16:49.240 and they have researchers around the world and they coordinate 0:16:49.280 --> 0:16:51.280 with a lot of people. But they've been under a 0:16:51.280 --> 0:16:56.520 lot of heat, um lately, and UM you know, there's 0:16:56.560 --> 0:16:59.080 a lot of chatter about them and what they do 0:16:59.120 --> 0:17:01.880 as an institution, and not just them, but in the 0:17:02.000 --> 0:17:06.080 short the short uh market in general, the way they 0:17:06.080 --> 0:17:12.160 go about doing their work, UM in a more controversial way. Right. Well, 0:17:12.160 --> 0:17:14.320 sometimes you do your work under duress. We have to 0:17:14.359 --> 0:17:16.639 get to how you start off your story, and I 0:17:16.640 --> 0:17:20.439 feel like it's very telling maybe about who Carson Block 0:17:21.040 --> 0:17:24.080 is in that he shared with you a very revealing 0:17:24.080 --> 0:17:26.359 and very personal story. Do you mind going there in 0:17:26.480 --> 0:17:29.639 terms of how you kick off your story? Sure? UM, 0:17:29.680 --> 0:17:32.800 you know, so we uh we went down to um to, 0:17:32.920 --> 0:17:35.920 Texas to meet with Carson and UM get a little 0:17:35.920 --> 0:17:38.879 bit of an understanding of how he does his work. 0:17:39.040 --> 0:17:42.240 And because we have written a lot about a d 0:17:42.480 --> 0:17:46.560 J investigation into short sellers UM and have reported about 0:17:46.720 --> 0:17:51.360 Carson being um UH person and his firm being one 0:17:51.359 --> 0:17:53.199 of the firms that are being looked at by the 0:17:53.240 --> 0:17:59.280 Justice Department UM for potential market manipulation or coordinated trading. UM. 0:17:59.280 --> 0:18:01.960 We're not actually sure what precise believe the d o 0:18:02.040 --> 0:18:04.399 J is looking at at this stage, but they have 0:18:04.520 --> 0:18:07.680 taken an interest in a lot of firms and Muddy 0:18:07.680 --> 0:18:10.160 Waters is one of them. So we went down and 0:18:10.280 --> 0:18:13.359 we wanted to know more about, you know, the wild 0:18:13.400 --> 0:18:16.199 West of short selling and what goes on there. You know, 0:18:16.400 --> 0:18:21.160 a lot of these firms, aren't, you know, they're they're 0:18:21.200 --> 0:18:24.560 they're they're they're a little bit different from the traditional 0:18:24.720 --> 0:18:27.320 hedge fund managers that you that that we may all 0:18:27.400 --> 0:18:29.480 be more familiar with, the more buttoned up or whatever. 0:18:29.800 --> 0:18:33.480 And these are a lot of independent researchers that sell 0:18:33.600 --> 0:18:38.080 their work to funds and move markets. UM. So we 0:18:38.160 --> 0:18:40.480 wanted to know a little bit about what that life 0:18:40.680 --> 0:18:43.280 was from that world was like and asked if you know, 0:18:43.359 --> 0:18:47.479 he had in the experience with wrongdoing in that in 0:18:47.520 --> 0:18:52.240 that space. UM. You know, CD practices, and he talked 0:18:52.359 --> 0:18:55.520 very openly about a time that he believes he was 0:18:55.600 --> 0:18:59.960 front run by UM, uh you know, UH, an individual 0:19:00.119 --> 0:19:03.960 he suspects UM leaked his information of the information about 0:19:03.960 --> 0:19:07.920 an upcoming report. He was on his way to present 0:19:08.080 --> 0:19:12.600 a short on tal education at a conference, and UM, 0:19:12.680 --> 0:19:16.560 on his way on the flight, he saw UM there 0:19:16.640 --> 0:19:20.040 was a there was a a mysterious interloper in the 0:19:20.119 --> 0:19:23.600 market building a position that would profit off of him 0:19:23.600 --> 0:19:26.800 getting up on stage and saying, go short this position. 0:19:27.119 --> 0:19:29.760 And UM. It was such a stressful moment that a 0:19:29.800 --> 0:19:34.480 hemorrhoid first. UM, well, well he was on the flight. 0:19:34.600 --> 0:19:36.640 All right, We're gonna have to leave it there, Which 0:19:36.680 --> 0:19:39.240 is a perfect reason that you want to go read 0:19:39.280 --> 0:19:42.280 the rest of this story, because it's just I feel 0:19:42.280 --> 0:19:44.600 like it just gives you an indication of kind of 0:19:44.640 --> 0:19:47.680 the pressure, the intensity of who this person is. Katia 0:19:47.800 --> 0:19:51.080 we gotta run Katia Porzakonski, she's US Legal News team leader. 0:19:51.280 --> 0:20:00.399 Check the story out on the Bloomberg Journal. Yeah, but 0:20:00.520 --> 0:20:05.320 you let me drive? Oh no, no, no no, non, please, 0:20:05.440 --> 0:20:11.160 I'll do the ride revels. I want to drive. It's 0:20:11.160 --> 0:20:17.520 a good question. Drive is the drive to the Clobe 0:20:18.560 --> 0:20:23.400 Music on Bluebird Radio, and we've got just about ten 0:20:23.400 --> 0:20:25.720 and a half minutes left in today's trading session, and 0:20:25.800 --> 0:20:28.760 as Charlie mentioned, we are at our lows, are just 0:20:28.920 --> 0:20:31.399 off our lows when it comes to the equity trade 0:20:31.720 --> 0:20:34.280 here with a few minutes to go out performance though, Tim, 0:20:34.280 --> 0:20:36.639 we're seeing it in the energy materials names, bottom of 0:20:36.640 --> 0:20:39.120 the pack, healthcare names, they're down about one point seven percent. 0:20:39.200 --> 0:20:41.240 All right, let's get into it with Chris Saccarelli, chief 0:20:41.280 --> 0:20:44.480 investment officer at Independent Advisor Alliance. Chris joins us this 0:20:44.520 --> 0:20:47.320 afternoon on the phone from Charlotte, North Carolina. Chris, how 0:20:47.359 --> 0:20:50.719 are you well? How about yourself? We're doing pretty well. Look, 0:20:50.760 --> 0:20:53.320