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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. Now, let's focus in

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Speaker 1: again on crypto after what we saw yesterday, it was

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Speaker 1: pretty mind blowing a drop down to thirty thousand and

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Speaker 1: then a rally back up to forty. Right now we're

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Speaker 1: trading at forty one thousand, six d forty five dollars.

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Speaker 1: What drove those moves as well as probably a number

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Speaker 1: of things together, But there is probably no other better

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Speaker 1: expert um with whom we could speak about this than

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Speaker 1: Bobby Lee is the founder and CEO of Ballet, also

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Speaker 1: co founder and former CEO of um btc C, the

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Speaker 1: longest running bitcoin exchange. Bobby Um, thanks very much for

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Speaker 1: your time this more thing. What do you think happened yesterday?

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Speaker 1: Was it just sort of Elon Musk doing an about face?

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Speaker 1: Plus um the Chinese authorities saying you can't use bitcoin again? Yes,

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Speaker 1: thank you for having me. It is it was a

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Speaker 1: confluence of things. Certainly it started with Emon Musk's you know,

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Speaker 1: you turn on bitcoin, so to speak, at least from

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Speaker 1: a perspective of using it as a accepted currency for

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Speaker 1: a purchase of TESTA vehicles. Uh you turned about this, uh,

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Speaker 1: you know, late last week. And um, certainly. The other

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Speaker 1: aspect is the Chinese regulatory so called the new ban

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Speaker 1: on bitcoin. But to analyze that, China didn't actually issue

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Speaker 1: anything new. There was no new rules or anything. It

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Speaker 1: was just a rehash of what it has previously published

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Speaker 1: in September of two thousand seventeen. So it's a confluence

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Speaker 1: of those two events which spooked the market. And then

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Speaker 1: of course there's a third factor which is very popular.

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Speaker 1: Bitcoin is a is the factor of the trading, leverage trading.

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Speaker 1: So people may not be aware of this, but bitcoin,

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Speaker 1: besides being traded on a smart market, uh, there's a

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Speaker 1: high volume activity in the futures, you know, sort of

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Speaker 1: leverage trading market, and when there's news events, you know,

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Speaker 1: the the short sellers take advantage of it and really

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Speaker 1: hammer the people holding the long position, and that really

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Speaker 1: helped drive it down a thirty dollars. So, Bobby, let's

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Speaker 1: talk about that volatility. Generally speaking, across the securities markets,

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Speaker 1: that kind of volatility is not welcome, is considered not healthy.

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Speaker 1: How do how do you view it? Yeah, I I

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Speaker 1: I see that perspective. Unfortunately, bitcoin is a global sort

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Speaker 1: of phenomenon and there and the markets are are not

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Speaker 1: well regulated. Frankly speaking, so in equities market, each country

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Speaker 1: has very strict regulatory agencies monitoring the trades and the

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Speaker 1: insider news and so on and and so forth. And for

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Speaker 1: even for the centralize things like gold and precious metals. Uh,

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Speaker 1: the exchanges are regulated. But unfortunately for bitcoin, because it's

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Speaker 1: a global phenomenon, even though you know, the coin based

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Speaker 1: gemini are regulated in the United States, you have a

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Speaker 1: lot of exchanges who are offshore and they do that

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Speaker 1: thing and it's very opaque. So so at least in

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Speaker 1: the near term, it's gonna be very hard to to

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Speaker 1: sort of, you know, try to try to control the volatility.

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Speaker 1: But as in my new books The Promise of Bitcoin,

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Speaker 1: I try to point out to people, volatility does not

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Speaker 1: equate to risk. So this is where there's a lot

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Speaker 1: of confusion. How is that. Well, so when you ask

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Speaker 1: me the question. There's an aliging assumption that volatility is bad,

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Speaker 1: and the reason is because risk is bad. You know,

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Speaker 1: something that's very high risk can be can be risky

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Speaker 1: quote unquote right. Um. But in the case of bitcoin,

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Speaker 1: what I found over the my ten years sort of

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Speaker 1: interacting with it is that it is well whisked adjusted.

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Speaker 1: In other words, I I do you know, I just

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Speaker 1: for disclosure, I want to put long position at bitcoin.

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Speaker 1: I think that, uh, it has a huge potential as

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Speaker 1: investment asset class. So I think for the for the

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Speaker 1: amount of return that I expect to see for bitcoin

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Speaker 1: in the coming five years, ten years, twenty years, I

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Speaker 1: think the volatility is well risk adjusted. I wonder about

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Speaker 1: the big whales, Bobby. Um. You know, Bloomberg has been

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Speaker 1: publishing a figure two percent of the wallets on of

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Speaker 1: the assets. I'd love to get your take on that.

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Speaker 1: And Um, the first time I ever met you was

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Speaker 1: probably about ten years ago. I was having drinks with

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Speaker 1: Matthew Mellon and Alex Waters and uh, you know, Matt

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Speaker 1: had a fair share of bitcoin that he you know,

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Speaker 1: locked up all over the place and I guess nobody

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Speaker 1: will ever access it again. The same him of course

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Speaker 1: is true with you know, massive storied steaks like Satoshi's.

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Speaker 1: What does it mean that so much of this, you

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Speaker 1: know what was you know once and more than a

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Speaker 1: trillion dollar market cap. It looks like, you know, billions

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Speaker 1: of it was just not accessible and never will be accessible. Um.

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Speaker 1: And then other billions of it could easily be moved

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Speaker 1: by one or two people. So so there is a

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Speaker 1: there is sort of the the notion that there are

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Speaker 1: rich people, you know, big whales in the industry, but

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Speaker 1: certainly nowhere, nowhere near the figures you presented of did

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Speaker 1: you say of the assets? That's what point? Maybe that

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Speaker 1: may be true of some other currencies, but certainly not

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Speaker 1: true for bitcoin. Uh. That's socially Nakamoto the the sudonymous

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Speaker 1: anonymous inventor of bitcoin. We people think he owns maybe

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Speaker 1: over a million bitcoins and that's that's the single largest holding, right,

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Speaker 1: So so if you can break it down very logically,

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Speaker 1: that's uh at most ten percent. Uh. But again he

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Speaker 1: hasn't surfaced. You know, there are a lot of rumors

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Speaker 1: that he he a should have lost his private keys.

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Speaker 1: So the next the next biggest holdings would be would

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Speaker 1: be those of those custodial providers, something like coin based

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Speaker 1: custody or these large exchanges with a large wallet holding

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Speaker 1: a lot of bitcoins, but in reality that is really

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Speaker 1: held on custody for you know, thousands or even millions

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Speaker 1: of customers. So that point is very well dispersed. I

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Speaker 1: wouldn't worry about anything like that. But by the way,

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Speaker 1: in reality on on in the physical world, you have

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Speaker 1: that phenomenon as well. You know, uh, you know what

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Speaker 1: percentage of wealth is owned by what percentage of people?

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Speaker 1: People say, you know their figures, you know, under ten

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Speaker 1: percent of the people own physic sound of the world's wealth,

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Speaker 1: whether it's real estate, equities or or other stuff. Right, Hey, Bobby,

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Speaker 1: thank you so much for joining us. We really appreciate

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Speaker 1: getting your thoughts here. Fascinating story. Lots of volatility in

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Speaker 1: the crypto world we've seen just just this week. Bobby Lee,

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Speaker 1: founder and CEO Ballet, is also co founder and former

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Speaker 1: CEO of bt C c UH. He's also an author

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Speaker 1: recent book out entitled The Promise of Bitcoin, The Future

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Speaker 1: of Money and How It Can Work for You that

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Speaker 1: came out on May eighteen. Some more news out of

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Speaker 1: Morgan Stanley today, Big shake up in the leadership ranks.

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Speaker 1: And this follows on what we just saw earlier from

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Speaker 1: JP Morgan. So some more changes that Morgan saying, let's

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Speaker 1: see what it means. We bring in our expert. That

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Speaker 1: would be Alison Williams. She's a senior banks analyst for

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Speaker 1: Bloomberg Intelligence. So Alison, what do you make of some

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Speaker 1: of the changes here? It looks like Mr Gorman is

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Speaker 1: setting up a race for potentially a successor. Here's that

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Speaker 1: I would say, Um, you know, the two sort of

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Speaker 1: leading candidates UH emerging from the announcements are no surprise.

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Speaker 1: Um he did say, at least occurring to Bloomberg News. Um,

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Speaker 1: he did say he expects to stand from at least

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Speaker 1: three more years. But then according to the the the

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Speaker 1: official announcement, you know, basically making the head of institutional

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Speaker 1: Ted Pics and the head of Wealth Management Andy Stafferstein

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Speaker 1: as as sort of the the co UH presidents and

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Speaker 1: so front running. I guess the front runners and the

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Speaker 1: air apparent, And both of these executives have done UM

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Speaker 1: a great job over the years. Tech Pic, as you know,

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Speaker 1: UM started out with leadership in the equities business and

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Speaker 1: then took over all of global trading they are the

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Speaker 1: global equities revenue leader, and UM, despite the fact that

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Speaker 1: that's sort of the biggest association with them, they have

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Speaker 1: really gained a lot of share in fixed income and

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Speaker 1: then on the wealth management side, obviously that's a business

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Speaker 1: that's done very well and become sort of the bigger

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Speaker 1: part of the bank, especially with two recent large deals.

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Speaker 1: I don't want to sound too cynical, but are you

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Speaker 1: allowed to choose UM two white men as possible successors

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Speaker 1: these days? It seems like such a faux pa. Well

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Speaker 1: these I mean, the one UM positive on the diversity

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Speaker 1: front is that they are promoting the head of investor Relations,

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Speaker 1: Sharon Yeshiva to UM, the head to to the CFO role.

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Speaker 1: So that was so I think that's a positive UM.

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Speaker 1: But building a bench takes time, and I think that's

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Speaker 1: UM important for all the firms. As we know, diversity

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Speaker 1: is something that you need to grow over time. And

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Speaker 1: for Morgan Stanley, these you know, these two UM executives

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Speaker 1: have run those two divisions and they really were sort

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Speaker 1: of the most clear cut choice is j Morgan. On

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Speaker 1: the other hand, UM, you know what's interesting is CFO

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Speaker 1: Marianne Lake, who has probably a much longer standing with

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Speaker 1: the investment relationship with the investment community than her her

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Speaker 1: new co head Jennifer keep sack Um. But certainly Marianne

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Speaker 1: has long been considered a potential for that role, Jennifer

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Speaker 1: as well in recent years, whereas Morgan family just does

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Speaker 1: not have that bench, but perhaps trying to build it

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Speaker 1: a little bit now, Alison. You know, we think about

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Speaker 1: you know, financial titans. Obviously Jamie Diamond right now is

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Speaker 1: the leader. Give us a sense of how shareholders and

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Speaker 1: folks like you who you know spend a lot of

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Speaker 1: time in the financial services industry. How does Mr Gorman

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Speaker 1: kind of stack up in terms of his tenure. Well,

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Speaker 1: he's done a great job and I would say that um,

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Speaker 1: you know, especially I think in the early years he

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Speaker 1: made some tough voices within the organization. I think that

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Speaker 1: that in general, um, he's been shareholder friendly over the

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Speaker 1: years in terms of um, you know, focusing on things

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Speaker 1: like uh cost control. They've um pretty much delivered all

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Speaker 1: of the targets they set um over the several year tenure.

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Speaker 1: And I think the investment community really likes the shift

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Speaker 1: at the bank more towards the more stable wealth management business.

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Speaker 1: But again They've had great success on the institutional side

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Speaker 1: as well, even though it's a lesser part of their

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Speaker 1: their business. Now, so what does I mean in terms

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Speaker 1: of the league tables here? Who are the rising stars?

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Speaker 1: Where does Morgan Stanley fit into the picture? Well, Morgan Stanley,

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Speaker 1: as I noted earlier, they're they're the leader in global

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Speaker 1: equities trading, so that's I think been been strong and

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Speaker 1: they've gained share um in fixed income. The other notable

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Speaker 1: edition for Morgan Stanley is you know, as an equities

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Speaker 1: underwriter and as a leader in M and A. So

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Speaker 1: it's really Morgan Stanley, JP Morgan and Golden Sex are

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Speaker 1: sort of the you know as we say they're they're

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Speaker 1: the consistent leaders in equity, undant underwriting and traditional I

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Speaker 1: p o s over time, although they have been less

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Speaker 1: active than perhaps some others in facts, they've also done

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Speaker 1: business there um. Both Goldman and Morgan Stanley are are

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Speaker 1: less strong on the death diversus someone like JP Morgan um,

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Speaker 1: but they do get sort of a talent and expected

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Speaker 1: to get a tale in there in M and A. Um.

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Speaker 1: Goldman is the clear revenue leader there um. But again,

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Speaker 1: the three players that I talked about are are very

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Speaker 1: active and that's the business that we expect is very

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Speaker 1: strong fundament with support, Alison, are these are these league

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Speaker 1: table standings and you can see them in many different

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Speaker 1: ways in the Bloomberg with League Rammy go, etcetera. Are

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Speaker 1: they important to UM equity returns? Does it? Does it

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Speaker 1: really play through and how investors can make money on

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Speaker 1: these banks? Sure? And and so I think that's the

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Speaker 1: that's the key point, because what matters to investors is profitability. UM.

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Speaker 1: But Morgan Stanley as well as the largest US banks

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Speaker 1: have benefited from sort of a virtuous cycle of scale

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Speaker 1: and spending and so UM. The benefit of scale is

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Speaker 1: that UM, it gives you more money to invest in technology.

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Speaker 1: That's been the key battleground for financial companies over the

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Speaker 1: last decade. And so that's where the scale has been helpful. Alice,

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Speaker 1: thanks so much for joining us. Always great to get

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Speaker 1: UM your insight. Alison Williams is a senior industry analyst

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Speaker 1: Global Investment, Banks and Asset Management for Bloomberg Intelligence. Talking

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Speaker 1: to us about the new succession plan over at Morgan

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Speaker 1: Stanley really our top story today, this is Bloomberg. Yeah, UM,

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Speaker 1: let's get over right now to Burt Flexinger. We had

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Speaker 1: the pleasure of speaking with Burt bree Flee and and

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Speaker 1: we're rudely interrupted UM the other day on the retail

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Speaker 1: UM earnings UH rampage that we saw over the last

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Speaker 1: few days. It just went on and on yesterday. He's

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Speaker 1: managing director of Strategic Resource Group, and he can come

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Speaker 1: back on thankfully and share a couple more minutes with us.

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Speaker 1: But what did you think after we got you know,

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Speaker 1: all of the UM UH, Walmart, Target, Macy's. I mean,

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Speaker 1: we got really lows home depot, just a ton of

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Speaker 1: big box retailers out as well. How does the economy

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Speaker 1: look from from a consumer perspective? I UH, Paul, Paul,

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Speaker 1: and Matt. The the economy looks spectacular from a consumer perspective.

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Speaker 1: Consumers have paid down seven fifty million dollars in debt

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Speaker 1: or about of total debt and are ready to spend.

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Speaker 1: But the interesting thing is is you reference from yesterday

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Speaker 1: is UM. Nobody's talking about leadership, innovation, inflation, and obesity,

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Speaker 1: which all UM unconventionally combine to really drive up retail.

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Speaker 1: On the Bloomberg terminal and the S and P x

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Speaker 1: RT index retails up about a year to date and

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Speaker 1: about a hundred and forty ttm or trailing twelve months.

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Speaker 1: And at the same time, we have record obesity levels

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Speaker 1: for adults from toddlers to teens. They're gonna need bigger clothes.

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Speaker 1: Inflation means restaurants are uncompetitive on costs. People eating more

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Speaker 1: at home, and uh be between clothing consumables, hard goods

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Speaker 1: and soft goods advantage lows, advantage BJS and advantaged calls,

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Speaker 1: all of whom reported record breaking numbers, and all of

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Speaker 1: whom have great leaders and tremendous boards. From an E,

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Speaker 1: S G and diversity standpoint, it is interesting that people

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Speaker 1: got fatter staying home. You would have thought maybe they'd

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Speaker 1: eat healthier. Um, that's not what happened. I guess it's

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Speaker 1: John Mackie once once once told me consumers want proverbial

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Speaker 1: quote unquote sin in salvation. They want salvation with natural

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Speaker 1: and organics. But when their floods and major natural disasters,

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Speaker 1: the foods full flavor, salt, and sugar are the first

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Speaker 1: to sell out in the stores, and the last to

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Speaker 1: go are the natural and organic items. Hey Bert, didn't

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Speaker 1: you hear any from any of these companies. Supply chain

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Speaker 1: challenges here we've heard that in a lot of industries,

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Speaker 1: are they being able to get the product they need

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Speaker 1: on the shelves? Yes, supply chain and and UH to

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Speaker 1: be b JS, Lowe's Lows UH respective credit they're investing

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Speaker 1: record capital and inventories. But also it's Marshall Merrifield and

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Speaker 1: the directors of the West Coast Sports Unwind. The backlog

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Speaker 1: is more ships seafair as containers come through the West Core,

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Speaker 1: West Coast Golf and Eastern ports. UH, you'll see a

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Speaker 1: record amount of special situation inventory marked H to sell

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Speaker 1: great margins and great treasure hunts for costco b JS

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Speaker 1: and and Lows and the others UH to really capitalize

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Speaker 1: on the logistics and supply chain being UH completely jammed

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Speaker 1: up for fifteen months and opening up to record breaking

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Speaker 1: shipments between now and New Year's which means it will

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Speaker 1: be a great memorial data, labor Day, back to school

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Speaker 1: and certainly holiday selling to all right, Bert, thanks so

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Speaker 1: much for jumping on with us. We always appreciate getting

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Speaker 1: your thoughts on all things retail. Bert Flickinger, Managing Director

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Speaker 1: as Strategic Resource Group, was a busy, busy week for

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Speaker 1: retailer earnings generally coming in very very strong, as you

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Speaker 1: would expect easy comparisons. Plus, this economy is opening up.

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Speaker 1: This is Bloomberg. Now, let's get into the world of

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Speaker 1: retail investing. And I don't mean, you know, buying chairs

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Speaker 1: of Kmart or Kroger, but I mean, um, you know

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Speaker 1: Wall Street bets, diamond hands, Reddit um boards about game

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Speaker 1: stop and alt coins to the moon. Mr Lena a

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Speaker 1: golf of Polo who joins US now personal finance reporter

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Speaker 1: at Bloomberg News. She wrote one of the most read

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Speaker 1: stories on the terminal today and Mr Lenna, I have

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Speaker 1: to say it's a little bit depressing, um reading about

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Speaker 1: this sad dude, Eric Hackney, who's uh his wife Brittany,

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Speaker 1: and he's got a couple of kids, and he just

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Speaker 1: wants to get rich fast, right without having to do anything.

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Speaker 1: So um, he buys what twenty billion Australian safe Shepherd coin.

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Speaker 1: That's exactly right. I mean, you know, this is one

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Speaker 1: could say, pretty parallel to the idea of gambling, right,

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Speaker 1: Like you are basically throwing a couple of hundreds of

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Speaker 1: dollars into uh, into something that you hope will help

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Speaker 1: you get rich quick. But there's absolutely no basis of

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Speaker 1: investing in these coins because of their fundamentals. This is

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Speaker 1: a pure gamble. And the reason why people like Eric

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Speaker 1: are you know, interested in throwing their money and assets

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Speaker 1: like that, is because they've seen people become very rich

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Speaker 1: through these vehicles. And namely, I think the one that

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Speaker 1: we all look at is dodge Coin, right like, this

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Speaker 1: is a coin that started as a joke, um, and

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Speaker 1: if you threw a couple of hundred dollars into dodge

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Speaker 1: coin last July, that meant that those dollars now are

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Speaker 1: worth hundreds of thousands of dollars. And so what these

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Speaker 1: investors are are trying to figure out is what's the

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Speaker 1: next dodge Coin. And that's when the Australian Safe Shepherd

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Speaker 1: coin comes in. But also other cryptocurrencies that are really

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Speaker 1: weirdly named and exists in this sort of really weird

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Speaker 1: um like space within the crypto world called defied for

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Speaker 1: Decentralized Finance and their named you know, after dogs like

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Speaker 1: Sidau or Papua u or baby Nu, but also names

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Speaker 1: like Taco Cat and even safe Moon, you know, which

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Speaker 1: is a coin that was endorsed by Dave Portnoy just

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Speaker 1: a few a few days ago, and so you're really

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Speaker 1: seeing these coins um game traction, and what these retail

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Speaker 1: investors are trying to figure out is which one of

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Speaker 1: them is going to become the next Dodge coin, because hey,

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Speaker 1: if it happened once, it's really will happen again, right,

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Speaker 1: all right, So this is kind of begs, you know,

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Speaker 1: being an old Wall Street guy trading in you know,

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Speaker 1: the boring old stock markets, bond markets, things like that.

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Speaker 1: It just kind of begs for SMA, yes and my munis,

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Speaker 1: thank you very much, just kind of begs for some

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Speaker 1: regulatory oversight. So where do we stand on that? You know,

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Speaker 1: not really not really far into it. I mean this

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Speaker 1: space is as of now completely unregulated, which is why

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Speaker 1: you're seeing a lot of these uh you know, players

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Speaker 1: in this space come in and basically do whatever whatever

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Speaker 1: they want. I mean, the pump and dump scheme in

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Speaker 1: this industry and in this space is known as the

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Speaker 1: rug put right because creating a coin right now it's

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Speaker 1: so easy. There's all these different platforms that exists in

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Speaker 1: the DeFi space where you can basically go on log

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Speaker 1: in at a couple of parameters, and you know, ten

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Speaker 1: minutes or an hour later, you you have a coin

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Speaker 1: and then what a lot of times you know, uh,

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Speaker 1: and that a careers with sort of bad incentives do

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Speaker 1: is they'll create a coin, they'll mint it, they'll they'll

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Speaker 1: promote it, um, but they'll buy in early and then

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Speaker 1: they'll get a lot of other people to buy into it,

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Speaker 1: and that'll cause the price to go up, and then

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Speaker 1: all of a sudden they'll just pull all of their

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Speaker 1: assets and have the price falls. So whoever invested basically

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Speaker 1: loses their money. And that is something that's happening pretty frequently.

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Speaker 1: And I mean, but can we I want two things

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Speaker 1: I have to say because I'm getting a lot of

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Speaker 1: messages here. Um, it's dog coin, not dodge coin. Doge.

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Speaker 1: It's almost it's supposed to be fun to say. It's

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Speaker 1: a ridiculous name. Um, like you know, a royal uh

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Speaker 1: person in Venice the doge. Um. I think though someone

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Speaker 1: like Eric right, um, who's who's chugging bud light my

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Speaker 1: ties and he he knows that this is a scam, right,

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Speaker 1: I mean, everyone who's involved this isn't any worse than people, um,

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Speaker 1: you know, on oxygen, smoking a pack of Marlborough's in

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Speaker 1: a casino, you know, putting their life savings into the

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Speaker 1: slot machine or even walking around New York. I see,

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Speaker 1: you know, the least fortunate people are always in the

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Speaker 1: seven eleven buying all the scratch offs with the money

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Speaker 1: that you know, they don't have to lose, right, so

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Speaker 1: this isn't any worse than that. In fact, these people

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Speaker 1: on Wall Street bets they know what they're in, but

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Speaker 1: they don't they don't mind. And I think of the

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Speaker 1: reason why they don't um and this is based clearly

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Speaker 1: on you know, having spoken to a lot of these investors,

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Speaker 1: is that they're not spending their life savings into these coins.

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Speaker 1: Right We're talking about a couple of hundred dollars, which

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Speaker 1: in their minds is safer than spending it on a

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Speaker 1: lottery tation or going to a casino. Because if you

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Speaker 1: are able to spend enough time on social media where

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Speaker 1: you're seeing uh, these coins being talked about, promote it,

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Speaker 1: and you're able to strategically get in early and pull

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Speaker 1: your money out at the right time, it could work.

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Speaker 1: Is this a safe investment? Definitely? You know, definitely not.

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Speaker 1: There's so much prism to it. But at the end

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Speaker 1: of the day, if you put in two hundred dollars

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Speaker 1: or three d dollars. That's how much you lose, and

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Speaker 1: I think a lot of people are comfortable doing that.

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Speaker 1: All right, fascinating story. Mr Lena a gulf of Polo,

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Speaker 1: Thank you so much. He's a personal financier quarter for

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Speaker 1: Bloomberg News. Thanks for listening to the Bloomberg Markets podcast.

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Speaker 1: You can subscribe and listen to interviews with Apple Podcasts

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Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm

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Speaker 1: on Twitter at Matt Miller nineteen seventy three. On Fall Sweeney,

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Speaker 1: I'm on Twitter at pt Sweeney before the podcast. You

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Speaker 1: can always catch us worldwide at Bloomberg Radio