Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. Now, let's focus in
Speaker 1: again on crypto after what we saw yesterday, it was
Speaker 1: pretty mind blowing a drop down to thirty thousand and
Speaker 1: then a rally back up to forty. Right now we're
Speaker 1: trading at forty one thousand, six d forty five dollars.
Speaker 1: What drove those moves as well as probably a number
Speaker 1: of things together, But there is probably no other better
Speaker 1: expert um with whom we could speak about this than
Speaker 1: Bobby Lee is the founder and CEO of Ballet, also
Speaker 1: co founder and former CEO of um btc C, the
Speaker 1: longest running bitcoin exchange. Bobby Um, thanks very much for
Speaker 1: your time this more thing. What do you think happened yesterday?
Speaker 1: Was it just sort of Elon Musk doing an about face?
Speaker 1: Plus um the Chinese authorities saying you can't use bitcoin again? Yes,
Speaker 1: thank you for having me. It is it was a
Speaker 1: confluence of things. Certainly it started with Emon Musk's you know,
Speaker 1: you turn on bitcoin, so to speak, at least from
Speaker 1: a perspective of using it as a accepted currency for
Speaker 1: a purchase of TESTA vehicles. Uh you turned about this, uh,
Speaker 1: you know, late last week. And um, certainly. The other
Speaker 1: aspect is the Chinese regulatory so called the new ban
Speaker 1: on bitcoin. But to analyze that, China didn't actually issue
Speaker 1: anything new. There was no new rules or anything. It
Speaker 1: was just a rehash of what it has previously published
Speaker 1: in September of two thousand seventeen. So it's a confluence
Speaker 1: of those two events which spooked the market. And then
Speaker 1: of course there's a third factor which is very popular.
Speaker 1: Bitcoin is a is the factor of the trading, leverage trading.
Speaker 1: So people may not be aware of this, but bitcoin,
Speaker 1: besides being traded on a smart market, uh, there's a
Speaker 1: high volume activity in the futures, you know, sort of
Speaker 1: leverage trading market, and when there's news events, you know,
Speaker 1: the the short sellers take advantage of it and really
Speaker 1: hammer the people holding the long position, and that really
Speaker 1: helped drive it down a thirty dollars. So, Bobby, let's
Speaker 1: talk about that volatility. Generally speaking, across the securities markets,
Speaker 1: that kind of volatility is not welcome, is considered not healthy.
Speaker 1: How do how do you view it? Yeah, I I
Speaker 1: I see that perspective. Unfortunately, bitcoin is a global sort
Speaker 1: of phenomenon and there and the markets are are not
Speaker 1: well regulated. Frankly speaking, so in equities market, each country
Speaker 1: has very strict regulatory agencies monitoring the trades and the
Speaker 1: insider news and so on and and so forth. And for
Speaker 1: even for the centralize things like gold and precious metals. Uh,
Speaker 1: the exchanges are regulated. But unfortunately for bitcoin, because it's
Speaker 1: a global phenomenon, even though you know, the coin based
Speaker 1: gemini are regulated in the United States, you have a
Speaker 1: lot of exchanges who are offshore and they do that
Speaker 1: thing and it's very opaque. So so at least in
Speaker 1: the near term, it's gonna be very hard to to
Speaker 1: sort of, you know, try to try to control the volatility.
Speaker 1: But as in my new books The Promise of Bitcoin,
Speaker 1: I try to point out to people, volatility does not
Speaker 1: equate to risk. So this is where there's a lot
Speaker 1: of confusion. How is that. Well, so when you ask
Speaker 1: me the question. There's an aliging assumption that volatility is bad,
Speaker 1: and the reason is because risk is bad. You know,
Speaker 1: something that's very high risk can be can be risky
Speaker 1: quote unquote right. Um. But in the case of bitcoin,
Speaker 1: what I found over the my ten years sort of
Speaker 1: interacting with it is that it is well whisked adjusted.
Speaker 1: In other words, I I do you know, I just
Speaker 1: for disclosure, I want to put long position at bitcoin.
Speaker 1: I think that, uh, it has a huge potential as
Speaker 1: investment asset class. So I think for the for the
Speaker 1: amount of return that I expect to see for bitcoin
Speaker 1: in the coming five years, ten years, twenty years, I
Speaker 1: think the volatility is well risk adjusted. I wonder about
Speaker 1: the big whales, Bobby. Um. You know, Bloomberg has been
Speaker 1: publishing a figure two percent of the wallets on of
Speaker 1: the assets. I'd love to get your take on that.
Speaker 1: And Um, the first time I ever met you was
Speaker 1: probably about ten years ago. I was having drinks with
Speaker 1: Matthew Mellon and Alex Waters and uh, you know, Matt
Speaker 1: had a fair share of bitcoin that he you know,
Speaker 1: locked up all over the place and I guess nobody
Speaker 1: will ever access it again. The same him of course
Speaker 1: is true with you know, massive storied steaks like Satoshi's.
Speaker 1: What does it mean that so much of this, you
Speaker 1: know what was you know once and more than a
Speaker 1: trillion dollar market cap. It looks like, you know, billions
Speaker 1: of it was just not accessible and never will be accessible. Um.
Speaker 1: And then other billions of it could easily be moved
Speaker 1: by one or two people. So so there is a
Speaker 1: there is sort of the the notion that there are
Speaker 1: rich people, you know, big whales in the industry, but
Speaker 1: certainly nowhere, nowhere near the figures you presented of did
Speaker 1: you say of the assets? That's what point? Maybe that
Speaker 1: may be true of some other currencies, but certainly not
Speaker 1: true for bitcoin. Uh. That's socially Nakamoto the the sudonymous
Speaker 1: anonymous inventor of bitcoin. We people think he owns maybe
Speaker 1: over a million bitcoins and that's that's the single largest holding, right,
Speaker 1: So so if you can break it down very logically,
Speaker 1: that's uh at most ten percent. Uh. But again he
Speaker 1: hasn't surfaced. You know, there are a lot of rumors
Speaker 1: that he he a should have lost his private keys.
Speaker 1: So the next the next biggest holdings would be would
Speaker 1: be those of those custodial providers, something like coin based
Speaker 1: custody or these large exchanges with a large wallet holding
Speaker 1: a lot of bitcoins, but in reality that is really
Speaker 1: held on custody for you know, thousands or even millions
Speaker 1: of customers. So that point is very well dispersed. I
Speaker 1: wouldn't worry about anything like that. But by the way,
Speaker 1: in reality on on in the physical world, you have
Speaker 1: that phenomenon as well. You know, uh, you know what
Speaker 1: percentage of wealth is owned by what percentage of people?
Speaker 1: People say, you know their figures, you know, under ten
Speaker 1: percent of the people own physic sound of the world's wealth,
Speaker 1: whether it's real estate, equities or or other stuff. Right, Hey, Bobby,
Speaker 1: thank you so much for joining us. We really appreciate
Speaker 1: getting your thoughts here. Fascinating story. Lots of volatility in
Speaker 1: the crypto world we've seen just just this week. Bobby Lee,
Speaker 1: founder and CEO Ballet, is also co founder and former
Speaker 1: CEO of bt C c UH. He's also an author
Speaker 1: recent book out entitled The Promise of Bitcoin, The Future
Speaker 1: of Money and How It Can Work for You that
Speaker 1: came out on May eighteen. Some more news out of
Speaker 1: Morgan Stanley today, Big shake up in the leadership ranks.
Speaker 1: And this follows on what we just saw earlier from
Speaker 1: JP Morgan. So some more changes that Morgan saying, let's
Speaker 1: see what it means. We bring in our expert. That
Speaker 1: would be Alison Williams. She's a senior banks analyst for
Speaker 1: Bloomberg Intelligence. So Alison, what do you make of some
Speaker 1: of the changes here? It looks like Mr Gorman is
Speaker 1: setting up a race for potentially a successor. Here's that
Speaker 1: I would say, Um, you know, the two sort of
Speaker 1: leading candidates UH emerging from the announcements are no surprise.
Speaker 1: Um he did say, at least occurring to Bloomberg News. Um,
Speaker 1: he did say he expects to stand from at least
Speaker 1: three more years. But then according to the the the
Speaker 1: official announcement, you know, basically making the head of institutional
Speaker 1: Ted Pics and the head of Wealth Management Andy Stafferstein
Speaker 1: as as sort of the the co UH presidents and
Speaker 1: so front running. I guess the front runners and the
Speaker 1: air apparent, And both of these executives have done UM
Speaker 1: a great job over the years. Tech Pic, as you know,
Speaker 1: UM started out with leadership in the equities business and
Speaker 1: then took over all of global trading they are the
Speaker 1: global equities revenue leader, and UM, despite the fact that
Speaker 1: that's sort of the biggest association with them, they have
Speaker 1: really gained a lot of share in fixed income and
Speaker 1: then on the wealth management side, obviously that's a business
Speaker 1: that's done very well and become sort of the bigger
Speaker 1: part of the bank, especially with two recent large deals.
Speaker 1: I don't want to sound too cynical, but are you
Speaker 1: allowed to choose UM two white men as possible successors
Speaker 1: these days? It seems like such a faux pa. Well
Speaker 1: these I mean, the one UM positive on the diversity
Speaker 1: front is that they are promoting the head of investor Relations,
Speaker 1: Sharon Yeshiva to UM, the head to to the CFO role.
Speaker 1: So that was so I think that's a positive UM.
Speaker 1: But building a bench takes time, and I think that's
Speaker 1: UM important for all the firms. As we know, diversity
Speaker 1: is something that you need to grow over time. And
Speaker 1: for Morgan Stanley, these you know, these two UM executives
Speaker 1: have run those two divisions and they really were sort
Speaker 1: of the most clear cut choice is j Morgan. On
Speaker 1: the other hand, UM, you know what's interesting is CFO
Speaker 1: Marianne Lake, who has probably a much longer standing with
Speaker 1: the investment relationship with the investment community than her her
Speaker 1: new co head Jennifer keep sack Um. But certainly Marianne
Speaker 1: has long been considered a potential for that role, Jennifer
Speaker 1: as well in recent years, whereas Morgan family just does
Speaker 1: not have that bench, but perhaps trying to build it
Speaker 1: a little bit now, Alison. You know, we think about
Speaker 1: you know, financial titans. Obviously Jamie Diamond right now is
Speaker 1: the leader. Give us a sense of how shareholders and
Speaker 1: folks like you who you know spend a lot of
Speaker 1: time in the financial services industry. How does Mr Gorman
Speaker 1: kind of stack up in terms of his tenure. Well,
Speaker 1: he's done a great job and I would say that um,
Speaker 1: you know, especially I think in the early years he
Speaker 1: made some tough voices within the organization. I think that
Speaker 1: that in general, um, he's been shareholder friendly over the
Speaker 1: years in terms of um, you know, focusing on things
Speaker 1: like uh cost control. They've um pretty much delivered all
Speaker 1: of the targets they set um over the several year tenure.
Speaker 1: And I think the investment community really likes the shift
Speaker 1: at the bank more towards the more stable wealth management business.
Speaker 1: But again They've had great success on the institutional side
Speaker 1: as well, even though it's a lesser part of their
Speaker 1: their business. Now, so what does I mean in terms
Speaker 1: of the league tables here? Who are the rising stars?
Speaker 1: Where does Morgan Stanley fit into the picture? Well, Morgan Stanley,
Speaker 1: as I noted earlier, they're they're the leader in global
Speaker 1: equities trading, so that's I think been been strong and
Speaker 1: they've gained share um in fixed income. The other notable
Speaker 1: edition for Morgan Stanley is you know, as an equities
Speaker 1: underwriter and as a leader in M and A. So
Speaker 1: it's really Morgan Stanley, JP Morgan and Golden Sex are
Speaker 1: sort of the you know as we say they're they're
Speaker 1: the consistent leaders in equity, undant underwriting and traditional I
Speaker 1: p o s over time, although they have been less
Speaker 1: active than perhaps some others in facts, they've also done
Speaker 1: business there um. Both Goldman and Morgan Stanley are are
Speaker 1: less strong on the death diversus someone like JP Morgan um,
Speaker 1: but they do get sort of a talent and expected
Speaker 1: to get a tale in there in M and A. Um.
Speaker 1: Goldman is the clear revenue leader there um. But again,
Speaker 1: the three players that I talked about are are very
Speaker 1: active and that's the business that we expect is very
Speaker 1: strong fundament with support, Alison, are these are these league
Speaker 1: table standings and you can see them in many different
Speaker 1: ways in the Bloomberg with League Rammy go, etcetera. Are
Speaker 1: they important to UM equity returns? Does it? Does it
Speaker 1: really play through and how investors can make money on
Speaker 1: these banks? Sure? And and so I think that's the
Speaker 1: that's the key point, because what matters to investors is profitability. UM.
Speaker 1: But Morgan Stanley as well as the largest US banks
Speaker 1: have benefited from sort of a virtuous cycle of scale
Speaker 1: and spending and so UM. The benefit of scale is
Speaker 1: that UM, it gives you more money to invest in technology.
Speaker 1: That's been the key battleground for financial companies over the
Speaker 1: last decade. And so that's where the scale has been helpful. Alice,
Speaker 1: thanks so much for joining us. Always great to get
Speaker 1: UM your insight. Alison Williams is a senior industry analyst
Speaker 1: Global Investment, Banks and Asset Management for Bloomberg Intelligence. Talking
Speaker 1: to us about the new succession plan over at Morgan
Speaker 1: Stanley really our top story today, this is Bloomberg. Yeah, UM,
Speaker 1: let's get over right now to Burt Flexinger. We had
Speaker 1: the pleasure of speaking with Burt bree Flee and and
Speaker 1: we're rudely interrupted UM the other day on the retail
Speaker 1: UM earnings UH rampage that we saw over the last
Speaker 1: few days. It just went on and on yesterday. He's
Speaker 1: managing director of Strategic Resource Group, and he can come
Speaker 1: back on thankfully and share a couple more minutes with us.
Speaker 1: But what did you think after we got you know,
Speaker 1: all of the UM UH, Walmart, Target, Macy's. I mean,
Speaker 1: we got really lows home depot, just a ton of
Speaker 1: big box retailers out as well. How does the economy
Speaker 1: look from from a consumer perspective? I UH, Paul, Paul,
Speaker 1: and Matt. The the economy looks spectacular from a consumer perspective.
Speaker 1: Consumers have paid down seven fifty million dollars in debt
Speaker 1: or about of total debt and are ready to spend.
Speaker 1: But the interesting thing is is you reference from yesterday
Speaker 1: is UM. Nobody's talking about leadership, innovation, inflation, and obesity,
Speaker 1: which all UM unconventionally combine to really drive up retail.
Speaker 1: On the Bloomberg terminal and the S and P x
Speaker 1: RT index retails up about a year to date and
Speaker 1: about a hundred and forty ttm or trailing twelve months.
Speaker 1: And at the same time, we have record obesity levels
Speaker 1: for adults from toddlers to teens. They're gonna need bigger clothes.
Speaker 1: Inflation means restaurants are uncompetitive on costs. People eating more
Speaker 1: at home, and uh be between clothing consumables, hard goods
Speaker 1: and soft goods advantage lows, advantage BJS and advantaged calls,
Speaker 1: all of whom reported record breaking numbers, and all of
Speaker 1: whom have great leaders and tremendous boards. From an E,
Speaker 1: S G and diversity standpoint, it is interesting that people
Speaker 1: got fatter staying home. You would have thought maybe they'd
Speaker 1: eat healthier. Um, that's not what happened. I guess it's
Speaker 1: John Mackie once once once told me consumers want proverbial
Speaker 1: quote unquote sin in salvation. They want salvation with natural
Speaker 1: and organics. But when their floods and major natural disasters,
Speaker 1: the foods full flavor, salt, and sugar are the first
Speaker 1: to sell out in the stores, and the last to
Speaker 1: go are the natural and organic items. Hey Bert, didn't
Speaker 1: you hear any from any of these companies. Supply chain
Speaker 1: challenges here we've heard that in a lot of industries,
Speaker 1: are they being able to get the product they need
Speaker 1: on the shelves? Yes, supply chain and and UH to
Speaker 1: be b JS, Lowe's Lows UH respective credit they're investing
Speaker 1: record capital and inventories. But also it's Marshall Merrifield and
Speaker 1: the directors of the West Coast Sports Unwind. The backlog
Speaker 1: is more ships seafair as containers come through the West Core,
Speaker 1: West Coast Golf and Eastern ports. UH, you'll see a
Speaker 1: record amount of special situation inventory marked H to sell
Speaker 1: great margins and great treasure hunts for costco b JS
Speaker 1: and and Lows and the others UH to really capitalize
Speaker 1: on the logistics and supply chain being UH completely jammed
Speaker 1: up for fifteen months and opening up to record breaking
Speaker 1: shipments between now and New Year's which means it will
Speaker 1: be a great memorial data, labor Day, back to school
Speaker 1: and certainly holiday selling to all right, Bert, thanks so
Speaker 1: much for jumping on with us. We always appreciate getting
Speaker 1: your thoughts on all things retail. Bert Flickinger, Managing Director
Speaker 1: as Strategic Resource Group, was a busy, busy week for
Speaker 1: retailer earnings generally coming in very very strong, as you
Speaker 1: would expect easy comparisons. Plus, this economy is opening up.
Speaker 1: This is Bloomberg. Now, let's get into the world of
Speaker 1: retail investing. And I don't mean, you know, buying chairs
Speaker 1: of Kmart or Kroger, but I mean, um, you know
Speaker 1: Wall Street bets, diamond hands, Reddit um boards about game
Speaker 1: stop and alt coins to the moon. Mr Lena a
Speaker 1: golf of Polo who joins US now personal finance reporter
Speaker 1: at Bloomberg News. She wrote one of the most read
Speaker 1: stories on the terminal today and Mr Lenna, I have
Speaker 1: to say it's a little bit depressing, um reading about
Speaker 1: this sad dude, Eric Hackney, who's uh his wife Brittany,
Speaker 1: and he's got a couple of kids, and he just
Speaker 1: wants to get rich fast, right without having to do anything.
Speaker 1: So um, he buys what twenty billion Australian safe Shepherd coin.
Speaker 1: That's exactly right. I mean, you know, this is one
Speaker 1: could say, pretty parallel to the idea of gambling, right,
Speaker 1: Like you are basically throwing a couple of hundreds of
Speaker 1: dollars into uh, into something that you hope will help
Speaker 1: you get rich quick. But there's absolutely no basis of
Speaker 1: investing in these coins because of their fundamentals. This is
Speaker 1: a pure gamble. And the reason why people like Eric
Speaker 1: are you know, interested in throwing their money and assets
Speaker 1: like that, is because they've seen people become very rich
Speaker 1: through these vehicles. And namely, I think the one that
Speaker 1: we all look at is dodge Coin, right like, this
Speaker 1: is a coin that started as a joke, um, and
Speaker 1: if you threw a couple of hundred dollars into dodge
Speaker 1: coin last July, that meant that those dollars now are
Speaker 1: worth hundreds of thousands of dollars. And so what these
Speaker 1: investors are are trying to figure out is what's the
Speaker 1: next dodge Coin. And that's when the Australian Safe Shepherd
Speaker 1: coin comes in. But also other cryptocurrencies that are really
Speaker 1: weirdly named and exists in this sort of really weird
Speaker 1: um like space within the crypto world called defied for
Speaker 1: Decentralized Finance and their named you know, after dogs like
Speaker 1: Sidau or Papua u or baby Nu, but also names
Speaker 1: like Taco Cat and even safe Moon, you know, which
Speaker 1: is a coin that was endorsed by Dave Portnoy just
Speaker 1: a few a few days ago, and so you're really
Speaker 1: seeing these coins um game traction, and what these retail
Speaker 1: investors are trying to figure out is which one of
Speaker 1: them is going to become the next Dodge coin, because hey,
Speaker 1: if it happened once, it's really will happen again, right,
Speaker 1: all right, So this is kind of begs, you know,
Speaker 1: being an old Wall Street guy trading in you know,
Speaker 1: the boring old stock markets, bond markets, things like that.
Speaker 1: It just kind of begs for SMA, yes and my munis,
Speaker 1: thank you very much, just kind of begs for some
Speaker 1: regulatory oversight. So where do we stand on that? You know,
Speaker 1: not really not really far into it. I mean this
Speaker 1: space is as of now completely unregulated, which is why
Speaker 1: you're seeing a lot of these uh you know, players
Speaker 1: in this space come in and basically do whatever whatever
Speaker 1: they want. I mean, the pump and dump scheme in
Speaker 1: this industry and in this space is known as the
Speaker 1: rug put right because creating a coin right now it's
Speaker 1: so easy. There's all these different platforms that exists in
Speaker 1: the DeFi space where you can basically go on log
Speaker 1: in at a couple of parameters, and you know, ten
Speaker 1: minutes or an hour later, you you have a coin
Speaker 1: and then what a lot of times you know, uh,
Speaker 1: and that a careers with sort of bad incentives do
Speaker 1: is they'll create a coin, they'll mint it, they'll they'll
Speaker 1: promote it, um, but they'll buy in early and then
Speaker 1: they'll get a lot of other people to buy into it,
Speaker 1: and that'll cause the price to go up, and then
Speaker 1: all of a sudden they'll just pull all of their
Speaker 1: assets and have the price falls. So whoever invested basically
Speaker 1: loses their money. And that is something that's happening pretty frequently.
Speaker 1: And I mean, but can we I want two things
Speaker 1: I have to say because I'm getting a lot of
Speaker 1: messages here. Um, it's dog coin, not dodge coin. Doge.
Speaker 1: It's almost it's supposed to be fun to say. It's
Speaker 1: a ridiculous name. Um, like you know, a royal uh
Speaker 1: person in Venice the doge. Um. I think though someone
Speaker 1: like Eric right, um, who's who's chugging bud light my
Speaker 1: ties and he he knows that this is a scam, right,
Speaker 1: I mean, everyone who's involved this isn't any worse than people, um,
Speaker 1: you know, on oxygen, smoking a pack of Marlborough's in
Speaker 1: a casino, you know, putting their life savings into the
Speaker 1: slot machine or even walking around New York. I see,
Speaker 1: you know, the least fortunate people are always in the
Speaker 1: seven eleven buying all the scratch offs with the money
Speaker 1: that you know, they don't have to lose, right, so
Speaker 1: this isn't any worse than that. In fact, these people
Speaker 1: on Wall Street bets they know what they're in, but
Speaker 1: they don't they don't mind. And I think of the
Speaker 1: reason why they don't um and this is based clearly
Speaker 1: on you know, having spoken to a lot of these investors,
Speaker 1: is that they're not spending their life savings into these coins.
Speaker 1: Right We're talking about a couple of hundred dollars, which
Speaker 1: in their minds is safer than spending it on a
Speaker 1: lottery tation or going to a casino. Because if you
Speaker 1: are able to spend enough time on social media where
Speaker 1: you're seeing uh, these coins being talked about, promote it,
Speaker 1: and you're able to strategically get in early and pull
Speaker 1: your money out at the right time, it could work.
Speaker 1: Is this a safe investment? Definitely? You know, definitely not.
Speaker 1: There's so much prism to it. But at the end
Speaker 1: of the day, if you put in two hundred dollars
Speaker 1: or three d dollars. That's how much you lose, and
Speaker 1: I think a lot of people are comfortable doing that.
Speaker 1: All right, fascinating story. Mr Lena a gulf of Polo,
Speaker 1: Thank you so much. He's a personal financier quarter for
Speaker 1: Bloomberg News. Thanks for listening to the Bloomberg Markets podcast.
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
Speaker 1: on Twitter at Matt Miller nineteen seventy three. On Fall Sweeney,
Speaker 1: I'm on Twitter at pt Sweeney before the podcast. You
Speaker 1: can always catch us worldwide at Bloomberg Radio