1 00:00:09,880 --> 00:00:13,880 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm term Keene Jelie. 2 00:00:13,960 --> 00:00:16,960 Speaker 1: We bring you insight from the best and economics, finance, 3 00:00:17,040 --> 00:00:23,520 Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,600 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. In 5 00:00:27,640 --> 00:00:30,800 Speaker 1: the effects market, the dollar weaker pretty much across the 6 00:00:30,840 --> 00:00:33,720 Speaker 1: board in G ten even against the pound just a 7 00:00:33,760 --> 00:00:35,960 Speaker 1: little bit sterling on the front foot by a tenth 8 00:00:35,960 --> 00:00:39,320 Speaker 1: of one percent at one thirty three fifty as inflation 9 00:00:39,360 --> 00:00:41,960 Speaker 1: in the UK comes in higher than expected, north of 10 00:00:42,120 --> 00:00:46,200 Speaker 1: three percent, which means that Governor Khney has to write 11 00:00:46,200 --> 00:00:48,879 Speaker 1: a letter to the Chancellor about why he's missing his 12 00:00:48,960 --> 00:00:52,920 Speaker 1: inflation target by so much. Howard Ward joins us in 13 00:00:53,000 --> 00:00:55,120 Speaker 1: a studio in New York of Gabelly Funds, the c 14 00:00:55,320 --> 00:00:57,840 Speaker 1: i O of Growth Equities. Can you imagine that, Howard, 15 00:00:57,880 --> 00:00:59,600 Speaker 1: that you missed your target and you've got to write 16 00:00:59,600 --> 00:01:02,520 Speaker 1: a letty your boss that is disclosed publicly as to 17 00:01:02,560 --> 00:01:06,479 Speaker 1: why you haven't met it. Yeah, I'm sure that's uh 18 00:01:06,920 --> 00:01:09,240 Speaker 1: not a lot of fun, But I think it's a 19 00:01:09,240 --> 00:01:13,920 Speaker 1: bit of a wake up call regarding the universal complacency 20 00:01:14,080 --> 00:01:20,360 Speaker 1: regarding inflation amongst the central bankers. Yeah, that inflation can 21 00:01:20,400 --> 00:01:24,040 Speaker 1: come upon us sooner than expected. And uh, and then 22 00:01:24,080 --> 00:01:27,399 Speaker 1: what because it's it's in nobody's expectations here in the 23 00:01:27,480 --> 00:01:31,080 Speaker 1: US that we're going to have an inflation problem anytime soon. 24 00:01:31,520 --> 00:01:35,120 Speaker 1: Lots of headlines about how inflation is still missing in action, 25 00:01:35,400 --> 00:01:38,839 Speaker 1: but it can resurface unexpectedly. So there are some really 26 00:01:38,880 --> 00:01:42,240 Speaker 1: specific issues in the UK, Brexit driven issues, a real 27 00:01:42,280 --> 00:01:45,000 Speaker 1: collapse in Sterling after the Brexit vote. Here in the 28 00:01:45,080 --> 00:01:47,560 Speaker 1: United States, we sit down and prepare for the two 29 00:01:47,600 --> 00:01:50,280 Speaker 1: day meaning of the f WEMC, which concludes tomorrow. Most 30 00:01:50,320 --> 00:01:53,280 Speaker 1: economists expect the rate hike. Everyone expects it to be 31 00:01:53,360 --> 00:01:55,400 Speaker 1: Yelling's last press and we go into next year and 32 00:01:55,400 --> 00:01:58,480 Speaker 1: it's just this unbelievable comfort Howard with how this is 33 00:01:58,480 --> 00:02:00,520 Speaker 1: going to play out of the next couple of years 34 00:02:00,520 --> 00:02:02,640 Speaker 1: and yet on two points and things are going to 35 00:02:02,680 --> 00:02:06,280 Speaker 1: remain us They offer a while, do you believe that? Yeah, Well, actually, 36 00:02:06,360 --> 00:02:07,960 Speaker 1: let me just go back from it and try to 37 00:02:07,960 --> 00:02:11,040 Speaker 1: connect some dots here. Because of the because of the 38 00:02:11,120 --> 00:02:15,080 Speaker 1: lag in monetary policy and in the lag impact that 39 00:02:15,360 --> 00:02:20,080 Speaker 1: low rates have on economic growth, you can uh connect 40 00:02:20,160 --> 00:02:24,200 Speaker 1: the surge that we've had in global economic growth in 41 00:02:24,240 --> 00:02:28,760 Speaker 1: recent months to the breaks it period of June of 42 00:02:28,840 --> 00:02:32,200 Speaker 1: sixteen when we had record low interest rates that's when 43 00:02:32,200 --> 00:02:37,200 Speaker 1: the tenure had one point three percent and uh that 44 00:02:37,639 --> 00:02:39,600 Speaker 1: and so because of the lag, we've had a surge. Well, 45 00:02:39,639 --> 00:02:43,679 Speaker 1: now that lag is ending and we're gonna be going 46 00:02:43,680 --> 00:02:46,960 Speaker 1: into a period where we we we haven't benefited from 47 00:02:46,960 --> 00:02:50,120 Speaker 1: the ultra low rate period that we had then. Now 48 00:02:50,240 --> 00:02:52,239 Speaker 1: rates are still very low. In fact, I still think 49 00:02:52,280 --> 00:02:55,880 Speaker 1: there's eleven countries in the world with negative sovereign yields. 50 00:02:55,960 --> 00:02:57,680 Speaker 1: So you know that is still a bit of an 51 00:02:57,760 --> 00:03:01,440 Speaker 1: artificial situation. But what I do think we are we 52 00:03:01,480 --> 00:03:04,960 Speaker 1: are at a point where growth is not it's not accelerating, 53 00:03:05,080 --> 00:03:08,079 Speaker 1: it's actually beginning to slow, and it's going to begin 54 00:03:08,160 --> 00:03:12,079 Speaker 1: to slow in Europe as as the months unwind h 55 00:03:12,200 --> 00:03:14,480 Speaker 1: immediately ahead. Now that's going to be interesting because we 56 00:03:14,520 --> 00:03:16,760 Speaker 1: approached the side of the equity market where a lot 57 00:03:16,760 --> 00:03:18,680 Speaker 1: of people are saying this is late cycle stuff. Now 58 00:03:18,720 --> 00:03:21,160 Speaker 1: position for the late cycle. Themes Bank of America said 59 00:03:21,160 --> 00:03:25,079 Speaker 1: to me just yesterday, position for euphoria? Is it time 60 00:03:25,080 --> 00:03:27,960 Speaker 1: to position for euphoria? Well, I think it's time to 61 00:03:28,200 --> 00:03:33,000 Speaker 1: be prepared for uh. Turbulence because we've had far too 62 00:03:33,040 --> 00:03:37,200 Speaker 1: long a period has passed without having any real turbulence 63 00:03:37,200 --> 00:03:43,000 Speaker 1: in the equity market, and so I think that, uh, 64 00:03:43,040 --> 00:03:47,600 Speaker 1: are things euphoric? No, uh, well, the bitcoin being a side, 65 00:03:47,680 --> 00:03:49,760 Speaker 1: uh you know, something different. But as far as the 66 00:03:49,760 --> 00:03:52,480 Speaker 1: stock market concerns, we don't have euphoria. But we have 67 00:03:52,560 --> 00:03:55,320 Speaker 1: had a three hundred and seventy one total return on 68 00:03:55,360 --> 00:03:58,600 Speaker 1: the SMP five hundred since March of oh nine, and folks, 69 00:03:58,640 --> 00:04:00,440 Speaker 1: that doesn't get much better than that? Can we just 70 00:04:00,480 --> 00:04:03,040 Speaker 1: site Tom Kane that bitcoin was brought up by Howard 71 00:04:03,040 --> 00:04:05,680 Speaker 1: Ward and not me. I didn't mention it. Yeah, he 72 00:04:05,720 --> 00:04:08,240 Speaker 1: did have this morning on television. He just just randomly 73 00:04:08,240 --> 00:04:11,440 Speaker 1: brings up bitcoin. I like to talk about my mistakes 74 00:04:11,440 --> 00:04:13,520 Speaker 1: because I haven't gotten bitcoin right. But let me just 75 00:04:13,560 --> 00:04:17,479 Speaker 1: say this with respect to how bitcoin's price behavior in 76 00:04:17,480 --> 00:04:20,480 Speaker 1: the last couple of weeks, I don't care what you're 77 00:04:20,480 --> 00:04:24,960 Speaker 1: talking about. When anything rises the way bitcoin has risen 78 00:04:25,480 --> 00:04:27,599 Speaker 1: in the last few weeks, to me, that is a 79 00:04:27,640 --> 00:04:31,400 Speaker 1: definition of a mania, and it's smacks of greater greater 80 00:04:31,480 --> 00:04:34,039 Speaker 1: fuel theory. I don't think most of the people that 81 00:04:34,080 --> 00:04:36,520 Speaker 1: are buying bitcoin actually have any idea of what they're 82 00:04:36,520 --> 00:04:39,240 Speaker 1: buying now, we will we will see you. We'll do 83 00:04:39,320 --> 00:04:43,080 Speaker 1: some more on this as well today. Good morning everyone, 84 00:04:43,160 --> 00:04:47,279 Speaker 1: John Pharaoh and Tom Keane in New York, a day 85 00:04:47,320 --> 00:04:49,680 Speaker 1: before a FED meeting. I guess two day meeting, but 86 00:04:50,360 --> 00:04:53,080 Speaker 1: we'll do a lot of FED coverage tomorrow as well. 87 00:04:53,160 --> 00:04:56,719 Speaker 1: Bloomberg Surveillance this morning with Futures Up one brought you 88 00:04:56,760 --> 00:05:02,320 Speaker 1: by Investco. Investco dedicated to delivering an investment experience that 89 00:05:02,360 --> 00:05:05,039 Speaker 1: can help you get more out of life. Learn more 90 00:05:05,120 --> 00:05:10,040 Speaker 1: at investco dot com slash more out of Life. I 91 00:05:10,120 --> 00:05:13,800 Speaker 1: am v E s c O investco dot com slash 92 00:05:13,920 --> 00:05:19,920 Speaker 1: more out of Life. When de FED rate increases, Howard 93 00:05:19,920 --> 00:05:23,599 Speaker 1: Ward click in and begin to impinge in a normal 94 00:05:24,200 --> 00:05:29,520 Speaker 1: traditional way that we have forgotten ages ago. Well, Tom Um, 95 00:05:29,560 --> 00:05:33,200 Speaker 1: I think that, uh, we're at a point where ordinarily 96 00:05:33,240 --> 00:05:37,159 Speaker 1: you would start to see some impact very shortly. Um. 97 00:05:37,279 --> 00:05:40,279 Speaker 1: The reason that it really hasn't happened is that we've 98 00:05:40,320 --> 00:05:44,200 Speaker 1: had no uh increase in longer yields during the last 99 00:05:44,240 --> 00:05:46,599 Speaker 1: two years while the FED has been tightening, and that 100 00:05:46,720 --> 00:05:50,320 Speaker 1: I think is largely because of the lack of yields 101 00:05:50,360 --> 00:05:55,040 Speaker 1: abroad in Europe and Japan has created tremendous demand for treasuries. 102 00:05:55,360 --> 00:05:58,280 Speaker 1: You're getting about twenty nine basis points on a five 103 00:05:58,360 --> 00:06:03,160 Speaker 1: year German bond. You're getting really nothing on a five 104 00:06:03,240 --> 00:06:07,520 Speaker 1: ten year Japanese bond. So the US looks like Mount 105 00:06:07,600 --> 00:06:12,320 Speaker 1: Rushmore in terms of yields right now. So, so you've 106 00:06:12,360 --> 00:06:14,599 Speaker 1: had a flat end of the of the yield curve, 107 00:06:14,680 --> 00:06:17,000 Speaker 1: and as the FED continues to tighten, I don't think 108 00:06:17,040 --> 00:06:19,320 Speaker 1: that yield curve is gonna Stephen. I think it's going 109 00:06:19,400 --> 00:06:22,359 Speaker 1: to remain flat. It's going to get even flatter, And 110 00:06:22,480 --> 00:06:27,800 Speaker 1: so I think that the pe ratios can sustain themselves. Uh, 111 00:06:28,200 --> 00:06:31,240 Speaker 1: as long as that's the case, it's time to get 112 00:06:31,240 --> 00:06:34,040 Speaker 1: out of growth and get into value. That's really the 113 00:06:34,040 --> 00:06:36,120 Speaker 1: heart John, you've nailed. Do you know how many times 114 00:06:36,120 --> 00:06:41,120 Speaker 1: I had that? Howard, all my radars up because of that. 115 00:06:40,920 --> 00:06:43,600 Speaker 1: That's it is. It time to get out of growth 116 00:06:43,600 --> 00:06:46,159 Speaker 1: and get into value. So you know, full confession, you 117 00:06:46,160 --> 00:06:48,400 Speaker 1: know I am. I'm on the growth side of the ledger. 118 00:06:48,480 --> 00:06:52,400 Speaker 1: That's why. Yes, So growth has outperformed value every month 119 00:06:52,480 --> 00:06:56,040 Speaker 1: this year except for June and September. September was a 120 00:06:56,200 --> 00:07:00,360 Speaker 1: violent rotation in the direction of value and smaller caps, 121 00:07:00,360 --> 00:07:03,520 Speaker 1: but I would say this. Historically, we know that growth 122 00:07:03,520 --> 00:07:08,760 Speaker 1: typically outperforms value during periods of of moderate to slowing 123 00:07:08,800 --> 00:07:12,679 Speaker 1: economic growth. So as we look at two thousand and eighteen, 124 00:07:12,760 --> 00:07:15,600 Speaker 1: you can go on the Bloomberg Economic Survey and you 125 00:07:15,640 --> 00:07:19,160 Speaker 1: will see that the consensus for economic growth next year 126 00:07:19,240 --> 00:07:22,040 Speaker 1: is slower growth, not faster growth. So if we're going 127 00:07:22,080 --> 00:07:24,640 Speaker 1: to have slower growth next year and the old curve 128 00:07:24,720 --> 00:07:27,600 Speaker 1: is flat and getting flatter as the Fed titans, I 129 00:07:27,600 --> 00:07:30,120 Speaker 1: don't think I'd be wanting to rush into value stocks. 130 00:07:30,200 --> 00:07:31,480 Speaker 1: So I talked to me about what this means at 131 00:07:31,520 --> 00:07:33,840 Speaker 1: a sector level, because the sector level story that goes 132 00:07:33,880 --> 00:07:35,679 Speaker 1: with that get out of growth and get into value 133 00:07:35,720 --> 00:07:38,640 Speaker 1: story is get out of tech and get into financials. 134 00:07:38,760 --> 00:07:42,400 Speaker 1: What do you say back to that? So, Uh, there's 135 00:07:42,440 --> 00:07:44,920 Speaker 1: a wide variety of stocks that fall under the heading 136 00:07:44,920 --> 00:07:47,440 Speaker 1: of financials, and some of them are not your traditional 137 00:07:47,480 --> 00:07:50,600 Speaker 1: banks or insurance companies. So let me just talk about 138 00:07:51,040 --> 00:07:54,720 Speaker 1: the more traditional financials. For the banks, um flat or 139 00:07:54,760 --> 00:07:57,640 Speaker 1: yield curve is not good for them. Uh, loan demand 140 00:07:57,720 --> 00:08:02,000 Speaker 1: is falling. That's strange. Again, it speaks to the lack 141 00:08:02,040 --> 00:08:05,200 Speaker 1: of acceleration in economic growth. To see commercial industrial loan 142 00:08:05,200 --> 00:08:09,280 Speaker 1: growth slowing, not not increasing, and so the banks are 143 00:08:09,280 --> 00:08:12,320 Speaker 1: gonna have a more difficult time making profits on loans 144 00:08:12,320 --> 00:08:15,480 Speaker 1: and loan demand is falling. Will they benefit from higher 145 00:08:15,520 --> 00:08:19,000 Speaker 1: rates at the short end, yes, they will on their 146 00:08:19,040 --> 00:08:22,440 Speaker 1: deposit base, But nevertheless, uh, you know, the banks have 147 00:08:22,520 --> 00:08:24,480 Speaker 1: had a bit of a run. I don't think it's 148 00:08:24,520 --> 00:08:27,280 Speaker 1: going to be anything surprisingly good for them in the 149 00:08:27,320 --> 00:08:29,480 Speaker 1: near future. Hard word, thank you so much. With Jam 150 00:08:29,760 --> 00:08:32,679 Speaker 1: greatly appreciate the briefing this morning, and of course John, 151 00:08:33,440 --> 00:08:35,760 Speaker 1: I guess really this week we're at the time John, 152 00:08:35,760 --> 00:08:39,400 Speaker 1: where every conversation is a next year coming and it 153 00:08:39,559 --> 00:08:42,040 Speaker 1: has a year and feel. And what's interested about that, Tom, 154 00:08:42,120 --> 00:08:43,600 Speaker 1: is that the year it really hasn't finished. I don't 155 00:08:43,640 --> 00:08:47,720 Speaker 1: mean just by the day. We've got a FED hike 156 00:08:47,800 --> 00:08:49,720 Speaker 1: coming up. We're still waiting for the tax bill to 157 00:08:49,760 --> 00:08:51,960 Speaker 1: go through, and you need to get your Christmas shopping done, 158 00:08:52,000 --> 00:08:54,400 Speaker 1: you know, to the point, and we really haven't discussed 159 00:08:54,400 --> 00:08:56,400 Speaker 1: it yet this morning. You really wonder where is the 160 00:08:56,440 --> 00:09:01,400 Speaker 1: tax bill? Late last night I saw one legit analysis 161 00:09:02,200 --> 00:09:05,600 Speaker 1: that that suggested that they've only got four to five 162 00:09:06,559 --> 00:09:09,760 Speaker 1: billion of the one point five trillion covered. They've got 163 00:09:09,760 --> 00:09:11,880 Speaker 1: to work it out, which which I think is why 164 00:09:12,000 --> 00:09:14,440 Speaker 1: we've we've kind of got this move away from twenty 165 00:09:14,480 --> 00:09:16,520 Speaker 1: and talk at twenty two on the corporate rate to 166 00:09:16,679 --> 00:09:18,959 Speaker 1: which might open up things a little bit. And we've 167 00:09:19,000 --> 00:09:22,760 Speaker 1: got an Alabama special election or Kevin surreally in Alabama 168 00:09:22,800 --> 00:09:25,920 Speaker 1: with some terrific perspective really turn out focused. I know 169 00:09:26,040 --> 00:09:28,320 Speaker 1: Michael bar will be touching that in New York and 170 00:09:28,360 --> 00:09:32,080 Speaker 1: with our news around the nation and world as well. 171 00:09:32,200 --> 00:09:36,040 Speaker 1: Futures up one jeoff, Futures Up thirty. This is Bloomberg. 172 00:09:38,600 --> 00:09:40,920 Speaker 1: And now with the news in New York City and 173 00:09:41,040 --> 00:09:44,360 Speaker 1: sadness in San Francisco. Here's Michael Barr, Tom Jonathan, thank 174 00:09:44,400 --> 00:09:46,400 Speaker 1: you very much, and as you mentioned out of San 175 00:09:46,440 --> 00:09:50,880 Speaker 1: Francisco this morning news Mayor ad Lee has suddenly died. 176 00:09:51,640 --> 00:09:55,080 Speaker 1: Lee when was the first Asian American mayor of San Francisco. 177 00:09:55,520 --> 00:09:58,680 Speaker 1: Lee was sixty. It is election day in Alabama and 178 00:09:58,840 --> 00:10:02,040 Speaker 1: highly it watched in at race. Voters will choose between 179 00:10:02,080 --> 00:10:06,160 Speaker 1: Republican Roy Moore and Democrat Doug Jones. Multiple women have 180 00:10:06,200 --> 00:10:09,400 Speaker 1: accused More of sexual misconduct when they were in their 181 00:10:09,440 --> 00:10:12,280 Speaker 1: teens and he was in his thirties. More now seventy 182 00:10:12,320 --> 00:10:16,000 Speaker 1: denies the charges. Top world officials have opened the Climate 183 00:10:16,040 --> 00:10:19,240 Speaker 1: summon in Paris by saying investors and the entire global 184 00:10:19,240 --> 00:10:24,040 Speaker 1: financial system need to shift faster toward energy and businesses 185 00:10:24,080 --> 00:10:27,040 Speaker 1: that don't worsen climate change. The Prime Minister of the 186 00:10:27,080 --> 00:10:30,160 Speaker 1: Island of Fiji said, we're all in the same canoe. 187 00:10:30,280 --> 00:10:33,439 Speaker 1: Rich countries and poor Global news twenty four hours a day, 188 00:10:33,440 --> 00:10:37,640 Speaker 1: powered by more journalists, analysts, more than a hundred twenty countries. 189 00:10:38,000 --> 00:10:41,440 Speaker 1: Michael Barr, this is Bloomberg. Jonathan tomp Michael, thanks so much. 190 00:10:41,559 --> 00:10:44,680 Speaker 1: Curve flattening this morning, not down to new record flat, 191 00:10:44,760 --> 00:10:48,640 Speaker 1: but nevertheless a flatter yield curve fed day tomorrow. This 192 00:10:49,240 --> 00:10:55,800 Speaker 1: is Bloomberg. Surveillance is brought to you by Bank America, 193 00:10:55,800 --> 00:10:58,120 Speaker 1: Mary Lynch. Dedicated to bring in our clients insights and 194 00:10:58,160 --> 00:11:00,760 Speaker 1: solutions to meet the challenges of a trend filming world. 195 00:11:00,880 --> 00:11:03,160 Speaker 1: And that's the power of global connections. Marrow Ledge, Pace, 196 00:11:03,200 --> 00:11:24,600 Speaker 1: Phenom and Smith Incorporated member Spike PC to be direct. 197 00:11:24,760 --> 00:11:27,680 Speaker 1: It was the interview of the day given the huge 198 00:11:27,760 --> 00:11:32,000 Speaker 1: tragedy we saw a number of months ago and Alexandria, Virginia, 199 00:11:32,080 --> 00:11:36,400 Speaker 1: you remember the um, the shootings, the terror of a 200 00:11:36,440 --> 00:11:40,320 Speaker 1: baseball field with a congressman struck down grievously, and many 201 00:11:40,360 --> 00:11:43,880 Speaker 1: others dead. Nobody gave us better coverage than Terry Haines 202 00:11:43,920 --> 00:11:46,800 Speaker 1: on that horrific morning. He used with ever Corps, I 203 00:11:47,000 --> 00:11:51,320 Speaker 1: s I a citizen of Alexandria, Virginia and someone who, 204 00:11:51,400 --> 00:11:55,000 Speaker 1: among other things, out of Oberlin provides political strategy to 205 00:11:55,200 --> 00:11:57,800 Speaker 1: Ed Hyman and the team over at Evercrep I side. 206 00:11:57,800 --> 00:11:59,600 Speaker 1: He's in her studios, which is a good thing, which 207 00:11:59,640 --> 00:12:01,680 Speaker 1: wonderful to have you here, to be here, thank you 208 00:12:01,760 --> 00:12:04,360 Speaker 1: very much. How do you get a turnout out? I mean, 209 00:12:04,400 --> 00:12:08,120 Speaker 1: you are so steeped in the Washington game that if 210 00:12:08,160 --> 00:12:11,679 Speaker 1: it's Alabama and everybody knows it's about to turn out 211 00:12:11,760 --> 00:12:14,400 Speaker 1: real clear politics as Mr more I believe it had 212 00:12:14,400 --> 00:12:17,280 Speaker 1: by two point two percent. How do you get the 213 00:12:17,360 --> 00:12:20,400 Speaker 1: turnout out? Is that guys like you in Washington who 214 00:12:20,440 --> 00:12:24,040 Speaker 1: fly into a place to get the turnout out? Or 215 00:12:24,080 --> 00:12:27,600 Speaker 1: is that locally derived that The answer is it's a 216 00:12:27,640 --> 00:12:31,960 Speaker 1: mix of both. Actually the what they and I I 217 00:12:32,000 --> 00:12:34,319 Speaker 1: saw a lot of this with the Georgia sixth special 218 00:12:34,320 --> 00:12:36,120 Speaker 1: earlier in the year. You get a lot of you 219 00:12:36,160 --> 00:12:39,479 Speaker 1: get a lot of state party officials and UH and 220 00:12:39,600 --> 00:12:42,280 Speaker 1: technology and the like. To get people out. And then 221 00:12:42,320 --> 00:12:45,280 Speaker 1: you have a lot of money and expertise coming in 222 00:12:45,320 --> 00:12:48,040 Speaker 1: from Washington as well as an overlay, and they hope 223 00:12:48,080 --> 00:12:50,160 Speaker 1: that will help as well. Let's let's just do the 224 00:12:50,720 --> 00:12:56,199 Speaker 1: bipolar outcome here. If Mr Moore wins the Republican hugely contentious, 225 00:12:56,800 --> 00:13:00,880 Speaker 1: what happens next for your Washington? Uh? In my Washington, 226 00:13:02,720 --> 00:13:06,520 Speaker 1: the tax bill still goes forward. Whoever wins this election 227 00:13:06,559 --> 00:13:11,040 Speaker 1: won't be seated until the two of December at the earliest. 228 00:13:11,880 --> 00:13:15,560 Speaker 1: So what the you know, the that goes forward? Uh, 229 00:13:15,640 --> 00:13:19,800 Speaker 1: the more more spending bill negotiations go forward. I expect 230 00:13:19,800 --> 00:13:22,439 Speaker 1: there to be a continue another short term bill to 231 00:13:22,559 --> 00:13:25,800 Speaker 1: tide people into the new year. Uh. Not much changes. 232 00:13:25,960 --> 00:13:30,880 Speaker 1: And there is a decision by the Republican leadership in 233 00:13:30,880 --> 00:13:35,240 Speaker 1: the Senate as to whether they started investigating or all that. 234 00:13:35,480 --> 00:13:38,079 Speaker 1: What about Mr Jones a Democrat? If he, I guess 235 00:13:38,080 --> 00:13:40,640 Speaker 1: it's an upset, I'll use that word. If he wins, 236 00:13:40,679 --> 00:13:43,760 Speaker 1: it's a it's a huge deal for next year, isn't it. Yeah? 237 00:13:43,800 --> 00:13:46,080 Speaker 1: I think it's a huge deal anyway either way. The 238 00:13:46,440 --> 00:13:49,920 Speaker 1: what you have is a situation where, uh, in a 239 00:13:50,000 --> 00:13:53,400 Speaker 1: in a short term sense, Democrats can't lose because either 240 00:13:53,480 --> 00:13:55,800 Speaker 1: More wins, in which case they decry that and uh, 241 00:13:56,000 --> 00:13:57,800 Speaker 1: you put Republicans into a bit of a box. But 242 00:13:57,840 --> 00:14:00,600 Speaker 1: if Jones wins, Uh, then they think they've got more 243 00:14:00,600 --> 00:14:04,280 Speaker 1: wind in their sales for eighteen and uh, and they 244 00:14:04,360 --> 00:14:06,920 Speaker 1: think they've got the last chance to knock off some 245 00:14:06,960 --> 00:14:08,800 Speaker 1: of this stuff they get. They they think they have 246 00:14:08,880 --> 00:14:13,640 Speaker 1: marginally more strength on spending bills. Uh. They probably don't 247 00:14:13,679 --> 00:14:15,880 Speaker 1: think they have an opportunity to knock off the tax bill, 248 00:14:16,000 --> 00:14:18,800 Speaker 1: but they think it might make Republicans think twice. It's 249 00:14:18,800 --> 00:14:23,160 Speaker 1: the Trump miracle versus the nullification project. The words of 250 00:14:23,240 --> 00:14:26,680 Speaker 1: Steve Bannon, The words of Steve Bannon on what is 251 00:14:26,720 --> 00:14:30,120 Speaker 1: happening in Alabama? What's his what's his role? What's his 252 00:14:30,280 --> 00:14:34,680 Speaker 1: role here? Terry? Uh? In other than uh, let's see 253 00:14:34,760 --> 00:14:40,880 Speaker 1: sort of Adrian provocateur h slash uh informal strategist. Although 254 00:14:40,920 --> 00:14:45,160 Speaker 1: I think that that that's probably a little overblown uh slash. 255 00:14:45,240 --> 00:14:47,240 Speaker 1: You know, bringing some money into the campaign. Is he 256 00:14:47,320 --> 00:14:50,720 Speaker 1: splitting the Republican Party? I don't think so. I don't. 257 00:14:50,960 --> 00:14:52,760 Speaker 1: I really don't think so at all. I think I 258 00:14:52,800 --> 00:14:54,920 Speaker 1: think a lot of that's overblown. Frankly, why do you 259 00:14:54,920 --> 00:14:56,640 Speaker 1: think that because a lot of people think that he 260 00:14:56,680 --> 00:14:59,960 Speaker 1: could possibly do what Nigel Farach did in the United Kingdom, 261 00:15:00,040 --> 00:15:02,960 Speaker 1: which is drive a wedge between the between the center 262 00:15:03,080 --> 00:15:05,440 Speaker 1: right party in this case, drive a wedge into the 263 00:15:05,480 --> 00:15:08,720 Speaker 1: Republican Party. Why can Steve Bannon not do what Nigel 264 00:15:08,720 --> 00:15:11,160 Speaker 1: Farage did in the UK? Um Well, and then I 265 00:15:11,160 --> 00:15:14,240 Speaker 1: think that's a smart question. The I think the answer 266 00:15:14,240 --> 00:15:16,760 Speaker 1: to that is what you've got is you've got a 267 00:15:16,800 --> 00:15:19,440 Speaker 1: few races, and I mean a few, the Alabama Race, 268 00:15:19,520 --> 00:15:23,960 Speaker 1: the race uh, couple, a couple of others where the 269 00:15:24,000 --> 00:15:29,440 Speaker 1: Arizona Race where there was a situation where the incumbent 270 00:15:29,520 --> 00:15:31,880 Speaker 1: was already getting way out of step with the state party. 271 00:15:32,600 --> 00:15:35,680 Speaker 1: Bannon is taking that those races, and I think trying 272 00:15:35,720 --> 00:15:39,080 Speaker 1: to project more into that. But as far as the 273 00:15:39,120 --> 00:15:41,800 Speaker 1: fundamental rift in the party, I don't see it. Okay. 274 00:15:41,800 --> 00:15:44,080 Speaker 1: Can I just say the tweet of the days this 275 00:15:44,200 --> 00:15:48,840 Speaker 1: early in the morning, just Scarborough kills it over at MSNBC, say, hey, Bannon, 276 00:15:49,280 --> 00:15:51,880 Speaker 1: you only went to Harvard because you couldn't get into 277 00:15:51,920 --> 00:15:55,960 Speaker 1: Alabama rolled damn tide. You know this this back and 278 00:15:56,000 --> 00:15:58,160 Speaker 1: forth they've had the last forty eight hours, that's just 279 00:15:58,680 --> 00:16:01,920 Speaker 1: you know, I just that's the spirit of this, you know, John, 280 00:16:02,000 --> 00:16:06,240 Speaker 1: that's the trenches debate, the cultural debate that we're seeing 281 00:16:06,240 --> 00:16:09,520 Speaker 1: within this election. In this trenches debate, there is a 282 00:16:09,560 --> 00:16:12,880 Speaker 1: serious discussion about the morals of the goop at this point, 283 00:16:12,920 --> 00:16:16,920 Speaker 1: given the accusations around more in alabamatary, how does the 284 00:16:16,920 --> 00:16:20,320 Speaker 1: president tread this really delicate line between the moral issues 285 00:16:20,360 --> 00:16:24,120 Speaker 1: that are dominating this particular election and the idea that 286 00:16:24,160 --> 00:16:26,200 Speaker 1: actually just got a really slim majority in the Senate. 287 00:16:26,280 --> 00:16:29,840 Speaker 1: Againethan done. Well, there's two There's there's two ways that 288 00:16:29,920 --> 00:16:33,240 Speaker 1: gets addressed. One is that the Republicans and the Senate, 289 00:16:33,480 --> 00:16:37,640 Speaker 1: should More win, have to have to engage and uh 290 00:16:37,720 --> 00:16:39,760 Speaker 1: and investigate more on their own and figure out what 291 00:16:39,760 --> 00:16:42,320 Speaker 1: they want to do. They've got an awful lot of 292 00:16:42,320 --> 00:16:45,640 Speaker 1: of leeway to do that. Number one. Number two, Uh, 293 00:16:46,040 --> 00:16:48,200 Speaker 1: you know, Democrats have frankly helped here. This is not 294 00:16:48,240 --> 00:16:51,320 Speaker 1: a republican problem. This is a political problem. It's a 295 00:16:51,640 --> 00:16:54,400 Speaker 1: it's a political ruling class problem, and of course it 296 00:16:54,400 --> 00:16:57,920 Speaker 1: goes far beyond politics. Uh So, what will end up 297 00:16:57,920 --> 00:17:01,680 Speaker 1: happening is is that as the Democrats seek to make 298 00:17:01,720 --> 00:17:04,080 Speaker 1: this a republican problem, what will end up happening is 299 00:17:04,119 --> 00:17:08,040 Speaker 1: that Republicans will remind everybody that this is a problem. Uh, 300 00:17:08,440 --> 00:17:11,200 Speaker 1: regardless of political affiliate. Your your claim, Terry Haynes with 301 00:17:11,280 --> 00:17:13,959 Speaker 1: this ever corps I s I your your a claim 302 00:17:14,480 --> 00:17:19,399 Speaker 1: is just a very calm Washington. The pragmatic. It's like, 303 00:17:19,480 --> 00:17:22,760 Speaker 1: we're pragmatic. This is the legislation. We've got to get 304 00:17:22,800 --> 00:17:27,399 Speaker 1: it through. What is the pragmatic view in this conference 305 00:17:27,440 --> 00:17:31,840 Speaker 1: now on tax cuts on salt, on state and local taxes? 306 00:17:32,359 --> 00:17:36,320 Speaker 1: What's the pragmatic discussion going on right now? The pragmatic 307 00:17:36,359 --> 00:17:39,840 Speaker 1: discussion is really this the uh that that you have 308 00:17:40,440 --> 00:17:44,240 Speaker 1: what I call the bones of the bill, corporate tax rate, 309 00:17:44,400 --> 00:17:48,199 Speaker 1: keeping it under the trillion and a half dollar deficit cap, uh, 310 00:17:49,240 --> 00:17:53,000 Speaker 1: tweaking the individual rates, that sort of thing. Uh. Every 311 00:17:53,240 --> 00:17:56,080 Speaker 1: you know, you've got to keep that. Everything else is 312 00:17:56,119 --> 00:17:59,760 Speaker 1: to pay for every other discussion about every other pay 313 00:17:59,840 --> 00:18:02,119 Speaker 1: for means you gotta pay for it, You gotta you 314 00:18:02,200 --> 00:18:04,040 Speaker 1: gotta pay for it. Do you see evidence of that? 315 00:18:04,080 --> 00:18:05,960 Speaker 1: Because I don't see evidence of that as a ten 316 00:18:06,000 --> 00:18:09,200 Speaker 1: pm last night, that it's not being paid for it. 317 00:18:09,480 --> 00:18:10,720 Speaker 1: How are we gonna pay? How are we going to 318 00:18:10,800 --> 00:18:12,520 Speaker 1: pay for it? To close a nut to one point 319 00:18:12,520 --> 00:18:16,480 Speaker 1: five trillion. Well, both both bills have pay for us 320 00:18:16,560 --> 00:18:19,080 Speaker 1: that get you within that. So it's a question of 321 00:18:19,119 --> 00:18:21,040 Speaker 1: whether it's it's really a question of which one you 322 00:18:21,160 --> 00:18:24,040 Speaker 1: pick from a from a fairly long laundry list. But 323 00:18:24,080 --> 00:18:28,639 Speaker 1: nobody should be surprised to find that vast majority of 324 00:18:28,680 --> 00:18:32,040 Speaker 1: the ending the salt deduction states in all that sort 325 00:18:32,040 --> 00:18:35,359 Speaker 1: of stuff, because my conversation with Trump administration officials is simple. 326 00:18:36,040 --> 00:18:39,639 Speaker 1: They seem to be modestly aware of how unpopular this 327 00:18:39,800 --> 00:18:44,439 Speaker 1: legislation is. How do how does your Washington respond to 328 00:18:44,560 --> 00:18:47,680 Speaker 1: the polling of this text cut bill. What they think 329 00:18:47,960 --> 00:18:51,119 Speaker 1: is that six months, nine months from now, when the 330 00:18:51,160 --> 00:18:54,040 Speaker 1: rubber starts meeting the road with the mid terms, Uh, 331 00:18:54,080 --> 00:18:59,440 Speaker 1: they get credit for revivifying the economy. And the opinion 332 00:18:59,640 --> 00:19:03,280 Speaker 1: that what's your opinion of that opinion? Well, what we 333 00:19:03,400 --> 00:19:06,960 Speaker 1: see economically, and we wrote about this yesterday, is that 334 00:19:07,560 --> 00:19:12,920 Speaker 1: we see a thirty BIPs increase so that you get 335 00:19:13,520 --> 00:19:16,439 Speaker 1: our median growth is to seven to eight something like 336 00:19:16,480 --> 00:19:20,159 Speaker 1: that for next year. That's a modest uptick, but it's uh, 337 00:19:21,000 --> 00:19:24,520 Speaker 1: but it will help and and and politically, you also 338 00:19:24,560 --> 00:19:26,880 Speaker 1: get to take your Republicans. You also get to take 339 00:19:26,920 --> 00:19:29,639 Speaker 1: credit for every good thing that's happened between now and 340 00:19:29,680 --> 00:19:33,120 Speaker 1: when the effects of the bill start uh start bringing Tom. 341 00:19:33,280 --> 00:19:35,080 Speaker 1: We spent much of the last two years talking about 342 00:19:35,119 --> 00:19:38,280 Speaker 1: the two Americas and the headline GDP number might increase, 343 00:19:38,320 --> 00:19:40,440 Speaker 1: But I wonder whether this really helps the Second America. 344 00:19:40,800 --> 00:19:42,360 Speaker 1: And whilst they might be able to go around next 345 00:19:42,440 --> 00:19:44,520 Speaker 1: year saying that GDP is up, we promised you three 346 00:19:44,520 --> 00:19:47,040 Speaker 1: pc and GDP has a three handle, I wonder what 347 00:19:47,080 --> 00:19:49,320 Speaker 1: wage growth looks like in the Midwest and whether they've 348 00:19:49,359 --> 00:19:50,960 Speaker 1: really moved the dial there, because that's going to be 349 00:19:51,000 --> 00:19:54,760 Speaker 1: the real test of this administration, the promise to address 350 00:19:54,880 --> 00:19:57,640 Speaker 1: the economic issues of the Second America outside of the 351 00:19:57,680 --> 00:20:01,080 Speaker 1: metropolitan and leader New York City, etcetera, to help them. 352 00:20:01,200 --> 00:20:02,919 Speaker 1: UM and I wonder whether this tax plan what he 353 00:20:02,960 --> 00:20:19,520 Speaker 1: does that Terry's thrilled that he's with us right now. 354 00:20:19,560 --> 00:20:23,160 Speaker 1: Brian Reynolds can of court Jenuity, you know Tony Dwyer 355 00:20:23,640 --> 00:20:28,919 Speaker 1: giving wisdom there. Brian has done terrific research and something 356 00:20:29,320 --> 00:20:32,560 Speaker 1: very important and that is shared by back Dynamics. Brian, 357 00:20:32,600 --> 00:20:35,800 Speaker 1: give us the quick summary here what you've learned in 358 00:20:35,880 --> 00:20:41,120 Speaker 1: your year in study of share by backs. Well, buy 359 00:20:41,200 --> 00:20:44,840 Speaker 1: backs have been the main engine for this bull market 360 00:20:45,119 --> 00:20:48,800 Speaker 1: since two thousand nine, and they're continuing to grow when 361 00:20:48,800 --> 00:20:52,800 Speaker 1: they're actually accelerating a little bit. In fact, just yesterday 362 00:20:52,920 --> 00:20:56,200 Speaker 1: Bowling announced an eighteen billions dollars buyback that comes on 363 00:20:56,280 --> 00:20:59,560 Speaker 1: the heels of home depots fifteen billions dollars buy back 364 00:21:00,080 --> 00:21:04,680 Speaker 1: last week. It is stunning the disparity. You've got a chart, folks, 365 00:21:04,760 --> 00:21:07,560 Speaker 1: is too complicated even the discuss, but it's got like 366 00:21:07,600 --> 00:21:11,640 Speaker 1: eight lines and then there's buy backs. I mean, are 367 00:21:11,680 --> 00:21:13,800 Speaker 1: you willing to say we're getting these big double digit 368 00:21:13,840 --> 00:21:18,879 Speaker 1: returns just because of buybacks? Yes? And well, letrot you 369 00:21:18,920 --> 00:21:22,080 Speaker 1: refer to was really complex because it looks at every 370 00:21:22,080 --> 00:21:25,359 Speaker 1: major participant in the stock market. I have another chart 371 00:21:25,440 --> 00:21:28,440 Speaker 1: that's really simple towards the end of that column, which 372 00:21:28,520 --> 00:21:32,760 Speaker 1: just compares buy backs to all investors combined. And what 373 00:21:32,920 --> 00:21:36,920 Speaker 1: that shows is that investors have done very little point 374 00:21:36,960 --> 00:21:41,360 Speaker 1: to point during this bull market. What do they say, 375 00:21:41,440 --> 00:21:43,920 Speaker 1: What does this say about tax cuts though? And what's 376 00:21:43,920 --> 00:21:45,480 Speaker 1: going to happen with the money once they fall to 377 00:21:45,520 --> 00:21:51,639 Speaker 1: the bottom line? Well, these buy backs are fueled by debt. 378 00:21:52,520 --> 00:21:55,639 Speaker 1: The debt is fueled by our nation's public pensions, who 379 00:21:55,720 --> 00:21:59,119 Speaker 1: have become the dominant global investor, tax performer is going 380 00:21:59,160 --> 00:22:03,359 Speaker 1: to do nothing in terms of changing the demand for debt, 381 00:22:05,640 --> 00:22:08,000 Speaker 1: and so what it may do is that if it 382 00:22:08,119 --> 00:22:12,480 Speaker 1: makes companies issue less death then there's two outcomes. One 383 00:22:12,720 --> 00:22:16,119 Speaker 1: is that bond fields decline or two there's more shadow 384 00:22:16,160 --> 00:22:20,040 Speaker 1: banking to fill that void. Either way, that results in 385 00:22:20,160 --> 00:22:23,560 Speaker 1: more money for share buybacks going forward for the next 386 00:22:23,640 --> 00:22:26,800 Speaker 1: few years. So the bullmarket rolls on. Is that basically 387 00:22:26,800 --> 00:22:30,639 Speaker 1: the conclusion then, Brian, Yes, and there's a chance that 388 00:22:30,720 --> 00:22:35,159 Speaker 1: may accelerate. So you've expected to mount up. Is that 389 00:22:35,160 --> 00:22:39,600 Speaker 1: what you're looking for, the classic top, that's just a 390 00:22:39,720 --> 00:22:45,440 Speaker 1: mount up to infinity and then not quite beyond rollover aggressively. Well, 391 00:22:45,440 --> 00:22:48,080 Speaker 1: the amount of money going into public pension is increasing, 392 00:22:48,480 --> 00:22:52,320 Speaker 1: so the melt up may come after two. But don't 393 00:22:52,359 --> 00:22:55,719 Speaker 1: forget this is just a credit cycle. Credit cycles always end, 394 00:22:55,760 --> 00:22:58,240 Speaker 1: and they always end badly. I don't think it's going 395 00:22:58,320 --> 00:22:59,959 Speaker 1: to end for a while, but when it does end, 396 00:23:00,800 --> 00:23:03,960 Speaker 1: we're likely going to have another financial disaster on our hands. 397 00:23:04,000 --> 00:23:08,080 Speaker 1: But in the meantime, all this financial engineering results in 398 00:23:08,160 --> 00:23:10,359 Speaker 1: higher stock prices. Brian, what's going to lead to a 399 00:23:10,400 --> 00:23:13,520 Speaker 1: financial disaster? Though? The banks, the CEOs would say we're 400 00:23:13,560 --> 00:23:15,720 Speaker 1: really well capitalized. In fact, what we'd like to see 401 00:23:15,800 --> 00:23:19,320 Speaker 1: is less regulation, not more. Please stop. The banks really 402 00:23:19,359 --> 00:23:21,880 Speaker 1: well capitalized. Can they handle any kind of big time 403 00:23:21,880 --> 00:23:24,160 Speaker 1: correction in the ext market because the stress tests would 404 00:23:24,200 --> 00:23:27,600 Speaker 1: say yes, Well, the banks are going to be fine 405 00:23:27,960 --> 00:23:30,359 Speaker 1: because they don't own any of this stuff. In the 406 00:23:30,440 --> 00:23:32,840 Speaker 1: last two cycles, in the nineteen nineties and in the 407 00:23:32,880 --> 00:23:36,480 Speaker 1: subprime cycle, the banks owned a lot of it. Now 408 00:23:36,560 --> 00:23:40,640 Speaker 1: we're having the most intense creditable woever without the banks participating. 409 00:23:41,160 --> 00:23:44,440 Speaker 1: That tells you the other participants, the public pensions and 410 00:23:44,440 --> 00:23:48,040 Speaker 1: the insurance companies, are pushing the accelerator harder than ever. 411 00:23:48,600 --> 00:23:52,040 Speaker 1: So the next financial crisis likely won't impact the banks 412 00:23:52,200 --> 00:23:54,640 Speaker 1: the way the last one did, but it will impact 413 00:23:54,680 --> 00:23:57,520 Speaker 1: other sectors on the downside. So let's explore this, Brian, 414 00:23:57,800 --> 00:24:01,200 Speaker 1: what's the response of the government to a financial crisis 415 00:24:01,200 --> 00:24:03,640 Speaker 1: that we're not anticipating next year. It might not happen 416 00:24:03,760 --> 00:24:06,240 Speaker 1: next year, the year after that, but eventually, what does 417 00:24:06,240 --> 00:24:09,800 Speaker 1: the response look like. Well, the crisis may not happen 418 00:24:10,200 --> 00:24:13,400 Speaker 1: until further out than that, and the crisis response will 419 00:24:13,400 --> 00:24:15,919 Speaker 1: be pretty much the same. The Fed will ease and 420 00:24:16,000 --> 00:24:18,760 Speaker 1: it will not have any impact. Remember, the FED eased 421 00:24:18,960 --> 00:24:22,480 Speaker 1: all the way down from late two thousand seven through 422 00:24:22,520 --> 00:24:25,720 Speaker 1: two thousand nine. They ease from two thousands to two 423 00:24:25,720 --> 00:24:30,760 Speaker 1: thousand and three. In need occasion, get it stopped to decline, 424 00:24:31,040 --> 00:24:34,199 Speaker 1: because once you get a snowball, a snowball decline and credit. 425 00:24:35,119 --> 00:24:38,160 Speaker 1: It continues until the price of credit goes below its 426 00:24:38,160 --> 00:24:42,000 Speaker 1: liquidation value. In other words, crom bonds going to twelve 427 00:24:42,040 --> 00:24:47,240 Speaker 1: cents g GM and Chrysler bonds going to eighteen cents. 428 00:24:47,800 --> 00:24:51,080 Speaker 1: Once you hit that point where a bankruptcy judge gives 429 00:24:51,119 --> 00:24:54,359 Speaker 1: creditors more than the bonds are worth, that's what stops 430 00:24:54,400 --> 00:24:56,960 Speaker 1: the crisis, not the FED grant to catch out the 431 00:24:57,000 --> 00:24:59,760 Speaker 1: Brian Reynolds on some really interesting research on his bi 432 00:25:00,000 --> 00:25:02,520 Speaker 1: exton where we might be in five to ten years 433 00:25:02,560 --> 00:25:05,520 Speaker 1: and who know its kind of call genus asset class strategists. 434 00:25:21,080 --> 00:25:24,479 Speaker 1: This is a joy, in an important joy. They're rowers 435 00:25:24,520 --> 00:25:27,600 Speaker 1: out of Harvard, which I've thought has always been grossly 436 00:25:27,680 --> 00:25:31,600 Speaker 1: unfair to their accomplishments at Greenwich Country Day and Brunswick 437 00:25:31,600 --> 00:25:34,400 Speaker 1: in and onto Harvard where they actually took a Really 438 00:25:34,400 --> 00:25:37,080 Speaker 1: I mean, can anybody, how can anybody take a light 439 00:25:37,160 --> 00:25:40,600 Speaker 1: course at Harvard? Is their basket weaving at Harvard. There's 440 00:25:40,640 --> 00:25:45,960 Speaker 1: actually a couple of rocks for Jacks was geology, of course, 441 00:25:46,119 --> 00:25:48,879 Speaker 1: but yeah, most of them pretty hard, yeah, would be. 442 00:25:48,880 --> 00:25:51,000 Speaker 1: You can know it's the Winkle Losses twins are with 443 00:25:51,119 --> 00:25:55,040 Speaker 1: us right now, which barely describes again their success with bitcoin, 444 00:25:55,080 --> 00:25:56,880 Speaker 1: which is the topic of the day. I can talk 445 00:25:56,920 --> 00:26:00,440 Speaker 1: about all sorts of other things, but Cameron, we start 446 00:26:00,480 --> 00:26:03,680 Speaker 1: with with where you are right now with Cebo And see, 447 00:26:03,720 --> 00:26:07,520 Speaker 1: I mean you've picked one of the exchanges and what 448 00:26:07,560 --> 00:26:10,439 Speaker 1: are you exactly going to do for them? So, uh, 449 00:26:10,560 --> 00:26:15,640 Speaker 1: the cebos Bitcoin futures contract XPT futures is a cash 450 00:26:15,680 --> 00:26:19,080 Speaker 1: shuttle contracts. So in order they need to price that contract, 451 00:26:19,359 --> 00:26:22,520 Speaker 1: and so Gemini will be providing the price that contract 452 00:26:22,680 --> 00:26:27,000 Speaker 1: will settle to Gemini's four pm daily auction. I'm gonna 453 00:26:27,000 --> 00:26:28,960 Speaker 1: cut right to the chase. You guys have had a 454 00:26:29,040 --> 00:26:31,880 Speaker 1: huge success with this. You've got to be the greatest 455 00:26:31,920 --> 00:26:36,480 Speaker 1: sale candidate in investment. Right now are people knocking on 456 00:26:36,520 --> 00:26:40,280 Speaker 1: the door major firms saying we'd love to take over Gemini. 457 00:26:41,359 --> 00:26:45,520 Speaker 1: So we're seeing both interests obviously from the customer side. Um, 458 00:26:45,520 --> 00:26:47,840 Speaker 1: we're seeing a lot of the largest market makers in 459 00:26:47,840 --> 00:26:50,840 Speaker 1: the world start onboarding on our platform, and we're also 460 00:26:50,840 --> 00:26:55,560 Speaker 1: seeing a lot of inbound investment interest. Um so absolutely yes. 461 00:26:55,680 --> 00:26:58,280 Speaker 1: I mean the the the interest here is extraordinary to me. 462 00:26:58,440 --> 00:27:01,159 Speaker 1: It goes back to you know, within your family and 463 00:27:01,160 --> 00:27:04,720 Speaker 1: your father was one of the grandfather uh was it 464 00:27:04,800 --> 00:27:07,800 Speaker 1: acclaimed actuary blah blah blah, But you're you grew up 465 00:27:07,800 --> 00:27:11,440 Speaker 1: in a math household with a terrific rigor with your 466 00:27:11,440 --> 00:27:14,919 Speaker 1: father being one of the leading actuaries in the nation. 467 00:27:15,480 --> 00:27:21,560 Speaker 1: Give me the underlying mathematical architecture. Tyler, of the futures 468 00:27:21,640 --> 00:27:25,520 Speaker 1: market to cash right now? Is it a normal futures 469 00:27:25,600 --> 00:27:29,600 Speaker 1: market to cash? You know, I don't know. I'm not 470 00:27:29,640 --> 00:27:33,040 Speaker 1: an expert on that type of structure, but the I 471 00:27:33,080 --> 00:27:34,919 Speaker 1: can tell you that the futures have been off for 472 00:27:35,040 --> 00:27:37,920 Speaker 1: thirty six hours right now, the first ever big point futures. 473 00:27:38,000 --> 00:27:40,280 Speaker 1: And I remember other ones they start out slow. Just 474 00:27:40,560 --> 00:27:43,480 Speaker 1: this completely normal. Actually this started out faster than the 475 00:27:43,560 --> 00:27:47,000 Speaker 1: VIX which is a well traded contract on the CBO 476 00:27:47,080 --> 00:27:51,439 Speaker 1: as well. Um so about seventy eighty million dollars notional 477 00:27:51,440 --> 00:27:55,119 Speaker 1: traded in the first Asia US session. Um, but you know, 478 00:27:55,160 --> 00:27:58,480 Speaker 1: the emails were getting from the huge prop trading firms 479 00:27:58,520 --> 00:28:01,520 Speaker 1: in Chicago that are trading this are about to trade. 480 00:28:01,520 --> 00:28:05,440 Speaker 1: This was you know, massive congratulations, double exclamation points, you know, 481 00:28:05,560 --> 00:28:09,479 Speaker 1: huge success. So for a launch, Um we you know, 482 00:28:10,400 --> 00:28:13,719 Speaker 1: I said Gemini. Um, the folks at the CBO and 483 00:28:13,800 --> 00:28:18,359 Speaker 1: also the other market participants, UM, we're all like, you know, 484 00:28:18,520 --> 00:28:21,399 Speaker 1: jumping and excited for this to our global audience and 485 00:28:21,400 --> 00:28:24,120 Speaker 1: across this nation and particularly in Chicago and serious sex. 486 00:28:24,160 --> 00:28:27,800 Speaker 1: I'm Channel one nineteen Cameron entire wrinkle us with us 487 00:28:28,320 --> 00:28:31,320 Speaker 1: right now with Gemini on this day, the second third day, 488 00:28:31,320 --> 00:28:35,600 Speaker 1: almost third day of trading on uh A bitcoin camera. 489 00:28:35,680 --> 00:28:38,479 Speaker 1: When I look at this market and I look at 490 00:28:38,520 --> 00:28:41,760 Speaker 1: the doubt involved, you guys had a huge confidence of this. 491 00:28:42,120 --> 00:28:46,000 Speaker 1: People made funny. Come on, people were laughing all these 492 00:28:46,000 --> 00:28:49,000 Speaker 1: guys come last week, first day, laugh at you. When 493 00:28:49,040 --> 00:28:50,960 Speaker 1: did you know it was for real? Don't give me 494 00:28:51,000 --> 00:28:53,680 Speaker 1: this malark. You know it was real right away. When 495 00:28:53,720 --> 00:28:57,280 Speaker 1: did it click in that bitcoin could be a tradeable, 496 00:28:57,440 --> 00:29:00,600 Speaker 1: fungible product. Well, I think part of that was when 497 00:29:00,640 --> 00:29:03,200 Speaker 1: we got a trust company license in New York. Um, 498 00:29:03,280 --> 00:29:06,480 Speaker 1: Gemini is a New York trust company, so we have 499 00:29:06,640 --> 00:29:09,640 Speaker 1: the same licensing structure that State Street in Bank of 500 00:29:09,680 --> 00:29:12,400 Speaker 1: New York started with over two hundred years ago, so 501 00:29:12,440 --> 00:29:15,520 Speaker 1: we literally have one of the oldest banking licenses in 502 00:29:15,560 --> 00:29:18,480 Speaker 1: the world married with one of the newest technologies in 503 00:29:18,480 --> 00:29:20,640 Speaker 1: the world. So I think that was really a watershed 504 00:29:20,680 --> 00:29:24,440 Speaker 1: moment where we could say, hey, we're now building regulated 505 00:29:24,480 --> 00:29:28,320 Speaker 1: infrastructure in this market with the same type of license 506 00:29:28,400 --> 00:29:32,440 Speaker 1: structure that UM. Some of the largest financial institutions entrusted 507 00:29:32,600 --> 00:29:35,320 Speaker 1: in the world have UM. And then, as like an 508 00:29:35,360 --> 00:29:38,360 Speaker 1: operator of the business, you see the types of customers 509 00:29:38,400 --> 00:29:40,840 Speaker 1: that are onboarded, and you see the type of customers 510 00:29:40,840 --> 00:29:42,480 Speaker 1: that we're dealing with on a day to day basis. 511 00:29:42,920 --> 00:29:45,360 Speaker 1: It definitely started out as more of a retail market 512 00:29:45,800 --> 00:29:48,200 Speaker 1: or high net worth partners or you know, people who 513 00:29:48,240 --> 00:29:51,480 Speaker 1: got excited about the technology but couldn't necessarily sell it 514 00:29:51,520 --> 00:29:54,840 Speaker 1: to their LPs, and that has completely changed. The conversation 515 00:29:54,880 --> 00:29:57,040 Speaker 1: is completely different. Just to be clear, if you saw 516 00:29:57,280 --> 00:30:00,920 Speaker 1: a list of names of our client US and Gemini 517 00:30:01,080 --> 00:30:04,880 Speaker 1: is a is the world's most regulated exchange custodian to 518 00:30:05,120 --> 00:30:09,000 Speaker 1: buy and sell and store bitcoin and ether. In fact, 519 00:30:09,040 --> 00:30:12,400 Speaker 1: Andrew Governor Governor Andrew Cuomo gave the press release when 520 00:30:12,400 --> 00:30:15,480 Speaker 1: we got the approval to UM to support Ether which 521 00:30:15,480 --> 00:30:17,240 Speaker 1: is another digital asset. But if you looked at the 522 00:30:17,240 --> 00:30:23,560 Speaker 1: client list of companies individuals who are on Gemini and trading, 523 00:30:24,160 --> 00:30:27,520 Speaker 1: the biggest names in the head fund industry, the biggest 524 00:30:28,040 --> 00:30:33,080 Speaker 1: market makers, high frequency traders, proper checkers, down to the 525 00:30:33,160 --> 00:30:36,680 Speaker 1: everyday person. Okay, let's compare to wheat is a tangible product. 526 00:30:36,720 --> 00:30:39,960 Speaker 1: Bitcoin is clearly an intangible product. It has a value, 527 00:30:40,000 --> 00:30:44,120 Speaker 1: there's no question about that. Is your future Tyler and 528 00:30:44,160 --> 00:30:49,720 Speaker 1: Cameron Winklevoss, it's your future linked to the volatility of 529 00:30:49,800 --> 00:30:53,800 Speaker 1: it of bitcoin? Is it linked to a price drop? 530 00:30:53,840 --> 00:30:56,080 Speaker 1: I mean, do you care if the price goes from 531 00:30:56,120 --> 00:30:58,880 Speaker 1: sixteen thousand down to eleven thousand right now? You still 532 00:30:58,880 --> 00:31:02,160 Speaker 1: make money? Right well? As an issue, so the answer 533 00:31:02,240 --> 00:31:05,360 Speaker 1: is um are we're tied to all of it. So 534 00:31:05,480 --> 00:31:09,160 Speaker 1: we are long term UM owners and holders of bitcoin 535 00:31:09,440 --> 00:31:13,280 Speaker 1: and ether um. But with Gemini UM we're tied to 536 00:31:13,480 --> 00:31:18,040 Speaker 1: basically three lines of business exchange trading fees, market data 537 00:31:18,120 --> 00:31:21,000 Speaker 1: fees and custodial. That tells me you don't care what 538 00:31:21,000 --> 00:31:24,000 Speaker 1: the price does. Gemini doesn't. Gemini is agnostic and the 539 00:31:24,040 --> 00:31:27,440 Speaker 1: futures price will follow the spot price. And and quite frankly, 540 00:31:27,480 --> 00:31:30,480 Speaker 1: as you mentioned, earlier. There are a lot of naysayers. Um, 541 00:31:30,520 --> 00:31:33,280 Speaker 1: there's plenty of people going on and saying, oh, bitcoins 542 00:31:33,280 --> 00:31:35,840 Speaker 1: a bubble this or that, and hey, we've been working 543 00:31:35,960 --> 00:31:39,400 Speaker 1: really hard to make this future's contract, um, to bring 544 00:31:39,440 --> 00:31:41,400 Speaker 1: it live so that those people can cut their money 545 00:31:41,440 --> 00:31:43,320 Speaker 1: where their mouth is. If you touch Ice just as 546 00:31:43,400 --> 00:31:46,600 Speaker 1: one example of of one major major international player and 547 00:31:46,640 --> 00:31:50,680 Speaker 1: exchanges and in volume and transactions, if you talk to 548 00:31:50,720 --> 00:31:54,000 Speaker 1: Ice just as one example, No, I'm I'm referring more 549 00:31:54,120 --> 00:31:57,280 Speaker 1: towards the investors and or people who are saying, oh bitcoin, 550 00:31:57,480 --> 00:32:00,239 Speaker 1: you know, we don't agree or think there's long term 551 00:32:00,320 --> 00:32:03,920 Speaker 1: value like Jamie there, Um, so we you know the 552 00:32:03,920 --> 00:32:06,160 Speaker 1: Future's contract. The great thing about is you can now 553 00:32:06,640 --> 00:32:09,960 Speaker 1: actually short bitcoin and so that will increase price discovery 554 00:32:09,960 --> 00:32:13,640 Speaker 1: and long term probably reduced volatility because it has not 555 00:32:13,720 --> 00:32:15,840 Speaker 1: been a two sided market. What would you say, Tyler 556 00:32:15,880 --> 00:32:19,280 Speaker 1: to Jamie Diamond is he looks at JP Morgan, who 557 00:32:19,280 --> 00:32:21,920 Speaker 1: have they have They have a bank responsibility to study 558 00:32:21,960 --> 00:32:25,400 Speaker 1: this market, to study this speculation and hedging. What would 559 00:32:25,440 --> 00:32:29,800 Speaker 1: you say to Mr Diamond this morning? Well, first said say, um, 560 00:32:29,880 --> 00:32:32,080 Speaker 1: talk is cheap. You should put your money where your 561 00:32:32,120 --> 00:32:33,959 Speaker 1: mouth is. Well, he is he's got some people at 562 00:32:34,000 --> 00:32:36,760 Speaker 1: JP Morgan looking at this right well, he thinks that 563 00:32:37,120 --> 00:32:40,720 Speaker 1: he personally thinks that, um, you know, bitcoins of fraud. 564 00:32:40,760 --> 00:32:44,040 Speaker 1: He would fire anybody in his firm that traded it. Um. 565 00:32:44,120 --> 00:32:45,719 Speaker 1: So if he thinks it's a fraud, he should go 566 00:32:45,720 --> 00:32:50,160 Speaker 1: on the c bow and in short bitcoin contracts, because 567 00:32:50,200 --> 00:32:51,719 Speaker 1: that's what I would do, right if I if I 568 00:32:51,760 --> 00:32:55,400 Speaker 1: thought a company was inflated or cooking their books or something, 569 00:32:55,840 --> 00:32:58,760 Speaker 1: I wouldn't just go on and throw at hattums at it. 570 00:32:59,080 --> 00:33:01,560 Speaker 1: I would actually go short it. And so now we've 571 00:33:01,600 --> 00:33:04,880 Speaker 1: given him the opportunity to do it. I agree that, um, 572 00:33:04,960 --> 00:33:06,920 Speaker 1: you know, his bank should look at it, and I 573 00:33:06,920 --> 00:33:09,360 Speaker 1: imagine they are okay. But with Cameron, did you take 574 00:33:09,400 --> 00:33:12,360 Speaker 1: exten With Martin Feldstine? I did? What was it like 575 00:33:12,400 --> 00:33:15,520 Speaker 1: sitting in Necktien with Martin Feldstine? You're seventeen, eighteen years old. 576 00:33:15,840 --> 00:33:17,480 Speaker 1: You're dumb as what I mean? You have your claim 577 00:33:17,480 --> 00:33:19,520 Speaker 1: in high school and all that. How dumb did you 578 00:33:19,560 --> 00:33:24,880 Speaker 1: feel in neck ten there's definitely points. Martin Feldstine was 579 00:33:24,920 --> 00:33:26,600 Speaker 1: on the show the other day. He's a little bit 580 00:33:26,640 --> 00:33:30,080 Speaker 1: skeptical about bigcoin. What would you say to your professor 581 00:33:30,200 --> 00:33:34,680 Speaker 1: freshman year at Harvard about the value, the economic intrinsic 582 00:33:34,800 --> 00:33:37,880 Speaker 1: value of this currency want to be, Yeah, it's a 583 00:33:37,880 --> 00:33:40,880 Speaker 1: great question. I actually did talk to us, so we went. 584 00:33:41,000 --> 00:33:42,960 Speaker 1: We did an NBA at Oxford, and I did talk 585 00:33:43,040 --> 00:33:46,640 Speaker 1: to sent some emails to two of my professors years ago, 586 00:33:46,760 --> 00:33:48,760 Speaker 1: and I should actually probably dig those up at this 587 00:33:48,800 --> 00:33:51,040 Speaker 1: point and kind of see what will give some names 588 00:33:51,040 --> 00:33:53,600 Speaker 1: we like some dirt man, I have to I had 589 00:33:54,280 --> 00:33:56,480 Speaker 1: you didn't go? Did you go to his robof on 590 00:33:56,520 --> 00:33:59,520 Speaker 1: your board? No? No, that would be very interesting with 591 00:33:59,560 --> 00:34:02,800 Speaker 1: a cursor, I'm su which is my book. So I think, 592 00:34:02,800 --> 00:34:07,800 Speaker 1: what what what? Most probably you know Mr Feld's Professor Feldstein, 593 00:34:08,040 --> 00:34:10,640 Speaker 1: or or academics in the space would would look at 594 00:34:10,640 --> 00:34:14,680 Speaker 1: bitcoin and say where's the intrinsic value? And most people say, well, 595 00:34:14,719 --> 00:34:18,160 Speaker 1: gold has intrinsic value because you know, jewelry or this, 596 00:34:18,280 --> 00:34:20,200 Speaker 1: it's shining in this, and it's a store of value. 597 00:34:20,320 --> 00:34:23,640 Speaker 1: And and that is true to some extent um maybe 598 00:34:23,680 --> 00:34:26,320 Speaker 1: ten to fifteen percent of gold value could be attributed 599 00:34:26,360 --> 00:34:30,440 Speaker 1: to industrial purposes or jewelry and things like that UM, 600 00:34:30,520 --> 00:34:33,319 Speaker 1: But in reality, gold is simply a network. We all 601 00:34:33,320 --> 00:34:36,040 Speaker 1: agree that it has value UM, and it's been around 602 00:34:36,080 --> 00:34:37,759 Speaker 1: for thousands of years. But if you look at the 603 00:34:37,760 --> 00:34:43,359 Speaker 1: properties of gold that make gold gold, scarcity, fungibility, divisibility, portability, 604 00:34:43,560 --> 00:34:47,360 Speaker 1: Bitcoin equals or surpasses it in each category. For example, 605 00:34:47,840 --> 00:34:51,920 Speaker 1: gold is scarce. Bitcoin is actually fixed. In terms of portability, 606 00:34:52,480 --> 00:34:54,880 Speaker 1: Bitcoin is like you can send bitcoin like you can 607 00:34:54,920 --> 00:34:57,399 Speaker 1: send an email. It's pretty hard to to to send 608 00:34:57,400 --> 00:35:00,080 Speaker 1: a bar of gold. And and going back to of 609 00:35:00,160 --> 00:35:04,320 Speaker 1: the larger intrinsic value thing, gold has zero intrinsic value. 610 00:35:04,400 --> 00:35:07,399 Speaker 1: To Robinson Crusoe when he's shipwrecked on an island, he'd 611 00:35:07,480 --> 00:35:09,960 Speaker 1: much prefer to have a bottle of water or a sandwich. 612 00:35:10,040 --> 00:35:12,920 Speaker 1: So I think the intrinsic value arguments of gold are 613 00:35:13,320 --> 00:35:17,280 Speaker 1: way overstated. Um. And if you talk to any millennial 614 00:35:17,360 --> 00:35:20,759 Speaker 1: or younger person, they don't want hardware, they want software. 615 00:35:21,200 --> 00:35:22,880 Speaker 1: They do not want to do what you're saying. This 616 00:35:22,920 --> 00:35:26,040 Speaker 1: is a generational thing. It's definitely, that's definitely part of 617 00:35:26,040 --> 00:35:28,480 Speaker 1: It's how your worst nightmare has got to be the government's. 618 00:35:28,560 --> 00:35:32,400 Speaker 1: China looked at this, Stereus said, enough Japan huge, South 619 00:35:32,480 --> 00:35:36,040 Speaker 1: Korea huge? Can government be your friend or enemy as 620 00:35:36,080 --> 00:35:38,840 Speaker 1: you build out Gemini? Oh we we I mean we 621 00:35:38,920 --> 00:35:42,440 Speaker 1: definitely think it's our friend. UM in terms of you 622 00:35:42,440 --> 00:35:45,160 Speaker 1: know that if we went out to build a bank 623 00:35:45,520 --> 00:35:47,680 Speaker 1: that had nothing to do with bitcoin, we would never 624 00:35:47,680 --> 00:35:51,920 Speaker 1: expect not to become licensed and have any money laundering 625 00:35:51,920 --> 00:35:55,120 Speaker 1: and k y C type regulations. Um, we're actually in. 626 00:35:55,280 --> 00:35:58,000 Speaker 1: We're a New York trust company regulated by the New 627 00:35:58,080 --> 00:36:01,759 Speaker 1: York UM State Department of Finential Services, and it took 628 00:36:01,840 --> 00:36:05,000 Speaker 1: us about two years to get that license. And that 629 00:36:05,040 --> 00:36:07,640 Speaker 1: license allows us to get banking partners, that allows us 630 00:36:07,640 --> 00:36:10,279 Speaker 1: to attract hedge funds and actually allows us to do 631 00:36:10,400 --> 00:36:13,560 Speaker 1: this business relationship with the Sea Bows. So we think 632 00:36:13,600 --> 00:36:18,399 Speaker 1: government thoughtful regulation is completely the path forward, and that's 633 00:36:18,440 --> 00:36:20,440 Speaker 1: what we've done with Jemina. I believe it there. Cameron 634 00:36:20,480 --> 00:36:24,879 Speaker 1: Tyler Winkles, congratulations. A lot of people doubted you been 635 00:36:25,120 --> 00:36:29,080 Speaker 1: very very interesting, to say the least on bitcoin. Uh 636 00:36:29,280 --> 00:36:40,759 Speaker 1: the Vinkal Bosses. Thanks for listening to the Bloomberg Surveillance podcast. 637 00:36:41,160 --> 00:36:46,160 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 638 00:36:46,239 --> 00:36:50,560 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 639 00:36:50,640 --> 00:36:54,520 Speaker 1: Keane before the podcast, you can always catch us worldwide. 640 00:36:55,000 --> 00:37:03,480 Speaker 1: I'm Bloomberg Radio