WEBVTT - China's Didi Crackdown, Controlling Data 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.239 at Bloomberg dot com slash podcast. Well, first it was 0:00:22.280 --> 0:00:26.079 Ali Baba, Jack Mars Ali Baba and his aunti financial 0:00:26.200 --> 0:00:30.040 Chinese regulators blocking that I p O, sending shivers through 0:00:30.480 --> 0:00:33.760 the big Chinese technology sector. Then d D China's crackdown 0:00:33.840 --> 0:00:37.839 on the ride hailing service UM just days after d 0:00:37.920 --> 0:00:42.440 D went public again in the US, really sending again 0:00:42.560 --> 0:00:46.559 chills through the entire tech sector, particularly those Chinese domacile 0:00:46.640 --> 0:00:48.760 companies that are listed in the West. And people are 0:00:48.800 --> 0:00:50.800 really trying to get a sense of what is behind 0:00:51.479 --> 0:00:57.840 the Chinese government and their crackdown seemingly on these companies. Yeah, absolutely, um, 0:00:57.880 --> 0:01:00.800 you know, really getting you know, list in the West. 0:01:01.080 --> 0:01:04.240 So we have questions about anything China, we go to 0:01:04.319 --> 0:01:06.920 Leland Miller. He's the CEO of China Beach Book International. 0:01:07.360 --> 0:01:09.520 Leland Again, at first I thought it was just Jack 0:01:09.600 --> 0:01:14.440 mob mismanaging or misreading his relationship with the Chinese regulators. 0:01:14.440 --> 0:01:16.440 But it seems to be something much broader than that. 0:01:16.560 --> 0:01:20.679 What's going on. Well, that's the interesting thing about this issue. 0:01:20.959 --> 0:01:23.680 You've got a whole bunch of different sub jobs playing 0:01:23.720 --> 0:01:27.240 out across the Chinese text fhere and and the listing 0:01:27.640 --> 0:01:31.000 the listing universe. We have jack ma and and financial 0:01:31.080 --> 0:01:34.240 and you've got all these stories that's developing on DED 0:01:34.400 --> 0:01:38.920 and how they ignored regulators. I think the broader story 0:01:39.040 --> 0:01:42.880 here is that China is really forcing a paradigm shift. 0:01:43.160 --> 0:01:45.640 There's a lot of worry that these these firms are 0:01:45.680 --> 0:01:47.600 going to go list abroad and they're going to be 0:01:47.640 --> 0:01:50.640 subject to US rules or foreign rules, and they're not 0:01:50.680 --> 0:01:53.320 going to be safeguarding their data which should be in 0:01:53.400 --> 0:01:56.840 China and subject to Chinese rules. So what what Beijing 0:01:56.960 --> 0:02:01.880 is doing right now is in four seeing Beijing's view 0:02:01.960 --> 0:02:05.400 on this this these data are are these are Chinese companies, 0:02:05.560 --> 0:02:07.880 this will be Chinese data, this will be stored in China, 0:02:08.320 --> 0:02:10.720 and uh, I think this is this is finally the 0:02:10.800 --> 0:02:13.280 lesson that that foreign investors need to hear in terms 0:02:13.280 --> 0:02:15.880 of realizing that what the Chinese government has been saying 0:02:16.240 --> 0:02:18.560 it's real, they mean what they're saying, and that they're 0:02:18.639 --> 0:02:23.400 real long term implications here. Yeah, to me, it makes 0:02:23.480 --> 0:02:26.000 perfect sense. I mean, if I were China, I feel 0:02:26.000 --> 0:02:28.960 like I would do it too. If I were the US, 0:02:29.040 --> 0:02:31.880 I would wonder what what to do about this. UM. 0:02:31.880 --> 0:02:35.840 We had a great Bloomberg story overnight that UM showed 0:02:36.320 --> 0:02:41.280 somebody has been circulating a couple of charts illustrating traffic 0:02:41.320 --> 0:02:44.400 at the Ministry of Public Security was really busy on 0:02:44.440 --> 0:02:48.400 a certain day while UM the Anti Corruption Agency wasn't 0:02:48.480 --> 0:02:52.240 using any cars. And it just flipped the switch for me. 0:02:52.600 --> 0:02:55.400 You can use big data to really track some stuff 0:02:55.440 --> 0:02:58.280 that gets that that that the country might want to 0:02:58.360 --> 0:03:01.600 keep secret. You know, not just with DED but also 0:03:01.760 --> 0:03:04.280 probably you can do the same with TikTok. You know 0:03:04.320 --> 0:03:06.800 where all the teenagers are, what they're doing, you know 0:03:06.840 --> 0:03:10.760 what they're buying what It just seems like you would 0:03:10.840 --> 0:03:12.720 want to get a handle on this and not let 0:03:12.760 --> 0:03:17.320 foreign investors access it, right And and you know, when 0:03:17.320 --> 0:03:20.799 you're talking about big data, there are insights you can 0:03:20.880 --> 0:03:23.240 glean from big data, and then there are ways to 0:03:23.400 --> 0:03:27.040 use data to influence certain populations. That's of course what 0:03:27.080 --> 0:03:29.440 we were talking about with TikTok the potential there for 0:03:29.480 --> 0:03:32.799 them to send political messages subtenly or not through into 0:03:32.880 --> 0:03:37.080 the into the Western environments. But yeah, look the risk 0:03:37.160 --> 0:03:40.000 with big data are are just developing, and China is 0:03:40.480 --> 0:03:43.640 very cognizant of what it doesn't want to be, uh, 0:03:43.880 --> 0:03:45.280 you know, a face that doesn't want to be showing 0:03:45.280 --> 0:03:47.200 the rest of the world. So so again, this this 0:03:47.280 --> 0:03:50.600 is just a gigantic issue going forward. So Leland, you know, 0:03:50.880 --> 0:03:52.560 we love to have you acause you help us really 0:03:52.560 --> 0:03:55.000 see the big picture as it relates to US and 0:03:55.120 --> 0:03:58.640 China relations as we pull back here and think about it. 0:03:58.680 --> 0:04:03.240 Is this just, guess, another example of a building tech 0:04:03.520 --> 0:04:08.760 cold war between the US and China. Yeah. Look, every 0:04:08.760 --> 0:04:11.440 time anyone uses a term like that, there's a thousand 0:04:11.520 --> 0:04:13.600 academics that rush in and say, no, no, look, it's 0:04:13.600 --> 0:04:15.480 not a cold war. It's different than the last one, 0:04:15.760 --> 0:04:19.080 you know, decoupling. There's not a real US China financial 0:04:19.120 --> 0:04:21.840 decoupling and the broadest sense. But sure, I mean, look, 0:04:21.839 --> 0:04:23.880 if you're if you're just trying to get an understanding 0:04:23.880 --> 0:04:27.240 of directionality here, yes, you're seeing all these uh you know, 0:04:27.279 --> 0:04:30.080 you're seeing this, this this this cold war esque environment 0:04:30.080 --> 0:04:33.400 developed and you are seeing some elements of financial decoupling. 0:04:33.960 --> 0:04:36.920 The US has an enormous amount of leverage, particularly because 0:04:37.040 --> 0:04:39.520 Chinese companies like the list in the US, and it 0:04:39.600 --> 0:04:43.160 has used that leverage, not not always and not enough, 0:04:43.320 --> 0:04:45.599 you know, in the case of audits, for instance, but 0:04:45.640 --> 0:04:48.839 it is used for for its compliance regime to be 0:04:49.040 --> 0:04:51.760 the default. And what China is saying is no, our 0:04:51.800 --> 0:04:54.040 companies will not be subject to that. They will be 0:04:54.080 --> 0:04:58.479 subject to a Chinese compliance regime overall at the top layer. 0:04:58.760 --> 0:05:01.680 And the problem with this is it's not entirely clear 0:05:02.120 --> 0:05:05.080 that a lot of companies who who operate in China 0:05:05.120 --> 0:05:08.120 and the United States and other places can actually adhere 0:05:08.160 --> 0:05:10.240 to the law that is both Chinese law and the 0:05:10.320 --> 0:05:12.560 U s law. Something has to give, and it's not 0:05:12.800 --> 0:05:16.240 clear at all what that's going to be. You know, 0:05:16.360 --> 0:05:18.760 this all happened right around the same time we saw 0:05:18.920 --> 0:05:23.920 yield start to um drop in the US for six 0:05:24.000 --> 0:05:25.720 days in a row, seven days in a row, eight 0:05:25.800 --> 0:05:28.240 days in a row. And then Jim O'Neill was on 0:05:28.680 --> 0:05:32.000 Bloomberg Television I think it was yesterday morning, telling Francine 0:05:32.080 --> 0:05:38.159 Lacroix that um that China is really the catalyst for 0:05:38.320 --> 0:05:43.480 the flight to safety, maybe not the data issue or 0:05:43.680 --> 0:05:46.919 the d D issue specifically, but concerns about growth, concerns 0:05:46.920 --> 0:05:51.919 about what's happening post one year anniversary, Um, what's going 0:05:51.960 --> 0:05:54.320 on there? Do do we do? We do? We know 0:05:54.520 --> 0:05:57.320 enough about Chinese growth and how strong it is the 0:05:57.360 --> 0:06:02.760 recovery from COVID. Sure, we know a lot about it, 0:06:03.000 --> 0:06:05.080 Chinese growth. And the problem is that not enough people 0:06:05.120 --> 0:06:07.640 are listening and you know a lot about it. We 0:06:07.680 --> 0:06:10.159 don't know. That's why we have you on. Well, you know, 0:06:10.240 --> 0:06:13.599 look the the issues since China emerged, you know that 0:06:13.760 --> 0:06:16.680 with with with quotations around emerged from from the coronavirus 0:06:17.040 --> 0:06:18.880 uh and and and it's you know, into this very 0:06:18.960 --> 0:06:24.840 impressive recovery was that Beijing announced this recovery as way 0:06:24.839 --> 0:06:27.080 more intense than it actually was. They did a great job, 0:06:27.120 --> 0:06:29.560 that did better anyone else. That's fine, but it was 0:06:29.640 --> 0:06:32.719 never a soaring recovery. What they did is pull growth 0:06:32.720 --> 0:06:35.359 forward from one and announced year and year growth and 0:06:35.600 --> 0:06:38.520 basically signal that there is a return to normalcy because 0:06:38.560 --> 0:06:41.839 the party conquered the virus. And what the real story 0:06:42.040 --> 0:06:44.400 was is that yes, they got stimulus out there and 0:06:44.400 --> 0:06:47.960 they did a good crackdown to to to take out outbreaks, 0:06:48.000 --> 0:06:51.359 but there was never a durable recovery. On the consumption side, 0:06:51.640 --> 0:06:55.239 services has been treading water. Retail has been doing very poorly. 0:06:55.440 --> 0:06:58.800 Consumption more broadly has been doing very poorly, particularly in 0:06:58.800 --> 0:07:01.839 the latest China Beja book data. Our credit data are 0:07:02.320 --> 0:07:06.520 shockingly tight right now. You know, our our investment data down. 0:07:06.760 --> 0:07:09.119 So yes, he were seeing some of these numbers early 0:07:09.160 --> 0:07:12.400 on that suggested that, you know, China's back. China's not 0:07:12.560 --> 0:07:14.800 back in the sense that it it's where it was before. 0:07:15.120 --> 0:07:18.080 And now you're seeing people finally get the worries and 0:07:18.120 --> 0:07:20.920 realize that, look, getting up factories up and running and 0:07:20.920 --> 0:07:23.400 exports up and running is good, but I's not sustainable 0:07:23.400 --> 0:07:25.400 if they can't get the consumption inside of the economy 0:07:25.400 --> 0:07:28.400 back working again. This is why it's great to get 0:07:28.600 --> 0:07:30.240 you on the program, Leland. We should have you on 0:07:30.280 --> 0:07:33.400 more often because I think you know, for for a while, 0:07:33.720 --> 0:07:36.520 markets kind of lost sight um the last few weeks, 0:07:36.520 --> 0:07:39.360 the last few months of what was going on in China, 0:07:39.600 --> 0:07:41.840 and then all of a sudden got wind of it, 0:07:42.000 --> 0:07:45.239 and as a result, we saw a tenure yield um 0:07:45.360 --> 0:07:49.080 in US treasuries at so Leland. Miller is the CEO 0:07:49.200 --> 0:07:53.120 of China beige Book International, talking to us about the 0:07:53.160 --> 0:07:57.280 big data, the control of big data, and UM the 0:07:57.400 --> 0:08:05.200 growth situation post pandemic. We have been asking I've been 0:08:05.240 --> 0:08:08.119 asking the same question for days and days and days. 0:08:08.160 --> 0:08:10.760 And I know that we've seen things turn around a 0:08:10.760 --> 0:08:16.880 little bit now, but Paul, treasuries are still very Yeah, 0:08:16.920 --> 0:08:20.360 and in the ten year I mean, yes, it's a 0:08:20.400 --> 0:08:22.440 bounce back from yesterday. We were down. What was the 0:08:22.480 --> 0:08:25.920 lowest we hit? Like one was the body tick UM. 0:08:25.960 --> 0:08:29.280 In any case, it's still a conundrum to me. Just heard, uh, 0:08:29.680 --> 0:08:32.240 just heard Muhammad al Arian talk about it. Let's bring 0:08:32.240 --> 0:08:34.760 in Jordan Jackson to ask him. He's vice president and 0:08:34.760 --> 0:08:40.679 global market strategist for JP Morgan Asset Management. Jordan's you know, 0:08:40.880 --> 0:08:43.439 I don't just ask these questions. I was up past 0:08:43.480 --> 0:08:47.680 midnight reading people's theories online, not just you know, crazy 0:08:47.720 --> 0:08:51.960 people on Reddit, but you know smart market technicians. I 0:08:52.120 --> 0:08:56.960 still don't get it. It doesn't seem to jibe with 0:08:57.400 --> 0:09:01.400 UM a view that the economy is strong and picking 0:09:01.480 --> 0:09:02.960 up and we're going to see real growth for the 0:09:03.000 --> 0:09:08.120 next couple of years. Yeah, it's it's I if anyone 0:09:08.160 --> 0:09:11.600 tells says that they are absolutely a hundred percent accurate, 0:09:11.640 --> 0:09:13.920 and why yields are where they are, I think, I 0:09:13.920 --> 0:09:15.959 think that's a long shot. But I think there's a 0:09:15.960 --> 0:09:19.640 confluence of things that are happening that are causing or 0:09:19.760 --> 0:09:23.320 that have caused this this reversal in yields. And you know, 0:09:23.480 --> 0:09:26.680 one is the supply side of the equation. If we 0:09:26.760 --> 0:09:29.839 think about what's happened over pretty much the course of 0:09:29.880 --> 0:09:32.400 the first half of the year, you've seen a significant 0:09:32.440 --> 0:09:36.320 draw down in the Treasury General Account. So the Treasury 0:09:36.320 --> 0:09:40.440 Department has not been funding additional fiscal stimulus by way 0:09:40.440 --> 0:09:43.600 of issuing new treasury bonds. It's by way of drawing 0:09:43.640 --> 0:09:47.160 down the Treasury General the Treasury General account. And what 0:09:47.320 --> 0:09:50.679 that does is that increases bank reserves in the system, 0:09:50.960 --> 0:09:54.000 just that mechanical aspect. And so what we actually have 0:09:54.080 --> 0:09:57.360 seen is, you know, from from banks. You know, as 0:09:57.400 --> 0:09:59.960 as reserves have increased in the banking system, that money 0:10:00.000 --> 0:10:02.920 it's got to find itself somewhere. Typically it finds its 0:10:02.960 --> 0:10:04.760 way at the front end of the curve. But what 0:10:04.880 --> 0:10:07.120 we have been observing more recently is that those flows 0:10:07.120 --> 0:10:09.040 have actually been making their way to the back end 0:10:09.040 --> 0:10:11.599 of the curve as well. So there's there's this have 0:10:11.720 --> 0:10:13.880 been some strong demand from banks as well as from 0:10:13.920 --> 0:10:16.400 from foreign investors as well. I talked about how the 0:10:16.760 --> 0:10:20.280 rolldown of the treasury general account at the same time 0:10:20.320 --> 0:10:23.040 the FED is still purchasing eighty billion dollars a month 0:10:23.080 --> 0:10:26.720 and treasuries. You've actually seen net negative supply of treasury 0:10:26.720 --> 0:10:29.400 issuance come to the market as well. So you can 0:10:29.640 --> 0:10:32.440 sort of paint yourself with supply and demand demand picture 0:10:32.880 --> 0:10:36.959 in which you've got potentially demand outpacing pacing supply that's 0:10:36.960 --> 0:10:39.079 put down with pressure and yield. I think there was 0:10:39.160 --> 0:10:41.400 sort of a self fulfilling prophecy to the first half 0:10:41.440 --> 0:10:43.839 of the first quarter of the year that yields were 0:10:43.880 --> 0:10:45.760 going to rise in the back half. Growth is going 0:10:45.800 --> 0:10:47.880 to be stronger in the second half of the year 0:10:48.040 --> 0:10:49.520 than it was going to be in the first half 0:10:49.559 --> 0:10:51.920 of the year. Until you have this this this this 0:10:52.240 --> 0:10:55.280 broad market narrative of a Stephen and yield curve, and 0:10:55.320 --> 0:10:58.160 I think folks were positioned as such um and so 0:10:58.240 --> 0:11:00.439 you have some shorts come onto the market. I think 0:11:00.440 --> 0:11:02.760 some of those shorts have to unwound themselves as yields 0:11:02.760 --> 0:11:06.040 started to grind lower UM and so a lot of 0:11:06.040 --> 0:11:09.200 these factors kind of funneling into the move lower from 0:11:09.240 --> 0:11:13.040 a technical perspective, the move lower in bond yields. All right, George, 0:11:13.040 --> 0:11:17.480 given where we are in the yield market, what are 0:11:17.520 --> 0:11:19.520 you telling your clients in terms if they're looking for 0:11:19.559 --> 0:11:22.600 a return here and they just gotta go the equity markets, 0:11:22.600 --> 0:11:26.800 don't they? What are you hearing from your clients? That's 0:11:26.880 --> 0:11:29.680 that's pretty much what what we're seeing. I mean, the 0:11:29.720 --> 0:11:32.280 reality is the fixed income landscape. It's kind of like 0:11:32.320 --> 0:11:35.160 trying to look for um, the cheapest house on a 0:11:35.200 --> 0:11:38.400 really expensive block, um, and we're trying to generate output. 0:11:38.440 --> 0:11:40.800 It's it's we don't want to trick ourselves into trying 0:11:40.800 --> 0:11:42.560 to pick up pennies in front of a steam roller. 0:11:42.760 --> 0:11:45.800 I mean, that's just where credit spreads are at um UM. 0:11:46.040 --> 0:11:49.199 Given the impact of that, everyone searching for yield, there's 0:11:49.240 --> 0:11:50.959 a lot of cash out there are not enough bonds 0:11:51.480 --> 0:11:53.720 UM and so look, if you do have to sort 0:11:53.720 --> 0:11:57.000 of start to look towards the equity market for for 0:11:57.000 --> 0:12:00.320 for yields UM hedge type of strategies to sort of 0:12:00.360 --> 0:12:03.280 mitigate some of some of the downside risk UM and 0:12:03.280 --> 0:12:06.239 and even looking at some of the sort of hybrid securities, 0:12:06.320 --> 0:12:10.520 may think preferredsum given bank stocks are the primary issuers 0:12:10.600 --> 0:12:13.360 of preferred stocks. Uh C CAR results came out a 0:12:13.360 --> 0:12:15.800 couple of weeks ago those where those are very encouraging. 0:12:16.200 --> 0:12:18.760 We're going to get some reports coming through. From an 0:12:18.760 --> 0:12:22.040 earnings perspective, we think bank balaciets are are very very strong, 0:12:22.320 --> 0:12:24.280 so preferred preferred to look like they could be a 0:12:24.280 --> 0:12:27.679 good spot for for income income as well. And then 0:12:27.720 --> 0:12:29.760 on the convertible side, we do think some of the 0:12:29.840 --> 0:12:33.400 more UM equity like convertibles or those things, they have 0:12:33.520 --> 0:12:37.760 run up pretty significantly UM over over the past twelve 0:12:37.800 --> 0:12:39.920 months or so. UM we still think there are some 0:12:39.920 --> 0:12:44.800 some interesting opportunities in that space as well. Is UM 0:12:44.920 --> 0:12:47.520 the US going to continue to outperform? Do you do 0:12:47.559 --> 0:12:50.960 you start to put more of your bets on in, 0:12:51.960 --> 0:12:54.760 for example, emerging markets as they start to well, as 0:12:54.800 --> 0:13:00.760 they eventually will reopen and recover. So it's it's it's interesting. 0:13:00.800 --> 0:13:03.000 It's kind of like, if I'm going to think about 0:13:03.040 --> 0:13:06.080 global equity markets, where is the baton going to be passed? 0:13:06.120 --> 0:13:09.600 Two next sort of started started to start the conversation 0:13:09.679 --> 0:13:11.960 that folks generally thought that growth was going to be 0:13:12.000 --> 0:13:15.280 particularly exceptional in the second half of the year. We 0:13:15.320 --> 0:13:17.760 actually may be looking at peak growth in the second 0:13:17.840 --> 0:13:20.559 quarter of this year, particularly here in the US. Now, 0:13:20.559 --> 0:13:23.319 we still are expecting above trend growth in the second half, 0:13:23.559 --> 0:13:27.000 but at certain deceleration from sort of a ten percent 0:13:27.080 --> 0:13:30.160 quarter a quarter pace that we're expecting here in in 0:13:30.160 --> 0:13:33.080 in the second quarter. Now, where does the baton get 0:13:33.200 --> 0:13:36.200 passed too? I do think that the next sort of 0:13:36.200 --> 0:13:38.960 of of of equity market, global equity market is going 0:13:39.000 --> 0:13:42.040 to be sort of your Europe and Japan um, you know, 0:13:42.280 --> 0:13:45.720 as they get over there their their COVID curves. Over 0:13:45.760 --> 0:13:47.880 the next few months here you should start to see 0:13:47.960 --> 0:13:51.079 some that cyclical trade, that reflation trade bring itself back 0:13:51.080 --> 0:13:53.120 into the market. Hey, Jordan, thanks so much for joining us. 0:13:53.120 --> 0:13:56.040 Really appreciated. Jordan Jackson, vice president, Global market Strategist at 0:13:56.120 --> 0:14:01.560 JP Morgan Asset Manager. All Right, you've heard a venture capital, 0:14:01.600 --> 0:14:04.280 You've heard maybe even a venture equity, but how about 0:14:04.400 --> 0:14:08.520 venture debt. Dan divorcets CE IO and executive vice president 0:14:08.600 --> 0:14:12.280 for Horizon Technology Fans. They're based in Brookfield, Connecticut. He 0:14:12.320 --> 0:14:14.040 joins us. Dan, thanks so much for taking the time. 0:14:14.559 --> 0:14:18.679 What is venture debt Matt and Paul, first of all, 0:14:18.679 --> 0:14:21.520 thanks for having me pleasure to be here. Venture debt 0:14:22.040 --> 0:14:24.600 is a non dilutive source of capital for these same 0:14:24.680 --> 0:14:28.480 venture capital backed companies that you were referring to UM, 0:14:29.240 --> 0:14:33.400 their development and growth stage companies that are backed by 0:14:33.440 --> 0:14:36.760 really world class VC and P investors. And venture debt 0:14:36.840 --> 0:14:41.160 is secured loans to these companies that provide non dilutive 0:14:41.160 --> 0:14:43.920 capital to get them to their next valuation point and 0:14:44.000 --> 0:14:47.480 raise additional equity at much higher evaluations. We provide UH 0:14:47.560 --> 0:14:51.400 an option for for for equity. I think it's really 0:14:51.440 --> 0:14:55.680 fascinating because Matt Levin just UM a couple of days ago, 0:14:55.840 --> 0:15:00.320 was writing about how important vcs are not just as 0:15:00.320 --> 0:15:03.280 a source of capital, but also as a source of advice. 0:15:03.840 --> 0:15:06.760 You know, these young kids or I guess old people 0:15:06.760 --> 0:15:10.080 could start companies to UM, you know, just get getting 0:15:10.120 --> 0:15:13.080 into the into the market. They need to know how 0:15:13.480 --> 0:15:15.600 before the I p O to a bunch of strangers, 0:15:15.680 --> 0:15:18.280 right or before they sell debt to a bunch of strangers. 0:15:18.320 --> 0:15:21.920 So I wonder how how much you not only loan 0:15:22.000 --> 0:15:24.120 these companies money, but take them by the hand the 0:15:24.200 --> 0:15:27.720 hand and lead them along. So we provide we've certainly 0:15:27.760 --> 0:15:31.120 provided advice in terms of their financial path. We don't 0:15:31.120 --> 0:15:33.360 claim we I'm not a technologist, I'm not a I'm 0:15:33.360 --> 0:15:34.880 not a scientist, So I'm not going to tell them 0:15:34.880 --> 0:15:36.800 how to how to do their clinical trials, but I 0:15:36.800 --> 0:15:41.720 will certainly will certainly help them with advice on financing alternatives. 0:15:42.280 --> 0:15:45.800 UM and and venture debt is one that that sometimes 0:15:45.800 --> 0:15:49.560 sometimes entrepreneurs need need um education on that you can 0:15:49.920 --> 0:15:54.200 you can raise equity and and uh sell off. You know, 0:15:54.400 --> 0:15:56.480 Let's say let's say you're you're developing the next great 0:15:56.520 --> 0:16:00.000 drug and your companies valued at a hundred million dollars 0:16:00.000 --> 0:16:02.960 and it's gonna take thirty million dollars of new capital 0:16:03.000 --> 0:16:05.240 to get to that next valuation point when you're when 0:16:05.240 --> 0:16:07.880 you when you get approval, you can sell thirty million 0:16:07.880 --> 0:16:10.320 dollars of equity and sell thirty percent of your of 0:16:10.320 --> 0:16:13.080 your shares, or you can sell twenty million dollars of equity, 0:16:13.160 --> 0:16:15.520 take a ten million dollar venture loan, and when you 0:16:15.600 --> 0:16:18.960 hit that next valuation inflection point, you'll have preserved tens 0:16:18.960 --> 0:16:22.040 of millions of dollars for your management team and your investors. 0:16:22.040 --> 0:16:24.320 So we provide that certainly provide that type of advice 0:16:24.320 --> 0:16:27.200 to our to our companies. All right, Dan, Back in 0:16:27.240 --> 0:16:29.320 the day, I was a corporate finance banker at the 0:16:29.520 --> 0:16:32.840 Chase Manhattan Bank. We lost deals to nobody back in 0:16:32.920 --> 0:16:36.400 the day had swagger. But we lent against either assets 0:16:36.480 --> 0:16:40.400 like property, plant, equipment, or inventory or cash flow, the 0:16:40.440 --> 0:16:43.280 good stuff that actually pays you back. VC companies don't 0:16:43.320 --> 0:16:45.360 have any of that stuff. So what's the collateral for 0:16:45.520 --> 0:16:47.320 some of this debt? Cash? So I don't know what 0:16:47.360 --> 0:16:52.920 cash flow is gonna We have cash flow, but it's 0:16:52.960 --> 0:16:54.800 going it's going out of the company. Our companies are 0:16:54.800 --> 0:16:59.080 cash burn companies. Uh So we are lending against the 0:16:59.240 --> 0:17:01.800 enterprise value of the company. We take a senior secured 0:17:01.840 --> 0:17:04.880 position in all assets of the of the company. Certainly 0:17:04.920 --> 0:17:07.560 cash is a big piece of it. But but as 0:17:07.600 --> 0:17:10.320 I said, that is draining. We are looking at the 0:17:10.359 --> 0:17:13.880 intellectual property, we're looking at at the franchise value. We're 0:17:13.880 --> 0:17:19.159 looking at growing exactly exactly. Yeah, but you never got 0:17:19.240 --> 0:17:22.440 that kind of opportunity then, right, what kind of yield 0:17:23.600 --> 0:17:26.840 we are we are lending so we have premium yields 0:17:26.920 --> 0:17:29.920 in the in the loan terms, we get interest rates 0:17:29.960 --> 0:17:33.480 as well as fees that are in the eleven. Then 0:17:33.520 --> 0:17:36.520 we take small small exactly. Then we take small warrant 0:17:36.520 --> 0:17:40.440 positions um in all of our companies, so as they 0:17:40.440 --> 0:17:43.959 do succeed, we can we can get some capital appreciation 0:17:44.000 --> 0:17:47.000 on the success stories. That's the trade off right there. 0:17:47.080 --> 0:17:49.560 That's the look at the look at what the guy's 0:17:49.640 --> 0:17:55.280 got who lent money to corectly on the wireless side. 0:17:56.119 --> 0:17:58.920 I lost that. Can you repeat that? I apologize? No, No, 0:17:59.000 --> 0:18:01.520 We're all good anyway, Dan, thanks so much for joining us. 0:18:01.560 --> 0:18:04.240 We really appreciated. We're just at a time Dan divorcets, 0:18:04.320 --> 0:18:06.800 uh from you know, giving us some thoughts here on 0:18:06.840 --> 0:18:12.840 this Venture technology Horizon Technology Financi. Yeah, back in the day, um, 0:18:12.880 --> 0:18:14.600 it was either you gotta have some assets and you 0:18:14.600 --> 0:18:16.800 gotta have some cash flowmat of course, of course, but 0:18:16.840 --> 0:18:20.000 you weren't getting thirteen Well maybe you were depending I 0:18:20.040 --> 0:18:23.040 guess in the eighties that that was at the time 0:18:23.080 --> 0:18:27.680 my parents were paying a mortgage. Um, all right, this 0:18:28.400 --> 0:18:35.080 is Bloomberg. There's been a lot of talk about bitcoin 0:18:35.240 --> 0:18:39.399 today on CNBC. Scott Miners said it's in a crash 0:18:39.520 --> 0:18:43.080 right now and he sees no reason to own it. Um, 0:18:43.119 --> 0:18:48.080 And our next guest says, it is an ecological disaster. 0:18:48.280 --> 0:18:50.359 James ross A joins a c i O and founding 0:18:50.359 --> 0:18:55.160 partner at Coast Capital. UM. So, James, your take on this, 0:18:55.280 --> 0:18:57.919 I mean it's from the mining point of view, a 0:18:58.040 --> 0:19:01.199 very dirty business. UM. And but you also think that 0:19:01.320 --> 0:19:07.159 gold is a much cleaner alternative. UM. I think cleaner 0:19:07.200 --> 0:19:09.720 alternative is not nice to be with you. Cleaner alternative 0:19:09.800 --> 0:19:14.200 is not Look, any human endeavor results in carbon emission 0:19:14.320 --> 0:19:17.560 and an erosion in the environment if not offset property. Right, 0:19:17.640 --> 0:19:19.879 So there's nothing you can do literally that doesn't have 0:19:19.920 --> 0:19:22.760 an environmental impact, and that can be described as having 0:19:22.760 --> 0:19:26.480 a negative environmental impact. The problem that we have with bitcoin, 0:19:26.560 --> 0:19:28.919 and why we think the value is zero, although the 0:19:28.920 --> 0:19:31.399 price maybe what it is, is that not only is 0:19:31.440 --> 0:19:34.400 it an ecological disaster, I think it's a monetary disaster 0:19:34.520 --> 0:19:37.439 and it is bound to fail. The reason why we 0:19:37.480 --> 0:19:40.960 think bitcoin is bound to fail is because, well, first 0:19:40.960 --> 0:19:44.320 of all, you can't it's very difficult to conduct transactions 0:19:44.320 --> 0:19:48.119 with cryptocurrencies. And we were told by the bitcoin profits, 0:19:49.000 --> 0:19:51.160 who you know, I must admit to sound a lot 0:19:51.240 --> 0:19:54.320 less like profits and like um promoters of a product 0:19:54.320 --> 0:19:57.040 that no one can has figured out how to use. UM. 0:19:57.119 --> 0:19:59.439 You know, we were taught that it would become a 0:19:59.480 --> 0:20:03.360 basically functiable with money, that it would become an monetary instrument, 0:20:03.400 --> 0:20:05.199 and it has failed to do that. And then we 0:20:05.200 --> 0:20:07.560 were told it's not gonna be money. It's too cumbersome 0:20:07.640 --> 0:20:10.119 to use. It takes thirty minutes to expect payment from 0:20:10.119 --> 0:20:13.800 a testla using bitcoin. But it's a store of value, 0:20:13.840 --> 0:20:16.840 and it's going to appreciate, you know, at inflationary times, 0:20:16.840 --> 0:20:20.600 which we certainly aren't. Now. If you look at concerns 0:20:20.600 --> 0:20:23.879 about it, you can't deny that it's appreciated. I meant 0:20:27.320 --> 0:20:29.760 it certainly has. But when you look at when inflation 0:20:29.840 --> 0:20:32.320 began to make itself out, which was you know, three 0:20:32.359 --> 0:20:35.560 or four months ago, Bitcoin has half since then it 0:20:35.640 --> 0:20:37.920 was supposed to react, you're just looking at a very 0:20:37.960 --> 0:20:43.520 short window though, I mean, you know, moment. Sure. Look, 0:20:43.640 --> 0:20:46.720 time will tell where this thing ends. But here's one 0:20:46.760 --> 0:20:49.879 thing that I think is difficult to argue against. Bitcoin 0:20:50.040 --> 0:20:54.160 will be superseded by another cryptocurrency, or by a by 0:20:54.160 --> 0:20:56.879 a by a more attractive one. That um does not 0:20:57.040 --> 0:20:59.760 have some of the flaws that bitcoin has, and that 0:21:00.160 --> 0:21:03.280 the ethereum, and in fact, it looks like a hysterium 0:21:03.320 --> 0:21:07.199 itself will be unseated by another cryptocurrency that will not 0:21:07.359 --> 0:21:10.159 have solved the short comings that eithereum has, and so 0:21:10.200 --> 0:21:13.040 why would I commit my saving stupid coin. You know, 0:21:13.960 --> 0:21:16.520 so I hear, I hear this argument. I think it's 0:21:16.640 --> 0:21:19.639 it's a fair argument for sure. So James, I guess 0:21:19.680 --> 0:21:22.560 you know I'm not in the in the big bitcoin believer, right. 0:21:22.640 --> 0:21:24.479 I think you know, my colleague Matt has really been 0:21:24.480 --> 0:21:28.240 covering it since the absolute beginning here. But my understanding 0:21:28.560 --> 0:21:31.760 is it's a commodity, and it's a commodity with a 0:21:31.800 --> 0:21:38.320 fixed supply and presumably ever increasing demand from more use cases. 0:21:38.400 --> 0:21:42.199 For that argument suggests that's the we can go higher argument. 0:21:42.320 --> 0:21:44.280 I mean, I think James has a great point that 0:21:44.400 --> 0:21:47.440 we were told at the beginning um that it was 0:21:47.520 --> 0:21:50.919 going to be fungible with any other currencies, and that 0:21:51.000 --> 0:21:54.080