WEBVTT - Ethereum Merge Reshapes Crypto Universe 0:00:01.800 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanovick. We're here every day bringing 0:00:07.280 --> 0:00:09.799 you the latest news from the world of business and finance, 0:00:09.840 --> 0:00:13.640 plus technology, politics, economics, all purtnising the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.160 --> 0:00:19.640 analyst in more than one and twenty countries. You can 0:00:19.640 --> 0:00:23.160 download Bloomberg Business Week at iTunes, SoundCloud, or Bloomberg dot com. 0:00:23.400 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.160 --> 0:00:27.840 pm Eastern Time on Bloomberg Radio or watch us on 0:00:27.880 --> 0:00:31.720 YouTube search Bloomberg Global News. Well you might have heard, 0:00:31.960 --> 0:00:35.760 you know, big headlines like Bitcoin's energy usage or cryptos 0:00:35.800 --> 0:00:38.919 energy usage uses more energy in a single year than 0:00:38.960 --> 0:00:42.920 the entire country of Argentina. One of the reasons is 0:00:43.000 --> 0:00:47.560 because the Ethereum blockchain uses something called proof of work, 0:00:48.240 --> 0:00:50.800 and now it is going to merge into something called 0:00:50.840 --> 0:00:53.120 a proof of steak. If it's a little bit of 0:00:53.479 --> 0:00:55.680 jargon or perhaps a different language, really likely to be 0:00:55.760 --> 0:00:58.280 joined by a people who speak that language. Joe Weber 0:00:58.320 --> 0:01:00.240 is the editor of Bloomberg Business Week. He's with us 0:01:00.240 --> 0:01:02.600 in the Bloomberg interactive at Broker Studio. Follow him on 0:01:02.640 --> 0:01:05.199 Twitter at Joel Weber Show. We also got Olga Career 0:01:05.360 --> 0:01:07.720 with us. She's a crypto reporter for Bloomberg News. She 0:01:07.760 --> 0:01:09.959 has been covering the space for years and can explain 0:01:10.040 --> 0:01:12.120 exactly what is going on. She's joining us on the 0:01:12.160 --> 0:01:15.080 phone from Portland, Oregon. Olga story is featured in the 0:01:15.160 --> 0:01:17.560 upcoming issue of Business Week magazine. You can read it 0:01:17.600 --> 0:01:21.039 now on the Bloomberg and at Bloomberg dot com slash 0:01:21.200 --> 0:01:24.800 business Week. Joeld emerge has been a long time coming. 0:01:25.680 --> 0:01:28.760 Why do we need to care about it? Will it come? 0:01:29.160 --> 0:01:32.960 It should come? It comes to be comes right, like 0:01:33.160 --> 0:01:37.120 we don't know. But the countdown clock there there, there 0:01:37.160 --> 0:01:39.640 is a countdown clock. Everybody's been very excited about this 0:01:39.680 --> 0:01:43.000 for a really long time. UM. And one of the 0:01:43.000 --> 0:01:46.360 things that Olga points out here is really this foundational 0:01:47.000 --> 0:01:50.960 way that things are happen on on the Ethereum blockchain. 0:01:51.280 --> 0:01:53.800 And we're gonna talk about that because, um, I think 0:01:53.840 --> 0:01:58.000 it has some pretty big implications for for especially that 0:01:58.120 --> 0:02:01.080 energy consumption you mentioned. So this proof of stake ORGA, 0:02:01.480 --> 0:02:03.360 I want to talk to you about what what that 0:02:03.440 --> 0:02:08.480 really means, what it means for for miners um and 0:02:08.600 --> 0:02:10.760 why should uh, you know the norm is out there? 0:02:10.800 --> 0:02:16.280 Care sure so, Uh, It's it's a huge change. It's 0:02:16.320 --> 0:02:18.800 this kind of a change has never been attempted in 0:02:19.120 --> 0:02:22.920 the blockchain world before. And what it does is essentially 0:02:23.560 --> 0:02:29.079 until now and for the next day or so, uh, 0:02:29.320 --> 0:02:33.960 miners basically very powerful computers are the ones ordering transactions 0:02:33.960 --> 0:02:37.040 on the ethere And blockchain. And then after that there 0:02:37.080 --> 0:02:41.239 will be a switch to proof of stake essentially stakes 0:02:41.320 --> 0:02:44.480 of coins will be used to do the same to 0:02:44.639 --> 0:02:47.359 order transactions. And of course what this means for miners 0:02:47.440 --> 0:02:49.960 is that they will be out of the job. And 0:02:50.200 --> 0:02:53.480 miners have been looking around to see which other changes 0:02:53.600 --> 0:02:57.640 they could potentially move their equipment to or what other 0:02:57.720 --> 0:03:01.880 options they have. And for Ethereum, what this will mean 0:03:02.040 --> 0:03:06.040 is that um power consumption of the blockchain will drop 0:03:06.120 --> 0:03:11.720 by about which is really good news for investors and 0:03:11.720 --> 0:03:15.800 and developers who have been deterred from participating in the 0:03:16.080 --> 0:03:21.640 Theoryum ecosystem because of its high energy consumption. You know, 0:03:22.080 --> 0:03:26.799 companies and investors who have s G requirements can now 0:03:26.919 --> 0:03:31.800 perhaps give Ethereum a second look. So good time to 0:03:31.800 --> 0:03:35.480 buy a mining rig on the cheap I guess the second. 0:03:36.200 --> 0:03:39.360 But what I'm fascinated with is the other innovation that 0:03:39.440 --> 0:03:43.000 this sort of unlocks, which is staking coins in return 0:03:43.160 --> 0:03:45.480 for your yield. You know, you lock up your ether 0:03:46.320 --> 0:03:48.880 uh in a staking protocol and you get, say, I 0:03:48.880 --> 0:03:51.040 don't know, three or four or five percent whatever the 0:03:51.120 --> 0:03:55.200 yield is. Obviously, that makes ether look a lot more 0:03:55.280 --> 0:03:59.240 like a security than just a cryptocurrency like bitcoin. And 0:03:59.440 --> 0:04:02.280 I wonder, how are you thinking about the regulators. Is 0:04:02.320 --> 0:04:06.200 there the potential for a backlash from the Gary Gensler's, 0:04:06.240 --> 0:04:10.960 the SEC chairman, and other regulators of the world. Absolutely, 0:04:11.080 --> 0:04:13.760 this is an issue that a lot of people are 0:04:13.880 --> 0:04:22.080 thinking about and worrying about because so about um, high up, 0:04:23.920 --> 0:04:28.400 high up executive at the SEC essentially said, you know, 0:04:29.080 --> 0:04:32.120 ethereum does not look like a security to us, and 0:04:32.200 --> 0:04:36.200 so that was the assumption to everybody ever since. But 0:04:36.400 --> 0:04:40.960 now etherium is undergoing some very dramatic changes. You know, 0:04:42.240 --> 0:04:45.520 right now people are going to be essentially staking, putting 0:04:45.520 --> 0:04:50.840 in money to earn yield, and that brings ethereum just 0:04:50.920 --> 0:04:55.200 a little bit closer to um appearing to at least 0:04:55.320 --> 0:05:00.600 one point off about four that regulators look at to 0:05:00.760 --> 0:05:03.760 determine if something is the security or not. There are 0:05:03.800 --> 0:05:08.200 also questions about does the theory and become more or 0:05:08.360 --> 0:05:13.160 less decentralized after this change, which is which also impacts 0:05:13.200 --> 0:05:15.720 whether it will be defined as a security or not. 0:05:15.880 --> 0:05:19.560 So there could be some uh, there could be some 0:05:20.279 --> 0:05:24.720 moves from regulators on this front. And in fact, in August, 0:05:25.080 --> 0:05:30.760 coin Base UH, the US's biggest scripto exchange, UH, did 0:05:30.920 --> 0:05:37.159 disclose that the SEC has asked for some um information 0:05:37.240 --> 0:05:40.599 from it on it's taking services someone the other things. 0:05:40.640 --> 0:05:44.200 So uh, you know, this is definitely something that people 0:05:44.200 --> 0:05:47.400 are watching. Okay, so this has never happened before. It's 0:05:47.400 --> 0:05:50.279 going to happen. If it doesn't go well, can you 0:05:50.320 --> 0:05:52.359 just put it in reverse and back up and like 0:05:52.440 --> 0:05:57.640 go back to the way it was before. Well, so, uh, 0:05:57.720 --> 0:06:02.960 there are some people who are sort of creating alternatives 0:06:03.040 --> 0:06:07.279 and then an alternative chain UH in hopes that the 0:06:07.360 --> 0:06:11.280 merge the SUFT software upgrade does not go well and 0:06:11.320 --> 0:06:13.840 then people will be like, wait a minute, we want 0:06:13.839 --> 0:06:18.360 to go back to the previous block chain. So um, 0:06:18.600 --> 0:06:23.359 there are people who are creating a copy of UH 0:06:23.880 --> 0:06:28.800 ethereum that will still use minors, but I think UM, 0:06:28.960 --> 0:06:32.479 the majority of the Ethereum community is going ahead with 0:06:32.680 --> 0:06:37.479 this uh new block proof of state blockchain. It's been 0:06:37.520 --> 0:06:42.360 tested and retested for years. I mean, it's it's been 0:06:42.440 --> 0:06:46.919 expected to happen for years. The developers have been delaying 0:06:46.960 --> 0:06:50.840 in delaying because of this very extensive testing that they've performed. 0:06:50.880 --> 0:06:53.960 So they're hoping that the issues that do come up 0:06:54.480 --> 0:06:59.000 um after this upgrade will be relatively minor. And what 0:06:59.080 --> 0:07:02.440 does this all mean for for bitcoin? And there's this 0:07:02.480 --> 0:07:07.839 thing called the flippening right, so some people believe that 0:07:08.080 --> 0:07:12.520 this puts Etherium more head to head in competition with bitcoin, 0:07:12.960 --> 0:07:18.120 which of course, um, you know, crypto fans have long 0:07:18.200 --> 0:07:24.800 called digital gold. With Etherium undergoing this transition, perhaps it's 0:07:24.840 --> 0:07:31.360 going to become more more attractive um for corporate treasuries 0:07:31.520 --> 0:07:35.920 and for hedge funds and for other investors that have 0:07:36.080 --> 0:07:40.160 until now only I have only invested in bitcoins. So 0:07:41.240 --> 0:07:44.760 there is a potential for something that crypto fans called 0:07:44.960 --> 0:07:51.240 the flippenine, which is basically the Etherium market cap exceeding bitcoins. 0:07:51.280 --> 0:07:56.000 And this is you know, probably some time away from 0:07:56.120 --> 0:08:00.040 from it not happening anytime soon, auga, right, I A. 0:08:01.160 --> 0:08:02.880 And you know, not much buying happening when it comes 0:08:02.880 --> 0:08:05.880 to crypto today, Bitcoin down more than nine point two percent, 0:08:05.920 --> 0:08:09.360 of theory Um down close to eight percent. Check out 0:08:09.360 --> 0:08:11.880 Olga's article in the new issue of Bloomberg Business Week 0:08:11.920 --> 0:08:14.240 magazine out later this week. Thanks to Joel Webber and 0:08:14.320 --> 0:08:17.800 Ogel Career from Bloomberg Business Week. You're listening to Bloomberg Radio. 0:08:19.000 --> 0:08:22.600 You're listening to Bloomberg Business Week with Carol Messer and 0:08:22.720 --> 0:08:27.080 Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio. Well, I 0:08:27.160 --> 0:08:29.160 might have spoke too soon, because Twitter shows now we're 0:08:29.160 --> 0:08:30.960 only up seven tenths of one percent. But on a 0:08:31.040 --> 0:08:34.160 day where everything is down, it is notable that something 0:08:34.360 --> 0:08:37.439 is in the grain. The reason why Well shareholders approving 0:08:37.480 --> 0:08:40.720 a billionaire Elon Musk's proposed forty four billion dollar buyout. 0:08:40.720 --> 0:08:42.640 It paves the way for a trial next month to 0:08:42.679 --> 0:08:46.240 determine the disputed deal's fate. We've got Man deep Seeing 0:08:46.320 --> 0:08:48.719 right now. He's in the Bloomberg Interactive Broker studios. He's 0:08:48.720 --> 0:08:52.040 senior tech industry analyst. Hey Man deep Um, you were 0:08:52.120 --> 0:08:55.000 joking that maybe this will mean that you know, this 0:08:55.040 --> 0:08:56.800 will all come to an end pretty soon, and I 0:08:56.920 --> 0:08:59.120 kind of like said, you know, not so fast, because 0:08:59.760 --> 0:09:02.720 they're still quite a bit left to have happened before 0:09:02.880 --> 0:09:05.760 there is some sort of resolution to this. What is it? Well, 0:09:05.800 --> 0:09:08.839 I mean, there could be another whistle blower. It could be, 0:09:09.040 --> 0:09:13.280 you know, anything from Twitter not handling their data properly, 0:09:13.679 --> 0:09:17.400 or they may have gotten breached which they may not 0:09:17.480 --> 0:09:19.760 have reported. Look, I mean, we can come up with 0:09:19.800 --> 0:09:22.080 a lot of different scenarios, but at the end of 0:09:22.120 --> 0:09:25.760 the day, when when it comes to how the court 0:09:25.880 --> 0:09:28.720 is going to view it, it's very clear that you know, 0:09:28.840 --> 0:09:32.760 there will be a specific performance performance clause in the 0:09:32.840 --> 0:09:36.400 sense that if it goes to trial and must lose this, 0:09:37.000 --> 0:09:39.080 he has to buy the company. He just can't get 0:09:39.120 --> 0:09:42.800 away with paying the termination fee. And I think that's critical. 0:09:42.960 --> 0:09:46.560 That is what will determine the odds of this closing, 0:09:46.600 --> 0:09:49.760 and that seemed to be increasing, uh, you know, with 0:09:49.840 --> 0:09:53.680 the shareholders finally approving the deal. Bendy, what's kind of 0:09:53.679 --> 0:09:57.400 the vibe check on this case? I mean it from 0:09:57.400 --> 0:10:00.000 what I read, it doesn't strike me as the judge 0:10:00.080 --> 0:10:03.240 just being very friendly to Musque's case. I mean, is 0:10:03.240 --> 0:10:07.360 there any sort of settlement possibility? Do you think some 0:10:07.480 --> 0:10:10.760 you know, between a complete forcing of him to take 0:10:10.800 --> 0:10:13.600 it over and and just throwing the case out. I mean, 0:10:13.640 --> 0:10:16.200 what what where do you see this going? Yeah, it's 0:10:16.320 --> 0:10:21.520 very unlikely given how the company's uh, you know, has 0:10:21.600 --> 0:10:25.280 behaved in terms of dealing with Musk and uh, what 0:10:25.320 --> 0:10:28.640 they have said so far, it's very clear they want 0:10:28.720 --> 0:10:31.920 to force the deal to close, and the way the 0:10:32.000 --> 0:10:36.080 contract is structured, I think it really goes in their favor. 0:10:36.320 --> 0:10:39.680 And uh, the whole I think whistle blower thing has 0:10:39.720 --> 0:10:43.440 created more noise. The judge hasn't really given it a 0:10:43.440 --> 0:10:47.280 lot of credence in terms of it influencing how this 0:10:47.440 --> 0:10:51.520 deal may fall apart, and uh, I I think that's 0:10:51.520 --> 0:10:54.560 still remains. So I I think the odds of the 0:10:54.640 --> 0:10:58.600 deal closing are fairly high, given we've seen an approval 0:10:58.679 --> 0:11:04.320 closing at what price. Maybe there is a concession here 0:11:04.360 --> 0:11:07.960 on the company's part. They may, uh if if they find, 0:11:08.080 --> 0:11:11.840 you know, their systems weren't perfect, you know, based on 0:11:11.880 --> 0:11:14.880 the whistle lower complaints, they may have to give a concession. 0:11:14.920 --> 0:11:18.559 But we're talking about maybe a dollar or two of concession, 0:11:18.640 --> 0:11:21.840 not material really. Yeah, I mean the company right now 0:11:21.880 --> 0:11:24.680 is valued at thirty two billion dollars by the public markets, 0:11:24.720 --> 0:11:28.480 so you're actually saying that we could see Elon Musk 0:11:28.840 --> 0:11:31.680 being forced to pay more than forty billion dollars for 0:11:31.720 --> 0:11:36.200 this company. Absolutely, and uh bad deal for him. Just 0:11:36.559 --> 0:11:38.320 the only reason I say that is because I mean, 0:11:38.320 --> 0:11:41.000 look what's happened to the to these types of stocks 0:11:41.040 --> 0:11:44.880 in the last few months. It has, But you know, 0:11:45.440 --> 0:11:47.320 I think when he signed the deal, he kind of 0:11:47.440 --> 0:11:50.920 knew that Twitter would take a while to you know, 0:11:51.160 --> 0:11:54.120 really turn around in terms of you know, coming up 0:11:54.120 --> 0:11:56.840 with a subscription model and all that. Why he changed 0:11:56.920 --> 0:11:59.240 his mind and why he doesn't want to, you know, 0:11:59.280 --> 0:12:03.240 buy the company anymore is beyond my wild We had 0:12:03.240 --> 0:12:06.319 buyers remorse, right, Yeah, Like when I was a kid, 0:12:06.320 --> 0:12:08.560 I saved up for that new pair of shoes, you know, 0:12:08.640 --> 0:12:10.760 go buy it, and then I you know like, oh, 0:12:10.800 --> 0:12:14.320 I shouldn't have bought this. But the fundamentals are impaired 0:12:14.360 --> 0:12:17.720 now from where you know, he signed a contract and 0:12:17.760 --> 0:12:21.079 the employee morale is low. So a lot has changed 0:12:21.200 --> 0:12:24.400 for the worst, which is the reason why the company 0:12:24.480 --> 0:12:26.840 is so keen to close this deal because they know 0:12:26.920 --> 0:12:29.120 they can't find an alternative buyer. Well, I wanted to 0:12:29.120 --> 0:12:31.280 ask you about that. What is the outlook for Twitter's 0:12:31.320 --> 0:12:33.640 business itself. You know, I'm looking at their financials here. 0:12:33.679 --> 0:12:36.400 They had a drop in revenue in the second quarter, 0:12:36.440 --> 0:12:39.720 looks like another drop is expecting the third quarter drop 0:12:39.720 --> 0:12:43.120 in gross profit. Last quarter they're kind of in decline. 0:12:43.160 --> 0:12:45.600 I mean, is is this all part and parcel of 0:12:45.760 --> 0:12:48.640 just a sort of rudderless ship or what's coming on? 0:12:49.080 --> 0:12:52.480 You're right about the management and the board not doing 0:12:52.480 --> 0:12:55.840 a great job of, you know, the fundamental performance. But 0:12:55.920 --> 0:12:58.319 at the same time, Twitter as a platform that still 0:12:58.440 --> 0:13:00.880 has the engagement when you look at their daily active 0:13:00.960 --> 0:13:04.319 user base, it's still intact. They always had a monetization 0:13:04.440 --> 0:13:08.320 problem and probably will take somebody more creative to really 0:13:08.360 --> 0:13:11.200 come up with a better model to monetize the time 0:13:11.240 --> 0:13:15.040 spent on Twitter. But look, I think the fundamentals are 0:13:15.880 --> 0:13:19.360 much poorer than they were back if they could monetize 0:13:19.400 --> 0:13:23.880 all the anger that that site it creates. I mean, 0:13:24.040 --> 0:13:26.240 the time, the time I spent on Twitter, like I 0:13:26.280 --> 0:13:28.560 should be And you know what, the ads I see 0:13:28.559 --> 0:13:31.120 are so irrelevant shocking to me that they haven't figured 0:13:31.120 --> 0:13:32.640 it out. I mean, they should know what I do. 0:13:32.720 --> 0:13:34.400 And it's like, you know, I spend way too much 0:13:34.440 --> 0:13:36.000 time on that platform, and deep we love it when 0:13:36.040 --> 0:13:37.880 you join us, you know, for the sake of us, 0:13:37.960 --> 0:13:40.120 we hope you get to continue to keep covering this 0:13:40.160 --> 0:13:42.280 story because we love having you join us. Senior tech 0:13:42.320 --> 0:13:45.720 industry analyst for Bloomberg Intelligence, Man Deep saying, this is 0:13:45.760 --> 0:13:49.720 Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes 0:13:49.800 --> 0:13:53.560 Tim Stinovich on Bloomberg Radio. Yeah, a lot of red 0:13:53.559 --> 0:13:56.400 there on the screen. Of course, today's equity market reaction 0:13:56.559 --> 0:13:58.840 a response to what we saw when it came into 0:13:58.880 --> 0:14:01.720 those hotter than expect did inflation numbers that happening at 0:14:01.760 --> 0:14:05.360 eight thirty AM. Well, a few hours before that, about 0:14:05.440 --> 0:14:09.000 eight hours before that, John Authors from Bloomberg Opinion, a 0:14:09.040 --> 0:14:11.720 senior editor for Bloomberg Markets as well, I wrote a 0:14:11.760 --> 0:14:14.120 column that said markets need a less rosy view of 0:14:14.160 --> 0:14:17.360 inflation news. He wrote that there's no sign of a 0:14:17.360 --> 0:14:20.160 FED pivot or reason for Powell to make one until 0:14:20.200 --> 0:14:23.160 it's clear how to get back to two percent. John 0:14:23.160 --> 0:14:26.520 Authors joins us right now from the Bloomberg Interactive Broker Studio, 0:14:26.560 --> 0:14:30.080 following him on Twitter at John Authors. John Um, like 0:14:30.120 --> 0:14:32.040 I said at the start of our show today, this 0:14:32.080 --> 0:14:35.400 was a really prescient column. You kind of called it uh, 0:14:36.040 --> 0:14:38.920 also kind of gutsy to do this on CPI Tuesday. 0:14:39.440 --> 0:14:41.160 What did you see that perhaps a lot of people 0:14:41.200 --> 0:14:46.120 missed here? Okay, um, I think first well, first of all, 0:14:46.240 --> 0:14:48.520 I did see quite a little of it's it's actually 0:14:48.560 --> 0:14:50.800 worse than I was expecting. Because was I did buy 0:14:50.880 --> 0:14:52.960 into is the notion that we at least the peak 0:14:53.080 --> 0:14:56.280 was in even if we weren't going to decrease inflation 0:14:56.320 --> 0:15:01.600 and anything like the rate that people were hoping. If 0:15:01.640 --> 0:15:04.680 you if you looked at all the numbers other than oil, 0:15:05.640 --> 0:15:08.600 there were still reasons for concern that inflation was still growing. 0:15:08.680 --> 0:15:13.360 And the other critical point is that, particularly in this country, 0:15:13.640 --> 0:15:20.000 gas prices work almost contrary to the rest of the index. 0:15:20.320 --> 0:15:25.240 So gas prices, because there's so little tax on gas 0:15:25.240 --> 0:15:30.080 in the this country, um in percentage terms, they vary 0:15:30.160 --> 0:15:32.280 far more than they do in other places. And obviously 0:15:32.280 --> 0:15:35.920 Americans love their cars, and it turns out that if 0:15:36.080 --> 0:15:38.600 gas price goes up, they just spend more on gas 0:15:39.200 --> 0:15:42.280 and drive the same amount and spend less on everything 0:15:42.280 --> 0:15:46.280 else and vice versa. So basically what we had had 0:15:46.320 --> 0:15:48.920 in the last two months, which at least did help 0:15:48.920 --> 0:15:51.800 the headline number come down because gases in the headline 0:15:52.280 --> 0:15:54.200 was the effect the E couldn't of a tax cut. 0:15:54.840 --> 0:15:58.320 It's as though we've had Vladimir Putin more or less 0:15:58.360 --> 0:16:02.280 gave us the eculdment of a up tax hike followed 0:16:02.280 --> 0:16:06.160 by a tax cut, and that meant there was always 0:16:06.160 --> 0:16:11.280 a great risk, which is what happened, that the underlying 0:16:12.040 --> 0:16:15.760 project products, that the things that were separate from oil 0:16:16.360 --> 0:16:19.840 would actually take off in a bigger way than we 0:16:19.840 --> 0:16:23.040 were thinking. And boy did they ever. I mean, it 0:16:23.160 --> 0:16:26.880 was a very very bad number compared to not only 0:16:26.880 --> 0:16:28.960 what the market was expecting, but to be honest, I 0:16:29.040 --> 0:16:30.800 was barish about it, and it was worse than I 0:16:30.840 --> 0:16:33.000 was expecting. John, I'm gonna throw a bit of a 0:16:33.000 --> 0:16:36.320 curveball here, something that's not in your comment Calm today, 0:16:36.360 --> 0:16:38.360 but I have a feeling you'll you'll hit this curveball 0:16:38.440 --> 0:16:42.680 like crickets and making the Google or one of you 0:16:42.840 --> 0:16:46.880 was a David Ortiz type here, I have an Ortis 0:16:47.000 --> 0:16:51.800 Jersey car. But I was talking earlier about the whole 0:16:51.840 --> 0:16:55.360 notion of value versus growth, and you know how lo 0:16:55.520 --> 0:16:59.040 and behold, we finally had this value out performance earlier 0:16:59.040 --> 0:17:02.320 in the year. Uh, many people tying it to this, 0:17:02.720 --> 0:17:05.760 you know, high inflation regime. Good for energy company, is 0:17:05.760 --> 0:17:07.639 good for banks, Harry Yields on and on and on 0:17:08.520 --> 0:17:11.520 it does. It looked like growth kind of made a 0:17:11.560 --> 0:17:13.600 comeback and it was back to the old normal where 0:17:13.680 --> 0:17:16.240 where growth was outperforming again. You know your touch stocks, 0:17:16.280 --> 0:17:20.160 your your high growth companies like that? Does today put 0:17:20.320 --> 0:17:23.600 value back in front for a while? Do you think 0:17:24.880 --> 0:17:28.959 of growth yet? Not a momentum? The last time I checked, 0:17:29.000 --> 0:17:32.679 I did look at the ft W. Those listings at 0:17:32.760 --> 0:17:35.720 home Factors that work ft W go on the terminal 0:17:35.840 --> 0:17:37.679 was a really good way of seeing how the different 0:17:37.880 --> 0:17:40.720 factors are moving. The one that was the strongest for 0:17:40.880 --> 0:17:44.119 today was momentum, which is simply because the momentum has 0:17:44.160 --> 0:17:47.320 generally been against the fangs, and the fangs have really 0:17:47.440 --> 0:17:53.320 sold off very bloodily, very impressively today. Um yes, I 0:17:53.359 --> 0:17:56.879 do think it probably helps value at the margin. What 0:17:57.000 --> 0:18:01.040 people really didn't want to be holding value forward be stagflation. 0:18:01.560 --> 0:18:07.679 I think the chances of stagflation as supposed to a 0:18:07.800 --> 0:18:10.720 recession that comes after the FED has really had to 0:18:10.840 --> 0:18:14.720 bludgeon bloodgend us all into into the out of our 0:18:14.760 --> 0:18:18.000 resistance in a matter of you know, many more months. 0:18:18.520 --> 0:18:22.000 I think stagflation looks less likely simply because the stag 0:18:22.080 --> 0:18:25.240 isn't happening, and that is why the flation is worse. 0:18:25.760 --> 0:18:28.800 That adds up to value continues to be a better 0:18:28.800 --> 0:18:30.960 deal than we thought, and growth continues to be a 0:18:30.960 --> 0:18:32.680 worse deal than we thought. John, we only have ten 0:18:32.720 --> 0:18:34.720 seconds left here. What does this all mean for the Fed? 0:18:35.040 --> 0:18:37.320 And you know seventy five verses one at the next 0:18:37.359 --> 0:18:41.000 meeting and beyond I would still better on. The critical 0:18:41.040 --> 0:18:42.879 thing is how much they're going to cut by the 0:18:42.960 --> 0:18:45.520 end of next year. Okay, that's what we'll keep an 0:18:45.560 --> 0:18:47.480 eye on. We have a little ways to go before 0:18:47.520 --> 0:18:49.160 we get there. Big thank you to John Authur, Senior 0:18:49.280 --> 0:18:52.119 editor for Bloomberg Markets, also a Bloomberg opinion columnist with 0:18:52.160 --> 0:18:54.359 us in the Bloomberg Interactive Broker Studio. Check out his 0:18:54.400 --> 0:18:57.400 story on Bloomberg dot com and on the terminal. You're 0:18:57.440 --> 0:19:01.440 listening to Bloomberg Business Week with Roll Messer and Bloomberg 0:19:01.480 --> 0:19:06.000 Quick Takes. Tim Stinovic on Bloomberg Radio. Mike, you were 0:19:06.119 --> 0:19:09.159 looking at the sins function on the Bloomberg terminal, Uh, 0:19:09.480 --> 0:19:11.680 getting us some data about when the last time we 0:19:11.720 --> 0:19:14.040 saw drops like this in the market. What are you saying, yeah, 0:19:14.040 --> 0:19:16.800 it's it's pretty brutal. That is actually on a closing basis, 0:19:16.800 --> 0:19:19.520 you know, going from closing level to closing level. Uh, 0:19:19.560 --> 0:19:24.199 that's the worst drop since June of remember when the 0:19:24.240 --> 0:19:26.920 pandemic was still locking us all down. Even worse for 0:19:26.960 --> 0:19:30.560 the NASTAC one d though closing basis, biggest drop since March. 0:19:32.760 --> 0:19:34.520 And I had forgotten how bad that day was, to 0:19:34.560 --> 0:19:37.560 be honest, twelve percent drop NASTAC one hundred that day. 0:19:37.600 --> 0:19:40.320 What a crazy time it was. But uh, here we 0:19:40.359 --> 0:19:42.480 are having, you know, five and a half percent dropping 0:19:42.480 --> 0:19:46.360 the deck one hundred, worst day since Hey, let's bring 0:19:46.400 --> 0:19:49.480 in carrol'sch life. She's deputy chief investment officer at a 0:19:49.560 --> 0:19:51.919 bemo family office. Really pleased to have her this afternoon, 0:19:52.000 --> 0:19:54.680 joining us on the phone from Minneapolis. Carol, how are you? 0:19:55.480 --> 0:20:00.600 Oh great? Really? But are you? Are you really great? Uh? Well, 0:20:00.640 --> 0:20:03.119 it's a beautiful fault day here and we're getting lots 0:20:03.119 --> 0:20:06.000 of pretty sunset things to all the smoke in the sky. Right. 0:20:06.160 --> 0:20:08.560 Other than that, yeah, the market day is not such 0:20:08.600 --> 0:20:10.560 a nice day. Okay, we'll help us make sense of this. 0:20:10.640 --> 0:20:13.200 I mean, obviously the equity traders got a little ahead 0:20:13.200 --> 0:20:15.440 of themselves when it came to thinking that the inflation 0:20:15.520 --> 0:20:19.360 numbers would come in softer that didn't end up happening. 0:20:19.640 --> 0:20:22.720 What are you looking at today? Yeah, I think it's 0:20:22.760 --> 0:20:26.000 interesting because we've been saying all along, you know, we're 0:20:26.160 --> 0:20:29.879 range bound data dependent through the summer, there's little to 0:20:30.000 --> 0:20:34.240 really do a compelling uh push to the top side 0:20:34.359 --> 0:20:37.120 or the downside necessarily, And keep in mind we had 0:20:37.119 --> 0:20:42.240 migrated back towards the top of the channel and so 0:20:42.400 --> 0:20:45.600 coming back like this, And honestly this comes from the perspective. 0:20:45.640 --> 0:20:47.760 I know that the down days are scary, but I 0:20:47.760 --> 0:20:51.320 watched seven happened that was in a day, and the 0:20:51.400 --> 0:20:56.560 year still closed up, so pertive. Well, I think a 0:20:56.560 --> 0:20:59.800 piece of this is too, is that the market desperately 0:21:00.280 --> 0:21:02.840 to figure out a bullish tone and they've been fighting 0:21:02.840 --> 0:21:06.640 the FED all year, and the FED has been unequivocal 0:21:06.800 --> 0:21:10.000 saying we're gonna you know, they communicated pretty clearly that 0:21:10.040 --> 0:21:12.560 it's the three quarters of basis point rise. And I 0:21:12.600 --> 0:21:15.920 think this number took everybody by surprise. But the data 0:21:15.960 --> 0:21:19.000 has been really sloppy month to month, and there are 0:21:19.280 --> 0:21:22.920 signs of slowing in some pockets. There's it's going to 0:21:23.000 --> 0:21:26.359 be tough to slow things like wages and rents because 0:21:26.400 --> 0:21:29.080 that takes time to work through the system. So the 0:21:29.160 --> 0:21:34.840 data sloppy, and markets and investors hate sloppy and hate unknown. Carol, 0:21:34.920 --> 0:21:37.080 I keep thinking about, well, what could sort of break 0:21:37.160 --> 0:21:40.680 us out of this range that you describe um, which 0:21:40.720 --> 0:21:42.080 I think is a great point to make. It's a 0:21:42.160 --> 0:21:45.879 very wide range, but certainly arranged range battle market. And 0:21:45.920 --> 0:21:48.200 I keep thinking, well, earning the season is coming up 0:21:48.280 --> 0:21:50.680 in a few weeks, and it seems like so many 0:21:50.680 --> 0:21:54.640 people we talked to our skeptical of the earnings estimates 0:21:54.720 --> 0:21:57.200 out there. They believe that they need to come down 0:21:57.680 --> 0:22:00.640 to account for sort of the data image being done, 0:22:00.680 --> 0:22:04.200 the profit margins from inflation. So I'm wonder how you're 0:22:04.240 --> 0:22:07.040 thinking about that. Is that the third quarter the earning 0:22:07.080 --> 0:22:10.320 season where companies really sort of hit us over the 0:22:10.320 --> 0:22:13.480 head with some bad news. Yeah, I think you could 0:22:13.520 --> 0:22:16.120 see a lot. You know, people will be listening very 0:22:16.240 --> 0:22:19.479 very carefully to the earnings announcements. They won't be watching 0:22:19.480 --> 0:22:22.600 the numbers as much because numbers are are a picture, 0:22:22.680 --> 0:22:25.560 a snapshot of what's already happened. So they're going to 0:22:25.640 --> 0:22:28.479 be listening really carefully for what are the inventories, like, 0:22:28.560 --> 0:22:31.280 they'll be watching all the consumer goods companies for that, 0:22:31.640 --> 0:22:35.159 what's their pricing power alike? You know, are their supply 0:22:35.320 --> 0:22:37.720 chain issues, are their labor issues? What are they doing 0:22:37.760 --> 0:22:39.480 with their labor. They're going to be listening to all 0:22:39.480 --> 0:22:43.399 those indications. And you know, it's too bad markets when 0:22:43.440 --> 0:22:45.800 they get volatile like this. People tend to look only 0:22:45.840 --> 0:22:48.360 at the short term because the intermediate to longer term. 0:22:48.359 --> 0:22:51.119 When you look at the US economy relative to the 0:22:51.160 --> 0:22:55.600 global economy, there's a lot of potential strength underneath to 0:22:55.640 --> 0:22:59.919 prevent us from really tailing off deeply, because it's been 0:23:00.040 --> 0:23:02.680 a long time since we've had a FED tightening cycle 0:23:03.040 --> 0:23:06.160 where you actually had the quantity of fiscal stimulus coming 0:23:06.200 --> 0:23:08.040