WEBVTT - Fed Expected to Increase Target Rate 0:00:01.800 --> 0:00:04.440 This is Bloomberg Business Week. I'm Karl Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanobek. 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 partnising 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 --> 0:00:19.599 analyst in more than one and twenty countries. You can 0:00:19.640 --> 0:00:23.239 download Bloomberg Business Week on 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 --> 0:00:32.040 YouTube search Bloomberg Global News. Well. This story, it is 0:00:32.080 --> 0:00:33.760 the Bloomberg Big Take. It is also one of the 0:00:33.800 --> 0:00:35.920 most read stories on the Bloomberg Today. It's a story 0:00:35.960 --> 0:00:38.560 that's been two years in the making about how free 0:00:38.640 --> 0:00:41.640 checking accounts actually haven't really lived up to their name, 0:00:41.840 --> 0:00:44.720 costing consumers ever eight billion dollars. That's real money, it 0:00:44.840 --> 0:00:47.320 really is, and it's real profits for the companies. Jenny 0:00:47.360 --> 0:00:49.920 Seraine is the reporter on the story. She's Finance reporter 0:00:50.000 --> 0:00:51.839 for Bloomberg Near She's with us right now in the 0:00:51.840 --> 0:00:55.080 Bloomberg Interactive Broker Studio. Jenny I want to repeat this 0:00:55.360 --> 0:00:58.560 because it's it's such an astounding statistic to me. Customers 0:00:58.560 --> 0:01:01.480 who pay overdraft fees again and the again are responsible 0:01:01.520 --> 0:01:04.679 for over half the profits from mass market consumer checking 0:01:04.680 --> 0:01:08.160 accounts at the biggest US lenders. I thought these companies 0:01:08.200 --> 0:01:09.840 were trying to get rid of these fees because the 0:01:09.920 --> 0:01:14.280 upstart banks are offering accounts without them. Yeah. I think 0:01:14.400 --> 0:01:17.440 that's honestly sort of what drove us uh down this 0:01:17.520 --> 0:01:20.959 line of reporting and into this story. Um, we've seen 0:01:21.040 --> 0:01:23.960 time and time again big banks making announcements. You've got City, 0:01:23.959 --> 0:01:26.160 You've got Capital One, you know, saying we're getting rid 0:01:26.160 --> 0:01:29.280 of overdrive fees. Bank of America, JP, Morgan, They've all 0:01:29.319 --> 0:01:32.160 announced something along the lines of we're distancing ourselves from 0:01:32.240 --> 0:01:35.200 this practice. But UM, it's true for the industry as 0:01:35.200 --> 0:01:37.920 a whole that really these fees are what allows them 0:01:37.920 --> 0:01:41.600 to offer free checking accounts to you know, wealthier Americans 0:01:41.600 --> 0:01:44.360 who maintain a certain balance and and um, and it's 0:01:44.360 --> 0:01:46.280 really these fees that allow them to do that. So 0:01:46.760 --> 0:01:48.960 UM really wanted to dive in and kind of put 0:01:48.960 --> 0:01:51.160 a number on a lot of this stuff that we 0:01:51.160 --> 0:01:53.760 hear so much about. And UM, it was really just 0:01:53.800 --> 0:01:56.600 an interesting practice and diving into this data. I feel 0:01:56.600 --> 0:01:58.160 like going to the story Jenny, and then it's like 0:01:58.280 --> 0:02:01.080 and the gap just gets wider and why there? Yeah, 0:02:01.160 --> 0:02:03.680 I think it's interesting because we hear so much time 0:02:03.680 --> 0:02:06.200 and time again from these banks about UM wanting to 0:02:06.240 --> 0:02:09.160 solve for inequities and finance wanting to do more for 0:02:09.680 --> 0:02:12.040 UM lower income Americans, and I think this is a 0:02:12.080 --> 0:02:15.680 really tangible way that we've seen them maybe flounder a bit, 0:02:15.720 --> 0:02:18.079 and so I think it'll be interesting. You know, Washington 0:02:18.160 --> 0:02:21.640 is paying really close attention to this issue, Regulators, lawmakers, 0:02:21.760 --> 0:02:24.400 consumer advocates alike, really making a lot of noise, and 0:02:24.440 --> 0:02:25.600 so I think we're going to see a lot of 0:02:25.600 --> 0:02:28.520 movement here, especially in the coming months and quarters. How 0:02:28.560 --> 0:02:31.400 much of this is about regulators making movement versus the 0:02:31.480 --> 0:02:33.919 upstart banks that I mentioned, these so called neo banks 0:02:33.960 --> 0:02:37.640 coming after the customers who are the ones who are overdrafting. Yeah, No, 0:02:37.760 --> 0:02:39.840 I think it's a great point. The fin techs for 0:02:39.919 --> 0:02:41.760 sure have a place here, and I think the banks 0:02:41.760 --> 0:02:45.400 actually they point more often to competition being what's driving 0:02:45.400 --> 0:02:48.639 them on this versus the you know, Senator Elizabeth Warren's 0:02:48.720 --> 0:02:52.200 and Maxine Waters of the world. And so I think, um, 0:02:52.240 --> 0:02:54.680 they definitely point a competition from these up starts, and 0:02:54.800 --> 0:02:56.760 they really were the first to kind of push the thing, 0:02:57.120 --> 0:03:00.640 push the banks on overdraft fees. UM. They also, you know, 0:03:00.800 --> 0:03:03.600 one of the really unique things that those guys do is, UM, 0:03:03.840 --> 0:03:07.160 instead of waiting, you know, if Bloomberg pays our our paychecks, 0:03:07.200 --> 0:03:09.120 for instance, if they send that money on a Tuesday, 0:03:09.160 --> 0:03:11.640 we might not get it until Friday. What a lot 0:03:11.680 --> 0:03:13.639 of these upstarts have done is said, Okay, as soon 0:03:13.639 --> 0:03:15.919 as we get the notification from your employer that they've 0:03:15.960 --> 0:03:18.560 sent you your paycheck, UM, that will be in your account. 0:03:18.560 --> 0:03:21.000 And so they're actually looking for ways to avoid the 0:03:21.040 --> 0:03:23.320 overdraft fee ever coming. So where a lot of these 0:03:23.320 --> 0:03:25.640 other banks are like, oh, if you if you overdrafted, 0:03:25.680 --> 0:03:27.600 will you know, lower the fee or we'll give you 0:03:27.600 --> 0:03:30.760 like a fifty dollar cushion, UM, these upstarts are actually saying, 0:03:30.760 --> 0:03:32.320 you know what, no, that's not enough. Let's just like 0:03:32.360 --> 0:03:35.280 get them their money faster. For folks living paycheck to paycheck, 0:03:35.360 --> 0:03:38.480 that's what matters, UM. And so wait, wait not benefit 0:03:38.520 --> 0:03:42.040 on the flow exactly exactly, um exactly. And so I 0:03:42.080 --> 0:03:44.880 think that's where these upstarts have gotten you know, their 0:03:44.920 --> 0:03:47.720 their nimble, they're fast and wall streets paying attention. Can 0:03:47.760 --> 0:03:49.880 we just break it down. It's a great chart ONMA 0:03:50.000 --> 0:03:52.920 and and just great kind of interactive I feel like, uh, 0:03:53.000 --> 0:03:55.200 in terms of the media, that's part of this story. 0:03:55.240 --> 0:03:58.840 But overdraft fees in terms of the biggest banks, we're 0:03:58.840 --> 0:04:01.800 talking about one point to bill for JP Morgan, one 0:04:01.800 --> 0:04:06.400 million for City, nine for P and C, one point 0:04:06.400 --> 0:04:09.120 one for b of A, one point four for Wells Fargo. 0:04:09.160 --> 0:04:11.560 I mean this is real money. Yeah, no, and a 0:04:11.560 --> 0:04:13.840 lot of what they've announced in recent months in terms 0:04:13.840 --> 0:04:16.400 of you know, distancing themselves for the from this practice, 0:04:16.560 --> 0:04:18.880 that's real money too. So they are giving up revenue 0:04:18.920 --> 0:04:21.039 here are they how much? Though? Like how much do 0:04:21.080 --> 0:04:25.440 they get penalized by people who forfeit? Right? Our problems 0:04:25.520 --> 0:04:28.400 are problem accounts basically. No, it's a good point. I 0:04:28.400 --> 0:04:30.520 think what the banks like to say is there's a 0:04:30.560 --> 0:04:33.160 cost of providing overdraft. This isn't you know, a free 0:04:33.200 --> 0:04:36.160 service that for them, and and people do you know 0:04:36.320 --> 0:04:39.080 overdraft and never make good on that loan essentially, and 0:04:39.080 --> 0:04:41.359 so they have to account for that when they're setting 0:04:41.440 --> 0:04:44.320 up these programs. Um. I think what consumer advocates say, 0:04:44.400 --> 0:04:46.400 is you know, does it really need to be thirty dollars? 0:04:46.480 --> 0:04:48.159 You know, does it really need to be when someone's 0:04:48.200 --> 0:04:51.280 already literally out of money, that you're charging them thirty 0:04:51.279 --> 0:04:54.080 dollars on top of the already tough situation they've clearly 0:04:54.080 --> 0:04:56.440 found themselves in. Um So, I think that's going to 0:04:56.520 --> 0:04:59.359 be a big, big piece of this. But um but, 0:04:59.440 --> 0:05:01.560 you know, no think it is real money that they're 0:05:01.560 --> 0:05:03.880 giving up. And I do think what will be interesting 0:05:04.000 --> 0:05:06.719 is a lot of banks, as they move away from overdraft, 0:05:06.760 --> 0:05:09.000 they're saying, oh, well, there's this other account we now 0:05:09.040 --> 0:05:11.479 have that instead of charging over draft fees, it comes 0:05:11.480 --> 0:05:13.480 with the five to ten dollar monthly fee, and so 0:05:13.520 --> 0:05:15.880 you could just sign up for that instead. Um So, 0:05:16.040 --> 0:05:18.200 I think we'll see a rise in those accounts. I 0:05:18.240 --> 0:05:19.880 think a lot of consumers will say, you know what, 0:05:20.279 --> 0:05:23.240 I don't want this, you know, privilege of overdrafting. I'm 0:05:23.279 --> 0:05:26.080 I'm done. I just want out, and and they'll choose 0:05:26.080 --> 0:05:29.479 to pay those monthly fees instead. Really powerful story. Lots 0:05:29.520 --> 0:05:31.800 of examples of people who have been affected by this. 0:05:31.960 --> 0:05:34.400 Check out the story by Jenny Seraine and others on 0:05:34.400 --> 0:05:37.159 our finance team. Jenny's finance reporter for Bloomberg News and 0:05:37.200 --> 0:05:39.800 Caroll another really good one to lead to read online 0:05:39.839 --> 0:05:43.040 because great interactive elements on it, showing you know, in 0:05:43.120 --> 0:05:46.080 terms of like padding profits and over draft fees is 0:05:46.120 --> 0:05:48.080 a portion of non interest income. And no joke, it 0:05:48.120 --> 0:05:50.840 took a couple of years to put this story together, yes, yeah, 0:05:50.960 --> 0:05:53.279 and just a long one coming and just to show 0:05:53.400 --> 0:05:56.560 the amount of reporting in time that was put into 0:05:56.960 --> 0:05:59.679 bringing this story to life. So it is definitely a must. Rey, Jenny, 0:05:59.720 --> 0:06:04.120 thank you. This is Bloomberg Business Week with Carol Messer 0:06:04.360 --> 0:06:09.000 and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. We've 0:06:09.040 --> 0:06:12.080 been watching shares of coin based Global because they are 0:06:12.160 --> 0:06:15.880 once again under pressure in today's session alone. We're looking 0:06:15.880 --> 0:06:19.720 at the stock down right now nineteen percent, so we're 0:06:19.760 --> 0:06:22.039 talking about I think an eighty percent or eight percent 0:06:22.080 --> 0:06:24.800 plus decline this year. Company facing a US probe into 0:06:24.800 --> 0:06:28.039 whether it improperly let Americans trade digital assets that should 0:06:28.040 --> 0:06:31.320 have been registered as securities. According to those, I think 0:06:31.360 --> 0:06:33.880 it's like about three people familiar with the matter. Yeah. 0:06:33.960 --> 0:06:37.080 Max Chafkin is a columnist for Bloomberg Business Week. He's 0:06:37.160 --> 0:06:39.480 also the author of the book that can try in 0:06:39.560 --> 0:06:42.839 Peter Tiel and Silicon Valley's Pursuit of Power. He joins 0:06:42.880 --> 0:06:44.680 us right now on the phone from Queen's. Max has 0:06:44.680 --> 0:06:46.280 got a great column. You can read it on the 0:06:46.279 --> 0:06:49.720 Bloomberg and at bloomberg dot com slash of Business Week, 0:06:50.040 --> 0:06:53.320 all about what coin based has been doing. When it 0:06:53.400 --> 0:06:56.800 comes to these you know, so called I want to 0:06:56.800 --> 0:06:59.840 call them s coins. Okay, that's what I'm gonna call them, Carol, Max, 0:07:00.000 --> 0:07:04.080 make us back to September. No, I'm not going to 0:07:04.120 --> 0:07:06.480 do that. A lot of people, I think would who 0:07:06.480 --> 0:07:09.080 don't necessarily play in the crypto space, would would recognize 0:07:09.120 --> 0:07:12.080 coin base because they got a lot of attention almost 0:07:12.080 --> 0:07:14.720 two years ago when the company's CEO came out in 0:07:14.760 --> 0:07:17.440 the wake of activism by employees and supported the Black 0:07:17.440 --> 0:07:20.920 Lives Matter movement. What happened. Yeah, So we've had two 0:07:20.960 --> 0:07:22.880 things that have happened over the last couple of years 0:07:22.880 --> 0:07:26.320 with coin based. As the kind of crypto markets had booms, 0:07:26.320 --> 0:07:29.600 this company has moved kind of closer into the kind 0:07:29.600 --> 0:07:31.800 of center of the the cultural right guys, and as they 0:07:32.000 --> 0:07:36.080 as the company approached a direct listing last year, one 0:07:36.120 --> 0:07:39.640 of which is that the company kind of embraced. Uh. 0:07:39.960 --> 0:07:42.000 This is kind of like culture war thing. It. It 0:07:42.320 --> 0:07:46.040 basically told its employees that they couldn't you know, protests 0:07:46.040 --> 0:07:48.360 in favor of Black Lives Matter, which one a lot 0:07:48.360 --> 0:07:51.600 of um praise from kind of you know, right wing 0:07:51.720 --> 0:07:54.200 types um uh you know who are sort of into 0:07:54.240 --> 0:07:57.280 that kind of thing. And at the same time, um, 0:07:57.440 --> 0:07:59.960 the company was sort of making some some pretty significant 0:08:00.040 --> 0:08:03.400 changes to its business to allow more of these kind 0:08:03.440 --> 0:08:06.320 of lightly traded they're sometimes called alt coins if you 0:08:06.360 --> 0:08:10.760 want a clean for these. These are basically, um, you know, 0:08:10.800 --> 0:08:13.600 it's like the crypto equivalent of a penny stock. So 0:08:13.600 --> 0:08:15.840 so some of them, you know, of course are are 0:08:15.920 --> 0:08:18.960 are legitimate. Some of them have sort of gone nowhere. Um. 0:08:19.240 --> 0:08:22.240 But what has happened, um over the last year or 0:08:22.280 --> 0:08:25.200 so is that coin Base went from being you know, 0:08:25.320 --> 0:08:28.760 kind of seen as a relatively sober minded, you know, 0:08:28.800 --> 0:08:31.880 one of the more um, you know conservative of the 0:08:31.920 --> 0:08:35.360 crypto and exchanges insofar as that's possible, to kind of 0:08:35.400 --> 0:08:41.520 embracing a more um edgy, you know, confrontational pose with regulators. UM. 0:08:41.559 --> 0:08:43.920 Part of that is this kind of like cultural component. 0:08:44.280 --> 0:08:47.440 Part of it is listing lots and lots more of 0:08:47.480 --> 0:08:51.280 these um alt coins UM probably most famously dozed, which 0:08:51.360 --> 0:08:55.160 is like a joke cryptocurrency that that the company added 0:08:55.360 --> 0:08:58.839 UM in May. So I do wonder, like I think 0:08:58.840 --> 0:09:00.320 about this in so many different ways as I think 0:09:00.360 --> 0:09:02.800 about going back to the tech bubble and you know, 0:09:02.880 --> 0:09:05.760 and then there are analysts out there pumping things basically 0:09:06.080 --> 0:09:09.520 that you know, they didn't really believe in those financials 0:09:09.520 --> 0:09:12.320 behind closed doors. But I also think about, you know, 0:09:12.559 --> 0:09:16.120 the crypto world, it's like this freewheeling. It feels like 0:09:16.280 --> 0:09:20.280 to some extent like let's figure this out UM. And 0:09:20.280 --> 0:09:25.120 then there's like, what's the responsibility of these companies to investors, 0:09:25.600 --> 0:09:27.720 you know, in terms of what they are offering up 0:09:27.840 --> 0:09:30.480 like you know, buy or beware? Like who's responsible at 0:09:30.480 --> 0:09:34.839 this point? Yeah? Absolutely, Colindys has done some of that. UM. 0:09:35.280 --> 0:09:38.920 The thing that happened to this company is that, you know, 0:09:38.960 --> 0:09:42.400 as I said, it followed initially Coinny says a long history. 0:09:42.440 --> 0:09:44.320 You know, it's been around I think for almost ten years, 0:09:44.600 --> 0:09:47.640 backed by some of the biggest names in tech. UM. 0:09:47.679 --> 0:09:50.680 What happened is that it sort of fell behind the 0:09:50.720 --> 0:09:54.200 ball on these kind of lesser known currencies. So you 0:09:54.240 --> 0:09:58.160 have this sort of meme stock moment happened, and and competitors, 0:09:58.800 --> 0:10:03.480 most notably Binance uh, basically distinguished themselves by allowing a 0:10:03.559 --> 0:10:06.959 lot more different securities or sorry, we're not I guess 0:10:06.960 --> 0:10:08.839 we're not allowed to call them securities because because that's 0:10:08.880 --> 0:10:12.080 kind of coin business whole position. But um uh, these 0:10:12.120 --> 0:10:15.600 different digital assets and coin base kind of in this 0:10:15.679 --> 0:10:19.240 frenzy to catch up, I think, basically allowed a lot 0:10:19.240 --> 0:10:21.760 more of these things on. And that's kind of where 0:10:21.800 --> 0:10:24.560 they find themselves today, where you have, um, you have 0:10:24.679 --> 0:10:28.560 this Department of Justice uh arrest of a former coin 0:10:28.600 --> 0:10:32.480 based employee who's you know, accused of basically insider trading um. 0:10:32.520 --> 0:10:36.400 And then you have the sec saying that some of 0:10:36.440 --> 0:10:40.359 these tokens that we're being traded are in fact unlicensed securities. 0:10:40.520 --> 0:10:43.000 The upshot of that is that you know, the sec 0:10:43.280 --> 0:10:46.000 is is you know, maybe suggesting or interested in the 0:10:46.080 --> 0:10:49.320 question of whether or not coin bases operating a you know, 0:10:49.400 --> 0:10:52.200 unlicensed security change, which would be really bad for the business, 0:10:52.240 --> 0:10:54.480 which is why you know, we've seen the stock price 0:10:54.840 --> 0:10:56.839 collapse today. And I guess the question is is it 0:10:57.200 --> 0:10:59.720 a security? I mean, is it is it insider trading? Max? 0:10:59.760 --> 0:11:01.920 Because as you know, I think back to when the 0:11:01.920 --> 0:11:06.959 Amazon announcement happened for for Queens, Uh, there was there 0:11:06.960 --> 0:11:09.240 were a lot of reports about Amazon employees having brought 0:11:09.280 --> 0:11:12.400 up real estate in Queens ahead of that, and people 0:11:12.400 --> 0:11:15.560 are saying, well, it's not really you know, insider trading 0:11:15.600 --> 0:11:17.520 because you know, we don't look at real estate in 0:11:17.559 --> 0:11:20.839 that way. And I'm wondering if if we're looking at 0:11:20.880 --> 0:11:23.600 you know, all coins in that way. Well, and that's 0:11:23.640 --> 0:11:26.320 certainly the position of coin Base, you know, they they've 0:11:26.360 --> 0:11:29.240 put out after these these UM complaints drop the d 0:11:29.280 --> 0:11:31.080 o J one in the SEC one. And it's important 0:11:31.120 --> 0:11:33.959 to say that coin Base has not itself been named 0:11:33.960 --> 0:11:35.880 in any of these complainants. You know, they're not charged, 0:11:35.920 --> 0:11:38.920 they haven't been sued UM. And although you know Bloomberg 0:11:38.920 --> 0:11:41.200 has reported on this, you know investigation, you know, the 0:11:41.280 --> 0:11:45.240 SEC hasn't taken any UM formal action UM. Their position, 0:11:45.320 --> 0:11:48.200 the company's position is that it doesn't list securities. These 0:11:48.240 --> 0:11:51.680 things are digital assets UM and and therefore you know 0:11:51.720 --> 0:11:54.600 it's it's in full compliance UM. There has been a 0:11:54.600 --> 0:11:57.720 lot of ambiguity over the last a few years where 0:11:58.000 --> 0:12:01.079 where you know, where it hasn't been clear what exactly 0:12:01.120 --> 0:12:03.480 the ethic is going to do what you know is 0:12:03.480 --> 0:12:06.360 a security, what isn't a security? And again we've seen 0:12:06.640 --> 0:12:09.800 coin bas and some of these other players adopts maybe 0:12:09.800 --> 0:12:12.600 what you might think of as um more aggressive poses. 0:12:13.440 --> 0:12:16.640 As far as that question, I guess I was wondered too, Max, like, 0:12:17.880 --> 0:12:20.440 if we find out that there's some internal conversations, you know, 0:12:20.480 --> 0:12:23.079 basically to the extent of, yeah, we don't really think 0:12:23.080 --> 0:12:24.200 this is anything, but we gotta put it on our 0:12:24.240 --> 0:12:26.520 platform because if we don't, somebody else's, like you do 0:12:26.559 --> 0:12:29.280 wonder like what's the responsibility of a company and its 0:12:29.360 --> 0:12:32.000 leaders and they maybe they don't believe in something, but 0:12:32.280 --> 0:12:36.240 at the same time they know investors are interested in it. Right, 0:12:36.280 --> 0:12:38.160 And this has kind of been something I think has 0:12:38.160 --> 0:12:40.880 been kind of whispered about in in crypto circles, but 0:12:40.920 --> 0:12:43.520 maybe not said publicly until these um you know, to 0:12:43.600 --> 0:12:45.640 build This happened last week, which is that you know, 0:12:45.679 --> 0:12:48.400 there are a lot of assets on coin base that 0:12:48.440 --> 0:12:52.160 are you know, pretty obscure, right, they're not. It's not 0:12:52.240 --> 0:12:56.800 like bitcoin and ethereum. It's it's things like pot call, 0:12:56.960 --> 0:12:59.679 which is a you know, social network for pets, right, 0:13:00.200 --> 0:13:03.080 lightly traded um and you know you can buy it somepoinment, 0:13:03.360 --> 0:13:06.840 and and there's a question about what when you when 0:13:06.880 --> 0:13:09.720 you when you invest in that token, what exactly are 0:13:09.760 --> 0:13:12.400 you doing? And I think the the kind of coin 0:13:12.480 --> 0:13:15.440 based position, right is that you're buying a you know, 0:13:15.520 --> 0:13:17.640 you're not buying a security. You're buying some kind of 0:13:17.640 --> 0:13:19.840 token that's going to be useful in this company. But 0:13:19.880 --> 0:13:21.920 I think that, you know, the reality is a lot 0:13:21.920 --> 0:13:25.920 of people who are transacting in these digital assets are 0:13:26.080 --> 0:13:28.880 are basically gambling, right and and and then so there's 0:13:28.880 --> 0:13:31.600 a question about whether or not that should be regulated. 0:13:31.960 --> 0:13:33.640 And then there's also a question of whether or not, 0:13:33.720 --> 0:13:35.560 you know, there's even a problem with that. You know, 0:13:35.600 --> 0:13:37.800 maybe you know people are going to take take take 0:13:37.840 --> 0:13:39.880 these risks and and maybe it's not a problem. Maybe 0:13:39.880 --> 0:13:41.560 there's gonna be a lot of innovation along the way. 0:13:41.600 --> 0:13:44.480 So certainly lots for the SEC and regulators to kind 0:13:44.480 --> 0:13:48.000 of work through. Max. When you were doing the reporting 0:13:48.040 --> 0:13:50.720 for this column, what was the favorite alt coin that 0:13:50.720 --> 0:13:52.439 you found? I don't want to say favorite, but you 0:13:52.480 --> 0:13:55.880 know what was prohaps the most surprising? I mean to me, 0:13:56.280 --> 0:13:58.000 you know, does is still and I know it's a 0:13:58.080 --> 0:14:00.600 satiated answer, it's still the one that I keep coming 0:14:00.600 --> 0:14:04.000 back to because it was literally founded as a joke. 0:14:04.160 --> 0:14:06.320 I mean, you know that it was not ever meant 0:14:06.360 --> 0:14:07.959 to be an asset, It was not ever meant to 0:14:08.000 --> 0:14:11.880 have any um, you know, any specific utility, and it 0:14:12.040 --> 0:14:13.680 just kind of clucked on a life of its own 0:14:13.760 --> 0:14:16.440 thanks to Elon Musk and meet stock traders. And then 0:14:16.480 --> 0:14:19.080 you're in a situation where this kind of otherwise pretty 0:14:19.120 --> 0:14:21.800 sober minded company feels like it's got to offer a 0:14:21.840 --> 0:14:25.200 mean coin to its investors. Another. Oh, Ellen, apparently haven't 0:14:25.200 --> 0:14:29.040 heard of the steno, which is really cool in certain circles. 0:14:29.080 --> 0:14:31.960 All Right, Max Chafkin over Bloomberg Business Week, a columnist. 0:14:32.080 --> 0:14:36.720 This is Bloomberg. You're listening to Bloomberg Business Week with 0:14:36.840 --> 0:14:41.640 Carol Messer and Bloomberg Quick Takes. Tim Stenovic on Bloomberg Radio. 0:14:42.080 --> 0:14:44.320 You know the FEDS interest rate hikes, they are kind 0:14:44.360 --> 0:14:46.240 of wearing at their welcome in the bond markets. We've 0:14:46.240 --> 0:14:49.280 seen a measure of the yield curve that Cher J. 0:14:49.400 --> 0:14:53.160 Palace highlighted as a recession indicator, sending out a warning message. 0:14:53.200 --> 0:14:55.760 We're talking about the difference between rates where three month 0:14:55.760 --> 0:14:57.800 bills are now where they will be in eight team 0:14:57.840 --> 0:15:00.320 months that's tumbled about nine basis points in like the 0:15:00.360 --> 0:15:03.640 biggest monthly decline in data starting in We keep watching 0:15:03.920 --> 0:15:08.880 these relationships and what's happening, so essentially flashing warning signals 0:15:08.880 --> 0:15:12.080 about a recession. Right, Yeah, we've seen some inversion. Right. Um, 0:15:12.160 --> 0:15:15.280 so we know the Fed's got a bit of a 0:15:15.280 --> 0:15:18.280 conundrum yanked down inflation with aggressive rate hikes without creating 0:15:18.520 --> 0:15:20.640 a recession. That's not easy. Let's get into it with 0:15:20.720 --> 0:15:24.080 Dr Stephen Skanky, chief economic advisor at keel Point, also 0:15:24.120 --> 0:15:27.000 a former US Treasury and White House National Security Council 0:15:27.120 --> 0:15:30.880 staff member. We love it when Steve joins us ahead 0:15:30.920 --> 0:15:32.560 of FED meanings to give us an idea of what 0:15:32.600 --> 0:15:36.320 to look for. Doctor Skanky, how are you. I'm doing well, 0:15:36.360 --> 0:15:38.440 thanks to him. Thanks for having me on. It's always 0:15:38.480 --> 0:15:40.200 great to be with you and Carol. Yeah, well it's 0:15:40.200 --> 0:15:41.880 it's always great when you join us, um, and it 0:15:41.920 --> 0:15:43.560 also means that you know we got we got the 0:15:43.560 --> 0:15:46.720 FED chair coming tomorrow when you join us. So before 0:15:46.760 --> 0:15:48.480 we get to what to watch for, I want to 0:15:48.480 --> 0:15:51.360 go to Carol's point about recession concerns, because that's something 0:15:51.400 --> 0:15:54.120 that we're certainly going to listen to from J. Powell. 0:15:54.160 --> 0:15:56.360 But what are you watching right now in terms of 0:15:56.640 --> 0:16:00.720 how you're thinking about the health of the economy. Well, 0:16:00.720 --> 0:16:04.760 the health of the economy is actually pretty pretty good. Obviously, 0:16:05.840 --> 0:16:08.280 growth is declining, but when you look at just some 0:16:08.400 --> 0:16:14.680 of the fundamentals, first quarter, second quarter industrial production up 0:16:14.760 --> 0:16:17.880 for all those five percent, a little better than six 0:16:17.960 --> 0:16:24.000 percent respectively. Unemployment is is below where we started the year. 0:16:24.120 --> 0:16:28.120 We've averaged more than four hundred thousand new jobs each 0:16:28.240 --> 0:16:31.640 month since the beginning of the year. Those are all 0:16:31.640 --> 0:16:35.720 strong indicators. You know, to be honest, if if this 0:16:35.800 --> 0:16:40.520 is a recession, uh, it's a sort of condition that 0:16:40.800 --> 0:16:44.000 we wouldn't mind having from time to time. I was 0:16:44.000 --> 0:16:46.080 just gonna say, yeah, I'll take this kind of recession 0:16:46.120 --> 0:16:48.920 going forward. I mean, but you know what exactly right? Well, 0:16:48.920 --> 0:16:50.680 but Steve, you know what's crazy? Like Tim and I 0:16:50.680 --> 0:16:52.080 scratch your head. And we do this with our TV 0:16:52.160 --> 0:16:54.560 colleagues when we talk about the markets and kind of 0:16:54.600 --> 0:16:58.720 the contrasting views about what's going on, it just feels conflicting. 0:16:58.760 --> 0:17:01.360 Whether it's Walmart talking to on their numbers, or McDonald's 0:17:01.400 --> 0:17:03.960 able to pass higher prices along or UNI leave are 0:17:03.960 --> 0:17:06.719 being able to pass higher prices along, and you know, 0:17:06.880 --> 0:17:09.920 consider sentiment and confidence numbers coming down. I'm not quite 0:17:09.960 --> 0:17:13.520 sure how to read. Is it just the reset of 0:17:13.520 --> 0:17:16.919 our world post pandemic, although the pandemic isn't over. Is 0:17:16.960 --> 0:17:19.760 that what's going on and that's why it's so weird. 0:17:21.359 --> 0:17:23.639 I think that's a good part of it, Carol, I 0:17:23.680 --> 0:17:26.040 think you've just sort of put your finger right on 0:17:26.080 --> 0:17:32.600 the nose of it. Um. Concers are you know, all 0:17:32.600 --> 0:17:36.160 of the confidence and sentiment servation that they're just glump 0:17:37.040 --> 0:17:39.479 and get their balance sheets are stronger than ever, they 0:17:39.520 --> 0:17:45.760 continue to spend their outlook for inflation six and twelve 0:17:45.760 --> 0:17:50.840 months out continues to come down. All positive indicators. But 0:17:51.000 --> 0:17:53.480 when you look at what we've had well over the 0:17:53.520 --> 0:17:56.200 last twelve and a half years, but even just over 0:17:56.240 --> 0:18:07.920 the last three years, uh eighteen percent, thirty percent And 0:18:07.960 --> 0:18:09.760 if so, if you've been looking at your four old 0:18:09.800 --> 0:18:15.000 one K over the last three years, being down twenty 0:18:15.200 --> 0:18:19.320 three and a half percent by mid July is is 0:18:19.359 --> 0:18:25.080 a real joke. Um, it just feels awful. H Many 0:18:25.160 --> 0:18:29.720 people have even compared it to being worse than the 0:18:29.760 --> 0:18:33.440 financial crisis that we had in two thousand and eight, 0:18:33.440 --> 0:18:37.280 two thousand and nine, when in unemployment with double digit 0:18:38.480 --> 0:18:43.199 just all that doesn't make sense to sing, right, I mean, 0:18:43.280 --> 0:18:45.560 think about where we were just over two years ago. 0:18:45.640 --> 0:18:48.919 I mean we had what an spirol that in one 0:18:49.000 --> 0:18:52.120 was up twenty close for the year, and we knew 0:18:52.160 --> 0:18:57.080 that that was mega performance, Yes it was, but we 0:18:57.119 --> 0:19:00.640 got it again in we got in one. We got 0:19:00.680 --> 0:19:04.280 it in twenty nineteen, right, and even in which was 0:19:04.400 --> 0:19:07.560 weird because of the shutdown from the pandemic, the sp 0:19:07.760 --> 0:19:11.640 was still up eighteen percent for the year. So we're 0:19:11.680 --> 0:19:13.560 gonna watch a couple of you know, it's an interesting 0:19:13.640 --> 0:19:17.440 week where we obviously have the FED meeting UM steve 0:19:17.520 --> 0:19:20.160 this week, and that's obviously their focus tomorrow. But then 0:19:20.480 --> 0:19:22.760 after that FED meeting, we're going to get a reading 0:19:22.960 --> 0:19:26.840 on second quarter GDP the first right, and UM, we're 0:19:26.920 --> 0:19:29.720 concerned about you know what that might tell us about 0:19:29.760 --> 0:19:32.600 recession not recession. We're going to get the PC eight 0:19:32.800 --> 0:19:36.480 PC cores, which are also key. Uh. Someone also talked 0:19:36.480 --> 0:19:38.520 about employment cost index. That's going to be really key 0:19:38.560 --> 0:19:43.359 whether we're continuing to see wage pressure. I guess what 0:19:43.600 --> 0:19:46.720 should we really be focusing on to give us a 0:19:46.800 --> 0:19:49.760 true indication of kind of where this economy is headed. 0:19:52.440 --> 0:19:55.320 The numbers coming down on Thursday would be really instructive 0:19:56.320 --> 0:20:00.960 because we'll we'll see what the components of GDP growth 0:20:01.080 --> 0:20:06.240 are for the second quarter. UH. And A and a 0:20:06.440 --> 0:20:09.840 big interest is where we ended up with net exports. 0:20:10.680 --> 0:20:14.399 That that's just the big swing here. UH. The the 0:20:14.520 --> 0:20:18.440 Atlanta GDP now is is still showing down one and 0:20:18.520 --> 0:20:20.800 a half one point six percent for the second quarter 0:20:20.880 --> 0:20:24.080 analyzed rate. But when you when you go through and 0:20:24.720 --> 0:20:28.159 you you calculate sort of from the bottom up with 0:20:28.280 --> 0:20:32.280 what consumers are doing, business investment which is negative, government 0:20:32.320 --> 0:20:35.800 which is is neutral, and then you come to net exports, 0:20:37.200 --> 0:20:41.919