WEBVTT - "Madoff Speaks" Author: Bernie Madoff Resented His Investors 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 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.959 at Bloomberg dot com slash podcast. Cornard made Off, the 0:00:23.000 --> 0:00:27.080 Manhattan investment advisor who promised stellar returns to his A 0:00:27.200 --> 0:00:29.760 list clients and instead you frauded them of more than 0:00:29.920 --> 0:00:33.960 nineteen billion dollars in history's largest Ponzi scheme, has died. 0:00:34.000 --> 0:00:36.360 He was eighty two. We want to get more color 0:00:36.479 --> 0:00:40.400 on the man behind the scam, Bernie made Off, and 0:00:40.400 --> 0:00:42.800 we do that. We're so fortunate to have Jim Campbell. 0:00:43.080 --> 0:00:46.000 Jim is the author of an upcoming book entitled Made 0:00:46.000 --> 0:00:48.559 Off Talks. He's also hosted the radio shows Business Talk 0:00:48.600 --> 0:00:50.960 with Jim Campbell and his crime show Forensic Talk with 0:00:51.040 --> 0:00:53.280 Jim Campbell. Jim, thanks so much for joining us. I 0:00:53.320 --> 0:00:55.600 know you have your book coming out on Bernie made Off. 0:00:55.760 --> 0:01:00.600 Made Off Talks available April. Talk to us about out 0:01:00.680 --> 0:01:04.000 the access you had to Bernie made Off for this book. 0:01:04.040 --> 0:01:08.080 I think it's just really interesting. Well, first all, thanks 0:01:08.120 --> 0:01:10.679 for having me on. Obviously something most have happened today, 0:01:10.680 --> 0:01:14.759 and it is big news. Actually, Um, it was very 0:01:14.959 --> 0:01:17.520 It was really fortuitous in the sense that I was 0:01:17.560 --> 0:01:19.760 doing an interview from my show on a book on 0:01:19.920 --> 0:01:22.360 made Off and they let me speak off the record 0:01:22.400 --> 0:01:25.399 with Andrew made Off, and UM, I told him would 0:01:25.400 --> 0:01:28.200 be very open. I asked him tough questions. He obviously 0:01:28.280 --> 0:01:30.959 was doing nothing publicly because he was under all kinds 0:01:31.000 --> 0:01:33.720 of assault from the Southern District of New York and 0:01:33.760 --> 0:01:38.200 recific made Off trustee. He introduced me then to Ruth Madeoff, 0:01:38.280 --> 0:01:42.280 who again fortuitously had just moved to Greenwich, where I live, 0:01:42.560 --> 0:01:46.280 and we developed a relationship. She introduced me to Bernie. 0:01:46.280 --> 0:01:49.320 Bernie and I communicated. I had got over four hundred 0:01:49.400 --> 0:01:54.440 pages between handwritten letters emails. Um, he's very Nixtonian. He 0:01:54.560 --> 0:02:00.680 had this need compulsion to kind of explain everything. Fascinating guy. Um, 0:02:00.920 --> 0:02:03.400 you'd just be amazed about him. He was not driven 0:02:03.440 --> 0:02:08.480 by greed, um, ironically driven by control. And let me 0:02:08.560 --> 0:02:10.239 just tell you then you can ask you whatever you want. 0:02:10.480 --> 0:02:12.800 The biggest single thing that blows my mind is he 0:02:12.960 --> 0:02:17.120 built side by side one of the most ethical, innovative, 0:02:17.160 --> 0:02:19.560 and leading businesses on Wall Street. That was his market 0:02:19.720 --> 0:02:23.639 maker at the same time, two fours down behind the 0:02:23.800 --> 0:02:28.519 locked uh door with several unsophisticated folks, he built the 0:02:28.520 --> 0:02:32.560 biggest criminal enterprise in Wall Street history. It wasn't like 0:02:32.639 --> 0:02:34.839 he got in trouble had to double down and then 0:02:35.240 --> 0:02:37.280 do a Ponzi scheme he thought he would get out of. 0:02:37.520 --> 0:02:43.240 He built them side by side. So I wonder do 0:02:43.320 --> 0:02:45.680 you feel sorry for Bernie made off? I know he 0:02:46.360 --> 0:02:50.360 committed I guess you could say heinous crimes, although they 0:02:50.360 --> 0:02:54.120 were you know, financial and nature. Um he did bankrupt 0:02:54.160 --> 0:02:56.959 a lot of people who, you know, their lives were 0:02:56.960 --> 0:03:01.240 made considerably worse afterwards. They were suicide, one of whom 0:03:01.480 --> 0:03:04.240 was his own son, though um Mark killed himself in 0:03:04.240 --> 0:03:07.160 two thousand and ten and then Andrew died of lymphoma 0:03:07.160 --> 0:03:11.359 in two thousand fourteen. I mean, do you feel bad 0:03:11.400 --> 0:03:14.640 for the guy? I think the way to answer that 0:03:14.720 --> 0:03:19.120 question is was he a pure social path? Um who 0:03:19.480 --> 0:03:22.000 sentce you was a financial terrorist? And the answer is no, 0:03:22.600 --> 0:03:25.120 It's not black and white. He ran the firm like 0:03:25.160 --> 0:03:30.160 a family. He paid for folks sudden medical expenses their 0:03:30.240 --> 0:03:33.960 honeymoons traditionally, and so it was not black and white. 0:03:34.040 --> 0:03:38.720 On the other hand, he has the sociopath aspects of 0:03:38.960 --> 0:03:42.240 very little empathy. He had resentment for his victims in 0:03:42.320 --> 0:03:44.840 some sense, he thought they were greedy. They were always 0:03:44.880 --> 0:03:48.240 asking him for more. He could never say no. So 0:03:48.640 --> 0:03:51.240 it's kind of a mixed bag. He's obviously can never 0:03:51.280 --> 0:03:53.760 be forgiven for what he did, and he could never 0:03:53.840 --> 0:03:58.000 come to grips essentially with honestly admitting it. But he's 0:03:58.040 --> 0:04:04.800 not at you know, pure sociopath evil God what I found. 0:04:05.040 --> 0:04:07.400 I'm sorry. Let me just say Ellie was out, you know, 0:04:07.480 --> 0:04:12.200 the famed Nazi hunter, Holocaust survivor, Nobel Peace Prize winner, 0:04:13.280 --> 0:04:15.040 was asked if he could forgive made off and he 0:04:15.080 --> 0:04:17.880 said no. To forgive first of all, and this is 0:04:17.920 --> 0:04:20.159 a direct quote, would mean that he would come on 0:04:20.200 --> 0:04:23.400 his knees and asked for ask for forgiveness. He wouldn't 0:04:23.480 --> 0:04:26.839 do that. Um. Is that right? Did he never do 0:04:27.040 --> 0:04:30.960 that even to someone like Ellie Wizzell Well, let me 0:04:31.000 --> 0:04:34.520 tell you this, and this is kind of an irony. Um. 0:04:34.560 --> 0:04:38.480 He wrote a one satins letter to Andrew, and Andrew's 0:04:38.520 --> 0:04:44.840 partner fiancee Um that said, I'm so sorry, Dad, essentially 0:04:44.880 --> 0:04:47.120 apologizing for the scheme not even a look. But it 0:04:47.160 --> 0:04:50.279 was one set. At the same time, I was getting 0:04:50.520 --> 0:04:56.599 six seven single spaced letters in beautiful, exquisitive handwriting, explaining 0:04:56.600 --> 0:04:59.839 and rationalizing everything. So yeah, he had a tough time. 0:05:00.120 --> 0:05:02.920 He had an ego that could never admit any kind 0:05:02.920 --> 0:05:06.120 of loss, which is not something to be a tribute 0:05:06.120 --> 0:05:07.440 and the trait you want to have if you're in 0:05:07.440 --> 0:05:10.240 the investment business, where losses are are part of the game, 0:05:10.320 --> 0:05:13.600 similar to President Trump in that way. And so there's 0:05:13.640 --> 0:05:16.560 a huge denial mechanism. And though he did not ask 0:05:16.600 --> 0:05:20.440 for forgiveness, he told me Um he felt he felt 0:05:20.720 --> 0:05:23.440 really bad for his his uh you know, his victims 0:05:23.440 --> 0:05:26.080 and everything he knew he'd done wrong. He was devastated 0:05:26.080 --> 0:05:28.360 by what he did to his sons. He essentially killed 0:05:28.360 --> 0:05:34.000 both because Andrew died slowly of cancer. But I spent 0:05:34.120 --> 0:05:38.000 a lot of time with victims, and Um, it's it's 0:05:38.160 --> 0:05:41.080 very very hard to forgive a guy, um, knowing what 0:05:41.200 --> 0:05:44.440 he what he the damage that he calls Jim and 0:05:44.480 --> 0:05:48.000 your communications with made off. You know, did you talk 0:05:48.040 --> 0:05:51.080 to Hi about the angle? Only angles that fascinates me 0:05:51.160 --> 0:05:54.359 was you know, it seems like he took advantage of 0:05:55.279 --> 0:05:59.560 his friends, um and maybe praying upon their Jewish religion. Hey, 0:06:00.360 --> 0:06:02.760 you know, you know that's where a lot of his 0:06:03.120 --> 0:06:06.320 relationships came from, whether it's a synagogue or just you know, 0:06:06.600 --> 0:06:10.120 uh circle of friends and pomp Beach or Adam Hampton's. 0:06:10.120 --> 0:06:14.240 And it seemed to really prey upon you know, his friends, 0:06:14.279 --> 0:06:17.560 that his Jewish friends. Did that come up at all? 0:06:18.480 --> 0:06:21.279 Oh yeah, he's um in a sense, it was almost 0:06:21.279 --> 0:06:24.720 a financial holocaust, and in the Jewish community, UM to 0:06:24.920 --> 0:06:30.280 betray financially um, you know, fellow brotherren is almost beyond conception, 0:06:30.279 --> 0:06:32.800 which is one of the reasons he was so successful. 0:06:33.000 --> 0:06:36.040 Here's example of the two sides of him. His his 0:06:36.320 --> 0:06:40.279 he had big four investors who he basically took his 0:06:40.440 --> 0:06:43.240 lower net worth investors and passed the money onto them 0:06:43.240 --> 0:06:47.200 and what I call a reverse Robin hood and um 0:06:47.279 --> 0:06:49.839 one of the uh, one of the four Norm Levy 0:06:50.000 --> 0:06:53.400 he was very close to and and and worked hand 0:06:53.440 --> 0:06:55.320 in hand and when he died even sort of took 0:06:55.360 --> 0:06:57.520 care of him to keep control over him. At the 0:06:57.560 --> 0:07:00.480 same time, he was the executor of his non real estate. 0:07:00.480 --> 0:07:02.520 Asked that he was a big real estate investor. He 0:07:02.640 --> 0:07:06.960 stole twitter in fifty million to pump into his headge fund. So, um, 0:07:07.000 --> 0:07:09.800 you know, how do you fathom this guy? It is 0:07:10.120 --> 0:07:13.840 it's it's an it's an amazing, um, you know thing 0:07:13.920 --> 0:07:15.840 that I have been sort of blessed with to try 0:07:15.880 --> 0:07:19.240 to diagnose this and get under the hood. Did he 0:07:19.280 --> 0:07:22.600 have any friends at the end, Jim, you mentioned that 0:07:22.720 --> 0:07:26.440 you have that you have a relationship with Ruth, And 0:07:26.480 --> 0:07:29.120 I know at one point, I think after mark suicide, 0:07:29.160 --> 0:07:31.600 she said she was never going to talk to Bernie again. 0:07:32.160 --> 0:07:34.240 But surely she must have remained in contact if she 0:07:34.280 --> 0:07:38.080 hiked you up. Yeah. She Um. The first thing is 0:07:38.120 --> 0:07:42.040 that that she's really was almost cult like controlled by him, 0:07:42.600 --> 0:07:45.440 and she had a very hard time decoupling from him. 0:07:45.480 --> 0:07:47.880 She was thirteen years old when they started dating. She 0:07:48.000 --> 0:07:52.080 believed his rationalizations and minimizations at first. By the time 0:07:52.120 --> 0:07:55.240 I met her, she was presenting to me at least that, um, 0:07:55.320 --> 0:07:57.040 you know that he was going to that she was 0:07:57.080 --> 0:07:59.960 cutting off relations to the degree she could. He emailed her, 0:08:00.240 --> 0:08:03.440 he phoned her, They were in communication. Still they were. 0:08:03.600 --> 0:08:08.360 She was also obviously through me funnel uh stuff to him. 0:08:08.360 --> 0:08:12.040 But um, it was very hard for her to get through. 0:08:12.080 --> 0:08:14.600 To be honest, she was also very hurt, as I 0:08:14.720 --> 0:08:17.920 say in the book, by um some sexual affairs that 0:08:17.960 --> 0:08:20.240 he had that actually related more to control of his 0:08:20.320 --> 0:08:23.280 investors than it did to the pure sex. But that's 0:08:23.280 --> 0:08:25.520 all in the book. You'll find Also in the book, 0:08:25.560 --> 0:08:28.720 I will just uh, I'm the first meteor media source 0:08:28.800 --> 0:08:32.760 I believe to determine if Ruth, Mark and Andrew were 0:08:32.840 --> 0:08:36.120 complicit in any way. The FBI and the SIF the 0:08:36.200 --> 0:08:38.880 trust stee believe that they had to have known, and 0:08:39.080 --> 0:08:43.120 I have I've got a it's in chapter eight, folks, right, 0:08:43.440 --> 0:08:47.120 that's interesting real quick? How is his time in prison, 0:08:47.200 --> 0:08:49.920 the ten years? How hard was it? Did he have 0:08:49.960 --> 0:08:52.480 any friends or any supporters or is he really alone? 0:08:53.600 --> 0:08:57.400 My understanding was that actually, you know, he's charismatic, and 0:08:57.679 --> 0:09:01.680 uh he is. He is a non con con man 0:09:02.000 --> 0:09:04.360 because he's so low Keith and I think he gained 0:09:04.400 --> 0:09:07.520 a lot of respect that a lot of the prisoners 0:09:07.559 --> 0:09:09.559 thought he was kind of cool. We'll pull off what 0:09:09.720 --> 0:09:14.199 he pulled off, and he's kind of a survivor that way. Um. 0:09:14.320 --> 0:09:18.080 He's been sick for a while, though pretty badly and isolated. 0:09:18.120 --> 0:09:20.920 I think the hospital wins all right. Jim, Hey Jim, 0:09:20.960 --> 0:09:23.680 we really appreciate you taking time here on this really 0:09:23.679 --> 0:09:26.079 important day. Jim Campbell, he's the author of the upcoming 0:09:26.080 --> 0:09:29.559 book it's due uh out in stores and on online 0:09:29.880 --> 0:09:34.319 on April seven, entitled Made Off Talks, so that should 0:09:34.320 --> 0:09:36.920 be very interest giving the timing that we have here. Jim, 0:09:36.920 --> 0:09:43.320 thanks so much for joining us here. Point based public 0:09:43.400 --> 0:09:46.160 offering today via directed listening. We're still waiting for that 0:09:46.240 --> 0:09:49.360 to open, but it is certainly has the attention of 0:09:49.400 --> 0:09:53.480 a global Wall Street. Meltem Demror's cheap strategy officer from 0:09:53.600 --> 0:09:56.480 coin Shares Group, joins us here today. Give us your 0:09:56.480 --> 0:10:01.839 thoughts of what's the feeling inside coin Shares today. Quick delineation. 0:10:02.320 --> 0:10:06.120 Coin Base is listening today. Coin Shares, which is my firm, 0:10:06.280 --> 0:10:09.439 listed about a month ago, so look really great day 0:10:09.480 --> 0:10:12.240 for the industry. Coin Base is not only going to 0:10:12.280 --> 0:10:16.040 be a great validation, not just for crypto assets, which 0:10:16.040 --> 0:10:19.400 are two trillion dollar market now, but for the companies 0:10:19.480 --> 0:10:23.080 building in the crypto ecosystem slated to be und billion 0:10:23.080 --> 0:10:25.000 dollar I p O. I think we're going to tap 0:10:25.000 --> 0:10:27.080 a hundred fifty billion by the end of the week. 0:10:27.320 --> 0:10:29.840 Coin Base will be bigger than Golden and Stacks, which 0:10:29.880 --> 0:10:33.800 is amazing. But really the monumental moment here is we're 0:10:33.840 --> 0:10:36.760 firmly planting the flag in the ground. Crypto is an 0:10:36.760 --> 0:10:40.480 asset class. Crypto is an industry, and for investors, this 0:10:40.600 --> 0:10:44.000 is a place where you can no longer afford to ignore. 0:10:44.280 --> 0:10:47.839 You have to be allocating to this sector. You can 0:10:47.840 --> 0:10:49.840 do it be the assets themselves. That's what we do 0:10:49.920 --> 0:10:52.520 at coin Shares. We have five billion in assets under 0:10:52.520 --> 0:10:55.280 management in our change trade of products. Or now with 0:10:55.400 --> 0:10:59.360 coin base, you can buy equity in high growth sintech companies. 0:10:59.440 --> 0:11:02.400 So we're super excited. So let's talk about the well, 0:11:02.520 --> 0:11:05.320 to some extent, the differences right. Coin Base is an exchange, 0:11:05.360 --> 0:11:09.439 the largest US cryptocurrency exchange. What you offer with your 0:11:09.480 --> 0:11:14.160 exchange traded product is the ability to and correct me 0:11:14.240 --> 0:11:17.120 if if I'm wrong to buy bitcoin, but I don't 0:11:17.160 --> 0:11:19.560 have to. I can buy bitcoin with your E t P, 0:11:19.679 --> 0:11:22.120 but I don't have to figure out how to hold it. 0:11:22.160 --> 0:11:23.520 Do I put it in? I don't know what it's 0:11:23.559 --> 0:11:28.480 called cold storage or whatever. Um you guarantee my security, 0:11:28.880 --> 0:11:31.959 you know, you know, I know what I'm talking about, Meltham. No, 0:11:32.080 --> 0:11:35.719 But the point is you. Um, you basically take the 0:11:36.160 --> 0:11:39.160 busy work out of it for an old gen Z 0:11:39.280 --> 0:11:41.800 guy like me, and I don't have to worry about 0:11:41.840 --> 0:11:45.719 someone stealing it. I I still own it though, Yep, 0:11:45.920 --> 0:11:49.000 exactly right. So coin Shares we've been around for the 0:11:49.080 --> 0:11:52.320 last seven years and basically what we do. We're an 0:11:52.360 --> 0:11:55.040 investment firm that does a lot of different things. Were 0:11:55.080 --> 0:11:58.240 best known for products, which again you can go onto 0:11:58.280 --> 0:12:01.760 any old brokerage platform type in a ticker and hold 0:12:01.920 --> 0:12:05.080 crypto exposure in your account. Coin based lifts you buy 0:12:05.200 --> 0:12:09.040 the underlying assets directly, which is different right there. They're 0:12:09.040 --> 0:12:12.840 more of an exchange and a bank effectively. But again, 0:12:13.040 --> 0:12:15.840 there's tons of innovation in this space. We're seeing a 0:12:15.880 --> 0:12:19.880 lot of different companies going public over the coming months 0:12:19.920 --> 0:12:23.120 and years, and we're really excited. You know, I manage 0:12:23.120 --> 0:12:26.320 our venture portfolio. We're also interesting in a lot of 0:12:26.360 --> 0:12:29.640 these companies with our balance sheet capital and we're just 0:12:29.720 --> 0:12:33.800 so excited to see huge validation. I just want to 0:12:33.800 --> 0:12:36.320 say one more thing on the coin based on listing. 0:12:36.480 --> 0:12:38.800 What's really cool. Here's Colin Based didn't do an I 0:12:38.920 --> 0:12:42.000 p O. They're going to market through a direct listing, 0:12:42.280 --> 0:12:46.520 which I think is great, um. But more importantly, this 0:12:46.720 --> 0:12:50.240 listing is going to be the biggest direct listing and 0:12:50.320 --> 0:12:53.480 one of the biggest capital markets events we've seen in 0:12:53.480 --> 0:12:56.520 the venture space in the last ten years. So I 0:12:56.600 --> 0:12:59.559 think again, the fact that this is a crypto native 0:12:59.640 --> 0:13:02.680 comp ane that's able to achieve this type of outcome 0:13:03.080 --> 0:13:06.880 just validates why it's so important for investors to allocate 0:13:06.960 --> 0:13:09.440 to this space. And then I think again, just a 0:13:09.679 --> 0:13:13.800 huge moment for this industry. After seven years of being 0:13:13.840 --> 0:13:18.040 called crazy and the traditional financial world shutting us, we 0:13:18.120 --> 0:13:21.480 are now being accepted because we speak in the language 0:13:21.480 --> 0:13:25.400 that investors understand, which is money. Well, you know, my 0:13:25.400 --> 0:13:29.000 my heartache is UM. When I started researching and reporting 0:13:29.040 --> 0:13:31.320 on bitcoin in two thousand twelve, I bought some, put 0:13:31.320 --> 0:13:35.280 it in my blockchain wallet and promptly forgot the password. 0:13:35.480 --> 0:13:38.720 I'm not I'm not feeling the pain as much as 0:13:38.840 --> 0:13:42.400 some of the bigger whales that did the same. But Um. 0:13:42.559 --> 0:13:44.680 The benefit I guess of an et P which you 0:13:44.760 --> 0:13:46.760 offer is that I would be able to what call 0:13:46.880 --> 0:13:50.240 somebody and say, hey, help me out here exactly. And 0:13:50.280 --> 0:13:52.760 it's also the other element that's really important is you 0:13:52.760 --> 0:13:56.200 can hold exchange trigger products in your retirement account. Right, 0:13:56.320 --> 0:14:05.800 so tax advantage savings really important. Through me, Are you 0:14:05.840 --> 0:14:08.120 going through a tunnel? Are you in an elevator right now? 0:14:08.400 --> 0:14:11.839 You know I'm right hear me? Okay, yeah, okay, you're 0:14:11.880 --> 0:14:15.000 breaking up a little bit. We got you, okay. So, look, 0:14:15.000 --> 0:14:16.880 that big opportunity with E T t s is the 0:14:16.960 --> 0:14:20.520 retirement accounts. Americans hold the majority of their wealth in 0:14:20.560 --> 0:14:23.680 their homes and in their retirement accounts. So we want 0:14:23.680 --> 0:14:27.440 to get crypto into every retirement account so that people 0:14:27.560 --> 0:14:30.640 can grow their their wealth through this asthet class and 0:14:30.680 --> 0:14:34.480 through these businesses in their tax advantaged savings, especially as 0:14:34.480 --> 0:14:37.720 the U. S. Government looks to tax earners and savers 0:14:37.760 --> 0:14:40.200 alike at a much higher basis than the years going 0:14:40.240 --> 0:14:43.480 forward given all of the deficit that we're seeing in 0:14:43.480 --> 0:14:47.080 this country and in the world more broadly. Meltime, you 0:14:47.120 --> 0:14:49.920 talked about maybe some of the uptake of some of 0:14:50.280 --> 0:14:52.880 this cryptocurrencies at there give us a sense for the 0:14:52.920 --> 0:14:57.440 institutional appetite for all things crypto. There's concerns that maybe 0:14:57.880 --> 0:15:00.480 we're not seeing the uptake from some of the big 0:15:00.520 --> 0:15:05.440 institutional investors. What's your experience, Yeah, absolutely, so, look from 0:15:05.480 --> 0:15:09.120 an asset allocation perspective. We produced the weekly fund Flows 0:15:09.240 --> 0:15:12.200 reports that tracks all of the inflows and outflows into 0:15:12.320 --> 0:15:16.800 crypto products that are publicly traded right now, those products 0:15:16.840 --> 0:15:20.200 have over sixty billion in assets under management between them. 0:15:20.480 --> 0:15:24.200 The last two quarters have seen record inflows. And I'll 0:15:24.200 --> 0:15:27.200 just share one more fact. Gold has typically been the 0:15:27.240 --> 0:15:33.040 preferred portfolio diversifier for institutions. What we are seeing right 0:15:33.080 --> 0:15:37.160 now is over the last two quarters, gold products and 0:15:37.200 --> 0:15:42.040 gold ETF have seen twenty billion dollars in outflows. Crypto 0:15:42.080 --> 0:15:46.160 products have seen seven billion dollars in inflows. And so 0:15:46.200 --> 0:15:50.040 what we have here is a sector rotation. Investors and 0:15:50.080 --> 0:15:54.600 allocators need diversifiers in the current macro climates. Our research 0:15:54.640 --> 0:15:58.000 has found a four percent allocation to bitcoins is the 0:15:58.120 --> 0:16:03.120 optimal portfolio diversitycation to balance risk and reward. JP Morgan 0:16:03.200 --> 0:16:06.440 says one percent that we think our research is better 0:16:06.520 --> 0:16:09.520 at four per cents um. But look, investors are looking 0:16:09.520 --> 0:16:13.440 to diversify. They're looking for places to generate return. With 0:16:13.520 --> 0:16:16.880 real inflation at two point five to three percent and 0:16:17.000 --> 0:16:19.640 fixed in comic close to zero and real rate it 0:16:19.680 --> 0:16:23.160 close to zero. We think crypto and bitcoin will play 0:16:23.160 --> 0:16:27.200 an increasingly important role in investor portfolios and allocators are 0:16:27.280 --> 0:16:29.720 starting to come out of the woodwork. They're starting to 0:16:29.760 --> 0:16:32.720 allocate in size, and nowhere is that more apparent than 0:16:32.760 --> 0:16:36.480 the inflows we're being into these products. All right, Melton, 0:16:36.600 --> 0:16:38.000 great to get some time with you. I hope we 0:16:38.000 --> 0:16:40.080 can talk to you a little bit more after this. 0:16:40.240 --> 0:16:44.280 Melton um Demers has been really a huge driving force 0:16:44.360 --> 0:16:47.120 in this industry. She's on the she founded the World 0:16:47.120 --> 0:16:51.240 Economic Forum Blockchain Council, and you've probably seen her if 0:16:51.240 --> 0:16:54.800 you watch c SPAN testifying in front of Congress on 0:16:55.280 --> 0:16:58.720 digital currencies. She also teaches at m I T as 0:16:58.760 --> 0:17:02.040 well as ox Ford and UM. Right now, you know, 0:17:02.080 --> 0:17:04.840 we're focused on the coin based direct listing. It's indicated 0:17:04.840 --> 0:17:08.600 to open at three five and no now indicated to 0:17:08.600 --> 0:17:11.840 open at three six five dollars in the NASDAC debut. 0:17:11.880 --> 0:17:14.159 But there's so much more to talk about around crypto, 0:17:14.240 --> 0:17:16.440 especially as here in Europe they're talking about digital currency 0:17:16.760 --> 0:17:18.840 and they're focused on privacy. I wonder how much of 0:17:18.840 --> 0:17:21.600 that she believes. We'll get her back on again soon. 0:17:21.720 --> 0:17:27.199 This is Bloomberg, John Tucker. They're talking about some of 0:17:27.240 --> 0:17:30.480 the big banks that have come out today. JP Morgan 0:17:31.000 --> 0:17:35.040 Goldman Sachs Wells Fargo. We have one of the top 0:17:35.320 --> 0:17:38.359 bank analysts on Wall Street Quick Chris Whalen joins, us 0:17:38.680 --> 0:17:43.120 chairman of Whalen Global Advisors, And Chris, let me get 0:17:43.119 --> 0:17:46.440 your reaction first to JP Morgan. I mean, everyone is 0:17:46.960 --> 0:17:49.399 saying it was such a great quarter, and yet the 0:17:49.440 --> 0:17:53.200 shares are down for the third day in a row. Well, 0:17:53.240 --> 0:17:57.240 it's because we're counting last year's earnings. Very simply, if 0:17:57.240 --> 0:18:00.840 you back out the release of loan loss reserves, which 0:18:00.880 --> 0:18:05.199 they had put aside when COVID first exploded on the scene, Um, 0:18:05.359 --> 0:18:08.440 we're now taking them back into income. So if you 0:18:08.520 --> 0:18:12.560 really look at the numbers, their expenses were up, revenues 0:18:12.600 --> 0:18:16.440 were flat, and as you mentioned in your intro, loan 0:18:16.600 --> 0:18:19.560 demand is soft. Um. You know, it's funny in the 0:18:19.680 --> 0:18:23.640 classical economics texts, when rates rise, you're supposed to see 0:18:23.640 --> 0:18:27.520 an expansion of margins on lending. We're not seeing that. Uh, 0:18:27.600 --> 0:18:31.800 net interest margin is being squeezed. So I think, honestly, uh, 0:18:31.920 --> 0:18:35.480 it may be record gap earnings because the accountants and 0:18:35.520 --> 0:18:38.199 the Fed let them take four and a half billion 0:18:38.240 --> 0:18:41.439 dollars back into income from loan loss reserves. But if 0:18:41.480 --> 0:18:43.640 you back that out, the numbers don't look so good. 0:18:44.359 --> 0:18:47.040 And I think that's what the more astute observers on 0:18:47.080 --> 0:18:50.520 the street are going to trade based on how concerned 0:18:50.520 --> 0:18:54.679 are you about the commentary from JP Morgan about the 0:18:54.680 --> 0:18:57.560 corporate loan growth or the lack thereof in terms of demand. 0:18:57.640 --> 0:19:00.320 Is that something you view as temporary that event Actually, 0:19:00.320 --> 0:19:03.800 as this economy reopens, we will, in fact see lenders 0:19:03.840 --> 0:19:05.920 come back into the market, our barbarers come back into 0:19:05.960 --> 0:19:10.080 the market. We've had soft loan demand for a while. 0:19:10.760 --> 0:19:13.960 And you know, the street typically hasn't focused on this. 0:19:14.080 --> 0:19:17.000 They just focus on the press release, maybe the first 0:19:17.040 --> 0:19:19.840 paragraph of the press release when it comes to earnings. 0:19:19.840 --> 0:19:22.960 But banks are in a very difficult environment now because 0:19:23.000 --> 0:19:27.760 the FED has created scarcity and just about any asset 0:19:27.800 --> 0:19:31.639 class you look at, and the competition for big commercial 0:19:31.720 --> 0:19:35.000 loans is intense. So in order for banks to win 0:19:35.080 --> 0:19:37.520 that business, they have to be willing to drop their rate, 0:19:37.880 --> 0:19:40.359 and in some cases the banks just fold their arms 0:19:40.359 --> 0:19:43.080 and say, no, I'm going to just leave the reserves 0:19:43.080 --> 0:19:45.679 at the FED. I don't need to work for nothing, 0:19:46.040 --> 0:19:49.360 which is what quantitative easing really means. It means financial 0:19:49.400 --> 0:19:52.440 assets have no value and so I think the FED 0:19:52.560 --> 0:19:55.240 needs to rethink what they're doing because if we leave 0:19:55.359 --> 0:19:58.040 current policy in place, I think banks are going to 0:19:58.119 --> 0:20:00.520 be in trouble by the end of the year. There's 0:20:00.560 --> 0:20:03.879 a certain level of interest earnings that they have to 0:20:03.960 --> 0:20:06.800 have to survive, and we are going to test those 0:20:06.840 --> 0:20:10.360 limits because of people like Janet Yellen and j Powell. 0:20:10.680 --> 0:20:13.119 They just don't get it. You know, they're they're working 0:20:13.160 --> 0:20:15.960 with a playbook that's twenty five years old. Yeah, but Chris, 0:20:16.040 --> 0:20:18.280 I mean, you know, we're coming out of this pandemic. 0:20:18.400 --> 0:20:21.200 It's all about getting the economy open. And these banks 0:20:21.200 --> 0:20:25.440 are printing record profits. Nobody's going to cry for these guys. Well, 0:20:25.440 --> 0:20:28.879 they're printing record gap profits. But if you back out 0:20:28.920 --> 0:20:32.200 the low loss reserves, they're not doing that. Well, um, 0:20:32.400 --> 0:20:35.800 look at again, look at the results if you take 0:20:35.840 --> 0:20:38.800 that out, because remember that's last year's profits were counting. 0:20:38.800 --> 0:20:42.399 Now that's not this year. Market stuff. I mean, you know, 0:20:42.440 --> 0:20:45.440 the consolidation in the banking industry has resulted in five 0:20:45.520 --> 0:20:47.800 six of these players just racking up numbers that and 0:20:47.800 --> 0:20:49.600 I used to work on the street, we'd never even 0:20:49.920 --> 0:20:53.399 think of these levels of profitability. Well, no, and and 0:20:53.600 --> 0:20:57.040 thank God, because it is the transactional side of people 0:20:57.119 --> 0:21:01.520 like Goldman and JP Morgan that's gonna save them temporarily 0:21:01.640 --> 0:21:05.720 from quantitative easing, the the ill effects on net interest 0:21:05.760 --> 0:21:08.840 margin and on the return on earning assets, which is 0:21:08.880 --> 0:21:11.639 really all that matters with banks. You know, banks a 0:21:11.680 --> 0:21:14.960 big portfolio. If they're not making money on their assets, 0:21:15.160 --> 0:21:17.760 you can survive for a while when the FED pushes 0:21:17.800 --> 0:21:20.399 the cost of funds down. The cost of funds for 0:21:20.440 --> 0:21:24.800 the whole industry today is about eleven billion dollars for 0:21:24.920 --> 0:21:28.919 twenty trillion dollars worth of assets. Think about that, and 0:21:28.960 --> 0:21:32.960 that's just helping them look okay. So over the next 0:21:33.000 --> 0:21:36.840 several quarters, the benefit of that cheap funding is gonna 0:21:36.960 --> 0:21:40.840 eventually EBB and the the earnings on assets are falling 0:21:40.960 --> 0:21:43.240 just as fast. So it's kind of a race to 0:21:43.280 --> 0:21:46.520 the bottom right now on banks, the mid sized banks, 0:21:46.520 --> 0:21:48.320 I mean, it could be an example the bank I 0:21:48.359 --> 0:21:51.840 love Western Alliance that just bought a big mortgage company, 0:21:51.840 --> 0:21:55.000 a Mara home from Apollo. They're gonna do okay because 0:21:55.040 --> 0:21:58.280 the smaller banks have more pricing power. They're they're chasing 0:21:58.320 --> 0:22:02.520 smaller loans. But the big banks, you know, they are 0:22:02.560 --> 0:22:05.119 in a world a hurt right now because the competition 0:22:05.240 --> 0:22:09.560 for large assets is global. Every private equity fund, every 0:22:09.640 --> 0:22:12.960 sovereign fund, they're all chasing the same customers and so 0:22:13.119 --> 0:22:17.159 JP Thank god they have capital markets. Is any of 0:22:17.400 --> 0:22:20.760 the big banks positioned well to deal with this situation then, 0:22:20.840 --> 0:22:25.280 Chris or do you look down? Um? The latter two, 0:22:25.480 --> 0:22:31.200 the smaller, midsize and smaller banks look the best bank 0:22:31.280 --> 0:22:34.639 in the top five as US bankrupt consistently, they have 0:22:34.760 --> 0:22:37.800 actually been taking more losses in the other banks half, 0:22:37.920 --> 0:22:40.960 which I see as a sign of strength. They're cleaning house. 0:22:41.359 --> 0:22:43.560 There's a lot of forbearance on the street. So as 0:22:43.560 --> 0:22:46.479 an analyst, when my clients asked me about these banks, 0:22:46.720 --> 0:22:49.000 I tell them off. And I don't know because the 0:22:49.119 --> 0:22:55.399 FED has countenanced forbearance on commercial credits, especially commercial real estate, 0:22:55.760 --> 0:22:58.280