1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,479 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Shares 7 00:00:32,560 --> 00:00:35,800 Speaker 1: of Walmart they are lower right now by about nine 8 00:00:35,800 --> 00:00:38,959 Speaker 1: and a half percent as comes after the company reports 9 00:00:39,000 --> 00:00:42,840 Speaker 1: that it's online business not doing as well as analysts 10 00:00:42,840 --> 00:00:46,360 Speaker 1: had estimated. Well, here to tell us more about Walmart 11 00:00:46,479 --> 00:00:49,360 Speaker 1: and the retail industry is none other than Birch Flickincher. 12 00:00:49,479 --> 00:00:52,760 Speaker 1: He is managing director of the Strategic Resource Group. He 13 00:00:52,840 --> 00:00:58,000 Speaker 1: can be found online on Twitter at Birch Underscore flickincher Bert. 14 00:00:58,160 --> 00:01:02,200 Speaker 1: Let's begin with Walmart. What do you think happened? Cleaning 15 00:01:02,240 --> 00:01:08,120 Speaker 1: the deck? Clean, quarter, Clean fiscal. Walmart's investing at record 16 00:01:08,280 --> 00:01:13,520 Speaker 1: levels to take on Amazon with many fulfillment centers, were rooms, 17 00:01:13,520 --> 00:01:16,520 Speaker 1: Etcetera be launched through Sam's Club, as you and Lisa 18 00:01:16,920 --> 00:01:21,720 Speaker 1: reported earlier and starting this fall, winner of eighteen nineteen, 19 00:01:22,520 --> 00:01:25,440 Speaker 1: Walmart's gonna take it to Amazon. It's gonna be Amazon's 20 00:01:25,440 --> 00:01:29,120 Speaker 1: worst nightmare. So today's the buying opportunity of a decade 21 00:01:29,160 --> 00:01:32,160 Speaker 1: with Walmart. Okay, so the buying opportunity of a decade 22 00:01:32,240 --> 00:01:35,520 Speaker 1: bold call. Given the unite and a half percent drop 23 00:01:35,600 --> 00:01:40,600 Speaker 1: in Walmart shares, can you explain how cleaning the decks 24 00:01:40,800 --> 00:01:45,880 Speaker 1: relates to slowing online growth? Specifically, what did Walmart do 25 00:01:46,560 --> 00:01:50,840 Speaker 1: to divert resources away from getting more clients online that 26 00:01:50,920 --> 00:01:53,840 Speaker 1: you think is productive. It's a complete reset, Lisa under 27 00:01:54,280 --> 00:01:58,160 Speaker 1: Mark Laurie with Jet dot Com, getting rid of Rob Walton, 28 00:01:58,200 --> 00:02:01,680 Speaker 1: the lawyer's uh, son of Sam Walden who was chairman 29 00:02:01,680 --> 00:02:05,760 Speaker 1: of the board, having Doug McMillan, really moved to a 30 00:02:05,840 --> 00:02:10,639 Speaker 1: European formula similar to what Okado does so successfully against Amazon. 31 00:02:11,160 --> 00:02:13,480 Speaker 1: That's going to be the Walmart model in the US. 32 00:02:13,520 --> 00:02:16,080 Speaker 1: And to do that they had to divert capital to 33 00:02:16,200 --> 00:02:19,440 Speaker 1: your point, so click and collect, pick up in the store, 34 00:02:19,600 --> 00:02:25,200 Speaker 1: delivery to home offices, and doing it more effectively and efficiently. Uh, 35 00:02:25,280 --> 00:02:29,520 Speaker 1: you and your Bloomberg listeners and and terminal subscribers will 36 00:02:29,600 --> 00:02:32,200 Speaker 1: see this within a hundred and fifty days. So it's 37 00:02:32,200 --> 00:02:34,520 Speaker 1: just taking capital from the old way, putting it into 38 00:02:34,560 --> 00:02:38,440 Speaker 1: the new way. I was just looking at Walmart and 39 00:02:38,480 --> 00:02:44,160 Speaker 1: they are now offering free to day shipping, no membership fee. 40 00:02:45,040 --> 00:02:47,799 Speaker 1: Is that the kind of promotion that is going to 41 00:02:47,840 --> 00:02:51,519 Speaker 1: cause a reaction at Amazon? It's going to carouse the reaction. 42 00:02:51,600 --> 00:02:55,240 Speaker 1: But it's my colleague, Paul Bower says, Amazon does not 43 00:02:55,560 --> 00:02:58,240 Speaker 1: have the balance sheet to get into a price war 44 00:02:58,360 --> 00:03:03,520 Speaker 1: with Walmart. Walmart wins. So Walmart's winning on apparel for 45 00:03:03,560 --> 00:03:07,359 Speaker 1: the first time, It's winning on general merchandise, hardlines, soft lines, 46 00:03:07,919 --> 00:03:11,200 Speaker 1: and Walmart always wins on food, and we'll win on 47 00:03:11,280 --> 00:03:16,360 Speaker 1: our X. So Walmart will win ubiquitously, while Amazon's winning 48 00:03:16,360 --> 00:03:20,639 Speaker 1: on there's core ears of strengths from books to aws 49 00:03:20,760 --> 00:03:23,760 Speaker 1: or Amazon Web services in the cloud. So is this 50 00:03:23,840 --> 00:03:27,040 Speaker 1: just a one quarter kind of cleaning the decks type 51 00:03:27,080 --> 00:03:30,359 Speaker 1: of blip? In other words, if we see UH sort 52 00:03:30,400 --> 00:03:34,680 Speaker 1: of lower than expected online sales UH in the first quarter, 53 00:03:34,800 --> 00:03:37,480 Speaker 1: is that is that a red flag? It's not a 54 00:03:37,480 --> 00:03:41,880 Speaker 1: red flag because it's clean up. As you reference this quarter, Lisa, 55 00:03:42,040 --> 00:03:44,560 Speaker 1: as it will be next quarter the following quarter. What 56 00:03:44,680 --> 00:03:48,000 Speaker 1: I'd be most worried about is Campbell soup that Walmart 57 00:03:48,040 --> 00:03:52,000 Speaker 1: describes as liquid sodium and a can Bennett Doran's uh, 58 00:03:53,080 --> 00:03:57,080 Speaker 1: the leading shareholder of Campbell's is best friend with Rob Walton. 59 00:03:57,920 --> 00:04:03,080 Speaker 1: Walmart is punishing Campbell's continuing items, de emphasizing the brands 60 00:04:03,200 --> 00:04:07,640 Speaker 1: getting tough with all vendors, including vendors that use Amazon 61 00:04:07,800 --> 00:04:10,720 Speaker 1: Web services, that they will not be allowed to do 62 00:04:10,880 --> 00:04:14,160 Speaker 1: business with Walmart. So this is the retail war of 63 00:04:14,200 --> 00:04:19,400 Speaker 1: the world's online and in the stratosphere. Turn your attention now. 64 00:04:19,480 --> 00:04:23,160 Speaker 1: Another retailer that we want to learn more about is 65 00:04:23,200 --> 00:04:26,240 Speaker 1: this h the Right Aid deal? And you know a 66 00:04:26,279 --> 00:04:28,839 Speaker 1: little bit about this uh this business tell us about 67 00:04:29,200 --> 00:04:34,159 Speaker 1: why couldn't Walgreen's get this deal done? I? Uh, professionally, 68 00:04:34,360 --> 00:04:37,680 Speaker 1: I think uh while got y'all of the anti trust 69 00:04:37,680 --> 00:04:41,560 Speaker 1: and m and a uh lawyer's euro monitor didn't get 70 00:04:41,560 --> 00:04:45,559 Speaker 1: the job done. Phil Progert Jones Day got Jack Ecker 71 00:04:45,720 --> 00:04:49,960 Speaker 1: Drug Company equally and cleanly split between Right Aid and CVS. 72 00:04:50,080 --> 00:04:55,200 Speaker 1: Christine Varney at Kravath gets these deals done. Uh while 73 00:04:55,320 --> 00:04:59,280 Speaker 1: gotchall they lost Dennis Block to Greenberg. Trouty didn't have 74 00:04:59,400 --> 00:05:01,400 Speaker 1: all the horse is that they've had in the past, 75 00:05:01,960 --> 00:05:06,920 Speaker 1: and uh Walgreen's boots paid a fortune for an inferior result. 76 00:05:07,360 --> 00:05:11,680 Speaker 1: Bob Miller, the humble, brilliant country boy from Mississippi, came 77 00:05:11,720 --> 00:05:15,520 Speaker 1: in great best turnaround retail CEO in forty years in 78 00:05:15,600 --> 00:05:19,360 Speaker 1: any sector. Miller bought it for nothing, as Lisa reference 79 00:05:20,000 --> 00:05:24,480 Speaker 1: six and an eighth bonds traded up to par Stockholder's 80 00:05:24,520 --> 00:05:29,520 Speaker 1: gotten next to nothing. Yeah and right and Uh, Albertson 81 00:05:29,680 --> 00:05:33,520 Speaker 1: Albertson's with the Oscar drug stores becomes number three overnight 82 00:05:33,880 --> 00:05:36,680 Speaker 1: and as you referenced on Bloomberg Radio an hour ago, 83 00:05:37,800 --> 00:05:40,560 Speaker 1: Right eight is the leader in consumables and sales for 84 00:05:40,760 --> 00:05:44,919 Speaker 1: store solid snacks, cookies and crackers, beer pop as we 85 00:05:44,960 --> 00:05:49,440 Speaker 1: say in Buffalo where I grew up, and also the 86 00:05:49,560 --> 00:05:52,920 Speaker 1: leader in in tobacco. So it's a not because right 87 00:05:52,960 --> 00:05:56,080 Speaker 1: Ad pushes tobacco, but because they're in blue collar states 88 00:05:56,120 --> 00:05:59,600 Speaker 1: were twenty of their shoppers smoke. Bob Miller can help 89 00:05:59,680 --> 00:06:05,120 Speaker 1: make the is UH consumers healthier while driving very significant 90 00:06:05,120 --> 00:06:08,440 Speaker 1: profitable growth for Albertson Safe Way Oscar. I love the 91 00:06:08,480 --> 00:06:12,080 Speaker 1: pop reference that brings me back to my mother, uh 92 00:06:12,120 --> 00:06:14,520 Speaker 1: and talking about our childhood about the Midwest. Real quick, 93 00:06:14,720 --> 00:06:17,440 Speaker 1: do you have any sense of what could be the 94 00:06:17,480 --> 00:06:21,280 Speaker 1: next sort of healthcare pharmaceutical tie up that you're expecting. Uh. 95 00:06:21,680 --> 00:06:27,240 Speaker 1: Still still see Albert Albertson's by buying a number of 96 00:06:27,480 --> 00:06:32,000 Speaker 1: express scripts type acquisitions. So so they're still in the market. 97 00:06:32,200 --> 00:06:35,440 Speaker 1: Still in the market, looking for everything from from small 98 00:06:35,480 --> 00:06:39,600 Speaker 1: the big uh as CVS is continued to do that. 99 00:06:39,720 --> 00:06:43,600 Speaker 1: Dr Tom Ryan had started at CVS so brilliantly and H. 100 00:06:43,720 --> 00:06:47,000 Speaker 1: Walgreen's boots is put together as well. I'm gonna have 101 00:06:47,080 --> 00:06:51,719 Speaker 1: five thousand location nearly five thousand locations, more than forty 102 00:06:51,839 --> 00:06:57,520 Speaker 1: three hundred pharmacy counters and more than three hundred clinics. 103 00:06:57,880 --> 00:07:00,400 Speaker 1: And Bob Miller does not get the at it for 104 00:07:00,560 --> 00:07:05,280 Speaker 1: saving right aid the first time from Marty Grass's financial fraud. 105 00:07:05,320 --> 00:07:08,159 Speaker 1: Bob Miller came as chairman, turned around the first time. 106 00:07:08,160 --> 00:07:10,720 Speaker 1: We'll turn around the second time. Thank you so much, 107 00:07:11,680 --> 00:07:16,880 Speaker 1: Managing director at Strategic Resource Group. Watch this space. Albertson's 108 00:07:16,920 --> 00:07:34,360 Speaker 1: maybe in the market for it yet another purchase is 109 00:07:34,400 --> 00:07:37,240 Speaker 1: the recent spike in volatility over and what does it 110 00:07:37,280 --> 00:07:40,160 Speaker 1: mean for your investments? Russ Costa Ridge is the head 111 00:07:40,200 --> 00:07:43,920 Speaker 1: of Asset Allocation for Black Rocks and Global Allocation Fund 112 00:07:44,240 --> 00:07:46,840 Speaker 1: black Rock, of course, helping to manage over four trillion 113 00:07:46,880 --> 00:07:51,680 Speaker 1: dollars worth of assets and RUSS is based in San Francisco. RUSS, 114 00:07:51,720 --> 00:07:54,440 Speaker 1: thanks very much for being with us. As always, maybe 115 00:07:54,480 --> 00:07:56,679 Speaker 1: just give us your your current outlook as it relates 116 00:07:56,680 --> 00:08:01,240 Speaker 1: to volatility and what investors should take away from it. Well, PIM, 117 00:08:01,280 --> 00:08:04,440 Speaker 1: I think volatility of the of the time we had 118 00:08:04,560 --> 00:08:06,600 Speaker 1: in February and I haven't had for quite some time, 119 00:08:07,240 --> 00:08:10,200 Speaker 1: is probably gonna become a more permanent feature of the market. 120 00:08:10,600 --> 00:08:13,160 Speaker 1: It doesn't mean stocks can't go higher, but it does 121 00:08:13,240 --> 00:08:16,400 Speaker 1: mean the type of very unusual environment we had in 122 00:08:16,600 --> 00:08:19,440 Speaker 1: the back half of sixteen and most of seventeen were 123 00:08:19,480 --> 00:08:22,880 Speaker 1: stocks just steadily one up day after day. That's probably done. 124 00:08:23,280 --> 00:08:24,800 Speaker 1: And part of the reason for that is, for the 125 00:08:24,840 --> 00:08:27,120 Speaker 1: first time in a while, we have a said that 126 00:08:27,200 --> 00:08:31,440 Speaker 1: may tighten more than the market expects. RUS. We keep 127 00:08:31,480 --> 00:08:35,480 Speaker 1: talking a lot about the record auctions of three and 128 00:08:35,600 --> 00:08:37,880 Speaker 1: six months tea bells that are coming up. Are you 129 00:08:37,880 --> 00:08:40,640 Speaker 1: going to be a buyer at these auctions? Well, right now, 130 00:08:40,720 --> 00:08:43,480 Speaker 1: we've actually been using the last few weeks to back 131 00:08:43,559 --> 00:08:45,960 Speaker 1: up in yields to actually add a bit of duration 132 00:08:46,000 --> 00:08:48,120 Speaker 1: in the US. So I do think that yields are 133 00:08:48,160 --> 00:08:51,120 Speaker 1: becoming more attractive. Wait, hold on one second, I'm sorry 134 00:08:51,160 --> 00:08:53,280 Speaker 1: to interrupt you, but you said duration, that's not short 135 00:08:53,400 --> 00:08:56,160 Speaker 1: term debt, that means like ten year and thirty year treasury. 136 00:08:56,559 --> 00:08:58,160 Speaker 1: We haven't been going that far out of the curve. 137 00:08:58,240 --> 00:09:00,400 Speaker 1: We've mostly been focusing on the five to ten year 138 00:09:00,440 --> 00:09:03,160 Speaker 1: part of the curve. But I do think there are 139 00:09:03,160 --> 00:09:05,720 Speaker 1: a couple of challenges, which means that right now we're 140 00:09:05,760 --> 00:09:09,240 Speaker 1: waiting and seeing before adding much more. The first challenge 141 00:09:09,800 --> 00:09:12,880 Speaker 1: is how much more we're going to see inflation accelerate. 142 00:09:12,920 --> 00:09:14,439 Speaker 1: We've already seen a bit of that in the wage 143 00:09:14,520 --> 00:09:18,240 Speaker 1: numbers in the January cp I. The second issue, which 144 00:09:18,280 --> 00:09:21,280 Speaker 1: is a longer term one, is how effective is the 145 00:09:21,280 --> 00:09:24,560 Speaker 1: market going to be and absorbing what will probably be 146 00:09:24,760 --> 00:09:28,880 Speaker 1: trillion dollar deficits, which of course create more supply in 147 00:09:28,960 --> 00:09:32,839 Speaker 1: the coming years. You know, I have to wonder what's 148 00:09:32,920 --> 00:09:39,000 Speaker 1: driving the upward direction of benchmark treasury yields. Is it 149 00:09:39,120 --> 00:09:41,280 Speaker 1: just the deficit purely on its own? I mean, if 150 00:09:41,320 --> 00:09:43,640 Speaker 1: you take inflation out of it, Let's say we enter 151 00:09:43,640 --> 00:09:45,800 Speaker 1: a period where we have the same type of inflation, 152 00:09:46,000 --> 00:09:48,120 Speaker 1: would we still see the yield rise that we've seen. 153 00:09:48,800 --> 00:09:50,839 Speaker 1: I think a lot of it so far has been 154 00:09:50,880 --> 00:09:53,120 Speaker 1: the yield apartment has been inflation. A matter of fact, 155 00:09:53,160 --> 00:09:55,440 Speaker 1: if you go back and you look at where inflation 156 00:09:55,520 --> 00:09:58,680 Speaker 1: expectations were back in September, when bond yields were much 157 00:09:58,679 --> 00:10:02,040 Speaker 1: lower than they are, inflation expectations have moved up a 158 00:10:02,080 --> 00:10:05,200 Speaker 1: great deal about fifty basis points uh And the good 159 00:10:05,200 --> 00:10:07,720 Speaker 1: news there is that we've probably already seen much of 160 00:10:07,760 --> 00:10:10,840 Speaker 1: that adjustment. So I do think the question going forward is, 161 00:10:11,440 --> 00:10:13,839 Speaker 1: with an economy that's likely to grow faster than we've 162 00:10:13,880 --> 00:10:17,080 Speaker 1: seen in the post crisis world, and we have more 163 00:10:17,160 --> 00:10:20,600 Speaker 1: supply coming at a time when the economy is already 164 00:10:20,679 --> 00:10:24,160 Speaker 1: already running close to capacity, is that going to nudge 165 00:10:24,200 --> 00:10:27,000 Speaker 1: real or inflation just at rates higher? And I think 166 00:10:27,040 --> 00:10:28,719 Speaker 1: that's one of the things that is the market a 167 00:10:28,760 --> 00:10:31,960 Speaker 1: bit nervous right now, all right. So if that's the 168 00:10:32,040 --> 00:10:36,439 Speaker 1: case or US and you do see this extended growth 169 00:10:36,600 --> 00:10:40,320 Speaker 1: in the US economy, won't that benefit of emerging markets? 170 00:10:41,120 --> 00:10:43,320 Speaker 1: It does benefit emerging markets a matter of fact, I 171 00:10:43,360 --> 00:10:45,760 Speaker 1: think one of the places where you would expect to 172 00:10:45,760 --> 00:10:48,920 Speaker 1: see the biggest benefits is an emerging market. So a 173 00:10:48,920 --> 00:10:50,480 Speaker 1: lot of people when they think of the im equities, 174 00:10:50,480 --> 00:10:53,199 Speaker 1: they think only about the dollar. The dollar is less 175 00:10:53,240 --> 00:10:55,200 Speaker 1: relevant for e em equities, and it used to be 176 00:10:55,280 --> 00:10:58,240 Speaker 1: they tend to run lower current account deficits, they have 177 00:10:58,360 --> 00:11:02,760 Speaker 1: higher reserves. The think is determinant of e M stocks 178 00:11:02,840 --> 00:11:05,240 Speaker 1: relative performance has been the strength of a global economy. 179 00:11:05,280 --> 00:11:07,600 Speaker 1: So if you do believe as we do, that you're 180 00:11:07,600 --> 00:11:10,120 Speaker 1: going into an environment where not only US growth is 181 00:11:10,160 --> 00:11:12,840 Speaker 1: likely to be stronger, but the global economy is likely 182 00:11:12,840 --> 00:11:15,040 Speaker 1: to be stronger, and that's an environment where i M 183 00:11:15,080 --> 00:11:17,560 Speaker 1: stocks are likely to do well. So Russ you said, 184 00:11:17,640 --> 00:11:19,760 Speaker 1: you said that you've been or you had been increasing 185 00:11:19,800 --> 00:11:23,760 Speaker 1: a little bit of duration, particularly five year treasuries. What's 186 00:11:23,920 --> 00:11:25,880 Speaker 1: what else have you done recently? What other sort of 187 00:11:25,920 --> 00:11:30,680 Speaker 1: allocation shifts have you made that that you think are important? Well, 188 00:11:30,679 --> 00:11:32,719 Speaker 1: the other thing we've added a bit to is our 189 00:11:32,760 --> 00:11:36,120 Speaker 1: gold holdings. Gold is an interesting asset class, and a 190 00:11:36,120 --> 00:11:37,960 Speaker 1: lot of people wrestle with it is that an asset 191 00:11:37,960 --> 00:11:41,040 Speaker 1: class is a currency. I think the most important thing 192 00:11:41,040 --> 00:11:44,520 Speaker 1: about gold is gold is a risk mitigant. Not always 193 00:11:44,640 --> 00:11:47,280 Speaker 1: doesn't work in all circumstances. But going back to the 194 00:11:47,280 --> 00:11:49,840 Speaker 1: original question, or we're going to see higher volatility than 195 00:11:49,960 --> 00:11:52,120 Speaker 1: last year, I think we are. And if part of 196 00:11:52,120 --> 00:11:53,840 Speaker 1: what you want to do is have a portfolio that 197 00:11:53,920 --> 00:11:56,400 Speaker 1: can dampen that volatility create a little bit of a 198 00:11:56,400 --> 00:11:59,200 Speaker 1: smoother ride that I think having a moderate amount of 199 00:11:59,200 --> 00:12:01,800 Speaker 1: gold help. So that's been another place we've been adding 200 00:12:01,840 --> 00:12:04,520 Speaker 1: to in recent weeks. So how much have you been 201 00:12:04,600 --> 00:12:07,760 Speaker 1: adding there? And in contrast have you been reducing risk assets? 202 00:12:08,440 --> 00:12:10,680 Speaker 1: What we've added. We haven't added that much to gold. 203 00:12:11,080 --> 00:12:14,960 Speaker 1: We've added probably about roughly maybe basis points, So our 204 00:12:15,000 --> 00:12:17,600 Speaker 1: goal position is somewhere around five percent. I think that's 205 00:12:17,600 --> 00:12:20,800 Speaker 1: probably about right for the fund. Outside of gold, we 206 00:12:20,880 --> 00:12:24,040 Speaker 1: have been looking for other places to add, uh, mostly 207 00:12:24,280 --> 00:12:27,880 Speaker 1: in some of the higher quality companies in the US 208 00:12:27,880 --> 00:12:31,680 Speaker 1: that we think can produce solid earnings growth regardless of 209 00:12:31,720 --> 00:12:33,559 Speaker 1: whether or not we see rates being a bit higher. 210 00:12:33,640 --> 00:12:36,760 Speaker 1: Right now, what kind of companies technology? We have been 211 00:12:36,760 --> 00:12:40,360 Speaker 1: adding to technology? We do have a modest overweight to tech. 212 00:12:40,679 --> 00:12:42,360 Speaker 1: Now again, I think with tech you've got to be 213 00:12:42,360 --> 00:12:46,520 Speaker 1: careful as we all know their pockets of stretched valuations. 214 00:12:46,679 --> 00:12:48,880 Speaker 1: We do think many of the large cap tech names 215 00:12:49,600 --> 00:12:52,640 Speaker 1: do still offer good value at these levels. When you 216 00:12:52,679 --> 00:12:57,000 Speaker 1: talk about stretched valuations, what kind of metric are you using, 217 00:12:57,000 --> 00:12:59,720 Speaker 1: what's the what's the comparison? Well, you know, this is 218 00:12:59,760 --> 00:13:01,839 Speaker 1: one of challenging thing there never is the one right 219 00:13:01,920 --> 00:13:04,439 Speaker 1: valuation metric, and I think right now, if you look 220 00:13:04,440 --> 00:13:07,440 Speaker 1: at US equities, by and large, the market is on 221 00:13:07,480 --> 00:13:11,040 Speaker 1: the expensive side. The good news is that if you 222 00:13:11,160 --> 00:13:14,240 Speaker 1: have an environment, which we believe we're in UH where 223 00:13:14,240 --> 00:13:16,679 Speaker 1: earnings growth is likely to be strong, then we believe 224 00:13:16,720 --> 00:13:20,880 Speaker 1: these valuations are sustainable over the next year. Having said that, 225 00:13:20,920 --> 00:13:22,640 Speaker 1: I think one of the things a lot of investors 226 00:13:22,679 --> 00:13:25,640 Speaker 1: want to think about is adding to positions in non 227 00:13:25,720 --> 00:13:28,920 Speaker 1: US markets. Have already spoken about em out at Japan 228 00:13:29,520 --> 00:13:31,760 Speaker 1: as another market that we right now are very overweight. 229 00:13:32,160 --> 00:13:34,200 Speaker 1: And the reason this is important is that for most 230 00:13:34,200 --> 00:13:36,720 Speaker 1: of the last seven or eight years, investors have benefited 231 00:13:36,880 --> 00:13:39,240 Speaker 1: from a home country bias, most of their money in 232 00:13:39,280 --> 00:13:43,440 Speaker 1: the US. In a strengthening global economy, other economies are 233 00:13:43,480 --> 00:13:46,080 Speaker 1: catching up and those markets are likely to also start 234 00:13:46,080 --> 00:13:48,960 Speaker 1: to catch up with the US. Rest cos Stretch always 235 00:13:49,000 --> 00:13:52,960 Speaker 1: wonderful to catch up with you, really interesting comments. Rest Costritch, 236 00:13:53,000 --> 00:13:56,840 Speaker 1: head of Asset Allocation for black Rocks Global Allocation Fund 237 00:13:56,960 --> 00:14:02,040 Speaker 1: and black Rock, the biggest asset management firm in the world. 238 00:14:18,040 --> 00:14:21,360 Speaker 1: New news from Washington, an attorney who worked for a 239 00:14:21,360 --> 00:14:25,040 Speaker 1: prominent law firm was charged with making false statements to 240 00:14:25,120 --> 00:14:29,080 Speaker 1: federal authorities as part of Special Council Robert Mueller's probe 241 00:14:29,080 --> 00:14:34,040 Speaker 1: of Russian collusion into the sixteen presidential election. Here to 242 00:14:34,080 --> 00:14:36,360 Speaker 1: help us make some sense of all this is Richard Kahn. 243 00:14:36,520 --> 00:14:40,960 Speaker 1: He is managing partner of Eurasia Advisors, and he joins 244 00:14:41,040 --> 00:14:45,480 Speaker 1: us in our eleven three oh studios. Richard, can you 245 00:14:45,560 --> 00:14:51,680 Speaker 1: tell us about you're knitting together the various public pieces 246 00:14:51,720 --> 00:14:55,440 Speaker 1: of information that we have received, the various indictments of 247 00:14:55,520 --> 00:15:02,040 Speaker 1: the thirteen efficient people previously having participated in some kind 248 00:15:02,040 --> 00:15:07,720 Speaker 1: of meddling in the US sixteen presidential election. And now uh, 249 00:15:07,880 --> 00:15:13,240 Speaker 1: this latest indictment charge rather of making false statements, is 250 00:15:13,280 --> 00:15:16,880 Speaker 1: having to do with Alex vanders Van charge with Lyne 251 00:15:16,920 --> 00:15:21,280 Speaker 1: to the FBI and Robert Mueller's office about his work 252 00:15:21,360 --> 00:15:25,920 Speaker 1: related to a report that was prepared for the former 253 00:15:26,000 --> 00:15:31,240 Speaker 1: president of Ukraine. Well, look, the first thing I would 254 00:15:31,280 --> 00:15:34,200 Speaker 1: comment on is you know that the Muller indictment and 255 00:15:34,240 --> 00:15:38,280 Speaker 1: these other other indictments speak to the breadth and scope 256 00:15:38,320 --> 00:15:41,600 Speaker 1: and capabilities of the Russian FSB in terms of their 257 00:15:41,640 --> 00:15:46,000 Speaker 1: ability and willingness to the successor to the KGB. Yes, correct, 258 00:15:46,240 --> 00:15:50,120 Speaker 1: their ability to mount what we might call asymmetrical attacks 259 00:15:50,160 --> 00:15:55,840 Speaker 1: to deal with either retaliatory types of situations or what 260 00:15:55,920 --> 00:15:59,880 Speaker 1: they view is defensive situations. That's how they would characterize it. Uh. 261 00:16:00,000 --> 00:16:04,760 Speaker 1: But they are extremely effective in uh locating people not 262 00:16:04,880 --> 00:16:07,120 Speaker 1: just in the United States, but elsewhere who are part 263 00:16:07,200 --> 00:16:10,600 Speaker 1: of whether governments or part of press or part of 264 00:16:10,640 --> 00:16:15,760 Speaker 1: institutions that can affect public influence. UH. And they are 265 00:16:15,760 --> 00:16:20,800 Speaker 1: extremely effective in their willingness to utilize those techniques to 266 00:16:20,920 --> 00:16:24,600 Speaker 1: try to see people elected to power that are favorable 267 00:16:24,640 --> 00:16:27,120 Speaker 1: to them. So I think, you know, the big benefit 268 00:16:27,320 --> 00:16:30,200 Speaker 1: of the Mueller indictment as I look at it is 269 00:16:30,360 --> 00:16:34,600 Speaker 1: it is uh. It brings to the forefront that there 270 00:16:34,760 --> 00:16:38,080 Speaker 1: is actually something that took place here. The analogy I 271 00:16:38,080 --> 00:16:41,360 Speaker 1: would draw is to say the tower is falling during 272 00:16:41,760 --> 00:16:46,160 Speaker 1: the September eleventh attack. In the mindset of the United States, 273 00:16:46,240 --> 00:16:49,160 Speaker 1: there was no question that that happened up until the 274 00:16:49,240 --> 00:16:51,280 Speaker 1: moment that we have them all our indictment, which I 275 00:16:51,360 --> 00:16:54,360 Speaker 1: really hope everyone will read. UH. There was some doubt 276 00:16:54,720 --> 00:16:57,640 Speaker 1: caused by potential co conspirators as to whether there was 277 00:16:57,720 --> 00:17:01,080 Speaker 1: actually a set of crimes that occurred. Now we know that, 278 00:17:01,360 --> 00:17:04,600 Speaker 1: and you have to be basically willing not to look 279 00:17:04,640 --> 00:17:07,120 Speaker 1: at the World Trade Center of tapes and and accept 280 00:17:07,160 --> 00:17:09,320 Speaker 1: them to take the view that there really is no 281 00:17:09,440 --> 00:17:12,880 Speaker 1: crime here at this stage. So it has changed dramatically 282 00:17:12,960 --> 00:17:17,200 Speaker 1: the ability of the narrative in the United States to 283 00:17:17,960 --> 00:17:21,600 Speaker 1: disagree on at least one fundamental set of crimes that 284 00:17:21,640 --> 00:17:25,239 Speaker 1: has occurred against our nation. So we're heading into mid 285 00:17:25,400 --> 00:17:29,280 Speaker 1: term elections. Reading over the indictment, do you think that 286 00:17:30,000 --> 00:17:32,600 Speaker 1: the Russian government will likely try to interfere again? And 287 00:17:32,640 --> 00:17:34,520 Speaker 1: do you think that the US government will be better 288 00:17:34,560 --> 00:17:39,520 Speaker 1: prepared to intervene. Oh, look, I'm not optimistic that our 289 00:17:39,560 --> 00:17:46,520 Speaker 1: current administration has any interest whatsoever in stopping that from happening. Um. 290 00:17:46,560 --> 00:17:48,880 Speaker 1: I think it's clear that the Trump and his team 291 00:17:48,880 --> 00:17:52,040 Speaker 1: were the beneficiaries of Russian interference that comes out of 292 00:17:52,080 --> 00:17:55,400 Speaker 1: the Mulla Report. I think they are in a conflicted position, 293 00:17:55,480 --> 00:17:57,400 Speaker 1: to say the least, in terms of wanting to see 294 00:17:57,400 --> 00:17:59,520 Speaker 1: that stop and and not see people that are going 295 00:17:59,520 --> 00:18:02,560 Speaker 1: to continue to help protect him elected to Congress in 296 00:18:02,560 --> 00:18:05,920 Speaker 1: the midterm elections. So I would look to, if you will, 297 00:18:05,960 --> 00:18:08,920 Speaker 1: our traditional resources and namely the head of our own government, 298 00:18:09,000 --> 00:18:12,040 Speaker 1: which as you know, leads our law enforcement agencies, as 299 00:18:12,160 --> 00:18:16,080 Speaker 1: essentially hopefully conflicted in this um and seeking to avoid 300 00:18:16,720 --> 00:18:20,520 Speaker 1: being drawn into it by by making statements you know 301 00:18:20,560 --> 00:18:25,159 Speaker 1: that he has not involved. I'm just pausing for a 302 00:18:25,200 --> 00:18:27,520 Speaker 1: second to try to figure out is this the case 303 00:18:27,560 --> 00:18:30,800 Speaker 1: of following the money and the power or is it 304 00:18:30,960 --> 00:18:35,600 Speaker 1: just about money at least for some of the people involved. Oh, 305 00:18:35,800 --> 00:18:38,400 Speaker 1: I think it's going to be a mixture. I would 306 00:18:38,440 --> 00:18:40,760 Speaker 1: expect that Mueller is going to come out with indictments 307 00:18:40,800 --> 00:18:44,320 Speaker 1: that layout uh for example, obviously the d n C 308 00:18:44,760 --> 00:18:49,280 Speaker 1: hacking um, as well as the link to wiki leaks. 309 00:18:49,960 --> 00:18:52,760 Speaker 1: I think he's going to lay out money trail issues 310 00:18:52,920 --> 00:18:56,239 Speaker 1: that deal with Trump and with his family that are 311 00:18:56,280 --> 00:18:59,520 Speaker 1: based on, for example, Don Junior statements in two thousand 312 00:18:59,600 --> 00:19:02,200 Speaker 1: eight that had disproportioned amount of money came from Russia, 313 00:19:02,359 --> 00:19:05,399 Speaker 1: you know, into the Trump organization. I think all of 314 00:19:05,440 --> 00:19:09,639 Speaker 1: those are going to weave together a picture that demonstrates 315 00:19:09,800 --> 00:19:12,879 Speaker 1: how it is that the Russians essentially were able to 316 00:19:13,000 --> 00:19:17,199 Speaker 1: recruit at a certain level agents to to work with 317 00:19:17,280 --> 00:19:20,960 Speaker 1: them in the United States. So you speak a lot 318 00:19:21,119 --> 00:19:24,520 Speaker 1: with people in Russia who are close to Russia, have 319 00:19:24,600 --> 00:19:28,119 Speaker 1: it involved with dealmaking cross borders. What's the perception from 320 00:19:28,200 --> 00:19:32,480 Speaker 1: that side? Well, look, let me start by saying, it 321 00:19:32,520 --> 00:19:35,800 Speaker 1: would be a huge mistake and tragedy if the lesson 322 00:19:35,920 --> 00:19:38,640 Speaker 1: out of all this is that Russians are bad. This, 323 00:19:38,640 --> 00:19:40,399 Speaker 1: this is not at all what we ought to be 324 00:19:40,440 --> 00:19:42,560 Speaker 1: thinking about. But this is clearly through a wrench in 325 00:19:42,600 --> 00:19:45,160 Speaker 1: the relationship between the US and Russia, regardless of what 326 00:19:45,240 --> 00:19:47,800 Speaker 1: the leadership does. Oh yes, no, and I'll get to that. 327 00:19:47,840 --> 00:19:50,199 Speaker 1: What I'm referring to is we all have neighbors and 328 00:19:50,240 --> 00:19:53,120 Speaker 1: friends who are Russian descent, for example here, or may 329 00:19:53,760 --> 00:19:57,600 Speaker 1: be the immigrants from Main fact be still living in Russia. Uh. 330 00:19:57,880 --> 00:20:00,560 Speaker 1: There's always a possibility that the FSB is involved in 331 00:20:00,560 --> 00:20:03,320 Speaker 1: some way in public life in our country or in others. 332 00:20:03,400 --> 00:20:06,240 Speaker 1: But that certainly doesn't mean that's simply by virtue of 333 00:20:06,240 --> 00:20:08,680 Speaker 1: being Russian that you're somehow implicated in this. I think 334 00:20:08,680 --> 00:20:10,399 Speaker 1: it's an important point for us all to keep in 335 00:20:10,440 --> 00:20:13,200 Speaker 1: mind less we go down the road that Trump wants 336 00:20:13,240 --> 00:20:15,879 Speaker 1: us to go down of divisiveness and of making assumptions 337 00:20:15,880 --> 00:20:18,320 Speaker 1: about people. But in terms of the number one, the 338 00:20:18,359 --> 00:20:21,760 Speaker 1: business climate is absolutely dead between Russia and the United States. 339 00:20:22,240 --> 00:20:25,800 Speaker 1: I think Russians themselves are well aware that their government 340 00:20:25,840 --> 00:20:29,720 Speaker 1: did this. Some of them take great pride in that. Uh. 341 00:20:29,880 --> 00:20:34,200 Speaker 1: Others are embarrassed and are very hopeful that over time 342 00:20:34,240 --> 00:20:37,080 Speaker 1: this regime and Russia will change. They're lad, for example, 343 00:20:37,119 --> 00:20:40,320 Speaker 1: by a gentleman named Navali who comes out with videos periodically, 344 00:20:40,880 --> 00:20:43,200 Speaker 1: uh demonstrating the corruption at the highest levels of the 345 00:20:43,280 --> 00:20:45,919 Speaker 1: Russian government. Uh. He just came out with one that 346 00:20:46,000 --> 00:20:50,359 Speaker 1: was relevant to this very investigation, showing ties between Russian 347 00:20:50,400 --> 00:20:53,480 Speaker 1: oligarchs and this investigation in other words, in the in 348 00:20:53,520 --> 00:20:56,919 Speaker 1: the both the hacking as well as in the uh 349 00:20:57,000 --> 00:21:01,120 Speaker 1: the election uh for you know, potential fraud itself. So UH. 350 00:21:01,440 --> 00:21:03,280 Speaker 1: And that was taken down off the Internet by the 351 00:21:03,320 --> 00:21:06,680 Speaker 1: Russians within days once they saw it was up there. Really, 352 00:21:07,160 --> 00:21:10,320 Speaker 1: you know, superb work by by Navali. But look, at 353 00:21:10,320 --> 00:21:13,040 Speaker 1: the end of the day, the Russians have their agenda, 354 00:21:13,400 --> 00:21:19,120 Speaker 1: and we obviously must as a first step, focus on defense, 355 00:21:19,440 --> 00:21:24,000 Speaker 1: meaning dealing with the likelihood which I would view is 356 00:21:24,359 --> 00:21:27,679 Speaker 1: virtually a certainty that the Russians are going to continue 357 00:21:27,720 --> 00:21:32,240 Speaker 1: these activities in terms of influencing our electorate as best 358 00:21:32,280 --> 00:21:37,200 Speaker 1: they can during the upcoming midterms. And simultaneously, we're going 359 00:21:37,240 --> 00:21:41,280 Speaker 1: to have to eventually get to the UH prosecution of 360 00:21:41,320 --> 00:21:44,119 Speaker 1: people who in the United States may have been involved 361 00:21:44,119 --> 00:21:47,280 Speaker 1: in this, if only to send the message worldwide that 362 00:21:47,320 --> 00:21:50,440 Speaker 1: if you cooperate with the Russians and these activities, there 363 00:21:50,440 --> 00:21:53,040 Speaker 1: will be a day of reckoning. That is an important 364 00:21:53,040 --> 00:21:56,600 Speaker 1: thing to do to undermine their infiltration of these different organizations. 365 00:21:56,840 --> 00:21:58,760 Speaker 1: Richard Khn, thank you so much for being with us. 366 00:21:58,840 --> 00:22:06,720 Speaker 1: Richard Khan, managing partner of Eurasia Advisors, based in New York. 367 00:22:16,920 --> 00:22:19,439 Speaker 1: The Petro is going on sale today. You may not 368 00:22:19,520 --> 00:22:22,280 Speaker 1: have heard of it. It may just be the first 369 00:22:22,440 --> 00:22:27,359 Speaker 1: sovereign cryptocurrency and it is being issued by Venezuela. Is 370 00:22:27,359 --> 00:22:31,480 Speaker 1: this a game changer or simply a stunt to try 371 00:22:31,520 --> 00:22:34,080 Speaker 1: to attract some more money? Here to talk about that 372 00:22:34,160 --> 00:22:38,320 Speaker 1: and what's been going on in the cryptocurrency worlds. Kris Perniski, 373 00:22:38,440 --> 00:22:42,880 Speaker 1: partner and a placeholder also advisor to our investment management. 374 00:22:42,920 --> 00:22:46,120 Speaker 1: He joins us here in our Bloomberg eleven three oh studios. Chris, 375 00:22:46,119 --> 00:22:48,080 Speaker 1: thank you so much for coming back. So what do 376 00:22:48,080 --> 00:22:51,639 Speaker 1: you make of Petro? I would go with the latter 377 00:22:51,960 --> 00:22:55,080 Speaker 1: assessment in terms of this is a stunt um and 378 00:22:55,119 --> 00:22:58,399 Speaker 1: I don't think of it as a cryptocurrency um. And 379 00:22:58,440 --> 00:23:01,320 Speaker 1: the reason I say that is cryptocurrencies need to be 380 00:23:01,400 --> 00:23:04,640 Speaker 1: decentralized in the infrastructure that supports them, in the way 381 00:23:04,640 --> 00:23:06,520 Speaker 1: in which the code is curated, in the way in 382 00:23:06,560 --> 00:23:09,960 Speaker 1: which the community is managed. And the petro is really 383 00:23:10,480 --> 00:23:14,760 Speaker 1: a top down, hierarchically controlled asset, and it's much more 384 00:23:14,800 --> 00:23:18,960 Speaker 1: akin to a new way to tokenize oil. So to 385 00:23:19,040 --> 00:23:22,239 Speaker 1: use an analogy here, when the first gold ETFs came 386 00:23:22,280 --> 00:23:24,199 Speaker 1: out in the early two thousands, that didn't create a 387 00:23:24,200 --> 00:23:27,040 Speaker 1: new asset class, right, That was just a new rapper 388 00:23:27,440 --> 00:23:30,639 Speaker 1: or a new wrapper around gold specifically, but the gold 389 00:23:30,680 --> 00:23:33,240 Speaker 1: asset class remained intact, and that's what drove the value. 390 00:23:33,600 --> 00:23:36,840 Speaker 1: With the petro, we really have a new wrapper around 391 00:23:36,920 --> 00:23:40,000 Speaker 1: oil um and that's not creating a new asset class, 392 00:23:40,000 --> 00:23:41,840 Speaker 1: which is why I wouldn't put it in the bucket 393 00:23:41,840 --> 00:23:45,320 Speaker 1: of crypto assets with cryptocurrencies, crypto commodities, and crypto tokens. 394 00:23:45,320 --> 00:23:48,760 Speaker 1: But does it set some sort of precedent for sovereign 395 00:23:48,840 --> 00:23:53,080 Speaker 1: issuance of digital tokens? That it does, and I think 396 00:23:53,119 --> 00:23:56,119 Speaker 1: that's the key takeaway here. Um, these are things I 397 00:23:56,119 --> 00:23:59,679 Speaker 1: call crypto fiat um in terms of you're using the 398 00:23:59,720 --> 00:24:02,400 Speaker 1: under long technology, and this is very common with disruptive 399 00:24:02,400 --> 00:24:06,880 Speaker 1: innovations where you have a new technology come online that's 400 00:24:06,960 --> 00:24:10,639 Speaker 1: highly disruptive, and UH incumbents will take parts of that 401 00:24:10,720 --> 00:24:15,439 Speaker 1: technology and use it to make their existing services better, faster, cheaper. 402 00:24:15,640 --> 00:24:17,399 Speaker 1: And I think this is an example of that, and 403 00:24:17,440 --> 00:24:19,240 Speaker 1: we'll see a lot more of this from other nation 404 00:24:19,320 --> 00:24:22,000 Speaker 1: states in the years to come. Chris, maybe just some 405 00:24:22,040 --> 00:24:26,679 Speaker 1: definitions to help me hear what is a cryptocurrency in 406 00:24:26,800 --> 00:24:31,439 Speaker 1: your mind? So I think of a cryptocurrency as a 407 00:24:31,440 --> 00:24:37,119 Speaker 1: asset that is tracked using an immutable and distributed ledger 408 00:24:37,560 --> 00:24:42,040 Speaker 1: with code that is open source and community defined. All right, 409 00:24:42,400 --> 00:24:45,840 Speaker 1: does that differ from a crypto token? So this is 410 00:24:45,880 --> 00:24:48,800 Speaker 1: where we get into my taxonomy, So yes, it would differ. 411 00:24:49,240 --> 00:24:51,439 Speaker 1: Um if we think of the asset class as a 412 00:24:51,480 --> 00:24:55,879 Speaker 1: whole as crypto assets. There are right now three maybe 413 00:24:55,920 --> 00:24:59,240 Speaker 1: four verticals within that asset class. So there's cryptocurrencies, which 414 00:24:59,240 --> 00:25:01,480 Speaker 1: are means of exchange in store value unit account. But 415 00:25:01,600 --> 00:25:05,680 Speaker 1: using that stack, there's crypto commodities, which are really taking 416 00:25:05,840 --> 00:25:09,159 Speaker 1: all of our physical world commodities but applying that to 417 00:25:09,280 --> 00:25:13,360 Speaker 1: digital world commodities. So compute or storage or GPU flops 418 00:25:13,440 --> 00:25:16,400 Speaker 1: or whatever it may be, and the PU what flops, 419 00:25:16,600 --> 00:25:20,920 Speaker 1: So like UH, that's a metric for a graphical processing unit. 420 00:25:21,200 --> 00:25:23,800 Speaker 1: Flops is the number of floating point calculations that can 421 00:25:23,840 --> 00:25:27,760 Speaker 1: make in a second UM. And then crypto tokens if 422 00:25:27,760 --> 00:25:31,120 Speaker 1: we use the analogy of an economy bringing together UH, 423 00:25:31,200 --> 00:25:34,639 Speaker 1: currencies and commodities to create finished goods and services, I 424 00:25:34,680 --> 00:25:38,520 Speaker 1: see crypto tokens as the consumer facing applications that are 425 00:25:38,520 --> 00:25:42,399 Speaker 1: provisioning these finished digital services to consumers. Okay, what is 426 00:25:42,520 --> 00:25:45,640 Speaker 1: an initial coin offering? What is that? How does that 427 00:25:45,920 --> 00:25:49,120 Speaker 1: connect with all this? And initial coin offering is one 428 00:25:49,200 --> 00:25:52,080 Speaker 1: means of many to create a liquidity event for a 429 00:25:52,119 --> 00:25:55,399 Speaker 1: crypto asset UM. So something that concerns me is I 430 00:25:55,440 --> 00:25:58,840 Speaker 1: see people conflating I c O or initial coin offering 431 00:25:59,119 --> 00:26:02,800 Speaker 1: with crypto assets. Probably that's that's not the right connection 432 00:26:02,840 --> 00:26:06,399 Speaker 1: to make. It's one mechanism, one liquidity event. There are 433 00:26:06,480 --> 00:26:09,719 Speaker 1: many other, many others. We started this whole space with mining, 434 00:26:10,000 --> 00:26:13,439 Speaker 1: right where you're organically minting and issuing the crypto asset 435 00:26:13,720 --> 00:26:16,560 Speaker 1: as a function of resources provided the network. There are 436 00:26:16,560 --> 00:26:19,320 Speaker 1: things like air drops were actually just give it away 437 00:26:19,440 --> 00:26:22,840 Speaker 1: to try and seed a user and holder base UM, 438 00:26:22,960 --> 00:26:25,640 Speaker 1: and there are all kinds of evolving things. There's auctions 439 00:26:25,640 --> 00:26:28,159 Speaker 1: which we were talking about before, which is, you know, 440 00:26:28,240 --> 00:26:31,359 Speaker 1: maybe a more responsible variant of an I c O UM, 441 00:26:31,440 --> 00:26:33,960 Speaker 1: but really important to not conflate I c O with 442 00:26:34,000 --> 00:26:37,959 Speaker 1: crypto assets. Probably, So, Chris, what your firm does is 443 00:26:38,080 --> 00:26:43,280 Speaker 1: supply venture capital to firms in the crypto space. Correct. 444 00:26:43,680 --> 00:26:45,960 Speaker 1: I'm trying to get a sense of where the opportunities 445 00:26:46,040 --> 00:26:50,000 Speaker 1: lie at this point. What types of companies look promising 446 00:26:50,040 --> 00:26:52,639 Speaker 1: to you, given the fact that there has been at 447 00:26:52,680 --> 00:26:57,400 Speaker 1: this rush of cash into a lot of companies almost indiscriminately. Uh, 448 00:26:57,440 --> 00:27:00,200 Speaker 1: where is the value what kinds of companies for us 449 00:27:00,320 --> 00:27:03,479 Speaker 1: UM as a venture capital firm, Right, we're focused ten 450 00:27:03,560 --> 00:27:07,880 Speaker 1: years out, that's our our time horizon. And when we're 451 00:27:07,880 --> 00:27:11,680 Speaker 1: looking at at teams, they're not companies, right, Their decentralized 452 00:27:11,720 --> 00:27:14,360 Speaker 1: information networks and centifized with the token, and so we're 453 00:27:14,400 --> 00:27:18,320 Speaker 1: looking at the cryptoeconomics, the government structure, all of these 454 00:27:18,359 --> 00:27:20,520 Speaker 1: things that we think will lay a foundation for something 455 00:27:20,560 --> 00:27:24,399 Speaker 1: to provide utility and value five ten years out. So 456 00:27:24,440 --> 00:27:28,600 Speaker 1: you're not giving money to a company or uh, you're 457 00:27:28,640 --> 00:27:33,720 Speaker 1: you're trying to help spur activity on decentralized platforms. Is 458 00:27:33,720 --> 00:27:35,880 Speaker 1: that correct? Yes, So a way to think of it 459 00:27:36,359 --> 00:27:39,960 Speaker 1: UM is we are funding teams early on that want 460 00:27:39,960 --> 00:27:43,600 Speaker 1: to build future protocols, future networks UM and so they 461 00:27:43,600 --> 00:27:47,320 Speaker 1: can raise say a million or two million dollars, not 462 00:27:47,480 --> 00:27:50,280 Speaker 1: a massive amount, right, but enough to fund say a 463 00:27:50,359 --> 00:27:52,480 Speaker 1: year or two years of development to then have a 464 00:27:52,480 --> 00:27:56,080 Speaker 1: working protocol two then more responsibly be able to launch 465 00:27:56,080 --> 00:27:58,920 Speaker 1: a cryptosity. Isn't this really dangerous just because there's a 466 00:27:59,000 --> 00:28:01,840 Speaker 1: lot of people expect there to be some massive shakeout 467 00:28:02,119 --> 00:28:04,880 Speaker 1: where there's one winner in this space or three winners 468 00:28:04,920 --> 00:28:09,200 Speaker 1: that take all We think UM, this structure is actually 469 00:28:09,240 --> 00:28:12,600 Speaker 1: the most responsible approach to the market. UM. By having 470 00:28:12,640 --> 00:28:15,920 Speaker 1: a ten year fund, we inject time diversity both into 471 00:28:15,920 --> 00:28:19,560 Speaker 1: the way our thesis involved and valuations involved. Right if 472 00:28:19,600 --> 00:28:22,560 Speaker 1: we have a massive valuation reset, we can recover from 473 00:28:22,560 --> 00:28:25,560 Speaker 1: that because we're not fully allocated UM. And then in 474 00:28:25,680 --> 00:28:28,280 Speaker 1: terms of you know, picking our spots and whether we're 475 00:28:28,280 --> 00:28:32,160 Speaker 1: going to have a handful of winners or a vast 476 00:28:32,200 --> 00:28:35,960 Speaker 1: proliferation of winners, that's to be seen UM for us 477 00:28:36,040 --> 00:28:39,560 Speaker 1: as a venture firm. Historically, venture firms can return their 478 00:28:39,600 --> 00:28:42,240 Speaker 1: fund based on one big home run, right that goes 479 00:28:42,280 --> 00:28:44,960 Speaker 1: a hundred x or goes a thousand x UM so 480 00:28:45,000 --> 00:28:46,760 Speaker 1: that is one option, or we could have a number 481 00:28:46,760 --> 00:28:49,280 Speaker 1: of base hits that get us there. The future is 482 00:28:49,320 --> 00:28:52,240 Speaker 1: to be seen, but we have designed this structure to 483 00:28:52,280 --> 00:28:56,320 Speaker 1: really support the entrepreneurs and developers behind these networks and 484 00:28:56,360 --> 00:29:01,320 Speaker 1: allow them to responsibly build over the long term. The 485 00:29:01,360 --> 00:29:06,040 Speaker 1: governor of the Financial Supervisory Service in South Korea has 486 00:29:06,080 --> 00:29:10,600 Speaker 1: said that the government will quote support cryptocurrency trading if 487 00:29:10,720 --> 00:29:15,080 Speaker 1: normal transactions are made. They already have a ban on 488 00:29:15,200 --> 00:29:19,400 Speaker 1: anonymous trading that took place at the end of January. 489 00:29:19,440 --> 00:29:22,240 Speaker 1: What do you believe will happen as a result of this. 490 00:29:23,200 --> 00:29:24,680 Speaker 1: I think that we're going to see a lot of 491 00:29:24,840 --> 00:29:28,080 Speaker 1: learnings from the equity markets and the traditional capital markets 492 00:29:28,280 --> 00:29:31,640 Speaker 1: UM about best practices brought to crypto UM. And that's fine, 493 00:29:31,680 --> 00:29:34,120 Speaker 1: that's a good thing, right. We need to better protect 494 00:29:34,120 --> 00:29:39,400 Speaker 1: consumers UM, and so I just see South Korea UM 495 00:29:39,440 --> 00:29:41,959 Speaker 1: as leading the charge in that Japan has also been 496 00:29:42,000 --> 00:29:45,120 Speaker 1: active and that you as active UM in terms of 497 00:29:45,160 --> 00:29:48,440 Speaker 1: classifying bitcoin as a foreign currency. I think that was 498 00:29:48,480 --> 00:29:51,200 Speaker 1: in UM, but we're going to see more and more 499 00:29:51,240 --> 00:29:54,120 Speaker 1: conversation around this. I'm just glad that the fear and 500 00:29:54,200 --> 00:29:58,000 Speaker 1: certainty and doubt from mid December has been clarified, and 501 00:29:58,000 --> 00:30:01,680 Speaker 1: it's clear. South Korea isn't banning cryptocurrency trading, they're just 502 00:30:01,760 --> 00:30:03,680 Speaker 1: better regulating it. So if you want to learn about 503 00:30:03,680 --> 00:30:05,840 Speaker 1: if you want to be in the forefront of cryptocurrencies, 504 00:30:06,320 --> 00:30:08,840 Speaker 1: just take a trip to South Korea. That's one of 505 00:30:08,840 --> 00:30:11,160 Speaker 1: my plans. All right, Well done, Thanks very much for 506 00:30:11,200 --> 00:30:14,240 Speaker 1: being with us. Chris Pernisky. He is a partner placeholder 507 00:30:14,280 --> 00:30:18,120 Speaker 1: advisor to ARC Investment Management. You can be followed on 508 00:30:18,120 --> 00:30:23,520 Speaker 1: Twitter at a ce Bernisky. Thanks for listening to the 509 00:30:23,520 --> 00:30:26,640 Speaker 1: Bloomberg P and L podcast. You can subscribe and listen 510 00:30:26,640 --> 00:30:30,800 Speaker 1: to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform 511 00:30:30,840 --> 00:30:34,760 Speaker 1: you prefer. I'm pim Fox. I'm on Twitter at pim Fox. 512 00:30:35,080 --> 00:30:38,600 Speaker 1: I'm on Twitter at Lisa Abramo. It's one before the podcast. 513 00:30:38,640 --> 00:30:41,240 Speaker 1: You can always catch us worldwide on Bloomberg Radio.