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Speaker 1: Hello, and welcome to another episode of the Odd Blots podcast.

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Speaker 2: I'm Tracy Alloway and I'm Joe Wisenthal.

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Speaker 1: Joe, have you ever heard of something called the tablet

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Speaker 1: of a Naser? I'm going to mispronounce that because my

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Speaker 1: ancient Mesopotamian isn't up to scratch, but the tablet of

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Speaker 1: a Nasser?

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Speaker 3: No.

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Speaker 2: Never.

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Speaker 1: This became like a big internet meme. There were lots

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Speaker 1: of jokes about it, but it was basically this tablet,

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Speaker 1: this old Mesopotamian tablet I think it was like four

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Speaker 1: thousand years old with cuneiform written on it. People sometimes

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Speaker 1: talk about it as the world's oldest business complaint.

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Speaker 2: You know, not only have I never heard of this tablet,

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Speaker 2: I'm actually struggling to like figure out what the next

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Speaker 2: thing you're going to say is that connects it to

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Speaker 2: this episode that's coming up.

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Speaker 1: This is the most random intro to.

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Speaker 4: What I like.

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Speaker 2: I like this one. I like where you're going.

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Speaker 1: I'm trying, I'm trying to bring historic context. But okay,

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Speaker 1: So written on this tablet was a business complaint against

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Speaker 1: this guy, a Nasser, who was a copper trader in

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Speaker 1: ancient Mesopotamia and his customer had written a complaint basically saying,

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Speaker 1: you promised me a certain amount and type of copper,

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Speaker 1: you gave me lesser quality copper, and I am upset

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Speaker 1: and you have to do something about that.

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Speaker 2: So I get this is okay. Now I get how

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Speaker 2: this makes sense. And I guess this is like a

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Speaker 2: phenomenon throughout history that if you're buying actual physical stuff,

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Speaker 2: there is a question of you enter into a contract,

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Speaker 2: did you actually get the stuff? Is the stuff that

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Speaker 2: the stuff that the person said they were going to

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Speaker 2: give you? Is it actually what it is? Is it real?

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Speaker 5: That's exactly it?

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Speaker 1: And how do you check beforehand to see whether or

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Speaker 1: not the stuff that you're going to be getting is

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Speaker 1: the stuff that was promised to you. These are ancient,

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Speaker 1: ancient problems. And the weird thing is it seems like

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Speaker 1: the commodities world hasn't actually progressed that much from cuneiform

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Speaker 1: tablets written on stone to what we use today, which

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Speaker 1: is mostly paperwork.

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Speaker 2: I remember an episode we did with Dan Davies several

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Speaker 2: years ago, and we talked about the salad oil scandal.

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Speaker 2: The fame is one where the guy like filled up

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Speaker 2: those tanks filled with water and then put a thin

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Speaker 2: layer of oil, and they came and they checked and

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Speaker 2: they're like, oh, these tanks are oil, and he was

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Speaker 2: able to borrow against them. Warren Buffett made a bunch

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Speaker 2: in the crash of all the entities that were associated

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Speaker 2: with it. But this stuff always fascinates me because I

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Speaker 2: think these are the stories where there's something different between

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Speaker 2: just the lines we see on the chart, these abstracted

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Speaker 2: version of commodities versus like the actual handling of the

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Speaker 2: real thing.

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Speaker 1: Right, there's the financialized commodity, the line that you see

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Speaker 1: on an electronic screen, and then the actual commodity. The

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Speaker 1: two are supposed to match or relate, but they're not

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Speaker 1: one way or another. But they're definitely not the same thing.

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Speaker 1: And recently, one of the reasons we wanted to do

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Speaker 1: this episode is there have been a series of scandals

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Speaker 1: in commodities land that have to do with collateral management.

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Speaker 1: So the big one that springs to mind is Elemy

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Speaker 1: discovering that it had a bunch of rocks instead of

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Speaker 1: nickel backing some of its content, and this kind of

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Speaker 1: was a major talking point in commodities world.

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Speaker 2: Yeah, we recently did that interview with us CME chief

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Speaker 2: Terry Duffy, and he seemed to acknowledge that there's like

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Speaker 2: something about Nichols specifically that makes it susceptible to this

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Speaker 2: sort of deception. But we didn't really get into the details.

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Speaker 2: But this is just so fascinating that involves like heists

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Speaker 2: and scams and deceptions on the fraud and it's just

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Speaker 2: as you say, it's throughout history. So I'd love to

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Speaker 2: learn more about how this business works.

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Speaker 1: Yeah, why does the commodities world seem so sort of

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Speaker 1: ripe for these types of scandals. I'm very pleased to

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Speaker 1: say that we have truly the perfect guests. We are

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Speaker 1: going to be speaking with multi time, a lots guests

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Speaker 1: at the moment. Mercury Group CEO Anton Posner and Mercury

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Speaker 1: Group Coooh, Margo Brock, thank you so much for coming

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Speaker 1: back on all thoughts.

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Speaker 5: Thanks for having us.

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Speaker 3: Thank you great to be here.

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Speaker 1: So the last time we talked, I think we were

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Speaker 1: talking about the barge business and what was going on

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Speaker 1: in the Mississippi River. But walk us through your approach

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Speaker 1: to collateral management because this is a space that you

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Speaker 1: play in. I think you do some business for major

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Speaker 1: players such as the big banks, but what exactly do

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Speaker 1: you guys do in the field of collateral management.

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Speaker 3: Sure, yeah, I'll take the lead on that one trace. Again, First,

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Speaker 3: I'd just like to say, as that canneiform reference you made,

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Speaker 3: they're still fighting it out in court and Athens. Their

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Speaker 3: errors are still has not been resolved, so it's still

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Speaker 3: going on.

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Speaker 1: We can litigate it right now.

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Speaker 3: Yeah, exactly, it's continuing. So yeah, that's why I have

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Speaker 3: conneiform keyboard on my iPhone. So what we do We,

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Speaker 3: as you mentioned, we work for several major banks that

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Speaker 3: are involved in physical commodity finance and trade. In addition

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Speaker 3: to trading companies and producers and commodities, a certainly a

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Speaker 3: strong focus on metals and steel and raw materials that

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Speaker 3: go along with it. On the collateral management front, we

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Speaker 3: perform audits and inspections at facilities for banks and financiers

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Speaker 3: that are financing physical commodities to do some initial vetting work,

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Speaker 3: finding out the procedures, diving into the everything from the

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Speaker 3: ownership and the procedures and the personnel that are involved

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Speaker 3: in issuance of documentation to who's going to be the

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Speaker 3: primary point of communication, how are they keeping track of

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Speaker 3: who owns what? And so forth. That is the pre

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Speaker 3: work that's done preliminary ahead of a finance deal. And

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Speaker 3: then once there are physical commodities in place, we're doing

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Speaker 3: jobs like having auditors go out and count physical metal

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Speaker 3: accounting bundles of aluminum, ingots and warehouse for banks to

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Speaker 3: verify what's there. And even to the point where we have,

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Speaker 3: through our subcontract or partners, flying drones to measure the

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Speaker 3: heights an angle of repose of stockpiles of coal, for example,

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Speaker 3: to verify approximately how many tons are in stockpile for

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Speaker 3: banks that are financing drybulk commodities like that.

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Speaker 2: I have a question before we get into like the

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Speaker 2: various frauds and deceptions, why do we take like a

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Speaker 2: very sort of simple, sort of vanilla instance of how

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Speaker 2: trade would work. Like suppose Tracy has a bunch of

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Speaker 2: oil and she wants to pledge it borrow some money

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Speaker 2: from me, and I would need to make sure that

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Speaker 2: she actually has the oil and she actually.

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Speaker 4: Oil.

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Speaker 3: Is the old story, right.

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Speaker 2: Yeah, Tracy is coal. She doesn't want she wants to

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Speaker 2: borrow against it, get some liquidity for it. I say, yeah,

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Speaker 2: I want to. I'm happy to lend against your coal. Tracy,

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Speaker 2: but I need some proof that it's there. She goes

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Speaker 2: to you, what's like the basic steps of the process.

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Speaker 2: What do you produce for me?

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Speaker 3: Sure the you know, initially, and we work with our clients,

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Speaker 3: with our bank and trading clients to determine what level

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Speaker 3: they want to go down, how far they want to

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Speaker 3: go down the rabbit hole in terms of analyzing, okay,

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Speaker 3: I mean you could could be the point of sending

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Speaker 3: a survey or out taking samples, sending it to a

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Speaker 3: pre agreed laboratory that expertise in that particular commodity to

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Speaker 3: verify the quality that's there. Of course, the quantity inspection

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Speaker 3: is important, right, verifying that the quantity matches what Tracy's

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Speaker 3: declaring to the bank or the financier. So verifying the

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Speaker 3: quality the volume, and then also verifying and working to

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Speaker 3: ensure that the facility that it's being stored at Tracy's

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Speaker 3: house in Connecticut may may not past monster in terms

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Speaker 3: of a secure collateral.

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Speaker 1: Squirrels that have made exactly within.

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Speaker 3: The exactly the biomass that's mixed in exactly right, So

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Speaker 3: so ensuring that right. And we have clients that sometimes

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Speaker 3: don't want us to go that deep. Sometimes it's just volume.

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Speaker 3: But we're not taking samples for qualities and so forth.

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Speaker 3: So we're our initial approach with a one of our

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Speaker 3: clients that hire us for collateral management services is determining

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Speaker 3: how far how far down they want to go.

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Speaker 1: I was going to ask how much of this depends

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Speaker 1: on the sample size, because it seems like an easy

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Speaker 1: thing for me to do if I was worried about

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Speaker 1: the quality of my coal is I don't know, I

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Speaker 1: would get a really nice piece of anthracite from somewhere

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Speaker 1: else and say here, here's a sample of my coal.

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Speaker 3: Sure.

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Speaker 4: Yeah, Well, most importantly, if you're going to draw samples,

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Speaker 4: it's going to be randomized, and you're going to have

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Speaker 4: a certain percentage of the cargo that has to be sampled.

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Speaker 4: If it's quite a large stockpile of coal, you know

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Speaker 4: you're going to want a lot of representative samples from

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Speaker 4: different sides, different angles, top bottoms, and quite so people

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Speaker 4: can't pick the most attractive piece of anthracites run out there.

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Speaker 4: So it really does depend on the parcel size that

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Speaker 4: you're talking about.

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Speaker 1: I mean, you've just laid out how it's supposed to

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Speaker 1: go in the theory, and yet what we've seen recently

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Speaker 1: is numerous examples of people fooling the auditors, people fooling

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Speaker 1: the inspectors, sometimes in kind of amusing ways with painted

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Speaker 1: rocks and things like that. So what's going on there?

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Speaker 3: Uh? I mean there's a lot of opportunity for fraud

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Speaker 3: at all levels, at all all the facets right that

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Speaker 3: of this process. As you said, going back you know

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Speaker 3: to the Phoenicians right in there in their complaints. So

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Speaker 3: there's no nothing, nothing much has changed except the methods

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Speaker 3: of which communication has. But you know the things that

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Speaker 3: could go wrong where you had the recent traffic Aura

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Speaker 3: mess uh there with a thousand containers of what appears

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Speaker 3: to be steel discs or fake nickel. And then there

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Speaker 3: was other other examples that Henleyong scandal in Singapore for example,

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Speaker 3: where you had the warehousemen that was storing the petroleum

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Speaker 3: oil in this case was issuing issuing documentation to multiple

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Speaker 3: financiers for the same exact stocks. You had a that's

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Speaker 3: a situation where it wasn't the supplier that was the problem,

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Speaker 3: but rather the facility that was doing the storage, which

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Speaker 3: which has been a problem.

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Speaker 2: Well, so I was going to ask and it's the

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Speaker 2: sort of perfect your answer, because I was going to

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Speaker 2: add on to Tracy's like, do entities become vulnerable when

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Speaker 2: they work with the same counterparties over and over again

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Speaker 2: and just sort of like drop their guard essentially, like, oh,

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Speaker 2: this is the way we've always done it. There's the

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Speaker 2: way we've always done it. And then someone figures out

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Speaker 2: how to enter into that relationship that's existed for a

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Speaker 2: long time. Like maybe the first time Tracy pledges are

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Speaker 2: called to me, like I do a big inspection, but

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Speaker 2: by the tenth time, like, yeah, I know you're good

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Speaker 2: for it. But is that when fraud starts?

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Speaker 4: Absolutely, because you get complacent and you let your guard down,

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Speaker 4: like anything else in life. So these long standing relationships

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Speaker 4: that have always just run on autopilot, and someday some

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Speaker 4: guy has a great idea of how he's going to

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Speaker 4: fool the system and make money. So yeah, I think

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Speaker 4: you have to keep the guard up. You have to

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Speaker 4: have your checks and balances in place from the beginning

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Speaker 4: of that relationship straight through to the end.

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Speaker 5: That's why they exist.

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Speaker 4: Once you drop your checks and balances, that's when you

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Speaker 4: stop being a.

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Speaker 1: Of all use that you know, looking at what you have,

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Speaker 1: so Here's a really basic question because I you know,

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Speaker 1: we all read a little bit about the traffic Era

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Speaker 1: and LME scandal, but everyone was focused on those very

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Speaker 1: big names for obvious reasons. But what happened to the

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Speaker 1: alleged fraudster? Do they just disappear with the money? I

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Speaker 1: imagine their business of commodity shipping and producing is pretty

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Speaker 1: moot at that point, right.

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Speaker 3: Yeah, the producer in India, and on the Nickel situation,

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Speaker 3: I'm sure is untouchable at this point in terms of

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Speaker 3: ability to transact with other anyone else really at this point.

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Speaker 4: He also but he also got half a billion dollars,

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Speaker 4: so he's fine.

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Speaker 2: Yeah, And there's no like real obvious recourse against.

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Speaker 3: The trafficker is pursuing. You know, we don't certainly don't

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Speaker 3: know the ins and outs of right, We're not we're

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Speaker 3: not involved in that, so be clear on that. Right.

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Speaker 3: So we're we're reading what transpired from news reports, right,

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Speaker 3: but we you know, it looks like they're pursuing legal

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Speaker 3: avenues to to to go after them, but that's going

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Speaker 3: to be long and drawn out.

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Speaker 2: It just to be clear on Nickel, and I think

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Speaker 2: this is something Terry Duffy when we talk to him,

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Speaker 2: he's like, there's something about nickel. It's that it's in bags, right,

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Speaker 2: Like some metal is like stacked you see it, and

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Speaker 2: so everything what would be an ideal form of auditing.

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Speaker 2: I can't imagine open every bag, but what.

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Speaker 5: Is opening some bags?

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Speaker 3: Okay?

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Speaker 4: Yeah, again it becomes that randomized audit, that randomized sampling,

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Speaker 4: and you do have to you have to look and

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Speaker 4: you have to go in and say, let's you know,

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Speaker 4: it's all stacked in the warehouse, let's break some down,

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Speaker 4: Let's pull it out, and let's just at a minimum

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Speaker 4: open the top of the bags and look in.

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Speaker 3: Also is going to say two Nickel is a much

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Speaker 3: more higher value metal versus aluminum, let's say, or zinc.

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Speaker 3: So it's like counterfeiting. If you're going to counterfeit bills,

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Speaker 3: you can probably counterfeit if taking the time to do

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Speaker 3: what you're going to be doing one hundred dollars bills, right,

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Speaker 3: rather than focusing on counterfeiting on dollar bills.

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Speaker 2: Nickel so in bags high value.

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Speaker 4: And there's really been two different types of fraud on it,

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Speaker 4: and one is the Indian one that traffic Goor is

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Speaker 4: involved in is during shipment. So by the time it

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Speaker 4: lands where it's headed, the last containers are already afloat

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Speaker 4: and everything, all the documents are presented and everyone's been paid,

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Speaker 4: so they haven't had the opportunity to open doors on

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Speaker 4: that very first container that's shipped to even look and

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Speaker 4: find their fraud. So that fraud you have to really

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Speaker 4: concentrate on combating at load.

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Speaker 5: And then there's the fraud of the rocks that were.

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Speaker 4: In the nickel bags, and that was in warehouse for

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Speaker 4: years and years, but again nobody.

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Speaker 5: Opened up the bags there.

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Speaker 4: So there's you know, like Anton said, it's a system

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Speaker 4: as old as time, and there's so many points within

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Speaker 4: that system where fraud can happen and theft happens and

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Speaker 4: the opportunities present themselves.

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Speaker 1: So just on this note, I mean, my impression is

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Speaker 1: that one of the issues here and one of the

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Speaker 1: reasons why the commodities world is susceptible to this type

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Speaker 1: of fraud is, you know, not just that you can

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Speaker 1: fake nickel by using some rocks put in a bag,

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Speaker 1: but also so much of it relies on paperwork and

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Speaker 1: you know, invoices and trade receivables and things like that.

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Speaker 1: Can you talk a little bit about why that is

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Speaker 1: and how endemic it is in your line of business.

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Speaker 3: Sure on the paper referring to the paperwork side rate paperwork.

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Speaker 3: The documents that go along with a shimment are fairly

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Speaker 3: easy to forge, right, So the quality certificates that went

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Speaker 3: along with that nickel coming out of India, or the

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Speaker 3: the paperwork. Let's take the Henleyong situation, right, the documentation,

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Speaker 3: the warehouse receipts, the holding certificates that went to the

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Speaker 3: to the banks to show that that there was ownership, right,

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Speaker 3: can are just printed off off a computer, signed and stamped.

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Speaker 3: It's fairly easy to to make these documents and send

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Speaker 3: them along, So it's the doc The paperwork is only

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Speaker 3: as good as the counter party that's that's drawing it up.

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Speaker 3: So it's the old trust. But verify premise, as Margo said, right,

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Speaker 3: taking representative samples, not just you know the paperwork really

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Speaker 3: really is to go along with a but it has

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Speaker 3: to be part of a part of the bigger process.

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Speaker 2: Right. So obviously one way of fighting fraud is, as

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Speaker 2: you say, go in the bags, rip open a bunch,

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Speaker 2: do samples. The other way to engage in fraud that

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Speaker 2: you've sort of hinted up and haven't talked about as much.

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Speaker 2: Is Tracy comes to me asks for money against her call,

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Speaker 2: but also does it for like six or seven entities

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Speaker 2: over pledges. So what are some of the checks that

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Speaker 2: you do or that a party should do to avoid

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Speaker 2: or prevent multiple pledged collateral.

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Speaker 3: Yeah, and this is a it's a tougher one. Yeah,

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Speaker 3: because let's go back to the to the ching Dao

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Speaker 3: scandal in China ten plus years ago. I believe where

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Speaker 3: the Western warehousing companies LM warehousing companies in China doesn't

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Speaker 3: have Linda Metal Exchange warehouses. So these are the same

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Speaker 3: companies that had subcontracted warehouses in ching Dao storing copper

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Speaker 3: and other metals, and the warehouse been there. There was

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Speaker 3: a couple of warehouses in ching Dao that were subcontracted

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Speaker 3: by the LEM warehousing companies and they were in cahoots

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Speaker 3: with some of the local traders there to double triple,

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Speaker 3: quadruple pledge these of copper to multiple banks. So they'd say, right,

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Speaker 3: you got a ten thousand tons of copper cathodes sitting

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Speaker 3: in there, and the local warehouse ban was issuing warehouse

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Speaker 3: receipt to multiple multiple banks. And financing entities for that

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Speaker 3: same stack of copper, unbeknownst to the warehousing company that

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Speaker 3: was contracting contracting with them. So they thought the western

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Speaker 3: warehousing companies or the large lumy wareusing companies thought that

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Speaker 3: they were that their Chinese subcontractor was doing the right

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Speaker 3: thing and being honorable, but was really handing out paper

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Speaker 3: left and right right for the same stack of metal.

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Speaker 4: And I would say, if Joe was looking to finance

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Speaker 4: Tracy's coal, you don't want to do it on Tracy's

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Speaker 4: property because Tracy retains retains control of it.

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Speaker 5: And that's going to be Yeah, that's going to be

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Speaker 5: step number one.

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Speaker 4: I want your call somewhere where I have a trusted

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Speaker 4: third party controlling it and hopefully issuing only one warehouse

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Speaker 4: receipt on it, so.

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Speaker 2: It would be the warehouse. So in the process of

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Speaker 2: getting that confirmation, it would be the warehouse sort of

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Speaker 2: vouching for it, and then it would be on them.

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Speaker 2: It would be on the warehouse, like would be the

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Speaker 2: one breaking the law, being complicit and breaking the law

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Speaker 2: if they were sending.

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Speaker 5: It out to right, which is what happened in Chindawn

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Speaker 5: got it.

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Speaker 3: And Marker brings up a really good point, and often

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Speaker 3: we've had multiple conversations over the years about providing collateral

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Speaker 3: management services for stock retained at a customers or at

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Speaker 3: a at a facility that's controlled by the entity that's

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Speaker 3: getting that's benefiting from the financing. Right. So, as Margo said,

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Speaker 3: with that's always a more complicated collateral management approach. Then

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Speaker 3: you have to have regular inspections verify that when the

352
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Speaker 3: inspector is not there, is that material being taken being

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Speaker 3: being taken out right? We were We did a a

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Speaker 3: similar project for inbound steel slab going into a rolling

355
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Speaker 3: mill in Ohio. This and the bank that we were

356
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Speaker 3: working for on that one was financing the steel slab,

357
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Speaker 3: but it was on the property of the rolling mill,

358
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Speaker 3: and then the bank would would have possession of the

359
00:19:10,520 --> 00:19:13,720
Speaker 3: slab but also the coils steel coils that were rolled

360
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Speaker 3: from that slab afterward. That meant we had to send

361
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Speaker 3: in Mercury or predecessor predecessor company. We had to send

362
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Speaker 3: in inspectors regularly to verify what was there. Did they

363
00:19:24,480 --> 00:19:27,120
Speaker 3: did the mill take more slabs than they were supposed

364
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Speaker 3: to from the stock that was that was dedicated to

365
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Speaker 3: that particular bank And in one case, Margo uncovered interesting situation.

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Speaker 4: Fraud and it was only detected simply because we were

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Speaker 4: working on behalf of both banks that were financing the

368
00:19:46,240 --> 00:19:48,760
Speaker 4: slab and the ultimate hot rolled coil that were coming

369
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Speaker 4: out of the slab. So at the end of each

370
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Speaker 4: day there was a pledge list of you know, we've

371
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Speaker 4: we've removed this much slab from your inventory by you know,

372
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Speaker 4: specific piece number, and to balance out the value, you

373
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Speaker 4: now have this stack of coils and these are the

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Speaker 4: numbers of your coils. And this happens on a daily basis,

375
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Speaker 4: and all those reports came to us and basically it

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Speaker 4: was a simple overlay of reports and we started identifying

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00:20:12,600 --> 00:20:13,960
Speaker 4: coils that were double pledged.

378
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Speaker 2: Sorry explain that an overlay of reports? What does that mean?

379
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Speaker 4: Just taking both inventory reports, both daily declarations to each

380
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Speaker 4: of each of the banks, oh and doing them side

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Speaker 4: by side to look and start realizing that we had

382
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Speaker 4: a handful of coils that were pledged to both banks.

383
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Speaker 1: So out of curiosity, how much was that slab and

384
00:20:33,000 --> 00:20:35,879
Speaker 1: the coils worth? And the reason I ask is because

385
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Speaker 1: this seems like a lot of work and very granular risk, right,

386
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Speaker 1: granular high risk, and I kind of wonder, I wonder

387
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Speaker 1: about the incentive structure here. If there are commodities dealers

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Speaker 1: out there who basically say, this is a risk we're

389
00:20:51,680 --> 00:20:53,879
Speaker 1: willing to take. We're going to find someone, you know,

390
00:20:53,960 --> 00:20:57,200
Speaker 1: a warehouse or whoever with the least amount of paper work,

391
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Speaker 1: the least bureaucratic process to go through. Because this all

392
00:21:00,920 --> 00:21:01,960
Speaker 1: seems like quite a lot.

393
00:21:02,160 --> 00:21:06,120
Speaker 3: Yeah. This the value of the slabs a few hundred

394
00:21:06,160 --> 00:21:08,080
Speaker 3: bucks a ton, and then they were when they were

395
00:21:08,119 --> 00:21:10,440
Speaker 3: rolled in. The coils were added value at that point,

396
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Speaker 3: So add on another one hundred bucks a ton. I'm

397
00:21:12,640 --> 00:21:16,320
Speaker 3: certainly not a steel pricing expert, right, but but that

398
00:21:16,520 --> 00:21:20,159
Speaker 3: was just just to give you approximate value. But Tracy,

399
00:21:20,200 --> 00:21:24,920
Speaker 3: were seeing just on your question, right, We're seeing banks

400
00:21:24,960 --> 00:21:29,240
Speaker 3: that bailed out of commodity trade finance because of these problems.

401
00:21:29,280 --> 00:21:32,399
Speaker 3: Ab an Amorro being Paraba a couple of years ago

402
00:21:32,800 --> 00:21:35,400
Speaker 3: announced that they were getting out of a lot, some

403
00:21:35,440 --> 00:21:39,600
Speaker 3: significant portion of their physical commodity trade. It's left a

404
00:21:39,720 --> 00:21:43,800
Speaker 3: smaller group of trader of banks that are willing to

405
00:21:44,000 --> 00:21:46,920
Speaker 3: get involved in this at this point, which has opened

406
00:21:46,960 --> 00:21:48,960
Speaker 3: up the door to some of the some of the

407
00:21:49,119 --> 00:21:53,240
Speaker 3: less scrupulous ones take the Green Cell disaster right using

408
00:21:53,240 --> 00:21:54,400
Speaker 3: their disaster.

409
00:21:54,080 --> 00:21:56,439
Speaker 2: There, Yeah, because I don't think of that in the

410
00:21:56,520 --> 00:21:59,800
Speaker 2: same category. So yeah, different yea, So how is green

411
00:22:00,080 --> 00:22:01,159
Speaker 2: all fit into the story?

412
00:22:01,760 --> 00:22:05,159
Speaker 3: And Green still pretty basically it boils down for the

413
00:22:05,200 --> 00:22:09,760
Speaker 3: most part to an entity Green Seal Capital, that that

414
00:22:09,960 --> 00:22:12,720
Speaker 3: was too close with one of the steel steel producers.

415
00:22:12,760 --> 00:22:19,320
Speaker 3: They were financing trades uh that were that involved the

416
00:22:19,359 --> 00:22:23,000
Speaker 3: steel producer. The bank that the steel producer owned was

417
00:22:23,000 --> 00:22:24,760
Speaker 3: was heavily involved in uh.

418
00:22:24,920 --> 00:22:29,879
Speaker 4: In trade receivable, trade receivable, but also future sales.

419
00:22:30,920 --> 00:22:36,320
Speaker 5: Yeah, so you don't even have anything to secure.

420
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Speaker 3: That set right, So and fake invoices that were presented

421
00:22:39,840 --> 00:22:43,280
Speaker 3: to Green Salt to finance, and Green Salt was backed

422
00:22:43,280 --> 00:22:45,800
Speaker 3: by Credit Swee and we know where Credit sweez is

423
00:22:45,840 --> 00:22:48,480
Speaker 3: at these days, so none of this worked out well.

424
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Speaker 2: For the number of credit stepped over the exactly.

425
00:22:53,520 --> 00:22:56,600
Speaker 3: I mean, this was one of you know, massive uh

426
00:22:56,960 --> 00:22:59,560
Speaker 3: you know, massive strike against against the bank. And of

427
00:22:59,560 --> 00:23:02,119
Speaker 3: course now look where they are, right and it's merged

428
00:23:02,160 --> 00:23:05,760
Speaker 3: into ubs. But you know, this was the situations Marko

429
00:23:05,840 --> 00:23:09,439
Speaker 3: mentioned the future receivables which was never made clear to

430
00:23:09,520 --> 00:23:11,879
Speaker 3: Credit Sweee and they are investors in the funds that

431
00:23:11,920 --> 00:23:16,240
Speaker 3: were backing Green sell that they weren't financing physical sales,

432
00:23:16,280 --> 00:23:20,840
Speaker 3: they were financing theoretical sales. I mean when you read

433
00:23:21,400 --> 00:23:25,400
Speaker 3: what transpired there, you know, I think, you know, our

434
00:23:25,600 --> 00:23:27,919
Speaker 3: teenage kids could have figured out that this was a

435
00:23:27,960 --> 00:23:28,879
Speaker 3: bad deal.

436
00:23:29,240 --> 00:23:31,600
Speaker 2: So it's one thing to be a future receivable, and

437
00:23:31,640 --> 00:23:34,119
Speaker 2: a future sale may one day become a receivable, but

438
00:23:34,200 --> 00:23:38,919
Speaker 2: it's clearly not the same thing by an exactly you

439
00:23:39,080 --> 00:23:41,520
Speaker 2: mentioned the banks have gotten out of this business. So

440
00:23:41,600 --> 00:23:44,160
Speaker 2: this is not just like that's interesting to me because

441
00:23:44,240 --> 00:23:48,479
Speaker 2: that implies it's not just the occasional idiosyncratic thing that

442
00:23:48,520 --> 00:23:50,600
Speaker 2: pops up on the news and becomes a scandal that

443
00:23:50,600 --> 00:23:52,719
Speaker 2: we talked about once every years, that it must be

444
00:23:52,800 --> 00:23:55,720
Speaker 2: like a big enough challenge for the industry that some

445
00:23:55,800 --> 00:23:57,960
Speaker 2: banks like this is not do you talk about like

446
00:23:58,200 --> 00:23:59,359
Speaker 2: how big are we talking about here?

447
00:24:00,359 --> 00:24:03,040
Speaker 3: Yeah, we've seen, you know, with EB and AMRO and

448
00:24:03,119 --> 00:24:06,080
Speaker 3: BNP Paraba getting out there were two major, two banks

449
00:24:06,080 --> 00:24:08,800
Speaker 3: that were major had a major presence in the physical

450
00:24:08,800 --> 00:24:13,080
Speaker 3: commodity uh physical commodity trade. So it's left the banks

451
00:24:13,480 --> 00:24:17,600
Speaker 3: that are that are left in it. I N G. Rabobank,

452
00:24:17,920 --> 00:24:20,560
Speaker 3: Brown Brothers, Harriman here in New York of course, UH

453
00:24:20,680 --> 00:24:22,840
Speaker 3: JP Morgan Chase and so forth. But it's left a

454
00:24:22,920 --> 00:24:26,000
Speaker 3: dwindling number of banks that have the appetite for getting

455
00:24:26,440 --> 00:24:31,239
Speaker 3: getting involved in physical commodity UH trade finance. And in

456
00:24:31,280 --> 00:24:33,919
Speaker 3: this way, look at what happened with on the Trafficura

457
00:24:34,040 --> 00:24:36,200
Speaker 3: part of this part of the story. And certainly again

458
00:24:36,240 --> 00:24:39,359
Speaker 3: not an expert and exactly what happened, but City Bank

459
00:24:39,440 --> 00:24:43,680
Speaker 3: bailed out of financing those nickel trades with that particular supplier.

460
00:24:44,040 --> 00:24:47,040
Speaker 3: I think it was about a year before, maybe before

461
00:24:47,080 --> 00:24:49,840
Speaker 3: the problem became evident, So there was must have been

462
00:24:49,840 --> 00:24:52,280
Speaker 3: some red flags that were that were coming up, and

463
00:24:52,440 --> 00:24:56,160
Speaker 3: City was was keen enough to be able to extract

464
00:24:56,240 --> 00:25:01,560
Speaker 3: themselves from that prior that left Trafficura in a situation

465
00:25:01,680 --> 00:25:05,600
Speaker 3: where we saw they went to non some non traditional

466
00:25:05,680 --> 00:25:10,760
Speaker 3: secondary finance entities to mitigate their risk. They weren't using

467
00:25:10,800 --> 00:25:14,720
Speaker 3: their own money for purchasing that nickel. They were using

468
00:25:15,680 --> 00:25:19,639
Speaker 3: trade finance trade finance company money that that ended up

469
00:25:19,640 --> 00:25:22,119
Speaker 3: getting caught up in the in the mess at this

470
00:25:22,160 --> 00:25:25,160
Speaker 3: point too. So it leads to the question of if

471
00:25:25,200 --> 00:25:29,639
Speaker 3: a major company like traffic Aura can't get bank level

472
00:25:29,920 --> 00:25:33,160
Speaker 3: interest rates to finance this, and they're going to the

473
00:25:33,200 --> 00:25:37,800
Speaker 3: secondary lenders, right that are much higher cost.

474
00:25:38,720 --> 00:25:42,560
Speaker 1: Why right, Well, I've seen some people draw a not

475
00:25:42,920 --> 00:25:46,840
Speaker 1: very subtle connection between like, Okay, the regulators put in

476
00:25:46,960 --> 00:25:50,960
Speaker 1: additional rules around trade financing because it's a risky business

477
00:25:51,000 --> 00:25:53,680
Speaker 1: for the banks. So a bunch of banks pulled out.

478
00:25:53,720 --> 00:25:57,359
Speaker 1: Now you have a smaller body of players, some of

479
00:25:57,480 --> 00:26:01,440
Speaker 1: varying qualities, and this might be one reason why we're

480
00:26:01,480 --> 00:26:04,760
Speaker 1: seeing more scandals because you don't have as much credit,

481
00:26:05,000 --> 00:26:08,680
Speaker 1: you don't have as big an ecosystem as you did previously.

482
00:26:08,960 --> 00:26:11,320
Speaker 1: Is there any truth to that claim?

483
00:26:11,800 --> 00:26:17,720
Speaker 3: Yeah, yeah, the certainly without with less lenders and less

484
00:26:17,760 --> 00:26:22,080
Speaker 3: participants in the in the field, right, it's it's concentrated

485
00:26:22,119 --> 00:26:25,399
Speaker 3: that risk into a smaller group of entities that are

486
00:26:25,440 --> 00:26:28,480
Speaker 3: willing the banks, the financiers that are that are doing

487
00:26:28,480 --> 00:26:31,240
Speaker 3: this type of this type of business. So I think

488
00:26:31,280 --> 00:26:35,720
Speaker 3: that there's some credence credence to that, but it ultimately

489
00:26:35,760 --> 00:26:38,400
Speaker 3: goes back still to the quality. Right, if we're talking

490
00:26:38,440 --> 00:26:42,640
Speaker 3: about financing aluminum coming out of an Alcoa smelter, it's

491
00:26:42,640 --> 00:26:47,440
Speaker 3: not quite the same as what traffic Goura got got

492
00:26:47,440 --> 00:26:50,440
Speaker 3: hooked into, or the problems with the uh, you know,

493
00:26:50,600 --> 00:26:55,320
Speaker 3: fake copper painted bricks and stuff. This was not this

494
00:26:55,400 --> 00:26:58,760
Speaker 3: metal was not coming out of a out of you know,

495
00:26:58,800 --> 00:27:02,320
Speaker 3: an al Co or Rio tin level of producer and

496
00:27:02,400 --> 00:27:06,080
Speaker 3: counter parties. So the minute you're going getting involved in

497
00:27:06,280 --> 00:27:10,120
Speaker 3: entities that are that may not have quite the level

498
00:27:10,119 --> 00:27:13,680
Speaker 3: of reputation as these major major producers have, you need

499
00:27:13,720 --> 00:27:17,560
Speaker 3: to start ramping up your level of collateral management and

500
00:27:17,600 --> 00:27:21,400
Speaker 3: oversight and uh and risk risk management. And I think

501
00:27:21,440 --> 00:27:24,639
Speaker 3: that's that's really where the problem is, where we see

502
00:27:25,280 --> 00:27:29,119
Speaker 3: regularly not not that desire to go as far as

503
00:27:29,119 --> 00:27:29,560
Speaker 3: they need to.

504
00:27:46,560 --> 00:27:50,240
Speaker 2: Can we talk about gold? The internet loves the occasional

505
00:27:50,280 --> 00:27:55,280
Speaker 2: story about gold theories like all the gold gold, Yeah,

506
00:27:55,560 --> 00:27:57,639
Speaker 2: all the gold that's in Fort Knox is actually a

507
00:27:57,680 --> 00:28:00,240
Speaker 2: brick and if painted, no one is inspected in fifty year.

508
00:28:00,280 --> 00:28:03,960
Speaker 2: You know, you just like see this constantly, constantly, what

509
00:28:04,080 --> 00:28:07,760
Speaker 2: kind of regular inspections are a is there gold? Is

510
00:28:07,760 --> 00:28:10,280
Speaker 2: there gold fraud? Is that a thing that exists in

511
00:28:10,400 --> 00:28:12,639
Speaker 2: terms of this is not gold or something painted or

512
00:28:12,960 --> 00:28:14,720
Speaker 2: that someone moved it out and no one has checked

513
00:28:14,720 --> 00:28:17,880
Speaker 2: the warehouse, and uh, how is gold inspected?

514
00:28:18,320 --> 00:28:21,600
Speaker 3: Yeah? Gold, gold is not something that we get involved.

515
00:28:21,600 --> 00:28:25,320
Speaker 3: We don't get involved in pressure spunels. So caveat. With

516
00:28:25,359 --> 00:28:29,000
Speaker 3: that that being said, uh, what are the inspection companies

517
00:28:29,040 --> 00:28:31,560
Speaker 3: that we that we work closely with? They have they

518
00:28:31,560 --> 00:28:34,040
Speaker 3: fly somebody down to the Cayman Islands every once in

519
00:28:34,040 --> 00:28:37,000
Speaker 3: a while to go into the bank vaults and check

520
00:28:37,000 --> 00:28:40,960
Speaker 3: out the gold, doesn't it. I thought that was fantastic.

521
00:28:41,480 --> 00:28:47,640
Speaker 2: Applying to say, I've never admitted this before. I was

522
00:28:47,760 --> 00:28:48,800
Speaker 2: I did this field trip.

523
00:28:48,920 --> 00:28:50,520
Speaker 1: I thought you were going to say you're a gold bug.

524
00:28:50,680 --> 00:28:53,480
Speaker 2: No. I did this field trip to the New York

525
00:28:53,520 --> 00:28:58,440
Speaker 2: fed when I was in high school. And they brought

526
00:28:58,480 --> 00:29:00,280
Speaker 2: us down to the gold vault and it was pretty cool,

527
00:29:00,280 --> 00:29:02,160
Speaker 2: and they showed us how like often like when one

528
00:29:02,280 --> 00:29:04,600
Speaker 2: entity like the I m F like sells gold to

529
00:29:04,640 --> 00:29:12,040
Speaker 2: another entity, like the gold is put on a palette locker.

530
00:29:12,360 --> 00:29:14,360
Speaker 2: But anyway, I was like standing next to the gold

531
00:29:14,480 --> 00:29:16,320
Speaker 2: and I like sort of scratched a little bit of

532
00:29:16,360 --> 00:29:18,480
Speaker 2: it myself and a couple of pieces of dust like

533
00:29:18,600 --> 00:29:20,040
Speaker 2: fell that like sort of freaked out.

534
00:29:20,400 --> 00:29:21,840
Speaker 5: But then he put it in his pocket.

535
00:29:21,920 --> 00:29:23,240
Speaker 2: No, it didn't turn it on the floor.

536
00:29:23,240 --> 00:29:25,120
Speaker 1: But I was like, oh, like that gold is that

537
00:29:25,200 --> 00:29:26,320
Speaker 1: must be a federal crime.

538
00:29:26,400 --> 00:29:30,800
Speaker 4: Yeah, I was just like, statue of limitations has expired.

539
00:29:30,920 --> 00:29:34,440
Speaker 2: This little pieces of dust fell throughout. I forgot freaked

540
00:29:34,480 --> 00:29:37,000
Speaker 2: out that was even possible. So somewhere there was a

541
00:29:37,080 --> 00:29:42,320
Speaker 2: golden get was just like a little I don't know anyway, Yeah, limitations,

542
00:29:42,640 --> 00:29:43,920
Speaker 2: I freaked out. I didn't take any of that.

543
00:29:45,040 --> 00:29:48,400
Speaker 3: Yeah, they see them pulling movies, right, pulling pulling the

544
00:29:48,440 --> 00:29:51,280
Speaker 3: gold around and these big palettes with these pulleys, and

545
00:29:51,960 --> 00:29:53,920
Speaker 3: not to dive too deep into gold because it's not

546
00:29:54,000 --> 00:29:56,800
Speaker 3: our ear of expertise, right, But same principles, right, if

547
00:29:56,840 --> 00:29:58,800
Speaker 3: you're flying down to the Cayman isons and you're going

548
00:29:58,840 --> 00:30:03,320
Speaker 3: to inspect gold old in this story, in this particular case,

549
00:30:03,400 --> 00:30:06,120
Speaker 3: one of the major global banks that was financing the

550
00:30:06,200 --> 00:30:09,760
Speaker 3: gold there in a vault in the Caymans. I'm not

551
00:30:09,840 --> 00:30:12,520
Speaker 3: sure what level of how far they took they went

552
00:30:12,560 --> 00:30:15,240
Speaker 3: as far as taking samples and setting into a lab

553
00:30:15,320 --> 00:30:17,280
Speaker 3: for analysis and so forth, or if it was just

554
00:30:17,360 --> 00:30:19,800
Speaker 3: a simple counting. But when you get into a simple

555
00:30:19,880 --> 00:30:24,680
Speaker 3: counting of gold bars, then you're just counting them, you're

556
00:30:24,720 --> 00:30:27,520
Speaker 3: not verifying that they're actually gold, and you might end

557
00:30:27,600 --> 00:30:29,920
Speaker 3: up with something you know that like is on that

558
00:30:30,040 --> 00:30:30,720
Speaker 3: table over there.

559
00:30:34,960 --> 00:30:40,040
Speaker 2: I thought we were gonna Yeah, so exactly what what

560
00:30:40,280 --> 00:30:41,800
Speaker 2: what is our takeaway from this problem.

561
00:30:41,960 --> 00:30:44,600
Speaker 3: Yeah, the takeaway is that I can count that as one,

562
00:30:44,760 --> 00:30:46,640
Speaker 3: but it doesn't mean that it's one bar of gold

563
00:30:46,720 --> 00:30:51,800
Speaker 3: one brick of gold, right, So just doing account and

564
00:30:52,320 --> 00:30:54,520
Speaker 3: is is only only one.

565
00:30:54,440 --> 00:30:57,160
Speaker 2: Story actually brought more And so I guess part of

566
00:30:57,240 --> 00:30:58,160
Speaker 2: the story could be.

567
00:30:59,760 --> 00:31:00,240
Speaker 3: This one.

568
00:31:02,280 --> 00:31:04,360
Speaker 2: How common is stuff like that? Because that actually is

569
00:31:04,480 --> 00:31:08,040
Speaker 2: not that different from even conceptually the Celling oil scandal, right,

570
00:31:08,080 --> 00:31:10,880
Speaker 2: which is like you have this layer of something legitimate.

571
00:31:11,200 --> 00:31:13,120
Speaker 2: So talk to us a little bit about like just

572
00:31:13,240 --> 00:31:14,880
Speaker 2: sort of like the way some of this can get

573
00:31:14,920 --> 00:31:17,440
Speaker 2: concealed if like the you know, the top layer or

574
00:31:17,480 --> 00:31:18,320
Speaker 2: something like that is.

575
00:31:18,560 --> 00:31:22,000
Speaker 4: Legit exactly what you said, you make those outer layers

576
00:31:22,040 --> 00:31:25,480
Speaker 4: look to be the right material, and then it's the

577
00:31:25,560 --> 00:31:29,840
Speaker 4: onus is on someone to be responsible and look inside, right, Yeah,

578
00:31:30,000 --> 00:31:33,200
Speaker 4: look inside that stack and see is it what you

579
00:31:33,320 --> 00:31:35,880
Speaker 4: think it is all the way through? Right? And again

580
00:31:35,960 --> 00:31:38,280
Speaker 4: that's just like I said, you know, early on you

581
00:31:38,400 --> 00:31:39,920
Speaker 4: talked about the nickel and maybe you do have to

582
00:31:39,960 --> 00:31:42,520
Speaker 4: get into the warehouse and occasionally say I want that

583
00:31:42,680 --> 00:31:45,480
Speaker 4: lot they're broken down and pull out all of them,

584
00:31:45,560 --> 00:31:47,360
Speaker 4: and I want to look inside the bags in the middle.

585
00:31:47,800 --> 00:31:49,640
Speaker 5: Don't forget that about the middle. That's where we all

586
00:31:49,840 --> 00:31:52,280
Speaker 5: you know, it's like the middle of the mashed potatoes.

587
00:31:51,920 --> 00:31:55,040
Speaker 2: Here your hdge of vegetables as a kid, like a

588
00:31:55,280 --> 00:31:57,840
Speaker 2: movie in which someone is convinced there's a fraud and

589
00:31:58,040 --> 00:32:00,680
Speaker 2: just goes through this like and just tearing bag after

590
00:32:00,800 --> 00:32:03,800
Speaker 2: bag and still like they're all, well, they slowly go

591
00:32:03,880 --> 00:32:05,440
Speaker 2: and sane, they know there's fraud.

592
00:32:05,240 --> 00:32:07,880
Speaker 3: And they finally get carted out for the warehouse but

593
00:32:07,960 --> 00:32:10,840
Speaker 3: has the right to charge for for the labor and

594
00:32:11,040 --> 00:32:13,920
Speaker 3: time to move all that stuff. So and warehouseman doesn't

595
00:32:13,920 --> 00:32:18,560
Speaker 3: carry but certainly whoever is perpetrating that potential fraud. I

596
00:32:18,640 --> 00:32:21,440
Speaker 3: think this goes to what Margo said earlier too about

597
00:32:21,480 --> 00:32:26,200
Speaker 3: the the repetition the comfort. Right if the inspector that

598
00:32:26,320 --> 00:32:28,800
Speaker 3: flies down down to the Cayman Islands to go inspect

599
00:32:28,800 --> 00:32:30,720
Speaker 3: for the bank shows up once a month and he

600
00:32:31,000 --> 00:32:34,360
Speaker 3: does the same thing and doesn't dive too deep, you know,

601
00:32:34,440 --> 00:32:38,000
Speaker 3: potential thief at that point. Could someone that says ulterior

602
00:32:38,080 --> 00:32:40,640
Speaker 3: motives could say, you got to mix it up. We

603
00:32:41,400 --> 00:32:44,320
Speaker 3: know that he's never going to go beyond just the

604
00:32:44,400 --> 00:32:46,280
Speaker 3: first first layer, right.

605
00:32:47,400 --> 00:32:49,680
Speaker 1: So one thing I wanted to ask is how often

606
00:32:49,880 --> 00:32:53,280
Speaker 1: maybe two questions how often does commodities fraud go hand

607
00:32:53,320 --> 00:32:56,400
Speaker 1: in hand with insurance fraud? Because I imagine a lot

608
00:32:56,440 --> 00:32:59,400
Speaker 1: of these dealers must have some insurance in place, although

609
00:32:59,440 --> 00:33:03,000
Speaker 1: I did read about Mercuria, I think, which thought it

610
00:33:03,080 --> 00:33:05,280
Speaker 1: had insurance and then it turned out that that insurance

611
00:33:05,360 --> 00:33:10,240
Speaker 1: was also fraudulent. And then secondly, secondly, just going back

612
00:33:10,240 --> 00:33:13,080
Speaker 1: to your example of the steel slabs, like what happened

613
00:33:13,360 --> 00:33:16,840
Speaker 1: after you discovered that? Do you start talking to the

614
00:33:16,920 --> 00:33:19,440
Speaker 1: counter parties? Do you make a claim for a loss?

615
00:33:19,720 --> 00:33:20,560
Speaker 1: How does it all work?

616
00:33:21,600 --> 00:33:26,440
Speaker 4: Settling that became easy in that we went back to

617
00:33:26,520 --> 00:33:30,880
Speaker 4: the facility. We went back to the steel mill and said,

618
00:33:31,600 --> 00:33:34,400
Speaker 4: you know, we've found a problem and you are double pledged,

619
00:33:34,600 --> 00:33:36,920
Speaker 4: and how are we going to rectify this? And they

620
00:33:37,160 --> 00:33:39,160
Speaker 4: looked at it and they said, okay, we're going to

621
00:33:39,280 --> 00:33:43,200
Speaker 4: rescind that report and republish it. And they said, you know,

622
00:33:43,360 --> 00:33:45,640
Speaker 4: citing it was just a clerical error, which it could

623
00:33:45,680 --> 00:33:48,320
Speaker 4: have been. And they definitely focused on what was the

624
00:33:48,520 --> 00:33:51,720
Speaker 4: more high profile, important bank that you would all know

625
00:33:52,080 --> 00:33:54,520
Speaker 4: favored counterparty, yes, who they really needed to make sure

626
00:33:54,520 --> 00:33:55,560
Speaker 4: they stayed in their good graces.

627
00:33:55,600 --> 00:33:57,680
Speaker 5: They said, don't touch that report and don't tell them anything.

628
00:34:00,240 --> 00:34:01,920
Speaker 5: The bigger one with the bigger line.

629
00:34:01,840 --> 00:34:04,360
Speaker 4: Is who got to keep the double pledged coils, and

630
00:34:04,520 --> 00:34:08,160
Speaker 4: they the secondary bank got a new list. But we

631
00:34:08,320 --> 00:34:11,719
Speaker 4: did have in that instance someone on site so we

632
00:34:11,840 --> 00:34:15,000
Speaker 4: could dispatch them at any point to go out with

633
00:34:15,120 --> 00:34:17,520
Speaker 4: the list and say, I need you to verify these coils.

634
00:34:17,800 --> 00:34:18,440
Speaker 5: And that's what you do.

635
00:34:18,560 --> 00:34:20,920
Speaker 4: You go out and you say to the warehouse owner

636
00:34:21,280 --> 00:34:24,480
Speaker 4: or the facility where it's being stored, this is the cargo.

637
00:34:24,600 --> 00:34:26,800
Speaker 4: I want a spot check. Tell me on your report

638
00:34:26,840 --> 00:34:28,840
Speaker 4: where it is, and now let's go find it.

639
00:34:29,520 --> 00:34:31,640
Speaker 5: And that's what you know. That's a bit of the

640
00:34:31,680 --> 00:34:33,480
Speaker 5: corrective action for the checks and balances.

641
00:34:33,520 --> 00:34:35,680
Speaker 4: Let's make sure there it's where they say it is

642
00:34:35,719 --> 00:34:36,880
Speaker 4: and it truly exists.

643
00:34:37,400 --> 00:34:39,880
Speaker 3: After Margo, it definitely think it might have been the

644
00:34:40,000 --> 00:34:42,600
Speaker 3: second time that it happened, because it wasn't just once

645
00:34:43,280 --> 00:34:46,480
Speaker 3: the larger, larger bank. First time I ever heard the

646
00:34:46,560 --> 00:34:50,480
Speaker 3: phrase the d risking team got involved and they withdrew

647
00:34:50,640 --> 00:34:51,800
Speaker 3: themselves de risking.

648
00:34:51,920 --> 00:34:53,080
Speaker 1: That's when you know you're in trouble.

649
00:34:54,360 --> 00:34:57,759
Speaker 3: Yeah, exactly thought the same thing like Margot, so that

650
00:34:57,880 --> 00:34:59,840
Speaker 3: the de risking team is extracted.

651
00:35:00,000 --> 00:35:02,359
Speaker 1: I imagining like a swat team that just like comes

652
00:35:02,560 --> 00:35:05,000
Speaker 1: through the It's definitely it's a military action, right, and

653
00:35:05,640 --> 00:35:06,719
Speaker 1: it never ends well for you.

654
00:35:07,280 --> 00:35:09,800
Speaker 3: But yeah, they that bank wound down their involvement in

655
00:35:09,920 --> 00:35:13,000
Speaker 3: that trade after Margo's discovery, which was the right thing

656
00:35:13,040 --> 00:35:15,160
Speaker 3: to do. Is just getting sloppy, Uh, you know at

657
00:35:15,200 --> 00:35:15,560
Speaker 3: that point.

658
00:35:15,680 --> 00:35:19,440
Speaker 2: So can you talk a little bit about liquids? I mean,

659
00:35:19,560 --> 00:35:22,200
Speaker 2: just even I started talking about the salad oil scandal,

660
00:35:22,600 --> 00:35:25,719
Speaker 2: did anything change fundamentally after that in terms of how

661
00:35:25,920 --> 00:35:28,839
Speaker 2: inspections are done? Because that was pretty clever. The oil

662
00:35:28,880 --> 00:35:31,640
Speaker 2: floats to the top water underneath. But like, did anything

663
00:35:31,760 --> 00:35:35,759
Speaker 2: fundamentally change? And our liquids still tricky to verify in

664
00:35:35,840 --> 00:35:36,400
Speaker 2: some cases.

665
00:35:36,800 --> 00:35:40,520
Speaker 3: M liquids are not an area that were involved, Yeah,

666
00:35:40,840 --> 00:35:42,560
Speaker 3: were involved in so take it. Take it with a

667
00:35:42,600 --> 00:35:45,000
Speaker 3: grain of salt, right in this case, or a dash

668
00:35:45,080 --> 00:35:49,960
Speaker 3: of olive oil. But yeah, liquid sampling and so forth

669
00:35:50,040 --> 00:35:52,640
Speaker 3: something that we Margo and I were both ship's officers,

670
00:35:52,719 --> 00:35:56,240
Speaker 3: merchant marine officers, so we uh had our time learning

671
00:35:56,320 --> 00:35:59,120
Speaker 3: in school about taking samples in a tanker. Yeah, and

672
00:35:59,320 --> 00:36:03,560
Speaker 3: uh and so worth with so forth. But I don't

673
00:36:03,600 --> 00:36:07,160
Speaker 3: think that there's anything It's still the same basic principles

674
00:36:07,200 --> 00:36:11,320
Speaker 3: of representative samples, not just not just going to the

675
00:36:11,400 --> 00:36:14,640
Speaker 3: top layer, right, but doing a thorough inspection and having

676
00:36:15,840 --> 00:36:20,240
Speaker 3: and also vetting of the facility that's storing it, ensuring

677
00:36:20,320 --> 00:36:24,320
Speaker 3: that the facility is vetted, vetted properly, and that the

678
00:36:24,400 --> 00:36:29,000
Speaker 3: ownership and the management and the procedures are tight and intact,

679
00:36:29,520 --> 00:36:33,840
Speaker 3: and the counter party counterparty risk. But the sampling physical

680
00:36:33,920 --> 00:36:36,759
Speaker 3: sampling of when it comes to liquid commodities, I think

681
00:36:36,880 --> 00:36:41,399
Speaker 3: is something that hasn't changed in the past few thousand years,

682
00:36:41,440 --> 00:36:43,359
Speaker 3: and it's just a matter of how thorough it's done

683
00:36:43,360 --> 00:36:44,480
Speaker 3: and if it's done in the right way.

684
00:36:45,040 --> 00:36:48,000
Speaker 1: So speaking of change, I mean we started this conversation

685
00:36:48,239 --> 00:36:52,920
Speaker 1: talking about that Mesopotamian tablet and the complaint about copper quality.

686
00:36:53,480 --> 00:36:58,520
Speaker 1: It does seem like a lot of this hasn't technologically advanced.

687
00:36:58,640 --> 00:37:01,359
Speaker 1: But talk to us about what is happening on that front.

688
00:37:01,400 --> 00:37:05,640
Speaker 1: Because you mentioned drones surveying coal, I imagine ancient Mesopotamia

689
00:37:05,719 --> 00:37:08,560
Speaker 1: did not have the benefit of drones. I'm certain there

690
00:37:08,640 --> 00:37:12,160
Speaker 1: happened dozens if not hundreds of people on LinkedIn pitching

691
00:37:12,280 --> 00:37:16,360
Speaker 1: blockchain for siles. That must be a thing. But what

692
00:37:16,600 --> 00:37:19,120
Speaker 1: kind of advancements are people talking about?

693
00:37:19,440 --> 00:37:22,120
Speaker 3: As you said, right, certainly the drone. Ability to use

694
00:37:22,200 --> 00:37:28,400
Speaker 3: drones to measure physical dry bulk stockpiles is an advancement.

695
00:37:28,480 --> 00:37:31,080
Speaker 3: It gives a far more accurate picture of what's what's

696
00:37:31,120 --> 00:37:36,640
Speaker 3: there versus a versus an eyeballing an estimation, right, which

697
00:37:36,680 --> 00:37:40,319
Speaker 3: would be another form of doing that or verifying very

698
00:37:40,400 --> 00:37:43,520
Speaker 3: complicated verifying of the weight of everything that's gone into

699
00:37:43,600 --> 00:37:47,920
Speaker 3: that stockpile, but that can change any day. Was materials withdrawn?

700
00:37:48,440 --> 00:37:53,560
Speaker 3: The blockchain UH, and electronic bills of lading right, and

701
00:37:53,880 --> 00:37:58,279
Speaker 3: so forth, it all helps, but still it goes back

702
00:37:58,360 --> 00:38:02,840
Speaker 3: to traffic goura right. All of the paperwork was perfect.

703
00:38:03,200 --> 00:38:06,480
Speaker 3: So the block paperwork, whether it flew h whether it

704
00:38:06,760 --> 00:38:10,440
Speaker 3: moved via blockchain or went via via FedEx, it was

705
00:38:10,480 --> 00:38:13,520
Speaker 3: still perfect. The metal was it right, So blockchain is

706
00:38:13,560 --> 00:38:16,880
Speaker 3: not going to prevent that. It might catch some other problems.

707
00:38:16,960 --> 00:38:20,440
Speaker 2: But garbage and garbage out right, like exactly, you can just.

708
00:38:20,520 --> 00:38:23,200
Speaker 1: Track it better. You can track.

709
00:38:24,880 --> 00:38:25,360
Speaker 3: What about?

710
00:38:25,560 --> 00:38:29,000
Speaker 1: What about even more basic solutions? And I'm sure there's

711
00:38:29,000 --> 00:38:31,440
Speaker 1: a really obvious and simple reason why you couldn't do this,

712
00:38:31,640 --> 00:38:34,320
Speaker 1: But for instance, the nickel in the bags, could you

713
00:38:34,560 --> 00:38:37,080
Speaker 1: like put it in plastic bags or glass jars so

714
00:38:37,160 --> 00:38:37,920
Speaker 1: you could see.

715
00:38:37,760 --> 00:38:40,480
Speaker 3: It, Yeah, something more visible.

716
00:38:41,000 --> 00:38:44,960
Speaker 4: Well, I'm assuming the bags that are used are for longevity.

717
00:38:45,120 --> 00:38:45,719
Speaker 5: Oh, I see right.

718
00:38:45,960 --> 00:38:48,200
Speaker 4: Glass is going to add weight, harder to handle, so

719
00:38:48,440 --> 00:38:51,280
Speaker 4: that's not really too feasible. But different bags.

720
00:38:51,719 --> 00:38:52,120
Speaker 5: I don't know.

721
00:38:52,400 --> 00:38:55,279
Speaker 1: But what are the warehouses saying about this? Are are they,

722
00:38:55,440 --> 00:38:57,680
Speaker 1: you know, making noises about we're going to start doing

723
00:38:57,760 --> 00:39:01,640
Speaker 1: things maybe slightly differently in order to void all right?

724
00:39:01,840 --> 00:39:06,839
Speaker 4: I mean that's where is the liability and who's authenticating

725
00:39:06,960 --> 00:39:11,160
Speaker 4: what that material is? If the warehouseman is merely storing it,

726
00:39:12,040 --> 00:39:15,840
Speaker 4: they're saying their receipts will say said to contain. You know,

727
00:39:16,160 --> 00:39:19,960
Speaker 4: I'm declaring I'm annoyante, right, I'm ware housing this as copper.

728
00:39:20,040 --> 00:39:23,600
Speaker 4: But I'm not a metallurgist. I've not been part of

729
00:39:23,760 --> 00:39:26,399
Speaker 4: the buy and sell on this. I'm merely the guy

730
00:39:26,400 --> 00:39:29,120
Speaker 4: who's building you put this in. So I'm just saying,

731
00:39:29,360 --> 00:39:32,920
Speaker 4: those twenty four stacks are there, and they are purported

732
00:39:33,000 --> 00:39:35,520
Speaker 4: to be this. Maybe we've weighed them and we can

733
00:39:35,560 --> 00:39:38,840
Speaker 4: authenticate the weight of the units, but I can't guarantee

734
00:39:38,920 --> 00:39:42,479
Speaker 4: that it's copper or at a different level, you're saying

735
00:39:42,560 --> 00:39:45,239
Speaker 4: it's you know, a certain quality and it's truly a

736
00:39:45,280 --> 00:39:50,080
Speaker 4: different quality. I certainly can't authenticate that, but there are

737
00:39:51,120 --> 00:39:53,880
Speaker 4: you know, you can certainly hire people to come in

738
00:39:54,040 --> 00:39:56,680
Speaker 4: and do whatever is the right level of scrutiny for

739
00:39:56,880 --> 00:40:01,279
Speaker 4: the commodity. Obviously, all commodities have different different approaches on

740
00:40:01,360 --> 00:40:04,560
Speaker 4: that liquid versus cards versus soft commodities and so forth,

741
00:40:05,120 --> 00:40:07,400
Speaker 4: and the warehouse can play a role in that for

742
00:40:07,480 --> 00:40:11,160
Speaker 4: a hired service, for whatever reliability they're willing to take on.

743
00:40:11,560 --> 00:40:13,920
Speaker 2: Yeah, I was gonna say because you mentioned that earlier,

744
00:40:14,040 --> 00:40:18,120
Speaker 2: So on some level, I imagine there are some commodities

745
00:40:18,160 --> 00:40:20,920
Speaker 2: in which there's not much fraud, probably because it's just

746
00:40:21,120 --> 00:40:23,400
Speaker 2: cheap and bulky and there's not much I don't know,

747
00:40:23,520 --> 00:40:26,000
Speaker 2: there's probably not much point in putting something fake for

748
00:40:26,120 --> 00:40:29,520
Speaker 2: thos like soybeans or corn or something like that would

749
00:40:29,560 --> 00:40:31,720
Speaker 2: be my guest. But I guess for like the ones

750
00:40:31,760 --> 00:40:34,520
Speaker 2: where that are more susceptible to fraud, that take more

751
00:40:34,680 --> 00:40:37,520
Speaker 2: time for someone to go in and do representative samples,

752
00:40:37,560 --> 00:40:40,040
Speaker 2: et cetera. Is there a de facto like, you know,

753
00:40:40,440 --> 00:40:44,359
Speaker 2: higher risk premium that traders in these markets pay. They're

754
00:40:44,440 --> 00:40:46,839
Speaker 2: paying for the warehouse at the time. The warehouse has

755
00:40:46,960 --> 00:40:50,080
Speaker 2: this and you as a participant on one side of

756
00:40:50,200 --> 00:40:53,680
Speaker 2: the trade rents time, I guess for the from the

757
00:40:53,719 --> 00:40:56,879
Speaker 2: warehouse for that inspection. Is that basically how it works,

758
00:40:56,920 --> 00:40:59,320
Speaker 2: and so like to transact into some of these commodities,

759
00:40:59,560 --> 00:41:01,880
Speaker 2: whether it's like a nickel that for reasons because of

760
00:41:01,880 --> 00:41:04,719
Speaker 2: the bags or whatever, they're valuable and not visible, like

761
00:41:04,800 --> 00:41:07,279
Speaker 2: you ultimately like have to pay more to transact in

762
00:41:07,360 --> 00:41:07,960
Speaker 2: these commodities.

763
00:41:08,160 --> 00:41:11,239
Speaker 3: Certainly you know from an insurance standpoint where you're getting

764
00:41:11,239 --> 00:41:14,480
Speaker 3: an all risk cargo insurance which is typical policy when

765
00:41:14,520 --> 00:41:18,759
Speaker 3: you're moving and storing goods and commodities like this, that

766
00:41:19,040 --> 00:41:21,800
Speaker 3: the insurance premiums are going to be significantly higher for

767
00:41:22,760 --> 00:41:28,000
Speaker 3: higher value goods. Goods like that. The facilities themselves will

768
00:41:28,080 --> 00:41:32,480
Speaker 3: often look at the warehousing companies facilities will often look

769
00:41:32,560 --> 00:41:36,680
Speaker 3: at at higher costs for storing higher value The risk

770
00:41:36,800 --> 00:41:40,320
Speaker 3: is higher, the incidents of theft or higher, you know

771
00:41:40,360 --> 00:41:42,759
Speaker 3: with those type of those type of commodities. So yes,

772
00:41:43,320 --> 00:41:46,560
Speaker 3: there's going to be more costs in dealing dealing with

773
00:41:47,239 --> 00:41:50,160
Speaker 3: you know, with that with higher value commodities for sure.

774
00:41:50,680 --> 00:41:52,400
Speaker 1: One thing I wanted to ask before I forget, is

775
00:41:52,440 --> 00:41:56,680
Speaker 1: there a commodity that is particularly well suited to fraud.

776
00:41:58,200 --> 00:41:59,760
Speaker 5: I think I think nickel apparently.

777
00:42:00,120 --> 00:42:03,800
Speaker 3: Yeah, copper also has been a big, big one, right, Yeah.

778
00:42:04,000 --> 00:42:08,640
Speaker 4: Something that's higher value. So that's what peaues interest because

779
00:42:09,200 --> 00:42:11,359
Speaker 4: it's a great thing to steal and resell. Copper can

780
00:42:11,400 --> 00:42:16,440
Speaker 4: go on the secondary market quite fast. Aluminum nobody steals aluminum.

781
00:42:16,600 --> 00:42:17,280
Speaker 5: Nobody cares.

782
00:42:17,480 --> 00:42:19,759
Speaker 4: It's not worth it's not worth enough, and it's really

783
00:42:19,800 --> 00:42:21,320
Speaker 4: big and heavy, so people don't move it.

784
00:42:21,640 --> 00:42:26,120
Speaker 2: Heavy, unwieldly, right, small and expensive is where you want

785
00:42:26,120 --> 00:42:26,640
Speaker 2: to exactly.

786
00:42:27,480 --> 00:42:31,800
Speaker 1: Gold bricks, they're a classic for a reason.

787
00:42:32,040 --> 00:42:32,959
Speaker 2: Okay, that makes sense.

788
00:42:33,560 --> 00:42:36,840
Speaker 1: So we would be remiss if we didn't also ask you,

789
00:42:36,960 --> 00:42:39,160
Speaker 1: while we have you here, what's going on with the

790
00:42:39,200 --> 00:42:42,000
Speaker 1: Mississippi River and the barges, because the last time we

791
00:42:42,080 --> 00:42:44,960
Speaker 1: spoke to you, I think it was back in August, yeah, September,

792
00:42:45,840 --> 00:42:48,239
Speaker 1: there was a drought. There wasn't enough water in the

793
00:42:48,360 --> 00:42:51,600
Speaker 1: river and so people were having difficulty getting the barges

794
00:42:51,600 --> 00:42:55,040
Speaker 1: where they needed to be. Now we've heard some stories

795
00:42:55,080 --> 00:42:57,640
Speaker 1: that there's too much water. What's going on that?

796
00:42:57,960 --> 00:43:00,080
Speaker 4: I think the last time we spoke, we were we

797
00:43:00,120 --> 00:43:01,719
Speaker 4: weren't even into the belly of the beast jet.

798
00:43:01,800 --> 00:43:04,480
Speaker 5: It got worse before it got better. It was pretty

799
00:43:04,520 --> 00:43:06,640
Speaker 5: epic last year what we saw.

800
00:43:06,560 --> 00:43:08,960
Speaker 4: And it was what most people haven't seen in a

801
00:43:09,040 --> 00:43:10,800
Speaker 4: lifetime of doing river business.

802
00:43:10,880 --> 00:43:12,480
Speaker 5: It's just been that long.

803
00:43:13,080 --> 00:43:18,200
Speaker 4: The river is always cyclical, and we do see drier periods,

804
00:43:18,600 --> 00:43:21,000
Speaker 4: and we do see periods where we get a lot

805
00:43:21,040 --> 00:43:22,279
Speaker 4: of the you know, this time of year, we get

806
00:43:22,320 --> 00:43:25,000
Speaker 4: a lot of runoff from the mountains from snow and

807
00:43:25,520 --> 00:43:27,839
Speaker 4: makes it way its way all the way down the Mississippi.

808
00:43:28,480 --> 00:43:31,840
Speaker 4: And so that is a classic feast or famine, and

809
00:43:31,960 --> 00:43:35,640
Speaker 4: both of them present similar challenges where we have to

810
00:43:35,840 --> 00:43:41,280
Speaker 4: reduce the toe size. Navigation is harder, and as an overall,

811
00:43:41,320 --> 00:43:43,799
Speaker 4: the river just slows down and trade slows down.

812
00:43:44,719 --> 00:43:46,719
Speaker 2: See can you walk through the mechanics of why does

813
00:43:46,800 --> 00:43:49,120
Speaker 2: too much water it reduced to size?

814
00:43:50,000 --> 00:43:52,640
Speaker 4: We end up with the water is moving too fast

815
00:43:53,000 --> 00:43:55,439
Speaker 4: and a lot of instances and they will take down

816
00:43:55,520 --> 00:43:58,640
Speaker 4: the toe sizes just to keep better controls. That's when

817
00:43:58,680 --> 00:44:03,160
Speaker 4: you start seeing toes break apart. Whereas in the fall

818
00:44:03,280 --> 00:44:05,480
Speaker 4: we were on smaller toe sizes because we had to

819
00:44:05,760 --> 00:44:09,000
Speaker 4: the towboats had to navigate little water in so many places.

820
00:44:09,520 --> 00:44:11,520
Speaker 5: They couldn't take the big toes, so.

821
00:44:12,080 --> 00:44:13,680
Speaker 2: They couldn't be filled up as much right, because they

822
00:44:13,680 --> 00:44:13,960
Speaker 2: were right.

823
00:44:14,440 --> 00:44:16,120
Speaker 5: Yeah, we had to have them really really light.

824
00:44:16,520 --> 00:44:20,279
Speaker 3: And a typical tow like on the mainline toe on

825
00:44:20,320 --> 00:44:24,000
Speaker 3: the river would be tugboat pushing spending as like thirty barges.

826
00:44:24,120 --> 00:44:27,399
Speaker 3: So give you a perspective, right, So reducing that from

827
00:44:27,440 --> 00:44:28,120
Speaker 3: a thirty barge.

828
00:44:28,400 --> 00:44:30,000
Speaker 2: Yeah, so we are.

829
00:44:30,800 --> 00:44:34,640
Speaker 4: We're over that hump. Now we're getting back into normal

830
00:44:34,719 --> 00:44:36,719
Speaker 4: flows and more normal water.

831
00:44:36,600 --> 00:44:38,000
Speaker 5: Size and water depths.

832
00:44:38,640 --> 00:44:41,080
Speaker 4: So that puts the river at a better speed and

833
00:44:41,120 --> 00:44:43,200
Speaker 4: we get back to some normal traffic for a bit.

834
00:44:44,360 --> 00:44:47,000
Speaker 3: You mentioned, Tracy, but the high water situation was in

835
00:44:47,000 --> 00:44:50,000
Speaker 3: the upper Misissippi rivers in the north of Saint Louis,

836
00:44:50,080 --> 00:44:54,160
Speaker 3: like up toward through up to Minneapolis. So you know

837
00:44:54,200 --> 00:44:57,080
Speaker 3: that'll get back to normal. But yeahs it's low water.

838
00:44:59,280 --> 00:45:02,000
Speaker 1: Is it ever the what's the perfect level of water

839
00:45:02,080 --> 00:45:03,680
Speaker 1: in the Mississippi for the barge business?

840
00:45:04,239 --> 00:45:04,359
Speaker 3: Oh?

841
00:45:04,719 --> 00:45:07,080
Speaker 5: Yes, I don't know what happens like twice a year.

842
00:45:07,239 --> 00:45:07,560
Speaker 3: I don't know.

843
00:45:07,920 --> 00:45:09,879
Speaker 4: I don't know where a moment that's gonna happen this year?

844
00:45:10,239 --> 00:45:10,759
Speaker 2: Fair enough?

845
00:45:11,200 --> 00:45:14,120
Speaker 1: All right, Well, Anton and Margo, we really appreciate you

846
00:45:14,280 --> 00:45:17,160
Speaker 1: coming back on odlots. Thank you so much. We appreciate

847
00:45:17,200 --> 00:45:17,920
Speaker 1: your thoughts too.

848
00:45:18,239 --> 00:45:18,839
Speaker 3: Always fun.

849
00:45:19,040 --> 00:45:35,319
Speaker 1: Yeah, thanks so much, Thank you so much, guys. So Joe,

850
00:45:35,400 --> 00:45:37,879
Speaker 1: I really enjoyed that conversation. I gotta say, I feel

851
00:45:37,920 --> 00:45:40,280
Speaker 1: like we need to do an odd lots on location

852
00:45:40,480 --> 00:45:42,960
Speaker 1: where we follow the guy flying down to the Cayman

853
00:45:43,040 --> 00:45:44,160
Speaker 1: Islands to check on the gold.

854
00:45:44,400 --> 00:45:47,120
Speaker 2: I love that idea. Yeah, actually do an inspection, you

855
00:45:47,200 --> 00:45:49,080
Speaker 2: know what I was thinking about. And I guess it's

856
00:45:49,239 --> 00:45:51,719
Speaker 2: even goes back to some of our conversations that we

857
00:45:51,760 --> 00:45:54,480
Speaker 2: had with Javier Bloss last year, Like it's sort of

858
00:45:54,560 --> 00:45:59,120
Speaker 2: like commodities seems very unincorporate, yeah, compared to the rest

859
00:45:59,239 --> 00:46:02,640
Speaker 2: of the finance industry, and this is like another reminder of.

860
00:46:02,680 --> 00:46:03,240
Speaker 5: It, totally.

861
00:46:03,320 --> 00:46:04,879
Speaker 1: And it's kind of weird when you think that it's

862
00:46:05,080 --> 00:46:08,320
Speaker 1: the basic building, yes, for so much of our world,

863
00:46:08,440 --> 00:46:10,279
Speaker 1: and yet it still seems to be the sort of

864
00:46:10,440 --> 00:46:14,120
Speaker 1: like I'm going to mix my metaphors here, but swashbuckling, wild.

865
00:46:13,960 --> 00:46:18,160
Speaker 2: West, Yes, piracy, gray areas, all of these things in

866
00:46:18,280 --> 00:46:20,359
Speaker 2: which like you just sort of assumed that like large

867
00:46:20,400 --> 00:46:23,359
Speaker 2: corporations would have like squeezed all that out. Yeah, crime

868
00:46:23,440 --> 00:46:25,919
Speaker 2: is kind of hard in many digital realms at this point,

869
00:46:25,960 --> 00:46:29,359
Speaker 2: but it feels like when there's physical stuff like crime

870
00:46:29,440 --> 00:46:30,000
Speaker 2: finds a way.

871
00:46:30,320 --> 00:46:32,200
Speaker 1: But the other thing I was thinking is it does

872
00:46:32,400 --> 00:46:35,359
Speaker 1: feel like there's a sort of clash of incentives here

873
00:46:35,480 --> 00:46:38,239
Speaker 1: where you want to encourage people to use the best

874
00:46:38,320 --> 00:46:42,200
Speaker 1: counter parties, use warehouses with very stringent risk control measures,

875
00:46:42,880 --> 00:46:47,160
Speaker 1: and yet that also seems extremely time consuming and expensive

876
00:46:47,320 --> 00:46:49,920
Speaker 1: and bureaucratics. You could see why people might want to

877
00:46:50,440 --> 00:46:51,560
Speaker 1: switch to others.

878
00:46:51,880 --> 00:46:55,280
Speaker 2: And I guess that also, like to the original point,

879
00:46:55,400 --> 00:46:58,720
Speaker 2: like a warehouse, like the element, you just don't expect

880
00:46:58,760 --> 00:47:02,160
Speaker 2: it to have any issue, and then that is ultimately

881
00:47:02,360 --> 00:47:05,560
Speaker 2: the mental bias. I suppose that the fraudsters take advantage

882
00:47:05,600 --> 00:47:07,879
Speaker 2: of if you can get in somehow into the most

883
00:47:07,960 --> 00:47:11,160
Speaker 2: reputable entities where people feel like nothing bad is going

884
00:47:11,239 --> 00:47:13,120
Speaker 2: to happen here. So you could see how it's sort

885
00:47:13,120 --> 00:47:15,640
Speaker 2: of like this, like I don't know, cat and mouse game.

886
00:47:15,880 --> 00:47:18,919
Speaker 1: Speaking of mental bias, you need to shift your take

887
00:47:19,160 --> 00:47:22,800
Speaker 1: on the golden Fort Knox and you scratching it and

888
00:47:22,920 --> 00:47:26,040
Speaker 1: say you were you didn't accidentally touch it. You were checking,

889
00:47:26,239 --> 00:47:29,919
Speaker 1: I was checking, checking, check, and we did everyone.

890
00:47:32,239 --> 00:47:35,040
Speaker 2: For everyone that at least one gold bar that was

891
00:47:35,080 --> 00:47:37,040
Speaker 2: in the basement of the New York Fed in nineteen

892
00:47:37,120 --> 00:47:39,200
Speaker 2: ninety eight when I took a field trip, there was

893
00:47:39,280 --> 00:47:40,600
Speaker 2: real gold service.

894
00:47:40,680 --> 00:47:41,640
Speaker 3: I have done my part.

895
00:47:41,719 --> 00:47:42,920
Speaker 2: I have done my parts.

896
00:47:43,160 --> 00:47:44,080
Speaker 3: Thank you for the reframe.

897
00:47:44,200 --> 00:47:45,960
Speaker 1: All right? On that note, shall we leave it there?

898
00:47:46,080 --> 00:47:46,719
Speaker 2: Let's leave it there?

899
00:47:46,760 --> 00:47:47,080
Speaker 5: All right?

900
00:47:47,239 --> 00:47:49,960
Speaker 1: This has been another episode of the All Thoughts podcast.

901
00:47:50,080 --> 00:47:52,560
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at

902
00:47:52,600 --> 00:47:53,360
Speaker 1: Tracy Alloway.

903
00:47:53,440 --> 00:47:56,080
Speaker 2: And I'm Joe Wisenthal. You can follow me on Twitter

904
00:47:56,239 --> 00:47:59,719
Speaker 2: at the Stalwart. Follow our producers on Twitter Carmen rod

905
00:47:59,800 --> 00:48:03,279
Speaker 2: ree Is at Carmen Arman and dash Ol Bennett at Dashbot.

906
00:48:03,520 --> 00:48:05,880
Speaker 2: And check out all of the Bloomberg podcasts under the

907
00:48:05,960 --> 00:48:07,200
Speaker 2: handle at podcasts.

908
00:48:07,560 --> 00:48:11,280
Speaker 1: And you can stream Bloomberg originals on Apple TV, Roku,

909
00:48:11,680 --> 00:48:15,520
Speaker 1: Samsung TV, and more, and tune in on Bloomberg TV

910
00:48:15,680 --> 00:48:16,960
Speaker 1: at ten pm Eastern.

911
00:48:17,200 --> 00:48:19,680
Speaker 2: And for more odd Lots content, go to Bloomberg dot

912
00:48:19,760 --> 00:48:22,239
Speaker 2: com slash odd Lots, where we have a blog, we

913
00:48:22,360 --> 00:48:25,440
Speaker 2: post our transcripts, we have a weekly newsletter, and we

914
00:48:25,520 --> 00:48:27,560
Speaker 2: have a discord where you can go chat twenty four

915
00:48:27,600 --> 00:48:30,120
Speaker 2: to seven with other odd Lots listeners. It's really fun.

916
00:48:30,360 --> 00:48:33,759
Speaker 2: Discord dot gg slash odd lots. Go check it out.

917
00:48:34,440 --> 00:48:37,040
Speaker 2: Thanks for joining, Thanks for watching, Thanks for listening.

918
00:49:00,920 --> 00:49:02,960
Speaker 3: Now stood in a