1 00:00:00,080 --> 00:00:12,960 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 2 00:00:13,480 --> 00:00:16,960 Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, 3 00:00:17,040 --> 00:00:23,480 Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:34,080 Speaker 1: Bloomberg dot Com and of course on the Bloomberg with 5 00:00:34,280 --> 00:00:39,279 Speaker 1: the Steen Jacobson, who has a number of titles at 6 00:00:39,360 --> 00:00:44,239 Speaker 1: Sexo Bank of Copenhagen. He's out of economics Copenhagen universe 7 00:00:44,479 --> 00:00:48,640 Speaker 1: versus university. But Steen, what is so important with your 8 00:00:48,680 --> 00:00:53,120 Speaker 1: August position chief economist and all that? If you have 9 00:00:54,080 --> 00:00:58,720 Speaker 1: a trading experience to die for? And this was of 10 00:00:58,760 --> 00:01:01,040 Speaker 1: course the Chase men. This is folks, when it was 11 00:01:01,120 --> 00:01:07,480 Speaker 1: Chase Manhattan, Proprietary Trading Group, Swiss Bank or Swiss Bank Corps. 12 00:01:07,480 --> 00:01:10,240 Speaker 1: These are names from the past, Steen, But you have 13 00:01:10,360 --> 00:01:14,759 Speaker 1: been on a desk. How does a trading experience, grizzled 14 00:01:14,760 --> 00:01:18,920 Speaker 1: guy like you look at bitcoin? Do you trust the 15 00:01:18,959 --> 00:01:23,160 Speaker 1: bid and trust the ask? Given the years and years 16 00:01:23,200 --> 00:01:29,880 Speaker 1: you've had of enjoying losing money? Absolutely not. I must say. 17 00:01:29,680 --> 00:01:32,840 Speaker 1: I'm just back from pretty much a world tour and 18 00:01:33,000 --> 00:01:37,520 Speaker 1: as sooner my presentation over the first question is about cryptocurrency. 19 00:01:37,600 --> 00:01:39,720 Speaker 1: The second, the third, the fourth, and the the fifth is 20 00:01:39,720 --> 00:01:43,000 Speaker 1: also about cryptocurrency. So you know, you made me sound 21 00:01:43,080 --> 00:01:45,160 Speaker 1: very old, which of course I had, but now I'm 22 00:01:45,160 --> 00:01:48,360 Speaker 1: actually uh my most recent highs of twenty two year 23 00:01:48,400 --> 00:01:52,200 Speaker 1: old crypti analysts. So it's very much become part of 24 00:01:52,240 --> 00:01:54,760 Speaker 1: my my every day. And I have to say the 25 00:01:54,800 --> 00:01:57,640 Speaker 1: crypto analyst the high it which twenty two and me 26 00:01:57,960 --> 00:02:00,920 Speaker 1: we sit and exactly obviously the ends of the spectrum 27 00:02:00,960 --> 00:02:03,880 Speaker 1: in terms of how exciting old this is for me. 28 00:02:04,080 --> 00:02:07,880 Speaker 1: This is a very sophisticated computer game that is running 29 00:02:07,880 --> 00:02:10,359 Speaker 1: out of steam at as soon as we see as 30 00:02:10,400 --> 00:02:12,360 Speaker 1: we saw today the confirmation of c M E, c 31 00:02:12,440 --> 00:02:14,600 Speaker 1: B O E and other exchanges going to make it 32 00:02:14,639 --> 00:02:16,960 Speaker 1: live because we know in history, when we actually have 33 00:02:17,040 --> 00:02:19,680 Speaker 1: a proper and that is the essence of your question, 34 00:02:19,720 --> 00:02:21,680 Speaker 1: when we have a proper bit and a proper offer, 35 00:02:21,960 --> 00:02:25,040 Speaker 1: when we have the ability to trade both side off 36 00:02:25,080 --> 00:02:28,200 Speaker 1: the trade, then the market becomes a totally different animal. 37 00:02:28,280 --> 00:02:31,519 Speaker 1: In other words, I think the US to salization of 38 00:02:31,600 --> 00:02:33,240 Speaker 1: the c M E, c B OH we actually become 39 00:02:33,280 --> 00:02:36,520 Speaker 1: a transparent market, will make this market grow, whether they've 40 00:02:36,520 --> 00:02:39,320 Speaker 1: been continues to go either to twenty five thousand or 41 00:02:39,320 --> 00:02:41,679 Speaker 1: five thousand or one thousand. Of course we will be 42 00:02:41,720 --> 00:02:44,400 Speaker 1: depending on how good they are becoming a real currency 43 00:02:44,440 --> 00:02:47,760 Speaker 1: with the heritage of the Baltic Sea and the mathematics 44 00:02:47,800 --> 00:02:50,440 Speaker 1: of Louvin. And I don't know where the first trade 45 00:02:50,520 --> 00:02:52,480 Speaker 1: was made in Copenhagen. Maybe it was out in the 46 00:02:52,520 --> 00:02:55,720 Speaker 1: harbor with a mermaid. And there's the buttonwood tree and 47 00:02:55,760 --> 00:02:59,560 Speaker 1: the rest of it. Where do the markets meet on bitcoin? 48 00:02:59,639 --> 00:03:05,120 Speaker 1: Do you have any belief in the bid ask process 49 00:03:05,120 --> 00:03:11,440 Speaker 1: of bitcoin being a market transparent process? Not at all. 50 00:03:11,520 --> 00:03:14,360 Speaker 1: And we see dating stories that that circulated, certainly on 51 00:03:14,400 --> 00:03:17,800 Speaker 1: Twitter and other social media platfhones that are people have 52 00:03:18,160 --> 00:03:20,440 Speaker 1: been trying to hit the bid then they've gone from 53 00:03:20,480 --> 00:03:23,320 Speaker 1: being up hundred stuves to being down miners thirty. Because 54 00:03:23,360 --> 00:03:25,959 Speaker 1: as sex as you say, what we what we're dealing 55 00:03:25,960 --> 00:03:29,480 Speaker 1: with mathematically, which Switchpane O'Connor told me a long time 56 00:03:29,520 --> 00:03:31,960 Speaker 1: ago is the fat tail and in the fat tel. 57 00:03:32,080 --> 00:03:34,440 Speaker 1: The central problem is that we have what we call 58 00:03:34,639 --> 00:03:39,200 Speaker 1: this continuity discontinuity, and this continus you means basically you 59 00:03:39,200 --> 00:03:41,640 Speaker 1: cannot expect the price we want you once to free 60 00:03:41,640 --> 00:03:43,760 Speaker 1: fall free fall. What you have is you have to 61 00:03:43,800 --> 00:03:46,120 Speaker 1: price this hundred is hundred, and then it's fifty, and 62 00:03:46,160 --> 00:03:48,280 Speaker 1: then it's sixty, and then it's hundred and twenty. So 63 00:03:48,400 --> 00:03:51,240 Speaker 1: you have a pricing model that looks very very different. 64 00:03:51,320 --> 00:03:53,800 Speaker 1: It doesn't mean the market doesn't have liquidity, but it 65 00:03:53,920 --> 00:03:58,000 Speaker 1: only has pockets of liquidity. So you absolutely writing saying that. 66 00:03:58,080 --> 00:04:00,880 Speaker 1: I will say for the business we do mainly in 67 00:04:00,960 --> 00:04:05,560 Speaker 1: exchange traded products on this uh, this is exchange traded notes, 68 00:04:05,760 --> 00:04:09,000 Speaker 1: which we facilitate a lot of people are treading it, 69 00:04:09,040 --> 00:04:11,280 Speaker 1: but it's really with the one person of the capital 70 00:04:11,400 --> 00:04:13,360 Speaker 1: trying it out. How do we do this? How does 71 00:04:13,360 --> 00:04:16,320 Speaker 1: it work? So far? And all the last couple of days, 72 00:04:16,320 --> 00:04:19,039 Speaker 1: a few people got burned, but overall, of course, as 73 00:04:19,080 --> 00:04:21,800 Speaker 1: long as we have this trajectory higher today ten thousand, 74 00:04:21,800 --> 00:04:24,440 Speaker 1: four and fifty five, as we talked, of course people 75 00:04:24,480 --> 00:04:26,440 Speaker 1: think this is a money machine. But I have noticed 76 00:04:26,480 --> 00:04:28,520 Speaker 1: my email box is starting to fill up with people 77 00:04:28,560 --> 00:04:31,960 Speaker 1: saying I can make in a week the stein. You know, 78 00:04:32,000 --> 00:04:34,560 Speaker 1: I want to just follow up on this idea of 79 00:04:34,640 --> 00:04:37,919 Speaker 1: what's real and what's not because Tesla comes to mind 80 00:04:37,920 --> 00:04:40,360 Speaker 1: when I think of a company that's not making any 81 00:04:40,400 --> 00:04:43,080 Speaker 1: money but has evaluation that's greater than many of its 82 00:04:43,160 --> 00:04:46,159 Speaker 1: peers like Ford for example, and one if you could 83 00:04:46,200 --> 00:04:48,360 Speaker 1: just dive a little bit deeper into this whole world 84 00:04:48,480 --> 00:04:52,480 Speaker 1: of electric vehicles and what it takes to power them 85 00:04:52,560 --> 00:04:56,320 Speaker 1: and an investment opportunity. This is all about lithium batteries, 86 00:04:56,360 --> 00:04:59,800 Speaker 1: at least at the moment, as certainly, if not list 87 00:05:00,160 --> 00:05:02,880 Speaker 1: in the future, then certainly batteries. What I've been arguing 88 00:05:02,880 --> 00:05:05,920 Speaker 1: and saying is that when you have one single political 89 00:05:06,000 --> 00:05:09,360 Speaker 1: power like China wanting to deal with this number one 90 00:05:09,440 --> 00:05:13,000 Speaker 1: social easy pollution through electrification of costs and in the 91 00:05:13,040 --> 00:05:16,480 Speaker 1: process saying by twenty thirty all costs has to be electrified, 92 00:05:16,800 --> 00:05:21,040 Speaker 1: do you have a magnitude of new release k bix 93 00:05:21,080 --> 00:05:25,479 Speaker 1: and and and research and development We've never seen false 94 00:05:25,560 --> 00:05:28,719 Speaker 1: Wargen of Germany has committed over twenty billion. That took 95 00:05:28,720 --> 00:05:30,919 Speaker 1: committed twenty five billions to drive all this carts in 96 00:05:30,920 --> 00:05:33,760 Speaker 1: the space of last six months. We see across the 97 00:05:33,800 --> 00:05:35,680 Speaker 1: board the money has been front at it at a 98 00:05:35,760 --> 00:05:38,080 Speaker 1: rate we have not seen. I mean, if there's one 99 00:05:38,120 --> 00:05:40,840 Speaker 1: thing lagging from this beautiful stock market we've seen over 100 00:05:40,839 --> 00:05:43,640 Speaker 1: the last ten years, it is exactly that the companies 101 00:05:44,040 --> 00:05:47,240 Speaker 1: to some extent has stopped doing K bix and taking 102 00:05:47,240 --> 00:05:50,279 Speaker 1: the kpick expendure down to the bottom life improving margins. 103 00:05:50,520 --> 00:05:52,400 Speaker 1: What we see now, in my opinion, and the next 104 00:05:52,400 --> 00:05:55,800 Speaker 1: ten years, and even most dominantly in US next two years, 105 00:05:55,960 --> 00:05:59,240 Speaker 1: is that everybody's going to move to electric cars. Seeing 106 00:05:59,240 --> 00:06:01,880 Speaker 1: this has been brilliant. We've got to get you on 107 00:06:01,920 --> 00:06:05,600 Speaker 1: again soon, particularly in our London offices. Mr Jacobson, this 108 00:06:05,760 --> 00:06:31,400 Speaker 1: was Sexo Bank, this is Bloomberg. We're back with Joseph 109 00:06:31,440 --> 00:06:35,960 Speaker 1: Stiglitz of Columbia University in January. Professor Stiglitz said this, 110 00:06:36,160 --> 00:06:38,280 Speaker 1: so let's bring in that quote board. I believe very 111 00:06:38,320 --> 00:06:42,159 Speaker 1: strongly that countries like the United States could and should 112 00:06:42,320 --> 00:06:45,200 Speaker 1: move to a digital currency. Professor, were you talking about 113 00:06:45,200 --> 00:06:47,960 Speaker 1: bitcoin then, No, I was not. I was talking to 114 00:06:48,400 --> 00:06:55,200 Speaker 1: about actually extending the systems that we already have, like uh, 115 00:06:55,600 --> 00:06:59,960 Speaker 1: master card, visa. Let's make the whole system, uh into 116 00:07:00,000 --> 00:07:05,360 Speaker 1: to one in which we we use digital currency. Uh. 117 00:07:05,440 --> 00:07:10,080 Speaker 1: It's not bitcoin, it's a basically US dollar based uh 118 00:07:10,400 --> 00:07:15,120 Speaker 1: in the United States and Europe, uh, euro and the pound. Uh. 119 00:07:15,440 --> 00:07:21,080 Speaker 1: But it's using electronics rather than paper. You know, paper 120 00:07:21,200 --> 00:07:26,360 Speaker 1: is so uh first century? Why are we using paper? 121 00:07:26,640 --> 00:07:30,560 Speaker 1: That was the question that was professor. If bitcoin were 122 00:07:30,600 --> 00:07:34,360 Speaker 1: to be regulated, could it be viable? I look look 123 00:07:34,360 --> 00:07:37,880 Speaker 1: at uh one of the main functions of government is 124 00:07:37,920 --> 00:07:44,800 Speaker 1: to create currency. Uh. And bitcoin is successful only because 125 00:07:45,320 --> 00:07:50,480 Speaker 1: of its potential for circumvention, uh, lack of oversight. So 126 00:07:50,520 --> 00:07:52,840 Speaker 1: it seems to me it ought to be outlawed. It 127 00:07:52,920 --> 00:07:58,880 Speaker 1: doesn't serve any socially useful function. Uh. It's uh. We 128 00:07:58,920 --> 00:08:02,680 Speaker 1: ought to just go back to what we always have had. 129 00:08:03,160 --> 00:08:06,440 Speaker 1: And and this is just a bubbles. Several of your 130 00:08:06,800 --> 00:08:11,800 Speaker 1: commentators have already pointed out it's a bubble. That's uh. Uh. 131 00:08:12,640 --> 00:08:14,000 Speaker 1: I'm going to give a lot of people a lot 132 00:08:14,000 --> 00:08:17,320 Speaker 1: of exciting times as it rigs up and then goes down. 133 00:08:17,440 --> 00:08:20,840 Speaker 1: But what I was talking about is the medium of 134 00:08:20,920 --> 00:08:24,760 Speaker 1: exchange that we use for transaction. Uh. And what I 135 00:08:24,800 --> 00:08:27,920 Speaker 1: was trying to say is, let's move away from paper 136 00:08:28,320 --> 00:08:31,920 Speaker 1: into the century of a digital economy. This is a 137 00:08:31,920 --> 00:08:34,679 Speaker 1: way from your Nobel prize, and it's away from your 138 00:08:34,679 --> 00:08:37,400 Speaker 1: acclaim and economics, but I'm gonna go there anyways. Charles 139 00:08:37,440 --> 00:08:41,560 Speaker 1: mcka eighteen forty one talks about our peculiar follies in 140 00:08:41,559 --> 00:08:44,800 Speaker 1: the behavioral component that makes for these bubbles. Whether it's 141 00:08:44,800 --> 00:08:48,400 Speaker 1: sixteen thirty seven and Tulip Bubs eighteen forty rows. Bring 142 00:08:48,520 --> 00:08:50,880 Speaker 1: up the chart here, here's the bubble into making. This 143 00:08:50,960 --> 00:08:54,600 Speaker 1: is log bitcoin. I can't stand the arithmetic charts and 144 00:08:54,640 --> 00:08:57,080 Speaker 1: this is all you need to know. This is massive convexity. 145 00:08:57,320 --> 00:08:59,840 Speaker 1: I haven't seen that charts since the Tulip bulbs. When 146 00:08:59,880 --> 00:09:04,440 Speaker 1: we're doing surveillance by Semaphore Professor Stiglets, they're relying on 147 00:09:04,559 --> 00:09:09,320 Speaker 1: a Marxist theory of value. They're going back to middle 148 00:09:09,440 --> 00:09:14,319 Speaker 1: marks and looking at the value of exchange. It's smoking mirrors, 149 00:09:14,440 --> 00:09:18,360 Speaker 1: isn't it. Uh precisely, thank you? Why well, the value 150 00:09:18,360 --> 00:09:21,920 Speaker 1: of a bitcoin today is expectations of what the bitcoin 151 00:09:22,120 --> 00:09:25,199 Speaker 1: is going to be tomorrow. Uh. If the government says, 152 00:09:25,480 --> 00:09:30,160 Speaker 1: look at the reason bitcoin is being used as the circumvention, 153 00:09:30,320 --> 00:09:32,920 Speaker 1: they could compt down in any moment and then uh 154 00:09:33,000 --> 00:09:35,240 Speaker 1: it collapses. We got to get you back here. I 155 00:09:35,280 --> 00:09:37,560 Speaker 1: would love to have you join our London set with 156 00:09:37,640 --> 00:09:41,280 Speaker 1: Francine to talk about Brexit, some of that politics, and 157 00:09:41,400 --> 00:09:45,079 Speaker 1: also talk to you about the underlying value of exchange 158 00:09:45,240 --> 00:09:48,640 Speaker 1: of bitcoin. He is a lord from Colombia. Two books, 159 00:09:48,679 --> 00:09:52,680 Speaker 1: two books and one there they are the classic globalization 160 00:09:52,840 --> 00:09:57,880 Speaker 1: is discontent and the Euro as well from Joe Stiglets 161 00:09:58,000 --> 00:10:20,880 Speaker 1: as well. You're gonna get to another important conversation ripping 162 00:10:20,960 --> 00:10:24,600 Speaker 1: up the script on this truly historic announcement on bitcoin 163 00:10:24,640 --> 00:10:28,440 Speaker 1: where CME and cbo E have chosen to set up 164 00:10:28,440 --> 00:10:31,280 Speaker 1: markets on a bitcoin that is a big bitcoin higher. 165 00:10:31,520 --> 00:10:33,760 Speaker 1: We'll get to that quote in a moment. First, our 166 00:10:33,840 --> 00:10:36,520 Speaker 1: economic indicators and they are always always brought you by 167 00:10:36,520 --> 00:10:40,240 Speaker 1: Commonwealth Financial Network to broker dealer. Are I a that's 168 00:10:40,280 --> 00:10:46,240 Speaker 1: been putting relationships first since found out why the industry 169 00:10:46,280 --> 00:10:50,240 Speaker 1: is most satisfied advisors. They are head over heels about 170 00:10:50,920 --> 00:10:56,480 Speaker 1: Commonwealth Financial Network. Visit Commonwealth dot com. So we've had 171 00:10:56,520 --> 00:11:00,760 Speaker 1: a Jimmer con Cambridge Mathematics principal group. He was brilliant 172 00:11:01,240 --> 00:11:04,439 Speaker 1: on the gyrations, if you will, as the news broke. 173 00:11:04,880 --> 00:11:09,520 Speaker 1: And then we got lucky with Steen Jacobson Uh exceptionally 174 00:11:09,600 --> 00:11:13,440 Speaker 1: experienced trader UH and now chief economist with Saxo Bank 175 00:11:14,280 --> 00:11:16,880 Speaker 1: so much. And now we go to the gentleman who 176 00:11:16,920 --> 00:11:19,839 Speaker 1: fractured mathematics like I did when he was at California 177 00:11:20,160 --> 00:11:23,920 Speaker 1: Santa Barbara. Chris Alman joins us UH right now with 178 00:11:24,000 --> 00:11:27,839 Speaker 1: the California State Teachers Retirement System you're on a whole 179 00:11:27,880 --> 00:11:33,880 Speaker 1: another spectrum from some of our other Matthew guests is bitcoin, 180 00:11:33,960 --> 00:11:39,240 Speaker 1: I'm sure is tangential for you. But nevertheless, you gotta 181 00:11:39,440 --> 00:11:43,200 Speaker 1: think about it. How does how many assets do you have? 182 00:11:43,360 --> 00:11:48,360 Speaker 1: Are you wonder like seventeen trillion? Uh? Okay, that's a 183 00:11:48,360 --> 00:11:52,720 Speaker 1: little smaller than trillion. But you're you're running this aircraft 184 00:11:52,800 --> 00:11:55,760 Speaker 1: carrier through the water. Do you care about the little 185 00:11:55,840 --> 00:12:00,480 Speaker 1: pt boat? We do well a bitcoin because it is 186 00:12:00,520 --> 00:12:04,520 Speaker 1: a market, it's interesting. I actually don't believe it's institutional yet. 187 00:12:04,559 --> 00:12:08,280 Speaker 1: The news today is another step along that way. But 188 00:12:08,400 --> 00:12:13,319 Speaker 1: I've said, uh, Tom, you know there's tangible and intangible investments, 189 00:12:13,360 --> 00:12:17,600 Speaker 1: and bitcoin is the ultimate intangible investment. It represents nothing 190 00:12:17,679 --> 00:12:20,400 Speaker 1: other than what somebody else will pay for it. It's air, 191 00:12:20,480 --> 00:12:23,360 Speaker 1: it's invisible. Um. The fact that it has a market 192 00:12:23,480 --> 00:12:27,400 Speaker 1: that's good. If anything in our world, Um, it's gonna 193 00:12:27,440 --> 00:12:30,959 Speaker 1: probably represent an alternative currency. It's not a yen, it's 194 00:12:31,000 --> 00:12:33,160 Speaker 1: not a pound, it's not a dollar. I'm going to 195 00:12:33,280 --> 00:12:35,720 Speaker 1: get upset here. I did this with mail Pass yesterday 196 00:12:35,960 --> 00:12:40,400 Speaker 1: at the Counts on Foreign Relations. David wants dependable currencies. 197 00:12:41,040 --> 00:12:44,280 Speaker 1: It's not a come on Chris with that vall up 198 00:12:44,360 --> 00:12:47,240 Speaker 1: or down. It's not a currency. It what I said 199 00:12:47,320 --> 00:12:49,920 Speaker 1: was an alternative. In other words, if you're managing your 200 00:12:49,920 --> 00:12:52,920 Speaker 1: currency portfolio and hedging it and you don't like pounds 201 00:12:53,000 --> 00:12:56,600 Speaker 1: or dollars or yen or euros, it then becomes another 202 00:12:56,640 --> 00:13:00,000 Speaker 1: alternative of almost being out. It's the cash equivalent maybe 203 00:13:00,120 --> 00:13:03,040 Speaker 1: of of the asset allocation. We're not going to be 204 00:13:03,200 --> 00:13:05,400 Speaker 1: using it. I'm gonna be studying it, but I bet 205 00:13:05,440 --> 00:13:07,240 Speaker 1: it's going to be five to ten years before it 206 00:13:07,280 --> 00:13:11,480 Speaker 1: becomes institutional. Do you ever feel that the it's a 207 00:13:11,559 --> 00:13:16,400 Speaker 1: generational experiment that people under the age at thirty. I mean, 208 00:13:16,440 --> 00:13:19,199 Speaker 1: we were just hearing from Steen Jacobson saying that he's 209 00:13:19,240 --> 00:13:22,040 Speaker 1: got a twenty two year old analyst who's following bitcoin 210 00:13:22,160 --> 00:13:24,920 Speaker 1: form and that they are at opposite ends when they 211 00:13:24,960 --> 00:13:29,160 Speaker 1: look at the efficacy and the legitimacy of bitcoin. Oh, absolutely, 212 00:13:29,160 --> 00:13:32,520 Speaker 1: you can cut it. Basically, I'll divide our audience five 213 00:13:32,760 --> 00:13:36,040 Speaker 1: and before don't really get bitcoin. Very few of them 214 00:13:36,080 --> 00:13:39,280 Speaker 1: trade it. After that, gen x a little bit, and 215 00:13:39,320 --> 00:13:41,719 Speaker 1: the millennials absolutely just think it's the coolest thing. But 216 00:13:41,760 --> 00:13:43,880 Speaker 1: they also put their entire lives out on the web 217 00:13:43,920 --> 00:13:48,360 Speaker 1: and trust trust things implicitly. Uh. And again, this is 218 00:13:48,600 --> 00:13:53,760 Speaker 1: a digital entity that has no underlying value underneath it. 219 00:13:53,760 --> 00:13:57,200 Speaker 1: It is an invisible product. Um. And I think there's 220 00:13:57,200 --> 00:14:00,640 Speaker 1: a generational divide people who want things that have underlying 221 00:14:00,920 --> 00:14:03,880 Speaker 1: Even a stock which is digital, has an underlying ownership 222 00:14:04,040 --> 00:14:06,520 Speaker 1: slice of a of a company. Right. But I'm glad 223 00:14:06,559 --> 00:14:10,040 Speaker 1: you mentioned stocks because this also makes me think of Amazon, right, 224 00:14:10,080 --> 00:14:13,480 Speaker 1: and I think of the Amazon Alexa echos that are 225 00:14:13,520 --> 00:14:17,599 Speaker 1: appearing in people's homes. And how if I had described 226 00:14:17,640 --> 00:14:19,960 Speaker 1: to you five ten years ago that this would be 227 00:14:20,000 --> 00:14:24,800 Speaker 1: the way that you would interact with your uh, your retailer. 228 00:14:25,360 --> 00:14:27,560 Speaker 1: I don't think many people would say, oh yeah, I'll 229 00:14:27,600 --> 00:14:30,040 Speaker 1: just say what I want and it will just magically 230 00:14:30,040 --> 00:14:34,080 Speaker 1: appear at my door. There's gonna be disruption, um. There's 231 00:14:34,080 --> 00:14:38,200 Speaker 1: no regulations on bitcoins. So just like with Amazon, UM 232 00:14:38,280 --> 00:14:42,600 Speaker 1: and Echo and all the different products, you're gonna see proliferations, 233 00:14:42,640 --> 00:14:45,480 Speaker 1: You're gonna see growth, um. But I think you're also 234 00:14:45,520 --> 00:14:48,320 Speaker 1: going to have some ups and downs of disruptions. As 235 00:14:48,360 --> 00:14:51,120 Speaker 1: Tom said, volatility is going to be the code word 236 00:14:51,200 --> 00:14:54,440 Speaker 1: because there's no rules and regulations to follow these things. 237 00:14:54,960 --> 00:14:57,120 Speaker 1: But don't people counter that would saying that g You know, 238 00:14:57,160 --> 00:14:59,720 Speaker 1: I lived through the two thousand eight two thousand seven 239 00:14:59,760 --> 00:15:03,920 Speaker 1: to house and eight decline in stock prices and I'm 240 00:15:03,920 --> 00:15:05,800 Speaker 1: still recovering from that. So I don't have a lot 241 00:15:05,800 --> 00:15:09,320 Speaker 1: of faith in the stock market. Uh, what's the difference 242 00:15:09,400 --> 00:15:12,000 Speaker 1: between that and bitcoin? It's just about what someone else 243 00:15:12,080 --> 00:15:14,480 Speaker 1: is willing to pay me. Well, I'd argue that if 244 00:15:14,520 --> 00:15:17,200 Speaker 1: you invested in no way, if you stayed invested like 245 00:15:17,320 --> 00:15:20,240 Speaker 1: we have, you've already recovered and you own something that 246 00:15:20,360 --> 00:15:24,320 Speaker 1: actually has some underlying asset value. There's a book value 247 00:15:24,360 --> 00:15:27,120 Speaker 1: to those equities that you hold. There's no book value 248 00:15:27,160 --> 00:15:30,080 Speaker 1: underlying of of a bitcoin. Doesn't mean it needs to 249 00:15:30,080 --> 00:15:32,200 Speaker 1: go away, but you know who wants to trade a 250 00:15:32,200 --> 00:15:36,840 Speaker 1: product that is primarily used by North Korea and unknown people. 251 00:15:36,880 --> 00:15:41,920 Speaker 1: It's underlying value is it's the only value it has 252 00:15:41,920 --> 00:15:45,160 Speaker 1: that it's anonymous, and obviously that's being proven to be wrong. 253 00:15:45,280 --> 00:15:48,040 Speaker 1: When you were at Santa Barbara, did you get to 254 00:15:48,080 --> 00:15:52,080 Speaker 1: see dish wall before they became famous? I did not, Tom, 255 00:15:52,680 --> 00:15:54,400 Speaker 1: But you're right there. A lot of good things have 256 00:15:54,480 --> 00:15:57,360 Speaker 1: come out of Santa Barbara and continue to to this day. 257 00:15:57,400 --> 00:16:00,360 Speaker 1: This is the popular place. Counting blue cars came out 258 00:16:00,360 --> 00:16:04,320 Speaker 1: of nowhere, and everyone's like, who are these people? I mean, 259 00:16:04,320 --> 00:16:09,160 Speaker 1: it was magical bitcoin has come out of nowhere. I 260 00:16:09,200 --> 00:16:12,760 Speaker 1: haven't had a constructive interview this week, pim with somebody 261 00:16:12,880 --> 00:16:17,520 Speaker 1: under over. Is there anybody you know of our vintage 262 00:16:17,760 --> 00:16:21,760 Speaker 1: that knows who dishwallet is that actually thinks bitcoins for real? 263 00:16:22,040 --> 00:16:26,120 Speaker 1: That hurts at hurts And no, no constructive interviews? Uh? Sis, 264 00:16:26,160 --> 00:16:30,040 Speaker 1: I know, seriously, I'm not sure that that there are. 265 00:16:30,560 --> 00:16:33,600 Speaker 1: I think you've heard from very knowledgeable people, Jamie Diamond, 266 00:16:33,880 --> 00:16:36,200 Speaker 1: quite a few others that have spoken out very strongly 267 00:16:36,240 --> 00:16:39,400 Speaker 1: about bitcoin. Um, it could be it will be around 268 00:16:39,440 --> 00:16:42,200 Speaker 1: for a long time. A number of the cryptocurrencies. Well, 269 00:16:42,280 --> 00:16:45,400 Speaker 1: I'm gonna well, let me do this. Christie Allman. Uh, 270 00:16:45,480 --> 00:16:49,280 Speaker 1: Christie Alman with Kelster California, say, teachers retirement system and 271 00:16:49,320 --> 00:16:52,080 Speaker 1: the headline there's this, This is like in a million 272 00:16:52,160 --> 00:16:54,280 Speaker 1: I've been here for like a hundred and twelve years, Michael, right, 273 00:16:54,680 --> 00:17:00,200 Speaker 1: this headline. US regulators to allow bitcoin futures at c 274 00:17:00,680 --> 00:17:21,200 Speaker 1: in the CBO, get hold out my wallet. Well to 275 00:17:21,240 --> 00:17:23,880 Speaker 1: get back to and Richard's CEO of MMG Investments who 276 00:17:23,920 --> 00:17:27,400 Speaker 1: manages over two eight billion pounds and assets, and Robert Niblett. 277 00:17:27,440 --> 00:17:29,640 Speaker 1: He's director of Chatham House. So and first of all, 278 00:17:29,680 --> 00:17:31,760 Speaker 1: what is bitcoin? I mean, can you afford to to 279 00:17:31,800 --> 00:17:34,639 Speaker 1: sit it out or you need to be in but 280 00:17:34,680 --> 00:17:38,720 Speaker 1: stay skeptical. Look, there are people that use bitcoin for 281 00:17:38,760 --> 00:17:41,640 Speaker 1: all sorts of different reasons. Um. I mean I tend 282 00:17:41,680 --> 00:17:43,920 Speaker 1: to agree, as you've just seen from the price moves 283 00:17:43,960 --> 00:17:45,600 Speaker 1: that you can't say this is a store of value 284 00:17:45,600 --> 00:17:47,800 Speaker 1: when the volume moves around as much as it does. 285 00:17:48,400 --> 00:17:51,320 Speaker 1: It's clear that there are reasons why some people may 286 00:17:51,440 --> 00:17:55,360 Speaker 1: choose to use appeer to peer currency or exchange, which 287 00:17:55,400 --> 00:17:57,560 Speaker 1: is effectively what you're talking about in bitcoin. There might 288 00:17:57,560 --> 00:18:00,679 Speaker 1: be legitimate reasons for that because you want to transactions 289 00:18:00,680 --> 00:18:04,800 Speaker 1: away from prying government eyes. There might be illegitimate reasons 290 00:18:04,800 --> 00:18:06,840 Speaker 1: why you might want to do that to keep transactions 291 00:18:06,840 --> 00:18:11,040 Speaker 1: away from prying tax authorities. Um. But what it is 292 00:18:11,080 --> 00:18:14,560 Speaker 1: not is something that you can use in replace of 293 00:18:15,119 --> 00:18:19,919 Speaker 1: a dollar or sterling or euro. Because it is it 294 00:18:20,000 --> 00:18:22,600 Speaker 1: does not have the underpinning and the backing of government 295 00:18:22,680 --> 00:18:25,560 Speaker 1: oversighter issuance. And I think some of that, certainly on 296 00:18:25,560 --> 00:18:27,800 Speaker 1: the oversight will come because it has to come, But 297 00:18:27,840 --> 00:18:30,520 Speaker 1: that shouldn't take away from the fact that the underlying technology. 298 00:18:30,560 --> 00:18:34,240 Speaker 1: The distributed ledger technology is a blot chain that sits underneath. 299 00:18:34,240 --> 00:18:37,879 Speaker 1: It is a really powerful technology, and people have in 300 00:18:37,920 --> 00:18:39,760 Speaker 1: the last two or three years have been starting to 301 00:18:39,760 --> 00:18:43,800 Speaker 1: develop that distributed ledger technology for other purposes and other applications, 302 00:18:43,800 --> 00:18:45,879 Speaker 1: and that is immensely powerful. But what's going on in 303 00:18:45,880 --> 00:18:48,600 Speaker 1: the pricing of bitcoin is definitely mainlya in my mind 304 00:18:48,720 --> 00:18:50,680 Speaker 1: right now, do you think it'll be regulated? And if 305 00:18:50,680 --> 00:18:53,800 Speaker 1: it does get regulated, can then actually come back as 306 00:18:53,960 --> 00:18:56,640 Speaker 1: an asset that you would look at? Well, I think 307 00:18:56,680 --> 00:18:58,720 Speaker 1: it's possible that if you go way down the line 308 00:18:58,720 --> 00:19:00,840 Speaker 1: that it's possible that might be some thing that you trade, 309 00:19:00,880 --> 00:19:03,520 Speaker 1: But it's not a it's an instrument. It's not an asset. 310 00:19:03,600 --> 00:19:04,920 Speaker 1: I think that's the way to look at it. So 311 00:19:04,960 --> 00:19:07,720 Speaker 1: it's an instrument in the way that we've we've now 312 00:19:07,760 --> 00:19:11,440 Speaker 1: trade in other non underpinned assets and sorts of derivatives 313 00:19:11,480 --> 00:19:14,600 Speaker 1: that you have, but volatility would be one example. You 314 00:19:14,640 --> 00:19:18,520 Speaker 1: can trade volatility. There's not an underlying asset to volatility itself. 315 00:19:18,800 --> 00:19:21,000 Speaker 1: So I think yes, as a traded instrument, it is 316 00:19:21,040 --> 00:19:23,359 Speaker 1: possible it will mature enough to be something that we 317 00:19:23,400 --> 00:19:25,640 Speaker 1: can use, but we're away away from that We're years 318 00:19:25,680 --> 00:19:28,320 Speaker 1: away from that. What is clear though, is that regulation 319 00:19:28,440 --> 00:19:30,800 Speaker 1: I think at some stage must come to this market 320 00:19:30,840 --> 00:19:32,760 Speaker 1: because people need to be protected. It's lots of people 321 00:19:32,800 --> 00:19:34,360 Speaker 1: playing in this space who don't know what they're doing. 322 00:19:34,520 --> 00:19:36,680 Speaker 1: Let's zoom in on the chart here. If we have bitcoin, 323 00:19:36,720 --> 00:19:39,360 Speaker 1: we showed it yesterday. This is the interday chart. It's 324 00:19:39,400 --> 00:19:41,359 Speaker 1: really you know, there's like eight ways to look at 325 00:19:41,359 --> 00:19:43,879 Speaker 1: this chart on a log basis. Up we go with 326 00:19:43,960 --> 00:19:46,880 Speaker 1: the surgery. You really don't get the moonshad feel a bitcoin, 327 00:19:47,119 --> 00:19:49,879 Speaker 1: but you do get is this huge volatility yesterday and 328 00:19:49,920 --> 00:19:52,960 Speaker 1: then the churn and this recent little move here. What 329 00:19:53,040 --> 00:19:55,720 Speaker 1: I would suggest is you got a vector like this 330 00:19:55,880 --> 00:19:58,640 Speaker 1: and we'll really have to see if bitcoin can find 331 00:19:58,640 --> 00:20:01,080 Speaker 1: a bidder. I love what Dennis gar And said, taking 332 00:20:01,119 --> 00:20:05,840 Speaker 1: a direct shot at Bloomberg surveillance, Bitcoin this and Bitcoin that. Dennis, 333 00:20:05,880 --> 00:20:09,000 Speaker 1: if you're watching, yes, we're doing more bitcoin this in 334 00:20:09,080 --> 00:20:13,080 Speaker 1: Bitcoin that, and Richards if bitcoin's out there, and Robin Nibblet, 335 00:20:13,160 --> 00:20:15,480 Speaker 1: let me go to you on this. The focus seems 336 00:20:15,520 --> 00:20:19,480 Speaker 1: to be on the excesses of bitcoin in China. Can 337 00:20:19,520 --> 00:20:26,480 Speaker 1: that be a set of financial instability for the Chinese leadership? Um, well, 338 00:20:26,760 --> 00:20:28,720 Speaker 1: you're getting a little bit beyond my Ken here. I mean, 339 00:20:28,760 --> 00:20:31,200 Speaker 1: my instinct would be to say that part of this 340 00:20:31,680 --> 00:20:33,960 Speaker 1: rise of bitcoin is to do with the fact that 341 00:20:34,000 --> 00:20:37,159 Speaker 1: we have some large anti corruption drives in place in 342 00:20:37,400 --> 00:20:39,680 Speaker 1: key markets across the world. China has been going on 343 00:20:39,760 --> 00:20:42,320 Speaker 1: for a while, but you've got Saudi Arabia as well. 344 00:20:42,400 --> 00:20:44,760 Speaker 1: Now who knows what might come in some of these 345 00:20:44,800 --> 00:20:48,919 Speaker 1: other as we discussed earlier, kind of very tightly controlled governments. 346 00:20:49,000 --> 00:20:50,800 Speaker 1: So people are looking, as Anne was saying, for a 347 00:20:50,840 --> 00:20:54,000 Speaker 1: place to hide money, to be frank more than anything else. 348 00:20:54,000 --> 00:20:56,119 Speaker 1: So I'm just wondering how much of this in my world, 349 00:20:56,359 --> 00:20:58,359 Speaker 1: how much of my world is spilling over into the 350 00:20:58,400 --> 00:21:01,440 Speaker 1: bitcoin space. If it is from a Chinese government standpoint, 351 00:21:01,480 --> 00:21:06,600 Speaker 1: having pretty much impost some control on the the shadow 352 00:21:06,640 --> 00:21:09,040 Speaker 1: banking side that had really got a little bit out 353 00:21:09,040 --> 00:21:12,200 Speaker 1: of control, it'll worry them that a new risk has 354 00:21:12,240 --> 00:21:14,200 Speaker 1: come along that they're now also going to have to tame. 355 00:21:14,480 --> 00:21:16,080 Speaker 1: This goes to my book of the Year last year, 356 00:21:16,160 --> 00:21:20,520 Speaker 1: Kenneragos the cursor cash Robin and the idea of of 357 00:21:20,560 --> 00:21:23,480 Speaker 1: Sweden leading the way and maybe India or their courage 358 00:21:23,520 --> 00:21:25,639 Speaker 1: dealing with it as well. Is there going to be 359 00:21:25,640 --> 00:21:28,560 Speaker 1: a cursive bitcoin. Do you just assume that if it's 360 00:21:28,600 --> 00:21:32,800 Speaker 1: the new cash alternative, at some point bitcoin collapses? Is 361 00:21:32,800 --> 00:21:38,119 Speaker 1: it almost barter medium? For my taste, it feels more 362 00:21:38,160 --> 00:21:41,360 Speaker 1: like Barto medium. I'm still a big believer, however, weak 363 00:21:41,400 --> 00:21:43,840 Speaker 1: governments are around the world that the best thing you've 364 00:21:43,880 --> 00:21:46,800 Speaker 1: got in terms of preserving order, and whether that order 365 00:21:46,840 --> 00:21:49,840 Speaker 1: is applied to international alliances or to markets or the money. 366 00:21:50,119 --> 00:21:52,280 Speaker 1: People are still looking for some ultimate authority and the 367 00:21:52,280 --> 00:21:55,440 Speaker 1: only one that's just right now national governments very good. Well, 368 00:21:55,480 --> 00:21:57,640 Speaker 1: the cursive bitcoin, maybe that's what we'll call it. Robbin 369 00:21:57,720 --> 00:22:20,840 Speaker 1: Nibblet where a sitting in Richards him. I want to 370 00:22:20,840 --> 00:22:22,720 Speaker 1: get to this because there's so much to talk about 371 00:22:23,040 --> 00:22:26,560 Speaker 1: with Jim McCahon this morning, Jim, John cry and Deutsche Bank, 372 00:22:27,080 --> 00:22:31,000 Speaker 1: James Gorman, Morgan Stanley and Richards we spoke to earlier 373 00:22:31,040 --> 00:22:36,600 Speaker 1: this morning at MG. You you're all mathematically based. Do 374 00:22:36,680 --> 00:22:41,119 Speaker 1: you have a confidence that are fixed income markets can 375 00:22:41,240 --> 00:22:49,040 Speaker 1: unwind in the cute with mathematical stability over the next 376 00:22:49,040 --> 00:22:53,360 Speaker 1: two to five years, Tom, I have confidence, but not certainty. 377 00:22:53,760 --> 00:22:56,560 Speaker 1: So far, the Fed has judged it very well. They 378 00:22:56,560 --> 00:23:00,400 Speaker 1: went through a lengthy period of not replacing of placing 379 00:23:00,400 --> 00:23:02,880 Speaker 1: the bones now they're not replacing them. The running down 380 00:23:02,880 --> 00:23:06,240 Speaker 1: the balance sheet, I think that's eminently possible within the 381 00:23:06,920 --> 00:23:10,040 Speaker 1: market structure, within the flow of funds. Essentially, what the 382 00:23:10,080 --> 00:23:12,840 Speaker 1: Fed has done is moved from a very accommodative monetary 383 00:23:12,840 --> 00:23:16,000 Speaker 1: policy with que through a neutral one to now a 384 00:23:16,119 --> 00:23:19,600 Speaker 1: slight tightening by reducing the balance sheet. And I think 385 00:23:19,600 --> 00:23:22,840 Speaker 1: that goes with a modest interest rate increase. Now they've 386 00:23:22,840 --> 00:23:26,040 Speaker 1: got to keep it stable. But then Mr Powell as 387 00:23:26,160 --> 00:23:30,200 Speaker 1: chair is a continuity candidate, so I'm fairly confident they'll 388 00:23:30,280 --> 00:23:33,040 Speaker 1: keep it stable. Without certainty they will sounded like the 389 00:23:33,080 --> 00:23:37,720 Speaker 1: gentleman from Cambridge using their the calculus of through the 390 00:23:37,840 --> 00:23:41,920 Speaker 1: calculus of the words slight. These are all gentle gradual, 391 00:23:42,560 --> 00:23:45,760 Speaker 1: vector driven ideas. You and I know there can be 392 00:23:45,800 --> 00:23:50,840 Speaker 1: exoggerous shocks. What's the exaggerous shock that could upset the 393 00:23:50,880 --> 00:23:54,480 Speaker 1: apple cart for Governor Carney, Chairman Powell and all those 394 00:23:54,520 --> 00:23:58,919 Speaker 1: remaining including Mr drag Well, for for for Governor Karney 395 00:23:59,000 --> 00:24:01,600 Speaker 1: and for Mr drag you, it would be the impact 396 00:24:01,600 --> 00:24:03,720 Speaker 1: of a hard Brexit. And I think the news on 397 00:24:03,760 --> 00:24:08,680 Speaker 1: Bloomberg today about banks having to repay per contracts is 398 00:24:08,680 --> 00:24:11,639 Speaker 1: a very good example of the sort of disruption that 399 00:24:11,720 --> 00:24:14,560 Speaker 1: could inhibit credit creation in Europe. That would be a 400 00:24:14,640 --> 00:24:17,680 Speaker 1: nasty shock coming from within the monetary system, and one 401 00:24:17,720 --> 00:24:20,480 Speaker 1: that hasn't been focused on yet. There are lots of 402 00:24:20,520 --> 00:24:24,600 Speaker 1: these events that could with a fairly low probability of 403 00:24:24,600 --> 00:24:28,600 Speaker 1: a serious adverse effect. So far we're managing to shimmy 404 00:24:28,600 --> 00:24:30,960 Speaker 1: around them and not to have any of them really 405 00:24:31,000 --> 00:24:33,840 Speaker 1: hit the economy. But that's what I'm concerned about. I 406 00:24:33,840 --> 00:24:36,600 Speaker 1: think it's basically a good environment, but I am more 407 00:24:36,640 --> 00:24:40,000 Speaker 1: worried about negative tail risk than usual. Jim, maybe you 408 00:24:40,000 --> 00:24:42,880 Speaker 1: could just focus a little bit on small and mid 409 00:24:42,920 --> 00:24:47,560 Speaker 1: cap stocks because they have lagged the overall market, whether 410 00:24:47,560 --> 00:24:49,880 Speaker 1: you're talking about the S and P five and I'd 411 00:24:49,880 --> 00:24:51,560 Speaker 1: like to get your thoughts on whether you think that 412 00:24:51,560 --> 00:24:55,440 Speaker 1: that is an opportunity for investors. Yeah. I think that 413 00:24:56,000 --> 00:24:59,679 Speaker 1: the US private sector has prospered and will continue to 414 00:24:59,720 --> 00:25:02,359 Speaker 1: pross Spur and Spider Washington. I think there's a lot 415 00:25:02,440 --> 00:25:07,560 Speaker 1: of innovation. I think there's some derregulation. If tax changes 416 00:25:07,600 --> 00:25:11,480 Speaker 1: go through, it will be good for the US private sector. 417 00:25:12,000 --> 00:25:15,720 Speaker 1: So I would be a supporter of buying small and 418 00:25:15,760 --> 00:25:19,080 Speaker 1: MidCap stocks in the US. Not so much because they're small, 419 00:25:19,119 --> 00:25:21,919 Speaker 1: but because they're largely domestic, and I think that is 420 00:25:21,920 --> 00:25:26,040 Speaker 1: a good place to be relative to other markets. Well, 421 00:25:26,080 --> 00:25:28,920 Speaker 1: that also indicated your view on the US dollar. I mean, 422 00:25:28,960 --> 00:25:32,160 Speaker 1: if they're domestically oriented, that means they're insulated from many 423 00:25:32,200 --> 00:25:34,760 Speaker 1: swings and currency. Yeah. I think that's right. The dollar, 424 00:25:34,880 --> 00:25:37,320 Speaker 1: I suspect is going a little bit stronger over the 425 00:25:37,359 --> 00:25:39,960 Speaker 1: next year or two. If one of these negative tail 426 00:25:40,040 --> 00:25:42,280 Speaker 1: risks happened, the dollar would go a lot stronger. But 427 00:25:42,359 --> 00:25:44,600 Speaker 1: I think most likely the dollar will have a fairly 428 00:25:44,640 --> 00:25:50,640 Speaker 1: firm undertone. That's not necessarily great for global companies. It's 429 00:25:50,680 --> 00:25:54,040 Speaker 1: probably better for the domestics. Well, let me just ask 430 00:25:54,040 --> 00:25:56,119 Speaker 1: you a little bit more about this call the dollar 431 00:25:56,240 --> 00:25:59,720 Speaker 1: getting stronger. You really believe it. For example, I would 432 00:25:59,720 --> 00:26:03,880 Speaker 1: imagin and President Donald Trump, real estate expert as he is, 433 00:26:04,480 --> 00:26:08,880 Speaker 1: would be in favor of either stable or lower interest rates. 434 00:26:08,880 --> 00:26:12,040 Speaker 1: A my missing something. Yeah he is. But you know, 435 00:26:12,080 --> 00:26:15,639 Speaker 1: you're at a point where FED policy points to higher 436 00:26:15,800 --> 00:26:18,280 Speaker 1: short term rates and that will affect the dollar. I 437 00:26:18,320 --> 00:26:20,600 Speaker 1: think it mean, it's the nearest thing to a certainty 438 00:26:20,600 --> 00:26:23,400 Speaker 1: on the markets that they're going to do a basis 439 00:26:23,400 --> 00:26:26,720 Speaker 1: point increase at their December meeting. I think the consensus 440 00:26:26,760 --> 00:26:29,800 Speaker 1: is sort of ninety plus percent that they'll do that. Well, 441 00:26:29,760 --> 00:26:32,120 Speaker 1: I just cause, what what's your thought then on if 442 00:26:32,160 --> 00:26:35,919 Speaker 1: you what's the percentage of sort of your analysis of 443 00:26:35,960 --> 00:26:38,400 Speaker 1: an inverted yield curve? Do you think? Yeah, I think 444 00:26:38,400 --> 00:26:41,760 Speaker 1: an inverted yield curve could eventually happen. But I think 445 00:26:41,800 --> 00:26:45,240 Speaker 1: what's going to happen in the next twelve months is 446 00:26:45,280 --> 00:26:47,840 Speaker 1: that the short rates will go up, but not as 447 00:26:47,920 --> 00:26:51,040 Speaker 1: much as the Fed's dot plot, and that you'll see 448 00:26:51,080 --> 00:26:53,240 Speaker 1: some yield curve of flattening. I think that's where it 449 00:26:53,280 --> 00:26:55,800 Speaker 1: goes over the next year or two. Him all Jim 450 00:26:55,880 --> 00:27:00,000 Speaker 1: mccoon's hand with his Jim mccon mathematician, chief executive, all 451 00:27:00,040 --> 00:27:03,600 Speaker 1: a certain force of principal group. Here's the headline. It's 452 00:27:03,640 --> 00:27:07,359 Speaker 1: seven am. Would you hold his hand please, He's gonna 453 00:27:07,359 --> 00:27:12,159 Speaker 1: need to be medicated him. US regulators to allow bitcoin 454 00:27:12,359 --> 00:27:17,200 Speaker 1: futures to trade on CME and cbo E. We now 455 00:27:17,280 --> 00:27:20,680 Speaker 1: rip up the show here to talk to Jim about 456 00:27:21,119 --> 00:27:24,840 Speaker 1: auction theory. Okay, it's it's a bloody class your junior 457 00:27:24,920 --> 00:27:27,600 Speaker 1: year on auction theory. You've got a bid in an ask, 458 00:27:27,880 --> 00:27:30,040 Speaker 1: You've got no depth in the market. You've got a 459 00:27:30,080 --> 00:27:34,040 Speaker 1: mystery to who's who, You've got massive ill liquidity, you've 460 00:27:34,080 --> 00:27:39,040 Speaker 1: got no data stability tick to tick, and these guys 461 00:27:39,080 --> 00:27:42,640 Speaker 1: are going to do futures on that auction process. Can 462 00:27:42,680 --> 00:27:44,960 Speaker 1: you tell us? Can you tell what Tom's view on this? 463 00:27:46,000 --> 00:27:48,760 Speaker 1: I think I've got a good guess. How can we 464 00:27:48,840 --> 00:27:54,360 Speaker 1: set up a regulatory structure around a mystery of bidass process. 465 00:27:54,600 --> 00:27:57,840 Speaker 1: We're not doing futures. I'm proctoring gamble and this is 466 00:27:57,880 --> 00:28:02,480 Speaker 1: a derivative, which means that the regulatory structure isn't reaching 467 00:28:02,520 --> 00:28:05,439 Speaker 1: into the cash market, which is probably just as well 468 00:28:05,680 --> 00:28:09,639 Speaker 1: because they couldn't get into transparency into the cash market. 469 00:28:10,080 --> 00:28:13,440 Speaker 1: I think the problem with bitcoin is, you know, even 470 00:28:14,240 --> 00:28:17,720 Speaker 1: even precious metals have a have some sort of intrinsic 471 00:28:17,800 --> 00:28:21,199 Speaker 1: value because they look good. Bitcoin has no intrinsic value, 472 00:28:21,320 --> 00:28:23,680 Speaker 1: which means it could go down a p it could 473 00:28:23,680 --> 00:28:27,400 Speaker 1: go up very easily. You and I know. Then let's 474 00:28:27,440 --> 00:28:31,600 Speaker 1: take the gloom case. If something goes down, everybody looks 475 00:28:31,640 --> 00:28:34,000 Speaker 1: at all my word, they're selling it, and you and 476 00:28:34,080 --> 00:28:37,200 Speaker 1: I know the type two construct is not the ask 477 00:28:37,760 --> 00:28:39,960 Speaker 1: when it goes down, if there's no one there in 478 00:28:40,040 --> 00:28:43,800 Speaker 1: the bid and then these derivative regulatory bodies cm E, 479 00:28:43,880 --> 00:28:46,360 Speaker 1: c B o E, they have to deal with that 480 00:28:46,640 --> 00:28:50,680 Speaker 1: the vacuum. Yeah, so what the regulators need to do 481 00:28:50,760 --> 00:28:54,840 Speaker 1: with any players that are actually trading this future is 482 00:28:54,920 --> 00:28:57,680 Speaker 1: make sure they're not exposed either way on it because 483 00:28:57,680 --> 00:29:01,240 Speaker 1: the volatility will remain very high. From a regulatory point 484 00:29:01,280 --> 00:29:03,120 Speaker 1: of view, I think that's about all you can do, 485 00:29:03,320 --> 00:29:05,800 Speaker 1: because this is I mean, this is no better than 486 00:29:05,880 --> 00:29:09,440 Speaker 1: betting on the horses. It's a pure with that accent 487 00:29:09,560 --> 00:29:12,080 Speaker 1: saying betting on the horses works great. But Jim mccoin, 488 00:29:12,360 --> 00:29:16,160 Speaker 1: what is absolutely critical here is you and I know 489 00:29:16,280 --> 00:29:20,040 Speaker 1: this can be a correct, responsible hedge vehicle. I get 490 00:29:20,120 --> 00:29:26,160 Speaker 1: that by definition you need to have speculation. On the 491 00:29:26,160 --> 00:29:29,920 Speaker 1: other side, you do what do you predictive speculation and 492 00:29:30,080 --> 00:29:34,000 Speaker 1: that emotion of leverage as you're successful for a set 493 00:29:34,080 --> 00:29:38,320 Speaker 1: number of units. I think the problem with this market 494 00:29:38,360 --> 00:29:42,680 Speaker 1: will be that events will drive it. And remember it's 495 00:29:42,680 --> 00:29:47,720 Speaker 1: not many years ago Mounts the exchange went under, bitcoins disappeared, 496 00:29:48,440 --> 00:29:53,640 Speaker 1: investor value was was obliterated. That could happen again. You know, 497 00:29:53,680 --> 00:29:57,040 Speaker 1: there are unregulated exchanges and all kinds of jurisdictions that 498 00:29:57,080 --> 00:29:59,920 Speaker 1: are trading these bitcoins. There's all kinds of trading going 499 00:30:00,040 --> 00:30:04,080 Speaker 1: on which is confidential and totally untransparent. That's what you're 500 00:30:04,080 --> 00:30:07,320 Speaker 1: betting on. So I I think anyone who gets involved 501 00:30:07,320 --> 00:30:09,680 Speaker 1: in this has to be prepared to lose all their money. 502 00:30:09,800 --> 00:30:12,640 Speaker 1: But the the term, and this is a quote, the term, 503 00:30:12,760 --> 00:30:16,000 Speaker 1: the term that it's being used to describe the process 504 00:30:16,040 --> 00:30:20,200 Speaker 1: by which this is coming to market is called self certification. 505 00:30:20,760 --> 00:30:23,960 Speaker 1: Have you ever heard of self certification? Not exactly No, 506 00:30:24,240 --> 00:30:26,360 Speaker 1: I think I know what it sounds like. It sounds 507 00:30:26,360 --> 00:30:30,600 Speaker 1: like canfattempt or doesn't it? Is this though? The kind 508 00:30:30,640 --> 00:30:33,440 Speaker 1: of event, for example, if you go to coin based, 509 00:30:33,520 --> 00:30:35,520 Speaker 1: you go to some of these sites and they lock 510 00:30:35,680 --> 00:30:38,840 Speaker 1: up for whatever reason. Is that the kind of event 511 00:30:38,920 --> 00:30:41,600 Speaker 1: that then gets everybody you know, saying, let's just get out, 512 00:30:41,640 --> 00:30:44,000 Speaker 1: I want to go to cash. That could happen. That 513 00:30:44,040 --> 00:30:46,440 Speaker 1: could happen, But I think I think it's likely to 514 00:30:46,440 --> 00:30:48,480 Speaker 1: be something worse than a temporary lock up in a 515 00:30:48,520 --> 00:30:51,600 Speaker 1: trading site. You know, we're doing Bloomberg Radio twenty five 516 00:30:51,640 --> 00:30:55,880 Speaker 1: year anniversary. To me, Pim, this is a really important point. 517 00:30:56,520 --> 00:30:59,680 Speaker 1: You and I remember when cbo E was who are 518 00:30:59,760 --> 00:31:04,760 Speaker 1: those guys options? Really? I mean, if we're developing a 519 00:31:04,920 --> 00:31:09,400 Speaker 1: new would you within derivative math very quickly, or Jim Macon, 520 00:31:09,520 --> 00:31:13,280 Speaker 1: would you call this a synthetic instrument. There's no tangible. 521 00:31:13,960 --> 00:31:17,520 Speaker 1: It's the tangible. It's a derivative ones synthetic instruments, it's 522 00:31:17,560 --> 00:31:21,440 Speaker 1: there is nothing tangible. Here's I think the way that 523 00:31:21,520 --> 00:31:24,920 Speaker 1: bitcoin could obtain an economic value if it was used 524 00:31:24,920 --> 00:31:27,800 Speaker 1: as a medium of exchange. But it's not happening. It's 525 00:31:27,840 --> 00:31:31,680 Speaker 1: actually going into reverse. Many of the bitcoins and circulation 526 00:31:31,960 --> 00:31:34,640 Speaker 1: are actually going into fronts, so they're not being they're 527 00:31:34,680 --> 00:31:37,240 Speaker 1: being used less. We are so fortunate you're with us 528 00:31:37,280 --> 00:31:39,720 Speaker 1: today on this announcement, Jim mccoon with us from Principal 529 00:31:39,960 --> 00:31:59,120 Speaker 1: Group and CME and cbo E looking at bitcoin. We 530 00:31:59,200 --> 00:32:03,800 Speaker 1: are honored always at Bloomberg surveillance over the acuity and 531 00:32:03,880 --> 00:32:06,880 Speaker 1: the distinctions and the differences of our guests. Today has 532 00:32:06,920 --> 00:32:10,000 Speaker 1: been no difference. And now for another twisted look. She 533 00:32:10,080 --> 00:32:14,040 Speaker 1: holds an electrical engineering degree from kel Tech and showed 534 00:32:14,040 --> 00:32:17,880 Speaker 1: out a shingo at Harvard University in Stanford for a bit. 535 00:32:17,960 --> 00:32:21,520 Speaker 1: Elaine Oh joins us. She writes for Bloomberg View, Elaine, 536 00:32:21,720 --> 00:32:23,800 Speaker 1: what was it like the day you got your acceptance 537 00:32:23,880 --> 00:32:28,440 Speaker 1: letter from kel Tech. Oh, that was a really long 538 00:32:28,960 --> 00:32:32,200 Speaker 1: time ago, But I mean I always knew I wanted 539 00:32:32,240 --> 00:32:35,040 Speaker 1: to go there because I I've been interested in tech 540 00:32:35,080 --> 00:32:38,640 Speaker 1: and computers since that was the kid. You come from 541 00:32:38,720 --> 00:32:43,400 Speaker 1: the tech side of this arch debate on bitcoin, as 542 00:32:43,600 --> 00:32:48,080 Speaker 1: as someone of prodigious academics in engineering and operations systems, 543 00:32:48,520 --> 00:32:52,800 Speaker 1: how do you respond to economists, for example, Joseph Stiglets 544 00:32:52,920 --> 00:32:58,800 Speaker 1: Laureate saying bitcoin should be outlawed. Well, I mean it's 545 00:32:58,840 --> 00:33:01,640 Speaker 1: a really silly thing to say that the coins should 546 00:33:01,680 --> 00:33:04,120 Speaker 1: be outlawed because it can't be outlawed. It's it's not 547 00:33:04,880 --> 00:33:11,320 Speaker 1: controlled by anyone. There's no command center. I mean, this 548 00:33:11,200 --> 00:33:13,560 Speaker 1: is this is something that's being run in the countries 549 00:33:13,600 --> 00:33:17,080 Speaker 1: all around the world on like tens of thousands of machines. 550 00:33:17,240 --> 00:33:21,520 Speaker 1: So I mean he can say that, but it's just silly. Well, Elaine, 551 00:33:21,560 --> 00:33:23,760 Speaker 1: if it's silly, I mean, I'm wondering, for example, can 552 00:33:23,800 --> 00:33:30,560 Speaker 1: you log on to Facebook in China? Uh? You Well, 553 00:33:30,600 --> 00:33:32,520 Speaker 1: you'd have to go through a vp N. I mean, 554 00:33:32,560 --> 00:33:35,200 Speaker 1: there are ways to log onto Facebook in China, but 555 00:33:35,680 --> 00:33:39,560 Speaker 1: it's not accessible to But but I raised that that 556 00:33:39,800 --> 00:33:44,200 Speaker 1: specific example just because you say that it can't be outlawed. 557 00:33:44,520 --> 00:33:47,400 Speaker 1: What if, let's say the Chinese government were to see 558 00:33:47,560 --> 00:33:51,080 Speaker 1: bitcoin as a threat to the stability of the financial 559 00:33:51,160 --> 00:33:55,080 Speaker 1: system and they outlawed people's ability to invest in it. 560 00:33:57,160 --> 00:33:59,920 Speaker 1: Um I think, I mean, that's actually a very real 561 00:34:00,120 --> 00:34:04,360 Speaker 1: threat right now China has I guess the central banks 562 00:34:04,560 --> 00:34:08,080 Speaker 1: or people think has um made insinuations that they plan 563 00:34:08,239 --> 00:34:10,760 Speaker 1: to do some sort of deep packing inspection to filter 564 00:34:10,840 --> 00:34:15,680 Speaker 1: out bitcoin related traffic. But I think that users will 565 00:34:15,719 --> 00:34:18,560 Speaker 1: find a way around that if they truly want to 566 00:34:18,640 --> 00:34:23,359 Speaker 1: use bitcoin. You are a blockchain engineer, do you care 567 00:34:23,440 --> 00:34:29,680 Speaker 1: about the price of bitcoin? Um? Only in as far 568 00:34:29,760 --> 00:34:34,640 Speaker 1: as uh, A lot of my clients pay me in bitcoin, 569 00:34:34,840 --> 00:34:38,600 Speaker 1: But for the most part, I mean not really. But 570 00:34:38,600 --> 00:34:41,239 Speaker 1: but I mean the technology is sound and it will 571 00:34:41,320 --> 00:34:44,680 Speaker 1: continue to be for many years. Can we then partition 572 00:34:45,960 --> 00:34:50,720 Speaker 1: all the price blah blah blah from your engineering work 573 00:34:51,600 --> 00:34:58,799 Speaker 1: or on a ven diagram? Are they overlamping not? The 574 00:34:58,880 --> 00:35:03,560 Speaker 1: price doesn't have a lot to do with the underlying technology, um, 575 00:35:03,600 --> 00:35:08,560 Speaker 1: I mean right now, bitcoin's number one use case is speculation, 576 00:35:08,840 --> 00:35:11,000 Speaker 1: which is not really what it was intended for you, 577 00:35:11,480 --> 00:35:15,120 Speaker 1: But that's just a side effect. Is this number two 578 00:35:15,239 --> 00:35:22,799 Speaker 1: use corruption? In black market crime. I wouldn't say that, uh. 579 00:35:23,760 --> 00:35:27,120 Speaker 1: Um from my experience, the number two US is just 580 00:35:27,239 --> 00:35:32,640 Speaker 1: to make UM international payments because it's not always easy 581 00:35:32,800 --> 00:35:38,640 Speaker 1: to or the cost effective to go through UM a 582 00:35:38,680 --> 00:35:41,600 Speaker 1: bank that needs to then go through a corresponding bank 583 00:35:41,640 --> 00:35:46,800 Speaker 1: to making international transfer. Elaine, you wrote back in June 584 00:35:47,000 --> 00:35:50,359 Speaker 1: and a really great piece for a Bloomberg And it 585 00:35:50,440 --> 00:35:52,680 Speaker 1: has to do with the blockchain bubble. You said that 586 00:35:52,719 --> 00:35:55,560 Speaker 1: it might be a desirable thing having to do with 587 00:35:55,600 --> 00:35:57,680 Speaker 1: the sale of digital tokens, and what if you could 588 00:35:57,680 --> 00:36:02,319 Speaker 1: explain that Yeah, uh, well, so this is sort of 589 00:36:02,320 --> 00:36:06,640 Speaker 1: separate from bitcoin, but people have been trying for I 590 00:36:06,680 --> 00:36:10,160 Speaker 1: guess a lot of startups and entrepreneurs are raising money 591 00:36:10,200 --> 00:36:16,040 Speaker 1: by selling digital tokens, and most of the people who 592 00:36:16,040 --> 00:36:19,480 Speaker 1: are buying these tokens will see their investment s paper rise. 593 00:36:20,160 --> 00:36:24,799 Speaker 1: But at the same time, UM, it's always been really 594 00:36:24,840 --> 00:36:28,200 Speaker 1: hard for people who are developing open source software to 595 00:36:28,239 --> 00:36:33,919 Speaker 1: find sources of funding, and the bubble, I mean might 596 00:36:34,040 --> 00:36:37,480 Speaker 1: not result in returns for the investors, but I think 597 00:36:37,719 --> 00:36:41,800 Speaker 1: this is finally a good way for UM software developers 598 00:36:41,840 --> 00:36:45,120 Speaker 1: to write independent sources of funding. What is your best outcome? 599 00:36:45,239 --> 00:36:49,080 Speaker 1: I mean, you know, almost within an engineering standpoint, what 600 00:36:49,280 --> 00:36:53,000 Speaker 1: is your best outcome for all the froth and uproar 601 00:36:53,120 --> 00:36:56,919 Speaker 1: over the price ascent of bitcoin? What what? What would 602 00:36:56,960 --> 00:37:00,120 Speaker 1: you like to have happen? If we see it in 603 00:37:00,160 --> 00:37:04,160 Speaker 1: an arithmetic space, it's a hyperbola, it's not there yet 604 00:37:04,239 --> 00:37:07,759 Speaker 1: in a log y axis where it's simply convex. Do 605 00:37:07,800 --> 00:37:10,640 Speaker 1: you want it to go higher? Do you want stability? 606 00:37:11,000 --> 00:37:12,920 Speaker 1: Or do you want it to retreat to some level 607 00:37:13,280 --> 00:37:18,600 Speaker 1: that's optimal for you. I'd actually prefer to see the 608 00:37:18,840 --> 00:37:23,880 Speaker 1: price go lower right now. Bitcoin transactions are every bitcoin 609 00:37:23,960 --> 00:37:27,920 Speaker 1: transaction costs a certain amount of money that denominate in bitcoin, 610 00:37:28,360 --> 00:37:30,560 Speaker 1: and the higher the price of bitcoin, the more expensive 611 00:37:30,600 --> 00:37:33,840 Speaker 1: it is to make a payment using bitcoin. So I 612 00:37:33,880 --> 00:37:36,160 Speaker 1: would prefer to see the price quite a bit lower 613 00:37:36,200 --> 00:37:39,400 Speaker 1: just to make it so payments aren't as expensive as 614 00:37:39,440 --> 00:37:42,120 Speaker 1: a team Eleno, thank you so much. She writes for 615 00:37:42,160 --> 00:37:45,560 Speaker 1: Bloomberg View, and of course with her work within blockchain 616 00:37:46,040 --> 00:37:51,200 Speaker 1: UH and with a more technological end of of bitcoin, 617 00:37:51,360 --> 00:37:55,680 Speaker 1: she's with global financial access as well, but writing for Bloombergview. 618 00:37:55,800 --> 00:38:00,360 Speaker 1: Thrilled to have a len On with us today. H 619 00:38:04,719 --> 00:38:08,920 Speaker 1: thanks for listening to the Bloomberg Surveillance podcast subscribe and 620 00:38:08,960 --> 00:38:14,279 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 621 00:38:14,320 --> 00:38:18,560 Speaker 1: platform you prefer. I'm on Twitter at Tom Keene before 622 00:38:18,600 --> 00:38:22,440 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg 623 00:38:22,520 --> 00:38:22,840 Speaker 1: Radio