WEBVTT - Surveillance Special: The Bitcoin Debate 0:00:00.080 --> 0:00:12.960 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:16.960 Jai Ley. We bring you insight from the best in economics, finance, 0:00:17.040 --> 0:00:23.480 investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.080 Bloomberg dot Com and of course on the Bloomberg with 0:00:34.280 --> 0:00:39.279 the Steen Jacobson, who has a number of titles at 0:00:39.360 --> 0:00:44.239 Sexo Bank of Copenhagen. He's out of economics Copenhagen universe 0:00:44.479 --> 0:00:48.640 versus university. But Steen, what is so important with your 0:00:48.680 --> 0:00:53.120 August position chief economist and all that? If you have 0:00:54.080 --> 0:00:58.720 a trading experience to die for? And this was of 0:00:58.760 --> 0:01:01.040 course the Chase men. This is folks, when it was 0:01:01.120 --> 0:01:07.480 Chase Manhattan, Proprietary Trading Group, Swiss Bank or Swiss Bank Corps. 0:01:07.480 --> 0:01:10.240 These are names from the past, Steen, But you have 0:01:10.360 --> 0:01:14.759 been on a desk. How does a trading experience, grizzled 0:01:14.760 --> 0:01:18.920 guy like you look at bitcoin? Do you trust the 0:01:18.959 --> 0:01:23.160 bid and trust the ask? Given the years and years 0:01:23.200 --> 0:01:29.880 you've had of enjoying losing money? Absolutely not. I must say. 0:01:29.680 --> 0:01:32.840 I'm just back from pretty much a world tour and 0:01:33.000 --> 0:01:37.520 as sooner my presentation over the first question is about cryptocurrency. 0:01:37.600 --> 0:01:39.720 The second, the third, the fourth, and the the fifth is 0:01:39.720 --> 0:01:43.000 also about cryptocurrency. So you know, you made me sound 0:01:43.080 --> 0:01:45.160 very old, which of course I had, but now I'm 0:01:45.160 --> 0:01:48.360 actually uh my most recent highs of twenty two year 0:01:48.400 --> 0:01:52.200 old crypti analysts. So it's very much become part of 0:01:52.240 --> 0:01:54.760 my my every day. And I have to say the 0:01:54.800 --> 0:01:57.640 crypto analyst the high it which twenty two and me 0:01:57.960 --> 0:02:00.920 we sit and exactly obviously the ends of the spectrum 0:02:00.960 --> 0:02:03.880 in terms of how exciting old this is for me. 0:02:04.080 --> 0:02:07.880 This is a very sophisticated computer game that is running 0:02:07.880 --> 0:02:10.359 out of steam at as soon as we see as 0:02:10.400 --> 0:02:12.360 we saw today the confirmation of c M E, c 0:02:12.440 --> 0:02:14.600 B O E and other exchanges going to make it 0:02:14.639 --> 0:02:16.960 live because we know in history, when we actually have 0:02:17.040 --> 0:02:19.680 a proper and that is the essence of your question, 0:02:19.720 --> 0:02:21.680 when we have a proper bit and a proper offer, 0:02:21.960 --> 0:02:25.040 when we have the ability to trade both side off 0:02:25.080 --> 0:02:28.200 the trade, then the market becomes a totally different animal. 0:02:28.280 --> 0:02:31.519 In other words, I think the US to salization of 0:02:31.600 --> 0:02:33.240 the c M E, c B OH we actually become 0:02:33.280 --> 0:02:36.520 a transparent market, will make this market grow, whether they've 0:02:36.520 --> 0:02:39.320 been continues to go either to twenty five thousand or 0:02:39.320 --> 0:02:41.679 five thousand or one thousand. Of course we will be 0:02:41.720 --> 0:02:44.400 depending on how good they are becoming a real currency 0:02:44.440 --> 0:02:47.760 with the heritage of the Baltic Sea and the mathematics 0:02:47.800 --> 0:02:50.440 of Louvin. And I don't know where the first trade 0:02:50.520 --> 0:02:52.480 was made in Copenhagen. Maybe it was out in the 0:02:52.520 --> 0:02:55.720 harbor with a mermaid. And there's the buttonwood tree and 0:02:55.760 --> 0:02:59.560 the rest of it. Where do the markets meet on bitcoin? 0:02:59.639 --> 0:03:05.120 Do you have any belief in the bid ask process 0:03:05.120 --> 0:03:11.440 of bitcoin being a market transparent process? Not at all. 0:03:11.520 --> 0:03:14.360 And we see dating stories that that circulated, certainly on 0:03:14.400 --> 0:03:17.800 Twitter and other social media platfhones that are people have 0:03:18.160 --> 0:03:20.440 been trying to hit the bid then they've gone from 0:03:20.480 --> 0:03:23.320 being up hundred stuves to being down miners thirty. Because 0:03:23.360 --> 0:03:25.959 as sex as you say, what we what we're dealing 0:03:25.960 --> 0:03:29.480 with mathematically, which Switchpane O'Connor told me a long time 0:03:29.520 --> 0:03:31.960 ago is the fat tail and in the fat tel. 0:03:32.080 --> 0:03:34.440 The central problem is that we have what we call 0:03:34.639 --> 0:03:39.200 this continuity discontinuity, and this continus you means basically you 0:03:39.200 --> 0:03:41.640 cannot expect the price we want you once to free 0:03:41.640 --> 0:03:43.760 fall free fall. What you have is you have to 0:03:43.800 --> 0:03:46.120 price this hundred is hundred, and then it's fifty, and 0:03:46.160 --> 0:03:48.280 then it's sixty, and then it's hundred and twenty. So 0:03:48.400 --> 0:03:51.240 you have a pricing model that looks very very different. 0:03:51.320 --> 0:03:53.800 It doesn't mean the market doesn't have liquidity, but it 0:03:53.920 --> 0:03:58.000 only has pockets of liquidity. So you absolutely writing saying that. 0:03:58.080 --> 0:04:00.880 I will say for the business we do mainly in 0:04:00.960 --> 0:04:05.560 exchange traded products on this uh, this is exchange traded notes, 0:04:05.760 --> 0:04:09.000 which we facilitate a lot of people are treading it, 0:04:09.040 --> 0:04:11.280 but it's really with the one person of the capital 0:04:11.400 --> 0:04:13.360 trying it out. How do we do this? How does 0:04:13.360 --> 0:04:16.320 it work? So far? And all the last couple of days, 0:04:16.320 --> 0:04:19.039 a few people got burned, but overall, of course, as 0:04:19.080 --> 0:04:21.800 long as we have this trajectory higher today ten thousand, 0:04:21.800 --> 0:04:24.440 four and fifty five, as we talked, of course people 0:04:24.480 --> 0:04:26.440 think this is a money machine. But I have noticed 0:04:26.480 --> 0:04:28.520 my email box is starting to fill up with people 0:04:28.560 --> 0:04:31.960 saying I can make in a week the stein. You know, 0:04:32.000 --> 0:04:34.560 I want to just follow up on this idea of 0:04:34.640 --> 0:04:37.919 what's real and what's not because Tesla comes to mind 0:04:37.920 --> 0:04:40.360 when I think of a company that's not making any 0:04:40.400 --> 0:04:43.080 money but has evaluation that's greater than many of its 0:04:43.160 --> 0:04:46.159 peers like Ford for example, and one if you could 0:04:46.200 --> 0:04:48.360 just dive a little bit deeper into this whole world 0:04:48.480 --> 0:04:52.480 of electric vehicles and what it takes to power them 0:04:52.560 --> 0:04:56.320 and an investment opportunity. This is all about lithium batteries, 0:04:56.360 --> 0:04:59.800 at least at the moment, as certainly, if not list 0:05:00.160 --> 0:05:02.880 in the future, then certainly batteries. What I've been arguing 0:05:02.880 --> 0:05:05.920 and saying is that when you have one single political 0:05:06.000 --> 0:05:09.360 power like China wanting to deal with this number one 0:05:09.440 --> 0:05:13.000 social easy pollution through electrification of costs and in the 0:05:13.040 --> 0:05:16.480 process saying by twenty thirty all costs has to be electrified, 0:05:16.800 --> 0:05:21.040 do you have a magnitude of new release k bix 0:05:21.080 --> 0:05:25.479 and and and research and development We've never seen false 0:05:25.560 --> 0:05:28.719 Wargen of Germany has committed over twenty billion. That took 0:05:28.720 --> 0:05:30.919 committed twenty five billions to drive all this carts in 0:05:30.920 --> 0:05:33.760 the space of last six months. We see across the 0:05:33.800 --> 0:05:35.680 board the money has been front at it at a 0:05:35.760 --> 0:05:38.080 rate we have not seen. I mean, if there's one 0:05:38.120 --> 0:05:40.840 thing lagging from this beautiful stock market we've seen over 0:05:40.839 --> 0:05:43.640 the last ten years, it is exactly that the companies 0:05:44.040 --> 0:05:47.240 to some extent has stopped doing K bix and taking 0:05:47.240 --> 0:05:50.279 the kpick expendure down to the bottom life improving margins. 0:05:50.520 --> 0:05:52.400 What we see now, in my opinion, and the next 0:05:52.400 --> 0:05:55.800 ten years, and even most dominantly in US next two years, 0:05:55.960 --> 0:05:59.240 is that everybody's going to move to electric cars. Seeing 0:05:59.240 --> 0:06:01.880 this has been brilliant. We've got to get you on 0:06:01.920 --> 0:06:05.600 again soon, particularly in our London offices. Mr Jacobson, this 0:06:05.760 --> 0:06:31.400 was Sexo Bank, this is Bloomberg. We're back with Joseph 0:06:31.440 --> 0:06:35.960 Stiglitz of Columbia University in January. Professor Stiglitz said this, 0:06:36.160 --> 0:06:38.280 so let's bring in that quote board. I believe very 0:06:38.320 --> 0:06:42.159 strongly that countries like the United States could and should 0:06:42.320 --> 0:06:45.200 move to a digital currency. Professor, were you talking about 0:06:45.200 --> 0:06:47.960 bitcoin then, No, I was not. I was talking to 0:06:48.400 --> 0:06:55.200 about actually extending the systems that we already have, like uh, 0:06:55.600 --> 0:06:59.960 master card, visa. Let's make the whole system, uh into 0:07:00.000 --> 0:07:05.360 to one in which we we use digital currency. Uh. 0:07:05.440 --> 0:07:10.080 It's not bitcoin, it's a basically US dollar based uh 0:07:10.400 --> 0:07:15.120 in the United States and Europe, uh, euro and the pound. Uh. 0:07:15.440 --> 0:07:21.080 But it's using electronics rather than paper. You know, paper 0:07:21.200 --> 0:07:26.360 is so uh first century? Why are we using paper? 0:07:26.640 --> 0:07:30.560 That was the question that was professor. If bitcoin were 0:07:30.600 --> 0:07:34.360 to be regulated, could it be viable? I look look 0:07:34.360 --> 0:07:37.880 at uh one of the main functions of government is 0:07:37.920 --> 0:07:44.800 to create currency. Uh. And bitcoin is successful only because 0:07:45.320 --> 0:07:50.480 of its potential for circumvention, uh, lack of oversight. So 0:07:50.520 --> 0:07:52.840 it seems to me it ought to be outlawed. It 0:07:52.920 --> 0:07:58.880 doesn't serve any socially useful function. Uh. It's uh. We 0:07:58.920 --> 0:08:02.680 ought to just go back to what we always have had. 0:08:03.160 --> 0:08:06.440 And and this is just a bubbles. Several of your 0:08:06.800 --> 0:08:11.800 commentators have already pointed out it's a bubble. That's uh. Uh. 0:08:12.640 --> 0:08:14.000 I'm going to give a lot of people a lot 0:08:14.000 --> 0:08:17.320 of exciting times as it rigs up and then goes down. 0:08:17.440 --> 0:08:20.840 But what I was talking about is the medium of 0:08:20.920 --> 0:08:24.760 exchange that we use for transaction. Uh. And what I 0:08:24.800 --> 0:08:27.920 was trying to say is, let's move away from paper 0:08:28.320 --> 0:08:31.920 into the century of a digital economy. This is a 0:08:31.920 --> 0:08:34.679 way from your Nobel prize, and it's away from your 0:08:34.679 --> 0:08:37.400 acclaim and economics, but I'm gonna go there anyways. Charles 0:08:37.440 --> 0:08:41.560 mcka eighteen forty one talks about our peculiar follies in 0:08:41.559 --> 0:08:44.800 the behavioral component that makes for these bubbles. Whether it's 0:08:44.800 --> 0:08:48.400 sixteen thirty seven and Tulip Bubs eighteen forty rows. Bring 0:08:48.520 --> 0:08:50.880 up the chart here, here's the bubble into making. This 0:08:50.960 --> 0:08:54.600 is log bitcoin. I can't stand the arithmetic charts and 0:08:54.640 --> 0:08:57.080 this is all you need to know. This is massive convexity. 0:08:57.320 --> 0:08:59.840 I haven't seen that charts since the Tulip bulbs. When 0:08:59.880 --> 0:09:04.440 we're doing surveillance by Semaphore Professor Stiglets, they're relying on 0:09:04.559 --> 0:09:09.320 a Marxist theory of value. They're going back to middle 0:09:09.440 --> 0:09:14.319 marks and looking at the value of exchange. It's smoking mirrors, 0:09:14.440 --> 0:09:18.360 isn't it. Uh precisely, thank you? Why well, the value 0:09:18.360 --> 0:09:21.920 of a bitcoin today is expectations of what the bitcoin 0:09:22.120 --> 0:09:25.199 is going to be tomorrow. Uh. If the government says, 0:09:25.480 --> 0:09:30.160 look at the reason bitcoin is being used as the circumvention, 0:09:30.320 --> 0:09:32.920 they could compt down in any moment and then uh 0:09:33.000 --> 0:09:35.240 it collapses. We got to get you back here. I 0:09:35.280 --> 0:09:37.560 would love to have you join our London set with 0:09:37.640 --> 0:09:41.280 Francine to talk about Brexit, some of that politics, and 0:09:41.400 --> 0:09:45.079 also talk to you about the underlying value of exchange 0:09:45.240 --> 0:09:48.640 of bitcoin. He is a lord from Colombia. Two books, 0:09:48.679 --> 0:09:52.680 two books and one there they are the classic globalization 0:09:52.840 --> 0:09:57.880 is discontent and the Euro as well from Joe Stiglets 0:09:58.000 --> 0:10:20.880 as well. You're gonna get to another important conversation ripping 0:10:20.960 --> 0:10:24.600 up the script on this truly historic announcement on bitcoin 0:10:24.640 --> 0:10:28.440 where CME and cbo E have chosen to set up 0:10:28.440 --> 0:10:31.280 markets on a bitcoin that is a big bitcoin higher. 0:10:31.520 --> 0:10:33.760 We'll get to that quote in a moment. First, our 0:10:33.840 --> 0:10:36.520 economic indicators and they are always always brought you by 0:10:36.520 --> 0:10:40.240 Commonwealth Financial Network to broker dealer. Are I a that's 0:10:40.280 --> 0:10:46.240 been putting relationships first since found out why the industry 0:10:46.280 --> 0:10:50.240 is most satisfied advisors. They are head over heels about 0:10:50.920 --> 0:10:56.480 Commonwealth Financial Network. Visit Commonwealth dot com. So we've had 0:10:56.520 --> 0:11:00.760 a Jimmer con Cambridge Mathematics principal group. He was brilliant 0:11:01.240 --> 0:11:04.439 on the gyrations, if you will, as the news broke. 0:11:04.880 --> 0:11:09.520 And then we got lucky with Steen Jacobson Uh exceptionally 0:11:09.600 --> 0:11:13.440 experienced trader UH and now chief economist with Saxo Bank 0:11:14.280 --> 0:11:16.880 so much. And now we go to the gentleman who 0:11:16.920 --> 0:11:19.839 fractured mathematics like I did when he was at California 0:11:20.160 --> 0:11:23.920 Santa Barbara. Chris Alman joins us UH right now with 0:11:24.000 --> 0:11:27.839 the California State Teachers Retirement System you're on a whole 0:11:27.880 --> 0:11:33.880 another spectrum from some of our other Matthew guests is bitcoin, 0:11:33.960 --> 0:11:39.240 I'm sure is tangential for you. But nevertheless, you gotta 0:11:39.440 --> 0:11:43.200 think about it. How does how many assets do you have? 0:11:43.360 --> 0:11:48.360 Are you wonder like seventeen trillion? Uh? Okay, that's a 0:11:48.360 --> 0:11:52.720 little smaller than trillion. But you're you're running this aircraft 0:11:52.800 --> 0:11:55.760 carrier through the water. Do you care about the little 0:11:55.840 --> 0:12:00.480 pt boat? We do well a bitcoin because it is 0:12:00.520 --> 0:12:04.520 a market, it's interesting. I actually don't believe it's institutional yet. 0:12:04.559 --> 0:12:08.280 The news today is another step along that way. But 0:12:08.400 --> 0:12:13.319 I've said, uh, Tom, you know there's tangible and intangible investments, 0:12:13.360 --> 0:12:17.600 and bitcoin is the ultimate intangible investment. It represents nothing 0:12:17.679 --> 0:12:20.400 other than what somebody else will pay for it. It's air, 0:12:20.480 --> 0:12:23.360 it's invisible. Um. The fact that it has a market 0:12:23.480 --> 0:12:27.400 that's good. If anything in our world, Um, it's gonna 0:12:27.440 --> 0:12:30.959 probably represent an alternative currency. It's not a yen, it's 0:12:31.000 --> 0:12:33.160 not a pound, it's not a dollar. I'm going to 0:12:33.280 --> 0:12:35.720 get upset here. I did this with mail Pass yesterday 0:12:35.960 --> 0:12:40.400 at the Counts on Foreign Relations. David wants dependable currencies. 0:12:41.040 --> 0:12:44.280 It's not a come on Chris with that vall up 0:12:44.360 --> 0:12:47.240 or down. It's not a currency. It what I said 0:12:47.320 --> 0:12:49.920 was an alternative. In other words, if you're managing your 0:12:49.920 --> 0:12:52.920 currency portfolio and hedging it and you don't like pounds 0:12:53.000 --> 0:12:56.600 or dollars or yen or euros, it then becomes another 0:12:56.640 --> 0:13:00.000 alternative of almost being out. It's the cash equivalent maybe 0:13:00.120 --> 0:13:03.040 of of the asset allocation. We're not going to be 0:13:03.200 --> 0:13:05.400 using it. I'm gonna be studying it, but I bet 0:13:05.440 --> 0:13:07.240 it's going to be five to ten years before it 0:13:07.280 --> 0:13:11.480 becomes institutional. Do you ever feel that the it's a 0:13:11.559 --> 0:13:16.400 generational experiment that people under the age at thirty. I mean, 0:13:16.440 --> 0:13:19.199 we were just hearing from Steen Jacobson saying that he's 0:13:19.240 --> 0:13:22.040 got a twenty two year old analyst who's following bitcoin 0:13:22.160 --> 0:13:24.920 form and that they are at opposite ends when they 0:13:24.960 --> 0:13:29.160 look at the efficacy and the legitimacy of bitcoin. Oh, absolutely, 0:13:29.160 --> 0:13:32.520 you can cut it. Basically, I'll divide our audience five 0:13:32.760 --> 0:13:36.040 and before don't really get bitcoin. Very few of them 0:13:36.080 --> 0:13:39.280 trade it. After that, gen x a little bit, and 0:13:39.320 --> 0:13:41.719 the millennials absolutely just think it's the coolest thing. But 0:13:41.760 --> 0:13:43.880 they also put their entire lives out on the web 0:13:43.920 --> 0:13:48.360 and trust trust things implicitly. Uh. And again, this is 0:13:48.600 --> 0:13:53.760 a digital entity that has no underlying value underneath it. 0:13:53.760 --> 0:13:57.200 It is an invisible product. Um. And I think there's 0:13:57.200 --> 0:14:00.640 a generational divide people who want things that have underlying 0:14:00.920 --> 0:14:03.880 Even a stock which is digital, has an underlying ownership 0:14:04.040 --> 0:14:06.520 slice of a of a company. Right. But I'm glad 0:14:06.559 --> 0:14:10.040 you mentioned stocks because this also makes me think of Amazon, right, 0:14:10.080 --> 0:14:13.480 and I think of the Amazon Alexa echos that are 0:14:13.520 --> 0:14:17.599 appearing in people's homes. And how if I had described 0:14:17.640 --> 0:14:19.960 to you five ten years ago that this would be 0:14:20.000 --> 0:14:24.800 the way that you would interact with your uh, your retailer. 0:14:25.360 --> 0:14:27.560 I don't think many people would say, oh yeah, I'll 0:14:27.600 --> 0:14:30.040 just say what I want and it will just magically 0:14:30.040 --> 0:14:34.080 appear at my door. There's gonna be disruption, um. There's 0:14:34.080 --> 0:14:38.200 no regulations on bitcoins. So just like with Amazon, UM 0:14:38.280 --> 0:14:42.600 and Echo and all the different products, you're gonna see proliferations, 0:14:42.640 --> 0:14:45.480 You're gonna see growth, um. But I think you're also 0:14:45.520 --> 0:14:48.320 going to have some ups and downs of disruptions. As 0:14:48.360 --> 0:14:51.120 Tom said, volatility is going to be the code word 0:14:51.200 --> 0:14:54.440 because there's no rules and regulations to follow these things. 0:14:54.960 --> 0:14:57.120 But don't people counter that would saying that g You know, 0:14:57.160 --> 0:14:59.720 I lived through the two thousand eight two thousand seven 0:14:59.760 --> 0:15:03.920 to house and eight decline in stock prices and I'm 0:15:03.920 --> 0:15:05.800 still recovering from that. So I don't have a lot 0:15:05.800 --> 0:15:09.320 of faith in the stock market. Uh, what's the difference 0:15:09.400 --> 0:15:12.000 between that and bitcoin? It's just about what someone else 0:15:12.080 --> 0:15:14.480 is willing to pay me. Well, I'd argue that if 0:15:14.520 --> 0:15:17.200 you invested in no way, if you stayed invested like 0:15:17.320 --> 0:15:20.240 we have, you've already recovered and you own something that 0:15:20.360 --> 0:15:24.320 actually has some underlying asset value. There's a book value 0:15:24.360 --> 0:15:27.120 to those equities that you hold. There's no book value 0:15:27.160 --> 0:15:30.080 underlying of of a bitcoin. Doesn't mean it needs to 0:15:30.080 --> 0:15:32.200 go away, but you know who wants to trade a 0:15:32.200 --> 0:15:36.840 product that is primarily used by North Korea and unknown people. 0:15:36.880 --> 0:15:41.920 It's underlying value is it's the only value it has 0:15:41.920 --> 0:15:45.160 that it's anonymous, and obviously that's being proven to be wrong. 0:15:45.280 --> 0:15:48.040 When you were at Santa Barbara, did you get to 0:15:48.080 --> 0:15:52.080 see dish wall before they became famous? I did not, Tom, 0:15:52.680 --> 0:15:54.400 But you're right there. A lot of good things have 0:15:54.480 --> 0:15:57.360 come out of Santa Barbara and continue to to this day. 0:15:57.400 --> 0:16:00.360 This is the popular place. Counting blue cars came out 0:16:00.360 --> 0:16:04.320 of nowhere, and everyone's like, who are these people? I mean, 0:16:04.320 --> 0:16:09.160 it was magical bitcoin has come out of nowhere. I 0:16:09.200 --> 0:16:12.760 haven't had a constructive interview this week, pim with somebody 0:16:12.880 --> 0:16:17.520 under over. Is there anybody you know of our vintage 0:16:17.760 --> 0:16:21.760 that knows who dishwallet is that actually thinks bitcoins for real? 0:16:22.040 --> 0:16:26.120 That hurts at hurts And no, no constructive interviews? Uh? Sis, 0:16:26.160 --> 0:16:30.040 I know, seriously, I'm not sure that that there are. 0:16:30.560 --> 0:16:33.600 I think you've heard from very knowledgeable people, Jamie Diamond, 0:16:33.880 --> 0:16:36.200 quite a few others that have spoken out very strongly 0:16:36.240 --> 0:16:39.400 about bitcoin. Um, it could be it will be around 0:16:39.440 --> 0:16:42.200 for a long time. A number of the cryptocurrencies. Well, 0:16:42.280 --> 0:16:45.400 I'm gonna well, let me do this. Christie Allman. Uh, 0:16:45.480 --> 0:16:49.280 Christie Alman with Kelster California, say, teachers retirement system and 0:16:49.320 --> 0:16:52.080 the headline there's this, This is like in a million 0:16:52.160 --> 0:16:54.280 I've been here for like a hundred and twelve years, Michael, right, 0:16:54.680 --> 0:17:00.200 this headline. US regulators to allow bitcoin futures at c 0:17:00.680 --> 0:17:21.200 in the CBO, get hold out my wallet. Well to 0:17:21.240 --> 0:17:23.880 get back to and Richard's CEO of MMG Investments who 0:17:23.920 --> 0:17:27.400 manages over two eight billion pounds and assets, and Robert Niblett. 0:17:27.440 --> 0:17:29.640 He's director of Chatham House. So and first of all, 0:17:29.680 --> 0:17:31.760 what is bitcoin? I mean, can you afford to to 0:17:31.800 --> 0:17:34.639 sit it out or you need to be in but 0:17:34.680 --> 0:17:38.720 stay skeptical. Look, there are people that use bitcoin for 0:17:38.760 --> 0:17:41.640 all sorts of different reasons. Um. I mean I tend 0:17:41.680 --> 0:17:43.920 to agree, as you've just seen from the price moves 0:17:43.960 --> 0:17:45.600 that you can't say this is a store of value 0:17:45.600 --> 0:17:47.800 when the volume moves around as much as it does. 0:17:48.400 --> 0:17:51.320 It's clear that there are reasons why some people may 0:17:51.440 --> 0:17:55.360 choose to use appeer to peer currency or exchange, which 0:17:55.400 --> 0:17:57.560 is effectively what you're talking about in bitcoin. There might 0:17:57.560 --> 0:18:00.679 be legitimate reasons for that because you want to transactions 0:18:00.680 --> 0:18:04.800 away from prying government eyes. There might be illegitimate reasons 0:18:04.800 --> 0:18:06.840 why you might want to do that to keep transactions 0:18:06.840 --> 0:18:11.040 away from prying tax authorities. Um. But what it is 0:18:11.080 --> 0:18:14.560 not is something that you can use in replace of 0:18:15.119 --> 0:18:19.919 a dollar or sterling or euro. Because it is it 0:18:20.000 --> 0:18:22.600 does not have the underpinning and the backing of government 0:18:22.680 --> 0:18:25.560 oversighter issuance. And I think some of that, certainly on 0:18:25.560 --> 0:18:27.800 the oversight will come because it has to come, But 0:18:27.840 --> 0:18:30.520 that shouldn't take away from the fact that the underlying technology. 0:18:30.560 --> 0:18:34.240 The distributed ledger technology is a blot chain that sits underneath. 0:18:34.240 --> 0:18:37.879 It is a really powerful technology, and people have in 0:18:37.920 --> 0:18:39.760 the last two or three years have been starting to 0:18:39.760 --> 0:18:43.800 develop that distributed ledger technology for other purposes and other applications, 0:18:43.800 --> 0:18:45.879 and that is immensely powerful. But what's going on in 0:18:45.880 --> 0:18:48.600 the pricing of bitcoin is definitely mainlya in my mind 0:18:48.720 --> 0:18:50.680 right now, do you think it'll be regulated? And if 0:18:50.680 --> 0:18:53.800 it does get regulated, can then actually come back as 0:18:53.960 --> 0:18:56.640 an asset that you would look at? Well, I think 0:18:56.680 --> 0:18:58.720 it's possible that if you go way down the line 0:18:58.720 --> 0:19:00.840 that it's possible that might be some thing that you trade, 0:19:00.880 --> 0:19:03.520 But it's not a it's an instrument. It's not an asset. 0:19:03.600 --> 0:19:04.920 I think that's the way to look at it. So 0:19:04.960 --> 0:19:07.720 it's an instrument in the way that we've we've now 0:19:07.760 --> 0:19:11.440 trade in other non underpinned assets and sorts of derivatives 0:19:11.480 --> 0:19:14.600 that you have, but volatility would be one example. You 0:19:14.640 --> 0:19:18.520 can trade volatility. There's not an underlying asset to volatility itself. 0:19:18.800 --> 0:19:21.000 So I think yes, as a traded instrument, it is 0:19:21.040 --> 0:19:23.359 possible it will mature enough to be something that we 0:19:23.400 --> 0:19:25.640 can use, but we're away away from that We're years 0:19:25.680 --> 0:19:28.320 away from that. What is clear though, is that regulation 0:19:28.440 --> 0:19:30.800 I think at some stage must come to this market 0:19:30.840 --> 0:19:32.760 because people need to be protected. It's lots of people 0:19:32.800 --> 0:19:34.360 playing in this space who don't know what they're doing. 0:19:34.520 --> 0:19:36.680 Let's zoom in on the chart here. If we have bitcoin, 0:19:36.720 --> 0:19:39.360 we showed it yesterday. This is the interday chart. It's 0:19:39.400 --> 0:19:41.359 really you know, there's like eight ways to look at 0:19:41.359 --> 0:19:43.879 this chart on a log basis. Up we go with 0:19:43.960 --> 0:19:46.880 the surgery. You really don't get the moonshad feel a bitcoin, 0:19:47.119 --> 0:19:49.879 but you do get is this huge volatility yesterday and 0:19:49.920 --> 0:19:52.960 then the churn and this recent little move here. What 0:19:53.040 --> 0:19:55.720 I would suggest is you got a vector like this 0:19:55.880 --> 0:19:58.640 and we'll really have to see if bitcoin can find 0:19:58.640 --> 0:20:01.080 a bidder. I love what Dennis gar And said, taking 0:20:01.119 --> 0:20:05.840 a direct shot at Bloomberg surveillance, Bitcoin this and Bitcoin that. Dennis, 0:20:05.880 --> 0:20:09.000 if you're watching, yes, we're doing more bitcoin this in 0:20:09.080 --> 0:20:13.080 Bitcoin that, and Richards if bitcoin's out there, and Robin Nibblet, 0:20:13.160 --> 0:20:15.480 let me go to you on this. The focus seems 0:20:15.520 --> 0:20:19.480 to be on the excesses of bitcoin in China. Can 0:20:19.520 --> 0:20:26.480 that be a set of financial instability for the Chinese leadership? Um, well, 0:20:26.760 --> 0:20:28.720 you're getting a little bit beyond my Ken here. I mean, 0:20:28.760 --> 0:20:31.200 my instinct would be to say that part of this 0:20:31.680 --> 0:20:33.960 rise of bitcoin is to do with the fact that 0:20:34.000 --> 0:20:37.159 we have some large anti corruption drives in place in 0:20:37.400 --> 0:20:39.680 key markets across the world. China has been going on 0:20:39.760 --> 0:20:42.320 for a while, but you've got Saudi Arabia as well. 0:20:42.400 --> 0:20:44.760 Now who knows what might come in some of these 0:20:44.800 --> 0:20:48.919 other as we discussed earlier, kind of very tightly controlled governments. 0:20:49.000 --> 0:20:50.800 So people are looking, as Anne was saying, for a 0:20:50.840 --> 0:20:54.000 place to hide money, to be frank more than anything else. 0:20:54.000 --> 0:20:56.119 So I'm just wondering how much of this in my world, 0:20:56.359 --> 0:20:58.359 how much of my world is spilling over into the 0:20:58.400 --> 0:21:01.440 bitcoin space. If it is from a Chinese government standpoint, 0:21:01.480 --> 0:21:06.600 having pretty much impost some control on the the shadow 0:21:06.640 --> 0:21:09.040 banking side that had really got a little bit out 0:21:09.040 --> 0:21:12.200 of control, it'll worry them that a new risk has 0:21:12.240 --> 0:21:14.200 come along that they're now also going to have to tame. 0:21:14.480 --> 0:21:16.080 This goes to my book of the Year last year, 0:21:16.160 --> 0:21:20.520 Kenneragos the cursor cash Robin and the idea of of 0:21:20.560 --> 0:21:23.480 Sweden leading the way and maybe India or their courage 0:21:23.520 --> 0:21:25.639 dealing with it as well. Is there going to be 0:21:25.640 --> 0:21:28.560 a cursive bitcoin. Do you just assume that if it's 0:21:28.600 --> 0:21:32.800 the new cash alternative, at some point bitcoin collapses? Is 0:21:32.800 --> 0:21:38.119 it almost barter medium? For my taste, it feels more 0:21:38.160 --> 0:21:41.360 like Barto medium. I'm still a big believer, however, weak 0:21:41.400 --> 0:21:43.840 governments are around the world that the best thing you've 0:21:43.880 --> 0:21:46.800 got in terms of preserving order, and whether that order 0:21:46.840 --> 0:21:49.840 is applied to international alliances or to markets or the money. 0:21:50.119 --> 0:21:52.280 People are still looking for some ultimate authority and the 0:21:52.280 --> 0:21:55.440 only one that's just right now national governments very good. Well, 0:21:55.480 --> 0:21:57.640 the cursive bitcoin, maybe that's what we'll call it. Robbin 0:21:57.720 --> 0:22:20.840 Nibblet where a sitting in Richards him. I want to 0:22:20.840 --> 0:22:22.720 get to this because there's so much to talk about 0:22:23.040 --> 0:22:26.560 with Jim McCahon this morning, Jim, John cry and Deutsche Bank, 0:22:27.080 --> 0:22:31.000 James Gorman, Morgan Stanley and Richards we spoke to earlier 0:22:31.040 --> 0:22:36.600 this morning at MG. You you're all mathematically based. Do 0:22:36.680 --> 0:22:41.119 you have a confidence that are fixed income markets can 0:22:41.240 --> 0:22:49.040 unwind in the cute with mathematical stability over the next 0:22:49.040 --> 0:22:53.360 two to five years, Tom, I have confidence, but not certainty. 0:22:53.760 --> 0:22:56.560 So far, the Fed has judged it very well. They 0:22:56.560 --> 0:23:00.400 went through a lengthy period of not replacing of placing 0:23:00.400 --> 0:23:02.880 the bones now they're not replacing them. The running down 0:23:02.880 --> 0:23:06.240 the balance sheet, I think that's eminently possible within the 0:23:06.920 --> 0:23:10.040 market structure, within the flow of funds. Essentially, what the 0:23:10.080 --> 0:23:12.840 Fed has done is moved from a very accommodative monetary 0:23:12.840 --> 0:23:16.000 policy with que through a neutral one to now a 0:23:16.119 --> 0:23:19.600 slight tightening by reducing the balance sheet. And I think 0:23:19.600 --> 0:23:22.840 that goes with a modest interest rate increase. Now they've 0:23:22.840 --> 0:23:26.040 got to keep it stable. But then Mr Powell as 0:23:26.160 --> 0:23:30.200 chair is a continuity candidate, so I'm fairly confident they'll 0:23:30.280 --> 0:23:33.040 keep it stable. Without certainty they will sounded like the 0:23:33.080 --> 0:23:37.720 gentleman from Cambridge using their the calculus of through the 0:23:37.840 --> 0:23:41.920 calculus of the words slight. These are all gentle gradual, 0:23:42.560 --> 0:23:45.760 vector driven ideas. You and I know there can be 0:23:45.800 --> 0:23:50.840 exoggerous shocks. What's the exaggerous shock that could upset the 0:23:50.880 --> 0:23:54.480 apple cart for Governor Carney, Chairman Powell and all those 0:23:54.520 --> 0:23:58.919 remaining including Mr drag Well, for for for Governor Karney 0:23:59.000 --> 0:24:01.600 and for Mr drag you, it would be the impact 0:24:01.600 --> 0:24:03.720 of a hard Brexit. And I think the news on 0:24:03.760 --> 0:24:08.680 Bloomberg today about banks having to repay per contracts is 0:24:08.680 --> 0:24:11.639 a very good example of the sort of disruption that 0:24:11.720 --> 0:24:14.560 could inhibit credit creation in Europe. That would be a 0:24:14.640 --> 0:24:17.680 nasty shock coming from within the monetary system, and one 0:24:17.720 --> 0:24:20.480