WEBVTT - Bankman-Fried Associates Flip on FTX Founder 0:00:01.840 --> 0:00:04.440 This is Bloomberg Business Week. I'm Karl Masser and I'm 0:00:04.480 --> 0:00:06.840 Tim Stanevik. We're here every day bringing you the latest 0:00:06.840 --> 0:00:11.000 news from the world's of business and finance, technology, politics, economics, 0:00:11.039 --> 0:00:14.040 all harnessing the power of Business Week reporters and editors, 0:00:14.160 --> 0:00:17.000 not to mention our journalists and analyst in more than 0:00:17.040 --> 0:00:21.160 one twenty countries. You can download Bloomberg Business Weekend iTunes, SoundCloud, 0:00:21.239 --> 0:00:23.320 or Bloomberg dot com. You can also listen to our 0:00:23.360 --> 0:00:26.160 radio show at two pm Eastern Time on Bloomberg Radio 0:00:26.280 --> 0:00:30.920 or stream us live on YouTube and Bloomberg dot com. Alright, 0:00:30.920 --> 0:00:33.080 if I look at the Bloomberg terminal right now, the 0:00:33.120 --> 0:00:36.839 headline right on top is Sam Bankman free released on 0:00:36.880 --> 0:00:41.080 two hundred fifty million dollar bond in ft X fraud case. 0:00:41.200 --> 0:00:43.159 Let's check in with someone on the ground. We have 0:00:43.240 --> 0:00:46.560 Ava Benny Morrison on the phone from the Southern District 0:00:46.640 --> 0:00:50.120 Court of New York in New York City. But we're 0:00:50.159 --> 0:00:52.640 gonna get to the bill package in just a minute, 0:00:52.640 --> 0:00:55.280 but tell us a little bit about the scene on 0:00:55.440 --> 0:00:59.920 the ground. Good afterday. So at the moment, we're waiting 0:01:00.160 --> 0:01:03.279 outside the front doors of the Southern District of New 0:01:03.360 --> 0:01:07.800 York District Court House in downtown Manhattan. Um. There's dozens 0:01:07.800 --> 0:01:12.320 of photographers of cameraman UM, a lot of reporters, all 0:01:12.400 --> 0:01:15.319 waiting to Sam Batman free to walk out. In the 0:01:15.400 --> 0:01:19.040 last hour, he's been granted um bail. It was a 0:01:19.160 --> 0:01:22.080 very very stringent bail package. UM. And he was told 0:01:22.080 --> 0:01:23.800 by the judge that he'll be able to walk out 0:01:23.800 --> 0:01:26.720 of court today. Um. Once he and his parents signed 0:01:26.760 --> 0:01:31.520 a paper work. Even did was there a plee entered today? No, 0:01:31.760 --> 0:01:34.160 there wasn't a poet entered today. It was the first 0:01:34.160 --> 0:01:37.920 time that he had appeared in court on the US charges, um, 0:01:38.080 --> 0:01:40.959 and the court heard that he'll have a chance to 0:01:41.080 --> 0:01:43.720 enter a plea at a later date. The next court 0:01:43.800 --> 0:01:47.920 date was stepped out for January. So this must be 0:01:47.960 --> 0:01:52.840 some house to parents have it securest million dollar bond. 0:01:53.080 --> 0:01:56.040 Can you explain how that works? Well, it's it's not 0:01:56.120 --> 0:01:58.560 so much the worth of the house, um, but it 0:01:58.840 --> 0:02:00.640 is that he will be on the hook and his 0:02:00.720 --> 0:02:02.720 parents will be on the hook for two hundred fifty 0:02:02.760 --> 0:02:06.080 million dollars if he breaches any of these bail conditions. 0:02:06.360 --> 0:02:09.680 Now there are fifteen bail conditions. He's essentially going to 0:02:09.760 --> 0:02:13.400 have to live in home detention with electronic monitoring in 0:02:13.520 --> 0:02:18.520 his parents house in California. Uh and uh they used 0:02:18.560 --> 0:02:23.600 their house um as a surety UM attached to the bond. 0:02:23.800 --> 0:02:27.880 So again, if he tries to flee, if he breaches 0:02:27.880 --> 0:02:30.480 any of these conditions and a warrant is put out 0:02:30.520 --> 0:02:34.160 for his arrest, the judge warned him actually today UM 0:02:34.280 --> 0:02:37.680 that he will be UM. You know, he will have 0:02:37.720 --> 0:02:40.359 to pay two hundred and fifty million dollars. And I'll 0:02:40.360 --> 0:02:42.760 make the point as well that the prosecutors said that 0:02:43.120 --> 0:02:48.000 this was the largest pre trial bond um in history. 0:02:49.280 --> 0:02:51.920 So Ever, I mean, you've been covering this story every 0:02:52.000 --> 0:02:54.560 step of the way, and it's just a whirlwind. I mean, 0:02:54.800 --> 0:02:57.880 it was just ten days ago on December twelve, that 0:02:58.040 --> 0:03:01.640 Sam Bankman Fried was arrest did in the Bahamas. And 0:03:02.280 --> 0:03:04.160 ten days ago we thought that he was going to 0:03:04.240 --> 0:03:07.760 fight extradition. Walk us through how we got there, how 0:03:07.919 --> 0:03:11.680 we ended up here at this New York court appearance today. 0:03:12.720 --> 0:03:14.960 You're very right. It has been a wild ride over 0:03:15.000 --> 0:03:18.120 the past ten days. Bankman freed has been living in 0:03:18.120 --> 0:03:20.760 the Bahamas for some time, and it was last Monday 0:03:20.880 --> 0:03:24.720 evening that the behind me in authorities acting on a 0:03:24.720 --> 0:03:29.200 proditional restaurant from the US. Arrested bankman freed. He was 0:03:29.200 --> 0:03:33.680 accused of orchestrating a year long fraud through FTX and 0:03:34.160 --> 0:03:39.040 FTX hedge fund um aur a meter research. He appeared 0:03:39.080 --> 0:03:43.480 in court in the Bahamas and he was denied bail, 0:03:43.920 --> 0:03:47.200 and initially he indicated that he would fight extradition to 0:03:47.240 --> 0:03:50.400 the US um but I think there was maybe a 0:03:50.400 --> 0:03:52.480 bit of an insumption that he would be granted bail 0:03:52.560 --> 0:03:55.400 and he would be able to uh leave, moved back 0:03:55.400 --> 0:03:59.440 into his apartment in the Bahamas and fight extradition from there. 0:03:59.680 --> 0:04:02.680 But he was taken to quite a notorious prison in 0:04:02.720 --> 0:04:05.840 the Bahamas, where he has been for more where he 0:04:06.000 --> 0:04:08.360 was for more than a week. Then he changed his 0:04:08.400 --> 0:04:10.480 mind over the weekend and decided that he was going 0:04:10.480 --> 0:04:13.440 to consent to extradition back to the United States, and 0:04:13.480 --> 0:04:15.920 that played in his favor in the bail hearing today. 0:04:15.960 --> 0:04:19.200 The prostitutor said that if he hadn't have if he 0:04:19.240 --> 0:04:21.840 hadn't had consented be coming back to the United States, 0:04:22.400 --> 0:04:25.680 then he may not have been getting bail today. He 0:04:25.920 --> 0:04:30.479 was flown back from the Bahamas to um White Plains 0:04:30.880 --> 0:04:34.240 north of Manhattan last night. He was escorted by FBI 0:04:34.320 --> 0:04:37.440 agents and then appeared for the first time in court today. 0:04:37.800 --> 0:04:42.080 And another major announcement regarding this case is former Element 0:04:42.160 --> 0:04:45.400 the chief executive officer Caroline Ellison and former ft X 0:04:45.480 --> 0:04:49.560 Chief Technology Officer Gary Wayang. They pleaded guilty to fraud 0:04:49.600 --> 0:04:53.599 and we're cooperating with the prosecution. Boy, I didn't see 0:04:53.600 --> 0:04:56.120 that coming give us kind of what we know now. 0:04:57.200 --> 0:04:59.240 I think there was a lot of rumor and speculation 0:04:59.760 --> 0:05:03.960 at out who from FTX was co operating or wasn't cooperating. 0:05:04.560 --> 0:05:08.320 Banquetfried had been very vocal about what happened at ft 0:05:08.600 --> 0:05:11.440 X or his version of events ever since it all 0:05:11.480 --> 0:05:13.320 collapsed early last month. He was doing a lot of 0:05:13.360 --> 0:05:16.800 media interviews UM, but his co executives and the people 0:05:16.800 --> 0:05:20.919 that are closest to him UM were noticeably quiet. And 0:05:20.960 --> 0:05:25.039 the timing on this announcement about UM Ellison and sorry 0:05:25.040 --> 0:05:28.000 about the Caroline Ellison and Gary Wayange pleading guilty was 0:05:28.040 --> 0:05:31.560 really interesting. UM. The prosecutors here in New York waited 0:05:31.640 --> 0:05:34.359 until he was on the plane in the custody of 0:05:34.600 --> 0:05:37.600 US law enforcement UM and on his way to New 0:05:37.680 --> 0:05:41.679 York before they announced that Caroline Ellison and Gary Wang, 0:05:42.600 --> 0:05:45.000 who had been with Banker and Freed from the very 0:05:45.080 --> 0:05:49.200 early stages of ftx UM, had actually been cooperating the 0:05:49.279 --> 0:05:52.880 SUN and they had both pleaded guilty to fraud charges. 0:05:53.000 --> 0:05:57.000 Ellison has pleaded guilty seven charges, Wayang has pleaded guilty 0:05:57.120 --> 0:06:01.320 to four, and they have agreed to cooperate with prosecutors. 0:06:01.320 --> 0:06:04.159 This is obviously a massive blow for bank and Freed. 0:06:04.680 --> 0:06:06.919 Uh and they will be really, really valuable for the 0:06:06.960 --> 0:06:09.520 prosecution case. Well, that's what I've been wondering what this 0:06:09.640 --> 0:06:13.200 means for bank Man Freed's defense, because, I mean, during 0:06:13.240 --> 0:06:16.400 his media tour, he was very clear that he it 0:06:16.480 --> 0:06:21.479 wasn't necessarily intentional, it was management missteps that at least 0:06:21.600 --> 0:06:24.480 is what he was trying to present. But now that 0:06:24.520 --> 0:06:28.440 you have these two, these two very inner circle people, 0:06:28.440 --> 0:06:30.159 I don't know how much more inner circle you can 0:06:30.160 --> 0:06:33.480 get plead and guilty cooperating. I mean, what does that 0:06:33.560 --> 0:06:38.400 mean for bank man Freed exactly? And during his media 0:06:38.480 --> 0:06:42.160 interviews before his arrest, he was attempting to shift the 0:06:42.160 --> 0:06:44.720 blame a little bit to Alameda and saying that he 0:06:44.800 --> 0:06:47.800 didn't have as much oversight over Alameda as he should have, 0:06:48.160 --> 0:06:50.120 and he wasn't quite sure what was going on there, 0:06:50.839 --> 0:06:53.000 because one of the key issues of this case obviously 0:06:53.160 --> 0:06:56.240 is the use of FTX customer funds um to place 0:06:56.440 --> 0:06:59.600 high respects and prop up Alameda, And so he was 0:06:59.640 --> 0:07:03.160 attempt him to sort of put that hedge fund house 0:07:03.640 --> 0:07:06.760 arms lank Um and we sort of got maybe a 0:07:06.760 --> 0:07:08.960 little bit of a preview or the argument he might 0:07:09.000 --> 0:07:12.040 put up at a future court case. But Gary Wayang, 0:07:12.120 --> 0:07:15.840 I think will be a difficult witness to get around. 0:07:15.920 --> 0:07:20.480 He lived with Bankman Freed in the Bahamas. He was 0:07:20.520 --> 0:07:24.119 the chief technology officer of ft x UM. He wrote 0:07:24.120 --> 0:07:28.240 the codes that helped establish FTX. He was, you know, 0:07:29.200 --> 0:07:32.280 all accounts working side by side with him. So it 0:07:32.400 --> 0:07:35.160 might be a difficult argument for Bankman Free to make 0:07:35.280 --> 0:07:37.840 that he didn't know what Wayne was up to when 0:07:37.880 --> 0:07:41.640 Wayange has admitted to UM engaging in fraud. So we 0:07:41.680 --> 0:07:43.480 only have about twenty seconds left with you. But I 0:07:43.480 --> 0:07:46.200 am curious what should we be watching for next? What's 0:07:46.240 --> 0:07:49.800 next in the timeline? Uh, well, we're waiting now for 0:07:49.920 --> 0:07:51.720 bankman Free to walk out of the court house, his 0:07:51.880 --> 0:07:56.920 parents Barbara and Joseph to standford awful professors were um 0:07:57.000 --> 0:07:59.640 here in court. We're waiting for them all to walk work, 0:07:59.720 --> 0:08:01.320 walk half and then he will have to make his 0:08:01.440 --> 0:08:04.040 way back to California. So I guess we're watching to 0:08:04.080 --> 0:08:07.960 see as he abides by those bowel conditions. But also well, 0:08:08.280 --> 0:08:12.640 students have their eye on alright, great stuff. That is 0:08:12.840 --> 0:08:15.720 ava Benni Morrison on the phone outside the Southern District 0:08:15.720 --> 0:08:18.280 Court of New York in New York City, giving us 0:08:18.320 --> 0:08:21.680 all the latest on Sam bankman Fried and that FTX 0:08:21.800 --> 0:08:25.520 fraud case. Definitely a lot of moving parts here, these 0:08:25.560 --> 0:08:29.720 sees Bloomberg Business Week with Carol Masser and Tim Stinebeck 0:08:30.280 --> 0:08:34.199 on Bloomberg Radio. Well, how about this for an uplifting 0:08:34.559 --> 0:08:39.679 uh title? Here? Federal Reserve doesn't care about misery investors 0:08:39.760 --> 0:08:42.599 are feeling. And then I read along supporting stock and 0:08:42.640 --> 0:08:44.880 bond markets. That's not the business of the Federal Reserve. 0:08:45.160 --> 0:08:47.520 As I read those two things, I said, this feels 0:08:47.800 --> 0:08:51.000 it sounds like a Michael Reagan, you know, piece of writing. 0:08:51.040 --> 0:08:53.640 And sure enough, that's what it is. Joe Weber, editor 0:08:53.679 --> 0:08:56.000 Bloomber Business Week, joins us here in our Bloomberg Inner 0:08:56.000 --> 0:08:59.360 Actor Broker studio, and he said, Mike Reagan, Senior editor 0:08:59.400 --> 0:09:02.319 for Bloomer Market Joints is on zoom from New Jersey 0:09:02.400 --> 0:09:06.080 with his Maryland Turps sweatshirt. Looks like there we go. 0:09:06.160 --> 0:09:09.640 All right, Maryland football, are they bowling? Yeah, Maryland has 0:09:09.640 --> 0:09:14.640 they are? Yeah, the Duke's mayonnaise ball, which we of 0:09:14.679 --> 0:09:20.240 course is the most sure, absolutely exactly. All right, Joel, 0:09:20.440 --> 0:09:22.640 talk to us about kind of what we're doing here 0:09:22.640 --> 0:09:24.439 with this column. Here the feder reserves not in the 0:09:24.480 --> 0:09:27.679 business supporting stocks and bonds. Yeah, you know, when we 0:09:27.760 --> 0:09:31.960 just we're talking about um. The year that's been one 0:09:32.000 --> 0:09:34.520 of the themes has just been how you know, for 0:09:34.559 --> 0:09:36.720 a long time, it felt like there was a punch 0:09:36.800 --> 0:09:39.840 bowl and the FED was there to like host a 0:09:39.880 --> 0:09:42.720 great fun party and everything always went up. And then 0:09:42.720 --> 0:09:44.680 all of a sudden that punch bowl was taken away 0:09:44.800 --> 0:09:49.679 and um some carnadge and suit and obviously um inflation 0:09:49.840 --> 0:09:52.480 being a huge theme of the year, and the FED 0:09:52.520 --> 0:09:57.600 continuing to raise rates and any sort of uh accommodation 0:09:57.760 --> 0:10:00.600 that once may have felt like it from the Fed 0:10:00.760 --> 0:10:04.000 is nowhere to be seen. And in fact, that uh 0:10:04.200 --> 0:10:07.080 J pal might look a little bit like a certain 0:10:07.200 --> 0:10:10.959 you know, movie poster and from the movie Misery or something, 0:10:11.080 --> 0:10:12.679 right right, Mike, that was where we went with the 0:10:13.080 --> 0:10:15.880 art in this one. Yeah, pretty much. You know, it's 0:10:15.920 --> 0:10:19.319 interesting in that, you know, you can have this economy 0:10:19.360 --> 0:10:22.280 that on the surfaces is sort of booming. You know, 0:10:22.320 --> 0:10:25.200 we got that GDP print this morning three points percent. 0:10:25.280 --> 0:10:29.360 We've got a unemployment rate that's three point seven percent, 0:10:29.480 --> 0:10:33.680 you know, near a fifty some year low. But if 0:10:33.679 --> 0:10:35.640 the inflation picks up like it has this here, it's 0:10:35.679 --> 0:10:40.000 it's an economic uh emergency basically that the FED has 0:10:40.040 --> 0:10:44.200 to fight because you know, inflation really can cause maybe 0:10:44.280 --> 0:10:48.240 less pain less misery than unemployment uh per person that 0:10:48.320 --> 0:10:51.319 it affects, but it affects everyone, right, a broader swath 0:10:51.520 --> 0:10:55.280 of the population. So I went back to this, uh 0:10:55.360 --> 0:10:57.920 one of my favorite indexes, the misery index. It's called 0:10:58.240 --> 0:11:02.120 Arthur Oakin, who was a advisor to lb J president 0:11:02.160 --> 0:11:05.120 Lyndon Johnson in the in the sixties. And I love 0:11:05.160 --> 0:11:07.520 it because the math and it's very simple. It's just 0:11:08.000 --> 0:11:13.360 the unemployment rate plus the inflation rate, and the idea being, 0:11:13.760 --> 0:11:17.199 you know, it's either ones elevated you've got problems in 0:11:17.240 --> 0:11:20.200 the economy, um And in this case, it's it's the 0:11:20.240 --> 0:11:23.679 inflation that's elevated. So as you put out Joel, you 0:11:23.720 --> 0:11:26.000 know that the markets got used to this, the FED 0:11:26.200 --> 0:11:30.199 that would always come to the rescue if the stock 0:11:30.280 --> 0:11:33.520 market or even the bond market was looking wobbly and 0:11:33.520 --> 0:11:37.240 and you know, headed towards a bear market or a 0:11:37.280 --> 0:11:40.600 big drop. And I think there was a tough lesson 0:11:40.600 --> 0:11:43.720 for investors to learn this year that it's not the 0:11:43.720 --> 0:11:47.240 case this time that you know, um, it's it's really 0:11:47.280 --> 0:11:49.840 this inflation is causing so much misery for so many 0:11:49.840 --> 0:11:54.480 people that that um, they're willing to really just allow 0:11:54.600 --> 0:11:57.600 the markets to to create this pain for investors this year. 0:11:57.679 --> 0:12:00.400 So a lot of misery to go around. To say, 0:12:00.440 --> 0:12:03.839 my personal Misery index has a few more components than 0:12:03.880 --> 0:12:06.640 just those two, but it's a pretty good give me 0:12:06.679 --> 0:12:08.880 with the With the next one, it depends heavily on 0:12:08.920 --> 0:12:13.360 the weather, but in any case, yeah, it's going to 0:12:13.440 --> 0:12:15.480 be disgusting tomorrow. But Mike, I do want to push 0:12:15.520 --> 0:12:17.640 back a little bit on the headline. So the Fed 0:12:17.720 --> 0:12:20.760 doesn't care about the misery investors are feeling. But if 0:12:20.800 --> 0:12:24.160 you look from the perspective of financial conditions, in some way, 0:12:24.160 --> 0:12:27.600 they they do care, and they actually like it when 0:12:27.600 --> 0:12:31.640 you think about what they're trying to accomplish, fight with 0:12:31.679 --> 0:12:34.200 me a little bit, Yeah right, No, I mean you're 0:12:34.200 --> 0:12:37.400 absolutely right. I would never fight with you, thank you, 0:12:38.080 --> 0:12:41.000 because they're just gonna throw me under the bus there. Well, 0:12:41.120 --> 0:12:44.200 Joel put that in there. Well, that's the thing. You know. 0:12:44.520 --> 0:12:48.760 The financial conditions are exactly the one tool that the 0:12:48.800 --> 0:12:51.760 FED has at its disposal, and the way, you know, 0:12:51.800 --> 0:12:54.360 the remote control for that tool is is interest. Right, 0:12:54.520 --> 0:12:59.200 So if uh, you know, unemployment is their concern, if 0:12:59.240 --> 0:13:02.280 inflation is not an issue. As you know, it wasn't 0:13:02.320 --> 0:13:04.480 really an issue for how long they're from you know, 0:13:05.080 --> 0:13:08.400 basically since the global financial crisis in two thousand and 0:13:08.480 --> 0:13:11.559 eight all the way up until COVID there there was 0:13:11.600 --> 0:13:14.360 no no real worry about the inflation from Feds. So 0:13:14.400 --> 0:13:18.000 they really were focused on that other side of their mandate, 0:13:18.040 --> 0:13:20.880 the the employment situation and trying to make sure the 0:13:20.920 --> 0:13:24.559 economy was at full employment. So, um, you know, if 0:13:24.600 --> 0:13:28.320 you can keep rates low to keep financial financial conditions 0:13:28.360 --> 0:13:32.439 accommodative to the economy, Um, that's what they did for 0:13:32.480 --> 0:13:36.520 so long. It kind of lulled the market into thinking, uh, 0:13:36.559 --> 0:13:39.640 you know, the FED has this unspoken third mandate to 0:13:39.640 --> 0:13:42.560 to really prop up the stock and bond markets. Um. Well, 0:13:42.559 --> 0:13:46.000 and doesn't it feel just like the markets like that 0:13:46.000 --> 0:13:48.240 that third rail is like, you know, if you're in 0:13:48.240 --> 0:13:50.839 the markets, that's what you really do want. All all 0:13:50.960 --> 0:13:52.960 year it felt like that. It was just like, at 0:13:53.040 --> 0:13:55.440 some point here the Fed's gonna cave and it's all 0:13:55.440 --> 0:13:57.839 gonna go our way, and we'll be we'll be ready 0:13:57.840 --> 0:14:01.040 for that moment. And yet that moment simply has has 0:14:01.080 --> 0:14:04.800 not happened this year, and if we look ahead, probably 0:14:04.840 --> 0:14:08.720 not gonna happen for for a while. Still. Yeah, yeah, 0:14:08.720 --> 0:14:11.000 I would think I would guess at least not until 0:14:11.120 --> 0:14:12.920 and not in the first half of the year for sure. 0:14:13.000 --> 0:14:15.440 Maybe towards the back half of the year we'll start 0:14:15.440 --> 0:14:18.640 getting some hints and some clues. Um. But yeah, you know, 0:14:18.720 --> 0:14:21.760 and to Katie's point, I mean, now they're using that 0:14:21.920 --> 0:14:25.800 tool of financial conditions for the opposite purpose to to 0:14:25.920 --> 0:14:28.960 really cool off the economy, to undergree to cool off 0:14:29.000 --> 0:14:33.240 the job market. Um and inflation. Uh So it's you know, 0:14:33.560 --> 0:14:36.800 it's what they've always said that they do. You know, 0:14:37.240 --> 0:14:40.280 they haven't made it much of a secret or much 0:14:40.320 --> 0:14:43.680 of a mystery, but investors sort of hear what they 0:14:43.760 --> 0:14:46.880 want to hear, I think, and Um, you know, so 0:14:46.920 --> 0:14:48.680 that this is the year where it was kind of 0:14:48.720 --> 0:14:51.720 a reality check for markets, I think, and that's sort 0:14:51.760 --> 0:14:54.360 of the point of this column is that you know, uh, 0:14:55.160 --> 0:14:57.680 to go back to Arthur Oakan and his his delightfully 0:14:57.720 --> 0:15:01.240 simple index. You know, that's it. Job market and inflation 0:15:01.680 --> 0:15:05.800 UH are to him as far as how do you 0:15:05.880 --> 0:15:09.120 gauge sort of whether the nation is miserable or not? 0:15:09.560 --> 0:15:12.880 And so the FED to to fulfill their mandates from Congress, 0:15:13.160 --> 0:15:15.920 those are the two inputs they look at. So you know, 0:15:16.400 --> 0:15:19.560 if if it's the unemployment rate that's causing the misery, 0:15:19.600 --> 0:15:22.160 they're gonna err on the side of being too accommodative 0:15:22.240 --> 0:15:25.040 to financial conditions and and actually will prop up the 0:15:25.040 --> 0:15:27.640 stock market in the bond market, um to some degree. 0:15:27.760 --> 0:15:30.560 If though it's inflation like we saw this year, Um, 0:15:30.760 --> 0:15:33.640 they're turning that knob the other way and tightening financial 0:15:33.680 --> 0:15:37.800 conditions to uh to make sure that you know, the 0:15:37.880 --> 0:15:40.280 child market doesn't get too hot, wage growth doesn't get 0:15:40.320 --> 0:15:44.080 too hot and feed into that inflation problem by forcing 0:15:44.080 --> 0:15:48.720 companies to raise prices to cover these higher wages. So UM, 0:15:48.760 --> 0:15:51.080 and I think you're right Sol that, Uh, it doesn't 0:15:51.080 --> 0:15:54.920 seem like they'll be turning that knob back the other direction. Uh, 0:15:54.960 --> 0:15:57.600 at least not in the foreseeable future. Again, maybe maybe 0:15:57.600 --> 0:16:01.560 they'll start hitting at it later in Alright, great stuff. 0:16:01.720 --> 0:16:04.800 Mike Greagan, senior editor for Bloomberg Markets, joining us on 0:16:05.000 --> 0:16:08.920 Zoom from New Jersey, donning his Maryland terps. Uh, pull 0:16:08.960 --> 0:16:11.600 over there, good stuff. Joe Webber, Editor Bloomberg Business Week. 0:16:11.720 --> 0:16:14.880 Here in a Bloombergan Actor broker studio. You're listening to 0:16:14.960 --> 0:16:18.800 Bloomberg Business Week with Karrol Messer and Tim Stenovic on 0:16:18.920 --> 0:16:22.720 Bloomberg Radio. Well, it's been over an hour, Paul. We 0:16:22.760 --> 0:16:27.480 haven't even talked about Elon Muskat that button on. I know, 0:16:27.600 --> 0:16:30.800 but there's so much going on there. You know. You 0:16:30.840 --> 0:16:34.240 talked to some of these shareholders and the south side 0:16:34.240 --> 0:16:37.440 analysts that have been recommending this company, recommending this technology, 0:16:37.480 --> 0:16:43.080 recommending this management team. They're they're understandably upset. Well, let's 0:16:43.120 --> 0:16:46.400 talk to a shareholder now, someone who has been following 0:16:46.480 --> 0:16:48.720 Tesla for a while. His name is Gary Black. He 0:16:48.840 --> 0:16:52.920 is a portfolio manager. Uh. He manages the Future Fund 0:16:53.000 --> 0:16:56.800 active exchange traded fund. That's my world at cover ETFs. 0:16:56.960 --> 0:16:59.680 The ticker there is f F and D Gary joins 0:16:59.760 --> 0:17:02.440 us on the phone from Chicago, and Gary, I'm looking 0:17:02.440 --> 0:17:05.160 at your holdings right now. I see Tesla is your 0:17:05.320 --> 0:17:09.600 biggest position by market value. But I don't know, looking 0:17:09.640 --> 0:17:11.640 over your notes, you don't seem too pleased with Elon 0:17:11.720 --> 0:17:15.240 Musk right now. Well, it's definitely hurt us this year. 0:17:15.600 --> 0:17:19.240 And I guess you know. Look, we look at Tesla 0:17:19.359 --> 0:17:23.560 and it's got great fundamentals as ev adoption global EVY adoption. 0:17:23.880 --> 0:17:26.120 Right now it's about ten percent global. We think it'll 0:17:26.119 --> 0:17:31.920 be by uh, Tesla earnings should explode, and you know, 0:17:32.040 --> 0:17:34.280 from a fundamental standpoint, we're looking for about seven dollars 0:17:34.320 --> 0:17:36.560 and earnings next year, which kind of puts Tesla about 0:17:36.560 --> 0:17:39.360 a I don't know an e tempe, which is about 0:17:39.400 --> 0:17:43.120 where the SMP is. But it's growing earnings at a year. 0:17:43.520 --> 0:17:47.000 But it's the noise from Twitter and Ellen tweeting out 0:17:47.160 --> 0:17:51.920 his um his political views and all the drama that 0:17:52.119 --> 0:17:53.879 is killing the stock right now, and we just have 0:17:54.040 --> 0:17:57.120 to stomach it and wait till that ends. Well, it's 0:17:57.200 --> 0:18:01.680 it's interesting, Gary, I mean, Tesla is theoretically a publicly 0:18:01.920 --> 0:18:07.040 traded company. There is public shareholders, board of directors. As 0:18:07.080 --> 0:18:10.879 a shareholder are you frustrated that no one entity, no 0:18:11.040 --> 0:18:14.560 one person, whether no board is able to rain in? 0:18:15.880 --> 0:18:19.639 Mr Musk, I believe that the reason you saw this 0:18:19.800 --> 0:18:22.600 Twitter poll that came out Sunday night where you said 0:18:22.640 --> 0:18:25.760 should I step down from Twitter as CEO? I think 0:18:25.840 --> 0:18:27.399 the board frustrated them to do it. I know very 0:18:27.440 --> 0:18:29.879 I've been on two public boards, I've been a CEO. 0:18:30.680 --> 0:18:32.960 I know very few public boards will allow somebody to 0:18:33.000 --> 0:18:35.960 moonlight as a CEO and another company I certainly wasn't 0:18:35.960 --> 0:18:37.680 able to do it. And you know, a Twitter, he's 0:18:37.680 --> 0:18:41.600 basically rebuilding it from the ground up. So I've written 0:18:41.680 --> 0:18:43.520 letters to the board. I've you know, not been an 0:18:43.560 --> 0:18:46.520 activist because we don't practice that style of management. But 0:18:46.640 --> 0:18:49.879 I'm frustrated. I know um Leo Kogowan, who is the 0:18:49.920 --> 0:18:54.520 third largest individual shareholder after Ellen and Larry Ellison, has 0:18:54.800 --> 0:18:57.840 he voiced his frustrations. Many of us are frustrated. But 0:18:58.320 --> 0:19:00.560 you know, I believe that the board is trying to 0:19:00.920 --> 0:19:04.119 pressure Ellen in in a in a nice way, you know, 0:19:04.200 --> 0:19:07.320 in a constructive way. I'll say to do the right thing, 0:19:07.359 --> 0:19:10.200 which is to step off the Twitter board, bringing a 0:19:10.240 --> 0:19:13.359 new CEO and focus on Tesla. Tesla has a clear 0:19:13.440 --> 0:19:16.640 path to being a three trillion dollar company because of FSD, 0:19:16.840 --> 0:19:19.479 because of ev adoption, because of all the new product 0:19:19.560 --> 0:19:22.800 launches coming like Cybertruck. There's a thirty dollar ev coming 0:19:23.640 --> 0:19:27.000 um and yet it's it's you know, from a stock standpoint, 0:19:27.000 --> 0:19:30.159 it's failing miserably because of all the Twitter noise. So 0:19:30.440 --> 0:19:32.879 I do believe they're trying to do something about it. 0:19:33.040 --> 0:19:34.600 I don't think that that that pol would have just 0:19:34.640 --> 0:19:37.040 showed up out of nowhere on Sunday Unite unless the 0:19:37.040 --> 0:19:39.320 board was pressuring him to step down. Garry, did you 0:19:39.440 --> 0:19:44.160 vote in the poll? Of course I voted yes. One 0:19:44.200 --> 0:19:46.720 of the debates, one of the debates is, you know, 0:19:46.800 --> 0:19:49.600 did Ellen know the results beforehand? I think he viewed 0:19:49.920 --> 0:19:52.280 that he was going to win, I meaning the people 0:19:52.400 --> 0:19:54.600 say no, don't step down, because he was tweeting all 0:19:54.680 --> 0:19:56.680 throughout the pole like be careful what you wish for 0:19:57.000 --> 0:19:59.800 and nobody can do this. You know, nobody would be 0:20:00.000 --> 0:20:02.080 liot enough to take this job. And you know that's 0:20:02.119 --> 0:20:04.560 partially true because he has vowed to stay on as 0:20:04.600 --> 0:20:06.960 the head of I think software and I don't know 0:20:07.040 --> 0:20:10.080 what he calls it, buts and and you know, look 0:20:10.160 --> 0:20:12.040 if I'm and we can go through the names of 0:20:12.080 --> 0:20:14.800 people who I think could be interested, but if I'm 0:20:14.840 --> 0:20:16.800 one of those people, I don't know if I would 0:20:16.840 --> 0:20:18.600 want to sign up if he's going to be very, 0:20:18.720 --> 0:20:22.480 very involved, and you know, and look what he's done again, 0:20:22.520 --> 0:20:24.760 I'm voicing my frustration. I'm not knocking the guy because 0:20:24.760 --> 0:20:28.920 he's brilliant, but you know, he has basically blamed the 0:20:29.000 --> 0:20:31.840 test of stock price to client underfed raising interest rates. 0:20:32.440 --> 0:20:34.800 That's that that's just not true. If you look at 0:20:34.840 --> 0:20:39.159 tests of stock price this year through September, uh they 0:20:39.200 --> 0:20:42.119 were actually outperforming Nazdak. They were down twenty five, but 0:20:42.240 --> 0:20:46.720 NASAC was down thirty three. Since October one, um Tesla 0:20:46.880 --> 0:20:50.760 is down fifty two and Nazac is down three. And 0:20:51.000 --> 0:20:53.199 you know what has happened in that time is they 0:20:53.320 --> 0:20:56.240 missed on third quarterblans because of China. And that's again 0:20:56.359 --> 0:20:58.480 their own vault because they didn't have a thirty thou 0:20:58.640 --> 0:21:02.240 dollar EV one and two he bought where he took 0:21:02.280 --> 0:21:04.480 possession of Twitter and then you know, I made a 0:21:04.520 --> 0:21:09.000 series i'd say mistakes um at at running Twitter, and 0:21:09.320 --> 0:21:11.560 you know, he he angered a lot of the advertisers 0:21:11.640 --> 0:21:14.040 by saying if you leave, I'm gonna name and shame you. 0:21:14.200 --> 0:21:16.800 That's not the way you treat an advertiser. Um. And 0:21:16.840 --> 0:21:20.080 then there was a there was a constant like constant 0:21:20.160 --> 0:21:23.159 action that you know, created a lot of drama, like 0:21:23.440 --> 0:21:26.159 when they launched that Twitter blue and you know, they 0:21:26.240 --> 0:21:28.879 didn't think it through and people signed up, and then 0:21:28.920 --> 0:21:31.080 you had things like you know, super Mario putting his 0:21:31.119 --> 0:21:35.560 middle finger up. Uh, you know, and if you're an advertiser, 0:21:35.760 --> 0:21:38.920 that's what you're most concerned about, product adjacency. So I 0:21:39.040 --> 0:21:41.080 just think the drama's got to stop. And then, you know, 0:21:41.200 --> 0:21:44.400 the third thing is him tweeting out constantly his political beliefs. 0:21:45.040 --> 0:21:47.159 That's fine, he can have his political beliefs, but but 0:21:47.280 --> 0:21:50.280 you're gonna you're gonna anger the very when you when 0:21:50.320 --> 0:21:53.639 you accused people of having woke mind virus and stuff 0:21:53.760 --> 0:21:56.720 words like that, you're basically angering the very people that 0:21:56.800 --> 0:21:58.760 you're trying to buy get to buy e v s. 0:21:58.840 --> 0:22:01.800 And so the big question that we have and everybody's 0:22:01.800 --> 0:22:03.240 trying to and this is why I think the stock 0:22:03.320 --> 0:22:06.960