Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com Slash podcast. Looking at Credit Swiss
Speaker 1: trading in Switzerland three point six four five Swiss francs.
Speaker 1: That is unbelievable, um for one of the leading financial
Speaker 1: services companies in Europe, one of the two stellar investment
Speaker 1: banks wealth managers in the country of Switzerland. I need
Speaker 1: to figure out what's going on because I saw this
Speaker 1: headline on the Bloomberg terminal. Credit Swiss saw eighty eight
Speaker 1: billion dollars outflows as confidence slumps, and I remember from
Speaker 1: the Great Financial Crisis. When you see headlines like that,
Speaker 1: whether it's Bear Sterns or Lemon, that's when it gets
Speaker 1: really ugly. Alison Williams, she's a senior Global Banks and
Speaker 1: Asset Managers analyst at Bloomberg Intelligence. Alison, how bad are
Speaker 1: things at Credit Suite? I mean, those outflow numbers were stunning.
Speaker 1: This morning, and to put it in perspective, the outflows UM,
Speaker 1: you know, just in these several weeks are more than
Speaker 1: the inflows of and combined. And I mean that I
Speaker 1: guess the good news is that they said that things
Speaker 1: have stemmed but not reversed. And so they had said
Speaker 1: in October that they saw UM outflows in the first
Speaker 1: couple of weeks. UM. They pointed to social media and
Speaker 1: a lot of the reports at the time that UM,
Speaker 1: you know, I think this is similar to what we've
Speaker 1: seen in the past, where headlines can kind of UM
Speaker 1: drive actual risk to UM the fundamentals of a business,
Speaker 1: and they had pointed to that UM. But I think
Speaker 1: certainly no one expected UM the severity that we saw.
Speaker 1: So let me just take this down to the very
Speaker 1: basic level. For those of our listeners who aren't well
Speaker 1: versed in Credit Sweets. You and Paul obviously know the
Speaker 1: bank inside now, but UM Switzerland has two big banks,
Speaker 1: Ubs and Credit Sweets, and they're big businesses are wealth management.
Speaker 1: They take care of money for high net worth individuals,
Speaker 1: stemming all the way back to the days when you
Speaker 1: had numbered accounts and everything was super secret and your
Speaker 1: money was safe there right, So the concern is those
Speaker 1: rich people, international wealth, they're pulling their money out of
Speaker 1: credit sweez because they have existential concerns. Is that right? Um,
Speaker 1: you know it is right. I mean again, when the
Speaker 1: headlines were coming across UM, you know talking about the
Speaker 1: headlines really focused on the bank's need for capital. Obviously
Speaker 1: that that's something that concerns investors. Um, they've had so
Speaker 1: many prices, they've had huge losses tied to Artagos and
Speaker 1: um other sort of big giant hedge fund scams and
Speaker 1: bad risk management, and now they need to raise four billion, correct,
Speaker 1: And so you know, the good news is that they
Speaker 1: are on that path. So they are trying to study
Speaker 1: the downside, if you will, in terms of shoring up
Speaker 1: the capitol. The bad news is they announced a one
Speaker 1: point five billion pre tax loss for the quarter. I
Speaker 1: think consensus was about seven hundred and thirty million francs.
Speaker 1: So that is a setback in terms of some of
Speaker 1: the capitals that they're raising. It's unclear what types of
Speaker 1: charges might be included there. But um, you know, the
Speaker 1: concerning thing at this point is just as I said,
Speaker 1: the fact that we're seeing outflows or they're seeing outflows
Speaker 1: in their core business. So the wealth and asset measurement
Speaker 1: businesses as part of the new strategy or businesses, they're
Speaker 1: focusing on their restructuring the investment bank, but they're going
Speaker 1: to see a loss in both the wealthy unit and
Speaker 1: the investment banking unit in the quarter um, and so
Speaker 1: the key for them is really going to be two
Speaker 1: you know, reverse course with the with these flows, I
Speaker 1: think that's not only is it a bad quarter, but
Speaker 1: the flows are sort of an indication of business health,
Speaker 1: and so that sort of is cast out on the
Speaker 1: overall strategy going forward. Clients pulled eight billion dollars. They
Speaker 1: need four billion dollars in capital. Clients pulled eighty eight
Speaker 1: billion dollars out in a few weeks. Crazy numbers, Alison.
Speaker 1: I think what I learned one of the things I
Speaker 1: learned during the Great Financial Crisis is when other firms
Speaker 1: won't trade with me, that's when I really got a problem.
Speaker 1: Is credit swiss at that point? Yet, Well, the I
Speaker 1: guess the the important news is that they've really moved
Speaker 1: away from a lot of those businesses. So prime brokerage
Speaker 1: is the most um prone to those concerns. Right, So, um,
Speaker 1: if your hedge fund clients start pulling balances from you
Speaker 1: and won't trade with you. UM. Things can very quickly unravel.
Speaker 1: But they exited that business after the Arctic goes UM hit.
Speaker 1: They announced that they were exiting it, so that that business,
Speaker 1: you know, nine percent of revenues had already kind of
Speaker 1: gone away. And then the securitized products trading business UM,
Speaker 1: which is another big business for them, is a business
Speaker 1: that they're UM selling to Apollo. UM. The interesting wrinkle
Speaker 1: there is that it was originally supposed to be Apolo
Speaker 1: and Pink Pimco UM, but it seems like we haven't
Speaker 1: gotten any financial details yet there. But it's really Apollo
Speaker 1: that's going to be taking over that business, and so
Speaker 1: that the trading effort that they're retaining is really slimmed
Speaker 1: down at this point. And Allison thirty seconds, is there
Speaker 1: any chance the government steps in here one way or
Speaker 1: the other, either supports the bank or allows a merger
Speaker 1: with the U b S. I don't think they need
Speaker 1: to at this point. UM. You know that that's always
Speaker 1: something that's a consideration. I don't think that they would
Speaker 1: force a merger with you guys, and I'm not sure
Speaker 1: if that necessarily solves anything, UM, But again we do
Speaker 1: see we do need to see things right it but
Speaker 1: the capital raise and all the business changes that we
Speaker 1: just talked about I think are gonna help limit the
Speaker 1: downside there, all right, good stuff as always, Matt. You know,
Speaker 1: Allison is on a vacation day today, a t day,
Speaker 1: Yet she still makes time to talk to us, so
Speaker 1: we appreciate that. Alison Williams, Senior banks annalyst for Bloomberg Intelligence.
Speaker 1: She's old school, she works big time, folks. She's been
Speaker 1: coming to banks for decades, first of Morgan Stanley Investment Management,
Speaker 1: where she was the shareholders some of the major banks
Speaker 1: around the world, and now as Bloomberg Intelligence senior banks
Speaker 1: analysts based in our Princeton, New Jersey office. Good stuff
Speaker 1: to check in with, Allison. This is Bloomberg looking at
Speaker 1: the Bloomberg Dollar Index itself about five point five percent
Speaker 1: from its recent high, one of the drivers fueling you know,
Speaker 1: a little bit more than a ten percent pop here
Speaker 1: in the SMP five index. I want to get a
Speaker 1: sense of kind of what's going on out there in
Speaker 1: the markets on a day to day basis. We do
Speaker 1: that with Vince Signarella, global macro Strategist for Bloomberg news, Vince,
Speaker 1: have you seen peak US dollar at least maybe I
Speaker 1: don't know for the short term. Yeah, I think so.
Speaker 1: That it made the point about the high er smp
Speaker 1: uh five d they've been in a reverse correlation, an
Speaker 1: inverse correlation since it was from March at west in August. Uh,
Speaker 1: it's holding for now and with a bid and risk,
Speaker 1: I would expect the dollar to continue to suffer. Talk
Speaker 1: to me about the Bloomberg Dollar Index itself, Well, what's
Speaker 1: the differentiation here between that index and the d x Y,
Speaker 1: which used to be kind of the traditional Street benchmark. Yeah, well,
Speaker 1: you're actually talking to probably the expert on the subject.
Speaker 1: The Bloomberg Dollar Index was derived from the Wall Street
Speaker 1: Journal Dollar Index, of which I am the co inventor.
Speaker 1: Very cool. The difference is, uh, it includes many, many
Speaker 1: more currencies than the Ice Dollar Index. The Ice Dollar
Speaker 1: index was recently revamped. It was initially based on just
Speaker 1: four currencies from basically trade data in ninety two. Uh.
Speaker 1: The dollar doesn't move so much on trade data anymore.
Speaker 1: It moves on financial flows, US, fixed income flows, etcetera.
Speaker 1: You know it does. Trade does affect the dollar, no doubt,
Speaker 1: but the financial flows are a much much bigger effect,
Speaker 1: and that's what the Bloomberg Dollar Index is taken into account,
Speaker 1: including more currencies, so it's a much broader level for
Speaker 1: the dollar. The Ice Dollar Index, I think, uh, these days,
Speaker 1: fifty eight percent of it is composed of the Euro,
Speaker 1: so it's it's almost really a euro index than it
Speaker 1: is a straight dollar index. But it is widely traded,
Speaker 1: so it does get a lot of press. But but
Speaker 1: the thing is it's often quoted, right. I'll hear Tom
Speaker 1: throw around d x y instead of b B d
Speaker 1: x y, and then I think, yeah, that is how
Speaker 1: not as useful? You know, Yeah, I think that's just
Speaker 1: the old habit because it's been around for fifty years. Um,
Speaker 1: you know in the Bluemer Dollar Index is you know,
Speaker 1: a handful of years. I mean they've they've retro retrot
Speaker 1: it to capture the past, but it's realistically only been
Speaker 1: around I think since two tho fourteen, off top of
Speaker 1: my head something like that. So, um, the Ice Dollar
Speaker 1: Index obviously traded heavily on the ice um, the ice platform. Um,
Speaker 1: It's it's just old school, hard, old habits hard to break. So,
Speaker 1: you know, Vince, I've heard increasingly I guess maybe since
Speaker 1: the Great Financial Crisis, a lack of liquidity in quote
Speaker 1: unquote the market, whether it's fixed income, especially on treasuries,
Speaker 1: that's the thing that but I don't hear about it
Speaker 1: in currencies. Talk to us about how liquidity has evolved
Speaker 1: across you know, certain asset classes over the last dozen years.
Speaker 1: So if I if I showed you there was a
Speaker 1: little red book that used to go around every year,
Speaker 1: and it was done by a bank that no longer exists,
Speaker 1: And what it did was it captured all the banks
Speaker 1: that traded far in exchange all across the world, and
Speaker 1: it was roughly an inch thick. And and so liquidity
Speaker 1: was very backtick in the eighties and nineties because you
Speaker 1: had all these banks around. Now liquidity is pretty much
Speaker 1: provided by give or take ten major players. But the
Speaker 1: volumes have risen considerably. And that's because we've learned electronic
Speaker 1: as opposed to pupil trading over a telephone. So the
Speaker 1: market's grown to like five point three triling and uh,
Speaker 1: it's liquidity is provided pretty much by by ten players,
Speaker 1: and and they're they're making markets all the time except
Speaker 1: for when the market moves abruptly. So no it's that's
Speaker 1: that's totally true. So like if you if I were
Speaker 1: making a price to you know, X y Z corporation
Speaker 1: back in the day, uh, and they dealt on that
Speaker 1: price whether the market moved and was my tough luck.
Speaker 1: Now as soon as the electronic markets trip, and whether
Speaker 1: it's algo driven or a big order driven, whatever the
Speaker 1: case may be, if that price changes, the electronic platform
Speaker 1: disqualifies or decus the trade. So the corporation or the
Speaker 1: bank that's trying to deal on that price doesn't get
Speaker 1: that price. They get the next one, and it could
Speaker 1: be kind of far away if if somebody's doing enough size.
Speaker 1: So you know, in a way, the market mayors, the
Speaker 1: market makers, or I should say that the takers of
Speaker 1: the market, the corps of financial companies, etcetera. In in
Speaker 1: chasing the banks to do tighter and tighter and tighter
Speaker 1: spreads actually hurt themselves because now the liquidity shortages work
Speaker 1: against them when they're there, because the market moves abruptly
Speaker 1: and they don't get the price they think they're going
Speaker 1: to get. And this is how we get things like
Speaker 1: remember when oil traded negative, Yes, just no liquid to
Speaker 1: be there at least was paid to take a barrel
Speaker 1: of oil. Still got it? You get those that's where
Speaker 1: you get those called fat finger trades. If you will
Speaker 1: good stuff. I'm sure I would have been, you know,
Speaker 1: a victim of that at some point. Vincignarella, global macro
Speaker 1: strategist for Bloomberg News, joining us here giving us a
Speaker 1: sense of what's happening out there in the markets. And again,
Speaker 1: the the Bloomberg Dollar Index b b d x Y
Speaker 1: on your Bloomberg terminal, it's all about five and a
Speaker 1: half percent from it's just recent high a uh several
Speaker 1: weeks ago. It's off about a half a percent today,
Speaker 1: so a little bit of a pullback in the dollar.
Speaker 1: One of the proving to be one of the drivers
Speaker 1: here is VINCEU was just mentioning of uh stocks actually
Speaker 1: out there, so uh interesting to see that correlation coming up.
Speaker 1: I'm gonna call that w T a coud oil. It's
Speaker 1: all four point seven percent here, seventy seven dollars from
Speaker 1: w T a coudrail. That gets my tention. We are
Speaker 1: sitting in the studio here, me and Paul with our
Speaker 1: friend Katie Greifeld. She is a cross asset reporter, so
Speaker 1: she's across everything from single stocks to E T F
Speaker 1: s too, Crypto, uh and cats. She covers cat for
Speaker 1: us as well, but the cats, well, cats and coins
Speaker 1: is the name of her newsletter. Oh would you like
Speaker 1: to join Love Too? You don't subscribe, I don't know
Speaker 1: everything actually a pretty exclusive list. If you would like
Speaker 1: to be on, you have to tell me your work
Speaker 1: email and I will add you. Okay. Uh, by the way,
Speaker 1: you say that a lot. Do you not send it
Speaker 1: to personal emails? I used to send it. I got
Speaker 1: a lot of gmails, and then the gmails on the
Speaker 1: list got a little weird. Oh you know, you have
Speaker 1: to send me your work email so I can keep
Speaker 1: you accountable. Okay, let's talk about the latest in the
Speaker 1: ft X saga. Um, just when you think you can't
Speaker 1: get any more news, Sam Bankman Freed goes and writes
Speaker 1: a letter to employees. Yeah, he certainly he lost it.
Speaker 1: You know it's interesting. It's I feel like this would
Speaker 1: be shocking in any other case. But you know, he
Speaker 1: was tweeting so furiously for so long, furiously just describing
Speaker 1: the pace. It's probably not too surprising to see him
Speaker 1: formalize his thoughts in a letter. I don't think it
Speaker 1: was received that well, necessarily, I don't know. I can't
Speaker 1: believe it was. Now he points out that they had,
Speaker 1: and you gotta take whatever he says with a grain
Speaker 1: of salt, right because he still maintains that they have
Speaker 1: nine billion dollars in assets. Yeah, it is, they had
Speaker 1: sixty he did. Yeah, it's interesting to see. I don't
Speaker 1: know what reality he's operating in versus um what reality
Speaker 1: is coming to light in court. We did have first
Speaker 1: emotions yesterday, and again the f t X lawyers have
Speaker 1: made very very clear at this point SPF does not
Speaker 1: speak for f t X or for Alimato and is
Speaker 1: not involved in these processes. Do we have the authorities?
Speaker 1: I don't know which authority would be the FBI, for example,
Speaker 1: as anybody sat down with this guy, brought him into
Speaker 1: the office in New York, in Washington, d C, in Miami,
Speaker 1: wherever I know he's I guess he's in the Bahamas,
Speaker 1: is what I hear, and said, what's going on here?
Speaker 1: I believe they would like to I think us uh,
Speaker 1: the d O J would like to meet with him
Speaker 1: in New York. I remember reading that story last week.
Speaker 1: We know that Congress would like to as well. In
Speaker 1: the Bahamas. It's not like he's on the other side
Speaker 1: of the here. It's not too bad of a trip.
Speaker 1: It's not that far in terms of you know what.
Speaker 1: His parents need to go get him. I mean, we
Speaker 1: can sit here and talk about the fallout from the bankruptcy.
Speaker 1: It's massive. A lot of counterparties had serious exposure. What's
Speaker 1: happened to Genesis, what's happened to Gemini Um, the customers
Speaker 1: who got the short shrift? I feel horrible for them,
Speaker 1: But the bottom line is his parents need to go
Speaker 1: get him. That's a child. You know. My youngest brother
Speaker 1: is either thirty six or thirty seven, I can't remember,
Speaker 1: but he's still a little kid. Like if something like
Speaker 1: this happened to him, I would go and physically get
Speaker 1: him and bring him home. He is he's thirty right, Yeah,
Speaker 1: that's he's only I don't understand the Yeah, I don't
Speaker 1: understand the legal side of it. The was their fraud,
Speaker 1: I don't know it sure, just from reading looks like
Speaker 1: there may have been. So why is you know, you
Speaker 1: go get Bernie made off on the you know, sixty
Speaker 1: seven street wherever they grabbed them. They got him pretty quick.
Speaker 1: It was only a matter of days. But but you know,
Speaker 1: I look at bitcoin, it's up one today, six d
Speaker 1: bucks of coin. It's kind of holding in there. It's
Speaker 1: down from the twenty level, but it seems like the
Speaker 1: market investors haven't bailed on all things cryptofi look at
Speaker 1: bitcoin is a proxy? Yeah, no, I think this is
Speaker 1: one of the interesting subtext that's going on. I know
Speaker 1: we've discussed this on this radio talking about how is
Speaker 1: bitcoin still resilient right now? And actually Cathy Wood of
Speaker 1: our investment management was on Bloomberg Radio on TV yesterday
Speaker 1: and she addressed that that the Bitcoin blockchain, the Ethereum blockchain,
Speaker 1: they've been running very smoothly. So this isn't necessarily a
Speaker 1: Bitcoin problem. This is all of these centralized sort of
Speaker 1: monstrosity conglomer it's sort of compresents. This is the point
Speaker 1: I make constantly. And the thing is, it doesn't matter
Speaker 1: your take on Bitcoin. You could you can believe it's
Speaker 1: a Ponzi scheme, you can say it's worthless. I can
Speaker 1: understand the arguments on both sides um, But at the
Speaker 1: end of the day, this isn't about how Bitcoin performs.
Speaker 1: This isn't about how Ethereum performs. This isn't about how
Speaker 1: doge coin performs. This is about how an exchange, a
Speaker 1: centralized exchange, duped so many people into thinking that it
Speaker 1: was running an orderly business exactly. It's more about the
Speaker 1: systems that have spawned around Bitcoin. But Bitcoin itself, I mean,
Speaker 1: it's just a ledger, it's just basically a data center, uh,
Speaker 1: and it hasn't had any issues, whereas you think of
Speaker 1: some of the other blockchains I mean unrelated to uh
Speaker 1: this entire blow up over over the past three weeks,
Speaker 1: but the Salanta blockchain, for example, that had to be
Speaker 1: shut on and off many times during the summer. Different
Speaker 1: blockchains have run into different problems at certain points. But
Speaker 1: Bitcoin ethereum no such issues. So you look at the
Speaker 1: price of bitcoin, and there are still a lot of
Speaker 1: whales out there. For example, I really think the marginal
Speaker 1: seller at this point is gone. If you're looking at
Speaker 1: this news and you're sitting on bitcoin still, you're probably
Speaker 1: a true believer. You're probably you've forgotten your quote or
Speaker 1: you bought it seven dollars or a hundred dollars, you know,
Speaker 1: so you're not going to sell all right. C Z
Speaker 1: c Z is this guy and I don't know his name,
Speaker 1: but I'm just going to use his his initial. That's
Speaker 1: the cool thing to do. That's a cool thing to do.
Speaker 1: Is he just is there any reason to believe that
Speaker 1: Bloomberg employee is that serious? You did not know that?
Speaker 1: So is there any reason to believe that he's more
Speaker 1: legitimate less legitimate of the versus SPF or his business
Speaker 1: hasn't blown up? That's right, and so doesn't have customers
Speaker 1: who just lost millions of dollars? So is he the
Speaker 1: kind of lender of last resort? Is he a savior?
Speaker 1: For think he in a certain way has enjoyed portraying that.
Speaker 1: And it's interesting there was a Bloomberg News exclusive that
Speaker 1: Genesis and trying to raise one billion dollars in fresh capital.
Speaker 1: There had been talks with Binance that funding failed to materialize.
Speaker 1: I don't think we can call him the lender of
Speaker 1: last resort because you look at what happened. You've never
Speaker 1: been that right exactly. And I don't think there are
Speaker 1: any saviors left at this point, at least not in
Speaker 1: the crypto world. Well is I don't see for example,
Speaker 1: JP Morgan stepping in, City Bank stepping in saying we're
Speaker 1: gonna backstop. This market provides some liquidity. I just don't
Speaker 1: see any of that, and that to me, maybe it's
Speaker 1: just I'm just too old school. That's a little bit
Speaker 1: of a war. But the market doesn't need backstop. That's
Speaker 1: the thing. The market does not It was necessary. Yeah, okay, okay.
Speaker 1: They just took everybody's money, put it all on black
Speaker 1: one and lost and lost is what it looks like.
Speaker 1: I mean, I haven't done any forensic accounting here, but
Speaker 1: it seems like forensic accounting will be very difficult. But
Speaker 1: at this point in terms of the companies, when you
Speaker 1: think about who Genesis is probably trying to raise money from,
Speaker 1: at this point, it's probably traditional finance players. It's interesting
Speaker 1: that no one has stepped up. But then you think
Speaker 1: about Sequoia having to basically come out and say, I'm sorry,
Speaker 1: we did a bad job of due diligence here. That's
Speaker 1: probably I don't know, spooking a lot of Maybe some
Speaker 1: of these would be saviors. Otherwise. Matt Levin's Money, Money Stuff,
Speaker 1: Money Stuff Yesterday, which is that must read every day
Speaker 1: I have my alert set up. He basically says, you know,
Speaker 1: the instry doesn't need more bitcoin, I e. C Z
Speaker 1: stepping in. He needs dollars like the stuff that I haven't,
Speaker 1: you know, you know, the people actually can spend and
Speaker 1: that's what it really needs. And so we'll see how
Speaker 1: that plays that. Katie Greifeld, Cross asset reporter joining US
Speaker 1: Live Broker Studio. We appreciate that. Gold Stark. Let's bring
Speaker 1: in Matt Siegel now, he's ahead of digital asset research
Speaker 1: at Van Neck. He's been on the street for a
Speaker 1: slid fifteen years. Before that, he was a producer here
Speaker 1: at Bloomberg and he also worked for The Money Honey
Speaker 1: or he worked for him. Yeah, back whever at seeing BC. Um,
Speaker 1: but it's great to have you back in the office
Speaker 1: and especially to focus on the crypto story. Um. You
Speaker 1: have been in the space for a long time, the
Speaker 1: kind of I don't know what does Cathy would call it,
Speaker 1: that you've been on the cutting edge right of the
Speaker 1: sort of uh future investments. What do you think about
Speaker 1: where we are now in crypto? I mean, is there
Speaker 1: a future or is f t X kind of the
Speaker 1: big bang that's going to end at all. We're gonna
Speaker 1: deep deep crypto winter and that's going to be the
Speaker 1: time when the news flow is most negative and it's
Speaker 1: easiest to become a hater in the space. So we're
Speaker 1: dealing with kind of three concurrent major stories here. The
Speaker 1: first is, you know, the apparent fraud and siphoning of
Speaker 1: funds by SPF and his family, and you know, recovery
Speaker 1: of that may impact the recovery in the bankruptcy courts.
Speaker 1: And since there's so many counterparties tied into this, whether
Speaker 1: it's Block five, Voyager, etcetera, UH, that has implications for
Speaker 1: the recoveries going forward. It is whether or not he
Speaker 1: has charged and his personal assets or on recoveries. I
Speaker 1: have a lot of listeners writing in with the same
Speaker 1: question over the last few days and really the last
Speaker 1: couple of weeks, um how likely our customers to get
Speaker 1: anything back to recover assets The recovery process in this
Speaker 1: in these cases UH like Mount Cox can stretch into six, seven,
Speaker 1: eight years, It would could be longer than that with
Speaker 1: a case of this complexity we are getting. We have
Speaker 1: visibility of FTX customer and bankruptcy claims that are trading
Speaker 1: you know, at three to eight cents on the dollar,
Speaker 1: So you know, if you're buying them today, if you're
Speaker 1: buying them today, that's the type of recovery that that's
Speaker 1: a Matt Miller haircut right there, three cents on the dollar.
Speaker 1: But Mount Cox, what was the final outcome of that?
Speaker 1: I mean that's been now a decade, right, Yeah, I
Speaker 1: can't remember exactly what the what the claims that were
Speaker 1: propels Magic the gathering online exchange was stood for. I
Speaker 1: think they recovered a significant amount. And you know in
Speaker 1: the made off case there were real recoveries here there,
Speaker 1: but uh, from what we know so far, from what
Speaker 1: we read, uh, and here from John Ray, like there
Speaker 1: weren't even records kept at f t X. It's going
Speaker 1: to be difficult. Yeah, there's multiple loans made between counterparties
Speaker 1: owned by the same guy that were not disclosed to
Speaker 1: institutional investors when private shares were sold in the market
Speaker 1: on us soil last year, breaking the terms of service
Speaker 1: that were pretty clearly written on their website. Hard to
Speaker 1: see it any other way that that he is personally
Speaker 1: liable for the chunk of it looks bad for Sam
Speaker 1: Bankman Freed at least from this perspective, which I guess
Speaker 1: is why you're still in the Bahamas. Does this is
Speaker 1: this critical moment for the industry in terms of perhaps
Speaker 1: regulation and should this industry be regulated? If so, is
Speaker 1: there a consensus who should do it? Well, let's let's
Speaker 1: just take a step back and like talk about the
Speaker 1: two other big stories that are going on besides the
Speaker 1: ft X bankruptcy specifically, and both of them are connected
Speaker 1: to regulation. You know. The second is that there's a
Speaker 1: hacker who stole funds off the ft X exchange is
Speaker 1: still currently holding about two fifty million dollars worth of
Speaker 1: bitcoin and ethereum that he or she has laundered through
Speaker 1: a mix of second tier exchanges and and blenders. And
Speaker 1: you know what my question is, are we sure now
Speaker 1: that that was a hack? And I know that Um
Speaker 1: in his kind of off the record Twitter d m
Speaker 1: uh interview with The Box Sam bankman Free did say
Speaker 1: it was a hack. But some people have speculated that um,
Speaker 1: the Bahamian authorities may have instructed f t X employees
Speaker 1: to move assets. That's a separate sum where the Bahamian
Speaker 1: authorities have now it seems capitulated and will let the
Speaker 1: bankruptcy take place in New York and so we should
Speaker 1: get visibility into those funds. But there's this other three
Speaker 1: hundred million dollars in bitcoin and eath that's been laundered.
Speaker 1: It it looks like the way that the Lazarus Group,
Speaker 1: which is connected to North Korea, has laundered funds in
Speaker 1: the past, at least according to US authorities. But tracing
Speaker 1: and potentially getting hands on those funds could also impact
Speaker 1: the recovery in bankruptcy in a material way. But you
Speaker 1: can always see them, right. I talked to Um the
Speaker 1: co one of the co founders of Chain Analysis yesterday,
Speaker 1: and he said, we have our eye on those assets.
Speaker 1: We're not gonna lose sight of them. It's not like
Speaker 1: these blenders are sophisticated enough that they baffle us. It
Speaker 1: just makes it more difficult. Yeah, and you've got conflicting
Speaker 1: jurisdictions on the regulation side. So will it be the
Speaker 1: same parties who are going after that funds as who
Speaker 1: are investigating Sbfuh. You know, we don't know. And a
Speaker 1: lot of the reason for that, as to your question,
Speaker 1: is that the regulatory landscape is very fragmented. So you said,
Speaker 1: there's two other issues, Um, one was the hack once
Speaker 1: the hack, one is the fraud and the personal taking
Speaker 1: of funds by SPF, and then the third is Genesis,
Speaker 1: which is, you know, the largest institutional counterparty, the only
Speaker 1: full service regulated crypto prime broker in the US. Uh.
Speaker 1: And it's hard to do business as an institutional investor
Speaker 1: and not touch Genesis in some way. They also have
Speaker 1: connecting claims to block five. Um, so all of it
Speaker 1: kind of yes, so a lot of bankruptcies here. Um,
Speaker 1: if you want to do business in this country, I
Speaker 1: guess in cryptom you have had to deal with one
Speaker 1: of those counterparties, right, Yes. Uh, maybe Jamie Diamond was
Speaker 1: right at least at this stage, which is like you've
Speaker 1: thought he's right since the very I don't know. I mean,
Speaker 1: Japen Morgan just filed for a bitcoin wallet two days ago,
Speaker 1: a trademark. Yes, So maybe these people sometimes say one
Speaker 1: thing one thing can do another And it's the sentiment
Speaker 1: that you express which is most common at a market. Bottoms,
Speaker 1: explain what you were telling us about El Salvador harnessing
Speaker 1: the power of volcanoes. There's a headline on the Bloomberg
Speaker 1: terminal this morning that El Salvador has tabled a new
Speaker 1: securities law that would permit the government to transfer digital
Speaker 1: assets to and FRO and would pave the way for them,
Speaker 1: issuing a billion dollar bond on the bitcoin network would
Speaker 1: be the first sovereign blockchain bond. But they would use
Speaker 1: those proceeds to build essentially bitcoin minds what on top
Speaker 1: of their volcanoes and use the geothermal energy as power.
Speaker 1: There's a lot of carbon in the world that's stranded,
Speaker 1: not because it's dirty or there's no use for it economically,
Speaker 1: but because the nations or entities that control it don't
Speaker 1: have the resources to build how voltage transmission lines with
Speaker 1: all that copper and all that infrastructure. Uh so. El
Speaker 1: Salvador is one such case where they're rich and natural resources.
Speaker 1: It's a country full of volcanoes and geothermal energy, but
Speaker 1: there's no transmission down into the city. So they have
Speaker 1: built a bitcoin mine about one mega watts worth of
Speaker 1: power at the top of the volcano as a test
Speaker 1: case so that they can print their own money. Rather
Speaker 1: than having the poorest country in the world's monetary policy
Speaker 1: tied to the monetary policy of one of the richest
Speaker 1: countries in the world, it never makes much sense. It's
Speaker 1: a real loss of sovereignty. El Salvador went to a
Speaker 1: dollar economy forty years ago when they had a civil
Speaker 1: war that increases a lot of domestic tension. So this
Speaker 1: bitcoin gambit for them, the first country in the world
Speaker 1: to make bitcoin legal tender is a way of restoring
Speaker 1: sovereignty and introducing some degree of negotiating leverage versus an
Speaker 1: I m F who has become arguably rather heavy handed
Speaker 1: in some of their demands. So they can make bitcoin
Speaker 1: with all handos. I learned something new. I mean, this
Speaker 1: guy met Sego, I don't know, and he was just
Speaker 1: in El Salvador. How is it? How is it? Were
Speaker 1: you spending bitcoin when you were there? Yes? Yeah, so
Speaker 1: they use it. They use it. Yeah, they used for
Speaker 1: a serving lesson in bitcoin, paid for serving lesson in
Speaker 1: bitcoin in El Salvador. They used the Lightning network, which
Speaker 1: is something I was Yeah, they used the Lightning network,
Speaker 1: which makes it easier to uh, to handle in terms
Speaker 1: of spending and receiving. But I think that's so cool.
Speaker 1: You know, about two of El salvador remittances are sent
Speaker 1: via the bitcoin network. That may sound like a low number,
Speaker 1: but the country about twenty gdp is remittances, and the
Speaker 1: World Bank has a report that the corridors that have
Speaker 1: the highest fees for remittances are the poorest countries in
Speaker 1: the world. So this is the reason why bitcoin can
Speaker 1: still provide value because it seems so One other country,
Speaker 1: Central African Republic, has also the bitcoin legal tender. Central
Speaker 1: African Republic uses the last colonial currency and existence the
Speaker 1: c f A franc where they are forced to deposit
Speaker 1: of all their foreign exchange reserves at the Bank of France,
Speaker 1: who has veto power over how they are spent and
Speaker 1: who uses that to coerce the country into signing these
Speaker 1: commercial agreements where France gets right at first refusal on
Speaker 1: their natural resources. So if you look at like what
Speaker 1: the new Prime Minister of Italy has been highlighting, it's
Speaker 1: these types of colonial arrangements. Uh, you know, bitcoin cryptocurrencies,
Speaker 1: they're a call option on a different financial future in
Speaker 1: which these arrangements are broken and neutral energy based money
Speaker 1: you know, grows. And that's kind of what Thomas Edison
Speaker 1: and Henry Ford suggested a hundred years ago. You know
Speaker 1: that it seems hard to imagine now, but that's why
Speaker 1: the price of these assets are down in the last year.
Speaker 1: I want to get back to um this the Genesis
Speaker 1: Gemini story, which I think is fascinating. Really the Genesis
Speaker 1: UM GBTC story. Uh, does Barry Silbert find money for
Speaker 1: this whole? If you look at the last time Genesis
Speaker 1: raised capital, it was exactly a year ago at the
Speaker 1: peak of the market. Nice job. It was at an
Speaker 1: equity value of ten billion dollars. Soft Bank lad that round.
Speaker 1: Google's venture arm also participated. So soft Bank doesn't have
Speaker 1: the money, right they need that they're owed five billion
Speaker 1: by by Masyoshi San. I don't see Google leading that round.
Speaker 1: So the existing investors, it seems like, are not going
Speaker 1: to put new money into this. Uh. Regulated institutions like banks,
Speaker 1: you know, still have regulatory uncertainty around it, so they're
Speaker 1: they're likely has to be a new entity that puts
Speaker 1: money into it, or possibly a haircut. And and then GBTC,
Speaker 1: I mean they're trading at what fort below that asset value?
Speaker 1: How does that work out? Bitcoin et F could be
Speaker 1: approved under a different regulatory regime. That seems unlikely unless
Speaker 1: the HR Department, if this administration makes some changes. Otherwise
Speaker 1: gray Scale could um break the law and redeem anyway? Well,
Speaker 1: they've been I believe I have done that in the past,
Speaker 1: and we're centered by the SEC that that's a possibility, um,
Speaker 1: but raising capital and or haircuts seeming as most likely option.
Speaker 1: All right, we're getting into Luis a little bit, but
Speaker 1: because I'm gonna get this guy back in here. Yes,
Speaker 1: I mean, he knows what he's talking about. Matt seguy's
Speaker 1: head of digital asset Research. I don't know what the
Speaker 1: hell that is. But he's at Van Neck, which is
Speaker 1: I just learned, is a very cool that he does
Speaker 1: know what it is asset management firm and super duper smart.
Speaker 1: And he was a former producer here at Bloomberg Television,
Speaker 1: which is of course minor stop along the number one
Speaker 1: on his resume. We appreciate him coming in here. John
Speaker 1: Deer and Company Deer and Coke symbols d on your
Speaker 1: Bloomberg terminal four forty five cents right now, A five
Speaker 1: point seven today. It hit a fifty two week high
Speaker 1: today and it also hit an all time high today.
Speaker 1: And that's saying something. This company went public back in
Speaker 1: all time high today. Some good, good numbers out of Moline, Illinois.
Speaker 1: Christian's good for America. That's by the America. It's good
Speaker 1: for the farmers. Boy, we are internationally broadcast, so that's right.
Speaker 1: I'm not biased towards one country or the other, necessarily
Speaker 1: as you wear your green flannel shirt. But I'm happy.
Speaker 1: I'm happy about the middle story for America. Christilo, he's happy.
Speaker 1: Equity Research channels to Bloomberg Intelligence. Chris talked to us
Speaker 1: about this quarter. What what's going right for dear? What's
Speaker 1: the basis for their positive outlook? Yeah, a lot of
Speaker 1: going right. UM, it was a real solid quarter and
Speaker 1: against some pretty elevated expectations going into the print UM
Speaker 1: and really driven by a very strong top line sales
Speaker 1: in the period where UM they were sixty and their
Speaker 1: profitable large agg business and that's really being driven by
Speaker 1: UM robust double digit pricing and higher volume. As some
Speaker 1: of these supply disruptions seem to be easing, demand for
Speaker 1: farm equipment continues to be remarkably strong and it really
Speaker 1: doesn't appear to be showing any signs of slowing into three.
Speaker 1: You have some healthy farm fundamentals, You have order books
Speaker 1: that already extend into the second half of next year.
Speaker 1: Inventories are tight, we have a lot of pent up
Speaker 1: demand due to the supply challenges. So it's certainly a
Speaker 1: favorable setup for deer heading into next year. Tell us
Speaker 1: about the American farmer Chris, because we don't know anything
Speaker 1: about it from here in New York. I am from
Speaker 1: the Great State of Ohio, so I'm from the live
Speaker 1: in the Garden State. Does that mean anything? I don't
Speaker 1: think they have farms there? Okay, they actually they do
Speaker 1: obviously have a lot of farming in Jersey as well.
Speaker 1: But uh, you know, is the family farms still a thing?
Speaker 1: Is this? Are there small business farms? Are they midsized?
Speaker 1: Have corporate farms taken over? What's what is the state
Speaker 1: to the American farmer? Yeah? So you know, if if
Speaker 1: you look at the health of the farm economy UM,
Speaker 1: especially over the last three years, it's it's been remarkably healthy.
Speaker 1: We're going to set another record this year for net
Speaker 1: farm income UM and that's really being supported by these
Speaker 1: elevated crop prices that we're seeing. You know, part of
Speaker 1: that stemming from Russia's invasion of Ukraine and some adverse
Speaker 1: weather UM. So we we think that's going to provide
Speaker 1: a favorable backdrop even as we move into next year
Speaker 1: UM as some of those grain flows out of the
Speaker 1: Black Sea region UM are restricted UM. And then you
Speaker 1: also have a lack of fertilizer availability due to the war,
Speaker 1: so we think crop eels will still be somewhat lower UM,
Speaker 1: which is going to limit some of this replenishment of
Speaker 1: depleted grainstock piles. So that's going to support this elevated
Speaker 1: crop price environment. That being said, farmers are also facing
Speaker 1: UM significantly higher input costs, whether it's fertilizer or fuel.
Speaker 1: But because of this these higher grain price is UM,
Speaker 1: they're able to invest in equipment UM, which helps them
Speaker 1: to be more productive and efficient on the form and
Speaker 1: ultimately drives higher profits for them. So so long as
Speaker 1: cross prices are elevated UM, it's still supportive of of
Speaker 1: spending on new equipment. And the labor story at a
Speaker 1: Deer made headlines for a while. UM. Has that been
Speaker 1: worked out? Is the union satisfied with what they got
Speaker 1: or are there any strikes on the horizon? Yeah, no,
Speaker 1: the the the U a W contract was ironed out
Speaker 1: earlier in this fiscal year for them. UM. You know, labor,
Speaker 1: labor across the industrial sector, you know, continues to be
Speaker 1: a problem UM, and labor I think is one of
Speaker 1: the headwinds that Deer and others will face as we
Speaker 1: move into next year. UM and you know DearS pouring
Speaker 1: a lot of money into autonomy and autonomous equipment. UM.
Speaker 1: Labor and also the quality of labors is kind of
Speaker 1: an ongoing challenge on the farm. It's scarce, it's more costly,
Speaker 1: and autonomy could help mitigate some of the allunges that
Speaker 1: farmers face, UM, not only getting the job done more efficiently,
Speaker 1: but also kind of in those optimal planning windows. And Chris,
Speaker 1: you know, if I go into a car lot these days,
Speaker 1: I don't have a lot to choose from. If I
Speaker 1: do find something, I gotta pay M S r P.
Speaker 1: Maybe even more than that. What's it like when I
Speaker 1: go on a deer lot to buy a big tractor.
Speaker 1: It's almost as bad. Um. We are at you know,
Speaker 1: historically historically low levels, particularly if you look at the
Speaker 1: large ac sector, which is really what moves the needle
Speaker 1: for deer. UM. We are significantly below historical levels. We
Speaker 1: will probably be below historical levels as we end next
Speaker 1: year as well. UM. You know, there's so much demand
Speaker 1: out there UM and and a lot of pent up
Speaker 1: replacement from these multiple years of underproduction that you know,
Speaker 1: deer's just meeting retail demand right now. They can't even
Speaker 1: restock the dealer a lot. So we think the restocking
Speaker 1: story could unfold into which should really help extend the
Speaker 1: ag cycle for Deer. All right, very interesting stuff and
Speaker 1: the stock has just been on fire. By the way.
Speaker 1: Do you see the company taking advantage of the situation?
Speaker 1: Can they do they have a fair amount of their
Speaker 1: own shares and award chess, Can they go and do
Speaker 1: some M and A? Is there anything like that going
Speaker 1: on in the space. Yeah, you know a lot of
Speaker 1: their investments. You know, they did a big deal for Verkin,
Speaker 1: which is a road construction equipment company number years back,
Speaker 1: So that should you know, play favorably into the infrastructure
Speaker 1: built here in the US and really help kind of
Speaker 1: give them some scale globally. Um I think a lot
Speaker 1: of their M and A going forward will be more
Speaker 1: focused on maybe some smaller bolt on deals around technology, autonomy, electrification,
Speaker 1: something that gives them, you know, additional technological capabilities that
Speaker 1: they haven't had. Um So, I think that's probably where
Speaker 1: we're looking at if they were to do some more
Speaker 1: M and A in the future. What did they say
Speaker 1: about Ukraine. I'm guessing that's probably a big market for them.
Speaker 1: What what are they saying uh, the big scheme of things.
Speaker 1: It's like, you know, Russia, Ukraine's like two percent of
Speaker 1: consolidated revenue. UM. You know, they've you know, suspended operations
Speaker 1: and taking some some right offs. They're um really not
Speaker 1: that different from any other UM industrial company. UM. That
Speaker 1: being said, it is important uh global commodity market, particularly
Speaker 1: with wheat and corn UM. So you know that that's
Speaker 1: part of the reason why we were kind of in
Speaker 1: this elevated crop price environment and probably will be for
Speaker 1: the next couple of years. Well, I would not be
Speaker 1: surprised if they have suppliers there as well. You know,
Speaker 1: a lot of UM auto production gets wire harnesses for
Speaker 1: example from Ukraine. Yeah, they they produce a lot of
Speaker 1: a lot of gear over there, but obviously they're not
Speaker 1: in the equation right now, so that hurts in a
Speaker 1: lot of ways. It also changes the picture UM, as
Speaker 1: Chris is explaining in terms of you know, uh, the
Speaker 1: crop prices, which plays out to be to to the
Speaker 1: to their benefit. Chris, great to talk to you, Thanks
Speaker 1: so much for warning us. Hope we get back on
Speaker 1: the show. Christie Alieno there equity research analysts from Bloomberg
Speaker 1: Intelligence talking to us about deer the stock trading at
Speaker 1: an all time high right now. Thanks for listening to
Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to
Speaker 1: interviews of Apple Podcasts or whatever podcast platform you prefer.
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three.
Speaker 1: On False Sweeney, I'm on Twitter at pt Sweeney Before
Speaker 1: the podcast. You can always catch us worldwide at Bloomberg
Speaker 1: Radio