WEBVTT - Exuberance Versus Optimism in Markets 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio. 0:00:20.040 --> 0:00:23.280 We've got Callie Cox. She's a US investment analyst at 0:00:23.280 --> 0:00:26.720 each Brow and she's joining us on zoom. Callie. Always 0:00:26.720 --> 0:00:28.480 great to have you on. Thanks so much for making 0:00:28.520 --> 0:00:32.839 time for us this afternoon. As Jess was kind of mentioning, uh, 0:00:33.080 --> 0:00:37.080 market optimism right now looking really good. Market is up today, 0:00:37.120 --> 0:00:41.440 tech earnings really strong. Is that optimism out there warranted 0:00:41.600 --> 0:00:42.120 in your view? 0:00:43.760 --> 0:00:45.720 Yeah, I definitely think it is. And by the way, 0:00:45.800 --> 0:00:48.640 I am so jealous of whoever's going to the Beyonce concert. 0:00:48.760 --> 0:00:49.400 It's Maddie. 0:00:49.479 --> 0:00:51.800 CALLI fly up and come with me to Met Life 0:00:52.000 --> 0:00:52.559 tomorrow night. 0:00:52.640 --> 0:00:55.160 Oh my gosh, give me, give me some give me 0:00:55.200 --> 0:00:57.720 some time and I'll book my flight. Great, so excited 0:00:57.760 --> 0:01:00.600 for that. But you know, I really think it does. 0:01:00.880 --> 0:01:04.040 I think the optimism is warranted because investors, the economy, 0:01:04.080 --> 0:01:06.400 and the FED all seem to be on the same page. 0:01:06.440 --> 0:01:06.640 Now. 0:01:06.680 --> 0:01:09.679 There's no fighting the FED at this moment. No, earnings 0:01:09.680 --> 0:01:12.920 are coming out better than expected once again. Economic data 0:01:12.959 --> 0:01:15.920 is turning back up, especially on the consumer side. It's 0:01:16.080 --> 0:01:18.959 really hard to find a bearish narrative in this market. 0:01:19.640 --> 0:01:24.120 So seasonality looking at seag go in the terminal, you 0:01:24.160 --> 0:01:26.800 could pull up the heat map and look at historically 0:01:26.880 --> 0:01:30.039 how August September typically the worst months of the year. 0:01:30.040 --> 0:01:32.800 But we've also seen seasonality buck the trend, say like 0:01:32.920 --> 0:01:35.640 June swoon that didn't come to fruition, but July still 0:01:35.680 --> 0:01:37.480 was strong. But one of the big ones was just 0:01:37.480 --> 0:01:39.880 looking at the presidential cycle, the last three quarters were 0:01:39.880 --> 0:01:42.920 typically the strongest and that actually overlapped with what we've 0:01:42.920 --> 0:01:45.759 seen with this rally. How do you view the stock 0:01:45.800 --> 0:01:48.440 market heading into this weaker period seasonally wise? 0:01:49.840 --> 0:01:52.080 Yeah, so I'm glad you brought up seasonality because if 0:01:52.080 --> 0:01:55.120 I had to pick out two things that make me nervous, 0:01:55.840 --> 0:01:59.160 I'd probably say seasonality and sentiment, Because you're right, we're 0:01:59.160 --> 0:02:02.920 heading into weaker season of the year. You know, considering 0:02:02.960 --> 0:02:05.360 that we have a lot of people on vacation, volumes 0:02:05.360 --> 0:02:08.560 are lower. That can result in some error pockets of 0:02:08.639 --> 0:02:11.920 selling and you know buying. Quite honestly, if there's a 0:02:11.960 --> 0:02:14.600 headline that moves markets, and we saw that yesterday with 0:02:14.639 --> 0:02:18.080 yield curve control. You know, arguably a headline that probably 0:02:18.120 --> 0:02:20.320 didn't mean much for the US investor, it does for 0:02:20.320 --> 0:02:24.000 foreign exchange markets. It has you know, certain effects on 0:02:24.120 --> 0:02:27.880 company earnings and individual stocks, but on the whole, you know, 0:02:27.919 --> 0:02:30.480 when you're in a low volume period, you can see 0:02:30.840 --> 0:02:33.320 markets swing around a lot more. I'm not sure if 0:02:33.360 --> 0:02:35.560 that'll come to fruition this year. I mean, obviously we 0:02:35.600 --> 0:02:37.760 see a lot of momentum in the stock market right now, 0:02:38.080 --> 0:02:40.960 but at these levels, at this point, with rates so high, 0:02:41.000 --> 0:02:44.480 we are telling customers to, you know, consider a plan 0:02:44.680 --> 0:02:47.320 for if stocks fall. What would you do if we 0:02:47.320 --> 0:02:50.760 saw prices fall five or ten percent? Is it worth hedging, 0:02:51.000 --> 0:02:53.800 you know, is it worth making it making a plan 0:02:53.919 --> 0:02:57.120 to maybe buy some more shares? So you know, we're 0:02:57.160 --> 0:02:59.800 aware of the fact that prices could drop, and this 0:03:00.240 --> 0:03:02.680 is a part of the year where you know, we 0:03:02.720 --> 0:03:05.040 do see those air pockets and storms pop up. 0:03:05.080 --> 0:03:07.480 So then how are you advising clients to position or 0:03:07.560 --> 0:03:09.400 do you think that would be a buying opportunity if 0:03:09.400 --> 0:03:11.240 you do see the S and P five hundred pull 0:03:11.280 --> 0:03:12.680 back five ten percent. 0:03:13.639 --> 0:03:15.959 Well, I will say we've been more optimistic than the 0:03:16.000 --> 0:03:18.440 average Wall Street firm out there. We've been saying since 0:03:18.520 --> 0:03:21.720 November or December that you know, it's really hard to 0:03:21.720 --> 0:03:24.800 see stocks sell off when investors are prepared for the worst. 0:03:25.160 --> 0:03:26.720 And I don't think you can say that right now. 0:03:26.760 --> 0:03:29.040 I think sentiment is a lot more positive than it was, 0:03:29.440 --> 0:03:31.600 you know, seven or eight months ago. But you know, 0:03:31.680 --> 0:03:33.880 at the same time, we're seeing a lot of positive 0:03:33.880 --> 0:03:37.240 conditions swing in the bulls favor. So we think it's 0:03:37.320 --> 0:03:40.000 dangerous to let go of risk entirely in the first 0:03:40.120 --> 0:03:42.280 year of what looks like a bull market. I mean, 0:03:42.360 --> 0:03:44.360 the S and P five hundred rises an average of 0:03:44.440 --> 0:03:47.520 forty three percent in the first year of every bull 0:03:47.600 --> 0:03:50.280 market that we've seen since nineteen fifty. So we're telling 0:03:50.320 --> 0:03:53.280 our customers hold on to risk, but look at quality risk, 0:03:53.520 --> 0:03:56.520 look at companies that you think can weather recession. And 0:03:56.640 --> 0:03:59.240 on the bond side or outside of stocks, you really 0:03:59.320 --> 0:04:02.480 think about what could help you if a recession were 0:04:02.560 --> 0:04:06.800 to materialize. I mean, bonds, especially longer term treasury bonds, 0:04:07.240 --> 0:04:10.920 have been one of those classic recession hedges, and you know, 0:04:11.040 --> 0:04:13.400 if we see prices fall, they could at the very 0:04:13.480 --> 0:04:17.320 least provide you a sanity hedge in terms of, you know, 0:04:17.400 --> 0:04:20.120 managing your emotions and what could be a tough sell off. 0:04:20.520 --> 0:04:23.240 Do you think the Bears are going to get anything 0:04:23.360 --> 0:04:24.320 right this year? 0:04:26.800 --> 0:04:31.320 Oh, that's such a charged question. I mean, I think 0:04:31.320 --> 0:04:33.440 they have gotten a few things right. I mean, have 0:04:33.520 --> 0:04:35.840 we not forgotten that in March and in April? I mean, 0:04:35.839 --> 0:04:39.280 we had a banking scare that resulted from tighter policy, 0:04:39.400 --> 0:04:42.839 and that's still happening in the background. Of course, lending 0:04:42.880 --> 0:04:46.640 has picked up, but overall, we're looking at tighter conditions, 0:04:46.680 --> 0:04:49.680 and I think I think the pessimists are right in that, 0:04:49.800 --> 0:04:52.279 you know, we should still be aware of, you know, 0:04:52.360 --> 0:04:55.040 the lags that we could see in tighter monetary policy. 0:04:55.440 --> 0:04:58.680 So you know, it looks like we might be saved 0:04:58.680 --> 0:05:00.960 for the next month or two. But I'm certainly not 0:05:01.000 --> 0:05:03.600 one to step out there and say everything's okay. And 0:05:04.080 --> 0:05:06.840 that's why you know, we're telling customers again to you know, 0:05:06.880 --> 0:05:10.120 maybe look at some bonds, maybe look at diversifying your portfolio, 0:05:10.480 --> 0:05:13.400 and you know, maybe think about one of those more 0:05:13.440 --> 0:05:17.120 complex views where everything's going great right now, but you know, 0:05:17.360 --> 0:05:21.400 maybe there could be some differentiation among sectors or potentially 0:05:21.400 --> 0:05:23.080 some weakness in the overall market. 0:05:23.320 --> 0:05:25.880 What is sentiment telling us? When you have someone like 0:05:25.960 --> 0:05:29.400 Mike Wilson, obviously a well known bear on Wall Street, 0:05:29.440 --> 0:05:31.720 throwing in the towel this week saying that they were 0:05:31.760 --> 0:05:34.920 wrong but still holding a thirty nine hundred price target 0:05:35.120 --> 0:05:36.440 at the end of this year for the S and 0:05:36.480 --> 0:05:38.600 P five hundred, When does sentiment get a little bit 0:05:38.640 --> 0:05:39.600 too frothy for you? 0:05:40.880 --> 0:05:42.920 Well, the mood is getting better, and I wouldn't describe 0:05:42.920 --> 0:05:46.159 it as frothy quite yet. I actually wrote a note 0:05:46.160 --> 0:05:48.600 this week on the you know phrase we all know 0:05:48.839 --> 0:05:51.920 irrational exuberance and why we might not be be seeing 0:05:51.920 --> 0:05:55.760 irrational exuberance right now, especially after you know such a 0:05:55.839 --> 0:05:59.080 such an encouraging FED meeting and more I mean more 0:05:59.120 --> 0:06:03.440 importantly and encouraging FED press conference. I'd say now that 0:06:03.520 --> 0:06:05.880 you know, sentiment of course is getting better and investors 0:06:05.880 --> 0:06:08.600 have a right to feel better about the future. I 0:06:08.640 --> 0:06:10.520 think when it starts to get frothy is when we 0:06:10.560 --> 0:06:14.840 do start getting those conflicting signals. You know, data potentially weakening, 0:06:15.200 --> 0:06:17.839 seeing a lot of weakening and leading indicators. I mean, 0:06:18.040 --> 0:06:20.680 I'm looking at the job markets leading indicators right now, 0:06:20.760 --> 0:06:23.880 and you know, if we saw them weaken substantially in 0:06:23.920 --> 0:06:26.479 the weeks and months ahead, then I would probably raise 0:06:26.520 --> 0:06:29.720 the red flag and say, hey, something's wrong here. But 0:06:30.160 --> 0:06:33.200 right now it's it's pretty incredible to me about how 0:06:33.200 --> 0:06:36.240 many data series are turning in the bulls favor. So 0:06:37.000 --> 0:06:40.800 you know, stay on watch. Anything can happen. But you know, 0:06:40.880 --> 0:06:44.799 the market's momentum is moving higher, and if you're feeling 0:06:44.880 --> 0:06:47.000 encouraged about the future, there is a reason why you 0:06:47.000 --> 0:06:47.800 should feel that way. 0:06:47.880 --> 0:06:48.159 Yeah. 0:06:48.200 --> 0:06:52.480 Well, that momentum clearly driven by the AI euphoria. And 0:06:52.520 --> 0:06:54.440 we had that note from Michael Harten at this morning 0:06:54.560 --> 0:06:57.120 saying that rates are still too low to pop what 0:06:57.160 --> 0:07:00.440 he calls the AI baby bubble. I wonder, Kelley, to 0:07:00.480 --> 0:07:05.880 what extent do you foresee the fundamentals justifying these valuations 0:07:05.920 --> 0:07:08.160 for some of the n video like names out there 0:07:08.640 --> 0:07:10.240 in the second half of the year, and we have 0:07:10.320 --> 0:07:11.880 just about forty five seconds left. 0:07:13.080 --> 0:07:13.320 Sure. 0:07:13.400 --> 0:07:15.560 Well, first of all, you can't call a bubble until 0:07:15.720 --> 0:07:18.240 you're past it. So that's the first thing I tell 0:07:18.240 --> 0:07:20.720 it anybody, if everybody asked me, if anybody asked me 0:07:20.760 --> 0:07:22.480 if AI is in a bubble. But I think we're 0:07:22.480 --> 0:07:25.720 already seeing some of those fundamentals come out. We're seeing 0:07:25.840 --> 0:07:29.760 companies like semiconductor companies raising their sales guidance. We're seeing 0:07:29.760 --> 0:07:32.880 other companies invest in AI technology, you know. So I 0:07:33.400 --> 0:07:35.200 think we're seeing it play out, But we have to 0:07:35.240 --> 0:07:37.640 remember that AI is an emerging theme and it could 0:07:38.040 --> 0:07:40.520 take some time to really see that show up in 0:07:40.560 --> 0:07:43.600 the numbers. For now, I mean, it's anybody's guests, So 0:07:43.840 --> 0:07:45.960 I'm not surprised people are excited about it, But at 0:07:45.960 --> 0:07:47.720 the same time, I'm not ready to call it a bubble. 0:07:48.080 --> 0:07:49.640 I feel like we have to get to a point 0:07:49.680 --> 0:07:52.480 where there's IPOs, where AI is probably attached to the 0:07:52.560 --> 0:07:55.000 name right, and we just aren't quite there yet. Do 0:07:55.000 --> 0:07:55.960 you feel that way, Kelly. 0:07:57.720 --> 0:07:59.960 I don't know if that's where I would get work, 0:08:00.400 --> 0:08:03.720 But where I would get worried is if we didn't 0:08:03.760 --> 0:08:07.720 see AI flow into the economy and we didn't see 0:08:07.720 --> 0:08:11.200 it utilized by companies. We didn't see it commercialized, if 0:08:11.240 --> 0:08:13.400 you will, and I think that's a step that any 0:08:13.440 --> 0:08:15.000 groundbreaking technology needs to. 0:08:14.920 --> 0:08:17.160 Make, right. That's gonna be the big question. Yeah, these 0:08:17.160 --> 0:08:19.680 companies can keep saying AI on their earnings calls, but 0:08:19.720 --> 0:08:23.400 how is Kroger going to monetize their AI usage there. Callie, 0:08:23.400 --> 0:08:25.280 thank you so much for joining us on this Friday. 0:08:25.320 --> 0:08:27.760 It's always a pleasure to get you on our coverage. 0:08:27.800 --> 0:08:30.560 That was Callie Cox. She's a US investment analyst at 0:08:30.560 --> 0:08:33.520 e Toro. She's also got great commentary on Twitter, so 0:08:33.679 --> 0:08:35.120 follow her over there for more. 0:08:35.760 --> 0:08:39.320 You're listening to the Bloomberg Business Week podcast. Catch us 0:08:39.360 --> 0:08:42.720 live weekday afternoons from three to six Eastern Listen on 0:08:42.760 --> 0:08:46.800 Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, 0:08:47.080 --> 0:08:49.800 or watch us live on YouTube. 0:08:49.920 --> 0:08:52.520 Better to come in and chat with us more about 0:08:52.559 --> 0:08:57.000 what's happening in the crypto space than Everett Milman, chief 0:08:57.040 --> 0:09:00.600 market analysts at Gainesville Coins, joining us on on zoom 0:09:00.679 --> 0:09:03.040 and to chat with us more about how this particular 0:09:03.120 --> 0:09:06.040 asset class has been performing. Thank you so much for 0:09:06.160 --> 0:09:08.720 joining us, and I want to get your take just 0:09:08.840 --> 0:09:10.520 as far as sort of the wild ride. I know 0:09:10.559 --> 0:09:12.600 there's obviously so many coins when we are talking about 0:09:12.600 --> 0:09:15.600 the crypto space, but your view on Bitcoin right now 0:09:15.920 --> 0:09:19.559 and while it's trading once again below that psychological level 0:09:19.640 --> 0:09:21.240 of thirty thousand. 0:09:22.640 --> 0:09:24.440 Right Thank you so much for having me on. 0:09:24.920 --> 0:09:27.440 It has been interesting to see that although we know 0:09:28.120 --> 0:09:32.400 bitcoin has experienced incredible volatility over the course of its history, 0:09:33.080 --> 0:09:37.000 over the much of this summer, it has remained fairly steady, 0:09:37.080 --> 0:09:40.920 kind of trading sideways around that thirty thousand level. And 0:09:41.000 --> 0:09:44.560 it raises an interesting question about whether or not bitcoin 0:09:44.640 --> 0:09:48.160 actually can function as money, because you have, on the 0:09:48.160 --> 0:09:50.640 one hand, the idea of a store of value that 0:09:50.720 --> 0:09:53.400 it needs to be steady and stable, But on the 0:09:53.400 --> 0:09:56.520 other hand, money is supposed to be used for spending, 0:09:57.000 --> 0:10:01.040 and in that sense, Bitcoin perhaps is better characterized as 0:10:01.080 --> 0:10:04.640 digital gold as purely a store of value, because as 0:10:04.640 --> 0:10:08.480 a medium of exchange it runs into this problem that 0:10:08.559 --> 0:10:12.160 is known as Gresham's law. Basically that bad money drives 0:10:12.160 --> 0:10:15.720 out good money. Bad money money that depreciates in value, 0:10:15.720 --> 0:10:17.520 people are going to want to spend that as quickly 0:10:17.559 --> 0:10:20.040 as possible, to get their hands on real things with 0:10:20.080 --> 0:10:21.320 it before it becomes worthless. 0:10:21.760 --> 0:10:22.319 Bitcoin. 0:10:22.559 --> 0:10:25.280 If a price does simply keep going up, as a 0:10:25.320 --> 0:10:30.200 lot of the advocates and evangelists certainly hope, that's not 0:10:30.360 --> 0:10:32.640 very good as money. That is the opposite problem that 0:10:33.080 --> 0:10:35.800 people would simply hoard the bitcoin and never use it 0:10:35.840 --> 0:10:38.480 as money or spend it. So I think that that 0:10:38.760 --> 0:10:42.640 brings up this interesting philosophical question about sure. I think 0:10:42.679 --> 0:10:47.480 bitcoin has established itself as a unique asset class, perhaps 0:10:47.600 --> 0:10:51.280 less so for other cryptocurrencies. But then the question does become, well, 0:10:52.000 --> 0:10:55.000 what is bitcoin? Is it money or is it simply 0:10:55.840 --> 0:10:57.920 kind of like a digital gold bar that you just 0:10:57.920 --> 0:10:59.080 put in the vault and keep. 0:10:58.920 --> 0:11:02.160 In a wallet, the question that regulators are going to 0:11:02.200 --> 0:11:04.920 be tasked with answering. And having said that, we've got 0:11:04.920 --> 0:11:08.240 some regulatory news on the terminal crossing around three pm 0:11:08.360 --> 0:11:13.840 Eastern that Apple the Apple App Store rules face lawmaker 0:11:13.920 --> 0:11:17.439 scrutiny over crypto and NFTs. And this comes basically after 0:11:17.559 --> 0:11:20.600 complaints from the likes of Coinbase saying that Apple's in 0:11:20.640 --> 0:11:23.960 app purchase system doesn't support crypto, so they weren't able 0:11:24.000 --> 0:11:26.559 to comply with the Apple App Store rules even if 0:11:26.559 --> 0:11:29.360 they had tried. And now those questions are going to 0:11:29.360 --> 0:11:32.040 be dealt with by regulators. But having said that, I'm 0:11:32.080 --> 0:11:34.760 curious what do you think about the role of big 0:11:34.840 --> 0:11:38.160 tech companies when it comes to regulatory questions for crypto. 0:11:38.200 --> 0:11:41.080 Does a company like Apple help you in your quest 0:11:41.120 --> 0:11:45.800 to get crypto regulation clarity or does it hurt that effort? 0:11:46.679 --> 0:11:49.000 That is kind of a conundrum, right. 0:11:49.920 --> 0:11:53.200 It really brings up this question that cryptocurrency itself gets 0:11:53.240 --> 0:11:56.760 at the heart at how much control do we want 0:11:57.000 --> 0:12:00.640 governments to have over this three new world of the 0:12:00.679 --> 0:12:04.760 future of digital money, Because whether it is a tech company, 0:12:04.880 --> 0:12:08.599 a private enterprise, or indeed the government with the CBDC 0:12:09.280 --> 0:12:13.000 issuing these digital currencies, that does inevitably seem to be 0:12:13.080 --> 0:12:15.560 the path forward in the future, and up to now, 0:12:16.240 --> 0:12:20.880 somewhat confusingly, we've seen the SEC and the CFTC essentially 0:12:20.920 --> 0:12:25.360 attempt regulation purely by enforcement, and I think that what 0:12:25.360 --> 0:12:27.840 we're going to need in terms of clarity is actual 0:12:27.960 --> 0:12:31.680 legislation from Congress. So there are a few crypto bills 0:12:31.679 --> 0:12:35.400 that are currently being debated, one on stable coins and 0:12:35.600 --> 0:12:39.800 another the Loomis Jilibrand bill that is being workshopped. I 0:12:39.840 --> 0:12:42.280 would be very interested to see what comes out on 0:12:42.280 --> 0:12:45.080 the other end of those two laws, if indeed they 0:12:45.120 --> 0:12:48.439 do become laws, because there has to be some level 0:12:48.440 --> 0:12:52.600 of clarity about not just what kind of influence we're 0:12:52.600 --> 0:12:55.280 going to allow tech companies to have in the crypto space, 0:12:55.559 --> 0:12:58.800 but what is the government's position on these things, And 0:12:58.840 --> 0:13:02.640 I think it's been very unclear. That's really all that 0:13:02.679 --> 0:13:04.319 we can say at this point is that the government 0:13:04.800 --> 0:13:07.800 has not been able to establish a clear position, and 0:13:07.920 --> 0:13:11.600 rather than letting the executive branch and its agencies try 0:13:11.640 --> 0:13:14.760 and kind of grasp in the dark and change direction 0:13:14.840 --> 0:13:17.880 in midstream, it would be very helpful if Congress could 0:13:17.880 --> 0:13:21.319 come up with some sensible rules that go beyond simply, 0:13:21.440 --> 0:13:26.040 you know, punishing bad actors like FTX, and it actually 0:13:26.200 --> 0:13:30.400 established some framework for how do we think of cryptocurrencies 0:13:30.440 --> 0:13:36.600 and bitcoin relative to regular money or other forms of 0:13:36.600 --> 0:13:38.000 payments and transactions. 0:13:38.280 --> 0:13:41.360 And one of these biggest debates, especially in this crypto space, 0:13:41.400 --> 0:13:43.920 is what should and shouldn't count as a security in 0:13:43.960 --> 0:13:46.800 the eyes when it comes to US regulators. What's your 0:13:46.920 --> 0:13:49.320 view on that right? 0:13:49.520 --> 0:13:52.440 And as you referenced, we recently had the Ripple case 0:13:52.640 --> 0:13:55.480 in court and I think we got sort of a 0:13:55.679 --> 0:14:01.000 mixed or ambiguous response that Ripple seems have been vindicated 0:14:01.320 --> 0:14:04.360 that it is not a security, but it really was 0:14:04.400 --> 0:14:07.440 only looking the court was very narrowly looking at one 0:14:07.559 --> 0:14:10.360 aspect of sort of the creation of the token, not 0:14:10.600 --> 0:14:15.600 the downstream distribution of Ripple. Tooken's XRP when it gets 0:14:15.640 --> 0:14:19.160 to the secondary market or to retail In my opinion, 0:14:19.240 --> 0:14:24.240 I think it's fairly clear that most cryptocurrencies, as they 0:14:24.240 --> 0:14:28.479 are currently constructed, they are securities. They function like securities, 0:14:28.480 --> 0:14:32.600 they're traded on exchanges, but they are obviously not quite 0:14:32.640 --> 0:14:37.640 the same as other existing financial instruments. That being said, 0:14:37.680 --> 0:14:39.880 I think that is another one of these hot button 0:14:39.960 --> 0:14:42.840 issues that are at the center of the future of 0:14:42.880 --> 0:14:46.160 the crypto space that we need more clarity, we need 0:14:46.200 --> 0:14:50.560 sensible regulation in order for things to evolve and develop 0:14:50.960 --> 0:14:53.440 further than where they are right now, because everything is 0:14:53.480 --> 0:14:54.240 sort of in limbo. 0:14:55.320 --> 0:14:57.320 Well it is sort of in limbo, and that makes 0:14:57.320 --> 0:15:00.320 me wonder whether there's kind of a credibility question, least 0:15:00.320 --> 0:15:02.160 a pr question for crypto. 0:15:02.680 --> 0:15:06.480 This week, the. 0:15:05.040 --> 0:15:07.400 Terminal Tracker when it comes to word counts show that 0:15:07.400 --> 0:15:09.760 the Barbie movie got more mentions on the terminal than 0:15:09.840 --> 0:15:12.440 Bitcoin did, and that feels like a bad indicator for 0:15:12.480 --> 0:15:13.520 you for the second half. 0:15:13.360 --> 0:15:13.760 Of the year. 0:15:15.200 --> 0:15:18.600 Ah, that's a fair point. Obviously, the public consciousness or. 0:15:18.600 --> 0:15:23.360 Awareness of bitcoin as an investment has waxed and waned, 0:15:23.680 --> 0:15:26.480 and I think it's interesting to take into account that 0:15:26.560 --> 0:15:31.080 although cryptocurrency itself has inescapably become a bit of a 0:15:31.080 --> 0:15:35.120 political issue, we have multiple presidential candidates that are openly 0:15:35.160 --> 0:15:39.320 taking a stance. The most recent polling shows that actually 0:15:40.040 --> 0:15:43.080 the majority of the public is somewhat indifferent right now 0:15:43.120 --> 0:15:47.080 to what happens with cryptocurrency and where policy goes. And 0:15:47.200 --> 0:15:50.960 obviously within the space there are still mean coins and 0:15:51.280 --> 0:15:55.520 this curious culture of I would say unseriousness that characterizes 0:15:55.800 --> 0:15:59.720 the broader crypto space. But as of right now, without 0:15:59.800 --> 0:16:02.720 the clear legal framework, I think that that is simply 0:16:03.240 --> 0:16:05.760 the cost of admission, so to speak, in order to 0:16:05.840 --> 0:16:09.000 engage with some of the more interesting and promising ideas 0:16:09.000 --> 0:16:10.520 that are coming out of crypto. 0:16:10.720 --> 0:16:12.640 We only have about twenty seconds left. But what's the 0:16:12.680 --> 0:16:14.760 top question you hear from clients. 0:16:16.360 --> 0:16:19.320 Is what do I do with my cryptocurrency? Where do 0:16:19.400 --> 0:16:21.080 I put it? And I think that there is sort 0:16:21.080 --> 0:16:25.040 of a knowledge gap when it comes to using the technology. 0:16:25.360 --> 0:16:27.920 How do you get crypto into cold storage? How do 0:16:27.960 --> 0:16:30.800 you spend it? Those really basic questions about how do 0:16:30.840 --> 0:16:34.040 you even use the technology. So it's a user experience. 0:16:33.640 --> 0:16:35.680 Question definitely, and I feel like that's been going on 0:16:35.720 --> 0:16:37.640 for a while too. When it comes to blockchain, Well, 0:16:37.640 --> 0:16:41.200 thank you so much by going through breaking this down 0:16:41.200 --> 0:16:45.240 with us that's Everett Millman, chief market analysts at Gainesville Coin, 0:16:45.360 --> 0:16:49.200 speaking us about crypto all things and what's happening with bitcoin. 0:16:49.920 --> 0:16:53.480 You're listening to the Bloomberg Business Week podcast. Catch us 0:16:53.480 --> 0:16:57.520 live weekday afternoons from three to six Eastern on Bloomberg Radio, 0:16:57.720 --> 0:17:01.000 the Bloomberg Business App, and YouTube. You can also listen 0:17:01.080 --> 0:17:04.200 live on Amazon Alexa from our flagship New York station 0:17:04.560 --> 0:17:07.439 Jo Just Say Alexa play Bloomberg eleven thirty. 0:17:08.920 --> 0:17:10.480 Well, if you've got a great guest coming on to 0:17:10.560 --> 0:17:14.160 talk with us about all of the deal's news out there. 0:17:14.200 --> 0:17:17.760 Mitch Berlin is the vice chair of Strategy and Transactions 0:17:18.119 --> 0:17:22.000 at EY and he's joining us on Zoom from New Hope, Pennsylvania. Mitch, 0:17:22.040 --> 0:17:24.440 thanks so much for coming on with us on this Friday. 0:17:24.480 --> 0:17:26.920 As we were talking about it's been a tough environment 0:17:26.960 --> 0:17:29.280 to get deals done for the first half of the year, 0:17:29.680 --> 0:17:31.159 what would you say is going to be the single 0:17:31.200 --> 0:17:33.480 biggest catalyst to change that? 0:17:35.320 --> 0:17:37.000 It has been a difficult year. Thanks for having me, 0:17:37.000 --> 0:17:40.840 by the way. I think that the biggest catalyst for 0:17:40.920 --> 0:17:46.320 improving the Difficut lemonade market is predictability. Predictability in where 0:17:46.359 --> 0:17:49.280 the economy is going you know, you build these models 0:17:49.320 --> 0:17:52.040 to take your business case to the board, to do 0:17:52.119 --> 0:17:55.679 these deals based on a predictable economy, and if the 0:17:55.720 --> 0:17:59.119 economy is unstable, it's very hard to give board's confidence 0:17:59.560 --> 0:18:03.240 that those those predictable models that underlie your business case 0:18:03.440 --> 0:18:04.840 are actually going to come to realization. 0:18:05.119 --> 0:18:07.879 When you're speaking with CEOs, what are they telling you 0:18:07.920 --> 0:18:10.040 about how they feel about the direction of the economy 0:18:10.119 --> 0:18:10.480 right now? 0:18:11.600 --> 0:18:15.480 I think they're cautiously optimistic. They know that they need 0:18:15.520 --> 0:18:19.000 to actually do transactions if they want to transform, because 0:18:19.119 --> 0:18:22.159 M and A is the fastest path to transformation versus 0:18:22.200 --> 0:18:25.679 doing it organically. They're watching very closely. They're looking at 0:18:25.720 --> 0:18:29.919 the valuations out there. There's still a significant mismatch between 0:18:29.920 --> 0:18:32.360 the cost of capital evaluations, and one of those two 0:18:32.400 --> 0:18:35.200 things have to come down in addition to a predictable 0:18:35.200 --> 0:18:37.680 economy for M and A really to pick up again. 0:18:37.760 --> 0:18:40.320 So what would have to be rectified between those two 0:18:40.359 --> 0:18:41.919 what would we need to see happen? 0:18:43.359 --> 0:18:45.800 Well, you know, we do think that sometime in early 0:18:45.840 --> 0:18:49.199 twenty twenty four, hopefully the FED will will decrease the 0:18:49.240 --> 0:18:51.640 FED borrowing, right, so the cost of capital may come down, 0:18:51.680 --> 0:18:55.600 But if not, ultimately those that need to sell their 0:18:55.600 --> 0:18:58.679 businesses will have will have to become more realistic on 0:18:58.760 --> 0:19:00.919 what those businesses are worth, and we'll see a decrease 0:19:00.920 --> 0:19:04.360 in evaluations. We already have seen a slight decrease in valuations, 0:19:04.760 --> 0:19:07.600 but not enough to trigger a strong m and a 0:19:07.720 --> 0:19:10.199 market like we had in twenty twenty one or twenty twenty. 0:19:10.359 --> 0:19:13.880 So you mean, say the Federal Reserve does end up 0:19:14.520 --> 0:19:18.000 officially concluding sometime at the end of this year, but 0:19:18.080 --> 0:19:21.720 then keeps the terminal rate at a particular level. That's 0:19:21.760 --> 0:19:24.400 going to cost some issues there because they're not obviously 0:19:24.440 --> 0:19:27.800 cutting rates, they're still keeping them elevated, right. 0:19:27.640 --> 0:19:31.400 But at least keeping them elevated is still predictable, right, 0:19:31.480 --> 0:19:34.800 so then other things can adjust up and down to 0:19:34.840 --> 0:19:37.159 accommodate that. It's when you never know where it's going 0:19:37.240 --> 0:19:39.280 to be three months from now that creates havoc. 0:19:40.359 --> 0:19:42.840 Well, some of that havoc is happening with the Live 0:19:42.920 --> 0:19:45.840 Nation stock hitting it's fifty two week highs earlier today 0:19:45.920 --> 0:19:49.320 and then dropping as much as sixteen percent today. And 0:19:49.560 --> 0:19:52.000 I don't need you to talk about Live Nation specifically here, 0:19:52.040 --> 0:19:54.080 but I just think it's the perfect example of the 0:19:54.200 --> 0:19:55.920 challenge when it comes to M and A. Right now 0:19:55.920 --> 0:19:58.399 they have all this cash on hand because of all 0:19:58.400 --> 0:20:01.160 of this consumer spending on concert they were looking into 0:20:01.200 --> 0:20:03.000 some M and A. Now they get hit with this 0:20:03.080 --> 0:20:07.879 DOJ suit. So in your recommendation, how should companies be 0:20:08.000 --> 0:20:11.680 thinking about the cost of benefit analysis of getting into 0:20:11.800 --> 0:20:14.359 M and A when we are in such a tough 0:20:14.440 --> 0:20:17.680 regulatory environment and it might just be more beneficial to say, 0:20:17.720 --> 0:20:19.399 I'm just going to keep this dry powder on the 0:20:19.400 --> 0:20:20.160 sidelines for. 0:20:20.080 --> 0:20:20.560 A little bit. 0:20:21.560 --> 0:20:22.080 I think we are. 0:20:22.119 --> 0:20:24.840 But we have seen some successes against the FTC as well, 0:20:25.040 --> 0:20:28.440 you know where you know where they have where companies 0:20:28.440 --> 0:20:31.800