WEBVTT - Lyft Earnings Hit the Skids 0:00:01.320 --> 0:00:05.680 This is Bloomberg business Week Inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine, plus 0:00:09.480 --> 0:00:13.600 global business finance and tech news. The Bloomberg Business Week 0:00:13.680 --> 0:00:18.600 Podcast with Carol Masser and Tim stinebec from Bloomberg Radio. 0:00:20.160 --> 0:00:22.760 All right, we're definitely keep going to watch on Lift. 0:00:22.880 --> 0:00:24.920 I mean to see what happened last night after they 0:00:24.960 --> 0:00:28.320 reported their latest quarterly results and outlook. I mean, it 0:00:28.480 --> 0:00:30.639 just fell off a cliff here, Katie. I know, and 0:00:30.680 --> 0:00:34.280 I know that there's this duopoly between Uber and Lift. 0:00:34.560 --> 0:00:38.000 It seems like it's increasingly in favor of Uber when 0:00:38.000 --> 0:00:40.600 you look at some of those ridership numbers, but different models. 0:00:41.040 --> 0:00:43.120 Lift right now though, down about thirty six percent. So 0:00:43.200 --> 0:00:46.479 let's get to it with Bloomberg News technology reporter Jackie Devlos. 0:00:46.520 --> 0:00:48.640 She's writing about it. She joins us from our nine 0:00:48.640 --> 0:00:51.960 one studio in Washington. Jackie, Happy Friday. Good to have 0:00:52.080 --> 0:00:54.600 you here with us. You're happy if you are shorting 0:00:54.800 --> 0:00:58.400 Lift on this Friday. Um, talk to us about the 0:00:58.520 --> 0:01:01.240 quarter and kind of what it wrong and why everybody's 0:01:01.280 --> 0:01:05.600 so pessimistic here. It was a rough day yesterday, But 0:01:05.959 --> 0:01:08.840 to be honest, I think Wall Street was somewhat expecting 0:01:09.040 --> 0:01:12.480 a version of a slowdown, but that profit outlook completely 0:01:12.520 --> 0:01:16.120 missed estimates. Uh. Lift said that they would make anywhere 0:01:16.120 --> 0:01:19.680 between five to fifteen million and adjusted earnings, while Street 0:01:19.680 --> 0:01:22.840 was expecting closer to eighty millions. That's a huge miss. 0:01:22.959 --> 0:01:27.199 Revenue also missed that problem that outlook um. But really 0:01:27.240 --> 0:01:31.440 what's lying underneath the surface here is that their ridership 0:01:31.520 --> 0:01:34.640 just is not coming back. You still saw that active 0:01:34.720 --> 0:01:38.919 rider growth below pre pandemic levels. That's all the second 0:01:39.000 --> 0:01:42.720 quarter that lived has lagged Uber Uber as well. You know, 0:01:42.800 --> 0:01:48.400 beyond their recovery there, their bookings for mobility excluding delivery 0:01:49.000 --> 0:01:51.600 is already back to where it used to be. So 0:01:51.880 --> 0:01:55.240 when you think about what Lift has uh to, what 0:01:55.360 --> 0:01:58.400 lever they have to pull on pricing is really the 0:01:58.440 --> 0:02:00.720 only thing they have left to keep some of those 0:02:00.960 --> 0:02:03.840 consumers coming back. Well, Jackie, that was going to be 0:02:03.920 --> 0:02:06.200 my question. I mean, we know that Lift reduced based 0:02:06.200 --> 0:02:10.040 prices for rides in January, That of course followed a 0:02:10.160 --> 0:02:13.720 move by Uber. If that's the lever, haven't they already 0:02:13.760 --> 0:02:17.360 pulled in? How much more is there to cut? Well, 0:02:17.400 --> 0:02:20.200 if you remember this time around last year, all of 0:02:20.240 --> 0:02:24.840 us were graping about how expensive Uber and Lift rides were, 0:02:25.040 --> 0:02:27.880 and you saw some of that pricing come down because 0:02:28.160 --> 0:02:30.839 that driver shortage that we were talking about last year 0:02:30.880 --> 0:02:34.280 has really eased. And so what you're seeing is Uber 0:02:34.360 --> 0:02:36.800 is starting to kind of pull back on some on 0:02:36.800 --> 0:02:40.799 how much it's extracting from um some of those higher fares. 0:02:40.840 --> 0:02:45.120 It just has a better balance. It's demand and supplies 0:02:45.160 --> 0:02:47.240 and equalibrium a little bit more so than what you're 0:02:47.280 --> 0:02:51.200 seeing with Lift. So when you think about how many 0:02:51.360 --> 0:02:54.680 customers are coming onto the platform, now, Lift is kind 0:02:54.680 --> 0:02:57.959 of seeing, well, we have pretty good driver supply, We're 0:02:58.040 --> 0:03:01.519 just not seeing those numbers really cover on the writer side. 0:03:01.560 --> 0:03:05.480 So they need to either attract more riders, and the 0:03:05.520 --> 0:03:08.440 way they're going to do that is basically sacrificing that 0:03:08.520 --> 0:03:10.920 profit and saying, you know what, we don't want to 0:03:10.919 --> 0:03:14.880 deter customers from coming onto our app versus Uber, so 0:03:14.919 --> 0:03:16.920 we're going to give you a cheaper ride. Hey, Jackie 0:03:17.040 --> 0:03:19.960 checking with our Bloomberg intelligence team yesterday. I mean, one 0:03:20.000 --> 0:03:22.359 of the things that jumps out here, Lift and Uber 0:03:22.400 --> 0:03:24.760 are not exactly the same companies. Yes, they both are 0:03:24.800 --> 0:03:28.080 in ride sharing, but Uber, you know, there's food there's 0:03:28.080 --> 0:03:30.360 other deliveries. They are really kind of building out a 0:03:30.360 --> 0:03:33.000 little bit of a different and bigger and broader model here, 0:03:33.040 --> 0:03:37.560 and I wonder how that impacts performance. That's absolutely right, Carrol. 0:03:37.560 --> 0:03:40.640 When you think about how much Uber has built out 0:03:40.640 --> 0:03:44.400 that food delivery business, the advantages it gets is that 0:03:44.560 --> 0:03:49.120 cross selling component. It's able to attract new rides share 0:03:49.200 --> 0:03:53.040 customers from its food delivery business and vice versa. Lift 0:03:53.080 --> 0:03:56.720 does not have that advantage. They basically have to just 0:03:56.880 --> 0:04:00.880 rely on UM pulling that pricing lever. Uber also has 0:04:00.920 --> 0:04:04.040 an international business, and what that does is that helps 0:04:04.480 --> 0:04:08.760 its algorithms get better at matching and batching drivers to 0:04:09.080 --> 0:04:14.120 rides and orders so much more efficiently. Another key differentiator 0:04:14.280 --> 0:04:17.320 is that Lift has a scooter and bike business that 0:04:17.400 --> 0:04:20.200 makes up a greater portion of its revenue, and in 0:04:20.320 --> 0:04:22.440 seasonal months it's going to take a bigger hit. But 0:04:22.520 --> 0:04:24.960 you couple that with the fact that the West Coast 0:04:25.000 --> 0:04:28.599 hasn't recovered nearly as much as it has for Uber 0:04:28.800 --> 0:04:31.400 Uber's other markets. Um, it's just taking a hit on 0:04:31.440 --> 0:04:34.720 all fronts. And so I mean, tell us about the 0:04:34.760 --> 0:04:38.200 path forward. I know that you know, Lift already went 0:04:38.320 --> 0:04:42.280 through its own rounds of layoffs, but you know, in 0:04:42.520 --> 0:04:45.440 trying to you know, bring back up the ridership and 0:04:45.480 --> 0:04:48.120 trying to control costs, I mean, should we expect more 0:04:48.200 --> 0:04:52.080 news of that type from a lift You beat me 0:04:52.120 --> 0:04:54.440 to it, Katie. That's really what's going to come next. 0:04:54.560 --> 0:04:58.640 And management was pretty forthcoming in the call yesterday after results, 0:04:58.640 --> 0:05:02.839 saying that it is take gain cost cutting measures very seriously. 0:05:03.200 --> 0:05:05.480 The next step is to you know, wonder where that's 0:05:05.520 --> 0:05:07.920 going to come from. They've already said that stock based 0:05:07.920 --> 0:05:10.359 compensation is going to come down. The way they're doing 0:05:10.400 --> 0:05:14.040 that is by hiring more overseas where you don't pay 0:05:14.360 --> 0:05:17.280 so much in stock based compens mostly cash. And so 0:05:17.560 --> 0:05:20.320 you know, whether that means more layoffs or perhaps hiving 0:05:20.360 --> 0:05:23.160 off other parts of the business, I think everything is 0:05:23.200 --> 0:05:24.680 on the table at this point. But that's sort of 0:05:24.720 --> 0:05:26.719 strategy forward, right. They've got to figure out how to 0:05:26.720 --> 0:05:28.919 grow the business, right, because you can only cut costs 0:05:28.920 --> 0:05:31.200 so much. I mean, I think of the IBM equation 0:05:31.279 --> 0:05:34.120 right where they were, you know, it wasn't necessarily severally 0:05:34.160 --> 0:05:37.360 for a long time they weren't growing the organic business, um, 0:05:37.400 --> 0:05:40.080 but they were doing good cost cutting and different measures. 0:05:40.320 --> 0:05:43.120 Having said that, UM, you do see Lift partnering up 0:05:43.160 --> 0:05:45.440 with grubhub. I mean, is this their way forward to 0:05:45.440 --> 0:05:48.440 compete a little bit better with Uber. That's a great point, gurl. 0:05:48.520 --> 0:05:51.599 You know. Even Uber said on their own earnings call 0:05:51.720 --> 0:05:55.320 that the membership product is going to be an incredibly 0:05:55.360 --> 0:05:58.120 important way to kind of increase not just the number 0:05:58.160 --> 0:05:59.760 of people that come onto the app, but just keeping 0:05:59.760 --> 0:06:03.039 them are even longer. Lift hasn't really leaned into it 0:06:03.160 --> 0:06:06.120 as much as some of the other gig economy piers, 0:06:06.240 --> 0:06:09.480 door Dash and instacrat have their own um. You know, 0:06:09.520 --> 0:06:12.240 it has a partnership with grubhub, but that's not going 0:06:12.279 --> 0:06:15.200 to be enough to really kind of get the wider 0:06:15.240 --> 0:06:18.120 scope of customers that are active in food delivery. So 0:06:18.160 --> 0:06:20.800 I think it's considering other partnerships there, but it's going 0:06:20.839 --> 0:06:22.719 to have to ramp that up a little bit more. 0:06:23.000 --> 0:06:26.760 Uber said they have over twelve million members. Lift hasn't 0:06:26.760 --> 0:06:30.599 disclosed their membership based so I always wonder when there's 0:06:30.600 --> 0:06:37.640 no disclosure the ten million um Jackie, thank you so 0:06:37.720 --> 0:06:39.920 much of a great weekend. Jackie devil Us. She is 0:06:39.920 --> 0:06:42.400 our Bloomberg News technology reporter, joining us from our nine 0:06:42.400 --> 0:06:44.520 and I went studio in Washington, d c I'm mostly 0:06:44.520 --> 0:06:48.159 an Uber household. Yeah, no, me too. I was just 0:06:48.200 --> 0:06:50.640 looking at the share prices over the past year. Uber's 0:06:50.640 --> 0:06:58.040 down nine percent lift is down seal of two cities. Yeah, exactly, 0:06:58.080 --> 0:06:59.840 And I feel like they're in kind of a makeup 0:07:00.200 --> 0:07:06.479 moment in many ways. This is Bloomberg business Week Inside, 0:07:06.520 --> 0:07:09.440 from the reporters and editors who bring you America's most 0:07:09.480 --> 0:07:13.800 trusted business magazine, plus global business finance and tech news. 0:07:14.040 --> 0:07:18.160 The Bloomberg Business Week Podcast with Carol Messer and Tim 0:07:18.200 --> 0:07:22.880 Stinebec from Bloomberg Radio. Well. We mentioned the story in 0:07:23.000 --> 0:07:27.240 our TV simulcast earlier in the week. It's actually the 0:07:27.280 --> 0:07:29.680 international cover of the new issue of Bloomberg Business Week, 0:07:29.680 --> 0:07:32.840 now out on newsstands, online at Bloomberg dot com slash 0:07:32.840 --> 0:07:35.520 business Week, also on the Bloomberg Terminal. It's written by 0:07:35.520 --> 0:07:39.280 Bloomberg News Economics reporter Rich Miller, who notes forget about 0:07:39.280 --> 0:07:42.480 the harder soft economic landing and meet the rolling recession 0:07:42.880 --> 0:07:46.680 riches with us via zoom in our Washington d c. Bureau, 0:07:46.760 --> 0:07:49.160 along with the editor of Bloomberg Business Week, Joel Webber. 0:07:49.400 --> 0:07:52.600 He's here in our Bloomberg Interactive Broker's studio. I feel 0:07:52.600 --> 0:07:53.960 like we keep trying to figure out how do we 0:07:54.040 --> 0:07:57.160 describe where we are? Joel, that'd be great if you 0:07:57.200 --> 0:07:59.840 could answer that. And that's why I turned to uh, 0:08:00.040 --> 0:08:02.840 you know, my colleagues, uh not on like Rich Miller 0:08:02.960 --> 0:08:05.920 to help answer these And you know, the thing that um, 0:08:06.000 --> 0:08:09.560 you know obviously everybody was was keyed on was you know, 0:08:09.600 --> 0:08:15.400 the pal uh and and redecision, the FEDS right decision. 0:08:15.440 --> 0:08:17.400 And then all of a sudden, those job numbers happened, 0:08:17.440 --> 0:08:20.280 and and we we tacked a little bit, and and 0:08:20.680 --> 0:08:23.440 that led to, um, you're rich coming back with talking 0:08:23.440 --> 0:08:26.680 about the rolling recession? So so what is a rolling 0:08:26.760 --> 0:08:32.480 recession and what does it potentially look like for the economy? Rich? Yeah, 0:08:32.520 --> 0:08:36.360 I mean if you're of a certain event vintage, and 0:08:36.440 --> 0:08:39.760 if you started talking about rolling, you started thinking about, uh, 0:08:40.760 --> 0:08:45.840 the the old Western rawhide. But anyway, uh, rolling recession 0:08:45.880 --> 0:08:51.280 basically is um the downturns sort of um goes from 0:08:51.320 --> 0:08:53.640 one sector to the another, but you never have the 0:08:53.800 --> 0:08:58.880 entire economy go down all at once. So it's kind 0:08:58.920 --> 0:09:01.480 of a hyperd between this hard landing. We've both heard 0:09:01.520 --> 0:09:04.160 about this hard landing, you know, where we we really 0:09:04.280 --> 0:09:08.000 enter a full blown recession unemployment goes up, you know too. 0:09:08.200 --> 0:09:12.160 Three and the soft landing where we sort of steady 0:09:12.240 --> 0:09:15.640 out and you know, the economy just grows and ice 0:09:15.720 --> 0:09:18.839 and steady while inflation comes down. The rolling recession is 0:09:18.920 --> 0:09:21.080 kind of a hybrid. We get recessions, but they're in 0:09:22.040 --> 0:09:25.720 one sector than another sector. Then those sectors start to 0:09:25.720 --> 0:09:27.680 pick up a little bit, and then it goes into 0:09:27.720 --> 0:09:30.040 another sector. We've We've got to quote in the story 0:09:30.080 --> 0:09:36.240 from um some one son who's a economics professor out 0:09:36.240 --> 0:09:38.080 on the West coast. He said, you know, industries and 0:09:38.160 --> 0:09:42.640 sectors take turns going down, but as opposed to everybody 0:09:42.920 --> 0:09:45.160 going down all at once. And that's that's what we're 0:09:45.200 --> 0:09:49.480 talking about. And and I think that's probably the best 0:09:49.559 --> 0:09:52.000 we can hope for at the moment. Do we have 0:09:52.040 --> 0:09:55.160 a blueprint for the rolling recession? Have we seen this 0:09:55.600 --> 0:09:57.800 happened before? And if so, I mean, what does that 0:09:57.880 --> 0:10:00.720 tell us about what we could be heading into? Yeah, 0:10:00.920 --> 0:10:03.559 I mean it has happened a couple of times before. 0:10:03.760 --> 0:10:08.960 I mean, um uh. The term sort of got coined first, 0:10:09.120 --> 0:10:12.280 sort of in the mid nineteen eighties. We had a 0:10:12.360 --> 0:10:17.439 big drop in um oil prices and that really devastated 0:10:17.440 --> 0:10:20.440 the oil patch in Houston. And we also had sort 0:10:20.440 --> 0:10:23.240 of a change in tax law that really hit the 0:10:23.240 --> 0:10:25.800 commercial real estate and everybody thought, oh, here we go, 0:10:25.920 --> 0:10:29.199 we're heading into recession. But there were folks like ed 0:10:29.280 --> 0:10:33.440 Yard Denny was still around analyzing stock markets who said, no, no, 0:10:33.520 --> 0:10:36.120 let's it's a rolling recession. We're gonna see it in 0:10:36.160 --> 0:10:39.000 commercial real estate. We're gonna see it in but we're 0:10:39.040 --> 0:10:40.760 gonna see it in the oil patch. But we're not 0:10:40.800 --> 0:10:43.439 going to see it the other. The other one people talked. 0:10:44.000 --> 0:10:47.520 The other rolling recession people talk about is in two 0:10:47.559 --> 0:10:52.600 thousand sixteen, when we had the manufacturing sector got hit 0:10:52.640 --> 0:10:57.839 by a very strong dollar of UM. Agricultural prices were 0:10:57.840 --> 0:11:00.120 going down, so the farm sector got hit, but the 0:11:00.160 --> 0:11:03.720 rest of the economy didn't hit. Some some pundits, you know, 0:11:03.840 --> 0:11:09.160 say the pain though that the heartland of America faced 0:11:09.360 --> 0:11:12.480 helped get Trump reelected that year. I'll leave that the 0:11:12.520 --> 0:11:16.480 political pundits. But anyway, but we didn't. But we you know, 0:11:16.520 --> 0:11:18.640 we didn't get a full blown recession in either of 0:11:18.640 --> 0:11:23.760 those those um those episodes, and that's what some people 0:11:23.800 --> 0:11:27.880 are hoping, We're it's gonna happen this time. Okay, So 0:11:27.960 --> 0:11:31.120 how are we gonna know if we're in a rolling 0:11:31.120 --> 0:11:33.880 recession or are we already in one and we just 0:11:34.080 --> 0:11:37.320 haven't you had well, I mean, we we're sort of 0:11:37.360 --> 0:11:40.800 in one, like we're in we're in one in the 0:11:40.840 --> 0:11:45.360 sense that we we've seen housing go down first as 0:11:45.400 --> 0:11:49.360 the fedruaries interest rates and now and then manufacturing is 0:11:49.400 --> 0:11:52.720 now kind of going down and tech is going down. 0:11:52.840 --> 0:11:56.320 So you do see it rolling and arguably you see 0:11:56.360 --> 0:11:58.760 the first one who was rolling in, which was housing, 0:11:59.679 --> 0:12:03.560 is starting to stabilize maybe and there's some hints with 0:12:03.600 --> 0:12:06.959 mortgage race having come down, you know, maybe that market's 0:12:06.960 --> 0:12:11.200 going to stabilize, and then the next one to go 0:12:11.400 --> 0:12:16.160 would be more like the service sector part of the economy. Um, 0:12:16.559 --> 0:12:20.680 and as that happens, hopefully the other ones are sort 0:12:20.679 --> 0:12:23.360 of stabilizing and coming back up. I mean, but you know, 0:12:23.440 --> 0:12:25.640 I mean, the worst comes to worst is that, you know, 0:12:26.040 --> 0:12:32.360 the service sector doesn't just just sort of you know, slow, 0:12:33.000 --> 0:12:37.559 it sort of caves in. Basically, what I'm curious about, So, 0:12:38.120 --> 0:12:40.559 if it's a rolling recession, does ultimately the National Peer 0:12:40.640 --> 0:12:43.320 of Economic Research say we were in a recession or 0:12:43.360 --> 0:12:46.040 because it kind of works its way through, is it 0:12:46.200 --> 0:12:48.920 officially still a recession. Well, I mean, if it if 0:12:48.960 --> 0:12:51.120 it works the way those two other episodes, well those 0:12:51.240 --> 0:12:54.520 neither of those episodes were classified as as as I 0:12:54.640 --> 0:12:58.080 love that, sign me up. It's recession. But we're just 0:12:58.080 --> 0:13:01.680 not going to use the word right right right. I 0:13:01.720 --> 0:13:03.960 mean obviously, you know, if you're in the housing market, 0:13:04.000 --> 0:13:08.280 in the home builders, you know, you know they they 0:13:08.679 --> 0:13:11.160 say they're in recession, right, you know, and if you 0:13:11.200 --> 0:13:15.200 ask somebody who who, um, you know, some of the 0:13:15.240 --> 0:13:18.960 manufacturing companies like we have you know, three M which 0:13:19.000 --> 0:13:21.640 makes you know pretty much almost everything you can think of, 0:13:21.679 --> 0:13:25.040 posted notes and computer consoles, et cetera. You know, they 0:13:25.040 --> 0:13:27.080 are laying off people, so it feels like a recession 0:13:27.120 --> 0:13:29.439 to them. But you know, you ask the airlines, and 0:13:30.679 --> 0:13:34.600 you know everything's hunky door basically, you know, so and 0:13:34.640 --> 0:13:37.440 so Richard, I wanted to jump in and ask, I mean, 0:13:37.840 --> 0:13:40.680 it feels like soft landing. It was a dirty word 0:13:40.720 --> 0:13:42.439 for a little bit. We've sort of wrote it off. 0:13:42.520 --> 0:13:45.920 Is definitely not happening. Now I'm seeing more people make 0:13:45.960 --> 0:13:48.200 the argument that we could get it. The counter to 0:13:48.240 --> 0:13:51.840 that would be that a soft landing is just a 0:13:51.880 --> 0:13:55.199 precursor to hard landing. A hard landing at the start 0:13:55.280 --> 0:13:58.800 looks like a soft landing. I mean, where what's the 0:13:58.880 --> 0:14:01.560 current thinking on and uh, if if there is a 0:14:01.600 --> 0:14:04.319 binary outcome, if it's not a rolling recession, which one 0:14:04.400 --> 0:14:09.040 is more likely, well, I think people were becoming more 0:14:09.200 --> 0:14:12.800 um sympathetically idea of a swaftland I mean that there's 0:14:12.960 --> 0:14:16.080 yet another sort of you know, one making the rounds now, 0:14:16.160 --> 0:14:19.120 which is kind of you know, to further complicate things, 0:14:19.120 --> 0:14:25.320 which is something called a no landing right right right, 0:14:25.360 --> 0:14:29.600 you know, which is basically coming off the very spectacular 0:14:29.760 --> 0:14:33.760 jobs gains we were reported in January, so that you know, 0:14:33.840 --> 0:14:38.800 so the economy uh, basically you know has slowed. It 0:14:38.840 --> 0:14:41.760 definitely has slowed, but like it's like, you know, then 0:14:41.760 --> 0:14:47.480 it kind of re accelerates, and um, the that that 0:14:47.840 --> 0:14:50.920 people would think if it re accelerates and inflation re 0:14:51.000 --> 0:14:53.760 accelerates with it, we'd eventually get a hard landing because 0:14:53.760 --> 0:14:55.960 the FED would say, you know, enough is enough and 0:14:56.040 --> 0:15:01.600 really slam on the brakes. But brishin or I don't know, 0:15:03.400 --> 0:15:07.760 shoot it down. There's the chat bot recession. I mean, 0:15:07.760 --> 0:15:09.720 we could just go on, love it, love it, love 0:15:09.760 --> 0:15:12.120 It's so relevant. Rich Miller, thank you so much Bloomberg 0:15:12.200 --> 0:15:15.560 News Economics reporter uh the story the upcoming issue. The 0:15:15.640 --> 0:15:20.280 cover of the issue is on the ADNNI Empire. This 0:15:20.440 --> 0:15:26.440 is Bloomberg. This is Bloomberg business Week inside from the 0:15:26.520 --> 0:15:30.000 reporters and editors who bring you America's most trusted business 0:15:30.040 --> 0:15:34.520 magazine plus global business, finance and tech news. The Bloomberg 0:15:34.560 --> 0:15:39.000 Business Week Podcast with Carol Messer and Tim stinebec from 0:15:39.200 --> 0:15:42.720 Bloomberg Radio. We wanted to talk a little bit about 0:15:42.760 --> 0:15:44.960 the crypto world, and in fact for the next half hours, 0:15:45.000 --> 0:15:47.600 so we're gonna kind of dig deep into the crypto 0:15:47.600 --> 0:15:50.560 world because there's a bunch of stories out, including SEC 0:15:50.760 --> 0:15:54.800 Chair Gary Ginsler talking about the settlement with crypto exchange 0:15:54.920 --> 0:15:58.480 krackin over stalking digital assets and he said it should 0:15:58.480 --> 0:16:00.960 put everyone on notice in a smart your place. The 0:16:01.080 --> 0:16:03.680 SEC Chair catching up with Bloombergs David Weston earlier on 0:16:03.760 --> 0:16:08.840 Bloomberg TV and Radio. Check it out. These storefronts, these 0:16:08.920 --> 0:16:13.680 these crypto exchanges, crypto lending platforms, crypto staking as a service. 0:16:14.680 --> 0:16:18.800 They need to come into compliance and there are generally 0:16:18.880 --> 0:16:22.480 non compliant right now. The investing public is not only 0:16:22.520 --> 0:16:26.640 at risk by the speculative nature of crypto, but their 0:16:26.640 --> 0:16:29.560 at risk of ending up in line at a bankruptcy 0:16:29.600 --> 0:16:32.840 court because a lot of these platforms are doing things 0:16:32.880 --> 0:16:36.080 they're not disclosing. All right, That, of course, was the 0:16:36.160 --> 0:16:38.680 SEC chair Gary against the earlier on Bloomberg TV and 0:16:38.800 --> 0:16:42.040 Radio with David Weston. Let's talk about the crypto space 0:16:42.120 --> 0:16:44.720 more broadly, and especially when it comes to the regulatory 0:16:44.800 --> 0:16:46.600 up front with our Crypto round up. Let's kick it 0:16:46.600 --> 0:16:49.440 off with Stacy Murria Schmall. She's managing editor for Crypto 0:16:49.560 --> 0:16:52.360 right here at Bloomberg News. Lucky for us, Blush you, Katie. 0:16:52.760 --> 0:16:56.360 She's in our Interactive Brokers studio. Um, Stacy, thank you 0:16:56.400 --> 0:16:58.920 so much. We're so excited to have you here. So 0:16:59.040 --> 0:17:03.040 you heard Gensler, Yes, out there talking big time. UM, 0:17:03.080 --> 0:17:06.520 what's your takeaway? I think one of the fun things 0:17:06.560 --> 0:17:08.919 about reporting in crypto is every day you wake up 0:17:08.920 --> 0:17:12.560 and you're like, what's slightly unexpected thing may happen today? 0:17:12.680 --> 0:17:15.400 And for a lot of the folks who've been paying attention, 0:17:15.640 --> 0:17:18.679 especially in the back half of two after the collapse 0:17:18.720 --> 0:17:22.160 of FTX, we've sort of been waiting to see when 0:17:22.240 --> 0:17:24.320 the SEC was going to do the thing that they've 0:17:24.400 --> 0:17:26.560 hinting they wanted to do for a while, which has 0:17:26.560 --> 0:17:28.720 come out and say, here are all of the ways 0:17:28.760 --> 0:17:31.280 that we find the industry to be non compliant. And 0:17:31.320 --> 0:17:35.720 we have absolutely seen, particularly in January from the SEC 0:17:35.880 --> 0:17:38.479 from Gensler himself, that they're like, well, okay, here are 0:17:38.520 --> 0:17:40.760 all the ways that you have been noncompliant. And we 0:17:40.800 --> 0:17:44.040 think the crackdown on staking is just the latest example 0:17:44.240 --> 0:17:48.000 of them trying to remind both the crypto industry but 0:17:48.040 --> 0:17:51.720 also traditional finance that regulations do exist and they will 0:17:51.800 --> 0:17:53.960 enforce them. Can you guys both remind us what staking 0:17:54.040 --> 0:17:55.280 is just for those who do That was going to 0:17:55.359 --> 0:17:59.240 be my next question for five years old. How would 0:17:59.240 --> 0:18:01.520 you explain to or you know, if I was in puberty, 0:18:01.520 --> 0:18:05.360 how would you do it? Um? Do you like free money? Yes? Excellent, 0:18:05.640 --> 0:18:07.840 because if you like free money and you happen to 0:18:07.880 --> 0:18:10.480 have some imaginary money in the form of say ether 0:18:10.720 --> 0:18:14.080 or bitcoin or another token, you could agree to have 0:18:14.320 --> 0:18:17.400 a big crypto exchange like a kracking or a coin 0:18:17.440 --> 0:18:21.600 base hold that money for you that token, and pay 0:18:21.680 --> 0:18:26.320 you a return of anywhere up to and in exchange. 0:18:26.359 --> 0:18:30.199 They would use your tokens to validate other transactions in 0:18:30.359 --> 0:18:34.120 crypto and that's staking. So how does that work? Because 0:18:34.240 --> 0:18:38.280 I mean, the sort of the curmudgeon's cry against crypto 0:18:38.359 --> 0:18:40.800 is that it doesn't have any cash flows, So how 0:18:40.840 --> 0:18:44.720 does it actually generate that money? It's partly that what 0:18:44.880 --> 0:18:47.359 staking does is for the folks who are doing the staking. 0:18:47.440 --> 0:18:49.600 So if you're cracking or a coin base and you're saying, Okay, 0:18:49.640 --> 0:18:50.960 we have a bunch of these tokens, we're going to 0:18:51.119 --> 0:18:55.480 use them to help validate transactions, they also generate returns 0:18:55.480 --> 0:18:57.480 on those things, so you're sort of participating in a 0:18:57.560 --> 0:19:01.359 yield generating ecosystem. This is this is the pitch. But 0:19:01.480 --> 0:19:05.600 of course the argument from the SEC is exactly like, well, you, 0:19:05.680 --> 0:19:09.280 as an investor, somebody who likes free money, are looking 0:19:09.320 --> 0:19:12.679 to these other entities to generate value for you, and 0:19:12.760 --> 0:19:15.399 something like that starts to look sound and feel like 0:19:15.440 --> 0:19:18.239 what they would consider a security to be. And of 0:19:18.280 --> 0:19:20.840 course we did get the news yesterday that crypto Exchange 0:19:20.960 --> 0:19:24.440 krack in like you mentioned, uh, they made a deal 0:19:24.800 --> 0:19:27.720 with the SEC over their staking program. They're going to 0:19:27.800 --> 0:19:31.080 pay thirty million dollars to settle those allegations that it 0:19:31.200 --> 0:19:35.679 broke the agency's rules when it comes to staking products. 0:19:35.800 --> 0:19:39.600 Kracking isn't the only one that does this though, give 0:19:39.680 --> 0:19:42.439 us a sense of the landscape. So there are different 0:19:42.440 --> 0:19:44.919 types of players in this ecosystem. The other one that 0:19:44.960 --> 0:19:47.760 I mentioned coin Base. You know, in the aftermath of 0:19:47.920 --> 0:19:51.400 the krack in settlements with the SEC, Brian Armstrong, all 0:19:51.440 --> 0:19:53.679 of coin Bases lawyers, they're all like here, all of 0:19:53.720 --> 0:19:55.800 the ways the thing we do is not like the 0:19:55.800 --> 0:19:58.520 thing that Kraken does. So you know, it's very much 0:19:58.560 --> 0:20:01.080 in the interest of all of the other crypto players 0:20:01.119 --> 0:20:04.719 to try to identify how they are either compliant with 0:20:04.760 --> 0:20:07.520 whatever the rule is, or however the rule doesn't apply 0:20:07.600 --> 0:20:10.359 to them. And what we fully expect from the SEC, 0:20:10.480 --> 0:20:12.720 and especially from the tenor of the comments that you 0:20:12.840 --> 0:20:15.920 just heard with his interview on TV, is that they're 0:20:15.960 --> 0:20:19.119 going to say, no, that loophole actually probably does apply 0:20:19.200 --> 0:20:20.680 to you. And if you think it doesn't, just give 0:20:20.760 --> 0:20:22.879 us some time. I gotta say to me, it just 0:20:22.920 --> 0:20:25.320 doesn't even sound like a business, because the whole point 0:20:25.359 --> 0:20:30.000 is if somebody calls in their steak, what am I'm missing? 0:20:31.800 --> 0:20:33.159 I mean, I think this is kind of one of 0:20:33.160 --> 0:20:35.200 the fun things, is like, okay, so if somebody would 0:20:35.200 --> 0:20:37.359 have tried to call in their steak. It's it's not 0:20:37.400 --> 0:20:39.760 like a traditional run on the bank per se, Right, 0:20:39.760 --> 0:20:43.160 It's not this idea of the exchanges or whoever has 0:20:43.200 --> 0:20:45.159 this money is necessarily going to run out of the 0:20:45.200 --> 0:20:48.600 ability to offer this thing to you, which to be clear, 0:20:48.680 --> 0:20:51.720 has happened in other circumstances. But the Krakens and the 0:20:51.720 --> 0:20:55.520 coin basis of the world are very well capitalized and 0:20:55.720 --> 0:20:59.359 coin based, especially as a US traded, publicly listed company 0:20:59.440 --> 0:21:02.160 has ordered to financials, they can show you how well 0:21:02.200 --> 0:21:05.399 capitalized there are they are. So the concern from the 0:21:05.440 --> 0:21:08.720 SEC is more like other people who do similar things 0:21:08.760 --> 0:21:11.080 have to play by more rules, and we want to 0:21:11.080 --> 0:21:14.000 be clear that these rules apply to you, So I 0:21:14.040 --> 0:21:15.760 mean coin based. Of course, like you said, they're going 0:21:15.800 --> 0:21:18.520 to make the argument that ours is different, etcetera, etcetera. 0:21:18.560 --> 0:21:20.600 But then you look at what's going on in the shares, 0:21:20.640 --> 0:21:23.359 and of course coin basis had a really great start 0:21:24.480 --> 0:21:27.520 along with everything else crypto, but it was down four 0:21:27.920 --> 0:21:32.320 percent yesterday, it was down four today. I look at that, 0:21:32.400 --> 0:21:34.840 it seems like the thinking is that maybe those arguments 0:21:34.880 --> 0:21:38.359 aren't necessarily going to hold water at the SEC. I 0:21:38.359 --> 0:21:41.200 think there's a lot of jittere jit ter nous right now, 0:21:41.320 --> 0:21:45.560 because in addition to the comments about staking, you also 0:21:45.640 --> 0:21:48.600 have as Bloomberg News my colleagues, they are confirmed that 0:21:49.040 --> 0:21:52.399 the you know, New York regulators are looking into a 0:21:52.440 --> 0:21:56.160 company called Paxsos which issues a stable coin. The stable 0:21:56.200 --> 0:21:58.120 coins are the ones that are supposed to be stable, 0:21:58.200 --> 0:22:00.040 like they're not supposed to move up and down, and 0:22:00.400 --> 0:22:03.720 other tokens do that, and that is the thing. And 0:22:03.880 --> 0:22:05.879 you know, we just published a story a couple of 0:22:05.880 --> 0:22:09.159 minutes ago that PayPal, which was looking to issue its 0:22:09.160 --> 0:22:11.800 own stable coin, have been like, ha ha, we may not. 0:22:12.760 --> 0:22:16.320 Regulatory uncertainty is a little bit stressful, and so you know, 0:22:16.400 --> 0:22:19.560 you're seeing this real. I wouldn't say shift in sentiment 0:22:19.560 --> 0:22:23.320 because sentiment hasn't been great, but a pause in the 0:22:23.440 --> 0:22:25.639