Speaker 1: This is Bloomberg business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Masser and Tim stinebec from Bloomberg Radio.
Speaker 1: All right, we're definitely keep going to watch on Lift.
Speaker 1: I mean to see what happened last night after they
Speaker 1: reported their latest quarterly results and outlook. I mean, it
Speaker 1: just fell off a cliff here, Katie. I know, and
Speaker 1: I know that there's this duopoly between Uber and Lift.
Speaker 1: It seems like it's increasingly in favor of Uber when
Speaker 1: you look at some of those ridership numbers, but different models.
Speaker 1: Lift right now though, down about thirty six percent. So
Speaker 1: let's get to it with Bloomberg News technology reporter Jackie Devlos.
Speaker 1: She's writing about it. She joins us from our nine
Speaker 1: one studio in Washington. Jackie, Happy Friday. Good to have
Speaker 1: you here with us. You're happy if you are shorting
Speaker 1: Lift on this Friday. Um, talk to us about the
Speaker 1: quarter and kind of what it wrong and why everybody's
Speaker 1: so pessimistic here. It was a rough day yesterday, But
Speaker 1: to be honest, I think Wall Street was somewhat expecting
Speaker 1: a version of a slowdown, but that profit outlook completely
Speaker 1: missed estimates. Uh. Lift said that they would make anywhere
Speaker 1: between five to fifteen million and adjusted earnings, while Street
Speaker 1: was expecting closer to eighty millions. That's a huge miss.
Speaker 1: Revenue also missed that problem that outlook um. But really
Speaker 1: what's lying underneath the surface here is that their ridership
Speaker 1: just is not coming back. You still saw that active
Speaker 1: rider growth below pre pandemic levels. That's all the second
Speaker 1: quarter that lived has lagged Uber Uber as well. You know,
Speaker 1: beyond their recovery there, their bookings for mobility excluding delivery
Speaker 1: is already back to where it used to be. So
Speaker 1: when you think about what Lift has uh to, what
Speaker 1: lever they have to pull on pricing is really the
Speaker 1: only thing they have left to keep some of those
Speaker 1: consumers coming back. Well, Jackie, that was going to be
Speaker 1: my question. I mean, we know that Lift reduced based
Speaker 1: prices for rides in January, That of course followed a
Speaker 1: move by Uber. If that's the lever, haven't they already
Speaker 1: pulled in? How much more is there to cut? Well,
Speaker 1: if you remember this time around last year, all of
Speaker 1: us were graping about how expensive Uber and Lift rides were,
Speaker 1: and you saw some of that pricing come down because
Speaker 1: that driver shortage that we were talking about last year
Speaker 1: has really eased. And so what you're seeing is Uber
Speaker 1: is starting to kind of pull back on some on
Speaker 1: how much it's extracting from um some of those higher fares.
Speaker 1: It just has a better balance. It's demand and supplies
Speaker 1: and equalibrium a little bit more so than what you're
Speaker 1: seeing with Lift. So when you think about how many
Speaker 1: customers are coming onto the platform, now, Lift is kind
Speaker 1: of seeing, well, we have pretty good driver supply, We're
Speaker 1: just not seeing those numbers really cover on the writer side.
Speaker 1: So they need to either attract more riders, and the
Speaker 1: way they're going to do that is basically sacrificing that
Speaker 1: profit and saying, you know what, we don't want to
Speaker 1: deter customers from coming onto our app versus Uber, so
Speaker 1: we're going to give you a cheaper ride. Hey, Jackie
Speaker 1: checking with our Bloomberg intelligence team yesterday. I mean, one
Speaker 1: of the things that jumps out here, Lift and Uber
Speaker 1: are not exactly the same companies. Yes, they both are
Speaker 1: in ride sharing, but Uber, you know, there's food there's
Speaker 1: other deliveries. They are really kind of building out a
Speaker 1: little bit of a different and bigger and broader model here,
Speaker 1: and I wonder how that impacts performance. That's absolutely right, Carrol.
Speaker 1: When you think about how much Uber has built out
Speaker 1: that food delivery business, the advantages it gets is that
Speaker 1: cross selling component. It's able to attract new rides share
Speaker 1: customers from its food delivery business and vice versa. Lift
Speaker 1: does not have that advantage. They basically have to just
Speaker 1: rely on UM pulling that pricing lever. Uber also has
Speaker 1: an international business, and what that does is that helps
Speaker 1: its algorithms get better at matching and batching drivers to
Speaker 1: rides and orders so much more efficiently. Another key differentiator
Speaker 1: is that Lift has a scooter and bike business that
Speaker 1: makes up a greater portion of its revenue, and in
Speaker 1: seasonal months it's going to take a bigger hit. But
Speaker 1: you couple that with the fact that the West Coast
Speaker 1: hasn't recovered nearly as much as it has for Uber
Speaker 1: Uber's other markets. Um, it's just taking a hit on
Speaker 1: all fronts. And so I mean, tell us about the
Speaker 1: path forward. I know that you know, Lift already went
Speaker 1: through its own rounds of layoffs, but you know, in
Speaker 1: trying to you know, bring back up the ridership and
Speaker 1: trying to control costs, I mean, should we expect more
Speaker 1: news of that type from a lift You beat me
Speaker 1: to it, Katie. That's really what's going to come next.
Speaker 1: And management was pretty forthcoming in the call yesterday after results,
Speaker 1: saying that it is take gain cost cutting measures very seriously.
Speaker 1: The next step is to you know, wonder where that's
Speaker 1: going to come from. They've already said that stock based
Speaker 1: compensation is going to come down. The way they're doing
Speaker 1: that is by hiring more overseas where you don't pay
Speaker 1: so much in stock based compens mostly cash. And so
Speaker 1: you know, whether that means more layoffs or perhaps hiving
Speaker 1: off other parts of the business, I think everything is
Speaker 1: on the table at this point. But that's sort of
Speaker 1: strategy forward, right. They've got to figure out how to
Speaker 1: grow the business, right, because you can only cut costs
Speaker 1: so much. I mean, I think of the IBM equation
Speaker 1: right where they were, you know, it wasn't necessarily severally
Speaker 1: for a long time they weren't growing the organic business, um,
Speaker 1: but they were doing good cost cutting and different measures.
Speaker 1: Having said that, UM, you do see Lift partnering up
Speaker 1: with grubhub. I mean, is this their way forward to
Speaker 1: compete a little bit better with Uber. That's a great point, gurl.
Speaker 1: You know. Even Uber said on their own earnings call
Speaker 1: that the membership product is going to be an incredibly
Speaker 1: important way to kind of increase not just the number
Speaker 1: of people that come onto the app, but just keeping
Speaker 1: them are even longer. Lift hasn't really leaned into it
Speaker 1: as much as some of the other gig economy piers,
Speaker 1: door Dash and instacrat have their own um. You know,
Speaker 1: it has a partnership with grubhub, but that's not going
Speaker 1: to be enough to really kind of get the wider
Speaker 1: scope of customers that are active in food delivery. So
Speaker 1: I think it's considering other partnerships there, but it's going
Speaker 1: to have to ramp that up a little bit more.
Speaker 1: Uber said they have over twelve million members. Lift hasn't
Speaker 1: disclosed their membership based so I always wonder when there's
Speaker 1: no disclosure the ten million um Jackie, thank you so
Speaker 1: much of a great weekend. Jackie devil Us. She is
Speaker 1: our Bloomberg News technology reporter, joining us from our nine
Speaker 1: and I went studio in Washington, d c I'm mostly
Speaker 1: an Uber household. Yeah, no, me too. I was just
Speaker 1: looking at the share prices over the past year. Uber's
Speaker 1: down nine percent lift is down seal of two cities. Yeah, exactly,
Speaker 1: And I feel like they're in kind of a makeup
Speaker 1: moment in many ways. This is Bloomberg business Week Inside,
Speaker 1: from the reporters and editors who bring you America's most
Speaker 1: trusted business magazine, plus global business finance and tech news.
Speaker 1: The Bloomberg Business Week Podcast with Carol Messer and Tim
Speaker 1: Stinebec from Bloomberg Radio. Well. We mentioned the story in
Speaker 1: our TV simulcast earlier in the week. It's actually the
Speaker 1: international cover of the new issue of Bloomberg Business Week,
Speaker 1: now out on newsstands, online at Bloomberg dot com slash
Speaker 1: business Week, also on the Bloomberg Terminal. It's written by
Speaker 1: Bloomberg News Economics reporter Rich Miller, who notes forget about
Speaker 1: the harder soft economic landing and meet the rolling recession
Speaker 1: riches with us via zoom in our Washington d c. Bureau,
Speaker 1: along with the editor of Bloomberg Business Week, Joel Webber.
Speaker 1: He's here in our Bloomberg Interactive Broker's studio. I feel
Speaker 1: like we keep trying to figure out how do we
Speaker 1: describe where we are? Joel, that'd be great if you
Speaker 1: could answer that. And that's why I turned to uh,
Speaker 1: you know, my colleagues, uh not on like Rich Miller
Speaker 1: to help answer these And you know, the thing that um,
Speaker 1: you know obviously everybody was was keyed on was you know,
Speaker 1: the pal uh and and redecision, the FEDS right decision.
Speaker 1: And then all of a sudden, those job numbers happened,
Speaker 1: and and we we tacked a little bit, and and
Speaker 1: that led to, um, you're rich coming back with talking
Speaker 1: about the rolling recession? So so what is a rolling
Speaker 1: recession and what does it potentially look like for the economy? Rich? Yeah,
Speaker 1: I mean if you're of a certain event vintage, and
Speaker 1: if you started talking about rolling, you started thinking about, uh,
Speaker 1: the the old Western rawhide. But anyway, uh, rolling recession
Speaker 1: basically is um the downturns sort of um goes from
Speaker 1: one sector to the another, but you never have the
Speaker 1: entire economy go down all at once. So it's kind
Speaker 1: of a hyperd between this hard landing. We've both heard
Speaker 1: about this hard landing, you know, where we we really
Speaker 1: enter a full blown recession unemployment goes up, you know too.
Speaker 1: Three and the soft landing where we sort of steady
Speaker 1: out and you know, the economy just grows and ice
Speaker 1: and steady while inflation comes down. The rolling recession is
Speaker 1: kind of a hybrid. We get recessions, but they're in
Speaker 1: one sector than another sector. Then those sectors start to
Speaker 1: pick up a little bit, and then it goes into
Speaker 1: another sector. We've We've got to quote in the story
Speaker 1: from um some one son who's a economics professor out
Speaker 1: on the West coast. He said, you know, industries and
Speaker 1: sectors take turns going down, but as opposed to everybody
Speaker 1: going down all at once. And that's that's what we're
Speaker 1: talking about. And and I think that's probably the best
Speaker 1: we can hope for at the moment. Do we have
Speaker 1: a blueprint for the rolling recession? Have we seen this
Speaker 1: happened before? And if so, I mean, what does that
Speaker 1: tell us about what we could be heading into? Yeah,
Speaker 1: I mean it has happened a couple of times before.
Speaker 1: I mean, um uh. The term sort of got coined first,
Speaker 1: sort of in the mid nineteen eighties. We had a
Speaker 1: big drop in um oil prices and that really devastated
Speaker 1: the oil patch in Houston. And we also had sort
Speaker 1: of a change in tax law that really hit the
Speaker 1: commercial real estate and everybody thought, oh, here we go,
Speaker 1: we're heading into recession. But there were folks like ed
Speaker 1: Yard Denny was still around analyzing stock markets who said, no, no,
Speaker 1: let's it's a rolling recession. We're gonna see it in
Speaker 1: commercial real estate. We're gonna see it in but we're
Speaker 1: gonna see it in the oil patch. But we're not
Speaker 1: going to see it the other. The other one people talked.
Speaker 1: The other rolling recession people talk about is in two
Speaker 1: thousand sixteen, when we had the manufacturing sector got hit
Speaker 1: by a very strong dollar of UM. Agricultural prices were
Speaker 1: going down, so the farm sector got hit, but the
Speaker 1: rest of the economy didn't hit. Some some pundits, you know,
Speaker 1: say the pain though that the heartland of America faced
Speaker 1: helped get Trump reelected that year. I'll leave that the
Speaker 1: political pundits. But anyway, but we didn't. But we you know,
Speaker 1: we didn't get a full blown recession in either of
Speaker 1: those those um those episodes, and that's what some people
Speaker 1: are hoping, We're it's gonna happen this time. Okay, So
Speaker 1: how are we gonna know if we're in a rolling
Speaker 1: recession or are we already in one and we just
Speaker 1: haven't you had well, I mean, we we're sort of
Speaker 1: in one, like we're in we're in one in the
Speaker 1: sense that we we've seen housing go down first as
Speaker 1: the fedruaries interest rates and now and then manufacturing is
Speaker 1: now kind of going down and tech is going down.
Speaker 1: So you do see it rolling and arguably you see
Speaker 1: the first one who was rolling in, which was housing,
Speaker 1: is starting to stabilize maybe and there's some hints with
Speaker 1: mortgage race having come down, you know, maybe that market's
Speaker 1: going to stabilize, and then the next one to go
Speaker 1: would be more like the service sector part of the economy. Um,
Speaker 1: and as that happens, hopefully the other ones are sort
Speaker 1: of stabilizing and coming back up. I mean, but you know,
Speaker 1: I mean, the worst comes to worst is that, you know,
Speaker 1: the service sector doesn't just just sort of you know, slow,
Speaker 1: it sort of caves in. Basically, what I'm curious about, So,
Speaker 1: if it's a rolling recession, does ultimately the National Peer
Speaker 1: of Economic Research say we were in a recession or
Speaker 1: because it kind of works its way through, is it
Speaker 1: officially still a recession. Well, I mean, if it if
Speaker 1: it works the way those two other episodes, well those
Speaker 1: neither of those episodes were classified as as as I
Speaker 1: love that, sign me up. It's recession. But we're just
Speaker 1: not going to use the word right right right. I
Speaker 1: mean obviously, you know, if you're in the housing market,
Speaker 1: in the home builders, you know, you know they they
Speaker 1: say they're in recession, right, you know, and if you
Speaker 1: ask somebody who who, um, you know, some of the
Speaker 1: manufacturing companies like we have you know, three M which
Speaker 1: makes you know pretty much almost everything you can think of,
Speaker 1: posted notes and computer consoles, et cetera. You know, they
Speaker 1: are laying off people, so it feels like a recession
Speaker 1: to them. But you know, you ask the airlines, and
Speaker 1: you know everything's hunky door basically, you know, so and
Speaker 1: so Richard, I wanted to jump in and ask, I mean,
Speaker 1: it feels like soft landing. It was a dirty word
Speaker 1: for a little bit. We've sort of wrote it off.
Speaker 1: Is definitely not happening. Now I'm seeing more people make
Speaker 1: the argument that we could get it. The counter to
Speaker 1: that would be that a soft landing is just a
Speaker 1: precursor to hard landing. A hard landing at the start
Speaker 1: looks like a soft landing. I mean, where what's the
Speaker 1: current thinking on and uh, if if there is a
Speaker 1: binary outcome, if it's not a rolling recession, which one
Speaker 1: is more likely, well, I think people were becoming more
Speaker 1: um sympathetically idea of a swaftland I mean that there's
Speaker 1: yet another sort of you know, one making the rounds now,
Speaker 1: which is kind of you know, to further complicate things,
Speaker 1: which is something called a no landing right right right,
Speaker 1: you know, which is basically coming off the very spectacular
Speaker 1: jobs gains we were reported in January, so that you know,
Speaker 1: so the economy uh, basically you know has slowed. It
Speaker 1: definitely has slowed, but like it's like, you know, then
Speaker 1: it kind of re accelerates, and um, the that that
Speaker 1: people would think if it re accelerates and inflation re
Speaker 1: accelerates with it, we'd eventually get a hard landing because
Speaker 1: the FED would say, you know, enough is enough and
Speaker 1: really slam on the brakes. But brishin or I don't know,
Speaker 1: shoot it down. There's the chat bot recession. I mean,
Speaker 1: we could just go on, love it, love it, love
Speaker 1: It's so relevant. Rich Miller, thank you so much Bloomberg
Speaker 1: News Economics reporter uh the story the upcoming issue. The
Speaker 1: cover of the issue is on the ADNNI Empire. This
Speaker 1: is Bloomberg. This is Bloomberg business Week inside from the
Speaker 1: reporters and editors who bring you America's most trusted business
Speaker 1: magazine plus global business, finance and tech news. The Bloomberg
Speaker 1: Business Week Podcast with Carol Messer and Tim stinebec from
Speaker 1: Bloomberg Radio. We wanted to talk a little bit about
Speaker 1: the crypto world, and in fact for the next half hours,
Speaker 1: so we're gonna kind of dig deep into the crypto
Speaker 1: world because there's a bunch of stories out, including SEC
Speaker 1: Chair Gary Ginsler talking about the settlement with crypto exchange
Speaker 1: krackin over stalking digital assets and he said it should
Speaker 1: put everyone on notice in a smart your place. The
Speaker 1: SEC Chair catching up with Bloombergs David Weston earlier on
Speaker 1: Bloomberg TV and Radio. Check it out. These storefronts, these
Speaker 1: these crypto exchanges, crypto lending platforms, crypto staking as a service.
Speaker 1: They need to come into compliance and there are generally
Speaker 1: non compliant right now. The investing public is not only
Speaker 1: at risk by the speculative nature of crypto, but their
Speaker 1: at risk of ending up in line at a bankruptcy
Speaker 1: court because a lot of these platforms are doing things
Speaker 1: they're not disclosing. All right, That, of course, was the
Speaker 1: SEC chair Gary against the earlier on Bloomberg TV and
Speaker 1: Radio with David Weston. Let's talk about the crypto space
Speaker 1: more broadly, and especially when it comes to the regulatory
Speaker 1: up front with our Crypto round up. Let's kick it
Speaker 1: off with Stacy Murria Schmall. She's managing editor for Crypto
Speaker 1: right here at Bloomberg News. Lucky for us, Blush you, Katie.
Speaker 1: She's in our Interactive Brokers studio. Um, Stacy, thank you
Speaker 1: so much. We're so excited to have you here. So
Speaker 1: you heard Gensler, Yes, out there talking big time. UM,
Speaker 1: what's your takeaway? I think one of the fun things
Speaker 1: about reporting in crypto is every day you wake up
Speaker 1: and you're like, what's slightly unexpected thing may happen today?
Speaker 1: And for a lot of the folks who've been paying attention,
Speaker 1: especially in the back half of two after the collapse
Speaker 1: of FTX, we've sort of been waiting to see when
Speaker 1: the SEC was going to do the thing that they've
Speaker 1: hinting they wanted to do for a while, which has
Speaker 1: come out and say, here are all of the ways
Speaker 1: that we find the industry to be non compliant. And
Speaker 1: we have absolutely seen, particularly in January from the SEC
Speaker 1: from Gensler himself, that they're like, well, okay, here are
Speaker 1: all the ways that you have been noncompliant. And we
Speaker 1: think the crackdown on staking is just the latest example
Speaker 1: of them trying to remind both the crypto industry but
Speaker 1: also traditional finance that regulations do exist and they will
Speaker 1: enforce them. Can you guys both remind us what staking
Speaker 1: is just for those who do That was going to
Speaker 1: be my next question for five years old. How would
Speaker 1: you explain to or you know, if I was in puberty,
Speaker 1: how would you do it? Um? Do you like free money? Yes? Excellent,
Speaker 1: because if you like free money and you happen to
Speaker 1: have some imaginary money in the form of say ether
Speaker 1: or bitcoin or another token, you could agree to have
Speaker 1: a big crypto exchange like a kracking or a coin
Speaker 1: base hold that money for you that token, and pay
Speaker 1: you a return of anywhere up to and in exchange.
Speaker 1: They would use your tokens to validate other transactions in
Speaker 1: crypto and that's staking. So how does that work? Because
Speaker 1: I mean, the sort of the curmudgeon's cry against crypto
Speaker 1: is that it doesn't have any cash flows, So how
Speaker 1: does it actually generate that money? It's partly that what
Speaker 1: staking does is for the folks who are doing the staking.
Speaker 1: So if you're cracking or a coin base and you're saying, Okay,
Speaker 1: we have a bunch of these tokens, we're going to
Speaker 1: use them to help validate transactions, they also generate returns
Speaker 1: on those things, so you're sort of participating in a
Speaker 1: yield generating ecosystem. This is this is the pitch. But
Speaker 1: of course the argument from the SEC is exactly like, well, you,
Speaker 1: as an investor, somebody who likes free money, are looking
Speaker 1: to these other entities to generate value for you, and
Speaker 1: something like that starts to look sound and feel like
Speaker 1: what they would consider a security to be. And of
Speaker 1: course we did get the news yesterday that crypto Exchange
Speaker 1: krack in like you mentioned, uh, they made a deal
Speaker 1: with the SEC over their staking program. They're going to
Speaker 1: pay thirty million dollars to settle those allegations that it
Speaker 1: broke the agency's rules when it comes to staking products.
Speaker 1: Kracking isn't the only one that does this though, give
Speaker 1: us a sense of the landscape. So there are different
Speaker 1: types of players in this ecosystem. The other one that
Speaker 1: I mentioned coin Base. You know, in the aftermath of
Speaker 1: the krack in settlements with the SEC, Brian Armstrong, all
Speaker 1: of coin Bases lawyers, they're all like here, all of
Speaker 1: the ways the thing we do is not like the
Speaker 1: thing that Kraken does. So you know, it's very much
Speaker 1: in the interest of all of the other crypto players
Speaker 1: to try to identify how they are either compliant with
Speaker 1: whatever the rule is, or however the rule doesn't apply
Speaker 1: to them. And what we fully expect from the SEC,
Speaker 1: and especially from the tenor of the comments that you
Speaker 1: just heard with his interview on TV, is that they're
Speaker 1: going to say, no, that loophole actually probably does apply
Speaker 1: to you. And if you think it doesn't, just give
Speaker 1: us some time. I gotta say to me, it just
Speaker 1: doesn't even sound like a business, because the whole point
Speaker 1: is if somebody calls in their steak, what am I'm missing?
Speaker 1: I mean, I think this is kind of one of
Speaker 1: the fun things, is like, okay, so if somebody would
Speaker 1: have tried to call in their steak. It's it's not
Speaker 1: like a traditional run on the bank per se, Right,
Speaker 1: It's not this idea of the exchanges or whoever has
Speaker 1: this money is necessarily going to run out of the
Speaker 1: ability to offer this thing to you, which to be clear,
Speaker 1: has happened in other circumstances. But the Krakens and the
Speaker 1: coin basis of the world are very well capitalized and
Speaker 1: coin based, especially as a US traded, publicly listed company
Speaker 1: has ordered to financials, they can show you how well
Speaker 1: capitalized there are they are. So the concern from the
Speaker 1: SEC is more like other people who do similar things
Speaker 1: have to play by more rules, and we want to
Speaker 1: be clear that these rules apply to you, So I
Speaker 1: mean coin based. Of course, like you said, they're going
Speaker 1: to make the argument that ours is different, etcetera, etcetera.
Speaker 1: But then you look at what's going on in the shares,
Speaker 1: and of course coin basis had a really great start
Speaker 1: along with everything else crypto, but it was down four
Speaker 1: percent yesterday, it was down four today. I look at that,
Speaker 1: it seems like the thinking is that maybe those arguments
Speaker 1: aren't necessarily going to hold water at the SEC. I
Speaker 1: think there's a lot of jittere jit ter nous right now,
Speaker 1: because in addition to the comments about staking, you also
Speaker 1: have as Bloomberg News my colleagues, they are confirmed that
Speaker 1: the you know, New York regulators are looking into a
Speaker 1: company called Paxsos which issues a stable coin. The stable
Speaker 1: coins are the ones that are supposed to be stable,
Speaker 1: like they're not supposed to move up and down, and
Speaker 1: other tokens do that, and that is the thing. And
Speaker 1: you know, we just published a story a couple of
Speaker 1: minutes ago that PayPal, which was looking to issue its
Speaker 1: own stable coin, have been like, ha ha, we may not.
Speaker 1: Regulatory uncertainty is a little bit stressful, and so you know,
Speaker 1: you're seeing this real. I wouldn't say shift in sentiment
Speaker 1: because sentiment hasn't been great, but a pause in the
Speaker 1: rally that we saw in January as people try to
Speaker 1: figure out what might be coming next. Stacy in terms
Speaker 1: of the regulatory framework that ultimately gets established. Is it
Speaker 1: going to be piecemeal as things go wrong or as
Speaker 1: a disaster happens. Is that how it's going to probably
Speaker 1: develop an evolve. That is one the most common criticism
Speaker 1: of all regulators that it's like they're regulating the last
Speaker 1: war And what's been interesting for about the past few
Speaker 1: months is, you know, folks were jumping up and down
Speaker 1: to the SEC and saying, what are you doing about
Speaker 1: consumer protection? Like how are you going to stop there
Speaker 1: being another x y Z files for bankruptcy and then
Speaker 1: like a week later, another x y Z files for bankruptcy,
Speaker 1: and so they are very much in a position where
Speaker 1: they got all of this criticism that they weren't fast enough,
Speaker 1: they weren't aggressive enough, and they're trying to respond, which
Speaker 1: immediately leads to people saying, no, no, that's too aggressive.
Speaker 1: We don't want you to kill the whole industry. Or
Speaker 1: the common criticism right now is well, you're just going
Speaker 1: to cause people in the US to try to transact
Speaker 1: offshore and overseas where they may have even fewer investor productions.
Speaker 1: Well that's the thing, right, didn't crack and say that
Speaker 1: they're only this only applies to their US, But that's
Speaker 1: exactly going to happen overseas. That's exactly right. That's so interesting.
Speaker 1: So I mean, but is that a solvable problem? Obviously,
Speaker 1: the the SEC has jurisdiction over the US. It feels like,
Speaker 1: you know, if you try, if you think about this
Speaker 1: as a multi headed beast. They only have there. They
Speaker 1: can only be responsible for cutting off one head. And
Speaker 1: this is entirely why, you know, like the Devil's elite,
Speaker 1: as it were. One of one of the big talking
Speaker 1: points there from regulators, from central bankers is, hey, we
Speaker 1: have to have a unified front on cryptoregulation. This is
Speaker 1: a global asset class. It's functionally border less. We have
Speaker 1: to have baseline standards in which we are coordinated and
Speaker 1: aligned because otherwise, to your point, it's going to be,
Speaker 1: you know, you try to top off ahead, you play
Speaker 1: whackam like, pick some kind of frustrating metaphor, and folks
Speaker 1: will find ways to work around those. To the regulators,
Speaker 1: do people do they understand it at this point? Yes,
Speaker 1: I mean I think there is a very common misconception
Speaker 1: that it's like, oh, the ft doesn't know what they're doing.
Speaker 1: Fet knows exactly what they're doing. The various central banks
Speaker 1: know what they're doing. They have hired from industry, They
Speaker 1: are doing their own you know, to use the popular
Speaker 1: crypto phrase, they're doing their own research. They are issuing
Speaker 1: policy papers, they are doing demos of how you could
Speaker 1: run a blockchain. So you're dealing with an increasingly sophisticated
Speaker 1: regulatory environment in a way that may not have been
Speaker 1: true two years ago. Does it feel like it's going
Speaker 1: to be a better year or a smarter year when
Speaker 1: it comes to crypto? My question, so that would be
Speaker 1: like what side of defense are you on? Because you know,
Speaker 1: depending on how your position, this could go very well,
Speaker 1: very poorly for you as a as a journalist. No
Speaker 1: position would imagine though that you're you're going to be busy. Yeah,
Speaker 1: that seems to be the theme. Um. You know, and
Speaker 1: I think that we're also seeing the stories evolve, right.
Speaker 1: We are seeing different types of very traditional financial institutions
Speaker 1: making their own plays and different types of crypto things.
Speaker 1: We're seeing tech companies trying to figure out how are
Speaker 1: they going to compete? You know, if you are an
Speaker 1: Apple Wallets, you might want to know, like, what's our
Speaker 1: crypto strategy? Do we maybe hear more of that blockchain
Speaker 1: versus crypto just kind of about ten seconds the underlying
Speaker 1: technology I thought already had. It just feels like I
Speaker 1: can see the evolution already. Um Stacy, thank you so much,
Speaker 1: really great deep dive. Stacy. Marishmael I, Managing editor for
Speaker 1: cryptop Bloomberg News Right here in studio. You're listening to
Speaker 1: the Bloomberg Business Week podcast. Catch Just Live week days
Speaker 1: from two to five pm Easter on Bloomberg Radio, the
Speaker 1: Bloomberg Business Band You Doo. You can also listen live
Speaker 1: to our flagship New York station, Just Say Alexa play
Speaker 1: Bloomberg e Love and Dirty. Can you know kind of
Speaker 1: want to continue with the crypto world for a little bit.
Speaker 1: We've got a good guest coming up. Um, we're gonna
Speaker 1: talk about the energy used when it comes to crypto
Speaker 1: mining because I don't know, Katie, you know stats really
Speaker 1: well on this world, but about six global currency mining
Speaker 1: is fueled by coal and natural gas as opposed to
Speaker 1: renewable energy sources. I mean you've done a lot of reporting.
Speaker 1: This is a big issue. Oh yeah, I mean this
Speaker 1: has been one of the pain points for the industry.
Speaker 1: There's a lot of pain points right now. But it's
Speaker 1: a really it's it's it's makes them vulnerable, the fact
Speaker 1: that you're you're wasting some would say this much energy. Uh,
Speaker 1: it's an easy point to attack, all right, So that
Speaker 1: is what we do want to kind of attack with
Speaker 1: our next guest in our weekly crypto segment with us
Speaker 1: as Kent Halliburton, president and chief operating officer at SAYS Mining,
Speaker 1: which connects investors to renewable energy mining facilities. He joins
Speaker 1: us via zoom in Portugal. In Portugal, excuse me, hey, Ken,
Speaker 1: good to have you here with Katie and myself. First
Speaker 1: of all, tell us little bit about your company in
Speaker 1: your background. Yeah, happy to thanks for having me so um,
Speaker 1: I've made a pivot in my personal career from the
Speaker 1: solar electric industry to bitcoin mining because I saw its
Speaker 1: environmental potential. And here it says mining we're actually transforming
Speaker 1: the way people relate with money and energy. We actually
Speaker 1: just launched our first turnkey hydropower data centered Wisconsin to
Speaker 1: make bitcoin mining easy and accessible for every person. Just
Speaker 1: go into our website is easier than Netflix subscription. You
Speaker 1: can get started with a mining rig of your own
Speaker 1: and receive rewards directly to your wallet. We never custody
Speaker 1: our customers m bitcoin. And on top of that, we've
Speaker 1: also just picked off a crowdfunding campaign through start Engine,
Speaker 1: so that anybody that wants to participate with this transformation
Speaker 1: with us can do so by owning a piece of
Speaker 1: SAS Mining and um, yeah, we're just making it easy.
Speaker 1: So let's talk a little bit more about your business model,
Speaker 1: because you know, when I hear sustainable bitcoin mining companies,
Speaker 1: sometimes that simply means that you're buying offsets or using
Speaker 1: credits somehow, But so are you're actually it's a hydro
Speaker 1: powered facility. Correct, Correct, we're actually purchasing the power directly
Speaker 1: from the damn operator himself. And so you know, you
Speaker 1: you mentioned, and I've seen in your notes that you
Speaker 1: just launched a facility in Wisconsin, And a conversation I
Speaker 1: have around crypto mining all the time is how different
Speaker 1: states treat it? What about Wisconsin? What led you there? Well,
Speaker 1: we'll let us there was a combination of the facility itself.
Speaker 1: So we've got a clean energy mandate. All the bitcoin
Speaker 1: mining that we do is carbon neutral, and you know,
Speaker 1: we we took a step back and said, look, this
Speaker 1: energy thing is a serious concern, but at the end
Speaker 1: of the day, we need to have a little bit
Speaker 1: more of a nuanced conversation to separate electricity from carbon.
Speaker 1: Carbon is the culprit when it comes to climate change,
Speaker 1: which I've been a part of, you know, advocating against
Speaker 1: my entire career being then both solar and now on
Speaker 1: bitcoin mining. But UM, we need to figure out ways
Speaker 1: to to mine bitcoin with carbon neutral sources, and there's
Speaker 1: quite a few of them out there, and in fact,
Speaker 1: the network last stats I saw was improving it about
Speaker 1: four percent per annum uh in its carbon neutrality. So
Speaker 1: help me out. UM and Katie are crypto expert. Uh,
Speaker 1: why isn't it just all renewables? Is it just access cost?
Speaker 1: What is it? And Ken come on in like why
Speaker 1: is it? You know, what are the difficulties since this
Speaker 1: is such as Katie mentioned a pain point, Why isn't
Speaker 1: it just all all of the mining done through renewable sources. Well,
Speaker 1: at the end of the day, we first need to
Speaker 1: kind of take a step back and think about UM
Speaker 1: the grid itself, right, So when when it comes to
Speaker 1: the grid, it's kind of surprising I think for some
Speaker 1: folks to realize that it's an on demand situation. So
Speaker 1: it's a complicated UM navigation where you've got power on
Speaker 1: the grid and it has to be consumed as it's produced.
Speaker 1: So there's this concept balancing act UM for energy producers
Speaker 1: and renewables. Hydro is a consistent baseload energy on the grid,
Speaker 1: but renewables have a lot of variation and fluctuation and
Speaker 1: form bitcoin mining, what we are looking for as miners
Speaker 1: is the lowest cost energy, and that's energy that's often
Speaker 1: discarded or unused. So actually there's quite a bit that's
Speaker 1: been going on with renewables. Specifically, hydro has been a
Speaker 1: major power source, but the coal has actually been an
Speaker 1: issue primarily in China and has a stand and bitcoin
Speaker 1: mining has left those places. So if you look at
Speaker 1: the most recent stats, actually it's growing more renewable actually
Speaker 1: quite quickly day or day. Well. Kind something I always
Speaker 1: wonder about when I have these conversations about how to
Speaker 1: make crypto mining greener is where this falls on the
Speaker 1: priority list Because you talked to crypto minors over the
Speaker 1: past year really and it feels like the focus has
Speaker 1: just been survival as we've seen the price of bitcoin
Speaker 1: in particular really plummet and their margins just basically get
Speaker 1: eaten up. So when you think about the mining industry
Speaker 1: as a whole outside of just sas mining, I mean,
Speaker 1: do you think that it just is in that high
Speaker 1: of a priority item right now that people are still
Speaker 1: just trying to survive? No, I think it's absolutely a priority.
Speaker 1: I think there's a deep seated worry industry right now
Speaker 1: for bitcoin miners in the United States, right like we
Speaker 1: can control what's happening in the rest of the world,
Speaker 1: but bitcoin mining it is are in the US sees
Speaker 1: that there's a regulatory risk right now if you're not
Speaker 1: mining bitcoin in a carbon neutral way, which actually the
Speaker 1: White House advocates for. You know, they came out the
Speaker 1: Office and Science and Technology with the report saying, look,
Speaker 1: we've got a methane mitigation issue right now, and bitcoin
Speaker 1: mining is actually one of the few economical opportunities we
Speaker 1: have to avoid this. And methane is greenhouse gas that
Speaker 1: has up to an eighty four times more impactful on
Speaker 1: climate change than carbon. You know, it's interesting and you
Speaker 1: and you say the hydro power is more reliable. There
Speaker 1: isn't kind of some instability in that because of climate change. Well,
Speaker 1: there is definitely. There's definitely some seasonality with water flows
Speaker 1: where we are in Wisconsin. We analyze the water flows
Speaker 1: for the last five years and saw that there was
Speaker 1: only one month in five years that there could be
Speaker 1: a potential dip in electricity prices or in electricity output
Speaker 1: in which case, the beauty of bitcoin mining is it
Speaker 1: can be curtailed um and we have that arrangement built
Speaker 1: in with the damn power producer. Okay, So another question
Speaker 1: that I have sort of ex essentially is, you know,
Speaker 1: part of the reason, a big part of the reason
Speaker 1: why bitcoin mining is so energy intensive is because it's
Speaker 1: proof of work basically that really just to simplify it
Speaker 1: for simplicity steak that requires a lot of energy. We
Speaker 1: saw the Ethereum blockchain go to proof of steak, and
Speaker 1: I remember at the time, you know, the number that
Speaker 1: kept getting tossed around was what it was going to
Speaker 1: cut energy usage by. Don't quote me on that. It's
Speaker 1: a simple question, why can't the bitcoin blockchain just go
Speaker 1: from proof of work to proof of steak. Doesn't that
Speaker 1: seem like sort of an elegant solution, Well, it would
Speaker 1: seem like it on this surface, right, but you actually
Speaker 1: have to look a little bit more deep. And I
Speaker 1: don't want to get too bogged down with the technicality,
Speaker 1: but at the end of the day, proof of work
Speaker 1: and proof of steak or two different consensus mechanisms, And
Speaker 1: there's a strong argument to be made that there's a
Speaker 1: centralizing force within proof of steak over time. And one
Speaker 1: of the keys that bitcoin has been designed around is
Speaker 1: decentralization and security, and that's where the proof of warp
Speaker 1: comes in. Without proof of work, you actually can't really
Speaker 1: reliably have decentralization over the long time period. Now we'll
Speaker 1: see maybe we can, but thus far we haven't seen
Speaker 1: where proof of stake systems have been able to avoid
Speaker 1: that outcome. And the reason why people are really investing
Speaker 1: in bitcoin is because we've had such a long period
Speaker 1: of stability. Uh that fourteen years really gives investors a
Speaker 1: lot of confidence that bitcoin is going to be around
Speaker 1: for the future. So massive change to proof of eight
Speaker 1: would undermine that stability that we've developed. Ken just got
Speaker 1: thirty seconds. The proof is in the pudding. Um, how
Speaker 1: much is your business growing? Are you guys profitable? And
Speaker 1: just quickly? So? We are an early stage company, so
Speaker 1: we're not to profitability yet. However, we have designs that
Speaker 1: we should be there within the next year or so. UM.
Speaker 1: But this industry has so much opportunity and where we
Speaker 1: come in with our specific niches, we don't think that
Speaker 1: anybody is designed a great solution for the every person,
Speaker 1: and so by coming up with a platform that is
Speaker 1: accessible and easy in the best of web two like
Speaker 1: customers are used to. We think we're going to break
Speaker 1: this market wide open. Well, we appreciate your time on
Speaker 1: this Friday afternoon, Kent, Thank you so much. Ken Haliburton,
Speaker 1: President and Chief operating Officer at Says Mining, joining us
Speaker 1: via Zoom from Portugal. I just think about it's complex
Speaker 1: computations right there. Want as much power where we can
Speaker 1: get it right, and that's what makes the industry vulnerable.
Speaker 1: This is Bloomberg business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: a business, finance and tech news the Bloomberg Business Week
Speaker 1: Podcast with Carol Massier and Tim Stinebec from Bloomberg Radio.
Speaker 1: I'm broom mac Journal. How but you let me drive?
Speaker 1: Oh no, no, no, no, who's please? I'll do the
Speaker 1: riding revels. I want to drive. It's good question. This
Speaker 1: is the drive to the close up on Bloomberg Radio.
Speaker 1: All right, everybody, just about seventeen and a half minutes
Speaker 1: left intod his trading session. Yes, I'm counting down to
Speaker 1: the Friday closing bell. Are you counting down We're close.
Speaker 1: We're getting closer right now. Oh sorry, thinking she's been traveling.
Speaker 1: She's been in Miami, she's been having drinks with that
Speaker 1: umbrellas or something. I have to keep reminding myself it's Friday.
Speaker 1: It's not actually Monday. It is Friday. All right, let's
Speaker 1: get to it with David Dee's. I'm sure he knows
Speaker 1: exactly how many minutes until the close. He's managing principal
Speaker 1: senior portfolio Strategies at Pepack Private Wealth Management ten billion
Speaker 1: in assets under management. David with us once again on
Speaker 1: the phone in Summit, New Jersey. Um, David, good to
Speaker 1: have you here. It's been another interesting week. I do
Speaker 1: feel like we're looking at a treasury market that's thinking
Speaker 1: a little bit different, uh, and getting the Fed memo
Speaker 1: that yep, they're going to keep raising rates, They're going
Speaker 1: to stay higher for longer. How do you see the
Speaker 1: market environment, the investment environment right now? Yeah? Absolutely, uh, Carol.
Speaker 1: So we basically had a goldilocks month in January, of course,
Speaker 1: with that inflation indicator starting to come down, interest rate
Speaker 1: for coming down. Um, we had the job Marcus staying strong,
Speaker 1: and then all of a sudden we ran smack into
Speaker 1: the January jobs for for it, and with the much
Speaker 1: stronger than expected jobs, people had to start recalculating where
Speaker 1: the stead o reserver was going. The market for a
Speaker 1: long time was saying, you know, one or two and
Speaker 1: then done and coming back down in the second half
Speaker 1: of the year. Now all bets are off. And so
Speaker 1: what we've been seeing this week, of course, is that
Speaker 1: particularly with his tenure treasury backing up, that's really hitting
Speaker 1: the NASTAC stocks heart. Why because those are the longer
Speaker 1: so called earnings duration stocks, and as those interest face
Speaker 1: to go up, the discounting of those earnings to present
Speaker 1: value really hits the present value hard. And that's what
Speaker 1: we're seeing the real weakness. Having said that, though, when
Speaker 1: we first got our FED decision right, we saw actually
Speaker 1: a rally, didn't we in terms of the equity market,
Speaker 1: And I think there was some you know, we were
Speaker 1: having these questions, are we've seen with this talk of
Speaker 1: higher rates, we've seen tech rally despite it? Um Are
Speaker 1: you just saying that traders are finally getting it kind
Speaker 1: of thing? Well, you know, I think that's right. So
Speaker 1: when we first got the FED decisions, I was before
Speaker 1: the January jobs report, and although the Feds said, you know,
Speaker 1: we're standing the course, we've got to, you know, manage
Speaker 1: the job, there was still a doubbish overtone and chaired
Speaker 1: Jerome Pale's message to investors. Then all bets were off.
Speaker 1: Jerome Pall, I think made took the best of it,
Speaker 1: saying we don't want to basically overreact to that January
Speaker 1: jobs number. But then we got this florry of additional
Speaker 1: Fed speak um in this past week, and that has
Speaker 1: really caused investors to recalculate where they see the centers
Speaker 1: are going. Of course, let's put it in context. The
Speaker 1: NAZDAC had its strongest January since two thousand one, up
Speaker 1: over eleven and so we were due to take a pause,
Speaker 1: if not a little bit more well David, like Carroll said,
Speaker 1: I've been in Miami for the past week, but even
Speaker 1: I knew that there was a lot of Fed speak
Speaker 1: this week. It was very hawkish, And as you've laid out,
Speaker 1: I've gotten some pretty important data points in the last
Speaker 1: couple of weeks. Chief among them is, of course, that
Speaker 1: non farm payrolls report. If we look ahead to next
Speaker 1: week with are you important inflation print coming up on Tuesday,
Speaker 1: also Valentine's Day. But when you think about I don't know,
Speaker 1: it feels like a real jitteriness has overtaken the market
Speaker 1: in the past couple of days. How high are the
Speaker 1: stakes heading into Tuesday and that inflation report, Well, I
Speaker 1: think they're very high because you know we're coming off this.
Speaker 1: You know, over five thousand jobs created, lowest jobless rate
Speaker 1: since nineteen sixty nine, and so the concern is that
Speaker 1: this labor mark is going to get away from us
Speaker 1: in terms of a wage price spiral, which is going
Speaker 1: to make the first job exceedingly difficult. Um. So yeah,
Speaker 1: all eyes are on the eight thirty Eastern Tuesday, the
Speaker 1: CPI print. But let's take it in stride here. First
Speaker 1: of all, we know what eleven of the last twelve
Speaker 1: months actually are, so we're just looking at the January number.
Speaker 1: I think the bullish cases. You know, when you look
Speaker 1: at just the three months of the last quarter of
Speaker 1: last year, you're only up one per cent. So hopefully
Speaker 1: we can have something close to the flat I think
Speaker 1: the flying apaintment right now, and that Wall Street has
Speaker 1: to get ready for is gas prices. Fish is an
Speaker 1: important component of the headline number. Have drifted up in
Speaker 1: the months of January after after backing off tremendously in
Speaker 1: Q four, and that could make for a print that
Speaker 1: doesn't resolve the question as to where inflation is going. Yeah,
Speaker 1: we talked about energy earlier. Let's get to picks, you know,
Speaker 1: the macro. I feel like we can go back and
Speaker 1: forth and so many directions. Uh, you know, any on
Speaker 1: any given day. But let's get to some names that
Speaker 1: you think investors should be looking at, and Fightser is
Speaker 1: one of them. Stocks down about pays a dividend um.
Speaker 1: What is it about Fiser that you find interesting? David?
Speaker 1: It's your quintessential blue chet. And with all the concerns
Speaker 1: will there be a recession, what type of landing, and
Speaker 1: so forth. I like the healthcare sector because it's not
Speaker 1: particularly sensitive to the economy. Now, you know, where would
Speaker 1: we be in terms of coming out of COVID nineteen
Speaker 1: if we didn't have Fiser. Here's the problem for the
Speaker 1: stock is they made so much money. Now investors are saying, okay, us,
Speaker 1: you know the encore here, how long will the valley
Speaker 1: be before you come up with your next blockbuster? But
Speaker 1: when I look at this company, the size of their
Speaker 1: labor force, their global diversification, the fact that it's only
Speaker 1: about eleven times earning three point seven percent dividend and
Speaker 1: close to off of its you know, fifty two week high.
Speaker 1: I think this is a good place to hang out
Speaker 1: in terms of the volatility that we could have next week.
Speaker 1: So you like healthcare good place to hang out. Where
Speaker 1: is not a good place to hang out? Where are
Speaker 1: you avoiding right now? Well, certainly, you know, one concerning
Speaker 1: thing about the overall market environment is to return on
Speaker 1: the speculative phase. So if uh, if it has a
Speaker 1: I or chat bt in its name, please look up.
Speaker 1: I mean, it just makes us, it makes no sense.
Speaker 1: It reminds me of you know, twenty two years ago
Speaker 1: when everyone was putting dot com after their names, and
Speaker 1: now we're trying to figure out a way to put
Speaker 1: AI into their business model, into their name, and the
Speaker 1: prices have gotten out of sight. And I mean, you know,
Speaker 1: the Chinese government and state media have never been a
Speaker 1: bastion of you know, kind of conservative thinking. But I
Speaker 1: love the fact that even they warned their people that
Speaker 1: the whole the stock marketing, as far as a I
Speaker 1: was concerned, was getting way overheated. Caution of course, and
Speaker 1: of course you've got some of the meme stocks are
Speaker 1: on the rise again, you know, the A M C
Speaker 1: s UM and you do want to steer clear of that.
Speaker 1: All right, We're gonna leave it on that note. Um,
Speaker 1: we really appreciate it, David. Thank you so much. David
Speaker 1: Diets he's managing principal and senior portfolio strategies at Pepack
Speaker 1: Private Wealth Management, joining us on the phone from Semit,
Speaker 1: New Jersey. This is the Bloomberg Business Week podcast, available
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