WEBVTT - Checking in on Morgan Stanley and Goldman Sach's Earnings 0:00:01.360 --> 0:00:05.680 This is Bloomberg business Week Inside from the reporters and 0:00:05.880 --> 0:00:09.479 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 Stenebeck from Bloomberg Radio. 0:00:20.560 --> 0:00:23.200 One thing for certain is the big banks have reported. 0:00:23.239 --> 0:00:26.960 We got another drop today, Goldman Sachs topping profit estimates 0:00:27.320 --> 0:00:29.920 as its equities trading unit posted a jump at revenue. 0:00:29.960 --> 0:00:32.159 It was triple what analysts expected. Capping off what is 0:00:32.440 --> 0:00:34.960 it's pitching as a year of transition. We did see 0:00:34.960 --> 0:00:37.560 Goldman shares trading slightly higher today. 0:00:37.640 --> 0:00:40.080 And then there's Morgan Stanley shares sold off the most 0:00:40.120 --> 0:00:43.159 in three months as its traders fell short of expectations. 0:00:43.479 --> 0:00:46.559 Also executive said Carol that lower wealth management margins may 0:00:46.640 --> 0:00:50.720 stick around. A nice welcoming gift to Morgan's new CEO. 0:00:50.720 --> 0:00:51.160 Ted Peck. 0:00:51.280 --> 0:00:54.480 Yeah, have fun. Morgan Stanley shares down four point seven percent. 0:00:54.560 --> 0:00:57.160 Goldman just up a hare, just up for actually, So 0:00:57.240 --> 0:01:00.560 let's get to with CFA Research, Global Director Industry and 0:01:00.560 --> 0:01:03.400 Equity Research, Ken Leon. He's on Zoom in New York City. Ken, 0:01:03.440 --> 0:01:05.360 by the way, has a hold on Goldman and a 0:01:05.400 --> 0:01:07.800 buy on Morgan Stanley. Ken good to have you here. 0:01:09.400 --> 0:01:11.280 What are the key points for Goldman? What are the 0:01:11.360 --> 0:01:12.880 key points for Morgan Stanley. 0:01:14.680 --> 0:01:18.199 Well, they're in many of the same businesses, but really 0:01:18.240 --> 0:01:24.120 the direction of these companies are a little bit different. Goldman, 0:01:24.200 --> 0:01:28.280 of course, is really downsizing or closing the book on 0:01:28.319 --> 0:01:32.399 a failed strategy, which was the consumer area, and they're 0:01:32.440 --> 0:01:36.959 looking to get in the more positive areas such as 0:01:37.760 --> 0:01:44.000 alternative investment and private credit. Morgan Stanley, it's just because 0:01:44.000 --> 0:01:47.280 of market conditions that we did see a week fourth 0:01:47.360 --> 0:01:51.200 quarter for investment banking, but their strategy is firmly in 0:01:51.280 --> 0:01:55.600 place and think that they will execute well in twenty four. 0:01:56.200 --> 0:01:59.200 Well, now that all the banks have reported Friday and 0:01:59.240 --> 0:02:02.360 then today, what's a way that you could characterize the 0:02:02.480 --> 0:02:04.760 quarter that was in the quarter that is. 0:02:06.240 --> 0:02:11.440 So, what we're seeing is still a healthy US economy 0:02:11.919 --> 0:02:17.200 and that speaks to both loan growth and also credit 0:02:17.280 --> 0:02:22.960 loan risk, whether it's a commercial or consumer that held 0:02:23.040 --> 0:02:28.640 up incredibly well. We also saw the opportunities for these 0:02:28.680 --> 0:02:33.320 banks to gain wallet share from some of the smaller banks, 0:02:33.639 --> 0:02:37.040 and part of that was really the effects we had 0:02:37.200 --> 0:02:41.280 from last March with the bank failures. On a global basis, 0:02:42.639 --> 0:02:48.840 all these banks that do investment banking are really getting 0:02:48.840 --> 0:02:52.600 the lion's share of their revenue from the US, and 0:02:52.639 --> 0:02:55.960 the US is expected to still be the driver for 0:02:56.120 --> 0:03:01.640 growth in twenty four, Asian next and then perhaps Europe. 0:03:02.280 --> 0:03:06.240 So it's an interesting time to look at these banks, 0:03:06.800 --> 0:03:11.760 particularly since they're not firing on all cylinders. There are 0:03:11.840 --> 0:03:16.120 some doubt in terms of both the economic outlook and 0:03:16.240 --> 0:03:22.960 also investment banking, but their strategy has led to durable assets, 0:03:23.720 --> 0:03:27.679 more predictable revenue and cash flow and return of capital. 0:03:28.280 --> 0:03:32.359 I think the only dark shadow for these banks as 0:03:32.400 --> 0:03:35.720 we progress in the early months of this year would 0:03:35.760 --> 0:03:39.680 be what we're hearing from Washington in terms of bank regulation. 0:03:41.080 --> 0:03:44.320 Hey can you have a hold on Goldman and a 0:03:44.360 --> 0:03:48.160 buy on Morgan Stanley? Last year Morgan Stanley gained about 0:03:48.200 --> 0:03:51.720 ten percent, Goldman was up more than twelve percent. Why 0:03:51.760 --> 0:03:53.600 the hold on Goldman? Why the buy on Morgan? 0:03:55.240 --> 0:03:58.680 So we were negative on the strategy that Goldman had. 0:03:58.920 --> 0:04:02.280 It was a major action of time for management, not 0:04:02.320 --> 0:04:05.160 only for last year but the last three years. And 0:04:05.240 --> 0:04:10.000 in terms of right sizing the ship, yeah, Goldman finally 0:04:10.280 --> 0:04:14.880 did that. But again, these are highly competitive markets, whether 0:04:14.880 --> 0:04:18.280 it's the capital markets, we're moving into some of the 0:04:18.279 --> 0:04:23.159 more attractive areas of investment and asset management, and Morgan 0:04:23.240 --> 0:04:24.600 Stanley is not distracted. 0:04:26.839 --> 0:04:28.520 As you look forward, what are you going to be 0:04:28.600 --> 0:04:31.120 watching out for these names in particular that you think 0:04:31.160 --> 0:04:34.279 investors bloom And I'm thinking about our audience who are 0:04:34.320 --> 0:04:36.240 listening and watching right now, she'd kind of keep an 0:04:36.240 --> 0:04:38.880 eye on Goldman, Morgan, but the whole group. 0:04:40.560 --> 0:04:43.719 So I think the key point is that we did 0:04:43.720 --> 0:04:46.600 see in the financial sector but also the large banks 0:04:46.800 --> 0:04:50.320 outsized gains in the fourth quarter of last year. So 0:04:50.360 --> 0:04:54.039 we expect the stock prices to trade sideways, perhaps for 0:04:54.120 --> 0:04:57.640 a month or two, kind of consolidate their positions, and 0:04:57.680 --> 0:05:01.280 then as we see closer to a FED rate cut 0:05:01.640 --> 0:05:04.159 and what it means in terms of whether it's three 0:05:04.360 --> 0:05:08.200 or four, that might create the signal of a risk 0:05:08.279 --> 0:05:11.440 on environment, both in the boardrooms for M and A 0:05:12.680 --> 0:05:15.720 or in other aspects of investment banking. 0:05:16.320 --> 0:05:18.400 So as long as the FED isn't too aggressive right 0:05:18.440 --> 0:05:22.560 which signals things are going south, it should be at 0:05:22.640 --> 0:05:25.760 least initially positive for the bank's bottom line. Twenty seconds here, 0:05:26.640 --> 0:05:27.479 we're pretty. 0:05:27.200 --> 0:05:30.720 Confident because looking back at twenty nineteen to twenty when 0:05:30.760 --> 0:05:34.640 the Fed did raise rates, bank stocks, the large bank 0:05:34.720 --> 0:05:37.080 stocks of quality did well. 0:05:37.160 --> 0:05:39.440 All right, good to know, great to check in with 0:05:39.480 --> 0:05:41.320 you so appreciate it. Have a great week. Ken Leeon, 0:05:41.640 --> 0:05:44.880 Global Director of Industry and Equity Research at CFI Research 0:05:44.960 --> 0:05:48.280 on Zoom in New York City. As we said, hold 0:05:48.320 --> 0:05:50.520 on Goldman By and Morgan, but breaking down the results. 0:05:50.520 --> 0:05:53.280 If you want to know more, do check out our 0:05:53.400 --> 0:05:56.520 complete reporter analysis of those names and they're reporting. Just 0:05:56.560 --> 0:05:59.360 head to Bloomberg dot com of course, the Bloomberg terminal. 0:05:59.440 --> 0:06:01.760 This is Bloomberg Radio. 0:06:02.839 --> 0:06:06.400 You're listening to the Bloomberg Business Week podcast. Catch us 0:06:06.440 --> 0:06:09.800 live weekday afternoons from three to six Eastern Listen on 0:06:09.839 --> 0:06:13.880 Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, 0:06:14.160 --> 0:06:16.000 or watch us live on YouTube. 0:06:16.839 --> 0:06:19.719 Well, airline stocks falling for yet another day, this after 0:06:19.760 --> 0:06:22.719 they got absolutely hammered on Friday. Back then, Carol. The 0:06:22.800 --> 0:06:26.360 smpage of airlines declined the most in nineteen months. United 0:06:26.440 --> 0:06:29.000 sell more than ten percent, Delta fell nine percent, American 0:06:29.040 --> 0:06:32.400 Airlines fell nine point five percent. This all a result 0:06:32.480 --> 0:06:34.960 of Delta lowering its profit forecast for the full year, 0:06:35.400 --> 0:06:38.480 which really underscores the challenges the broader industry faces when 0:06:38.480 --> 0:06:41.920 it comes back to recapturing that pre pandemic performance. 0:06:42.000 --> 0:06:43.960 Yeah, like you said, the group overall down seven point 0:06:44.000 --> 0:06:46.239 six percent on Friday, then another one point three percent 0:06:46.320 --> 0:06:49.440 today's session. All right, so concern lingers even after what 0:06:49.600 --> 0:06:51.680 was the busy stay over for US air travel just 0:06:51.720 --> 0:06:54.880 a few months ago. We're talking about the Sunday after Thanksgiving. 0:06:54.960 --> 0:06:56.280 So all right, what's going on? 0:06:56.520 --> 0:06:59.000 Yeah, Haley Berg is back with us. She's lead economist 0:06:59.040 --> 0:07:02.120 for the travel app hop. That app analyzes trillions of 0:07:02.160 --> 0:07:05.479 data points i e. Prices on flights, car rentals, and 0:07:05.480 --> 0:07:08.040 hotels to make predictions about how much tickets are going 0:07:08.080 --> 0:07:11.840 to cost. Haley joins us on Zoom from Boston. Haley, 0:07:11.880 --> 0:07:14.560 good to have you back with us. So what gives here? 0:07:14.600 --> 0:07:16.880 Because Hopper says that more than three quarters of Americans 0:07:16.880 --> 0:07:18.880 are going to spend the same or even more on 0:07:19.000 --> 0:07:21.000 travel this coming year. So why are we hearing the 0:07:21.160 --> 0:07:22.760 gloominess when it comes to airlines? 0:07:24.280 --> 0:07:27.120 You know, one of the biggest sticking points for prices 0:07:27.160 --> 0:07:30.440 in the last three or four years has been supply. 0:07:30.720 --> 0:07:33.760 There have not been enough seats to book and that's 0:07:33.840 --> 0:07:36.200 why fares have been so incredibly high over the past 0:07:36.280 --> 0:07:39.200 few years. Think back to summer twenty twenty two, domestic 0:07:39.240 --> 0:07:41.880 airfare the highest that we had seen in all of 0:07:41.920 --> 0:07:46.680 our history at Hopper. So supply is now exceeding where 0:07:46.680 --> 0:07:49.640 it was in twenty nineteen. A lot of it is 0:07:49.800 --> 0:07:53.040 exceeding now on international routes. So part of this is 0:07:53.160 --> 0:07:56.720 just the equation of travelers are looking for low prices. 0:07:57.080 --> 0:07:59.560 There are more seats available to books, so they have 0:07:59.640 --> 0:08:02.800 more options. A lot of those options are low cost 0:08:02.880 --> 0:08:06.240 carriers who may have entered or expanded in the last 0:08:06.240 --> 0:08:09.880 two years. All of that is putting downward pressure on prices, 0:08:10.080 --> 0:08:13.160 despite the fact that fifty percent of our users at 0:08:13.200 --> 0:08:15.800 Hopper are expecting to travel more this year than they 0:08:15.840 --> 0:08:16.440 did last year. 0:08:16.560 --> 0:08:18.760 Is that true domestic versus international travel. 0:08:20.320 --> 0:08:24.160 Yes, we're seeing a tremendous amount of demand for international travel, 0:08:24.440 --> 0:08:30.360 especially among younger travelers, and they're not just hitting the London. 0:08:30.200 --> 0:08:31.640 And Paris of the world. 0:08:31.680 --> 0:08:35.040 They're really going to more off the beaten track destinations, 0:08:35.480 --> 0:08:39.080 destinations where there might be deals or just more unique experiences. 0:08:39.400 --> 0:08:42.760 So still very strong demand on international capacity. There has 0:08:42.760 --> 0:08:46.400 been slower to recover prices to Europe are recovering because 0:08:46.400 --> 0:08:50.360 we've seen capacity added back there. Prices trans Pacific very 0:08:50.360 --> 0:08:53.520 different story. They still remain thirty to sixty percent higher 0:08:53.800 --> 0:08:55.680 because capacity has been slow to recover there. 0:08:56.040 --> 0:08:57.920 What about when it comes to other parts of the 0:08:57.920 --> 0:09:01.200 travel experience? Hotels? I couldn't believe how expensive hotels were 0:09:01.200 --> 0:09:03.440 in the fall when Carol and I were traveling and 0:09:03.480 --> 0:09:06.000 we weren't even staying maybe I'm giving to we weren't 0:09:06.000 --> 0:09:08.800 even staying in nice hotels and like I was, what 0:09:09.280 --> 0:09:12.839 hotel one of the one remain It was not nice, 0:09:13.679 --> 0:09:16.200 but it was so I couldn't believe how expensive it was. 0:09:17.040 --> 0:09:18.800 What's it going to look like this year? 0:09:19.880 --> 0:09:23.160 You're not alone in feeling like accommodation prices have been 0:09:23.320 --> 0:09:27.080 incredibly high. They have been, and we're expecting them to 0:09:27.160 --> 0:09:30.880 stay about the same this year. If we do see improvement, 0:09:30.960 --> 0:09:33.840 it would probably be towards summer or the second half 0:09:33.880 --> 0:09:37.199 of the year. But yes, demand for travel remains high, 0:09:37.240 --> 0:09:42.040 and that means that hotel stays vacation rentals, especially in 0:09:42.080 --> 0:09:45.080 those peak markets, they're selling out, and that means that 0:09:45.080 --> 0:09:47.720 if you're not booking far enough in advance, you're probably 0:09:47.720 --> 0:09:51.640 seeing incredibly high prices. What we always recommend is for 0:09:51.720 --> 0:09:54.760 hotels in particular, if you're headed to a big city, 0:09:54.800 --> 0:09:57.680 book at the last minute. That's when those perishable rooms 0:09:57.720 --> 0:09:59.679 are going to go on sale. You're headed to a 0:09:59.760 --> 0:10:01.839 lesion your destination, you go to Miami, you're doing a 0:10:01.840 --> 0:10:04.559 spring break trip. Book that very far in advance a 0:10:04.559 --> 0:10:06.920 couple of months, because that's when prices will be lowest, 0:10:06.920 --> 0:10:10.240 when that availability is still high. 0:10:10.600 --> 0:10:11.880 What are you looking at, Carol. 0:10:11.760 --> 0:10:13.319 No, I'm just kind of close now. 0:10:13.320 --> 0:10:14.600 I'm thinking are you thinking? 0:10:15.640 --> 0:10:18.120 No, It's just interesting and I just wonder you know 0:10:18.520 --> 0:10:21.880 what you're seeing. We've got a great chart for our 0:10:21.880 --> 0:10:25.360 folks who are watching on YouTube and a streaming service. 0:10:25.400 --> 0:10:28.440 I'm just not sure. So if you're basically it says, 0:10:28.440 --> 0:10:31.360 if you're thinking about the main vacation plan you want 0:10:31.400 --> 0:10:33.080 to take in twenty twenty four, and this comes courtesy 0:10:33.080 --> 0:10:35.480 of our Bloomberg Intelligence team, if the costs exceeds your 0:10:35.480 --> 0:10:38.560 plan budget, what will you do? Twelve percent are going 0:10:38.600 --> 0:10:41.679 to look for a cheaper destination, fifteen percent are going 0:10:41.760 --> 0:10:44.160 to look I guess at attractions and maybe what they're 0:10:44.200 --> 0:10:47.160 spending there. Forty five percent will increase their budgets. O. 0:10:47.240 --> 0:10:48.000 Yeah, that's the tax. 0:10:48.120 --> 0:10:49.880 And if you're just listening to us and not watching, 0:10:50.040 --> 0:10:52.520 the forty five percent is like, you know, the possible 0:10:52.600 --> 0:10:55.680 changes of your budget exceeeds plan. The majority of people, 0:10:55.880 --> 0:10:57.960 almost the majority of people, almost half the people said 0:10:58.120 --> 0:10:58.840 they'll just increase. 0:10:58.920 --> 0:10:59.440 I manage it. 0:10:59.520 --> 0:11:02.880 Yeah that's bullish, but it's bullish. But it's also interesting 0:11:02.880 --> 0:11:05.040 when we just did a story about where if people 0:11:05.040 --> 0:11:07.079 found that they had what a ten percent bump in incomers. 0:11:07.160 --> 0:11:07.959 Yeah, they pay down debt. 0:11:07.960 --> 0:11:09.679 They're going to pay down debt. So help me. Are 0:11:09.679 --> 0:11:11.840 you talking about I don't know what are you seeing? 0:11:12.360 --> 0:11:16.560 Higher end traveler, a bigger pocketbook, lower end? Is there 0:11:16.600 --> 0:11:17.319 any differences? 0:11:18.880 --> 0:11:20.240 There are a few things happening. 0:11:20.360 --> 0:11:23.640 So our Hopper users are primarily millennial in gen Z 0:11:24.040 --> 0:11:27.080 and seventy seven percent of them say that they are 0:11:27.120 --> 0:11:29.720 going to spend the same or more on travel this year. 0:11:30.200 --> 0:11:34.800 And there's really two schools here. One is our millennial generation. 0:11:35.200 --> 0:11:38.760 They built wealth. They are coming out, many of them 0:11:38.920 --> 0:11:41.440 of a few years of savings. Those who were in 0:11:41.559 --> 0:11:45.960 advantageous positions headed into the pandemic. They are spending more 0:11:45.960 --> 0:11:48.760 on travel a larger proportion of their wealth is going 0:11:48.800 --> 0:11:53.240 towards trips vacations. They have credit cards that allow them 0:11:53.280 --> 0:11:56.200 to gain points the more they book. They are loyal 0:11:56.880 --> 0:12:00.640 So this group is absolutely spending more in traveling more. 0:12:01.000 --> 0:12:03.800 And then on the flip side, we have incredibly priced 0:12:03.800 --> 0:12:07.400 conscious travelers more on the gen Z and in what 0:12:07.400 --> 0:12:10.400 they're doing. They're taking their travel budget and they're saying, 0:12:10.440 --> 0:12:12.959 can I get two trips out of my budget from 0:12:13.120 --> 0:12:14.760 last year that might have been one trip? 0:12:15.160 --> 0:12:16.280 And we often see this. 0:12:16.480 --> 0:12:20.480 Travelers are skipping the trip to Miami and they're going 0:12:20.520 --> 0:12:22.800 to a destination in Puerto Rico that might be a 0:12:22.880 --> 0:12:26.640 whole lot less expensive and flight and in country expenses, 0:12:26.760 --> 0:12:29.200 So there is some optimization within the budget. 0:12:29.200 --> 0:12:30.360 That's absolutely happening. 0:12:30.360 --> 0:12:32.480 We see that a lot among Copper users because they're 0:12:32.600 --> 0:12:33.360 very price insitle. 0:12:33.400 --> 0:12:36.920 Okay, very briefly, we have top domestic and top international locations. 0:12:37.480 --> 0:12:40.240 Your top domestic locations. We got a list of them. 0:12:40.480 --> 0:12:43.040 We're about to show on the screen which one sticks 0:12:43.040 --> 0:12:44.360 out to you of these five. 0:12:44.160 --> 0:12:48.880 Here, I would say that Orlando is always a big one. 0:12:49.240 --> 0:12:53.200 It's popular not just for those Disney trips, but also 0:12:53.400 --> 0:12:56.680 for Port of Orlando starting on cruises, which as we know, 0:12:56.760 --> 0:12:59.680 are coming back, you know, in the last year or two. 0:13:00.320 --> 0:13:02.959 So Orlando is always a big one, in part because, 0:13:03.000 --> 0:13:06.160 no matter how much demand we see going there, prices 0:13:06.200 --> 0:13:10.839 are low. It's inaccessible and affordable place to visit and international. 0:13:10.920 --> 0:13:18.840 Your top international locations Cancun, Mexico, Dominican Republic, London, England, Rome, Italy, Tokyo, Japan. 0:13:19.720 --> 0:13:21.720 That's kind of a mixed bag. Just got about fifteen 0:13:21.760 --> 0:13:23.240 seconds left. Any thoughts on that. 0:13:24.240 --> 0:13:28.800 Those tropical destinations are inexpensive alternatives to some of those 0:13:28.840 --> 0:13:31.520 longer hauled trips. But really this year is going to 0:13:31.520 --> 0:13:34.080 be all about Tokyo and the return to Asia. 0:13:34.240 --> 0:13:35.599 Wow. That's cool to do. 0:13:36.240 --> 0:13:39.080 That's interesting. Where are you going me? 0:13:39.400 --> 0:13:42.719 Yeah, we don't have anything planned. Oh, I'll probably go 0:13:42.760 --> 0:13:43.559 to the American West. 0:13:43.760 --> 0:13:46.040 Oh that's what you said that earlier. All right, Haley Burg, 0:13:46.120 --> 0:13:48.440 lead economist at Hopper, Thank you so much. That was fun. 0:13:48.520 --> 0:13:49.280 This is Bloomberg. 0:13:52.400 --> 0:13:56.000 You're listening to the Bloomberg Business Week podcast. Catch us 0:13:56.040 --> 0:14:00.000 live weekday afternoons from three to six Easter on Bloomberg Radio, 0:14:00.240 --> 0:14:03.520 the Bloomberg Business app, and YouTube. You can also listen 0:14:03.640 --> 0:14:06.720 live on Amazon Alexa from our flagship New York station. 0:14:07.160 --> 0:14:13.439 Just say Alexa playing Bloomberg eleven thirty, I'm. 0:14:13.200 --> 0:14:19.080 Putting all my eggs in one basket, pop bit. 0:14:19.440 --> 0:14:23.480 You know, when we think about baskets of stocks. 0:14:23.040 --> 0:14:24.480 We used to think about mutual funds. 0:14:24.640 --> 0:14:26.440 We did, but alas no more. 0:14:26.880 --> 0:14:30.360 Now we think about ETFs. And as I mentioned earlier, Carol, 0:14:30.680 --> 0:14:33.120 this year is already a huge year for ETFs thanks 0:14:33.120 --> 0:14:36.480 to last week's SEC approval of eleven. 0:14:36.160 --> 0:14:39.040 This spot, well, we get approval, yefs we did, as 0:14:39.120 --> 0:14:41.600 tex sarcus, we got approval, you. 0:14:41.560 --> 0:14:44.480 Know, via tweet that ended up not being correct. I 0:14:44.520 --> 0:14:45.520 don't know if can't remember that. 0:14:45.560 --> 0:14:46.280 What a week it was. 0:14:46.720 --> 0:14:49.720 In the next day, the actual approval came. But there's 0:14:49.720 --> 0:14:53.200 so much more to ETFs than the shiny new bitcoin ETFs. 0:14:53.280 --> 0:14:53.520 Yes. 0:14:53.560 --> 0:14:56.680 Indeed, Unfortunately, the team that covers ETFs at Bloomberg Intelligence, 0:14:56.760 --> 0:15:00.600 led by senior analyst Eric baltunis who hopefully got some 0:15:00.680 --> 0:15:03.720 sleep over the weekend. Uh while that team led by 0:15:03.800 --> 0:15:07.000 Eric whittled their global list of two dozen picks down 0:15:07.080 --> 0:15:08.360 to just a handful. 0:15:08.560 --> 0:15:11.000 The story featured in the year ahead issue of BusinessWeek magazine, 0:15:11.040 --> 0:15:13.640 which is available now on newsstands on the Bloomberg terminal 0:15:13.640 --> 0:15:16.560 and at Bloomberg dot com slash BusinessWeek. This story, by 0:15:16.600 --> 0:15:21.040 the way, written none other than Bloomberg BusinessWeek editor Joel Weber. 0:15:21.320 --> 0:15:24.280 Joel's here in the Bloomberg Interactive Broker's studio with us. 0:15:24.560 --> 0:15:27.320 Also with us is Eric Belchunis, senior ETF analyst for 0:15:27.320 --> 0:15:30.240 Bloomberg Intelligence. He joins us on zoom in Philadelphia. 0:15:30.400 --> 0:15:33.560 Joel, If I you know how to write a story. 0:15:33.200 --> 0:15:33.840 It's amazing. 0:15:33.920 --> 0:15:35.240 Oh come on, you have time. 0:15:35.360 --> 0:15:37.040 Jeez, you have time for a story. 0:15:37.240 --> 0:15:39.160 Oh come on. So Eric and I co host this 0:15:39.240 --> 0:15:41.080 podcast and we've been doing it for years. 0:15:42.080 --> 0:15:43.360 Trillions You love ETF. 0:15:43.600 --> 0:15:46.280 We you know, it's just this thing. It's an Eric. 0:15:46.400 --> 0:15:49.200 I think it's Eric's theory of everything. Like if you 0:15:49.240 --> 0:15:51.480 could kind of like put it, put the universe into 0:15:51.560 --> 0:15:55.560 one thing, the ETF would explain Eric and investment, investing 0:15:55.560 --> 0:15:58.840 in all kinds of other stuff. That's what working on 0:15:58.880 --> 0:16:00.880 trillions with him for me, he has felt like and 0:16:00.960 --> 0:16:03.480 so it becomes a really interesting way to kind of 0:16:03.520 --> 0:16:07.000 I think, look at finance and investing and there are 0:16:07.960 --> 0:16:10.560 there's just more and more interest in it. We named 0:16:10.560 --> 0:16:14.040 it trillions because every year there's more trillions that go 0:16:14.120 --> 0:16:17.240 into these things. You can still talk about mutual funds. 0:16:17.560 --> 0:16:21.120 We actually make time occasionally on trillions to do so, 0:16:22.800 --> 0:16:25.440 and we also do this episode every year that we 0:16:25.520 --> 0:16:28.200 have not had a chance to talk about yet. And 0:16:28.600 --> 0:16:30.880 if you're if you'd like to listen to the whole thing, 0:16:31.120 --> 0:16:34.600 you can do so wherever you listen to podcasts. But 0:16:34.840 --> 0:16:37.960 for the year ahead issue, I took that conversation and 0:16:38.040 --> 0:16:40.960 kind of whittled it down to just a handful. And 0:16:41.080 --> 0:16:43.680 while we were first talking about it, you know, we 0:16:43.720 --> 0:16:47.320 didn't have an approved ETF for bitcoin, for spot bitcoin, 0:16:47.720 --> 0:16:49.560 and then last week happened and it was just like 0:16:49.600 --> 0:16:51.320 we got to talk about this with Eric a little 0:16:51.360 --> 0:16:52.280 bit as well as some of. 0:16:52.240 --> 0:16:52.920 These other ones. 0:16:53.120 --> 0:16:56.320 So Eric, you I quote you in the story because 0:16:56.360 --> 0:16:59.840 you say, by what march. By the end of March, 0:17:00.000 --> 0:17:02.280 we're gonna know who the winner of the race is. 0:17:03.200 --> 0:17:05.680 Sec let a lot of ETFs out at first, who's 0:17:05.760 --> 0:17:08.520 the early who's got the early lead? 0:17:09.600 --> 0:17:12.480 Okay, So I've separated the ten launches into what I 0:17:12.520 --> 0:17:18.280 call the newborn nine and GBTC because it's different being 0:17:18.320 --> 0:17:20.719 a newborn in the ETF world, Joel, As you know, 0:17:20.840 --> 0:17:23.920 we call the terodome. It's a tough industry, so being 0:17:23.960 --> 0:17:27.080 a newborn is a different playing field. GBTC was a 0:17:27.119 --> 0:17:30.639 trust that existed, had thirty billion dollars in assets in 0:17:30.640 --> 0:17:32.800 a bunch of volume, and it converted into an ETF. 0:17:32.840 --> 0:17:36.280 So it came over with like ammunition, right, and all 0:17:36.359 --> 0:17:39.640 kinds of supplies into the terodome. So if you if 0:17:39.680 --> 0:17:41.679 you look at all of them, GBTC still has the 0:17:41.680 --> 0:17:45.680 most assets and volume, but of the newborn nine, black Rock, 0:17:45.880 --> 0:17:48.439 no shocker, is in the lead. Fidelity a close second 0:17:48.840 --> 0:17:51.560 arc bit wise, you know, jockeying for the third position. 0:17:52.119 --> 0:17:54.080 But a lot of them are doing well, Like if 0:17:54.080 --> 0:17:55.640 you look at the volume of even like the least 0:17:55.680 --> 0:17:58.320 traded one, which I believe is the Wisdom Tree, it 0:17:58.600 --> 0:18:01.439 did six ten million dollars in the first two days. 0:18:01.840 --> 0:18:04.200 That would be a big hit, a big day for 0:18:04.320 --> 0:18:07.800 any regular new ETF. So a lot of them has 0:18:07.840 --> 0:18:10.280 traded over ten billion dollars in the first three days. 0:18:10.640 --> 0:18:15.199 Unbelievable action in these ETFs. But Blackrock looking like the 0:18:15.280 --> 0:18:19.320 early favorite to be sort of the GLD of bitcoin, 0:18:19.400 --> 0:18:23.479 but it's got to overtake GBTC, which again came in 0:18:23.520 --> 0:18:25.679 with all this assets and volume and still has. 0:18:25.560 --> 0:18:29.040 More there's a story though on the Bloomberg that talks 0:18:29.080 --> 0:18:33.080 about investors pulling over half a billion dollars from the 0:18:33.119 --> 0:18:36.719 Gray Scale Bitcoin Truster in the first days of trading 0:18:36.760 --> 0:18:38.960 as an ATF. Is that significant or how do you 0:18:39.000 --> 0:18:39.320 read that? 0:18:39.480 --> 0:18:39.680 Eric? 0:18:40.440 --> 0:18:43.879 Yeah, so this is a big situation. So the Newborn nine, 0:18:43.960 --> 0:18:47.040 all the volume is influenced pretty much because there's nobody 0:18:47.040 --> 0:18:49.840 who shares to sell because they didn't exist, right. So 0:18:50.280 --> 0:18:53.040 the GBTC, however, are people who probably want to get out. 0:18:53.080 --> 0:18:54.440 Now that said, you have to take a tax sit 0:18:54.440 --> 0:18:55.960 if you want to get out. So I don't think 0:18:56.040 --> 0:18:58.399 all twenty six billion as it stands now we're going 0:18:58.440 --> 0:19:00.160 to get out, but there could be some people who 0:19:00.160 --> 0:19:03.440 want to get out take the tax hit. Now. It's 0:19:03.480 --> 0:19:05.000 a long story short, but it can't go right into 0:19:05.040 --> 0:19:06.320 the new ETF. So that's why I think a lot 0:19:06.320 --> 0:19:09.480 of the new funds into the newborns are new money, 0:19:09.880 --> 0:19:13.400 some maybe GBTC refugees. But over time, I do believe 0:19:13.480 --> 0:19:16.359 GBTC will be like a slowly melting ice cube and 0:19:16.440 --> 0:19:18.920 the Newborn nine will build up and at some point 0:19:18.960 --> 0:19:21.840 they'll probably be it. They'll both settle a little bit. 0:19:22.240 --> 0:19:24.240 But there is an interesting dynamic of play that you 0:19:24.280 --> 0:19:26.840 don't normally see. And so if I had to guess, 0:19:26.840 --> 0:19:29.879 I'd say gbtcc's you know, four or five billion of 0:19:29.880 --> 0:19:32.320 outflows in the first couple of months and then kind 0:19:32.320 --> 0:19:32.960 of settles down. 0:19:33.080 --> 0:19:35.679 Isn't it bigger than an ice cube? Though, it's like 0:19:35.760 --> 0:19:36.720 more like a glacier. 0:19:37.600 --> 0:19:39.959 It's a glacier. Yeah, twenty six billion. I mean I 0:19:40.000 --> 0:19:42.800 believe that makes GBTC like the top three biggest holder 0:19:42.840 --> 0:19:47.040 of bitcoin on Earth. So yeah, it's a total glacier 0:19:48.440 --> 0:19:49.919 glacier change. 0:19:50.040 --> 0:19:58.240 Yeah, yeah, hey, sorry, take it over the show, guys. 0:20:00.080 --> 0:20:02.520 Podcast, This is a trillion podcast. 0:20:02.880 --> 0:20:05.080 Eric, I got a question. I'm curious if you look 0:20:05.119 --> 0:20:10.080 at the eleven different spot bait, cooinytfs, should they all 0:20:10.320 --> 0:20:13.640 have the exact same performance every single day because they're 0:20:13.680 --> 0:20:18.000 tracking the exact same thing like Voo and Spy for example, 0:20:18.040 --> 0:20:20.199 that track the S and P five hundred. Shouldn't they 0:20:20.200 --> 0:20:21.159 have the same performance? 0:20:22.000 --> 0:20:24.159 Yeah, it should be very close. The only thing you 0:20:24.240 --> 0:20:26.399 might find difference this is what the premium discount the 0:20:26.400 --> 0:20:28.800 price to the NAV. There's been like I don't know, 0:20:28.800 --> 0:20:32.080 a thirty basis point swing between them. But again, these 0:20:32.080 --> 0:20:35.520 are minor points. We were a little worried that the 0:20:35.640 --> 0:20:38.120 price in the NAB would be a little further apart, 0:20:38.160 --> 0:20:41.800 which is a sign that arbitrage and the mechanics of 0:20:41.880 --> 0:20:44.119 the ETF were more difficult because you can only do 0:20:44.160 --> 0:20:48.320 cash creations. Long story short, everything looks pretty good. So 0:20:48.640 --> 0:20:51.600 the dollars you buy it at, like I think, ib 0:20:51.840 --> 0:20:54.520 ibit start at twenty five dollars. Another one might be 0:20:54.520 --> 0:20:57.679 trading at fifty, but the percentage day on each that 0:20:57.720 --> 0:21:00.960