WEBVTT - Big Tech Dominance May Trigger New Antitrust Legislation: Strauss 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.560 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.120 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Time 0:00:33.159 --> 0:00:36.040 now to learn a little bit more about free cash flow, 0:00:36.159 --> 0:00:39.839 value investing, and artificial intelligence. We have David Pearl. He 0:00:39.920 --> 0:00:43.479 is the co chief investment officer of Epic Investment Partners, 0:00:43.520 --> 0:00:47.000 helping to manage more than forty seven billion dollars in 0:00:47.040 --> 0:00:51.240 a variety of funds, and I believe also well. First, David, 0:00:51.240 --> 0:00:53.240 thanks very much for coming into the studio. Thanks for 0:00:53.280 --> 0:00:56.280 having them. I just should mention overall t D Bank, 0:00:56.400 --> 0:00:59.640 I think is the big parent companies that correct Yes, okay, 0:00:59.680 --> 0:01:02.760 just so set that stage. I want you to offer 0:01:02.840 --> 0:01:05.840 this idea, uh and analyze it for us. That free 0:01:05.920 --> 0:01:10.240 cash flow is a very important metric, a very important 0:01:10.280 --> 0:01:14.880 bit of information that may not be reflected necessarily in 0:01:14.959 --> 0:01:17.960 the earnings of a company. And I'm wondering if you 0:01:18.000 --> 0:01:20.840 could explain why that would be so and why that 0:01:20.959 --> 0:01:25.040 is attractive. Right, when you make an investment in an equity, 0:01:25.840 --> 0:01:28.680 you own a company. The company gives you your return 0:01:28.800 --> 0:01:31.560 through only three things. It generates profit, and that's what 0:01:31.680 --> 0:01:34.360 we're going to talk about free cash flow. It pays 0:01:34.400 --> 0:01:37.080 you back some of the money. That's return of capital, 0:01:37.120 --> 0:01:39.640 dividends and share buy back and even debt pay down, 0:01:40.160 --> 0:01:43.480 and then valuation. And you know those three are the 0:01:43.520 --> 0:01:47.600 only determinants of return. Uh. The markets for the last 0:01:47.920 --> 0:01:51.240 five years up until this year were driven by pe 0:01:51.320 --> 0:01:56.080 expansion evaluation, not by the growth of profits, and only 0:01:56.360 --> 0:01:59.280 by a small amount. And this is surprising to people 0:01:59.280 --> 0:02:01.760 about dividends. Dividends have been four percent a year, but 0:02:01.800 --> 0:02:04.880 the markets were up double digits every year, so the 0:02:04.880 --> 0:02:08.040 rest of it was valuation. This has started to change 0:02:08.120 --> 0:02:11.079 now and it is a profit driven market, which is 0:02:11.160 --> 0:02:14.280 better for active managers because what we do is trying 0:02:14.280 --> 0:02:16.560 to find the companies that are growing, to grow profits 0:02:16.639 --> 0:02:20.639 faster than their competitors, and use the money more wisely, 0:02:20.680 --> 0:02:24.240 including share by backward growing the dividend, and p will 0:02:24.280 --> 0:02:28.480 be less of the metric that determines return going forward, 0:02:28.520 --> 0:02:31.480 because as rates go up, valuations are liable to be 0:02:31.560 --> 0:02:34.120 flat or even down. But the good news is if 0:02:34.160 --> 0:02:37.680 the economy is growing, you're going to find earnings growth. Now, 0:02:37.720 --> 0:02:40.480 the difference between earnings and profits, this is the question. 0:02:41.480 --> 0:02:45.880 Accounting is a game. People think it's like physics, it's 0:02:45.880 --> 0:02:48.560 a law of nature, can't be changed. It's not so. 0:02:48.639 --> 0:02:51.320 As long as everyone plays by the same rules. You 0:02:51.360 --> 0:02:55.600 can compare company A to company B. Well, company A 0:02:55.840 --> 0:02:58.760 changes the rules every year. That's more than half the 0:02:58.760 --> 0:03:04.680 companies that are publish don't use standard accounting UH and 0:03:04.880 --> 0:03:08.280 many many many more UH. And what they do is 0:03:08.320 --> 0:03:11.800 call it pro forma earnings adjusted earnings. We call it 0:03:11.840 --> 0:03:15.240 earnings before expenses. Because they throw out anything they feel like, 0:03:15.600 --> 0:03:18.080 and they change it every year. You can't compare even 0:03:18.120 --> 0:03:23.040 their own history anymore. Whereas cash much harder to manipulate. 0:03:23.280 --> 0:03:25.600 You can sort of do it, but it's much harder. 0:03:26.160 --> 0:03:28.520 And if you've ever worked in a company as a 0:03:28.560 --> 0:03:31.959 treasurer bookkeeper, companies run on cash. That's how you pay 0:03:32.000 --> 0:03:36.160 everyone's salary, pay the rent, build a factory. Once a quarter. 0:03:36.360 --> 0:03:40.480 They translate from cash to this game of accounting and earnings. 0:03:40.720 --> 0:03:42.480 So companies say we're going to do a dollar and 0:03:42.520 --> 0:03:44.560 everyone's happy if they do a dollar five and they 0:03:44.560 --> 0:03:48.200 don't care how it happened. Okay, So so cash is 0:03:48.240 --> 0:03:51.160 the dependable metric to look at on balance sheets. I 0:03:51.160 --> 0:03:52.960 want to get to the point that you made saying 0:03:53.000 --> 0:03:57.160 that active management will be increasing really relevant going forward. 0:03:57.160 --> 0:04:00.760 Not everybody agrees with you. Uh. Certainly, investors have been 0:04:00.840 --> 0:04:04.280 voting with their money and pouring into index funds. David Einhorn, 0:04:04.640 --> 0:04:07.560 who is the founder of green Light capit All, said 0:04:07.600 --> 0:04:10.800 earlier this year value investing may be dead, and Amazon 0:04:10.800 --> 0:04:14.120 and tests like killed it. Meanwhile, you have, for example, 0:04:14.160 --> 0:04:17.920 Mainstay Epoch Global Equity Yield Fund, which is a fund 0:04:17.960 --> 0:04:22.159 that is co managed by your your firm, and it 0:04:22.360 --> 0:04:26.480 has an expense ratio of uh, you know, pot six percent, 0:04:26.640 --> 0:04:29.720 which is a pretty significant one. And how I mean 0:04:30.120 --> 0:04:34.800 our our investors buying what you're saying. Yeah again, during 0:04:34.800 --> 0:04:37.840 the period of quantitative easing over the last five years, 0:04:37.960 --> 0:04:42.000 returns were driven by valuation, and that is hard for 0:04:42.120 --> 0:04:44.560 most active managers because what we're trying to do is 0:04:44.560 --> 0:04:47.400 find a company that's going to grow faster, grow earnings faster, 0:04:47.720 --> 0:04:49.880 be at a discounted valuation. And what was happening is 0:04:49.960 --> 0:04:52.480 the whole boat, the tide was lifting all the boats, 0:04:52.920 --> 0:04:55.720 and index funds were actually making it worse because they 0:04:55.960 --> 0:04:59.200 their market cap weighted, so they're buying the largest stocks 0:04:59.400 --> 0:05:03.640 which looked more and more overvalued. And the last thing 0:05:03.760 --> 0:05:06.880 that happened the perfect storm was that when you bring 0:05:06.960 --> 0:05:09.440 rates to zero, people who would have kept their money 0:05:09.440 --> 0:05:12.240 in the bank or in bonds were forced by equities, 0:05:12.240 --> 0:05:15.160 and they only wanted equities that acted like bonds that 0:05:15.200 --> 0:05:18.240 paid big dividends, which happened to be the largest ones. 0:05:18.760 --> 0:05:23.080 So managers who are looking for the better stocks were 0:05:23.160 --> 0:05:27.080 under owning the biggest names, which kept getting bigger and bigger. 0:05:27.440 --> 0:05:30.840 Now what's changed is rates are beginning to go up. 0:05:30.960 --> 0:05:35.000 That is putting a crimp on pe expansion correlations. If 0:05:35.000 --> 0:05:38.839 you look at the market this year, correlations have really widened, 0:05:38.880 --> 0:05:41.120 meaning that you know, the difference between a good stock 0:05:41.120 --> 0:05:43.520 and a bad stock is a big difference. Stock picking 0:05:43.600 --> 0:05:46.400 can work this year, and actually active managers are beginning 0:05:46.400 --> 0:05:49.760 to outperform this year. This has been clearly a better year. 0:05:49.800 --> 0:05:51.600 And I would have used the word frustrating over the 0:05:51.680 --> 0:05:54.640 last few years because stocks that I thought were overvalued. 0:05:54.680 --> 0:05:57.240 Take a utility or you know it has a four 0:05:57.279 --> 0:06:00.960 percent dividend, but can't really beat anyone's not Bird's regulated 0:06:01.279 --> 0:06:04.360 went to all time highs, and they were trading at 0:06:04.360 --> 0:06:06.680 a huge premium to a market that had gone from 0:06:06.680 --> 0:06:11.719 twelve times earnings to nineteen. Utilities were so so it 0:06:11.920 --> 0:06:15.080 was a terrible environment for stock picking. We're finally moving 0:06:15.120 --> 0:06:18.560 to one where your return is going to be determined 0:06:18.600 --> 0:06:21.880 by earnings or in our case, free cash flow and 0:06:22.000 --> 0:06:24.200 the return of cap. David Pearl, thank you so much 0:06:24.240 --> 0:06:26.600 for joining as David Pearl co Chief investment Officer of 0:06:26.680 --> 0:06:31.800 Epoch Investment Partners, which overseas forty seven point two billion dollars. 0:06:52.160 --> 0:06:55.600 The rise in Amazon's market cap this year alone is 0:06:55.640 --> 0:06:58.640 bigger than the combined total market values of virtually every 0:06:58.760 --> 0:07:02.120 familiar chain that is to be found in US malls. 0:07:02.360 --> 0:07:06.400 Jeff Bezos, the founder of Amazon dot Com, His wealth 0:07:06.680 --> 0:07:10.440 searched past one hundred billion dollars on Friday. Is Amazon 0:07:10.520 --> 0:07:14.320 dot Com benefited yet again from another shopping holiday, at 0:07:14.360 --> 0:07:16.760 this time Black Friday to day Cyber Monday. Here to 0:07:16.800 --> 0:07:21.040 talk about the implications of the rapid rise of these 0:07:21.160 --> 0:07:25.480 big tech companies and uh the possibility or uh sort 0:07:25.480 --> 0:07:28.400 of rationale behind breaking them up is Steven Strauss He 0:07:28.640 --> 0:07:31.480 is the John Weinberg Goldman Sacks Visiting Professor at the 0:07:31.480 --> 0:07:35.560 Woodrow Wilson School at Princeton University. He is joining us 0:07:35.640 --> 0:07:38.160 from our Boston studio today. Uh, Stephen, thank you so 0:07:38.240 --> 0:07:40.280 much for joining us. I just want to get first 0:07:40.280 --> 0:07:43.120 of all, your take. Do you think that there is 0:07:43.160 --> 0:07:49.400 a sufficient rationale for breaking up companies like Amazon dot Com? Um? 0:07:49.440 --> 0:07:52.120 I think there's a sufficient rational to look at what 0:07:52.320 --> 0:07:57.240 needs to be done about them. Um. Amazon, Alphabet, which 0:07:57.240 --> 0:08:01.400 is apparent to Google, Apple, Facebook, They basically have a 0:08:01.400 --> 0:08:03.480 few things in common. They are all in high fixed 0:08:03.520 --> 0:08:06.280 cost businesses. If you want to go after you know, 0:08:06.360 --> 0:08:10.280 Facebook or Google, you're literally talking about spending billions. Um. 0:08:10.360 --> 0:08:13.200 I think when Microsoft want to enter search, it was 0:08:13.240 --> 0:08:17.520 a five billion dollar fixed cost investment upfront. These are 0:08:17.560 --> 0:08:20.720 businesses with very low marginal costs. I mean the actual 0:08:20.760 --> 0:08:26.240 cost when you log into Facebook or use um, you 0:08:26.280 --> 0:08:29.800 know Alphabet or even Amazon is almost nothing to the 0:08:29.800 --> 0:08:32.840 company is just server time. So there's very low marginal costs. 0:08:33.280 --> 0:08:36.120 And there's network effects. Um. You know you want to 0:08:36.200 --> 0:08:40.560 be part of a community, you want to share on Facebook, Uh, 0:08:40.720 --> 0:08:42.560 because that's where other people are sharing and all of 0:08:42.559 --> 0:08:46.280 these companies have to varying degrees those three characteristics, and 0:08:46.320 --> 0:08:49.360 those are the classic recipe for a monopoly or an oligopoly. 0:08:49.440 --> 0:08:52.319 And it's not just their size and profitability. I mean, 0:08:52.360 --> 0:08:55.920 Google has been on sevent share of the search market, 0:08:56.880 --> 0:09:01.920 um Amazon of the incremental sales growth each year, and 0:09:02.000 --> 0:09:05.640 online sales goes to Amazon. They've also got something like 0:09:05.640 --> 0:09:09.840 a by revenues share of the book sales market and 0:09:09.880 --> 0:09:12.560 so on for this group. So you know, the classic 0:09:12.640 --> 0:09:16.720 recipe for dealing with that is break it up regulated 0:09:16.760 --> 0:09:20.480 as a platform or in some way force a leving 0:09:20.760 --> 0:09:25.079 level playing field. Exactly what the mix of solutions UH 0:09:25.360 --> 0:09:27.560 is or how it should be approached, I'm not as sure, 0:09:27.600 --> 0:09:30.120 but it certainly needs to be, you know, focus of 0:09:30.240 --> 0:09:33.880 legislation and focus of regulatory work, Professor Strauss. I'm just 0:09:33.880 --> 0:09:36.839 gonna throw a couple of legal UH statutes at you. 0:09:36.920 --> 0:09:40.959 The Interstate Commerce Act, the Sherman Any Trust Act, the 0:09:41.040 --> 0:09:46.240 Clayton Any Trust Act, Robinson Patment Seller to Father. We 0:09:46.360 --> 0:09:50.040 have a lot of laws that deal with any trust situations. 0:09:50.040 --> 0:09:52.480 And I'm wondering, do you believe that the laws as 0:09:52.520 --> 0:09:57.679 they exist offer the government the power and authority to 0:09:58.240 --> 0:10:02.440 do whatever it is, you might suggest, store alleviate the situation, 0:10:02.600 --> 0:10:04.720 or is it is something in the legal framework that 0:10:04.760 --> 0:10:08.960 needs to be changed. Um, I'm almost well first among 0:10:09.040 --> 0:10:11.559 my I have a number of different qualifications of degrees. 0:10:11.880 --> 0:10:15.480 But how how let me just give you more of 0:10:15.520 --> 0:10:20.400 a you know, a public policy person's perspective. There's probably 0:10:20.440 --> 0:10:22.880 gonna be a need for new legislation or at least 0:10:22.880 --> 0:10:26.439 new ways of thinking about this. The current classic view 0:10:26.520 --> 0:10:30.080 of antitrust in the US is so long as sort 0:10:30.080 --> 0:10:33.080 of in the short intermediate term, the consumer is benefiting, 0:10:33.640 --> 0:10:38.000 the antitrust authorities don't really get involved. And since most 0:10:38.040 --> 0:10:41.160 of these services are offering things to the public for 0:10:41.200 --> 0:10:45.360 free or at very low prices, um, there isn't that 0:10:45.480 --> 0:10:49.320 much of an interest. Now again you get into the 0:10:49.360 --> 0:10:53.280 question of what is the public who is benefiting? Uh. 0:10:53.360 --> 0:10:55.640 If you look at the media landscape, for example, there's 0:10:55.640 --> 0:10:59.600 a fairly strong argument that you know, Facebook, Google, et 0:10:59.679 --> 0:11:04.080 cetera ability to distribute news media and content online. Um 0:11:04.160 --> 0:11:07.599 that basically the diverting advertising revenues that were used to 0:11:07.640 --> 0:11:09.640 be going to newspapers used to be going to news 0:11:09.679 --> 0:11:14.119 media to themselves. That's probably one avenue for an antitrust 0:11:14.120 --> 0:11:17.520 approach saying you know that this other industries being damaged. 0:11:18.440 --> 0:11:22.680 There's already been one successful case of litigation um. It 0:11:22.720 --> 0:11:25.360 was I believe Apple and Google had entered into a 0:11:25.400 --> 0:11:29.240 collusive agreement to try and to press wages in Silicon Valley, 0:11:29.360 --> 0:11:31.680 that they had agreed not to poach each other, and 0:11:31.720 --> 0:11:34.080 they were challenged by that already on the Justice Department. 0:11:34.080 --> 0:11:37.840 By the Justice Department had to settle. In Europe, Google 0:11:37.880 --> 0:11:40.440 has paid about two point four billion dollars in an 0:11:40.440 --> 0:11:45.240 antitrust um challenge. So there are certainly things you can 0:11:45.280 --> 0:11:47.720 do under the existing frameworks, but I wouldn't be surprised 0:11:47.760 --> 0:11:50.600 if new frameworks need to be developed. Stephen, have you 0:11:51.000 --> 0:12:00.640 had any conversations with public policymakers about yes, I completely sure. 0:12:00.640 --> 0:12:04.000 I want to say who or what? Mean? Yeah? I 0:12:04.000 --> 0:12:07.320 mean my point is, I mean, is this something that 0:12:08.000 --> 0:12:11.960 policymakers are actively thinking about or is this something that 0:12:12.520 --> 0:12:14.760 people sort of nervously whispered to one another if they're 0:12:14.760 --> 0:12:17.360 invested in these companies, and that's sort of you know, 0:12:17.480 --> 0:12:20.280 argue if their investors in the brick and mortar companies 0:12:21.280 --> 0:12:24.280 someplace in between. With my answer, I mean, one of 0:12:24.280 --> 0:12:27.800 the problems we go off on a whole different discussion 0:12:27.800 --> 0:12:31.240 about dysfunction in Congress. But one of the challenges you've 0:12:31.240 --> 0:12:32.960 currently got at this point, I would say, is a 0:12:32.960 --> 0:12:36.120 bit of overload in Washington, d C. And just getting 0:12:36.120 --> 0:12:40.199 people's banned with Uh. Sure you're aware FCC has come 0:12:40.200 --> 0:12:42.839 out with or is trying to come out with new 0:12:42.920 --> 0:12:45.720 rules doing away with that neutrality. We could have a 0:12:45.720 --> 0:12:47.360 separate debate and one of that's a good idea or 0:12:47.360 --> 0:12:49.560 a bad idea, But that's absorbing a using amount of 0:12:49.559 --> 0:12:53.280 bandwidth just in terms of people's ability to think about issues. 0:12:53.920 --> 0:12:58.640 You know, more generally, you've got very substantial changes being 0:12:58.640 --> 0:13:01.680 proposed to the tax code. So, yes, this is on 0:13:01.720 --> 0:13:06.800 people's radar screens. I mean, certainly it's there, but you know, 0:13:06.840 --> 0:13:09.160 to the extent that you want to get anyone in 0:13:09.240 --> 0:13:12.240 Congress to think about it, you know, there are twenty 0:13:12.280 --> 0:13:15.640 seven other crises at the moment which are ahead of it. Uh. 0:13:15.720 --> 0:13:19.880 What's the expression the urgent crowds out the important? Well, 0:13:19.920 --> 0:13:22.599 I mean I guess that the next question is is 0:13:22.640 --> 0:13:24.600 there a point of no return? I mean, is there 0:13:24.640 --> 0:13:26.600 some kind of urgency to this matter or is it 0:13:26.679 --> 0:13:29.199 just sort of hanging out? There is something to address 0:13:29.200 --> 0:13:33.360 at some point someday. Maybe I'm not a believer that much. 0:13:33.400 --> 0:13:35.360 In the otherit you get to points of no return. 0:13:37.000 --> 0:13:39.439 I mean the h and by the way, interesting analog 0:13:39.559 --> 0:13:42.400 is sort of the late seventies and early eighties, a 0:13:42.520 --> 0:13:46.440 number of factors came together. IBM was challenged as monopoly. 0:13:47.200 --> 0:13:49.719 Uh in the sale of mainframe computers, A T and 0:13:49.800 --> 0:13:52.719 T was broken up. And you know, the A T 0:13:52.880 --> 0:13:56.040 and T monopoly had lasted, you know, quasi monopoly had 0:13:56.120 --> 0:14:00.960 lasted seventy or eighty years. UM, so it maybe a 0:14:00.960 --> 0:14:03.200 while before this hits, you know, the boiling point and 0:14:03.240 --> 0:14:06.800 people focus, Uh may not. And I just flagged that. 0:14:06.840 --> 0:14:08.520 You know, one of the advantage of breaking up these 0:14:08.559 --> 0:14:11.840 companies is it may stimulate a lot of entrepreneurship, a 0:14:11.880 --> 0:14:14.520 lot of opportunities. I mean. One of the issues at 0:14:14.559 --> 0:14:19.000 this point with you know, Facebook or Google or Amazon, 0:14:19.760 --> 0:14:21.840 it's the extent that you try to challenge them. If 0:14:21.840 --> 0:14:24.680 you're a tech entrepreneur, you are on a real risk 0:14:24.760 --> 0:14:27.480 that if you don't sell out to them, Uh, they're 0:14:27.480 --> 0:14:29.920 simply going to drive you out of business, because you know, 0:14:29.960 --> 0:14:33.640 they have enough money to undercut and over and outspend 0:14:33.720 --> 0:14:36.840 just about any competitor. Thanks very much for joining us. 0:14:36.880 --> 0:14:41.160 Steven Strauss is the John Weinberg Goldman Sachs Visiting Professor 0:14:41.320 --> 0:14:45.120 at the Woodrow Wilson School of International Affairs and Public 0:14:45.160 --> 0:15:13.040 Policy at Princeton University. Well, the bitcoin curve has just 0:15:13.320 --> 0:15:20.240 gone vertical. Bitcoin up almost just so far today. Here 0:15:20.280 --> 0:15:22.360 to talk about what it is that we're seeing. Here 0:15:22.400 --> 0:15:25.280 is Chris Perniski, partner at Placehold, our an advisor to 0:15:25.360 --> 0:15:30.120 our investment management, also author of a new early out book, 0:15:30.200 --> 0:15:35.480 Crypto Assets, The Innovative Investors Guide to Bitcoin and Beyond. Chris, 0:15:35.560 --> 0:15:37.920 thank you so much for joining us. I want to 0:15:37.960 --> 0:15:40.600 just start by asking what are we seeing right now 0:15:40.640 --> 0:15:43.680 with respect to the action in bitcoin? Is this mass 0:15:43.680 --> 0:15:48.440 speculation or real money flowing into the asset class. Well, 0:15:48.480 --> 0:15:51.320 we're definitely seeing a lot of activity, and I think 0:15:51.400 --> 0:15:55.920 to quantify that activity it's best to look at how 0:15:56.040 --> 0:15:59.880 much new fiat currency is slowing into the bitcoin ecast 0:15:59.880 --> 0:16:04.480 of some versus how much is the network value, which 0:16:04.560 --> 0:16:07.560 which many people think of as the market capitalization is increasing. 0:16:08.080 --> 0:16:11.359 So we know over the last month, bitcoin has appreciated 0:16:11.440 --> 0:16:14.360 roughly sixty billion in total value. So a month ago 0:16:14.480 --> 0:16:17.360 it was at a hundred billion, and today it's around 0:16:17.400 --> 0:16:21.120 a hundred sixty billion. Uh So then we have to ask, well, 0:16:21.560 --> 0:16:24.680 how how much of that is is new dollars? And 0:16:24.720 --> 0:16:26.440 so if we look at coin base, one of the 0:16:26.560 --> 0:16:31.000 largest retail platforms where people can buy new bitcoin, they're 0:16:31.040 --> 0:16:34.240 adding roughly a hundred twenty five thousand new users a day. 0:16:34.720 --> 0:16:37.040 Uh If you assume, you know, that's one fourth of 0:16:37.080 --> 0:16:39.840 the global totals, then we would have roughly five hundred 0:16:39.840 --> 0:16:43.600 thousand new bitcoin users a day. And if we assume 0:16:43.720 --> 0:16:46.880 they buy roughly, say a hundred thousand per new user, 0:16:47.200 --> 0:16:50.600 then over thirty days, that would suggest fifteen billion new 0:16:50.680 --> 0:16:55.240 dollars have entered the bitcoin ecosystem over the last thirty days. 0:16:55.480 --> 0:16:59.840 And that doesn't even account for institutional Chris, it's always 0:16:59.840 --> 0:17:02.080 go to speak with you, and I just want to 0:17:02.080 --> 0:17:06.439 reference your book Crypto Assets, The Innovator Innovative Investors Guide 0:17:06.480 --> 0:17:09.280 to a Bitcoin and Beyond. Because if you look on Amazon, 0:17:09.400 --> 0:17:12.560 it says on the one hand, it's temporarily out of stock. 0:17:12.680 --> 0:17:14.639 Yet if you want the hardcover it will cost you 0:17:14.760 --> 0:17:17.960 twenty five. The kindle version is fifteen. You can get 0:17:17.960 --> 0:17:21.000 a collectible version of the book for over a thousand dollars. 0:17:21.000 --> 0:17:23.439 My point being that you have all of these different 0:17:23.560 --> 0:17:29.320 suppliers offering a product at various prices. Is that similar 0:17:29.359 --> 0:17:32.719 to what bitcoin could experience? Because if you don't have 0:17:32.760 --> 0:17:36.000 any central clearing, how do you know or how does 0:17:36.040 --> 0:17:39.359 any buyer know that the person that just sold you 0:17:39.480 --> 0:17:44.480 the asset will buy it back for a similar price. Well, 0:17:44.560 --> 0:17:46.800 it's interesting you mentioned the book because there has been 0:17:46.800 --> 0:17:50.000 an aftermarket for it UM, which is interesting in and 0:17:50.000 --> 0:17:53.080 of itself. It shows there's a uh, definitely a thirst 0:17:53.080 --> 0:17:56.320 for knowledge. In terms of the bitcoin markets, you know 0:17:56.400 --> 0:17:59.560 there are you can think of the different exchanges as 0:17:59.640 --> 0:18:03.160 some way isolated liquidity pulse UM. But if you if 0:18:03.160 --> 0:18:06.360 you look globally UM, because you know there are over 0:18:06.400 --> 0:18:10.240 fifty exchanges globally that trade seven three sixty five days 0:18:10.240 --> 0:18:14.440 a year UM, there are some arbitrary some some arbitrage opportunities, 0:18:14.720 --> 0:18:17.600 But as more and more professional market makers come in, 0:18:17.960 --> 0:18:21.080 we're seeing some of those opportunities get squashed. So I 0:18:21.080 --> 0:18:23.840 would I would think of it as UM still a 0:18:23.840 --> 0:18:27.199 somewhat immature market, but we're definitely seeing a tightening of 0:18:27.200 --> 0:18:31.320 the spreads across all the different exchanges. So what could 0:18:31.440 --> 0:18:35.240 happen to sort of puncture this rally. Considering the fact 0:18:35.320 --> 0:18:38.439 that so many people are calling it a massive bubble, 0:18:40.440 --> 0:18:43.280 I think that, UM, you know, there's there's any number 0:18:43.320 --> 0:18:46.600 of things that could happen UM and learning from from 0:18:46.640 --> 0:18:51.040 the past. You know, in late we also had a 0:18:51.080 --> 0:18:53.679 similar ascent that was the first time bit clan crossed 0:18:53.720 --> 0:18:57.520 a thousand dollars UM. Following that ascent, there was a 0:18:57.520 --> 0:19:00.880 big hack on an exchange called mount Box, which had 0:19:00.920 --> 0:19:04.320 nothing to do with the underlying bitcoin protocol that wasn't compromised. 0:19:04.320 --> 0:19:07.560 It was just a poorly run exchange that was compromised 0:19:07.880 --> 0:19:10.520 that threw people off. At that time, there was also 0:19:10.600 --> 0:19:14.480 commentary from from China around bitcoin not being a real 0:19:14.520 --> 0:19:18.560 currency with real meaning in in you know, we've seen 0:19:18.600 --> 0:19:22.200 different scares. We've seen a few small hacks. We've seen 0:19:22.359 --> 0:19:25.919 China come in with new commentary around its regulation and 0:19:25.960 --> 0:19:30.359 banning i ceas, and while that has temporarily dampened bitcoins ascent, 0:19:30.800 --> 0:19:34.600 it has recovered, which shows stronger hands. So right now 0:19:34.760 --> 0:19:39.000 it's an extremely strong bowl market. UM. I can't say 0:19:39.000 --> 0:19:41.919 for sure what what would stop this UM, but we 0:19:41.960 --> 0:19:43.919 do have a few things to learn from in the past. 0:19:44.840 --> 0:19:47.240 All right, let's just talk about short term. If you're 0:19:47.280 --> 0:19:50.760 an investor or speculator that is long any kind of 0:19:50.840 --> 0:19:54.440 bitcoin or cryptocurrency and you've got a significant gain, would 0:19:54.440 --> 0:19:58.920 you sell it? So I don't give public investment advice. 0:19:59.080 --> 0:20:01.720 It's it's a very very tricky thing to do in 0:20:01.560 --> 0:20:04.320 the in the bit clin space, I definitely think people 0:20:04.600 --> 0:20:08.280 need to UM exercise caution in these markets. You know, 0:20:08.359 --> 0:20:10.879 over the last twenty four hours, we've traded over six 0:20:10.920 --> 0:20:14.760 billion dollars in the bitclin markets, which is about three 0:20:14.960 --> 0:20:16.920 three x what we've seen as the average over the 0:20:17.000 --> 0:20:21.040 last fifty days. So things are are getting hot UM. 0:20:21.160 --> 0:20:23.960 You know, if if you're entering the market, always good 0:20:23.960 --> 0:20:26.879 to average in UM, and it really depends on what 0:20:27.000 --> 0:20:29.760 your risk profile is in terms of UM if you're 0:20:29.800 --> 0:20:33.320 a holder or seller right now, Chris, real quick, are 0:20:33.359 --> 0:20:40.320 there more retail establishments actually accepting bitcoin as currency? There 0:20:40.400 --> 0:20:42.760 was a famous article that came out this year that 0:20:42.840 --> 0:20:47.520 actually showed fewer merchants were accepting bitcoin UM this year 0:20:47.560 --> 0:20:50.240 than than the year past. I believe it was UM. 0:20:50.359 --> 0:20:54.960 So we're we're not seeing um B two B or 0:20:55.160 --> 0:20:58.560 or or or C two B UM use increase some 0:20:58.680 --> 0:21:01.480 merchants were more se B two B, and you can 0:21:01.520 --> 0:21:06.919 track that through um bitcoin's transaction volume on change transaction 0:21:07.000 --> 0:21:10.239 volume which is um right around two billion dollars right 0:21:10.240 --> 0:21:13.160 now or one point million dollars a minute. So that's 0:21:13.240 --> 0:21:15.760 using bitcoin as a means of exchange, which is very 0:21:15.800 --> 0:21:18.520 different from the trading volume we see. Thank you very 0:21:18.600 --> 0:21:21.440 much for being with us. Chris Berniski is a partner 0:21:21.560 --> 0:21:26.240 and at placeholder and adviser to ARC Investment Management, and 0:21:26.280 --> 0:21:28.879 he is the author co author of Crypto Assets, The 0:21:28.920 --> 0:21:57.639 Innovative Investors Guide to Bitcoin and beyond the shares of 0:21:57.840 --> 0:22:01.000 Time Incorporator they are higher right now by a little 0:22:01.040 --> 0:22:04.600 bit more than nine percent after a deal has been 0:22:04.640 --> 0:22:09.000 announced that Meredith Corporation would like to buy Time Inc. 0:22:09.080 --> 0:22:12.440 Along with the financial backing from the Koch Brothers. Here 0:22:12.440 --> 0:22:15.320 to help us understand why this is taking place and 0:22:15.359 --> 0:22:19.040 the price implications is our media and entertainment guru, Porter 0:22:19.080 --> 0:22:23.560 Bib of Media Tech Capital Partners Porters. So go ahead, 0:22:23.680 --> 0:22:27.760 answer your own question. How does Meredith justify a forty 0:22:27.840 --> 0:22:31.119 six percent premium for Time? This is there? What is 0:22:31.160 --> 0:22:33.240 this is like the lucky charm? Right? The third time 0:22:33.320 --> 0:22:38.159 is the price that's exactly right. And they think that 0:22:38.240 --> 0:22:40.440 they're going to be able to say nearly a half 0:22:40.440 --> 0:22:44.760 a billion dollars in operating expenses and overhead by combining 0:22:44.800 --> 0:22:49.840 Time Ink with their existing publications. But the key here 0:22:50.080 --> 0:22:54.040 is twofold one. The Koch Brothers put a half a 0:22:54.040 --> 0:22:57.640 billion dollars into this deal. There are ostensibly not going 0:22:57.720 --> 0:23:01.840 to interfere with editorial. They're also not taking a board 0:23:01.840 --> 0:23:06.760 position on Meredith. However, no one has said in the 0:23:06.800 --> 0:23:10.399 Coke camp that Coke at some point, if Meredith can't 0:23:10.400 --> 0:23:14.320 make a go of Time Magazine or Fortune or any 0:23:14.359 --> 0:23:17.720 of the other key titles, that the Cokes won't be 0:23:17.800 --> 0:23:21.440 able to buy those from Meredith. Uh. The interesting thing 0:23:21.520 --> 0:23:26.399 that Meredith is is positing right now is the fact 0:23:26.400 --> 0:23:30.520 that they're the seventh largest digital publisher in the country, 0:23:30.960 --> 0:23:34.760 maybe maybe even in the world. Uh. And that's the 0:23:34.800 --> 0:23:40.000 future of print. Even though there are now seven hundred 0:23:40.400 --> 0:23:45.359 magazine publishing companies in the United States, almost maybe maybe 0:23:45.480 --> 0:23:49.200 significantly more is controlled by just four companies. It will 0:23:49.240 --> 0:23:53.480 be Meredith, Hearst, Conde Nast in American media, and the 0:23:53.640 --> 0:23:59.520 value of pure print standalone magazines is plummeting. Timing for 0:23:59.640 --> 0:24:03.919 Examp double lost to billion dollars in revenue for the 0:24:03.960 --> 0:24:09.399 first nine months of this year. Meredith is hanging a 0:24:09.480 --> 0:24:12.240 lot better in terms of the print side, but they 0:24:12.280 --> 0:24:17.200 are really doing a good job on monetizing the digital assets. 0:24:19.200 --> 0:24:23.200 Go ahead, well, Porter, I guess that what the backdrop 0:24:23.240 --> 0:24:26.320 that you're painting of an industry and decline, which we 0:24:26.400 --> 0:24:31.120 know the magazine industry is what would the Koch brothers 0:24:31.200 --> 0:24:34.720 motivation be to get into this. I mean, obviously there's 0:24:34.760 --> 0:24:38.400 been quite a bit of speculation that they have political 0:24:38.440 --> 0:24:41.080 interests in controlling these magazines, although they've said that they 0:24:41.440 --> 0:24:45.800 won't necessarily exert editorial control. So if that's not what 0:24:45.840 --> 0:24:50.200 they're doing, what are they trying to do? Well? One 0:24:50.200 --> 0:24:55.280 of the hidden assets of Timing is uh it's database 0:24:55.480 --> 0:25:00.959 of consumer information. They have tens, maybe even hundreds of 0:25:01.000 --> 0:25:06.359 millions of names and customer and consumer profiles on on 0:25:06.520 --> 0:25:10.760