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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm PIM Fox.

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Speaker 1: Along with my co host Lisa Bramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. The

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Speaker 1: big mystery in bond markets this week is whether or

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Speaker 1: not ten year treasury yields can break out of the

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Speaker 1: range that they have been in. Can they break out

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Speaker 1: rising above three? P Here to answer that mystery, Mike Collins,

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Speaker 1: Senior investment Officer and portfolio manager at PGIM Fixed Income. Mike,

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Speaker 1: what's the answer? Why? Why is? Why is the tenure

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Speaker 1: treasury yield pegged below three percent? No matter what? Good morning, Lisa. Yeah,

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Speaker 1: it looks like it's breaking out to the downside if

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Speaker 1: anything here right, uh, in the near term. And that's

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Speaker 1: really been our view all along. Our view has been,

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Speaker 1: you know, three is really probably the high water mark.

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Speaker 1: Anything above that would be an overshot kind of scenario

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Speaker 1: where rates, you know, really overreacted to what's likely to

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Speaker 1: be the path of growth and inflation. And and fed

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Speaker 1: rate hikes. You know, we came into the year understanding

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Speaker 1: that the one thing that we had the most conviction

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Speaker 1: and is that volatility is probably going to be higher,

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Speaker 1: right because you have bigger tail risks. Right last year

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Speaker 1: it felt like, you know, over the last few years,

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Speaker 1: we're going to grow at two percent and everything steady

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Speaker 1: as she goes. But with the you know, aggressive removal

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Speaker 1: of monetary accommodation, the downside and upside tails have have

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Speaker 1: increased sharees what I'm struggling with. There were a couple

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Speaker 1: of weeks there where the narrative had shifted to a

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Speaker 1: supply demand dynamic where all of a sudden, the US

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Speaker 1: was about to issue a record amount of the deficit

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Speaker 1: was deepening, Will there be enough demand? The Federal Reserve

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Speaker 1: is letting its balance sheet an awful little bit. So

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Speaker 1: what happened to that whole discussion? Well, the treasury market

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Speaker 1: the very large, efficient market and attends to reprice new

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Speaker 1: information really quickly, and that's why you get these kind

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Speaker 1: of you know, jerky moves and rates. And we've seen that,

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Speaker 1: you know, a couple moves from two you know, last

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Speaker 1: September to two and a half and then close to three,

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Speaker 1: you know, in a couple of big steps. And you know,

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Speaker 1: the first half of that move I think was just

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Speaker 1: repricing in the re acceleration of growth and the potential

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Speaker 1: for slightly higher inflation and certainly the expectation for for

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Speaker 1: more aggressive FED rate hikes. And it feels like the

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Speaker 1: last you know, basis points was probably trying to find

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Speaker 1: a clearing level for all the incremental supply. But that

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Speaker 1: that's in the market now right Everybody basically knows what

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Speaker 1: the funding requirements are for the government for the next

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Speaker 1: few years, so that I think has been priced in

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Speaker 1: at this point. So where do we end the year

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Speaker 1: for tenary treasury yields? You know, again, it's really a

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Speaker 1: bifurcated you know, binary outcome potential. It's it's really weird.

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Speaker 1: Normally have a base case that's like and you have

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Speaker 1: these small tails, but right now it feels like, you know,

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Speaker 1: one tail is that we're sitting here at the end

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Speaker 1: of the year and growth is lower and inflation is lower.

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Speaker 1: I'm looking at the tips market this morning, you know,

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Speaker 1: break evens are falling, meaning people's expectations for inflation are

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Speaker 1: actually coming down um, which which actually makes sense to us,

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Speaker 1: and maybe rates are back at you know, to fifty.

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Speaker 1: The other tail is, you know, maybe we continue to

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Speaker 1: get this re acceleration, maybe finally we get some you know,

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Speaker 1: signs of inflation rearing its head, and maybe it ends

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Speaker 1: at three. But you know, it feels like to us

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Speaker 1: that the FETE is not going to be able to

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Speaker 1: raise rates all the way to that long term dot

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Speaker 1: they have, which is right about three and a half

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Speaker 1: percent is what they expect the funds rate to be

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Speaker 1: at the end of two thousand twenty, and I think

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Speaker 1: that is highly unlikely. So if they pull back at

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Speaker 1: all from that, you can see a rallying rates. So, Mike,

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Speaker 1: given that sort of bifur Kidd potential, it sounds like

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Speaker 1: you're positioning yourself for more of a rally in treasuries

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Speaker 1: and inflation undershooting and people ratcheting back their expectations. So

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Speaker 1: as a portfolio manager, how are you positioned around that? Yeah? So,

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Speaker 1: so we um added to duration, you know, at these

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Speaker 1: higher levels, and we continue to be slightly long duration

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Speaker 1: in our portfolios relative to our our benchmarks. We continue

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Speaker 1: to have a curve flattenuron which really worked well last

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Speaker 1: year and it's actually worked this year despite you know,

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Speaker 1: consensus view that all the curves bounce is steep, and

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Speaker 1: you know, we don't believe that, right because if the

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Speaker 1: Fed insist on moving along that very aggressive hiking path, uh,

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Speaker 1: the curve is going to flatten, right, If they get

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Speaker 1: the funds rate to three or above three, the curve

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Speaker 1: is going to be flat or inverted. So yeah, so

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Speaker 1: we've you know, maintained a slightly long duration bias at

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Speaker 1: these higher levels towards three and and a guild curt flattener.

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Speaker 1: So what about credit? Credit is actually a tricky qual

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Speaker 1: I think that's going to be a bigger deal over

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Speaker 1: the next year or two or three uh than the

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Speaker 1: rate scenario. And and I think we're at a bit

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Speaker 1: of an inflection point in credit. We're definitely seeing more

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Speaker 1: competition among companies. And you just see the volatility that's

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Speaker 1: reared its head in the in the equity markets, and

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Speaker 1: a lot of the business models are being called into question.

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Speaker 1: Whether you know, it's a car company, what's that Tesla? Yeah, Tesla,

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Speaker 1: your name is Netflix. Netflix bonds are actually selling off today.

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Speaker 1: It's sort of interesting. It's not just you know, Tesla's

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Speaker 1: down in the mid eighties their bonds, right, and um,

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Speaker 1: you know they came not that long ago at a

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Speaker 1: five handle coupon, which we thought was was way too

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Speaker 1: low for a pretty risky company's burning three billion in

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Speaker 1: cash this year, So um, it's gonna be you know,

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Speaker 1: a lot of idiosyncratic, nagging credit problems, I believe, over

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Speaker 1: the next few years. So you really have to be

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Speaker 1: careful on credit. We have paired back our exposure to

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Speaker 1: investment grade and high yield industrial corporate bonds to to

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Speaker 1: really become a little more defensive here. How concerned are

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Speaker 1: you about the swath of triple B rated investment grade bonds?

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Speaker 1: Just to put this into perspective, the amount of triple

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Speaker 1: B bonds, which is the lowest chair of investment grade credit,

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Speaker 1: accounts for the biggest portion of the six trillion dollar

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Speaker 1: you as corporate debt market that is rated investment create

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Speaker 1: Are you preparing for a sort of rash of downgrades

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Speaker 1: among that debt? You know, this is a trend we've

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Speaker 1: been seeing throughout my entire thirty year career, right invest

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Speaker 1: in great corporate indexs has gone from double A to

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Speaker 1: things like the triple B effectively, and you see even

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Speaker 1: the banks have moved along that same negative credit migration path.

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Speaker 1: But what happens is the higher quality companies, the double

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Speaker 1: as and single as are really not incentivized to stay there, right,

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Speaker 1: so they are levering up their capital structures to move

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Speaker 1: into triple B. That's really what's happened. Once you get

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Speaker 1: into triple B, companies are extremely reticent to lever up further. Right.

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Speaker 1: They do not want to go into junk land because

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Speaker 1: then their financing costs or their access to markets and

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Speaker 1: liquidity really become restricting. A lot of these companies, as

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Speaker 1: you point out, I'll have a lot of debt that

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Speaker 1: they're going to have to refinance at some point. So

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Speaker 1: we actually believe it or not, our underweight the double

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Speaker 1: A single A part of the market because of that

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Speaker 1: negative credit migration as we call it, and overweight select

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Speaker 1: triple bes because there is a lot more opportunities to

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Speaker 1: add alpha or add value by avoiding the triple bs

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Speaker 1: that might go to junk and picking the ones that

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Speaker 1: you know, maybe just did a big M and A

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Speaker 1: deal and have levered up and issue new bonds that

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Speaker 1: you know attractive spreads, and you can take advantage of

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Speaker 1: that as an entry point so you've been reducing exposure

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Speaker 1: to some investment grade credit, also to some high yield credit.

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Speaker 1: What have you been adding to instead? It sounds like

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Speaker 1: long term treasuries and well, well treasuries to some extent,

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Speaker 1: but really uh, a little more of a credit barbell.

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Speaker 1: So a lot of the proceeds have gone into triple

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Speaker 1: A asset back securities. I know it's a little esoteric,

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Speaker 1: but these are actually really undervalued in our mind for

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Speaker 1: the underlying credit risk. Right, if you're worried about waking

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Speaker 1: up and reading the paper and seeing Trump tweet or

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Speaker 1: or something happening, and your you know your company is

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Speaker 1: having some competitive issues, you don't have to worry about

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Speaker 1: that when you're in the triple A of a CMBs

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Speaker 1: or collateralized loan obligation security that has tremendous, tremendous credit

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Speaker 1: enhancement or support below you. So we've actually built pretty

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Speaker 1: big position in that paper. But on the other side

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Speaker 1: of the barbell, we have added on the margin to

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Speaker 1: some emerging market debt. Right at some of the emerging

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Speaker 1: market and even European peripheral sovereigns have come out of

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Speaker 1: recessions in the last few years, right and they're on

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Speaker 1: an improving path. Mike Collins, thank you so much for

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Speaker 1: being with me. Always wonderful to hear what you have

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Speaker 1: to say. Mike Collins, Senior investment Officer and portfolio manager

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Speaker 1: at PGIM Fixed Income talking about the current h fixed

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Speaker 1: income market that he oversees. Helps oversee about seven billion dollars.

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Speaker 1: This is Bloomberg. Amazon stocks down the most for three

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Speaker 1: days since February two thousand and sixteen. Why well, perhaps

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Speaker 1: because President Trump confirmed that he is now focused on

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Speaker 1: Amazon in a Twitter post today. But perhaps there's more

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Speaker 1: to it than that. Joining us now, Shara o Vida

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Speaker 1: Bloomberg Gadfly columnists. We always love speaking with her, Shira,

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Speaker 1: what's going on with Amazon today? In a word, Trump

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Speaker 1: is it? Yes? I think it is so. We saw

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Speaker 1: both yesterday and today Amazon shares responding to news yesterday.

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Speaker 1: There was an Axios story today. Trump himself tweeted earlier

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Speaker 1: this morning about basically his concerns that Amazon is hurting

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Speaker 1: U S cities and states by not paying taxes quote unquote,

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Speaker 1: hurting the U S. Postal service, um, hurting retailers. It's

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Speaker 1: the Acio story described Trump as obsessed with Amazon and

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Speaker 1: trying to come up with ways to kind of curtail

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Speaker 1: its power. But you know, even a lot of people

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Speaker 1: who might disagree with President Trump on a lot of

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Speaker 1: issues do agree with him about curtailing Amazon's power. And

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Speaker 1: you know, I'm wondering how much the shares are accurately

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Speaker 1: pricing in that aspect. And you know, and if that's

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Speaker 1: not on the table, then are they overreacting to President

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Speaker 1: Trump's tweets. It's clearly an overreaction. Look, it's we've been

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Speaker 1: talking about this for a couple of years now that

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Speaker 1: all of these large US tech companies, they're at a

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Speaker 1: point where people are questioning whether they have too much

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Speaker 1: unchecked power on every dimension, right, And Amazon is certainly

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Speaker 1: in that conversation too. And there's been kind of a

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Speaker 1: parlor game in certain circles to talk about Amazon and

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Speaker 1: maybe think about whether different kinds of antitrust laws should

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Speaker 1: be applied. Um to Amazon, which is not a conventional

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Speaker 1: anti trust case by any struct of the imagination, has

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Speaker 1: small market share, it's not hurting, it's not raising consumer

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Speaker 1: prices as far as we can tell in the broader economy.

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Speaker 1: Things like that. Um So, yes, I think what's happening

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Speaker 1: here is it just kind of anxiety and noise that

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Speaker 1: if the president doesn't like a company, maybe that's bad

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Speaker 1: for the company. But you're right, he's certainly not alone

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Speaker 1: in wondering if Amazon is doing harm in certain sectors

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Speaker 1: of the economy. But it's not really clear what could

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Speaker 1: be done at the government level to change that. Um.

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Speaker 1: So we are talking about fang stocks. We dealt with

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Speaker 1: the A. UM I wanna I wanna move out to

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Speaker 1: another A. I think that there are two a's in there.

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Speaker 1: There are fang Okay, So I want to talk about Apple,

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Speaker 1: and you put out a really interesting column about their

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Speaker 1: iPad initiative of trying to get them into schools, and

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Speaker 1: I I had an initial gut reaction to this that

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Speaker 1: I think was somewhat similar to yours, just because my

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Speaker 1: children are in school and they have chromebooks. Um. But

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Speaker 1: but you were saying that Apple needs schools more than

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Speaker 1: they need its iPads. Well, look, it's not a secret

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Speaker 1: that iPad Sales of iPads peaked in and have been

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Speaker 1: declining every year since then. It's clearly a device that

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Speaker 1: is popular in certain circles. Is a lot of people

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Speaker 1: like it, but it is not a world changing device

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Speaker 1: either you know, for technology at large, nor for Apple's

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Speaker 1: bottom line. It's obviously a big business, but in the

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Speaker 1: scale of Apple, not a game changer. So they're trying

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Speaker 1: again as they did when the iPad initially came out,

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Speaker 1: to make a push into U S schools. Where As

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Speaker 1: you said, Google, I mean I said this before. It's

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Speaker 1: really the most undercover tech story of the last five

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Speaker 1: years is what Google has done to sweep into US

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Speaker 1: schools with Chromebooks, with their suite of software, and really

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Speaker 1: to dislodge Apple and Microsoft to some extent too, from

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Speaker 1: school districts um in this way. That's been really interesting

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Speaker 1: to see in Apple's trying again to kind of make

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Speaker 1: a different case, different pitch to school districts to adopt iPads.

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Speaker 1: I my my initial reaction to this was three hundred

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Speaker 1: sticker price sticker. That's huge, and especially compared with the

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Speaker 1: price of Chrome books and frankly fancier and better screens

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Speaker 1: isn't going to cut it. When you're talking about a

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Speaker 1: basic device that students need to just communicate with their teacher,

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Speaker 1: write papers, keep track of their homework and the like.

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Speaker 1: You don't want it to be too distracting. Yeah, it's

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Speaker 1: it's a good point. I mean, look the thing with

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Speaker 1: the iPad, You're right, it's a three hundred device. Apple

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Speaker 1: is also talking about their their digital styluses, which is

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Speaker 1: another ninety dollars or so. And then remember those devices

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Speaker 1: don't come with keyboards, so if you want your kid

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Speaker 1: to have a keyboard, that's more money. But I think

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Speaker 1: they lose things all the time. I mean the stylus.

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Speaker 1: I guarantee you one of children will lose or damage

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Speaker 1: a digital stylus. The interesting thing about chromebooks is not

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Speaker 1: just that they're relatively low cost, they're sort of two

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Speaker 1: and up for schools, but also that you know, Google

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Speaker 1: is kind of thought smartly about the kind of software

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Speaker 1: around those devices, right that you can log into your

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Speaker 1: Gmail or Google Docs account from any device. Um, they

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Speaker 1: have these this piece of software for teachers where teachers

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Speaker 1: can kind of assign homework and see what kids are

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Speaker 1: doing on their screens. And Google very smartly thought about

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Speaker 1: what teachers really need in the classroom and then delivered

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Speaker 1: that to school districts and told school districts over and

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Speaker 1: over again, this will be good for you. Apples trying

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Speaker 1: to make a little bit of a different pitch, which

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Speaker 1: is more about creativity. Right. So okay, if you want

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Speaker 1: your kids to write papers, maybe chromebooks as the way

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Speaker 1: to go. But if you want your kids to make,

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Speaker 1: you know, videos of dissecting frogs and annotate those, um

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Speaker 1: those videos with their digital stylus, is that is something

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Speaker 1: that is in Apple's wheelhouse and is not really in

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Speaker 1: Google's wheelhouse. I will say, as a parent simpler often

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Speaker 1: it's not being the most effect I wonder about school

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Speaker 1: districts kind of feeling the same way as that. But see, yeah,

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Speaker 1: thank you so much, Sharah O. Love having you on.

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Speaker 1: Shory Shia Overday, technology columnist for Bloomberg Gadfly read her

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Speaker 1: call um g a d f go on the Bloomberg

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Speaker 1: as well as on Bloomberg dot com talking about fang.

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Speaker 1: Facebook shares are up nearly three percent, trying to pick

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Speaker 1: up some of the losses from the dreadful weeks that

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Speaker 1: have incurred the company with some pretty big losses. The

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Speaker 1: US is quickly getting further into debt. We have a

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Speaker 1: week after week of record sales of US treasuries. At

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Speaker 1: what point does this matter? Joining me now? Is Jim Nadler,

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Speaker 1: chief executive Officer of Cruel bond rating Agency. UH. They

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Speaker 1: have a report on the United States of America, big

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Speaker 1: American flag on the front, saying that the long term

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Speaker 1: rating of triple A is stable. So jim him, why

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Speaker 1: will it not affect the us is credit worthiness to

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Speaker 1: become much more indebted. Certainly, debt and the deficit matter,

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Speaker 1: and I think that it's important over the long term

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Speaker 1: to keep track of the debt and the deficit. But

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Speaker 1: I think more importantly for the US is the fact

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Speaker 1: that the US mains by far the largest reserve currency

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Speaker 1: of the world. The reason that's important is because the

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Speaker 1: US is able to issue UH. They really have unlimited

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Speaker 1: ability to issue debt at a reasonable UH interest rate.

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Speaker 1: And you saw that when one of our competitors downgraded

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Speaker 1: the United States and the the what happened the next

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Speaker 1: day was the stock market tumbled, but treasuries rallied because

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Speaker 1: in a crisis, everyone buys the US debt, even in

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Speaker 1: a crisis that was sort of started by the fact

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Speaker 1: that the US got downgraded, and so it's counterintuitive. I'm

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Speaker 1: struck by a recent article that I read on Bloomberg. UH.

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Speaker 1: It was talking with and looking at the holdings of

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Speaker 1: a number of central banks around the world, and they

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Speaker 1: were noting that there was an increase in Euro denominated

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Speaker 1: assets at the expense of dollar denominated assets. All of

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Speaker 1: this to say, if the US does become much more

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Speaker 1: in debt, well that threaten the reserve status of the dollar.

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Speaker 1: It could, but I think you still have to look

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Speaker 1: at the u s is ability to defend its markets.

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Speaker 1: The US's ability still were the largest economy in the

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Speaker 1: world where we have a we have a consumer economy,

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Speaker 1: We buy things from around the world, so all that

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Speaker 1: impacts it. And your point is a good one, but

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Speaker 1: the US is more is over sixty of holdings in

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Speaker 1: central banks. The closest to that is and that's the euro.

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Speaker 1: And so while we can talk about the Euro may

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Speaker 1: increase a couple of percentage, it's the US is by

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Speaker 1: far the largest whole holding on the balance sheets of

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Speaker 1: central banks. If you saw that, if you saw another currency,

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Speaker 1: UH coming close in the US and and and buyers,

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Speaker 1: some central bank buyers shutting US, that then I think

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Speaker 1: the the ability of the US to maintain a better

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Speaker 1: balance sheet could become important. But I don't see any

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Speaker 1: factors in the near term causing that to change. What's

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Speaker 1: the tipping point. I mean, what does a deficit have

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Speaker 1: to get to at which point you might start to

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Speaker 1: think that, uh that forward investors might I don't know,

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Speaker 1: have a gut check, have a ha moment saying maybe

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Speaker 1: we don't want these treasuries. You know, I'm not sure.

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Speaker 1: I think as long as we maintain a robust economy,

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Speaker 1: we maintain our status as uh, you know, one of

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Speaker 1: the leading economies and one of the leading democracies in

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Speaker 1: the world. I think that that's going to have more

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Speaker 1: influence than our than our balance sheet. But certainly, you know,

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Speaker 1: certainly the balance sheet matters, and it's going to matter

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Speaker 1: more for taxes and how we spend our money over time,

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Speaker 1: the things that we choose to spend our money on.

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Speaker 1: And so I think that's where you'll see those discussions

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Speaker 1: take place, is over time. You know, how much we

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Speaker 1: spend on defense, how much we spend on domestic on

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Speaker 1: domestic programs. Yeah, um, I know that Cruel looks also

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Speaker 1: at a number of structured products as well as municipal

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Speaker 1: bonds and and some other securities. I'm wondering on the

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Speaker 1: structured products side, there's a bit a lot of questions

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Speaker 1: around auto loans, particularly subprime auto loans. We've seen credit

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Speaker 1: card delinquencies picking up. From your perspective, has there been

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Speaker 1: a material deterioration in the credit worthiness of consumer related credit?

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Speaker 1: And this concerning to you, I think broadly speaking, certainly

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Speaker 1: you can see the numbers we've seen a deterioration in

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Speaker 1: in credit. The question is how big that deterioration has been.

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Speaker 1: And I think when you look at that, you really

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Speaker 1: have to look at the various segments of consumer credit.

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Speaker 1: So we still are seeing even though we're seeing a

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Speaker 1: bit uh more delinquencies in the subprime auto sector, we

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Speaker 1: still see that sector as being robust. And while we

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Speaker 1: talk about delinquencies maybe you know, going up half a

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Speaker 1: percent or something like that, they still in the structured

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Speaker 1: products world have a very large credit enhancement that they

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Speaker 1: would need to break through before it would start to

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Speaker 1: lead to rating deteriorations. These are also short term assets,

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Speaker 1: and so we still are seeing in a lot of

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Speaker 1: the consumer depth, particularly in subprime auto, upgrades on those

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Speaker 1: tranchas as those deals pay off very rapidly, and so

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Speaker 1: a lot of times you'll see a single A or

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Speaker 1: a double A going to triple A because the deal

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Speaker 1: is paying off, and I think it speaks to the

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Speaker 1: UH the amount of credit enhancement that is in those

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Speaker 1: deals to cover for losses. So, yes, we've seen an

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Speaker 1: increase in losses, but I think we've not seen anything

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Speaker 1: that has caused us to rethink the way that we

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Speaker 1: look at credit enhancement in those sectors. So, in other words, people,

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Speaker 1: the amount of money coming in is so much that

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Speaker 1: any losses are immaterial with respect to the upper rated trunches.

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Speaker 1: Jim Nadler, thank you so much for joining me today.

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Speaker 1: Jim Nataler, chief executive officer of Cruel Bond Rating Agency,

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Speaker 1: talking the US and what it would take to shake

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Speaker 1: its status as the reserve currency, and it sounds like

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Speaker 1: a heck of a lot more than what we're facing

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Speaker 1: in the years to come. If you're thinking about donating

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Speaker 1: to a political campaign, how about using bitcoin? This has

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Speaker 1: some regulators hand lawmakers little concerned about the potential for abuse. MICHAELA.

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Speaker 1: Ross joins US now technology reporter for Bloomberg Law. She

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Speaker 1: comes to us from Arlington, Virginia. MICHAELA. Your story on

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Speaker 1: this was fascinating. First, can you just lay out whether

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Speaker 1: bitcoin really is being used as a currency UH to

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Speaker 1: donate to political campaigns. Thanks for having me on. Absolutely.

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Speaker 1: Bitcoin has actually a lot of people don't don't know,

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Speaker 1: but has been donated to campaigns. We were able to

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Speaker 1: trace as far back as two thousand fourteen. Of course,

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Speaker 1: the difference now is we're gearing up for midterm elections,

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Speaker 1: is that the price of bitcoin has skyrocket Back then

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Speaker 1: it was around the four hundred dollar mark and now

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Speaker 1: it's around the eight thousand dollar mark. But um, so

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Speaker 1: there's still a small number of campaigns accepting this. There's

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Speaker 1: a lot of people that are looking into it, testing

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Speaker 1: the waters is this something that we would benefit from.

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Speaker 1: But there's a lot of interests and growing interests. So um,

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Speaker 1: small number of campaigns. But what we're hearing from campaign

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Speaker 1: parency groups UM and some regulators is that they're concerned

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Speaker 1: that the framework is their conditions are there, that this

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Speaker 1: could potentially be abused if there's not some some extra

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Speaker 1: guidance and teeth put into some of these rules. So

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Speaker 1: talking about those concerns, how do bitcoin donations differ from

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Speaker 1: cash donations. Bitcoin donations are actually reported to the Federal

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Speaker 1: Elections Commission as in kind donations, but that's where one

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Speaker 1: of the problems is is that there's a lot of

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Speaker 1: different interpretations on how they should be reported and what

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Speaker 1: needs to be reported by different campaigns, and that stems

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Speaker 1: from a two thousand fourteen advisory opinion given by the FEC,

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Speaker 1: the Federal Elections Commission again um and what campaigns, what

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Speaker 1: the transparency groups are concerned about is a crux a

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Speaker 1: combination of two things that are coming from some legal

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Speaker 1: gray area. And this advisory opinion number one is just

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Speaker 1: how much can campaigns take a bitcoin donations? Because in

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Speaker 1: that advisory opinion it's captain at a hundred a hundred

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Speaker 1: dollars worth of bitcoin you once converted into US dollars. Um. However,

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Speaker 1: that there's a divide on party lines on that, and

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Speaker 1: that's been interpreted differently by different campaigns. So some are

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Speaker 1: taking up to the max of two thousand, seven hundred

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Speaker 1: dollars and so that's more concerning to groups for the

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Speaker 1: potential for fraud. And combine that with the potential for pseudonyms.

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Speaker 1: So bitcoin, uh, you know, has the potential to be

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Speaker 1: used more anonymously. And even though campaigns always collect personal

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Speaker 1: data of their donors, UH, if there was a pseudonym

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Speaker 1: used by a donor, how are we going to be

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Speaker 1: able to track that and once again, how are we

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Speaker 1: going to subpoena that information? Um? And that is where

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Speaker 1: there's also a lack of teeth on that FEC advisory

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Speaker 1: opinion on how the how these campaigns are accepting these

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Speaker 1: donations from what kinds of institutions not obviously not banks

430
00:24:50,680 --> 00:24:53,960
Speaker 1: that have no your customer laws. I'm wondering what kind

431
00:24:53,960 --> 00:25:00,000
Speaker 1: of political support there is to sort of close these loopholes. Alright,

432
00:25:00,000 --> 00:25:03,280
Speaker 1: we don't imagine that some uh, some potential candidates might

433
00:25:03,359 --> 00:25:06,080
Speaker 1: have mixed feelings on that. Yeah, well, you know, it's

434
00:25:06,200 --> 00:25:08,560
Speaker 1: it's great to hear what some of these campaigns. We

435
00:25:08,560 --> 00:25:10,800
Speaker 1: definitely don't want to allege. All the campaigns that we

436
00:25:10,840 --> 00:25:15,639
Speaker 1: spoke to were very, very um concerned about being compliant.

437
00:25:15,680 --> 00:25:18,240
Speaker 1: They were actively working to try to comply with the

438
00:25:18,320 --> 00:25:21,359
Speaker 1: FEC guidance. But what they're saying the benefit of is

439
00:25:21,440 --> 00:25:23,920
Speaker 1: and what we why we might be seeing more campaigns

440
00:25:23,920 --> 00:25:27,680
Speaker 1: taking this in the future or committees, is that, um,

441
00:25:27,680 --> 00:25:30,000
Speaker 1: it sets them apart, you know, it sets them apart

442
00:25:30,040 --> 00:25:33,520
Speaker 1: from establishment candidates. There's a growing interest in people who

443
00:25:33,520 --> 00:25:37,600
Speaker 1: are not only interested in cryptocurrencies and bitcoin, but also

444
00:25:37,640 --> 00:25:39,879
Speaker 1: just the blockchain technology and they want to support it,

445
00:25:39,920 --> 00:25:41,639
Speaker 1: and how do you do that, Well, you donate to

446
00:25:42,119 --> 00:25:44,080
Speaker 1: you know the two some of the lawmakers who are

447
00:25:44,080 --> 00:25:46,639
Speaker 1: considering this and and that are going to be authorizing

448
00:25:46,640 --> 00:25:51,000
Speaker 1: different regulatory bodies to be regulating this in the future. So, um,

449
00:25:51,119 --> 00:25:54,000
Speaker 1: those were a couple of reasons. It's also much cheaper, um,

450
00:25:54,040 --> 00:25:56,840
Speaker 1: compared to a credit card where you're paying you know,

451
00:25:56,880 --> 00:25:59,480
Speaker 1: abround four percent for a transaction fee for a donation,

452
00:25:59,480 --> 00:26:03,800
Speaker 1: the campaign saying they're they're paying around one person. So um,

453
00:26:03,800 --> 00:26:06,840
Speaker 1: it's interest. There's more let's call the bitcoin millionaires in

454
00:26:06,840 --> 00:26:10,560
Speaker 1: the ecosystem now after the value of the currency as

455
00:26:10,640 --> 00:26:14,040
Speaker 1: as cryptocurrency has gone up, and so if they want

456
00:26:14,080 --> 00:26:15,720
Speaker 1: to be supporting more candidates, I think we're going to

457
00:26:15,800 --> 00:26:17,600
Speaker 1: be seeing more of that as well. Yeah, I mean

458
00:26:17,640 --> 00:26:21,280
Speaker 1: it sounds pretty cool if a campaign uses a crypto

459
00:26:21,320 --> 00:26:24,800
Speaker 1: platform like coin base or bit pay to say two

460
00:26:24,880 --> 00:26:27,520
Speaker 1: younger constituents that you know, if you if you want

461
00:26:27,520 --> 00:26:30,320
Speaker 1: to do something a little bit uh off the beaten path,

462
00:26:30,680 --> 00:26:34,520
Speaker 1: check us out there. One question though, quickly here Mikaela.

463
00:26:34,560 --> 00:26:37,920
Speaker 1: Ahead of the midtermal elections, is there any chance that

464
00:26:38,000 --> 00:26:42,359
Speaker 1: these rules could get honed or changed in order to

465
00:26:42,359 --> 00:26:45,720
Speaker 1: tighten up the protections in time for the upcoming elections.

466
00:26:46,320 --> 00:26:48,280
Speaker 1: That does not look likely. We did speak to a

467
00:26:48,320 --> 00:26:50,600
Speaker 1: couple of the commissioners at the FEC, and they're not

468
00:26:50,720 --> 00:26:52,760
Speaker 1: hearing a lot of questions about that. It's going to

469
00:26:52,840 --> 00:26:55,080
Speaker 1: take a wave of questions about how are we going

470
00:26:55,119 --> 00:26:57,520
Speaker 1: to do this for them to to take up this

471
00:26:57,600 --> 00:27:01,200
Speaker 1: room making. They're quite busy. They're quite is for example,

472
00:27:01,200 --> 00:27:04,439
Speaker 1: looking at social media ads and uh potential for abuse

473
00:27:04,480 --> 00:27:07,320
Speaker 1: there um to be taking this up. But what we're

474
00:27:07,359 --> 00:27:10,040
Speaker 1: hearing is that rulemaking could really solve a lot of

475
00:27:10,040 --> 00:27:13,479
Speaker 1: these problems. Um, just to clarify to campaigns exactly how

476
00:27:13,560 --> 00:27:15,960
Speaker 1: much they can be taking in exactly how they should

477
00:27:16,000 --> 00:27:18,560
Speaker 1: be reporting it, because the real problem is that we're

478
00:27:18,640 --> 00:27:21,320
Speaker 1: lacking the data. When you look at the FBCS database,

479
00:27:21,680 --> 00:27:24,439
Speaker 1: it's not capturing a lot of these donations. And the

480
00:27:24,480 --> 00:27:27,000
Speaker 1: reason is partly just because of the way their database

481
00:27:27,000 --> 00:27:29,399
Speaker 1: has run, and partly because of how it's reported, and

482
00:27:29,440 --> 00:27:33,880
Speaker 1: partly because of how it campaigns are interpreting their advisory committing. Uh.

483
00:27:34,000 --> 00:27:35,800
Speaker 1: So it's it's a catch twenty two. We don't really

484
00:27:35,840 --> 00:27:37,760
Speaker 1: know how much this is going to be growing because

485
00:27:37,800 --> 00:27:41,000
Speaker 1: we already know just that the database isn't capturing all

486
00:27:41,040 --> 00:27:44,399
Speaker 1: of it um and until there's more interest by campaigns

487
00:27:44,400 --> 00:27:46,840
Speaker 1: to be asking that and asking for that clarifications, there's

488
00:27:46,840 --> 00:27:49,040
Speaker 1: gonna We're going to continue to see different interpretations of

489
00:27:49,080 --> 00:27:51,560
Speaker 1: how these campaigns, even if once again they're trying to

490
00:27:51,600 --> 00:27:54,440
Speaker 1: be compliant and for you have to leave it. They're

491
00:27:54,560 --> 00:27:58,520
Speaker 1: fascinating story. Recommend everyone read it. Technology reporter for Bloomberg Latch.

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00:28:01,520 --> 00:28:04,080
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.

493
00:28:04,400 --> 00:28:08,320
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, SoundCloud,

494
00:28:08,440 --> 00:28:11,920
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm

495
00:28:11,920 --> 00:28:15,960
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.

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00:28:16,080 --> 00:28:18,679
Speaker 1: It's one before the podcast. You can always catch us

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00:28:18,680 --> 00:28:20,280
Speaker 1: worldwide on Bloomberg Radio