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Speaker 2: Worldpool and on. I spent the last seventy five years
Speaker 2: becoming lawn v ex first. But now that make it
Speaker 2: easy for everybody, all.
Speaker 3: Right, who doesn't have a vintage commercial Whirlpool, of course,
Speaker 3: and they are front and center today we're watching the
Speaker 3: share price down about fourteen percent here. What we love
Speaker 3: about these kinds of companies is they can tell us
Speaker 3: so much about what's going on, certainly in the minds
Speaker 3: of the US consumer and what's going on in the
Speaker 3: US economy. And this is a great conversation, especially Tim,
Speaker 3: if you think about it. On a day where we
Speaker 3: got GDP, we expected it to be hot, and it
Speaker 3: came in even hotter than expected.
Speaker 4: In fact, Treasury Secretary Annie Yellen just in the last
Speaker 4: couple of hours telling Bloomberg exclusively that the surge that
Speaker 4: we're seeing in longer term body yields in recent months
Speaker 4: that's a reflection of the strong US economy not of
Speaker 4: a jump and government borrowing driven by that widening fiscal deficit.
Speaker 3: All right, so good to know. And that GDP report
Speaker 3: for the third quarter, it was fueled by surge and
Speaker 3: consumer spending. So let's get to our guests. We're Pull Corporation.
Speaker 3: Mark Bitzer, he is with us. He is chairman, he
Speaker 3: is president and CEO of Whirlpool, and he joins us
Speaker 3: on Zoom from Benton Harbor, Michigan. Mark, it is good
Speaker 3: to have you back with us. Your company. You came
Speaker 3: out and you trimmed your full year profit outlook, amen,
Speaker 3: and uptick in promotions. Investors noticed, and the stock is
Speaker 3: down the most and to the lowest since twenty twenty.
Speaker 3: So investors, definitely you are upset about what they heard
Speaker 3: from you.
Speaker 5: Guys.
Speaker 3: First of all, let's take the big picture. What's it
Speaker 3: like operating in today's environment right now?
Speaker 6: Yeah, First one, Carolyn, thanks for having me back on
Speaker 6: the show.
Speaker 7: I mean, what would be communicate today is a third
Speaker 7: quarter which I would still describe as pretty solid results.
Speaker 6: That we year the year we grew our business.
Speaker 7: We hadn't grown our business for six quarters in a row,
Speaker 7: and now we grew our business more than three percent
Speaker 7: revenue growth, we expanded market share, and year year we
Speaker 7: expanded our margin by about one.
Speaker 6: Hundred basis points.
Speaker 7: But yes, we trimmed our forecast technically not on the
Speaker 7: ongoing EPs because we also had some text benefits, but
Speaker 7: we as opposed to seven point seven and a quarter
Speaker 7: EBIT margin, we lowered it to six and a quarter
Speaker 7: to six and a half. So that is trimming the
Speaker 7: EBIT margin, and the market reacted. You could in many
Speaker 7: ways argue probably overacted, but it is what it is.
Speaker 7: But I think that's the essentially what happened. The underlying
Speaker 7: results which we had I would still consider very solid
Speaker 7: and particularly compared to the pre COVID levels and also
Speaker 7: compared to Q two where we essentially went sideways. But
Speaker 7: in all transparency, we expected our margins to continue to
Speaker 7: improve and instead of it by basic move sideways. And
Speaker 7: I think that's what we see today, a lot of
Speaker 7: reactions out there.
Speaker 6: Underneath that.
Speaker 7: That's probably getting to your broader question about the consumer.
Speaker 7: You know, the consumer right now in our industry, we
Speaker 7: see strong replacement demand. I even products breakdown and you
Speaker 7: have more applnes usage post COVID, but the discretionary side
Speaker 7: of a consumer, which is so much driven by consumer confidence.
Speaker 6: That is the soft part of a business.
Speaker 7: That is also the inherently more attractive part of a
Speaker 7: business because it comes with higher margin and higher mix.
Speaker 7: So we see right now a pretty heavy shift of
Speaker 7: consumer spending towards replacement side and lesser to a big
Speaker 7: discretionary purchase.
Speaker 4: That's interesting and that that makes sense given you know
Speaker 4: what else we're hearing with the economy mark. Where else
Speaker 4: are you seeing when it comes to the consumer in
Speaker 4: the US weakness when it comes to consumer spending? Is
Speaker 4: there certain categories that you can out line for us
Speaker 4: where you're seeing weakness? Are there geographies? Is it the
Speaker 4: higher end consumer that's that's actually struggling more than a
Speaker 4: consumer you know, the in the middle or lower end.
Speaker 4: Tell us, tell us what you're learning and what you're seeing.
Speaker 7: Yeah, and again it comes back to my early comment
Speaker 7: about replacement demand. You know a replacement demand just put
Speaker 7: yourself in consumer shoes. If you have a washer or
Speaker 7: refugeral breaking down, you want to have it replaced with
Speaker 7: two days. You don't do the big shopping around and
Speaker 7: the mixed up you want to replace. So that is
Speaker 7: just a one on one sale, which again is typically
Speaker 7: not a very mix or margin tractive business. The discretionary side,
Speaker 7: where people plan for a new kitchen or remodel house,
Speaker 7: is the soft part right now, and that's the much
Speaker 7: richer part of that. So in general terms, you could say, yeah,
Speaker 7: there's a little bit of a trading down on a
Speaker 7: consumer landscape. There's a segment of call it a premium consumer,
Speaker 7: which is pretty resilient, but it's kind of a big
Speaker 7: mass in between where you just don't see trading up
Speaker 7: if at all. Right now, you just see more trading
Speaker 7: down coupled with you know, a promotion environment which we
Speaker 7: described as return back to pre COVID levels.
Speaker 3: Well, as a consumer, I'm saying, yay promotions, Mark, I'm
Speaker 3: going to be quite honest with you, but it does
Speaker 3: say something to kind of move the needle right to
Speaker 3: get consumers kind of off the thinking area into the
Speaker 3: actual you know, buying of something. So how aggressive are
Speaker 3: your promotions and are you anticipating that in terms of
Speaker 3: maybe some weakness and the need for promotions that this
Speaker 3: continues into well into twenty twenty four.
Speaker 7: Yeah, and in rones called today, what we refer to
Speaker 7: is we consider a promotion environment as having normalized, ie
Speaker 7: call it past tense, which AWS implies we expected stabilized
Speaker 7: going forward. So in terms of the depth of duration
Speaker 7: of promotion, this is not any different from pre COVID,
Speaker 7: and frankly it is something which we expected, but it
Speaker 7: happened and occurred maybe one or two quarters early when
Speaker 7: we originally anticipated. And that again comes fully back to
Speaker 7: the discretionary side of a demand, post mortgage rate increases,
Speaker 7: post all these horrible world news messages that tumbled pretty
Speaker 7: much call it in Q two, and consumer confidence ultimately
Speaker 7: drove that lower discretion of demand, which in turn drove
Speaker 7: a higher promotional intensity and the environment.
Speaker 4: What about the other part of your business, the part
Speaker 4: about workers attracting and retaining talent costs that you have
Speaker 4: in terms of buying the equipment necessary to build these machines.
Speaker 4: How are wages for whirldpool workers right now? Are they
Speaker 4: up yere over year?
Speaker 7: Yeah, So, first of all, to put it in a
Speaker 7: broader context, as you know, over the last three years,
Speaker 7: we were not only concerned about cost, we were also
Speaker 7: concerned about resilience and the strength of our supply chain.
Speaker 7: The latter part we basically have I would say pretty
Speaker 7: much fully resolved.
Speaker 6: Our supply chain is intact.
Speaker 7: We don't have major availability issues, so that make a
Speaker 7: check mark behind it. On the cost side, over the
Speaker 7: last couple of years, we saw the biggest increase of
Speaker 7: cost on basically raw material and transport. Transport has come
Speaker 7: down quite a bit, and raw materials are starting to
Speaker 7: trend down and that is a favorable trend which we
Speaker 7: observe particular second half of this year, and we also
Speaker 7: expect into next year well wage side, and again that
Speaker 7: is more driven by of our US factories. One is unionized,
Speaker 7: once are non unionized. We basically have every year wage adjustment,
Speaker 7: and we in phase of a labor shortage, particular in
Speaker 7: twenty one and twenty two, we did already fairly significant
Speaker 7: moves on that wage side.
Speaker 6: So so I would.
Speaker 7: Say this year we're not confronted with a massive wage increase.
Speaker 7: We still of course do year the year increases and
Speaker 7: that kind of helps us dealing with a labor shortage.
Speaker 7: And right now I would say across the board, maybe
Speaker 7: with some fewer regions option, we're pretty well staffed and
Speaker 7: beliebor shortage is it's a lot less of initiate than
Speaker 7: in most for example two years ago.
Speaker 3: Hey, Mark, so what do you make of when we
Speaker 3: get the like the retail sales numbers that come out
Speaker 3: and it shows a really strong consumer and which kind
Speaker 3: of surprises everybody because we keep talking about student loan
Speaker 3: payments or car payments that are going to slow down
Speaker 3: the consumer. I see what you said about replacement versus discretionary.
Speaker 3: But do you does that retail sales data sometimes surprise you?
Speaker 3: Do you when people say resilient consumer, does it kind
Speaker 3: of just say, well, resilient but maybe.
Speaker 5: Not so much.
Speaker 6: Yeah, I'm in Carol.
Speaker 7: I mean I would say, I think you need to
Speaker 7: move from a headline into the details. And yeah, with
Speaker 7: consumer spending, and that's that's confirmed. The question is on
Speaker 7: what is for consumer spending? And we saw there's a
Speaker 7: lot of spending on services. Restaurant calls have gone up,
Speaker 7: travelers gone up quite a bit. Our part of a
Speaker 7: business consumer durable. And again I'm talking of a discretionary side,
Speaker 7: not a replacement site. For most families, buying a washing
Speaker 7: machine or remodeling kitchen is a very significant part of
Speaker 7: a disposable income. You only do this expenditure if you
Speaker 7: have confidence in your economic future and the broader environment
Speaker 7: and consumer confidence. And you can look at whatever index
Speaker 7: that is one which kind of call it. April may
Speaker 7: dropped off pretty sharply. So yes, I do cbover consumer spending.
Speaker 7: I think more durable categories is a slightly different picture.
Speaker 7: They're just on the long term big disposable items or
Speaker 7: big ticket items. There's some reluctance of the discretionary side. Again,
Speaker 7: replacement site is very solid, but on a discretionary side
Speaker 7: is soft.
Speaker 3: Do you guys talk a lot about a recession coming?
Speaker 3: You know, it's been coming for two years, and some
Speaker 3: would say, listen, we've already had you know, certain parts
Speaker 3: of the market have seen you know, or certain parts
Speaker 3: of our economy have seen it. But what's your best
Speaker 3: guess as someone who runs a company, you've seen some
Speaker 3: any different. You know, we've gone through a very tough
Speaker 3: market cycle, certainly coming off the pandemic that was bad,
Speaker 3: and then it was actually pretty good. People were doing things,
Speaker 3: especially on their homes. So do you think a recession
Speaker 3: is likely in the United States? Your biggest market here
Speaker 3: certainly by revenue.
Speaker 7: Yeah, First of all, I would start with a cabin
Speaker 7: there's probably a lot more people more confident.
Speaker 6: About that subject than I am.
Speaker 7: So it's the way I would look at it. Our company,
Speaker 7: in many ways is a cannery in the coal minor.
Speaker 7: We see certain trends earlier. What I mean with that,
Speaker 7: we saw the cost inflation in our business a lot
Speaker 7: earlier than most companies saw it. The same time, we
Speaker 7: saw the beginning for cost inflation a little bit earlier.
Speaker 7: And we probably also see the kind of a normalized
Speaker 7: consumer promotion environment that livered early. So most of the
Speaker 7: broad economy sees we tend to see maybe call it
Speaker 7: three to six months earlier that in mind, you know,
Speaker 7: it's kind of I think broader terms, the US economy
Speaker 7: is more resilient than most people thought. So from that perspective,
Speaker 7: I personally do not see a scenario for a deep recession.
Speaker 6: Cooper be something shallow.
Speaker 7: Yes, I think the key element will be going forward
Speaker 7: to is you know, when when will the Feds signal
Speaker 7: a kind of a stabilization of a plateau of interest rates?
Speaker 6: That is a big element.
Speaker 7: And then of course what is a little bit more
Speaker 7: difficult to answer, when do you when do always horrible
Speaker 7: world news become a little bit more less or or
Speaker 7: are we getting numb against it. So that's for consumer
Speaker 7: confidence part of it. But again from a person perspective,
Speaker 7: we don't expect a big boom, but we don't expect
Speaker 7: the scenario for deep recession. We're prepared to very small,
Speaker 7: modest growth in our industry, but were also prepared to
Speaker 7: deal with a shallow recession.
Speaker 4: Mark on that subject of everything that's happening around the world,
Speaker 4: are focused certainly not numb. Yeah, and our boocus certainly
Speaker 4: on the Middle East in addition to other parts of
Speaker 4: the world. But there's also the business side of this,
Speaker 4: which is oil prices. And I'm wondering how you're watching
Speaker 4: energy markets, how you're watching oil prices, and if we
Speaker 4: do see a spike in oil prices, what that does
Speaker 4: to your business?
Speaker 7: Yeah, And then and let me be maybe a radio
Speaker 7: cause maybe not a perfect form to comment on this
Speaker 7: horrific attax and the subjequent subsequent human tragedy coming out
Speaker 7: of this one. So it's kind of difficult to move
Speaker 7: from mad to economic impact. Having said that, of course,
Speaker 7: there's you know, the entire Middle East situation, if it
Speaker 7: would further escalate, has some risk on the oil prices. Again,
Speaker 7: there's a big if if it further escalates in an
Speaker 7: uncontrolled manner. As you've seen the last two days the
Speaker 7: oil price from initial spike, they came down a little
Speaker 7: bit and and right now in our internal forecast, but
Speaker 7: again there's people who probably know a lot more about it.
Speaker 7: We expect also stabilization sideway to move off the oil,
Speaker 7: but it's a lot depends on will there be stability
Speaker 7: in what is an extremely difficult Middle East environment.
Speaker 3: No, absolutely, Mark, We so appreciate your time. You've always
Speaker 3: been so generous, especially throughout the pandemic coming off of it,
Speaker 3: trying to help make sense of that cycle. And we
Speaker 3: really appreciate your time trying to understand what's going on
Speaker 3: and really appreciate it. Mark Bitzer. He is chairman, president
Speaker 3: and CEO of Whirlpool, joining us on Zoom from Benton Harbor, Michigan.
Speaker 3: A great gauge on what's going on in the economy
Speaker 3: at a time when there is so much heavy news,
Speaker 3: so much uncertainty. Really appreciate what's more to come. Right
Speaker 3: here on.
Speaker 1: BusinessWeek, you're listening to the Bloomberg Business Week podcast. Catch
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Speaker 3: As promised, we do have the Mattel's CEO on christ
Speaker 3: joining us from Elsagundo, California on Zoom.
Speaker 8: Hi Carolim, it's great to be with you.
Speaker 3: It's so great to be with you. I feel like
Speaker 3: I have a million questions. I feel like I want
Speaker 3: to go to a bar, have a drink with you
Speaker 3: and just sit and talk. I want to start with
Speaker 3: the Israel Hamas conflict. You're born in Israel, studied at
Speaker 3: Tel Aviv University before heading to the West coast of
Speaker 3: the United States of America. I hope your family and
Speaker 3: friends are safe. I pray that they are safe. How
Speaker 3: are you thinking about all of this right now and
Speaker 3: this conflict and is there a way to peace in
Speaker 3: that region?
Speaker 8: Yeah, thank you for asking my family. My family is okay,
Speaker 8: My immediate family is okay. But and you know, of course,
Speaker 8: in Israelia, this is very personal to me. And I
Speaker 8: know too many people who lost loved ones or have
Speaker 8: relatives that have been kidnapped and are now being held
Speaker 8: hostage in Gaza. You know, on behalf of Mattel. We
Speaker 8: condemned the terrorism and atrocities perpetrated by Hamas and stand
Speaker 8: against hate and violence in all forms. We express hope
Speaker 8: for the safety of Israelis and Palestine and children and
Speaker 8: families part in the Israeli Hamas war. As a company.
Speaker 8: Since the Hamas attacks on October seventh, the Mattel Children's
Speaker 8: Foundation has been focused on humanitarian work, including cash and
Speaker 8: toy donations with shelters and hospitals who support children who
Speaker 8: are suffering. And we're sitting here all wishing for a
Speaker 8: swift resolution to the war and more peaceful times in
Speaker 8: the future.
Speaker 4: Well you know, and it's something that you know, people
Speaker 4: who are wow, gosh, I mean up to eighty years
Speaker 4: old at this point have dealt with their entire lives
Speaker 4: in that area of the world. And I'm wondering to you,
Speaker 4: and not speaking on behalf of Mattel, but just getting
Speaker 4: your thoughts personally, how this ends. If a two state
Speaker 4: outcome is the only solution to ending the conflict there
Speaker 4: once and for all.
Speaker 8: You know, it's a complicated conflict, and were now sitting
Speaker 8: at a time that is very volatile. We see risk
Speaker 8: of escalation, and we just hope for a swift, swift
Speaker 8: resolution and wishing peace for everybody as soon as we can.
Speaker 3: I want to talk about Mattel. I have one more
Speaker 3: questions for you. Do you think Prime Minister Benjamin Netanyah
Speaker 3: who is not going to be the leader that brings
Speaker 3: lasting peace.
Speaker 8: And this is not the time to get into the
Speaker 8: political discussion right now. Everyone is focused on resolving the situation.
Speaker 8: Israel articulated its priorities. We're all really looking forward for
Speaker 8: the release of the hostages. There are thirty run under
Speaker 8: the edge of sixteen that are being held at captive
Speaker 8: right now, about half the hostages of women, and we
Speaker 8: really believe that this should be a resolved as soon
Speaker 8: as possible, and we pray for the release, safety and
Speaker 8: release of all the hostages that are now being held captives.
Speaker 3: You are absolutely right, but we do appreciate you weighing
Speaker 3: in on this because we have talked to you about
Speaker 3: serious issues in the past, so really appreciate this. No
Speaker 3: easy segue, but I do want to talk about the
Speaker 3: business of Mattel. Talked to us about last quarter and
Speaker 3: the outlook. It was a tough day in the equity
Speaker 3: market for you guys. You did talk about tougher industry conditions.
Speaker 3: What are those tougher industry conditions that you guys are
Speaker 3: worried about.
Speaker 8: What they see the industry being soft in the third
Speaker 8: quarter and near to date, and as a result, we
Speaker 8: adjusted our expectations and expect and believe the industry will
Speaker 8: decline mixing a digit for the full year. But don't
Speaker 8: you need to remember that this is after the industry
Speaker 8: was up twenty two percent from twenty nineteen to twenty
Speaker 8: twenty two, reaching an all time high. So coming off
Speaker 8: after such a strong increase, especially in a challenging microeconomic environment,
Speaker 8: we believe that this is a reasonable situation and doesn't
Speaker 8: reflect on the strength and resilience of the industry long term.
Speaker 8: The toy industry has been growing for over ten years
Speaker 8: and it's a growth category, So we feel very good
Speaker 8: about the industry and it's a growth process. And even
Speaker 8: in that environment, even in a softer market, Matsel performed
Speaker 8: very strongly. Our quarter exceeded, our quarterly result exceeded expectations.
Speaker 8: We showed meaningful sales groat margin with very strong free
Speaker 8: cash flow. Intercourse, we saw consumer dement increasing and we
Speaker 8: continue to outfreitz the industry.
Speaker 4: I think a lot of investors today, at least sending
Speaker 4: shares down about seven percent, were concerned that you guys
Speaker 4: maintained your full year sales outlook despite all of the
Speaker 4: success of the Barbie movie. So what would have to
Speaker 4: happen Eon to bring in more than the one hundred
Speaker 4: and twenty five million dollars expected from the Barbie movie
Speaker 4: and related products? What needs to happen at MATEL or
Speaker 4: in the industry for that to happen or for the consumer.
Speaker 9: I should say, while we maintained the top line expectations,
Speaker 9: we increase our outpook for a ghost margin for our
Speaker 9: EPs and EBIDA, and still expect a very strong free
Speaker 9: cash flows to float through.
Speaker 8: What they change is that relative to our initial expectation
Speaker 8: at the start of the year is that the industry
Speaker 8: is we believe will now decline amidst of the digit
Speaker 8: but the fundamentals are strong. We do expect an accelerated
Speaker 8: growth rate in the fourth quarter and significant expansion and
Speaker 8: growth margin compared to the prior year, and for consumer
Speaker 8: demand to be positive for Mattel in the holiday season,
Speaker 8: in the fourth quarter and the full year. So we
Speaker 8: are performing strongly. We're heading into the fourth quarter, seeing
Speaker 8: stronger support from retailer, more shelf space, more representation in
Speaker 8: major holiday catalogs, and overall a strong position with a
Speaker 8: very broad based offering, a product across a play patterns,
Speaker 8: crash points, and we believe we have very well positioned competitives.
Speaker 3: So just to follow up there, the one hundred and
Speaker 3: twenty five million that you put out there, the estimate
Speaker 3: from the Barbie movie and related products, would you say
Speaker 3: it might be even conservative a little bit?
Speaker 8: You know, well, we did say it's at least one
Speaker 8: hundred and twenty five million dollars revenue at sixty percent
Speaker 8: operating income margin.
Speaker 9: But the.
Speaker 8: Takeaway from this is that this is one movie in
Speaker 8: one year, and as we continue to scale our strategy
Speaker 8: and have more movies, more executions, and not just in film,
Speaker 8: but also in television, in location based entertainment, theme parks,
Speaker 8: consumer products, digital experiences, music, and other verticals in some
Speaker 8: cases that are actually bigger than the toy industry, we
Speaker 8: believe that we have an opportunity to capture significant value
Speaker 8: from our franchises. And we're not saying that everything let's
Speaker 8: go there as successful as Barbie, but we absolutely believe
Speaker 8: that in the aggregate there's a meaningful opportunity for us.
Speaker 3: Well, let's go there. And I've got to say, you know,
Speaker 3: I remember when we start talking to you or you
Speaker 3: was it the early days of the Barbie Movie or
Speaker 3: you started filming. So it was kind of fun to
Speaker 3: be along for that process. But it was a movie
Speaker 3: that made us laugh, made us cry, and like I said,
Speaker 3: it appealed to a lot of different ages, which was
Speaker 3: pretty pretty wild. So what are the key brands that
Speaker 3: you think have life beyond a kid's toy chest and
Speaker 3: that you think we should be all kind of waiting for.
Speaker 3: I don't know whether it's six months, twelve months, the
Speaker 3: next couple of years that are going to be brought
Speaker 3: to life in different ways.
Speaker 8: Well, the division of Mattel's Films is to collaborate with
Speaker 8: leading filmmakers to create stand out quarterly movies based on
Speaker 8: our iconic brands that will resonate in culture and a
Speaker 8: field of global audiences. And the Barbie Movie and I'm
Speaker 8: glad you enjoyed it as much as you did, is
Speaker 8: a clear showcase it did.
Speaker 3: And we have brought me back to the theater for
Speaker 3: the first time.
Speaker 8: I don't have to hear that, and we have fourteen
Speaker 8: other movies in development right now, different demographics, different genres.
Speaker 8: We have Hot Wheels in development with jj Abrams as
Speaker 8: Warner Brothers, Matchbox in development with sky Dams, which, as
Speaker 8: you know, produced the Mission Impossible movie that did very well,
Speaker 8: and Top Dan We have a movie in development with
Speaker 8: Vin Diesel around Rocking Stock and Robots Parley Pocket with
Speaker 8: Lena Danham and Lily Collins. We have a Wishbone in
Speaker 8: development with Pitt Farley, Major Matt Mason with Tom Hanks
Speaker 8: as a star, Thomas the Tank with Mark Forrester as director,
Speaker 8: and the list goes on and off, so we really well.
Speaker 4: You know, it's very good that you're so close to
Speaker 4: Hollywood out there. Yeah, it's good that you're so close
Speaker 4: to Hollywood out there. Nel Segundo, Hey, we only have
Speaker 4: about thirty seconds left. I'd love to hear comments on
Speaker 4: the consumer going into the holiday season. Are you seeing
Speaker 4: signs of weakness in the consumer.
Speaker 8: Well, we expect a strong holiday season for Mattel. We
Speaker 8: believe our retail partners and the industry as a whole
Speaker 8: is well prepared for the season, and were very excited
Speaker 8: to be able to care consumers of all ages with
Speaker 8: a great product for in the holiday.
Speaker 3: I'm going to get yelled at, but I'm going to
Speaker 3: ask twenty seconds, what's the hot toy for Christmas and
Speaker 3: the holidays and for Hanukah? What is the hot toy?
Speaker 8: Well, anything Barbie is a hot toy, especially even before
Speaker 8: the holiday. For the spirit Halloween Barbie costume, watch out
Speaker 8: for that. But of course hot Wheels is always the winner.
Speaker 8: The basic car assortment and the five car pack assortment,
Speaker 8: and look out for the months the high four dollar assortment,
Speaker 8: and you know that will will be very will be
Speaker 8: hot selling toys for the holiday season.
Speaker 3: God, you're speaking my language. I love Uno and I
Speaker 3: love Barbie. En On Chris, thank you so much, truly,
Speaker 3: your friends and your family are on our minds and
Speaker 3: our thoughts. Chairman and CEO of Mittel.
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Speaker 3: Well, as we reported earlier, we talked about Sam makmin
Speaker 3: Free taking the stand in his fraud trial earlier downtown
Speaker 3: in New York City. Some special testimony jury was sent home.
Speaker 3: It's very fascinating everything it feels like surrounding SBF and FTX.
Speaker 3: For the latest headlines though on that trial, just head
Speaker 3: to Bloomberg dot com or check out the Bloomberg terminal.
Speaker 3: I mean, I've got to say, the rise and fall
Speaker 3: of SBF it was just tim a few years ago, right,
Speaker 3: Just go back to twenty nineteen.
Speaker 4: Yeah, there was no such thing as ftx's six change.
Speaker 4: By twenty twenty one, though, it was naming arenas after itself,
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Speaker 4: in politics and pop culture. By then. By autumn it
Speaker 4: was gone, along with much of its customers' money. The
Speaker 4: question is how did this happen so quickly?
Speaker 6: Well.
Speaker 3: A new documentary by Bloomberg Originals Ruined the Sam Bank
Speaker 3: bin Fried's story captures the head spinning frenzy around Crypto.
Speaker 3: Here's a little piece of it.
Speaker 5: I don't think he even had almost a conception at
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Speaker 6: I think he just had them metality that he has
Speaker 6: to win.
Speaker 4: It was almost like trying to explain like business ethics
Speaker 4: one oh one to a baby.
Speaker 3: Sam has basically become a villain in everyone's minds.
Speaker 5: This committee will not stop until we uncovered the bull
Speaker 5: truth behind the collapse of FTX.
Speaker 1: Will this be the last of its kind? No, this
Speaker 1: is the nature of capitalism.
Speaker 3: Get over it, all right, everybody with more on this
Speaker 3: documentary by Bloomberg Originals ruined the Sam Magmin Freed story.
Speaker 3: Let's bring in Pat ragne Or, editor of Bloomberg Markets
Speaker 3: Magazine and also the editor of Bloomberg BusinessWeek, Joel Webber,
Speaker 3: both back at Bloomberg headquarters in the Bloomberg Interactive Brokers studio.
Speaker 4: Hey, Joel Weber. I don't know if you know this,
Speaker 4: but at a point last year, earlier this year, pat
Speaker 4: Rick near was so involved in this story. I gave
Speaker 4: him a new nickname, and it was called Crypto Pat.
Speaker 4: So whenever he was walking around, I would say Hi
Speaker 4: to Crypto Pat. And it's good. Didn't know that Pat
Speaker 4: with us this afternoon. You didn't know that. But there's
Speaker 4: a reason I gave him that nickname.
Speaker 10: Isn't there, Well, look like Pat is Pat is amazing
Speaker 10: and worked with Matt Levine last year on the Crypto Story,
Speaker 10: where we went in BusinessWeek cover to cover and we
Speaker 10: published it and we felt really good about ourselves. And
Speaker 10: then the biggest story in crypto ever happened, which was
Speaker 10: the collapse of FTX, like a couple of weeks.
Speaker 4: Later, and we were like, thus far, biggest story crypto
Speaker 4: thus far, Yeah.
Speaker 1: Thus far.
Speaker 10: So as that was happening, a small group of us
Speaker 10: started talking about FTX and SBF and I helped basically
Speaker 10: put what became this documentary in motion. And as we
Speaker 10: were doing that, I was like, you know, who could
Speaker 10: take everything that he's learned about crypto from working closely
Speaker 10: with Matt Levine on the Crypto Story and parlay that
Speaker 10: into whatever this effort becomes. You want to work with
Speaker 10: Pat Ragnar And that's basically you know, here we are
Speaker 10: a year later. Funny enough, the Crypto Story published a
Speaker 10: year ago yesterday. I did don't know if you realized that, Pat, Wow,
Speaker 10: So so here we are and a lot has changed
Speaker 10: and actually today you cannot just make this stuff up.
Speaker 10: It's like so perfect. So this documentary comes out and
Speaker 10: Pat and I have been talking for a while about like, hey,
Speaker 10: we should you know, write a story for Business Week
Speaker 10: that sort of takes a step back and like tells
Speaker 10: us all what it all means. And it's tied to
Speaker 10: the documentary. And then oh, by the way, Sam bankman
Speaker 10: Fried is taking the stand, So it all comes together
Speaker 10: in elegant ways, sometimes so so pat when you kind
Speaker 10: of started writing this remarks, and you know, here we
Speaker 10: are having SBF just taking the stand for the first time.
Speaker 10: You know what what stands out to you about it all?
Speaker 5: You know, in preparing the documentary, we did some interviews
Speaker 5: with a lot of people, we guys around one hundreds
Speaker 5: of people. Yeah, but one person I spoke to who
Speaker 5: is kind of a prominent crypto critic, a guy named
Speaker 5: David Gerard, said something to me that really stuck in
Speaker 5: my head. And he said, you know, people in well
Speaker 5: regulated markets don't really understand what it means for something
Speaker 5: to be unregulated. We take for granted how finance works,
Speaker 5: even when we understand that finance is risky and full
Speaker 5: of full of opportunities for trouble and plunder. But there
Speaker 5: are bank compliance departments. Actually, most importantly, when you're deal
Speaker 5: with traditional financial institutions, there's lots of checks and balances,
Speaker 5: splitting of roles, and in crypto, you're just kind of
Speaker 5: like handing your money to a guy and you're kind
Speaker 5: of hoping, you're hoping that that they're doing the things
Speaker 5: that they're saying they're gonna do, and you really don't
Speaker 5: know what will happen. And FTX was just this like
Speaker 5: kind of very vivid illustration about like, well, what can
Speaker 5: happen is is that like everything your your your money
Speaker 5: can just you know, evaporate into a bankruptcy. And you know,
Speaker 5: I think that was why people were willing to do
Speaker 5: that and why regulators weren't able to get a hold
Speaker 5: of this faster. Is like a puzzle that I've been
Speaker 5: thinking about almost like every minute that I've ever been
Speaker 5: looking at crypto. So I was kind of trying to
Speaker 5: work through that.
Speaker 10: So what came what happened at the trial today that
Speaker 10: you found it trusting? Well it, you know.
Speaker 5: So the main thing that happened was is that the
Speaker 5: judge sent the jury home. Interesting, So what what they're
Speaker 5: doing now is kind of we're getting a hint of
Speaker 5: the testimony that he might give in front of a jury.
Speaker 5: As the judge decides what's relevant, and you know, I'm
Speaker 5: reading between the lines on the excellent live blog our
Speaker 5: reporters are doing from the courthouse to.
Speaker 7: Yeah.
Speaker 5: But but I think the implication is that he's making
Speaker 5: a case that he had lawyers, and the lawyers were saying,
Speaker 5: this is fine, this is fine, this is fine, which
Speaker 5: you know, I think goes to what it always looks
Speaker 5: like his defense has been, which is that this was
Speaker 5: an error and just a very big one. You know,
Speaker 5: I blanked up, as he said more times than his
Speaker 5: lawyers probably wishes.
Speaker 6: That he would.
Speaker 5: But that kind of seems to be the defense. And
Speaker 5: then maybe he's adding that and by the way, my
Speaker 5: lawyers helped me.
Speaker 3: Well, Pats, any time in putting this documentary together, did
Speaker 3: you at one point think well, maybe they just yeah,
Speaker 3: it was just a really mega mistake.
Speaker 5: You know, I mean, I think, I mean, my point
Speaker 5: of view is that even if like, let's let's let's
Speaker 5: have that be the generous interpretation, you don't get to
Speaker 5: do that, you know, when you're running, when you're running
Speaker 5: something where you have somebody else's money. At one point,
Speaker 5: one of his lawyers said, you know, it's like, uh,
Speaker 5: this company never had a chief risk officer, and you know,
Speaker 5: it's like you had to find time to find Tom
Speaker 5: Brady and Gazelle. You know, maybe you should have like
Speaker 5: not having a chief risk officer when you are in
Speaker 5: the risk business is And again I'm just like saying, like,
Speaker 5: let's let's be generous about it is. It's is its
Speaker 5: own kind of massive problem. But I mean, look, he's
Speaker 5: got three of his top lieutenants of gled guilty to front, right.
Speaker 5: I mean, I think you know, we can presume, well,
Speaker 5: we will wait to see what happens with the jury
Speaker 5: in this case about him, but ft X is I
Speaker 5: think it's just a legal fact at this point that
Speaker 5: FTX was a fraudulent enterprise. And what can be confusing
Speaker 5: about that is that, you know, there are often these
Speaker 5: questions sometimes we will write like, well, what happened was
Speaker 5: was that his trading firm borrowed from FTX and people
Speaker 5: and I'll hear from people saying you borrow it, he
Speaker 5: took it, and you know, but that's actually the mechanics
Speaker 5: of these kinds of things, like well, the mechanics of
Speaker 5: how you take it as you borrow it. But that's
Speaker 5: not it's not really different, you know, And it looks
Speaker 5: this was a substantially fake business.
Speaker 10: Okay, so you got to travel around the world with
Speaker 10: a really talented crew. We had a lot of Bloembird
Speaker 10: reporters participate. There are some other people that got to
Speaker 10: participate in this film Ruined. Like who when you get
Speaker 10: to and we went through the premiere together last night?
Speaker 10: Like when you got to watch that?
Speaker 1: Like what what sticks with you?
Speaker 10: And like who are you so proud of getting a
Speaker 10: chance to speak with?
Speaker 5: Well, let's say I was very interested to speak to
Speaker 5: Suzuo of of Three Arrows Capital, who, in many ways
Speaker 5: like that the the the trade that they made that
Speaker 5: fell apart on Tara Luna was the first string that
Speaker 5: pulled everything out. It was interesting to listen to him
Speaker 5: and his business partner Kyle Davies uh talk about their
Speaker 5: experience of that. I will let viewers judge how they
Speaker 5: how they how they take that conversation. Uh. Suzu is
Speaker 5: currently have has his own legal troubles. Uh, but uh,
Speaker 5: you know, so that's that that's fascinating. We also spoke to,
Speaker 5: you know, a commissioner at the CFTC who had met
Speaker 5: with Sam Bank and Freed Uh several times while he
Speaker 5: was lobbying to really get the US to open the
Speaker 5: door to his business. And you really see from that
Speaker 5: how hard he was pushing to become a h and
Speaker 5: how close he got, how close he and how close
Speaker 5: he got, and and I think that's pretty scary. I mean,
Speaker 5: it seems like in some ways it's like if a
Speaker 5: series of trades hadn't gone wrong at one hedge fund
Speaker 5: and then that hadn't fallen through another hedge fund. I mean,
Speaker 5: I think at some level this always was going to happen.
Speaker 5: But if it hadn't happened at that particular time and
Speaker 5: he had had a little more time to play it out,
Speaker 5: I think there would have been a lot more mom
Speaker 5: and pop money at FTX. They were going hard getting.
Speaker 4: That money, ay Pat. One thing that I've been thinking
Speaker 4: a lot about over the last year is what this
Speaker 4: moment means for crypto. And it's interesting that this is
Speaker 4: happening at a time where we've actually seen in recent
Speaker 4: days the price of bitcoin move higher on optimism around
Speaker 4: a spot bitcoin ETF. But I do wonder, after you
Speaker 4: spent a year really in this world, just I'm so
Speaker 4: involved in this world, and now you're on the other
Speaker 4: side of it, I don't know if you have more
Speaker 4: crypto projects planned. I don't know what Joel has planned
Speaker 4: for you moving forward.
Speaker 6: But.
Speaker 9: Do you.
Speaker 4: I'm just wondering, like, what is what is this as
Speaker 4: an existential moment for crypto now that we're kind of
Speaker 4: on the other side of it.
Speaker 5: I mean, I I think they've got a lot of
Speaker 5: work to do. I think you have to be careful
Speaker 5: not to overinterpret price moves. It's such a you know,
Speaker 5: it's a it's a pretty opaic market without a lot
Speaker 5: of liquidity. And actually, even when it was hot, that
Speaker 5: was always a question was like how many actual people
Speaker 5: are putting money into this?
Speaker 6: You know, I mean it was.
Speaker 5: Actually very hard to get a read on, like where
Speaker 5: where is a lot of this money coming from? You know,
Speaker 5: classic problem which the documentary kind of talks about is
Speaker 5: like we always talk about like, well this this tokens
Speaker 5: worth billions, that token's worth billions on these kind of
Speaker 5: very thinly traded markets, It's like how many people are
Speaker 5: actually trading this stuff? And you know it, you do
Speaker 5: see that there is some institutional interest in this, you know.
Speaker 5: I I try not to make predictions about what's what's ahead,
Speaker 5: but you know, a whole part of crypto really fell away,
Speaker 5: and it's not I think fully captured by the fall
Speaker 5: in market value. So I think crypto went from like
Speaker 5: three trillion at its peak to below a trillion in
Speaker 5: market value. It's come back up, it's about a trillion
Speaker 5: and a trillion point three, but but you know that
Speaker 5: that changed from a trillion to one trillion, is from
Speaker 5: three trillion to one trillion, doesn't really capture. Also, you
Speaker 5: know people who entrusted their money to something like a
Speaker 5: crypto bank and saw it and saw it go away,
Speaker 5: people who put their money into exchanges and saw it frozen,
Speaker 5: people who were trying to get different kinds of yields
Speaker 5: and had to go away. And it's it's hard for
Speaker 5: me to see that being an easy sell to anybody
Speaker 5: for a really long time.
Speaker 10: Okay, So one of the things though, like crypto has this,
Speaker 10: has had this come down, and I think the SBF
Speaker 10: taking the standard is a really good reminder of that.
Speaker 10: And yet at the same time, like we've seen this
Speaker 10: enthusiasm recently again where you know, Bitcoin's continue to like
Speaker 10: go up up, and it's littal like reminiscent of other
Speaker 10: moments in time where like bad things are happening, and
Speaker 10: yet it's like this thing, this thing that nobody quite
Speaker 10: understands is going up. And that also made me ask you, like,
Speaker 10: you know, so you know this ETF, that spot ETF.
Speaker 10: There seems to be a lot of interest in that
Speaker 10: is is that is that what it needs? Is that
Speaker 10: what this industry needs to have a chance that you know,
Speaker 10: redemption perhaps.
Speaker 5: You know, it would provide I think a simpler way
Speaker 5: to get in. It would get you know, on the
Speaker 5: one hand, it would bring bitcoin into the regulatory world
Speaker 5: right like you'd be you would be buying a security
Speaker 5: when you you know, would be the easiest way to
Speaker 5: buy bitcoin, you know, And obviously what the regulators are
Speaker 5: are wrestling with is can you bring this is is
Speaker 5: this fit for the regulatory world? The fund will be
Speaker 5: regulated and we'll be treated as regulated. But what's happening
Speaker 5: behind the scenes in the bitcoin market. You know, a
Speaker 5: lot of crypto people will say that you need to
Speaker 5: make a distinction between bitcoin and other crypto, you know,
Speaker 5: one of the things, and I would agree with that
Speaker 5: in so far as the the the the investment case
Speaker 5: around a lot of the crypto that people were trading
Speaker 5: was like, you know, it was like a penny stock
Speaker 5: market blossomed overnight. Bitcoin has kind of a different investment
Speaker 5: case and a different theory.
Speaker 3: But listen, we apologize, we've got to jump in, but
Speaker 3: it was interesting. We'd had a conversation with the folks
Speaker 3: over at Wisdom Treaty and they have filed for a
Speaker 3: spot Bitcoin ETF but waiting on regulatory Pat Ragnar, thank
Speaker 3: you so much, and of course Joe Webber the documentary
Speaker 3: Ruined the sam Baquin Free on the Bloomberg and on
Speaker 3: Bloomberg Originals and APM wull Street Time tonight, do not miss.
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