Speaker 1: This is Bloomberg Business Week. I'm Carole Masser and I'm
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Speaker 1: Bloomberg business Week magazine it's on the shelves right now.
Speaker 1: As the kids used to say, the cover is the
Speaker 1: Bloomberg fifty, the people who defined a global business in
Speaker 1: two and Mike are You're gonna be shocked to find
Speaker 1: out that I am not on it. I did not
Speaker 1: make the list exactly. But we've got the person responsible
Speaker 1: for that, Brett Bagan. He's a senior editor of Bloomberg
Speaker 1: Business Week, joining us via zoom from New York City.
Speaker 1: So Brett the fifty folks who really defined global business
Speaker 1: to talk to us about maybe some themes that emerged
Speaker 1: from your list this year. Yeah, So I would say
Speaker 1: that the biggest theme that emerged is the tentacles really
Speaker 1: that the war in Ukraine had, So we have obviously
Speaker 1: Vladimir z Lensky is on the list UM, but then
Speaker 1: when you start to look into other UH industries, you
Speaker 1: see people like in the finance world like Dolly Singh,
Speaker 1: who was the architect of the sanctions regime against Putin.
Speaker 1: He's on our list. And then even people like Todd
Speaker 1: Bowley who want winds up investing in buying the Chelsea
Speaker 1: Football Club after UM the Russian oligarch Romano Bromvich was
Speaker 1: pressured to sell it. So that was one of the
Speaker 1: sort of major themes UM. And then I would say
Speaker 1: it was also sort of hard to avoid um what's
Speaker 1: going on in crypto and the crypto winter. UM. So
Speaker 1: we had some familiar names like uh uh Serena Williams
Speaker 1: who's raising money UM including investing in in some crypto stuff,
Speaker 1: people like Katie Hahn, and up until about a month ago,
Speaker 1: UM we thought we were going to have someone with
Speaker 1: the initials SPF on the list, but we wound up
Speaker 1: we wound up putting his replacement John Rayan Insteady certainly
Speaker 1: an influential character, but I guess not the type you
Speaker 1: want this particular list. My favorite, though, Brett is Bad
Speaker 1: Bunny for those who are what's going on to reggaeton man?
Speaker 1: Okay there, what's he doing on there? Brett? Yeah? So UM,
Speaker 1: Bad Bunny is kind of fascinating. You know, he sort
Speaker 1: of emerges in the pandemic from He's really sort of
Speaker 1: first recognized when he was a teen for his work
Speaker 1: on SoundCloud UM and has been an incredibly prolific UM
Speaker 1: musician in the last couple of years, and that really
Speaker 1: culminated this year in him selling more are tickets to
Speaker 1: concerts and having the number one album UM of the
Speaker 1: year when he had competition from some huge names Harry Styles, Beyonce, Bts, etcetera.
Speaker 1: So no one had a bigger tour this year and
Speaker 1: no one had a bigger album this year. And Bad
Speaker 1: Bunny and he really appears appeals to like a gen
Speaker 1: Z crowd. He sort of challenges gender norms. He and
Speaker 1: his music is great and he surprises for you this year.
Speaker 1: I mean there are always surprises to me. UM. I
Speaker 1: would you know, I would say that, Um, we look
Speaker 1: at people like someone like Tom Oxley who makes the
Speaker 1: list because when you try to explain what he does,
Speaker 1: it's it's not just surprising, it's sort of shocking. He's
Speaker 1: a neuroscientist and entrepreneur who is looking into the world
Speaker 1: of brain computer interfaces and has successfully implanted device essentially
Speaker 1: allows people who are suffering from things like als to
Speaker 1: communicate via their thoughts. You know, the world of science fiction,
Speaker 1: we've heard about this for you know, years, and it's
Speaker 1: always been something in novels, but he's actually making it
Speaker 1: happen in in Australia. In this trial run, they were
Speaker 1: able to get people to actually um send emails using
Speaker 1: this technology and to order things online. So learning about
Speaker 1: people like that is always one of the most fascinating
Speaker 1: parts of businesses to get, you know, Brett. One name
Speaker 1: that chumped out in my world of market coverage is
Speaker 1: Ken Griffin, billionaire founder of Citadel. What what caught your
Speaker 1: eye with him this year? Yeah? Ken Griffin is you know,
Speaker 1: fascinating in normal times. But this, uh, this move to Miami,
Speaker 1: you know, it is not the first to do it,
Speaker 1: but he is certainly the wealthiest, certainly the richest to
Speaker 1: do it, and he's really signaling a move down there
Speaker 1: and in an attempt to make Miami into I think
Speaker 1: what we referred to as Wall Street South Um. He's
Speaker 1: building a tower there that I believe he's estimated to
Speaker 1: be at about a billion dollars. And there's also just
Speaker 1: a you know, fascinating backstory here with him wanting to
Speaker 1: leave um Illinois because of his battles with JB. Pritzker
Speaker 1: there and to go down to Florida was generally perceived
Speaker 1: as being more business friendly where the governor is Rond
Speaker 1: de Santas and and Griffin is one of his biggest contributors.
Speaker 1: So it's like a story within a story within a
Speaker 1: story on that one. You know, I was glad to
Speaker 1: see Nick Hayak on because I interviewed him this earlier
Speaker 1: this week and doing research. He's the president's CEO of
Speaker 1: the Swatch Group in Switzerland. I didn't know that the
Speaker 1: Swatch Group was the biggest watch company in the world
Speaker 1: and they have a huge market cap. Just a fascinating
Speaker 1: story when I did the research. Interesting to find him
Speaker 1: on your Bloomberg Business Week fifty. Yeah, Nick Hik is like,
Speaker 1: you know, it's a very story. He's the kind of
Speaker 1: person who you know, wouldn't have made it on last
Speaker 1: year and probably won't get on next year. But the
Speaker 1: Moon Swatch is this genius stroke that he had where um,
Speaker 1: they've basically took Um a Swatch and which is one
Speaker 1: of the lower end brands, right, and they combine that
Speaker 1: with Omega, which is one of their hiring bread and
Speaker 1: you had a watch that would normally cost about seven
Speaker 1: thousand dollars and they swapped out basically the parts to
Speaker 1: make it a two DFT watch UM, and it was
Speaker 1: wildly popular. I actually looked for one even as recently
Speaker 1: is about a week ago, and I walked into the boutique,
Speaker 1: the Swatch boutique, and they said they almost knew exactly
Speaker 1: why why were there, And they said, we don't have
Speaker 1: any you know, like almost right off the bat. And
Speaker 1: this is months and months and months after this this partnership,
Speaker 1: So it's really really just a genius stroke. The Watchers
Speaker 1: are super cool and you basically get to own this
Speaker 1: iconic watch time piece, but you only have to spend
Speaker 1: two hundred fifty dollars on it versus the seven thousand
Speaker 1: that it would the original would cost. Another one someone
Speaker 1: I did not know of Picky Cole. Uh, I'm not
Speaker 1: sure if you're allowed to say the name of a restaurant.
Speaker 1: I think this is this a family program, business business.
Speaker 1: We put it in print, we did, and our complying,
Speaker 1: our alert compliance flagged me every single um. Yeah. So
Speaker 1: Pinky Cole was fascinating. She raised million dollars this year
Speaker 1: with the help of Danny Meyer of shake Shack fame
Speaker 1: and of course of Unit Square, etcetera. Um So, she
Speaker 1: started a vegan burger chain called Slutty Vegan uh. And
Speaker 1: you know, it's basically fast food for vegans. She was
Speaker 1: trying to change people's perception of vegan food from like
Speaker 1: tofu bowls and grain bowls, and she liked junk food
Speaker 1: and wanted to be able to eat junk foods. So
Speaker 1: she needed Slutty Vegan basically so that we would talk
Speaker 1: about it, joke about it, and the burger. The burgers
Speaker 1: all have fun names like Hollywood Hooker, Manage One night Stand.
Speaker 1: It's it's great, that's fun. All right, that's good. It's
Speaker 1: a great uh collection and maybe of different people on there.
Speaker 1: It's a great read. Uh. So I suggest people run
Speaker 1: out to the you know you've got the you know
Speaker 1: place and get magazines, right, you can do that still,
Speaker 1: plus you can do it on that bloom Bloomberg dot
Speaker 1: com exactly. All right, good stuff. Brent Bigan, Senior editor
Speaker 1: Bloomberg Business Week, joining us v Assume from New York's City. Um,
Speaker 1: and it's a really good, good collection of diverse individuals.
Speaker 1: I got the usual suspects, you know, kind of the
Speaker 1: big players out there, but there's also some new ones.
Speaker 1: Serena Williams. I saw I was on there too, which
Speaker 1: is really cool. So cruise back in the back in
Speaker 1: the book. Oh it is good news for him. Alright,
Speaker 1: this is Bloomberg. These sees Bloomberg Business Week with Carol
Speaker 1: Messerer and Tim Stinebeck on Bloomberg Radio. All right, elon Musk,
Speaker 1: No surprise, I guess Michael still in the news. But
Speaker 1: now he's saying, Okay, now I'm really done. I'm really
Speaker 1: done selling stock and I mean it this time. I
Speaker 1: don't know we've heard that before. Let's bring in Sarah Fryar.
Speaker 1: She's a big tech team leader for Bloomberg News. She's
Speaker 1: also the author of No Filter, The Inside Story of Instagram.
Speaker 1: She's uh joined us on zoom from San Francisco Sarah,
Speaker 1: do we believe him this time? I know you were
Speaker 1: in the Twitter spaces called yesterday, and I guess some
Speaker 1: shareholders weren't too happy. What do you think, Well, I
Speaker 1: think it's it's difficult to say whether we believe him. Certainly,
Speaker 1: it's it's um, it's what he has promised. I think
Speaker 1: shareholders were also really interested in what he said right afterwards,
Speaker 1: which is that he will be spending more of his
Speaker 1: time on Tesla going forward. They felt he was distracted
Speaker 1: by the Twitter project. They said, you know, why didn't
Speaker 1: you come back, uh to this company that is that
Speaker 1: is a much bigger part of your life and net worth.
Speaker 1: He said, don't worry, Tesla is way more complex than
Speaker 1: Twitter ever will be. He said, Twitter has about ten
Speaker 1: percent of the complexity of Tesla, So of course he
Speaker 1: will need to be spending more of his attention on
Speaker 1: that club any going forward, which which shareholders are happy
Speaker 1: to hear. But then they confronted him with this this
Speaker 1: problem they have with how he has brought so much
Speaker 1: political you know, controversy into his his run of Twitter,
Speaker 1: bringing back UM people who had been banned, and making
Speaker 1: his own proclamations about politics and um causing you know
Speaker 1: a lot of people who loved his brand, including these investors,
Speaker 1: to feel a little alienated and to feel a little
Speaker 1: different writing around in their Tesla's and being owners of
Speaker 1: Tesla stock. And what I thought was really interesting is
Speaker 1: he responded to responded to those fears by saying, of course,
Speaker 1: I'm not going to stop talking about politics just to
Speaker 1: satisfy shareholders. Of course, not um. And I don't think
Speaker 1: that they were very pleased to hear that. Not pleased,
Speaker 1: but probably not surprised. Yea, I would guess if you
Speaker 1: know anything about but sorry, I wonder if he got
Speaker 1: into sort of any of the nitty gritty on Tesla
Speaker 1: Tesla's business because obviously, you know, the stock has taking
Speaker 1: a huge hit this year, but especially this week that
Speaker 1: those news of the discount on some models seemed to
Speaker 1: really knock a lot off the stockers down something like
Speaker 1: eight or nine percent that day. Did he talk about
Speaker 1: that at all or really any of the sort of
Speaker 1: demand dynamics for for Tesla going forward. Well, he he
Speaker 1: tied it to the economy. He tied it to the
Speaker 1: interest rate environment, the the inflationary environment. I think that
Speaker 1: you know what he was trying to get across to
Speaker 1: these investors is look, you know, this is what's happening
Speaker 1: in the industry at large, and uh, we're just kind
Speaker 1: of rolling with with the trend here. And I don't
Speaker 1: know that that you know, when you look at Tesla
Speaker 1: compared to the rest of the market, it is being
Speaker 1: hit a little harder. Um. So, I don't know if
Speaker 1: that was a satisfying answer for his investors. Sarah, you
Speaker 1: know you're out there in Francisco. You know all of
Speaker 1: these companies, you know, a lot of the Silicon Valley
Speaker 1: investors there on Sandhill Road too. Is there a sense
Speaker 1: that Twitter there's even a place for Twitter as a business?
Speaker 1: I mean, you've got Amazon now on the advertising business obviously,
Speaker 1: Facebook and Instagram, Google. Where does Twitter fit in? You know,
Speaker 1: can it be fixed? Well? Twitter isn't really replicated by
Speaker 1: any of those other businesses because it is a very
Speaker 1: real time product. People go to Twitter to figure out
Speaker 1: what's happening now. And and I think that if you're
Speaker 1: going to instagrams are going to Facebook, you're going to TikTok.
Speaker 1: It's more about entertainment around, you know, spending the few
Speaker 1: minutes you have while you're waiting for an uber. So
Speaker 1: I think that the place Twitter has in our our
Speaker 1: conversation and that's what Musk was drawn to, this idea
Speaker 1: that you would control this extremely powerful communication platform where
Speaker 1: you see politicians, celebrities, UM, athletes, actors, journalists, um sharing
Speaker 1: what's happening to them in real time and what they're thinking.
Speaker 1: That said, Twitter as a business has always been rather
Speaker 1: niche um in one part because advertisers don't really feel
Speaker 1: the need to be tied to, you know, a place
Speaker 1: of of controversy or a place where where anything can
Speaker 1: happen related to the news. It's much safer if you're
Speaker 1: an advertiser to play on UM, a platform that is
Speaker 1: more about about making people feel good and more about entertainment.
Speaker 1: So it's always been a little bit of a struggle
Speaker 1: for them to grow. And of course not everyone in
Speaker 1: the public needs to know what's happening right at the
Speaker 1: moment it's happening UM as journalists were rather addicted to
Speaker 1: that and part of the part of the engine of that.
Speaker 1: But you know, regular people don't need to be glued
Speaker 1: to Twitter all day. Yeah sor I wonder if it's
Speaker 1: possible to get a sort of vibe check on what
Speaker 1: these shareholders were like during this spaces h Q and
Speaker 1: A yesterday. You know, did they seem angry? Do they
Speaker 1: seem like they're itching to hit that sell button or
Speaker 1: is it more a matter of come on, Ellen, we
Speaker 1: were on board, but we need you to do this,
Speaker 1: that and the other thing very much, the latter. I mean,
Speaker 1: I think a lot of things that must would say,
Speaker 1: the shareholders would say, oh yeah, that makes a lot
Speaker 1: of sense. I get it. I just want to you know,
Speaker 1: you know, are you punching down when you talk about
Speaker 1: trends rights? Are you punching down when you when you
Speaker 1: you know, do this your political commentary that you do? Um,
Speaker 1: how how can we tell our our daughters or our
Speaker 1: sons that we admire you as as you you know,
Speaker 1: really change your your public perstona and taken on so
Speaker 1: much um controversy with this Twitter bid and And I
Speaker 1: think that that's something that he didn't really answer to
Speaker 1: their satisfaction. I think they were very much just trying
Speaker 1: to to communicate to him, like, man, we're on your side,
Speaker 1: Like you really to see this turnaround. It's in all
Speaker 1: of our financial interests um and And he was like, Hey,
Speaker 1: like this is this is who I am and and
Speaker 1: I'm I have great things. Yeah, so, Sarah, one of
Speaker 1: the next things I guess we'll see in terms of
Speaker 1: Twitter as a businesses CEO. Are they going to hire
Speaker 1: a CEO? Now? I can't imagine being taking that position
Speaker 1: given that Elon Elon Musk be He's still gonna be
Speaker 1: involved in the company. Any rumblings out there in the
Speaker 1: valley about who might get the job want the job, well,
Speaker 1: Must for his part, says that anybody who wants it
Speaker 1: is probably not qualified. So you know, maybe you have
Speaker 1: to not want it and have Must come call on
Speaker 1: you and say will you step up to the plate.
Speaker 1: But listen, it's gonna be really complicated position because not
Speaker 1: only do you have to um run this company where
Speaker 1: Musk is still financially in control. He said that he
Speaker 1: wants to remain in charge of in engineering and software
Speaker 1: and servers, so he's still going to be a larger
Speaker 1: than like presence in the office. If if not, you know,
Speaker 1: making a lot of the decisions still, and you need
Speaker 1: somebody who can can cater to that well at the
Speaker 1: same time, putting the business in the direction where it
Speaker 1: can't succeed and Musk has said that it's been on
Speaker 1: the path to bankruptcy. It's may I don't know if
Speaker 1: that's hyperbolic or not, but certainly Twitter has taken on
Speaker 1: a lot of debt that must borrowed in order to
Speaker 1: finance this transaction. And so you know, he explained that
Speaker 1: they were, prior to his cuts, they'd be on track
Speaker 1: to to spend way more than they make. Um. Alright,
Speaker 1: s great stuff. I don't know, We're gonna I know
Speaker 1: we're gonna continue talking to you over the coming days
Speaker 1: and months and on this issue because it just seems
Speaker 1: to be the story that keeps on giving. Sarah Fryar
Speaker 1: she's a big tech team leader Bloomberg News. She's also
Speaker 1: the author of No Filter, the inside story of Instagram.
Speaker 1: She joins us on Zoom from San Francisco, talking lord
Speaker 1: elon Musk and a little testo, wellmore coming up. You're
Speaker 1: listening to Bloomberg Business Week with Carol Messer and Tim
Speaker 1: Stenovic on Bloomberg Radio. All Right, let's be honest here,
Speaker 1: stocks disaster bonds even more of a disaster like epic
Speaker 1: proportions disaster. Right, That's what the fixing come people tell me.
Speaker 1: They've they've never seen it ever. Don't even get started
Speaker 1: on crypto. Then, don't even get started on crypto. Let's
Speaker 1: talk about another kind of hot item with the kids.
Speaker 1: E t F S E t This is a surprising
Speaker 1: turn of events for E TFS, and I think Emily
Speaker 1: is going to explain it to us. All all right,
Speaker 1: I'm like geo. She's cross asset reporter for Bloomberg News,
Speaker 1: joining us here on our Bloomberg Interactive Broker studio. It's
Speaker 1: cross asset reporter, just another way to say et F
Speaker 1: reporter because you Hadi Greifeld. She's also a cross s reporter,
Speaker 1: but she talks a lot about E t F S.
Speaker 1: Cross asset is everything, every little thing, but E t
Speaker 1: F S does fall under our coverage and we love them.
Speaker 1: So how highs lows just give us a thirty foot picture. Okay,
Speaker 1: so thirty thousand foot picture. We obviously have had a
Speaker 1: bear market in stocks, but not every E t F
Speaker 1: has done poorly. The ones that you would imagine that
Speaker 1: have done well in the equity side, the energy linked stocks,
Speaker 1: the crypto linked ones have done poorly. But then when
Speaker 1: you look at the more are alternative space, the commodity
Speaker 1: funds have done really well, and then some hedge fund
Speaker 1: tracking hedge fund style et F. So the hedge fund
Speaker 1: hedge fund strategies one is a managed futures one. So
Speaker 1: that's a specific trend falling strategy. I know, Mike, you
Speaker 1: had Andrew Beer on your What Goes Up podcasts a
Speaker 1: few months ago, But that fund has done incredibly well
Speaker 1: this year. It's up about year to date. It's started
Speaker 1: two with about sixty million in assets and it crossed
Speaker 1: over one billion and just months. A lot of trust
Speaker 1: there in terms of flows into those kind of alternative strategies.
Speaker 1: What really shocked me though, is, you know, Paul and
Speaker 1: I were talking about how the I p O market
Speaker 1: was basically dead for good reason. Who wants to try
Speaker 1: to float in IPO in this market? But how many
Speaker 1: new ETFs. My eyes popped out of my head when
Speaker 1: I saw this. Yeah, so right now that tally is
Speaker 1: four hundred twenty two new e t and that's a record.
Speaker 1: We had a record last year. Emily has written about
Speaker 1: every one of them. Yes, every PR person has pitched
Speaker 1: me on the brand new ETF. But we had a
Speaker 1: record last year, and then this is another year which
Speaker 1: is surprising because you wouldn't think that any common theme
Speaker 1: among them. You know, I'm sure that they're not all
Speaker 1: exactly the same strategy, but any themes pop out. Well.
Speaker 1: There were a lot of interest rate hedging strategies. Everyone
Speaker 1: was trying to kind of figure out, like how do
Speaker 1: we position for the bear market in bonds? So some
Speaker 1: of them were more successful than other. Some of the
Speaker 1: funds were betting on the yield curve um steepening, and
Speaker 1: then some we're betting more on inflation depending on the
Speaker 1: kind of derivatives that they had in the fund. So
Speaker 1: it was a mixed bag for those. And then there
Speaker 1: were still a lot of E s G funds coming out,
Speaker 1: which was surprising given the year that E s G
Speaker 1: has had. But there is some appetite, at least on
Speaker 1: the issuer side to launch a fund with that kind
Speaker 1: of label in it. And I guess some of these
Speaker 1: are years in the making, so you know, you get
Speaker 1: them across the finish line when it's the right time
Speaker 1: or not. Another thing that really boggles my mind this
Speaker 1: year is cathy Woods Innovation Arc Innovation Fund had a
Speaker 1: very awful year. You know, those high growth tech stocks, uh,
Speaker 1: not so high on the profits. Yet Um just got
Speaker 1: collaborated this year. She actually had influence this year though
Speaker 1: she did yeah over one billion. Yeah. Well, I wonder
Speaker 1: what is that play out across that whole sort of growth,
Speaker 1: this tech innovation strategy or is it just her her
Speaker 1: special mojo? Do you think? I don't have the details
Speaker 1: of every single tech et F, but I do know
Speaker 1: that there are fans that just they love arc they
Speaker 1: want to hold on. I was actually talking about it
Speaker 1: with the source this morning who was kind enough to
Speaker 1: take my call on Christmas eve eve Um, who was
Speaker 1: saying that there are these people that she has a
Speaker 1: long term thesis. They feel like they're making the right
Speaker 1: call by investing for the longer terms. So even though
Speaker 1: the fund has fallen there, they're still interested in this innovation.
Speaker 1: What is an active e t F fund? So an
Speaker 1: active e t F Normally when retail investors think of ETFs,
Speaker 1: they usually think of funds at track indexes, index funds
Speaker 1: passive strategy. But we're seeing the growth of e t
Speaker 1: fs that have active managers that actively buy and sell
Speaker 1: and change the waitings of different stocks. And so what
Speaker 1: we've really seen this year in two is these large
Speaker 1: legacy asset managers companies that are known for their actively
Speaker 1: managed mutual funds. Launching et F s. Capital Group was
Speaker 1: the big cahuna this making with the still the low
Speaker 1: cost structure that makes ETFs the cool thing most of
Speaker 1: the time. The active e t fs are lower fee
Speaker 1: than the mutual I have to say the manager, which
Speaker 1: was the whole part of the lower fees was there's
Speaker 1: nobody really I had to pay and have to pay
Speaker 1: some start portfolio. Yeah, the fee, it's it's lower than
Speaker 1: the mutual fund, but it's it's more expensive than a
Speaker 1: passive E t F across the for the most part,
Speaker 1: Emily smart to call sources on two days before Christmas.
Speaker 1: You might get them with a few egg nogs and
Speaker 1: you know, I'll tell you a little bit more than
Speaker 1: they had planned. But but Emily, you know, there's so
Speaker 1: many players in the E t F space now, um
Speaker 1: is anyone making ground on the on the big two?
Speaker 1: You know, black Rock Vanguard obviously have dominated the space
Speaker 1: for years, but they're you know, getting attacked from all
Speaker 1: sides with different strategies and different new products. Is are
Speaker 1: they making any headways all these upstart competitors? Yeah, I
Speaker 1: mean the big asset managers are starting to UM reached
Speaker 1: the top reach Vanguard and black Rock. We don't think
Speaker 1: that the assets are going to replace or get bigger
Speaker 1: than Van Goard or black Rock. But three names that
Speaker 1: I'm watching Dimensional JP Morgan, and Capital Group UM. They
Speaker 1: had some of the most successful et F launches in
Speaker 1: two This is from Bloomberg Intelligence. They've taken in sixty
Speaker 1: percent of the assets gathered by all of the new
Speaker 1: et F that have launches, sixty eight percent of the
Speaker 1: assets went to those three companies. So they have been
Speaker 1: able and they're launching this active strategy, which some strategists
Speaker 1: were doubtful that active would take a place in the
Speaker 1: e t F world. I guess in some way, maybe
Speaker 1: they're cannibalizing a little their mutuals. We are seeing a
Speaker 1: lot of companies fidelity to converting their mutual want e
Speaker 1: t s. That's a thing, yes, yes, so it started
Speaker 1: in one and we're seeing now there's a tool. They're
Speaker 1: in the town. There's a new tool. Bomberg Intelligence keeps
Speaker 1: a tally of how many I think it's a little
Speaker 1: bit over thirty five now mutual funds to have UM
Speaker 1: flipped to e T f s. But it is a
Speaker 1: little bit of saving yourself, not wanting the competitor to
Speaker 1: launch an ETF, so you're gonna do it yourself. I mean,
Speaker 1: is there any future I don't, Michael, you might know
Speaker 1: to it, like for the traditional mutual fund structures or
Speaker 1: future there that we all grew up with it or
Speaker 1: I don't know. It seems like they're gonna die by
Speaker 1: a million cuts with all these conversions to two E
Speaker 1: t f s and ETFs that replicate the same strategies.
Speaker 1: Because I grew up as an and I have a
Speaker 1: lot of mutual fund yes manager friends who are gonna
Speaker 1: I'm gonna hear about something they're not listening to that.
Speaker 1: I mean, I started my career as an analyst and
Speaker 1: you had to go to Boston three or four times
Speaker 1: a year, and the great thing about is you could
Speaker 1: just take a within a ten minute walk radius. Fidelity
Speaker 1: part them well, I mean the big bunny managers in
Speaker 1: the world and boom, they were right there. But I'm
Speaker 1: wondering about that business now. Yeah. I mean a lot
Speaker 1: of those aims that you mentioned, I saw them at
Speaker 1: the E t F conferences that I attended this year.
Speaker 1: The one thing that I think is keeping mutual funds
Speaker 1: still in business is that in a lot of retirement accounts,
Speaker 1: it doesn't really make sense to have the e t F,
Speaker 1: the tax advantages of the et F, it's kind of
Speaker 1: canceled out by the retirement accounts. So until that changes,
Speaker 1: we probably won't see a very large flip and a
Speaker 1: complete death of mutual funds. They'll stick around. The conference
Speaker 1: schedule tracks me up. ETFs and crypto are keeping the
Speaker 1: conference industry alive, I think, and I don't see any
Speaker 1: like et F conferences in Milwaukee, you know, bringing your sunscreen,
Speaker 1: that that sort of thing. Alright, so, uh, Emily, good stuff.
Speaker 1: We're gonna let you cross as. I'm just gonna call
Speaker 1: them et F slash crypto reporters. It's like the fancy
Speaker 1: pooh me. Have you seen that, you know? Et F reporter? Okay,
Speaker 1: put a tuxedo on pool and their cross exactly. I
Speaker 1: am a cross as reporter Blomberg News. Joining us here
Speaker 1: on our Bloomberg Interactive Broker studio. These sees Bloomberg Business
Speaker 1: Week with Carol Messerer and Tim Stinavic on Bloomberg Radio.
Speaker 1: Let's talk a little crypto, but maybe from a little
Speaker 1: bit different angle. Bruce Roger's chairman, CEO and president of
Speaker 1: l M Funding It's tickers l m f A joins
Speaker 1: us via zoom from Tampa, Florida, where I think even
Speaker 1: the cold weather is going to reach. Uh Tampa, Bruce,
Speaker 1: Are you guys getting ready for a little bit chillier
Speaker 1: than usual Christmas? Down to Tampa? Sure it was seventy
Speaker 1: and sunny when I came in, so I wore my
Speaker 1: leather jacket. Good for you, Well, somehow try to, you know,
Speaker 1: bear through it. Uh, Bruce, talk to us about LM funding.
Speaker 1: What what do you guys do? Where do you how
Speaker 1: do you participate in the crypto space? Well, we made
Speaker 1: a pivot into bitcoin a year ago um as an
Speaker 1: outpouring of an effort to do a spack. So we
Speaker 1: founded as back and looked at a bunch of different
Speaker 1: industries to pivot our l m f A ticker and
Speaker 1: landed on bitcoin mining. And the reason we landed on
Speaker 1: that it seems like it's bearing its way out. We
Speaker 1: looked a lot of exchanges and a lot of the
Speaker 1: different defied plays, and I just never as a lawyer,
Speaker 1: could come to grips with the regulations on that, so
Speaker 1: we started buying bitcoin and put it on our balance sheet,
Speaker 1: kind of the micro strategies piece. And then I realized
Speaker 1: the cheapest way to buy a bitcoin if you believe
Speaker 1: in this stuff is the mining, and so we bought
Speaker 1: a bunch of mining machines at the peak of the market.
Speaker 1: Fortunately with a variable price contract so we didn't get
Speaker 1: burned too badly. And now we're up in mining at
Speaker 1: a in the bigcoin winner at the hardest of times.
Speaker 1: But um, I still believe in bitcoin and what it
Speaker 1: can do, and it solves the trust problem between humans,
Speaker 1: and it does so by having lots and lots of
Speaker 1: humans participate in every transaction. So that's the story of
Speaker 1: why bitcoin for us. Yeah, first talk to us a
Speaker 1: little bit about the climbing climate for miners these days.
Speaker 1: You know, we did have Core Scientific, one of the
Speaker 1: largest miners of bitcoin, file for bankruptcy protection earlier in
Speaker 1: the month. What are the challenges facing bitcoin miners? Obviously
Speaker 1: the dropping prices is one leverage. What's going on in
Speaker 1: the space in general? Are we gonna see more more
Speaker 1: sort of bankruptcies or failures like like we saw with
Speaker 1: Course Scientific. I think that anybody that levered up a
Speaker 1: year ago and the asset that we're all betting on
Speaker 1: to make us money is down. That leverage is gonna
Speaker 1: be very hard to pay back. So I feel very
Speaker 1: fortunate and that we did not lever up and we're
Speaker 1: entirely cash based company. Um. The overall it's as bad
Speaker 1: as it could be, but it can always get worse,
Speaker 1: you know. UM, gas prices are up, so Winner's cold
Speaker 1: electricity is going to be expensive. Um. We made the
Speaker 1: We've we've tried three different approaches to uh to getting
Speaker 1: machines hosted. We went with the startup entrepreneurial guy and
Speaker 1: he went bust, and then we said, nope, we're gonna
Speaker 1: go big balance sheets for our hosts. We went to
Speaker 1: Compute North and they went bust and we're still kind
Speaker 1: of working a way out of that. And we moved
Speaker 1: a bunch of our Core machines too, I'm sorry, bunch
Speaker 1: of our Compute North machines to Core and unfortunately there
Speaker 1: that seems to be working out well. I've reviewed their
Speaker 1: plan and uh, it looks like that we're gonna be
Speaker 1: able to stay energized based on what they've informed us
Speaker 1: so far. Uh, soaper it's just looking at your background
Speaker 1: originally from Bowling Green, Kentucky, and just so you know,
Speaker 1: I'm a huge fan of Bowling Green, Kentucky, have spent
Speaker 1: a lot of time there. And I also note that
Speaker 1: you're in the United States Navy for four years and
Speaker 1: the surface warfare officers, So thank you for your service.
Speaker 1: My question to you here is, I mean where I
Speaker 1: mean the bitcoin mining. I mean that seems like the
Speaker 1: nuts and bolts of the business, and I get that,
Speaker 1: and that's where you guys are focused in. But when
Speaker 1: you see a big exchange like ft X blow up
Speaker 1: and you know, Sam Bankman, find what does that mean
Speaker 1: to you as an industry participant? How how cripple thing
Speaker 1: is that? If it is at all or in terms
Speaker 1: of credibility, there's nothing good about it, um other than
Speaker 1: I guess it gets this out of the way. UM.
Speaker 1: I thought as a bitcoin miner, as when I did
Speaker 1: not buy into the DeFi thing, when we were looking
Speaker 1: at different companies with our SPACs, I just I could
Speaker 1: not figure out what securities laws they were trying to
Speaker 1: comply with and find out they weren't. UM. So there's
Speaker 1: some scatting forward there and watching it it failed. But
Speaker 1: what I didn't realize is that our hosting companies were
Speaker 1: intertwined with the DeFi situation, and that it's it's sucks
Speaker 1: some liquidity out of the coin and it sucks some
Speaker 1: Uh well, let's put some some miners into a bad
Speaker 1: place because of the financing. Uh it the whole DeFi thing.
Speaker 1: To me, I heard this it was either late night
Speaker 1: TV or maybe on Bloomberg when somebody compared it to
Speaker 1: the Right Brothers financing their company by selling frequent flyer miles.
Speaker 1: And I loved it because I thought through the example,
Speaker 1: and it is kind of what sambrankmun freed and the
Speaker 1: magic box we're talking about. You know, they just had here.
Speaker 1: We got an idea. We got this idea. It was
Speaker 1: gonna be a wing and we're gonna run down a
Speaker 1: dune into the wind and we're gonna fly. And so
Speaker 1: what we think you should do is by tickets on
Speaker 1: these planes that are gonna shuttle people over around the Earth.
Speaker 1: And it would have worked out, well, it really wouldn't
Speaker 1: work because the airline business turned out not to be
Speaker 1: so good and so forth. But even if they had done,
Speaker 1: it had taken the time delay in flying and the
Speaker 1: first flight was a little bit, and people would have
Speaker 1: got ansty so they would have had to invent the
Speaker 1: stable coin too, and and we would have got through
Speaker 1: that whole thing. If the right bones, the irony is
Speaker 1: the right brothers could have financed their operations by selling
Speaker 1: frequent flyer miles because it wasn't illegal back. Yeah, person,
Speaker 1: it's good to hear that. Uh, you know, your company's
Speaker 1: not levered up like some of these other miners, and
Speaker 1: and maybe can weather this, uh, this turmoil in the
Speaker 1: market a lot better than those that were. But I
Speaker 1: wonder what if any risk there is to bitcoin as
Speaker 1: more miners struggle, and you know, if they do start
Speaker 1: failing on plugging the rigs. Um, is there a risk
Speaker 1: to sort of I don't know the integrity of bitcoin
Speaker 1: or the transaction times or anything. Um if if a
Speaker 1: lot of miners fail, or is it just you know,
Speaker 1: the last company standing like yourself, just get more of
Speaker 1: the pie. Well, Bitcoin has lots of built in features,
Speaker 1: but the degree of difficulty the more miners plugged in,
Speaker 1: the harder it is. The mind So with if miners
Speaker 1: fall offline, you know, take it to a logical extremes,
Speaker 1: it becomes easier and easier so that the actual transaction
Speaker 1: in the coin and the yield is calculated to be
Speaker 1: about the same over periods of time. And that's why
Speaker 1: we say the last coin will be mined in UM.
Speaker 1: So you got you got some time there. Yeah. Yeah.
Speaker 1: One of my board members is just in the office.
Speaker 1: He said, I think we got till twenty forty. I
Speaker 1: said that this none of the math works if that's true.
Speaker 1: So you got that check that date. So first talk
Speaker 1: to us about one of the other aspects of mining.
Speaker 1: It's just that the power issue. What's your strategy there,
Speaker 1: how do you kind of maximize that? So we were
Speaker 1: driven by capital and so it to us it's the
Speaker 1: cost of capital to get bitcoin, and I don't want
Speaker 1: to buy infrastructure right now if I can avoid it, uh,
Speaker 1: you know, thirty year infrastructure to mind bitcoin. I would
Speaker 1: rather pay per kill a lot. So we do everything
Speaker 1: through hosting companies like Core and Compute North that um
Speaker 1: they up charge us on the cost of electricity and
Speaker 1: the infrastructure. So that's been our approach to it. And
Speaker 1: then with that we're kind of like outsourcing. The dealing
Speaker 1: with the local politics of bitcoin mining is loud and
Speaker 1: it throws off a lot of heat. So there are
Speaker 1: neighbors that aren't gonna like that. So where are your
Speaker 1: machines physically? I mean, are they just in an I
Speaker 1: T office park kind of thing? Where where do you
Speaker 1: house them? Or were they may maybe not just you yourselves,
Speaker 1: but just the industry. So just relying on public information,
Speaker 1: the we house a bunch of them at Core Scientific
Speaker 1: and uh specifically at their Calvert City, Kentucky facility. Yeah.
Speaker 1: I wanted the high Point Award there at age nine,
Speaker 1: so I came back years later to spend some money. Um.
Speaker 1: Uh so these are that facility, if I recall, used
Speaker 1: to be a steel uh facility, so it had great
Speaker 1: power access. There's a new facility out there in the
Speaker 1: western part of the state of Kentucky. And uh so
Speaker 1: that brings you to the energy piece, which is you know,
Speaker 1: if you're on the grid, you're getting whatever energy is
Speaker 1: in the grid, and that's where we are. All right,
Speaker 1: that's good stuff. Uh you know, two thumbs up for
Speaker 1: Kentucky again. I'm a big fan of bowling your Kentucky.
Speaker 1: You didn't know that my big big bourbon guy over
Speaker 1: there poem Yeah exactly. Bruce Rogers, Chairman CEO and president
Speaker 1: of l M Funding, joining us on Zoom from Tampa, Florida,
Speaker 1: and you know that whole mining aspect. It's just it's
Speaker 1: just fascinating. You know, my understanding level is relatively and elemental,
Speaker 1: but I mean just the concept that just you know,
Speaker 1: cranking out code and just kind of running and running
Speaker 1: and running it, and the power associated with running those machines,
Speaker 1: and you know, it was it was interesting too to
Speaker 1: hear Bruce. You know that that's sort of skeptical lawyer's mind.
Speaker 1: Figure out this is the avenue uh at least likely
Speaker 1: to get everyone in trouble. Which is which is? It's
Speaker 1: good stuff? All right, good stuff? That was Bruce Rogers journal.
Speaker 1: But you let me drive? Oh no, no, Nobles, I
Speaker 1: want to drive. It's a good question. M Time this
Speaker 1: to the clothes on Blueberg Radio. All right, Mike, it's
Speaker 1: December eve eve for me. So in the rearview, as
Speaker 1: the kids say, I mean, stocks down twenty plus percent,
Speaker 1: I got bonds down double digits. Enough. I'm looking forward
Speaker 1: to and I want to talk to somebody maybe he
Speaker 1: can give me. It's not like you wanted to retire ever, Paul, No, no, exactly.
Speaker 1: So I love this working thing. So as as Tom
Speaker 1: Keane refers to the four O K, the the two away.
Speaker 1: So Michael Sheldon, he's the executive director and chief investment
Speaker 1: officer for High Tower r d M Financial Group. He
Speaker 1: joined us via zoom from Westport, Connecticut. Michael, I don't
Speaker 1: care about two give me your call. What's the letter
Speaker 1: that What was in your letter that you sent out
Speaker 1: to your clients preparing them for well? I think as
Speaker 1: we obviously two thousand twenty two is certainly a roller
Speaker 1: coaster over the year. As we look ahead to two
Speaker 1: thousand twenty three, ultimately we're seeing some weakness in the
Speaker 1: economy in the first half of the year. UM. Either
Speaker 1: a slowed ending economy or shallow recession appears likely. If
Speaker 1: you look at some of the data. For example, the
Speaker 1: leading economic indicator has been negative for nine months in
Speaker 1: a row. The yield curve continues to point to some weakness.
Speaker 1: That's the difference between short and long term rates UM. Ultimately,
Speaker 1: the Fed wants to see I think three or four
Speaker 1: months in a row of positive meaning inflationary data that's
Speaker 1: moving in the right direction. Today's data. You talked about
Speaker 1: the PC data. There were no surprises in that, and
Speaker 1: that's the good news. The core number, which the FED
Speaker 1: watches fell from five to four point seven percent on
Speaker 1: a year of a year basis, and that's the lowest
Speaker 1: actually since the fall of two thousand twenty one. So
Speaker 1: I think the FED wants to seem more positive inflation data,
Speaker 1: and ultimately that will lead to a shift in FED policy,
Speaker 1: probably in the spring of next year, after the FED
Speaker 1: probably raises rates to five and a quarter or so,
Speaker 1: five to five and a quarter or so, and we
Speaker 1: see some possible weakness in the first half of the year,
Speaker 1: but then ultimately we've see things recovering as investors start
Speaker 1: to look ahead to a rebound in the economy and
Speaker 1: corporate profits as we head into two thousand and twenty four. So, so, Michael,
Speaker 1: what does that shift in FED policy or at least
Speaker 1: communications look like to you? Is preservably not an actual
Speaker 1: cut in rates, but at least the end of of
Speaker 1: the tightening. Yeah, I think you know, if you look
Speaker 1: at past if you look at past cycles when the
Speaker 1: fedtest cut rates, the markets have rallied. In this situation,
Speaker 1: we're likely to see the FED shift policy first by
Speaker 1: indicating that they're moving to the sidelines because inflationary data
Speaker 1: has has started to improve, but maybe they haven't met
Speaker 1: all of their criteria just yet. So we will probably
Speaker 1: see rates day at five to five and a quarter
Speaker 1: percent through much of next year, unless things really change
Speaker 1: where the credit markets free up freeze up, which we
Speaker 1: don't see at this point. UM. So I think that
Speaker 1: FED shifting policy sort of a more of a neutral bias,
Speaker 1: will create a more positive environment for the markets. One
Speaker 1: of the big questions we're thinking about is what kind
Speaker 1: of weakness or what kind of recession we see next year.
Speaker 1: And some people think it will be more serious. We
Speaker 1: think it will probably be shallow. Um. For example, if
Speaker 1: you look at the last nine recessions, the unemployment rate
Speaker 1: rose each of those times on average by three point
Speaker 1: four percent, So this time around, that would mean the
Speaker 1: unemployment rate would rise to over seven But given the
Speaker 1: labor market challenges that we see right now, companies are
Speaker 1: still trying to hire a lot of workers. Um. We
Speaker 1: see some layoffs, but we don't think that we're going
Speaker 1: to see the kind of economic downturn that we saw,
Speaker 1: for example, in in oh eight or two thousand two. Yeah,
Speaker 1: it's tough to see kind of those types of unemployment rates.
Speaker 1: When you got a Jolts number that's still over ten millions.
Speaker 1: So so that's right, Michael, talk to us about the
Speaker 1: consumer here, as we all know the consumer, you know,
Speaker 1: its generally hanging in there. The consumer has a job
Speaker 1: if here she won one. Yes, their savings have been
Speaker 1: run down, yes, the running Usman credit card debt. But
Speaker 1: you know, we had some good numbers out of Nike
Speaker 1: and some others recently. How are you thinking about the
Speaker 1: consumer going into twenty three. Yeah, it's important to keep
Speaker 1: an eyeing the consumer because that represents about two thirds
Speaker 1: of the U S economy. So I mean, looking backwards,
Speaker 1: if you look at some of the jobs data, we've
Speaker 1: created more than two hundred thousand jobs per month in
Speaker 1: each of the last three months. So granted we had
Speaker 1: a hold to climb out of out of COVID. The
Speaker 1: unemployment rate right now is around three point seven percent,
Speaker 1: which is the lowest level almost since ninety nine, and
Speaker 1: wages are rising at a more than five percent rate.
Speaker 1: So at the same time, that wage rate is one
Speaker 1: of the sticky things that that Powell is trying to
Speaker 1: bring down. UM, there are some signs that consumer spending
Speaker 1: will slow equity markets and financial markets in general have
Speaker 1: been volatile, and we're likely to see some more layoffs
Speaker 1: as we head into next year. But but overall, Um,
Speaker 1: the consumer overall is generally I am pretty good footing.
Speaker 1: But we do see some slowing in consumer spending during
Speaker 1: the first half of next year before things likely pick
Speaker 1: up again. You know, Michael, with UH, these interest rates
Speaker 1: expected pretty much by everyone, uh and you included, to
Speaker 1: stay relatively elevated, say the FED funds rate above five
Speaker 1: percent for three I think the general thinking is that,
Speaker 1: you know, gains in the equity market strictly through valuation
Speaker 1: expansion are pretty much off the table. That you know,
Speaker 1: in that pe ratio, we really need to rely on
Speaker 1: the E rather than just the P to get a
Speaker 1: gain in in the equity market next year. Um. There's
Speaker 1: a lot of skepticism about earnings, uh, the estimates where
Speaker 1: they stand for next year. UM, But I'm curious how
Speaker 1: you're thinking a about earnings. And you know, am I
Speaker 1: right to think that valuation expansion is off the table
Speaker 1: even if the Fed sort of pauses rather than signals
Speaker 1: are cut. Yeah. In terms of valuation, the markets are
Speaker 1: currently trading at about seventeen times forward earnings UM. Valuation
Speaker 1: levels had pulled back substantially heading into the June lows,
Speaker 1: and then they've sort of rallied. Valuation levels have moved
Speaker 1: up with the market heading UM as the markets rallied
Speaker 1: into the December highs. Right now, the outlook is for
Speaker 1: corporate profits overall to rise about five for the SMP
Speaker 1: five hundred next year, and those numbers have been coming down.
Speaker 1: Our thinking is that earnings will numbers will have to
Speaker 1: come down probably when companies start to report their fourth
Speaker 1: quarter earnings, which will be sometime in January or the
Speaker 1: second half of January. UM. It's it's a tough call
Speaker 1: right now. Earnings for the next year two thousand twenty
Speaker 1: three could very well be flatter or could be negative
Speaker 1: actually on a year of a year basis. But ultimately
Speaker 1: the markets bottom ahead of earnings, and the markets bottom
Speaker 1: ahead of the economy. So that's why even if there
Speaker 1: is a downturn next year, we think that the stock
Speaker 1: market and bottom sometime in the in the spring or summer,
Speaker 1: before earnings and before the economy starts to get get better.
Speaker 1: All right, Michael, good Stuff, really appreciate you taking the
Speaker 1: time on this Friday Christmas Eve Eve. Michael Sheldon, He's
Speaker 1: executive director and chief Investment Officer of High Tower r
Speaker 1: d M Financial Group, joining us via zoom from Westport, Connecticut.
Speaker 1: Thanks for listening to Bloomberg Business Week. Download the podcast
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