WEBVTT - US Court Paves Way for Spot Bitcoin ETF 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.960 --> 0:00:22.120 Should we talk about crypto? 0:00:22.400 --> 0:00:24.680 Yeah, I'm taking a look at bitcoin right now, and 0:00:25.120 --> 0:00:26.960 I haven't seen a rally like this in quite some time. 0:00:27.000 --> 0:00:29.400 It's up seven point four percent just today, Carol. 0:00:29.520 --> 0:00:31.320 Yeah, I'm looking at the whole crypto monitor on the 0:00:31.360 --> 0:00:34.120 Bloomberg like it's all up. Ethereums up about five and 0:00:34.120 --> 0:00:35.080 a half percent. 0:00:34.800 --> 0:00:37.680 Which makes no sense. If this is about bitcoin, then 0:00:37.680 --> 0:00:38.720 why is every other crypto? 0:00:38.920 --> 0:00:40.800 I'm sorry, Tim Stenewick. You want sense when it comes 0:00:40.840 --> 0:00:41.640 to the crypto market. 0:00:41.800 --> 0:00:43.760 Maybe Hannah Miller can help us make sense. 0:00:43.920 --> 0:00:46.120 I hope so, because we did have a three judge 0:00:46.120 --> 0:00:49.239 appeals panel in Washington today overturning a decision by the 0:00:49.320 --> 0:00:52.640 SEC to block a spot based bitcoin ETF from Grayscale. 0:00:52.680 --> 0:00:53.800 Does that make sense to you? 0:00:53.800 --> 0:00:56.319 You know? I just feel like getting an interpreter when 0:00:56.320 --> 0:00:58.680 it comes to all things crypto. We do get an 0:00:58.680 --> 0:01:01.880 assist from Hannah Miller's Digital currencies and venture capital reporter 0:01:02.240 --> 0:01:04.319 for Bloomberg News, and she's with us on the phone 0:01:04.360 --> 0:01:09.200 in San Francisco. Hannah, take it away. So big decision, 0:01:09.360 --> 0:01:10.640 significant help. 0:01:12.040 --> 0:01:15.240 Yeah, So this is a significant decision for the industry. 0:01:15.560 --> 0:01:18.559 You know, this has been a very drawn out battle. 0:01:18.600 --> 0:01:22.000 This is lasted years, and it is paving the way 0:01:22.240 --> 0:01:25.600 for the approval of the spot Bitcoin ETF in the US. 0:01:26.319 --> 0:01:28.520 But that is not definitive. There's still a lot of 0:01:28.520 --> 0:01:30.840 stuff that needs to happen. There still needs to be 0:01:30.880 --> 0:01:33.679 an approval process from the SEC. So I've been talking 0:01:33.680 --> 0:01:35.720 to people in the industry. It's been a lot of 0:01:35.800 --> 0:01:38.199 cautious optimism about what's happening here. 0:01:38.440 --> 0:01:42.480 Okay, forgive the question, Hannah, but why do we need 0:01:42.520 --> 0:01:45.319 a spot bitcoin ETF when bitcoin is so easy to buy? 0:01:45.400 --> 0:01:47.360 Oh my god, they're banging out the doors, Tim the 0:01:47.400 --> 0:01:48.160 crypto folks. 0:01:48.800 --> 0:01:52.400 No, that is a great question. So this stockcoin, the 0:01:52.440 --> 0:01:57.040 spot Bitcoin ETF, allows people to have exposure to bitcoin 0:01:57.160 --> 0:02:00.920 without actually buying the cryptocurrency. So for people who are, 0:02:00.960 --> 0:02:03.560 you know, a little nervous about bitcoin, especially amid all 0:02:03.560 --> 0:02:06.600 of the regulatory uncertainty happening here, this is a way 0:02:06.640 --> 0:02:08.680 to kind of get a taste of the action without 0:02:08.760 --> 0:02:11.280 you know, going all in. So a lot of people 0:02:11.280 --> 0:02:14.720 think that this could broaden mainstream adoption amongst both retail 0:02:14.880 --> 0:02:16.480 and institutional investors. 0:02:16.880 --> 0:02:18.840 So what do you wait? So what do you own? 0:02:18.880 --> 0:02:23.200 Then you have an ETS that's tied to the spot 0:02:23.200 --> 0:02:26.320 bitcoin price. You know, you are able to track the market. 0:02:26.880 --> 0:02:30.120 And they're hoping, they're hoping that, you know, the discount 0:02:30.240 --> 0:02:35.280 between the gray scale bitcoin trust and bitcoin itself will narrow, 0:02:35.639 --> 0:02:38.120 you know, with this decision, and we've seen that happen. 0:02:38.200 --> 0:02:41.160 You know, these two are becoming more closely aligned in price. 0:02:41.560 --> 0:02:44.720 So you know, GBTC is up, Bitcoin is up. Uh, 0:02:44.880 --> 0:02:46.480 the industry is celebrating right now. 0:02:47.280 --> 0:02:49.920 Sounds like a derivative. I don't it's I don't want 0:02:49.919 --> 0:02:52.320 to get too mechanical here because I know we're talking 0:02:52.560 --> 0:02:55.120 crypto and not necessarily et S. This is not et 0:02:55.320 --> 0:02:59.720 f IQ, but it's it's just again, I I question 0:02:59.840 --> 0:03:01.640 that the need for something like this, and also the 0:03:01.639 --> 0:03:04.120 reaction from from the entire crypto market. 0:03:05.480 --> 0:03:07.400 Yeah, I think that entire crypto market is just looking 0:03:07.440 --> 0:03:10.480 for some positive news here. I mean, there's been you know, 0:03:10.840 --> 0:03:14.560 such entanglement with regulators, there's all these legal battles. This 0:03:14.680 --> 0:03:17.880 is you know, a much needed win, even though you 0:03:17.919 --> 0:03:20.280 know there's still a lot of uncertainty about what's going 0:03:20.320 --> 0:03:20.919 to happen here. 0:03:21.280 --> 0:03:24.040 So what's so, is there a timeline, a date that's 0:03:24.120 --> 0:03:26.640 kind of on your radar radar as to what's next. 0:03:27.639 --> 0:03:30.639 Yeah, so we could see an approval as soon as 0:03:30.960 --> 0:03:34.840 next week. You know, there's this labor day deadline, and 0:03:35.160 --> 0:03:37.600 you know that that could happen. But again, there are 0:03:37.600 --> 0:03:39.720 a lot of logistics that need to you know play 0:03:39.760 --> 0:03:42.240 out here. The SEC has to decide how they're going 0:03:42.280 --> 0:03:44.440 to react to this, if they're going to you know, 0:03:44.520 --> 0:03:46.880 file with new reasoning for their rejection or if they're 0:03:46.920 --> 0:03:50.400 just going to capitulate here. So there's stuff that we 0:03:50.440 --> 0:03:53.600 still need to watch a Buyah, no. 0:03:53.600 --> 0:03:55.000 Go ahead, Hannah. 0:03:55.040 --> 0:03:57.520 Oh, there's just also a lot of buzz about ethereum products, 0:03:57.560 --> 0:03:59.600 you know, ethereum ets, you know, whether this could help 0:03:59.640 --> 0:04:01.200 pave the way for I always just. 0:04:01.200 --> 0:04:04.040 Feel like whenever there's like a crypto story, Hannah, I 0:04:04.040 --> 0:04:07.880 don't know, tim like it's like hey, hey good, but 0:04:08.400 --> 0:04:09.200 like there's always a. 0:04:09.200 --> 0:04:11.960 Lot of bubbs. Well that's so my butt question for 0:04:12.000 --> 0:04:14.040 Hannah before we go, just in the last minute that 0:04:14.040 --> 0:04:17.719 we have. Does this mean that Chair Gensler is a 0:04:17.720 --> 0:04:18.520 friend of crypto? 0:04:18.560 --> 0:04:18.760 Now? 0:04:20.320 --> 0:04:22.919 I wouldn't go that far. I think he's taken a 0:04:22.920 --> 0:04:27.120 couple of blows here. This is the latest setback. We'll 0:04:27.160 --> 0:04:31.080 see what happens, but yeah, I think it hasn't been 0:04:31.120 --> 0:04:33.400 the easiest road as of late for Gensler and NASTYC. 0:04:33.800 --> 0:04:35.440 All right, well, it's keeping us on our toes in 0:04:35.440 --> 0:04:38.159 these dog days of August. That's gonna say, that's for sure. 0:04:38.160 --> 0:04:40.840 Hannah Miller, thank you, Thank you. She's Digital Currencies and 0:04:40.960 --> 0:04:43.200 VC reporter for a Bloomberg News joining us on the 0:04:43.200 --> 0:04:46.000 phone from San Francisco. You did so much reporting too 0:04:46.560 --> 0:04:49.520 for Crypto r L. Yeah, so how are you thinking 0:04:49.560 --> 0:04:50.080 about these? 0:04:50.120 --> 0:04:52.240 I mean, this is something that the industry has wanted 0:04:52.279 --> 0:04:53.840 to see for a very long time. So it's a 0:04:53.920 --> 0:04:56.480 huge win for the industry. But I still question, you know, 0:04:56.960 --> 0:04:57.599 is it a product? 0:04:57.680 --> 0:04:59.359 I want to see a unicorns flying in the sky, 0:04:59.440 --> 0:05:00.640 But does that mean it's a good thing? 0:05:01.000 --> 0:05:03.800 Again, it's so easy to buy crypto. You can use 0:05:03.839 --> 0:05:06.000 PayPal or like, you know, just pull out your phone 0:05:06.040 --> 0:05:07.159 and buy it. But do more? 0:05:07.279 --> 0:05:10.400 Does general investors feel like it's so easy? 0:05:10.640 --> 0:05:12.920 I think so yeah, it's really easy. 0:05:13.040 --> 0:05:16.000 I don't know all right to be continued, that's for sure. 0:05:16.160 --> 0:05:19.679 If you're listening to the Bloomberg Business Week podcast, catch 0:05:19.720 --> 0:05:23.040 us live weekday afternoons from three to six Eastern Listen 0:05:23.160 --> 0:05:26.640 on Bloomberg dot com, the iHeartRadio app and the Bloomberg 0:05:26.680 --> 0:05:29.919 Business app, or want us live on YouTube. 0:05:30.560 --> 0:05:32.920 We want to continue a little bit with the hp 0:05:34.040 --> 0:05:36.480 E story because they are out. We're waiting for HPQ 0:05:36.600 --> 0:05:40.080 to report. As we said, HPE did pre announce, so 0:05:40.600 --> 0:05:43.040 a lot of it was already laid out for investors. 0:05:43.080 --> 0:05:45.799 Having said that, we do want to get a little 0:05:45.800 --> 0:05:48.000 bit of some color, if you will, on the quarter 0:05:48.000 --> 0:05:51.400 of the outlook and how this particular tech company, well 0:05:51.440 --> 0:05:53.320 known around for a long time, kind of fits into 0:05:53.440 --> 0:05:53.880 our world. 0:05:54.080 --> 0:05:55.960 Very pleased to have with us this after in Bloomberg 0:05:55.960 --> 0:05:59.680 Intelligence Senior Technology analyst Wou Jenoe with us on zoom 0:05:59.680 --> 0:06:03.000 from b I headquarters in Princeton, New Jersey. So good 0:06:03.000 --> 0:06:05.680 to have you with us this afternoon. The question I 0:06:05.680 --> 0:06:07.640 have is what in here was a surprise to you? 0:06:07.680 --> 0:06:09.120 What's new to you? 0:06:09.120 --> 0:06:11.920 Well, I mean, there's really nothing new here. They're pretty 0:06:11.960 --> 0:06:12.760 much okay. 0:06:12.800 --> 0:06:17.680 I guess they pretty much pre announced, but if we did, 0:06:17.920 --> 0:06:19.480 if we dig deeper. 0:06:19.279 --> 0:06:23.480 Into the numbers, actually, look what's been white hot not 0:06:23.520 --> 0:06:26.279 only for HPE, but also the rest of the tech 0:06:26.279 --> 0:06:29.600 sector has been the networking space. And the slide upside 0:06:29.640 --> 0:06:32.080 into the quarter was the intelligent edge, right that that 0:06:32.680 --> 0:06:35.159 segment group fifty percent on a year on year basis. 0:06:35.320 --> 0:06:37.800 Where it fell short, however, was on the compute space. 0:06:37.839 --> 0:06:40.559 There has been some concern that, uh, the service space 0:06:40.640 --> 0:06:44.320 is going to be weak, and they missed by about 0:06:44.360 --> 0:06:47.240 three percent versus consensus expectation, and that that turned out 0:06:47.440 --> 0:06:49.719 to be true. We're still waiting for the service space 0:06:49.720 --> 0:06:51.719 to rebound. It still may take a couple of quarters 0:06:51.720 --> 0:06:53.559 before we start seeing growth come back here. 0:06:53.760 --> 0:06:56.680 You know, in an AI obsessed world, how do we 0:06:56.680 --> 0:06:59.280 think about HPE specifically and where they fit in? 0:07:00.120 --> 0:07:04.360 Yeah, I mean they're actually trying to really position position 0:07:04.480 --> 0:07:07.560 themselves very well in AI. Keep in mind that they 0:07:07.560 --> 0:07:10.720 have this high performance compute division which is going to 0:07:10.800 --> 0:07:11.480 drive some AI. 0:07:12.080 --> 0:07:12.200 Uh. 0:07:12.720 --> 0:07:16.600 The CEO, Antennayo Nire said either recent investor briefing that 0:07:16.640 --> 0:07:18.640 they had about eight hundred million dollars in order. So 0:07:18.880 --> 0:07:21.440 that's a number that I'm really curious to hear on 0:07:22.240 --> 0:07:24.480 on the on the call. But you know, in the 0:07:24.520 --> 0:07:28.360 overall picture, they're still growing that AI business. Uh. But 0:07:28.760 --> 0:07:31.360 and also they have to get access to the Nvidia 0:07:31.440 --> 0:07:34.360 cards to build these AI clusters for the enterprise. So 0:07:34.400 --> 0:07:36.200 it's going to take some time for that AI business 0:07:36.240 --> 0:07:37.520 to be to be a real business. 0:07:37.560 --> 0:07:39.400 What is that AI business like? What does it look like, 0:07:39.440 --> 0:07:42.600 what do customers experience? And how much of it is done? 0:07:43.280 --> 0:07:46.000 I mean, how much of a value creator is HPE. 0:07:46.480 --> 0:07:48.840 You said it sounds like a real winner is in video. 0:07:49.680 --> 0:07:53.800 It's it's it's potentially you know, a value creator over 0:07:53.840 --> 0:07:55.680 over the long term near term. I you know, eight 0:07:55.720 --> 0:07:59.559 hundred million dollars in orders in a roughly forty million 0:07:59.600 --> 0:08:04.679 dollar revenue base or twenty nine billion revenue base isn't 0:08:04.680 --> 0:08:08.400 going to move the needle anytime soon. But there's a 0:08:08.400 --> 0:08:11.280 couple of things right First, the enterprise customers do not 0:08:11.400 --> 0:08:15.800 have access to these Nvidia cards where all the clouds 0:08:15.840 --> 0:08:18.800 are sucking them up. HP can actually come in there 0:08:18.840 --> 0:08:23.600 and provide as a service provider to build in house 0:08:23.720 --> 0:08:29.840 AI systems for these enterprises. That's number one, number two HPE. 0:08:30.000 --> 0:08:32.440 Over the past several years, that has been moving over 0:08:32.480 --> 0:08:36.800 to this as a service business model, and with that 0:08:37.040 --> 0:08:40.600 they've actually introduced a new AI large language model service 0:08:40.800 --> 0:08:43.199 to provide to these customers. So if there are customers 0:08:43.200 --> 0:08:45.480 who want to build out these large language models do 0:08:45.559 --> 0:08:48.280 not have the wherewithal they can actually rely on HPE. 0:08:48.679 --> 0:08:53.400 And among all the large enterprise vendors enterprise IT providers, 0:08:53.679 --> 0:08:56.440 HPE is very far along relative to someone like ADEL 0:08:57.080 --> 0:08:58.120 or a Cisco. 0:08:57.960 --> 0:08:59.960 Which just as a reminder that when we speak of 0:09:00.040 --> 0:09:02.560 about AI and the needs and the demands and who 0:09:02.559 --> 0:09:04.840 are the winners, there's going to be multiple ones. Is 0:09:04.840 --> 0:09:07.640 that safe to say? Wouldjin Well? 0:09:07.720 --> 0:09:11.640 Right now, the the the big winter right is in video, 0:09:11.640 --> 0:09:15.000 as we saw on last week's earning right, and when 0:09:15.080 --> 0:09:17.880 when we think about AI in the early stages and 0:09:17.960 --> 0:09:22.320 think about AI house being built, the first thing that's 0:09:22.360 --> 0:09:24.800 going to be built is the plumbing. And in video 0:09:25.080 --> 0:09:28.439 is the leader there. One smaller name that I can 0:09:28.480 --> 0:09:31.320 share is probably a risk of Networks and they provide 0:09:31.320 --> 0:09:35.600 Ethernet networking and they're probably going to try to fight 0:09:35.679 --> 0:09:39.920 the battle where Nvidia is on the networking side. You know, 0:09:40.240 --> 0:09:44.280 if you talk about on a services perspective, the cloud, 0:09:44.320 --> 0:09:47.360 the hyperscale cloud providers are probably nearer in terms of 0:09:47.400 --> 0:09:52.760 being revenue generating versus like meaningfully revenue general genera generating 0:09:53.040 --> 0:09:54.839 relative to some of these enterprise I guys. 0:09:55.040 --> 0:09:58.079 Recent Networks is fifty two percent this year to Sharon, Yeah. 0:09:57.880 --> 0:10:00.920 Wujin who would be competitors when A comes to AI 0:10:01.040 --> 0:10:03.800 and where Hewlett Packard Enterprise is really trying to grow. 0:10:04.800 --> 0:10:09.719 Well, you know, the one benefit that HPE has is 0:10:09.880 --> 0:10:12.880 actually their their Qua acquisition from several years back, and 0:10:12.920 --> 0:10:16.520 they've actually been they've been trying to pivot that towards 0:10:16.520 --> 0:10:21.080 an AI play, so they know high performance compute really 0:10:21.120 --> 0:10:24.240 really well, and they are starting to build out the 0:10:24.440 --> 0:10:28.920 servers for enterprises to drive AI. Now the one company 0:10:28.920 --> 0:10:31.560 that is trying to there are two companies that are 0:10:31.600 --> 0:10:34.280 trying to move on the server side. One larger company 0:10:34.360 --> 0:10:37.000 is Dell. They're building out their own AI servers. A 0:10:37.040 --> 0:10:40.000 smaller company that I can share is super Micro and 0:10:40.240 --> 0:10:43.319 they've been performing. They've been delivering these high performance compute 0:10:43.360 --> 0:10:45.240 and if you look at that stock price that's I 0:10:45.280 --> 0:10:49.160 think has tripled over the past year because of they 0:10:49.200 --> 0:10:51.560 make these AI specific servers. 0:10:51.640 --> 0:10:54.400 Yeah, two hundred and eighteen percent this year alone, So yeah, 0:10:54.440 --> 0:10:56.240 it's been on a tear. It's been a thirteen almost 0:10:56.240 --> 0:11:00.400 fourteen billion dollar market cap company for micro HPE. Nice done. 0:11:00.640 --> 0:11:03.160 HPE is down about four ten percent in the aftermarket. 0:11:03.320 --> 0:11:07.199 H can we flip to HPQ. We're waiting for those numbers. 0:11:07.280 --> 0:11:11.280 It's definitely been outperforming. It's uh, you know, former sister, brother, 0:11:11.360 --> 0:11:13.120 whatever you want to call it HPE. 0:11:13.200 --> 0:11:15.480 Well, before you get into that, is it typical wujin 0:11:15.520 --> 0:11:17.360 that these are two companies report on the same day. 0:11:17.440 --> 0:11:18.360 This is surprising to me. 0:11:19.000 --> 0:11:20.960 It's it's all legacy. 0:11:21.120 --> 0:11:25.400 They always bear they do okay, all right, so they're 0:11:25.840 --> 0:11:28.400 stick to brother and sister and they're still like, you know, 0:11:28.520 --> 0:11:28.920 kind of. 0:11:28.840 --> 0:11:33.280 Related twins of a Yeah. So okay. HPQ up about 0:11:33.320 --> 0:11:35.920 sixteen percent. We used to call this was the old right, 0:11:36.200 --> 0:11:39.120 uh heulid packard. What are you watching out for that one? 0:11:39.880 --> 0:11:43.000 Yep. So I'm looking for the rebound on the on 0:11:43.000 --> 0:11:46.720 on the PC market. It looks as if it's silently 0:11:46.880 --> 0:11:49.840 flattened out in the second well the calendar second quarter 0:11:49.840 --> 0:11:53.920 of their fiscal third quarter, and hopefully they'll talk about 0:11:53.920 --> 0:11:56.959 signs of a slow but steady recovery. I don't think 0:11:56.960 --> 0:12:00.240 it's going to go down any further, and I don't 0:12:00.240 --> 0:12:02.400 think they're going to stick the neck outs and talk 0:12:02.480 --> 0:12:08.000 about growth anytime soon. What stability is where investors want 0:12:08.000 --> 0:12:08.800 them to be right now. 0:12:09.400 --> 0:12:13.920 Did back to school help with with PCs? 0:12:14.040 --> 0:12:16.960 Well, look what had happened over the past couple of 0:12:17.000 --> 0:12:21.120 quarters was that there was such an influx of PC 0:12:21.320 --> 0:12:27.280 production build that companies have overbuilt PCs and there was 0:12:27.320 --> 0:12:30.280 an inventory correction, so there was a halt on PC sales. 0:12:30.880 --> 0:12:33.719 Back to school and a return to seasonal demand is 0:12:34.040 --> 0:12:37.640 going to help back to school plus the holidays. 0:12:37.520 --> 0:12:40.439 And it looks like HPQ just crossing. Just go through 0:12:40.440 --> 0:12:44.920 a quick some numbers at you Amujin hp Inc. C's 0:12:44.920 --> 0:12:48.320 fiscal year adjusted EPs of three twenty three to three 0:12:48.520 --> 0:12:52.520 thirty five had seen three thirty to three fifty, So 0:12:52.559 --> 0:12:56.280 it looks like it's bringing in its fiscal year justin EPs. 0:12:57.000 --> 0:12:59.120 Looking at fourth quarter just a DPS eighty five to 0:12:59.200 --> 0:13:03.199 ninety seven, the estimate is ninety four cents personal third 0:13:03.280 --> 0:13:06.520 quarter personal systems revenue eight point nine to three billion, 0:13:07.120 --> 0:13:09.280 that is better than the estimate of eight point seven 0:13:09.320 --> 0:13:12.360 to nine billion, and third quarter free cash flow we're 0:13:12.360 --> 0:13:14.960 looking at nine hundred million. Estimate though was for more 0:13:15.000 --> 0:13:15.680 than a billion dollars. 0:13:15.720 --> 0:13:17.599 Yeah, and in the after hours shares at least the 0:13:17.640 --> 0:13:20.280 kne jerk reaction is lower wo'gen down about six point 0:13:20.320 --> 0:13:22.240 five percent. What's your immediate reaction. 0:13:23.840 --> 0:13:27.760 The reduction in guidance is possibly because of higher mix 0:13:27.800 --> 0:13:30.760 of PCs. Because PCs did better, that means they have 0:13:30.800 --> 0:13:33.640 lower gross margin. The printing business actually has higher gross 0:13:33.679 --> 0:13:37.520 margin and operating margins because of the supplies business. 0:13:38.120 --> 0:13:39.800 So the. 0:13:41.280 --> 0:13:44.000 Stability or better PC business is actually encouraging. 0:13:44.080 --> 0:13:46.440 Sign It did say, I'm just going to get to it. 0:13:46.720 --> 0:13:49.360 Our rite through real quickly reducing its full year cash 0:13:49.400 --> 0:13:51.120 flow and profit outlooks. Sing A rebound on the market 0:13:51.200 --> 0:13:55.079 for PCs will take longer than expected, so it sounds 0:13:55.080 --> 0:13:56.240 like a little bit more of the same that we've 0:13:56.280 --> 0:13:58.720 been expecting. Hey, thank you so much in real time 0:13:58.760 --> 0:14:01.400 breaking down those earnings with us. Swi Jinho. He's senior 0:14:01.440 --> 0:14:05.280 technology analyst at Bloomberg Intelligence, joining us from BI headquarters 0:14:05.280 --> 0:14:07.240 in Princeton. We've been leaning on those guys a lot. 0:14:07.320 --> 0:14:10.160 Heading out to our Princeton bureau today and our BI team. 0:14:10.520 --> 0:14:11.439 They are incredible. 0:14:13.600 --> 0:14:17.199 You're listening to the Bloomberg Business Week podcast. Catch us 0:14:17.240 --> 0:14:21.240 live weekday afternoons from three to six Eastern on Bloomberg Radio, 0:14:21.440 --> 0:14:24.720 the Bloomberg Business App, and YouTube. You can also listen 0:14:24.840 --> 0:14:27.920 live on Amazon Alexa from our flagship New York station, 0:14:28.360 --> 0:14:39.960 Just Say Alexa playing Bloomberg eleven thirty. 0:14:40.560 --> 0:14:42.880 All right, well, speaking of shaky ground out Later this 0:14:42.920 --> 0:14:45.920 week the Double City's issue of Bloomberg BusinessWeek, where a 0:14:45.920 --> 0:14:48.400 team of global reporters looked around the world to tell 0:14:48.440 --> 0:14:53.640 stories happening in all corners of our societies. Among them 0:14:53.720 --> 0:14:56.280 is one about a fragile real estate boom emerging in 0:14:56.440 --> 0:14:57.760 Palestinian territories. 0:14:57.800 --> 0:15:01.000 Tim Yeah, one in which Arab Israelis are purchasing luxury 0:15:01.000 --> 0:15:03.880 homes in Jericho, adding a new dynamic to their complex 0:15:03.920 --> 0:15:08.680 relationship with other Palestinians and Jewish Israelis. Take us to 0:15:08.880 --> 0:15:11.120 taking us to the development known as Jericho Gay. We've 0:15:11.120 --> 0:15:15.120 got Bloomberg News Israel Bureau chief Ethan Bronner with us 0:15:15.160 --> 0:15:18.040 on zoom along with the editor of Bloomberg BusinessWeek, Joel Webber, 0:15:18.280 --> 0:15:21.880 who joins us on the access line in Massachusetts. So Joel, 0:15:22.720 --> 0:15:25.040 take us first into you know, the Double Cities issue 0:15:25.040 --> 0:15:29.320 and where Ethan's truly amazing story fits in. 0:15:30.880 --> 0:15:35.320 So Jericho happens to be one of the oldest cities 0:15:35.360 --> 0:15:37.560 in the world. So I thought that was pretty fitting 0:15:37.640 --> 0:15:40.200 way to you know, build the city's issue, go to 0:15:40.240 --> 0:15:43.840 the really old, and then also find ways to talk 0:15:43.880 --> 0:15:48.480 about some of the new new challenges and new innovations 0:15:48.480 --> 0:15:50.920 and things that we can all be excited about, as 0:15:51.000 --> 0:15:54.320 we've also discussed right here on the show before. I 0:15:54.400 --> 0:15:58.040 went to one of the world's most complicated geopolitical situations 0:15:58.040 --> 0:16:02.280 in Taiwan recently, and you know, the only place in 0:16:02.320 --> 0:16:05.600 the world that might rival that one is probably where 0:16:05.680 --> 0:16:10.480 Ethan resides. And so I thought, you know, we can 0:16:10.520 --> 0:16:12.680 always talk about cities, and we can talk about the pandemic, 0:16:12.720 --> 0:16:16.480 but let's be real and talk about some seriously interesting stuff. 0:16:16.480 --> 0:16:19.200 And that's what Ethan was able to bring us from 0:16:19.240 --> 0:16:23.400 a development called Jericho Gate. So Ethan, what's happening? 0:16:25.040 --> 0:16:28.200 A Jael hs Tevit and Carol So, yes, it is 0:16:28.520 --> 0:16:31.920 a very complex and interesting situation. I mean, of course, 0:16:32.120 --> 0:16:37.000 the West Bank is occupied, militarily occupied by Israel, and 0:16:37.080 --> 0:16:40.120 it is no fun to live under occupation. It is 0:16:40.160 --> 0:16:44.920 a difficult situation for many. But what I learned is 0:16:45.040 --> 0:16:49.840 that despite that, there has been a Palaestadian business class 0:16:49.840 --> 0:16:54.680 that has decided to build vacation villas with pools, for 0:16:55.600 --> 0:16:58.680 there are several hundred some thousands of Palace Citians who 0:16:58.680 --> 0:17:01.360 can afford it. And now the complicated thing here is 0:17:01.360 --> 0:17:04.600 also that there are three kinds of Palestinians evolvetor those 0:17:04.640 --> 0:17:07.520 who live under occupation in the West Bank, those who 0:17:07.600 --> 0:17:10.199 live in Jerusalem, which is a kind of occupation, but 0:17:10.240 --> 0:17:14.120 they have special IDs because Israel considers all of Jerusalem 0:17:14.240 --> 0:17:17.359 it's capital. And then there are those who are Israeli Arabs, 0:17:17.359 --> 0:17:21.399 who are citizens of Israel, and all three populations have 0:17:22.080 --> 0:17:25.240 grown wealthier, I don't want to say wealthy, but wealthier 0:17:25.760 --> 0:17:28.840 in the last twenty years, because Israel has become very, 0:17:28.960 --> 0:17:32.719 very wealthy compared to what it was generation ago. And 0:17:32.800 --> 0:17:37.760 therefore there is kind of a room for vacation homes 0:17:37.760 --> 0:17:40.440 for people who live nearby. Now, the other thing that's 0:17:40.480 --> 0:17:43.520 so interesting is that the Israeli Arabs were not really 0:17:43.600 --> 0:17:45.919 mixing with those of the West Bank for many years. 0:17:46.040 --> 0:17:48.560 Now they are. And one of the questions the story 0:17:48.640 --> 0:17:51.200 raises is what that might mean politically in the future. 0:17:52.040 --> 0:17:54.520 Can we just take a step back and just talk 0:17:54.560 --> 0:17:58.000 about the development itself and what's inside the walls and 0:17:58.200 --> 0:17:59.520 kind of what surrounds it. 0:18:00.440 --> 0:18:03.200 Sure, So this is just outside the city of Jericho, 0:18:03.320 --> 0:18:05.800 and as Joel mentioned, one of the very oldest cities 0:18:05.800 --> 0:18:08.360 in the world, the lowest city on the planet as well, 0:18:08.359 --> 0:18:12.439 and just near the Dead Sea. And so you have 0:18:13.800 --> 0:18:17.679 a whole group of Palestinian developers who created villas with 0:18:17.760 --> 0:18:21.399 walls around them, typically three bedrooms, three bathrooms with a pool, 0:18:21.520 --> 0:18:24.600 pretty big pool fied by ten meters. And these are 0:18:24.720 --> 0:18:27.560 vacation homes that sell for a quarter of a million dollars, 0:18:28.000 --> 0:18:30.480 which is a pretty good price in most places for 0:18:30.520 --> 0:18:33.760 a vacation villa like that. And there is a big 0:18:33.800 --> 0:18:36.960 development around. They're still building it, but the plan is 0:18:36.960 --> 0:18:39.240 for going to be a couple of three or four malls, 0:18:39.400 --> 0:18:42.800 a water park and other kinds of tourism things. So 0:18:43.000 --> 0:18:46.000 the idea is to make it a real a place 0:18:46.000 --> 0:18:49.679 of attraction for people visiting from within Israel and Palestine 0:18:49.720 --> 0:18:51.160 areas and from outside. 0:18:51.840 --> 0:18:56.919 There's an incredible quote in your story. One of the 0:18:56.920 --> 0:19:01.680 subjects says, Jericho is booming despite the checkpoints and occasional war. 0:19:02.400 --> 0:19:04.080 People can make money here. 0:19:05.000 --> 0:19:08.280 That's right, that's right. I mean, what is the. 0:19:09.280 --> 0:19:10.919 Looming threat of war described that. 0:19:12.720 --> 0:19:15.960 Look, I mean there have been is there you know, 0:19:16.040 --> 0:19:19.280 there there is tension. I mean, nobody wants to live 0:19:19.359 --> 0:19:24.040 under military occupation. So there are young men who are armed, 0:19:24.080 --> 0:19:29.000 who are go after Israeli soldiers and Israeli settlers, and 0:19:29.040 --> 0:19:32.200 then the Israeli army comes in and tries to quote 0:19:32.280 --> 0:19:34.240 unquote restore order from its perspective. 0:19:34.440 --> 0:19:39.040 So there in January there were there was a shooting 0:19:39.200 --> 0:19:44.000 at a restaurant where Israeli's go and the Israeli military 0:19:44.040 --> 0:19:47.879 went into a refugee camp near Jericho Gate and killed. 0:19:47.640 --> 0:19:50.480 Five guys and the course of trying to restore the 0:19:50.520 --> 0:19:54.080 situation to the stems quote ante. So that's what that means. 0:19:54.119 --> 0:19:56.320 And at any given time, there could there have been 0:19:56.359 --> 0:20:00.240 two so called intifadas uprisings in the last forty years, 0:20:00.800 --> 0:20:03.520 and there could be another one in theory, And that's 0:20:04.440 --> 0:20:06.720 what the mayor means, the mayor who said those things. 0:20:06.960 --> 0:20:10.000 At the same time, there is money to be made, 0:20:10.080 --> 0:20:13.000 because there is a lot of money slashing around now, 0:20:13.400 --> 0:20:16.800 partly as a result of Israel's wealth and partly as 0:20:16.800 --> 0:20:20.200 a result of some savvy business folks who are decided 0:20:20.560 --> 0:20:23.640 listen whatever happens, we're here. And that's the other interesting 0:20:23.680 --> 0:20:28.160 aspect here, right, that these developers and business people who say, look, 0:20:28.200 --> 0:20:31.560 whatever happens, we're not going to go, so let's just 0:20:31.800 --> 0:20:34.960 build and make sure that whatever happens in the end, 0:20:35.080 --> 0:20:36.520 we have someplace nice to live. 0:20:38.520 --> 0:20:41.159 So talk to us about that. The fragile piece that 0:20:41.200 --> 0:20:45.280 it's all sort of built on ethan because sure you 0:20:45.320 --> 0:20:47.879 can build stuff like this and you can develop it, 0:20:48.000 --> 0:20:50.840 but like underneath it all, you know, as you kind 0:20:50.840 --> 0:20:54.000 of mentioned here, I mean, there's there's some real fragility 0:20:54.000 --> 0:20:54.800