WEBVTT - Tax Plan Likely to Spur More M&A: Evercore's Schlosstein 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:35.240 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Him. 0:00:35.240 --> 0:00:39.080 I am so excited about our upcoming guest, Ralph Schlastein, 0:00:39.159 --> 0:00:43.320 President and chief executive officer of ever Core, because he 0:00:43.360 --> 0:00:47.400 has such broad perspective on everything that's going on right 0:00:47.400 --> 0:00:50.080 now with respect to tax changes and how it affects 0:00:50.440 --> 0:00:54.840 CEOs and their companies. He joins us now. Ever Court 0:00:55.040 --> 0:00:58.400 was the number one boutique investment bank in mergers and 0:00:58.440 --> 0:01:02.160 acquisitions last year. Ralph also Mr schlast and it was 0:01:02.200 --> 0:01:07.080 also the co founder of black Rock. Thank you so 0:01:07.200 --> 0:01:10.800 much for joining us. I wanted to start with getting 0:01:11.000 --> 0:01:14.040 your sense of what the tax bill that is about 0:01:14.080 --> 0:01:17.840 to be passed by the Congress, what effect it will 0:01:17.880 --> 0:01:22.480 have on mergers and acquisitions activity. Well, I think as 0:01:22.520 --> 0:01:25.559 a general matter, there are a number of effects. First 0:01:25.600 --> 0:01:30.800 of all, the passage of the bill itself h takes 0:01:30.800 --> 0:01:38.759 away a major uncertainty about UH taxation and organizations of businesses, 0:01:38.959 --> 0:01:45.600 so things, you know, transactions that made strategic sense, but 0:01:45.760 --> 0:01:51.160 we're held up by uh, you know, deep uncertainty about 0:01:51.200 --> 0:01:56.120 how the world in eighteen would look versus UH. That 0:01:56.240 --> 0:02:00.800 issue has been resolved, and uncertainty as always the enemy 0:02:00.880 --> 0:02:05.560 of M and A activity. UH. The second thing that 0:02:05.600 --> 0:02:11.520 will happen is UH, with the repatriation of you know, 0:02:11.560 --> 0:02:15.160 two plus trillion dollars of cash that's held off shore 0:02:15.280 --> 0:02:19.280 right now by US companies. UH, some amount of that 0:02:19.440 --> 0:02:25.400 unquestionably will go into uh you know, strategic investments UH, 0:02:25.560 --> 0:02:28.679 you know, which you know will be done through M 0:02:28.760 --> 0:02:35.280 and A activity. The third thing that also I believe 0:02:35.320 --> 0:02:41.440 will happen is uh, you know, the strategic repositioning of 0:02:41.600 --> 0:02:47.520 business portfolios at large and particularly diversified companies. So in 0:02:47.639 --> 0:02:52.320 the seventeen world, UH, if a company wanted to sell 0:02:52.320 --> 0:02:55.720 a division that they had a very low tax basis in, 0:02:56.400 --> 0:03:00.560 they had, you know, uh to pay thirty five percent 0:03:01.440 --> 0:03:04.960 of the proceeds plus whatever the state tax was. UH. 0:03:05.000 --> 0:03:09.840 And you know, the hurdle for disposing of businesses, particularly 0:03:09.880 --> 0:03:14.680 low basis businesses, UH is you know a lot lower 0:03:14.720 --> 0:03:17.920 today and then finally the effect on uh you know, 0:03:17.960 --> 0:03:20.560 the general M and A environment. M and A thrives 0:03:21.160 --> 0:03:27.200 when we have uh strong equity evaluations, readily available credit, 0:03:28.080 --> 0:03:30.920 uh you know, good visibility as to the direction of 0:03:30.960 --> 0:03:36.280 the economy. UH and CEO confidence and uh you know, 0:03:36.400 --> 0:03:41.720 the first uh three have been present, and I think 0:03:41.720 --> 0:03:48.720 this bill reinforces CEO confidence and makes you know, it's 0:03:49.160 --> 0:03:53.800 somewhat more probable that M and A activity will continue. 0:03:54.080 --> 0:03:56.560 Mr Slawson, could next year be a record year for 0:03:56.680 --> 0:04:00.760 M and A. Uh you know, it's it's possible to 0:04:00.880 --> 0:04:05.000 predict uh, you know, the level of activity you know, 0:04:05.160 --> 0:04:09.440 in the next quarter, much less the next year. Uh. 0:04:09.440 --> 0:04:13.640 He's certainly true that all of the conditions are in place, 0:04:14.480 --> 0:04:18.279 uh for a very strong year in M and A activity, 0:04:18.800 --> 0:04:25.040 but was an extremely strong year four point two trillion 0:04:25.080 --> 0:04:29.000 dollars of announced transactions last year was about three point 0:04:29.040 --> 0:04:33.320 five This year. It looks to be tracking around that. Uh. So, 0:04:34.200 --> 0:04:37.760 you know, do I think it could possibly uh be 0:04:37.920 --> 0:04:41.920 positive versus the last two years? I would say yes, Uh, 0:04:42.040 --> 0:04:43.640 you know, is it going to go back to the 0:04:43.760 --> 0:04:47.880 level of uh you know, I'm not smart enough to 0:04:47.920 --> 0:04:52.159 really know that. Dan Donovan, who is a Republican congressman 0:04:52.520 --> 0:04:56.479 serving uh Staten Island and Brooklyn some areas of Brooklyn, 0:04:56.560 --> 0:04:59.760 said that he's worried about quote mobility of taxpayers in 0:04:59.800 --> 0:05:03.119 the hop income brackets. He says losing even a small 0:05:03.160 --> 0:05:06.839 percentage of those households will decimate the state and city 0:05:06.920 --> 0:05:11.600 tax base. Do you agree with him? I think the 0:05:11.800 --> 0:05:16.159 biggest risk to New York City and New York State 0:05:17.400 --> 0:05:21.359 is precisely that, uh, you know, I honestly don't believe 0:05:22.240 --> 0:05:26.320 uh that you know, this bill will have that much 0:05:26.360 --> 0:05:30.480 of an effect on uh New York being the financial 0:05:31.640 --> 0:05:35.240 capital of the world. Uh. The only competitor to us, 0:05:35.560 --> 0:05:40.200 you know, of real concentration is London, and they have 0:05:40.560 --> 0:05:43.720 a heck of a lot more uncertainty than we do. 0:05:44.000 --> 0:05:50.359 And you know, financial businesses will aggregate and agglomerate in 0:05:51.080 --> 0:05:54.560 places where there are other financial businesses and where they 0:05:54.560 --> 0:05:59.719 can attract uh, you know, super talented young people, and 0:06:00.200 --> 0:06:04.200 the most talented young people are you know, opting with 0:06:04.320 --> 0:06:07.839 their feet to be in the places like New York 0:06:07.880 --> 0:06:12.359 City and this bill because they tend to be you know, 0:06:12.560 --> 0:06:16.560 entry level workers who aren't affected by the size of 0:06:16.600 --> 0:06:19.480 the state and local deduction or the mortgage interest deduction. 0:06:20.320 --> 0:06:23.039 Uh you know, they you know, they will continue to 0:06:23.120 --> 0:06:26.640 come in in in droves, I believe to New York City. 0:06:26.680 --> 0:06:29.800 What I do worry about, uh is people who are 0:06:29.839 --> 0:06:36.200 not uh attached by employment, uh you know, to the city. 0:06:36.279 --> 0:06:40.880 So those who are well off uh and you know, 0:06:41.000 --> 0:06:47.039 have significant net worths and incomes, but are uh you 0:06:47.080 --> 0:06:52.200 know long no longer working full time or retired. And 0:06:52.480 --> 0:06:56.359 you know, for those people, uh, this is a quite 0:06:56.400 --> 0:07:02.479 substantial tax increase and uh you know, they have complete 0:07:02.480 --> 0:07:06.360 discretion as to where they live. And you know, I 0:07:06.760 --> 0:07:10.760 think somewhere on the order of the tax receipts of 0:07:11.840 --> 0:07:14.040 New York State and New York City come from one 0:07:15.080 --> 0:07:20.360 of the population, which is overwhelmingly concentrated in New York 0:07:20.400 --> 0:07:25.160 and the surrounding uh suburbs. So uh, you know, it 0:07:25.280 --> 0:07:29.160 remains to be seen the effect that this will have 0:07:29.480 --> 0:07:33.360 on you know, what is already a you know, somewhat 0:07:33.360 --> 0:07:38.320 of a movement of you know, people who have you know, 0:07:38.480 --> 0:07:42.120 real discretion as to where they live, uh, you know, 0:07:42.240 --> 0:07:46.480 away from high tech states to lower no tech states. 0:07:47.600 --> 0:07:51.119 Thank you very much for being with us. Ralph slow Stein, 0:08:07.720 --> 0:08:09.400 all right, I want to bring in Shira every Day, 0:08:09.680 --> 0:08:13.559 Bloomberg Gadfly columnist. When it comes to technology and the 0:08:13.600 --> 0:08:17.240 topic today happens to be Uber, and they lost, didn't they? 0:08:17.240 --> 0:08:20.320 They lost their fight in the European Union. Tell us 0:08:20.360 --> 0:08:23.119 what this loss means for Uber and what it means 0:08:23.120 --> 0:08:26.280 for the taxi and transport companies that have been fighting 0:08:26.440 --> 0:08:29.520 this up start. So there's a there was a case 0:08:29.720 --> 0:08:33.200 pending before the European Court of Justice and the legal 0:08:33.280 --> 0:08:37.440 question was basically is Uber a digital company, a tech 0:08:37.440 --> 0:08:41.800 company or is it a transportation company? And the court 0:08:41.880 --> 0:08:45.480 ruled that that Uber is basically a transportation company and 0:08:45.800 --> 0:08:49.959 it's a matter of law. Practically speaking, not much is 0:08:50.000 --> 0:08:52.480 going to change for Uber. So the way that Uber 0:08:52.600 --> 0:08:57.400 operates in most countries in Europe already complies with the 0:08:57.440 --> 0:09:00.079 idea that they are a transportation company, which means that 0:09:00.120 --> 0:09:03.840 their drivers need to be licensed UM in a way 0:09:03.880 --> 0:09:07.800 that similar to how taxi drivers are licensed. So practically speaking, 0:09:08.120 --> 0:09:11.000 not much changes. The interesting thing for me is kind 0:09:11.000 --> 0:09:15.600 of thinking beyond today's court ruling, UH two broader questions 0:09:15.640 --> 0:09:20.120 about Uber, which is one um will this have implications 0:09:20.160 --> 0:09:25.560 for the idea that Uber drivers are not employees, which 0:09:25.640 --> 0:09:29.000 is another legal matter that's pending in a separate court 0:09:29.040 --> 0:09:32.760 case in Europe. And two, does this mean that local 0:09:32.800 --> 0:09:36.480 transportation regulators will feel more empowered to kind of metal 0:09:36.920 --> 0:09:41.760 in Uber Uber's business in every conceivable country, which, to 0:09:41.800 --> 0:09:43.960 be honest, they've been doing everything they can to do 0:09:44.000 --> 0:09:46.520 that because the Uber drivers are paid a lot less 0:09:46.520 --> 0:09:49.600 than they make, they charge much lower rates, and they 0:09:49.640 --> 0:09:53.240 have gained a lot of market share very quickly. I'm 0:09:53.280 --> 0:09:56.480 just wondering how much cross border influence does this have. 0:09:56.520 --> 0:09:58.880 In other words, are US regulators looking at to what 0:09:59.120 --> 0:10:02.040 the European Union is doing and thinking of doing something similar. 0:10:02.760 --> 0:10:05.760 That's a good question. I I doubt it, at least 0:10:05.800 --> 0:10:08.840 in the US, because you know, the US does not 0:10:09.000 --> 0:10:13.520 really have this kind of the national transportation regulator regulation 0:10:13.559 --> 0:10:16.840 that's much more on a city by city basis. So 0:10:17.559 --> 0:10:20.360 while this ruling in Europe maybe it will empower some 0:10:20.920 --> 0:10:24.360 local transportation regulators in you know, New York or Seattle, 0:10:24.520 --> 0:10:27.040 I don't know that it will have kind of broad 0:10:27.160 --> 0:10:30.560 national implications in the US. So we'll see. I mean, 0:10:30.679 --> 0:10:33.560 it's it's fair to say that in every market in 0:10:33.600 --> 0:10:39.679 which Uber operates, it is already under intense um regulatory scrutiny. 0:10:39.880 --> 0:10:43.280 So it's hard to imagine that it will get any worse. 0:10:44.559 --> 0:10:48.280 They've got a new chief operating officer, Barty Hartford. Right 0:10:48.320 --> 0:10:53.000 here is the former chief executive officer of Orbits, that's right. 0:10:53.040 --> 0:10:57.040 And notably, the new number two at Uber used to 0:10:57.080 --> 0:11:03.400 work with Uber's new CEO who came from Expedia. So um, 0:11:03.920 --> 0:11:06.120 the two presumably know each other and like each other, 0:11:06.120 --> 0:11:08.600 otherwise they wouldn't agree to work together. And look, this 0:11:08.640 --> 0:11:12.559 is an important higher because Uper Uber's leadership bench has 0:11:12.600 --> 0:11:15.760 been decimated over the last year. So they lost their 0:11:15.840 --> 0:11:19.320 previous number two chief executive in March who left under 0:11:20.000 --> 0:11:26.439 unamicable conditions. Um, they lost chief legal officers now been replaced. 0:11:26.480 --> 0:11:29.520 They're looking for a new board chairman. They lost the 0:11:29.520 --> 0:11:31.760 one and a half billion dollars in the third quarter 0:11:31.800 --> 0:11:34.839 of the year. Yes, they have financial losses as well 0:11:34.880 --> 0:11:37.600 as leadership losses. So it's it's clearly been important to 0:11:37.640 --> 0:11:41.679 the new CEO at Uber to restock the leadership bench 0:11:41.880 --> 0:11:45.080 and preferably restock the leadership bench with people he knows 0:11:45.160 --> 0:11:49.000 or trusts well. Talking about trust, Uber has had some 0:11:49.120 --> 0:11:54.360 issues on that front as certainly with regulators and lawmakers, 0:11:54.679 --> 0:11:58.520 and part of Uber's reputation has been that they do 0:11:58.640 --> 0:12:01.000 kind of, I don't know, test the edges a little bit. 0:12:01.280 --> 0:12:04.800 And how much does the new leadership try to demonstrate 0:12:04.840 --> 0:12:08.120 that it's turning a page with a cultural shift. Look, 0:12:08.120 --> 0:12:11.240 I think that has been Job one for Uber's new 0:12:11.280 --> 0:12:15.320 CEO is basically to change Uber's reputation. He said something, 0:12:15.880 --> 0:12:19.960 Uber got this unfavorable ruling in London that may, at 0:12:20.040 --> 0:12:24.640 least in the future, prohibit Uber from operating in London, 0:12:24.679 --> 0:12:28.160 which is one of the company's largest markets. And the 0:12:28.320 --> 0:12:30.880 Uber CEO basically said, look, this is a sign that 0:12:30.960 --> 0:12:34.760 there is a high cost to a bad reputation. And 0:12:34.840 --> 0:12:38.000 that's what Uber has in almost every market in which 0:12:38.000 --> 0:12:42.160 it operates, at least with regulators and and including with 0:12:42.280 --> 0:12:46.640 drivers too in many cases. And the new CEO's job 0:12:46.760 --> 0:12:51.280 is to basically repair those relationships with regulators, with drivers, 0:12:51.520 --> 0:12:54.920 with customers in some cases, with with you know, writers. 0:12:55.160 --> 0:12:58.559 Sure just quickly Harvard coming in, He's going to oversee 0:12:58.600 --> 0:13:03.720 the regional general managers along with the gentleman who heads 0:13:03.760 --> 0:13:06.640 the food delivery business at Uber. Are they going to 0:13:06.800 --> 0:13:09.440 change the way the companies actually run? Are they going 0:13:09.440 --> 0:13:12.160 to keep the stream structure? I mean, I think it 0:13:12.200 --> 0:13:14.480 remains to be seen that it was interesting that when 0:13:14.559 --> 0:13:17.400 Uber's CEO came in, initially didn't think he needed a 0:13:17.480 --> 0:13:19.840 number two, and then once probably he saw how much 0:13:20.040 --> 0:13:22.160 repair work he was going to have to do with regulators, 0:13:22.240 --> 0:13:26.160 changed his mind and lift. Meanwhile, I was gaining share, 0:13:26.240 --> 0:13:29.079 so let me still see with that right. Shara Ovid, 0:13:29.320 --> 0:13:32.920 technology columnist with Bloomberg gad Fly, thank you so much 0:13:33.400 --> 0:13:36.559 for joining us. She joins us here in our eleven 0:13:36.640 --> 0:13:57.400 three oh studios. It's important to get some perspective on 0:13:57.640 --> 0:14:00.600 bitcoin and get a sense of just how many accounts 0:14:00.600 --> 0:14:03.400 are involved, just how much real money, and just how 0:14:03.480 --> 0:14:08.240 much more institutional interest we have seen as the futures 0:14:08.360 --> 0:14:11.400 contracts start trading. Here to join us and give us 0:14:11.400 --> 0:14:13.560 that insight is Bobby Show, who is head of trading 0:14:13.840 --> 0:14:19.160 at Cumberland in Chicago. Cumberland is DRW Holdings Digital Currency 0:14:19.280 --> 0:14:22.560 unit is one of the world's largest bitcoin trading desks 0:14:22.640 --> 0:14:26.920 and liquidity providers in cryptocurrencies. Bobby, thank you so much 0:14:26.960 --> 0:14:30.680 for joining us. I want to start with just how 0:14:30.760 --> 0:14:33.960 much more money are you seeing come into this market? 0:14:34.000 --> 0:14:36.760 Are you seeing a lot of new accounts being created, 0:14:37.040 --> 0:14:41.840 an institution starting to come in thanks for having me um. So, yeah, 0:14:41.880 --> 0:14:44.120 I mean, well, we've kind of experienced over the last 0:14:44.200 --> 0:14:47.240 let's call it twelve to sixteen months, really a shift 0:14:47.320 --> 0:14:50.040 of the profile of the counterparty that we face here 0:14:50.040 --> 0:14:52.360 at Cumberland. So, as you mentioned, Cumberland is one of 0:14:52.400 --> 0:14:55.640 the largest institutional size liquidity providers in the space. So 0:14:55.960 --> 0:14:59.080 we make markets for uh an array of different folks 0:14:59.120 --> 0:15:02.400 in the industry. We're looking to get exposure to different cryptocurrencies. 0:15:02.800 --> 0:15:08.160 Um you know, heavily dominated in bitcoin and ethereum. So 0:15:08.240 --> 0:15:11.400 what we've seen when we started the business in was 0:15:12.080 --> 0:15:14.960 we were catering to many folks who were very specific 0:15:15.000 --> 0:15:18.480 to the crypto space, payment processors, minors and and other 0:15:18.520 --> 0:15:22.440 individuals that were early adopters. Well, that shifted dramatically again 0:15:22.440 --> 0:15:24.480 in the last year or a year and a half, 0:15:24.760 --> 0:15:28.240 where you saw a number of cryptocurrency funds starting to 0:15:28.280 --> 0:15:31.920 pop up, a number of other institutional investors coming into 0:15:32.000 --> 0:15:34.520 the market. And really what that signals to me is 0:15:34.560 --> 0:15:36.000 that there was a lot of money and still is 0:15:36.040 --> 0:15:38.520 a lot of money sitting on the sidelines waiting to 0:15:38.720 --> 0:15:41.840 get exposure to this asset class. Right, So this class 0:15:41.880 --> 0:15:45.640 currently is sits around six billion dollars and that's obviously 0:15:45.800 --> 0:15:49.080 grown tremendously over the last few years. Bubby, when you 0:15:49.080 --> 0:15:53.200 talk about the hedge funds or funds that are specifically 0:15:53.240 --> 0:15:56.800 focused on cryptocurrencies, that triggered my interest because I saw 0:15:56.840 --> 0:16:00.280 that hedge Hedge Fund Research put out an end X 0:16:00.480 --> 0:16:03.120 of cryptocurrency hedge fund returns, and I'm trying to get 0:16:03.120 --> 0:16:04.800 a sense. Do you have a sense of the a 0:16:04.960 --> 0:16:10.200 U M under cryptocurrency specific funds? You know, Uh, what 0:16:10.240 --> 0:16:14.040 we've seen is the number of cryptocurrency funds has continued 0:16:14.080 --> 0:16:17.200 to increase month over month. So to give you some perspective, 0:16:17.320 --> 0:16:21.000 right in August that number was right around eighty cryptocurrency funds. 0:16:21.000 --> 0:16:23.640 This is globally um that number probably sits somewhere around 0:16:23.640 --> 0:16:25.840 a hundred and fifty. And we don't see that number 0:16:25.880 --> 0:16:30.239 stopping um or slowing down anytime soon. Mainly because of this, 0:16:30.240 --> 0:16:33.760 this ability to access the market continues to be limited, 0:16:34.120 --> 0:16:36.200 and so what people are doing if if they are 0:16:36.240 --> 0:16:38.800 looking to get access into these market is they're looking 0:16:38.840 --> 0:16:41.840 to actually invest in kind of traditional um fund structures 0:16:41.880 --> 0:16:44.960 or vehicles like those that that we mentioned, crypto funds 0:16:45.040 --> 0:16:47.360 or hedge funds. Bobby, can you just tell us a 0:16:47.400 --> 0:16:50.440 little bit about Cumberland, how many people are working on this, 0:16:50.720 --> 0:16:53.000 and maybe just tell us where you got the original 0:16:53.040 --> 0:16:57.160 inventory of bitcoin. Sure so, so Cumberland, as you mentioned, 0:16:57.160 --> 0:16:59.720 we're one of the largest liquidity providers in the world, 0:17:00.160 --> 0:17:02.640 um in terms of just our team and our desk, 0:17:02.680 --> 0:17:06.240 so we are global. Um. So, Cumberland's headquarters is here 0:17:06.240 --> 0:17:08.480 in Chicago, we have an office in London and we 0:17:08.480 --> 0:17:11.399 actually just opened up Singapore a few weeks ago, and 0:17:11.440 --> 0:17:13.760 so that allows us to kind of service our counterparties 0:17:13.760 --> 0:17:17.840 on the basis we are looking to open up in 0:17:17.840 --> 0:17:23.399 the near term um. And so basically, uh, we're we're 0:17:23.440 --> 0:17:26.160 great in the fifteen now, mainly just because the expansion 0:17:26.320 --> 0:17:28.200 and we see that number only growing over the next 0:17:28.240 --> 0:17:31.760 few months. UM. And so in terms of I guess 0:17:31.760 --> 0:17:35.840 inventory and things like that, when we had gotten started 0:17:35.880 --> 0:17:39.880 in the idea really came about in twenty twelve, give 0:17:39.960 --> 0:17:42.399 or take, when obviously through the walls of d r 0:17:42.560 --> 0:17:44.840 W and some of the folks here just trying to 0:17:44.880 --> 0:17:48.920 conceptualize what bitcoin is, how bitcoin is going to change 0:17:48.920 --> 0:17:50.959 the world, and and fundamentally, how we're gonna look at 0:17:50.960 --> 0:17:53.240 this thing in the future. But hang on, I understand 0:17:53.280 --> 0:17:57.040 that you actually, or at least Cumberland bought a lot 0:17:57.080 --> 0:18:00.679 of the bitcoins from ross Albrick. That's the founder of 0:18:00.840 --> 0:18:03.720 Silk Road who's now serving a life sentence right for 0:18:03.840 --> 0:18:08.520 narcotics trafficking. You bought seventy thousand bitcoins that were auctioned 0:18:08.560 --> 0:18:11.959 by US and overseas authorities. Is that correct? So we 0:18:12.040 --> 0:18:15.040 had bought seventy thousand bitcoins from the U. S. Marshal's 0:18:15.080 --> 0:18:19.399 office at auction. Okay, that's correct, yes, And do you 0:18:19.440 --> 0:18:23.400 still have those seventy thousand bitcoins or what what form 0:18:23.440 --> 0:18:26.800 did they currently take? So we still manage a large 0:18:27.160 --> 0:18:30.360 portfolio of cryptocurrencies, and that really allows us to do 0:18:30.480 --> 0:18:33.879 what one of our main kind of responsibility here is 0:18:33.960 --> 0:18:36.960 and and services that we provide is providing over the 0:18:37.000 --> 0:18:39.960 counter trading for large institutional sized positions. So when someone 0:18:40.000 --> 0:18:42.240 comes in and says, hey, I'd like to buy fifty 0:18:42.280 --> 0:18:45.000 million dollars a bitcoin, well, we have a portfolio that 0:18:45.040 --> 0:18:47.080 we managed to be able to supply that from our 0:18:47.080 --> 0:18:50.440 own inventory and so, um, we still manage a large 0:18:50.480 --> 0:18:54.280 portfolio of cryptocurrencies and and that obviously helps to support 0:18:54.359 --> 0:18:57.520 our business in making markets over the counter. Bobby how 0:18:57.520 --> 0:19:01.280 do you hedge against any downs it swings in your portfolio. 0:19:02.320 --> 0:19:05.480 So that's obviously something that is UM super important to 0:19:05.520 --> 0:19:08.280 us because as much as trading UH that we do 0:19:08.400 --> 0:19:11.320 during the day, from my perspective, we really take a 0:19:11.400 --> 0:19:13.560 lens of risk management. That's kind of the first thing 0:19:13.600 --> 0:19:16.000 that we look at um and so if we try 0:19:16.040 --> 0:19:17.800 to be aware of everything that's kind of happening in 0:19:17.840 --> 0:19:21.440 the market, Obviously it's very difficult to do so, mainly 0:19:21.520 --> 0:19:24.720 because this is a product that's traded seven around the 0:19:24.720 --> 0:19:28.000 world and can be accessed by a number of different 0:19:28.000 --> 0:19:31.479 types of folks in the market. And so with the 0:19:31.520 --> 0:19:34.240 advent of futures out there in the market, that kind 0:19:34.240 --> 0:19:36.320 of helps in terms of being able to hedge exposure. 0:19:36.600 --> 0:19:39.399 Although we'll kind of see what how much traction games 0:19:39.680 --> 0:19:41.560 in the futures market, but we are just trying to 0:19:41.600 --> 0:19:44.000 prepare and be aware of kind of everything that's out there. 0:19:44.440 --> 0:19:46.920 Thanks very much for joining us. Bobby Chow is head 0:19:46.920 --> 0:19:50.159 of trading for Cumberland and that's d r W holding 0:19:50.480 --> 0:19:54.719 digital currency unit. He's a joining us from Chicago and 0:19:55.040 --> 0:19:56.920 much appreciated for giving us a little bit of a 0:19:56.960 --> 0:20:02.399 window into the world of trading bitcoin. And other cryptocurrencies. 0:20:16.680 --> 0:20:19.520 It almost sounds like a joke or a story. The 0:20:19.640 --> 0:20:23.760 couple that went on a vacation, stayed in a particular location, 0:20:23.920 --> 0:20:26.760 liked it so much they decided to stay there permanently. 0:20:27.200 --> 0:20:31.560 Man Deep Singers are technology industry analyst for Bloomberg Intelligence 0:20:31.600 --> 0:20:34.440 and he's here to tell us about Airbnb launching their 0:20:34.480 --> 0:20:38.760 own apartment complexes. Man Deep tell us the story of Airbnb, 0:20:39.359 --> 0:20:42.760 I guess leveraging their brand and their expertise into a 0:20:42.760 --> 0:20:46.480 new market. Sure, so when you think about you know, 0:20:46.600 --> 0:20:50.840 online travel or online logistics, it's really about scale and 0:20:50.920 --> 0:20:54.119 network effects. These are the two most important things that 0:20:54.359 --> 0:20:57.000 any company that operates in this space has to have, 0:20:57.800 --> 0:21:02.119 and airbnbi had the first more vantage in vacation rentals. 0:21:02.160 --> 0:21:05.040 That space is getting crowded now with price sign and 0:21:05.160 --> 0:21:09.520 Expedia also expanding inventory. So what Airbnb is trying to 0:21:09.560 --> 0:21:13.840 do is essentially kind of grow their scale by getting 0:21:13.840 --> 0:21:16.720 into this new segment of you know, owning their apartments 0:21:16.760 --> 0:21:21.480 and really they're trying to offer you know, uh accommodations 0:21:21.520 --> 0:21:24.320 for business travelers. So that's a new segment they want 0:21:24.320 --> 0:21:27.680 to cater to. So we're talking about this in part 0:21:27.920 --> 0:21:31.280 because Brookfields, the big developer, just agreed to invest as 0:21:31.359 --> 0:21:34.280 much as two hundred million dollars in a joint venture 0:21:34.480 --> 0:21:39.320 with Needo. It's a multi family development partner of airbnbs, 0:21:39.840 --> 0:21:43.400 and this would go toward building a few apartment complexes 0:21:43.440 --> 0:21:47.440 I believe in Florida. Right. Uh, that would allow residents 0:21:47.440 --> 0:21:51.840 and owners to rent out their properties through the Airbnb 0:21:52.160 --> 0:21:56.200 website for up to half the year. Is that correct? 0:21:56.280 --> 0:21:58.080 Is this a first time type of thing or is 0:21:58.080 --> 0:22:01.439 there a model for this? So Airbnb is really the 0:22:01.480 --> 0:22:04.159 disruptor in this space, and they have helped, you know, 0:22:04.359 --> 0:22:07.280 for people to share their homes and you know kind 0:22:07.280 --> 0:22:13.359 of uh basically draw like inventory where it wasn't available before, 0:22:13.480 --> 0:22:16.040 especially in urban cities or even for that matter, you 0:22:16.080 --> 0:22:19.359 know in holiday locations. And and the way they're able 0:22:19.440 --> 0:22:24.560 to do it is provided technology platform that's Airbnb strength. Well, 0:22:24.560 --> 0:22:28.240 but what's the advantage to somebody who's buying one of 0:22:28.320 --> 0:22:31.200 these homes? I mean, what what would what would it takes? 0:22:31.240 --> 0:22:33.280 It's up to a half a year, so it's not 0:22:33.400 --> 0:22:36.800 more than that. So is this for basically snowbirds that 0:22:37.200 --> 0:22:39.240 want to make some income on the property while they're 0:22:39.280 --> 0:22:42.120 not there? Exactly? Yeah, and and a lot of these 0:22:42.160 --> 0:22:47.440 times these properties were vekend. So by allowing these owners 0:22:47.520 --> 0:22:50.960 to actually you know, put their properties on Airbnb's platform, 0:22:51.080 --> 0:22:55.240 it's free income and Airbnb knows how to manage these properties, 0:22:55.280 --> 0:22:58.880 so it's a win win for both of them, you know, man, Deep, 0:22:58.920 --> 0:23:00.639 I want to go back to something you said earlier, 0:23:00.640 --> 0:23:03.040 which is the business traveler and how this might be 0:23:03.200 --> 0:23:06.000 a real game changer when it comes to business travel. 0:23:06.160 --> 0:23:08.840 Rather than checking into a hotel where you're overcharged for 0:23:08.880 --> 0:23:13.160 everything from the coffee to the use of the business 0:23:13.160 --> 0:23:15.800 center if there is one, and paying for WiFi if 0:23:15.840 --> 0:23:19.800 you have to. They're going to architecturally design these new 0:23:19.880 --> 0:23:24.280 properties in order to cater specifically to these kinds of 0:23:24.600 --> 0:23:27.800 potential customers, isn't that right? Correct? And and they want 0:23:27.800 --> 0:23:31.560 to move up markets so till now their core customer 0:23:31.600 --> 0:23:35.639 base airbnbs core customer base for price conscious customers who 0:23:35.680 --> 0:23:38.760 are looking for the cheapest price on you know, urban 0:23:38.840 --> 0:23:41.960 dwellings and and really looking for a price that was 0:23:42.040 --> 0:23:45.359 cheaper than a hotel. Now, I think the fact that 0:23:45.400 --> 0:23:47.880 they have scaled, they the fact that they have created 0:23:47.920 --> 0:23:50.919 a brand name, they want to cater to all the 0:23:51.000 --> 0:23:54.119 segments and they want to have you know, separate uh, 0:23:54.160 --> 0:23:58.479 you know entities which serve these segments. So business travel 0:23:58.680 --> 0:24:01.119 is a big market it in itself, and are just 0:24:01.119 --> 0:24:03.760 going to add that they don't necessarily then have all 0:24:03.800 --> 0:24:07.320 of that inventory that they have to rent out all 0:24:07.400 --> 0:24:10.800 the time, just as a hotel group would, because that's 0:24:11.119 --> 0:24:14.760 stagnant inventory unless you know, you occupy it. Yeah, So 0:24:14.800 --> 0:24:18.040 the benefit of Airbnb is they are so good with 0:24:18.160 --> 0:24:21.359 crunching data that's available on their platform, and that's really 0:24:21.400 --> 0:24:24.480 their advantage that they're able to, you know, assess the 0:24:24.520 --> 0:24:28.399 supply demand equation much better than a hotel or you know, 0:24:29.320 --> 0:24:32.480 some of the smaller hotels will be able to do themselves, 0:24:32.480 --> 0:24:35.320 so they really have a good stock of what the 0:24:35.359 --> 0:24:38.920 current supply demand dynamics are. You know. I'm struck by 0:24:38.960 --> 0:24:41.280 the fact that Uber right now, which will talk about 0:24:41.400 --> 0:24:45.840 later in the show, is facing some increased regulatory pressure 0:24:46.280 --> 0:24:49.840 in Europe in part because they are designating them a 0:24:49.960 --> 0:24:54.639 taxi company, not necessarily a gig company. The way they 0:24:54.640 --> 0:24:56.800 attach company, the way that they sort of build themselves 0:24:56.800 --> 0:24:59.520 to investors. I wonder at what point this type of 0:24:59.560 --> 0:25:02.800 thing it's Airbnb and they start getting treated more like 0:25:02.800 --> 0:25:07.760 a hotel company than a tech upstart. I mean, that's 0:25:08.440 --> 0:25:10.280 very much of a risk. And when I look at 0:25:10.320 --> 0:25:14.119 all the new sharing economy companies like Uber, like Airbnb, 0:25:14.920 --> 0:25:18.680 they started off as a technology platform, they picked an 0:25:18.720 --> 0:25:22.119 area to focus on, and they really you know, leverage 0:25:22.200 --> 0:25:25.639 technology to mass scale. There is a risk that there's 0:25:25.680 --> 0:25:28.560 a cost side of the equation that obviously could get 0:25:28.560 --> 0:25:32.880 affected once you become regulated. So once you know, Uber 0:25:32.960 --> 0:25:37.000 gets regulated or n B Airbnb gets regulated, it's gonna 0:25:37.400 --> 0:25:40.399 have an impact on the cost side, and that's always 0:25:40.400 --> 0:25:43.600 a risk. But having this investment from Brookfield, that's got 0:25:43.640 --> 0:25:46.399 to be a stamp of approval, or at least that 0:25:47.080 --> 0:25:51.200 conditional stamp of approval. Absolutely, and no one is doubting 0:25:51.240 --> 0:25:54.199 that Airbnb is a viable business. It's there for the 0:25:54.280 --> 0:25:57.119