Latest / Bloomberg Intelligence / Amazon, CES, Inflation, and Latino Businesses (Podcast)

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Amazon, CES, Inflation, and Latino Businesses (Podcast) · Bloomberg Intelligence

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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com Slash podcast. Let's talk retail because
0:23
Speaker 1: we had Bed Bathroom Beyond, which by the way, is
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Speaker 1: based in Union, New Jersey. In my backyard, we've got
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Speaker 1: Amazon laneoff people. So jobs right, yeah, I mean we
0:34
Speaker 1: don't know. That's right, that's eight jobs. So let's roundtable
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Speaker 1: a little bit here on the retail space. We can
0:40
Speaker 1: do that with Punum Boyle. She covers all the retail stuff.
0:42
Speaker 1: Don't forget intelligence. Yeah, we'll talk about that. John Edwards,
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Speaker 1: the third team leader, covers the US consumer retail luxury space. Um, John,
0:51
Speaker 1: thanks so much for coming here in our Bloomberg and
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Speaker 1: Actor Broker studio. You get a gold Star and my
0:54
Speaker 1: friend Um talk to us about Bed Bathroom Beyond. This
0:58
Speaker 1: is just there's They have news today about a going
1:01
Speaker 1: concern issue. Um. Is this this poor management or is
1:05
Speaker 1: this some symptom of just greater retail. Do you think, Yeah,
1:08
Speaker 1: it's it's a combination of things. I mean, it's it's definitely. Um,
1:12
Speaker 1: you know, they're they're affected by the things that are
1:15
Speaker 1: affecting retail broadly, but they do have some company specific
1:22
Speaker 1: problems that have been plaguing them for years and if
1:26
Speaker 1: not really gotten any better. Uh. You know. One of
1:29
Speaker 1: one of the main issues they had was that they
1:32
Speaker 1: made this big push toward private label goods, you know,
1:36
Speaker 1: which in theory, uh, you know, is a positive for
1:40
Speaker 1: a retailer if they can get people buying you know,
1:44
Speaker 1: private label products that they create themselves, that obviously boost
1:49
Speaker 1: their margins by you know, um, reducing the things that
1:53
Speaker 1: they have to buy from others. Are they quality? They
1:55
Speaker 1: Kirkland well products? That's that is that's the issue. They
2:00
Speaker 1: are not Kirkland levels. Uh. No, they they had just
2:04
Speaker 1: a variety of problems with with introducing these products under
2:09
Speaker 1: a you know, now three CEOs ago. Uh. They brought
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Speaker 1: in uh, guy Mark Tritton from from Target with who
2:18
Speaker 1: had you know, extensive experience, successful experience there with private label,
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Speaker 1: but you know, he had execution problems at bed Bath
2:28
Speaker 1: and Beyond as well. You know, he in some ways
2:30
Speaker 1: tried to apply too much of the sort of identical
2:34
Speaker 1: target playbook to uh, you know, to bed Bath, which
2:38
Speaker 1: didn't have the internal infrastructure to support a lot of
2:42
Speaker 1: his his goals. So so, Pum, I want to bring
2:46
Speaker 1: you in here, you know, as we're talking about bed
2:48
Speaker 1: Beth and beyond, I love to just pull it back
2:50
Speaker 1: the lens a little bit and just talk about retail
2:52
Speaker 1: in general. Give us your sense of just the consumers
2:54
Speaker 1: seem strong. We got some good jobs data again today. Um,
2:58
Speaker 1: it seemed like the hollid season was pretty good. I'd
3:01
Speaker 1: love to get your assess. And because you see so
3:03
Speaker 1: many retail companies to talk to so many of those investors,
3:07
Speaker 1: what are you hearing about the environment out there? Yeah,
3:09
Speaker 1: so the environment is still mixed. Really if you think
3:12
Speaker 1: about what we saw were the holiday we did have
3:14
Speaker 1: a good holiday season. Adobe just came out with their
3:16
Speaker 1: e commerce UM numbers that holiday sales were up three
3:19
Speaker 1: point five percent and that's better than they had estimated.
3:22
Speaker 1: So overall good. But you know, I think when we
3:24
Speaker 1: start to see earnings later this month and into February,
3:27
Speaker 1: there will be mixed treats. Because remember there was a
3:29
Speaker 1: snowstorm right in the Northeast right ahead of the Christmas season,
3:32
Speaker 1: which probably truncated a lot of the sales that would
3:36
Speaker 1: have been there and may have really prompted more gift
3:39
Speaker 1: card sales well, because people couldn't get out and get
3:41
Speaker 1: to the stores. They couldn't get out and whatever was
3:43
Speaker 1: coming from online probably couldn't make it there because of
3:45
Speaker 1: the snow storm. So really a double whammy there where
3:48
Speaker 1: you couldn't shop online and you couldn't shop in stores.
3:51
Speaker 1: Outside of that, the consumer, yeah, they're they're holding up,
3:53
Speaker 1: but they're spending where they want to spend. So really
3:56
Speaker 1: you have to be the brand that they're seeking for
3:59
Speaker 1: you to get the bus this and do well. And
4:01
Speaker 1: and there are brands out there that are that are
4:03
Speaker 1: doing well. You know, we think at Sea is one
4:05
Speaker 1: of them on the online space that continues to drive
4:08
Speaker 1: shoppers to its website because it's unique in what it
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Speaker 1: offers and there's really no one else like them. Yeah,
4:13
Speaker 1: it's you know, this is interesting. I've been looking lately.
4:16
Speaker 1: I've been trying to focus on buying products that are
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Speaker 1: made in America or you know, made in Europe, like
4:23
Speaker 1: a leather jacket. Well, for example, those are handmade in Scotland.
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Speaker 1: But if you look on Amazon, I've noticed nearly everything
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Speaker 1: on Amazon is made in China. I don't know why
4:35
Speaker 1: I don't just drop the middleman and go straight to
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Speaker 1: Ali Baba because Jeff bezos factory is in China. Um.
4:42
Speaker 1: Then I discovered Etsy, where you can find things that
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Speaker 1: are made by people who get a working wage or
4:49
Speaker 1: at least run their own businesses, which made me happy.
4:52
Speaker 1: But the user experience isn't quite nearly as good. Um
4:56
Speaker 1: is there is there any uh sense that deglobalization is
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Speaker 1: coming to Amazon? Are they? Are they at all affected
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Speaker 1: by the US China the poor trade relationship? I mean,
5:09
Speaker 1: I think all of retails is affected by that. It's
5:12
Speaker 1: not just Amazon, right, we import. Most of what we
5:15
Speaker 1: consume is imported, and China is a big area where
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Speaker 1: we are dependent on So that doesn't just impact Amazon
5:23
Speaker 1: and impact all of retail. Really, I don't mind importing
5:25
Speaker 1: stuff if if I'm importing it from h a producer
5:30
Speaker 1: that pays a decent wage, maybe uses union labor, you
5:34
Speaker 1: know where I'm not worried about sweatshops or kids making
5:37
Speaker 1: this stuff. Hey, John, I know in your beat you
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Speaker 1: cover luxury I can't. I'm so surprised how luxury remains
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Speaker 1: so strong cycle in, cycle out. What are we hearing
5:51
Speaker 1: from the luxury brands these days? Uh? Yeah, they continue
5:55
Speaker 1: to hold up. I mean, I think what we're starting
5:58
Speaker 1: to see is, you know, some of the entry level
6:02
Speaker 1: luxury goods, you know, some of your sort of accessories,
6:05
Speaker 1: your belts, your uh Gucci shower shoes, your things, all that,
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Speaker 1: are you know, starting to weaken a bit, because you know,
6:14
Speaker 1: those are the luxury customers who are most exposed to
6:18
Speaker 1: uh you know, feeling the pinch of inflation. But you know,
6:22
Speaker 1: the rich are still rich and uh you know, still
6:25
Speaker 1: want what they want. You know. A Astin was saying,
6:27
Speaker 1: they're not going to bed bath and beyond, though, John,
6:29
Speaker 1: they cover both luxury and bed bath and beyond. We
6:32
Speaker 1: cover it all. I was thinking about in in the
6:36
Speaker 1: bigger picture of the whole Wall Street bets phenomenon, the
6:40
Speaker 1: meme stock thing that we covered a couple of years ago.
6:43
Speaker 1: Are there companies out there that should have gone bust
6:46
Speaker 1: but didn't because of buyers of stocks with their with
6:51
Speaker 1: their stinnies. I mean, I you know, I certainly can't
6:53
Speaker 1: call out any boy name, but yeah, you could probably
6:56
Speaker 1: say that there are some companies who's uh, poor Wormans
7:00
Speaker 1: was papered over for a while by the fact that, yeah,
7:03
Speaker 1: they got, you know, caught in the meme wave the
7:06
Speaker 1: road that as long as they could. It's funny. The
7:08
Speaker 1: bed bath and beyond near me is right next to
7:12
Speaker 1: the game stop in this little strip mall that you
7:14
Speaker 1: want to kind of avoid it all calls right, you
7:16
Speaker 1: know exactly, there's a harsh fluorescent lighting everywhere if they
7:20
Speaker 1: leave the lights on at all. And alright, some news
7:24
Speaker 1: just crossing the Bloomberg terminal. I want to get it
7:25
Speaker 1: out there. Putin orders. January six, seventh, ceasefire in Ukraine.
7:29
Speaker 1: The Kremlin says, well more reporting on that, but that's
7:32
Speaker 1: gets your attention there. Put um um In terms of
7:35
Speaker 1: the retail space here is now that we're kind of
7:37
Speaker 1: through the holiday season, give us a sense of kind
7:39
Speaker 1: of how the inventory levels are. I know that was
7:42
Speaker 1: an issue for a lot of retailers, leading them to
7:44
Speaker 1: maybe really be aggressive on some of the promotions. Here,
7:47
Speaker 1: how are inventories looking. Inventories are still a little bloated.
7:50
Speaker 1: While sales were good, they entered inventories really high. So
7:53
Speaker 1: we think January will be the key month for them
7:56
Speaker 1: to really press on promotions and clear out all that
7:59
Speaker 1: inventory to make room for a spring goods. But this
8:02
Speaker 1: is the This is a clearance month for retail, and
8:03
Speaker 1: we expect retailers to push as much inventory as they
8:07
Speaker 1: can out of their system this month. Is it going
8:09
Speaker 1: to be harder for our is someone like Target who
8:12
Speaker 1: had a difficult time managing inventory, You're gonna be doing
8:15
Speaker 1: more discounting. There will be more discounting across retail right now,
8:18
Speaker 1: just because the inventories have to get out. And even
8:20
Speaker 1: if you are Lena on inventory, if your neighbor is
8:23
Speaker 1: discounting aggressively, in order for you to get wallet chair,
8:26
Speaker 1: you also need to increase your promotional activity. That's just
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Speaker 1: how retail works. Hey, John. Lastly, are there still too
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Speaker 1: many stores in the US? Do you think because we've
8:35
Speaker 1: seen so many store closures and Punam has been, you know,
8:38
Speaker 1: writing a lot about that in her research, and we
8:41
Speaker 1: probably had that accelerator in the pandemic. What do you
8:44
Speaker 1: hear from some of the retailers you guys cover, Yeah, well,
8:46
Speaker 1: it's um You know, for one thing, there are still
8:49
Speaker 1: stores being open, but most of them are dollar stores. Okay,
8:53
Speaker 1: that's that's an area where the physical retail is still
8:56
Speaker 1: expanding rapidly. Um. But yeah, a lot of the you know,
9:00
Speaker 1: sort of mid level and higher end um retailers are
9:04
Speaker 1: becoming more selective about where they place there, uh, their
9:08
Speaker 1: physical locations and uh you know, we also see companies
9:13
Speaker 1: doing things like converting parts of their stores to online
9:17
Speaker 1: fulfillment centers, you know, because there's too much online stuff.
9:21
Speaker 1: I'm looking for pickleball rackets, find them in a physical store.
9:25
Speaker 1: Follow from who follows fans better than you. You've got
9:27
Speaker 1: to get them from Jeff Bezos, who to get some
9:30
Speaker 1: sources them directly in China. All right, do you wear
9:32
Speaker 1: the leather jacket when you're playing? Probably? John Edwards the
9:35
Speaker 1: third he's a team leader US consumer Retail for Bloomberg
9:37
Speaker 1: News and put them boil covers all things for Bloomberg Intelligence.
9:41
Speaker 1: Out in Las Vegas, Math, there's a little technology conference
9:46
Speaker 1: called the Consumer Electronics Show. Gets a couple hundred thousand
9:49
Speaker 1: people out there to see all the new cool gadgets
9:51
Speaker 1: and stuff like that. It's really become, i think an
9:54
Speaker 1: automotive conference. They have such a huge presence there. The
9:57
Speaker 1: automotive industry. At the cs UH convention, Martin Fisher board member,
10:02
Speaker 1: z F Group and Bloomberg Technology host ed love. Though
10:05
Speaker 1: he's out in Vegas, he joins us. They both join
10:07
Speaker 1: us to discuss what's going on out there from the
10:10
Speaker 1: auto perspective. Uh, Martin Fisher, thanks so much for joining
10:13
Speaker 1: us here. ZF Group, the world's largest automotive supplier mobility company.
10:18
Speaker 1: What do you guys doing at CES this year? Why
10:21
Speaker 1: is that and why is this a convention important to
10:23
Speaker 1: you guys? I mean, FS for us has always been
10:26
Speaker 1: the plower place to present our large scale innovations and
10:30
Speaker 1: also some smallest smart ideas, and that's what we're up
10:33
Speaker 1: to this year as well. So we focus on the
10:36
Speaker 1: key trends of automated driving and electrification and I have
10:40
Speaker 1: good news to present in both areas. So what well?
10:45
Speaker 1: First of all, I gotta say your resume looks awesome
10:47
Speaker 1: from a car guy perspective. You were at vd Siemens Video,
10:52
Speaker 1: you were the CEO at Hella. I was just searching
10:55
Speaker 1: for some of their products online. General manager at Borg Warner,
10:58
Speaker 1: famous for making the turbos. Z F Group makes the
11:00
Speaker 1: best transmissions in the world. Um, what a sweet career,
11:05
Speaker 1: you've had what I mean, what gets boring? Right? What?
11:09
Speaker 1: What gets you excited? What do you what do you have?
11:12
Speaker 1: What are you showing at CES? Yeah, the whole transformation
11:15
Speaker 1: that we go through is really what keeps me exciting.
11:18
Speaker 1: And we have a couple of highlight topics out here.
11:21
Speaker 1: We are revealing later today our latest generation autonomous shuttle
11:25
Speaker 1: and that's really for me as an engineer. And if
11:29
Speaker 1: that strong automotive background, really a highlight autonomous shovel means
11:34
Speaker 1: we bring up a vehicle that you know, it's about
11:36
Speaker 1: twenty people, it's electrically driven, and it's fully autonomous, so
11:40
Speaker 1: it's gonna blend nicely and safely into the traffic. And
11:44
Speaker 1: that's how a highlight presentation for today. Who who? Who's
11:47
Speaker 1: your customer? There? Is it like the Walt Disney Disney
11:50
Speaker 1: World so they can shuttle people around? Or is it
11:53
Speaker 1: a corporate campus a college campus? I mean, Vegas seems
11:57
Speaker 1: like a good place you can ferry at Ludlow back
12:00
Speaker 1: and forth from from the fair Grounds to his suite
12:05
Speaker 1: at the Villaggio or yeah, absolutely no, those are already
12:09
Speaker 1: very good use cases. Plus it is also in addition
12:12
Speaker 1: to the public transportation systems. So when you go into
12:15
Speaker 1: a metro pilotan areus and you have subway systems, conventional
12:19
Speaker 1: bus systems, where we fall short of is typically the
12:23
Speaker 1: last mild transportation solutions. So how do I get from
12:26
Speaker 1: the subway station into my neighborhood? And that's where these
12:29
Speaker 1: shuttles can help. All of the business cases are l
12:34
Speaker 1: You the technology reporter for Bloomberg News, You've seen it all.
12:36
Speaker 1: You you have to be at cees from start to finish.
12:40
Speaker 1: What's your what's your sense of what's kind of some
12:42
Speaker 1: of the highlights out there. It's it's interesting to have
12:45
Speaker 1: Martin on the program. Good morning to Martin. You know
12:48
Speaker 1: Matt's riot. He is a brilliant cv zs so important
12:53
Speaker 1: in globals. Most White Chaine for me, like the famous
12:57
Speaker 1: series Let's Get Real, guys, Let's get real. And the industry.
13:00
Speaker 1: You know, when I was here in we were talking
13:03
Speaker 1: about robotaxis and we were talking about autonomy, and the
13:06
Speaker 1: bubbles burst a little bit in that time. But I
13:09
Speaker 1: think what's interesting about theF is that they have a
13:13
Speaker 1: track record with existing shuttles that working very narrowly defined settings,
13:18
Speaker 1: specific lanes in g O fence locations like campuses and
13:22
Speaker 1: Martin correct me if I'm wrong, but I think that
13:24
Speaker 1: you know, this is kind of an extension of that. Right,
13:27
Speaker 1: we're talking about thousands of shuttles with beef over a
13:30
Speaker 1: number of years, although I'd be interested to know how soon,
13:33
Speaker 1: how many years is this going to happen, because that
13:36
Speaker 1: that's really the conversation here at the S like, let's
13:38
Speaker 1: let's start announcing some things that are actually going to
13:40
Speaker 1: materialize into the real one. Yeah, you're right on its
13:44
Speaker 1: solid scaling, and that's how we approached the whole tubbles.
13:48
Speaker 1: As you said, we have frost solutions in operations for
13:51
Speaker 1: years now and they are inddicated lanes, controlled environment, but
13:56
Speaker 1: for us to experience the through stuffs and now we
13:59
Speaker 1: go into a traffic operations with the lately announced shuttle.
14:03
Speaker 1: Your question, how is it going to hit the market?
14:06
Speaker 1: Also out in Vegas yesterday we announced a new partnership
14:10
Speaker 1: with Beep Beep as an operator for such autonomous shuttles,
14:13
Speaker 1: and that agreement enables us to deliver a couple of
14:17
Speaker 1: thousand shuttles into the US market. In terms of timing,
14:21
Speaker 1: we will have first vehicles delivered in and then I'm
14:25
Speaker 1: going to ramp up in Are you talking with any governments?
14:30
Speaker 1: I mean, I know that I'm sitting right here. In Manhattan.
14:33
Speaker 1: There's a bus that just every day goes back and
14:35
Speaker 1: forth along Central Park, doesn't change the route, isn't going
14:39
Speaker 1: very far, takes about twenty or thirty people. Uh why
14:43
Speaker 1: don't you talk to the m T A. Yeah, no,
14:46
Speaker 1: that's happening, and we do it here and we as
14:48
Speaker 1: through partners through BEEP in this case, UM in Europe
14:51
Speaker 1: where we are home based, we go also straight into
14:54
Speaker 1: these public government discussions. So it's a new avenue for us.
14:59
Speaker 1: And in Vegas, what's the fielder as a crowded is
15:02
Speaker 1: our people back? Is a pre pandemic? Do you think? Yeah? Yeah,
15:06
Speaker 1: I think it is. I think you know, I need
15:08
Speaker 1: to talk to the organizers about the official number. And
15:10
Speaker 1: actually I'll be honest with you, the c P A
15:11
Speaker 1: a pretty kg about it and have been since. But
15:15
Speaker 1: you know, my sense of being here is that we're
15:17
Speaker 1: back to full sense c S. I think for like
15:20
Speaker 1: r global audience, right, you have to appreciate what it is.
15:22
Speaker 1: It is a lot of fun. You know, this is
15:23
Speaker 1: Las Vegas, right, I won't tell you what I did
15:26
Speaker 1: last night, but I did a lot of work late
15:28
Speaker 1: into the evening. Yeah, but you know a lot of
15:31
Speaker 1: bankers that there are bankers here, there are investors here,
15:34
Speaker 1: there are there executives, and I bet you Martin won't
15:36
Speaker 1: give us any names. But it's a great chance to
15:38
Speaker 1: speed date everyone that you want to see. You can
15:40
Speaker 1: see in the space of three days. And that's really
15:43
Speaker 1: what it's about. It's about getting all your client meetings
15:45
Speaker 1: in doing some deals. Maybe Martin's done some last night
15:48
Speaker 1: over dinner. I don't know the question for him, but
15:51
Speaker 1: that's kind of the vibe to alright, good stuff. Martin Fisher,
15:54
Speaker 1: member of the board of Management at ZF Group and
15:58
Speaker 1: at the Low at a Ballooon News in Vegas at
16:02
Speaker 1: the ce S. Natalie Trevor Thick, head of investment grade
16:08
Speaker 1: credit strategy at paid In in in Regal. So, Natalie, how's
16:13
Speaker 1: my analysis? Hold up? It can't be any worse. Is
16:16
Speaker 1: got to be better? What's your outlook? Yeah, you're absolutely right.
16:20
Speaker 1: We're at a much better starting point here. On bonds,
16:23
Speaker 1: you can buy one year tea bills for four and
16:24
Speaker 1: a half percent, or corporate bonds for five and a
16:27
Speaker 1: half percent. So we think fixed income can go back
16:29
Speaker 1: to be being the safe haven asset class um as
16:33
Speaker 1: people expect and deliver nice positive returns in two thousand
16:36
Speaker 1: and twenty three. So, um, we're talking about treasuries, but
16:41
Speaker 1: what about corporates. Um. Obviously, fixed income is a very
16:45
Speaker 1: big universe. What do you like the best? Yeah, corporate
16:50
Speaker 1: bonds are very attractive, particularly in the front end of
16:53
Speaker 1: the curve. You can get yields five and a half
16:55
Speaker 1: even six percent in investment grade credit. That's nearly double
16:58
Speaker 1: what you can get in high yield the couple of
17:00
Speaker 1: years ago, and high yield yielding you know, around nine.
17:04
Speaker 1: So given a strong fundamental backdrop, corporations really aren't in trouble.
17:08
Speaker 1: They may see some margin compression which is hurting their
17:11
Speaker 1: equity performance, but from a bond perspective, they're still quite strong.
17:15
Speaker 1: So we think investing in credit is a nice place
17:17
Speaker 1: for investors to park their money if they're worried about
17:20
Speaker 1: a recession or inflation and volatility and the equity markets well,
17:24
Speaker 1: and as you go further out the risk spectrum, you've
17:26
Speaker 1: got to start to worry about defaults. Apparently covenants have
17:31
Speaker 1: gotten a lot weaker over the past few years investors
17:34
Speaker 1: search for hunt for yield. Um, what are your concerns
17:38
Speaker 1: in three are defaults? Yeah, we really don't see defaults
17:44
Speaker 1: moving materially higher off of their current level. Maybe they
17:47
Speaker 1: get up to four per cent, and there are some
17:49
Speaker 1: concerns in the triple B a triple C sector, but
17:52
Speaker 1: for the most part, high yield companies have extended their
17:55
Speaker 1: maturities so they don't really have a hanging debt wall,
17:58
Speaker 1: so it's pretty expensive for them to issue right now,
18:01
Speaker 1: and most companies can hold off to issuing until two
18:03
Speaker 1: thousand twenty four or later, so we don't think the
18:06
Speaker 1: default story is a big story for two thousand twenty three,
18:09
Speaker 1: and most of these companies can weather mild recession. Natalie,
18:13
Speaker 1: In terms of you know an investment grade side, Um,
18:16
Speaker 1: what are some of the sectors that you guys are
18:19
Speaker 1: are favoring right now? We still favor some of the
18:23
Speaker 1: defensive sectors, such as pharmaceuticals and healthcare utilities, But we
18:27
Speaker 1: also think the banking sector has cheapened up materially and
18:31
Speaker 1: these banks still have strong balance sheets, so we're comfortable
18:34
Speaker 1: that they aren't going to see the kind of uh
18:36
Speaker 1: financial crisis they saw on the Great recession. Even if
18:38
Speaker 1: we were to go into another recession, and they offer
18:41
Speaker 1: pretty Commumpelly meals in duration, how far are you willing
18:46
Speaker 1: to go out here? Because, as you mentioned, on a
18:48
Speaker 1: two year note, you can get four point four six
18:50
Speaker 1: percent here and a four to your treasury. So on
18:53
Speaker 1: the corporate credit side, how far are you guys willing
18:55
Speaker 1: to go out? We are willing to buy thirty years
18:59
Speaker 1: typically higher quality bonds. There there is quite an inverted
19:02
Speaker 1: treasury curve, you know, as two years are yielding nearly
19:05
Speaker 1: four and a half percent and thirty years are only
19:07
Speaker 1: at three point eight percent. But investors want to lock
19:10
Speaker 1: in these higher yields because if they think that the
19:12
Speaker 1: Fed's going to pivot eventually, maybe not this year, but
19:15
Speaker 1: and be cutting rates, they want to lock in these
19:17
Speaker 1: longer yields further out the curve. So we are seeing
19:20
Speaker 1: quite a lot of demand for corporates in ten and
19:22
Speaker 1: thirty years. Yeah, we are hearing more and more people
19:27
Speaker 1: talk about the possibility of a pivot not coming in
19:31
Speaker 1: until what's your view? We agree with that view. But
19:37
Speaker 1: despite how hard the FED tries to deliver a hawkish signal,
19:40
Speaker 1: investors just aren't buying it. They seem to be in
19:43
Speaker 1: the camp that inflation is coming down, the Fed's getting
19:46
Speaker 1: it under control, and we are going to keep rates
19:48
Speaker 1: higher for longer. So, you know, we had a little
19:51
Speaker 1: bit of a rate reversal today, but what we've seen
19:53
Speaker 1: consistently since, uh the beginning of November, is that rates
19:56
Speaker 1: are moving lower. Not only when you go to talk
20:00
Speaker 1: to your clients. What's kind of some of the big
20:02
Speaker 1: issues that they're asking you? Again, two was such a
20:06
Speaker 1: you know, really difficult year for fixed income investors. They've
20:09
Speaker 1: never seen it before. What are they asking you these days?
20:13
Speaker 1: Most investors understand what happened in two thousand twenty two
20:17
Speaker 1: given the extreme raise and interest rates, and investors are
20:20
Speaker 1: more looking for opportunities right now, asking where in credit
20:23
Speaker 1: market should they get involved, just because we do expect
20:26
Speaker 1: the volatility to continue, particularly in equity markets, and they
20:30
Speaker 1: arguing it as a safe haven asset class once again.
20:33
Speaker 1: I'm excited, you know, because for the past by some
20:36
Speaker 1: bonds a couple of decades, I've been thinking my whole
20:39
Speaker 1: future relies on the stock market, and now it seems
20:42
Speaker 1: like I can lock in some real returns and then
20:45
Speaker 1: sleep easier exactly two year treasuries. Four am I am
20:50
Speaker 1: I off base here, Natalie mean, is this the case?
20:52
Speaker 1: I'm you know, I'm forty nine years old, happen to
20:55
Speaker 1: have a young kid, so I gotta I gotta work
20:57
Speaker 1: for the next at least twenty years. But is that
21:00
Speaker 1: the situation people my age are going to be in.
21:02
Speaker 1: Are they gonna start investing in fixed income and and
21:04
Speaker 1: not have to worry so much about the volatility of
21:07
Speaker 1: the stock market? Exactly, it's sleep at night. You can
21:11
Speaker 1: get five percent just and cupons alone. And if you
21:14
Speaker 1: actually do believe that that's gonna pivot and start cutting
21:16
Speaker 1: rates even next year, then you can have the positive
21:19
Speaker 1: total returns from declining interest rates and price appreciation on
21:23
Speaker 1: top of that five percent. So I think we're looking
21:24
Speaker 1: at mid single digit returns and credit this year and
21:28
Speaker 1: maybe high single digit to double digits in the years ahead.
21:32
Speaker 1: Are your portfolio managers are they kind of running recession
21:36
Speaker 1: scenarios here where they have to really start thinking about
21:38
Speaker 1: covenants and interest coverage and you know that that kind
21:42
Speaker 1: of thing. Are they running those recession models kind of
21:45
Speaker 1: right now in case we do have some issues. Absolutely,
21:49
Speaker 1: and we're always looking at those contingencies and evaluating evaluating
21:54
Speaker 1: aiding it on a bond by bond basis. But we
21:56
Speaker 1: really don't think that's going to be a major concern.
21:59
Speaker 1: So we do like having a defensive mix in our portfolios,
22:02
Speaker 1: but we're looking to extend out the respectrum and credits
22:05
Speaker 1: where we feel pretty confident. You gotta want to push
22:08
Speaker 1: on covenants a little bit more, um Am, I right,
22:11
Speaker 1: that they've become a little bit too Uh well, I
22:14
Speaker 1: guess advantageous to the borrower over the past couple of years. Yes,
22:19
Speaker 1: boards have been getting away with a lot. So that's
22:22
Speaker 1: something our analyst team really focuses on when we meet
22:25
Speaker 1: with management teams, is pushing back from covenants and we're
22:27
Speaker 1: more than happy to not participate in deals where we
22:29
Speaker 1: don't think they're strong enough. Natalie mentioned how often do
22:33
Speaker 1: your analysts meet with analyst teams these days? Posts, you know,
22:37
Speaker 1: post pandemic management teams. Yeah, with Matt management teams, are
22:40
Speaker 1: they are they traveling to come see you in Los Angeles?
22:42
Speaker 1: Are you going to conferences? How do you interact with
22:45
Speaker 1: management teams these days? Yeah, we're doing both tho. It's
22:48
Speaker 1: picking up again with in person meetings, but They still
22:51
Speaker 1: do a lot of virtual meetings via Zoom, but the
22:54
Speaker 1: in person meetings conferences that management teams to travel into
22:57
Speaker 1: our office is picked up a lot. Alright, good stuff.
22:59
Speaker 1: Nat the treviorth Thick, head of Investment Grade UH Credit
23:03
Speaker 1: Strategy at Payton and regal Um. They're based on Los
23:06
Speaker 1: Angeles at one of the great office towers in Los Angeles,
23:09
Speaker 1: three thirty three South Grand Avenue. You've got like all
23:12
Speaker 1: the big firms there have been there at various times.
23:19
Speaker 1: Do you know that Katie gray Feld spends her entire
23:22
Speaker 1: weekend slaving away on her cats and Coins newsletter? Is
23:24
Speaker 1: that right? Yeah? Okay, Katie Gryfeld, cross Asset reporter joins
23:27
Speaker 1: us here in a Bloomberg Interactive Broker studio. First of all,
23:30
Speaker 1: when you do your grsage riding thing on the horse,
23:33
Speaker 1: you have a saddle, right, big time big. But it's
23:35
Speaker 1: not a cowboy John Wayne saddle. No, it's a grsage saddle.
23:39
Speaker 1: It's you can tell it's a gossage shaddle because it
23:42
Speaker 1: has a really high back. It's kind of like sitting
23:44
Speaker 1: in a bucket because you really want to have a
23:46
Speaker 1: firm base ride. Alright, good stuff. We were Matt. Matt
23:49
Speaker 1: and I were just talking about that. We weren't sure
23:51
Speaker 1: how that out. But when you when you say you
23:54
Speaker 1: rope a calf and you've got to tie tie into
23:56
Speaker 1: your saddle, what do you do if there's a calf
23:59
Speaker 1: in the the grsage? Right, something went wrong. But I
24:02
Speaker 1: would say a Western saddle is like a couch, Like
24:05
Speaker 1: that's a comfortable saddle. But a Grsage saddle took a bucket.
24:09
Speaker 1: You know you're really sitting in there, you're strapped in
24:11
Speaker 1: You guys have fallen off. All right? I want to
24:15
Speaker 1: talk crypto here. Who is Barry Silver? And do I
24:18
Speaker 1: care who this guy is? Definitely care who Barry Silver?
24:22
Speaker 1: It is. He is the founder of Digital Currency Group.
24:26
Speaker 1: It is. It was once valued at ten billion dollars.
24:29
Speaker 1: It's this huge crypto conglomerate. The reason you're hearing so
24:32
Speaker 1: much about Barry Silver right now is because the companies
24:37
Speaker 1: that dcg owns it has Gray Scale, which has the
24:40
Speaker 1: gray scale Bitcoin Trust exactly, which is in a lot
24:44
Speaker 1: of well you know how much bitcoin does the gray
24:47
Speaker 1: gray scale Bitcoin Trust own. At one point it held
24:51
Speaker 1: like three percent of all outstanding supply of bitcoin. So
24:54
Speaker 1: it's a. It's a massive amount of money, but the
24:56
Speaker 1: thing about it is it's trading at a massive discount,
25:00
Speaker 1: massive to net asset value. Like if they own out,
25:03
Speaker 1: let's say a billion dollars worth of bitcoin um, the
25:07
Speaker 1: whole thing is only worth okay okay. So and shareholders
25:12
Speaker 1: are upset because they can't get their their bitcoin out
25:15
Speaker 1: because it doesn't have redemptions. There are Gray Skills actually
25:18
Speaker 1: getting sued by a hedge fund right now, for a
25:20
Speaker 1: Tree Capital is suing Gray Scale over the discount. They're
25:24
Speaker 1: saying that they mismanaged the trust, etcetera, etcetera. So we'll
25:27
Speaker 1: see if that goes anywhere. But there's starting to be
25:30
Speaker 1: some like really long shot activist campaigns to try to
25:33
Speaker 1: oust Gray Scale as the manager of this trust. Again,
25:36
Speaker 1: these are long shots, but we'll see. It just speaks
25:40
Speaker 1: to the fact that there's this bubbling discontent over what's
25:42
Speaker 1: happening at Gray Scale. One of the DCG companies, the
25:45
Speaker 1: other one that you're hearing a lot about is Genesis.
25:49
Speaker 1: So that's a lending crypto lending company owned by DCG. Actually,
25:53
Speaker 1: I don't know if you guys like we're following over
25:56
Speaker 1: the weekend, but Gemini the winkle vibes, wins. It was
26:01
Speaker 1: just one winkel By. It was Cameron, Yeah, Cameron Winklevoss.
26:04
Speaker 1: He wrote a really heated letter in open letter to
26:07
Speaker 1: Barry Silbert because Gemini they say that their own nine
26:11
Speaker 1: million dollars in customer assets, uh, basically in limbo at
26:16
Speaker 1: at Genesis and they haven't been able to make satisfying
26:19
Speaker 1: contact with Barry Silbert's So there's a lot you can
26:23
Speaker 1: understand why Cameron's angry, right, because that's not just his money.
26:27
Speaker 1: He's got clients who are probably angry with him. Oh yeah,
26:31
Speaker 1: and actually they have their own lawsuit on their him.
26:34
Speaker 1: They're being sued by their customs. So the way that
26:36
Speaker 1: Cameron sees it, what he alleges is that Barry Silbert
26:41
Speaker 1: has done some serious co mingling of fun. I've that
26:45
Speaker 1: term before, and we know that co mingling is no way. No,
26:48
Speaker 1: that is a big accusation. That's definitely what I mean.
26:51
Speaker 1: It was a long letter. I read every word well.
26:53
Speaker 1: Cameron says that Silbert's DCG borrowed one point six seven
26:57
Speaker 1: five billion dollars from Genesis is and uh, Silbert responded, no,
27:04
Speaker 1: we have not borrowed one point six seven five billion
27:07
Speaker 1: dollars from Genesis and we make every interest payment on time,
27:11
Speaker 1: so kind of implying we have borrowed money, but not
27:13
Speaker 1: that much money, or at least not that exact amount. Yeah,
27:16
Speaker 1: that was a little uh like, how much then have
27:19
Speaker 1: you borrowed? Is it one point seven five billion? Is
27:22
Speaker 1: it only one billion? I would love to know. There's
27:25
Speaker 1: plenty who would love to know, not just reporters, really
27:27
Speaker 1: everyone in the crypto industry would love to know. But
27:29
Speaker 1: they actually gave Silbert a deadline here, Cameron Winklevoss, he
27:34
Speaker 1: said that he wants some sort of public commitment that, uh,
27:39
Speaker 1: Silbird and DCG is going to work together to solve
27:42
Speaker 1: this problem by January eighth, that is three days from now.
27:45
Speaker 1: What happens on January eighth? I don't know, I don't know.
27:48
Speaker 1: All right, let's bring in Barry Ridholtz. He's a host
27:50
Speaker 1: of Masters in business on Bloomberg Radio, Chairman and chief
27:53
Speaker 1: investment Officervert Hults Wealth Management. Barry, you know we've been
27:56
Speaker 1: talking about crypto. It was certainly am pelling story, broadly
28:01
Speaker 1: defined uh in two Well, you know what, I let's
28:05
Speaker 1: ask Barry about com England. So Barry, how much money
28:08
Speaker 1: do you borrow from the clients that Rittoltz Wealth Management
28:10
Speaker 1: without telling them about it? You know, it's It's one
28:12
Speaker 1: of the first rules you learn when you get into
28:15
Speaker 1: either a Series seven or sixth Series sixty five. Don't
28:19
Speaker 1: co mingle funds. Never borrow money from clients. That's verboten.
28:24
Speaker 1: You know, you were here to provide a service to
28:26
Speaker 1: the clients. They are not here to provide a line
28:29
Speaker 1: of credit to you. And it's astonishing that we continue
28:32
Speaker 1: to see these same sort of things pop up all
28:35
Speaker 1: over the place. Although to be fair, you know, crypto
28:39
Speaker 1: is unregulated, it's not arguably a security. A lot of
28:42
Speaker 1: these companies are headquartered outside of the United States. So
28:47
Speaker 1: you know, as much as people want to blame Gary Ginsler,
28:50
Speaker 1: this is out of his jurisdiction. H agree. I mean, um,
28:54
Speaker 1: everyone complains that the SEC hasn't done enough in terms
28:57
Speaker 1: of f t X, but f t x dot Com
29:00
Speaker 1: was located in the Bahamas. The SEC doesn't have jurisdiction
29:02
Speaker 1: over it. And by the way, even if Gensler did,
29:07
Speaker 1: assuming that there was some kind of fraud, committed that
29:10
Speaker 1: there was money taken from clients, when that that's already illegal.
29:14
Speaker 1: It's not like there's no regulation against that. Um. By
29:18
Speaker 1: the way, in terms of Sam Bankman freed to me,
29:22
Speaker 1: I kind of get it. I mean, he's a little kid.
29:25
Speaker 1: He's clearly different. He's a young person, and he's a
29:29
Speaker 1: very different kind of person. So if you tell me
29:32
Speaker 1: like he didn't know the rules or whatever, I feel
29:35
Speaker 1: like it's possible someone like John Corzine he knew the
29:39
Speaker 1: rules right. And I still get pulled over in my
29:43
Speaker 1: twenties going seventy over the speed limit. I used to
29:46
Speaker 1: say to the police, Look, I'm a young kid, I
29:48
Speaker 1: don't know the rules. Let me go, And that worked beautifully. Well, look,
29:52
Speaker 1: my dad's a lawyer. He says, if you don't know
29:54
Speaker 1: the law, you're allowed to break it. That doesn't really,
29:56
Speaker 1: that doesn't really work. Ignorance is no excuse. And the way,
30:01
Speaker 1: thirty one is not a child, he's out of college
30:04
Speaker 1: for a decade, he has attorneys and accountants and CFOs.
30:09
Speaker 1: The fact that he said it'll be okay to you know,
30:13
Speaker 1: borrow some money from from clients, you know, that's just
30:17
Speaker 1: holly an excuse. If that's what happened, right, we don't
30:19
Speaker 1: we still were still that's what appears to have happened,
30:22
Speaker 1: but we don't know for sure yet. Kenny carries a
30:25
Speaker 1: lawyer two by the way, I know, yep, he's jd
30:28
Speaker 1: Eton That a card Dozo school of Walachu University, one
30:31
Speaker 1: of the goodwins. Um Katie, what's the feeling when you
30:34
Speaker 1: talk to folks in the crypto space. Is this a
30:38
Speaker 1: bump along the road of the evolution of an asset
30:40
Speaker 1: class or is this something more fundamental? When you see
30:43
Speaker 1: sam Bank MN freed a major exchange and maybe even
30:46
Speaker 1: some more issues within this sector. Well, I mean, it
30:50
Speaker 1: feels like this is almost like a fork in the road.
30:53
Speaker 1: You have all these crypto companies. This is definitely a
30:57
Speaker 1: reckoning for the crypto companies. Then you have the hardcore
31:00
Speaker 1: believers you know, own your keys were all about no duh, right,
31:05
Speaker 1: that's the whole point. Yeah, yeah, so I mean, and
31:07
Speaker 1: that's why you mean for you have to hold your
31:10
Speaker 1: own private key. You don't leave a whole bunch of
31:12
Speaker 1: crypto on centralized centralized exchange, but which by the way,
31:17
Speaker 1: is located offshore, right so that you don't have jurist
31:20
Speaker 1: your own regulations on jurisdiction over it. So where do
31:22
Speaker 1: you keep so obvious. You keep it in a cold wallet, Yeah,
31:25
Speaker 1: you keep it on a hard drive. On a hard drive,
31:28
Speaker 1: you keep it under your bed or safe for at
31:31
Speaker 1: your sister's house. I don't know, but you clearly don't
31:34
Speaker 1: keep it on an offshore exchange. That is I just
31:38
Speaker 1: I can't get over that. And that's why you're seeing
31:40
Speaker 1: I mean, coin Base, what a story downgraded again today
31:44
Speaker 1: now at Collen And that's just I mean, I remember
31:49
Speaker 1: if we turned back to early November when all this
31:51
Speaker 1: FTX news was breaking, there was a question out there,
31:55
Speaker 1: wasn't this good for coin base. You have one of
31:56
Speaker 1: their top competitors now out of the market. It there's
32:00
Speaker 1: this sort of migration away from these centralized exchanges by
32:05
Speaker 1: these true believers who maybe weren't even there in the
32:07
Speaker 1: first place. Now they're definitely not going to be going
32:10
Speaker 1: to a coin base to store up their money. And
32:13
Speaker 1: the normal retail, average sort of crypto trader, they're not
32:18
Speaker 1: in the market anymore. There are decentralized exchanges. But in
32:21
Speaker 1: terms of you know what this says about crypto, Fortunately
32:25
Speaker 1: for us, there's a market and an asset that's priced,
32:30
Speaker 1: so we can tell what people think about crypto and
32:33
Speaker 1: guess what, Barry, the price of bitcoin hasn't moved since
32:36
Speaker 1: November seven, since the explosion of f t X. What
32:40
Speaker 1: does that tell you that it's still worth sixteen thousand
32:44
Speaker 1: dollars and change. I'll tell you what has moved since then,
32:47
Speaker 1: and that's been gold. And one of the things that's
32:51
Speaker 1: kind of fascinating. You call the phrase early in in
32:55
Speaker 1: crypto's history millennial gold, that a lot of the anti
33:00
Speaker 1: central bank, anti fea currency, Hey we need hard assets
33:05
Speaker 1: kind of abandoned precious metals and moved into crypto. Well,
33:09
Speaker 1: it looks like over the past you know, three to
33:12
Speaker 1: six months, some frustration with crypto. First the price decrease,
33:17
Speaker 1: which seems to be a regular occurrence with crypto. But
33:21
Speaker 1: then everything that's been going on with with issues of
33:25
Speaker 1: of you know, criminality and illegality and and potentially theft,
33:30
Speaker 1: seems to have given gold an opportunity to catch a bid.
33:35
Speaker 1: And I just can't help but wonder if if crypto
33:38
Speaker 1: is now stagnant because some of the true believers are
33:41
Speaker 1: going back to the yellow metal. It is wild. I mean,
33:45
Speaker 1: I'm looking at gold's move It's up twelve percent over
33:48
Speaker 1: twelve since November three. What a coincidence. I think, on
33:55
Speaker 1: the other hand, you could say, uh, well no, I
33:59
Speaker 1: think it's totally fascinating also in regards to bitcoin. But
34:03
Speaker 1: a lot of people do think we're headed into a recession.
34:06
Speaker 1: I love Michael Burry's recent post on Twitter. He said
34:09
Speaker 1: that we're going to see disinflation or deflation in the
34:13
Speaker 1: second half of We're going to be in a recession
34:16
Speaker 1: by any way you measure it, and that not only
34:19
Speaker 1: is the FED going to have to cut but um,
34:22
Speaker 1: the government's going to have to deploy more fiscal stimulus. Now.
34:25
Speaker 1: To be fair, that's a very uh that seems like
34:29
Speaker 1: an outlier. That's a very outlier and alarmist sensationalist view.
34:34
Speaker 1: But I love alarmist sensationalism. You know it's Twitter. Yeah,
34:39
Speaker 1: that really plays on Twitter. So deflation, I mean, what
34:43
Speaker 1: does well in inflation? Do we have any sort of blueprint?
34:46
Speaker 1: I don't know, Barry, what's the deal with gold as
34:48
Speaker 1: an inflation hedge? And because it didn't seem to do
34:51
Speaker 1: that well and as we ramped up to ten percent
34:55
Speaker 1: and change on the CPI and do you want to
34:58
Speaker 1: own it? If we're headed into a recession? And where
35:00
Speaker 1: the fed is going to have to cut. So to me,
35:02
Speaker 1: gold seems to trade most correlated or really inversely correlated
35:08
Speaker 1: to the dollar. You know, we had a huge run
35:10
Speaker 1: up in the US dollar last year that peaked and
35:12
Speaker 1: started to fall. That peaked sometime I don't know, around
35:15
Speaker 1: the beginning of November. And remember the dollar is a
35:18
Speaker 1: measuring stick for commodities, including gold, So as the dollar softens,
35:24
Speaker 1: price of gold goes up. When the measuring stick gets
35:26
Speaker 1: a little smaller, it makes the measured a little a
35:29
Speaker 1: little larger. So uh, to me, golds has always been
35:33
Speaker 1: a trading vehicle. It has never been a investment vehicle
35:37
Speaker 1: because it doesn't produce any sort of cash flow, It
35:40
Speaker 1: doesn't produce any sort of dividend. Arguably, you say the
35:44
Speaker 1: same thing about crypto. But at your mountain house where
35:47
Speaker 1: you keep like, you know, dozens of gallons of water
35:50
Speaker 1: and some shotguns, you have gold bars there too. Right, Listen,
35:54
Speaker 1: If if you're planning on existing in the post of
36:00
Speaker 1: acalyptic landscape and you're gonna be treating bars of gold
36:04
Speaker 1: for food and water, I think we have lots of
36:06
Speaker 1: other problems that If you're that person, though, I think
36:10
Speaker 1: you probably also have some bitcoin. Doesn't it just fit
36:12
Speaker 1: with that sort of I would think so, although it
36:15
Speaker 1: doesn't because bitcoin is specifically tied to technology. And so
36:22
Speaker 1: if you have a technology that um only works on
36:29
Speaker 1: the internet, what happens? And when there's no network, no
36:33
Speaker 1: no infrastructure, no electricity, no internet, Bitcoin ain't gonna be
36:38
Speaker 1: a whole lot of anything then So so Barry, at
36:41
Speaker 1: the cocktail party this weekend, somebody comes up to you
36:44
Speaker 1: and says, it's crypto real, it's bitcoin real. Should I
36:47
Speaker 1: invest in this? What do you? What do you tell them?
36:50
Speaker 1: The same thing I've been saying for for years and years,
36:53
Speaker 1: which is, think of crypto like a large megacap tech stock,
36:58
Speaker 1: like an Amazon or an Apple. It's not quite its
37:02
Speaker 1: own asset class yet, it's not quite um something that
37:06
Speaker 1: has shown a whole lot of ability to diversify. It
37:09
Speaker 1: really seems to be highly correlated to UH two equity prices.
37:14
Speaker 1: And you know, we always tell people if you want
37:16
Speaker 1: to have a fun account, you want to have a
37:19
Speaker 1: five percent mad money account to just do really dumb
37:23
Speaker 1: things that will not affect your long term quote unquote
37:27
Speaker 1: real money. Well, have at it. But by out of
37:29
Speaker 1: the money call options by bitcoin play around with short tesla,
37:34
Speaker 1: whatever you want to do, but you know that five
37:37
Speaker 1: percent is going to scratch your itch, and if it
37:39
Speaker 1: goes to zero, you're done, You're tapped out, and you
37:42
Speaker 1: let you leave your real money alone. And that seems
37:45
Speaker 1: to have been a pretty good approach, especially for people
37:49
Speaker 1: who were chasing meme stocks. In thank goodness, it was
37:54
Speaker 1: only five percent of their accounts and not their real money.
37:57
Speaker 1: All right, very great stuff as always, very Ridholtz Narvard
38:00
Speaker 1: Holts Wealth Management, host of Masters in Business and Katie
38:03
Speaker 1: Raifel Bloomberg News cross asset reporter joining US year. We're
38:07
Speaker 1: talking a little bit of crypto and you know, Sam
38:10
Speaker 1: Bankman freed, he's pled not guilty, So it looks like
38:13
Speaker 1: we're going to trial sometime in October. I believe is
38:17
Speaker 1: that they they've said to start that travel. We'll see
38:19
Speaker 1: if that happens, but that will be compelling theater if
38:23
Speaker 1: none they nonetheless, I mean, if nothing else would be
38:25
Speaker 1: compelling drama, compelling theater as people try to get a
38:28
Speaker 1: sense of what happened at ft x UH and Sam
38:31
Speaker 1: Bankman freed, the total economic output of US latinos was
38:38
Speaker 1: two point eight trillion dollars in Yet, despite being a
38:42
Speaker 1: key driving force of the US economy, experts say the
38:46
Speaker 1: capital isn't flowing toward the growth. According to the Latino
38:50
Speaker 1: Business Action Network, Hispanic downed businesses have grown forty four
38:55
Speaker 1: per cent in the last ten years, compared to just
38:58
Speaker 1: a four percent for non Latino but less than two
39:01
Speaker 1: percent of the available venture capital funding in the US
39:04
Speaker 1: goes into this cohort. This is the best economy in
39:07
Speaker 1: the world, the free enterprise system, but it largely excludes
39:11
Speaker 1: small businesses and minority owned businesses even today. Rameiro Cavaso,
39:15
Speaker 1: says the president and CEO of the United States Hispanic
39:19
Speaker 1: Chamber of Commerce. Then, a big part of it, I
39:21
Speaker 1: think it's just relationships. It's networks, you know, I hate
39:25
Speaker 1: to say it, we're largely invisible. In order to make
39:28
Speaker 1: those connections, Anna Veldez, president and CEO of the Latino
39:32
Speaker 1: Donor Collaborative, says more vcs need to get out of
39:35
Speaker 1: their comfort zone. You need to start reaching out to
39:39
Speaker 1: places where you actually never reached. People that may not
39:42
Speaker 1: be as well versed, that may not come from your environment,
39:45
Speaker 1: that may not look like you, that may not talk
39:47
Speaker 1: like you. But there are that are making a lot
39:49
Speaker 1: of money. Anthony Alcasar is finding himself in the middle
39:54
Speaker 1: of the struggle. His company, Mr. Tortilla is number one
39:57
Speaker 1: on Amazon. They've expanded their product line and just opened
40:01
Speaker 1: a second factory. My projections are thirty millions between three
40:06
Speaker 1: sixty million for hundred million, and I can't get a
40:13
Speaker 1: fair shake, he says. The offers he has received include
40:16
Speaker 1: a majority stake in his business. We worked a whole
40:19
Speaker 1: life for this, and so if I lose control ownership now,
40:22
Speaker 1: I can't guarantee that they're going to focusing philosophies and
40:25
Speaker 1: run our business the way we want to run it.
40:29
Speaker 1: That's why Latino venture capitalists and banking and community lenders
40:34
Speaker 1: and c DFIs community development finance institutions, we've got to
40:38
Speaker 1: get them to step up. Latitude Ventures is doing just that.
40:42
Speaker 1: The company recently launched a one hundred million dollar fund
40:45
Speaker 1: focused on Latino founded early stage businesses. We're looking hard,
40:49
Speaker 1: We're creating the pipeline. We're creating the visibility so that
40:53
Speaker 1: any Latino and Latino that has been shut out that
40:56
Speaker 1: they can come here and they're gonna get a fair look.
40:58
Speaker 1: Company president, so all through he has his own prediction.
41:02
Speaker 1: My bed is between now and the end of the decade,
41:05
Speaker 1: a trillion dollars a capital should be flowing here so
41:08
Speaker 1: that we can grow GDP at a highly competitive rate
41:12
Speaker 1: versus doing it the same way. Valdez puts that growth
41:16
Speaker 1: into perspective. If Latino's got the same proportion of credit
41:21
Speaker 1: as whites are given, it would translate into adding three
41:25
Speaker 1: point three trillion of revenue of companies in this country.
41:30
Speaker 1: But it's not only venture capital funding. L B a
41:33
Speaker 1: N reports the odds of loan approval from national banks
41:37
Speaker 1: are sixty percent lower for Latino owned businesses. Industry leaders
41:41
Speaker 1: say it comes down to diversification. It's a proportionate representation
41:45
Speaker 1: at all levels in the bank, from the board all
41:47
Speaker 1: the way to the C suite, all the way to
41:49
Speaker 1: the executive branch, and then to the branches. Actress, singer
41:52
Speaker 1: and entrepreneur Jennifer Lopez is looking to change the playing
41:56
Speaker 1: field journey from the one. Lopez launched Limitless Labs to
42:05
Speaker 1: raise funds for Latina entrepreneurs, including a partnership with Goldman Sachs,
42:10
Speaker 1: and this past June, Lopez partnered with Gramina America to
42:13
Speaker 1: help distribute fourteen billion dollars in loans to six hundred
42:17
Speaker 1: thousand Latina business owners by the future of this economy
42:21
Speaker 1: will depend on small businesses and Latino owned businesses because
42:26
Speaker 1: of share demographics. According to the US Census Bureau, more
42:30
Speaker 1: than half of the total US population growth between came
42:35
Speaker 1: from Hispanics, and with Latino entrepreneurs starting small businesses faster
42:40
Speaker 1: than the rest of the startup population, the rising tide
42:43
Speaker 1: will lift all boats in New York. I'm Lisa Matteo,
42:46
Speaker 1: Bloomberg Radio. All right, that's Bloomberge Business, corresponded Lisa Matteo.
42:54
Speaker 1: She joins us now on our Bloomberg Interactive Broker studio. Lisa,
42:57
Speaker 1: fascinating story here. I mean, you know, they're the Hispanic population.
43:01
Speaker 1: I know a lot about it from an economic perspective.
43:03
Speaker 1: Haven't done a lot of work with Univision over the years.
43:05
Speaker 1: I know it's a fast growing, uh demographic um. But
43:09
Speaker 1: access to capital has really been a challenge here. So historically,
43:13
Speaker 1: how of Hispanic businesses kind of finance their businesses? Just bootstraps?
43:18
Speaker 1: I guess yeah, bootstraps. They they relied on family and friends,
43:21
Speaker 1: They've maxed out their credit cards, They've done things like
43:23
Speaker 1: that home equity UM and they've tried those small community banks.
43:27
Speaker 1: The problems that community banks are closing down and being
43:30
Speaker 1: replaced by the national banks. And so Stanford University they
43:33
Speaker 1: you know, they put out this annual report on Latin entrepreneurship.
43:37
Speaker 1: They have one coming out actually next month, UM, and
43:39
Speaker 1: they just show that latinos typically the trend is is
43:43
Speaker 1: that their income is lower, so so their credit score
43:46
Speaker 1: is lower. So what happens that they're paying higher interest
43:48
Speaker 1: rates for these loans, are at being asked for collateral
43:51
Speaker 1: UM and sometimes not being approved at all for them.
43:54
Speaker 1: So it's kind of this struggle back and forth about
43:56
Speaker 1: how they're going to get their business off the ground.
43:58
Speaker 1: A lot of it is culture role to UM in
44:01
Speaker 1: this spanic culture. Sometimes you know, you money is something
44:04
Speaker 1: you don't talk about, you know, it's kind of under
44:06
Speaker 1: the table, you know. And it's this it's this common
44:09
Speaker 1: misconception that they say, you know, buddho cash pure cash,
44:12
Speaker 1: like everything is cash. So it's now starting to come
44:14
Speaker 1: around that they need more, which is why I mean
44:16
Speaker 1: the credit scores can be lower just if you're not
44:19
Speaker 1: involved in the system. So if you don't have a
44:21
Speaker 1: bunch of credit cards, car loans. If you're not borrowing,
44:24
Speaker 1: then you won't have a high grad I think it's
44:26
Speaker 1: interesting because I think of the Latino community as and
44:31
Speaker 1: I don't want to stereotype here as being honest, hard working,
44:35
Speaker 1: and reliable. And I feel like that's the common perceptions
44:40
Speaker 1: across maybe just my uh, you know, social circle. But um,
44:44
Speaker 1: why wouldn't banks extend more credit to them knowing that
44:48
Speaker 1: they're more likely to pay loans back than say, your
44:52
Speaker 1: typical American white person in the middle of the country,
44:54
Speaker 1: right right, And that's the thing that's the misconception is that, well,
44:58
Speaker 1: they're not going to pay back. Um. And and apparently
45:01
Speaker 1: that is that is incorrect. You know, there are a
45:03
Speaker 1: lot of studies out there, but talking with different people
45:05
Speaker 1: in the industry that Latinos are the number one people
45:08
Speaker 1: who will pay that back because we're more appreciative to
45:11
Speaker 1: be here. And I say, were my family from Puerto Rico.
45:13
Speaker 1: So so it's a bit. So that's the credit side,
45:16
Speaker 1: the death side. Um. But a lot of business obviously
45:19
Speaker 1: need growth capital, equity capital, I know, I know, noticing
45:22
Speaker 1: your report, you know there are some people trying to
45:24
Speaker 1: really pull up some venture capital from private equity for latinos.
45:28
Speaker 1: Is that something that's having some traction. It is starting
45:32
Speaker 1: to get some traction. I mean you see more people
45:33
Speaker 1: getting involved UM when you say we talk to Latitude
45:36
Speaker 1: Adventures in the piece and they're getting backing from people
45:39
Speaker 1: like JP Morgan Chase from Bank of America. Like they're
45:41
Speaker 1: starting to get other people and corporations involved um in this.
45:46
Speaker 1: And you see that a lot now with a lot
45:48
Speaker 1: of foundations. Foundations are starting to come out. There's Hispanics
45:51
Speaker 1: and philanthropies and they're starting to go to these corporations
45:54
Speaker 1: get the money they need and give them out to
45:56
Speaker 1: these communities. And you see it's starting to pick up.
45:59
Speaker 1: I mean with the pandemic, you saw a lot of
46:01
Speaker 1: P P P loans Uh that started to pick up.
46:03
Speaker 1: You know in the s AB changed the rules there
46:08
Speaker 1: um and they said they're more they want more minority
46:11
Speaker 1: on businesses to be a part of it, and that
46:13
Speaker 1: really helped out UM as well. Alright, great stuff, great report.
46:16
Speaker 1: Lisa Matteo, business correspondent for Bloomberg Radio. Were so fortunate
46:19
Speaker 1: that she's joined at Bloomberg. She has had a heck
46:21
Speaker 1: of a career in New York City media I first
46:24
Speaker 1: came to know where former reporter and anchored Picks eleven,
46:26
Speaker 1: which is a great independent TV station in New York City.
46:29
Speaker 1: She was there for for many years, so we're glad
46:31
Speaker 1: she's at Bloomberg. Thanks for listening to the Bloomberg Markets podcast.
46:38
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
46:41
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
46:45
Speaker 1: on Twitter at Matt Miller three. Put on fall Sweeney
46:49
Speaker 1: I'm on Twitter at pt Sweeney before the podcast. You
46:52
Speaker 1: can always catch us worldwide at Bloomberg Radio