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Expect the U.S. To Issue Digital Currency Next Year: FiREapps CEO · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Obviously,
• 0:33
  Speaker 1: we've been focusing a lot on bitcoin, but one question
• 0:37
  Speaker 1: remains supreme. Can bitcoin ever act as a true currency?
• 0:42
  Speaker 1: Is it the future of money? Right now? I want
• 0:44
  Speaker 1: to bring in Wolfgang Custer. He is chief executive officer, chairman,
• 0:48
  Speaker 1: and co founder of fire Apps, which is based in Phoenix, Arizona. Wolfgang,
• 0:52
  Speaker 1: thank you so much for joining us. Fire Apps is
• 0:55
  Speaker 1: known as a firm that helps companies understand their foreign
• 0:58
  Speaker 1: exchange their currency risk. Does your recent focus on bitcoin
• 1:03
  Speaker 1: indicate that you consider it a currency? No, I don't.
• 1:08
  Speaker 1: I think that while some people may consider it a
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  Speaker 1: currency um to the point that there's some sort of
• 1:14
  Speaker 1: size to it, but reality is that I've been talking
• 1:17
  Speaker 1: to a lot of corporate CEOs and CFOs as well
• 1:20
  Speaker 1: as treasury departments, and none of them are really with
• 1:23
  Speaker 1: the exception of some maybe marketing gimmicks, are really looking
• 1:27
  Speaker 1: at bitcoin as a currency that they're going to be
• 1:29
  Speaker 1: doing business in. And there really are three reasons for that. Um.
• 1:33
  Speaker 1: The first one is that the Federal Reserve Bank itself
• 1:36
  Speaker 1: will end up coming out with a digital currency, and
• 1:39
  Speaker 1: that's what they're waiting for, and other governments will as well.
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  Speaker 1: Secondly is there is a Senate Bill twelve forty one
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  Speaker 1: that has been discussed for over two hours on November
• 1:49
  Speaker 1: twenty eight, so very recently, where they're looking to change
• 1:53
  Speaker 1: the definition of financial institutions and what that would do.
• 1:58
  Speaker 1: If they get what they're looking to get, which is
• 2:00
  Speaker 1: pretty likely, it would actually criminalize bitcoin, um and would
• 2:04
  Speaker 1: make it who would make the liquidity rather questionable. And
• 2:11
  Speaker 1: then we'll go back, Yeah, I know, that's fine, it's
• 2:13
  Speaker 1: no perm at home. We can talk about taxation here
• 2:15
  Speaker 1: in a little bit, which is the third part that
• 2:17
  Speaker 1: the governments will do to really to some degree fight
• 2:21
  Speaker 1: bitcoin in that sense. But let's go back to two.
• 2:24
  Speaker 1: Then I want to talk about too, just because if
• 2:26
  Speaker 1: you criminalized bitcoin that would certainly hamper the meteoric rise
• 2:31
  Speaker 1: that we have seen this year. How would it do that? Well,
• 2:35
  Speaker 1: it would do that by changing the definition of what
• 2:37
  Speaker 1: is a financial institution and what are they allowed to do?
• 2:42
  Speaker 1: So how transparent do they have to be? And quite frankly,
• 2:45
  Speaker 1: the whole thing on bitcoin, as you well know, is
• 2:48
  Speaker 1: that it is based on a blockchain technology, one of
• 2:52
  Speaker 1: many blockchain technologies that actually hides who's doing the transactions,
• 2:57
  Speaker 1: and the United States government as well as many other
• 3:00
  Speaker 1: governments saying that's not acceptable. Okay, I want to go
• 3:03
  Speaker 1: back to the first thing that you said too, because
• 3:05
  Speaker 1: this is fascinating that the Federal Reserve could come out
• 3:08
  Speaker 1: with its own digital currency as soon as next year.
• 3:11
  Speaker 1: What does that mean? I mean there is a difference
• 3:13
  Speaker 1: between digital currency, which we all use when we use
• 3:16
  Speaker 1: credit cards or uh you know, Apple pay or other
• 3:19
  Speaker 1: things that are online transactions. It's another thing for it
• 3:22
  Speaker 1: to be on blockchain. So what are you talking about
• 3:24
  Speaker 1: specifically with the Fed issuing this digital currency. Yes, So,
• 3:28
  Speaker 1: what I believe has happened over the last five to
• 3:31
  Speaker 1: ten years, if you arguably since two thousand eight, is
• 3:34
  Speaker 1: that UM, the people that started cryptocurrencies UM really looked
• 3:40
  Speaker 1: at there is an inefficiency in the market, and I
• 3:42
  Speaker 1: believe they were right. Their inefficiencies twofold. One is it
• 3:47
  Speaker 1: takes two days on average to move from one account
• 3:50
  Speaker 1: to another, and two is it's pretty expensive. So what
• 3:53
  Speaker 1: they tried to achieve as a currency that is digital
• 3:56
  Speaker 1: and immediate, as you're saying, to some degree like credit
• 3:59
  Speaker 1: cards are as well as some that are not as expensive.
• 4:03
  Speaker 1: And so these inefficiencies need to be embraced by the
• 4:06
  Speaker 1: governments and they are interestingly here and even Putent came
• 4:10
  Speaker 1: out with that they will issue a crypto ruble in
• 4:14
  Speaker 1: January of next year already, So this is pretty imminent.
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  Speaker 1: Is the fact that, at the end of the day
• 4:20
  Speaker 1: is that blockchain can actually use quite exactly opposite the
• 4:25
  Speaker 1: way Bitcoin is using it right now. I e. The reason,
• 4:28
  Speaker 1: one of the two reasons that Putent wants to do
• 4:31
  Speaker 1: this is because he wants to gain better visibility into
• 4:35
  Speaker 1: all transactions related to the ruble. The United States will
• 4:39
  Speaker 1: end up doing the same thing. This is really fascinating.
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  Speaker 1: So in other words, it's sort of a blockchain that,
• 4:46
  Speaker 1: rather than decentralizing the currency, really centralizes it and gives
• 4:51
  Speaker 1: the government visibility into every transaction. Is that correct? That
• 4:55
  Speaker 1: is correct? That is my belief, and that's what everything
• 4:57
  Speaker 1: is pointing towards and if you look back at of
• 5:00
  Speaker 1: the work that's already been done in Washington on this
• 5:04
  Speaker 1: on dual ledger technology, it's absolutely confirms that. So the
• 5:07
  Speaker 1: Treasure Department, basically, I'm trying to figure out how this
• 5:10
  Speaker 1: would work where they remove all paper currency from circulation,
• 5:13
  Speaker 1: or they would just have a subset that would be
• 5:16
  Speaker 1: used for business transaction transactions and start there. How would
• 5:19
  Speaker 1: it work, How would it begin? Yeah, the way I
• 5:21
  Speaker 1: envisioned it is it's kind of like the Euro. For
• 5:24
  Speaker 1: when the Euro came out. Um, you know, you still
• 5:27
  Speaker 1: had for a while Deutsche marks and French franks, and
• 5:30
  Speaker 1: then slowly but surely they disappeared and now you can't
• 5:33
  Speaker 1: you know, can't use a deutsch mark anymore in Germany,
• 5:36
  Speaker 1: but you can use euros. And I anticipate this to
• 5:38
  Speaker 1: be very similar. It's going to take time. It's not
• 5:41
  Speaker 1: going to be immediately. Digital dollar is here and therefore
• 5:44
  Speaker 1: paper currencies are gone, but it is definitely going into
• 5:48
  Speaker 1: that direction. If you think about the way we transact today,
• 5:52
  Speaker 1: you know, I have dollars in my wallet, I hardly
• 5:53
  Speaker 1: ever use them. I certainly use my credit cards or
• 5:56
  Speaker 1: other payment methods. And this is going to be the
• 5:58
  Speaker 1: same thing. It's going to be better, quicker, faster, yet
• 6:01
  Speaker 1: very controlled. And the reason that the United States FED
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  Speaker 1: isn't going to come out with this in January is
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  Speaker 1: because they're going to have to build a very secure
• 6:09
  Speaker 1: um blockchain that everybody trusts that won't be broken into
• 6:14
  Speaker 1: so fire app clients include Google, ericson Pepsi, Nike Accenture,
• 6:18
  Speaker 1: and how do they feel about the introduction of a
• 6:21
  Speaker 1: cryptocurrency and how do they feel about bitcoin? I think
• 6:26
  Speaker 1: that all of them in general, I certainly have NBA,
• 6:28
  Speaker 1: so I'm not going to speak to one particular one,
• 6:30
  Speaker 1: but all in general have the belief that digital currency
• 6:34
  Speaker 1: will actually be good for them. I think it will
• 6:36
  Speaker 1: help them transact faster and cheaper. And yet they do
• 6:40
  Speaker 1: realize one of the reasons that we're also talking to
• 6:42
  Speaker 1: them is that that requires more automation on their parts.
• 6:46
  Speaker 1: So as digital currencies are coming abroad and all of
• 6:49
  Speaker 1: a sudden, they don't have manual processes that allow them
• 6:53
  Speaker 1: to spend two days of settling currencies, it's going to
• 6:56
  Speaker 1: be immediate, and so they're looking at what the company
• 7:00
  Speaker 1: to do to be ready for this, and how to
• 7:02
  Speaker 1: automate these processes which end up streamlining liquidity really to
• 7:08
  Speaker 1: that to the point that they will, so it's gonna
• 7:10
  Speaker 1: be actually going to be embraced by them and there
• 7:12
  Speaker 1: and I'm not hearing anything negative about digital currency. I
• 7:16
  Speaker 1: am hearing that for a bitcoin is just too volatile
• 7:19
  Speaker 1: to get involved and from a true main mean wolf gangcaster,
• 7:23
  Speaker 1: thank you so much for joining as CEO, chairman and
• 7:25
  Speaker 1: co founder of fire Apps in Phoenix, Arizona. This is Bloomberg.
• 7:47
  Speaker 1: Viagraph is going generic. This is a big moment for
• 7:52
  Speaker 1: the millions of people who have been affected by this drug.
• 7:55
  Speaker 1: And here to talk about it is John Tozzi. He's
• 7:58
  Speaker 1: a healthcare reporter for Bloomberg News and he joins us
• 8:01
  Speaker 1: here in our eleven three oh studios. So your piece
• 8:03
  Speaker 1: was phenomenal. You basically talked to the creators of viagra
• 8:10
  Speaker 1: and about the creation of it. And before we go
• 8:13
  Speaker 1: into the implications of it going to naric, can you
• 8:15
  Speaker 1: just give us the story behind how they came to
• 8:19
  Speaker 1: develop this drug. Sure, this was a drug that Fiser
• 8:24
  Speaker 1: was actually investigating for a different purpose back in uh
• 8:28
  Speaker 1: the late excuse me eies and early nineties. They were
• 8:32
  Speaker 1: looking for treatments for hypertension, high blood pressure, and then
• 8:37
  Speaker 1: for chest pain and the compound that they UH you know,
• 8:43
  Speaker 1: the chemists that Fiser at a lab in England were developing.
• 8:47
  Speaker 1: It didn't really show a lot of effect in those conditions,
• 8:52
  Speaker 1: but it did have a side effect UM that they
• 8:56
  Speaker 1: decided was worth looking into. So the side effect was
• 9:00
  Speaker 1: that it allowed erections to last longer and come more frequently,
• 9:05
  Speaker 1: and some of the details were hysterical. One of my
• 9:08
  Speaker 1: favorite from this whole thing is UH that the study
• 9:12
  Speaker 1: subjects were fitted what was called ridges scan UH and
• 9:16
  Speaker 1: given the drug and shown blue movies or movies that
• 9:18
  Speaker 1: were soft pornography or hard pornography. At the end of
• 9:20
  Speaker 1: the week we had to get the drugs back from
• 9:22
  Speaker 1: them anything that was unused. Some of them would not
• 9:25
  Speaker 1: give the drug back. This is actually something we heard
• 9:28
  Speaker 1: from several researchers we talked to that during trials. All
• 9:32
  Speaker 1: along the time when viagra was being developed. You know
• 9:36
  Speaker 1: that when you when you test a drug, you can
• 9:38
  Speaker 1: only give it for a limited amount of limited period
• 9:41
  Speaker 1: until you know that it's not going to be toxic
• 9:43
  Speaker 1: for when taken for longer UM and the researchers had
• 9:46
  Speaker 1: real trouble getting the drugs back. People didn't want to
• 9:49
  Speaker 1: give this up. And I think for Fiser, um, you know,
• 9:52
  Speaker 1: this was a condition that didn't really have a pharmaceutical
• 9:55
  Speaker 1: treatment before viagra, and that was an indication to them
• 9:58
  Speaker 1: of how important could be to the people who would
• 10:01
  Speaker 1: take it well and John to that point, Viagara kind
• 10:05
  Speaker 1: of changed the conversation about sex on a pretty massive scale.
• 10:09
  Speaker 1: I mean, in one case, they're one of the researchers,
• 10:13
  Speaker 1: one of the developers was going to go on a
• 10:15
  Speaker 1: major television network and they said, what are you going
• 10:18
  Speaker 1: to say? And he said he was going to use
• 10:20
  Speaker 1: the word erection and they said, no, you can't do that, right.
• 10:23
  Speaker 1: I think that was actually not one of the Fiser
• 10:25
  Speaker 1: researchers but another doctor, But yeah, that I think. You know,
• 10:29
  Speaker 1: it was a period when um, in the culture, Americans
• 10:34
  Speaker 1: were becoming more comfortable kind of talking frankly about sexuality, um,
• 10:42
  Speaker 1: you know, in a way that you know, decades before
• 10:44
  Speaker 1: wasn't really the case. So now that the drug is
• 10:49
  Speaker 1: going generic, what are the implications It will be cheaper,
• 10:53
  Speaker 1: it will be less of a moneymaker for Fiser, and
• 10:56
  Speaker 1: will it become more mainstream or it already has out
• 11:00
  Speaker 1: in so mainstream that it really can't really have much more. Yeah,
• 11:03
  Speaker 1: I mean I think it's it's hard to tell. I mean,
• 11:05
  Speaker 1: the price will go down. That happens whenever there's a
• 11:07
  Speaker 1: generic version of the drug. Um. You know. I know
• 11:12
  Speaker 1: there's certain in the United Kingdom they're actually applying or
• 11:17
  Speaker 1: in the process of trying to have it sold over
• 11:19
  Speaker 1: the counter. So I think you know, from the drug manufacturers,
• 11:24
  Speaker 1: uh point of view, the um you know, the goal
• 11:28
  Speaker 1: is to make it more widely available, more easily available. Um.
• 11:33
  Speaker 1: But you know, we'll see what happens with the generic.
• 11:36
  Speaker 1: It's unclear how much. Um. You know, the price is
• 11:39
  Speaker 1: a barrier to people taking viagara if everybody who wants
• 11:42
  Speaker 1: it pretty much has it. One one question that I
• 11:45
  Speaker 1: have is from the female side. I mean, it's it's
• 11:47
  Speaker 1: one thing for men to have this, but um, there's
• 11:51
  Speaker 1: a lot of comedy show is kind of highlighted. Men
• 11:54
  Speaker 1: would come home and be very excited and the women
• 11:56
  Speaker 1: would say, oh my god. No. Um. So there's a
• 11:58
  Speaker 1: question about you know, a allowing women's libido to match
• 12:02
  Speaker 1: men's on viagra. Is there any development there with respect
• 12:05
  Speaker 1: to a feminine I mean, certainly in the history of viagra.
• 12:09
  Speaker 1: That was something that UM people were, you know, that
• 12:12
  Speaker 1: was an issue that women were you know, did not
• 12:15
  Speaker 1: have a drug that worked. Similarly, Viagra was actually tested
• 12:18
  Speaker 1: in women at one point to see if it would work,
• 12:21
  Speaker 1: and it didn't show much efficacy. UM. There is at
• 12:25
  Speaker 1: least one product on the market intended to UM help
• 12:31
  Speaker 1: improve women's libidos. But I think the consensus is that,
• 12:36
  Speaker 1: you know, it doesn't have the same um effect, you know,
• 12:40
  Speaker 1: the same degree of efficacy that viagra had for men.
• 12:45
  Speaker 1: So you know, that's an area of research and science
• 12:49
  Speaker 1: that I think is still being investigated. Just real quick,
• 12:53
  Speaker 1: can you give us a sense of how big a
• 12:54
  Speaker 1: business viagra has been pro visor, Uh, well, we look,
• 12:58
  Speaker 1: we looked up the sales over since it was released.
• 13:03
  Speaker 1: It's been about thirty six billion in sales UM. That's
• 13:07
  Speaker 1: a big number, but it's by no means Fiser's biggest drug. UM.
• 13:12
  Speaker 1: So you know, it's an important product, but you know,
• 13:15
  Speaker 1: it's interesting the Fiser many fightser veterans we talked to
• 13:18
  Speaker 1: you said, you know, it wasn't our biggest product, but
• 13:20
  Speaker 1: it's what people knew us. You know, people would find
• 13:23
  Speaker 1: out you worked for Fiser and then they'd be like,
• 13:25
  Speaker 1: oh viagras um, whereas you know, they didn't have the
• 13:28
  Speaker 1: same effect for for lipatour for example. Yeah, people like
• 13:30
  Speaker 1: to talk about sex more than blood pressure of it.
• 13:32
  Speaker 1: John Tosi, thank you so much for joining us. He's
• 13:34
  Speaker 1: a healthcare reporter with Bloomberg News. Many analysts and investors
• 13:58
  Speaker 1: have said that companies will just buy back more of
• 14:01
  Speaker 1: their shares with the money that they received from the
• 14:04
  Speaker 1: tax cuts. Others are saying not so fast. Companies have
• 14:08
  Speaker 1: already slowed their stock purchases. Here to hash this argument
• 14:12
  Speaker 1: out with us, as Tim Grisky, chief investment officer of
• 14:14
  Speaker 1: Solaris Asset Management in New York. Tim, thank you so
• 14:18
  Speaker 1: much for joining us. Good morning, Lisa, Good morning. So
• 14:21
  Speaker 1: let's talk about where we are with respect to stock
• 14:24
  Speaker 1: buy backs, because actually, SMP five hundred companies have announced
• 14:28
  Speaker 1: the intention to purchase five hundred sixty eight billion dollars
• 14:31
  Speaker 1: of their own shares for the first eleven months of seventeen,
• 14:33
  Speaker 1: which is a lot, but it's down timber cent from
• 14:35
  Speaker 1: a year ago and on pace to be the first
• 14:37
  Speaker 1: decrease since two thousand and eight. That is, according to
• 14:40
  Speaker 1: data compiled by Bery Annie Bery n Associate so do
• 14:44
  Speaker 1: you think that we're in a slowing down phase for
• 14:47
  Speaker 1: the share buy backs. Do you think that they're gonna
• 14:49
  Speaker 1: get ramped back up with any tax cut? Well, you know, we,
• 14:53
  Speaker 1: as you said, we certainly have seen a slowdown in
• 14:55
  Speaker 1: buy backs, but it's not that I don't think you
• 15:00
  Speaker 1: can assume that that's going to be what's going to
• 15:02
  Speaker 1: happen with these tax savings. We have to differentiate between
• 15:07
  Speaker 1: two things here. One is the repatriation of foreign cash
• 15:11
  Speaker 1: and the other one is the annual tax savings from
• 15:13
  Speaker 1: the lower tax rate. The repatriation is going to be
• 15:16
  Speaker 1: a one time benefit to companies, and we think the
• 15:19
  Speaker 1: majority of that is probably going to go to stock
• 15:22
  Speaker 1: buy backs. Unlikely that that will go to dividend increases
• 15:25
  Speaker 1: because it's not going to be repetitive. Some will go
• 15:28
  Speaker 1: certainly to any capital spending projects that companies might have.
• 15:32
  Speaker 1: But if companies have a good growth prospect from and
• 15:37
  Speaker 1: reinvesting inside the company, they're already doing it, especially given
• 15:41
  Speaker 1: how low debt is. So in other words, you're saying
• 15:44
  Speaker 1: that to the extent that there is going to a
• 15:46
  Speaker 1: be a boost from shared by backs, it will be
• 15:50
  Speaker 1: a one time thing, largely tied to the cash repatriation?
• 15:54
  Speaker 1: Am I understanding that correctly? Exactly? Yeah, so you said
• 15:57
  Speaker 1: that better than I do know. Well, I mean, how
• 15:59
  Speaker 1: much with with with the with the cash repatriation? One
• 16:02
  Speaker 1: big question that I have is haven't we already seen
• 16:05
  Speaker 1: that money get repatriated? I mean, you've seen the Apples
• 16:07
  Speaker 1: and the Oracles of the world borrowing billions and billions
• 16:10
  Speaker 1: of dollars through the debt markets to uh do their
• 16:13
  Speaker 1: capital uh re whatever it is that they are doing,
• 16:17
  Speaker 1: their giving their money back to their shareholders. Apple has
• 16:20
  Speaker 1: like I think, a three hundred billion dollar uh capital
• 16:24
  Speaker 1: give back program. I mean, haven't we already seen this? Well,
• 16:27
  Speaker 1: we've seen it from a handful of companies, But there's
• 16:29
  Speaker 1: still a lot of companies out there with foreign cash
• 16:33
  Speaker 1: strandard overseas. Now, a lot of these companies, we think,
• 16:36
  Speaker 1: have found ways of actually using that cash overseas, repatriating
• 16:41
  Speaker 1: part of it through various schemes uh and and finding
• 16:45
  Speaker 1: ways of of of really using that cash and far
• 16:49
  Speaker 1: on foreign soil to benefit the company. So we think
• 16:53
  Speaker 1: there will be some repatriation, but companies are going to
• 16:56
  Speaker 1: have to decide if they want to pay that ten
• 16:58
  Speaker 1: percent tax on repatriating those dollars or leave it where
• 17:02
  Speaker 1: it is if it's actually returning above that ten penalty. So, Tim,
• 17:08
  Speaker 1: do you think that in general the tax plan as
• 17:11
  Speaker 1: lead out in the House and send it understanding that
• 17:13
  Speaker 1: there will be some changes. Do you think that it
• 17:16
  Speaker 1: will stimulate growth materially? You know, we we just don't
• 17:20
  Speaker 1: see that. We think if they're growth prospects out there,
• 17:22
  Speaker 1: and certainly the economy is growing, it's accelerating growth. Um.
• 17:27
  Speaker 1: You know, we think that's already being done by companies already.
• 17:31
  Speaker 1: Companies are already putting their money into growth opportunities that
• 17:35
  Speaker 1: they have, and there's no reason for them not to
• 17:37
  Speaker 1: do that. They can certainly borrow money very inexpensively now
• 17:42
  Speaker 1: to um to stimulate any internal growth. Otherwise they're going
• 17:47
  Speaker 1: to look to to gift it to their shareholders, either
• 17:51
  Speaker 1: through stock buy backs or through increasing dividends. And we
• 17:55
  Speaker 1: think the annual tax savings might lead to some nice
• 17:59
  Speaker 1: dividend increases. Is that a number of companies. Is there
• 18:01
  Speaker 1: any company in particular that you're targeting for a dividend increase? Well,
• 18:05
  Speaker 1: I think if you look at some of the old
• 18:06
  Speaker 1: economy companies that don't have play other places to put
• 18:10
  Speaker 1: their money. I think increasing dividends in those companies which
• 18:15
  Speaker 1: will attract a certain type of investor, those dividend income
• 18:19
  Speaker 1: loving investors. We think that's where a lot of dividend
• 18:22
  Speaker 1: increases might incur occur. Are you changing around your investments
• 18:26
  Speaker 1: at all in response? Not? You know, not really, It's
• 18:29
  Speaker 1: hard to know what which company is gonna do. What
• 18:32
  Speaker 1: are they going to increase dividends? Are they going to
• 18:34
  Speaker 1: increase buy backs? Are they going to find some internal
• 18:38
  Speaker 1: growth opportunities. It's hard to know at this point. But
• 18:41
  Speaker 1: we do know that there are a number of companies
• 18:43
  Speaker 1: out there with high tax rates that are going to
• 18:45
  Speaker 1: be big beneficiaries, and we have made investments uh in
• 18:49
  Speaker 1: those companies. Can you give us any names? Uh? Broad
• 18:53
  Speaker 1: Com uh symbols A V G O UH is a
• 18:57
  Speaker 1: high taxpayer and we think it's going to really benefit
• 19:00
  Speaker 1: it from lower tax rates and real quick. What about bonds?
• 19:03
  Speaker 1: Do you think that they're going to get crushed next year? No? Uh,
• 19:06
  Speaker 1: you know we're gonna see four percent interest rates. The
• 19:09
  Speaker 1: world's going on fire. Investors need bonds, pension funds need bonds.
• 19:14
  Speaker 1: H Bonds are not going to go away at all.
• 19:17
  Speaker 1: Is it going to be a great place for money.
• 19:18
  Speaker 1: I don't think it's going to be anything special, but
• 19:21
  Speaker 1: there will be a place for bonds and portfolios. To
• 19:24
  Speaker 1: Tim Grisky, thank you so much for joining us. Tim Grisky,
• 19:27
  Speaker 1: chief investment Officer of Solaris Asset Management in New York.
• 19:32
  Speaker 1: Definitely intriguing about the old economy companies that will increase
• 19:37
  Speaker 1: their dividends and attract some shareholders and possibly be looked
• 19:41
  Speaker 1: at as even better bonds substitutes and interesting developments. In
• 20:00
  Speaker 1: two thousand and fifteen, there was a lot of focus
• 20:02
  Speaker 1: on the Baltic Dry Index and how low it was.
• 20:05
  Speaker 1: This is an index that measures how much ship owners
• 20:09
  Speaker 1: are making to ship dry bulk things like iron ore
• 20:13
  Speaker 1: or grains or whatever else is needed in a general economy.
• 20:18
  Speaker 1: This year, however, it has surged to the highest since
• 20:20
  Speaker 1: early and here to do a victory lap or perhaps
• 20:24
  Speaker 1: not he he said it is not his style. John
• 20:26
  Speaker 1: woven Smith, president of Genko Shipping, which is based in
• 20:30
  Speaker 1: New York, shares up almost sixty two so far this year. So, John,
• 20:36
  Speaker 1: how much more do you think that the dry the
• 20:38
  Speaker 1: Baltic Dry Index has to rise? And what's behind this, Yes,
• 20:42
  Speaker 1: So I think you I think you have to take
• 20:43
  Speaker 1: a a step back to where we were over the
• 20:46
  Speaker 1: last couple of years, where we had too many ships
• 20:49
  Speaker 1: in the market. Um We've always had a pretty robust
• 20:53
  Speaker 1: demand situation, but the the the ship owners over built.
• 20:58
  Speaker 1: So now we're in a situation where we absorb that
• 21:01
  Speaker 1: supply because of increasing demand, but also a lot of
• 21:04
  Speaker 1: scrapping um or removing ships from the market over the
• 21:06
  Speaker 1: last couple of years. And we're looking forward into two
• 21:10
  Speaker 1: thousand and eighteen and we're only going to see one
• 21:12
  Speaker 1: to one and a half percent growth in the number
• 21:14
  Speaker 1: of ships that are delivering versus a growth of three
• 21:18
  Speaker 1: to four percent on the demand side, driven by iron
• 21:21
  Speaker 1: ore and coal imports primarily. So this is a two
• 21:24
  Speaker 1: sided equation. In other words, there are fewer ships being
• 21:27
  Speaker 1: built and there is incrementally more demand coming out of
• 21:31
  Speaker 1: different economies. So before we get into your projection of
• 21:35
  Speaker 1: how much more the Baltic dry indexs could rise, I'm
• 21:38
  Speaker 1: curious which do you think is more important here? I mean,
• 21:41
  Speaker 1: in other words, when people point to this increase and
• 21:43
  Speaker 1: they say, well, this is the leading indicator that shows
• 21:46
  Speaker 1: the global economy is surging, are you saying not so fast.
• 21:51
  Speaker 1: This is really kind of a more complicated equation that
• 21:53
  Speaker 1: has several different heads. I think there are two things here,
• 21:56
  Speaker 1: um one the supply side and dry bulk shipping, meaning
• 21:59
  Speaker 1: and then number of ships that are on the water
• 22:01
  Speaker 1: on any given day to ship a cargo is probably
• 22:04
  Speaker 1: one of the major factors and does drive the market.
• 22:07
  Speaker 1: Having said that, if you look at what we're seeing
• 22:10
  Speaker 1: on the cargo flow side, we're seeing increased iron ore
• 22:13
  Speaker 1: going into China. We're seeing increased coal going into China,
• 22:17
  Speaker 1: which is all done on the larger ships. But here's
• 22:19
  Speaker 1: the neat thing. It's not just China centric. As we've
• 22:23
  Speaker 1: seen in the last couple of years. We've seen a
• 22:24
  Speaker 1: recovery in the European steel industry, so increased iron ore
• 22:28
  Speaker 1: imports and coking coal going into Europe. We've seen India's
• 22:32
  Speaker 1: steel industry recover, so increased coking coal going into India.
• 22:36
  Speaker 1: We've seen coal imports into Taiwan, the Philippines, um cement
• 22:40
  Speaker 1: into Indonesia in the outcoming out of the US golf.
• 22:45
  Speaker 1: On the grain front, soybeans and corn are at all
• 22:48
  Speaker 1: time highs. So this is much more of a global
• 22:51
  Speaker 1: recovery from what we're seeing for cargo flows. So when
• 22:54
  Speaker 1: was the last time that Jenko Shipping saw this degree
• 22:59
  Speaker 1: of activity and demand. I would say you'd have to
• 23:03
  Speaker 1: go back to probably two thousand fourteen, two thousand thirteen,
• 23:06
  Speaker 1: two thousand fourteen, and what what happened in two thousand thirteen. Again,
• 23:11
  Speaker 1: we we saw some overbuilding. We have now absorbed all
• 23:14
  Speaker 1: of that, and as I said before, it's because of
• 23:16
  Speaker 1: high scrapping over the last twenty four months and just
• 23:19
  Speaker 1: a complete slow down in the number of ships that
• 23:21
  Speaker 1: are that are going on the water. And I'll just
• 23:24
  Speaker 1: go back to it, just simple number wise again, you
• 23:27
  Speaker 1: look at next year and then two thousand nineteen. The
• 23:31
  Speaker 1: supply side of the equation, meaning the number of ships
• 23:34
  Speaker 1: that are that are going to come to the water
• 23:35
  Speaker 1: is very predictable. And you know because if you're going
• 23:38
  Speaker 1: to contract a ship today, that's two years out. So
• 23:41
  Speaker 1: for the next two years you have a good visibility
• 23:44
  Speaker 1: on the supply side. And we're only going to see
• 23:46
  Speaker 1: as I said, one and a half percent fleet growth
• 23:48
  Speaker 1: in two thousand eighteen, and some are around one to
• 23:51
  Speaker 1: one and a half and two thousand nineteen against a
• 23:53
  Speaker 1: backdrop of three to four percent growth on the demand side.
• 23:58
  Speaker 1: Those are very favorable numbers going into eighteen and nineteen.
• 24:01
  Speaker 1: And that's why I go back to, we're seeing we're
• 24:04
  Speaker 1: in the beginnings of the recovery, and we've started to
• 24:07
  Speaker 1: see at this quarter fourth quarter. And I dont want
• 24:09
  Speaker 1: to pick up on that because we mentioned that JENKO
• 24:11
  Speaker 1: is up nearly so far this year, but that follows
• 24:15
  Speaker 1: a nearly lost last year and lost the year before.
• 24:20
  Speaker 1: So there's a question of you know, we're these just
• 24:22
  Speaker 1: these shipping stocks way too beaten up and there was
• 24:25
  Speaker 1: way too much demand. Uh, and we're seeing a recovery.
• 24:27
  Speaker 1: There's a question of how much we will recover because
• 24:30
  Speaker 1: if you look back at the Baltic dry Index going
• 24:33
  Speaker 1: back to two thousand and eight and two seven, two six,
• 24:36
  Speaker 1: it was still a lot higher than where we are today.
• 24:37
  Speaker 1: So do you think that shipmakers will start earning more
• 24:40
  Speaker 1: and more or are we close to the peak here? No, Again,
• 24:44
  Speaker 1: I go back to I think we're in the first
• 24:45
  Speaker 1: instance of the game. Um. This is something that we
• 24:49
  Speaker 1: started talking about at the beginning of of two thousand
• 24:53
  Speaker 1: and seventeen. UM that we thought that supplying demand fundamentals
• 24:57
  Speaker 1: would start to come into balance in the fourth quarter.
• 24:59
  Speaker 1: We're now being that and going into next year again
• 25:02
  Speaker 1: we see an even rosier picture because the supply side
• 25:05
  Speaker 1: of the equation, the number of ships that are being delivered,
• 25:08
  Speaker 1: are going to basically be at all time loads at
• 25:10
  Speaker 1: one and a half percent. So how are you positioning
• 25:13
  Speaker 1: JENKO to take advantage of this upside? So a couple
• 25:17
  Speaker 1: of things. One, if you look at um the real
• 25:20
  Speaker 1: growth and commodities, it's going to come on the iron
• 25:23
  Speaker 1: ore front with an increased iron ore exports going from
• 25:26
  Speaker 1: Brazil to China. Valet in particular is projecting another twenty
• 25:31
  Speaker 1: five to thirty million tons of iron ore that is
• 25:35
  Speaker 1: going to be shipped. And the great thing about Brazil
• 25:37
  Speaker 1: to China that's a long haul trade route, so it
• 25:40
  Speaker 1: increases to the great thing for shipping owners. Great, No,
• 25:44
  Speaker 1: that's that's exactly right, Um. And what's also driving a
• 25:48
  Speaker 1: lot of this, which I think is important, is the
• 25:51
  Speaker 1: environmental side in China. So China is actually encouraging imports
• 25:55
  Speaker 1: of higher grade iron ore, which can only come from seaborn.
• 25:59
  Speaker 1: It cannot come domestic suppliers in China, so we're seeing
• 26:02
  Speaker 1: domestic supply shrink in China and more seaborn trade of
• 26:06
  Speaker 1: iron ore take place. I'm curious what you think about
• 26:09
  Speaker 1: the US tax plan and increasing trade tensions between the
• 26:14
  Speaker 1: US and other countries. Is that on your radar at all,
• 26:17
  Speaker 1: is possibly hampering trade or is that just sort of
• 26:20
  Speaker 1: noise for you for dry ball shipping. It really doesn't
• 26:24
  Speaker 1: come into play if you think about just the major
• 26:26
  Speaker 1: trade routes again, it's Brazil to China, Australia to China
• 26:30
  Speaker 1: on the iron ore and coal front, and then you
• 26:33
  Speaker 1: have a strong trade in the minor box, whether it
• 26:36
  Speaker 1: be cement or soybeans, corn coming out of the US,
• 26:39
  Speaker 1: golf going into Europe, going into India, going into China.
• 26:43
  Speaker 1: I don't you know, I don't see any trade issues
• 26:46
  Speaker 1: with that. China has all the incentive in the world
• 26:49
  Speaker 1: to continue growing on the steel production side. Based on
• 26:51
  Speaker 1: what you're seeing from the demand side. What country do
• 26:56
  Speaker 1: you think has a better economy than many give it
• 26:59
  Speaker 1: credit right now? I think the Chinese economy is is strong.
• 27:03
  Speaker 1: I mean, I you know, I I go back over
• 27:05
  Speaker 1: the last six eight months and I and I think
• 27:07
  Speaker 1: that people are finally starting to recognize that iron ore
• 27:11
  Speaker 1: imports are really growing at a significant level, and I
• 27:14
  Speaker 1: think people failed to grasp the environmental um aspect of
• 27:20
  Speaker 1: China and clamping on the pollution and how that is
• 27:22
  Speaker 1: actually beneficial to dry ball shipping and the shipping of
• 27:25
  Speaker 1: high quality iron ore. John woven Smith, thank you so
• 27:28
  Speaker 1: much for joining joining us. He's president of Jenko Shipping,
• 27:31
  Speaker 1: which is based in New York. It's very interesting. Thank you,
• 27:35
  Speaker 1: Thank you. Thanks for listening to the Bloomberg P and
• 27:41
  Speaker 1: L podcast. You can subscribe and listen to interviews at
• 27:44
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• 27:56
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