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Institutional Investors Now Buying the Purpose Bitcoin ETF: CEO Seif · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  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
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. Matt, this next next
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  Speaker 1: segment is right down your alley. We're talking bitcoin. As
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  Speaker 1: I look at my Bloomberg terminal here, XPTU top one
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  Speaker 1: percent today to thousand, call it one seventy five dollars
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  Speaker 1: for the coin. Let's introduce some safe He's the founder
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  Speaker 1: and CEO of Purpose Investments. They're based in Toronto, Canada.
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  Speaker 1: So thanks so much for joining us. I want to
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  Speaker 1: talk to you about your Purpose Bitcoin e t F.
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  Speaker 1: It's the world's first bitcoin ETF backed by physically settled bitcoin,
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  Speaker 1: and it just crossed one billion dollars in assets under
• 0:53
  Speaker 1: management on this one month anniversary. Talk to us about
• 0:57
  Speaker 1: how the last month is gone for you guys. Thanks guys.
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  Speaker 1: That yeah, no, it's been quite exciting. UM, I mean
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  Speaker 1: we knew it was gonna be UM an interesting product
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  Speaker 1: to get out the marketplace, being the first of its
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  Speaker 1: kind in the world. And you know, I I've been
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  Speaker 1: quite amazed by the one of course, the global interest
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  Speaker 1: in in the product, but also just the continuous focus
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  Speaker 1: on its uniqueness. UM. And you know, I think we're
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  Speaker 1: we're we've been, you know, pleasantly surprised by by such
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  Speaker 1: an amazing on point and the continuation of it, I mean,
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  Speaker 1: across the billion dollars and you know, ironically on this
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  Speaker 1: one month anniversary uh and uh. And then of course
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  Speaker 1: we've seen just really rapid continued interest in the asset.
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  Speaker 1: And you know, look, I think innovation always wins in
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  Speaker 1: the long run, and I think that's what this ultimately proves.
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  Speaker 1: So some lift up the hood for us and tell
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  Speaker 1: us how this works mechanically. How do you trade, for example,
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  Speaker 1: your bitcoin for the fund? So yeah, I know, it's
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  Speaker 1: look at it's actually really important. You know what sounds
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  Speaker 1: like a simple question, but it's it's not. As you know,
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  Speaker 1: the bitcoin asset, digital assets in general trade uh in
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  Speaker 1: real time and settle in real time, so they are
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  Speaker 1: instantaneous settlement. Then, of course, the traditional securities market trades
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  Speaker 1: um with a T plus mon or T plus two
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  Speaker 1: please so te plus three. So bridging that gap was
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  Speaker 1: an important thing. So what we do is, we of
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  Speaker 1: course have the market makers uh and the you know
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  Speaker 1: call it the A p s that are basically market
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  Speaker 1: making the e t F all throughout the day. They're
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  Speaker 1: accumulating the interests and demand. And then what we do
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  Speaker 1: is we work with them on you know, when they
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  Speaker 1: have creations or we haven't had redemptions yet, but if
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  Speaker 1: we have redemptions, we are ultimately able to execute the
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  Speaker 1: bitcoin in real time UM with them, with them and
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  Speaker 1: our specific traders. So we work with some of the
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  Speaker 1: best institutional traders in the over the counter market of bitcoin, uh,
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  Speaker 1: you know, and executing in the best execution prices we
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  Speaker 1: can get. UM. So I'm talk to me about who
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  Speaker 1: is investing in your e t F. I've be interested
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  Speaker 1: here kind of the mix between retail and maybe institutional. Yeah,
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  Speaker 1: we look, we've seen a really strong kind of balanced.
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  Speaker 1: Of course, retail UM continuously is looking for unique ways
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  Speaker 1: to buy this asset, I mean efficient ways, and this
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  Speaker 1: is the first of its kind in that way. But
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  Speaker 1: but we've also seen some really good both active trading
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  Speaker 1: institutions plus UM long term fundamental investors coming to the
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  Speaker 1: to the vehicle as well. So you know, we've had
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  Speaker 1: a number of institutions that had been looking for an
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  Speaker 1: easy way to buy you know, bitcoin, but had been
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  Speaker 1: struggling because you know, they either had to go up
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  Speaker 1: and set up their own institutional costody accounts with let's g.
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  Speaker 1: Gemini or other um, or they have to go buy
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  Speaker 1: one of the clothes in tons like a GBPC and
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  Speaker 1: you know, effectively have found this as a more efficient
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  Speaker 1: way to do so. So we're seeing that now trick
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  Speaker 1: in and that's actually been one of the big legs
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  Speaker 1: up in the last couple of weeks, and I think
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  Speaker 1: we'll see that more specifically with some of the larger
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  Speaker 1: fundamental investors institutional investors UM in the next couple of
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  Speaker 1: months as well. So we anticipate, you know, pretty strong
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  Speaker 1: demand from the fundament investors coming into bitcoin through a
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  Speaker 1: vehicle like this. How does the regulation work? I mean
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  Speaker 1: there are some very large countries that have not yet
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  Speaker 1: approved a bitcoin e t F. So um, are are
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  Speaker 1: all investors welcomed? You have to somehow police that? Yeah? No,
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  Speaker 1: I mean look, I mean it's a publicly listed vehicle,
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  Speaker 1: so any investor with a brokerage accounts and who has
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  Speaker 1: access to the securities market can basically buy it um.
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  Speaker 1: You know, look at the regulators, you know, have been
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  Speaker 1: going through their own decisions on this asset for the
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  Speaker 1: last number of years. And if you go back to
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  Speaker 1: times when we had a number of filings come to
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  Speaker 1: market in the US and Canada and globally, the regulators
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  Speaker 1: at that time had two concerns. The first one, of course,
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  Speaker 1: you know, was this an asset that we you know,
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  Speaker 1: believe is legitimate and should you know, be accessible by
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  Speaker 1: the broad investor base. And then too was is the
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  Speaker 1: infrastructure there to enable a daily liquid and trading vehicle
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  Speaker 1: like this. I think, you know, back in eighteen they
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  Speaker 1: were right to have concerns about the latter concern, which is,
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  Speaker 1: you know, the infrastructure. It just wasn't there. And I
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  Speaker 1: think if they had said yes at that point, it
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  Speaker 1: would have been a disaster in many ways. But but
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  Speaker 1: a law has changed in the last number of years
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  Speaker 1: around the infrastructure. So we now have institutional grade UM custodians.
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  Speaker 1: We have you know, institutional trading in the futures market.
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  Speaker 1: We have you know, broker dealers who actually have direct
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  Speaker 1: linkages to the asset could trade it in real time
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  Speaker 1: and settle in real time with the custodian, So all
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  Speaker 1: this stuff was really changed. It created a very unique
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  Speaker 1: ability to trade. I think the first question though, of
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  Speaker 1: was this an asset that they regulators wanted to have
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  Speaker 1: um you know, investors have brought access to that has
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  Speaker 1: also been going through a really important discussion, and I
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  Speaker 1: think in Canada the regulators felt comfortable that it was
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  Speaker 1: the time that institutions and investors were going to want
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  Speaker 1: to have access to this, and they're gonna get it
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  Speaker 1: even if it was an unregulated way. And I felt, well,
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  Speaker 1: why not make it regulated way? All right? So I'm
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  Speaker 1: great having you on. Fascinating to see this kind of
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  Speaker 1: development in the industry. See if they're from the purpose
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  Speaker 1: bitcoin e t F. Let's bring in right now. Bloomberg
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  Speaker 1: opinion columnist Joe No Sarah. It takes a lot to
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  Speaker 1: get your own NI code on the Bloomberg terminal, but
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  Speaker 1: Joe has one that should tell you how important we
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  Speaker 1: consider his opinion. Joe, you're talking about union saying they
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  Speaker 1: are back in favor and they need to seize the
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  Speaker 1: moment um. Is this about making America great again? I
• 6:31
  Speaker 1: knew you. I they warned me that you guys are
• 6:33
  Speaker 1: gonna beat me up. So so let's let's let's know
• 6:39
  Speaker 1: it's about it's about trying to reduce income inequality, and
• 6:44
  Speaker 1: it's and it's also trying to to understand, you know,
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  Speaker 1: why workers have had so little leverage in terms of
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  Speaker 1: UH waves growth UM over the last you know, quarter century.
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  Speaker 1: Al Right, so income inequality is a bad thing. We
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  Speaker 1: want to try and alleviate that, and wage growth is
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  Speaker 1: something that we all want to see. But you point
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  Speaker 1: out that um, private sector workers should emulate the public
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  Speaker 1: sector when it comes to organized labor, and I just
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  Speaker 1: wonder why the public sector workers should be a model
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  Speaker 1: that is not what it says. It's said the only
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  Speaker 1: the only way that it should replicate the public sector
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  Speaker 1: is increasing their numbers. I mean, the public of public
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  Speaker 1: sector workers are unionized and six point eight six point
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  Speaker 1: three percent of private sector union workers are unionized. And
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  Speaker 1: and the only point I was making about the comparisons
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  Speaker 1: tocluding public and private is that we'd like to see
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  Speaker 1: the private sector get HI are closer to But why,
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  Speaker 1: I'm wondering why, because the public sector doesn't seem like
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  Speaker 1: a great example it's a number. It's a number. It's like,
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  Speaker 1: you know, I'm not crazy about public sector unions either,
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  Speaker 1: although you know they've done they've done okay in terms
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  Speaker 1: of way waves growth. But um, you know, the teachers union.
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  Speaker 1: As you read my column, I've been I have been
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  Speaker 1: the highly highly critical of the teachers union's unwillingness to
• 8:10
  Speaker 1: go back to school, even though schools are are probably
• 8:13
  Speaker 1: the safest place because you can be in this pandemic. No,
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  Speaker 1: it's not that at all. And and and if you
• 8:18
  Speaker 1: get sidetracked on that, it's sort of yeah, you're missing
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  Speaker 1: the point. The point is that you know, Amazon workers, UH,
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  Speaker 1: Walmart workers, McDonald's workers, I mean, people who make craft money.
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  Speaker 1: You know, the only way they're going to do better
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  Speaker 1: is through union, period, end of story. And and the
• 8:43
  Speaker 1: the history of American labor since the nine forty absolutely
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  Speaker 1: proves that. Um, when when unions were strong, we had
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  Speaker 1: a we had a vibrant middle blue collar middle class.
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  Speaker 1: And as UH unions have faded, that vibrancy has has
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  Speaker 1: faded as well. So Joe. Again, the labor narrative in
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  Speaker 1: my lifetime has been as you just stay a kind
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  Speaker 1: of the the the steady decline of unionization in this country.
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  Speaker 1: We now have a democratic White House, we now have
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  Speaker 1: democratic Congress. I'll be at a very very slightest of margins.
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  Speaker 1: Is this the time for something at the federal levels,
• 9:26
  Speaker 1: some legislation to be passed to kind of spur all unionization. Well,
• 9:32
  Speaker 1: the House has actually passed such a bill, um of course,
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  Speaker 1: on the party line, and it's basically a bill that
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  Speaker 1: tries to uh give union organizers or workers trying to
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  Speaker 1: organize inside like an Amazon warehouse, um a better shot.
• 9:51
  Speaker 1: Not you know, just try to make the planing field
• 9:54
  Speaker 1: a little more even the obvious it's obvious that you
• 9:56
  Speaker 1: can't pass a bill like that in the Senate as
• 9:58
  Speaker 1: long as you have to sell a bu uh. There's
• 10:01
  Speaker 1: a lot of legislation that could pass the House and
• 10:04
  Speaker 1: camp pass the Senate was that without getting rid of
• 10:06
  Speaker 1: the filibuster. And the question is, you know, are the
• 10:09
  Speaker 1: Democrats ultimately willing to give up the sale of buster
• 10:11
  Speaker 1: at the moment. The answer is no. And so you know,
• 10:14
  Speaker 1: President Biden can do what he can in terms of
• 10:17
  Speaker 1: jaw boning, which he has done uh visa visa the
• 10:21
  Speaker 1: Amazon uh effort in Alabama. But really he can't do
• 10:26
  Speaker 1: more than that as long as the filibuster exists. Now
• 10:31
  Speaker 1: we could have a whole show on the filibuster. I
• 10:33
  Speaker 1: would love to have you on to talk about that.
• 10:35
  Speaker 1: I think the Democrats would really regret giving it up
• 10:38
  Speaker 1: if they then lost the majority. But in terms of
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  Speaker 1: UM labor, you know, my opinion doesn't matter, Joe, but
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  Speaker 1: my heart goes out to these gig workers, especially uber
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  Speaker 1: drivers UM and the like. California gave them a big
• 10:54
  Speaker 1: fat finger in November last year with Prop twenty two.
• 10:58
  Speaker 1: Why would have left leaning state vote against UM you know,
• 11:03
  Speaker 1: a better livelihood for people like that. Well, that's a
• 11:07
  Speaker 1: really good question. And and especially since um uh in
• 11:12
  Speaker 1: Europe somewhere they actually are, they are being considered employees
• 11:18
  Speaker 1: in all those ways. I mean, you know, there are
• 11:22
  Speaker 1: uber drivers who who like the state, the situation, the
• 11:25
  Speaker 1: way it is as a part time thing. And you know, America,
• 11:29
  Speaker 1: we don't do a good job of allowing people to
• 11:34
  Speaker 1: be a part time and still uh you know, get
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  Speaker 1: benefits like health insurance. You know, it's either it's either
• 11:43
  Speaker 1: you're a full time employee, which a lot of these
• 11:45
  Speaker 1: super drivers don't want to do, or your part time
• 11:48
  Speaker 1: and you don't get anything. So, uh, you know, we
• 11:52
  Speaker 1: need some kind of system that's in between. I don't
• 11:54
  Speaker 1: know why the California thing didn't pass. Um. You know,
• 11:58
  Speaker 1: obviously Uber and Lift you know, pulled out all the stops,
• 12:02
  Speaker 1: which is which is not not a surprise. Um, but
• 12:05
  Speaker 1: you're right. It isn't let letely state and you would
• 12:07
  Speaker 1: have thought it it might have happened. Yeah, Matt. My
• 12:10
  Speaker 1: my take on that is, you know, people choose to
• 12:13
  Speaker 1: be gig workers, and you think about when the g
• 12:17
  Speaker 1: that it was that historically low unemployment rates. Okay, so
• 12:21
  Speaker 1: these are people that, for whatever reason, chose the gig
• 12:24
  Speaker 1: economy and that allows these business models to flourish to
• 12:27
  Speaker 1: the benefit of consumers. Airbnb, you, Uber, all those things.
• 12:30
  Speaker 1: So there's certainly that argument to be made. So, but
• 12:33
  Speaker 1: I think it's gonna come up again and again and
• 12:35
  Speaker 1: again because it is key to those companies. Modeled Joe.
• 12:39
  Speaker 1: Is there any reason to believe unionization rates will not
• 12:43
  Speaker 1: continue to decline in this country? Um? Yes, I do.
• 12:48
  Speaker 1: I do think that there's a decent possibility that they'll rise.
• 12:53
  Speaker 1: I mean, um, you know, you do have the Democrats
• 12:55
  Speaker 1: and you do have the President talking about Alabama. UM,
• 12:59
  Speaker 1: let's see what happens with this Alabama effort. And you know,
• 13:03
  Speaker 1: if if I were to passed, it would it would
• 13:06
  Speaker 1: spark a union union organizations all over Amazon shops and
• 13:11
  Speaker 1: probably started at Walmart as well. I don't think it's
• 13:14
  Speaker 1: I don't think it's UM. I don't think unions are
• 13:18
  Speaker 1: dead in this country, although they've been in decline for
• 13:22
  Speaker 1: a very long time. Joe, thanks so much for joining us.
• 13:25
  Speaker 1: Really appreciate it chatting with you. Your column is fascinating.
• 13:28
  Speaker 1: Jonah Sarah, calumnist for Bloomberg Opinion. You can meet Joe's
• 13:31
  Speaker 1: work and all the good work from our friends at
• 13:33
  Speaker 1: Bloomberg Opinion, at Bloomberg dot com, Slash Opinion, or by
• 13:37
  Speaker 1: typing in O P, I N go on the terminal.
• 13:43
  Speaker 1: Now I have a little bit of a mini vacation
• 13:46
  Speaker 1: this afternoon. Normally, I'm sure all of our listeners are
• 13:49
  Speaker 1: driving either home or to work in order to watch
• 13:52
  Speaker 1: my program on Bloomberg Television at one PM. But today
• 13:56
  Speaker 1: I will be supplanted by j Powell and Janet Yellen.
• 14:01
  Speaker 1: They'll be testifying in front of Congress and here to
• 14:04
  Speaker 1: help us UH gauge what to expect what to watch really,
• 14:08
  Speaker 1: Ben Emmons, Managing director of Global macro Strategy at Medley Advisors. Ben,
• 14:14
  Speaker 1: thanks for coming back on the program. What are you
• 14:16
  Speaker 1: going to be most focused on in today's hearing? Hey,
• 14:21
  Speaker 1: Matt's good. Good to be back on the show. Um. Yeah,
• 14:24
  Speaker 1: I do think I want to focus on what exactly
• 14:27
  Speaker 1: they see as the progress in the economy. Right, That
• 14:29
  Speaker 1: continues to be I think for the market the puzzle
• 14:32
  Speaker 1: to understand because as Ira Jersey earlier on your program
• 14:36
  Speaker 1: actually mentioned, right, we have tip bits on what they
• 14:39
  Speaker 1: expect about inflation and how long that could stay potential
• 14:42
  Speaker 1: of target, but the substantial progresses is something that I
• 14:46
  Speaker 1: think also Congress will ask you do you see that?
• 14:49
  Speaker 1: And how I know? And how far does that need
• 14:51
  Speaker 1: to be in order if you to then change your policy.
• 14:54
  Speaker 1: I think that would be the key focus today, in
• 14:56
  Speaker 1: addition to, of course the on a ployment picture, which
• 14:59
  Speaker 1: is which is key in that in that calculation. As
• 15:02
  Speaker 1: also Cappen said this morning, right, they want to hit
• 15:05
  Speaker 1: the benchmark on unemployment. Yeah, That's kind of where I
• 15:08
  Speaker 1: wanted to go, Ben, because so much of it the
• 15:10
  Speaker 1: U S economy is tied towards the consumer and getting
• 15:14
  Speaker 1: folks back to work here. Um, what do you think
• 15:17
  Speaker 1: the Fed and the and the Treasury, how do you
• 15:20
  Speaker 1: think they're thinking about the unemployment picture in the US.
• 15:24
  Speaker 1: Is it something that can be you know, fixed relatively
• 15:28
  Speaker 1: quickly post pandemic, or is this something that might be
• 15:31
  Speaker 1: a little bit more institutionalized. It's an interestant dynamic bol
• 15:35
  Speaker 1: because if if you think about when Yellen was having
• 15:38
  Speaker 1: her testimony, you know, beforecoming the Treasure secretary, she was
• 15:43
  Speaker 1: very convinced that the US would be back to full
• 15:45
  Speaker 1: employment by next year as the fetis taken, the more
• 15:48
  Speaker 1: I think someone more conservative stands there right there. The
• 15:51
  Speaker 1: Multi Policy Report outlined labor market disparity and goes in
• 15:55
  Speaker 1: all the details of that and shows that you know,
• 15:57
  Speaker 1: the significant slack it will take a while. So it
• 16:00
  Speaker 1: was a bit of a bit of a economy there
• 16:02
  Speaker 1: between the two in terms of dead view in Jelly Yellen,
• 16:06
  Speaker 1: Jennet Yellen being the labor economists, seems to be pretty
• 16:09
  Speaker 1: optimistic that this fiscal stimulus is powerful enough to get
• 16:12
  Speaker 1: everybody back into the labor force and at work. So
• 16:15
  Speaker 1: I think it is indeed a function of one and
• 16:18
  Speaker 1: institutional as function of you know, how you measure slack
• 16:22
  Speaker 1: and how you at then at some point would say yes,
• 16:24
  Speaker 1: we're back to full employment. But there's another answers the
• 16:27
  Speaker 1: function of very cyclical dynamic here and economy. That is
• 16:31
  Speaker 1: it STV opening doesn't get too much derailed and really
• 16:34
  Speaker 1: opens the fiscal stimus should do its work and people
• 16:37
  Speaker 1: get back get back into the libor force. Is this FED?
• 16:41
  Speaker 1: Does this FED look at um full employment different than
• 16:44
  Speaker 1: any other FED? I mean, are they more focused on
• 16:48
  Speaker 1: equality than another FED? Are they more focused on wages
• 16:52
  Speaker 1: than any other FED? I think there's a change that
• 16:55
  Speaker 1: meant in terms of the previous episodes when indeed the
• 16:59
  Speaker 1: wages were think imporn part of the narrative, and let's
• 17:02
  Speaker 1: say the period of into sixteen, there's determining policy today.
• 17:07
  Speaker 1: It's of course as broad inclusive labor force growth. Like
• 17:12
  Speaker 1: I said, we want to pull on as many people
• 17:14
  Speaker 1: in as we could possibly do, because I think they
• 17:17
  Speaker 1: have found out through all those sessions on the ground
• 17:19
  Speaker 1: that that listens uh series that they did that people
• 17:23
  Speaker 1: really emphasize like it's it is obviously really important to
• 17:27
  Speaker 1: have emprooyment and to get as many people back in
• 17:29
  Speaker 1: the labor force. So it's broad inclusive definition. Again referring
• 17:34
  Speaker 1: back to the mountt Policy Report. If you go in,
• 17:36
  Speaker 1: there as a good table on that that actually shows
• 17:39
  Speaker 1: how many people per type of jobs and Peru was
• 17:43
  Speaker 1: it um population in terms of the Hispanic or Black etcetera.
• 17:48
  Speaker 1: All these people, you know, are still on the sidelines. Right,
• 17:51
  Speaker 1: So I think this is the definition today, get a
• 17:54
  Speaker 1: broad inclusive recovery there and that will take sometimes too.
• 17:59
  Speaker 1: Then you in the background, still is the chatter about
• 18:02
  Speaker 1: the next round of fiscal stimulus. I think the number
• 18:05
  Speaker 1: that's being bandied about these days is maybe three trillion
• 18:07
  Speaker 1: dollars over some period of time, maybe ten years. How
• 18:10
  Speaker 1: important is that fiscal stimulus plan to your economic recovery outlook?
• 18:17
  Speaker 1: I think it's key bold because you know there's one
• 18:20
  Speaker 1: point nine trillion is a good effort in terms of
• 18:23
  Speaker 1: forgetting the initial cyclical boost here for the next quarter
• 18:26
  Speaker 1: to two quarters. But it is the more long term
• 18:29
  Speaker 1: investment in the economy that that is key to get
• 18:32
  Speaker 1: us really at a sustained track. Let's say back to
• 18:35
  Speaker 1: the trend that we had in eighteen at close to
• 18:38
  Speaker 1: three or higher m and and it's not factored in yet.
• 18:43
  Speaker 1: I think in many people's forecasts other than maybe some
• 18:45
  Speaker 1: outliers that see that party happening already this year. There's
• 18:50
  Speaker 1: a big political issue here too, of course, right this
• 18:52
  Speaker 1: infrastructure bill has more things included than just spending on infrastructure.
• 18:57
  Speaker 1: It's climate change, is inequality, it's those set of issues
• 19:00
  Speaker 1: that come along. So to get that food package proof
• 19:04
  Speaker 1: will not be that straightforward. But if it does happen,
• 19:07
  Speaker 1: it could significantly boost the potential output for the US
• 19:11
  Speaker 1: because I would think that would be significant investments in
• 19:15
  Speaker 1: infrastructure and the grid and everything else that we need.
• 19:18
  Speaker 1: So yeah, it's an important aspect of going forward. Hey, Ben,
• 19:22
  Speaker 1: thanks so much for joining us. As always, we always
• 19:24
  Speaker 1: appreciate getting your thoughts and perspective here. Again, as we
• 19:27
  Speaker 1: prepare for Janet Yellen and FED Chairman j Pal testifying
• 19:30
  Speaker 1: in front of Congress uh in just at the top
• 19:33
  Speaker 1: of the hour, maybe we will certainly bring that to you.
• 19:35
  Speaker 1: Ben Emmon's managing director, Global macro Strategy at Medley Advisors.
• 19:42
  Speaker 1: I want to bring in right now, Vince Signarella, our
• 19:44
  Speaker 1: global macro strategist at Bloomberg and on on Trini vass On,
• 19:48
  Speaker 1: the senior semiconductor and hardware analyst at Bloomberg Intelligence to
• 19:52
  Speaker 1: talk about the problem getting chips, the supply chain issue,
• 19:57
  Speaker 1: and the increase in price, the inflation issue, and whether
• 20:01
  Speaker 1: or not this kind of inflation is transient or here
• 20:04
  Speaker 1: to stay. Vince, let me get your take first, because
• 20:07
  Speaker 1: I know you have a um UH a counter consensus
• 20:12
  Speaker 1: take on it. Well. A source of mind that I've
• 20:15
  Speaker 1: been speaking with in UH in San Francisco, who specializes
• 20:18
  Speaker 1: in UH in tracking data chips and semiconductors and such,
• 20:23
  Speaker 1: has been filling me in on some of the issues
• 20:25
  Speaker 1: have played and saying that the expectation for prices going
• 20:29
  Speaker 1: through this year is going to increase in every quarter
• 20:33
  Speaker 1: and carry into two. And from what he's seeing is
• 20:38
  Speaker 1: essentially the shortage in the industry is driving up prices.
• 20:42
  Speaker 1: And when I asked him about UM, you know that
• 20:45
  Speaker 1: you know the contracts that are in place, especially in
• 20:47
  Speaker 1: the large corporations, you know, people like Apple for instance,
• 20:51
  Speaker 1: Forward Motor Company UH And he says, yet they have
• 20:54
  Speaker 1: contracts in place to set a price. But in reality,
• 20:58
  Speaker 1: if the if these contracts with company is in Taiwan,
• 21:00
  Speaker 1: they don't actually have to sell it to them at
• 21:02
  Speaker 1: their price. At that price there it's a supply and
• 21:06
  Speaker 1: demand issue and recent prices Apple for instances, as he
• 21:10
  Speaker 1: tells me, of scrambling for supply and can't get them
• 21:13
  Speaker 1: because they will offer prices refused and now the prices
• 21:17
  Speaker 1: are higher and they're coming back and the suppliers are
• 21:19
  Speaker 1: telling them sorry, the the uh, the allocation has gone
• 21:22
  Speaker 1: to someone else. So that type of frenzy, if you will. Uh,
• 21:26
  Speaker 1: The expectation is to drive prices up through the end
• 21:29
  Speaker 1: of the year. And on the small old margin suppliers,
• 21:32
  Speaker 1: the people that supply wal Mart and Amazon, they have
• 21:35
  Speaker 1: to pass that cost alonge because they simply don't have
• 21:37
  Speaker 1: the margin. Uh, they to eat away and their profits
• 21:41
  Speaker 1: to to take that themselves. All Right, So I want
• 21:44
  Speaker 1: to bring in you. You've been covering the semiconductor industry
• 21:48
  Speaker 1: for decades. Explain to us what's going on here, How
• 21:52
  Speaker 1: did this shortage come about, and how long do you
• 21:54
  Speaker 1: think it plays out? Yeah, hey, guys, thanks for having
• 21:57
  Speaker 1: me on. So a couple of different things. One of
• 22:00
  Speaker 1: the things that we've been talking about with respect of
• 22:02
  Speaker 1: the ship chip shortage is that the pandemic has boosted
• 22:06
  Speaker 1: demand and the demand hasn't come from areas that we
• 22:09
  Speaker 1: thought were going to be the demand spikes. So, for example,
• 22:13
  Speaker 1: PCs have been through the roof, so associated components of PCs, CPUs, memory,
• 22:20
  Speaker 1: um io chips, display drivers have all from a demand perspective,
• 22:25
  Speaker 1: shot through the roof from second half of last year
• 22:28
  Speaker 1: and it's ongoing. So that's a big component that's about.
• 22:31
  Speaker 1: You know, PCs, at OLPCs and um servers are roughly
• 22:35
  Speaker 1: about thirty of semiconductor consumption across different categories. Second handsets
• 22:42
  Speaker 1: have been very, very strong despite the Wahwei band. There's
• 22:46
  Speaker 1: been movement of market share five gs that and that
• 22:49
  Speaker 1: demand has been very strong as well. So that's another
• 22:52
  Speaker 1: thirty five or so percent of demand for for semiconductors.
• 22:57
  Speaker 1: Those two alone have been spiking demand. Now, one of
• 23:01
  Speaker 1: the things that we've also seen through the industry is
• 23:05
  Speaker 1: supply has moved around, so all those were expected to
• 23:08
  Speaker 1: fall off a cliff. They're roughly about ten percent of
• 23:10
  Speaker 1: semi conductor demand. So people cut cut back on autos.
• 23:14
  Speaker 1: Come three Q of last year, whoa nellie, demands spiked again,
• 23:19
  Speaker 1: but too late we've already moved away from autos, so
• 23:22
  Speaker 1: that area has been caught on the back foot. UM
• 23:25
  Speaker 1: So that's the part I care about. On I don't
• 23:27
  Speaker 1: care about the PC demand. I'm fine using my old
• 23:31
  Speaker 1: one handset, doesn't matter. The cars are important because we're
• 23:35
  Speaker 1: seeing ten fifty dollar markups on dealer lots. Um is
• 23:40
  Speaker 1: that going to Are they going to get production back
• 23:43
  Speaker 1: into line? Not any time soon? Is the is the
• 23:47
  Speaker 1: short answer? Um? And UM, you've you've had some marvels
• 23:51
  Speaker 1: already under a little bit of a supply crunch, and
• 23:55
  Speaker 1: you know this is this, Uh, the the adage of
• 23:58
  Speaker 1: you know, for the warrant of a horse shoe, the
• 24:00
  Speaker 1: kingdom was was lost is a good one here, because
• 24:03
  Speaker 1: these could all be ten cent parts, two dollar parts.
• 24:06
  Speaker 1: But as a result, you know, twenty two fifty to
• 24:09
  Speaker 1: seventy thousand dollar cars are waiting for this last electronic
• 24:13
  Speaker 1: component despite its value, low value, in order to shift
• 24:17
  Speaker 1: the product. And you're seeing a lot of that. And
• 24:20
  Speaker 1: I don't know if you've seen this in industrial or
• 24:22
  Speaker 1: certain types of very mundane household electronic items that are
• 24:27
  Speaker 1: on back order and prices being marked up. So I
• 24:29
  Speaker 1: agree with Vince's point in that you're going to see shortages,
• 24:35
  Speaker 1: you're going to see delays, and you're going to see
• 24:37
  Speaker 1: higher prices. And this is most likely sustained through one
• 24:43
  Speaker 1: and perhaps me spill over into two depending on whether
• 24:47
  Speaker 1: demand is sustained. Some of this demand is perishable UM,
• 24:52
  Speaker 1: but most of the demand, like auto demand for example,
• 24:55
  Speaker 1: is long lasting. You're not going to go out and
• 24:57
  Speaker 1: buy a bicycle because you can't get your hands on
• 24:59
  Speaker 1: a car are UM, So either you buy it in
• 25:03
  Speaker 1: two Q or t Q, or you know gone. All right, guys,
• 25:09
  Speaker 1: thank you very much. This is going to be a
• 25:11
  Speaker 1: big issue for this economy and will certainly pay attention
• 25:13
  Speaker 1: to a Vinced Signarella, Global macro strategists for Bloomberg News
• 25:17
  Speaker 1: joining us on the phone. And Anna Trinivasan, senior semiconductor
• 25:20
  Speaker 1: and hardware analysts for Bloomberg Intelligence. Thanks for listening to
• 25:25
  Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to
• 25:29
  Speaker 1: interviews of Apple Podcasts or whatever podcast platform you prefer.
• 25:33
  Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller on
• 25:38
  Speaker 1: ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast,
• 25:41
  Speaker 1: you can always catch us worldwide at Bloomberg Radio.