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Dream Hotel Group CEO Optimistic On Travel · 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
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast
0:15
Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. Pandemic trends here in
0:22
Speaker 1: the United States are really trending in the right direction.
0:26
Speaker 1: Pandemic is on its back foot as vaccinations continue to rise.
0:30
Speaker 1: And then of course we have from the CDC yesterday
0:32
Speaker 1: relaxed mask requirements and that is good news for a
0:35
Speaker 1: lot of business. And Taylor, you're saying you can't even
0:38
Speaker 1: get a spot in a pilates class in the city, right,
0:40
Speaker 1: I know, you know, they're booked at full capacity and
0:43
Speaker 1: everyone is jammed back. I had to hurry and rush
0:46
Speaker 1: to get my spots, So, like everyone else, that is
0:49
Speaker 1: good to hear. So I'd say another group of businesses
0:51
Speaker 1: that need this economy to reopen is the hotel business.
0:55
Speaker 1: Let's talk about that. J Stein. He's the chief executive
0:57
Speaker 1: officer for the Dream Hotel Group. Jake, thanks so much
1:00
Speaker 1: for joining us here. I would love to get your
1:02
Speaker 1: thoughts as to where we are right now with your
1:05
Speaker 1: hotel business visa v maybe six months ago. Thanks Paul Tell,
1:10
Speaker 1: Thanks thanks for having me on. Yeah, so good progress
1:13
Speaker 1: for the last six months. Nationally, New York City just
1:17
Speaker 1: starting to make some progress. As you know. We're opening
1:20
Speaker 1: up a two new uh two new hotels this month
1:23
Speaker 1: or reopening i should say, the Dream Midtown and the
1:27
Speaker 1: Dream Downtown. Dream Midtown actually opens today. So we're thrilled
1:30
Speaker 1: to uh here with the with the staff and welcoming
1:34
Speaker 1: back employees that have been furloughed for over a year.
1:36
Speaker 1: It's just so nice to see their faces. And we'll
1:39
Speaker 1: do the same thing about ten days later for the
1:41
Speaker 1: Dream Downtown crew. And then we have two more hotels
1:43
Speaker 1: that are closed, the Chat Wall and the Time, which
1:46
Speaker 1: we hope to have open maybe in the next sixty
1:48
Speaker 1: days as well. So a lot of things moving to
1:50
Speaker 1: New York. UH. Still a long way to go to build.
1:53
Speaker 1: The occupancy is back up to reasonable levels, but certainly
1:57
Speaker 1: you're starting to see a little bit of light at
1:59
Speaker 1: the end of shun office point. You know, it was
2:01
Speaker 1: interesting we heard from Airbnb last night, UH and and
2:05
Speaker 1: really highlighting that the urban tourists has not quite come back.
2:10
Speaker 1: We're still doing a lot of vacation homes outside big cities.
2:14
Speaker 1: When are you hoping that that urban tourist really does
2:17
Speaker 1: come back? Yeah, I would disagree with that. I mean,
2:21
Speaker 1: I certainly not back to the sense where they're back
2:24
Speaker 1: all the way, but certainly it is moving in in
2:26
Speaker 1: other markets. New York is just starting, but Miami is
2:29
Speaker 1: I'm sure you've heard stories is very strong in our
2:32
Speaker 1: urban product of the dream of South Beach. The dream
2:34
Speaker 1: in Nashville really started to bounce back. UH pootain beverage
2:38
Speaker 1: very strong, but also on the room side, back over
2:42
Speaker 1: levels now UH and the dream in Hollywood as well.
2:45
Speaker 1: We're seeing good traction in l A starting to uh
2:48
Speaker 1: to move. So I think that you are starting to
2:51
Speaker 1: see people coming back to the urban centers. UH and
2:53
Speaker 1: as museum start to uh reopen and larger percentages, baseball
2:58
Speaker 1: games and and all those kinds of things. Certainly with
3:00
Speaker 1: restaurants and a lot of relaxation there on the amount
3:03
Speaker 1: of people, it's a big attraction to come to New
3:06
Speaker 1: York and certainly when we get Broadway open in September, UH,
3:09
Speaker 1: it's gonna be game changing. So, Jay, what is your
3:11
Speaker 1: expectation for New York New York. I'm sure those are
3:14
Speaker 1: obviously key key properties for you. How do you expect
3:16
Speaker 1: the occupancy to ramp up based only maybe some of
3:19
Speaker 1: your experience and some of your other markets. Yeah, it's
3:23
Speaker 1: a little tough to say. Nobody really knows. I'm optimistic.
3:27
Speaker 1: I think people want to come to New York one
3:30
Speaker 1: just you know, for the fun of it. But you know,
3:32
Speaker 1: there's eight million people that people need to come and
3:34
Speaker 1: visit Um that they haven't seen him a long time,
3:37
Speaker 1: family and friends, So I think we may be a
3:40
Speaker 1: little surprised. And beautiful weather, uh this was always one
3:44
Speaker 1: of the best times of the year to be in
3:46
Speaker 1: the city. I think we'll start to see the numbers
3:49
Speaker 1: rebound and hopefully by the fall we start creeping back
3:53
Speaker 1: up into those uh six. You know, we will normally
3:57
Speaker 1: run here in New York, which is twenty higher than
4:00
Speaker 1: the rest of the country. So it's just a very
4:02
Speaker 1: different in general. You know, we have to talk about
4:05
Speaker 1: the labor shortage going on right now. Are your employees
4:08
Speaker 1: coming back to work or do you have to incentivize
4:10
Speaker 1: them with higher pay? You know, we're just starting here
4:14
Speaker 1: in New York, so we haven't had too much difficulty,
4:17
Speaker 1: but we're bringing back from a very small staff where
4:20
Speaker 1: you know, we'll probably only be in the twenty occupancy
4:23
Speaker 1: range in the first month, so that's you know, a
4:26
Speaker 1: third of what we normally do, and so there'll be
4:28
Speaker 1: a much much, much fewer employees than normal. But nationally, Uh,
4:33
Speaker 1: it's very difficult getting employees. And I'm sure you're hearing
4:36
Speaker 1: that every day. Uh. And it was talking something about
4:39
Speaker 1: markets before COVID, you know, don't get me wrong, um,
4:42
Speaker 1: but now and I'm sure it has to do with
4:44
Speaker 1: the enhanced unemployment and stimulus and things like that certainly
4:47
Speaker 1: play a part of it. Um. So your labor is
4:50
Speaker 1: a very very uh difficult aspect for our industry right now.
4:55
Speaker 1: What is the business like in your Miami hotel? Is
4:58
Speaker 1: it back to normal? I see, I see watched the
5:01
Speaker 1: news every night for months and these people are parting
5:04
Speaker 1: like there is no pandemic. So how's your hotel doing
5:08
Speaker 1: down there? Yeah? So I wouldn't say it's like there's
5:11
Speaker 1: no pandemic. I mean you do see those that's what
5:13
Speaker 1: you see on TV because they interviewed certain people but
5:16
Speaker 1: I was there yesterday. I was at the dream In
5:18
Speaker 1: in Miami for the whole day. I was in the
5:20
Speaker 1: Durham unscripted yesterday a day before that. And I've been
5:23
Speaker 1: traveling all over all over to all about properties, but
5:27
Speaker 1: Miami is definitely the highest demand right now. UM. You know,
5:32
Speaker 1: people eating indoors without masks, That's the same thing you
5:35
Speaker 1: have in New York City. So it's not like it's
5:38
Speaker 1: you know, the wild wild West that day, the way
5:40
Speaker 1: people describe it, it's really not. What's it been like
5:42
Speaker 1: traveling on the planes and stuff. Um, for the most plot,
5:47
Speaker 1: I've been on a lot of flights, four flights in
5:49
Speaker 1: the last three days, UM. And last week I was
5:51
Speaker 1: on four flights as well. I was in Louisville, I
5:53
Speaker 1: was in Nashville, UM, went through Atlanta, went through Detroit. UM.
5:58
Speaker 1: So yeah, there's a lot of people. I was shocked.
6:00
Speaker 1: I had to go through Charlotte yesterday. It looked completely
6:03
Speaker 1: normal in the terminal, right, Okay, alright, busy, most people
6:10
Speaker 1: being very courteous and wearing the mask for people taking
6:14
Speaker 1: a little little little bit of liberties with that. All right,
6:17
Speaker 1: all right, well hopefully, well we can continue this reopening
6:20
Speaker 1: in a safe way and and get folks back out there.
6:22
Speaker 1: J Stein, chief executive officer of the Dream Hotel Group.
6:26
Speaker 1: They're opening one of the New York properties today and
6:29
Speaker 1: another one on the twenty six, So that's good to
6:31
Speaker 1: see properties here in New York City coming back. This
6:35
Speaker 1: is Bloomberg. It seems like the discussion has moved from
6:41
Speaker 1: the pandemic, two vaccinations, and now this week it seems
6:45
Speaker 1: to be mask or no mask. That seems to be
6:48
Speaker 1: where the conversation is going. Let's get the latest on
6:51
Speaker 1: all of these issues with Lawrence Soer. We always appreciate
6:54
Speaker 1: her giving us some time every week. Lawrence Sowers is
6:56
Speaker 1: socio Professor of Emergency Medicine that the Johns Hopkins School
7:00
Speaker 1: of Medicine. I should know that the Bloomberg School of
7:02
Speaker 1: Public Health at Johns Hopkins is supported by Michael Lare Bloomberg,
7:05
Speaker 1: founder of Bloomberg LP and Bloomberg Philanthropies, and this radio
7:08
Speaker 1: and TV operation. So, Lauren, we're having the CDC update there.
7:13
Speaker 1: I guess their mask mandate, so if you're fully vaccinated,
7:17
Speaker 1: you don't really have to wear mass in most situations.
7:20
Speaker 1: Do you think that's the right message? Yeah, I think, Um,
7:23
Speaker 1: you know, the CDC is continuing to get data and
7:26
Speaker 1: and that is in turn influencing their policies, and we're
7:29
Speaker 1: seeing it happened rapidly, right like in real time. I
7:32
Speaker 1: think for me, the message doesn't change much as as
7:36
Speaker 1: we think about how we are going to actually evaluate
7:40
Speaker 1: whether people are vaccinated or not. And so until we
7:44
Speaker 1: have a system in which we have higher coverage, we
7:48
Speaker 1: have lower incidents and we know who's vaccinated. I don't
7:52
Speaker 1: see this UM changing at least my personal behavior and
7:56
Speaker 1: probably many cities, states, and and and companies behaviors and
8:00
Speaker 1: policies on masking. Lauren, can you help me understand how
8:05
Speaker 1: do eight fully vaccinated members of the Yankees baseball team
8:09
Speaker 1: test positive for COVID? Yeah, it's a great question. I
8:13
Speaker 1: think what we're seeing is breakthrough cases. And so what
8:15
Speaker 1: we're going to look to hear from the Yankees or
8:18
Speaker 1: from um, you know, the health departments that's going to
8:20
Speaker 1: be managing those breakthrough cases, is was it a variant strain? UM?
8:25
Speaker 1: What vaccine did the Yankees use? UM? What were what
8:29
Speaker 1: were their contacts? Like? UM that contact tracing is going
8:32
Speaker 1: to become very important, and and did they become sick. Um,
8:36
Speaker 1: and that those are all going to be important questions
8:39
Speaker 1: that we as we continue to evaluate both our vaccine
8:41
Speaker 1: efficacy and how we strategize the use of these other
8:44
Speaker 1: public health activities like masking, like social distancing. Um, these
8:49
Speaker 1: breakthrough cases become important, you know, data points that we
8:52
Speaker 1: will continue to use to influence our policy. Lauren, do
8:57
Speaker 1: you think you know? I was just looking at a
8:59
Speaker 1: story talking about a story on air about wind Resorts,
9:02
Speaker 1: the casino company they're reopening and they're dropping their mask
9:05
Speaker 1: mandate and they're basically saying it's on the honor system.
9:09
Speaker 1: To me, I guess that's probably how it has to go,
9:12
Speaker 1: don't you think? And how do you think about the
9:15
Speaker 1: vaccinative folks versus non vaccinati folks and identifying one another. Yeah,
9:20
Speaker 1: I think it's a really hard question, um, And I
9:24
Speaker 1: think it ends up being where you, as the individual,
9:26
Speaker 1: have to make that choice about whether or not you're
9:28
Speaker 1: comfortable wearing your mask if you've been vaccinated, you know,
9:31
Speaker 1: taking off your mask if you've been vaccinated, and also
9:33
Speaker 1: if you're even comfortable being in places where masks aren't
9:35
Speaker 1: required anymore. Um, it's going to be a really hard
9:39
Speaker 1: and new space for the public and local governments and
9:42
Speaker 1: businesses to navigate. UM. I think the honor system is
9:47
Speaker 1: all we have right now, UM and until we find
9:50
Speaker 1: a sort of ethical and appropriate way to do this
9:53
Speaker 1: otherwise that's what we're going to be stuck with. But
9:55
Speaker 1: I do think that, UM, there are going to be
9:58
Speaker 1: people who just don't want to wear a mask ask anymore, UM,
10:01
Speaker 1: and we'll make that decision because they feel like they
10:04
Speaker 1: can independent of their vaccine status. And so people who
10:08
Speaker 1: feel less safe, UM, people like frontline health workers, people
10:12
Speaker 1: like other frontline workers, like restaurants, plantation, things like that,
10:16
Speaker 1: are going to be affected by this to a degree.
10:18
Speaker 1: And similar news Paul Las Vegas stands also saying that
10:22
Speaker 1: they are not requiring vaccinated guests to wear masks. So
10:26
Speaker 1: Vegas Vegas leading the way. Vegas is open, baby, That's
10:30
Speaker 1: all you have to to say. Lauren, just sort of
10:35
Speaker 1: square with me. Maybe some of the mixed messages. I
10:38
Speaker 1: was on an airplane and they said no up and
10:40
Speaker 1: through at least September. For now, you have to wear
10:42
Speaker 1: a mask. AM track some of the subways. So we're
10:46
Speaker 1: getting some of the CDC guidance. But then of course,
10:48
Speaker 1: if you're on an airplane, the rules are a little different.
10:51
Speaker 1: But how is the coordination going. Yeah, I think we
10:55
Speaker 1: have some work to do in the coordination setting, exactly
10:57
Speaker 1: as you're suggesting, and a lot of it is about
11:00
Speaker 1: communication messaging, so UM, we don't really know the full
11:05
Speaker 1: data on airplanes and the risk of transmission. There's been
11:08
Speaker 1: a lot of work done in the Space team with
11:09
Speaker 1: other public transportation areas like subway, cars and trains, and
11:13
Speaker 1: so when you're in those close quarters, masking does still
11:17
Speaker 1: seem appropriate, and we're continuing to learn about those spaces
11:20
Speaker 1: as these sort of natural experiments happen. UM. But I
11:25
Speaker 1: think the reason you're still seeing that requirement UM and
11:28
Speaker 1: those policies is because we don't fully understand the transmission
11:32
Speaker 1: dynamics in that space, and because we know that they're
11:34
Speaker 1: that people can't really truly sit, you know, six ft
11:37
Speaker 1: apart that we we want to keep them masked and
11:42
Speaker 1: safe as safe as possible, and this is a relatively easy,
11:45
Speaker 1: relatively harmless way to do that. We appreciate you coming
11:49
Speaker 1: in every week, Lauren and helping us kind of really
11:51
Speaker 1: understand what's going on with this pandemic and with the vaccines.
11:54
Speaker 1: Laurence Soer, social Professor of Emergency Medicine at the Johns
11:57
Speaker 1: Hopkins School of Medicine. And I should know it again
11:59
Speaker 1: that the Blue School of Public Health is supported by
12:01
Speaker 1: Michael Bloomberg, founder Bloomberg LP, Bloomberg Philanthropies, and Bloomberg Radio
12:06
Speaker 1: and Television. Well, if you can flashback just you know,
12:12
Speaker 1: four or five days ago, the market was really concerned
12:15
Speaker 1: about inflation and not just the transitory kind as well.
12:19
Speaker 1: But uh, and that was some really weakness in the market.
12:22
Speaker 1: We've had a couple of days very strong rebounds here,
12:24
Speaker 1: kind of climbing back some of those losses from the
12:26
Speaker 1: earlier in the week. But the questions where do we
12:27
Speaker 1: go from here? Let's check in with Jeff Carbon and
12:29
Speaker 1: he's co founder and managing partner of Cornerstone. Well, if
12:32
Speaker 1: they have got one point two billion dollars in assets
12:34
Speaker 1: under management, so Jeff, kind of a seesaw type of
12:38
Speaker 1: week here. Started off very week, had some real concerns
12:41
Speaker 1: about maybe this economy is overheating. That might prompt the
12:43
Speaker 1: Fed to step in a little bit, but not so
12:45
Speaker 1: much of the past couple of days. What are your
12:46
Speaker 1: thoughts here? Yeah, no, good morningful. Yeah, we certainly the
12:51
Speaker 1: predominant risk of inflation. And uh, it certainly started the
12:54
Speaker 1: week off and kind of maybe we were going we
12:57
Speaker 1: were coming down that roller coaster and now we're moving
12:59
Speaker 1: back up. Right. Was still down probably two and a
13:01
Speaker 1: half percent for the week, but we've had a good
13:04
Speaker 1: recovery um from the early part. And yeah, like I think,
13:08
Speaker 1: as you mentioned, it was that fear of the market
13:11
Speaker 1: maybe was expecting transitory risk and we were not on
13:14
Speaker 1: that court. We think there's more concern of inflationary pressure.
13:19
Speaker 1: But beyond that, you've got to look at you know,
13:21
Speaker 1: the FED and what the FED is gonna do. And
13:23
Speaker 1: it's almost that Goldilocks theory, right, because the FED is
13:26
Speaker 1: under the pressure of if they let the market overheat
13:29
Speaker 1: too much, we get too much inflation, inflation runs hot. Um,
13:33
Speaker 1: if they move too slow, we're a little bit behind
13:36
Speaker 1: and things fall, and you know, they gotta just do
13:38
Speaker 1: it just right, right. We needed to be perfect. And
13:40
Speaker 1: it's going to be that induced FED induced language. Right,
13:44
Speaker 1: we gotta see what they're gonna say. It's gonna as
13:46
Speaker 1: the importance that we're watching right now. You know, Jeff,
13:48
Speaker 1: you you're hitting on a point that I want to
13:50
Speaker 1: go next. I read a Bloomberg opinion article from Muhammad
13:53
Speaker 1: hillary In earlier this week, and he hinted that the
13:55
Speaker 1: FED is really doing us a disservice by insisting and
13:58
Speaker 1: insisting and insisting in that inflation is transitory and leaving
14:02
Speaker 1: no room for anything else. And he comes out and
14:05
Speaker 1: says that instead of looking at a single baseline, they
14:09
Speaker 1: should be looking at a range of scenarios and not
14:11
Speaker 1: be holding this single baseline to a degree of conviction
14:14
Speaker 1: that isn't supported right now in some of the data.
14:17
Speaker 1: Is the FED doing us a little bit of a disservice?
14:21
Speaker 1: I believe so. And I you know, watch Mohammed and
14:24
Speaker 1: talk to him and really keep a close eye on
14:27
Speaker 1: what he does, because he's brilliant. So in the FED
14:30
Speaker 1: and the FEDS forgetting that every major crash in history
14:34
Speaker 1: has been preceded by the FED tightening right and there.
14:38
Speaker 1: So the language is so going back to the messaging
14:41
Speaker 1: is so important. Um, you know, we've taped, we've continued
14:44
Speaker 1: to taper, what a undred and twenty billion dollars per month.
14:47
Speaker 1: We can probably start pulling off the I mean that
14:50
Speaker 1: the economy is heating, it's heated, up right, we've had
14:52
Speaker 1: that big recover. We can certainly lay off the put
14:56
Speaker 1: a little bit of the take off the gas a
14:57
Speaker 1: bit and maybe start by tapering little um. Maybe not immediately,
15:02
Speaker 1: but we need to have the plan to do so,
15:04
Speaker 1: because yeah, this is that trend and we don't transitory
15:07
Speaker 1: inflation is not there go you know, look at the
15:09
Speaker 1: gas pumps, look at food. We can see the you know,
15:12
Speaker 1: some of the with other commodities, whether it be corn
15:15
Speaker 1: et cetera. The prices are rising. So inflation is definitely
15:18
Speaker 1: out there a lot stronger than there that they may
15:21
Speaker 1: be seeing. So we definitely have a different different opinion
15:24
Speaker 1: between the Treasury Secretary Yelling and Jerome Powell UH on
15:29
Speaker 1: the FED. So we're we're we're seeing more inflationary pressure
15:32
Speaker 1: and we're starting to get concerned about it right now,
15:34
Speaker 1: and that's why we're backing off a bit. We're taking
15:37
Speaker 1: some of the UH high A BEATA positions and going
15:40
Speaker 1: a little bit more conservative right now. All right, talk
15:42
Speaker 1: to us, Jeff about where you're going, where you think
15:45
Speaker 1: your clients should be going. If in fact, uh we
15:48
Speaker 1: are you know, kind of facing potentially some tapering, if
15:51
Speaker 1: not outright rate increases. Yeah. Uh yeah, so so Paul,
15:56
Speaker 1: we've been you know, I think when I sent some notes,
15:58
Speaker 1: you know, we've been moving a little little bit out
16:00
Speaker 1: of those uh uh reopening trades. Although Norwegian Cruise Line
16:05
Speaker 1: this morning is having a really good day and but
16:07
Speaker 1: at the same time you were seeing Disney not so good. Right,
16:10
Speaker 1: So we've really moved away from some of those reopening
16:14
Speaker 1: um and high data positions, trying to go a little
16:17
Speaker 1: higher quality. We're moving up, you know, quality, big names,
16:21
Speaker 1: higher market cap, and really important for us is cash flow,
16:24
Speaker 1: right we want to see really good cash flows. Where
16:27
Speaker 1: do you go What sectors we like? Continue to like industrials.
16:31
Speaker 1: We still like the financials, especially regionals and some brokerage.
16:36
Speaker 1: We do think that's a good space in this economy. Uh. Energy,
16:39
Speaker 1: and we're adding some healthcare back in at this point.
16:42
Speaker 1: Are you moving up in credit quality as well? Absolutely? Yeah,
16:48
Speaker 1: we're definitely better quality. I think it's high quality around
16:52
Speaker 1: the across the board, right, Um. The you know, you
16:56
Speaker 1: can move on from credit quality not just in our
17:00
Speaker 1: equity positions, but credit quality within the bonds that we're
17:04
Speaker 1: holding as well. And you know with the bond market,
17:06
Speaker 1: that's that's the toughest place to be right now with
17:09
Speaker 1: I think we got the aggregate bond index down what
17:12
Speaker 1: two and a half percent for the year. Um, we're
17:14
Speaker 1: losing money, and then um on our on the bond side,
17:18
Speaker 1: and then try to find some place in cash. It's
17:20
Speaker 1: that losing money safely positioned because inflation is somewhere you
17:24
Speaker 1: call it one seven to two, and we're getting into
17:27
Speaker 1: banks list than you know, if we're lucky ten basis points,
17:30
Speaker 1: if if we could find it somewhere, so it's it's
17:33
Speaker 1: definitely a fixed income market is a is a tough
17:36
Speaker 1: tough place to be right now. All right, Jeff, Hey,
17:39
Speaker 1: thanks so much for joining us. We really appreciate getting
17:41
Speaker 1: your thoughts on these markets here. Jeff Carbone he's co
17:44
Speaker 1: founder and managing partner for Cornerstone Wealth. Again, we started
17:47
Speaker 1: off this market on this week on a very down note, uh,
17:52
Speaker 1: retracing some of those losses here in the past couple
17:54
Speaker 1: of days. We'll keep you up to date on those
17:55
Speaker 1: markets right now that we want to talk crypto. What
18:01
Speaker 1: a wild week it's been for crypto. Taylor, It's almost
18:03
Speaker 1: been like the Elon Musk effect. Does he does Elon
18:06
Speaker 1: like crypto does Elon not like crypto? And I think
18:08
Speaker 1: we're back to Elon likes crypto, but certainly been a
18:12
Speaker 1: volatile week for the crypto space, and I suspect people
18:15
Speaker 1: that traffic there and trade there and invest there are
18:18
Speaker 1: are used to that. John Wu he's a president of
18:19
Speaker 1: Ava Labs. Uh. He joins us once again to kind
18:22
Speaker 1: of get us the latest on what is going on
18:25
Speaker 1: with crypto. And I guess one of the interesting stories
18:27
Speaker 1: John was, you know, Ellen initially saying maybe I'm not
18:31
Speaker 1: really supporting crypto because the whole E s G issue,
18:34
Speaker 1: it takes too much power to mind crypto. What's your
18:38
Speaker 1: view of that whole storyline, Hey, Paul, Hey Taylor. So
18:43
Speaker 1: you know, Elon has a flair for the dramatic, obviously,
18:47
Speaker 1: but that statement where he said he's no longer accepting
18:51
Speaker 1: bitcoin for transactions in terms of buying Tesla actually was
18:56
Speaker 1: killing three birds with one stone, and it was quite
18:58
Speaker 1: brilliant on his part, because there's no one buying Tesla's
19:02
Speaker 1: right now using bitcoin. There's tax implications and and obviously
19:07
Speaker 1: when there are transactions happening, you do need to you know,
19:11
Speaker 1: mind and validate and secure all of this, and that
19:14
Speaker 1: does require a lot of energy. So in one statement,
19:17
Speaker 1: he basically kept his green initiative. He also did not
19:21
Speaker 1: hurt his testla sales and he really, like you know,
19:25
Speaker 1: was actually kind of a brilliant statement, and he's got
19:27
Speaker 1: that flare for the dramatic, so good for him. Um,
19:30
Speaker 1: But his point is correct. There is a lot of
19:33
Speaker 1: wasteful spend when you have bitcoing and mining, and that's
19:37
Speaker 1: because you basically for every transaction you ultimately need to secure, validating,
19:42
Speaker 1: create a next block. Right now, the energy consumption in
19:46
Speaker 1: the bitcoin ecosystem is roughly one thirty terot watts an
19:51
Speaker 1: hour per year, and people have said that's the equosal
19:54
Speaker 1: of the consumption of countries like Argentina or Norway, So
19:58
Speaker 1: that's a lot of consumption, and a lot of that
20:01
Speaker 1: is carbon footprints that are just you know, not very green.
20:06
Speaker 1: So he has a lot of good points. What's even
20:09
Speaker 1: worse is the way this works is it's not necessary.
20:13
Speaker 1: You know, the proof of work concept for mining and
20:15
Speaker 1: bitcoin is you have to solve math problems in order
20:19
Speaker 1: to have the right to create the next block. But
20:23
Speaker 1: the way it's set up, it's almost like a lottery system.
20:26
Speaker 1: So the more chances you have, the more likely you're
20:30
Speaker 1: rewarded bitcoin and given the right to create the next block.
20:34
Speaker 1: Now that means you need more computing power, you need
20:36
Speaker 1: more hardware, and you need to consume more energy. This
20:39
Speaker 1: is all useless work. There is no reason for this
20:43
Speaker 1: is just mining companies competing against each other. It doesn't
20:46
Speaker 1: make the securing and the validating and transactions and creating
20:49
Speaker 1: a next block more efficient. Unfortunately, a lot of this
20:53
Speaker 1: just useless work. John Though there was some pushback after
20:57
Speaker 1: the Elon Musk tweet, many people who are bullish on crypto.
21:01
Speaker 1: I believe Mike Novograps Right of Galaxy, someone that we
21:03
Speaker 1: speak with frequently, a lot of other millionaires and billionaires
21:06
Speaker 1: and investors said that, yeah, it might use some carbon now,
21:10
Speaker 1: but the future is renewable energy and we're working on
21:13
Speaker 1: getting there. Does that have any validation to it that
21:17
Speaker 1: eventually it can become a positive renewable way to mine.
21:24
Speaker 1: It's better, but even if it's renewable, it's still displacing
21:29
Speaker 1: um the use for other things that you need to
21:32
Speaker 1: consume energy. So it's better, for sure, and there is carbon,
21:36
Speaker 1: there's wind power, but it's still displacing you know, um,
21:40
Speaker 1: the need for the use energy for other things. So, John,
21:45
Speaker 1: you mentioned you mentioned that the current way that crypto
21:48
Speaker 1: is being mine is not the most efficient. What are
21:51
Speaker 1: some more efficient ways that you think this industry needs
21:54
Speaker 1: to go towards. Well, I think a lot of the
21:58
Speaker 1: newer blockchains are using a proof of stake method, which
22:02
Speaker 1: is a much more an improved way of doing things
22:05
Speaker 1: because it's literally like one million of the times more efficient, um.
22:12
Speaker 1: And instead of using physical hardware and mining and using
22:17
Speaker 1: energy to secure and validate, you're effectively putting your coin
22:22
Speaker 1: or putting up you know, security pots. I think of
22:24
Speaker 1: it for the right to vote and the right to
22:26
Speaker 1: secure the blocks and the transactions, and that is literally
22:31
Speaker 1: so much more efficient way, and there's no useless work,
22:34
Speaker 1: so to speak. John, you mentioned something at the beginning
22:37
Speaker 1: of your first answer about the tax implications, and this
22:41
Speaker 1: brings up the question about what is bitcoin? What is
22:46
Speaker 1: the real value? Is it a store of value or
22:48
Speaker 1: is it a form of payment? And that tax issue
22:51
Speaker 1: this week has brought up a lot of conversations about well,
22:55
Speaker 1: maybe that's why you don't use it to pay. You
22:58
Speaker 1: keep it as a store of value, right, What is
23:01
Speaker 1: the use case for bitcoin, it is a store of value.
23:06
Speaker 1: It is the it's taking share from the nine trillion
23:09
Speaker 1: dollars of gold that's out there, and that is the
23:12
Speaker 1: number one use case. There are new blockchains that are
23:16
Speaker 1: far more efficient, more green, and have the ability for utility.
23:21
Speaker 1: There's a buddy ecosystem of other blockchains that have actual
23:26
Speaker 1: use cases on top of their blockchains. John, if one
23:31
Speaker 1: of our listeners wanted to get exposure to just this
23:33
Speaker 1: whole crypto thing, how would you recommend they do it?
23:37
Speaker 1: Do they buy a piece of bitcoin? Is there? What
23:41
Speaker 1: do you think is the best way to do that? Well, Listen,
23:44
Speaker 1: I still agree with Mike no regrets that bitcoin is
23:47
Speaker 1: going to go a lot higher. Um, you know, bitcoin
23:50
Speaker 1: right now is still used to the store of value,
23:53
Speaker 1: and you know the whole space is two trillion dollars
23:57
Speaker 1: and and bitcoins again, gold is nine trillion, And every
24:01
Speaker 1: single last year I think there was um close to
24:05
Speaker 1: like fifty billion dollars in new influence to gold and
24:09
Speaker 1: a lot of that is going to come into bitcoin
24:12
Speaker 1: over the over the years. So, first of all, I
24:15
Speaker 1: still agree with him that bitcoin is going to go higher.
24:17
Speaker 1: But to get exposure to the states more and more
24:19
Speaker 1: people are now looking below the folds and speak on
24:23
Speaker 1: like when you search it is not just about daycoin.
24:26
Speaker 1: There there are other blockchain ecosystems that are actually thriving.
24:31
Speaker 1: Of the labs the place I work at, the software
24:34
Speaker 1: company that that launched the lance the blockchain, we already
24:38
Speaker 1: have a more even more efficient than a therem in
24:41
Speaker 1: terms of a greenness if you will, and and has
24:46
Speaker 1: the characteristics that we all desire for better utility, which
24:49
Speaker 1: is scale, no latency whatsoever, and closing a transaction as
24:54
Speaker 1: well as the ability to have very low prices for
24:57
Speaker 1: a transaction. So for investor, I would definitely look at
25:02
Speaker 1: new things that are coming up that are inflecting right
25:05
Speaker 1: now because part of the reason, let's be honest, fall
25:07
Speaker 1: people want to get into this because they seemed the
25:09
Speaker 1: great terms in some of the top coins. And that's
25:12
Speaker 1: really like the first two right now, Etherory and Bitcoin.
25:16
Speaker 1: But if you want to find the next ones, you've
25:18
Speaker 1: got to look at who's got the most utility go
25:20
Speaker 1: forward and they should look um, you know, be a
25:23
Speaker 1: little to top two. John, it was interesting the timing
25:26
Speaker 1: of all of this. We did here yesterday that Colonial
25:29
Speaker 1: Pipeline did indeed pay their ransom of five million dollars
25:34
Speaker 1: to get that pipeline back up and running, and while
25:37
Speaker 1: they paid it in crypto, And we had a conversation
25:40
Speaker 1: earlier with Tim O'Brien of our Bloomberg opinion saying that
25:43
Speaker 1: other people indeed have paid, and they've all been requesting
25:47
Speaker 1: bitcoin and cryptos. Everyone says, well, there's a form of payment,
25:52
Speaker 1: there's a paper trail, so it's actually really good. But
25:55
Speaker 1: I'm not seeing anyone who's paying ransom and crypto being
25:58
Speaker 1: brought to justice here. Is there a paper trail then?
26:01
Speaker 1: If so, why are ransom attackers asking to be paid
26:07
Speaker 1: in crypto? Well, there is some it's pseudonymity, it's not
26:12
Speaker 1: true anonymity, and it is global, so it makes it,
26:16
Speaker 1: you know, a little separated from other financial systems. So
26:21
Speaker 1: does because it's border lists. It's harder for jurisdictions to
26:25
Speaker 1: go after certain people, but it is you can if
26:29
Speaker 1: you really want to do the work. Attach um the
26:32
Speaker 1: actual people behind it um just like any other form
26:35
Speaker 1: of human my understanding, looking at studies done from very
26:40
Speaker 1: reputable firms, the percentage of fraud as in crypto is
26:44
Speaker 1: really not more than any other system it just gets
26:47
Speaker 1: highlighted because of the crypto nature and the association of
26:52
Speaker 1: the early days. Hey, John wall Street and has a
26:55
Speaker 1: new sheriff in town, Gary Ginstler at the SEC. This
26:59
Speaker 1: is a mark when I think about crypto that is
27:01
Speaker 1: just crying out for some regulation that we're just one
27:05
Speaker 1: blow up away from somebody saying, hey, is somebody looking
27:08
Speaker 1: at this? What do you think? How do you think
27:10
Speaker 1: the regulatory framework is going to develop a evolve around
27:15
Speaker 1: all things crypto going forward? So having been in the
27:19
Speaker 1: space for a long time, the regulatory framework has actually
27:22
Speaker 1: already evolved and it's getting better every single day. There's
27:25
Speaker 1: no doubt. There's still a lot of gray area, and uh,
27:29
Speaker 1: the Gary and the new SEC commissioners need to continue
27:33
Speaker 1: to give guidance. But I think we're getting better every
27:37
Speaker 1: single day. I mean remember in two thousand seventeen with
27:40
Speaker 1: the I c oh boom um that led to the
27:44
Speaker 1: SEC coming in to finding what needs to be done,
27:47
Speaker 1: and things are done a lot better than they used
27:49
Speaker 1: to be. So it is getting better every single day.
27:52
Speaker 1: But the industry is still relatively new. Um. You know,
27:55
Speaker 1: bitcoin has been around for eleven years, etheriums only have
27:58
Speaker 1: been around for like less than half of that, and
28:01
Speaker 1: then you have all of these new coins. But the
28:04
Speaker 1: more important thing is there's a lot of development, and Paul,
28:07
Speaker 1: you know, that's the same as the Internet days and
28:09
Speaker 1: the early adopters for the Internet usage was really not
28:13
Speaker 1: the best people, if you will. However, as that show
28:17
Speaker 1: the capabilities and the potential of the Internet, same way, uh,
28:21
Speaker 1: the early guys and crypto have done it, and the
28:23
Speaker 1: potential for the future use cases and disinniation and the
28:29
Speaker 1: positive utility that have come out of this. More and
28:31
Speaker 1: more intellectual capital is moving into the space. Some of
28:35
Speaker 1: the smartest and brightest kids from various great universities are
28:40
Speaker 1: coming to me every single day and wanting to join
28:43
Speaker 1: our firm and other similar firms. So just like we
28:46
Speaker 1: couldn't figure out in the late nineties, when we can
28:49
Speaker 1: have streaming video, a lot of things that we can't
28:51
Speaker 1: figure out exactly right now, they're on the com Hey, John,
28:54
Speaker 1: thanks so much for joining us. We really appreciate you
28:56
Speaker 1: taking your time. You always help us kind of get
28:58
Speaker 1: a little bit more clarity on the crypto market. Is
29:00
Speaker 1: new to so many people. John Wu president of Ava Labs.
29:03
Speaker 1: They're based in New York, City and he's been doing
29:05
Speaker 1: this for a long time, and uh, it's interesting. You
29:08
Speaker 1: know what's happened. One of the things during the pandemic,
29:10
Speaker 1: um Taylor, is my increased use of electronic banking. Okay, well, okay,
29:15
Speaker 1: so thank you, I know. And it's just you're kind
29:19
Speaker 1: of forced to and you get more and more comfortable
29:22
Speaker 1: with it, as we all do with all the new
29:24
Speaker 1: apps and new technologies. But be interesting to see how
29:27
Speaker 1: crypto comes into, you know, the consumer experience. I was
29:32
Speaker 1: joking on TV yesterday in the afternoon hours and my
29:35
Speaker 1: dad texted me and said, okay, give me your thoughts
29:38
Speaker 1: on krypto, and I thought, oh, that might be the
29:40
Speaker 1: cell signal. Dad's getting involved here. But no, all joking aside,
29:44
Speaker 1: I mean more and more mainstream, right. We talked about
29:47
Speaker 1: coin base, Paul and trying to make it easy. Thanks
29:52
Speaker 1: for listening to the Bloomberg Markets podcast. You can subscribe
29:55
Speaker 1: and listen to interviews with Apple Podcasts or whatever podcast
29:59
Speaker 1: platform you for her. I'm Matt Miller. I'm on Twitter
30:02
Speaker 1: at Matt Miller N seventy three and on Fall Sweeney,
30:05
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
30:08
Speaker 1: can always catch US worldwide at Bloomberg Radio,