Biden Says US Would Defend Taiwan

Business Week and Itunes, soundcloud or Bloomberg Dot Com. You can also listen to our radio show at two PM eastern time on Bloomberg radio or watch us on Youtube. Search Bloomberg Glovel News. So let's get to it, everybody, and let's talk about what President Biden had to say, and this has certainly caught everyone's attention. Uh President Biden last night on CBS is sixty minutes saying US military

forces would defend Taiwan from an unprecedented attack. His latest pledge of support as his administration seeks to deter China from increasing military pressure on the democratically elected government in Taipei. Here's more of what President Biden had to say. There's one China policy, tire one and makes their own judgments about their independence. We are not moving. We're not encouraging their being independent. We're not. That's their decision. But would

US forces defend the island? Yes, if in fact there was an unprecedented an attack. That was President Biden, courtesy of sixty minutes. Let's get to it right now, with Bloomberg News White House correspondent Josh Wynd Grove joining us on the phone from Washington d C. Josh, good to have you with us. So President Biden makes these comments in an interview on sixty minutes, and then what does the White House do in reaction? Does he think, Josh,

nobody was listening. I mean it's the aftermath that I'm interested in too, write the damage control that they do. Yeah, I mean, look, the White House messaging on Taiwan is the strategic ambiguity, and the president, uh, you know, flips back and forth, depending on the day, between the between the strategic part and the ambiguous part. I think a little bit here and there. Now he's made comments like this before, most recently inmate when he made the sort

of scene signal. At the time, of course, reacted pretty strongly to that. The White House tried to put the two space back in the two tubes thing. Look, the one China policy has not changed. This is all consistent with that. But you know, I suppose one or two things is happening. One is that the like likes a little bit of uncertainty in the mix and he keeps injecting it and kind of to keep the Chinese government on their toes a bit about what the U S

response would be. The other, maybe a little less, uh, a litt less generous maybe, is that perhaps this is just how he feels and you just can't help but kind of spurt it out, whether it's neatly into the U S policy or not. But what they're saying today that that the clean up, if you will, or the follow up maybe is just simply that he has said this before. We said before that there's no change the one China policy. That remains the case. They're trying to

sort of hit off any Chinese reactions. Well, that's it, Josh. Can you, as the president of the United States, say yeah, I stand by the one China policy, but if there's an unprecedented attack, we can't stand by it depends on what one precedented attack me, of course, and you know this this comment, of course, does come book ending something pretty important that happened between the last time he said it and last night, which is, of course, speaker Pelope's visit.

That really raised tensions in the region. The president went so far as to say that he thought the Department of Defense thought it was not a great idea for the speaker to go when she was not publicly confirming that she would. Of course she ultimately did. That led to Chinese military exercises, missile launches, sort of Saber rattling in and around Taiwan uh and so he's sort of, I guess, drawing a line on the sand again now

with this comment, saying this is where he is. I should note, though, that on another part of the interview he sort of gave a more of a comming sort of view on China when he was asked about Putin Uh and uh she Jin Ping's relationship and said that as of now there's no indications that China has provided weapons or support to Russia in its war in Ukraine.

And of course he said that he'd warned she jim king that there would be consequences in terms of a lack of form and that's been an American investment in particular, if that happened. So you know, this Taiwan comment is getting a lot of attention and should of course, arguably

the newsiest thing of that interview. But the other sort of trappings of the interview were one that thinks that right now he's actually kind of optimistic that China is fully aligning as of yet with Moscow, and that, of course is good news for the West and all the

countries that are trying to prop up you, Maine, in despight. Well, it kind of makes sense to Josh coming off of even President g right in that first face to face since was a covid with Um President Putin, where he too kind of seemed to just maybe put Putin a little bit on guard. So I feel like there's some perhaps some layering going on here. Can I ask you something, though? I always feel like, always, always like I don't know that I can make a blanket statement, but he is

president the United States. He knows what he says something, it's going to be taken largely at face value. Is that true of this particular president, or do we sometimes say, and I just kind of speaks top of mind, no Malarkey, that's right. I think Joe Biden's candor is probably pretty pricedy and at this point this is not a guy that ductor script all that much as vice president and he continued as president. You know, he does not do a lot of innergy that's what mean the sixty minutes.

One kind of UH must watch for for those in my field of work. The last one he did was several months ago, is sit down with the Associated Press. He does kind of want off things, like he did something with Jay Lena recently, that sort of thing, but he's done far fewer TV and print interviews then, for instance, Barack Obama did at this point in his president. So as to why that is, you know, who's to say?

We live in a different environment. You know, maybe they think they can get their message out other ways, other channels, more direct channels, don't have to go through the mainstream press as much. Of course trump spoke to the press all the time. On the flip side, towards the end didn't hold any press briefings by the females press briefings all the time. So it sort of like picked your path a little bit. But he does these so rarely.

That's why all eyes are on them my kind maybe his eye at the beholder on when when he goes off script a little bit, whether that's part of a Cacus, and whether they do these or not. Then you know anyone to do. What Else Josh did six and Scott Kelly get out of the president last night, especially when it comes to Ukraine, but also second term idea? Yeah, they're. I mean we there are a bunch of stories that

came out of that. On you on Ukraine, I mean it just he said that they would do whatever it takes to defend Lensky's government and defend the country against Russian attacks. That's consistent with what he said before four he said they haven't really had an explicit conversation. Remember, Joe Biden, if he runs for re election, will be the oldest president to do it. As of now, he says regularly he's intending on running for re election, but

he's said something to the effective face. He has intervened in his life uh many times and he's sort of not ruling out the fact that things go sideways. The last night shure sounded like a guy that thought as of now he'll be running. The other thing that really caught on was the pandemic. He said the pandemic is over. Walking on with Mr Kelly at the Detroit auto shot was on that strip, and you know he's right in the sense that like there was virtually no mass that

sort of thing, because of course it's not. The COVID isn't over. But I gotta tell you, Josh, presidents, tell that to my mask, which was on my face on the same way this morning, Josh Wyn Grove, Love You, love you. White House correspondent Bloomberg News joining us on the phone from Washington D C. You are listening in watching Bloomberg Business Week, and this is Bloomberg. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes

Tim Stinovic on Bloomberg radio. Let's get to the store. That is the Bloomberg big take today. It's also among our most read on the Bloomberg Terminal and it will be in the upcoming issue of Bloomberg Business Week, do out later this week. It has to do with what Tim many would argue is our biggest story the day, certainly for the Bloomberg audience, and it has to do with the global race to hike interest rates and how that is tilting economies toward recession. Yeah, this a piece

by rich Miller. It is Bloomberg, the Bloomberg big take as well. It's about the global race hike rates tilting economies to recession. Carol, as you mentioned, it's not just the United States, Joel Webber and rich that is the entire world dealing with this right now. Rich Miller is economics reporter for Bloomberg News. He joins us on the phone from our Washington D C Bureau. Joel Weber is the editor of Bloomberg Business Week. He's with us in

the Bloomberg Interactive Broker Studio. So, Joel, we were talking a little bit earlier about Um, President Biden on sixty minutes last night. He was also asked about inflation, UH and Um. You know, one thing that I thought of when I was listening to his answer is that this is not just something that's happening in the United States, that the US is dealing with. You've got pretty much every central bank trying to get interest rates to a

place where inflation comes down. Yeah, and it's almost become as as rich rates here, Um, a competition and let's see who can hike these rates faster. Rich. Remember when money was cheap? That was fun. Um, it's gonna get

more expensive. And you're in the US and elsewhere, right. Uh. And and among everything that's happening, I think it's uh, you know, one thing that's really interesting here is like it does seem like with interest rates, central bankers are just becoming myopically focused on taming recession, taming inflation at all costs, and that increasingly starts to look like recession. Right, but it is a global one, not just a U S story. So, even though you know we're gonna hear

from J earlier this week, how is this manifesting itself elsewhere? Yeah, well, as you say, I mean it's you know, it's incredible when you look through it. It's like nineties central banks of you know, hiked and you know, like more than half of them have hiked by pre courters, some of them more more than that, as you say, like everybody's trying to outhaulk each other. Right now, I'll compete each other.

And Uh, there are some people worried, you know, with everybody going in the same direction, the boat's going to tip over into global recession. Right, Um, uh. So that's one thing, and the other thing is when you go the you know, Milton Friedman, monetary policy affects the economy with long and variable legs. Um, Um, you know the raised rates. You first see it in the stock market, stock market weekends. Then you sort of see it in, you know, the housing market, the Housing Market Solce, and

it comes at the very end, it comes into inflation. But, as you say, if they're myopically, you know, focusing on inflation, that means they're probably going to Overdo it and that's gonna push us into a recession, maybe your recession, you know, all all around the globe, Richard, we're talking millions of

jobs here. As you write in your piece, analysts at black rock reckon that bringing inflation back to the feds two goal would mean a deep recession and three million more unemployed, and then also hitting the ECB's target would require an even bigger contraction. All that, right now is is spelling out a global recession, something that affects the entire globe. So what does this look like when it comes to economic growth? Well, I mean basically no growth.

You know, the the economies are contracting right so, Um, I would think you know that translating that three million on employed into like growth, and you probably have two, two and a half contraction in the economy, in the US economy. Um, Um uh, an actual contraction as opposed to sort of, you know, the sort of phony contraction that we got earlier this year when it was mainly because we were importing more. But you know, this would be actual contraction and you know pain. The pain would

be in the labor market. And you know one of the questions is, you know, uh, you know the politicians now with the most part except for uh, Senator War, and they're sort of cheering the Fed on. Yeah, inflation is bad, go ahead fed, race the rates. But you know, once once you start seeing some pain, j Powell has promised us, you you wonder whether the politicians will change

their tune, which were already seeing pain. We were just talking about the housing market with Patrick Clark, right those five mortgage rates, and it made me want to ask

you about lag effect. What is it really I mean, we're seeing it already on housing, but the successive and cumulative interest rate high exp global central banks right all of a sudden, I feel like it's like when you know you've got a clag and you're pushing through, nothing's happening and then all of a sudden it comes flying through. I'm waiting for that. Is that what's going to happen? I mean that is the danger and Um, that's in

the past. Why the central banks would when they did raise rates, they'd go in small steps, like twenty five basis points. So you go, you go slowly and you see, you know what, you have a little more time to see what. You know what impact your rates were having. You know so, but when you're going and when you're galloping ahead in like seventy five basis point chunks, you know you don't have as much time to sort of

gauge how how the earlier hikes were are affecting growth. And, as you say, housing is kind of in the crosshairs here. But you know, off housing, if housing uh weekends and you know, people are buying lesser appliances. You know, Um, if, if, if people Um uh feel that their house prices are going down and they were gonna save more and then and that just has a ripple. So it just takes time. But you know, as you say, it could sort of be like, you know, an exploding toilet right, could splash

right into our faces. Didn't I didn't want to get graphic here. That wasn't that a cover of bloom purposiness. Joe was known for some the bar bag was a favorite. Might need to dust that one off. Look for the you know, your you know passenger next to you. You can get there. Back to Um rich. One of the things that um I thought was a little bit frightening, that I hadn't totally appreciated was the growth forecast charts

in your story. US goes down pretty dramatically. When you start to look out euro area, worse, UK man, that looks really Bade Um, just from a sense of Um, you know, the folks that you talked to in the daddy that you're looking at it is it starting to feel like there's that pit in the stomach that's like, Oh God, this is going to get really bad. Yeah, I mean, truth be told, the U S we you know,

we've held up surprisingly well. The Labor markets held up pretty well and it's, you know, most of the concern right at the moment is it faced on Europe where, you know, in the UK, where they're getting hit with you know, this incredible uh, getting that not guess, uh, price shock and you know, at the same time you

have the central banks raising rates and you know. But the problem in the US is we've got this you know, embedded inflation problem, and the strongest the economy is, it means probably the Fed's going to have to work that much harder to slow things down. And that's when you know you get risk that they slow it down too much and we go slipping into a recession rich real quickly. Just got abouts here. Is Inflation still a supply problem or is it now kind of more demand problem? And

that's where the Fed can do something. I think in the US it's probably becoming more and more demand problem, particularly in the labor market. With the you know, wages are going up about five six percent a year and to be consistent with the feds target they have to be going up three and a half percent. So I got a long way Togo. That's why people think unemployment's gonna have to go up a lot so workers finally get a break. And now it's like, yeah, I'm sorry

about that, it's not a good thing. We won't blame you, rich or we can. It's all started here because the rich Miller is excellent reporting. He's in DC, so there's nothing you can do comment directly. All right, this story, as we mentioned, it's going to be the upcoming issue of Bloomberg Business Week do later this week. It's also already on the Bloomberg terminal and Bloomberg dot com slash business weeker, thanks to Bloomberg News Economics reporter Rich Miller and,

of course, the editor of business week, Jill Weber. This is Bloomberg radio. You're listening to Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stintov on Bloomberg radio. It is the second busiest port in North America, generating some two point six million jobs across the US. Some one seventy five shipping lines connecting long beach to two hundred seventeen ports and this past August it's second busiest August on record, following the busiest talcust on records at

the previous year back in August one. So we're going to get a great state of our shipping and cargo industry. For that we turned to Mario Cordero, executive director of the port of Long Beach. He joins US right now in the Bloomberg Interactive Broker Studio. Mario, it's great to have you back with us, uh, in in person too. Welcome to New York. Well, thank you. Thank you for the CON invitation. So, Carol just mentioned some of the data that we have, and we have a ton of

it thanks to you and the team, uh. But second busiest. It may not be the best thing for, you know, a port to see, you know, the business come down year over year, but can we argue that it actually is a good thing because it's not as backed up as it was a year ago? Well, certainly, when you look at the metrics here. Currently we have in the San Peter Bury Complex twelve vessels backed up trying to get into the ports. So if you go back to January, that number was a hundred and nine. So just on

that alone it's a tremendous progress being made. Is Any of that seasonal? Part me, is any of that seasonal? You know, we're in peak season right now and I think we're at the peak, so to speak. Again you're looking at the numbers of the consumer demand or some softening on that. So for the third and fourth quarter of the year I think we're looking to diminish demand

in turns on the consumer front. Well, that's what we wanted to I mean, I feel like you have such a great vantage point when it comes to what's going on on an economy. We're all kind of on pins and needles trying to figure out what comes next as we wait for, certainly the Fed decision. What is your read on the state of the U S economy right now? I think we have a strong economy. We certainly have a strong labor market and keep in mind where we were two years ago. I think part of the two

years was terrible. Right the outlier. So are we pre pandemic levels? Are Like? How do you in terms of in terms of the job market, I think we're approaching pre pandemic doubles in terms of the jaws. I have been added since then. But I think the point is we've had a very fast recovery from a worse scenario that we experience. So in that regard, the economy was real hot and now, of course, what we're trying to

do as a nation is kind of softened that. So I think again, the dollar question is, you know, words inflation going to go. So I think that's the outlier. In terms of what's to come. Well, when you look at the activity at the port, and it's really just fascinating about just the the amount of flow through there and what the imports of the exports moving through your ports largest trading partner country is China, which accounts for

so much of it. Um does recession come to your mind a lot, which is certainly something we are worried about, especially as global central banks are increasingly doing everything in anything in terms of hiking rates to stem off global inflation. So do you think a lot about recession in terms

of the activity you're seeing? Well, Carol, a good friend of mine, economist Paul Bingham, who has been following this industry for many, many years, once said tell me how many containers go through the poor Long Beach and I'll tell you how good the economy is. So, so far good. Is Inflation a concern? Yes, however, again, if you look at the latest plan of action by the Federal Reserve UH,

they believe they may be able to control this. Will wait to see what that decision is uh in the coming week, whether that's point seven, five or one oh increase, but I think it's safe to say that again, we went through an unusual quick recovery. The consumer demand has really been extraordinary in the last year and a half. Energy prices have gone down. Admittedly, grocery prices have gone up.

So I think what we're looking to is again a very good job market, good consumer demand, considerably considerable in terms of what we experienced previously. But again we are looking at some economic growth, certainly in the global arena, and after the United States, think we're gonna feel some of that also. So it sounds like you're saying we're not in a recession right now. Today, we're not. I mean, you know, is it removing towards your recession? Fore? I

mean there's a debate. I know that all this is uh, highlights. How many like do people book? Help me out with like the shipping. Understanding Shipping, having recently been at the Panama Canal fascinating to just understand it. Same thing with your report. Do our companies booking for December? Are they booking for November? Like, how much visibility or how much forward looking visibility do you actually have to get an

idea of? Wow, things are going to slow down. Well, what I can tell you is part of the problem that we experience here in the nation's largest monstrategic gateway is the advancing of that inventory. So, looking forward, some of these companies were advancing the inventory, but they certainly didn't want to put us back to where we were in the second half of uh so I think, uh, it's interesting to watch. You know, there's some bigger company

to start looking at their labor force. Uh. But at this point I will say that in terms of the coming holiday Christmas season, we're gonna be very well established in terms of that inventory because much of that has been advanced already. It's already it's already where it needs to be right I mean for the poor lawmas. If you look at the first eight months of this year, we've superseded the numbers of our record year last year

at this point by four point six percent. So that's kind of an indicator in terms out a continued volume. But again, it's gonna be interesting to see how we end the third and approach to fourth quarter, because it does make me feel like people are pulling a lot of stuff forward because they just don't want to be caught off guard, like things can get it more expensive, so they're buying it now. Yeah, our empty shelves and you don't want that in Christmas rights, but especially if

you're a retailer. Correct, and I firmly believe we're not going to see that scenario for sure. Hey, tell us a little bit about what you're saying based on where port traffic is coming from and what that says about economies around the world. I mean, we saw Fedex loose of its market value on Friday after it pulled its earnings forecast because if weakness specifically in Europe and in Asia. I know you guys have a really good view on Asia. Um,

is there any softness there? Well, first of all, for fed x, you saw that because a lot of the numbers for fed x in terms with the CEO indicated here this past week that component in terms of what their loss were in earnings was in the Asia market. So I think on that respect, certainly what we see in Asia, more specifically China. You are seeing a slowdown there. UH, in China. So that is the domino effect. But is that?

Is that based on lockdowns in China? Is it based on the covid zero policy, or is it is it all tied to that? It's all tied to what precipitated these times, that is the covid nineteen pandemic. So I think again, Um, we'll see how China handles this. I mean the good news is I don't think you're going to see the kind of lockdowns in China and we saw in the past because they're also watching their numbers

in terms of their economic growth. So there'll be a softening. Uh, and as we approach three I believe that the good news the supply change. Certain United States. I think we're now seeing some semblance of normalization and moderation and supply change. So that's very good news. So okay, and that's the thing. I mean that was obviously the problem right during the pandemic and stuff. You feel like that has has calmed down completely, or close to it. It's calmed down substantially.

So I think again, at least for the West Coast, that car continues to move. I think the delays have diminished, uh, and certainly the backups have substantially diminished. Now there is one asterisk to this and that's the state of the rail equipment. Uh, the ongoing issue with the class one railroads and for the West Coast, the imbalance of the eastbound westbound equipment issues. So for the poor law reach, we're a little bit better on the rail goal, which

is eleven days. Nothing to brag about because in normal times that's about three point five days, but it's certainly better than the thirdeen twelve days we were seeing in recent months. So incremental progress is that? Why is it still such a lag or such a problem and not back to what it should be? I think a lot has to do at the congestion in the inland in the modal yards. I mean this goes back to Chicago

in the hubs there. I think the class one railroads have been rather challenge uh, they have their own challenges. Would Be Lard to shortage of labor and equipment issues. So I think unfortunately we've been the victims of the lack of that rail car which in my view should not happen at the world's most strategic, significant gateway. I am disappointed on that point that it's happened. We're talking with Mario Cordero. He's executive director of the port of

Long Beach. As we said, it is the second busiest port in North America and so a great way to get a feel of what's going on in the economy. Do you feel like, based on what happened and the supply chain problems and just it wasn't just port issues, but it was trucking, it was just kind of all along the line, that we will ultimately se in some ways more automation potentially come into this industry? Or does it need to? Well, I mean those are two very good questions, but let me let me first of all

address the first one. In terms of what we experience. I think the good news for those of us in this industry people finally uh saw the importance and witness the importance of a supply chain. We all found out that the supply chain is not as resilient as some people may have thought. We took it for granted. We

took it for granted. So you know, the essential workforce, which includes obviously our safety officers, are people in the health industry during this pandemic, but also are people who work in goods movement, people who work, men and women who work on the docks, the truckers, the railroad workers, essential workers who move commerce, which has a great impact, obviously, on our GPU, our our GDP, our economy. So I think the good news for us is it's not just

about talk of how importance this industry is. We've seen it, particularly from this administration, in terms of the investment, the ending in this industry in America. Sports, uh, you know, for the Poor Long Beach. We've had the secretary of transportation come to the San Peter Bay Complex already three times this year. And it's not just about visiting her

talking is also funded. Port Lombas received the most significant funding by way of the P D I P grants almost to the two of fifty three million, the largest of any port authority in the country. So we're very pleased that not only people are recognizing the importance. But, like the secretary said, it's not about no longer disinvestment, it's about investments. To shame, it takes a crisis there

for all that to happen. Right. Hey, let's talk a little bit about Labor and I want to draw your attention to a number that our colleagues scarlet food sent us earlier today when she knew that we were working with you later today. UH, so, last year, January, September, sixteenth. This is according to Dowd Jones. There were a hundred and fifty strikes. The Cornell strike tracker has this January one this year. To the past Friday, there's been two

hundred seventy three strikes. How do you look at the power of the worker right now, especially in the context of strikes that could happen at the port at any time, given that you don't have a contract? Well, number one, I don't believe it. You're going to see a strike at the port or even slow down, at least not in the west coast. So I'm very optimistic that the parties will come to a meeting of the mines. Uh, you thought it was going to happen by Labor Dai,

didn't you? Well, I mean we're still in September. Slim in a few weeks off. I'm not wearing white anymore. Put My spectator pumps away. It fall outside. But, but, but, I think that clearly there's no slow down, uh, much less a strike. and the volume numbers that I was just referencing down. Yeah, the volume knows how it's just referencing earlier signifies that the productivity continues at a very high pace in terms of the overall labor issue throughout

the country. Keep in mind that you know the average wages. At least a couple of months ago you saw a fine point, five point three increase in wages. I think that number now is six point three across the board. So you know from my perspective, I mean I think, particularly with the American workforce, many of these industries for the past few years were rather styming would regard to the wage increases. So it's no surprise that, given that how good the economy has been. UH, there's those sectors

that want a piece of the piece of the Pie. Right, you'll get to be in the driver's seat very much when it comes to wages. Hey, just got about a minute or so left here. I want to go back, though, to the economy and you said that there you know, it sounds like we're not going to see empty shelves, that there's been a lot of kind of pre advanced buying. Could we, though, start to see, or how quickly can things kind of start to slow down in terms of shipments?

Does in your industry how often do you maybe like wow, all of a sudden things can slow down, that you didn't see it coming? Well, we're starting to see that. Let me qualify that, because we always thought that the surge that we experienced, particularly last year, was an unusual surge because of the reasons we've stated. So we're going to get back to some realization. So when you compare our number for August, we moved the poort Lombers, moved the most, had the most container volume of any port

in the country. However, we were still minus point one percent compared to August, which is a record yere. So are we in the minus? Technically, yes. Is it bad? No? No, but okay, and never session, you would say, at this point? Not at this point, but again, we'll see what the Fed does in the coming week and we will go

from there. I mean the numbers right now are we're trying to get to a point where we have a soft landing, and that's the kind of tricky points across the what's the word for soft landing for a ship coming into court? Well, any landing where you don't hit hit the dock and you stay in one piece. Very Cordero. Thank you so much. Thank you so much, really gracious and so much time executive director port of Long Beach

joining us here in our interactive broker studio. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg radio. All right, I want to get to another story that is on the Bloomberg terminal. It's part of the Bloomberg Tech Newsletter. Has To do with the merge, the CRYPTO merge that we were all talking about last week. We've got Hannah Miller right now. She's Bloomberg News digital currencies and VC reporter, joining us

on the phone from San Francisco. Hannah, how was your weekend? It was a lot of fun. Yeah, it was nice to relax that you're doing some major merge coverage. Okay, are you joking? Because of them? The reason I ask is because we don't see a ether and Bitcoin stop trading on the weekends, and it was a down weekend for the cryptocurrency. So I don't know if you were being facetious there and you had to work the whole time. No, luckily I didn't have to tekend duty. Ok, okay, what happened?

You know, the merge was priced in. What's going on? I feel like it's like y two K, two point. Oh, it's my two point. Oh Day right, remember we thought everything was going to fall apar could have fallen apart and we thought the merge could have. Like you know, I feel like if something got wrong, it would have been a really big story. It would have been we would have seen huge disruption to trading, to the market, uh, really see startups flounder. But actually everything went really smoothly.

So what's the significance of it? You know, Hannah, I feel like we continue to learn more and more about this crypto world and many would argue, certainly those within the world, that there's still a lot more to become. But what was the significance of this? Because it's really tapped into to some extent the use of energy as well. It's a really big deal because the theorium migrated to prove a bake, which is a different way to validate

and a transaction to the blockchain. Previously, ethereum relied on coupe of work, which is very energy intensive uses large amounts of electricity. So it's supposedly will reduce etherium's energy usage by so when is the Bitcoin merch that is very unlikely to happen. You have really, you know, strong proponents of Bitcoin who believe doing such a switch would undermine bitcoin's core principles and that we would actually be a less secure, less um the centralized way of running

the blockchain. So Hannah raises the question why does something like this work for ethereum's blockchain but not for Bitcoins blockchain? You know, ethereum, it's it's pretty interesting. We do have the ethereum foundation, which is really active and educating people about this blockchain. Um, we have the Tali Puteran who is just a huge force within the industry. He is the creator of ethereum. So there's a little bit more

coordinated effort. I guess with ethereum that we don't see what's Bitcoin, which has, as we know, a studonymous founder into total Nakamoto. You know, one other thing I wondered to Hannah is proof of work versus proof of steak. So now it's a proof of steak proof of work. To me it's like, I don't know, maybe being old fascions, like all right, show me a proof of work, right, in terms of the reliability, the security of it? Is there a difference in terms of the security of your,

you know, ethereum ownership steak? Yeah, so the argument years that with proof of stake it's a bit more it's a bit more centralized in terms of WHO's validating transactions on the blockchain. So if you have fewer parties involved, you know something that affects one of those parties would have, overall, a bigger impact on the blockchain. So that's that's where that concern is. Um and people see bitcoin is as being much more decentralized and having a wider network of

minors versus ethereums taking network. Okay, so it kind of raises the question about why we saw such a precipitous decline over the weekend in and I'll just focus on ether right now because we also saw it on in Bitcoin Um. But was it about the merger? Is it completely unrelated to the merge? I mean, I would say

we knew the merger was coming. So isn't this just a sort of you know, stocks are going down, cryptos going down to yeah, when I talk to people, uh, it's they really bring up the macro condition that we're seeing here that dragging down on prices. Another thing to keep in mind is the merge to not immediately fixed problems with ethereum like congestion, uh, and high transaction fees. It's paving the way for later upgrades that will help

with those things. But, for example, the first NFP minted on the ethereum network after the switch to proof of stake at a transaction fee of more than sixty dollars, which is massive. You know, I've got to, you know, assume that regulators are watching this closely. I'M gonna be a little Um physicious here, but I'm assuming. So the merge happens and our regulators are like, okay, everything's okay with ether and like, and it's okay with ethereum and

it's okay with crypto. Not even close. Right. Regulators to have a lot of issues when it comes to cryptocurrencies overall. Yes, we've already had Gary Gensler call out proof of state stake networks and saying that they have qualities that could make the crypto on those networks classified as securities. So this is just another example of regulators homing in, you know, really just looking forward to tightening oversight of the digital

asset industry. So what are you looking for? Has Somebody who reports on digital currencies and venture capital, because you've you've got this sort of really interesting position. Venture capitalists are looking for. What the next big thing is, and they're talking like the next generation right there, talking years away from big returns, finding that next next facebook or

finding Bitcoin, you know, ten years ago. Um, what has their conversation shifted at all when it comes to how they're thinking about digital currencies or how they're thinking about web three, given that it's been so brutal in terms of a sell off? Yeah, when I speak to DC as, many of them are still bullish on the space. They're in it for the long haul. They believe this is a great time to build, that amazing founders will come out of the scripto winter and that this is only temporary.

We've seen huge interest in N F T S and gaming, despite slumping N F T sale. Uh so that's been really interesting. Vcs are looking to really tap into to mainstream ways to have crypto appeal to consumers and they want, you know, just average people on board. They don't want to just stick with a crypto native audience, right, which is why you've heard some of the big fun houses, right, you know, thinking about or starting to offer a fund

house or Fun House. No, not fun I'm like, what fund what's going on to fun house play for you, Amusement Park Games Um, Hannah. Thank you so much. I'm really glad that we got to check in with you, Hannah Miller. She's Bloomberg News digital currencies and VC reporter joining us there on the phone. Just look at what I'm just going to say a little preview for what we've got coming. One of my decliners coin base today, because when you see big moves in Crypto, you see

big moves and the platforms that help trade them. I'm looking at the CRYPTO currency monitor on the Bloomberg terminal. Bitcoin down one point two percent. You've got X RP down one point four percent. Of Theory, I'm just down about three quarters of a percent, but you know, you go down polka dot. What the heck is that? To stamp out five and a half percent, and that's one that you've made it into the cryptocurrency monitor. Unbelievable. I'm ro Mac Journal. Yeah, but you let me drive. Oh No,

no, no no, no, Oh right, please, I'll do. I want to dry. It's good question. This is the drive to the clothes on Bluebird radio. All right, TIKTOK's everybody. TIKTOK. It is just about ten minutes left in today's trading session. Having some fun with our guest in Studio. Jake Dolly, is with US senior investment strategist at B and y mail and investment management. Here in our interactive broker studio, we're since in buying here in the last half hour video.

I gotta say it even caught you off guard, Jake. You walked in here, you looked up at the TV you said, oh my goodness, stocks are up today. What's up with that? I think it's going to be pretty choppy this week. Right. We're all eating for Wednesday. We're all very attentive to you know, what's going to be coming uh, most notably, I think, in the summary of economic projections. Um, that's what we're all, you know, fed watchers, and I think everybody feels like a fed watcher these days. Um,

but we're definitely looking there. I think we're we're going to see a higher mediant on the dot plot. Um. So I think we're we're all waiting for that. But Um, until then I think it's going to be a little bit choppy. It's I think it's interesting that yes, this has been a year of a lot of elatility and here we have the vixed down a little bit today and it's still at like twenty five. It's not like we've seen any big move up to thirty or forty

in particular. Um. Do you think, based on what we get from the Fed, that it will be then potentially a major reset for some of your valuation models? It's definitely possible. Um. I think there there are risks, uh, if the you know so called economic economic pain that Charepal was mentioning at Jackson Hole, if we start to see that in a big way, uh, in the Sep Um, I think that's where we start to see the potential for a rerating higher. Um. I think I wouldn't say that's, AH,

you know, highest likelihood. Um. I think more likely we're gonna see an SP that, Hugh's very close to what the market is currently pricing in, okay, which is coming Um, and then, you know, getting pretty close to four, a little north of four percent by the end of the

year on the Fed funds rate. Um. I think you could see it a negative reaction in the market if we see something that is notably higher than sort of what is being currently priced in, which is, you know, just a little bit above four percent, Um, and then peeking out by mid next year. So the move up that we've seen in yields, particularly on the shorter end

of the yield car. But you know, right now we've got the ten year at three point forty eight, that two year note with three nine four, so just below four percent and off its highs. That we saw a little bit earlier in today's session. You know, we keep talking about, you know, where it where is the high end yields like? Where does it settle down? where the low when it comes to the equity side of things, this move up in yields that we've seen, is it

just volatility or it seeking at a new high level? Yeah, well, if you look historically, what we see is that rates continue to move higher while the Fed is hiking Um, and that's where so much of this uncertainty comes in, is that the market has been continually this year having to increase those expectations of where the terminal rate's gonna sit.

Because how many times have we talked about, okay, it looks like we're settling in exactly Um and right now, you know, I think last time I looked, we're sort of, you know, close to four and a half at the peak for next year. Um, but we'll see if if the SEP comes out with something that is pretty close to that or if they go above it. That's where

I think we get a negative reaction. But on the flip side of that, I think if we see something much lower and we hear from chair pal some confidence that four percent is the right place to kind of do this hike and hold tactic, Um we may see, you know, a bit of a relief rally there, because we're kind of there right. Yeah, exactly how long is the hold if it's a hike and hold strategy from J Powell? That's you know, we wish we would get

some four guidance on that, but we're probably not going to. Um. So I think the Fed is in the position that they know they've done a lot of tightening. They've they've really tightened screws on this economy. So they need to see how the economy holds up and I think so far the jury is still out. But when they look at the labor market, they're just not seeing the kind of slack, the softness that they would expect with so much tightening so far this year. So what what gives there?

Because we're starting to see softness in other areas. I mean, I think Carol today specifically, we've been talking a lot about the housing market. Of the days got earlier today. I mean nine months, like nine month declines for certain indicators for the housing market. Uh. So we're seeing it play out in some places. When do we start to see that play out in the labor market? That's the problem.

The labor market is oftentimes the last thing to move Um, and I think that one of the big debates out there is just that, the fact that the labor market is so unprecedentedly tight right now that you know, trying to forecast when you're going to see that softening. It might be further out, and that's what I was kind of referring to there, is that the Fed, you know, it's probably happy with the financial conditions tightening, but when they look at the labor market, they really haven't seen

sort of the softness that they would have expected. Now, at the same time, they wanted to be gradual, right, they won't. Don't want a very fast, rapid deterioration in labor market conditions. Um. So there's some positives there, UM, you know. But our view is that if you're going

to get sort of the so called softish landing. Um, you need the data to go in the Fed's favor, and relatively quickly, because we don't think that rates can really go much higher than what is currently being priced in without things getting, Um, you know, slowing down, quite significant. When you've got headlines like the tenure. You know, we've talked about three and a half percent, first time since so more than a decade. I mean is that kind of a you know, causes you to to kind of

pause for a moment? Is that? How do you see it in terms of what that potentially means? Yeah, I mean, finding the right level is certainly difficult. And then, and I know that all the brains at the Fed are thinking about this, looking at history, trying to figure out where that right rate is. Um. I guess just to sort of point out one you know level is that if you look at where core pc inflation is, you know, I think the last Peron was about four point six.

So taking the Fed funds rate close to that level is when you start to see, at least by one measure, a positive real fed funds rate. Um. So I think that that's there is, you know, some rational at that level for why they would want to hike and hold. What are the problems created for investors in this environment where we continue to try and figure it out? But to be fair, Um, you know, I keep saying it over and over again, we're coming out of a pandemic.

We're coming out of unprecedented global stimulus. We don't exactly know how this plays out. And here we are talking recession, yet we've got a strong labor market. We would normally not do that. Yeah, it's a very challenging environment. It has been for most of this year. Um. I think, you know, to put an optimistic spin on it, the fact that we are getting the yields that we are now on the fixed income side, it certainly makes the

repetive exactly. The relative attractiveness looks a lot better outcums. Was that it said? Finally, finally, exactly, it's it's a new regime. Um. And, although we are still in an inverted yield curve, so you know, there isn't really that that compensation for moving out the curve, we are seeing much better opportunities relative to equities. Um. And I think you know, even if you believe that a softish landing is,

is kind of potentially going to happen. You have to be very cautious in this type of market because we think that there is still downside risk in equities right now. Swings can happen, but it does make you wonder. Is it an anomaly when we get, you know, put this all of the textbooks, or is it the beginning of some kind of new trend going forward? Um Jake, great to catch up with you. Thanks for having really appreciate it.

Jake Jolly. He's senior investment strategies at B and y mail and investment management here in our interactive brokers studio. Thanks for listening to Bloomberg Business Week. Download the podcast on Itunes, soundcloud or Bloomberg Dot Com, and you can also listen to our radio show at two PM Eastern on Bloomberg radio or watch us on Youtube. Search to Bloomberg Global News.