Bloomberg Businessweek Weekend - June 9th, 2023

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch us live on YouTube.

Hy Everyone. Welcome to the weekend edition of Bloomberg Business Week. I'm Carol Masser with Matt Miller, who is in for Tim Stenovick, who is on lead. Now, one storyline that caught our attention this past week that didn't involve the FED or talk of a recession, or that mega merger between the PGA Tour and Live Golf. Instead, it was about the future of crypto. We're going to have more

Well, I think we talked about that. Yeah, people refer to crypto and they think of a product. Crypto is really a technology. It's blockchain technology, distributed ledger technology that may manifest itself in many products. I believe that ten years from now there will continue to be blockchain based products. I expect the blockchain or some transformative technology like it will come to the traditional financial system and we're going to see that. I think we should be looking to

Dan, I want you to weigh in on what happened this week here.

So I think Jay's points spot on is that, you know, it's a very important technology. Three or four hundred million people are already using it. We just have to establish rules that allow entrepreneurs in the space to build things so that we can keep growing the technology, especially domestically, rather than pushing it offshore.

I mean, there was so much fraud, There is so much pump and dump, There is so much you know, somebody rug poles. Clearly a lot of the coins that we saw ic over the past few years should have been dealt with by the SEC. So I think, you know, even people in the industry are probably happy about that. What is left, dan, you know, aside from blockchain, what else is there that's not a security In terms of tokens.

Well, anytime you have a very disruptive new technology, people try a lot of things. In hindsight, some didn't work right. And if you think back to the dot com boom, there were a lot of ideas that were tried, and I guess we didn't want to buy cans of pet food on the internet, right, But like a lot of other ideas.

Not until where we are now.

You know, now everybody buys literally everything for his pet on the internet exactly.

And that's one of my favorite things. Nobody remembers who the dope was that was majority owner of pets dot com. There's this guy who thought the technology would be really impactful, tried pet food that didn't work. He also tried books, and so Jeff Bezos is doing fine even though he was the majority owner of pets dot com. And that's basically what's happening in the tokens. We're trying a lot of ideas, some like Ethereum, you know, workerly well and some just didn't work well well.

When it comes to the regulatory framework work, Jay, do we can we compare what's going on in blockchain and crypto to the dot com era? Is it apples to apples or not? Necessarily?

I think different. I think it rhymes. I think it right?

You do?

I do?

I do.

We talked a little about this before. Ye Look at the stable coin. I see the stable coins that were truly stable, truly backed. Look look at the uptake in that and the efficiencies that that created. Now, if we can have that kind of retail dollar, you know, basically digital dollar, right, people talk, that's what a stable coin, a truly well functioning, well structured, well regulated stable coin is a digital dollar. The power of that versus the power of caloring cash. Think about it.

It's fantastic, but it still is like pulling teeth getting tether to properly report you know, everything that it holds. Disclosure is key, isn't it, Dan? Why don't people just come up with it?

It is?

And obviously I can't speak why Teather doesn't do that, but USDC that's done by Circle and coinbase incredibly transparent, incredibly stable back by you know, very short term high quality treasury debt. That is something you can really see what it is. And you know, frankly, it's a lot more transparent than a bank is. I have no idea what my bank's actually doing with my money.

We learned that this year, right, I mean a lot of people didn't realize we're gonna.

Let ja come in on that.

No, no to me.

And and the Matt's point. Look, regulation has to have all the key elements. It has to have investor protection. We learned that, right. It has to have prudential regulation, you know, for this for the system, it has to have that, and also has to have aml KYC, you know, the law enforcement, illicit activity to terrens. You've got to get those things right. But you can get those things right and still have innovation.

By the way, that's another thing that's come out this year, Not that it's surprised anybody, but the number of crypto firms were like instructing clients how to use vpms in order to essentially cheat the system.

Right.

Does that happen on in traditional finance on Wall Street as well? Or have they learned their lesson not to mess with the SEC in that way.

I think in most if I hope all, I'm going to say most retail products, activity like that is non existent or aggressively and effectively deterred.

You were laughing.

No, I appreciate that. You know, anybody that's committing a crime or fraud should be hammered right like that. I agree with that.

But I will say, you know, our markets, one of the areas where we have the most difficulty as regulators is activity that takes place offshore that affects our markets. That is, that is one of the more difficult places. And I'll tell you that. When I was at the SEC, you know, trades came in in large batches from offshore. Large batch trades make it difficult to detect elicit activity.

We can kind of wonder after you left.

Over the last few years, every time I interviewed Sam Bankman Freed, I was like, why is this effective altruist in the Bahamas? Is it just that he likes the Sun. Is he just a beach guy at heart? You know, he didn't seem like.

A beach guy.

What I'm curious is, when you look back at your time at the SEC, is there something that you wish you had done more of when it comes to crypto and blockchain.

Well, look, anytime you look back, I mean, you know, you look back at this interview, you're going say, gosh, I wish I asked him that. So when you look back, you always that's human behavior.

But did you look back is there something you thought you wish you had done?

Oh?

Sure, sure. Look I do think that a safe place for this innovation is stable coin, and I wish that we had worked together across the federal financial regulators to give a clear indication of what is a very safe, well regulated stable coin that touches all those touches, all those places, investor protection, stability, a MLKYC, deterrens of illicit activity. I think that's doable, and I wish we'd done it.

So it's great that we're getting some regulatory clarity here, even if it's not the kind of clarity that everybody would.

Have won it.

Uh, Are we though killing the industry in this country? Dan, I mean, is it a problem that you know, we're going to talk about battery technology a little bit later on and how US regulation basically destroyed our chances of leading in that technology and now China owns it, right car batteries, electric car batteries.

Are we doing the same thing right now?

To crypto, Well, there has been a you know, very pronounced movement to have crypto companies based outside the United States, and so I think it is it is different than the way the US treated the Internet itself, where all the large internet companies based in the US.

So that's a that's a bad thing, I mean, because that is like what San Francisco's all about.

Now.

Well, and I'm going to go back to go ahead.

No, and look, we have a couple of recent data points and they're just recent data points, but foreign governments are using the blockchain to issue sovereign debt as a test case. And if they're doing that, they're thinking, you know, have do we have an efficiency assisting technology and enhancing technology here? And you're seeing government support that question, support the answer to that question.

I think we ought to be doing that too, you know, seeing it now today.

With AI as well well, we kicked off the conversation today. I was saying, you know, let's look at climate and what's going on, and you said, like, we need to have global cooperation in order for anything to be productive and get done.

Correct.

Yes, And it's the same thing with crypto and blockchain. Why are you worry about the climate, Carol, because I'm going to be living in the metaverse where.

Because we are.

When we go outside in New York City, ten percent of all you know, the United States financial activity happens like it's a big problem for the economy and for my daughter.

Real quickly, because we only have about a minute left, thirty seconds on how you see the market, the broader market environment right now, there's mixed data.

Yeah, so I still think that, you know, rates have to be high for longer than most people think. There's no working age person that's traded in a rising rate environment, and so we all keep thinking, oh, it's just by the dip, by the dip, and there was a forty two year Yeah, there's a forty two year pool market and rates. There might be a you know, four or five year bear market rates, and it might impact intertrate

Saved you twenty five seconds outlook, broad Macro.

We continue to be surprised to the upside, and we could and we should ask ourselves why.

That was Former SEC chairman Jay Clayton, along with Panteric Capitals Dan moorehead with me and Matt Miller. Coming up, will hear from another event participant who offered a stark assessment of current market conditions. PGM CEO David Hunt is coming up next. You're listening to Bloomberg Business Week. This is Bloomberg.

You're listening to the Bloomberg Business Week Podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business app and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.

Well, the once hot Wall Street trades of twenty twenty three are all falling apart in a fresh blow to market pros blind sided again and again ever since the pandemic broke out nearly halfway into the year, a slew of consensus bets are losing big time as the US economy defies the recession bears, the artificial intelligence craze heating up, and more so, for all you naysayers on tech, the US dollar, and for those talking up emerging markets in China,

Secure right now is pretty interesting because well, for two reasons. Number one, we didn't know how safe a lot of assets were for a moment, and number two, they're actually offering us some yield for the first time in like a decade. So what's your take on the safe and secure assets?

Well, and Matt, I think that is one of the things that's the most different about today's investing environment versus a couple of years ago. I mean, you now do have secure sources of cash where you can earn a real yield nominally actually very attractive and even a positive positive real piece so it's makes a very different backdrop to a lot of fixed income investments and obviously a

Yeah, I think the OECD is out with a report talking about the same thing, that we're in for a prolonged period of lower growth, higher inflation. We've heard the same thing from a number of gigantic fund managers. For example, the Norwegian Sovereign Wealth Fund CEO Nikolai Tangen came out and said that at the end of last year that we're in for a prolonged period of lower returns.

Do you think that's true? As well lower returns.

So lower returns is a very different idea because actually, with higher rates, a good deal of assets are actually returning better. I do think that when we hit a period where it looks like the FED has kind of maxed out and people begin to believe that they're going to move down, you're going to see an enormous amount of that money that has gone into money market funds come back into public fixed income, and a lot of those investments are going to be yielding quite attractive returns.

I'm looking at the money market fund assets on the Bloomery terminal, and MFA index is something I love to pull up five point.

Four trillion dollars.

Still, I find it hard to believe that money would pour into two stocks, for example, right now, when you can get so much in safe or near as damn it to safe investments, right why would investors go into stocks. How much higher could we go on this market with all of the headwinds we're looking at.

So I think that there's a very good reason why so much money has moved in money market funds, most recently because of the little banking blips that we had where basically a lot of money came out of regional lenders.

The second and third biggest bank failures in US history.

It went to some of the very larger banks into their deposits, but it also really went into money market funds. And ultimately, I don't think that money necessarily comes back into stocks, but I do think it comes back into into fixed income at very higher rates, and that I think is going to, you know, be a very attractive move, which we'll see only when people are convinced that the FED has has kind of maxed out.

We saw a surprise hike from the Bank of Canada, and usually the Bank of Canada isn't kind of front and center in my on my dashboard, but they do tend to make moves before the FED rather than following as a lot of other central banks do. And the fact that you know, we expected them to hold and they raise rates, I think it's very interesting because that's kind of the outlier take on the FED right now.

How do you look at the FED right now?

Yeah, we've you know, kind of fallen in line with the market term of the the hawkish pause, which I think is a kind of an interesting phrase, but I think it does kind of reflect a belief that the FED may want to have a little bit more data before they move. But Ben, we certainly think that either at one of the next two meetings that they will kind of have one more left in them just one more, yeah,

So you want to take the other side of that trade out.

A listener who wrote in and was asking, you know, how do you invest in this market? Trade uncomfortably long and then really what is the moment that you can put a stake in the ground and have conviction?

And I guess and that trade at least you are doing it now.

Yes, But I think obviously for any investor, it depends on your risk tolerances and your time Horizon's a whole sorts of different things. I think as a as a market overall, when you're going to see money moving out of the money market funds is when there is belief that the FED has peaked and is now basically started a decline, and that's when that that that kind of big move will will happen.

But how long do you expect the pause to last.

And surely I'm saying, I think the pause is going to be longer than what the market is priced in for now for sure.

And so we have to wait till what four you've been doing.

The next year. We could easily be into next year before we really we really see that.

Yeah, what do you think, David about the earnings picture we had? Everyone comes on the program and says, hey, first quarter earnings weren't bad, but they weren't great, you know, and we're not expecting them to be fantastic in Q two either, And then we get into the second half where that's where people have their recession forecast, right, So what do you expect from American companies?

So we would we would say that that the that the earnings outlook will begin to gradually come down. You always see the expectation game being set now, even with the earnings that came in, which maybe we were fine ish and for some companies maybe better than expected. Even for those companies, they were managing expectations for the rest

That was PGM CEO David Hunt with my co host Matt Miller on the sidelines of this year's Bloomberg invest Summit. For more on the event, head over to Bloomberg Live dot com. Still ahead, on Bloomberg BusinessWeek, our magazine team pulls back the curtain on a Depression era relic that is helping to prop up big banks instead of the American home buyers it was designed to serve.

It's sort of a publicly subsidized private institution. It's a financial cooperative. So all the banks who are members pay into it a little bit with stock and then they raise money in the debt market with bonds.

But tax free sorry, tax free bonds, right, yeah.

Yeah, there's a lot of tax benefits. There's a lot of government benefits for a system that really should probably be private.

You go inside the one and a half trillion dollar federal home loan bank system. On the other side, this is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch us live on YouTube.

Reports this week that US regulators may look to force bigger banks to lift their capital requirements by an average of twenty percent to help shore up the system following this year's regional banking crisis. Meantime, another American institution that was born out of a far different financial disaster is

Earlier this year, many of us watched the kind of chaos and collapse of Silicon Valley silver gates Signature, and as information about their financial health started kind of trickling out in the autopsy, it became clear that they all had tens of billions of loans from these federal home loan banks, and so we were left kind of scratching our heads, thinking, well, what are these things? I mean, has federal in the name and has home lending in

So how do I get hold of one of these loans? I mean, it's believable, right, you just have to be a bank. I mean, like like these these these banks that were more focused on crypto, like Silvergate and Signature, they had billions of dollars from FHLB, and of the one and a half trillion, it doesn't seem like very much at all goes to actual, you know, helping low income people finance home purchases.

Right, So with the crypto related banks. There's kind of a weird system that they have. So when you join one of these banks, if you do a certain amount of home lending or even buy a certain amount of mortgage backed securities, you can be a member, but they don't keep tabs on that over the years, So when Silvergate kind of got out of mortgage lending, they remained a member, and even though they were doing virtually no home lending, just borrowed and borrowed and borrowed, and there's

Right, So in other words, when these banks start to go into trouble, right, they can kind of tap into this and at the same time, and I think something that certainly got into our craw is that this whole idea that executives were getting their bonuses right and being paid out while these bones, while these banks were tapping into this program.

Yeah, we should point out the CEO of the San Francisco FHLB got what two and a half million dollars in pay and bonuses last year when I guess she was giving all of this money to SVB First Republic Silvergate.

Is that going to get clawed back?

No, it's not. And they are definitely incentivized to grow their membership and to give bigger loans and all of that is tied directly to their bonuses.

But Heather, who is it, Congress that's incentivizing them? You know who's behind this.

Well, I mean it was created in the nineteen thirties. It's it's sort of a publicly subsidized private institution. It's a financial cooperative. So all the banks who are members pay into it a little bit with stock and then they raise money in the debt market with bonds.

But tax free.

Yes, there's a lot of tax benefits. There's a lot of government benefits for a system that really should probably be private.

I guess one of the things I want to ask, and it's not just your Silicon Valley banks, right or signature excuse me that tapped into it. Signature specifically big banks tap into it as well, correct, Yeah.

JP Morgan Wells. All of these banks that have kind of scaled back on home lending use it as a way to get cheap money and kind of arbitrage or you know, do financial management depending on which deposits are coming out and when they need money, and these things have a lot of other sources of cheap funding, so it doesn't seem like it's something that would be mandatory or necessary for them.

Heather, what are the rules in terms of being able to tap into this, because it sounds like within your reporting to that there were some questionable financial institutions that maybe shouldn't have been tapping into it.

But were the rules are? They basically look at the collateral you cledch. So once you become a member, which again just requires a kind of minimum amount of home lending, you're in sort of for life because there's so many giant insurance companies which back in the day were hugely important to the mortgage market and now do virtually no home lending. So it's sort of like a private club.

Ask you what, which is a problem if that collateral turns out to not be so right right exactly.

I mean, we had the second and third biggest bestest failures in history. And you talk tether to or you got to quote from Elliott Sloan, who's a spokesperson for the San Francisco FHLB. Elliott says the level of advances to a member is based on a careful, thoughtful and conservative underwriting approach, which doesn't seem to be borne out by the results. And by the way, do they care at all if it has anything to do with helping lower income people buy houses?

Not really, especially when it comes to emergency funding. Silicon Valley Bank was asked to pledge forty five or forty six billion dollars in collateral for those fifteen billion in loans. So anybody looking at back and see they knew the financial health of that institution wasn't so great. I mean, there's a lot of collateral for the loan.

You're getting.

What's crazy is and you including your story that the lion's share of US home loans are now issued by non banks such as a Rocket Mortgage right and they cannot tap the FHLB system. So that is just another mind blowing thing. Part of me thinks they get away from it because, as you also point out, this assistance from the government doesn't appear as a line in the US budget, so there's no real congressional what oversight.

Right, I mean, they exist in this kind of limbo. It's definitely a little bit of a congressional gray area, and I think that that has benefited them greatly over the years. It's sort of like fight club, right, Like nobody wants to talk about it, and nobody wants to nobody wants anything to change because there's so many people. Big banks, small banks, the executive insurance companies is just benefiting too many people for them to just take it away.

But not.

Yeah, well the housing market too. I mean, that's a huge problem, and a lot of housing advocates want to see that number, that ten percent that they get increase to at least twenty, but that would still be really a sliver.

We have to blame George hw maybe Herbert Hoover.

Okay, you have to go back.

You did talk to one independent director on the board of Boston's FHLB, Cornelius Hurley. It doesn't seem like he serves on the board anymore. He was there for fourteen years, but he said it's embarrassing that this is a public entity, and we should be demanding more from them. Do you expect that we're going to hear more about this, Heather, you know, from board members or from Congress in the coming weeks and months.

I think so. There's a Senator Cortes Masso is very passionate about this subject. She is a bill in there trying to bring the number dedicated to the affordable housing program much higher. There are other people looking at this, and the SGHFA, who regulates all of these banks is doing one hundred year review and giving their recommendations to Congress. So it certainly seems like all of the dirt that was kicked up earlier this year is going to come to a head at some point.

And you know what, a bank can actually tap, right, Heather, more than one FHLB exactly.

And they like to say that that's not becoming that's not a problem the way it used to be. But you can look at the books and see that while Fargo and Morgan belong to more than one even now, so they may not be playing them against each other to get better terms as much as they used to. Really do compete for business a little bit.

That was Bloomberg New Senior Wealth reporter, Heather Pearlberg. You're listening to Bloomberg Business Week. Up next, we dig into another story in the new issue about unlikely alliances between political and energy industry foes who are seeing costly new projects held by mountains of red tape.

Some of the projects we've written about, it can take seventeen years and they're still not steel in the ground. And what that does is it costs companies billions of dollars. You know, it slows down the energy transition and the fight against climate change that we're trying to get going with all the Queen energy. Just a really inefficient bureaucratic way that it's set up right now.

The push for permitting reform. Explain this is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business App and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa, play Bloomberg eleven thirty.

Here in the US, the most elusive piece of any new energy project is it materials such as copper, steel, labor, or even capital. It's a permit. Without the right approvals, nothing gets built. And that's why unlikely alliances are coming together. The renewables and fossil fuel industries, and Democrats and Republicans in Washington are uniting in their push to streamline the country's thicket of regulations. Who to Thunk? You can find this story in the economic section of the new issue

Permitting system in the US is so is so old and so complicated that to build, for example, a transmission line that's going to carry clean power across the US. To build a new gas pipeline, to build a new solar farm that's going to create that kind of clean electricity that we want, can take years, can take ten years. Some of the projects we've written about, it can take seventeen years and there's still not steel in the ground. And what that does is it costs companies billions of dollars.

So there's a sign in this story that Bloomberg has covered before, but it was a reminder of just how hellish this can look like. There's this five I have one hundred mile long sun zea Southwest transmission projects. How bad can this permitting stuff get?

Josh, it really bad that the sun zeal Line, which is going to carry clean power, solar solar power from big solar fields in New Mexico to the Phoenix area. And that's important if you care about climate change, for the idea that we'll be displacing you know, natural gas fired plants in the Phoenix area with electrons created by the sun that will be blowing from New Mexico. But in order to do that, you have to build a power line to carry them, to carry them, to carry them,

Hey, Josh, can we talk pizza?

Yes?

I love, thank you, I want. I'm surprised we got this far. In the conversation, one of the energy analysts we spoke to had a fun analogy, and this gets to the idea that, yes, there are strange bedfellows both Republicans, Democrats, oil, oil and gas, solar and wind folks all want to reform the system. But an energy analyst had a good point, which is that yet, in a broad sense, everyone wants reform of the system. They all want, Hey, yeah, let's

That was Bloomberg News Energy reporter Josh Saul along with Joe Weber, who's sticking around for our next segment, and that wraps up our first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio Head. In our next hour, our cover story on the United States long torture journey to mass produce batteries for electric vehicles.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube.

I'm Carol Masser Matt Miller Fillian for Tim This week plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, including insights on what to do when money and love converge, with life's biggest decisions before you. Plus we speak with the founder of Connecticut based BlackBridge Motors, which transforms vintage vehicles into finely engineered works of art

I wanted to profile this guy named Mujib Jazz, who is the entrepreneur who's trying to build an American battery company now here in Michigan. And he's actually a veteran of A one two three. And as I dug into the story, I learned the story of A one two three, which, as Joel mentioned, this was a company that had a brief moment. You know, think back to twenty eleven, twenty twelve,

Well, let's let's go there, Like how did we get there? Like if you had to point your finger at maybe one or two things. How is it that we kind of screwed this up?

I think the biggest thing is that we did not value manufacturing. And I say this as someone who a reporter who worked in New York for a long time and moved to Detroit four years ago and has been covering the auto industry. We for many, for many decades, our idea of economic growth was we don't need manufacturing. We should just outsource it. It's a commodity, and you know, we can just we can just write apps or work at Walmart or in the service industry or whatever, and

Part of the process.

So what we thought was a commodity is actually really valuable. And we are learning that the hard way now and then you know the open up. The story is this very symbolic moment that you know, Ford Voter Company is building a new, brand new battery factory right here in Michigan.

That's part of their success.

It's not all subsidies. The chairman, Lob and Zung is obviously like a very smart guy and he's built something great. But the crazy thing is that the technology that Sport

I want to just quickly ask you about cattle or c at L. I was in Detroit a couple of weeks ago, last week, was it?

Last week?

Was talking to people at the Ford Motor Company about this, And I know that some on the right, including the governor of Virginia, have called this kind of a trojan horse because they have gone to Michigan the Chinese to help Ford set up this plant, and the Chinese are going to stay there as advisors on the on the project, right, is there any concern that it is kind of a trojan horse operation or is this just kind of political theater?

Yeah?

I think that's a fabulous question, Matt, And like most things in life, there's a lot of nuances in that question. It's not black and white. So do I think c ATL has anything but the intentions of trying to grow their business.

No.

I mean, these guys have a lot of capacity in China and they need to find places to fill it outside China, and so their fight that they can do that with Ford. I also don't think that just like any supplier, you don't always I mean, you don't want to get you tried. Just like think about the irony

So what you're talking about, Gaby is ultimately, you know, America's innovation machine, and that has been the thing that has gotten us.

Where we are.

And yet there what you're ultimately talking about here is the lack of an industrial policy, right, America has no industrial policy. I'm curious when you talk to some of the folks that are quoted in the story, what kind of insights did they have to say about what that could even look like here.

You know, I think that's a great question, and I think it's a hard question. And you know, that's certainly a question for economists and people in government, and you know, I think that they still want to people still want to see uh, they want you know, private capital, capitalbly capital. There want to be some competition here that the best can survive. You know, But I think a little bit of runway, you know. I think if you look at you know what, then what the bidominstration is trying to

We are already doing this, right, we are.

First of all, the Department of Defense does it already, okay, and the Department of Energy does it because all the time they are giving loans and seating new startups and technologies, and that is also part of what the Bidminstration has been doing. But the thing is they give them money for to get it out of the labs. But then when it comes to the hard work of like building something, that's when you're supposed to go to the private market.

Like a hot potato.

You know, if you believe something is strategic, then you need to treat it like it's strategic. And I think I think one of the other big risks to us is that you know, the US every four years or every years, we have this major pendulum switch switch in our swing and our policy. Right, we don't say the course. We're inconsistent. We're not long term, We're short term.

And that was.

Bloomberg News Auto reporter Gabrielle Coppola and Bloomberg BusinessWeek editor Joe Weber on this week's cover story. You are listening to Bloomberg Business Week. Still ahead, We'll stay on the road and hear from the head of a company that aims to create one of a kind luxury vehicles that bridge the gap between today's performance demands and classic designs, the founder of BlackBridge Motors on how the process works and how much it'll cost you. This is Bloomberg.

You're listening to the Bloomberg Business Week Podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station just Say Alexa Play. Bloomberg eleven thirty.

News noting last month the rejected size of the collectible car market in the US eighteen point seven billion dollars, growth and value of classic vehicles as an asset class last year twenty five percent, and the average age of buyers on the collectible car auction platform forty four. I mean, who doesn't love a classic car from any era? But hmm, without today's technological bells and whistles and high performance systems. If we could only do something to change that. Enter

So we started a couple of years ago with the sole focus, and I think about point he had a lot of great issues that we had really tried to solve day one. It was really about taking this iconic, esthetically appealing platform. Now, we all liked the look of these older cars and we wanted to engineer out a lot of the old car problem. So everything drive line solutions, to electronics, to breaks. All that is modernized and upgraded.

So let's talk about the process and how this works. You guys started, I think with defenders, right, yeah, with you a lot of those, yes, so, And you know, something really interesting about the old land Rover defenders is they're impossible to import from overseas. A car has to be twenty five years old before you're allowed to bring it over here, and by that time it's in pretty bad shape in terms of driveability. Right, So how does this work?

Scott?

If I buy an older Defender, like Doug DeMuro has this yellow Defender, you know that looks really cool but is probably very crappy to drive. If he brings you his yellow Defender, can you, you know, put in a new V eight. Can you put in new suspension? Can you put it in disc brakes on all of four wheels? Is that how it works? Yeah?

There's two ways.

If you bring us an existing car where you can upgrade and modernize what you have currently. The other pathway, which is becoming much more common, is to start with a donor vehicle that really is just about transferring title and ownership, and we rebuild you a new car that

The GMV eight is the real game changer there, right, because I don't know what these vehicles came with. They came with like two and a half liter five cylinders, like something horrible that produced a maximum of one hundred and twenty horse power. But you drop in like an LT four from GM, and all of a sudden you're looking at five hundred horsepower and a Defender.

Correct And you have to remember these cars, you know, the Defender one tens are almost six thousand pounds. So while it sounds like a lot of power. Really, the reason behind integrating that solution starts with reliability and safety, and yes, do you get a performance increase, absolutely, but

All right, So, Scott, I'm gonna sound like the wife of someone who's really into cars because I am one. And how much is all this cost to do? Like a conversion?

So most if you're starting from scratch, the average price point is any over to two hundred and two hundred and fifty thousand, and it can go up from there if you choose some you know, really expensive leathers in creature conference. But for the most part it's a it's about a two hundred thousand dollars option. But when you compare them toward to newer luxury vehicles, you know things

We're on radio obviously, but for those who are watching on YouTube and Bloomberg Originals so you can see some of the work that Black Rage Motors does. Supply chain. I'm curious about this and getting pieces because again husband has a vintage car. Getting the pieces, like the supply chains, that alone is like, you know, when he gets something, he feels like he's won the jackpot. How difficult is it, are you guys easy to get the pieces?

Well, it's it's been challenging, and I think you know, a lot of what we did smart early on was you know, recognized that this wasn't going to get better anytime soon, and you know, you start to place larger orders recognizing that there's going to be fractional fills. So it's been challenging. It's really been an exercise in inventory management and proper ordering and you know, at the end

It seems like your business is growing pretty rapidly though. I've been lurking on the website for a couple years now, and I see, you know, the banners pop up every time I log into a website from another company, your banners pop up there.

So your marketing is great. You have land.

Cruisers also, you have the Ford Broncos, the classic ones that you do, and that now I see you are offering a Mustang product as well as a Corvette.

And we've tried over the years to really invest in R and D and recognize that as tastes change, as you know, what's the new hot car changes. We didn't want to be parked into one specific make and model. We wanted to be solutions based. So our company provides solutions for classic events if vehicles, and we offer a variety of different makes and models, and in Greate a

What's your story, Scott, How'd you get into this?

So?

I was I previously was in a totally different career as in finance before this, and I made the decision to leave and get into cars for a variety of reasons, but it was really rooted in just a natural recognition that a lot of car based companies don't put the customer first, and it was something that I learned very quickly in finance. If you don't do that, it's just a matter of time and so you have to find

What's the industry like? You know, there have been others in the past. I think about Singer, right, they do this with Porsche's Icon also has done kind of the SUVs out on the West coast. Are you facing more and more competition?

I'd say recently, yeah, there's a lot of you know, players popping up and recognizing I think the value in the space. So you know, i'd say there is definitely more entrance into the space than we're certainly five or six years ago. I think you're starting to see demand grow in a variety of different ways, which is a good thing. And you know that leads to providers, you know, coming online and providing some good solutions and just natural competition.

Do you guys do any EV conversions?

So we have the engineering done. The one thing that we always run into is, you know, parts of availability is very very challenging. You're fighting some very large companies that are obviously very well funded, that are fighting for battery technology and just simple parts. So it is an

That was Scott Gilbert, founder and lead designer BlackBridge Motors in Norwalk, Connecticut. He joined me in a giddy Matt Miller still to come on Bloomberg BusinessWeek while buying a quarter million dollar luxury vehicle. Maybe a big decision for a select few. Most of us are faced with far more pressing choices on a regular basis.

The conventional wisdom is that you should separate career decisions financial decisions, make those with your head, from love decisions relationship decisions. Just follow your heart. And the reason that I found those decisions so difficult is, as my scribed in her class, that money and love decisions are inextricably linked.

We lay out an intelligent roadmap to help make those decisions. When we come back. This is Bloomberg.

You're listening to the Bloomberg Business Week Podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube.

So, Matt, I bet you've made some pretty big decisions in your life.

Oh, there's a pretty big mistakes.

I have made a lot of mistakes in my romantic life that bled over into my financial life in a negative way. Really for years and years, as soon as a woman even said hi to me back, I would say, do you want to move in with me?

And it never worked out. Well, that is.

Matt in a nutshell, that really is. But needless to say, he's moved along and he's in a much much better place. This brings us to our next two guests, who are the authors of a book, Money and Love, an intelligent roadmap for life biggest decisions. And with this is Myra Strober, labor economists at Stanford University here in studio along with Abby Davison, social innovation leader. Let me kick it off

Well, I've been teaching a course, first at Berkeley and then at Stanford for gosh, close to fifty years on work and family. And Abby was a student of mine in two thousand and eight, along with the man that she married. Her was her husband. They were not even engaged then, but they both took the class, and I asked them to come back and speak once they had children of their own and were in the thick of

Let's do it.

No, no, no, She wanted me to be accountable to somebody. And I looked at her and I thought, no, I need a co author. So even though our book tells people not to make decisions on the spot, I made a decision right there and then to ask her to be my co author.

I love it and she accepted.

And this book, the course material which I took now fifteen years ago, totally changed my life. It was a light bulb moment for me because the conventional wisdom is that you should separate career decisions financial decision make those with your head, from love decisions, relationship decisions, just follow your heart. And the reason that I found those decisions so difficult is, as Myra described in her class, that money and love decisions are inextricably linked. You cannot separate them.

And look, we could do a sixty minute therapy session.

I mean, I'm sure everybody talks to you guys about this book, talks about his or her own personal experience. So when I hear you say that, I realized that, you know, all of my relationships that failed in the past typically failed because at first I wanted to go from zero to sixty in like two seconds, and not

But that would have that always ended up being a mistake.

If I had not done those things from the get go, the relationships would have been much healthier, and maybe they wouldn't have lasted, you know, to eternity, but they wouldn't have failed so miserably. So when I was looking through this book last week, I thought, I really wish I had read this book in two thousand and three.

And I'm sure a lot of people tell you that.

Well, the key is, and I don't know if you did this in those failed relationships, but maybe before you offer to subsidize the master's degree, have a conversation about your money experiences.

Growing up, that was always top secret in my family.

Also, my father has never even told my mother about his finances, which are essentially you know, our finances as a family.

In my family, that just.

Wasn't something you spoke about when you were growing up.

Well, you're not alone.

Money is a very taboo topic. And so I think one of the wonderful things that Mara's class did, and what we aim to do in our book is to demystify those conversations, to encourage people to have them before they feel ready, right, And that was one of the things that I had to do with this man who I had only been dating for about a year when we found ourselves in Myra's class.

Did it work?

We've been married for over yea almost fourteen years with two kids.

Well, well, I think this is really relevant. I also think, you know, more and more, I feel like society is changed in a big way, right, women, working, women supporting their families. I mean, my husband and I kind of did a flip where he supported us half the time and then I in the last half of our you know, we're still married, you know, have kind of we just reversed our roles. Having said that, so your heart says, this person's for me, what's the conversation you should then

So before you even get to the conversation with the other person, we talk about a framework, which we call the five c's, And the first see in the framework is clarify, So clarify what it is you're looking for, and you know, don't think about this like choosing a pizza topping. You know, don't think about, oh, I want a little bit of this and a little bit of that. What are your core values? What are you looking for in your own Did you do that with your Well.

We didn't have the framework in the cost. Now we use it actually to make all of our major life decisions, including we both are starting new companies, and so we absolutely did clarify our core values and talk about them with each other.

And then the next step is to communicate those core values to the person you're thinking of spending your life with, or the person you want to help because you love them and they're about to retire and you wonder how they're going to make it.

So wait, so Matt, you love cars, So I'm curious, what's the conversation?

Matt is casts a difficult conversation that I'm having right now with my wife and my financial planner, because I can't afford to continue buying cars and motorcycles at the rate I have Now, I've just had a child and I'm having another one if we want to send them to the coll So yeah, I mean, it's tricky, but it's not the kind of conversation I really want to have because I don't like reality. You know, I'd prefer

Well, they're uncomfortable conversations, there's no doubt about it. And I always think about it as going up to a huge diving board, standing at the top of the diving board, knowing that you've got to jump into that pool or else go down the ladder, and knowing that that diving board is not going to get any shorter in terms of the distance to the water and take the plunge,

Well, but it's too late for me.

And the idea is as you said, you can still use this system in your everyday life even after you're married.

Absolutely, And so I would say, for you, what is it that car or the motorcycles mean to you everything?

Sorry, well no it was everything children. To be honest with you, it's not so much.

Yeah, And so maybe there is a way to incorporate your family into that love. And so one of the questions actually that we encourage people to ask one another early on, is what do you spend reckless amounts of money on? And so that might have been a question that would lead you to say, actually, cars and motorcycles, and that could start a conversation about, Okay, well what is that for you? Oh it's escape, Oh it's excitement, Oh,

Is it similar? Akin to I've have a brother and his wife and like they had like a whiteboard, I forget what you call it, and you basically like put your goals on it together, whether it's financial goals and so on and so forth, and they make sure that they're kind of on the same page about it. But they both contribute to it, and they work towards it. So it's kind of that idea right absolutely.

And it starts as mare mention by being really clear and then communicating with the other person or people, and then it's about being very clear on your choices. So when we are in the throes of a big life decision, we often see the two extremes. We see do I marry this person or break up with them? And the truth is that there are a lot of options in between those two extremes, and we don't always see them

Thanks to Labory economists and Stanford professor Myras Strober and her former student turned co author, social innovation consultant Abbi Davison, pick up their new book, Money and Love and Intelligent Roadmap for Life's Biggest Decisions. By the way, the all important fifth see that we didn't get to in that excerpt, Consequences. Head over to our podcast feed for the entire conversation and more on Matt Miller's personal life. You get to

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa, Play Bloomberg eleven thirty.

Since nineteen eighty five, Delivering Good has distributed over three billion dollars in new clothing, home goods, toys, furniture, books, and other consumer products through its network of more than eight hundred community partners, and they send it to at risk children, families, and individuals. Group does it by uniting retailers, manufacturers, foundations, and individuals with an update on the work they are doing and with a post check on the retail sector.

It's a difficult time for many people, both in the industry and outside of the industry, and I think we have the great fortune of having some very committed brand partners that support the work of Delivering Good, and that allows us to keep doing the important work we're doing. And I think, you know, the reality is the need is as great as ever right now, so we continue to rely on them and have great appreciation for their support of our work.

It does seem like we have a real bifurcation. I mean, we talked ten years ago about wealth inequality, but the pandemic seems to have worsened that. Right The higher income consumer is still able to spend and as a fat bank account, whereas the lower income American is having to put things on credit card if they even have that kind of access.

What kind of.

What kind of economic situation Jaron are you seeing right now?

Michael, course, well, in North America specifically, I mean, the climate is definitely the consumer sentiment is a little tough right now. It feels We're feeling it in all of our businesses, and it's not just exclusive to Michael Core's industrywide. So listen, you know, the economic situation, recession looming, Consumers are nervous. We're lapping COVID spend of last year, so we're compared to last year and that was post COVID spend.

By the way, I'm curious because you know, retail and in general the consumer is affected broadly by the economy, but I wonder in fashion, if there's something that's hot, you know, if there's something that's new and completely different, does that change the picture a little bit?

It does it incentivized? I mean, we're, you know, in fashion industry, we don't sell anything that anybody needs, So creating the demand is a big is a big motivator. And for sure we're seeing in our business that something that's new and it's innovative and really fashion customers abiding at that.

So is there anything like that? I mean when.

I don't know because I don't hang around in that world too often. But if all of a sudden, you know, we go from dark blue, heavy denim to acid wash ripped jeans, does everybody have to go out and change? Is there something like that right now in fashion?

I don't think so.

That's Delivering Good President and CEO Matt Fasciano and group president of retail at Michael Cores. Jarrenbloom She is also a Delivering Good board member. That full interview on our podcast feed, and that wraps up the weekend edition of Bloomberg Business Week from Bloomberg Radio. Thank you so much for joining us. Be sure to tune into Bloomberg Business Week Monday through Fridays starting at three pm Wall Street Time on Bloomberg Radio and on Series XM Channel one. Nineteen.