Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business Weekdaily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus global business finance and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenebeck on Bloomberg Radio.
We're going to stay tim on the US economy.
We're going to broaden out as well, especially when it comes to geopolitics and the global economy, something we talked about with our Stu Paul yesterday.
We got a great voice to do this, Doctor Adam Posen joins US, President of the Peterson Institute for International Economics, joining us this afternoon from Washington, DC. Before we broaden out, doctor Posen, want to talk about the US economy coming off of that inflation print that we just talked about with Mike McKee. Where do you see the US economy?
Well, thank you for having me back, Tim, and I agree with a lot of what Mike said about what was under the hood. But the main thing I think your investor listeners should be thinking about is that if your plus or minus zero point one zero point two from expectation on any given months print. It's not worth real information. I mean, nobody has their expectations that precise.
So you have to look at the bigger stories. And to me, the bigger stories in the US are that we have a labor market that isn't cratering as people used to worry about, that has solid retention of employment, not huge employment growth, but solid retention. We have potentially some very stimulative fiscal policies coming down the pike in that the Republican majorities in the Congress may give President Trump checks to hand out ahead of the midterm elections
in November. They may, I hope they will restore some of the funding for Obamacare insurance subsidies that we're taken out in last year's bill. And we've got in the end a bunch of things on the tara front and even more so on the anti migration front that are percolating through the economy. And people were premature to say, oh, it all must have happened by now, or it won't happen. That's not right. It takes time for businesses and households and migrants to make decisions. So I'm with Mike, I'm
with a lot of people. I think the pricing of three FED cuts this year is much too many.
So this explains, or I'm assuming this kind of explains, doctor Posen, that you and Lazard CEO Peter Orzag of course, formerly director of the Office of Management and Budget and director of the CBO. You guys put out a column in January that the Fed's two percent inflation target could be totally left in the dust. You think inflation could quote surprise to the upside, potentially exceeding four percent sent
by the end of twenty twenty six. Is it because of what you just laid out in terms of you know, tax cuts, federal government spending.
These are things that are going to be stimulative.
Stimulation carols exactly and Peter and I And I was glad to co author with Peter because he knows the fiscal stuff. So if he and I agree that these are real likely risks to more stimulus out of fiscal I'm willing to buy it or willing to sell it.
Actually.
But I think the other things that we're talking about is the lagged effect of tariffs and anti migration. I wrote about this in a column for Business Week magazine earlier this month. I think we're talking about in Peter points too from his Purchaselizard, various corporate CEOs I at Amazon, and or the beige books from the FED that say companies are only just now passing through some of these adjustments.
I think there's also just the bottom line that the labor market, it is more solid, and so if we get any inflation, it's in a more tidy economy. And then finally, whether or not we get into the new leadership at the FED. After all the attacks on the FED over the last year since President Trump came back into office, you have to be a little more worried that the FED will not react quickly if there is inflation, and that to some degree becomes self fulfilling. So I
think there's a lot of things going on now. It could be a recession. It could be that the migrants really haven't left yet. They could be that the government breaks down and doesn't pass these stimulus, in which case inflation won't be that high. But I think each of these is pretty darn likely, and cumulatively they get you up to high inflation by end of the year.
Well, you mentioned the FED, so I want to go there then, and then I want to do some demographic stuff because there's a lot of questions about what the economy looks like in the next few years with the decline and immigration. On the FED, you said if the FED is less react moving forward. Is that a result you think of Kevin Walsh being nominated as Chair of the FED?
I think it's a result of the desires expressed so strongly by President Trump and by Secretary Dissent, and by not just Kevin worsh to the nominee, but all the shortlisted people who would be FED Chair in favor of loosening policy quite a bit, and doing so in the face of data which the vast majority of the Federal Open Market Committee has publicly said leads them to want to pause. I think should give people pause. So I think there is a real issue there. I think there's
also genuine debate to be had. Nominee Warsh, Governor Waller and others have said that some of these tariff and other effects are one time shocks are not going to be passed on We'll see that would be very unusual. But maybe they've also said or started to say that productivity growth will bail us out, we'll be able to have more growth with less inflation. That's more plausible to me. But even there that's by no means for sure. There was a nice piece by Jason Furman and the Wall
Street Journal discussing this. The angle I would take is, just as Governor Waller or Kevin worsh says, with the tariffs, you get a real income shock, in this case positive from AI. It's indeterminate ahead of time, to use a fancy word, how much of that shows up as income and how much of that shows up as price disinflation.
And my reading of the historical evidence is when you get a new technology, most of the disinflation stuff comes with a lag, because that only comes when companies start restructuring, changing their workforces, figure out how to use this stuff. Whereas some of the income growth, the productivity growth you get upfront just because we've all got a new toy. So I think there's room for me to be plenty wrong. But I think we're going to end up pretty high inflation fed that's behind the curve.
So is that the biggest realistic risk to the US economy. I wanted to insert that word realistic because I think we talk about risks all the time, and there's a list, you know, as long as my arm and then some. But I'm just curious. Is it higher inflation? Is a higher interest rates? Is it demographics and older population folks not having babies. Is it less immigration? Is it rising debt?
Is it China? US tech? What do you think is the biggest realistic risk to the US economy, maybe to the global economy.
Yeah, well, thank you for putting it that with, Carol. I would sort the risks by two categories, the realistic and unrealistic, as you said, but then at what time frame they hit. I think the realistic risk for the US in the next three to twelve months is probably inflation is the biggest risk. And I'm not that worried about a downside unemployment. I'm not that worried about trade wars turning into hot wars with China. I mean, I'm worried about it. It'd be terrible, but I'm not that
worried it's likely. But if we start looking out one two years, then to me, the realistic risk starts to get into some of those demographic issues you and Tim just mentioned, because we are cutting off a lot of
people from the workforce by excluding or deporting migrants. And there's a lot of things that happen, for example, the female labor force participation in prime AH women if you don't have cheap available healthcare and cheap available childcare and the budget doesn't support that out of the federal government, and healthcare is cut back if they don't pass the subsidies for Obamacare, and even if they do, it's still cut back. So those are the things in the next
couple of years. But then when we think beyond that, then you've got a tug of war between the positive impact of AI and the potential for large scale unemployment as people adjust to AI. And there I got to say, not only I, but the economics profession has no clear idea. There are a few people out there a very strong opinions, but there's no consensus and we're still working on that.
What's your best bet there? What's there's no consensus. We don't know what's going to happen. We can't see the future. But what's realistic.
What's realistic is productivity growth stays up as high as it's now starting the trend, maybe even goes a little higher and unemployment shoots up in a couple of years, but doesn't shoot up enormously, and it is disproportionately on younger people, and that you get some decline in labor force participation because people figure out different ways of living their lives, and so the unemployment number understates how many people feel displaced?
Yeah, gosh, a million questions. I want to ask you, when do we are we seeing kind of the fruits of the gaps in wealth playing out globally?
And is it kind of where we are?
It's amazing to me where people point to stock market highs. We've talked about the K shaped economy a lot, but how many conversations I have on a regular basis with so many Americans that just find it difficult and ones that I wouldn't even think so, that are probably in a decent income bracket, but it's just doesn't feel so good.
Now.
I think as economists, you all are anchors. You cover everything, but as economists have got to be a little bit modest that sometimes when people don't feel so good, it's not about the economic numbers. They may say it's about that, but it's about their relative position in life. It's about uncertainty. It's about through an ideological lens. Is their party in power? Not in power? Are their kids? So it's not that people's feelings are unimportant, but obviously not. They can vote,
they can choose. But the connection, and there's very clear data on this, the connection between surveys of how good people feel, how confident people feel, has become much more tenuous in terms of linking it to actual economic outcomes than it used to be. That's interesting what I would say, Carol.
We have to run though yet quickly.
Yeah, no, no, no, sorry, just to just to say that the global situation is similar to the US. There's a lot of youth unemployment in China and in Europe, and that we got to think about.
Just means you want to have you come back real soon, doctor Posen be well, have a great weekend.
Stay with us.
More from Bloomberg Business Week Daily coming up after this.
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Hey, consumer spending on Valentine's Day expected to reach a record twenty nine point one billion dollars according to an annual survey that was released by the National Retail Federation and Prosper Insights and Analytics. Now that amount surpasses the previous record of twenty seven point five billion that was
last year. Shoppers budgeting a record almost two hundred dollars on average for gifts, and increase from one hundred and eighty nine dollars last year and surpassing the previous record of one hundred and ninety six dollars spent in twenty twenty.
So basically, people are going to send two hundred bucks.
Is that how you're talking? Yeah, Okay, that seems like a lot.
It seems like a lot. Like I love, I love, Yeah, but but it's like I don't know. Yeah, it's sweet, Okay, I do love.
Let's ask Christina Stembull.
She's got her CEO of farm Girl Flowers Hates, a firm she built from the ground up. She strapped it starting back in twenty ten, making booquets from her San Francisco apartment. She's in Gig Harbor, Washingtonday at what the company calls the farm Quarters, which I'm guessing is like you know, there's a headquarters.
There's a farm headquarters. This is the farm quarters. Where are you exactly?
Yeah, we're about an hour south of Seattle.
And what's going on there?
Lots of lots of busyness here going on, just like Valentine's DA and Mother's Day. As you know, I've been on here many times with you. Thank you for having me back by the way, but just a lot of busyness, a lot of forecasting, making sure that orders are coming in, we're taking care of our customers. Well, the normal Valentine's Day hubbub.
Well yeah.
What we do know though, is that people think Valentine's Day is the busiest day for you, but it's not. Mother's Day is a busier holiday, right, Yeah.
This is our like warm up to motas. So it's good to have this one. First Mother's Day is about double the size Valentine's Day.
Fir tell us about like kind of what's going on behind the scenes, And I am curious.
We are curious.
Is a ber than last year or you know? No, you are always such a great read on the consumer because I think about things like holidays, is when okay, we can find the money to spend so give us an idea of what the consumer's doing this year, what they're buying, how much they're spending.
Yeah, yeah, it kind of falls in line with what you just said. We are seeing that people are spending a little bit more this year. Orders are up a little bit as well year every year, which we're really happy about.
And they're spending more this year, which is also a great thing.
Valentine' Day has always been kind of a high average order value, high high ticket.
Item holiday for us. Mother's Day tends to be a little bit less.
We get a lot more orders, you know, but people spend a little bit less on their moms unfortunately.
Than their lovers.
What are they buying this year.
Yeah, they're buying. You know, we did survey again.
We hadn't done any surveying of our customers since before COVID, so we did a great survey this year that totally you know, kind of give us more insights.
You know.
Everything's kind of you know, changed a lot since COVID, so we wanted to see if if we were still providing what customers wanted, and we found a lot of the same from before COVID and a.
Little bit different. So it's a thought that counts.
You know, our customers want their loved ones to really think about what they what they like, to know what flower like, their favorite flower like instead of a red rose. We did find, just like before COVID, not many women want true just standard red roses.
Yeah, we don't want it, guys, get the message.
Sorry, most totally. You're so right, Carol. Women want a bright, mixed, beautiful bouquet. So that's what we're giving our customers a lot of options on bright, beautiful bouquets. But since men are the consumer for this holiday, we also have to keep them happy. We found this many many years ago, over a decade ago, you know, when I was just kind of stumped with like why the senders were not happy,
but the recipients were. And so that was the first survey ever did over a decade ago and found that just what women and what men want are very different. So men want a red rose. So we're mixing red roses in with a lot of other flowers to give women they want and men what they want when they order. But the main thing from our survey showed us that women really and you know everyone really, not just women, want their partner to really think about the gifts they're giving.
So if their favorite flower is a renucular, don't send a mixed Okay, send you know the forty stems of beautiful Hanoi rinuculars that we have on our site. So they just don't really want to feel like the person that they're with knows them really well.
What does it mean when there's a Saturday delivery? Like I think about that a lot. Is it better?
Is it easier? Is it harder?
Like?
How do and how do consumers think about it?
Yeah, it's horrible, so you know, I'll just give it two straight. It's really bad. The only day worse is Sunday. So next year is going to be great. So you know, when you're a company our size, which is small, we're
small business. You know, we don't have the buying power that some of the giant companies have that if made consumers think that deliveries happen at you know, eleven pm on a Sunday, even like that doesn't happen for companies outside of those you know, goliaths, companies that you think of with that, So you know, we can't get Sunday deliveries and Saturday deliveries are tough, so not everybody lives in an urban enough place to receive deliveries on Saturdays,
but the senders don't know that necessarily, so you know, we offer Saturday delivery. It's we have it at right now. It's the same price as is during the week, but there's a lot more risk on Saturday. It's that they're not going to make it there in time. So another thing we found in our survey is that this surprised us. Actually, women don't want to get the flowers on Saturday. They want to get them earlier in the week so they
can enjoy them. And on the weekends they have very full schedules, so they don't want to have to like worry that they're sitting on their front porch freezing somewhere. If you're in parts of the United States where it's freezing right now, and the flowers aren't going to look good when they get home. So we found that most
people wanted to get them early. We saw that in the orders too, most people selected Friday for delivery, So now that timings up, so now we're getting the people that might have might have slipped their minds and are ordering for Saturday delivery, but there were always on pins and needles like, oh, you know, it's going to be a higher percent that don't make it in time on a Saturday.
Yeah, the last minute folks out there making the calls right now, Christina. In the past year when we have you on, you've spoken about tariffs because a lot of the what ends up in these bouquets comes from outside of the United States. Just give us an update there and the way that you've shifted your supply chain or not, and how the bottom line has been affected.
Yeah, tariffs are definitely impacting a lot this year in ways that people don't think about.
And I wouldn't have.
Thought about either, So I'm this is no shade on anybody. I wouldn't have thought about this if I didn't have a flower company. But you know, flowers, they cost a lot more in the United States. So you know, all the tariffs on encouraging to bring back manufacturing and agriculture to the United States, it just doesn't have that impact. I understand the intention is there, but the impact isn't that way because what happens are it's not just you know,
the flowers themselves. So like when you're bringing in flowers from Europe or South America.
Which is a tremendous amount.
I think the stat this year is eighty percent of the exports from Columbia came to the United States.
I just saw this morning.
So you know, that's a lot are imported and you pay more for those imported flowers. But for US grown flowers, you have all of the materials to grow those flowers. So the bulb prices have gone up so much, the fertilizers, everything that you're bringing in still to grow them here. And then on top of that, the land, the labor, everything here costs so much more. The insurance, the legals,
you know, everything here in the US costs more. So you know, for instance, a good example, just to kind of break it down and.
Just quickly, yeah, a tulip.
A tulip is you know, three times three to four times more expensive to buy it here in the US. We're still making that choice to buy tulips here here in the US to support the farms that we have that we've worked us for a long time, but we could get them significantly cheaper if we imported them, even with the tariffs. Because of what the farmers here are experiencing.
Yeah, no, you like you really kind of like open a window for us in terms of what it means in terms of farming here in the United States. Happy Valentine's Day, Good luck. I know it's a crazy time for you, but always fun to check in with you. That, of course, is Christina Stembel, founder and CEO of farm Girl Flowers.
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You know what is one of the most read stories on the Bloomberg Anything related to Jeffrey Epstein.
Yeah, yeah, it's.
An interesting story about gloomc Sachs that regards.
Yeah, from a resignation of the top lawyer there to the resignation of one of the most powerful figures in the Middle East. We are all over the fallout from the latest batch of the Epstein files. Todd Gillespie's here. We have Jason Leopold next hour to really tell us what the steady outflow of information has been from these files and potential repercussions moving forward.
All right.
Also, I'm holding this up because this is Bloomberg Markets Magazine. It's a February March issue and it is out. It asked should we be afraid of the big boom in private credit? The asset class is the subject of the latest issue of Bloomberg Markets Magazine. The editor is going to join us in just a few minutes. I do feel like credit, in all its twists and turns, is certainly top of mine for everybody.
Okay, champagne haad of Valentine's Day? That sounds nice, Yeah, all right, could cost you more due to those tariffs. The founder and CEO of one champagne company. Yeah, chocolate covered anything.
No, but they go, you know with oh, I don't know, have you not some pretty one?
Okay, I'm trying to stay on track here, right. This company is suing the Trump administration for what the founder and ceo says is seventy eight thousand dollars she is owed that she spent on tariffs last year.
Well, Supreme Court might remember who's staying.
For that tariffs.
Supreme Court though, Yeah, totally, that's where it's going. All right, lots to come over the next two hours. Do not go anywhere.
First up, though, check on that trading day. Here's Amy Morrison for Charlie Pellett.
All right, thank you, Carol sources telling Bloomberg that SpaceX is pursuing a dual class share structure in its planned IPO this year. A two tier structure would give select shareholders stock with extra voting power, allowing them to dominate decision making, but it would also allow insiders like Elon Musk to maintain control of the company even with a minority stake.
And you're right.
Tamer than expected inflation numbers spurred bigger bets on fed rate cuts, moving markets into the green. But just a little bit, just a little bit, peering back some of those gains from earlier Today. Right now, s and P five hundred up a quarter percent, NASDAK little changed on the upside, the Dow up about two tens seven percent, tenure treasury yield at four percent, the two year yield
at three point four percent. Let's check bitcoin now, Oh, it's fine, up almost five percent around sixty nine thousand dollars. Traders now pricing a fifty percent chance of a third rate cut this year. CPI fell to a nearly five year low last month as apartment rental price growth slowed and gas prices fell. That offered some relief to Americans who are still dealing with sharp increases and costs of the past five years. Consumer prices are about twenty five
percent higher than they were five years ago. Efan Devit is global more market strategist at Monetta Group Investment Advisors.
Cuarently not just noise.
We have to look at how this is cascading through different sectors.
It hit our sector just this week, Private wealth.
There is definitely a sell first, to ask questions later type of mentality.
Money Ifinns Devitz was on Bloomberg Open interest for on demand news twenty four hours a day. Subscribe to Bloomberg News Now wherever you get your podcasts.
I'm Amy Morris. That's a Bloomberg Business Flash.
We go back to Bloomberg Business Week Daily with Carol Masser and Tim Stineviek.
He thanks for that update. Do appreciate it well.
One of the most read stories on the Bloomberg Kathy Rumler leaving our position as Goldman Sachs top lawyer, drawing to a closing month on Saga that saw the investment bank staunchly defend her over previous associations with Jeffrey Epstein.
We've got Todd Gillespie with us. He's Bloomberg News banking reporter.
He joins us here in the Bloomberg Interactive Brokers studio. So her name has been associated with Jeffrey Epstein for months at this point, but the bank changed its tune after the latest batch.
Well apparently noted him. And in fact, that's actually one of the most interesting things about this. David Solomon was on CNBC this morning. She said fully supported her right right, and she offered her resignation. And this is actually one of the things that is quite incredible to a lot of the partners and senior executives at Goldman is how
staunchly the leadership continues to defend her. And there was in fact no contrition, no you know, no acknowledgment of any wrongdoing at all about Rumor's behavior from David Solomon this morning when he spoke on TV. Just before, by the way, he went to play golf alongside Ronda Santis
at Pebble Beach. So some people are suggesting that perhaps Goldman's response to this whole crisis, And you know, the two weeks or so that David Solomon has been battling this out essentially against the media and internally and perhaps even against his own psyche. Who knows, really when it comes to David Hollomon, sometimes you know, some are really asking questions about his judgment now, and really that's where people in the next few days are going to start to turn their attention.
Who asking those questions?
I mean, are there are employees internally Did it become difficult for her internally because of this?
Yeah?
I mean, I mean suddenly employees internally felt a lot of them couldn't necessarily raise their concerns to David Solomon. Bearing in mind, you know, he's someone who has consolidated power at this firm over the past few years, away from its partnership structure and much more towards a sort
of traditional top down CEO environment. You also have a management committee that he's expanded dramatically, which now has forty six people on it, way more than any other Wall Street bank, which essentially, you know, when you talk about collaboration and everything, actually, in the end one might argue it ends up consolidating power in the hands of you know, the one CEO who's essentially the top of that all.
Right, devil's advocate for a moment, like some would say, what what did she legally do wrong? Like did she provide him any legal advice?
She certainly did. Cal Yeah.
And in fact, one of the most incredible things this week that came out was revelations about emails in this drop that showed how she essentially helped him suppress the media strategy and legal fight by Virginia Dufrey, who we all know, one of the most vocal defenders, sorry, vocal accusers of Jeffrey Epstein who committed suicide last year. Bear
in mind the story that we love. Sorry she didn't write a book, Yeah, there was posthumously published then, right, and she you know, and throughout all of this you can see these emails that show actually that how Rumler talks about relishing the potential opportunity if only she could have been the lawyer to depose her at the stand.
She helps advise lawyers of Epstein on how to wage that campaign to stop her interview with Good Morning America from airing, which famously never aired and has still never aired.
You know, before she died. And so there are these moments here where people are starting to see these emails and then question more deeply at the firm, in particular why Goldman was continuing to stand by her and also what came up in this due diligence process that they said they conducted and that led them to such confidence in her.
What do we know about her relationship with Jeffrey Epstein? Why was she so close to him?
Well, one thing that's cleared throughout the emails is that he consistently started leaning on her for years for informal legal advice for media strategy. She was also receiving things in return, right, He was introducing her to people, he was advising her on, you know, getting a new job for instance. She was he was giving referrals to people like Larry Summers, you know, who was close to Cheryl Sandberg at Facebook when she was looking for a potential
job there. And all through this you see this like very transactional reciprocal relationship between these two people who you know, as lots of people who have been troubled throughout these files. This is you know, and you know many people have mentioned in this case in particular, you know, the plutocratic class that sort of comes and you know that they're intimate.
Levels of behavior that come out within these files are quite something, and I mean it's important to say, you know that she you know, she says she's never done anything wrong, she's never done anything illegal. She says she's never represented Epstein in court or advocated on his behalf to the press or to any government officials.
And yet, as we all remind that, in two thousand and eight is when he did the plea agreement, and he was a registered sex offender. So at that point, anything that anybody does in terms of a relationship is with that knowledge.
Yeah.
Absolutely, And I mean one of the things that you know, there's an op ed, for instance, that he was trying to get published in the Washington Post that she helped edit that basically defended, you know, the strength of the plea agreement and the federal investigation that he was under back in two thousand and eight. She entered this relationship with him. In around twenty fifteen US, she entered this
friendship with him. She calls it a friendship, you know, and says that she wants to get help him get rid of his legal troubles, and this continues and persists even after the twenty eighteen Miami Herald investigation which released, you know, accusations of abuse by sixty women. She ended up at his in court standing behind his lawyers during his arraignment.
Yeah, so some would say judgment comes into Carl certainly.
Todd, thank you so much for keeping us up to speed on this banking reporter at Bloomberg News. This is one of the most right, if not the most red story on the Bloomberg Ternal today.
Also one of the most red stories has to do with SpaceX considering a dual class share structure in its planned IPO this year with us with what you need to know is Bloomberg Tech co host ed Ludlow. He joins us from San Francisco and the dual class share structure nothing uncommon about that in Silicon Valley and you know in media companies too. To be fair, is this all about Elon maintaining control?
It's all about Elon maintaining control, right, I mean, it's not surprising that this would be something SpaceX is considering. You know what I understand from sources, and we did this story of Ryan Gould, right, is that it's being considered. Like, I don't think they're as far as having decided the structure of an IPO. But the state of play with SpaceX anyway is that, you know, it's kind of already
structured that way. Musk has a lot of like the majority of influence and control, but he doesn't have a financial majority. So the cat table's quite diversified among all the names you know, like Google and Fidelity and Founder's Fund, But within that in terms of power, in terms of
votes as a private company, must's already there. And I just point out finally that you know, he tried to do that previously with Tesla and it didn't work, And so I think there had been an underlying assumption that they would at least try with SpaceX.
If you were sitting down, I don't know, with the Elon, what would you ask him about this?
Oh goodness, if I was sitting down with Elon, I mean, it's something I think about day and night.
Well, you know, as it.
Relates to voting control. The one reason it's not surprising is if you think about Elon musk stated motivations with Tesla and the compensation package. Right, so we when the compensation package for Tesla. And again people are going to get confused because we're jumping from SpaceX Tesla. Are they one and the same? Who knows? He always framed this as being not about money. He didn't care how much
he was paid. In the end, he wanted to have enough voting power so that he could execute on what he thought his vision for the company was in the AI context, and with SpaceX, like the logic's very much the same. You have a company that's doing really well at launching rockets and payload for customers and has got a very successful so far constellation based internet service in Starlink.
But he's like ripping up the script right. The future is space based data centers, and so the control part is for him to be able to do it.
A catapult to the moon, that's what he wants. I'd love low from Bloomberg Tech. That was Mars Moon and then Mars.
Okay, yeah, that's what we do.
Just check out story, Ryan gold story and more on the Bloomberg terminal. You're listening to and watching Bloomberg BusinessWeek Daily.
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The best performer in the S and P five hundred coin base up sixteen point eight percent as we speak. Volume is actually triple the average company posted week results. Yet people are buying. I want to bring in Stacy Marie ishmel Hi, Bloomberg News executive for Crypto, Payments and Digital Finance. Is this a signal, Yeah, I'm.
Gonna do this. I'm gonna put you on the spot.
Is this a signal that people think this is the bottom.
I think it's a signal that people will hope it's the bottom. So one of the interesting things that we've been keeping an eye on is, you know, we talked the last time that I was here, thanks for having me back up there.
It was just a week ago, and things have changed a lot since then.
A lot of crypto stuff.
Folks really are looking for signs that even if it's not going to get better, it's not going to get worse. And one of the interesting things about the coin based results yesterday was that there was this feeling of like, okay, like that was they had a rough quarta.
Everybody else had a rough quarta.
A lot of the you know, loss that they reported was based on like the mark to market value of bitcoin, and so maybe you know, coming into Q one and Q two, that's as low as we're going to see it for the foreseeable future. And so even though you had various analysts and you know, different folks on the cell side adjusting their price targets, it was still very much kind of like, okay, we think now we're at a level that stuff may be over sold, and so let's like let's not get out of control here.
I'm glad you went there, because I mean you go back to the October high and we saw, i mean coinbase has fallen as crypto has fallen, right, and I mean it's down about sixty percent since then. So there's a lot of bad news factored in at this point. And it's not like this these results were terrible, right, So that's just okay.
Like you said, maybe the worst is the results were kind of you know, they missed some estimates, but like not buy a huge amount, and there was some like optimism about what might be coming in the next closas And I think one of the things, interestingly, you know, FinTechs and digital asset companies aren't being punished by the market because they are a little bit outside of the AI narrative. They're a little bit outside of the why
do you need billions of dollars in capital expenditure? And so you know, they're really kind of benefiting from this idea of if you think that bitcoin has had a rough time, but the road ahead looks more positive, it's time to buy up some of these stocks.
Well, can I just say in the press release there was optimism from the coin based team about regulation and things, and are they kind of right that that's going to make it better for anybody or can we not make that assumption.
I think there is very much the a sense within the digital asset industry that there is a one remaining key piece of legislation that they are really desperately looking forward to, and that is what's been called the Clarity Act, which would you know, codify some elements of market structure and also make some final adjustments to how stable coins
are regulated and legislated. The problem for the digital asset industry is the banks and the crypto companies do not agree on how to move forward with some of those provisions, and that's been a real drag on both sentiment and prices across the market.
When there is agreement, If there is agreement, does that change things markedly absolutely?
I mean, our own analysts on BI have said that, you know, companies like Coinbase and Robinhood will really benefit from like this this agreement to go forward because one of the things that it removes is the uncertainty that if there's a change of administration, if Democrats retact the White House, then you know, they'll just undo the executive
orders and everything else. So having things like actually codified into legislation really provides a much clearer path for the digital asset companies.
So on back to Coinbase, and then we can branch out a little bigger. If we think about Coinbase, can we think about Coinbase like we think about Intercontinental Exchange or the Nasdaq?
Uh?
I mean, I would say that Coinbase, much like robin Hood, has demonstrated a real commitment to like diversifying in some of the ways that these other like you know, traditional exchanges have. I think they are doing some really interesting things around the fact that they are like, oh okay, Like how are we thinking about tokenization, how are we
thinking about custody of different kinds of digital assets? Like what are our relationships with the ETF providers in that particular vein so from you know, the analysts who are more bullish on the stock are really looking in like that forward looking direction of digital asset companies. Don't only think of them as a proxy for bitcoin, think of them as like FinTechs in that broader sense.
Because if you know, this is a company where transaction revenue accounts for the majority of revenue, and then subscription and services is the minority of revenue, and there are different segments and lines within each of those segments. But if we think about it, if they're making money from transactions, people are buying and selling crypto no matter what the price of bitcoin is, So they're still making money even if the price of bitcoin is going down because those
transactions are happening. Do more transactions happen when prices rise.
Really depends, So you know, one of the things you sometimes see is that when prices are falling, you might have like more selling or people kind of sitting out on the sidelines or exiting completely. The bigger risk from some of the analysts that we've been talking to to crypto companies is people spending less money on transacting on crypto exchanges and more money on the prediction rights. Right.
So again it's this idea of if you're a person who used to trade like meme stocks, or you're into sports gambling, and you're like, oh, like bitcoin and dogecoin and meme coins, this seems fun, and now you're like, or I could be putting some money on polymer that I putting some money on calshi. So it's you know, like the competition is not so much. Is this person
interested in like crypto for the sake of crypto. It's more like they have some discretionary income, right, and there are more ways that you could be, you know, spending that than their world previous lies.
So then how do you think about this? Because I feel like you and I have these conversations tim a lot do. But I mean, are we still like, what will cryptocurrencies really be in terms? Are they going to be this thing that totally changes how everybody and everything transacts?
Are not necessarily.
Deep existential questions in a front.
Sorry, it's we do have champagne later to make up for it.
But like, do you know what I'm saying, Like I just I still don't know, you know, do we have to have the like what does it mean for them, the big banks or the big financial firms or I don't know, just all the financial infrastructure that we have today, Does that mean they will likely be all a part of this too?
So there's absolutely a version of what you are describing, which is in fact the version that banks are preparing for in a lot of ways, which is that crypto becomes a traditional financial payments rail alongside like the swifts and the hs and everything else where. It's just like so normalized that it's a way of either transacting or moving money across borders or trading certain types of assets and you don't even think about it, and it's just
like built into the system. And one of the great ironies of that is it's like absolutely the opposite of what the people who came up with crypto.
Wants to exactly, because to me, that sounds like a lot of oversight and a lot of regulation and.
So then what but also potentially like way more volume right, like way like different kinds of use cases, And yeah, I think that that is to me what makes this
beat so interesting. It's you can either have this perception that you are betting on bitcoin because you think all of the world's governments are going to fail, or you could have this perception that you think things like stable coins are interesting because governments are going to need more ways to like monitor financial transactions across borders.
This is why she is the best I know.
Oh my gosh.
Faith and Maria Mel, executive editor for Crypto, Payments and Digital Finance for Bloomberg News. In here in our Bloomberg Interactive Brokers studio. Check out what she and the team do on the terminal.
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