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Let's get two it. As we keep saying, Stock's initially getting a bit hammered, bond yields jumping with traders slashing their bets for FED rate cuts this year after data showed a solid jobs market and an increase in consumer inflation expectations. So let's dig into all of it a round table Bloomberg News International Economics and Policy correspondent Michael McKee to my left and to our right is Bloomberg News Rates reporter Michael McKenzie. Michael McKay, Let's start with
you first. I want to ask you about today's jobs and you mish sentiment numbers laid out for us and what it says about the US economy.
I always love Jobs Day because Carol bakes cookies and you know, didn't get Tim decorates the tree.
It's once a month.
Now you must be thinking of a different holiday.
Payrolls were obviously very strong. We have to take it with a little bit of a grain of salt because there's probably some still some hurricane and strike catchup in that.
And also we had the very late Black Friday, which appears to have delayed the hiring of retail employees because we saw twenty seven thousand decline in retail in November, when normally you'd expect all those people to come on, and we saw forty three thousand additional people hired for retailers in December, and also forty seven thousand hired in the category that includes basically the delivery drivers, the ups and FedEx people who are bringing you all those packages.
Dudes to deliver it before the porch bandit stealer from my pirates.
There was there, There was good news in there, but it maybe there may be some payback next week or next month orrather. But the good news for the FED is that the unemployment rate went down, massive increase in the household survey in terms of people hired after a big decrease the month before, and everybody said, oh, labor market is falling apart, and it's not. That's the bottom
line here. Which can keep the Fed on the sidelines, which will bring Mike mackenzie in to explain all the joy that was found in the market.
I listened to I think you know, we're all listening to surveillance this morning when the numbers passed, and it was like, I mean, man, the market reaction was pretty swift, Michael.
Indeed it was. This has been a really tough week for the bond markets, right. Fact, what was interesting about today was longer day to bondes have been signing off the most. So much of this week today is all about the front end because the market saying, oh, the Fed, he's really going to go on extended pause. Now we've pushed out the first rate cut for this year from around June. Now we're flirting with a September October timeframe.
Bank of America come out today and say no, we don't see any more rate cuts now for the cycle. Goldman City pushing it back. So the real problem now is that you've got a series of forces all combining to really hurt bonds because there's no really place here nowhere here to hide really, because a Frinda yd is going to get whacked because if the economy keeps trundling along at this kind of pace, and you've also got that uncertainty coming from the Trump administration coming in who
they want to keep the economy going. The FED is also going to have to look at inflation a lot more closely now, and we've got a really important inflation report coming out next Wednesday. So everything's pushing us towards the world where the FED is basically done. The December expectations for rates where the FED rate will be is now above four percent, So four percent is now your flaw, and that means the longer end is still going to sell off. It hasn't sold off as much today, but
it's sold off a lot this week. And we did test five percent on the thirty year. The twenty year bond is already above five percent. Tens when above four seventy five where everyone has been saying, oh, that's going to be where the buyers turn up, we're not really seeing it.
Ten years right now.
Yeah, So does that mean we get to five for our folks talk that you talked to Michael McKenzie saying we could see five percent on.
Yes, I think you've got a pretty good chance of that. We'll see. I mean, inflation next week is expected to show the third consecutive monthly rise and the headline rate, so we're not trending in the right way. And then Scott Besson's going to sit down for the Senate confirmation hearing on Thursday, and everyone in the bond market wants to hear what he's going to say about what's happening
in terms of fiscal policy. How do you square this incoming administration's efforts to keep on spending bring in tax cuts with being fiscally disciplined. And that's what's got people worried as well.
But you guys keep reminding both of you do that. Listen, there's a lot that happens, you know, from FED meeting to FED meeting, whether it's more reads on inflation, more reads on jobs. And then we'll see, Mike, in reality, what we get out of this administration that ultimately might impact things.
Yeah, what Michael was talking, I was like, we're all dated. I was thinking, you want to pat the bond traders on the head and go, you guys are so cute, I mean, changing their views like this, and we all know in a couple of weeks it'll all change again, because yes, CPI is very important next week, but after that, the big one is Inauguration Day and the hundred executive orders he's going to put out, and then whatever plans
they go through. I think the only safe bet is that we don't know what the FED is going to be doing this year, and the FED doesn't know either, and they're very happy to go sit in the shade and wait this out for a little bit because they don't want to be on the wrong side, you know, slow the economy or goose it too much, given what we don't know about what's going to happen.
So January twenty ninth is the consensus on the twenty ninth than the idea is the consensus says maybe the next move comes all the way in the fall summer.
Well, the consensus for January. You look at the WRP page and I think it's written down there.
We'd be gobsmacked.
If the let's see WRP moved greats oh it does say that, yeah, twenty nine.
But after that, who knows.
I mean by March, first of all, we've got the dead ceiling hanging over everybody's head. We're going to have a government has to be funded in.
March by March, right, And so you have that little thing.
Just those two little things alone, let alone any new policies to throw people out of the country or imposed tariffs or things like that.
I want to throw two things into it. First of all, isn't it great that the job market's doing well and this growth is happening, So where's that aspect of it? The other thing is, and I heard this on surveillance this morning, like what is really behind the growth and rates? Is it inflation? Is it that the economies growing?
Like?
Do we really know what is truly behind the move up in rates.
It's a combination of factors. But clearly, if you look at term premium measures from the New York Fed model, it's risen a lot. I mean, it was barely above zero a month ago. It's now above sixty basis points. So it's moved a lot. And that tells you that investors are going to demand a higher premium to own longer day to debt rate. You've then got the front end of the curve where everybody was really telling me for the last month of just stay in the two year.
That's going to be fine because the Fed's still going to cut this year. Well, now that's now kind of in question, and in fact, we now have a situation is quite rare. The two year yield is now above the Fed Fund's effective rate of four thirty three. Now, before everyone saying, oh that's got the Fed effective is a really tough level to break for the two year, well that's just been broken. So you're in an environment right now where there's a lot of uncertainty.
So is it uncertainty that's just moving rates up? Like that's what I'm trying to get to do, Like we do we really understand why we've seen it?
Well, I think there's another element to this is and if you talk to a lot of us, talking to on Greg Peter's at PGA Meda this week, he says, we're is going back to where we were before the financial crisis, that's when real us were above two percent. Inflation is running in a sort of two and a half three percent zip code, which means bond yields are going.
To be at five percent. So back to normal.
That's kind of back to normal, back.
To the old normal, the old normal of the new normal.
But what's funny is you look at the actual cost of borrowing, not the FED funds rate, because you're not a bank. But if you look at mortgage rates, and if you look at credit card rates, and you look even look at the prime rate for the best business borrowers, none of them have come down since the FED cut
rates one hundred basis points. And yet the economy is, like I said, is just still roaring along, which tells you a that the Fed's probably not restrictive enough and b that the neutral rate has clearly moved up at this point. Now the feds concern is how long does it stay up? Do we revert or are we back at the old normal? And it stays that.
Way, Mike, When it comes to the estimate, economists, apart from our own Ana Wong here at Bloomberg Economics, they got this wrong in terms of the figure that we got this morning. Why is that so hard to get.
Well, there's a lot of moving parts in all of this, and then there's some group thing too, and so people are looking at what's happened in the past and extrapolating that. Some people may have missed the change in the holiday and the seasonal effect of that, and it's been for months and months, really hard to get a handle on what's happening with the labor market. Remember, it was only a couple of months ago that the labor market was so bad that we had to start cutting interest rates
to save it. And now you've got this reversal, And does that last or is this just a quickie.
Thing too, like just to kind of wrap up here though, So, Michael, is that like we just have to think about folks. We're just going back to the way it maybe used to be it should be.
I think you have to because let's face it, so many people in this country have locked in very low mortgage costs. So even though the thirtieth fixed today is going to be above seven percent when we get the new numbers next week, it doesn't really affect the majority
of people. And as long as the job market stays tight and potentially could give you tight if you start to see people being deported this year, if you don't lose your job and you've locked in really low borrowing rates, and look, a lot of companies did the same as well. And we still have all the fiscal stimulus from the Biden administration still flowing through the economy. So again, it's very hard to see what's going to knock this economy
off course. The only silver lining for the bomb market right now, The only reason you'd be buying ten year yields at these levels and thirties at five percent, is that if you think there's going to be enough. We're moving into a sort of in a sort of an environment where good economic news becomes bad news for the equity market. You get a tumble in stock folk and you get a back up and credit, then treasuries will
probably show some haven support. Right But again, it's going to be interesting to see how that works, given again at the US fiscal position.
Mike, twenty seconds left here, though, I mean, is there enough growth out there in the US economy to keep things going?
Appears to be back right now, and it looks like maybe only something that would come from the administration at this point, or some exogenous event, some war we didn't anticipate, or something would knock it off its pins at the moment.
All right, Cookies and Christmas tree next time around. All right, guys, thank you so much. Bloomberg News International Economics and Policy correspondent Michael McKee, along with Bloomberg News Rates reporter Michael McKenzie. Guys, thanks, have a great weekend.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Our next guest has spent a decade and a half of public service, serving three US administrations, including former Presidents Jimmy Carter and Bill Clinton. Joining US right now is Stuart Eisenstadt. He's former Deputy Secretary of the Treasury, Undersecretary of State for Economic Affairs, former Undersecretary of Commerce for International Trade, and former US Ambassador to the European Union.
He understands a lot of how the world works, certainly from a US perspective when it comes to policy and geopolitics and more. He was President Jimmy Carter's Chief White House Domestic policy advisor and wrote a biography of him entitled President Carter The White House Years, and gave a eulogy at the state funeral yesterday for former President Carter. Today, Ambassador Eisenstadt a senior council member at Covington and Burling,
and he joins US from Washington. D c Ambassador Eisenstadt, thank you so much for being with us, and we are very sorry for your loss.
Thank you very much. As you've known Jimmy Carter for fifty five years. I was his policy director when he ran for governor of Georgia, then when he ran for president, and then four years in the White House as his chief domestic advisor. So it was a personal loss. But he lived a long life and he in many ways taught us how to live a life of purpose, a
life of faith, a life of determination, of honesty. And one of the things that I really tried to stress in my eulogy was that we shouldn't only look at him as the greatest former president, which he was forty three years, curing two African diseases, monitoring over one hundred elections, building houses for habitat. Rather, we should later rest the myth that his greatest achievements came only as former president.
And I believe that as we look back at what was actually accomplished, that we will see that he was one of the most consequential one term presidents in American history. And I say that I wasn't nominating him for Mount Rushmore, but he belonged in the foothills other presidents who have really made the country stronger and the world safer. And he did. And I tried to lay out in my eulogy what major things he had accomplished.
You know, maybe not Mount Rushmore, but you did call him a renaissance man for all these different things that he had done. You mentioned that in your eulogy. I want to say that I'm glad you went there in terms of his first term or his only term, in terms of what he accomplished, because I do feel like so much of the narrative and conversation since his passing about is all that he achieved once he left. But
it's remarkable. And in listening to the eulogies yesterday, yours and others about the issues that he worked on in the White House, whether it was the Middle East, whether it was inequalities, whether it was the environment, these are things that are with us today and pressing and challenging issues. And I think about the environment, and here we are watching the fires out on the West Coast. I want to kind of go there because obviously this was something
that President Carter thought about. What is wrong and why hasn't our US policy maybe on the environment and climate change specifically, why aren't we maybe better?
And he was I think the greatest environmental president since Theodore Roosevelt. He literally double the size of our national park system with the Alaska Lands built. He had strong amendments to the Clean Air and Clean Water ract But interestingly he did the super fun to clean up chemical waste and all of these our major accomplishments, and in fact, we put out a report in nineteen eighty called the Global two thousand Report, which forecast climate change on energy.
Really did everything together. He deregulated oil and gas, that is, ended the price controls, which led to a huge upsurge in production, so we're now the number one producer in the world of both. But he also had the first incentives for conservation like installation, and the first incentives for renewable energy like solar and even put symbolically solar panels
on the White House. I mean this was done like in the nineteen seventy eight seventy nine period, so he already envisioned that is being a really critical thing for the United States. He really inaugurated the whole clean.
Energy euro Ambassador you talk about all these accomplishments, and look, I think it's important for us to look at historical context here. Why then do you think voters this didn't resonate with voters, and he lost in the election of nineteen eighty so badly to Ronald Berry.
That's that's a good a good question. And all the op eds that I've written on his life in the Wall Street Journal and elsewhere, I mentioned that I hope we don't end by the way before going to deregulation, which even Senator Graham or Republican Senator said transformed the whole US economy. Let me answer your direct question. I call it the three eyes that were against them. First, inter party warfare with the liberal wing of the Democratic Party,
hitted by Ted Kennedy. It divided the convention in nineteen eighty. Kennedy never really reconciled and worked for him, and that was a huge disability. Second, the second eye is inflation. We had inherited high inflation. It was part of the nineteen seventies with Nixon who had double digit inflation and Ford and we had double digit inflation, but that was largely powered as was Nixon's by the way, by the oil shock. It was the Opeic embargo against the US
in nineteen seventy three. It was the Iranian Revolution and shock in nineteen seventy nine nineteen eighty that just hugely increased the pressures. But here is one of the most courageous things he did, and it makes the point that much of what he accomplished only blossomed after he left. So let's put ourselves in July of nineteen seventy nine.
Inflation is roaring, gas prices are going up, gas lines are occurring, and he decides over the objection, and I'm not exaggerating of all of his advisers to appoint Paul Voker to head the Federal Reserve, knowing in advance because Paul told him in the Oval office that if I'm appointed the head of the BED, I'm going to have to take drastic actions on interest rates that are going to make it very difficult for you in an election.
You're in nineteen eighty in terms of a potential recession, our unemployment, And he said, Paul, I cannot make mon legacy leaving this kind of inflation. You take care of the economy, I'll take care of the politics. Well, the fact is inflation dropped like a rock right for Paul's but only in Reagan's first two years, after Carter had already left. And third is Iran. The Iran hostage crisis four hundred and forty four days was so unbelievably debilitating
and humiliating. Carter made a choice early on that he was going to save the lives of the hostages rather than take dramatic military action which would risk their lives. All of them did come back, all of them came back safe, but he paid a huge political price.
Well, you know, Ambassador Eisenstadt, you know one of the things I think someone said during one of the eulogesus that he was far sighted. In other words, he thought about longer term impact, not on only the current generation, but generations to come. We only have about unfortunately, about three
and a half minutes or so left here. I do think about policies today that he seemed to have some insights, some foresight, some foresightedness, whether it was the Middle East, whether it was China, whether it was equality in the environment. When you look at the divisiveness today and the political swings that we are saying and extremes, Americans are looking for something else, and maybe they don't feel represented. How
do you think about the environment today. President Carter tried to represent everybody.
Yeah, let me give you three answers to that. First of all, we had much more backpartisanship then much of our legislation. We had almost seventy percent of our legislation passed. We had regular meetings with Republican leadership, regular breakfasts as well as Democratic. Second, he had a major role in ending the Cold War. Reagan gets the credit for it,
and he deserves credit. But all the weapons systems which Reagan implemented, the MX mobile missile, the cruise missile, the stealth bomber, and intermediate nuclear forces in Europe, every single one of them he started. And Brennan, the longtime Soviet ambassador and his memoirs, said that Jimmy Carter's human rights policy played a major role in undermining Soviet Union. And last, he said, I'm going to do the right thing, regardless of politics. And let's take deregulation, which would be an
important subject for Bloomberg. When we came into office, there was tight regulation on roots and prices for all of our surface and air transportation, no new entrance, rigid prices, administered by government agencies. Jimmy Carter deregulated every single one of those deregulated air lands, which made it possible for competitors to come in. Right today, ninety percent of the public flas only less than fifty percent did. Then, trucks
and rail deregulation made a more efficient supply chain. Deregulation of telecommunications allowed the cable era to occur, and even deregulated beer industry, which led to the growth of.
He're here on a Friday beer industry. I'm in on that. Hey, listen, we only do have about thirty five to forty seconds, So forgive me for asking you to be brief if you could, But I do think about those major initiatives that you were laying out as you talk about the former president's legacy thirty seconds. Do you think the country is moving in the right direction when it comes to laying out those long term plans? And again, I just asked that you'd be very brief.
I do not.
I think we're very short term focused. I don't think we're looking around the corner at the real challenges of climate change, the real challenges that will come from China and how to combat it. So I really think we're looking at a very shortsighted, narrow political way of attacking these problems, and we're doing it without the back parisanship that Jimmy Carter was able to foster.
I so appreciate that, and I so appreciate you reminding us of all the things that happened during the Carter administration. I think history always teaches us right, the things that go right, the things that go wrong. But it's an important way in terms of our way forward. Ambassador Eisenstadt, thank you so much. Stewart Eisenstadt, former US ambassador, and so much more in terms of his public service currently at Covington and Berlin.
This is the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and the Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa played Bloomberg eleven thirty.
Gave you an update on the wildfires out there in the Los Angeles area, looking at it from a couple of different perspectives on the ground and what we are seeing, but also you know, we do think about the business and financial impact. In the meantime, you continue to see a lot of organizations that are rolling to help out those affected by the LA wildfires, including some to help find shelter. So let's get into what airbnb dot org is doing. Their executive director, Christoph Gorder, is with us.
He joins us from Salt Lake City. Christoph, nice to have you here with us. First of all, what can you tell us about what you are hearing about operations there, your teams in the area when it comes to the fires.
Great, thanks for having me on, and you know, our hearts go out to the thousands of families that are just going through the most traumatic events right now. Airbnb dot org we're a nonprofit. We're founded by arenb a few years ago, and we provide free housing in times of crisis like this. So we've been working in LA since the fire started on Tuesday. Housed our first guest yesterday, and now I think we're probably the last numbers I have.
We've housed. We've provided housing support for about six five hundred people in the last twenty four hours. But the need is just enormous.
How does that housing support manifest and what's the relationship that you have currently with Airbnb. Are you taking airbnbs that are available and then essentially fronting the cost covering the cost for those affected exactly.
So.
The way we work is we partner with a local nonprofit. In this case, it's a nonprofit called La two one one, which covers all of La City in La County. They are very connected into the community. They identify and vet
the families who are going to stay with us. Once they've approved them, we issue them a credit to book the airbnb that works best for them and their needs where they want to be, if they need wheelchair accessibility or it needs to be pet friendly, and so they're able to just sort of pick the airbnb that's going to be most communient for them, and then we work with hosts to get a discount on that and the balance is paid for by Arianbe dot org.
You said about sixty sixty five hundred people you've already helped out, but you said the demand is incredible. Can you give us an idea of how many people are reaching out and looking for your assistance, so.
It's really fast moving. I mean the number the sixty five hundred numbers from last night, and you know, I'm just waiting for some updates today, but you know, will be thousands more will have gotten help just this morning in terms of the need, you know, immediately right after we open the program on Wednesday, you know, we had thousands and thousands of requests and so we've got a backlog right now and you know, working our way through it.
But the situation is still evolving, and there are more areas you know, opening up for evacuation, and so it's still you know, I think unfortunately, very early days.
So it's hard to.
Get a you know, a number really nailed down because it's moving so fast.
One thing that I'm trying to understand is how long some of these folks are going to be displaced. I mean, think about it from the perspective of how long it takes to rebuild something. Factor in not just the insurance issues, but also the fact that getting building materials and folks to actually do that work. Those people are going to be in a very short supply because of the scale of this devastation. How long do you plan to be housing people in the wake of this disaster.
Well, we've committed in this immediate emergency, We've committed and aremb is there to support us to provide emergency housing to twenty five thousand people, and so we're going to do as much as we can. We sort of look at this in a couple phases as this evolves. The first phase is the evacuation phase, and they're the stays that we're providing are very short, so it's about a
week now. Most of the people we're hoping are going to be able to go back to their homes in these evacuation areas, but of course they're going to be thousands and thousands of people. We're going to need a long term stay and so then we will move into phase two, will extend to stay out to about a month, and we're sort of an emergency stop gap while people figure out their other options. So think of us sort of like as the ambulance that gets you to the hospital.
And then there'll be other options FEMA, insurance, etc. That people will need to do. But it's a long, long road to recovery.
Yeah, we can only imagine. Christoph. You guys have been doing this, you know, in other either natural disasters. Tell us about, you know, kind of what you guys have learned about this process to where you are today.
Well, you know, the idea has been around for a while. It goes back to actually twenty twelve when Hurricane Sandy hit in New York City and there was an EVERYB and B host in Brooklyn who called in and said, Hey, I see all these people displaced. Can I open up my home for free? And that's where the idea started, and very quickly they were over a thousand hosts in New York City who opened up their homes for Hurricane Sandy victims. And you know, that went along for a
few years. But by twenty twenty we realized it was a really big idea and so everybb dot org was formalized. It was created as a separate nonprofit and now we respond around the world to disasters. So, you know, unfortunately in southern California, we were just down in that same area in December and Malibu working on a fire there. And it's continuous for us around the world and throughout the year.
Before you go, just got about twenty seconds, thirty seconds. How can people find out more information about this organization?
Hop on our website Airbnb dot org. There's two ways you can help. If you make a donation every penny will go to pay for a family and need for a stay because EVERYMB covers all of our operating expenses. So if you want to help people in LA, it's a great direct way to do that. You'll help us help more people. If you're in the LA area and you've got a place that you can host a family, you can learn about how to sign up to a host and we also need your help there.
And if somebody needs a place to stay, how do they do that real quickly?
So you reach out to two one one LA two one one, either on their website or call them. There's a very easy intake form and they'll take you through the process. There's a little bit of a delay right now because we've got so many people in the system, but be patient. Will help you.
Good luck with your efforts, Christoph, Thank you so much. Christeph Gorder joining us executive director of at Airbnb dot org.
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Carol the fire affecting so many case in point We were actually set to interview Corey Clipston, the CEO at swan Bitcoin, about crypto, but he let us know a little earlier today that he now has to evacuate due to fires in southern California, so he's unable to make the interview.
Right.
Joining us instead is John Harai, swan Bitcoin's managing director. Swan Bitcoin, in case you don't remember, it's a platform that offers a host of services, including allowing people to buy bitcoin in personal, business and retirement accounts. John joining us from New York City. John, first of all, thank you for jumping in and talking with us. First up, Corey. Okay, what do we know about any of your team that maybe had exposure to the LA wildfires.
Yeah, great to be here with you guys and standing in for Corey. So far, Corey and his family and his house appear to be okay, but he is quite close to the danger zone and I believe he is helping some people who may have lost their home or at least had to evacuate. So it's pretty hectic over there right now, and it's one of those things where every day brings new updates. So yeah, definitely thinking about Corey and all of my other colleagues and everyone who is in that area right now.
It's hard to transition to talking about something like crypto when we spent so much time talking about the wildfires and the devastation out in LA affecting so many people. But nonetheless we are going to do that because it is one area of green today in a market where we're seeing a lot of selling. Bitcoin up by three percent right now, though it's down about eleven percent from that all time high last month, down this week by
a little more than four percent. John, what's the outlook as we head into the new year, especially as we get the new administration in office. What's priced in right now?
Yeah, and today is an interesting day. I agree with you.
To see bitcoin be up a few percent while stocks are down, while bond yields are up. That's interesting. I don't want to read too much into one day, but it is noteworthy. Looking forward outlook wise, I typically highlight three things that I think will support Bitcoin's price going forward. One is continued relatively easy fiscal policy. Number two is continued relatively easy monetary policy, and then third is continued adoption.
And if we double click on that adoption, I would say it's going to come from many places, but there's two big ones. One is potential nation state adoption. And here, of course, i'm talking about a new administration, Trump administration coming in. They're talking about what's being known as the SBR Strategic Bitcoin Reserve. Some are calling it a stockpile, but either way, it would be the US government proactively and consciously adding and holding bitcoin, which would be a
a big deal. And then the other leg of that adoption story is basically what micro Strategy is doing, and it's corporate adoption. And they have bought just a ton of bitcoin in the past several months here, and the
pace of their accumulation is really increasing. I don't believe we're going to see micro strategy, you know, they're in a class of their own, but I think it is going to be a big story for twenty twenty five what nation states do, primarily driven by the US in terms of bitcoin accumulation, and what corporations do you know, call it copycats of the micro Strategy playbook. We're actually calling it lbe at SWAN or leveraged Bitcoin Equity. It's a little bit of a nod to the old LBO
leveraged buyout. But that's what we're calling the micro strategy playbook, the LBE playbook, and I think there's going to be more companies that do that.
Can I just say, John, I'm listening to you, and so might say and I'm waiting for the emails to come in that both of those, forgive me, are maybe a little flimsy. First of all, well, I think the strategic reserves, I don't know, it's a long ways to get that. I think there are a lot of folks that say that that makes absolutely no sense.
Including some prominent bitcoin investors like Nick Carter of Castle Island, who came on our show and got a lot of flak for saying he doesn't think the US should.
Do that right, And I mean as taxpayers, I think a lot of us would be like, wait, what is our money being used for? And the other hand is the micro strategy. I get that supply demand equation and why that is supportive of bitcoin, but again it doesn't go to what is bitcoin, what is it really being used for? What is that long term usage that to me really then would help put in a floor that lasts around for a long time.
Yeah, it's great points you guys bring up and I am familiar with Nick Carter's views.
I think his views were nuanced.
He was particularly against bitcoin being accumulated by a state government, particularly the US, using the word reserve and the language that some people were using, that it would be a monetary asset, that it would somehow back the dollar provide stability to the dollar. That is specifically what Nick was against my and he in his article he said that he's okay with a bitcoin stockpile, so he made that distinction.
My summary view is that regardless of what they call it, it's going to act like a stockpile, even if they call it a reserve. I don't think we are anywhere close to a world where bitcoin held by the US government is actually backing the dollar or providing stability to
the dollar. So I guess you could say I kind of understand Nick's argument, but I think there is a world where the US owns bitcoin as a stockpiled asset, and I think there is a relatively easy way for them to do that, and that's just them saying, Hey, the roughly two hundred thousand bitcoin that we hold, we're
just going to hold onto it. And personally, I think that would be massive if the wealthiest, most powerful country in the world says, hey, we are accumulating a big we're just holding a bit bitcoin as a strategic asset.
Maybe we need to tell our deficit first before we start doing that and spending money on it. I guess my point is I just am trying to understand, Like, if that doesn't happen, you pull the rugout. That doesn't happen. If micro strategy starts to back off, you know what fundamentally is there to support bitcoin?
Yeah, so the micro strategy piece, I would say bitcoin is the primary use case for Bitcoin is a store of value monetary asset that is distinct from bitcoin being used as payments or medium of exchange. I think all of that will come, but that's many years down the road. So I think corporations, individuals, Nation States, financial advisors, family offices will continue to use bitcoin as a store of
value monetary asset in twenty twenty five and beyond. I think that is ultimately what provides some sort of stability or a floor for bitcoin. But I actually think it will be pretty significant appreciation in the coming twelve months.
Appreciation is certainly helpful when folks are long bitcoin, or they're making leverage bets on bitcoin, such as Michael Sailor at micro Strategy. But if we see a significant decline, then it starts to really hurt and be painful.
What happens, then, yeah, that's for sure true.
If you're going to execute this micro Strategy playbook or the LBE playbook as we're calling it, it does require that Bitcoin goes up on a longer term time horizon. I would point people to twenty twenty when Sailor and micro Strategy made their first buys. Bitcoin did not go upright after that. It actually went down very quickly in the weeks after his purchases. But the way you execute that strategy is you do it prudently.
You do it.
If you're going to do it with debt, you do it with debt that doesn't have a maturity for four to five years. If you're going to do it with equity, you tap the equity markets when your stock is trading at a hefty multiple to your bitcoin holdings. Those are just some of the ways, And you think about the ratio of the outstanding debt you have to your bit coin market value. So I think as long as people are getting that those companies will be okay.
Got it run John, Thank you so much for jumping in. Really appreciate this. John Harry Swanpitcoin's managing director.
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Don on Bloomberg Radio.
All right, everybody, just about eighteen nineteen minutes to go until we wrap up the trading day. Charlie Bill Maloney there breaking down the trade on this Friday, and we were definitely off our best levels of the session, but we've seen some definite reaction to the day's economic news, expectations about the FED and maybe pushing out at least based on what we see in the trade. The first rate cut out until maybe October, so but a lot can happen.
Hey, what a parlor game we play?
We do, indeed don't we. I mean it's like day to day, week to week, day to day week.
Everything's different when it comes to what investors think the Fed's going to do.
Yeah, I know, it's kind of like why do we even bother because the Fed's going to do what it's gonna do, what it means.
Pretty much laughed at me when I asked if January it was in play.
It's like Tim steadeveek, No, I know, but you know you never know, Like I mean, month things happen, right, I mean, if anything we found in our look are year ahead pieces, I think about talking with Tim O'Brien from our opinion team who oversees that Sam Potter on the Markets and Stocks team, is that there's just so so many things in last year that we just weren't kind of expecting and that happened. So things come out of anywhere, so that will change the market environment.
Well, let's see what Dana Duoria has to say about that. Dana is the co chief investment officer over at invest Net. It's the tech provider to banks and registered investment advisors. The investment platform has more than six point eight trillion dollars in assets on it, managed by many different folks out there. Dana, good to have you with us.
How are you good to be here?
I'm great, thank you.
So, so, what do you make of the way that this Job's report changes the outlook for the FED this year?
Well, certainly predictable. How the reaction to it, I mean, really wants a blowout report?
This was not you know, just a little bit more in terms of the non farm payrolls.
This was pretty much one hundred thousand more than what was expected.
So not surprising that the reaction that the market had interesting.
I guess from the standpoint that the market had already, of course, from the last foe C meeting, been pricing you know, lower expectations for rate cuts, and you know, those lower expectations, I think, to a certain extent, we're all you could argue, we're already sort of taking account of the fact that unemployment was still low, you know, jobs market was still strong, and that the Fed certainly didn't have to move anytime soon.
So I could argue this is a bit of an overshoot.
You know that you had what the information you had before, we were down to fifty basis points, and now you know, the market reacts again, whereas this report blowout as it is, I think is you know, kind of confirmation of what maybe we knew.
Was a possibility, which is that the FED really isn't going to want to move. I think we all know the FED at this point.
You know, the failure here is letting inflation take hold again, and.
So they're probably going to air. I think we all kind of recognize.
Right to a certain extent, they're gonna err on the side of staying higher for longer.
This just kind of you know, confirms it.
Hey, what does it mean though for valuations currently on the equity side of things. I mean, if I just do I look at the price to earning, so just doing really basic on like something like the NASTAQ one hundred, it's about thirty two. If I look at the S and P five hundred, it's just about twenty four. So if we are indeed going to live in this higher rate environment, valuations they've got to come down.
Yeah, look one hundred percent, right, multiples are not multiples.
Uh, you know, work inversely. So if you have higher rates, you would expect multiples to come down.
And we're already, as you you know, just quoted, we're pretty high on multiples, right. I mean, if there's you know, a flying the ointment around the expectation that equities do well this year, it's where we sit from a multiple's perspective.
We have a very concentrated market.
We have, you know, a series of very large stocks that are you know, you just read it, rate very high. The S and P five hundred is very high, and that's driven even more by you know, kind of bigger names. So valuations do matter.
I mean, I'm certainly of the school that you can't you can't keep ignoring that forever.
And you know, higher rates does work against price multiples being a continued driver of expansion in the market. So that's one hundred percent of fly in the ointment.
If US stocks are expensive by some measures, many measures, I think it's fair to say, is it time to look to emerging markets?
To Europe?
Yeah, I mean from a tactical perspective, if I was going to look right now at you know, what what we see in the market in terms of a strong dollar expectation you know, a FED that's not going to cut rates as fast as maybe overseas economies will will more likely cut rates more quickly. That strong dollar is a headwind to the emerging market story for sure. So if you're thinking about it in terms of, hey, tactically,
what do I think is the case? I mean, I think you have to include that, and you have to, you know, think about within emerging markets maybe where you.
Want to be.
But if you're looking at it, where I think your question is, and it's a very valid one, which is, Hey, look, at the end of the day, the market is valuing all those things that they've priced in everything that I just said, and having some diversification in that portfolio, particularly when the US market is so concentrated, probably makes sense, particularly for long term investors.
How do you define diversification then.
So it's interesting you say that, right, if you look at the academic research, theoretically, the most diverse byed portfolio is the total market.
Right, It's the market clearing portfolio. It's everything you can own. But in the if you look at.
The total market, that's pricing everything at the value in the market, and you're getting back to that place where okay, but I've got some by other measures, I've got some concentration risk there because I've got a lot of money if I'm sitting in market or anything that's low tracking error to market, I've got a lot of money in those big stocks. And so I think, you know, if you're thinking about it from that perspective, think about diversifying
into smaller parts of the market. Think about diversifying, as you said, into international economies.
Okay, international economies one where one area we could look private markets though, for retail investors, something that's on your radar. I know that the I know that the private equity folks would like more people to be investing in the private markets. But what yeah, you know, more money out there, they want to wear more one K two. Is this something that you could see moving away from the ultra high net worth folks and actually going to regular people.
Yeah, yeah, for sure. It's it's very much a trend. We expect the trend to get a good trend.
I think it can be.
You know, yes, I think it absolutely can be, because you're seeing a lot of the innovation that maybe was available in public markets now take place in private markets. And you know, if you're a believer in democratizing those types of those.
Return streams, then yes, the devil in the details of courses. What is the vehicle?
Am I really getting access to these returns and cannot live with the ill equis that comes with it? But I think the alternatives managers are seeing that, you know, they're looking at Hey, dB plans are just not going to be the source anymore.
It's called d C.
How do we come down.
Market to more of a retail audience.
And they're innovating in their structures, interval funds in particular, right, so semi liquid structures that are maybe more palatable to the audience in that high net worth and even you know, getting into the mass.
Apple one area.
Hey we get to run. Happy New Year. Good to check in with you, Danna Dioria. She's Chief investment Officer of Investment. It's the tech provider to banks and rias. The platform has more than six point eight trillion dollars in assets.
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