Expect the U.S. To Issue Digital Currency Next Year: FiREapps CEO

Is it the future of money? Right now? I want to bring in Wolfgang Custer. He is chief executive officer, chairman, and co founder of fire Apps, which is based in Phoenix, Arizona. Wolfgang, thank you so much for joining us. Fire Apps is known as a firm that helps companies understand their foreign exchange their currency risk. Does your recent focus on bitcoin indicate that you consider it a currency? No, I don't.

I think that while some people may consider it a currency um to the point that there's some sort of size to it, but reality is that I've been talking to a lot of corporate CEOs and CFOs as well as treasury departments, and none of them are really with the exception of some maybe marketing gimmicks, are really looking at bitcoin as a currency that they're going to be

doing business in. And there really are three reasons for that. Um. The first one is that the Federal Reserve Bank itself will end up coming out with a digital currency, and that's what they're waiting for, and other governments will as well. Secondly is there is a Senate Bill twelve forty one that has been discussed for over two hours on November twenty eight, so very recently, where they're looking to change the definition of financial institutions and what that would do.

If they get what they're looking to get, which is pretty likely, it would actually criminalize bitcoin, um and would make it who would make the liquidity rather questionable. And then we'll go back, Yeah, I know, that's fine, it's no perm at home. We can talk about taxation here in a little bit, which is the third part that the governments will do to really to some degree fight bitcoin in that sense. But let's go back to two.

Then I want to talk about too, just because if you criminalized bitcoin that would certainly hamper the meteoric rise that we have seen this year. How would it do that? Well, it would do that by changing the definition of what is a financial institution and what are they allowed to do?

So how transparent do they have to be? And quite frankly, the whole thing on bitcoin, as you well know, is that it is based on a blockchain technology, one of many blockchain technologies that actually hides who's doing the transactions, and the United States government as well as many other

governments saying that's not acceptable. Okay, I want to go back to the first thing that you said too, because this is fascinating that the Federal Reserve could come out with its own digital currency as soon as next year. What does that mean? I mean there is a difference between digital currency, which we all use when we use credit cards or uh you know, Apple pay or other things that are online transactions. It's another thing for it to be on blockchain. So what are you talking about

specifically with the Fed issuing this digital currency. Yes, So, what I believe has happened over the last five to ten years, if you arguably since two thousand eight, is that UM, the people that started cryptocurrencies UM really looked at there is an inefficiency in the market, and I believe they were right. Their inefficiencies twofold. One is it takes two days on average to move from one account

to another, and two is it's pretty expensive. So what they tried to achieve as a currency that is digital and immediate, as you're saying, to some degree like credit cards are as well as some that are not as expensive. And so these inefficiencies need to be embraced by the governments and they are interestingly here and even Putent came out with that they will issue a crypto ruble in January of next year already, So this is pretty imminent.

Is the fact that, at the end of the day is that blockchain can actually use quite exactly opposite the way Bitcoin is using it right now. I e. The reason, one of the two reasons that Putent wants to do this is because he wants to gain better visibility into all transactions related to the ruble. The United States will end up doing the same thing. This is really fascinating. So in other words, it's sort of a blockchain that, rather than decentralizing the currency, really centralizes it and gives

the government visibility into every transaction. Is that correct? That is correct? That is my belief, and that's what everything is pointing towards and if you look back at of the work that's already been done in Washington on this on dual ledger technology, it's absolutely confirms that. So the Treasure Department, basically, I'm trying to figure out how this would work where they remove all paper currency from circulation, or they would just have a subset that would be

used for business transaction transactions and start there. How would it work, How would it begin? Yeah, the way I envisioned it is it's kind of like the Euro. For when the Euro came out. Um, you know, you still had for a while Deutsche marks and French franks, and then slowly but surely they disappeared and now you can't you know, can't use a deutsch mark anymore in Germany, but you can use euros. And I anticipate this to be very similar. It's going to take time. It's not

going to be immediately. Digital dollar is here and therefore paper currencies are gone, but it is definitely going into that direction. If you think about the way we transact today, you know, I have dollars in my wallet, I hardly ever use them. I certainly use my credit cards or other payment methods. And this is going to be the same thing. It's going to be better, quicker, faster, yet

very controlled. And the reason that the United States FED isn't going to come out with this in January is because they're going to have to build a very secure um blockchain that everybody trusts that won't be broken into so fire app clients include Google, ericson Pepsi, Nike Accenture, and how do they feel about the introduction of a

cryptocurrency and how do they feel about bitcoin? I think that all of them in general, I certainly have NBA, so I'm not going to speak to one particular one, but all in general have the belief that digital currency will actually be good for them. I think it will help them transact faster and cheaper. And yet they do realize one of the reasons that we're also talking to them is that that requires more automation on their parts.

So as digital currencies are coming abroad and all of a sudden, they don't have manual processes that allow them to spend two days of settling currencies, it's going to be immediate, and so they're looking at what the company to do to be ready for this, and how to automate these processes which end up streamlining liquidity really to that to the point that they will, so it's gonna be actually going to be embraced by them and there

and I'm not hearing anything negative about digital currency. I am hearing that for a bitcoin is just too volatile to get involved and from a true main mean wolf gangcaster, thank you so much for joining as CEO, chairman and co founder of fire Apps in Phoenix, Arizona. This is Bloomberg. Viagraph is going generic. This is a big moment for the millions of people who have been affected by this drug.

And here to talk about it is John Tozzi. He's a healthcare reporter for Bloomberg News and he joins us here in our eleven three oh studios. So your piece was phenomenal. You basically talked to the creators of viagra and about the creation of it. And before we go into the implications of it going to naric, can you just give us the story behind how they came to develop this drug. Sure, this was a drug that Fiser was actually investigating for a different purpose back in uh

the late excuse me eies and early nineties. They were looking for treatments for hypertension, high blood pressure, and then for chest pain and the compound that they UH you know, the chemists that Fiser at a lab in England were developing. It didn't really show a lot of effect in those conditions, but it did have a side effect UM that they decided was worth looking into. So the side effect was that it allowed erections to last longer and come more frequently,

and some of the details were hysterical. One of my favorite from this whole thing is UH that the study subjects were fitted what was called ridges scan UH and given the drug and shown blue movies or movies that were soft pornography or hard pornography. At the end of the week we had to get the drugs back from them anything that was unused. Some of them would not give the drug back. This is actually something we heard from several researchers we talked to that during trials. All

along the time when viagra was being developed. You know that when you when you test a drug, you can only give it for a limited amount of limited period until you know that it's not going to be toxic for when taken for longer UM and the researchers had real trouble getting the drugs back. People didn't want to

give this up. And I think for Fiser, um, you know, this was a condition that didn't really have a pharmaceutical treatment before viagra, and that was an indication to them of how important could be to the people who would take it well and John to that point, Viagara kind of changed the conversation about sex on a pretty massive scale. I mean, in one case, they're one of the researchers, one of the developers was going to go on a major television network and they said, what are you going

to say? And he said he was going to use the word erection and they said, no, you can't do that, right. I think that was actually not one of the Fiser researchers but another doctor, But yeah, that I think. You know, it was a period when um, in the culture, Americans were becoming more comfortable kind of talking frankly about sexuality, um, you know, in a way that you know, decades before

wasn't really the case. So now that the drug is going generic, what are the implications It will be cheaper, it will be less of a moneymaker for Fiser, and will it become more mainstream or it already has out in so mainstream that it really can't really have much more. Yeah, I mean I think it's it's hard to tell. I mean, the price will go down. That happens whenever there's a

generic version of the drug. Um. You know. I know there's certain in the United Kingdom they're actually applying or in the process of trying to have it sold over the counter. So I think you know, from the drug manufacturers, uh point of view, the um you know, the goal is to make it more widely available, more easily available. Um. But you know, we'll see what happens with the generic. It's unclear how much. Um. You know, the price is a barrier to people taking viagara if everybody who wants

it pretty much has it. One one question that I have is from the female side. I mean, it's it's one thing for men to have this, but um, there's a lot of comedy show is kind of highlighted. Men would come home and be very excited and the women would say, oh my god. No. Um. So there's a question about you know, a allowing women's libido to match men's on viagra. Is there any development there with respect to a feminine I mean, certainly in the history of viagra.

That was something that UM people were, you know, that was an issue that women were you know, did not have a drug that worked. Similarly, Viagra was actually tested in women at one point to see if it would work, and it didn't show much efficacy. UM. There is at least one product on the market intended to UM help improve women's libidos. But I think the consensus is that, you know, it doesn't have the same um effect, you know, the same degree of efficacy that viagra had for men.

So you know, that's an area of research and science that I think is still being investigated. Just real quick, can you give us a sense of how big a business viagra has been pro visor, Uh, well, we look, we looked up the sales over since it was released. It's been about thirty six billion in sales UM. That's

a big number, but it's by no means Fiser's biggest drug. UM. So you know, it's an important product, but you know, it's interesting the Fiser many fightser veterans we talked to you said, you know, it wasn't our biggest product, but it's what people knew us. You know, people would find out you worked for Fiser and then they'd be like, oh viagras um, whereas you know, they didn't have the same effect for for lipatour for example. Yeah, people like to talk about sex more than blood pressure of it.

John Tosi, thank you so much for joining us. He's a healthcare reporter with Bloomberg News. Many analysts and investors have said that companies will just buy back more of their shares with the money that they received from the tax cuts. Others are saying not so fast. Companies have already slowed their stock purchases. Here to hash this argument out with us, as Tim Grisky, chief investment officer of Solaris Asset Management in New York. Tim, thank you so

much for joining us. Good morning, Lisa, Good morning. So let's talk about where we are with respect to stock buy backs, because actually, SMP five hundred companies have announced the intention to purchase five hundred sixty eight billion dollars of their own shares for the first eleven months of seventeen, which is a lot, but it's down timber cent from a year ago and on pace to be the first

decrease since two thousand and eight. That is, according to data compiled by Bery Annie Bery n Associate so do you think that we're in a slowing down phase for the share buy backs. Do you think that they're gonna get ramped back up with any tax cut? Well, you know, we, as you said, we certainly have seen a slowdown in buy backs, but it's not that I don't think you can assume that that's going to be what's going to happen with these tax savings. We have to differentiate between

two things here. One is the repatriation of foreign cash and the other one is the annual tax savings from the lower tax rate. The repatriation is going to be a one time benefit to companies, and we think the majority of that is probably going to go to stock buy backs. Unlikely that that will go to dividend increases because it's not going to be repetitive. Some will go certainly to any capital spending projects that companies might have.

But if companies have a good growth prospect from and reinvesting inside the company, they're already doing it, especially given how low debt is. So in other words, you're saying that to the extent that there is going to a be a boost from shared by backs, it will be a one time thing, largely tied to the cash repatriation? Am I understanding that correctly? Exactly? Yeah, so you said that better than I do know. Well, I mean, how

much with with with the with the cash repatriation? One big question that I have is haven't we already seen that money get repatriated? I mean, you've seen the Apples and the Oracles of the world borrowing billions and billions of dollars through the debt markets to uh do their capital uh re whatever it is that they are doing, their giving their money back to their shareholders. Apple has like I think, a three hundred billion dollar uh capital

give back program. I mean, haven't we already seen this? Well, we've seen it from a handful of companies, But there's still a lot of companies out there with foreign cash strandard overseas. Now, a lot of these companies, we think, have found ways of actually using that cash overseas, repatriating part of it through various schemes uh and and finding ways of of of really using that cash and far

on foreign soil to benefit the company. So we think there will be some repatriation, but companies are going to have to decide if they want to pay that ten percent tax on repatriating those dollars or leave it where it is if it's actually returning above that ten penalty. So, Tim, do you think that in general the tax plan as lead out in the House and send it understanding that there will be some changes. Do you think that it will stimulate growth materially? You know, we we just don't

see that. We think if they're growth prospects out there, and certainly the economy is growing, it's accelerating growth. Um. You know, we think that's already being done by companies already. Companies are already putting their money into growth opportunities that they have, and there's no reason for them not to do that. They can certainly borrow money very inexpensively now to um to stimulate any internal growth. Otherwise they're going to look to to gift it to their shareholders, either

through stock buy backs or through increasing dividends. And we think the annual tax savings might lead to some nice dividend increases. Is that a number of companies. Is there any company in particular that you're targeting for a dividend increase? Well, I think if you look at some of the old economy companies that don't have play other places to put their money. I think increasing dividends in those companies which will attract a certain type of investor, those dividend income

loving investors. We think that's where a lot of dividend increases might incur occur. Are you changing around your investments at all in response? Not? You know, not really, It's hard to know what which company is gonna do. What are they going to increase dividends? Are they going to increase buy backs? Are they going to find some internal

growth opportunities. It's hard to know at this point. But we do know that there are a number of companies out there with high tax rates that are going to be big beneficiaries, and we have made investments uh in those companies. Can you give us any names? Uh? Broad Com uh symbols A V G O UH is a high taxpayer and we think it's going to really benefit it from lower tax rates and real quick. What about bonds? Do you think that they're going to get crushed next year? No? Uh,

you know we're gonna see four percent interest rates. The world's going on fire. Investors need bonds, pension funds need bonds. H Bonds are not going to go away at all. Is it going to be a great place for money. I don't think it's going to be anything special, but there will be a place for bonds and portfolios. To Tim Grisky, thank you so much for joining us. Tim Grisky, chief investment Officer of Solaris Asset Management in New York.

Definitely intriguing about the old economy companies that will increase their dividends and attract some shareholders and possibly be looked at as even better bonds substitutes and interesting developments. In two thousand and fifteen, there was a lot of focus on the Baltic Dry Index and how low it was. This is an index that measures how much ship owners are making to ship dry bulk things like iron ore or grains or whatever else is needed in a general economy.

This year, however, it has surged to the highest since early and here to do a victory lap or perhaps not he he said it is not his style. John woven Smith, president of Genko Shipping, which is based in New York, shares up almost sixty two so far this year. So, John, how much more do you think that the dry the Baltic Dry Index has to rise? And what's behind this, Yes, So I think you I think you have to take a a step back to where we were over the last couple of years, where we had too many ships

in the market. Um We've always had a pretty robust demand situation, but the the the ship owners over built. So now we're in a situation where we absorb that supply because of increasing demand, but also a lot of scrapping um or removing ships from the market over the

last couple of years. And we're looking forward into two thousand and eighteen and we're only going to see one to one and a half percent growth in the number of ships that are delivering versus a growth of three to four percent on the demand side, driven by iron ore and coal imports primarily. So this is a two sided equation. In other words, there are fewer ships being built and there is incrementally more demand coming out of

different economies. So before we get into your projection of how much more the Baltic dry indexs could rise, I'm curious which do you think is more important here? I mean, in other words, when people point to this increase and they say, well, this is the leading indicator that shows the global economy is surging, are you saying not so fast. This is really kind of a more complicated equation that

has several different heads. I think there are two things here, um one the supply side and dry bulk shipping, meaning and then number of ships that are on the water on any given day to ship a cargo is probably one of the major factors and does drive the market. Having said that, if you look at what we're seeing on the cargo flow side, we're seeing increased iron ore going into China. We're seeing increased coal going into China, which is all done on the larger ships. But here's

the neat thing. It's not just China centric. As we've seen in the last couple of years. We've seen a recovery in the European steel industry, so increased iron ore imports and coking coal going into Europe. We've seen India's steel industry recover, so increased coking coal going into India. We've seen coal imports into Taiwan, the Philippines, um cement into Indonesia in the outcoming out of the US golf. On the grain front, soybeans and corn are at all

time highs. So this is much more of a global recovery from what we're seeing for cargo flows. So when was the last time that Jenko Shipping saw this degree of activity and demand. I would say you'd have to go back to probably two thousand fourteen, two thousand thirteen, two thousand fourteen, and what what happened in two thousand thirteen. Again,

we we saw some overbuilding. We have now absorbed all of that, and as I said before, it's because of high scrapping over the last twenty four months and just a complete slow down in the number of ships that are that are going on the water. And I'll just go back to it, just simple number wise again, you look at next year and then two thousand nineteen. The supply side of the equation, meaning the number of ships that are that are going to come to the water

is very predictable. And you know because if you're going to contract a ship today, that's two years out. So for the next two years you have a good visibility on the supply side. And we're only going to see as I said, one and a half percent fleet growth in two thousand eighteen, and some are around one to one and a half and two thousand nineteen against a backdrop of three to four percent growth on the demand side. Those are very favorable numbers going into eighteen and nineteen.

And that's why I go back to, we're seeing we're in the beginnings of the recovery, and we've started to see at this quarter fourth quarter. And I dont want to pick up on that because we mentioned that JENKO is up nearly so far this year, but that follows a nearly lost last year and lost the year before. So there's a question of you know, we're these just these shipping stocks way too beaten up and there was way too much demand. Uh, and we're seeing a recovery.

There's a question of how much we will recover because if you look back at the Baltic dry Index going back to two thousand and eight and two seven, two six, it was still a lot higher than where we are today. So do you think that shipmakers will start earning more and more or are we close to the peak here? No, Again, I go back to I think we're in the first instance of the game. Um. This is something that we started talking about at the beginning of of two thousand

and seventeen. UM that we thought that supplying demand fundamentals would start to come into balance in the fourth quarter. We're now being that and going into next year again we see an even rosier picture because the supply side of the equation, the number of ships that are being delivered, are going to basically be at all time loads at one and a half percent. So how are you positioning JENKO to take advantage of this upside? So a couple

of things. One, if you look at um the real growth and commodities, it's going to come on the iron ore front with an increased iron ore exports going from Brazil to China. Valet in particular is projecting another twenty five to thirty million tons of iron ore that is going to be shipped. And the great thing about Brazil to China that's a long haul trade route, so it increases to the great thing for shipping owners. Great, No,

that's that's exactly right, Um. And what's also driving a lot of this, which I think is important, is the environmental side in China. So China is actually encouraging imports of higher grade iron ore, which can only come from seaborn. It cannot come domestic suppliers in China, so we're seeing domestic supply shrink in China and more seaborn trade of iron ore take place. I'm curious what you think about the US tax plan and increasing trade tensions between the

US and other countries. Is that on your radar at all, is possibly hampering trade or is that just sort of noise for you for dry ball shipping. It really doesn't come into play if you think about just the major trade routes again, it's Brazil to China, Australia to China on the iron ore and coal front, and then you have a strong trade in the minor box, whether it be cement or soybeans, corn coming out of the US, golf going into Europe, going into India, going into China.

I don't you know, I don't see any trade issues with that. China has all the incentive in the world to continue growing on the steel production side. Based on what you're seeing from the demand side. What country do you think has a better economy than many give it credit right now? I think the Chinese economy is is strong.

I mean, I you know, I I go back over the last six eight months and I and I think that people are finally starting to recognize that iron ore imports are really growing at a significant level, and I think people failed to grasp the environmental um aspect of China and clamping on the pollution and how that is actually beneficial to dry ball shipping and the shipping of high quality iron ore. John woven Smith, thank you so much for joining joining us. He's president of Jenko Shipping,

which is based in New York. It's very interesting. Thank you, Thank you. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm Pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio became the thea