The Case For Crypto After Market Meltdown

then a rally back up to forty. Right now we're trading at forty one thousand, six d forty five dollars. What drove those moves as well as probably a number of things together, But there is probably no other better expert um with whom we could speak about this than Bobby Lee is the founder and CEO of Ballet, also co founder and former CEO of um btc C, the longest running bitcoin exchange. Bobby Um, thanks very much for your time this more thing. What do you think happened yesterday?

Was it just sort of Elon Musk doing an about face? Plus um the Chinese authorities saying you can't use bitcoin again? Yes, thank you for having me. It is it was a confluence of things. Certainly it started with Emon Musk's you know, you turn on bitcoin, so to speak, at least from a perspective of using it as a accepted currency for a purchase of TESTA vehicles. Uh you turned about this, uh,

you know, late last week. And um, certainly. The other aspect is the Chinese regulatory so called the new ban on bitcoin. But to analyze that, China didn't actually issue anything new. There was no new rules or anything. It was just a rehash of what it has previously published in September of two thousand seventeen. So it's a confluence of those two events which spooked the market. And then of course there's a third factor which is very popular.

Bitcoin is a is the factor of the trading, leverage trading. So people may not be aware of this, but bitcoin, besides being traded on a smart market, uh, there's a high volume activity in the futures, you know, sort of leverage trading market, and when there's news events, you know, the the short sellers take advantage of it and really hammer the people holding the long position, and that really helped drive it down a thirty dollars. So, Bobby, let's

talk about that volatility. Generally speaking, across the securities markets, that kind of volatility is not welcome, is considered not healthy. How do how do you view it? Yeah, I I I see that perspective. Unfortunately, bitcoin is a global sort of phenomenon and there and the markets are are not well regulated. Frankly speaking, so in equities market, each country has very strict regulatory agencies monitoring the trades and the insider news and so on and and so forth. And for

even for the centralize things like gold and precious metals. Uh, the exchanges are regulated. But unfortunately for bitcoin, because it's a global phenomenon, even though you know, the coin based gemini are regulated in the United States, you have a lot of exchanges who are offshore and they do that thing and it's very opaque. So so at least in the near term, it's gonna be very hard to to sort of, you know, try to try to control the volatility.

But as in my new books The Promise of Bitcoin, I try to point out to people, volatility does not equate to risk. So this is where there's a lot of confusion. How is that. Well, so when you ask me the question. There's an aliging assumption that volatility is bad, and the reason is because risk is bad. You know, something that's very high risk can be can be risky

quote unquote right. Um. But in the case of bitcoin, what I found over the my ten years sort of interacting with it is that it is well whisked adjusted. In other words, I I do you know, I just for disclosure, I want to put long position at bitcoin. I think that, uh, it has a huge potential as investment asset class. So I think for the for the amount of return that I expect to see for bitcoin in the coming five years, ten years, twenty years, I

think the volatility is well risk adjusted. I wonder about the big whales, Bobby. Um. You know, Bloomberg has been publishing a figure two percent of the wallets on of the assets. I'd love to get your take on that. And Um, the first time I ever met you was probably about ten years ago. I was having drinks with Matthew Mellon and Alex Waters and uh, you know, Matt had a fair share of bitcoin that he you know, locked up all over the place and I guess nobody

will ever access it again. The same him of course is true with you know, massive storied steaks like Satoshi's. What does it mean that so much of this, you know what was you know once and more than a trillion dollar market cap. It looks like, you know, billions of it was just not accessible and never will be accessible. Um. And then other billions of it could easily be moved

by one or two people. So so there is a there is sort of the the notion that there are rich people, you know, big whales in the industry, but certainly nowhere, nowhere near the figures you presented of did you say of the assets? That's what point? Maybe that may be true of some other currencies, but certainly not true for bitcoin. Uh. That's socially Nakamoto the the sudonymous

anonymous inventor of bitcoin. We people think he owns maybe over a million bitcoins and that's that's the single largest holding, right, So so if you can break it down very logically, that's uh at most ten percent. Uh. But again he hasn't surfaced. You know, there are a lot of rumors that he he a should have lost his private keys.

So the next the next biggest holdings would be would be those of those custodial providers, something like coin based custody or these large exchanges with a large wallet holding a lot of bitcoins, but in reality that is really held on custody for you know, thousands or even millions of customers. So that point is very well dispersed. I wouldn't worry about anything like that. But by the way, in reality on on in the physical world, you have

that phenomenon as well. You know, uh, you know what percentage of wealth is owned by what percentage of people? People say, you know their figures, you know, under ten percent of the people own physic sound of the world's wealth, whether it's real estate, equities or or other stuff. Right, Hey, Bobby, thank you so much for joining us. We really appreciate getting your thoughts here. Fascinating story. Lots of volatility in

the crypto world we've seen just just this week. Bobby Lee, founder and CEO Ballet, is also co founder and former CEO of bt C c UH. He's also an author recent book out entitled The Promise of Bitcoin, The Future of Money and How It Can Work for You that came out on May eighteen. Some more news out of Morgan Stanley today, Big shake up in the leadership ranks. And this follows on what we just saw earlier from JP Morgan. So some more changes that Morgan saying, let's

see what it means. We bring in our expert. That would be Alison Williams. She's a senior banks analyst for Bloomberg Intelligence. So Alison, what do you make of some of the changes here? It looks like Mr Gorman is setting up a race for potentially a successor. Here's that I would say, Um, you know, the two sort of leading candidates UH emerging from the announcements are no surprise. Um he did say, at least occurring to Bloomberg News. Um, he did say he expects to stand from at least

three more years. But then according to the the the official announcement, you know, basically making the head of institutional Ted Pics and the head of Wealth Management Andy Stafferstein as as sort of the the co UH presidents and so front running. I guess the front runners and the air apparent, And both of these executives have done UM

a great job over the years. Tech Pic, as you know, UM started out with leadership in the equities business and then took over all of global trading they are the global equities revenue leader, and UM, despite the fact that that's sort of the biggest association with them, they have really gained a lot of share in fixed income and then on the wealth management side, obviously that's a business that's done very well and become sort of the bigger

part of the bank, especially with two recent large deals. I don't want to sound too cynical, but are you allowed to choose UM two white men as possible successors these days? It seems like such a faux pa. Well these I mean, the one UM positive on the diversity front is that they are promoting the head of investor Relations, Sharon Yeshiva to UM, the head to to the CFO role. So that was so I think that's a positive UM. But building a bench takes time, and I think that's

UM important for all the firms. As we know, diversity is something that you need to grow over time. And for Morgan Stanley, these you know, these two UM executives have run those two divisions and they really were sort of the most clear cut choice is j Morgan. On the other hand, UM, you know what's interesting is CFO Marianne Lake, who has probably a much longer standing with the investment relationship with the investment community than her her

new co head Jennifer keep sack Um. But certainly Marianne has long been considered a potential for that role, Jennifer as well in recent years, whereas Morgan family just does not have that bench, but perhaps trying to build it a little bit now, Alison. You know, we think about you know, financial titans. Obviously Jamie Diamond right now is the leader. Give us a sense of how shareholders and folks like you who you know spend a lot of time in the financial services industry. How does Mr Gorman

kind of stack up in terms of his tenure. Well, he's done a great job and I would say that um, you know, especially I think in the early years he made some tough voices within the organization. I think that that in general, um, he's been shareholder friendly over the years in terms of um, you know, focusing on things like uh cost control. They've um pretty much delivered all of the targets they set um over the several year tenure.

And I think the investment community really likes the shift at the bank more towards the more stable wealth management business. But again They've had great success on the institutional side as well, even though it's a lesser part of their their business. Now, so what does I mean in terms of the league tables here? Who are the rising stars?

Where does Morgan Stanley fit into the picture? Well, Morgan Stanley, as I noted earlier, they're they're the leader in global equities trading, so that's I think been been strong and

they've gained share um in fixed income. The other notable edition for Morgan Stanley is you know, as an equities underwriter and as a leader in M and A. So it's really Morgan Stanley, JP Morgan and Golden Sex are sort of the you know as we say they're they're the consistent leaders in equity, undant underwriting and traditional I p o s over time, although they have been less active than perhaps some others in facts, they've also done

business there um. Both Goldman and Morgan Stanley are are less strong on the death diversus someone like JP Morgan um, but they do get sort of a talent and expected to get a tale in there in M and A. Um. Goldman is the clear revenue leader there um. But again, the three players that I talked about are are very active and that's the business that we expect is very strong fundament with support, Alison, are these are these league table standings and you can see them in many different

ways in the Bloomberg with League Rammy go, etcetera. Are they important to UM equity returns? Does it? Does it really play through and how investors can make money on these banks? Sure? And and so I think that's the that's the key point, because what matters to investors is profitability. UM. But Morgan Stanley as well as the largest US banks have benefited from sort of a virtuous cycle of scale

and spending and so UM. The benefit of scale is that UM, it gives you more money to invest in technology. That's been the key battleground for financial companies over the last decade. And so that's where the scale has been helpful. Alice, thanks so much for joining us. Always great to get UM your insight. Alison Williams is a senior industry analyst Global Investment, Banks and Asset Management for Bloomberg Intelligence. Talking to us about the new succession plan over at Morgan

Stanley really our top story today, this is Bloomberg. Yeah, UM, let's get over right now to Burt Flexinger. We had the pleasure of speaking with Burt bree Flee and and we're rudely interrupted UM the other day on the retail UM earnings UH rampage that we saw over the last few days. It just went on and on yesterday. He's managing director of Strategic Resource Group, and he can come back on thankfully and share a couple more minutes with us. But what did you think after we got you know,

all of the UM UH, Walmart, Target, Macy's. I mean, we got really lows home depot, just a ton of big box retailers out as well. How does the economy look from from a consumer perspective? I UH, Paul, Paul, and Matt. The the economy looks spectacular from a consumer perspective. Consumers have paid down seven fifty million dollars in debt or about of total debt and are ready to spend. But the interesting thing is is you reference from yesterday

is UM. Nobody's talking about leadership, innovation, inflation, and obesity, which all UM unconventionally combine to really drive up retail. On the Bloomberg terminal and the S and P x RT index retails up about a year to date and about a hundred and forty ttm or trailing twelve months. And at the same time, we have record obesity levels for adults from toddlers to teens. They're gonna need bigger clothes.

Inflation means restaurants are uncompetitive on costs. People eating more at home, and uh be between clothing consumables, hard goods and soft goods advantage lows, advantage BJS and advantaged calls, all of whom reported record breaking numbers, and all of whom have great leaders and tremendous boards. From an E, S G and diversity standpoint, it is interesting that people got fatter staying home. You would have thought maybe they'd

eat healthier. Um, that's not what happened. I guess it's John Mackie once once once told me consumers want proverbial quote unquote sin in salvation. They want salvation with natural and organics. But when their floods and major natural disasters, the foods full flavor, salt, and sugar are the first to sell out in the stores, and the last to go are the natural and organic items. Hey Bert, didn't

you hear any from any of these companies. Supply chain challenges here we've heard that in a lot of industries, are they being able to get the product they need on the shelves? Yes, supply chain and and UH to be b JS, Lowe's Lows UH respective credit they're investing record capital and inventories. But also it's Marshall Merrifield and the directors of the West Coast Sports Unwind. The backlog is more ships seafair as containers come through the West Core,

West Coast Golf and Eastern ports. UH, you'll see a record amount of special situation inventory marked H to sell great margins and great treasure hunts for costco b JS and and Lows and the others UH to really capitalize on the logistics and supply chain being UH completely jammed up for fifteen months and opening up to record breaking shipments between now and New Year's which means it will be a great memorial data, labor Day, back to school

and certainly holiday selling to all right, Bert, thanks so much for jumping on with us. We always appreciate getting your thoughts on all things retail. Bert Flickinger, Managing Director as Strategic Resource Group, was a busy, busy week for retailer earnings generally coming in very very strong, as you would expect easy comparisons. Plus, this economy is opening up. This is Bloomberg. Now, let's get into the world of

retail investing. And I don't mean, you know, buying chairs of Kmart or Kroger, but I mean, um, you know Wall Street bets, diamond hands, Reddit um boards about game stop and alt coins to the moon. Mr Lena a golf of Polo who joins US now personal finance reporter

at Bloomberg News. She wrote one of the most read stories on the terminal today and Mr Lenna, I have to say it's a little bit depressing, um reading about this sad dude, Eric Hackney, who's uh his wife Brittany, and he's got a couple of kids, and he just wants to get rich fast, right without having to do anything. So um, he buys what twenty billion Australian safe Shepherd coin.

That's exactly right. I mean, you know, this is one could say, pretty parallel to the idea of gambling, right, Like you are basically throwing a couple of hundreds of dollars into uh, into something that you hope will help you get rich quick. But there's absolutely no basis of investing in these coins because of their fundamentals. This is

a pure gamble. And the reason why people like Eric are you know, interested in throwing their money and assets like that, is because they've seen people become very rich through these vehicles. And namely, I think the one that we all look at is dodge Coin, right like, this is a coin that started as a joke, um, and if you threw a couple of hundred dollars into dodge coin last July, that meant that those dollars now are

worth hundreds of thousands of dollars. And so what these investors are are trying to figure out is what's the next dodge Coin. And that's when the Australian Safe Shepherd

coin comes in. But also other cryptocurrencies that are really weirdly named and exists in this sort of really weird um like space within the crypto world called defied for Decentralized Finance and their named you know, after dogs like Sidau or Papua u or baby Nu, but also names like Taco Cat and even safe Moon, you know, which is a coin that was endorsed by Dave Portnoy just a few a few days ago, and so you're really seeing these coins um game traction, and what these retail

investors are trying to figure out is which one of them is going to become the next Dodge coin, because hey, if it happened once, it's really will happen again, right, all right, So this is kind of begs, you know, being an old Wall Street guy trading in you know, the boring old stock markets, bond markets, things like that. It just kind of begs for SMA, yes and my munis, thank you very much, just kind of begs for some regulatory oversight. So where do we stand on that? You know,

not really not really far into it. I mean this space is as of now completely unregulated, which is why you're seeing a lot of these uh you know, players in this space come in and basically do whatever whatever they want. I mean, the pump and dump scheme in this industry and in this space is known as the rug put right because creating a coin right now it's

so easy. There's all these different platforms that exists in the DeFi space where you can basically go on log in at a couple of parameters, and you know, ten minutes or an hour later, you you have a coin and then what a lot of times you know, uh, and that a careers with sort of bad incentives do is they'll create a coin, they'll mint it, they'll they'll promote it, um, but they'll buy in early and then they'll get a lot of other people to buy into it,

and that'll cause the price to go up, and then all of a sudden they'll just pull all of their assets and have the price falls. So whoever invested basically loses their money. And that is something that's happening pretty frequently. And I mean, but can we I want two things I have to say because I'm getting a lot of messages here. Um, it's dog coin, not dodge coin. Doge. It's almost it's supposed to be fun to say. It's a ridiculous name. Um, like you know, a royal uh

person in Venice the doge. Um. I think though someone like Eric right, um, who's who's chugging bud light my ties and he he knows that this is a scam, right, I mean, everyone who's involved this isn't any worse than people, um, you know, on oxygen, smoking a pack of Marlborough's in a casino, you know, putting their life savings into the

slot machine or even walking around New York. I see, you know, the least fortunate people are always in the seven eleven buying all the scratch offs with the money that you know, they don't have to lose, right, so this isn't any worse than that. In fact, these people on Wall Street bets they know what they're in, but

they don't they don't mind. And I think of the reason why they don't um and this is based clearly on you know, having spoken to a lot of these investors, is that they're not spending their life savings into these coins. Right We're talking about a couple of hundred dollars, which in their minds is safer than spending it on a

lottery tation or going to a casino. Because if you are able to spend enough time on social media where you're seeing uh, these coins being talked about, promote it, and you're able to strategically get in early and pull your money out at the right time, it could work. Is this a safe investment? Definitely? You know, definitely not. There's so much prism to it. But at the end of the day, if you put in two hundred dollars

or three d dollars. That's how much you lose, and I think a lot of people are comfortable doing that. All right, fascinating story. Mr Lena a gulf of Polo, Thank you so much. He's a personal financier quarter for Bloomberg News. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three. On Fall Sweeney,

I'm on Twitter at pt Sweeney before the podcast. You can always catch us worldwide at Bloomberg Radio