Why Bermuda Is At The Forefront Of Blockchain Tech (Podcast)

Help us better understand what is going on in Bermuda. We welcome the honorable David Birt. He's Premier of the government in Bermuda. He joins us live here on a Bloomberg Interactive Broker Studio premiere. Thank you so much for being with us. I wonder if you could just get my When I think blockchain, when I think krypto, I don't necessarily think of Bermuda. So tell me what's going

on on that beautiful island Bermuda. Thank you very much. Paul. Well, when you think blockchain and crypto in the future, you should think about Bermuda because Bermuda was the first country in the world to actually have a full suite of laws and regulations to govern companies in this space. And we did that because we want to remain on the

forefront of innovation in financial services. So now our Bermuda Monetary Authority, who is a world renowned regulator UM has an entire fintech team and we are there now able to license companies in this space to make sure that consumers are protected and that companies can grow and expand their services in a well regulated environment. So, uh, just I'm wondering, premiere, how closely do you watch the price of bitcoin? UM? I actually don't watch the price of bitcoin.

I just gave him a quote bitcoin I just popped up on the screen. Well, I guess the reason why I ask is does the price of bitcoin cohere or sort of match the growing or waning demand by institutional investors for blockchain for the services that you're hoping Bermuda

will be home to UM. I think that certainly the price of bitcoin as a factor, because a lot of the companies that are backed by persons who did make a lot of money during the run up in the price of bitcoin certainly are able to better deploy that capital but I think on a broader level, we're not looking at it from the short term. We're looking at it from the long term. This is just getting started.

So what we want to ensure is that companies that are looking for that regulation have a home where they

have a government that understands this. I have a technology background, they have a government that understands this, they have a regulator that's willing to work with them so they can design these new cutting edge products which will not have you know, digital currency is its own asset class, but we're talking about new financial products which heretofore you were not able to create, which you can now create UM

with UH with these new UH distributed currencies. So we think about blockchain the technology, what are some of the applications that some of the companies that are coming to Bermuda think that might be some of the initial applications of blockchain or fintech. And broadly speaking, I can give you an example of one company which is called Diamond Standard, which is just announced that they're increasing the amount of

jobs which UH. They have UM in Bermuda and are currently in the being regulated by the Muta Monitory Authority. And these are things that which you can do which you weren't able to do before. Their commoditizing diamonds. So before diamonds are one of those things you can't cut

it because it loves its value. But that value is there, that value exists, So you can have secure custody those uh, those diamonds while at the same points in time leveraging those uh leveraging that asset and making use of it from that perspective, and you can do that with blockchain. You couldn't do that before. So Premiere, I'm just wondering. We talk about blockchain, we talked about virtual currencies. Blockchain increasingly is becoming sort of the state domain of back

office operations. Virtual currencies still have a certain sexiness to them, but what is the primary business that you expect to

fuel the industry in Bermuda? Is it blockchain? Is the back office sort of operations and tracking, or is it sort of this idea of virtual gold um I would say that it's more blockchain generally distributed leisure technologies, but they're but they're hard to divide because when we talk about you here bitcoin, which is a digital currency in its effect, but there are so many other types of digital currencies of which can be deployed to incentivize certain

types of behavior. So when you're talking about the data, the data which you own, how do you get paid for the data which you own? In many different aspects. These are just two new structures which are able to be brought in place by distributed leisure technology. So it's the entire gamut right now. As I say, we're just at lead cutting edge, we're just at the beginning. So

we're now beginning to see companies that are thinking. So in Bermuda right now, you can have a Bermuda company that can tokenize a real estate asset here in New York City and divide that amongst investors into multiple intantestimal divisions. These are things of which you can do efficiently now through blockchain that you were not able to do previously through traditional financial sector. We're speaking with the Honorable David Bird, the Premier of the Government of Bermuda, talking about all

things crypto and fintech on the island of Bermuda. So a mirror wondering you know, Bermuda has always had a very strong regulatory framework. As you mentioned, I'm guessing from the insurance industry that that that's been home to the NFER for a long time. Who does Bermuda compete against in these early stages of trying to be the a home or a trust at home for UH blockchain type

technology companies. Bermuda is not in composition with anyone. And there's a reason why I say that there's a lot of other countries around the world that will be engaged in the hype cycle. The fact is that as this early stages, there's going to be a lot of companies that pop up and a lot of companies that don't. In Bermuda, we started our licensing regime in September and today we've only had one company that's passed our licensing process.

And there's a reason why we want quality and not quantity. We want to have those large institutional back companies that can actually pass those large hurdles because we don't want to have as a jurisdiction that protects its reputation consumers that would have lost a lot of money due to a cybersecurity era and the wrest. We have strict custody rules, strict cybersecurity rules and all those things which is necessary

for adoption of this industry. So what I would say is that from that perspective we compete with no one. But I just want to say where Bermuda stands, there's only two countries in the world that have regulatory equivalents when it comes to risk, with both United States and the European Union, and that's Bermuda in Switzerland. And that's the class in which Bermuda plays in premiere. There is a little bit of a complication recently which has to

do with Britain and Brexit. We do know that you guys are self governed, but you are a British territory and I'm just wondering how this sort of escalating debate in Parliament and and the likelihood of the increasing likelihood of potentially even a heartbreak affects your your your your territories economy. The only thing that I can say is the uncertainty is not helpful and we hope that someone would make a decision at some point in time um

and it's very unfortunate. Ber Bermuda has its own relationships with the European Union and those relations as will continue. We have solvency to equivalents in insurance that was not through the United Kingdom that was through Bermuda and Bermuda Monitor Authority, direct liaise with the European Union, and those things will continue. We just hope that they can have some clarity as the nature the relationships so that we can actually plan our future engagement. But we expect minimal

impact Bermuda from Brexit. Do you actually watch any of the Parliament debates? I woke up this morning watching Premier Prime Minister's question time, so I do. Actually. My wife laughs at me. She says that I'm addicted to Brexit and I can't get enough of the Brexit news. Well then you can. You'd be right at home up Bloomberg, cause we cover it very closely. Unfortunately, people have to be addicted because the outcome could potentially have pretty big

ramifications on Britain and the territories. The Honorable David Burt, thank you so much for being with us. The Honorable David Burt, Premiere of the Government of Bermuda, joining us from our interactive broker studios in New York. Well. As the US and China trade tensions continue to simmer, markets are understandably nervous and our next guest is eminently qualified

to a pine on these ongoing trade negotiations. Christopher Smartest, head of Bearings Investment Institute UH, and from he served US Special Assistant to the President at the National Economic Council and the National Security Council, where he was principal advisor on trade, investment and a wide range of global economic issues. Christopher, thank you so much for being with us.

You just want to get your sense for the last ten days of really seeing these trade negotiations and the tensions between US and China really make a significant turn. Where do you think we are right now? I think right now we're still in kind of late stage throws of closing in on a deal. Of course, you get different messages from the White House in different days, but I think that seems to be where we're still headed.

I think those who have done the long term negotiations with China this is relatively typical as we get closer to the end, where the bureaucracy back home may pull back from one or two agreed principles UH. And that's not unusual. I think it's not unusual for an American side, a political leader too threatened to walk away from the deal to sort of try and secure as much as as he can at the end of the day, but

I think that's where we're still headed. I think the broader issue, though, is that looking out over the next few years or even decades, UH tariffs are going to be very much a part of our relationship with China. Whether they come off in the near term, I think they will always be looming in the background as a potential threat. And that's a new thing that investors in

business UM managers are gonna have to deal with. Well and Christopher, we have seen money coming out of emerging markets funds over the past week or so as the rhetoric has gotten increasingly heated between China and the US. If the threat of tariffs does hang over China and the relationship between China the US in the years to come, what does that do for UM. Well, it's not great, since EM always depends on vibrant and growing UH international trade.

But I think as investors learned to understand what the new framework is. I mean, tariffs are principally on the US China trade relationship. That creates opportunities for other emerging markets, particularly in South Asia. We've already seen that over the last few years, where costs in China have been rising and so people are looking for expanding their supply chains to UM, Malaysia, Singapore, Indonesia and other other countries, so

that will continue as well. One of the concerns Christopher is as to the extent that this trade tension goes on longer than people expect and the tariffs remain in place, it may prompt China to sell uh U S treasuries their holdings of US treasuries. What is do you think that could occur will occur? And topic of a deal is that, well, if if they did, it would be

a big deal. I think the chances of them doing that in this sudden, reactive, punitive way or next to nil uh it would be a tremendously self self damaging act to undertake. China uses those reserves in order to help manage the movements of its own currency uh and you know, a quick sell off would um would lower the value of those um of those treasuries it continues to own, as well as raising interest rates and all the consequences of the global economy on which China ultimately depends.

So I think that's a very you know, there will be times where they buy slightly less or they buy slightly more. But I think looking to that as the way they would react is the wrong place to look. More likely than not, they will react by imposing new restrictions on American companies doing business in China. Um something they've been very good at, something they've been trying to

loosen up on. But it's very easy to reimpose those restrictions making it more difficult for American firms already in China. So Chris, President Trump has talked about how he now has to deal with this because previous presidents have not, and that the just the relationship between the U. S and China has been incredibly complicated in China's been taking

advantage of US companies for years. As a former member of the Obama administration, what's your response, Well, we have been as a country dealing with the rise of China for years, for decades, and to be you know, honest, I think what President Trump is trying to achieve is very much in line with what previous presidents in both parties have been trying to achieve, which is to recognize that China is a very big and growing part of the global economy that we needed to be more integrated

and more um in line with global trade and investment practices. How do you achieve that? That's the big question. The President has chosen to be much more forthcoming on the punitive tariff side of things. Uh, it may work. Uh, you know, time will tell. I think the issue is that there is a single agreement that will solve the problem anything that is done or agreed over the next few months. These are long term issues that will be coming back to and talking to China with for years

and years ahead. And it's really much more about the kind of relationship you're able to develop with China to manage these issues, I think, much more than any particular deal that you may sign. Christopher Smart, thank you so much for being with us. Christopher Smart, head of Bearings Investment Institute Bearings Overseas more than three hundred billion dollars

coming to us from Boston. Christopher really raises some interesting points, which is this is not that big of a departure from previous administrations in terms of trying to address the U. S. China relationship when it comes to trade. It is just a different approach and the question is will tariffs work? And only time will tell. Well, we did get those weaker than expected retail sales data figures out of the US this morning. There is a question of what this

means for the consumer joining us now. Craig Johnson, president of Customer Growth Partners, joining us in our eleven three oh studios. Craig, thank you so much for being with us. When you joined us back in February, you said that the dismal, the dismal retail sales print that we saw earlier in the year was calculated wrong and the you expect five percent retail sales growth for this year. Do

you still see that to be the case after April's report? Well, we were actually very encouraged by the April report because we look at things on a year of year unadjusted basis, and April sales ex autos, Excasole and X rests was up five pe a touch above our forecast for the

year um and that shows very strong growth. The nominal sequential zero point to growth, we think to fall to the way to look fall the way to look at things because the adjustment factors two to ten full points in any given month, you know more than an order of magnitude. So the question is as a point to represent actual sales growth or the accuracy of the adjustment factor. So but apples and apples the year of the year,

it's five point one up. So, Craig, we had Macy's report, and we're gonna have a bunch of the big retailers report their earnings coming up better than expected results out of macy Today stocks trading up modestly. What did you take out of the Macy's numbers, Well, the department store

sector is is very troubled now. And the zero point seven percent comp they posted, it's like the old line in the Land of the Blind and one eyed man is king, and so of a sorry bunch um the zero point seven it was a very credible thing, uh performance. And the other aspect of it is the quarters started out very slow. The first six or seven weeks of

the quarter were very slow, almost abysmal. Allen sharply and so Mazie's ended up on a on a high note entering May and we think it's that may well be nicely positioned for um for summer and back to school. Not that the point seven is going to be a pin, you know, five percent, but it should creep up from

that point. So Greig I want to go back to what you were just talking about with the fact that you still are optimistic that the retail sales aut it that we saw this morning was actually much more positive than the market is reading it to be. What's the market getting wrong because you saw so off deep end after this data come out and you saw yields plunge on on US treasury is given the fact that people are pricing in slower growth without consumer support. Um, well,

I think there's a There's a couple of factors at play. UM. One is the accuracy of the adjustment factor, and the Census Bureau has been changing their methodology uh for calculating

the figure. And we believe that the adjustment factors retail is changing so quickly um with the rise of the Internet that um uh that the statistics generated by the Censors Bureau, we think are faulty unless you look at things on an unadjusted year of a year basis and take online Online is by far the fastest growing sector in December they showed since BREL showed like a one

percent growth for the Internet. That's that hasn't happened like ever to have just a one percent growth, And then now this month in April, year of a year, Uh, it was aleven point nine. Um, so they're they're the numbers are gradually improving on a accuracy basis, but we think there are some questions about the methodology that over time, hopeully'll get cleared up. So so Craig. When I look at the Macy's release, I see a lot of talk

about from management by cutting costs. And I can understand the need to cut costs in a in an environment, in a business where there's not a lot of top line growth. But at the same time, you feel like the traditional retailers that department stores ought to be investing in there maybe in their business trying to come but new models, new ways to reach perhaps the the the new consumer. How do you come out on balancing the cost cuts to make your numbers versus spending to try

to drive top line growth. Well, I think your poll your point is well taken. And Macy's and other smart department stores, first of all, they they're beginning to recognize that they they work in a declining sector. Um it's department stares. Traditional department store is only comprised about one point three percent of over our retail sales, So it's

a declining size of the pie. And so a store like Macy's, which has six D eight unit fleet, needs to trim the fleet on the one hand, but ramp up what they call their growth fifty, which is growth one fifty, which is the premier stores that are actually you know, pulling the train there, and they need to dump about another hundred stores that are just not pulling their weight. So I wanted to sort of broaden out here with respect to retailers because we talked about sort

of the weakening consumer. You think is is a data issue, but what about tariffs? I mean, how much can these retailers absorb the costs? How much can they pass it along? And what are you expecting there? Well, um, we did a study that shows about everything that's been enacted now, in other words, through I think it was May ten um, the households would have an incremental um uh burden of

about five and sixty dollars per household. And to put that in perspective, collectively across retail, that represents about zero point nine of total sales, which is not nothing, but it's not zero, but it's not some huge burden. And what happens is is that UM retailers UH or brands that try to raise prices are going to meet a lot of price resistance from the consumer. And if the retailer or the brand is smart, they will take that pressure from consumers and work it right back up the

supply chain. UM. So example, number one known branded consumer product coming out of China's chin Dao. Let's say the landed cost of a six packs four bucks, and they try to raise that up UH, and after wholesale and retail margins, they're going to get something around the webbin dollars well from what might be now about nine and a half or ten dollars. Consumers will flock out of that, they'll bail out of chin Dao, and if they want to keep the business, they're going to have to eat

eat some of you. That's it would be interesting to see. It's a very good point about, you know, how much will be passed along the consumers or will be taken by the supply chain. Craig Johnson, president of Customer Growth Partners, joining us here in our Bloomberg Interactive Broker Studio talking about Macy's talking about the retail sales number UH Craig says, you know, a year of a year better than the headline looks, and also talking about tariffs and the impact

on the consumer end on retail spending. Well, two of the tech giants out of China reported earnings, Ali Baba, Intense Cent. Both stocks are up about one to two today. So to dig deeper into those earnings, so what it might mean about the underlying Chinese economy the Chinese consumer, we turned to Lulu Chen. Lulu is a reporter for Bloomberg News based in Hong Kong. Lulu, thanks for staying up late to be with us. Let's start with Ali Baba first. What are the takeaways the highlights for you

from the Ali Baba earnings? So for Ali Baba, it proved to be really resilient, especially given how the economy has not been doing that great in China. Um, if you look at their core e commerce business, social really strong growth there. And then also the key metric that people are looking at is their customer management revenue and

that's where advertising is included. That posted a thirty one percent growth, definitely a pickup and showing the fact that the company is able to monetize what it has been trying to push out a new initiative called recommendation feed and based on what consumers like their past shopping experiences, and and that has able been able to help the company leare more consumers to buy products on the on the site, and and returns also get advertisers to spend

more money as well. So Lulu, the fact that Ali Baba posted sales and earnings that both topped estimates, is this a sign that the Chinese consumer is stronger than some people are giving them credit for, or is this a sign that Ali Baba is simply consolidating the market share. I think if you look at the total transaction figures, the growth was not that strong. So I don't think that Chinese e commerce as a whole is immune to

the slowdown and macro economy. But Ali Baba has been managing to do really well as um introduced this thing called recommendations based feeds, and it's really using the eye and algorithms to show different people different user interfaces and product fees and that and return generates more shopping h churn from users, and for advertisers, what they want is to make sure that there are a lot their their dollar is spent in the right places and so for them, uh,

it's also great to know that they're targeting the right users when they spent those advertising dollars. So Ali Baba has really been hunting in on that. So let's switch gears to ten Cent, another large Chinese technology company. They reported as well, what were your takeaways there? That stock has not been as strong a performer, you know over the its recent past as Ali Baba has been. Yeah, it's a it's a next picture for a ten Cent,

I guess. They also showed signs of recovery definitely. Analysts are saying that the worst is behind us, given how brutal the past year has been, especially with the regulatary crackdowns. At least for now, their their game approval. The pipelines are back on UM. The company is rolling out this new game called a Peacekeeper Leak, and it's sort of in the same drama as Battle Royale, UM in the same vein as pup G and also Fortnite. So a good game breaks in twenty million dollars within the first

five days that there is. Also, user reviews are kind of a mixed bag as well, so we still need some more time to see whether Tencent can really get back to its glory days where they were just posting so much revenue growth UM based on share gaming demand. You know, there was a stunning statistic in ten cents earnings that the cash the company spent on investing in other companies was at from the year before. How barished

is that for the entire tech sector in China. UM that statistic is is based on I think what the company really said was that the amount that they spent on cash for investing and its investing as a whole has actually dropped in UH. Investing in Portofolio companies is definitely part of that UM for Tencent. UM management has always been very adamant and since that they said, they say that they're going to keep investing. The company has invested in more than seven companies globally. I don't think

they're backtracking from that strategy as of now. So the Legitio briefly did either company, how any commentary what they thought or how they thought trade negotiations would go. Yeah, Ali Baba um Joe's Hive vice chairman for Ali Baba was very vocal about this. UM. He tried to obviously put a positive spin on it and say that as part of the negotiation for the trade wars, China will become a net import country. And Ali Baba has been positioning for this for a very long period of time.

They really want to leverage their cross border transaction UH infrastructure UH to fully help OTHERIR exporters outside of China to sell to train consumers. And it's all part of the whole consumption upgrade narrative that they've been talking for many years. Very good, Lulu Chen, Thank you so much. Lulu's reporter for Bloomberg News in Hong Kong, staying up late to cover the Ali Baba intencent earnings and to share her thoughts with us. We appreciate that. Again, Ali

Bab inten sent to Chinese tech giants reporting earnings. I think Ali Baba people really look at the Alibaba story really as a call on or a view into the Chinese consumer and consumer spending. And you know, good numbers, Lisa, and I think you know, at least in the short term, um, you know, not much of an impact from the trade uncertainty, but obviously it'll be quarters to come to see how the Chinese consumer really responds to trade uncertainty. Thanks for

listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm Lisa abram Woyits I'm on Twitter at Lisa abram Woits One. Before the podcast, you can always catch us worldwide on Bloomberg Radio