July 2, 2025 • 45 mins
Watch Bloomberg Businessweek Daily LIVE every day on YouTube: http://bit.ly/3vTiACF.
A rally in several big techs fueled gains in stocks, with the market extending its advance as President Donald Trump said he reached a trade deal with Vietnam. Treasuries fell as a selloff in UK bonds underscored deficit worries. The dollar was steady.
Following earlier losses driven by weak jobs data, the S&P 500 rose to fresh all-time highs. Nike Inc. climbed alongside other apparel and footwear companies amid hopes the latest US trade deal will avert a potential supply-chain catastrophe. Tech megacaps led gains, with Tesla Inc. jumping 5% as a drop in sales was seen as better than feared. Marvell Technology Inc. slid about 2.5% on a report that Microsoft Corp. is scaling back its ambitions for AI chips to overcome delays.
Longer-dated Treasuries underperformed, following moves in the UK, where concerns about Chancellor of the Exchequer Rachel Reeves’ future reignited questions over the nation’s fiscal position. Investors have raised similar concerns in the US, where the Senate passed Trump’s sweeping tax and spending bill.In the run-up to the jobs report, economists forecast employers added 110,000 jobs in June — the fewest in four months — amid a slight rise in the unemployment rate to 4.3%. The Bureau of Labor Statistics report is due Thursday, a day earlier than usual because of the Independence Day holiday.
Data Wednesday showed employment at US companies fell for the first time in over two years. Despite signs of a downshift, Federal Reserve Chair Jerome Powell has repeated the labor market remains solid. Policymakers have refrained from lowering interest rates this year as they wait to see the impact of tariffs on inflation.
Today's show features:
- Brent Meyer, Assistant Vice President and Economist in the Economic Survey Research Center at the Federal Reserve Bank of Atlanta and Bloomberg TV and Radio International Economics & Policy Correspondent Mike McKee on a new report from the Atlanta Fed: “The Evolving Impact of Tariffs on CFOs' Outlook”
- Bloomberg Businessweek writer Deena Shanker on her story about SNAP cuts in the Federal tax and spending bill potentially hurting people in red and blue states alike
- Bloomberg Businessweek Editor and Writer Laura Bliss on her Bloomberg Big Take about landfills around the US reaching scorching temperatures and getting nearby residents sick
- Fred Thiel, Chairman and CEO of MARA on the regulatory outlook for Bitcoin and the company’s energy consumption and deployment strategy in terms of Bitcoin mining
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:08):
This is Bloomberg Business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy, plus global business, finance
and tech news as it happens. The Bloomberg Business Weekdaily
Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 3 (00:32):
In thirteen days, earning Season in the US gets underway
JP Morgan Chase kicking it off before the market open,
along with a few other big banks that will happen
in July fifteenth. It is also what's so great about this, Matt,
I love earning season. I feel like it's a gut
check on companies. And I know sometimes we feel like
companies manage expectations in a big way, but we also
do hear from the c suites on those analysts and
(00:52):
investor calls.
Speaker 4 (00:53):
Yeah.
Speaker 5 (00:54):
Absolutely, I mean that's the most important part, right. It
doesn't really matter once you get there, how they did
in the court of their reporting on It really matters
what the outlook is exactly, all right.
Speaker 3 (01:03):
And we're going to talk a little bit about outlook
because our Michael McKee actually bringing this to our attention
this morning. A survey out from the Atlanta Fed on
the evolving impact of tariffs on cfo's outlooks. As we said,
I think, published this morning. Mike is, of course Bloomberg
News International Economics and Policy correspondent. He's right here in
our studio and joining us from Atlanta is Brent Meyer.
He's assistant vice president and economist at the Economic Survey
(01:26):
Research Center at the Fed Bank of Atlanta. Great to
have you here with us both. Brent Mike did share
your survey with us this morning. Lay it out for
us and what you guys found out.
Speaker 6 (01:38):
Now, good afternoon, thanks for having me so. Basically, what
we found is over the past few quarters, CFOs are
seeing a darkening outlook and it seems to be connected
to firms that are the most heavily exposed to tariffs.
They have a much heavier exposure on inputs and supplies
coming from abroad. Their outlooks deteriorated markedly, so their expectations
(02:03):
for GDP growth saale in twenty twenty five. They're down
about a percentage point from where they were at the
end of last year. Their sales revenue growth projections are down,
and then on the flip side, unit cost expectations and
price expectations are up quite a bit. So again we
see these things as sort of CFO see things darkening
(02:28):
materially as we move throughout the remainder of the year.
Speaker 5 (02:31):
On the other hand, they're coming from a pretty good level, right.
We were talking with near CaSR earlier. He wrote a
piece for Bloomberg Opinion and pointed out that profit margins
for the S and P five hundred equal weight index
are at a record high, so they do have some
cushion into which to absorb tariffs if they have to.
Speaker 6 (02:53):
Yeah, potentially, And that's that's an interesting angle. So one
thing we can look at is both firms cost and
priced projections for the year their expectations for the year.
And one thing that we see here is that the
sort of margin squeeze seems to be strongest on those
(03:14):
that are more heavily exposed to the potential tariffs and
the tariff picture. The other thing that's kind of interesting
here is that firms that aren't directly exposed to teriffs
seem to be pushing up their price expectations a little
bit more than where their costs are coming from so
(03:36):
we might see margin compression on those that are most
heavily exposed, and at the same time on those that
maybe aren't as heavily exposed to the sort of tear
picture seem a little bit of increased margin or something.
Speaker 5 (03:51):
You know from I mean, that is absolutely fascinating, Mike.
What do you make Mike, I'm gonna bring Mike McKee here,
what do you make of that? So firm that don't
really need to pay for it or trying to take
price for it.
Speaker 7 (04:04):
Well, it doesn't surprise anybody, I don't think, and it
will add to inflation questions, shall we say, not necessarily
to inflation. We'll have to see how widespread that is.
I'm curious though, when you did your survey the time
frame on it. In other words, did anybody say, we
(04:24):
might feel a whole lot better come July eighth when
we find out what the reciprocal tariffs are.
Speaker 6 (04:33):
So, no, we didn't ask that question. It would have
been a great question to ask. Next time we go
in the field, we'll definitely be able to pick that up.
But the survey was in the field during the first
couple of weeks at June, and we're comparing really what
we wrote in this article compares to the end of
last year, so we can see as they move forward
(04:53):
from say, right around the time of the election through
the first quarter survey, in the second quarter survey, the
sort of march your deterioration on sales revenue growth, and
then they're ratcheting up on the price picture.
Speaker 3 (05:09):
You know, Brett, we love the stuff that we get
from the various regional feds. I think about the GDP
now Index that we get from from you know, you guys,
and I'm sure stuff like this, you know how it
works into some of your thoughts about kind of where
we're going. But as you are gathering information anecdotally real
data points public, private sector, I mean, what's the picture
(05:33):
that you are seeing in the US economy right now?
Speaker 6 (05:37):
Oh, that's a good question. So if I take a
wholesome approach and look across all our surveys and here
at the Atlanta FED, we all still have a regional
economic information network. So this is a group of folks
that are chatting face to face with businesses on a
daily basis. It's it's a picture of very heightened uncertainty,
(05:57):
a picture with you know, basically they're a lot of
clouds on the horizon. We don't know exactly how things
are going to play out. But at the same time,
firms seem to be moving forward in a direction and
expecting expecting one to ratchet up price as the you know,
as tariffs really hit their bottom line, and then at
the same time anticipating as they're raising price, seeing some
(06:22):
of that bite into their sales revenue.
Speaker 7 (06:26):
Did they suggest any actions they're going to take or
is this a case of what we've been hearing in
terms of the pagebook and other FED communications that companies
are just sort of sitting and waiting to make decisions.
Speaker 6 (06:40):
No, that's a good question, Mike. So it's there tends
to be some dispersion here across maybe firm size, so
larger firm size, larger firms that are a bit more agile,
that are able to make different moves there. It seems
like they're doing so smaller firms. I think the picture
is a bit cloudy there, but I think the bite
(07:02):
from all of this action to date it is likely
to hit them a little bit harder. They're a little
bit less well connected when we're talking about reconfiguring supply
chains and things like that.
Speaker 5 (07:15):
I wonder how this affects the labor market because it
seems that the larger firms, from what I'm hearing you say,
are going to be able to deal with this better.
And that is I think what has been our assumption.
The smaller firms are going to have a bit much
bigger problem, especially if they're exposed to international supply chains.
But those smaller firms, don't they make up a massive
(07:38):
share of US jobs and job creation.
Speaker 6 (07:42):
Yeah. I don't know what it is off the top
of my head, but I think it's a very sizable
share of overall employment on firms that are less than
two hundred and fifty employees in size. And yeah, that's right.
So I think if you're looking at the rear view mirror,
the employment picture looks positive. I mean, we've seen some slowing,
but not not a whole lot of you know, quick
(08:06):
deterioration as we look forward. It's those small firms were
painted a lot of attention to how their employment realizations
and expectations of both over the next couple quarters.
Speaker 3 (08:19):
Mike, last question to you, I mean, it's a big
day tomorrow right with that monthly labor report. I mean,
any number that comes in weaker is certainly going to
catch our attention. But what are you anticipating here.
Speaker 7 (08:30):
Well, I think we'll see a weak number for a
couple of reasons. One that's been the trend, and two
the seasonal factors suggests that that could be the case.
But week being a matter of definition, I mean, if
you had one hundred and ten thousand, which is the forecast,
that would kind of fit in with what the Fed
(08:51):
thinks the regular replacement number needs to be to keep
the unemployment rates steady. If we get anything significantly lower
than that, it will put the idea of a July
rate cut onto the market's agenda. Yeah, but I don't
think it will do so to the Fed. We'd need
a big rise in the unemployment rate for that.
Speaker 3 (09:11):
All right, good to lead with there, gentlemen. Thank you
so much. Really appreciate it, of course. Brent Meyer, Sistant
vice president Economists at the Economic Survey Research Center at
the Fed Bank of Atlanta out there in Atlanta. And Mike,
thanks for bringing this to us. Really appreciate it. You're
gonna have a busy dad market. You're here, I'm here,
I'm here.
Speaker 1 (09:30):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five e's during
Listen on Apple Karplay and Android Auto with the Bloomberg
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Speaker 3 (09:45):
Hey, the Republican led House and Senator planning to cut
the Supplemental Nutrition Assistance program known as SNAP, which could
leave millions of Americans without enough food despite its importance
as a safety net. We should point out that there
have been some carve outs in the Senate bill, so
maybe not all it's are impacted the same way, but
we wanted to get into this story. It's on the
Bloomberg terminal. It's also can be found at Bloomberg dot
(10:06):
com slash BusinessWeek with the details, let's bring in Bloomberg
Business Week writer Dina Shanker. She joins us in our
Bloomberg Interactive Broker studio. Dina, I think everybody knows what
SNAP is, but let's just kind of lay out some
of the basics. What is it, who qualifies for it,
how many Americans use it? Give us a little bit
of background here.
Speaker 8 (10:24):
Sure, thanks so much for having me.
Speaker 9 (10:26):
So SNAP is a food assistants program, It's a safety
net program. It is available to people based on their
income level either at or one hundred percent below the
poverty line.
Speaker 8 (10:40):
That sort of the baseline.
Speaker 9 (10:41):
States can sort of make adjustments to that based on
their cost of living.
Speaker 8 (10:44):
In twenty twenty.
Speaker 9 (10:45):
Four, there were more than forty million Americans using SNAP,
which is about twelve percent of the population.
Speaker 10 (10:51):
That is disturbingly high. Why are that many Americans?
Speaker 8 (10:55):
Yeah, so it's really it's crazy.
Speaker 9 (10:58):
What actually happened was that the numbers loomed during COVID
and never came really very far down because people, you know,
we talk about in a cay shaped economy, and this
is a perfect example of some people have completely rebounded
since COVID, and as these SNAP numbers show, a lot
of people have not.
Speaker 5 (11:17):
So is there any way of assessing And I was
asking Mike Dorning this earlier, and I'm afraid the answer
is going to be no. But is there any way
of assessing whether people are abusing these programs or whether
those forty million Americans actually cannot afford to feed themselves
in their families.
Speaker 9 (11:35):
So the way the bill is structured is based on
state error rates. Now, an error can be an overpayment
or an underpayment, and so the higher your error rate
as a state than the higher percentage of the costs
you're going to have to shoulder under the new bill.
Speaker 8 (11:56):
So the error rates really vary.
Speaker 9 (11:59):
Actually, the highest error rate belongs to it for twenty
twenty three belonged to Alaska, which had like a.
Speaker 8 (12:06):
Sixty percent error rate. But I think it's really important
to remember that.
Speaker 9 (12:11):
As one of the people I spoke with pointed out
to me, she said, listen, errors get made. To be clear,
these are errors being made by the state administrative staff.
Speaker 8 (12:20):
These are not being made by the recipients.
Speaker 9 (12:24):
And also like, so the people who administer the program,
it's the.
Speaker 8 (12:28):
States making the errors.
Speaker 9 (12:30):
Yeah, And as she pointed out, she said, like we
all make errors in our bills. I mean, has anyone
I mean I can say for myself, I've overpaid bills
and then been like, oh shoot, I've no money left
in my checking account. I've underpaid and then had to
pay late fees, and it's all just really by accident.
So I think the idea of like freight fraud, waste
(12:51):
and abuse, I'm sure somewhere somebody's doing something wrong, but
it is not from anyone I spoke to. It does
not seem to be you know, like a really big issue.
And one thing I will also add is that food banks,
which are not part of the SNAP program but often
support some of the same communities, they're seeing increased demand too,
(13:13):
So it's the increased demand is very real.
Speaker 5 (13:16):
Yeah, it's I mean, I can imagine waste, fraud and
abuse in Medicare and medicaid right because people who run
healthcare facilities are likely trying to take advantage of the system.
It's harder to understand that somebody would try and claim
food stamps if he or she didn't have to. It
(13:36):
doesn't sound like it's that lucrative, for one thing, and
it's also not I mean, it's a It wouldn't be
a point of pride if you were using you know,
food stamps in a grocery store.
Speaker 10 (13:48):
So the problem, of course, isn't really.
Speaker 5 (13:51):
The fact that we are paying for forty million Americans
to use food stamps. The problem is forty million Americans
find themselves in position, and I'm wondering if anyone's doing
anything to address the cause of that.
Speaker 8 (14:06):
Well, not in this bill that much, I can say.
Speaker 9 (14:11):
I mean, there are there are all sorts of organizations
out there. I think that are really trying to help
people meet their basic needs, and as well as organizations
trying to help people that you know are out of
work find work.
Speaker 8 (14:26):
But remember that.
Speaker 10 (14:27):
It's obviously it's a huge issue.
Speaker 5 (14:28):
So I didn't mean to put you on the spot there,
because it starts with like childhood, nutrition, education, love, like
there are a lot of issues right that lead to
unemployment and poverty.
Speaker 11 (14:39):
And there's also a lot of people you know are
in jobs that don't they have jobs, like a teacher
who needs to take on this was an example that
was related.
Speaker 9 (14:50):
To me, who needs to take unpaid leave because she
had a complicated pregnancy and birth and now she needs
to go on food assistance because that's the only.
Speaker 10 (15:00):
Way, and the husband has probably left that part of
the story.
Speaker 9 (15:04):
I didn't I have to say, didn't get.
Speaker 3 (15:06):
But we've talked a lot about people like who just
you know, have a bad turn in their life. They
lose a job, they've got debt or something, and all
of a sudden they find themselves in a really really
bad way, and it's.
Speaker 8 (15:16):
Just it is.
Speaker 3 (15:17):
But Matt, I agree with you, it's it's kind of staggering.
We're supposed to.
Speaker 10 (15:20):
Be what you know, the most the wealthiest nation in
the world, right.
Speaker 3 (15:24):
And then yet we're dealing with these kind of statistics.
So basically, though, Dina, like what happens to these people
if they're not going to be able to get this assistance.
I agree with what you were talking about, Matt, like,
we have to figure out what's the root cause of this.
Speaker 10 (15:39):
But for now, they need food, right, for now they
need food?
Speaker 8 (15:42):
And how many are kids?
Speaker 9 (15:43):
So one estimate said that about two million households snap
using households have children that will that will at least
lose some benefits.
Speaker 8 (15:54):
The bills cut the benefits in a variety.
Speaker 9 (15:57):
I have to say, like almost every conversation I had,
I found out another way that they were cutting benefits.
Speaker 8 (16:03):
They are expanding work requirements, they are.
Speaker 9 (16:08):
Basically completely defunding. They are completely defunding a nutritional education
program that really helped low income families. And the biggest
change is that they are shifting a portion.
Speaker 8 (16:21):
Of the costs to the states.
Speaker 9 (16:22):
So what used to be completely federally funded benefits are
now being switched to the states. But the states, unlike
the federal government, they have to have a balanced budget.
So how states are going to come up with you know,
tens of millions, hundreds of millions, sometimes more than a
billion dollars depending on the state and how many recipients
they have. Is really nobody knows, Like that's the answer
(16:45):
is that nobody knows.
Speaker 5 (16:46):
Right, by the way, how much money are we talking
about being saved in spending? Because it goes up against
four and a half trillion dollars in tax custs.
Speaker 9 (16:55):
So the cost shifting, which is going to be the
biggest portion, will save about forty billion dollars.
Speaker 8 (17:01):
So a small amount of those peanuts related too exactly.
Speaker 9 (17:06):
And I should say that the average, the average snap
benefit is about six dollars a day per person. So
we were here in New York City. How far would
six dollars get you in food today?
Speaker 5 (17:18):
Especially if you live in a food desert. I mean
you basically would have like one fast food meal.
Speaker 8 (17:24):
Yeah, I mean, oh but you could.
Speaker 9 (17:25):
You can't spend it at a you can't spend it
on hot prepared.
Speaker 5 (17:28):
Right, Okay, Yeah, but you're going to go to a
store that takes food stamps and they won't have any
fresh produce and your only choices like hot talkies, right, So.
Speaker 9 (17:38):
I mean you're you're not going to have a lot
of options and your family.
Speaker 8 (17:42):
I mean, if it's these cuts.
Speaker 9 (17:45):
With the people that I'm speaking to, and when they
watched this pass in the in the Senate, they're they're
just devastated. I think there's a big question of like
what are what are we going to do? For every
meal of food bank provides nine from snap So what
happens when that number is drastically cut?
Speaker 8 (18:04):
And people really don't know? And I'll just throw one
more number.
Speaker 3 (18:07):
God forbid, the economy slows, right, are we going to recession?
Speaker 8 (18:10):
And food prices are expected to go up as well?
Speaker 9 (18:14):
So yeah, one more number I'll throw in is that
in this country about forty percent of our food goes
to waste. And so it is just the whole picture
is just mind boggling that we could have all these
people who don't have enough food, we could have all
these great growing away food.
Speaker 8 (18:31):
I mean, it's it's really it's crazy.
Speaker 3 (18:33):
It makes no sense, It makes no that much waste
and then to see, you know, so many people going
without food, and yeah.
Speaker 12 (18:40):
It's pretty sad.
Speaker 8 (18:41):
It's awful.
Speaker 3 (18:42):
Dina Shanker. It's a great read. Check it out at
the at Bloomberg dot comment on the Blomberg Bloomberg Business
Week's Business Week writer, I should say Dina Shaker.
Speaker 2 (18:49):
If you're listening to the Bloomberg Business Week Daily podcast,
catch us live weekday afternoons from two to five pm Eastern.
Listen on Apple CarPlay and Android Auto with the bloom
Burg Business app, or watch us live on YouTube.
Speaker 3 (19:04):
If you're driving, pullover because you're going to want to
listen to this story. Beneath layers of waste landfills around
the United States have been reaching scorching temperatures, and neighbors
have been getting sick. This is today's Bloomberg Big Take,
where Bloomberg's Laura Blisten Rachel Donnell Wright. For many of
the more than two million Americans who live within a
mile of a landfill, what all of this means is
(19:24):
that they're living within a mile of a potential time bomb,
with little way to know when it might go off.
You can read this full story and more from the
Bloomberg Big Take. It's on the Bloomberg Terminal and also
at bloomberg dot com Slash Big Take. Let's head to
our San Francisco bureau and to Bloomberg BusinessWeek editor and
writer Laura Bliss. Laura, so bring story. What is America's
hot garbage problem?
Speaker 4 (19:47):
Yeah, thank you so much for having me. The landfill
that you mentioned in La County is a great example.
And pockets of buried waste in this landfill have been
rising to temperatures over to high under degrees for the
past three years. That's about forty percent higher than the
EPA safety standard. California regulators suspect that what's causing this
(20:11):
is too much much oxygen getting into this landfill, which
is a problem known to start fires. This goes against
federal regulations. The landfill operator says that's not the case,
says nothing is on fire. And as I found out,
these landfills that have been overheating are a phenomenon that
we've seen across the US over the last twenty years.
(20:33):
And there's real debate, there's real controversy, you know, within
the industry in between regulators about what's causing them and
what to do about it.
Speaker 5 (20:44):
Laura, First of all, I read your story this morning,
first thing I read on the Bloomberg and I could
not put it down. And you know, I'm the type
of reader who typically gets goes through the first four paragraphs.
I'm from the Matt Winkler School of Bloomberg, and then
I'm done, so fantastic job writing this. One question I
did have is isn't it pretty easy to determine whether
(21:05):
something is on fire or not? I mean, it seems
like you could gauge that pretty quickly.
Speaker 4 (21:13):
You would, You would think so, you would think so.
And a challenge with these incidents is that, you know,
the the temperature climbs. You know, this is happening several
feet below the surface of the landfill, and so you
don't necessarily see smoke, you don't necessarily smell you know,
what you might think of as a burning smell. You know,
(21:34):
these events can can manifest in a lot of different ways.
And it's because actually that you don't necessarily see those
you know, classic fire symptoms that the industry is saying, well,
this is this is not a fire. We think it's
something else that's that's going on here. But as the
story shows, and thank you so much for reading it,
I mean, you know, regardless of what we call it,
you know, residents are getting sick, and there's a lot
(21:57):
of challenges in really address seeing the problem and kind
of getting to the root cause.
Speaker 3 (22:02):
What's exactly what's crazy is like people are getting caught up.
Is it a fire? Is it not a fire? And
there's all these terminal terminology, subsurface oxidation, smoldering events.
Speaker 8 (22:12):
But it's an important.
Speaker 3 (22:13):
Distinction because you write the distinction is in trivial federal
regulations explicitly forbid operators from running landfills in a way
that starts fires. Why is that so important, especially when
you so clearly write that people who are living nearby
then and their families are getting pretty sick.
Speaker 4 (22:31):
Absolutely, I mean, it's it's been, you know, a well
known issue in the industry for years. You know that
these fires can create really dangerous and toxic situations. And
you know, among the you know, few regulations that are
out there at the federal level for landfills, you know,
don't start a fire is absolutely one of them. And
you know, one of the concerning things that I found
(22:51):
is that one of the key rules that environmental engineers
and safety advocates say, you know, was really there to
prevent fires was actually rolled back. And so you know,
as far as like what is there to do about it?
That is something that a number of scientists highlighted for
me that we need the return of some of these rules,
(23:11):
for example, to stop too much oxygen from getting in
because as we all know, right that can that can
start fires when you when you mix that with hot
enough temperatures.
Speaker 3 (23:20):
And the point is it starts fires, but it also
gives off really dangerous gases, right, and and talk to
us about what's happening to people who live nearby.
Speaker 4 (23:31):
Yeah, I mean, so just to take the Chiquita Canyon
landfall as an example, I mean, we see elevated levels
of benzene, you know, and known carcinogen, carbon monoxide, other
toxic gases that are known, you know, to cause the
kind of respiratory, neurological, cardiovascular symptoms that people are reporting,
(23:52):
you know, hand tremors, headaches, nosebleeds that won't end. You know,
people are having you know, cancer also, and wondering, you know,
is what's going on with the landfill having to do
with my diagnosis?
Speaker 10 (24:05):
So what can these people do about it?
Speaker 5 (24:07):
I mean, as I was reading your story, I had
a feeling of like frustration in my chest because it's
so hard to prove causation. Right, people are getting sick
who don't live near the landfill also, and these corporations
have seemingly endless pools of money for litigation.
Speaker 10 (24:27):
I think of dark Waters. I think of Aaron Brockovich.
Speaker 5 (24:30):
You know, what can the houses who is the couple
that you that you write about in your lead, what
can they do about it?
Speaker 4 (24:39):
Yeah, I mean it's a great question. There are like
I think over a dozen, you know, mass torts moving
through the legal system right now of residents trying to
take legal action to represent themselves. Los Angeles County has
also sued you know this at the state regulatory level.
There have been a lot of enforcement actions, and I
think what a lot of these efforts are all kind
(24:59):
of pushing for our funds, you know, from the operator,
to fund the relocation of residents right to get out
of this danger zone. And so I think that is
what a lot of people are pushing for at this point.
But you know, there's also I write about in the story.
Polar Chiavo, who's an assembly member in California, has a
has a bill that's she's you know, I think, is
(25:21):
awaiting a hearing in the state Senate that would basically
just attach more you know, penalties right to landfills in
the future that you know, exhibit these symptoms that are
cause these kinds of problems for people.
Speaker 3 (25:34):
What do the companies say, Well, just to reiterate, right,
they say that this is not a fire.
Speaker 4 (25:40):
This is what they call an elevated temperature landfill, which
is a term that you know, the industry is applied
to at least ten, you know, large landfills across the
US over the last twenty years that have exhibited similar symptoms.
And you know, they pointed to you know, millions of
dollars that they've spent in mitigating the problem, adding gas
wells to trap the odors, putting a cover on top,
(26:03):
you know, contributing some money to residents to you know,
buy air filters and things like that.
Speaker 5 (26:08):
Why don't they just go in there with cranes and
dump trucks and move it away. I mean, there is
a temperature regulation, right, They're not allowed to be above
a certain temperature, and you can just stick a thermometer
in there and see that this does exceed that regulation.
Speaker 8 (26:23):
It's true, It's absolutely true.
Speaker 4 (26:26):
I think the challenge is, you know, what do you
do when these kind of hot temperatures become this kind
of runaway problem?
Speaker 3 (26:33):
And again, the.
Speaker 8 (26:35):
Question of causation, what to call it?
Speaker 4 (26:38):
Like this, this all matters, right, because that drives it
the question of what do you do about it? And
California regulators say you need to dig a fire break,
which is actually not unlike what you're saying, right, you
need to sort of create almost a trench, right to
stop this reaction from progressing.
Speaker 8 (26:53):
The operator says that that would make things much worse.
Speaker 4 (26:57):
They say that the solution is to keep heat out
using these wells. So there's just there's a lot of
disagreement there, well.
Speaker 3 (27:06):
You know, and I feel like it gets into a
bigger problem in the United States, and that has to
do with waste, right, Like what do we do with it?
You know, if you can't you know, I think there's
pushback against creating new waste facilities, right or waste or
dumps based on wouldn't exactly exactly. So then what you
have to do is deal with the existing ones and
(27:28):
just pile more and more stuff into it. I mean,
as you noted in our in your story, is that
for a long time people burn garbage. We thought that
was the way to do it, and then we realized, Okay,
that's not the way. I mean and doing kind of
also some you know, giving us a little bit of
a history lesson in terms of dealing with garbage. I mean,
this is again becoming another big problem, not only maybe
potentially for the health of US citizens, but also for
(27:51):
the climate.
Speaker 4 (27:53):
Yeah, I mean absolutely, I think this, this whole situation
is a great and really alarming picture of the problems
that can arise, like when we just keep kind of
piling our trash higher and deeper, right, And I mean
I will also add that, you know, safety advocates will say,
you know, we don't we're going to generate trash, right,
we know that we're gonna that trash is going to
(28:15):
generate methane emissions. And that's kind of part of the
story too, because trapping these emissions, you use these wells
that can actually lead to more oxygen intrusion, which is
known to start these fires. And so you know, advocates
will say, like, we just need better monitoring, right, We
need you know, better technology to monitor emission levels, you know,
real time temperature monitoring for example, so that you know,
(28:38):
operators and regulators can take action more quickly instead of
you know, letting problems kind of spiral.
Speaker 5 (28:46):
Well and as Carol and I were talking about this yesterday,
one of the great things to do would be to
stop generating as much waste. Right. I was over the
weekend camping looking for a spoon, and I went to
a store and they had a box of two hundred
plastic ones if I wanted it.
Speaker 10 (29:01):
But that's part of the problem.
Speaker 3 (29:03):
Yeah, like making things that you actually.
Speaker 5 (29:05):
Want, you got to attack the problem at the root, right, Laura,
I'm sure you've thought about this.
Speaker 10 (29:08):
A lot, absolutely.
Speaker 4 (29:10):
I mean it's funny. I part of the way I
celebrated publishing this story yesterday was taking the base of
my dead electric toothbrush to a battery recycling facility, which
even in the city of San Francisco, was not that
easy to find. But that's another problem. That's another you
know issue of this too. Right, We're not just generating
(29:30):
more waste, we also have a lot more flammable waste,
you know, vapes, e cigarettes, like these kinds of things,
and so you know, figuring out the right safest place
to put it is important too.
Speaker 3 (29:41):
Yeah, And you bring on the recycling experts to it,
they'll say, you know, you think so much stuff is
being recycling, but it recycled, but it's not necessarily face.
Speaker 10 (29:48):
Doesn't everybody now have a drawer full of dead vape batteries?
Speaker 12 (29:51):
Not in mind?
Speaker 3 (29:52):
No, Laura, incredible story.
Speaker 10 (29:57):
That's right.
Speaker 3 (29:58):
We were talking about kind of the waste yesterday and
when he saw it this morning, he's like, oh my God, like,
this is what we've been talking about. It's a great
deep dive and we so appreciate you giving us some
time with it. Laura Bliss, Bloomberg BusinessWeek editor and writer.
Check it out. You can find it on the Bloomberg
and at Bloomberg dot com slash BusinessWeek.
Speaker 1 (30:14):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five East. During
that listen on Applecarplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 3 (30:29):
At the world's biggest asset manager, I don't know if
you saw this, a bitcoin exchange trade fund MATT now
generates more revenue than it's signature tracker of the S
and P five hundred. So we're talking about the I
Shares Bitcoin Trust ETF generating more revenue than Black Rocks
I Shares Core S and P five hundred ETF. Oh yeah,
that's pretty wild, right.
Speaker 10 (30:49):
Yeah, but they try and keep the expense ratio way
down on the index tracker.
Speaker 3 (30:54):
I understand, I understand. Okay, all right, that's fair, that's fair.
But they also talk about you know, we've seen so
much money going into bitcoin ETFs in general because of
US regulators opening the doors to mainstream adoption. So let's
talk about some of this because our next guest is
sure to have some thoughts on today's regulatory environment. I
know Matt, you've talked with him a lot. He heads
(31:15):
one of the world's biggest bitcoin miners, Fred til As
chairman and CEO of the publicly held six point one
billion dollar market cap company Mara. He joins us from Miami, Florida.
The stock, by the way, as you reminded me, Matt
up eighteen hundred percent in the past five years, up
four percent year to date with nearly thirty percent of
the float. Short, Fred, great to have you here. I
(31:35):
know Matt and you have had several exchanges macro and
micro in terms of the industry. But help me out here.
And as I was kind of reading in here, you're
an energy and infrastructure company, You're a bitcoin miner. You
lay this all out on your website. What really drives
revenue growth at the company? Because our FA page on
the Bloomberg basically says it's bitcoin mining. Is that what
(31:57):
you guys do? Is that what leads you to profitability?
Speaker 12 (32:01):
Yeah? Essentially, we operate sixteen data centers across four continents,
and the majority of the load that we operate, the
compute that we operate is bitcoin mining, and when we
mind bitcoin, the bitcoin that we receive for doing that
we keep, and so that essentially we recognize as revenues.
(32:23):
But we're in the process of beginning or transition an
expansion into inference AI, which will be a growing portion
of the workloads that we deploy. We also are a
vertically integrated technology company and energy company. We own energy assets,
we own wind farms, we generate energy off of flare
gas and oil fields. We're able to develop co developed
(32:44):
technologies around a six software orchestration layer. So we're a
technology company that's very focused on maximizing the value of
every electron we can get, and we help energy companies
take excess energy and turn it into profits.
Speaker 3 (32:58):
What make what's going to lead you to profitability?
Speaker 12 (33:02):
Well? In combination of things. One is obviously the bitcoin
that we hold on the balance sheet is constantly marked
to market. But more importantly, as bitcoin continues to be
accumulated by institutions. You mentioned it in the your kind
of preamble as you're talking about you know, Blacks Bitcoin
ETF having garnered bigger fees than the S and P
(33:25):
five hundred fund. There's a huge amount of institutional interest
in bitcoin. There are a number of bitcoin treasury companies
springing up every day, and you're seeing an accumulation of bitcoin,
which is driving the price up. We're almost at record
highs again, and as that continues to move upwards, it
helps us generate considerable margins. The thing with our business
(33:46):
similar to the AI business, and I think you're going
to find this if you look at any AI company
that operates large data centers, is there's a huge CAPEX
investment upfront in building these sites, and the profitability comes
over time once the equipment has been depreciated. We depreciate
our equipment over three years, and unlike our peers, we
(34:07):
have the bit mining also the flair guests. We're able
to essentially move our a six that have been depreciated
to these low cost marginal energy sites marginal cost energy sites,
and that drives much higher profitability and also better capital utilization.
Speaker 5 (34:31):
I'm sure you've been following the back and forth between
Jim Chainos and Michael Sailor.
Speaker 10 (34:37):
It's been really entertaining.
Speaker 5 (34:39):
But you know, micro Strategy stock is up even more
than yours, I think like three or four thousand percent
in the past five years. And these kind of leveraged
you know, bitcoin holding companies are popping up all over
the place.
Speaker 10 (34:57):
What do you make of that because.
Speaker 5 (34:59):
Those these don't really do anything else besides, you know,
sell shares and borrow in order to buy bitcoin.
Speaker 12 (35:09):
So you know, the model with bitcoin treasury companies, in
the model that you know Michael Saylor has optimized is
essentially buy bitcoin issue equity, and as the price and
value of the bitcoin that you have continues to go up,
it drives your equity price up. And if you can
(35:30):
raise capital at a higher price than bitcoin, then your
bitcoin yield per share goes up, which is very attractive.
The problem is what happens at bitcoin price stays flat
or starts to go down. You said his stock was
up over a five year basis by a huge amount,
which is true, but if you look from year to
date at its performance compared to the bitcoin minors, even
(35:52):
you're starting to see the performances running into headwinds. In theory,
a bitcoin treasury company price should increase by upwards of
two times whatever bitcoin's price is increasing on a daily
basis because of the leverage that they're driving, and that's
not the case anymore. I think what we're starting to
see the saturation of the bitcoin treasury business market because
(36:16):
to your point, they're not in any other business. They're
taking over a company with a marginally profitable business and
they're turning it into an accumulator for bitcoin. And at
the end of the day, you have a bunch of
people competing for capital, and that capital is going to
go to the highest return, which means the lowest multiple
to NAVE, and over time that multiple to NAV is
(36:38):
eventually going to go to zero, not unlike what happened
with Grayscale, where for a long period of time the
Grayscale Trust, which held bitcoin, was trading at a discount
to its NAT. And I think there's risk, especially as
you layer a lot of debt on these companies, if
Bitcoin goes down by any considerable amount or stagnates for
any length of time, there could be challenges for them
(36:59):
to maintained that multiple.
Speaker 5 (37:02):
You know, you're borrowing against bitcoin as well. Obviously you
have other businesses that you're running. You mentioned the sixteen
data centers, the energy generation inferencing, which is I agree
going to be absolutely monstrous, but it's still risky. How
do you manage those risks?
Speaker 12 (37:22):
Well, we follow very much a capital allocation model where
we look at our average weighted cost of capital and
then we look at the types of investments that we're
making to see that we're ensuring that we have, you know,
are above a certain hurdle rate across a variety of places.
And if you think about our business, we were basically
(37:44):
five people and a few miners four years ago and
today we're the largest in the world at what we do,
and we're also the second largest holder of bitcoin in
the world of corporate entities. And so I think we
have built a very strong balance sheet, we've built the
ability to execute. Are the only company of the publicly
traded miners that has the geographic distribution that we have
(38:06):
and that has the kind of breadth of business that
we have. And I think that's going to pay off
very much, not just in the near term, but the
long term. As bitcoin becomes more and more of an
institutional asset, Bitcoin data centers start becoming more and more
integrated into energy transformation place. With data centers, the grid
has a huge need for flexible baseload, which is essentially
(38:30):
a type of compute that can turn on and turn
off as needed by their grid. You guys saw with
the heat bubble that happened in the Northeast the grid
was strained, Yet in Texas they didn't have those issues.
Why because in Texas they have a large amount of
bitcoin mining on their grid where the grid operator can
tell them, hey, shut off, I need the energy, and
(38:51):
bitcoin miners comply and shut off. If you had more
bitcoin mining across the grids in this country, especially the
grids that are heavily loaded, you would not see the
challenges that you have today, such as in PGM and
other ISOs, where consumers are being impacted total by increasing
(39:12):
prices of energy because AI loads which are not flexible
are coming online and they're getting more and more strain
on their grids. So we play a very unique role
in helping balance grids and helping make grids more flexible.
And I think what you're going to start seeing is
embracing and a bit of a marriage between AI data
(39:34):
centers bitcoin mining and how the two can work together
to optimize grids and make sure that there's plenty of
available energy for consumers. If you wanted to do some research,
Duke University did a study about four months ago on
this topic that showed that, you know, there's more than
enough energy on the US grid to support flexible loads
(39:55):
if they could flex zero point two five of a percent,
which is order of a percent, and you know we
flex upwards of thirty forty percent, so we're clearly an
answer to that problem.
Speaker 3 (40:07):
Let me just ask you though on this, And you
talked about the hot weather and that Texas you know,
managing it, But how has the hot weather increased the
energy costs when it comes to bitcoin mining for all
miners so far this summer.
Speaker 12 (40:22):
Well, it's most of our sites in the US operate
in Texas, also in Nebraska and North Dakota, Ohio, amongst
other places. And so the northern regions don't have don't
sit on grids where you have really that challenge. In Texas,
you've had a lot of hot weather, and you've had
(40:42):
a lot of what's called curtailment, which is when the
grid operators contact us and say, hey, we need you
to shut off. And so the impact to bitcoin miners
is that, you know, we essentially don't operate, so we're
not generating revenues those days. But the benefit to us
is that we get lower priced energy because of that.
Providing that flexibility to the grid in Texas allows the
(41:04):
Texas grid to not have to buy extra energy that
is very expensive. If you think about the energy markets,
baseload is kind of the energy that runs all day long.
It has a fixed price, and then you have this
variable or intermittent energy. Wind and solar farms create a
problem for grids because the wind doesn't blow at a
(41:25):
constant rate for a constant number of hours every day.
Neither does the sun, and so they're dealing with balancing
this variable intermittent generation from solar and wind, and at
the same time, demand is different all day long. So
does it say to match the two?
Speaker 3 (41:41):
I totally get that, just quickly. I know Matt wants
to also ask something, but I want to ask you, quickie,
are you asking? I mean, are you looking for other
areas of the US or even the world when it
comes to new bitcoin mind.
Speaker 12 (41:55):
Yes, absolutely. We have a stated objective that fifty percent
of our revenue will come from outside the US by
twenty twenty eight, and we're quite ways along in building
a pipeline of opportunities across places in the Middle East
and Europe where we believe we'll be able to meet
that goal quite handily.
Speaker 5 (42:10):
I would be happy in the great state of Ohio,
you know, and not need to go anywhere else.
Speaker 10 (42:14):
Go buck eyes, Fred.
Speaker 5 (42:16):
I want to ask quickly about you have developed new
technology for inferencing, including a proprietary two phase emerging immersion
cooling technology, which I think is really neat.
Speaker 10 (42:28):
But the thing is with inferencing, you don't need.
Speaker 5 (42:31):
Nearly the power that you need for training, right And
I wonder about the hardware that you're using because in
vidio chips are obviously very expensive and maybe overkill for inferencing.
Have you said or are you working with other chip
makers to get your gear?
Speaker 2 (42:51):
Yeah?
Speaker 12 (42:51):
Absolutely so. The inferencing is very similar bitcoin mining that
you're constantly chasing an efficiency curve. In the world of inference,
it's lowest cost per token, and you know, obviously an AI,
a token is not what it is in the crypto world,
but a token is a measurement of a certain amount
of compute, and so there's this constant need to lower
(43:12):
the cost of token. As AI gets more intelligent, as
there's more reasoning in AI, the cost to do a
query and inference becomes more expensive in the number of
tokens that it takes. And the single biggest challenge that
if you talk to enterprise customers, they'll tell you, you know,
the price for tokens too high. We need a lower
cost for token, and at the same time they need
(43:33):
to ensure that they can get access to very rapid responses.
So these data centers have to be in close proximity
to the customers and the energy costs have to be low.
So we've been working with people all the way down
the cost curve all the way down to a six
as we look at inference as a way to lower
(43:54):
the cost, and we totally predict that there'll be a
very extreme costs decline over the next two to three
years in inferencing as new technologies come in place, so
that you won't have to use this huge infrastructure that
you have for learning. You know, one of the biggest
challenges today is that a data center builder needs to
(44:16):
get a payback on all that investment in under a
year because the technology and their data center is obsolete
after a year. Just look at what in video is
releasing in the way of technologies.
Speaker 3 (44:27):
So glad we could get some time with you. I
wish we had we had more. Come back soon, Come
back soon, Fred til thank you so much, chairman. It's
at you of Mara.
Speaker 2 (44:35):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
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(44:56):
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Speaker 2 (00:08):
This is Bloomberg Business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy, plus global business, finance
and tech news as it happens. The Bloomberg Business Weekdaily
Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 3 (00:32):
In thirteen days, earning Season in the US gets underway
JP Morgan Chase kicking it off before the market open,
along with a few other big banks that will happen
in July fifteenth. It is also what's so great about this, Matt,
I love earning season. I feel like it's a gut
check on companies. And I know sometimes we feel like
companies manage expectations in a big way, but we also
do hear from the c suites on those analysts and
(00:52):
investor calls.
Speaker 4 (00:53):
Yeah.
Speaker 5 (00:54):
Absolutely, I mean that's the most important part, right. It
doesn't really matter once you get there, how they did
in the court of their reporting on It really matters
what the outlook is exactly, all right.
Speaker 3 (01:03):
And we're going to talk a little bit about outlook
because our Michael McKee actually bringing this to our attention
this morning. A survey out from the Atlanta Fed on
the evolving impact of tariffs on cfo's outlooks. As we said,
I think, published this morning. Mike is, of course Bloomberg
News International Economics and Policy correspondent. He's right here in
our studio and joining us from Atlanta is Brent Meyer.
He's assistant vice president and economist at the Economic Survey
(01:26):
Research Center at the Fed Bank of Atlanta. Great to
have you here with us both. Brent Mike did share
your survey with us this morning. Lay it out for
us and what you guys found out.
Speaker 6 (01:38):
Now, good afternoon, thanks for having me so. Basically, what
we found is over the past few quarters, CFOs are
seeing a darkening outlook and it seems to be connected
to firms that are the most heavily exposed to tariffs.
They have a much heavier exposure on inputs and supplies
coming from abroad. Their outlooks deteriorated markedly, so their expectations
(02:03):
for GDP growth saale in twenty twenty five. They're down
about a percentage point from where they were at the
end of last year. Their sales revenue growth projections are down,
and then on the flip side, unit cost expectations and
price expectations are up quite a bit. So again we
see these things as sort of CFO see things darkening
(02:28):
materially as we move throughout the remainder of the year.
Speaker 5 (02:31):
On the other hand, they're coming from a pretty good level, right.
We were talking with near CaSR earlier. He wrote a
piece for Bloomberg Opinion and pointed out that profit margins
for the S and P five hundred equal weight index
are at a record high, so they do have some
cushion into which to absorb tariffs if they have to.
Speaker 6 (02:53):
Yeah, potentially, And that's that's an interesting angle. So one
thing we can look at is both firms cost and
priced projections for the year their expectations for the year.
And one thing that we see here is that the
sort of margin squeeze seems to be strongest on those
(03:14):
that are more heavily exposed to the potential tariffs and
the tariff picture. The other thing that's kind of interesting
here is that firms that aren't directly exposed to teriffs
seem to be pushing up their price expectations a little
bit more than where their costs are coming from so
(03:36):
we might see margin compression on those that are most
heavily exposed, and at the same time on those that
maybe aren't as heavily exposed to the sort of tear
picture seem a little bit of increased margin or something.
Speaker 5 (03:51):
You know from I mean, that is absolutely fascinating, Mike.
What do you make Mike, I'm gonna bring Mike McKee here,
what do you make of that? So firm that don't
really need to pay for it or trying to take
price for it.
Speaker 7 (04:04):
Well, it doesn't surprise anybody, I don't think, and it
will add to inflation questions, shall we say, not necessarily
to inflation. We'll have to see how widespread that is.
I'm curious though, when you did your survey the time
frame on it. In other words, did anybody say, we
(04:24):
might feel a whole lot better come July eighth when
we find out what the reciprocal tariffs are.
Speaker 6 (04:33):
So, no, we didn't ask that question. It would have
been a great question to ask. Next time we go
in the field, we'll definitely be able to pick that up.
But the survey was in the field during the first
couple of weeks at June, and we're comparing really what
we wrote in this article compares to the end of
last year, so we can see as they move forward
(04:53):
from say, right around the time of the election through
the first quarter survey, in the second quarter survey, the
sort of march your deterioration on sales revenue growth, and
then they're ratcheting up on the price picture.
Speaker 3 (05:09):
You know, Brett, we love the stuff that we get
from the various regional feds. I think about the GDP
now Index that we get from from you know, you guys,
and I'm sure stuff like this, you know how it
works into some of your thoughts about kind of where
we're going. But as you are gathering information anecdotally real
data points public, private sector, I mean, what's the picture
(05:33):
that you are seeing in the US economy right now?
Speaker 6 (05:37):
Oh, that's a good question. So if I take a
wholesome approach and look across all our surveys and here
at the Atlanta FED, we all still have a regional
economic information network. So this is a group of folks
that are chatting face to face with businesses on a
daily basis. It's it's a picture of very heightened uncertainty,
(05:57):
a picture with you know, basically they're a lot of
clouds on the horizon. We don't know exactly how things
are going to play out. But at the same time,
firms seem to be moving forward in a direction and
expecting expecting one to ratchet up price as the you know,
as tariffs really hit their bottom line, and then at
the same time anticipating as they're raising price, seeing some
(06:22):
of that bite into their sales revenue.
Speaker 7 (06:26):
Did they suggest any actions they're going to take or
is this a case of what we've been hearing in
terms of the pagebook and other FED communications that companies
are just sort of sitting and waiting to make decisions.
Speaker 6 (06:40):
No, that's a good question, Mike. So it's there tends
to be some dispersion here across maybe firm size, so
larger firm size, larger firms that are a bit more agile,
that are able to make different moves there. It seems
like they're doing so smaller firms. I think the picture
is a bit cloudy there, but I think the bite
(07:02):
from all of this action to date it is likely
to hit them a little bit harder. They're a little
bit less well connected when we're talking about reconfiguring supply
chains and things like that.
Speaker 5 (07:15):
I wonder how this affects the labor market because it
seems that the larger firms, from what I'm hearing you say,
are going to be able to deal with this better.
And that is I think what has been our assumption.
The smaller firms are going to have a bit much
bigger problem, especially if they're exposed to international supply chains.
But those smaller firms, don't they make up a massive
(07:38):
share of US jobs and job creation.
Speaker 6 (07:42):
Yeah. I don't know what it is off the top
of my head, but I think it's a very sizable
share of overall employment on firms that are less than
two hundred and fifty employees in size. And yeah, that's right.
So I think if you're looking at the rear view mirror,
the employment picture looks positive. I mean, we've seen some slowing,
but not not a whole lot of you know, quick
(08:06):
deterioration as we look forward. It's those small firms were
painted a lot of attention to how their employment realizations
and expectations of both over the next couple quarters.
Speaker 3 (08:19):
Mike, last question to you, I mean, it's a big
day tomorrow right with that monthly labor report. I mean,
any number that comes in weaker is certainly going to
catch our attention. But what are you anticipating here.
Speaker 7 (08:30):
Well, I think we'll see a weak number for a
couple of reasons. One that's been the trend, and two
the seasonal factors suggests that that could be the case.
But week being a matter of definition, I mean, if
you had one hundred and ten thousand, which is the forecast,
that would kind of fit in with what the Fed
(08:51):
thinks the regular replacement number needs to be to keep
the unemployment rates steady. If we get anything significantly lower
than that, it will put the idea of a July
rate cut onto the market's agenda. Yeah, but I don't
think it will do so to the Fed. We'd need
a big rise in the unemployment rate for that.
Speaker 3 (09:11):
All right, good to lead with there, gentlemen. Thank you
so much. Really appreciate it, of course. Brent Meyer, Sistant
vice president Economists at the Economic Survey Research Center at
the Fed Bank of Atlanta out there in Atlanta. And Mike,
thanks for bringing this to us. Really appreciate it. You're
gonna have a busy dad market. You're here, I'm here,
I'm here.
Speaker 1 (09:30):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five e's during
Listen on Apple Karplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 3 (09:45):
Hey, the Republican led House and Senator planning to cut
the Supplemental Nutrition Assistance program known as SNAP, which could
leave millions of Americans without enough food despite its importance
as a safety net. We should point out that there
have been some carve outs in the Senate bill, so
maybe not all it's are impacted the same way, but
we wanted to get into this story. It's on the
Bloomberg terminal. It's also can be found at Bloomberg dot
(10:06):
com slash BusinessWeek with the details, let's bring in Bloomberg
Business Week writer Dina Shanker. She joins us in our
Bloomberg Interactive Broker studio. Dina, I think everybody knows what
SNAP is, but let's just kind of lay out some
of the basics. What is it, who qualifies for it,
how many Americans use it? Give us a little bit
of background here.
Speaker 8 (10:24):
Sure, thanks so much for having me.
Speaker 9 (10:26):
So SNAP is a food assistants program, It's a safety
net program. It is available to people based on their
income level either at or one hundred percent below the
poverty line.
Speaker 8 (10:40):
That sort of the baseline.
Speaker 9 (10:41):
States can sort of make adjustments to that based on
their cost of living.
Speaker 8 (10:44):
In twenty twenty.
Speaker 9 (10:45):
Four, there were more than forty million Americans using SNAP,
which is about twelve percent of the population.
Speaker 10 (10:51):
That is disturbingly high. Why are that many Americans?
Speaker 8 (10:55):
Yeah, so it's really it's crazy.
Speaker 9 (10:58):
What actually happened was that the numbers loomed during COVID
and never came really very far down because people, you know,
we talk about in a cay shaped economy, and this
is a perfect example of some people have completely rebounded
since COVID, and as these SNAP numbers show, a lot
of people have not.
Speaker 5 (11:17):
So is there any way of assessing And I was
asking Mike Dorning this earlier, and I'm afraid the answer
is going to be no. But is there any way
of assessing whether people are abusing these programs or whether
those forty million Americans actually cannot afford to feed themselves
in their families.
Speaker 9 (11:35):
So the way the bill is structured is based on
state error rates. Now, an error can be an overpayment
or an underpayment, and so the higher your error rate
as a state than the higher percentage of the costs
you're going to have to shoulder under the new bill.
Speaker 8 (11:56):
So the error rates really vary.
Speaker 9 (11:59):
Actually, the highest error rate belongs to it for twenty
twenty three belonged to Alaska, which had like a.
Speaker 8 (12:06):
Sixty percent error rate. But I think it's really important
to remember that.
Speaker 9 (12:11):
As one of the people I spoke with pointed out
to me, she said, listen, errors get made. To be clear,
these are errors being made by the state administrative staff.
Speaker 8 (12:20):
These are not being made by the recipients.
Speaker 9 (12:24):
And also like, so the people who administer the program,
it's the.
Speaker 8 (12:28):
States making the errors.
Speaker 9 (12:30):
Yeah, And as she pointed out, she said, like we
all make errors in our bills. I mean, has anyone
I mean I can say for myself, I've overpaid bills
and then been like, oh shoot, I've no money left
in my checking account. I've underpaid and then had to
pay late fees, and it's all just really by accident.
So I think the idea of like freight fraud, waste
(12:51):
and abuse, I'm sure somewhere somebody's doing something wrong, but
it is not from anyone I spoke to. It does
not seem to be you know, like a really big issue.
And one thing I will also add is that food banks,
which are not part of the SNAP program but often
support some of the same communities, they're seeing increased demand too,
(13:13):
So it's the increased demand is very real.
Speaker 5 (13:16):
Yeah, it's I mean, I can imagine waste, fraud and
abuse in Medicare and medicaid right because people who run
healthcare facilities are likely trying to take advantage of the system.
It's harder to understand that somebody would try and claim
food stamps if he or she didn't have to. It
(13:36):
doesn't sound like it's that lucrative, for one thing, and
it's also not I mean, it's a It wouldn't be
a point of pride if you were using you know,
food stamps in a grocery store.
Speaker 10 (13:48):
So the problem, of course, isn't really.
Speaker 5 (13:51):
The fact that we are paying for forty million Americans
to use food stamps. The problem is forty million Americans
find themselves in position, and I'm wondering if anyone's doing
anything to address the cause of that.
Speaker 8 (14:06):
Well, not in this bill that much, I can say.
Speaker 9 (14:11):
I mean, there are there are all sorts of organizations
out there. I think that are really trying to help
people meet their basic needs, and as well as organizations
trying to help people that you know are out of
work find work.
Speaker 8 (14:26):
But remember that.
Speaker 10 (14:27):
It's obviously it's a huge issue.
Speaker 5 (14:28):
So I didn't mean to put you on the spot there,
because it starts with like childhood, nutrition, education, love, like
there are a lot of issues right that lead to
unemployment and poverty.
Speaker 11 (14:39):
And there's also a lot of people you know are
in jobs that don't they have jobs, like a teacher
who needs to take on this was an example that
was related.
Speaker 9 (14:50):
To me, who needs to take unpaid leave because she
had a complicated pregnancy and birth and now she needs
to go on food assistance because that's the only.
Speaker 10 (15:00):
Way, and the husband has probably left that part of
the story.
Speaker 9 (15:04):
I didn't I have to say, didn't get.
Speaker 3 (15:06):
But we've talked a lot about people like who just
you know, have a bad turn in their life. They
lose a job, they've got debt or something, and all
of a sudden they find themselves in a really really
bad way, and it's.
Speaker 8 (15:16):
Just it is.
Speaker 3 (15:17):
But Matt, I agree with you, it's it's kind of staggering.
We're supposed to.
Speaker 10 (15:20):
Be what you know, the most the wealthiest nation in
the world, right.
Speaker 3 (15:24):
And then yet we're dealing with these kind of statistics.
So basically, though, Dina, like what happens to these people
if they're not going to be able to get this assistance.
I agree with what you were talking about, Matt, like,
we have to figure out what's the root cause of this.
Speaker 10 (15:39):
But for now, they need food, right, for now they
need food?
Speaker 8 (15:42):
And how many are kids?
Speaker 9 (15:43):
So one estimate said that about two million households snap
using households have children that will that will at least
lose some benefits.
Speaker 8 (15:54):
The bills cut the benefits in a variety.
Speaker 9 (15:57):
I have to say, like almost every conversation I had,
I found out another way that they were cutting benefits.
Speaker 8 (16:03):
They are expanding work requirements, they are.
Speaker 9 (16:08):
Basically completely defunding. They are completely defunding a nutritional education
program that really helped low income families. And the biggest
change is that they are shifting a portion.
Speaker 8 (16:21):
Of the costs to the states.
Speaker 9 (16:22):
So what used to be completely federally funded benefits are
now being switched to the states. But the states, unlike
the federal government, they have to have a balanced budget.
So how states are going to come up with you know,
tens of millions, hundreds of millions, sometimes more than a
billion dollars depending on the state and how many recipients
they have. Is really nobody knows, Like that's the answer
(16:45):
is that nobody knows.
Speaker 5 (16:46):
Right, by the way, how much money are we talking
about being saved in spending? Because it goes up against
four and a half trillion dollars in tax custs.
Speaker 9 (16:55):
So the cost shifting, which is going to be the
biggest portion, will save about forty billion dollars.
Speaker 8 (17:01):
So a small amount of those peanuts related too exactly.
Speaker 9 (17:06):
And I should say that the average, the average snap
benefit is about six dollars a day per person. So
we were here in New York City. How far would
six dollars get you in food today?
Speaker 5 (17:18):
Especially if you live in a food desert. I mean
you basically would have like one fast food meal.
Speaker 8 (17:24):
Yeah, I mean, oh but you could.
Speaker 9 (17:25):
You can't spend it at a you can't spend it
on hot prepared.
Speaker 5 (17:28):
Right, Okay, Yeah, but you're going to go to a
store that takes food stamps and they won't have any
fresh produce and your only choices like hot talkies, right, So.
Speaker 9 (17:38):
I mean you're you're not going to have a lot
of options and your family.
Speaker 8 (17:42):
I mean, if it's these cuts.
Speaker 9 (17:45):
With the people that I'm speaking to, and when they
watched this pass in the in the Senate, they're they're
just devastated. I think there's a big question of like
what are what are we going to do? For every
meal of food bank provides nine from snap So what
happens when that number is drastically cut?
Speaker 8 (18:04):
And people really don't know? And I'll just throw one
more number.
Speaker 3 (18:07):
God forbid, the economy slows, right, are we going to recession?
Speaker 8 (18:10):
And food prices are expected to go up as well?
Speaker 9 (18:14):
So yeah, one more number I'll throw in is that
in this country about forty percent of our food goes
to waste. And so it is just the whole picture
is just mind boggling that we could have all these
people who don't have enough food, we could have all
these great growing away food.
Speaker 8 (18:31):
I mean, it's it's really it's crazy.
Speaker 3 (18:33):
It makes no sense, It makes no that much waste
and then to see, you know, so many people going
without food, and yeah.
Speaker 12 (18:40):
It's pretty sad.
Speaker 8 (18:41):
It's awful.
Speaker 3 (18:42):
Dina Shanker. It's a great read. Check it out at
the at Bloomberg dot comment on the Blomberg Bloomberg Business
Week's Business Week writer, I should say Dina Shaker.
Speaker 2 (18:49):
If you're listening to the Bloomberg Business Week Daily podcast,
catch us live weekday afternoons from two to five pm Eastern.
Listen on Apple CarPlay and Android Auto with the bloom
Burg Business app, or watch us live on YouTube.
Speaker 3 (19:04):
If you're driving, pullover because you're going to want to
listen to this story. Beneath layers of waste landfills around
the United States have been reaching scorching temperatures, and neighbors
have been getting sick. This is today's Bloomberg Big Take,
where Bloomberg's Laura Blisten Rachel Donnell Wright. For many of
the more than two million Americans who live within a
mile of a landfill, what all of this means is
(19:24):
that they're living within a mile of a potential time bomb,
with little way to know when it might go off.
You can read this full story and more from the
Bloomberg Big Take. It's on the Bloomberg Terminal and also
at bloomberg dot com Slash Big Take. Let's head to
our San Francisco bureau and to Bloomberg BusinessWeek editor and
writer Laura Bliss. Laura, so bring story. What is America's
hot garbage problem?
Speaker 4 (19:47):
Yeah, thank you so much for having me. The landfill
that you mentioned in La County is a great example.
And pockets of buried waste in this landfill have been
rising to temperatures over to high under degrees for the
past three years. That's about forty percent higher than the
EPA safety standard. California regulators suspect that what's causing this
(20:11):
is too much much oxygen getting into this landfill, which
is a problem known to start fires. This goes against
federal regulations. The landfill operator says that's not the case,
says nothing is on fire. And as I found out,
these landfills that have been overheating are a phenomenon that
we've seen across the US over the last twenty years.
(20:33):
And there's real debate, there's real controversy, you know, within
the industry in between regulators about what's causing them and
what to do about it.
Speaker 5 (20:44):
Laura, First of all, I read your story this morning,
first thing I read on the Bloomberg and I could
not put it down. And you know, I'm the type
of reader who typically gets goes through the first four paragraphs.
I'm from the Matt Winkler School of Bloomberg, and then
I'm done, so fantastic job writing this. One question I
did have is isn't it pretty easy to determine whether
(21:05):
something is on fire or not? I mean, it seems
like you could gauge that pretty quickly.
Speaker 4 (21:13):
You would, You would think so, you would think so.
And a challenge with these incidents is that, you know,
the the temperature climbs. You know, this is happening several
feet below the surface of the landfill, and so you
don't necessarily see smoke, you don't necessarily smell you know,
what you might think of as a burning smell. You know,
(21:34):
these events can can manifest in a lot of different ways.
And it's because actually that you don't necessarily see those
you know, classic fire symptoms that the industry is saying, well,
this is this is not a fire. We think it's
something else that's that's going on here. But as the
story shows, and thank you so much for reading it,
I mean, you know, regardless of what we call it,
you know, residents are getting sick, and there's a lot
(21:57):
of challenges in really address seeing the problem and kind
of getting to the root cause.
Speaker 3 (22:02):
What's exactly what's crazy is like people are getting caught up.
Is it a fire? Is it not a fire? And
there's all these terminal terminology, subsurface oxidation, smoldering events.
Speaker 8 (22:12):
But it's an important.
Speaker 3 (22:13):
Distinction because you write the distinction is in trivial federal
regulations explicitly forbid operators from running landfills in a way
that starts fires. Why is that so important, especially when
you so clearly write that people who are living nearby
then and their families are getting pretty sick.
Speaker 4 (22:31):
Absolutely, I mean, it's it's been, you know, a well
known issue in the industry for years. You know that
these fires can create really dangerous and toxic situations. And
you know, among the you know, few regulations that are
out there at the federal level for landfills, you know,
don't start a fire is absolutely one of them. And
you know, one of the concerning things that I found
(22:51):
is that one of the key rules that environmental engineers
and safety advocates say, you know, was really there to
prevent fires was actually rolled back. And so you know,
as far as like what is there to do about it?
That is something that a number of scientists highlighted for
me that we need the return of some of these rules,
(23:11):
for example, to stop too much oxygen from getting in
because as we all know, right that can that can
start fires when you when you mix that with hot
enough temperatures.
Speaker 3 (23:20):
And the point is it starts fires, but it also
gives off really dangerous gases, right, and and talk to
us about what's happening to people who live nearby.
Speaker 4 (23:31):
Yeah, I mean, so just to take the Chiquita Canyon
landfall as an example, I mean, we see elevated levels
of benzene, you know, and known carcinogen, carbon monoxide, other
toxic gases that are known, you know, to cause the
kind of respiratory, neurological, cardiovascular symptoms that people are reporting,
(23:52):
you know, hand tremors, headaches, nosebleeds that won't end. You know,
people are having you know, cancer also, and wondering, you know,
is what's going on with the landfill having to do
with my diagnosis?
Speaker 10 (24:05):
So what can these people do about it?
Speaker 5 (24:07):
I mean, as I was reading your story, I had
a feeling of like frustration in my chest because it's
so hard to prove causation. Right, people are getting sick
who don't live near the landfill also, and these corporations
have seemingly endless pools of money for litigation.
Speaker 10 (24:27):
I think of dark Waters. I think of Aaron Brockovich.
Speaker 5 (24:30):
You know, what can the houses who is the couple
that you that you write about in your lead, what
can they do about it?
Speaker 4 (24:39):
Yeah, I mean it's a great question. There are like
I think over a dozen, you know, mass torts moving
through the legal system right now of residents trying to
take legal action to represent themselves. Los Angeles County has
also sued you know this at the state regulatory level.
There have been a lot of enforcement actions, and I
think what a lot of these efforts are all kind
(24:59):
of pushing for our funds, you know, from the operator,
to fund the relocation of residents right to get out
of this danger zone. And so I think that is
what a lot of people are pushing for at this point.
But you know, there's also I write about in the story.
Polar Chiavo, who's an assembly member in California, has a
has a bill that's she's you know, I think, is
(25:21):
awaiting a hearing in the state Senate that would basically
just attach more you know, penalties right to landfills in
the future that you know, exhibit these symptoms that are
cause these kinds of problems for people.
Speaker 3 (25:34):
What do the companies say, Well, just to reiterate, right,
they say that this is not a fire.
Speaker 4 (25:40):
This is what they call an elevated temperature landfill, which
is a term that you know, the industry is applied
to at least ten, you know, large landfills across the
US over the last twenty years that have exhibited similar symptoms.
And you know, they pointed to you know, millions of
dollars that they've spent in mitigating the problem, adding gas
wells to trap the odors, putting a cover on top,
(26:03):
you know, contributing some money to residents to you know,
buy air filters and things like that.
Speaker 5 (26:08):
Why don't they just go in there with cranes and
dump trucks and move it away. I mean, there is
a temperature regulation, right, They're not allowed to be above
a certain temperature, and you can just stick a thermometer
in there and see that this does exceed that regulation.
Speaker 8 (26:23):
It's true, It's absolutely true.
Speaker 4 (26:26):
I think the challenge is, you know, what do you
do when these kind of hot temperatures become this kind
of runaway problem?
Speaker 3 (26:33):
And again, the.
Speaker 8 (26:35):
Question of causation, what to call it?
Speaker 4 (26:38):
Like this, this all matters, right, because that drives it
the question of what do you do about it? And
California regulators say you need to dig a fire break,
which is actually not unlike what you're saying, right, you
need to sort of create almost a trench, right to
stop this reaction from progressing.
Speaker 8 (26:53):
The operator says that that would make things much worse.
Speaker 4 (26:57):
They say that the solution is to keep heat out
using these wells. So there's just there's a lot of
disagreement there, well.
Speaker 3 (27:06):
You know, and I feel like it gets into a
bigger problem in the United States, and that has to
do with waste, right, Like what do we do with it?
You know, if you can't you know, I think there's
pushback against creating new waste facilities, right or waste or
dumps based on wouldn't exactly exactly. So then what you
have to do is deal with the existing ones and
(27:28):
just pile more and more stuff into it. I mean,
as you noted in our in your story, is that
for a long time people burn garbage. We thought that
was the way to do it, and then we realized, Okay,
that's not the way. I mean and doing kind of
also some you know, giving us a little bit of
a history lesson in terms of dealing with garbage. I mean,
this is again becoming another big problem, not only maybe
potentially for the health of US citizens, but also for
(27:51):
the climate.
Speaker 4 (27:53):
Yeah, I mean absolutely, I think this, this whole situation
is a great and really alarming picture of the problems
that can arise, like when we just keep kind of
piling our trash higher and deeper, right, And I mean
I will also add that, you know, safety advocates will say,
you know, we don't we're going to generate trash, right,
we know that we're gonna that trash is going to
(28:15):
generate methane emissions. And that's kind of part of the
story too, because trapping these emissions, you use these wells
that can actually lead to more oxygen intrusion, which is
known to start these fires. And so you know, advocates
will say, like, we just need better monitoring, right, We
need you know, better technology to monitor emission levels, you know,
real time temperature monitoring for example, so that you know,
(28:38):
operators and regulators can take action more quickly instead of
you know, letting problems kind of spiral.
Speaker 5 (28:46):
Well and as Carol and I were talking about this yesterday,
one of the great things to do would be to
stop generating as much waste. Right. I was over the
weekend camping looking for a spoon, and I went to
a store and they had a box of two hundred
plastic ones if I wanted it.
Speaker 10 (29:01):
But that's part of the problem.
Speaker 3 (29:03):
Yeah, like making things that you actually.
Speaker 5 (29:05):
Want, you got to attack the problem at the root, right, Laura,
I'm sure you've thought about this.
Speaker 10 (29:08):
A lot, absolutely.
Speaker 4 (29:10):
I mean it's funny. I part of the way I
celebrated publishing this story yesterday was taking the base of
my dead electric toothbrush to a battery recycling facility, which
even in the city of San Francisco, was not that
easy to find. But that's another problem. That's another you
know issue of this too. Right, We're not just generating
(29:30):
more waste, we also have a lot more flammable waste,
you know, vapes, e cigarettes, like these kinds of things,
and so you know, figuring out the right safest place
to put it is important too.
Speaker 3 (29:41):
Yeah, And you bring on the recycling experts to it,
they'll say, you know, you think so much stuff is
being recycling, but it recycled, but it's not necessarily face.
Speaker 10 (29:48):
Doesn't everybody now have a drawer full of dead vape batteries?
Speaker 12 (29:51):
Not in mind?
Speaker 3 (29:52):
No, Laura, incredible story.
Speaker 10 (29:57):
That's right.
Speaker 3 (29:58):
We were talking about kind of the waste yesterday and
when he saw it this morning, he's like, oh my God, like,
this is what we've been talking about. It's a great
deep dive and we so appreciate you giving us some
time with it. Laura Bliss, Bloomberg BusinessWeek editor and writer.
Check it out. You can find it on the Bloomberg
and at Bloomberg dot com slash BusinessWeek.
Speaker 1 (30:14):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five East. During
that listen on Applecarplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 3 (30:29):
At the world's biggest asset manager, I don't know if
you saw this, a bitcoin exchange trade fund MATT now
generates more revenue than it's signature tracker of the S
and P five hundred. So we're talking about the I
Shares Bitcoin Trust ETF generating more revenue than Black Rocks
I Shares Core S and P five hundred ETF. Oh yeah,
that's pretty wild, right.
Speaker 10 (30:49):
Yeah, but they try and keep the expense ratio way
down on the index tracker.
Speaker 3 (30:54):
I understand, I understand. Okay, all right, that's fair, that's fair.
But they also talk about you know, we've seen so
much money going into bitcoin ETFs in general because of
US regulators opening the doors to mainstream adoption. So let's
talk about some of this because our next guest is
sure to have some thoughts on today's regulatory environment. I
know Matt, you've talked with him a lot. He heads
(31:15):
one of the world's biggest bitcoin miners, Fred til As
chairman and CEO of the publicly held six point one
billion dollar market cap company Mara. He joins us from Miami, Florida.
The stock, by the way, as you reminded me, Matt
up eighteen hundred percent in the past five years, up
four percent year to date with nearly thirty percent of
the float. Short, Fred, great to have you here. I
(31:35):
know Matt and you have had several exchanges macro and
micro in terms of the industry. But help me out here.
And as I was kind of reading in here, you're
an energy and infrastructure company, You're a bitcoin miner. You
lay this all out on your website. What really drives
revenue growth at the company? Because our FA page on
the Bloomberg basically says it's bitcoin mining. Is that what
(31:57):
you guys do? Is that what leads you to profitability?
Speaker 12 (32:01):
Yeah? Essentially, we operate sixteen data centers across four continents,
and the majority of the load that we operate, the
compute that we operate is bitcoin mining, and when we
mind bitcoin, the bitcoin that we receive for doing that
we keep, and so that essentially we recognize as revenues.
(32:23):
But we're in the process of beginning or transition an
expansion into inference AI, which will be a growing portion
of the workloads that we deploy. We also are a
vertically integrated technology company and energy company. We own energy assets,
we own wind farms, we generate energy off of flare
gas and oil fields. We're able to develop co developed
(32:44):
technologies around a six software orchestration layer. So we're a
technology company that's very focused on maximizing the value of
every electron we can get, and we help energy companies
take excess energy and turn it into profits.
Speaker 3 (32:58):
What make what's going to lead you to profitability?
Speaker 12 (33:02):
Well? In combination of things. One is obviously the bitcoin
that we hold on the balance sheet is constantly marked
to market. But more importantly, as bitcoin continues to be
accumulated by institutions. You mentioned it in the your kind
of preamble as you're talking about you know, Blacks Bitcoin
ETF having garnered bigger fees than the S and P
(33:25):
five hundred fund. There's a huge amount of institutional interest
in bitcoin. There are a number of bitcoin treasury companies
springing up every day, and you're seeing an accumulation of bitcoin,
which is driving the price up. We're almost at record
highs again, and as that continues to move upwards, it
helps us generate considerable margins. The thing with our business
(33:46):
similar to the AI business, and I think you're going
to find this if you look at any AI company
that operates large data centers, is there's a huge CAPEX
investment upfront in building these sites, and the profitability comes
over time once the equipment has been depreciated. We depreciate
our equipment over three years, and unlike our peers, we
(34:07):
have the bit mining also the flair guests. We're able
to essentially move our a six that have been depreciated
to these low cost marginal energy sites marginal cost energy sites,
and that drives much higher profitability and also better capital utilization.
Speaker 5 (34:31):
I'm sure you've been following the back and forth between
Jim Chainos and Michael Sailor.
Speaker 10 (34:37):
It's been really entertaining.
Speaker 5 (34:39):
But you know, micro Strategy stock is up even more
than yours, I think like three or four thousand percent
in the past five years. And these kind of leveraged
you know, bitcoin holding companies are popping up all over
the place.
Speaker 10 (34:57):
What do you make of that because.
Speaker 5 (34:59):
Those these don't really do anything else besides, you know,
sell shares and borrow in order to buy bitcoin.
Speaker 12 (35:09):
So you know, the model with bitcoin treasury companies, in
the model that you know Michael Saylor has optimized is
essentially buy bitcoin issue equity, and as the price and
value of the bitcoin that you have continues to go up,
it drives your equity price up. And if you can
(35:30):
raise capital at a higher price than bitcoin, then your
bitcoin yield per share goes up, which is very attractive.
The problem is what happens at bitcoin price stays flat
or starts to go down. You said his stock was
up over a five year basis by a huge amount,
which is true, but if you look from year to
date at its performance compared to the bitcoin minors, even
(35:52):
you're starting to see the performances running into headwinds. In theory,
a bitcoin treasury company price should increase by upwards of
two times whatever bitcoin's price is increasing on a daily
basis because of the leverage that they're driving, and that's
not the case anymore. I think what we're starting to
see the saturation of the bitcoin treasury business market because
(36:16):
to your point, they're not in any other business. They're
taking over a company with a marginally profitable business and
they're turning it into an accumulator for bitcoin. And at
the end of the day, you have a bunch of
people competing for capital, and that capital is going to
go to the highest return, which means the lowest multiple
to NAVE, and over time that multiple to NAV is
(36:38):
eventually going to go to zero, not unlike what happened
with Grayscale, where for a long period of time the
Grayscale Trust, which held bitcoin, was trading at a discount
to its NAT. And I think there's risk, especially as
you layer a lot of debt on these companies, if
Bitcoin goes down by any considerable amount or stagnates for
any length of time, there could be challenges for them
(36:59):
to maintained that multiple.
Speaker 5 (37:02):
You know, you're borrowing against bitcoin as well. Obviously you
have other businesses that you're running. You mentioned the sixteen
data centers, the energy generation inferencing, which is I agree
going to be absolutely monstrous, but it's still risky. How
do you manage those risks?
Speaker 12 (37:22):
Well, we follow very much a capital allocation model where
we look at our average weighted cost of capital and
then we look at the types of investments that we're
making to see that we're ensuring that we have, you know,
are above a certain hurdle rate across a variety of places.
And if you think about our business, we were basically
(37:44):
five people and a few miners four years ago and
today we're the largest in the world at what we do,
and we're also the second largest holder of bitcoin in
the world of corporate entities. And so I think we
have built a very strong balance sheet, we've built the
ability to execute. Are the only company of the publicly
traded miners that has the geographic distribution that we have
(38:06):
and that has the kind of breadth of business that
we have. And I think that's going to pay off
very much, not just in the near term, but the
long term. As bitcoin becomes more and more of an
institutional asset, Bitcoin data centers start becoming more and more
integrated into energy transformation place. With data centers, the grid
has a huge need for flexible baseload, which is essentially
(38:30):
a type of compute that can turn on and turn
off as needed by their grid. You guys saw with
the heat bubble that happened in the Northeast the grid
was strained, Yet in Texas they didn't have those issues.
Why because in Texas they have a large amount of
bitcoin mining on their grid where the grid operator can
tell them, hey, shut off, I need the energy, and
(38:51):
bitcoin miners comply and shut off. If you had more
bitcoin mining across the grids in this country, especially the
grids that are heavily loaded, you would not see the
challenges that you have today, such as in PGM and
other ISOs, where consumers are being impacted total by increasing
(39:12):
prices of energy because AI loads which are not flexible
are coming online and they're getting more and more strain
on their grids. So we play a very unique role
in helping balance grids and helping make grids more flexible.
And I think what you're going to start seeing is
embracing and a bit of a marriage between AI data
(39:34):
centers bitcoin mining and how the two can work together
to optimize grids and make sure that there's plenty of
available energy for consumers. If you wanted to do some research,
Duke University did a study about four months ago on
this topic that showed that, you know, there's more than
enough energy on the US grid to support flexible loads
(39:55):
if they could flex zero point two five of a percent,
which is order of a percent, and you know we
flex upwards of thirty forty percent, so we're clearly an
answer to that problem.
Speaker 3 (40:07):
Let me just ask you though on this, And you
talked about the hot weather and that Texas you know,
managing it, But how has the hot weather increased the
energy costs when it comes to bitcoin mining for all
miners so far this summer.
Speaker 12 (40:22):
Well, it's most of our sites in the US operate
in Texas, also in Nebraska and North Dakota, Ohio, amongst
other places. And so the northern regions don't have don't
sit on grids where you have really that challenge. In Texas,
you've had a lot of hot weather, and you've had
(40:42):
a lot of what's called curtailment, which is when the
grid operators contact us and say, hey, we need you
to shut off. And so the impact to bitcoin miners
is that, you know, we essentially don't operate, so we're
not generating revenues those days. But the benefit to us
is that we get lower priced energy because of that.
Providing that flexibility to the grid in Texas allows the
(41:04):
Texas grid to not have to buy extra energy that
is very expensive. If you think about the energy markets,
baseload is kind of the energy that runs all day long.
It has a fixed price, and then you have this
variable or intermittent energy. Wind and solar farms create a
problem for grids because the wind doesn't blow at a
(41:25):
constant rate for a constant number of hours every day.
Neither does the sun, and so they're dealing with balancing
this variable intermittent generation from solar and wind, and at
the same time, demand is different all day long. So
does it say to match the two?
Speaker 3 (41:41):
I totally get that, just quickly. I know Matt wants
to also ask something, but I want to ask you, quickie,
are you asking? I mean, are you looking for other
areas of the US or even the world when it
comes to new bitcoin mind.
Speaker 12 (41:55):
Yes, absolutely. We have a stated objective that fifty percent
of our revenue will come from outside the US by
twenty twenty eight, and we're quite ways along in building
a pipeline of opportunities across places in the Middle East
and Europe where we believe we'll be able to meet
that goal quite handily.
Speaker 5 (42:10):
I would be happy in the great state of Ohio,
you know, and not need to go anywhere else.
Speaker 10 (42:14):
Go buck eyes, Fred.
Speaker 5 (42:16):
I want to ask quickly about you have developed new
technology for inferencing, including a proprietary two phase emerging immersion
cooling technology, which I think is really neat.
Speaker 10 (42:28):
But the thing is with inferencing, you don't need.
Speaker 5 (42:31):
Nearly the power that you need for training, right And
I wonder about the hardware that you're using because in
vidio chips are obviously very expensive and maybe overkill for inferencing.
Have you said or are you working with other chip
makers to get your gear?
Speaker 2 (42:51):
Yeah?
Speaker 12 (42:51):
Absolutely so. The inferencing is very similar bitcoin mining that
you're constantly chasing an efficiency curve. In the world of inference,
it's lowest cost per token, and you know, obviously an AI,
a token is not what it is in the crypto world,
but a token is a measurement of a certain amount
of compute, and so there's this constant need to lower
(43:12):
the cost of token. As AI gets more intelligent, as
there's more reasoning in AI, the cost to do a
query and inference becomes more expensive in the number of
tokens that it takes. And the single biggest challenge that
if you talk to enterprise customers, they'll tell you, you know,
the price for tokens too high. We need a lower
cost for token, and at the same time they need
(43:33):
to ensure that they can get access to very rapid responses.
So these data centers have to be in close proximity
to the customers and the energy costs have to be low.
So we've been working with people all the way down
the cost curve all the way down to a six
as we look at inference as a way to lower
(43:54):
the cost, and we totally predict that there'll be a
very extreme costs decline over the next two to three
years in inferencing as new technologies come in place, so
that you won't have to use this huge infrastructure that
you have for learning. You know, one of the biggest
challenges today is that a data center builder needs to
(44:16):
get a payback on all that investment in under a
year because the technology and their data center is obsolete
after a year. Just look at what in video is
releasing in the way of technologies.
Speaker 3 (44:27):
So glad we could get some time with you. I
wish we had we had more. Come back soon, Come
back soon, Fred til thank you so much, chairman. It's
at you of Mara.
Speaker 2 (44:35):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
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You can also watch us live every weekday on YouTube
(44:56):
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