Sam Bankman-Fried Is Sentenced to 25 Years in Prison

Published Mar 28, 2024, 8:10 PM

 Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg News Legal Analyst June Grasso and Bloomberg News Financial Investigations Reporter Zeke Faux discuss FTX co-founder Sam Bankman-Fried being sentenced to 25 years in prison for stealing billions of dollars from customers. Lauren Hochfelder, Co-CEO of Real Estate Investing at Morgan Stanley Investment Management, shares her thoughts on the commercial real estate outlook. Carlyle Co-Founder David Rubenstein talks about the Baltimore bridge accident and buying the Orioles. Jennifer Huddleston, Technology Policy Research Fellow at Cato Institute, breaks down the US Justice Department suing Apple. And we Drive to the Close with Alan Zafran, Founding Partner and Co-CEO at IEQ Capital.
Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan. 

Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business Week Inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

Once Crypto King, once Golden Boy, Crypto, once a modern day JP Morgan, that one time billionaire Tim and FTX co founder Sam Bankman Fried as you know by, now sentenced to twenty five years in prison for stealing billions of dollars from customers, marking the final chapter in a case that is both captivated and overshadowed the crypto industry with more on.

Today sentencing in the era of crypto and finance failure and fraud that the now thirty two year old SBF was behind. We welcome into the Bloomberg Studio. Bloomberg News Legal anais Judent Grosso. She's also host of Bloomberg Law weeknights at six pm Wall Street Time on Bloomberg along with Zeke Fox, Bloomberg News Financial Investigations Reporter, also the author of Number Go Up, Inside Crypto's Wild Rise and staggering fall. Zeke joining us on the phone from New York City because Zeke traveling after being in the courtroom this morning. Now that's where we want to start. Zeke, what was it like in the courtroom earlier today when Sam Bankmon freed was sentenced, and also ahead of that sentencing.

So it was packed as usual with reporters. And when Sam walked in, he was wearing his prison jumpsuit instead of a suit like during the trial, as his legal procedure, and he took the opportunity to address the judge like he did during his case. And I was watching to see if he would just apologize and take responsibility for what happened. For a minute, it sort of looked like he might, but then he fell back on the story that he's been saying since FTX failed, which is that mistakes were made the buckstocks with me. But he's not admitting to stealing customer money, all right, So I.

Want to bring in June Grosso June. So I am curious that twenty five year sentence. How much did the judge, potentially Judge Kaplan use that. You know that even in the eleventh hour, Sam makemin Free didn't come out and said I committed a crime. How did that factor into the sentencing? Because it could have been much worse, It could have been a lot less potentially.

So even before the sentencing, Judge Kaplan had increased the guidelines range for Bankin Freed after finding that he had perjured himself at his trial. And what he said at the sentencing was when he wasn't outright lying, he was evasive, hair splitting, dodging questions and quote, I've never seen a performance quite like that. He took that into account, and I think that you know that weighed against Sam Bankman Freed. He also took into account you know, as Zeke said, he didn't think that he was sorry for what he had done. He said, he expressed expressed sorrow, but it wasn't real to him. And you know also he had before the sentencing expanded the guidelines too, and he found that Sam Bankmin Freed had tampered with a witness. If you remember, before trial, Sam was out on bail and the judge called him back to New York and abruptly threw him into prison despite the bail because he said he had been tampering with a witness. So I mean the judge had been through this whole trial watching Sam Bankman freed, and you know, this is a very tough sentence if you think about though, it is in line with some of the big kind of white collar crime we've seen. For example, Jeff Skilling at Anron, I think he was sentenced to twenty four years and Bernie Evers twenty five years, So it is in line with that. But you think about state crimes. If you're committed murder state basically you know you'll be out in fifteen years or so. So they're making this white the white collar crime into what.

You made one hundred and fifty years.

Yeah, Bernie made off that is held up as the most extreme example of how many years of defrauding people. So I think it was a tough It is a tough sentence.

Is he come on back in here and give us an idea of what Sam Beakman fried was like when he found out that he got twenty five years. If you saw any reaction from his parents who were in the courtroom, because his mom did write a lengthy letter to the judge in recent weeks about going being lenient in the sentencing.

Yeah, Sam was standing there, his hands folded. He was pretty impassive. It was hard to know what he was thinking. His parents also did not make a big dramatic reaction, I mean his mom yet she had written a pretty moving letter about what Sam was like as a child, how he was different from other kids, how he wasn't motivated by the same things as them, and how his commitment to making the world a better place was real. And the defense talked about that that too when they when his new lawyer gave a speech, but in the defense said, in kind of a good one liner, he wasn't a monster, he was a mass nerd. And you know, if you if this was all the information you had, you know it might be kind of convincing. But the problem was that this totally didn't address the fact that during the trial, his four best friends and top lieutenants at FTX in a row each took the stand and said, hey, no, we committed a giant fraud on purpose. We knew it was wrong, we did it anyway Sam directed us to do it, and they presented a lot of evidence that showed that. So whether Sam was a nerd or whether he was actually greedy was kind of beside the point. It's like this fraud still occurred.

Yeah, well, Zeke, I said, you bring up a really good point. We're talking about Caroline Allison, Nieschad Singing Gary Wong right now. They're awaiting their own fate after helping seal their former former bosses conviction for pulling off a multi billion dollar fraud involving tens of thousands of customers. June, I have this dish question, and I don't know to what extent you can answer it because we're kind of playing, you know, should it would have Kulda here? Yeah, but the three individuals I just mentioned, they all pleaded guilty and cooperated. What if Sam Bankman Freed had pleaded guilty and cooperated with law enforcement? What would he be facing right now?

As I understand, and Zeke may know better. As I understand, the prosecutors never offered him a deal. There weren't deal negotiations. So that's my understanding that he wasn't offered a deal, that they got those three and the case against him then just built.

Zeke, was that the case that's true?

And I.

You have to imagine he would have gotten a lighter set into be just threw himself in the mercy of the court. But I have another interesting counterfactual. What if all of those people got together and decided, hey, let's let's stick to a different story. Let's say it was you know, we didn't let's not admit to fraud. Let's all say we're not We're not guilty. Could do the government have enough evidence from documents and otherwise to convict them. I mean, they definitely had some evidence, but it would have been a lot harder. All of their text messages were set to auto delete, so the government didn't have a lot of contemporary records of them, you know, agreeing to commit some of the key acts.

Someone always flips, though, Someone always flips because you have three people, four people, and someone is going to feel nervous about it. And the prosecutors, you know, they ask them questions, they bring them in, they bring them in with their lawyers, and you know, it's it's very hard to imagine that all three of them, all four of them, would have kept to a story. So I think one of them would have flipped somewhere along the way.

See, let me ask you. I mean, the lawyers said that they expect to cover more money or enough money excuse me to pay back everyone in full in terms of FTX investors. So having said that, I don't know, does it speak to that, you know, they actually kind of figured out some things and did it well in the crypto space, Like, how do you read that? Interpret that?

Yeah, So it is pretty wild that when ftx s failed, there's eight billion dollars mithsay, and now the lawyers running the bankrupt company are like, we've recovered enough money that we think we'll be able to pay all of that back to the customers. And the reason, though, is not that the money was never stolen. It's that a lot of it comes from this huge run up in crypto prices. Basically, when FTX filled in Alameda, they still had some crypto and it wasn't the stuff they thought they could sell quickly enough to satisfy the customer demand, hence the bankruptcy. But now they've had more time and the price of one of these tokens, in particular Solana, is up like tenfold, and if the bankruptcy estate is able to sell it all while the market is hot, they'll make like ten billion dollars. It's crazy. So that's essentially it's not that the customer money wasn't misappropriated. That he did make some good gambles with it.

It looks like or.

With the help of these bankruptcy lawyers.

Judge didn't believe that, by the way, talk about that.

That was interesting momentary.

Because that was also what was in the defense papers, Hey, there's not really a loss here. They're going to be paid back. And the judge said the defendant's assurance that they'll be paid in full is misleading. It is logically flawed, it is speculative. The judge basically everything that they threw at him the defense, including that Sam Bankman Freed is autistic, he twisted it around and used it against Sam Bankman Fried. So they said he's autistic, he's and he said, well, he is autistic, but that gives him a great capacity to do things.

He worries the judge Kaplin worried about what he might do next.

Yet that was that was chilling to me and I just was reading it, he said, because the defense was arguing he has is young, he has an opportunity to do so many things. They tried to compare him to Michael Milkin, and what could happen if he comes out charitable work and the judge said, no, he just wanted power. He was power hunger, and he said, there's a risk that this man will be in a position to do something very bad in the future. It's not a trivial risk, and I was shocked by that.

It's interesting, right.

Well, I want to talk to Zeke about that, because Zeke, before the downfall of Sam Bankman Freed, before the fall of FTX, you spent some time one on one with SBF. You got to know him a little bit for a pretty story in BusinessWeek that you recently recounted in the Big Take podcast. Talk a little bit about what he's maybe actually maybe it was a Spellcaster podcast. Excuse me, it was in one of the great podcasts that our team has done.

That's the message.

A lot of.

Podcast was ze talk a little bit about what his personality was like and what really shocked you about this guy.

So one, some people after FTX failed have taken this to mean that you know, everything about Sam was a lie, and I actually don't think that that's true. When I met him, what really made him seem different and interesting was that this was a guy who he told me this story about how when he was a teenager he met a philosopher who convinced him that the best way to help the world would be to get really rich and give all the money away. I'm meeting him, it's like nine years later, and he's worth twenty billion dollars. And I actually think, from like all my time getting to know him and talking to people in his circles, this part of the story is really true, and that actually is what motivate made him dangerous because when he was presented with a chance to either he could justify anything that he wanted to do by saying, hey, there's like a real chance that if we're successful, we might do something that could change world history. So what's a little fraud here and there? Like we might literally save millions of lives when we get rich enough and make trillions of dollars. And he's a guy who thought about the odds all the time. He's somebody who weighed the odds, like, what are the odds I'm going to get caught? What are the odds if I'm successful? I mean to be fair, This is my take. Now, he did not admit to this to say sorry today, but I think that's why they're saying he's dangerous. Because if he has another chance to his philosophy, in my opinion, would justify trying again.

The means justify the end is basically is basically what it is. Hey, June, I want to ask you, this was a punitive sentencing. This was about sending a message. Is it clear that Judge Kaplan did just that when it comes to I don't know, not just crypto but finance fraud.

I think that that was part of what this was all about. And he said that this is about such, you know, stopping people from doing this in the future. And afterwards the Manhattan US Attorney Damian Williams put out a statement and he also said that this is a way of warning people about this. So that's part of a sentence. Because this is such a high profile case. It wasn't For example, Mark Mucazy got Trevor Milton four years instead of eleven. That case was high profile, but not like this. This was crazy. So I think that the judge felt that he had to send a message.

Is there appeal? Can this be reduced real quickly?

There is going to be an appealed that he says, they're going to appeal the conviction and the sentence. But you know, appeals are very difficult in cases like this, so and he has a new team, he has a great team. But so we'll see what happens with that. And the judge also asked that to be put in a low security prison because of his autism and that it might be difficult for him in a regular prison, although he seems to be getting along okay at Brooklyn Correction.

Well, a fascinating I guess final chapter. Perhaps I don't know appeal yet. Well that's right, okay, so not quite a final chapter to both of you. Thank you so much really bringing a lot of clarity and analysis to the story. Bloomberg News legal alyst jun Gross, host of Bloomberg Law Weaknights at six pm Wall Street Time on Bloomberg Radio. To catch that and Zeke Fox immeasurable in terms of his insight to on the world of crypto Bloomberg News Financial Investigations Reporter. Check out his book Number Go Up, Inside Cryptos, Wild Rise and Staggering Fall.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple card Play and then Bright Auto with him Blomberg Business Act or want us live on YouTube.

We just talked with Bloomberg's mat Day about Amazon's plan to spend almost one hundred and fifty billion dollars over I think fifteen years on data centers needed for the AI Boom Data Center's tim We know one of the real estate investment plays we've heard a lot about for years. More recently, the focus and concern when it comes to commercial real estate has been on offices as working from home, as we know, still sticks for many post pandemic TEMs.

Yeah, the Bloomberg Readoffice Property Index down about two percent so far this year. It lost three percent in twenty twenty three, but Carol dropped close to forty percent back in twenty twenty two.

All right, with a look at the commercial real estate space, we welcome Lauren Huckfelder. She's co CEO of real estate Investing over at Morgan Stanley Investment Management. She joins us right here in New York City. Lauren, welcome to Bloomberg. Hey, commercial real estate. We know location, location, location, but it also can be divided into a lot of different buckets. You've got office, retail, You've got data centers, You've got industrial, walk us through the different sectors. Where are you seeing strength and where's the continued weakness, like perhaps office.

Sure, well, first of all, thank you for having me. It's great to be here. And I would say it's funny you use the old expression location, location, location, that is absolutely paramount in real estate. But you know, today we talk about dislocation, dislocation, dislocation. We have to look at what's changing, what's being disrupted, and invest accordingly. So yes, take office, take US Commodity office in particular, and it is absolutely being disrupted. You have a dramatic demand destruction. We all know that people tried out working from home in the pandemic and decided it wasn't so bad. So we're seeing a dramatic demand destruction. But frankly, also those assets just don't meet modern tenant demands. They don't meet them from a standpoint of quality or menetization.

Frankly, they don't meet their carbon reduction goals.

So these are assets that many of which will be stranded because they simply don't have long term cash flow growth potential.

But go to the office.

Wait, wait, wait, can I jump in there?

Though?

So US Commodity Office you're saying it's going to be stranded. So what happens and what are the financial implications, whether it's to the owners of those properties, to the banks who hold the loans on those properties. How does that play out? And then how does that maybe make more valuable some of the higher tier or office property.

Yeah, no, no, that's a fantastic question. Well, I'll start with the ends. So you're seeing a massive consolidation of demand into the best of the best assets. So perhaps counter intuitively, the destruction of demand for more commodity space is actually driving increased demand for the best of the best. I'll give you an example. Take San Francisco. San Francisco office is one of the worst markets globally, and I can tell you even in San Francis Go we own some.

Of the best office assets in that market.

Even today we're signing leases at rents above pre COVID levels.

So to your point, it speaks to the benefits to the best.

Okay, so let's talk about some of those benefits or what that offers potential tenants. I mean, what exactly in twenty twenty four, in this world of hybrid work that we live in a world where AI companies are just flourishing in the Bay Area and bringing people back to the city. What is an office building? What does an office building need to provide to attract and retain tenants right now?

Yeah?

Absolutely, Look, it's amenities, it's a focus on wellness. It is all of the bones, if you will, so big open ceiling, heights, big open windows.

But ultimately it comes.

Down to I think amenetization, wellness, and of course location.

So can can buildings that don't offer those things right now? Can they be converted at a reasonable cost to buildings that will soon become attractive.

There's a lot of talk about converting old office buildings into other uses, converting it into residential, converting it into life.

Science or lab space, and the reality.

Is some assets will be converted. We've seen success stories. For example, here in New York. After September eleventh, a lot of office buildings in Lower Manhattan were converted to residential buildings.

But two things were different.

One, many of those office buildings had smaller floor plates, so physical structures that were more conducive to conversion. And two, frankly, there was a government subsidy for that.

And I think that the math is.

Simply, even for those assets that have the right physical footprint, the math is very challenging when you get to over hauling the mechanical systems, everything going.

Up and down the building.

Hey, one thing I wanted to ask you obviously front and center here coming off the unfortunate bridge collapse in Baltimore, and we are once again talking about supply chains, and that is certainly an investment trend that you guys are seeing. You call it a second mega trend tail when driving demand in the industrial real estate space, and it has to do with the global supply chain. Talk to us about that, and you guys are investing this.

Way absolutely, So I would say, in contrast to office we love industrial real estate. We love it on a global basis, and it's really for two reasons. The first is e commerce. So that's very much been the story of the last decade. So we, as all of us started buying and increasing share of our goods online versus in store, and frankly demanding it get to us faster and faster. We started buying in buildings, those warehouses that get goods to our front doors every day.

And as e commerce penetration went grew by two and a half x so too did rents.

So that's been a great tailwind for US industrial real estate, for global industrial real estate, and I think that will continue, albeit decelerate the second mega trend, and it's really at the earlier inning. So even more exciting is the overhaul in the global supply chain. Look, we're coming off decades of a super smooth, super efficient global supply chain. We've all enjoyed the disinflationary benefits of that supply chain, but now things are changing.

You look at.

What happened tragically in Baltimore this week, but I think it's really it goes well beyond that. Among the many things that COVID late, there was the fragility of the global supply chain and we live it daily now.

It is event driven supply shocks, so COVID certainly.

Being an enormous one, but you also have what's going on in the Panama Canal or labor disputes at the court, so event driven supply shocks, and frankly, you have the overlay of geopolitics.

Yeah global Hey, Lauren, we only have thirty seconds left, but I do want to talk politics, not geopolitics. How do investors in this space need to follow the presidential election. Does do things change for you if Biden loses and Trump wins?

Just got about twenty seconds.

Love.

Politics affects everything, but ultimately we are focused around big, mega trends that are durable demand drivers, regardless of who's in office.

All right, interesting stuff, and certainly it feels like this is going to be continuing a chapter in the real estate state space in general. Kind of we talk about in terms of how office plays its way out and then just kind of where investors are going. Hey, Lauren, thank you so much. Lauren Hackfelder, co CEO real Estate Investing and Morgan Stanley Investment Management joining us in New York City.

You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business ad. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.

Well, a salvage firm that helped contain the Deep Water Horizon oil spill and safely blow up part of New York's Tappanzee Bridge, is heading to Baltimore as a first step to what will likely become a more than two billion dollar rebuilding projects.

Yeah, and Tim, someone who knows the Baltimore area very well, haven't been born there, is well known to our Bloomberg audience as he is the host of peer to peer Conversations on Bloomberg is Carlisle. Co founder and co chairman David Rubinstein, who I caught up with last night to talk about the bridge, as well as some news earlier in the day. We started now on the collapse of the Francis Scott Key Bridge. I want to start with something that we have certainly been focusing on the last twenty four hours or so, and that is what's going going on in Baltimore. You were raised there, born there. The collapse obviously of the Francis Scott Key Bridge. How important is this bridge to the area. What does it mean to the people who live in and around that area.

It's an important bridge to people in this area. It's important bridge for the country in many ways because many important ships go through that channel there. But the bridge itself is iconic, well known, named after a very famous person, of course, Francis Scott Key. But it is a sad situation that it couldn't have been prevented. Apparently the ship lost control or lost its power, and therefore it couldn't control where it went. Based on what I read, and I think that at this point there's been a loss of life. It's tragic. The governor is on top of it. He's an incredibly pessive person, and he and the Secretary of Transportation are on top of what needs to be done. In President Biden has said that the federal government will put up the money to fix the bridge, but it's going to take time. So there'll have to be a way to figure out how to get people across that area, which is otherwise you know, reached by the bridge. But you know, sad situation for the city for sure.

But I just want to ask you as someone who's lived in the area, right, I think you know, when we live across the country or we're not from that area, we think, okay, it's it's another bridge, And obviously loss of life first and foremost we feel bad for that. But I'm just in terms of the area and and you growing up in that area, like how you how you think about that bridge?

Well, the bridge is one that is an important part of the commerce of this area, important for people that live in the area. It wasn't actually built when I was growing up, and blomers built afterwards, but it's an important bridge and serves a great purpose. It's just so tragic that the ship lost power and it was in the middle of the night and you couldn't really help eeasibly rescue people. But Baltimore has had many challenges in recent years. This is a challenge, but it's a challenge that you know we can where you can't recover the lives of people who are gone. But I think the bridge can be rebuilt. It just takes time to build bridges, and therefore there'll have to be some temporary measures to get people across that area.

We certainly have heard from various government officials about that, specifically about the time that's going to be needed to get certainly the port up and running, but even more importantly at the longer term time that it will take in terms of getting that bridge rebuilt. Are you confident that the government will do what it needs to get that bridge rebuilt in a timely manner.

I'm confident that the government as the intent to get it done as quickly as possible, and the present United States, the governor of Maryland, the mayor, and Baltimo are all unified. It's not a political issue, just a question of you know, it's something that it takes time to build, and you've got to redesign the bridge, and you've got to get structural engineers and you've got to get construction people. So it's a multi year effort to get that rebuilt, there's no doubt.

And as I said, we've heard from the government. Is there something that the private sector can do? Is there a public you know, private partnership that needs to be thought about in terms of getting this bridge up, up and running and rebuilt.

Well, typically you have public private partnerships when there's a need to involve the private sector in some way, and the government can help with financial support. Here, the government is putting up all the money necessary for the rebuild. So the private sector I think can probably help the most by raising funds for the families who lost their loved ones in this tragic accident. And I think that's something the federal government doesn't typically provide support for, and so I think you'll see private sector money focused on that for the commediate future.

All right, and David, we definitely obviously appreciate you weighing in on the collapse. I think we would be remiss not to ask about some big news for you personally today, and that is about the Baltimore Orioles. You tweated it out about ownership. Major League Baseball's owners today unanimously approving you as the new controlling owner of the Baltimore Orioles just before opening season begins or the season begins. Congratulations, you've wanted this team for years. What's gone through your mind now that you've got it.

Well, whenever you achieve something you want, you always have to wonder what bad things can happen, because you you know, life can always be perfect. So I'm very pleased. We have a great team, a great investment group that I've assembled. But you know, it's one hundred and sixty two games, and it's you know, you're considered successful if you win you know, one hundred or so of them. So you're going to lose a fair number of games. So we have an opening day tomorrow. Hopefully the weather will operate and well, we'll do well in opening day. But it's a long season. I just pleased that I was able to do this. I came from very modest circumstances in Baltimore. Never dreamed that I would be able to buy the Ortols when I was growing up. But you know, life moves forward in strange ways, and things worked out, and I'm happy to do this as a way to help give back to Bottomore if it's good for having helped me get a very good education here.

I feel like it's an obvious question. I'm assuming you will be sitting in the owner's box tomorrow at Camden Yards.

It's an obvious question, but the answer is not obvious.

I will be.

I have some friends, relatives and others coming, but I don't want to be there that long because I want to move around the stadium and see what the fans think, and because I'll be sitting in various parts of the stadium and sitting next to average fans. That's what I hope to do in that game and other games.

That's really lovely to hear. And the other thing I'm going to ask you is a team obviously you've thought about for a long time. As you said, you feel I can hear in your voice that you know Lucky to have it as your team and be part of the ownership there. It is a young team made the playoffs last year? What are your plans? How are you thinking about that?

We have the best manager in the American League, as voted by the league last year, and the best general manager. Nobody has ever thought that my baseball expertise was quite at the level of those two individuals. So I'm going to rely on them on what to do, and I'll try to be as supportive as possible from the business side, but clearly on the player's side, you know. I mean, we have it in the hands of people that are really experts, and my job is to kind of help them do what they need to do.

So if they say we need to spend more on the team payroll, would you be up for that.

I'm going to follow the advice of the people that know what they're doing in baseball, so I you know, I'm RELI look at what they recommend. So I just don't want to be committing to any one thing or getting people's hopes up beyond what I can realistically do. So I think I want to rely on Mike Elias, who's the incredible general manager. We have in Brandon High the great manager we have. And beyond that, I don't think I can say more.

Hey, listen, and I don't know what you can say about the dispute that's been going on for a long time with Mason. Is there anything in terms of moving that forward and getting some kind of resolution.

I do think that it would be helpful to base Ball generally and helpful to the Nationals and the Eros to have some type of resolution. But obviously, when you have something that's going on for ten years of dispute, no one can come in overnight say I got a solution that no, none of you thought of. So it's something that we want to resolve. I think the Commission of Baseball would like to see it resolve, but it's going to take some time to dig into it. Obviously lawyers have benefited from this over the years. But hopefully we can get it resolved without the lawyers being too deeply involved in and we can get it resolved before too long. But it's beyond that. I can't really say, hey, David, one more thing.

You know you talk about tomorrow, you know, being among the fans and walking around the stadium, and I do wonder how you think about it. I know it's something we talk about in New York a lot about the expensive cost of taking a family affoord to go see a team. And how do you think about, you know, making this you know, wonderful sport and this team, you know, accessible to everyone.

Well, people in New York who want to go to a baseball game might find it cheaper to come to the Orioles game than to go to the Mets or the Yankees game. So we welcome everybody in New York to come to Baltimore, which is less expensive and a beautiful city, charm city as it's known. So I think the prices here are more affordable, even with the transportation. So I hope people from New York who might be listening, we'll say, let's go to Baltimore.

All right, I'm going to let all the New York fans. Hey, I lied one more question. You've been the chairman of the Kennedy Center Honors for fourteen years. You've got one more year. You step down tomorrow. I know it sounds like taking something off your plate. You've got a lot going on, is understandable, but any thoughts about that. It's something that I've enjoyed watching with my family, and I'm just curious as you wrap that up and move on to other things, how you're thinking about that.

Well, the Kenny Center has been something I've chaired for fourteen years. I'll finish at the end of December, but then I'll become the chairman of the Kenny Center Foundation, which is designed to help raise money for the endowment of the Kenny Center. So I'll still be involved there a bit, but I think it's a good time to get somebody who's young and pressure than me, and I have one more honors to do, and we're going to pick the honorees in the New York Future and hopefully everybody will think it's a great selection.

All right, David, thank you so much. Any celebrating tonight, we.

Have the investors and Maney of the key people in the OILS organization having a dinner tonight, and I will host that dinner with some of my partners.

Yes, all right, That of course is Carlile co founder and co chairman David Rubinstein. Conversation I had with him last evening, obviously talking about the bridge, but also the news yesterday that he is now the owner of the Baltimore Ornols. That's a big deal, John Tucker.

Does that mean we get tickets? Well, we should point how does this benefit me, John Tucker, I don't know the answer to that question. I'm kidding.

We should point out though, Michael R. Bloomberg, of course, the founder of Bloomberg LP and Bloomberg Philanthropies, is also part of that investor group.

I will just say it's a sight when the Yankees here in New York go play book. Bltimore Camden Yards is a fantastic studio.

Love.

Yeah, it's a great trip, by the way. Yeah, sometimes you get more Yankee fans in Baltimore.

Then because it's a good deal, because it's cheaper.

It's it's a great trip.

Yeah, it's a great trip. All right, all right, folks, Carol Master, timstad Vic, where to come. We're going to talk about the markets right here on Bloomberg.

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So we're going to go further with Apple, the company in the processers of it, seems regulators around the globe. Here in the US, as you know, one week ago, the US Justice Department in sixteen attorneys General suit Apple, accusing the iPhone maker of violating anti trust laws by blocking rivals from accessing hardware and software features on its popular devices.

Indeed, well, our next guest believes misguided anti trust actions could harm consumers and small businesses and only lead to increased government intervention. So here to explain her view is Jennifer Huddleston. She's Technology Policy Research Fellow at the Cato Institute, adjunct professor at George Mason University's Antonin Scalia Law School, and she joins us from Washington, d C. Jennifer, good to have you here on Bloomberg. So let's get to it. You it sounds like you don't agree with this action by the US Justice Department. Lay it out for us.

What we have is the US Justice Department trying to very narrowly define a market in order to show a market dominance that doesn't actually reflect the reality that most consumers have or why Apple is a large, successful company. Instead, what we have is a bit of a return of a big as bad mentality the idea that certain companies, because of their size, should be immediately subject to greater regulatory scrutiny. But if we think about some of the issues brought up in the complaint, things like the idea that you get a green bubble and messaging if you have an Android device, the reality is that many consumers are choosing from a lot of different messaging options, not just text message and I Message, but any array of apps that are out there like WhatsApp, Signal, Telegram, and so on. This also makes a lot of presumptions about what the smartphone market is. The average consumer when they're choosing a smartphone is going to consider many many different features beyond just the operating system. They may be thinking about things like the camera, or the availability of certain apps, or the privacy and security features of a phone.

Hey, one thing I do want to, just for transparency, make clear to our audience is understand the funding of the Cato Institute. We do this with our think tank guests. So give us an idea of where the funding comes from for the Cato Institute, and if Apple is one of the companies that does support the Cato Institute, I'm.

Here to talk about my research, I don't work on our development team. Institute is funded by a wide range of individuals, and I can direct any questions you might have on that to the appropriate sources, all.

Right, and companies though, to be fair, so we just want to make sure the transparency is out there. Well, what is it about your research says that you know consumers would be hurt and small businesses would be hurt by this decision.

Well, when we look at what's gone on in the past, when we have seen something that was not the consumer welfare standard applied in anti trust, whether it was in the US in a private prior anti trust era, or if it was looking to Europe, what we have traditionally seen is that that focuses more on subjective means of measuring what is good and bad for competition, and it really sets up for a potential government intervention against politically disfavored companies, and it can actually take away some of those very features that consumers enjoy, whether it's the ability to know that an ecosystem is closed and therefore they feel that it's more secure because they know that that's the way that the product was designed, or whether it is to look at other aspects of the smartphone market, particularly for small developer for app store developers, this could change the way that the app store works as well, and the way that different elements that are currently available are such that it makes it much more complicated and in some ways could make every phone the same rather than really allowing a wider range of options for consumers.

Jennifer, what about the take rate for Apple, that thirty percent fee that it takes from stuff that's purchased through apps that are downloaded from the Apple App Store. I'm wondering your thoughts on that and if there are any antitrust concerns about that. Just to remind our viewers and listeners, it's the idea that when you buy something through an app that you downloaded through Apples App Store, whether or not that app comes from Apple or not, Apple does get and these are digital goods we're talking about, Apple does get a portion of that. That's what really set things off with regulators, and that's where Epic Games was coming from.

And we've actually already seen that, as you largely litigated in the Epic Games case, in which the court found mostly in favor of Apple's process. I think the question there is also is that actually an antitrust concern? Is that actually an anti competitive behavior or is that a matter of contract law? Is this a case of companies that can negotiate with each other over a fee the way that we would see in an offline world. If this was a shopping mall, for example, or Walmart, or a department store like Nordstrom, and they were having a negotiation with someone who went to sell something in their space, we would say that's a contract negotiation, and different companies may or may not like the terms of those contracts, but we would say that's a contract dispute and not necessarily an anti trust issue.

Jennifer, what would rise to an anti trust issue in your opinion when it comes to Apple. What would you have to see from the company to say, Okay, this is an instance where we need to see regulators get involved.

We would want to see something that indicated that it was anti competitive behavior and not just the case of having a product that responds to what consumers want and having a product that has been very popular with consumers. So we would be looking for things that were actually somehow distorting the market as opposed to something that's just a result of a company's success. We want companies to be responding to what their consumers want and creating products that meet those that meet those demands, and that may mean that they're successful and that they drive innovation as a result that other companies have to really rise to that challenge.

Well, to be fair, I mean, we talk about it a lot, right tim, We've talked about I mean, I'm an Apple family and we've made a choice, and so everything we do is within the Apple universe. And having said that, we don't necessarily as consumers know that if Apple was more open with its platform whether or not we might benefit from that as consumers. So it's hard to kind of make that case right without knowing whether or not by opening it up and not being so closed in terms of the Apple system, whether or not we actually might benefit.

There is an alternative system out there in that the Android system provides a different option, and so for people that are looking at wanting to have that more side loading experience, there are options out there where there's a wider range of operating systems. Apple has really tried to distinguish itself in the market through kind of having this closed ecosystem that they market as better for privacy and security, and that's part of their marketing strategy and what they feel is their role and their competitive advantage in the market, meaning in that would take away a company's option of really portraying themselves as that privacy centric option.

I'm wondering what you think of the idea of an environment being created where startups can flourish. And I think that a lot of people would point to the anti trust action taken against Microsoft in the nineties that essentially hobbled Microsoft for so many years, created this foundation in Silicon Valley where a lot of startups that are now the biggest companies in the world were actually able to succeed and flourish. Do you think Apple and other big companies are preventing startups from succeeding in this day and age because of their size.

We continue to have a really flourishing ecosystem of startups in the US, and we're very lucky that there are very low barriers to entry to start a company because of how we've had a light touch regulatory approach to regulation. I get concerned with some of the calls to change antitrust law around mergers and acquisitions, not only for the impact that could have on large companies, but for the impact that could have on some of those small companies. Some companies want to be the next Apple, the next Google, the next Microsoft and IPO and get really big. Others are looking at other exit strategies where they want to make an existing product better, or perhaps you know there's someone who the better option is to get acquired by a large company and continue to be a serial entrepreneur. So what we ideally want is something that has a wide range of exit strategies for companies of all sizes, so that they're really focused on benefiting consumers and on trying and failing in the marketplace.

Jennifer, we only have fifteen seconds left, But how do you think this plays out in court over the next few years.

I think the next few years is key there. This is going to be a long case. We're going to see a lot of conversations and a lot of further discussion on this issue.

All right, really it there? Hey, listen, Thank you so much. Jennifer Huddleston, technology policy research fellow at the Cato Institute, joining us from Washington, d C. And I will say tim our own legal analysis Jennery here at our Bloomberg intelligence team on this case, saying that you know, it's probably going to be three years in the making, and says that there is a lot that can happen in the technology world that might make it a very different case in that time.

Once again, a good thing for lawyers. They always out there a we seem to win.

M brom.

Journal.

How about you let me drive?

Oh no, no, no no, who's going to drive?

Honey?

Please?

How do the riding gravels? Let's make I want to drive.

It's a good question that.

This is the drive to the globe dot Com? Tim, think we'll buy around it on Bloomberg Radio.

All right, everybody, TikTok. Just about eighteen minutes left in today's training session. Carol Master along with Tim stane It getting ready to wrap up the holiday shortened trading week and wrap up Tim the first quarter. That was quite a stellar quarter if you were a bull in the equity markets here in the US.

Yeah, I'm really curious what Alan Zopfren has to say about that. He's founding partner in co CEO at IQ Capital. He joins us once again from Foster City, California. Alan, how are you.

I'm great, Tim, and Carol, how are you doing?

We're doing pretty well. Hard to believe.

We just opened up our four oh one k's and we're like, no, okay, no.

The trick, Carrol is never looked. That's the trick, never periodically.

Yes, of course you did.

Yeah, way too much. All right, what do you think of what's going what happened this quarter? I mean, what how does it mesh with what you thought would happen in the first quarter of the year, And where do you think we're going in the remaining seventy five percent of the year.

Well, first of all, the equity rally surprised me, probably as much as many investment professionals. So now we're calling it a five oh one K or six to one k Carol, not a one k.

I like that.

But you know, here's what happened in retrospect. It's easy to see it in retrospect. The market investors basically determine the Fed pivoted its policy in mid October. And the easiest way to consider that as you look at the yield on the two year treasury. It peaked in mid October on five and a quarter percent. It's right now at about four point sixty two percent. Once the market concluded the Fed had pivoted, everyone concluded it was time to be bullshigan and put money back into the markets. And if you look at history, markets always rally even if economic activity is weakening post the FED pivot. So that's what we think is happen to you have a liquidity washed market, and it goes to old adage time in the market is better than timing the market. So, despite my skepticism with a looming recession, sitting on our hands and not taking steps to mak any changes ended up being the right decision.

Having said that, okay, so we're getting ready for the Powell pivot or Powelling company pivoted. But yesterday, as we've been talking about allan, FED Governor Chris Waller saying that recent inflation data make him hesitant to cut rates as soon as he did a couple of months ago. And it's kind of interesting. So, you know, you do wonder and I'm curious about what Jay Powell will say ultimately tomorrow whether or not we're starting to get a little bit more managed about Yeah, maybe it's three, maybe it's two, maybe it's one, maybe it's none. Like I don't know. I guess we need to see and read the tea leaves here.

You're actually a highlighting we think is a greater risk of the market. Here's the irony. We would tell you greater economic strength with more inflation and a higher rate environment is actually more problematic and scary in the short run for markets than a slow down economically, even into a recession. In other words, we're at a near all time high of correlation with where yields are on what's happening with stock prices, and so our view is the biggest new term risks of the market is not a slow down economically. It's a pick up an inflation, a FED that doesn't lower the Fed funds rate and people have to unwind all their expectations about the rate cuts and we change the valuations we're paying for these stocks. So that is in fact the risk.

What's the balance of someone like you who watches the markets has to come out with advice and say the balance between growth good, a little bit of inflation good maybe versus a recession or deep recession and fallout.

Well. Stocks Historically archery actually and inflation hedge. It's only in times of extreme inflation where stock markets tend to fall or disinflation with recession. So we would argue, you know, it's semantics, but whether it's one and a half to three and a half percent, inflation is completely tolerable. What you're really looking for in the long run is, if you think about it mathematically, stocks are giving you real GDP growth of around four percent, inflation of another three percent, you get your two percent dividen yield. On an average, stock share counts drop by about one percent year, more shares are repurchased or redeemed than issued, So four three two one that's a ten percent rate to return. That's the historical rat return in the market. So inflation doesn't prevent the four percent economic growth as long as it's kind of in that one and a half to four percent range. When it gets too low, it's telling you there's no growth in the economy. Or when it's way too high, consumers can't afford to pay prices anymore. Companies have to raise prices to point the crowd out consumption, it leads to recession. So inflation is okay to a point, and in this environment win it's plenty fined as long as the pressure isn't great enough to cause rates to go a lot higher.

Hey, al, and I've been asking all our guests about asset allocation lately, given that we are seeing really highs in a lot of different asset classes. Right now, someone comes to you with new money, how do you deploy it?

Obviously, let's go back to risk Tarrant's investment time line, timeline, age goals, objectives, income needs, tax rate. But as a generalization, we would argue it's no different than any other time. But we would always argue whatever you're going into dollar cost average. So if I was going to tell you you are forty years old, you might be sixty percent stocks and forty percent bonds. But that's sixty percent in stocks. I'm going to take ten to twelve months to dollar cost average.

You wins.

You're buying ten percent of the stocks every month for ten months, and you get an average cost. You don't put all the money in on day one, because it's very hard emotionally to put all your money in the stock market. In three weeks later, if the market's down, you'll panic. So we would tell you it's status quote, it's no different than a normal time right now, But normal time means you tiptoe into markets. You don't put all your eggs into the basket on the very first day.

All right, So you shared with our producer Paul Brennan ten market themes for twenty twenty four. You believe a new bull market is underway, Allen, lower interest rates finally bring economic reacceleration. Insight, markets are evolved to what we think they resolve higher. And you say, this bull market, this new bull market, requires a different playbook, and that you believe interest rates and inflation will ultimately setter at a higher baseline level compared to the last fifteen years. So this is a rethink. Do we get the Fed to buy in on that rethink? You think anytime soon? And kind of admit that, yeah, I do.

I actually think the Fed has already admitted it. But they don't want to be a Fed like Arthur Burns in the nineteen seanies that let inflation creep back in and created a massive recession. So what they're going to do is they're purposely going slowly. They'd rather keep rates a little bit too high, a little too long, to guide us into this new economic environment. Then lower rates too quickly reads to gate inflation to cause a greater havoc. So I do think that's the playbook, but I think they are in fact could be methodical working us back down in the way they tip to us back down on the Yulker.

Favorite investment idea somewhere where you would commit money right now and be as specific as you can.

Private credit so you can buy both in public markets there are vehicles as well as in the private markets. Private credit is basically a set of loans senior and floating great issued largely than private companies, and because they're tied to the effectively the Fed Funds rate, it's called soafer. It's like what Libra was. Companies are you use the investor or lending money to a bask good of businesses that are giving you anywhere from five and a half to seven and a half percent of the five and a half percent Fed Funds rate.

So you're making no worry though there's a lot of transparency concerns about that. Alan just got about twenty seconds.

But if you're the senior floating rate lender on loans that are three or four and if you go into a pool of thousands of loans, the propensity you'll lose money, and that is exceptionally small. So experienced manager with a well diversified portfolio can make a very good private credit issuance. Note it's ordinary income, so that's the challenge.

It's an argument in favor we've heard a lot about, but interesting, there's also some nervousness about the sector. Allen, thank you so much of a good holiday weekend. Alan Zaffron, founding partner co CEO at IEQ Capital, joining us there from California. This is Bluebird.

This is the Bloomberg Business Week podcast. I'll a little lot of Apple, Spotify and anywhere else you get your podcast. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal

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