Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. I'm so tired. My
Speaker 1: body battery is twenty one out of one hundred.
Speaker 2: Is this the thing that I should know what it is?
Speaker 1: Well, if you have a garment, you would know what
Speaker 1: yours is, So that.
Speaker 2: Was a yes, I should know what it is. But
Speaker 2: I don't.
Speaker 1: I don't know what's going to happen when I hit
Speaker 1: zero during this podcast, maybe all time.
Speaker 2: Hello and welcome to The Money Stuff Podcast. You're a
Speaker 2: weekly podcast where we talk about stuff related to money.
Speaker 2: I'm Matt Levine and I write The Money Stuff com
Speaker 2: for Bloomberg Opinion.
Speaker 1: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 1: an anchor for Bloomberg Television. Short week this week, can't
Speaker 1: we short week? Short? Tough week? It's not as bad
Speaker 1: when we're all on Fridays. I love those for Davies.
Speaker 1: When you're off on a Monday, it just feels like
Speaker 1: the rest of the week you're just sliding rapidly down
Speaker 1: a mountain.
Speaker 2: And here we have reached the bottom of the nets.
Speaker 1: We're about to crash.
Speaker 2: Yeah, it was what have we scraped.
Speaker 1: Up for Jack Bogel's nightmares?
Speaker 2: Because we have like a synergy where you read about
Speaker 2: a thing and then I wrote about the thing you
Speaker 2: wrote about.
Speaker 1: Yeah. Yeah, I guess the challenge for us is finding
Speaker 1: things to say beyond that. But we're going to tackle
Speaker 1: that in a minute. We're also going to talk about
Speaker 1: taxicabs and New York's all important industry, and then we're
Speaker 1: going to talk about truth, social.
Speaker 2: Social Left for GTF. Jack Bogel's Nightmare.
Speaker 1: Yeah so you know Jack Bogel.
Speaker 2: Yeah, we're buddies.
Speaker 1: Yeah.
Speaker 2: I actually did meet him once.
Speaker 1: Yeah, I wish I had met him. I mean I
Speaker 1: worked closely with Eric Belgunis from Bloomberg Intelligence, who literally
Speaker 1: wrote the book about Bogel and Vanguard, and he sounds
Speaker 1: like he was a real who to interview and talk
Speaker 1: to up until the end. But he founded Vanguard. He's
Speaker 1: the father of the index fund. He hated ETFs, which
Speaker 1: is really funny since they're sort of the offspring of
Speaker 1: index funds. He said that ETFs they only incentivize trading
Speaker 1: among This is a quote fruitcakes, nutcases, and the lunatic fringe.
Speaker 1: And it's funny that in twenty twenty four, some ETFs
Speaker 1: are being designed to do exactly that just incentivized trading
Speaker 1: them on that cohort of traders.
Speaker 2: He's kind of wrong that, like an SB five hundred,
Speaker 2: ETF is a perfectly good buy and hold product that's
Speaker 2: actually slightly better than an index fund because it has
Speaker 2: tax advantages if you are going to buy and hold it.
Speaker 2: But it is also the case that you can put
Speaker 2: lots of things into an ETF wrapper, and some of
Speaker 2: those things are high octane gambling products.
Speaker 1: I feel like I've ETF pilled you over the course
Speaker 1: of this podcast, which is great. It's nice to hear
Speaker 1: like a full throated defense.
Speaker 2: You know. I was for a long time an investor
Speaker 2: in Vanguard index mutual funds.
Speaker 1: And I would imagine then I was like.
Speaker 2: I know enough about the tax advantages of ETFs that
Speaker 2: I'm going to start being an investor in index ETFs.
Speaker 1: I get it, But I don't like day trade them,
Speaker 1: you know. And I mean Jack Bogel he was a
Speaker 1: principaled guy, so he did. He didn't like literally the
Speaker 1: exchange traded portion, like why why do you need that?
Speaker 1: He also famously didn't want any commodity funds or anything
Speaker 1: like that. He was just stock spawns playing fanilla that
Speaker 1: was his whole thing. And now you look at this
Speaker 1: ETF market that we exist in, and the subject of
Speaker 1: my story specifically was these leverage single stock ETFs, leveraged
Speaker 1: and in verse one point two five all the way
Speaker 1: up to three if you include Europe as well. Europe
Speaker 1: has higher leverage than we do. And uh, I've been
Speaker 1: calling them one day only funds because you're not supposed
Speaker 1: to hold them for more than a single day, in
Speaker 1: some cases not more than a couple hours.
Speaker 2: Right, there's a lot there. One thing is that this
Speaker 2: is not a fund, right, You're getting a levered three
Speaker 2: times return on an n video or whatever. Like. It's
Speaker 2: not in any meaningful sense an excentradmoron. It's a retail
Speaker 2: leverage product. Right, It's a way, Yeah, you get three
Speaker 2: times the returns of a stock without borrowing money from
Speaker 2: your broker.
Speaker 1: Yeah, And if you talk to the CEOs of these firms,
Speaker 1: that's exactly what they say. I've interviewed Will Rind of
Speaker 1: Granite Shares for this article, and that's exactly that they're
Speaker 1: offering institutional grade leverage without the expenses of opening a
Speaker 1: traditional margin account.
Speaker 2: Right. I mean, they probably do get better leverage terms
Speaker 2: than every tilvester, but it does come at the cost,
Speaker 2: as as you and I both read about of like
Speaker 2: they rebalance every day. Yes, so if you borrow money
Speaker 2: to buy a stock, you decide when you want to
Speaker 2: close out that position. I mean, unless you get a
Speaker 2: margin call, but like you know, you decide want to
Speaker 2: close that position. And if you take out a fifty
Speaker 2: percent margin Lon and died, you know, twice as much
Speaker 2: stock you have, like two times leverage, you'll get two
Speaker 2: times the return of the stock for whatever period you
Speaker 2: hold it for. With the leveraged ETFs, it doesn't work
Speaker 2: that way. They rebalance every day, so you get two
Speaker 2: times the daily returns or three times the daily returns
Speaker 2: each day. And as you and I both read about,
Speaker 2: that has like sort of arithmetically paradoxical results, where like
Speaker 2: you read about there's a micro strategy. Micro strategies is
Speaker 2: like insanely volatile sort of bitcoin proxy stock, and there's
Speaker 2: a micro strategy three times ETF micro strategy is ut
Speaker 2: like one hundred and ten percent this year, and that
Speaker 2: ETF is down eighty percent, right, yeah, because three times
Speaker 2: one hundred and ten is negative eighty which is not
Speaker 2: normally how things.
Speaker 1: Work and it's so interesting and you know, the math
Speaker 1: is so much better than me. So that's that's the
Speaker 1: micro strategy dynamic, and you're seeing that play out with
Speaker 1: Nvidia and a lot of these single stock funds are
Speaker 1: based on Invidia. That is the most popular stock to
Speaker 1: launch a single stock fund on. Understandably, it's not as bad.
Speaker 1: You're doing negative right, exactly.
Speaker 2: Lower than three times, but it's it's not nicive.
Speaker 1: Yeah, you're doing pretty okay up to this point. We'll see,
Speaker 1: you know what the next few weeks hold for in video,
Speaker 1: but you're doing pretty okay if you're in a leverage
Speaker 1: long and video product.
Speaker 2: Yeah. It's like the math has to do with basically,
Speaker 2: like the comparison between the sort of returns of the
Speaker 2: stock and the volatility of the stock. So Microshata is
Speaker 2: incredibly volatile and is up a lot, but like in
Speaker 2: Vidia is less volatile and is up more, so that
Speaker 2: effect sort of swamps the volatility effect. But basically, like
Speaker 2: the intuition is, you know, if a stock goes up
Speaker 2: ten percent and then down ten percent, you're subtracting the
Speaker 2: losses from a bigger number. So when it goes up
Speaker 2: to ten percent, you have a bigger number, and then
Speaker 2: down ten percent is like ten percent of a bigger
Speaker 2: number than you started with, and vice versa. If it
Speaker 2: goes down ten percent and up ten percent, you're getting
Speaker 2: like ten percent return on a smaller number. When you
Speaker 2: multiply things, that effect gets amplified, and so you're making
Speaker 2: the downswings worse. Yeah, and therefore you can turn the
Speaker 2: long term returns negative even if the unmultiplied returns are positive.
Speaker 1: So not to toot my own horn, sure, but this
Speaker 1: article was much more widely shared than I anticipated it
Speaker 1: to be, partly because you wrote about it in Money Stuff,
Speaker 1: and it feels like the probability of getting your face
Speaker 1: ripped off is what a lot of people focused on.
Speaker 1: But the surprising thing that I found while looking at
Speaker 1: this was actually that these funds are being broadly used
Speaker 1: as intended, which is interesting. There's a really rough Napkin
Speaker 1: math way to take a look at the average daily
Speaker 1: holding period, and again this is very rough, but basically,
Speaker 1: if you divide the average trading volume by the average
Speaker 1: market cap of one of these funds, you should get
Speaker 1: a pretty rough answer there. So if you take a
Speaker 1: look at the largest single stock ETFs, it's also from
Speaker 1: granted shares, it's two times long. On Nvidia, it's almost
Speaker 1: five billion dollars. It takes under three days for the
Speaker 1: entirety of its shares to flip over, which is not bad,
Speaker 1: you know.
Speaker 2: Yeah, they do a good job of warning people. Yeah,
Speaker 2: and probably if you're finding this sort of thing, you
Speaker 2: know what you doing. But that average probably can seal
Speaker 2: some number of people buy it and forget it and
Speaker 2: then end up down eighty percent or whatever.
Speaker 1: Yeah, it's inevitable that someone's having a really painful time
Speaker 1: and maybe doesn't even know.
Speaker 2: Most likely doesn't even right. Yeah, three times Yeah, I
Speaker 2: think that, like they are probably mostly being used for
Speaker 2: speculative day treading by people who know what they're doing. Yeah,
Speaker 2: but that's Jack Buckle's nightmare, right exactly. And also, I mean,
Speaker 2: in addition to my sharing your piece, I don't know
Speaker 2: if you saw you were, Cliff Asma has put out
Speaker 2: this this paper this week. Oh my god, market inefficiency.
Speaker 1: Old man Wining is he is what he called himself.
Speaker 2: He said something like, I'm gonna sound like a grumpy
Speaker 2: old man because he's like sort of known as a
Speaker 2: as a like quantitative value investor and essentially the point
Speaker 2: of the paper is like, it's hard to be a
Speaker 2: quant value investor these days because like value keeps underperforming,
Speaker 2: which he argues is because the markets are inefficient. And
Speaker 2: one reason markets are inefficient is because people are crazy,
Speaker 2: like retail investors are like crazily chasing like speculative eyes.
Speaker 2: And he does cite one day on the ETFs with
Speaker 2: a little parenthetical Grayfield twenty twenty four. I loved that
Speaker 2: footnote saying what fresh hell is this?
Speaker 1: So he tweeted that on Friday, and like three pm
Speaker 1: on a Friday, I am fried. You know, there's nothing left.
Speaker 1: My body battery is negative. I saw that he tweeted that,
Speaker 1: and I was so scared because all he said was
Speaker 1: what fresh hell is this? With no follow up? And
Speaker 1: I was like, is he gonna rip me? Like what's
Speaker 1: going on? But I'm glad that he said it.
Speaker 2: He's mad not at you, yeah, but at the thing
Speaker 2: you read about.
Speaker 1: Hate the game, not the player. One quick fun fact
Speaker 1: on the average holding period, so less than three days
Speaker 1: is really short. Eric Belchunis was telling me that remember
Speaker 1: those vics ETFs that blew up in Valmageddon. Sure, at
Speaker 1: one point one of the biggest ones had an average
Speaker 1: holding period of literally less than one day. The average
Speaker 1: holding period was less than one day, which is amaz
Speaker 1: So people were holding it for like.
Speaker 2: During the blow up or like weeks before the.
Speaker 1: Book going into it when they still existed. Yeah, now
Speaker 1: there arefs.
Speaker 2: Again, that does suggest professional usage, right, yeah, or they're
Speaker 2: crazy day dreading.
Speaker 1: I don't know.
Speaker 2: The one other thing I would have mentioned is yes,
Speaker 2: that the day after I read about this, the trader
Speaker 2: launched a set of products that are like week long yeah,
Speaker 2: month law liberty.
Speaker 1: That was such funny timing. Yes, And funny timing is
Speaker 1: kind of what we're talking about with the dfs, so
Speaker 1: I so they're trying to solve this problem of volatility,
Speaker 1: drag or decay. I know you don't like those terms,
Speaker 1: but that's what they're trying to do with these. I
Speaker 1: actually spoke to the guy behind it. His name is
Speaker 1: Matt Markuwick's and he said that, I know, we were
Speaker 1: just talking about how less than three days is pretty good.
Speaker 1: He was saying, and they have single stock daily ETFs
Speaker 1: that it's clear people are holding these for more than
Speaker 1: one day, which is not using them as intended. So
Speaker 1: he's not happy with that stat So the idea behind
Speaker 1: this with a weekly reset is that you don't have
Speaker 1: to babysit the funds in your position as closely as
Speaker 1: you would have to with a daily reset. But even
Speaker 1: still it does introduce risk, like you have to show
Speaker 1: it at I know, but you have to time when
Speaker 1: you buy it to get the full effect.
Speaker 2: Right. The reason the one day funds work the way
Speaker 2: they do, even though people get mad about it, is
Speaker 2: because they're giving you exactly the same experience every day.
Speaker 2: They're like, you're getting the one three times daily return
Speaker 2: no matter what day you buy it. With a weekly fund,
Speaker 2: if you buy it on a Tuesday, you're getting slightly
Speaker 2: different eybe more or less, you're getting a slightly different
Speaker 2: than the advertised return. But if you then hold it
Speaker 2: for four days, you get something closer to what you expected,
Speaker 2: Whereas if you hold the single day ETF the daily
Speaker 2: rebouance ETF for four days, you get something very different
Speaker 2: than three times the four day return. Yeah, if people
Speaker 2: hold things more than a day, it doesn't necessarily mean
Speaker 2: they're wrong or not using it as intended. It's just
Speaker 2: they are making a series of bets that are like,
Speaker 2: this is going to go up each of these days. Right,
Speaker 2: if it goes up all of the days, then holding
Speaker 2: the daily rebalancing atf is better than holding that's true,
Speaker 2: the weekly. It's just like it has to go up
Speaker 2: every day. Yeah, maybe it will.
Speaker 1: I feel like that's a in some cases generous interpretation
Speaker 1: of holding the daily one for more than one day,
Speaker 1: that you are choosing clearly, in.
Speaker 2: Some cases, gener clearly. In some cases people just buy
Speaker 2: it for a year and forget about it. Probably someone
Speaker 2: is like, at the end of day, yeah, this is
Speaker 2: getting up again tomorrow. I don't know.
Speaker 1: Taxi caves and the American Transit Insurance Company, Boy, are
Speaker 1: they in trouble.
Speaker 2: Yeah. So this is a Bloomberg News article about the
Speaker 2: American Transit Insurance Company, which like apparently insures.
Speaker 1: Most sixty percent uber.
Speaker 2: Drivers, taxi drivers. If you get if you've like get
Speaker 2: in a car in New York, it's probably insured by them.
Speaker 1: Yeah.
Speaker 2: And there's a reason for that, which is that they
Speaker 2: offered cheap.
Speaker 1: Rates, super cheap.
Speaker 2: And there's a reason for that, which is that they
Speaker 2: were under reserving for their risk and now they are
Speaker 2: apparently insolvent.
Speaker 1: So this is amazing because if Bloomberg News has done
Speaker 1: a great job covering this, and I was reading one
Speaker 1: of the pieces out today that Okay, so this company
Speaker 1: was founded in nineteen seventy two, and in nineteen eighty six,
Speaker 1: state regulators were already describing the company as insolvent by
Speaker 1: six million dollars. That is according to a state examination
Speaker 1: report that was obtained by Bloomberg. So they've been insolvent
Speaker 1: for decades. It was six million dollars in nineteen eighty six,
Speaker 1: and I believe in the second quarter it posted more
Speaker 1: than seven hundred million dollars in net losses. That's according
Speaker 1: to a filing with the National Association of Insurance Commissioners.
Speaker 1: It's amazing how long this has been.
Speaker 2: Going on, right, I mean for years people have been
Speaker 2: saying they're charging too little, yeah, and they're underreserving. And
Speaker 2: you know, it's a great illustration of like a lot
Speaker 2: of financial services, it's very easy to win market share
Speaker 2: by being wrong. Yeah. So the classic is like consumer
Speaker 2: like lending. FinTechs will be like, we have this new
Speaker 2: algorithm to like evaluate people's credit. It's better than regular
Speaker 2: credit scores, and we're going to do such a great
Speaker 2: job and make so many loans. And if they make
Speaker 2: so many loans. That just means they're like mispricing on
Speaker 2: the risk and their algorithm is wrong, and then they
Speaker 2: you know, and like the way it works is that
Speaker 2: if you do that, then you get a lot of
Speaker 2: business and book a lot of profits early on, and
Speaker 2: then later you go insolve it window. It's like don't
Speaker 2: get paid back. It is weirder here just because this
Speaker 2: is a decades long process process where like they keep
Speaker 2: apparently under charging.
Speaker 1: Yeah, this is pretty bad. This is according to Bloomberg News,
Speaker 1: reporting again that New York's insurance regulator issued a report
Speaker 1: on Thursday that shows that state regulators under both Governor
Speaker 1: Kathy Hochel and Andrew Cuomo have been aware for at
Speaker 1: least half a decade about just how bad things were.
Speaker 1: So this has just been festering in plain sight.
Speaker 2: For a while, right, But it's like the fix is rates.
Speaker 1: Yeah, and you know, it's hard.
Speaker 2: To politically unpopular to be like we're going to double
Speaker 2: the price of insurance for ubers, which means we're going
Speaker 2: to push out the price of and ubers And I
Speaker 2: don't know, yeah, we sort of hope that like this
Speaker 2: this is the thing, like this model of like under
Speaker 2: charging for insurance through in market share and then like
Speaker 2: getting out of town when the when the when the
Speaker 2: claims come to goodbye. It's like so obvious, right, there's
Speaker 2: lots and lots of insurance companies in history that have
Speaker 2: kind of done this, and the point of insurance regulation
Speaker 2: is just to prevent that. Right. But in a important
Speaker 2: salient industry like New York City taxi cabs, it can
Speaker 2: be hard for the regulators to say, we have to
Speaker 2: double rates because the insurances be underpriced, and so you
Speaker 2: get this weird dynamic where where it's like the short
Speaker 2: term benefit of everyone and to under charge and then
Speaker 2: it's like, you know, you kick the can down the
Speaker 2: road and yeah, there's not enough money to pay claims. Yeah.
Speaker 1: According to Bloomberg Reporting, drivers insured by the American Transit
Speaker 1: Insurance Company typically pay annual premiums of four thousand dollars
Speaker 1: to six thousand dollars, depending on experience, accident claims, different calculations.
Speaker 1: So I mean jacking that up to eight thousand dollars
Speaker 1: a lot, I mean I assume a lot of drivers
Speaker 1: just wouldn't be able to do that.
Speaker 2: I just think about that's a lot higher than my
Speaker 2: current insurance yeah, but I'm not driving yeah the day.
Speaker 1: So what happens now? According to Bloomberg Reporting, I wonder
Speaker 1: how many times I'm going to say that the New
Speaker 1: York regulator has ordered this company to weigh a sale.
Speaker 1: I don't know what happens here. It seems that a
Speaker 1: lot of people are saying a lot of analysts are
Speaker 1: saying that if they can't keep insuring drivers, it's going
Speaker 1: to be massively painful for people moving around New York
Speaker 1: drivers included.
Speaker 2: But because like some drivers will be forced out of
Speaker 2: the market because they won't be able to get insurance. Yeah,
Speaker 2: and then like prices of ubers will go up, Yeah,
Speaker 2: because they've been underpressed for years, that'll go offer.
Speaker 1: It's horrible, and maybe it's gonna happen. You did compare
Speaker 1: this to that working paper that you reference in money
Speaker 1: stuff about when insurres exit. It was a case study
Speaker 1: looking at Florida red.
Speaker 2: It's so good because it's like half of it is.
Speaker 2: This is just this classic insurance story, which which is,
Speaker 2: you know a lot of houses in Florida are risky, right,
Speaker 2: They're like near the beach and there's hur Again.
Speaker 1: I'm well acquainted with Florida real estate. Sure, yeah, I
Speaker 1: leave that one hanging out there.
Speaker 2: And so you know a lot of insurance companies don't
Speaker 2: want to ensure them or would charge very high rates.
Speaker 2: And so there's this like class of wish insurance companies
Speaker 2: in Florida that will ensure you know, houses in risky.
Speaker 1: Areas, vibrant startup ecosystem.
Speaker 2: And they'll do it at like reasonable seeming rates which
Speaker 2: are probably underpriced. And this paper argues that these insurers
Speaker 2: are under capitalized and risky insurance have to be raided
Speaker 2: by ratings agencies. These insurers tend to be rated by
Speaker 2: like new startup ratings agencies.
Speaker 1: Another rant ecosystems.
Speaker 2: It's like slightly different criteria from the regular more traditional
Speaker 2: ratings agencies. And so you have these insurers that are like,
Speaker 2: according to the others of this paper, under capitalized, that
Speaker 2: get good enough ratings to be like sort of in
Speaker 2: good standing with regulators. But so that's like kind of normal.
Speaker 2: And then like you know, some of these insurers go bankrupt.
Speaker 2: When then when a lot of clampshead and it's like wow,
Speaker 2: you know, they're not really providing insurance. The fascinating thing
Speaker 2: is like it's homeowners insurance right. So like New York
Speaker 2: City taxis it's like this politically scient industry. It would
Speaker 2: like be bad for the government if you couldn't ensure
Speaker 2: your home, and so the regulators have an incentive to
Speaker 2: be okay with these companies. But there's another party, which is,
Speaker 2: you know, these homes tend to have mortgages, and the
Speaker 2: mortgage lender doesn't want them to be uninsured or you know,
Speaker 2: have insolvent insurers. And what the authors find is that
Speaker 2: when these insurers ensure the homes, the mortgage lenders are
Speaker 2: more likely to sell their mortgages to Fanny May and
Speaker 2: Freddie Mack, the government backed mortgage you know kind of
Speaker 2: guarantee firms. And the way it works is just like
Speaker 2: there's a market signal that these insurance companies aren't that good,
Speaker 2: and the market signals the banks don't want to hold
Speaker 2: mortgages that are insured by them or where the houses
Speaker 2: are insured by them, But the banks will sell the
Speaker 2: mortgages to Fanny and Freddy, which like are kind of
Speaker 2: like unthinking, like they don't like send a market signal,
Speaker 2: they just like look at the rating and like there's
Speaker 2: a rating from like this arguably you know, bad rating.
Speaker 2: Agency and they say you meet the ratings criteria, said,
Speaker 2: we'll buy the mortgages, and so all of the like
Speaker 2: mortgages and like the risky areas migrate to Fanny and
Speaker 2: Freddy because the market doesn't.
Speaker 1: Want to hold them, similar to houses in Florida. Seems
Speaker 1: like a really shakily built system. There.
Speaker 2: There you go.
Speaker 1: It is interesting. I mean, coming back to the timelines here,
Speaker 1: reading and listening to your summary of this paper, which
Speaker 1: I haven't read, it seems like these insurers are cropping
Speaker 1: up in Florida, whereas again this is in New York
Speaker 1: with the taxi industry. Is just I am just speechless
Speaker 1: that it's been going on for longer than I've been alive.
Speaker 2: Yeah, some of this is like increased the claims in verdicts, right,
Speaker 2: Like yeah, some of it is like all of insurance
Speaker 2: is like estimating risks, right, and like maybe they were
Speaker 2: doing an okay job of estimating risks and then the
Speaker 2: risks changed, but maybe not.
Speaker 1: Well, it'll be fun to follow.
Speaker 2: We'll definitely talk about it next week.
Speaker 1: Yeah, the whole system collapses and I.
Speaker 2: Can't get here because I can't get.
Speaker 1: A newer then we really have to cancel the podcast
Speaker 1: Truth Social DJT, DJT.
Speaker 2: Trump Media and Technology Group, Right for sure, Social, let
Speaker 2: me be formal, Trump and Media and Technology Group is
Speaker 2: the is the name of the company, and DJT is
Speaker 2: the ticker, which is what everyone calls it.
Speaker 1: So true, So this stock is flat at least on
Speaker 1: Thursday on a year to day basis, a one year basis,
Speaker 1: it's down closed to seventy percent since it's market cat
Speaker 1: beaked in early May. It's now worth three point four
Speaker 1: billion dollars. It was almost ten billion dollars. It has
Speaker 1: to be one of the few three billion dollar companies
Speaker 1: that doesn't have a single analyst that covers it. And
Speaker 1: I know why because what are the fundamentals here? But
Speaker 1: I'm still really hoping when I typed an A and
Speaker 1: R on my Bloomberg terminal that something would possible.
Speaker 2: Imagine being an alyss covering this company. Like it's bad
Speaker 2: enough for me writing about it, but like like what
Speaker 2: can you say?
Speaker 1: Yeah?
Speaker 2: Sell and then like Donald Trump will be mad at you, yeah,
Speaker 2: And what's the benefit of that? Like everyone knows that,
Speaker 2: Like there's no fundamentals to this company.
Speaker 1: So you remember when meme stocks were just dawning. I
Speaker 1: guess so came up and AMC. There were real analysts
Speaker 1: who covered those companies, but like.
Speaker 2: Those are like you kind of say stuff about that
Speaker 2: business exactly. You can be like, okay, this this is
Speaker 2: you know, a thousand percent, but.
Speaker 1: A lot of them did end up dropping coverage and.
Speaker 2: Because like like what value do you add?
Speaker 1: Yeah, I remember inviting a couple of them on TV
Speaker 1: and they were like, I Am not going to talk
Speaker 1: about this on time.
Speaker 2: And it's because like, one, what value do you add?
Speaker 2: Because like the dynamics are not things that you can
Speaker 2: inform with your fundamental analysis. But then also people being
Speaker 2: mad at oh yeah right, yeah. It's the same with DJT, right,
Speaker 2: like oh, you could be like, you know, this company
Speaker 2: is like one million dollars of revenue and it's a
Speaker 2: three point five billion dollar market cap sell right, Like okay, one,
Speaker 2: everyone knows that, and then two people get mad at you,
Speaker 2: like what's you why?
Speaker 1: Yeah? Yeah. So it's interesting. It's enormous fall from grace.
Speaker 1: Of course it's approaching the end of the lock up period,
Speaker 1: but also the fundamentals that it did have have been eroded,
Speaker 1: undermined by the fact that Donald Trump is back on
Speaker 1: X Now I don't know what are you not a
Speaker 1: truth social guy? This is shocking.
Speaker 2: Truth social. I agree with you that, like if your
Speaker 2: if your case, if your business case for Trump media
Speaker 2: was like truth social is like the place for tens
Speaker 2: of millions of Donald Trump fans to like get their
Speaker 2: social media, then like the fact that Donald Trump is
Speaker 2: back on X and that X is like clearly the
Speaker 2: right wing social network. Now, yeah, undermines that business case.
Speaker 1: I do have some stats for you. Okay, So Bloomberg's
Speaker 1: Bailey Lipshoals has done such a fantastic job covering pretty
Speaker 1: much everything but including a dj team. So I was
Speaker 1: asking him how many people are actually on truth Social
Speaker 1: and it's really difficult to tell, and DJT truth Social
Speaker 1: will refute these figures. But this is according to aptopia.
Speaker 1: It's been around three hundred and fifty thousand, not above
Speaker 1: one million, over the past year. For context, I think
Speaker 1: Twitter has a few hundred million, and then you compare
Speaker 1: it to Reddit.
Speaker 2: I wouldn't compare that number to the Mummy Stuff subscriber base,
Speaker 2: but I won't because those figures maybe.
Speaker 1: Flex Flex what's your market cap?
Speaker 2: Yeah, it's three five billion.
Speaker 1: That's huge. Wait wait, wait, one more point Reddit ninety
Speaker 1: one million users in the second quarter. Reddit's market cap
Speaker 1: is only three times that of DJT. Reddit is like
Speaker 1: nine point seven billion.
Speaker 2: It's the way. Maybe the case with the stock was
Speaker 2: Donald Trump is going to.
Speaker 1: Start that I could see that as social media.
Speaker 2: I think that's that's over now, right, I mean, no one,
Speaker 2: no one really thinks that now. The case for the stock,
Speaker 2: if I had a case for the stock, it would
Speaker 2: be like it would be a corruption based case, right.
Speaker 2: It would be like Donald Trump lucom president again is
Speaker 2: most obviously large and monetizable asset will be his like
Speaker 2: sixty percent holdings of DJT, and people who want his
Speaker 2: attention and favor will do things to increase the value
Speaker 2: of that stock. I don't know exactly what that is, right,
Speaker 2: Maybe like the Saudi government will buy ten percent of
Speaker 2: the stock at a premium. Right, Maybe someone ever knows
Speaker 2: offered to take over the company. Maybe Elon musklell strike
Speaker 2: a business deal where like you know, there's a lot
Speaker 2: of ways you could imagine the stock going up because
Speaker 2: people want to influence and or send money to Donald Trump.
Speaker 2: That case, I think has been a little undermined by
Speaker 2: the fact that Trump and his sons have been promoting
Speaker 2: a crypto project, right yeah, because it's like like DJT
Speaker 2: is essentially a token of like let's give money to
Speaker 2: Donald Trump. And they're like, wait, we can create those tokens,
Speaker 2: like freely, we can create as many tokens as I.
Speaker 1: Confess something to you. I have been blissfully not following
Speaker 1: that story at all so.
Speaker 2: Closely, but there is there's like and there's not much
Speaker 2: of a story. It's like, yeah, they have teased like
Speaker 2: we're starting this like DeFi Crypto World Liberty project, and
Speaker 2: then the other day they.
Speaker 1: Were act like it was Eric Trump, right, it's.
Speaker 2: Like the Trump sons. But then like some other Trump
Speaker 2: family members were hacked and like we're posting promotions for
Speaker 2: for their crypto project that were actually just like scam
Speaker 2: sites that would take your money. So it's just like
Speaker 2: too perfect. But anyway, the point is like the DJT
Speaker 2: thing is such an amazing proof of concept because you
Speaker 2: have this like minimal business and you attach a three
Speaker 2: billion dollar memestock to it, and like you to do
Speaker 2: that again with like without the minimal business, right, you
Speaker 2: do like some DeFi project and you're like, oh, give
Speaker 2: us money for a DeFi project, and like it gets
Speaker 2: a billion dollar market cap. Yeah, there yet, but it's
Speaker 2: like the more they do that, the less any individual
Speaker 2: project is worth. Right, So I think that undermines DJ
Speaker 2: two too. But then the real problem with DJT, yeah,
Speaker 2: go on is that Donald Trump bounds like sixty.
Speaker 1: Percent of it, for sure, he does.
Speaker 2: Shares are locked up, and the lockup ends like.
Speaker 1: This month, yeah, I September.
Speaker 2: Yeah, And so like it's fascinating to me because what
Speaker 2: he sold it all? Yeah?
Speaker 1: And can he sure?
Speaker 2: I mean in what sense?
Speaker 1: I don't know. There was some in reading the various
Speaker 1: articles that Elliptionals has written about this, it seems like
Speaker 1: there are some complications about whether he'd be able to
Speaker 1: sell it.
Speaker 2: At one fells, you can't if you're an insider of
Speaker 2: a company, you have limit, like legal limits on how
Speaker 2: much you can sell without registering yourselves. But like he
Speaker 2: could conceivably to a registration statement, and the company would
Speaker 2: do a registration statement saying we're selling He's selling two
Speaker 2: billion dollars of stuck, and then like they could try
Speaker 2: to find buyers for it, and they might write like
Speaker 2: they might not as like a not necessarily as that
Speaker 2: on the fundamentals of the company, but as a like
Speaker 2: I would like to give Bendon Donalds from Yeah, you
Speaker 2: see this a lot in crypto, where it's like you
Speaker 2: can do a thing and it can have like nominal
Speaker 2: multi billion dollar market capitalization, but then when you try
Speaker 2: to cash in, the evaluation proof stamp to zero, right,
Speaker 2: like because like the valuation is like trading of a
Speaker 2: like a sort of small like portion of the of
Speaker 2: the market cap, like you own most of it, and
Speaker 2: like your involvement is crucial, and once you sell, everyone
Speaker 2: will say, oh, this thing is going to zero, and
Speaker 2: so like the market cap just poofs and you're not
Speaker 2: able to actually extract the billions of dollars of paper
Speaker 2: value that's like easily imaginable here, right, And like it's
Speaker 2: probably part of why the stock is going down. And
Speaker 2: it's like Trump wants to monetize it. Like that's a
Speaker 2: bad sign for the future of the stock, and so
Speaker 2: like why would you hold going into that? But I'm
Speaker 2: not sure what happened here, Yeah, and other possibilities people
Speaker 2: be like, oh, yeah, we love Donald Trump, we love
Speaker 2: what he's done with the truth social and we're going
Speaker 2: to pay to buy stock from him, right, Maybe not
Speaker 2: you know, it's like seventeen dollars. Now, maybe not seventeen dollars,
Speaker 2: but enough that you could extract hundreds of millions of
Speaker 2: dollars from this company that has a million dollars of revenue.
Speaker 1: Yeah, so we'll see because that period, that lock up
Speaker 1: period is expiring very soon.
Speaker 2: I assume he's not actually going to dump stock and like,
Speaker 2: you know, now mighty borrow against the stock. Like I
Speaker 2: love that outcome because like I love the idea of
Speaker 2: being the margin lender at a bank and having him
Speaker 2: come in and say, I have two billion dollars of
Speaker 2: DJT collateral. How much will you lend me against the
Speaker 2: non recourse what's the right answer?
Speaker 1: Then you literally start rubbing your hands as you say,
Speaker 1: I love this outcome.
Speaker 2: To me if you were like Donald Trump wants to
Speaker 2: borrow against two billion dollars of DJT stock non recourse, Yeah,
Speaker 2: like how much would you give him? Some twenty million dollars?
Speaker 2: But like someone will go higher?
Speaker 1: Someone someone will So there's a lot to keep an
Speaker 1: eyeball on here. You do present two robust, compelling reasons
Speaker 1: to explain why the stock is absolutely pancaked over the
Speaker 1: last two months.
Speaker 2: It hasn't even like pancaked is the wrong word. It's
Speaker 2: a three point five billion dollar market.
Speaker 1: It's seventy.
Speaker 2: It's a stack, so it's like, you know, like people
Speaker 2: put in ten dollars a share, like way back when
Speaker 2: when those back launch, and it's at seventeen. So it's
Speaker 2: like it's a pretty successful spack.
Speaker 1: It was more successful, though it is less successful than
Speaker 1: it was. There's also the argument to be made that
Speaker 1: Donald Trump's clear lead in the polls has eroded since
Speaker 1: Kamala Harris entered the race. Absolutely, and this was like
Speaker 1: a proxy.
Speaker 2: Partly because it was just literally a proxy here, it's
Speaker 2: just literally a token of attention, and then partly because
Speaker 2: if you had a business case for the stock, it
Speaker 2: was it evolved around him being president and somehow value
Speaker 2: according to the company because he's president, and if he's
Speaker 2: not president, if he's not president, maybe has more time
Speaker 2: to focus on his social media company and it will
Speaker 2: become a powerhouse.
Speaker 1: But yeah, it didn't make me think briefly, and this
Speaker 1: is something we've talked about before election contracts and the
Speaker 1: fact that they're illegal. Question Mark can't really do.
Speaker 2: That right, Like if you want to bet on like
Speaker 2: the fluctuating chances of Donald Trump being elected, Like trading
Speaker 2: DJT stock is not the worst way to do it
Speaker 2: because it does seem pretty correlated to his like polls. Yeah,
Speaker 2: it's probably easier to get money down than it isn't
Speaker 2: like the action contrast markets.
Speaker 1: Yeah, so if you want to scratch that itch, this
Speaker 1: is the way that people have been doing.
Speaker 2: It, go on because it doesn't like resolve to one
Speaker 2: hundred dollars if he's elected on zero dollars if he's
Speaker 2: not right, it's like it's not it doesn't really have
Speaker 2: anything to do with but it does.
Speaker 1: Because like a million percent, right, there's some.
Speaker 2: Like business case for if he's president, it's worth a
Speaker 2: lot of money, and if he's not president, it's not
Speaker 2: worth a lot of money. But I think probably the
Speaker 2: moves in the price are exaggerating that business case, and
Speaker 2: it's really mostly like people want some proxy for that,
Speaker 2: and it feels like a good proxy.
Speaker 1: I still wish some analysts covered it. I want to
Speaker 1: interview the loan analysts.
Speaker 2: It would be fun, right, because this is the thing,
Speaker 2: like there should be analysts who cover meme stocks and
Speaker 2: this stock and crypto, and they should just have a
Speaker 2: different method of it out because like, obviously you're not
Speaker 2: going to be like, oh, he looked at orders and
Speaker 2: they're coming in a little light, right, you need a
Speaker 2: different method of analyzing this company. But like, if you're
Speaker 2: good at making calls about what the stock would do,
Speaker 2: that'd be like a value.
Speaker 1: Out of ten read in the room reading sentiment, I
Speaker 1: will say zerolysts track the stock as tracked by Bloomberg.
Speaker 1: So maybe there's someone out there in the world but
Speaker 1: they're not on the Bloomberg terminal system. Someone some of
Speaker 1: the I want to hear from you.
Speaker 2: How's your battery?
Speaker 1: Oh god, it's nineteen This has drained me.
Speaker 2: The electricity of the last.
Speaker 1: Fading before your eyes and yours. I'm going on vacation though,
Speaker 1: really yeah, on vacation. It wasn't enough. I'm going to
Speaker 1: retact it the week after next. Maybe not ma, maybe
Speaker 1: I'll wait a few months there. But anyway, the week
Speaker 1: after next I'm going on vacation, so there won't be
Speaker 1: used a podcast.
Speaker 2: In lieu of a scintillating conversation about the monetary news
Speaker 2: of the week. We're going to can and mail bag.
Speaker 1: Yes, absolutely so send us your best questions. We appreciate
Speaker 1: everyone who's sent questions so far, and we have those
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Speaker 2: Fun question?
Speaker 1: I love talking about myself. No, yes, No one ever
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Speaker 2: Talking about that would be a good episode.
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Speaker 2: Matt? I like questions about myself.
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