Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to The Money Stuff Podcast, your weekly
Speaker 2: podcast where we talk about stuff related to money. I'm
Speaker 2: Matt Levine, I'm the Money Stuff columnist at Bloomberg Opinion.
Speaker 1: And I'm Katie Greifeld. I'm a reporter for Bloomberg News
Speaker 1: and an anchor for Bloomberg Television.
Speaker 2: Katie, Welcome to the Best Day of Our Lives, the
Speaker 2: very first Money Stuff Podcast.
Speaker 1: It is the best day of our lives, and every
Speaker 1: Friday will be the best day of our lives because
Speaker 1: that's only go up from here, only going up. We're
Speaker 1: going to talk about some stuff from your columns every
Speaker 1: single Friday, and it's going to be fun.
Speaker 2: You made that sound like a threat in.
Speaker 1: Many ways, it is. Those are our marching orders, and
Speaker 1: we're going to have fun.
Speaker 2: What are you talking about this week, Katie, What a
Speaker 2: great question.
Speaker 1: We actually have a really strong first episode because we're
Speaker 1: going to be talking about the Destiny Tech one hundred
Speaker 1: fund close stend fund publicly listed. The stock has been
Speaker 1: going nuts and there's a lot to say here. Yes,
Speaker 1: and then we're going to go from Destiny to Mango,
Speaker 1: specifically Mango markets and we're going to talk about whether
Speaker 1: code actually is law or is law law, a lot
Speaker 1: of big existential questions there, and then we're going to
Speaker 1: talk about super users, this time related to inflation and
Speaker 1: also the nature of insider trading and the Bureau of
Speaker 1: Labor Statistics. Indeed, Matt, what is Destiny The.
Speaker 2: Destiny Tech one hundred is a publicly traded fund that
Speaker 2: invests in private tech companies. So right now, as of
Speaker 2: their last disclosure, they have about a fifty million dollar
Speaker 2: portfolio of steaks in like twenty three private companies. A
Speaker 2: lot of it is SpaceX, some of it is like
Speaker 2: you know, plaid and stripe and all the other patterns
Speaker 2: that are also FinTechs. So they have this pot of
Speaker 2: stock and they sold shares in the fund to the public.
Speaker 2: They like did a direct listing last month, and since
Speaker 2: then the stock has just only gone off. It's not
Speaker 2: even been very volatile, but it's way above where they
Speaker 2: listed it at. And so right now that fifty million
Speaker 2: dollar pot of private stocks has a market value of
Speaker 2: something like five hundred million dollars, which is one thousand
Speaker 2: percent premium to the net asset value of the fund,
Speaker 2: which seems real high.
Speaker 1: And you and I have both spoken to the CEO.
Speaker 1: His name is Sohail Prisad. What's remarkable is that he
Speaker 1: doesn't seem super stressed about the premium or the volatility
Speaker 1: of the stock. I mean I spoke to him on
Speaker 1: Thursday morning on TV and his explanation was there in
Speaker 1: a discovery phase. Have only been public for about two weeks,
Speaker 1: which is fair, but I might be a little bit
Speaker 1: stressed out.
Speaker 2: To me, it just seems like a disaster to do
Speaker 2: this thing and have it traded one thousand percent premium.
Speaker 2: But others would disagree, apparently including him, because to me,
Speaker 2: like the thing you're marketing is like you can buy
Speaker 2: exposure to these private tech companies. Never before have you
Speaker 2: been able to buy shares of SpaceX and Stripe, And
Speaker 2: we are giving you that exposure, which is a great pitch,
Speaker 2: which is not true if you're trading at one thousand
Speaker 2: percent pew. If you're trading a one thousand percent premium,
Speaker 2: retail investors can only buy the premium, right Like when
Speaker 2: they put their money in, they're getting like five dollars
Speaker 2: worth of private tech stocks and like fifty dollars worth
Speaker 2: of public market volatile frothy enthusiasm for the stock. The
Speaker 2: product that he's saying is only that product if it
Speaker 2: trades like at a round the net asset value.
Speaker 1: Well, you had a suggested solution for him in the
Speaker 1: form of issuing more shares, which I don't know if
Speaker 1: it would help the retail traders who are buying in
Speaker 1: right now at one thousand percent premium, but it would
Speaker 1: theoretically if they sold enough, help to collapse the premium
Speaker 1: a little bit.
Speaker 2: Right. You suggested that solution to him, didn't you.
Speaker 1: Yeah, And he can't really talk about that, especially not
Speaker 1: on live television, and we can we can theorize about it.
Speaker 2: One way to think about what he has is he's
Speaker 2: got a fifty million dollar venture fund and there's like
Speaker 2: a two billion dollar waiting list for that fund or
Speaker 2: whatever I made that number up. But like the market
Speaker 2: cap of the fund is so far above the acid
Speaker 2: value of the fund that like a lot of people
Speaker 2: clearly want to put their money into a thing that
Speaker 2: gives them exposure to private textlocks. So what he can
Speaker 2: do is he can like take names off the waiting list.
Speaker 2: He can sell a bunch of stock to the public
Speaker 2: app a huge premium to the current net asset value,
Speaker 2: and he can take that money and invest it into
Speaker 2: private tech startups. And if you do that over time,
Speaker 2: probably the premium compresses because you're selling a lot of stock,
Speaker 2: you're buying a lot of the underlying portfolio, and you
Speaker 2: end up with a fund that is much bigger by
Speaker 2: net asset value than it is today, probably bigger by
Speaker 2: market cap. But like instead of trading at one thousand
Speaker 2: percent premium, it trades it's something that sort of reflects
Speaker 2: the value of the underlying private companies.
Speaker 1: The question of him deploying capital is also really interesting one,
Speaker 1: and first of all, how he's actually getting these shares
Speaker 1: in private companies. He said that it's through a combination
Speaker 1: of private stakes, trading platforms, and investing directly. But one
Speaker 1: of the interesting nuggets from the interview that I had
Speaker 1: with him was that he has these private companies calling
Speaker 1: him now, which is probably a result of the fact
Speaker 1: that we all keep talking about it.
Speaker 2: It's brilliant. I mean you look at the disclosure of
Speaker 2: their portfolio and also like what he said about it,
Speaker 2: like it really like he's like scraping sticks together to
Speaker 2: find private company stakes, right, He's like calling employees and
Speaker 2: being like, hey, could you do a forward contract and
Speaker 2: they're like, no, we're not allowed to. Our company will
Speaker 2: let us, and oh, you know, maybe we can do
Speaker 2: it under the table, right. You know, he's finding things
Speaker 2: in the secondary market. It's like piecing together this portfolio
Speaker 2: because he's just like a guy, you know, like that.
Speaker 2: It's not true. He's the founder of forts, like, he's
Speaker 2: got some experience in private markets, but these big tech
Speaker 2: companies can kind of choose their investors and it's not
Speaker 2: necessarily easy to get in. But now he's a much
Speaker 2: higher profile because he's got this huge you know, market
Speaker 2: cap to his fund. There's like clear pent up demand
Speaker 2: from retail investors. He's getting a lot of press coverage
Speaker 2: and so yeah, this is a marketing tool not only
Speaker 2: to retail investors, but also to companies who might you know,
Speaker 2: want to sell him some stuck.
Speaker 1: It's just really interesting that this is happening this week.
Speaker 1: I'm really grateful because this is the first week that
Speaker 1: we're recording the money Soff podcasts. But also I feel
Speaker 1: like we're just at the moment in public equity markets
Speaker 1: where the public equity market has been shrinking. You hear
Speaker 1: about all these hot, shiny startups that the average person
Speaker 1: can't get exposure to. And again, an interesting week to
Speaker 1: be having this conversation because I actually also spoke to
Speaker 1: Kristen Olsen from Goldman Sachs this week. She is the
Speaker 1: global head of Alternative Capital Markets and her pitch for
Speaker 1: why people should invest in private markets is because companies
Speaker 1: are saying private so much longer, you're missing out on
Speaker 1: all that growth. You know, the company that goes public,
Speaker 1: you've already missed out on a ton of that growth,
Speaker 1: which makes sense if you're pitching private markets. But I
Speaker 1: feel like all of this sort of ties into a
Speaker 1: general theme of there's been a dearth of IPOs, the
Speaker 1: public market is shrinking, and it feels like all the
Speaker 1: exciting stuff is happening outside of public markets.
Speaker 2: Yeah, I mean that's what everyone thinks, which is why
Speaker 2: this thing is so popular. But of course it undermines
Speaker 2: the mechanics of this thing, because if you're like, oh,
Speaker 2: private companies grow so fast, so we should get in
Speaker 2: before they go public, you get in at twenty times
Speaker 2: their valuation, then it doesn't work anymore. Right. It's funy
Speaker 2: to like imagine the sort of end case for this.
Speaker 2: What if like everyone agrees with the thesis that you
Speaker 2: should get into private companies and they should do it
Speaker 2: through this fund, then that's going to bid up private valuations. Right. Yeah,
Speaker 2: we talked earlier about how he is getting calls from companies,
Speaker 2: right because like, one, he's like in the news companies
Speaker 2: who want to raise money, Like, oh, here's a guy
Speaker 2: who has money. But also he has a lot of
Speaker 2: flexibility to pay up on valuations, right because like people
Speaker 2: are already buying into his fund at ten times in
Speaker 2: that asset value. Like if he pays twice the last
Speaker 2: funding round for a company, like that's fine, that's easy.
Speaker 2: Like that's a that's a good trade for him. I mean,
Speaker 2: the one reason that private companies are cheap is that
Speaker 2: they're young, and that one grown yet. But another reason is, like,
Speaker 2: you know, you don't have liquidity, you don't have the
Speaker 2: same number of investors that have access to private markets
Speaker 2: as you have in the public markets. In one sense,
Speaker 2: it's a way to like democratize private companies, but another way,
Speaker 2: that's a way for private companies to access all those
Speaker 2: public investors and bid up their price.
Speaker 1: It's interesting that he's in this position because this isn't
Speaker 1: a new pitch the Destiny Tech one hundred funds. This
Speaker 1: idea has been brought forward by ARC before they have
Speaker 1: the ARC Venture Fund, and it hasn't created this moment
Speaker 1: that this fund has. And I find it interesting that
Speaker 1: again he is in this position.
Speaker 2: Well, I think they all have different structures, and I
Speaker 2: think the ARC Venture Fund is not as exchange traded. Yes,
Speaker 2: that really matters, right. The weird thing about this fund
Speaker 2: is not that it's a way for public investors to
Speaker 2: put money into a fund that invests in produate companies.
Speaker 2: It's that it's a publicly traded way for them to
Speaker 2: do it. So it has a market price, and it
Speaker 2: turns out the market clearing price for that product, like
Speaker 2: at this point where the product is so small, is
Speaker 2: much much higher than the amount of money though to put.
Speaker 2: And that's kind of wild. We live in a memestock world.
Speaker 2: Things like that just build on themselves because you attract
Speaker 2: attention to us thought because it's like gone way up
Speaker 2: and it's trading way over acid value, and that just
Speaker 2: attracts attention and more people get into it.
Speaker 1: Well, I feel like we're going to be talking about
Speaker 1: this again because in declining to answer one of the
Speaker 1: questions I asked him, which is has your net acid
Speaker 1: value changed materially since the end of twenty twenty three
Speaker 1: when they last provided it. He said, can't say anything
Speaker 1: about that. Obviously, they calculate it on a quarterly basis,
Speaker 1: but they report earnings I believe at the end of
Speaker 1: April or the beginning of May. So it's gonna be
Speaker 1: really fun to see if it's changed from that four
Speaker 1: dollars and eighty four cents net acid value that they had.
Speaker 2: Yeah, but you know, I mean they owned steaks and
Speaker 2: big private tech companies. Rights that market doubled in the
Speaker 2: last you know it has has it ten times?
Speaker 1: We're going to find out. Stay tuned. I think I
Speaker 1: have a guess. Mangoes, what is Mango markets?
Speaker 2: Mango Markets is a decentralized finance trading platform.
Speaker 1: I haven't thought about one of those in a while.
Speaker 2: I know, right, But this guy blew it up in
Speaker 2: twenty twenty two, and he was arrested and he's going
Speaker 2: on trial this week. And the question is is it
Speaker 2: legal to blow up a DeFi trading market? That's not
Speaker 2: really the question. The question is is code law or
Speaker 2: is law law?
Speaker 1: Those are just some big heavy questions because crypto obviously
Speaker 1: would say code is law, and I mean.
Speaker 2: You say that until you're a trading platform gets blown
Speaker 2: up and then you're like, wait a minute, that was fraud. Right,
Speaker 2: This is not how it always works.
Speaker 1: Right.
Speaker 2: You're like, as long as you're the smart one, you're like, yeah,
Speaker 2: anything goes, you don't need regulators. But then you get
Speaker 2: blown up and you're like, ah, where there were regulators?
Speaker 1: Well, explain to me briefly, what is the part of
Speaker 1: the code that he exploited.
Speaker 2: Okay, So Mango Markets is like a decentralized finance trading platform.
Speaker 2: You can trade perpetual features like sort of derivatives on
Speaker 2: crypto tokens. Right, people love this. There's all sorts of
Speaker 2: crypto trading platforms that allow you to speculate on other cryptotokens.
Speaker 2: Mango Markets, as a DeFi trading platform, also had its
Speaker 2: own token called Mango or ngo like mngo and so
Speaker 2: I thin guy did so he set up two accounts
Speaker 2: on Mango Markets. Because everything's anonymous, you know, it's not
Speaker 2: like the way DeFi works, Like you're not like putting
Speaker 2: down your credit card and your driver's license like you
Speaker 2: just set up a wallet, right for sure. So he
Speaker 2: set in two accounts on Mago markets. In one of
Speaker 2: those accounts, he offered to sell a ton of futures
Speaker 2: on the Mango token, and the other account he offered
Speaker 2: to buy a ton of futures on the Mago token.
Speaker 2: And like, no one else was trading in that minute,
Speaker 2: so they crossed, and so he ended up long a
Speaker 2: bunch of futures in one account, short a bunch of
Speaker 2: futures in the other account. And for these days, you
Speaker 2: have to put up some collateral, right, so he had
Speaker 2: like he had some exposure to the Mango token, and
Speaker 2: he had to put up collateral on both sides of
Speaker 2: the trade. And then he went out in a third
Speaker 2: market elsewhere and he just bought the Mango token. So
Speaker 2: not future is not a weird drove as trade. He
Speaker 2: just bought the Mango token. And like it turns out,
Speaker 2: there's not that many people want to buy that many
Speaker 2: Mango tokens, and so he really drove out the price
Speaker 2: a lot, but like one thousand percent or more. And
Speaker 2: what this meant was that his derivatives contracts. His two
Speaker 2: accounts on the Mango trading platform, one of them had
Speaker 2: a huge profit, you know, one hundreds of millions of dollars,
Speaker 2: and the other one had a huge loss, hundreds of
Speaker 2: millions of dollars. And what happened is that he took
Speaker 2: the one with the profit and he went to like
Speaker 2: the Mango you know, exchange platform, and he said, I
Speaker 2: want to borrow against all this profit. Basically, I want
Speaker 2: to withdraw some of my winnings. And so he withdrew
Speaker 2: like one hundred million dollars of winnings. Meanwhile, on the
Speaker 2: other side, he had hundred million dollars of losses and
Speaker 2: he didn't post any collateral for those. But like there's
Speaker 2: a there's like the moment in time where he could
Speaker 2: withdraw on the winning side and ignore the losing side,
Speaker 2: and then you know, everything collapses because he like walks
Speaker 2: away with this hundred million dollars. The price of the
Speaker 2: token goes back down, and Mango Markets has lost one
Speaker 2: hundred million dollars of customer money and basically is blown up.
Speaker 2: And then he like calls them up and says, I'll
Speaker 2: give you back some of the money, and like they
Speaker 2: negotiate a sort of return of some of the money
Speaker 2: in exchange for them not pressing charges. By the way,
Speaker 2: pressing charges is not really a thing if you commit
Speaker 2: a federal crime and like your victims like I don't
Speaker 2: want press charges, like the federal government can still go
Speaker 2: ahead and prosecute you. And that's what happened. But anyway,
Speaker 2: it's great because like one, it's like it's just very
Speaker 2: like simple trade and it's like people things that are
Speaker 2: sort of rhyme with this in like real financial markets.
Speaker 2: This manipulation is like way too simple to do in
Speaker 2: the real financial markets. But like he managed it in
Speaker 2: a DeFi market where basically they were not careful about
Speaker 2: structuring how people could withdraw money and like how they're
Speaker 2: token pricing worked. Just like the mechanics of how they
Speaker 2: did this allowed him to do this exploit. And when
Speaker 2: he was doing it, he was posting through it. He
Speaker 2: was posting on Discord. Actually I think this is before
Speaker 2: he did it. He posted on Discord being like I've
Speaker 2: discovered and exploit and people were like, what is it?
Speaker 2: Is it? And then they sort of described this and
Speaker 2: he's like yes, he said, you take a long position
Speaker 2: and then you make number go up numbers and umba,
Speaker 2: of course you make number go up and like, that's
Speaker 2: what he did. He took a long position, he made
Speaker 2: the number go up, and then he'd, you know, cash
Speaker 2: that before anyone noticed that it was all kind of fake.
Speaker 1: I love that because it sort of gets back to
Speaker 1: the code's law versus laws law. Like he wasn't secret
Speaker 1: about it. He was very open and kind of proud
Speaker 1: about it, which really speaks to the fact that, like
Speaker 1: in his circles, in his discords, code is law.
Speaker 2: I mean he went on Twitter after doing it. People
Speaker 2: are like, oh my god, there's a there's a hack
Speaker 2: of a lot of hackets. A better word is like
Speaker 2: exploit or manipulation, because he didn't like break into the computers.
Speaker 2: He just did the thing that the market allowed that
Speaker 2: was bad. But after he did it, he went on
Speaker 2: Twitter and under his own name and said I was
Speaker 2: involved with a team that operated a highly profitable trading strategy.
Speaker 1: Last Night Strategy.
Speaker 2: I believe all of our actions were legal, open market
Speaker 2: actions using the protocol as designed, even if the development
Speaker 2: team did not fully anticipate all the consequences of setting
Speaker 2: parameters the way they are. Unfortunately, the exchanges took place
Speaker 2: on Mengo markets became insolvent as a result with the
Speaker 2: insurance fund being insufficient to cover all equidations. And he's
Speaker 2: not wrong about any of that. Like he used the
Speaker 2: protocol the way it was designed. It was designed badly,
Speaker 2: and he excited a lot of money for himself.
Speaker 1: So that's what I was thinking about when I was
Speaker 1: reading this. If he had been like a little less ambitious,
Speaker 1: what if instead of what it was, like one hundred
Speaker 1: and ten million dollars, it had been ten million dollars,
Speaker 1: which is still a lot of money, but not collapsible money,
Speaker 1: maybe this wouldn't have happened.
Speaker 2: Yeah, there's an assumption that, like a lot of markets,
Speaker 2: like people are leaning a little bit into trades and
Speaker 2: like you know, doing like a little bit of manipulation
Speaker 2: around the edges in a way that doesn't get them caught.
Speaker 2: The problem is you can't like repeatedly do that here.
Speaker 2: You know, you're taking risk of both of going to
Speaker 2: prison and of losing money each time you do this trade.
Speaker 2: So it kind of makes sense that if you're going
Speaker 2: to do this trade, you're going to do it for
Speaker 2: a big score, and he did it for a big score.
Speaker 2: I agree with you that it probably attracted him more
Speaker 2: attention than was good for him, yeah, or.
Speaker 1: I don't know. Obviously, the he wanted attention, which is
Speaker 1: why he was posting vall.
Speaker 2: I think he probably wanted the money, but yeah, the
Speaker 2: attention of the money. He was not averse to the attention.
Speaker 1: I mean, attention is definitely a commodity.
Speaker 2: Yeah, but a one hundred million dollars podcast, I think
Speaker 2: is better than the kind of attention that lends you're
Speaker 2: in jail. Right, Yeah, perhaps he should have had less,
Speaker 2: Like ordinarily, when you manipulate a market for one hundred
Speaker 2: million dollars, it's nice to not mentioned that on Twitter.
Speaker 2: I don't know.
Speaker 1: I don't know. Maybe I would have tweeted about it
Speaker 1: once done it for one hundred and ten million dollars
Speaker 1: and just walked away. But we didn't get into your
Speaker 1: dream dichotomy world of nice versus fun markets.
Speaker 2: I really like that, Yeah, I mean I just think that.
Speaker 2: Like we talked about crypto people saying code is law,
Speaker 2: Like that's not true, Like that's kind of true. But
Speaker 2: a lot of crypto projects are about building some sort
Speaker 2: of future of finance or decentralized ownership or something, and
Speaker 2: the people working on that are not necessarily like also anarchists. Right,
Speaker 2: some of them might be, but they have nothing to
Speaker 2: do with each other. Right, Like you can believe that
Speaker 2: crypto enables something special and new in like the economic world,
Speaker 2: and also that it should be sobjet to regulation, you
Speaker 2: shouldn't be able to like do fraud in it, right,
Speaker 2: And a lot of people in crypto, I think, believe that.
Speaker 2: And then a lot of people don't. And a lot
Speaker 2: of people in crypto really believe code is law. Regulatory
Speaker 2: interventions are generally bad and make things worse, and you
Speaker 2: should just be careful and you should design your protocol directly.
Speaker 2: And by the way, if you design it poorly and
Speaker 2: someone exploits it for one hundred million dollars and you
Speaker 2: go bankrupt, then like there's an evolutionary process whereby everyone
Speaker 2: learns that lesson and the next protocol is more robust.
Speaker 2: Whereas like regulation makes things worse because it makes people
Speaker 2: less careful, you know, And I think, like you see
Speaker 2: that playing out here, where like it's not like everyone
Speaker 2: in crypto thinks this is great, right, Like a lot
Speaker 2: of people are like this is bad. Like he's manipulating
Speaker 2: a market. He wouldn't say this, but like other people
Speaker 2: would say, he's stealing money from other investors on that platform,
Speaker 2: and it's a bad outcome that makes crypto less attractive
Speaker 2: to ordinary people and therefore makes crypto adoption harder. Right, Like,
Speaker 2: I think a lot of people in crypto find all
Speaker 2: this anarchist stuff kind of distasteful. But then a lot
Speaker 2: of people are like, look like, we're trying to build
Speaker 2: a system that works on its own, or trying to
Speaker 2: build a system of smart contracts, where like you don't
Speaker 2: need to go to the court to enforce your contract,
Speaker 2: you can just have the computer enforce your contract. And
Speaker 2: we're undermining that when the Justice Department comes in to
Speaker 2: bail people out of badly designed protocols.
Speaker 1: Yeah. And then again, the people who would like to
Speaker 1: operate in the fun markets would probably say, we're finding
Speaker 1: bugs in the code.
Speaker 2: Yeah, yeah, right, there are white hat hackers. Yeah, they're
Speaker 2: getting a bug bounty.
Speaker 1: I just liked those categories because I think all the time,
Speaker 1: and I joke with my family that there should be
Speaker 1: like the Dope versus the Clean Olympics, where you have
Speaker 1: all the athletes taking drugs and they all race each
Speaker 1: other and it'd be really interesting to see who wins.
Speaker 1: But then you should also have the clean Olympics where
Speaker 1: all the athletes actually don't drug themselves.
Speaker 2: Right, And the reason you don't have the dope Olympics.
Speaker 1: I think, well, probably a lot of reasons.
Speaker 2: Is it's probably like not that healthy people to take
Speaker 2: a lot of dope. But the nice thing about crypto is,
Speaker 2: like Mango was just the marketplace for speculating our crypto teconds.
Speaker 2: No one will die if Mango is a lawless market
Speaker 2: where you can manipulate it to your heart's content. Right.
Speaker 2: The problem here is that like some people on Mango
Speaker 2: thought it was like not manipulated, and other people are like, oh,
Speaker 2: what a fun place to manipulate. But like if everyone
Speaker 2: had known going in, like hey, if there's any problem
Speaker 2: with this protocol that allows someone to take all of
Speaker 2: the money out of it, good for him. That's you're
Speaker 2: a problem. No guarantees of anything working, No one will
Speaker 2: rescue you. If everyone had had that expectation going in,
Speaker 2: and if you could sort of prove that everyone had
Speaker 2: that expectation, then like, yeah, it's fine, Yeah, who's it
Speaker 2: like external harm?
Speaker 1: No one died, all right? So were two thirds done?
Speaker 2: Ye?
Speaker 1: Just gotta know we just got to bring it home.
Speaker 2: You know.
Speaker 1: The third act is the hardest, is what they say
Speaker 1: in playwriting. I don't know, Okay, super users, super us
Speaker 1: of inflation.
Speaker 2: Yeah. I feel like that's a bad headline.
Speaker 1: That's what the list was.
Speaker 2: I know that's what it's called. Right, It's a bad
Speaker 2: headline for the people who read it.
Speaker 1: I think they have other worries right now, like what inflation.
Speaker 2: No. So, the Viereau of Labor Statistics, which releases inflation data,
Speaker 2: released inflation data a while back and there was like
Speaker 2: a surprising change that was methodological. Right.
Speaker 1: It was a big deal.
Speaker 2: Yeah, but it's like nothing changed, like our calculations have
Speaker 2: changed and this is why. Right. And so a person
Speaker 2: at the bl US emailed a bunch of people not
Speaker 2: at the PLS to explain this change that they didn't
Speaker 2: freak out and so that they could understand what was
Speaker 2: going on. And the email, unfortunately began super users Yeah,
Speaker 2: And then it got forwarded around Wall Street because like,
Speaker 2: people are very interested in the inflation numbers, and then
Speaker 2: it got forwarded to reporters and people are like, wait,
Speaker 2: there are super users of the Bureau Labor. Just looks like,
Speaker 2: is there a higher tier of customer where the government
Speaker 2: tells them information about inflation that everyone else doesn't get.
Speaker 2: How do I then it became a scandal. How do
Speaker 2: I subcress? They became a scandal?
Speaker 1: Great reporting from the New York Times. And when you
Speaker 1: think about who was actually on the list, because.
Speaker 2: The scandal came out a while ago, and like the
Speaker 2: Times last week Breakfast story that this not I went off,
Speaker 2: there really was a group of super users. There were
Speaker 2: people emailing the guy being like, hey, how do I
Speaker 2: get on the super users list? It was a real thing.
Speaker 1: Yeah, it seemed like there was a lot of engagement
Speaker 1: on that particular distribution list. Yeah, so the New York
Speaker 1: Times submitted a Foyer request and now we ended up
Speaker 1: with a good idea of who was on the list.
Speaker 1: It was you know, GP Morgan, black Rock, and then
Speaker 1: he had a bunch of hedge funds on the list
Speaker 1: as well. And in your column you ask the question
Speaker 1: of how bad is this, like is this insider trading?
Speaker 1: I don't know. Probably when it comes to what is
Speaker 1: material information, the bar has come way down.
Speaker 2: If the story was that there's a list of super users,
Speaker 2: and before every like CPI data release, like the day
Speaker 2: before the BLS sends the super users the release to
Speaker 2: be like, hey, here's a preview. That would be really
Speaker 2: bad and people would be going to jail, right, But
Speaker 2: that's not at all what happened, right. Like what happened
Speaker 2: is that, as far as I can tell, they put
Speaker 2: out the data every you know, periodically, and people from
Speaker 2: all over the place email or call the people in
Speaker 2: charge of the data at the government saying hey, can
Speaker 2: you explain this thing? And these people who work at
Speaker 2: the BLS work for the people, right like their government employees, Like,
Speaker 2: their job is to help people understand on these statistics,
Speaker 2: and so when people call them and say, hey, can
Speaker 2: you explain what's happening here, they try to explain it.
Speaker 2: And so there's this range of things where like giving
Speaker 2: people the data early would be really bad. Yeah, Like
Speaker 2: answering their legitimate questions seems very legitimate. And when I
Speaker 2: wrote about this the other day, like, I got a
Speaker 2: lot of reader email being like this is fine and
Speaker 2: exactly what they should be doing. Yeah, someone wrote to
Speaker 2: me saying this is very strange. The BLS has people
Speaker 2: who are supposed to answer questions from the outside. Literally,
Speaker 2: anyone can email or call them and get answers. It's
Speaker 2: not a scandal but a public service, right, which I
Speaker 2: think is right.
Speaker 1: Yeah, No, there's definitely a sympathetic reading here. And I mean,
Speaker 1: if you look at the statement that the BLS has
Speaker 1: given to different media organizations, I believe they gave this
Speaker 1: one to Bloomberg. Was that to your point, the BLS
Speaker 1: it encourages people to ask questions and makes it staff
Speaker 1: available to engage with the public, but they start to
Speaker 1: create equal access to the information for everyone, of course.
Speaker 1: But also in the New York Times reporting, they spoke
Speaker 1: to someone who was actually on the Super Super Loser
Speaker 1: super User list, Omerisha Reef. He is the founder of
Speaker 1: Inflation Insights. He also is a recipient. He said that
Speaker 1: this was relatively new and his best guess for why
Speaker 1: the super user list was created was just because they're
Speaker 1: getting so many more questions than they were previously about inflation,
Speaker 1: and with the volumes of questions increasing so much, the
Speaker 1: staffing has not, so maybe they just created a master list.
Speaker 1: Let's just answer everyone's questions at once and put them
Speaker 1: all on this list.
Speaker 2: Which, when you think about it, is like the better
Speaker 2: way to do it. Right. The thing you might worry
Speaker 2: about is that analysts at hedge funds. One can call
Speaker 2: the number at the BLS that anyone can call, but
Speaker 2: two have better questions, right. They can ask really pointed
Speaker 2: questions about things that will move the market, then get
Speaker 2: specific answers, and then they can go trade on it
Speaker 2: with everyone else not knowing it. If you do it
Speaker 2: on an email list, it's a little bit fairer, right, So, like,
Speaker 2: you know, the HEADEPHNT analyst emails the BLS and says,
Speaker 2: can you explain this data point? And instead of writing
Speaker 2: back and saying, yeah, sure, here you go, they can
Speaker 2: send up to the whole list that wants the same explanation,
Speaker 2: and you know, arguably can get on the list. It's
Speaker 2: probably better than like the alternative of having one on
Speaker 2: one conversations, yeah, about stuff that might be market moving.
Speaker 2: But the whole problem here is if you're having any
Speaker 2: form of conversations about stuff that might be market moving
Speaker 2: and you're doing it in any way that is not public,
Speaker 2: people are going to get upset about that, right because,
Speaker 2: like it just is the case that some of these
Speaker 2: hedge FOIND analysts got information that was not broadly disseminated
Speaker 2: to the public, and that they found useful. Right, that's
Speaker 2: why we're there.
Speaker 1: I have a few silly thoughts. The first thing that's
Speaker 1: thrown into my minds as you were talking was they
Speaker 1: should have an earnings call. That doesn't quite work because
Speaker 1: we're talking about a company.
Speaker 2: No, but that's right, I mean, like right, That's what
Speaker 2: companies do to partially address this problem. Is like they
Speaker 2: put out the press release and their earnings release, and
Speaker 2: then they have a call where analysts can ask questions.
Speaker 2: But you can hear. Everyone can hear the questions, everyone
Speaker 2: can hear the answers, and so it's a little bit
Speaker 2: more you know, open access than the system of doing
Speaker 2: it by private emails.
Speaker 1: Perhaps they could have a subreddit. A subreddit, yeah, and
Speaker 1: this guy could be the moderator, this BLS economist who
Speaker 1: was described as not super high ranking, but he had
Speaker 1: been there for I know.
Speaker 2: It was like a really mean nag in the time.
Speaker 2: I know. Someone suggested an other approach that a lot
Speaker 2: of government agencies g used for other things, which is
Speaker 2: anyone can ask questions, but instead of just answering the questions,
Speaker 2: they like collate the questions, write the answers, and then
Speaker 2: put all of that out publicly at the same time,
Speaker 2: so everyone gets the answers to everyone's questions, and everyone
Speaker 2: gets to see the questions at once, which is sort
Speaker 2: of like using the super user list, only instead of
Speaker 2: just doing it in like a reply, I'll email you
Speaker 2: do it online or something so everyone can see it.
Speaker 1: Did you have any more reader comments? I feel like
Speaker 1: you had a lot.
Speaker 2: Oh yeah, no, A bunch of people were all sort
Speaker 2: of in the camp of this is all fun. Yeah,
Speaker 2: I'm going to read you another one.
Speaker 1: Okay.
Speaker 2: Why in the world can't anyone ask a question of
Speaker 2: their government about technical aspects of the report the government
Speaker 2: produced with their taxes. Granted, there won't be many people
Speaker 2: with the ability to frame such questions, much less profit
Speaker 2: from the answers, but the technique should be freely available
Speaker 2: to anyone, even big hedge funds.
Speaker 1: Seems invisible.
Speaker 2: Yeah, I mean it's it's good government service. By the
Speaker 2: way I think about this, I'm like more of a
Speaker 2: stocks guy, and I think about this by analogy to
Speaker 2: public company insider trading all the time, right, I mean, like,
Speaker 2: if you're a public company and someone calls you up
Speaker 2: and it's like I'm a big investor in your company,
Speaker 2: I'm a shareholder in your company, you work for me,
Speaker 2: I want you to explain something about your business, Like
Speaker 2: your instinct is going to be to explain your business
Speaker 2: to them, right, Like your instinct is going to be
Speaker 2: I work for you. This is information that you legitimately want,
Speaker 2: I'm going to tell it to you. But you know,
Speaker 2: there's also rules against insider trading, and there's rules against
Speaker 2: selectively disclosing material and public information, and so companies are
Speaker 2: constantly walking this tightrope between like we don't want to
Speaker 2: like be dismissive through our shaholders and not tell them anything,
Speaker 2: but we also don't want to tell them anything that
Speaker 2: will get user them in trouble. And there's a lot
Speaker 2: of thinking about that and a lot of people trying
Speaker 2: to get that right. But it's just always strikes me
Speaker 2: as kind of a weird balance, where like people who
Speaker 2: know they're insider trading rules are sometimes shocked to find
Speaker 2: out that companies talk to their investors all the time
Speaker 2: and try to explain their companies to them. The Bureau
Speaker 2: Labor said has the same problems.
Speaker 1: They could also be like the FED. I mean, maybe
Speaker 1: that's a better analogy than a corporate earnings call. The
Speaker 1: FED releases their decision at two pm, and then two
Speaker 1: thirty Jerome pal starts speaking and the entire knee jerk
Speaker 1: reaction unravels. Matter. Are you on the super User's list?
Speaker 1: It sounds like you could have just emailed them and
Speaker 1: asked to be added to the list, and you could
Speaker 1: be on the list.
Speaker 2: I guess one question is does it still Is that
Speaker 2: still a possibility? Like I feel like it's kind of
Speaker 2: fraught now, And if I were to email the BLS
Speaker 2: today and say, hey, guys, I'd love to be on
Speaker 2: the super User List, I feel like that would be awkward.
Speaker 1: But maybe I feel like you'd only do that if
Speaker 1: you want to detrol them.
Speaker 2: That's true of me. But the reasons for the super
Speaker 2: User list haven't really gone away, right, They still have
Speaker 2: to explain this stuff, And so now that it's so
Speaker 2: well known, why shouldn't people be able to add themselves
Speaker 2: to it.
Speaker 1: It's a fair question.
Speaker 2: I do want to talk about one reader email I
Speaker 2: got this week.
Speaker 1: Oh my god, great, this is.
Speaker 2: Like the Money Stuff podcast nail bag section.
Speaker 1: Oh my gosh, let me bring it up.
Speaker 2: So there's this great story in the FT about renewable
Speaker 2: investors and like d Shaw hiring sheep to mow the
Speaker 2: lawns around their solar panels. And it's great because it's
Speaker 2: just like it's this image of like these hedgehood investors
Speaker 2: and like the way they hire the sheep. Apparently is
Speaker 2: often that a solar array is being built in some
Speaker 2: rural area and a farmer, a neighboring farmer, kind of
Speaker 2: wanders over and says, hey, could you use any sheep?
Speaker 2: And I thought that was so funny, and I wrote
Speaker 2: that the first scene of my Cormick McCarthy influenced finance
Speaker 2: novel would involve a hedge fund manager leaning against the fence,
Speaker 2: chewing on a piece of straw, and a neighboring farmer
Speaker 2: wandering over to talk about sheep. So a reader asked
Speaker 2: the Gemini AI model to write that scene and sent
Speaker 2: it to me, and I'm going to read it to you.
Speaker 2: He shimmered off the desolate, distorting the rows of glass
Speaker 2: panels into an alien mirage. Matt Levine, a hedge fund
Speaker 2: refugee transplanted to this forgotten corner of North Carolina, leaned
Speaker 2: against the rusting perimeter fence. His city suit, once a
Speaker 2: symbol of power and prestige now hung on him like
Speaker 2: a molting carapace, ill suited to the unforgiving sun. A
Speaker 2: plume of dust announced the arrival of Silas, the neighboring farmer.
Speaker 2: His weathered face etched with the harsh lines of a
Speaker 2: life spent wrestling with the land, held a deep well
Speaker 2: of suspicion. Silas stopped a good distance away, the silence
Speaker 2: thick between them. Finally he spoke. His voice, a dry
Speaker 2: rasp carried on the hot wind. Heard you needed your
Speaker 2: fancy heater contraptions mode. Silas gestured towards the panels with
Speaker 2: a gnarled hand. Sheep got restless with all that shade
Speaker 2: blocking their usual path. It ends there, but I feel
Speaker 2: like you get the sense of it.
Speaker 1: Oh my god, I was hoping he was getting going.
Speaker 2: Yeah, yeah, Well someone's got to write it. This person
Speaker 2: told me that he didn't ask Gemini to name the
Speaker 2: headphone character Matt Levine, not.
Speaker 1: Just it just it felt right. Yeah, I love it.
Speaker 1: I feel like we should keep going on this. I
Speaker 1: think there's a lot of the.
Speaker 2: Podcast doesn't work out, then then we'll collaborate on the novel. Maybe.
Speaker 1: God, your readers are fun. That is a lot, and
Speaker 1: that was unprompted.
Speaker 2: I mean he prompted Gemini.
Speaker 1: I know he didn't write all of them. You didn't say, hey,
Speaker 1: intrepid reader, do this for me. No, Yeah, that's what
Speaker 1: I'm saying.
Speaker 2: No, I've got a lot of like people being like
Speaker 2: I asked GPT to write like you, and this is
Speaker 2: what it produced. And I'm always like, still safe. But
Speaker 2: one day like GPP seven will just you know, just
Speaker 2: do the job.
Speaker 1: But they can't do a.
Speaker 2: Podcast, I'll be reduced to podcasting. There we go, And
Speaker 2: that was the Money Stuff Podcast.
Speaker 1: I'm Matt Levin and I'm Katie Greifeld.
Speaker 2: You can find my work by subscribing to the Money
Speaker 2: Stuff newsletter.
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Speaker 2: The Money Stuff Podcast is produced by Anna Maserakus and Moses.
Speaker 1: Andm Our theme music was composed by Blake Maples.
Speaker 2: Brendan Francis Neonan is our executive producer.
Speaker 1: And Sage Bauman is Bloomberg's head of podcasts.
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