Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to
Speaker 1: The Money Stuff Podcast. You're a weekly podcast where we
Speaker 1: talk about stuff related to money. I'm Matt Levin and
Speaker 1: I write The Money Stuff COLMN for Bloomberg Opinion.
Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 2: an anchor for Bloomberg Television.
Speaker 1: Katy, you know what my man career aspiration is, tell
Speaker 1: me still lose a billion.
Speaker 3: Dollars and come out better for it.
Speaker 1: Well you can't not. Yeah, well it's not the best
Speaker 1: possible career move. But up there, surprisingly I up there
Speaker 1: on the list of career moves that you can make
Speaker 1: is losing a billion dollars if you're a hedge fund
Speaker 1: trader or bank trader, because like, there's just got to
Speaker 1: be something special about you. If you use a billion dollars, well.
Speaker 3: You know what I always say, A wounded lion is
Speaker 3: still a lion.
Speaker 1: So The Shank Kumar has a great story about how
Speaker 1: hedgehund traders who lose money are in high demand and
Speaker 1: hopping among multi strategy hedgehunds, and it does feature a
Speaker 1: quote from a hedgehund re creator named Jason Kennedy who
Speaker 1: says even a wounded lion is still a lion, and
Speaker 1: the lion isn't mortally wounded, he will heal, and when
Speaker 1: he's fully back, that lion is worth a lot more money.
Speaker 4: I do love it.
Speaker 1: Like by the end of the metaphrase like also there's money,
Speaker 1: He's like.
Speaker 2: Wait, let me tie this back into what we're talking about.
Speaker 2: That's an incredible quote. Sometimes you read an article and
Speaker 2: you come across a passage that just makes you pause.
Speaker 3: That was this for me.
Speaker 2: Yes, I would definitely rather be a wounded lion than
Speaker 2: a beaten mule, which is a callback to our mailback episode.
Speaker 1: I'm the title of our episode.
Speaker 2: Jason Kennedy has a very optimistic take on this, that
Speaker 2: the lion will heal. Sometimes lions do get wounded and
Speaker 2: then they just die or they're never the same.
Speaker 1: I grew up in sort of an efficient markets world.
Speaker 1: I find it fascinating how quaint confident people are that
Speaker 1: they can identify investing skill. Clearly, people believe it and
Speaker 1: like they have good reason to believe it.
Speaker 4: Right.
Speaker 1: These are like large, successful firms that for many years
Speaker 1: produce good returns, but just fascinating to me that you
Speaker 1: can be like, Wow, this guy who lost a billion dollars,
Speaker 1: he's great, he's so skilled. You know, we'll get him
Speaker 1: on the on the downswing.
Speaker 3: And get him at a discount.
Speaker 1: Yeah, we'll get him at a discount and it'll be great, right, Yeah,
Speaker 1: as opposed to like the regime has changed, or he
Speaker 1: was lucky before or something, and now he's not a
Speaker 1: winded line. He's just the guy who loses money.
Speaker 3: He's a gazelle.
Speaker 2: So there's a lot of recent examples of this happening, basically,
Speaker 2: these battered former stars getting picked up, perhaps at a discount.
Speaker 3: I was struggling to find a success story. It felt
Speaker 3: like this article.
Speaker 2: Named a lot of bad examples or how this could
Speaker 2: go wrong. I wonder if this ever works out.
Speaker 1: It's weird, like you probably don't hear about the ones
Speaker 1: that work out, because like they're not going around bragging
Speaker 1: about how they lost a lot of money at their
Speaker 1: previous firms.
Speaker 3: They're back to just being lions.
Speaker 1: They're back to just being lions. But right, the other
Speaker 1: thing is that this has always been a thing that happens, Like, yeah,
Speaker 1: it is definitely there's been an uptick in it recently,
Speaker 1: just because there's been such a talent war among the
Speaker 1: big multi strategy hedge funds, and so there are all
Speaker 1: these people on very large compensation packages that are moving
Speaker 1: around between these firms. And if you run these firms,
Speaker 1: the people you can pick off from your competitors are
Speaker 1: often the people who have lost money. That's partly because
Speaker 1: like they're out of favor or whatever. Some of them,
Speaker 1: you know, potentially been fired, right because like traditionally these firms,
Speaker 1: if you have a big draw down, you get fired.
Speaker 1: Although the article mentions some of these people are stars
Speaker 1: who like that doesn't happen to like they have a
Speaker 1: big draw down and it's like, oh, it's okay, you
Speaker 1: can stay here, but they get picked off anyway. The
Speaker 1: other reason they're attractive is because they have to leave. Like,
Speaker 1: if you lose money, even if you don't get fired,
Speaker 1: you're now like below your high water mark, and so
Speaker 1: you have to earn back all the money you lost
Speaker 1: before you can get a big bonus again, you know,
Speaker 1: more or less traditionally, and so if that's the case,
Speaker 1: it's very tempting to quit and started a new firm
Speaker 1: where your high water mark is resent back to zero.
Speaker 3: Yeah, you're not in the penalty box.
Speaker 1: Yeah, and you know, the article points out that it's
Speaker 1: not great for investors, like particularly if you're in multiple firms,
Speaker 1: like and people are just moving around to like reset
Speaker 1: their high watermarks, Like you're not getting the benefit of
Speaker 1: the high water mark.
Speaker 2: That's true to that point. There was a quote from
Speaker 2: a woman who now is a performance coach. She used
Speaker 2: to be the ex head of a Georgia bank unit
Speaker 2: that linked investors with hedge funds, saying that after a
Speaker 2: bad year, the pitch is simple, check clean, sight, chill
Speaker 2: and let's be honest. Some of these deals are the
Speaker 2: definition of an offer you can't refuse. So it makes
Speaker 2: sense psychologically.
Speaker 1: Yeah, I wonder about chill, right, Like what are your
Speaker 1: incentives at your new firm? On the one hand, you
Speaker 1: want to prove that you still got.
Speaker 3: It, you're still lying.
Speaker 1: On the other hand, one thing the article points out is,
Speaker 1: like you get one of these, you can't continually lose
Speaker 1: a billion dollars. So if you lose a billion dollars,
Speaker 1: it's like you did great. You like took a lot
Speaker 1: of risk, You've learned from your mistakes, You move on,
Speaker 1: You got a new firm, it's great, but you lose
Speaker 1: it again that you're done, so like you haven't sentives
Speaker 1: to be more conservative at your new firm.
Speaker 2: Well to that point, we already have an example. There
Speaker 2: is this man, his name is Rob Banham. He was
Speaker 2: at point seventy two, then he moved to Citadel. He's
Speaker 2: already been let go after making tens of millions of
Speaker 2: dollars of more losses. So I guess he found his
Speaker 2: second strike right.
Speaker 1: Again, this is not would be classy, but it is
Speaker 1: possible that you lost a lot of money because you're
Speaker 1: really talented at losing money. Yeah, but no, I love
Speaker 1: I love the like edgehun compensation structure of like like,
Speaker 1: I think a lot of people would like to be
Speaker 1: able to find a system where if you lose money,
Speaker 1: that's your problem, right, Not so much in multi strategy funds,
Speaker 1: but I've said about this before with single manager hedge funds,
Speaker 1: where if they lose a lot of money for their
Speaker 1: investors and they're below their high water mark, they will
Speaker 1: shut down the fund and spend like six months doing
Speaker 1: penance on a beach, and then they'll like start a
Speaker 1: new fund with a new name, and the investors would
Speaker 1: be like, what the hell, Yeah, you got to earn
Speaker 1: back your high water work. And every so often people
Speaker 1: will be like, I'm going to indenture myself for years
Speaker 1: to my old investors and just earn back every penny
Speaker 1: of my how outter remark and not take and right
Speaker 1: like people do that, but not everyone does that. I
Speaker 1: think limited partners would love to have some incentive structure,
Speaker 1: some compstructure, some contract where they could make the losses
Speaker 1: fully the hedgemand manager's problem. But it's hard to do.
Speaker 1: It's hard to do. No one's quite cracked the good.
Speaker 1: The only thing I stud point out is after I
Speaker 1: wrote about this, I learned of a paper by Maury L.
Speaker 1: Say If a Duke called hedge fund Incentives, risk taking
Speaker 1: and asset prices. What I wrote about is like the
Speaker 1: hedgehend managers like including a multi shred firms have like
Speaker 1: incentives to optimize their b and their high water mark.
Speaker 1: So what that means is like, if it's getting to
Speaker 1: be the end of the year and you're up a lot,
Speaker 1: you like chill because you don't want to lose all
Speaker 1: the games you've made because those games provide your bonus. Right,
Speaker 1: if you're down a little bit, you have a lot
Speaker 1: of incentive to take big risks because if you're down
Speaker 1: a little bit or flat, you don't get a big bonus.
Speaker 1: But if you're up a lot, you got a big bonus.
Speaker 1: And if you're down a lot, you don't do any
Speaker 1: worse than if you're down a little bit, So you
Speaker 1: might as well take big risks. And what else say
Speaker 1: if he finds is that one that's true? And two
Speaker 1: you can see it in asset prices where like basically
Speaker 1: more hi beta, more volatile stocks go up when a
Speaker 1: lot of hedgehunes are below their high water mark because
Speaker 1: they're gambling on redemption. And so like you actually see
Speaker 1: stock prices react to the year end of bonus structures
Speaker 1: of hedgelong managers.
Speaker 2: Man, so I'm gonna I'm going to borrow this paper
Speaker 2: for when I'm on television at the end of the
Speaker 2: year and things are going bananas. I'm just going to say, well,
Speaker 2: I guess a lot of heat.
Speaker 1: Yeah, anything that happens in the year, it's like probably
Speaker 1: someone like optimizing their bonus.
Speaker 2: I use it all the time, month end, quarter ends. Well,
Speaker 2: it looks like things are just weird today. I can't
Speaker 2: explain this tick in this stock.
Speaker 1: But right, I think that, as we've said on this podcast,
Speaker 1: the market is a conversation among four hedge funds. I'm like,
Speaker 1: you know, if they need their.
Speaker 3: Bonus's, it is time to talk about Elon Musk.
Speaker 1: It's been what at least at.
Speaker 3: Least a week, at least a single.
Speaker 1: Week, has it only been want to make anyway? Yeah,
Speaker 1: Elon Musk is back in the news this week.
Speaker 2: Yeah, well actually last Friday Friday. Yeah, you famously don't
Speaker 2: publish on Fridays.
Speaker 1: It's does the crafting email for this?
Speaker 3: Yeah, it takes hours. So Elon Moss one trillion dollars.
Speaker 1: I really don't like this framing.
Speaker 3: Everyone says this, everyone does.
Speaker 1: Elon Musk is the CEO of Tesla and the techno
Speaker 1: king of Tesla. There's also, controversially, let's say he's the
Speaker 1: founder of Tesla.
Speaker 3: That is a controversial statement.
Speaker 1: He didn't found Tesla, but he's the founder of Tesla,
Speaker 1: right for sure. For theoretical purposes, he's the founder of Tesla,
Speaker 1: and so like many founder CEOs, he's a big shareholder
Speaker 1: in Tesla and depends how you can because of like
Speaker 1: the weird option stuff, but he owns like twelve to
Speaker 1: twenty percent of Tesla.
Speaker 3: It's not enough.
Speaker 1: It's not enough, but it's a lot, right, And you
Speaker 1: look at a lot of like these big tech companies
Speaker 1: that are run by their more or less founders. They
Speaker 1: don't get huge compensation packages, and they don't get huge
Speaker 1: compensation packages because like it's just assumed that, like they
Speaker 1: profit from the upside in the company by owning a
Speaker 1: lot of the company. So like Jeff Bezos rand Amazon,
Speaker 1: and you know, Mark Zuckerberg runs Meta, Like these people
Speaker 1: don't get paid hundreds of billions of dollars. They just
Speaker 1: own hundreds of billions of dollars of stock, and like
Speaker 1: when they do good stuff, the stock goes up. And
Speaker 1: so anyway, Elon Musk is not like that for reasons,
Speaker 1: and he instead gets huge compensation packages. And the board
Speaker 1: or Tessa's ass shareholders to vote on a new package
Speaker 1: that targets growing Tesla from the day about a trillion
Speaker 1: dollar company into a eight point five trillion dollar.
Speaker 3: Company, which is two in videos, two.
Speaker 1: In videos, yeah, right, more two in videos now, yeah,
Speaker 1: who knows what year, But if he succeeds in growing
Speaker 1: Tesla to an eight point five trillion dollar company, they
Speaker 1: will give him a trillion dollars worth of stock, which
Speaker 1: is great, but like, also he will have a trillion
Speaker 1: dollars worth of stock anyway, Like, he already owns a
Speaker 1: lot of stock, and if he eight point five times
Speaker 1: the company, then the stock will be worth a trillion dollars.
Speaker 1: So like, it's not like they sat down and thought,
Speaker 1: if we give elan musk at trillion dollars, he will
Speaker 1: turn this into an eight point five trillion dollar company.
Speaker 1: It's like, if we give another trillion dollars on top
Speaker 1: of the trillion dollars he already get for that, then
Speaker 1: I'll turn it into an eight point five trillion dollar company.
Speaker 1: It's not a trillion dollar it's like whatever, it's if
Speaker 1: he does this, he would have a trillion dollars anyway,
Speaker 1: because he's a big shelter. This is all in the
Speaker 1: shadow of like he had this comp package that Adella
Speaker 1: reports strike down, and like the judge at the time wrote,
Speaker 1: like the board did not analyze whether it was necessary
Speaker 1: to give him all of this given that he's a
Speaker 1: huge shareholder anyway, and like the comp set, the Zuckerbergs
Speaker 1: of the world don't get, you know, trillion dollar Paybay
Speaker 1: just they benefit from their share ownership. Once again, the
Speaker 1: board does not think that Elon Musk gets much incentive
Speaker 1: effect from the shares he already owns. Yeah, they're just
Speaker 1: like he needs more shares, and it's like clearly not
Speaker 1: true that he is being incentivized by a trillion dollars.
Speaker 1: What's happening here is that Elon Musk wants to own
Speaker 1: twenty five percent of the company, and so the board
Speaker 1: is like, how do we get him twenty five percent
Speaker 1: of the company, And they just give him twenty five
Speaker 1: percent of the company. They'd be like, well, if we
Speaker 1: don't give him twenty five percent of the company, you'd quit.
Speaker 1: So here it is right, but that like looks really bad.
Speaker 1: Even to a Texas court, that would look bad. So
Speaker 1: what they're doing is they're saying, oh, we have like
Speaker 1: these super ambitious performance calls, and if he meets these goals,
Speaker 1: then we'll give them a trillion dollars. It's probably a
Speaker 1: reasonable solution. But it's so like he's owned like twenty
Speaker 1: five percent of Tesla, then he sold down like by
Speaker 1: Twitter and stuff. It's very strange that he just he
Speaker 1: thinks he deserves to perpetually own twenty five percent of
Speaker 1: Tesla and the board is like, well you have to
Speaker 1: give it to m.
Speaker 2: Well, people have tried to stop him from what from
Speaker 2: owning that much or I don't know, you think about
Speaker 2: the twenty eighteen experience, Yeah.
Speaker 1: Right, I think that. You know. Elan mess says, the
Speaker 1: funniest thought comes the most likely, Like you could sue.
Speaker 1: You could takes us to stop this. Everyone assumes you
Speaker 1: would lose, but anyone really knows that's true. I am
Speaker 1: really what if someone sued in one? Wouldn't that be funny?
Speaker 2: That wouldn't be funny. Maybe not the funniest thing though,
Speaker 2: so it probably won't happen.
Speaker 1: He'd be so mad that I think it'd be pretty.
Speaker 2: Funny, but whatever, Okay, I am curious to see what
Speaker 2: happens over the next decade. Obviously, because eight point five
Speaker 2: trillion dollars, I mean, the first you think about the
Speaker 2: incentive structure that was put in place the first time around.
Speaker 2: That was very ambitious as well.
Speaker 1: And he did it when he got his twenty eighteen package,
Speaker 1: Like the idea of making Tesla a trillion dollar company,
Speaker 1: which is not exactly the target, but like yeah, which
Speaker 1: he did would have seemed kind of absurd, and then
Speaker 1: he did it in fairly short order. Yeah, I don't know,
Speaker 1: a decade, a long time.
Speaker 2: One of the things that you mentioned in your column
Speaker 2: is that Elon Musk the world's richest man that briefly
Speaker 2: became not true this that's right, Larry Elson briefly became.
Speaker 3: The world's richest man.
Speaker 2: Now they're I don't know, I think like a billion
Speaker 2: dollars separates them at this exact moment. But you think
Speaker 2: about the future, I think the exact think one.
Speaker 1: Or both of them is like watching the chart as
Speaker 1: the lens crossed.
Speaker 2: I would like to think that both of them are.
Speaker 2: But in any case, obviously Oracle had insane earnings and
Speaker 2: had an insane outlook.
Speaker 1: And uh like flatish earnings on insane look.
Speaker 3: But yeah, well that's it's mostly out.
Speaker 2: Yeah, and you think about the billings growth and whatever
Speaker 2: and where the future is going to go. It really
Speaker 2: just underscored why Elon wants to turn Tesla into an
Speaker 2: AI company, because, Okay, maybe evs still are the future.
Speaker 2: They don't feel as immediately the future as AI is
Speaker 2: right now.
Speaker 1: Oh yeah, right, I mean you can point to your billings,
Speaker 1: your like potential future sales as a DA company to your.
Speaker 2: Three hundred billion dollars worth of contracts that you signed
Speaker 2: with open Ai.
Speaker 1: It's you know, it's sort of worth that much in
Speaker 1: market cup, right. That's why Elon Musk is turning his
Speaker 1: focus to AI, and it's also why Tesla needs to
Speaker 1: pay up to keep him, right, because there are more
Speaker 1: obvious AI players like his AI company. Also in the
Speaker 1: Tesla proxy, yeah, there's a shareholder proposal to invest in Xai.
Speaker 1: And it's funny because like there's some business rationale for
Speaker 1: Tesla to invest in XI companies put the chat out
Speaker 1: on the dashboard.
Speaker 3: Which they've done I think talk to your car.
Speaker 1: Yeah, But so like there's some business case. There's a
Speaker 1: there's a very big, like Elon Musk personal business case,
Speaker 1: which is that Tesla is not the most obvious AI company, right,
Speaker 1: it's not going to capture the public imagination the way
Speaker 1: like Oracle is. But then like Xai, which is a
Speaker 1: more obvious AI play, plays are very expensive and it
Speaker 1: needs money, and Tesla has money, so like it does
Speaker 1: make sense for Elon Musk to like merge them or
Speaker 1: like take some Tesla money and give a TEXTI or whatever.
Speaker 1: But even in the current situation. Even in Texas, it
Speaker 1: doesn't seem a little hard for Tesla to just decide
Speaker 1: on the CEO's whim to invest billions or dollars in
Speaker 1: the CEO's other company. But if the cherlders.
Speaker 3: Asked for it, yeah, that's true.
Speaker 1: And then it's funny because like someone tweeted about it
Speaker 1: and Elon Musk was like, it's not up to me.
Speaker 1: The shareolders have to ask far and so like some
Speaker 1: chrelder duly like went and proposed exactly and then like
Speaker 1: you know, the shareholders overwhelming the button favor and then
Speaker 1: the word are like that did they give surely what
Speaker 1: they want? Well, we're going to give Elan his money,
Speaker 1: and then someone will negotiate it. It's not how one
Speaker 1: normally runs a company, but it's like it's happening.
Speaker 4: It's runs a company, all right, Eric Adams, thank you
Speaker 4: to Front of the Show Bill Ackman, the actual Bill Ackman,
Speaker 4: for teeing us up for this too delating conversation.
Speaker 1: Friend of the Show by Lackman went on Twitter to
Speaker 1: try to persuade Eric Adams to drop out of the
Speaker 1: New York City mayoral race, which is a for our purposes.
Speaker 1: Let's say three way race between Zori Mundanni.
Speaker 3: Who's you know, fan favorite.
Speaker 1: Odd lots cast, betting market favorite, polling favorite, Zora Mundannie,
Speaker 1: and then there's Andrew who's heard of him Bill Ackman
Speaker 1: favorite yep. And then there's Area Adams is the current
Speaker 1: mayor and seems to have no shot. But so like
Speaker 1: a prediction market, the polymarket has zorround at like eighty percent,
Speaker 1: odds Cuomo like eighteen percent, and then like you know,
Speaker 1: Adams like one or two percent or something like that.
Speaker 1: And so Bill Ackman went on Twitter to be like,
Speaker 1: Arian Adams drop out, because I'm Donnie, seems to have
Speaker 1: a plurality, and so like if everyone else drops out,
Speaker 1: then like maybe a Cuomo consolidate's enough support to win.
Speaker 1: So if Aria Adams drops out, that like really materially
Speaker 1: improves Cuomo's chances. And so Acman went on Twitter to
Speaker 1: be like, er Adams drop out. But he also said,
Speaker 1: and to fund your future, you could place a large
Speaker 1: bet on Andrew Cuomo and then announce your withdrawal from
Speaker 1: the race. There is no insider trading on polymarket.
Speaker 3: What a crazy thing to say. I mean, God, plus,
Speaker 3: he's not even wrong.
Speaker 1: He's wrong in the sense that he says you could
Speaker 1: place a large bet on uncoma. I don't think that's true. Like,
Speaker 1: I don't think the liquidity in these markets is enough
Speaker 1: for like, Like one thing we know about Eric Adams
Speaker 1: is that he enjoys like playing trips. Yes, I don't
Speaker 1: think you could make a ton of money betting on
Speaker 1: anentercroma some liquidity. But like, as a general proposition, is
Speaker 1: this a thing that will become popular in politics, which
Speaker 1: is betting against yourself and then dropping out of the race.
Speaker 2: Yeah, I would like to see that world that future actualized.
Speaker 2: I think it would be funny and it would provide
Speaker 2: a lot of fodder for this podcast.
Speaker 1: Oh yeah, oh yeah, right, I mean, because like traditionally
Speaker 1: you're not you're not supposed to pay people to drop
Speaker 1: out of political races. Seems a little it seems a
Speaker 1: little bribby. But then like the prediction markets are sort
Speaker 1: of like a distributed way for dropping out of your race.
Speaker 2: And I mean trading, and Bi Lackman didn't say I
Speaker 2: will be on the other side of this trade, so
Speaker 2: that was good, right.
Speaker 1: I Mean, one thing I wrote about this is that
Speaker 1: there's not a ton of liquidity. Eric Adams couldn't make
Speaker 1: a ton of money by doing this unless someone where
Speaker 1: to step in and be on the other side of
Speaker 1: the trade, which again he didn't offer, but like would
Speaker 1: have been you know, it would be the logical next step.
Speaker 1: But then the other question is is he right about
Speaker 1: there being no insider trading and nobody really knows.
Speaker 3: Yeah, it's like don't know until you try.
Speaker 1: Or for years afterwards. So, by the way, another independent
Speaker 1: reason that Eric Adams couldn't do that is because no
Speaker 1: one believes it's still illegal to trade on Pollymarket if
Speaker 1: you're a US person, Like poly Market is not available
Speaker 1: in the US.
Speaker 3: No one ever talks about that ever.
Speaker 1: Talks about like they used to chuckle about it, like
Speaker 1: you can't you know, like Probly marks like advertising all
Speaker 1: over New York and everyone's like, oh, you can't trade
Speaker 1: on Pollymarket in the US. But like everyone did. If
Speaker 1: you go to their website now they're like, Polymarket is
Speaker 1: coming home. The website actually has a little eagle, so good. No,
Speaker 1: it's like it's just like, you know, it looks like
Speaker 1: it looks like a Trump Sun designed it. But anyway,
Speaker 1: Polymarket is coming home. Polymarket will soon be available for
Speaker 1: US traders the website right, but it's not now right,
Speaker 1: so you can't do it, but so right now, Like
Speaker 1: if you want to trade prediction markets in the US,
Speaker 1: you can trade on CALCI. What should talk about all
Speaker 1: the time because you can predict sporting events on calshy,
Speaker 1: and CALSHI has insider trading rules, quite strict insider trading rules,
Speaker 1: so you can't trade if you have material on public
Speaker 1: information or if you can influence the outcome of the event.
Speaker 1: Polymarkets rules are less clear, and I imagine that when
Speaker 1: polymarket is available in the US, it will look more
Speaker 1: like real commodities exchanges, which don't say you can't trade
Speaker 1: on material on public information, because that's not how commodities
Speaker 1: markets work. I quoted Carolyn fam who's the acting Commissioner
Speaker 1: at the CFTC. You talked about the special characteristics of
Speaker 1: the derivative markets, where end users necessarily trade on the
Speaker 1: basis of their own proprietary information in order to hedge
Speaker 1: their risks. You're an oil company trading oil futures. You
Speaker 1: know something about oil production that other people don't know,
Speaker 1: and you're totally allowed to trade it. So in US
Speaker 1: regulated commodities markets, you're not allowed to trade with misappropriated information.
Speaker 1: So if you work at an oil company and you
Speaker 1: trade for your personal account based on the oil companies
Speaker 1: production plans, that's probably insider trading. That's probably not allowed
Speaker 1: because you're misappropriating that information. You have some duty to
Speaker 1: keep that confidential, right, But like the oil company itself
Speaker 1: can trade commodities, And if you like, read that through
Speaker 1: to election markets, which are not commodities, none of this
Speaker 1: makes any sense in election markets, but you know they
Speaker 1: are treated as commodities. If you read it through to
Speaker 1: election markets, then it's like, well, if Eric Adams is
Speaker 1: campaign manager place an insider bet, that would be bad
Speaker 1: to be misappropriation for sure, eric Adoms does it himself.
Speaker 1: Maybe it's fun. So I really don't know. I really
Speaker 1: don't know what the sort of like future rules around
Speaker 1: insider trading prediction markets will be, because like there are
Speaker 1: a lot of people, include like Calshi and the people
Speaker 1: who got Calshi to be a regulated US Torovators exchange,
Speaker 1: there are a lot of people who are like, that's
Speaker 1: icky and unfair, and we do not want to have
Speaker 1: the trouble that would come with allowing insider trading, right,
Speaker 1: but there are a lot of people who are, like,
Speaker 1: the whole point of prediction markets is insider trading. The
Speaker 1: whole point of prediction markets is to get accurate predictions
Speaker 1: by like incentivizing insiders to bet on stuff they know.
Speaker 1: Like that's like when economists set up prediction markets, right,
Speaker 1: that's the whole point. Yeah, And so Kelshi has spent
Speaker 1: years trying to become a regulated exchange, and like wanted
Speaker 1: to appeal to conservative regulators. We don't live at a
Speaker 1: time where people are that conservative insider trading anymore. So
Speaker 1: I think I don't really know what's gonna happen.
Speaker 2: You could build a case that Eric Adams did listen
Speaker 2: to Bill Ackman, which I find tickling about this story.
Speaker 1: He hasn't dropped out yet, right, he.
Speaker 3: Hasn't dropped out yet.
Speaker 2: But this is Thursday, und Yes, on September fifth, Eric
Speaker 2: Adams had a press conference I believe that was Friday.
Speaker 2: He said that he's staying in New York City's mayoral race.
Speaker 2: He also said that Andrew Cuomo is a snake and
Speaker 2: a liar. That's a direct quote. So on Friday of
Speaker 2: last week, he was very committed to staying In September
Speaker 2: six is when we got the Bill Lackman tweet, which
Speaker 2: was awesome. And then today, on Thursday, the eleventh of September,
Speaker 2: Bloomberg News reported that New York City Mayor Eric Adams
Speaker 2: did tell a group of civic and business leaders that
Speaker 2: he's conducting his own polling to decide the future of
Speaker 2: his re election campaign. This is according to people who
Speaker 2: attended the meeting. So he's at least thinking about it.
Speaker 1: He's still making money. Like that's like, I just love
Speaker 1: the tell the political matter. Billman would like him drop
Speaker 1: out the financial matter, believans like you can make a
Speaker 1: lot of money by dropping in. I don't think it's true,
Speaker 1: but it would be funny if it was true.
Speaker 3: Maybe he's thinking about it. Who knows, I'm not.
Speaker 1: You know you're buying enter Cromo contracts.
Speaker 3: I'm certainly not. I don't know if we can man
Speaker 3: step away from the mic first.
Speaker 1: No, as I said, I don't think there's a lot
Speaker 1: of money to be made at it, and there's a
Speaker 1: lot of unpleasantness, right, But maybe it's like the market
Speaker 1: is discounting this right, Like, yeah, the market is aware
Speaker 1: of Bill.
Speaker 3: Ackrans streets like that's true.
Speaker 1: Is like three percent?
Speaker 3: Right?
Speaker 1: I wonder if Coma's chances would go have that much
Speaker 1: if Adams chopped out, But I don't know.
Speaker 2: We'll say I was going to say, we've still got
Speaker 2: a long way to go, but there's not that much
Speaker 2: longer time marchers still on.
Speaker 3: All right, Well we've collectively sighed, So I think I
Speaker 3: think that's the end.
Speaker 1: That's the final side. Yeah, And that was the Money
Speaker 1: Stuff Podcast.
Speaker 3: I'm Matt Levine and I'm Katie Greifeld.
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