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 Levin and I are at the Money Stuff column
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.
Speaker 2: Katy, we traveled into the future. Yes, five minutes ago.
Speaker 2: We're recording a money Stuff episode for I'm going to
Speaker 2: say September.
Speaker 1: Thirteenth, possible Friday the thirteenth, the thirteenth.
Speaker 3: And now.
Speaker 2: Still before Friday the thirteenth, we're recording an episode for
Speaker 2: I'm going to guess Friday the twentieth.
Speaker 1: You're so right, Yeah, yeah, seven days to thirteen, you
Speaker 1: get twenty all.
Speaker 2: Right, So here we are.
Speaker 1: We asked for questions.
Speaker 2: From eight days ago.
Speaker 1: Yeah, we asked you for questions, and boy did you
Speaker 1: deliver our inbox flooded.
Speaker 2: We haven't delivered yet.
Speaker 1: Well, no, we haven't delivered.
Speaker 3: But you did.
Speaker 1: Singing mail Bag, mail Bag. It's our first real mail bag.
Speaker 2: Episode, first all mail bag episode.
Speaker 1: Yeah, so let's dive right in. A writer who asked
Speaker 1: to stay anonymous asks why are private markets the new
Speaker 1: public markets? And is it bad that private markets are
Speaker 1: the new public markets. It's a topic we explore frequently,
Speaker 1: and I guess we should talk about whether or not
Speaker 1: it's like a good development.
Speaker 2: I feel like my like Poddot answer on this is,
Speaker 2: like why are the new public markets? Because there's so
Speaker 2: much money in private markets to that, like, if you
Speaker 2: wanted to raise a lot of money, you went to
Speaker 2: the public markets because like the best way to reach
Speaker 2: people was to like advertise broadly. But now like there
Speaker 2: are a lot of rich people. Financial markets are very
Speaker 2: globalized so that you can call the rich people in
Speaker 2: Saudi Arabia instead of having to like get the rich
Speaker 2: people in America. And technology is such that it's like
Speaker 2: pretty easy to care emphasis all the people with a
Speaker 2: lot of money, and so it is much less necessary
Speaker 2: to go out to public markets to raise a lot
Speaker 2: of money because like it is relatively straightforward to access
Speaker 2: giant pools of money in the private markets. And other
Speaker 2: than the money, like private markets are a lot easier, Right,
Speaker 2: It's like you don't have the same disclosure rules, you
Speaker 2: don't have the same like governance rules, you don't have
Speaker 2: the same getting sued by shareholders. It's a lot easier
Speaker 2: to stay private in many ways. And if you can
Speaker 2: access as much money as like you know, open Ai
Speaker 2: or SpaceX can access in the private markets, then they
Speaker 2: sort of become the default place. And then our questioner
Speaker 2: also asks, is it bad that private markets in the
Speaker 2: new public markets? I mean, the standard story is that
Speaker 2: the point of public markets is in part to like
Speaker 2: allocate capital of the best uses or whatever, but it's
Speaker 2: also in part, like, there are a lot of people
Speaker 2: who have like retirement savings, and you'd like them to
Speaker 2: have adequate retirement savings. True, and like you know, this
Speaker 2: block market is a way to invest in like the
Speaker 2: growth of the economy. Right, you can stakes in big companies,
Speaker 2: and as the economy grows, the value of your stakes
Speaker 2: grows and you end up more than keeping pace with
Speaker 2: inflation and have a lot of money to retire on.
Speaker 2: And if all of the cool, fast growing, innovative small
Speaker 2: companies that will become large are in the private markets
Speaker 2: and the public markets are just for kind of older,
Speaker 2: more stable companies that are no longer growing dynamically, then
Speaker 2: that's worse for retirements for ordinary people, because only essentially
Speaker 2: rich people and like institutions can access the fast growing companies,
Speaker 2: and people say this, you know, Jake Clayton, when you
Speaker 2: around the SEC was fun of saying things like this.
Speaker 2: People sometimes then make the further leap of like, therefore
Speaker 2: we should let retail investors have more access to private investments.
Speaker 1: But like, perhaps they're an ETF from Apollo.
Speaker 2: Sure a nice callback to eight days.
Speaker 1: Ago too, roughly minutes.
Speaker 2: Ago time as a flat circle.
Speaker 1: It's a concept, the concept, but.
Speaker 2: The problem is that like if you give retail investors
Speaker 2: access to private like there's no such thing as private
Speaker 2: markets or like a public market. It's like you can
Speaker 2: buy all the stocks on the public market because they
Speaker 2: just trade publicly. The private market there's no market, right,
Speaker 2: It's just like you can invest in SpaceX if Elon
Speaker 2: Musk likes you, you can invest in open Ai if
Speaker 2: open Ai calls you. If they don't call you, you
Speaker 2: can invest in a different private company. But like if
Speaker 2: you're just like a random person, the private company opportunities
Speaker 2: that you get are not as good as the ones
Speaker 2: that you know, Warren Buffet gets or whatever. And so
Speaker 2: the problem of like ordinary retail investors not having access
Speaker 2: to like the best private market investments is not sold
Speaker 2: by giving them access to the worst private market investments.
Speaker 1: Right, it's made worse. Well, the follow up question that
Speaker 1: someone DM me about is can companies just stay private forever?
Speaker 1: I mean the answer in a lot of cases is yes.
Speaker 1: But I mean do you think about open ai, what
Speaker 1: it has? One hundred and fifty billion dollar valuations? Spacexi,
Speaker 1: forget what they're at. But if you're in that position,
Speaker 1: is there any pressure to go public?
Speaker 2: I mean, companies stay private forever? Right? I mean, yeah,
Speaker 2: Coke Industries has been private for decades or whatever. Everyone
Speaker 2: in this room is gesturing at the room or to
Speaker 2: suggest another private company that exists. Yeah, you know, like
Speaker 2: the big names are like open Ai, SpaceX, and Stripe. Yeah,
Speaker 2: like these big, like Silicon Valley venture funded tech companies.
Speaker 2: There is an expectation among your venture capital investors and
Speaker 2: among your employees that they'll be able to cash out
Speaker 2: their stock, right, Like they bought stock or they got
Speaker 2: paid in stock, and they want to cash out. And
Speaker 2: the ordinary way to cash out is you do an
Speaker 2: IPO and then they can sell their stock. Those companies
Speaker 2: have found a way to avoid that, which is they
Speaker 2: do tender offers. They raise money from new investors and
Speaker 2: they use it to buy back the old investors. It's
Speaker 2: not as good, it's not as nice for the investors.
Speaker 2: It's more complicated. It's more work and like more managerial
Speaker 2: attention possibly than just letting stock trade on the open market,
Speaker 2: but you avoid magorial attention to other things like disclosure.
Speaker 2: I don't know. I mean, my vet is like these
Speaker 2: companies probably could they have it forever. I think they
Speaker 2: have some pressure to make it easier to sell. But
Speaker 2: you know, like if you're an open AI employee and
Speaker 2: you want to sell your ten million dollars of stock
Speaker 2: and the company says, we're not going to go public,
Speaker 2: but we'll do a tender, and like it'll be a
Speaker 2: little bit of administratively annoying, but you'll probably get your
Speaker 2: ten million dollars. That's fine because you like you you
Speaker 2: got so much money from like working at this hot startup.
Speaker 2: Right if in ten years they're not growing fast, you know,
Speaker 2: it's like more administratively annoying to not go public. But yeah,
Speaker 2: you get a lot of runway if you are a
Speaker 2: hot startup and there's so much money in the private
Speaker 2: markets to let you cash out early. Investors.
Speaker 1: Well, we've gotten through one question. Great, so let's move
Speaker 1: swiftly along here. Jeff writes, howdy, you've spent a lot
Speaker 1: of time talking about regulatory finds. For example, the SEC
Speaker 1: collected almost four hundred million dollars in twenty twenty three
Speaker 1: as a result of off channel business communications. My question
Speaker 1: is where does that money go. The off channel communications
Speaker 1: example isn't necessarily harming anyone in particular, so I don't
Speaker 1: imagine it gets paid out as restitution to victims.
Speaker 2: Right off channel communication that means like people texting about
Speaker 2: work on their cell phones, which as SCC's big inforce
Speaker 2: and parity. I write a lot about the SEC being
Speaker 2: like a machine for generating fines, right and like the
Speaker 2: cell phone stuff is such a good way to generate
Speaker 2: fines because every single bank has employees who have texted
Speaker 2: about work, and so you can find all of the
Speaker 2: bank's you know, nine figure sums the answer to the question.
Speaker 2: So the SEC is funded by fees that it charges
Speaker 2: for registration of securities. The SEC has a budget, then
Speaker 2: goes to Congress for its budget, but then the government
Speaker 2: doesn't pay for it like the securities industry pays for it,
Speaker 2: like companies registering securities pay for it, so the sec
Speaker 2: is like free to the government sort of. And it
Speaker 2: last year had like a budget of like two billion
Speaker 2: dollars like employees and stuff, and it collected about five
Speaker 2: billion dollars in fines. She's like pretty good return on capital.
Speaker 2: Most of that I think is like what is referred
Speaker 2: to as discorg min which means like you made money
Speaker 2: illicitly and you have to give it back. Some of
Speaker 2: that is going to be discord to victims, right, Like
Speaker 2: a lot of that is like you stole money and
Speaker 2: you have to give the money back that you stole.
Speaker 2: But there is like a lot of money left over
Speaker 2: for the sec A lot of that goes I think
Speaker 2: they paid out like nine hundred million dollars through victims,
Speaker 2: and they paid at six hundred million dollars the whistleblowers. Nice,
Speaker 2: they pay a commission.
Speaker 1: Not a bad business all these.
Speaker 2: Fines, right, Like you know, six hundred million divided by
Speaker 2: five billion is like you know, they pay like like
Speaker 2: twelve percent fees to the whistleblowers who bring them the fines,
Speaker 2: and then the rest just goes to the treasury, just
Speaker 2: goes back to the U. S. Government. It's a revenue
Speaker 2: source for the US government. I don't know that the
Speaker 2: SEC thinks of itself that way. I think they must
Speaker 2: think of themselves you have a higher yeah, protecting investors
Speaker 2: and like upholding the rule of law, whatever. But I
Speaker 2: like to think of them as doing a certain amount
Speaker 2: of like you know, revenue maximization, and they're good of it.
Speaker 3: Good for them.
Speaker 1: We have a question for me, so I'm.
Speaker 2: Going to read this question, okay. Paul asks Katie what
Speaker 2: is the value of writing a big story as Katy
Speaker 2: did last week?
Speaker 1: Last week, which is actually weeks ago.
Speaker 2: Katie wrote a big story about single stock single stock
Speaker 2: she got so many questions about, and a big story
Speaker 2: at least one that is widely circulated and cited in
Speaker 2: financial media. It was cited by such luminaries as the
Speaker 2: Money Stuff Newsletter, True and.
Speaker 1: Cliffs really just the two institutions care about the most.
Speaker 2: Anyway, what was the How did you feel about that? Well?
Speaker 1: First off, I am glad that we got so many
Speaker 1: questions about average details. Yes, because we end up talking
Speaker 1: about ETFs A loted on this podcast, and I feel
Speaker 1: like that is a lot of my influence. So I'm
Speaker 1: glad that people are somewhat interested, right, It.
Speaker 2: Would be a shame if everyone's like, like one note
Speaker 2: is less ets.
Speaker 1: Yes, please stop talking. I think it's pretty human. It's
Speaker 1: fun to see the hit count on an article that
Speaker 1: is widely circulated. It's also nice when people talk about
Speaker 1: the thing that you wrote about, because usually when I
Speaker 1: pitch an article on a topic that I find cool
Speaker 1: and then people read it a lot and talk about
Speaker 1: it a lot and tweet about it and also think
Speaker 1: it's cool, that is gratifying. And also just when you
Speaker 1: write an article that has an impact, it tends to
Speaker 1: open up communication to people that you would like to
Speaker 1: talk about, who you would think are interesting, so you
Speaker 1: get more inbound from interesting people.
Speaker 2: So I always find it like super gratifying when I
Speaker 2: am right about a thing where I'm like, this is
Speaker 2: ridiculous in our care and of interest only to me,
Speaker 2: and then like that gets me the best feedback and
Speaker 2: be like, oh I love this. Right, it's really satisfying
Speaker 2: that I got like there are people like me out there,
Speaker 2: you know, Yeah, it.
Speaker 1: Is really nice. And also I mean I can see
Speaker 1: my hits, so like it's instant gratification for something that
Speaker 1: you know if you write that story. I mean, it
Speaker 1: didn't take me too long, but I probably worked on
Speaker 1: it for like a week and a half and then
Speaker 1: just got the instant gratification always feels good. Yeah, yeah,
Speaker 1: you don't mean you read spikes on the terminal every
Speaker 1: single day that you publish. I read spiking is when
Speaker 1: you get a certain amount of spikes and a certain
Speaker 1: amount of time. And Matt always reads spikes, so we
Speaker 1: have a rea. I have read spike alerts, So, Justin writes,
Speaker 1: both Icon and Acman have been living rent free in
Speaker 1: my mind lately thanks to Matt's columns, And it made
Speaker 1: me think about how it would be funny if Acman
Speaker 1: took an activist position on i EP. Given the history
Speaker 1: of public feuds between the two and the recent precipitous
Speaker 1: fall of that stocks price, could this actually play out?
Speaker 1: That would be amazing. I go back and I watched
Speaker 1: that CNBC cliff.
Speaker 2: It's like the most famous piece of financial television ever.
Speaker 1: Probably watch it once a month. It's just so good
Speaker 1: just to remind myself, like, what who is on?
Speaker 2: Is it? Akman was on and I kind of called the.
Speaker 1: Inner Vice versas I think Akman was on an Icon
Speaker 1: called it and they just let it run.
Speaker 2: I definitely said that I want to be friends with
Speaker 2: with you, Bill, I wouldn't And I wait, you say
Speaker 2: you'd like to be friends so that we could invest together,
Speaker 2: cal I have no interest.
Speaker 3: Do you think I want to invest with you?
Speaker 2: Okay, let's fees. Would you let me move on?
Speaker 3: Earth, Let's move on.
Speaker 2: This is like ten years This is like more than
Speaker 2: ten years ago.
Speaker 1: I know, but I watched it to remind myself. What
Speaker 1: like peak financial television looks like.
Speaker 2: The greatest fight financial television ever. It's so good. I
Speaker 2: don't think they've like.
Speaker 1: Any they have like, yeah, they've appeared on stage together.
Speaker 2: They're friends, but let's for the purposes podcast together would
Speaker 2: not be so good. Can we just give up our seats.
Speaker 1: To be icon show? Yeah, we'll just leave them alone
Speaker 1: in this box of a room.
Speaker 2: That would be so good.
Speaker 3: Yeah.
Speaker 2: But failing that, iep is I kind of Enterprises, which
Speaker 2: is Carla CON's probably traded company, which has had a
Speaker 2: precipitous fall because a short cellar accused it of being
Speaker 2: a Ponzi's game, and it like lost a lot of
Speaker 2: its bibe. The answer is no, Acman can't really do
Speaker 2: much activism in IEP just because Carla Kon owns eighty
Speaker 2: five percent of it, and so that's not much activism do.
Speaker 2: Now he had margined a lot of that stock and
Speaker 2: had his bank seased and sold his stock, then there
Speaker 2: might be something there, but that would be a bigger
Speaker 2: problem for him than that just Bill Ackman being in
Speaker 2: the stock. But the real answer is question is no,
Speaker 2: Acman can't do that, but the reverse is possible. True,
Speaker 2: And in fact, Elliott built an activist steak in Bill
Speaker 2: Ackman's European public vehicle in like twenty seventeen, which like
Speaker 2: he has talked about, Like I think.
Speaker 1: He revealed it on a podcast this podcast with Carl
Speaker 1: not this podcast. I think it was Lux Friedman.
Speaker 2: Yeah, And so like it's a little unclear exactly what
Speaker 2: happened because it's just like his version of the story
Speaker 2: and like they didn't actually do any activism because I
Speaker 2: think basically they were building a stake and like, yeah,
Speaker 2: Akan was able to head them off, but I don't know.
Speaker 2: I was looking idly through the filing for Pershing Square USA,
Speaker 2: and it sort of looked like there were in that
Speaker 2: many anti activist protections. So if he does end up
Speaker 2: taking that thing public. God Will wants the bar against
Speaker 2: his iep' stot to try something. It'd be fun.
Speaker 1: I mean, my fantasy lineup is psh IPOs trades it
Speaker 1: a discount. Boas Wysteine does activism.
Speaker 2: Right, But I think and Black are they're friends their friends.
Speaker 1: I know, Well that's the thing, like, is Boas morally obligated.
Speaker 2: To do close unfund activism wherever the opportunity for Maybe
Speaker 2: maybe he is.
Speaker 1: That's what I'm saying.
Speaker 2: I have a podcast with them.
Speaker 1: Yes, yes, Jeff. I wonder if he said the same, Jeff.
Speaker 1: Jeff asks, So, whether I'm in the long or short
Speaker 1: micro strategy leverage gtfs, I'm guaranteed to lose money over
Speaker 1: the long term. Is it possible to borrow these shares
Speaker 1: to short them? And isn't this a guaranteed money maker?
Speaker 2: No, you're not guaranteed to lose money.
Speaker 1: You tell him, Jeff, what do you It happens.
Speaker 2: To be the case that this micro strategy ETF that
Speaker 2: Katie wrote about low of these two weeks ago, it's
Speaker 2: like a triple levered ETF. That micro strategy was up
Speaker 2: a lot over the year, and the ETF was down
Speaker 2: a lot. Because the way the math works is that
Speaker 2: if you leverage a vital stock enough, then even though
Speaker 2: the stock goes up, your triple levered stock can go down.
Speaker 2: But that just you know, was kind of bad luck.
Speaker 2: And in fact, lots of other triple leverty ETFs, including
Speaker 2: the in video one, like go up when the stock
Speaker 2: goes up, like normally goes up, and the stock goes up,
Speaker 2: and it has to be things have to go pretty
Speaker 2: wrong for it to go down when the stock goes up.
Speaker 2: But then we also got a question from then, if
Speaker 2: a leverage single stock fund produces worse long term returns
Speaker 2: than the volatile underlying stock, then would you get better
Speaker 2: returns than the underlying stock if the fund gave you
Speaker 2: less than one hundred percent of the stock's daily returns
Speaker 2: e g. A fund that gives you fifty percent of
Speaker 2: the daily return of micro Strategy. I think the answer
Speaker 2: is yes.
Speaker 1: That's really interesting.
Speaker 2: I think if you you can create that yourself, right,
Speaker 2: you create that by like taking one hundred dollars and
Speaker 2: putting fifty dollars of it into micro Strategy stock and
Speaker 2: just keeping the other fifty dollars in cash, and then
Speaker 2: you have half as much volatile as micro strategy, and
Speaker 2: then the key is you keep it fifty to fifty.
Speaker 2: You rebalance each day. So if micro strategy goes down,
Speaker 2: so you have like forty five dollars of micro strategy,
Speaker 2: then you rebalance. You put two to fifty into micro strategy,
Speaker 2: so now you have forty seven to fifty of cash
Speaker 2: forty seven to fifty of micro strategy. Micro strategy goes up,
Speaker 2: on the other end, you sell micro strategy and keep
Speaker 2: some cash. So each day you always start fifty to fifty.
Speaker 2: And what that strategy is is just buying low and
Speaker 2: selling high. Right, It's you're sort of assuming that micro
Speaker 2: strategy will be like more volatile than directional, like it'll
Speaker 2: bounce around a lot without going anywhere. And if that's true,
Speaker 2: then each time it goes down, you'll buy. Each time
Speaker 2: it goes up, you'll sell, and you'll make money over
Speaker 2: the long term. That happens to work sometimes, but it's
Speaker 2: just a guess on what the stock will look like.
Speaker 2: If the stock is very volatile that doesn't go anywhere,
Speaker 2: that'll make money. But if the stock goes up a lot,
Speaker 2: you'll be sad that you did that instead of.
Speaker 1: Just buying the stock, Well, might as well launch it.
Speaker 2: You don't even need to have you just need to
Speaker 2: I mean fine.
Speaker 1: This week, you mean this week last week? What are
Speaker 1: your favorite types of stock malfeasance? Is that how I
Speaker 1: see malfeasance? To cover? Short cellar witch hunts, no shorts.
Speaker 1: That was one sentence, short cellar witch hunts, gnarly bankruptcies,
Speaker 1: insurance fraud, question mark which one?
Speaker 2: Well, I always love clever ones, right, I love the
Speaker 2: Spotify or you're talking.
Speaker 1: Nah, that's about you mean the one that we covered
Speaker 1: last week last week?
Speaker 2: Yeah, the Spotify one from last week last I love
Speaker 2: clever ones. I love things that like use leverage. So like,
Speaker 2: there's some really good insurance frauds where like the thing
Speaker 2: to notice about insurance is like, this is true of
Speaker 2: a bank too, and it's maybe more intuitive with the bank.
Speaker 2: A bank is like a pot of a billion dollars
Speaker 2: with like one hundred million dollars of equity, right, like
Speaker 2: a bank. You can buy control of a bank by
Speaker 2: buying its stock, and the stock is just a tiny
Speaker 2: fraction of the value of money in the bank. Right.
Speaker 2: The bank is mostly leverage, and so if you buy
Speaker 2: a bank stock, you control all that money in the
Speaker 2: bank and then you can give it to yourself. And
Speaker 2: of course, of course, of course banking and regulation, I
Speaker 2: mean banking and insurance, there's regulation to stop you from
Speaker 2: doing that extremely obvious straight but people find ways, mostly
Speaker 2: an insurance sometimes in banking too, but like insurance, you
Speaker 2: buy this little insurance company. It has this big pot
Speaker 2: of premiums that it's written and like money that it controls,
Speaker 2: and then you give that money to yourself. Yeah, and
Speaker 2: it's great, It's very clever. The other thing I really
Speaker 2: like to write about is Evan writing about it a
Speaker 2: lot recently. It is fake takeover offers, because you think
Speaker 2: it's like the stereotype of fake takeover offers, which is
Speaker 2: that it's like you buy a stock, you put out
Speaker 2: a fake press relief saying that you're buying the company,
Speaker 2: the stock goes up, you sell the stock, you make money.
Speaker 2: And in fact, there are a lot of cases like that.
Speaker 2: In almost every case they don't make money because they
Speaker 2: are bad at it, and they like don't sell in time,
Speaker 2: and so they lose money. It doesn't matter. That's like
Speaker 2: regular front But there are a lot of cases of
Speaker 2: like fake or quasi fake takeovers where they're not trying
Speaker 2: to do that where they just want to go on television. Yeah,
Speaker 2: just want to be a big shot, you know, they
Speaker 2: want to like have a little merger negotiation.
Speaker 1: So which I say, just start an AI company, you'll
Speaker 1: get on TV.
Speaker 2: I know. But I'm so sympathetic to as like an
Speaker 2: m and a guy. Like it's like, I understand it's
Speaker 2: fun to negotiate a merger and like, if you don't
Speaker 2: have the money to buy a big company, just pretend
Speaker 2: you have the money to buy the company.
Speaker 1: Who are we talking about?
Speaker 2: Lots?
Speaker 1: I know, but recently in the past three months, who
Speaker 1: did that.
Speaker 2: Here's the guy who tried to buy a Virgin Orbit. Yeah,
Speaker 2: and he went on television a lot.
Speaker 1: Yeah, and he was bad on TV.
Speaker 2: Many of them are it was stressful.
Speaker 1: Well, they don't have media training because they're not legit.
Speaker 1: They don't anyway, they're so excited to be there. Yeah,
Speaker 1: I get it, I got it. It is amazing before
Speaker 1: you know, closely paying attention to money stuff. I wouldn't
Speaker 1: have thought that there would be plural that many plural.
Speaker 2: I have to say. It's the thing I noticed more recently.
Speaker 2: The other thing about it is like it's a continuum
Speaker 2: with real takeover offers, because very few people offered to
Speaker 2: buy a company saying I've got a pot of cash
Speaker 2: right here sufficient to buy the company. They're like, if
Speaker 2: you engage with me and we negotiate a deal, I
Speaker 2: will get financing, Like someone will lend me the money
Speaker 2: about the company, or I'll be able to sell them.
Speaker 2: I'll be able to raise this money. But like I
Speaker 2: don't have it now. I have to talk to you
Speaker 2: about the merger first. Yeah, and like that can be
Speaker 2: very legitimate, and like that's how Elon must bought Twitter, right,
Speaker 2: I mean, it's like a real thing. It's how most
Speaker 2: big dollar em and a gets done. It's like you
Speaker 2: started without having all the money lined up, but like
Speaker 2: there's a continuum down to the guy with like literally
Speaker 2: one dollar in his bank account calling up Version Orbit
Speaker 2: and I could probably get the money he couldn't write.
Speaker 2: But it's like it's all on to continue.
Speaker 1: God bless.
Speaker 2: All Right, what's up now?
Speaker 1: It's a question for me. Okay, your questions are very intense.
Speaker 1: This is a good question for me, though I have
Speaker 1: a real answer.
Speaker 2: Thomas also asks Katie, what's your pitch for the next
Speaker 2: great cat based business financial fundamentals need not apply.
Speaker 1: So I have a real answer for this, and I'm
Speaker 1: going to steal it from my husband. But we've been
Speaker 1: talking about this for a while.
Speaker 2: And discusses.
Speaker 1: Yes, let me tell you. So you know cat trees, Matt, Yeah,
Speaker 1: I know cates. Have you ever had a cat? No?
Speaker 3: Oh?
Speaker 1: Well, okay, so I've.
Speaker 2: Had a dog who was really interested in cats.
Speaker 1: Okay, so that doesn't count. But cat trees, if you
Speaker 1: have a cat, you have to get a cat trick.
Speaker 2: You know.
Speaker 1: They're usually beige. They usually have some scratchy posts and
Speaker 1: little platforms that the cat can hop up on because
Speaker 1: cats like to go hi. We end up buying a
Speaker 1: cat tree every couple of years because they get gnarly
Speaker 1: or just like your cat is bored of them.
Speaker 2: Okay when I say that, I know about cat tries.
Speaker 2: When I lived in Brooklyn, yeah, every so often a
Speaker 2: cat owner would buy a new cat tree, and yes,
Speaker 2: throughout the old cat tree on the street, and my
Speaker 2: obsessed dog it would sniff it and sit by it
Speaker 2: and lurk hoping there is a cat inside.
Speaker 1: Yeah, I get that.
Speaker 2: I'm aware of the discarding.
Speaker 1: They're probably really stinky of cats. Yes, yeah, because the
Speaker 1: cat spent so much on their cattery, but you have
Speaker 1: to switch them out every few years because they get
Speaker 1: grody and your cat gets bored. Modular cat trees okay,
Speaker 1: so that you can mix and match, and it's also good.
Speaker 1: I saw a TikTok recently. I should stop revealing how
Speaker 1: much time it's been on TikTok, but I get a
Speaker 1: lot of like cat behavioral videos, like a lot of
Speaker 1: Jackson Galaxy.
Speaker 2: I'm nodding, not knowledgeably.
Speaker 1: A lot of Jackson Galaxy and stuff. And someone made
Speaker 1: the point that you should make every day a little
Speaker 1: bit different for your cat, because your cat stays in
Speaker 1: your apartment and you want them to be fun and stimulated.
Speaker 1: And I think it would be nice if you had
Speaker 1: modular cat trees that you could switch up easily so
Speaker 1: that your cat encounters something new more often than every
Speaker 1: couple of years.
Speaker 3: Thank you.
Speaker 1: We have so many great ideas that we just never
Speaker 1: execute a lot of great ideas.
Speaker 2: I was a little worried that you've disclosed it on
Speaker 2: them now. Fortunately this podcast will air eight days after,
Speaker 2: so you have eight days to really act.
Speaker 1: Yeah, okay, to work l w ass. How can you
Speaker 1: both be a broker and a dealer, as in SEC
Speaker 1: registered broker slash dealers. Isn't being both at the same
Speaker 1: time a problem? A straightforward conflict. I e. Some trades
Speaker 1: you broker and some trades you take a principal position.
Speaker 2: This question, it's so on my wavelimp, How can you
Speaker 2: be both a broker and dealer?
Speaker 1: Are you l W did you write in No?
Speaker 2: I just like it's just a good you know, like
Speaker 2: it's a it's a good phrase, like an SEC broker dealer.
Speaker 2: Everyone's a broker dealer, but like right, those are differently something.
Speaker 2: A broker is someone who like matches up a transaction,
Speaker 2: so like you want to buy someone else wants to sell.
Speaker 2: I sit in the middle. I take a commission. I
Speaker 2: sell from them to you.
Speaker 1: Right.
Speaker 2: A dealer is someone who like trades directly with the customer.
Speaker 2: So you want to buy, I'm like, I'll sell it
Speaker 2: to you, right. And many businesses in the world are
Speaker 2: dealer business right. Like if you want to buy a car,
Speaker 2: you go to a car dealer and they'll sell you
Speaker 2: a car that they own. And many businesses are broker businesses.
Speaker 3: Right.
Speaker 2: They want to buy a house, you go to a
Speaker 2: real estate agent, and they find you a house and
Speaker 2: take a commission, but they don't own the house. You know,
Speaker 2: in a lot of financial markets, there is a broker
Speaker 2: dealer model where like you want to buy a security
Speaker 2: and you go to your bank, it's the generic term,
Speaker 2: and they will either be your broker or they'll be
Speaker 2: your dealer. They'll either like find it for you or
Speaker 2: they'll deal directly off their balance sit with you. And
Speaker 2: is that a conflict? I mean, like, yeah, of course
Speaker 2: it's a conflict, but it's also it's like it's just
Speaker 2: good service, right, Like it's like the reason that exists
Speaker 2: is because there is someone you can call and you say,
Speaker 2: I want to buy this bond, and if they have
Speaker 2: the bomb, they'll sell it to you. And if they
Speaker 2: don't have the bomb, they'll find it for you, right,
Speaker 2: And they have some amount of you know, regulatory and
Speaker 2: also just like sort of custom expectation that they will
Speaker 2: do the best thing they can for you. You see
Speaker 2: this in like retail stock trading, where like your retail
Speaker 2: broker who is only a broker, and we'll just route
Speaker 2: it to like a big market maker. Your retail broker
Speaker 2: will write your order to a big market maker and
Speaker 2: the big market maker will either fill it out of
Speaker 2: inventory at a better price than you could get on
Speaker 2: the stock exchange, or they will send it to the
Speaker 2: stock exchange and they'll do whatever they think is best,
Speaker 2: and they have like an obligation the best execution, and
Speaker 2: I you know, they're getting measured by their broker to
Speaker 2: like make sure they're giving you the best price. So
Speaker 2: you know, in general, it's a good service, right, And
Speaker 2: I often think of like, like I've written a lot
Speaker 2: about private credit, and like one thing in private credit
Speaker 2: is like if you're a company looking for financing or
Speaker 2: like a private equity sponsor looking to do an LBA,
Speaker 2: and you go to a bank and you say, I
Speaker 2: want to borrow money for this LBO, Like the bank
Speaker 2: will be like, okay, we can probably find you that money.
Speaker 2: We got to go find investors and get you that money.
Speaker 2: If you go to a private credit fund, I'll just
Speaker 2: be like, yeah, we have money, Like you take the money, right,
Speaker 2: And that's in some ways a better service. And I've
Speaker 2: written about how like banks, because they're getting into private credit,
Speaker 2: because they can like broker private credit treds banks, they
Speaker 2: should be able to offer you either we'll give you
Speaker 2: the fundinancing, or we'll send to get to the financing, right.
Speaker 2: And I think there's like some of that in real banking,
Speaker 2: And like that's a broken deal a model, right, that's
Speaker 2: like for some price, we can just give you the money,
Speaker 2: we can just face you on the trade, and for
Speaker 2: some other price, we can find someone else to face
Speaker 2: you on the trade, and we'll do both because we're
Speaker 2: like working for you however we can. It obviously raises
Speaker 2: the possibility of conflicts, because like what you could do
Speaker 2: is the opposite, right, what you could do is if
Speaker 2: it's the best deal for you, you take it, and
Speaker 2: if it's not the best deal for you, you send
Speaker 2: it to someone else. But you know, that's why it's
Speaker 2: a regulated business.
Speaker 1: It's a good thing you wrote yourself that question, because
Speaker 1: that was an interesting answer there.
Speaker 3: This is a long one.
Speaker 1: Anonymous asks why does there need to be an actual
Speaker 1: stock to borrow when shorting seems like there would have
Speaker 1: been a more direct derivative contract that mimics the risk
Speaker 1: slash rewards slash cash flow structure of a short but
Speaker 1: without having to worry about the actual shares of stock
Speaker 1: floating around to various parties. Is that the key that
Speaker 1: three slash four parties each brings something unique to the
Speaker 1: deal in releaship into the short cellar and derivatives contracts
Speaker 1: aren't typically coordinated between multiple parties. If this does in
Speaker 1: fact exist, please don't make me look stupid on air.
Speaker 2: Okay, Okay, So there's two points here. Yeah, one is
Speaker 2: like what is a derivative? So, like, are there derivative
Speaker 2: contracts to short stocks? Yeah, Like there's puts and there's
Speaker 2: totally turn swaps, like you can if you're a big
Speaker 2: hedge on you want to short of stock, you can
Speaker 2: easily go to a bank and say I want to
Speaker 2: get short the stock on swap. So the derivative absolutely exists.
Speaker 2: But that doesn't matter because like a derivative is like
Speaker 2: you go to a bank to say I want to
Speaker 2: get short the stock on swap. The bank says, fine,
Speaker 2: we'll charge you for it, and we will go hedge
Speaker 2: that derivative by shortening the stock ourselves. So you still
Speaker 2: need the shares of stock to borrow because you can't
Speaker 2: like manufacture the short out of nothing. The bank is
Speaker 2: not going to just make that bet against you, like
Speaker 2: on its own account. It's going to hedge that bet
Speaker 2: and the way it hedges it by shorting. Now it
Speaker 2: doesn't have to hedge by shorting. It can hedge by
Speaker 2: finding someone on the long side of the swap. Right, So, like,
Speaker 2: if you want to get short on swap, the bank
Speaker 2: can find someone wants to get long on swap and
Speaker 2: they can match you up and then no stock needs
Speaker 2: to be borrowed. But why would someone want to get
Speaker 2: long on swap rather than by buying the stock themselves.
Speaker 2: The answer is, I mean they wouldn't, right, because like
Speaker 2: then they're taking credit risk and it's like weird, and
Speaker 2: it's like harder to get out of. It's just more inconvenient.
Speaker 2: The reason they do it is like if they get
Speaker 2: long on swap, they could get paid more than by
Speaker 2: owning the stock themselves. But that ultimately sort of leads
Speaker 2: you back to the stock borrowing market. Right, If like
Speaker 2: a stock is difficult to borrow, then it's going to
Speaker 2: be just as pricey and difficult to get short on swap.
Speaker 2: So you get short via derivative as it would be
Speaker 2: to get short in the cash market, because like everyone
Speaker 2: involved knows that, And like if you get short on
Speaker 2: swap with the bank, either the bank has to short
Speaker 2: the stock, which is expensive for the bank, so I
Speaker 2: won't do it, or the bank has to find someone
Speaker 2: to get long on swap, and the person getting long
Speaker 2: on swap knows that the stock is expensive to borrow
Speaker 2: and they could make a lot of money by owning
Speaker 2: it in cash and lending it out in the stock
Speaker 2: borrow market. So it doesn't work. The derivative contract doesn't work.
Speaker 2: They kind of were expected, like doesn't solve the problem.
Speaker 2: Which the problem is there are some stocks that are
Speaker 2: hard to borrow, and therefore you can't short them. You
Speaker 2: can't for the most part, practically get around that by
Speaker 2: using derivatives. You know, you can do options, you can
Speaker 2: like sell put options on the stock, or byput options
Speaker 2: on the stock, but again the pricing is going to
Speaker 2: be affected by the borrow market. The second part of
Speaker 2: the question is like why do we have that as
Speaker 2: a rule, and why not just allowed naked short selling?
Speaker 3: Yeah? Why not?
Speaker 2: And like, yeah, I've kind of written that, like tentatively,
Speaker 2: people get really mad, get really mad. People really don't
Speaker 2: like naked short selling. They think it's like a way
Speaker 2: to manipulate stocks. There's probably some limit where it could
Speaker 2: be a way to manipulate stocks, right, where like if
Speaker 2: you could just manufacture an infinite amount of stock and
Speaker 2: sell it, you could probably drive the price of the
Speaker 2: stock down and like maybe do some damage. I don't
Speaker 2: think that's as big a concern as people who get
Speaker 2: mad about naked short selling think it is, but it's
Speaker 2: like a real concern. It's like funny, I probably can't
Speaker 2: have like unlimited naked short selling. You also have like
Speaker 2: weird voting effects with naked short selling, yeah, because like
Speaker 2: you manufacture an unlimited number of shares and the people
Speaker 2: who buy the shares don't know if they own actual
Speaker 2: shares and they can vote, or if they own fake
Speaker 2: shares and they can't vote. So it's a little weird.
Speaker 2: But I don't know. I've always been sort of fond
Speaker 2: of the idea that there has to be some way
Speaker 2: to allow naked short selling to because it would make
Speaker 2: markets more efficient. It would just like allow you to
Speaker 2: bet against over priced stocks. And you see that there
Speaker 2: are certain stocks where they're hard to borrow, and I
Speaker 2: won't name any names, there's stocks that are hard to
Speaker 2: borrow and that trade at very very inflated prices where
Speaker 2: people would probably like to bet against them and be correct,
Speaker 2: but they can't do it because it's so expensive to
Speaker 2: borrow them, and if you use short stock without borrowing it,
Speaker 2: those prices would be more efficient. And I mean mostly
Speaker 2: Trump media, but also also there's a few others.
Speaker 1: Sent Hill from Chicago. He writes, since you both acknowledge
Speaker 1: being needy, no shame in that, and wanted more questions
Speaker 1: about yourselves. How do you talk to your children and
Speaker 1: or nibblings at all about money stuff?
Speaker 2: How do you I don't talk to my children a
Speaker 2: ton about money stuff. Now they have listened to the
Speaker 2: podcast in the car and I found it very amusing. Yeah,
Speaker 2: my sons are like, listen to I heard you talk
Speaker 2: to me and said, why'd she call you Matt Because
Speaker 2: to them, I'm not mad.
Speaker 1: I guess you're either dad or mister Levine.
Speaker 2: Yes, I'm my children. Yeah, but like it is just
Speaker 2: a kick for them to just hear my voice in
Speaker 2: a format that normally plays. You know, Olivia Rodrigo. I
Speaker 2: don't talk about the newsletter that much, but I do
Speaker 2: remember that I was once with my daughter and we
Speaker 2: met like another dad who is like a money stuff
Speaker 2: reader and was like I found on the newsletter and
Speaker 2: my daughter didn't like fully understand the economic model. After
Speaker 2: he left, she was like, does he give you money
Speaker 2: for writing such a good newsletter?
Speaker 1: And I was like, ah, that sense indirectly he does, sweetie,
Speaker 1: that's really cute.
Speaker 2: Every so often I will try to like explain a
Speaker 2: financial news her mouth. He's in story at the dinner table,
Speaker 2: but like they're a little young for that. Yeah, yeah,
Speaker 2: you talk to your siblings.
Speaker 1: So my family are money stuff fans. They've been Matt
Speaker 1: Levine fans.
Speaker 2: How do you talk to your parents.
Speaker 1: More directly? How do you talk to your dad? No,
Speaker 1: but my brothers are as well. My mom likes you,
Speaker 1: but she she isn't particularly interested in the newsletter. But
Speaker 1: my parents do listen to the podcast quite a bit.
Speaker 1: I feel like my brothers listen on the side. But
Speaker 1: I said this in one of the trailers, like having
Speaker 1: this podcast is great proof that we actually are friends.
Speaker 1: Because before we launched it, and like you would come
Speaker 1: up in our conversations, like when we were gathered as
Speaker 1: a family, I'd be like, oh, yeah, like I know
Speaker 1: Matt Levien, like we're friends, and they'd be like, yeah, okay,
Speaker 1: I talk to your dad on your phone once I know,
Speaker 1: I know, but still I feel like my one brother
Speaker 1: in particular was skeptical. And then I actually I brought
Speaker 1: you to a Capital one cafe.
Speaker 2: And he was Capital Cafe in the Bloomberg Building.
Speaker 1: Yeah, and he was there, and I think he truly
Speaker 1: wash like super yeah. No, he thought it was like
Speaker 1: an elaborate long con that we were actually friends.
Speaker 2: So this podcast is a continuation of the long con.
Speaker 1: It is great, great proof to stick it to him
Speaker 1: that I have friends and some of them are Matt Levine.
Speaker 2: As many as one of them, yeah.
Speaker 1: As many as one. My parents do listen to Money
Speaker 1: stuffal and I do get comments, like on episodes that
Speaker 1: we recorded weeks ago, and then like my dad has
Speaker 1: like another point that he wants to tell me about
Speaker 1: and I'm like, I cannot remember. Oh my gosh, that
Speaker 1: would be great.
Speaker 2: All right. That was the Money Stuff mail Bag, mail Bag,
Speaker 2: thank you so much for these questions, which good. We
Speaker 2: appreciate from the bottom of our hearts. Sending us questions.
Speaker 1: It was hard to h whittle it down, so we
Speaker 1: didn't get to everyone, of course, but keep sending us
Speaker 1: question We'll do it again.
Speaker 3: This is great.
Speaker 2: Thank you. And that was the Money Stuff Podcast.
Speaker 1: I'm Matt Levian and I'm Katie Greifeld.
Speaker 2: You can find my work by subscribing to The money
Speaker 2: Stuff newsletter on Bloomberg.
Speaker 1: Dot com, and you can find me on Bloomberg TV
Speaker 1: every day on Open Interest between nine to eleven am Eastern.
Speaker 2: We'd love to hear from you. You can send an
Speaker 2: email to Moneypod at Bloomberg dot net, ask us a
Speaker 2: question and we might answer it on air.
Speaker 1: You can also subscribe to our show wherever you're listening
Speaker 1: right now and leave us a review. It helps more
Speaker 1: people find the show.
Speaker 2: The Money Stuff Podcast is produced by Anna Maserakus and
Speaker 2: Moses Onen.
Speaker 1: Our theme music was composed by Blake.
Speaker 2: Maples, Brandon, Francis Nuinimits our executive.
Speaker 1: Producer, and Stage Bauman is Bloomberg's head of Podcasts.
Speaker 2: Thanks for listening to The Money Stuff Podcast. We'll be
Speaker 2: back next week with more stuff