WEBVTT - Unbundled Advice: A Mailbag Episode 0:00:02.720 --> 0:00:10.640 Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to 0:00:10.640 --> 0:00:13.760 The Money Stuff Podcast. You're a weekly podcast. Are you 0:00:13.840 --> 0:00:17.959 talking about stuff related to money? I'm Matt Levine and 0:00:18.040 --> 0:00:21.200 I write The Money Stuff com Bloomberg Opinion, and. 0:00:21.160 --> 0:00:23.760 I'm Katie Greifeld, a reporter for Bloomberg News and an 0:00:23.760 --> 0:00:29.240 anchor for Bloomberg Television. And today it's a nail back. 0:00:30.600 --> 0:00:33.120 Dear listeners just keep on sending in questions, and it 0:00:33.120 --> 0:00:36.400 feels like it's about time. It also helps that I'm 0:00:36.440 --> 0:00:40.360 on vacation right now. We're recording this in the future. 0:00:40.479 --> 0:00:41.919 In the past, I don't know. 0:00:42.120 --> 0:00:42.839 I'm the Sloops. 0:00:42.960 --> 0:00:52.760 Yeah, definitely, I am actively skiing right now. Remember we 0:00:52.800 --> 0:00:55.240 did an episode about cocoa futures. 0:00:56.160 --> 0:00:56.920 How could I forget? 0:00:57.360 --> 0:00:59.800 I forgot a little bit, but I was so tickled 0:01:00.240 --> 0:01:05.240 by this question. Yeah, we did. We talked about Hersheyr. 0:01:05.680 --> 0:01:08.600 Can I forget? Coming back to me, Matt. 0:01:09.360 --> 0:01:12.200 We have a question from Patrick, who says, thanks to 0:01:12.280 --> 0:01:16.200 your podcast, I'm now obsessed with chocolate futures contracts. I 0:01:16.240 --> 0:01:18.720 have a question about these chocolate warehouses that I just 0:01:18.959 --> 0:01:22.279 can't understand. Maybe you can help me if they exist 0:01:22.319 --> 0:01:25.240 to facilitate futures contracts. Why is the quality of the 0:01:25.319 --> 0:01:29.240 chocolate often bad? I thought futures contracts specified the quality 0:01:29.280 --> 0:01:32.600 of the chocolate in advance, in terms of origin and grade. 0:01:33.000 --> 0:01:35.240 Is it not a flaw in the system that worst 0:01:35.280 --> 0:01:39.920 chocolate is being put in these warehouses? Thanks? I love 0:01:39.959 --> 0:01:47.160 that questions, good question. I did some Reportingeah, I I 0:01:47.200 --> 0:01:50.240 went to Bloomberg Intelligence. When I have like a niche 0:01:50.320 --> 0:01:53.480 question about a topic I know very little about. I'm 0:01:53.480 --> 0:01:56.000 going to read this out loud. Sure, I got this 0:01:56.080 --> 0:01:58.840 email and I read it really quickly, so I haven't 0:01:58.880 --> 0:02:03.400 thought deeply about this. So hello, You're completely right. Contracts 0:02:03.400 --> 0:02:06.280 would specify the quality and origin of cocoa beans, and 0:02:06.320 --> 0:02:08.639 this is the reason why cocoa really doesn't have one 0:02:08.680 --> 0:02:12.320 single price, but several that reflect these differences. So to 0:02:12.400 --> 0:02:15.760 illustrate this from a higher level perspective, at the end 0:02:15.800 --> 0:02:19.600 of last year, the ic COO published a report noting 0:02:19.639 --> 0:02:22.560 that the price difference between London futures and NY was 0:02:22.639 --> 0:02:26.160 due to London having more beans from Cameroon, which are 0:02:26.280 --> 0:02:29.520 perceived to be of lower quality. Now, because cocoa is 0:02:29.560 --> 0:02:32.600 a soft maybe there is some scope for exchanges to 0:02:32.639 --> 0:02:36.840 hold lower quality or just mismanaged inventories. Don't really know 0:02:36.919 --> 0:02:39.239 to what extent this is happening. Now, I'll leave a 0:02:39.280 --> 0:02:43.600 quote quite popular among cocoa market participants. Quote when there 0:02:43.680 --> 0:02:46.200 is a lot of cocoa, all cocoa is crap. When 0:02:46.200 --> 0:02:49.440 there is no cocoa, all crap is cocoa. Oh dear, 0:02:50.680 --> 0:02:56.280 I hadn't read that first. That's really funny. It's all 0:02:56.360 --> 0:03:01.880 crap is coco. That is so interesting. I guess I 0:03:01.880 --> 0:03:03.560 haven't really thought about it before that. When you take 0:03:03.560 --> 0:03:06.520 a look at commodities such as this and you think 0:03:06.560 --> 0:03:08.800 about the different prices on the different exchanges, I have 0:03:08.840 --> 0:03:11.600 never thought that maybe the quality in this case of 0:03:11.639 --> 0:03:16.280 cocoa explains the difference. Yeah, because with oil, I mean, 0:03:16.720 --> 0:03:18.760 I don't really think about the quality of oil, but 0:03:18.800 --> 0:03:21.839 it makes sense that there's I don't because I don't 0:03:21.880 --> 0:03:27.880 think about that, but it makes sense. Yes, true, Yeah, 0:03:28.440 --> 0:03:28.720 I mean I. 0:03:28.720 --> 0:03:31.519 Read about this a lot. Like if you're a chocolate maker, 0:03:32.560 --> 0:03:35.240 you want cocoa to put into chocolate, and like if 0:03:35.280 --> 0:03:37.680 your a chocolate bars tastes bad, that's bad for you. 0:03:38.800 --> 0:03:42.640 If you're a commodity's futures warehouse, you need cocoa to 0:03:42.760 --> 0:03:46.280 like be the underlying deliverable for the commodity future since 0:03:46.320 --> 0:03:49.400 you put that in the warehouse, but you don't expect 0:03:49.400 --> 0:03:51.960 that most people trading the futures will take delivery of 0:03:52.000 --> 0:03:53.680 the cocoa, and so there's like a little bit more 0:03:53.720 --> 0:03:56.240 of a disconnect, like you have to use pct vigrate 0:03:56.320 --> 0:03:58.480 and everything, but like it's a little bit less important 0:03:58.560 --> 0:04:01.480 that the cocoa taste good if it's mostly being used 0:04:01.760 --> 0:04:04.600 as a substrate for commodities futures contracts, then if you're 0:04:04.600 --> 0:04:06.920 actually just putting it directly into chocolate bars. And so 0:04:07.360 --> 0:04:11.240 there are a couple of like examples of this from 0:04:11.280 --> 0:04:15.000 the not chocolate market, which my very favorite is that 0:04:15.760 --> 0:04:19.599 in the nickel market, Yes there's a warehouse, put nickel 0:04:19.640 --> 0:04:22.800 in it. You trade futures on the nickel. Nickel is 0:04:22.880 --> 0:04:25.520 kind of non perishable and so like you never really 0:04:25.520 --> 0:04:27.039 have to say the nickel out of the warehouse, and 0:04:27.080 --> 0:04:29.440 so it just sits in the warehouse for years. And 0:04:29.640 --> 0:04:32.120 at some point someone discovered that some nickel that JP 0:04:32.240 --> 0:04:34.800 Morgan owned not because it was like JP Morgan nickel, 0:04:34.839 --> 0:04:36.400 because like they you know, happen to take the liver 0:04:36.440 --> 0:04:38.720 around the futures contract. The nickel in this warehouse that 0:04:38.760 --> 0:04:41.560 JP Morgan owned was actually a bag of rocks, and 0:04:41.600 --> 0:04:43.920 like it was fine, Like who cares. They never took 0:04:43.960 --> 0:04:45.440 it out, They never like made anything with it. Was 0:04:45.440 --> 0:04:46.760 just a bag of rocks and the thing. But like, 0:04:47.000 --> 0:04:49.200 once you discover it's a bag of rocks, you can 0:04:49.200 --> 0:04:51.359 no longer use it to trade nickel futures. But until 0:04:51.360 --> 0:04:54.720 then it doesn't matter. You're not like building anything. The 0:04:54.760 --> 0:04:58.560 other great example is coffee futures. Yeah, in the coffee market, 0:04:58.960 --> 0:05:03.240 coffee is like cocoa, perishable, and so there are rules 0:05:03.279 --> 0:05:05.400 about like quality of the coffee that goes into the 0:05:05.400 --> 0:05:07.440 coffee warehouses. One of the rules like you can't leave 0:05:07.440 --> 0:05:10.800 it there forever, right because it's perishable, and so there's 0:05:10.960 --> 0:05:13.440 an age penalty where like you get paid less if 0:05:13.440 --> 0:05:16.279 you deliver old coffee. But it used to be that 0:05:16.320 --> 0:05:18.960 you could take your older beans off the exchange and 0:05:19.000 --> 0:05:21.400 then resubmit them for a new round of certification and 0:05:21.400 --> 0:05:23.600 get rid of the age penalty. So the beans are 0:05:23.640 --> 0:05:27.159 so like abstracted that like taking them out and putting 0:05:27.160 --> 0:05:29.800 them back in makes them fresh new beans again, which 0:05:29.800 --> 0:05:32.000 is not how like actual coffee brewing works. But for 0:05:32.040 --> 0:05:34.520 commodities futures. It's fine, it's good enough, and they change 0:05:34.520 --> 0:05:36.680 that rule, so like now you have to the fresher coffee. 0:05:36.720 --> 0:05:38.919 That would be a disgusting cup of coffee. 0:05:39.240 --> 0:05:42.480 I mean yes, like I think coffee. Probably you could go, I. 0:05:42.480 --> 0:05:44.640 Don't know, pretty high standards. 0:05:44.720 --> 0:05:48.120 Yeah, okay, fun you would not drink no commodities futures 0:05:48.120 --> 0:05:50.960 exchange coffee. I probably would just for rust. 0:05:51.279 --> 0:05:56.200 I mean, if I was dying, that would be kind 0:05:56.240 --> 0:05:56.560 of fun. 0:05:56.920 --> 0:05:59.320 I think you should do it. So different commodities have 0:05:59.320 --> 0:06:01.720 different rules, but like in general, like the need to 0:06:01.800 --> 0:06:04.640 have like the freshest possible commodity, Like you want that 0:06:04.680 --> 0:06:06.560 for your industrial uses, not for your putting in an 0:06:06.560 --> 0:06:07.120 a warehouse. 0:06:07.240 --> 0:06:10.160 Yeah, great question, Patrick, that was That was a lot 0:06:10.160 --> 0:06:16.320 of fun. Mail bag, mail bag. This question comes from 0:06:16.440 --> 0:06:20.479 justin straight after my own heart. With the advent of 0:06:20.480 --> 0:06:24.000 a private credit ETF is an adverse selection and inherent issue. 0:06:24.279 --> 0:06:26.560 What is to protect the retail investor and prevent the 0:06:26.560 --> 0:06:29.120 ETF manager from stuffing the fun with the loans it 0:06:29.160 --> 0:06:32.479 expects to underperform with respect to similar loans from a 0:06:32.480 --> 0:06:36.320 particular vintage. That is, like the most pessimistic fear here 0:06:36.880 --> 0:06:39.719 a very reasonable fear, I know, but you would hope 0:06:39.720 --> 0:06:42.599 that Apollo isn't trying to like use retail as exit 0:06:42.600 --> 0:06:43.599 liquidity or whatever. 0:06:44.240 --> 0:06:47.760 I mean, you would hope you hope that all the 0:06:47.800 --> 0:06:50.560 loans are good. Yeah, And like as an asset manager, 0:06:50.600 --> 0:06:53.560 you have fiducial idities to all of your clients and 0:06:53.600 --> 0:06:56.240 you try to make only the best loans. It is weird, 0:06:56.320 --> 0:06:58.159 you know, Like, you know, you look at Apollo, like 0:06:59.080 --> 0:07:01.200 much of their capital is their balance sheet, right, I 0:07:01.200 --> 0:07:03.720 mean they run a big retirement services company, right, so yeah, 0:07:03.760 --> 0:07:05.240 a lot of it is their balance sheet. A lot 0:07:05.279 --> 0:07:09.200 of it is client money that pays stereotypically two and twenty, right, 0:07:09.200 --> 0:07:10.760 It's probably not really two and twenty, but like you know, 0:07:10.800 --> 0:07:14.200 people who pay kind of like alternative manager fees, and 0:07:14.280 --> 0:07:16.600 some of it is like ETF money who pay let 0:07:16.600 --> 0:07:19.480 our fees. So where do you put the best loans? 0:07:19.960 --> 0:07:23.640 Your insurance company, your balance sheet? Very smart people run that, 0:07:23.960 --> 0:07:27.680 your limited partners and your institutional prior credit funds, smart 0:07:27.720 --> 0:07:33.440 repeat player allocators, your retail ETF clients. Who knows? Well? 0:07:33.800 --> 0:07:37.240 I actually did reporting for this question as well. I 0:07:37.280 --> 0:07:40.680 sat down with Annopoglia from State Street Global Advisors on 0:07:40.880 --> 0:07:44.760 March thirteenth on Bloomberg Television and I asked her this question, 0:07:45.000 --> 0:07:49.600 does State Street have the in house expertise to sort 0:07:49.600 --> 0:07:52.480 of evaluate what Apollo is putting in the ETF? And 0:07:52.600 --> 0:07:53.440 this was her answer. 0:07:53.560 --> 0:07:56.240 She said, we do have the expertise in house, but 0:07:56.280 --> 0:07:58.560 we also made the new hire set to make sure 0:07:58.600 --> 0:08:02.120 that we had the right in seed SSGA is the 0:08:02.160 --> 0:08:05.440 advisor by design. We wanted us to be in a 0:08:05.600 --> 0:08:09.760 position to make selections and have investment discretion on what 0:08:09.880 --> 0:08:12.720 task sets to take or not to take from Apollo. 0:08:13.280 --> 0:08:14.920 That's the sounds a blance right, is like, yeah, the 0:08:14.920 --> 0:08:18.800 ETF manager has a fiducial abbligation to the ETF clients 0:08:19.160 --> 0:08:21.880 and they have their own independent ability to make sure 0:08:21.880 --> 0:08:24.160 they're not getting stuffed with like Apollo's worse loans. But 0:08:24.240 --> 0:08:25.800 it's like Apollo, it's like not in the business of 0:08:25.920 --> 0:08:27.440 like trying to make the worst loans, right, so like 0:08:28.320 --> 0:08:32.400 they're trying to also make good loans. If you think 0:08:32.400 --> 0:08:36.320 about like a bond ETF, like you have the same 0:08:36.400 --> 0:08:39.720 risk there. And the reason people don't think about it 0:08:39.840 --> 0:08:41.560 very much like they do a little bit right because 0:08:41.559 --> 0:08:44.199 like there are sometimes like worries about chart picking But 0:08:44.240 --> 0:08:45.960 the reason people don't think about it that much is because, 0:08:45.960 --> 0:08:47.720 like you know, a bond fund has like a track record. 0:08:48.160 --> 0:08:50.800 There's an incentive for like PIMCO to not do a 0:08:50.840 --> 0:08:54.000 bad job managing its public bond funds because then people 0:08:54.040 --> 0:08:57.360 won't put money into them. Yeah, the prior CREDITTF stuff 0:08:57.400 --> 0:09:00.400 is new, and so there's no like through the cycle 0:09:00.480 --> 0:09:03.400 performance data where you can tell whether a fund is 0:09:03.440 --> 0:09:05.840 good or not right, and so you have to worry 0:09:05.840 --> 0:09:07.760 about this stuff. In the long run, you sort of 0:09:07.760 --> 0:09:10.360 assume that, like people will try to manage funds well 0:09:10.400 --> 0:09:11.800 because that's how they raise money. 0:09:12.080 --> 0:09:13.880 Yeah, it doesn't have a track re heard, And I 0:09:13.880 --> 0:09:15.640 think that's an important point because there are a lot 0:09:15.640 --> 0:09:19.040 of very pessimistic concerns about the CTF. But it just 0:09:19.280 --> 0:09:20.880 hasn't been alive for very long. 0:09:21.000 --> 0:09:23.040 Right, Like you could like sort of tell a story 0:09:23.040 --> 0:09:25.680 of like private credit has had this like massive boom 0:09:26.120 --> 0:09:29.440 and the market might be turning a little bit and 0:09:30.600 --> 0:09:32.280 that was the perfect time to stuff retail with it. 0:09:32.400 --> 0:09:33.360 But yeah, that's like. 0:09:33.320 --> 0:09:36.240 A kind of a I mean, we're recording this in 0:09:36.280 --> 0:09:39.040 the future, so who knows what it looks like. Yeah, 0:09:39.120 --> 0:09:41.960 maybe things will be totally better by the time this 0:09:42.000 --> 0:10:05.080 episode comes out. But great question, mail bag, mail Bag, 0:10:05.640 --> 0:10:07.800 we have another question. I don't have a name to 0:10:07.840 --> 0:10:10.679 attach to this one, but the question is fun. As 0:10:10.720 --> 0:10:14.040 we accelerate slash descend into the scenario where Elon Musk 0:10:14.120 --> 0:10:16.400 is God King and the answer to every question is 0:10:16.679 --> 0:10:20.040 because that's what Elon wants. What's the point of digging 0:10:20.080 --> 0:10:26.120 into anything, Matt, take us into this existential spiral, right. 0:10:26.720 --> 0:10:28.560 I used to think of my job as like trying 0:10:28.600 --> 0:10:34.480 to understand and explain complex structural financial topics, and then 0:10:34.559 --> 0:10:38.760 like memestocks hit and I found myself writing a lot 0:10:38.800 --> 0:10:43.120 of very dumb stuff and like coining the Elon market hypothesis, 0:10:43.200 --> 0:10:46.719 which is, yeah, financial assets are valuable not because of 0:10:46.760 --> 0:10:49.320 their cash flows, but because of their proximity to Elon Musk. 0:10:49.360 --> 0:10:51.000 Because like there was a time and it's kind of 0:10:51.120 --> 0:10:53.720 continuing where like Elon would like tweet about a thing 0:10:53.760 --> 0:10:54.959 and like the thing would go up, and it's like 0:10:55.000 --> 0:10:57.520 doage cooin, or like there's a story about Signal where 0:10:57.520 --> 0:10:59.960 he tweeted Signal and like an unrelated company with Signal 0:11:00.080 --> 0:11:02.679 his name went up. Like just anything like he turned 0:11:02.679 --> 0:11:06.200 his attention to would go up. And if you sort 0:11:06.200 --> 0:11:09.640 of like looked at that and thought, well, the present 0:11:09.720 --> 0:11:11.920 value of the expected future cashlows of this company has 0:11:11.960 --> 0:11:15.840 gone up because Elon tweeted about it, Then you would 0:11:15.840 --> 0:11:18.559 be missing the point. And like what was actually happening 0:11:18.679 --> 0:11:20.280 was just like yeah, people like Elan Musk and the 0:11:20.280 --> 0:11:22.839 stock goes up right, And then like Memestock's kind of 0:11:22.840 --> 0:11:24.920 crystallized that, like a lot of mental energy went into 0:11:24.960 --> 0:11:27.560 like understanding the technicalities of a game stop where it's like, oh, 0:11:27.679 --> 0:11:29.280 you know, like you could have a thesis about the 0:11:29.280 --> 0:11:31.720 company's turnound, or you can be like, oh, like there's 0:11:31.760 --> 0:11:33.800 a gamma squeeze and a short squeeze. There's all this 0:11:33.880 --> 0:11:36.680 like technical stuff that you can understand. But like mostly 0:11:36.720 --> 0:11:38.280 it was like people online liked it and this so 0:11:38.360 --> 0:11:40.760 they bought it and went up. Right, everything got kind 0:11:40.760 --> 0:11:47.080 of dumber, and our current political environment has expanded that dramatically. 0:11:47.080 --> 0:11:50.800 You know, I wrote, let's say last week now about 0:11:51.120 --> 0:11:54.679 the US Consumer Financial Protection BEEAU. The CFPP right like, 0:11:54.920 --> 0:11:58.040 has written some rules about how financial companies are supposed 0:11:58.040 --> 0:12:02.120 to interact with consumer customers, and those rules have been 0:12:02.200 --> 0:12:06.080 sort of suspended by everyone of the FB being told 0:12:06.080 --> 0:12:09.040 to go home. But like they're still there. Yeah, and 0:12:09.080 --> 0:12:10.959 so there's only like stuff you can look at and 0:12:10.960 --> 0:12:12.520 me like, oh, like the rules say this or like 0:12:12.559 --> 0:12:14.720 this is like how you're supposed to do stuff, but 0:12:14.800 --> 0:12:16.400 like it's not clear that how you're supposed to do 0:12:16.400 --> 0:12:19.760 stuff matters anymore, that the rules are enforceable, And so 0:12:19.840 --> 0:12:21.599 we're in this sort of weird gray area where like 0:12:21.640 --> 0:12:24.920 if you try too hard to understand what is allowed 0:12:25.040 --> 0:12:28.640 or how things work, you will be making mistakes because 0:12:28.679 --> 0:12:30.720 like things don't work the way they're supposed to work, 0:12:31.080 --> 0:12:35.319 and the rules don't necessarily apply anymore. And that's a 0:12:35.360 --> 0:12:37.319 frustrating position to be in if you're in the business 0:12:37.360 --> 0:12:38.520 of trying to understand things. 0:12:38.640 --> 0:12:40.480 How does it make you feel as a person who 0:12:40.480 --> 0:12:43.040 writes a newsletter though, because it seems like you had 0:12:43.080 --> 0:12:44.400 fun with the GameStop era. 0:12:44.640 --> 0:12:46.360 I define fund with the GameStop era, but it ate 0:12:46.400 --> 0:12:48.280 at me because I was like, I wish I had 0:12:48.360 --> 0:12:50.360 insight to off or have elite jokes. 0:12:51.840 --> 0:12:55.400 Well, when all else fails, at least we can laugh. Yeah, 0:12:55.679 --> 0:12:56.360 we still have our. 0:12:56.360 --> 0:13:02.320 Loster sort of like yeah, I don't know. I mean, like, 0:13:02.600 --> 0:13:04.640 as a person who has a newsletter, like there are 0:13:04.640 --> 0:13:08.320 always events, but they are not interesting events. 0:13:08.400 --> 0:13:10.920 Yeah, I mean there's a parallel to be drawn with 0:13:11.360 --> 0:13:15.679 my life on TV. News is always happening. I anchor 0:13:15.720 --> 0:13:17.960 from nine to eleven, and there's just so many tape 0:13:17.960 --> 0:13:21.520 bombs coming across all the time. But you know you 0:13:21.559 --> 0:13:22.880 have to wonder at the end of the day, like 0:13:24.200 --> 0:13:25.160 did I add value? 0:13:26.760 --> 0:13:27.559 I wonder every day. 0:13:27.640 --> 0:13:30.520 I cannot. I can't answer this question on this podcast. 0:13:31.000 --> 0:13:37.240 Cool great question, mail Bag, mail Bag. I like this one. 0:13:37.600 --> 0:13:39.560 This question comes from Bruce. It's a little bit of 0:13:39.559 --> 0:13:43.120 a long one, so tuck in. Bruce says, I'm intrigued 0:13:43.120 --> 0:13:47.560 by your recent coverage, so stick with us, all right, Bruce. 0:13:47.720 --> 0:13:50.520 Bruce says, I'm intrigued by your recent coverage of super 0:13:50.520 --> 0:13:54.440 performing private investment funds sefed heavily with techies. For my 0:13:54.520 --> 0:13:57.600 spy novel, I invented a tech heavy hedge fund whose 0:13:57.640 --> 0:14:01.320 principles are former CIA contractors who go from stealing Oligarch 0:14:01.400 --> 0:14:05.040 secrets to stealing Oligarch cash, which they then launder through 0:14:05.040 --> 0:14:07.520 a private fund whose operations are a black box to 0:14:07.559 --> 0:14:11.200 the outside world. My villains reverse engineer capital market data 0:14:11.240 --> 0:14:15.200 to fake trade reports for their tame auditor that explained 0:14:15.200 --> 0:14:19.280 the funds quote unquote returns. I'm not accusing the funds 0:14:19.280 --> 0:14:22.560 you wrote about of anything nefarious. I'm just struck by 0:14:22.600 --> 0:14:25.800 how much they resemble the fictional high tech high return 0:14:25.960 --> 0:14:28.240 mcguffin in my book. Is that crazy? 0:14:31.280 --> 0:14:31.640 Is there? 0:14:31.680 --> 0:14:35.320 For a recent A real world operator with bad intentions 0:14:35.360 --> 0:14:38.960 couldn't take say, the cash from his cocaine business and 0:14:39.040 --> 0:14:42.600 report it as fictional market returns from a proprietary model 0:14:42.640 --> 0:14:46.160 investment fund, pay some tax, and then have untraceable money 0:14:46.160 --> 0:14:50.120 to spend. Just asking the question, and not for legal advice, Bruce, 0:14:50.560 --> 0:14:54.480 don't give away this gold material. As someone who's also 0:14:54.560 --> 0:14:57.640 working on a kooky novel, you know, you can't say 0:14:57.640 --> 0:14:58.120 too much. 0:14:58.680 --> 0:15:00.720 Have you not described your entire navel on this podcast? 0:15:02.240 --> 0:15:03.400 Off Mike? For sure. 0:15:03.960 --> 0:15:06.400 It's a little bit like Bernie made Off right, Like, yeah, 0:15:06.440 --> 0:15:09.360 it's a little different. But like Bernie Madoff pretended to 0:15:09.440 --> 0:15:14.640 have investing returns and in fact had you know, Ponzi returns, 0:15:15.120 --> 0:15:21.440 and people who are knowledgeable noticed that and said he 0:15:21.480 --> 0:15:23.720 can't really have these investment returns. Someone is just like 0:15:24.240 --> 0:15:27.200 he like, was doing more pretend volume than there was 0:15:27.280 --> 0:15:29.400 volume in the stocks he was pretending to trade, right, 0:15:29.960 --> 0:15:31.360 And so you have a little of that here. If 0:15:31.400 --> 0:15:35.000 you were in the business of like selling drugs, yeah, 0:15:35.160 --> 0:15:38.320 and then taking the money and pretending the money was 0:15:38.360 --> 0:15:41.400 returns from your hedge fund, you would be reporting to 0:15:41.440 --> 0:15:44.520 a regulator something about your trades, and the regular would 0:15:44.560 --> 0:15:47.480 be like, but you don't have a custodian, you don't 0:15:47.520 --> 0:15:49.960 have audited financial and like maybe like you grab your 0:15:50.000 --> 0:15:52.880 auditor and maybe like the SEC is fooled, as they 0:15:52.920 --> 0:15:55.520 kind of were with Bernie made Off. But it seems 0:15:55.560 --> 0:15:58.520 like a lot of effort to go through in a 0:15:58.520 --> 0:16:01.960 lot of like surface area for regulatory exposure. Yeah, and 0:16:02.000 --> 0:16:05.520 you'd probably rather run like a coin opp laundromat or something, right, Yeah, 0:16:05.560 --> 0:16:07.760 There's a lot of ways to launder money that don't 0:16:07.800 --> 0:16:10.000 involve like entering a regulated industry. 0:16:10.320 --> 0:16:12.160 So, Bruce, I do want you to keep in touch 0:16:12.200 --> 0:16:15.120 though you know where this, Yes, did you get further 0:16:15.160 --> 0:16:17.320 along with the novel? Love to know the title? 0:16:17.760 --> 0:16:19.840 He's not like the only person who's ever thought this. 0:16:20.240 --> 0:16:23.400 A while back, there is like a kerfuffle when uh oh, 0:16:23.440 --> 0:16:27.360 when someone speculated that Bridgewater might be a Ponzi scheme 0:16:27.400 --> 0:16:29.920 because they like were trading with like someone who they 0:16:29.960 --> 0:16:32.040 expected them to be trading with the people had this 0:16:32.280 --> 0:16:34.800 tether too, where they're like, who trades with tether? Whoere 0:16:34.800 --> 0:16:37.280 do they get all their stuff from? But those things 0:16:37.320 --> 0:16:38.200 seem to be wrong. 0:16:39.040 --> 0:16:41.240 Yeah, I don't think Bridgewater is a Ponzi scheme. 0:16:41.840 --> 0:16:44.360 No, I don't either. Okay, there was a minute where 0:16:44.360 --> 0:16:46.000 people were like, oh, that's interesting. 0:16:46.960 --> 0:16:49.480 I feel like some of those tether questions are still 0:16:49.480 --> 0:16:52.920 out there. Yeah, great question, Bruce, Good luck with the novel. 0:16:53.000 --> 0:16:55.120 Maybe people have had this thought before, but turns out 0:16:55.200 --> 0:16:59.600 it's really hard to actually write a novel. So I 0:16:59.640 --> 0:17:00.720 respect very hard. 0:17:01.480 --> 0:17:24.000 That's making money and contrary. 0:17:21.520 --> 0:17:26.320 Mail bag mail Bag one more from Andy, Let's bring 0:17:26.359 --> 0:17:30.240 it home, Andy says. Matt's newsletter today mentioned how financial 0:17:30.280 --> 0:17:34.359 advice was traditionally bundled, where the overpriced stock picking paid 0:17:34.400 --> 0:17:37.200 for the useful advice. This reminded me of a dumb 0:17:37.280 --> 0:17:41.080 question I've had for years. Why doesn't anyone offer unbundled 0:17:41.160 --> 0:17:44.160 financial advice on a fee for service basis? I want 0:17:44.160 --> 0:17:46.240 to pay someone a fixed fee to chat with me 0:17:46.359 --> 0:17:50.439 once per quarter about my goals, asset allocation, tax considerations, 0:17:50.680 --> 0:17:53.240 when I can retire, et cetera. But as far as 0:17:53.240 --> 0:17:55.600 I can tell and I've looked. No one offers these 0:17:55.600 --> 0:17:59.080 services without bundling them with money management services where the 0:17:59.119 --> 0:18:02.320 fee structure is a percent of AUM, and then they 0:18:02.440 --> 0:18:05.120 charge like one percent of AUM, which feels like a lot. 0:18:05.280 --> 0:18:07.399 It sounds like Vanguard is offering a cheaper version of 0:18:07.400 --> 0:18:10.879 this for like twenty basis points of AUM in improvement. 0:18:11.200 --> 0:18:13.840 But if I have like five million dollars to invest, 0:18:13.840 --> 0:18:16.840 that works out to two thy five hundred per quarterly 0:18:17.000 --> 0:18:21.280 zoom call or whatever. Seems like a bit expensive. Anyway, 0:18:21.320 --> 0:18:23.159 Does unbundled financial advice exist? 0:18:24.080 --> 0:18:26.400 I feel like it must a little bit, but like, right, 0:18:26.760 --> 0:18:30.720 there's not a lot. And you see why. It's like 0:18:31.080 --> 0:18:33.640 the opposite of his problem, right, Like, if you're offering 0:18:33.920 --> 0:18:36.399 zoom calls to people to talk about their hopes and 0:18:36.480 --> 0:18:40.600 dreams and portfolio allocations, yeah, and you do you four 0:18:40.680 --> 0:18:42.760 zoom calls a year with that person. You have to 0:18:42.800 --> 0:18:46.440 like market yourself. You have to find hundreds of clients 0:18:46.800 --> 0:18:50.200 and you have to amortize the cost of that over 0:18:50.200 --> 0:18:52.560 the zoom calls. You do have to charge them hundreds 0:18:52.640 --> 0:18:55.120 or thousands of dollars for the zoom call because that's 0:18:55.119 --> 0:18:56.560 just your time on the zoom call. It's your time 0:18:56.600 --> 0:18:58.960 like marketing and like, you know, building the business, and 0:18:58.960 --> 0:19:00.920 then like who wants to pit dollars for a zoom 0:19:00.920 --> 0:19:03.240 call when you put it like that, right, if you 0:19:03.280 --> 0:19:05.919 put it as like, I'll provide you holistic services in 0:19:05.960 --> 0:19:10.320 exchange for a small percentage of your assets, then people like, yeah, sure, 0:19:10.359 --> 0:19:12.119 And if the small percentage one percently works out to 0:19:12.200 --> 0:19:15.280 thousands of dollars, but I don't know, like you don't 0:19:15.280 --> 0:19:18.000 get into the financial services industry to like build a 0:19:18.040 --> 0:19:20.920 captive out for your hours, like you want the ability 0:19:20.960 --> 0:19:23.520 to scale. And it's also it's like a natural form 0:19:23.560 --> 0:19:27.199 of price discrimination, where like if you get a small client, 0:19:27.320 --> 0:19:29.720 you can charge them a small amount of money because 0:19:29.880 --> 0:19:32.960 you're charging them a fixed percentage of assets under management, 0:19:33.240 --> 0:19:35.000 And if they then grow into a large client, you 0:19:35.040 --> 0:19:37.440 charge them a large amount of money and they don't 0:19:37.440 --> 0:19:40.439 notice because it's the same percentage of assets under management. 0:19:41.080 --> 0:19:43.639 And it's just like a better business model for someone 0:19:43.640 --> 0:19:45.600 who is, like you know, kind of largely in the 0:19:45.640 --> 0:19:48.800 business of marketing and funding clients. That just seems like 0:19:48.840 --> 0:19:51.119 the answer, right, Like, it seems like a bad business 0:19:51.119 --> 0:19:52.720 model for someone to be in to be like I'll 0:19:52.720 --> 0:19:55.800 give you some financial advice for an hour for one 0:19:55.880 --> 0:19:57.679 hundred bucks, Like, I just don't think you can make 0:19:57.680 --> 0:20:00.880 a living doing that. I will say that Andy found 0:20:00.880 --> 0:20:03.639 a solution, so he continues, I think I found a workaround. 0:20:03.720 --> 0:20:06.119 I signed up for a wirehouse financial advisor. He charges 0:20:06.160 --> 0:20:08.239 like one percent of AUM, but I only pay him 0:20:08.240 --> 0:20:09.719 for the accounts I keep with him, which I keep 0:20:09.760 --> 0:20:13.200 around the minimum he'll tolerate. And he's not the only 0:20:13.240 --> 0:20:16.840 person who has done this. Like, you know, you find 0:20:16.840 --> 0:20:19.440 a financial advisor, You're like, how much do I need 0:20:19.520 --> 0:20:23.399 to put with you? He tells you five hundred thousand dollars. 0:20:23.520 --> 0:20:25.520 You put five hundred thousand dollars with him for the 0:20:25.520 --> 0:20:27.919 rest of the money and index funds, you know, and 0:20:28.000 --> 0:20:30.119 like your self directed Vanguard account, and then you call 0:20:30.160 --> 0:20:32.639 your financial advisor. I record it for advice. Right, you 0:20:32.720 --> 0:20:34.800 get like a lot of the tax advice and whatever 0:20:34.920 --> 0:20:36.679 that you get from the bundled fee, But you're not 0:20:36.720 --> 0:20:38.719 paying him one percent of all of your ass as. 0:20:38.720 --> 0:20:41.280 You're paying one percent of the minimum amount of assets 0:20:41.280 --> 0:20:42.199 to get him on the phone. 0:20:42.359 --> 0:20:45.760 Does that feel a little mean to the financial advisors? Like, Hey, 0:20:45.800 --> 0:20:47.919