Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Should we talk about the fact that we're recording a mail.
Speaker 1: Bag, recording a mail bag?
Speaker 2: Mail bag not too tired to sing?
Speaker 1: Yeah, we're going to release this sometimes Ny eight. Yeah,
Speaker 1: it's the end of April now, but it's going to
Speaker 1: be it's gonna be all timeless wisdom from the Money
Speaker 1: Stuff Podcast today, so we can release it at anytime.
Speaker 2: That's true. On May eighth, I'll have just gotten back
Speaker 2: from the Milkan Conference in Los Angeles, So if.
Speaker 1: You're listening to this, Katy has returned from Milkin. But yeah,
Speaker 1: hasn't had time to podcast this week, So we're diving
Speaker 1: into the wall for some timeless wisdom.
Speaker 2: Yeah, we've got some good ones lined up.
Speaker 1: Should we do the thing where I say hello and
Speaker 1: welcome to the Money Stuff Podcast.
Speaker 2: I love doing that, So, yeah.
Speaker 1: Hello and welcome to the Money Stuff Podcast. I'm Matt
Speaker 1: Levin and I heard the Money Stuff Calm Opinion.
Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 2: an anchor for Bloomberg Television.
Speaker 1: All right, let's get into the mail bag.
Speaker 3: Yeah, mail bag mailbag.
Speaker 2: Pierre started us off strong. You've put this disclosure in
Speaker 2: newsletters before or specifically one your disclosure read through a
Speaker 2: financial advisor. I have a small amount of money in
Speaker 2: a blue alphund though I am not sure which one.
Speaker 2: Pierre wants to know why does Matt have a financial
Speaker 2: advisor and does he read money stuff?
Speaker 1: So first of all, I want to address the fact
Speaker 1: that I do own a little bit of bluel credit
Speaker 1: Incomcorp is private BDC that once not yet tender before,
Speaker 1: but he said today he's thinking about tendering for it.
Speaker 2: Are you panicking, No, I'm not panicking.
Speaker 1: So when I started this financial advisor, he's I got
Speaker 1: this great thing for you called b read the Blacks
Speaker 1: on real estate like non treated to real estate Investment trust.
Speaker 1: And I was like, no, I don't think I can
Speaker 1: do that because I've written about them like four times
Speaker 1: and I don't want to own something I write about.
Speaker 2: Yeah, that's fair.
Speaker 1: And he was like, okay, what about the Star War one?
Speaker 1: I was like no, no, no, still counts. And then
Speaker 1: he's like, what about just like a little little scooch
Speaker 1: of private credit. I was like a little scooch of
Speaker 1: private credits.
Speaker 2: I'll never write about that.
Speaker 1: I don't know what. I don't know what I was thinking,
Speaker 1: but obviously now I own a little bit of this
Speaker 1: private credit fund, and I don't want to own it.
Speaker 1: Not because I'm panicking about software companies or whatever. It's
Speaker 1: really like a tiny portion of my net worth. But
Speaker 1: I don't want to own it up because I'm panicking
Speaker 1: about liquidity or software companies or whatever, but because I
Speaker 1: don't want to have to say every time I write
Speaker 1: about it, I own a little bit of this one.
Speaker 1: So I'd love to be out of it. But unfortunately
Speaker 1: getting out of it is like the thing that is
Speaker 1: the news story. So if I were tendering, then I
Speaker 1: would be a good more of the story. So I
Speaker 1: just have to hold it and or it. So I'm not. Well,
Speaker 1: he didn't bid for that one, but he's going to.
Speaker 1: If he bids for that one, I might have to
Speaker 1: sell to him so that he can come back on
Speaker 1: the podcast. How are you enjoying my shows?
Speaker 2: And it would be a very fun science experience. I
Speaker 2: wouldn't though I'd enjoy it.
Speaker 1: I would enjoy it. Yeah, I would get sixty five
Speaker 1: cents on the dollar it's worth anyway. I have no
Speaker 1: investment advice. I have no opinions on the Blue Prior
Speaker 1: Credit Fund. I have no complaints about their management of
Speaker 1: the fund, but I also wish I had known it
Speaker 1: for purely journalistic re since way about my financial advisor
Speaker 1: that does.
Speaker 2: He read money stuff? Does he listen to this podcast?
Speaker 2: So see a man.
Speaker 1: Most of most importantly, I hope he does not listen
Speaker 1: to this podcast. I feel bad talking about him. He
Speaker 1: definitely did not know who I was when I sort
Speaker 1: of came in the door. Yeah, this is like a
Speaker 1: few years ago. I was like talking to a fancy
Speaker 1: friend of ours in the newsroom and she was like
Speaker 1: talking about her financial advisor giving her like tax advice.
Speaker 1: And I was like, I've always been like a bang guy.
Speaker 1: I don't want a financial advisor to tell me what
Speaker 1: stocks to buy, yeah, what credit funds to buy, But
Speaker 1: you know, I want like some professional to hold my
Speaker 1: hand a little bit on like how much should I
Speaker 1: be putting in college funds? How much should I be
Speaker 1: like what's my target number for retirement? What tax stuff
Speaker 1: should I do to make my taxes lower? All the
Speaker 1: sort of not investing advice stuff that financial advisors do.
Speaker 1: And our fancy newsroom friend was talking up the benefit
Speaker 1: so I came in the door and had a moment
Speaker 1: of like nervousness but also arrogance that like that like
Speaker 1: this guy like ooh, the money stuff guy. But in
Speaker 1: fact he was like okay, whatever. We really did not
Speaker 1: know who I was. But now I believe he is
Speaker 1: at least aware of the newsletter because when I moved
Speaker 1: talked to him most recently, he was like, yeah, I
Speaker 1: sometimes skim him the newsletter and you probably don't want
Speaker 1: to be in this blue al fund anymore. Like yeah,
Speaker 1: but you know what can you do? So yeah, I
Speaker 1: have a financial advisor for like tax and other advising stuff.
Speaker 2: That's what you're supposed to do.
Speaker 1: Yeah. I feel conflicted about it because I'm definitely like
Speaker 1: I am sophisticated enough that I probably could just use
Speaker 1: index funds and like figure stuff out on my own.
Speaker 1: But like it's nice to like talk to a professional
Speaker 1: and be like this is how much I was thinking
Speaker 1: of saving for college and and being like, yeah, that
Speaker 1: sounds good, right, It's just like confirmatory. Yeah, eventually I
Speaker 1: just do that with like chat JPT. It's true, but no,
Speaker 1: it's it's helpful to have someone whose job it is
Speaker 1: to do this, even though my job is not unrelated
Speaker 1: to this.
Speaker 2: Yeah, I mean I feel like that's the pitch of
Speaker 2: financial advisors.
Speaker 1: Right, It's not really like we will buy this stocks
Speaker 1: that will go up, right. Yeah, that's not the pitch
Speaker 1: to me. Although if I had like bit at b Read,
Speaker 1: he might have had like a lot more spicy stuff
Speaker 1: to put into my portfolio. Like there's a certain amount
Speaker 1: of him being like what about this, and maybe like,
Speaker 1: nah's index one? Yeah, what about you?
Speaker 2: I have a financial advisor.
Speaker 1: For the comment.
Speaker 2: No, I'm in all index funds and it's just you
Speaker 2: know the other stuff. Yeah, I'm also I mean, we're journalists.
Speaker 2: We're not supposed to like do too much.
Speaker 1: No one private credit fund.
Speaker 2: Justin has a question. Justin says, I just recently finished
Speaker 2: reading and loved When Genius Failed, along with the Jamie
Speaker 2: Diamond biography. Last man standing, what are some of your
Speaker 2: favorite books about finance? That's fun. I don't have any
Speaker 2: favorite fund.
Speaker 1: Any favorite finance books, I don't think so.
Speaker 2: I like fiction. I feel like we've talked about it
Speaker 2: a bit on this podcast. I like sci fi and fantasy,
Speaker 2: and I really.
Speaker 1: I mean, I'm going to send you some.
Speaker 2: They have to be really good finance sci fi books
Speaker 2: that would be great.
Speaker 1: A genre that is not high on my list, but
Speaker 1: a genre that I read because sometimes people will be like, Hi,
Speaker 1: I work in finance and read it wrote a finance
Speaker 1: sci fi book.
Speaker 2: And I'll be like, well, that would be absolutely I
Speaker 2: have like four of those. Yeah. I feel bad saying
Speaker 2: that because I actually really love finance and markets and
Speaker 2: like the world that I exist in in a professional capacity.
Speaker 2: But when I get out of this building, I like
Speaker 2: to read fiction. But you definitely have a library.
Speaker 1: Yeah, I have some of that. Like I definitely try
Speaker 1: not to spend all of my time reading business books,
Speaker 1: but no, I do have a long list of fair
Speaker 1: finance books. Yeah, and I'm going to go to town on that. Now.
Speaker 2: Yeah, you can name five?
Speaker 1: Really five?
Speaker 2: Well, how many do you have?
Speaker 1: Seven? Like Pinnacle is Liar's Poker and by Brands at
Speaker 1: the Gate, everyone knows that it's boring.
Speaker 2: I can talk about I have started Liar's Poker.
Speaker 1: I do enjoy like the whole language of wallstre continues
Speaker 1: to be derived from jokes on that book. But so
Speaker 1: I want to talk about a few others that I
Speaker 1: love and just tell an anecdote from each one. Yeah,
Speaker 1: I get prepared unusually. So one that I recommend all
Speaker 1: the time is a book called Diary of a Very
Speaker 1: Bad Year, which is from N plus one, the literary magazine.
Speaker 1: It's like Keith Kessen is an N plus one editor
Speaker 1: interviewing an anonymous hedgehund manager. It's like a PM at
Speaker 1: a multispreat firm, and it's like he sort of like
Speaker 1: does periodic interviews throughout like the two thousand and eight
Speaker 1: financial crisis, and this guy gives a window into how
Speaker 1: he's thinking about the financial crisis and how he's trading markets,
Speaker 1: and it's really good.
Speaker 2: That's awesome.
Speaker 1: One thing that I love. He's like a credit he's
Speaker 1: like an emerging markets manager, and he says, every time
Speaker 1: you do a private investment, you're writing a call option
Speaker 1: on your own time. In a sense, you're writing more
Speaker 1: call options against your time than you have time, on
Speaker 1: the assumption that the correlation is not one hundred percent,
Speaker 1: And in a crisis, correlations go to one hundred percent,
Speaker 1: and so you just run out of time because you're
Speaker 1: dealing with all of these like fires on all all
Speaker 1: of your investments, and you sort of figured these investments
Speaker 1: won't all catch fire at once, but they do, and
Speaker 1: so you have no time and so it's not just
Speaker 1: like about your portfolio, it's about your time management. Another
Speaker 1: favorite book is in a different vein. Auntie Ilmanon of
Speaker 1: a AQR wrote a book called Expected Returns, which I
Speaker 1: think is the best book about investing. When people ask me, like,
Speaker 1: actually think about investing, I'm like, the question is like,
Speaker 1: why are you getting paid? Why should you expect to
Speaker 1: get money for this investment? Yeah, And this book is
Speaker 1: like an attempt to sort of answer that question comprehensively
Speaker 1: about all sorts of investments, and it has all these
Speaker 1: like little stylized facts that I love. One that I
Speaker 1: think about sometimes is that carry basically works if you
Speaker 1: have two investments and one pays ten percent a year
Speaker 1: and the other pays like eight percent a year. Right,
Speaker 1: Like financial theory would say that the one that pays
Speaker 1: ten percent a year has like a higher expected loss.
Speaker 1: And so really like they're like risk of tusted returns
Speaker 1: are the same. But in fact, like over time, things
Speaker 1: that pay more tend to pay more than things that
Speaker 1: pay less. So it's like the very intuitive, like simple
Speaker 1: thing that you just sort of eyeball turns out to
Speaker 1: work a lot of the time. This is famous in
Speaker 1: foreign exchange, where economic theory says that currency is that
Speaker 1: pay higher interest rates you're expected to depreciate, but like
Speaker 1: that never works at all, and it's like always the
Speaker 1: case that you can like make money in the character
Speaker 1: and not not investing in this. Okay, our friend Mary
Speaker 1: Childs wrote a book.
Speaker 2: Called The Bottom King that I did read.
Speaker 1: Okay, Okay, there's one favorite finance book.
Speaker 2: I had to read it.
Speaker 1: Are you saying it's not your favorite?
Speaker 2: I mean, I guess it has to be the one finance.
Speaker 1: Book you've ever read. I love The Bond King. One
Speaker 1: thing I love is I read all the time everything
Speaker 1: is seating charts, and in The Bond King, like you know,
Speaker 1: it's like sort of the story of how Bill Gross
Speaker 1: pilt pimcos and investing firm and then got defenestrated from PIMCO,
Speaker 1: And like why did he get kicked out? I like
Speaker 1: to say that he got kicked at because like he
Speaker 1: was like having tension with like the other senior managers
Speaker 1: at PIMCO, and he called a meeting and in the meeting,
Speaker 1: he didn't put his enemies at the front table. He
Speaker 1: put them in the audience facing the front table instead
Speaker 1: of at the front table where the big people sat.
Speaker 1: And so they got so mad that they went back
Speaker 1: to their offices afterwards, like he has to go and
Speaker 1: they fired him. That's not quite true. That's like a
Speaker 1: little true. Yeah, And you know sheple making millions and
Speaker 1: millions of dollars a year. All they care about is
Speaker 1: where they sit.
Speaker 2: At the big Mom, We're all a human at the
Speaker 2: end of the day.
Speaker 1: One I could go on for I have like.
Speaker 2: I can tell Yeah, I'm looking at a long list,
Speaker 2: strapping in here for a long time.
Speaker 1: Katie is literally falling asleep. Okay. Donald McKenzie, he was
Speaker 1: on oddlines recently. He's like a Scottish sociologist. He wrote
Speaker 1: a book called Trading at the Speed of Light, which
Speaker 1: is about like how high frequency trading rooms live their
Speaker 1: lives and think about things. And it has so many
Speaker 1: great antingtudes, including that when the CME, the Chicago Meercandolics
Speaker 1: Change moved its technology from writing trade tickets in pencil
Speaker 1: to writing them in pen it took eight months of
Speaker 1: fighting to change from pencil to pen It's like a
Speaker 1: great story of technological progress. On the seventy eighties. But
Speaker 1: also it's a lot about like microwave links from Chicago
Speaker 1: to New York. And apparently in the twenty tens of
Speaker 1: rain created liquidity because when it rained, the microwave link
Speaker 1: went down and it was like slower to get information
Speaker 1: from Chicago to New York. And so what that meant
Speaker 1: was that basically like predatory high fergency traders were slowed
Speaker 1: down enough that market makers could quote tighter spreads because
Speaker 1: they weren't getting picked off by predatory market by predatory HFTs.
Speaker 1: And then like later in the decade, that factory reversed
Speaker 1: because I guess the market makers couldn't get the information
Speaker 1: past enough. But anyway, so rain created liquidity.
Speaker 2: That's amazing. Justin, that was the most fun that matters.
Speaker 1: Justin, will have a beer at Morgan's. I'll give you
Speaker 1: some of my other voices.
Speaker 2: Great question, Justin. Okay, Chris has a question. Though Chris
Speaker 2: works at a private equity firm. Like many firms, we
Speaker 2: advertise our ESG credentials to our institutional LPs parentheses. I
Speaker 2: mean less so now than two years ago. But you
Speaker 2: get the idea.
Speaker 1: Among the we get this question a while, like a
Speaker 1: few weeks ago, and it's probably like they've really scrubbed
Speaker 1: it entirely from the web pitch.
Speaker 2: But yeah, Anyway, among the ESG initiatives we tout is
Speaker 2: how well we treat our employees, things like health and
Speaker 2: wellness initiatives, but also nice corporate retreats does sound nice.
Speaker 2: My question is this our employee benefits for private equity employees,
Speaker 2: good ESG or bad ESG.
Speaker 1: Someone once told me that ESG is really E and
Speaker 1: S and then G is just there to make the
Speaker 1: numbers work. So one pitch for ESG environmental, social and
Speaker 1: governments investing is that it's good for returns, Like if
Speaker 1: you buy things with good if you buy companies with
Speaker 1: good ESG scores, you'll get a higher return. And the
Speaker 1: theory that I've heard is that the G is there
Speaker 1: because that's what gives you the higher returns. And like
Speaker 1: that theory is very simple, which is that G governance
Speaker 1: basically means doing shareholder friendly stuff basically means like supervising
Speaker 1: management and trying to get good returns for shareholders and
Speaker 1: being aligned with shareholders rather than doing whatever management wants.
Speaker 1: E and S. Environmental and social stuff are about other stakeholders.
Speaker 1: Environmental is about like doing good stuff for the environment
Speaker 1: even have cost shareholders. Social is about doing good stuff
Speaker 1: for employees or communities, even if it costs shaholders money.
Speaker 1: But G is about doing stuff for shareholders even who
Speaker 1: it costs the CEO money, And so G doesn't really
Speaker 1: fit with with like ESG like the other things are
Speaker 1: about like having a broader set of stakeholders, and G
Speaker 1: is just about trying to MAXI my Chareolter returns in
Speaker 1: that vein. Being nice to your employees is good social,
Speaker 1: and if they're very senior management employees, then it's kind
Speaker 1: of bad governance, right. It's like if you give the
Speaker 1: CEO one hundred million dollars at the expensive shaholders, that's like, yeah,
Speaker 1: not ideal governance. Right. So I think that there's no
Speaker 1: like real answer to this question. But I think there's
Speaker 1: some like seniority dividing line where like giving your CEO
Speaker 1: nice perks is bad governance and giving your cashiers is
Speaker 1: good social. I think that like, probably the employees of
Speaker 1: portfolio companies are good social, and probably the like actual
Speaker 1: employees of the private equity funder a little more don't
Speaker 1: advertise the parks that give them that's fine.
Speaker 2: Cool. Well, thanks for the question, Chris, I hope things
Speaker 2: are going yeah, okay. This comes from Ron asking about IPOs.
Speaker 2: Ron asks, after a company has gone public and has
Speaker 2: received the infusion of cash from the IPO, what role
Speaker 2: does the share price actually play in the operation of
Speaker 2: the company. Do most companies continue to hold a percentage
Speaker 2: of shares that they buy slash sell to generate cash
Speaker 2: at later dates or is this mainly for employee stock
Speaker 2: compensation slash options.
Speaker 1: You know, I used to be a capital markets banker,
Speaker 1: and it is always straighting to me how much people
Speaker 1: believe in like the concept of treasury stock. Like people
Speaker 1: believe that companies have stock and there's a pot and
Speaker 1: they can sell that stock, and then they run out.
Speaker 1: They run out, And that's not how it works in
Speaker 1: the US. It is how it works in some of
Speaker 1: the places. But in the US there's no such thing
Speaker 1: as like you can pretty much always print new stock
Speaker 1: whenever you want, so it's not like they're holding stock
Speaker 1: to sell. And most companies don't sell stock after they
Speaker 1: go public. Maybe that's not true and exaggeration, but like classically,
Speaker 1: the big successful companies tend not to sell a lot
Speaker 1: of stock. I have written that at this point the
Speaker 1: public stock market is for returning capital to shareholders rather
Speaker 1: than raising capital from shareholders. And even a lot of
Speaker 1: IPOs companies don't need the money. They're just going public
Speaker 1: so they can so their early investors can cash up,
Speaker 1: although that is very much changing with the big AI
Speaker 1: IPOs where people need all the money they can raise.
Speaker 1: But so why does the stock price matter? I mean
Speaker 1: A big part of the answer is executive and employee pay. Right,
Speaker 1: If you're paying people in stock, you're motivating them with
Speaker 1: the stock, and if the stock goes up, then they're
Speaker 1: more motivated, and so it is good for the stock
Speaker 1: to go up for compensation reasons. There's also like M
Speaker 1: and A, if your stock is valuable, you can buy
Speaker 1: companies with your stock. Yes, big successful public companies don't
Speaker 1: like to sell stock, but they do like to sell debt,
Speaker 1: and the more the stock is worth, like all things
Speaker 1: being equal, it's easier to raise debt financing. Probably the
Speaker 1: stock price is a market signal about whether your company
Speaker 1: is creating value, about whether you're like a good thing
Speaker 1: to allocate capital to. And so a lot of CEOs
Speaker 1: like are sort of raised in like the church of
Speaker 1: capital allocation discipline, and if their stock is going up,
Speaker 1: then they think we are doing good stuff. We should
Speaker 1: do more projects and build more factories and launch new
Speaker 1: products and generally invest more in this company that has succeeded.
Speaker 1: And if their stock is going down, they're like, we
Speaker 1: should do stock buybacks, right, which essentially means the stuff
Speaker 1: we're doing isn't working, so we should just give money
Speaker 1: back to shaholders and they can find something else to
Speaker 1: do with it, which is kind of the signals by
Speaker 1: a stock bybick. Yeah, well, kind of the signal that
Speaker 1: the stock prize going down sends you and then you
Speaker 1: do the stock bibike. So I think that like it's
Speaker 1: just the stock price is a signal of like where
Speaker 1: to allocate capital, both to like the market and to
Speaker 1: the to the executives.
Speaker 2: Yeah, and it's like a real time report.
Speaker 1: And then people believe in that. Executives are motivated by that.
Speaker 1: Executives try to allocate capital to things that are good.
Speaker 1: The stock price sends them a signal. There's also like
Speaker 1: the market for corporate control, which is a fancy way
Speaker 1: of saying, if your stock price gets too low, then
Speaker 1: like Carli Kin, is going to try to buy the
Speaker 1: company or something. You know, you try to keep the
Speaker 1: stock price high to fend off activists and hostile takeovers
Speaker 1: and whatnot. So yeah, I think that's the answer. I've
Speaker 1: enjoyed writing about memestacks over the last three years. Memestacks
Speaker 1: like break a lot of this, right, Like you're not
Speaker 1: getting the right capital allocation signals when you're stuck goes
Speaker 1: up a thousand percent for no reason.
Speaker 2: Yeah, you're getting other signals more.
Speaker 1: But more about you know, right, and you're sometimes like
Speaker 1: allocating more capital to your company, right, I mean, like
Speaker 1: we I wrote about like when Gameslop was like way up,
Speaker 1: they were like hiring executives from Amazon and you know,
Speaker 1: launching all these new projects. It's the same, you know,
Speaker 1: it's the if your sty price is up, that means
Speaker 1: you're a good allocator of capital. And so you start
Speaker 1: like doing new stuff and hiring new executives and making
Speaker 1: acquisitions and doing all the stuff that a big growing
Speaker 1: company does because the market is telling you you're a
Speaker 1: big growing company that like has you know, high returns
Speaker 1: on your projects. And if you don't in fact have
Speaker 1: high returns on your projects, then like that signal gets
Speaker 1: messed up.
Speaker 2: I talk to a lot of CEOs on on the television,
Speaker 2: and about half of them, maybe more than that, will
Speaker 2: tell you that they don't pay attention to cotor. But
Speaker 2: that's so crazy. You know that they're lying. If I
Speaker 2: had a real time report card of how my company
Speaker 2: and my job performance was being viewed, I'm not like that. No,
Speaker 2: I can't watch it move in real time. Yeah, right,
Speaker 2: Like I'd be glued to the screen.
Speaker 1: It's not just like people's opinions about you, it's also
Speaker 1: like your bank account. People like a lot of their
Speaker 1: networks and their company's stock, right absolutely. If I had
Speaker 1: all of my networth in one company of stock, I
Speaker 1: would pay a lot of attention to.
Speaker 2: That for sure. Nice question, Ron, Paul has a question.
Speaker 2: Paul was saying that he was reading your segment about
Speaker 2: the whole business securitization and how business loans get paid off.
Speaker 2: It was interesting to Paul that the normal way that
Speaker 2: they get paid off is in interest only payments followed
Speaker 2: by a balloon payment at the end of the term.
Speaker 2: The only high dollar amount loan most people are familiar
Speaker 2: with from personal experience as a mortgage where you pay
Speaker 2: down the principle along the way, and usually the final
Speaker 2: payment is the same size as all the others. Why
Speaker 2: are these two so different to busines? This is just
Speaker 2: need slash warrant more flexibility. Why don't they pay down
Speaker 2: some principle early to reduce interest costs?
Speaker 1: Okay, okay, Actually there's like several kinds of answers here.
Speaker 1: One is that companies and humans have different life cycles.
Speaker 1: Like a human is born and make no money, and
Speaker 1: then as a career where they start out making a
Speaker 1: little bit of money and then they make more and
Speaker 1: more money, and then towards the end of the career
Speaker 1: they stop making money, right, And so you have financial
Speaker 1: products to sort of smooth that out. And so if
Speaker 1: you take out a mortgage, it's like typically you take
Speaker 1: out a mortgage and you don't have very much money,
Speaker 1: but you have a lot of earning power, and you
Speaker 1: pay down the mortgage during your earnings here your earning years,
Speaker 1: and then when you stop having earning power, you stop
Speaker 1: having a mortgage. It's pretty convenient. It's not perfect, but
Speaker 1: like that kind of works out that way. Companies ideally grow,
Speaker 1: they're earning power every year. Ideally a right countries too,
Speaker 1: So like corporate and sovereign borrowers have more and more
Speaker 1: earnings power every year, and so ideally and so they
Speaker 1: have more and more ability to pay down debt every year.
Speaker 1: And so if you take out a corporate loan, it's like,
Speaker 1: you need the money now, but in ten years you'll
Speaker 1: easily be able to pay back the money because you
Speaker 1: keep growing your earnings. But also, mortgage is amortized. Because
Speaker 1: if you're a person and you like go around for
Speaker 1: thirty years making the interest payment on your mortgage, and
Speaker 1: then at the end of the term, it's like, we
Speaker 1: need a million dollars, please, you might not have the
Speaker 1: million dollars lying around like a company. One they might right,
Speaker 1: their earnings power might keep crying. Two they can refinance
Speaker 1: the debt. And in fact, companies do not generally borrow
Speaker 1: money and then pay it back and then say, whoow,
Speaker 1: we've cleared that debt. Companies like target a certain amount
Speaker 1: of a capital structure with a certain amount of debt
Speaker 1: because to a company, interest expense is cheaper than equity,
Speaker 1: right Like, if they have debt, then that increases their
Speaker 1: return on equity, and they think of their equity as
Speaker 1: being more expensive than debt. They think we need to
Speaker 1: earn a twenty percent return for shareolders, whereas we can
Speaker 1: pay our creditors, you know, six percent or whatever. So
Speaker 1: companies typically like to have debt, and as they grow,
Speaker 1: they tend to borrow more money, and so they don't
Speaker 1: need to amortize their debt. They want to keep a
Speaker 1: certain amount of debt outstanding, and advertising would make that
Speaker 1: more complicated because they'd have to like incur more debt
Speaker 1: as they paid down their earlier debt. Also, like from
Speaker 1: a market perspective, like the non advertizing bond or bullet
Speaker 1: loan is a better product for an investor because if
Speaker 1: you're an investor, you have a fund and you want
Speaker 1: to invest it, and then you get some of the
Speaker 1: money back every year, like I have to go invest
Speaker 1: this again. So having a non adverortizing product is better
Speaker 1: for a lot of investors.
Speaker 2: Those are all the questions.
Speaker 1: I think we didn't have any any real questions for you.
Speaker 2: Should I ask you a question?
Speaker 1: I try to you to talk about your financial advisor
Speaker 1: or your favorite finance books, but you did not take
Speaker 1: the what's your favorite science fiction book?
Speaker 2: I have recency buys here, which is just probably okay,
Speaker 2: interesting I read that.
Speaker 1: I ever read this.
Speaker 2: It was fun.
Speaker 1: Yeah, but did you learn anything about I just say
Speaker 1: the sunders in the space. I don't know what it's about.
Speaker 2: Did you not see the movie?
Speaker 1: I don't see movies.
Speaker 2: Oh, I went with my parents. So nice, something you
Speaker 2: have to look forward to and a few decades.
Speaker 1: Yeah, yeah, I've gone to the movies with my children.
Speaker 2: But I have to imagine that's still chore. It's not like.
Speaker 1: I've gone to Frozen too. Okay, just sure.
Speaker 2: Yeah, projects you'll marry might be a little intense for them.
Speaker 1: So for gotten there, Gotten there. And that was The
Speaker 1: Money Stuff Podcast.
Speaker 2: I'm Matt Levine and I'm Katie Greifeld.
Speaker 1: You can find my work why subscribing to The Money
Speaker 1: Stuff New Letter on Bloomberg dot.
Speaker 2: Com, and you can find me on Bloomberg TV every
Speaker 2: day on the Cloe between three and five pm Eastern.
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Speaker 1: question and we might answer it on the air.
Speaker 2: You can also subscribe to our show wherever you're listening
Speaker 2: right now and leave us a review. It helps more
Speaker 2: people find the show.
Speaker 1: The Money Stuff podcast is produced by Anamasarakis, Moses Onam
Speaker 1: and Alexis HoTT Our.
Speaker 2: Theme music was composed by Blake Maples.
Speaker 1: Amy Keen is our executive producer. Thanks for listening to
Speaker 1: The Money Stuff Podcast. We'll be back next week with
Speaker 1: more stuff