Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: H Matt, it's nice to be back in studio with you.
Speaker 1: Yeah, we've we've we've each had a series of adventures. Yeah,
Speaker 1: the car crashed into my house. You went to Ireland's insane.
Speaker 2: Those two events are not related.
Speaker 1: No, it would be rader they were.
Speaker 2: I'm a year older, two.
Speaker 1: Weeks old there, but yeah, across the mouse A happy birthday.
Speaker 2: Thank you. It was last Monday.
Speaker 1: My birthday is, it's around, it's coming weird, it's fine,
Speaker 1: social Security number is.
Speaker 2: Some people are so caged about their birthdays.
Speaker 1: I guess I shouldn't be. It's like, don't don't be ashamed. Birthday, Katie,
Speaker 1: thank you. Everyone's on your birthday is just Katie.
Speaker 2: Yeah for me and Matt, just you can send.
Speaker 1: Them to we have We have a close to overlapping birthday.
Speaker 2: Yeah.
Speaker 1: You and I had like birthday parties a day apart once, right.
Speaker 2: Yeah, I went to your birthday party.
Speaker 1: Yeah.
Speaker 2: I was going to say the number leap the number.
Speaker 2: That was fun. Okay, I didn't go.
Speaker 1: To yours because I was like in the far reaches
Speaker 1: of New Jersey, but I heard it was a wild time.
Speaker 2: You should have gone, I should have gone. Well, my
Speaker 2: baby showers there, so you should go to that.
Speaker 1: Yeah, yeah, wild fire trucks.
Speaker 2: No, maybe, I don't know, depending.
Speaker 1: On depending how he Wow and Welcome to The Money
Speaker 1: Stuff Podcast, new weekly podcast where we talk about stuff
Speaker 1: related to money. I'm Matt Levine and I write the
Speaker 1: Money Stuff Call for Bloomberg Opinion.
Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 2: an anchor for Bloomberg Television.
Speaker 1: I got so many emails from people being like, are
Speaker 1: you on vacation, because it's like a bit yea that
Speaker 1: every time I go ahead becation, Elon Musk does some
Speaker 1: wild thing and it's not like literally only when I
Speaker 1: go on vacation. And in fact, I was not on
Speaker 1: vacation last week, but you were.
Speaker 2: Yeah, you were ready and waiting to.
Speaker 1: To write about the SpaceX ip Yeah, which they made
Speaker 1: the public filing for an IPO that is supposed to
Speaker 1: go in like a.
Speaker 2: Couple of weeks like mid June. Yeah, there's a it
Speaker 2: was interesting to see all the different numbers. Is you said,
Speaker 2: it seems like the AI is taking up a lot
Speaker 2: of cash.
Speaker 1: Yeah. Right. The basic financial situation here is like they have,
Speaker 1: you know, a kind of goodish business of flinging satellites
Speaker 1: into space and more importantly like charging people for satellite service.
Speaker 1: They have had until recently a sort of money pit
Speaker 1: for building a front of your AI lab that is
Speaker 1: not necessarily the most renovator generating front of youer AI lab.
Speaker 1: But now they've sort of switched, like like a little
Speaker 1: too late for the IPO filing. They're now like a
Speaker 1: AI infrastructure company that basically rents data centers through anthropic
Speaker 1: you know whatever. Yeah, they've spent a lot of money
Speaker 1: on AI. They've made more of their money on space.
Speaker 1: But to me, the interesting thing is that sort of
Speaker 1: projections they talk about their total addressable market, which is
Speaker 1: a number you throw around for here is like where
Speaker 1: we could make money, and you know, they say, we've
Speaker 1: idented about the largest dam and human history or whatever,
Speaker 1: twenty eight trillion dollars. But almost all of that is
Speaker 1: enterprise AI. Right. The perspective begins with twelve pages of
Speaker 1: photos and illustrations of rocket launches and Mars colonies, and
Speaker 1: then it's like we're gonna do enterprise AI. Yeah, and
Speaker 1: there's like a near term play of we make money
Speaker 1: actually sending rockets into space. And then there's like a
Speaker 1: medium term play We're gonna make trillions of dollars doing
Speaker 1: enterprise AI, even though we just started that a couple
Speaker 1: of months ago. And then there's like a long term
Speaker 1: planet we're gonna build Mars colonies. Right, it's like a strange,
Speaker 1: like you know, U shaped curve of space and then
Speaker 1: AI and then more space. There are projections of like
Speaker 1: how we're going to make money. It's like this is
Speaker 1: an AI company, and I don't know if that's the
Speaker 1: story that investors are hearing are interested in, but it
Speaker 1: is sort of the when they look around to be
Speaker 1: like how can we justify a two trillion dollar valuation,
Speaker 1: it's like, well, we're gonna sell a lot of enterprise
Speaker 1: AI software.
Speaker 2: Yeah, this is what we're going to do in the meantime.
Speaker 2: Before before the.
Speaker 1: Mars colony becomes vilt that in orbital data centers, which
Speaker 1: are now like they have gone from like a glimmer
Speaker 1: and Elon Musk's side to everyone being like, oh yeah.
Speaker 2: Urbal data center like a thing that you say with
Speaker 2: the straight yeah.
Speaker 1: Exactly exactly, like I have laughed the first time.
Speaker 2: Well, yeah, of course, where else would you do with them?
Speaker 2: It makes sense. Yeah, it's gonna be interesting. This is
Speaker 2: also something else we've talked about on the podcast is
Speaker 2: the Elon Musk premium that Tesla shares enjoy and I
Speaker 2: I wonder if that's going to transfer to SpaceX.
Speaker 1: They have, you know, like a eighteen billion annual revenue
Speaker 1: run rate lose money, like then like all of the
Speaker 1: numbers that are being talked about for the IPI or
Speaker 1: load a mid one trillions to like two trillions to there,
Speaker 1: that's a hundred times revenue for a money losing company.
Speaker 1: I think that's an Elon Musk premium.
Speaker 2: It sounds like it quite a large one. Yeah, that's fair.
Speaker 1: I make fun of Elon Musk, but like if you
Speaker 1: put money into SpaceX, you have more money now like
Speaker 1: necessarily on a like profit basis, but on a valuation basis.
Speaker 1: Like people have made a lot of money with the
Speaker 1: Elon Musk and so there's a reason that people keep
Speaker 1: putting a premium on investing with them, and like you know,
Speaker 1: like like will that eventually run out? Will people like
Speaker 1: who buy on the IPO be disappointed that like it
Speaker 1: doesn't justify a two trillion dollar valuation like Marrie, I
Speaker 1: don't know, but there's going to be an Elon Musk premium.
Speaker 1: Even if this is a super disappointing IPO, It'll be
Speaker 1: an Elon Musk premium.
Speaker 2: And it'll also be in a bunch of indexes and
Speaker 2: be in a bunch of it. There's a lot of consternation.
Speaker 1: I was thinking about this, Like I had an email
Speaker 1: from one person, you know, like a regular retail investor.
Speaker 1: I put money at the SMP. Is there anyway for
Speaker 1: me to short Elon Musk And the answer is like, sure,
Speaker 1: short space AX if you want to get your you know,
Speaker 1: and then it goes up to and you lose your shorts.
Speaker 1: I totally understand, and I think I'm more sympathetic than
Speaker 1: most people to the idea that, like the big indexes
Speaker 1: have to include SpaceX on an accelerated basis. Like I
Speaker 1: think that's right. Like I think when you're like the
Speaker 1: S and P or the Russell three thousand or even
Speaker 1: the Nasdaq one hundred, like you are more or less
Speaker 1: saying we are the stock market, right, or at least
Speaker 1: we're the large cap companies, or like in the ass case,
Speaker 1: we're like the big tech companies. Listen, on ethic, Like
Speaker 1: it would be a dereliction of their job to not
Speaker 1: include in their index a gigantic return driving, super high
Speaker 1: profile company that is a public company, Like they just
Speaker 1: have to include SpaceX, Like I totally get it. And
Speaker 1: people are mad because they're like waving their rules and
Speaker 1: it's like they're waving their rules. They're really mad and
Speaker 1: they're waving their rules to include this giant company. And
Speaker 1: I'm very sympathetic to it, but I will say that
Speaker 1: so many people are mad about it that there should
Speaker 1: be a competitor index that's just like the S and
Speaker 1: P five hundred without Elon Mosk. Right, my general view
Speaker 1: is like if you are a passive index investor, you
Speaker 1: can't like have standards. You can't be like, oh but
Speaker 1: this company is bad, Right, that's not how it works.
Speaker 1: Like you're you're taking the market's judgment. That's the market's judgment.
Speaker 1: Is that SpaceX is worth two trillion dollars, then, like
Speaker 1: that's the markets.
Speaker 2: So you signed up, that's what you sign up for.
Speaker 1: But like just empirically, a lot of people don't want
Speaker 1: to sign up for that, and so you should give
Speaker 1: them the other thing, Like it doesn't matter, Like it's
Speaker 1: like esthetically displeasing to be like, wow, that's an index
Speaker 1: fund with that Elon mus but the best people want
Speaker 1: give it to.
Speaker 2: It's like ex China, you know exactly.
Speaker 1: It's like ESG indexes where it's like most of the
Speaker 1: s and P five hundred but not the bad companies, right,
Speaker 1: Like you do the same thing with Elon Musk. Yeah,
Speaker 1: it would sell like hotcakes.
Speaker 2: Well, and if it didn't, that also too would be interesting.
Speaker 2: Like all of this hand ringing.
Speaker 1: Was just that, right. Part of the hand ring is
Speaker 1: people are mad about like their index funds being invested
Speaker 1: in Elon Musk. Yeah, this drives me a little nuts.
Speaker 1: But like part of it is active manager being like, well,
Speaker 1: we're benchmarked to these indexes, and SpaceX is going to
Speaker 1: be a huge driver of under or over performance, right,
Speaker 1: Like either it'll go up a lot or it won't, right,
Speaker 1: And the only way for us to be safe in
Speaker 1: keeping our jobs is to like, I don't know, hug
Speaker 1: the index on that one, right, and if like we
Speaker 1: buy no SpaceX and ten xes, then we will look
Speaker 1: terrible against the index that we're benchmarked too. Yeah, your
Speaker 1: job is to actively manage when they're supposed to get
Speaker 1: it right. But then unless people are really mad about it,
Speaker 1: and it's going to be the most like attention getting
Speaker 1: company in the index until it open a goes public.
Speaker 2: It's interesting to point out that we also saw Russell, Yeah,
Speaker 2: make the decision to fast track sure SpaceX, Like.
Speaker 1: It's like the Russell three thousands. Every company they have
Speaker 1: to it's crazy.
Speaker 2: But it's probably worth pointing out that Nasak did win
Speaker 2: the listing for the SpaceX IPO after they agreed to
Speaker 2: let SpaceX in early to the NASAQ one hundred.
Speaker 1: I know, but I don't like, I don't think that
Speaker 1: these index providers, I mean, like maybe past that because
Speaker 1: playing three dimensional chests or whatever. Like, I don't think
Speaker 1: these index providers are, oh we have to kiss up
Speaker 1: to Elon Musk. I think they are consulting with the
Speaker 1: users of the indexes, index ones and investors generally, and
Speaker 1: they're like, is this a public company? Yes, well then
Speaker 1: it should be in the list of public companies. I
Speaker 1: don't know.
Speaker 2: Yeah, Well, the fact that it isn't just nastact is yeah,
Speaker 2: add credence to that.
Speaker 1: People are mad about indexes monking with their float requirements,
Speaker 1: and in fact it looks like SpaceX's float will be
Speaker 1: it's actually available, free float will be pretty low for
Speaker 1: the first six months or so, like a lot of
Speaker 1: shares will be subject to lock up, and so only
Speaker 1: in the order of five percent of shares will trade.
Speaker 1: And so if you force all the index ones to
Speaker 1: squeeze into that five percent of shares are going to
Speaker 1: push out the price a lot. I don't know how
Speaker 1: binding that is. A lot of the indexes have like
Speaker 1: float adjustments where it's not like you have to buy
Speaker 1: the entire free float. And also the biggest index of
Speaker 1: the S and P which is not going to add
Speaker 1: it for six months or Yeah, so it'll be they'll
Speaker 1: have more free float by then because the lock ups
Speaker 1: will explare. But yeah, like the there's gonna be a
Speaker 1: lot of index or day five in the case of
Speaker 1: the Rustler, day fifteen in the case of the NAZAC,
Speaker 1: which is when these when that will be eligible for
Speaker 1: the index. There'll be a lot of like index demand
Speaker 1: and not a lot of supply, and that could be
Speaker 1: have weird dynamics for prices.
Speaker 2: Yeah, you pointed this out in one of your columns.
Speaker 2: But fifteen days, I mean fine, five days does seem
Speaker 2: a little quick, like it'll it feels like it'll still
Speaker 2: be funky at that point.
Speaker 1: When a company goes public like s and P five
Speaker 1: hundred funds are not buying in the IPO because who knows,
Speaker 1: and I'll be added to the SMP. There's gonna be significant,
Speaker 1: like Russell and Nazac, index demand for this company very
Speaker 1: predictably within three weeks after, you know, one to three
Speaker 1: weeks after the IPO, and so you know, like we'll
Speaker 1: hedge funds be buying in the IPO to deliver in
Speaker 1: their index arm strategy. Yeah, and so there's going to
Speaker 1: be essentially index demand for these shares in the IPO,
Speaker 1: and that's like a little unusual, right. I don't really
Speaker 1: know the numbers, but like people have said, seventy five
Speaker 1: billion dollars of stock coming in the IPO, which is
Speaker 1: a giant IPO. Yeah, the valuation is one thing, but
Speaker 1: then the amount of stock being issued is huge, and
Speaker 1: some of that is going to go to institutional investors
Speaker 1: who like the stock and go to meetings and build
Speaker 1: some valuation model and come to some price and put
Speaker 1: in an order at a price and get allocated the stock.
Speaker 1: But some of it is going to come from really
Speaker 1: like price in sensitive demand, which is like, you know,
Speaker 1: thirty percent or whatever the deal is going to retail,
Speaker 1: and retail is like generally in offerings is assumed to
Speaker 1: be priced and sensitive, right, Like the retail just prices
Speaker 1: at what the institutional prices. And so if you have
Speaker 1: thirty percent going to retail, you have a lot of
Speaker 1: price and sensitive demand, and then some of it is
Speaker 1: going to effectively go to index funds, which are like
Speaker 1: effectively priced and sensitive.
Speaker 2: Yeah. Well, we brought up with the seventy five billion dollars,
Speaker 2: and definitely the amount of the float that's available is
Speaker 2: also one of the reasons why people are upset about
Speaker 2: sort of the rules being bent here because I think
Speaker 2: that's like five percent. Yeah, but think about that absolute number,
Speaker 2: like seventy five billion dollars. I feel like the percent
Speaker 2: becomes a little bit less meaningful.
Speaker 1: Well depends if there were eighty billion dollars of index demand.
Speaker 1: That would be a big deal, I don't think, because
Speaker 1: it's not. The S and P day one and the
Speaker 1: indexes all have like adjustments. The index inclusion is not
Speaker 1: based on the entire market gap, but it's based on
Speaker 1: some multiple of the.
Speaker 2: Foot something I was just thinking about. So this IPO
Speaker 2: is expected by June eleventh, it's expected on a Thursday.
Speaker 2: What are we going to do well? I don't know,
Speaker 2: live podcast. Yeah, we should come out with a really.
Speaker 1: Strong start trading as we walk in here.
Speaker 2: Yeah, Jeese Louise.
Speaker 1: Maybe we can get them to move it up.
Speaker 2: Yeah, I mean, just tom him a.
Speaker 1: Price on a Thursday. I think so, and then I'll
Speaker 1: trade on Friday, so it doesn't matter.
Speaker 2: I need to think about this. We were trying to
Speaker 2: plan it for television.
Speaker 1: I have a governance a little bit. The governance is crazy.
Speaker 1: It's not that crazy because you know, we talked about
Speaker 1: the Elon Musk prenant. It's like the governance of this
Speaker 1: company is Elon Musk can do whatever he wants, right,
Speaker 1: he has eighty five percent voting control his super voting stock.
Speaker 1: He also gets to a point more than you know,
Speaker 1: fifty one percent of the directors regardless of his voting power.
Speaker 1: Because he has the special stock, he doesn't have to
Speaker 1: He's no obligations to like give the SpaceX any corporate opportunities.
Speaker 1: So if he wants to start a new AI company
Speaker 1: or a new space company, you just do it, and
Speaker 1: he can't be sued for like preaching his fidy SIA duties.
Speaker 1: He can basically not be sued for securities fraud. If
Speaker 1: you super securities fraud, you have to do it in
Speaker 1: Texas State court. And there's all this stuff and you
Speaker 1: really can't sue for like preaching forty sharded is you
Speaker 1: need to have three percent of the stock to do that,
Speaker 1: which like there's tens of billions of dollars, and you
Speaker 1: wouldn't do that if you didn't like Elon Musk. So
Speaker 1: it's really just there's no checks on him whatsoever. And
Speaker 1: I do think that that is how SpaceX has been
Speaker 1: run up till now. He has worked out well for shareholders.
Speaker 1: I think a lot of the sholders of SpaceX are
Speaker 1: There's some quibbles about the ex high merger or whatever,
Speaker 1: but the most the shareholders of SpaceX are pretty happy
Speaker 1: with how Elon Musk is round the place. Yeah, And
Speaker 1: I think that Elon Musk and a lot of investors like, yeah,
Speaker 1: just letting Elon Musk do whatever he wants is the
Speaker 1: right way to run this company. And the stuff that
Speaker 1: happened to Tesla in Delaware where he got sued for
Speaker 1: getting paid too much. Was not the right way for
Speaker 1: Elon Musk to be governed, and he should get to
Speaker 1: do what he wants. And they are fixing the mistakes
Speaker 1: of Tesla by going public this way with SpaceX. I
Speaker 1: think that's a reasonable analysis. But I also think that
Speaker 1: as we just talked about, a lot of people who
Speaker 1: will buy the stock in the near term are index funds, Yes,
Speaker 1: and they don't like that. No, that's not their kind
Speaker 1: of thing.
Speaker 2: If you don't want SpaceX exposures, just buy an ESG fund.
Speaker 2: It seems neat.
Speaker 1: The ESG and Elon Musk relationship is interesting, right because
Speaker 1: it's like, you know, he has in many ways very
Speaker 1: environmentally friendly and in other way is not so ESG.
Speaker 1: It's not so much there's this really bizarre precedence setting
Speaker 1: management friendly governance of this company. And they were like, yeah,
Speaker 1: that's what people want investing in SpaceX. That's what you
Speaker 1: want to be. Like, what about the index ons, index ones?
Speaker 1: Like the deal with indix ons is they don't get
Speaker 1: what they want, they get what the market wants, right,
Speaker 1: So that's that's the deal they're signing up for. But
Speaker 1: it is a real new president now public companies are
Speaker 1: governed and if it goes well, what we saw with
Speaker 1: the Elon Musk like Winshot pay package is that every
Speaker 1: other texto is like, I want a trillion dollars if
Speaker 1: the people copy the Elon mus president because everyone wants
Speaker 1: to be Elon Musk. And so I think you'll see
Speaker 1: other companies go public with no constraints on their CEOs
Speaker 1: and like not all old Elon Musk. So Robin Hood
Speaker 1: like announced they're gonna let you like hook up your
Speaker 1: AI agents to our trading account and you'll have a
Speaker 1: special sandbox where they can't lose all of your money,
Speaker 1: but they can lose as much money as you give them. Yeah,
Speaker 1: and then you can like type in a box like
Speaker 1: they have some examples, like an active trader can backtis
Speaker 1: the mean reversion strategy to see how it performed historically
Speaker 1: and to play it automatically buy over sold stocks and
Speaker 1: so when they revert to the means, So stuff like that,
Speaker 1: you can like type in a box like, hey, here's
Speaker 1: a trade idea, and then your bot will do it
Speaker 1: for you. And I read about this this week, and
Speaker 1: I what I said was like you and I have
Speaker 1: talked and I've written about how eventually every trade will
Speaker 1: be an ETF. Yes, and like the ETF will be
Speaker 1: like the universal rapper for trade ideas. And now I'm like,
Speaker 1: now I'm wrong. It's not that it's agents. Agents will
Speaker 1: be the universal rapper because like you'll be able to
Speaker 1: think up whatever trade the idea you want, and instead
Speaker 1: of like laboriously piecing together stocks and options and what
Speaker 1: not to implement it, you'll just type the idea and
Speaker 1: then your agent will do the laborious piecing together.
Speaker 2: Yeah, I think it makes sense for trades. But and
Speaker 2: if you're just you want to buy indexes.
Speaker 1: Indexes, fine, yeah, yeah, but what has happened in the
Speaker 1: last few years is that like ETFs have been not
Speaker 1: just a rapper for index fund buy on hold ownership,
Speaker 1: but also long short pair trade.
Speaker 2: Strategy, stock auto call, all.
Speaker 1: Sorts of nonsense. Yeah, and all that nonsense is going
Speaker 1: to just be agentic AI and ETFs will be index
Speaker 1: fense again. And like, you know, it's a little.
Speaker 2: Sad for me, but I mean this is in your
Speaker 2: for you, this isn't your vision of the world. There's
Speaker 2: a lot of steps to make that happen.
Speaker 1: Yeah, we're early days of agent Rabinhood trading. In fact,
Speaker 1: they don't. They only have stocks right now, Like eventually
Speaker 1: it will be your agent can do options and crypto
Speaker 1: and prediction markets and then all the reil fund will happen,
Speaker 1: but for not stocks.
Speaker 2: And uh, it's also credit cards, right, like you can
Speaker 2: instruct the agent to make purchases.
Speaker 1: Yeah, which it was just not a thing that only
Speaker 1: Robinhood has been working on. But neither is the record
Speaker 1: stuff like public had a Bignoun's been about agentic brokerage stuff.
Speaker 1: But bid Yeah, like your credit card. You can like
Speaker 1: type in a box like buy me these sneakers if
Speaker 1: they get cheap, and then it'll do.
Speaker 2: It's just fun. I feel like you can imagine a
Speaker 2: myriad of ways where this goes wrong. Yeah, sure, especially
Speaker 2: I mean trading, yes, but also with the credit card.
Speaker 1: Sure, I think like you can set like hard limits
Speaker 1: on which the bot can spend.
Speaker 2: That's true, But even still I could see the bots
Speaker 2: being like, I don't know, this is a really good deal,
Speaker 2: maybe we should just go for it.
Speaker 1: Well, I think the idea is that the limits are
Speaker 1: not internal to the bot. They're on the credit card. Yeah,
Speaker 1: we're on the broker's account. If you say the bot
Speaker 1: can have ten thousand dollars on my robin Hood account,
Speaker 1: then like in theory, if your robin that if that
Speaker 1: pot gets to zero, then the bot has to stop.
Speaker 2: I do like your your vision of the world where
Speaker 2: this replaces all these one click trade ETFs. It seems
Speaker 2: like for the time being that Robinhood itself has less
Speaker 2: ambitious desires here, they think. The write up by Bloomberg's
Speaker 2: Page Smith quotes their vice president of product management for
Speaker 2: Brokerage saying that you know, they're looking forward to learning
Speaker 2: how different people use the product, which will inform how
Speaker 2: the team develops it.
Speaker 1: So yeah, I'm always exaggerating here, like probably like twenty
Speaker 1: Like really you know, hardcore sophisticated people will use it
Speaker 1: to like fairly sophisticated trades, right, and then like will
Speaker 1: someone be like hey, if there's a dip by the dip, yeah, sure, yeah.
Speaker 1: Like one thing that might happen is like there might
Speaker 1: be like just sort of like emergent like common behavior
Speaker 1: mm that that's codified, right, Like if everyone sort of
Speaker 1: wakes up and like, oh I have a bot, what
Speaker 1: should I have to do it? By the dip or
Speaker 1: like whatever then like you might see I don't know,
Speaker 1: you might see like different developments in the market where
Speaker 1: like instead of instead of like retail traders all having
Speaker 1: sort of random reactions than it is, they can all
Speaker 1: sort of pre program the same reactions, and like they
Speaker 1: might have more coordinated behavior. The other thing I want
Speaker 1: to say is I wrote about this is this thing
Speaker 1: only makes sense. It doesn't. It's not just a matter
Speaker 1: of AI. It only makes sense because hood is offered
Speaker 1: free trading for a long time. Right, I you know
Speaker 1: was writing a financial column before free trading was a thing. Right, Like,
Speaker 1: free trading is a development of the last eleven or
Speaker 1: eight years. And in a world without free stock trading,
Speaker 1: the idea that you'd tell you're bot like automatically buy
Speaker 1: over sold stocks and sell when they revert to the
Speaker 1: mean is crazy. It's like nine ninety five each time
Speaker 1: you do that trade. And in a world where there
Speaker 1: are no visible transaction costs, and like, there are definitely
Speaker 1: invisible transaction costs, right, because you're definitely like dealing with
Speaker 1: a market maker and paying a spa at each time
Speaker 1: you trade that. In a world no visible transaction costs,
Speaker 1: you can be like, yeah, do you like one hundred
Speaker 1: trades a day, no problem. Right, So this is like
Speaker 1: a technology that exists because Robinhood innovated in free trading.
Speaker 1: But it's also a technology that is very lucrative for
Speaker 1: Robinhood and for its like market maker partners, because it'll
Speaker 1: if people use this, this is even more trades, right, Like,
Speaker 1: if people use it, they're going to program a bot
Speaker 1: that will do one hundred trades a day to take
Speaker 1: advantage of some technal the they think of, and then
Speaker 1: that'll generate a lot of revenue for the market makers
Speaker 1: who fill orders on robinin everyone wins perhaps, yeah, I
Speaker 1: mean like right, Like.
Speaker 2: You might lose as the trade if you're.
Speaker 1: Doing those hundred trades a day, Like, what are the
Speaker 1: odds that you and your bot have come up with
Speaker 1: a with a trade idea that not only beats the
Speaker 1: market on a back desk, but that beats the market
Speaker 1: after the actual transaction costs of trading.
Speaker 2: On robin The dozen or so people who take up
Speaker 2: this tool.
Speaker 1: Someone's going to do great on it.
Speaker 2: Yeah.
Speaker 1: Also it's going to be sports betting.
Speaker 2: But well, it just feels like you know the arc
Speaker 2: of humanity sports.
Speaker 1: Best the credit card, Like the first idea they have
Speaker 1: for the credit card is like by this like cool
Speaker 1: sneaker when it goes below whatever price. And it's like
Speaker 1: lad Zenda has talked about like democratizing finance by like
Speaker 1: introducing the new asset class, which is sports betting. I
Speaker 1: mean sorry, pre sports betting. And it's funny to think of,
Speaker 1: like like rob had started as like a stock brokerage,
Speaker 1: and there's a world of asset classes out there, some
Speaker 1: of which are like sneakers and sports bets, and yeah,
Speaker 1: if you want it to be and like between the
Speaker 1: credit card and the brokerage, soon all of the like
Speaker 1: retail phasing asset classes will be sort of like fungibly
Speaker 1: tradable and you can be like I mean trade you know,
Speaker 1: I mean you tell your agent if these sneakers get
Speaker 1: cheap by them, but if the stock gets cheap by that,
Speaker 1: and if the sports bet gets you just have a
Speaker 1: sort of like fungible dashboard of bets that you can make.
Speaker 2: I do want to call out a line in your
Speaker 2: column about this that I just really loved this sentence
Speaker 2: that if in your shameful secret heart, what a beautiful
Speaker 2: phrase you want to do a trade like by every
Speaker 2: stock whose ticker begins with C, so out of the
Speaker 2: money call options on every stock who sticker begins with D.
Speaker 2: Nobody will sell you an ETF like that, and you'd
Speaker 2: be too embarrassed to ask. I love thinking about like
Speaker 2: the human psychology element, right.
Speaker 1: I probably could have come up with a more shameful idea,
Speaker 1: But then I was like, I'm really going to spend
Speaker 1: like ten minutes sitting here like the most shameful.
Speaker 2: What's the most embarrassing trade I could ask to be
Speaker 2: packaged into an ETF?
Speaker 1: I did.
Speaker 2: I did love that, though, I will say I was
Speaker 2: sitting on the path this morning reading that, thinking about
Speaker 2: my own shameful secret heart, and like, I don't know,
Speaker 2: I didn't get very far. I didn't come up with
Speaker 2: a shameful trade, but it's fun to imagine.
Speaker 1: Tell me about your sci fi novel, Yeah.
Speaker 2: I don't.
Speaker 1: I think we aired it well.
Speaker 2: I don't want anyone to see you told.
Speaker 1: Me about it extensively on MIC and then we cut
Speaker 1: it all that.
Speaker 2: It's all about blood anyway and space. But listen, we'll
Speaker 2: come out by twenty thirty and then everyone could buy it.
Speaker 1: We're going to talk about this.
Speaker 2: I'm going to really lock in finally and write this
Speaker 2: GD book. Do you want to start with baseball or
Speaker 2: do you want to start with drugs?
Speaker 1: You're like, round to go with drugs.
Speaker 2: I want to talk about drugs because longtime listeners of
Speaker 2: the Money Stuff podcast will remember me talking about like
Speaker 2: the drug Olympics that I wanted to happen, where like
Speaker 2: all the athletes are on drugs and we just let
Speaker 2: them battle to the death alone.
Speaker 1: No, brothers also want that.
Speaker 2: Yeah, and Peter Tile apparently yikes. So the Enhanced Games
Speaker 2: that was exact. That was exactly their idea as well.
Speaker 2: They had their first event Sunday in this past Sunday
Speaker 2: in Las Vegas, and uh.
Speaker 1: It was a bit of a bus we've talked about
Speaker 1: they're like, Onion, sorry about doping and tressage?
Speaker 2: Have we have we not bring me back up to speed.
Speaker 1: There's like a truly insanely funny, like long form Onion,
Speaker 1: sorry about doping and dressage. That's hope.
Speaker 2: I don't think I've read this one of.
Speaker 1: The funniest Onion things that it might be quick, but
Speaker 1: its the Onion franchise.
Speaker 2: What's the thrust of it that they gave the horses drugs? Yeah, yeah,
Speaker 2: oh well, yeah, well there is a lot of you know,
Speaker 2: athleticism involved anyway, don't drug your horses. Okay, So there
Speaker 2: were some technical glitches in the Enhanced Games. Apparently the
Speaker 2: live stream froze for more than ten minutes during the
Speaker 2: first competition. The bigger thing was that you had three
Speaker 2: athletes who were described by the organizers as clean. They
Speaker 2: didn't take any drugs, they won their events. There was
Speaker 2: only one world record set in the entire games. I
Speaker 2: think it was in swimming.
Speaker 1: Record is pretty good. It's better than nowhere, Like for
Speaker 1: your first for your first outing, to set a world
Speaker 1: record is pretty good because.
Speaker 2: I feel like I feel like people wanted and I
Speaker 2: think the event itself also said that you know, we're
Speaker 2: going to see like we're going to break all the records.
Speaker 1: Sure, I feel like you're not going to get the
Speaker 1: very top tier of Olympic level athletes to compete in
Speaker 1: the Drug Games, but you get the next tier or
Speaker 1: three tiers down, and then if taking drugs allows them
Speaker 1: to break our world record, like that's a pretty good
Speaker 1: case for drugs.
Speaker 2: That's true.
Speaker 1: I don't want to get here like kids take drugs.
Speaker 1: That's Peter till Job like I'm persuaded, I'm going to
Speaker 1: go take some steroids.
Speaker 2: Well, you can also sort of take the other side
Speaker 2: of this trade going on, because enhanced group shares fell
Speaker 2: to an all time low after the event. I didn't
Speaker 2: know that this was publicly listed. It is. It was
Speaker 2: down like forty I think on Tuesday, which is nuts.
Speaker 2: It is interesting though, I feel like we did prove something,
Speaker 2: which is that it takes more than drugs.
Speaker 1: No, it took it. They got a world record in
Speaker 1: one event. How many did they do?
Speaker 2: They did a bunch like how many Okay, I don't
Speaker 2: have the number in front of me.
Speaker 1: But they run a whole Olympics, did they?
Speaker 2: They did a lot of different stuff.
Speaker 1: Come on.
Speaker 2: The thing that I cared, the thing that I care
Speaker 2: about is of course the sprints as a runner myself.
Speaker 2: The one hundred meter dash. The winner was Fred Curley.
Speaker 2: He's an actual Olympian. He was one of the clean ones,
Speaker 2: and I mean he won the field clean sure, which
Speaker 2: I don't know. I just I feel like we proved
Speaker 2: that you need more than drugs you need in.
Speaker 1: One hundred meter dash. Well the first time, like if
Speaker 1: this thing like we're real and ten years later it
Speaker 1: has like a big prize pool. Then like somebody who's
Speaker 1: going to finished seventh in the Olympics, he'll be like, yeah,
Speaker 1: you know what, screwt, I'll set a world record in
Speaker 1: the handscams and win a prize pool. Like, I don't know,
Speaker 1: it was a good start. Actually, I have bush on
Speaker 1: the drug games.
Speaker 2: The payout does look pretty good. I think the world
Speaker 2: record that was said, I think the winner got like
Speaker 2: a million dollars.
Speaker 1: It's yeah, I don't know what the general payouts for
Speaker 1: like it really.
Speaker 2: Not a million dollars. I take the more like human
Speaker 2: optimists then, which is like, you need god given talent
Speaker 2: really hard drugs.
Speaker 1: But but surely their point is that is that people
Speaker 1: who have that plus drugs, you know what that's worth it.
Speaker 2: What we really need is to, as you said, take
Speaker 2: the absolute best athletes from the Olympics and give them
Speaker 2: drugs and then we'll really.
Speaker 1: Like the seventh best, like that's that's who they're going for, right.
Speaker 1: The person is not going to win a medal, but
Speaker 1: like with drugs.
Speaker 2: Yeah, with drugs, you could I feel like I've been
Speaker 2: we really got to look into your shameful secret heart.
Speaker 1: Anyway, speaking of people who have taken performance and had
Speaker 1: some drugs to play sports. Yes, it's true.
Speaker 2: So I don't know anything about baseball. So so.
Speaker 1: Fernando Tatis Junior is a guy I've written about a
Speaker 1: few times because he's involved in a fascinating piece of
Speaker 1: financial structuring. He was a minor league baseball player in
Speaker 1: like twenty seventeen who was wined and dined by this
Speaker 1: company called Big League Advance, and they were like, we'll
Speaker 1: give you two million dollars right now in exchange for
Speaker 1: ten percent of your future earnings in Major League Baseball
Speaker 1: if you make it to the majors. And if you're
Speaker 1: a minor league player, you live on peanuts and your
Speaker 1: chances of making it to the majors are slim. And
Speaker 1: so he took the money and gave up ten percent
Speaker 1: of his future earnings, and then he made it to
Speaker 1: the majors in fairly short order and did really well
Speaker 1: and fairly quickly, and then pretty quickly assigned a fourteen year,
Speaker 1: three hundred and forty million dollar contract with the Padres
Speaker 1: and was like, wait a minute, I'm giving up thirty
Speaker 1: four million dollars, you know, a two million dollar advance
Speaker 1: three years ago or whatever. Yeah, and so he sued.
Speaker 1: He waited a while to suit, like this is this
Speaker 1: all happened? And he signed as the the Padres twenty
Speaker 1: one or something, and he sued last year saying, this
Speaker 1: was a you serious loan, This was you loaned me
Speaker 1: two million dollars and you're charging me one thousand percent interests.
Speaker 2: Just predatory.
Speaker 1: It's predatory. And he's like, I was a naive seventeen
Speaker 1: year old kid. There's some quotes in the story. He's like,
Speaker 1: you know, I want to protect those young players who
Speaker 1: don't yet know how to protect themselves from these predatory
Speaker 1: lenders and illegal financial schemes. Baseball should be about our
Speaker 1: passion for the game, not dodging shady businesses driven only
Speaker 1: by profit and greed. Okay, so he lost last week, Yeah,
Speaker 1: basically because he didn't object to arbitration soon enough, and
Speaker 1: so he still has to pay big league advance. They
Speaker 1: are millions of dollars. I have a couple of views
Speaker 1: on this. One is that I read all the time
Speaker 1: about businesses that by equity and people. I'm like, yeah,
Speaker 1: this is the trade, right. Sometimes you invest in a
Speaker 1: minor league player, you give them an advance, they never
Speaker 1: make the majors, you can get zero dollars back. Right.
Speaker 1: It's like a venture capital portfolio. Right. Sometimes you invest
Speaker 1: in a minor league player and you give thellion dollars
Speaker 1: and they sign a gigantic contract and get thirty. You know,
Speaker 1: it's just it's a portfolio. And if you are the players,
Speaker 1: and you're the minor league player who takes in advance
Speaker 1: and then doesn't make it to the majors, that was
Speaker 1: a good trade for you, for sure, But you're sad
Speaker 1: because you would have rather made the majors. If you're
Speaker 1: Fernando Tettis Junior, on the one hand, you are paying
Speaker 1: back a very large multiple of the money you got.
Speaker 1: On the other hand, you make three hundred and forty
Speaker 1: million dollars. Fine. But so also, every time I write
Speaker 1: about this, I get several emails from people and they
Speaker 1: all say the same thing. They say, Fernando Tuttis Junior
Speaker 1: is a junior. His father is Fernando Tuttis's And they
Speaker 1: always say that Fernando Tuttis is the only person to
Speaker 1: hit two Grand slams in the same inning of a
Speaker 1: Major League baseball And this is the most notable fact
Speaker 1: about the Tuttis family apparently, But they also say, look,
Speaker 1: he was doing fine. He was a successful major leaguer.
Speaker 1: His son was, first of all, not like some hopeless prospect.
Speaker 1: He was like the top prospect in baseball. He knew
Speaker 1: he was going to have a major league career. And secondly,
Speaker 1: he wasn't like broke, no like.
Speaker 2: So I went on a real educational journey here because
Speaker 2: I don't know anything about baseball. But you linked to
Speaker 2: the New York Post story about this, which anytime I
Speaker 2: don't think we often discuss like New York Post stories
Speaker 2: on this podcast. But I didn't realize who his dad was.
Speaker 2: Twenty million dollars in career earnings. Why on earth would
Speaker 2: his son need a two million dollar advance, asked the
Speaker 2: New York Post, Which is a good question. But they
Speaker 2: also say, and again, I don't know anything about baseball,
Speaker 2: So I'm just believing them that anyone with two eyes
Speaker 2: could see that he would one day become a star,
Speaker 2: and baseball's bloated contracts in a league without a salary cap,
Speaker 2: ten percent of his future earnings was going to be
Speaker 2: much greater than a two million dollar upfront payment. Yeah,
Speaker 2: you lay it out like that.
Speaker 1: No, so right, Like one thing is maybe it's evaluation playing.
Speaker 1: Maybe he's like, ah, I'm gonna suck. Like one thing
Speaker 1: that has happened is he had a great start to
Speaker 1: his career and let people are a little mad at
Speaker 1: him now because he's stopped to home runs.
Speaker 2: And also, well he got his money.
Speaker 1: Yeah, he got his money, but also he was suspended
Speaker 1: for eighty ams for performance enhancing drug finding and he
Speaker 1: was injured. He's been less successful in recent years then
Speaker 1: in the years and forty million dollar contract. But anyway,
Speaker 1: a lot of people have the same reaction as the post,
Speaker 1: which was like he didn't need this two million dollars
Speaker 1: so much that he was making a good financial decision
Speaker 1: signing away. Yeah, Like it's a good hedge, right, it's
Speaker 1: I mean, depending on you know how much money his
Speaker 1: father still has. It's a good hedge. Right, you get
Speaker 1: two million dollars. Now if it doesn't work out, people
Speaker 1: get injured. Even doesn't work out and you don't get
Speaker 1: the three hundred and forty million dollar contract, then like
Speaker 1: you have the money now, and like when you enter
Speaker 1: into a hedge and then things work out great, their
Speaker 1: hedge is a waste.
Speaker 2: But it's like you know, sometimes you lose money on
Speaker 2: a hedge.
Speaker 1: But that's good.
Speaker 2: Yeah.
Speaker 1: Do you want that as opposed to the thing where
Speaker 1: the hedge pays off, because like the good thing didn't
Speaker 1: pay off.
Speaker 2: I hope he's listening, you know, maybe that would make
Speaker 2: him feel better me saying I don't know anything about this,
Speaker 2: but this guy.
Speaker 1: And that was the Money Stuff Podcast. I'm Matt Levine and.
Speaker 2: I'm Katie Greifeld.
Speaker 1: You can find my work by subscribing to The Money
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Speaker 1: The Money Stuff Podcast is produced by Anamazarakis, Moses andm
Speaker 1: and Alexis HoTT Our.
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Speaker 1: The Money Stuff Podcast. We'll be back next week.
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