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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Here we are Friday, January second, twenty twenty, recording this, live,

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Speaker 2: recording this, live recording this on I don't know, December

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Speaker 2: seventeenth days. Wow, it's been it's been an eventful two weeks.

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Speaker 2: I know, between when we recorded this and when you're

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Speaker 2: listening to it.

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Speaker 3: Ominous, very ominous.

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Speaker 2: Yeah, I'm going to regret this so.

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Speaker 3: Much, probably just given the pace of everything that's happening

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Speaker 3: all at once. But hopefully our answers to these questions

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Speaker 3: won't have changed too much in two weeks. Hopefully, unless

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Speaker 3: something amazing happens.

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Speaker 2: Hello, and welcome to the Money Stuff Podcast here, weekly

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Speaker 2: podcasts where we talk about stuff related to money. I'm

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Speaker 2: Matt Levine, and I read the Moneys Doft column for

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Speaker 2: Bloomberg Opinion.

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Speaker 3: And I'm Katie Greifeld, a reporter for Bloomberg News and

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Speaker 3: an anchor for Bloomberg Television.

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Speaker 2: Not pretending to sing the mail bag thing, but today

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Speaker 2: is a mailbag episode.

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Speaker 1: Yeah, mail bag, Thank you, Katie, mail bag nail bag.

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Speaker 2: Yeah, let's get into it.

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Speaker 3: We've got some good ones. We're starting off strong with

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Speaker 3: a question from Christopher, who asks why do analysts ask

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Speaker 3: questions on earnings calls? I get why they ask them.

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Speaker 3: In private meetings with the company, they then get exclusive

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Speaker 3: access to body language information, but on public earnings calls

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Speaker 3: they get their information only to have it simultaneously shared

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Speaker 3: with everyone else. What do they get out of that?

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Speaker 2: It's a good question. So basically all of the questions

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Speaker 2: on earnings calls are asked by sales ad analysts whose

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Speaker 2: job is not to buy stocks that will then go

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Speaker 2: up vote, rather to publish research reports for their customers

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Speaker 2: saying what's thots will go up and so like, broadly speaking,

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Speaker 2: the research analysts are in a business of like providing

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Speaker 2: public ish goods, right, Like, they're not getting paid directly

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Speaker 2: for picking stocks. What they're doing is they're providing some

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Speaker 2: holistic set of services to investor clients that make the

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Speaker 2: investor clients think fondly about them and about their banks.

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Speaker 2: And then the investor clients, because of those fond feelings,

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Speaker 2: will either you know, in the US, they'll trade with

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Speaker 2: the banks and pay them commissions and in Europe they'll

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Speaker 2: pay directly for research. And so what that means is

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Speaker 2: that like anything that the research analyst does that like

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Speaker 2: makes investors like them is productive, and providing public goods

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Speaker 2: by asking good questions on the earnings call is reasonably productive. Also,

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Speaker 2: if you ask good questions on the earnings call, then

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Speaker 2: people will hear you and think, ooh, I like that analyst,

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Speaker 2: and that will lead to things like maybe them paying

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Speaker 2: for your research. It will also lead to maybe the

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Speaker 2: company thinking you're good and liking you, and therefore one

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Speaker 2: you know, having private meetings with you where they tell

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Speaker 2: you stuff or give you a body language that allows

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Speaker 2: you to be more informed and too.

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Speaker 3: Like.

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Speaker 2: Another job of research analysts is brokering meetings between companies

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Speaker 2: and investors, right, so they do corporate access where you know,

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Speaker 2: when a company is doing a non deal ROACHO or

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Speaker 2: a conference or whatever, they're meeting with investors and those

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Speaker 2: slots are kind of like arranged by the banks by

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Speaker 2: the research analysts, and if you are in good favor

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Speaker 2: with the company, then you get better access to those

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Speaker 2: things and you can do more for your clients. So

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Speaker 2: as part of like the broad set of services they provide,

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Speaker 2: asking good questions in a very public place on ear

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Speaker 2: news callus it's a useful thing to do.

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Speaker 3: It sounds a bit performative. But I hear it.

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Speaker 2: Yeah, it's like a market Like being a research analyst

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Speaker 2: is in some sense a marketing job, right, and so

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Speaker 2: like being good in public is good marketing, I should say,

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Speaker 2: also like it is an analytical job, and you are

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Speaker 2: building your own model, and like if you have differentiated

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Speaker 2: views or differentiated skills and you ask a good question

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Speaker 2: that informs your model, other people will get the answer

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Speaker 2: to the question, but they don't have the same model,

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Speaker 2: they don't have the same skills, right, So you could

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Speaker 2: still get differentiated information or analysis by asking a question

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Speaker 2: that everyone can hear. But a lot of what you're

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Speaker 2: doing is letting everyone here smar you are.

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Speaker 3: Yeah, you're sort of speaking to something that I was

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Speaker 3: wondering when reading this question, is whether there's satisfaction in

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Speaker 3: asking like a really good question on the earnings call

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Speaker 3: that maybe gets something more candid from the executives on

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Speaker 3: the call.

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Speaker 2: You're a television anchor, Sure you know the answer to

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Speaker 2: this question?

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Speaker 3: Well, yeah, I guess. I mean, if someone asked a

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Speaker 3: really good question on an earnings call, I would probably

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Speaker 3: highlight it and also steal it from myself.

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Speaker 2: Yeah, But also, just like, isn't there satisfaction.

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Speaker 3: In asking a really good question. Yeah, that's true. Or

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Speaker 3: like the journalists at the FED press conference, right, yeah.

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Speaker 2: Right, same thing. The journalists of the FED Press conference.

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Speaker 2: Any answer to their question. Every other journalists of that

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Speaker 2: conference can write down, right, yes, but you ask a

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Speaker 2: good question, then you're like, oh, you impress your colleagues,

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Speaker 2: you impress the FED. Yeah, you impress your readers.

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Speaker 3: Yeah about or you tick off the FED something else.

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Speaker 3: Something else I also wonder about is like whether I

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Speaker 3: wonder this too about the journalists in the room at

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Speaker 3: the FED Press conference, is whether there's any sort of

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Speaker 3: sense that, like this is a team sport, that we're

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Speaker 3: trying to get something out of these people that we

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Speaker 3: might not have otherwise, or whether everyone is asking their

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Speaker 3: own individual questions and not necessarily building on the question

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Speaker 3: that was asked before you.

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Speaker 2: I mean, surely it's some combination, right, Like, surely you

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Speaker 2: want to distinguish yourself, but also, like someone else draws

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Speaker 2: some blood, you move in for the killer. Right, Yeah,

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Speaker 2: probably somewhat similar.

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Speaker 3: Good question, Christopher. This next question, Yeah, who wants to

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Speaker 3: read it?

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Speaker 2: It?

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Speaker 1: Gover?

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Speaker 2: What idiotic book is coming from senior hedge fund leaders?

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Speaker 2: It's asset management? The entire point is to care about

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Speaker 2: making few money. The people that do get hired who

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Speaker 2: don't care about money are weirdos who create ten billion

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Speaker 2: dollars Ponzi schemes. Jane Street hiring Mathcamp weirdos rather than

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Speaker 2: the cross players is a literal criminal conspiracy. Anthropic is

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Speaker 2: a weird cult, and it's specifically because of how weird

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Speaker 2: and abnormal that the Open Ai board was that they

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Speaker 2: tried to destroy the company because it released the successful product.

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Speaker 2: We need more normal people in these companies and less

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Speaker 2: ethereal PhDs that don't care buying a house, a plane,

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Speaker 2: or a yacht, don't care about buying your household. Companies

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Speaker 2: should have corporate policies that require employees over the age

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Speaker 2: of twenty five to not have roommates. We get better

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Speaker 2: products and better corporate decisions if people aren't living in

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Speaker 2: cult houses but rather have to deal with the real

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Speaker 2: housing market and do things like buy groceries and pick furniture.

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Speaker 2: If hedge fund leadership wants to only hire socialists, then

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Speaker 2: they should go lead a university rather than managing financial assets.

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Speaker 2: For two and twenty or more. I love this question,

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Speaker 2: any of this question. I love this rant. I don't

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Speaker 2: even know what prompted it, but I have written about

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Speaker 2: this that I believe, and I think I am not

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Speaker 2: alone in this, that like a lot of the most

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Speaker 2: successful people in the financial industry are deep down motivated

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Speaker 2: by puzzle solving and intellectual curiosity rather than the pursuit

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Speaker 2: of money. And I just think that this is an

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Speaker 2: empirical fact that might not be true, but it seems

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Speaker 2: to be true, right, Like you could imagine that the

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Speaker 2: thing that would make you the best at managing hedge

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Speaker 2: fund was like really liking money a lot, But it

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Speaker 2: turns out that solving puzzles is really good for managing money.

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Speaker 2: But Graham is right that there are weirdnesses there, and

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Speaker 2: that like, if you get into this business because you

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Speaker 2: really like solving puzzles, like some number of those people

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Speaker 2: do end up committing huge frauds. And there is some

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Speaker 2: possibility that a world of nice, sociable, moderately intelligent lacrosse

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Speaker 2: players would commit less fraud and have fewer blow ups

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Speaker 2: and Ponzi schemes than one where where the weirds are

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Speaker 2: running the nuts funds. But what do you do about that? Right?

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Speaker 2: You can't. It's a fiercely competitive business, and if you

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Speaker 2: are just trying to trade stocks with like friendly sociability,

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Speaker 2: you'll get run over by the math kids. And so,

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Speaker 2: you know, the competition leads to this strange place where

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Speaker 2: the people who are less motivated by money make the

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Speaker 2: most money, and then some of them are weird. Also,

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Speaker 2: I should say, like I'm being sympathetic to his question,

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Speaker 2: but fundamentally my sympathies are with the puzzle people, right,

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Speaker 2: I mean, I love the puzzle people, and I think

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Speaker 2: it is on balance good for the world and also

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Speaker 2: very pleasing aesthetically that the puzzle people are in charge

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Speaker 2: of finance. But it's a real you know, this is

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Speaker 2: like it goes back to Liar's Poker. Right. This transition

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Speaker 2: from the sort of sociable, essentially marketing oriented people to

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Speaker 2: math puzzle people is one that has called attention on

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Speaker 2: Wall Street for decades.

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Speaker 3: H Great Graham, really good stuff. Okay, here's Sean that

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Speaker 3: seems to love certain quotes because they're graded explaining a

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Speaker 3: moment mechanism, trend, et cetera. For example, quote, it would

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Speaker 3: be wise to view any investing in open Ai Global

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Speaker 3: LLC in the spirit of a donation. End quote hidden

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Speaker 3: poorly internally labeled Fiat at account eight million?

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Speaker 2: Do you eight billion?

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Speaker 3: Eight billion?

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Speaker 2: She's a little till there.

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Speaker 3: In front of it because it.

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Speaker 2: Shan beckman Fried's famous spreadsheet famous.

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Speaker 3: Do you have an all time favorite?

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Speaker 2: Do I have an all time favorite quote? So I

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Speaker 2: almost said this in the last answer, Samuel Johnson says,

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Speaker 2: there are a few ways in which a man can

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Speaker 2: be more innocently employed than in getting money. I think

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Speaker 2: about that a lot. Yeah, people regularly get mad at

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Speaker 2: Wall Street and fanciers and people trying to make a buck,

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Speaker 2: and I often think it's better than almost all of

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Speaker 2: the alternatives. People who are motivated power or revenge or

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Speaker 2: even a sense of mission, we're often doing worse things

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Speaker 2: than the people are just out there trying to make

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Speaker 2: a buck or eight billion bucks. So that's a that's

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Speaker 2: a you know, an all time favorite quote of mine.

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Speaker 2: Another favorite quote of mine is, you know, Warren Buffett

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Speaker 2: has a lot of famous quotes and his famous shareholder letters.

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Speaker 3: Yeah, probably quoted a.

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Speaker 2: Lot of them. The one that I like them most

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Speaker 2: is at some point he's like talking trash about gold

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Speaker 2: as an investment, right, and he's like, you can invest

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Speaker 2: I think the number was like the market cap with

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Speaker 2: the SMP. He's like, you can put you know, thirty

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Speaker 2: two trillion dollars into the into the SMP. You put

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Speaker 2: it the money into the SMP, you get all the

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Speaker 2: productive capacity of America, all the companies, all the corporate profits,

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Speaker 2: all right, all the business. Or you can put that

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Speaker 2: amount of money into a cube of gold that is

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Speaker 2: like yay hi by yay long, by yay wide. And

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Speaker 2: he's like, and then it'll just sit there. You can

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Speaker 2: fundle the cube, but it will not respond.

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Speaker 3: It will not spin off any any dividends anything like that,

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Speaker 3: no cash flow.

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Speaker 2: I just think of Warren Buffett's saying, you can fundle

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Speaker 2: the cube, but it will not respond.

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Speaker 3: Okay. From ends a question on ISS slash Glass Lewis

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Speaker 3: and the voting discussion. Isn't this the easiest way for

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Speaker 3: a billionaire to gain a huge influence on companies? Buy

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Speaker 3: Iss or Glass Lewis and steal the voting in one

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Speaker 3: in the direction you want? Would this work?

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Speaker 2: I don't know, you know, and Glass Lewis people, people

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Speaker 2: are really mad at Iss, Glass List or the proxy advisory.

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Speaker 3: Firms, as discussed on this pod ages ago.

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Speaker 2: Now I speak only a few days before we recorded

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Speaker 2: this pod, Donald Trump put out an executive order basically

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Speaker 2: saying we don't like the proxy advisors. And there's this

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Speaker 2: notion that the proxy advisors are in charge of all

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Speaker 2: shareholder voting. Right, People like a conspira like this where

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Speaker 2: it's like two foreign owned companies control how all American

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Speaker 2: public companies are run. Right. The idea is that Iss

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Speaker 2: and Glass Lewis tell the shareholders how to vote, and

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Speaker 2: then the shareholders vote that way, and then the companies

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Speaker 2: have to do what they say. This is exaggerating in

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Speaker 2: a lot of ways, one of which is that like

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Speaker 2: Iss and Glass Lewis have their most influence in the

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Speaker 2: least important things like there are shareholder votes on you know,

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Speaker 2: there are hundreds a year on non binding proposals that

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Speaker 2: companies should write reports about ESG stuff or whatever, and there. Yeah,

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Speaker 2: a lot of shareholders do defer to Iss and Glass

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Speaker 2: Lewis because it just doesn't matter to them that much.

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Speaker 2: Iss and Glass Lewis have meaningful influence on things like

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Speaker 2: contested merger situations and proxy fights, where like there are

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Speaker 2: real economic stakes, but they're a lot of asset managers

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Speaker 2: are making their own decisions because they have more at stake,

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Speaker 2: whereas the stuff where the Iss and Glass Lewis have

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Speaker 2: the most impact is where people have the least at stake.

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Speaker 2: But also it's just like they have no authority. They're

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Speaker 2: just persuasive, right, They're just like useful, and if they

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Speaker 2: stop being useful, then people would stop paying attention to them.

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Speaker 2: So I think if you bought Iss and glass Lewis

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Speaker 2: and use them to advance an agenda, first of all,

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Speaker 2: you can only do so much to advance the agenda

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Speaker 2: because it's only like share all theer voting. And secondly,

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Speaker 2: if you did it too obviously, then people would get

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Speaker 2: sick of you, and it can't be that hard to

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Speaker 2: start another one.

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Speaker 3: That's the thing like in practice, if a controversial billionaires,

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Speaker 3: which is Elon Musk, bought either Iss or Glass Lewis,

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Speaker 3: I feel like like whatever recommendation they make, people just

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Speaker 3: know it's biased.

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Speaker 2: Yeah, well you know everyone's like, oh it's biased. Now

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Speaker 2: it is biased. They have some priors that happened to

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Speaker 2: more or less aligned with the views of a lot

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Speaker 2: of investment managers. Because the investment manager are the customers,

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Speaker 2: and they're trying to run a business where people pay

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Speaker 2: for their advice. But yeah, like you know, their bias

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Speaker 2: is kind of aligned with their customers, and if you

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Speaker 2: change that, then the customers would go somewhere else.

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Speaker 3: Yeah, now we have a question from it's like the

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Speaker 3: ETF segment. I don't really know how to answer this,

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Speaker 3: but Leo asks, I feel like you could just have

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Speaker 3: every buy in ETF be a creation and every cell

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Speaker 3: be a redemption routed to the issuer and remove the

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Speaker 3: possibility of ETF's trading outside of NAV. Why bother being

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Speaker 3: able to trade them with other traders directly at.

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Speaker 2: All, because they're exchange traded.

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Speaker 3: Yeah, that's the thing. They trade throughout the day.

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Speaker 2: Right. An instrument where you could only create and redeem

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Speaker 2: with the issuer is just.

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Speaker 3: The mutual fund yeah right, Yeah.

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Speaker 2: And mutual funds have a couple of disadvantages. One is

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Speaker 2: that it's just an administrative cost to the issue always

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Speaker 2: having to trade with you, rather than you can trade

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Speaker 2: on the exchange with anyone who wants to two. The

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Speaker 2: issue wants to trade with you at NAV, but the

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Speaker 2: NAV changes throughout the day, and so there's a cost

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Speaker 2: in just updating that, whereas with an ETF you're trading

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Speaker 2: at the market price, and so it just kind of

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Speaker 2: takes care of itself. Nobody takes care of itself with

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Speaker 2: arbitreasure is making sure the price is close to the

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Speaker 2: nav but like the issuer doesn't have to worry about that, Like,

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Speaker 2: it's much more administratively simple. Also though, like a lot

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Speaker 2: of the point of the ETF thing is that if

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Speaker 2: you're doing trades with the issue, the way ETFs worked

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Speaker 2: is that I gave the issuer money and it gave

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Speaker 2: me back shares. That is a taxable trade that creates

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Speaker 2: tax liabilities for the other holders of the ETF of

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Speaker 2: the fund right, because when the issue is selling stock

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Speaker 2: for cash, it creates a tax realization event. The trick

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Speaker 2: of ETFs is that they never trade.

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Speaker 3: For cash famously.

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Speaker 2: Famously, and so when I trade with you on the

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Speaker 2: exchange and we're not trading with the issure, there's no

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Speaker 2: tax realization event for the ATF. When there are creations,

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Speaker 2: they're not like me going to the ETF with cash

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Speaker 2: and getting my shares or vice versa. They're otherwise participants

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Speaker 2: handing in shares and getting back of the ETF. So

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Speaker 2: there's an in kind transaction and no tax event. Yeah,

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Speaker 2: and so it is like, really important to the ETF

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Speaker 2: is that there are no cash trades with the ETF,

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Speaker 2: so there are no taxes, and they deffer taxes for

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Speaker 2: as long as you hold the fund.

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Speaker 3: So doing this would remove all the things that make

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Speaker 3: an ets.

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Speaker 2: This is just a mutual fund.

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Speaker 3: Yeah.

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Speaker 2: The question why would you why can't you just do

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Speaker 2: every trade with the issuer? Is like, why can't an

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Speaker 2: etfpm mutual fund? And the answer is, we've discovered a

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Speaker 2: better technology.

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Speaker 3: Yeah, why can't a mule be a horse? A lot

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Speaker 3: of reasons. This is a really great question from Oscar.

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Speaker 3: Why are there no meme ETFs? We have meme stocks

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Speaker 3: and meme stock ETFs, but there is no meme ETF

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Speaker 3: in otherwise completely boring ETF holding boring assets that nevertheless

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Speaker 3: drums up huge retail excitement. It doesn't have to trade

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Speaker 3: at some dune premium, just build up a big NAV.

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Speaker 3: I read this a few times and then I understood

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Speaker 3: what Oscar was asking because my immediate reaction was, there

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Speaker 3: are ETFs that hold meme stocks, but he's talking about

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Speaker 3: why hasn't an ETF t taken off in the same

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Speaker 3: way that a meme stock has, like display meme like characteristics.

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Speaker 3: Is how I understood it.

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Speaker 2: And the answer is because of the ARP. Right. The

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Speaker 2: answer is because if I buy an ETF on the

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Speaker 2: stock exchange, I'm buying it from a market maker who

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Speaker 2: is probably selling me shares of the ETF and buying

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Speaker 2: the underlying stock, right and vice versa. If I'm selling,

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Speaker 2: they'll buy the ETF, they can sell the underlying stock,

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Speaker 2: and so if the values get out of line, then

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Speaker 2: they'll just do that arbitrage. Right. If an ETF is

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Speaker 2: trading it well above its net acid value, then market

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Speaker 2: makers are going to sell the ETF and buy the

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Speaker 2: underlying shares and close the ARP and do creations and

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Speaker 2: redemptions to close the APP. So it can't really trade

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Speaker 2: it much of a premium. And then the question is

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Speaker 2: it's not trading at a premium, it would just pull

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Speaker 2: up a big nav meme stock can be fairly small, right,

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Speaker 2: people can buy the memestock and it'll go up. And

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Speaker 2: a meme ETF that held a lot of shares would

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Speaker 2: have to push the prices of all of the shares

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Speaker 2: in order to go to the moon, right, Like, you

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Speaker 2: can't have a premium, not sustainably, and so the only

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Speaker 2: way for it to like go to the moon is

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Speaker 2: to push out the prices of all the underlying shares.

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Speaker 2: So you can imagine like a small ETF with like

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Speaker 2: small Memei stocks doing that, But it's not the.

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Speaker 3: Most obvious thing to do a giant ETF that holds

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Speaker 3: small stocks. I feel like that would kind of.

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Speaker 2: You can't have a giant Meme. Yeah, like the audience

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Speaker 2: for Meme anything, the audience for like irrationally pushing out

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Speaker 2: the price of things. It's not you know, it's not

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Speaker 2: that big.

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Speaker 3: Yeah.

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Speaker 2: I will say, like, this is an interesting question because

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Speaker 2: I feel like I've written this and said this possible

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Speaker 2: on this podcast. One of the lessons of the Meme

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Speaker 2: stock episode is that fundamental value is a floor on

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Speaker 2: stock price, because if like a stock is trading well

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Speaker 2: below it's fundamental value, then some private equity firm can

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Speaker 2: come and buy the company and you know, extract its

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Speaker 2: cash flows. But fundamental value is not a cap on

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Speaker 2: stock price. Like, if a stock trades it ten times

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Speaker 2: its fundamental life, there's nothing you can do about that.

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Speaker 2: You can short it, but you can't make it go

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Speaker 2: down to its fundamental day. There's no offsetting equivalent to

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Speaker 2: like a private equity firm buying the company and cracking

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Speaker 2: up its cash flows. And so everyone sort of thought

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Speaker 2: that fundamental value in the long run was the driver

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Speaker 2: of thought prices, and the memestock episode threw that into question.

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Speaker 2: Is like, no, you don't. It doesn't have to be. No,

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Speaker 2: with ETFs, there is a symmetrical mechanism, right, there's the

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Speaker 2: arbitrage mechanism means that the ETF kind of has to

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Speaker 2: trade its fundamental value, and if it doesn't, you can

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Speaker 2: fix that yourself. You can like extract that premium directly

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Speaker 2: by you know, genie a creation or redemption. And so

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Speaker 2: that's why there's no MEITF because you can't sustainably trade

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Speaker 2: above fair value.

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Speaker 3: I still feel like it could happen. Yeah, maybe it'll

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Speaker 3: happen in the next two weeks, and this will be

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Speaker 3: the thing that eurodically changes our answers. Chris asks thank

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Speaker 3: you for continuing to cover the amusing and somehow not

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Speaker 3: yet a legal state of prediction market quote sporting outcome commodities.

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Speaker 3: On the last podcast, it sounded like hal She could

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Speaker 3: arguably become a platform that connects betters with market makers,

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Speaker 3: which somehow seems like a bad thing for DraftKings and flutter.

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Speaker 3: But couldn't the sports books become the market makers?

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Speaker 2: Yeah? Why not? I Mean, it's unclear what actual entities

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Speaker 2: end up doing this, but I do think that one

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Speaker 2: way to think about it is that right now, there

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Speaker 2: are sports books which are in the business of trading

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Speaker 2: sports pets with retail customers essentially, and there are prediction markets,

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Speaker 2: which are public registered exchanges that are in the business

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Speaker 2: of trading sports pets with anyone who wants to show up.

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Speaker 2: And like, that's kind of how the stock market works.

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Speaker 2: Right There are retail brokerages that send their retail custom

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Speaker 2: stock orders to you know, sit at all securities or

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00:21:04,040 --> 00:21:07,040
Speaker 2: chains trade or power or whoever, and then there's a

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Speaker 2: public stock market. And one thing that happens is that

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Speaker 2: those electronic trading firms that get the retail orders, they're

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Speaker 2: also trading on the stock exchange, and so one thing

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Speaker 2: they are doing is interacting with retail orders and then

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Speaker 2: laying off risk in the public markets. And you could

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Speaker 2: imagine something like that happening with sports books, right maybe

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Speaker 2: not the current sports books, maybe that's more like a

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Speaker 2: market maker or function, but you have people who are

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Speaker 2: interacting with retail traders and they're getting flows and they're

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Speaker 2: you know, they're getting like two sided, uninformed flows and

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Speaker 2: they're trading against it and they're making a spread and

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Speaker 2: so forth. And when they have unbalanced risk, they go

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Speaker 2: lay it off in the public markets against whatever sharp

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Speaker 2: traders they find. They're like, I think that's a very

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Speaker 2: reasonable model, and like, the way it works in the

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Speaker 2: stock market is if you're a retail trader, you get

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Speaker 2: a better customer experience and often like better pricing by

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00:21:53,400 --> 00:21:59,000
Speaker 2: trading with an electronic wal seller through your retail broker's platform,

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Speaker 2: And like that could happen here too, or we're like,

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Speaker 2: you know, the retail sports books can offer maybe a

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Speaker 2: better user experience and so you trade with them, but

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Speaker 2: then they are trading in the public markets to lay

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Speaker 2: out their risk. There are some problems with that theory,

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Speaker 2: including about like the legal structure of commodities markets, but

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Speaker 2: it does kind of feel like that could be a

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Speaker 2: place that this ends up, where the retail traders are

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Speaker 2: trading with someone who specializes in retail trading, and then

435
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Speaker 2: like there's some professional institutional market.

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Speaker 3: So Chris maybe he identified the evolution.

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Speaker 2: Yeah, I don't know that the current sports books are

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Speaker 2: going to be the best situated to to do that.

439
00:22:34,960 --> 00:22:37,680
Speaker 2: But yeah, they're all kind of they're all basically hiring

440
00:22:37,760 --> 00:22:39,240
Speaker 2: the same pool of high frequency traders.

441
00:22:39,320 --> 00:22:42,720
Speaker 3: That's probably fine, all right, Dan Dan asks, I have

442
00:22:42,760 --> 00:22:45,960
Speaker 3: a question about how companies execute share repurchases and the

443
00:22:46,040 --> 00:22:48,840
Speaker 3: rules around it. I know that parenthetical back when the

444
00:22:48,880 --> 00:22:53,520
Speaker 3: SEC and Force rules insiders could use a one oh

445
00:22:53,560 --> 00:22:56,040
Speaker 3: five B one plan to try and five one ten

446
00:22:56,440 --> 00:22:57,960
Speaker 3: ten five be one plan ten.

447
00:22:57,920 --> 00:22:58,440
Speaker 2: Be five to one.

448
00:22:59,160 --> 00:23:01,160
Speaker 3: Wait did I say ten B five to one ten

449
00:23:01,240 --> 00:23:04,160
Speaker 3: five B one oh ten be five to one ten. No,

450
00:23:04,240 --> 00:23:04,760
Speaker 3: it says it.

451
00:23:04,720 --> 00:23:06,399
Speaker 2: Doesn't matter what it says. I'm telling you about it

452
00:23:06,400 --> 00:23:06,800
Speaker 2: actually is?

453
00:23:06,840 --> 00:23:11,080
Speaker 3: Okay? Sorry, sorry, down ten Wait you just said ten

454
00:23:11,160 --> 00:23:14,240
Speaker 3: B five one plan to try and protect themselves against

455
00:23:14,240 --> 00:23:17,520
Speaker 3: insigner trading allegations. Is there a similar plan for when

456
00:23:17,520 --> 00:23:20,439
Speaker 3: a company is repurchasing shares or are they allowed to

457
00:23:20,600 --> 00:23:24,240
Speaker 3: use insider information to time the repurchases? Also, how do

458
00:23:24,280 --> 00:23:26,520
Speaker 3: they do it? I assume Coca Cola doesn't open their

459
00:23:26,560 --> 00:23:29,080
Speaker 3: Robinhood account and submit a market order.

460
00:23:30,200 --> 00:23:33,159
Speaker 2: No, here's what they do. They call me, and then

461
00:23:33,200 --> 00:23:35,240
Speaker 2: they used to call me when I was a banker.

462
00:23:35,240 --> 00:23:38,520
Speaker 2: One thing I did was share repurchases, and so I

463
00:23:38,520 --> 00:23:40,040
Speaker 2: can tell you all about this. I will try to

464
00:23:40,119 --> 00:23:42,479
Speaker 2: keep it short because although it is dear to my heart,

465
00:23:42,520 --> 00:23:45,680
Speaker 2: it's not that interesting. But yeah, So ten B five

466
00:23:45,720 --> 00:23:48,199
Speaker 2: to one is like the SEC rule that basically says,

467
00:23:48,640 --> 00:23:50,679
Speaker 2: when you don't have inside information, you can set up

468
00:23:50,720 --> 00:23:53,280
Speaker 2: a plan to buy stock or sell stock. So like

469
00:23:53,320 --> 00:23:55,040
Speaker 2: corporate executives will set up a ten B five to

470
00:23:55,040 --> 00:23:58,000
Speaker 2: one plan to sell stock to pay for college, and

471
00:23:58,040 --> 00:24:01,359
Speaker 2: then later when the plans sell stock, even if they

472
00:24:01,359 --> 00:24:03,560
Speaker 2: have inside information, it doesn't matter because that the plan

473
00:24:03,640 --> 00:24:07,080
Speaker 2: is just automated. This is the theory. There are various workarounds,

474
00:24:07,240 --> 00:24:10,040
Speaker 2: but it's the same rule for companies. Companies regularly do

475
00:24:10,200 --> 00:24:13,200
Speaker 2: stock buybacks using ten to five to one plans because

476
00:24:13,560 --> 00:24:16,040
Speaker 2: they have some open window after they announce earnings where

477
00:24:16,040 --> 00:24:17,679
Speaker 2: they can set up the plan and then like the

478
00:24:17,720 --> 00:24:20,000
Speaker 2: plan can kind of go and be automated throughout the

479
00:24:20,080 --> 00:24:22,920
Speaker 2: year and they can buy stock even when they're discussing

480
00:24:22,960 --> 00:24:24,639
Speaker 2: mergers or whatever because like they have a ten to

481
00:24:24,760 --> 00:24:28,040
Speaker 2: five one plan. Sometimes companies do that, they also do

482
00:24:28,160 --> 00:24:30,560
Speaker 2: other things. It used to be that the main way

483
00:24:30,600 --> 00:24:33,399
Speaker 2: companies bought backstock was through tender offers where they made

484
00:24:33,440 --> 00:24:35,959
Speaker 2: a public announcement anyone who wants to sell stock at

485
00:24:35,960 --> 00:24:37,840
Speaker 2: this price can do it, and then they would buy

486
00:24:37,920 --> 00:24:39,959
Speaker 2: stock at a price, and this would solve all those

487
00:24:39,960 --> 00:24:42,800
Speaker 2: problems because they'd make full disclosure of everything and like

488
00:24:43,119 --> 00:24:45,600
Speaker 2: everyone would have the same information and they'd tender all

489
00:24:45,600 --> 00:24:48,360
Speaker 2: their stock at the same time. It's pretty annoying process

490
00:24:48,359 --> 00:24:50,440
Speaker 2: and companies do much less of that than they used to,

491
00:24:50,600 --> 00:24:53,120
Speaker 2: basically because the SEC relaxed the rules. Like a few

492
00:24:53,160 --> 00:24:55,920
Speaker 2: decades ago, it used to be considered that like open

493
00:24:55,960 --> 00:24:59,160
Speaker 2: market stock purchases where market manipulation, and so companies didn't

494
00:24:59,200 --> 00:25:03,000
Speaker 2: do it, and they relax those rules. This is periodically controversial,

495
00:25:03,080 --> 00:25:06,879
Speaker 2: like people are like stock buybacks are market manipulation, so

496
00:25:06,920 --> 00:25:09,280
Speaker 2: they should change the rules back and then companies would

497
00:25:09,280 --> 00:25:10,960
Speaker 2: have to do tender offers. But now they mostly do

498
00:25:11,000 --> 00:25:14,880
Speaker 2: open market purchases. The other thing they do is delightful

499
00:25:15,200 --> 00:25:19,240
Speaker 2: derivative products with their friendly local investment banker. Basically, anything

500
00:25:19,240 --> 00:25:20,800
Speaker 2: you do, you're going to call an investment bank and

501
00:25:20,800 --> 00:25:22,520
Speaker 2: they're going to do it for you. And the simple

502
00:25:22,560 --> 00:25:24,840
Speaker 2: way is they're going to do it in the open market.

503
00:25:25,320 --> 00:25:28,200
Speaker 2: Not so dissimilar from what you would do with robinhood.

504
00:25:28,520 --> 00:25:31,480
Speaker 2: They usually they'll like handle the you know, the average

505
00:25:31,480 --> 00:25:33,000
Speaker 2: over the course of the day rather than you hitting

506
00:25:33,040 --> 00:25:35,920
Speaker 2: every bye you know order. But if you want something

507
00:25:35,920 --> 00:25:38,600
Speaker 2: more complicated, like a fancy derivative product, they'd be happy

508
00:25:38,600 --> 00:25:42,520
Speaker 2: to put you into that called accelerated stock buybacks really good.

509
00:25:42,720 --> 00:25:43,479
Speaker 2: I used to sell them.

510
00:25:43,560 --> 00:25:44,200
Speaker 3: Sounds juicy.

511
00:25:44,320 --> 00:25:47,880
Speaker 2: Yeah they're good. Yeah, call me for I don't want

512
00:25:47,880 --> 00:25:50,840
Speaker 2: to actually endorse accelerate. It's like, well, have complicated feelings

513
00:25:50,960 --> 00:25:54,080
Speaker 2: about this product I used to sell. But in any case,

514
00:25:55,160 --> 00:25:57,800
Speaker 2: here's a question from Ian. Katie is mentioned on more

515
00:25:57,840 --> 00:26:00,719
Speaker 2: than one occasion that she craves adrenaline and is an

516
00:26:00,720 --> 00:26:05,760
Speaker 2: adrenaline junkie. She has also discussed her participation in the

517
00:26:05,800 --> 00:26:09,960
Speaker 2: sport of horse dancing. Are the two related? Is trissage

518
00:26:10,000 --> 00:26:13,199
Speaker 2: in activity that adrenaline junkies flock too? I want to

519
00:26:13,200 --> 00:26:14,080
Speaker 2: hear the answer to this one.

520
00:26:14,280 --> 00:26:15,200
Speaker 3: Probably no.

521
00:26:16,000 --> 00:26:18,399
Speaker 2: I feel like horseback riding in itself is like a

522
00:26:18,440 --> 00:26:20,199
Speaker 2: little bit you have has an element of.

523
00:26:22,080 --> 00:26:22,920
Speaker 3: Animal danger.

524
00:26:23,600 --> 00:26:26,800
Speaker 2: Yeah, could go fast even if during horse dancing He's.

525
00:26:26,640 --> 00:26:31,120
Speaker 3: Probably ideally they wouldn't. It's a twofold answer, because yes,

526
00:26:32,400 --> 00:26:35,480
Speaker 3: there is an element of adrenaline and riding horses. But

527
00:26:35,560 --> 00:26:39,840
Speaker 3: if you most adrenaline junkies are more into jumping, you know,

528
00:26:40,280 --> 00:26:43,440
Speaker 3: they want to go fast over jumps. Dressage often the

529
00:26:43,560 --> 00:26:45,840
Speaker 3: goal is to not go that fast. It's like horse ballet.

530
00:26:46,400 --> 00:26:51,040
Speaker 3: But I love drissage well. I love drisage just for

531
00:26:51,440 --> 00:26:54,240
Speaker 3: the training element of it. It's like horse pilates, honestly.

532
00:26:54,560 --> 00:26:57,639
Speaker 3: But when it comes to showing, I just love having

533
00:26:57,680 --> 00:27:01,800
Speaker 3: to be on. It probably takes five to ten minutes

534
00:27:01,800 --> 00:27:04,399
Speaker 3: for you to complete your test, and for those five

535
00:27:04,440 --> 00:27:07,080
Speaker 3: to ten minutes, you have to nail every part of it.

536
00:27:07,119 --> 00:27:09,480
Speaker 3: You just have to be on the entire time. So

537
00:27:09,520 --> 00:27:12,679
Speaker 3: I really enjoy that element. It's not dissimilar from television,

538
00:27:12,720 --> 00:27:14,719
Speaker 3: where the camera is on and you just have to perform,

539
00:27:15,240 --> 00:27:15,760
Speaker 3: right Like.

540
00:27:15,760 --> 00:27:20,400
Speaker 2: Any performance or competitive activity has an adrenaline competit, even yes,

541
00:27:20,520 --> 00:27:21,320
Speaker 2: even if it's.

542
00:27:21,560 --> 00:27:26,560
Speaker 3: Like, for example, obviously that's a high adrenaline sort of thing. Yes,

543
00:27:26,800 --> 00:27:29,840
Speaker 3: for yeah, if you're like in a high stakes match,

544
00:27:30,000 --> 00:27:34,280
Speaker 3: your heart is racing, but you're not obviously. In most cases,

545
00:27:34,280 --> 00:27:39,320
Speaker 3: I assume chess probably yoursage is the most similar. I

546
00:27:39,359 --> 00:27:43,520
Speaker 3: don't know, everyone go YouTube drissage in the alone?

547
00:27:44,840 --> 00:27:47,040
Speaker 2: Are there YouTube videos of Kiddie raffle.

548
00:27:47,359 --> 00:27:49,679
Speaker 3: Absolutely not, absolutely not.

549
00:27:50,119 --> 00:27:51,520
Speaker 2: Well, don't look for those though.

550
00:27:51,400 --> 00:27:55,280
Speaker 3: No, please don't. All right, Well, happy happy New Year.

551
00:27:55,640 --> 00:27:56,760
Speaker 3: I hope you all had a great time.

552
00:28:03,960 --> 00:28:05,480
Speaker 2: And that was the Money Stuff Podcast.

553
00:28:05,840 --> 00:28:07,960
Speaker 3: I'm Matt Levine and I'm Katie Greifeld.

554
00:28:08,160 --> 00:28:10,280
Speaker 2: You can find my work by subscribing to the Money

555
00:28:10,320 --> 00:28:12,320
Speaker 2: stuffnewsletter on Bloomberg.

556
00:28:11,880 --> 00:28:14,520
Speaker 3: Dot com, and you can find me on Bloomberg TV

557
00:28:14,680 --> 00:28:18,120
Speaker 3: every day on the close between three and five pm Eastern.

558
00:28:18,840 --> 00:28:20,840
Speaker 2: We'd love to hear from you. You can send an

559
00:28:20,840 --> 00:28:24,199
Speaker 2: email to Moneypod at Bloomberg dot net, ask us a

560
00:28:24,280 --> 00:28:26,120
Speaker 2: question and we might answer it on the air.

561
00:28:26,480 --> 00:28:29,080
Speaker 3: You can also subscribe to our show wherever you're listening

562
00:28:29,119 --> 00:28:31,000
Speaker 3: right now and leave us a review. It helps more

563
00:28:31,000 --> 00:28:31,840
Speaker 3: people find the show.

564
00:28:32,760 --> 00:28:35,879
Speaker 2: The Money Stuff Podcast is produced by annam Aserakis and

565
00:28:35,920 --> 00:28:36,840
Speaker 2: Moses One.

566
00:28:36,920 --> 00:28:39,160
Speaker 3: Our theme music was composed by Blake Maples.

567
00:28:39,880 --> 00:28:42,600
Speaker 2: Amy Keen is our executive producer.

568
00:28:42,520 --> 00:28:45,040
Speaker 3: And Sage Bauman is Bloomberg's head of Podcasts.

569
00:28:46,200 --> 00:28:48,680
Speaker 2: Thanks for listening to The Money Stuff Podcast. We'll be

570
00:28:48,720 --> 00:28:50,400
Speaker 2: back next week with more stuff