Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Here we are Friday, January second, twenty twenty, recording this, live,
Speaker 2: recording this, live recording this on I don't know, December
Speaker 2: seventeenth days. Wow, it's been it's been an eventful two weeks.
Speaker 2: I know, between when we recorded this and when you're
Speaker 2: listening to it.
Speaker 3: Ominous, very ominous.
Speaker 2: Yeah, I'm going to regret this so.
Speaker 3: Much, probably just given the pace of everything that's happening
Speaker 3: all at once. But hopefully our answers to these questions
Speaker 3: won't have changed too much in two weeks. Hopefully, unless
Speaker 3: something amazing happens.
Speaker 2: Hello, and welcome to the Money Stuff Podcast here, weekly
Speaker 2: podcasts where we talk about stuff related to money. I'm
Speaker 2: Matt Levine, and I read the Moneys Doft column for
Speaker 2: Bloomberg Opinion.
Speaker 3: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 3: an anchor for Bloomberg Television.
Speaker 2: Not pretending to sing the mail bag thing, but today
Speaker 2: is a mailbag episode.
Speaker 1: Yeah, mail bag, Thank you, Katie, mail bag nail bag.
Speaker 2: Yeah, let's get into it.
Speaker 3: We've got some good ones. We're starting off strong with
Speaker 3: a question from Christopher, who asks why do analysts ask
Speaker 3: questions on earnings calls? I get why they ask them.
Speaker 3: In private meetings with the company, they then get exclusive
Speaker 3: access to body language information, but on public earnings calls
Speaker 3: they get their information only to have it simultaneously shared
Speaker 3: with everyone else. What do they get out of that?
Speaker 2: It's a good question. So basically all of the questions
Speaker 2: on earnings calls are asked by sales ad analysts whose
Speaker 2: job is not to buy stocks that will then go
Speaker 2: up vote, rather to publish research reports for their customers
Speaker 2: saying what's thots will go up and so like, broadly speaking,
Speaker 2: the research analysts are in a business of like providing
Speaker 2: public ish goods, right, Like, they're not getting paid directly
Speaker 2: for picking stocks. What they're doing is they're providing some
Speaker 2: holistic set of services to investor clients that make the
Speaker 2: investor clients think fondly about them and about their banks.
Speaker 2: And then the investor clients, because of those fond feelings,
Speaker 2: will either you know, in the US, they'll trade with
Speaker 2: the banks and pay them commissions and in Europe they'll
Speaker 2: pay directly for research. And so what that means is
Speaker 2: that like anything that the research analyst does that like
Speaker 2: makes investors like them is productive, and providing public goods
Speaker 2: by asking good questions on the earnings call is reasonably productive. Also,
Speaker 2: if you ask good questions on the earnings call, then
Speaker 2: people will hear you and think, ooh, I like that analyst,
Speaker 2: and that will lead to things like maybe them paying
Speaker 2: for your research. It will also lead to maybe the
Speaker 2: company thinking you're good and liking you, and therefore one
Speaker 2: you know, having private meetings with you where they tell
Speaker 2: you stuff or give you a body language that allows
Speaker 2: you to be more informed and too.
Speaker 3: Like.
Speaker 2: Another job of research analysts is brokering meetings between companies
Speaker 2: and investors, right, so they do corporate access where you know,
Speaker 2: when a company is doing a non deal ROACHO or
Speaker 2: a conference or whatever, they're meeting with investors and those
Speaker 2: slots are kind of like arranged by the banks by
Speaker 2: the research analysts, and if you are in good favor
Speaker 2: with the company, then you get better access to those
Speaker 2: things and you can do more for your clients. So
Speaker 2: as part of like the broad set of services they provide,
Speaker 2: asking good questions in a very public place on ear
Speaker 2: news callus it's a useful thing to do.
Speaker 3: It sounds a bit performative. But I hear it.
Speaker 2: Yeah, it's like a market Like being a research analyst
Speaker 2: is in some sense a marketing job, right, and so
Speaker 2: like being good in public is good marketing, I should say,
Speaker 2: also like it is an analytical job, and you are
Speaker 2: building your own model, and like if you have differentiated
Speaker 2: views or differentiated skills and you ask a good question
Speaker 2: that informs your model, other people will get the answer
Speaker 2: to the question, but they don't have the same model,
Speaker 2: they don't have the same skills, right, So you could
Speaker 2: still get differentiated information or analysis by asking a question
Speaker 2: that everyone can hear. But a lot of what you're
Speaker 2: doing is letting everyone here smar you are.
Speaker 3: Yeah, you're sort of speaking to something that I was
Speaker 3: wondering when reading this question, is whether there's satisfaction in
Speaker 3: asking like a really good question on the earnings call
Speaker 3: that maybe gets something more candid from the executives on
Speaker 3: the call.
Speaker 2: You're a television anchor, Sure you know the answer to
Speaker 2: this question?
Speaker 3: Well, yeah, I guess. I mean, if someone asked a
Speaker 3: really good question on an earnings call, I would probably
Speaker 3: highlight it and also steal it from myself.
Speaker 2: Yeah, But also, just like, isn't there satisfaction.
Speaker 3: In asking a really good question. Yeah, that's true. Or
Speaker 3: like the journalists at the FED press conference, right, yeah.
Speaker 2: Right, same thing. The journalists of the FED Press conference.
Speaker 2: Any answer to their question. Every other journalists of that
Speaker 2: conference can write down, right, yes, but you ask a
Speaker 2: good question, then you're like, oh, you impress your colleagues,
Speaker 2: you impress the FED. Yeah, you impress your readers.
Speaker 3: Yeah about or you tick off the FED something else.
Speaker 3: Something else I also wonder about is like whether I
Speaker 3: wonder this too about the journalists in the room at
Speaker 3: the FED Press conference, is whether there's any sort of
Speaker 3: sense that, like this is a team sport, that we're
Speaker 3: trying to get something out of these people that we
Speaker 3: might not have otherwise, or whether everyone is asking their
Speaker 3: own individual questions and not necessarily building on the question
Speaker 3: that was asked before you.
Speaker 2: I mean, surely it's some combination, right, Like, surely you
Speaker 2: want to distinguish yourself, but also, like someone else draws
Speaker 2: some blood, you move in for the killer. Right, Yeah,
Speaker 2: probably somewhat similar.
Speaker 3: Good question, Christopher. This next question, Yeah, who wants to
Speaker 3: read it?
Speaker 2: It?
Speaker 1: Gover?
Speaker 2: What idiotic book is coming from senior hedge fund leaders?
Speaker 2: It's asset management? The entire point is to care about
Speaker 2: making few money. The people that do get hired who
Speaker 2: don't care about money are weirdos who create ten billion
Speaker 2: dollars Ponzi schemes. Jane Street hiring Mathcamp weirdos rather than
Speaker 2: the cross players is a literal criminal conspiracy. Anthropic is
Speaker 2: a weird cult, and it's specifically because of how weird
Speaker 2: and abnormal that the Open Ai board was that they
Speaker 2: tried to destroy the company because it released the successful product.
Speaker 2: We need more normal people in these companies and less
Speaker 2: ethereal PhDs that don't care buying a house, a plane,
Speaker 2: or a yacht, don't care about buying your household. Companies
Speaker 2: should have corporate policies that require employees over the age
Speaker 2: of twenty five to not have roommates. We get better
Speaker 2: products and better corporate decisions if people aren't living in
Speaker 2: cult houses but rather have to deal with the real
Speaker 2: housing market and do things like buy groceries and pick furniture.
Speaker 2: If hedge fund leadership wants to only hire socialists, then
Speaker 2: they should go lead a university rather than managing financial assets.
Speaker 2: For two and twenty or more. I love this question,
Speaker 2: any of this question. I love this rant. I don't
Speaker 2: even know what prompted it, but I have written about
Speaker 2: this that I believe, and I think I am not
Speaker 2: alone in this, that like a lot of the most
Speaker 2: successful people in the financial industry are deep down motivated
Speaker 2: by puzzle solving and intellectual curiosity rather than the pursuit
Speaker 2: of money. And I just think that this is an
Speaker 2: empirical fact that might not be true, but it seems
Speaker 2: to be true, right, Like you could imagine that the
Speaker 2: thing that would make you the best at managing hedge
Speaker 2: fund was like really liking money a lot, But it
Speaker 2: turns out that solving puzzles is really good for managing money.
Speaker 2: But Graham is right that there are weirdnesses there, and
Speaker 2: that like, if you get into this business because you
Speaker 2: really like solving puzzles, like some number of those people
Speaker 2: do end up committing huge frauds. And there is some
Speaker 2: possibility that a world of nice, sociable, moderately intelligent lacrosse
Speaker 2: players would commit less fraud and have fewer blow ups
Speaker 2: and Ponzi schemes than one where where the weirds are
Speaker 2: running the nuts funds. But what do you do about that? Right?
Speaker 2: You can't. It's a fiercely competitive business, and if you
Speaker 2: are just trying to trade stocks with like friendly sociability,
Speaker 2: you'll get run over by the math kids. And so,
Speaker 2: you know, the competition leads to this strange place where
Speaker 2: the people who are less motivated by money make the
Speaker 2: most money, and then some of them are weird. Also,
Speaker 2: I should say, like I'm being sympathetic to his question,
Speaker 2: but fundamentally my sympathies are with the puzzle people, right,
Speaker 2: I mean, I love the puzzle people, and I think
Speaker 2: it is on balance good for the world and also
Speaker 2: very pleasing aesthetically that the puzzle people are in charge
Speaker 2: of finance. But it's a real you know, this is
Speaker 2: like it goes back to Liar's Poker. Right. This transition
Speaker 2: from the sort of sociable, essentially marketing oriented people to
Speaker 2: math puzzle people is one that has called attention on
Speaker 2: Wall Street for decades.
Speaker 3: H Great Graham, really good stuff. Okay, here's Sean that
Speaker 3: seems to love certain quotes because they're graded explaining a
Speaker 3: moment mechanism, trend, et cetera. For example, quote, it would
Speaker 3: be wise to view any investing in open Ai Global
Speaker 3: LLC in the spirit of a donation. End quote hidden
Speaker 3: poorly internally labeled Fiat at account eight million?
Speaker 2: Do you eight billion?
Speaker 3: Eight billion?
Speaker 2: She's a little till there.
Speaker 3: In front of it because it.
Speaker 2: Shan beckman Fried's famous spreadsheet famous.
Speaker 3: Do you have an all time favorite?
Speaker 2: Do I have an all time favorite quote? So I
Speaker 2: almost said this in the last answer, Samuel Johnson says,
Speaker 2: there are a few ways in which a man can
Speaker 2: be more innocently employed than in getting money. I think
Speaker 2: about that a lot. Yeah, people regularly get mad at
Speaker 2: Wall Street and fanciers and people trying to make a buck,
Speaker 2: and I often think it's better than almost all of
Speaker 2: the alternatives. People who are motivated power or revenge or
Speaker 2: even a sense of mission, we're often doing worse things
Speaker 2: than the people are just out there trying to make
Speaker 2: a buck or eight billion bucks. So that's a that's
Speaker 2: a you know, an all time favorite quote of mine.
Speaker 2: Another favorite quote of mine is, you know, Warren Buffett
Speaker 2: has a lot of famous quotes and his famous shareholder letters.
Speaker 3: Yeah, probably quoted a.
Speaker 2: Lot of them. The one that I like them most
Speaker 2: is at some point he's like talking trash about gold
Speaker 2: as an investment, right, and he's like, you can invest
Speaker 2: I think the number was like the market cap with
Speaker 2: the SMP. He's like, you can put you know, thirty
Speaker 2: two trillion dollars into the into the SMP. You put
Speaker 2: it the money into the SMP, you get all the
Speaker 2: productive capacity of America, all the companies, all the corporate profits,
Speaker 2: all right, all the business. Or you can put that
Speaker 2: amount of money into a cube of gold that is
Speaker 2: like yay hi by yay long, by yay wide. And
Speaker 2: he's like, and then it'll just sit there. You can
Speaker 2: fundle the cube, but it will not respond.
Speaker 3: It will not spin off any any dividends anything like that,
Speaker 3: no cash flow.
Speaker 2: I just think of Warren Buffett's saying, you can fundle
Speaker 2: the cube, but it will not respond.
Speaker 3: Okay. From ends a question on ISS slash Glass Lewis
Speaker 3: and the voting discussion. Isn't this the easiest way for
Speaker 3: a billionaire to gain a huge influence on companies? Buy
Speaker 3: Iss or Glass Lewis and steal the voting in one
Speaker 3: in the direction you want? Would this work?
Speaker 2: I don't know, you know, and Glass Lewis people, people
Speaker 2: are really mad at Iss, Glass List or the proxy advisory.
Speaker 3: Firms, as discussed on this pod ages ago.
Speaker 2: Now I speak only a few days before we recorded
Speaker 2: this pod, Donald Trump put out an executive order basically
Speaker 2: saying we don't like the proxy advisors. And there's this
Speaker 2: notion that the proxy advisors are in charge of all
Speaker 2: shareholder voting. Right, People like a conspira like this where
Speaker 2: it's like two foreign owned companies control how all American
Speaker 2: public companies are run. Right. The idea is that Iss
Speaker 2: and Glass Lewis tell the shareholders how to vote, and
Speaker 2: then the shareholders vote that way, and then the companies
Speaker 2: have to do what they say. This is exaggerating in
Speaker 2: a lot of ways, one of which is that like
Speaker 2: Iss and Glass Lewis have their most influence in the
Speaker 2: least important things like there are shareholder votes on you know,
Speaker 2: there are hundreds a year on non binding proposals that
Speaker 2: companies should write reports about ESG stuff or whatever, and there. Yeah,
Speaker 2: a lot of shareholders do defer to Iss and Glass
Speaker 2: Lewis because it just doesn't matter to them that much.
Speaker 2: Iss and Glass Lewis have meaningful influence on things like
Speaker 2: contested merger situations and proxy fights, where like there are
Speaker 2: real economic stakes, but they're a lot of asset managers
Speaker 2: are making their own decisions because they have more at stake,
Speaker 2: whereas the stuff where the Iss and Glass Lewis have
Speaker 2: the most impact is where people have the least at stake.
Speaker 2: But also it's just like they have no authority. They're
Speaker 2: just persuasive, right, They're just like useful, and if they
Speaker 2: stop being useful, then people would stop paying attention to them.
Speaker 2: So I think if you bought Iss and glass Lewis
Speaker 2: and use them to advance an agenda, first of all,
Speaker 2: you can only do so much to advance the agenda
Speaker 2: because it's only like share all theer voting. And secondly,
Speaker 2: if you did it too obviously, then people would get
Speaker 2: sick of you, and it can't be that hard to
Speaker 2: start another one.
Speaker 3: That's the thing like in practice, if a controversial billionaires,
Speaker 3: which is Elon Musk, bought either Iss or Glass Lewis,
Speaker 3: I feel like like whatever recommendation they make, people just
Speaker 3: know it's biased.
Speaker 2: Yeah, well you know everyone's like, oh it's biased. Now
Speaker 2: it is biased. They have some priors that happened to
Speaker 2: more or less aligned with the views of a lot
Speaker 2: of investment managers. Because the investment manager are the customers,
Speaker 2: and they're trying to run a business where people pay
Speaker 2: for their advice. But yeah, like you know, their bias
Speaker 2: is kind of aligned with their customers, and if you
Speaker 2: change that, then the customers would go somewhere else.
Speaker 3: Yeah, now we have a question from it's like the
Speaker 3: ETF segment. I don't really know how to answer this,
Speaker 3: but Leo asks, I feel like you could just have
Speaker 3: every buy in ETF be a creation and every cell
Speaker 3: be a redemption routed to the issuer and remove the
Speaker 3: possibility of ETF's trading outside of NAV. Why bother being
Speaker 3: able to trade them with other traders directly at.
Speaker 2: All, because they're exchange traded.
Speaker 3: Yeah, that's the thing. They trade throughout the day.
Speaker 2: Right. An instrument where you could only create and redeem
Speaker 2: with the issuer is just.
Speaker 3: The mutual fund yeah right, Yeah.
Speaker 2: And mutual funds have a couple of disadvantages. One is
Speaker 2: that it's just an administrative cost to the issue always
Speaker 2: having to trade with you, rather than you can trade
Speaker 2: on the exchange with anyone who wants to two. The
Speaker 2: issue wants to trade with you at NAV, but the
Speaker 2: NAV changes throughout the day, and so there's a cost
Speaker 2: in just updating that, whereas with an ETF you're trading
Speaker 2: at the market price, and so it just kind of
Speaker 2: takes care of itself. Nobody takes care of itself with
Speaker 2: arbitreasure is making sure the price is close to the
Speaker 2: nav but like the issuer doesn't have to worry about that, Like,
Speaker 2: it's much more administratively simple. Also though, like a lot
Speaker 2: of the point of the ETF thing is that if
Speaker 2: you're doing trades with the issue, the way ETFs worked
Speaker 2: is that I gave the issuer money and it gave
Speaker 2: me back shares. That is a taxable trade that creates
Speaker 2: tax liabilities for the other holders of the ETF of
Speaker 2: the fund right, because when the issue is selling stock
Speaker 2: for cash, it creates a tax realization event. The trick
Speaker 2: of ETFs is that they never trade.
Speaker 3: For cash famously.
Speaker 2: Famously, and so when I trade with you on the
Speaker 2: exchange and we're not trading with the issure, there's no
Speaker 2: tax realization event for the ATF. When there are creations,
Speaker 2: they're not like me going to the ETF with cash
Speaker 2: and getting my shares or vice versa. They're otherwise participants
Speaker 2: handing in shares and getting back of the ETF. So
Speaker 2: there's an in kind transaction and no tax event. Yeah,
Speaker 2: and so it is like, really important to the ETF
Speaker 2: is that there are no cash trades with the ETF,
Speaker 2: so there are no taxes, and they deffer taxes for
Speaker 2: as long as you hold the fund.
Speaker 3: So doing this would remove all the things that make
Speaker 3: an ets.
Speaker 2: This is just a mutual fund.
Speaker 3: Yeah.
Speaker 2: The question why would you why can't you just do
Speaker 2: every trade with the issuer? Is like, why can't an
Speaker 2: etfpm mutual fund? And the answer is, we've discovered a
Speaker 2: better technology.
Speaker 3: Yeah, why can't a mule be a horse? A lot
Speaker 3: of reasons. This is a really great question from Oscar.
Speaker 3: Why are there no meme ETFs? We have meme stocks
Speaker 3: and meme stock ETFs, but there is no meme ETF
Speaker 3: in otherwise completely boring ETF holding boring assets that nevertheless
Speaker 3: drums up huge retail excitement. It doesn't have to trade
Speaker 3: at some dune premium, just build up a big NAV.
Speaker 3: I read this a few times and then I understood
Speaker 3: what Oscar was asking because my immediate reaction was, there
Speaker 3: are ETFs that hold meme stocks, but he's talking about
Speaker 3: why hasn't an ETF t taken off in the same
Speaker 3: way that a meme stock has, like display meme like characteristics.
Speaker 3: Is how I understood it.
Speaker 2: And the answer is because of the ARP. Right. The
Speaker 2: answer is because if I buy an ETF on the
Speaker 2: stock exchange, I'm buying it from a market maker who
Speaker 2: is probably selling me shares of the ETF and buying
Speaker 2: the underlying stock, right and vice versa. If I'm selling,
Speaker 2: they'll buy the ETF, they can sell the underlying stock,
Speaker 2: and so if the values get out of line, then
Speaker 2: they'll just do that arbitrage. Right. If an ETF is
Speaker 2: trading it well above its net acid value, then market
Speaker 2: makers are going to sell the ETF and buy the
Speaker 2: underlying shares and close the ARP and do creations and
Speaker 2: redemptions to close the APP. So it can't really trade
Speaker 2: it much of a premium. And then the question is
Speaker 2: it's not trading at a premium, it would just pull
Speaker 2: up a big nav meme stock can be fairly small, right,
Speaker 2: people can buy the memestock and it'll go up. And
Speaker 2: a meme ETF that held a lot of shares would
Speaker 2: have to push the prices of all of the shares
Speaker 2: in order to go to the moon, right, Like, you
Speaker 2: can't have a premium, not sustainably, and so the only
Speaker 2: way for it to like go to the moon is
Speaker 2: to push out the prices of all the underlying shares.
Speaker 2: So you can imagine like a small ETF with like
Speaker 2: small Memei stocks doing that, But it's not the.
Speaker 3: Most obvious thing to do a giant ETF that holds
Speaker 3: small stocks. I feel like that would kind of.
Speaker 2: You can't have a giant Meme. Yeah, like the audience
Speaker 2: for Meme anything, the audience for like irrationally pushing out
Speaker 2: the price of things. It's not you know, it's not
Speaker 2: that big.
Speaker 3: Yeah.
Speaker 2: I will say, like, this is an interesting question because
Speaker 2: I feel like I've written this and said this possible
Speaker 2: on this podcast. One of the lessons of the Meme
Speaker 2: stock episode is that fundamental value is a floor on
Speaker 2: stock price, because if like a stock is trading well
Speaker 2: below it's fundamental value, then some private equity firm can
Speaker 2: come and buy the company and you know, extract its
Speaker 2: cash flows. But fundamental value is not a cap on
Speaker 2: stock price. Like, if a stock trades it ten times
Speaker 2: its fundamental life, there's nothing you can do about that.
Speaker 2: You can short it, but you can't make it go
Speaker 2: down to its fundamental day. There's no offsetting equivalent to
Speaker 2: like a private equity firm buying the company and cracking
Speaker 2: up its cash flows. And so everyone sort of thought
Speaker 2: that fundamental value in the long run was the driver
Speaker 2: of thought prices, and the memestock episode threw that into question.
Speaker 2: Is like, no, you don't. It doesn't have to be. No,
Speaker 2: with ETFs, there is a symmetrical mechanism, right, there's the
Speaker 2: arbitrage mechanism means that the ETF kind of has to
Speaker 2: trade its fundamental value, and if it doesn't, you can
Speaker 2: fix that yourself. You can like extract that premium directly
Speaker 2: by you know, genie a creation or redemption. And so
Speaker 2: that's why there's no MEITF because you can't sustainably trade
Speaker 2: above fair value.
Speaker 3: I still feel like it could happen. Yeah, maybe it'll
Speaker 3: happen in the next two weeks, and this will be
Speaker 3: the thing that eurodically changes our answers. Chris asks thank
Speaker 3: you for continuing to cover the amusing and somehow not
Speaker 3: yet a legal state of prediction market quote sporting outcome commodities.
Speaker 3: On the last podcast, it sounded like hal She could
Speaker 3: arguably become a platform that connects betters with market makers,
Speaker 3: which somehow seems like a bad thing for DraftKings and flutter.
Speaker 3: But couldn't the sports books become the market makers?
Speaker 2: Yeah? Why not? I Mean, it's unclear what actual entities
Speaker 2: end up doing this, but I do think that one
Speaker 2: way to think about it is that right now, there
Speaker 2: are sports books which are in the business of trading
Speaker 2: sports pets with retail customers essentially, and there are prediction markets,
Speaker 2: which are public registered exchanges that are in the business
Speaker 2: of trading sports pets with anyone who wants to show up.
Speaker 2: And like, that's kind of how the stock market works.
Speaker 2: Right There are retail brokerages that send their retail custom
Speaker 2: stock orders to you know, sit at all securities or
Speaker 2: chains trade or power or whoever, and then there's a
Speaker 2: public stock market. And one thing that happens is that
Speaker 2: those electronic trading firms that get the retail orders, they're
Speaker 2: also trading on the stock exchange, and so one thing
Speaker 2: they are doing is interacting with retail orders and then
Speaker 2: laying off risk in the public markets. And you could
Speaker 2: imagine something like that happening with sports books, right maybe
Speaker 2: not the current sports books, maybe that's more like a
Speaker 2: market maker or function, but you have people who are
Speaker 2: interacting with retail traders and they're getting flows and they're
Speaker 2: you know, they're getting like two sided, uninformed flows and
Speaker 2: they're trading against it and they're making a spread and
Speaker 2: so forth. And when they have unbalanced risk, they go
Speaker 2: lay it off in the public markets against whatever sharp
Speaker 2: traders they find. They're like, I think that's a very
Speaker 2: reasonable model, and like, the way it works in the
Speaker 2: stock market is if you're a retail trader, you get
Speaker 2: a better customer experience and often like better pricing by
Speaker 2: trading with an electronic wal seller through your retail broker's platform,
Speaker 2: And like that could happen here too, or we're like,
Speaker 2: you know, the retail sports books can offer maybe a
Speaker 2: better user experience and so you trade with them, but
Speaker 2: then they are trading in the public markets to lay
Speaker 2: out their risk. There are some problems with that theory,
Speaker 2: including about like the legal structure of commodities markets, but
Speaker 2: it does kind of feel like that could be a
Speaker 2: place that this ends up, where the retail traders are
Speaker 2: trading with someone who specializes in retail trading, and then
Speaker 2: like there's some professional institutional market.
Speaker 3: So Chris maybe he identified the evolution.
Speaker 2: Yeah, I don't know that the current sports books are
Speaker 2: going to be the best situated to to do that.
Speaker 2: But yeah, they're all kind of they're all basically hiring
Speaker 2: the same pool of high frequency traders.
Speaker 3: That's probably fine, all right, Dan Dan asks, I have
Speaker 3: a question about how companies execute share repurchases and the
Speaker 3: rules around it. I know that parenthetical back when the
Speaker 3: SEC and Force rules insiders could use a one oh
Speaker 3: five B one plan to try and five one ten
Speaker 3: ten five be one plan ten.
Speaker 2: Be five to one.
Speaker 3: Wait did I say ten B five to one ten
Speaker 3: five B one oh ten be five to one ten. No,
Speaker 3: it says it.
Speaker 2: Doesn't matter what it says. I'm telling you about it
Speaker 2: actually is?
Speaker 3: Okay? Sorry, sorry, down ten Wait you just said ten
Speaker 3: B five one plan to try and protect themselves against
Speaker 3: insigner trading allegations. Is there a similar plan for when
Speaker 3: a company is repurchasing shares or are they allowed to
Speaker 3: use insider information to time the repurchases? Also, how do
Speaker 3: they do it? I assume Coca Cola doesn't open their
Speaker 3: Robinhood account and submit a market order.
Speaker 2: No, here's what they do. They call me, and then
Speaker 2: they used to call me when I was a banker.
Speaker 2: One thing I did was share repurchases, and so I
Speaker 2: can tell you all about this. I will try to
Speaker 2: keep it short because although it is dear to my heart,
Speaker 2: it's not that interesting. But yeah, So ten B five
Speaker 2: to one is like the SEC rule that basically says,
Speaker 2: when you don't have inside information, you can set up
Speaker 2: a plan to buy stock or sell stock. So like
Speaker 2: corporate executives will set up a ten B five to
Speaker 2: one plan to sell stock to pay for college, and
Speaker 2: then later when the plans sell stock, even if they
Speaker 2: have inside information, it doesn't matter because that the plan
Speaker 2: is just automated. This is the theory. There are various workarounds,
Speaker 2: but it's the same rule for companies. Companies regularly do
Speaker 2: stock buybacks using ten to five to one plans because
Speaker 2: they have some open window after they announce earnings where
Speaker 2: they can set up the plan and then like the
Speaker 2: plan can kind of go and be automated throughout the
Speaker 2: year and they can buy stock even when they're discussing
Speaker 2: mergers or whatever because like they have a ten to
Speaker 2: five one plan. Sometimes companies do that, they also do
Speaker 2: other things. It used to be that the main way
Speaker 2: companies bought backstock was through tender offers where they made
Speaker 2: a public announcement anyone who wants to sell stock at
Speaker 2: this price can do it, and then they would buy
Speaker 2: stock at a price, and this would solve all those
Speaker 2: problems because they'd make full disclosure of everything and like
Speaker 2: everyone would have the same information and they'd tender all
Speaker 2: their stock at the same time. It's pretty annoying process
Speaker 2: and companies do much less of that than they used to,
Speaker 2: basically because the SEC relaxed the rules. Like a few
Speaker 2: decades ago, it used to be considered that like open
Speaker 2: market stock purchases where market manipulation, and so companies didn't
Speaker 2: do it, and they relax those rules. This is periodically controversial,
Speaker 2: like people are like stock buybacks are market manipulation, so
Speaker 2: they should change the rules back and then companies would
Speaker 2: have to do tender offers. But now they mostly do
Speaker 2: open market purchases. The other thing they do is delightful
Speaker 2: derivative products with their friendly local investment banker. Basically, anything
Speaker 2: you do, you're going to call an investment bank and
Speaker 2: they're going to do it for you. And the simple
Speaker 2: way is they're going to do it in the open market.
Speaker 2: Not so dissimilar from what you would do with robinhood.
Speaker 2: They usually they'll like handle the you know, the average
Speaker 2: over the course of the day rather than you hitting
Speaker 2: every bye you know order. But if you want something
Speaker 2: more complicated, like a fancy derivative product, they'd be happy
Speaker 2: to put you into that called accelerated stock buybacks really good.
Speaker 2: I used to sell them.
Speaker 3: Sounds juicy.
Speaker 2: Yeah they're good. Yeah, call me for I don't want
Speaker 2: to actually endorse accelerate. It's like, well, have complicated feelings
Speaker 2: about this product I used to sell. But in any case,
Speaker 2: here's a question from Ian. Katie is mentioned on more
Speaker 2: than one occasion that she craves adrenaline and is an
Speaker 2: adrenaline junkie. She has also discussed her participation in the
Speaker 2: sport of horse dancing. Are the two related? Is trissage
Speaker 2: in activity that adrenaline junkies flock too? I want to
Speaker 2: hear the answer to this one.
Speaker 3: Probably no.
Speaker 2: I feel like horseback riding in itself is like a
Speaker 2: little bit you have has an element of.
Speaker 3: Animal danger.
Speaker 2: Yeah, could go fast even if during horse dancing He's.
Speaker 3: Probably ideally they wouldn't. It's a twofold answer, because yes,
Speaker 3: there is an element of adrenaline and riding horses. But
Speaker 3: if you most adrenaline junkies are more into jumping, you know,
Speaker 3: they want to go fast over jumps. Dressage often the
Speaker 3: goal is to not go that fast. It's like horse ballet.
Speaker 3: But I love drissage well. I love drisage just for
Speaker 3: the training element of it. It's like horse pilates, honestly.
Speaker 3: But when it comes to showing, I just love having
Speaker 3: to be on. It probably takes five to ten minutes
Speaker 3: for you to complete your test, and for those five
Speaker 3: to ten minutes, you have to nail every part of it.
Speaker 3: You just have to be on the entire time. So
Speaker 3: I really enjoy that element. It's not dissimilar from television,
Speaker 3: where the camera is on and you just have to perform,
Speaker 3: right Like.
Speaker 2: Any performance or competitive activity has an adrenaline competit, even yes,
Speaker 2: even if it's.
Speaker 3: Like, for example, obviously that's a high adrenaline sort of thing. Yes,
Speaker 3: for yeah, if you're like in a high stakes match,
Speaker 3: your heart is racing, but you're not obviously. In most cases,
Speaker 3: I assume chess probably yoursage is the most similar. I
Speaker 3: don't know, everyone go YouTube drissage in the alone?
Speaker 2: Are there YouTube videos of Kiddie raffle.
Speaker 3: Absolutely not, absolutely not.
Speaker 2: Well, don't look for those though.
Speaker 3: No, please don't. All right, Well, happy happy New Year.
Speaker 3: I hope you all had a great time.
Speaker 2: And that was the Money Stuff Podcast.
Speaker 3: I'm Matt Levine and I'm Katie Greifeld.
Speaker 2: You can find my work by subscribing to the Money
Speaker 2: stuffnewsletter on Bloomberg.
Speaker 3: Dot com, and you can find me on Bloomberg TV
Speaker 3: every day on the close between three and five pm Eastern.
Speaker 2: We'd love to hear from you. You can send an
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Speaker 2: question and we might answer it on the air.
Speaker 3: You can also subscribe to our show wherever you're listening
Speaker 3: right now and leave us a review. It helps more
Speaker 3: people find the show.
Speaker 2: The Money Stuff Podcast is produced by annam Aserakis and
Speaker 2: Moses One.
Speaker 3: Our theme music was composed by Blake Maples.
Speaker 2: Amy Keen is our executive producer.
Speaker 3: And Sage Bauman is Bloomberg's head of Podcasts.
Speaker 2: Thanks for listening to The Money Stuff Podcast. We'll be
Speaker 2: back next week with more stuff