1 00:00:02,720 --> 00:00:09,000 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. We talked last week 2 00:00:09,039 --> 00:00:12,880 Speaker 1: about we're so excited. I don't get out of the 3 00:00:12,880 --> 00:00:13,360 Speaker 1: house much. 4 00:00:13,480 --> 00:00:15,160 Speaker 2: Oh my god. The weather in Vegas, though, it's going 5 00:00:15,240 --> 00:00:16,160 Speaker 2: to be like high eighties. 6 00:00:16,560 --> 00:00:18,400 Speaker 1: I don't know what the weather in New Orleans is. 7 00:00:18,960 --> 00:00:20,720 Speaker 1: It's gonna be great, it's gonna be great whatever. 8 00:00:20,960 --> 00:00:23,599 Speaker 2: Yeah, it will be good, humid. Drink a hurricane. 9 00:00:24,680 --> 00:00:26,240 Speaker 1: I feel like I'm gonna drink a hurricane. 10 00:00:26,560 --> 00:00:28,400 Speaker 2: It's not good. We'll make you feel good. 11 00:00:28,520 --> 00:00:30,520 Speaker 1: No, I think the last time I was in New Orleans, 12 00:00:30,600 --> 00:00:35,879 Speaker 1: I was. I was in high school, okay, And in 13 00:00:35,960 --> 00:00:39,519 Speaker 1: high school I was on the quiz Bowl team, all right, 14 00:00:39,760 --> 00:00:44,239 Speaker 1: which is like surely no surprise to anywhere. And we 15 00:00:44,320 --> 00:00:48,440 Speaker 1: call for some sort of national championship tournament in New Orleans, 16 00:00:48,960 --> 00:00:52,839 Speaker 1: of course, and I was, you know, seventeen. We definitely 17 00:00:52,880 --> 00:00:53,760 Speaker 1: drank hurricanes. 18 00:00:54,040 --> 00:00:55,560 Speaker 2: That's pretty cool. 19 00:00:55,680 --> 00:00:58,360 Speaker 1: Actually, like teacher chaperones are like took us to Bourbon 20 00:00:58,440 --> 00:01:00,440 Speaker 1: Street and we're like, we're going to walk this way. 21 00:01:01,040 --> 00:01:03,680 Speaker 2: Wow. Did anyone have a fake idea or was it 22 00:01:03,760 --> 00:01:04,280 Speaker 2: just like. 23 00:01:04,480 --> 00:01:06,480 Speaker 1: As I recall, no. 24 00:01:07,040 --> 00:01:09,280 Speaker 2: Or was it like one kid and he was like. 25 00:01:09,959 --> 00:01:11,840 Speaker 1: This is a similar time in New Orleans. 26 00:01:12,080 --> 00:01:14,240 Speaker 2: God. Yeah, he just. 27 00:01:14,280 --> 00:01:18,720 Speaker 1: Wiped up bar and you were sixteen seventeen years old 28 00:01:18,760 --> 00:01:21,240 Speaker 1: and you said I'd like a hurricane, and they're like, 29 00:01:21,760 --> 00:01:25,319 Speaker 1: nobody who's not underage wants a hurricane. So here you. 30 00:01:25,280 --> 00:01:28,160 Speaker 2: Go, man, Well you can recreate that. 31 00:01:28,360 --> 00:01:31,240 Speaker 1: I'm going to recreate that experience. That's it, like, honestly, 32 00:01:31,280 --> 00:01:33,200 Speaker 1: like the m and A conference and the quiz Bowl 33 00:01:33,440 --> 00:01:37,919 Speaker 1: National Championship, very similar. Probably probably people. 34 00:01:38,000 --> 00:01:39,280 Speaker 2: Yes, that's cute. 35 00:01:40,480 --> 00:01:42,800 Speaker 1: Hello, and welcome to the Money Stuff Podcast. You're a 36 00:01:42,800 --> 00:01:47,280 Speaker 1: weekly podcast where we talk about stuff related to money. 37 00:01:47,960 --> 00:01:50,040 Speaker 1: I'm Matt Levian and I Wade the Money Stuff column 38 00:01:50,040 --> 00:01:51,000 Speaker 1: for Bloomberg. 39 00:01:50,600 --> 00:01:55,120 Speaker 2: Opinion, and I'm Katie Greifeld, a reporter for Bloomberg News 40 00:01:55,120 --> 00:01:56,760 Speaker 2: and an anchor for Bloomberg Television. 41 00:02:04,880 --> 00:02:06,440 Speaker 1: Friend of the Pud Bill Ackman is doing. 42 00:02:06,560 --> 00:02:09,920 Speaker 2: The show Lackman returning not as a bird but as 43 00:02:10,040 --> 00:02:10,600 Speaker 2: the manager. 44 00:02:10,720 --> 00:02:13,119 Speaker 1: So I forgot that was a sensitive subject. A friend 45 00:02:13,160 --> 00:02:17,400 Speaker 1: of the show, Bill Ackman Man, not bird is the 46 00:02:17,440 --> 00:02:21,000 Speaker 1: thing that he likes to do. Yeah, launch large clothes 47 00:02:21,240 --> 00:02:23,920 Speaker 1: funds or try or try He's going to get at 48 00:02:23,919 --> 00:02:26,280 Speaker 1: one of these days. He filed for the IPO of Well, 49 00:02:26,320 --> 00:02:31,080 Speaker 1: the IPOs of Pershing Square USA, which is the closed 50 00:02:31,200 --> 00:02:34,079 Speaker 1: end fund that he tried to launch in twenty twenty 51 00:02:34,080 --> 00:02:37,280 Speaker 1: four and then pulled because he didn't there was very 52 00:02:37,320 --> 00:02:40,640 Speaker 1: much money. But also the Pershing Square, Inc. Which is 53 00:02:41,280 --> 00:02:44,239 Speaker 1: the new form of the Pershing Square Hedgehund management company. 54 00:02:44,280 --> 00:02:46,800 Speaker 1: So his actual hedgehund firm is going to go public 55 00:02:47,280 --> 00:02:50,760 Speaker 1: simultaneously with his clothes end fund for the simple reason 56 00:02:50,840 --> 00:02:53,079 Speaker 1: that if you buy shares of the clothes then fund, 57 00:02:53,080 --> 00:02:56,560 Speaker 1: you're gonna get shares of the management company as a 58 00:02:56,600 --> 00:02:58,320 Speaker 1: sweetener to induce you to buy shares of. 59 00:02:58,320 --> 00:03:00,880 Speaker 2: The clothes twenty shares the management company. 60 00:03:00,960 --> 00:03:03,440 Speaker 1: Right, everyone reported this, and I'm like, you can't be 61 00:03:03,560 --> 00:03:06,320 Speaker 1: like twenty shares. If you buy one hundred shares of 62 00:03:06,360 --> 00:03:08,320 Speaker 1: the Pershing Square USA, you get twenty shares of the 63 00:03:08,320 --> 00:03:10,639 Speaker 1: management company, So you get one fifth as many shares 64 00:03:10,720 --> 00:03:13,480 Speaker 1: of the manager company. But like shares are a meaningless concept, 65 00:03:13,560 --> 00:03:15,320 Speaker 1: you can divide a company into as many shares as 66 00:03:15,560 --> 00:03:17,799 Speaker 1: you want. This is true, and so I haven't looked 67 00:03:17,800 --> 00:03:19,880 Speaker 1: at it, and going to be four dred million shares 68 00:03:19,919 --> 00:03:24,120 Speaker 1: of Pershing Square ink the management company. So basically, if 69 00:03:24,160 --> 00:03:26,480 Speaker 1: you buy a fifty dollars share of Pershing square USA 70 00:03:26,720 --> 00:03:29,400 Speaker 1: the clothes un fund. You get fifty dollars worth give 71 00:03:29,440 --> 00:03:32,840 Speaker 1: or take of the clothes unfund plus zero point two 72 00:03:32,880 --> 00:03:36,160 Speaker 1: shares of the manager company, which is one two billionth 73 00:03:36,240 --> 00:03:38,880 Speaker 1: of the management company, which you know, what's the management 74 00:03:38,960 --> 00:03:42,200 Speaker 1: company worth? Two years ago or a year and a 75 00:03:42,200 --> 00:03:45,640 Speaker 1: half ago, they did offering, they raise money at about 76 00:03:45,640 --> 00:03:48,520 Speaker 1: a ten billion dollar valuation, and they would argue that 77 00:03:48,560 --> 00:03:51,480 Speaker 1: it's more now. So you know, if the managing company 78 00:03:51,560 --> 00:03:55,560 Speaker 1: is worth ten or twenty billion dollars, then your bonus 79 00:03:55,720 --> 00:03:58,280 Speaker 1: as a investor in the clothes unfund is worth five 80 00:03:58,360 --> 00:04:01,440 Speaker 1: or ten dollars or so that is I think they 81 00:04:01,480 --> 00:04:04,800 Speaker 1: hope enough of a bonus to overcome the tradition that 82 00:04:04,840 --> 00:04:08,920 Speaker 1: closed un funds trade a discount. And in fact, but. 83 00:04:08,880 --> 00:04:11,800 Speaker 2: There's a rich history of closed un funds trading at 84 00:04:11,800 --> 00:04:12,400 Speaker 2: a discount. 85 00:04:12,800 --> 00:04:15,760 Speaker 1: The rich history includes right Bill Ackman's closed up fund 86 00:04:15,760 --> 00:04:20,240 Speaker 1: in europ, which is their discount is very complicated because 87 00:04:20,279 --> 00:04:24,039 Speaker 1: like there's this thing coming. But you know, if you 88 00:04:24,080 --> 00:04:26,000 Speaker 1: started from that as a starting point, you'd be like, well, 89 00:04:26,480 --> 00:04:28,679 Speaker 1: twenty five percent discount means if I put fifty dollars 90 00:04:28,680 --> 00:04:30,440 Speaker 1: into persons through a USA, I'm going to get back 91 00:04:31,279 --> 00:04:33,880 Speaker 1: thirty seven fifty worth of stock, and then you need 92 00:04:33,960 --> 00:04:36,240 Speaker 1: enough of the management company stock to make it worth it, 93 00:04:36,279 --> 00:04:37,280 Speaker 1: which maybe this does. 94 00:04:37,640 --> 00:04:40,440 Speaker 2: Yeah, So we were talking a little bit about this 95 00:04:40,520 --> 00:04:43,080 Speaker 2: earlier and then we quickly stopped ourselves because we should 96 00:04:43,120 --> 00:04:45,520 Speaker 2: save it for the POD. But it's interesting when it 97 00:04:45,520 --> 00:04:49,640 Speaker 2: comes to IPOs of companies, there's this stigma around trading 98 00:04:49,640 --> 00:04:54,520 Speaker 2: below your IPO price. Does the same stigma exist if 99 00:04:54,560 --> 00:04:57,880 Speaker 2: you IPO closed and fund and immediately traded a discount. 100 00:04:58,040 --> 00:05:00,920 Speaker 1: Well, two things. One, it's not a stigma, it's a 101 00:05:01,279 --> 00:05:04,560 Speaker 1: total impediment. Like Bill Ackman last time he tried to 102 00:05:04,560 --> 00:05:07,359 Speaker 1: take Pushing Square USI public, he just didn't. And the 103 00:05:07,400 --> 00:05:10,280 Speaker 1: reason he didn't is because a lot of investors were like, look, 104 00:05:11,360 --> 00:05:13,960 Speaker 1: this sounds great, but we think it'll trade at a discount, 105 00:05:14,000 --> 00:05:15,600 Speaker 1: and we'd rather buy it at a discount on day 106 00:05:15,600 --> 00:05:18,600 Speaker 1: two than buy it from you at par in the IPO. 107 00:05:19,880 --> 00:05:21,800 Speaker 1: And if everyone says that, then you don't sell any 108 00:05:21,800 --> 00:05:23,520 Speaker 1: shares in the IPI and you just don't go public. 109 00:05:23,600 --> 00:05:27,840 Speaker 1: Right with a company, stuff is different. Right, Like a 110 00:05:27,920 --> 00:05:30,200 Speaker 1: company like you set the IPO price at the price 111 00:05:30,240 --> 00:05:31,720 Speaker 1: the market is willing to bear with. They closed, then 112 00:05:31,800 --> 00:05:34,760 Speaker 1: fund if you don't raise money at NAV like you 113 00:05:34,839 --> 00:05:38,200 Speaker 1: kind of can't raise money, so they pulled the IPO. 114 00:05:38,560 --> 00:05:41,200 Speaker 1: It's anothery're coming back with this thing, which you know 115 00:05:41,240 --> 00:05:44,680 Speaker 1: you ask, is there are a stigma if that trades down? Well, 116 00:05:45,080 --> 00:05:47,520 Speaker 1: maybe I'm wrong, but it's going to trade down the way. 117 00:05:47,600 --> 00:05:49,560 Speaker 1: The way you know that is because they're giving this bonus. Right, 118 00:05:49,600 --> 00:05:51,719 Speaker 1: the management company shares and the closed un fund shares 119 00:05:51,760 --> 00:05:53,360 Speaker 1: are going to trade separately day one, right, And there's 120 00:05:53,400 --> 00:05:55,760 Speaker 1: just they're two separate companies. And if you buy shares 121 00:05:56,000 --> 00:05:58,680 Speaker 1: of the closed then fund and the IPO, you get 122 00:05:58,720 --> 00:06:01,719 Speaker 1: clothes unfund shares and separate management company shares. Yeah, and 123 00:06:01,760 --> 00:06:04,800 Speaker 1: then day one they trade separately, and you hope the 124 00:06:04,839 --> 00:06:08,480 Speaker 1: package will trade at above fifty dollars so that you've 125 00:06:08,480 --> 00:06:11,400 Speaker 1: made money on the IPO. But if the package trades 126 00:06:11,440 --> 00:06:13,040 Speaker 1: about fifty dollars, like the closed infund is going to 127 00:06:13,040 --> 00:06:14,960 Speaker 1: trade down, it's just gonna trade down, and it's you know, 128 00:06:14,960 --> 00:06:16,440 Speaker 1: it's not gonna be that much think aout because everyone 129 00:06:16,480 --> 00:06:17,640 Speaker 1: like anticipating it. 130 00:06:18,200 --> 00:06:20,200 Speaker 2: I'm glad you said it's going to trade down. 131 00:06:20,000 --> 00:06:21,760 Speaker 1: Because maybe I'm wrong. 132 00:06:22,160 --> 00:06:24,000 Speaker 2: I mean, maybe i'm wrong too, but that was my 133 00:06:24,080 --> 00:06:25,320 Speaker 2: knee jerk reaction. 134 00:06:25,120 --> 00:06:27,360 Speaker 1: Like, oh, every clothes Why that's why there's a bonus, 135 00:06:27,400 --> 00:06:29,080 Speaker 1: because it's going to trade down, and so you get 136 00:06:29,080 --> 00:06:31,159 Speaker 1: these extra shares and you have the package trades up, 137 00:06:31,160 --> 00:06:32,560 Speaker 1: but the package trades up, it's a win, and so 138 00:06:32,640 --> 00:06:35,400 Speaker 1: it's a good IPO. Yeah, maybe over time, like Bill 139 00:06:35,440 --> 00:06:38,200 Speaker 1: Ackman has always made the case that like if he 140 00:06:38,920 --> 00:06:43,760 Speaker 1: compounds the clothes End Fund at an above market rate, 141 00:06:44,279 --> 00:06:46,279 Speaker 1: then you should be willing to pay more than Navy 142 00:06:46,400 --> 00:06:49,400 Speaker 1: to buy into the clothes down Fund, and maybe over 143 00:06:49,480 --> 00:06:54,240 Speaker 1: time that argument wins and that they want. 144 00:06:54,440 --> 00:06:59,000 Speaker 2: Yeah, it's kind of interesting that Robinhood also just set 145 00:06:59,040 --> 00:07:02,159 Speaker 2: sale on a close funds, a venture fund that holds 146 00:07:02,320 --> 00:07:06,360 Speaker 2: private companies that iPod last week. I believe it also 147 00:07:06,880 --> 00:07:09,800 Speaker 2: it opened at a discount or something like that, and 148 00:07:10,280 --> 00:07:13,560 Speaker 2: I guess that sort of feeds into my long term 149 00:07:13,600 --> 00:07:16,800 Speaker 2: thinking that okay, package aside, it feels like this close 150 00:07:16,880 --> 00:07:19,160 Speaker 2: end fund is going to trade at a discount. Given 151 00:07:19,160 --> 00:07:22,720 Speaker 2: that we've talked about how there is all this demand 152 00:07:22,720 --> 00:07:26,080 Speaker 2: out there for private companies from retail investors, you would 153 00:07:26,080 --> 00:07:28,680 Speaker 2: expect that they would be drawn to this Robin Hood 154 00:07:29,320 --> 00:07:32,160 Speaker 2: venture funds. And then you compare that to the portfolio 155 00:07:32,400 --> 00:07:35,880 Speaker 2: and Bill Ackman's closed end funds. 156 00:07:36,000 --> 00:07:38,240 Speaker 1: Which is not not large cap stocks. 157 00:07:38,640 --> 00:07:39,440 Speaker 2: What are you talking about? 158 00:07:39,640 --> 00:07:42,040 Speaker 1: I said, I said, it's not not large cap stocks. 159 00:07:41,760 --> 00:07:43,600 Speaker 2: Right in Bill Ackmans. Yeah, No, I'm not saying that 160 00:07:43,600 --> 00:07:46,440 Speaker 2: it's not I'm saying it's all public large cap stocks. 161 00:07:46,440 --> 00:07:48,960 Speaker 2: It's not like the shiny pre IPO. 162 00:07:52,400 --> 00:07:54,760 Speaker 1: There's a reason for telling it this way. 163 00:07:54,920 --> 00:07:58,040 Speaker 2: Yeah, I know. I'm just saying the portfolio, like if 164 00:07:58,040 --> 00:08:01,559 Speaker 2: you're looking at this like shiny package of like data bricks, ramp, 165 00:08:01,640 --> 00:08:04,400 Speaker 2: like a lot of companies that are expected to go 166 00:08:05,040 --> 00:08:09,120 Speaker 2: public in the near future, versus you know, a close 167 00:08:09,200 --> 00:08:13,200 Speaker 2: and fund of large cap perhaps the right public stocks, 168 00:08:13,200 --> 00:08:16,600 Speaker 2: but still public stocks that might not like appeal to 169 00:08:18,160 --> 00:08:20,280 Speaker 2: people in the open market who might want to buy this. 170 00:08:20,560 --> 00:08:22,280 Speaker 1: Oh yeah, the thing you're selling in the clothes n 171 00:08:22,360 --> 00:08:26,600 Speaker 1: fund is not like the underlying investments, which are kind 172 00:08:26,600 --> 00:08:30,680 Speaker 1: of a NOLLA. The thing you're selling is one Bill 173 00:08:30,720 --> 00:08:34,880 Speaker 1: Ackman's future ability to pick good investments, and then two 174 00:08:35,000 --> 00:08:37,360 Speaker 1: just like his persona, right, I mean, like this is 175 00:08:37,360 --> 00:08:40,520 Speaker 1: a like to some extent, he's a public figure. He 176 00:08:40,520 --> 00:08:42,560 Speaker 1: tweets a lot, like if you're interested in that, like 177 00:08:43,440 --> 00:08:45,439 Speaker 1: this is in the way that Tesla is a way 178 00:08:45,440 --> 00:08:47,400 Speaker 1: to access Elmus. This is the way to access like 179 00:08:47,480 --> 00:08:50,760 Speaker 1: his brand, and maybe some people will buy that. Yeah, 180 00:08:50,840 --> 00:08:52,280 Speaker 1: I should say like that a lot of this is 181 00:08:52,280 --> 00:08:54,520 Speaker 1: spoken for, Like they have two point eight billion dollars 182 00:08:54,520 --> 00:08:57,000 Speaker 1: of like pre IPO commitments. 183 00:08:56,960 --> 00:08:59,120 Speaker 2: And those people got thirty shares. 184 00:08:59,200 --> 00:09:01,559 Speaker 1: They have thirty Yes, yeah, the extra bonus, but those 185 00:09:01,559 --> 00:09:04,360 Speaker 1: people are like institutions and family offices and stuff. I 186 00:09:04,400 --> 00:09:05,559 Speaker 1: do want to tell you a little bit about it, 187 00:09:05,640 --> 00:09:07,880 Speaker 1: Like the management company is going public, right, so it 188 00:09:07,920 --> 00:09:09,800 Speaker 1: seems like the management company is going public sort of 189 00:09:09,800 --> 00:09:12,840 Speaker 1: out of necessity to do the to close them fund deal. 190 00:09:12,880 --> 00:09:15,360 Speaker 1: But it's also like they're always talking about taking it public. 191 00:09:15,679 --> 00:09:17,520 Speaker 1: They're not raising money for the management company. They're just 192 00:09:17,520 --> 00:09:20,480 Speaker 1: taking it public to give to the closes unfund shoulders. 193 00:09:21,200 --> 00:09:23,800 Speaker 1: But they have to do a perspectives for the management company. 194 00:09:23,800 --> 00:09:27,160 Speaker 1: And so you can see things about like comp including 195 00:09:27,200 --> 00:09:29,520 Speaker 1: Akman got one hundred and forty three million dollars last 196 00:09:29,559 --> 00:09:32,800 Speaker 1: year and a lot of birds and Brian Israel who 197 00:09:32,880 --> 00:09:35,800 Speaker 1: is the actual chief investment officer and got forty four million. 198 00:09:36,400 --> 00:09:38,559 Speaker 1: I also I want to quote one of the great 199 00:09:38,559 --> 00:09:41,560 Speaker 1: sentences go on and this is actually from Ackman's letter, 200 00:09:41,600 --> 00:09:44,000 Speaker 1: I think to shelders not from the actual perspective, but 201 00:09:44,640 --> 00:09:47,720 Speaker 1: he writes, with one of the highest ratios of fee 202 00:09:47,760 --> 00:09:51,520 Speaker 1: paying assets to investment professionals in our industry, Pershing Square 203 00:09:51,559 --> 00:09:54,080 Speaker 1: is also an economically attractive place. 204 00:09:53,800 --> 00:09:56,640 Speaker 2: To work, oh, which is like we're going to pay you. 205 00:09:56,640 --> 00:09:59,319 Speaker 1: Like a great flax. Like it's like they have like whatever, 206 00:09:59,320 --> 00:10:01,880 Speaker 1: they have like twelve employees and they run thirty billion dollars. 207 00:10:01,960 --> 00:10:04,640 Speaker 1: They all get paid. It gets a great business. And 208 00:10:05,400 --> 00:10:07,360 Speaker 1: the masging company is also interesting. They do a really 209 00:10:07,400 --> 00:10:10,480 Speaker 1: interesting thing where they have, like most other hedgehn managers, 210 00:10:10,520 --> 00:10:14,080 Speaker 1: they charge performance fees and they have what they call 211 00:10:14,120 --> 00:10:16,680 Speaker 1: the preferred performance fee. It basically means the performance fee 212 00:10:16,720 --> 00:10:19,240 Speaker 1: that they get on the first five percent of returns 213 00:10:19,280 --> 00:10:23,120 Speaker 1: and their funds goes to the managment company to the 214 00:10:23,120 --> 00:10:27,480 Speaker 1: shareolders basically and everything over that goes to employees. So 215 00:10:28,360 --> 00:10:31,080 Speaker 1: one that incentivizes is employees because then get real or rich. 216 00:10:31,440 --> 00:10:35,120 Speaker 1: And two they think they argue that it makes the 217 00:10:35,280 --> 00:10:37,839 Speaker 1: management company a better investment because like the theory is 218 00:10:37,880 --> 00:10:40,320 Speaker 1: that people don't like to buy shares of hedge fund 219 00:10:40,320 --> 00:10:43,760 Speaker 1: companies because their returns are so variable. Because if they 220 00:10:43,760 --> 00:10:44,960 Speaker 1: have a good year, they make a lot of money. 221 00:10:44,960 --> 00:10:46,800 Speaker 1: If they have a bad year, they don't make any money. 222 00:10:46,840 --> 00:10:50,040 Speaker 1: And so, you know, stereotypically, investors do not place a 223 00:10:50,200 --> 00:10:53,880 Speaker 1: high multiple on performance fees and pushing squares. Theory is like, well, 224 00:10:54,000 --> 00:10:57,080 Speaker 1: the first five percent, we'll get that every year, and 225 00:10:57,120 --> 00:10:58,840 Speaker 1: so that's like almost like a management fee. It's like 226 00:10:58,880 --> 00:11:01,800 Speaker 1: just like a guaranteed fee. And so investor shop plays 227 00:11:01,800 --> 00:11:03,319 Speaker 1: a highmultiple on that. So they're like carving up the 228 00:11:03,360 --> 00:11:05,719 Speaker 1: fees in a nice way where like shareholders place a 229 00:11:05,800 --> 00:11:09,199 Speaker 1: high value on the low part of the fees, like 230 00:11:09,240 --> 00:11:12,000 Speaker 1: the very predictable stuff, and employees plays a high value 231 00:11:12,040 --> 00:11:14,079 Speaker 1: on the upside lottery tickets, and so we're going to 232 00:11:14,120 --> 00:11:16,000 Speaker 1: carve it up so that everyone gets the piece they value. 233 00:11:16,120 --> 00:11:16,520 Speaker 2: Mm hmm. 234 00:11:16,720 --> 00:11:18,559 Speaker 1: So we'll see that works. But it's a good idea. 235 00:11:18,760 --> 00:11:21,200 Speaker 2: I feel like we're going to be talking about this 236 00:11:21,760 --> 00:11:22,960 Speaker 2: more as we get closer. 237 00:11:23,280 --> 00:11:24,480 Speaker 1: Maybe yeh. 238 00:11:26,080 --> 00:11:41,840 Speaker 2: Can something we've been talking about a lot which we're 239 00:11:41,840 --> 00:11:44,320 Speaker 2: going to talk about more right now, probably credit. She's 240 00:11:44,360 --> 00:11:47,080 Speaker 2: the Louis vibes are atrocious. 241 00:11:48,040 --> 00:11:51,839 Speaker 1: Yes, I guess they're bad. Yeah, I guess they're bad. 242 00:11:52,080 --> 00:11:54,960 Speaker 2: They're bad. Well, if you have an optimistic. 243 00:11:55,040 --> 00:11:58,120 Speaker 1: Take the story about a golden executor who said at 244 00:11:58,160 --> 00:12:01,640 Speaker 1: a conference with that so good credit glans, we're enjoying 245 00:12:01,679 --> 00:12:04,280 Speaker 1: the war and Iran because at least the distracts from 246 00:12:04,440 --> 00:12:08,880 Speaker 1: questions about gates and yeah, you really don't want to 247 00:12:08,920 --> 00:12:09,120 Speaker 1: say that. 248 00:12:09,360 --> 00:12:12,480 Speaker 2: I keep that. I feel like that also points to 249 00:12:12,520 --> 00:12:16,760 Speaker 2: the vibes being atrocious. War. 250 00:12:17,920 --> 00:12:21,320 Speaker 1: I guess. Actually, after we recorded last week, eah Lend 251 00:12:21,600 --> 00:12:27,800 Speaker 1: the HPS slash black Rock Big Private BDC gated itself. 252 00:12:27,960 --> 00:12:31,000 Speaker 1: Investors requested to a breading about nine percent of their 253 00:12:31,040 --> 00:12:34,480 Speaker 1: shares and HPS says, nope, our cap is five percent, 254 00:12:34,559 --> 00:12:36,400 Speaker 1: so we're not giving you back the rest of your money. 255 00:12:37,320 --> 00:12:39,360 Speaker 2: They didn't have their employees pitch in, they. 256 00:12:39,240 --> 00:12:43,280 Speaker 1: Didn't have their pitch in, and they basically said the 257 00:12:43,320 --> 00:12:48,000 Speaker 1: correct things, which are the point of private credit, is 258 00:12:48,080 --> 00:12:51,880 Speaker 1: that you accept some illiquidity in exchange for expected higher returns. 259 00:12:52,360 --> 00:12:54,520 Speaker 1: And because we own a liquid stuff, we can't just 260 00:12:54,600 --> 00:12:57,120 Speaker 1: cast you out whenever you want, and so we set 261 00:12:57,160 --> 00:12:58,800 Speaker 1: a limit of five percent so you can get some 262 00:12:58,840 --> 00:13:00,680 Speaker 1: money out if you need it, but we're keeping them 263 00:13:00,679 --> 00:13:01,520 Speaker 1: limit a five percent. 264 00:13:01,600 --> 00:13:02,840 Speaker 2: Tough cookies, And. 265 00:13:03,280 --> 00:13:05,000 Speaker 1: It's funny you say the vibes are bad the vibes 266 00:13:05,040 --> 00:13:06,559 Speaker 1: are not good. But a lot of people in the 267 00:13:06,559 --> 00:13:08,880 Speaker 1: private credits you're like, they did the right thing. The 268 00:13:08,960 --> 00:13:11,080 Speaker 1: gates are to prodict the clients, and you want to 269 00:13:11,120 --> 00:13:14,360 Speaker 1: not have a run on the bank and you say, nope, 270 00:13:14,360 --> 00:13:16,400 Speaker 1: the bank is closed. Then you do prevent that at 271 00:13:16,400 --> 00:13:19,720 Speaker 1: the cost of getting awkward questions and getting bad headlines 272 00:13:19,760 --> 00:13:21,520 Speaker 1: and having bad vibes. But I think it is like 273 00:13:21,600 --> 00:13:23,320 Speaker 1: people in private credit, is the right thing to do? 274 00:13:23,480 --> 00:13:26,400 Speaker 2: Was it Blackstone that the employees pitched? Yeah, maybe the 275 00:13:26,440 --> 00:13:30,200 Speaker 2: employees a Blackstone forked over some cash to meet the 276 00:13:30,280 --> 00:13:32,520 Speaker 2: x ex redemptions. We're like, God, I wish that black 277 00:13:32,600 --> 00:13:34,920 Speaker 2: Rocket done that a week earlier so we wouldn't have 278 00:13:34,960 --> 00:13:36,640 Speaker 2: had to pay off very possibly. 279 00:13:36,880 --> 00:13:39,080 Speaker 1: There are like differences in numbers that are kind of 280 00:13:40,080 --> 00:13:43,000 Speaker 1: kind of matter a little, Like Blackstone got seven point 281 00:13:43,080 --> 00:13:45,320 Speaker 1: nine percent redemptions, which like you can kind of do 282 00:13:45,400 --> 00:13:47,200 Speaker 1: seven percent in your ten to offward then it's like 283 00:13:47,840 --> 00:13:50,679 Speaker 1: zero point nine, Well, we'll find the money somewhere, whereas 284 00:13:50,720 --> 00:13:52,719 Speaker 1: like HP has got nine point three, where it's like 285 00:13:53,480 --> 00:13:55,720 Speaker 1: nine point three really got to do something, And there 286 00:13:55,760 --> 00:13:57,400 Speaker 1: have been since then. There's like cliff Water had a 287 00:13:58,480 --> 00:14:00,280 Speaker 1: fourteen percent Yeah, and you. 288 00:14:00,200 --> 00:14:03,640 Speaker 2: Gotta shut Morgan Stanley as well. Yeah, it just feels 289 00:14:03,679 --> 00:14:05,320 Speaker 2: like if you haven't, the whole thing. 290 00:14:05,200 --> 00:14:07,800 Speaker 1: Has been kind of like the numbers have been creeping 291 00:14:07,880 --> 00:14:09,880 Speaker 1: up because this is all kind of cumulative, right, Like 292 00:14:10,200 --> 00:14:11,640 Speaker 1: you go out and you say how many people would 293 00:14:11,640 --> 00:14:13,480 Speaker 1: like to redeem, and like seven percent say we'd like 294 00:14:13,520 --> 00:14:15,880 Speaker 1: to redeem, and then you announce that and they're bad headlines, 295 00:14:15,880 --> 00:14:17,240 Speaker 1: and then like the next fund that does it, it's 296 00:14:17,280 --> 00:14:19,480 Speaker 1: like eight percent, you know, and so it keeps getting worse. 297 00:14:19,360 --> 00:14:21,680 Speaker 2: Kind of like a vicious cycle or feedback loss. 298 00:14:21,800 --> 00:14:25,360 Speaker 1: Yeah, it's it's just people get nervouser and nervouser, and 299 00:14:25,640 --> 00:14:28,560 Speaker 1: these redemption numbers are index of nervousness. But I don't 300 00:14:28,600 --> 00:14:30,280 Speaker 1: know how much this has to do with like fund 301 00:14:30,280 --> 00:14:33,120 Speaker 1: by fund like performance or like trusting the matters, and 302 00:14:33,120 --> 00:14:35,360 Speaker 1: how much of it is just like each fund gets 303 00:14:35,400 --> 00:14:37,280 Speaker 1: a little bit more redemption requests than the fun before. 304 00:14:37,360 --> 00:14:39,800 Speaker 2: Well, the private credit titans would tell you that this 305 00:14:39,920 --> 00:14:45,040 Speaker 2: is totally disconnected from fundamentals of the portfolios. Apollo trying 306 00:14:45,040 --> 00:14:49,360 Speaker 2: to maybe combat that by offering more frequent. 307 00:14:49,440 --> 00:14:51,440 Speaker 1: Marks, more frequent marks. 308 00:14:51,520 --> 00:14:53,360 Speaker 2: That was one of the stories out this week. 309 00:14:53,440 --> 00:14:55,720 Speaker 1: Yeah, no, they're going to mark their stuff more frequently. 310 00:14:55,360 --> 00:14:57,320 Speaker 2: Monthly with ambition to get to daily. 311 00:14:57,480 --> 00:14:59,280 Speaker 1: Yeah, and also with ambition to get third party marks, 312 00:14:59,280 --> 00:15:01,440 Speaker 1: which I think is interesting, right, Like if you're a 313 00:15:01,480 --> 00:15:04,200 Speaker 1: hedge fund and you're just like, well, we think all 314 00:15:04,200 --> 00:15:06,040 Speaker 1: our stuff is worth one hundred cents on the dollar, 315 00:15:06,400 --> 00:15:08,640 Speaker 1: Like that's bad. You can't do that. Like someone's like 316 00:15:08,680 --> 00:15:10,760 Speaker 1: you're supposed to have like some sort of third party 317 00:15:10,880 --> 00:15:13,120 Speaker 1: justifiable marks. If you're private credit fund, you're like, yeah, 318 00:15:13,120 --> 00:15:15,520 Speaker 1: it's our loans. We think it's good. And I think 319 00:15:15,520 --> 00:15:18,520 Speaker 1: that Apollo certainly sees it shifting to a world war. 320 00:15:18,600 --> 00:15:23,280 Speaker 1: You have third party evaluations and you can say no, 321 00:15:23,400 --> 00:15:26,240 Speaker 1: these marks are right. The value of that is like, 322 00:15:26,240 --> 00:15:30,960 Speaker 1: like why are people redeeming One reason might be they 323 00:15:31,000 --> 00:15:32,960 Speaker 1: want to quit it to Another reason is they think 324 00:15:33,000 --> 00:15:35,880 Speaker 1: things worse, But like it does sort of seem like 325 00:15:35,920 --> 00:15:38,600 Speaker 1: part of it is that people don't trust the marks. Yeah. 326 00:15:38,680 --> 00:15:43,160 Speaker 1: You see stories about like private credit funds carrying a 327 00:15:43,160 --> 00:15:44,680 Speaker 1: loan at one hundred cents on the dollar and then 328 00:15:44,680 --> 00:15:46,960 Speaker 1: marking it down to zero, Like that's like it's like 329 00:15:47,040 --> 00:15:49,920 Speaker 1: kind of no step, that's kind of like that kind 330 00:15:49,920 --> 00:15:52,240 Speaker 1: of makes sense, Like yeah, in terms of like, yeah, 331 00:15:52,240 --> 00:15:54,040 Speaker 1: you're a lender, like either paying the loan or they're not. 332 00:15:54,080 --> 00:15:55,560 Speaker 1: If they're paying, it's worth a hundred. If they're not, 333 00:15:55,600 --> 00:15:58,480 Speaker 1: it's maybe wor zero. Yeah, But like that's not how 334 00:15:58,480 --> 00:16:00,880 Speaker 1: people in public markets think. And so you kind of 335 00:16:00,920 --> 00:16:04,520 Speaker 1: want the intermediate moves. And so if you have some person, 336 00:16:04,680 --> 00:16:07,320 Speaker 1: some outside person saying yeah, today it's worth ninety seven, 337 00:16:07,640 --> 00:16:10,240 Speaker 1: that like might inspire some confidence among your investors. 338 00:16:10,320 --> 00:16:12,480 Speaker 2: Well that's what I was wondering. What the hope from 339 00:16:12,560 --> 00:16:15,400 Speaker 2: Apollo that you know, we show you your marks more frequently, 340 00:16:15,840 --> 00:16:18,800 Speaker 2: you can see that this portfolio isn't actually going down 341 00:16:18,840 --> 00:16:21,200 Speaker 2: the tube, so you'll be less likely to redeem. 342 00:16:21,360 --> 00:16:24,840 Speaker 1: Yeah. And also just like redemptions are like a nav arbitrage, 343 00:16:24,880 --> 00:16:29,200 Speaker 1: Like if you think the fund is worth ninety five 344 00:16:29,280 --> 00:16:31,520 Speaker 1: and the fund says it's worth one hundred, then you 345 00:16:31,520 --> 00:16:33,640 Speaker 1: should redeem because they'll give you one hundred for something 346 00:16:33,640 --> 00:16:35,880 Speaker 1: you think is worth ninety five. And if you're right, 347 00:16:35,960 --> 00:16:39,680 Speaker 1: that's really bad for the investors who stay in because 348 00:16:40,120 --> 00:16:42,080 Speaker 1: they're giving you one hundred for something it's worth ninety five. 349 00:16:42,120 --> 00:16:44,560 Speaker 1: And so like everyone else has less, and so it's 350 00:16:44,560 --> 00:16:47,440 Speaker 1: a run on the bank, right, And if Apollo is 351 00:16:47,480 --> 00:16:49,880 Speaker 1: really confident and it's marks, then doesn't have to worry 352 00:16:49,880 --> 00:16:51,040 Speaker 1: about a run on the bank because you can pay 353 00:16:51,040 --> 00:16:53,080 Speaker 1: people at what it thinks is it the right value. 354 00:16:53,680 --> 00:16:55,760 Speaker 1: And if you believe that as an investor, then you 355 00:16:55,800 --> 00:16:58,680 Speaker 1: won't redeem because you're like, well, if it's worth ninety five, 356 00:16:58,720 --> 00:17:00,280 Speaker 1: they'll give me ninety five, and so like there's no 357 00:17:00,280 --> 00:17:03,920 Speaker 1: point in me redeeming and so so it's that right, 358 00:17:03,960 --> 00:17:05,800 Speaker 1: it's to avoid the run on the bank problem. If 359 00:17:05,840 --> 00:17:07,960 Speaker 1: you and all of your investors are confident in the marks, 360 00:17:07,960 --> 00:17:10,320 Speaker 1: then you're less likely to have a run. The other thing, 361 00:17:10,359 --> 00:17:12,240 Speaker 1: it is just like weird, like Apollo has like has 362 00:17:12,240 --> 00:17:15,080 Speaker 1: a trading desk, Like they just have a different vision 363 00:17:15,080 --> 00:17:17,440 Speaker 1: of what private credit will be than other people, and 364 00:17:17,520 --> 00:17:19,440 Speaker 1: like they're, you know, they're trying to make their vision 365 00:17:19,480 --> 00:17:21,439 Speaker 1: come true. And some of that is like if they 366 00:17:21,480 --> 00:17:23,399 Speaker 1: can move the world to a marked to market world, 367 00:17:23,440 --> 00:17:25,280 Speaker 1: then like their trading desk is going to have more business. 368 00:17:25,359 --> 00:17:27,040 Speaker 1: They're going to be providing the third party marks to 369 00:17:27,080 --> 00:17:30,000 Speaker 1: other firms, you know, So it's a differentiated business decision. 370 00:17:30,480 --> 00:17:33,920 Speaker 2: Have we talked about the push to put private assets 371 00:17:33,960 --> 00:17:39,560 Speaker 2: in retirement ETFs? Have we ever talked about that well, 372 00:17:40,160 --> 00:17:45,040 Speaker 2: Apollo famously has an ETF with State Street that has 373 00:17:45,119 --> 00:17:46,480 Speaker 2: daily marks, right, all. 374 00:17:46,480 --> 00:17:49,360 Speaker 1: Right, put private credit and retirement funds? Have we probably 375 00:17:49,640 --> 00:17:51,200 Speaker 1: probably I read about it a lot. 376 00:17:51,400 --> 00:17:53,359 Speaker 2: I was thinking about it yesterday because there was a 377 00:17:53,359 --> 00:17:56,600 Speaker 2: comment from Elizabeth Warren saying that, you know, we need 378 00:17:56,600 --> 00:17:57,840 Speaker 2: to stop this push right now. 379 00:17:57,960 --> 00:17:59,960 Speaker 1: It's just incredibly awkward time. 380 00:18:00,280 --> 00:18:03,440 Speaker 2: We also heard from the Treasury Secretary of Scott Besson 381 00:18:03,560 --> 00:18:07,679 Speaker 2: saying the DOUBLET no saying actually agreeing, saying. 382 00:18:07,440 --> 00:18:10,280 Speaker 1: That we need to no one like no one's going 383 00:18:10,320 --> 00:18:12,840 Speaker 1: around right this minute, being like, you know, what we 384 00:18:12,840 --> 00:18:14,840 Speaker 1: need is to put more private credit in to retirement funds. 385 00:18:14,960 --> 00:18:16,240 Speaker 1: Two weeks ago they were sure. 386 00:18:16,640 --> 00:18:19,360 Speaker 2: But it's like it's kind of beautiful to right, It's 387 00:18:19,440 --> 00:18:24,720 Speaker 2: like a bipartisan moment among our government, two leading figures 388 00:18:24,720 --> 00:18:28,240 Speaker 2: in the US government uniting on this issue in this 389 00:18:28,320 --> 00:18:28,880 Speaker 2: wrought time. 390 00:18:29,040 --> 00:18:31,000 Speaker 1: And I've written this like structurally, it actually makes a 391 00:18:31,040 --> 00:18:33,119 Speaker 1: lot of sense to put private credit and retirement funds 392 00:18:33,119 --> 00:18:35,440 Speaker 1: because like your money and your retirement funds, you shouldn't 393 00:18:35,480 --> 00:18:38,159 Speaker 1: need until you retire, so you can lock it up 394 00:18:38,200 --> 00:18:40,360 Speaker 1: for a long time, right, And like you know, it's 395 00:18:40,359 --> 00:18:42,600 Speaker 1: a percent interest or whatever, So it's nice to have 396 00:18:42,680 --> 00:18:44,800 Speaker 1: been in a text the fur retirement account. 397 00:18:44,560 --> 00:18:46,680 Speaker 2: But Elizabeth Warren is listening right now. 398 00:18:46,720 --> 00:18:50,000 Speaker 1: But nobody believes that. And I do think that, like 399 00:18:50,160 --> 00:18:53,159 Speaker 1: the last couple of weeks demonstrate why no one believes that, 400 00:18:53,200 --> 00:18:56,800 Speaker 1: because like, in fact, retail investors do not want to 401 00:18:56,800 --> 00:18:59,919 Speaker 1: lock up their money for twenty years, and you have 402 00:19:00,119 --> 00:19:04,840 Speaker 1: real structural problems giving even a little bit of liquidity 403 00:19:04,920 --> 00:19:07,159 Speaker 1: to indivitional investors in private credit cands, right, I mean, 404 00:19:07,160 --> 00:19:09,440 Speaker 1: like part of what what's happening here is like structurally 405 00:19:09,440 --> 00:19:10,880 Speaker 1: these funds are fine, like they don't need to give 406 00:19:10,880 --> 00:19:12,920 Speaker 1: money back because they're set up in a way where 407 00:19:12,960 --> 00:19:14,680 Speaker 1: they can keep the money and only return five percent 408 00:19:14,680 --> 00:19:18,720 Speaker 1: per quarter and so forth. But the vibes of doing 409 00:19:18,760 --> 00:19:19,879 Speaker 1: it that way are bad. 410 00:19:20,520 --> 00:19:22,520 Speaker 2: So do you want to mention JP Morgan as well? 411 00:19:22,600 --> 00:19:25,520 Speaker 1: Oh yeah, JP Morgan is like allegedly marking down some 412 00:19:25,560 --> 00:19:28,639 Speaker 1: private credit loans because they're like they provide back leverage 413 00:19:28,640 --> 00:19:32,080 Speaker 1: to these private credit funds, and they lend money against 414 00:19:32,200 --> 00:19:35,480 Speaker 1: private credit loans that some loan to value ratio. And 415 00:19:35,480 --> 00:19:37,840 Speaker 1: when I say some loan to value ratio, like private 416 00:19:37,880 --> 00:19:40,240 Speaker 1: credit firms can tell their retail customers these are what 417 00:19:40,280 --> 00:19:42,120 Speaker 1: the loans are worth. But when they go to JP Morgan, 418 00:19:42,200 --> 00:19:44,040 Speaker 1: JP Morgan tells them what the loans are worth, and 419 00:19:44,080 --> 00:19:46,280 Speaker 1: so JP Morgan told them the loans are worth less 420 00:19:46,320 --> 00:19:46,800 Speaker 1: than they thought. 421 00:19:46,800 --> 00:19:49,880 Speaker 2: It's funny because you know, we heard from Jamie Diamond 422 00:19:50,240 --> 00:19:54,320 Speaker 2: famously CEO of JP Morgan saying that there's probably more 423 00:19:54,320 --> 00:19:56,919 Speaker 2: cockroaches around if you see one, and turns out he 424 00:19:57,040 --> 00:19:57,400 Speaker 2: was right. 425 00:19:57,960 --> 00:20:00,000 Speaker 1: JP Morgan marking down these loans doesn't prove that you 426 00:20:00,000 --> 00:20:01,800 Speaker 1: A Morgan is right. It just pears that JP Morgan 427 00:20:01,920 --> 00:20:04,520 Speaker 1: is marking down the lens. The FC article about the 428 00:20:04,600 --> 00:20:07,800 Speaker 1: JP Morgan markedown like quoted some private credit people anonymously 429 00:20:07,840 --> 00:20:09,919 Speaker 1: being like they're more nervous than everyone else, right, Like, 430 00:20:09,960 --> 00:20:13,000 Speaker 1: it's always evaluation dispute, but when you're getting your levers 431 00:20:13,040 --> 00:20:16,520 Speaker 1: from JP Morgan, they kind of win the evaluation disputes. 432 00:20:16,760 --> 00:20:19,680 Speaker 2: Yeah, this one was interesting because again, when we're talking 433 00:20:19,720 --> 00:20:24,120 Speaker 2: about redemptions, it's mostly psychological. Again, we're not really talking 434 00:20:24,160 --> 00:20:25,000 Speaker 2: about the fundamentals. 435 00:20:25,040 --> 00:20:28,520 Speaker 1: Whereas maybe, well you say that, like, it's possible that 436 00:20:28,560 --> 00:20:30,440 Speaker 1: all the retail private credit investors who are like I 437 00:20:30,480 --> 00:20:32,920 Speaker 1: would like my money back are just like looking around 438 00:20:32,960 --> 00:20:35,639 Speaker 1: at the macro environment and being like these companies are 439 00:20:35,680 --> 00:20:38,119 Speaker 1: gonna get destroyed by AI. Like maybe they're right, Like 440 00:20:38,480 --> 00:20:40,560 Speaker 1: maybe they are the people running the private credit firms 441 00:20:40,560 --> 00:20:43,680 Speaker 1: who are like there's no fundamental problem here, Like they 442 00:20:43,720 --> 00:20:46,120 Speaker 1: have they have money on the line. On that view, 443 00:20:46,200 --> 00:20:48,240 Speaker 1: the people taking their money they have they have their 444 00:20:48,240 --> 00:20:50,679 Speaker 1: own potentially valid opinions. 445 00:20:50,840 --> 00:20:53,119 Speaker 2: What I'm saying is like, we don't know that. Whereas 446 00:20:53,320 --> 00:20:56,639 Speaker 2: JP Morgan it gets back to the software sort of 447 00:20:56,720 --> 00:20:59,240 Speaker 2: apocalypse story that we were talking about a couple. 448 00:20:59,119 --> 00:21:02,120 Speaker 1: Of weeks ago, looking after themselves, like. 449 00:21:03,000 --> 00:21:03,880 Speaker 2: Guess that's what you do. 450 00:21:04,320 --> 00:21:19,280 Speaker 1: That's definitely what you do. I heard this week about 451 00:21:19,400 --> 00:21:22,560 Speaker 1: Calshi is getting sued for not paying out bets on 452 00:21:23,200 --> 00:21:28,679 Speaker 1: Ali Kimenya off leaving office as Supreme Leader of Iran. 453 00:21:29,200 --> 00:21:33,120 Speaker 1: Calshi had markets on Camanie leaving office as of certain dates, 454 00:21:33,160 --> 00:21:37,680 Speaker 1: including as of April first, and as it became clear 455 00:21:37,720 --> 00:21:41,959 Speaker 1: that he was going to leave office, those prices spite 456 00:21:42,080 --> 00:21:45,280 Speaker 1: because people were betting on him leaving office and then 457 00:21:45,320 --> 00:21:47,520 Speaker 1: he left office. But Calshi said those bets will not 458 00:21:47,520 --> 00:21:49,439 Speaker 1: pay off that one hundred cents on the dollar because 459 00:21:49,800 --> 00:21:52,800 Speaker 1: there's an exception if he leaves office due to death, 460 00:21:53,359 --> 00:21:56,399 Speaker 1: which is why he left office. Then you don't get 461 00:21:56,640 --> 00:21:58,240 Speaker 1: paid the full amount and you get paid just the 462 00:21:58,280 --> 00:22:01,120 Speaker 1: last trading price before his death, which is very hard 463 00:22:01,160 --> 00:22:05,160 Speaker 1: to measure because these markets are trading minute by minute, 464 00:22:05,200 --> 00:22:08,399 Speaker 1: as like the US is conducting military operations. So I 465 00:22:08,400 --> 00:22:09,800 Speaker 1: don't even know what the last trade was. I mean, 466 00:22:09,840 --> 00:22:11,760 Speaker 1: like the last trade before they paused it was like 467 00:22:11,760 --> 00:22:13,840 Speaker 1: in the forties, but like it got up to the sixties, 468 00:22:13,880 --> 00:22:15,520 Speaker 1: so we don't really know what the last trade was. 469 00:22:16,000 --> 00:22:18,000 Speaker 1: But yeah, so they were not paying those bets at 470 00:22:18,000 --> 00:22:20,919 Speaker 1: one hundred cents on the dollar. And the reason for that, 471 00:22:20,960 --> 00:22:25,040 Speaker 1: I think is that the US commodities rules for prediction 472 00:22:25,119 --> 00:22:28,680 Speaker 1: markets specifically do say you can't have bets on war 473 00:22:28,800 --> 00:22:34,600 Speaker 1: or assassination fair for pretty good reasons about not wanting 474 00:22:34,640 --> 00:22:36,480 Speaker 1: to encourage assassinations. 475 00:22:36,560 --> 00:22:38,720 Speaker 2: Yeah, there's an easy but extreme way to. 476 00:22:38,720 --> 00:22:42,560 Speaker 1: Manipulate that market, so it is not technically allowed. And 477 00:22:42,640 --> 00:22:45,040 Speaker 1: so the way cal she deals with that is by 478 00:22:45,640 --> 00:22:50,840 Speaker 1: having bats on people leaving office, but specifically excluding leaving 479 00:22:50,920 --> 00:22:55,480 Speaker 1: office by death. And they apparently didn't exclude it clearly 480 00:22:55,560 --> 00:22:59,240 Speaker 1: enough because there's like a lawsuit filed against them saying no, 481 00:22:59,320 --> 00:23:01,800 Speaker 1: we should get our or hold money back, which you 482 00:23:01,840 --> 00:23:03,600 Speaker 1: know the lawsuit is basically like sure it was in 483 00:23:03,680 --> 00:23:05,480 Speaker 1: the fine print, but it wasn't on the front page. 484 00:23:05,520 --> 00:23:08,280 Speaker 1: And the way I think about it's like, as a 485 00:23:08,320 --> 00:23:11,440 Speaker 1: matter of consumer protection and like you know the user 486 00:23:11,480 --> 00:23:14,639 Speaker 1: interface on your consumer facing financial site, like that's kind 487 00:23:14,640 --> 00:23:16,159 Speaker 1: of a reasonable claim, right it should be on the 488 00:23:16,160 --> 00:23:19,520 Speaker 1: front page. And then as a matter of like this 489 00:23:19,600 --> 00:23:23,119 Speaker 1: is a commodity derivatives exchange, like you should be reading 490 00:23:23,160 --> 00:23:25,679 Speaker 1: the whole contract when you try to commodity futures contract. 491 00:23:25,720 --> 00:23:27,520 Speaker 1: And if you don't, like that's kind of on you. 492 00:23:27,680 --> 00:23:30,000 Speaker 1: So I'm unsympathetic about side too. 493 00:23:30,280 --> 00:23:33,479 Speaker 2: Yeah, I wonder what if you're calci, what you're going 494 00:23:33,560 --> 00:23:33,840 Speaker 2: to do. 495 00:23:34,040 --> 00:23:36,240 Speaker 1: They've done their best to be like we've refounded everyone. 496 00:23:36,320 --> 00:23:38,960 Speaker 1: Nobody lost money. It was just whatever, Like they're going 497 00:23:39,000 --> 00:23:40,760 Speaker 1: to pay out some amount of money to make everyone 498 00:23:40,800 --> 00:23:43,080 Speaker 1: as whole as possible. But they can't really go to 499 00:23:43,320 --> 00:23:46,199 Speaker 1: we'll pay one hundred cents on the dollar because that 500 00:23:46,240 --> 00:23:51,960 Speaker 1: would probably violate their rules, the safety c rules there 501 00:23:52,080 --> 00:23:53,680 Speaker 1: and presumably these people one hundredth in. 502 00:23:54,040 --> 00:23:57,160 Speaker 2: You also wrote that polymarket doesn't care, just paid one 503 00:23:57,520 --> 00:23:58,080 Speaker 2: It's weird. 504 00:23:58,119 --> 00:24:01,880 Speaker 1: Polymarket is like creeping into being as regulated commodities exchange, 505 00:24:01,880 --> 00:24:04,280 Speaker 1: but it's like all the way the area. Yeah, I 506 00:24:04,320 --> 00:24:05,880 Speaker 1: think they have like a US site that is only 507 00:24:05,920 --> 00:24:08,440 Speaker 1: sports betting, but I could be wrong about that. But yeah, 508 00:24:08,480 --> 00:24:12,479 Speaker 1: like there can many leaving office bets paid out no 509 00:24:12,560 --> 00:24:16,000 Speaker 1: problem because they are not subject to the same rules. 510 00:24:16,080 --> 00:24:18,679 Speaker 2: I don't want to talk about ETFs, but I know 511 00:24:19,320 --> 00:24:21,439 Speaker 2: you want to time think about ETFs because you know, 512 00:24:21,520 --> 00:24:24,840 Speaker 2: this was a a hullabaloo over like the concept of 513 00:24:24,880 --> 00:24:28,000 Speaker 2: complex ETFs where it's really easy to lose your money. 514 00:24:28,520 --> 00:24:33,040 Speaker 2: But we live in a disclosure based system and you 515 00:24:33,040 --> 00:24:37,320 Speaker 2: know on all of these funds perspectuses that risk is 516 00:24:37,359 --> 00:24:39,439 Speaker 2: spelled out that there's a big chance of losing your 517 00:24:39,440 --> 00:24:42,320 Speaker 2: money here. So like the idea that like this was 518 00:24:42,359 --> 00:24:44,320 Speaker 2: in the fine print, but the print was too fine. 519 00:24:44,880 --> 00:24:45,280 Speaker 2: I don't know. 520 00:24:45,359 --> 00:24:47,199 Speaker 1: Yeah, you're right. Part of it is like you're right, 521 00:24:47,280 --> 00:24:49,840 Speaker 1: and they probably won't win this lawsuit. Yeah, legal advice, 522 00:24:50,200 --> 00:24:52,280 Speaker 1: But part of it is like this is a new thing, 523 00:24:52,320 --> 00:24:56,240 Speaker 1: Like there is widespread acceptance of the disclosure rules in 524 00:24:56,280 --> 00:24:58,679 Speaker 1: the stock market, and you're like if you're like, oh 525 00:24:58,720 --> 00:25:01,120 Speaker 1: I didn't read the perspectives, I lost money. I think 526 00:25:01,119 --> 00:25:02,520 Speaker 1: the lawyers are not going to take that case, it's 527 00:25:02,520 --> 00:25:05,000 Speaker 1: like you're supposed to the perspectives right, and even that, we. 528 00:25:04,960 --> 00:25:08,560 Speaker 2: Know no one reads this, but I'll just scroll past it. 529 00:25:08,640 --> 00:25:13,639 Speaker 1: But with a consumer gambling site, it feels more reasonable 530 00:25:13,680 --> 00:25:16,120 Speaker 1: to make complaints about the user interface. I mean part 531 00:25:16,119 --> 00:25:18,760 Speaker 1: of it is like the SEC really regulates the user 532 00:25:18,800 --> 00:25:24,040 Speaker 1: interface for things like ets, right, Like your perspectus is 533 00:25:24,080 --> 00:25:30,160 Speaker 1: not designed by the world's best user interface engineers to 534 00:25:30,200 --> 00:25:34,880 Speaker 1: be attractive and informative. Your perspectus is designed by decades 535 00:25:34,920 --> 00:25:37,960 Speaker 1: of accretion of like SEC lawyers, and so your perspectives 536 00:25:38,119 --> 00:25:41,520 Speaker 1: works the way it works, and if it's not readable, like, 537 00:25:41,560 --> 00:25:44,280 Speaker 1: that's not your fault, that's like the law's fault. But 538 00:25:44,359 --> 00:25:46,480 Speaker 1: with the consumer gambling site, everyone's kind of making it 539 00:25:46,520 --> 00:25:47,800 Speaker 1: up as they go along, and some maybe they should 540 00:25:47,800 --> 00:25:48,359 Speaker 1: make it up better. 541 00:25:48,520 --> 00:25:50,359 Speaker 2: I really want to talk about this quote that you 542 00:25:50,400 --> 00:25:53,879 Speaker 2: included from Shane Coplan, the founder of Polymarket, from a 543 00:25:53,920 --> 00:25:56,000 Speaker 2: conference in twenty twenty six. I don't know why I 544 00:25:56,040 --> 00:25:58,080 Speaker 2: thought this would have been a couple of years ago, 545 00:25:58,800 --> 00:26:02,800 Speaker 2: but it's right now. Not necessarily about the Iran War, 546 00:26:02,840 --> 00:26:05,800 Speaker 2: obviously that time stamps it, but just like the concept 547 00:26:06,280 --> 00:26:08,120 Speaker 2: of warbats, given that it is a. 548 00:26:08,160 --> 00:26:08,800 Speaker 1: Top of mind. 549 00:26:09,000 --> 00:26:13,440 Speaker 2: Yeah, a touchy topic. So he said, there's still a 550 00:26:13,440 --> 00:26:16,480 Speaker 2: lot of resistance to innovation that kind of also seems 551 00:26:16,520 --> 00:26:17,360 Speaker 2: daring to begin with. 552 00:26:17,560 --> 00:26:21,760 Speaker 1: I love when people are like selling the worst possible products. 553 00:26:21,880 --> 00:26:24,879 Speaker 1: They're like, people are so resistant to innovation. Like when 554 00:26:24,920 --> 00:26:27,800 Speaker 1: you say, when you hear innovation, that means like scam. Like, 555 00:26:28,000 --> 00:26:29,640 Speaker 1: if you have something good, you're like, this is good. 556 00:26:29,680 --> 00:26:31,480 Speaker 1: Here's why it's good. But you have something bad, you're like, 557 00:26:31,520 --> 00:26:35,280 Speaker 1: it's innovative. Yeah, you're just an exaggerating MELLINGI a little. 558 00:26:35,000 --> 00:26:37,919 Speaker 2: Man, resisting innovation man. But he also said when I 559 00:26:37,920 --> 00:26:38,960 Speaker 2: get hit up by people. 560 00:26:38,800 --> 00:26:41,160 Speaker 1: Nobody's resist nobody's like, nobody wakes up at the morning 561 00:26:41,240 --> 00:26:42,960 Speaker 1: like I want to resist innovation. The thing I don't 562 00:26:43,000 --> 00:26:44,879 Speaker 1: like is innovation. So I'm going to stop innovation. What 563 00:26:44,920 --> 00:26:47,119 Speaker 1: they say is I'm going to stop people from betting 564 00:26:47,119 --> 00:26:50,560 Speaker 1: on assassinations, which is a different thing from resisting innovation. 565 00:26:50,720 --> 00:26:53,560 Speaker 2: It's different. Okay, this quote though, it's so amazing. 566 00:26:53,560 --> 00:26:54,119 Speaker 1: Sorry, go on. 567 00:26:54,520 --> 00:26:56,000 Speaker 2: When I get hit up by people in the Middle 568 00:26:56,000 --> 00:26:58,320 Speaker 2: East who are saying, hey, we're looking at poly market 569 00:26:58,400 --> 00:27:00,840 Speaker 2: to decide whether we sleep near the bomb shelter. We 570 00:27:00,880 --> 00:27:03,360 Speaker 2: look at it every day and I'm like, oh, it's 571 00:27:03,400 --> 00:27:06,920 Speaker 2: really that popular over there. That's the first reaction that's 572 00:27:07,080 --> 00:27:10,600 Speaker 2: very powerful. That's an undeniable value of proposition that did 573 00:27:10,600 --> 00:27:11,399 Speaker 2: not exist before. 574 00:27:11,800 --> 00:27:14,480 Speaker 1: Ah yeah, I mean what I wrote about that is 575 00:27:14,520 --> 00:27:16,800 Speaker 1: like the other value proposition that didn't exist before is 576 00:27:16,840 --> 00:27:19,159 Speaker 1: right now, if you are launching a missile strike, you 577 00:27:19,160 --> 00:27:21,359 Speaker 1: can make money on it by betting on poly market. 578 00:27:21,520 --> 00:27:23,920 Speaker 2: That's the thing. Like, if you see those different value 579 00:27:23,920 --> 00:27:26,919 Speaker 2: proposition going up, one of the questions I have is like, 580 00:27:26,960 --> 00:27:29,199 Speaker 2: why are they going up? Who is bidding this up? 581 00:27:29,359 --> 00:27:31,080 Speaker 1: If you're like in the Middle East debating whether to 582 00:27:31,160 --> 00:27:32,720 Speaker 1: sleep in your bomb shelter, and you see the odds 583 00:27:32,760 --> 00:27:34,880 Speaker 1: going up and you think, well, that's probably an insider trader, 584 00:27:34,880 --> 00:27:37,240 Speaker 1: then you should sleep in the bomb shelter. Yeah right, yeah, 585 00:27:37,280 --> 00:27:39,600 Speaker 1: it is. It is more informative if there's insider trading, 586 00:27:39,640 --> 00:27:42,400 Speaker 1: which has always been the like taboo thing that real 587 00:27:42,400 --> 00:27:44,960 Speaker 1: prediction markets heads will say is like, yeah, it should 588 00:27:44,960 --> 00:27:46,840 Speaker 1: be insider trading. Is that makes it more informative. On 589 00:27:46,880 --> 00:27:48,960 Speaker 1: the other hand, if it's the better training making money 590 00:27:49,000 --> 00:27:50,440 Speaker 1: by dropping moms, maybe. 591 00:27:50,320 --> 00:27:53,080 Speaker 2: The US military is also watching these odds on poll market. 592 00:27:53,840 --> 00:27:55,879 Speaker 1: Yeah, I would hope so, and if the odds of 593 00:27:55,920 --> 00:27:59,760 Speaker 1: a like Iranian action go up, then they should prepare 594 00:27:59,760 --> 00:28:02,240 Speaker 1: for that action. And if the odds of a US 595 00:28:02,280 --> 00:28:05,119 Speaker 1: action go up too much, they should like check to 596 00:28:05,160 --> 00:28:16,480 Speaker 1: see who's insider trading. Yeah, yeah, pretty grammar. And that 597 00:28:16,560 --> 00:28:17,800 Speaker 1: was the Money Stuff Podcast. 598 00:28:18,080 --> 00:28:20,240 Speaker 2: I'm Matt Levine and I'm Katie Greifeld. 599 00:28:20,440 --> 00:28:22,560 Speaker 1: You can find my work by subscribing to the Money 600 00:28:22,560 --> 00:28:24,600 Speaker 1: Stuff newsletter on Bloomberg. 601 00:28:24,160 --> 00:28:27,520 Speaker 2: Dot com, and you can find me on Bloomberg TV 602 00:28:27,680 --> 00:28:31,120 Speaker 2: every day on the close between three and five pm Eastern. 603 00:28:31,400 --> 00:28:33,320 Speaker 1: We'd love to hear from you. You can send an 604 00:28:33,320 --> 00:28:36,639 Speaker 1: email to Moneypod at Bloomberg dot net, ask us a 605 00:28:36,760 --> 00:28:38,600 Speaker 1: question and we might answer it on the air. 606 00:28:38,840 --> 00:28:41,440 Speaker 2: You can also subscribe to our show wherever you're listening 607 00:28:41,480 --> 00:28:43,320 Speaker 2: right now and leave us a review. It helps more 608 00:28:43,360 --> 00:28:44,200 Speaker 2: people find the show. 609 00:28:44,760 --> 00:28:48,120 Speaker 1: The Money Stuff Podcast is produced by Moses Onam and 610 00:28:48,160 --> 00:28:49,719 Speaker 1: Alexis HoTT Our. 611 00:28:49,760 --> 00:28:51,840 Speaker 2: Theme music was composed by Blake Maples. 612 00:28:52,600 --> 00:28:56,080 Speaker 1: Amy Keen is our executive producer. Thanks for listening to 613 00:28:56,080 --> 00:28:58,640 Speaker 1: the Money Stuff Podcast. We'll be back next week with 614 00:28:58,720 --> 00:29:01,040 Speaker 1: more stuff. Bob