Speaker 1: Strap on your parachute. It's time for What Goes Up
Speaker 1: with Sarah Ponzick and Mike Regan. Hello and welcome to
Speaker 1: What goes Up, a Bloomberg Weekly Markets podcast. I'm Sarah Pons,
Speaker 1: a reporter on the cross as That Team, and I'm
Speaker 1: Mike Reagan, a senior editor at Bloomberg. Again. You can
Speaker 1: think of me as the Yahoo chat room to Sarah's
Speaker 1: Wall Street bets. I get to be a Wall Street bet.
Speaker 1: I've got the power here. Joke might take a little
Speaker 1: bit of thinking, but it's a good one, I promise.
Speaker 1: I promised listeners. If you needed to get to explain,
Speaker 1: give me a call and he'll give you his personal
Speaker 1: number alongside the podcast hotline at the end of the show.
Speaker 1: Just wait for it. But this week was really a
Speaker 1: week like no other. A short squeeze for the record books,
Speaker 1: shares of game Stop AMC costs, Bill the Bear and
Speaker 1: others going to the moon to use the term and
Speaker 1: now infamous sub credit that might just referenced called Wall
Speaker 1: Street bets. I'm sure you've heard of it. By now
Speaker 1: going private then making the foreum public once again, brokerage
Speaker 1: is restricted trading and representative AOC and Senator Ted Cruz
Speaker 1: actually agreed on something that had to do with the
Speaker 1: stock market, and the list just goes on. Mike right, Sarah,
Speaker 1: And you know, I think some of our listeners might
Speaker 1: have game stop fatigue and Wall Street Bets fatigue. I've
Speaker 1: gotten a few tweets saying, please, please do not make
Speaker 1: any of the crazy things about game stopper Wall Street Bets.
Speaker 1: I've got good news and bad news for those people.
Speaker 1: My crazy thing will not be about Wall Street Bets,
Speaker 1: but the whole podcast will be so so so good
Speaker 1: news and bad news. But luckily for us, we've got
Speaker 1: a really great guest to give us some insight on
Speaker 1: all of this craziness. He's really one of the world's
Speaker 1: leading experts on the complicated structure of the stock market,
Speaker 1: where trades are getting executed dark pools and exchanges and
Speaker 1: wholesalers like Citadel. He's the founder of the research firm,
Speaker 1: the Tab Group, and for the last couple of years
Speaker 1: we've been lucky enough to call him our colleague here
Speaker 1: at Bloomberg. He is our head of market structure research
Speaker 1: at Bloomberg Intelligence, and his name is Larry Tab. Larry,
Speaker 1: Welcome to the show. Oh great to be here, Mike
Speaker 1: and Sarah. Great so Larry. I let's obviously dig into
Speaker 1: this whole game stop and Robin Hood and Wall Street
Speaker 1: bet scenario. The question I keep getting, and I keep
Speaker 1: asking people like yourself over and over again, is, um,
Speaker 1: it's obviously been so wild these moves in these stocks,
Speaker 1: hedge funds getting burned left and right, stocks up thousands
Speaker 1: of percent in a month. It seems like on first
Speaker 1: blush that there's something illegal going on here. But you know,
Speaker 1: the more I look at it on these forums, it's
Speaker 1: hard for me to really pinpoint anything illegal. I feel
Speaker 1: like the regulators have have their work cut out for them. Um.
Speaker 1: I mean imagine, if they dig far enough, maybe they'll find,
Speaker 1: you know, something here or there. Um. But when you
Speaker 1: have a brokerage like Robin Hood, who all of a
Speaker 1: sudden starts restricting trading of some of these stocks and
Speaker 1: interactive brokerage, um, you know, heightening their margin requirements both
Speaker 1: on the on the short and the long end. I
Speaker 1: feel like, all of a sudden, it's it's forcing the
Speaker 1: issue to some degree with regulators that they have to
Speaker 1: sort of get on the school board here somehow about
Speaker 1: this issue. How do you sort of look at it
Speaker 1: from the regulators standpoint, Um, is there anything they can do?
Speaker 1: Is there anything they should do? Um? Yeah, the halting
Speaker 1: of these stocks is not particularly nefarious. The issue has
Speaker 1: to do a clearing and how the clearing mechanisms work. Basically,
Speaker 1: stocks settled in a two day period and and in
Speaker 1: those two days, the brokerages are responsible for ensuring that
Speaker 1: those stocks set and so the question that becomes is, um,
Speaker 1: they can't pledge their customers cash or securities to ensure
Speaker 1: that they settle, so that they have to come up
Speaker 1: with a basically a margin, you know, their margin, just
Speaker 1: like you know, just like you know an individual investor's
Speaker 1: margins if if they're doing margin loans or at they're
Speaker 1: short or whatever. So they have to come up with
Speaker 1: a bunch of capital to basically, you know, put aside
Speaker 1: over at dt c C. And what dt c C
Speaker 1: basically said is is that these stocks have become so
Speaker 1: risky that you know, if you're buying Game Stop at
Speaker 1: three sixty uh and tomorrow it's a one d are
Speaker 1: you really going to pay three sixty for this um
Speaker 1: if it goes down the one hundred. So they put
Speaker 1: up the margin on a lot of these these uh
Speaker 1: um you know, high flyers or whatever, uh so high
Speaker 1: that they that the brokerages can't afford really the margin
Speaker 1: to to set aside so their clients can actually even
Speaker 1: buy this stuff. So it's not really caba all, it's
Speaker 1: not really Robin Hood dwin fairious stuff. It's the DTC
Speaker 1: s C saying this stuff is just too risky. We
Speaker 1: don't trust that these guys have the cash to be
Speaker 1: able to withstand settling these things two days from now,
Speaker 1: because in two days, who knows what the price could
Speaker 1: be could be zero, right, I mean, just and I'm
Speaker 1: just gonna throw it out there because things are moving
Speaker 1: so quickly these days. We record on Thursday. So in
Speaker 1: the morning on Thursday, for example, game Stop shares are
Speaker 1: trading above five hundred dollars a share, and then all
Speaker 1: of a sudden we're back down towards one hundred dollars
Speaker 1: a share. So so it's just things are moving at
Speaker 1: such a quick pace. So I want to double down
Speaker 1: on something you just said. There's obviously a lot of
Speaker 1: rumors swirling around that maybe the hedge funds got together,
Speaker 1: or Citadel or the market makers got together and are
Speaker 1: are telling Robin Hood and the other brokers that they
Speaker 1: have to halt trading on these sites. And you've also
Speaker 1: seen the likes of AOC and Ted cruz Uh and
Speaker 1: Dave Portnoy of Barstool Sports come out and kind of
Speaker 1: shooes you this and say this is an issue. We
Speaker 1: need to look into this. It shouldn't be allowed. So
Speaker 1: what you're saying is there's a structure issue behind the scenes,
Speaker 1: and it's not up to the brokers. So no, it
Speaker 1: has to do with how how securities are cleared and
Speaker 1: so UM basically I buy something today, it settles in
Speaker 1: two days. Basically there's an IOU out there for two
Speaker 1: days that somebody has to basically put cash behind UM.
Speaker 1: And it can't be UM me the individual investor that
Speaker 1: my broker can't take my cash to pledge against their
Speaker 1: overall health or their overall margin account. It's got to
Speaker 1: be capital, you know that the that that the broker
Speaker 1: puts up. And given the increase in capital and the
Speaker 1: increase in risk in clearing these items, they up the
Speaker 1: capital ratio for these tremendously and and none of the
Speaker 1: brokers can afford the risk in case the price of
Speaker 1: this goes down and basically wipes out all their clients,
Speaker 1: and they don't have any cash to basically settle the trades,
Speaker 1: you know, Larry, Unfortunately, uh, we live in the golden
Speaker 1: age of the conspiracy theory as as I'm sure you
Speaker 1: know in politics as well as markets, and obviously people
Speaker 1: looking very heavily now at the role of a wholesaler
Speaker 1: like Citadel Um. Citadel obviously being an unusual situation in that,
Speaker 1: you know, half the firms a hedge fund, half the
Speaker 1: firms a market maker wholesaler um. So walk us through
Speaker 1: how their market making sideworks. I mean, my understanding is
Speaker 1: basically Robin hood sends all their orders to Citadel, who
Speaker 1: pays them a fee, not all of them, but a percentage, uh,
Speaker 1: to Citadel and firms like that who who these orders
Speaker 1: never actually make it to a stock exchange. They're matched
Speaker 1: by these internalizers, as they're called. My impression is, you know,
Speaker 1: maybe they're making I don't know what half a cent
Speaker 1: a share something like that in this way less so,
Speaker 1: you know, and they the reason it's lucrative to them though,
Speaker 1: is they're just getting so much fune. I mean, they're
Speaker 1: they're getting however, many millions or even a billion shares
Speaker 1: a day. I guess to to some of these, Um,
Speaker 1: but I don't wonder. You know, it's got to be
Speaker 1: a tough time to be Ken Griffin with all this
Speaker 1: uh scrutiny. You know of a business that, okay, on
Speaker 1: one side of the businesses is bailing out a hedge
Speaker 1: fund that got run over by these day traders. The
Speaker 1: other side of the business is making a lot of
Speaker 1: money by matching the orders. Um. I mean, is there
Speaker 1: a case to be made for for separating the hedge
Speaker 1: fund from the market making business? Do you think that
Speaker 1: is kind of where this is going that there might
Speaker 1: be certain calls for that. I think that's Ken Griffin's view.
Speaker 1: There's been rumors for years that they're trying to take
Speaker 1: the market maker the security side of the business public.
Speaker 1: So uh, currently the security side of the business is
Speaker 1: mostly in New York or moving down to Florida. The
Speaker 1: hedge funds still in Chicago and elsewhere. They run pretty separately. Um.
Speaker 1: You know, Uh, Joe McCain runs the equities business over
Speaker 1: at the security side. Yeah, he's in Chicago every once
Speaker 1: in a while, but it's a pretty separate business. Now. Yeah,
Speaker 1: people are saying Oh yeah, you know we're going to
Speaker 1: get you know, Citadel, because you know we're gonna do
Speaker 1: all this game stop trading and it's gonna run over Citadel. UM.
Speaker 1: It's you know, it could hurt the hedge fund side
Speaker 1: if they're short. But UM market makers don't lose money
Speaker 1: on their trading. What they're doing is they're selling liquidity
Speaker 1: UM and and when UM spreads widen and the and
Speaker 1: the valuable liquidity becomes more precious, they actually make money.
Speaker 1: So UM the security side of the business of Citadel
Speaker 1: or Virtu or two Sigma or uh Susquehanna g One
Speaker 1: g One Execution, which is the other major market maker,
Speaker 1: I'm saying they have. They had a pretty good week.
Speaker 1: They've had a pretty good year. Uh. The in fact,
Speaker 1: the financials for Citadel securities were leaked for last year
Speaker 1: and I think they made six point seven billion last year,
Speaker 1: which is up from I think like a billion or
Speaker 1: two maybe a year or two ago. So UM, I'm
Speaker 1: not sure they're harden Ken Griffin too much more fuel
Speaker 1: for the redditors. So I was I was hoping, Larry,
Speaker 1: because you've done so much work on on price improvement
Speaker 1: and payment for order flow. If you could kind of
Speaker 1: break down for us at our listeners how this actually
Speaker 1: works here, because I know there's there's Before any of
Speaker 1: this happened, there's been a lot of back and forth
Speaker 1: about how, yes, Robin Hood's all about democratizing investing, then
Speaker 1: they're going ahead and selling all their customers orders and
Speaker 1: Citadel's profiting anybody any anytime anybody says anything about democratizing
Speaker 1: Wall Street, you would need to run the other direction.
Speaker 1: That's okay, But I'll talk about payment for water flow
Speaker 1: and how those mechanics were and how this stuff and
Speaker 1: why this stuff is not you know that nefarious. It's
Speaker 1: not perfect, but it's not in the fairest um the
Speaker 1: market UM the market has become. The market now is
Speaker 1: not NASDAC in New York, with NASDACK stocks trading in
Speaker 1: NASDAC and New York stocks trading in New York. There
Speaker 1: are sixteen different exchanges. Those exchanges are mostly located in
Speaker 1: three different areas in northern New Jersey. UM and there's
Speaker 1: a lot of back and forth and trading between all
Speaker 1: these exchanges. There are thirty two dark pools UM and
Speaker 1: and there's a whole fragment, fragmented world. The way that
Speaker 1: the way the SEC regulates exchanges is generally there's a
Speaker 1: minimum a minimum tick size of a penny. For a
Speaker 1: lot of the stocks trading at a penny, that spread
Speaker 1: is too wide, UM that that they'd actually traded less
Speaker 1: than a penny if if UM, if they were allowed UM.
Speaker 1: And so what happens is market makers can can actually
Speaker 1: improve the price of these things. Now getting back to
Speaker 1: the market overall um because of all this electronics and
Speaker 1: complexity um uh. The market, the lit markets are really
Speaker 1: geared for institutions. And so if you're posting a price
Speaker 1: on Nastack or New York or CEBO or any one
Speaker 1: of the sixteen exchanges, you have to be ready that
Speaker 1: it's going to get executed by you know, Stevie Cohen
Speaker 1: or some very sophisticated, very smart guy UM or some
Speaker 1: very large guy like Fidelity is going to come in
Speaker 1: and buy a million shares. So so you have to
Speaker 1: be prepared when you're when your quotes are accessible to everybody,
Speaker 1: that you're going to get hit by the most sophisticated
Speaker 1: guy in the world. And so your quote better be
Speaker 1: your quote better be good, and it better be ready
Speaker 1: for for the market to move forward. That said, when
Speaker 1: you or I or Mike or Sarah or whoever come
Speaker 1: in and buy their hundred shares of game stopper. You know,
Speaker 1: let's say Apple, Um, you know you're hunter chairs of
Speaker 1: Apple or your five shares of Apple are not going
Speaker 1: to influence the price of Apple. So in effect, the
Speaker 1: price that's being displayed on Apple is actually too wide
Speaker 1: because it's geared for the institutions. Because of this, um,
Speaker 1: market makers who know that that waterflow is coming from
Speaker 1: Robin Hood, or it's coming from e Trade or coming
Speaker 1: from Schwab, they know that it's not a million shares
Speaker 1: behind it. It's not Stevie Cohen hitting the enter button. Um.
Speaker 1: You know, they might not know it's Sarah or Larry
Speaker 1: or Mike, but they know it's a retail guy. And
Speaker 1: and because of that, they can actually give you a
Speaker 1: better price than they can give Stevie comb Um. And
Speaker 1: so they can price it better and so um, the
Speaker 1: pot of money that they make on your apple trade
Speaker 1: gets split basically three ways. One a portion goes to them.
Speaker 1: They keep it for making you know, for servicing your waterflow.
Speaker 1: The the other balance is broken out into price improvement.
Speaker 1: When you get your your your share price back from
Speaker 1: your execution. A lot of times you'll see fractions to
Speaker 1: the right of pennies. Um, that means that your price
Speaker 1: got improved. That means you've got a better price than
Speaker 1: then was displayed in the marketplace. Um, that price improvement
Speaker 1: goes to you. And then a little bit of that
Speaker 1: what's left over from from from that profit the market
Speaker 1: maker makes, goes back to the broker to pay for
Speaker 1: that order and that's that's payment for water flow. Now,
Speaker 1: payment for order flow tends to be about a quarter
Speaker 1: of what's not kept by the wholesaler. So you've got
Speaker 1: the whole salar portion, and then you've got the price
Speaker 1: improvement and the payment for waterflow of that bucket. The
Speaker 1: broker usually gets a quarter of that, and two thirds
Speaker 1: of that or three quarters of that goes to the client.
Speaker 1: In terms of those little pennies or subpennies that go
Speaker 1: to the people say oh that's demnimous. It's not necessarily dementimous.
Speaker 1: It's adds up to you know, billions dollars a year.
Speaker 1: It's just you know, shows up in your accounts for
Speaker 1: actions of assent. Yeah, Larry, I wanted to get back
Speaker 1: to that you mentioned the dt c C, the Depository
Speaker 1: Trust and Clearing corp UM, and it sounds like, um,
Speaker 1: you're thinking that robin Hood probably got a call from them,
Speaker 1: and that is sort of what motivated Uh. Chances are
Speaker 1: m robin Hood got a call from their clearing firm,
Speaker 1: who got a call from DCCC. Right, So, I mean
Speaker 1: would that lead you to expect more discount brokerages to
Speaker 1: to follow suit and restrict these talks? I mean, does
Speaker 1: it depend how well capitalized you are as as a brokerage.
Speaker 1: I guess it depends on how well capitalized you are.
Speaker 1: It also it depends on what your your percentage of
Speaker 1: volume of If you know, if you're only doing shares
Speaker 1: of one of these names, it's not a big deal.
Speaker 1: But if you're doing a billion shares, then you're probably
Speaker 1: need to pony up some more margin. So it really
Speaker 1: depends on your mix a client basis. So I kind
Speaker 1: of you know, if you think about it, you know,
Speaker 1: is Bank of America, Merrill Lynch or their clients you know,
Speaker 1: you know being funneled into the game stop Probably not
Speaker 1: um so if you know, but if you're in the
Speaker 1: Merry Trade or robin Hood or whatever, you know or
Speaker 1: it could very well be. And those are the brokerages
Speaker 1: that at this point have placed the restrictions. It seems
Speaker 1: so it's the customer base that would be trading these
Speaker 1: types of shares, which makes sense. I also just wanted
Speaker 1: to get your take clear. I mean, there's been a
Speaker 1: lot of talk this year or not this year, this
Speaker 1: week about the stock market feeling like it's broken, that
Speaker 1: we shouldn't be seeing shares of costs or game stop
Speaker 1: or a MC we shouldn't be able to see markets
Speaker 1: move like this, And there's been a lot of comparisons
Speaker 1: made to the late nineties and the dot com bubble,
Speaker 1: But have you ever seen anything like this? And is
Speaker 1: the market equipped to kind of go forwards? If if
Speaker 1: this is going to continue? And let me put in, Sara,
Speaker 1: this this week actually lasted a full year, so you're
Speaker 1: right on your right on both terms. That thank you,
Speaker 1: It's that is true. I think five I think every
Speaker 1: every week, you know, in the last year and a
Speaker 1: half has felt like a whole year. So I'm I'm
Speaker 1: tempted to say though that with everyone weighing in this week,
Speaker 1: I mean, jaw Rule was even coming out the rapper
Speaker 1: talking about this, I mean already feels weirder to me.
Speaker 1: St started to stopping your question there, Sarah, I've forgotten
Speaker 1: what it is. I've ruined the whole thing here and shortly,
Speaker 1: have you ever seen this before? I have not seen
Speaker 1: this before. Um. You know, you've got to kind of
Speaker 1: harken back to the Pets that got pets dot com
Speaker 1: days of the of the thousand's, but it wasn't like this, um.
Speaker 1: And is the market broken? No, the market is not
Speaker 1: really broken. This is what markets do. When there's a
Speaker 1: lot of buying demand, the price goes up, and when
Speaker 1: there's a lot of selling demand, the price goes down.
Speaker 1: Are there issues with short selling rules and riggings show
Speaker 1: and some of the infrastructure the price should be looked at?
Speaker 1: Should should affirm or should a company be a hundred
Speaker 1: and forty or of its float be short? You got
Speaker 1: us think that there's some problem with rig show and
Speaker 1: borrows and locates and things like that, which is basically
Speaker 1: the mechanism you need to actually go short. Um. Uh,
Speaker 1: you know that. You know, it seems like that would
Speaker 1: be a good place to look first off, But the market,
Speaker 1: that's what the market does. The market responds to buying
Speaker 1: and selling pressure. And and people are saying, oh, get
Speaker 1: rid of those electronic market makers, blah blah blah, we
Speaker 1: should go back to the days when stch lists were
Speaker 1: on the floor. Well, those guys got arrested and taken
Speaker 1: away for handcuffs, you know. And um, you know, and
Speaker 1: and put it this way, nobody no market makers in
Speaker 1: the business to provide liquidity at a loss. They're not
Speaker 1: there to basically let you profit and pillage their balance sheet. Um,
Speaker 1: They're going to react as quickly as they can to
Speaker 1: the buying and selling pressure to find what the new
Speaker 1: price should be. That's what markets do. And and you know,
Speaker 1: back in the the fractional trading days, those guys were
Speaker 1: making a killing on every trade get relatively, you know,
Speaker 1: if you compare it to the spreads now. But you know,
Speaker 1: you you mentioned the pets dot com And I made
Speaker 1: the joke about the Yahoo chatboards at the beginning. I mean,
Speaker 1: it's it's similar in a way. You know. I remember
Speaker 1: lurking in those chat rooms twenty years ago when I
Speaker 1: worked at a different news service and didn't have access
Speaker 1: to a Bloomberg, just trying to figure out what's moving
Speaker 1: each individual stock. I mean, I guess it's it's sort
Speaker 1: of just the natural evolution of the hive mind, the
Speaker 1: the hive trader mind to some degree. Well that that's
Speaker 1: actually a really interesting question because if if you would
Speaker 1: have done this ten years ago, it would have been
Speaker 1: a Long Island boiler room shop and it would have
Speaker 1: been done. It would have been done, you know, by
Speaker 1: talking up ant ant selma, you know, go buy some
Speaker 1: stock that doesn't really exist, or you know, now now
Speaker 1: you got basically the same thing going on, you know,
Speaker 1: you know, short squeeze on game stop by all three, um.
Speaker 1: You know, is you know, you know, what's the difference
Speaker 1: between that and being done and being done in a
Speaker 1: you know, Long Island boiler room. I don't know. I
Speaker 1: think SEC's I think that's a you know, that's an
Speaker 1: interesting thing for the SEC to look at. Is this
Speaker 1: market manipulation. I remember in the early days of cell
Speaker 1: phones you used to get random text pump and dump
Speaker 1: text messages saying, you know, by by this this and
Speaker 1: that stock, let's just pretend play play make believe for
Speaker 1: a minute here, and we'll pretend I'm Joe Biden and
Speaker 1: I just called you up and I said, Larry, what
Speaker 1: the heck do I do about this? I don't understand it.
Speaker 1: I know something's wrong. Can I fix this? Do I
Speaker 1: need to fix this? You know what? What's what's your
Speaker 1: response to Joe? What's my response to Joe? I think
Speaker 1: as adviser of the president promoted Larry, it's long overdo
Speaker 1: Overdo I have enough pressure being from under now? You know?
Speaker 1: Now I got to Biden. Um, you know, I think
Speaker 1: this is what I would be looking at his rig show.
Speaker 1: You know, let's you know, let's start off with, you know,
Speaker 1: is the short side of this business operating properly and
Speaker 1: where they you know, because that's kind of what started it.
Speaker 1: It was like, oh there, you know this company, this
Speaker 1: float is a short or short let's go charge it.
Speaker 1: The second thing may actually be, you know what, you know,
Speaker 1: what happened you know on Thursday, is maybe we can
Speaker 1: speed up the settlement process. Because if you can speed
Speaker 1: up the settlement process, then the marchin we don't have
Speaker 1: these issues with you know, basically you know, stopping out
Speaker 1: the brokers from letting you trade these names. But in
Speaker 1: terms of the market structure, you know, it's hard to
Speaker 1: it's hard to say that there are things wrong with
Speaker 1: it and that you know, when a lot of people
Speaker 1: come and buying, the price goes up, When a lot
Speaker 1: of people sell, the price goes down. You know, you
Speaker 1: have callers on these from the exchanges to stop them.
Speaker 1: If they're volatile, you might want to tighten some of
Speaker 1: them so that there are more stops. So, but I
Speaker 1: don't think that's the problem. These aren't These aren't air pockets,
Speaker 1: these aren't order book abnormalities. That's making this. This is
Speaker 1: clearly buying and selling demand. You know. The other issue
Speaker 1: is the linkage is possibly between the options and the
Speaker 1: equities market, but I'm not that seems what happens there
Speaker 1: is that if you buy an option, then it gets
Speaker 1: hedged in the equity side. That's actually that's what That's
Speaker 1: a good thing. That's that's how the markets supposed to work.
Speaker 1: So I'm not sure you want to do anything there.
Speaker 1: I'm not I'm not sure there's some massive amounts of
Speaker 1: change I would make. Um. You know, you know people
Speaker 1: are allowed to pay stupid prices for things. You know,
Speaker 1: you go into the local convenience store milk is you
Speaker 1: know three times would cost in the supermarket. Are you're
Speaker 1: not supposed to be able to you know, charge charge that.
Speaker 1: Actually in the stock market, UM, it's way better than that,
Speaker 1: because you can go to any one of the sixteen exchanges,
Speaker 1: you'll all pay the same price. So so I'm not
Speaker 1: sure there's a ton of stuff to do. Stand clear
Speaker 1: of the craziest things we saw in markets this week. Well, Sarah,
Speaker 1: I believe we did get a voicemail into the what
Speaker 1: Goes Up hotline. This is a message for what throes
Speaker 1: up And this is something crazy that happened on the
Speaker 1: Australian Stock Exchange this week. Uh. There is a ticker
Speaker 1: on that exchange g m E, which is a Perth
Speaker 1: based resources, a Perth based minor, and the ticker is
Speaker 1: the same as a ticker in the US that has
Speaker 1: been going a little crazy this week. And on January
Speaker 1: twenty second, UH just over four hundred thousand shares were traded,
Speaker 1: but on January eighteen million shares were traded and the
Speaker 1: stock reached a fifty two week high of twelve cents.
Speaker 1: So this is a this is a um a penny
Speaker 1: stock UH with a sort of a not very well
Speaker 1: known minor. And the chief executive has spoken to the
Speaker 1: Australian Financial Review and basically said, we have no idea
Speaker 1: what was going on. We think that um, in the
Speaker 1: future there may be some rocket potential. But there was
Speaker 1: no real statement from the compan me to explain why,
Speaker 1: uh this doc did this on Thursday, except for the
Speaker 1: fact that uh, some people might have thought that it
Speaker 1: was called g M E For another reason, I for one,
Speaker 1: never get tired of wrong ticker trade stories. It's it's
Speaker 1: it's a great h a great of the crazy thing
Speaker 1: genre for sure, classic ticker confusion. And I'll also point out,
Speaker 1: and maybe this is just a coincidence, but whereas you
Speaker 1: had gm E Resources in Australia going crazy because it
Speaker 1: has the same ticker as game Stop in the US.
Speaker 1: Even in the US, if you look at companies that
Speaker 1: all start their ticker with two bees, so BlackBerry, build
Speaker 1: a Bear, BBW, bed bath and beyond b b B,
Speaker 1: why it makes you wonder like, do we have some
Speaker 1: fat fingers there? How does that happen? Yeah? Stunks? I
Speaker 1: think the answer is stunks. Let's me answer to everything.
Speaker 1: Also a shout out to uh the Twitter users short
Speaker 1: term capital Management great Twitter name at term mg M
Speaker 1: two pointed out record volume on Wednesday, almost twenty four
Speaker 1: billion shares. I believe it was Larry. Yeah. You ever
Speaker 1: think you'd see a twenty billion share day? Yeah, I
Speaker 1: don't know, they don't. I have a surprise we haven't
Speaker 1: seen it sooner because because really the record the record
Speaker 1: day was UM. The record day before this was uh
Speaker 1: uh so when you look at at total volumes UM,
Speaker 1: you know, the high was out of the global financial crisis,
Speaker 1: we did UM nineteen billion point seven shares. Then uh
Speaker 1: you know, the next UM was was UM end of
Speaker 1: February early March of last year when the pandemic just
Speaker 1: decimated the whole market place. And then the real volume
Speaker 1: day is yesterday Game stop. So so so which one
Speaker 1: of these three days don't look like each other? You know? Um,
Speaker 1: you know January, you know, the global financial crisis or
Speaker 1: the pandemic. You know, I don't know how much for
Speaker 1: the S a T. Guys are are going to get
Speaker 1: that one, right? Yeah? If Game Stopped makes its way
Speaker 1: into the economics textbooks and that, I don't know. I
Speaker 1: think I might retire at that point. But uh and
Speaker 1: I do want to remind our listeners to of course,
Speaker 1: you can give us a call on our podcast hotline.
Speaker 1: That number is six or six three two four three
Speaker 1: four nine. Oh, and you can leave us a voice
Speaker 1: smail and maybe we'll play it on the show, just
Speaker 1: like we recently heard yep. And of course you can
Speaker 1: tweet at us, at podcasts or at Sarah and I
Speaker 1: will give you our handles at the end of the show.
Speaker 1: And that's where I got mine. This week, Sarah, I'm
Speaker 1: going to to the Twitter user at Jeff Billbrow at
Speaker 1: Jeff Underscore Bill Brow in New Zealand. We've we've we've
Speaker 1: mentioned him on the show before. He's pretty good at this.
Speaker 1: And uh, hes us something in my favorite asset class,
Speaker 1: the the alternative asset class. And when I say alternative,
Speaker 1: I really mean alternative. This I guess is you could
Speaker 1: consider in the alternative commodity space. Um. So, you might
Speaker 1: be a little too young to remember the show Cheers,
Speaker 1: the sitcom Cheers that might be before your time. I
Speaker 1: know of it, but I can't say I've ever actually
Speaker 1: watched it. Larry remembers it. Larry might remember the episode
Speaker 1: where the Cliff the mailman found a potato that looked
Speaker 1: like Nixon and it was, uh, you know, basically the
Speaker 1: whole topic of the show. Well, this story is courtesy
Speaker 1: a c Net and it's about a rock that looks
Speaker 1: like the Cookie Monster from Sesame Street. It's a chunk
Speaker 1: of blue agget and if you cut the I get
Speaker 1: down the middle, it looks and I'm not I'm not exaggerating.
Speaker 1: This thing looks exactly like Cookie Monster with the Google
Speaker 1: eyes and everything. It's hard to do with justice on
Speaker 1: a on an audio only podcast, but Google, I don't know,
Speaker 1: Cookie Monster Rock or aged or something. You'll find a
Speaker 1: bunch of stories on it. Um found in Brazil last fall,
Speaker 1: will summer in Brazil, I guess, uh, or spring in Brazil,
Speaker 1: of course, Sarah. It's already been sold once. Um. The
Speaker 1: guy who owns it now is a guy named Mike Bowers. Uh.
Speaker 1: He had an awesome quote in the story that was
Speaker 1: something like, you know, I've seen a lot of cookie
Speaker 1: Monster rocks in my day, but this is the most
Speaker 1: perfect Cookie Monster rock. I don't know if I've ever
Speaker 1: seen a Cookie Monster rock before in my life. So
Speaker 1: he's getting he's getting offer sward, of course. So you
Speaker 1: know what time it is, It's it's time to play
Speaker 1: prices right here, Sarah, considering how frothy markets are right now,
Speaker 1: what would you pay for not just any cookie rock
Speaker 1: monster rock, but the perfect cookie Monster Rock. Well, I
Speaker 1: have a question, and you might not know the answer
Speaker 1: to this, but do we know what material the rock
Speaker 1: is made of? Because that's got to impact value. It's
Speaker 1: blue AGGT A gate. I'm not sure A G A T.
Speaker 1: I'm not sure how you pronounce it. Yeah, the raw
Speaker 1: material I think is irrelevant here we're talking about the
Speaker 1: cookie monster. Um, but of course that I'm not sure
Speaker 1: you're gonna make a ring out of blue egg it. Yeah.
Speaker 1: So okay, so last week I really low balled it.
Speaker 1: This time, I'm really gonna up a rock that looks
Speaker 1: like the cookie Monster. I'm gonna go with eight thousand dollars,
Speaker 1: eight thousand dollars. I'm gonna keep a poker face, Larry,
Speaker 1: What is your bid for the perfect Cookie Monster? Can
Speaker 1: remember prices right, rules are in effect, So you can
Speaker 1: go one dollar or twenty eight thousand and one dollars. So,
Speaker 1: so what's my bit or what do I think the
Speaker 1: greater full theories? So is the greater greater full theory?
Speaker 1: And and and it's truly truly a greater full in
Speaker 1: this case I think is appropriate. I don't know. That's
Speaker 1: a pretty good bid. I don't know. I've been thirty
Speaker 1: five grand. I got gonna buy this. I'm gonna arb
Speaker 1: this trade and sell to one of you guys ten grand.
Speaker 1: What I would pay for it is, you know, I
Speaker 1: don't know what what did pet Rocks go for? But
Speaker 1: that's again before Sarah again, before Sarah was born, the
Speaker 1: fields pet Rock I know, I know pet Rocks. Well,
Speaker 1: you know it's you might you guys might be right though,
Speaker 1: because the the bid is ten grand. This guy hasn't
Speaker 1: disclosed his his offer price though, so so it could
Speaker 1: be high. He hasn't sold it yet, so very very
Speaker 1: a liquid market for cookie months. And I have a
Speaker 1: Beanie Baby that I can sell. And I still have
Speaker 1: my Pokemon cards that was revilable. I think, I know,
Speaker 1: I need to check I need to check out. I
Speaker 1: don't think I have any valuable is going to be
Speaker 1: a billionaire, I know it, don't you know what? That's
Speaker 1: the truth. That's the truth, all right. I know we've
Speaker 1: been talking about crazy things all podcasts long, though, but Larry,
Speaker 1: do you have anything else? You know? I My craziest
Speaker 1: thing is, you know how how a bunch of rag
Speaker 1: tank guys living in their mom's basement could basically bankrupt
Speaker 1: the hedge fund. You know, um, you know, in my world,
Speaker 1: it doesn't get a whole lot more crazy there, crazier
Speaker 1: than that. Yeah, that's true. You know. To your point though,
Speaker 1: who shorts of stock that's already a short interests? I
Speaker 1: just don't get it if the value is thirty and
Speaker 1: you think it's zero, Alright, I'm not. I'm not going
Speaker 1: to let myself off the hook though, because I feel
Speaker 1: like I was about to get passed by and not
Speaker 1: have to share a crazy thing. And it's happened before.
Speaker 1: But I'm not gonna not gonna slide away that easily. Uh.
Speaker 1: This is also just within this year round of craziness.
Speaker 1: This week, but also on Wednesday, thirty million call options traded,
Speaker 1: as we talked about hash equity trading volume, but that
Speaker 1: was also a record by far um Well that that
Speaker 1: actually could be a whole another podcast. I'm gonna be
Speaker 1: writing some something about you know how this with these options,
Speaker 1: all this stuff comes together, especially around game stop. That's
Speaker 1: it's insane. The great Gamma squeeze of We'll have to
Speaker 1: get you back on for that, because that's that would
Speaker 1: be a good one. That'd be interesting. Uh yeah, we'll
Speaker 1: certainly have to have you back, Larry. Let us know
Speaker 1: when it's out. But Larry Tad, thank you so much
Speaker 1: for joining the show, especially in what was a week
Speaker 1: to remember. Sarah am I happy to be happy to
Speaker 1: join it, happy to be on the Bloomberg team, and
Speaker 1: call me whenever I'm in the pandemic. I'm not going anywhere,
Speaker 1: None of us are. I haven't been going anywhere for
Speaker 1: twenty years, Larry, What Goes Up We'll be back next week.
Speaker 1: Until then, you can find us on the Bloomberg Terminal,
Speaker 1: website and app, or wherever you get your podcasts. We'd
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Speaker 1: review the show on Apple Podcasts so more listeners can
Speaker 1: find us. And you can find us on Twitter, follow
Speaker 1: me at at Sarah Pontzack Mike is a reaganonymous, and
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Speaker 1: you to Charlie Pellett of Bloomberg Radio and the voice
Speaker 1: of the New York City Subway System. What Goes Up
Speaker 1: is produced by Tobra Foreheads. The head of Bloomberg Podcast
Speaker 1: is Francesco Levie, thanks for listening, See you next time.