Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.
Speaker 1: My name is Mike Reagan. I'm a senior editor at Bloomberg.
Speaker 2: Now Meldonna Hirich across asset reporter with Bloomberg.
Speaker 1: And this week on the show, Well Weil Donna. You
Speaker 1: know what I always say, one of the best perks
Speaker 1: of being a journalist is that you get to meet
Speaker 1: these very smart people and ask these very smart people
Speaker 1: some dumb questions. Yes, one of the being a journalist,
Speaker 1: and what's great about working at Bloomberg is we have
Speaker 1: so many very smart people just sitting a few rows away.
Speaker 2: Yeah, and we can chitchat with them whenever we feel
Speaker 2: like it.
Speaker 1: And ask them dumb questions.
Speaker 2: So many dumb questions, and they give us smart answer
Speaker 2: smart answers.
Speaker 1: That's right. There are no dumb answers, just dumb questions.
Speaker 1: I don't know.
Speaker 2: Just for me and you, I think, yeah, yeah.
Speaker 1: Well you can have a smart answer to a dumb
Speaker 1: question if I've learned anything from Mad magazine.
Speaker 2: Yeah.
Speaker 1: But anyway, I think, as you're talking about our guests, right,
Speaker 1: I am talking about our Yes, yes.
Speaker 2: I'm so happy to have him he is. Can I
Speaker 2: say he's famous in our circles. Absolutely, yeah, Yeah, he's
Speaker 2: a big deal our guest this week. He is famous
Speaker 2: in our circles. We all talk about him in the
Speaker 2: nicest possible ways.
Speaker 1: The suspense.
Speaker 2: I know, I'm dragging this out, like I want people
Speaker 2: at home listening to be like, who is it? It's
Speaker 2: no other than Matt Levine, our colleague and Bloomberg opinion columnists.
Speaker 2: And I'm so happy to have him on the show.
Speaker 2: Thank you so much for joining us, Thanks for having me. Okay,
Speaker 2: The New York Times famously wrote about you a couple
Speaker 2: of years ago. They don't typically profile financial newsletter writers.
Speaker 2: I don't think so it was a big deal. But
Speaker 2: maybe we can just start with you telling us like
Speaker 2: how did you become a columnist at Bloomberg.
Speaker 3: Well, I was a lawyer a long time prior to that.
Speaker 3: I left law for investment banking because it was two
Speaker 3: thousand and seven and if you were a corporate lawyer,
Speaker 3: it felt like the sort of right thing to do
Speaker 3: is to get into finance. And I didn't really know
Speaker 3: much about like the financial industry, like what people did
Speaker 3: all day. Someone offered me a job at Goldman and
Speaker 3: I was like, well that seems like it can't hurt.
Speaker 3: And I did it for like four years, like structuring
Speaker 3: equity derivatives for corporate clients, and I learned a lot
Speaker 3: and like it was fun and interesting, but over time
Speaker 3: you like learn less and become more of a like
Speaker 3: just salesperson, like at senior levels. The job is like
Speaker 3: you get on planes and fly around to clients and
Speaker 3: make small talk and try to convince them to do deals.
Speaker 3: And I was much less good at that, and so
Speaker 3: I was kind of tired of it, and I wanted
Speaker 3: to get out. And I'd always vaguely imagined being a
Speaker 3: writer without ever doing anything about it, and so I
Speaker 3: wanted to leave Goldman at the same time that a
Speaker 3: job was opening up a deal Breaker, which is this
Speaker 3: small like finance and comedy blog that I was reading religiously,
Speaker 3: as was everyone on Wall Street two thousand and eleven
Speaker 3: when I was leaving, and so I applied and they
Speaker 3: hired me, and I sort of took a leap of
Speaker 3: faith and went to do that. And I did that
Speaker 3: for a couple of years, and then eventually Bloomberg.
Speaker 2: Noticed me, and thank god they noticed you.
Speaker 1: Well, it does give you such a unique perspective both
Speaker 1: the law background and the sort of derivatives background at Goldman,
Speaker 1: It really puts you in a great position to do
Speaker 1: what you do and analyze basically the news flow. But Matt,
Speaker 1: my first question for you is what is the total
Speaker 1: market value of pepperoni in the United States in any
Speaker 1: given year?
Speaker 3: So I read about this the other day because this
Speaker 3: guy like did this cacamami calculation for his consulting firm,
Speaker 3: which I thought was so wonderful because this is a
Speaker 3: stereotypical question, like there's some like just random thing and
Speaker 3: that you get to a consulting interviewer, like you've asked
Speaker 3: some random question about like how many washing machines there
Speaker 3: are in the United States. Right, They just like to
Speaker 3: try to like judge your thought process.
Speaker 1: It was an intern, right, wasn't an intern?
Speaker 3: Yeah? He was an inn.
Speaker 1: Anyway.
Speaker 3: He had like heard somewhere like a Pepperoni CEO saying
Speaker 3: we sell enough pepperoni to blanket the entire US and
Speaker 3: in a thin layer of pepperoni, And so he did
Speaker 3: that math. And if you do that math, you get
Speaker 3: like the market for pepperoni is larger than entire economy
Speaker 3: of the world for the entire history of the world,
Speaker 3: Like more pepperoni is sold in a year than all
Speaker 3: goods and services sold in the world in all of
Speaker 3: human history.
Speaker 2: It's probably true, right, I don't know.
Speaker 3: You can go to the Domino's website and probably get
Speaker 3: most of what you need to know. Yeah, it's like
Speaker 3: two dollars that pepperoni to a pizza and they sell
Speaker 3: like a million pizzas a day, and then you're kind
Speaker 3: of in the ballpack.
Speaker 1: Or Hormel's earnings transcripts. Maybe I don't know.
Speaker 2: I like who sells pepperoni.
Speaker 1: I don't even know, Like figure Hormel I think is
Speaker 1: the main But I like computing the entire square inch
Speaker 1: the United.
Speaker 3: States, Right, that's just like if you think about that
Speaker 3: for a moment, like the United States has not covered
Speaker 3: wall to wall and cows or anything like it, Like
Speaker 3: not even one percent of the land in the US
Speaker 3: is covered by gues and so like you'd really need
Speaker 3: to like squish kas pretty thin to make that much pepperoni.
Speaker 1: Anyway, I don't know. Anyway, I forgot a lot about this.
Speaker 1: For one, I know you did. That's why I forget.
Speaker 1: I think it was two quadrillion dollars. Was the addressable. Yeah, right,
Speaker 1: But I bring it up because that is That's what
Speaker 1: Matt's so good at, is like finding some random financial
Speaker 1: news story and really dissecting it and unpacking.
Speaker 2: It and u and teaching us all how things work
Speaker 2: or how they were done, or how the calculations.
Speaker 1: Happened, how the pepperoni's made.
Speaker 2: Okay, but I'm so interested. As Mike said, that's a
Speaker 2: really good example of a recent story that you did
Speaker 2: that was really fun and fun for people to read.
Speaker 2: Your entire column every day is some dissecting some very
Speaker 2: very interesting story or aspect of something that's happening in markets.
Speaker 2: I'm curious about your process, like what do you do?
Speaker 2: Where do you look for these stories? Do people send
Speaker 2: them to you? I've always been so curious about how
Speaker 2: this worked, and I'm obviously trying to rip you off.
Speaker 3: I go to a little website I like to call
Speaker 3: Bloomberg dot com. No, I mean, like I don't know,
Speaker 3: like probably seventy five percent of what I write about
Speaker 3: is stuff that is kind of recognizably in the financial news.
Speaker 3: Stuff that's like on the front page of Bloomberg or
Speaker 3: the Wall Street Journal or the Ft or Delburg are
Speaker 3: often all of them, and so like there's no like
Speaker 3: particularly interesting process for finding like the big stories people
Speaker 3: sent me stuff, and there's there's stuff that I'm just
Speaker 3: like attuned to. Like I have a genre of stories
Speaker 3: called everything is securities fraud, which is where public companies
Speaker 3: do like random bad things and people sue them for
Speaker 3: securities fraud, like anything from like sexual harassment to like
Speaker 3: animal welfare stuff to pollution to it. Now there's a
Speaker 3: lot of like anti Dei backlash where Republicans have gotten
Speaker 3: into the game of suing companies for securities fraud because
Speaker 3: they like use transgender influencers in advertising and all that
Speaker 3: stuff gets a certain amount of media coverage. But to me,
Speaker 3: it's like indicative of this like really big interesting trend
Speaker 3: in like American securities laws, where like all conduct gets
Speaker 3: reflected through through like the notion of securities fraud because
Speaker 3: it is easy to bring cases and like the damages
Speaker 3: can be really large and so you can like litigate,
Speaker 3: you can fight over all sorts of like political and
Speaker 3: social issues by calling them securities fraud. I think that's
Speaker 3: like really weird and interesting, and so each individual case
Speaker 3: might be kind of dumb, but like the theme is
Speaker 3: big and interesting, so you do get some of that.
Speaker 3: Occasionally people will be like, I'm sure at this company
Speaker 3: you should write about how they're bad, and like sometimes
Speaker 3: that's annoying and ignore it. And sometimes it's like, oh,
Speaker 3: this is a really funny company. I tell people that
Speaker 3: my favorite email to gain or my favorite like IB
Speaker 3: messages to gat is you will enjoy this eight K
Speaker 3: because like that has like one hundred percent hit rate
Speaker 3: because like someone who sends me that message one knows
Speaker 3: what an eight K is. So if someone sends me
Speaker 3: an aking it's a funny AK, it's probably funny EK,
Speaker 3: and I will probably enjoy it. I am a columnist
Speaker 3: and I don't do a lot of like you know,
Speaker 3: breaking of news, and so when someone's like, oh you
Speaker 3: should look into this company they're really scammy, I'm like, yeah, okay,
Speaker 3: but like who I got a call to confirm that, right.
Speaker 3: Whereas like if someone's like, look at this ak, like
Speaker 3: the funny thing is like there in the public domain,
Speaker 3: publicly filed, it's sort of right in my wheelhouse to.
Speaker 2: Write about, Yeah, what's the funniest AK you ever read?
Speaker 3: It's not an eight K, but there's this public company
Speaker 3: that was like this sort of like tiny, shallow of
Speaker 3: public company was run by like one guy and he
Speaker 3: filed like, I don't know, thirty ten cues and ten
Speaker 3: k's like periodic reports all at once, Like he was
Speaker 3: way behind on the on the annual filings for his company,
Speaker 3: and so he filed them all at once. And they
Speaker 3: were just like complaining about how hardy was working, like
Speaker 3: all of this stuff was like mister so and so
Speaker 3: it gets no support and he's doing all these ten
Speaker 3: cues by hand, and they were very like there's a
Speaker 3: range of public companies and most of their filings are
Speaker 3: sort of carefully loyal, lured and sensible, and then at
Speaker 3: the far tael there's a lot of very weird stuff.
Speaker 1: What I find fascinating is, you know, you've always kind
Speaker 1: of focused on some of the absurdities of finance and
Speaker 1: the markets, but I feel like the markets are getting
Speaker 1: more and more absurd and more more and more Matt
Speaker 1: Levine esque as as the years go on. And I'll
Speaker 1: give you an example. You know, you're talking about securities fraud.
Speaker 1: One of my favorite columns of years recently was about
Speaker 1: Ryan Cohen, who is the meme stock He basically he
Speaker 1: was long bed, Bath and beyond, right, and uh to
Speaker 1: some big amount of dollar amount. And they tweeted. Someone
Speaker 1: tweeted something about bad, Bath and Beyond, and he replied
Speaker 1: with a funny quip and he included the moon face emoji,
Speaker 1: which I'm that and to your point, Matt, I think
Speaker 1: in the commn I've never even seen that emoji before.
Speaker 1: I don't think it translates to every device.
Speaker 3: Like everyone who was calling it the moon face the emotion,
Speaker 3: and I looked at it, like it's a smiley face.
Speaker 3: Apparently it's a moon.
Speaker 2: I thought it was a smiley face too.
Speaker 3: Actually it's just a smiley face. But like there's like
Speaker 3: if you like hover over it, it says it's a muonomiji. Anyway, Yeah,
Speaker 3: he treated this moon emigi, which I guess in like
Speaker 3: the code of memestacks means that the stock will go
Speaker 3: to the moon. And then he sold the stock like
Speaker 3: the next day, basically like two days later. Yeah, And
Speaker 3: so they sued him for securities for i'd saying that
Speaker 3: he was telling people to buy even as he was telling.
Speaker 1: You know, it's all funny and it's absurd and it's
Speaker 1: fun to talk about because that. But I feel like
Speaker 1: there's a bigger issue. Let me just read a couple
Speaker 1: of lines from your column. You said, back in the
Speaker 1: olden days, I learned that securities fraud meant lying about
Speaker 1: things that would be material to quote a reasonable investor.
Speaker 1: But in the world of memestocks, there are no reasonable investors.
Speaker 1: What matters is not cash flows or business plans, but
Speaker 1: memes and influencers, and so the standards for fraud are
Speaker 1: perhaps different.
Speaker 3: You know, I think it's reasonable to say, to a
Speaker 3: large extent, the memestock was a phenomenon of a particular
Speaker 3: macroeconomic and also social environment where like people were stuck
Speaker 3: at home. They were Yeah, Robinhood had sort of recently,
Speaker 3: like relatively reasonally come on the scene and like built
Speaker 3: a good product for gamifying stock trading, and like people
Speaker 3: are getting stimulus checks. There are a lot of factors
Speaker 3: combined to allow like a bunch of retail traders to
Speaker 3: get really into sort of irrational trading. And I don't
Speaker 3: think that's like the main factor that is driving like
Speaker 3: the price of Nvidia or whatever, or like of treasury bills. Yeah,
Speaker 3: like that's the thing, Like, and absolutely I've spent more
Speaker 3: time writing about dumber stuff than I would have five
Speaker 3: years ago, and that dumber stuff is often the meme
Speaker 3: stocks are crypto.
Speaker 1: I'm curious how you think about that. I mean crypto
Speaker 1: obviously it's a very similar storyline. But a regulator's kind
Speaker 1: of a sleep at the switch on policing this stuff.
Speaker 1: Or should it be up to these PLANEFFS attorneys. Should
Speaker 1: we just allow the markets to have this sort of
Speaker 1: absurd element to them without really doing anything to correct it.
Speaker 3: Think that regulators are not in the business for the
Speaker 3: most part of like correcting mistakes in financial markets, right, Like,
Speaker 3: if you think that people are buying stocks for irrational reasons, like,
Speaker 3: there's not so much you can do about it, right,
Speaker 3: And it's hard because like the regulatory paradigm has always
Speaker 3: been in the US about disclosure, and so when you
Speaker 3: know they're in sort of the early days of memestocks,
Speaker 3: some memestocks, I think it was kind of this is
Speaker 3: more or less true of Game Stop. We're nervous about
Speaker 3: their sock had gone up ten ten x and they
Speaker 3: needed money, and they were a little nervous about raising
Speaker 3: money because they're like, our stock is at really weird
Speaker 3: prices and it's gonna it just feels like fraud to
Speaker 3: raise money, and then other memestocks were like, great, people
Speaker 3: want to buy a stock, We're going to sell it
Speaker 3: to them, right, And that was like AMC was big
Speaker 3: on that. But also like Hurts were bankrupt and their
Speaker 3: stock got mamed up, and they're like, Okay, we're selling stock.
Speaker 3: I think they shut that down. Didn't shut that down? Yeah,
Speaker 3: but it turns out you would have done well buying
Speaker 3: the stock. But anyways, in response to the SEC basically
Speaker 3: said you need to put out more disclosure, like if
Speaker 3: you're if you are selling stock because you're a memestock,
Speaker 3: and they phrase it differently, you know what they mean.
Speaker 3: Then you have to put out in your perspectives like
Speaker 3: we don't know why our stock is trading this high.
Speaker 3: It's probably for no good reason. You probably shouldn't buy it, right,
Speaker 3: And so like companies would do that, they like put
Speaker 3: out a perspective saying, our stock is trading at random
Speaker 3: prices for no reason. We don't understand it either, but
Speaker 3: like nobody reads that. Like the whole disclosure regime just
Speaker 3: sort of falls apart in the face of like the
Speaker 3: memestock phenomenon because you can say whatever you want in
Speaker 3: this perspective, but nobody is reading it or deterred by it,
Speaker 3: and like that's the bullet that the SEC has and
Speaker 3: after that, like, Okay, you want to buy it, you
Speaker 3: buy it.
Speaker 1: Yeah.
Speaker 3: I think it's really hard, and I think they feel
Speaker 3: obligated to say stuff and do stuff and commission reports
Speaker 3: and like testify it in front of Congress and like
Speaker 3: creat the impression they're doing stuff. To the extent you
Speaker 3: diagnose the memestock phenomenon as like a bunch of people
Speaker 3: online decided to be fine to buy stocks at really
Speaker 3: high prices. It's just not something the SEC has any
Speaker 3: any like authority to stop, right, And so they go
Speaker 3: to after they talk about things that are ancillary to that.
Speaker 3: There's a lot of talk about payment for order flow
Speaker 3: and market structure and somehow you think if you change
Speaker 3: how the stock market orders get routed, that will somehow
Speaker 3: solve the memes. But it's had nothing to do with it, right,
Speaker 3: It's just some people get mad about online or they
Speaker 3: like the SEC has looked into short selling rules because
Speaker 3: some of the early name stock phenomenon was about trying
Speaker 3: to squeeze short sellers. But regulating short selling more harshly
Speaker 3: is a strange response to that, because like the short
Speaker 3: sellers weren't really the they were the victims there as
Speaker 3: it were. They looked into a little bit like is
Speaker 3: there some sort of collusive market manipulation here? And I
Speaker 3: just think the answer is clearly no. Right, it's people
Speaker 3: online saying I like the stock, so there's not a
Speaker 3: lot they can do. And I think they're keenly aware
Speaker 3: that it's embarrassing. Right if you want your capital markets
Speaker 3: to look sophisticated and professional and driven by fundamentals, and
Speaker 3: then when they're just meming around, you feel embarrassed about
Speaker 3: it is it's not a it's not something they can fix.
Speaker 1: But you know, I mean, there is this cohort of
Speaker 1: people posting on Reddit these wild conspiracy theories to help
Speaker 1: pump up the stock. But even with that, I'm not
Speaker 1: sure there's a lot they can do about that.
Speaker 3: And they regularly go after like true pumping numbers. Yeah,
Speaker 3: people who are who are pumping stocks while they're selling them,
Speaker 3: men who are lying about the fundamentals of the business.
Speaker 3: But I think in a lot of the memestock stuff
Speaker 3: in some combination of people who seem to be genuinely
Speaker 3: and often like pretty well informed believers in the business,
Speaker 3: plus like just the random enthusiasts and like they're not lying.
Speaker 3: They're just like to the moon. It's not a lie,
Speaker 3: there's nothing, there's nothing deceptive about that, And so it's
Speaker 3: just hard, hard to police that.
Speaker 2: When I went to see the Barbie movie, they played
Speaker 2: the preview for the Game Stop movie. Did you know
Speaker 2: it's coming out?
Speaker 1: I knew there was one.
Speaker 2: I don't even want to see it. What I love
Speaker 2: when I read your column, and I read them every day.
Speaker 2: I'm your number one reader. I think we Mike probably
Speaker 2: can't say the same about himself. I read all of
Speaker 2: them every day. I read you read all the way
Speaker 2: through thenoe bottom, oh yeah, just in case, because sometimes
Speaker 2: he saves like the funniest stuff for the last.
Speaker 1: Yeah.
Speaker 3: Often people would tell me they.
Speaker 2: Read it and reverse, Oh, that's not a bad idea.
Speaker 2: I might start doing so I can get a good
Speaker 2: laughing At first.
Speaker 1: I usually go in and make sure he's not making
Speaker 1: fun of me for something.
Speaker 2: Oh searched, Yeah, when if my yeah, you sometimes mentioned
Speaker 2: my articles and my heart stops. I'm like, oh no,
Speaker 2: did I do this calculation correctly? But anyway, what I
Speaker 2: love is that you do have these recurring themes. So one,
Speaker 2: like we were just talking about his memes talks everything
Speaker 2: is security is fraud. Another one is proximity to Elon Musk.
Speaker 3: I don't talk about that one so much because like
Speaker 3: that magic has gone away a little bit. Like for
Speaker 3: a while I was saying that the most important factor
Speaker 3: in financial markets was not cash flows, but proximity to
Speaker 3: Elon Musk. And what that meant is like when he
Speaker 3: would like tweet about a word a company who's stock,
Speaker 3: the company whose name was nearer to that word would
Speaker 3: stock would go up, like fans of Elon Musk would
Speaker 3: buy stuff he tweeted about. And so he really did
Speaker 3: have the ability to manipulate the prices of things like
Speaker 3: doage coin and to some extent Bitcoin and to a
Speaker 3: larger extent the price of Tesla stock and a lot
Speaker 3: of other stuff. And I thought that was fascinating in
Speaker 3: part just because like I would like to have that power,
Speaker 3: I would use it to make money. Doesn't it's not
Speaker 3: clear that he ever did use it to make money.
Speaker 3: He just sort of wanted to.
Speaker 2: That would be securities fraud.
Speaker 3: That would probably be securities for it that it depends,
Speaker 3: but Yeah, that has dissipated a little bit. I think
Speaker 3: partly because that's just a memes stock phenomenon, right, and
Speaker 3: people who are less bored and don't have stimulus strikes
Speaker 3: are just less interested in throwing money at whatever Elon
Speaker 3: Musk mentions, And then partly because a lot of those
Speaker 3: trades have not gone particularly well. He pumped doge coron
Speaker 3: and didn't do that great for people, and he did
Speaker 3: this ridiculous Twitter acquisition that I think went terribly for him,
Speaker 3: and so he might be less inclined to just invest
Speaker 3: with everything he's tweeting about. But I think most of like,
Speaker 3: I don't think people were buying dogecoin because they thought
Speaker 3: he had a genius investing idea in doge grain. I
Speaker 3: think they were buying it because he was like a
Speaker 3: meme king and they liked participating in the meme. And
Speaker 3: I think that whole phenomenon has just lessened.
Speaker 2: But what does keep happening is every time you go
Speaker 2: on vacation, he does have like the biggest news of
Speaker 2: the year, and then you are full time.
Speaker 3: I was out last week and he did only a
Speaker 3: few crazy things, including he did tweet that he was
Speaker 3: going to drive from Mark Zuckerberg's house and beat him up,
Speaker 3: which is pretty crazy, but not like core financial news
Speaker 3: that I felt obligated to cover in previous vacations. He's
Speaker 3: done things like by Twitter, and so like those I
Speaker 3: have to write about even from vacation.
Speaker 1: Yeah, well, Mett, one of your perennial themes that I've
Speaker 1: always enjoyed. It used to be anyway, people are worried
Speaker 1: about bond market liquidity. I don't know how many stories
Speaker 1: we've all seen about people worried about bond market liquidity,
Speaker 1: and then sure enough, last year we have the worst
Speaker 1: bond market of any of our lifetimes, bear market in
Speaker 1: all manner of bonds. I don't think I heard liquidity
Speaker 1: blamed ones for any of it. Are those worries over?
Speaker 3: I hope that I embarrassed people out of writing something,
Speaker 3: But also I do think that like the theories, and
Speaker 3: there's like two veins of bond market people are worried
Speaker 3: about bomb market liquidity. One is just like worried about
Speaker 3: bomb market liquidity. It's just there's a story of like
Speaker 3: pre two thousand and eight, banks had a lot of
Speaker 3: balance sheet to commit to market making and bonds, and
Speaker 3: they did that by like absorbing losses and making tight
Speaker 3: markets and generally making it so that if you wanted
Speaker 3: to move a lot of bonds even into following you
Speaker 3: could do so efficiently. And post two thousand and eight,
Speaker 3: with higher capital requirements and more regulation of prop trading
Speaker 3: and just less risk mapnite from banks, there's no shock
Speaker 3: observers anymore. And now if you want to sell a
Speaker 3: lot of bonds, you'll drive down the price by twenty
Speaker 3: percent and it'll be a bloodbath. And like, I think,
Speaker 3: like there's truth to that at some margin, right, But
Speaker 3: like it used to be fairly cheap to trade bonds,
Speaker 3: like investors were subsidized by essentially banks underpricing liquidity risk,
Speaker 3: and like that led to two thousand and eight, right,
Speaker 3: And now it's like a little bit more expensive to
Speaker 3: trade bonds because banks don't under underprice liquidity provision as much.
Speaker 1: And you know, it's.
Speaker 3: Fine, Like it's not like the worry was not it
Speaker 3: would be like ten bases points more expensive to trade bonds.
Speaker 3: The worry was that like bond markets would seize up
Speaker 3: if like rates went up or if their credit problems,
Speaker 3: and like no one would be able to sell and
Speaker 3: it would be a blood bath, and it just never happened, right,
Speaker 3: Like grades went up, and it's that worry never really
Speaker 3: came true. The other worry was that like bond ETFs
Speaker 3: for some reason, was ETFs not mutual funds. The ETFs
Speaker 3: created a liquidity illusion where people could day trade, you know,
Speaker 3: in and out of the ETF, but like the underlying
Speaker 3: bonds were less liquid and in a scenario where everyone
Speaker 3: wanted out of the ETF, the liquidity would dry up
Speaker 3: and it would be a disaster. And I think, like
Speaker 3: in some of the dislocations around COVID, there was like
Speaker 3: a little truth to that, Like there was a little
Speaker 3: bit of like dislocations between ETF prices and bond prices,
Speaker 3: but not in a way that caused the big crisis.
Speaker 3: And I think the sort of latest research is that
Speaker 3: ETFs actually contribute to the liquidity of the underlying bonds.
Speaker 2: I love ETFs, so I'm happy to hear that, yeah
Speaker 2: you hate bonds. When you said bond market liquidity, I
Speaker 2: tuned out. I can't believe how long we've gone without
Speaker 2: really doing a deeper dive into crypto, which I feel
Speaker 2: like is a very much recurring topic for you on
Speaker 2: a weekly basis, because there's so much news in crypto
Speaker 2: worth examining further, I guess writing about how do you choose,
Speaker 2: even given everything that's going on in crypto, how do
Speaker 2: you choose what to focus on, the answer.
Speaker 3: To how do I choose is really simple. I'm not
Speaker 3: that interested in crypto except that it is an amazing,
Speaker 3: amazing laboratory for understanding real finance, because it's just like
Speaker 3: people rebuild like these schematic versions of stuff that exists
Speaker 3: in the world. Like they're like, what if we had
Speaker 3: margin lending, Let's build it in a really dumb way,
Speaker 3: and then you just see how it breaks, and it's
Speaker 3: so fun, and they do that so much, and so
Speaker 3: like I'm interested in crypto stories that are like that,
Speaker 3: like illuminate, like good or bad financial market intuitions, and
Speaker 3: there's so many of those. I mean, frankly, like what
Speaker 3: I often write about in crypto is the sort of
Speaker 3: big headline legal battles over whether it's legal in the US,
Speaker 3: which I don't think is that interesting, which I think
Speaker 3: is important, and which like I have kind of stayed
Speaker 3: at a position there where like everyone in crypto thinks
Speaker 3: that the SEC is like wildly overreaching in saying that
Speaker 3: crypto most tokens or securities, and I think the SEC
Speaker 3: is clearly right, and I think most crypto is not entirely,
Speaker 3: but in the meaningful part a way to try to
Speaker 3: get around the securities laws that have existed in the
Speaker 3: US for one hundred years that are designed to prevent
Speaker 3: people from going out and raising a lot of money
Speaker 3: from the public by selling shares of their business project
Speaker 3: without certain disclosures. And I think most crypto tokens are
Speaker 3: clearly people raising money for their business projects without those disclosures,
Speaker 3: and the SEC thinks that, and most people in crypto
Speaker 3: I think that's crazy. So I find myself getting involved
Speaker 3: in those debates and running about that a lot. But
Speaker 3: I don't think it's that interesting, right.
Speaker 1: Given all the enforcement actions we've seen, coinbase Finance, the
Speaker 1: Ripple lawsuit, are you any more comfortable with saying what
Speaker 1: the SEC considers as a security and what isn't right now?
Speaker 1: Do you think that clarity is there yet or is
Speaker 1: it still.
Speaker 3: There's been there for years? They think they think every
Speaker 3: cryptotoken is a security except Bitcoin, and like they're not
Speaker 3: gonna say e theory it is, although they think it is,
Speaker 3: and this is totally clear. Like there's no lack of
Speaker 3: clarity there. It's like just people are mad about it.
Speaker 3: And by the way, like the SEC could well be wrong.
Speaker 3: I think they're kind of right, but like they've had
Speaker 3: a mixed record in court and they had one big
Speaker 3: loss in some other cases where like they've won, but
Speaker 3: it's like a little the language is bad for them.
Speaker 3: But no, I think like the SEC's position is really
Speaker 3: really really clear. They've been a little slow and enforcing
Speaker 3: that position, but that's changing. But like the action right
Speaker 3: now is whether courts will agree with the SEC and
Speaker 3: also whether Congress will will.
Speaker 2: Ruin them in the loss you're talking about is is
Speaker 2: the Ripple case?
Speaker 3: Right, sorry, the loss of the Rippel case.
Speaker 2: Yes, so that's excerpt. So is XRPA security. That's a
Speaker 2: Ripple token excerpt.
Speaker 3: I mean, I don't know O is going to be appeal.
Speaker 3: I mean the finding in court was incoherent, but I
Speaker 3: mean it's kind of that XRP is not a security,
Speaker 3: and it's kind of that it's sometimes a security when
Speaker 3: it's sold to institutional investors, but not when it's sold
Speaker 3: to retail investors, which is not really the way the security.
Speaker 1: Yeah, that's that doesn't seem like that that will stand.
Speaker 1: I feel like that is too weird of a judgment.
Speaker 1: I don't know, Like, do you see that getting overturned? Ultimately?
Speaker 1: Where do you where do you see it all going?
Speaker 1: Do you think Congress is going to sort of finally
Speaker 1: get on the ball and and codify what is and
Speaker 1: what isn't? Where is that? Is that wishful thinking that
Speaker 1: that's going to happen?
Speaker 3: Do you think there is a good chance Congress will
Speaker 3: do that? Which I think is very weird because like
Speaker 3: to me two years ago, one year ago, Crypto was
Speaker 3: this like industry, like hot industry that had a huge
Speaker 3: lobbying presence, and people could sort of align themselves with
Speaker 3: it as the wave of the future. And I think
Speaker 3: if you look at it today, much smaller than it was.
Speaker 3: The way the future is AI now not Crypto. Every
Speaker 3: VC has pivoted from CRYPTOIII, And a lot of the
Speaker 3: prominent crypto founders who were posing for panshakes with senators
Speaker 3: are at least their project has gone bankrupt when they're
Speaker 3: suing each other, and like sometimes they're in prison, right
Speaker 3: and so like, I don't know if I were a
Speaker 3: Congress like I feel this as just someone who wrote
Speaker 3: about crypto, like I feel burned by crypto. I'm like,
Speaker 3: I'm not going to give these guys the benefit of
Speaker 3: the data anymore. I'm not gonna advocate for them anymore,
Speaker 3: because like they're all in prison. I think if I
Speaker 3: were a congressman, I would be like, man, I pose
Speaker 3: shaking hands with a lot of people who are now
Speaker 3: in jail, and I don't want to do that again.
Speaker 3: So I'm not going to introduce the bill to like
Speaker 3: make crypto more illegal. But that's not apparently what the
Speaker 3: congressmen think. And there continues to be a lot of
Speaker 3: support for crypto in Congress that I find to me,
Speaker 3: it just seems like a strange political calculation, and maybe
Speaker 3: some of it is like their remains lobbying money in crypto.
Speaker 3: Six months ago, I would have been incredibly pessimistic about
Speaker 3: Congress doing anything to regular crypto, just because like it
Speaker 3: seemed after the Class of FTX, it just seemed so dead.
Speaker 3: And now I have more optimistic that Congress will will
Speaker 3: do stuff. There's also like away from the crypto industry,
Speaker 3: there's just like the political dynamics of like Gary Gensler
Speaker 3: at the SEC is a very aggressive regulator. There's a
Speaker 3: strong deregulatory movement in the Republican Party in Congress and
Speaker 3: also in the courts, and so away from the substance
Speaker 3: of crypto, like there might be just a move to
Speaker 3: limit the SEC's power and like limit just the effect
Speaker 3: of regulation, and the crypto might be a sort of
Speaker 3: like accidental beneficiary of that.
Speaker 1: Matt Levine of Bloomberg Opinion, such a treat to catch
Speaker 1: up with you. Just for the record, I did find
Speaker 1: a research report from twenty twenty one the global pepperoni
Speaker 1: market two billion dollars a year. That sounds low to me.
Speaker 2: That's way too lowly, too low.
Speaker 1: I think it's too quadrillion. It was the right answer. Well,
Speaker 1: now we can't let you go just yet though, with
Speaker 1: abbutrition on this podcast where we all share the craziest
Speaker 1: things we've seen in markets. I'll confess your column is
Speaker 1: often a very good source of the craziest things.
Speaker 2: Which is why the bar is high for you.
Speaker 1: The bar is high. But when do you get us started?
Speaker 2: Okay? I have a story from the Wall Street Journal.
Speaker 2: It says job hunters are invading dating apps, so people
Speaker 2: looking for jobs they'll use dating apps, they'll connect with
Speaker 2: people at companies they want to work for work at,
Speaker 2: and when they get romantic messages, they'll feel ikey about it.
Speaker 1: They'll send their resume back.
Speaker 2: Yeah exactly, no, but they'll feel ikey about the romantic messages.
Speaker 2: But they're really looking to network and hopefully get a job.
Speaker 2: Placement is so interesting?
Speaker 1: Is it working for any of them?
Speaker 2: There's a couple of examples in the story, and it
Speaker 2: says like this one moment, she didn't end up at
Speaker 2: the company where she was like chatting this guy up.
Speaker 2: I guess yeah, but it helped with the networking and
Speaker 2: ultimately shehanded up with her job.
Speaker 1: Huh, how do you know? They're not all the guy
Speaker 1: Matt wrote about who was pumping up options for what
Speaker 1: was the name of that club, the so House the guy.
Speaker 2: Oh that was a good story.
Speaker 1: Yeah, what did what did the guy do? He said
Speaker 1: he created a bunch of fake female profile and then
Speaker 1: he would match with guys and tell them.
Speaker 2: To meet it so yes, so they would have to
Speaker 2: buy the membership.
Speaker 1: Yeah, that's a brilliant scheme. I don't know securities fraud, Matt.
Speaker 3: I read the common to find out.
Speaker 2: I didn't.
Speaker 3: I don't even know if it was a joke. I
Speaker 3: think like he clearly wasn't doing it. But yeah, yeah,
Speaker 3: did he meme up the stock?
Speaker 1: I don't know. Yeah, if he didn't do it, I
Speaker 1: don't know. It sounds like right, yeah, yeah, all right, Matt,
Speaker 1: how about you see anything crazy this week?
Speaker 3: Not to cheat and time I call him, but I've
Speaker 3: a I'm fascinated by the situation with Sculptor Capital Management.
Speaker 3: Sculpture is this like publicly traded hedge fund firm and
Speaker 3: it's got a you know, a hedge fund manager who
Speaker 3: runs it, and it's trying to go private. It is
Speaker 3: agreed to sell itself to another firm that would keep
Speaker 3: that manager in place, and like a bunch of other
Speaker 3: hedge fund guys have just lobbed in a topping bid
Speaker 3: saying no, no, we should buy it, we should kick
Speaker 3: out that guy, and we should take over this fund.
Speaker 3: It's such a it's like you you wonder why it
Speaker 3: doesn't happen more often. An answer is basically because there
Speaker 3: are not a lot of publicly traded hedge fund firms.
Speaker 3: But it's such a like aggressive move of these guys
Speaker 3: wanting to buy a hedge fund firm because they think
Speaker 3: they do a better job of running the hedge fund
Speaker 3: than the guy who's running the hedge fund. And it's
Speaker 3: also it's weird because it's like it's a bunch of them.
Speaker 3: It's like Boas Weinstein and Bill Ackman and Mark Lazary
Speaker 3: who are all big hedge fund managers teaming up together
Speaker 3: to go in on this other hedge fund, and they're
Speaker 3: doing it in their personal accounts, like they're not like
Speaker 3: they all run hedge fund firms, but those firms are
Speaker 3: not buying or not trying to buy the sculptor. They're
Speaker 3: just they're doing it with their own money, I guess
Speaker 3: because as like their hedgehund managers and their day job,
Speaker 3: but they want to run a want to manage a
Speaker 3: different hedge fund as a hobby. I just think it's
Speaker 3: so wild and it's going to be like a contested
Speaker 3: mn A situation, and like there's all sorts of accusations
Speaker 3: and just like the under like the just the basic
Speaker 3: gist of these hedge fund guys trying to steal hedge
Speaker 3: funds from each other is just is very unusual.
Speaker 1: That is a great story, all right, I'll give you mine.
Speaker 1: I'm always fascinated. I don't know about you guys. I
Speaker 1: assume we all take public transportation to work, right, So
Speaker 1: I've never been a big car guy.
Speaker 2: I take a helicopter.
Speaker 1: Oh of course you do. Yeah, I've never been a
Speaker 1: big car guy. And especially people that buy these vintage
Speaker 1: cars for a lot of money. That never quite got that.
Speaker 1: But it's great for crazy things. I'll give you this
Speaker 1: story from the BBC. This wasn't like a car. It
Speaker 1: was the burnt out shell of an old Ferrari. It
Speaker 1: was from nineteen the nineteen fifties. It was a five
Speaker 1: hundred Mandu Spider Series one, if that means anything to anyone,
Speaker 1: one of thirteen made. It was driven by Ferrari's first
Speaker 1: like official race car driver, Franco quotes, who I doesn't
Speaker 1: sound like he was that very good at being a
Speaker 1: race car driver. Even he finished fourteenth in this thousand
Speaker 1: mile race across Italy. He crashed the car a bunch
Speaker 1: of times. Anyway, someone bought the remnants of this carb
Speaker 1: Why wasn't burned out? I guess because he would crash
Speaker 1: and much fire. But then it was. It was in
Speaker 1: a big warehouse fire at some point and so finally
Speaker 1: what was left was basically a big heap of scrap metal.
Speaker 1: All right, but it is the scrap metal of this
Speaker 1: famous old school Ferrari racing car. Someone stuck it in
Speaker 1: a barn in Florida and it just sat there with
Speaker 1: these other busted up Ferraris for years and years, and
Speaker 1: then hurricane comes along in a two thousand and four
Speaker 1: blows the roof off of the barn and they discover
Speaker 1: these Ferraris, and then it's been a hot collector's.
Speaker 2: Items, like frosty Ferraris rusty.
Speaker 1: This isn't even like it's just basically the shell, like
Speaker 1: the outer body of it, and it's no color. It's
Speaker 1: like a gray and it's burnout. And you know they're
Speaker 1: saying theoretically could refurbish it. I am highly doubtful of that.
Speaker 1: I wish I could show you the picture on the podcast,
Speaker 1: but I cannot. But you know what time it is, Yes,
Speaker 1: it's I'm sorry to inform you, Matt, but you're now
Speaker 1: a contestant on our game show. Here the price is precise.
Speaker 1: What do you think At Sotheby's, the winning bid was,
Speaker 1: We're basically a hunk of scrap metal that used to
Speaker 1: be a Ferrari race car in the nineteen fifties.
Speaker 2: How much does a regular Ferrari cost? Oh, I should
Speaker 2: know because I own so many.
Speaker 1: That is a good question. I don't know, dis guessing
Speaker 1: they're probably half a million. Now, I don't have no idea.
Speaker 2: Why are they? Yeah, so this would be more.
Speaker 3: I think the vintage Ferrari is like a like a
Speaker 3: real classic Ferrari.
Speaker 1: Yeah, more right, right in the collector's market. Now, No, I'm.
Speaker 2: Going with one point two million.
Speaker 1: I'm going with one okay, one point one nine million,
Speaker 1: and you said.
Speaker 2: More one point two I was gonna go, MAT's.
Speaker 1: Watch the prices right before two million dollars two million?
Speaker 2: I win?
Speaker 1: You win?
Speaker 2: Yeah, Oh my gosh, I beat Matt Levine.
Speaker 1: Wait, though, I'm questioning your strategy there. One point one
Speaker 1: nine human one dollar.
Speaker 3: Yeah, you're right, and that's not actually prices right.
Speaker 1: Over.
Speaker 3: But I just want to be closest. Yeah, and as
Speaker 3: close to that being because there's only two of us,
Speaker 3: I figured it was less than that.
Speaker 1: True. Well, yeah, you would have won if it was
Speaker 1: less than that's that's fine.
Speaker 2: It was two million.
Speaker 1: I would have a worded him two million. Yeah, for
Speaker 1: scrap a bunch of five hundred mondy Old Spider series one,
Speaker 1: one of thirteen, never made two million.
Speaker 2: No comments million.
Speaker 1: Maybe they'll make an n F two out of it. Yeah, anyway,
Speaker 1: Matt Levine, thanks so much for your time. Always just
Speaker 1: a pleasure to hear your thoughts about if we would
Speaker 1: cover all the most absurd topics. I think really appreciate it. Matt,
Speaker 1: Thank you, Eric, thank you, thank you man.
Speaker 2: What Goes Up. We'll be back next week. Until then,
Speaker 2: you can find us on the Bloomberg Terminal website and app,
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Speaker 2: What Goes Up is produced by Stacey Wong and our
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Speaker 4: We'll see you next week.
Speaker 1: Thanks