1 00:00:02,720 --> 00:00:08,959 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. If you watched our 2 00:00:09,039 --> 00:00:11,360 Speaker 1: video podcast, you saw us in the fancy studio of it. 3 00:00:11,440 --> 00:00:12,880 Speaker 1: Now we're in the other studio. 4 00:00:13,039 --> 00:00:15,400 Speaker 2: Yeah, we're in the little box on the fourth floor 5 00:00:15,400 --> 00:00:18,520 Speaker 2: of Bloomberg. The women's order room is right there, and 6 00:00:18,560 --> 00:00:21,840 Speaker 2: I often play music to myself because I usually have 7 00:00:21,920 --> 00:00:24,720 Speaker 2: time alone in there, and sometimes I think there's probably 8 00:00:24,760 --> 00:00:26,599 Speaker 2: people recording a podcast right next door. 9 00:00:26,680 --> 00:00:29,480 Speaker 1: Yeah, we're definitely in the partially soundproofed recording studio. 10 00:00:29,880 --> 00:00:34,400 Speaker 2: It could it could be you think being soundproof is binary. 11 00:00:34,840 --> 00:00:36,040 Speaker 1: Oh, I would never think that. 12 00:00:36,320 --> 00:00:39,760 Speaker 2: I I mean, ideally it would be. This room is 13 00:00:39,760 --> 00:00:41,760 Speaker 2: not soundproofish. 14 00:00:41,920 --> 00:00:43,600 Speaker 1: No, it has a lot of patting on the walls, 15 00:00:43,600 --> 00:00:47,360 Speaker 1: but a lot of sirens in the background. Hello, and 16 00:00:47,400 --> 00:00:50,599 Speaker 1: welcome to the Money Stuff Podcast. You're a weekly podcast 17 00:00:50,640 --> 00:00:54,560 Speaker 1: where we talk about stuff related to money. I'm Matt 18 00:00:54,640 --> 00:00:57,560 Speaker 1: Levine and I write the Money Stuff column for Bloomberg Opinion. 19 00:00:58,040 --> 00:01:00,680 Speaker 2: And I'm Katie Greifeld, a reporter for Blomberg News and 20 00:01:00,720 --> 00:01:02,279 Speaker 2: an anchor for Bloomberg Television. 21 00:01:03,360 --> 00:01:05,680 Speaker 1: I feel like people get mad at me because I 22 00:01:05,720 --> 00:01:07,680 Speaker 1: am not very good at like sitting at the right 23 00:01:07,680 --> 00:01:09,440 Speaker 1: distance from the mic, and I end up like yo 24 00:01:09,520 --> 00:01:11,960 Speaker 1: yoing around and so I get closer and further from 25 00:01:12,000 --> 00:01:14,480 Speaker 1: the mic. But this mic is really vibrating toward and 26 00:01:14,480 --> 00:01:18,279 Speaker 1: away from it because one time it's not entirely my fault. 27 00:01:18,440 --> 00:01:20,240 Speaker 2: Yeah, we're not familiar with these mics. 28 00:01:20,240 --> 00:01:21,360 Speaker 1: Mike is on a pendulum. 29 00:01:21,440 --> 00:01:23,280 Speaker 2: Yeah, it does feel like it is shaking a little bit, 30 00:01:23,319 --> 00:01:25,399 Speaker 2: but that's fine. You know, maybe the lad a little 31 00:01:25,840 --> 00:01:28,679 Speaker 2: new vibrato. Maybe the audience will appreciate that. 32 00:01:29,000 --> 00:01:29,960 Speaker 1: They do love vibrada. 33 00:01:32,560 --> 00:01:35,920 Speaker 2: But you know what, the US Court of Appeals for 34 00:01:35,959 --> 00:01:41,200 Speaker 2: the Federal Circuit on Friday does not necessarily love. They're 35 00:01:41,240 --> 00:01:44,080 Speaker 2: still illegal, as you laid out. Yeah, they're saying in 36 00:01:44,120 --> 00:01:46,080 Speaker 2: place though, Right, we. 37 00:01:46,000 --> 00:01:49,880 Speaker 1: Live in a weird world where like the government does 38 00:01:49,920 --> 00:01:53,520 Speaker 1: a lot of stuff that's illegal, and the courts are like, well, 39 00:01:54,240 --> 00:01:58,480 Speaker 1: this is illegal, but we can't stop you. So I 40 00:01:58,520 --> 00:02:01,240 Speaker 1: don't know. It's very depressing. District Court a while back 41 00:02:01,400 --> 00:02:05,000 Speaker 1: ruled that the broad Trump tariffs are illegal because, as 42 00:02:05,040 --> 00:02:07,400 Speaker 1: I've written a number of times, the US Constitution is 43 00:02:07,440 --> 00:02:10,520 Speaker 1: really clear that Congress has the power to impose taxes. 44 00:02:11,440 --> 00:02:13,960 Speaker 1: Doesn't like, that's like a really core part of the Constitution, 45 00:02:14,480 --> 00:02:18,680 Speaker 1: And so when the president announces swooping new taxes without 46 00:02:18,840 --> 00:02:24,240 Speaker 1: any legislation does seem very illegal, and the court found 47 00:02:24,280 --> 00:02:28,440 Speaker 1: it illegal, and the government appealed, and this week the 48 00:02:28,480 --> 00:02:31,280 Speaker 1: appeals court, the Court for the Federal Circuit, agreed that 49 00:02:31,320 --> 00:02:34,240 Speaker 1: those tariffs remain illegal. And the way it works is that, 50 00:02:34,320 --> 00:02:39,320 Speaker 1: like the government's position is that there's a statute called AEPA, 51 00:02:39,400 --> 00:02:44,760 Speaker 1: the International Emergency Economic Powers Act, Yes, got it, And 52 00:02:44,800 --> 00:02:49,639 Speaker 1: AIPA gives the president some powers to deal with unusual 53 00:02:49,639 --> 00:02:54,400 Speaker 1: and extraordinary threats from abroad by doing any number of things, 54 00:02:54,480 --> 00:03:00,360 Speaker 1: including regulate importation. And the government argued, well, if the 55 00:03:00,400 --> 00:03:03,760 Speaker 1: president can regulate importation, that means he can impose tariffs 56 00:03:03,760 --> 00:03:08,200 Speaker 1: on imports, and because trade deficits are an emergency, he 57 00:03:08,240 --> 00:03:11,760 Speaker 1: can declare an emergency and impose tariffs to stop trade deficits. 58 00:03:12,919 --> 00:03:14,720 Speaker 1: And there are a lot of holes in that argument, 59 00:03:15,320 --> 00:03:18,400 Speaker 1: one of which is that, as the appeals court wrote, 60 00:03:18,720 --> 00:03:22,079 Speaker 1: saying that you can regulate importation does not actually mean 61 00:03:22,280 --> 00:03:24,679 Speaker 1: that you can impose taxes. And as they point out, 62 00:03:25,080 --> 00:03:28,360 Speaker 1: the sec the Securitiest Exchange Commission, has the power to 63 00:03:28,480 --> 00:03:31,520 Speaker 1: regulate financial market activity, but that doesn't give it the 64 00:03:31,520 --> 00:03:35,680 Speaker 1: power to make up new taxes because that's part of 65 00:03:35,720 --> 00:03:38,840 Speaker 1: financial markets. Yeah, Like the sec has regulatory power, but 66 00:03:38,920 --> 00:03:42,520 Speaker 1: not tax inventing power yea. And so similarly here, the 67 00:03:42,520 --> 00:03:45,160 Speaker 1: president doesn't have the power to invent new taxes or 68 00:03:45,200 --> 00:03:47,920 Speaker 1: so the appeals Court held, but it also state its 69 00:03:48,000 --> 00:03:49,760 Speaker 1: ruling because it's kind of got appealed to the Supreme 70 00:03:49,800 --> 00:03:51,400 Speaker 1: Court and nobody knows it'll happen there. 71 00:03:51,680 --> 00:03:54,320 Speaker 2: Yeah, I mean President Trump didcide this week that they're 72 00:03:54,360 --> 00:03:57,240 Speaker 2: going to ask the Supreme Court for an expedited ruling, 73 00:03:57,360 --> 00:03:58,280 Speaker 2: So we'll see. There. 74 00:03:58,560 --> 00:04:02,720 Speaker 1: There's a pretty consistent situation where the president loses in 75 00:04:02,800 --> 00:04:06,280 Speaker 1: lower courts because the lower courts follow a precedent inside 76 00:04:06,320 --> 00:04:08,119 Speaker 1: this is illegal, and then he gets the Supreme Court, 77 00:04:08,120 --> 00:04:10,560 Speaker 1: and the Supreme Court is the more flexible you have precedents, 78 00:04:10,680 --> 00:04:13,200 Speaker 1: so they tend to let him duty once. So we'll see. 79 00:04:13,280 --> 00:04:15,720 Speaker 2: We'll see. Anyway, the scope period this covers most of 80 00:04:15,760 --> 00:04:19,680 Speaker 2: President Trump's tariffs. There are some specific sections that he's 81 00:04:19,839 --> 00:04:22,120 Speaker 2: used which are a little bit more cumbersome. 82 00:04:22,200 --> 00:04:24,800 Speaker 1: Yeah, Congress has a long history of delegating tariff power 83 00:04:24,800 --> 00:04:27,520 Speaker 1: to the president. There are specific statutes doing that, saying, 84 00:04:27,720 --> 00:04:29,919 Speaker 1: you know, for particular industries or for particular reasons you 85 00:04:29,920 --> 00:04:33,240 Speaker 1: can impose tariffs, and usually there's like an administrative process 86 00:04:33,279 --> 00:04:34,839 Speaker 1: where they have to like go through some sort of 87 00:04:35,240 --> 00:04:39,000 Speaker 1: review in fact finding before imposing tariffs. And so the 88 00:04:39,040 --> 00:04:41,360 Speaker 1: Trump administration has done a little of that, and that 89 00:04:41,480 --> 00:04:44,839 Speaker 1: stuff is fine. But most of their tariffs though, you 90 00:04:44,839 --> 00:04:49,480 Speaker 1: know what they call reciprocal tarffs tariffs, but whatever, most 91 00:04:49,480 --> 00:04:52,040 Speaker 1: of that is opposed with no kind of fact finding. 92 00:04:52,080 --> 00:04:56,320 Speaker 1: A review based on AIPA and IEPA pretty clearly doesn't 93 00:04:56,320 --> 00:04:57,719 Speaker 1: give them the power tom post tars. 94 00:04:57,839 --> 00:05:00,880 Speaker 2: Yeah. Yeah, so the terrorists are saying in place. Now, 95 00:05:00,920 --> 00:05:03,400 Speaker 2: we'll see what the Supreme Court does. But it is 96 00:05:03,520 --> 00:05:06,680 Speaker 2: fun to game plan what would happen if the majority 97 00:05:06,680 --> 00:05:08,680 Speaker 2: of the tariffs had to be rolled back. I mean, 98 00:05:08,680 --> 00:05:11,840 Speaker 2: you think about where that would leave the US, first all, 99 00:05:11,839 --> 00:05:14,719 Speaker 2: when it comes to negotiating trade deals, et cetera. Obviously, 100 00:05:14,720 --> 00:05:16,640 Speaker 2: that would put the US in a worse position. 101 00:05:16,480 --> 00:05:18,520 Speaker 1: Sort of, right, I mean, like it depends on what 102 00:05:18,560 --> 00:05:19,640 Speaker 1: you think is worse or better. 103 00:05:20,160 --> 00:05:25,000 Speaker 2: Stick if you can't a stick to. 104 00:05:24,000 --> 00:05:25,800 Speaker 1: Trade like we did, you know, a year. 105 00:05:25,680 --> 00:05:29,680 Speaker 2: Ago, I don't think that that's necessarily the goal of this. 106 00:05:30,960 --> 00:05:34,119 Speaker 2: If they're trying to pursue you know, the world. 107 00:05:34,120 --> 00:05:36,560 Speaker 1: You're trying to pursue no free trade. And by the way, 108 00:05:36,560 --> 00:05:38,520 Speaker 1: like there's still some you know, as you said, there's 109 00:05:38,600 --> 00:05:41,960 Speaker 1: other statutes that I give him some tariffing and frankly 110 00:05:41,960 --> 00:05:45,000 Speaker 1: there's you know, but those are the possibility of going 111 00:05:45,000 --> 00:05:48,440 Speaker 1: to Congress and asking for tarifs, like it's a Republican 112 00:05:48,440 --> 00:05:51,560 Speaker 1: controlled Congress and like you could imagine Trump saying tariffs 113 00:05:51,600 --> 00:05:55,440 Speaker 1: are good and getting Congress to fulfill its constitutional role 114 00:05:55,480 --> 00:05:56,360 Speaker 1: of passing terrors. 115 00:05:56,600 --> 00:05:59,440 Speaker 2: Yeah. The problem that probably the Oval offices with all 116 00:05:59,440 --> 00:06:01,400 Speaker 2: of that is that would just take more time. It's 117 00:06:01,440 --> 00:06:03,520 Speaker 2: not as easy as sending a truth social. 118 00:06:03,240 --> 00:06:06,120 Speaker 1: Posts of course, of course. Yeah, that's the problem that 119 00:06:06,400 --> 00:06:09,000 Speaker 1: the Oval Office is with it. Many people would say 120 00:06:09,320 --> 00:06:11,240 Speaker 1: it's good to have a rule of anyway. 121 00:06:11,320 --> 00:06:13,000 Speaker 2: Anyway, we'll see what the Supreme Court does. 122 00:06:13,120 --> 00:06:15,039 Speaker 1: Yeah, there's a lot of stuff. Like to me, like 123 00:06:15,200 --> 00:06:19,560 Speaker 1: the interesting gaming out what would happen is if they 124 00:06:20,320 --> 00:06:23,279 Speaker 1: agree with the lower courts that the tariffs are illegal, 125 00:06:23,760 --> 00:06:27,200 Speaker 1: does that make them refundable? Because you know they're in 126 00:06:27,200 --> 00:06:29,640 Speaker 1: place now. The government is collecting tens of billions of 127 00:06:29,680 --> 00:06:33,120 Speaker 1: dollars a month from Yeah, lots, you know, lots of 128 00:06:33,160 --> 00:06:33,839 Speaker 1: boats coming. 129 00:06:33,680 --> 00:06:36,160 Speaker 2: In and thirty billion dollars in July. 130 00:06:36,279 --> 00:06:40,039 Speaker 1: Actually, and like what happens if those tariffs are all illegal? 131 00:06:40,160 --> 00:06:41,680 Speaker 1: Do they have to pay them money back? 132 00:06:41,839 --> 00:06:44,680 Speaker 2: Yeah, that's a good question, right, it seems very hard. 133 00:06:44,720 --> 00:06:47,159 Speaker 1: And in fact I read about this on Thursday. There 134 00:06:47,160 --> 00:06:49,080 Speaker 1: are you can go to the prediction markets, you know, 135 00:06:49,200 --> 00:06:53,919 Speaker 1: to Calshier polymarket, and they give odds for the Supreme 136 00:06:53,920 --> 00:06:56,640 Speaker 1: Court upholding the tariffs, and then they're like fifty to fifty, 137 00:06:56,640 --> 00:07:00,040 Speaker 1: which seems right, right Court, But the odds of the 138 00:07:00,080 --> 00:07:02,120 Speaker 1: chans of the tariffs being refunded are lower than that. 139 00:07:02,160 --> 00:07:05,360 Speaker 1: They're lower than fifty to fifty because there's some sense 140 00:07:05,400 --> 00:07:09,960 Speaker 1: that even if the tariffs are illegal, it's like kind 141 00:07:09,960 --> 00:07:13,240 Speaker 1: of hard to unscramble that egg. And yeah, just say okay, 142 00:07:13,320 --> 00:07:15,240 Speaker 1: going forward, no more tariffs, but like you don't have 143 00:07:15,240 --> 00:07:17,200 Speaker 1: to refund them, yeah, if you do have to refund 144 00:07:17,240 --> 00:07:20,080 Speaker 1: them to be one of the really interesting questions is 145 00:07:20,560 --> 00:07:24,400 Speaker 1: if you are an importer who paid tariffs and you 146 00:07:24,480 --> 00:07:27,600 Speaker 1: somehow pass those tariffs along, right, like you charged your 147 00:07:27,640 --> 00:07:30,680 Speaker 1: customers or you like didn't explicitly charge them, but you 148 00:07:30,760 --> 00:07:34,440 Speaker 1: raised prices, Like do you have to refund them if 149 00:07:34,480 --> 00:07:37,320 Speaker 1: you're like just the company that raised prices to consumers 150 00:07:37,320 --> 00:07:39,480 Speaker 1: because of tariffs, and then like you got all the 151 00:07:39,480 --> 00:07:41,680 Speaker 1: tariffs back, Like, are consumer is going to be mad? 152 00:07:41,760 --> 00:07:43,080 Speaker 1: Are you going to have to refund them the money? 153 00:07:43,160 --> 00:07:47,080 Speaker 1: It's like an interesting tariff effect is like it is 154 00:07:47,120 --> 00:07:49,960 Speaker 1: hard to unscramble even if you refund the actual tariffs. 155 00:07:50,080 --> 00:07:53,480 Speaker 2: Yeah, I mean you could say I've already raised my prices, 156 00:07:53,480 --> 00:07:54,800 Speaker 2: I might as well just keep them here. 157 00:07:55,440 --> 00:07:58,040 Speaker 1: Oh yeah, yeah, yeah. 158 00:07:58,120 --> 00:08:01,240 Speaker 2: It is interesting to think about some of that. There 159 00:08:01,280 --> 00:08:03,960 Speaker 2: was an interesting column from former New York Fed President 160 00:08:03,960 --> 00:08:07,160 Speaker 2: Bill Dudley on the Terminal sometime this week saying that, 161 00:08:07,720 --> 00:08:10,080 Speaker 2: you know, if you do game plan out this scenario, 162 00:08:10,200 --> 00:08:13,640 Speaker 2: the tariffstary, illegal, et cetera, what does that mean for companies? 163 00:08:13,680 --> 00:08:16,679 Speaker 2: His view is that companies are going to be slower 164 00:08:16,720 --> 00:08:19,240 Speaker 2: to pass on their cost increases if we do have 165 00:08:19,280 --> 00:08:22,720 Speaker 2: this wildly swinging pendulum. And what that means for the 166 00:08:22,760 --> 00:08:26,880 Speaker 2: Federal Reserve is a fun thought exercise. Is inflation transitory? 167 00:08:27,360 --> 00:08:31,000 Speaker 2: Once again, seems like a difficult environment to make policy in, 168 00:08:31,120 --> 00:08:35,000 Speaker 2: but probably not any more difficult than it is right now. 169 00:08:35,200 --> 00:08:36,839 Speaker 1: I was going to say, there's a really distinct lack 170 00:08:36,840 --> 00:08:39,400 Speaker 1: of clarity on tireffs, both in terms of their legality 171 00:08:39,480 --> 00:08:42,040 Speaker 1: and in terms of what the negotiated rights will be. Yeah, 172 00:08:42,080 --> 00:08:44,360 Speaker 1: and I was going to say that at the Supreme 173 00:08:44,360 --> 00:08:48,120 Speaker 1: Court definitively rules that the AJEPA illegal, then you get 174 00:08:48,160 --> 00:08:50,480 Speaker 1: more clarity. But that's not really true, right, because then 175 00:08:50,480 --> 00:08:52,440 Speaker 1: they go back and use other statutes, and it's like 176 00:08:52,920 --> 00:08:56,520 Speaker 1: it just takes a more drawn out, more complicated process 177 00:08:56,600 --> 00:09:00,800 Speaker 1: with further legal challenges. And yeah, yeah myself, out of 178 00:09:00,800 --> 00:09:02,480 Speaker 1: that sounds it's all pretty grim. 179 00:09:02,600 --> 00:09:05,400 Speaker 2: Yeah, it is pretty grim. It's also grim just for 180 00:09:05,840 --> 00:09:09,480 Speaker 2: the US government and the fiscal outlook sort of well, 181 00:09:09,720 --> 00:09:14,200 Speaker 2: Scott Vesson, Treasury Secretary Scott Besson has projected that tariffs 182 00:09:14,240 --> 00:09:17,120 Speaker 2: are supposed to bring in like five hundred billion dollars 183 00:09:17,200 --> 00:09:20,720 Speaker 2: in a year in annual income. They would have a 184 00:09:20,760 --> 00:09:21,480 Speaker 2: hole there. 185 00:09:21,920 --> 00:09:25,640 Speaker 1: Yeah, But like the US fiscal outlook is a long 186 00:09:25,720 --> 00:09:31,720 Speaker 1: term outlook, and if you think as most economists still 187 00:09:31,760 --> 00:09:36,120 Speaker 1: seem to think that tariffs are bad for the US economy, 188 00:09:36,480 --> 00:09:40,360 Speaker 1: which is a separate from the legality question. But again, 189 00:09:40,400 --> 00:09:43,040 Speaker 1: most economists think that not Scott Bessant, not Donald Trump, 190 00:09:43,080 --> 00:09:46,640 Speaker 1: but most economists think that tariffs are not really helping 191 00:09:46,760 --> 00:09:50,319 Speaker 1: economic growth. If you think that, then getting rid of 192 00:09:50,360 --> 00:09:53,400 Speaker 1: the tariffs is good for fiscal sustainability, right because like 193 00:09:53,440 --> 00:09:56,400 Speaker 1: in the long run, right, like fiscal sustainability is driven 194 00:09:56,440 --> 00:09:59,280 Speaker 1: by like the economist's capacity rather than like the particular 195 00:09:59,360 --> 00:10:00,560 Speaker 1: text rate on. Yeah. 196 00:10:01,440 --> 00:10:04,360 Speaker 2: Just in terms of though bringing down the budget deficit, 197 00:10:05,000 --> 00:10:08,760 Speaker 2: it does hurt there. This was part of the pillars 198 00:10:08,800 --> 00:10:12,200 Speaker 2: that US treasure Secretary Scott Best and put in place, Like, yeah, 199 00:10:12,720 --> 00:10:15,640 Speaker 2: plants have been built around this revenue coming in to 200 00:10:15,720 --> 00:10:18,440 Speaker 2: the government's coffers and taking that out would I don't know. 201 00:10:18,600 --> 00:10:21,320 Speaker 1: Yeah, no, it's it's like super disruptive, yeah, right, Like 202 00:10:21,400 --> 00:10:24,800 Speaker 1: on the one hand, you could imagine a court somewhat 203 00:10:24,840 --> 00:10:28,800 Speaker 1: unconstrained by precedent on law saying it would be so 204 00:10:28,920 --> 00:10:31,480 Speaker 1: disruptive to the government to take away this thirty billion 205 00:10:31,480 --> 00:10:33,920 Speaker 1: dollars a month of revenue source that we're just gonna 206 00:10:34,000 --> 00:10:37,360 Speaker 1: benever backwards not to do it. It really is what 207 00:10:37,400 --> 00:10:40,120 Speaker 1: the constitution says, is said Congress system post taxes, Right, 208 00:10:40,280 --> 00:10:42,360 Speaker 1: it's a really important part of the constitutional structure. And 209 00:10:42,360 --> 00:10:44,680 Speaker 1: it's like, you know, there's hundreds of years of history 210 00:10:44,720 --> 00:10:48,160 Speaker 1: of like kings and executives in wanting to raise taxes, 211 00:10:48,240 --> 00:10:51,439 Speaker 1: and the only constraint on them being the legislature's power 212 00:10:51,640 --> 00:10:55,800 Speaker 1: to raise taxes. And so for the Supreme Court to say, eh, 213 00:10:56,160 --> 00:10:57,840 Speaker 1: it's like too important for the president to be able 214 00:10:57,840 --> 00:11:00,200 Speaker 1: to impost whatever taxes he wants. It's like really a 215 00:11:00,240 --> 00:11:03,480 Speaker 1: shocking change in the constitutional structure. But here we are. 216 00:11:03,640 --> 00:11:05,800 Speaker 2: Maybe the government can make up what they're not making 217 00:11:05,800 --> 00:11:09,520 Speaker 2: a terror revenue from their stakes in US companies. Maybe 218 00:11:09,520 --> 00:11:12,319 Speaker 2: that's the future we're rattling towards. 219 00:11:13,559 --> 00:11:16,040 Speaker 1: How did this get more depressing? It's true that the 220 00:11:16,040 --> 00:11:19,400 Speaker 1: Trump administration has found many new revenue sources, like owning 221 00:11:19,440 --> 00:11:22,560 Speaker 1: ten percent of Intel. This is a real tangent, But like, 222 00:11:22,640 --> 00:11:24,640 Speaker 1: I do think that one model that people have is that, 223 00:11:24,679 --> 00:11:27,040 Speaker 1: like the US government has a twenty percent stake in 224 00:11:27,080 --> 00:11:30,000 Speaker 1: every company because it taxes twenty percent of their earnings. 225 00:11:30,600 --> 00:11:32,600 Speaker 1: If you take an additional ten percent stake and Intel, 226 00:11:32,640 --> 00:11:35,080 Speaker 1: then that's like kind of an additional tax, but whatever, 227 00:11:35,559 --> 00:11:38,720 Speaker 1: that's not really a tax. It's fine, but right. I mean, 228 00:11:38,760 --> 00:11:43,320 Speaker 1: the other like truly novel revenue source that the Trump 229 00:11:43,360 --> 00:11:47,000 Speaker 1: administration has found, not for the government but for Trump 230 00:11:47,040 --> 00:11:51,760 Speaker 1: personally is cryptos shitandingg it and like you could probably 231 00:11:51,800 --> 00:11:54,480 Speaker 1: make thirty billion dollars a month telling US government crypto 232 00:11:54,679 --> 00:11:55,120 Speaker 1: that's true. 233 00:11:55,160 --> 00:11:57,800 Speaker 2: I thought you were gonna bring up the revenue share 234 00:11:58,000 --> 00:12:01,319 Speaker 2: that has been floated with AMD in video, but that's 235 00:12:01,400 --> 00:12:04,680 Speaker 2: you know, the crypto she innigans is probably a much 236 00:12:04,679 --> 00:12:07,040 Speaker 2: more short thing. I don't think that the Trump family 237 00:12:07,120 --> 00:12:07,520 Speaker 2: is giving that. 238 00:12:07,679 --> 00:12:10,240 Speaker 1: You like Intel and AMD and video. 239 00:12:10,240 --> 00:12:12,960 Speaker 2: It's like we talked about this on the podcast. 240 00:12:13,120 --> 00:12:14,600 Speaker 1: I don't write about it. It's not that fun. But 241 00:12:14,640 --> 00:12:17,760 Speaker 1: like these are all like voluntary taxating. They're like voluntary taxes, right, 242 00:12:17,760 --> 00:12:19,640 Speaker 1: they're like, yeah, Talald Trump goes to like in video 243 00:12:19,640 --> 00:12:21,559 Speaker 1: and it's like, hey, you give you ten percent of 244 00:12:21,559 --> 00:12:26,839 Speaker 1: your revenue? No, And they're like yes, no, well no 245 00:12:26,960 --> 00:12:29,079 Speaker 1: they I mean right, like they're thinking, no, I don't 246 00:12:29,120 --> 00:12:31,480 Speaker 1: want to give you ten percent of my revenue. But like, yeah, 247 00:12:31,640 --> 00:12:35,120 Speaker 1: you know there's like a certain like nice chip company here, 248 00:12:35,440 --> 00:12:37,640 Speaker 1: anything were to happen to it, right, Like if you 249 00:12:37,720 --> 00:12:40,480 Speaker 1: replaced the tariffs of voluntary tariffs, like how much revenue 250 00:12:40,480 --> 00:12:44,439 Speaker 1: would you collect? Like not none? Yeah, it's like voluntary 251 00:12:44,600 --> 00:12:45,520 Speaker 1: like nudge nudge. 252 00:12:45,679 --> 00:12:49,600 Speaker 2: I don't know enough about a MD's situation to pine 253 00:12:49,600 --> 00:12:52,840 Speaker 2: on it too confidently, but at least in video Bloomberg 254 00:12:52,880 --> 00:12:56,680 Speaker 2: had an interview with Invidia CFO last week, and she 255 00:12:56,760 --> 00:12:59,800 Speaker 2: said something along the lines of, I haven't seen anything, 256 00:12:59,800 --> 00:13:03,040 Speaker 2: I haven't signed anything. We're not giving up fifteen percent 257 00:13:03,080 --> 00:13:10,000 Speaker 2: of our Chinese chip revenue yet, so I might be editorializing. 258 00:13:10,040 --> 00:13:12,000 Speaker 2: I don't know if she said it with that much passion. 259 00:13:14,000 --> 00:13:15,359 Speaker 1: Happened to that Chinee. 260 00:13:16,360 --> 00:13:20,640 Speaker 2: Well, I don't know even if Chinese companies are going 261 00:13:20,679 --> 00:13:22,720 Speaker 2: to be able to continue buying it. Apparently the Chinese 262 00:13:22,760 --> 00:13:27,280 Speaker 2: government reportedly has encouraged companies not to buy American chips. 263 00:13:27,400 --> 00:13:45,640 Speaker 2: But anyway, Charlie move long, what tickles your fancy to 264 00:13:45,679 --> 00:13:51,320 Speaker 2: talk about? Second? This week my old haunts Coldman Goldman. 265 00:13:51,920 --> 00:13:53,720 Speaker 2: I am excited to talk about this. This is a 266 00:13:53,720 --> 00:13:54,200 Speaker 2: weird one. 267 00:13:54,400 --> 00:13:57,120 Speaker 1: Yeah, it's sort of. It's not that way, it's like 268 00:13:57,200 --> 00:13:59,920 Speaker 1: it seems weird. It's weird in detail, but like effectively, 269 00:14:01,000 --> 00:14:04,400 Speaker 1: every week on this podcast we talk about some sort 270 00:14:04,440 --> 00:14:07,440 Speaker 1: of deal where a big traditional asset manager is buying 271 00:14:07,679 --> 00:14:09,840 Speaker 1: like an alterative asset manager, like a private markets are 272 00:14:09,880 --> 00:14:12,520 Speaker 1: just partnering, or a private manager is buying a traditional 273 00:14:12,520 --> 00:14:15,120 Speaker 1: manager or a private manager and a traditional manager or 274 00:14:15,160 --> 00:14:17,880 Speaker 1: partnering to do like an ETF or whatever. And this 275 00:14:18,000 --> 00:14:22,400 Speaker 1: week it is Goldman partnering with Tierro Price and no 276 00:14:22,400 --> 00:14:25,800 Speaker 1: one's buying each other. Golden's buying a little too. Yeah, 277 00:14:25,920 --> 00:14:28,360 Speaker 1: they're buying a billion dollars of Tiro in the inn 278 00:14:28,400 --> 00:14:29,000 Speaker 1: open market. 279 00:14:29,120 --> 00:14:31,280 Speaker 2: To be clear, The weird part, at least from where 280 00:14:31,280 --> 00:14:33,360 Speaker 2: I'm sitting, is that Goldman will make a series of 281 00:14:33,360 --> 00:14:36,200 Speaker 2: open market purchases to a mass up to three point 282 00:14:36,240 --> 00:14:38,520 Speaker 2: five percent of TIRO stock. That's as much as one 283 00:14:38,560 --> 00:14:41,480 Speaker 2: billion dollars. That would make them, I think, one of 284 00:14:41,480 --> 00:14:44,440 Speaker 2: the top five biggest shareholders in Tiro. Why do they 285 00:14:44,440 --> 00:14:45,880 Speaker 2: have to go through all that? Why can't they just 286 00:14:45,920 --> 00:14:48,760 Speaker 2: do a little jv A partnership. 287 00:14:48,960 --> 00:14:51,800 Speaker 1: I don't know. We are in a moment where there's 288 00:14:51,800 --> 00:14:55,280 Speaker 1: a lot of momentum behind alts managers by alts managers, 289 00:14:55,320 --> 00:14:59,760 Speaker 1: I mean, you know KKR, Apollo, you know Blackstone. But also, 290 00:15:00,040 --> 00:15:01,280 Speaker 1: and I think we've talked about this on the pod 291 00:15:01,280 --> 00:15:03,640 Speaker 1: and I've certainly written about it, like Goldman is very much, 292 00:15:03,720 --> 00:15:05,120 Speaker 1: very much wants to be an altimage. 293 00:15:05,200 --> 00:15:06,720 Speaker 2: We've talked about it, and you know. 294 00:15:07,080 --> 00:15:10,560 Speaker 1: Look it is right, it like it runs alternative assets fun, 295 00:15:10,640 --> 00:15:12,640 Speaker 1: you know, it manages assets well. 296 00:15:12,560 --> 00:15:16,480 Speaker 2: Didn't it use that to justify the pay packages for 297 00:15:16,640 --> 00:15:17,920 Speaker 2: David Suleman and John Waldron. 298 00:15:18,320 --> 00:15:21,200 Speaker 1: Like, Goldman is an investment bank and it's also it 299 00:15:21,240 --> 00:15:24,160 Speaker 1: manages a lot of money for institutions that it invests 300 00:15:24,200 --> 00:15:27,120 Speaker 1: in alternative assets, and it's been a big business for 301 00:15:27,160 --> 00:15:29,280 Speaker 1: a long time. So it's not quite the same as 302 00:15:29,320 --> 00:15:31,040 Speaker 1: like KKR, but it's you know, it's like they think 303 00:15:31,040 --> 00:15:31,400 Speaker 1: that they can. 304 00:15:31,640 --> 00:15:33,200 Speaker 2: Well I was going to ask who is the alts 305 00:15:33,240 --> 00:15:34,600 Speaker 2: manager in this scenario? 306 00:15:35,680 --> 00:15:38,680 Speaker 1: And it's funny, right because like Tiro actually owns a 307 00:15:38,720 --> 00:15:41,720 Speaker 1: private credit manager. Yeah. Cool, But if you read the 308 00:15:41,720 --> 00:15:44,080 Speaker 1: press release in this deal, it's like it kind of 309 00:15:44,160 --> 00:15:50,280 Speaker 1: says we're bringing goldbn's ALTS assets to Tiro's retail and 310 00:15:50,320 --> 00:15:53,720 Speaker 1: retirement distribution. And then Okayill is like we're here too, 311 00:15:55,520 --> 00:15:57,880 Speaker 1: because I think how I read that? But right, so 312 00:15:57,920 --> 00:15:59,520 Speaker 1: Goldman is I think the alts manager here, and that 313 00:15:59,600 --> 00:16:01,840 Speaker 1: they do you know, they raise a lot of money 314 00:16:01,880 --> 00:16:04,280 Speaker 1: to invest in alts and you know they do that 315 00:16:04,320 --> 00:16:07,440 Speaker 1: from institutions and they do that from their private wealth clients. Yeah. 316 00:16:07,240 --> 00:16:11,400 Speaker 1: The story and private credit and private equity these days 317 00:16:11,520 --> 00:16:16,280 Speaker 1: is like trying to find like true retail distribution, trying 318 00:16:16,280 --> 00:16:19,200 Speaker 1: to sell through financial advisors and in particularly trying to 319 00:16:19,200 --> 00:16:21,920 Speaker 1: sell to fore own K plans. Yeah, And Tiro has 320 00:16:21,960 --> 00:16:24,280 Speaker 1: a lot of furrow and K business, and like they 321 00:16:24,280 --> 00:16:27,080 Speaker 1: do target dated funds for own case, right, And if 322 00:16:27,080 --> 00:16:29,400 Speaker 1: you can put private assets into target date funds, like 323 00:16:29,400 --> 00:16:31,840 Speaker 1: that's a no brainer, right, It's like it's exactly the 324 00:16:31,880 --> 00:16:37,520 Speaker 1: liquidity profile you want and you're selling alts assets to 325 00:16:37,680 --> 00:16:40,800 Speaker 1: your giant pool of retirement savers. Yeah. I mean Tiro 326 00:16:40,920 --> 00:16:43,680 Speaker 1: is like very much classic Like, Okay, they have some alts, 327 00:16:43,720 --> 00:16:49,480 Speaker 1: but like they're very much a classic traditional long only 328 00:16:49,520 --> 00:16:52,960 Speaker 1: activity manage mutual fund manager. And that is a tough business, right, 329 00:16:53,040 --> 00:16:55,560 Speaker 1: I mean the Bloomberg article about this tie up mentions 330 00:16:55,560 --> 00:16:57,560 Speaker 1: that Tiro has had like two hundred billion dollars of 331 00:16:57,640 --> 00:17:00,600 Speaker 1: client outflows. Yeah, their stock is down fifty from where 332 00:17:00,600 --> 00:17:02,920 Speaker 1: it wasn't twenty twenty one. It's a tough business to 333 00:17:02,960 --> 00:17:05,320 Speaker 1: beg in. And you know everyone in that business is 334 00:17:05,359 --> 00:17:07,080 Speaker 1: like looking around and me like, how can we get 335 00:17:07,119 --> 00:17:08,600 Speaker 1: into privates because the fees are better? 336 00:17:08,840 --> 00:17:12,080 Speaker 2: Yeah, Well that's the thing. I guess. I'm surprised that 337 00:17:12,160 --> 00:17:16,000 Speaker 2: this search led them to Tiro, which isn't entirely fair. 338 00:17:16,040 --> 00:17:18,840 Speaker 2: The Bloomberg News article does also point out that two 339 00:17:18,960 --> 00:17:21,320 Speaker 2: thirds of Tiro's assets are in retirement funds. They're one 340 00:17:21,320 --> 00:17:23,840 Speaker 2: of the largest firms in that part of the market. 341 00:17:23,920 --> 00:17:27,560 Speaker 1: Everyone in privates wants retail distribution. This gets back to 342 00:17:27,600 --> 00:17:30,200 Speaker 1: your question about why do they have to buy three 343 00:17:30,240 --> 00:17:30,640 Speaker 1: point five? 344 00:17:30,880 --> 00:17:33,280 Speaker 2: Yeah, is it just because the stock was on sale? 345 00:17:33,400 --> 00:17:35,200 Speaker 1: To your point, I think it's the stock was on self. 346 00:17:35,240 --> 00:17:37,160 Speaker 1: But I think a lot of it is like if 347 00:17:37,160 --> 00:17:40,400 Speaker 1: you're Tiro, you know, you're like every alt manager wants 348 00:17:40,400 --> 00:17:43,520 Speaker 1: to distribute through every four O, one K channel, and 349 00:17:44,119 --> 00:17:48,119 Speaker 1: we want a real partnership with Goldlan rather than just 350 00:17:48,200 --> 00:17:53,440 Speaker 1: like letting them stuff their funds into our clients. Right, 351 00:17:54,040 --> 00:17:56,440 Speaker 1: And what does a real partnership mean. Well, I think 352 00:17:56,480 --> 00:18:00,720 Speaker 1: it means like giving Golden some incentive of to have, 353 00:18:01,080 --> 00:18:03,200 Speaker 1: you know, some upside in Tiro stock, so that Golvin 354 00:18:03,200 --> 00:18:04,480 Speaker 1: has some incentives. 355 00:18:03,960 --> 00:18:05,440 Speaker 2: To actually skin in the game. 356 00:18:05,640 --> 00:18:09,199 Speaker 1: Yeah. Actually, you know, not just like used to as 357 00:18:09,200 --> 00:18:11,000 Speaker 1: a dumping ground for its products, but like try to 358 00:18:11,040 --> 00:18:12,320 Speaker 1: you know, be a real partnership. 359 00:18:12,480 --> 00:18:12,680 Speaker 2: Yeah. 360 00:18:12,680 --> 00:18:14,200 Speaker 1: I think that's like it makes sense to say you 361 00:18:14,200 --> 00:18:15,040 Speaker 1: should buy some stock. 362 00:18:15,240 --> 00:18:18,280 Speaker 2: Yeah. It is interesting because I mean you think about 363 00:18:18,280 --> 00:18:20,320 Speaker 2: some of the other partnerships that we've talked about on 364 00:18:20,359 --> 00:18:24,040 Speaker 2: this show. You have Vanguard and Wellington with Blackstone that's 365 00:18:24,240 --> 00:18:28,000 Speaker 2: just partnering on fun. State Street has partnered with Apollo. 366 00:18:28,800 --> 00:18:30,960 Speaker 1: Like Van Garden. State Street are not in the same 367 00:18:31,000 --> 00:18:37,120 Speaker 1: position as like the traditional active management firms Wellington. Well, yeah, 368 00:18:38,600 --> 00:18:42,199 Speaker 1: come on, I was saying, yeah, yeah, right, I mean, 369 00:18:42,240 --> 00:18:44,760 Speaker 1: like I think of it as like the investment world 370 00:18:45,000 --> 00:18:48,439 Speaker 1: now is like focused on alts and index ones, and 371 00:18:48,760 --> 00:18:51,920 Speaker 1: if you're a traditional active manager, it's really hard. And 372 00:18:52,000 --> 00:18:54,399 Speaker 1: so you can get into indexing, but that's like you 373 00:18:54,440 --> 00:18:56,320 Speaker 1: know that stuff, isn't it get into Yeah, and so 374 00:18:56,440 --> 00:18:57,919 Speaker 1: you get into get adults. 375 00:18:58,000 --> 00:19:01,399 Speaker 2: Yeah, I'm interested to see how this turns out, to 376 00:19:01,400 --> 00:19:02,879 Speaker 2: see this sort of transaction to. 377 00:19:03,359 --> 00:19:20,280 Speaker 1: Call my eye, deal contingent hedges. 378 00:19:20,920 --> 00:19:23,400 Speaker 2: Are we only talking about currency hudges here? 379 00:19:23,680 --> 00:19:25,639 Speaker 1: You can do deal contingent rates hudges? 380 00:19:25,800 --> 00:19:29,320 Speaker 2: Okay, yeah, spiritually similar, It's possible. 381 00:19:28,880 --> 00:19:31,480 Speaker 1: That someone somewhere has done a deal contingent oil hedge. 382 00:19:32,960 --> 00:19:37,360 Speaker 1: Yeah maybe, yeah, but no, I mean it's mostly currency 383 00:19:37,520 --> 00:19:40,040 Speaker 1: and occasionally rate. So like you're a company, you're buying 384 00:19:40,040 --> 00:19:40,760 Speaker 1: another company. 385 00:19:40,840 --> 00:19:41,920 Speaker 2: I'm a business man. 386 00:19:43,280 --> 00:19:45,800 Speaker 1: You buy another company, you sign a deal to buy 387 00:19:45,800 --> 00:19:48,880 Speaker 1: the company, and it's closing in like six months, and 388 00:19:49,240 --> 00:19:50,879 Speaker 1: if it's in a foreign country, you might have to 389 00:19:51,000 --> 00:19:52,480 Speaker 1: get a lot of foreign currency and you want to 390 00:19:52,480 --> 00:19:54,440 Speaker 1: lock in your currency rate today, but if the deal 391 00:19:54,440 --> 00:19:58,280 Speaker 1: doesn't close, you don't want to have liability for that currency. 392 00:19:58,480 --> 00:20:00,879 Speaker 1: Similarly like you might lock in your bar in cost today, right, 393 00:20:00,920 --> 00:20:04,440 Speaker 1: like you might hedge with treasuries to hadge your you know, 394 00:20:04,680 --> 00:20:07,639 Speaker 1: interest rates in some months, but if the deal doesn't closed, 395 00:20:07,640 --> 00:20:09,879 Speaker 1: you don't need that interest rate hedge anymore. And so 396 00:20:10,160 --> 00:20:12,639 Speaker 1: there's a long time banking product of deal contingent hedges 397 00:20:12,640 --> 00:20:14,399 Speaker 1: where you go to your investment bank that did the 398 00:20:14,440 --> 00:20:16,600 Speaker 1: merger for you and you say, I would like to 399 00:20:17,080 --> 00:20:19,439 Speaker 1: hedge my currency risk or my rates risk or whatever, 400 00:20:19,920 --> 00:20:22,320 Speaker 1: but I want to lock in my rates today, and 401 00:20:22,359 --> 00:20:24,480 Speaker 1: if the deal doesn't close, I want to tear up 402 00:20:24,520 --> 00:20:26,560 Speaker 1: the contract to not owe you anything, right, and for 403 00:20:26,600 --> 00:20:31,040 Speaker 1: some price, the bank will do that. And historically this 404 00:20:31,200 --> 00:20:33,719 Speaker 1: was like what banks did, right. Banks had big balance sheets, 405 00:20:34,080 --> 00:20:38,560 Speaker 1: and they were good at pricing complicated risks, and they 406 00:20:38,560 --> 00:20:41,680 Speaker 1: were in a client service business, so you know, as 407 00:20:41,720 --> 00:20:44,120 Speaker 1: their merger client, if you wanted that sort of hedge, 408 00:20:44,119 --> 00:20:45,760 Speaker 1: that was a nice thing for them to sell you, right, 409 00:20:46,000 --> 00:20:49,639 Speaker 1: help them win merger business. And it's also very risky 410 00:20:49,840 --> 00:20:51,919 Speaker 1: because like it's easy to do a foreign currency hedge right, 411 00:20:51,920 --> 00:20:54,040 Speaker 1: like you you know, just buy the right delta in 412 00:20:54,080 --> 00:20:54,560 Speaker 1: the spot link. 413 00:20:54,560 --> 00:20:55,800 Speaker 2: I could do that right now, right. 414 00:20:56,080 --> 00:20:59,479 Speaker 1: But like a foreign currency hedge that is torn up 415 00:20:59,520 --> 00:21:01,840 Speaker 1: when a deal falls apart is very difficult to hedge. 416 00:21:02,080 --> 00:21:04,479 Speaker 1: And banks sometimes get it wrong or get surprised by 417 00:21:04,480 --> 00:21:06,639 Speaker 1: deals falling apart and lose you one hundred million dollars 418 00:21:06,640 --> 00:21:09,520 Speaker 1: on a deal. And so there've been a series of 419 00:21:09,760 --> 00:21:13,440 Speaker 1: IFI articles, like International Financing Review articles about how hedge 420 00:21:13,440 --> 00:21:17,560 Speaker 1: funds are getting into the deal contention hedge business, where 421 00:21:18,119 --> 00:21:19,600 Speaker 1: you know, there's an article last year that I read 422 00:21:19,600 --> 00:21:23,400 Speaker 1: about where basically a number of banks will do these 423 00:21:23,440 --> 00:21:25,119 Speaker 1: deals with their clients, like they'll do a deal with 424 00:21:25,119 --> 00:21:27,360 Speaker 1: a corporate client saying, well, you know, hedge your foreign 425 00:21:27,400 --> 00:21:30,440 Speaker 1: currency risk and tear it up if the deal falls apart, 426 00:21:30,600 --> 00:21:32,840 Speaker 1: and then they'll go to a big hedge fund and 427 00:21:32,880 --> 00:21:35,320 Speaker 1: buy the offsetting trade, and the hedge fund will price 428 00:21:35,359 --> 00:21:37,760 Speaker 1: the merger risk and give them the trade, and the 429 00:21:37,760 --> 00:21:39,760 Speaker 1: bank will collect a little fee for setting up the deal, 430 00:21:40,040 --> 00:21:42,040 Speaker 1: but the hedge fund will take the risk. Right, And 431 00:21:42,119 --> 00:21:43,960 Speaker 1: I thought of this is like an interesting story about 432 00:21:43,960 --> 00:21:47,399 Speaker 1: how like banks don't have the risk appetite and balance 433 00:21:47,440 --> 00:21:49,359 Speaker 1: sheet that they used to, and like the big hedge 434 00:21:49,359 --> 00:21:55,399 Speaker 1: funds are becoming that the source of risk capital. But 435 00:21:55,480 --> 00:21:58,320 Speaker 1: then this last month there's an IFI article about how 436 00:21:58,760 --> 00:22:00,960 Speaker 1: the hedge funds are taking the next logical step and 437 00:22:01,040 --> 00:22:03,639 Speaker 1: just going directly to the clients and saying, hey, we'll 438 00:22:03,680 --> 00:22:04,879 Speaker 1: do the hedge for you. You don't need to go to 439 00:22:04,880 --> 00:22:05,439 Speaker 1: your bank at all. 440 00:22:05,640 --> 00:22:06,000 Speaker 2: Yeah. 441 00:22:06,080 --> 00:22:07,879 Speaker 1: One, then that's interesting. You know, when I was a banker, 442 00:22:08,000 --> 00:22:11,960 Speaker 1: like I thought of like bankers as covering companies, large 443 00:22:12,000 --> 00:22:18,919 Speaker 1: corporate right, I did deals, But increasingly the main client 444 00:22:18,960 --> 00:22:21,960 Speaker 1: of investment banking is private equity, right, Like a lot 445 00:22:21,960 --> 00:22:24,320 Speaker 1: of deals are done by private equity, and so particularly 446 00:22:24,359 --> 00:22:27,000 Speaker 1: deal contentionent hedges. It's a lot of private equity firms 447 00:22:27,000 --> 00:22:30,040 Speaker 1: saying we're going to buy this foreign company, the deal's 448 00:22:30,040 --> 00:22:31,600 Speaker 1: going to close in sixty nine months, we want to 449 00:22:31,560 --> 00:22:34,360 Speaker 1: have your currency arrest today, and we're interested in structure, 450 00:22:34,400 --> 00:22:37,200 Speaker 1: so we're happy to do a deal contentionent hedge. And 451 00:22:37,480 --> 00:22:39,480 Speaker 1: the good and bad thing with private equity firms as 452 00:22:39,520 --> 00:22:42,119 Speaker 1: a client for a bank is like there's like twelve 453 00:22:42,119 --> 00:22:43,720 Speaker 1: of them and stuff of thousands. 454 00:22:43,960 --> 00:22:44,160 Speaker 2: Yeah. 455 00:22:44,160 --> 00:22:48,280 Speaker 1: And so if you're a hedge fund and banks are 456 00:22:48,280 --> 00:22:50,879 Speaker 1: constantly coming to you to do deal contentionent hedges and 457 00:22:50,920 --> 00:22:52,920 Speaker 1: they're all for like three private equity firms, You're like, 458 00:22:52,920 --> 00:22:54,639 Speaker 1: why do not I just call those three private equity 459 00:22:54,640 --> 00:22:57,040 Speaker 1: firms myself? Why do I need the bank at all? Right? Like, 460 00:22:57,280 --> 00:23:00,320 Speaker 1: if banks have thousands of corporate clients, like they're client 461 00:23:00,400 --> 00:23:04,040 Speaker 1: relationships are important and hard to replicate, right, HAG fund 462 00:23:04,080 --> 00:23:05,600 Speaker 1: is not going to get into that business. But if 463 00:23:05,600 --> 00:23:08,120 Speaker 1: they have like twelve private equity clients, you could do that. 464 00:23:08,280 --> 00:23:09,320 Speaker 1: You can cover twelve. 465 00:23:09,680 --> 00:23:13,040 Speaker 2: My first thought reading this was wouldn't it be inefficient to, 466 00:23:13,280 --> 00:23:14,960 Speaker 2: you know, try to take a guess of which of 467 00:23:15,000 --> 00:23:19,240 Speaker 2: the private equity clients are bound to do cross border deal? 468 00:23:19,400 --> 00:23:21,680 Speaker 1: But putting it like you no, right, because like they've 469 00:23:21,680 --> 00:23:23,679 Speaker 1: done the deals right, Like yeah, Like, if you do 470 00:23:23,760 --> 00:23:26,400 Speaker 1: a deal contingent heads like regardless of whether the bank 471 00:23:26,440 --> 00:23:27,960 Speaker 1: tells you who's on the other side of it, like 472 00:23:28,440 --> 00:23:30,760 Speaker 1: it's continuent on a particular merger, so you can tell 473 00:23:30,760 --> 00:23:32,800 Speaker 1: who's doing the merger, right, Yeah, And if you do 474 00:23:32,840 --> 00:23:35,000 Speaker 1: three deals for one private equity firm, You're like, hey, 475 00:23:35,640 --> 00:23:36,800 Speaker 1: I should get to know that. 476 00:23:37,119 --> 00:23:40,919 Speaker 2: Yeah, so I understand I can put myself in the 477 00:23:40,920 --> 00:23:42,800 Speaker 2: shoes of the banks being upset about this. I can 478 00:23:42,840 --> 00:23:44,840 Speaker 2: put myself in the shoes of the hedge funds who 479 00:23:44,840 --> 00:23:47,280 Speaker 2: are doing this. But I think it's also interesting to 480 00:23:47,320 --> 00:23:50,400 Speaker 2: think about the private equity firms. And the article does 481 00:23:50,440 --> 00:23:53,280 Speaker 2: ask the question should it really matter to the client 482 00:23:53,640 --> 00:23:57,479 Speaker 2: who is the back ends? And it raises good points 483 00:23:57,520 --> 00:24:00,480 Speaker 2: that you know, you could get worried about the possibility 484 00:24:00,560 --> 00:24:03,520 Speaker 2: of leaks surrounding M and A. There's potential conflicts of 485 00:24:03,560 --> 00:24:06,440 Speaker 2: interest here. It'd be interesting to hear from the perspective 486 00:24:06,520 --> 00:24:08,560 Speaker 2: of the private equity clients how they feel about this. 487 00:24:09,119 --> 00:24:10,879 Speaker 1: Yeah. I always assume you could do these hedges the 488 00:24:10,960 --> 00:24:12,760 Speaker 1: day after you sign the deal rather than the day before. 489 00:24:12,880 --> 00:24:15,120 Speaker 1: Maybe that's wrong, but like if you do the day after, 490 00:24:15,160 --> 00:24:17,160 Speaker 1: you don't have to car about leaks. Yeah, I guess 491 00:24:17,160 --> 00:24:19,240 Speaker 1: you'd worry about credit. Like the nice thing of doing 492 00:24:19,320 --> 00:24:21,360 Speaker 1: this trade with like a big bank is like you're 493 00:24:21,359 --> 00:24:23,920 Speaker 1: facing the big bank and they probably went to Faull, 494 00:24:23,960 --> 00:24:25,520 Speaker 1: Whereas if you're facing a hedge fund, you. 495 00:24:25,480 --> 00:24:28,120 Speaker 2: Have to have some counterparty, yes. 496 00:24:28,480 --> 00:24:31,280 Speaker 1: Some diligence on how well the hedge fund is, But 497 00:24:31,400 --> 00:24:34,000 Speaker 1: I don't know. If I were a big private equity firm, 498 00:24:34,160 --> 00:24:36,880 Speaker 1: I would find it cool to like diversify my pool 499 00:24:36,880 --> 00:24:39,640 Speaker 1: of counterparties and like decent deals with DJA or whatever 500 00:24:39,680 --> 00:24:41,720 Speaker 1: instead of with a bank. Yeah. 501 00:24:41,760 --> 00:24:44,680 Speaker 2: Well that's actually all I have to say. I guess 502 00:24:44,680 --> 00:24:46,800 Speaker 2: there's more deals happening, so this will. 503 00:24:47,160 --> 00:24:48,879 Speaker 1: I always thought this is like a really niche, like 504 00:24:49,000 --> 00:24:52,000 Speaker 1: unusual business, and now it's like a thing. It's weird, 505 00:24:52,080 --> 00:24:54,720 Speaker 1: but uh, yeah, the smart deal's happening. Yeah, sort of. 506 00:24:54,760 --> 00:24:58,520 Speaker 1: There's no private equity actual acquisition, so that's true. 507 00:24:58,880 --> 00:25:01,840 Speaker 2: Though apparently August was the best month for deal making 508 00:25:01,920 --> 00:25:04,080 Speaker 2: since twenty twenty one or something along those lines. 509 00:25:04,200 --> 00:25:06,800 Speaker 1: Yeah, good news, we're back. 510 00:25:07,280 --> 00:25:07,960 Speaker 2: We're back. 511 00:25:11,600 --> 00:25:13,080 Speaker 1: And that was the Money Stuff Podcast. 512 00:25:13,200 --> 00:25:15,200 Speaker 2: I'm Matt Levian and I'm Katie Greifeld. 513 00:25:15,560 --> 00:25:17,640 Speaker 1: You can find my work by subscribing to the Money 514 00:25:17,640 --> 00:25:20,359 Speaker 1: Stuff newsletter on Bloomberg dot com, and. 515 00:25:20,280 --> 00:25:22,639 Speaker 2: You can find me on Bloomberg TV every day on 516 00:25:22,680 --> 00:25:25,560 Speaker 2: the close between three and five pm Eastern. 517 00:25:26,000 --> 00:25:27,719 Speaker 1: We'd love to hear from you. 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