Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Let's get go in here.
Speaker 1: Enough chit chat, let's go.
Speaker 2: We're on the cloth a right, I have so much
Speaker 2: more chit chat. Hello, and welcome to The Money Stuff Podcast,
Speaker 2: your weekly podcast where we talk about stuff related to money.
Speaker 2: I'm Matt Levine and I write the Money Stuff column
Speaker 2: for Bloomberg Opinion.
Speaker 1: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 1: an anchor for Bloomberg Television.
Speaker 2: Katie, it's good to be back putting out this week.
Speaker 1: I'm so excited to see you in person, not pixelated.
Speaker 1: We're talking about short sellers, We're talking about Bill Lackman.
Speaker 1: We're also talking about drama at the Bureau of Labor Statistics.
Speaker 2: Dramas maybe a generous term for it. Drama, Yeah, drama,
Speaker 2: drama scan, dramatic intrigues, short.
Speaker 1: Sellers, short sellers. I have to say, so the way
Speaker 1: that I prepare for this podcast, and we can cut
Speaker 1: this if it's boring. I listened to it text to speech.
Speaker 1: I put your columns in text to speech and then
Speaker 1: this robot voice spits them out. And so I was
Speaker 1: listening to activist shorts can still have fun and that
Speaker 1: legal disclaimer from Carrysdale Capital, And I was so confused
Speaker 1: because I was like, did Matt write this? It kind
Speaker 1: of read like you wrote it, just the tone of
Speaker 1: this legal disclaimer.
Speaker 2: You know, I have not taken any steps to confirm this,
Speaker 2: but I did feel a little bit like this disclaimer
Speaker 2: was somewhat influenced by money stuff.
Speaker 1: It was like a column, So let me take a
Speaker 1: step back, okay, carrysale, right, let me take a further
Speaker 1: step back. Okay, for sure.
Speaker 2: Andrew left Active a short. Tried about him on the
Speaker 2: podcast a while back. He was charged criminally with like
Speaker 2: doing securities ride because he was a short. Look, he
Speaker 2: would short a stock. You would publish a report saying
Speaker 2: the stock is bad, it'll go down, and then the
Speaker 2: stock would go down because people would read the report.
Speaker 2: And then he would buy back the stock he had shorted.
Speaker 2: He would cover his short, and he make a profit.
Speaker 2: And the sec and the Department of Justice didn't like
Speaker 2: this because they thought that he was sort of deceiving
Speaker 2: investors because he would say, oh, I'm sure that stock
Speaker 2: is going to zero, and then the stock would go
Speaker 2: down ten percent. He'd buy back his short. It was like, oh,
Speaker 2: he's not really conveying his true opinion because he's buying back.
Speaker 2: He's just trying to manipulate the market. He's not trying
Speaker 2: to make money by finding companies that are really going
Speaker 2: to zero. He's trying to make money by convincing other
Speaker 2: people to sell the stock and then he's going to
Speaker 2: buy back for them. It's like a reverse pumpit dump.
Speaker 2: A lot of people think this is kind of a
Speaker 2: wild theory because it's not like he's obligated to keep
Speaker 2: his short on until the company goes to zero, right,
Speaker 2: and his reports, you don't have disclaimers that are like
Speaker 2: we can trade on the security is at any time,
Speaker 2: no promises, right. But you know, there's like some bad
Speaker 2: facts and like there's some bad emails that sort of
Speaker 2: suggest that maybe he did overly enjoy his influence over
Speaker 2: retail traders. And there are a couple cases where like
Speaker 2: you would go on TV and they'd say have you
Speaker 2: covered your short and its say like no, not really,
Speaker 2: and then like they argue he had. So that's the
Speaker 2: Andrew Left story. I think that when he was arrested
Speaker 2: that kind of like cast a Paul over the activist
Speaker 2: short community because everyone who does this, who like shorts
Speaker 2: a stock and then publishes a negative report about it.
Speaker 2: They all have disclaimers of the back saying we reserve
Speaker 2: the right to buy back at any time. And I
Speaker 2: think my impression is that the business model has always
Speaker 2: involved a certain amount of that of covering. Right. If
Speaker 2: you do a really good job in the report and
Speaker 2: the stock goes down twenty percent on the first day,
Speaker 2: you will be tempted to say, well, I'm going to
Speaker 2: take some risk off, right. I did my job. I
Speaker 2: want to get paid for it now. Maybe this company
Speaker 2: will go to zero in a year, but I don't
Speaker 2: want to lock up all my capitol. I don't take
Speaker 2: that risk. I'm going to take some money off now.
Speaker 2: And so I think that when the SEC brought this
Speaker 2: case against Left, that was sort of scary to a
Speaker 2: lot of these short sellers. And so anyway, this week
Speaker 2: Carrisdale and other activist short seller Carrystelle published a negative
Speaker 2: report on the Lumen and they have this disclaimer at
Speaker 2: the back that is one written like I'm going to
Speaker 2: arrogantly say some what money stuff style too?
Speaker 1: If you like money stuff, you'll lost di.
Speaker 2: And I cudited extensively. Two is you know a response
Speaker 2: directly to the left case, and three is just like
Speaker 2: sort of like lays out more clearly what the business
Speaker 2: model might be. And so it says things like, perhaps
Speaker 2: I would help investors to just assume the following. Assume
Speaker 2: we have shorted lots and lots of the stock of
Speaker 2: the covered assurer, that is Lumen, immediately prior to publication,
Speaker 2: and assume we will buy lots and lots of the
Speaker 2: stock of women to cover our short position immediately subsequent
Speaker 2: to pupl equations.
Speaker 1: Right.
Speaker 2: So they've always said we reserved the right to buy
Speaker 2: back ers not but now they're saying, just assume we
Speaker 2: bought back the stock. There's also some other like so
Speaker 2: in the absence of second by second trading updates, just
Speaker 2: assume that is exactly what we'll do. Then you won't
Speaker 2: be er defrauded or something like that.
Speaker 1: That was when I almost crashed my car. But I
Speaker 1: was listening to this while driving and it was read
Speaker 1: to me in this rope voice, and I was like,
Speaker 1: did the robot mess up? Or did they really just
Speaker 1: put that.
Speaker 2: An error in the text.
Speaker 1: So funny.
Speaker 2: Yes, So there's like there's morely that it's like a
Speaker 2: very sarcastic legal disclaimer. Yeah, and I think it's a
Speaker 2: good response to the SEC case because once you have
Speaker 2: that disclaimer, they can't really very a case against you, right. Yeah,
Speaker 2: really elated it out there, and it is sort of
Speaker 2: like a sarcastic defense of the activist short business model. Also,
Speaker 2: the other thing that happened is that Luman was down
Speaker 2: fourteen point five percent when they published this report, right,
Speaker 2: So the report had an impact. And one thing that
Speaker 2: the SEC is saying and the Andrew Left case is
Speaker 2: that when he allegedly deceived people about what he was doing,
Speaker 2: he was buying back the shorts while saying he was
Speaker 2: short forever. I think that's like a little bit of
Speaker 2: a weird claim, right, because I think that what happened
Speaker 2: is that people would sell those stocks that Andrew Left
Speaker 2: recommended against because they thought he was right, or because
Speaker 2: they thought he had a good track record, or because
Speaker 2: they thought other people would copy him, right, but not
Speaker 2: because they really thought he was going to be short
Speaker 2: the whole time. And here Carristelle is like, assume we
Speaker 2: are not short anymore, and they still had a big
Speaker 2: effect on the stock, right, which suggests that like the
Speaker 2: effect that activist short sellers have is much more about
Speaker 2: like the content of the reports than it is about
Speaker 2: people trying to copy their trades, because these people are
Speaker 2: you know, when we talked about Andrew Left, what I
Speaker 2: said is like he's a guy on Twitter, Like, yeah,
Speaker 2: he's not running a multi billion dollar hedge fund. People
Speaker 2: are not copying their trades because I think they are
Speaker 2: huge lucrative hedgehom manage.
Speaker 1: His investor letters are addressed to him.
Speaker 2: Yeah, they're copying the trades because I think they get
Speaker 2: them right. And here again like Caroristelle, like you know,
Speaker 2: is not a huge fund, but people seem to have
Speaker 2: found the report convincing, even as Carrostel is emphatically saying
Speaker 2: just assume we've covered it.
Speaker 1: Short I want to talk about another short selling story
Speaker 1: that dropped this week because it feels like, I don't know,
Speaker 1: earlier this year, there was a lot of obituaries being
Speaker 1: written about short selling. You know, Jim Chainos, Yeah, forever.
Speaker 2: It's been since like GameStop people have been writing.
Speaker 1: Yeah. But Carson Block launched his first law only fond,
Speaker 1: which felt really like a sign of the times. So
Speaker 1: you had Carastale, you also had Hindenburg coming out against
Speaker 1: super Micro. Just in this past week, it feels like,
Speaker 1: and maybe it's just because I've been paying attention to
Speaker 1: it more since we talk about it a lot, but
Speaker 1: it feels like we are seeing more short selling campaigns
Speaker 1: come to life and make a splash in this market.
Speaker 2: Yeah. Well, I think a little of it is like
Speaker 2: a reaction to the left case and they're like yeah,
Speaker 2: They're like we're still here, like like it can't intimidate
Speaker 2: us too much. I think an interesting thing about the
Speaker 2: left case is like I think that that business model
Speaker 2: is okay. The business model, like we short the stock,
Speaker 2: we publish negative things on it, and then we buy
Speaker 2: back because we take that first day reaction to our
Speaker 2: report and like we're not in it for the long term.
Speaker 2: We're in it for what we hope is a good report,
Speaker 2: and the stock goes down, we take our profits, and
Speaker 2: then we do this again and again and hopefully like
Speaker 2: we have enough of a track record that like, you know,
Speaker 2: we have some long term interest, because it only works
Speaker 2: if we have a track record, right, Like we're not
Speaker 2: our report is not going to move down the stock
Speaker 2: if we keep being wrong. So I think that's like
Speaker 2: a legitimate business model and My impression from like years
Speaker 2: of like kind of following these guys and talking to
Speaker 2: these guys occasionally is that that's not like an uncommon
Speaker 2: business model. It's sort of understood in the activist short community.
Speaker 2: They're like, yeah, you take some profits on the first
Speaker 2: day because like you're you know, you run a small fund,
Speaker 2: and yeah, and like why would you take you know,
Speaker 2: short selling is a really risky business. And if you
Speaker 2: can take a profit on the first day and not
Speaker 2: sort of hold it until the stock goes to zero
Speaker 2: and get like in fights with the company and all
Speaker 2: this stuff, why wouldn't you take some risk off the table.
Speaker 2: But I think that it is probably the case that
Speaker 2: the SEC case against Andrew left probably some people didn't
Speaker 2: understand that aspect of the business model and were surprised. Yeah,
Speaker 2: and sort of thought that if an activist short seller
Speaker 2: said the stock is going to zero, like they were
Speaker 2: going to hold their short position until the stock went
Speaker 2: to zero. And like one thing in the in the
Speaker 2: Caristel disclaimer is like we sometimes publish reports on companies
Speaker 2: that we think are worth zero dollars. We have never
Speaker 2: held a short position until the company went to zero.
Speaker 2: But yeah, a thing that the SEC did was call
Speaker 2: attention to this business model, and like maybe the equilibrium
Speaker 2: going forward as everyone understands the business model, no one
Speaker 2: is deceived, you know, or allegedly deceived by people covering
Speaker 2: on the first day, but it continues to kind.
Speaker 1: Of work, and maybe we get more fantastically written legal
Speaker 1: disclaimers out of it. That would be pretty good too.
Speaker 2: Yeah, I mean, like the way this business works is
Speaker 2: you are good at writing, good at being inflammatory, good
Speaker 2: at getting publicity, right, That's how this business works, and
Speaker 2: so like you'll get good disclaimers, which.
Speaker 1: Reminds me, well, two points. We haven't talked about hunter
Speaker 1: Brook in a while.
Speaker 2: We're still there.
Speaker 1: How do you say it?
Speaker 2: Hunter Brook? All right? Right, right right? Hunter Brook the
Speaker 2: newspaper that is also a hedge fund that is also
Speaker 2: a website whose name doesn't have value because.
Speaker 1: The skill set that you just described, being good at
Speaker 1: writing and being splashy sounds a lot like a journalist,
Speaker 1: and Hunter Brook is an interesting hybrid between those two.
Speaker 2: Oh yeah, and like there's always been overlap between investigative
Speaker 2: journalism and like opinion journalism and shortzellers.
Speaker 1: We asked the question the other week, who's hated more
Speaker 1: journalists are short sellers, but also quickly on the super
Speaker 1: Micro short report. So basically, hint, Hinterbrook, No, no, no, Hindenburg,
Speaker 1: Hinden never mind Hindenburg was Basically the basis of their
Speaker 1: short was that their investigationvealed glaring accounting red flags, evidence
Speaker 1: of undisclosed related party transactions, sanctions and export control failures
Speaker 1: and customer issues. So super Micro said that they don't
Speaker 1: comment on rumors and speculations. But then I think the
Speaker 1: next day or the day after the next day, super
Speaker 1: Micro delayed their ten K filing, and I just thought
Speaker 1: that was interesting in light of you writing about how
Speaker 1: cool accounting is this week, it kind of ties in
Speaker 1: and now we have an accounting booboo.
Speaker 2: Yeah. I mean, you know, the activist short business model
Speaker 2: is like they're filling a real need, right. It's like
Speaker 2: if a company is messing up its account and like
Speaker 2: someone notices that and says it publicly, like that can
Speaker 2: have a big effect.
Speaker 1: Well, unless the accounting industry rebearns itself, we might have
Speaker 1: more short campaigns for years and years to comb Yeah.
Speaker 2: I'll say something about that. So I wrote about accounting
Speaker 2: this week. I wrote like I sort of like appreciation
Speaker 2: of accountants, because there was riffing on a business inside
Speaker 2: our article saying that like kids these days don't want
Speaker 2: to be accountants. And I got a bunch of emails
Speaker 2: from accountants saying thank you for appreciating my art. But
Speaker 2: I got one from a guy saying, like, you know,
Speaker 2: there's actually, like there's some studies of the sort of
Speaker 2: long run demand for accountancy degrees. And one of the
Speaker 2: big drivers of people into accounting was Enron. Like when
Speaker 2: Enron failed in like a sea of accounting scandals, everyone
Speaker 2: like looked at that, or like a lot of young
Speaker 2: people looked at that, and they're like, I want to
Speaker 2: be an accountant, which is fascinating. So anyway, he's like, yeah,
Speaker 2: that we just need another big accounting scandal and the
Speaker 2: accountancy will come right back there, you go.
Speaker 1: I like that.
Speaker 2: I'll tice together.
Speaker 1: How about Bill Ackman?
Speaker 2: How about him?
Speaker 1: Oh my gosh. So the Financial Times reported that he's
Speaker 1: seeking to resurrect the initial public offering of the Pershing
Speaker 1: Square USA by offering sweeteners to early investors. Can you
Speaker 1: imagine my delight at seeing the story cross from The
Speaker 1: Financial Times At nine to twelve am Eastern this morning,
Speaker 1: on Thursday.
Speaker 2: I can imagine your delight. I think I shared it.
Speaker 1: Yeah.
Speaker 2: We both were sort of like, what will we talk
Speaker 2: about on this podcast and then and then the answer
Speaker 2: came to us. Yeah, sweeteners.
Speaker 1: So let's talk about some of the sweeteners again. This
Speaker 1: is according to reporting from the Financial Times. According to
Speaker 1: several people familiar with the matter, some of them are
Speaker 1: the right to buy extra shares in the vehicle in
Speaker 1: the future at a fixed price through Warrens. But according
Speaker 1: to the Financial Times, the real prize could be if
Speaker 1: you invest in Pershing Square USA, the closed end fund,
Speaker 1: you could get rights to buy into the eventual IPO
Speaker 1: of the actual hedge fund.
Speaker 2: Yeah, the hedge on management company, right, right, So we
Speaker 2: talked about this when the Pershing Square USA IPO got
Speaker 2: delayed postponed with true tron would be a rude.
Speaker 1: Word, okay, forget, I said, temporarily.
Speaker 2: With drown rather than the problem was that people didn't
Speaker 2: want to pay full price for the shares, and you
Speaker 2: can't really sell the shares at a discount, right Again,
Speaker 2: a normal IPO, you just negotiate the price and if
Speaker 2: people want to pay less than you think the company
Speaker 2: is worth, then like you do that. But with this,
Speaker 2: they're raising money to invest, and so you can't really
Speaker 2: sell the shares at a discount because then you don't
Speaker 2: get as much money as you wanted to invest. And
Speaker 2: that was a real problem. And so they went back
Speaker 2: to the drawing board and they're like, how do we
Speaker 2: give people a sweetener so that they'll put in fifty
Speaker 2: dollars for me to invest fifty dollars and they'll feel
Speaker 2: like they're getting a discount. And there are a couple
Speaker 2: of ways to do that. One way is to actually
Speaker 2: give them a discount by putting in cash from Pershing Square.
Speaker 2: Another way to do it is to give them ownership.
Speaker 2: And I think we talked about this last time. The
Speaker 2: obvious asset that you can put into this IPO is
Speaker 2: some of the management company. The management company has a
Speaker 2: recent valuation. They sold ten percent of it at a
Speaker 2: ten billion dollar valuations. We have some idea of what
Speaker 2: the management company is supposed to be worth, so sophisticated investors,
Speaker 2: the management company has plans to go public perhaps by
Speaker 2: next year. When you say we'll give you a bit
Speaker 2: of the management company, there's like a path to that
Speaker 2: being monetizable, and they have it coming around. There's like
Speaker 2: an alignment of incentives where it's like someone emailed me
Speaker 2: when they pulled the IPO, like they could do what
Speaker 2: Vanguard does. Vanguard is a mutual, it's owned by the
Speaker 2: investors in its funds. You pay fees to Vanguard, but
Speaker 2: like you have an alignment of incentives because you kind
Speaker 2: of get the fees back as an owner of the company.
Speaker 2: Pershing Square would be like a little like that too,
Speaker 2: where Pershing Square USA holders would also own the management company.
Speaker 2: So that makes sense as a sweetener, like you give
Speaker 2: them some of the management company. It's a little awkward
Speaker 2: because part of the point of the Pershing Square USI IPO,
Speaker 2: it's like, raise a lot of assets for Pershing Square
Speaker 2: so that it's management company will be worth a lot
Speaker 2: of money, so that they can do an IPO of
Speaker 2: the management company that will raise a lot of money
Speaker 2: for Pershing Square and its owners and its investors, and
Speaker 2: giving away some of the management company to get the
Speaker 2: Pershing Square US ideal done. It's like a little bit
Speaker 2: of a setback, yeah, but you know you could do it.
Speaker 2: And then the third option you can do is you
Speaker 2: can give people optically a discount. You can give them
Speaker 2: warrants to buy more shares of Pershing Square USA, which
Speaker 2: I don't think is that appealing. Yeah, that's why the
Speaker 2: ft says, like the real prize is the management company,
Speaker 2: because like just giving them warrants, it's still the same
Speaker 2: pot of money. You're just like slicing it a different
Speaker 2: ways to try to, you know, see if people will
Speaker 2: like that more.
Speaker 1: So, I mean, where does this leave you on the
Speaker 1: question of whether you just be better off waiting here?
Speaker 1: I mean, is this enough to answer for what? So
Speaker 1: for waiting for it to actually trade at a discount?
Speaker 2: Oh, it's just like a matter of price, right, Like
Speaker 2: you're getting a discount. Right, So if you put in
Speaker 2: fifty dollars in a structure where like you get back
Speaker 2: your person Square USA share plus a warrant to buy
Speaker 2: the management company, then you're getting a fifty dollars claim
Speaker 2: on a pot of money that Bi Lackman is investing,
Speaker 2: and you're also getting some percentage of the management company
Speaker 2: that is worth some amount of money, right, And then
Speaker 2: you just negotiate the price, right, Like if the managing
Speaker 2: company is worth ten billion dollars and like people want
Speaker 2: a ten percent discount and persons Square a USA is
Speaker 2: raising five billion dollars and you just do the math
Speaker 2: and be like, well, you know, then they need five
Speaker 2: hundred million dollars and like that's five percent of the
Speaker 2: managing company, you know whatever, right, and then you can
Speaker 2: negotiate what the valuation of the management company is. But
Speaker 2: there's a path to getting a deal done. So, like
Speaker 2: when the IPO starts trading, it will probably trade at
Speaker 2: a discount to its net asset value, but the net
Speaker 2: asset value will be more than fifty dollars per share, right,
Speaker 2: because it'll be the fifty dollars you put in plus
Speaker 2: whatever bit of the management company they put in. So
Speaker 2: if the net asset value is like fifty five dollars
Speaker 2: and a trades at fifty dollars, then you should buy
Speaker 2: it for fifty dollars in the IPI.
Speaker 1: So does it also get you back to twenty five
Speaker 1: billion dollars?
Speaker 2: I don't think so.
Speaker 1: It's a big like a big pot of money.
Speaker 2: Right. That's the other important point here is that at
Speaker 2: some point there was discussion of raising twenty five billion
Speaker 2: dollars in this IPO.
Speaker 1: And it's a tall order.
Speaker 2: It's a tall order, and you know, and like if
Speaker 2: the discount needs to be ten percent. Then you need
Speaker 2: to put in Like, if you're raising five billion dollars,
Speaker 2: you need to put in five hundred million dollars worth
Speaker 2: of stuff to give people the discount. If you're raising
Speaker 2: twenty five billion dollars, you have to put in two
Speaker 2: point five billion dollars worth of stuff. It costs you
Speaker 2: more r The other interesting thing in the ft article
Speaker 2: is that in the previous round, part of the incentive
Speaker 2: to put in your money was that they would waive
Speaker 2: the management fees for the first year of the fund,
Speaker 2: and now in a revised version, they might not waive
Speaker 2: the management fees. Yeah, in part because you're maybe getting
Speaker 2: shares of the management company, which you share the management
Speaker 2: fees anyway. But yeah, like, whatever they do to get
Speaker 2: people into this fund is going to cost the pushing
Speaker 2: square money and so they will make back some of
Speaker 2: it by charging more fees.
Speaker 1: You know, I think they should just launch an ETF.
Speaker 1: I know that they're not going to. I know it.
Speaker 2: I know it. You traded a discout.
Speaker 1: You're right, it wouldn't It would easily solve that problem.
Speaker 2: You know. It's an idea that I've poo pooed because
Speaker 2: the whole plant here is permanent capital to make long
Speaker 2: term investments, and ETF doesn't do that. But you're right that,
Speaker 2: like it would solve the main problem they're trying to
Speaker 2: solve now it's just trading at a discount.
Speaker 1: Yeah, and I understand why investors such as Bill Ackman
Speaker 1: and issuers in general would like the closed end fund
Speaker 1: structure for that appeal of permanent capital, but investors clearly
Speaker 1: prefer ETFs. I mean, if you take a look at
Speaker 1: closed end fund assets, they've been camped out at the
Speaker 1: same level. I think it's like three hundred billion dollars
Speaker 1: in the US for a long time now. There's been
Speaker 1: no growth there, even through all of these market cycles.
Speaker 2: Yeah, the Bill Lackman pictures like, this is not a
Speaker 2: c is then fund. This is sort of like Berkshire
Speaker 2: Hathaway Analytic, Like this is a company that happens to
Speaker 2: be structured as I closed then fund, and but it is.
Speaker 2: It's like, I'm not sure that that's right.
Speaker 1: Yeah, let me just fact check that number. It's either
Speaker 1: three hundred or five hundred.
Speaker 2: We're gonna leave all of this in.
Speaker 1: Come on, Matt, do something fun. I don't talk about
Speaker 1: the economy. Either she's right, it's three hundred billion.
Speaker 2: Oh yeah, all of it, all of it. If you
Speaker 2: had been wrong, you would have had to like just
Speaker 2: edit it.
Speaker 1: But I was gonna follow up a salad anyway. The
Speaker 1: point being close end funds are really small b LS,
Speaker 1: the BLS, the Bureau of Labor Statistics. What is going
Speaker 1: on over there? I don't know, Absolutely a monkey business.
Speaker 1: I'm trying to think what I can say on this podcast.
Speaker 1: So the payroll revisions data covering April twenty twenty three
Speaker 1: through March twenty twenty four, there was hyper focus on
Speaker 1: these revisions, and ultimately they were huge. It shows that
Speaker 1: payrolls are likely going to be revised down by over
Speaker 1: eight hundred thousand jobs in those twelve months through March.
Speaker 1: But just the singular focus on this specific report was
Speaker 1: already ridiculous, and then it was made even more ridiculous
Speaker 1: by the fact that it was supposed to come out
Speaker 1: at ten am. One half of this podcast is on
Speaker 1: live TV at that time, and it's me It didn't
Speaker 1: come out until ten thirty three am. But people are
Speaker 1: getting a piecemeal.
Speaker 2: I have seen your filibustering skills in this podcast. Were
Speaker 2: you like just talking about we called that for thirty
Speaker 2: three minutes.
Speaker 1: We call it tap dancing. I was on air with
Speaker 1: Matt Miller and Shannali Basic, so we at least had.
Speaker 2: Each and it was like sitting at me like, yeah,
Speaker 2: where's that.
Speaker 1: Yeah, we were kind of you know, by ten minutes
Speaker 1: in you're like, okay, well something is strange here. We
Speaker 1: still don't have this data. We're waiting on it. There
Speaker 1: was some funky trading going on as well. I mean,
Speaker 1: in the grand scheme of life, it didn't amount to anything,
Speaker 1: but you know, you had the S and P five hundred,
Speaker 1: you had bond yield zigging and zagging. Because people were
Speaker 1: getting it piecemeal. That was the crazy thing. People, as
Speaker 1: we know now were calling up the BLS and the
Speaker 1: BLS was telling them the number right.
Speaker 2: Because apparently what happened is they had the numbers. The
Speaker 2: BLS employees were able to see the numbers. There was
Speaker 2: a technical glitch on the website, so the website didn't
Speaker 2: have the numbers, but the internal people had the numbers,
Speaker 2: and the data was embargoed until ten am, and so
Speaker 2: at like ten fifteen, if you called BLS, you might
Speaker 2: reach a person who was like, oh, the embargoes off,
Speaker 2: I can give you the numbers, even though it wasn't
Speaker 2: on the website yet, So like some people called and
Speaker 2: got the numbers, and other people didn't call, and we're
Speaker 2: like refreshing the webpage and didn't get the numbers.
Speaker 1: So reading the reporting after the fact, it seems like
Speaker 1: there were several communication failures over at the BLS about
Speaker 1: how they would handle external inquiries. I will say that
Speaker 1: going through this experience, this is where lockups are your
Speaker 1: friend when it comes to economic data releases. There used
Speaker 1: to be lockups for things such as the jobs reports
Speaker 1: such as CPI, where you know news agencies would get
Speaker 1: them in advance. That went away during the pandemic. But
Speaker 1: that wouldn't have even helped us in this situation because
Speaker 1: this is such usually not that substantial data, or it's
Speaker 1: like second or third tier data being generous. This was
Speaker 1: never even subject to a lock up, so it's ridiculous
Speaker 1: that we even cared this much. But there was a
Speaker 1: better way to do this.
Speaker 2: Sort of right, I mean, like this is like I
Speaker 2: appreciate the effort to sort of publish it on the
Speaker 2: website to everyone all at once.
Speaker 1: Right, If you can't do that you know, you have
Speaker 1: to be able to do it. Yeah.
Speaker 2: I think there's an interesting thing in financial markets where like,
Speaker 2: on the one hand, you want to reward people for
Speaker 2: doing work, for doing research, like trying to find stuff out,
Speaker 2: because that's the point of financial markets. It's to make
Speaker 2: prices more efficient for people to find stuff out and
Speaker 2: then have them reflected in prices. On the other hand,
Speaker 2: you want things to be fair, right, So you don't
Speaker 2: want like people to find stuff out by playing golf
Speaker 2: with the company ceo and being like, sorry, you didn't
Speaker 2: e merger and like finding out inside information, right, and
Speaker 2: so like there's this effort to make it a level
Speaker 2: playing field, but you also do want to incentivize people
Speaker 2: to get information. So it didn't work here. They were
Speaker 2: trying to make it a level playing field and they failed.
Speaker 2: But I do really appreciate the people who and it
Speaker 2: didn't come out At ten o'clock, we're like, well, I
Speaker 2: guess I'll make a phone call. You should do that.
Speaker 2: It should work.
Speaker 1: You sound like an editor, Yeah, right, exactly, yeah, exactly,
Speaker 1: telling your reporter to just pick up.
Speaker 2: Like pick up the phone, you know, and like the
Speaker 2: way financial markets work now is a lot of people
Speaker 2: probably have automated trading algorithms that were scraping the you know,
Speaker 2: BLS website at ten o'clock and you.
Speaker 1: Know, thirty three minutes straight mines.
Speaker 2: Just refreshing the website, and the people who picked up
Speaker 2: the phone had an advantage over those computer traders for once,
Speaker 2: you know, So I don't know, I appreciate the people
Speaker 2: who picked up the phone. It's one of these where
Speaker 2: like if you didn't get this information before I was
Speaker 2: out on the website, Like, yeah, it's like a little
Speaker 2: embarrassing in hindsight, Yeah, like you should have called.
Speaker 1: I guess part of the reason I'm being so hard
Speaker 1: on the BLS is because it has been not a
Speaker 1: great year for them, well right.
Speaker 2: Because they've previously like done the opposite, and they put
Speaker 2: it up on the website before it was supposed to
Speaker 2: be up.
Speaker 1: Oh yeah, CPI data too, Like I'm dunking on this
Speaker 1: payroll revisions release, but CPI data is absolutely I mean,
Speaker 1: now we're all really focused on the labor market, of course,
Speaker 1: but the CPI prints for the last four years have
Speaker 1: been the most important piece of data that you can get,
Speaker 1: and they put it on the website thirty minutes early
Speaker 1: in May.
Speaker 2: I was a little unclear on that they put some
Speaker 2: stuff on the website a little early, but like there
Speaker 2: was no weird trading in it ahead of it, right,
Speaker 2: Like I think it was like they if identified a
Speaker 2: glitch where they published it early, but it wasn't like
Speaker 2: the market got it early.
Speaker 1: Even still even still even still also super users, super users,
Speaker 1: the fact that they didn't have clear communication on how
Speaker 1: to handle external inquiries after the super users debacle, it
Speaker 1: raises an eyebrow.
Speaker 2: Yeah, the super users debacle is when like people would
Speaker 2: get enhanced color on economic.
Speaker 1: Being a host today, Oh yeah, I've just rippen through
Speaker 1: these explain super users.
Speaker 2: I forget they would release economic data and like they
Speaker 2: would give like further color to a list of economists
Speaker 2: and like you know, hedge funds or whatever who bothered
Speaker 2: to sign up. Right, this is again it's like, you know,
Speaker 2: it's like a little meaning scandal, but it's also it's
Speaker 2: like these people are public servants. Like if you call
Speaker 2: the Bureau labor Stahysics and say I'd like to know
Speaker 2: more about CPI, they'll tell you more. Yeah, And the
Speaker 2: people who have an economic interest in trading on macro
Speaker 2: data would say Hey, I'd like to be on your
Speaker 2: email where you explain things more, and the people who
Speaker 2: didn't didn't, right, And so the people who signed up
Speaker 2: for the email list got better information, and I don't know,
Speaker 2: I sort of feel like they deserved better information.
Speaker 1: This actually brings me neatly to a point that I
Speaker 1: should make, because again I've been pretty harsh on the
Speaker 1: BLS here, But if we think back to this super
Speaker 1: user's debacle, one of the reasons why it even happened
Speaker 1: was because, yes, you can ask the BLS questions and
Speaker 1: the BLS can answer you, but the BLS doesn't have
Speaker 1: enough resources to answer each individual one. So this specific economists.
Speaker 1: I believe it was an economist thinking was I'll just
Speaker 1: put everyone on a list. And I remember last week,
Speaker 1: after the payrolls revision debacle, I was speaking to Claudia
Speaker 1: sam who's a former freed economist, and I asked her
Speaker 1: what this meant for BLS credibility, and she said, it's
Speaker 1: absolutely inexcusable, of course, but at the same time, like
Speaker 1: the BLS is underfunded, they're under resource constraints, and you know,
Speaker 1: something like this is bound to happen if you don't
Speaker 1: give them the proper support. So here we are.
Speaker 2: Yeah, here we are.
Speaker 1: Sorry BLS, they're going through it. Katie is our you
Speaker 1: need to raise Yeah, yeah, here I am.
Speaker 2: And that was the Money Stuff Podcast.
Speaker 1: I'm Matt Levian and I'm Katie Greifeld.
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