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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Hello and welcome to The Money Stuff Podcast, your weekly

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Speaker 2: podcast where we talk about stuff related to money. I'm

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Speaker 2: Matt Levin, all right, the Money Stuff Colm for Bloomberg.

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Speaker 3: Opinion, And I'm Katie Greifeld, a reporter for Bloomberg News

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Speaker 3: and an anchor for Bloomberg Television.

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Speaker 2: What are you at today, Katie?

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Speaker 1: Death bets, death bets.

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Speaker 3: We're going to talk about Apollo, and we're going to

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Speaker 3: talk about a really interesting asset class.

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Speaker 2: Death death, the final asset class.

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Speaker 3: We're also going to talk about a messy merger. We're

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Speaker 3: talking about Paramount and Sherry Redstone and what is going

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Speaker 3: to happen there.

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Speaker 2: And we're going to talk about Bill Wang and Archagis

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Speaker 2: and how money.

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Speaker 1: Failed him Money failed.

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Speaker 2: And we might talk about reader mail.

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Speaker 1: We have a lot of it.

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Speaker 2: We have a certain amount of reader mail.

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Speaker 1: Death bets.

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Speaker 3: Specifically, you said that Apollo had some death bets, really

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Speaker 3: interesting case. I'm going to need you to just give

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Speaker 3: us a quick summary here.

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Speaker 2: Okay, So you can buy life insurance. If you buy

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Speaker 2: life insurance, you can sell that life insurance if you

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Speaker 2: have like a twenty year life insurance policy, and after

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Speaker 2: five years you're like, I don't need this life insurance

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Speaker 2: policy anymore. They're investors who will buy it from you.

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Speaker 2: One of the biggest investors that owns these policies is Apollo,

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Speaker 2: or it's funds run by Apollo, and when you do this,

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Speaker 2: then they take over the policy and then if you die,

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Speaker 2: they get the money, but the estate the sun. I

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Speaker 2: think of a woman who died well Apollo owned her

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Speaker 2: life insurance policy, sued Apollo saying you shouldn't get that money,

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Speaker 2: and he actually won, and now he's suing Apollo some more.

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Speaker 1: Which is crazy. We're going to get into the specifics,

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Speaker 1: all the bits of it occurred that case.

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Speaker 3: I have to say before you even wrote about this,

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Speaker 3: because I think the original story was from April twenty six,

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Speaker 3: and there were a imediately so many memes on Twitter

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Speaker 3: about like how this is the perfect money stuff story.

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Speaker 3: There is a meme of Matt Levine reading this headline

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Speaker 3: and it was like this cartoon guy like being reanimated.

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Speaker 3: I really enjoyed it, and then you did write about it.

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Speaker 2: I did write about it. There is a sense in

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Speaker 2: which it is not news. This is a trade that

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Speaker 2: happened in two thousand and six. The women died several

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Speaker 2: years ago. The lawsuit they won against the polo last year,

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Speaker 2: but it burbled up into consciousness this week when they

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Speaker 2: filed this other lawsuit. And although it is not very newsy,

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Speaker 2: it is very money stuff.

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Speaker 3: It is very money stuff. And I'm going to need

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Speaker 3: you to just explain to me what they're alleging that

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Speaker 3: Apollo did wrong here, because, as you lay out in

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Speaker 3: your column, you can sell your life insurance policy. If

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Speaker 3: you have one, you can sell it. And it seems

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Speaker 3: like that is somewhat common.

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Speaker 2: Somewhat common, it's common. It's a very small fraction of

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Speaker 2: the life insurance market, but it does happen a lot.

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Speaker 2: So they're actually not saying Apolo did anything wrong. Weirdly,

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Speaker 2: I mean they are because like they're trying to be inflammatory.

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Speaker 2: But what happened here is that for a long time

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Speaker 2: you could sell your life insurance policies, and at some

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Speaker 2: point in the early two thousands, people realize, hey, this

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Speaker 2: could be a big business, so they started funds so

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Speaker 2: they'd raise money from investors saying we're going to go

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Speaker 2: buy all these life insurance policies from people, and they

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Speaker 2: raise all this money and then they're like, oh, we

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Speaker 2: got to go find all this life insurance. It's actually

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Speaker 2: not that easy. All these people have life insurance and

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Speaker 2: they don't want to keep paying the premiums. It's hard

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Speaker 2: to find them. Like they don't know that there's a

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Speaker 2: secondary market where they can sell their life insurance. And

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Speaker 2: so what happened in the early to mid two thousands

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Speaker 2: is that there is a boom in insurance brokers saying,

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Speaker 2: wait a minute, there's all these investors looking to buy

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Speaker 2: life insurance policies. I'm trying to sell life insurance policies

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Speaker 2: to people. There's a trade here where I sell a

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Speaker 2: five million dollar life insurance policy to like an older person.

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Speaker 2: I get my commission for selling the life insurance policy.

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Speaker 2: She turns around and immediately sells the policy to an investor,

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Speaker 2: and she gets cash for selling the policy. I get

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Speaker 2: cash for originating the policy, and the investors get life

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Speaker 2: insurance policies that they want to invest in. So this

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Speaker 2: became a big business in the early mid two thousands.

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Speaker 2: And it's called stolely, which is stranger originated life insurance.

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Speaker 2: And so this policy came into being, like an insurance

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Speaker 2: agent went to this woman and said, hey, I've got

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Speaker 2: a trade for you. You can get paid one hundred

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Speaker 2: and fifty thousand dollars to sign your name to some papers,

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Speaker 2: and then I'll sell the life insurance to investors. The

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Speaker 2: investors were not Apollo. Yeah, Apollo like several years later

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Speaker 2: bought this policy in a big pool of policies from

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Speaker 2: other investors. So Pollow didn't have anything to do with

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Speaker 2: the apparently illegal origination of this policy. Because it turns

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Speaker 2: out that if you're a person and you take out

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Speaker 2: life insurance and you then change your mind years later

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Speaker 2: and decide to sell it, you can do that. There's

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Speaker 2: a secondary market. It's sometimes controversial, but basically it works

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Speaker 2: and it's legal. But if you do this, if you

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Speaker 2: do the thing where you just take out a policy,

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Speaker 2: planning from day one to sell it to investors, and

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Speaker 2: you're not paying the premium, the investors are sponsoring the

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Speaker 2: premium from day one, then that doesn't work.

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Speaker 4: Why not?

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Speaker 1: Is it just because the insurance company doesn't like that?

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Speaker 2: Because insurance companies don't like it, and so like states

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Speaker 2: regulate it. I don't have a good answer to why not. Yeah,

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Speaker 2: But the rough answer is that insurance is supposed to

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Speaker 2: be insurance. You're supposed to be buying it for what

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Speaker 2: they call insurance purposes, which is this kind of vague term,

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Speaker 2: but it means like, you're trying to protect your family

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Speaker 2: if you die, you're trying to do some estate planning,

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Speaker 2: you have some sort of personal reason for buying the insurance.

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Speaker 2: If you're just doing it as a bet on your mortality,

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Speaker 2: then it's frowned upon. And this trade where it's just

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Speaker 2: an investor buying life insurance for you is just a

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Speaker 2: pure bet on your mortality, and so they don't like it.

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Speaker 2: It's kind of illegal, by which I mean not that

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Speaker 2: you go to jail necessarily. But the result here is

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Speaker 2: that the investors bought this policy for this one. They

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Speaker 2: gave her money, They paid her like one hundred and

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Speaker 2: fifty to sign the papers and do this thing. They

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Speaker 2: paid all the premiums on the policy for her entire life,

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Speaker 2: and then she died and the policy paid out five

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Speaker 2: million dollars and the investors were like, Okay, that's the

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Speaker 2: insurance we paid for, and her estate was like, no, no,

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Speaker 2: we get that money because you weren't allowed to do

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Speaker 2: this in the first place. And turns out the estate

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Speaker 2: is right, and so the estate gets the money she

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Speaker 2: got paid to take out the insurance, and then she

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Speaker 2: got the proceeds of the insurance. It seems kind of unfair.

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Speaker 3: I have two points to make here, the first being

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Speaker 3: on like why insurance companies don't like this. I mean,

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Speaker 3: you make the point that this is an insurance product,

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Speaker 3: it's not necessarily supposed to be financialized in the way

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Speaker 3: that it has been. But I was talking to someone

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Speaker 3: in the insurance industry and they also said that these

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Speaker 3: insurance companies count on there's going to be a certain

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Speaker 3: percentage of people who let their life insurance laughs, like

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Speaker 3: they're not going to pay the premiums, they can't keep

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Speaker 3: up with it, and then obviously they don't have to

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Speaker 3: pay it out the insurance company, and this whole model

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Speaker 3: that we're talking about removes that.

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Speaker 2: Yeah, that's exactly right. That's sort of what it means

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Speaker 2: to say, shouldn't be financialized. Like the insurance companies sell

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Speaker 2: you the insurance understanding that you're a person, and like

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Speaker 2: your circumstances can change. You might forget to pay the premiums,

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Speaker 2: you might not be able to afford to pay the premiums.

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Speaker 2: You might decide, actually, I don't need this life insurance

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Speaker 2: anymore because my kids grew up or whatever. And if

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Speaker 2: you do that, you will stop paying the premiums, and

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Speaker 2: so they can price that and the insurance is cheaper

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Speaker 2: because they know some people won't pay the premiums and

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Speaker 2: will then die and won't get the death benefit. But

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Speaker 2: if you sell your insurance to a financial investor, the

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Speaker 2: financial investor is just going to make a rational calculation

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Speaker 2: about what the expected value of the policy is and

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Speaker 2: they're going to keep paying the premiums as long as

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Speaker 2: it has positive expected value. And so the insurance company

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Speaker 2: is underpricing its insurance. Like that's why this trade worked,

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Speaker 2: because you could go to all these people and buy

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Speaker 2: underpriced insurance because the insurance companies were pricing it expecting

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Speaker 2: the policies with lapse. But they didn't know or they

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Speaker 2: didn't think about the fact that they're selling it to

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Speaker 2: financial investors.

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Speaker 3: I have to say, from the investors, you seems like

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Speaker 3: a great trade. I mean you thinking about uncorrelated returns,

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Speaker 3: how much more uncorrelated can you get?

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Speaker 2: That's how this worked. People were like realized that this

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Speaker 2: was a asset class that first of all, there's tons

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Speaker 2: of life insurance out there, and sandly it's uncorrelated, and

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Speaker 2: so it's a great product to pitch to investors. I

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Speaker 2: would say that my understanding is that the size of

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Speaker 2: the market is limited by the fact that a lot

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Speaker 2: of investors in a lot of investors everywhere, but particularly

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Speaker 2: the United States, find this cross like, yeah, I don't

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Speaker 2: want to buy life. I don't want to if you

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Speaker 2: can grow up.

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Speaker 4: Yeah.

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Speaker 2: Well. The reason I use the word death bets is

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Speaker 2: because like it's funny. Well, yeah, because it's funny, but

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Speaker 2: also because the estate suing Apollo in their complaint they

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Speaker 2: had a lot of rhetoric about how Apollo is secretly

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Speaker 2: betting on people's deaths and people don't know who has

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Speaker 2: an incentive to have them dead, and it's like, this

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Speaker 2: is true. The reason for a lot of these like

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Speaker 2: rules is it's called the insurable interest treament. It's like,

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Speaker 2: you can only take out insurance on someone who you

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Speaker 2: have some connection to, you have some incentive, you have

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Speaker 2: some reason to want them to stay a lot. Right,

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Speaker 2: So you're gonna have insurance on your parents because like

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Speaker 2: hopefully you're not going to kill your parents, right, you

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Speaker 2: get have insurance on your employee because like, you care

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Speaker 2: about your employee's production, right, and if your employee dies,

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Speaker 2: you'll be sad and the insurance will compensate you for that.

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Speaker 2: But you can have insurance on a stranger because if

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Speaker 2: you go and try to take out insurance on a stranger,

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Speaker 2: why are you doing that? Is it because you're trying

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Speaker 2: to kill them? The insurance law is really based in

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Speaker 2: part in like not creating incentives to murder people. And

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Speaker 2: as when Investor pointed out, there are no cases o

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Speaker 2: case we know financial investors killing the insurance on their

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Speaker 2: contracts to get the payout. There are many cases of husbands, wives,

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Speaker 2: children killing their loved ones to get insurance parents, So like,

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Speaker 2: really this is not that gross at all, Right, yeah,

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Speaker 2: really this is like sure they're betting on depths, but

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Speaker 2: they're like more more morell than the sort of tail

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Speaker 2: end of the spouse distribution.

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Speaker 3: I was wondering how quickly we would get to the

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Speaker 3: fact that this does create incentive for murder.

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Speaker 2: I mean, when I wrote about it, I think I

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Speaker 2: got to it immediately. It's the most sense to talk

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Speaker 2: about it insurance.

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Speaker 3: I mean, I have the entire column in front of

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Speaker 3: me and yeah, you're right, murder did get brought up

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Speaker 3: pretty quickly.

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Speaker 2: Did you not think about murder when you think about

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Speaker 2: life insurance.

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Speaker 1: Let's talk a little bit though, about this actual case.

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Speaker 1: Her name.

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Speaker 3: I feel like we've referenced her a few different times,

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Speaker 3: Martha Barotes. I'm saying it correctly. She died in twenty eighteen.

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Speaker 3: Like you said, the estate wants.

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Speaker 1: The payout back.

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Speaker 3: They got it, and I don't know is that entirely

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Speaker 3: fair because Martha knew what she was doing.

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Speaker 2: Martha knew what she was doing. Yeah, she never paid

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Speaker 2: a penny for this insurance. She got paid to fill

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Speaker 2: out the forums, and then when she died, her children

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Speaker 2: were like, hey, we'd like the money. I would think

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Speaker 2: that if you decide that this policy is invalid because

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Speaker 2: it was like a bad evil betting on lives, it

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Speaker 2: didn't have an insurable interest whatever, I would think that

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Speaker 2: you would say, well, then the insurance company doesn't have

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Speaker 2: to pay. But in fact, the law seems to be

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Speaker 2: that if the insurance company pays, the estate can get

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Speaker 2: it back rather than giving it to the investors because

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Speaker 2: they want Basically, the law wants to punish the investors

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Speaker 2: so that the investors don't.

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Speaker 3: Do this one more point on investing, what do this do?

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Speaker 3: The thoughts I had while reading this and thinking about

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Speaker 3: this was to the point that this has become an

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Speaker 3: asset class. I feel like just the evolution of markets

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Speaker 3: is that somehow this is gonna be an investable asset class.

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Speaker 3: On robin Hood, retail will be involved in It'll trade

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Speaker 3: twenty four to seven.

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Speaker 2: So there I would worry more about murder.

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Speaker 1: Murder, oh my god.

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Speaker 2: Because it's like there's a limited number of investors in

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Speaker 2: this asset class. They're all institutional, they have careers, they

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Speaker 2: don't want to go to jail, they care about the

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Speaker 2: reputation of the asset class, and they're doing it in scale,

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Speaker 2: so that like murdering one person wouldn't change the returns

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Speaker 2: that much.

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Speaker 1: It I don't know, man, it have to be totally blind.

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Speaker 2: If you invested in a big pool, then you wouldn't

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Speaker 2: have much incentive together.

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Speaker 1: Well, you'd want to diversify, obviously, but.

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Speaker 2: Unless you're planning to do murder, than you wouldn't want

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Speaker 2: a diverse Well.

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Speaker 3: I feel like then it'd be easy to track, like

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Speaker 3: who just has some really concentrated part of the playoffs

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Speaker 3: a lot.

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Speaker 2: Of insider trading is pretty easier to track, and people

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Speaker 2: do it anyway, So if you had a lot of this,

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Speaker 2: you'd have at least one murder, I think.

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Speaker 3: I think it'd be a really interesting psychological and market

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Speaker 3: structure experiment.

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Speaker 4: So maybe someone will do it.

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Speaker 3: Let's talk about a messy merger, potentially tricky, messy. I

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Speaker 3: don't know what word do you want to use.

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Speaker 2: It's a classic boardroom battle.

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Speaker 1: That's a good one.

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Speaker 2: Why don't you tell that?

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Speaker 3: What we're talking about Paramount and the fact that it's

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Speaker 3: in exclusive conversations with sky Dance, which is owned by

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Speaker 3: David Ellison, but there's a lot of investors who would

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Speaker 3: like them to consider also a deal coming from Apollo

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Speaker 3: and Sony as well. So that's one tricky element. Then

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Speaker 3: the other tricky element is, of course Sherry Redstone, who

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Speaker 3: owns seventy seven percent of the Class A shares, which

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Speaker 3: is what Skydance is after. And then you have the

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Speaker 3: vast majority of outstanding shares or Class B shares that

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Speaker 3: have no voting power.

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Speaker 2: Yeah, so it's like this weird situation where Paramount is

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Speaker 2: a big company with a lot of shares outstanding, most

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Speaker 2: of which don't vote, and so basically Sharry Redstone controls

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Speaker 2: about five percent of the stock, but that five percent

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Speaker 2: of the stock has seventy seven percent of the voting power,

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Speaker 2: which means that if you buy her five percent stake,

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Speaker 2: you control the company, which creates a lot of incentives

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Speaker 2: for mischief. The other weird thing is that share Redson

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Speaker 2: doesn't actually own that stock, which she owns is a

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Speaker 2: company called National Amusements. National Amusements is a chain of

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Speaker 2: movie theaters that also owns this five percent one.

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Speaker 1: Hundred and twenty four theaters on.

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Speaker 2: Four theaters, but they also own this chunk of class

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Speaker 2: A voting stock in Paramount. That company controls Paramount, and

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Speaker 2: shire redsn controls that company. And so if you want

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Speaker 2: to buy Paramount. One thing you could do is you

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Speaker 2: can go to the board of directors and say we'll

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Speaker 2: pay twelve dollars a share in cash for all the

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Speaker 2: shares of Paramounts in a merger. And that's kind of

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Speaker 2: more or less what Apolo seems to have offered. Another

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Speaker 2: thing you can do is you get a share red

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Speaker 2: Zone and say, hey, we'll take National Amusements off your

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Speaker 2: hands for like two billion dollars, which is like a

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Speaker 2: fraction of the price of Paramount. Paramount is equity value

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Speaker 2: something like twelve billion dollars. This is what people seem

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Speaker 2: to be talking about. If you could pay two billion

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Speaker 2: dollars for National Amusements and then you control Paramount and

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Speaker 2: then you can do what you want, and I don't

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Speaker 2: know what they want, but the deal structure is very complicated. Basically,

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Speaker 2: skid Ends wants to buy National Amusements and then have

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Speaker 2: Paramount buy Skuidens for stock and then put their own

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Speaker 2: people in charge of Paramount, and they're like, this is

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Speaker 2: going to make Paramount be worth thirty dollars a share.

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Speaker 2: But it's like a complicated merger structure. But step one

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Speaker 2: of the structures, we're going to buy National Amusements and

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Speaker 2: then we'll control Paramount.

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Speaker 3: So that was a gorgeous explanation. I don't know why

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Speaker 3: I had to try. So that's very tricky. And I

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Speaker 3: have to say the disparity, the discrepancy in pricing between

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Speaker 3: the Class A and the Class B is interesting.

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Speaker 1: I mean, there's just a wide gap there.

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Speaker 2: There's lots of companies that have dual class shares, but

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Speaker 2: it's often like a founder compan where like Mark Zuckerberg

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Speaker 2: isn't going to sell Facebook, right, Like here, you really

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Speaker 2: can buy control of a twelve million dollar company by

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Speaker 2: buying five percent of the stock. And it's like just

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Speaker 2: an unusually sharp case of the difference in the value

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Speaker 2: of the two types of shares.

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Speaker 3: So that's tricky. That's one of the messy things. The

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Speaker 3: other messy thing they fired the CEO. Now it's a

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Speaker 3: CEO committee run.

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Speaker 2: Office of COO. Right, it's like three guys. Yeah, yeah,

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Speaker 2: I was looking at the announcement. They say the Office

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Speaker 2: of the CEO is working with the board to develop

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Speaker 2: a comprehensive long range plan to accelerate growth and develop

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Speaker 2: popular content. But you know they don't mean that, right.

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Speaker 2: You don't install three guys as your office of CEO

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Speaker 2: if you're planning to like have them run the company

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Speaker 2: for ten years and develop new content. Right. That's like,

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Speaker 2: we are selling this company in the next two weeks.

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Speaker 2: We don't really care he's running it for like two.

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Speaker 1: Weeks, right, yeah.

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Speaker 3: Yeah. As Blueberg Intelligence put it, the replacement of Bob

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Speaker 3: Backish puts Paramount a step closer to a deal with

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Speaker 3: Skydance Media. Backish obviously the acquisition it feels like, there's

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Speaker 3: a lot of people who vocally oppose this.

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Speaker 2: Yeah, well so shareholders, Yes, some shareholders oppose it. Backers

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Speaker 2: seems to opposed that. Several directors step down last month

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Speaker 2: because they seem to be not super comfortable with the deal.

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Speaker 2: One person who really opposes it is h Marrigabelly, who

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Speaker 2: runs GAM who's the biggest holder of Class A shares

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Speaker 2: other than National Amusements. He's in this weird position where like,

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Speaker 2: he has these shares that are like theoretically worth more

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Speaker 2: than the Class B shares, except that like Skydence doesn't

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Speaker 2: have to go buy up all the Class A shares,

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Speaker 2: They don't have to pay a premium for the Class

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Speaker 2: A shares. All they have to do is buy National

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Speaker 2: Amusements and then they get a majority of the vote

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Speaker 2: and they're done. So they don't have to pay him

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Speaker 2: any premium. Right, they don't have to pay the other

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Speaker 2: Class A holders of premium. They just have to pay

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Speaker 2: Shary Redstone for National Amusements. So he's in this weird

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Speaker 2: position where he's like, I think I have these super

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Speaker 2: voting valuable shares, but actually they turn out not to

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Speaker 2: be that valuable because they're a minority.

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Speaker 1: I mean, where does this go from here? Is this

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Speaker 1: like a done deal?

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Speaker 3: Is there any way that some of these vocal people

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Speaker 3: who don't like this deal could actually stop it?

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Speaker 2: Oh? Yeah, I mean you can't literally buy the seventy

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Speaker 2: seven percent voting stock, fire the board and say okay,

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Speaker 2: we're like taking over this company and we're not going

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Speaker 2: to give the public shareholders anything. There's a special committee

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Speaker 2: of Paramount directors who have to approve any transaction. Now

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Speaker 2: it's tricky because they don't have to approve any National

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Speaker 2: Amusements transaction. Yeah, they don't run National Amusements. The Class

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Speaker 2: A shares don't have to change hands, right Like National Amusements,

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Speaker 2: which is its own company, could just be acquired and

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Speaker 2: then National Amusements can come into the board meaning and say, okay,

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Speaker 2: we're still we still have our seventy seven percent control.

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Speaker 2: Nothing has changed except who owns National Amusements. It's also

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Speaker 2: tricky because the Special Committee and thinking about paramount will

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Speaker 2: think about how much value did share Redstone get for

390
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Speaker 2: her Class A shares? How much value are the other

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Speaker 2: shareholders getting for their Class P shares? But they don't

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Speaker 2: know how much value she's getting for her Class A

393
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Speaker 2: shares because Skydance will presumably right her a check for

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Speaker 2: National amusements. And you know, her Class A shares have

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Speaker 2: a market value seven hundred million dollars, and the check

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Speaker 2: for National amusemance is like supposedly the reporting is going

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Speaker 2: to be around two billion dollars. So that's a big premium.

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Speaker 2: But there's all those movie theaters. We don't know how

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Speaker 2: much they're worth.

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Speaker 1: Right, all one hundred and twenty four of them.

401
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Speaker 2: You can make like AMC memestock, like maybe movie theater

402
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Speaker 2: companies are really valuable, right, maybe they're paying her the

403
00:18:21,320 --> 00:18:24,040
Speaker 2: two billion for the movie theaters. So like the Special

404
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Speaker 2: Committee of the Board has the job of making sure

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Speaker 2: that whatever deal is done for paramount is fair to

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Speaker 2: the Class P shareholders, to like the regular public shareholders.

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Speaker 2: And so one thing you can do is say no

408
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Speaker 2: to any acquisition of sky Dance, for instance, that it

409
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Speaker 2: thinks is not fair to shareholders. But what it can't

410
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Speaker 2: do is like say to share Redstone, you have to

411
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Speaker 2: sell to the person we pick. Right if they like

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Speaker 2: the Apollo deal and she doesn't like, they can't make

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Speaker 2: her sell, and she can block the Apolo deal because

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Speaker 2: she has seventy sum percent of the vote. So it

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Speaker 2: seems likely there's going to be a deal because they

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Speaker 2: have no CEO, and it seems like any deal would

417
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Speaker 2: have to be one that's acceptable to share Redstones. You

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Speaker 2: have to thread this needle of like, whoever's going to

419
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Speaker 2: buy the company has to give Shy Redstone enough that

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Speaker 2: she wants to take the deal, but it also has

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Speaker 2: to be fair enough to the public shareholders that the

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Speaker 2: Special Committee agrees to take the deal. And by the way,

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Speaker 2: there's history here before it was Paramount, like the predecessor

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Speaker 2: Viacom CBS was also the structure where a Shay Redstone

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Speaker 2: and a majority of this voting stock through National Amusements,

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Speaker 2: And at some point the board of Viacom CBS tried

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Speaker 2: to take away her voting rights or like make it

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Speaker 2: so that all the shares were voting to like block

429
00:19:32,280 --> 00:19:34,359
Speaker 2: her from doing some merger that they thought was bad.

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Speaker 2: Didn't work. They got in a lot of trouble for her,

431
00:19:36,720 --> 00:19:39,920
Speaker 2: but they were like, we can't have this dynamic where

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Speaker 2: like there's one shareholder who has a minority of the

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Speaker 2: economic interest, but who has a controlling voting stake and

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Speaker 2: who can like just force through a merger that we

435
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Speaker 2: think is unfair to the shareolders. So they tried to

436
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Speaker 2: take away her super voting rights. Didn't work.

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Speaker 1: Now they are I crave that kind of power.

438
00:19:55,119 --> 00:19:56,920
Speaker 2: Which kind of power the super voting rights or the

439
00:19:57,240 --> 00:19:57,960
Speaker 2: super board.

440
00:19:57,800 --> 00:20:00,040
Speaker 1: Tried to take away the super voting super voting right.

441
00:20:00,320 --> 00:20:03,680
Speaker 2: I know, it's good, it's really it's so unusual. Yeah,

442
00:20:03,720 --> 00:20:06,280
Speaker 2: it's so unusual. Like it's not that unusual to have

443
00:20:06,320 --> 00:20:10,760
Speaker 2: super voting rights, but like usually people try to not

444
00:20:11,400 --> 00:20:13,880
Speaker 2: have so little of the economics and have so much

445
00:20:13,920 --> 00:20:16,680
Speaker 2: of the voting rights. Yeah, sort of looks weird. Many

446
00:20:16,720 --> 00:20:18,880
Speaker 2: of the companies that you talk about it a lot.

447
00:20:18,960 --> 00:20:22,080
Speaker 2: The founders are still around. They're still running things, you

448
00:20:22,119 --> 00:20:24,000
Speaker 2: know you think about like Facebook, they're huge companies are

449
00:20:24,080 --> 00:20:27,919
Speaker 2: unlikely to sell right. Like here it's like share Edstone

450
00:20:28,000 --> 00:20:29,719
Speaker 2: is an air to like the sort of mogul who

451
00:20:29,800 --> 00:20:33,159
Speaker 2: ran it. She's interested in cashing out. You know, Usually

452
00:20:33,160 --> 00:20:37,000
Speaker 2: the super voting shares people are like that's designed to

453
00:20:37,320 --> 00:20:40,160
Speaker 2: keep control with the people who care the most about

454
00:20:40,160 --> 00:20:43,119
Speaker 2: the company, even if they have a minority economic interest.

455
00:20:43,359 --> 00:20:44,960
Speaker 2: But here that's not what it's doing. Here, it's like

456
00:20:45,280 --> 00:20:48,160
Speaker 2: just the cash benefit for someone who wants to get

457
00:20:48,200 --> 00:20:48,840
Speaker 2: rid of the company.

458
00:20:49,000 --> 00:20:51,879
Speaker 3: What I find amusing about this episode is that we're

459
00:20:52,119 --> 00:20:55,320
Speaker 3: all so interested in sort of the theater and the

460
00:20:55,359 --> 00:20:57,800
Speaker 3: drama of what this merger is actually going to be

461
00:20:57,920 --> 00:21:00,679
Speaker 3: that there hasn't, at least in my circle, has been

462
00:21:00,720 --> 00:21:03,959
Speaker 3: a lot of discussion on Okay, but what about the

463
00:21:03,960 --> 00:21:06,720
Speaker 3: future of Paramount, What about the actual business? Because they're

464
00:21:06,760 --> 00:21:09,920
Speaker 3: in a very tough industry, and it's funny that they

465
00:21:10,000 --> 00:21:13,600
Speaker 3: reported earnings this week paramounted and it was a total

466
00:21:13,640 --> 00:21:17,119
Speaker 3: non event. It was a complete afterthought the actual numbers.

467
00:21:16,880 --> 00:21:19,680
Speaker 2: Because the stock is not going to train on earnings, right. Yeah,

468
00:21:19,760 --> 00:21:22,840
Speaker 2: if you look at like the two bids, like it's unclear,

469
00:21:22,880 --> 00:21:25,960
Speaker 2: like what businesses stay with businesses go like, Yeah, it's

470
00:21:25,960 --> 00:21:27,720
Speaker 2: in a bit of a limbo about what it's actually

471
00:21:27,800 --> 00:21:28,520
Speaker 2: going forward.

472
00:21:28,280 --> 00:21:30,160
Speaker 4: Business is going to be.

473
00:21:44,359 --> 00:21:52,359
Speaker 1: Speaking of Viacom CBS, Bill Wang, what was that transition our.

474
00:21:52,320 --> 00:21:57,720
Speaker 3: Chade goos okay, one of their physicians, was that.

475
00:21:57,760 --> 00:22:00,159
Speaker 2: What brought him down? I had forgotten about that. I

476
00:22:00,200 --> 00:22:03,800
Speaker 2: made a gorgeous That was a great transition. I am sorry,

477
00:22:04,680 --> 00:22:08,560
Speaker 2: Bill Wang brought down by Viacom CBS. Go on, Bill Lang,

478
00:22:08,600 --> 00:22:11,880
Speaker 2: he's a guy, he's a former Tiger Cub hedge fund

479
00:22:11,920 --> 00:22:15,440
Speaker 2: manager who then left headge fund managing after an insider

480
00:22:15,480 --> 00:22:18,560
Speaker 2: trading incident and then ran his own family office called

481
00:22:18,560 --> 00:22:21,840
Speaker 2: our Kego's Capital Management. That briefly became like a thirty

482
00:22:21,880 --> 00:22:24,879
Speaker 2: billion dollar portfolio because he bought like twelve stocks on

483
00:22:25,040 --> 00:22:28,719
Speaker 2: which is ViacomCBS. He bought them with like huge amounts

484
00:22:28,720 --> 00:22:31,439
Speaker 2: of bargin borrowing or like total return swaps from like

485
00:22:31,680 --> 00:22:34,880
Speaker 2: a collection of banks. All these banks learned up lots

486
00:22:34,880 --> 00:22:37,280
Speaker 2: of money to buy stock. He bought all the stock.

487
00:22:37,400 --> 00:22:39,160
Speaker 2: The stock went up because he was buying so much

488
00:22:39,160 --> 00:22:41,480
Speaker 2: of it. Then he had a profit. He was able

489
00:22:41,520 --> 00:22:43,600
Speaker 2: to borrow more money against the profit from the banks

490
00:22:43,760 --> 00:22:45,879
Speaker 2: to buy more stock, and this kept going in like

491
00:22:45,920 --> 00:22:48,000
Speaker 2: a sort of like virtuous cycle where the stocks went

492
00:22:48,080 --> 00:22:49,360
Speaker 2: up and up and up, and he got to buy

493
00:22:49,400 --> 00:22:53,840
Speaker 2: more and more until Viacom CBS was like, car stock

494
00:22:53,840 --> 00:22:55,920
Speaker 2: price has gone in this incredible run, we should sell

495
00:22:55,960 --> 00:22:58,640
Speaker 2: some stock. So they sold some stock. The stock gap down.

496
00:22:59,320 --> 00:23:02,159
Speaker 2: He had a loss. His banks issued margin calls. He's like,

497
00:23:02,160 --> 00:23:03,800
Speaker 2: I don't have any money. I put every penny I

498
00:23:03,880 --> 00:23:07,440
Speaker 2: have into these twelve stocks, and they've let the stocks

499
00:23:07,480 --> 00:23:10,440
Speaker 2: all went down. He lost everything, and then he was

500
00:23:10,520 --> 00:23:13,119
Speaker 2: arrested and he's going on trial next week for market manipulation.

501
00:23:13,640 --> 00:23:16,280
Speaker 3: I am so interested in this trial. I feel like

502
00:23:16,680 --> 00:23:20,680
Speaker 3: that's going to be so interesting to follow. We also

503
00:23:20,720 --> 00:23:23,800
Speaker 3: have to talk about his charity as well. One of

504
00:23:23,840 --> 00:23:26,080
Speaker 3: the things actually that I was going to use to

505
00:23:26,160 --> 00:23:28,399
Speaker 3: lead into this was I have a new name for

506
00:23:28,480 --> 00:23:29,160
Speaker 3: your newsletter.

507
00:23:29,800 --> 00:23:31,800
Speaker 2: Oh, money fail, Yeah, which is.

508
00:23:31,720 --> 00:23:35,959
Speaker 1: A biblical reference. That's Genesis forty seven. Money failed, money failed.

509
00:23:36,200 --> 00:23:38,280
Speaker 2: Right. It's a biblical reference, but also not what you

510
00:23:38,320 --> 00:23:41,119
Speaker 2: want when you're a headsprend manager or a family office manager.

511
00:23:41,200 --> 00:23:43,720
Speaker 2: That was your job was to not have money fail. Yeah,

512
00:23:43,920 --> 00:23:44,639
Speaker 2: money that fail.

513
00:23:44,920 --> 00:23:47,800
Speaker 3: Okay, money failed, but the word of God doesn't fail.

514
00:23:48,040 --> 00:23:51,000
Speaker 3: That is a quote that was used to describe the situation,

515
00:23:51,119 --> 00:23:54,160
Speaker 3: which we don't have to get into but the trial itself.

516
00:23:54,200 --> 00:23:56,639
Speaker 3: So the trial going on trial next week. I wanted

517
00:23:56,640 --> 00:23:59,560
Speaker 3: to talk a little bit about the judge, Judge Alvin

518
00:23:59,760 --> 00:24:03,639
Speaker 3: held Stein. He oversaw lawsuits arising from the nine to

519
00:24:03,680 --> 00:24:06,920
Speaker 3: eleven attacks. He's also ninety years old, which I found

520
00:24:07,040 --> 00:24:10,359
Speaker 3: extremely impressive. You know what I won't be doing at

521
00:24:10,400 --> 00:24:11,160
Speaker 3: ninety years old.

522
00:24:12,080 --> 00:24:14,639
Speaker 2: I feel like this is tying back to the life insurance.

523
00:24:14,280 --> 00:24:18,680
Speaker 1: Right, but I will be selling my life insurance to Apollo.

524
00:24:19,119 --> 00:24:22,320
Speaker 2: I'll be doing at ninety years old, not podcasting.

525
00:24:22,520 --> 00:24:23,000
Speaker 4: Mm hmmm.

526
00:24:23,160 --> 00:24:23,440
Speaker 1: Yeah.

527
00:24:23,480 --> 00:24:27,640
Speaker 3: And I definitely won't be presiding over criminal trials. Yeah,

528
00:24:27,720 --> 00:24:29,760
Speaker 3: I mean this is going to be a big one.

529
00:24:30,760 --> 00:24:32,159
Speaker 3: Do you think about some of the charges that have

530
00:24:32,200 --> 00:24:34,480
Speaker 3: been brought against him, including RICO charges.

531
00:24:34,800 --> 00:24:37,280
Speaker 2: There's two sort of types of charges against them. There's

532
00:24:37,320 --> 00:24:42,919
Speaker 2: market manipulation charges, which I think is fascinating because his

533
00:24:43,000 --> 00:24:46,640
Speaker 2: defense it seems like, is I just like these stocks.

534
00:24:46,760 --> 00:24:48,880
Speaker 2: I thought they were undervalued, so I bought as much

535
00:24:48,880 --> 00:24:50,720
Speaker 2: as I could of them, and then the stocks shot up,

536
00:24:50,720 --> 00:24:53,520
Speaker 2: and then that all blew up. But they don't have

537
00:24:53,560 --> 00:24:56,040
Speaker 2: a lot of as far as I've seen so far

538
00:24:56,359 --> 00:24:58,359
Speaker 2: from like the charging documents, they don't seem to have

539
00:24:58,359 --> 00:25:01,520
Speaker 2: a lot of evidence against It's like a crime of intent, right,

540
00:25:01,560 --> 00:25:03,239
Speaker 2: Like if he bought these stocks because he thought they

541
00:25:03,240 --> 00:25:06,359
Speaker 2: were undervalued, then that's not market manipulation. If he bought

542
00:25:06,359 --> 00:25:10,000
Speaker 2: them because he wanted to push their prices up in

543
00:25:10,119 --> 00:25:13,240
Speaker 2: order to like get some benefit elsewhere, then it is

544
00:25:13,320 --> 00:25:15,440
Speaker 2: market manipulation. He didn't go around saying I'm going to

545
00:25:15,480 --> 00:25:17,000
Speaker 2: buy the stocks so I can push their prices up.

546
00:25:17,040 --> 00:25:18,840
Speaker 2: What would be the point of the market manipulation. I

547
00:25:18,880 --> 00:25:23,080
Speaker 2: think we talked on this podcast about the Mango markets guy.

548
00:25:23,280 --> 00:25:25,200
Speaker 1: It was hard first, oh yeah.

549
00:25:25,560 --> 00:25:28,480
Speaker 2: Last day of our lives. The Mango markets guy, he

550
00:25:28,600 --> 00:25:30,920
Speaker 2: like did some stuff in crypto where basically he pushed

551
00:25:30,960 --> 00:25:33,000
Speaker 2: up the price of this token and then extracted like

552
00:25:33,000 --> 00:25:35,959
Speaker 2: one hundred million dollars from the token exchange and then

553
00:25:36,040 --> 00:25:38,840
Speaker 2: ran away laughing right, Bill Wang pushed up the price

554
00:25:38,880 --> 00:25:41,120
Speaker 2: of these stocks and like borrowed more money against them

555
00:25:41,240 --> 00:25:42,800
Speaker 2: to push up the price of the stocks more and

556
00:25:42,840 --> 00:25:44,399
Speaker 2: then at the end it all collapsed and he ran

557
00:25:44,440 --> 00:25:47,000
Speaker 2: away with nothing more or less. He ran away with something.

558
00:25:47,040 --> 00:25:48,800
Speaker 2: But we'll get it to that. But the thing that

559
00:25:48,920 --> 00:25:51,080
Speaker 2: you do in market manipulation is one you push up

560
00:25:51,080 --> 00:25:52,560
Speaker 2: the price of the stock and then two you take

561
00:25:52,600 --> 00:25:54,120
Speaker 2: the money out. And he didn't take the money out.

562
00:25:54,160 --> 00:25:56,679
Speaker 2: What was the market manipulation. It's a very strange case.

563
00:25:56,840 --> 00:25:59,159
Speaker 2: He's got a real defensive. I wasn't manipulating the market.

564
00:25:59,400 --> 00:26:01,560
Speaker 2: And the way you do that is because I didn't

565
00:26:01,560 --> 00:26:06,000
Speaker 2: make any money. Now, to be fair, he gave this

566
00:26:06,119 --> 00:26:09,199
Speaker 2: talk about how money failed with this incredible slide. The

567
00:26:09,200 --> 00:26:11,600
Speaker 2: Bloomberg story about this. There's a picture of him standing

568
00:26:11,600 --> 00:26:13,960
Speaker 2: in front of his charity talking about how money failed

569
00:26:14,000 --> 00:26:15,640
Speaker 2: at the slide behind him, saying money failed.

570
00:26:15,680 --> 00:26:17,680
Speaker 1: Explanation but beauty and simplicity.

571
00:26:17,840 --> 00:26:20,760
Speaker 2: It's so good. It's like the level of PowerPoint that

572
00:26:20,800 --> 00:26:23,920
Speaker 2: I aspire to. He gave that talk at his charitable foundation,

573
00:26:24,320 --> 00:26:27,919
Speaker 2: which runs five hundred million dollars of assets, which is like,

574
00:26:28,320 --> 00:26:30,680
Speaker 2: it's a lot. He didn't walk away from Archagos with

575
00:26:30,840 --> 00:26:33,640
Speaker 2: no money. You worked away with five hundred million dollars

576
00:26:33,680 --> 00:26:36,240
Speaker 2: in this charitable foundation. And in fact, the Bloomberg Sorry

577
00:26:36,280 --> 00:26:38,960
Speaker 2: mentions that like several of the old traders from Archagos

578
00:26:39,000 --> 00:26:41,439
Speaker 2: are now working as traders at the charity foundation. So

579
00:26:41,480 --> 00:26:43,600
Speaker 2: it's like a little bit he like scrolled away part

580
00:26:43,600 --> 00:26:45,240
Speaker 2: of the hedge fund into the child of foundation.

581
00:26:45,480 --> 00:26:48,720
Speaker 3: Yeah, and apparently it's assets screws significantly in twenty twenty three.

582
00:26:48,880 --> 00:26:50,920
Speaker 2: Just is it it's run by some hedge fund traders.

583
00:26:51,000 --> 00:26:52,600
Speaker 1: Yeah, I want to know what they're doing.

584
00:26:53,160 --> 00:26:56,679
Speaker 2: Probably buying a concentrated portfolio stocks that are going up.

585
00:26:56,880 --> 00:26:57,440
Speaker 1: There you go.

586
00:26:57,720 --> 00:26:59,720
Speaker 2: I would say. The other charges against him, though, are

587
00:26:59,760 --> 00:27:02,639
Speaker 2: like about lying to banks, and that's much worse because

588
00:27:02,640 --> 00:27:04,679
Speaker 2: there's like an email chain and it's mostly not from him.

589
00:27:04,720 --> 00:27:06,719
Speaker 2: It's mostly from his Like it's like underlings, but like

590
00:27:06,840 --> 00:27:08,480
Speaker 2: it's you know, saying, oh, no, we don't have a

591
00:27:08,520 --> 00:27:10,680
Speaker 2: concentrated portfolio of twelve stocks that we couldn't sell that

592
00:27:10,720 --> 00:27:12,840
Speaker 2: oft we're very diversified. And then like that's not true.

593
00:27:12,880 --> 00:27:15,760
Speaker 2: So there's some bad stuff there and the bad stuff

594
00:27:15,760 --> 00:27:17,600
Speaker 2: it's one like that's a crime, and lining to a

595
00:27:17,600 --> 00:27:18,840
Speaker 2: bank is a crime. You can get a jail for

596
00:27:18,880 --> 00:27:21,040
Speaker 2: a long time. But then also just like if you're

597
00:27:21,200 --> 00:27:24,439
Speaker 2: asking the question of was he manipulating the stock market?

598
00:27:24,840 --> 00:27:29,080
Speaker 2: Was he manipulating these stocks? Like just by the shape

599
00:27:29,080 --> 00:27:31,679
Speaker 2: of his trades, you'd be like maybe not, maybe just

600
00:27:31,760 --> 00:27:33,520
Speaker 2: like the stocks because he didn't throw any money. But

601
00:27:33,560 --> 00:27:34,639
Speaker 2: then you're like, oh, and I'll see he was lying

602
00:27:34,680 --> 00:27:36,520
Speaker 2: to the banks. It's like, okay, I was probably doing something.

603
00:27:37,119 --> 00:27:38,840
Speaker 3: And just to put some numbers on it when it

604
00:27:38,880 --> 00:27:42,240
Speaker 3: comes to how much the bank's actually lost, we're talking

605
00:27:42,240 --> 00:27:46,000
Speaker 3: about how Viacom CBS brought down our Chagos.

606
00:27:46,080 --> 00:27:47,680
Speaker 2: Well brought down see credit.

607
00:27:48,200 --> 00:27:49,800
Speaker 3: Yeah, it was one of the things that brought down

608
00:27:49,880 --> 00:27:52,440
Speaker 3: Credit Sweee or in the chain of dominoes, it was

609
00:27:52,440 --> 00:27:54,440
Speaker 3: somewhere in there because Credit Sweee lost five and a

610
00:27:54,440 --> 00:27:57,320
Speaker 3: half billion dollars. No Mirror lost three billion dollars. Morgan

611
00:27:57,400 --> 00:28:00,440
Speaker 3: Stanley more than nine million dollars. So I mean it's

612
00:28:00,480 --> 00:28:03,399
Speaker 3: not chump change that we're talking about. This caused really

613
00:28:03,640 --> 00:28:04,880
Speaker 3: widespread damage.

614
00:28:05,000 --> 00:28:07,040
Speaker 2: Yeah, I mean he had like a thirty six billion

615
00:28:07,119 --> 00:28:09,880
Speaker 2: dollar portfolio that went poof, and like he lost whatever

616
00:28:09,880 --> 00:28:11,560
Speaker 2: equity he had, but like a lot of banks lost

617
00:28:11,600 --> 00:28:12,320
Speaker 2: a lot of money too.

618
00:28:12,440 --> 00:28:14,560
Speaker 3: That was a wild moment in time. I mean it

619
00:28:14,600 --> 00:28:17,240
Speaker 3: was also what was that twenty twenty one, Yeah, March

620
00:28:17,280 --> 00:28:20,560
Speaker 3: twenty twenty one. That was just a very upside down

621
00:28:20,640 --> 00:28:21,400
Speaker 3: time for everyone.

622
00:28:21,560 --> 00:28:26,040
Speaker 2: It was a wild time that was like, hey, this

623
00:28:26,160 --> 00:28:28,840
Speaker 2: thing you've never heard of called Archagos is like the

624
00:28:28,880 --> 00:28:29,880
Speaker 2: biggest Dutch front in the world.

625
00:28:29,920 --> 00:28:32,120
Speaker 3: For like a week, no one knew how to pronounce it.

626
00:28:32,400 --> 00:28:35,080
Speaker 3: I remember I would have to go on and do

627
00:28:35,400 --> 00:28:38,840
Speaker 3: like telephone phoners for television and trying to be googling

628
00:28:39,040 --> 00:28:42,360
Speaker 3: and youtubing. How do I pronounce this? Archigos was something

629
00:28:42,400 --> 00:28:44,440
Speaker 3: I'm pretty sure I said a few different times.

630
00:28:44,440 --> 00:28:47,320
Speaker 2: I will understandable. Yeah, yeah, Like I'm always sort of

631
00:28:47,360 --> 00:28:49,720
Speaker 2: allergic to the financial trip of like this company you've

632
00:28:49,760 --> 00:28:52,320
Speaker 2: never heard of, controls the world right, because it's now

633
00:28:52,320 --> 00:28:54,880
Speaker 2: you've heard of Jane Street, you've heard of whatever, Like yeah,

634
00:28:54,920 --> 00:28:57,480
Speaker 2: I feel like really people had not heard of Archagos

635
00:28:57,480 --> 00:29:00,160
Speaker 2: because it really was like one guy's family office. And

636
00:29:00,200 --> 00:29:04,000
Speaker 2: then it was a gigantic hedge fund that or family office.

637
00:29:04,160 --> 00:29:05,640
Speaker 2: By the way, I would call it a hedge fund.

638
00:29:05,760 --> 00:29:08,520
Speaker 2: People from the hedge fund industry would be like, you're

639
00:29:08,680 --> 00:29:10,880
Speaker 2: slandering us. Okay, it's a hedge fund. It is not

640
00:29:10,960 --> 00:29:12,880
Speaker 2: a hedge fund. It is just a family office. It

641
00:29:12,960 --> 00:29:13,160
Speaker 2: is not.

642
00:29:13,520 --> 00:29:16,120
Speaker 3: Yeah, I can tell that you've been chewing on that,

643
00:29:16,240 --> 00:29:18,440
Speaker 3: like what to call it? Just in this conversation.

644
00:29:18,760 --> 00:29:21,680
Speaker 2: It's a thirty six billion dollar fund run by a

645
00:29:21,680 --> 00:29:23,880
Speaker 2: hedgehund manager. It feels like a hedge fund, even though

646
00:29:24,000 --> 00:29:24,880
Speaker 2: it was only his money.

647
00:29:25,920 --> 00:29:26,840
Speaker 1: It was only his money.

648
00:29:41,520 --> 00:29:46,040
Speaker 2: Mail bag, mail bag, we need we need a musical cube.

649
00:29:46,120 --> 00:29:47,120
Speaker 1: We should just both sing.

650
00:29:47,840 --> 00:29:49,040
Speaker 2: Perhaps only you should sing.

651
00:29:49,640 --> 00:29:52,400
Speaker 1: No, it could be cute if we harmonize.

652
00:29:52,560 --> 00:29:54,720
Speaker 2: It would it would be less cute if I harmon.

653
00:29:56,360 --> 00:30:02,280
Speaker 1: You go high, I'll go low. You did get a

654
00:30:02,280 --> 00:30:04,640
Speaker 1: lot of that's a mail this week.

655
00:30:04,840 --> 00:30:08,760
Speaker 2: We got emails at the money pod at Bloomberg dot

656
00:30:08,840 --> 00:30:12,160
Speaker 2: net email address. And now we will read some of them.

657
00:30:12,280 --> 00:30:15,200
Speaker 2: If you want your emails we read, send it to

658
00:30:15,520 --> 00:30:17,960
Speaker 2: money Pod at Bloomberg dot net and we'll see what

659
00:30:18,000 --> 00:30:18,360
Speaker 2: we can do.

660
00:30:18,680 --> 00:30:21,560
Speaker 1: Phil the Jeweler had some facts for us.

661
00:30:21,760 --> 00:30:24,320
Speaker 2: I don't think he signed his name Phil the Jeweler's.

662
00:30:23,880 --> 00:30:26,680
Speaker 3: But his name is Phil and he is a metals

663
00:30:26,680 --> 00:30:31,080
Speaker 3: and jewelry design professor. Okay, so Phil writes, I'm going

664
00:30:31,120 --> 00:30:32,800
Speaker 3: to imagine that you are going to get a lot

665
00:30:32,800 --> 00:30:35,360
Speaker 3: of this. But an ounce of gold does not weigh

666
00:30:35,360 --> 00:30:38,640
Speaker 3: an ounce, or more specifically, gold is typically described and

667
00:30:38,680 --> 00:30:41,280
Speaker 3: sold in Troy ounces and not the normal ounce we

668
00:30:41,280 --> 00:30:46,840
Speaker 3: were used to. I can't pronounce that word avoir dupois ounce.

669
00:30:47,120 --> 00:30:47,520
Speaker 1: I don't know.

670
00:30:47,720 --> 00:30:48,640
Speaker 2: This is pretty good.

671
00:30:48,840 --> 00:30:51,880
Speaker 3: So an ounce of gold weighs almost one point one ounces.

672
00:30:52,080 --> 00:30:54,760
Speaker 3: I'm guessing you probably already know this, but just because

673
00:30:54,760 --> 00:30:56,560
Speaker 3: you mentioned that an ounce of gold weight an ounce,

674
00:30:56,640 --> 00:30:59,040
Speaker 3: I thought I would just send it in case. So

675
00:30:59,400 --> 00:31:02,120
Speaker 3: I can't remember remember exactly how this originated.

676
00:31:02,240 --> 00:31:04,640
Speaker 2: Okay, So you were talking about how gold is heavy, yeah,

677
00:31:04,680 --> 00:31:06,240
Speaker 2: and you were like, it costs like forty dollars to

678
00:31:06,240 --> 00:31:09,200
Speaker 2: mail an ounce of gold, and I was like, that's

679
00:31:09,240 --> 00:31:12,040
Speaker 2: not that heavy, Like it's dense, but an ounce of

680
00:31:12,080 --> 00:31:15,480
Speaker 2: gold weighs an ounce, And now we have received a

681
00:31:15,480 --> 00:31:17,600
Speaker 2: reader correction pointing out that anounce of gold does not

682
00:31:17,600 --> 00:31:18,760
Speaker 2: weigh an ounce, which is really wild.

683
00:31:19,040 --> 00:31:22,160
Speaker 3: Let me clarify what I'm What I was trying to

684
00:31:22,200 --> 00:31:25,320
Speaker 3: say is that it's expensive to mail gold.

685
00:31:25,400 --> 00:31:28,120
Speaker 1: I know, do you want to talk about old fashions.

686
00:31:27,720 --> 00:31:31,160
Speaker 2: A little bit? So getting a correction from a reader

687
00:31:31,200 --> 00:31:33,200
Speaker 2: that announce of gold does not weigh announces one of

688
00:31:33,200 --> 00:31:35,640
Speaker 2: my better corrections. But it reminds me of my very

689
00:31:35,640 --> 00:31:39,360
Speaker 2: favorite probably reader mail bag of all time, which is it?

690
00:31:39,440 --> 00:31:43,120
Speaker 2: Years ago I was writing about some article that described

691
00:31:43,360 --> 00:31:45,800
Speaker 2: like a quantity of sugar and they were like, that's

692
00:31:45,920 --> 00:31:48,920
Speaker 2: enough to fill three thousand Olympic sized swimming pools. And

693
00:31:48,960 --> 00:31:51,960
Speaker 2: I was like, how is that a helpful description?

694
00:31:52,400 --> 00:31:52,600
Speaker 3: Yeah?

695
00:31:52,760 --> 00:31:55,080
Speaker 2: Who puts sugar in swimming pools? And so I wrote

696
00:31:55,160 --> 00:31:57,800
Speaker 2: jokingly like, if you combine three thousand Olympic sized swimming

697
00:31:57,800 --> 00:32:00,520
Speaker 2: pools of sugar with three thousand swimming pools of to

698
00:32:00,520 --> 00:32:02,960
Speaker 2: form six thousand Olympics sized swimming pools of simple syrup,

699
00:32:03,160 --> 00:32:05,040
Speaker 2: having Katie that ike, you swim through them and then

700
00:32:05,120 --> 00:32:08,280
Speaker 2: use the syrup to make three trillion old fashioned cocktails.

701
00:32:08,800 --> 00:32:11,720
Speaker 2: And I got so many emails.

702
00:32:11,800 --> 00:32:12,880
Speaker 1: I mean, that's just bait.

703
00:32:13,040 --> 00:32:15,360
Speaker 2: I got emails that were like, actually, if you combine

704
00:32:15,360 --> 00:32:17,480
Speaker 2: three thousand pools of sugar with three thousand pools of water,

705
00:32:17,680 --> 00:32:20,320
Speaker 2: you wouldn't get six thousand pools because the sugar dissolves

706
00:32:20,320 --> 00:32:23,400
Speaker 2: in the water. The syrup that it makes is denser

707
00:32:23,440 --> 00:32:25,160
Speaker 2: than the water, So you'd only be able to fill

708
00:32:25,160 --> 00:32:27,800
Speaker 2: about forty five hundred pools with the combination of those

709
00:32:27,840 --> 00:32:28,760
Speaker 2: three thousand.

710
00:32:28,280 --> 00:32:30,520
Speaker 1: And kind of shocked that you would make such an

711
00:32:30,640 --> 00:32:31,240
Speaker 1: error like that.

712
00:32:31,400 --> 00:32:34,600
Speaker 2: In retrospect, it seemed obvious and I was embarrassed. I

713
00:32:34,640 --> 00:32:36,760
Speaker 2: also got to read your emails. It was around the

714
00:32:36,800 --> 00:32:38,640
Speaker 2: time of the Olympics. Kitty that Ichi was in the news.

715
00:32:38,760 --> 00:32:41,120
Speaker 2: I read about her swimming through these pools of syrup,

716
00:32:41,160 --> 00:32:43,000
Speaker 2: and I said something like it would probably take her

717
00:32:43,000 --> 00:32:45,320
Speaker 2: longer than her usual time to swim through a pool

718
00:32:45,320 --> 00:32:46,760
Speaker 2: of syrup because it's.

719
00:32:46,680 --> 00:32:48,520
Speaker 1: Thick and gooey, And you were kind of wrong on that.

720
00:32:48,640 --> 00:32:51,600
Speaker 2: I was wrong on that too. Apparently Isaac Newton wrote

721
00:32:51,600 --> 00:32:54,080
Speaker 2: about this because it's like it's harder to get through

722
00:32:54,120 --> 00:32:56,640
Speaker 2: the pools. I'm making swimming motions that you can't see

723
00:32:56,720 --> 00:32:57,280
Speaker 2: on this audio.

724
00:32:57,280 --> 00:32:58,880
Speaker 1: On the podcast they're very convincing.

725
00:32:58,960 --> 00:33:01,600
Speaker 2: It's hard. It's harder to move through the pool because

726
00:33:01,640 --> 00:33:03,960
Speaker 2: it's thick, but you also get more forced because you're

727
00:33:04,000 --> 00:33:06,680
Speaker 2: pushing off on thicker stuff and they cancel out. And

728
00:33:06,800 --> 00:33:09,840
Speaker 2: actually professors had done experiments and it turns out to

729
00:33:09,840 --> 00:33:11,800
Speaker 2: be true. You can serve just as fast and syrup

730
00:33:11,960 --> 00:33:12,880
Speaker 2: as you can in water.

731
00:33:13,120 --> 00:33:16,880
Speaker 3: So one of my like rich person fantasies is a

732
00:33:17,200 --> 00:33:19,960
Speaker 3: sort of uh is to fill up a pool with

733
00:33:20,240 --> 00:33:22,600
Speaker 3: pudding or jell o and see what that would be like.

734
00:33:22,760 --> 00:33:26,440
Speaker 3: But a little worried about suffocating, right, I.

735
00:33:26,360 --> 00:33:28,560
Speaker 2: Don't want to give you any advice. Yeah, but it

736
00:33:28,560 --> 00:33:30,880
Speaker 2: does seem like you could swim as fast through putting

737
00:33:31,120 --> 00:33:33,640
Speaker 2: as you could through water. But I don't know what

738
00:33:33,800 --> 00:33:36,240
Speaker 2: the sinking situation that is. We're going to get email

739
00:33:36,240 --> 00:33:37,080
Speaker 2: about that too good.

740
00:33:37,120 --> 00:33:40,240
Speaker 3: No, please someone write in about that, because obviously in

741
00:33:40,280 --> 00:33:42,720
Speaker 3: water you float. I don't think you float and pudding.

742
00:33:42,920 --> 00:33:44,840
Speaker 2: I'm not trying to speculate, but our readers will.

743
00:33:44,840 --> 00:33:49,880
Speaker 3: On one, you learned your lessons, Okay, moving swiftly along,

744
00:33:50,320 --> 00:33:52,640
Speaker 3: so Alex writes in a version of the Great Consumer

745
00:33:52,680 --> 00:33:56,600
Speaker 3: Financial Arbitrage I've heard goes as follow one get a

746
00:33:56,600 --> 00:33:59,200
Speaker 3: no limit credit card from a bank, two using that

747
00:33:59,280 --> 00:34:02,720
Speaker 3: card by the three have the bank forgive your credit

748
00:34:02,720 --> 00:34:06,080
Speaker 3: card debt for profit question mark you own a bank now,

749
00:34:06,160 --> 00:34:06,920
Speaker 3: can't be that hard.

750
00:34:07,160 --> 00:34:08,839
Speaker 2: So why can't you buy a bank of a credit card?

751
00:34:09,040 --> 00:34:12,120
Speaker 2: Because merchants have to agree to accept credit cards, right,

752
00:34:12,120 --> 00:34:14,120
Speaker 2: because it costs money to accept the credit card. Right,

753
00:34:14,160 --> 00:34:15,759
Speaker 2: every time you do a credit card transaction, you have

754
00:34:15,760 --> 00:34:17,320
Speaker 2: to pay the credit card company like one and a

755
00:34:17,320 --> 00:34:20,200
Speaker 2: half percent or two percent of the transaction. So a

756
00:34:20,200 --> 00:34:22,600
Speaker 2: lot of businesses want to accept credit cards so they

757
00:34:22,600 --> 00:34:24,520
Speaker 2: can increase their seals. But M and A bankers are

758
00:34:24,520 --> 00:34:26,520
Speaker 2: not one of those businesses, right, They're like not going

759
00:34:26,560 --> 00:34:29,120
Speaker 2: to pay two percent to the credit card company. And also,

760
00:34:29,239 --> 00:34:32,040
Speaker 2: like if you get a credit card to buy a bank,

761
00:34:32,200 --> 00:34:34,560
Speaker 2: the credit card is not going to have a sufficient

762
00:34:34,600 --> 00:34:36,279
Speaker 2: limit to buy the bank. You're not going to have

763
00:34:36,320 --> 00:34:39,200
Speaker 2: like a one hundred million dollar ten billion dollar credit

764
00:34:39,239 --> 00:34:42,640
Speaker 2: limit on your credit card. That said, the basic idea

765
00:34:43,040 --> 00:34:46,760
Speaker 2: of like step one, borrow money, step two, buy a bank,

766
00:34:46,920 --> 00:34:49,560
Speaker 2: step three forgive the loan is like kind of a

767
00:34:49,600 --> 00:34:52,480
Speaker 2: really deep one. A lot of finance, a lot of

768
00:34:52,480 --> 00:34:55,240
Speaker 2: financial companies work this way where you have a giant

769
00:34:55,239 --> 00:34:57,960
Speaker 2: pool of assets that is very levered. So at bank

770
00:34:58,280 --> 00:35:01,359
Speaker 2: with ten billion dollars of ho assets will probably have

771
00:35:01,800 --> 00:35:04,560
Speaker 2: stock that's worth one billion dollars or less. Right, it

772
00:35:04,600 --> 00:35:07,800
Speaker 2: will be like ten to oneish ratio of assets to stock.

773
00:35:08,080 --> 00:35:10,160
Speaker 2: If you could get a billion dollars and buy the stock,

774
00:35:10,480 --> 00:35:13,000
Speaker 2: then you would control ten billion dollars of assets. Then

775
00:35:13,000 --> 00:35:14,960
Speaker 2: you could just lend it all to yourself and forgive

776
00:35:14,960 --> 00:35:17,200
Speaker 2: the loan, and then you have a huge profit. This

777
00:35:17,400 --> 00:35:20,640
Speaker 2: works financially. It's a good idea, except that it's like

778
00:35:20,719 --> 00:35:23,360
Speaker 2: wildly illegal because you're stealing the money from the bank's customers.

779
00:35:23,560 --> 00:35:26,440
Speaker 2: But like much of bank regulation is cured around preventing

780
00:35:26,520 --> 00:35:28,880
Speaker 2: people from doing that, right, like the rules regulating related

781
00:35:28,920 --> 00:35:31,120
Speaker 2: party loans, so that the president of a bank who

782
00:35:31,160 --> 00:35:34,160
Speaker 2: controls the one billion dollars of bank stock doesn't lend

783
00:35:34,200 --> 00:35:36,840
Speaker 2: himself ten billion dollars and then forgive it. There's rules

784
00:35:36,880 --> 00:35:39,680
Speaker 2: around that. Because it is a good idea, you don't

785
00:35:39,680 --> 00:35:41,160
Speaker 2: see it that much in banking, but you see it

786
00:35:41,200 --> 00:35:45,000
Speaker 2: a lot in insurance, where smart investors will.

787
00:35:44,800 --> 00:35:48,879
Speaker 1: Say, let's buy life insurance policies so that but.

788
00:35:48,960 --> 00:35:51,160
Speaker 2: No, what I was thinking of is smart investors will

789
00:35:51,160 --> 00:35:53,480
Speaker 2: say I have a million dollars. I would like to

790
00:35:53,680 --> 00:35:56,320
Speaker 2: make investments. I'm really good at making investments. I'd like

791
00:35:56,360 --> 00:35:58,319
Speaker 2: to make ten million dollars of investments. How can I

792
00:35:58,360 --> 00:36:00,480
Speaker 2: do that? I only have one million dollars. Will buy

793
00:36:00,520 --> 00:36:03,359
Speaker 2: a life insurance company for one million dollars, and then

794
00:36:03,480 --> 00:36:05,160
Speaker 2: I will have the life insurance comp You know, life

795
00:36:05,160 --> 00:36:07,680
Speaker 2: insurance also a very levered company, right, it has all

796
00:36:07,680 --> 00:36:11,000
Speaker 2: this policyholder assets that it can invest. I will buy

797
00:36:11,000 --> 00:36:13,399
Speaker 2: the life insurance company stock for a million dollars. I'll

798
00:36:13,400 --> 00:36:16,000
Speaker 2: take over the life insurance company, and then I'll have

799
00:36:16,040 --> 00:36:18,600
Speaker 2: ten million dollars to invest in all my other good ideas. Right.

800
00:36:19,760 --> 00:36:22,800
Speaker 2: Sometimes people get arrested for this when like they're good ideas,

801
00:36:22,840 --> 00:36:26,040
Speaker 2: are like they're other weird companies that they are making

802
00:36:26,200 --> 00:36:29,560
Speaker 2: concentrated risky bets that sort of run a foul of

803
00:36:29,640 --> 00:36:32,319
Speaker 2: life insurance standards. Other times, people who do this are

804
00:36:33,360 --> 00:36:35,799
Speaker 2: Warren Buffett, Like Warren Buffett, right, Like buy a life

805
00:36:35,800 --> 00:36:37,680
Speaker 2: insurance company and now he like controls a life insurance

806
00:36:37,680 --> 00:36:39,799
Speaker 2: company and gets to make investments. And everyone's like, oh,

807
00:36:39,800 --> 00:36:41,759
Speaker 2: he's so good at making investments. It's good that he

808
00:36:41,800 --> 00:36:43,920
Speaker 2: has this giant pool of life insurance money to invest

809
00:36:44,080 --> 00:36:48,240
Speaker 2: and that's true, But like taking over a levered financial

810
00:36:48,239 --> 00:36:50,960
Speaker 2: institution in order to control the money of that levered

811
00:36:50,960 --> 00:36:54,000
Speaker 2: financial institution is a great idea, and people do it sometimes.

812
00:36:54,320 --> 00:36:56,600
Speaker 1: So Alex sounds like you're on the right.

813
00:36:56,440 --> 00:36:59,480
Speaker 2: Track, except for the illegality, right.

814
00:36:59,360 --> 00:37:02,640
Speaker 3: For sure, keep thinking, so, Steve writes in with some

815
00:37:02,760 --> 00:37:05,719
Speaker 3: stern words for you. He says, from time to time

816
00:37:05,800 --> 00:37:09,520
Speaker 3: you mentioned dentists in your commentaries, certainly with more frequency

817
00:37:09,560 --> 00:37:13,000
Speaker 3: than one would expect from a financial writer. Sometimes use

818
00:37:13,120 --> 00:37:17,840
Speaker 3: dentists as the archetypal rubes getting scammed for an unsophisticated

819
00:37:17,880 --> 00:37:20,719
Speaker 3: financial crime. I want to be shocked and offended by

820
00:37:20,760 --> 00:37:24,680
Speaker 3: such a portrayal, perhaps having the American Dental Association brand

821
00:37:24,760 --> 00:37:28,520
Speaker 3: you as an anti dentype. My discussions with colleagues seem

822
00:37:28,560 --> 00:37:31,080
Speaker 3: to bear that out, that sure enough, dentists are greater

823
00:37:31,160 --> 00:37:34,920
Speaker 3: rubes than the average well educated professional. Could you comment

824
00:37:35,040 --> 00:37:38,400
Speaker 3: on what you think uniquely qualifies dentists to be such rubes,

825
00:37:38,640 --> 00:37:42,680
Speaker 3: and more generally, what makes a good target for financial criminals.

826
00:37:43,160 --> 00:37:45,120
Speaker 2: I'm sorry to the dentists. I don't think I ever

827
00:37:45,160 --> 00:37:49,000
Speaker 2: really thought about it much as like dentists specifically. In fact,

828
00:37:49,000 --> 00:37:50,880
Speaker 2: I think I once wrote that The general rule of

829
00:37:51,000 --> 00:37:53,400
Speaker 2: US securities law is that you're not allowed to invest

830
00:37:53,440 --> 00:37:56,759
Speaker 2: in risky, weird private companies unless you're a dentist. But

831
00:37:56,800 --> 00:37:59,640
Speaker 2: then I qualified it and said or a radiologist or

832
00:38:00,239 --> 00:38:02,799
Speaker 2: a retired professional football player. I mean. The point is

833
00:38:02,840 --> 00:38:08,919
Speaker 2: that there are rules that say only qualified investors, any

834
00:38:09,200 --> 00:38:12,959
Speaker 2: accredited investors they called, can invest in certain private offerings. Right.

835
00:38:13,080 --> 00:38:20,000
Speaker 2: Private offerings typically have less disclosure, weirder financials, more fees,

836
00:38:20,280 --> 00:38:23,560
Speaker 2: more hidden fees than like public market investments. And so

837
00:38:23,600 --> 00:38:25,320
Speaker 2: there are a lot of people in the world whose

838
00:38:25,400 --> 00:38:28,160
Speaker 2: job it is to find people to invest in not

839
00:38:28,360 --> 00:38:32,279
Speaker 2: very good privately marketed investments. And so those people are

840
00:38:32,320 --> 00:38:35,080
Speaker 2: looking for accredited investors. Right. They're looking for people who

841
00:38:35,160 --> 00:38:38,200
Speaker 2: make more than a certain amount of money, and dentists

842
00:38:38,280 --> 00:38:41,040
Speaker 2: are a nice target because they all pretty much make

843
00:38:41,080 --> 00:38:43,520
Speaker 2: more than the accredited investor threshold, which I think is

844
00:38:43,560 --> 00:38:46,480
Speaker 2: like two hundred thousand dollars a year. But they're not

845
00:38:46,840 --> 00:38:50,480
Speaker 2: typically millionaires, so they don't have like a family office

846
00:38:50,480 --> 00:38:53,840
Speaker 2: that devets investments for them. They're not like tech startup

847
00:38:54,200 --> 00:38:57,560
Speaker 2: people who've exited Tech startups are good targets for private investments,

848
00:38:57,560 --> 00:39:00,520
Speaker 2: but they're like connected to venture capitalists. It's a good

849
00:39:00,560 --> 00:39:02,840
Speaker 2: venture capital investments. If you're just like a dentist in

850
00:39:02,840 --> 00:39:04,920
Speaker 2: the middle of the country, you have no like necessary

851
00:39:04,960 --> 00:39:08,800
Speaker 2: like connections to high finance, but you have enough money

852
00:39:08,960 --> 00:39:11,879
Speaker 2: to be put into really bad investment decisions. So people

853
00:39:11,920 --> 00:39:14,319
Speaker 2: are targeting you. It's not that you're bad, it's that

854
00:39:14,360 --> 00:39:16,920
Speaker 2: you're in that like narrow band of rich enough to

855
00:39:17,000 --> 00:39:19,640
Speaker 2: have access to like the worst possible investments, but also

856
00:39:19,760 --> 00:39:21,239
Speaker 2: not so rich that you have access to the best

857
00:39:21,239 --> 00:39:23,600
Speaker 2: possible investments. So I think that's the main reason.

858
00:39:23,719 --> 00:39:24,520
Speaker 1: Well, thank you for that.

859
00:39:24,840 --> 00:39:29,920
Speaker 2: Sorry dentists, no bad. Yeah, you can send you know

860
00:39:30,080 --> 00:39:32,680
Speaker 2: through money pot at Bloomberg dot net if you want

861
00:39:32,760 --> 00:39:36,360
Speaker 2: to be a participant in a future mail bag segments.

862
00:39:36,480 --> 00:39:39,319
Speaker 3: So you did sing, We're going to get that out there,

863
00:39:41,840 --> 00:39:44,200
Speaker 3: mash them together like the harmonize.

864
00:39:44,239 --> 00:39:47,279
Speaker 1: You did go high, So that was perfect. Should I

865
00:39:47,320 --> 00:39:49,240
Speaker 1: go low? Anyway?

866
00:39:49,239 --> 00:39:50,400
Speaker 2: That was the Many Stuff podcasts.

867
00:39:50,560 --> 00:39:52,560
Speaker 1: I'm Matt Levin and I'm Katie Greefeld.

868
00:39:52,840 --> 00:39:54,680
Speaker 2: You can find my work by subscribing to the Money

869
00:39:54,719 --> 00:39:55,600
Speaker 2: Stuff newsletter on.

870
00:39:55,560 --> 00:39:58,240
Speaker 3: Bloomberg dot com, and you can find me on Bloomberg

871
00:39:58,280 --> 00:40:01,839
Speaker 3: TV every day between ten to eleven am Eastern we'd

872
00:40:01,880 --> 00:40:02,800
Speaker 3: love to hear from you.

873
00:40:02,800 --> 00:40:05,399
Speaker 2: You can send an email to Moneypod at bloomberg dot net,

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Speaker 2: ask us a question and we might answer it on

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Speaker 2: the air.

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Speaker 3: You can also subscribe to our show wherever you're listening

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Speaker 3: right now and leave us a review. It helps more

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Speaker 3: people find the show.

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Speaker 2: The Money Stuff Podcast is produced by Ana Mazerakus and

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Speaker 2: Roses adam Our.

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Speaker 1: Theme music was composed by Blake Maples.

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Speaker 2: Brandon Francis Newnham is our executive producer.

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Speaker 1: And Sage Bauman is Bloomberg's head of Podcasts.

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Speaker 2: Thanks for listening to The Money Stuff Podcast. We'll be

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Speaker 2: back next week with more stuff.