1 00:00:03,160 --> 00:00:08,800 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:11,160 --> 00:00:14,360 Speaker 2: Hello and welcome to The Money Stuff Podcast, your weekly 3 00:00:14,400 --> 00:00:19,080 Speaker 2: podcast where we talk about stuff related to money. I'm 4 00:00:19,079 --> 00:00:21,079 Speaker 2: Matt Levin and I write the Money Stuff column for 5 00:00:21,079 --> 00:00:21,919 Speaker 2: Bloomberg Opinion. 6 00:00:22,239 --> 00:00:24,799 Speaker 1: And I'm Katie Greifeld, a reporter for Bloomberg News and 7 00:00:24,840 --> 00:00:26,480 Speaker 1: an anchor for Bloomberg Television. 8 00:00:27,320 --> 00:00:28,880 Speaker 2: Katie, what are we talking about today? 9 00:00:29,240 --> 00:00:33,000 Speaker 1: We're going to talk about Direct TV buying Dish. We're 10 00:00:33,040 --> 00:00:36,680 Speaker 1: going to talk about fan duel and gambling addiction, and 11 00:00:36,720 --> 00:00:46,000 Speaker 1: we're also going to talk about Apollo. Hey, Matt, have 12 00:00:46,120 --> 00:00:47,720 Speaker 1: you ever gotten a really bad haircut? 13 00:00:48,080 --> 00:00:50,519 Speaker 2: I've almost exclusively gotten really bad haircuts. 14 00:00:50,520 --> 00:00:52,239 Speaker 1: I feel like I reached you cut that out. 15 00:00:52,360 --> 00:00:55,160 Speaker 2: I've recently moved on to getting better haircuts, but for 16 00:00:55,280 --> 00:00:56,600 Speaker 2: much of my life I got bad. 17 00:00:56,640 --> 00:00:58,920 Speaker 1: Your last few haircuts, I've said, you've got a haircut. 18 00:00:58,960 --> 00:00:59,520 Speaker 1: It looks nice. 19 00:00:59,560 --> 00:01:01,080 Speaker 2: Thank you. That's the highest compliment. 20 00:01:01,160 --> 00:01:04,319 Speaker 1: It's really easy to tell with men because you shorter hair. Anyway, 21 00:01:04,400 --> 00:01:09,399 Speaker 1: moving so long. So direct TV paying one dollar for 22 00:01:09,480 --> 00:01:13,480 Speaker 1: Dish and nine point seventy five billion dollars of debt. 23 00:01:13,920 --> 00:01:16,120 Speaker 2: Or less than that. Yeah, Well, go on, tell me 24 00:01:16,160 --> 00:01:20,280 Speaker 2: why they're buying Dish Ray slightly negative or meaningfully negative 25 00:01:20,319 --> 00:01:21,600 Speaker 2: amount of money, or they're trying to. 26 00:01:21,800 --> 00:01:23,200 Speaker 1: They are trying, They're trying to. 27 00:01:23,440 --> 00:01:26,720 Speaker 2: So Dish is a company sort of that is an entity, 28 00:01:26,760 --> 00:01:30,520 Speaker 2: but it is owned by Echo Star, Charlie Ergan's satellite conglomerate, 29 00:01:30,920 --> 00:01:34,440 Speaker 2: and so EchoStar wants to sell it to DirecTV. DirecTV 30 00:01:34,480 --> 00:01:36,960 Speaker 2: wants to buy it, but the value of the company 31 00:01:37,040 --> 00:01:39,640 Speaker 2: is apparently somewhat less than its debt. So it has 32 00:01:39,680 --> 00:01:42,679 Speaker 2: like nine point seventy five billion dollars of bonds outstanding, 33 00:01:43,200 --> 00:01:46,360 Speaker 2: and the direct TV doesn't want to pay all those 34 00:01:46,360 --> 00:01:49,080 Speaker 2: bonds back, so it wants to buy it for one dollar, 35 00:01:49,560 --> 00:01:52,280 Speaker 2: you know, a check for one dollar to do Echo 36 00:01:52,320 --> 00:01:56,040 Speaker 2: Star and also for taking on the debt but taking 37 00:01:56,040 --> 00:01:58,440 Speaker 2: on less than all of the debt. And basically to 38 00:01:58,480 --> 00:02:00,560 Speaker 2: get the deal done, the bondholders have to agree to 39 00:02:00,680 --> 00:02:03,160 Speaker 2: a bad haircut, an unpleasant haircut. 40 00:02:03,440 --> 00:02:06,960 Speaker 1: Yeah, so we're talking about one point six billion dollars 41 00:02:07,000 --> 00:02:08,400 Speaker 1: worth of haircutting going on. 42 00:02:08,600 --> 00:02:10,600 Speaker 2: Yeah, so like you know, bond holder dets agree, Like 43 00:02:10,600 --> 00:02:12,359 Speaker 2: they can just insist on getting their money back, but 44 00:02:12,400 --> 00:02:15,320 Speaker 2: if they agree to take one point six billion dollars less, 45 00:02:15,520 --> 00:02:17,919 Speaker 2: so like a total of like eight point two billion dollars, 46 00:02:18,440 --> 00:02:21,679 Speaker 2: then the deal will go through. And if they say no, 47 00:02:22,200 --> 00:02:25,600 Speaker 2: then then technically the deal doesn't have to go through. 48 00:02:25,639 --> 00:02:28,480 Speaker 2: But like everyone understands that this is just the opening 49 00:02:28,560 --> 00:02:31,360 Speaker 2: of negotiations, and so what is happening is that the 50 00:02:31,400 --> 00:02:34,160 Speaker 2: bondholders have said no. And the way it works is 51 00:02:34,160 --> 00:02:36,800 Speaker 2: you kind of get a vote, so, like you know, 52 00:02:36,840 --> 00:02:38,519 Speaker 2: basically you need to get like two thirds of each 53 00:02:38,720 --> 00:02:42,120 Speaker 2: series of bonds to agree, and so some bond holders 54 00:02:42,160 --> 00:02:45,040 Speaker 2: have said that they have accumulated a blocking position, which 55 00:02:45,080 --> 00:02:47,600 Speaker 2: means basically they have enough bonds to prevent the deal 56 00:02:47,600 --> 00:02:50,399 Speaker 2: from going through, and they don't not want the deal 57 00:02:50,440 --> 00:02:53,040 Speaker 2: to go through. This will be a better company that 58 00:02:53,160 --> 00:02:55,280 Speaker 2: is more likely to pay off its debts if it 59 00:02:55,280 --> 00:02:58,120 Speaker 2: gets more money in, and what they want is just 60 00:02:58,240 --> 00:02:59,079 Speaker 2: get less of a haircut. 61 00:02:59,120 --> 00:02:59,200 Speaker 1: Right. 62 00:02:59,200 --> 00:03:01,560 Speaker 2: There's a different series of with different maturities that were 63 00:03:01,560 --> 00:03:04,520 Speaker 2: trading at different market prices, and like the longest dated 64 00:03:04,520 --> 00:03:06,480 Speaker 2: it was trading in like the fifties cents on the 65 00:03:06,520 --> 00:03:09,840 Speaker 2: dollar area, and they are offered to pay it off 66 00:03:09,880 --> 00:03:13,200 Speaker 2: at sixty cents on the dollar, and the vond holders 67 00:03:13,200 --> 00:03:15,200 Speaker 2: were like more than sixty cents on the dollar. So 68 00:03:15,560 --> 00:03:17,480 Speaker 2: that's sort of the state of plays. They've said no, 69 00:03:17,720 --> 00:03:19,440 Speaker 2: but it's like an opening and negotiations. 70 00:03:19,919 --> 00:03:22,720 Speaker 1: They would like a slightly less worse haircut, something that 71 00:03:22,760 --> 00:03:23,919 Speaker 1: doesn't look as bad. 72 00:03:24,360 --> 00:03:26,880 Speaker 2: I'm resisting the temptation to just spend the whole time 73 00:03:26,919 --> 00:03:30,680 Speaker 2: talking about my own history of quests for getting haircuts. 74 00:03:30,680 --> 00:03:33,440 Speaker 1: You know, I cut hair. Yeah, I cut men's hair. 75 00:03:34,160 --> 00:03:35,600 Speaker 2: I cut Oh, that's right, I did know that. 76 00:03:35,920 --> 00:03:39,960 Speaker 1: Yeah, I cut my husband's. Your Instagram if you're cutting 77 00:03:39,960 --> 00:03:43,640 Speaker 1: your husband's, my dad, my brother, and my nephew. My 78 00:03:43,720 --> 00:03:45,760 Speaker 1: nephew has gotten like three haircuts in his life, and 79 00:03:45,800 --> 00:03:46,680 Speaker 1: I've done all of them. 80 00:03:46,800 --> 00:03:50,240 Speaker 2: This is gonna be like the money stuff live event. Yeah. 81 00:03:50,280 --> 00:03:53,360 Speaker 1: Well, actually I love cutting hair. I'm always looking for 82 00:03:53,400 --> 00:03:57,760 Speaker 1: opportunities anyway, So yeah, Bloomberg News. That, of course is 83 00:03:57,800 --> 00:04:02,080 Speaker 1: according to Bloomberg reporting about that locking position. Bloomberg also 84 00:04:02,120 --> 00:04:05,360 Speaker 1: expanded on that in the Brink newsletter, going through the 85 00:04:05,480 --> 00:04:09,600 Speaker 1: various contentions that this group of creditors have. First, they 86 00:04:09,600 --> 00:04:12,040 Speaker 1: contend that they were being asked to take losses as 87 00:04:12,080 --> 00:04:15,440 Speaker 1: high as forty percent of face value. That obviously doesn't 88 00:04:15,560 --> 00:04:19,440 Speaker 1: sound great, While Echo Star owner Charlie Ergan comes out 89 00:04:19,480 --> 00:04:21,280 Speaker 1: relatively unscathed in all of this. 90 00:04:22,279 --> 00:04:24,360 Speaker 2: Yeah, I don't know the full history of it, but 91 00:04:24,400 --> 00:04:26,839 Speaker 2: like obviously you know they're selling it for zero dollars 92 00:04:26,839 --> 00:04:30,919 Speaker 2: of equity value, right, So like it's respecting seniority in 93 00:04:30,960 --> 00:04:33,560 Speaker 2: the sense that the equity is getting nothing, and like 94 00:04:33,600 --> 00:04:37,520 Speaker 2: there's apparently so little value here that in addition to 95 00:04:37,560 --> 00:04:39,360 Speaker 2: the equity hitting nothing, the bond holders have to take 96 00:04:39,400 --> 00:04:42,640 Speaker 2: a haircut in order to sort of sell the asset, right, 97 00:04:43,000 --> 00:04:44,719 Speaker 2: And the fact that the bonds are trading it, you know, 98 00:04:44,800 --> 00:04:47,040 Speaker 2: fifty something sounds on the dollars. Is that you know, 99 00:04:47,279 --> 00:04:50,479 Speaker 2: people did not think there was a ton of equity 100 00:04:50,560 --> 00:04:53,120 Speaker 2: value here before. This deal, isn't nun So Yeah, like 101 00:04:53,160 --> 00:04:55,120 Speaker 2: this is a deal where you look at like the 102 00:04:55,160 --> 00:04:57,039 Speaker 2: trading prices of the bonds and you're like, oh, if 103 00:04:57,080 --> 00:05:00,920 Speaker 2: we can get this asset for the value implied by 104 00:05:00,920 --> 00:05:03,800 Speaker 2: these trading prices and also paying a dollar to the equity, 105 00:05:03,920 --> 00:05:06,000 Speaker 2: then it's a good deal. Right. And then you're like, oh, 106 00:05:06,040 --> 00:05:07,960 Speaker 2: pay a little premium to the values applied by the 107 00:05:07,960 --> 00:05:11,280 Speaker 2: trading prices, and like that's you know, that's like normal MNA, 108 00:05:11,440 --> 00:05:13,760 Speaker 2: except that here, you know, the thing is underwater, and 109 00:05:13,800 --> 00:05:16,440 Speaker 2: so instead of paying off the shareholders. You're paying off 110 00:05:16,480 --> 00:05:19,480 Speaker 2: the bond holders, but you know you're not paying them 111 00:05:19,520 --> 00:05:21,600 Speaker 2: that much of a premium to the trading prices, and 112 00:05:22,120 --> 00:05:24,480 Speaker 2: unlike shareholders, they have a contractual right to demand their 113 00:05:24,480 --> 00:05:26,640 Speaker 2: money back. So it's a it's a fight. 114 00:05:26,920 --> 00:05:29,599 Speaker 1: Well to that point. One of the other contentions is 115 00:05:29,600 --> 00:05:32,040 Speaker 1: that some of them argue, and I'm reading directly from 116 00:05:32,040 --> 00:05:34,360 Speaker 1: the Brink newsletter, some of them argue that the sale 117 00:05:34,440 --> 00:05:37,320 Speaker 1: direct TV for one dollar confirms that the company was 118 00:05:37,400 --> 00:05:40,920 Speaker 1: already insolvent when it completed a contentious deal in January 119 00:05:40,960 --> 00:05:43,479 Speaker 1: to strip them of their collateral. If the company wasn't 120 00:05:43,480 --> 00:05:45,640 Speaker 1: solvent at the time, that transaction could be avoided and 121 00:05:45,680 --> 00:05:47,120 Speaker 1: the whole plan could be called off. 122 00:05:47,480 --> 00:05:50,520 Speaker 2: Yes, but you have like your legal rights, but you 123 00:05:50,600 --> 00:05:54,440 Speaker 2: also have like you know, like if you win those arguments, 124 00:05:54,480 --> 00:05:57,880 Speaker 2: like what the company is into bankruptcy, we won, Like yeah, 125 00:05:58,000 --> 00:06:01,240 Speaker 2: you like there is going to be some intro credit 126 00:06:01,320 --> 00:06:03,320 Speaker 2: or fighting about like you know, who gets the collateral 127 00:06:03,400 --> 00:06:05,560 Speaker 2: or whatever. But like I think in general, you would 128 00:06:05,680 --> 00:06:09,359 Speaker 2: rather have the company be solvent and get paid a 129 00:06:09,400 --> 00:06:11,760 Speaker 2: premium to the market value of the bonds than have 130 00:06:11,839 --> 00:06:14,520 Speaker 2: the company not be solvent and sort of take your chances, 131 00:06:14,920 --> 00:06:16,320 Speaker 2: but you want to get paid a premium to the 132 00:06:16,360 --> 00:06:18,160 Speaker 2: market value of the bonds, and like this premium was 133 00:06:18,200 --> 00:06:19,960 Speaker 2: a little it was a little slim. 134 00:06:20,040 --> 00:06:23,679 Speaker 1: It's interesting that this might be what kills the deal 135 00:06:23,839 --> 00:06:26,240 Speaker 1: because I remember when this was the whole deal. I know, 136 00:06:26,400 --> 00:06:29,240 Speaker 1: but people were talking about regulatory concerns, blah blah blah. 137 00:06:29,279 --> 00:06:31,239 Speaker 1: Wasn't going to get blocked because you remember the history 138 00:06:31,240 --> 00:06:34,839 Speaker 1: of these two companies, DirecTV and Dish. They've been flirting 139 00:06:34,880 --> 00:06:38,919 Speaker 1: with merging for like two decades, and that regulators sued 140 00:06:39,000 --> 00:06:41,520 Speaker 1: in two thousand and two to block a previous attempt 141 00:06:41,560 --> 00:06:44,960 Speaker 1: to combine. Now they're coming back together. It's sort of 142 00:06:45,200 --> 00:06:48,440 Speaker 1: like j Lo and ben Affleck and we know how 143 00:06:48,480 --> 00:06:50,280 Speaker 1: that ended. They recently filed. 144 00:06:50,000 --> 00:06:52,800 Speaker 2: For Direction exactly. Yeah, followed that closely. Ye, I don't know. 145 00:06:52,839 --> 00:06:54,360 Speaker 2: The world has changed in two thousand and two, and 146 00:06:54,520 --> 00:06:58,640 Speaker 2: like the idea of that Dish DirecTV are monopolists in 147 00:06:58,720 --> 00:07:02,160 Speaker 2: the provision of television is a lot less compelling than 148 00:07:02,160 --> 00:07:04,279 Speaker 2: it was twenty years ago, right, I mean, like, who 149 00:07:04,279 --> 00:07:08,480 Speaker 2: has shir DirecTV likes? It's just yeah, streaming has overtaken them, 150 00:07:08,520 --> 00:07:11,800 Speaker 2: and so it is now like these two somewhat troubled 151 00:07:11,800 --> 00:07:12,960 Speaker 2: players are trying to merge. 152 00:07:13,040 --> 00:07:14,960 Speaker 1: Well, that's the thing, Like, what are we fighting over. 153 00:07:15,160 --> 00:07:19,800 Speaker 1: There's some great Bloomberg Intelligence data that shows that together 154 00:07:19,960 --> 00:07:22,640 Speaker 1: Dish and DirecTV have lost sixty three percent of their 155 00:07:22,640 --> 00:07:26,920 Speaker 1: satellite customers since twenty sixteen. Uh, that's according to the companies. 156 00:07:26,960 --> 00:07:29,480 Speaker 1: And then Bloomberg Intelligence says that nearly thirty percent of 157 00:07:29,520 --> 00:07:32,240 Speaker 1: that loss of their user base or six million subscribers, 158 00:07:32,440 --> 00:07:35,360 Speaker 1: has been since the start of twenty twenty two. So, 159 00:07:35,720 --> 00:07:38,840 Speaker 1: I mean it's ugly, Like, this is a tough, tough business, 160 00:07:38,840 --> 00:07:41,840 Speaker 1: and you're right, things have obviously changed dramatically in the 161 00:07:41,880 --> 00:07:43,280 Speaker 1: past twenty two years. 162 00:07:43,640 --> 00:07:46,160 Speaker 2: Right, it's a tough business. And I mean trading for 163 00:07:46,280 --> 00:07:48,560 Speaker 2: lower than the value of the done is maybe something 164 00:07:48,560 --> 00:07:49,000 Speaker 2: to be done. 165 00:07:49,160 --> 00:07:49,400 Speaker 1: Yeah. 166 00:07:49,520 --> 00:07:51,320 Speaker 2: The other thing that's interesting is like, you know, we 167 00:07:51,400 --> 00:07:54,160 Speaker 2: say like direct TV is buying Dish, but like kind 168 00:07:54,200 --> 00:07:56,760 Speaker 2: of what's happening here is TPG is buying both of them, right, 169 00:07:56,800 --> 00:08:00,720 Speaker 2: Like DirecTV is like a AT and T obsidiary that 170 00:08:00,800 --> 00:08:03,080 Speaker 2: like AT and T saw the writing on the wall 171 00:08:03,120 --> 00:08:07,080 Speaker 2: and sold the part of it to TPG, the private 172 00:08:07,080 --> 00:08:09,280 Speaker 2: equity firm, And now as part of this deal, TPG 173 00:08:09,400 --> 00:08:12,160 Speaker 2: is buying the rest of it, and also putting in 174 00:08:12,200 --> 00:08:15,120 Speaker 2: cash directly to finance Dish like before the deal closes, 175 00:08:15,160 --> 00:08:18,560 Speaker 2: and also buying Dish. Right, So this is like going 176 00:08:18,600 --> 00:08:21,800 Speaker 2: from being a big part of two public companies to being, 177 00:08:22,000 --> 00:08:25,480 Speaker 2: you know, a private equity roll up that you know, 178 00:08:25,640 --> 00:08:28,440 Speaker 2: it sort of sounds like that classic private equity playbook 179 00:08:28,440 --> 00:08:31,360 Speaker 2: of like a declining business and like, you know, sort 180 00:08:31,400 --> 00:08:33,040 Speaker 2: of extracting as much money as they can for as 181 00:08:33,040 --> 00:08:33,680 Speaker 2: long as they can. 182 00:08:34,240 --> 00:08:36,400 Speaker 1: Well, I was kind of wondering about the creditor dynamics here, 183 00:08:36,400 --> 00:08:38,319 Speaker 1: and you wrote a bit about this. I was wondering 184 00:08:38,320 --> 00:08:40,640 Speaker 1: if this is like a beautiful moment of like the 185 00:08:40,679 --> 00:08:43,960 Speaker 1: creditors banding together to stop themselves from being screwed. But 186 00:08:44,000 --> 00:08:46,240 Speaker 1: it seems like you're saying that things will get ugly 187 00:08:46,520 --> 00:08:47,280 Speaker 1: between creditors. 188 00:08:47,360 --> 00:08:51,000 Speaker 2: No, they're they're banding together. It's nice. It's like they're 189 00:08:51,920 --> 00:08:53,360 Speaker 2: but like you can't just be like, oh, we want 190 00:08:53,400 --> 00:08:55,400 Speaker 2: a hundred cents on the dog, because like there's some 191 00:08:55,600 --> 00:08:57,760 Speaker 2: risk there. Right. The other thing that I wrote is 192 00:08:57,800 --> 00:09:00,959 Speaker 2: that Charlie Erican clearly has some ability to to put 193 00:09:00,960 --> 00:09:04,200 Speaker 2: it on past creditors, you know. But it is interesting 194 00:09:04,240 --> 00:09:07,240 Speaker 2: to me that this is a private equity roll up. 195 00:09:07,520 --> 00:09:10,440 Speaker 2: What I wrote was that you could have a model 196 00:09:10,440 --> 00:09:13,599 Speaker 2: that is, like important skill set of private equity is 197 00:09:13,640 --> 00:09:16,760 Speaker 2: extracting value from creditors, right like they're repeat players, are 198 00:09:16,800 --> 00:09:19,840 Speaker 2: doing liability management transactions. And if you get good at that, 199 00:09:20,160 --> 00:09:24,120 Speaker 2: then like you can make a troubled company worth more 200 00:09:24,160 --> 00:09:26,839 Speaker 2: than anyone else could because you can, you know, make 201 00:09:26,920 --> 00:09:29,960 Speaker 2: the creditors take back less money. And you know, if 202 00:09:30,000 --> 00:09:31,600 Speaker 2: you own a troubled company, you might be like, well, 203 00:09:31,600 --> 00:09:33,120 Speaker 2: I got to sell this to private equity because they're 204 00:09:33,120 --> 00:09:35,320 Speaker 2: the only people who can kind of extract some value 205 00:09:35,360 --> 00:09:38,360 Speaker 2: from it. Although here, you know, the equity owner got 206 00:09:38,400 --> 00:09:41,160 Speaker 2: one dollar, so it's not that much value for him. 207 00:09:41,320 --> 00:09:44,960 Speaker 1: Watch this space unless you have anything else like that. 208 00:09:45,000 --> 00:09:47,320 Speaker 2: You end every segment with watch space. 209 00:10:01,760 --> 00:10:06,160 Speaker 1: Let's talk about FanDuel and gambling addiction. I really enjoyed 210 00:10:06,520 --> 00:10:09,480 Speaker 1: listening to this or reading the robot from the robot 211 00:10:09,559 --> 00:10:10,440 Speaker 1: told me all about this. 212 00:10:10,880 --> 00:10:13,880 Speaker 2: So there's this guy, I mean Patel. He worked for 213 00:10:13,880 --> 00:10:16,240 Speaker 2: the Jacksonville Jaguars, which is a football team. 214 00:10:16,360 --> 00:10:18,280 Speaker 1: Yeah you might know, uh I heard of. 215 00:10:18,240 --> 00:10:22,839 Speaker 2: Him, and he stole twenty two million dollars from the 216 00:10:22,920 --> 00:10:26,240 Speaker 2: Jaguars to do a bunch of things. He was arrested 217 00:10:26,280 --> 00:10:28,680 Speaker 2: and died. He's in prison right now. He pleaded guilty. 218 00:10:28,760 --> 00:10:30,800 Speaker 2: He did a bunch of things with the twenty two 219 00:10:30,800 --> 00:10:33,760 Speaker 2: million dollars, and the prosecutors of course listed them all. 220 00:10:33,800 --> 00:10:36,520 Speaker 2: He like bought some fancy watches, he like paid for 221 00:10:37,080 --> 00:10:40,640 Speaker 2: trips on private chats with his friends, normal stuff. He 222 00:10:40,679 --> 00:10:43,240 Speaker 2: put some of the money towards a retainer with a 223 00:10:43,280 --> 00:10:46,160 Speaker 2: criminal defense layer, which is an amazing thing to do 224 00:10:46,520 --> 00:10:48,840 Speaker 2: with money that you've stolen. Right, It's like, I know 225 00:10:48,880 --> 00:10:51,440 Speaker 2: I'm gonna get caught. I'm going to hire my criminal 226 00:10:51,480 --> 00:10:53,800 Speaker 2: defense layer in advance so that when I get caught, 227 00:10:53,800 --> 00:10:55,360 Speaker 2: at least they'll have a you know, a well paid 228 00:10:55,400 --> 00:10:56,240 Speaker 2: criminal defense layer. 229 00:10:56,320 --> 00:10:56,640 Speaker 1: Yeah. 230 00:10:56,800 --> 00:10:59,480 Speaker 2: Just amazing, like real indication of his state of mind. 231 00:10:59,679 --> 00:11:01,360 Speaker 2: He was, I'm not like, oh great, I'm commnting the 232 00:11:01,400 --> 00:11:03,240 Speaker 2: perfect crime. And he was like, oh my god, I 233 00:11:03,280 --> 00:11:04,959 Speaker 2: am stealing all this money and. 234 00:11:04,880 --> 00:11:06,640 Speaker 1: I'm going to our own time here. 235 00:11:06,800 --> 00:11:08,400 Speaker 2: So why did he steal all this money even though 236 00:11:08,400 --> 00:11:09,880 Speaker 2: he knew it was a bad idea because he was 237 00:11:09,880 --> 00:11:11,840 Speaker 2: a gambling at it. Because most of the money that 238 00:11:11,880 --> 00:11:14,000 Speaker 2: he stole went not to his lawyers or to watch 239 00:11:14,080 --> 00:11:16,760 Speaker 2: his but to FanDuel I read an article saying that 240 00:11:16,800 --> 00:11:19,040 Speaker 2: he was known as the biggest loser ever on Fandel, 241 00:11:19,080 --> 00:11:22,480 Speaker 2: like he lost the most money and so that was 242 00:11:22,520 --> 00:11:24,320 Speaker 2: bad and he went to prison. And this week the 243 00:11:24,360 --> 00:11:27,840 Speaker 2: news is that he is suing Fandel for letting him 244 00:11:27,880 --> 00:11:31,920 Speaker 2: do that. And I have like a lot of sympathy 245 00:11:31,960 --> 00:11:33,920 Speaker 2: to him. I have no way of handicapping like how 246 00:11:33,960 --> 00:11:36,520 Speaker 2: this lawsuit will go. I think there's like a real 247 00:11:37,080 --> 00:11:40,160 Speaker 2: common reaction of like, come on, man, you stole this money, 248 00:11:40,280 --> 00:11:43,160 Speaker 2: you voluntarily bet it on FanDuel, and now you're suing 249 00:11:43,160 --> 00:11:45,360 Speaker 2: FanDuel for letting you. But I kind of think he's 250 00:11:45,360 --> 00:11:46,000 Speaker 2: got a point. 251 00:11:46,160 --> 00:11:47,960 Speaker 1: What is he suing for? Does he want his stolen 252 00:11:47,960 --> 00:11:48,480 Speaker 1: money back? 253 00:11:48,640 --> 00:11:51,440 Speaker 2: He wants money? Does he want his stolen money back? 254 00:11:51,920 --> 00:11:55,679 Speaker 2: He wants money for like fraud, damages and right and 255 00:11:55,840 --> 00:11:58,280 Speaker 2: like his emotional distress he wants He's suing for more 256 00:11:58,320 --> 00:12:00,439 Speaker 2: than the twenty two million dollars. Yeah, I think the 257 00:12:00,520 --> 00:12:02,760 Speaker 2: number in the lawsuit is like two hundred and fifty millions, 258 00:12:02,800 --> 00:12:04,520 Speaker 2: But like, you know, he's not going to get like 259 00:12:05,040 --> 00:12:07,240 Speaker 2: I think he'd be happy with some money. But yeah, 260 00:12:07,280 --> 00:12:09,240 Speaker 2: I mean there's a bunch of theories, but basically they're 261 00:12:09,280 --> 00:12:13,440 Speaker 2: like you exploited my gambling addiction. And even though you 262 00:12:13,520 --> 00:12:17,400 Speaker 2: had policies to not take money from addicted gamblers, you 263 00:12:17,480 --> 00:12:19,800 Speaker 2: went around those policies. So there's things like you know, 264 00:12:19,840 --> 00:12:21,439 Speaker 2: you had like a vip host, right, Like. 265 00:12:21,440 --> 00:12:24,280 Speaker 1: That was the craziest part to me, the vip host 266 00:12:24,360 --> 00:12:26,920 Speaker 1: that he was texting with. Oh yeah, one hundred texts 267 00:12:26,960 --> 00:12:27,240 Speaker 1: a day. 268 00:12:27,400 --> 00:12:30,360 Speaker 2: Yeah, any casino business, right, Like if you are a whale, 269 00:12:30,400 --> 00:12:32,280 Speaker 2: if you're like gambling a lot of money, they will 270 00:12:33,120 --> 00:12:34,959 Speaker 2: do nice things for you, like he got like tickets 271 00:12:35,040 --> 00:12:37,240 Speaker 2: this morning events and things. But they also have like 272 00:12:37,280 --> 00:12:40,200 Speaker 2: a customer service representative whose job is to make you 273 00:12:40,240 --> 00:12:42,120 Speaker 2: feel special so that you gamble more with them. 274 00:12:42,360 --> 00:12:45,080 Speaker 1: Just so many texts, Like even the height of my 275 00:12:45,160 --> 00:12:47,360 Speaker 1: texting days in like high school, I don't think I 276 00:12:47,440 --> 00:12:49,280 Speaker 1: was exchanging that many text messages. 277 00:12:49,600 --> 00:12:51,680 Speaker 2: Well, I think that a lot of his texts were. 278 00:12:51,480 --> 00:12:52,920 Speaker 1: Like gambling orders. 279 00:12:52,960 --> 00:12:55,360 Speaker 2: At least give me more credit on fanduels so I 280 00:12:55,360 --> 00:12:56,040 Speaker 2: can bet more. 281 00:12:56,520 --> 00:12:57,200 Speaker 1: Just so much. 282 00:12:57,480 --> 00:12:59,439 Speaker 2: Yeah, but like also like the texts were like they 283 00:12:59,480 --> 00:13:02,120 Speaker 2: moved it from the guy's like work account to like 284 00:13:02,120 --> 00:13:04,560 Speaker 2: his personal phone for like the reasons that you know, 285 00:13:04,600 --> 00:13:06,400 Speaker 2: I talk about a lot when the sec goes after. 286 00:13:06,960 --> 00:13:09,560 Speaker 2: You know, it's like easier to avoid compliance when you're 287 00:13:09,600 --> 00:13:12,080 Speaker 2: texting from your personal phone, and like they were doing 288 00:13:12,160 --> 00:13:14,640 Speaker 2: dummy texts, like they're making sure to text from the 289 00:13:14,640 --> 00:13:17,080 Speaker 2: guy's work account like a few times a day, so 290 00:13:17,120 --> 00:13:19,280 Speaker 2: that compliance wasn't like why did you stop texting with 291 00:13:19,320 --> 00:13:21,480 Speaker 2: this guy? Because if compliant saw that, they would know 292 00:13:21,559 --> 00:13:23,840 Speaker 2: he was texting somewhere else. But anyway, so like he 293 00:13:23,960 --> 00:13:26,000 Speaker 2: had this vip host, and the vip host was like 294 00:13:26,120 --> 00:13:28,120 Speaker 2: getting around all of you know, first of all, he 295 00:13:28,160 --> 00:13:30,199 Speaker 2: was doing it from his personal phone, but secondly, he 296 00:13:30,280 --> 00:13:33,400 Speaker 2: was allegedly getting around limitations on how much the credit 297 00:13:33,440 --> 00:13:36,160 Speaker 2: the guy could get. And there's other claims like he 298 00:13:36,320 --> 00:13:39,160 Speaker 2: was doing a lot of gambling with just his Jaguars 299 00:13:39,400 --> 00:13:44,520 Speaker 2: corporate credit card. And fan Duel is sort of regulated 300 00:13:44,559 --> 00:13:48,000 Speaker 2: like a financial stituition. It has anti money laundering requirements, 301 00:13:48,880 --> 00:13:52,400 Speaker 2: and those requirements, you know, they're sort of geared towards 302 00:13:52,720 --> 00:13:55,960 Speaker 2: you should not be taking stolen money. And because he 303 00:13:56,080 --> 00:13:58,720 Speaker 2: was gambling with stolen money, he is now arguing you 304 00:13:58,760 --> 00:14:01,240 Speaker 2: should have known and you probably did know that I 305 00:14:01,280 --> 00:14:03,280 Speaker 2: was gambling with stolen money because I was, for instance, 306 00:14:03,360 --> 00:14:06,640 Speaker 2: using my corporate card to make bets and you should 307 00:14:06,640 --> 00:14:08,400 Speaker 2: have stopped me and I should get the money back 308 00:14:08,400 --> 00:14:11,480 Speaker 2: because you didn't do the anti money laundering and know 309 00:14:11,559 --> 00:14:13,800 Speaker 2: your customer checks. I think it's like a really interesting 310 00:14:13,920 --> 00:14:19,560 Speaker 2: theory that like traditionally, when a bank fails to do 311 00:14:19,640 --> 00:14:22,480 Speaker 2: it's money laundering checks, it will get in trouble with 312 00:14:22,680 --> 00:14:25,920 Speaker 2: the government if it allows a terrorist or a drug 313 00:14:25,960 --> 00:14:29,040 Speaker 2: trafficker to use the payment system. You never hear about 314 00:14:29,040 --> 00:14:31,240 Speaker 2: like the drug trafficker saying, well, you should have to 315 00:14:31,280 --> 00:14:34,000 Speaker 2: give me the money back because you didn't do your 316 00:14:34,120 --> 00:14:37,400 Speaker 2: KYC checks. But here it's like I was doing crimes 317 00:14:37,440 --> 00:14:39,720 Speaker 2: and you didn't check, so I should get the money back. Yeah, 318 00:14:39,760 --> 00:14:40,360 Speaker 2: it's a good theory. 319 00:14:40,440 --> 00:14:43,040 Speaker 1: Okay, so he stole the money from the Jaguars, but 320 00:14:43,120 --> 00:14:44,880 Speaker 1: he was using his Jaguars corporate card. 321 00:14:45,120 --> 00:14:47,960 Speaker 2: That was the theft, Like he would just play plays 322 00:14:47,960 --> 00:14:49,000 Speaker 2: bets with his corporate card. 323 00:14:49,080 --> 00:14:51,280 Speaker 1: I feel like that in and of itself should. 324 00:14:50,960 --> 00:14:54,120 Speaker 2: Be a no no, Like that's what he's saying. 325 00:14:54,240 --> 00:14:55,840 Speaker 1: No, I know, but like the fact that it's a 326 00:14:55,880 --> 00:14:58,280 Speaker 1: sports organization, you know, like it's a. 327 00:14:58,240 --> 00:15:01,880 Speaker 2: Supports right, I believe from it being stolen, I agree 328 00:15:01,880 --> 00:15:02,480 Speaker 2: with that too. 329 00:15:02,600 --> 00:15:04,720 Speaker 1: But like, oh my god, why are we getting millions 330 00:15:04,760 --> 00:15:07,080 Speaker 1: of dollars from a sports place. 331 00:15:07,160 --> 00:15:09,040 Speaker 2: Yeah, yeah, you're right, You're right, that's also bad. 332 00:15:09,240 --> 00:15:10,040 Speaker 1: That's bananas. 333 00:15:10,160 --> 00:15:10,720 Speaker 2: I agree with you. 334 00:15:10,880 --> 00:15:14,160 Speaker 1: Yeah, I do. Wonder so as you write about, of 335 00:15:14,160 --> 00:15:17,040 Speaker 1: course this is good business for FanDuel. 336 00:15:17,160 --> 00:15:19,720 Speaker 2: I mean, the biggest ever loser on Fendel is you know, yeah, 337 00:15:19,840 --> 00:15:21,800 Speaker 2: like twenty million dollars to Fendel. 338 00:15:21,920 --> 00:15:24,720 Speaker 1: But like, how many of him are there? I'm wondering. 339 00:15:24,760 --> 00:15:28,080 Speaker 1: I wonder how many cases like this this man there are, 340 00:15:28,400 --> 00:15:30,440 Speaker 1: maybe to lesser extent. 341 00:15:30,120 --> 00:15:33,360 Speaker 2: But I think it's a really it's a really dicey business, 342 00:15:33,440 --> 00:15:36,880 Speaker 2: right because like there are clearly people who are billionaires 343 00:15:36,960 --> 00:15:40,000 Speaker 2: who like a gamble, who will lose a million dollars 344 00:15:40,400 --> 00:15:42,200 Speaker 2: in a week and be like, yeah, that was fun 345 00:15:42,440 --> 00:15:44,520 Speaker 2: and it's fine, And like those are the best customers, right, Like, 346 00:15:44,520 --> 00:15:46,040 Speaker 2: those are the customers who can lose a lot of 347 00:15:46,120 --> 00:15:48,080 Speaker 2: money and not feel it are great. There's not that 348 00:15:48,160 --> 00:15:50,720 Speaker 2: many of them. Then they're the customers who lose a 349 00:15:50,720 --> 00:15:52,720 Speaker 2: lot of money and can't really afford to lose a 350 00:15:52,720 --> 00:15:55,440 Speaker 2: lot of money. And like, you know, all these sports 351 00:15:55,480 --> 00:15:59,800 Speaker 2: books have policies about safe gambling, and you know, they're 352 00:16:00,200 --> 00:16:02,560 Speaker 2: regulated business, and they don't want to look like they 353 00:16:02,600 --> 00:16:07,560 Speaker 2: are exploiting addicted gamblers, but clearly they make money by 354 00:16:07,560 --> 00:16:09,720 Speaker 2: people losing money, and the more money people lose, the 355 00:16:09,720 --> 00:16:13,000 Speaker 2: more money they make. And not all of those people 356 00:16:13,040 --> 00:16:15,200 Speaker 2: can afford to lose the money that they lose. And 357 00:16:15,240 --> 00:16:17,960 Speaker 2: I've written about there's a subset of sports gamblers who 358 00:16:17,960 --> 00:16:23,239 Speaker 2: are advantage gamblers, who win right, who can identify exploitable 359 00:16:23,360 --> 00:16:25,760 Speaker 2: bets and make money at the expense of sports books, 360 00:16:26,200 --> 00:16:30,440 Speaker 2: and those people their problem is that sportsbooks don't like 361 00:16:30,480 --> 00:16:32,720 Speaker 2: them and won't let them bet very much. And so 362 00:16:33,640 --> 00:16:36,160 Speaker 2: a lot of the business of being a professional sports 363 00:16:36,200 --> 00:16:40,000 Speaker 2: gambler is not knowing who will win, but it's knowing 364 00:16:40,040 --> 00:16:42,760 Speaker 2: how to bet a lot of money at a sports book. 365 00:16:43,080 --> 00:16:45,320 Speaker 2: And there are stories about how people do it, and 366 00:16:45,320 --> 00:16:46,720 Speaker 2: one thing they do is they try to look like 367 00:16:46,760 --> 00:16:49,520 Speaker 2: addicted gamblers because that's what the sportsbook wants. So there's 368 00:16:49,560 --> 00:16:52,080 Speaker 2: a story of like a guy who has a bot 369 00:16:52,160 --> 00:16:55,400 Speaker 2: log into his sportsbook account every night between two and 370 00:16:55,440 --> 00:17:01,080 Speaker 2: four am, because that just looks desperate. If you look desperate, 371 00:17:01,080 --> 00:17:02,960 Speaker 2: they're like, oh, this guy's an addict, so we'll give 372 00:17:03,040 --> 00:17:05,840 Speaker 2: him more credit. And like he seems to think that 373 00:17:05,840 --> 00:17:08,399 Speaker 2: that works, right, so there's like this real tension where 374 00:17:09,520 --> 00:17:12,680 Speaker 2: these companies really do not want to look like they're 375 00:17:12,720 --> 00:17:15,479 Speaker 2: exploiting addicted gamblers, but like that is where the money is. 376 00:17:15,880 --> 00:17:17,960 Speaker 1: Reading this and thinking about it kind of made me 377 00:17:18,000 --> 00:17:21,880 Speaker 1: think about, you know, the conversations around robin Hood when 378 00:17:21,880 --> 00:17:24,600 Speaker 1: the memestock era was really in full swing. Of course, 379 00:17:24,680 --> 00:17:27,800 Speaker 1: like yeah, like what is the responsibility of like Robinhood 380 00:17:27,800 --> 00:17:30,920 Speaker 1: to make sure people aren't trading more than they can 381 00:17:30,960 --> 00:17:33,760 Speaker 1: afford to lose? And there, of course are tragic stories 382 00:17:33,760 --> 00:17:34,200 Speaker 1: about that. 383 00:17:34,760 --> 00:17:37,120 Speaker 2: Yeah, and robin Hood will tell you that they are, 384 00:17:37,200 --> 00:17:38,440 Speaker 2: and I think there's a lot of truth to this, 385 00:17:38,680 --> 00:17:42,400 Speaker 2: that they are sort of a gateway drug to sensible 386 00:17:42,440 --> 00:17:44,960 Speaker 2: four O and K investing, Right, Like, you come to 387 00:17:45,040 --> 00:17:47,520 Speaker 2: Robinhood because it's fun, and then like it's not being 388 00:17:47,600 --> 00:17:49,560 Speaker 2: that fun, and like I'll just put it in like 389 00:17:49,640 --> 00:17:50,399 Speaker 2: an SMP. 390 00:17:50,359 --> 00:17:53,080 Speaker 1: Index fund you like graduate up, you just like get. 391 00:17:52,960 --> 00:17:55,119 Speaker 2: Bored of like day trading GameStop and you put it 392 00:17:55,240 --> 00:17:57,439 Speaker 2: money into an SMP fun That seems plausible to me. 393 00:17:58,119 --> 00:18:02,159 Speaker 1: You're like, man, why does this stock keep beating me? 394 00:18:02,440 --> 00:18:06,239 Speaker 2: Right? So, like I think there's some plausibility of that. 395 00:18:06,760 --> 00:18:10,000 Speaker 2: At the same time, like you look at how robin 396 00:18:10,000 --> 00:18:12,560 Speaker 2: Hood makes money. They make a lot of money on options, right, Yeah, 397 00:18:12,640 --> 00:18:14,960 Speaker 2: like a lot of money on options. It's hard to 398 00:18:15,080 --> 00:18:18,480 Speaker 2: argue that like a lot of retail traders are responsibly 399 00:18:18,560 --> 00:18:21,800 Speaker 2: saving for retirement by day trading options. But that's where 400 00:18:21,840 --> 00:18:24,879 Speaker 2: the money is for these firms. I will say I 401 00:18:24,920 --> 00:18:30,199 Speaker 2: wrote about like there's a move to make more single 402 00:18:30,240 --> 00:18:33,640 Speaker 2: stock daily expery options, which I don't want to say 403 00:18:33,680 --> 00:18:35,800 Speaker 2: is a pure gambling product, because I think you could 404 00:18:35,880 --> 00:18:38,880 Speaker 2: imagine a hedging use for it for somebody, but it's 405 00:18:38,920 --> 00:18:44,720 Speaker 2: like it's it's pretty much a gambling product. And the 406 00:18:44,840 --> 00:18:47,200 Speaker 2: articles I read about it, you know, there's a lot 407 00:18:47,200 --> 00:18:51,560 Speaker 2: of push from from some like market makers to do 408 00:18:51,560 --> 00:18:56,000 Speaker 2: that because like a gusher of money. But Robinhood has 409 00:18:56,040 --> 00:18:58,400 Speaker 2: pushed back on it. Because you know, single stock zero 410 00:18:58,480 --> 00:19:02,480 Speaker 2: day x pery options become a big thing. Robin Hood 411 00:19:02,480 --> 00:19:06,760 Speaker 2: will offer them, and Robinhood's customers will use them, and 412 00:19:06,800 --> 00:19:10,080 Speaker 2: there will be terrible stories like rebin Hood doesn't want 413 00:19:10,080 --> 00:19:11,520 Speaker 2: that headache, right, They're like, we would make a lot 414 00:19:11,520 --> 00:19:13,080 Speaker 2: of money doing this, but we don't want that that 415 00:19:13,080 --> 00:19:17,040 Speaker 2: looks like catering to gamblers, and and they have, they have, 416 00:19:17,480 --> 00:19:18,280 Speaker 2: they don't want it you know. 417 00:19:18,359 --> 00:19:20,359 Speaker 1: Yeah, well it would give us something to talk about 418 00:19:20,359 --> 00:19:21,480 Speaker 1: on the Money SOFF podcast. 419 00:19:22,920 --> 00:19:26,000 Speaker 2: Zero day single slock options, Yeah, we just talked about them, 420 00:19:26,080 --> 00:19:31,040 Speaker 2: I know. I mean yeah, it's again, it's like they 421 00:19:31,040 --> 00:19:33,240 Speaker 2: expire at four and so like if you're heading earnings 422 00:19:33,280 --> 00:19:36,239 Speaker 2: and earnings come at four fifteen, you're like exercising at 423 00:19:36,240 --> 00:19:38,160 Speaker 2: a stale price. It's it's crazy product. 424 00:19:38,240 --> 00:19:40,320 Speaker 1: I'm really glad that that's a sandbox I can't play 425 00:19:40,320 --> 00:19:41,320 Speaker 1: in because that sounds fun. 426 00:19:41,640 --> 00:19:43,760 Speaker 2: What zero day single slack options. 427 00:19:43,960 --> 00:19:47,879 Speaker 1: If I wasn't there, I would be the most degenerate 428 00:19:48,320 --> 00:19:49,960 Speaker 1: day trader. I would have a great time. 429 00:19:50,640 --> 00:19:53,200 Speaker 2: Really. Yeah, I didn't know this about you. 430 00:19:53,560 --> 00:19:56,720 Speaker 1: I love a drenaline you can't tell, okay, but like 431 00:19:57,240 --> 00:19:59,480 Speaker 1: that particular form of I would not be a day 432 00:19:59,480 --> 00:20:03,600 Speaker 1: trader and scared. Well, there's two sides sides to the 433 00:20:03,680 --> 00:20:18,600 Speaker 1: trade or something. Let's talk about Apollo. A lot of 434 00:20:19,320 --> 00:20:22,120 Speaker 1: Apollo headlines recently. 435 00:20:22,440 --> 00:20:25,040 Speaker 2: Instay doing some stuff. Tell me about it. 436 00:20:25,600 --> 00:20:28,680 Speaker 1: Well, I was gonna turn it over to you. Apollo's 437 00:20:28,760 --> 00:20:32,000 Speaker 1: Investor Day. They came out with a big projection ten 438 00:20:32,040 --> 00:20:36,280 Speaker 1: billion dollars of annual earnings in five years. Before that, 439 00:20:36,560 --> 00:20:39,320 Speaker 1: they joined forces with City Group, for this twenty five 440 00:20:39,320 --> 00:20:42,600 Speaker 1: billion dollar private credit push. It just feels like Apollo 441 00:20:42,880 --> 00:20:45,199 Speaker 1: has been particularly in the news lately. 442 00:20:45,840 --> 00:20:49,760 Speaker 2: Their investor Day, they sort of positioned themselves as everyone's 443 00:20:49,760 --> 00:20:50,600 Speaker 2: retirement fund. 444 00:20:50,920 --> 00:20:55,480 Speaker 1: Yep, they certainly did. CEO Mark Rowan, he said that 445 00:20:55,560 --> 00:20:58,919 Speaker 1: privates can produce fifty to sixty percent better outcomes for 446 00:20:58,920 --> 00:21:02,000 Speaker 1: for one case, and would expect him to say that, 447 00:21:02,440 --> 00:21:06,679 Speaker 1: I don't know's well, of course, I mean that's the thing, Like, 448 00:21:06,720 --> 00:21:09,320 Speaker 1: of course he would say that do we need privates 449 00:21:09,320 --> 00:21:10,520 Speaker 1: in four one ks? I don't know. 450 00:21:10,680 --> 00:21:13,760 Speaker 2: I don't know. I just think about this kitty. You 451 00:21:13,800 --> 00:21:16,640 Speaker 2: are ETF build, You're a sure big believer in. 452 00:21:17,000 --> 00:21:18,919 Speaker 1: Can't even get an ETF and a four oh one K. 453 00:21:19,280 --> 00:21:21,760 Speaker 2: You're a big believer in daily liquidity. 454 00:21:21,960 --> 00:21:25,920 Speaker 1: Sure am, I'm sorry. I just value transparency and interry 455 00:21:25,960 --> 00:21:26,679 Speaker 1: day liquidity. 456 00:21:27,320 --> 00:21:30,159 Speaker 2: But it is possible, Like a four one K is 457 00:21:30,160 --> 00:21:32,879 Speaker 2: really a perfect place to not have those things. I know, 458 00:21:33,520 --> 00:21:35,600 Speaker 2: like it is, And it isn't right because like you, 459 00:21:36,160 --> 00:21:39,480 Speaker 2: because it's for small investors. You do want like transparency 460 00:21:39,800 --> 00:21:42,760 Speaker 2: and low fees and not like you don't want people 461 00:21:42,960 --> 00:21:44,960 Speaker 2: to like lock their money away for thirty years and 462 00:21:45,000 --> 00:21:47,879 Speaker 2: forget about it and have someone stealing it, you know. No, definitely, 463 00:21:48,600 --> 00:21:50,440 Speaker 2: it is a place where you can lock your money 464 00:21:50,440 --> 00:21:53,439 Speaker 2: away for thirty years, and that does suggest that you 465 00:21:53,480 --> 00:21:56,520 Speaker 2: don't need daily liquidity. Yeah, and if it is the 466 00:21:56,600 --> 00:22:00,280 Speaker 2: case that I liquid things pay premium, and like you know, 467 00:22:00,359 --> 00:22:03,439 Speaker 2: Apollo sort of looks around and it's like, we are 468 00:22:03,440 --> 00:22:07,040 Speaker 2: in the business investing in liquid things, right, and so 469 00:22:07,080 --> 00:22:09,680 Speaker 2: who do we find on the other side, Like who 470 00:22:09,680 --> 00:22:11,960 Speaker 2: will give us the money to invest in liquid things? 471 00:22:12,119 --> 00:22:14,960 Speaker 2: It's like, well, you know, it's pensions and endowments, and like, oh, 472 00:22:15,040 --> 00:22:18,159 Speaker 2: let's have a you know, a THEENE is like I 473 00:22:18,200 --> 00:22:19,720 Speaker 2: always out of Athene is sort of like a life 474 00:22:19,720 --> 00:22:22,280 Speaker 2: insurance company, but it's not really it's like an annuities company, right, 475 00:22:22,320 --> 00:22:24,120 Speaker 2: It's like a or like those are kind of two 476 00:22:24,119 --> 00:22:26,359 Speaker 2: sides of the same thing, but like it's you know, 477 00:22:26,359 --> 00:22:28,320 Speaker 2: they position in the investor day as a as a 478 00:22:28,359 --> 00:22:31,080 Speaker 2: retirement services company, which is what it is, right, And 479 00:22:31,160 --> 00:22:33,399 Speaker 2: so eventually you sort of get to the point of saying, 480 00:22:33,520 --> 00:22:36,960 Speaker 2: you know, we need all the money and the place 481 00:22:37,040 --> 00:22:43,119 Speaker 2: where people have long time horizons and so some ability 482 00:22:43,160 --> 00:22:46,560 Speaker 2: to take your liquidity is like in their retirement accounts. Yeah, 483 00:22:46,640 --> 00:22:48,320 Speaker 2: it makes a lot of sense to me when I 484 00:22:48,320 --> 00:22:50,000 Speaker 2: think of it that way. It's like a little weird 485 00:22:50,160 --> 00:22:55,040 Speaker 2: that retel products and like mutual funds have liquidity requirements 486 00:22:55,040 --> 00:22:57,760 Speaker 2: because it's not exactly addressing the problem of retirement savings, 487 00:22:57,880 --> 00:22:59,719 Speaker 2: which is why people have annuities and stuff, right, I mean, 488 00:22:59,720 --> 00:23:02,159 Speaker 2: that's like the classic way to do this is like 489 00:23:02,240 --> 00:23:04,880 Speaker 2: Athene sells people an annuity and then apollos and charge 490 00:23:04,880 --> 00:23:06,600 Speaker 2: it figuring out how to invest their money for the 491 00:23:06,600 --> 00:23:07,960 Speaker 2: next forty years or whatever. 492 00:23:08,160 --> 00:23:10,840 Speaker 1: Yeah, No, I hear what you're saying, and it doesn't 493 00:23:10,840 --> 00:23:13,080 Speaker 1: make sense. Like, again, you're locking away your money for 494 00:23:13,200 --> 00:23:15,560 Speaker 1: thirty years. You don't need that intry day liquidity. I 495 00:23:15,560 --> 00:23:20,080 Speaker 1: guess it's just what I like about public markets and 496 00:23:20,119 --> 00:23:23,520 Speaker 1: public assets is just knowing the performance. 497 00:23:23,760 --> 00:23:26,600 Speaker 2: So Cliff Assess has this great blog posts from a 498 00:23:26,640 --> 00:23:29,119 Speaker 2: couple of years ago. Cliff Asseness is like a public 499 00:23:29,119 --> 00:23:31,919 Speaker 2: markets value investor, right. One thing he doesn't like is 500 00:23:31,960 --> 00:23:34,880 Speaker 2: that private equity, which is kind of like you know, 501 00:23:35,119 --> 00:23:39,800 Speaker 2: value investing in companies. Private equity has what appears to 502 00:23:39,800 --> 00:23:42,880 Speaker 2: be a much better sharp ratio because it has much 503 00:23:42,920 --> 00:23:46,520 Speaker 2: better risk adjusted performance because it has high performance or 504 00:23:46,680 --> 00:23:49,400 Speaker 2: you know, it has sort of vaguely SMP like performance, 505 00:23:49,760 --> 00:23:51,800 Speaker 2: but it has much less volatility. And the reason has 506 00:23:51,880 --> 00:23:54,159 Speaker 2: much less volatilities because it doesn't report with market prices 507 00:23:54,160 --> 00:23:55,600 Speaker 2: every day. Right, Like a lot of what happens in 508 00:23:55,640 --> 00:23:58,480 Speaker 2: the public market, sprices go up and down without that 509 00:23:58,600 --> 00:24:00,679 Speaker 2: much change in fundamental value, and so it looks like 510 00:24:00,720 --> 00:24:03,399 Speaker 2: your stocks are very valatile. Private equity doesn't look vital 511 00:24:03,440 --> 00:24:06,480 Speaker 2: because they report marks once a year or whatever, and 512 00:24:06,520 --> 00:24:08,359 Speaker 2: like they have, you know, have some flexibility to say 513 00:24:08,400 --> 00:24:10,960 Speaker 2: out nothing's changed. And he is like kind of mad 514 00:24:10,960 --> 00:24:14,160 Speaker 2: about that, but he's also saying, he says in this piece, 515 00:24:14,480 --> 00:24:16,720 Speaker 2: you can see why that's actually good because, like what 516 00:24:16,880 --> 00:24:19,960 Speaker 2: happens is if your stocks move around every day, you'll 517 00:24:19,960 --> 00:24:22,600 Speaker 2: be tempted to sell them at the worst time. You'll panic. Right, 518 00:24:23,240 --> 00:24:27,720 Speaker 2: Buying private equity is a way to like discipline yourself 519 00:24:28,040 --> 00:24:31,200 Speaker 2: and prevent yourself from panicking when market prices move around. 520 00:24:31,640 --> 00:24:34,119 Speaker 2: And that story that private equity is traditionally a story 521 00:24:34,119 --> 00:24:37,399 Speaker 2: about pensions and endowments, right, who you know are maybe 522 00:24:37,440 --> 00:24:39,840 Speaker 2: prey to like political factors and will take their money 523 00:24:39,880 --> 00:24:42,320 Speaker 2: out if prices go down, and can stop that by 524 00:24:42,640 --> 00:24:44,760 Speaker 2: investing in things that don't report prices. But it's like 525 00:24:44,880 --> 00:24:47,639 Speaker 2: also equally true of retirement savers, right like if you 526 00:24:48,080 --> 00:24:49,800 Speaker 2: if you're looking at your furrow and k every day 527 00:24:49,840 --> 00:24:51,320 Speaker 2: and saying, oh, no, stocks went down and take my 528 00:24:51,400 --> 00:24:53,399 Speaker 2: money out, Like maybe it's better to be locked up 529 00:24:53,400 --> 00:24:55,240 Speaker 2: in something that doesn't have price transparency. 530 00:24:55,440 --> 00:24:58,439 Speaker 1: That's a fair point. I do find it fund that. 531 00:24:58,680 --> 00:25:01,960 Speaker 1: Of course, Apollo is public, locally traded, and it's interesting 532 00:25:02,040 --> 00:25:07,560 Speaker 1: to consider it's its market cap. It's something like seventy 533 00:25:07,600 --> 00:25:12,000 Speaker 1: four billion dollars. Their AUM is like six hundred sixty 534 00:25:12,040 --> 00:25:15,360 Speaker 1: two billion dollars somewhere around there. It's a fun thought 535 00:25:15,440 --> 00:25:19,000 Speaker 1: exercise to compare that to black Rock, which has ten 536 00:25:19,040 --> 00:25:21,320 Speaker 1: trillion dollars in AUM and their market cap is like 537 00:25:21,359 --> 00:25:23,640 Speaker 1: one hundred and forty billion dollars. And this is something 538 00:25:23,680 --> 00:25:27,880 Speaker 1: that we've talked about a little bit before, like Square, Yeah, exactly, 539 00:25:27,920 --> 00:25:32,720 Speaker 1: Like how the stock market values these different asset managers. 540 00:25:33,119 --> 00:25:35,720 Speaker 2: I think it is pretty straightforward, right crudely, if you 541 00:25:35,720 --> 00:25:39,160 Speaker 2: put it ten times multiple on earnings, right, like Apollo 542 00:25:40,760 --> 00:25:44,520 Speaker 2: can kind of extract kind of one percent in fees. 543 00:25:44,720 --> 00:25:48,280 Speaker 1: I have some numbers right here. Yeah, I printed I'm 544 00:25:48,280 --> 00:25:51,080 Speaker 1: reading this right. So if you take a look at 545 00:25:51,119 --> 00:25:58,120 Speaker 1: Apollos AUM, this cent earned per one dollars of AUM 546 00:25:58,240 --> 00:25:59,360 Speaker 1: is point eighty. 547 00:25:59,240 --> 00:26:02,000 Speaker 2: Nine yeah, so close to one percent. 548 00:26:02,119 --> 00:26:04,479 Speaker 1: Yeah, and then you compare that to black Rock and 549 00:26:04,600 --> 00:26:08,159 Speaker 1: it's like point oh six sense well. 550 00:26:08,160 --> 00:26:10,440 Speaker 2: Like sixplasive points. I think like there's two kinds of 551 00:26:10,480 --> 00:26:14,560 Speaker 2: asset managers. There's like expensive asset managers who charge one percent, 552 00:26:14,880 --> 00:26:17,080 Speaker 2: and there's cheap asset managers who charge like one basis 553 00:26:17,080 --> 00:26:18,560 Speaker 2: point right, right, and then you put it ten times 554 00:26:18,640 --> 00:26:20,919 Speaker 2: multiple on them, and like black Rock should trade it 555 00:26:20,960 --> 00:26:23,560 Speaker 2: like one percent of AUM, and Apollo should trade it 556 00:26:23,640 --> 00:26:26,000 Speaker 2: a ten percent of AUM, right, yeah, because like they're 557 00:26:26,080 --> 00:26:29,120 Speaker 2: charging one percent of AUM versus charging ten basis points 558 00:26:29,119 --> 00:26:32,359 Speaker 2: of AUM. And I wrote about this in the context 559 00:26:32,400 --> 00:26:36,440 Speaker 2: of Brushing Square, where they raised money at a valuation 560 00:26:36,480 --> 00:26:39,040 Speaker 2: for the management company of something like fifty percent of AUM, 561 00:26:39,359 --> 00:26:42,840 Speaker 2: which implies quite insane things about the fees they can 562 00:26:42,880 --> 00:26:46,560 Speaker 2: charge or about their expected growth. But that's neither here 563 00:26:46,600 --> 00:26:48,800 Speaker 2: nor there. What is Yeah, Like Apollo is in the 564 00:26:48,840 --> 00:26:51,040 Speaker 2: business of being an expensive asset manager, and one thing 565 00:26:51,080 --> 00:26:53,679 Speaker 2: that might happen, one that you could imagine is like 566 00:26:53,760 --> 00:26:57,679 Speaker 2: if all of their pushes to be like mass market 567 00:26:58,000 --> 00:27:01,760 Speaker 2: and retirement savings and all these things all come true, 568 00:27:01,920 --> 00:27:05,240 Speaker 2: and like possibly there will be some fee compression, right, 569 00:27:05,359 --> 00:27:09,919 Speaker 2: possibly you can't charge the same fees for everyone's retirement 570 00:27:09,920 --> 00:27:11,679 Speaker 2: account that you can charge for like private equity. 571 00:27:11,760 --> 00:27:15,080 Speaker 1: I would imagine. So Also John Farrell and BTV interviewed 572 00:27:15,119 --> 00:27:17,639 Speaker 1: marcro In the day after the investor Day, and he 573 00:27:17,720 --> 00:27:19,880 Speaker 1: asked the good question, which is that you have rates 574 00:27:19,920 --> 00:27:22,280 Speaker 1: coming down. The economy is looking pretty good right now, 575 00:27:22,400 --> 00:27:27,159 Speaker 1: financial conditions are easy. Why would people keep going to 576 00:27:27,200 --> 00:27:29,960 Speaker 1: the private credit markets versus issuing in the public markets, 577 00:27:30,000 --> 00:27:33,320 Speaker 1: which I think is a fair question. Marcro And said 578 00:27:33,320 --> 00:27:35,800 Speaker 1: something like, you know, we're doing things that the public 579 00:27:35,800 --> 00:27:38,199 Speaker 1: markets wouldn't allow, and then he talked about infrastructure for 580 00:27:38,240 --> 00:27:40,520 Speaker 1: a while. But there was also an interesting story on 581 00:27:40,560 --> 00:27:44,880 Speaker 1: the terminal from Ellen Schneider and Michael Toblin, quoting Bank 582 00:27:44,920 --> 00:27:48,000 Speaker 1: of America research that said almost thirty billion dollars of 583 00:27:48,040 --> 00:27:52,080 Speaker 1: private debt has been refinanced through broadly syndicated loans across 584 00:27:52,200 --> 00:27:55,359 Speaker 1: more than seventy deals so far this year. So banks 585 00:27:55,480 --> 00:27:58,000 Speaker 1: reclaiming some ground there from private credit. 586 00:27:58,359 --> 00:28:00,119 Speaker 2: Yeah, that makes sense. As you said, they just a 587 00:28:00,200 --> 00:28:02,119 Speaker 2: a big, you know, partnership with the city, right, So 588 00:28:02,280 --> 00:28:04,560 Speaker 2: I think there's a real view that private credit is 589 00:28:04,560 --> 00:28:06,679 Speaker 2: going to stick around. You can imagine a story of, 590 00:28:06,720 --> 00:28:09,240 Speaker 2: like a lot of private credit funds raised a lot 591 00:28:09,240 --> 00:28:12,879 Speaker 2: of money because it's very hot, and then like in 592 00:28:12,920 --> 00:28:15,520 Speaker 2: a year, they need to deploy that money, and they 593 00:28:15,560 --> 00:28:19,360 Speaker 2: are possibly giving better terms than the public markets. Right. 594 00:28:19,600 --> 00:28:21,240 Speaker 2: I think a lot of the story of private credit 595 00:28:21,280 --> 00:28:23,639 Speaker 2: in recent years has been like when public markets seized up, 596 00:28:23,640 --> 00:28:27,280 Speaker 2: private credit seized a lot of share. But you can 597 00:28:27,320 --> 00:28:28,960 Speaker 2: imagine a story of just like there's so much money 598 00:28:29,000 --> 00:28:31,080 Speaker 2: in private credit, it's going to be cheap, and watch 599 00:28:31,160 --> 00:28:32,160 Speaker 2: the space comebye. 600 00:28:31,920 --> 00:28:37,879 Speaker 1: Watch the space bye bye. 601 00:28:40,600 --> 00:28:42,080 Speaker 2: And that was the Money Stuff Podcast. 602 00:28:42,240 --> 00:28:44,280 Speaker 1: I'm Matt Levian and I'm Katie Greifeld. 603 00:28:44,600 --> 00:28:46,640 Speaker 2: You can find my work by subscribing to the Money 604 00:28:46,680 --> 00:28:48,960 Speaker 2: Stuff newsletter on Bloomberg dot com. 605 00:28:48,680 --> 00:28:51,160 Speaker 1: And you can find me on Bloomberg TV every day 606 00:28:51,200 --> 00:28:54,280 Speaker 1: on Open Interest between nine to eleven am Eastern. 607 00:28:54,680 --> 00:28:56,400 Speaker 2: We'd love to hear from you. You can send an 608 00:28:56,400 --> 00:28:59,960 Speaker 2: email to Moneypot at Bloomberg dot No ask us a question. 609 00:29:00,120 --> 00:29:01,120 Speaker 2: You might answer it on air. 610 00:29:01,600 --> 00:29:03,800 Speaker 1: You can also subscribe to our show wherever you're listening 611 00:29:03,840 --> 00:29:05,840 Speaker 1: right now and leave us a review. It helps more 612 00:29:05,880 --> 00:29:06,760 Speaker 1: people find the show. 613 00:29:07,440 --> 00:29:10,240 Speaker 2: The Money Stuff Podcast is produced by Ana Mazerakus and 614 00:29:10,320 --> 00:29:13,280 Speaker 2: Moses On and special thanks this week to Cal Brooks. 615 00:29:13,960 --> 00:29:16,120 Speaker 1: Our theme music was composed by Blake Maples. 616 00:29:16,320 --> 00:29:19,000 Speaker 2: Brandon. Francis nunim is our executive producer. 617 00:29:18,800 --> 00:29:20,960 Speaker 1: And Stage Bauman is Bloomberg's head of podcasts. 618 00:29:21,240 --> 00:29:23,560 Speaker 2: Thanks for listening to the Money Stuff Podcast. We'll be 619 00:29:23,640 --> 00:29:25,160 Speaker 2: back next week with more stuff