1 00:00:02,560 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:08,200 --> 00:00:10,320 Speaker 2: The bird's doing well, by the way, So the next 3 00:00:10,400 --> 00:00:14,840 Speaker 2: milestone is like he flies, Yes, he is great news. 4 00:00:15,080 --> 00:00:17,840 Speaker 2: He yes. So I believe last week I was talking 5 00:00:17,840 --> 00:00:19,680 Speaker 2: about how we needed to work on flying, really good 6 00:00:19,680 --> 00:00:21,000 Speaker 2: at perching, really good at eating. 7 00:00:21,079 --> 00:00:23,200 Speaker 1: Sure you've been showing him YouTube videos. 8 00:00:23,320 --> 00:00:25,840 Speaker 2: We've been working on flying. He's pretty good at flying. 9 00:00:25,880 --> 00:00:26,040 Speaker 1: Now. 10 00:00:26,160 --> 00:00:30,520 Speaker 2: The thing is, I'm still working on my flying. Apparently 11 00:00:30,600 --> 00:00:35,760 Speaker 2: came naturally to the bird. I have to keep reminding myself, like, 12 00:00:35,840 --> 00:00:37,159 Speaker 2: this is a baby bird. 13 00:00:37,760 --> 00:00:39,800 Speaker 1: Yeah, do birds when. 14 00:00:41,600 --> 00:00:44,239 Speaker 2: I think he's or she, we can't tell because it's 15 00:00:44,240 --> 00:00:48,080 Speaker 2: a baby is just entering adolescence. Because the bird will 16 00:00:48,120 --> 00:00:50,479 Speaker 2: also like peck at you, Like yesterday was sitting on 17 00:00:50,479 --> 00:00:52,160 Speaker 2: my shoulder and it was like pecking at my ear 18 00:00:52,680 --> 00:00:54,800 Speaker 2: and then I googled it and they go through a 19 00:00:54,840 --> 00:00:57,920 Speaker 2: teenager phase where they like get into biting you for 20 00:00:58,000 --> 00:00:59,720 Speaker 2: a little bit and then they kind of grow out 21 00:00:59,760 --> 00:00:59,960 Speaker 2: of it. 22 00:01:00,360 --> 00:01:05,720 Speaker 1: Anyway, congratulations to your bird, Thank you, Hello and welcome. 23 00:01:07,120 --> 00:01:09,440 Speaker 1: It's going to keep being the bird Stuff podcast, isn't it. 24 00:01:09,680 --> 00:01:10,240 Speaker 2: I love it? 25 00:01:11,080 --> 00:01:13,600 Speaker 1: Anyway, Hello and welcome to the money Stuff Podcast. You're 26 00:01:13,600 --> 00:01:15,959 Speaker 1: a weekly podcast where we're talking about stuff related to 27 00:01:16,000 --> 00:01:18,680 Speaker 1: money sometimes. I'm Matt Levine and I read the Money 28 00:01:18,680 --> 00:01:20,120 Speaker 1: Stuff com for Bloomberg Opinion. 29 00:01:20,240 --> 00:01:22,640 Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and 30 00:01:22,680 --> 00:01:24,240 Speaker 2: an anchor for Bloomberg Television. 31 00:01:24,840 --> 00:01:27,320 Speaker 1: Katie, in your other life as an anchor for Bloomberg Television, 32 00:01:27,360 --> 00:01:29,600 Speaker 1: you've been anchoring some Bloomberg television. 33 00:01:29,680 --> 00:01:32,480 Speaker 2: Absolutely, because we had a little bit of a SmackDown 34 00:01:32,560 --> 00:01:37,360 Speaker 2: this week, I'm trying to make this a dramatic. 35 00:01:36,319 --> 00:01:39,839 Speaker 1: Everyone loves a financial industry SmackDown now after ever since 36 00:01:39,920 --> 00:01:44,280 Speaker 1: the like the classic act then icon one from like 37 00:01:44,280 --> 00:01:46,440 Speaker 1: a decade ago, Everyone's like, oh, SmackDown. 38 00:01:46,959 --> 00:01:49,800 Speaker 2: I mean, we'll never achieve those heights again. That was 39 00:01:50,000 --> 00:01:51,880 Speaker 2: That's at the Bar and no one's passed it since. 40 00:01:52,200 --> 00:01:57,760 Speaker 2: But in slightly less interesting smackdowns smackish last week I 41 00:01:57,800 --> 00:02:01,480 Speaker 2: believe it was, there was a splashly Bloomberg News article 42 00:02:01,480 --> 00:02:05,320 Speaker 2: about how Jim Chanos has a short thesis when it 43 00:02:05,360 --> 00:02:08,440 Speaker 2: comes to Michael Sailor's strategy, the idea being that you 44 00:02:08,520 --> 00:02:13,040 Speaker 2: basically short strategy and you buy bitcoin because strategy trades 45 00:02:13,080 --> 00:02:15,040 Speaker 2: at a premium to its actual bitcoin holdings. 46 00:02:15,120 --> 00:02:17,160 Speaker 1: Yeah, and one thing that Jim Chaino said that is 47 00:02:17,320 --> 00:02:24,800 Speaker 1: entirely accurate and revealing, and everything ignored is that micro 48 00:02:24,840 --> 00:02:28,280 Speaker 1: strategy also does the same trade and enormous side. Yeah, 49 00:02:28,360 --> 00:02:30,679 Speaker 1: and like micro strategy is like kind of like fundamental 50 00:02:30,720 --> 00:02:33,080 Speaker 1: business models, Like, well, our stock trades that two times 51 00:02:33,120 --> 00:02:36,160 Speaker 1: the value of the underlying bitcoins, So we're gonna sell 52 00:02:36,200 --> 00:02:38,480 Speaker 1: a ton of stock and use the money to buy bitcoin. 53 00:02:38,520 --> 00:02:39,920 Speaker 1: It's like, yeah, of course it's the great trade. But 54 00:02:40,000 --> 00:02:44,240 Speaker 1: like micro strategy has some advantages and putting the trade 55 00:02:44,240 --> 00:02:46,360 Speaker 1: on Jim Chanos doesn't have, Like they don't have to 56 00:02:46,400 --> 00:02:48,680 Speaker 1: pay to borrow the stock, they can't get squeezed out 57 00:02:48,680 --> 00:02:50,360 Speaker 1: of their sharp but they were doing the same trade. 58 00:02:50,400 --> 00:02:54,240 Speaker 2: But anyway, yeah, well go on. That was Chenos's position. 59 00:02:54,680 --> 00:02:59,120 Speaker 2: We interviewed Michael Sailor on Tuesday of this week, and 60 00:03:00,240 --> 00:03:01,320 Speaker 2: obviously he disagreed. 61 00:03:01,320 --> 00:03:03,960 Speaker 1: Well, he was like, no, nobody should sell his biker 62 00:03:04,040 --> 00:03:06,200 Speaker 1: strategy stocked by bitcoin. That's a crazy thing to do. 63 00:03:06,280 --> 00:03:08,959 Speaker 1: Why would anyone sell biker stategy stocked by bitcoin? Yeah 64 00:03:09,000 --> 00:03:11,120 Speaker 1: except for him, but whatever, whatever, No, I mean, to 65 00:03:11,160 --> 00:03:12,400 Speaker 1: be fair, he's not doing it anymore. 66 00:03:12,600 --> 00:03:14,880 Speaker 2: Yeah. Oh. He also said that you know, Chinos doesn't 67 00:03:14,960 --> 00:03:19,200 Speaker 2: understand how like his valuation of strategy is off sides. 68 00:03:19,680 --> 00:03:23,120 Speaker 2: That was on Tuesday. Jim Chanos came on Bloomberg Television 69 00:03:23,160 --> 00:03:27,560 Speaker 2: on Wednesday with my colleague and friend Scarlett Fou and 70 00:03:29,240 --> 00:03:31,440 Speaker 2: give his side of the story. I mean, he said 71 00:03:31,480 --> 00:03:36,320 Speaker 2: that Sailor is a great salesman, but basically his argument 72 00:03:37,320 --> 00:03:40,080 Speaker 2: amounts to financial gibberish. I think he might have I 73 00:03:40,160 --> 00:03:42,720 Speaker 2: think he might have said that on social media and 74 00:03:42,720 --> 00:03:45,520 Speaker 2: not on I would it's really the case that like, 75 00:03:47,280 --> 00:03:49,120 Speaker 2: oh wait, wa wait, let me read you betweet. Actually 76 00:03:49,160 --> 00:03:53,000 Speaker 2: it's pretty good. In response to Sailor's television club from 77 00:03:53,080 --> 00:03:56,440 Speaker 2: our interview with him, this is, of course complete financial gibberish. 78 00:03:56,680 --> 00:03:59,560 Speaker 2: Mister Sailor wants you to value his business based not 79 00:03:59,600 --> 00:04:04,080 Speaker 2: only on net value of his bitcoin holdings NAV at market, 80 00:04:04,200 --> 00:04:06,600 Speaker 2: but additionally with a multiple on the change in that 81 00:04:06,720 --> 00:04:11,000 Speaker 2: NAV exclamation point, because now he can leverage his balance sheet. Lol. 82 00:04:11,440 --> 00:04:14,800 Speaker 1: I mean, like, I'm sorry, that's correct. Like I don't 83 00:04:14,800 --> 00:04:18,760 Speaker 1: want to say that micro strategies thing can't work right, 84 00:04:18,800 --> 00:04:21,520 Speaker 1: because it's worked right, and like a lot of people 85 00:04:21,560 --> 00:04:23,840 Speaker 1: have gotten carried out shorting it right, and like I'm 86 00:04:23,839 --> 00:04:26,680 Speaker 1: not saying, oh, it's a great idea just short micro strategy, 87 00:04:27,240 --> 00:04:31,200 Speaker 1: but like it is gibberoiush right, It's like the point 88 00:04:31,320 --> 00:04:35,080 Speaker 1: that they're making is like bitcoin has gone up a lot, 89 00:04:35,120 --> 00:04:38,120 Speaker 1: and so when we buy bitcoin, we're creating a ton 90 00:04:38,160 --> 00:04:41,520 Speaker 1: of value for shareholders. And like at some level that's true, 91 00:04:41,520 --> 00:04:43,880 Speaker 1: but another level, you just buy bitcoin, Like. 92 00:04:43,920 --> 00:04:44,440 Speaker 2: This is true. 93 00:04:44,480 --> 00:04:47,080 Speaker 1: And I think I probably said this on the podcast before, 94 00:04:47,120 --> 00:04:48,920 Speaker 1: but like a thing that is just wild to me 95 00:04:49,000 --> 00:04:52,760 Speaker 1: about micro Strategy in particular and bitcoin treasury companies generally, 96 00:04:52,839 --> 00:04:55,800 Speaker 1: is like you have to tell some story about why 97 00:04:56,040 --> 00:04:58,919 Speaker 1: you're not just a pot of bitcoins, right, and there 98 00:04:58,960 --> 00:05:00,480 Speaker 1: are a number of ways to tell that story. And 99 00:05:00,520 --> 00:05:02,560 Speaker 1: like all credit to micro Strategy, they've done all of it. 100 00:05:02,560 --> 00:05:05,320 Speaker 1: They're smart, like they're good at fine, Like this is 101 00:05:05,360 --> 00:05:07,960 Speaker 1: a well run bitcoin treasury company with a model that 102 00:05:08,000 --> 00:05:11,040 Speaker 1: I fundamentally don't understand, but like they're great at it. 103 00:05:11,600 --> 00:05:14,680 Speaker 1: But the sort of central story that they tell is like, well, 104 00:05:14,720 --> 00:05:16,960 Speaker 1: we can be levered bitcoin holders, right, Like we can 105 00:05:17,000 --> 00:05:19,960 Speaker 1: be instead of just you know, buying bitcoin put in 106 00:05:19,960 --> 00:05:22,080 Speaker 1: the plot, we can like borrow money to put bitcoin 107 00:05:22,120 --> 00:05:24,080 Speaker 1: in the plot. We can you know micro saylers, like 108 00:05:24,080 --> 00:05:27,839 Speaker 1: we can issue preferred stock that pays ten percent, and 109 00:05:27,880 --> 00:05:29,520 Speaker 1: we can buy a bitcoin that goes up by forty 110 00:05:29,560 --> 00:05:31,839 Speaker 1: seven percent a year, and therefore we're like we're doing 111 00:05:31,839 --> 00:05:35,080 Speaker 1: an arbitrage, which is like nobody should ever said the 112 00:05:35,080 --> 00:05:37,000 Speaker 1: word arbitrage. You gain after that. But the thing that 113 00:05:37,040 --> 00:05:39,279 Speaker 1: I find fascinat about micro strategy is that, like from 114 00:05:39,279 --> 00:05:42,160 Speaker 1: the shareolders per sective, it is just not levered bitcoin exposure. 115 00:05:42,240 --> 00:05:45,599 Speaker 1: Like the way micro strategy works. If there's a sixty 116 00:05:45,640 --> 00:05:49,279 Speaker 1: billion ish dollar pot of bitcoin that trades it one 117 00:05:49,400 --> 00:05:53,440 Speaker 1: hundred and twenty billion ish market capitalization, which means it's 118 00:05:53,440 --> 00:05:57,480 Speaker 1: not levered bitcoin for you. If you put in a dollar, 119 00:05:57,760 --> 00:05:59,479 Speaker 1: you get like fifty cents worth of bitcoin, which is 120 00:05:59,480 --> 00:06:01,120 Speaker 1: the opposite of leverage. Leverage is like you put in 121 00:06:01,520 --> 00:06:04,560 Speaker 1: you get back two dollars with a bitcoin. So I 122 00:06:04,800 --> 00:06:08,760 Speaker 1: just find it somewhat crazy making. But here we are. 123 00:06:08,880 --> 00:06:11,240 Speaker 2: But the thing is, even if Jim Chinos is correct 124 00:06:11,279 --> 00:06:13,039 Speaker 2: what you were saying he is, that doesn't mean his 125 00:06:13,080 --> 00:06:13,880 Speaker 2: trade is gonna work. 126 00:06:14,400 --> 00:06:17,760 Speaker 1: He's sorry, I want to be there. The thing that 127 00:06:17,800 --> 00:06:20,320 Speaker 1: he has definitely correct about is that it's jibberish, right, 128 00:06:20,839 --> 00:06:23,120 Speaker 1: just from an aesthetic point of view, it's jibberish that 129 00:06:23,160 --> 00:06:24,960 Speaker 1: doesn't doesn't mean the stoggle go down. 130 00:06:25,160 --> 00:06:27,080 Speaker 2: That's the thing, and that's something we've talked about before 131 00:06:27,120 --> 00:06:31,080 Speaker 2: with these bitcoin treasury companies, is that in the stock 132 00:06:31,160 --> 00:06:35,159 Speaker 2: market people are happy to pay double basically in the 133 00:06:35,200 --> 00:06:36,560 Speaker 2: case of Strategy, like the. 134 00:06:36,480 --> 00:06:39,560 Speaker 1: Trade is about that that can't last. Yeah, and like 135 00:06:39,680 --> 00:06:41,680 Speaker 1: you see cracks in it, right, the game Stop is 136 00:06:41,680 --> 00:06:44,560 Speaker 1: now a big treasuring company and like it should converts 137 00:06:44,600 --> 00:06:46,120 Speaker 1: this week, and you know, let's talk with down like 138 00:06:46,120 --> 00:06:47,840 Speaker 1: twenty percent at some point, like you know, two weeks ago, 139 00:06:48,000 --> 00:06:49,880 Speaker 1: I would have said, like, yeah, any company can like 140 00:06:49,920 --> 00:06:52,400 Speaker 1: announce that the bitcoin treasuring company and like trade at 141 00:06:52,440 --> 00:06:53,920 Speaker 1: two x of the value of it's bitcoin. Like it's 142 00:06:53,920 --> 00:06:55,159 Speaker 1: not quite as true anymore. 143 00:06:55,240 --> 00:06:58,080 Speaker 2: Yeah, like kind of immediately if it came not true, yeah. 144 00:06:57,880 --> 00:07:01,200 Speaker 1: Which is great, but like the micro strategy still does. 145 00:07:01,279 --> 00:07:02,640 Speaker 1: I mean it's coming a little bit. 146 00:07:02,920 --> 00:07:03,120 Speaker 2: Yeah. 147 00:07:03,800 --> 00:07:05,919 Speaker 1: But it is a little bit weird to me for 148 00:07:06,000 --> 00:07:08,680 Speaker 1: Sailor to criticize Channis because as Channos has said, and 149 00:07:08,720 --> 00:07:11,520 Speaker 1: as I just said, Sailor was doing the same trade 150 00:07:11,560 --> 00:07:14,280 Speaker 1: right selling micro strategy, Like micro Strategy is in the 151 00:07:14,280 --> 00:07:16,680 Speaker 1: business of selling it's on stock to buy bitcoin, right, 152 00:07:16,760 --> 00:07:20,280 Speaker 1: So clearly, at some point in the fairly recent past, 153 00:07:20,400 --> 00:07:23,120 Speaker 1: like this year, like micro Strategy has thought that bigcoin 154 00:07:23,280 --> 00:07:25,080 Speaker 1: was better as it than its stock, right, like you 155 00:07:25,080 --> 00:07:27,360 Speaker 1: could sell this stock to buy bitcoin. That's a longer 156 00:07:27,400 --> 00:07:29,280 Speaker 1: as true. Right now, they're doing a lot of weird stuff, 157 00:07:29,720 --> 00:07:33,440 Speaker 1: and they've moved kind of further away from equity. Right 158 00:07:33,440 --> 00:07:37,880 Speaker 1: they started doing stock and convertible bonds, and then they 159 00:07:37,880 --> 00:07:42,040 Speaker 1: moved into like this very high premium convertible preferred, and 160 00:07:42,080 --> 00:07:44,560 Speaker 1: they moved into I think higher premium convertible preferred that 161 00:07:44,600 --> 00:07:46,720 Speaker 1: has looked less and less equity content, and now they're 162 00:07:46,720 --> 00:07:50,360 Speaker 1: selling straight ten percent preferred that doesn't convert into stock, 163 00:07:50,400 --> 00:07:53,560 Speaker 1: So they're basically you know, if you just look at 164 00:07:53,560 --> 00:07:56,400 Speaker 1: their actions, it suggests that they thought their stock was 165 00:07:56,440 --> 00:07:58,360 Speaker 1: overvalued at some point and now they think their stock 166 00:07:58,440 --> 00:08:00,960 Speaker 1: is fairly valued. And I think he's on TV something 167 00:08:01,080 --> 00:08:04,160 Speaker 1: like you know, watch out, Jim Chanis, because we could 168 00:08:04,200 --> 00:08:07,080 Speaker 1: issue preferred and you know, if the premium comes down, 169 00:08:07,080 --> 00:08:09,560 Speaker 1: we'll just issue more preferred, Yeah, which I took to 170 00:08:09,760 --> 00:08:11,960 Speaker 1: sort of mean that they might buy back stock, which 171 00:08:12,160 --> 00:08:13,640 Speaker 1: is also crazy making. 172 00:08:13,560 --> 00:08:16,200 Speaker 2: This might be what you're referring to. He said, if 173 00:08:16,200 --> 00:08:18,840 Speaker 2: the stock trades at a week premium We're just going 174 00:08:18,880 --> 00:08:21,640 Speaker 2: to sell the preferred and if the stock rallies up, 175 00:08:21,720 --> 00:08:23,520 Speaker 2: he's going to get liquidated and wiped out. 176 00:08:23,680 --> 00:08:25,680 Speaker 1: Yeah, which doesn't exactly say we're going to buy the. 177 00:08:25,680 --> 00:08:30,280 Speaker 2: Stock, but yeah, whatever. So he also said so if 178 00:08:30,320 --> 00:08:34,000 Speaker 2: the premium declines enough, he will issued preferred also in 179 00:08:34,000 --> 00:08:36,320 Speaker 2: that scenario and then buy back the common shares. 180 00:08:36,840 --> 00:08:37,440 Speaker 1: Well whatever. 181 00:08:37,480 --> 00:08:42,200 Speaker 2: I mean, he's a few different king plans. Something that 182 00:08:42,240 --> 00:08:44,520 Speaker 2: I thought was interesting from that interview, which I'm still 183 00:08:44,520 --> 00:08:46,520 Speaker 2: trying to formulate an opinion on. So maybe you can 184 00:08:46,559 --> 00:08:50,040 Speaker 2: give me one is you know, I asked him, you 185 00:08:50,120 --> 00:08:53,640 Speaker 2: have all these copycat bitcoin treasury companies that are coming out, 186 00:08:54,120 --> 00:08:56,040 Speaker 2: do you view them as competition? He said, I don't 187 00:08:56,080 --> 00:09:00,600 Speaker 2: view them as competition. I view ETFs that track preferred 188 00:09:00,600 --> 00:09:03,800 Speaker 2: shares is competition. So as Investco has one, I think 189 00:09:03,800 --> 00:09:06,480 Speaker 2: the ticker is pg X. It has like four billion 190 00:09:06,520 --> 00:09:09,199 Speaker 2: dollars in assets, So I guess he's trying to compete 191 00:09:09,200 --> 00:09:12,240 Speaker 2: for investor attention, like he wants investors to buy his 192 00:09:12,720 --> 00:09:16,760 Speaker 2: preferred shares, not broadly preferred shares. I don't really know. 193 00:09:17,120 --> 00:09:21,320 Speaker 1: Interesting, Yeah, the bitcoin treasury thing is interesting because he has, 194 00:09:21,440 --> 00:09:23,240 Speaker 1: like for a long time been a proselytizer for other 195 00:09:23,280 --> 00:09:25,120 Speaker 1: companies should do this, right, Yeah, And when you think 196 00:09:25,160 --> 00:09:28,679 Speaker 1: about like the model, like Jim Chandos and I can 197 00:09:28,679 --> 00:09:31,000 Speaker 1: talk about the premium all we want, but like fundamentally, 198 00:09:31,640 --> 00:09:34,760 Speaker 1: Michael Sailor reviews micro strategy, they bet that bitcoin will 199 00:09:34,800 --> 00:09:36,240 Speaker 1: go up, and so like the main thing they want 200 00:09:36,280 --> 00:09:39,079 Speaker 1: is for bitcoin to go up rate. Yeah, and the 201 00:09:39,080 --> 00:09:42,400 Speaker 1: more companies that devote themselves to buying bitcoin, like, the 202 00:09:42,400 --> 00:09:44,200 Speaker 1: more bigcoin will go up, and the better off micro 203 00:09:44,240 --> 00:09:47,280 Speaker 1: strategy and shoulders. All right, so they're not competition, right, Yeah, 204 00:09:47,320 --> 00:09:51,560 Speaker 1: like in a world of like enormous competition for you know, 205 00:09:51,760 --> 00:09:54,160 Speaker 1: people to invest in this thing, Like would micro strategies 206 00:09:54,200 --> 00:09:56,959 Speaker 1: premium come down maybe, But if micro strategies premium comes 207 00:09:56,960 --> 00:09:58,720 Speaker 1: down by like Bitcoin going up ten x, I'm like, 208 00:09:58,720 --> 00:10:02,320 Speaker 1: that's great for Michael Sailor, you know the preferred thing, Yeah, 209 00:10:02,360 --> 00:10:07,880 Speaker 1: Like I don't. I actually don't know who. I've always 210 00:10:07,880 --> 00:10:11,640 Speaker 1: thought of straight preferred as a pretty niche financial product, right, 211 00:10:11,640 --> 00:10:13,280 Speaker 1: It's like, yeah, a lot of banks issue it, and 212 00:10:13,320 --> 00:10:15,000 Speaker 1: it looks some like utility ones. It's not like a 213 00:10:15,120 --> 00:10:20,040 Speaker 1: huge You don't regularly have tech companies being like I'm 214 00:10:20,080 --> 00:10:22,160 Speaker 1: going to issue a straight preferred. Right, it's not like 215 00:10:22,160 --> 00:10:25,440 Speaker 1: a real thing, Like bankers don't go around marketing ten 216 00:10:25,480 --> 00:10:29,800 Speaker 1: percent preferred stock to companies, and micro Strategy is doing 217 00:10:29,840 --> 00:10:32,560 Speaker 1: it in size, And yeah, I guess they're competing for 218 00:10:32,640 --> 00:10:35,439 Speaker 1: like the fairly limited pool of like retail investors who 219 00:10:35,480 --> 00:10:39,680 Speaker 1: want preferred stock. You know, they're offering ten percent. They're like, 220 00:10:40,000 --> 00:10:42,640 Speaker 1: take our ten percent. And I guess, like surely somewhere 221 00:10:42,640 --> 00:10:44,600 Speaker 1: out there there's a fixed income investor who is like, 222 00:10:45,360 --> 00:10:50,120 Speaker 1: I just want a safe, high dividend, and the best 223 00:10:50,480 --> 00:10:53,679 Speaker 1: dividend paying stock that I can get is this microstritge 224 00:10:53,720 --> 00:10:56,600 Speaker 1: preferred And I don't care what the business model it's vies. Yeah, 225 00:10:56,600 --> 00:10:58,079 Speaker 1: don't tell me about it, as long as they keep 226 00:10:58,080 --> 00:11:03,199 Speaker 1: paying the dividend. And that's the thing that someone thought I. 227 00:11:03,120 --> 00:11:07,000 Speaker 2: Could have seen him embracing these ETFs and other funds 228 00:11:07,000 --> 00:11:10,280 Speaker 2: the track preferred chairs because theoretically micro strategy Yeah, so 229 00:11:10,520 --> 00:11:10,960 Speaker 2: I don't know. 230 00:11:11,120 --> 00:11:13,120 Speaker 1: Yeah, I don't. I don't really understand either, but like 231 00:11:13,280 --> 00:11:15,240 Speaker 1: right to the extent that like instead of buying a 232 00:11:15,240 --> 00:11:18,600 Speaker 1: diversified dividend fund, retail investors like I want that micro 233 00:11:18,640 --> 00:11:19,640 Speaker 1: strategy dividend, Like. 234 00:11:20,760 --> 00:11:22,800 Speaker 2: Yeah, who won? 235 00:11:23,280 --> 00:11:23,679 Speaker 1: Who won? 236 00:11:24,160 --> 00:11:24,959 Speaker 2: Yeah? 237 00:11:25,320 --> 00:11:28,080 Speaker 1: Like to the extent that, like I'm the judge of 238 00:11:28,120 --> 00:11:30,240 Speaker 1: this match, Like, yeah, I'm going to award it to 239 00:11:30,280 --> 00:11:33,320 Speaker 1: Jim Chana's on points to the extent that, like, you know, 240 00:11:33,400 --> 00:11:36,400 Speaker 1: we'll find out when someone gets knocked out, Like Jim 241 00:11:36,480 --> 00:11:39,160 Speaker 1: Chanas is going to exit this trade before Michael Saylor does. 242 00:11:39,360 --> 00:11:40,839 Speaker 2: That's true. That's true. 243 00:11:42,480 --> 00:11:43,400 Speaker 1: He's going to do great. 244 00:12:00,040 --> 00:12:04,480 Speaker 2: Cycle recruiting. You wrote that, Uh, no one likes it. 245 00:12:04,480 --> 00:12:06,760 Speaker 1: It's amazing. They fixed it. They just fixed it. 246 00:12:06,800 --> 00:12:09,679 Speaker 2: Well, Jamie Diamond especially didn't like it. You're right, he 247 00:12:09,800 --> 00:12:10,559 Speaker 2: solved the problem. 248 00:12:10,760 --> 00:12:12,480 Speaker 1: So I have some backstorright here. So I clerked for 249 00:12:12,520 --> 00:12:17,360 Speaker 1: a federal judge after law school, and clerkship hiring has 250 00:12:17,559 --> 00:12:21,960 Speaker 1: the same issues, where like basically there's a pool of candidates, 251 00:12:21,960 --> 00:12:24,960 Speaker 1: and there's a pool of judges, and there's like a 252 00:12:25,040 --> 00:12:27,960 Speaker 1: ranking of prestigious judges is ranking of prestigious candidates, and 253 00:12:27,960 --> 00:12:31,760 Speaker 1: everyone's the best candidates are the best judges. And you know, 254 00:12:32,080 --> 00:12:33,719 Speaker 1: it used to be that like towards the end of 255 00:12:33,800 --> 00:12:35,920 Speaker 1: law school, you'd interview with the judge to get a clerkship, 256 00:12:36,160 --> 00:12:38,560 Speaker 1: and then some judges were like, we'll interview a little 257 00:12:38,640 --> 00:12:41,280 Speaker 1: earlier for clerkships. To start in two years and then 258 00:12:41,280 --> 00:12:43,720 Speaker 1: we'll get the first cut up. The best candidates of 259 00:12:43,720 --> 00:12:46,040 Speaker 1: crept up earlier and earlier, and it became like untenable. 260 00:12:47,000 --> 00:12:50,480 Speaker 1: And when I was a clerk, my judge was like 261 00:12:50,520 --> 00:12:54,080 Speaker 1: the leader of the like clerkship hiring plan that told 262 00:12:54,120 --> 00:12:56,480 Speaker 1: people you can't hire before, like you know, the beginning 263 00:12:56,520 --> 00:12:59,840 Speaker 1: of the third year of law school. And it was 264 00:12:59,840 --> 00:13:01,480 Speaker 1: like kind of mostly enforced, but like a couple of 265 00:13:01,559 --> 00:13:04,160 Speaker 1: judges defected and hired in the second year, and you know, 266 00:13:04,679 --> 00:13:07,319 Speaker 1: I couldn't enforce it, but I was like in a 267 00:13:07,400 --> 00:13:10,280 Speaker 1: dudgeon when people would would hire clerks too early, And 268 00:13:10,320 --> 00:13:12,720 Speaker 1: so I saw this process play out where like it 269 00:13:12,760 --> 00:13:15,200 Speaker 1: got too early. Everyone's like, this is dumb, it's too early. 270 00:13:15,280 --> 00:13:18,760 Speaker 1: Let's move things back, yeah, and and hire on a 271 00:13:18,800 --> 00:13:21,160 Speaker 1: normal schedule where we can like see people's grades and 272 00:13:21,200 --> 00:13:23,320 Speaker 1: like know what they're like, and not just like hire 273 00:13:23,320 --> 00:13:27,160 Speaker 1: at the beginning of law school. And we set it back, 274 00:13:27,200 --> 00:13:30,120 Speaker 1: and then like immediately it started decaying again. So I 275 00:13:30,160 --> 00:13:32,000 Speaker 1: think that like private equity hiring is a little of that, 276 00:13:32,040 --> 00:13:36,000 Speaker 1: where like there's a logical time to hire new private 277 00:13:36,040 --> 00:13:38,760 Speaker 1: equity associates, and it's you know, as they get to 278 00:13:38,800 --> 00:13:41,240 Speaker 1: the end of their investment banking jobs, right, it's like 279 00:13:41,840 --> 00:13:46,200 Speaker 1: three months before those jobs end or whatever. And because 280 00:13:46,720 --> 00:13:49,719 Speaker 1: prestigious firms want prestigious candidates, they'll be like, well, just 281 00:13:49,840 --> 00:13:53,240 Speaker 1: interview a month earlier. And then everyone rushes to, you know, 282 00:13:53,760 --> 00:13:55,960 Speaker 1: keep up with them. And so now it's the hiring 283 00:13:56,040 --> 00:13:59,880 Speaker 1: is like before the investment banking jobs start, and everyone 284 00:14:00,240 --> 00:14:02,480 Speaker 1: that's Domin. So Jamie Diamond is like, that's Domin, we 285 00:14:02,480 --> 00:14:04,840 Speaker 1: won't let you do it. And because he's Jamie Diamond, 286 00:14:04,880 --> 00:14:08,640 Speaker 1: because JP Morgan is a big prestigious bank, Like they've 287 00:14:08,679 --> 00:14:11,880 Speaker 1: had some traction where I think Apollo and General Atlantic 288 00:14:11,920 --> 00:14:14,160 Speaker 1: have already said I'm not going to hire people this 289 00:14:14,240 --> 00:14:16,600 Speaker 1: year for their twenty twenty seven start dates. 290 00:14:16,679 --> 00:14:18,320 Speaker 2: But it sounds like you're saying you don't think that 291 00:14:18,400 --> 00:14:20,440 Speaker 2: this truth of sorts will last. 292 00:14:20,680 --> 00:14:23,360 Speaker 1: I think in five years we will be reading articles 293 00:14:23,400 --> 00:14:26,760 Speaker 1: about how private equity hiring is, you know, starting before. 294 00:14:26,800 --> 00:14:28,480 Speaker 2: Investing, talking about on this podcast. 295 00:14:28,480 --> 00:14:30,880 Speaker 1: I'm talking about on this podcast for sure. This is yeah, 296 00:14:31,000 --> 00:14:33,600 Speaker 1: this is a this is a long run contact for 297 00:14:33,640 --> 00:14:39,320 Speaker 1: this podcast. Will this equilibrium decay like next month? I 298 00:14:39,400 --> 00:14:41,040 Speaker 1: don't think so. I think there's gonna be like a 299 00:14:41,080 --> 00:14:44,160 Speaker 1: real impact, where like people who started private equity in 300 00:14:44,200 --> 00:14:46,560 Speaker 1: twenty twenty seven might get interviewed in twenty twenty six 301 00:14:46,640 --> 00:14:48,600 Speaker 1: rather than twenty twenty five. Like that that could really 302 00:14:48,600 --> 00:14:51,360 Speaker 1: happen because it has gotten sort of comical and like 303 00:14:51,400 --> 00:14:54,840 Speaker 1: there is like some good will around, like moving things back, 304 00:14:54,880 --> 00:14:56,840 Speaker 1: but like will it last forever? I don't know. I 305 00:14:56,840 --> 00:14:57,280 Speaker 1: don't think so. 306 00:14:57,480 --> 00:14:59,880 Speaker 2: Well, it's interesting. I took a dig in some of 307 00:15:00,080 --> 00:15:04,240 Speaker 2: the Bloomberg historical archives. Morgan Stanley tried to do something 308 00:15:04,320 --> 00:15:04,560 Speaker 2: like this. 309 00:15:04,760 --> 00:15:06,840 Speaker 1: Everyone's tried to do this. This is like a thing. Yeah. 310 00:15:06,880 --> 00:15:11,280 Speaker 2: Well, in twenty thirteen, Morgan Stanley then abandoned their attempt 311 00:15:11,280 --> 00:15:14,480 Speaker 2: to block first year bankers from talking with recruiters for 312 00:15:14,560 --> 00:15:18,160 Speaker 2: outside firms. Employees complained and the complaint this is all 313 00:15:18,160 --> 00:15:21,280 Speaker 2: according to people familiar from the time. The complaint was 314 00:15:21,360 --> 00:15:25,560 Speaker 2: that they're being put at a disadvantage to you know, 315 00:15:25,680 --> 00:15:27,960 Speaker 2: other entry level bankers at other firms. 316 00:15:28,040 --> 00:15:30,840 Speaker 1: I don't think JP Morgan could enforce this. Yeah, the 317 00:15:30,840 --> 00:15:34,280 Speaker 1: private equity firms hadn't come out in support of them. 318 00:15:34,360 --> 00:15:36,680 Speaker 1: Like the calculation of JP Morgan is not just we 319 00:15:36,720 --> 00:15:39,200 Speaker 1: will stop people from taking offers too early, because like 320 00:15:39,240 --> 00:15:42,680 Speaker 1: that is really hard to do because you know, everyone 321 00:15:42,720 --> 00:15:45,080 Speaker 1: going into banking wants to be in private equity, and like, 322 00:15:45,160 --> 00:15:47,160 Speaker 1: you lose analysts if you said you can't go into 323 00:15:47,160 --> 00:15:51,080 Speaker 1: private equity. But I think because also the private equity 324 00:15:51,080 --> 00:15:54,280 Speaker 1: firms don't love it, it has a chance to succeed. 325 00:15:54,520 --> 00:15:57,000 Speaker 2: Well, that's what I'm curious about. So I mean Apollo 326 00:15:57,160 --> 00:16:00,400 Speaker 2: kicked this off, Mark Owen said in an email statement 327 00:16:00,440 --> 00:16:03,040 Speaker 2: to Bloomberg. When someone says something that is just plainly true, 328 00:16:03,360 --> 00:16:06,040 Speaker 2: I feel compelled to agree with it. But is part 329 00:16:06,040 --> 00:16:09,040 Speaker 2: of the calculation on Apollo's part that they're going to 330 00:16:09,600 --> 00:16:12,200 Speaker 2: earn some brownie points with Jamie Diamond, and that's more 331 00:16:12,280 --> 00:16:15,480 Speaker 2: valuable than you know, getting an early shot at some 332 00:16:15,520 --> 00:16:16,280 Speaker 2: of these analysts. 333 00:16:16,600 --> 00:16:19,240 Speaker 1: I think it's both. Like, I think they're not kidding 334 00:16:19,280 --> 00:16:23,040 Speaker 1: that it's dumb to hire people before they graduate from college, 335 00:16:23,120 --> 00:16:26,480 Speaker 1: right for a job that starts in two plus years, 336 00:16:26,920 --> 00:16:30,080 Speaker 1: and you know, interview them about like LBO modeling when 337 00:16:30,080 --> 00:16:33,160 Speaker 1: they've never worked on a deal, right, Like it's genuinely dumb. 338 00:16:33,200 --> 00:16:35,440 Speaker 1: You know, Like, yes, being in the good graces of 339 00:16:35,480 --> 00:16:37,440 Speaker 1: Jamie Diamond is not a bad idea for any private 340 00:16:37,440 --> 00:16:39,520 Speaker 1: equity firm. But like no, I think I mostly agree 341 00:16:39,520 --> 00:16:41,440 Speaker 1: with them. I want to tell you about a couple 342 00:16:41,440 --> 00:16:44,400 Speaker 1: of like reader emails I've gotten out this topic. Yeah, 343 00:16:44,520 --> 00:16:46,760 Speaker 1: so one as I heard from someone who was like, yeah, 344 00:16:46,800 --> 00:16:50,720 Speaker 1: I started in banking. I accepted my PE job like immediately, 345 00:16:51,120 --> 00:16:52,800 Speaker 1: and then after a couple of weeks in banking, I 346 00:16:52,840 --> 00:16:55,160 Speaker 1: realized I didn't like to do deals, and so he 347 00:16:55,280 --> 00:16:59,240 Speaker 1: like backed out of his PE offer, which, first of 348 00:16:59,240 --> 00:17:01,960 Speaker 1: all like yes, and generally I think and Apollo talking 349 00:17:01,960 --> 00:17:05,080 Speaker 1: about this, they're like, we want to get recruiting right. 350 00:17:05,560 --> 00:17:08,679 Speaker 1: If you're recruiting people before they start in banking, you 351 00:17:08,680 --> 00:17:11,440 Speaker 1: don't really know that you're getting the people who really 352 00:17:11,840 --> 00:17:15,200 Speaker 1: want to and will be good at doing private equity right. 353 00:17:15,800 --> 00:17:17,600 Speaker 1: They don't know anything about Yeah, I've never worked on 354 00:17:18,000 --> 00:17:21,679 Speaker 1: whatever they've been. This is part of a bigger process 355 00:17:21,680 --> 00:17:23,760 Speaker 1: where everything is crept up earlier and become more intense. 356 00:17:23,800 --> 00:17:26,200 Speaker 2: So now like you interns, well, we talked about university 357 00:17:26,280 --> 00:17:27,720 Speaker 2: finance a few weeks through. 358 00:17:28,080 --> 00:17:29,640 Speaker 1: Like I'm like, oh, they don't know anything about banking, 359 00:17:29,640 --> 00:17:31,560 Speaker 1: but they've been like doing banking since there were children. 360 00:17:31,920 --> 00:17:33,880 Speaker 1: But still, like you get a better sense of who 361 00:17:33,920 --> 00:17:35,800 Speaker 1: actually wants to do it if you interview people after 362 00:17:35,840 --> 00:17:37,440 Speaker 1: like a year in banking than if you interview them 363 00:17:37,440 --> 00:17:40,560 Speaker 1: after twenty minutes. Yeah, I thought it was interesting that 364 00:17:40,640 --> 00:17:43,280 Speaker 1: like this doesn't happen that much, like people backing out, 365 00:17:43,280 --> 00:17:45,680 Speaker 1: Like he was like, yeah, my firm was then like 366 00:17:45,760 --> 00:17:48,440 Speaker 1: advertising for someone to fill this spot really quickly, because 367 00:17:48,480 --> 00:17:50,919 Speaker 1: like they don't over hire. It's not like you know, 368 00:17:50,920 --> 00:17:54,000 Speaker 1: an airline where they sell twenty percent more seats because 369 00:17:54,000 --> 00:17:56,520 Speaker 1: they figure people will drop out. They just figure everyone 370 00:17:56,560 --> 00:17:58,440 Speaker 1: they hire's going to start two years later, which is 371 00:17:58,480 --> 00:18:00,760 Speaker 1: pretty wild. The other thing that guys, like a couple 372 00:18:00,760 --> 00:18:05,720 Speaker 1: of people are like you ask, like why is Apollo 373 00:18:05,800 --> 00:18:08,399 Speaker 1: jumping to agree with Chap Murray? And like more possibility 374 00:18:08,440 --> 00:18:11,040 Speaker 1: is they think that recruiting this early is not a 375 00:18:11,040 --> 00:18:13,359 Speaker 1: good idea and they would like to recruit later to 376 00:18:13,359 --> 00:18:16,840 Speaker 1: get more have a more informed recruiting conversation. Another possibility 377 00:18:16,840 --> 00:18:18,280 Speaker 1: is they want to curry favor with shaving time. And 378 00:18:19,119 --> 00:18:23,840 Speaker 1: a third possibility is that they don't need as many people. Yeah, 379 00:18:23,880 --> 00:18:26,680 Speaker 1: Like the third possiblity is you're hiring for twenty twenty seven, 380 00:18:26,720 --> 00:18:30,399 Speaker 1: you're like okay in two years. First of all, like 381 00:18:30,880 --> 00:18:32,920 Speaker 1: there's all this stuff about how like private AQUD firms 382 00:18:32,960 --> 00:18:34,720 Speaker 1: have nothing to do, like they're you know, they like 383 00:18:34,920 --> 00:18:37,600 Speaker 1: can't get any excess, Like shops are kind of bored, 384 00:18:37,640 --> 00:18:39,320 Speaker 1: like they're not doing as many deal as they can't 385 00:18:39,359 --> 00:18:43,960 Speaker 1: raise money. You know, Yeah, it'd be good to tighten 386 00:18:43,960 --> 00:18:46,639 Speaker 1: this wigod for twenty twenty seven. And then there's also 387 00:18:46,760 --> 00:18:52,560 Speaker 1: just like the theme of what AI will do for 388 00:18:52,640 --> 00:18:55,760 Speaker 1: junior hiring and financial services, right, Like, so if you're 389 00:18:55,800 --> 00:18:57,600 Speaker 1: like running a big private equity firm and you're looking 390 00:18:57,600 --> 00:18:59,840 Speaker 1: at your need for junior headcount two years out, and 391 00:19:00,000 --> 00:19:02,199 Speaker 1: I feel a little uncertain, and you might say, you 392 00:19:02,200 --> 00:19:04,080 Speaker 1: know what, we don't need to hire everyone for twenty 393 00:19:04,119 --> 00:19:05,879 Speaker 1: twenty seven right now. We can take a pause on 394 00:19:05,920 --> 00:19:07,560 Speaker 1: that and see how many people we actually need in 395 00:19:07,560 --> 00:19:10,479 Speaker 1: twenty twenty seven. So I detinally don't know, like if 396 00:19:10,520 --> 00:19:12,840 Speaker 1: you were a junior, like if you're about to start 397 00:19:12,840 --> 00:19:15,880 Speaker 1: your banking job, like I don't know whether you'd rather 398 00:19:16,280 --> 00:19:19,320 Speaker 1: have private equity recruiting now or not. It's kind of 399 00:19:19,400 --> 00:19:22,359 Speaker 1: nice to have your entire future sewn up for the 400 00:19:22,400 --> 00:19:25,280 Speaker 1: next five years, but at the same time, it's like 401 00:19:25,280 --> 00:19:29,000 Speaker 1: stressful to interview now without knowing anything and without having 402 00:19:29,080 --> 00:19:32,679 Speaker 1: done any deals and commit yourself to you know, your 403 00:19:32,760 --> 00:19:34,880 Speaker 1: jobs for the next five years. I would think it's 404 00:19:34,920 --> 00:19:37,720 Speaker 1: better for candidates to have a little bit more time. Yeah, 405 00:19:37,760 --> 00:19:39,600 Speaker 1: but not if like the reason for that is that 406 00:19:40,240 --> 00:19:42,720 Speaker 1: you know, the dystopian the dystopian future. 407 00:19:42,880 --> 00:19:45,880 Speaker 2: Yeah, that AI will just replace them anyway. Also wanted 408 00:19:45,880 --> 00:19:47,840 Speaker 2: to talk about this a bit more from you know, 409 00:19:47,880 --> 00:19:51,159 Speaker 2: the perspective of an Apollo or another pe firm. The 410 00:19:51,200 --> 00:19:54,920 Speaker 2: reason why everything has been pushed are we saying back 411 00:19:55,040 --> 00:19:58,720 Speaker 2: or forward? Probably the reason why later. The reason why 412 00:19:58,720 --> 00:20:01,680 Speaker 2: everything is getting pushed early is theoretically because they want 413 00:20:01,680 --> 00:20:05,120 Speaker 2: the best analysts, and it's almost seems like a trade 414 00:20:05,160 --> 00:20:07,679 Speaker 2: off that to get the best analysts, part of the 415 00:20:07,720 --> 00:20:10,600 Speaker 2: price you pay is probably some of the folks that 416 00:20:10,640 --> 00:20:14,000 Speaker 2: you hire two years early before they have any experiences, 417 00:20:14,040 --> 00:20:15,280 Speaker 2: some of them are going to be duds. 418 00:20:15,560 --> 00:20:17,960 Speaker 1: Oh yeah, yeah, And this is I mean, this is 419 00:20:17,960 --> 00:20:20,120 Speaker 1: what they say when they agree with JA. We want 420 00:20:20,119 --> 00:20:22,280 Speaker 1: to get the recruiting right. You know, I did get 421 00:20:22,320 --> 00:20:24,800 Speaker 1: one reader email. I was like, it's really hard to 422 00:20:24,840 --> 00:20:28,879 Speaker 1: do recruiting. We've never found a way to be really 423 00:20:29,440 --> 00:20:31,679 Speaker 1: like confident that we're getting the right people, and so like, 424 00:20:32,600 --> 00:20:34,560 Speaker 1: who did the good job in the interview and is 425 00:20:34,560 --> 00:20:37,399 Speaker 1: going to Goldman? Is like fine. To me, it seems 426 00:20:37,440 --> 00:20:39,359 Speaker 1: like this would be a bad recruiting system because you 427 00:20:39,400 --> 00:20:42,679 Speaker 1: would not know anything about people's performance. But like the 428 00:20:42,720 --> 00:20:44,679 Speaker 1: counter argument is like, yeah, you never know anything anyway, 429 00:20:44,840 --> 00:20:47,680 Speaker 1: and that's fine, But yeah, I would think that you'd 430 00:20:47,680 --> 00:20:51,080 Speaker 1: get a lot of duds or people who aren't motivated, 431 00:20:51,160 --> 00:20:52,800 Speaker 1: or you know, you'd miss a lot of people who 432 00:20:52,880 --> 00:20:55,879 Speaker 1: like don't have the most prestigious backgrounds. But I actually 433 00:20:56,000 --> 00:20:59,320 Speaker 1: kill it in banking, you know, like like it seems 434 00:20:59,320 --> 00:21:01,520 Speaker 1: like a worst recruit process than like waiting until people 435 00:21:01,520 --> 00:21:02,840 Speaker 1: have like done deals for a while. 436 00:21:03,400 --> 00:21:05,520 Speaker 2: Also, in you know, all the coverage I've read about 437 00:21:05,520 --> 00:21:07,920 Speaker 2: this over the past months, in the past couple of years, 438 00:21:07,920 --> 00:21:11,640 Speaker 2: it just seems like there's only one pipeline to get 439 00:21:11,680 --> 00:21:14,440 Speaker 2: into PEE at the entry level, and that's to come 440 00:21:14,480 --> 00:21:17,800 Speaker 2: from banking. Do they hire from anywhere other than I 441 00:21:17,920 --> 00:21:19,840 Speaker 2: be Yeah. 442 00:21:19,720 --> 00:21:23,600 Speaker 1: You know, historically some number of like management consultants, some 443 00:21:23,720 --> 00:21:27,560 Speaker 1: number of post MBA people. But I think it's increasingly 444 00:21:28,600 --> 00:21:31,240 Speaker 1: hard and increasingly like the pipeline is the pipeline, and 445 00:21:31,320 --> 00:21:34,359 Speaker 1: like there's like one way to do it, you know, 446 00:21:34,359 --> 00:21:35,920 Speaker 1: particularly because they're interviewing so early. 447 00:21:36,480 --> 00:21:40,160 Speaker 2: Well, we'll see how long this truth lasts. 448 00:21:40,480 --> 00:21:42,880 Speaker 1: Yeah, I think there's something interesting, but like people want 449 00:21:42,920 --> 00:21:44,879 Speaker 1: me to be like, if they want to compete for 450 00:21:46,160 --> 00:21:49,120 Speaker 1: the best people want, don't they just wait and pay more. 451 00:21:49,960 --> 00:21:52,719 Speaker 1: There's a weird fungibility about like both the people and 452 00:21:52,800 --> 00:21:55,119 Speaker 1: the firms where it's like we all have to do 453 00:21:55,240 --> 00:21:57,040 Speaker 1: the same recruiting at the same time because we're getting 454 00:21:57,080 --> 00:21:59,520 Speaker 1: the same people to do the same job. Like you 455 00:21:59,560 --> 00:22:04,000 Speaker 1: could have imagine like one private equity firm going to people, 456 00:22:04,680 --> 00:22:08,240 Speaker 1: you know, a week before the job starts and say, look, 457 00:22:08,280 --> 00:22:10,440 Speaker 1: I know you've accepted a job at another private equity firm, 458 00:22:10,440 --> 00:22:13,119 Speaker 1: but like we think you're good, we'll double your salary. Right, 459 00:22:13,240 --> 00:22:15,159 Speaker 1: you could imagine doing that, but I think it's like 460 00:22:15,240 --> 00:22:17,560 Speaker 1: not done and you know, sort of frowned upon. And 461 00:22:17,560 --> 00:22:19,560 Speaker 1: it's like small enough industry that people wouldn't do it. 462 00:22:20,080 --> 00:22:22,159 Speaker 1: But it is a strange thing that everything feels so 463 00:22:22,200 --> 00:22:25,000 Speaker 1: fungible and like, yeah, you know, it's such a direct 464 00:22:25,000 --> 00:22:27,680 Speaker 1: competition for the same people that do the same thing, 465 00:22:27,760 --> 00:22:31,119 Speaker 1: rather than like, you know, trying to differentiate yourself in 466 00:22:31,119 --> 00:22:33,080 Speaker 1: some way other than hiring twenty minutes earlier. 467 00:22:33,200 --> 00:22:50,000 Speaker 2: Yeah, the grand convergence. 468 00:22:50,680 --> 00:22:52,600 Speaker 1: Right. There's a story in the Financial Times about Tower 469 00:22:52,600 --> 00:22:57,760 Speaker 1: Research Capital, the great delightful high fregancy trading firm. 470 00:22:57,840 --> 00:23:01,760 Speaker 2: Yeah, one of the oldest ones. Yeah, if I'm the oldest, 471 00:23:01,760 --> 00:23:02,159 Speaker 2: I don't know. 472 00:23:03,240 --> 00:23:05,680 Speaker 1: It's hard to note what counts as the hypercancy trading firm, 473 00:23:05,680 --> 00:23:10,480 Speaker 1: but they're they're sort of big established hygh frequency training firm, 474 00:23:10,680 --> 00:23:13,400 Speaker 1: and they're starting a they're apparently launching a hedge fund 475 00:23:13,480 --> 00:23:17,000 Speaker 1: to run outside capital because like, you know, your high 476 00:23:17,000 --> 00:23:19,960 Speaker 1: fagency trading firm, you run your own capital. You get 477 00:23:20,000 --> 00:23:22,800 Speaker 1: like market signals that tell you what stocks to buy 478 00:23:22,880 --> 00:23:27,640 Speaker 1: in the next three seconds. Yeah, and like those signals 479 00:23:27,680 --> 00:23:29,600 Speaker 1: throw off enough exhaust that you can be like, I'll 480 00:23:29,640 --> 00:23:32,920 Speaker 1: know what stocks to buy in the next three minutes, right, Yeah, 481 00:23:33,040 --> 00:23:35,800 Speaker 1: you like, you know, you reach your capacity for how 482 00:23:35,840 --> 00:23:37,359 Speaker 1: much of that you can do with your own money, 483 00:23:37,680 --> 00:23:39,200 Speaker 1: and then you're like, well, open up to outside money 484 00:23:39,240 --> 00:23:41,280 Speaker 1: and charge people twenty percent for telling them what stocks 485 00:23:41,280 --> 00:23:43,960 Speaker 1: to buy in the next three hours or whatever. So 486 00:23:44,000 --> 00:23:46,840 Speaker 1: it's an interesting like convergence of like what hedge funds 487 00:23:46,880 --> 00:23:48,439 Speaker 1: do and what hypergency trading firms do. 488 00:23:49,160 --> 00:23:52,160 Speaker 2: Yeah, this is an interesting one. I liked this phrase 489 00:23:52,280 --> 00:23:54,800 Speaker 2: that was in the FT article. Let me find it 490 00:23:54,840 --> 00:23:57,199 Speaker 2: where I put it? In my notes. Oh yeah, I 491 00:23:57,280 --> 00:24:00,240 Speaker 2: like this mid frequency strategies. I haven't heard that before. 492 00:24:00,280 --> 00:24:02,440 Speaker 2: We talked about high frequency, but now we're talking about 493 00:24:02,480 --> 00:24:05,960 Speaker 2: mid frequency. 494 00:24:03,640 --> 00:24:08,520 Speaker 1: Different. I don't know what it means, because, like, I 495 00:24:08,560 --> 00:24:11,119 Speaker 1: think different people have different Like I think there are 496 00:24:11,119 --> 00:24:13,200 Speaker 1: definitely people in the world who you're like, oh, yeah, 497 00:24:13,240 --> 00:24:16,080 Speaker 1: I'm a high frequency trader. I've trade like every couple 498 00:24:16,119 --> 00:24:18,879 Speaker 1: of days, right, But like, yeah, when like HFT people 499 00:24:18,880 --> 00:24:21,399 Speaker 1: say it, they mean, like when HFT people like I 500 00:24:21,440 --> 00:24:24,200 Speaker 1: trade every second, They're like, oh, that's so low frequency. 501 00:24:24,680 --> 00:24:26,840 Speaker 2: What a pedestrian case of trading. 502 00:24:27,160 --> 00:24:30,159 Speaker 1: You know. I've said milliseconds in articles and people have 503 00:24:30,200 --> 00:24:33,080 Speaker 1: been like, seconds are so slow we're even talking about 504 00:24:33,560 --> 00:24:36,159 Speaker 1: but no mid frequency. So we're doing a microsecond and 505 00:24:36,280 --> 00:24:39,520 Speaker 1: an hour. Yeah, I'm sorry, we're doing a microsecond in 506 00:24:39,600 --> 00:24:42,040 Speaker 1: a month somewhere in that range. 507 00:24:42,480 --> 00:24:45,560 Speaker 2: I do like to imagine like a full circle moment though, 508 00:24:45,760 --> 00:24:49,840 Speaker 2: like Tower being an example of Okay, they're you know, 509 00:24:50,080 --> 00:24:52,840 Speaker 2: going out the time spectrum and maybe just we end 510 00:24:52,920 --> 00:24:56,040 Speaker 2: up with long only fund managers at a certain point. 511 00:24:56,600 --> 00:24:59,119 Speaker 1: I don't think we're gonna up. Well, it's sure like 512 00:25:00,080 --> 00:25:02,800 Speaker 1: this is the thing, like people who are doing a 513 00:25:02,840 --> 00:25:05,359 Speaker 1: lot of quantitative research into like signals that tell them 514 00:25:05,400 --> 00:25:08,040 Speaker 1: what stocks to buy and sell. There are different ways 515 00:25:08,040 --> 00:25:10,840 Speaker 1: to use that, and often it's like at different time scales, 516 00:25:10,840 --> 00:25:13,760 Speaker 1: where like if you have like a pretty good method 517 00:25:14,000 --> 00:25:17,720 Speaker 1: for knowing which stocks are likely to go up or down, like, 518 00:25:18,359 --> 00:25:20,720 Speaker 1: one natural thing to do is to like buy the 519 00:25:20,760 --> 00:25:22,920 Speaker 1: ones that'll go up and short the ones that'll go down, right, 520 00:25:23,320 --> 00:25:24,919 Speaker 1: But nothing to do is you buy the ones that 521 00:25:25,119 --> 00:25:27,440 Speaker 1: go up and not short anything and run a long 522 00:25:27,440 --> 00:25:29,800 Speaker 1: only fund, right, And so you have like you know, 523 00:25:30,760 --> 00:25:34,040 Speaker 1: AQR and other people who run you know, hedge funds 524 00:25:34,119 --> 00:25:35,679 Speaker 1: and also are like, well, just take the long signals 525 00:25:35,720 --> 00:25:39,119 Speaker 1: and run long only money because people want long only products. 526 00:25:39,440 --> 00:25:42,159 Speaker 1: Or like, you know, I think about like other examples 527 00:25:42,240 --> 00:25:45,600 Speaker 1: of this kind of thing, and like you look at Renaissance, 528 00:25:45,880 --> 00:25:48,600 Speaker 1: and it's never clear exactly what the dividing line is. 529 00:25:48,600 --> 00:25:53,520 Speaker 1: But like Renaissance, you know, yeah, as a very famous, 530 00:25:53,920 --> 00:25:58,439 Speaker 1: extraordinarily successful hedge fund called Medallion that has been closed 531 00:25:58,440 --> 00:26:02,080 Speaker 1: to outside money for that now because it's too good 532 00:26:02,480 --> 00:26:04,920 Speaker 1: and it only has so much capacity, right, Yeah, And 533 00:26:05,000 --> 00:26:06,960 Speaker 1: so they close it outside money and they run their 534 00:26:07,000 --> 00:26:09,639 Speaker 1: own money and they make themselves billionaires, and then they go, well, 535 00:26:09,720 --> 00:26:11,119 Speaker 1: you know, we have all of us, like you know, 536 00:26:11,480 --> 00:26:14,439 Speaker 1: it's like pretty good signals that you know, like we 537 00:26:14,520 --> 00:26:16,840 Speaker 1: reach capacity on our own money, but like we can 538 00:26:16,920 --> 00:26:19,240 Speaker 1: use those signals to run institutional money and like not 539 00:26:19,400 --> 00:26:22,480 Speaker 1: quite as good but good enough. So there's a lot 540 00:26:22,480 --> 00:26:25,840 Speaker 1: of that where like you know, people who have really 541 00:26:25,920 --> 00:26:29,320 Speaker 1: good signals that have limited capacity will run their own 542 00:26:29,359 --> 00:26:31,359 Speaker 1: money with those really good signals, and then like there's 543 00:26:31,359 --> 00:26:33,359 Speaker 1: some second tier of like we can run other people's 544 00:26:33,400 --> 00:26:34,800 Speaker 1: money and still be pretty good. 545 00:26:35,000 --> 00:26:36,720 Speaker 2: Yeah, I mean other I don't know that. 546 00:26:36,680 --> 00:26:39,199 Speaker 1: Towers advertising that like maybe they're like, oh or like 547 00:26:39,440 --> 00:26:42,160 Speaker 1: mid frequency signals or even better. You should definitely get 548 00:26:42,160 --> 00:26:44,200 Speaker 1: in on this, right, But like I do think in 549 00:26:44,280 --> 00:26:47,199 Speaker 1: renaissance is quite explicitly the case that they're like we 550 00:26:47,280 --> 00:26:49,800 Speaker 1: have really good stuff for us and like okay stuff 551 00:26:49,840 --> 00:26:50,040 Speaker 1: for you. 552 00:26:50,240 --> 00:26:53,080 Speaker 2: Yeah, yeah, I yeah. The article doesn't go into that, 553 00:26:53,119 --> 00:26:55,200 Speaker 2: but it does say that this would mark one of 554 00:26:55,240 --> 00:26:59,080 Speaker 2: the first examples of a large high speed proprietary trading 555 00:26:59,080 --> 00:27:01,600 Speaker 2: shop opening a product for outside investors. 556 00:27:01,840 --> 00:27:04,480 Speaker 1: Yeah sort of. Wellthough, like Jane Streets, it should bombs, right, Yeah, 557 00:27:04,560 --> 00:27:07,239 Speaker 1: not not a product for outside investors per se, but 558 00:27:07,320 --> 00:27:10,240 Speaker 1: like the idea that like you are a big successful 559 00:27:10,240 --> 00:27:12,960 Speaker 1: proprietary trading firm, and so you use outside money to 560 00:27:13,000 --> 00:27:16,200 Speaker 1: grow your business, is not like completely unheard of true? 561 00:27:17,040 --> 00:27:18,359 Speaker 1: And also I think some of them have taken like 562 00:27:18,400 --> 00:27:21,120 Speaker 1: outside equity investments. So I'm not sure about that you. 563 00:27:21,160 --> 00:27:24,639 Speaker 2: Touched on this, but one of the quotes in the article, 564 00:27:25,440 --> 00:27:28,359 Speaker 2: attributed to a person close to Tower is that there's 565 00:27:28,480 --> 00:27:30,359 Speaker 2: just a finite limit to the amount of money that 566 00:27:30,400 --> 00:27:34,600 Speaker 2: you can make with the really high frequency strategies. Why 567 00:27:34,720 --> 00:27:37,440 Speaker 2: is that It's just because they're dealing with the likes 568 00:27:37,440 --> 00:27:39,679 Speaker 2: of Citadel and Jane Street and trying to compete against them, 569 00:27:39,800 --> 00:27:40,720 Speaker 2: or what does that mean? 570 00:27:41,480 --> 00:27:46,879 Speaker 1: Well, like stocks don't go up that much, and so 571 00:27:47,000 --> 00:27:48,400 Speaker 1: is that just in a microsecond? 572 00:27:48,480 --> 00:27:48,600 Speaker 2: Right? 573 00:27:48,720 --> 00:27:52,600 Speaker 1: Like like what is investing? Right? Like you're a sort 574 00:27:52,640 --> 00:27:54,960 Speaker 1: of deep questionnaire. It was like why should you make 575 00:27:54,960 --> 00:27:57,560 Speaker 1: money by buying stocks? Right? And the answer is in 576 00:27:57,640 --> 00:28:00,000 Speaker 1: like the long term, because you're alligating capital to its 577 00:28:00,040 --> 00:28:03,320 Speaker 1: best uses, and you are saying this AI company is 578 00:28:03,359 --> 00:28:05,959 Speaker 1: going to transform the world, and so if I invest 579 00:28:05,960 --> 00:28:08,200 Speaker 1: in it now, it'll like ten x my money because 580 00:28:08,240 --> 00:28:11,120 Speaker 1: like it'll be transformative to the world. Right, And if 581 00:28:11,119 --> 00:28:14,600 Speaker 1: you're like why should you make money holding stocks? For 582 00:28:14,800 --> 00:28:18,399 Speaker 1: like one one thousandth of a second. The answer is 583 00:28:18,640 --> 00:28:22,440 Speaker 1: because you're providing a tiny, tiny liquidity service to somebody, right, 584 00:28:22,680 --> 00:28:24,520 Speaker 1: And like it turns out that you can make a 585 00:28:24,600 --> 00:28:27,520 Speaker 1: really nice living providing a tiny liquidity service to people. 586 00:28:27,720 --> 00:28:30,360 Speaker 1: But you can't, like, you know, make a trillion dollars, right, 587 00:28:30,359 --> 00:28:33,200 Speaker 1: Like you're not like allocating capital to like changing the 588 00:28:33,200 --> 00:28:35,240 Speaker 1: world really yeah, like providing a little service, right, So, 589 00:28:35,280 --> 00:28:37,720 Speaker 1: like there shouldn't be that much money. Like there's a 590 00:28:37,800 --> 00:28:41,520 Speaker 1: lot of money in very high frequency understanding what stocks 591 00:28:41,520 --> 00:28:43,080 Speaker 1: will go up in the next hundredth of a second, 592 00:28:43,120 --> 00:28:45,720 Speaker 1: But there's more money in understanding like how the economy 593 00:28:45,720 --> 00:28:47,400 Speaker 1: will transform the next ten years. 594 00:28:47,160 --> 00:28:49,400 Speaker 2: Right, yeah, Because I wrote that quote and I was like, 595 00:28:49,440 --> 00:28:53,320 Speaker 2: isn't that true of a lot of things? What I mean, 596 00:28:53,560 --> 00:28:55,480 Speaker 2: like there's only a finite amount of money that you. 597 00:28:55,600 --> 00:28:58,360 Speaker 1: Make, Like I don't think that there's Like I think 598 00:28:58,440 --> 00:29:00,720 Speaker 1: the one place where there is not a amount of 599 00:29:00,720 --> 00:29:05,959 Speaker 1: money is in like understanding what companies and technologies will 600 00:29:06,000 --> 00:29:08,440 Speaker 1: be transformative for the world, right, Like if you like 601 00:29:08,520 --> 00:29:10,520 Speaker 1: pick where economic growth will be, like you can make 602 00:29:10,520 --> 00:29:13,360 Speaker 1: a trillion dollars, right, Like not really, but like I 603 00:29:13,400 --> 00:29:15,200 Speaker 1: mean you can't, right I mean, like, you know, Facebook 604 00:29:15,240 --> 00:29:17,560 Speaker 1: is a trillion dollar company, right, you can like know 605 00:29:17,640 --> 00:29:19,719 Speaker 1: what the future will look like and make a trillion 606 00:29:19,800 --> 00:29:26,080 Speaker 1: dollars right, Like you can't? You know, you're like prodding 607 00:29:26,120 --> 00:29:28,320 Speaker 1: a service. Yeah, the bloomit how much money you can make? 608 00:29:28,440 --> 00:29:31,480 Speaker 2: Well, there's a quote in here from a professor over 609 00:29:31,520 --> 00:29:35,480 Speaker 2: at the University of Illinois who also here's another quote 610 00:29:35,520 --> 00:29:37,880 Speaker 2: that just made me think a little bit. If you're 611 00:29:37,880 --> 00:29:40,560 Speaker 2: a firm that gets really good at mining gold, why 612 00:29:40,600 --> 00:29:45,720 Speaker 2: sticks are just mining gold? It's like both That was 613 00:29:45,760 --> 00:29:46,800 Speaker 2: another thinker. 614 00:29:48,160 --> 00:29:49,480 Speaker 1: Mining gold, right, but. 615 00:29:50,280 --> 00:29:51,160 Speaker 2: It's like you. 616 00:29:52,920 --> 00:30:01,920 Speaker 1: Newsletter why Not? Why Not? Podcast? And that was the 617 00:30:01,960 --> 00:30:02,960 Speaker 1: Money Stuff Podcast. 618 00:30:03,080 --> 00:30:05,120 Speaker 2: I'm Matt Luvian and I'm Katie Greifeld. 619 00:30:05,440 --> 00:30:07,520 Speaker 1: You can find my work by subscribing to the Money 620 00:30:07,520 --> 00:30:10,000 Speaker 1: stuffnewsletter on Bloomberg dot com. 621 00:30:09,680 --> 00:30:12,200 Speaker 2: And you can find me on Bloomberg TV every day 622 00:30:12,240 --> 00:30:15,360 Speaker 2: on Open Interest between nine to eleven am Eastern. 623 00:30:15,560 --> 00:30:17,280 Speaker 1: We'd love to hear from you. You can send an 624 00:30:17,280 --> 00:30:20,480 Speaker 1: email to Moneypod at Bloomberg dot net, ask us a 625 00:30:20,560 --> 00:30:21,960 Speaker 1: question and we might answer it on air. 626 00:30:22,440 --> 00:30:24,600 Speaker 2: You can also subscribe to our show wherever you're listening 627 00:30:24,680 --> 00:30:26,680 Speaker 2: right now and leave us a review. 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