WEBVTT - Smack-ish: MSTR, PE, MFT 0:00:02.560 --> 0:00:07.040 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.200 --> 0:00:10.320 The bird's doing well, by the way, So the next 0:00:10.400 --> 0:00:14.840 milestone is like he flies, Yes, he is great news. 0:00:15.080 --> 0:00:17.840 He yes. So I believe last week I was talking 0:00:17.840 --> 0:00:19.680 about how we needed to work on flying, really good 0:00:19.680 --> 0:00:21.000 at perching, really good at eating. 0:00:21.079 --> 0:00:23.200 Sure you've been showing him YouTube videos. 0:00:23.320 --> 0:00:25.840 We've been working on flying. He's pretty good at flying. 0:00:25.880 --> 0:00:26.040 Now. 0:00:26.160 --> 0:00:30.520 The thing is, I'm still working on my flying. Apparently 0:00:30.600 --> 0:00:35.760 came naturally to the bird. I have to keep reminding myself, like, 0:00:35.840 --> 0:00:37.159 this is a baby bird. 0:00:37.760 --> 0:00:39.800 Yeah, do birds when. 0:00:41.600 --> 0:00:44.239 I think he's or she, we can't tell because it's 0:00:44.240 --> 0:00:48.080 a baby is just entering adolescence. Because the bird will 0:00:48.120 --> 0:00:50.479 also like peck at you, Like yesterday was sitting on 0:00:50.479 --> 0:00:52.160 my shoulder and it was like pecking at my ear 0:00:52.680 --> 0:00:54.800 and then I googled it and they go through a 0:00:54.840 --> 0:00:57.920 teenager phase where they like get into biting you for 0:00:58.000 --> 0:00:59.720 a little bit and then they kind of grow out 0:00:59.760 --> 0:00:59.960 of it. 0:01:00.360 --> 0:01:05.720 Anyway, congratulations to your bird, Thank you, Hello and welcome. 0:01:07.120 --> 0:01:09.440 It's going to keep being the bird Stuff podcast, isn't it. 0:01:09.680 --> 0:01:10.240 I love it? 0:01:11.080 --> 0:01:13.600 Anyway, Hello and welcome to the money Stuff Podcast. You're 0:01:13.600 --> 0:01:15.959 a weekly podcast where we're talking about stuff related to 0:01:16.000 --> 0:01:18.680 money sometimes. I'm Matt Levine and I read the Money 0:01:18.680 --> 0:01:20.120 Stuff com for Bloomberg Opinion. 0:01:20.240 --> 0:01:22.640 And I'm Katie Greifeld, a reporter for Bloomberg News and 0:01:22.680 --> 0:01:24.240 an anchor for Bloomberg Television. 0:01:24.840 --> 0:01:27.320 Katie, in your other life as an anchor for Bloomberg Television, 0:01:27.360 --> 0:01:29.600 you've been anchoring some Bloomberg television. 0:01:29.680 --> 0:01:32.480 Absolutely, because we had a little bit of a SmackDown 0:01:32.560 --> 0:01:37.360 this week, I'm trying to make this a dramatic. 0:01:36.319 --> 0:01:39.839 Everyone loves a financial industry SmackDown now after ever since 0:01:39.920 --> 0:01:44.280 the like the classic act then icon one from like 0:01:44.280 --> 0:01:46.440 a decade ago, Everyone's like, oh, SmackDown. 0:01:46.959 --> 0:01:49.800 I mean, we'll never achieve those heights again. That was 0:01:50.000 --> 0:01:51.880 That's at the Bar and no one's passed it since. 0:01:52.200 --> 0:01:57.760 But in slightly less interesting smackdowns smackish last week I 0:01:57.800 --> 0:02:01.480 believe it was, there was a splashly Bloomberg News article 0:02:01.480 --> 0:02:05.320 about how Jim Chanos has a short thesis when it 0:02:05.360 --> 0:02:08.440 comes to Michael Sailor's strategy, the idea being that you 0:02:08.520 --> 0:02:13.040 basically short strategy and you buy bitcoin because strategy trades 0:02:13.080 --> 0:02:15.040 at a premium to its actual bitcoin holdings. 0:02:15.120 --> 0:02:17.160 Yeah, and one thing that Jim Chaino said that is 0:02:17.320 --> 0:02:24.800 entirely accurate and revealing, and everything ignored is that micro 0:02:24.840 --> 0:02:28.280 strategy also does the same trade and enormous side. Yeah, 0:02:28.360 --> 0:02:30.679 and like micro strategy is like kind of like fundamental 0:02:30.720 --> 0:02:33.080 business models, Like, well, our stock trades that two times 0:02:33.120 --> 0:02:36.160 the value of the underlying bitcoins, So we're gonna sell 0:02:36.200 --> 0:02:38.480 a ton of stock and use the money to buy bitcoin. 0:02:38.520 --> 0:02:39.920 It's like, yeah, of course it's the great trade. But 0:02:40.000 --> 0:02:44.240 like micro strategy has some advantages and putting the trade 0:02:44.240 --> 0:02:46.360 on Jim Chanos doesn't have, Like they don't have to 0:02:46.400 --> 0:02:48.680 pay to borrow the stock, they can't get squeezed out 0:02:48.680 --> 0:02:50.360 of their sharp but they were doing the same trade. 0:02:50.400 --> 0:02:54.240 But anyway, yeah, well go on. That was Chenos's position. 0:02:54.680 --> 0:02:59.120 We interviewed Michael Sailor on Tuesday of this week, and 0:03:00.240 --> 0:03:01.320 obviously he disagreed. 0:03:01.320 --> 0:03:03.960 Well, he was like, no, nobody should sell his biker 0:03:04.040 --> 0:03:06.200 strategy stocked by bitcoin. That's a crazy thing to do. 0:03:06.280 --> 0:03:08.959 Why would anyone sell biker stategy stocked by bitcoin? Yeah 0:03:09.000 --> 0:03:11.120 except for him, but whatever, whatever, No, I mean, to 0:03:11.160 --> 0:03:12.400 be fair, he's not doing it anymore. 0:03:12.600 --> 0:03:14.880 Yeah. Oh. He also said that you know, Chinos doesn't 0:03:14.960 --> 0:03:19.200 understand how like his valuation of strategy is off sides. 0:03:19.680 --> 0:03:23.120 That was on Tuesday. Jim Chanos came on Bloomberg Television 0:03:23.160 --> 0:03:27.560 on Wednesday with my colleague and friend Scarlett Fou and 0:03:29.240 --> 0:03:31.440 give his side of the story. I mean, he said 0:03:31.480 --> 0:03:36.320 that Sailor is a great salesman, but basically his argument 0:03:37.320 --> 0:03:40.080 amounts to financial gibberish. I think he might have I 0:03:40.160 --> 0:03:42.720 think he might have said that on social media and 0:03:42.720 --> 0:03:45.520 not on I would it's really the case that like, 0:03:47.280 --> 0:03:49.120 oh wait, wa wait, let me read you betweet. Actually 0:03:49.160 --> 0:03:53.000 it's pretty good. In response to Sailor's television club from 0:03:53.080 --> 0:03:56.440 our interview with him, this is, of course complete financial gibberish. 0:03:56.680 --> 0:03:59.560 Mister Sailor wants you to value his business based not 0:03:59.600 --> 0:04:04.080 only on net value of his bitcoin holdings NAV at market, 0:04:04.200 --> 0:04:06.600 but additionally with a multiple on the change in that 0:04:06.720 --> 0:04:11.000 NAV exclamation point, because now he can leverage his balance sheet. Lol. 0:04:11.440 --> 0:04:14.800 I mean, like, I'm sorry, that's correct. Like I don't 0:04:14.800 --> 0:04:18.760 want to say that micro strategies thing can't work right, 0:04:18.800 --> 0:04:21.520 because it's worked right, and like a lot of people 0:04:21.560 --> 0:04:23.840 have gotten carried out shorting it right, and like I'm 0:04:23.839 --> 0:04:26.680 not saying, oh, it's a great idea just short micro strategy, 0:04:27.240 --> 0:04:31.200 but like it is gibberoiush right, It's like the point 0:04:31.320 --> 0:04:35.080 that they're making is like bitcoin has gone up a lot, 0:04:35.120 --> 0:04:38.120 and so when we buy bitcoin, we're creating a ton 0:04:38.160 --> 0:04:41.520 of value for shareholders. And like at some level that's true, 0:04:41.520 --> 0:04:43.880 but another level, you just buy bitcoin, Like. 0:04:43.920 --> 0:04:44.440 This is true. 0:04:44.480 --> 0:04:47.080 And I think I probably said this on the podcast before, 0:04:47.120 --> 0:04:48.920 but like a thing that is just wild to me 0:04:49.000 --> 0:04:52.760 about micro Strategy in particular and bitcoin treasury companies generally, 0:04:52.839 --> 0:04:55.800 is like you have to tell some story about why 0:04:56.040 --> 0:04:58.919 you're not just a pot of bitcoins, right, and there 0:04:58.960 --> 0:05:00.480 are a number of ways to tell that story. And 0:05:00.520 --> 0:05:02.560 like all credit to micro Strategy, they've done all of it. 0:05:02.560 --> 0:05:05.320 They're smart, like they're good at fine, Like this is 0:05:05.360 --> 0:05:07.960 a well run bitcoin treasury company with a model that 0:05:08.000 --> 0:05:11.040 I fundamentally don't understand, but like they're great at it. 0:05:11.600 --> 0:05:14.680 But the sort of central story that they tell is like, well, 0:05:14.720 --> 0:05:16.960 we can be levered bitcoin holders, right, Like we can 0:05:17.000 --> 0:05:19.960 be instead of just you know, buying bitcoin put in 0:05:19.960 --> 0:05:22.080 the plot, we can like borrow money to put bitcoin 0:05:22.120 --> 0:05:24.080 in the plot. We can you know micro saylers, like 0:05:24.080 --> 0:05:27.839 we can issue preferred stock that pays ten percent, and 0:05:27.880 --> 0:05:29.520 we can buy a bitcoin that goes up by forty 0:05:29.560 --> 0:05:31.839 seven percent a year, and therefore we're like we're doing 0:05:31.839 --> 0:05:35.080 an arbitrage, which is like nobody should ever said the 0:05:35.080 --> 0:05:37.000 word arbitrage. You gain after that. But the thing that 0:05:37.040 --> 0:05:39.279 I find fascinat about micro strategy is that, like from 0:05:39.279 --> 0:05:42.160 the shareolders per sective, it is just not levered bitcoin exposure. 0:05:42.240 --> 0:05:45.599 Like the way micro strategy works. If there's a sixty 0:05:45.640 --> 0:05:49.279 billion ish dollar pot of bitcoin that trades it one 0:05:49.400 --> 0:05:53.440 hundred and twenty billion ish market capitalization, which means it's 0:05:53.440 --> 0:05:57.480 not levered bitcoin for you. If you put in a dollar, 0:05:57.760 --> 0:05:59.479 you get like fifty cents worth of bitcoin, which is 0:05:59.480 --> 0:06:01.120 the opposite of leverage. Leverage is like you put in 0:06:01.520 --> 0:06:04.560 you get back two dollars with a bitcoin. So I 0:06:04.800 --> 0:06:08.760 just find it somewhat crazy making. But here we are. 0:06:08.880 --> 0:06:11.240 But the thing is, even if Jim Chinos is correct 0:06:11.279 --> 0:06:13.039 what you were saying he is, that doesn't mean his 0:06:13.080 --> 0:06:13.880 trade is gonna work. 0:06:14.400 --> 0:06:17.760 He's sorry, I want to be there. The thing that 0:06:17.800 --> 0:06:20.320 he has definitely correct about is that it's jibberish, right, 0:06:20.839 --> 0:06:23.120 just from an aesthetic point of view, it's jibberish that 0:06:23.160 --> 0:06:24.960 doesn't doesn't mean the stoggle go down. 0:06:25.160 --> 0:06:27.080 That's the thing, and that's something we've talked about before 0:06:27.120 --> 0:06:31.080 with these bitcoin treasury companies, is that in the stock 0:06:31.160 --> 0:06:35.159 market people are happy to pay double basically in the 0:06:35.200 --> 0:06:36.560 case of Strategy, like the. 0:06:36.480 --> 0:06:39.560 Trade is about that that can't last. Yeah, and like 0:06:39.680 --> 0:06:41.680 you see cracks in it, right, the game Stop is 0:06:41.680 --> 0:06:44.560 now a big treasuring company and like it should converts 0:06:44.600 --> 0:06:46.120 this week, and you know, let's talk with down like 0:06:46.120 --> 0:06:47.840 twenty percent at some point, like you know, two weeks ago, 0:06:48.000 --> 0:06:49.880 I would have said, like, yeah, any company can like 0:06:49.920 --> 0:06:52.400 announce that the bitcoin treasuring company and like trade at 0:06:52.440 --> 0:06:53.920 two x of the value of it's bitcoin. Like it's 0:06:53.920 --> 0:06:55.159 not quite as true anymore. 0:06:55.240 --> 0:06:58.080 Yeah, like kind of immediately if it came not true, yeah. 0:06:57.880 --> 0:07:01.200 Which is great, but like the micro strategy still does. 0:07:01.279 --> 0:07:02.640 I mean it's coming a little bit. 0:07:02.920 --> 0:07:03.120 Yeah. 0:07:03.800 --> 0:07:05.919 But it is a little bit weird to me for 0:07:06.000 --> 0:07:08.680 Sailor to criticize Channis because as Channos has said, and 0:07:08.720 --> 0:07:11.520 as I just said, Sailor was doing the same trade 0:07:11.560 --> 0:07:14.280 right selling micro strategy, Like micro Strategy is in the 0:07:14.280 --> 0:07:16.680 business of selling it's on stock to buy bitcoin, right, 0:07:16.760 --> 0:07:20.280 So clearly, at some point in the fairly recent past, 0:07:20.400 --> 0:07:23.120 like this year, like micro Strategy has thought that bigcoin 0:07:23.280 --> 0:07:25.080 was better as it than its stock, right, like you 0:07:25.080 --> 0:07:27.360 could sell this stock to buy bitcoin. That's a longer 0:07:27.400 --> 0:07:29.280 as true. Right now, they're doing a lot of weird stuff, 0:07:29.720 --> 0:07:33.440 and they've moved kind of further away from equity. Right 0:07:33.440 --> 0:07:37.880 they started doing stock and convertible bonds, and then they 0:07:37.880 --> 0:07:42.040 moved into like this very high premium convertible preferred, and 0:07:42.080 --> 0:07:44.560 they moved into I think higher premium convertible preferred that 0:07:44.600 --> 0:07:46.720 has looked less and less equity content, and now they're 0:07:46.720 --> 0:07:50.360 selling straight ten percent preferred that doesn't convert into stock, 0:07:50.400 --> 0:07:53.560 So they're basically you know, if you just look at 0:07:53.560 --> 0:07:56.400 their actions, it suggests that they thought their stock was 0:07:56.440 --> 0:07:58.360 overvalued at some point and now they think their stock 0:07:58.440 --> 0:08:00.960 is fairly valued. And I think he's on TV something 0:08:01.080 --> 0:08:04.160 like you know, watch out, Jim Chanis, because we could 0:08:04.200 --> 0:08:07.080 issue preferred and you know, if the premium comes down, 0:08:07.080 --> 0:08:09.560 we'll just issue more preferred, Yeah, which I took to 0:08:09.760 --> 0:08:11.960 sort of mean that they might buy back stock, which 0:08:12.160 --> 0:08:13.640 is also crazy making. 0:08:13.560 --> 0:08:16.200 This might be what you're referring to. He said, if 0:08:16.200 --> 0:08:18.840 the stock trades at a week premium We're just going 0:08:18.880 --> 0:08:21.640 to sell the preferred and if the stock rallies up, 0:08:21.720 --> 0:08:23.520 he's going to get liquidated and wiped out. 0:08:23.680 --> 0:08:25.680 Yeah, which doesn't exactly say we're going to buy the. 0:08:25.680 --> 0:08:30.280 Stock, but yeah, whatever. So he also said so if 0:08:30.320 --> 0:08:34.000 the premium declines enough, he will issued preferred also in 0:08:34.000 --> 0:08:36.320 that scenario and then buy back the common shares. 0:08:36.840 --> 0:08:37.440 Well whatever. 0:08:37.480 --> 0:08:42.200 I mean, he's a few different king plans. Something that 0:08:42.240 --> 0:08:44.520 I thought was interesting from that interview, which I'm still 0:08:44.520 --> 0:08:46.520 trying to formulate an opinion on. So maybe you can 0:08:46.559 --> 0:08:50.040 give me one is you know, I asked him, you 0:08:50.120 --> 0:08:53.640 have all these copycat bitcoin treasury companies that are coming out, 0:08:54.120 --> 0:08:56.040 do you view them as competition? He said, I don't 0:08:56.080 --> 0:09:00.600 view them as competition. I view ETFs that track preferred 0:09:00.600 --> 0:09:03.800 shares is competition. So as Investco has one, I think 0:09:03.800 --> 0:09:06.480 the ticker is pg X. It has like four billion 0:09:06.520 --> 0:09:09.199 dollars in assets, So I guess he's trying to compete 0:09:09.200 --> 0:09:12.240 for investor attention, like he wants investors to buy his 0:09:12.720 --> 0:09:16.760 preferred shares, not broadly preferred shares. I don't really know. 0:09:17.120 --> 0:09:21.320 Interesting, Yeah, the bitcoin treasury thing is interesting because he has, 0:09:21.440 --> 0:09:23.240 like for a long time been a proselytizer for other 0:09:23.280 --> 0:09:25.120 companies should do this, right, Yeah, And when you think 0:09:25.160 --> 0:09:28.679 about like the model, like Jim Chandos and I can 0:09:28.679 --> 0:09:31.000 talk about the premium all we want, but like fundamentally, 0:09:31.640 --> 0:09:34.760 Michael Sailor reviews micro strategy, they bet that bitcoin will 0:09:34.800 --> 0:09:36.240 go up, and so like the main thing they want 0:09:36.280 --> 0:09:39.079 is for bitcoin to go up rate. Yeah, and the 0:09:39.080 --> 0:09:42.400 more companies that devote themselves to buying bitcoin, like, the 0:09:42.400 --> 0:09:44.200 more bigcoin will go up, and the better off micro 0:09:44.240 --> 0:09:47.280 strategy and shoulders. All right, so they're not competition, right, Yeah, 0:09:47.320 --> 0:09:51.560 like in a world of like enormous competition for you know, 0:09:51.760 --> 0:09:54.160 people to invest in this thing, Like would micro strategies 0:09:54.200 --> 0:09:56.959 premium come down maybe, But if micro strategies premium comes 0:09:56.960 --> 0:09:58.720 down by like Bitcoin going up ten x, I'm like, 0:09:58.720 --> 0:10:02.320 that's great for Michael Sailor, you know the preferred thing, Yeah, 0:10:02.360 --> 0:10:07.880 Like I don't. I actually don't know who. I've always 0:10:07.880 --> 0:10:11.640 thought of straight preferred as a pretty niche financial product, right, 0:10:11.640 --> 0:10:13.280 It's like, yeah, a lot of banks issue it, and 0:10:13.320 --> 0:10:15.000 it looks some like utility ones. It's not like a 0:10:15.120 --> 0:10:20.040 huge You don't regularly have tech companies being like I'm 0:10:20.080 --> 0:10:22.160 going to issue a straight preferred. Right, it's not like 0:10:22.160 --> 0:10:25.440 a real thing, Like bankers don't go around marketing ten 0:10:25.480 --> 0:10:29.800 percent preferred stock to companies, and micro Strategy is doing 0:10:29.840 --> 0:10:32.560 it in size, And yeah, I guess they're competing for 0:10:32.640 --> 0:10:35.439 like the fairly limited pool of like retail investors who 0:10:35.480 --> 0:10:39.680 want preferred stock. You know, they're offering ten percent. They're like, 0:10:40.000 --> 0:10:42.640 take our ten percent. And I guess, like surely somewhere 0:10:42.640 --> 0:10:44.600 out there there's a fixed income investor who is like, 0:10:45.360 --> 0:10:50.120 I just want a safe, high dividend, and the best 0:10:50.480 --> 0:10:53.679 dividend paying stock that I can get is this microstritge 0:10:53.720 --> 0:10:56.600 preferred And I don't care what the business model it's vies. Yeah, 0:10:56.600 --> 0:10:58.079 don't tell me about it, as long as they keep 0:10:58.080 --> 0:11:03.199 paying the dividend. And that's the thing that someone thought I. 0:11:03.120 --> 0:11:07.000 Could have seen him embracing these ETFs and other funds 0:11:07.000 --> 0:11:10.280 the track preferred chairs because theoretically micro strategy Yeah, so 0:11:10.520 --> 0:11:10.960 I don't know. 0:11:11.120 --> 0:11:13.120 Yeah, I don't. I don't really understand either, but like 0:11:13.280 --> 0:11:15.240 right to the extent that like instead of buying a 0:11:15.240 --> 0:11:18.600 diversified dividend fund, retail investors like I want that micro 0:11:18.640 --> 0:11:19.640 strategy dividend, Like. 0:11:20.760 --> 0:11:22.800 Yeah, who won? 0:11:23.280 --> 0:11:23.679 Who won? 0:11:24.160 --> 0:11:24.959 Yeah? 0:11:25.320 --> 0:11:28.080 Like to the extent that, like I'm the judge of 0:11:28.120 --> 0:11:30.240 this match, Like, yeah, I'm going to award it to 0:11:30.280 --> 0:11:33.320 Jim Chana's on points to the extent that, like, you know, 0:11:33.400 --> 0:11:36.400 we'll find out when someone gets knocked out, Like Jim 0:11:36.480 --> 0:11:39.160 Chanas is going to exit this trade before Michael Saylor does. 0:11:39.360 --> 0:11:40.839 That's true. That's true. 0:11:42.480 --> 0:11:43.400 He's going to do great. 0:12:00.040 --> 0:12:04.480 Cycle recruiting. You wrote that, Uh, no one likes it. 0:12:04.480 --> 0:12:06.760 It's amazing. They fixed it. They just fixed it. 0:12:06.800 --> 0:12:09.679 Well, Jamie Diamond especially didn't like it. You're right, he 0:12:09.800 --> 0:12:10.559 solved the problem. 0:12:10.760 --> 0:12:12.480 So I have some backstorright here. So I clerked for 0:12:12.520 --> 0:12:17.360 a federal judge after law school, and clerkship hiring has 0:12:17.559 --> 0:12:21.960 the same issues, where like basically there's a pool of candidates, 0:12:21.960 --> 0:12:24.960 and there's a pool of judges, and there's like a 0:12:25.040 --> 0:12:27.960 ranking of prestigious judges is ranking of prestigious candidates, and 0:12:27.960 --> 0:12:31.760 everyone's the best candidates are the best judges. And you know, 0:12:32.080 --> 0:12:33.719 it used to be that like towards the end of 0:12:33.800 --> 0:12:35.920 law school, you'd interview with the judge to get a clerkship, 0:12:36.160 --> 0:12:38.560 and then some judges were like, we'll interview a little 0:12:38.640 --> 0:12:41.280 earlier for clerkships. To start in two years and then 0:12:41.280 --> 0:12:43.720 we'll get the first cut up. The best candidates of 0:12:43.720 --> 0:12:46.040 crept up earlier and earlier, and it became like untenable. 0:12:47.000 --> 0:12:50.480 And when I was a clerk, my judge was like 0:12:50.520 --> 0:12:54.080 the leader of the like clerkship hiring plan that told 0:12:54.120 --> 0:12:56.480 people you can't hire before, like you know, the beginning 0:12:56.520 --> 0:12:59.840 of the third year of law school. And it was 0:12:59.840 --> 0:13:01.480 like kind of mostly enforced, but like a couple of 0:13:01.559 --> 0:13:04.160 judges defected and hired in the second year, and you know, 0:13:04.679 --> 0:13:07.319 I couldn't enforce it, but I was like in a 0:13:07.400 --> 0:13:10.280 dudgeon when people would would hire clerks too early, And 0:13:10.320 --> 0:13:12.720 so I saw this process play out where like it 0:13:12.760 --> 0:13:15.200 got too early. Everyone's like, this is dumb, it's too early. 0:13:15.280 --> 0:13:18.760 Let's move things back, yeah, and and hire on a 0:13:18.800 --> 0:13:21.160 normal schedule where we can like see people's grades and 0:13:21.200 --> 0:13:23.320 like know what they're like, and not just like hire 0:13:23.320 --> 0:13:27.160 at the beginning of law school. And we set it back, 0:13:27.200 --> 0:13:30.120 and then like immediately it started decaying again. So I 0:13:30.160 --> 0:13:32.000 think that like private equity hiring is a little of that, 0:13:32.040 --> 0:13:36.000 where like there's a logical time to hire new private 0:13:36.040 --> 0:13:38.760 equity associates, and it's you know, as they get to 0:13:38.800 --> 0:13:41.240 the end of their investment banking jobs, right, it's like 0:13:41.840 --> 0:13:46.200 three months before those jobs end or whatever. And because 0:13:46.720 --> 0:13:49.719 prestigious firms want prestigious candidates, they'll be like, well, just 0:13:49.840 --> 0:13:53.240 interview a month earlier. And then everyone rushes to, you know, 0:13:53.760 --> 0:13:55.960 keep up with them. And so now it's the hiring 0:13:56.040 --> 0:13:59.880 is like before the investment banking jobs start, and everyone 0:14:00.240 --> 0:14:02.480 that's Domin. So Jamie Diamond is like, that's Domin, we 0:14:02.480 --> 0:14:04.840 won't let you do it. And because he's Jamie Diamond, 0:14:04.880 --> 0:14:08.640 because JP Morgan is a big prestigious bank, Like they've 0:14:08.679 --> 0:14:11.880 had some traction where I think Apollo and General Atlantic 0:14:11.920 --> 0:14:14.160 have already said I'm not going to hire people this 0:14:14.240 --> 0:14:16.600 year for their twenty twenty seven start dates. 0:14:16.679 --> 0:14:18.320 But it sounds like you're saying you don't think that 0:14:18.400 --> 0:14:20.440 this truth of sorts will last. 0:14:20.680 --> 0:14:23.360 I think in five years we will be reading articles 0:14:23.400 --> 0:14:26.760 about how private equity hiring is, you know, starting before. 0:14:26.800 --> 0:14:28.480 Investing, talking about on this podcast. 0:14:28.480 --> 0:14:30.880 I'm talking about on this podcast for sure. This is yeah, 0:14:31.000 --> 0:14:33.600 this is a this is a long run contact for 0:14:33.640 --> 0:14:39.320 this podcast. Will this equilibrium decay like next month? I 0:14:39.400 --> 0:14:41.040 don't think so. I think there's gonna be like a 0:14:41.080 --> 0:14:44.160 real impact, where like people who started private equity in 0:14:44.200 --> 0:14:46.560 twenty twenty seven might get interviewed in twenty twenty six 0:14:46.640 --> 0:14:48.600 rather than twenty twenty five. Like that that could really 0:14:48.600 --> 0:14:51.360 happen because it has gotten sort of comical and like 0:14:51.400 --> 0:14:54.840 there is like some good will around, like moving things back, 0:14:54.880 --> 0:14:56.840 but like will it last forever? I don't know. I 0:14:56.840 --> 0:14:57.280 don't think so. 0:14:57.480 --> 0:14:59.880 Well, it's interesting. I took a dig in some of 0:15:00.080 --> 0:15:04.240 the Bloomberg historical archives. Morgan Stanley tried to do something 0:15:04.320 --> 0:15:04.560 like this. 0:15:04.760 --> 0:15:06.840 Everyone's tried to do this. This is like a thing. Yeah. 0:15:06.880 --> 0:15:11.280 Well, in twenty thirteen, Morgan Stanley then abandoned their attempt 0:15:11.280 --> 0:15:14.480 to block first year bankers from talking with recruiters for 0:15:14.560 --> 0:15:18.160 outside firms. Employees complained and the complaint this is all 0:15:18.160 --> 0:15:21.280 according to people familiar from the time. The complaint was 0:15:21.360 --> 0:15:25.560 that they're being put at a disadvantage to you know, 0:15:25.680 --> 0:15:27.960 other entry level bankers at other firms. 0:15:28.040 --> 0:15:30.840 I don't think JP Morgan could enforce this. Yeah, the 0:15:30.840 --> 0:15:34.280 private equity firms hadn't come out in support of them. 0:15:34.360 --> 0:15:36.680 Like the calculation of JP Morgan is not just we 0:15:36.720 --> 0:15:39.200 will stop people from taking offers too early, because like 0:15:39.240 --> 0:15:42.680 that is really hard to do because you know, everyone 0:15:42.720 --> 0:15:45.080 going into banking wants to be in private equity, and like, 0:15:45.160 --> 0:15:47.160 you lose analysts if you said you can't go into 0:15:47.160 --> 0:15:51.080 private equity. But I think because also the private equity 0:15:51.080 --> 0:15:54.280 firms don't love it, it has a chance to succeed. 0:15:54.520 --> 0:15:57.000 Well, that's what I'm curious about. So I mean Apollo 0:15:57.160 --> 0:16:00.400 kicked this off, Mark Owen said in an email statement 0:16:00.440 --> 0:16:03.040 to Bloomberg. When someone says something that is just plainly true, 0:16:03.360 --> 0:16:06.040 I feel compelled to agree with it. But is part 0:16:06.040 --> 0:16:09.040 of the calculation on Apollo's part that they're going to 0:16:09.600 --> 0:16:12.200 earn some brownie points with Jamie Diamond, and that's more 0:16:12.280 --> 0:16:15.480 valuable than you know, getting an early shot at some 0:16:15.520 --> 0:16:16.280 of these analysts. 0:16:16.600 --> 0:16:19.240 I think it's both. Like, I think they're not kidding 0:16:19.280 --> 0:16:23.040 that it's dumb to hire people before they graduate from college, 0:16:23.120 --> 0:16:26.480 right for a job that starts in two plus years, 0:16:26.920 --> 0:16:30.080 and you know, interview them about like LBO modeling when 0:16:30.080 --> 0:16:33.160 they've never worked on a deal, right, Like it's genuinely dumb. 0:16:33.200 --> 0:16:35.440 You know, Like, yes, being in the good graces of 0:16:35.480 --> 0:16:37.440 Jamie Diamond is not a bad idea for any private 0:16:37.440 --> 0:16:39.520 equity firm. But like no, I think I mostly agree 0:16:39.520 --> 0:16:41.440 with them. I want to tell you about a couple 0:16:41.440 --> 0:16:44.400 of like reader emails I've gotten out this topic. Yeah, 0:16:44.520 --> 0:16:46.760 so one as I heard from someone who was like, yeah, 0:16:46.800 --> 0:16:50.720 I started in banking. I accepted my PE job like immediately, 0:16:51.120 --> 0:16:52.800 and then after a couple of weeks in banking, I 0:16:52.840 --> 0:16:55.160 realized I didn't like to do deals, and so he 0:16:55.280 --> 0:16:59.240 like backed out of his PE offer, which, first of 0:16:59.240 --> 0:17:01.960 all like yes, and generally I think and Apollo talking 0:17:01.960 --> 0:17:05.080 about this, they're like, we want to get recruiting right. 0:17:05.560 --> 0:17:08.679 If you're recruiting people before they start in banking, you 0:17:08.680 --> 0:17:11.440 don't really know that you're getting the people who really 0:17:11.840 --> 0:17:15.200 want to and will be good at doing private equity right. 0:17:15.800 --> 0:17:17.600 They don't know anything about Yeah, I've never worked on 0:17:18.000 --> 0:17:21.679 whatever they've been. This is part of a bigger process 0:17:21.680 --> 0:17:23.760 where everything is crept up earlier and become more intense. 0:17:23.800 --> 0:17:26.200 So now like you interns, well, we talked about university 0:17:26.280 --> 0:17:27.720 finance a few weeks through. 0:17:28.080 --> 0:17:29.640 Like I'm like, oh, they don't know anything about banking, 0:17:29.640 --> 0:17:31.560 but they've been like doing banking since there were children. 0:17:31.920 --> 0:17:33.880 But still, like you get a better sense of who 0:17:33.920 --> 0:17:35.800 actually wants to do it if you interview people after 0:17:35.840 --> 0:17:37.440 like a year in banking than if you interview them 0:17:37.440 --> 0:17:40.560 after twenty minutes. Yeah, I thought it was interesting that 0:17:40.640 --> 0:17:43.280 like this doesn't happen that much, like people backing out, 0:17:43.280 --> 0:17:45.680 Like he was like, yeah, my firm was then like 0:17:45.760 --> 0:17:48.440 advertising for someone to fill this spot really quickly, because 0:17:48.480 --> 0:17:50.919 like they don't over hire. It's not like you know, 0:17:50.920 --> 0:17:54.000 an airline where they sell twenty percent more seats because 0:17:54.000 --> 0:17:56.520 they figure people will drop out. They just figure everyone 0:17:56.560 --> 0:17:58.440 they hire's going to start two years later, which is 0:17:58.480 --> 0:18:00.760 pretty wild. The other thing that guys, like a couple 0:18:00.760 --> 0:18:05.720 of people are like you ask, like why is Apollo 0:18:05.800 --> 0:18:08.399 jumping to agree with Chap Murray? And like more possibility 0:18:08.440 --> 0:18:11.040 is they think that recruiting this early is not a 0:18:11.040 --> 0:18:13.359 good idea and they would like to recruit later to 0:18:13.359 --> 0:18:16.840 get more have a more informed recruiting conversation. Another possibility 0:18:16.840 --> 0:18:18.280 is they want to curry favor with shaving time. And 0:18:19.119 --> 0:18:23.840 a third possibility is that they don't need as many people. Yeah, 0:18:23.880 --> 0:18:26.680 Like the third possiblity is you're hiring for twenty twenty seven, 0:18:26.720 --> 0:18:30.399 you're like okay in two years. First of all, like 0:18:30.880 --> 0:18:32.920 there's all this stuff about how like private AQUD firms 0:18:32.960 --> 0:18:34.720 have nothing to do, like they're you know, they like 0:18:34.920 --> 0:18:37.600 can't get any excess, Like shops are kind of bored, 0:18:37.640 --> 0:18:39.320 like they're not doing as many deal as they can't 0:18:39.359 --> 0:18:43.960 raise money. You know, Yeah, it'd be good to tighten 0:18:43.960 --> 0:18:46.639 this wigod for twenty twenty seven. And then there's also 0:18:46.760 --> 0:18:52.560 just like the theme of what AI will do for 0:18:52.640 --> 0:18:55.760 junior hiring and financial services, right, Like, so if you're 0:18:55.800 --> 0:18:57.600 like running a big private equity firm and you're looking 0:18:57.600 --> 0:18:59.840 at your need for junior headcount two years out, and 0:19:00.000 --> 0:19:02.199 I feel a little uncertain, and you might say, you 0:19:02.200 --> 0:19:04.080 know what, we don't need to hire everyone for twenty 0:19:04.119 --> 0:19:05.879 twenty seven right now. We can take a pause on 0:19:05.920 --> 0:19:07.560 that and see how many people we actually need in 0:19:07.560 --> 0:19:10.479 twenty twenty seven. So I detinally don't know, like if 0:19:10.520 --> 0:19:12.840 you were a junior, like if you're about to start 0:19:12.840 --> 0:19:15.880 your banking job, like I don't know whether you'd rather 0:19:16.280 --> 0:19:19.320 have private equity recruiting now or not. It's kind of 0:19:19.400 --> 0:19:22.359 nice to have your entire future sewn up for the 0:19:22.400 --> 0:19:25.280 next five years, but at the same time, it's like 0:19:25.280 --> 0:19:29.000