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

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

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

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Speaker 2: Matt Levie and I are at the Money Stuff column for.

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Speaker 1: Bloomberger Painton, and I'm Katie Greifeld, a reporter for Bloomberg

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Speaker 1: News and an anchor for Bloomberg Television.

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Speaker 2: What are we talking about today?

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Speaker 1: Arbageddon? I hope I said that right, and then.

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Speaker 2: We're currently spelled it because it's not a real word.

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Speaker 2: I'm not going to correct this.

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Speaker 1: That's good. There's an upside there. We're going to talk

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Speaker 1: about securities fraud in the burrito market, and then we're

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Speaker 1: going to talk about leverage. Warren Buffett. Let's see how

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Speaker 1: it goes. I didn't look at anything, so I don't

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Speaker 1: know if I did that. I don't know if I

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Speaker 1: did that in the right order, but I did it.

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Speaker 2: In order of your own interest, which is interest. Yeah,

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Speaker 2: that's what we need, all right.

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Speaker 1: I am intoxicated with power anyway. Merger arb arbageddon, Arbageddon.

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Speaker 2: I think arbageddon is a term that has applied to

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Speaker 2: like something that happened in my twenty fourteen It doesn't matter,

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Speaker 2: but yeah, does the.

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Speaker 1: Term arbageddon apply here. No, yeah, So why are we

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Speaker 1: saying it's an arbageddon?

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Speaker 2: Oh no, we're not. So what happened is that there

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Speaker 2: have been over the years bad things that happened to

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Speaker 2: merger arb firms, most recently when the handbag deal blew up,

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Speaker 2: which is what is it a tapestry in Capri or

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Speaker 2: the companies that it's like a very narrow market segment

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Speaker 2: definition which is like expensive but not very expensive handbags as.

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Speaker 1: Far as I can affordable luxury.

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Speaker 2: Afordable luxury, something like that. And so those companies dominate

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Speaker 2: the market for affordable luxury. And so they announced the

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Speaker 2: merger merger arbit treasure is loaded up on Capri stock,

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Speaker 2: I think, and then the Federal Trade Commissions sued to

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Speaker 2: block the deal. A judge agreed at the FT and

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Speaker 2: blocked the deal. Capri's stock fell like forty nine percent,

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Speaker 2: and some merger ARBs they lost a lot of money. Yeah,

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Speaker 2: and more generally, like in the last few years, the

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Speaker 2: FTC has been gung ho on sewing to block deals.

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Speaker 2: Sometimes it has succeeded, and the result of that is

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Speaker 2: bad news for merger arms, and some number of them

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Speaker 2: have lost their jobs. According to a Wall Street Journal

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Speaker 2: article that was published earlier this week.

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Speaker 1: Yeah, I was messy. The headline of the Wall Street

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Speaker 1: Journal article is that basically arbageddon potentially is over.

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Speaker 2: Yeah, the Arbageddon's have occurred, but like the assumption is

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Speaker 2: that Donald Trump will and least animal spirits in the

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Speaker 2: merger market.

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Speaker 1: That is the region consensus right now. I don't know

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Speaker 1: how many we're so back memes that you've seen over

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Speaker 1: the past week, but that is most of my social

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Speaker 1: media right now.

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Speaker 2: M and A Bankers.

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Speaker 1: Yes, me. I didn't know that I followed so many

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Speaker 1: financial meme accounts, but apparently I do. And in light

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Speaker 1: of that, it was interesting to see the tapestry and

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Speaker 1: could pre deal fall apart. We're recording this on Thursday,

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Speaker 1: and the headline crossed this morning that they're walking away

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Speaker 1: from the deal. And the reason that the companies gave

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Speaker 1: was that it's in the best interest of both companies

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Speaker 1: as the required closing condition of receiving necessary US regulatory

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Speaker 1: approvals was unlikely to be met by the outside date

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Speaker 1: of February tenth. By February tenth, of course, there will

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Speaker 1: be a new administration, at least in the White House.

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Speaker 2: Yeah, it's cutting Yeah, it's a little close. Yeah, once

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Speaker 2: you have a judge ruling that your deal is an

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Speaker 2: antitost violation, it's like hard to walk that back. It's

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Speaker 2: not completely impossible, but it's hard and it's harder to do.

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Speaker 2: And you know, three weeks after, you know, the new

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Speaker 2: administration is inaugurated. So there, and it's a lot of

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Speaker 2: uncertainty between now and then. Yeah.

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Speaker 1: Yeah, So I just I liked this story because it

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Speaker 1: was a little bit of reality that there are going

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Speaker 1: to be some lost causes when it comes to the

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Speaker 1: deal landscape right now. After the election last week, you

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Speaker 1: saw so many potential deal stocks just shoot up. I'm

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Speaker 1: thinking about like Capital One and Discovery in particular, and

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Speaker 1: I'm not commenting on those odds, but not all of

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Speaker 1: those deals are going to go through. Some of them

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Speaker 1: will die on the vine before things actually change, right, There's.

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Speaker 2: Like so much of a like immediate psychological shift in

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Speaker 2: how people see the new administration, like even before it's

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Speaker 2: in place, and my general sense is that the wheels

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Speaker 2: grind kind of slowly and it is hard to reverse course. Now,

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Speaker 2: this is clearly an administration that is not you know,

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Speaker 2: a respector of norms and procedures, and so the wheels

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Speaker 2: will grind a little faster than they usually do. But right, like,

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Speaker 2: once you have a court decision, it's pretty tough. The

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Speaker 2: other thing that I think is weird is like everyone

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Speaker 2: kind of assumes that this will be a far more

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Speaker 2: merger friendly administration, and the backing of all these business

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Speaker 2: people and bankers suggest that there's some reason to assume that.

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Speaker 2: But like Jennie Vance has praised Lena co On, the

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Speaker 2: head of the FTC, who's been very relatant about blocking

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Speaker 2: big mergers, it's not obvious that a sort of heterodox

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Speaker 2: populist Republican administration will actually be that much more pro merger,

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Speaker 2: or that they'll be pro merger in all the ways

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Speaker 2: that people want them to be. Yeah, but you know

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Speaker 2: that is everyone's assumption, so we are.

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Speaker 1: Yeah, it's a good point. I do wonder, and I

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Speaker 1: don't want to talk about politics, but I do wonder.

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Speaker 1: You know how much of us, say jd Vance, is

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Speaker 1: going to happen.

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Speaker 2: Oh, none, none, But but but I'm not you know,

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Speaker 2: I'm not sure anyone.

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Speaker 1: It's like a, yeah, there's going to be.

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Speaker 2: Some random television personalities, but in charge of the FTC,

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Speaker 2: and who knows what that person thinks, right, Like, who knows? Oh,

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Speaker 2: Katie is pointing to herself. Kat Katie as a television personality,

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Speaker 2: should be put in charge of the FTC. That's a

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Speaker 2: that's a good uh.

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Speaker 1: It would be an honor to serve my country. Specific

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Speaker 1: to Tapestry and Capri. Though you point out that it's

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Speaker 1: a quick turnaround. Two weeks is not a lot of time.

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Speaker 2: But also I wonder, Yeah, one thing that could happen

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Speaker 2: is that, like a deal gets dropped and it goes away,

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Speaker 2: and then like six months they start negotiating again. It

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Speaker 2: circumstances the change. You have an argument that I was

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Speaker 2: not anti coompetitive now and like you have much friendlier

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Speaker 2: de FTC and you know it all works out, But

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Speaker 2: that's pretty risky for you know, a jilted merger target.

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Speaker 1: At that point, it does seem like Tapestry shareholders do

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Speaker 1: not want this deal to happen.

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Speaker 2: There sure, I mean, like if both sides wanted this

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Speaker 2: deal to happen, like you say, well, appeal and you

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Speaker 2: know there's a deadline at February time, that doesn't matter.

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Speaker 2: You can you can mutually get together and wave the deadline.

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Speaker 2: But if you don't want to mutually get together, then

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Speaker 2: it deals off, you know.

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Speaker 1: But also, this isn't eighteen month saga, like this deal

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Speaker 1: has been going on for a long time. Things have

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Speaker 1: been pretty good at Tapestry. Their earnings have been solid.

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Speaker 1: They recently raised guidance for the year. Apparently the Coach

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Speaker 1: brand is popping off, and it seems like things have

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Speaker 1: kind of been deteriorating at Capri during that time. So

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Speaker 1: maybe there's a sigh of relief here.

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Speaker 2: Oh yeah, definitely. It is often the case that when

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Speaker 2: a deal is blocked and people are like, ah, it

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Speaker 2: was blocked. Often what that means is that one side

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Speaker 2: is kind of relieved it was blocked, right, like circumstances

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Speaker 2: of changing, you know, like or want to do the deal,

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Speaker 2: and you can't just back out of the deal. But

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Speaker 2: if there's some regulatory impediment, you can do things like

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Speaker 2: not agreed to extend the deadline.

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Speaker 1: And then there you are, Yeah, we gave it the

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Speaker 1: good college trial. It's not going to work out, you guys,

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Speaker 1: You know, you have.

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Speaker 2: An obligation to give it a words or like use

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Speaker 2: you know, all reasonable best efforts. But then once you

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Speaker 2: do that, you're done. Yeah, I do think that. Like

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Speaker 2: there's just the more general point of like the you know,

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Speaker 2: the merger ARB business, which has been difficult but lucrative

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Speaker 2: in the last few years. Right, So like merger IR right,

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Speaker 2: think of as like being sort of almost like market

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Speaker 2: making business, where like you're doing a lot of trades.

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Speaker 2: Each trade is like kind of a small spread you

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Speaker 2: make the spread and expectation and every soft and you

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Speaker 2: like absolutely run over on a deal like tap a

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Speaker 2: stry Capri, where like you lose you know, fifty percent

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Speaker 2: of your investment or whatever. In this scenario where like

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Speaker 2: Lena Khan is running the FTC and the FTC sues

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Speaker 2: to block a lot of deals that then they lose

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Speaker 2: in court. Like that's a really fun environment for merger

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Speaker 2: ARB because you can do things like buy Target stock

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Speaker 2: after the FTC sues and like the stock has gone down,

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Speaker 2: and then the FDC loses and the stock goes up

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Speaker 2: and you make a lot of money. Right, it's anything

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Speaker 2: else Like if you think of like merger ARB as

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Speaker 2: a market making business, then market makers make more money

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Speaker 2: in volatile periods, right, And so if you have a

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Speaker 2: volatile period where some mergers don't go through, some mergers

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Speaker 2: do go through. Some mergers get sued and they go down,

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Speaker 2: and then like they go through and they go up.

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Speaker 2: You can make a lot of money in this like

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Speaker 2: sort of liquidity provision business where you buy stocks when

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Speaker 2: the merger's announced and sort of sell them into the

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Speaker 2: merger when the merger closes. So it's a good lucrative business,

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Speaker 2: but it's also a business where you can get blown up, right,

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Speaker 2: and if you just make a couple of the wrong bets,

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Speaker 2: you get blown up and you're you're out of the business.

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Speaker 2: Whereas the assumption is that in a TRUBI administration, you

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Speaker 2: know there'll be a lot of mergers, so you'll have

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Speaker 2: a lot of volume. You know, if you think of

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Speaker 2: it as a market making business, you'll have a lot

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Speaker 2: of deals to do and they'll all go through, so

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Speaker 2: you won't really have a lot of risk and you

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Speaker 2: won't get blown up. The flip side of that, it

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Speaker 2: spreads will compress and you'll just make a sort of

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Speaker 2: more modest profit and not make tons of money and

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Speaker 2: h deal, but like you'll have an easier life.

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Speaker 1: What a pleasant and sedate landscape that sounds like I

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Speaker 1: kind of like the high octane.

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Speaker 2: Yeah, I think that almost everything about financial markets and

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Speaker 2: the world will be like less sedate under a Trump administration.

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Speaker 2: But like you know, mahade your arb, it'll be like yeah,

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Speaker 2: they all they all go, they all close, yeah or

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Speaker 2: not or not right or there will be you know,

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Speaker 2: a confounding expectations and they'll suit a block every deal.

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Speaker 1: Let's get to the good stuff. What's that burritos and

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Speaker 1: how little meat is in Chipotle burritos?

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Speaker 2: The lost suit that we're going to talk about also

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Speaker 2: points out that some of these burritos skimp on the

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Speaker 2: rice and beans.

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Speaker 1: Unbelievable.

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Speaker 2: It's not just the expense of it's it's everything.

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Speaker 1: I haven't been to a Chipotle in like fifteen.

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Speaker 2: Years when I worked at deal Breaker, my job before this,

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Speaker 2: we were upstairs from a Chipotle, and there was a

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Speaker 2: period right at Chipotle like three times a week for

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Speaker 2: months on end, and probably never since then. I don't

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Speaker 2: like a burrito with like a like a regular burrito.

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Speaker 1: Yeah, regular guy, I.

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Speaker 2: Think I got. I don't even remember what I what

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Speaker 2: meat I had of my.

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Speaker 1: Probably was it a true burrito, not a burrito bowl.

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Speaker 2: I don't think I've ever eaten neverat a.

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Speaker 1: Ball Wow, we're different people.

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Speaker 2: I don't know. I found it off putting. It's like

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Speaker 2: a very wrong salad.

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Speaker 1: Yeah, it's like a salad but more fun, with less

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Speaker 1: carbs than a burrito, but still a lot of more

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Speaker 1: carbs than a salad because there's rice.

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Speaker 2: The tortilla is so thin.

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Speaker 1: How many who would shock you?

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Speaker 2: Anyway? I've never had a burrito bo but I've had

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Speaker 2: hundreds of or at least dozens of Chipotle burritos. I'm

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Speaker 2: pretty good.

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Speaker 1: What were the portion sizes?

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Speaker 2: Like, I don't remember, but this is more than a

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Speaker 2: decade ago, and so I think they were ample. I

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Speaker 2: think this was.

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Speaker 1: Before chip Well, apparently things have deteriorated since then. If

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Speaker 1: you spend any time on social media, this has been

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Speaker 1: a long running issue. By long running issue, I mean

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Speaker 1: at least a couple of months.

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Speaker 2: Yeah, it's been like a thing this year.

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Speaker 1: Yeah.

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Speaker 2: Maybe maybe last year too, but I think it was

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Speaker 2: like really sort of took off and like Spring Suwheer

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Speaker 2: of twenty twenty four. Like people on social media, I'm

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Speaker 2: not on the YouTube channels where people are.

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Speaker 1: Like YouTube like wherever TikTok, Yeah, wherever people are going

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Speaker 1: to like post videos about their disappointment with their burritos.

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Speaker 2: I'm not on those channels, no, but they exist and

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Speaker 2: they're hugely influential, and I guess some people have posted

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Speaker 2: serious complaints about the size of Chipotle burrito balls, to

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Speaker 2: the point that Wells Fargo equity research analysts went and

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Speaker 2: did a study where I remember this, They ordered seventy

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Speaker 2: five quote like for like burrito bowls across eight locations

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Speaker 2: of Chipotle in New York City and found the smallest

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Speaker 2: bawl was thirteen point eight ounces and the largest was

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Speaker 2: twenty six point eight ounces.

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Speaker 1: This had to be interns, I don't know, sending them

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Speaker 1: out to various locations and having them.

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Speaker 2: Pick up I hear you, but like I mean sounds.

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Speaker 1: Like a summer project or something.

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Speaker 2: Yeah, that's probably right, but didn't they fun? But also

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Speaker 2: like I don't know, like like what a fun that

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Speaker 2: you're an equity researchology, Like I'm going to get out

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Speaker 2: of the building and order seventy five burrito balls like

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Speaker 2: that's funny. I don't know. I don't know.

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Speaker 1: Wells Fargo stock should fall because this is how their

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Speaker 1: analysts are spending their time.

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Speaker 2: But what I was supposed to spend their times.

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Speaker 1: A groundbreaking conclusion.

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Speaker 2: Did they find the biggest bowl is the twice as

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Speaker 2: big as the smallest ball.

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Speaker 1: That's pretty bad.

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Speaker 2: It's pretty bad. Yeah, and it prompted endless, endless soul

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Speaker 2: searching from Chipotle. Yeah, the CEO and the July Ironers

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Speaker 2: call said, before I give an update on our five

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Speaker 2: key strategies, I want to take a minute to address

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Speaker 2: the portion concerns that have been brought up in social media. First,

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Speaker 2: there was never a directive to provide less to our customers.

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Speaker 2: Generous portion is a core brand equity of Chipotle.

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Speaker 1: Okay, I know what that means.

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Speaker 2: It always has been and always will be. With that said,

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Speaker 2: getting the feedback caused us to relook at our execution

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Speaker 2: across our entire system, with the intention to always serve

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Speaker 2: our guests delicious, fresh custom burritos and bowls with generous portions.

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Speaker 1: Was this still Brian Nicol Yeah. Yeah. By the way,

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Speaker 1: if they make the Starbucks drinks smaller, I am going

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Speaker 1: to riot sure.

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Speaker 2: Well you'll see. Yeah, we're getting away from the point,

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Speaker 2: which is that. Okay, I feel I have complained about

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Speaker 2: various small consumer indignities on the internet forever, but like

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Speaker 2: there's this incredible modern technology, the securities road lawsuit that

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Speaker 2: allows you to turn this into a multi billion dollar lossuit. Right,

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Speaker 2: You're like, oh, the portions of my burrito are too small.

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Speaker 2: What can you do a you're gonna sue because you're

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Speaker 2: burritos too small. You don't have a class action. We

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Speaker 2: get everyone else's butos too small. It's crazy, right, But Like,

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Speaker 2: what happens here is that these reports come out and

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Speaker 2: the stock goes down a little bit. Chipotle actually announces earnings,

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Speaker 2: like most recently, like their earnings for Q three, which

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Speaker 2: i'd like just a couple of weeks ago, and their

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Speaker 2: earnings have like an increase in cost of good sold

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Speaker 2: because they're putting more meat in the burritos. They're like, like,

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Speaker 2: we did a throw audit of our portions and we

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Speaker 2: found that some stores were not putting enough in and

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Speaker 2: so we're putting more in everything. That's not exactly what

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Speaker 2: they said, but like they're putting more in everything. Yeah,

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Speaker 2: And so the stock goes down. Why is this not

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Speaker 2: go down? Well, it's earnings released. There's a number of

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Speaker 2: reasons that stock could go down, and one of them,

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Speaker 2: you know, might be that the future cost of good

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Speaker 2: sold is higher. And another one might be that you

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Speaker 2: worry that you've lost some brand value by you know, yeah,

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Speaker 2: getting yelled at for skimping on portions. All we know

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Speaker 2: is the stock goes down, right, and the stock goes

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Speaker 2: down by like a single digit number of percentage points.

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Speaker 2: That translates into billions of dollars of losses, right, And

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Speaker 2: so if your securities are you just like slapped that

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Speaker 2: in a lawsuit, you're like, they said the portions were big.

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Speaker 2: In fact, the portions were small. They were lying. It's frawed.

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Speaker 2: The stock went down when the fraud came out, so

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Speaker 2: everyone who bought the stock was defrauded out of you know,

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Speaker 2: billions of dollars. And then you sue and then you know,

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Speaker 2: it's like kind of ridiculous, but like maybe you settle

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Speaker 2: it for like, you know, pennies on the dollar and

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Speaker 2: you collected you know, multimillion dollar legal fee for bringing

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Speaker 2: this lawsuit. It's amazing, it.

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Speaker 1: Is amazing, and I'm excited to see how this turns out.

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Speaker 2: I read all the time everything is security is fraud.

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Speaker 2: It's like an amazing like use of the American legal

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Speaker 2: system to go after like really incredible complais You.

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Speaker 1: Want to speculate on how it might shake out. Do

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Speaker 1: you think that they're actually going to settle?

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Speaker 2: I don't, Actually, I don't. I always like write out

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Speaker 2: these people. When people file them, A lot of them

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Speaker 2: do not go very far. Some of them settle.

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Speaker 1: Yeah, I don't know.

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Speaker 2: It takes you like an hour to write this complaint.

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Speaker 2: It's so funny. And then like maybe they said it

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Speaker 2: and you get a few million dollars.

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Speaker 1: Well, if it does go that route, I wonder, like,

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Speaker 1: does this set any precedent for what you could sue for?

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Speaker 2: Like I've been writing this for years. You can see

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Speaker 2: for anything if it's a public company. Anything.

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Speaker 1: If a company sells marbles, for example, and it says like, oh,

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Speaker 1: people are loving the green marbles, and then on their

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Speaker 1: earnings call they have to say, actually, people didn't love

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Speaker 1: the green marbles that much. You can sue for that.

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Speaker 1: Of course, wow, for anything.

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Speaker 2: Not all these cases win, but like enough make money

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Speaker 2: that Like it's a lucrative business for a plaintiffs, for

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Speaker 2: security layers.

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Speaker 1: Well, I don't know. Maybe if I don't, you know,

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Speaker 1: become the next FTC head. This is something I could do.

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Speaker 1: Brian nicol knew that people were upset about the Chipotle

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Speaker 1: portion sizes. There was this amazing article by Fortune in

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Speaker 1: late May. The headline is, Chipotle, our portion sizes aren't

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Speaker 1: getting smaller, but you can get more food with a

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Speaker 1: secret look. Do you remember this? Did this enter your

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Speaker 1: sphere of knowledge? Okay, I'm so excited to tell you

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Speaker 1: about this. In an interview with Fortune, Nicol said portions

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Speaker 1: have not gotten smaller and offered disappointed customers seeking an

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Speaker 1: even bigger burrito or bowl a pro tip. Give the

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Speaker 1: workers a secret look. This is a direct quote. One

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Speaker 1: of the things I think is great about Chipotle is

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Speaker 1: if you come into the restaurant and you want a

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Speaker 1: little more rice, or you want a little more pico

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Speaker 1: de gallo, Nicol told Fortune, who then widened his eyes

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Speaker 1: slightly and did I say that wrong? What did I say?

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Speaker 1: Did I really sorry? I said that? Okay? If you

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Speaker 1: want more cheese on your case adilla, or you want

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Speaker 1: more gilapanos, this is a direct quote. One of the

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Speaker 1: things I think is great.

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Speaker 2: She's gonna play the tape of himself.

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Speaker 1: One of the things I think is great about Chipotle

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Speaker 1: is if you come into the restaurant. If you I'm

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Speaker 1: gonna start saying that though we used to call it

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Speaker 1: that in my family. One of the things I think

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Speaker 1: is great about Chipotle is if you come into the

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Speaker 1: restaurant and you want a little more rice, or you

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Speaker 1: want a little more Pico the gayo, I say, what

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Speaker 1: is it? Wait? How do I say it? Now? I'm

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Speaker 1: in my own head Pico to Gio, Nickel told Fortune,

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Speaker 1: who then widened his eyes slightly and nodded his head.

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Speaker 1: Usually our guys and women give them a little more scoop,

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Speaker 1: so he was aware of the complaints. And I just

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Speaker 1: love the suggestion of giving like a secret nod and

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Speaker 1: like maybe a wink to one of the Chipotle workers.

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Speaker 2: I just think it's like, you know, it is not

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Speaker 2: a factory produced product should have exactly the same way

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Speaker 2: each time. It's like you're talking to a person who's

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Speaker 2: like using a spoon, right, Like you can you can

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Speaker 2: do that, You can give it. You could even say,

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Speaker 2: could get bet a little more on that. I don't know,

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Speaker 2: I haven't done this in ten years, but it does

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Speaker 2: seem like a thing you could do. And you know,

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Speaker 2: then like Wells Fargo is going out, and like I

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Speaker 2: wonder if Wells Farger like controlled for like the books, right, Yeah,

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Speaker 2: like there's maybe the big the twenty six ounce ball

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Speaker 2: was like they like I looked at the worker a

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Speaker 2: little bit too intensely, and the workers like, all right,

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Speaker 2: here's it more.

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Speaker 1: Yeah, we do need to know the methodology, like did they.

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Speaker 2: Make right Like one intern like was making more eye

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Speaker 2: contact than the other intern and got.

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Speaker 1: More smile perhaps or or glare. Yeah, all of these

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Speaker 1: kind of influenced results. Maybe this is a good case

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Speaker 1: for AI. You know, maybe if the robots made your bowls,

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Speaker 1: then you get a perfect measurement every time. But humans

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Speaker 1: still rule this planet and this is just a byproduct

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Speaker 1: of that.

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Speaker 2: I think that said everything we did say about this.

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Speaker 1: I think I said too much poorly.

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Speaker 2: I hope we're keeping most of that.

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Speaker 1: We can keep some of it. I don't wantn't sound

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Speaker 1: too much like a blubbering idiot. It's really hard being

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Speaker 1: on TV because my worst instincts when it comes to pronunciation,

414
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Speaker 1: always win, always win. What do you think Warren Buffett's.

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Speaker 2: Doing leveraging now?

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Speaker 1: What He's probably not thinking about this strange etf filing

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Speaker 1: based off of Berkshire Hathaway. Tell me, okay, so one

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Speaker 1: of South Korea's largest retail Brokeaches has teamed up with

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Speaker 1: this white label issuer named Title to create a double

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Speaker 1: leveraged fund that will track, if approved, Class B shares

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Speaker 1: of Berkshire Hathaway. So this is another leverage single stock

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Speaker 1: ETF And I know that we've talked about them a lot,

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Speaker 1: maybe more than the listeners want, but listen, this one

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Speaker 1: is weird and interesting just because Berkshire Hathaway shares are

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Speaker 1: so boring that this is like antithetical to the single

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Speaker 1: stock leveraged wrapper.

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Speaker 2: What is the purpose of the single stalking leverge rapper?

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Speaker 2: To me, it is just marketing, right, and so.

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Speaker 1: Like it's fun, yeah, but like.

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Speaker 2: If you have some like snazzy thing, you can be like, yeah,

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Speaker 2: a snazzy thing, and then you get money and then

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Speaker 2: like you yeah, well, like this is not as snazzy

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Speaker 2: as like Tesla being is not that valuable, but it's like, yeah,

434
00:21:34,760 --> 00:21:37,120
Speaker 2: like weren Buffett over there, It's like being Warren Buffett.

435
00:21:37,200 --> 00:21:38,399
Speaker 1: I don't know if that's snazzy.

436
00:21:38,600 --> 00:21:40,240
Speaker 2: Snazzy is not the word I think, but like has

437
00:21:40,280 --> 00:21:41,880
Speaker 2: some retail appeal to someone.

438
00:21:41,920 --> 00:21:46,359
Speaker 1: Someone, maybe to South Korean investors, because in this article

439
00:21:46,760 --> 00:21:50,200
Speaker 1: it is pointed out that individual investors from South Korea

440
00:21:50,280 --> 00:21:53,639
Speaker 1: do follow and hold a lot of Berkshire shares, and

441
00:21:53,680 --> 00:21:58,240
Speaker 1: they also love leverage single stock ETFs, namely the tessel ones.

442
00:21:58,600 --> 00:22:02,600
Speaker 1: But this one is strange because, okay, you have the

443
00:22:02,680 --> 00:22:06,240
Speaker 1: snazzy marketing thing, but like the fun in it is

444
00:22:06,320 --> 00:22:08,879
Speaker 1: watching it go up and down a lot. If you

445
00:22:09,200 --> 00:22:12,320
Speaker 1: look at some of the numbers behind Berkshire, it's just

446
00:22:12,400 --> 00:22:16,240
Speaker 1: not very exciting. The stocks ninety day volatility is like

447
00:22:16,720 --> 00:22:21,439
Speaker 1: nineteen percent. You compare that to in video in videos

448
00:22:21,520 --> 00:22:24,359
Speaker 1: is fifty nine percent, and then micro strategy, which is

449
00:22:24,560 --> 00:22:28,560
Speaker 1: very popular in these wrappers, is like ninety eight percent.

450
00:22:29,080 --> 00:22:31,040
Speaker 1: So it's not going to be exciting.

451
00:22:31,520 --> 00:22:33,640
Speaker 2: Okay, So a couple of things, first of all, come on,

452
00:22:33,800 --> 00:22:39,600
Speaker 2: like making it a levertytf makes it more exciting, right,

453
00:22:39,760 --> 00:22:42,040
Speaker 2: Like there's some no like twice is exciting. There's some

454
00:22:42,400 --> 00:22:46,760
Speaker 2: level of volatility and expected high returns from Berkshire othay, and.

455
00:22:46,720 --> 00:22:48,639
Speaker 1: You get twice as much in the instead of seven

456
00:22:48,720 --> 00:22:51,639
Speaker 1: tenths of a percent, it went up one point four percent.

457
00:22:52,080 --> 00:22:55,000
Speaker 2: Sure. The other thing though, is that you know, when

458
00:22:55,000 --> 00:22:58,280
Speaker 2: we talk about these levertytfs, I like very vo little stocks.

459
00:22:58,520 --> 00:23:00,919
Speaker 2: They are a great one day gap link product, but

460
00:23:00,960 --> 00:23:03,240
Speaker 2: they're a mess to hold for a long time because

461
00:23:03,240 --> 00:23:06,560
Speaker 2: you have the volatility drag of like if you hold

462
00:23:06,560 --> 00:23:10,480
Speaker 2: them over time, you don't get necessarily two times of

463
00:23:10,520 --> 00:23:12,400
Speaker 2: the return or three times the return of the underlying

464
00:23:12,440 --> 00:23:15,800
Speaker 2: You get like some weird, horrible thing that is often

465
00:23:15,840 --> 00:23:18,080
Speaker 2: lower than the returns on the underline. Not always, but

466
00:23:18,320 --> 00:23:22,199
Speaker 2: often lower than like two times the returns on the underline.

467
00:23:22,560 --> 00:23:26,080
Speaker 2: With a not very volatile stock, you get less volatility drag.

468
00:23:26,200 --> 00:23:28,639
Speaker 2: And it's a little bit I'm sure they're not like

469
00:23:28,800 --> 00:23:31,080
Speaker 2: this is a buy and hold forever product, because it's

470
00:23:31,160 --> 00:23:33,920
Speaker 2: you know, it's a risky way to buy and hold forever.

471
00:23:34,160 --> 00:23:36,840
Speaker 2: But it's like you could hold it for longer and

472
00:23:36,880 --> 00:23:39,960
Speaker 2: probably get closer to two times the returns of Berkshire

473
00:23:39,960 --> 00:23:42,639
Speaker 2: Hathaway than you would if you were holding you know,

474
00:23:42,920 --> 00:23:46,000
Speaker 2: a two x micro strategies for a year.

475
00:23:46,280 --> 00:23:48,760
Speaker 1: Yeah, that's true. I mean I was thinking about it,

476
00:23:48,800 --> 00:23:50,560
Speaker 1: like could it make sense as buy and hold, and

477
00:23:50,600 --> 00:23:54,320
Speaker 1: then I was remembering all of our conversations about volatility drag.

478
00:23:54,480 --> 00:23:57,199
Speaker 2: Right, it's just less so it's not you know, eliminated,

479
00:23:57,240 --> 00:23:58,879
Speaker 2: but it's it's just less so here because it's a

480
00:23:58,920 --> 00:23:59,720
Speaker 2: less volatile stock.

481
00:24:00,000 --> 00:24:03,320
Speaker 1: If I had that much conviction about Berkshire Hathaway. And

482
00:24:03,720 --> 00:24:05,760
Speaker 1: I'm a journalist, so I don't have any opinions, but

483
00:24:06,200 --> 00:24:10,040
Speaker 1: I would just buy more shares of Berkshire Hathway. Like

484
00:24:10,080 --> 00:24:13,440
Speaker 1: instead of spending buying one share, maybe I would buy

485
00:24:13,480 --> 00:24:15,280
Speaker 1: two shares. That's what I would do.

486
00:24:15,760 --> 00:24:17,480
Speaker 2: Well, this is a way to buy two shares.

487
00:24:18,119 --> 00:24:21,360
Speaker 1: Yeah, but that's going to cost me some money. This

488
00:24:21,400 --> 00:24:23,560
Speaker 1: is a plan ETF. We should note that it hasn't

489
00:24:23,600 --> 00:24:25,520
Speaker 1: been launched and TVD if it does launch.

490
00:24:25,880 --> 00:24:28,359
Speaker 2: Sure we talked about talked about that.

491
00:24:29,240 --> 00:24:32,160
Speaker 1: Hey I Warren buff Yeah we did.

492
00:24:32,359 --> 00:24:35,240
Speaker 2: That's like a vague gesture in the direction of Warren Buffett.

493
00:24:35,280 --> 00:24:38,879
Speaker 2: And also, this is just buying two shares of Berkshire Hathaway.

494
00:24:39,040 --> 00:24:41,760
Speaker 1: Yeah, I will know this has been done before. Sure

495
00:24:41,800 --> 00:24:45,760
Speaker 1: there's a two times no, no, no, there's a two times

496
00:24:45,760 --> 00:24:49,639
Speaker 1: Warren Buffett ETF in Europe. It launched in twenty twenty

497
00:24:49,640 --> 00:24:52,960
Speaker 1: two and it has about two point three million dollars

498
00:24:53,000 --> 00:24:55,840
Speaker 1: in assets, which is not very much. And I don't

499
00:24:55,840 --> 00:24:58,760
Speaker 1: know you think about the marketing. And obviously Warren Buffett

500
00:24:58,800 --> 00:25:03,080
Speaker 1: is a name, but it's a name that doesn't seem

501
00:25:03,119 --> 00:25:08,040
Speaker 1: to appeal to the cohort of individual traders who buy

502
00:25:08,119 --> 00:25:09,360
Speaker 1: single stock ETFs.

503
00:25:09,640 --> 00:25:12,600
Speaker 2: But maybe maybe this is like broadening that audience. Maybe

504
00:25:12,600 --> 00:25:15,080
Speaker 2: this is like you think you don't like levered single

505
00:25:15,080 --> 00:25:18,440
Speaker 2: stockings because they're on crazy stocks, but here is a

506
00:25:18,520 --> 00:25:20,960
Speaker 2: levered single stocky up and a nice little stock, a

507
00:25:21,080 --> 00:25:24,200
Speaker 2: nice or nice big stock, a nice Calm Warren Buffetty

508
00:25:24,720 --> 00:25:26,000
Speaker 2: Value Eddy Eddie.

509
00:25:26,119 --> 00:25:27,600
Speaker 1: Yeah, yeah, I don't know.

510
00:25:28,520 --> 00:25:29,720
Speaker 2: I'm not it's not my head.

511
00:25:29,920 --> 00:25:33,159
Speaker 1: I'm excited to with so many with so many of

512
00:25:33,160 --> 00:25:36,479
Speaker 1: these products. I am excited to see them launch, and

513
00:25:36,560 --> 00:25:40,040
Speaker 1: I'm excited to then check on them in like six months.

514
00:25:40,240 --> 00:25:44,000
Speaker 2: I just feel like technology and like, know, how are

515
00:25:44,040 --> 00:25:46,439
Speaker 2: going to progress to the point where you can like

516
00:25:46,600 --> 00:25:50,880
Speaker 2: viably run a five million dollar ETF. Right, you can

517
00:25:50,880 --> 00:25:53,640
Speaker 2: just be like, we offer a suite of twenty thousand ETFs,

518
00:25:53,800 --> 00:25:55,960
Speaker 2: and you know, if each of them raises five million dollars,

519
00:25:56,000 --> 00:25:58,520
Speaker 2: it's fine, And then you have whatever dune thing you

520
00:25:58,560 --> 00:26:01,080
Speaker 2: want in an ETF. You can have heard two times

521
00:26:01,160 --> 00:26:03,640
Speaker 2: every single stock and if someone wants it, they can

522
00:26:03,680 --> 00:26:05,359
Speaker 2: buy it. And like this is like the sort of

523
00:26:05,400 --> 00:26:07,679
Speaker 2: thing it's like less appealing than like Tesla and Nvidia

524
00:26:07,840 --> 00:26:09,840
Speaker 2: for this thing, but like more appealing than like some

525
00:26:09,960 --> 00:26:11,840
Speaker 2: stock you've never heard of. But they're going to keep

526
00:26:11,840 --> 00:26:12,600
Speaker 2: going down the list.

527
00:26:12,720 --> 00:26:15,080
Speaker 1: Yeah, we are approaching the point where there's going to

528
00:26:15,119 --> 00:26:20,240
Speaker 1: be more US listed ETFs than US listed companies, which

529
00:26:20,280 --> 00:26:21,080
Speaker 1: will be fun.

530
00:26:20,920 --> 00:26:23,439
Speaker 2: And all should It's like the power set of you

531
00:26:23,480 --> 00:26:26,760
Speaker 2: has listed companies. It's like every possible combination of companies

532
00:26:27,000 --> 00:26:27,399
Speaker 2: is going.

533
00:26:27,280 --> 00:26:28,600
Speaker 1: To be averaged to end in verse.

534
00:26:30,040 --> 00:26:33,960
Speaker 2: Every possible single stock two stock, three stock.

535
00:26:33,800 --> 00:26:37,479
Speaker 1: Pir trades, seven stocks, YEAHWY three stock, any number. Oh

536
00:26:37,520 --> 00:26:39,760
Speaker 1: my god, this sky's the limit. But I was chatting

537
00:26:39,800 --> 00:26:42,840
Speaker 1: with some of my colleagues on my print team who

538
00:26:42,960 --> 00:26:45,720
Speaker 1: cover ETFs with me at Bloomberg News. I don't know

539
00:26:45,760 --> 00:26:49,280
Speaker 1: why it's such a preamble, And we chat to a

540
00:26:49,280 --> 00:26:52,399
Speaker 1: lot of white label issuers because they're really interesting. They

541
00:26:52,440 --> 00:26:54,600
Speaker 1: work with a lot of different clients. And we were

542
00:26:54,600 --> 00:26:57,840
Speaker 1: talking about what it costs to launch an ETF. Costs

543
00:26:57,880 --> 00:27:02,760
Speaker 1: have come down mightily, and depending on what your strategy is,

544
00:27:02,840 --> 00:27:05,960
Speaker 1: you can launch an ETF for like fifty grand And

545
00:27:06,280 --> 00:27:08,960
Speaker 1: I heard that and I was like, why you have

546
00:27:09,000 --> 00:27:11,600
Speaker 1: an ETF? Why don't I have an idea? And that

547
00:27:11,680 --> 00:27:15,040
Speaker 1: also explains why we've just seened so many launches. It

548
00:27:15,119 --> 00:27:16,520
Speaker 1: is just silly season out there.

549
00:27:17,160 --> 00:27:19,399
Speaker 2: It's like barely a product. It's like a It's just

550
00:27:19,440 --> 00:27:22,120
Speaker 2: a combination of stocks, and they can just you can

551
00:27:22,240 --> 00:27:24,639
Speaker 2: just any combination you can dream of. You pay a

552
00:27:24,720 --> 00:27:26,639
Speaker 2: small fee and then you can offer it and maybe

553
00:27:26,720 --> 00:27:28,480
Speaker 2: a litle bike side of it. There is we're not

554
00:27:28,480 --> 00:27:29,399
Speaker 2: there yet. We're getting there.

555
00:27:29,480 --> 00:27:31,600
Speaker 1: There is some break even level of asket.

556
00:27:31,600 --> 00:27:34,480
Speaker 2: Shure s show shure. We're not there yet where this

557
00:27:34,560 --> 00:27:35,280
Speaker 2: is like the future.

558
00:27:35,359 --> 00:27:37,159
Speaker 1: The future is right. We're gonna have a ton of

559
00:27:37,280 --> 00:27:39,440
Speaker 1: MM and A every deal is going to go through,

560
00:27:39,560 --> 00:27:43,320
Speaker 1: and boy, we're just gonna have thousands of ETFs and

561
00:27:43,720 --> 00:27:45,879
Speaker 1: so much meat in our burritos.

562
00:27:48,680 --> 00:27:50,120
Speaker 2: And that was the Money Stuff Podcast.

563
00:27:50,280 --> 00:27:52,280
Speaker 1: I'm Matt Livian and I'm Katie Greifeld.

564
00:27:52,640 --> 00:27:54,720
Speaker 2: You can find my work by subscribing to the money

565
00:27:54,720 --> 00:27:57,200
Speaker 2: Stuff newsletter on Bloomberg dot com.

566
00:27:57,080 --> 00:27:59,520
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567
00:27:59,600 --> 00:28:02,680
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568
00:28:02,800 --> 00:28:04,479
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569
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574
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575
00:28:18,760 --> 00:28:19,200
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576
00:28:19,400 --> 00:28:21,600
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577
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578
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579
00:28:26,640 --> 00:28:28,960
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580
00:28:29,080 --> 00:28:30,640
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581
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