WEBVTT - T+Lunchtime: Settlement, Musk, Hwang 0:00:03.120 --> 0:00:08.200 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:10.600 --> 0:00:13.360 Hello and welcome to The Money Stuff Podcast, your weekly 0:00:13.400 --> 0:00:16.520 podcast where we talk about stuff related to money. I'm 0:00:16.520 --> 0:00:18.480 Matt Levine and I write the Money Stuff column for 0:00:18.480 --> 0:00:19.360 Bloomberg Opinion. 0:00:19.760 --> 0:00:22.640 And I'm Katie Greifeld. I'm a reporter with Bloomberg News 0:00:22.680 --> 0:00:24.720 and an anchor for Bloomberg Television. 0:00:26.920 --> 0:00:29.080 Katy did that offscript, and I'm sort of clutching the 0:00:29.120 --> 0:00:29.960 table as she did. 0:00:30.640 --> 0:00:33.360 I forgot usually fret out the intro. I forgot to 0:00:33.400 --> 0:00:35.200 do that this week, but I do have a strong 0:00:35.240 --> 0:00:35.920 sense of self. 0:00:36.000 --> 0:00:37.800 Okay, what are we talking about this week? Katie? 0:00:38.760 --> 0:00:43.600 Great question freestyle? Yeah, T plus one. It's finally here 0:00:43.720 --> 0:00:46.440 in the US and in Canada and Mexico. 0:00:46.720 --> 0:00:47.440 It's possible. 0:00:47.640 --> 0:00:50.440 Maybe it's happening in India soon. We're going to talk 0:00:50.479 --> 0:00:52.720 about Elon Musk. We have a few different things to 0:00:52.720 --> 0:00:54.760 talk about with Elon Musk, but I really like the 0:00:55.080 --> 0:00:57.920 attention auction that you wrote about this week, So we're 0:00:57.920 --> 0:01:00.120 going to talk about that, and we're going to talk 0:01:00.000 --> 0:01:03.480 talk about Bill Wang. It thinks possible and there'll be 0:01:04.160 --> 0:01:10.080 we do have a mill bag. I like that you saying, 0:01:10.120 --> 0:01:12.760 and I didn't usually it's usually the other way around. 0:01:18.880 --> 0:01:22.800 T plus one. It's here. It feels like this was abrupt. 0:01:23.000 --> 0:01:24.640 Maybe I just haven't been paying attention. 0:01:25.000 --> 0:01:27.600 I think that if you had been reading articles for 0:01:27.640 --> 0:01:31.440 the last three months being like TE plus one settlement 0:01:31.520 --> 0:01:34.520 is coming the week after Memorial Day, you would have 0:01:34.880 --> 0:01:38.039 growen very bored. I think that's news for a long time. 0:01:38.240 --> 0:01:40.200 I think that's like news the week before, and then 0:01:40.280 --> 0:01:42.479 news the week it happens. But yeah, it's T plus one. 0:01:42.640 --> 0:01:45.000 It's T plus one. It happened at the start of 0:01:45.280 --> 0:01:48.440 this week that we're recording the podcast in there was 0:01:48.480 --> 0:01:52.400 a beautiful day where trades from both Tuesday and Friday 0:01:52.480 --> 0:01:55.120 settled on the same day. It was like a lunar 0:01:55.160 --> 0:01:58.200 eclipse or a solar eclipse, whatever you want to call it. 0:01:58.200 --> 0:02:00.520 Seems like things are actually going fine, right. 0:02:00.880 --> 0:02:05.280 I know, you root for chaos. I root for having 0:02:05.280 --> 0:02:09.160 funny things to write about, and so clearly it would 0:02:09.200 --> 0:02:11.720 have been more chaotic have T plus one kind of 0:02:11.880 --> 0:02:15.160 broken the financial system, But in fact things seem to 0:02:15.160 --> 0:02:17.440 be going very smoothly, and in fact, the fail rate 0:02:17.960 --> 0:02:19.720 so far it seems to be a little bit lower 0:02:19.720 --> 0:02:22.640 than the fail rate last week, meaning that if you 0:02:22.720 --> 0:02:25.920 do a security trade and it settles T plus two 0:02:25.960 --> 0:02:27.720 last week, T plus one this week. Then like in 0:02:27.760 --> 0:02:30.160 two days, you have to deliver the stock and the 0:02:30.160 --> 0:02:32.520 other person has to deliver the money, and if you 0:02:32.560 --> 0:02:34.880 don't do that in time, it's called a fail And 0:02:34.919 --> 0:02:37.639 people keep track of the fail rate and every soft 0:02:37.639 --> 0:02:40.239 and people have conspiracy theories about naked short selling because 0:02:40.280 --> 0:02:42.520 of like the fail rate's going up or whatever, and 0:02:42.560 --> 0:02:45.320 the fail rate like last week was like two percent 0:02:45.440 --> 0:02:49.560 or whatever, and then this week, like the first day 0:02:49.600 --> 0:02:50.600 of T plus one, it. 0:02:50.520 --> 0:02:52.440 Was like a little bit lower. 0:02:53.280 --> 0:02:57.040 So everything's going great. I was wondering what that means, 0:02:57.080 --> 0:02:59.160 like that the fail rate is lower. Like one possibility 0:02:59.200 --> 0:03:01.799 is that they spent all this time modernizing their systems. 0:03:02.000 --> 0:03:04.320 They turn on the modernized systems and it just works better. 0:03:04.480 --> 0:03:05.200 Right there you go. 0:03:05.360 --> 0:03:08.320 Possibility. Another possibility is that everyone's in the office this week. 0:03:08.320 --> 0:03:11.519 If you work in settlement, you're definitely not on vacations. Yeah, 0:03:11.520 --> 0:03:14.480 you're definitely like paying total attention to making sure the 0:03:14.520 --> 0:03:15.360 failure it stays though. 0:03:15.639 --> 0:03:17.600 Yeah, maybe the real thing to watch will be of 0:03:17.639 --> 0:03:21.399 course next week. Yeah, we do have another test coming 0:03:21.480 --> 0:03:25.240 up on Friday. The MSCI indexes are going to rebalance, 0:03:25.280 --> 0:03:28.720 so that's another potential hurdle. But yeah, definitely. The optimistic 0:03:28.720 --> 0:03:32.040 take here is that all the preparation that Bloomberg News 0:03:32.080 --> 0:03:34.480 and other outlets have been writing about that the banks 0:03:34.480 --> 0:03:37.360 and everyone else are undertaking, maybe it paid off. And 0:03:37.680 --> 0:03:40.160 this is a total y two K moment. 0:03:40.120 --> 0:03:42.000 Y two K in the sense of it's not like 0:03:42.080 --> 0:03:45.040 that the fears were misplaced. It's just that people worked 0:03:45.080 --> 0:03:47.160 really hard to fix them and they succeeded. 0:03:47.400 --> 0:03:48.040 We did it, guys. 0:03:48.280 --> 0:03:52.280 Yeah, congratulations all the settlement professionals. I think probably if 0:03:52.320 --> 0:03:54.000 you're a settlement professional and you spent like the last 0:03:54.000 --> 0:03:56.000 three months complaining about this's like probably some part of 0:03:56.040 --> 0:03:57.840 you wants there to be a disaster, so you like 0:03:57.880 --> 0:03:58.360 I told you. 0:03:58.400 --> 0:04:01.120 But yeah, I was saying to him Matt this morning 0:04:01.160 --> 0:04:03.600 that this would be a lot more fun had there 0:04:03.640 --> 0:04:06.560 been a disaster. But I guess it comes into question 0:04:06.920 --> 0:04:09.560 what's next. I know that some people talk about T 0:04:09.640 --> 0:04:13.120 plus zero. Gensler himself actually suggested that T plus evening 0:04:13.600 --> 0:04:16.039 could be a possibility, But what's the point. 0:04:16.200 --> 0:04:19.159 Well, part of why they moved to T plus one 0:04:19.680 --> 0:04:22.680 is like the credit risk involved in waiting two days 0:04:22.720 --> 0:04:25.280 to settle a trade. And I think the big impetus 0:04:25.360 --> 0:04:27.920 was the memestock failures in twenty twenty one, when well, 0:04:27.920 --> 0:04:30.159 when a lot of brokers got the large margin calls 0:04:30.160 --> 0:04:32.920 because of the crazy volatility in the memestocks, and Robinhood 0:04:32.920 --> 0:04:34.160 had to go out and raise money, and like the 0:04:34.200 --> 0:04:36.000 lott of brokers shut off trading in game stop for 0:04:36.040 --> 0:04:38.480 a while. So all that stuff felt kind of bad 0:04:38.520 --> 0:04:40.680 and rickety, and so they wanted to change it. But 0:04:40.760 --> 0:04:42.279 I do think another part of the impetus for this 0:04:42.360 --> 0:04:45.160 is just like there's a general sense that payments and 0:04:45.200 --> 0:04:48.479 like financial transactions should be real time. That wasn't always 0:04:48.520 --> 0:04:50.600 people's sense, right, they used to like nail a check 0:04:50.680 --> 0:04:52.719 or whatever. But now you know, you look at the 0:04:52.800 --> 0:04:55.320 Venmo sort of, you know, like people's desire to be 0:04:55.320 --> 0:04:57.240 able to make real time payments on their phone, and 0:04:57.279 --> 0:04:59.320 like people find it weird that the US banking system 0:04:59.360 --> 0:05:03.640 doesn't be support with that and with securities transactions. I 0:05:03.640 --> 0:05:07.120 do think there's the example of crypto where crypto doesn't 0:05:07.120 --> 0:05:10.599 always move like instantly, but like a crypto trade on 0:05:10.720 --> 0:05:13.719 the blockchain settles when it happens, right, It's like it's 0:05:13.760 --> 0:05:18.200 instantaneous settlement. And people sort of are introduced to the 0:05:18.200 --> 0:05:20.440 financial world through that, and they look at stock trading 0:05:20.440 --> 0:05:21.800 they're like, why does it take two days? Or even 0:05:21.839 --> 0:05:23.440 why does it take one day? So I think there's 0:05:23.480 --> 0:05:25.599 just like a sort of sense that like in a 0:05:25.680 --> 0:05:28.440 modern computerized age, it shouldn't take any time to settle 0:05:28.440 --> 0:05:31.160 a transaction. And I think that's like wrong. I think 0:05:31.200 --> 0:05:36.240 it's like people confuse like the computer mechanics of like 0:05:36.279 --> 0:05:38.120 moving the stuff around with the actual sort of like 0:05:38.160 --> 0:05:40.240 financial mechanics of it. Nic stock trading is like very 0:05:40.279 --> 0:05:42.400 efficient and very sort of just in time. And so 0:05:42.480 --> 0:05:44.720 when people want to buy stock, they don't have money 0:05:44.720 --> 0:05:46.920 sitting in their account. Most people do, but big hedgephones 0:05:46.920 --> 0:05:48.440 want to buy so I don't have money just like 0:05:48.600 --> 0:05:50.120 sitting around in their account. They have to like go 0:05:50.160 --> 0:05:52.080 to their financing prime broker to like lend them the 0:05:52.080 --> 0:05:53.839 money the moment after they agree to the trade. Right, 0:05:53.839 --> 0:05:56.239 there's a lot of like you agree to a trade 0:05:56.240 --> 0:05:58.400 before you have the money sitting in the account. Sometimes 0:05:58.440 --> 0:05:59.840 you agree to the trade before you have the stock. 0:06:00.240 --> 0:06:02.760 All those sort of business processes happen after you agree 0:06:02.800 --> 0:06:06.280 to the trade. And if you moved to like very 0:06:06.279 --> 0:06:08.920 fast settlement which I don't know exactly what very fast means, 0:06:08.920 --> 0:06:11.440 Like maybe T plus evening is still like slow enough. 0:06:11.720 --> 0:06:13.200 I want like T plus lunchtime. 0:06:13.360 --> 0:06:16.320 Yeah, if you move to like instantaneous settlement, then like 0:06:16.480 --> 0:06:19.120 everything changes, like you have to prefund trades, you have 0:06:19.160 --> 0:06:21.479 to have the money sitting in the account before you 0:06:21.520 --> 0:06:23.200 do the trade. And again, like in crypto, it kind 0:06:23.240 --> 0:06:24.760 of works that way. Like in crypto, you kind of 0:06:24.760 --> 0:06:27.240 prefund everything, and so people are there's like a model 0:06:27.240 --> 0:06:29.279 for that, but it's not really how the modern financial 0:06:29.279 --> 0:06:29.960 system works. 0:06:30.160 --> 0:06:33.039 Yeah, I know I'm being dramatic when I say this, 0:06:33.160 --> 0:06:36.720 but I don't know. The notion of taking pages out 0:06:36.760 --> 0:06:40.719 of crypto infrastructure and bringing it into like the equity 0:06:40.760 --> 0:06:43.240 market feels very weird for me. This is the second 0:06:43.240 --> 0:06:45.400 time that we're sort of talking about that. Like we 0:06:45.440 --> 0:06:48.440 talked about twenty four hour trading. Yeah, a few weeks 0:06:48.520 --> 0:06:50.400 or months or years ago. At this point, I can't 0:06:50.400 --> 0:06:53.440 remember what it feels like. But the idea that maybe 0:06:53.440 --> 0:06:56.039 stocks being able to trade twenty four to seven or 0:06:56.040 --> 0:06:58.679 twenty four to five, maybe that's a reality in the future. 0:06:59.040 --> 0:07:02.719 Crypto does it here, Instantaneous settlement crypto does it. Why 0:07:02.760 --> 0:07:04.000 not equities. 0:07:03.720 --> 0:07:06.640 Crypto is a financial system that grew up entirely around 0:07:06.680 --> 0:07:08.920 computers and in the computer era, right, like it dates 0:07:08.960 --> 0:07:10.720 to like, you know, two thousand and nine. I think 0:07:11.480 --> 0:07:14.200 if you were just like designing a financial system from 0:07:14.200 --> 0:07:17.000 first principles, you'd be like, wow, that'll be on computers, 0:07:17.160 --> 0:07:18.360 and then I'll be like, well, we should it open 0:07:18.360 --> 0:07:19.960 at nine thirty in the morning. Now it's on a computer. 0:07:20.160 --> 0:07:22.080 The Internet is open twenty four hours a day, so 0:07:22.120 --> 0:07:24.320 you'd sort of design a system like that. And similarly, 0:07:24.480 --> 0:07:26.920 if you're like, well, I've got a database of stocks 0:07:26.920 --> 0:07:29.480 and a database of dollars, and like when I agree 0:07:29.520 --> 0:07:32.240 a trade, we swapped the dollars to the stocks, It's like, yeah, 0:07:32.240 --> 0:07:34.520 that should happen like on a computer, like immediately. Right, 0:07:34.560 --> 0:07:37.480 if you're designing a financial system in two thousand and 0:07:37.560 --> 0:07:40.080 nine or in twenty twenty four around computers, like you'll 0:07:40.160 --> 0:07:43.960 naturally have twenty four hour real time trades. Right. It 0:07:44.080 --> 0:07:47.040 just so happens that the actual financial system grew up 0:07:47.040 --> 0:07:50.640 over hundreds of years and wasn't built around computers, and 0:07:51.800 --> 0:07:55.640 the processes that have built up around that are very 0:07:55.680 --> 0:07:58.080 path dependent and historically determined, but some of them are 0:07:58.800 --> 0:08:03.640 good ish or like they work for humans or they 0:08:03.720 --> 0:08:06.040 work for a financial system. So with twenty four hour trading, 0:08:06.120 --> 0:08:09.440 what we talked about was in fact, in modern markets, 0:08:09.640 --> 0:08:12.760 people like concentrated liquidity. You know, the stock markets open 0:08:12.800 --> 0:08:14.160 six and a half hours a day, but like people 0:08:14.200 --> 0:08:16.560 actually like largely traded the clothes because that's when everyone 0:08:16.560 --> 0:08:18.160 else is trading, and it's good to be able to 0:08:18.160 --> 0:08:20.200 trade when everyone else is trading. And if you spread 0:08:20.200 --> 0:08:22.280 out your trading over twenty four hours, a few people 0:08:22.280 --> 0:08:25.000 to trade with in like three am. And similarly here 0:08:25.000 --> 0:08:27.920 it's yeah, like if everything moved instantaneously, like in some ways, 0:08:27.960 --> 0:08:30.400 that would look more efficient, but it would mean that 0:08:30.440 --> 0:08:32.400 you'd need to have the money in your account before 0:08:32.440 --> 0:08:35.360 you did a trade, and so there'd be like weird stuff. 0:08:35.480 --> 0:08:37.520 A lot of the problems that people worried about with 0:08:37.520 --> 0:08:41.360 T plus one were foreign investors having to convert currents. 0:08:41.559 --> 0:08:45.360 If you're a foreign investor and you want to buy 0:08:45.400 --> 0:08:48.200 a US stock, you can just decide to do that 0:08:48.760 --> 0:08:52.160 and then figure out how to convert your euros into 0:08:52.200 --> 0:08:55.160 dollars later, not like much later, but like two minutes later, 0:08:55.280 --> 0:08:57.439 and an instantaneous settlement world, you wouldn't be able to 0:08:57.440 --> 0:09:00.599 do that. Now, maybe your FX transaction would also settletaneously 0:09:00.760 --> 0:09:03.280 and everything with like just in time workout, But it's 0:09:03.280 --> 0:09:03.800 like trickier. 0:09:04.040 --> 0:09:06.880 It does seem really complicated, especially, I mean the FX 0:09:06.880 --> 0:09:09.400 piece talking about T plus one. When it comes to 0:09:10.160 --> 0:09:14.120 just domestic US equities, that's somewhat easy to wrap one's 0:09:14.160 --> 0:09:17.000 mind around, but thinking about the FX piece and the 0:09:17.000 --> 0:09:20.160 international investor piece. I was talking to someone on TV 0:09:20.320 --> 0:09:22.520 sometime this week and they said, you went from having 0:09:23.280 --> 0:09:26.480 twelve hours to source your US dollars to having like 0:09:26.520 --> 0:09:27.040 two hours. 0:09:27.080 --> 0:09:28.520 Yeah, And like, I don't know you say that to 0:09:28.559 --> 0:09:30.200 a normal person, And it's like, how long does it 0:09:30.240 --> 0:09:32.800 take for your bank to convert your years? 0:09:32.800 --> 0:09:35.800 And I've never thought about it, right, Like, yeah. 0:09:35.320 --> 0:09:37.800 It should theoretically it kind of should take a millisecond. 0:09:38.040 --> 0:09:41.240 Yeah right, Well maybe that's computer entries, but that's the 0:09:41.559 --> 0:09:44.440 world we're rapidly hurtling towards her. Maybe we're already in 0:09:44.480 --> 0:09:46.040 Can we talk about the thing I won't really want 0:09:46.080 --> 0:09:49.679 to talk about? Okay? So I cover ETFs in my 0:09:49.760 --> 0:09:52.560 day job, and I think that a lot of etf 0:09:52.600 --> 0:09:56.319 issuers do is securities lending. They lend out the securities 0:09:56.360 --> 0:09:59.800 and their portfolio it gets them a few basis points 0:10:00.080 --> 0:10:02.240 for doing that. They make that, but you think about 0:10:02.240 --> 0:10:04.480 the expense ratios on a lot of these ETFs and 0:10:04.600 --> 0:10:07.960 they're like three basis points, So a couple of basis 0:10:07.960 --> 0:10:12.679 points is super meaningful. I don't really understand how security 0:10:12.760 --> 0:10:16.640 is lending is impacted by this move to T plus one. 0:10:16.720 --> 0:10:18.640 It seems like it would be a headache. Not just 0:10:18.640 --> 0:10:21.200 an ETFs, put mutual funds, et cetera. 0:10:21.559 --> 0:10:25.000 It's a huge headache, I think. So here's why it works. So, 0:10:25.040 --> 0:10:27.000 like you're a mutual fund or you're an ETF, you 0:10:27.080 --> 0:10:29.240 like lend out your stocks. You know on stocks, you 0:10:29.320 --> 0:10:31.520 lend them out, then you decide to sell them right 0:10:31.520 --> 0:10:34.320 because you have outflows or because you're your indexes rebalancing 0:10:34.360 --> 0:10:37.280 or whatever, you decide to sell your stocks. So between 0:10:37.320 --> 0:10:40.320 the minute you sell the stock, the minute you'd like 0:10:40.640 --> 0:10:44.040 your sell order executes on the stock exchange, and the 0:10:44.120 --> 0:10:46.960 settlement date, you have to get the stock right. Like 0:10:47.000 --> 0:10:49.319 you've loaned it out, you don't have it in your possession, 0:10:49.360 --> 0:10:53.520 so you have to call back the borrow. So you 0:10:53.559 --> 0:10:54.920 had two days to do that. Now you have one 0:10:55.000 --> 0:10:57.160 day to do it right. Now you call back the 0:10:57.200 --> 0:10:59.559 borrow by like you've loaned the stock out, probably through 0:10:59.600 --> 0:11:02.120 a broke who's loaned out to like a short cellar. 0:11:02.200 --> 0:11:04.320 So you call your broker and you say call the 0:11:04.320 --> 0:11:06.079 intermediary and you say, I want the stock back in. 0:11:06.120 --> 0:11:09.120 The intermediary calls the hedge fund who borrowed it and said, 0:11:09.120 --> 0:11:11.000 we want the stock pack and the edge fund doesn't 0:11:11.000 --> 0:11:12.800 have it either. They've sold the stock, so they have 0:11:12.920 --> 0:11:15.240 to find it somewhere else right now, maybe they borrow 0:11:15.280 --> 0:11:17.480 it from some other mutual fund or some other lender, 0:11:17.559 --> 0:11:20.160 right and then they borrow it in like four hours 0:11:20.280 --> 0:11:22.319 and they deliver it to you within twenty four hours, 0:11:22.320 --> 0:11:25.360 and then you deliver it to settle your sale. But 0:11:25.400 --> 0:11:27.400 another possibility is like they can't borrow it and they 0:11:27.440 --> 0:11:29.880 have to buy in their short but then that settles 0:11:29.920 --> 0:11:31.960 T plus one. So they're doing a trade after you 0:11:32.040 --> 0:11:34.319 that has to settle before you in order to give 0:11:34.360 --> 0:11:36.240 you the stocks that you can deliver it on your cell. 0:11:36.559 --> 0:11:38.840 So it's like very tricky, and I think that like 0:11:38.960 --> 0:11:41.839 one thing that mutual funds have been at least talking 0:11:41.880 --> 0:11:44.960 about doing to address this is calling in their borrow 0:11:45.000 --> 0:11:47.199 before they sell their stock. You know, you're having like 0:11:47.240 --> 0:11:51.440 an index rebalanceing or whatever. Instead of hitting sell and 0:11:51.480 --> 0:11:53.920 then calling back your borrow, you call back your borrow 0:11:53.960 --> 0:11:55.600 the day before, so you make sure it settles, and 0:11:55.600 --> 0:11:58.160 then you hit sell. Larry Tabbo Bloomberg Intelligence that has 0:11:58.200 --> 0:12:01.160 written about like the problems of that in terms of 0:12:01.200 --> 0:12:03.600 both you lose like a day of that lending income, 0:12:03.600 --> 0:12:06.000 but you also maybe tip your hand that you're going 0:12:06.000 --> 0:12:08.280 to be signing the stock because you're calling a sophisticated 0:12:08.320 --> 0:12:09.959 hedge fund and saying we need our borrow back. The 0:12:10.000 --> 0:12:13.440 hedge fund gets some information from that. They know you're selling. Yeah. 0:12:13.679 --> 0:12:16.480 I guess from my perspective of someone who cares about 0:12:16.520 --> 0:12:18.800 the ETF and a little bit the mutual fund world, 0:12:18.960 --> 0:12:21.440 the fact that you do lose a day of that 0:12:21.520 --> 0:12:22.400 fee coming in. 0:12:22.840 --> 0:12:24.760 And I don't think that's a big deal. 0:12:25.160 --> 0:12:27.040 You lose a day on Also. 0:12:26.679 --> 0:12:28.319 They have twenty basis points of earnings. 0:12:28.360 --> 0:12:30.760 Hey, that sounds pretty good. I mean, we're talking about 0:12:30.840 --> 0:12:33.600 razor thin margins on some of these ETFs. I'm wondering 0:12:33.600 --> 0:12:37.760 if it'll make securities lending a less appealing proposition for 0:12:37.960 --> 0:12:38.880 some of these companies. 0:12:39.240 --> 0:12:41.920 I be surprised if it moves the needle on that 0:12:42.080 --> 0:12:44.200 because it's the money. You know, if you're like an 0:12:44.240 --> 0:12:46.199 index e, you're not selling stock that often. 0:12:46.400 --> 0:12:48.400 All right, that's everything I wanted to know about this. 0:12:48.679 --> 0:12:49.840 That's probably everything I wanted to say. 0:12:49.920 --> 0:12:52.080 But I guess we'll talk about it when we do 0:12:52.160 --> 0:12:54.600 move to T plus zero, because actually it surprised me 0:12:54.640 --> 0:12:56.760 to learn that we only moved to T plus two 0:12:56.840 --> 0:12:57.760 and twenty seventeen. 0:12:58.120 --> 0:12:59.240 Oh yeah, I was there. 0:12:59.280 --> 0:13:00.320 I was not. 0:13:00.559 --> 0:13:02.640 I mean I was there, actually, I just was not 0:13:02.640 --> 0:13:05.080 paying attention. Yeah, yeah, no, what was that doing. 0:13:05.200 --> 0:13:07.120 It was really twenty seventeen. Hey, I remember that. Yeah, 0:13:07.200 --> 0:13:08.760 it was T plus three for my whole career, and 0:13:08.840 --> 0:13:11.960 it was like plus five in like the sixties or something. 0:13:12.080 --> 0:13:15.439 Yeah, we moved to T plus three, I guess in 0:13:15.520 --> 0:13:16.440 nineteen ninety three. 0:13:16.760 --> 0:13:18.760 My favorite part is that I didn't know this still 0:13:18.760 --> 0:13:20.480 like this week it was T plus one, and like 0:13:20.520 --> 0:13:23.120 the nineteen until nineteen years, I sort of imagine that, 0:13:23.160 --> 0:13:24.800 like the reason it was T plus three or whatever, 0:13:24.840 --> 0:13:26.120 you know, I grew up in T plus three. The 0:13:26.120 --> 0:13:27.560 reason it was T plus three is because like you 0:13:27.600 --> 0:13:29.720 needed to like load the stock certificates on a horse 0:13:29.760 --> 0:13:31.840 and buggy and take them across around and count them 0:13:31.840 --> 0:13:32.200 by hand. 0:13:32.320 --> 0:13:33.440 That was happening in the nineties. 0:13:33.800 --> 0:13:35.920 Yeah, no, it was happening in the twenties, but like 0:13:35.960 --> 0:13:37.760 there were only so many stock certificates, so you could 0:13:37.800 --> 0:13:39.400 do all of that in one day, right, Yeah, And 0:13:39.440 --> 0:13:42.240 so it only became like a longer settlement process when 0:13:42.280 --> 0:13:45.000 there were more trades and they were not like fully computerized, 0:13:45.040 --> 0:13:47.000 and so you had you know, max that at T 0:13:47.120 --> 0:13:49.520 plus five where it was like still a pretty manual process, 0:13:49.559 --> 0:13:51.920 but there were a lot of trades, and now there 0:13:51.920 --> 0:13:55.760 are many more trades, but it's a much less manual process. Okay, 0:13:56.040 --> 0:13:56.559 there we are. 0:13:57.240 --> 0:14:10.760 We're some buggies. 0:14:12.120 --> 0:14:16.320 Oh boy, Elon Musk, it's been several weeks since we 0:14:16.920 --> 0:14:18.439 really really dug in. 0:14:18.760 --> 0:14:21.040 Part of me feels like Elon Musk, it's always the same. 0:14:20.840 --> 0:14:23.200 Story, and that is checking his phone. He just checked 0:14:23.200 --> 0:14:25.560 the time he has to want to talk about this. 0:14:26.760 --> 0:14:29.720 We are drawing closer and closer to that shareholder vote. 0:14:29.800 --> 0:14:33.240 Yeah, so, Elon Musk, he had a huge package of 0:14:33.280 --> 0:14:35.720 options from Tesla in like twenty eighteenth. You know, everyone 0:14:35.760 --> 0:14:37.840 says it's fifty six billion dollars, it doesn't really matter. 0:14:38.280 --> 0:14:42.480 And then this year a Delaware judge said, no, we're 0:14:42.520 --> 0:14:45.800 taking those back, and in reaction to that, Tesla wants 0:14:45.840 --> 0:14:47.560 two things. They want the shareholders to vote to give 0:14:47.600 --> 0:14:51.160 him back the options, and they want the shareholders to 0:14:51.240 --> 0:14:54.080 vote to reincorporate the company in Texas so that no 0:14:54.200 --> 0:14:57.840 Delaware judge can ever again take away Elon Musk's money. 0:14:57.960 --> 0:14:58.600 Both of those votes. 0:14:58.640 --> 0:15:01.400 As j thirteenth, he met the targets. Yeah, that he 0:15:01.480 --> 0:15:02.280 was supposed to hit. 0:15:02.520 --> 0:15:05.840 Like, I'm not a big ela On Musk pooster necessarily, 0:15:05.920 --> 0:15:08.520 but I feel like here in this money, yeah, like 0:15:08.560 --> 0:15:11.320 he should get the money. Maybe this is just projecting, 0:15:11.360 --> 0:15:16.200 but my impression is that the maybe like most standard 0:15:16.280 --> 0:15:19.960 view among the institutional investors in Tesla is one he 0:15:20.000 --> 0:15:23.320 should get the money. Fair is fair, and two they 0:15:23.320 --> 0:15:24.880 should not reincorporate in Texas. 0:15:25.160 --> 0:15:28.520 Yeah, so let's attack the first point because I've been 0:15:28.520 --> 0:15:33.800 thinking about why that doesn't feel great. So, yes, fair 0:15:33.840 --> 0:15:35.720 is fair here in the money, But like, I feel 0:15:35.760 --> 0:15:38.360 like you have to kind of forget about everything that 0:15:38.400 --> 0:15:40.920 has happened in the past year or so. I mean, 0:15:40.960 --> 0:15:43.680 I'm talking pretty short term when I talk about the 0:15:43.760 --> 0:15:46.840 year to date performance of Tesla, but it's been pretty bad. 0:15:46.840 --> 0:15:49.280 We've seen a big draw down in market cap and 0:15:49.360 --> 0:15:52.440 they're facing real business problems right now. 0:15:52.640 --> 0:15:54.000 Right When I say here in the money, I mean 0:15:54.040 --> 0:15:56.400 like he was granted this money in twenty eighteen with 0:15:56.480 --> 0:15:58.320 the goal of taking the market cap from like fifty 0:15:58.320 --> 0:16:00.360 billion to six hundred and fifty billion dollars and he 0:16:00.400 --> 0:16:03.000 did that by like twenty twenty one. Yeah, and so 0:16:03.040 --> 0:16:04.720 he earned the money and they gave him the grants 0:16:04.720 --> 0:16:07.720 and then now they've been taken away. But like since then, yeah, yeah, 0:16:07.880 --> 0:16:10.840 things have changed. It's weird. It's a very backward looking 0:16:10.880 --> 0:16:13.040 pay award, yeah, because it was a forward looking pay 0:16:13.040 --> 0:16:15.360 award in twenty eighteen that has not been reversed. But 0:16:15.560 --> 0:16:18.480 the question is should they give him this backward looking 0:16:18.520 --> 0:16:21.680 pay award because he did accomplish all these things in 0:16:21.720 --> 0:16:24.280 the past. And I kind of think the answer is yes, 0:16:24.400 --> 0:16:27.040 that's fair. But I do think that if you're a 0:16:27.320 --> 0:16:30.920 just hyper rational investor looking at things today, it's like, 0:16:31.640 --> 0:16:33.120 is it a good idea to give him all this 0:16:33.200 --> 0:16:35.320 money given what has he done for me lately? 0:16:35.640 --> 0:16:39.560 Yeah? Yeah, I mean Tesla has a pretty sizable retail 0:16:39.720 --> 0:16:41.280 I mean a lot of them are huge fans of 0:16:41.280 --> 0:16:44.560 Elon Musk. But I would just imagine that human psychology 0:16:44.600 --> 0:16:46.280 is going to play in as and what has he 0:16:46.360 --> 0:16:47.160 done for me lately? 0:16:47.400 --> 0:16:49.360 Oh yeah, yeah, the retail people are there because they 0:16:49.400 --> 0:16:52.320 love Elon Musk. Yeah, the institutions, I think it's more. 0:16:52.520 --> 0:16:54.560 I mean you have seen like Glass Lewis come out 0:16:54.600 --> 0:16:56.840 and say that they probably shouldn't vote for this. 0:16:57.000 --> 0:16:59.120 There are few those came out against it in twenty 0:16:59.240 --> 0:16:59.800 eighteen as well. 0:17:00.080 --> 0:17:03.480 Yeah, something that keeps coming up is and this is 0:17:03.520 --> 0:17:06.680 something you've written about, is just that he's got a 0:17:06.800 --> 0:17:10.280 lot going on. This man is the CEO of six companies. 0:17:10.680 --> 0:17:14.560 It's clear that Tesla isn't like really the only thing 0:17:14.720 --> 0:17:18.040 occupying his mind share right now. He was really into 0:17:18.160 --> 0:17:22.080 his AI startup SpaceX Scark. I forgot actually that the 0:17:22.160 --> 0:17:24.640 boring company was still in there as well. 0:17:25.640 --> 0:17:27.800 The boring company is the one I always mentioned because 0:17:27.840 --> 0:17:30.040 it's like, I think, if you rank, how much does 0:17:30.119 --> 0:17:33.960 Elon Musk speak publicly about, pay attention to and care 0:17:34.040 --> 0:17:37.359 about his companies? Like, yeah, Tesla is really volatile and 0:17:37.480 --> 0:17:40.600 like right now Tesla maybe like having some problems of 0:17:40.680 --> 0:17:43.639 getting his attention, although the vote complicates that, But like 0:17:44.040 --> 0:17:47.000 boring companies usually toward the bottom because its name is 0:17:47.040 --> 0:17:49.840 the boring company. It digs tunnels. It's like just sort 0:17:49.880 --> 0:17:50.280 of less. 0:17:50.320 --> 0:17:52.320 It's like the cash in the portfolio, you know, you 0:17:52.359 --> 0:17:53.359