Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. I do think weather
Speaker 1: trading is I wrote this week about a guy who
Speaker 1: was thinking about buying weather futures to hedge golf bets
Speaker 1: on the sports Yeah platform that he ran, because that
Speaker 1: makes a lot of sports bets are correlated with weather.
Speaker 1: And so if you're a sports betting platform, one of
Speaker 1: your correlated like systemic risks, is weather risks, so you
Speaker 1: might as well trade rain futures or whatever.
Speaker 2: I mean. The weather is absolutely a factor when it
Speaker 2: comes to horse racing, which is one of the most
Speaker 2: popular or one of the oldest forms of sports betting. Okay,
Speaker 2: you know you have certain horses that are mutters, You're right,
Speaker 2: who really love racing and the wet and other horses
Speaker 2: just don't even want to touch it. Yeah, right, but
Speaker 2: they have to, right well, because of the abuse.
Speaker 1: Hello and welcome to the Money's Love Podcast, your weekly
Speaker 1: podcast where we talk about stuff related to my I'm
Speaker 1: Matt Levine and I write the Money Stuft column for.
Speaker 2: Bloomberg Opinion, and I'm Katie Greifeld, a reporter for Bloomberg
Speaker 2: News and an anchor for Bloomberg Television.
Speaker 1: Katie, there's a new bird in town, not thoughts but
Speaker 1: your fallen friends. But no new bird ai yeah, formerly
Speaker 1: currently now as all birds.
Speaker 2: I you know, love that they kept the bird. Maybe
Speaker 2: they only did it.
Speaker 1: It doesn't matter.
Speaker 2: It matters, Maden, it matters, and I just I'm charmed
Speaker 2: with their I love this story. I love I love
Speaker 2: the price action around this story. It reminds me, reminds
Speaker 2: me of a simpler time in twenty twenty one, when
Speaker 2: meme stocks were raging and you could just pivot into
Speaker 2: crypto or blockchain with seemingly few credentials and your stock
Speaker 2: would sotore. And here we are in twenty twenty six
Speaker 2: and that game is still alive.
Speaker 1: Right, the classic was I think it was earlier.
Speaker 2: Than twenty twenty one, It definitely was.
Speaker 1: It was like twenty seventeen. I want to say it
Speaker 1: was the real pinnacle of the blockchain stuff. Where Long
Speaker 1: island iceed tea company by the way, the non alcohol
Speaker 1: it's very funny name.
Speaker 2: Also confusing, yeah, very confused.
Speaker 1: Yeah, but lyland iceed Tea, so good lyland iceed Tea
Speaker 1: company pivoted to being a blockchain company and they kept
Speaker 1: like the Long Yeah, they became Long blockchain amazing. Their
Speaker 1: blockchains are going to be actual anyway they're talking about.
Speaker 1: The thing about like pivoting to blockchain in twenty seventeen
Speaker 1: is that like it was all kind of like blank space.
Speaker 2: It did feel novel.
Speaker 1: Oh I'm going to launch a crypto. People were like, O, yeah, sure,
Speaker 1: Like doaje cooin was worth billions of dollars, Like okay,
Speaker 1: you as well as anyone else, right, Uber and Ai? Yeah,
Speaker 1: pivoting into AI infrastructure, They're gonna, you know, by pus
Speaker 1: from Nvidia and put them in data centers and rent
Speaker 1: them out to run computer workloads for why on I'll
Speaker 1: tell you why not? Because like that takes a lot
Speaker 1: of money. It's not like crypto like that is a
Speaker 1: business for Iti. It's like open eyes talking about a
Speaker 1: trillion dollars of commitments. That is a business where people
Speaker 1: are like a huge superstructure of financing has been built
Speaker 1: up to allow people to build gigantic data centers and
Speaker 1: source in video chips years in advance and like get
Speaker 1: all of these things to work together. And it is
Speaker 1: quite capital intensive, yes, and quite credit dependent. And new
Speaker 1: Bird you know it was formerly all birds. It is
Speaker 1: selling the sneaker business the brand and the I don't know, ip, Yeah,
Speaker 1: it's selling the sneaker business for selling like thirty nine
Speaker 1: million dollars to someone else, and we'll have that cash,
Speaker 1: which it has already said it will dividend some or
Speaker 1: all of it to serrelders. And then it announced they
Speaker 1: financing which has a headline number of fifty million dollars,
Speaker 1: although really only five million of it has committed the
Speaker 1: rest of the investments. It's kind of like, you know,
Speaker 1: millions of dollars, which will you know, get you twenty
Speaker 1: minutes of a data center. But it's not an obvious
Speaker 1: AI infrastructure.
Speaker 2: But to that point, because there are sale side analysts
Speaker 2: who cover this company.
Speaker 1: Well quit well like I've done with this.
Speaker 2: William Blair an William Blair analyst Dylan Cardon says that
Speaker 2: a fifty million dollar investment is quote a drop in
Speaker 2: the bucket in the broader neo cloud market where most
Speaker 2: companies run Capex budgets well into the billions of dollars.
Speaker 2: And he also dropped his.
Speaker 1: Coverage trillions and fifty million is even a number state whatever,
Speaker 1: And yeah.
Speaker 2: He doesn't cover the company anymore, right, he dropped his coverage, right,
Speaker 2: probably because he.
Speaker 1: Covers moved to a farm upstate. He is done.
Speaker 2: I've seen it all.
Speaker 1: I just like that's what I would do.
Speaker 2: Yeah.
Speaker 1: He also take a baseball that to my computer and
Speaker 1: be done with the stock analyst game.
Speaker 2: He also attributed most of this move to some compilation
Speaker 2: of a very shallow float, automated momentum, and unchecked hype.
Speaker 1: Probably also some short squeeze. Yeah, maybe also some short squeeze.
Speaker 1: Lesson is don't I mean it was chazillion fund companies
Speaker 1: to zero, but yeah, no, I mean it's hype, it's
Speaker 1: it doesn't feel I don't think maybe I'm wrong. I
Speaker 1: don't think that there are a ton of retail investors
Speaker 1: or professional investors, but certainly not professionals. I don't think
Speaker 1: there are a ton of retail investors who like, wake
Speaker 1: up and read that press for this, and I'm like,
Speaker 1: oh boy, this is like the next big AI play.
Speaker 1: This is going to go to a trillion dollars. I
Speaker 1: need to get in on this earlier. I'm gonna buy
Speaker 1: some new bird stock maybe or some Yeah. But I
Speaker 1: think a lot of people are like, oh, this is
Speaker 1: a great headline. Other people are going to read this.
Speaker 1: I think it's almost all like like recursive, self referential
Speaker 1: game of hot potato, right, Like no one's being fooled,
Speaker 1: just someone as the last person to buy.
Speaker 2: Yeah, I've been kind of thinking of it as doing
Speaker 2: it for the plot, like it's funny buying some bird stock.
Speaker 2: At this moment.
Speaker 1: It was definitely possible, at any point yesterday that you
Speaker 1: would not be the last one out, the last one in. Right,
Speaker 1: It's definitely possible that would keep going up, So you
Speaker 1: know whatever.
Speaker 2: Yeah, well you talked yesterday.
Speaker 1: We're recording this on Thursday. Wednesday was the day that
Speaker 1: all Birds and said it was new Birds, and its
Speaker 1: stock went up like five hundred percent.
Speaker 2: It was so good.
Speaker 1: It's down a bit on Thursday. We had a lot
Speaker 1: of still like way up from Tuesday.
Speaker 2: I had a lot of fun talking about it on television. Obviously, sure, sure, okay,
Speaker 2: so we're talking about retail investors, but they do have
Speaker 2: that unnamed institutional investor who is making that yeah, fifty
Speaker 2: million dollar commit I had.
Speaker 1: Some guesses in my mind, but I didn't write them down,
Speaker 1: and then someone else send me a different guest that
Speaker 1: was probably more informant.
Speaker 3: It's not like black Crock, Okay, no, it's video. I
Speaker 3: don't think I don't know it would be right.
Speaker 1: I feel like I'm doing it for the plot.
Speaker 2: I feel like Johnson might just say we're doing this
Speaker 2: because it's funny.
Speaker 1: I did a little googling to see if he was
Speaker 1: like non for wearing all birds, because like all birds
Speaker 1: are like in their head out.
Speaker 2: Did you wear all Birds? Okay, my husband had a pair.
Speaker 2: They look nice. Actually, this is crazy. I don't know
Speaker 2: if you would want me to say this, but I
Speaker 2: am so. I visited my parents in Florida for Easter,
Speaker 2: and my husband keeps some shoes at their house, like
Speaker 2: we have just random shoes at their house, and my
Speaker 2: dad stepped out in a pair of like vintage all Birds.
Speaker 2: I was like, are you wearing Joe's shoes? And turns
Speaker 2: out he was. This must have been a signal you
Speaker 2: know this, and I do not think so. I don't
Speaker 2: think he qualifies as an institutional investor. I should have
Speaker 2: done something with this information, because are like three.
Speaker 1: Weeks later this is a valuable signal. Yeah, yeah, no,
Speaker 1: there's definitely like there are some funds that do these
Speaker 1: sorts of weird convertibles in micro gap stocks that are
Speaker 1: about to pivot to I don't want to say meme
Speaker 1: status exactly, but not not meme status. Yeah, like memish,
Speaker 1: and you know some of them do very well. I
Speaker 1: mean the classic is I wrote a lot about when
Speaker 1: Bad Bathroom Beyond did a big convertible structure kind of
Speaker 1: like this one with Hudson Bay Capital. Hutson Bay made
Speaker 1: like one hundred millions, like tens hundreds of millions of dollars.
Speaker 1: I take it selling stock on behalf of bed bath
Speaker 1: and Beyond as it trickled. That's way to bankruptcy. So
Speaker 1: there's definitely some money to be made doing weird floating
Speaker 1: strike convertible bonds for companies that are kind of just
Speaker 1: kicking around. But like when you pair it with the
Speaker 1: pivot to AI, it's really quite exciting.
Speaker 2: Yeah.
Speaker 1: I don't fully understand how the institutional investor monetizes this.
Speaker 1: Like classically, the convertible becomes convertible, and you convert some
Speaker 1: you get some stock, you sell it. So it's very
Speaker 1: possible they have made no money yet and they're waiting
Speaker 1: to like go through all of the process and actually
Speaker 1: fund the thing and get the stock. I think it's
Speaker 1: probably hard to short the stock right now, which is
Speaker 1: so it's hard for them to make any money, to
Speaker 1: have made any money so far. And you know there's
Speaker 1: a bit of a melting ice cube element here where Yeah,
Speaker 1: if you announce this pivot, you want to be selling
Speaker 1: stock like today. You don't want to be like eh
Speaker 1: in like six to eight weeks when the deal closes.
Speaker 2: Yea selling stock because you want to capitalize.
Speaker 1: I know what's going to happen.
Speaker 2: I do like your strategy that you put together finding
Speaker 2: ten near defunct public companies, right.
Speaker 1: Because this is not like a winner take all market
Speaker 1: where like, yeah, new Bird AI is going to dominate
Speaker 1: the data center market, there's plenty of room for ten
Speaker 1: other companies you.
Speaker 2: Haven't heard of, and you've got to diversify.
Speaker 1: Got a diversify. The Watch Journal today an article about
Speaker 1: how Barney's the story is coming back. But as a
Speaker 1: department store is like, oh, come on, they gotta do
Speaker 1: an AI pivot. And I realized they're not a public company,
Speaker 1: so it doesn't make sense. But but there was also
Speaker 1: impressed with this today miseum. So two weeks ago they
Speaker 1: put it up I don't know, but they put it
Speaker 1: out a pressure this seekco Myseum brings free, private social
Speaker 1: network to ten thousand weddings where every guest becomes the photographer.
Speaker 1: Oh yeah, so there's there's their business model as of
Speaker 1: two weeks ago. The company. Wednesday of this week, Myseum
Speaker 1: rebrands as miseum dot ai to align with full suite
Speaker 1: of technology and social media platforms. I think they just
Speaker 1: added dot ai to their name, Like, I don't think
Speaker 1: they're making a substantive change to their rewarding for yeah,
Speaker 1: all thattwork, but by adding dot ai, their stock doubled
Speaker 1: on Thursday.
Speaker 2: This is the new data.
Speaker 1: Well, it's the new pivots of crypti, which was the
Speaker 1: new pivot to dot com.
Speaker 2: In terms of everything for this moment in time, this
Speaker 2: is working and.
Speaker 1: You're still right that was the like twenty twenty four things.
Speaker 2: Yeah, like say that you're now you're accumulating cryptotoken your choice.
Speaker 1: Yeah, I can't video chips, which harder to do.
Speaker 2: Yeah, I don't know. We'll see how long there's juice
Speaker 2: to squeeze here.
Speaker 1: Dad's we're like very intense for like I don't know,
Speaker 1: three six months. I feel like this is like three
Speaker 1: to six days.
Speaker 2: But maybe about hours.
Speaker 1: I mean, the thing is like the AI boom has legs, right,
Speaker 1: So like there's definitely like miseum going a day after
Speaker 1: all birds. It feels like a flash in the pan.
Speaker 1: But like in six months if someone's like we're pivoting
Speaker 1: to AI infrastructure, will it work? Maybe? I don't know.
Speaker 2: It is weird that you know, this is only happening
Speaker 2: now in terms of like the market reaction, the market
Speaker 2: embrace here because you know, we've been talking about AI
Speaker 2: has been the conversation for at least two years now.
Speaker 1: Right Again, it's from crypto. You can't just like wake
Speaker 1: up one day like where are going to be a
Speaker 1: you know, frontier AI model, Like there is like a
Speaker 1: winner take all element here where people are giving a
Speaker 1: lot of money to fund people who have real AI
Speaker 1: chops and not you know, random sneaker companies. The ill
Speaker 1: say is that like the pivots AI thing, when you
Speaker 1: look at the actual like neo clouds, like the companies
Speaker 1: that are you know in this business, several of them
Speaker 1: did in fact pivot from crypto. Right, Yeah, there's a
Speaker 1: very traditional like crypto minding to AI neocloud path where
Speaker 1: basically like you were like, we're going to get it
Speaker 1: really into mining crypto and what that entailed in like
Speaker 1: twenty twenty one was building data centers and acquiring a
Speaker 1: lot of like Nvidia GPUs and then you happen to
Speaker 1: be really well set up to become an AI infrastructure provider. Yeah,
Speaker 1: when crypto crashed and AI took off, so is the
Speaker 1: stock market has rewarded pivots to AI of the past. Yeah,
Speaker 1: but from people who you know, chips servers.
Speaker 2: Well, there's new Bird on the street. At least I
Speaker 2: feel like this whole story. I mean, we'd still be
Speaker 2: talking about it, but it's.
Speaker 1: It didn't have a bird.
Speaker 2: It's made more fun by the fact that we're talking
Speaker 2: about new Bird AI. Matt fear Not, I know you
Speaker 2: were wondering what the etf angle is here, and I
Speaker 2: have one for you.
Speaker 1: Is theirs?
Speaker 2: No, it's the meme TF. Sure, apparently the memetf It's
Speaker 2: from Roundtail. It was resurrected. It's already bought into all birdstock, which.
Speaker 1: Like yes Wednesday, or like before Wednesday.
Speaker 2: I think on Wednesday. Well, here's the reporting. Here's the reporting.
Speaker 2: Round Hill Investments, which has a meme stock eat TF
Speaker 2: that was rolled out to capture such moves was one
Speaker 2: buyer of all Birds at the start of the training day.
Speaker 2: Do you want to hear from the CEO? Well, here's
Speaker 2: what he had to say. A shoe company rebranding as
Speaker 2: an AI compute infrastructure play is the kind of narrative
Speaker 2: if that ignites retail enthusiasm. The spike in retail sentiment,
Speaker 2: coupled with a sharp increase in trading volume and elevated
Speaker 2: volatility around Bird following its AI pivot are exactly the
Speaker 2: signals the meme METF is designed to capture in real time.
Speaker 1: Fine, whatever, Like he runs an ETF, It's fine, he
Speaker 1: can capture those signals in real What I will say
Speaker 1: is that if you were like an active meme investor, Yeah,
Speaker 1: which look he is, but whatever, if you're an active
Speaker 1: meme investor, the time to buy all Bird stock is
Speaker 1: before And on the one hand, how would you know
Speaker 1: this was coming?
Speaker 2: How would you know?
Speaker 1: On the other hand, this is a small public company
Speaker 1: with a like retail facing brand name with like some
Speaker 1: nostalgic value, that has already announced that's selling actual business
Speaker 1: and is just a public company listing. Just a public
Speaker 1: company listing right now has a lot of option value,
Speaker 1: right like just having a public company listing and not
Speaker 1: having anything particularly useful to do with it. If you
Speaker 1: have just a public listing nothing else, and you're like, welp,
Speaker 1: we've done what we need to do here. We're gonna
Speaker 1: shut this down. You are wasting shareholder money. You gotta
Speaker 1: do is be like, we've got a public listing. We're
Speaker 1: gonna do it. Dad, We're gonna do an ai P.
Speaker 1: We're gonna do some nonsense, right, And so these guys
Speaker 1: did some nonsense. And if you had been like, well,
Speaker 1: this is a shell public company listing, we're gonna see
Speaker 1: what nonsense they get up to, you would have made
Speaker 1: a lot of money. Mm hmm. Whatever.
Speaker 2: It's fine, some any thing about it in the future.
Speaker 2: For all the mean.
Speaker 1: Maybe you can only buy actual memes stacks, but if
Speaker 1: you're just like a person looking to invest the memesas
Speaker 1: you should, you should buy them before they become memes.
Speaker 1: This is like son advice, boy, oh boy, don't do that.
Speaker 1: I obviously don't do that. So excellent shareholder wedding. Yeah,
Speaker 1: there's like a lot of retail shareholders they try to
Speaker 1: never vote their shares because it's a waste of time
Speaker 1: to investor to vout their shares, and so this sometimes
Speaker 1: annoy is corporate managers because what you have is like
Speaker 1: the only people who vote are institutional investors, and sometimes
Speaker 1: those institutional investors are ornery, or they care about governance
Speaker 1: stuff that companies don't care about, or traditionally they care
Speaker 1: about ESG stuff the companies don't care about and excellent.
Speaker 1: In fact, a few years ago, a very small activist
Speaker 1: share they're called Engine number one, ran a proxy fight
Speaker 1: basically over there like climate transition plans. They won the
Speaker 1: proxy fight and they got a director elected to Excellon's board.
Speaker 1: It's very embarrassing for Exon. And they won the proxy
Speaker 1: fight not because they had a lot of shoes, but
Speaker 1: because they you know, they got some interest from like
Speaker 1: the sort of black rocks and state streets of the world. Who.
Speaker 2: You know, it was also very of the time.
Speaker 1: Yeah who At the time, we're like, oh, yes, g
Speaker 1: we love that, right, and so now this is all
Speaker 1: in the distant past, but Extend never really got over it. Like,
Speaker 1: you know, a couple of years ago they got to
Speaker 1: like some sort of like activist proposal and their shareolder proposal,
Speaker 1: and they sued the proponents to stop them from doing it.
Speaker 2: I grudge.
Speaker 1: They really have a grudge. And so one thing they
Speaker 1: did I think, like last September was they announced this
Speaker 1: new program where if you're a retail shareholder, you can
Speaker 1: just submit standing instructions to let the board vote your
Speaker 1: shares the way the board wants to. People got mad
Speaker 1: about this because like it's obviously designed to the ward
Speaker 1: esga and try to board power, which I understand, but
Speaker 1: I also like really expected because like the retail shoolders
Speaker 1: are not going to vote to waste the time. So
Speaker 1: this is like solving that problem. And the retail shareholders
Speaker 1: probably do want to do what the board wants to do,
Speaker 1: and probably don't want to do what like black Rock
Speaker 1: wants to do, probably have like less esg commitment than
Speaker 1: like the big institution manager. And so right now the
Speaker 1: institution's vote and the retail shoulders don't vote, and so
Speaker 1: the institutions have a lot of sway because they vote
Speaker 1: and they might have different preferences from the retail shareolders.
Speaker 1: And this is a way for Excellent to say, Okay,
Speaker 1: retail shareholders, if your preference is just do whatever the
Speaker 1: board wants, you can just do that and then we'll
Speaker 1: vote your shares for you, and we'll sort of recapture
Speaker 1: some voting power from the institutions. I think is like
Speaker 1: annoying if you're an institutional investor or like a fan
Speaker 1: of governance or a fan of ESG. But I think
Speaker 1: it's kind of a smart call by accent And you
Speaker 1: could never have done this in the past because, like
Speaker 1: I think, it's easy to characterize it as being undemocratic.
Speaker 1: And in the current SEC. Excellon went to the SEC
Speaker 1: and said, can we do this? And the current SEC
Speaker 1: was like absolutely, you know, like because the current SEC
Speaker 1: does not like the influence of Black Crock and EESG
Speaker 1: and proxy advisors and all that stuff. So Excellon was
Speaker 1: able to do this, and they are now they have
Speaker 1: their proxy season, their proxy has come out and so
Speaker 1: they're doing it. You can submit your standing instructions to
Speaker 1: the board to vote. But meanwhile they got a shareholder
Speaker 1: proposal from the New York City Comptroller, a classic opponent
Speaker 1: of everything.
Speaker 2: That Xcells Governance stands are right.
Speaker 1: And they say, no, it's not fair for you to
Speaker 1: have only one set of standing instructions that is, you know, vote. However,
Speaker 1: the board wants you should have other standing instructions such
Speaker 1: as vote against.
Speaker 2: Whatever the board wants in all situations.
Speaker 1: Yeah, I love it. You should have, like, if you have,
Speaker 1: like the option for retail trailers to always vote with
Speaker 1: the board, you should also give them the equivalent option
Speaker 1: to always vote.
Speaker 2: Against the board, or an option like fifty to fifty
Speaker 2: you know.
Speaker 1: Just a coin.
Speaker 2: Yeah right.
Speaker 1: They do actually say they should include a range of
Speaker 1: possible voting options, such as independent voting options based on
Speaker 1: standing instructions, a general against management policy, and or customized policies.
Speaker 1: They don't mention coin flipping, but that would be a
Speaker 1: good one.
Speaker 2: Yeah.
Speaker 1: Anyway, we'll see if this passes. It won't pass. Excellon
Speaker 1: has recommended against it, saying, in part, like, it would
Speaker 1: not be consistent with our fiduciary duties to let to
Speaker 1: like give people an instruction to always vote the way
Speaker 1: we think they shouldn't vote. It's like, you know, the
Speaker 1: board is a fiducia. They're like trying to tell you
Speaker 1: about the right way, right theory. They if they give
Speaker 1: you the option to always vote the wrong way, that
Speaker 1: seems bad.
Speaker 2: Yeah.
Speaker 1: I loved it as a piece of trawling.
Speaker 2: Yeah, I mean I also like it on the part
Speaker 2: of the New York City Controller's Office. Yeah, good game
Speaker 2: to both sides. I was reading a Morning Star reaction
Speaker 2: piece and very on brand from morning Star. They're also
Speaker 2: not a big fan of Exon's ideal here, but there
Speaker 2: were some interesting I kind of like it, excellent likes
Speaker 2: it and Matt Levine and.
Speaker 1: The sect of a lot of big fans, but yeah,
Speaker 1: not a lot of opinion.
Speaker 2: Con Well, morning Star points out that the company reports
Speaker 2: that forty percent of its shares are held by retail investors,
Speaker 2: and seventy five percent of those shareholders don't cast votes
Speaker 2: on the proxies. Forty percent is super high.
Speaker 1: Yeah right.
Speaker 2: Also, morning Star went into a little bit how if
Speaker 2: you look on Exxon's at Exon's marketing materials for this,
Speaker 2: they talk about just like what a pain this is
Speaker 2: for retail shareholders. They say that the average retail investor
Speaker 2: would have to dedicate a full year of full time
Speaker 2: work to briefly study and vote on each of the
Speaker 2: twenty eight thousand items in the proxy of the companies
Speaker 2: in the Russell threeenty and twenty twenty four, assuming they
Speaker 2: only spent five minutes on each item, which sounds like
Speaker 2: an exaggeration, right, I.
Speaker 1: Mean, like nobody owns every very single individual stock in
Speaker 1: the wrestle three thousand. Yeah, that's not a reasonable thing
Speaker 1: to do. You might own a Wrestle three thousand index fund, yeah,
Speaker 1: and not vote, But it would be very weird to
Speaker 1: buy all three thousand individual stocks and vote. But next
Speaker 1: sounds right, like it's irrational to spend any time more Correctionally,
Speaker 1: It's true you wouldn't actually spend a year reading proxy materials.
Speaker 2: But someone might or not a full yek. But I
Speaker 2: don't know, I don't There are people.
Speaker 1: Whose job is to read and vote, like giant asset managers.
Speaker 1: I picture hundreds of billions or dollars with a stock.
Speaker 2: In my mind's I I see like, you know, kind
Speaker 2: of elderly man stooped over his kitchen table just reading
Speaker 2: proxy materials. There are they can take about at.
Speaker 1: Him sometimes and they like to their proposal proponents, right,
Speaker 1: people who are like what can I try to get
Speaker 1: Exxon to do? And they spend a lot of time
Speaker 1: rating process. Yeah, but Exon does not care about them, No,
Speaker 1: it hates them them.
Speaker 2: It actually cares a lot in a negative place, like.
Speaker 1: It like stays up all my being angry at them.
Speaker 2: Do you know what is important?
Speaker 1: Coffee?
Speaker 2: Coffee. I was so charmed by this story in the
Speaker 2: Wall Street Journal by Crystal her talking about Nisies coffee rooms.
Speaker 2: It has an elite coffee tasting force. I feel like
Speaker 2: we've also talked about this general idea. Basically, they have
Speaker 2: to have people to set the ratings on US futures
Speaker 2: markets prices for various types of coffee, so they have
Speaker 2: to verify right any future markets work.
Speaker 1: The way many agricultural commodity of futures markets work is
Speaker 1: that you can take physical delivery of your futures. And
Speaker 1: if you buy coffee futures, you might get physical delivery
Speaker 1: of coffee in a nicy bonded warehouse. Yeah, a nice ice.
Speaker 1: Intercontinental Exchanges owns nicy in an ice bonded warehouse, and
Speaker 1: that coffee has to meet certain quality standards in order
Speaker 1: for the whole thing to work, for the futures to
Speaker 1: actually reflect to coffee prices, and in order for that
Speaker 1: coffee to meat quality standards. There's a room on the
Speaker 1: eighth floor of the New York Stock Exchange where thirty
Speaker 1: eight mostly fifty something year old men.
Speaker 2: Yeah, and they sniff and they slurp.
Speaker 1: So okay. A real peeve of mine and journalism is
Speaker 1: that people, often like discussing people like eating soup or
Speaker 1: drinking drinks, will say slurping, And I'm like, why does
Speaker 1: it have to be slurping? Why do you have to
Speaker 1: emphasize the sound? Like that's not how people eat. But
Speaker 1: in this case, I cannot fault it because they are
Speaker 1: required to noisily slurp the coffee because like apparently that's
Speaker 1: how you, you know, get the.
Speaker 2: Full floor of the flavor.
Speaker 1: And so they play loud music to drown out the
Speaker 1: horrifying sound of thirty eight men slurping coffee.
Speaker 2: Sounds that I've tried to get into this podcast when
Speaker 2: you eat soup.
Speaker 1: Yes, that's true. We're not going to am going to
Speaker 1: do that because we'll be immediately removed from the air.
Speaker 1: The other thing that is amazing in the story is
Speaker 1: that there are photographs, yeah, somewhat alarming photographs of people
Speaker 1: mid spit, spitting out the coffee that they've slopped. It's
Speaker 1: really it's like, it's not all glamorous and I fans.
Speaker 2: I know we've talked about Morgan's the the pub. Yes,
Speaker 2: in JP Morgan's new building which I still want to
Speaker 2: go to. Well, I've been there many times. I want
Speaker 2: to take the podcast there. I want to take this
Speaker 2: podcast to.
Speaker 1: Like a din of ac DC and slurping.
Speaker 2: That sounds insane. It sounds like the worst you've ever heard.
Speaker 2: But you might say this sounds like the best job ever.
Speaker 1: Oh I wouldn't, Oh, I might like honestly, like, I
Speaker 1: love my job so much.
Speaker 2: Yeah, and my.
Speaker 1: Only complaint is that sometimes, you know, we said on
Speaker 1: an open piet office, we do, and sometimes someone near
Speaker 1: me is eating an apple.
Speaker 2: That must really tick you off.
Speaker 1: Imagine like I could not tolerate this coffee slurping job.
Speaker 2: I could absolutely do it, but apparently not a lot
Speaker 2: of people are doing it.
Speaker 1: It's very well because it's partly because like it's not
Speaker 1: a real job. It's like apparently most of them are
Speaker 1: either retired or like after they finish their hour of slurping,
Speaker 1: they go to a real job.
Speaker 2: Like you know for sure it's their side hustle.
Speaker 1: Yeah, it's like it's like it's an their commodity trading job.
Speaker 1: But it's not like their it's not how they make money.
Speaker 1: They must get paid, Yeah, you get paid. It's not
Speaker 1: like maybe I.
Speaker 2: Could do that before the you know, quick hour before
Speaker 2: the show exactly.
Speaker 1: The other reason there aren't that many of them is
Speaker 1: because it's a very hard exam. Yes, but the Master
Speaker 1: SA exam but for coffee.
Speaker 2: Yeah, so only about five to eight percent of test
Speaker 2: takers will typically pass each time the test it is administered.
Speaker 2: But it's a four day exam. It's only given once
Speaker 2: every five years or so, which is nuts. And if
Speaker 2: you it's not like I don't know, if I don't know.
Speaker 1: One room, yeah, I know. But compared it to the
Speaker 1: Masters AA exam, where like there's a lot of like
Speaker 1: people who want that credential so they can do various
Speaker 1: jobs in the wine world. Like there's one job in
Speaker 1: the coffee world where you need this credential and it's
Speaker 1: like kind of a part time job.
Speaker 2: Yeah, but even still, you'd think that it's just as
Speaker 2: difficult to hold it once a year as it is
Speaker 2: every five years.
Speaker 1: I'm not sure that's true.
Speaker 2: So that's apparently a big This is why we need
Speaker 2: to go to the room and talk to the people
Speaker 2: in the room.
Speaker 1: The other thing I want to say about the exam
Speaker 1: is like I read a lot about like this linkage
Speaker 1: between financial futures and like the underlying commodity in the warehouse.
Speaker 1: And I often point out that because almost no not no,
Speaker 1: but almost no futures settle for physical delivery that has
Speaker 1: actually then taken out of the warehouse and used in industry,
Speaker 1: like very few of them settle that way, I would
Speaker 1: have some expectation that the quality of the stuff in
Speaker 1: the warehouses would be lower than the quality used by
Speaker 1: industrial users. Like yeah, if you're a coffee roaster, you
Speaker 1: will try to get the best beans delivered directly to
Speaker 1: you from the farmer or whatever. And the beans that
Speaker 1: are like, yeah, they're fine, get delivered to the stock
Speaker 1: exchange warehouse, right because those are not likely to be
Speaker 1: used immediately in making coffee, to be used to underlie
Speaker 1: financial futures contracts. And in fact, there was a great
Speaker 1: story that I read about a couple of years ago,
Speaker 1: twenty twenty three. The way the grading worked is, among
Speaker 1: other things, there's an age penalty where if the coffee
Speaker 1: has been in the warehouse for too long it is
Speaker 1: not as valuable. You get a discount when you deliver
Speaker 1: it into a futures contract for somewhat obvious reason, which
Speaker 1: is the yeah, it tastes bad still, right, But the
Speaker 1: rules allowed you to take coffee out of the warehouse, yeah,
Speaker 1: and then put it back in and get it regraded
Speaker 1: and you got rid of their age penalty because it
Speaker 1: was for futures. It wasn't for making coffee anyway. This
Speaker 1: is obviously not entirely true, because some of the stuff
Speaker 1: in the Future's warehouse does get taken out and used
Speaker 1: to make coffee in you know, and it is a
Speaker 1: source of supply for actually industrial users. But it's just
Speaker 1: like you wouldn't think that like the premium on freshness
Speaker 1: and quality at the Stock Exchange warehouse would be the highest,
Speaker 1: which is why it's fascinating that they need thirty eight
Speaker 1: testers who go through this rigorous testing to grade this coffee,
Speaker 1: because it's like like these are like, you know, the
Speaker 1: elite coffee tasters of the world, but they're not like
Speaker 1: working for like three star restaurants. They're working for like, yeah,
Speaker 1: it's going to go on the warehouse and it's going
Speaker 1: to be for futures. Contracts.
Speaker 2: Just love the game.
Speaker 1: Really, It's it's very admirable that that they care so much.
Speaker 2: You know.
Speaker 1: I've written about like Nickel Futures, where like JV. Moore
Speaker 1: gonna have had some nickel, whereas that turned out to
Speaker 1: be rocks. It didn't matter. It didn't matter with this coffee.
Speaker 1: They like lovingly grade the coffee.
Speaker 2: I know. I want to talk about the test a
Speaker 2: little more of the test because it's three stages, right
Speaker 2: stiff the beans, Well, let me tell you, well, actually.
Speaker 1: Written test sniff, beans, drink up.
Speaker 2: First part, you're correct, it's a written portion. You know,
Speaker 2: your test on rules and regulations regarding coffee grading. Second portion,
Speaker 2: which is more than three hours long, your test on
Speaker 2: your ability to grade the coffee based on factors such
Speaker 2: as smelling and color.
Speaker 1: And then this is I think not brood coffee. I
Speaker 1: think the second part is like beans, yes, and the cups.
Speaker 2: If you pass those two portions, and if you fail,
Speaker 2: you have to go back to the beginning. You can't
Speaker 2: like retake the second portion. But if you pass those
Speaker 2: two portions, you have a cupping exam, which is smelling, tasting,
Speaker 2: and spinning coffee in front of proctors, right, yeah, in.
Speaker 1: Front of every part of the coffee process.
Speaker 2: Yeah, well, not every part.
Speaker 1: The article mentions to even get to the exam, you
Speaker 1: have to have some like relevant background often as a
Speaker 1: commodity trader, and they're like, definitely not as a barista.
Speaker 2: Yeah, because actually that is hard.
Speaker 1: Much more relevant than commodity trading.
Speaker 2: But actually it's a quote that being a barista absolutely
Speaker 2: does not count.
Speaker 1: It has to be more relevant than trading commodities at
Speaker 1: a computer. But whatever, Yeah, that's what expert.
Speaker 2: That was my intuition as well. But again, once we're
Speaker 2: in the room, we can ask them all these questions. Yeah,
Speaker 2: apparently there's a lot of pent up demands to take
Speaker 2: the test. The test is this night, yeah right, the
Speaker 2: test is this month. This month's every five years test,
Speaker 2: and the Wall Street Journal reports that the last time
Speaker 2: that the test was administered, there were only about twenty candidates.
Speaker 2: But apparently there's been a swell of interest. So rest
Speaker 2: easy your warehouse coffee that's backing your coffee futures.
Speaker 1: Assume there are other like are there like pork belly tasters,
Speaker 1: corn futures, you know, frozen orange juice tasters.
Speaker 2: You know, if they had this rigorous process applied to
Speaker 2: nickel kickers, there are nic kickers.
Speaker 1: After the JP Morgan thing, they did actually send out
Speaker 1: good commodity analysts to kick all the nickel and that's
Speaker 1: funny in the warehouses. But but yeah, no, I mean
Speaker 1: like like there's a lot of uh delicious as your
Speaker 1: agricultural commodities. I wonder if there's like a similarly ring,
Speaker 1: you know, fraternity of tasters, Yeah, sugar tasters. Yeah, like
Speaker 1: kids said that's that dust, they wouldn't. I've written recently
Speaker 1: about the salad oils, you know, the salad oil scandal. No,
Speaker 1: this company in like the sixties, it was like getting
Speaker 1: a lot of apparently like soybean oil had just been invented,
Speaker 1: and so like there's a craze for soybean oil. Crazy, yeah,
Speaker 1: craze for sobeing oil. And this company that got hundreds
Speaker 1: of millions or millions of dollars of financing against that
Speaker 1: stock of soybean oil. And like the banks would be like, oh, yeah,
Speaker 1: we we'll lend you a millions of dollars aginst your
Speaker 1: sobe No, but we gotta go check on the soybean oil.
Speaker 1: And so they went and they looked at the tanks
Speaker 1: and the tanks were full, and they're like, eah, it's
Speaker 1: a full tank of slovino. But in fact it was
Speaker 1: salt water with like a few inches of soybean oil
Speaker 1: on top of god. So it collapsed and scandal and
Speaker 1: people lost a lot of money.
Speaker 2: That would never happen on the floor of the New
Speaker 2: York Sock Exchange.
Speaker 1: I'll tell you one more story. To Anchor Television, I
Speaker 1: mentioned that it comes back to your interests. I mentioned
Speaker 1: the salad oil scandal, and someone emailed me about how
Speaker 1: like they worked at a bank in like the eighties
Speaker 1: or something, and they're like, we were told like two
Speaker 1: stories about commodity financing. One was the salad oil scandal
Speaker 1: and the other was that our bank had loaned a
Speaker 1: lot of money against frozen shrimp and there was some
Speaker 1: scandal and default and that was why they served so
Speaker 1: much shrimp in the bank's cafeteria. I love the idea
Speaker 1: that the bank made loans secured by frozen shrimp and
Speaker 1: the lens defaulted and so the bank was like, we're
Speaker 1: going to eat the shrimp and then they ate the show.
Speaker 2: You're gonna liquidate it.
Speaker 1: So maybe that's what the coffee at Morgan's Papa is doing.
Speaker 1: And that was the Money Stuff podcast.
Speaker 2: I'm Matt Levine and I'm Katie Greifeld.
Speaker 1: You can find my work by subscribing to The Money
Speaker 1: Stuff newsletter on Bloomberg dot com.
Speaker 2: And you can find me on Bloomberg TV every day
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Speaker 1: The Money Stuff Podcast is produced by Anamasarakis, Moses ONAM
Speaker 1: and Alexis Hot.
Speaker 2: Our theme music was composed by Blake Maples.
Speaker 1: Amy Keen is our executive producer. Thanks for listening to
Speaker 1: The Money Stuff Podcast. We'll be back next week with
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