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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: I'm at forty percent right now. It was really not

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Speaker 2: great doing television today.

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Speaker 1: This is great. We have gotten I've gotten for months now,

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Speaker 1: emails from listeners being like, Bloomberg's engineers need to do

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Speaker 1: something because your voice isn't audible next to Katie's voice.

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Speaker 1: And what we have done is the Bloomberg engineers have

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Speaker 1: like tuned down Katie's voice by ten percent, so now

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Speaker 1: we are more compatible.

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Speaker 2: They've performed surgery on me. Actually, and now this is

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Speaker 2: how I sound. It feels like I ate an ash tray.

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Speaker 2: I just feel disgusting. I need more milk.

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Speaker 1: It's gonna be great.

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Speaker 2: It'll be fine.

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Speaker 1: Big week, Katie tenth anniversary of Money Stuff.

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Speaker 2: Happy birthday.

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Speaker 1: Birthday to the newsletter, not the podcast. The podcast is

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Speaker 1: still an infant getting mental.

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Speaker 2: When did we get born in like April? Well, well,

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Speaker 2: you seem like you're in a good mood.

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Speaker 1: It was touch and go to get here today, as

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Speaker 1: you know, because you're a bad late. Yeah, and we're

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Speaker 1: getting through the week.

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Speaker 2: This is my last thing that I have to do

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Speaker 2: today because I'm going to call out sick tomorrow.

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Speaker 1: Yeah, that's hello and Welcome to the Money Stuff Podcast,

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Speaker 1: your weekly podcast where we talk about stuff related to money.

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Speaker 1: I'm Matt Levine and I write the Money Stuff column

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Speaker 1: for Bloomberg Opinion.

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Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and

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Speaker 2: an anchor for Bloomberg Television.

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Speaker 1: Wonder who are you talking about the bay, Kat?

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Speaker 2: We're going to talk about Vanguard and seven basis points. Yeah,

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Speaker 2: We're going to talk about Apollo, and then we're going

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Speaker 2: to talk about the big game.

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Speaker 1: The big game, so Vanguard. I texted you this week

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Speaker 1: to say while I was on what should I say

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Speaker 1: about Vanguard? Because you wrote an article about Vanguard cutting

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Speaker 1: its fees and you never texted me back because you

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Speaker 1: were on television. Sure I never wrote about it, but

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Speaker 1: you did.

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Speaker 2: So the story begin on Monday when Vanguard announced that

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Speaker 2: they were putting through their biggest ever fee cut across

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Speaker 2: eighty seven mutual funds and ETFs. It brings their average

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Speaker 2: fee on their like ten trillion dollars of assets down

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Speaker 2: to just seven basis points, which is wild. These are

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Speaker 2: wild numbers. The industry averaged roughly is forty four bases points,

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Speaker 2: So that tells you just how low Vanguard is, and

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Speaker 2: then we wrote a follow up story myself and Vildna

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Speaker 2: Hirich a couple days later, talking about how this really

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Speaker 2: tightens the screws on everyone else Blackrock, State Street, Invesco,

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Speaker 2: et cetera, because Vanguard has this ownership structure where basically

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Speaker 2: the fund investors own the firm, and thus everything they

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Speaker 2: do is just geared towards lowering fees. Other companies don't

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Speaker 2: operate that way. Blackrock doesn't operate that way. And Blackrock

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Speaker 2: actually fell, i believe, by the most since twenty twenty

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Speaker 2: two on Monday alone, both because it was a down

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Speaker 2: market with you know, the will he won't on tariffs,

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Speaker 2: but also because of this news, which was interesting.

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Speaker 1: Yeah, this is sort of the most intuitive way for

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Speaker 1: an index fund to work, right. Like, It's like you

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Speaker 1: get a bunch of investors, they pull their money, they

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Speaker 1: hand their money to someone to perform the sort of

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Speaker 1: administrative tasks of putting it into all of the thoughts,

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Speaker 1: and they pay that someone a reasonable fee. But there's

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Speaker 1: no like outside shareholders. You don't need like pay the

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Speaker 1: cost of capital of some giant firm to like just

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Speaker 1: pull your money and put it into an index, right,

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Speaker 1: so it should be you know, a world of technology

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Speaker 1: and you know, a world of giant scale for these

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Speaker 1: funds that should be kind of free to invest in

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Speaker 1: in the next fund, and it kind of is. Well.

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Speaker 2: Vanguard would be quick to tell you, including CEO Salem Ramji,

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Speaker 2: who I also interviewed on BTV on Thursday, would say that, Okay,

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Speaker 2: you think of us as just this passive index fund company,

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Speaker 2: but we're more than that, Malavine. We also have active funds,

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Speaker 2: and they care very deeply about their active funds, but

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Speaker 2: their active funds are also really cheap. Their bond funds,

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Speaker 2: in particular, their active bond funds charged ten basis points

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Speaker 2: on average, and they have this interesting theory that because

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Speaker 2: their fee is so low, their managers don't have to

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Speaker 2: take outsized risks in the active portfolios to like outperform

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Speaker 2: or make up the fee, and that that leads to

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Speaker 2: their outperformance over longer term horizon.

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Speaker 1: That makes sense. Yeah, it's like an old tybee, like

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Speaker 1: how much work is it to like take my money

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Speaker 1: and invest it in bonds? Like it's active in the

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Speaker 1: sense that like you're choosing particular bonds, but.

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Speaker 3: They they choose that bond over that but it's like

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Speaker 3: the cost of that should come down over time, and

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Speaker 3: that shouldn't be you know, like Vanguard is a mutual right,

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Speaker 3: It's like the people in the mutual fund like pay

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Speaker 3: the managers and there's no outside ownership to collect another fee.

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Speaker 1: Makes sense what.

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Speaker 2: I find interesting about van Garden, especially right now, so

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Speaker 2: CEO Selim Ramsey, he came from Blackrock. He used to

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Speaker 2: run the I shares line at Blackrock, which is their

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Speaker 2: ETF business. So he went from Blackrock to van Guard,

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Speaker 2: which is like, we don't get a lot of like

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Speaker 2: exciting moves like that in the ETF industry all the time.

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Speaker 2: So that was a big deal. And again, like Blackrock

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Speaker 2: and everyone else has to operate in this universe that

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Speaker 2: Vanguard has creative where Vanguard is just lowering fees, lowering fees,

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Speaker 2: lowering fees, and everyone else has to respond, even though

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Speaker 2: you know they actually do have to worry about their

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Speaker 2: margins and their external shareholders. But in tweeting about this story,

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Speaker 2: I got a few tweets back to the effect of,

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Speaker 2: you know, maybe they should actually stop focusing on lower

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Speaker 2: fees and like focus more on putting this money back

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Speaker 2: into the business and making the customer experience better.

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Speaker 1: That's fair because I'm like, ah, you just put your

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Speaker 1: money and your own but like, in fact, it is

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Speaker 1: a corporation that has to do things like.

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Speaker 2: Yeah, maintain a website, yeah, exactly.

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Speaker 1: Have customer service and like yeah.

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Speaker 2: One of the responses I got was from a woman

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Speaker 2: theoretically who says that she's a financial planner who I

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Speaker 2: didn't verify her profile or anything, but she said I

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Speaker 2: wish they would have cut their fees a little less

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Speaker 2: and instead invest in their customer facing it and user experience,

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Speaker 2: which is often disjointed and confusing to consumer's relative to

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Speaker 2: the competition, which I find kind of funny. Okay, your

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Speaker 2: fees are seven basis points, you're playing next to nothing,

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Speaker 2: and you have this like small subset of people saying no,

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Speaker 2: please stop lowering fees, like put this into improving my

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Speaker 2: experience as your client.

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Speaker 1: Yeah, this is pretty reasonable man. Yeah, I would frequently

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Speaker 1: pay more for better experiences. And there are a lot

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Speaker 1: of people in the financial industry who get very sad

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Speaker 1: at the idea that the only criterion is like lowest

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Speaker 1: fees and you worry one about customer experience being sacrificed.

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Speaker 1: But then people don't those worried about performance being sacrificed too,

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Speaker 1: although the evidence for the higher fee managers having better

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Speaker 1: performance isn't great. The other thing I'll say is, like

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Speaker 1: you're talking about like black Rock, it seems to me

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Speaker 1: that like the move and asset management is like there's

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Speaker 1: this kind of Barbell strategy of like you know, there's

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Speaker 1: like indexy public stuff that tends to zero fees, and

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Speaker 1: there's hot new private credit where you can charge all

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Speaker 1: sorts of fees. Right, And so you look at black

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Speaker 1: Dot getting into private credit a big way because like

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Speaker 1: the fees on that are just a lot higher. Blueberg

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Speaker 1: lawa Benita has had an article this week about Pimco, Yeah,

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Speaker 1: not really getting into private credit. And like one thing

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Speaker 1: there is like you have a lot of competition and

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Speaker 1: margin compression on liquid fixed income, which is you know,

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Speaker 1: like the Vanguard, Like I have to fix I remember,

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Speaker 1: like you know, Pimco's bread and butter is like running

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Speaker 1: bond mutual funds, and that's a tough business because people

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Speaker 1: want low fees, and you get low fees and index funds,

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Speaker 1: and people want the hot new thing which is private credit,

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Speaker 1: and you can get high fees there. But like just

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Speaker 1: running an active bond fund is tough.

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Speaker 2: Yeah, what an interesting way to think about barbelling by

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Speaker 2: fees rather than like risk, which I guess correspond to

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Speaker 2: each other.

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Speaker 1: But I mean, like there are a lot of context

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Speaker 1: where you can make a BARRELLI decision, right, and like yeah,

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Speaker 1: here it's like your product offerings, Like there's a lot

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Speaker 1: of demand for index, there's a lot of demand for

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Speaker 1: alts in private, and like the middle is getting kind

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Speaker 1: of hollowed out. It's been a tough time for like

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Speaker 1: active mutual fund managers for a long time.

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Speaker 2: Yeah, I mean you're seeing that in the UTF world too,

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Speaker 2: which you can't offer private yet.

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Speaker 1: I know. But I was going to say, like the

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Speaker 1: other thing is like your article with the Vildanna, like

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Speaker 1: you talk about like in the ETF world, like there

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Speaker 1: are people who don't want to compete with yeah the

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Speaker 1: giants by cutting piece to zero, and so they're like, ooh,

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Speaker 1: here's a weird product where you can judge with higher fees,

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Speaker 1: and like we're certainly seeing and talking about a lot

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Speaker 1: of that, like the weird productized ETFs.

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Speaker 2: Yeah exactly. I mean you think about all the silly

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Speaker 2: single stock super leveraged ETFs that are out there, all

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Speaker 2: the derivatives based ETFs. Really interesting phenomenon occurred actually in

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Speaker 2: twenty twenty four where the average fee on new ETFs

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Speaker 2: coming to the market was ticking higher. So the new

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Speaker 2: the new launches were expensive because the feeling among issuers

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Speaker 2: is like, I'm not going to compete in the core,

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Speaker 2: so I got to launch the silly stuff and I

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Speaker 2: can try.

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Speaker 1: Yeah, the course is already there. You can get index

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Speaker 1: bonds like now you need like the silly stuff.

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Speaker 2: Shall we sail long?

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Speaker 1: So Apollo is crouching thinking about starting a private credit

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Speaker 1: trading desk.

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Speaker 2: They are having conversations that have been highly constructive at

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Speaker 2: the highest levels about this.

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Speaker 1: So I wrote this. I wrote, I don't really know

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Speaker 1: what private credit is, you know, And I get answers

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Speaker 1: like a bunch of people emailed to say basically something like,

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Speaker 1: if it's a registered public bond, it's public credit, and

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Speaker 1: if it's not that, then it's private credit, which is

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Speaker 1: not right. It's not how people use the term, right,

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Speaker 1: like people talk about syndicated bank loans and like loans

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Speaker 1: that are bought by clos like as not private credit, right,

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Speaker 1: Like that's something else People won't really say public credit,

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Speaker 1: but it's something else. Private credit is distinct from deals

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Speaker 1: done by banks, right private credit is asset managers during

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Speaker 1: direct lending. And in the past I would have followed

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Speaker 1: that by saying that they hold to maturity on their

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Speaker 1: balance sheet, but everyone kind of knew that would not

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Speaker 1: last forever, right, Like, eventually, if you have potentially trillions

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Speaker 1: of dollars in an asset class, like people are kind

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Speaker 1: of trade it and uh, pollow is the launching at

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Speaker 1: trading desk or talking about launching it trading desk.

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Speaker 2: I feel like we've been talking about Apollo's trading dusk

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Speaker 2: for a while because we first started having this conversation,

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Speaker 2: especially around when they filed for an ETF with State Streets.

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Speaker 1: Yeah, right, let me take that back. It's not that

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Speaker 1: they're launching a trading desk. It's that they're having conversations

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Speaker 1: that are consarned about.

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Speaker 2: Highly constructive at the highest levels.

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Speaker 1: About like a venue, about like a marketplace, where it's

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Speaker 1: not just they'll have a trading desk, but there will

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Speaker 1: be a bunch of trading desks and they'll trade with

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Speaker 1: each other, and they'll be a pricing service and some

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Speaker 1: sort of electronic platform for people to meet and trade

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Speaker 1: private credit because the trading desk that they were doing,

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Speaker 1: that they're planning and connection with the ETF was like

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Speaker 1: to do a private credit ETF, you need your assets

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Speaker 1: to be liquid Certainly the way you get liquidity is

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Speaker 1: by Apollo saying we'll buy the assets, right, and so

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Speaker 1: like that trading desk was a sort of like facing

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Speaker 1: a single customer, which is the ETF. But then obviously

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Speaker 1: you know if you have that, you're going to look

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Speaker 1: for other places to trade with. But here it's like

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Speaker 1: we want to all to all open venue for people

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Speaker 1: who want to trade private credit because like obviously that's

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Speaker 1: coming right, Like obviously you know you have enough private

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Speaker 1: credit funds, they're gonna want to start trading, and so

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Speaker 1: that's what they're putting on.

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Speaker 2: I'm trying to think about how to think about this,

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Speaker 2: and you say marketplace for bond trading, and I think

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Speaker 2: of like a market access or a trade web. Sure

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Speaker 2: are they just trying to build that put for private credit.

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Speaker 1: Something like that? You're so young you think of market access.

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Speaker 1: I mean like it used to be like you know,

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Speaker 1: a dozen dealers with telephones, right.

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Speaker 2: Well, that is that just sounds bake, yeah.

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Speaker 1: Or like a dozen dealers with Bloombergs, right, And I

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Speaker 1: think right when Pollow talks about you know, they're like

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Speaker 1: to part with banks, exchanges and fintech firms. Like exchanges

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Speaker 1: in fintech firms suggest there is like electronic marketplace, but yeah,

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Speaker 1: like there's not that for private credit because if don't

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Speaker 1: really trade and it doesn't have the electronic identifiers, right,

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Speaker 1: it's like you sign a contract, right, so you have

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Speaker 1: to like do some like technological processes to make it

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Speaker 1: tradable easily. But yeah, it's not that hard and they're

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Speaker 1: going to do those processes. The other thing that I

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Speaker 1: was thinking about in terms of how to think about

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Speaker 1: this is like I haven't used the word banks to

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Speaker 1: describe the golden Saxes of the world that like originate

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Speaker 1: bond deals and then have bond trading desks. But it

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Speaker 1: used to be that that business was done mostly by

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Speaker 1: non banks like Goldman Sachs right, which became a bank

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Speaker 1: holding company in two thousand and eight. And it used

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Speaker 1: to be that there was this world of investment banks

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Speaker 1: that use their own capital to trade securities and that

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Speaker 1: also originated and like underwrote bond deals. Committed the capital

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Speaker 1: that basically sold it on to other people. And like

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Speaker 1: those were non banks, they were investment banks, and they

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Speaker 1: you know, were big and had a big market niche.

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Speaker 1: And then over time, like you know, the rules were

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Speaker 1: relaxed in the US to allow banks to own them.

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Speaker 1: And then in two thousand and eight, the big independent

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Speaker 1: investment banks kind of got acquired or became bank holding companies.

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Speaker 1: But like this used to be a non bank business,

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Speaker 1: and you look at these big alternative managers and like

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Speaker 1: to some extent, they are like recreating what the big

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Speaker 1: investment banks used to be. Right, Like if you look

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Speaker 1: at like Apollo, like Apollo, KKR, Blackstone, like their DNA

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Speaker 1: is like their LBO shops, right yeah, but like the

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Speaker 1: thing that they're doing now is we're going to originate

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Speaker 1: loans or you originate you know, debt deals, and we're

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Speaker 1: going to run a trading desk for people to trade

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Speaker 1: debt deals. Right. They're kind of like moving into the

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Speaker 1: business that like Goldman Sachs was doing thirty years ago

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Speaker 1: before it became a bank. And they have some advantages

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Speaker 1: in doing that business now, like largely in terms of

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Speaker 1: just like being less regulated and also in terms of

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Speaker 1: like being the cool place to go work if you

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Speaker 1: want to work in finance, and so you can kind

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Speaker 1: of get a lot of talent that banks have a

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Speaker 1: harder time competing for now. Yeah, but a lot of

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Speaker 1: this is like the sort of traditional business of the

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Speaker 1: investment bank has become hard to do because the investment

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Speaker 1: banks are all banks now and they're all pretty highly regulated,

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Speaker 1: and so like the big alternative managers are kind of

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Speaker 1: stepping into do kinds of business that banks used to do.

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Speaker 2: So does that give you any blueprint about where this

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Speaker 2: expands to? I mean, you have all these lofty projections

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Speaker 2: right now of like private credit being thirty forty trillion

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Speaker 2: dollars if they're sort of like following the blueprint of

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Speaker 2: you know what these big investment banks used to be,

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Speaker 2: Like how does this end?

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Speaker 1: I mean how much credit is there in the world? Right? Like,

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Speaker 1: you know, like there is this long term push against

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Speaker 1: banks doing a lot of credit on their balancee Right,

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Speaker 1: this long term push through like a little bit narrower

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Speaker 1: banking where like the risk of lending is taken by

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Speaker 1: you know, equity finance investment funds, and you know, the

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Speaker 1: big private credit managers are kind of well set up

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Speaker 1: for that, and there's a lot of like, you know,

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Speaker 1: that's the sort of like stereotypical private credit deal is

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Speaker 1: like direct lending to finance at LBO. But like all

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Speaker 1: of these big managers are getting into structured investment CREAD stuff.

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Speaker 1: You know, a lot of them are getting into like

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Speaker 1: consumer loans, and like eventually, like why wouldn't these like

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Speaker 1: quote unquote private credit firms be like you know, holding

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Speaker 1: most of the mortgages or whatever. Like, I is a

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Speaker 1: real possibility that like this is like talking about like

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Speaker 1: Blackrock kind of trying to have higher fees by you know,

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Speaker 1: diversifying its dex funds with like private credit. Right, Like,

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Speaker 1: you could see the kind of the reverse happening in

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Speaker 1: private credit, where like you start with like very risky,

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Speaker 1: expensive direct LBO loans and you end up doing like

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Speaker 1: consumer credit for tighter spreads because you want to become

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Speaker 1: like a financial supermarket, right, Like that's a possible outcome.

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Speaker 2: Yeah, look forward to that future. And something I was

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Speaker 2: thinking about. I mean, there was been several articles this

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Speaker 2: week that have talked about this grand convergence between private

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Speaker 2: and public, which has been going on for a while now,

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Speaker 2: as a narrative but I mean, when you think about

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Speaker 2: that convergence, is it just the private debt markets becoming

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Speaker 2: more public? Are the public debt markets going to take

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Speaker 2: on any characteristics of what happens in the shadows, or

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Speaker 2: is this just private becoming more public.

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Speaker 1: I think it's mostly private becoming more public. But like

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Speaker 1: one way of private becoming more public is ets, right, Like,

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Speaker 1: if there's like liquid trading, then there will be private

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Speaker 1: credit ets, just as there are, like you know, loan ets, which,

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Speaker 1: like you know, bank loans used to not trade. Yeah,

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Speaker 1: bank loans used to be not a product that you

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Speaker 1: could buy in your retail account, and now like there's

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Speaker 1: loan ETFs, there'll be private credit ets if like this

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Speaker 1: gets off the ground and there's a lot of trading,

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Speaker 1: which I'm sure there.

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Speaker 2: Eventually will be, this being apollos.

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Speaker 1: Being someone's private credit trading venue, right, yeah, being like

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Speaker 1: just private credit trading. Right. I spent three years maybe

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Speaker 1: more writing most days the phrase people are worried about

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Speaker 1: bond market liquidity, because like people were worried about bond

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Speaker 1: market liquidity and the story was something like there are

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Speaker 1: all these like bond mutual funds, but like really bond

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Speaker 1: ETFs people are worried about these ETFs are so liquid

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Speaker 1: and you can just trade them on the Stock exchange

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Speaker 1: anytime you want, and if like, people will want their

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Speaker 1: money back. At the same time, these ETFs will have

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Speaker 1: effectually redemptions and they'll have to sell or someone will

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Speaker 1: have to sell all these bonds, and the bonds are

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Speaker 1: not as liquid as the ets now, and so it's

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Speaker 1: a disaster waiting to happen, and then disaster never really happened.

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Speaker 1: I made fun of this for a long time.

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Speaker 2: There are those would argue that it's like real twenty

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Speaker 2: twenty stuff, you know, I want.

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Speaker 1: To say it was earlier.

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Speaker 2: I don't know.

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Speaker 1: Yeah, twenty twenty is when it came to a head

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Speaker 1: because of like was when the theory was tested, but

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Speaker 1: people are worrying about it for years before that. So

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Speaker 1: I'm just really excited for like the first seventeen times

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Speaker 1: I can write people are worried about private credit liquidity

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Speaker 1: because it's just gonna happen again, right, Like, there will

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Speaker 1: be some trading and then there will be ETFs and

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Speaker 1: like trading and private credit markets will not be as

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Speaker 1: liquid as the easy apps, and then people are like, oh,

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Speaker 1: what happens if and it'll it'll.

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Speaker 2: Talk about ill liquidity, doom loops. It'll be great, It'll

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Speaker 2: be great.

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Speaker 1: And like the best part of this is that, I

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Speaker 1: want to say, Tracy Alley was who pointed to this

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Speaker 1: out to me, but our Bloomberg collegue. But in like

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Speaker 1: the sixties, people had this exact worry about equity mutual funds, right,

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Speaker 1: it was like, howint Yeah, it was like, oh, these

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Speaker 1: mutual funds, like if they all get redemptions at once,

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Speaker 1: like they'll have to sell the stocks. There's not enough

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Speaker 1: liquidity for that. And then like you know, they performed

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Speaker 1: relatively well and like people just forgot about that. And

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Speaker 1: it also stocks are very liquid, but it's gonna keep going,

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Speaker 1: keep moving up the capital structure to private credit.

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Speaker 2: God, history just repeats itself. Are you excited for the

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Speaker 2: Pro Football Championship?

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Speaker 1: I am looking forward to the professional football game to

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Speaker 1: be played this weekend between the Philadelphia Squadron and the

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Speaker 1: Kansas City eleven.

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Speaker 2: Wouldn't it be really cool if you could perhaps bet

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Speaker 2: on that on the place where you also trade stocks? Alas,

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Speaker 2: doesn't that.

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Speaker 1: Seem like a good day? It looked like it.

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Speaker 2: Might happen one beautiful shining day in the sun.

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Speaker 1: Yeah, Robin Hood. I love Robin Hood.

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Speaker 2: They just like they shoot their shot.

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Speaker 1: They do him play lawyers like good lawyers, but like

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Speaker 1: they keep years ago, they launched a thing called Robinhood

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Speaker 1: checking in savings. But they're like, it's a bank account.

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Speaker 1: And then like bank examiners are like, it's not a

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Speaker 1: bank account, You're not a bank and they pulled it

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Speaker 1: within like twenty four hours. It's so embarrassing, it's so

401
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Speaker 1: fun to write about. But yeah, they launched events contracts. Yes,

402
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Speaker 1: they launched an events contract on the Big Game. You

403
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Speaker 1: can't say bold because then you get in trouble.

404
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Speaker 2: Shit, pronounce it like brook.

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Speaker 1: They launched the contracts on the Big Game where you

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Speaker 1: could bet on Philadelphia Kansas City, not the Eagles or

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Speaker 1: the Chiefs, Philadelphia Kansas City. And they said they called

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Speaker 1: it an emerging asset class like event contracts in their announcement,

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Speaker 1: which is now deleted from their website. But they didn't

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Speaker 1: lunch football betting. They launched the event contract where you

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Speaker 1: could buy a contract that pays off a dollar if

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Speaker 1: Philadelphia wins the Pro Football Championship, pays off zero dollars

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Speaker 1: if Kansas City wins, or you could buy the other

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Speaker 1: contract that pays off of Kansas City wins, and that

415
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Speaker 1: is a football bet, but they don't call it that

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Speaker 1: because it's like there's this weird gray area where you

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Speaker 1: can launch commodity futures, and commodity sutures used to be

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Speaker 1: like futures on soybeans, and then people were like, we

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Speaker 1: can have financial commodity s features that are like bets

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Speaker 1: on what the ten year interest rate will be. And

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Speaker 1: then people are like, well, if you can do that,

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Speaker 1: what about bets on whether the Eagles will win the

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Speaker 1: Super Bowl? And the line between like a financial futures

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Speaker 1: contract and an events contract is a little blurry, and

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Speaker 1: there's a lot of interest in events contracts. And so

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Speaker 1: the CFTC, the Commodity Futures Trading Commission, which regulates commodity futures,

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00:21:13,880 --> 00:21:16,280
Speaker 1: it's like put out rules that they're like proposed rules

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Speaker 1: that haven't been finalized and probably won't be saying like

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Speaker 1: certain things are not okay, and those things include elections.

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Speaker 1: They're like lost on that one, like the elections are

431
00:21:26,280 --> 00:21:31,520
Speaker 1: now fair game. Assassinations timely, timely, timely.

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Speaker 2: We had several assassination attempts on President Trump.

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Speaker 1: Yeah, we also like, in fact, I think Calshi, one

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00:21:38,920 --> 00:21:42,080
Speaker 1: of the prediction markets, briefly listed contracts on what would

435
00:21:42,080 --> 00:21:44,960
Speaker 1: happened to Luigi, like whether Lujiman Johnny, which like Cleve,

436
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Speaker 1: which is like kind of an assassination contract. It's not

437
00:21:47,160 --> 00:21:49,840
Speaker 1: like it's related to assassinations. But anyway. Another thing that's

438
00:21:49,880 --> 00:21:54,600
Speaker 1: excluded is sports betting because like obviously like sports betting

439
00:21:54,640 --> 00:21:58,040
Speaker 1: is something else. Gambling is now, you know, largely legalized

440
00:21:58,080 --> 00:22:01,000
Speaker 1: in the US. You can like batance sports on your

441
00:22:01,000 --> 00:22:06,280
Speaker 1: sports book gap, but is that sports that a financial

442
00:22:06,359 --> 00:22:10,119
Speaker 1: futures that is allowed on your burgragee. Apparently not, because

443
00:22:10,200 --> 00:22:13,120
Speaker 1: Robinhood launched it and pulled it twenty four hours later

444
00:22:13,119 --> 00:22:15,560
Speaker 1: because the SAFTC told them to knock it off, and

445
00:22:15,600 --> 00:22:17,800
Speaker 1: they were very agreed about it. They said, we were

446
00:22:17,800 --> 00:22:20,760
Speaker 1: in regular contact with the CFTC prior to launching this product,

447
00:22:20,960 --> 00:22:22,760
Speaker 1: and we believe we were in full compliance with all

448
00:22:22,760 --> 00:22:25,400
Speaker 1: applicable regulations. But nonetheless they pulled it.

449
00:22:26,080 --> 00:22:28,240
Speaker 2: Well, who knows where this will go.

450
00:22:28,640 --> 00:22:30,639
Speaker 1: I'm pretty sure we'll go to not being able to

451
00:22:30,680 --> 00:22:35,080
Speaker 1: bet on the Big Game this weekend this particular next year.

452
00:22:35,960 --> 00:22:40,080
Speaker 2: Yeah, Well, reading our Bloomberg News Coverage. Apparently, Robinhood said

453
00:22:40,080 --> 00:22:42,720
Speaker 2: it will continue to collaborate with the CFTC as it

454
00:22:42,760 --> 00:22:47,480
Speaker 2: works on unveiling a more comprehensive events contract platform later

455
00:22:47,560 --> 00:22:51,000
Speaker 2: this year, So their ambition is unscathed, right.

456
00:22:50,840 --> 00:22:52,600
Speaker 1: I mean the whole trend is in the direction of

457
00:22:52,640 --> 00:22:57,240
Speaker 1: like free, lightly regulated events contract platforms, and like it's

458
00:22:57,280 --> 00:23:01,400
Speaker 1: just weird to have an events contract platform that doesn't

459
00:23:01,400 --> 00:23:03,480
Speaker 1: feature sports, right, because that's like the main event people

460
00:23:03,480 --> 00:23:03,879
Speaker 1: want to bet on.

461
00:23:04,160 --> 00:23:04,360
Speaker 2: Yeah.

462
00:23:04,640 --> 00:23:06,879
Speaker 1: Yeah, the CFTC also wanted to exclude like betting on

463
00:23:06,920 --> 00:23:09,040
Speaker 1: the oscars, like some point that.

464
00:23:09,080 --> 00:23:12,760
Speaker 2: I'm not going to be able to manipulate the oscars.

465
00:23:12,119 --> 00:23:15,440
Speaker 1: Right, I mean I don't really.

466
00:23:15,200 --> 00:23:17,760
Speaker 2: Know why, like why they would be against it.

467
00:23:17,960 --> 00:23:20,640
Speaker 1: Yeah, Like part of it is like when you think

468
00:23:20,640 --> 00:23:24,240
Speaker 1: about like soybean futures, they're for like farmers to hedge

469
00:23:24,280 --> 00:23:27,040
Speaker 1: their risk and for like soy sauce producers to heads

470
00:23:27,080 --> 00:23:30,840
Speaker 1: their risk. Right, Like you have natural counterparties on either

471
00:23:30,880 --> 00:23:34,320
Speaker 1: side who are like doing real economic activity and are

472
00:23:34,600 --> 00:23:36,879
Speaker 1: hedging that or like raising money to do it. Like

473
00:23:36,920 --> 00:23:40,239
Speaker 1: there's some like underlying economic activity for all the like

474
00:23:40,280 --> 00:23:42,400
Speaker 1: financial betting, right, And so you can be like, oh,

475
00:23:42,440 --> 00:23:44,920
Speaker 1: this commodities exchange is just like evil speculators betting, and

476
00:23:44,960 --> 00:23:46,600
Speaker 1: they can be like no, no, no, it's like supporting

477
00:23:46,640 --> 00:23:50,119
Speaker 1: real economic activity. And then betting is just betting, right,

478
00:23:50,240 --> 00:23:52,439
Speaker 1: Like no one really thinks maybe maybe I'm wrong, but

479
00:23:53,280 --> 00:23:55,919
Speaker 1: I've never heard anyone being like, oh, yeah, sports betting

480
00:23:56,000 --> 00:23:58,080
Speaker 1: is like building wealth, right, like people something to say it,

481
00:23:58,080 --> 00:24:02,040
Speaker 1: but it's it's like wells an emerging asset class. It's

482
00:24:02,040 --> 00:24:04,159
Speaker 1: a very cynical thing to say. Yeah, it's not an

483
00:24:04,200 --> 00:24:07,960
Speaker 1: asset class. The stock market goes up over time, not

484
00:24:08,160 --> 00:24:10,200
Speaker 1: because of magic. It goes up over time because it's

485
00:24:10,200 --> 00:24:12,520
Speaker 1: like an investment in economic activity, and like the economy

486
00:24:12,560 --> 00:24:15,959
Speaker 1: grows with like technological process and demographic growth, like the

487
00:24:16,000 --> 00:24:17,959
Speaker 1: size of the sports betting market does go up over time,

488
00:24:18,000 --> 00:24:19,840
Speaker 1: but like the outcome of the Eagles game doesn't go

489
00:24:19,960 --> 00:24:21,600
Speaker 1: up over time. Right, it's like you bad, and like

490
00:24:21,640 --> 00:24:23,800
Speaker 1: some people win and some people lose, and like that's

491
00:24:23,840 --> 00:24:25,760
Speaker 1: it and most people lose, right, And it's like you

492
00:24:25,920 --> 00:24:28,920
Speaker 1: negative some game for the betters. And if I were

493
00:24:29,880 --> 00:24:34,840
Speaker 1: a financial markets regulator, I would be like, look, I'll

494
00:24:34,840 --> 00:24:38,000
Speaker 1: approve a lot of stuff that is pretty tangentially related

495
00:24:38,119 --> 00:24:41,760
Speaker 1: to real economic activity. I understand that like the speculation

496
00:24:41,840 --> 00:24:45,159
Speaker 1: begets liquidity that like a lot of complicated products are

497
00:24:45,200 --> 00:24:48,240
Speaker 1: useful and hedging, you want to trade zero day options

498
00:24:48,280 --> 00:24:51,400
Speaker 1: on meum stocks like fine, Like that's really loosely related

499
00:24:51,400 --> 00:24:54,560
Speaker 1: to real financial activity, but like it's all in a continuum.

500
00:24:54,640 --> 00:24:56,399
Speaker 1: But then it's like sports betting is like there's nothing

501
00:24:56,480 --> 00:24:59,880
Speaker 1: this is embarrassing to a financial regulator. Now I think

502
00:25:00,119 --> 00:25:03,880
Speaker 1: probably entering an era of like unembarrassable financial regulators, and

503
00:25:04,359 --> 00:25:08,120
Speaker 1: so like yeah, they'll like whatever. You can definitely buy

504
00:25:08,160 --> 00:25:11,159
Speaker 1: futures contracts on the Super Bowl, but like I just

505
00:25:11,200 --> 00:25:14,359
Speaker 1: think that like turning over the financial markets purely to

506
00:25:14,440 --> 00:25:17,919
Speaker 1: gambling is kind of a scary stuff, right, Yeah, But

507
00:25:18,000 --> 00:25:20,800
Speaker 1: it's like you can understand why, right, because you look

508
00:25:20,840 --> 00:25:22,800
Speaker 1: at like the work of a sports book and the

509
00:25:22,840 --> 00:25:25,639
Speaker 1: work of like a high frequency equity trading shop is

510
00:25:25,680 --> 00:25:29,080
Speaker 1: like very similar, right, It's like similar techniques, it's similar skills,

511
00:25:29,080 --> 00:25:32,120
Speaker 1: it's like similar risks, Like you're really doing the same

512
00:25:32,200 --> 00:25:33,679
Speaker 1: kind of work, and there is a lot of movement

513
00:25:33,720 --> 00:25:36,520
Speaker 1: between you know, people who are market makers for stocks

514
00:25:36,520 --> 00:25:38,959
Speaker 1: and people who are book makers for sports and then

515
00:25:39,000 --> 00:25:41,080
Speaker 1: on like the retail side, Like you look at like

516
00:25:41,119 --> 00:25:43,600
Speaker 1: there's so much stuff in like retail stock markets. There's

517
00:25:43,600 --> 00:25:46,879
Speaker 1: a Bloomberg article this week about people betting on sports

518
00:25:46,520 --> 00:25:49,080
Speaker 1: and like people who got like thousands of dollars a

519
00:25:49,080 --> 00:25:51,960
Speaker 1: weekend on football, and like a lot of what they

520
00:25:52,040 --> 00:25:54,000
Speaker 1: say is like it's a social thing. It's like I'm

521
00:25:54,280 --> 00:25:56,240
Speaker 1: texting with my friends and like getting our bets in

522
00:25:56,280 --> 00:25:57,919
Speaker 1: and like it's my way to keep up with my

523
00:25:57,920 --> 00:26:00,879
Speaker 1: college buddies or whatever. And you see that in like

524
00:26:00,960 --> 00:26:02,840
Speaker 1: you know the memes phenomenon too, where it's like a

525
00:26:02,920 --> 00:26:05,960
Speaker 1: very social phenomenon and it's like gives people like a

526
00:26:06,000 --> 00:26:07,760
Speaker 1: sense of fun and a sense of identity. It's not

527
00:26:07,840 --> 00:26:10,000
Speaker 1: just like we expect these tacks to go up. There's

528
00:26:10,040 --> 00:26:13,400
Speaker 1: like some more social, very community based, Yeah, And it's

529
00:26:13,480 --> 00:26:16,800
Speaker 1: just that like one of them is like financial markets

530
00:26:17,119 --> 00:26:20,280
Speaker 1: and one of them is gambling. But like there's like

531
00:26:20,320 --> 00:26:24,320
Speaker 1: an obvious convergence like socially, and so you know, it

532
00:26:24,359 --> 00:26:27,080
Speaker 1: is a little weird for the regulators to say, no, robinhood,

533
00:26:27,119 --> 00:26:29,560
Speaker 1: you can offer some kinds of like fun gambling, but

534
00:26:29,600 --> 00:26:31,960
Speaker 1: not other kinds of fun gambling, and like eventually I

535
00:26:31,960 --> 00:26:33,119
Speaker 1: think that will erode.

536
00:26:33,560 --> 00:26:37,640
Speaker 2: Yeah, another great convergence indeed in those Shining twenty four

537
00:26:37,640 --> 00:26:40,320
Speaker 2: hours where you could do this on robin Hood. Apparently

538
00:26:40,600 --> 00:26:43,000
Speaker 2: it had been rolled out to one percent of their customers,

539
00:26:43,359 --> 00:26:45,960
Speaker 2: so robin Hood said it will give those investors the

540
00:26:46,000 --> 00:26:48,560
Speaker 2: option to close their positions or take them to resolution.

541
00:26:49,400 --> 00:26:51,080
Speaker 2: It would be fun to talk to some of those

542
00:26:51,080 --> 00:26:52,600
Speaker 2: folks who are caught in this limbo.

543
00:26:52,720 --> 00:26:54,399
Speaker 1: I think it's to take it to resolution. Yeah, I

544
00:26:54,440 --> 00:26:55,040
Speaker 1: guess because they.

545
00:26:55,080 --> 00:26:58,879
Speaker 2: Are pretty cool. Yeah, Okay, everything hurts.

546
00:27:07,280 --> 00:27:08,760
Speaker 1: And that was The Money Stuff Podcast.

547
00:27:08,880 --> 00:27:10,920
Speaker 4: I'm Matt Levy and I'm Katie Greifeld.

548
00:27:11,359 --> 00:27:13,440
Speaker 1: You can find my work by subscribing to the Money

549
00:27:13,440 --> 00:27:15,679
Speaker 1: Stuff newsletter on Bloomberg dot com.

550
00:27:15,440 --> 00:27:17,880
Speaker 4: And you can find me on Bloomberg TV every day

551
00:27:17,960 --> 00:27:21,040
Speaker 4: on Open Interest between nine to eleven am Eastern.

552
00:27:21,440 --> 00:27:23,159
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553
00:27:23,200 --> 00:27:26,399
Speaker 1: email to Moneypod at Bloomberg dot net, ask us a

554
00:27:26,480 --> 00:27:27,880
Speaker 1: question and we might answer it on air.

555
00:27:28,320 --> 00:27:30,480
Speaker 4: You can also subscribe to our show wherever you're listening

556
00:27:30,600 --> 00:27:32,600
Speaker 4: right now and leave us a review. It helps more

557
00:27:32,640 --> 00:27:33,520
Speaker 4: people find the show.

558
00:27:34,240 --> 00:27:37,800
Speaker 1: The Money Stuff Podcast is produced by Anna Maserakus and Moses.

559
00:27:37,440 --> 00:27:40,800
Speaker 4: Onam Our theme music was composed by Blake Maples Brandon

560
00:27:40,840 --> 00:27:44,440
Speaker 4: Francis Munimssara, executive producer and Stage Bauman is Bloomberg's head

561
00:27:44,440 --> 00:27:45,040
Speaker 4: of podcasts.

562
00:27:45,359 --> 00:27:47,680
Speaker 1: Thanks for listening to the Money Stuff podcast. We'll be

563
00:27:47,760 --> 00:27:49,320
Speaker 1: back next week with more stuff