Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: I'm at forty percent right now. It was really not
Speaker 2: great doing television today.
Speaker 1: This is great. We have gotten I've gotten for months now,
Speaker 1: emails from listeners being like, Bloomberg's engineers need to do
Speaker 1: something because your voice isn't audible next to Katie's voice.
Speaker 1: And what we have done is the Bloomberg engineers have
Speaker 1: like tuned down Katie's voice by ten percent, so now
Speaker 1: we are more compatible.
Speaker 2: They've performed surgery on me. Actually, and now this is
Speaker 2: how I sound. It feels like I ate an ash tray.
Speaker 2: I just feel disgusting. I need more milk.
Speaker 1: It's gonna be great.
Speaker 2: It'll be fine.
Speaker 1: Big week, Katie tenth anniversary of Money Stuff.
Speaker 2: Happy birthday.
Speaker 1: Birthday to the newsletter, not the podcast. The podcast is
Speaker 1: still an infant getting mental.
Speaker 2: When did we get born in like April? Well, well,
Speaker 2: you seem like you're in a good mood.
Speaker 1: It was touch and go to get here today, as
Speaker 1: you know, because you're a bad late. Yeah, and we're
Speaker 1: getting through the week.
Speaker 2: This is my last thing that I have to do
Speaker 2: today because I'm going to call out sick tomorrow.
Speaker 1: Yeah, that's hello and Welcome to the Money Stuff Podcast,
Speaker 1: your weekly podcast where we talk about stuff related to money.
Speaker 1: I'm Matt Levine and I write the Money Stuff column
Speaker 1: for Bloomberg Opinion.
Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 2: an anchor for Bloomberg Television.
Speaker 1: Wonder who are you talking about the bay, Kat?
Speaker 2: We're going to talk about Vanguard and seven basis points. Yeah,
Speaker 2: We're going to talk about Apollo, and then we're going
Speaker 2: to talk about the big game.
Speaker 1: The big game, so Vanguard. I texted you this week
Speaker 1: to say while I was on what should I say
Speaker 1: about Vanguard? Because you wrote an article about Vanguard cutting
Speaker 1: its fees and you never texted me back because you
Speaker 1: were on television. Sure I never wrote about it, but
Speaker 1: you did.
Speaker 2: So the story begin on Monday when Vanguard announced that
Speaker 2: they were putting through their biggest ever fee cut across
Speaker 2: eighty seven mutual funds and ETFs. It brings their average
Speaker 2: fee on their like ten trillion dollars of assets down
Speaker 2: to just seven basis points, which is wild. These are
Speaker 2: wild numbers. The industry averaged roughly is forty four bases points,
Speaker 2: So that tells you just how low Vanguard is, and
Speaker 2: then we wrote a follow up story myself and Vildna
Speaker 2: Hirich a couple days later, talking about how this really
Speaker 2: tightens the screws on everyone else Blackrock, State Street, Invesco,
Speaker 2: et cetera, because Vanguard has this ownership structure where basically
Speaker 2: the fund investors own the firm, and thus everything they
Speaker 2: do is just geared towards lowering fees. Other companies don't
Speaker 2: operate that way. Blackrock doesn't operate that way. And Blackrock
Speaker 2: actually fell, i believe, by the most since twenty twenty
Speaker 2: two on Monday alone, both because it was a down
Speaker 2: market with you know, the will he won't on tariffs,
Speaker 2: but also because of this news, which was interesting.
Speaker 1: Yeah, this is sort of the most intuitive way for
Speaker 1: an index fund to work, right. Like, It's like you
Speaker 1: get a bunch of investors, they pull their money, they
Speaker 1: hand their money to someone to perform the sort of
Speaker 1: administrative tasks of putting it into all of the thoughts,
Speaker 1: and they pay that someone a reasonable fee. But there's
Speaker 1: no like outside shareholders. You don't need like pay the
Speaker 1: cost of capital of some giant firm to like just
Speaker 1: pull your money and put it into an index, right,
Speaker 1: so it should be you know, a world of technology
Speaker 1: and you know, a world of giant scale for these
Speaker 1: funds that should be kind of free to invest in
Speaker 1: in the next fund, and it kind of is. Well.
Speaker 2: Vanguard would be quick to tell you, including CEO Salem Ramji,
Speaker 2: who I also interviewed on BTV on Thursday, would say that, Okay,
Speaker 2: you think of us as just this passive index fund company,
Speaker 2: but we're more than that, Malavine. We also have active funds,
Speaker 2: and they care very deeply about their active funds, but
Speaker 2: their active funds are also really cheap. Their bond funds,
Speaker 2: in particular, their active bond funds charged ten basis points
Speaker 2: on average, and they have this interesting theory that because
Speaker 2: their fee is so low, their managers don't have to
Speaker 2: take outsized risks in the active portfolios to like outperform
Speaker 2: or make up the fee, and that that leads to
Speaker 2: their outperformance over longer term horizon.
Speaker 1: That makes sense. Yeah, it's like an old tybee, like
Speaker 1: how much work is it to like take my money
Speaker 1: and invest it in bonds? Like it's active in the
Speaker 1: sense that like you're choosing particular bonds, but.
Speaker 3: They they choose that bond over that but it's like
Speaker 3: the cost of that should come down over time, and
Speaker 3: that shouldn't be you know, like Vanguard is a mutual right,
Speaker 3: It's like the people in the mutual fund like pay
Speaker 3: the managers and there's no outside ownership to collect another fee.
Speaker 1: Makes sense what.
Speaker 2: I find interesting about van Garden, especially right now, so
Speaker 2: CEO Selim Ramsey, he came from Blackrock. He used to
Speaker 2: run the I shares line at Blackrock, which is their
Speaker 2: ETF business. So he went from Blackrock to van Guard,
Speaker 2: which is like, we don't get a lot of like
Speaker 2: exciting moves like that in the ETF industry all the time.
Speaker 2: So that was a big deal. And again, like Blackrock
Speaker 2: and everyone else has to operate in this universe that
Speaker 2: Vanguard has creative where Vanguard is just lowering fees, lowering fees,
Speaker 2: lowering fees, and everyone else has to respond, even though
Speaker 2: you know they actually do have to worry about their
Speaker 2: margins and their external shareholders. But in tweeting about this story,
Speaker 2: I got a few tweets back to the effect of,
Speaker 2: you know, maybe they should actually stop focusing on lower
Speaker 2: fees and like focus more on putting this money back
Speaker 2: into the business and making the customer experience better.
Speaker 1: That's fair because I'm like, ah, you just put your
Speaker 1: money and your own but like, in fact, it is
Speaker 1: a corporation that has to do things like.
Speaker 2: Yeah, maintain a website, yeah, exactly.
Speaker 1: Have customer service and like yeah.
Speaker 2: One of the responses I got was from a woman
Speaker 2: theoretically who says that she's a financial planner who I
Speaker 2: didn't verify her profile or anything, but she said I
Speaker 2: wish they would have cut their fees a little less
Speaker 2: and instead invest in their customer facing it and user experience,
Speaker 2: which is often disjointed and confusing to consumer's relative to
Speaker 2: the competition, which I find kind of funny. Okay, your
Speaker 2: fees are seven basis points, you're playing next to nothing,
Speaker 2: and you have this like small subset of people saying no,
Speaker 2: please stop lowering fees, like put this into improving my
Speaker 2: experience as your client.
Speaker 1: Yeah, this is pretty reasonable man. Yeah, I would frequently
Speaker 1: pay more for better experiences. And there are a lot
Speaker 1: of people in the financial industry who get very sad
Speaker 1: at the idea that the only criterion is like lowest
Speaker 1: fees and you worry one about customer experience being sacrificed.
Speaker 1: But then people don't those worried about performance being sacrificed too,
Speaker 1: although the evidence for the higher fee managers having better
Speaker 1: performance isn't great. The other thing I'll say is, like
Speaker 1: you're talking about like black Rock, it seems to me
Speaker 1: that like the move and asset management is like there's
Speaker 1: this kind of Barbell strategy of like you know, there's
Speaker 1: like indexy public stuff that tends to zero fees, and
Speaker 1: there's hot new private credit where you can charge all
Speaker 1: sorts of fees. Right, And so you look at black
Speaker 1: Dot getting into private credit a big way because like
Speaker 1: the fees on that are just a lot higher. Blueberg
Speaker 1: lawa Benita has had an article this week about Pimco, Yeah,
Speaker 1: not really getting into private credit. And like one thing
Speaker 1: there is like you have a lot of competition and
Speaker 1: margin compression on liquid fixed income, which is you know,
Speaker 1: like the Vanguard, Like I have to fix I remember,
Speaker 1: like you know, Pimco's bread and butter is like running
Speaker 1: bond mutual funds, and that's a tough business because people
Speaker 1: want low fees, and you get low fees and index funds,
Speaker 1: and people want the hot new thing which is private credit,
Speaker 1: and you can get high fees there. But like just
Speaker 1: running an active bond fund is tough.
Speaker 2: Yeah, what an interesting way to think about barbelling by
Speaker 2: fees rather than like risk, which I guess correspond to
Speaker 2: each other.
Speaker 1: But I mean, like there are a lot of context
Speaker 1: where you can make a BARRELLI decision, right, and like yeah,
Speaker 1: here it's like your product offerings, Like there's a lot
Speaker 1: of demand for index, there's a lot of demand for
Speaker 1: alts in private, and like the middle is getting kind
Speaker 1: of hollowed out. It's been a tough time for like
Speaker 1: active mutual fund managers for a long time.
Speaker 2: Yeah, I mean you're seeing that in the UTF world too,
Speaker 2: which you can't offer private yet.
Speaker 1: I know. But I was going to say, like the
Speaker 1: other thing is like your article with the Vildanna, like
Speaker 1: you talk about like in the ETF world, like there
Speaker 1: are people who don't want to compete with yeah the
Speaker 1: giants by cutting piece to zero, and so they're like, ooh,
Speaker 1: here's a weird product where you can judge with higher fees,
Speaker 1: and like we're certainly seeing and talking about a lot
Speaker 1: of that, like the weird productized ETFs.
Speaker 2: Yeah exactly. I mean you think about all the silly
Speaker 2: single stock super leveraged ETFs that are out there, all
Speaker 2: the derivatives based ETFs. Really interesting phenomenon occurred actually in
Speaker 2: twenty twenty four where the average fee on new ETFs
Speaker 2: coming to the market was ticking higher. So the new
Speaker 2: the new launches were expensive because the feeling among issuers
Speaker 2: is like, I'm not going to compete in the core,
Speaker 2: so I got to launch the silly stuff and I
Speaker 2: can try.
Speaker 1: Yeah, the course is already there. You can get index
Speaker 1: bonds like now you need like the silly stuff.
Speaker 2: Shall we sail long?
Speaker 1: So Apollo is crouching thinking about starting a private credit
Speaker 1: trading desk.
Speaker 2: They are having conversations that have been highly constructive at
Speaker 2: the highest levels about this.
Speaker 1: So I wrote this. I wrote, I don't really know
Speaker 1: what private credit is, you know, And I get answers
Speaker 1: like a bunch of people emailed to say basically something like,
Speaker 1: if it's a registered public bond, it's public credit, and
Speaker 1: if it's not that, then it's private credit, which is
Speaker 1: not right. It's not how people use the term, right,
Speaker 1: like people talk about syndicated bank loans and like loans
Speaker 1: that are bought by clos like as not private credit, right,
Speaker 1: Like that's something else People won't really say public credit,
Speaker 1: but it's something else. Private credit is distinct from deals
Speaker 1: done by banks, right private credit is asset managers during
Speaker 1: direct lending. And in the past I would have followed
Speaker 1: that by saying that they hold to maturity on their
Speaker 1: balance sheet, but everyone kind of knew that would not
Speaker 1: last forever, right, Like, eventually, if you have potentially trillions
Speaker 1: of dollars in an asset class, like people are kind
Speaker 1: of trade it and uh, pollow is the launching at
Speaker 1: trading desk or talking about launching it trading desk.
Speaker 2: I feel like we've been talking about Apollo's trading dusk
Speaker 2: for a while because we first started having this conversation,
Speaker 2: especially around when they filed for an ETF with State Streets.
Speaker 1: Yeah, right, let me take that back. It's not that
Speaker 1: they're launching a trading desk. It's that they're having conversations
Speaker 1: that are consarned about.
Speaker 2: Highly constructive at the highest levels.
Speaker 1: About like a venue, about like a marketplace, where it's
Speaker 1: not just they'll have a trading desk, but there will
Speaker 1: be a bunch of trading desks and they'll trade with
Speaker 1: each other, and they'll be a pricing service and some
Speaker 1: sort of electronic platform for people to meet and trade
Speaker 1: private credit because the trading desk that they were doing,
Speaker 1: that they're planning and connection with the ETF was like
Speaker 1: to do a private credit ETF, you need your assets
Speaker 1: to be liquid Certainly the way you get liquidity is
Speaker 1: by Apollo saying we'll buy the assets, right, and so
Speaker 1: like that trading desk was a sort of like facing
Speaker 1: a single customer, which is the ETF. But then obviously
Speaker 1: you know if you have that, you're going to look
Speaker 1: for other places to trade with. But here it's like
Speaker 1: we want to all to all open venue for people
Speaker 1: who want to trade private credit because like obviously that's
Speaker 1: coming right, Like obviously you know you have enough private
Speaker 1: credit funds, they're gonna want to start trading, and so
Speaker 1: that's what they're putting on.
Speaker 2: I'm trying to think about how to think about this,
Speaker 2: and you say marketplace for bond trading, and I think
Speaker 2: of like a market access or a trade web. Sure
Speaker 2: are they just trying to build that put for private credit.
Speaker 1: Something like that? You're so young you think of market access.
Speaker 1: I mean like it used to be like you know,
Speaker 1: a dozen dealers with telephones, right.
Speaker 2: Well, that is that just sounds bake, yeah.
Speaker 1: Or like a dozen dealers with Bloombergs, right, And I
Speaker 1: think right when Pollow talks about you know, they're like
Speaker 1: to part with banks, exchanges and fintech firms. Like exchanges
Speaker 1: in fintech firms suggest there is like electronic marketplace, but yeah,
Speaker 1: like there's not that for private credit because if don't
Speaker 1: really trade and it doesn't have the electronic identifiers, right,
Speaker 1: it's like you sign a contract, right, so you have
Speaker 1: to like do some like technological processes to make it
Speaker 1: tradable easily. But yeah, it's not that hard and they're
Speaker 1: going to do those processes. The other thing that I
Speaker 1: was thinking about in terms of how to think about
Speaker 1: this is like I haven't used the word banks to
Speaker 1: describe the golden Saxes of the world that like originate
Speaker 1: bond deals and then have bond trading desks. But it
Speaker 1: used to be that that business was done mostly by
Speaker 1: non banks like Goldman Sachs right, which became a bank
Speaker 1: holding company in two thousand and eight. And it used
Speaker 1: to be that there was this world of investment banks
Speaker 1: that use their own capital to trade securities and that
Speaker 1: also originated and like underwrote bond deals. Committed the capital
Speaker 1: that basically sold it on to other people. And like
Speaker 1: those were non banks, they were investment banks, and they
Speaker 1: you know, were big and had a big market niche.
Speaker 1: And then over time, like you know, the rules were
Speaker 1: relaxed in the US to allow banks to own them.
Speaker 1: And then in two thousand and eight, the big independent
Speaker 1: investment banks kind of got acquired or became bank holding companies.
Speaker 1: But like this used to be a non bank business,
Speaker 1: and you look at these big alternative managers and like
Speaker 1: to some extent, they are like recreating what the big
Speaker 1: investment banks used to be. Right, Like if you look
Speaker 1: at like Apollo, like Apollo, KKR, Blackstone, like their DNA
Speaker 1: is like their LBO shops, right yeah, but like the
Speaker 1: thing that they're doing now is we're going to originate
Speaker 1: loans or you originate you know, debt deals, and we're
Speaker 1: going to run a trading desk for people to trade
Speaker 1: debt deals. Right. They're kind of like moving into the
Speaker 1: business that like Goldman Sachs was doing thirty years ago
Speaker 1: before it became a bank. And they have some advantages
Speaker 1: in doing that business now, like largely in terms of
Speaker 1: just like being less regulated and also in terms of
Speaker 1: like being the cool place to go work if you
Speaker 1: want to work in finance, and so you can kind
Speaker 1: of get a lot of talent that banks have a
Speaker 1: harder time competing for now. Yeah, but a lot of
Speaker 1: this is like the sort of traditional business of the
Speaker 1: investment bank has become hard to do because the investment
Speaker 1: banks are all banks now and they're all pretty highly regulated,
Speaker 1: and so like the big alternative managers are kind of
Speaker 1: stepping into do kinds of business that banks used to do.
Speaker 2: So does that give you any blueprint about where this
Speaker 2: expands to? I mean, you have all these lofty projections
Speaker 2: right now of like private credit being thirty forty trillion
Speaker 2: dollars if they're sort of like following the blueprint of
Speaker 2: you know what these big investment banks used to be,
Speaker 2: Like how does this end?
Speaker 1: I mean how much credit is there in the world? Right? Like,
Speaker 1: you know, like there is this long term push against
Speaker 1: banks doing a lot of credit on their balancee Right,
Speaker 1: this long term push through like a little bit narrower
Speaker 1: banking where like the risk of lending is taken by
Speaker 1: you know, equity finance investment funds, and you know, the
Speaker 1: big private credit managers are kind of well set up
Speaker 1: for that, and there's a lot of like, you know,
Speaker 1: that's the sort of like stereotypical private credit deal is
Speaker 1: like direct lending to finance at LBO. But like all
Speaker 1: of these big managers are getting into structured investment CREAD stuff.
Speaker 1: You know, a lot of them are getting into like
Speaker 1: consumer loans, and like eventually, like why wouldn't these like
Speaker 1: quote unquote private credit firms be like you know, holding
Speaker 1: most of the mortgages or whatever. Like, I is a
Speaker 1: real possibility that like this is like talking about like
Speaker 1: Blackrock kind of trying to have higher fees by you know,
Speaker 1: diversifying its dex funds with like private credit. Right, Like,
Speaker 1: you could see the kind of the reverse happening in
Speaker 1: private credit, where like you start with like very risky,
Speaker 1: expensive direct LBO loans and you end up doing like
Speaker 1: consumer credit for tighter spreads because you want to become
Speaker 1: like a financial supermarket, right, Like that's a possible outcome.
Speaker 2: Yeah, look forward to that future. And something I was
Speaker 2: thinking about. I mean, there was been several articles this
Speaker 2: week that have talked about this grand convergence between private
Speaker 2: and public, which has been going on for a while now,
Speaker 2: as a narrative but I mean, when you think about
Speaker 2: that convergence, is it just the private debt markets becoming
Speaker 2: more public? Are the public debt markets going to take
Speaker 2: on any characteristics of what happens in the shadows, or
Speaker 2: is this just private becoming more public.
Speaker 1: I think it's mostly private becoming more public. But like
Speaker 1: one way of private becoming more public is ets, right, Like,
Speaker 1: if there's like liquid trading, then there will be private
Speaker 1: credit ets, just as there are, like you know, loan ets, which,
Speaker 1: like you know, bank loans used to not trade. Yeah,
Speaker 1: bank loans used to be not a product that you
Speaker 1: could buy in your retail account, and now like there's
Speaker 1: loan ETFs, there'll be private credit ets if like this
Speaker 1: gets off the ground and there's a lot of trading,
Speaker 1: which I'm sure there.
Speaker 2: Eventually will be, this being apollos.
Speaker 1: Being someone's private credit trading venue, right, yeah, being like
Speaker 1: just private credit trading. Right. I spent three years maybe
Speaker 1: more writing most days the phrase people are worried about
Speaker 1: bond market liquidity, because like people were worried about bond
Speaker 1: market liquidity and the story was something like there are
Speaker 1: all these like bond mutual funds, but like really bond
Speaker 1: ETFs people are worried about these ETFs are so liquid
Speaker 1: and you can just trade them on the Stock exchange
Speaker 1: anytime you want, and if like, people will want their
Speaker 1: money back. At the same time, these ETFs will have
Speaker 1: effectually redemptions and they'll have to sell or someone will
Speaker 1: have to sell all these bonds, and the bonds are
Speaker 1: not as liquid as the ets now, and so it's
Speaker 1: a disaster waiting to happen, and then disaster never really happened.
Speaker 1: I made fun of this for a long time.
Speaker 2: There are those would argue that it's like real twenty
Speaker 2: twenty stuff, you know, I want.
Speaker 1: To say it was earlier.
Speaker 2: I don't know.
Speaker 1: Yeah, twenty twenty is when it came to a head
Speaker 1: because of like was when the theory was tested, but
Speaker 1: people are worrying about it for years before that. So
Speaker 1: I'm just really excited for like the first seventeen times
Speaker 1: I can write people are worried about private credit liquidity
Speaker 1: because it's just gonna happen again, right, Like, there will
Speaker 1: be some trading and then there will be ETFs and
Speaker 1: like trading and private credit markets will not be as
Speaker 1: liquid as the easy apps, and then people are like, oh,
Speaker 1: what happens if and it'll it'll.
Speaker 2: Talk about ill liquidity, doom loops. It'll be great, It'll
Speaker 2: be great.
Speaker 1: And like the best part of this is that, I
Speaker 1: want to say, Tracy Alley was who pointed to this
Speaker 1: out to me, but our Bloomberg collegue. But in like
Speaker 1: the sixties, people had this exact worry about equity mutual funds, right,
Speaker 1: it was like, howint Yeah, it was like, oh, these
Speaker 1: mutual funds, like if they all get redemptions at once,
Speaker 1: like they'll have to sell the stocks. There's not enough
Speaker 1: liquidity for that. And then like you know, they performed
Speaker 1: relatively well and like people just forgot about that. And
Speaker 1: it also stocks are very liquid, but it's gonna keep going,
Speaker 1: keep moving up the capital structure to private credit.
Speaker 2: God, history just repeats itself. Are you excited for the
Speaker 2: Pro Football Championship?
Speaker 1: I am looking forward to the professional football game to
Speaker 1: be played this weekend between the Philadelphia Squadron and the
Speaker 1: Kansas City eleven.
Speaker 2: Wouldn't it be really cool if you could perhaps bet
Speaker 2: on that on the place where you also trade stocks? Alas,
Speaker 2: doesn't that.
Speaker 1: Seem like a good day? It looked like it.
Speaker 2: Might happen one beautiful shining day in the sun.
Speaker 1: Yeah, Robin Hood. I love Robin Hood.
Speaker 2: They just like they shoot their shot.
Speaker 1: They do him play lawyers like good lawyers, but like
Speaker 1: they keep years ago, they launched a thing called Robinhood
Speaker 1: checking in savings. But they're like, it's a bank account.
Speaker 1: And then like bank examiners are like, it's not a
Speaker 1: bank account, You're not a bank and they pulled it
Speaker 1: within like twenty four hours. It's so embarrassing, it's so
Speaker 1: fun to write about. But yeah, they launched events contracts. Yes,
Speaker 1: they launched an events contract on the Big Game. You
Speaker 1: can't say bold because then you get in trouble.
Speaker 2: Shit, pronounce it like brook.
Speaker 1: They launched the contracts on the Big Game where you
Speaker 1: could bet on Philadelphia Kansas City, not the Eagles or
Speaker 1: the Chiefs, Philadelphia Kansas City. And they said they called
Speaker 1: it an emerging asset class like event contracts in their announcement,
Speaker 1: which is now deleted from their website. But they didn't
Speaker 1: lunch football betting. They launched the event contract where you
Speaker 1: could buy a contract that pays off a dollar if
Speaker 1: Philadelphia wins the Pro Football Championship, pays off zero dollars
Speaker 1: if Kansas City wins, or you could buy the other
Speaker 1: contract that pays off of Kansas City wins, and that
Speaker 1: is a football bet, but they don't call it that
Speaker 1: because it's like there's this weird gray area where you
Speaker 1: can launch commodity futures, and commodity sutures used to be
Speaker 1: like futures on soybeans, and then people were like, we
Speaker 1: can have financial commodity s features that are like bets
Speaker 1: on what the ten year interest rate will be. And
Speaker 1: then people are like, well, if you can do that,
Speaker 1: what about bets on whether the Eagles will win the
Speaker 1: Super Bowl? And the line between like a financial futures
Speaker 1: contract and an events contract is a little blurry, and
Speaker 1: there's a lot of interest in events contracts. And so
Speaker 1: the CFTC, the Commodity Futures Trading Commission, which regulates commodity futures,
Speaker 1: it's like put out rules that they're like proposed rules
Speaker 1: that haven't been finalized and probably won't be saying like
Speaker 1: certain things are not okay, and those things include elections.
Speaker 1: They're like lost on that one, like the elections are
Speaker 1: now fair game. Assassinations timely, timely, timely.
Speaker 2: We had several assassination attempts on President Trump.
Speaker 1: Yeah, we also like, in fact, I think Calshi, one
Speaker 1: of the prediction markets, briefly listed contracts on what would
Speaker 1: happened to Luigi, like whether Lujiman Johnny, which like Cleve,
Speaker 1: which is like kind of an assassination contract. It's not
Speaker 1: like it's related to assassinations. But anyway. Another thing that's
Speaker 1: excluded is sports betting because like obviously like sports betting
Speaker 1: is something else. Gambling is now, you know, largely legalized
Speaker 1: in the US. You can like batance sports on your
Speaker 1: sports book gap, but is that sports that a financial
Speaker 1: futures that is allowed on your burgragee. Apparently not, because
Speaker 1: Robinhood launched it and pulled it twenty four hours later
Speaker 1: because the SAFTC told them to knock it off, and
Speaker 1: they were very agreed about it. They said, we were
Speaker 1: in regular contact with the CFTC prior to launching this product,
Speaker 1: and we believe we were in full compliance with all
Speaker 1: applicable regulations. But nonetheless they pulled it.
Speaker 2: Well, who knows where this will go.
Speaker 1: I'm pretty sure we'll go to not being able to
Speaker 1: bet on the Big Game this weekend this particular next year.
Speaker 2: Yeah, Well, reading our Bloomberg News Coverage. Apparently, Robinhood said
Speaker 2: it will continue to collaborate with the CFTC as it
Speaker 2: works on unveiling a more comprehensive events contract platform later
Speaker 2: this year, So their ambition is unscathed, right.
Speaker 1: I mean the whole trend is in the direction of
Speaker 1: like free, lightly regulated events contract platforms, and like it's
Speaker 1: just weird to have an events contract platform that doesn't
Speaker 1: feature sports, right, because that's like the main event people
Speaker 1: want to bet on.
Speaker 2: Yeah.
Speaker 1: Yeah, the CFTC also wanted to exclude like betting on
Speaker 1: the oscars, like some point that.
Speaker 2: I'm not going to be able to manipulate the oscars.
Speaker 1: Right, I mean I don't really.
Speaker 2: Know why, like why they would be against it.
Speaker 1: Yeah, Like part of it is like when you think
Speaker 1: about like soybean futures, they're for like farmers to hedge
Speaker 1: their risk and for like soy sauce producers to heads
Speaker 1: their risk. Right, Like you have natural counterparties on either
Speaker 1: side who are like doing real economic activity and are
Speaker 1: hedging that or like raising money to do it. Like
Speaker 1: there's some like underlying economic activity for all the like
Speaker 1: financial betting, right, And so you can be like, oh,
Speaker 1: this commodities exchange is just like evil speculators betting, and
Speaker 1: they can be like no, no, no, it's like supporting
Speaker 1: real economic activity. And then betting is just betting, right,
Speaker 1: Like no one really thinks maybe maybe I'm wrong, but
Speaker 1: I've never heard anyone being like, oh, yeah, sports betting
Speaker 1: is like building wealth, right, like people something to say it,
Speaker 1: but it's it's like wells an emerging asset class. It's
Speaker 1: a very cynical thing to say. Yeah, it's not an
Speaker 1: asset class. The stock market goes up over time, not
Speaker 1: because of magic. It goes up over time because it's
Speaker 1: like an investment in economic activity, and like the economy
Speaker 1: grows with like technological process and demographic growth, like the
Speaker 1: size of the sports betting market does go up over time,
Speaker 1: but like the outcome of the Eagles game doesn't go
Speaker 1: up over time. Right, it's like you bad, and like
Speaker 1: some people win and some people lose, and like that's
Speaker 1: it and most people lose, right, And it's like you
Speaker 1: negative some game for the betters. And if I were
Speaker 1: a financial markets regulator, I would be like, look, I'll
Speaker 1: approve a lot of stuff that is pretty tangentially related
Speaker 1: to real economic activity. I understand that like the speculation
Speaker 1: begets liquidity that like a lot of complicated products are
Speaker 1: useful and hedging, you want to trade zero day options
Speaker 1: on meum stocks like fine, Like that's really loosely related
Speaker 1: to real financial activity, but like it's all in a continuum.
Speaker 1: But then it's like sports betting is like there's nothing
Speaker 1: this is embarrassing to a financial regulator. Now I think
Speaker 1: probably entering an era of like unembarrassable financial regulators, and
Speaker 1: so like yeah, they'll like whatever. You can definitely buy
Speaker 1: futures contracts on the Super Bowl, but like I just
Speaker 1: think that like turning over the financial markets purely to
Speaker 1: gambling is kind of a scary stuff, right, Yeah, But
Speaker 1: it's like you can understand why, right, because you look
Speaker 1: at like the work of a sports book and the
Speaker 1: work of like a high frequency equity trading shop is
Speaker 1: like very similar, right, It's like similar techniques, it's similar skills,
Speaker 1: it's like similar risks, Like you're really doing the same
Speaker 1: kind of work, and there is a lot of movement
Speaker 1: between you know, people who are market makers for stocks
Speaker 1: and people who are book makers for sports and then
Speaker 1: on like the retail side, Like you look at like
Speaker 1: there's so much stuff in like retail stock markets. There's
Speaker 1: a Bloomberg article this week about people betting on sports
Speaker 1: and like people who got like thousands of dollars a
Speaker 1: weekend on football, and like a lot of what they
Speaker 1: say is like it's a social thing. It's like I'm
Speaker 1: texting with my friends and like getting our bets in
Speaker 1: and like it's my way to keep up with my
Speaker 1: college buddies or whatever. And you see that in like
Speaker 1: you know the memes phenomenon too, where it's like a
Speaker 1: very social phenomenon and it's like gives people like a
Speaker 1: sense of fun and a sense of identity. It's not
Speaker 1: just like we expect these tacks to go up. There's
Speaker 1: like some more social, very community based, Yeah, And it's
Speaker 1: just that like one of them is like financial markets
Speaker 1: and one of them is gambling. But like there's like
Speaker 1: an obvious convergence like socially, and so you know, it
Speaker 1: is a little weird for the regulators to say, no, robinhood,
Speaker 1: you can offer some kinds of like fun gambling, but
Speaker 1: not other kinds of fun gambling, and like eventually I
Speaker 1: think that will erode.
Speaker 2: Yeah, another great convergence indeed in those Shining twenty four
Speaker 2: hours where you could do this on robin Hood. Apparently
Speaker 2: it had been rolled out to one percent of their customers,
Speaker 2: so robin Hood said it will give those investors the
Speaker 2: option to close their positions or take them to resolution.
Speaker 2: It would be fun to talk to some of those
Speaker 2: folks who are caught in this limbo.
Speaker 1: I think it's to take it to resolution. Yeah, I
Speaker 1: guess because they.
Speaker 2: Are pretty cool. Yeah, Okay, everything hurts.
Speaker 1: And that was The Money Stuff Podcast.
Speaker 4: I'm Matt Levy 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 4: And you can find me on Bloomberg TV every day
Speaker 4: on Open Interest between nine to eleven am Eastern.
Speaker 1: We'd love to hear from you. You can send an
Speaker 1: email to Moneypod at Bloomberg dot net, ask us a
Speaker 1: question and we might answer it on air.
Speaker 4: You can also subscribe to our show wherever you're listening
Speaker 4: right now and leave us a review. It helps more
Speaker 4: people find the show.
Speaker 1: The Money Stuff Podcast is produced by Anna Maserakus and Moses.
Speaker 4: Onam Our theme music was composed by Blake Maples Brandon
Speaker 4: Francis Munimssara, executive producer and Stage Bauman is Bloomberg's head
Speaker 4: of podcasts.
Speaker 1: Thanks for listening to the Money Stuff podcast. We'll be
Speaker 1: back next week with more stuff