1 00:00:02,720 --> 00:00:09,360 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. On my desk yesterday 2 00:00:09,360 --> 00:00:14,520 Speaker 1: I arrived a tungsten cube on the tungsten cube is engraved. 3 00:00:15,000 --> 00:00:20,320 Speaker 1: This is weird. It arrives in a box with no note. 4 00:00:20,560 --> 00:00:22,360 Speaker 1: I was not expecting a tungsten cube. 5 00:00:22,560 --> 00:00:26,480 Speaker 2: Was it checked for anthrax first? Was it dustin? 6 00:00:26,640 --> 00:00:28,360 Speaker 1: I want to give any ideas, but I assume that 7 00:00:28,400 --> 00:00:31,760 Speaker 1: Bloomberg mellroom is quite comprehensive and it's anthex tusting, I hope, 8 00:00:31,800 --> 00:00:33,959 Speaker 1: so I didn't even think about it. I was just like, ah, 9 00:00:34,400 --> 00:00:36,640 Speaker 1: it's come through the Bloomberg mellroom. It's fine. Anyway, I 10 00:00:36,640 --> 00:00:38,680 Speaker 1: have this tungsten cube now. So have anyone sent me 11 00:00:38,720 --> 00:00:41,080 Speaker 1: a tungsten cube that says this is weird? Be in touch? 12 00:00:41,440 --> 00:00:44,400 Speaker 1: That's fun. I have to say that, first of all, 13 00:00:44,440 --> 00:00:46,800 Speaker 1: a tungsten cube with this is weird and groat on 14 00:00:46,880 --> 00:00:49,479 Speaker 1: it is very much my jam. And secondly, sending that 15 00:00:49,520 --> 00:00:52,880 Speaker 1: with no note and thereby making it weird is kind 16 00:00:52,880 --> 00:00:55,280 Speaker 1: of a good joke. So I have no complaints, but 17 00:00:55,360 --> 00:00:57,880 Speaker 1: I wouldn't mind hearing from whoever was said that to me. 18 00:00:58,840 --> 00:01:01,160 Speaker 2: I didn't realize that this weird was engraved on it 19 00:01:01,200 --> 00:01:03,840 Speaker 2: when you posted it. On Instagram. I thought that you 20 00:01:03,880 --> 00:01:05,039 Speaker 2: added the text on. 21 00:01:05,000 --> 00:01:08,039 Speaker 1: The no no, no, yeah, I posted on my close 22 00:01:08,040 --> 00:01:09,959 Speaker 1: Friends stories. But I'm also holding it up to the 23 00:01:09,959 --> 00:01:12,800 Speaker 1: camera in our zoom another way that you can't see it. 24 00:01:14,240 --> 00:01:15,840 Speaker 2: That is a pretty good gag. 25 00:01:16,600 --> 00:01:18,880 Speaker 1: Yeah, yeah, yeah, this is my life. 26 00:01:18,920 --> 00:01:20,640 Speaker 2: It's pretty good. You have a little bit of a collection. 27 00:01:20,720 --> 00:01:23,800 Speaker 1: Now, I do have my I have my money Stuff 28 00:01:23,840 --> 00:01:26,880 Speaker 1: ten year anniversary collection. I'm now holding both of them 29 00:01:26,959 --> 00:01:30,880 Speaker 1: up to the camera and again no one can see it. 30 00:01:31,280 --> 00:01:34,120 Speaker 1: Speaking of things that come in the mail. 31 00:01:34,240 --> 00:01:38,000 Speaker 2: Oh good one. 32 00:01:38,040 --> 00:01:40,640 Speaker 1: Mail if it's also transition I've ever done on this podcast, 33 00:01:41,240 --> 00:01:43,560 Speaker 1: It's a mail bag episode that was smooth. 34 00:01:43,600 --> 00:01:45,039 Speaker 2: I wasn't even expecting it. 35 00:01:45,319 --> 00:01:47,760 Speaker 1: I know, right when you at least expected a transition, 36 00:01:47,920 --> 00:01:49,480 Speaker 1: We've got some pretty good ones this week. 37 00:01:49,640 --> 00:01:51,960 Speaker 2: Mail Bag mail Bag. 38 00:01:53,200 --> 00:01:56,280 Speaker 1: Hello and welcome to the Money Stuff Podcast. You're a 39 00:01:56,320 --> 00:02:00,080 Speaker 1: weekly podcast where we talk about stuff related to money. 40 00:02:00,600 --> 00:02:02,640 Speaker 1: I'm Matt Levian and I write the Money Stuff column 41 00:02:02,640 --> 00:02:04,000 Speaker 1: for Bloomberg Opinion. 42 00:02:04,000 --> 00:02:06,680 Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and 43 00:02:06,720 --> 00:02:08,240 Speaker 2: an anchor for Bloomberg Television. 44 00:02:10,080 --> 00:02:18,480 Speaker 1: And today we're doing a mailbag sud Effect. 45 00:02:19,919 --> 00:02:24,920 Speaker 2: Mail Bag mail Bag great questions. Thank you for everyone 46 00:02:24,960 --> 00:02:27,280 Speaker 2: for setting them in. Let's just dive right in. We 47 00:02:27,360 --> 00:02:29,720 Speaker 2: got a great one out of the gates from broad 48 00:02:30,400 --> 00:02:35,000 Speaker 2: he asks, why not more frequent reporting. As a CFO 49 00:02:35,040 --> 00:02:38,080 Speaker 2: of a small but private equity owned business, I close 50 00:02:38,080 --> 00:02:41,280 Speaker 2: our books monthly and report out our financial results each month. 51 00:02:41,639 --> 00:02:44,400 Speaker 2: Every public company in the world is doing the same. 52 00:02:44,520 --> 00:02:47,440 Speaker 2: It's no additional cost to release those results publicly in 53 00:02:47,480 --> 00:02:50,680 Speaker 2: some form, even if not a full ten Q. This 54 00:02:50,840 --> 00:02:51,440 Speaker 2: was interesting. 55 00:02:52,440 --> 00:02:55,720 Speaker 1: The ostensible purpose of financial reporting is to give investors 56 00:02:56,080 --> 00:02:58,520 Speaker 1: the same financial data that management is using to manage 57 00:02:58,520 --> 00:03:00,520 Speaker 1: its business, so that the investors can have sit in 58 00:03:00,520 --> 00:03:03,240 Speaker 1: the shoes of management. Everyone knows that's not true, but like, 59 00:03:03,280 --> 00:03:05,560 Speaker 1: that's sort of like the ostensible That's why there's a 60 00:03:05,639 --> 00:03:06,919 Speaker 1: you know, in your ten K you have to have 61 00:03:06,960 --> 00:03:09,520 Speaker 1: a management discussion and analysis where you sort of say what 62 00:03:09,600 --> 00:03:12,480 Speaker 1: management is thinking about the financial results. Rod is surely 63 00:03:12,560 --> 00:03:15,000 Speaker 1: right that every public company closes its books every month 64 00:03:15,000 --> 00:03:18,640 Speaker 1: and has some sense of the financial results for that month. 65 00:03:19,240 --> 00:03:22,320 Speaker 1: And if they had private equity investors, they would just 66 00:03:22,639 --> 00:03:25,080 Speaker 1: send over the spreadsheet and the private equity investors be like, 67 00:03:25,080 --> 00:03:28,880 Speaker 1: thanks this selfhul But they have public investors which means 68 00:03:29,919 --> 00:03:33,360 Speaker 1: primarily that they have people that can sue them. Everything 69 00:03:33,400 --> 00:03:39,040 Speaker 1: that happens in US financial regulation and especially US financial disclosure, 70 00:03:39,560 --> 00:03:41,840 Speaker 1: is in the shadow of litigation. Right, So if you 71 00:03:41,840 --> 00:03:44,280 Speaker 1: put out a ten Q and your numbers are wrong, 72 00:03:44,600 --> 00:03:47,320 Speaker 1: you will get sued and you will be like, yep, 73 00:03:47,360 --> 00:03:50,160 Speaker 1: our numbers are wrong. Here is some money plaintiffs layers, 74 00:03:50,760 --> 00:03:53,119 Speaker 1: and I think that's a lot of what is going 75 00:03:53,160 --> 00:03:54,680 Speaker 1: on here, Like when you put out a ten Q, 76 00:03:54,800 --> 00:03:56,960 Speaker 1: Like a ten Q does not have audited financials, but 77 00:03:57,040 --> 00:03:59,720 Speaker 1: you like spend three days with your auditor going through 78 00:03:59,760 --> 00:04:02,280 Speaker 1: the ten and making sure that you have utited or 79 00:04:02,320 --> 00:04:06,280 Speaker 1: comfort on every number in the financials because if they're wrong, 80 00:04:06,520 --> 00:04:09,280 Speaker 1: you'll get very sued. And so that I think is 81 00:04:09,280 --> 00:04:13,320 Speaker 1: why companies do not put out more frequent disclosure, because sure, 82 00:04:13,360 --> 00:04:16,280 Speaker 1: you have those numbers, but the task of turning those 83 00:04:16,360 --> 00:04:18,680 Speaker 1: numbers into something you could give to shareholders and not 84 00:04:18,680 --> 00:04:23,200 Speaker 1: worry about getting sued over is monumental. People like understand 85 00:04:23,200 --> 00:04:25,159 Speaker 1: that this is like not great, right, Like this is 86 00:04:25,200 --> 00:04:28,919 Speaker 1: why periodically the SEC tries to have some reform that 87 00:04:28,960 --> 00:04:31,560 Speaker 1: tries to make it harder for shareholders to sue public companies. 88 00:04:31,920 --> 00:04:34,800 Speaker 1: But you know, I always say everything is security is 89 00:04:34,839 --> 00:04:37,520 Speaker 1: for it. I think the arc of the universe spends 90 00:04:37,520 --> 00:04:39,880 Speaker 1: towards it, making it easier to sue public companies. 91 00:04:40,200 --> 00:04:42,240 Speaker 2: This question did make me think a little bit about 92 00:04:42,279 --> 00:04:45,400 Speaker 2: how occasionally you will see companies pre announce their earnings, 93 00:04:45,760 --> 00:04:49,760 Speaker 2: even though they're wedded to quarterly updates. They will go 94 00:04:49,880 --> 00:04:53,800 Speaker 2: early sometimes, but usually it's for bad news. Also, that's 95 00:04:53,839 --> 00:04:54,400 Speaker 2: not monthly. 96 00:04:55,160 --> 00:04:58,240 Speaker 1: Yeah, people pronounced for operatings or for bad news. But 97 00:04:59,040 --> 00:05:03,440 Speaker 1: right to have a monthly schedule of putting out financial 98 00:05:03,440 --> 00:05:07,360 Speaker 1: information no matter what would be three times as stressful 99 00:05:07,360 --> 00:05:08,200 Speaker 1: as doing it quarterly. 100 00:05:08,960 --> 00:05:11,359 Speaker 2: Yeah. But in all these conversations, I feel like, you know, 101 00:05:11,480 --> 00:05:16,080 Speaker 2: as we continue to bat around like quarterly versus semi annual, 102 00:05:16,120 --> 00:05:19,000 Speaker 2: I just feel like when it comes to shareholder reaction 103 00:05:19,120 --> 00:05:21,720 Speaker 2: in terms of how the stock actually performs, it just 104 00:05:21,760 --> 00:05:24,839 Speaker 2: needs to be consistent, you know, whether you announced monthly 105 00:05:24,960 --> 00:05:26,840 Speaker 2: or every three months or every six months. I feel 106 00:05:26,839 --> 00:05:30,840 Speaker 2: like switching around between the different timeframes is what really 107 00:05:30,880 --> 00:05:33,080 Speaker 2: matters for investors trying to make decisions. 108 00:05:33,480 --> 00:05:35,200 Speaker 1: Yeah, I mean, I think Rod points out that like 109 00:05:35,920 --> 00:05:38,839 Speaker 1: monthly reporting would smooth a lot of volatility and just 110 00:05:39,000 --> 00:05:41,680 Speaker 1: you know, make things more predictable. And investors could have 111 00:05:41,720 --> 00:05:45,480 Speaker 1: more information and not react as strongly to every three 112 00:05:45,520 --> 00:05:48,800 Speaker 1: month announcements. But yeah, I think like the disconnect here 113 00:05:48,880 --> 00:05:50,960 Speaker 1: is between the burden of actually doing the financials and 114 00:05:51,000 --> 00:05:53,159 Speaker 1: the burden of like public company reporting, which is an 115 00:05:53,279 --> 00:05:56,040 Speaker 1: entirely different beast. Kitty is wiping her screen. 116 00:05:57,440 --> 00:06:00,240 Speaker 2: There's like a beam of like. 117 00:05:59,560 --> 00:06:03,760 Speaker 1: She's trying wipe me off her screen. Is as you 118 00:06:03,839 --> 00:06:06,440 Speaker 1: might know if you've been listening closely or listened last 119 00:06:06,440 --> 00:06:08,640 Speaker 1: week closely. Katie is recording. 120 00:06:08,200 --> 00:06:10,320 Speaker 2: This from Colorado, Colorado. 121 00:06:10,600 --> 00:06:13,640 Speaker 1: I'm recording this from my house, so it's the somewhat 122 00:06:13,720 --> 00:06:17,160 Speaker 1: unusual but not unheard of remote money stuff podcast recording. 123 00:06:17,279 --> 00:06:21,599 Speaker 2: Yeah, it's always a little bit worse. So thanks for listening. 124 00:06:21,760 --> 00:06:23,640 Speaker 2: All right, great question, Rod. 125 00:06:25,080 --> 00:06:27,240 Speaker 3: Mail mail back. 126 00:06:27,839 --> 00:06:30,159 Speaker 2: Let's see we have another one from Josh, and this 127 00:06:30,240 --> 00:06:32,640 Speaker 2: one is about ETFs and Josh wants to know about them. 128 00:06:33,040 --> 00:06:35,920 Speaker 2: He says, you've done a great job covering the flaws 129 00:06:35,920 --> 00:06:39,280 Speaker 2: of levered equity ETFs, especially how daily resets make them 130 00:06:39,279 --> 00:06:43,280 Speaker 2: diverge from long term leveraged exposure. Do you see potential 131 00:06:43,360 --> 00:06:47,320 Speaker 2: for retail products that actually deliver true long term levered 132 00:06:47,360 --> 00:06:51,520 Speaker 2: equity performance. Suppose you think Corporate America is too conservative 133 00:06:51,880 --> 00:06:54,480 Speaker 2: with their use of leverage. But simply buying on margin 134 00:06:54,560 --> 00:06:57,640 Speaker 2: is too costly for the ordinary retail investor. But an 135 00:06:57,640 --> 00:07:01,720 Speaker 2: ETF sponsor could implement leverage far more efficiently. Is there 136 00:07:01,760 --> 00:07:03,080 Speaker 2: a path for this to exist? 137 00:07:03,560 --> 00:07:07,440 Speaker 1: Great question, so, Josh, I think that has been ETF 138 00:07:07,480 --> 00:07:11,200 Speaker 1: builded by Katie. So we've talked about like levered ETF's 139 00:07:11,400 --> 00:07:15,240 Speaker 1: ordinarily rebalance every day to give you two times or 140 00:07:15,240 --> 00:07:17,440 Speaker 1: three times the daily returns of a stock, and that 141 00:07:17,560 --> 00:07:22,040 Speaker 1: creates this weird volatility drag. And if you wanted to 142 00:07:22,080 --> 00:07:24,280 Speaker 1: have like two times the returns of a company for 143 00:07:24,360 --> 00:07:26,800 Speaker 1: like a year, there's not really a product that will 144 00:07:26,800 --> 00:07:30,240 Speaker 1: give you that other than buying the stock on margin 145 00:07:30,280 --> 00:07:32,520 Speaker 1: and waiting a year. But there's no rely ETF product. 146 00:07:33,080 --> 00:07:35,600 Speaker 1: Since we started talking about this, trader did like a 147 00:07:35,600 --> 00:07:39,320 Speaker 1: weekly and monthly rebel ETF which gives you a month 148 00:07:39,360 --> 00:07:41,720 Speaker 1: of two times the returns I think for like the 149 00:07:41,800 --> 00:07:45,120 Speaker 1: S and P. But it is very hard to do 150 00:07:45,160 --> 00:07:48,480 Speaker 1: an ETF that is like, we'll give you leverage return 151 00:07:48,520 --> 00:07:52,640 Speaker 1: on a stock for five years. Because the whole point 152 00:07:52,640 --> 00:07:54,640 Speaker 1: of an ETF is it has daily liquidity and so 153 00:07:54,680 --> 00:07:58,080 Speaker 1: people can buy into the ETF each day, and you're 154 00:07:58,120 --> 00:08:00,560 Speaker 1: giving them a different proposition each day. If you're giving them, 155 00:08:00,640 --> 00:08:03,560 Speaker 1: you know, five years return starting on September twenty fifth, 156 00:08:03,600 --> 00:08:07,040 Speaker 1: instead of saying we'll giving you daily leverage returns. But 157 00:08:07,880 --> 00:08:11,200 Speaker 1: there's no reason that if the thing that you want 158 00:08:11,320 --> 00:08:14,280 Speaker 1: is long term levered exposure to a company or an 159 00:08:14,280 --> 00:08:17,720 Speaker 1: index or whatever, there's no reason that you should get 160 00:08:17,760 --> 00:08:20,760 Speaker 1: that in the forum of a daily liquidity ETF that 161 00:08:20,840 --> 00:08:22,840 Speaker 1: you can get out of at any time, right, Like, 162 00:08:23,280 --> 00:08:25,560 Speaker 1: there are other ways to build that product. Now, the 163 00:08:25,600 --> 00:08:27,920 Speaker 1: classic way to build that product is something like a 164 00:08:27,960 --> 00:08:32,200 Speaker 1: private equity firm which buys companies, levers them up, and 165 00:08:32,280 --> 00:08:36,760 Speaker 1: takes investors. And as we talk about a lot around here, 166 00:08:36,960 --> 00:08:39,520 Speaker 1: it is getting easier and easier to put private equity 167 00:08:39,559 --> 00:08:43,199 Speaker 1: into your retail brokerage account and so one day in 168 00:08:43,240 --> 00:08:45,200 Speaker 1: the not too distant future, you'll just like, you know, 169 00:08:45,280 --> 00:08:48,320 Speaker 1: get a KKR fund and your brokerage account and that'll 170 00:08:48,360 --> 00:08:50,360 Speaker 1: be that. But otherwise, yeah, I mean, like it is 171 00:08:50,400 --> 00:08:53,439 Speaker 1: hard because the sort of classic retail products are mutual funds, 172 00:08:53,520 --> 00:08:57,200 Speaker 1: whether or not they're ETFs, and mutual funds have leverage limits, 173 00:08:57,360 --> 00:09:00,280 Speaker 1: and so it is a little hard to invest in 174 00:09:00,320 --> 00:09:03,600 Speaker 1: a retail product that gives you two x the exposure 175 00:09:03,640 --> 00:09:07,839 Speaker 1: to Corporate America other than that retail product being your 176 00:09:07,880 --> 00:09:11,679 Speaker 1: own margin account. But you know, watch this space. In 177 00:09:11,800 --> 00:09:13,440 Speaker 1: like a year, it's just going to be private equity 178 00:09:13,440 --> 00:09:14,360 Speaker 1: funds in your prohne. 179 00:09:14,120 --> 00:09:17,360 Speaker 2: Okay, I'm glad you brought up the trader ETFs. I 180 00:09:17,400 --> 00:09:20,040 Speaker 2: have some sad news. A bunch of them actually shut down. 181 00:09:20,480 --> 00:09:22,959 Speaker 1: I'm not surprised. It's a super niche product, right to 182 00:09:23,240 --> 00:09:25,720 Speaker 1: Like I want two times the monthly return on the 183 00:09:25,800 --> 00:09:30,240 Speaker 1: SMB why yeah, Like two times the daily returns is 184 00:09:30,240 --> 00:09:33,120 Speaker 1: a fun gambling product, right, and two times the long 185 00:09:33,240 --> 00:09:38,000 Speaker 1: term returns is maybe for like a month? Like why 186 00:09:38,040 --> 00:09:38,360 Speaker 1: a month? 187 00:09:38,679 --> 00:09:42,400 Speaker 2: Yeah? I think at least one of them still exists. 188 00:09:42,840 --> 00:09:46,600 Speaker 2: They did on the Queues spy and also the Philadelphia's 189 00:09:46,600 --> 00:09:53,320 Speaker 2: Semiconductor Index. Sure, and the Monthly Cues reset ETF still exists. 190 00:09:53,360 --> 00:09:55,040 Speaker 2: But I mean it's small. It just seems like the 191 00:09:55,080 --> 00:09:58,360 Speaker 2: demand isn't there. It's sixty one million, but. 192 00:09:58,360 --> 00:10:01,400 Speaker 1: Still there's two trades here. There's like what Jo asked 193 00:10:01,400 --> 00:10:04,679 Speaker 1: about is like if you think that Corporate America is 194 00:10:04,720 --> 00:10:06,960 Speaker 1: too conservative with their use of leverage, right, so like 195 00:10:07,360 --> 00:10:12,040 Speaker 1: you can think that the capital structure of the S 196 00:10:12,120 --> 00:10:15,240 Speaker 1: and P is under levered, and you want to back 197 00:10:15,360 --> 00:10:17,840 Speaker 1: lever at yourself, and you can't do that through a 198 00:10:17,840 --> 00:10:20,120 Speaker 1: margin account because like you can't get good margin terms, 199 00:10:20,120 --> 00:10:23,120 Speaker 1: but you wish some investment advisor would do it for you. 200 00:10:23,559 --> 00:10:26,960 Speaker 1: That's a sort of set of corporate financedcs that are reasonable. 201 00:10:27,280 --> 00:10:30,960 Speaker 1: The other one is like, if you enjoy gambling, you'll 202 00:10:31,040 --> 00:10:34,280 Speaker 1: enjoy a double gamble twice as much. And that I think, 203 00:10:34,559 --> 00:10:37,520 Speaker 1: I think is a levered bet on a semiconductor index. 204 00:10:37,640 --> 00:10:39,040 Speaker 1: Like I don't know, I don't know, but I think 205 00:10:39,040 --> 00:10:41,319 Speaker 1: you're coming to that being like from the perspective of like, ah, 206 00:10:41,360 --> 00:10:44,400 Speaker 1: the semi industry is too under levered. I need to 207 00:10:44,720 --> 00:10:48,040 Speaker 1: synthetically lever up that industry. I think you're like, ooh, 208 00:10:48,320 --> 00:10:50,200 Speaker 1: these talks will go up a lot. Why don't make 209 00:10:50,240 --> 00:10:51,200 Speaker 1: them go up twice as much? 210 00:10:51,559 --> 00:10:54,080 Speaker 2: Yeah, Josh, great question. 211 00:10:56,120 --> 00:10:58,960 Speaker 3: Mail bag, mail bag. 212 00:10:58,840 --> 00:11:02,480 Speaker 2: Another j name Justin asks. According to a recent op 213 00:11:02,600 --> 00:11:04,920 Speaker 2: ed in The New York Times, the number of publicly 214 00:11:04,960 --> 00:11:07,800 Speaker 2: traded companies has decreased by fifty percent over the last 215 00:11:07,840 --> 00:11:11,200 Speaker 2: thirty years. Companies are choosing to remain private to avoid 216 00:11:11,280 --> 00:11:15,200 Speaker 2: the additional regulatory requirements but also because of the evolution 217 00:11:15,559 --> 00:11:18,920 Speaker 2: in the funding models for promising tech startups, how will 218 00:11:18,960 --> 00:11:23,040 Speaker 2: this impact the investment options available to individual investors. Well, 219 00:11:23,120 --> 00:11:25,440 Speaker 2: four oh one K investors in the future have to 220 00:11:25,480 --> 00:11:29,200 Speaker 2: allocate some portion of their investment portfolio to private capital 221 00:11:29,200 --> 00:11:32,440 Speaker 2: funds with management fees that are much higher than standard 222 00:11:32,440 --> 00:11:33,640 Speaker 2: equity index funds. 223 00:11:33,880 --> 00:11:34,080 Speaker 3: Yeah. 224 00:11:34,080 --> 00:11:35,800 Speaker 1: I just feel like the answer is yes, right, Like 225 00:11:36,240 --> 00:11:38,599 Speaker 1: it's not a first best state of affairs, right, Like 226 00:11:38,679 --> 00:11:41,280 Speaker 1: the first best state of affairs I think. I think 227 00:11:41,280 --> 00:11:44,360 Speaker 1: in the abstract is like somehow it gets easier to 228 00:11:44,400 --> 00:11:47,160 Speaker 1: go public, and companies like feel some sense of like 229 00:11:47,200 --> 00:11:49,920 Speaker 1: patriotic obligation to go public, and they're like, you know, 230 00:11:49,960 --> 00:11:52,480 Speaker 1: we're a good company. We want mom and pop investors 231 00:11:52,480 --> 00:11:54,719 Speaker 1: to be able to participate in our growth. And so 232 00:11:54,840 --> 00:11:57,640 Speaker 1: all the little companies go public, and we make it 233 00:11:57,720 --> 00:12:00,240 Speaker 1: really cheap and easy, and you know, we don't get 234 00:12:00,280 --> 00:12:03,720 Speaker 1: sued when you go public. And so all the companies 235 00:12:03,760 --> 00:12:06,679 Speaker 1: go public, and like the big, fun, fast growing companies 236 00:12:06,679 --> 00:12:09,000 Speaker 1: are available to mom and pop investors they're available, and 237 00:12:09,040 --> 00:12:12,679 Speaker 1: index funds they're available, and like standard low fee equity 238 00:12:12,800 --> 00:12:16,080 Speaker 1: mutual funds, and life is great. Right, the second best 239 00:12:16,080 --> 00:12:19,840 Speaker 1: outcome is like all the companies stay private and big 240 00:12:19,880 --> 00:12:23,040 Speaker 1: institutional investors have access to their private shares, and those 241 00:12:23,040 --> 00:12:26,600 Speaker 1: big institutional investors get bigger and bigger and bigger, and 242 00:12:26,640 --> 00:12:30,880 Speaker 1: they tap out all of the available institutional capital and 243 00:12:30,920 --> 00:12:32,920 Speaker 1: they're like, hey, there's a lot of money in four 244 00:12:32,960 --> 00:12:36,640 Speaker 1: oh and ks, and then they lobby the president to 245 00:12:36,720 --> 00:12:39,640 Speaker 1: let them take four roh and K money, and everyone's like, oh, yeah, 246 00:12:39,640 --> 00:12:43,000 Speaker 1: it'd be great to put individual retail investors into private 247 00:12:43,040 --> 00:12:45,800 Speaker 1: investments because those are the ones that go up a lot. 248 00:12:45,920 --> 00:12:48,720 Speaker 1: And then the alternative asset managers are like, great, so 249 00:12:48,760 --> 00:12:51,560 Speaker 1: we'll just charge like two and twenty for that, and 250 00:12:51,640 --> 00:12:53,720 Speaker 1: then that's the equilibrium you end up in. I think 251 00:12:53,720 --> 00:12:56,400 Speaker 1: that's like clearly happening, and it's not how anyone would 252 00:12:56,400 --> 00:12:59,680 Speaker 1: design a financial system from like first principles, right, because 253 00:12:59,720 --> 00:13:02,319 Speaker 1: like the you know you have is like historically what 254 00:13:02,400 --> 00:13:04,200 Speaker 1: you have is like a lot of companies that want 255 00:13:04,200 --> 00:13:07,560 Speaker 1: a lot of money are public and they're available to everyone, 256 00:13:07,600 --> 00:13:10,120 Speaker 1: including retail investors, and then like a smaller number of 257 00:13:10,200 --> 00:13:12,959 Speaker 1: companies that don't need as much money are private and 258 00:13:13,440 --> 00:13:15,600 Speaker 1: they don't have access to retail investors. But like it's 259 00:13:15,640 --> 00:13:18,320 Speaker 1: fine because it's like they're the smaller companies, the weirder companies, 260 00:13:18,360 --> 00:13:20,400 Speaker 1: or the companies that don't need capital. And now we've 261 00:13:20,440 --> 00:13:22,400 Speaker 1: moved to a model where like the big companies that 262 00:13:22,440 --> 00:13:24,440 Speaker 1: do need a lot of capital can get it in 263 00:13:24,480 --> 00:13:27,920 Speaker 1: private markets, but the private market capital providers are like, hey, 264 00:13:27,920 --> 00:13:29,679 Speaker 1: we could really use some retail money. And so you 265 00:13:29,679 --> 00:13:32,719 Speaker 1: have this like second layer of intermediation where you can 266 00:13:32,760 --> 00:13:34,800 Speaker 1: just charge people a lot higher fees for investing in 267 00:13:34,840 --> 00:13:36,640 Speaker 1: companies that would have been public twenty years ago. 268 00:13:38,559 --> 00:13:41,120 Speaker 2: So the answer is yes, yes. 269 00:13:41,440 --> 00:13:44,280 Speaker 1: Yeah, right, I got it. 270 00:13:44,320 --> 00:13:44,800 Speaker 2: Prove me wrong. 271 00:13:44,840 --> 00:13:46,520 Speaker 1: I'd love to be wrong. It just it's right. 272 00:14:00,200 --> 00:14:02,480 Speaker 2: This is really interesting to just me. But we have 273 00:14:02,640 --> 00:14:08,880 Speaker 2: another question from another j name. This one comes from Jordan. 274 00:14:11,400 --> 00:14:14,880 Speaker 2: It'd be funny, okay, Jordan. Jordan asks one of the 275 00:14:14,960 --> 00:14:18,559 Speaker 2: recurring trends across both betting markets and crypto is that 276 00:14:18,640 --> 00:14:22,280 Speaker 2: things that were previously illegal are now legal if you 277 00:14:22,400 --> 00:14:26,080 Speaker 2: go through these venues not legal advice. Does there exist 278 00:14:26,120 --> 00:14:28,560 Speaker 2: a way to get around the Onion Futures Act of 279 00:14:28,640 --> 00:14:31,520 Speaker 2: nineteen fifty eight by creating a betting market on poly 280 00:14:31,640 --> 00:14:34,600 Speaker 2: market on the price of onions. Gosh, this question was 281 00:14:34,640 --> 00:14:35,640 Speaker 2: written just for you. 282 00:14:35,960 --> 00:14:37,560 Speaker 1: I feel like the answer is no. Okay. So we've 283 00:14:37,560 --> 00:14:39,480 Speaker 1: talked about the Onion Futures Act of nineteen fifty eight 284 00:14:39,520 --> 00:14:43,160 Speaker 1: in the past. Basically in the United States there are 285 00:14:43,320 --> 00:14:48,240 Speaker 1: regulated commodity futures trading markets except for onions, because onions 286 00:14:48,280 --> 00:14:52,160 Speaker 1: are specifically it's specifically illegal to trade onion futures. And 287 00:14:52,200 --> 00:14:53,960 Speaker 1: the reason for that is, like someone cornered the onion 288 00:14:53,960 --> 00:14:55,880 Speaker 1: market in the fifties and they were like so mad 289 00:14:56,120 --> 00:14:59,560 Speaker 1: that they said, nowhere onion futures also motion picture receipts. 290 00:14:59,760 --> 00:15:01,960 Speaker 1: Don't actually know why that is, but like the Onion 291 00:15:02,000 --> 00:15:04,720 Speaker 1: Features Act also says it's illegal to trade futures on 292 00:15:05,360 --> 00:15:08,560 Speaker 1: motion picture receipts, but otherwise you can trade futures on 293 00:15:08,560 --> 00:15:11,920 Speaker 1: any commodity, which like people used to understand to mean 294 00:15:12,000 --> 00:15:15,600 Speaker 1: like wheat and corn and metals and whatnot. And then 295 00:15:16,440 --> 00:15:18,400 Speaker 1: in like the seventies they started to understand it to 296 00:15:18,440 --> 00:15:22,840 Speaker 1: mean like treasury rates and stock indexes and stuff like that. 297 00:15:23,280 --> 00:15:26,880 Speaker 1: And from there we have very recently expanded into a 298 00:15:26,880 --> 00:15:29,440 Speaker 1: brave new world for commodities include who will win the 299 00:15:29,440 --> 00:15:32,640 Speaker 1: football game tonight and who will win the election, And 300 00:15:32,720 --> 00:15:34,440 Speaker 1: so now we have this brave new world where like 301 00:15:35,760 --> 00:15:41,920 Speaker 1: almost everything is by default with many objections, with many complaints, 302 00:15:41,920 --> 00:15:43,840 Speaker 1: with like many people believing this is wrong. But almost 303 00:15:43,840 --> 00:15:47,800 Speaker 1: everything is currently legal to trade as a commodity futures 304 00:15:47,800 --> 00:15:51,760 Speaker 1: contract on Calshie, Like if you can think of a proposition, 305 00:15:52,200 --> 00:15:55,240 Speaker 1: you can make it into a commodity's future contract on Calshi. 306 00:15:55,480 --> 00:15:58,120 Speaker 1: But there are a few exceptions, and one of them 307 00:15:58,160 --> 00:16:01,080 Speaker 1: is onions, because onions are actually the statute. They say 308 00:16:01,160 --> 00:16:03,560 Speaker 1: you can trade commodity features on everything but onions. So 309 00:16:03,600 --> 00:16:06,480 Speaker 1: everything includes sports, includes elections, that doesn't include onions. 310 00:16:08,200 --> 00:16:10,120 Speaker 3: Mail bag, mail back. 311 00:16:10,600 --> 00:16:12,760 Speaker 1: I'm going to read the next question because it's segueyed 312 00:16:12,840 --> 00:16:17,800 Speaker 1: directly from that. It's from Jamas, I mean Thomas Thomas right, 313 00:16:17,840 --> 00:16:20,680 Speaker 1: say syllogism. One, gambling is legal if it is a 314 00:16:20,680 --> 00:16:24,360 Speaker 1: commodities trade. True. Two, stock movement can be gambled on 315 00:16:24,440 --> 00:16:27,280 Speaker 1: well true. Three company can insider trade on a commodity 316 00:16:27,280 --> 00:16:30,360 Speaker 1: which it directly deals with, except onions of course, nice callback. 317 00:16:30,920 --> 00:16:33,560 Speaker 1: So is insider trading of a company's own stock legal 318 00:16:33,600 --> 00:16:37,200 Speaker 1: if it happens on a prediction market aka a commodities exchange. 319 00:16:37,360 --> 00:16:40,160 Speaker 1: So I think the other exception to like everything is 320 00:16:40,200 --> 00:16:42,400 Speaker 1: a commodity that can be traded on commodity exchange. The 321 00:16:42,480 --> 00:16:48,280 Speaker 1: other exception is stock, because stock is a security and 322 00:16:48,320 --> 00:16:52,400 Speaker 1: there are details complicated I do not pretend to fully understand, 323 00:16:52,440 --> 00:16:55,160 Speaker 1: but there are rules about securities based swaps, so like 324 00:16:55,880 --> 00:16:58,240 Speaker 1: there are commodities features which are regulated by the Commodity 325 00:16:58,320 --> 00:17:01,640 Speaker 1: Futures Trading Commission, and are you know, traded on commodities exchanges. 326 00:17:02,080 --> 00:17:05,560 Speaker 1: And then there are stock derivatives which are regulated by 327 00:17:05,600 --> 00:17:10,760 Speaker 1: the SEC and have a more or less completely separate 328 00:17:10,760 --> 00:17:13,119 Speaker 1: set of rules that apply to them. So if you 329 00:17:13,160 --> 00:17:18,000 Speaker 1: were to try to list stocks on a prediction market 330 00:17:18,359 --> 00:17:22,679 Speaker 1: just like stocks, or I think like binary options on stocks, 331 00:17:22,720 --> 00:17:26,479 Speaker 1: I think questions like will Tesla be up or down today? 332 00:17:26,960 --> 00:17:29,120 Speaker 1: Is I think a securities based swap, and I think 333 00:17:29,160 --> 00:17:32,159 Speaker 1: you could not list that on a commodities exchange like calcio. 334 00:17:32,240 --> 00:17:34,679 Speaker 1: This is not legal advice, and people are pushing the 335 00:17:34,680 --> 00:17:37,520 Speaker 1: boundaries of this every day, so I don't feel confident 336 00:17:37,560 --> 00:17:40,000 Speaker 1: that this will always be true, But for right now, 337 00:17:40,320 --> 00:17:42,240 Speaker 1: I think it is the case that you can't just 338 00:17:42,320 --> 00:17:45,399 Speaker 1: have straight up stock bets on prediction markets. Now, I 339 00:17:45,440 --> 00:17:48,040 Speaker 1: went and looked at polymarket and calshiy, and there's some stuff. 340 00:17:48,320 --> 00:17:50,600 Speaker 1: There's some like what will be the biggest AI company 341 00:17:50,600 --> 00:17:52,560 Speaker 1: at the end of the year. There's stuff where you're like, 342 00:17:52,880 --> 00:17:55,000 Speaker 1: that's a little bit like a securities based swap, but 343 00:17:55,000 --> 00:17:56,680 Speaker 1: it's like far enough away that people don't think of 344 00:17:56,720 --> 00:17:59,280 Speaker 1: it as betting on stocks. I know the answer to 345 00:17:59,320 --> 00:18:01,600 Speaker 1: the question. I mean, I think if you think that 346 00:18:01,760 --> 00:18:05,280 Speaker 1: like pretty straightforward bets on stocks will end up existing 347 00:18:05,359 --> 00:18:08,919 Speaker 1: on these prediction markets. I don't know the answer to 348 00:18:08,960 --> 00:18:11,040 Speaker 1: the question. Would it be legal for the company to 349 00:18:11,080 --> 00:18:14,800 Speaker 1: gamble on its own stock. I feel like the intuitively 350 00:18:14,800 --> 00:18:17,320 Speaker 1: correct answer is no, but the like the tracing through 351 00:18:17,359 --> 00:18:20,600 Speaker 1: the commodities rules might be yes. But in any case, 352 00:18:20,640 --> 00:18:22,600 Speaker 1: I wouldn't worry about it because like, these contracts are 353 00:18:22,680 --> 00:18:24,159 Speaker 1: never going to be that liquid, and like, no one, 354 00:18:24,720 --> 00:18:26,440 Speaker 1: you know, Tesla's not going to go around and be 355 00:18:26,520 --> 00:18:28,680 Speaker 1: like I can make forty dollars betting my stock will 356 00:18:28,680 --> 00:18:29,200 Speaker 1: be up today. 357 00:18:30,000 --> 00:18:31,879 Speaker 2: I feel like a company just has to do it 358 00:18:31,920 --> 00:18:33,159 Speaker 2: so we can find out the answer. 359 00:18:33,400 --> 00:18:34,840 Speaker 1: Once there's a series of things you have to do, 360 00:18:34,880 --> 00:18:36,960 Speaker 1: which include getting some sort of bet on your stock 361 00:18:37,000 --> 00:18:40,920 Speaker 1: listed on a prediction market, which is you know, that's 362 00:18:40,960 --> 00:18:43,480 Speaker 1: your first problem right there by the way. I do 363 00:18:43,560 --> 00:18:45,840 Speaker 1: think that more of that happens in Europe, like, you 364 00:18:45,840 --> 00:18:49,520 Speaker 1: can have bets on stocks on prediction markets, but instort 365 00:18:49,560 --> 00:18:51,200 Speaker 1: of treating rules and commodities rules are different. 366 00:18:51,240 --> 00:18:54,399 Speaker 2: There. That was a good one to two punch of questions. 367 00:18:54,040 --> 00:18:56,600 Speaker 1: Onions and stocks, the two things that are not legal 368 00:18:56,640 --> 00:18:57,800 Speaker 1: to trade, and commodities features. 369 00:18:59,480 --> 00:19:01,520 Speaker 3: We mail back. 370 00:19:02,160 --> 00:19:04,640 Speaker 2: I'm really pleased to say that. The next question comes 371 00:19:04,680 --> 00:19:07,400 Speaker 2: from another Josh, so we're back to the Jay names, 372 00:19:07,760 --> 00:19:12,479 Speaker 2: which is interesting anyway. This Josh asks sports betting apps 373 00:19:12,560 --> 00:19:16,159 Speaker 2: regularly ban or limit so called sharp betters, gamblers that 374 00:19:16,240 --> 00:19:18,679 Speaker 2: have a history of winning a high percent of the time. 375 00:19:19,160 --> 00:19:21,359 Speaker 2: This has always seemed weird or kind of unfair to me, 376 00:19:21,440 --> 00:19:24,520 Speaker 2: But whatever, If these apps and other prediction type markets 377 00:19:24,560 --> 00:19:27,840 Speaker 2: begin allowing bets on equities, can they legally do the 378 00:19:27,880 --> 00:19:31,359 Speaker 2: same thing. If I'm consistently winning bets on if the 379 00:19:31,480 --> 00:19:34,200 Speaker 2: SMP will go up or down on a specific day, 380 00:19:34,560 --> 00:19:36,840 Speaker 2: can they ban me from making that bet? I love 381 00:19:36,880 --> 00:19:39,360 Speaker 2: this question. I have no idea, but boys, it fun 382 00:19:39,400 --> 00:19:39,880 Speaker 2: to think about. 383 00:19:40,400 --> 00:19:43,040 Speaker 1: So a couple wins one is As we just said, 384 00:19:43,600 --> 00:19:45,320 Speaker 1: I think it's going to be hard for these prediction 385 00:19:45,400 --> 00:19:49,720 Speaker 1: markets to list stock trades because I think that's the 386 00:19:49,760 --> 00:19:52,720 Speaker 1: securities based on now there isn't. The exception is indexes 387 00:19:52,920 --> 00:19:56,400 Speaker 1: for some reason trade on commodities exchanges like stock indexas, 388 00:19:56,520 --> 00:20:00,560 Speaker 1: So you can probably probably have a better on the SMP, 389 00:20:00,800 --> 00:20:04,440 Speaker 1: whereas you can't on like Tesla or en video. So 390 00:20:04,560 --> 00:20:07,199 Speaker 1: like it is plausible that like consistently winning bets on 391 00:20:07,200 --> 00:20:10,159 Speaker 1: the s and P on your prediction market app is 392 00:20:10,160 --> 00:20:12,399 Speaker 1: the thing that could happen, and then the question is 393 00:20:12,400 --> 00:20:16,680 Speaker 1: can they ban you. So in traditional sports betting, you 394 00:20:16,800 --> 00:20:19,880 Speaker 1: like have an account with a sports book that takes 395 00:20:19,880 --> 00:20:22,320 Speaker 1: the other side of your bets, and the sports book 396 00:20:22,359 --> 00:20:25,840 Speaker 1: doesn't want to lose, and so it will think about 397 00:20:26,080 --> 00:20:27,879 Speaker 1: are you going to be a winning better? And it 398 00:20:27,920 --> 00:20:31,520 Speaker 1: has various data to you know, evaluate that, including your 399 00:20:31,520 --> 00:20:34,120 Speaker 1: track record and you know at the time of day 400 00:20:34,119 --> 00:20:36,199 Speaker 1: that you make bets and things like that, and if 401 00:20:36,280 --> 00:20:37,760 Speaker 1: it concludes you're going to be a winning better, it 402 00:20:37,800 --> 00:20:41,160 Speaker 1: will probably limit how much you can bet, or even 403 00:20:41,200 --> 00:20:43,160 Speaker 1: cut you off entirely because it doesn't want to lose 404 00:20:43,160 --> 00:20:45,160 Speaker 1: big bets to you because it's taking the other side 405 00:20:45,200 --> 00:20:49,639 Speaker 1: of your traits. A commodities exchange can't really do that. 406 00:20:50,000 --> 00:20:51,800 Speaker 1: A commodity exchange has to have some sort of like 407 00:20:51,840 --> 00:20:56,720 Speaker 1: fair open access and so if you are betting on 408 00:20:56,760 --> 00:20:59,120 Speaker 1: a commodities exchange, it can't limit your cut you off. Now, 409 00:21:00,440 --> 00:21:02,359 Speaker 1: the other thing that's true about a commodities exchange is 410 00:21:02,400 --> 00:21:04,600 Speaker 1: it isn't taking the other side of your bets. It's 411 00:21:04,720 --> 00:21:08,159 Speaker 1: just an exchange. Like in a classic sports book, the 412 00:21:08,200 --> 00:21:11,040 Speaker 1: person facing you is like both like the people providing 413 00:21:11,080 --> 00:21:13,280 Speaker 1: the interface and the people taking the other side of 414 00:21:13,280 --> 00:21:15,439 Speaker 1: the bets are the same, or the book maker. In 415 00:21:15,440 --> 00:21:18,520 Speaker 1: a commodities exchange, there's the exchange that provides the venue 416 00:21:18,520 --> 00:21:20,399 Speaker 1: for the bets, and then the person taking the other 417 00:21:20,440 --> 00:21:24,119 Speaker 1: side of your bet is just another better it's probably 418 00:21:24,200 --> 00:21:27,120 Speaker 1: a market maker in like these prediction markets, that's probably 419 00:21:27,680 --> 00:21:30,719 Speaker 1: a professional or semi professional market maker who is like 420 00:21:31,240 --> 00:21:33,199 Speaker 1: in the business of taking the other side of bets. 421 00:21:33,840 --> 00:21:38,080 Speaker 1: If you like look at actual US equity market structure, 422 00:21:38,359 --> 00:21:41,320 Speaker 1: it's not quite the case that like, if you're good 423 00:21:41,320 --> 00:21:43,560 Speaker 1: at you know, trading stocks, they will cut you off 424 00:21:43,640 --> 00:21:47,560 Speaker 1: or limit you because you know, equities markets have a 425 00:21:47,640 --> 00:21:51,399 Speaker 1: higher standard of fairness and openness than like sports books. 426 00:21:51,680 --> 00:21:55,160 Speaker 1: But it's not entirely not the case either. Like one 427 00:21:55,200 --> 00:21:58,400 Speaker 1: thing that happens is that like the stock exchanges have 428 00:21:59,080 --> 00:22:05,600 Speaker 1: programs separate venues to segregate retail and institutional orders, because 429 00:22:05,880 --> 00:22:08,560 Speaker 1: you know, in this world, the institutions are the sharps, 430 00:22:08,880 --> 00:22:11,760 Speaker 1: and the retail orders are the you know, like noise gamblers, 431 00:22:12,080 --> 00:22:16,040 Speaker 1: and so market makers, who are the equivalent of bookmakers, 432 00:22:16,200 --> 00:22:17,760 Speaker 1: want to trade on the other side of retail, and 433 00:22:17,760 --> 00:22:19,560 Speaker 1: they don't want to trade on the other side of sharps. 434 00:22:19,760 --> 00:22:21,760 Speaker 1: And so you have ways to segregate the order flow. 435 00:22:21,840 --> 00:22:23,480 Speaker 1: So like the exchanges do some of it where they 436 00:22:23,520 --> 00:22:26,240 Speaker 1: have like retail execution facilities, where like you can trade 437 00:22:26,280 --> 00:22:28,720 Speaker 1: with only retail on the exchange. But the main way 438 00:22:28,760 --> 00:22:31,280 Speaker 1: this happens in the US equity market is payment for orderflow, 439 00:22:31,320 --> 00:22:35,919 Speaker 1: where you know, Robinhood will route stock orders to market 440 00:22:35,960 --> 00:22:38,840 Speaker 1: makers because those market makers want to interact only with 441 00:22:39,160 --> 00:22:43,280 Speaker 1: retail orders. So most retail is noise traders, and it's 442 00:22:43,320 --> 00:22:45,440 Speaker 1: fun for a market maker and to interact with them. 443 00:22:45,560 --> 00:22:49,720 Speaker 1: But some retail is sharps. And I have heard anecdotally 444 00:22:49,960 --> 00:22:53,640 Speaker 1: that market makers do limit the sharps, and that if 445 00:22:53,680 --> 00:22:56,800 Speaker 1: you are really really really good at trading stocks in 446 00:22:56,800 --> 00:22:59,320 Speaker 1: a particular way, like if you're picking off quotes, or 447 00:22:59,359 --> 00:23:01,239 Speaker 1: if you're like if you have like really good like 448 00:23:01,960 --> 00:23:05,240 Speaker 1: short term alpha, possibly because you have like some weird algorithm, 449 00:23:05,240 --> 00:23:08,159 Speaker 1: possibly because you're spoofing, which some retail traders do, or 450 00:23:08,200 --> 00:23:10,720 Speaker 1: possibly because you're incredibly smart and you're doing that on 451 00:23:10,840 --> 00:23:13,320 Speaker 1: your Robinhoo account, and Robinhood is routing your orders to 452 00:23:13,480 --> 00:23:16,119 Speaker 1: some market maker. That market maker might notice and it 453 00:23:16,240 --> 00:23:18,240 Speaker 1: might call Robinhood up and say, hey, we don't want 454 00:23:18,240 --> 00:23:22,080 Speaker 1: these orders anymore. Right, there's some possibility of, like if 455 00:23:22,080 --> 00:23:24,480 Speaker 1: you're too sharp, you will get limited in some way 456 00:23:24,480 --> 00:23:26,480 Speaker 1: in the equity market, although I think it's much more 457 00:23:26,520 --> 00:23:29,520 Speaker 1: like unclear and uncertain than it is in the sports 458 00:23:29,520 --> 00:23:32,679 Speaker 1: betting world. I don't think that any of that is 459 00:23:33,040 --> 00:23:38,040 Speaker 1: in the near future for like Calshi, but in the 460 00:23:38,080 --> 00:23:42,720 Speaker 1: far future, when you know, sports betting on commodities exchanges 461 00:23:42,800 --> 00:23:48,919 Speaker 1: is a huge business. Will bookmakers pay like app providers 462 00:23:48,960 --> 00:23:52,199 Speaker 1: to route orders directly to the bookmakers? And will the 463 00:23:52,200 --> 00:23:55,680 Speaker 1: bookmakers say I don't want these orders because they're too sharp, Like, yeah, 464 00:23:55,800 --> 00:23:56,600 Speaker 1: maybe I don't know. 465 00:23:57,760 --> 00:24:01,320 Speaker 2: So maybe we revisited this question and like ten years, 466 00:24:01,600 --> 00:24:02,200 Speaker 2: I would. 467 00:24:01,920 --> 00:24:06,480 Speaker 1: Just say there's a continuum of how much a market 468 00:24:06,520 --> 00:24:10,639 Speaker 1: maker can limit sharps, and like bookmakers do it like 469 00:24:10,760 --> 00:24:12,920 Speaker 1: most clearly and explicitly, but like in the rest of 470 00:24:12,960 --> 00:24:15,280 Speaker 1: the financial world, there's a little bit of it. I 471 00:24:15,320 --> 00:24:19,560 Speaker 1: think in professional institutional bond trading you see a certain 472 00:24:19,560 --> 00:24:22,399 Speaker 1: amount of this, where like if you continue to like 473 00:24:22,600 --> 00:24:25,560 Speaker 1: pick off your brokers, your brokers will stop answering their calls, right, 474 00:24:25,560 --> 00:24:28,040 Speaker 1: I mean, like there's a lot of If you're too sharp, 475 00:24:28,400 --> 00:24:31,119 Speaker 1: people will notice and you'll get less ability to trade. 476 00:24:44,520 --> 00:24:47,920 Speaker 2: Mike asks During earning season, a company missus beats or 477 00:24:48,000 --> 00:24:51,359 Speaker 2: hits expectations, but the reality is that earnings are what 478 00:24:51,440 --> 00:24:54,159 Speaker 2: they are. It's the analysts who hit or miss or 479 00:24:54,160 --> 00:24:57,640 Speaker 2: come close in their predictions. When a Category five hurricane 480 00:24:57,720 --> 00:25:03,560 Speaker 2: drops to a Category fourlogists don't say the hurricane underperformed. Instead, 481 00:25:03,560 --> 00:25:06,200 Speaker 2: they say it took a different path, et cetera. Shouldn't 482 00:25:06,200 --> 00:25:08,680 Speaker 2: the hit or miss burden be on the analysts rather 483 00:25:08,800 --> 00:25:11,840 Speaker 2: than the company? So I think this is interesting, But 484 00:25:11,880 --> 00:25:14,080 Speaker 2: I also feel like it is on the company because 485 00:25:14,760 --> 00:25:18,280 Speaker 2: they're in pretty regular communication with the cell side and 486 00:25:18,880 --> 00:25:21,520 Speaker 2: are in the business of managing expectations. 487 00:25:22,359 --> 00:25:23,840 Speaker 1: Yeah, like, no one wants to hear that, but that's 488 00:25:23,880 --> 00:25:26,720 Speaker 1: the answer, right, I mean, like, yeah, earnings expectations are 489 00:25:26,720 --> 00:25:29,359 Speaker 1: not like analysts like putting their finger in the wind 490 00:25:29,359 --> 00:25:31,159 Speaker 1: and say, ah, I think those guys will go up. 491 00:25:31,280 --> 00:25:34,680 Speaker 1: You know, earnings expectations are analysts talking to the companies, 492 00:25:34,720 --> 00:25:37,920 Speaker 1: and it's sort of seeping out through the analysts. So, right, 493 00:25:38,440 --> 00:25:42,160 Speaker 1: if you miss expectations, like you have done a poor 494 00:25:42,280 --> 00:25:43,960 Speaker 1: job of managing your analysts. 495 00:25:44,040 --> 00:25:45,080 Speaker 2: Yeah, this is. 496 00:25:45,000 --> 00:25:48,320 Speaker 1: A common complaint. And it's like, no, the analysts were wrong, 497 00:25:48,400 --> 00:25:50,760 Speaker 1: not the company. And it's like that's fine, Like you 498 00:25:50,800 --> 00:25:54,879 Speaker 1: can say that, but like the point is that when you, Katie, 499 00:25:54,920 --> 00:25:58,240 Speaker 1: go on television and you say the company missed expectations, 500 00:25:59,040 --> 00:26:03,080 Speaker 1: what you're doing is explaining why the stock has gone down, right, Yeah, 501 00:26:03,119 --> 00:26:07,080 Speaker 1: And like the stock went down because people did have expectations, right, 502 00:26:07,520 --> 00:26:12,000 Speaker 1: and when the company underperformed those expectations or the expectations 503 00:26:12,040 --> 00:26:14,440 Speaker 1: overperformed the company in any case, like what happens next 504 00:26:14,800 --> 00:26:17,720 Speaker 1: the stock goes that, And so it is natural for 505 00:26:17,800 --> 00:26:22,840 Speaker 1: the investors to feel disappointed, right, Yeah, this company disappointed us, 506 00:26:23,040 --> 00:26:24,560 Speaker 1: Like I don't know, like it does feel like the 507 00:26:24,560 --> 00:26:27,240 Speaker 1: company is the one that is the immediate cause of 508 00:26:27,280 --> 00:26:29,280 Speaker 1: the disappointment. And so I think it's completely fair to 509 00:26:29,280 --> 00:26:30,600 Speaker 1: say they missed expectations. 510 00:26:31,160 --> 00:26:33,520 Speaker 2: It's in some way similar to the lead up to 511 00:26:33,720 --> 00:26:36,640 Speaker 2: big FED decisions, Like the FED doesn't like to surprise 512 00:26:36,720 --> 00:26:40,400 Speaker 2: the market. The FED is almost certainly going to tell 513 00:26:40,440 --> 00:26:42,720 Speaker 2: you without telling you what exactly it's going to do. 514 00:26:43,320 --> 00:26:46,119 Speaker 2: At their policy decision, they do have a blackout period, 515 00:26:46,160 --> 00:26:48,480 Speaker 2: so you see like a real parade of FED speakers 516 00:26:48,560 --> 00:26:51,520 Speaker 2: get in what they're going to say before the blackout period. Like, 517 00:26:52,280 --> 00:26:56,680 Speaker 2: no big FED decision should be that big of a surprise. 518 00:26:56,800 --> 00:26:59,080 Speaker 2: You have like a range of possibilities, and I feel 519 00:26:59,119 --> 00:27:01,439 Speaker 2: like it's the same at the micro level with all 520 00:27:01,480 --> 00:27:02,560 Speaker 2: these companies as well. 521 00:27:02,840 --> 00:27:04,840 Speaker 1: It is, and like I think that like there are 522 00:27:04,880 --> 00:27:09,280 Speaker 1: some you know, regulatory concerns about like the mechanism that 523 00:27:09,320 --> 00:27:11,560 Speaker 1: you and I have just positive of, Like companies managed 524 00:27:11,600 --> 00:27:14,320 Speaker 1: their analysts pretty closely. No one would quite say that, 525 00:27:14,480 --> 00:27:16,800 Speaker 1: like it's a little awkward. You're not supposed to disclose 526 00:27:16,840 --> 00:27:19,280 Speaker 1: material non public information to the analysts without disclosing it 527 00:27:19,359 --> 00:27:19,760 Speaker 1: to everyone. 528 00:27:19,800 --> 00:27:23,320 Speaker 2: But like yeah, you know, thanks, but we're on a podcast, 529 00:27:23,359 --> 00:27:24,199 Speaker 2: so we can say it. 530 00:27:24,400 --> 00:27:26,080 Speaker 1: We can say it. It's like the truth is somewhere 531 00:27:26,119 --> 00:27:28,120 Speaker 1: to be trained. But right, if you're in a company 532 00:27:28,280 --> 00:27:30,840 Speaker 1: and it's like two weeks before earnings and analysts expect 533 00:27:30,880 --> 00:27:32,680 Speaker 1: you to make two dollars a share, and you're gonna 534 00:27:32,680 --> 00:27:35,919 Speaker 1: make one dollar a share, like, it's too late to 535 00:27:35,920 --> 00:27:37,280 Speaker 1: make the extra dollar a share. 536 00:27:37,320 --> 00:27:37,359 Speaker 2: Like. 537 00:27:37,400 --> 00:27:38,920 Speaker 1: What you're trying to do is figure out a way 538 00:27:38,920 --> 00:27:40,800 Speaker 1: to communicate to the market that the market is going 539 00:27:40,840 --> 00:27:43,239 Speaker 1: to be disappointed. Yeah, and if you fail to do that, 540 00:27:43,280 --> 00:27:44,560 Speaker 1: then you missed expectations. 541 00:27:44,560 --> 00:27:47,440 Speaker 2: Man, or you could pre announce it. Good question, though, Mike, 542 00:27:47,520 --> 00:27:48,400 Speaker 2: we appreciate it. 543 00:27:49,920 --> 00:27:53,080 Speaker 3: Mail Bag, mail Bag Charlie. 544 00:27:53,119 --> 00:27:56,439 Speaker 2: I really like this question from Charlie. Charlie asks you 545 00:27:56,560 --> 00:28:00,639 Speaker 2: both seem to hold primarily orthodox spin to it views parentheses. 546 00:28:00,880 --> 00:28:03,439 Speaker 2: It is good to buy low cost index funds. Elon 547 00:28:03,600 --> 00:28:05,920 Speaker 2: is wild but makes the number go up. M two 548 00:28:05,920 --> 00:28:08,520 Speaker 2: graphs are not a useful way to consider price, et cetera. 549 00:28:08,960 --> 00:28:12,320 Speaker 2: Do either of you hold any heterodox opinions in this area. 550 00:28:13,000 --> 00:28:13,960 Speaker 2: I'll let you go first. 551 00:28:14,640 --> 00:28:17,000 Speaker 1: I hold no heterox opinion. I probably hold some heterot 552 00:28:17,040 --> 00:28:19,560 Speaker 1: ex opinions. I have like tried to start fights on 553 00:28:19,920 --> 00:28:22,639 Speaker 1: fin Twitter because I think that comparing stocks and flows 554 00:28:22,720 --> 00:28:26,160 Speaker 1: is completely normal and happens every day and the word 555 00:28:26,200 --> 00:28:28,800 Speaker 1: for it is valuation. And like for a long time 556 00:28:28,840 --> 00:28:30,960 Speaker 1: on finance Twitter there is like a stocks and flows 557 00:28:31,000 --> 00:28:34,640 Speaker 1: police where people would see that like Apple is worth 558 00:28:34,680 --> 00:28:36,679 Speaker 1: more than the GDP of Kazakhstan, and they'd be like, 559 00:28:36,680 --> 00:28:38,840 Speaker 1: that's a stock and flow. You can never compare stocks 560 00:28:38,840 --> 00:28:40,520 Speaker 1: and flow, And that's right. This is a very minor 561 00:28:40,560 --> 00:28:43,240 Speaker 1: heterox opinion. And for the most part, I hold only 562 00:28:43,360 --> 00:28:46,640 Speaker 1: orthodox opinions, and I think often that my job is 563 00:28:46,840 --> 00:28:51,239 Speaker 1: just to explain recent financial events in terms of like 564 00:28:51,360 --> 00:28:55,560 Speaker 1: corporate finance one oh one, and the most orthodox and 565 00:28:55,800 --> 00:29:00,680 Speaker 1: normal corporate finance theories remain counterintuitor to a lot of people, 566 00:29:00,680 --> 00:29:02,040 Speaker 1: and so it's fun to just explain them. 567 00:29:02,040 --> 00:29:05,840 Speaker 2: Again, I would say, the heterodox opinion that I hold 568 00:29:05,840 --> 00:29:09,080 Speaker 2: about investing, and this is not investing advice, et cetera. 569 00:29:09,640 --> 00:29:12,000 Speaker 2: I don't know, fixed income and bond seem kind of 570 00:29:12,040 --> 00:29:15,680 Speaker 2: stupid to me, Like I don't. It just seems dumb. 571 00:29:17,960 --> 00:29:20,840 Speaker 1: Like that's really I love that, you know, I like 572 00:29:21,120 --> 00:29:23,320 Speaker 1: come from an equities background, right, I was a convertible 573 00:29:23,360 --> 00:29:26,400 Speaker 1: bomb guy, and so like, I do have a bit 574 00:29:26,440 --> 00:29:32,280 Speaker 1: of like grievance that, like everyone thinks that equities are dumb, 575 00:29:32,840 --> 00:29:35,440 Speaker 1: but I appreciate that you're that you think fixed and 576 00:29:35,480 --> 00:29:36,040 Speaker 1: given is umb. 577 00:29:36,440 --> 00:29:39,760 Speaker 2: Money market funds, sure that, but that's basically cash. But 578 00:29:40,480 --> 00:29:44,360 Speaker 2: why on earth would anyone buy like even the belly 579 00:29:44,400 --> 00:29:47,280 Speaker 2: of the treasury curve and especially out from there, They're 580 00:29:47,560 --> 00:29:52,360 Speaker 2: unreliable as a hedge. And also I don't get that 581 00:29:52,440 --> 00:29:55,960 Speaker 2: excited about the yield. But that's not investing advice. That 582 00:29:56,080 --> 00:29:58,920 Speaker 2: is just a heterodox opinion that perhaps. 583 00:29:58,560 --> 00:30:02,360 Speaker 1: I hold answered. No, can't believe you, so then I know. 584 00:30:02,560 --> 00:30:03,640 Speaker 2: I'm sorry. 585 00:30:04,080 --> 00:30:05,400 Speaker 1: All right, that was a mail bag. 586 00:30:05,480 --> 00:30:07,760 Speaker 2: That was a meal bag. Thanks for the great questions. 587 00:30:07,920 --> 00:30:09,640 Speaker 1: Thanks for joining us from your vacation. 588 00:30:09,960 --> 00:30:13,120 Speaker 2: Yeah, I'm really eager to sign off, so I'm going 589 00:30:13,160 --> 00:30:13,440 Speaker 2: to do it. 590 00:30:13,640 --> 00:30:21,240 Speaker 1: All right, goodbye, And that was the Money Stuff Podcast. 591 00:30:21,520 --> 00:30:23,640 Speaker 2: I'm Matt Levine and I'm Katie Greifeld. 592 00:30:23,840 --> 00:30:26,000 Speaker 1: You can find my work by subscribing to the Money 593 00:30:26,000 --> 00:30:28,040 Speaker 1: stuffnuletter on Bloomberg dot. 594 00:30:27,800 --> 00:30:30,560 Speaker 2: Com, and you can find me on Bloomberg TV every 595 00:30:30,640 --> 00:30:33,800 Speaker 2: day on the Clothes between three and five pm Eastern. 596 00:30:34,520 --> 00:30:36,520 Speaker 1: We'd love to hear from you. You can send an 597 00:30:36,560 --> 00:30:39,880 Speaker 1: email to Moneypod at Bloomberg dot net, ask us a 598 00:30:39,960 --> 00:30:41,800 Speaker 1: question and we might answer it on the air. 599 00:30:42,160 --> 00:30:44,760 Speaker 2: You can also subscribe to our show wherever you're listening 600 00:30:44,800 --> 00:30:46,680 Speaker 2: right now and leave us a review. It helps more 601 00:30:46,680 --> 00:30:47,520 Speaker 2: people find the show. 602 00:30:48,480 --> 00:30:52,280 Speaker 1: The Money Stuff Podcast is produced by Anamazerakis and Moses Ona. 603 00:30:52,600 --> 00:30:54,840 Speaker 2: Our theme music was composed by Blake Maples. 604 00:30:55,560 --> 00:30:58,280 Speaker 1: Amy Keen is our executive producer. 605 00:30:58,240 --> 00:31:00,720 Speaker 2: And Sage Baalman is Bloomberg's head of Podcasts. 606 00:31:01,040 --> 00:31:03,400 Speaker 1: Thanks for listening to The Money Stuff Podcast that we'll 607 00:31:03,440 --> 00:31:05,200 Speaker 1: be back next week with more stuff.