Speaker 1: Bloomberg Audio Studios, podcasts, radio news. That's your body battery.
Speaker 2: Oh my god, I slept terribly last night. I'm so
Speaker 2: glad you asked. This is bad. I'm at seventeen. I
Speaker 2: woke up in my body battery. It was at fifty one.
Speaker 2: Usually I wake up in the eighties or the low nineties.
Speaker 1: So what was wearing on you?
Speaker 2: I'm moving tomorrow. I'm psyched. I'm going back to New Jersey.
Speaker 2: It's where I belong.
Speaker 1: I thought you were going to say you're a stressed
Speaker 1: about your bird.
Speaker 2: Oh god, I'm so glad you brought up the bird.
Speaker 1: So, Katy is a bird?
Speaker 2: Have a bird?
Speaker 1: So this is like the Katy's Exotic pet hower.
Speaker 2: Yeah. I have a lot to say about this bird.
Speaker 2: So he's a European starling.
Speaker 1: Sure, by the way, one of my proudest moments. And like,
Speaker 1: you didn't really notice this, but you showed me like
Speaker 1: two pictures of this bird on your phone. Yeah, he's
Speaker 1: like pretty small on this pictures. And I was on
Speaker 1: your phone and I was like, oh, a starling. You're like, yes,
Speaker 1: it's the starling. I was like, yes, yeah, you closed
Speaker 1: the bird identifier.
Speaker 2: Yeah, Well they're super common around these parts because they're
Speaker 2: an invasive species, which explains why now we're in possession
Speaker 2: of the bird. My dad actually found him at my parents' house,
Speaker 2: like as a creepy crawley little like no feathers, alien
Speaker 2: baby thing. And I called the Raptor Trust and they said,
Speaker 2: you know, because it's a non native species, we can't
Speaker 2: help it. They said, try to return to the nest.
Speaker 2: I tried that, I couldn't find the nest. And I said,
Speaker 2: hypothetically speaking, how hard would it be to raise this bird?
Speaker 2: And they said, actually, it's really easy to hand raise
Speaker 2: European starlings. So that's what we've done.
Speaker 1: He's sitting here at the podcast right now.
Speaker 2: My parents are taking care of him at my direction.
Speaker 2: It's kind of fun because it feels like they're my employees.
Speaker 1: How many like video calls? Are you doing a day
Speaker 1: with your parents?
Speaker 2: Many? Actually have a new photo to show you now
Speaker 2: he's about three to four weeks old. I'm really proud
Speaker 2: of this photo, not that anyone listening can see it.
Speaker 2: Hold on put in. My dad texted it to me
Speaker 2: this morning.
Speaker 1: You know, we can put it in my email.
Speaker 2: Oh my god. Yeah, Well I won't put this photo.
Speaker 2: Look at him.
Speaker 1: Oh he's a bird.
Speaker 2: Yeah, he's a real bird now, so we want to
Speaker 2: release him? So no, not yet. There's three important milestones
Speaker 2: that this bird needs to pass before we can think
Speaker 2: about releasing him to the wild. He needs to be
Speaker 2: able to perch. He's getting better. My mom has been
Speaker 2: putting him on a stick and he will perch on
Speaker 2: the stick. He needs to be able to fly. Obviously
Speaker 2: he's flapping around. He's not flying yet.
Speaker 1: Is your mom like clapping our arms to demonstrate to him?
Speaker 2: That's what the conversation we keep having is we're not birds,
Speaker 2: so it's not a bird. It's really hard. And the
Speaker 2: third thing he needs to be able to do is
Speaker 2: feed himself. The hand of God has been feeding him
Speaker 2: mush mush for weeks now, so he needs to you know, Oh,
Speaker 2: I'm so glad you asked. So high protein dry cat food.
Speaker 2: You soak it for you know a while. I've been
Speaker 2: doing a hard boiled egg and then you mash it up. Yeah,
Speaker 2: it's kind of feels bad, hag to a bird, but
Speaker 2: he doesn't know. And then I have this like egg
Speaker 2: shell mix it's made for chickens to try to give
Speaker 2: them more calcium so they lay better eggs. But basically,
Speaker 2: what starling, baby, Starling, growing Starling's need is a lot
Speaker 2: of protein and a lot of calcium. So this mix
Speaker 2: seems to be working pretty well. I've adjusted it as
Speaker 2: he's gotten a little bit older. As the photo shows,
Speaker 2: he looks like a real bird, so we'll see if
Speaker 2: his bones will support himself as he continues to learn
Speaker 2: how to perch and fly.
Speaker 1: Well, I hope you will bring him into the podcast
Speaker 1: before you.
Speaker 2: Yeah. Well, the thing is, and I promise we'll move
Speaker 2: on soon, is that if he's not able to be released,
Speaker 2: and we're not going to release him to a certain death,
Speaker 2: if he isn't meeting these milestones, then we just have
Speaker 2: a bird now, which isn't the worst thing.
Speaker 1: No, it's clearly the outcome you're rooting for. All right,
Speaker 1: I think we're done. We'll see you next week.
Speaker 2: Yeah, no, I think that that was a good update.
Speaker 1: And yeah, hello, come to the Money Stuff Podcast. You're
Speaker 1: a weekly podcast where we talk about stuff related to money.
Speaker 1: I'm Matt Levigne 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: Hey, there's been some tariff news.
Speaker 2: Yeah. I feel like we have to timestamp this conversation
Speaker 2: because everything is changing very rapidly.
Speaker 1: We're recording this at four o'clock on the Thursday, May
Speaker 1: twenty ninth.
Speaker 2: Yeah, and about twenty four hours ago or less than that.
Speaker 2: A court, which I learned existed.
Speaker 1: So U asked Court for International Trade.
Speaker 2: Yeah, based in Manhattan. Sure, yeah, so it blocked the
Speaker 2: the tariffs that Trump put on on Liberation Day.
Speaker 1: Yeah, most of his tariffs are, yeah, the Liberation Day tariffs,
Speaker 1: and actually like the pre Liberation Day like Canada and
Speaker 1: China tariffs, the opioid tariffs, the personal tariffs, those were
Speaker 1: all blocked by the court as of like Thursday afternoon.
Speaker 1: The Appeals Court for the Federal Circuit, which is like
Speaker 1: the appeals court the handles that you also just learned exist.
Speaker 1: That the handles it feels from the court from the
Speaker 1: International Trade. That court at a temporary stay, so it
Speaker 1: could like consider whether to put a longer stay. So
Speaker 1: everything's very much in flex. But yeah, the Court for
Speaker 1: International Trade said these tariffs are illegal.
Speaker 2: Yeah, and it seems like we're heading to the Supreme Court.
Speaker 1: Well, I mean certainly, yeah, yeah, yes, yeah. Probably won't
Speaker 1: be at the Supreme Court by the time this podcast
Speaker 1: air is on Friday.
Speaker 2: Probably not. But you know, crazy things have happened. I mean,
Speaker 2: coming into this morning, futures were up a ton on
Speaker 2: the S and P five hundred because it was like, Okay,
Speaker 2: the trade war's over. It's not. It seems like the
Speaker 2: consensus that has emerged is that Trump has plenty of
Speaker 2: other tools to put on tariffs somehow, And I don't
Speaker 2: know what this does to the US negotiating stance. It
Speaker 2: feels like it lessens it by quite a bit.
Speaker 1: I guess that's right. I don't know. It's just like
Speaker 1: it feels like the US negotiating stance is so mercurial
Speaker 1: and so unreliable that I'm not sure how much it
Speaker 1: affects the negotiating stents or going. On the one hand,
Speaker 1: as you said, he has a lot of tools to
Speaker 1: put on tariffs, and if you are a trade partner
Speaker 1: in negotiations with him, the threat has gone from I
Speaker 1: will put on whatever tariffs I like, pursuing to my
Speaker 1: unlimited authority to put on tariffs too. I will find
Speaker 1: some stuff to do and it'll be super annoying and confusing.
Speaker 1: It's like that's not that much better, right, That's still
Speaker 1: a pretty bad threat. And in some ways, I feel
Speaker 1: like a lot of what I read about people who
Speaker 1: are in the posture of negotiating with Trump, like you
Speaker 1: read about this, and like the situation with Harvard, right,
Speaker 1: people worry about making deals because he is not a
Speaker 1: reliable interlocutor and can always just change the deal and
Speaker 1: there's not a lot you can do about it. In
Speaker 1: some ways, like you having a little court supervision might
Speaker 1: be kind of good for negotiating postures. I don't know
Speaker 1: that's true, but like it's just like it's nice that
Speaker 1: there's like just a soup song of like law here, right,
Speaker 1: and like procedures, because you know, I wrote about this today.
Speaker 1: There's in some ways this is a complicated case. There's
Speaker 1: all these statutes, there's all these questions of like what
Speaker 1: things should be left to the executive's discretion. But in
Speaker 1: many ways it's a very very simple case, which is
Speaker 1: that the Constitution of the United States just like a
Speaker 1: real document. You can read it like it's a real
Speaker 1: thing that exists, right, Like, not everyone involved in the
Speaker 1: government has read it. But like, you know, there's like
Speaker 1: a real document that people at least say they care about.
Speaker 1: The Constitution just says the Congress has the power to
Speaker 1: impose taffs and the president doesn't. So like all this
Speaker 1: stuff of like executive orders imposing tariffs is really like
Speaker 1: on a first order analysis, just not what the Constitution says.
Speaker 1: And I think that's kind of the court starting point here. Yeah,
Speaker 1: so it seems like kind of simple stuff and there's
Speaker 1: more complicated stuff, but it is in some ways a
Speaker 1: relief to see that the Constitution still has some controlling power.
Speaker 2: Yeah, that does seem like something a couple hours that
Speaker 2: you would root for.
Speaker 1: I do. I'm weird like that.
Speaker 2: Yeah, when it comes into the negotiating stance, the standpoint
Speaker 2: that I've seen bandied about is basically, if you're another
Speaker 2: country negotiating with the US, like this kind of removes
Speaker 2: the urgency or the incentive to make a deal with
Speaker 2: the US because now it's in flux. You know how
Speaker 2: much power Trump actually has to enact these tariffs.
Speaker 1: Yeah, that's right. But you wouldn't that against him having
Speaker 1: a lot of power to do whatever he wants, if.
Speaker 2: You would, I don't know, yeah, yeah, I don't know.
Speaker 1: The one can say spring quick tomorrow.
Speaker 2: Yeah, at least on this Thursday. The consensus that has
Speaker 2: seemed to emerge throughout the day. And you've seen this
Speaker 2: in like the slow bleed of the S and P
Speaker 2: five hundred from you know, our pre market euphoria was
Speaker 2: this just turns up the volume so much on the
Speaker 2: trade policy noise because who knows what's going to happen and.
Speaker 1: Not other noise, right, I mean, like one overhang to
Speaker 1: finance is how much rule of law is there? And
Speaker 1: every time the court says Trump can't do something, you
Speaker 1: have wider variant in the outcome of how much rule
Speaker 1: of fla is there because like maybe you'll be like,
Speaker 1: oh yeah, the constitution does say that never mind, or
Speaker 1: maybe like Peter Navara said, nothing has changed after a
Speaker 1: court said the terriss around constitutional Like how did that's
Speaker 1: like ating posture?
Speaker 2: It was kind of funny that this all happens within
Speaker 2: hours of Trump being told about the taco trade. The
Speaker 2: tacos trade, taco trade being Trump always chickens out. It
Speaker 2: was coined by an.
Speaker 1: FT columnist Rob Armshuk at the FT.
Speaker 2: Yeah, yeah, basically that okay, Trump comes out with this
Speaker 2: big announcement, you know, we're going to slap a gazillion
Speaker 2: percent tariff on so and so, and then you know,
Speaker 2: inevitably it's walked back, and that's the taco trade. You
Speaker 2: bet on this is going to be walked back. And
Speaker 2: Trump was told about that in the Oval Office, and
Speaker 2: he was upset, as you would imagine, and said, no,
Speaker 2: this is negotiating. This is how it's done, which you know,
Speaker 2: maybe there's some truth to that, but you know, as
Speaker 2: an investor, I can see how you could also turn
Speaker 2: that into a trade, even though it feels like, you know,
Speaker 2: in the last couple of weeks or so, it's become
Speaker 2: less profitable because it feels like the shock value is fading, right, right, right.
Speaker 1: So a couple of things. One like Trump always chickens
Speaker 1: out is the insulting to him phrasing of it. Yeah,
Speaker 1: but the trade is when a drastic tariff announcement comes out,
Speaker 1: the actual result will be less than that, either because
Speaker 1: of the negotiation or because you checked, like you can
Speaker 1: be agnostic about the cause, or you can just say, like,
Speaker 1: this isn't as bad as it sounds. The second thing
Speaker 1: I want to say is that Lewis Astroth at ft Alphaville,
Speaker 1: like apparently got jealous of his colleagues ability to quinna
Speaker 1: term that became so famous, so he wrote a bunch
Speaker 1: of other potential acronyms, like Mexican food themed acronyms, and
Speaker 1: the one I liked was takita, which is Trump always
Speaker 1: quickly undoes initial trade offensive just like a little thing.
Speaker 1: It's more a specific about the thing that's happening. The
Speaker 1: other thing I want to say is that a reader
Speaker 1: emailed me to be like, would it be a good
Speaker 1: trade if you were a journalist to short the market
Speaker 1: and then ask Trump about the taco trade, because like
Speaker 1: the mechanism there is like you asked Trump about the
Speaker 1: taco trade and he gets really mad, and then he
Speaker 1: says I'll never chicken out again, and tarriffs get higher,
Speaker 1: the market drops, Like I think, like you could have
Speaker 1: imagined for a second that like Trump getting mad about
Speaker 1: the phrase taco trade could have been bad for stock prices,
Speaker 1: but of course it was quickly followed by the trade
Speaker 1: cord ruling, which is good for stack prices. So it's
Speaker 1: a little hard to isolate the impact of getting Trump
Speaker 1: mad about the taco trade Yeah.
Speaker 2: That's pretty funny. It could work if he had explicitly
Speaker 2: said I'm going to tear iff even harder. Right now,
Speaker 2: I think.
Speaker 1: That it would have been reasonable to think that he
Speaker 1: might have thought that. But then, you know, events moved on.
Speaker 2: Yeah, that's what happens a lot.
Speaker 1: That's kind of the real core of the taco trade,
Speaker 1: which is events just keep moving on.
Speaker 2: Yeah. Well, it'll be interesting to see what happens to
Speaker 2: the taco trade as we continue to muddle through whether
Speaker 2: or not these tariffs are illegal and what other types
Speaker 2: of terrifts were going to get. There's all these different
Speaker 2: tariffs that this ruling doesn't cover. When you think about
Speaker 2: steel and aluminum for example, Well.
Speaker 1: So the Liberation Day tariffs are ten percent to you know,
Speaker 1: one hundred and fifty percent towers on everything, right, it's
Speaker 1: ten percent baseline, But then every country had like quote
Speaker 1: unquote reciprocal tariffs that were much higher. Amazing calculation of
Speaker 1: the trade deficits. It's like the whole thing. It was
Speaker 1: like truly universal, and it was basically you talk about
Speaker 1: like steel taffs, there's like you have like a sort
Speaker 1: of national security justification or whatever right you have some
Speaker 1: theory behind steel tiers. But like this the Liberation Day tariffs,
Speaker 1: where the US runs a trade deficit and we want
Speaker 1: to stop that, and so we have tariffs that are
Speaker 1: calculated through some formula designed to zero the trade deficit essentially, right,
Speaker 1: And the court said you can't do that. The law
Speaker 1: that he used AEPA International Emergency Economic Powers Act of
Speaker 1: nineteen seventy seven. The AEPA allows you to respond to
Speaker 1: an emergency, and if you have tariffs that are responsive
Speaker 1: to an emergency, that's fine, but like, it can't be
Speaker 1: the case that all international trade for the last thirty
Speaker 1: years is an emergency. Like this is like too much,
Speaker 1: it's like too much power to the executive. So you
Speaker 1: can't do that. But can you find specific goods to
Speaker 1: tariff and use other laws that say you have like
Speaker 1: specific economic tariffing powers, like maybe probably often there are
Speaker 1: more limits in those laws if you have to like
Speaker 1: do fact finding and like put out a report and
Speaker 1: they're time limited, right, So it's not as completely broad
Speaker 1: as the powers that they claimed under AYEPA, which is
Speaker 1: why they did the AEPA stuff. They're like, we're you
Speaker 1: do everything all at once with no you know, review,
Speaker 1: no fact finding. So AEPA was the law they thought
Speaker 1: they could use for that. If they can't use that,
Speaker 1: then they have to find other laws which will be
Speaker 1: a little bit more narrow, but you can still do
Speaker 1: a lot of terror.
Speaker 2: Yeah, I mean, there's section two thirty two, for example,
Speaker 2: that's what's being used on steel, aluminum, vehicle and auto parts.
Speaker 2: There's other laws as well, but usually there's some investigation
Speaker 2: associated with him, so it takes months versus President Trump
Speaker 2: is sitting in the Oval office and he signed something.
Speaker 1: Because again, like the Constitution says that Congress can make tariffs. Yeah,
Speaker 1: and so Congress has in the past past laws saying
Speaker 1: here are some tariffs that the president can impose, right,
Speaker 1: but like, ultimately it's the Congress's tariff power, and the
Speaker 1: Congress doesn't say in any of those laws the president
Speaker 1: can make any tariffs he wants. It says, you know,
Speaker 1: he does an investigation these particular things, for these particular reasons,
Speaker 1: you can make tariffs. But it's not an open ended
Speaker 1: grant of power. And one thing that the court so
Speaker 1: yesterday is that if it were an open ended grant
Speaker 1: of power, and one way to read AIPA is that's
Speaker 1: an open ended grant to make whatever twists you want.
Speaker 1: I don't think it's a good reading, but it's like
Speaker 1: the Trump administration reading the court said, if you read
Speaker 1: it that way, then it would be unconstitutional for the
Speaker 1: Congress to give all of its tariff power to the
Speaker 1: president with no limitations whatsoever. And I think that's right.
Speaker 1: I have a personal interest in this. I don't know
Speaker 1: if I've talked about this on the podcast a column,
Speaker 1: but like that idea that Congress can't just give its
Speaker 1: power to the executive with no constraints is called the
Speaker 1: non delegation doctrine and it is had a controversial career
Speaker 1: in the Supreme Court. But one of the important cases
Speaker 1: in the recent Supreme Court about the non delegation doctrine
Speaker 1: was argued by my wife. Wow, he's a criminal defense layer.
Speaker 1: And so I was in the audience for that, and
Speaker 1: so you know, I have like a little rooting interest
Speaker 1: in the non delegation doctrine.
Speaker 2: I get it, even though to oversimplify and dumb it down.
Speaker 2: It seems like that is what has happened here, and
Speaker 2: it does just seem like Congress is too upset about it.
Speaker 1: So the podded history of the non delegation doctrine is
Speaker 1: that it's never had any effect whatsoever. Like there is
Speaker 1: lip service paid to the idea that Congress can't delegate
Speaker 1: all of its legislative powers to the president, but that
Speaker 1: lip service has always paid in cases saying but this
Speaker 1: delegation is fine, right, including my West case. But there
Speaker 1: is like this notion that interest in it has been relived,
Speaker 1: and like one day they're going to find a delegation
Speaker 1: that is too broad and maybe it's ayepa. I don't know.
Speaker 2: Yeah, I don't know. Again timestamp this is on Thursday.
Speaker 2: It'll be fun to see how this shakes out. I
Speaker 2: don't know. I would love to be a fly on
Speaker 2: the wall and like some of these negotiations, because I
Speaker 2: don't know, if you're Japan negotiating with the US right
Speaker 2: now or India, do you just wait and see.
Speaker 1: I don't understand why this would really change it that much.
Speaker 1: I just think that like the thing that you know
Speaker 1: as like the Japan trade negotiator or whatever, is that
Speaker 1: Trump really wants to make deals, he really wants to
Speaker 1: have wins, he really doesn't trust free trade. He's really
Speaker 1: willing to push the boundaries of the law as much
Speaker 1: as possible. He's not really aware of what those boundaries are.
Speaker 1: To think like I'm going to tell him to stuff
Speaker 1: because a court struck him down. Seems crazy, Like now
Speaker 1: more than ever, you make a deal, more than you're like, look,
Speaker 1: this court was wrong. We understand. Here's our tariff concessions.
Speaker 1: Like maybe you get a better deal now, and like
Speaker 1: you're rushing to make a deal. I don't know. I
Speaker 1: don't understand the idea that like now you're like, oh,
Speaker 1: it's fine, like no more tariffs, Like I'll just walk
Speaker 1: away from the negotiating table.
Speaker 2: So it's crazy. I don't know. Maybe you don't walk away,
Speaker 2: but maybe you say, why don't we break for lunch
Speaker 2: for a little bit. Why don't we.
Speaker 1: I think that was the opportunity to make a bigod deal.
Speaker 1: I don't know. I don't listen to me, I don't
Speaker 1: I don't know anything, but like to me like calling
Speaker 1: him up and being like, I'm in your camp, buddy,
Speaker 1: I want to make a deal. I know that you
Speaker 1: have the constitual parademphosies tariffs. Let's make a deal. To me,
Speaker 1: listen to the opportunity. You don't break for.
Speaker 2: Lunch that's true.
Speaker 1: You cut the deal now, Yeah, no exaggerating because like
Speaker 1: if the deal involves like him imposing lower ABA tariffs
Speaker 1: on you, like those are illegal maybe maybe. So I
Speaker 1: don't know. It's harder to know what the deal is,
Speaker 1: but I don't know how it changes the poster.
Speaker 2: That most of our topics today are vaguely and in
Speaker 2: some cases explicitly. Donald Trump related Fanny and Freddy for example,
Speaker 2: back in the.
Speaker 1: News another bit of you knowilateral.
Speaker 2: Pol an explicit implicit guarantee.
Speaker 1: Yeah, Donald Trump, the verb is so hard. I want
Speaker 1: to say he tweeted, but in fact he posted on
Speaker 1: truth social which you can say he truthed.
Speaker 2: Yeah, the truth.
Speaker 1: I am working on all caps taking these amazing companies public,
Speaker 1: but I want to be clear the US government will
Speaker 1: keep its implicit all caps guarantees, and I will stay
Speaker 1: strong in my position on overseeing them as president. So
Speaker 1: Fanny and Freddie, the government sponsored enterprises had a long
Speaker 1: prehistory as being implicitly guaranteed by the US government. So
Speaker 1: like they explicitly said, Morgus, they have trillion dollars Morgue,
Speaker 1: and they issued mortgage backed securities that are guaranteed by them,
Speaker 1: and those securities. Always said, these securities are not guaranteed
Speaker 1: by the US government, And they said that because otherwise
Speaker 1: you'd be confused, because everyone thought they were guaranteed by
Speaker 1: the US government. That's what it's called an implicit guarantee.
Speaker 1: They say it's not guaranteed, but everyone thinks it's guaranteed.
Speaker 1: And then in two thousand and eight they went past
Speaker 1: and they turned out to be guaranteed by the US
Speaker 1: government effectively because the government like stepped in and took
Speaker 1: them over, bailed them out, and made sure that creditors
Speaker 1: were made whole. And that was roughly sixteen years ago.
Speaker 1: And ever since, people have said this can't continue forever.
Speaker 1: They have to return to private hands. And I always said, why,
Speaker 1: it's fine, like no one. Yeah. But so now once again,
Speaker 1: because Trump is in office, and because there's a lot
Speaker 1: of money to me, there's a talk of returning Fanny
Speaker 1: and Freddie to private hands. And the mechanics of that
Speaker 1: are really complicated, and there's opportunity for people to get
Speaker 1: hundreds of billions of dollars of value. Yeah, and so
Speaker 1: that's of great interest to a lot of investors.
Speaker 2: Yeah, there's bags to be made, uh, bags to be made, yeah,
Speaker 2: which could bring us to Bill Ackman, but we don't
Speaker 2: have to talk about we don't have to.
Speaker 1: But Bill Ackman is one of the big investors in
Speaker 1: that trade. And when Fanny and Freddie were put into
Speaker 1: conservativeship by the government in the financial crisis, their stock
Speaker 1: became like you know, in the ballpark of worthless, but
Speaker 1: never stopped trading. And at some point in like twenty twelve,
Speaker 1: I think the government changed the deal from the bailout
Speaker 1: to say from now on, all of the profits of
Speaker 1: Fanny and Freddy forever we'll go to the government and
Speaker 1: shareholders will never get anything ever again, which you might
Speaker 1: think would make the stock worthless and like made it
Speaker 1: almost worthless, yeah, but some people thought that can't be true,
Speaker 1: like that'll change, and so they bought the stock and
Speaker 1: now they own stock. And it is unclear from first
Speaker 1: principles how you would reprivatize Fanny and Freddy, but it
Speaker 1: seems likely that whatever happens, the current shareholders of Fanny
Speaker 1: and Freddy, who bought the stock at you know penny
Speaker 1: is when it was declared to be worthless for all time,
Speaker 1: it seems like that the current shareholders will get a
Speaker 1: back yeah.
Speaker 2: Haven't they already though, like well like in market prices.
Speaker 1: Yes, yeah, yeah, because people are anticipating that Fanny and
Speaker 1: Freddy will be returned to private hands, and specifically their
Speaker 1: private hands, like specifically the existing shareholders of Fanny and
Speaker 1: Freddy will not in fact be zeroed, but will end
Speaker 1: up being shareholders of Fanny Freddy and look at a
Speaker 1: lot of value.
Speaker 2: Yeah, it would be you know, kind of funny if
Speaker 2: some of these big vocal investors who are calling for
Speaker 2: the reprivatization, who you know, have bought the stock when
Speaker 2: it was pretty much worthless sold now in this insane
Speaker 2: run up that it's seens. Yeah, yeah, this is good. Yeah.
Speaker 2: Stocks of both companies are trading at their highest level
Speaker 2: since two thousand and eight. But you look at the
Speaker 2: long term chart, like going back to the nineteen eighties,
Speaker 2: and it's still nowhere close to where it was.
Speaker 1: Yes, because right now they're controlled by the federal government
Speaker 1: and they're charters. Say that their shareholders can never get
Speaker 1: any money ever. Yeah, so that's worse than the old
Speaker 1: old business model.
Speaker 2: Yeah, for sure. I don't know this timeline. Even though
Speaker 2: Trump is posting on truth social about it, it seems like
Speaker 2: this has picked up an urgency, like this process would
Speaker 2: take years and years.
Speaker 1: I want to just be clear, Like there's two things.
Speaker 1: There's like you can return Fanny and predat to private hands,
Speaker 1: and then there's the specific question of like how much
Speaker 1: of it do you give to the existing shareholders? Yeah,
Speaker 1: weird as zero? You can say, Okay, the deal is
Speaker 1: the deal. And by the way, the deal is probably controversial.
Speaker 1: People think it's really unfair. There's been a lot of lawsuits.
Speaker 1: I want to respect their feelings that, like, in fact,
Speaker 1: the twenty twelve deal to zero the shareholders, there's a
Speaker 1: good case that it's pretty unfair. But whatever, given that
Speaker 1: it exists, you could reprivatize them without giving existing shareholders anything.
Speaker 1: You could just raise new money to cap them. You
Speaker 1: can say, I mean, but like there's like some corporate
Speaker 1: complexities to doing that, but like, you know, you could
Speaker 1: raise a lot of new money and like essentially dilute
Speaker 1: the existing charolders down to zero. And you could do
Speaker 1: that by saying, you know, the government has I think
Speaker 1: when I last read about this in January, in the
Speaker 1: accounting of Fanny and Freddy, they owe the government three
Speaker 1: hundred and forty billion dollars before the sholders can get
Speaker 1: anything right, and so you could say, well, okay, we're
Speaker 1: gonna go out and raise three hundred and forty billion
Speaker 1: dollars of new capital to repay the government. And after
Speaker 1: he raised that three hundred and forty billion dollars, then
Speaker 1: like you know, the existing cherolders will have you know,
Speaker 1: zero point zero zero zero one percent of the companies
Speaker 1: or whatever, and so like their shold will be worthless,
Speaker 1: not worthless, that's not worth very much. But the other
Speaker 1: extreme is you can say, you know what that three
Speaker 1: hundred and forty billion dollars that Fanny and Freddy o
Speaker 1: the government, that was a mistake. They don't really owe that,
Speaker 1: so we'll just cancel that that right, And then the
Speaker 1: existing shaerolders are sitting on shaares worth one hundred billions
Speaker 1: of dollars, more than one hundred billion dollars. And those
Speaker 1: are kind of the two poles, right easting shareolders have
Speaker 1: nothing or they have like more than one hundred billion
Speaker 1: dollars of equity.
Speaker 2: Two scenarios.
Speaker 1: Two scenarios. I don't think it's like a prayer necessary
Speaker 1: to choose the second one. I think there's reasons to
Speaker 1: choose the second one. You might think it's fairer to
Speaker 1: the shareholders. You might think the sharelder's got a raw
Speaker 1: deal on twenty twelve. It's a reasonable thing to think.
Speaker 1: And you might think that giving the charrelders a good
Speaker 1: deal is a good way too. You know, you'll need
Speaker 1: to raise money for Pannion and Freddy. You'll have better
Speaker 1: capital markets access if you treat the shareolders nicely. But
Speaker 1: it's also the case that like giving one hundred billion
Speaker 1: dollars of value to these existing shareholders is like it's
Speaker 1: like a little bit of an optically strange move.
Speaker 2: Yeah, yeah, I don't know. It feels like any scenario
Speaker 2: is just going to be messy and optically strange. So
Speaker 2: what I care about, circling back to ummoving is what
Speaker 2: this could mean for mortgage rates.
Speaker 1: Yeah. Yeah.
Speaker 2: So Bill Polsey, he's the head of the FHFA, which
Speaker 2: oversees Fanny and Freddy. He said back in February that
Speaker 2: any effort to reprivatize the two must be carefully planned
Speaker 2: to make sure that the housing markets to remain safe
Speaker 2: without pressure on mortgage rates. So the explicit implicit guarantee,
Speaker 2: even though you know, there's a lot of question marks
Speaker 2: and details to be worked out there. At least that
Speaker 2: seemed to remove some of the risk that mortgage rates
Speaker 2: would spike here, right.
Speaker 1: Like who knows what every privatized Fanny and Freddy looks like,
Speaker 1: but like here's some possibilities. One is, like there's an
Speaker 1: explicit government guarantee that they pay for, so there's like
Speaker 1: a fee, Yeah, that would be incorporated into your mortgage rates.
Speaker 1: It might raise rates because right now Fanning's Fredady kind
Speaker 1: of have an implicit somewhat more than implicit but less
Speaker 1: than explicit guarantee because like they're in conservatorship and that
Speaker 1: line of credit with the federal government and they don't
Speaker 1: pay for that, or they they pay a lot for it,
Speaker 1: but the accounting is somewhat complicated. But like in a
Speaker 1: world where the government charged a fifty basis point fee
Speaker 1: for a mortgage guarantee, then like that's fifty basis points
Speaker 1: on your mortgage. Right, you could have a fully private
Speaker 1: Fanny and Freddy where either they are fortress balance sheet
Speaker 1: triple A super safe and raise a lot of capital
Speaker 1: and that raises their costs and thus raises mortgage rates,
Speaker 1: or they're like, yeah, double a pretty good and like
Speaker 1: rais capital and then like possibly the mortgage backed security
Speaker 1: is trade wider and that raises your mortgage rates. Right,
Speaker 1: the implicit guarantee is essentially they're backed by the government,
Speaker 1: but they don't pay for that backing. That's probably the
Speaker 1: cheapest free of mortgage.
Speaker 2: Right, let's go with Allen then, seems to be what.
Speaker 1: They're going with.
Speaker 2: That's good.
Speaker 1: I know there's other stuff too, Like I was reading
Speaker 1: a paper today, like a privatized Fanny and Freddy, Like,
Speaker 1: right now there are arms of the government. They kind
Speaker 1: of have always been arms of the government. You could
Speaker 1: imagine them being like more kind of free market, ye, right,
Speaker 1: Like one thing that Fanny and Freddy do is there's
Speaker 1: like a thing called a conforming mortgage. And if you
Speaker 1: meet the requirements of a conforming mortgage, which are not
Speaker 1: that low but not that high, then you kind of
Speaker 1: get the same rate. The rate for a conforming mortgage
Speaker 1: is the rate for a conforming mortgage. But like you
Speaker 1: can imagine a fully private Fan and Freddy having more
Speaker 1: discrimination among borrowers where there's less cross subsidization, and like
Speaker 1: very credit worthy borrowers get lower rates than like medium
Speaker 1: credit worthy borrowers, So like you could have the effect
Speaker 1: of not raising her lowering mortgage rates, but just like
Speaker 1: increasing the dispersion of mortgage rates. That would probably be
Speaker 1: fine for you.
Speaker 2: You don't know that. I guess maybe I have a
Speaker 2: horrible credit score. You don't know.
Speaker 1: I don't know.
Speaker 2: So, yeah, well, seems like we're going to be talking
Speaker 2: about this for years.
Speaker 1: I know, I know, I've a lot. You know. It's
Speaker 1: it's like it's like heated up and cool down over
Speaker 1: the years. And I used to write about it a lot,
Speaker 1: and then I didn't for a long time because like
Speaker 1: in the Biden administration, nobody every time about this. And
Speaker 1: it's right about it again in January because like people
Speaker 1: started tweeting about it, and now it's like it feels
Speaker 1: like it's kind of coming back.
Speaker 2: I feel like the shares are just a good metric
Speaker 2: of how much this is being tweeted about.
Speaker 1: Yeah, the show's just yeah, the market some real action.
Speaker 3: Yeah, there's a lot of social media activity.
Speaker 1: Bitcoin treasury companies.
Speaker 2: Yeah, when did that phrase become real? I guess Microsoft,
Speaker 2: I think.
Speaker 1: Micro Strategy probably years ago, but like it's become like
Speaker 1: everywhere in the last few.
Speaker 2: Yes, especially everywhere, like in just in the last few months,
Speaker 2: because MicroStrategy started doing this in twenty twenty.
Speaker 1: I think that when micro Strategy started doing the first
Speaker 1: of all, the micro Strategy is kind of a real company, yeah.
Speaker 2: And they are a software company, right, And like they.
Speaker 1: Sort of started slow. They bought some bitcoin. It got
Speaker 1: kind of MEMI and so like early in the days
Speaker 1: of micro Strategy buying bitcoin, you could say, and I
Speaker 1: probably did say that it looks like every time they
Speaker 1: spend one dollar buying bitcoin, it increased their market cap
Speaker 1: by two dollars and that's a good trade. But it
Speaker 1: wasn't like super super super obvious, right, I think they
Speaker 1: would say things are or levered bitcoin. It was like
Speaker 1: they had a business. Who knows how you value the business? Yeah,
Speaker 1: that stuff. You could look at that and be like, well,
Speaker 1: I can't just copy that. I can't just like put
Speaker 1: bitcoins in a public company and have them be worth
Speaker 1: twice what they're worth as bitcoins. And so I think
Speaker 1: it was a little bit slow adoption if people copy them,
Speaker 1: but like it was, you know, not everyone covered them.
Speaker 1: And then the last few months, like people have realized
Speaker 1: that you could take any random public company and just
Speaker 1: stuff it full of bitcoins and like it'll double the
Speaker 1: value of the bitcoins, and so that just feels like
Speaker 1: a great trade. There are a lot of people who
Speaker 1: own a lot of bitcoins, right, And if you own
Speaker 1: two hundred million dollars worth a bitcoin, you sell them
Speaker 1: for two hundred million dollars. But if you stuff them
Speaker 1: into a public company, they'll be worth a billion dollars
Speaker 1: and that's more. Yeah, So everyone's doing it.
Speaker 2: Everyone's doing it, and especially this week, it feels like
Speaker 2: everyone is doing this. So you know, you kicked off
Speaker 2: the week by talking about sharplink.
Speaker 1: I guess they did it. No, they did this, they
Speaker 1: did the Monday, Yeah, or.
Speaker 2: Time they did this is a flat circle.
Speaker 1: So sharplink is great. Like sharplink is the purest form
Speaker 1: of list because they were a sports betting marketing company
Speaker 1: or some Yeah, they had a two million dollar market
Speaker 1: cap as of like mid last week. Someone pumped them
Speaker 1: full of four hundred and twenty five million dollars of
Speaker 1: ethereum right or eth and so now they're trading it
Speaker 1: like a two plus billion dollar pro form a market cup.
Speaker 1: I want to be clear, like I wrote about this
Speaker 1: and I said market cup, but it's not. They're done
Speaker 1: have two point four billion dollar market They have a
Speaker 1: two point four billion dollar pro form a market cup
Speaker 1: right now. They have some share with outstanding, not very
Speaker 1: many of them, and the shares traded a high price,
Speaker 1: and they have like whatever like Bloomberg will tell you
Speaker 1: eighty million dollar market caps something like that. But they've
Speaker 1: also agreed to issue all these shares to these investors
Speaker 1: who want to pump them full of ethereum. And if
Speaker 1: you count those shares to the market caps like two
Speaker 1: and a half billion dollars. And this is important because
Speaker 1: like you know, we talked about QXO a few times. Yeah,
Speaker 1: same deal, where you have a company with like very
Speaker 1: few shares outstanding and a huge pot of money coming in,
Speaker 1: and like the retail investors are like, oh, look, this
Speaker 1: company has four hundred million dollars with ethereum and its
Speaker 1: market cap is eighty million dollars. I should buy some
Speaker 1: more stock. Right, That's wrong, right, because like the eighty
Speaker 1: million doesn't count the four and twenty five million of ethereum.
Speaker 1: But the stock is like the publicly traded stub is
Speaker 1: small enough, and like the market cap is confusing enough
Speaker 1: that people are buying it at a five or ten
Speaker 1: times premium to the value of the ethereum and the pot,
Speaker 1: and like there's nothing else, right, two million dollar company, Right,
Speaker 1: But there's a ethereum in a pot and it trades
Speaker 1: at a large multiple of the value of the ethereum.
Speaker 2: It is somewhat interesting that they went with ethereum versus bitcoin.
Speaker 1: Oh, I just think that people need to pick a lane.
Speaker 1: And like Bitcoin is so saturated that like people are
Speaker 1: doing Solana, they're doing ethereum, they're.
Speaker 2: Doing you mostly hear popcoin, they're.
Speaker 1: Doing doage coin, they're doing everything. But yeah, a lot
Speaker 1: of them aren't bitcoin. But it's not only bitcoin.
Speaker 2: Yeah. Yeah.
Speaker 1: I wrote about two other big ones this week, household
Speaker 1: name meme companies are you know, DJT Trump Media and
Speaker 1: Technology Group and game Stop both announced bitcoin treasury buys
Speaker 1: and their stocks both went down, which is like, that's the.
Speaker 2: End of it, Okay, the trade's over.
Speaker 1: I don't think the trades are literally over, because I
Speaker 1: think those are special cases of companies that were kind
Speaker 1: of already meme stocks. But it's definitely the case that
Speaker 1: any random company for at least several weeks that announced
Speaker 1: it bought a lot of bitcoin, like the stock would
Speaker 1: go way up and people are like, oh, we should
Speaker 1: do that. Yeah, and then these two big name ish
Speaker 1: meme companies announced it and their stocks went down.
Speaker 2: It's like, yeah, trades over for game Stop. So they
Speaker 2: announced in March that they plan to.
Speaker 1: Actually this is not new news for games. They actually
Speaker 1: bought them coin this week and it went down.
Speaker 2: But like, in some ways, it's amazing that it took
Speaker 2: this long for them to come up with the plan
Speaker 2: that we're going to do this for game Stop. I
Speaker 2: feel like, I don't know, I would have expected it
Speaker 2: a couple of years ago, but here we are.
Speaker 1: Okay, First of all, I would expect it from AMC,
Speaker 1: who does everything like AFC bought a gold mine because
Speaker 1: that was funny, right, like AFC.
Speaker 2: Should somehow I had forgotten about.
Speaker 1: That they bought a gold mine.
Speaker 2: Maybe we should talk about that more. I would like
Speaker 2: to get a status report on that.
Speaker 1: I know every stuff, And I'm like, they bought a
Speaker 1: gold mine and I read about it, but I never did.
Speaker 1: I'm not even sure they literally, but I think they
Speaker 1: like did some sort of murder with a gold coin.
Speaker 1: I don't know anyway, Games Stop has always been like
Speaker 1: a little bit less like doing every meme, but they
Speaker 1: do a lot of memes stuff. But yeah, I think
Speaker 1: that if you want to do a viitcoin treasury strategy,
Speaker 1: you kind of have to be all in on it.
Speaker 1: And like gamesop, I still want to sell video games
Speaker 1: at them all, And I think it was reasonable for
Speaker 1: a long time to think that if you're just GameStop,
Speaker 1: you don't really have an advantage in doing that strategy.
Speaker 1: M h macro strategy was there to do at first.
Speaker 1: It's not clear why a copycat would be particularly valuable,
Speaker 1: so you might have tried to do something else before
Speaker 1: getting into the viccoins state.
Speaker 2: So you wrote that, you know, you compare maybe Michael
Speaker 2: Saylor will do something cooler with it's bitcoin than the
Speaker 2: CEO of DJT. But it doesn't seem like there's anything
Speaker 2: to do with it that's cool other than just buy
Speaker 2: more of it.
Speaker 1: Okay, I hear you.
Speaker 2: I don't really disagree it. They're not going to say
Speaker 2: I was being.
Speaker 1: Intentionally vague about doing cool stuff, Okay. One view of
Speaker 1: these bitcoin treasury companies is that like they're sort of
Speaker 1: like a like meta pump for pitcoin, right, The idea
Speaker 1: is they will buy all the bitcoin and not sell it,
Speaker 1: and that will cause the price of pitcoin to go
Speaker 1: up and they'll be rich. It's just like a diamond
Speaker 1: hands like theory of pitcoin like abstracted back one level
Speaker 1: to these treasury companies, but another theory and a related theory,
Speaker 1: I guess is like a lot of them, including micro strategy.
Speaker 1: We'll talk about like investor education efforts right right, And
Speaker 1: we talked about this with like twenty one. It's like
Speaker 1: another big Jack Muller's Jack Millers, Yeah, like big bitcoin
Speaker 1: treasury company with like Tether's bitcoins and you know they're
Speaker 1: like we're going to do investor education or like knack
Speaker 1: Amoto holdings like merch the opioid company, like a.
Speaker 2: Tiny drug company now on I haven't heard of.
Speaker 1: It's called kindly Empty. It's just like it's just random mania,
Speaker 1: all these like random like tiny companies, like you can
Speaker 1: pump them full of bitcoins, and like they all talk
Speaker 1: about like we're gonna do marketing, media, investor education. It's
Speaker 1: all like you know, we're gonna make the price of
Speaker 1: bitcoin go up, right yeah, And so like your theory
Speaker 1: is not only will they own bitcoin, but they'll do
Speaker 1: stuff to make the price of bitcoin go up. I
Speaker 1: don't know why that would make you buy them rather
Speaker 1: than bitcoin, but whatever. But like I will say, like
Speaker 1: micro Strategy, I have like a really interesting capital market
Speaker 1: strategy where they're like, we're gonna use every part of
Speaker 1: our cab structure to raise more money to buy a bitcoin.
Speaker 1: And you can imagine being like, I'll buy the equity
Speaker 1: because like they will get more attractive funding to buy
Speaker 1: bitcoin by like selling converts at a high volatility. I
Speaker 1: don't know, that's not a crazy position, but like most
Speaker 1: of these companies are, so yeah, we're gonna buy bitcoin
Speaker 1: and we're gonna talk about buying bitcoin. Why would you
Speaker 1: have a premium for that?
Speaker 2: Yeah, I don't know. This is a tangent, but I
Speaker 2: just want to talk to like the average employee at MicroStrategy,
Speaker 2: which is now just strategy by the way, we've been
Speaker 2: calling a micro strategy.
Speaker 1: It's still like a fish or whatever.
Speaker 2: Nothing matters because they employed thousands of people. I want
Speaker 2: to talk to an average employee there who isn't involved
Speaker 2: with the bitcoin strategy at all.
Speaker 1: It is a little perplexing, but you know, like if
Speaker 1: they get data stock, they're.
Speaker 2: Pretty happy I don't know, but I agree obviously, But
Speaker 2: you know, do they just think of it like I
Speaker 2: work at a conglomerate, Like there's part of the business
Speaker 2: that is just so totally disconnected to what I do.
Speaker 1: Right, It's funny, I've already said that, like the software
Speaker 1: company really matters because like I don't know, like some
Speaker 1: part I don't know what part, at least some small
Speaker 1: part of the micro strategy thesis is like they could
Speaker 1: get in the S and B one day, yeah, and
Speaker 1: then like yeah, you're in the NAZAC one yeah, right,
Speaker 1: because they're a real company, right yeah, And like if
Speaker 1: you're just a bitcoin ETF, you can't get into these indexes.
Speaker 1: It's like a little bit harder for like an active
Speaker 1: equity manager to buy an ETF share than it is
Speaker 1: to buy a share of an operating company. So I
Speaker 1: think like there's something very important about what the software
Speaker 1: employees do at micro Strategy that's a little bit undermined
Speaker 1: by like kindly MD and you know, sharplink, where like
Speaker 1: the operating business is so small, so small compared to
Speaker 1: the pot of the Coiner Earth theorem.
Speaker 2: Just to your point that you know, perhaps you could
Speaker 2: see micro strategy entered the S and P five hundred.
Speaker 2: It is amusing how much crypto exposure there is in
Speaker 2: the S and P five hundred right now, especially with
Speaker 2: Coinbase being added. These are our I assume that your
Speaker 2: four one k is in the S and P five hundred.
Speaker 1: I don't own any crypto because in part because like
Speaker 1: there's a notion of journalists together because you're not supposed
Speaker 1: to enryptos. You've heard about it, and like to me,
Speaker 1: I'm like, like I don't know like shares of Tesla,
Speaker 1: but I own mostly index funds, which on's.
Speaker 2: Tesla, right, Oh, yes, you do.
Speaker 1: Yeah, and like to me, like, the neutral portfolio is
Speaker 1: not owning nothing. The neutral portfolio is owning all of
Speaker 1: the financial assets in the world proportion to their like,
Speaker 1: you know, value. And so if you own zero bitcoin,
Speaker 1: you're like structurally biased against bitcoin because bitcoin is like
Speaker 1: a trillion dollars of value. So you should own like
Speaker 1: a little bit of bitcoin to like fully reflect the
Speaker 1: global financial portfolio.
Speaker 2: And now I do through that, you do, yeah.
Speaker 1: And you know, like why am I so smart?
Speaker 2: Right? Like why are you so smart if.
Speaker 1: One percent of like the global financial portfolio is bitcoin?
Speaker 1: Like why shouldn't I own that one percent of mys
Speaker 1: in bitcoin.
Speaker 2: I think that's a pretty reasonable take.
Speaker 1: And then I have to like it. But they have
Speaker 1: to like a lot of companies, right, Like I'm not right.
Speaker 2: Yeah, So you just want a market cap weighted total
Speaker 2: asset portfolio.
Speaker 1: You're looking at me like that's a weird thing to want.
Speaker 1: That's like the most normal possible thing to want. Everyone
Speaker 1: wants that, just you can't get it, but you can
Speaker 1: get closer to it by like having bitcoin treasury companies
Speaker 1: in the ass and.
Speaker 2: P Maybe I sound skeptical, but I'm not. I think
Speaker 2: that's great.
Speaker 1: I'm a simple man. I just want the global financial
Speaker 1: asset portfolio.
Speaker 2: Simple man. I just want to go home and see
Speaker 2: my bird.
Speaker 1: And that is the Money Stuff Podcast.
Speaker 2: I'm Matt Levian and I'm Katie Greifeld.
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