Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: How about them? Nixt Yeah, Michael R. Bloomberg photographed next
Speaker 2: to Timothy Shallamy and Kylie Jenner. That was a highlight
Speaker 2: for me. Taylor Switch was also there. Paul Tudor Jones
Speaker 2: was behind her. What an interesting cast of characters on
Speaker 2: Celebrity Row.
Speaker 1: It's funny. I feel like I've seen a number of
Speaker 1: articles about who was there on Celebrity Around. None of
Speaker 1: them mentioned Paul Tudor Jones.
Speaker 2: He was there.
Speaker 1: That's the kind of insight you need to come to
Speaker 1: Bloomberg for.
Speaker 2: I went to bed at halftime and the vibes were
Speaker 2: that of a funeral. Yeah, it was so bad.
Speaker 1: Then they changed.
Speaker 2: Oh my goodness did they change. I woke up at
Speaker 2: like one in the morning, and uh, I couldn't believe it.
Speaker 1: Can I tell you something cute? My kids love sports,
Speaker 1: and my I guess then loves basketball. But like he is,
Speaker 1: he is particularly enamored of half court shots, and he
Speaker 1: is like got it in his head that like a
Speaker 1: half court shot is the best thing in basketball. And
Speaker 1: so when like, you know, they go to bed before
Speaker 1: the next games, but like they could come down sturds
Speaker 1: in the morning, We're like the nixt one one, O seven,
Speaker 1: one of the six was a huge comeback, and he's like,
Speaker 1: were there any half court shots?
Speaker 2: Otherwise I'm not interested.
Speaker 1: It's pretty like one day in like the previous Spurs series.
Speaker 1: I cou'd be like, yes, Wemby made a half court
Speaker 1: shot at the first half.
Speaker 2: We don't speak his names.
Speaker 1: Yeah, Hello, and welcome to the Money Stuff Podcast. I'm
Speaker 1: Matt Levin and I heard the Money Stuff calm with.
Speaker 2: Then we're Companion, and I'm Katie Greifeld, a reporter for
Speaker 2: Bloomberg News and an anchor for Bloomberg Television.
Speaker 1: I was thinking, like two weeks ago you were talking
Speaker 1: about how we were going to be recording this like
Speaker 1: a crucial time for the space x Ipo because we're
Speaker 1: recording this at like two in the afternoon on thirteen
Speaker 1: to thirteen on Thursday, and it'll come out, you know,
Speaker 1: in the morning ish on Friday, and between now and then,
Speaker 1: the SpaceX IPI will have priced and maybe even started
Speaker 1: trading all that kind of dobt that and what will
Speaker 1: we do? What will we do? I read about it
Speaker 1: today a little bit. Yeah, time today was about why
Speaker 1: we're podcasting today. I kind of was like, there's no,
Speaker 1: there's not a pricing today, Like I understand that the
Speaker 1: IPI is pricing today, but actually priced a week ago
Speaker 1: because they went out at a fixed price and a
Speaker 1: fixed number of shares. They're like, the price is one
Speaker 1: thirty five per sure, take it or leave it? All
Speaker 1: accounts are that people took it?
Speaker 2: Yeah, a lot of people.
Speaker 1: It's like Blombers. Last reporting I think was that it
Speaker 1: was four times over subscribe, but that's like the institutional
Speaker 1: there's also like a hundred billion of retailer ITER's like
Speaker 1: it's significantly over subscribed, and so it would be interesting
Speaker 1: if it prices tonight at like one hundred and forty
Speaker 1: dollars or share, but I don't think they can even
Speaker 1: do that. I think they're in a price at the
Speaker 1: price they've said they're going to price to that, and
Speaker 1: then so we know the space, like if your price
Speaker 1: which is one hundred and thirty five dollars per share,
Speaker 1: we're going to beat this if if if I'm wrong.
Speaker 2: This makes my job on television today a lot easier
Speaker 2: because we're awaiting the pricing.
Speaker 1: Waiting pricing, and then like it's one hundred thirty five.
Speaker 1: And then of course the question is where it all
Speaker 1: open tomorrow, whichill probably happen after we published this episode.
Speaker 2: But theoretically, yeah.
Speaker 1: No, not theoretically, I mean, like you know, the stock
Speaker 1: exchange opens at nine thirty in the morning.
Speaker 2: Yeah, it's like, but I feel like you get first trades.
Speaker 1: They're like two in the after Yeah, it's all right,
Speaker 1: So it could open because they're going out at a
Speaker 1: fixed price that is, like Elon Musk's arbitrary decision. It
Speaker 1: could open wildly up or wildly down. Yeah, But I
Speaker 1: mean the thing that I read about today is like
Speaker 1: there's there's like market prices, right, so there's like the
Speaker 1: secondary private company secondaries like the five and forge inequities
Speaker 1: on which like I don't know how real those prices are,
Speaker 1: I don't know how much trades. And then yeah, but
Speaker 1: there's also like pretty robust gambling markets. Yes it's not
Speaker 1: just like polymarket, but also like finance and hyper liquid,
Speaker 1: like big crypto exchanges run essentially cash settled derivatives markets,
Speaker 1: right where you can just bet on the price of
Speaker 1: baseix luck, and then like you know, it eventually morphs
Speaker 1: into connecting to the actual public price of the stuck
Speaker 1: and those are training it like you know, up, you know,
Speaker 1: twenty percent from the IPO price, which is kind of
Speaker 1: what you want in an IPO. Yeah, I don't know.
Speaker 1: The market is kind of saying like you've done it perfectly.
Speaker 1: Elon Muss, you got it right on the first try. Yeah.
Speaker 2: I was actually having a conversation around like betting markets
Speaker 2: and this particular IPO, how they seem particularly relevant for
Speaker 2: this offering since there's just so much demand and it
Speaker 2: seems hard to get your little hands on it.
Speaker 1: Right. I feel like I spent a lot of time
Speaker 1: complaining about the betting markets. Yeah, for two reasons. One
Speaker 1: like mostly their sports bets and that's annoying, and then
Speaker 1: secondly today extent their stock market bets, like that's just illegal,
Speaker 1: and like all of these things are offshore like polymarket
Speaker 1: and Binance and hyper liquid other spaceix stock price bets
Speaker 1: are not open to US customers because like it's just
Speaker 1: clearly forbidden by US securities law and kind of for
Speaker 1: good reason. But also like the argument like they provide
Speaker 1: truth function and price seek and you know, and and
Speaker 1: price discovery is kind of real, right yeah, maybe right,
Speaker 1: Like if the stock opens at like four hundred tomorrow
Speaker 1: or like forty then whoops, never mind, But like for now,
Speaker 1: these things are like yeah, you got it perfectly right,
Speaker 1: you know.
Speaker 2: Yeah, to the point like are you only talking about
Speaker 2: individual stocks? Can I bet on the future movement of
Speaker 2: the S and P five hundred in the next fifteen minutes?
Speaker 1: Some more complicated question, but like I think the short
Speaker 1: answer is like yeah, you kind of can, because like
Speaker 1: for some reason index features the regulator regime is so weird.
Speaker 1: But basically, prediction markets are commodities exchanges, and for boring
Speaker 1: historical reasons, index futures are traded on commodities exchanges and
Speaker 1: so like cals, she can list them, and single stock
Speaker 1: futures are SEC regulated and so can't list them. And
Speaker 1: it's like.
Speaker 2: Marked it than that, but feel like we're getting into
Speaker 2: dangerous territory. Well also with our we're going to talk
Speaker 2: a little bit about the regular regime, but I want
Speaker 2: to talk about SpaceX a little bit more. Oh SMP
Speaker 2: came out.
Speaker 1: Yeah, we haven't talked about this.
Speaker 2: I know, which is crazy because it feels like so
Speaker 2: long ago, because every day it feels like a year.
Speaker 1: Right, everyone was like all the indexes are changing their
Speaker 1: rules to let SpaceX enter their index as fast as possible,
Speaker 1: and shocker SNP like put out a consultation being like,
Speaker 1: we're going to waive our profitability requirements and let them
Speaker 1: in in six months, and then they're like, Nope, we
Speaker 1: did the consultation and we decided we're not going to
Speaker 1: do that.
Speaker 2: So now we're talking about potentially a year before well.
Speaker 1: The minimum is a year. But then like they also
Speaker 1: have to be profitable, you know, I think I think
Speaker 1: the SMP rules you have to be probable for like
Speaker 1: four quarters basically, yeah, which is that's true twenty forty
Speaker 1: you know.
Speaker 2: So you're maybe a little bit optimistic. This was a
Speaker 2: shakra though. I remember chatting about it with my ETF
Speaker 2: friends over at Bloomberg Intelligence and they were replacing like
Speaker 2: seventy five percent odds that the S and P five
Speaker 2: hundred or the S and P rather would do what
Speaker 2: all the other index providers did, And what an interesting
Speaker 2: world this is going to create, right, It's kind of
Speaker 2: ugly for the other index providers.
Speaker 1: All of it is ugly for all index providers in
Speaker 1: the sense that if you think that you are a
Speaker 1: passive investor by buying, you know, an undifferent like whatever
Speaker 1: index you happen to buy, then it's a little annoying
Speaker 1: to be like, no, these are like active decisions made
Speaker 1: by committees after consultations in round numbers. Is the S
Speaker 1: and P five hundred the same thing as the CRISP
Speaker 1: Total Stock Market index that underlies the big Vanguard fund
Speaker 1: like kind of right, but for the next year or
Speaker 1: two or five, they're going to have wildly divergent performance
Speaker 1: because one of them will have the three big as
Speaker 1: STACs basically and one of them won't, right, Yeah, and
Speaker 1: that's going to be a big difference in index performance.
Speaker 1: And pere like, wow, some passive investment, you know. It's
Speaker 1: just like it's like such an active decision that has
Speaker 1: such an economic invit By the way, you're like, oh,
Speaker 1: it's it's bad for the other index providers, Like I
Speaker 1: don't know, it depends if they go up optically.
Speaker 2: I'm just talking about the optics.
Speaker 1: Someone everyone says, like I understand that, like the sort
Speaker 1: of like house view everywhere is that these index providers
Speaker 1: are evil for changing their rules to accommodate Elon Musk.
Speaker 1: I don't think that's true. I think it's like they're
Speaker 1: like look, you know, our job is to provide exposure
Speaker 1: to the stock the stock market.
Speaker 2: I am sympathetic to that view. I mean, you think
Speaker 2: about the mission of a lot of these indexes, the
Speaker 2: Nasdaq one hundred. They want to have the one hundred
Speaker 2: largest companies that are listed on Nasdaq. It makes sense.
Speaker 2: But definitely have seen SMP presented as like their decision,
Speaker 2: they're the adult in the room here.
Speaker 1: There's vocal support for what SMP did. I think there's
Speaker 1: vocal like, yeah, I got an email from one reader
Speaker 1: who's like, look, I don't buy the SMP to buy
Speaker 1: all like the five hundred biggest companies. I buy the
Speaker 1: SMP for its rules that you have to be profitable
Speaker 1: and liquid and you know, seasoned public company. And he
Speaker 1: might be the only one. I don't really believe that.
Speaker 1: That's how most like retirement savers are like, oh, you
Speaker 1: know what I really care about is SMP's rules. You know,
Speaker 1: so clearly that guy exists. But also, like I think
Speaker 1: a lot of people like when this problem is presented
Speaker 1: to them, when they were like reminded of the fact
Speaker 1: that SMP has rules and it's thinking about waving them
Speaker 1: for SpaceX. A lot of people are like, no, those
Speaker 1: rules are good and we don't like this, but will
Speaker 1: they change their minds in two weeks if SpaceX.
Speaker 2: Doubles and I don't know how would look terrible for them.
Speaker 2: I feel like for who S and P?
Speaker 1: Yeah, the thing is like S and P. Actually, in
Speaker 1: some ways it's not that big a problem for S
Speaker 1: and P because S and P was never considering, like,
Speaker 1: we're going to put SpaceX in the index in two weeks,
Speaker 1: which would like a lot of the other index of it.
Speaker 1: And one reason they didn't do that is you just
Speaker 1: could not physically fit the S and P demand at
Speaker 1: this space because like the SMP devat is like any
Speaker 1: I don't know, I'm going to say the run number,
Speaker 1: it's probably like ten plus percent of yeah companies stocks,
Speaker 1: and so faceax is going public with like four percent
Speaker 1: of its stock, Like you can't you can't fit the SMP.
Speaker 1: So like yeah, you know, they were like, should we
Speaker 1: do this in six months or should we do it
Speaker 1: in three years? Right? Yeah, So whatever happens in the
Speaker 1: next six months wouldn't have mattered anyway what their decision was.
Speaker 2: I have to say, I think this is the most
Speaker 2: interesting outcome, the fact that you had all the other
Speaker 2: index providers make this decision, S and P standing firm.
Speaker 2: And part of the reason I'm so interested is because
Speaker 2: I have to imagine there's a whole bunch of active
Speaker 2: managers out there who are absolutely psyched that SpaceX isn't
Speaker 2: going into the S and P Oh yeah, it's just
Speaker 2: been impossible to beat that benchmark, and now you potentially
Speaker 2: have a chance to.
Speaker 1: Right. Also, you're not forced to make a decision. Yeah,
Speaker 1: in the same way, like if you're like a quote
Speaker 1: unk active manager whose job is to track the index
Speaker 1: and beat it a little bit, or it might be
Speaker 1: how some active managers see themselves, then putting SpaceX in
Speaker 1: the index made you like either have to own it
Speaker 1: or have to really confident that you that you're not
Speaker 1: like missing out on performance. Having SpaceX in the index
Speaker 1: means that if you do not own SpaceX for your career,
Speaker 1: it's equivalent to being short SpaceX. And like you might
Speaker 1: not like an Elon Musk company, but you you don't
Speaker 1: like Tesla, you wouldn't necessarily short it because it's terrifying, right, yeah,
Speaker 1: And like you know, the same dynamic exists if you're
Speaker 1: like a long only manager benchmark to the index, and
Speaker 1: it's like, if I don't buy SpaceX and then it doubles,
Speaker 1: I'm gonna look like an idiot. So you get the
Speaker 1: thodds that pullet a little bit, and if you like SpaceX,
Speaker 1: you can buy it and not perform.
Speaker 2: Something we were talking about last week was ESG considerations
Speaker 2: around SpaceX. The governance super hard here and UH.
Speaker 1: Is the worst, like Mark Levine that relation the like
Speaker 1: Comptroller of New York put out his statement being like,
Speaker 1: we're going to try to stop them. They can't be
Speaker 1: allowed to disempowers.
Speaker 2: They're going to try to stop SpaceX. They're going to
Speaker 2: try to stop Elon Musk. Who are they trying to stop?
Speaker 1: He's gonna write a strongly worded letter. Wow, the governance
Speaker 1: of SpaceX is such that you cannot complain about the
Speaker 1: governance of SpaceX. You can't like buy shares and like
Speaker 1: sue or like run a proxy fight, like those are
Speaker 1: all closed off to you. So there's nothing you can do.
Speaker 1: Either buy the shares and just trust Elon, or you
Speaker 1: don't buy the shares, or the third option is you
Speaker 1: write strongly worded letters saying they should really have different governance.
Speaker 1: But it doesn't matter. Yeah, the governance is bad. I
Speaker 1: don't know what they e.
Speaker 2: I don't really know. I don't know how to make
Speaker 2: head or.
Speaker 1: Sort of like it's like sort of orthogonal to all
Speaker 1: previous esg like environmental conversations. It's like, Wow, we're going
Speaker 1: to put a lot of data centers in space. Is
Speaker 1: that good for the environment?
Speaker 2: Do the polluting in space versus.
Speaker 1: A lot of solar energy his data centers?
Speaker 2: Yeah?
Speaker 1: Oh, I really like the Bloomberg story. He was yesterday
Speaker 1: maybe today? Whatever about like all the retail investors quoting them,
Speaker 1: saying it's like they tried to borrow money from a
Speaker 1: bank or for their sister to buy more SpaceX stock
Speaker 1: or uh so. One woman says there's no such thing
Speaker 1: as too much when it comes to investing in one
Speaker 1: of the most ambitious companies that ever existed, and another
Speaker 1: guy says, I'm willing to overpay for it just to
Speaker 1: say I'm part of the thing, which is like an
Speaker 1: amazing I don't think about it, Like, what what is
Speaker 1: a meme stock? Yeah, it's hard to get like like
Speaker 1: it's easy for like you to look at like game
Speaker 1: Stop and be like, oh, this is a company that
Speaker 1: trades above its fundamental value because retail investors like it.
Speaker 1: But like then you go on like you know, Reddit
Speaker 1: or whatever, and like people are making fundamental cases for
Speaker 1: game Stop. You can't necessarily like tell a meme stock
Speaker 1: by what people say about it, right, You have to
Speaker 1: sort of like be like this enthusiasm is like it's
Speaker 1: my aesthetic judgment that some of these stocks are meme stocks.
Speaker 1: But then this guy is like, I know, I'm a
Speaker 1: were paying I don't think this company is worth that much,
Speaker 1: but I want to be part of this thing.
Speaker 2: I want to participate in the culture. That's exactly think
Speaker 2: it's kind of beautiful. I like how candid he is
Speaker 2: and like true to his own intentions. He is right
Speaker 2: you know something I did think was interesting and we've
Speaker 2: probably have to move along. But I just think the
Speaker 2: conversations that we're having around SpaceX anthropic open AI. I
Speaker 2: think back to the conversations we were having on this
Speaker 2: podcast probably a year ago talking about how Private Forever
Speaker 2: is the new mantra and like the dearth of IPOs,
Speaker 2: and it is pretty amazing to think about where we
Speaker 2: are at this moment where SpaceX is about to go public.
Speaker 2: We have s ones in some form from anthropic and
Speaker 2: open AI. It's just like a total total one to eighty.
Speaker 2: It feels like in some ways to the conversations that
Speaker 2: kind of defines my twenty twenty five.
Speaker 1: Yeah, it's interesting. I was thinking I think a lot
Speaker 1: about like Uber was part of a wave of like
Speaker 1: very similar conversations where it was like I think I
Speaker 1: started writing private markets or the new public markets. Yeah,
Speaker 1: when Uber was private, and there's this like real sense
Speaker 1: of like companies could stay private forever, Like all the
Speaker 1: technology for like tender offers and like fundraising in private
Speaker 1: markets and all that stuff like was being developed, and
Speaker 1: there is this real sense that companies didn't want to
Speaker 1: go public anymore, and all the big companies that stay
Speaker 1: private and then like they all kind of went public.
Speaker 1: And yeah, there's another wave of it this year basically,
Speaker 1: And you know, some of it is just like all
Speaker 1: of those stories are always overblown and eventually every company,
Speaker 1: every you know, big tech setup is going to go public.
Speaker 1: But some of it is just like the very specific
Speaker 1: AI story of like you need a gajillion dollars of
Speaker 1: CAPEX for data centers, and so you have to tap
Speaker 1: every possible financing source and being a public company helps
Speaker 1: you do them.
Speaker 2: Yeah, it's hard to say how much you can extrapolated out.
Speaker 2: I did think to this point though, the language in
Speaker 2: Open AI, the company coming out and saying that they
Speaker 2: basically just want to give themselves the option to go public,
Speaker 2: that there is this pressure to go public and they
Speaker 2: aren't kind of an orace with anthropic But the company
Speaker 2: said that they haven't decided on timing for an IPO yet.
Speaker 2: It may be a while because there are things we
Speaker 2: want to do that are likely easier as a private company,
Speaker 2: but it's a complicated set of trade offs, and this
Speaker 2: gives us the option to go public sooner if that
Speaker 2: ends up being the best. Which was pretty candid.
Speaker 1: Yeah, people who complain about the governance of space acts
Speaker 1: like they're not wrong. It is a real see change
Speaker 1: from how public companies are run. And basically it's like
Speaker 1: Elon Musk can do whatever he wants. Is se we're
Speaker 1: verutting stock, he controls the board. You can't sue him.
Speaker 1: There's a real way to sue for pre chef duties.
Speaker 1: The company can do whatever they wants, and obviously that
Speaker 1: is informed by Elon Musk's own particular history with public
Speaker 1: market lawsuits, but I don't know. Open Eye is like
Speaker 1: there are things we can do as a private company
Speaker 1: that are easier for a private Like some of those
Speaker 1: things will be easier if you copy the SpaceX governance
Speaker 1: structure and public right some of them were not, like
Speaker 1: some of like not having disclosure is useful or whatever,
Speaker 1: but like SpaceX will not be as constrained by public
Speaker 1: company rule as any previous public company. And you know,
Speaker 1: I wonder if Open Aye and Anthropic, which are not
Speaker 1: run by Elon Musk but which have similar like idiosyncratic interests,
Speaker 1: like maybe they'll do the same thing and be like
Speaker 1: Cheryler's just gotta trust whatever.
Speaker 2: We say, take it or leave it. We'll see. I
Speaker 2: will be firmly on attorney leave when those companies go public.
Speaker 1: So yeah, and this podcast will have already come out
Speaker 1: when that SpaceX officially public. Sports. Yeah, one thing I
Speaker 1: have been saying for a while now is that like
Speaker 1: now there is federal sports gambling. Yeah, And like one
Speaker 1: thing I said is like there's like now like federally
Speaker 1: regulated sports gambling where Calshi runs a sports betting operation
Speaker 1: that is regulated by the CFTC and it says, because
Speaker 1: it's regulated by the CFTC, it can't be regulated by
Speaker 1: state gaming regulators, and it has mostly won that argument
Speaker 1: in court. Mostly courts have said, yep, that's right. The
Speaker 1: CFTC regulation preemp state regulation. And so because you're a
Speaker 1: CFTC regulated sports book, you don't have to follow state laws. So,
Speaker 1: for instance, you can offer bats in states that forbid
Speaker 1: sports gampling. You can offer sports gambling to eighteen year olds,
Speaker 1: whereas most states restricted to twenty one year olds. All
Speaker 1: these things, and one thing that I said is like,
Speaker 1: this is a weird situation for many reasons, but one
Speaker 1: reason is that the CFTC does not actually regulate sportscampling.
Speaker 1: There's no rules that the TC has ever published about
Speaker 1: sports betting until this week. Yeah, I published a big
Speaker 1: set of proposed rules. They're not finally out, they have
Speaker 1: to go through notice in common, but like they propose
Speaker 1: rules for how to federal sports betting, which I just
Speaker 1: found just as a concept are very funny.
Speaker 2: Yeah. I enjoyed your column on this, the CFTC confronting
Speaker 2: questions that no regulator has had to contemplate before.
Speaker 1: Like plenty of state gaming regulators.
Speaker 2: Yeah, for sure, not necessarily the markets regulators. No, and
Speaker 2: I do love you know when talking about pre collegiate sports,
Speaker 2: I went to high school, Like that's where my brain went.
Speaker 2: You just went straight to the little league.
Speaker 1: Yeah, I mean for that have children high school. I
Speaker 1: have one of them. Is it's an accomplished little leaguer.
Speaker 2: I thought you were going to say I have a
Speaker 2: side hustle, and it's no.
Speaker 1: But like I will tell you, Katie, I am like
Speaker 1: the least athletic or sports knowligible person. But like I
Speaker 1: go to these little league games and I'm like, yeah,
Speaker 1: they need assistant coaches. That could be the third least coach.
Speaker 1: I feel like I'm going to be a little league
Speaker 1: coach within the next two years.
Speaker 2: I thought you were contemplating basketball as well.
Speaker 1: Uh, my daughter is like a competitive basketball and softball player,
Speaker 1: but I feel like I'm more suited to little league.
Speaker 2: I was going to say either little league it seems
Speaker 2: like slower paced than basketball, but then I realize I'm
Speaker 2: thinking about the NBA Finals, which is super fast, and probably.
Speaker 1: Basketball is just faster paced than Yes, it's fair yeah anyway, yes,
Speaker 1: so you can't bet on it. I wrote that the
Speaker 1: CFTC in it's like one hundred page role making about prediction.
Speaker 1: Markets did have to confront the question should there be
Speaker 1: federally regulated betting on Little league? Right? Technically what they
Speaker 1: say is pre collegiate sports or sports below the collegiate level,
Speaker 1: so that include high school sports and also include little league,
Speaker 1: And they come out on the side of no, you
Speaker 1: can't have betting on little league because essentially these are
Speaker 1: market integrity questions, right, Like, like you do not want
Speaker 1: to allow really regulated betting slash swap contract trading on
Speaker 1: stuff where you can't be like pretty confident that the
Speaker 1: result is one like determinable who won a little league game?
Speaker 1: There's no like official records, right yeah, and then two
Speaker 1: not manipulable, right, Like you don't want you want someone
Speaker 1: to throw a little league game to win a bat,
Speaker 1: That's true, whereas like, what are the chances of someone
Speaker 1: throwing an NBA game to win a bet? They're not zero,
Speaker 1: but like there's a lot of constraints on that, Yeah,
Speaker 1: fewer constraints on little league.
Speaker 2: In some ways, it's a shame because I feel like
Speaker 2: you could have a real edge, you know, if.
Speaker 1: You well that's the point. Yeah, Yeah, the point is that.
Speaker 1: Like the point is that, like prediction markets are meant
Speaker 1: to like be truth seeking functions, and like you want
Speaker 1: to incentivize people to to like find public information find
Speaker 1: difficult to get, but like you know, legally accessible information
Speaker 1: to build models to try to predict the future. This
Speaker 1: is mostly economically relevant for like nonsports prediction markets. It's like, ooh, well,
Speaker 1: like you know there's a prediction market and what the
Speaker 1: FED will do and like people who predict that, well,
Speaker 1: you know, add information to the world, whereas like people
Speaker 1: who predict the next game, well, will win a sports bet. Yeah,
Speaker 1: but the CFTC is agnostic. It's like sports are economically important,
Speaker 1: so we're going to have lots of betting on sports,
Speaker 1: but we want to encourage people to like do work
Speaker 1: that is informative rather than just like bribe or wrath.
Speaker 1: They want to ban injury contracts because like those are like,
Speaker 1: you know, the person who knows whether a player is
Speaker 1: going to come back from an injury is kind of
Speaker 1: like the player and his doctor and like his team,
Speaker 1: his camp, and like those are going to be insider
Speaker 1: traded contracts.
Speaker 2: And you don't want to encourage Tonya harding and have
Speaker 2: right right.
Speaker 1: They also they also they also want to ban contracts
Speaker 1: on fights, not like boxing, but like you know, I'm
Speaker 1: like will fight, well, bral break out at a baseball game.
Speaker 1: One reason for that is to protect like so you
Speaker 1: don't like bet on a brawl and then start a
Speaker 1: brawl and people get hurt. But then they also say,
Speaker 1: even if the probability that any athlete or market participant
Speaker 1: acts on such incentive is low, the effect of a
Speaker 1: market in physical altercation contract on the culture of athletic
Speaker 1: competition is inconsistent with the public interest, which is like true, yes,
Speaker 1: but imagine if I had told you five years ago
Speaker 1: that the Commodity Futures Trading Commission was like, well, you know,
Speaker 1: the integrity of the game requires us not to take
Speaker 1: bets on fights and games. It's like, why is that
Speaker 1: a commodity?
Speaker 2: It's amazing any of this happening.
Speaker 1: It's so like weird and path dependent.
Speaker 2: I do applaud them for, you know, putting out this report.
Speaker 1: I read it skeptically and they did a good job. Yeah,
Speaker 1: good job.
Speaker 2: Yeah. And it's you know, the way it's written, it's
Speaker 2: like very sober, it's with a straight face, it's.
Speaker 1: Thoughtful about like a lot of these questions.
Speaker 2: Yeah, it was pretty cool.
Speaker 1: I will say there's one very weird one.
Speaker 2: Yeah, it's not sports. Go on, did we.
Speaker 1: Talk about the Supreme Leader of Iran out of office?
Speaker 2: We must have.
Speaker 1: We must There's this controversy where like cal had a
Speaker 1: market on like well al KAMENI be out out of
Speaker 1: office as Supreme Leader of Iran and then he was
Speaker 1: out of office because he was killed for sure, and
Speaker 1: Calsh she was like, we don't want this to be
Speaker 1: an assassination market, so we're not gonna pay it out.
Speaker 1: We're not gonna pay out. Yes, we're gonna like refund
Speaker 1: everyone in their money basically, And people got really mad
Speaker 1: about that. Yeah, but that is like consistent with like
Speaker 1: the CFTC even before this rulemaking, like the CFTC has
Speaker 1: kind of had a rule against assassination markets. So like,
Speaker 1: obviously a market in like will a world leader be
Speaker 1: assassinated is obviously not okay, But what about like will
Speaker 1: a world leader leave office by the end of the year,
Speaker 1: If like the world leader resigns or loses an election,
Speaker 1: that's fine, You're allowed to have a market on that.
Speaker 1: And like election markets are a big part of it.
Speaker 1: But if he's assassinated, then that's bad. And you might say, well,
Speaker 1: if it's just done, will he leave office? It's not
Speaker 1: a bet on assassination, So that's fine. But in fact,
Speaker 1: what the CFTC says they talk about Nicholas Mudoro, which
Speaker 1: is like the example days, they say, an event contract
Speaker 1: that settles on whether Maduro is out of office by
Speaker 1: a certain date without further specification of the qualifying mechanisms
Speaker 1: involves assassination within the meaning of the rule, because assassination
Speaker 1: is among the pathways by which the settlement condition can
Speaker 1: be satisfied. That is, if you have like a world
Speaker 1: leader out contract, that is illegal. And so there's a
Speaker 1: lot of stuff like that. They're like, you know, around
Speaker 1: shutdown oil facilities. Contact is illegal if like one way
Speaker 1: they could shut them down is getting them bombed, which
Speaker 1: is very strange. Yea, like any event could happen or
Speaker 1: not happen because of like a murder. You know they
Speaker 1: have war. Yeah, so they have bets on like what
Speaker 1: state will Taylor Swift get married in?
Speaker 2: Oh, I thought you said date, Well, yeah they.
Speaker 1: Have they have I think they have date, but they
Speaker 1: certainly have location contracts. And it's like she will not
Speaker 1: get married in New York if she's murdered. But like,
Speaker 1: that can't be it can't be illegal to list that
Speaker 1: contract because there's some way for it to resolve no
Speaker 1: due to a war assassination. So it's very that's like
Speaker 1: they haven't thought that one through.
Speaker 2: How does that get resolved? Well, there's just a bunch
Speaker 2: of complaining about it.
Speaker 1: Yeah, probably, or there's not, and like I'm the only
Speaker 1: one complaining and they just blunder along.
Speaker 2: I don't know. It seems like a slippery soap.
Speaker 1: It is, because like the the Kamani contract was like
Speaker 1: probably everyone thought it was fine until he got killed
Speaker 1: and they're like, yeah, wait, that was in hindsight an
Speaker 1: assassination contract. Right. There'll probably be other things like that,
Speaker 1: where like things that are not obviously assassination contracts will
Speaker 1: turn out to be in hindsight assassination contracts.
Speaker 2: And I really like, what if you die of natural causes?
Speaker 1: I actually think it's okay, but it's a little it's
Speaker 1: a little gray area. I don't think I think they
Speaker 1: probably would discourage bats on people dying. It's limited to
Speaker 1: dying of natural causes. Yeah, well, who knows, Maybe it'll
Speaker 1: turn into an insurance market. Let's talk real quickly about
Speaker 1: Friend of the Show. Former guest lost a big case
Speaker 1: the Supreme Court Tooay.
Speaker 2: Yeah. The headline on the Bloomberg terminal is that the
Speaker 2: Supreme Court shields investment funds from shareholder suits. Specifically, the
Speaker 2: justices blocked activist investors from suing eleven closed end funds,
Speaker 2: and the suing investors were led by hedge fund manager
Speaker 2: Baulas Weinstein's SABA Capital Master Fund.
Speaker 1: It's a weird case. So basically, the Investment Company Act,
Speaker 1: which is like the federal law that regulates closed end funds,
Speaker 1: investment funds, mutual funds, says that if you issue shares
Speaker 1: of a mutual fund or closed end fund, you have
Speaker 1: to have one vote per share. They'll have to be
Speaker 1: equal voting shares, no super voting whatever. A lot of
Speaker 1: these funds are incorporated in Maryland. Maryland law that says
Speaker 1: you can have you can opt into a provision where
Speaker 1: if a shareholder gets more than ten percent of the stock,
Speaker 1: they can't vote their extra shares. They can only vote
Speaker 1: ten percent. They don't get to vote their entire holding.
Speaker 1: To prevent basically activists from influencing funds right, it's like
Speaker 1: an anti activist pro management provision. So all these funds
Speaker 1: are in Maryland and have that provision. And so boas
Speaker 1: I don't think, owns more than ten percent of any
Speaker 1: of these funds. But he sued to be like, you
Speaker 1: can't have that provision because that's like a way to
Speaker 1: block activism. And he said you can't have it because
Speaker 1: the investment company says really clearly one vote per share,
Speaker 1: and this would be taking away votes from shares. And
Speaker 1: so he won in court because that's true. And then
Speaker 1: in the Supreme Court you got reversed because the Supreme
Speaker 1: Court said didn't even address his argument. They're just like,
Speaker 1: you don't have a right to sue under this statute.
Speaker 1: Like this statute that says you have to have one
Speaker 1: vote per share, there's no right to sue if you
Speaker 1: violate it. The only way to enforce it is the
Speaker 1: SEC has to enforce it. If the SEC doesn't enforce it,
Speaker 1: tough luck. So Bo has lost on a technicality.
Speaker 2: Yeah, and his firm did provide a statement basically saying
Speaker 2: that this decision puts the burden squarely on the SEC.
Speaker 1: Good luck with them, et.
Speaker 2: Cetera, et cetera. Closing with the SEC has no excuse
Speaker 2: not to act.
Speaker 1: He does have which go on, which is everyone has
Speaker 1: turned off this podcast by now. Many people are not
Speaker 1: as interested in the injustices of closed end fund management
Speaker 1: as bo As. I'm saying is Katie is like gesturing
Speaker 1: like I'm interested. But you know who's not Paul Adkins
Speaker 1: in the SEC.
Speaker 2: Yeah, he's probably a little busy.
Speaker 1: Uh, he's busy.
Speaker 2: He has to answer a letter from Elizabeth Warren asking
Speaker 2: him to basically delay the SpaceX.
Speaker 1: IPO because it's because it's overpriced. Yeah, that's really good.
Speaker 1: He's also we're not gonna have time talking about this,
Speaker 1: but like today they put out a really major revision
Speaker 1: to equity market microstructure rules. Oh god, getting rid of
Speaker 1: the trade through rule, which is like ten of my
Speaker 1: readers like their heads exploited. But I'll just I'll just
Speaker 1: leave that here.
Speaker 2: We have like minutes, We have minutes left. What does
Speaker 2: this mean for the entire industry of closed un fund arbitrage?
Speaker 1: Though?
Speaker 2: Does this essentially mecap it?
Speaker 1: No, because as the funds that Boaz didn't earn ten
Speaker 1: percent of any of these funds. Okay, he's the dictorism.
Speaker 1: We just can't quote above ten percent of the funds.
Speaker 2: Okay.
Speaker 1: Also, like I can continue to write strongly worded letters
Speaker 1: to the SEC being like you guys got to do
Speaker 1: something about this. Yeah, maybe they'll read the letters.
Speaker 2: Yeah, who knows. I might.
Speaker 1: And that was the Money Stuff Podcast.
Speaker 2: I'm Matt Levin and I'm Katie Greifeld.
Speaker 1: I can find my work by subscribe to The Money
Speaker 1: stuffnew Letter at Bloomberg dot com.
Speaker 2: And you can find me on Bloomberg TV every day
Speaker 2: on the Clothes between three and five pm Eastern.
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Speaker 1: a questions and we might answer it on the air.
Speaker 2: You can also subscribe to our show wherever you're listening
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Speaker 1: The Money Stuff Podcast is produced by Anam Azarakus Moses
Speaker 1: Onam and Alexis HoTT Our.
Speaker 2: Theme music was composed by Blake.
Speaker 1: Maples Amy Keen as our executive producer. Thanks for listening
Speaker 1: to The Money Stuff Podcast. We'll be back next week
Speaker 1: with more stuff.