1 00:00:03,120 --> 00:00:08,240 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:10,240 --> 00:00:13,039 Speaker 2: Hello and welcome to The Money Stuff Podcast, your weekly 3 00:00:13,080 --> 00:00:17,239 Speaker 2: podcast where we talk about stuff related to money. I'm 4 00:00:17,239 --> 00:00:19,320 Speaker 2: Matt Levine and I write The Money Stuff com for 5 00:00:19,400 --> 00:00:20,200 Speaker 2: Bloomberg Opinion. 6 00:00:20,400 --> 00:00:22,840 Speaker 1: And I'm Katie Greifeld, a reporter for Bloomberg News and 7 00:00:22,880 --> 00:00:24,480 Speaker 1: an anchor for Bloomberg Television. 8 00:00:25,120 --> 00:00:26,040 Speaker 2: What's going on, Katie? 9 00:00:26,400 --> 00:00:29,640 Speaker 1: All right? We are going to talk about DJT and 10 00:00:29,800 --> 00:00:33,519 Speaker 1: your Phil. We're going to talk about sports gambling, and 11 00:00:33,560 --> 00:00:38,160 Speaker 1: we're also going to talk about Ron Barron and Elon Mosk. Alright, 12 00:00:38,680 --> 00:00:44,440 Speaker 1: it's been a while though, sure. Hey, so we tell 13 00:00:44,440 --> 00:00:47,600 Speaker 1: you to email us every week. We're specifically looking for questions. 14 00:00:47,640 --> 00:00:49,680 Speaker 2: So we want to do more of a mail bag 15 00:00:50,320 --> 00:00:53,720 Speaker 2: so that Katy and I can sing mail bag. Yeah, 16 00:00:53,760 --> 00:00:56,080 Speaker 2: And to do that, we need questions. So send us 17 00:00:56,080 --> 00:00:56,760 Speaker 2: to your questions. 18 00:00:56,800 --> 00:00:58,040 Speaker 1: All we need is a prompt. 19 00:00:58,680 --> 00:01:00,920 Speaker 2: All we need is a prompt. We don't want to 20 00:01:00,960 --> 00:01:01,920 Speaker 2: make up questions. 21 00:01:02,080 --> 00:01:04,400 Speaker 1: No, don't make us make up questions. 22 00:01:05,160 --> 00:01:09,360 Speaker 2: Send us your best questions at money Pod at Bloomberg 23 00:01:09,400 --> 00:01:12,399 Speaker 2: dot net. And then if you send us a good question, 24 00:01:13,120 --> 00:01:14,959 Speaker 2: we'll answer it on air. And if you send us 25 00:01:14,959 --> 00:01:18,039 Speaker 2: only bad questions, we'll be forced answer those on air. 26 00:01:18,080 --> 00:01:19,000 Speaker 1: We can work with that. 27 00:01:21,760 --> 00:01:25,400 Speaker 2: Dj T, Trump Media and Technology DJT. 28 00:01:25,880 --> 00:01:29,160 Speaker 1: They should sell stock. They can't sell stock yet, as 29 00:01:29,200 --> 00:01:31,800 Speaker 1: you write, because they're not yet a year old. But 30 00:01:31,880 --> 00:01:35,200 Speaker 1: there's a way for them to get more shares out 31 00:01:35,200 --> 00:01:35,920 Speaker 1: there into the handle. 32 00:01:36,000 --> 00:01:39,000 Speaker 2: They can sell stock. What they can't do, yeah, is 33 00:01:39,000 --> 00:01:41,920 Speaker 2: an ATM just the silly finance start for an at 34 00:01:41,959 --> 00:01:44,560 Speaker 2: the market offering. If you're a meme stock, this is 35 00:01:44,640 --> 00:01:46,440 Speaker 2: like as me me as a memestock cats, right, Like 36 00:01:46,480 --> 00:01:48,960 Speaker 2: it has like a business that I sometimes say it's 37 00:01:48,960 --> 00:01:51,760 Speaker 2: like a moderately successful substock. They make like, you know, 38 00:01:51,840 --> 00:01:54,520 Speaker 2: a million dollars a quarter in advertising revenues. Not bad, 39 00:01:55,480 --> 00:01:58,240 Speaker 2: it's not bad for like one man operation, but like 40 00:01:58,400 --> 00:02:01,240 Speaker 2: it's got a bunch of employees, a seven billion dollar 41 00:02:01,440 --> 00:02:04,320 Speaker 2: equity market cap, which seems high for like a million 42 00:02:04,360 --> 00:02:06,840 Speaker 2: dollar quarter revenue operation that, by the way, lose a 43 00:02:06,840 --> 00:02:08,200 Speaker 2: lot of money because like they have to pay a 44 00:02:08,240 --> 00:02:10,680 Speaker 2: lot of people to generate that million dollars revenue. And 45 00:02:10,760 --> 00:02:13,720 Speaker 2: so probably some people there think that it's a business, right, 46 00:02:13,760 --> 00:02:16,560 Speaker 2: and like it's going to be like the future of media, right, 47 00:02:16,600 --> 00:02:18,560 Speaker 2: They're going to get into television and they're going to 48 00:02:18,600 --> 00:02:22,000 Speaker 2: be the biggest social media platform there is. They're not now, 49 00:02:22,040 --> 00:02:25,240 Speaker 2: but maybe one day they will be. But my impression 50 00:02:25,320 --> 00:02:27,880 Speaker 2: is that it largely trades like a meme stock. It 51 00:02:27,919 --> 00:02:30,760 Speaker 2: trades as a bet on the newsworthiness of Donald Trump, 52 00:02:31,320 --> 00:02:35,520 Speaker 2: and so it has this valuation that is largely not 53 00:02:35,600 --> 00:02:39,799 Speaker 2: driven by business fundamentals. And I've written about that sort 54 00:02:39,840 --> 00:02:42,160 Speaker 2: of thing a lot over the years, and my feeling 55 00:02:42,240 --> 00:02:44,720 Speaker 2: is like, if you have a valuation that's not just fundamentals, 56 00:02:44,919 --> 00:02:46,640 Speaker 2: you should sell as much stock as you can because 57 00:02:46,680 --> 00:02:50,639 Speaker 2: then you have money, and you've transformed your irrational public 58 00:02:50,680 --> 00:02:52,880 Speaker 2: valuation into an actual pot of money that you can 59 00:02:52,960 --> 00:02:55,320 Speaker 2: use to build a business. And they seem to agree. 60 00:02:55,360 --> 00:02:57,160 Speaker 2: So they're like, we're going to sell stock. And the 61 00:02:57,160 --> 00:02:59,560 Speaker 2: way you sell that stock has to be to retail investors, right. 62 00:02:59,600 --> 00:03:01,800 Speaker 2: You have to go out and sell it in the 63 00:03:01,840 --> 00:03:05,320 Speaker 2: market to retail investors. You can't do a standard book 64 00:03:05,360 --> 00:03:09,919 Speaker 2: builds offering where like you hire a big investment bank 65 00:03:09,919 --> 00:03:12,280 Speaker 2: and they call big mutual funds and hedge funds and 66 00:03:12,280 --> 00:03:14,200 Speaker 2: they say, would you like to buy stock? Because like, yeah, 67 00:03:14,360 --> 00:03:16,480 Speaker 2: like what does that pitchbuck look like? Right? What does 68 00:03:16,520 --> 00:03:19,600 Speaker 2: the what does the investor deck look like. So they 69 00:03:20,320 --> 00:03:21,840 Speaker 2: want to do an out of the market offering, they can't 70 00:03:21,840 --> 00:03:23,960 Speaker 2: because they haven't been public for long enough basically because 71 00:03:24,080 --> 00:03:27,640 Speaker 2: they're a Deespac company. And so they are doing this 72 00:03:27,760 --> 00:03:32,880 Speaker 2: weird quasi ATM offering where like they've hired Yorkville Advisors, 73 00:03:32,880 --> 00:03:35,680 Speaker 2: which is like a smallish fund in New Jersey. 74 00:03:35,400 --> 00:03:37,400 Speaker 1: That mountain side mountain side New Jersey. 75 00:03:37,560 --> 00:03:39,080 Speaker 2: You this podcast expert on New. 76 00:03:39,040 --> 00:03:41,920 Speaker 1: Jersey to where I grew up, So. 77 00:03:41,880 --> 00:03:44,280 Speaker 2: It is your horse spin to mountain side. Probably not 78 00:03:45,240 --> 00:03:48,600 Speaker 2: I hire this mountain side fund to Basically, like, these 79 00:03:48,640 --> 00:03:51,200 Speaker 2: guys will buy their stock whenever they want to, and 80 00:03:51,200 --> 00:03:52,880 Speaker 2: then they'll turn around and sell it into the market 81 00:03:52,880 --> 00:03:55,200 Speaker 2: and look like like a two point seventy five percent fee, 82 00:03:55,400 --> 00:03:57,800 Speaker 2: and it's like a sort of quasi ATM offering. 83 00:03:57,960 --> 00:03:59,840 Speaker 1: And so they then sell it over the course of 84 00:04:00,160 --> 00:04:01,200 Speaker 1: three days, well. 85 00:04:01,320 --> 00:04:02,800 Speaker 2: I think it's like one or three days. Yeah, the 86 00:04:02,920 --> 00:04:05,080 Speaker 2: deal is for two and a half billion dollars, but 87 00:04:05,120 --> 00:04:07,400 Speaker 2: it's not like that's happening today. It's like two and 88 00:04:07,400 --> 00:04:09,000 Speaker 2: a half billion dollars over the course of up to 89 00:04:09,040 --> 00:04:11,360 Speaker 2: three years. And so on any day in that three 90 00:04:11,440 --> 00:04:14,360 Speaker 2: year period, the company can call the York Villa and say, hey, 91 00:04:14,400 --> 00:04:16,720 Speaker 2: we want to do like twenty million today. They say 92 00:04:16,720 --> 00:04:17,960 Speaker 2: a number of shares were I to do like a 93 00:04:18,000 --> 00:04:20,600 Speaker 2: million shares today? And York Villa will sell it those 94 00:04:20,600 --> 00:04:23,640 Speaker 2: shares over like three days. Yeah, give them the money. 95 00:04:24,160 --> 00:04:26,360 Speaker 1: Reading it kind of made me think of them as 96 00:04:26,400 --> 00:04:30,400 Speaker 1: just basically very slow market makers. I know that's super 97 00:04:30,720 --> 00:04:34,360 Speaker 1: reductive and simplistic, but that's how I talked about it 98 00:04:34,440 --> 00:04:35,840 Speaker 1: in my head to myself. 99 00:04:35,960 --> 00:04:38,240 Speaker 2: They're like a broker in an atm ufering. You hire 100 00:04:38,279 --> 00:04:40,000 Speaker 2: a bank or a broker and you tell them to 101 00:04:40,000 --> 00:04:41,479 Speaker 2: sell stock over the day. 102 00:04:41,600 --> 00:04:42,760 Speaker 1: Yeah, and they sell the stock. 103 00:04:42,560 --> 00:04:43,840 Speaker 2: And they charge you a fee. And this is the 104 00:04:43,880 --> 00:04:45,960 Speaker 2: same thing, only like they're not technically a broker. They're 105 00:04:46,000 --> 00:04:48,120 Speaker 2: not technically doing it as a broker. They're doing it 106 00:04:48,160 --> 00:04:50,440 Speaker 2: as a principal. They're buying the stock for their own 107 00:04:50,440 --> 00:04:52,640 Speaker 2: account and then they're selling it into the market. The 108 00:04:52,680 --> 00:04:54,440 Speaker 2: thing that makes them any principle rather than just the 109 00:04:54,480 --> 00:04:58,360 Speaker 2: broker is that if they sell stock for thirty five 110 00:04:58,400 --> 00:05:05,119 Speaker 2: dollars or whatever, they don't pay DJT the price they got. 111 00:05:06,040 --> 00:05:09,800 Speaker 2: They pay DJT the company Trump Media. DJT is the 112 00:05:09,839 --> 00:05:14,880 Speaker 2: ticker they pay DJT the volume weighted average price over 113 00:05:14,920 --> 00:05:17,480 Speaker 2: the period they sell it. Actually the more complicated than that, 114 00:05:17,680 --> 00:05:20,640 Speaker 2: but they pay them like a price that is objectively determined. 115 00:05:20,800 --> 00:05:22,400 Speaker 2: It's not like if we sell stock for you thirty 116 00:05:22,400 --> 00:05:24,599 Speaker 2: five dollars, we'll pay you thirty five dollars. It's like 117 00:05:25,080 --> 00:05:28,360 Speaker 2: we'll sell stock or we won't. And so the natural 118 00:05:28,400 --> 00:05:30,800 Speaker 2: thing to do is if you're paying the view op 119 00:05:30,880 --> 00:05:33,560 Speaker 2: over some period, you sell the stock over that period, 120 00:05:33,920 --> 00:05:36,800 Speaker 2: and then you've eliminated the risk, right, Like, you sell 121 00:05:36,800 --> 00:05:38,400 Speaker 2: it the view op and you pay the view up. 122 00:05:38,640 --> 00:05:41,400 Speaker 2: But like there's no obligation for them to sell, no 123 00:05:41,480 --> 00:05:44,520 Speaker 2: obligation to them to sell during the pricing period. And 124 00:05:44,600 --> 00:05:47,359 Speaker 2: so because of that, everyone can say, this is not 125 00:05:48,080 --> 00:05:50,760 Speaker 2: a deal in which DJT is selling stock to the market. 126 00:05:50,960 --> 00:05:52,840 Speaker 2: This is just the deal in which DJT is selling 127 00:05:52,880 --> 00:05:55,440 Speaker 2: stock to Yorkville. And what Yorkville does with the stock 128 00:05:55,520 --> 00:05:58,200 Speaker 2: is its own business. Now clearly, because they're paying like 129 00:05:58,200 --> 00:06:00,760 Speaker 2: the volume weighted average price over like period of time, 130 00:06:01,320 --> 00:06:04,719 Speaker 2: their incentive is to sell the stock over that period 131 00:06:04,760 --> 00:06:07,720 Speaker 2: of time. And like there are like various indications that 132 00:06:07,760 --> 00:06:09,440 Speaker 2: they're not going to hold onto the stock, right, Like 133 00:06:09,480 --> 00:06:12,839 Speaker 2: they're a thirty million dollar assets under management fund buying 134 00:06:12,839 --> 00:06:15,240 Speaker 2: two point five billion dollars of Trump stock. Right, there's 135 00:06:15,279 --> 00:06:16,840 Speaker 2: like a limit that they can't buy more than four 136 00:06:16,880 --> 00:06:18,800 Speaker 2: point nine nine percent of the stock. Two point five 137 00:06:18,800 --> 00:06:20,599 Speaker 2: billion is like a quarter of the stock. So they're 138 00:06:20,600 --> 00:06:22,680 Speaker 2: not going to hold onto the stock, but they're going 139 00:06:22,760 --> 00:06:24,520 Speaker 2: to sell the stock, but they don't have to. There's 140 00:06:24,520 --> 00:06:26,680 Speaker 2: no arrangement for them to sell the stock. The other 141 00:06:26,680 --> 00:06:28,680 Speaker 2: thing I would say is, like the way the pricing 142 00:06:28,720 --> 00:06:31,640 Speaker 2: works is that each day they look at the volume 143 00:06:31,640 --> 00:06:34,120 Speaker 2: weighted average price and they take the lowest of those 144 00:06:34,200 --> 00:06:36,680 Speaker 2: view ops and that is the price that they pay. 145 00:06:37,040 --> 00:06:41,240 Speaker 2: And so that it creates incentives. Right, if you sell 146 00:06:41,240 --> 00:06:43,919 Speaker 2: the stock like one third each day, then like the 147 00:06:43,960 --> 00:06:45,400 Speaker 2: lowest day is the price you pay it and the 148 00:06:45,480 --> 00:06:48,440 Speaker 2: other two days are like gravy for you. So you know, 149 00:06:48,520 --> 00:06:50,600 Speaker 2: their incentive is to have one day be really bad 150 00:06:50,880 --> 00:06:53,760 Speaker 2: so that they can pay DJT a low price for 151 00:06:53,800 --> 00:06:55,719 Speaker 2: the stock and like sell it for a high price. 152 00:06:55,880 --> 00:06:59,200 Speaker 1: And with a meme stock, that's probably gonna happen. You're 153 00:06:59,200 --> 00:07:01,599 Speaker 1: gonna have one rocky day, You're. 154 00:07:01,440 --> 00:07:04,359 Speaker 2: Gonna have volatility. Right, Essentially, what Yorkville is getting is 155 00:07:04,360 --> 00:07:06,200 Speaker 2: a series of short term options that they're getting kind 156 00:07:06,240 --> 00:07:07,800 Speaker 2: of for free, right, because of the stock is like 157 00:07:08,000 --> 00:07:10,360 Speaker 2: forty dollars one day, thirty five dollars the next day, 158 00:07:10,360 --> 00:07:12,840 Speaker 2: and forty dollars the following day. Then like they sell 159 00:07:12,840 --> 00:07:14,680 Speaker 2: stock at like an average price of like thirty eight, 160 00:07:14,720 --> 00:07:17,080 Speaker 2: but they pay like thirty five to DJT because that's 161 00:07:17,120 --> 00:07:18,160 Speaker 2: the lowest of the three of view. 162 00:07:18,200 --> 00:07:21,360 Speaker 1: Ops to just tie a bow on this. So they're 163 00:07:21,400 --> 00:07:28,760 Speaker 1: a broker in ATM, but it's totally on djt's terms. No, Well, 164 00:07:28,920 --> 00:07:30,760 Speaker 1: DJT is selling them the stock. 165 00:07:31,200 --> 00:07:33,680 Speaker 2: So a broker in an ATM, yeah, like a bank. 166 00:07:33,840 --> 00:07:35,440 Speaker 2: The way it works is that the company calls them 167 00:07:35,440 --> 00:07:36,960 Speaker 2: every day and says, hey, we want to sell twenty 168 00:07:37,000 --> 00:07:39,560 Speaker 2: million dollars off their stock or whatever, and the broker 169 00:07:39,640 --> 00:07:43,240 Speaker 2: sells that stock for the company and then pays the 170 00:07:43,280 --> 00:07:46,440 Speaker 2: company the money it received minus a fee. Right, yeah, 171 00:07:46,640 --> 00:07:50,280 Speaker 2: and this is different, Like this is the DJT calls 172 00:07:50,360 --> 00:07:52,200 Speaker 2: Yorkville and says, hey, you want to sell some stock, 173 00:07:52,480 --> 00:07:54,240 Speaker 2: and Yorksville says, okay, we'll give you the money in 174 00:07:54,240 --> 00:07:56,080 Speaker 2: three days. But they don't have to sell the stock, 175 00:07:56,600 --> 00:07:59,880 Speaker 2: and they're acting as principal and they're getting a lot 176 00:07:59,880 --> 00:08:03,200 Speaker 2: of like little options on DJT stock. Right, So basically, 177 00:08:03,240 --> 00:08:05,800 Speaker 2: if the stock is volatile, they make more money. That's 178 00:08:05,800 --> 00:08:08,080 Speaker 2: not true of a broker in an ATM, right, Yeah, 179 00:08:08,120 --> 00:08:10,240 Speaker 2: broker in a the ATM, if the stock is volatile, 180 00:08:10,320 --> 00:08:12,440 Speaker 2: then like they're just selling it on behalf of the 181 00:08:12,480 --> 00:08:16,160 Speaker 2: company here. Because they are a principal, they are making 182 00:08:16,360 --> 00:08:18,120 Speaker 2: probably a lot more money than a broker in an 183 00:08:18,120 --> 00:08:21,560 Speaker 2: at would. Also, they're not a broker, because that's sort 184 00:08:21,560 --> 00:08:23,520 Speaker 2: of important for legal reasons. If they're doing it as 185 00:08:23,560 --> 00:08:25,560 Speaker 2: a broker, then this is an ATM and it doesn't 186 00:08:25,600 --> 00:08:27,520 Speaker 2: really work. And by the way, this is not an 187 00:08:27,560 --> 00:08:30,160 Speaker 2: uncommon thing where a company wants to sell stock to 188 00:08:30,320 --> 00:08:33,520 Speaker 2: investors in the market and like there's some impediment and 189 00:08:33,600 --> 00:08:36,319 Speaker 2: so they do this sort of thing where they instead 190 00:08:36,679 --> 00:08:39,840 Speaker 2: sell the stock in some structured way to some investor 191 00:08:39,920 --> 00:08:44,199 Speaker 2: who specializes in intermediating these traits. Some of those people 192 00:08:44,200 --> 00:08:46,080 Speaker 2: get in trouble for doing a sort of like the 193 00:08:46,120 --> 00:08:49,040 Speaker 2: SEC says, you know, you're doing a brokerd offering and 194 00:08:49,080 --> 00:08:50,959 Speaker 2: you're not supposed to do that, or you're supposed to 195 00:08:50,960 --> 00:08:53,560 Speaker 2: be registered as a dealer. So there's some possibility of 196 00:08:53,559 --> 00:08:56,000 Speaker 2: getting in trouble here when companies do this. Yeah, I 197 00:08:56,000 --> 00:08:57,920 Speaker 2: think Borkville has a track record of doing it and 198 00:08:58,120 --> 00:09:00,400 Speaker 2: not getting in trouble, so it seems okay, But it's 199 00:09:00,400 --> 00:09:01,640 Speaker 2: a complicated kind of trade. 200 00:09:01,760 --> 00:09:03,320 Speaker 1: Yeah, as you can tell, I'm trying to work through this. 201 00:09:03,480 --> 00:09:07,400 Speaker 1: So Bailey Lipschultz wrote the article on Yorkville for Bloomberg News, 202 00:09:07,640 --> 00:09:09,840 Speaker 1: and I was chatting with him about it, and I 203 00:09:09,840 --> 00:09:12,000 Speaker 1: have to say, I've never thought about this before, And 204 00:09:12,360 --> 00:09:14,680 Speaker 1: I was like, is this like a booming business? Like, 205 00:09:14,679 --> 00:09:15,679 Speaker 1: who else does this? 206 00:09:16,080 --> 00:09:19,120 Speaker 2: Specs? Well, Yorkfool is a ton of these respective. 207 00:09:18,679 --> 00:09:21,160 Speaker 1: Yeah, well, he was saying, Yorkville is kind of one 208 00:09:21,200 --> 00:09:22,920 Speaker 1: of one when it comes to this. 209 00:09:23,520 --> 00:09:28,160 Speaker 2: They are one of one in this particular flavor of it. Yeah, 210 00:09:28,160 --> 00:09:31,520 Speaker 2: but like when bed Bath and Beyond was sliding into bankruptcy, 211 00:09:31,559 --> 00:09:34,200 Speaker 2: they did not this a different kind of trade, but 212 00:09:34,240 --> 00:09:35,680 Speaker 2: I kind of looked the same. It was kind of 213 00:09:35,720 --> 00:09:39,080 Speaker 2: like also a deal where like a investor agreed to 214 00:09:39,679 --> 00:09:43,120 Speaker 2: buy stock from a company and sell it out into 215 00:09:43,160 --> 00:09:44,800 Speaker 2: the market, but they weren't required to sell it out 216 00:09:44,800 --> 00:09:46,920 Speaker 2: into the market, And so it was like, they're like 217 00:09:47,040 --> 00:09:49,160 Speaker 2: flavors of this. You know. There was for a whilely 218 00:09:49,240 --> 00:09:52,200 Speaker 2: business of what are called death spiral convertibles are not this, 219 00:09:52,320 --> 00:09:55,679 Speaker 2: but they're not unrelated to this, right, So, yeah, Yorkville 220 00:09:55,720 --> 00:09:57,360 Speaker 2: is one of one in this particular line of business, 221 00:09:57,360 --> 00:09:58,760 Speaker 2: and this seems to be a better way of doing 222 00:09:58,800 --> 00:10:00,560 Speaker 2: it than some of the other ways. But yeah, like 223 00:10:00,880 --> 00:10:03,600 Speaker 2: this sort of thing of like selling stock to an 224 00:10:03,600 --> 00:10:06,320 Speaker 2: intermediary to like sell out to the market is the 225 00:10:06,360 --> 00:10:07,120 Speaker 2: thing that people do. 226 00:10:07,360 --> 00:10:10,320 Speaker 1: So I mean, does this business go away for Yorkville 227 00:10:10,440 --> 00:10:13,200 Speaker 1: once DJT is more than a year old. 228 00:10:13,760 --> 00:10:17,600 Speaker 2: Maybe, But there's always more companies. 229 00:10:17,200 --> 00:10:20,240 Speaker 1: That need it, that's true. I'm just wondering. Yorkville has 230 00:10:20,280 --> 00:10:22,320 Speaker 1: done a ton of these, but it's a moment in time. 231 00:10:22,880 --> 00:10:24,640 Speaker 2: Yeah, that's probably right. It's a moment in time for 232 00:10:24,679 --> 00:10:27,800 Speaker 2: each company. But there's always like companies that need weird financing, right, 233 00:10:27,880 --> 00:10:30,280 Speaker 2: and so like this is the being in the financing 234 00:10:30,280 --> 00:10:33,040 Speaker 2: weird companies kind of business, the one that I like 235 00:10:33,240 --> 00:10:37,520 Speaker 2: in weird companies. Yeah, I don't know, just. 236 00:10:37,600 --> 00:10:57,240 Speaker 1: Move on, I think so. So sports gambling, So, sports gambling, 237 00:10:57,720 --> 00:11:00,040 Speaker 1: you can't be too good at it if you run. 238 00:10:59,840 --> 00:11:05,400 Speaker 2: It sports scampling website. What you want is problem gamblers, right, 239 00:11:06,880 --> 00:11:08,480 Speaker 2: I'm sorry to laugh at that, but like what you 240 00:11:08,520 --> 00:11:11,800 Speaker 2: want is people who bet a lot of money. And 241 00:11:12,120 --> 00:11:15,679 Speaker 2: are very bad at Now there are regulatory problems with that, 242 00:11:15,720 --> 00:11:19,760 Speaker 2: because if you mostly get problem gamblers, like eventually you're 243 00:11:19,760 --> 00:11:22,480 Speaker 2: gonna get shut down, or like regulators are gonna step in, 244 00:11:22,520 --> 00:11:24,520 Speaker 2: are going to limit you in some way. Right, what 245 00:11:24,640 --> 00:11:28,120 Speaker 2: you don't want as a sports gambling website is people 246 00:11:28,120 --> 00:11:30,720 Speaker 2: who are really good at gambling and keep making money 247 00:11:30,760 --> 00:11:33,760 Speaker 2: off of you. And so there's a Wall Street Journal 248 00:11:33,840 --> 00:11:38,240 Speaker 2: article this week about basically some people who have built 249 00:11:38,800 --> 00:11:42,200 Speaker 2: reasonably good sports gambling systems and actually make money doing it, 250 00:11:42,559 --> 00:11:45,600 Speaker 2: find that the big sports gambling sites limit their accounts 251 00:11:45,600 --> 00:11:48,960 Speaker 2: so they can't bet very much money because they were 252 00:11:49,000 --> 00:11:51,240 Speaker 2: making too much money, and the gambling sites don't like that, 253 00:11:51,280 --> 00:11:55,320 Speaker 2: and so they make them smaller amounts, and they complain 254 00:11:55,640 --> 00:11:59,440 Speaker 2: and like regulators and politicians say that's not fair. But 255 00:11:59,480 --> 00:12:03,040 Speaker 2: of course the sport's caadpling sites, they control the entire apparatus, right, 256 00:12:03,040 --> 00:12:05,000 Speaker 2: they're both the market maker for the bats, and also 257 00:12:05,040 --> 00:12:07,200 Speaker 2: if they provide the website and they take the client information, 258 00:12:07,559 --> 00:12:09,079 Speaker 2: so they know who's good and who's bad, and they're like, 259 00:12:09,080 --> 00:12:10,480 Speaker 2: we don't want to bet against the people who are good. 260 00:12:10,480 --> 00:12:11,880 Speaker 2: We ran a bet against the people who are bad. 261 00:12:12,200 --> 00:12:14,720 Speaker 2: So they cut people down or they limit their bet sizes. 262 00:12:15,400 --> 00:12:17,520 Speaker 1: Seems like you got a lot of emails about this. 263 00:12:17,960 --> 00:12:20,880 Speaker 2: I don't follow sports gambling that closely, but I'm interested 264 00:12:20,880 --> 00:12:22,360 Speaker 2: in like market structure, and I read a lot about 265 00:12:22,360 --> 00:12:27,600 Speaker 2: equity market structure, and in equity market structure in America, 266 00:12:28,040 --> 00:12:30,599 Speaker 2: people are also very into this question of like, I 267 00:12:30,600 --> 00:12:32,040 Speaker 2: don't want to bet against people who are good, I 268 00:12:32,080 --> 00:12:33,960 Speaker 2: want to bet against people wo are bad. And so 269 00:12:34,080 --> 00:12:36,760 Speaker 2: what that means in practice and like US equity markets, 270 00:12:36,840 --> 00:12:41,640 Speaker 2: is that big market makers pay retail brokerages to trade 271 00:12:41,640 --> 00:12:43,520 Speaker 2: with their order flow. Because the idea is, if you're 272 00:12:43,520 --> 00:12:46,520 Speaker 2: a market maker, basically like some person on the other 273 00:12:46,559 --> 00:12:49,480 Speaker 2: side of the trade is either informed or not right. 274 00:12:49,840 --> 00:12:52,800 Speaker 2: Either their their order is informative, it's not right. And 275 00:12:52,840 --> 00:12:55,200 Speaker 2: if you are constantly trading like smart hedge funds or 276 00:12:55,200 --> 00:12:58,000 Speaker 2: with giant asset managers, then every time you sell them stock, 277 00:12:58,240 --> 00:12:59,760 Speaker 2: that stock is going to go up. Right, So every 278 00:12:59,760 --> 00:13:01,400 Speaker 2: time you sell them stock, you like lose little bit 279 00:13:01,440 --> 00:13:05,120 Speaker 2: of money. If you're constantly trading with retail traders, their 280 00:13:05,200 --> 00:13:07,280 Speaker 2: orders are not informative. They're not going to buy you know, 281 00:13:07,320 --> 00:13:10,200 Speaker 2: a million shares. They don't like have inside information and 282 00:13:10,240 --> 00:13:12,000 Speaker 2: so every time you sell them stock, the stock doesn't 283 00:13:12,040 --> 00:13:13,800 Speaker 2: go up, and so you don't lose money. So you'd 284 00:13:13,880 --> 00:13:15,960 Speaker 2: rather trade with the retail traders, and so you can 285 00:13:16,040 --> 00:13:19,520 Speaker 2: pay robin Hood or Fidelity or whatever to get their 286 00:13:19,559 --> 00:13:22,080 Speaker 2: retail orders, and then you get a better pool of 287 00:13:22,160 --> 00:13:25,400 Speaker 2: orders than you would with just trading in the public 288 00:13:25,440 --> 00:13:29,280 Speaker 2: market with like potentially institutions. And you know, so I 289 00:13:29,280 --> 00:13:30,760 Speaker 2: wrote about that. I was like, you know, like these 290 00:13:31,040 --> 00:13:34,960 Speaker 2: market makers in traditional finance and and you know equities 291 00:13:35,360 --> 00:13:37,320 Speaker 2: also try to segment their order flow to trade with 292 00:13:37,320 --> 00:13:39,080 Speaker 2: the bad people rather than the good people. But what 293 00:13:39,120 --> 00:13:41,120 Speaker 2: I said was, like, what I don't know of is 294 00:13:41,120 --> 00:13:44,480 Speaker 2: any cases where people who are just good at bets 295 00:13:44,640 --> 00:13:48,480 Speaker 2: or keep making good bets get cut off by their broker, right. Accept, 296 00:13:48,640 --> 00:13:51,080 Speaker 2: there's an example that I'm aware of because like they've 297 00:13:51,080 --> 00:13:53,439 Speaker 2: talked about it publicly three Hours Capital. You know the 298 00:13:53,480 --> 00:13:54,160 Speaker 2: crypto hedgeweb. 299 00:13:54,200 --> 00:13:56,640 Speaker 1: Oh yeah, I haven't heard that name in a long time. 300 00:13:57,160 --> 00:13:59,199 Speaker 2: So those guys before they became a crypto hedge one, 301 00:13:59,200 --> 00:14:01,000 Speaker 2: they were like currency at a bank and then they 302 00:14:01,120 --> 00:14:03,880 Speaker 2: started a currency trading hedge fund that eventually morphed into 303 00:14:04,040 --> 00:14:04,840 Speaker 2: a crypto. 304 00:14:04,679 --> 00:14:07,120 Speaker 1: Fund and then it was an existential event when it 305 00:14:07,200 --> 00:14:08,240 Speaker 1: went down, but in any. 306 00:14:08,080 --> 00:14:12,520 Speaker 2: Case, like great for crypto, but like sorry, the super 307 00:14:12,520 --> 00:14:14,600 Speaker 2: bad for crypto, big crypto story. But before that, they 308 00:14:14,640 --> 00:14:16,559 Speaker 2: were like a little FX story. And what they did 309 00:14:16,640 --> 00:14:18,960 Speaker 2: was they went to every bank and they signed up 310 00:14:18,960 --> 00:14:21,440 Speaker 2: for the bank's FX trading platform, where basically the bank 311 00:14:21,480 --> 00:14:24,080 Speaker 2: would like say, we'll trade currencies with you, and we'll 312 00:14:24,080 --> 00:14:27,040 Speaker 2: post prices and you can, you know, click and trade 313 00:14:27,040 --> 00:14:29,240 Speaker 2: at those prices and we'll take the other side of 314 00:14:29,320 --> 00:14:32,400 Speaker 2: the trade. And three Hours would sign up for every 315 00:14:32,400 --> 00:14:34,800 Speaker 2: bank's platform, and they just look at all the websites 316 00:14:34,800 --> 00:14:37,720 Speaker 2: and they'd see like sometimes one bank would post a 317 00:14:37,760 --> 00:14:40,320 Speaker 2: lower price than another bank, so they could buy from 318 00:14:40,400 --> 00:14:42,320 Speaker 2: one bank and sell to another bank and make a 319 00:14:42,360 --> 00:14:45,640 Speaker 2: guaranteed risk free profit. And they did that and the 320 00:14:45,680 --> 00:14:49,400 Speaker 2: banks got mad because that's just like taking money from them, 321 00:14:49,440 --> 00:14:51,160 Speaker 2: and so they kicked three Hours off their platform and 322 00:14:51,200 --> 00:14:52,680 Speaker 2: they said, we don't want to trade it with you anymore. 323 00:14:52,960 --> 00:14:54,800 Speaker 2: So I mentioned that when I wrote about it, and 324 00:14:54,840 --> 00:14:56,920 Speaker 2: someone else emailed me to be like when he was 325 00:14:56,960 --> 00:14:59,360 Speaker 2: an FX options trader, he had access to a bunch 326 00:14:59,400 --> 00:15:03,000 Speaker 2: of different banks single deal or platforms, and he also 327 00:15:03,600 --> 00:15:07,360 Speaker 2: armed the banks against each other. And he said I 328 00:15:07,400 --> 00:15:09,360 Speaker 2: can confirm that they really don't like that, and a 329 00:15:09,480 --> 00:15:12,200 Speaker 2: salesperson from each chewed me out and threatened to yank 330 00:15:12,240 --> 00:15:12,760 Speaker 2: my access. 331 00:15:12,880 --> 00:15:14,440 Speaker 1: I don't really understand what that's bad. 332 00:15:14,560 --> 00:15:16,560 Speaker 2: It's bad because the banks lose money. It's not like 333 00:15:16,600 --> 00:15:19,480 Speaker 2: illegal people do it, but like the banks feel like 334 00:15:19,480 --> 00:15:21,960 Speaker 2: it's rude, so they don't. It's the same as with 335 00:15:22,000 --> 00:15:24,400 Speaker 2: sports campling. It's the point is not that it's bad. 336 00:15:24,640 --> 00:15:28,080 Speaker 2: The point is that if you have a client relationship 337 00:15:28,200 --> 00:15:30,760 Speaker 2: and the client keeps making money off of you at 338 00:15:30,800 --> 00:15:33,640 Speaker 2: your expense, you can just stop having that client relationship. 339 00:15:33,760 --> 00:15:34,960 Speaker 2: And that's what the sports sides too. 340 00:15:35,320 --> 00:15:38,800 Speaker 1: That seems more rude to me, but in any say, really, yeah, 341 00:15:40,000 --> 00:15:41,760 Speaker 1: you're just arbitraging. 342 00:15:41,120 --> 00:15:43,520 Speaker 2: You know, why should I let you keep arbitraging me? 343 00:15:44,600 --> 00:15:46,160 Speaker 1: I guess that's a good question. 344 00:15:46,320 --> 00:15:48,520 Speaker 2: If I keep betting with you and I keep losing money, 345 00:15:48,520 --> 00:15:49,560 Speaker 2: I'm gonna stop betting with you. 346 00:15:50,360 --> 00:15:51,760 Speaker 1: Don't hate the player or hate the game. 347 00:15:51,800 --> 00:15:53,760 Speaker 2: I'm not hating you. I'm just not playing the game 348 00:15:53,800 --> 00:15:54,440 Speaker 2: with you anymore. 349 00:15:54,760 --> 00:15:56,280 Speaker 1: Fine, I mean right. 350 00:15:56,320 --> 00:15:57,880 Speaker 2: It's a little weird that they actually call them up 351 00:15:57,880 --> 00:16:00,360 Speaker 2: and yelled them instead of just stopping trading with them like, yeah, 352 00:16:00,440 --> 00:16:00,960 Speaker 2: stop trading. 353 00:16:01,480 --> 00:16:04,600 Speaker 1: I will say that I don't call me number one please. 354 00:16:05,360 --> 00:16:07,840 Speaker 2: But I also got an email from another reader saying 355 00:16:07,840 --> 00:16:10,760 Speaker 2: that he worked at a market maker, like one of 356 00:16:10,760 --> 00:16:13,280 Speaker 2: the big, you know, electronic trading firms that do trade 357 00:16:13,320 --> 00:16:16,800 Speaker 2: with retail orders, and he said, we built monitoring to 358 00:16:16,800 --> 00:16:19,880 Speaker 2: isolate and identify professional traders out of the stream of 359 00:16:19,920 --> 00:16:23,400 Speaker 2: retail orders, and so like they did identify people who 360 00:16:23,400 --> 00:16:27,760 Speaker 2: were doing arbitrages on burker dealers, basically, like people who 361 00:16:27,760 --> 00:16:30,360 Speaker 2: are good at trading stock options, not because they were 362 00:16:30,400 --> 00:16:33,280 Speaker 2: like geniuses, but because they could like are different broker 363 00:16:33,280 --> 00:16:35,680 Speaker 2: dealers against each other, And so he said, we called 364 00:16:35,760 --> 00:16:38,400 Speaker 2: up their broker and said, you have to kick them 365 00:16:38,400 --> 00:16:41,680 Speaker 2: off because they're making too much money off of us. 366 00:16:41,680 --> 00:16:43,680 Speaker 2: And the burger apparently did this. It's like a thing 367 00:16:43,720 --> 00:16:47,520 Speaker 2: that sort of happens in equities and equity options, like 368 00:16:47,520 --> 00:16:50,440 Speaker 2: in retail market making. Like it is apparently possible to 369 00:16:50,440 --> 00:16:52,720 Speaker 2: get kicked off your retail brokerage for being too good 370 00:16:52,720 --> 00:16:56,360 Speaker 2: at trading retail options, just as it is in sportscambling exactly. 371 00:16:56,400 --> 00:16:58,080 Speaker 1: And then you take a look at the Wall Street 372 00:16:58,160 --> 00:17:00,760 Speaker 1: Journal store and you put an excerpt of this in 373 00:17:00,800 --> 00:17:03,720 Speaker 1: your newsletter. But the example they used is Dave Holmes 374 00:17:04,000 --> 00:17:06,360 Speaker 1: sports partner in Chicago, so that he started to win 375 00:17:06,440 --> 00:17:10,320 Speaker 1: more using a math based wagering strategy. He ultimately got 376 00:17:10,400 --> 00:17:12,800 Speaker 1: kicked off. But I would love to know what that 377 00:17:12,880 --> 00:17:16,639 Speaker 1: strategy is because you think of where we sit as 378 00:17:17,280 --> 00:17:20,720 Speaker 1: journalists and we can't day trade, and if I wasn't 379 00:17:20,720 --> 00:17:23,679 Speaker 1: a financial journalist, I would be a fiend. But I 380 00:17:23,680 --> 00:17:27,040 Speaker 1: think we can sports scamble. I think I can scratch 381 00:17:27,119 --> 00:17:27,600 Speaker 1: this itch. 382 00:17:28,000 --> 00:17:29,240 Speaker 2: So but I understanding is that a lot of the 383 00:17:29,240 --> 00:17:32,360 Speaker 2: winning strategies are much like the three hours guys. It's 384 00:17:32,400 --> 00:17:34,160 Speaker 2: like you sign up for a bunch of different sports 385 00:17:34,160 --> 00:17:36,639 Speaker 2: pending platforms and you see where the odds are different, 386 00:17:36,960 --> 00:17:39,480 Speaker 2: and you like buy the cheap ods and sell the 387 00:17:39,600 --> 00:17:41,879 Speaker 2: expensive odds so that you end up neutral and you 388 00:17:41,960 --> 00:17:44,520 Speaker 2: just have a guarantee profit because you're basically harming the 389 00:17:44,560 --> 00:17:46,960 Speaker 2: sports books against each other. There are other ways, like, right, 390 00:17:47,040 --> 00:17:49,400 Speaker 2: you can be really good at knowing who'll hit. 391 00:17:49,359 --> 00:17:51,159 Speaker 1: A home run round study. 392 00:17:51,040 --> 00:17:53,720 Speaker 2: Yeah, learn football, But I think like the people who 393 00:17:53,760 --> 00:17:55,119 Speaker 2: like really do that like kind of work for the 394 00:17:55,160 --> 00:17:58,080 Speaker 2: sports market makers. So yeah, I think that typically the 395 00:17:58,160 --> 00:18:01,840 Speaker 2: arbitrage method is the one that people reliably make money 396 00:18:01,840 --> 00:18:04,440 Speaker 2: on I want to say that he didn't get kicked off. 397 00:18:05,000 --> 00:18:06,720 Speaker 2: This is the other thing that's interesting about it. It's 398 00:18:06,760 --> 00:18:08,960 Speaker 2: not that when you win too much money they kick 399 00:18:09,000 --> 00:18:11,199 Speaker 2: you off your platform. It's that when you win too 400 00:18:11,240 --> 00:18:14,240 Speaker 2: much money, they lower your bat size so you can 401 00:18:14,280 --> 00:18:17,440 Speaker 2: still win, usually win like twenty bucks instead of twenty 402 00:18:17,480 --> 00:18:20,439 Speaker 2: thousand bucks. And part of the reason for that is 403 00:18:20,480 --> 00:18:22,679 Speaker 2: if they kicked you off, there'd be more of a backlash, right, 404 00:18:22,720 --> 00:18:24,639 Speaker 2: And so the limits are a little bit more opaque, 405 00:18:24,720 --> 00:18:26,359 Speaker 2: and so you have a little bit less trouble with 406 00:18:26,400 --> 00:18:29,000 Speaker 2: like politicians and regulators. But another part of it is 407 00:18:29,040 --> 00:18:31,800 Speaker 2: they do want your bets. Right. It's not bad to 408 00:18:31,880 --> 00:18:34,080 Speaker 2: have on your platform someone who's really good at betting, 409 00:18:34,160 --> 00:18:36,600 Speaker 2: because that's informative to you. Or if you know someone 410 00:18:36,640 --> 00:18:39,760 Speaker 2: always wins, then when they make a bet, you can 411 00:18:39,920 --> 00:18:42,200 Speaker 2: bet along with them, which means basically adjusting the odds 412 00:18:42,200 --> 00:18:44,879 Speaker 2: so that like you're informed by their beats. And this 413 00:18:44,960 --> 00:18:46,879 Speaker 2: is true in like market making too, right, Like if 414 00:18:46,920 --> 00:18:48,760 Speaker 2: you're a banking you of a client who's like, you know, 415 00:18:48,800 --> 00:18:50,600 Speaker 2: whenever they buy stock, the stock goes up, Like that's 416 00:18:50,680 --> 00:18:53,280 Speaker 2: useful information for you. You can probably make some money 417 00:18:53,320 --> 00:18:55,240 Speaker 2: on that, right, even if like you're the one selling 418 00:18:55,320 --> 00:18:56,840 Speaker 2: the stock and so you lose money on each trader 419 00:18:56,880 --> 00:18:59,760 Speaker 2: on them, Like having good information is useful. Similar with 420 00:18:59,800 --> 00:19:02,640 Speaker 2: this scambling sites, like you want to keep the people 421 00:19:02,720 --> 00:19:05,200 Speaker 2: who are winning betters because they're giving you information. I've 422 00:19:05,200 --> 00:19:07,400 Speaker 2: written a little bit over the years about insider gambling 423 00:19:07,400 --> 00:19:10,320 Speaker 2: in sports m M because like in the US, like 424 00:19:10,359 --> 00:19:12,520 Speaker 2: the rules of insider trading for stocks are like kind 425 00:19:12,520 --> 00:19:15,399 Speaker 2: of clear, the rules of insider betting on sporting events 426 00:19:15,440 --> 00:19:17,639 Speaker 2: are like less clear, and like it's more controversial, and 427 00:19:17,640 --> 00:19:20,280 Speaker 2: every so often, you know, someone who knows about, you know, 428 00:19:20,359 --> 00:19:22,520 Speaker 2: a football player's injury will bet on a game, and 429 00:19:22,560 --> 00:19:24,719 Speaker 2: then it's like, oh, is that illegal or right? And 430 00:19:24,760 --> 00:19:26,840 Speaker 2: someone once told me that it used to be when 431 00:19:27,080 --> 00:19:30,000 Speaker 2: sports gambling was more of a sort of mob controlled activity. 432 00:19:30,240 --> 00:19:32,639 Speaker 2: You could get in trouble for insider gambling, you know, 433 00:19:32,680 --> 00:19:35,080 Speaker 2: with the mob, but also there was a certain amount 434 00:19:35,080 --> 00:19:36,800 Speaker 2: that was tolerated because like what they would do is 435 00:19:36,840 --> 00:19:38,960 Speaker 2: like they would set a line set, like an opening 436 00:19:39,040 --> 00:19:41,560 Speaker 2: line on a sporting event, and then like the people 437 00:19:41,560 --> 00:19:43,960 Speaker 2: with inside information would come in and put bets or 438 00:19:43,960 --> 00:19:46,360 Speaker 2: like the informed gamblers, like the good gamblers, but Also 439 00:19:46,359 --> 00:19:48,800 Speaker 2: the people i'd inside information would come in and make bets, 440 00:19:48,920 --> 00:19:51,240 Speaker 2: and then the bookies would get information from that and 441 00:19:51,240 --> 00:19:53,040 Speaker 2: they would adjust their lines so they'd be able to 442 00:19:53,080 --> 00:19:54,879 Speaker 2: make more money off the general public. So it's a 443 00:19:54,880 --> 00:19:56,960 Speaker 2: little of that here where like if you're really good, better, 444 00:19:57,240 --> 00:20:00,240 Speaker 2: the sports betting sites can use that to make money, 445 00:20:00,400 --> 00:20:02,640 Speaker 2: but they don't want to just also pay you at 446 00:20:02,640 --> 00:20:04,800 Speaker 2: millions of dollars because you keep winning your bets, so 447 00:20:04,840 --> 00:20:06,159 Speaker 2: they'll pay you at twenty dollars. 448 00:20:06,240 --> 00:20:08,000 Speaker 1: Yeah, and the mob's involved, Well, the. 449 00:20:07,960 --> 00:20:10,240 Speaker 2: Mob is not involved probably in the legal sports campling 450 00:20:10,280 --> 00:20:11,280 Speaker 2: sites for sure. 451 00:20:11,280 --> 00:20:13,680 Speaker 1: That's a good disclaimer. Just thinking back to Dave Holmes, 452 00:20:13,680 --> 00:20:15,960 Speaker 1: if they cut him down to twenty cents, like he 453 00:20:16,000 --> 00:20:19,400 Speaker 1: should just increase his volume and make them pay. 454 00:20:19,440 --> 00:20:22,680 Speaker 2: First of all, first of all, that's a very bad job, 455 00:20:22,800 --> 00:20:24,960 Speaker 2: right if like you're constantly making twenty cent bets, like 456 00:20:24,960 --> 00:20:27,359 Speaker 2: it's you know, you're like return on your time goes now. 457 00:20:27,359 --> 00:20:30,159 Speaker 2: But secondly, like assuming your math based strategy generates you know, 458 00:20:30,200 --> 00:20:32,199 Speaker 2: one hundred bets a day, like you can't make a 459 00:20:32,200 --> 00:20:34,400 Speaker 2: million bets a day, right, it is true? 460 00:20:34,720 --> 00:20:39,000 Speaker 1: Yeah, well anyway, God bless him, take it up and volume. 461 00:20:53,440 --> 00:20:57,960 Speaker 1: So Ron Barren loves Elon Musk, one of Elon Musk's 462 00:20:58,000 --> 00:21:02,280 Speaker 1: biggest backer. When you think about you know who invests 463 00:21:02,320 --> 00:21:07,159 Speaker 1: in various Tesla properties and Ron Barron, of course you 464 00:21:07,160 --> 00:21:08,800 Speaker 1: think of him as a mutual fund manager. And now 465 00:21:08,840 --> 00:21:12,520 Speaker 1: he's putting together these funds that are just for Elon 466 00:21:12,600 --> 00:21:15,720 Speaker 1: Musk's private companies for individuals. 467 00:21:15,800 --> 00:21:17,920 Speaker 2: Yeah, be fun to have, like Elon Musk mutual fund. 468 00:21:17,960 --> 00:21:20,000 Speaker 1: Few weeks ago, I said, I want to launch a 469 00:21:20,040 --> 00:21:23,359 Speaker 1: closed end fund of just Elon Musk. He's doing that 470 00:21:23,400 --> 00:21:27,800 Speaker 1: for one, yeah, for SpaceX and for XA, separate. 471 00:21:27,480 --> 00:21:28,600 Speaker 2: Funds for one for each. 472 00:21:28,800 --> 00:21:29,159 Speaker 1: Yeah. 473 00:21:29,240 --> 00:21:32,639 Speaker 2: There's enormous retail demand for Elon Musk, right, And you 474 00:21:32,680 --> 00:21:35,719 Speaker 2: can get a certain amount of Elon Musk by buying Tesla, 475 00:21:36,280 --> 00:21:40,679 Speaker 2: but you can't get Twitter, slash X or XAI or 476 00:21:40,760 --> 00:21:44,800 Speaker 2: SpaceX or the Boring Company or Neulink or all these 477 00:21:44,800 --> 00:21:47,639 Speaker 2: other things that he does. And a lot of people 478 00:21:47,640 --> 00:21:49,320 Speaker 2: want that. A lot of people want SpaceX, right, And 479 00:21:49,400 --> 00:21:51,600 Speaker 2: there's like you know, there's there's I think we've talked 480 00:21:51,600 --> 00:21:54,360 Speaker 2: about people like I want to say on the golf course, 481 00:21:54,359 --> 00:21:55,439 Speaker 2: so I own some space ax. 482 00:21:55,720 --> 00:21:55,880 Speaker 1: Yeah. 483 00:21:55,960 --> 00:21:58,480 Speaker 2: And so there's a booming business and giving it to them, right, 484 00:21:58,560 --> 00:22:00,960 Speaker 2: if you're like institutional and through like a friend of 485 00:22:00,960 --> 00:22:05,840 Speaker 2: Elon Musk, and you can put a slug of SpaceX 486 00:22:06,000 --> 00:22:09,040 Speaker 2: into a vehicle and sell shares of that vehicle, like, 487 00:22:09,080 --> 00:22:10,480 Speaker 2: people will pay you a lot of money for it. 488 00:22:10,640 --> 00:22:13,919 Speaker 1: I don't know if they would describe themselves as friends, 489 00:22:13,960 --> 00:22:17,399 Speaker 1: but Ron Barron and Elon Musk have a good relationship. 490 00:22:17,400 --> 00:22:20,400 Speaker 1: But they met originally in twenty ten, and I mean 491 00:22:20,560 --> 00:22:23,560 Speaker 1: Baron has just been buying Tesla stock forever. It feels like, 492 00:22:24,000 --> 00:22:26,159 Speaker 1: I think this is really interesting. I mean for a 493 00:22:26,160 --> 00:22:29,760 Speaker 1: lot of reasons. But also we've definitely talked about on 494 00:22:30,359 --> 00:22:33,480 Speaker 1: this program beyond just Elon Musk, there's just a lot 495 00:22:33,520 --> 00:22:38,200 Speaker 1: of demand among retail investors for private companies. It feels 496 00:22:38,200 --> 00:22:41,080 Speaker 1: like a lot of the exciting companies right now are 497 00:22:41,119 --> 00:22:45,640 Speaker 1: private companies, SpaceX probably being one of the best examples 498 00:22:45,680 --> 00:22:48,359 Speaker 1: of that. And this is a way to do it. 499 00:22:48,400 --> 00:22:50,320 Speaker 1: Is it the most efficient I mean compared to some 500 00:22:50,359 --> 00:22:53,160 Speaker 1: of the other vehicles that we've talked about, thinking about 501 00:22:53,240 --> 00:22:58,800 Speaker 1: Destiny for example, exactly. So there you have. 502 00:22:58,720 --> 00:23:02,919 Speaker 2: It, right, scarce supply of these private companies. There's a 503 00:23:02,920 --> 00:23:06,480 Speaker 2: lot of desire to invest in them. There are some 504 00:23:07,560 --> 00:23:09,879 Speaker 2: legal restrictions, but not that many. Right, A lot of 505 00:23:09,920 --> 00:23:12,119 Speaker 2: the investor class now are in credit and investors and can 506 00:23:12,160 --> 00:23:16,280 Speaker 2: buy private funds, and so there is a real demand 507 00:23:16,320 --> 00:23:18,080 Speaker 2: for this stuff. But I think is interesting is like 508 00:23:18,400 --> 00:23:20,159 Speaker 2: the fact that there's a real demand for this stuff 509 00:23:20,960 --> 00:23:23,840 Speaker 2: and like a limited supply mostly means that people who 510 00:23:23,840 --> 00:23:25,840 Speaker 2: have that supply can make a lot of money, right, 511 00:23:25,880 --> 00:23:27,720 Speaker 2: And so we've talked about the Destiny Tech one hundred 512 00:23:27,760 --> 00:23:30,440 Speaker 2: fund where it traded an enormous premium to the net 513 00:23:30,480 --> 00:23:33,000 Speaker 2: ascid value because like they had like this limited supply 514 00:23:33,040 --> 00:23:35,400 Speaker 2: of cool private tech stocks and so they could sell 515 00:23:35,400 --> 00:23:38,199 Speaker 2: that at you know, ten times acid value, or like, 516 00:23:38,320 --> 00:23:40,720 Speaker 2: you know, there are a number of other like SpaceX 517 00:23:40,800 --> 00:23:44,080 Speaker 2: or whatever vehicles where it's like the manager of that vehicle, 518 00:23:44,119 --> 00:23:46,919 Speaker 2: the person who has actual SpaceX shares, can charge like 519 00:23:47,200 --> 00:23:49,800 Speaker 2: two and twenty style fees to just own one stock. 520 00:23:50,040 --> 00:23:52,680 Speaker 2: The story about Ron Barn's SpaceX funds is that they're 521 00:23:52,680 --> 00:23:54,880 Speaker 2: not doing that, right. They're charging like a mutual fundye 522 00:23:54,920 --> 00:23:57,040 Speaker 2: kind of fee structure where it's not an incentive fee 523 00:23:57,040 --> 00:24:00,520 Speaker 2: and like relatively cheap. And so what he doing, which 524 00:24:00,520 --> 00:24:02,720 Speaker 2: I think is more interesting, He's not like gouging it 525 00:24:02,760 --> 00:24:06,720 Speaker 2: for money. He is using it as essentially advertisement for 526 00:24:06,800 --> 00:24:09,240 Speaker 2: active management. Yeah, because like the point is like, if 527 00:24:09,240 --> 00:24:11,719 Speaker 2: you run a mutual fund company, it's like a secularly 528 00:24:12,000 --> 00:24:14,080 Speaker 2: rough time to run a mutual fund company, right, because 529 00:24:14,119 --> 00:24:17,920 Speaker 2: index funds and ETFs are really taking away market share 530 00:24:17,960 --> 00:24:19,960 Speaker 2: from actively managed stock mutual funds. 531 00:24:20,000 --> 00:24:20,200 Speaker 1: Yeah. 532 00:24:20,200 --> 00:24:22,240 Speaker 2: And if you're running an actively managed stock mutual fund 533 00:24:22,359 --> 00:24:23,960 Speaker 2: and you're like, no, I'm really good at picking stocks, 534 00:24:23,960 --> 00:24:25,679 Speaker 2: so you should invest with me and pay me, you know, 535 00:24:26,240 --> 00:24:28,679 Speaker 2: one hundred basis point fees instead of paying Blackrock, you know, 536 00:24:28,720 --> 00:24:31,960 Speaker 2: one basis point fees, that's like not a message that 537 00:24:33,359 --> 00:24:35,800 Speaker 2: people are very receptive to you now, because like there's 538 00:24:35,840 --> 00:24:39,040 Speaker 2: been a real popularization of the idea that index funds 539 00:24:39,560 --> 00:24:42,280 Speaker 2: are better. There's a lot of data on like the 540 00:24:42,359 --> 00:24:45,240 Speaker 2: persistence of mutual fund performance where it's like the people 541 00:24:45,240 --> 00:24:46,919 Speaker 2: who are good at picking stocks, like, aren that good 542 00:24:46,920 --> 00:24:48,280 Speaker 2: at picking stocks? Right, And there's not a lot of 543 00:24:48,280 --> 00:24:50,280 Speaker 2: persistence from here to year of people who are good 544 00:24:50,280 --> 00:24:53,320 Speaker 2: at picking stocks. And so just saying like I'm a 545 00:24:53,320 --> 00:24:55,240 Speaker 2: good stock picker and you should invest with me because 546 00:24:55,240 --> 00:24:57,280 Speaker 2: I'll pick the right stocks for you is not a 547 00:24:57,320 --> 00:25:00,600 Speaker 2: good message anymore. But if you're like I will pick 548 00:25:00,640 --> 00:25:03,359 Speaker 2: the right thoughts for you. And SpaceX like that's not 549 00:25:03,359 --> 00:25:05,720 Speaker 2: in the index fund, right, I can't get SpaceX on 550 00:25:05,760 --> 00:25:08,240 Speaker 2: the index fund. And so if you're a stock picker 551 00:25:08,240 --> 00:25:11,760 Speaker 2: who has some mixture of private assets, like that is 552 00:25:11,800 --> 00:25:12,920 Speaker 2: a more appealing message. 553 00:25:13,040 --> 00:25:16,080 Speaker 1: Yeah. So two points there on the fees to be specific. 554 00:25:16,160 --> 00:25:19,359 Speaker 1: So these funds charged this is according to his story 555 00:25:19,359 --> 00:25:22,320 Speaker 1: from Miles Weiss. According to a person familiar with the matter, 556 00:25:22,359 --> 00:25:24,639 Speaker 1: the funds charge an annual management fee of around one 557 00:25:24,720 --> 00:25:28,479 Speaker 1: percent lock up investor capital for about eight years. Rival 558 00:25:28,520 --> 00:25:31,800 Speaker 1: single purpose funds typically charge management fees of one to 559 00:25:31,840 --> 00:25:35,800 Speaker 1: two percent annually, with that performance fee of as much 560 00:25:35,800 --> 00:25:39,960 Speaker 1: as twenty percent. And in an interview, Ron Barn said 561 00:25:40,080 --> 00:25:42,400 Speaker 1: exactly what you said. We're doing this because we want 562 00:25:42,400 --> 00:25:44,919 Speaker 1: people to know about our mutual funds. I want my 563 00:25:45,000 --> 00:25:49,000 Speaker 1: business to last for one hundred years. And I mean 564 00:25:49,000 --> 00:25:50,879 Speaker 1: that ties into the ETF story that I love that 565 00:25:50,920 --> 00:25:52,919 Speaker 1: you mentioned. But I will say that stock picking and 566 00:25:52,960 --> 00:25:57,280 Speaker 1: ETFs is coming now. There's going to say coming back, 567 00:25:57,320 --> 00:25:59,760 Speaker 1: but it's not coming back. It's becoming more of a moment. 568 00:26:00,720 --> 00:26:03,240 Speaker 2: Yeah. But I think that the old model of like 569 00:26:03,320 --> 00:26:05,639 Speaker 2: running a stock picking mutual fund and judging one hundred 570 00:26:05,640 --> 00:26:06,680 Speaker 2: basis points. 571 00:26:06,359 --> 00:26:08,200 Speaker 1: Is like oh yeah, yeah, yeah. 572 00:26:08,240 --> 00:26:10,919 Speaker 2: If you are running a sort of like actively managed 573 00:26:11,000 --> 00:26:13,359 Speaker 2: mutual fund complex and you want your business to last 574 00:26:13,400 --> 00:26:19,159 Speaker 2: for one hundred years, you were thinking something about private markets, right, 575 00:26:19,200 --> 00:26:21,480 Speaker 2: and like a lot of that is like these traditional 576 00:26:21,480 --> 00:26:24,600 Speaker 2: asset managers are buying private credit managers so that they 577 00:26:24,600 --> 00:26:28,639 Speaker 2: can get into that more lucrative, more not inexible business. 578 00:26:28,840 --> 00:26:29,199 Speaker 1: Yeah. 579 00:26:29,240 --> 00:26:31,240 Speaker 2: But this thing where it's like ah, SpaceX stocks, I 580 00:26:31,280 --> 00:26:33,840 Speaker 2: can do something with that. That's another way to do that, 581 00:26:33,920 --> 00:26:35,919 Speaker 2: but like something in. 582 00:26:35,840 --> 00:26:37,520 Speaker 1: Privates, yeah, you know. 583 00:26:37,600 --> 00:26:40,440 Speaker 2: Or the alternative is like enormous scale out automation. You 584 00:26:40,480 --> 00:26:43,320 Speaker 2: can be a mutual fund manager if you're running gigantic 585 00:26:43,359 --> 00:26:45,199 Speaker 2: index funds and you can afford to do that at 586 00:26:45,200 --> 00:26:47,840 Speaker 2: two basis points. But like I like to pick my stocks, 587 00:26:47,960 --> 00:26:49,520 Speaker 2: is like a harder business to stay in for the 588 00:26:49,520 --> 00:26:49,960 Speaker 2: long run. 589 00:26:50,119 --> 00:26:53,480 Speaker 1: Yeah, I don't know. Again, I find the idea of 590 00:26:54,000 --> 00:26:57,800 Speaker 1: a highly concentrated portfolio of just these are my stocks 591 00:26:57,800 --> 00:27:02,080 Speaker 1: that I like, here's like a dozen to two dozen 592 00:27:02,119 --> 00:27:05,120 Speaker 1: of them, and I'm going to beat the market that way. 593 00:27:05,480 --> 00:27:07,479 Speaker 1: I find that very compelling and you can see that 594 00:27:07,640 --> 00:27:09,960 Speaker 1: the market. Yeah, if you beat the market that's a 595 00:27:09,960 --> 00:27:10,440 Speaker 1: big if. 596 00:27:10,560 --> 00:27:12,600 Speaker 2: Look that is still a bits that works, right, I 597 00:27:12,640 --> 00:27:14,240 Speaker 2: mean Bill Ackman is out raising. 598 00:27:14,840 --> 00:27:15,960 Speaker 1: I was wondering how long. 599 00:27:15,920 --> 00:27:19,040 Speaker 2: Twenty five billion dollar funds to pick twelve stocks? But 600 00:27:19,119 --> 00:27:21,680 Speaker 2: that's not really true, but it's partially true. I think 601 00:27:21,720 --> 00:27:28,680 Speaker 2: the academic sort of consensus, the like regulatory consensus, there's 602 00:27:28,680 --> 00:27:31,359 Speaker 2: like even a real move to the indexing and a 603 00:27:31,400 --> 00:27:33,680 Speaker 2: real move to suspicion of active stock picking. 604 00:27:33,960 --> 00:27:36,240 Speaker 1: Yeah, and like and for good reason, yeah. 605 00:27:36,040 --> 00:27:37,840 Speaker 2: And a lot of suspicion that like, if you are 606 00:27:38,000 --> 00:27:43,560 Speaker 2: a long only equity mutual fund manager getting paid no 607 00:27:43,680 --> 00:27:46,720 Speaker 2: incentive fees, there's a lot of suspicion that you're generating 608 00:27:46,800 --> 00:27:49,280 Speaker 2: very much alpha there, right, And if you're not generating alpha. 609 00:27:49,000 --> 00:27:51,240 Speaker 1: Then like there's a good chance you're probably like a 610 00:27:51,280 --> 00:27:55,399 Speaker 1: closet indexer and you're not actually doing too much different 611 00:27:55,400 --> 00:27:56,200 Speaker 1: from the benchmark. 612 00:27:56,720 --> 00:27:59,119 Speaker 2: Yeah, and you're charging a lot bigger fees than an 613 00:27:59,160 --> 00:28:02,240 Speaker 2: index fund, right, right, even if you're not consciously a 614 00:28:02,280 --> 00:28:04,600 Speaker 2: closet indexer, right, even if you're like consciously like trying 615 00:28:04,640 --> 00:28:07,080 Speaker 2: to pick the best stocks. Like the track record of 616 00:28:07,359 --> 00:28:10,760 Speaker 2: active equity mutual fund management, like, people have a suspicion 617 00:28:10,760 --> 00:28:13,760 Speaker 2: about it, now, and so like having something that is 618 00:28:14,119 --> 00:28:18,680 Speaker 2: objectively differentiated from like I'm buying stocks is just what 619 00:28:19,000 --> 00:28:23,480 Speaker 2: this moment calls for. And it feels like that's secularly true, 620 00:28:23,520 --> 00:28:25,880 Speaker 2: and it feels like it's not like five years people 621 00:28:26,080 --> 00:28:29,120 Speaker 2: back to like wanting a twenty five stock equity mutual fund. 622 00:28:29,160 --> 00:28:32,840 Speaker 2: It feels like that was a model from the last century. 623 00:28:33,240 --> 00:28:36,359 Speaker 1: I think I'm taking the other side. I think I am. 624 00:28:36,560 --> 00:28:38,040 Speaker 2: Well, you're watching the cool ETFs. 625 00:28:38,240 --> 00:28:41,480 Speaker 1: For example, in ETF launch that I was really excited 626 00:28:41,520 --> 00:28:44,840 Speaker 1: to see Alistair Hibbert from black Rock. He's like their 627 00:28:44,880 --> 00:28:48,840 Speaker 1: star hedge fund manager. He was once paid more than 628 00:28:48,920 --> 00:28:53,560 Speaker 1: Larry Fink. He just launched in ETF. The whole idea 629 00:28:53,600 --> 00:28:56,840 Speaker 1: is like, here are my best picks. It's twenty to 630 00:28:56,880 --> 00:28:59,760 Speaker 1: twenty five stocks. We're gonna hold him for a while, 631 00:29:00,480 --> 00:29:05,880 Speaker 1: and it's in an ETF wrapper. That's really cool. Yeah yeah, yeah, 632 00:29:05,920 --> 00:29:08,680 Speaker 1: so Ron Barren should launch an ETF. But then you can't, have, 633 00:29:08,920 --> 00:29:11,080 Speaker 1: of course SpaceX in it. Though there are a lot 634 00:29:11,080 --> 00:29:14,200 Speaker 1: of people trying to figure out how to put private 635 00:29:14,200 --> 00:29:16,200 Speaker 1: assets in an ETF. I don't know how you do that, 636 00:29:16,280 --> 00:29:21,880 Speaker 1: but yeah, yeah, I don't think I could do that. 637 00:29:22,000 --> 00:29:23,800 Speaker 1: I don't know. I don't know how you would do it, 638 00:29:23,840 --> 00:29:25,719 Speaker 1: but listen. We've got some of our best and our 639 00:29:25,760 --> 00:29:26,440 Speaker 1: brightest on it. 640 00:29:26,560 --> 00:29:28,280 Speaker 2: So I'm excited for that. 641 00:29:28,600 --> 00:29:31,840 Speaker 1: Yeah, is there anything else I should say? 642 00:29:31,880 --> 00:29:37,280 Speaker 2: Today? In Money Stuff birthday announcements, we have Bob Greyfeld, 643 00:29:37,400 --> 00:29:38,440 Speaker 2: loyal listener. 644 00:29:38,160 --> 00:29:43,480 Speaker 1: And father, huge Matt Levine fan. This is this is 645 00:29:44,040 --> 00:29:47,680 Speaker 1: a great present the shout out. Even better would be 646 00:29:47,960 --> 00:29:50,440 Speaker 1: him meeting you. You haven't actually met. You've spoken on 647 00:29:50,480 --> 00:29:51,320 Speaker 1: the phone, though. 648 00:29:51,160 --> 00:29:53,680 Speaker 2: That's true, and now he's gotten the shout out on 649 00:29:53,720 --> 00:29:54,240 Speaker 2: the podcast. 650 00:29:54,440 --> 00:29:56,440 Speaker 1: This is huge. 651 00:29:58,520 --> 00:29:59,960 Speaker 2: And that was the Money Stuff Podcast. 652 00:30:00,160 --> 00:30:02,240 Speaker 1: I'm Matt Levia and I'm Katie Greifeld. 653 00:30:02,520 --> 00:30:04,560 Speaker 2: You can find my work by subscribing to the Money 654 00:30:04,560 --> 00:30:07,160 Speaker 2: stuffnewsletter on Bloomberg dot com. 655 00:30:06,880 --> 00:30:09,160 Speaker 1: And you can find me on Bloomberg TV every day 656 00:30:09,200 --> 00:30:12,520 Speaker 1: between ten to eleven am Eastern. You can also subscribe 657 00:30:12,520 --> 00:30:14,600 Speaker 1: to our show wherever you're listening right now and leave 658 00:30:14,680 --> 00:30:16,680 Speaker 1: us a review. It helps more people find the show. 659 00:30:17,320 --> 00:30:20,120 Speaker 2: The Money Stuff Podcast is produced by Anna Maserakus and 660 00:30:20,160 --> 00:30:20,880 Speaker 2: Moses Onen. 661 00:30:21,240 --> 00:30:23,080 Speaker 1: Our theme music was composed by Blake. 662 00:30:22,960 --> 00:30:26,840 Speaker 2: Maples, Brandon Francis Nianimmess, Our executive producer, and Stage Bauman 663 00:30:26,880 --> 00:30:29,280 Speaker 2: is Bloomberg's head of podcasts. Thanks for listening to the 664 00:30:29,320 --> 00:30:32,360 Speaker 2: Money Stuff podcast. We'll be back next week. Before Stuff