WEBVTT - Don’t Hate the Player: DJT, Bets, Funds 0:00:03.120 --> 0:00:08.240 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:10.240 --> 0:00:13.039 Hello and welcome to The Money Stuff Podcast, your weekly 0:00:13.080 --> 0:00:17.239 podcast where we talk about stuff related to money. I'm 0:00:17.239 --> 0:00:19.320 Matt Levine and I write The Money Stuff com for 0:00:19.400 --> 0:00:20.200 Bloomberg Opinion. 0:00:20.400 --> 0:00:22.840 And I'm Katie Greifeld, a reporter for Bloomberg News and 0:00:22.880 --> 0:00:24.480 an anchor for Bloomberg Television. 0:00:25.120 --> 0:00:26.040 What's going on, Katie? 0:00:26.400 --> 0:00:29.640 All right? We are going to talk about DJT and 0:00:29.800 --> 0:00:33.519 your Phil. We're going to talk about sports gambling, and 0:00:33.560 --> 0:00:38.160 we're also going to talk about Ron Barron and Elon Mosk. Alright, 0:00:38.680 --> 0:00:44.440 it's been a while though, sure. Hey, so we tell 0:00:44.440 --> 0:00:47.600 you to email us every week. We're specifically looking for questions. 0:00:47.640 --> 0:00:49.680 So we want to do more of a mail bag 0:00:50.320 --> 0:00:53.720 so that Katy and I can sing mail bag. Yeah, 0:00:53.760 --> 0:00:56.080 And to do that, we need questions. So send us 0:00:56.080 --> 0:00:56.760 to your questions. 0:00:56.800 --> 0:00:58.040 All we need is a prompt. 0:00:58.680 --> 0:01:00.920 All we need is a prompt. We don't want to 0:01:00.960 --> 0:01:01.920 make up questions. 0:01:02.080 --> 0:01:04.400 No, don't make us make up questions. 0:01:05.160 --> 0:01:09.360 Send us your best questions at money Pod at Bloomberg 0:01:09.400 --> 0:01:12.399 dot net. And then if you send us a good question, 0:01:13.120 --> 0:01:14.959 we'll answer it on air. And if you send us 0:01:14.959 --> 0:01:18.039 only bad questions, we'll be forced answer those on air. 0:01:18.080 --> 0:01:19.000 We can work with that. 0:01:21.760 --> 0:01:25.400 Dj T, Trump Media and Technology DJT. 0:01:25.880 --> 0:01:29.160 They should sell stock. They can't sell stock yet, as 0:01:29.200 --> 0:01:31.800 you write, because they're not yet a year old. But 0:01:31.880 --> 0:01:35.200 there's a way for them to get more shares out 0:01:35.200 --> 0:01:35.920 there into the handle. 0:01:36.000 --> 0:01:39.000 They can sell stock. What they can't do, yeah, is 0:01:39.000 --> 0:01:41.920 an ATM just the silly finance start for an at 0:01:41.959 --> 0:01:44.560 the market offering. If you're a meme stock, this is 0:01:44.640 --> 0:01:46.440 like as me me as a memestock cats, right, Like 0:01:46.480 --> 0:01:48.960 it has like a business that I sometimes say it's 0:01:48.960 --> 0:01:51.760 like a moderately successful substock. They make like, you know, 0:01:51.840 --> 0:01:54.520 a million dollars a quarter in advertising revenues. Not bad, 0:01:55.480 --> 0:01:58.240 it's not bad for like one man operation, but like 0:01:58.400 --> 0:02:01.240 it's got a bunch of employees, a seven billion dollar 0:02:01.440 --> 0:02:04.320 equity market cap, which seems high for like a million 0:02:04.360 --> 0:02:06.840 dollar quarter revenue operation that, by the way, lose a 0:02:06.840 --> 0:02:08.200 lot of money because like they have to pay a 0:02:08.240 --> 0:02:10.680 lot of people to generate that million dollars revenue. And 0:02:10.760 --> 0:02:13.720 so probably some people there think that it's a business, right, 0:02:13.760 --> 0:02:16.560 and like it's going to be like the future of media, right, 0:02:16.600 --> 0:02:18.560 They're going to get into television and they're going to 0:02:18.600 --> 0:02:22.000 be the biggest social media platform there is. They're not now, 0:02:22.040 --> 0:02:25.240 but maybe one day they will be. But my impression 0:02:25.320 --> 0:02:27.880 is that it largely trades like a meme stock. It 0:02:27.919 --> 0:02:30.760 trades as a bet on the newsworthiness of Donald Trump, 0:02:31.320 --> 0:02:35.520 and so it has this valuation that is largely not 0:02:35.600 --> 0:02:39.799 driven by business fundamentals. And I've written about that sort 0:02:39.840 --> 0:02:42.160 of thing a lot over the years, and my feeling 0:02:42.240 --> 0:02:44.720 is like, if you have a valuation that's not just fundamentals, 0:02:44.919 --> 0:02:46.640 you should sell as much stock as you can because 0:02:46.680 --> 0:02:50.639 then you have money, and you've transformed your irrational public 0:02:50.680 --> 0:02:52.880 valuation into an actual pot of money that you can 0:02:52.960 --> 0:02:55.320 use to build a business. And they seem to agree. 0:02:55.360 --> 0:02:57.160 So they're like, we're going to sell stock. And the 0:02:57.160 --> 0:02:59.560 way you sell that stock has to be to retail investors, right. 0:02:59.600 --> 0:03:01.800 You have to go out and sell it in the 0:03:01.840 --> 0:03:05.320 market to retail investors. You can't do a standard book 0:03:05.360 --> 0:03:09.919 builds offering where like you hire a big investment bank 0:03:09.919 --> 0:03:12.280 and they call big mutual funds and hedge funds and 0:03:12.280 --> 0:03:14.200 they say, would you like to buy stock? Because like, yeah, 0:03:14.360 --> 0:03:16.480 like what does that pitchbuck look like? Right? What does 0:03:16.520 --> 0:03:19.600 the what does the investor deck look like. So they 0:03:20.320 --> 0:03:21.840 want to do an out of the market offering, they can't 0:03:21.840 --> 0:03:23.960 because they haven't been public for long enough basically because 0:03:24.080 --> 0:03:27.640 they're a Deespac company. And so they are doing this 0:03:27.760 --> 0:03:32.880 weird quasi ATM offering where like they've hired Yorkville Advisors, 0:03:32.880 --> 0:03:35.680 which is like a smallish fund in New Jersey. 0:03:35.400 --> 0:03:37.400 That mountain side mountain side New Jersey. 0:03:37.560 --> 0:03:39.080 You this podcast expert on New. 0:03:39.040 --> 0:03:41.920 Jersey to where I grew up, So. 0:03:41.880 --> 0:03:44.280 It is your horse spin to mountain side. Probably not 0:03:45.240 --> 0:03:48.600 I hire this mountain side fund to Basically, like, these 0:03:48.640 --> 0:03:51.200 guys will buy their stock whenever they want to, and 0:03:51.200 --> 0:03:52.880 then they'll turn around and sell it into the market 0:03:52.880 --> 0:03:55.200 and look like like a two point seventy five percent fee, 0:03:55.400 --> 0:03:57.800 and it's like a sort of quasi ATM offering. 0:03:57.960 --> 0:03:59.840 And so they then sell it over the course of 0:04:00.160 --> 0:04:01.200 three days, well. 0:04:01.320 --> 0:04:02.800 I think it's like one or three days. Yeah, the 0:04:02.920 --> 0:04:05.080 deal is for two and a half billion dollars, but 0:04:05.120 --> 0:04:07.400 it's not like that's happening today. It's like two and 0:04:07.400 --> 0:04:09.000 a half billion dollars over the course of up to 0:04:09.040 --> 0:04:11.360 three years. And so on any day in that three 0:04:11.440 --> 0:04:14.360 year period, the company can call the York Villa and say, hey, 0:04:14.400 --> 0:04:16.720 we want to do like twenty million today. They say 0:04:16.720 --> 0:04:17.960 a number of shares were I to do like a 0:04:18.000 --> 0:04:20.600 million shares today? And York Villa will sell it those 0:04:20.600 --> 0:04:23.640 shares over like three days. Yeah, give them the money. 0:04:24.160 --> 0:04:26.360 Reading it kind of made me think of them as 0:04:26.400 --> 0:04:30.400 just basically very slow market makers. I know that's super 0:04:30.720 --> 0:04:34.360 reductive and simplistic, but that's how I talked about it 0:04:34.440 --> 0:04:35.840 in my head to myself. 0:04:35.960 --> 0:04:38.240 They're like a broker in an atm ufering. You hire 0:04:38.279 --> 0:04:40.000 a bank or a broker and you tell them to 0:04:40.000 --> 0:04:41.479 sell stock over the day. 0:04:41.600 --> 0:04:42.760 Yeah, and they sell the stock. 0:04:42.560 --> 0:04:43.840 And they charge you a fee. And this is the 0:04:43.880 --> 0:04:45.960 same thing, only like they're not technically a broker. They're 0:04:46.000 --> 0:04:48.120 not technically doing it as a broker. They're doing it 0:04:48.160 --> 0:04:50.440 as a principal. They're buying the stock for their own 0:04:50.440 --> 0:04:52.640 account and then they're selling it into the market. The 0:04:52.680 --> 0:04:54.440 thing that makes them any principle rather than just the 0:04:54.480 --> 0:04:58.360 broker is that if they sell stock for thirty five 0:04:58.400 --> 0:05:05.119 dollars or whatever, they don't pay DJT the price they got. 0:05:06.040 --> 0:05:09.800 They pay DJT the company Trump Media. DJT is the 0:05:09.839 --> 0:05:14.880 ticker they pay DJT the volume weighted average price over 0:05:14.920 --> 0:05:17.480 the period they sell it. Actually the more complicated than that, 0:05:17.680 --> 0:05:20.640 but they pay them like a price that is objectively determined. 0:05:20.800 --> 0:05:22.400 It's not like if we sell stock for you thirty 0:05:22.400 --> 0:05:24.599 five dollars, we'll pay you thirty five dollars. It's like 0:05:25.080 --> 0:05:28.360 we'll sell stock or we won't. And so the natural 0:05:28.400 --> 0:05:30.800 thing to do is if you're paying the view op 0:05:30.880 --> 0:05:33.560 over some period, you sell the stock over that period, 0:05:33.920 --> 0:05:36.800 and then you've eliminated the risk, right, Like, you sell 0:05:36.800 --> 0:05:38.400 it the view op and you pay the view up. 0:05:38.640 --> 0:05:41.400 But like there's no obligation for them to sell, no 0:05:41.480 --> 0:05:44.520 obligation to them to sell during the pricing period. And 0:05:44.600 --> 0:05:47.359 so because of that, everyone can say, this is not 0:05:48.080 --> 0:05:50.760 a deal in which DJT is selling stock to the market. 0:05:50.960 --> 0:05:52.840 This is just the deal in which DJT is selling 0:05:52.880 --> 0:05:55.440 stock to Yorkville. And what Yorkville does with the stock 0:05:55.520 --> 0:05:58.200 is its own business. Now clearly, because they're paying like 0:05:58.200 --> 0:06:00.760 the volume weighted average price over like period of time, 0:06:01.320 --> 0:06:04.719 their incentive is to sell the stock over that period 0:06:04.760 --> 0:06:07.720 of time. And like there are like various indications that 0:06:07.760 --> 0:06:09.440 they're not going to hold onto the stock, right, Like 0:06:09.480 --> 0:06:12.839 they're a thirty million dollar assets under management fund buying 0:06:12.839 --> 0:06:15.240 two point five billion dollars of Trump stock. Right, there's 0:06:15.279 --> 0:06:16.840 like a limit that they can't buy more than four 0:06:16.880 --> 0:06:18.800 point nine nine percent of the stock. Two point five 0:06:18.800 --> 0:06:20.599 billion is like a quarter of the stock. So they're 0:06:20.600 --> 0:06:22.680 not going to hold onto the stock, but they're going 0:06:22.760 --> 0:06:24.520 to sell the stock, but they don't have to. There's 0:06:24.520 --> 0:06:26.680 no arrangement for them to sell the stock. The other 0:06:26.680 --> 0:06:28.680 thing I would say is, like the way the pricing 0:06:28.720 --> 0:06:31.640 works is that each day they look at the volume 0:06:31.640 --> 0:06:34.120 weighted average price and they take the lowest of those 0:06:34.200 --> 0:06:36.680 view ops and that is the price that they pay. 0:06:37.040 --> 0:06:41.240 And so that it creates incentives. Right, if you sell 0:06:41.240 --> 0:06:43.919 the stock like one third each day, then like the 0:06:43.960 --> 0:06:45.400 lowest day is the price you pay it and the 0:06:45.480 --> 0:06:48.440 other two days are like gravy for you. So you know, 0:06:48.520 --> 0:06:50.600 their incentive is to have one day be really bad 0:06:50.880 --> 0:06:53.760 so that they can pay DJT a low price for 0:06:53.800 --> 0:06:55.719 the stock and like sell it for a high price. 0:06:55.880 --> 0:06:59.200 And with a meme stock, that's probably gonna happen. You're 0:06:59.200 --> 0:07:01.599 gonna have one rocky day, You're. 0:07:01.440 --> 0:07:04.359 Gonna have volatility. Right, Essentially, what Yorkville is getting is 0:07:04.360 --> 0:07:06.200 a series of short term options that they're getting kind 0:07:06.240 --> 0:07:07.800 of for free, right, because of the stock is like 0:07:08.000 --> 0:07:10.360 forty dollars one day, thirty five dollars the next day, 0:07:10.360 --> 0:07:12.840 and forty dollars the following day. Then like they sell 0:07:12.840 --> 0:07:14.680 stock at like an average price of like thirty eight, 0:07:14.720 --> 0:07:17.080 but they pay like thirty five to DJT because that's 0:07:17.120 --> 0:07:18.160 the lowest of the three of view. 0:07:18.200 --> 0:07:21.360 Ops to just tie a bow on this. So they're 0:07:21.400 --> 0:07:28.760 a broker in ATM, but it's totally on djt's terms. No, Well, 0:07:28.920 --> 0:07:30.760 DJT is selling them the stock. 0:07:31.200 --> 0:07:33.680 So a broker in an ATM, yeah, like a bank. 0:07:33.840 --> 0:07:35.440 The way it works is that the company calls them 0:07:35.440 --> 0:07:36.960 every day and says, hey, we want to sell twenty 0:07:37.000 --> 0:07:39.560 million dollars off their stock or whatever, and the broker 0:07:39.640 --> 0:07:43.240 sells that stock for the company and then pays the 0:07:43.280 --> 0:07:46.440 company the money it received minus a fee. Right, yeah, 0:07:46.640 --> 0:07:50.280 and this is different, Like this is the DJT calls 0:07:50.360 --> 0:07:52.200 Yorkville and says, hey, you want to sell some stock, 0:07:52.480 --> 0:07:54.240 and Yorksville says, okay, we'll give you the money in 0:07:54.240 --> 0:07:56.080 three days. But they don't have to sell the stock, 0:07:56.600 --> 0:07:59.880 and they're acting as principal and they're getting a lot 0:07:59.880 --> 0:08:03.200 of like little options on DJT stock. Right, So basically, 0:08:03.240 --> 0:08:05.800 if the stock is volatile, they make more money. That's 0:08:05.800 --> 0:08:08.080 not true of a broker in an ATM, right, Yeah, 0:08:08.120 --> 0:08:10.240 broker in a the ATM, if the stock is volatile, 0:08:10.320 --> 0:08:12.440 then like they're just selling it on behalf of the 0:08:12.480 --> 0:08:16.160 company here. Because they are a principal, they are making 0:08:16.360 --> 0:08:18.120 probably a lot more money than a broker in an 0:08:18.120 --> 0:08:21.560 at would. Also, they're not a broker, because that's sort 0:08:21.560 --> 0:08:23.520 of important for legal reasons. If they're doing it as 0:08:23.560 --> 0:08:25.560 a broker, then this is an ATM and it doesn't 0:08:25.600 --> 0:08:27.520 really work. And by the way, this is not an 0:08:27.560 --> 0:08:30.160 uncommon thing where a company wants to sell stock to 0:08:30.320 --> 0:08:33.520 investors in the market and like there's some impediment and 0:08:33.600 --> 0:08:36.319 so they do this sort of thing where they instead 0:08:36.679 --> 0:08:39.840 sell the stock in some structured way to some investor 0:08:39.920 --> 0:08:44.199 who specializes in intermediating these traits. Some of those people 0:08:44.200 --> 0:08:46.080 get in trouble for doing a sort of like the 0:08:46.120 --> 0:08:49.040 SEC says, you know, you're doing a brokerd offering and 0:08:49.080 --> 0:08:50.959 you're not supposed to do that, or you're supposed to 0:08:50.960 --> 0:08:53.560 be registered as a dealer. So there's some possibility of 0:08:53.559 --> 0:08:56.000 getting in trouble here when companies do this. Yeah, I 0:08:56.000 --> 0:08:57.920 think Borkville has a track record of doing it and 0:08:58.120 --> 0:09:00.400 not getting in trouble, so it seems okay, But it's 0:09:00.400 --> 0:09:01.640 a complicated kind of trade. 0:09:01.760 --> 0:09:03.320 Yeah, as you can tell, I'm trying to work through this. 0:09:03.480 --> 0:09:07.400 So Bailey Lipschultz wrote the article on Yorkville for Bloomberg News, 0:09:07.640 --> 0:09:09.840 and I was chatting with him about it, and I 0:09:09.840 --> 0:09:12.000 have to say, I've never thought about this before, And 0:09:12.360 --> 0:09:14.680 I was like, is this like a booming business? Like, 0:09:14.679 --> 0:09:15.679 who else does this? 0:09:16.080 --> 0:09:19.120 Specs? Well, Yorkfool is a ton of these respective. 0:09:18.679 --> 0:09:21.160 Yeah, well, he was saying, Yorkville is kind of one 0:09:21.200 --> 0:09:22.920 of one when it comes to this. 0:09:23.520 --> 0:09:28.160 They are one of one in this particular flavor of it. Yeah, 0:09:28.160 --> 0:09:31.520 but like when bed Bath and Beyond was sliding into bankruptcy, 0:09:31.559 --> 0:09:34.200 they did not this a different kind of trade, but 0:09:34.240 --> 0:09:35.680 I kind of looked the same. It was kind of 0:09:35.720 --> 0:09:39.080 like also a deal where like a investor agreed to 0:09:39.679 --> 0:09:43.120 buy stock from a company and sell it out into 0:09:43.160 --> 0:09:44.800 the market, but they weren't required to sell it out 0:09:44.800 --> 0:09:46.920 into the market, And so it was like, they're like 0:09:47.040 --> 0:09:49.160 flavors of this. You know. There was for a whilely 0:09:49.240 --> 0:09:52.200 business of what are called death spiral convertibles are not this, 0:09:52.320 --> 0:09:55.679 but they're not unrelated to this, right, So, yeah, Yorkville 0:09:55.720 --> 0:09:57.360 is one of one in this particular line of business, 0:09:57.360 --> 0:09:58.760 and this seems to be a better way of doing 0:09:58.800 --> 0:10:00.560 it than some of the other ways. But yeah, like 0:10:00.880 --> 0:10:03.600 this sort of thing of like selling stock to an 0:10:03.600 --> 0:10:06.320 intermediary to like sell out to the market is the 0:10:06.360 --> 0:10:07.120 thing that people do. 0:10:07.360 --> 0:10:10.320 So I mean, does this business go away for Yorkville 0:10:10.440 --> 0:10:13.200 once DJT is more than a year old. 0:10:13.760 --> 0:10:17.600 Maybe, But there's always more companies. 0:10:17.200 --> 0:10:20.240 That need it, that's true. I'm just wondering. Yorkville has 0:10:20.280 --> 0:10:22.320 done a ton of these, but it's a moment in time. 0:10:22.880 --> 0:10:24.640 Yeah, that's probably right. It's a moment in time for 0:10:24.679 --> 0:10:27.800 each company. But there's always like companies that need weird financing, right, 0:10:27.880 --> 0:10:30.280 and so like this is the being in the financing 0:10:30.280 --> 0:10:33.040 weird companies kind of business, the one that I like 0:10:33.240 --> 0:10:37.520 in weird companies. Yeah, I don't know, just. 0:10:37.600 --> 0:10:57.240 Move on, I think so. So sports gambling, So, sports gambling, 0:10:57.720 --> 0:11:00.040 you can't be too good at it if you run. 0:10:59.840 --> 0:11:05.400 It sports scampling website. What you want is problem gamblers, right, 0:11:06.880 --> 0:11:08.480 I'm sorry to laugh at that, but like what you 0:11:08.520 --> 0:11:11.800 want is people who bet a lot of money. And 0:11:12.120 --> 0:11:15.679 are very bad at Now there are regulatory problems with that, 0:11:15.720 --> 0:11:19.760 because if you mostly get problem gamblers, like eventually you're 0:11:19.760 --> 0:11:22.480 gonna get shut down, or like regulators are gonna step in, 0:11:22.520 --> 0:11:24.520 are going to limit you in some way. Right, what 0:11:24.640 --> 0:11:28.120 you don't want as a sports gambling website is people 0:11:28.120 --> 0:11:30.720 who are really good at gambling and keep making money 0:11:30.760 --> 0:11:33.760 off of you. And so there's a Wall Street Journal 0:11:33.840 --> 0:11:38.240 article this week about basically some people who have built 0:11:38.800 --> 0:11:42.200 reasonably good sports gambling systems and actually make money doing it, 0:11:42.559 --> 0:11:45.600 find that the big sports gambling sites limit their accounts 0:11:45.600 --> 0:11:48.960 so they can't bet very much money because they were 0:11:49.000 --> 0:11:51.240 making too much money, and the gambling sites don't like that, 0:11:51.280 --> 0:11:55.320 and so they make them smaller amounts, and they complain 0:11:55.640 --> 0:11:59.440 and like regulators and politicians say that's not fair. But 0:11:59.480 --> 0:12:03.040 of course the sport's caadpling sites, they control the entire apparatus, right, 0:12:03.040 --> 0:12:05.000 they're both the market maker for the bats, and also 0:12:05.040 --> 0:12:07.200 if they provide the website and they take the client information, 0:12:07.559 --> 0:12:09.079 so they know who's good and who's bad, and they're like, 0:12:09.080 --> 0:12:10.480 we don't want to bet against the people who are good. 0:12:10.480 --> 0:12:11.880 We ran a bet against the people who are bad. 0:12:12.200 --> 0:12:14.720 So they cut people down or they limit their bet sizes. 0:12:15.400 --> 0:12:17.520 Seems like you got a lot of emails about this. 0:12:17.960 --> 0:12:20.880 I don't follow sports gambling that closely, but I'm interested 0:12:20.880 --> 0:12:22.360 in like market structure, and I read a lot about 0:12:22.360 --> 0:12:27.600 equity market structure, and in equity market structure in America, 0:12:28.040 --> 0:12:30.599 people are also very into this question of like, I 0:12:30.600 --> 0:12:32.040 don't want to bet against people who are good, I 0:12:32.080 --> 0:12:33.960 want to bet against people wo are bad. And so 0:12:34.080 --> 0:12:36.760 what that means in practice and like US equity markets, 0:12:36.840 --> 0:12:41.640 is that big market makers pay retail brokerages to trade 0:12:41.640 --> 0:12:43.520 with their order flow. Because the idea is, if you're 0:12:43.520 --> 0:12:46.520 a market maker, basically like some person on the other 0:12:46.559 --> 0:12:49.480 side of the trade is either informed or not right. 0:12:49.840 --> 0:12:52.800 Either their their order is informative, it's not right. And 0:12:52.840 --> 0:12:55.200 if you are constantly trading like smart hedge funds or 0:12:55.200 --> 0:12:58.000 with giant asset managers, then every time you sell them stock, 0:12:58.240 --> 0:12:59.760 that stock is going to go up. Right, So every 0:12:59.760 --> 0:13:01.400 time you sell them stock, you like lose little bit 0:13:01.440 --> 0:13:05.120 of money. If you're constantly trading with retail traders, their 0:13:05.200 --> 0:13:07.280 orders are not informative. They're not going to buy you know, 0:13:07.320 --> 0:13:10.200 a million shares. They don't like have inside information and 0:13:10.240 --> 0:13:12.000 so every time you sell them stock, the stock doesn't 0:13:12.040 --> 0:13:13.800 go up, and so you don't lose money. So you'd 0:13:13.880 --> 0:13:15.960 rather trade with the retail traders, and so you can 0:13:16.040 --> 0:13:19.520 pay robin Hood or Fidelity or whatever to get their 0:13:19.559 --> 0:13:22.080 retail orders, and then you get a better pool of 0:13:22.160 --> 0:13:25.400 orders than you would with just trading in the public 0:13:25.440 --> 0:13:29.280 market with like potentially institutions. And you know, so I 0:13:29.280 --> 0:13:30.760 wrote about that. I was like, you know, like these 0:13:31.040 --> 0:13:34.960 market makers in traditional finance and and you know equities 0:13:35.360 --> 0:13:37.320 also try to segment their order flow to trade with 0:13:37.320 --> 0:13:39.080 the bad people rather than the good people. But what 0:13:39.120 --> 0:13:41.120 I said was, like, what I don't know of is 0:13:41.120 --> 0:13:44.480 any cases where people who are just good at bets 0:13:44.640 --> 0:13:48.480 or keep making good bets get cut off by their broker, right. Accept, 0:13:48.640 --> 0:13:51.080 there's an example that I'm aware of because like they've 0:13:51.080 --> 0:13:53.439 talked about it publicly three Hours Capital. You know the 0:13:53.480 --> 0:13:54.160 crypto hedgeweb. 0:13:54.200 --> 0:13:56.640 Oh yeah, I haven't heard that name in a long time. 0:13:57.160 --> 0:13:59.199 So those guys before they became a crypto hedge one, 0:13:59.200 --> 0:14:01.000 they were like currency at a bank and then they 0:14:01.120 --> 0:14:03.880 started a currency trading hedge fund that eventually morphed into 0:14:04.040 --> 0:14:04.840 a crypto. 0:14:04.679 --> 0:14:07.120 Fund and then it was an existential event when it 0:14:07.200 --> 0:14:08.240 went down, but in any. 0:14:08.080 --> 0:14:12.520 Case, like great for crypto, but like sorry, the super 0:14:12.520 --> 0:14:14.600 bad for crypto, big crypto story. But before that, they 0:14:14.640 --> 0:14:16.559 were like a little FX story. And what they did 0:14:16.640 --> 0:14:18.960 was they went to every bank and they signed up 0:14:18.960 --> 0:14:21.440 for the bank's FX trading platform, where basically the bank 0:14:21.480 --> 0:14:24.080 would like say, we'll trade currencies with you, and we'll 0:14:24.080 --> 0:14:27.040 post prices and you can, you know, click and trade 0:14:27.040 --> 0:14:29.240 at those prices and we'll take the other side of 0:14:29.320 --> 0:14:32.400 the trade. And three Hours would sign up for every 0:14:32.400 --> 0:14:34.800 bank's platform, and they just look at all the websites 0:14:34.800 --> 0:14:37.720 and they'd see like sometimes one bank would post a 0:14:37.760 --> 0:14:40.320 lower price than another bank, so they could buy from 0:14:40.400 --> 0:14:42.320 one bank and sell to another bank and make a 0:14:42.360 --> 0:14:45.640 guaranteed risk free profit. And they did that and the 0:14:45.680 --> 0:14:49.400 banks got mad because that's just like taking money from them, 0:14:49.440 --> 0:14:51.160 and so they kicked three Hours off their platform and 0:14:51.200 --> 0:14:52.680 they said, we don't want to trade it with you anymore. 0:14:52.960 --> 0:14:54.800 So I mentioned that when I wrote about it, and 0:14:54.840 --> 0:14:56.920 someone else emailed me to be like when he was 0:14:56.960 --> 0:14:59.360 an FX options trader, he had access to a bunch 0:14:59.400 --> 0:15:03.000 of different banks single deal or platforms, and he also 0:15:03.600 --> 0:15:07.360 armed the banks against each other. And he said I 0:15:07.400 --> 0:15:09.360 can confirm that they really don't like that, and a 0:15:09.480 --> 0:15:12.200 salesperson from each chewed me out and threatened to yank 0:15:12.240 --> 0:15:12.760 my access. 0:15:12.880 --> 0:15:14.440 I don't really understand what that's bad. 0:15:14.560 --> 0:15:16.560 It's bad because the banks lose money. It's not like 0:15:16.600 --> 0:15:19.480 illegal people do it, but like the banks feel like 0:15:19.480 --> 0:15:21.960 it's rude, so they don't. It's the same as with 0:15:22.000 --> 0:15:24.400 sports campling. It's the point is not that it's bad. 0:15:24.640 --> 0:15:28.080 The point is that if you have a client relationship 0:15:28.200 --> 0:15:30.760 and the client keeps making money off of you at 0:15:30.800 --> 0:15:33.640 your expense, you can just stop having that client relationship. 0:15:33.760 --> 0:15:34.960 And that's what the sports sides too. 0:15:35.320 --> 0:15:38.800 That seems more rude to me, but in any say, really, yeah, 0:15:40.000 --> 0:15:41.760 you're just arbitraging. 0:15:41.120 --> 0:15:43.520 You know, why should I let you keep arbitraging me? 0:15:44.600 --> 0:15:46.160 I guess that's a good question. 0:15:46.320 --> 0:15:48.520 If I keep betting with you and I keep losing money, 0:15:48.520 --> 0:15:49.560 I'm gonna stop betting with you. 0:15:50.360 --> 0:15:51.760 Don't hate the player or hate the game. 0:15:51.800 --> 0:15:53.760 I'm not hating you. I'm just not playing the game 0:15:53.800 --> 0:15:54.440 with you anymore. 0:15:54.760 --> 0:15:56.280 Fine, I mean right. 0:15:56.320 --> 0:15:57.880 It's a little weird that they actually call them up 0:15:57.880 --> 0:16:00.360 and yelled them instead of just stopping trading with them like, yeah, 0:16:00.440 --> 0:16:00.960 stop trading. 0:16:01.480 --> 0:16:04.600 I will say that I don't call me number one please. 0:16:05.360 --> 0:16:07.840 But I also got an email from another reader saying 0:16:07.840 --> 0:16:10.760 that he worked at a market maker, like one of 0:16:10.760 --> 0:16:13.280 the big, you know, electronic trading firms that do trade 0:16:13.320 --> 0:16:16.800 with retail orders, and he said, we built monitoring to 0:16:16.800 --> 0:16:19.880 isolate and identify professional traders out of the stream of 0:16:19.920 --> 0:16:23.400 retail orders, and so like they did identify people who 0:16:23.400 --> 0:16:27.760 were doing arbitrages on burker dealers, basically, like people who 0:16:27.760 --> 0:16:30.360 are good at trading stock options, not because they were 0:16:30.400 --> 0:16:33.280 like geniuses, but because they could like are different broker 0:16:33.280 --> 0:16:35.680 dealers against each other, And so he said, we called 0:16:35.760 --> 0:16:38.400 up their broker and said, you have to kick them 0:16:38.400 --> 0:16:41.680 off because they're making too much money off of us. 0:16:41.680 --> 0:16:43.680 And the burger apparently did this. It's like a thing 0:16:43.720 --> 0:16:47.520 that sort of happens in equities and equity options, like 0:16:47.520 --> 0:16:50.440 in retail market making. Like it is apparently possible to 0:16:50.440 --> 0:16:52.720 get kicked off your retail brokerage for being too good 0:16:52.720 --> 0:16:56.360 at trading retail options, just as it is in sportscambling exactly. 0:16:56.400 --> 0:16:58.080 And then you take a look at the Wall Street 0:16:58.160 --> 0:17:00.760 Journal store and you put an excerpt of this in 0:17:00.800 --> 0:17:03.720 your newsletter. But the example they used is Dave Holmes 0:17:04.000 --> 0:17:06.360 sports partner in Chicago, so that he started to win 0:17:06.440 --> 0:17:10.320 more using a math based wagering strategy. He ultimately got 0:17:10.400 --> 0:17:12.800 kicked off. But I would love to know what that 0:17:12.880 --> 0:17:16.639 strategy is because you think of where we sit as 0:17:17.280 --> 0:17:20.720 journalists and we can't day trade, and if I wasn't 0:17:20.720 --> 0:17:23.679 a financial journalist, I would be a fiend. But I 0:17:23.680 --> 0:17:27.040 think we can sports scamble. I think I can scratch 0:17:27.119 --> 0:17:27.600 this itch. 0:17:28.000 --> 0:17:29.240 So but I understanding is that a lot of the 0:17:29.240 --> 0:17:32.360 winning strategies are much like the three hours guys. It's 0:17:32.400 --> 0:17:34.160 like you sign up for a bunch of different sports 0:17:34.160 --> 0:17:36.639 pending platforms and you see where the odds are different, 0:17:36.960 --> 0:17:39.480 and you like buy the cheap ods and sell the 0:17:39.600 --> 0:17:41.879 expensive odds so that you end up neutral and you 0:17:41.960 --> 0:17:44.520 just have a guarantee profit because you're basically harming the 0:17:44.560 --> 0:17:46.960 sports books against each other. There are other ways, like, right, 0:17:47.040 --> 0:17:49.400 you can be really good at knowing who'll hit. 0:17:49.359 --> 0:17:51.159 A home run round study. 0:17:51.040 --> 0:17:53.720 Yeah, learn football, But I think like the people who 0:17:53.760 --> 0:17:55.119 like really do that like kind of work for the 0:17:55.160 --> 0:17:58.080 sports market makers. So yeah, I think that typically the 0:17:58.160 --> 0:18:01.840 arbitrage method is the one that people reliably make money 0:18:01.840 --> 0:18:04.440 on I want to say that he didn't get kicked off. 0:18:05.000 --> 0:18:06.720 This is the other thing that's interesting about it. It's 0:18:06.760 --> 0:18:08.960 not that when you win too much money they kick 0:18:09.000 --> 0:18:11.199 you off your platform. It's that when you win too 0:18:11.240 --> 0:18:14.240 much money, they lower your bat size so you can 0:18:14.280 --> 0:18:17.440