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Speaker 2: So it's a beautiful day in New York City. I'm
Speaker 2: having real lizard thoughts, you know what I mean, Like,
Speaker 2: I want to believe what you mean. Okay, let me explain.
Speaker 2: I want to believe I'm more complex than Oh, the
Speaker 2: sun is shining and the air feels good, but I'm
Speaker 2: not because when it's nice outside the weather, I am
Speaker 2: immediately so much happier. So in that way, I kind
Speaker 2: of feel like a lizard. Just simple.
Speaker 1: Yes, I thought we were gonna tire the fact that
Speaker 1: you have plans to leave this podcast and go home
Speaker 1: and take your.
Speaker 2: Turtles out to the roof to some I have some
Speaker 2: baby turtles in my apartment that I've been taking care of.
Speaker 2: This is what reptile brains. I've been taking care of
Speaker 2: them over the course of the winter, and they're going
Speaker 2: to be going back outside very soon. That's where they
Speaker 2: primarily live. But anyway, it's nice to take them to
Speaker 2: the roof and feed them their mealworms in the sunshine.
Speaker 2: They tend to like that.
Speaker 1: You and they both signing yourselves.
Speaker 2: Yeah, pretty much warming our scales.
Speaker 1: Hello and welcome to The Money Stuff Podcast, your weekly
Speaker 1: podcast where we talk about stuff related to money. I'm
Speaker 1: Matt Levian and I write The Money Stuff Colum for
Speaker 1: Bloomberg Opinion.
Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 2: an anchor for Bloomberg Television.
Speaker 1: It's another all tariffs edition of the Money Stuff podcast.
Speaker 2: Yeah, you know, it started as a joke and then
Speaker 2: it got really real. It's hard to talk about anything
Speaker 2: other than what is going on with the US trade policy.
Speaker 1: Yeah, we're gonna try. Yeah, It's like it's not really
Speaker 1: an all tariffs.
Speaker 2: But it's like at least a third tariff's maybe half
Speaker 2: a certain.
Speaker 1: Amount of what is going on in the world.
Speaker 2: I feel like we need to say what day we're
Speaker 2: recording it, since it changes so much. We'll talk about
Speaker 2: whether or not that is the strategy. But we are
Speaker 2: recording this on a Thursday. It's the twenty fourth of April.
Speaker 1: When last I looked, the market was up today.
Speaker 2: Yeah, after being yesterday, Yeah, and the day before.
Speaker 1: It's not literally a first in the last three months,
Speaker 1: but it feels like that.
Speaker 2: Well, it's funny that we're rallying so hard right now
Speaker 2: because you have China on one hand insisting that the
Speaker 2: US and China are not talking, that negotiations aren't currently happening,
Speaker 2: they do not exist. And then you have President Trump
Speaker 2: saying that no, they had a meeting this morning, and
Speaker 2: then a reporter asked him the follow up, what administration
Speaker 2: officials were involved in discussions? Who are you talking to?
Speaker 2: And Trump said, it.
Speaker 1: Doesn't matter who they is. We may reveal it later.
Speaker 2: But they had meetings this morning, and we've been meeting
Speaker 2: with China. So it's unclear what is actually what is
Speaker 2: actually going on, whether or not the US and China
Speaker 2: actually are talking. But it seems like the market just
Speaker 2: really wants the Trump administration to blink and is rallying
Speaker 2: merrily along hoping that they have right.
Speaker 1: It's so odd that, like the explicit statements from Trump
Speaker 1: as candidate and as president were tariffs are great, let's
Speaker 1: have lots of them, and the market in the lead
Speaker 1: up to his inauguration clearly, like very heavily discounted that. Yeah,
Speaker 1: and then the Liberation Day happened in the market crash
Speaker 1: realizing that in fact, he was serious about tariffs, and
Speaker 1: now we're right back to.
Speaker 2: Nah, he can't be serious about tariffs. Yeah, it feels
Speaker 2: very like first Trump administration where this sort of mantra
Speaker 2: was to take Trump seriously but not literally. And it
Speaker 2: feels like we're back there.
Speaker 1: Yes, and like we say, the all tariffs episode. But
Speaker 1: I feel like the other sort of big thing hanging
Speaker 1: over this week anyway, is firing Trump Powell. Yeah, get
Speaker 1: rid of FED independence.
Speaker 2: Yeah that was pretty well.
Speaker 1: It also seems to have been walked back, but who knows.
Speaker 2: Yeah, so Trump, in denying that he had any intention
Speaker 2: to fire trum Powell said that the media ran away
Speaker 2: with it. But you did have Kevin Hassett, who is
Speaker 2: the top White House economist, say last Friday that Trump
Speaker 2: is looking at options here when it comes to removing
Speaker 2: Jerome Pal. So it wasn't entirely just the media.
Speaker 1: Right. Also, he's like been in truth, so I was
Speaker 1: tallying about stupid.
Speaker 2: Yeah, said he can't wait for his termination.
Speaker 1: Yeah right. You combine like the legal team studying Rais
Speaker 1: to fire him and Trump saying how bad he is.
Speaker 2: In both situations, both when it comes to trade and
Speaker 2: the possibility of removing Pal from the FED. It kind
Speaker 2: of feels like Trump is just negotiating with the markets,
Speaker 2: like seeing how far the markets will let him go
Speaker 2: before long dated treasury yields skyrocket higher, which you've seen
Speaker 2: that happen, and then you see the Trump administration back off.
Speaker 2: But someone made the point today that it kind of
Speaker 2: feels like every time we see a little bit of
Speaker 2: green in the equity markets because maybe there's hope that
Speaker 2: we're going to get to a more reasonable place on trade,
Speaker 2: that it seems like the Trump administration has felt more
Speaker 2: emboldened by that, and we just enter this cycle again.
Speaker 2: But it's on the third day of the rally.
Speaker 1: People talking about the phrase the Trump put gets turned around, right, So,
Speaker 1: like you have like the classic like Powell put or
Speaker 1: whatever the Fed chairs at the time. You know, the
Speaker 1: idea that if things get bad, the federal step in
Speaker 1: to rescue the market, and so there's some floor under
Speaker 1: stock prices. My impressions that people think of the Powell
Speaker 1: put as being like kind of close to at the money,
Speaker 1: where like, you know, if you're the Fed, you're interested
Speaker 1: in steady economic growth, and like any sign of wabbling
Speaker 1: in the market is a negative. The Trump put that
Speaker 1: we've maybe seen this week feels like it's quite far
Speaker 1: out of the money. You know, It's like things have
Speaker 1: to go really off the rails to have the trump
Speaker 1: put kick in. And also, like you just said, it's
Speaker 1: like it's not just a floor. It's like yeah, right,
Speaker 1: Like if the market gets too good, it's like, oh,
Speaker 1: we have weird stuff. Right, the market gets too bad,
Speaker 1: you stop the word stuff. It's like a it's like
Speaker 1: a carter. It's like a like a call spread.
Speaker 2: Yeah, that's I don't know. It's a very tactical market.
Speaker 2: It makes for some real tactical trading strategies.
Speaker 1: I had a headline this week that was like, at
Speaker 1: least the market isn't boring, and so we're back. You're like, yeah,
Speaker 1: it's great if you're trading this market. And it's like, yeah,
Speaker 1: I got like a high vacancy trading for like you know,
Speaker 1: like it's so good for some people. Yeah, right, Like
Speaker 1: if you're a degenerate gambler, if you're a market maker,
Speaker 1: probably this is great, right, Like market makers that I
Speaker 1: have on volatility, some of them blow up on volatility,
Speaker 1: but yeah, a lot of them, it's probably great. And
Speaker 1: then if you're like a you know, like a manufacturing
Speaker 1: CEO trying to decide whether to.
Speaker 2: Build a factory or you know, or to hire or
Speaker 2: fire people. Yeah, it's been interesting. And some of the
Speaker 2: earnings reports you've seen companies, you know, you report your
Speaker 2: numbers and you give guidance. You've had a lot of
Speaker 2: firms either downgrade their guidance, pull their guidance all together.
Speaker 2: You've seen a few companies come out with like a
Speaker 2: range of options for what could happen, like different blueprints
Speaker 2: for different scenarios, which I think is kind of one
Speaker 2: of the airlines didn't. I wish I could remember, But
Speaker 2: I mean, what else can you do? It's impossible to
Speaker 2: forecast what six months from now will look like.
Speaker 1: My intuition is that that's just that, right that like
Speaker 1: being able that's a stupid saying. Being able to plan
Speaker 1: six months ahead is useful for business, right, Yeah, Like
Speaker 1: an economy wide basis, you would rather have businesses generally
Speaker 1: be able to plan basic macroeconomic building blocks six months
Speaker 1: ahead than not, right, Yeah, And so one possibility is
Speaker 1: that this is all error, right, Like they're just like
Speaker 1: they're not doing a good job of stewarding the economy, right,
Speaker 1: which seems to me like probably the correct analysis. But
Speaker 1: like people want there to be some sort of plan here, right,
Speaker 1: They want there to be some sort of explanation here
Speaker 1: that is more satisfying than like they keep changing their
Speaker 1: mind or they don't really know what they're doing, or
Speaker 1: the messaging is just treamly ud clear for no reason.
Speaker 2: Yeah.
Speaker 1: I don't know if that is though.
Speaker 2: Yeah, the end game is a question that comes up
Speaker 2: a lot when it comes to, you know, the shifting
Speaker 2: trade winds coming out of the administration. I mean, we
Speaker 2: know that Trump loves tariffs, We know that they want
Speaker 2: to rebalance the global trade landscape. What that actually means
Speaker 2: seems to be sort of shifting goalposts.
Speaker 1: I think I've read a few times, Like one way
Speaker 1: to interpret their statements and actions is that they want
Speaker 1: America to be reindustrialized, to find like they say, but
Speaker 1: also like definancialized, right, Like shifting from having a lot
Speaker 1: of foreigners selling goods to us getting cash and investing
Speaker 1: it in US financial assets, shifting to like investing the
Speaker 1: cash they get into US you know, manufactured goods. Right. Yeah,
Speaker 1: so we're selling fewer financial assets, and like the financial
Speaker 1: sector becomes a less important part of the American economy
Speaker 1: relative to like manufacturing. Right. That's one way I think
Speaker 1: to interpret some of the stuff that Trump Economic team
Speaker 1: does and says, But then you look at the actual
Speaker 1: effect and it's like, if you were going to high
Speaker 1: your kids are training, frame like, this is amazing. There's
Speaker 1: so much volatility. And then if you were at a manufacturer,
Speaker 1: you're like, this is terrible. There's so much volatility.
Speaker 2: Well, also, you don't know if these tariffs are going
Speaker 2: to stick, like you have no visibility into that. And
Speaker 2: there's also the very real question of what incentivizes a
Speaker 2: company to bring manufacturing back to the US. The Whirlpool
Speaker 2: CEO said on their earnings call this week that first
Speaker 2: of all, they think that actually they're going to benefit
Speaker 2: from tariffs. But the CEO, even with that in mind,
Speaker 2: said that twenty percent tariffs aren't going to you know,
Speaker 2: move factories away from China. And you think about like
Speaker 2: about one hundred and perhaps, but you think about, you
Speaker 2: know a lot of these pharma companies who make their
Speaker 2: drugs in Ireland, for example, they're probably not going to
Speaker 2: shift those factories to the US. They're probably just going
Speaker 2: to have to accept that things cost more now. So
Speaker 2: I don't know if tariffs are the way to incentivize
Speaker 2: bringing manufacturing back versus tax breaks for example.
Speaker 1: One thing that is happening here is that it seems
Speaker 1: so haphazard as a way of encouraging manufacturing, right, Like,
Speaker 1: if you wanted to encourage manufacturing, you would do things
Speaker 1: like not imposed tariffs on raw materials and intermediate goods
Speaker 1: so that you could make it easier for people to
Speaker 1: start factories here. But like you're constantly reading stories about
Speaker 1: like people who run factories here who like find that
Speaker 1: like their inputs have gone up because of tariffs, and
Speaker 1: so they can't run their factories anymore. Yeah, it's just
Speaker 1: it's it's not like a industrial policy designed to support manufacturing.
Speaker 1: It's like tariffs are good.
Speaker 2: Yeah, I don't know.
Speaker 1: People want there to be an explanation that is like
Speaker 1: a human you know, either like clever or like galaxy
Speaker 1: brain bad. Like one reason for the recent the rally
Speaker 1: the last couple of days is like Scott Bessant giving
Speaker 1: a speech at a closed door investor some it saying basically,
Speaker 1: we're gonna have like a thaw in the China situation.
Speaker 2: Very we're scandalized by that, and like it's definitely like
Speaker 2: you can definitely read like takes that are like this
Speaker 2: is like corruption and the whole thing is like for
Speaker 2: cronyism and to like give the favored people, you know,
Speaker 2: a lot of volatility trade and a lot of inside
Speaker 2: information about what the decisions will be, which is honestly
Speaker 2: like a more optimistic view than my view, which is
Speaker 2: that people just.
Speaker 1: Change their mind constantly and are not really yeah planning
Speaker 1: that nefariously far ahead.
Speaker 2: Well, the cynical takeout there too is that you know,
Speaker 2: Trump changes his mind based on who he lost. I
Speaker 2: don't know. I don't think you got notes from Neil
Speaker 2: Duddo of Renaissance Macro No, okay. He had a really
Speaker 2: interesting note oubt this week that he used the NT
Speaker 2: function on his Bloomberg terminal, which is way to chart
Speaker 2: news trends. He found that since the beginning of March,
Speaker 2: the S and P five hundred has shed a total
Speaker 2: of seven hundred and nineteen points on days that Howard
Speaker 2: Lutnik and Peter Navarro have been the biggest story. By contrast,
Speaker 2: if Besson has been the biggest story on the day,
Speaker 2: the S and P five hundred has advanced a total
Speaker 2: of fifty two points. So he concludes Bessen is good
Speaker 2: for about one percentage point up on the S and p.
Speaker 2: Five hundred. By contrast, the others are a drag of
Speaker 2: about thirteen and a half percentage points. So I mean
Speaker 2: those are the dueling forces. All three of those men
Speaker 2: are dueling for Trump's attention.
Speaker 1: Yeah, I mean there's a story about like Lutnik and
Speaker 1: Bessant actually rushing into drum when Navarro was like in
Speaker 1: the right. You might imagine someone thinking, we have the
Speaker 1: guy who's good for the economy, and we have the
Speaker 1: guys who are bad for the economy, So let's turn
Speaker 1: out the dial and the guy who's good for the economy.
Speaker 1: But I don't think that's your description of what's going
Speaker 1: on here.
Speaker 2: Yeah, it seems like Bessen at least looking at the
Speaker 2: reporting from this week, and things shift all the change.
Speaker 2: But apparently, you know, Bessen had a big hand according
Speaker 2: to people familiar and talking Trump off the ledge when
Speaker 2: it comes to firing Jerome Palell. Also, like you said,
Speaker 2: there was that story that when Peter Navarro was at
Speaker 2: the White House cafeteria or something along those lines, that
Speaker 2: him and Lutnix in We'll see. I mean, I don't
Speaker 2: know how to segue to this point, but I do
Speaker 2: want to make the point that Besson is also apparently,
Speaker 2: you know, playing a leading role in trade talks with Japan.
Speaker 2: He's also expressed that he would like the US to
Speaker 2: basically make agreements with its allies on trade and then
Speaker 2: they'll all approached China as a group. But it seems
Speaker 2: like that is very much not happening, because on Thursday
Speaker 2: you had two different stories drop One was that Japan
Speaker 2: is going to resist Trump's efforts to form a trade
Speaker 2: block against China, and then you also had a story
Speaker 2: about how the EU and Beijing are basically in talks.
Speaker 1: Right like one analysis that I saw of the Liberation
Speaker 1: Day situation, right or Trump announced enormous, fake reciprocal tariffs
Speaker 1: on every country.
Speaker 2: Incredibly I was with my grandmother, as discussed.
Speaker 1: And then in a fairly short time period walk them
Speaker 1: all back, except he raised tariffs on.
Speaker 2: China one hundred and forty five percent.
Speaker 1: One reading of that was that Trump had just announced
Speaker 1: giant TIFFs on China and also like small towers on
Speaker 1: the rest of the world. Then everyone would have been
Speaker 1: shocked and trade would have shifted away from the US
Speaker 1: to China. But by instead doing it in this shocking
Speaker 1: Liberation Day way and then walking to that all back.
Speaker 1: He primed people to think, oh, this could be a
Speaker 1: lot worse, and in fact he's only targeting China, so
Speaker 1: we should make deals at the US and cut out China.
Speaker 1: And so this was a sort of shock therapy way
Speaker 1: to reorient the talks to make it a essentially trade
Speaker 1: block of the rest of the world, or at least
Speaker 1: the US and its allies, with China on the outside, right,
Speaker 1: So it was a way to accomplish exactly that sort
Speaker 1: of like, you know, make deals with everyone else and
Speaker 1: then have the upper hand against China. And I don't
Speaker 1: know that was a reading of what happened, but it
Speaker 1: doesn't seem to have. No particularly had that effect. And
Speaker 1: because you're optimistic to think it'll have, you have to
Speaker 1: be like like, oh, people are so relieved and so
Speaker 1: happy that the tariffswordt as bad as we thought that
Speaker 1: now they'll be rushing to negotiate with Donald Trump. But
Speaker 1: the alternative reading is people will be like, this was
Speaker 1: so erratic and chaotic that we should be rushing to
Speaker 1: negotiate with China because like they're predictable.
Speaker 2: Yeah, that's the thing. I mean, I could definitely see
Speaker 2: the argument for that strategy, but the narrative also exists
Speaker 2: out there that no, the US is just an unreliable
Speaker 2: trading partner, and who knows if you agree to a
Speaker 2: deal that it'll stick. I mean, you think about what's
Speaker 2: going on with Canada and Mexico right now, the USMCA,
Speaker 2: that was Trump's trade deal and now apparently it's just
Speaker 2: been ripped up.
Speaker 1: Yeah, yeah, right, And it's related to the point about
Speaker 1: insane volatility in the market right like, none can plan ahead.
Speaker 1: This is not an administration that places any value on predictability.
Speaker 1: And in a lot of domain spritability is really useful.
Speaker 2: It's going to be interesting to see what access like
Speaker 2: this stabilization mechanism. It seems like the bond market does
Speaker 2: have some with Donald Trump, so bond investors.
Speaker 1: I think the sample size of that is small.
Speaker 2: It's small. There was also an interesting note doubt from
Speaker 2: thinking Chada over at Deutsche Bank. So he lowered his
Speaker 2: s and P five hundred target to sixty one fifty
Speaker 2: from seven thousand, sixty one to fifty. Sounds incredible to
Speaker 2: a lot of people right now because we're like at
Speaker 2: fifty five hundred on the SMP five hundred. But he
Speaker 2: said that if you start to see approval ratings drop,
Speaker 2: then that might cause an actual I forget the word
Speaker 2: he used, but that's when you might actually see things
Speaker 2: calm down. Maybe that will be the over.
Speaker 1: Some I've seen that. Secondly, I don't know why that's
Speaker 1: a mechanism.
Speaker 2: I mean, the pushback to that point is that, Okay,
Speaker 2: he's in his second term. He's not going to run again.
Speaker 2: Unless he does, that's also an open question. So who knows.
Speaker 1: Maybe he decides to run again, approval ratings will not
Speaker 1: be an impediment.
Speaker 2: No, no, But I mean there is some momentum building
Speaker 2: behind that idea that if you see approval ratings drop
Speaker 2: in a big way, maybe Trump would soften his stance.
Speaker 1: I'll think the other side of that, I think I
Speaker 1: would rate the bond market above appropal ratings. But I
Speaker 1: don't know what I know.
Speaker 2: Okay, Well, goodbye everyone, goodbye?
Speaker 1: Oh wait, other things?
Speaker 2: Oh right, right right? What else is there going on?
Speaker 2: Golden Goldman? The good thing is that David Solomon and
Speaker 2: John Waldron are going to be paid a lot of money.
Speaker 1: What does a lot of money mean? I mean they're
Speaker 1: getting paid. It means they got their eighty million dollars
Speaker 1: special retention.
Speaker 2: I got to tell you, I was, you know, biting
Speaker 2: my nails over this one.
Speaker 1: It was closed, like both of the big Chryler advisory
Speaker 1: firms said they shouldn't get them.
Speaker 2: And still they won sixty six percent of the vote.
Speaker 1: Though it's not that high.
Speaker 2: It is down from I think it was in the
Speaker 2: eighties the last time.
Speaker 1: You get on Pivot.
Speaker 2: We don't have the exact summer kind of a loss
Speaker 2: I prepared. So I want to tell you last year,
Speaker 2: Golden won eighty six percent of the vote from shareholders,
Speaker 2: despite also opposition from Glass Lewis.
Speaker 1: Yeah, these guys get paid sort of market rates for
Speaker 1: big bank CEOs, right. I think David Solom got thirty
Speaker 1: nine million dollars last year and Waldron got thirty eight
Speaker 1: million dollars, which is like, you know, comparable to like
Speaker 1: a Jamie Diamond or whatever. And so getting an extra
Speaker 1: eighty million dollar bonus just for being good guys and
Speaker 1: wanting them to stick around seems high, right, Like they're
Speaker 1: getting paid market rate. It's like, why do they need
Speaker 1: the extra bonus? And part of the answer is, literally,
Speaker 1: like Waldron, who is the number two at Goldman, there's
Speaker 1: a reporting that he was approached by Apollo to come
Speaker 1: be some sort of high up executive there and offered
Speaker 1: what the article character has that's life changing money even
Speaker 1: for him, which is like, I don't know if I
Speaker 1: made thirty eight million dollars a year, you would need
Speaker 1: a lot of money to in my life. But I
Speaker 1: think they offered him that.
Speaker 2: Well, it's like, I don't just want my great great
Speaker 2: grandchildren to be well off. I want their great great
Speaker 2: grandchildren to also do well, right.
Speaker 1: Like, I don't have a conception of how your life
Speaker 1: could change above making thirty eight million.
Speaker 2: Well, that's just a lack of imagination, I know.
Speaker 1: And I should I should, I should be thinking bigger.
Speaker 1: But anyways, he was offered life changing money, and he
Speaker 1: decided to stay because, yeah, he likes Goldvin it's a
Speaker 1: good place whatever. Yeah, but also because they were like, yeah,
Speaker 1: I we'll find out I any paid more. Right, So
Speaker 1: they got't paid any million dollars more.
Speaker 2: Something that I find interesting is I like to imagine
Speaker 2: how you know, the rest of Goldman feels about that.
Speaker 2: You had Mike Mayo from Wells Fargo say that this
Speaker 2: could be alienating to Goldman's workforce. He said, that before
Speaker 2: the vote, and in one of the articles written by
Speaker 2: Todd Gillespie, he did write that under Solomon's tenure, payouts
Speaker 2: for its top brass have been a thorny issue that
Speaker 2: until now was mostly expressed by the bank's partner class.
Speaker 2: Some privately grumbled that packages for its leaders were excessive
Speaker 2: relative to the firm's performance, and the awards being set
Speaker 2: aside for the rest to the staff.
Speaker 1: Yeah. So one thing I've written about a lot over
Speaker 1: the last few years is like Golbin has long had
Speaker 1: this partnership culture where there's a group of people who
Speaker 1: are called partners. They're not exactly like partners in the
Speaker 1: classic sense, but.
Speaker 2: They were like they're sort of.
Speaker 1: Successors to the partners when Goldman was a private partnership,
Speaker 1: and they sort of viewed the firm as a continuation
Speaker 1: of that partnership where the partners had a big say
Speaker 1: in running the firm. There was a sort of egalitarianism
Speaker 1: among the partners where the CEO was like sort of
Speaker 1: the managing partner, but he wasn't like the boss of
Speaker 1: all the partners or anything like that. And I think
Speaker 1: under Solomon that has really changed, and they've consolidated into
Speaker 1: being much more of a normal public company and maybe
Speaker 1: not the most important, but one symptom of that is
Speaker 1: it used to be that Golden was like a partnership
Speaker 1: run for the benefit of the partners, and so like
Speaker 1: if they had a good year, the partners all got paid, right,
Speaker 1: And now under the Solomon regime, it's a little bit
Speaker 1: more like we're going to pay like a public company
Speaker 1: and sort of maximize shareholder value and like not just
Speaker 1: toretiously pay partners just because you know they're going to
Speaker 1: them based on competitive pressures. And there's like sort of
Speaker 1: a walk in the opposite direction with like Solomon and Waldron,
Speaker 1: where like they're getting paid a lot of money as
Speaker 1: the partners are no longer like the people divan at
Speaker 1: the pod. So I think that like the partners, on
Speaker 1: the one hand, some of them resent being like relegated
Speaker 1: to a second tier status and no longer feeling that
Speaker 1: they run the firm. And on the other hand, they're like,
Speaker 1: these guys are getting paid so much money, right, Yeah.
Speaker 2: Well maybe they should go all work as an alts manager.
Speaker 1: Yeah. I mean, like one thing that that toddyts to
Speaker 1: be right is that Goldman is trying to position its
Speaker 1: off as an ALTS manager because that's better, you know,
Speaker 1: you get a better multiple as everyone's trying to position,
Speaker 1: like we've talked about black Rock on this ship, like
Speaker 1: the position itself as an ALTS manager because you get
Speaker 1: a higre multiple as an AULTS manager then as a
Speaker 1: you know, Index one manager.
Speaker 2: It's also it's like me trying to reruin myself as
Speaker 2: a podcaster versus you know, a TV anchor.
Speaker 1: It makes sense, are multiple podcasters?
Speaker 2: Yeah, there you call Goldman sex Hasset managed. They have
Speaker 2: about five hundred billion dollars of private assets under management.
Speaker 2: Blackstone for contacts has more than one trillion dollars. So
Speaker 2: I mean they are up there.
Speaker 1: They're really you know, I remember being you know, I
Speaker 1: was at Goldman. I Hurt did Goldman more than fifteen
Speaker 1: years ago. I were fifteen years ago, and there was
Speaker 1: a big focus on private equity as a you know,
Speaker 1: important component of the firm. You know, I was a
Speaker 1: fairly junior person, and I experienced it as like almost
Speaker 1: the recruiting thing where like, you know, the cool place
Speaker 1: to work in finance was private equity. So for Goldman
Speaker 1: to be able to be like we run private equity
Speaker 1: was good for you know, recruiting young people, but like similarly,
Speaker 1: it's good for recruiting shareholders because you're like, you know,
Speaker 1: the multiples that are given to alts managers are higher
Speaker 1: than the multiples given to investment banks. Yeah, and like
Speaker 1: the you know, the revenue is a little bit more stable,
Speaker 1: and like it's a little bit certainly its executives get
Speaker 1: paid more.
Speaker 2: Yeah. So I mean to put some numbers to Blackstone
Speaker 2: Trades at a p of like thirty seven. Goldman's closer
Speaker 2: to twelve, which is less than thirty seven. But I
Speaker 2: mean Blackstone KKR those are pure play alts managers.
Speaker 1: What that means They're not pure playing.
Speaker 2: Relatives relative to Goldman. Yeah, I mean when I think
Speaker 2: of Goldman, my first thought isn't their alts business?
Speaker 1: Obviously of course, right, no, they're not primarily business. But
Speaker 1: I think of KKR like as a growing capital markets business.
Speaker 1: Like the big alts managers want to get bigger. I'd
Speaker 1: want me to get bigger, is to get into some
Speaker 1: of the businesses that like the Goldman's of the world
Speaker 1: are in, right, Like, there is a convergence, and obviously
Speaker 1: you'd rather have the multiple of being a more or
Speaker 1: less pure alts manager than being a more or less
Speaker 1: pure investment bank. But like they're in a lot of
Speaker 1: overlapping businesses.
Speaker 2: Yeah, and the KRE people.
Speaker 1: Get paid more. So. One thing I wrote this week
Speaker 1: is like some of that is like the youth of
Speaker 1: those firms, you know, like those rooms, you know, they
Speaker 1: went public after Goldman did. They were founded way after
Speaker 1: Goldman was. They were still like at like the sort
Speaker 1: of closing stages of the like giant private equity like
Speaker 1: gold rush of the you know eighties and nineties and
Speaker 1: two thousands, whereas like you know, investment banks has been
Speaker 1: a lot around longer. Like they're no founders. I mean
Speaker 1: there are founders, right, they're founders of investment banks who've
Speaker 1: made very good money. But like the founders of like
Speaker 1: Bacon pulchbracket investment banks, right, like those guys, you know,
Speaker 1: those those banks a one hundred.
Speaker 2: Years old, they're resting peacefully.
Speaker 1: Yeah. Some of what's happening is that the alts managers,
Speaker 1: like the people who are senior executives there, took real
Speaker 1: risks getting into new businesses, whereas like people who grew
Speaker 1: up as partners at Colman were like in a you
Speaker 1: know sort of well established business. So like, of course
Speaker 1: the people who took those risks to start the alts
Speaker 1: managers get paid a lot more.
Speaker 2: Yeah, like took the risk to become a podcaster. It
Speaker 2: should be for that. Yeah, reading your column actually listening
Speaker 2: to it on my text to speech chiefly motivated me
Speaker 2: to find where there are still inefficiencies in the market.
Speaker 1: Do you think it's podcasting in terms of.
Speaker 2: The media landscape? Perhaps certainly doesn't seem like it's linear television.
Speaker 1: But you know what it is. Oh No, it's like
Speaker 1: some it's a horrifying fourth thing.
Speaker 2: God, it's like you it's YouTube's like twenty years old.
Speaker 1: If I even said, it's like TikTok uh, you can
Speaker 1: picture me shaking my fist at a cloud. It's it's
Speaker 1: sure is where the kids are at some form video
Speaker 1: so entirely other thing it's like it's like a brain implant.
Speaker 2: Yeah, it's brutal out there. Maybe glasses that you put
Speaker 2: on and it's just our faces. I was gonna say,
Speaker 2: it seems like the inefficiency still left to till in
Speaker 2: the market, to plow in the market. I don't know
Speaker 2: what farming metaphorm trying to use. Perhaps we should all
Speaker 2: just start bit coin treasury companies.
Speaker 1: I do think that, like so much of the crypto
Speaker 1: boom has been like people from traditional finance being like,
Speaker 1: oh my god, look at the bits spretz here. Right,
Speaker 1: It's like, yeah, crypto is so inefficient, and also you
Speaker 1: could kind of get into it efficiently, so like all
Speaker 1: these people from traditional finance like jumped in to capture
Speaker 1: those spreads. But yeah, so this week the amazing thing
Speaker 1: is twenty one.
Speaker 2: Twenty one one great net for a company.
Speaker 1: It is twenty one is a merger between a counter
Speaker 1: Fitzgerald spack. Right, the cantor raised the spack a special
Speaker 1: purpose acquisition coming they sold stock, so one hundred million
Speaker 1: dollars with the stock to public investors a while back,
Speaker 1: and like they had that pot and they were like
Speaker 1: looking around for some sort of operating company to merge
Speaker 1: with and take it public with this pack. And what
Speaker 1: they found was not an operating company. It was a
Speaker 1: pile of bitcoin managed by Tether, and also a pilo
Speaker 1: of bitcoin managed by bidfin X, which is sort of
Speaker 1: related to Tether, and also a pileo of bitcoin managed
Speaker 1: by soft Bank, and also probably some other piles of bitcoin.
Speaker 1: But Anyway, they mushed all these things together, counters one
Speaker 1: hundred million dollars of cash and then all the other
Speaker 1: people's bitcoin. You mush them all together. You have a
Speaker 1: giant pot of bitcoin that is publicly listed because the
Speaker 1: pack has a public listing. And so they announced the
Speaker 1: merger this week, and it's always it's a very easy
Speaker 1: merger because everyone is just a pot, and so you
Speaker 1: can be like, okay, so your pot is one hundred
Speaker 1: million dollars, so you get like one hundred million dollars
Speaker 1: worth of stock. Your pot is three billion dollars of bitcoin,
Speaker 1: so you get three billion dollars with it. So you like,
Speaker 1: you know, allocated based on how much stuff the different
Speaker 1: pots bring to the thing. And so you know, the
Speaker 1: counter Fitzgerald Spack got roughly one hundred million dollars worth
Speaker 1: of the pot and it probably like tripled in price. Yeah,
Speaker 1: so that suggests roughly that the stock market values the
Speaker 1: bitcoin in this pot at roughly three times the actual
Speaker 1: lure of the bitcoin.
Speaker 2: Of the Yeah, it's amazing.
Speaker 1: It's not like they invented this. No, this investor presentation
Speaker 1: which is amazing and which is like look at micro
Speaker 1: strategy or now it's called Strategy. You know, the Strategy
Speaker 1: company which has been buying bitcoin, putting them in a
Speaker 1: pot and selling shares for twice.
Speaker 2: The value for like five years.
Speaker 1: Now, I don't think it's literally five years.
Speaker 2: But it feels like no, I think it was like
Speaker 2: twenty twenty.
Speaker 1: Yeah, I think, yeah.
Speaker 2: You're right time.
Speaker 1: But you know they've been doing it forever, and there's
Speaker 1: room for more.
Speaker 2: Apparently my natural reaction when I saw this headline yesterday
Speaker 2: was how many strategies do there need to be out there?
Speaker 2: Apparently there's room.
Speaker 1: Right. It's like they came to it from opposite directions, right,
Speaker 1: So Strategy was like a company and it's CEO got
Speaker 1: really into bitcoin. Then CEO now Chairmanry Taylor, and he
Speaker 1: was like, what if we bought a lot of bitcoin
Speaker 1: because like that would be a good investment for our company, right,
Speaker 1: Like we should own bitcoin because it'll go up and
Speaker 1: our company will be worth more. And that metamorphosed than
Speaker 1: to like what if we were only a lot of
Speaker 1: bitcoin because people keep wanting to pay more for our
Speaker 1: stock than the bitcoin is worth. So they just did
Speaker 1: more and more buying and bitcoin. But like they started
Speaker 1: from a place of like we're a public company and
Speaker 1: you'd like to buy bitcoin. Twenty one starts from the
Speaker 1: place of I mean, I don't know how the merger
Speaker 1: conversations came to you. Yeah, but essentially starts in a
Speaker 1: place of like, we are Tether, Yeah, we own some bitcoin.
Speaker 1: By the way, it's weird that Tether own so much bitcoin. Yeah,
Speaker 1: because Tether is mostly in the business of like selling
Speaker 1: stable coin tokens for dollars and parking the money in dollars.
Speaker 1: But they have some like legacy businesses owning bitcoin. And
Speaker 1: also they've made so many profits that they invest in bitcoin,
Speaker 1: so they own a lot of bitcoin. And if you're
Speaker 1: a pot of bitcoin, if you're a crypto native owner
Speaker 1: of bitcoins, and you look at strategy, you're like, wow,
Speaker 1: those guys can get incredibly cheap funding for their bitcoin
Speaker 1: because they can sell stock at two x the value
Speaker 1: of their bitcoin. So if you're just like a bitcoin manager,
Speaker 1: how could you not be tempted to get into that business.
Speaker 2: Yeah, And so they did, and.
Speaker 1: They did it by like essentially buying a public company,
Speaker 1: but like in this case, buying a spact to make
Speaker 1: it really clean. And so now they have a public
Speaker 1: listing for their pot of bitcoin, which is worth three
Speaker 1: times with the bitcoin is worth.
Speaker 2: I do just say I like the ticker XXI twenty one,
Speaker 2: got it. So Jack Maller's is going to be the CEO.
Speaker 2: He's thirty one, which is my age. But he made
Speaker 2: that point as a selling point that we're not a
Speaker 2: pivoting company, we're pure bitcoin. And also talking about Tether,
Speaker 2: he said that how the deal came together was just
Speaker 2: that he's known tether for a while, that you know,
Speaker 2: a decade ago, there weren't many bitcoiners out there, and
Speaker 2: I had the same reaction to Tether is a stable coin?
Speaker 2: Is sure?
Speaker 1: That usually ship with bitcoin. It's more interesting. They are
Speaker 1: now basically in the business of taking dollars and parking
Speaker 1: those dollars and treasury bills. But like the history of
Speaker 1: the producing dollars out of bitcoin is an interesting one, right,
Speaker 1: I mean, they have been making collateralized loans against bitcoin
Speaker 1: to create more tether dollars, like they're an interesting business.
Speaker 2: But yeah, interesting business is you know, pretty diplomatic.
Speaker 1: But Jack Maller's I did seriously, but also yes.
Speaker 2: I'm taking you you know at your word at face value,
Speaker 2: tetherin is an interesting business. Jack Mallers went on Bloomberg
Speaker 2: TV to talk about this deal on Wednesday. I didn't
Speaker 2: interview him, my colleagues Caroline Hyde and At Ludlow did.
Speaker 2: It was so fun. So he's going to be the
Speaker 2: CEO of this company. He's also going to be the
Speaker 2: CEO of Strike And they asked him about that and
Speaker 2: he said, you can just do things and I'm going
Speaker 2: to lead both businesses. I truly believe my purpose on
Speaker 2: this planet is to try and help bitcoin have a
Speaker 2: chance to change the world.
Speaker 1: This is not a business, this is a part of bitcoin.
Speaker 2: Well, they asked him, what is your day to day
Speaker 2: going to be If you're just stroke the bitcoin, you're
Speaker 2: just accumulating bitcoin, what do you do all day? And
Speaker 2: I mean he basically said, is my job and what
Speaker 2: I've dedicated to do for our shareholders is grower bitcoin
Speaker 2: per share. That's what he's going to do, so, which
Speaker 2: just means he's going to buy bitcoin.
Speaker 1: Anyway, I did explode and you said that, but let
Speaker 1: me say a couple of things. So one like growing
Speaker 1: your bitcoin for shore just buying bitcoin bit fineey yeah. Two. No,
Speaker 1: they say in their presentation that they're going to do
Speaker 1: bitcoin education and branding, including branded video media, and acting
Speaker 1: as the go to content partner for major conferences, web
Speaker 1: three firms and fintech institutions. Which makes sense because like
Speaker 1: my analysis of these things, by which I mean Strategy this,
Speaker 1: and like there's like forty imitators. My analysis is like
Speaker 1: you're sort of like Meme stocking bitcoin, right, Like you're
Speaker 1: sort of like finding people who are so excited about
Speaker 1: the story you're telling that they're willing to pay two
Speaker 1: or three times the value of the bitcoin in your
Speaker 1: pot for your stock, right, So how do you sustain that?
Speaker 1: I mean, like one thing is you have to like
Speaker 1: be very visible, right, And like Strategy and Michael Saylor
Speaker 1: have done a really good job of being visible and
Speaker 1: identified with bitcoin, and like these guys have a great
Speaker 1: head start because they're like Tether, right, They're like they're
Speaker 1: people who are visibly identified with bitcoin. But you can't
Speaker 1: just rest on your laurels. You got to keep producing
Speaker 1: branded video to make people think no bitcoin. And also
Speaker 1: because I like bitcoin, I got to buy the stock
Speaker 1: of twenty one.
Speaker 2: Yeah, so I want to read you more of this interview.
Speaker 2: I really enjoyed watching it. So he said, I want
Speaker 2: to grow our bitcoin per share his BPS. When you
Speaker 2: buy a share of twenty one, let's say our BPS
Speaker 2: is zero point zero five, our intent is to be
Speaker 2: able to grow that to zero point zero six, et cetera.
Speaker 2: Whereas a vehicle like an ETF, your exposure is static.
Speaker 2: He said, we will never have negative bitcoin per share,
Speaker 2: at least that's our intent. How would they get there
Speaker 2: negative bitcoin? Yeah? Does that?
Speaker 1: I think he means negative bitcoin per share growth? Right?
Speaker 2: He said we will never have BPS negative at least
Speaker 2: that's our intent.
Speaker 1: He must mean negative growth.
Speaker 2: I was just there. I was at my desk, I
Speaker 2: was watching the interview, was typing curiously, and I guess that's.
Speaker 1: Like the inverse bitcoin exchange.
Speaker 2: How would you just like sell? How would you have
Speaker 2: negative bitcoin for sure? How do you get there?
Speaker 1: Borrow a lot of money and then you sell every
Speaker 1: I don't know. I don't have a great answer. I
Speaker 1: don't think.
Speaker 2: I think he must mean negative growth, Jack, friend of
Speaker 2: the show, come on, tell us what you meant?
Speaker 1: Yeah, negative bitcoin for sure? I should start that.
Speaker 2: I wonder if that would you know? Why would you
Speaker 2: ever issue?
Speaker 1: What you do is you borrow in bitcoin then you
Speaker 1: buy bonds?
Speaker 2: Yeah, well I should do that.
Speaker 1: Right, because like the basic theory of these bitcoin treasury
Speaker 1: companies is you borrow in dollars and you buy bitcoin.
Speaker 1: Like that theory isn't even true, Like they mostly issue
Speaker 1: stock and buy bitcoin. Like these these things all say like,
Speaker 1: oh we're super levered, they're not that lever. Yeah, but no,
Speaker 1: the way you would do a negative bitcoin company is
Speaker 1: you would go to like crypto firms, uh huh, borrow
Speaker 1: bitcoin from them, and then you'll use those bitcoin to
Speaker 1: buy treasury bonds. Okay, have negative bitcoin.
Speaker 2: For share, yeah, because the vast majority of companies have
Speaker 2: zero bitcoin. Yeah, zero.
Speaker 1: Negative would be weird but doable, possibly worth doing. I
Speaker 1: should start this company?
Speaker 2: You should? Why not?
Speaker 1: A lot of reasons.
Speaker 2: We'll see what multiple you got.
Speaker 1: Negative multiple, It would probably be terrible, just like you know,
Speaker 1: because bitcoin is very volatile, and the bitcoin treasury companies
Speaker 1: that we're gonna be levered bitcoin in vestments are one
Speaker 1: not that leverage, and two they're smartly levered, like they
Speaker 1: do you know, long term non margin callable convertible debt
Speaker 1: to buy bitcoin, right, So like they're really not taking
Speaker 1: on a lot of near term leverage risk. Right, If
Speaker 1: you borrowed bitcoin and used to buy treasury bonds and
Speaker 1: then bitcoin went up a lot. You could get margin
Speaker 1: calls from your crypto. Not fun people to deal with.
Speaker 2: Necessary that could be you getting.
Speaker 1: The margin calls. Yeah, no, never mind, I'm not doing it,
Speaker 1: but telling should do it. It'd be fun, be funny.
Speaker 1: All right.
Speaker 2: Well, I've got turtles to go sit out.
Speaker 1: In the sun, go enjoy your mealworms.
Speaker 2: They're kind of big, so I have to actually cut
Speaker 2: them up for the turtles. So I've thought jump on
Speaker 2: mealworms by accident. Okay, I want.
Speaker 1: To hear much more about the cutting up of the
Speaker 1: nail ORMs.
Speaker 2: They're just like an inch long, and the turtles are
Speaker 2: also an inch long, so it's too it's too big
Speaker 2: the turtle. To be clear, they're dead the mealworms. Right,
Speaker 2: let's go home.
Speaker 1: And that was the Money Stuff Podcast.
Speaker 2: I'm Matt Lvia and I'm Katie Greifeld.
Speaker 1: You can find my work by subscribing to the Money
Speaker 1: Stuff newsletter on Bloomberg dot com.
Speaker 2: And you can find me on Bloomberg TV every day
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Speaker 1: Stuff podcast that is produced by Anamazerakus and Moses ibm Ar.
Speaker 2: Thea music was composed by Blake Maples.
Speaker 1: Brandon Francis Nudim is our executive producer.
Speaker 2: And Stage Bauman is Bloomberg's head of podcasts.
Speaker 1: Thanks for listening for The Money Stuff Podcast. We'll be
Speaker 1: back next week with Morristo