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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I met your mom yesterday.

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Speaker 2: Yeah you did. That's so crazy.

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Speaker 1: I went to your baby shower.

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Speaker 2: Yeah it was supposed to be a surprise, but yes,

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Speaker 2: you surprised. I figured it out. I do. I do.

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Speaker 2: I love knowing things, so I try to just accumulate knowledge.

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Speaker 2: So I did, unfortunately spoil the surprise for myself. But

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Speaker 2: they brought in my mom, which was really nice. She

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Speaker 2: met Matt, which was really exciting for her. You keep

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Speaker 2: like circling around Greyfeld members who aren't my dad, and

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Speaker 2: my dad is dying to meet you.

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Speaker 1: Okay, maybe I'll meet him at your.

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Speaker 2: Are you actually going?

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Speaker 1: No, it's fun and I have too many children.

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Speaker 2: That a cruel tease. I know that my mom complimented

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Speaker 2: your voice.

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Speaker 1: Yes she did to me, and I said to her,

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Speaker 1: the reason this podcast exists is because enough people are

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Speaker 1: like your great place for a podcasts, and I was like,

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Speaker 1: I better do a podcast, and now here we are.

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Speaker 2: I know. God, it's such a full circle moment. I'm

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Speaker 2: having a real like supply chain day, like.

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Speaker 1: Welcome to.

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Speaker 2: Like if if one thing goes wrong, then everything everything

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Speaker 2: else goes wrong. No, I'm not like thinking deeply.

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Speaker 1: About transporting goods from me through the straight forms.

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Speaker 2: I mean, actually that I should think about a little bit.

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Speaker 1: What's gone wrong?

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Speaker 2: Nothing so far, So maybe this is the thing. It's

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Speaker 2: just a lot of events stacked on top of each other.

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Speaker 2: Let's start the thing that's going to derail everything for me,

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Speaker 2: and that's this podcast.

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Speaker 1: Setter Sol's up for fire. Hello, and welcome to The

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Speaker 1: Money Stuff Podcast, your weekly podcast where we talk about

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Speaker 1: stuff related to money. I'm Matt Levin and I read

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Speaker 1: the Money Stuff com from Bloomberg Opinion.

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Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and

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Speaker 2: an anchor for Bloomberg Television.

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Speaker 1: So you just get elin out of the way.

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Speaker 2: Yeah's out of the way. Is potentially a pair of

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Speaker 2: ets ETFs.

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Speaker 1: I've been like banging this jump for a while that, like,

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Speaker 1: you know, everybody complains about SpaceX training stock indexes like

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Speaker 1: a lot like this stuff comes up with but I've

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Speaker 1: never really seen it to this degree of fervor. People

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Speaker 1: are really really mad about SpaceX joining the NAZAC one X.

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Speaker 1: They're really mad about the possibility that it might join

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Speaker 1: the S and P.

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Speaker 2: It's a little bit beautiful like this is the most

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Speaker 2: the general public has ever cared about index technology. Yeah,

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Speaker 2: I know, right, it's nice.

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Speaker 1: And it's so strange because it's like, like, I'm really

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Speaker 1: mad that they change their rules to allow face x

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Speaker 1: in which you know, and NASAC sort of did and

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Speaker 1: SMP thought about doing them didn't do. Yeah. For wrestle

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Speaker 1: people got really emotional about like the sanctity of index

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Speaker 1: constitution rules. What a time like to me, like it

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Speaker 1: seemed like, okay, like this is a giant company and

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Speaker 1: we're like a big index that represents the giant companies

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Speaker 1: in the in the world. And if the giant company

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Speaker 1: doesn't get into the next because of our roles, yeah,

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Speaker 1: maybe should treat our rules. I think it's a reasonable

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Speaker 1: thing for the index providers to think, But nobody else

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Speaker 1: thinks that. Everyone thinks it's cheating for Elon Musk to

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Speaker 1: get put into indexes, and so a lot of people

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Speaker 1: are really mad about it, And there was a great

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Speaker 1: Bloomberg article this week about retail investors being mad about

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Speaker 1: it and saying things like I think he's on the

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Speaker 1: side of evil. There are ways to not have Elon

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Speaker 1: Musk in your stock portfolio, which people do in this article.

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Speaker 1: One of these ways is to like switch out of

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Speaker 1: the US stock indexes and into like international stock indexes,

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Speaker 1: which seems like a crazy overreat.

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Speaker 2: Yeah, you're making a lot of other choices that aren't

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Speaker 2: related to ELONSK.

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Speaker 1: When I wrote about like there should be an index

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Speaker 1: fund with no elon, people were like, oh, what about

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Speaker 1: this like small cap index It's like okay, yeah, but

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Speaker 1: like that's a different problem. Yeah, but no, the obvious

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Speaker 1: answer and like you know, the bloombergrater. As we talked

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Speaker 1: about directing indexing. There's a lot of obvious answers, but

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Speaker 1: one of the one of the main ones is like

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Speaker 1: you know, by the naz like ninety nine ninety eight,

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Speaker 1: by the NAZE like one hundred without the companies you

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Speaker 1: don't want, And now subversive et APS is launching or

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Speaker 1: is filed for Uh yes, the qqn E and spn

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Speaker 1: E E S answer no elon, the NAZEK one hundred

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Speaker 1: and SMP five hundred x elon.

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Speaker 2: Yeah.

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Speaker 1: So basically it's all of the companies in the NAZE

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Speaker 1: like one hundred or the S and P five hundred

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Speaker 1: except for those that are run by ELM Musk, which

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Speaker 1: right now is SpaceX and Tesla.

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Speaker 2: That's the thing, like for the S and P five

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Speaker 2: hundred one, especially, like you're just excluding Tesla, and Tesla

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Speaker 2: has a one point seventy five percent waiting in the

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Speaker 2: S and P five hundred So it feels like, what's

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Speaker 2: the point.

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Speaker 1: Well, the point is that you are getting mostly the

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Speaker 1: same thoughts, hopefully a comparable performance, but you are not

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Speaker 1: having Elon, which clearly people want. Like that's the thing

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Speaker 1: that people want.

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Speaker 2: You have the moral whatever.

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Speaker 1: You want, whatever the thing is that makes you like

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Speaker 1: go around calling your broker being like, how can I

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Speaker 1: find it? INEX with no Elon? You have that and

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Speaker 1: now you're recoit. Oh here it is.

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Speaker 2: Yeah, I don't know.

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Speaker 1: It's just like a market like this is not based

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Speaker 1: on like deep analysis of factor exposures. This is based

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Speaker 1: on like people want the things that we'll give it

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Speaker 1: to him.

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Speaker 2: Yeah. I feel like you were about to say marketing,

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Speaker 2: and that is what this is.

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Speaker 1: Sure? Yeah, Like, man, how many ETFs have you we

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Speaker 1: talked about like it's a it's a consumer product. Yeah,

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Speaker 1: you want to give people the consumer product they want.

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Speaker 2: Isabelleiott Bloomberg wrote this up. She quoted an ETF industry

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Speaker 2: analyst who I chat with a lot. His name is

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Speaker 2: Dave Natig, and he was one of those people who

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Speaker 2: had a lot of opinions about SpaceX being added into

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Speaker 2: a bunch of these indexes. But he said that they

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Speaker 2: may well attrack some money that doesn't think too hard.

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Speaker 2: But these kind of narrowcast micro ideas aren't really for

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Speaker 2: anyone fun marketing, not a real investment thesis. So I mean,

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Speaker 2: this is one of those investments well, I mean if

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Speaker 2: you think about, but.

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Speaker 1: Not a real investment, Like it's not a like systematic

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Speaker 1: like based on broad study of the entire stock market.

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Speaker 1: But like some people are like, look, I'm not a

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Speaker 1: stock expert. I want to own the index pods. I'm

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Speaker 1: not going to think about every company that I want

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Speaker 1: to own a passive index thing. But this Elon stuff

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Speaker 1: freaks me out right, and like that's not an unreasonable

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Speaker 1: like the these companies traded, you know, very high multiples

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Speaker 1: of sales, like SpaceX is trading on you know, plans

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Speaker 1: for space data centers. Like it's not crazy to think

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Speaker 1: I don't know a lot about stocks, but I think

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Speaker 1: these stocks are overvalued, right, Like not investment advice, it's

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Speaker 1: just like that's the thing that people clearly think. Like

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Speaker 1: some people think, oh, I don't like the kind of

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Speaker 1: Elon musks, but some people think, oh, these stocks are

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Speaker 1: overvalued and it's bad that they've been put into the indexes.

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Speaker 1: So yeah, you're like you're selling a real investment thesis

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Speaker 1: to those people. Yeah, or you're selling them their investment.

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Speaker 2: It's fair. I think the point that Dave is making,

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Speaker 2: or maybe the point that I want him to be making,

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Speaker 2: is that you think about these like very narrow niche ETFs,

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Speaker 2: and they tend to exist for a while, they float along,

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Speaker 2: they trade, they don't gather any money, and then they

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Speaker 2: shut down within the next year.

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Speaker 1: I agree, And this might be a very narrow niche eta,

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Speaker 1: but like I don't know, Like we've been talking about

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Speaker 1: this a lot, Like this thesis is not that narrow, right,

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Speaker 1: Like this thesis is something that a lot of people

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Speaker 1: are worried about.

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Speaker 2: Yeah, well, the fun thing is that, I mean, if

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Speaker 2: these launch, we can talk about it in six months

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Speaker 2: and see how it's actually done.

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Speaker 1: I know, But that people don't care, Like like.

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Speaker 2: That's the problem. I Mean, you get all these like

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Speaker 2: wild filings.

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Speaker 1: And the liberal article about people trying to avoid Elon

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Speaker 1: they quote a guy saying I would not feel bad

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Speaker 1: about never buying SpaceX no matter how well it does.

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Speaker 1: I'm saying, like the thing will know in six months. Well,

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Speaker 1: I guess we'll know how much money it took in,

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Speaker 1: which is important, but like there will also be performance, right,

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Speaker 1: like either SpaceX will or won't outperform then that index. Yeah,

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Speaker 1: and nobody in this fund will care. Yeah, I'm still

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Speaker 1: gad I stayed out of SpaceX.

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Speaker 2: Yeah. I would also love to check in with that

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Speaker 2: guy specifically though, if I mean SpaceX quadruples and value

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Speaker 2: or something, I would imagine that maybe he'll feel a

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Speaker 2: little bit of fomo. I'm not a SpaceX really don't

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Speaker 2: like I know, but people really like money. It's like competing. Yeah,

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Speaker 2: to your point on no one caring. Again, As an

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Speaker 2: ETF person, I take that as like you have all

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Speaker 2: these strange little funds out there that have like no assets,

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Speaker 2: that just bump around, but they get a lot of

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Speaker 2: coverage because they're interesting.

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Speaker 1: Yes, Like an ETF is a way is like a

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Speaker 1: form of expression. It's like a way to like package

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Speaker 1: an investment idea, and sometimes those investment ideas are appealing

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Speaker 1: to a lot of investors, but other times they're just

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Speaker 1: funny ideas and so they're fun to talk about, right, Yeah,

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Speaker 1: it's just like a little thesis. This is subversive which

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Speaker 1: launch these also runs the Nancy Pelosi copy trading ETF exactly,

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Speaker 1: which again, like, like you have an investment thesis like

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Speaker 1: Nancy Pelosi and other Democratic lawmakers are regularly trading on

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Speaker 1: inside information. They also have a Republican one. They have

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Speaker 1: a Democrat and Republican ETF. You can have a thesis

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Speaker 1: like those guys are trading on inside information, so I

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Speaker 1: want to copy them so I can make money. But

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Speaker 1: I kind of think that mainly it's performance hard, right,

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Speaker 1: Like it's mainly performance is kind of fun to have

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Speaker 1: a ETF that copies Nancy Pelosi's trades.

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Speaker 2: Yeah, I guess the key to not being grumpy about

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Speaker 2: it is to view it in that way, like it

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Speaker 2: is performance hard right.

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Speaker 1: Dave Natig is an ETF purist who like believes that

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Speaker 1: ETFs are important part of the portfolio and constructed in

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Speaker 1: a responsible way. But like, I just there's a lot

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Speaker 1: of investment options out there, and like this is a

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Speaker 1: fun way to yeah, produce funny ones, but this one

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Speaker 1: is not that fun like the Elon one. Like I

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Speaker 1: really think the thesis is just like pretty normal and

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Speaker 1: like we've talked about it in a very straightforward like

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Speaker 1: this should be the product that people offer because people

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Speaker 1: want them.

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Speaker 2: Yeah, in terms of out their ideas, this is definitely I.

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Speaker 1: Thought, like I had written, oh, they should, this should exist,

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Speaker 1: but what I'd actually written is there should be like

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Speaker 1: no SpaceX anthropic open eye one, which is like an

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Speaker 1: overwrapping idea, but not the same idea because like people

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Speaker 1: are mad about all those companies, like the rules being

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Speaker 1: changed for all those companies, but the Elon musk is

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Speaker 1: like more personally agitating to people.

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Speaker 3: Yeah, else were in SpaceX also in SpaceX Training index

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Speaker 3: right now.

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Speaker 2: Yeah, that's a smooth transition.

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Speaker 1: Yeah. So SpaceX as of last week was not in

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Speaker 1: the NAZE like one hundred. So it's timely that the

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Speaker 1: ETF lunched this week, filed this week. It didn't actually launch,

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Speaker 1: but so the space Eggs joined the NAZAC one hundred

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Speaker 1: basically Monday evening or Tuesday morning depend a Hay account,

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Speaker 1: and it's been like it went down that day. He

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Speaker 1: closed down on Monday, despite you know, tens of millions

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Speaker 1: of shares trading hand because all the index ones had

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Speaker 1: to buy it, and this brought some attention to the

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Speaker 1: index three balancing trade. Will also brought attention to the

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Speaker 1: index three balancing trade. Is that two portfolio managers that

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Speaker 1: Millennium made three point seven billion dollars doing it last month?

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Speaker 2: Yeah? At first I thought like year to date, like

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Speaker 2: the three point seven billion dollars UH singular month of

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Speaker 2: June was fantastic for these guys having the time of

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Speaker 2: their life, and there was a lot happening in June. Obviously.

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Speaker 1: I have talked to people who work at these multi

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Speaker 1: strategy hedge funds, and one question I've asked is, like,

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Speaker 1: if you're an index rebalanced trader, like there's some big

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Speaker 1: indexes that rebalance, you know, quarterly, twice a year, whatever,

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Speaker 1: do these people come to work every day?

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Speaker 2: Yeah?

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Speaker 1: When it shows me, yes, they worked very hard all

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Speaker 1: year round, but like you know, their job is kind

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Speaker 1: of focused on a couple of big dates. And while

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Speaker 1: apparently they worked very hard all year around, like they

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Speaker 1: clearly sometimes are doing huge trades and sometimes are not

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Speaker 1: doing any trades because they just think they're thinking very hard.

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Speaker 1: But in June. There were a lot of rebalancings. One

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Speaker 1: of the things that you know, the Bloomberg article about

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Speaker 1: this mentioned it's like five events there's but one of

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Speaker 1: them is the space X training, the NASDAC and I

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Speaker 1: think the foot see and.

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Speaker 2: Yeah, you know things. I mean, Russell had its annual

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Speaker 2: recal institution.

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Speaker 1: There's a lot of stuff going on, and we were

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Speaker 1: deploying a lot of capital and they made a boat

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Speaker 1: load of money.

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Speaker 2: Yeah, so there was a bunch. I mean, this story

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Speaker 2: was so well read and also made the rounds on

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Speaker 2: social media and as discussed, I booked mark a lot

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Speaker 2: of tweets about this.

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Speaker 1: A lot of people were calculating which the individual like

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Speaker 1: people took home, which I would not work anymore if

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Speaker 1: I had done one really good index rebalancing.

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Speaker 2: I mean, god, bless you just got to get one

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Speaker 2: home run. Front of the pod. Gappy pointed out that

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Speaker 2: this is very cyclical, lot of boom and bust. Someone

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Speaker 2: else tweeted out, yeah, like these.

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Speaker 1: Same pods lost hundreds of millions of dollars a while back.

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Speaker 2: Yeah. Specifically, there's a story from March of twenty twenty

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Speaker 2: five talking about the uncharacteristic loss that this team lost

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Speaker 2: in February, which was like nine hundred million dollars or something.

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Speaker 1: Now they've had a more characteristic game, so they.

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Speaker 2: Have to have a strong stomach, it seems like to

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Speaker 2: be in the index rebalancing game.

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Speaker 1: Yeah, strong stomach. So like the index rebalancing trade is

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Speaker 1: like essentially liquidity proves in trade. Yes, index funds need

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Speaker 1: to buy so much stock all at once, and that's terrible.

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Speaker 1: People something to get mad at the index rebalancers because

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Speaker 1: they think that they're front running the index ones because

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Speaker 1: like they know, the index ones have to buy and

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Speaker 1: so they're buying out of the index ones, which is

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Speaker 1: kind of true. But if they didn't do that, the

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Speaker 1: index ones would have to do all other buying at

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Speaker 1: the clothes on like the one day, and they would

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Speaker 1: have to pay up so much. Like the stock would

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Speaker 1: spike up at the close as there was like tens

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Speaker 1: of millions of shares of new orders from index ones

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Speaker 1: and nobody to sell it to them. So what the

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Speaker 1: rebalancing traders are doing is they're selling it to them, right.

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Speaker 1: They're saying, okay, we know that you know, at the

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Speaker 1: clothes on Monday, the index ones are gonna have to

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Speaker 1: buy sixty million shares of SpaceX or whatever it is.

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Speaker 1: We're going to buy some stocks so we can sell

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Speaker 1: them sixty million shares at the clothes so this stock

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Speaker 1: doesn't spike up at the clothes on the low rebalance day.

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Speaker 1: And so it's probably helpful to index ones. And like

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Speaker 1: they're studies showing that, like index ones have less slippage

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Speaker 1: basically because like the existence of this trade, they get

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Speaker 1: a fee for it. In expectation, Yeah, they get an

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Speaker 1: atoriska for it. I tried to as my manager sometimes

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Speaker 1: you're like, you know, if we didn't do this, like

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Speaker 1: indexing wouldn't work, Like the rise of indexing is made

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Speaker 1: possible by multi strategy hedge funds doing this trade. My

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Speaker 1: assumption is that if the hedge ones just didn't do

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Speaker 1: this trade anymore, like you could solve the problem with

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Speaker 1: like averaging periods. Instead of the index provider saying, you know,

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Speaker 1: as of Monday, this is entirely in the S ANDP,

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Speaker 1: you could be like, we're going to average it in

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Speaker 1: over thirty days, so the index will slowly adjust over time,

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Speaker 1: so that the index funds could buy over time rather

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Speaker 1: than buying on one day. But right now the index

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Speaker 1: ones that buy on one day and they buy from hedgehnes. Yeah,

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Speaker 1: and so the hedge ones make money by antsipating index

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Speaker 1: fund demand. And I also the main thing you have

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Speaker 1: to figure out. One thing you have to figure out

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Speaker 1: is what company will be added to the index?

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Speaker 2: I think is like that sounds like the fun part.

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Speaker 1: Yeah, I think like some of its kind of mechanical,

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Speaker 1: like some of these indexes is not that mechanical. But

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Speaker 1: but another thing you have to figure out is like

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Speaker 1: how much stock the index funds will buy, which is like,

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Speaker 1: you know, fairly mechanical because you can kind of guess

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Speaker 1: how much index funds I own and then then the percentage.

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Speaker 1: But then another thing you have to figure out is

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Speaker 1: how much you're you know, competitors will sell, right, Like

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Speaker 1: you have to know who else is doing this trade,

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Speaker 1: because if twice as many people as you think are

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Speaker 1: doing this trade, then you're not going then like you're

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Speaker 1: going to drive down the stock in the closing auction.

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Speaker 1: But so yeah, it's like a trade with some risk.

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Speaker 1: But the other risk is just like we own a

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Speaker 1: couple of stocks, the stocks that you think will be

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Speaker 1: added to the index, and like if you are just

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Speaker 1: so you're just like long a lot of idiosyncratic risk

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Speaker 1: on like huge positions in those stocks, and so that's

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Speaker 1: how you can lose money, is if those stocks go down.

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Speaker 1: It's also you can make money. Like one theory that

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Speaker 1: a reader sent me about the three point seven billion

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Speaker 1: dollars they made in the rebalancing trade last month is

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Speaker 1: that two stocks were added I think to the S

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Speaker 1: and P. One of those Marvel.

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Speaker 2: Yeah, that sounds right, Marvel.

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Speaker 1: It was announced they're being added on June and fifth,

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Speaker 1: but you could probably have guessed so, like probably some

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Speaker 1: of these funds were long Marvel before June started. Yeah,

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Speaker 1: and on June second, Jensen Wang gave a talk where

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Speaker 1: he said that Marvel is going to be a trie

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Speaker 1: into our company, and the stuck went up like thirty

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Speaker 1: three percent that day, adding seventy billion dollars of market cap.

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Speaker 1: Like that could be the whole explanation for this, right,

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Speaker 1: that you're just idiosyncratically long a lot of Marvel and

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Speaker 1: then a Marvel goes up and then you've made three

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Speaker 1: billion dollars, So that could be the whole story.

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Speaker 2: Yeah, Well, I was thinking it sounds fun to be

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Speaker 2: an index rebalancer because outside of like the Marvel Jensen

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Speaker 2: Wong situation. Even if it is somewhat mechanical determining which

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Speaker 2: stocks are going to be added, you still see big

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Speaker 2: pops in those names after it's announced that they're going

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Speaker 2: to add the index.

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Speaker 1: Right, I mean that's right, that's the trade is like, yeah,

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Speaker 1: he's like buying it before it's announce so that you

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Speaker 1: get that pomp.

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Speaker 2: Yeah, sounds fun. Something that I wanted to ask you about,

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Speaker 2: and maybe this is a dumb question. So you talk

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Speaker 2: about how when it comes to index funds needing to

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Speaker 2: get these shares at the closing auction, they used to

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Speaker 2: work with investment banks. Now it's these hedge funds that

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Speaker 2: have sort of stepped into that role. You also point

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Speaker 2: out that these hedge funds don't have customers or take orders.

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Speaker 2: How they actually link up with the index funds.

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Speaker 1: It's an auction.

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Speaker 2: It's just an auction.

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Speaker 1: It's just an as that closing auction.

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Speaker 2: They don't know in advance the index funds that.

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Speaker 1: I don't know if there's any sort of like block

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Speaker 1: traded desks during stuff, but like me nervous, seventy eight

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Speaker 1: million shares of space cleared in the closing auction on Monday,

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Speaker 1: which is like ten x what it usually does. So,

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Speaker 1: like indix sense have to buy at the closing price, right,

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Speaker 1: they don't have to, like but you know, to track

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Speaker 1: the index, they have to own it at the closing price.

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Speaker 1: And so they put in big orders to buy the

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Speaker 1: clothes and someone has to be on the other side

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Speaker 1: of those orders and at Touch Funds knowing that there

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Speaker 1: will be demand in the closing auction.

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Speaker 2: So what do you think the market, What do you

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Speaker 2: think happened this past week that you actually saw SpaceX

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Speaker 2: shares finish the day lower? Did someone miscalculate what the

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Speaker 2: closing price was going to be or how many shares

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Speaker 2: would be needed.

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Speaker 1: The way to make money on the index rebalancing trade

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Speaker 1: is to buy low in the days leading up to.

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Speaker 2: The rebounding event, right.

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Speaker 1: And then selling the rebalancing and then keep buying low. Conceptually,

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Speaker 1: you should sort of buy like half of the shares

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Speaker 1: before the rebalance event and half the shares after the

400
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Speaker 1: rebalance event. And like what should happen is that, like

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Speaker 1: you'll buy kind of low prices, then we'll just kind

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Speaker 1: of spike up into the clothes because like there'll be

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Speaker 1: a lot of you know, you'll you'll be buying and

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Speaker 1: then like inex onens will buy a ton and I'll

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Speaker 1: spike up, and then you'll keep buying. Like you'll short

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Speaker 1: some shares to the index funds in the closing auction

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Speaker 1: on the one day, and then you'll cover your short

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Speaker 1: over the next few days. Right, And that's like kind

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Speaker 1: of what's happened, right, Like the index ones had to

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Speaker 1: buy in the auction and then like their buying demand

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Speaker 1: was done, and then like you know, the hedge funds

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Speaker 1: have the opportunity to keep buying to close out their

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Speaker 1: shorts if they were short. I don't know, but like

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Speaker 1: that's what like Conceptually, you should buy half before and

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Speaker 1: half after because you're sort of averaging them in and

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Speaker 1: you don't have to average them in over the period

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Speaker 1: leading up to their rebalance date. You can average them

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Speaker 1: in over the period around the rebalancing bit.

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Speaker 2: These are good notes for my next career as an

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Speaker 2: index re balancer, because I love you.

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Speaker 1: Should I'm not an index re balanc I'm not sure

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Speaker 1: that I'm going to do this. We actually do it,

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Speaker 1: are horrified by my naivey day.

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Speaker 2: But hopefully they're listening and they're going to write.

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Speaker 1: In but yeah, no, I mean, like the answer is,

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Speaker 1: there was a big spike of demand in the auction,

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Speaker 1: and now the stock is lower because that big speke

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Speaker 1: of demand went away. And hopefully, if you're an index rebalancer,

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Speaker 1: you're profiting from that by selling in the closing auction

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Speaker 1: on Monday at like one sixty or whatever and then

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Speaker 1: buying today at like one to fifty.

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Speaker 2: It is going to be interesting also to as you

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Speaker 2: point out, we have the start of the lockups expiring

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Speaker 2: this month.

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Speaker 1: This is like an I think I've said this on

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Speaker 1: this podcast, Like what you want for like neatness is

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Speaker 1: the lockups all expire on the same day. I thought

438
00:20:42,560 --> 00:20:44,080
Speaker 1: it to the S and B five hundred, right, like

439
00:20:44,119 --> 00:20:47,040
Speaker 1: you want to just like there's huge natural supply, there's

440
00:20:47,119 --> 00:20:51,320
Speaker 1: huge natural demand. Sure, hedge funds can intermediate that, but like,

441
00:20:51,359 --> 00:20:53,560
Speaker 1: why not just you know, have an auction where the

442
00:20:54,000 --> 00:20:56,000
Speaker 1: lockup sellers sell to the index buyers.

443
00:20:56,119 --> 00:20:57,760
Speaker 2: In a perfect world that would be the case.

444
00:20:57,840 --> 00:21:01,320
Speaker 1: No one does that because it's like you can't like

445
00:21:01,400 --> 00:21:02,960
Speaker 1: count on me, You can't count on S and P

446
00:21:03,080 --> 00:21:04,919
Speaker 1: to include you at a particular time. But it just

447
00:21:04,960 --> 00:21:07,040
Speaker 1: like it just it would be it's so convenient.

448
00:21:07,359 --> 00:21:08,160
Speaker 3: Yeah, I just.

449
00:21:08,080 --> 00:21:10,480
Speaker 2: Feel like SpaceX is such like an interesting little Petri

450
00:21:10,600 --> 00:21:13,240
Speaker 2: dish of Okay, you have this index demand. Okay, it

451
00:21:13,280 --> 00:21:15,440
Speaker 2: was one time. Now you have like this waterfall, right,

452
00:21:17,320 --> 00:21:19,560
Speaker 2: I know, But what's going to happen because we're not.

453
00:21:20,040 --> 00:21:22,720
Speaker 1: Yeah, I don't know. I mean, like, I don't know, like.

454
00:21:22,960 --> 00:21:26,000
Speaker 2: You some analysts saying it's going to a ten trillion

455
00:21:26,080 --> 00:21:27,320
Speaker 2: dollars in market cap.

456
00:21:27,400 --> 00:21:29,840
Speaker 1: It's just I mean, like in general, the people with

457
00:21:29,880 --> 00:21:33,040
Speaker 1: the lockups are people who are not the anti Elon

458
00:21:33,119 --> 00:21:35,159
Speaker 1: must people. They're the opposite of that, right, So like

459
00:21:35,160 --> 00:21:37,800
Speaker 1: a lot of them won't sell some of them, a

460
00:21:37,840 --> 00:21:40,119
Speaker 1: lot of them sel right, Like a lot of them

461
00:21:40,160 --> 00:21:41,880
Speaker 1: made a lot of money, and you know, we'll take

462
00:21:41,920 --> 00:21:44,480
Speaker 1: some profits. But yeah, something like now I'm in this forever.

463
00:21:45,400 --> 00:21:46,119
Speaker 1: Still ten trillion.

464
00:21:46,240 --> 00:21:47,280
Speaker 2: They're true believers.

465
00:21:47,320 --> 00:21:50,000
Speaker 1: Man, Yeah, I don't know. I mean, I'm sure that

466
00:21:50,040 --> 00:21:52,159
Speaker 1: the lockup will you know, create a lot of supply.

467
00:21:52,600 --> 00:21:54,399
Speaker 1: I mean definitely. The one theory is that the stock

468
00:21:54,480 --> 00:21:56,360
Speaker 1: price is high because there is just not a lot

469
00:21:56,400 --> 00:21:58,399
Speaker 1: of supply and there's a lot of force demand from

470
00:21:58,400 --> 00:22:00,280
Speaker 1: index ones and a lot of demand from reaching well,

471
00:22:00,640 --> 00:22:02,640
Speaker 1: and if instead of five percent of the stock being

472
00:22:02,680 --> 00:22:04,640
Speaker 1: available to buy. You know, forty percent of the stock

473
00:22:04,720 --> 00:22:07,760
Speaker 1: was available to buy, it would be lower, but depends

474
00:22:07,760 --> 00:22:08,920
Speaker 1: on people are actually going.

475
00:22:09,040 --> 00:22:12,240
Speaker 2: We'll just have to watch this space you want, you'll

476
00:22:12,240 --> 00:22:16,440
Speaker 2: be gone. I will be watching fondly from afar very distantly.

477
00:22:34,040 --> 00:22:36,159
Speaker 1: Should we talk about eggs, Yes.

478
00:22:36,480 --> 00:22:38,560
Speaker 2: We should just started with eggs. It was a risky

479
00:22:38,600 --> 00:22:40,560
Speaker 2: bet to start with ETFs because I feel like we

480
00:22:40,640 --> 00:22:41,480
Speaker 2: lost a lot of the audience.

481
00:22:41,520 --> 00:22:43,200
Speaker 1: I know, should we switch them around in post?

482
00:22:43,480 --> 00:22:45,560
Speaker 2: Yeah, I don't care.

483
00:22:45,960 --> 00:22:48,800
Speaker 1: You don't care if you started with elon. People love

484
00:22:48,800 --> 00:22:49,560
Speaker 1: the amount of elon.

485
00:22:49,680 --> 00:22:54,000
Speaker 2: That's true. That's true apple to everyone. Yes, they're a

486
00:22:54,040 --> 00:22:57,320
Speaker 2: great source of protein and choline, which is very important

487
00:22:57,320 --> 00:23:00,600
Speaker 2: for brain healthy. Only a few with the yolks. Eggs

488
00:23:00,600 --> 00:23:04,159
Speaker 2: are super expensive. I love eggs.

489
00:23:04,480 --> 00:23:06,440
Speaker 1: They were super expensive because of bird.

490
00:23:06,160 --> 00:23:10,640
Speaker 2: Fluid, as it has since been revealed.

491
00:23:10,920 --> 00:23:14,320
Speaker 1: Maybe I'm not totally convinced that the market manipulation actually

492
00:23:14,400 --> 00:23:16,159
Speaker 1: raised the price of eggs that much, But like you know,

493
00:23:16,240 --> 00:23:19,240
Speaker 1: the Justice Department is, and many states attorney general State

494
00:23:19,280 --> 00:23:20,520
Speaker 1: attorneys general, that's my.

495
00:23:20,560 --> 00:23:23,880
Speaker 2: Least favorite plural. Attorneys general get.

496
00:23:23,680 --> 00:23:27,280
Speaker 1: Really into weird plurals. Anyway, The Justice department in several

497
00:23:27,280 --> 00:23:29,679
Speaker 1: states sued a bunch of egg producers for manipulating the

498
00:23:29,680 --> 00:23:36,320
Speaker 1: price of eggs, and they settled has to be for eggs.

499
00:23:36,800 --> 00:23:40,040
Speaker 2: I love how you basically ask, like, why wouldn't you

500
00:23:40,160 --> 00:23:43,760
Speaker 2: be rigging your version of libor if you were in kids?

501
00:23:43,840 --> 00:23:45,800
Speaker 1: So I feel bad it's calling it libor because like

502
00:23:45,840 --> 00:23:49,919
Speaker 1: libor was essentially a number that was self reported. The

503
00:23:49,960 --> 00:23:52,240
Speaker 1: standards setter would call banks and say, hey, what price

504
00:23:52,280 --> 00:23:53,520
Speaker 1: are you borring at? And they just make up a

505
00:23:53,600 --> 00:23:56,679
Speaker 1: number what I've been calling egg libor, which is actually

506
00:23:56,680 --> 00:24:00,400
Speaker 1: the Erner Barry and Express. It's now called it Expana.

507
00:24:00,480 --> 00:24:03,120
Speaker 1: But like there's a market data service called the XPAN

508
00:24:03,200 --> 00:24:05,560
Speaker 1: I used to be called Urner Barry that like reports

509
00:24:05,560 --> 00:24:06,920
Speaker 1: the price of eggs, and it reports the price of

510
00:24:06,960 --> 00:24:09,840
Speaker 1: eggs based on transactions on the egg clearing house. But

511
00:24:09,840 --> 00:24:11,960
Speaker 1: the egg clearing house is not where most egg transactions

512
00:24:12,000 --> 00:24:14,120
Speaker 1: take place. So like you have the egg clearing house

513
00:24:14,400 --> 00:24:18,719
Speaker 1: basically for egg producers to trade surplus eggs. So sometimes

514
00:24:18,760 --> 00:24:21,399
Speaker 1: an egg producer ows it's customers more eggs than it has.

515
00:24:21,680 --> 00:24:23,720
Speaker 1: Sometimes an egg producer has extra eggs and so they

516
00:24:23,800 --> 00:24:27,440
Speaker 1: like match off in the egg clearinghouse and that produces

517
00:24:27,440 --> 00:24:30,480
Speaker 1: a price. But there are not that many transactions on

518
00:24:30,480 --> 00:24:34,240
Speaker 1: the egg clearing house compared to just wholesale egg transactions, right,

519
00:24:34,280 --> 00:24:37,280
Speaker 1: And so the egg producers are like, well, I mean allegedly,

520
00:24:38,359 --> 00:24:41,359
Speaker 1: you know, settled law seed. But the egg producers are like, well,

521
00:24:41,400 --> 00:24:43,080
Speaker 1: you know, if the price on the egg clearing house

522
00:24:43,160 --> 00:24:44,880
Speaker 1: is high, that'll make the price on all of our

523
00:24:45,200 --> 00:24:48,800
Speaker 1: contracts high, so we can overpay in the clearing house

524
00:24:48,840 --> 00:24:50,920
Speaker 1: market to raise the price on all of our wholesale

525
00:24:50,960 --> 00:24:53,879
Speaker 1: contracts that price buy reference to the earner barry price.

526
00:24:54,800 --> 00:24:57,159
Speaker 1: And so allegedly they did that, and they have like

527
00:24:57,280 --> 00:25:00,200
Speaker 1: you know, emails and communications being like, hey, let's push

528
00:25:00,280 --> 00:25:03,240
Speaker 1: up the price really high. And they did some spoofing.

529
00:25:03,400 --> 00:25:06,280
Speaker 1: They like would put high bids onto the clearinghouse so

530
00:25:06,320 --> 00:25:08,679
Speaker 1: that the pricing service would use those high bids, and

531
00:25:08,680 --> 00:25:11,120
Speaker 1: then they take them away before they got it, and

532
00:25:11,840 --> 00:25:15,160
Speaker 1: the price of eggs allegedly went up again. The egg

533
00:25:15,160 --> 00:25:16,960
Speaker 1: producers are like, nah, it didn't really affect the price

534
00:25:17,000 --> 00:25:19,919
Speaker 1: of eggs, but the Justice Department things it did, and

535
00:25:20,000 --> 00:25:22,520
Speaker 1: so they sued and they settled with a bunch of

536
00:25:22,520 --> 00:25:26,040
Speaker 1: egg producers. And truly, my favorite part of the store

537
00:25:26,119 --> 00:25:28,199
Speaker 1: is that the settlement was paid in eggs. Yeah, you

538
00:25:28,320 --> 00:25:30,800
Speaker 1: never see that. You never see that. No, But like

539
00:25:31,800 --> 00:25:33,600
Speaker 1: e companies were like, Okay, we're going to pay fifty

540
00:25:33,640 --> 00:25:36,280
Speaker 1: million eggs for this market manipulation.

541
00:25:36,480 --> 00:25:38,480
Speaker 2: Those food banks are going to have to take physical

542
00:25:38,520 --> 00:25:40,440
Speaker 2: delivery of so many eggs.

543
00:25:40,520 --> 00:25:43,119
Speaker 1: Yeah, they're going to food banks, which is beautiful. The

544
00:25:43,200 --> 00:25:45,159
Speaker 1: New York press release was like a little ambiguous. It

545
00:25:45,200 --> 00:25:48,119
Speaker 1: was like, the New York Attorney General has secured fifty

546
00:25:48,160 --> 00:25:50,560
Speaker 1: million eggs, and five million of those eggs will go

547
00:25:50,560 --> 00:25:52,720
Speaker 1: to New York frud banks. Like the actual explanation is

548
00:25:52,720 --> 00:25:54,200
Speaker 1: that the other forty five million will go to food

549
00:25:54,200 --> 00:25:56,480
Speaker 1: banks in other states, because it's like the total settlement

550
00:25:56,520 --> 00:25:58,439
Speaker 1: and fifty million eggs or whatever. But I had a

551
00:25:58,440 --> 00:26:01,439
Speaker 1: moment of thinking, like, well, the New York Attorney General

552
00:26:01,560 --> 00:26:03,320
Speaker 1: eat forty five million eggs.

553
00:26:03,480 --> 00:26:06,000
Speaker 2: I mean, don't threaten me with a good time. I

554
00:26:06,040 --> 00:26:09,120
Speaker 2: love eggs, but I also loved some of the emails

555
00:26:09,640 --> 00:26:14,560
Speaker 2: that were found. Hickman's, for example, was you know, conspiring

556
00:26:14,600 --> 00:26:20,040
Speaker 2: with executives from other egg producers, and at one point emailed, hurry,

557
00:26:20,320 --> 00:26:23,080
Speaker 2: there are only sixteen bids on ECI right now. That's

558
00:26:23,080 --> 00:26:27,600
Speaker 2: the egg clearinghouse, and fifteen of them are ours meeting Hickman's,

559
00:26:27,640 --> 00:26:29,760
Speaker 2: which that's like a that's I don't know, that's a

560
00:26:29,760 --> 00:26:33,560
Speaker 2: bad email toscent. Even if they didn't really meaningfully manipulate

561
00:26:33,600 --> 00:26:35,680
Speaker 2: the price, that's that's that's a hard one.

562
00:26:36,160 --> 00:26:38,600
Speaker 1: Yeah. More than one person said if the bid like

563
00:26:38,640 --> 00:26:40,879
Speaker 1: they vote in Texas early and often, which is like

564
00:26:41,720 --> 00:26:45,280
Speaker 1: once is fine, but like, yeah, using that jag repeatedly.

565
00:26:45,359 --> 00:26:47,920
Speaker 2: I'm glad you immediately brought up bird flu because that

566
00:26:48,040 --> 00:26:51,320
Speaker 2: was my knee jerk reaction reading this, Like you think

567
00:26:51,359 --> 00:26:54,240
Speaker 2: about the time period that we're talking about, like twenty

568
00:26:54,320 --> 00:26:59,200
Speaker 2: twenty two, bird flu avian flu was devastating the nation's flocks.

569
00:26:59,320 --> 00:27:01,480
Speaker 2: Chickens were dyed left and right, they were having to

570
00:27:01,520 --> 00:27:04,840
Speaker 2: be cold on mass. They didn't need to do all of.

571
00:27:04,800 --> 00:27:10,280
Speaker 1: This, Yeah, I mean I think that the costs swayed up, right, Yeah. Right, So,

572
00:27:10,800 --> 00:27:16,080
Speaker 1: like one possibility is like they used bird flu as

573
00:27:16,119 --> 00:27:18,320
Speaker 1: cover for market manipulation. That's clearly kind of like the

574
00:27:18,680 --> 00:27:21,240
Speaker 1: vibe of the Justice Department complaint, which is like they

575
00:27:21,840 --> 00:27:24,719
Speaker 1: saw prices going on anyway, they figured any price increase

576
00:27:24,800 --> 00:27:27,479
Speaker 1: that they tried would be having them like op, it's

577
00:27:27,520 --> 00:27:29,680
Speaker 1: bird flu, it's fine, and so they tried to push

578
00:27:29,680 --> 00:27:31,600
Speaker 1: out the price a little bit extra to make extra profits.

579
00:27:31,840 --> 00:27:34,560
Speaker 1: The other possibility is that, like their costs went up

580
00:27:34,600 --> 00:27:37,119
Speaker 1: because of bird flu, and the market pricing service was

581
00:27:37,119 --> 00:27:38,919
Speaker 1: slow to react to that, and so they manipulated the

582
00:27:38,920 --> 00:27:41,560
Speaker 1: price on the clearing house to reflect the actual price

583
00:27:41,640 --> 00:27:45,840
Speaker 1: of eggs. Like you know, they say, everything we did

584
00:27:45,960 --> 00:27:47,520
Speaker 1: is legitimate, and it didn't push out the price, so

585
00:27:47,520 --> 00:27:50,280
Speaker 1: they added, you have you can imagine a sympathetic explanation

586
00:27:50,320 --> 00:27:51,879
Speaker 1: for this, but in any case, Yeah, the price went

587
00:27:51,960 --> 00:27:53,520
Speaker 1: up mostly because of bird flu, and then a little

588
00:27:53,520 --> 00:27:55,800
Speaker 1: bit maybe because of market manipulation around the edges.

589
00:27:56,000 --> 00:27:56,680
Speaker 2: Yeah.

590
00:27:56,880 --> 00:27:58,960
Speaker 1: The other thing that I like is that right around

591
00:27:58,960 --> 00:28:01,800
Speaker 1: when this is happening, I think two weeks after the

592
00:28:01,960 --> 00:28:06,159
Speaker 1: conspiracy allegedly ended in twenty twenty five, Calman, which is

593
00:28:06,200 --> 00:28:09,800
Speaker 1: one of the big egg producers, they're like controlling family

594
00:28:09,880 --> 00:28:12,000
Speaker 1: sold three hundred million dollars worth of stock.

595
00:28:11,800 --> 00:28:13,920
Speaker 2: And the Adam's family actually.

596
00:28:13,840 --> 00:28:16,280
Speaker 1: In an underwritten offering, and so they like put out

597
00:28:16,280 --> 00:28:19,000
Speaker 1: a perspectus disclosing all of their risk factors, and one

598
00:28:19,000 --> 00:28:21,520
Speaker 1: of the risk factors is like prices are temporarily high

599
00:28:21,560 --> 00:28:23,119
Speaker 1: because of bird fluid. By the way we got to

600
00:28:23,680 --> 00:28:27,080
Speaker 1: you got an investigative letter from the Justice Department trying

601
00:28:27,080 --> 00:28:28,399
Speaker 1: to figure out why prices are high.

602
00:28:28,720 --> 00:28:30,080
Speaker 2: Don't worry about that though.

603
00:28:29,960 --> 00:28:34,000
Speaker 1: Yeah, I wrote, there's a that feels like in everything

604
00:28:34,000 --> 00:28:36,200
Speaker 1: in security is for add lawsuit waiting to happen, right,

605
00:28:36,320 --> 00:28:39,360
Speaker 1: Like you bought shares, you know it basically like near

606
00:28:39,400 --> 00:28:41,880
Speaker 1: the all time high. You bought shares from the controlling

607
00:28:41,920 --> 00:28:45,920
Speaker 1: family without knowing that they were about to settle a

608
00:28:46,040 --> 00:28:48,960
Speaker 1: market manipulation case. No.

609
00:28:49,840 --> 00:28:51,680
Speaker 2: Yeah, there's a lot of family drama involved in that.

610
00:28:51,720 --> 00:28:54,719
Speaker 2: Maybe it's not drama, but the Adams family does control

611
00:28:54,760 --> 00:28:58,160
Speaker 2: it through super voting class A shares held by a

612
00:28:58,200 --> 00:29:01,600
Speaker 2: vehicle called Daughters, which is four of the daughters of

613
00:29:01,600 --> 00:29:03,760
Speaker 2: the late founder. Like, I don't know, I just love

614
00:29:03,760 --> 00:29:07,240
Speaker 2: the idea of like there's this egg dynasty. Sure, yeah,

615
00:29:07,560 --> 00:29:10,040
Speaker 2: a number of egg dynasties I would imagine. So I

616
00:29:10,080 --> 00:29:13,160
Speaker 2: wonder how many markets this sort of behavior is happening in.

617
00:29:13,240 --> 00:29:16,960
Speaker 2: I wonder if it's happening in cattle right now.

618
00:29:17,080 --> 00:29:19,640
Speaker 1: I talked about there's like a chicken live work inspiracy.

619
00:29:19,680 --> 00:29:23,400
Speaker 2: Yeah, yeah, well in cattle. I don't know if you've

620
00:29:23,440 --> 00:29:25,720
Speaker 2: been following screwworm.

621
00:29:25,040 --> 00:29:27,160
Speaker 1: I'm moderately up to speed on.

622
00:29:27,080 --> 00:29:32,200
Speaker 2: Screw worm ravaging, ravaging the nation's herds, So I don't

623
00:29:32,200 --> 00:29:35,360
Speaker 2: know beef prices are going up. I wonder all those

624
00:29:35,360 --> 00:29:39,480
Speaker 2: words bad news. Something else will be monitoring over the

625
00:29:39,520 --> 00:29:41,960
Speaker 2: next six months. It's a situation I'll keep an eye on.

626
00:29:49,360 --> 00:29:50,960
Speaker 1: And that was the Money Stuff Podcast.

627
00:29:51,280 --> 00:29:53,320
Speaker 2: I'm Matt Levine and I'm Katie Greifeld.

628
00:29:53,560 --> 00:29:55,720
Speaker 1: You can find my work by subscribing to The Money

629
00:29:55,760 --> 00:29:58,400
Speaker 1: Stuff new Letter on Bloomberg dot com.

630
00:29:58,120 --> 00:30:00,600
Speaker 2: And you can find me on Bloomberg TV every day

631
00:30:00,640 --> 00:30:03,520
Speaker 2: on the close between three and five pm Eastern.

632
00:30:04,200 --> 00:30:06,239
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633
00:30:06,240 --> 00:30:09,560
Speaker 1: email to Moneypod at Bloomberg dot net, ask us a

634
00:30:09,640 --> 00:30:11,480
Speaker 1: question and we might answer it on the air.

635
00:30:11,840 --> 00:30:14,400
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636
00:30:14,480 --> 00:30:16,360
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637
00:30:16,360 --> 00:30:17,240
Speaker 2: people find the show.

638
00:30:17,960 --> 00:30:22,280
Speaker 1: The Money Stuff Podcast is produced by Anamazerakis, Moses Onam

639
00:30:22,720 --> 00:30:24,680
Speaker 1: and Alexis HoTT Our.

640
00:30:24,720 --> 00:30:26,800
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641
00:30:27,520 --> 00:30:30,960
Speaker 1: Amy Keen is our executive producer. Thanks for listening to

642
00:30:30,960 --> 00:30:33,400
Speaker 1: The Money Stuff Podcast. We'll be back next week with

643
00:30:33,560 --> 00:30:34,280
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