Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I got a haircut.
Speaker 2: That was actually that's the first thing I said to you, though,
Speaker 2: after I told you that, I didn't want you to
Speaker 2: watch me yogurt.
Speaker 1: But in other news, you got a neck tattoo.
Speaker 2: Yeah, I got a neck tattoo last Friday.
Speaker 1: It's a Batman.
Speaker 2: Yeah, it's the bat signal, the bat signal. Yeah, it's
Speaker 2: a bat tat on my neck. It's my first tattoo.
Speaker 2: A little intense to get it on the neck.
Speaker 1: You can't realize this tattoo, like having only one tattoo
Speaker 1: and having apian neck tattoo is pretty good.
Speaker 2: The tattoo artist asked me that as well. The thing is,
Speaker 2: I got the tattoo for my late pony Batman. I'd
Speaker 2: had him since I was eleven. He passed away in May,
Speaker 2: the day before my birthday. Also intense. I knew I
Speaker 2: was going to get this tattoo when he did leave us.
Speaker 2: So my answer to that question is when my cat
Speaker 2: does get another tattoo. I wasn't expecting my TV producers
Speaker 2: to be as into it as they were. We have
Speaker 2: this thing called the.
Speaker 3: Tattoo is news, I know, but I thought.
Speaker 2: That, you know, we are a buttoned up financial news network.
Speaker 2: I thought that they wouldn't be thrilled about it, but
Speaker 2: they really wanted to do an on air reveal, so
Speaker 2: we did. We had a man with a steady cam,
Speaker 2: which is just a handheld camera essentially, come in and
Speaker 2: zoom in on it at one point during one day show. Thankfully,
Speaker 2: it wasn't scabbing yet, so it still looked kind of good.
Speaker 2: It's in like a little yeah. Yeah, I think it's
Speaker 2: healing nicely. It was really painful. Are you going to
Speaker 2: get a tattoo?
Speaker 3: No? No, no, I've missed.
Speaker 2: I don't think you've had.
Speaker 1: Had a tattoott man.
Speaker 2: I was kind of thinking about that that my first
Speaker 2: tattoo was at thirty two years old. It's still I
Speaker 2: don't know.
Speaker 3: I feel like age, I'm too old for tattoo.
Speaker 2: But I feel like if you want a tattoo, you
Speaker 2: probably get it in your teens twenties.
Speaker 1: No, I feel like a lot of people enter a
Speaker 1: new phase of life from their thirties and become tattoo people.
Speaker 2: Yeah.
Speaker 3: Maybe yes.
Speaker 1: I saw it on Instagram on Friday and I said
Speaker 1: to my wife, Oh, Katie got a neck tattoo, and
Speaker 1: I was like, what, I'm like, Katy is not just
Speaker 1: a financial news anchor, She's also an emo girl. Yeah.
Speaker 2: At heart, I'm just trying to get back to my roots.
Speaker 2: You know.
Speaker 1: Hello, and welcome to the Money Stuff Podcast. You're a
Speaker 1: weekly podcast where we talk about stuff related to money.
Speaker 1: I'm Matt Levine and I write the Money Stuff column
Speaker 1: for Bloomberg Opinion.
Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 2: an anchor for Bloomberg Television.
Speaker 3: Do you know what a lu booo is?
Speaker 2: I do? Are there impossible to escape? Did you know
Speaker 2: what a little boo boo was? Prior to this week?
Speaker 1: I'm definitely aware of the booboos as an important cultural force.
Speaker 2: Yeah, do I.
Speaker 1: Know what they are? Even now? I couldn't pick them
Speaker 1: out of a lineup.
Speaker 2: I really hate them. Sure, there's a print out of
Speaker 2: a little Boo Boo between us on the table right now.
Speaker 3: And I like free creatures that they're freaky.
Speaker 2: They're freaky little things. Now you can trade derivatives of them.
Speaker 3: Kind of them?
Speaker 1: Yes, absolutely, yeah, you can trade binary options on the
Speaker 1: boo boos. It's so good.
Speaker 3: Yeah, through enthusiasm.
Speaker 2: I really I don't get it. This is one of
Speaker 2: the first cultural phenomenons where I just I feel like
Speaker 2: I can't get into the headspace to pay sure.
Speaker 1: Yeah, this is like the four hundredth for me.
Speaker 2: Really, yeah, that's true. See I'm still getting neck tattoos.
Speaker 2: This is my limit though, so Calshi and stock x
Speaker 2: our partner, so that there's going to be event contracts
Speaker 2: tied to many things.
Speaker 1: Ye, here's the Boo Boo's a third category of h
Speaker 1: and also some trading cards. Trading cards.
Speaker 2: Yes, I don't understand this because I have my mind
Speaker 2: dropped around what stock x does. And you know, there's
Speaker 2: other alternative asset market places where you know, you can
Speaker 2: buy shares of collectible items. I don't know how you
Speaker 2: turn that into an events contract, right, this.
Speaker 1: Is what I've been writing about. It's a weird mechanism.
Speaker 2: Yeah.
Speaker 1: What you can do is you can buy a yes
Speaker 1: no contract that pays off a dollar if, like, you know,
Speaker 1: the price of some box of the Boo Boos is
Speaker 1: over one hundred and twenty dollars and it pays off
Speaker 1: zero dollars if the price of that box of the
Speaker 1: booos is less than one hundred you know, like you
Speaker 1: can turn any continuous variable into a binary. Right. You
Speaker 1: can say, if the price of Tesla is above four
Speaker 1: hundred dollars, then you get a dollar, and if it's
Speaker 1: below four hundred dollars, you don't get a dollar.
Speaker 2: Right.
Speaker 1: But it's not the most natural no product.
Speaker 2: It seems not fun, but that's.
Speaker 1: It's lot fun. But I don't know, it's like kind
Speaker 1: of interesting, right. I don't know the reason for this,
Speaker 1: but I speculated on some reasons, the simplest of which is, like,
Speaker 1: CALSHI is an event contract marketplace, right. I think that's
Speaker 1: what it does. It lets your bet on whether or
Speaker 1: not some event will happen. And if that's your lens,
Speaker 1: then like you could turn anything in the world into
Speaker 1: a yes no event, Right, And if you get money
Speaker 1: for trading, then you want to turn everything in the
Speaker 1: world into a yes no event. And so you sort
Speaker 1: of look around and say what products can we trade?
Speaker 1: And it's like, well sneakers, I was like, well sneakers
Speaker 1: are not really yes no events, but if you have to,
Speaker 1: you can make them into yes no events and you
Speaker 1: can trade them.
Speaker 2: You know, convolute the question in such a way that it
Speaker 2: becomes and it's not like.
Speaker 1: A crazy convolution, but it's like a little crazy it is. Yeah,
Speaker 1: it's a little crazy. Like I was looking at their charts,
Speaker 1: you know, and like they have like prices some sneaker
Speaker 1: and like there's a chart and the chart is like
Speaker 1: four different lines for the probabilities of different like price levels,
Speaker 1: because you want the chart to be just like the price. Right,
Speaker 1: there's an intuitive chart of a sneaker price, and they
Speaker 1: don't show that into ay, so it's a strange mechanism.
Speaker 1: Maybe this is just like a publicity stunt, but I've
Speaker 1: enjoyed writing about it because like one thing that is
Speaker 1: going on here is that there is a belief, possibly
Speaker 1: a money motivated belief among people like who are in
Speaker 1: prediction markets and who work at like big exchanges and
Speaker 1: who are partnering with prediction markets that this is like
Speaker 1: the path to be in everything exchange, which is like
Speaker 1: the term that coinbase has used, like this is the
Speaker 1: way that you can sort of suck everything in the
Speaker 1: world into financial markets. And one point I've been making
Speaker 1: this wee because it's like kind of a rickety way.
Speaker 1: Why does it have to be a prediction market like this?
Speaker 1: But it is something that people are pretty enthusiastic about,
Speaker 1: because at the end of the day, if you're running
Speaker 1: a financial market, like one big category of what you're
Speaker 1: doing is offering people more opportunities to bet, let's say,
Speaker 1: on more things. And this is the most general purpose
Speaker 1: way that people have found to let people bet on things.
Speaker 2: Yeah. I get the betting argument. People like to bet, and.
Speaker 1: I don't know why they would run a bet on
Speaker 1: like the yesterday.
Speaker 2: That's the thing. It has to be fun, right, and
Speaker 2: it doesn't seem as fun versus like I'm going to
Speaker 2: buy shares of a meme stock and hope it goes
Speaker 2: to the moon versus I'm going to hope the price
Speaker 2: of the box of the La Boo Boos goes above
Speaker 2: this certain threshold.
Speaker 1: Yeah. I do wonder if this is like a baby
Speaker 1: step on the way to some more moonworthy financial market.
Speaker 2: Yeah.
Speaker 1: One thing I've written is that the essential thing here
Speaker 1: is that these are contracts with someone on either side
Speaker 1: of them, right, Like you're betting against someone else, and
Speaker 1: if you have a contract that can go to a
Speaker 1: million dollars, then the person on the either side of
Speaker 1: that has to put up collateral and could have to
Speaker 1: put up a million dollars of collateral. Right, so you
Speaker 1: have like a really complicated and risky margining system if
Speaker 1: you're having bets that can go continuously as far as
Speaker 1: you want in either direction. Yeah, Whereas like traditional prediction markets,
Speaker 1: the bets are like you get a dollar or you
Speaker 1: don't get a dollar. So the collateral and the margining
Speaker 1: is a lot easier and the risk is a lot lower.
Speaker 1: So these are like not super risky exchanges. The exchange
Speaker 1: itself not a particular riskue proposition as compared to oh, say,
Speaker 1: certain crypto exchanges we've talked about. And so going from
Speaker 1: that system to a system where the price can be
Speaker 1: whatever the price is is like a you know, risky
Speaker 1: and complicated set of decisions, but possibly something that is
Speaker 1: in the future if you want to be at everything exchange.
Speaker 2: Yeah, I do wonder how this can be manipulated this, right,
Speaker 2: I mean events, contracts on.
Speaker 1: You know. The answer I think is very clearly that
Speaker 1: it can't be because go on, who is trading this.
Speaker 1: The way to the way to manipulate this is like
Speaker 1: there's a contract on like the average price of some sneaker,
Speaker 1: and I go and buy a bunch of the sneaker
Speaker 1: to push out the average price, right, and then I
Speaker 1: win on my prediction market contract. But I assume that
Speaker 1: however big the market for the sneaker is, it's probably
Speaker 1: not that big like treasury bounds. However the market for
Speaker 1: the sneaker is, presumably the prediction market is like orders
Speaker 1: of magnitude smaller, because like, some people buy sneakers because
Speaker 1: they want to wear the sneakers weird, But like, how
Speaker 1: many people are going to want to buy the contract
Speaker 1: that's like, oh, for the sneaker, price will be about
Speaker 1: one hundred and twenty dollars. So I think that it's
Speaker 1: going to be very hard to manipulate because it is,
Speaker 1: at this point, two days in or whatever, a very
Speaker 1: small derivative on top of a yeah, moderately larger market.
Speaker 1: But in the long run, sure, Like you know, you
Speaker 1: have an event contract that is a binary, right, it
Speaker 1: pays zero or one, and it's on some underlying thing.
Speaker 1: And the event contract gets big enough and it's like
Speaker 1: trading a penny below the threshold, You'll buy some of
Speaker 1: the underlying thing to push it up about the threshold,
Speaker 1: and you make a lot of money on the contract.
Speaker 1: It's like very easy to manipulate in concept. It's probably
Speaker 1: very hard to manipulate right now in reality, but like,
Speaker 1: you know, give it time, get more things.
Speaker 2: I get it sea legs first.
Speaker 1: And the other thing is, you know, I think about
Speaker 1: this all the time. Like the CFTC, the US Commodity's
Speaker 1: Futures Trading Commission, regulates commodities futures. It doesn't like really
Speaker 1: regulate the market for wheat, you know, but it does regulate, like,
Speaker 1: you can't manipulate the wheat market if it's going to
Speaker 1: affect commodity futures. So the CFTC has some like anti
Speaker 1: manipulation powers. And if you put everything onto prediction markets,
Speaker 1: then everything becomes a commodity. And like the CFTC has
Speaker 1: to think about like were you buying those sneakers to
Speaker 1: push out the price of sneaker futures?
Speaker 2: And then it's like, yeah, it's going to be interesting
Speaker 2: to see how just the prediction market space matures, because
Speaker 2: this I think is firmly silly season and I think
Speaker 2: we can put it in that bucket.
Speaker 1: Yeah. I think there are two paths for it maturing.
Speaker 2: Yeah.
Speaker 1: One is like what everyone says, which is like it's
Speaker 1: somehow like becomes a market for everything, and it's like
Speaker 1: becomes like the way that companies and like real people
Speaker 1: think about having risk and like predicting the future and
Speaker 1: like understanding probabilities and potentialities to the future. And then
Speaker 1: the other way is it's like a giant legalized sports book, right, yeah,
Speaker 1: and that's kind of where my money is. But who knows,
Speaker 1: who knows?
Speaker 2: Well, I was speaking to the CEO of CBO sure
Speaker 2: last week.
Speaker 1: Probably not in the legal live sports book.
Speaker 2: No, no, So Cibo doesn't have their own prediction markets
Speaker 2: outfit yet, but they're going to roll something twenty five minutes. Well,
Speaker 2: they're going to roll it out in the next few months,
Speaker 2: which is interesting because there's kind of a land grab
Speaker 2: going on right now. I have to imagine that the
Speaker 2: exchanges think about this all the time. They should've been.
Speaker 1: During commodity futures for years, and now it's like it
Speaker 1: turns out they were running a sports book and they
Speaker 1: didn't know it.
Speaker 2: Right. No sports, Cibo specifically is not going into sports
Speaker 2: at least, that's that's what the CEO said mid November
Speaker 2: twenty five. So we have the receipts and like that.
Speaker 1: Makes sense because like if you're like Calshier polymarket and
Speaker 1: you're like a little hobbyist prediction site. And then like
Speaker 1: sports is it's like enormous gusher of money. And then you
Speaker 1: go into sports right if you're seabow, like you know,
Speaker 1: if you have like treasury, Yeah, like you know, there's
Speaker 1: like more money in sports books than there is is
Speaker 1: in like traditional prediction markets. There's more money in real
Speaker 1: financial markets than there's in sports books.
Speaker 2: Yeah, exactly. So they're focusing on economic and financial prediction
Speaker 2: markets for the next forty five minutes.
Speaker 1: Synergies there with interest rates and whatnot.
Speaker 2: Yeah, for sure. Booze from La Boo boos to owls,
Speaker 2: owls the blue cones. One interesting week.
Speaker 1: We've said of this before, but like you yes, your
Speaker 1: first love besides your horse is ETFs. You love an ETF.
Speaker 1: So we've talked about private credit. We've talked a lot
Speaker 1: about retel private credit and like ETFs for private credit,
Speaker 1: which is like a category that kind of sort of.
Speaker 3: Exists, trying to make it make trying to make it thing.
Speaker 1: And whenever we talk about that, I always say, there
Speaker 1: is a retail exchange traded fund category for private credit,
Speaker 1: and it is called a BDC or business development company,
Speaker 1: which is a terrible name because it makes it sound
Speaker 1: like it's a business development company, and that is not
Speaker 1: what it is. I don't know what a business development
Speaker 1: company would be, but it sounds like a company that
Speaker 1: develops businesses, right, But in fact, a BDC is just
Speaker 1: a private credit fund. It's just a pot into which
Speaker 1: a manager like Blue Owl puts private credit investments.
Speaker 2: And it's publicly traded.
Speaker 1: It's totally traded, and so investors can buy shares a
Speaker 1: traded BDC. Not all some are like private like not traded, yes,
Speaker 1: but like a listed BDC is just a stock on
Speaker 1: the stock market. You can buy shares. Anyone can buy shares.
Speaker 1: You can sell shares in the market. It's a little
Speaker 1: bit like you need tof with one really important distinction.
Speaker 2: Go on.
Speaker 1: You can't redeem like you can sell your shares in
Speaker 1: the market. And so what that means is that the
Speaker 1: price of the shares is the price of the shares.
Speaker 1: There's no mechanism to make sure that the price of
Speaker 1: the shares is in line with NAV, whereas like an ETF,
Speaker 1: like you know, if like the shares are trading below NAV,
Speaker 1: then like you buy some shares and you pop them
Speaker 1: out of you know, pop the assets out of the fund,
Speaker 1: and you get stuff at a Navy.
Speaker 2: In authorized participant.
Speaker 3: Whatever.
Speaker 1: With BDC's that's not necessarily the case, and it's therefore
Speaker 1: not actually the case for whatever reason.
Speaker 2: And I feel like we got another lesson in that
Speaker 2: this week with Blue Owl having to call off the
Speaker 2: merger between one of its publicly listed BDCs and then
Speaker 2: a private fund.
Speaker 3: Yeah.
Speaker 1: So it has a thing called OBDC, which is like
Speaker 1: the Blue Al Business Development Company, which is a publicly
Speaker 1: traded PDC, and it has a thing called OBDC two,
Speaker 1: which is a private BDC. So private BDC is like
Speaker 1: they sell it to you know, investors. It doesn't trade
Speaker 1: on the market. And so if you're an investor in
Speaker 1: OBDC two, the private one, you can't get your money
Speaker 1: back by just selling on the stock market. And so
Speaker 1: the way it works is that they have a redemption
Speaker 1: mechanism where like every quarter they'll buy up to a
Speaker 1: certain amount of the shares back if you want to, right,
Speaker 1: so they'll offer to buy shares back and you can
Speaker 1: tender or not. And in recent months there's been a
Speaker 1: little tension. Yes, they have bought back anyone's shares who's
Speaker 1: wanted to sell. But there's like been a little bit
Speaker 1: more redemptions than they'd like, and there's like, you know,
Speaker 1: a widespread sense that if it continued at that pace,
Speaker 1: they would eventually get redemptions speak, which they're allowed to do, right, Like,
Speaker 1: they can sort of buy back as much as they want.
Speaker 1: And so to get out ahead of that, they announced
Speaker 1: that they were going to merge these two funds. So
Speaker 1: if you had shares of ABC two, the private company,
Speaker 1: you'd get shares of OBDC, the public company, and then
Speaker 1: you could sell those whenever you wanted, no problem, you
Speaker 1: don't have to redeem anymore. And that caused some unhappiness
Speaker 1: because OBDC won the publicly traded one happens to traded
Speaker 1: a about a twenty percent discount and net asset value,
Speaker 1: and so instead of being able to get back one
Speaker 1: hundred cents on the dollar, you can get back eighty
Speaker 1: cents on the dollar if you sell your public shares.
Speaker 1: No one wanted that, Yeah, so they ultimately called off
Speaker 1: the merger.
Speaker 2: Yeah. Specifically, when it comes to redemptions. In the third quarter,
Speaker 2: they approved about sixty million dollars worth that was already
Speaker 2: exceeding their pre set limit. Here the discount they've been
Speaker 2: trying to address that, they've been doing, you know, a
Speaker 2: bunch of share repurchases. They have a two hundred million
Speaker 2: dollar program. But I could see how that would cause
Speaker 2: some indigestion. Yeah, yeah, right, yeah, So now they're evaluating
Speaker 2: how to go forward.
Speaker 1: Yeah, it's hard because like the publicly traded product seems
Speaker 1: kind of like a better product for the manager and
Speaker 1: getting people out of the private product into the public product.
Speaker 1: The public product, for the manager's perspective is permanent capital, right,
Speaker 1: Like they never have to redeem any of it. Yeah,
Speaker 1: they can if they want to, and they have been right,
Speaker 1: they've been doing buybacks, which you can think of a
Speaker 1: buyback as like a way to address the discount and
Speaker 1: make shareholders happy, or you can think of it as
Speaker 1: like just an opportunistic trade where like they can buy
Speaker 1: one hundred cents worth of stuff at eighty cents on
Speaker 1: the dollar. Right. But with the private company, it's like
Speaker 1: people complaining when they don't get liquidity. You have asking
Speaker 1: for liquidity, so you have to pay up money when
Speaker 1: you don't necessarily want to. It's a less good product,
Speaker 1: but it is hard. To get people out when the
Speaker 1: public product trades at a discount. Yeah, The other question
Speaker 1: that one might ask is why does the public product
Speaker 1: trade at a discount? And some of the answer for
Speaker 1: that is, like everything trades at a discount, like clothes
Speaker 1: on funds trading at a discount, and like the traditional
Speaker 1: reason for that is, like you capitalize future fees in
Speaker 1: the discount, and so like you know, yeah, you'd rather
Speaker 1: own one hundred cents worth of loans than one hundred
Speaker 1: cents of worth of loans plus like the fees you
Speaker 1: have to pay Blue Howel for the rest of time,
Speaker 1: but in November of twenty twenty five. The other reason
Speaker 1: that there might be a discount is that there are
Speaker 1: some people who believe you may not believe this, for
Speaker 1: some people who believe that some private credit loans aren't
Speaker 1: worth as much as private credit managers think they're.
Speaker 2: Yeah, that seems to be a more and more pervasive view.
Speaker 1: It's a you you Jamie Diamond said some word about cockroaches, et.
Speaker 3: Cetera, et cetera, and so Jeffrey Gunlock.
Speaker 1: Everyone not everyone. I shouldn't say that. Mark Lipschels, Yeah,
Speaker 1: this is not like necessarily correct, but it is a
Speaker 1: you that people have. And so one reason that a
Speaker 1: publicly traded pot of private credit loans might trade at
Speaker 1: eighty cents on the dollar is that some of the
Speaker 1: people trading it don't really believe that the pot of
Speaker 1: loans is worth the dollar. Yeah, and so if that's
Speaker 1: the case, then, like one, this merger is awkward. But too,
Speaker 1: the awkwardness around this merger calls awkward attention to people's
Speaker 1: worries about valuation.
Speaker 2: Yeah, I mean you can also see this just in
Speaker 2: shares of blue Owl Proper, which are down like forty
Speaker 2: something percent this year. They're at their lowest since twenty
Speaker 2: twenty three. A lot of that decline happened before we
Speaker 2: got into any drama with the fund merger.
Speaker 1: Yeah, it's like a little you know, blue Owl as
Speaker 1: a management company, Right, you don't get a pure sense
Speaker 1: of like the valuation of the portfolio, but.
Speaker 2: People viewed as approximy I understand.
Speaker 1: Right, the price of blue Owl shares tells you something
Speaker 1: about what people think about the future cash flows of
Speaker 1: the private credit business. The price of OBDC shares tells
Speaker 1: you what people think about what the current loans are
Speaker 1: currently worth. Right, And like there's slightly different.
Speaker 2: Questions, slightly different. Right.
Speaker 1: The price of the Blue Owl shares going down suggests
Speaker 1: that people think that the private credit party is over
Speaker 1: coming to an end, not as good as it used
Speaker 1: to be. That right, Yeah, the price of the business
Speaker 1: developed company is possibly suggests cockroaches.
Speaker 2: Yeah.
Speaker 1: Possibly.
Speaker 2: Well, it's going to be interesting to see what happens here.
Speaker 2: According to Bloomberg News, they have until April to find
Speaker 2: a solution or will consider liquidating or dissolving the vehicle.
Speaker 2: According to filings, typically there's you know, some wiggle room
Speaker 2: around those deadlines.
Speaker 1: I will say pudating is like not a terrible outcome
Speaker 1: for the childers because it's like, then you get one
Speaker 1: hundred cents on the dollar.
Speaker 3: Yeah, assuming she's the loans one.
Speaker 2: Hundred and something better than eighty for sure.
Speaker 3: Yeah.
Speaker 1: Probably there's an incredible brain controversy. Let's say about Charlie.
Speaker 2: Javis another one.
Speaker 1: So, she was the founder and c of a company
Speaker 1: called Frank that like helped students fill out financial informs basically,
Speaker 1: and she sold it to JP Morgan for one hundred
Speaker 1: and seventy million dollars. And the allegations are that she
Speaker 1: sold it to them on the basis of like having
Speaker 1: millions of devoted customers. And then it turned out that
Speaker 1: all of the customer email addresses and her database were fake,
Speaker 1: and they sent out, you know, like JP Morgan is
Speaker 1: not really in the business of providing financialate advice, Like
Speaker 1: JP Morgan bought Frank to get like access to this
Speaker 1: like devoted young customer base, and then they sent out
Speaker 1: an email to all of Frank's customers being like, hey,
Speaker 1: sign up for JP Morgan credit card or whatever, and
Speaker 1: like all the emails bounced in there like wait a minute,
Speaker 1: and so they sued her for fraud and then ultimately
Speaker 1: got referred to prosecutors and she was arrested in charged
Speaker 1: with fraud and tried and convicted and sentenced to seven
Speaker 1: years in person.
Speaker 2: And she's now I'm trying to find the title that
Speaker 2: JP Morgan gave her because it was pretty good. But anyway,
Speaker 2: go on.
Speaker 1: She was like, yeah, they bought Frank and she was
Speaker 1: like made a managing director and head of Frank or whatever,
Speaker 1: and it was.
Speaker 2: Like head of students something.
Speaker 1: Yeah, and then like they'd send out this email and
Speaker 1: it all bounced and they're like wait a minute, and
Speaker 1: they put her on leave and fired her and so forth.
Speaker 1: But because she was a Japy Morgan employee and because
Speaker 1: she had a merger agreement where she's old Frank, they
Speaker 1: had agreed to indemnify her for legal expenses and pay
Speaker 1: her defense costs and and legal cases including it turns
Speaker 1: out and they litigated this but they lost. They were
Speaker 1: on the hook to pay for her criminal defense, which
Speaker 1: is like, seems a little weird that, like, she defrauded
Speaker 1: them allegedly and now convictedly and they had to pay
Speaker 1: for her legal defense. But it's not that weird, Like
Speaker 1: that's actually like a thing that happens somewhat regularly is
Speaker 1: that you know, you agree to and then the fire
Speaker 1: your employees, even against charges that they stole from you.
Speaker 1: But what has also happened is that she has racked
Speaker 1: up astonishing, amazing, incredible legal bills, to the point that
Speaker 1: people keep saying the legal bills might approach the amount
Speaker 1: the one hundred and seventy million dollars that she defrauded
Speaker 1: from David Morgan. The legal bills are now nine digits, according.
Speaker 2: To The Wall Street Journal, between her and her co
Speaker 2: executive's legal defense to already cost more than one hundred
Speaker 2: and forty two million dollars, So they're pretty dang close incredible, Yeah, clean,
Speaker 2: just kidding.
Speaker 1: If the government to send you to prison and someone
Speaker 1: else will pay for your lawyers, you might as well
Speaker 1: hire all of the best lawyers and leave no stone
Speaker 1: unturned in your defense, which I think is what happened.
Speaker 1: Like she hired really fancy lawyers, and they put in
Speaker 1: a lot of hours and they reviewed a lot of documents,
Speaker 1: and like from where I set, that doesn't seem all
Speaker 1: that useful, Like, you know, they she had a lot
Speaker 1: of emails being like, let's do fraud, right, That's not true.
Speaker 1: There is there is more of a defense of her
Speaker 1: actions that I'm whatever. I mean, like, it's pretty bad fraud,
Speaker 1: but if it's not your money, you might as well
Speaker 1: spend as much as you can to take any shot
Speaker 1: of kind of prism. But the other thing is that
Speaker 1: and this is like at the Times, Ron Lever wrote
Speaker 1: about this last week, like JP Morgan is trying to
Speaker 1: claw back some of this money and like stop paying
Speaker 1: for it. And one thing they're accusing her is like
Speaker 1: you know, enormous wasteful, unconscionable spending on legal bulls. But
Speaker 1: The other thing is they're like, she spent money on
Speaker 1: salulate butter.
Speaker 2: Yeah, I'd never heard of it. Okay, I'm interested.
Speaker 1: And I don't exactly know why JP Morgan, in paying
Speaker 1: her legal bills, would have paid her salulated better bills.
Speaker 1: But I have a guess which I read about, which
Speaker 1: is that law firms will serve you lunch. Like you know,
Speaker 1: I used to work at a law firm and like,
Speaker 1: so I once worked on a deal where like we
Speaker 1: had a client and like their negotiating meurger with some
Speaker 1: other client, and the other client had another law firm
Speaker 1: and we were meeting at that other law firm's offices,
Speaker 1: and our client was like, let's go to Walktell's offices.
Speaker 1: They have better food. And so we went to our offices,
Speaker 1: and we had better food, and it's much nicer to
Speaker 1: be at our offices, Like you have like a sort
Speaker 1: of negotiating advantage when it's at your office, right, And
Speaker 1: I was like, yeah, that's so nice. We got a
Speaker 1: real advantage by having better food. And we didn't cook
Speaker 1: the food, you know, we ordered in, but like we
Speaker 1: ordered in nice food. Like, on the one hand, it's
Speaker 1: nice that we're doing this nice thing for the client,
Speaker 1: but we're billing it to the client, like the client
Speaker 1: pays for all of this eventually, And so there's a
Speaker 1: lot of stuff like that, where like, if you're a
Speaker 1: client and you're at the law firm and you're paying
Speaker 1: the law firm an enormous bill, and you ask the
Speaker 1: law firm to do anything at all for you, like
Speaker 1: buy you a change of clothes because you've been there overnight,
Speaker 1: really anything, they'll just do it for you, but then
Speaker 1: they'll put it on your bill, right, Yeah, And so
Speaker 1: I think that one thing that might be happening here
Speaker 1: is that Jamie Wagen is not only paying the law
Speaker 1: firms bills. They're paying the law firms expenses, and the
Speaker 1: law firm's expenses could pay some stuff for Charlie Jovis.
Speaker 2: Yeah. Well, according to the Wall Street Journal, lawyers were
Speaker 2: billing for twenty hours of work in a single day. Sure,
Speaker 2: so maybe there were day shift and night shift lawyers
Speaker 2: working around the clock.
Speaker 3: No, that's that's no, that's individual. That's the same I've
Speaker 3: worked at a law firm.
Speaker 2: Yeah, that's awesome. Luxury hotel of grades, fine, the cellulite butter. Again,
Speaker 2: I'm very interested in that. But we should probably say that.
Speaker 2: A spokesperson for Charlie Avis says that Charlie says she
Speaker 2: has nothing to do with that, and it's a ridiculous allegation.
Speaker 1: No, it's not obvious that they could have bought the
Speaker 1: cell that had better for themselves. That's like you're on
Speaker 1: a work trip.
Speaker 2: You're like, yeah, it's very it.
Speaker 1: You got it, Like you build enough hours, you work
Speaker 1: enough hours. You're like, I'm going to expense everything on
Speaker 1: this work trip.
Speaker 2: It is very heteronormative that we assumed it was for.
Speaker 1: Charlie Well, right, because like JP Morgan is sort of
Speaker 1: accusing her of wasting their money.
Speaker 2: Yeah, but it could have been the law.
Speaker 1: The law lawyers, right, the lawyers brack up whatever experences
Speaker 1: they rack angels.
Speaker 2: Yeah, this is amazing And I didn't fully appreciate that.
Speaker 2: I would have just thought she's very expensive lawyers. But
Speaker 2: I'm glad that so many different news outlets have tackled this.
Speaker 2: Do you think that JP Morgan is going to be
Speaker 2: able to stop paying for her legal defense?
Speaker 1: Maybe?
Speaker 3: I don't know.
Speaker 2: When does it start to impact their earnings? Like when
Speaker 2: do we see analysts ask.
Speaker 3: Questions about this million dollar appeal?
Speaker 2: Someone asked Jamie Diamond next earnings call.
Speaker 1: Yeah, it's true, it's true, it's true. I think sometimes
Speaker 1: about like the level of like mistake that you have
Speaker 1: to make it a bank to be like asked about
Speaker 1: on the earning call, and like to be fair, the
Speaker 1: one hundred and seventy five million dollar acquisition of Frank
Speaker 1: definitely got raised on some calls, right, Like Jamie Diamond
Speaker 1: has addressed this, I think more than once. Yeah, with
Speaker 1: like analysts and reporters, people be like, yeah, could you
Speaker 1: do such bad due diligence and spent one hundred and
Speaker 1: sef you have a million dollars in this company that
Speaker 1: you know just have fay Gmail addresses. But now we're
Speaker 1: getting to that level, getting to be a double dime.
Speaker 2: Christ had Charlie Javis is exactly my age. She was
Speaker 2: born in March of nineteen ninety three. She said, so much,
Speaker 2: what have I done?
Speaker 3: God?
Speaker 2: What a whirlwind that must have been. Yeah, and by
Speaker 2: the time she gets out of prison, when she eventually goes,
Speaker 2: I mean she'll still be a relatively young woman. Yeah,
Speaker 2: early forties, a lot to live for. She could still
Speaker 2: get a tattoo.
Speaker 1: And that was the Money Stuff podcast I'm Matt.
Speaker 2: Levine and I'm Katie Greifeld.
Speaker 1: You can find my work by subscribing to The Money
Speaker 1: Stuffnoletter on Bloomberg.
Speaker 2: Dot com, and you can find me on Bloomberg TV
Speaker 2: every day on the close between three and five pm Eastern.
Speaker 1: We'd love to hear from you. You can send an
Speaker 1: email to Moneypod at Bloomberg dot net, ask us a
Speaker 1: question and we might answer it on the air.
Speaker 2: You can also subscribe to our show wherever you're listening
Speaker 2: right now and leave us a review. It helps more
Speaker 2: people find the show.
Speaker 1: The Money Stuff Podcast is produced by Anamazerakis and Moses
Speaker 1: ondem Our.
Speaker 2: Theme music was composed by Blake Maples.
Speaker 1: Amy Keen is our executive producer.
Speaker 2: And Sage Bauman is Bloomberg's head of Podcasts.
Speaker 1: Thanks for listening to The Money Stuff Podcast. We'll be
Speaker 1: back next week with more stuff.