WEBVTT - Bat Tat: Labubu, OBDC, Frank 0:00:02.720 --> 0:00:10.000 Bloomberg Audio Studios, podcasts, radio news. I got a haircut. 0:00:11.600 --> 0:00:13.760 That was actually that's the first thing I said to you, though, 0:00:13.880 --> 0:00:15.880 after I told you that, I didn't want you to 0:00:15.920 --> 0:00:16.840 watch me yogurt. 0:00:17.120 --> 0:00:19.880 But in other news, you got a neck tattoo. 0:00:22.400 --> 0:00:24.960 Yeah, I got a neck tattoo last Friday. 0:00:25.239 --> 0:00:26.360 It's a Batman. 0:00:27.040 --> 0:00:29.960 Yeah, it's the bat signal, the bat signal. Yeah, it's 0:00:29.960 --> 0:00:32.479 a bat tat on my neck. It's my first tattoo. 0:00:32.840 --> 0:00:34.880 A little intense to get it on the neck. 0:00:35.520 --> 0:00:38.040 You can't realize this tattoo, like having only one tattoo 0:00:38.040 --> 0:00:39.720 and having apian neck tattoo is pretty good. 0:00:39.800 --> 0:00:42.479 The tattoo artist asked me that as well. The thing is, 0:00:42.560 --> 0:00:46.000 I got the tattoo for my late pony Batman. I'd 0:00:46.000 --> 0:00:49.240 had him since I was eleven. He passed away in May, 0:00:49.400 --> 0:00:52.879 the day before my birthday. Also intense. I knew I 0:00:52.920 --> 0:00:55.440 was going to get this tattoo when he did leave us. 0:00:55.800 --> 0:00:59.040 So my answer to that question is when my cat 0:00:59.120 --> 0:01:04.160 does get another tattoo. I wasn't expecting my TV producers 0:01:04.160 --> 0:01:06.960 to be as into it as they were. We have 0:01:07.040 --> 0:01:07.760 this thing called the. 0:01:09.600 --> 0:01:11.800 Tattoo is news, I know, but I thought. 0:01:11.600 --> 0:01:14.400 That, you know, we are a buttoned up financial news network. 0:01:14.440 --> 0:01:17.280 I thought that they wouldn't be thrilled about it, but 0:01:17.880 --> 0:01:20.320 they really wanted to do an on air reveal, so 0:01:20.360 --> 0:01:22.400 we did. We had a man with a steady cam, 0:01:22.480 --> 0:01:25.600 which is just a handheld camera essentially, come in and 0:01:25.720 --> 0:01:29.080 zoom in on it at one point during one day show. Thankfully, 0:01:29.080 --> 0:01:31.800 it wasn't scabbing yet, so it still looked kind of good. 0:01:31.880 --> 0:01:38.240 It's in like a little yeah. Yeah, I think it's 0:01:38.560 --> 0:01:41.920 healing nicely. It was really painful. Are you going to 0:01:42.000 --> 0:01:42.679 get a tattoo? 0:01:42.720 --> 0:01:44.760 No? No, no, I've missed. 0:01:45.440 --> 0:01:46.399 I don't think you've had. 0:01:46.440 --> 0:01:48.080 Had a tattoott man. 0:01:48.280 --> 0:01:50.240 I was kind of thinking about that that my first 0:01:50.280 --> 0:01:53.920 tattoo was at thirty two years old. It's still I 0:01:53.920 --> 0:01:54.160 don't know. 0:01:54.200 --> 0:01:56.720 I feel like age, I'm too old for tattoo. 0:01:56.840 --> 0:01:58.520 But I feel like if you want a tattoo, you 0:01:58.600 --> 0:02:00.480 probably get it in your teens twenties. 0:02:00.720 --> 0:02:02.960 No, I feel like a lot of people enter a 0:02:02.960 --> 0:02:05.280 new phase of life from their thirties and become tattoo people. 0:02:05.560 --> 0:02:05.920 Yeah. 0:02:05.960 --> 0:02:07.200 Maybe yes. 0:02:07.280 --> 0:02:09.440 I saw it on Instagram on Friday and I said 0:02:09.480 --> 0:02:11.679 to my wife, Oh, Katie got a neck tattoo, and 0:02:12.000 --> 0:02:14.680 I was like, what, I'm like, Katy is not just 0:02:14.760 --> 0:02:18.720 a financial news anchor, She's also an emo girl. Yeah. 0:02:18.880 --> 0:02:21.480 At heart, I'm just trying to get back to my roots. 0:02:21.520 --> 0:02:21.680 You know. 0:02:23.400 --> 0:02:26.400 Hello, and welcome to the Money Stuff Podcast. You're a 0:02:26.400 --> 0:02:29.919 weekly podcast where we talk about stuff related to money. 0:02:30.840 --> 0:02:32.799 I'm Matt Levine and I write the Money Stuff column 0:02:32.800 --> 0:02:33.720 for Bloomberg Opinion. 0:02:34.600 --> 0:02:37.480 And I'm Katie Greifeld, a reporter for Bloomberg News and 0:02:37.520 --> 0:02:39.119 an anchor for Bloomberg Television. 0:02:49.120 --> 0:02:50.240 Do you know what a lu booo is? 0:02:50.560 --> 0:02:54.240 I do? Are there impossible to escape? Did you know 0:02:54.280 --> 0:02:57.720 what a little boo boo was? Prior to this week? 0:02:57.960 --> 0:03:02.000 I'm definitely aware of the booboos as an important cultural force. 0:03:02.240 --> 0:03:03.560 Yeah, do I. 0:03:03.600 --> 0:03:06.520 Know what they are? Even now? I couldn't pick them 0:03:06.520 --> 0:03:07.240 out of a lineup. 0:03:07.480 --> 0:03:11.640 I really hate them. Sure, there's a print out of 0:03:11.639 --> 0:03:13.799 a little Boo Boo between us on the table right now. 0:03:13.840 --> 0:03:16.720 And I like free creatures that they're freaky. 0:03:16.800 --> 0:03:20.200 They're freaky little things. Now you can trade derivatives of them. 0:03:20.120 --> 0:03:20.960 Kind of them? 0:03:21.040 --> 0:03:24.280 Yes, absolutely, yeah, you can trade binary options on the 0:03:24.320 --> 0:03:25.720 boo boos. It's so good. 0:03:25.919 --> 0:03:28.639 Yeah, through enthusiasm. 0:03:29.600 --> 0:03:31.959 I really I don't get it. This is one of 0:03:32.040 --> 0:03:36.360 the first cultural phenomenons where I just I feel like 0:03:36.400 --> 0:03:38.600 I can't get into the headspace to pay sure. 0:03:38.880 --> 0:03:40.920 Yeah, this is like the four hundredth for me. 0:03:41.320 --> 0:03:46.600 Really, yeah, that's true. See I'm still getting neck tattoos. 0:03:47.120 --> 0:03:51.480 This is my limit though, so Calshi and stock x 0:03:52.000 --> 0:03:56.520 our partner, so that there's going to be event contracts 0:03:56.880 --> 0:03:59.800 tied to many things. 0:03:58.040 --> 0:04:04.280 Ye, here's the Boo Boo's a third category of h 0:04:05.280 --> 0:04:07.119 and also some trading cards. Trading cards. 0:04:07.200 --> 0:04:12.040 Yes, I don't understand this because I have my mind 0:04:12.120 --> 0:04:14.360 dropped around what stock x does. And you know, there's 0:04:14.400 --> 0:04:17.680 other alternative asset market places where you know, you can 0:04:17.680 --> 0:04:20.520 buy shares of collectible items. I don't know how you 0:04:20.680 --> 0:04:23.440 turn that into an events contract, right, this. 0:04:23.440 --> 0:04:26.360 Is what I've been writing about. It's a weird mechanism. 0:04:26.640 --> 0:04:26.960 Yeah. 0:04:27.000 --> 0:04:29.039 What you can do is you can buy a yes 0:04:29.160 --> 0:04:33.320 no contract that pays off a dollar if, like, you know, 0:04:33.440 --> 0:04:35.159 the price of some box of the Boo Boos is 0:04:35.200 --> 0:04:37.520 over one hundred and twenty dollars and it pays off 0:04:37.640 --> 0:04:39.200 zero dollars if the price of that box of the 0:04:39.279 --> 0:04:41.719 booos is less than one hundred you know, like you 0:04:41.760 --> 0:04:45.880 can turn any continuous variable into a binary. Right. You 0:04:45.880 --> 0:04:48.160 can say, if the price of Tesla is above four 0:04:48.240 --> 0:04:49.720 hundred dollars, then you get a dollar, and if it's 0:04:49.760 --> 0:04:51.200 below four hundred dollars, you don't get a dollar. 0:04:51.320 --> 0:04:51.480 Right. 0:04:52.120 --> 0:04:55.120 But it's not the most natural no product. 0:04:55.440 --> 0:04:58.120 It seems not fun, but that's. 0:04:56.880 --> 0:04:59.200 It's lot fun. But I don't know, it's like kind 0:04:59.200 --> 0:05:01.600 of interesting, right. I don't know the reason for this, 0:05:02.000 --> 0:05:05.160 but I speculated on some reasons, the simplest of which is, like, 0:05:05.480 --> 0:05:08.400 CALSHI is an event contract marketplace, right. I think that's 0:05:08.400 --> 0:05:11.000 what it does. It lets your bet on whether or 0:05:11.000 --> 0:05:14.800 not some event will happen. And if that's your lens, 0:05:15.200 --> 0:05:16.880 then like you could turn anything in the world into 0:05:16.880 --> 0:05:21.440 a yes no event, Right, And if you get money 0:05:20.520 --> 0:05:24.360 for trading, then you want to turn everything in the 0:05:24.360 --> 0:05:26.080 world into a yes no event. And so you sort 0:05:26.080 --> 0:05:28.400 of look around and say what products can we trade? 0:05:28.800 --> 0:05:31.960 And it's like, well sneakers, I was like, well sneakers 0:05:31.960 --> 0:05:34.159 are not really yes no events, but if you have to, 0:05:34.240 --> 0:05:36.000 you can make them into yes no events and you 0:05:36.040 --> 0:05:36.560 can trade them. 0:05:36.760 --> 0:05:39.640 You know, convolute the question in such a way that it 0:05:39.720 --> 0:05:41.160 becomes and it's not like. 0:05:41.120 --> 0:05:44.279 A crazy convolution, but it's like a little crazy it is. Yeah, 0:05:44.279 --> 0:05:46.400 it's a little crazy. Like I was looking at their charts, 0:05:46.400 --> 0:05:48.200 you know, and like they have like prices some sneaker 0:05:48.240 --> 0:05:50.520 and like there's a chart and the chart is like 0:05:50.880 --> 0:05:54.160 four different lines for the probabilities of different like price levels, 0:05:54.320 --> 0:05:56.800 because you want the chart to be just like the price. Right, 0:05:57.880 --> 0:06:00.400 there's an intuitive chart of a sneaker price, and they 0:06:00.440 --> 0:06:03.440 don't show that into ay, so it's a strange mechanism. 0:06:03.680 --> 0:06:05.960 Maybe this is just like a publicity stunt, but I've 0:06:06.040 --> 0:06:09.120 enjoyed writing about it because like one thing that is 0:06:09.160 --> 0:06:14.200 going on here is that there is a belief, possibly 0:06:14.240 --> 0:06:17.200 a money motivated belief among people like who are in 0:06:17.200 --> 0:06:19.760 prediction markets and who work at like big exchanges and 0:06:19.800 --> 0:06:22.359 who are partnering with prediction markets that this is like 0:06:22.400 --> 0:06:24.560 the path to be in everything exchange, which is like 0:06:24.600 --> 0:06:26.919 the term that coinbase has used, like this is the 0:06:26.960 --> 0:06:29.400 way that you can sort of suck everything in the 0:06:29.440 --> 0:06:34.200 world into financial markets. And one point I've been making 0:06:34.240 --> 0:06:36.120 this wee because it's like kind of a rickety way. 0:06:36.640 --> 0:06:38.279 Why does it have to be a prediction market like this? 0:06:38.680 --> 0:06:40.760 But it is something that people are pretty enthusiastic about, 0:06:40.839 --> 0:06:42.240 because at the end of the day, if you're running 0:06:42.279 --> 0:06:45.680 a financial market, like one big category of what you're 0:06:45.680 --> 0:06:49.200 doing is offering people more opportunities to bet, let's say, 0:06:49.240 --> 0:06:51.920 on more things. And this is the most general purpose 0:06:51.920 --> 0:06:53.960 way that people have found to let people bet on things. 0:06:54.120 --> 0:06:57.720 Yeah. I get the betting argument. People like to bet, and. 0:06:57.960 --> 0:06:59.159 I don't know why they would run a bet on 0:06:59.200 --> 0:06:59.880 like the yesterday. 0:07:00.160 --> 0:07:02.479 That's the thing. It has to be fun, right, and 0:07:02.560 --> 0:07:04.920 it doesn't seem as fun versus like I'm going to 0:07:04.960 --> 0:07:07.839 buy shares of a meme stock and hope it goes 0:07:07.920 --> 0:07:10.360 to the moon versus I'm going to hope the price 0:07:10.360 --> 0:07:12.320 of the box of the La Boo Boos goes above 0:07:12.400 --> 0:07:13.360 this certain threshold. 0:07:13.720 --> 0:07:15.800 Yeah. I do wonder if this is like a baby 0:07:15.800 --> 0:07:19.920 step on the way to some more moonworthy financial market. 0:07:20.160 --> 0:07:20.440 Yeah. 0:07:21.120 --> 0:07:23.120 One thing I've written is that the essential thing here 0:07:23.160 --> 0:07:24.920 is that these are contracts with someone on either side 0:07:24.960 --> 0:07:27.720 of them, right, Like you're betting against someone else, and 0:07:27.960 --> 0:07:30.080 if you have a contract that can go to a 0:07:30.120 --> 0:07:32.560 million dollars, then the person on the either side of 0:07:32.600 --> 0:07:34.680 that has to put up collateral and could have to 0:07:34.680 --> 0:07:36.880 put up a million dollars of collateral. Right, so you 0:07:36.920 --> 0:07:41.600 have like a really complicated and risky margining system if 0:07:41.640 --> 0:07:44.200 you're having bets that can go continuously as far as 0:07:44.240 --> 0:07:48.280 you want in either direction. Yeah, Whereas like traditional prediction markets, 0:07:48.280 --> 0:07:50.120 the bets are like you get a dollar or you 0:07:50.160 --> 0:07:52.560 don't get a dollar. So the collateral and the margining 0:07:52.600 --> 0:07:54.680 is a lot easier and the risk is a lot lower. 0:07:54.880 --> 0:07:58.160 So these are like not super risky exchanges. The exchange 0:07:58.160 --> 0:08:02.239 itself not a particular riskue proposition as compared to oh, say, 0:08:02.520 --> 0:08:06.560 certain crypto exchanges we've talked about. And so going from 0:08:06.560 --> 0:08:08.600 that system to a system where the price can be 0:08:08.640 --> 0:08:10.600 whatever the price is is like a you know, risky 0:08:10.600 --> 0:08:14.160 and complicated set of decisions, but possibly something that is 0:08:14.200 --> 0:08:16.400 in the future if you want to be at everything exchange. 0:08:16.520 --> 0:08:21.160 Yeah, I do wonder how this can be manipulated this, right, 0:08:21.560 --> 0:08:23.200 I mean events, contracts on. 0:08:24.160 --> 0:08:27.760 You know. The answer I think is very clearly that 0:08:27.840 --> 0:08:31.960 it can't be because go on, who is trading this. 0:08:32.240 --> 0:08:34.760 The way to the way to manipulate this is like 0:08:34.960 --> 0:08:37.480 there's a contract on like the average price of some sneaker, 0:08:37.760 --> 0:08:39.360 and I go and buy a bunch of the sneaker 0:08:39.640 --> 0:08:41.720 to push out the average price, right, and then I 0:08:41.760 --> 0:08:46.440 win on my prediction market contract. But I assume that 0:08:46.840 --> 0:08:49.280 however big the market for the sneaker is, it's probably 0:08:49.280 --> 0:08:52.600 not that big like treasury bounds. However the market for 0:08:52.640 --> 0:08:56.880 the sneaker is, presumably the prediction market is like orders 0:08:56.880 --> 0:09:00.960 of magnitude smaller, because like, some people buy sneakers because 0:09:01.000 --> 0:09:03.840 they want to wear the sneakers weird, But like, how 0:09:03.840 --> 0:09:05.840 many people are going to want to buy the contract 0:09:05.880 --> 0:09:07.880 that's like, oh, for the sneaker, price will be about 0:09:07.880 --> 0:09:10.560 one hundred and twenty dollars. So I think that it's 0:09:10.559 --> 0:09:13.040 going to be very hard to manipulate because it is, 0:09:14.080 --> 0:09:17.000 at this point, two days in or whatever, a very 0:09:17.040 --> 0:09:20.320 small derivative on top of a yeah, moderately larger market. 0:09:20.679 --> 0:09:22.280 But in the long run, sure, Like you know, you 0:09:22.280 --> 0:09:24.559 have an event contract that is a binary, right, it 0:09:24.600 --> 0:09:29.640 pays zero or one, and it's on some underlying thing. 0:09:30.040 --> 0:09:32.680 And the event contract gets big enough and it's like 0:09:32.800 --> 0:09:35.360 trading a penny below the threshold, You'll buy some of 0:09:35.360 --> 0:09:37.240 the underlying thing to push it up about the threshold, 0:09:37.240 --> 0:09:38.840 and you make a lot of money on the contract. 0:09:39.160 --> 0:09:42.800 It's like very easy to manipulate in concept. It's probably 0:09:43.040 --> 0:09:45.840 very hard to manipulate right now in reality, but like, 0:09:45.920 --> 0:09:47.679 you know, give it time, get more things. 0:09:47.920 --> 0:09:49.400 I get it sea legs first. 0:09:49.640 --> 0:09:50.800 And the other thing is, you know, I think about 0:09:50.800 --> 0:09:54.120 this all the time. Like the CFTC, the US Commodity's 0:09:54.120 --> 0:09:58.280 Futures Trading Commission, regulates commodities futures. It doesn't like really 0:09:58.360 --> 0:10:02.120 regulate the market for wheat, you know, but it does regulate, like, 0:10:02.160 --> 0:10:04.280 you can't manipulate the wheat market if it's going to 0:10:04.320 --> 0:10:06.640 affect commodity futures. So the CFTC has some like anti 0:10:06.720 --> 0:10:12.040 manipulation powers. And if you put everything onto prediction markets, 0:10:12.240 --> 0:10:16.120 then everything becomes a commodity. And like the CFTC has 0:10:16.160 --> 0:10:18.480 to think about like were you buying those sneakers to 0:10:18.520 --> 0:10:20.560 push out the price of sneaker futures? 0:10:20.600 --> 0:10:23.840 And then it's like, yeah, it's going to be interesting 0:10:23.880 --> 0:10:28.680 to see how just the prediction market space matures, because 0:10:29.080 --> 0:10:31.760 this I think is firmly silly season and I think 0:10:32.000 --> 0:10:33.200 we can put it in that bucket. 0:10:33.280 --> 0:10:35.640 Yeah. I think there are two paths for it maturing. 0:10:35.800 --> 0:10:36.000 Yeah. 0:10:36.040 --> 0:10:38.080 One is like what everyone says, which is like it's 0:10:38.120 --> 0:10:40.079 somehow like becomes a market for everything, and it's like 0:10:40.160 --> 0:10:44.240 becomes like the way that companies and like real people 0:10:44.240 --> 0:10:47.200 think about having risk and like predicting the future and 0:10:47.240 --> 0:10:51.480 like understanding probabilities and potentialities to the future. And then 0:10:51.480 --> 0:10:54.360 the other way is it's like a giant legalized sports book, right, yeah, 0:10:54.400 --> 0:10:56.760 and that's kind of where my money is. But who knows, 0:10:56.800 --> 0:10:57.200 who knows? 0:10:57.280 --> 0:11:00.280 Well, I was speaking to the CEO of CBO sure 0:11:00.360 --> 0:11:00.840 last week. 0:11:00.960 --> 0:11:04.040 Probably not in the legal live sports book. 0:11:04.440 --> 0:11:09.120 No, no, So Cibo doesn't have their own prediction markets 0:11:09.120 --> 0:11:12.520 outfit yet, but they're going to roll something twenty five minutes. Well, 0:11:12.520 --> 0:11:14.320 they're going to roll it out in the next few months, 0:11:14.679 --> 0:11:16.640 which is interesting because there's kind of a land grab 0:11:16.679 --> 0:11:18.400 going on right now. I have to imagine that the 0:11:18.440 --> 0:11:22.480 exchanges think about this all the time. They should've been. 0:11:22.440 --> 0:11:25.480 During commodity futures for years, and now it's like it 0:11:25.520 --> 0:11:27.520 turns out they were running a sports book and they 0:11:27.520 --> 0:11:27.960 didn't know it. 0:11:28.040 --> 0:11:32.960 Right. No sports, Cibo specifically is not going into sports 0:11:33.040 --> 0:11:37.679 at least, that's that's what the CEO said mid November 0:11:37.760 --> 0:11:41.280 twenty five. So we have the receipts and like that. 0:11:41.240 --> 0:11:44.840 Makes sense because like if you're like Calshier polymarket and 0:11:44.880 --> 0:11:48.000 you're like a little hobbyist prediction site. And then like 0:11:48.080 --> 0:11:50.360 sports is it's like enormous gusher of money. And then you 0:11:50.480 --> 0:11:53.080 go into sports right if you're seabow, like you know, 0:11:53.360 --> 0:11:57.520 if you have like treasury, Yeah, like you know, there's 0:11:57.520 --> 0:12:00.200 like more money in sports books than there is is 0:12:00.240 --> 0:12:02.920 in like traditional prediction markets. There's more money in real 0:12:02.960 --> 0:12:04.760 financial markets than there's in sports books. 0:12:04.840 --> 0:12:11.040 Yeah, exactly. So they're focusing on economic and financial prediction 0:12:11.160 --> 0:12:13.720 markets for the next forty five minutes. 0:12:14.400 --> 0:12:16.440 Synergies there with interest rates and whatnot. 0:12:16.600 --> 0:12:37.560 Yeah, for sure. Booze from La Boo boos to owls, 0:12:37.800 --> 0:12:40.760 owls the blue cones. One interesting week. 0:12:41.280 --> 0:12:45.000 We've said of this before, but like you yes, your 0:12:45.000 --> 0:12:48.400 first love besides your horse is ETFs. You love an ETF. 0:12:48.880 --> 0:12:51.120 So we've talked about private credit. We've talked a lot 0:12:51.160 --> 0:12:55.760 about retel private credit and like ETFs for private credit, 0:12:55.800 --> 0:12:58.240 which is like a category that kind of sort of. 0:12:58.160 --> 0:13:00.240 Exists, trying to make it make trying to make it thing. 0:13:00.679 --> 0:13:02.920 And whenever we talk about that, I always say, there 0:13:03.040 --> 0:13:07.600 is a retail exchange traded fund category for private credit, 0:13:07.720 --> 0:13:11.240 and it is called a BDC or business development company, 0:13:11.200 --> 0:13:13.440 which is a terrible name because it makes it sound 0:13:13.520 --> 0:13:15.880 like it's a business development company, and that is not 0:13:15.920 --> 0:13:17.840 what it is. I don't know what a business development 0:13:17.880 --> 0:13:19.439 company would be, but it sounds like a company that 0:13:19.480 --> 0:13:22.640 develops businesses, right, But in fact, a BDC is just 0:13:22.720 --> 0:13:25.640 a private credit fund. It's just a pot into which 0:13:26.200 --> 0:13:30.360 a manager like Blue Owl puts private credit investments. 0:13:30.600 --> 0:13:31.720 And it's publicly traded. 0:13:31.760 --> 0:13:34.560 It's totally traded, and so investors can buy shares a 0:13:34.600 --> 0:13:38.920 traded BDC. Not all some are like private like not traded, yes, 0:13:39.040 --> 0:13:41.760 but like a listed BDC is just a stock on 0:13:41.800 --> 0:13:45.000 the stock market. You can buy shares. Anyone can buy shares. 0:13:45.200 --> 0:13:47.240 You can sell shares in the market. It's a little 0:13:47.240 --> 0:13:50.840 bit like you need tof with one really important distinction. 0:13:51.120 --> 0:13:51.480 Go on. 0:13:51.840 --> 0:13:55.040 You can't redeem like you can sell your shares in 0:13:55.080 --> 0:13:57.240 the market. And so what that means is that the 0:13:57.320 --> 0:13:59.040 price of the shares is the price of the shares. 0:13:59.040 --> 0:14:01.079 There's no mechanism to make sure that the price of 0:14:01.080 --> 0:14:03.880 the shares is in line with NAV, whereas like an ETF, 0:14:03.960 --> 0:14:06.600 like you know, if like the shares are trading below NAV, 0:14:06.760 --> 0:14:09.199 then like you buy some shares and you pop them 0:14:09.200 --> 0:14:10.880 out of you know, pop the assets out of the fund, 0:14:10.880 --> 0:14:12.280 and you get stuff at a Navy. 0:14:12.200 --> 0:14:13.920 In authorized participant. 0:14:15.200 --> 0:14:15.520 Whatever. 0:14:15.920 --> 0:14:21.720 With BDC's that's not necessarily the case, and it's therefore 0:14:21.800 --> 0:14:24.320 not actually the case for whatever reason. 0:14:24.960 --> 0:14:28.480 And I feel like we got another lesson in that 0:14:28.560 --> 0:14:31.280 this week with Blue Owl having to call off the 0:14:31.320 --> 0:14:34.800 merger between one of its publicly listed BDCs and then 0:14:35.040 --> 0:14:35.840 a private fund. 0:14:36.040 --> 0:14:36.320 Yeah. 0:14:36.360 --> 0:14:39.280 So it has a thing called OBDC, which is like 0:14:39.320 --> 0:14:42.760 the Blue Al Business Development Company, which is a publicly 0:14:42.800 --> 0:14:46.200 traded PDC, and it has a thing called OBDC two, 0:14:46.400 --> 0:14:50.000 which is a private BDC. So private BDC is like 0:14:50.400 --> 0:14:53.760 they sell it to you know, investors. It doesn't trade 0:14:53.800 --> 0:14:56.520 on the market. And so if you're an investor in 0:14:56.560 --> 0:14:59.640 OBDC two, the private one, you can't get your money 0:14:59.640 --> 0:15:01.240 back by just selling on the stock market. And so 0:15:01.280 --> 0:15:03.280 the way it works is that they have a redemption 0:15:03.360 --> 0:15:06.040 mechanism where like every quarter they'll buy up to a 0:15:06.040 --> 0:15:08.080 certain amount of the shares back if you want to, right, 0:15:08.160 --> 0:15:10.440 so they'll offer to buy shares back and you can 0:15:10.480 --> 0:15:16.400 tender or not. And in recent months there's been a 0:15:16.440 --> 0:15:19.880 little tension. Yes, they have bought back anyone's shares who's 0:15:19.960 --> 0:15:23.080 wanted to sell. But there's like been a little bit 0:15:23.120 --> 0:15:25.400 more redemptions than they'd like, and there's like, you know, 0:15:25.840 --> 0:15:28.440 a widespread sense that if it continued at that pace, 0:15:28.480 --> 0:15:31.600 they would eventually get redemptions speak, which they're allowed to do, right, Like, 0:15:32.120 --> 0:15:33.760 they can sort of buy back as much as they want. 0:15:34.240 --> 0:15:38.000 And so to get out ahead of that, they announced 0:15:38.040 --> 0:15:40.320 that they were going to merge these two funds. So 0:15:40.720 --> 0:15:43.960 if you had shares of ABC two, the private company, 0:15:44.400 --> 0:15:47.680 you'd get shares of OBDC, the public company, and then 0:15:47.720 --> 0:15:49.960 you could sell those whenever you wanted, no problem, you 0:15:50.000 --> 0:15:55.359 don't have to redeem anymore. And that caused some unhappiness 0:15:55.600 --> 0:16:00.360 because OBDC won the publicly traded one happens to traded 0:16:00.360 --> 0:16:02.880 a about a twenty percent discount and net asset value, 0:16:03.080 --> 0:16:05.280 and so instead of being able to get back one 0:16:05.320 --> 0:16:06.720 hundred cents on the dollar, you can get back eighty 0:16:06.760 --> 0:16:08.640 cents on the dollar if you sell your public shares. 0:16:08.760 --> 0:16:11.280 No one wanted that, Yeah, so they ultimately called off 0:16:11.280 --> 0:16:11.680 the merger. 0:16:11.920 --> 0:16:14.920 Yeah. Specifically, when it comes to redemptions. In the third quarter, 0:16:15.400 --> 0:16:18.800 they approved about sixty million dollars worth that was already 0:16:18.840 --> 0:16:23.160 exceeding their pre set limit. Here the discount they've been 0:16:23.160 --> 0:16:25.680 trying to address that, they've been doing, you know, a 0:16:25.720 --> 0:16:28.400 bunch of share repurchases. They have a two hundred million 0:16:28.440 --> 0:16:31.280 dollar program. But I could see how that would cause 0:16:31.360 --> 0:16:37.120 some indigestion. Yeah, yeah, right, yeah, So now they're evaluating 0:16:37.160 --> 0:16:37.800 how to go forward. 0:16:37.880 --> 0:16:41.400 Yeah, it's hard because like the publicly traded product seems 0:16:41.520 --> 0:16:45.760 kind of like a better product for the manager and 0:16:45.960 --> 0:16:49.840 getting people out of the private product into the public product. 0:16:49.880 --> 0:16:54.040 The public product, for the manager's perspective is permanent capital, right, 0:16:54.080 --> 0:16:56.080 Like they never have to redeem any of it. Yeah, 0:16:56.080 --> 0:16:58.440 they can if they want to, and they have been right, 0:16:58.520 --> 0:17:01.320 they've been doing buybacks, which you can think of a 0:17:01.320 --> 0:17:04.720 buyback as like a way to address the discount and 0:17:04.800 --> 0:17:06.840 make shareholders happy, or you can think of it as 0:17:06.880 --> 0:17:09.920 like just an opportunistic trade where like they can buy 0:17:10.520 --> 0:17:12.440 one hundred cents worth of stuff at eighty cents on 0:17:12.480 --> 0:17:17.159 the dollar. Right. But with the private company, it's like 0:17:17.680 --> 0:17:19.920 people complaining when they don't get liquidity. You have asking 0:17:19.920 --> 0:17:21.479 for liquidity, so you have to pay up money when 0:17:21.480 --> 0:17:23.880 you don't necessarily want to. It's a less good product, 0:17:24.440 --> 0:17:26.879 but it is hard. To get people out when the 0:17:26.880 --> 0:17:30.119 public product trades at a discount. Yeah, The other question 0:17:30.200 --> 0:17:33.200 that one might ask is why does the public product 0:17:33.240 --> 0:17:37.159 trade at a discount? And some of the answer for 0:17:37.200 --> 0:17:40.240 that is, like everything trades at a discount, like clothes 0:17:40.280 --> 0:17:42.360 on funds trading at a discount, and like the traditional 0:17:42.400 --> 0:17:46.960 reason for that is, like you capitalize future fees in 0:17:47.000 --> 0:17:49.200 the discount, and so like you know, yeah, you'd rather 0:17:49.240 --> 0:17:51.240 own one hundred cents worth of loans than one hundred 0:17:51.280 --> 0:17:53.040 cents of worth of loans plus like the fees you 0:17:53.080 --> 0:17:55.119 have to pay Blue Howel for the rest of time, 0:17:55.800 --> 0:17:59.080 but in November of twenty twenty five. The other reason 0:17:59.080 --> 0:18:01.239 that there might be a discount is that there are 0:18:01.280 --> 0:18:03.879 some people who believe you may not believe this, for 0:18:04.040 --> 0:18:07.320 some people who believe that some private credit loans aren't 0:18:07.359 --> 0:18:10.040 worth as much as private credit managers think they're. 0:18:10.160 --> 0:18:12.880 Yeah, that seems to be a more and more pervasive view. 0:18:13.160 --> 0:18:17.400 It's a you you Jamie Diamond said some word about cockroaches, et. 0:18:17.359 --> 0:18:19.840 Cetera, et cetera, and so Jeffrey Gunlock. 0:18:20.480 --> 0:18:25.040 Everyone not everyone. I shouldn't say that. Mark Lipschels, Yeah, 0:18:25.040 --> 0:18:27.359 this is not like necessarily correct, but it is a 0:18:27.440 --> 0:18:29.720 you that people have. And so one reason that a 0:18:29.760 --> 0:18:33.000 publicly traded pot of private credit loans might trade at 0:18:33.000 --> 0:18:34.879 eighty cents on the dollar is that some of the 0:18:34.920 --> 0:18:37.199 people trading it don't really believe that the pot of 0:18:37.520 --> 0:18:40.120 loans is worth the dollar. Yeah, and so if that's 0:18:40.160 --> 0:18:42.959 the case, then, like one, this merger is awkward. But too, 0:18:43.119 --> 0:18:46.960 the awkwardness around this merger calls awkward attention to people's 0:18:46.960 --> 0:18:47.960 worries about valuation. 0:18:48.160 --> 0:18:50.080 Yeah, I mean you can also see this just in 0:18:50.160 --> 0:18:54.680 shares of blue Owl Proper, which are down like forty 0:18:55.000 --> 0:18:57.520 something percent this year. They're at their lowest since twenty 0:18:57.560 --> 0:19:00.600 twenty three. A lot of that decline happened before we 0:19:00.680 --> 0:19:02.679 got into any drama with the fund merger. 0:19:02.840 --> 0:19:05.520 Yeah, it's like a little you know, blue Owl as 0:19:05.560 --> 0:19:08.440 a management company, Right, you don't get a pure sense 0:19:08.440 --> 0:19:11.199 of like the valuation of the portfolio, but. 0:19:11.280 --> 0:19:13.159 People viewed as approximy I understand. 0:19:13.240 --> 0:19:16.199 Right, the price of blue Owl shares tells you something 0:19:16.240 --> 0:19:21.399 about what people think about the future cash flows of 0:19:21.440 --> 0:19:24.920 the private credit business. The price of OBDC shares tells 0:19:24.960 --> 0:19:26.879 you what people think about what the current loans are 0:19:26.880 --> 0:19:30.760 currently worth. Right, And like there's slightly different. 0:19:30.560 --> 0:19:32.560