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All right, Matt Pye, Wow, you're back.
Hello, Hello, and welcome to the same recording session.
I like it when we spend time.
Yeah. Yeah, it was impressed the first time. Now it's like, oh, yes, we're recording two money stuffs for two separate reads. It was not even impressed the first time.
No.
Right, other people have also recorded more than one thing at a time.
Yeah.
I guess you know the fact that we're so charmed by this, or at least I am.
You're like a professional, you know, recorder of media. I guess you only do lived.
I know that's the thing I'm used to. The light is red and my heart is racing.
But this is very chilling, right me me still an amateur at all all recorded media.
Let's do this in twenty minutes.
Oh wow, Hey, I don't know about that. Hello, and welcome to the Money Stuff Podcast, your weekly podcast where were talking about stuff related to money. I'm Matt Levine and I wrote the Money Stuff column for.
Bloomberg Opinion, and I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television, and today is mail bag. You didn't sing.
No, I didn't sing. Come, I cued you to sing it. That's all we need.
That's true. I took it. Okay, so let's get right into it.
Yeah, mail bag, nail bag from Josh.
I saw this tweet about securities law. As to DoorDash, a blooming onion from outback steakhouse, you pay a fixed price now and receive it later. It is therefore a futures contract and thus illegal under the onion future side question our DoorDash orders a futures contract and therefore subject to securities law? This question? Okay, So, first of all,
onion futures are not securities. They're commodities. But famously, basically every commodity can be traded on a futures exchange, including things that are not commodities like interest rates and sports bets. But the only things that cannot be traded on futures exchanges are motion picture receipts.
Oh.
Yes, part of the Onion Futures Act add onions. Onion futures cannot be traded because there's like a famous story in like the fifties of someone cornering the market for onions, and like Congress got so mad that they banned trading of onion futures. So if you doored ash a blooming onion, have you violated that that law? Okay, this is a great question because the difference between future and spot is
actually quite legally meaningful and quite vague. The answer is no. So if you order an onion now and it arrives in an hour, that is not a futures contract. That's a spot delivery. You have just ordered an onion on the spot market. Interesting, but there's no clear distinction between spot and features. It seems like, you know, the CFTC says is that a spot conduct is one that is
intended to be physically settled within a few days. So if you order an onion now to be delivered, you know, you like order from a grocery store and like it's going to be delivered to you in three days, it's probably hard.
Yeah, yeah, right.
If you're like set up an instagrat order for like next week, it's probably one. There's a retail provision in the in the commodities that uses twenty eight days as a dividing line, which is sometimes used as a rule of thumb.
That's really interesting because I feel like from Amazon, you can subscribe to onions and you can interesting, Yeah, you can get onions delivered to you on a schedule.
Interesting.
I think that you can do that with cat food.
This is definitely not legaland and I think probably nobody's going to enforce that. I don't think I trut that as a futures conduct. That feels very spot. But you're right. It's one reason it feels very spot is because I believe that Amazon will well, you know, if like the price is changed, they'll change the price. Like I think that they they don't lock in if you do a subscribe and save, you don't lock in the price for it until the end of time.
Interesting.
So like it's essentially a new series of spot contracts.
Everything I've never actually done. Subscribe and save, I order never never for an onion or yeah, yeah, that'd be interesting, and then engineer the onion market so that price has changed dramatically.
So I think about this a lot because in stocks it's actually it's the other way around. Like there is a very legally sensitive thing in stock trading, which is naked short selling. If you promise me that you will deliver me Tesla shares, I promise tomorrow, and you don't have the Tesla shares, or you don't like have reasonable basis to believe that you can borrow those Tesla shares, you have committed a naked short selling, and people get
really really mad about that. But if you promise to deliver me Tesla shares in a year, you do not have to borrow the shares. That's a future or a forward contract, and that doesn't count. And this is extremely not legal advice. But no one knows what the dividing line between a like spot sale and a future sale of stock is. But again, it's like it's in the like I think I used to use a rule of
thumb of ten days. It's something like that. It's like, if you say you're gonna deliver me tell the stock tomorrow or in a week, that's probably a spot sale and you need to have a low kate to borrow the stock, or else you're committing naked short selling and you're in trouble. But if you say two weeks or a month or a year, then it's a forward contract and it's legal. So it's the opposite like an onion's a forward contract is illegal and stocks naked spot contract is illegal.
We spent seven minutes on this question.
Okay, you're really you're really going to hold me to twenty minutes of this episode? All right?
Mail mail bag from Daniel.
Why don't the underwriters for IPA seem to factor in retail menia? It seems like something you could do as an underwriter is have an analyst through the due diligence, spend thousands of hours in Excel cunching the numbers, get a fair valuation for the stock, and then when you have the final number, the managing product can just multiply it by two because a bunch of retail traders will buy it anyway. But they don't seem to do that,
even though it seems like it would make sense. Also, who gets fired when a company trades on its first day at two hundred percent above the IPO press and who gets to retire and buy a yacht? So this is about Figma.
I think yes, I was about to bring up Figma, because that's exactly what happens.
Right. So Figma, by the time this areas will have done an IPO about two weeks ago. But Figma did an IPO where it's sold stock at thirty three dollars a share and like it bounced to like one hundred and twelve or something in the firstance. And every time that happens, people and make people, I mean Bill Gurley specifically go on Twitter to complain about IPO Pops and how the company left money on the table, right, And people who work in capital markets and people who work
at Figma do not think that way. Right, Like Figma and it's venture capitalists, we're very happy to leave money on the table.
Yeah, talk more because this is inevitably going to happen again.
It's happened for decades. Yeah, people who have Bill Curley is complained about for decades. It's it's just like so from Figma's perspective, they are a company with a shareholder base, and they're shifting their shareholder base quite dramatically, right, They're going from these venture capitalists who own them in the private markets to public investors who own them in the
public markets. And if your pigmacy you have a relationship with your investors, I'm getting a whole new set of investors. I want a relationship with them. I want good investors. I want investors who I think are in it for the long term and will be supportive of me, and will be like good advisors and will be you know, not flighty, and not get mad at me if like the stock goes down one day, and who believe in
my long term vision? And so you go out and meet with a bunch of investors and there's some that you like, and then they say, I'll buy the stock at this price. You know, okay, great, here have a lot of the stock. And then some other people at like Citadel will buy it at a higher price. And I don't want those guys. I don't want the long
term guys. And so you pick and like the Bloomberg had in this, like there were specific long term investors they wanted in the stock, and if they raised the price, they could easily get the deal done, but they would lose those people. And they're like, no, I'd rather have those people and the stock they're selling in this deal
just doesn't matter in the long term. What matters in the long term is like their long term relationship with their investor base and with the capital markets, and giving everyone a pop on the first day makes investors love you, and so it's just better for like the long term business and similarly, you know, speaking about it was the company sold some stock and then sheraldon you know, the venture capitalists and like executives sold some stock and those
people you know did fine, like they made money, and then the rest of their stock because they didn't sell all their stock, The rest of their stock is now worth a lot because the stock traded up, and having the stock trade up makes it easier for them to sell stock in the future, and they're happy with that.
This is why you know, everyone is happy with an IPO pot because like they didn't need that money that much, right, Like, yeah, the amount of money they left on the table is not that important compared to like setting up the long term relationship. That's like the short answer to like the who gets fired question, the answer, no one gets fired.
And particularly like what would be bad is if the bankers and this does happen, honestly, if the bankers went to Figma and we're like, you cannot price as a penny above thirty three. The book is really weak right here, and we don't think it'll trade well at thirty three, and Figmas like, we really wanted thirty five. But if you insist, and then it traded up to one hundred and twelve, Like the bankers look really stupid. That's what
happened here. Like what happened here is they're like we're forty times covered, like there's a ton of demand, but these investors will be out above thirty three and figumas, Like I'd rather have those investors like they were fully informed here, reasonably, fully important. The other thing I want talking about is Daniel's original question is why don't they factor in retail mania? They do, but it is an
interesting question. Like my impression is that when I was an ECM banker, you know, a decade ago, retail was a pretty small part of the experience of doing an IPO, and you thought of institutions as price letters. And then you get like you expected a little bump from retail because like the day after the deal prices, all the retail people who couldn't get into the dealer will want to buy, and so they'll be like a nice lift there.
But it's not. It's not a mania. And now I think e CM bankers equity couple of markets bankers are having to figure out how to think about meme stocks and retail mania. Yeah, it's not so much in the IPO business. It's in the like going to companies that might be meme stocks and saying you should really haven't at the market stock offering setup, because if if a meme hits, you want to be able to sell us
talking to it. And so I've talked to ESM bankers and like there are thinking about how to capitalize on retail insanity. It's not natural to them, like they you know, they spend all day talking to big institutional managers and to then also lurk on Reddit boards is a bit of a shift.
It's funny, but that's just a fact of life. Now.
Yeah, I haven't noticed, so they aren't thinking about it. It's just like it's a mentality shift.
Yeah, mail mail bag, I really like this question from Tony.
Okay, yeah, me too.
Okay, I'm going to try to read it.
Do it.
If bitcoin treasury companies are priced irrationally as alternatives to ETFs, does that suggest a publicly traded company with a treasury strategy. It's a good alternative for alternatives that don't easily fit into an ETF. Fine art treasury company, diamonds and gems treasury company. Not actually Onion's futures treasury company, et cetera. This is a really interesting idea.
So there is a gold treasure company. You wrote about it. It's called biosig because it's like a biotech company that you know, they got bored of being a aotech company and they're like, we're gonna.
Buy a lot of gold, yeah, which is not the trade that a lot of people are making. I feel like biotech is more interesting than gold.
But anyway, they're not like pivoting to being a gold miner. They're just buying a lot of gold and they're a treasury company. So yes, it's like an ETF. And right, the thought process that Tony had is the thought process that a lot of CEO's of small biotech companies have had, which is that if you're a bitcoin treasury company, your stock trades that two times give or take, you're a NAV yeah, and that's much better than being an ETF, where you trade pretty rigorously at one time you're an AV.
And so every crypto person has started a crypto treasury company because you can, you know, double the value of your crypto. And then people look around they're like what else can we do that too? And gold seems to be part of the answer. This company, it's like the fundraise is weird, so it's hard to tell what their premium is, but they do seem to be trading at a premium to the value of the gold.
Yeah, didn't games Stop by diamond like some sort of miners.
Oh no, no, amc about a gold mine. But that was that was long before the treasury company.
That was something that was just.
The comedy thing. But no, actually some company bought Game Stop. Stock is a treasury right, which you can't really Stock is one thing you can't really do because if you're one hundred percent of stock treasury company, you're an investment company. And this doesn't work. Yeah, but Tony is right that, like bio saying, is zones gold but it like wants to be a commodity treasury company. But like other the
world is your oyster. Anything that you can think of that you want to be a treasury company of, you can try it.
This is so exciting, right, So there's two.
Problems with it, maybe one of the two problems. One problem is you have to sell it to retail, right, like crypto, this is like a known playbook and it's kind of a little thin, right, Everyone says the same things, like we're gonna, you know, do investor education and like modernize the payment system, and like eventually people stop believing it,
and so like the premium and crypto is like slowly eroding. Yeah, but you have to tell a new story with a new thing, and gold is like a crypto adjacent story.
Right, I'm not excited about gold.
No, I understand, but you're not excited about bitcoin. Try companies necessarily.
Either, maybe, well, but I'm more excited by the idea of you could have a treasury company for fine art for example.
Right, So you need a story and the story needs to appeal to a lot of people, and those people ideally or like retail weirdos on Reddit, but like there's a lot of stories you can tell, yeah on or it's a great.
Song dinosaur bones, dinosaur bones.
The other thing you need to do, Like a treasury company is not really about the thing crypto or gold or fine art or whatever. What a treasury company is. What micro strategy is is a company that has stock that trades above it's net asset value, and it sells stock and above the net asset value, and it buys more assets and it's just a flywheel. I read some
paper that called it a creative dilution. The more stock you sell, the more value you create for your shareholders, because like you're selling stock for two hundred dollars and then buying two undred dollars s worth of stuff than your stock has gone up by four hundred dollars. That's a great trade. Yeah, it has nothing to do with the underlying thing. It has to do with the amount of high you can get and then like with investors
buying into that you know, repeated process. So if you can do that, like that's the first step is can you get people to pay one hundred percent premium to an asset value? If you can, anything you buy, it's going to be a good strategy. It's going to work, right, Like, it's going to be a good trade for shareolders. But that relies on you know, the original shareholders buying for two times an av Yeah, and the question is can
you sell that story? And I do think that Tony is right that you can sell that story for things other than crypto. I think gold seems to kind of work. I think so m should definitely do a Diamond's one fine art whatever. But like onions, probably not, but like I don't know, probably not.
On onions. I am excited because you can put gold in an ETF. You can also put crypt.
You can't sell it at two percent of NAV.
I know that's really important. No, I want to see them put an asset that you can't put into an ETF into a treasury company such as fine.
Art, but I think the private credit treasure company.
There you go, mail bag, mail bag Duncan.
Duncan has a multiple part aer here. No it's not, it's got two parts.
Well, why aren't there formalized hedging markets for sports outcomes? I must imagine there are chains of bars and restaurants concentrated in areas associated with sports venues. Those locations position them to benefit from additional home games incremental spending associated with large victories, but only in positive outcomes. Bars around Wrigleyfield in Chicago be interested in hedging the risk associated with potentially ten plus more home outings in a season
if they make the playoffs. So this is a question. This comes up a lot weirdly, like there are now, as I mentioned, futures exchanges where you can trade futures on things like will the Cubs win tonight, and in the ordinary course you would say, oh, yes, that's sports gambling, but it's very important to a lot of people, including it Robinhood and also Calshie and also other prediction markets. It's very important to a lot of people to say no, no, no,
that's not sports gampling. That's a futures market. And what makes a thing a futures market rather than a sports book. Part of the answer is, like in theory, in a futures market, you are trading or betting against other participants
in the market rather than against the book. This is not actually important like actual sports books, like you can have a sports book website where like the people taking the other side of the bet are market makers, and like on a futures exchange, the people taking the other side of the bet are probably market makers. So it's not as different as it seems. Like technically, yeah, if you go to a sports book, you're betting against the sports book. If you're going to a futures exchange, you're
betting against other participants in the futures exchange. But the other thing that makes it different is there's this sense that futures exchanges offer like some sort of real economic benefit other than gambling. And when you think about sports futures, like, what is that benefit, Well, hedging is the best answer.
And so you will regularly see people say, oh, yeah, of course we should have a sports prediction market on a regulated futures exchange because bars near Wrigley Field needs to heads to the risk of not making the playoffs and you know, not having ten more home games to
sell beer at. And this always struck me as absurd, but it is true that, like, you know, there's like some tiny marginal hedging benefit, and that tiny marginal hedging benefit, theoretical hedging benefit is the wedge that people use to
justify futures markets as sports scambling platforms. I once hurt, like I won't start to a person at who works in the sports features business who said, well, you know, there's like big brands that sign multimillion dollar marketing deals with you know, tennis stars, and like their performance in tennis tournaments is economically material to like Nike or whatever, so they should be able to hedge that in the
sports futures market, right, So sure, why not? So that's why that's why this is all happening, right, Like the reason that there are increasingly legal and popular sports futures exchange is because they can be like, no, it's not gambling, it's for bars to hedge.
Yeah, totally innocent. Great question. Duncan mail Bag nail Bag Leo also has a question, and his question is that I just opened a no penalty CD at my bank and I'm trying to figure out how this product makes any sense for the bank. The terms are basically that it's about twenty five basis points higher interest than their high yield savings with a fixed rate, and your money is locked up for the first week and after that you can withdraw all your money, including to date earned interest,
at any time. But you have to take out all your money at once. How is this a higher yield product than a.
Savings Yeah, okay, this is like all of retail finance. Yeah, is like this, this is credit card rewards and everything. Right, this is the business of a bank. Is like monetizing depositor inattention. We talked about, I think on the podcast
the CFPB case against Teple. Right, so Capital One they offered this highild saving account called three sixty Savings and it had a high yield and people put their money into it, and then after a while they started lowering the yield, or I guess they lowered the yield one like rates cent to zero and they just didn't bring
it back up. And instead of what they did is they launched a knew high yeld saving the account called three sixty Performance Savings that did have a high yield, and so they could advertise the high yield on the new account to new customers and bring in new customers with competitive rates. But the old customers, who didn't notice that they were getting low rates, just continued to get low rates. Yes, you just do this forever you get in trouble, although not anymore. They were briefly in trouble,
but then they weren't. But this is everything, right the point of you know, Leo was asking about a no penalty CD where he basically gets a higher rate than a savings account, but his money isn't actually locked up like traditionally a CD your money is locked up for three months or six months or whatever. Right then this is one where your money is not locked up, so it's really like a savings account, but it has a
higher yield than your saving account. The reason they're offering that is because they are hoping that you will think of it as a CD and you will forget and you won't take your money out even if rates go up, and so they will get the advantage of paying you a lower rate and it will feel to them like a CD, and they will get the sort of like financial benefits of a CD. And if you are ruthlessly attentive and value maximizing, you will get some profit out of this at the expense of the bank. But the
bank is playing a statistical game. They figure most of their clients will not do that, and so they will make money on it. Yeah, it's also probably a rates bet, like they're probably just betting that rates will go down and so it won't cost them anything, right, Like it's like a ya, they're making a directional bet. But the main thing is just like they expect people not to.
Maximize it paying attention.
Leoh, and this is like everything. The credit card rewards are like the classic case where every credit card product has really high rewards on some category of spending. And if you are a ruthless maximizer and there are people
there are four am where people do this. Right, if you're a ruthless maximizer, you will use your gas credit card only to buy gas, and you'll use your dining credit card only to pay for meals, and you'll use your travel credit or only for travel, and you'll get a very high rate of cash back on all of your purchases, and you will cost each of your credit card issuers money. But almost no one is like that.
Almost everyone picks one credit card and uses it for everything, and they get high cash back on one category of spending and nothing on or like low cash back on the other categories. And the issuers make money. And this is like so clearly statistically true that the issuers have a great business even though if you're the one person who does it right, you'll make money. And so there are forums and money stuff for you doers who are probably like more maximizing than like the average customer. The
bank makes money on the average customer. All right, we have a few more questions.
We have some rapid fire questions.
All nail bag.
Henry asks, what is your spirit security? Like a spirit animal, but a security.
So now I'm worried it's a commodity. I was going to say, cattle, futures, commodities. Yeah, so let's just kind of grim. Yeah, but you know, don't you sometimes just feel like a beaten mule.
That's still different from a slaughtered cow.
What's your spirit security?
My spirit security is feline Prides, which is I believe trademarked by Merrill Lynch. I was an equity link security STRUCTURER at.
A bank and name the bank, And there's.
A formula acuaity link security called a mandatory convertible unit, which is ferociously complicated. Basically, it's like a variable share forward contract stocked by this bond that gets remarketed at the end of the forward term. It's so complicated. But also in the glory days of derivative structuring, these things had to have names and they had to have acronyms, right like now they're called the mandatary and verbal units.
But there's some flavor I don't remember the exact details, but some flavor of mandatory convertible units that were I believe trademarked by Marilynch that were called feline prides, which stood for something like flexible equity linked come on pries is like preferred yea remarketed equity and strata. I made it up like that's not what it's not for, but you can look it up. Maybe it probably exists money
stuff called but yeah. Feline prides were a form of mandatory converbal unit that were complicated enough as a security but incredible, like the pinnacle of acronymic work of all of financed was feline prids.
Man mail Bag, I like this question. I have a short answer here. How does Katie feel about being described by Google as an Internet personality rather than, say, a financial journalist. I like that because it suggests I have a personality, so I'm fine with it.
Yeah, I would probably be happy with I don't know how I'm described by Google, but Internet personalities. Yeah, it's pretty much the pinnacle of careers these days.
I feel great, Mike.
Mail Bag, nail Bag.
And from Joel. I have a question for Katy our business I should read this and anchor voice, but I can't.
I'm not trained to put on the mask.
I have a question for Katie. Our business news network anchors specifically trained on vocal patterns designed to make everything sound tense and serious. When I listen to you on the podcast, they don't notice this. However, I happen to catch you on Bloomberg TV while traveling, and you sounded different. It fits the pattern I hear on CNBC, Fox Business, et cetera. But I've never observed this on other live TV news formats in a sustained way. Maybe it's just me.
I love this question, and I ever really thought about it, and I don't think I've ever been trained for me. Maybe I should have been. So there's different types of speaking that you do on air as as an anchor. There's reading from the prompter, you know, when you're just reading the intro to a guest or straight news, and then there's the voice that you use while asking questions. And by the way, I come up with my own questions. I get this question a lot, actually, like do they
write questions for you? And it's like, no, they don't anyway. Yeah, if you're reading from the prompter, prompter is written in such a way that you kind of naturally fall into like the anchor voice. Also, I don't know, I just feel like it's osmosis. Like I'm sitting next to people who have also been anchoring for a lot longer than me, and they talk in that voice, so you kind of just talk in that voice. And then when you're asking someone a question, just the I don't know, just the
stage of television. You talk differently than you would on a podcast. But then even if I'm on TV, the way that I'm answering a question is different than the way I'm asking a question. I think just the fact that I'm on this podcast and I'm talking versus asking a question or answering a question, this is more of a conversation. So I sound more like a normal human. But I haven't. No one told me to talk that way. It's just kind of what you do, you know.
It's just like natural selection. Yeah, if you didn't talk that way, you wouldn't be on television.
Yeah.
Do you think that you make everything sound tense and serious?
I try not to. I mean, if it's a tense and serious means yeah, I mean you do speak with some urgency on TV. I realize. Sort of a weird fact of being on television is that time feels different on television, Like ten seconds. If someone says ten seconds. In my ear, there's so much you can say in ten seconds if you're on TV, yes, if you're in real life.
I don't do a lot of TV, but I have noticed that, Yeah, like a three minute time feels like an hour.
Yeah, like even when they're counting down five four, three, Like I know I should probably be tagging saying this is Boomberg at three, but you really don't need to say it until two, you know, So it really warps your sense of time. And I think that that urgency can sometimes show up in sounding serious.
No, I know what you mean, because because you said we're going to do this segment in twenty minutes, yeah, later passed it.
I could have said so many words in this time. All right, that was fun. I think we'll air this.
Yeah sounds good. All right, so we'll see you in two weeks.
I hope you're having fun on vacation.
Yeah, yeah, right right. It's now possibly August fifteenth. Then we'll be back on August possibly twenty ninth. I don't even know.
See you.
Then we'll see you sometimes. And that was the Money Sluf Podcast.
I'm Matt Levian and I'm Katie Greifeld.
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