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Katie some sort of take your children to Bloomberg Television day.
Yeah. I feel like that's evidenced by all the children that are well, there are a lot of children walking at where are your kids?
I have never once been informed in advance or frankly in real time about it take your child to workday. I just show up and all the kids are here, and they're like, oh, yeah, take your child the workday, And like I.
Hear, I hear there's a lottery. Not everyone's allowed to bring their children, is my understanding.
Okay, I wasn't informed with the lottery. It's fine, my kids have school. It's fine, it's fine.
It's fun. I mean you're not getting anything done that day, right.
Someone at Bloomber Opinion had.
His kids here and a kid.
I was like, a bad influence. I was like my daughter like first tried root beer here. But I saw two kids recording like on the camera in the lobby that's waking behind them, and I could see the prompter and it was like at Bloomberg News for kids, Yeah, It's like are they is that going to be aired?
It's cute that they do that. Certainly not on my show.
No, we're killing it.
Man, You're a competitive I don't know why I want to go tackle those children. Get away from my prompt looking for.
Your job In approximately twenty years.
I thought I was having to worry about AI.
Hello, Welcome to The Money Stuff Podcast, your weekly podcast where we talk about stuff related to money. I'm Matt Levine and I heard the Money Stuff Colm from Bloomberg Opinion.
And I'm Katie Greyfeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.
Should we talked about the weather? I feel like we talked about the weather last week and now we're talking about the weather again. There's a very economically important local climatic zone, which is that apparently somewhere within Charligall Airport in Paris, there's a censor that tells you the temperature for like Paris. Yeah, and so polymarket takes quite a
lot of bets on the weather in Paris. And at two points this month it's been reported the temperature in Paris, by which I mean the temperature at this one sensor in the airport spiked by like four or five degrees celsius in the space of a few minutes, causing very long shot bets on this temperature to pay off to
the tune of tens of thousands of dollars. And so the French like meteorological service is investigating, and you know their tweets about someone took a hair dryer to Sharyl the Gahala and made thousands of dollars treating these weather derivatives so good.
Yeah, I have to imagine there's going to be so many more cases like this.
Right, I tried to write about it.
I feel like you did successfully.
Well, yeah, I wrote words about it, Like there's market manipulation in the world. Right, there's some stuff tapping right now, lying stuff, and there are derivatives on the underlying stuff, and people can manipulate the stuff to cause the derivatives to go up. And I've written about dozens of cases over the years. But like, what prediction markets have done is they've created a sort of infinite surface for market manipulation.
Like anything you can think of, there can be a prediction market on and the outcome of anything you can think of might be manipulable. And so if you are buying like grain futures, the weather in the Midwestern United States is an input to the price of those grain futures, but like a leader of air in the Midwestern United States is not is not a material input. But if you're buying the polymarket, like bet on the weather in Paris, contract, one tiny little spot causes the vets to pay off
or not. There's always gonna be market manipulation. But like the prediction markets have just created this vast new possibility of things to manipulate.
It's exciting, right, it.
Kind of is.
Yeah.
I mean, I don't know, I feel stupid every time I write about it, but keep writing about it.
I mean, it's clever, and some of them are clever and fun.
I guess.
I feel like I want to see photos or a diagram of like where this temperature sensor is. Yeah, I feel like they could fix this by just placing it higher rights drinking.
Fountain like in the at the gate, you know, but it's probably not. It's probably like on a runway, yeah, right, because like you know, the weather in the actual airport is climate control.
So yeah, it's I think.
I don't actually eight degrees again, it would be in.
Europe is less committitary conditioning. Then it's a good still.
Still, that's yeah, still Yeah.
I also wrote this week about bespoke parametric insurance. Yeah, so basically there's a good Bloomberg article about bad Bunny.
I think it's bad Bunny.
Yeah.
He had a concert scheduled in like Columbia, and he worried about it being canceled for torrential rain. And he went to insurance companies to get cancelation insurance and they're like, wow, we can and sell your policy that pays off if it rains. But like the rain sensor is a mile away and it's like a very different microclimate where you are. And he was like, what if we built a weather station and it's not him, This is like insurance adjuster.
They built a weather station inside the venue so that they could get paid out if it rained in the venue. The story was great because one of the things like it was like they could have built just like a rain collector.
Yeah, but then you could manipulate.
Then you could you could just get a watering can and pour water on it. It's like they had to build out a whole weather station because that you have all the confirmatory readings and if they just pour water into the weather to the rain sensor. Then they'll know appurrently the French Meteorological Service has this problem.
Yeah, bad bunny. Should have just created a market on polymarket or kelcill.
That's the thing, right. I wrote about this and I was like, oh, bespoke parametric insurance, and someone was like, is bespoke parametric insurance the same thing as a prediction market? And it's like kind of yeah, I'm glad the weather sensor. It's gonna be all we talk about. Famously boring topic of conversation, but coming up more and more often.
It'll come up again talking about Avis. Yeah, do you know anything about as No.
Davis budget is what it's called.
That's too two or more different more have often used hurts. So I don't know much about AUS. I do know that the stock has been going insane ripped, and the consensus is that it's a short squeeze.
What's interesting is this stog who was like one hundred dollars about a month ago, one hundred dollars a share and it is a It got to seven hundred and thirteen on Tuesday.
Wow, it must have been a great earnings report.
Yeah, say, the consensus is that it's not earnings DRIPPN. But it's not a fundamental.
Their report on the twenty ninth of April.
Right, maybe people have an inside you on the but I don't think so. The phrase that is normally thrown out a short squeeze and a couple of good reasons for it, when is that is a heavily shortened stock. He's like, short interest is like a somewhat mysterious thing to report, and you often get it onto ala. But something like sixty percent of the shares have been shorter.
It's a little lot. But the other reason that people talk about a short squeeze, and I wrote about this last week, is that two hedge funds own one hundred and eight percent of the stock, which if you do some simple math, like if you want one hundred and eight percent of the stock and you call in all of your borrow, then there's no borrow to be found. Now, it's not that's not exactly what happened here. One thing that has happened is I've gotten several emails from people
being like, is there actually a short squeze? Because like there's no reports of hedge funds being like carried out like you know, like in gamestat where like, you know, a big hedge fund closed because of the game stop short squeeze. Yeah, there's not really any reports that here. Bloomberg has been reporting that people were adding short positions as the stock was going up and have now made billions of dollars more than all of setting the billions
of dollars they lost on the way up. Yeah, it's interesting. So these two hedgehunds own one hundred eight percent of the stock, but they don't really They own like sixty nine percent of the stock, right, and then they have big swap positions where like you know, traditionally, the way a swap works is like a bank writes the hedge fund of contract time, we'll give you the upside in the stock and you'll lose the downside, and the bank hedges it by buying stock. But it doesn't have to
hedge it by buying stock. One thing I was thinking about is that if short sellers want to be short a lot of the stock, and if like these two hedge funds are called SRS and Pentwater want to be long a lot of the stock, they can just do a bet with each other. The hedge fund says if the stock goes up, I'll pay you, and if the stock goes down, you'll pay me. Right, that's a swap. And what might be happening here is that that might
be happening. What might be happening is that the short sellers are short the stock on swap, SRS and Pentwater are along the stock on swap. The bank is sitting between them and basically brokering a bat between the short hedge funds and the long hedge funds. And then there's no short screeze. Everything's easy, you know. I mean, there's a little bit of short squeze youet, like collateral calls, but basically you can just sit there until the world returns to reality.
I do also like the psychological maybe theory that if enough people think there's a short squeeze happening, yeah, more people are going to pile in, right, regardless of whether it's truly happening at scale.
Yeah, because like a short squeeze is almost like a magical incantation for a meme stock. Right, You're gonna have a stock go up seven x without a short squeeze just because retail investors thinks there's a short squaze, right, I mean that's you know, that's game stop. Yeah, well there there was one probably, but right, and like the setup here with the huge amount shorted and the huge amount long really encourages someone to think, ooh a short
squeeze and then pile into it. So curse to me that my writing about it last week.
Is this your fault.
Not a lot of meme stops are born in money stuff. But who knows?
There was an interesting jp we're going to down.
No other fundamentals, don't justify.
This, Yeah, exactly.
It downgraded them to underweight from neutrals, saying it has an unsustainable valuation not supported by them.
Raise their price target, yes, because their pricever is like one hundred bucks or whatever. And then it goes to seven hundred and they're like, okay, well now it's a sell at two hundred.
Well they boosted the price target to account for capital markets opportunity. And this is what I wanted to bring to your attention that they wrote we view the recent extraordinary quote short squeeze driven rally and avis budget shares as a potentially significant opportunity for management to create lasting value via opportunistic capital market transactions.
I was thinking about that when you're a meme stock and you say, okay, we're going to rip off an ATM. Like that works, right, That's become like a standard piece of the playbook. Now you to at the market stock offering to take advantage of your memestock status. It's tougher when you are like nominally purely a short squeeze, because the thing about a stock offering is that like alleviates the short squeeze problem. Right, you can sell the shares
to the shorts or whatever. Right. Yeah, So when people are like really amped for short squeezes, they get mad if the company talks about issuing stock because that like somehow dew flights to the short squeeze. But sure, right, I mean if your stack's at seven hundred, sew some stock. Yeah, And I was wondering if they if they would do some sort of at the market offering. And it's it's trickier.
Yeah, has the moment passed?
The stock was down Tuesday was the peak, and it's you know, we're recording this on Thursday, it's up two hundred and thirty dollars or something, which is you know, yeah, like has the moment passed? It's doubled in the last month for no reason. It's still a good deal, but it's not seven hundred.
Well, at least JP Morgan thinks that what's the price start now? Their price target is one hundred and sixty five dollars. It was one hundred and twenty three dollars. We'll see earnings are next week.
You can be a Bye at one twenty three and the stocks at one hundred, and then you're a cell at one sixty five when the stock is at seven hundred.
There you go, speaking of stocks.
Should I about SpaceX?
Yeah?
Probably public. I can't wait.
You'll have to wait. It's supposedly going public in June.
I know there's no real guarantee of that, that's true, especially if they want to do some interesting M and A.
I love it so much. Decided to buy Cursor, Yeah, for like reasons, like they're.
A fundamental reasons.
Yeah. Then Thomson stra Techery has a nice piece about why this makes sense, right, I mean, like SpaceX has SpaceX is a rocket company, but it's also an AI company, And as an AI company, it's like quite good at getting chips and building data centers and just sort of like infrastructure. Yes, but you know it's a hot mess in terms of building a model, and so it seems a little bit like they're importing a AI lab into that, you know, use their AI infrastructure, which makes sense, right.
It turns out like the big use case for AI right now is coding tools and XAI fell behind in the coding tools race and Cursor had a lead in the coding tools race, and you know, maybe even the MOS of chips will help with that. So it makes sense. But the problem with it is that theoretically SpaceX is going public in June, yeah, and it's.
April and not for much longer either.
No, And traditionally, when you go public, you like, you know, disclose information about your business, and like SpaceX's business is changing from week to week, as you can tell from the fact that it's called SpaceX and we're talking about its AI business.
Yeah, well, data centers in.
Space, Data centers in space.
Absolutely, it's real, Matt, it's.
Something, it's it's it's really going to be a part of the pitch. But the point is you can't like acquire Cursor, generate pro form of financials, put the pro form of financials into the prospectus, run it by the SEC get the auditors to seign off, educate the research analysts about it, and go public in June. If you're signing that deal in April. So they're not doing that.
They're like, we're gonna buy Cursor, but we gotta do it after the IPI, So just put a pin in that, telling everyone we're planning it now, but no promises, no promises that are certain enough to require us to realize the IPI perspectives.
I wonder if in the meantime you see another bitter emerge.
It's an interesting question. I was thinking the opposite, which is, like Elon Musk has some track record of changing his mind about m and a mm hmm, particularly here, Like it seems apparent that this is not like they're signing a deal and then meeting once a week on a
conference room to negotiate into CREATIONIA. It's pretty clear that like those guys are going to work at SpaceX tomorrow, you know, so, like they have a lot of time to fall out of love with Elon Musk, or for him to fall out of love with them, and if he changes his mind, he has to pay a ten billion dollar breakup fee. Break up He's like traditionally are like, you know, on the order of two percent of deal, and this one is seventeen percent of deal value.
I was going to say, I mean even compared to like the Warner Brothers Discovery breakup like this.
It's an enormous breakup fee.
Yeah.
And here's why. One because it's not like a signed deal. It's a little bit weirder, so it's like buying an option rather than like really signing a deal with a breakup fee. And two, he has a track record, you.
Know, Twitter, which is part of XAI.
Which is part of When Musk was like trying to get out of the Twitter deal, I had so many people email me and I kept thinking about it, like, is this going to affect his ability to do m and A in the future. Will people be hesitant to sign MNA deals with Elon Musk in the future after he flaked on this one? And he's the answer, Yeah, you gotta pay a lot of money.
Because it is interesting that Musk's ambitions here are bumping up against like real human timelines. If he did want to really buy Cursor, he can't do it before the IPO. It just physically can't happen.
You say, physically, Like the jerker is always that Elon Musk is constrained only by the laws physics about the laws of friends at the SEC, and you could imagine, you know, him yelling at the lawyers who like, please don't close another deal between now and the IPO. You can imagine being like, ad, it's just doing physically impossible. For whatever reason they didn't do it, they decided to hold off.
It pours cold water also on some of the speculation of SpaceX combining with Tesla, because it kind of I don't think for the IPO it does.
It's not going to come out before the IPO.
Yeah.
So the other thing that I wrote about SpaceX this week is that SpaceX is going public with dual class stock, so I don't know the perspectives is not public and like it's you know, they're blanks anyway. But I don't know how much Elon Musk owns, but like he will have ten times voting stock he shares with ten votes per share, so he will control SpaceX probably, which makes sense because one, if you're investing in SpaceX, you are
clearly buying into the Elon Musk machine. And two, from his perspective, you know, like he said about Tesla, I don't want to build a robot army at Tesla if I don't control it. And all the more so when he's building like an intergalactic robot army to colonize Mars and data center, you know, all this stuff, like he needs to control it. So I get it. He's going to control SpaceX. It's going to go public with du a class stock. Tesla did not go public with du
a class stock. And you can't really add it afterwards, like even if you get the shaoulders to vote to approve it, like the stock exchange rules like they don't. They don't like it. So he can't really add du a class stock in Tesla. And so there's these weird things. Every few years he gets a trillion dollar payback that then we talk about, you know, whether that's legal. It wouldn't be a trillion dollar pay package if they're just
like you get ten times as many votes. Anyway, there is an obvious solution to all of these problems, which is you take SpaceX public with dual class stock. Elon Musk controls the votes and then two weeks later, maybe two weeks is optimistic. Two months later and then the combined company has doll class stock and Elon Musk controls both of them forever, and like they both you know, there's some overlap in like they're both building robot armies.
Yes, like you know you only need one company building robot robot army.
Well, you wouldn't want the robot armies to fight.
I mean I would like.
To see that.
Yes, actually that would be probably probably like give them good for humanity. Elon Musk's root armies fight and annihilate each other, like somewhere off the shoulders of Oryon, you know, like.
Just a theory.
I want to get your take on. Is you know Tesla reported earnings on Wednesday, broke those on live TV. But right now Tesla is the only public option to get into the Elon Musk machine, as you call it. I do wonder if SpaceX going public takes the shine off of Tesla and sort of collapses the Elon Musk premium there.
I think it's very possible. I think it's so interesting to me that Tesla spends so much time talking about AI and robots, and it's like you got to sprinkle a little of the AI dust on both of them. You know, you can't just do all the AI stuff in the AI company, because then you don't have the AI stuff in the other company. It's possible that the only public musk company, Premium, goes away, but then the possible merger with SpaceX Premium comes in and so nothing.
Yeah, there's a passing of the baton there.
I don't know.
Yeah, Tessa's trading. It's something like one hundred and eighty three times forward earnings.
By the way, Yeah, SpaceX is allegedly going public at one hundred times forwards revenue.
It's going to be so fun. I keep thinking about what I need to do between now and the time I give birth, Like the events I have to live through. I have to live through Milkin, and I have to live through the SpaceX Ipo. I have to see them, right, and then I can have a child.
Right, So please go publican dream life highlights in the coming year SpaceX Ipo.
Birth of I'm to tell my child about this.
Mommy, Where were you space Ex went public?
Let me tell you.
I hate the word zumping.
Oh yeah, I was talking to my group chat about how much we all hate the work.
Okay, this is America, right.
I did not realize it's like a British real estate term, and so I'm less offended by it now because it likes sure fair, But no, it's a it's the term for like when you have a deal to buy a house and then someone else offer the higher price and you lose your deal to why house. And so there's a Bloomberg story this week about that happened dads fund
portfolio managers. Yes, because the market for portfolio managers that multi strategy hedge funds is so tight that people who have quit their jobs and accepted new offers to go to other hedgephnes or while on gardening move getting poached at still higher offers to go to still other hedgephones are often to go back to their original hedge one.
And what I read about is like there's a time value of hedgehod portfolio managers, where like ordinarily if you hire a hedge fund manager, if you hire a portfolio manager, you should expect to have to wait about a year for them to serve out their gardening leave. And that's a long time to wait, and you've got big plans. And so if you can find someone who's already served out eleven months of their gardening leave, they can start
next month. Yeah, and so the hedge fund managers who are currently sitting out on gardening leave are in some sense the most desirable candidates, and so of course people bid them up.
Yeah. A different term which I like is interception trade, which is good American football term that you just say you have to get the timing just right, which is called that hard. Well, yeah, but it's made easier if you are a recruiter and you have list yea of who you've placed in.
You get someone a nice deal at a new hedge fund, and you set a calendar reminder for like eleven and a half months to check in with them so you can get them a higher offer. It is pretty evil. The thing that I most endorsed is like people get in that bag by negotiating up their offers, Like I'm all for it.
Well, I love this quote. It's from Mark Greenberg, who is a former managing director at Point seventy two who now trained traders. You're talking about a group of people who are economic animals. They'll pay lip service to quality of life and where they live and the type of people that they're working for. But at the end of the day. One of the reasons the large firms have been so successful is because they can pay more they can.
Right, this is also pure like it's just like you're good at profiting from optionality and spotting opportunities, Like it would be disappointing if you weren't doing this.
Yeah, it does seem like a vicious price spirral, though, you know, what does it end?
It doesn't end, you know, it ends if the strategy is not working. I don't know. I should mention there's as a lawsuit. Yeah, Schoenfeld suit a guy who worked at Millennium. Schoenfeld did like long, painful, vigorous negotiations to hire him. They signed an employment agreement with him, They signed a confidentiality agreement, and of course, of course, once he has that, he goes to his bosses at Millennium and is like, so, and Millennium.
What do you think matched?
And stay Yeah, which like you know, more powered to him. Schonfeld suit him Yeah, million dollars.
His name is Adam Grunfeld, which is sort of like Graefeld. But yeah, apparently he held himself out during negotiations as a long term addition to Schoenfeld, capable not only of generating returns through his own trading strategies, but also contributing to the firm's intellectual capital. Of course, that's something it doesn't see. It doesn't seem that different of a playbook than any other industry, you know, sort of interview and chop yourself around and then you bring it back.
The unusual thing is getting sued.
Yeah.
Yeah, Also, eleven million dollars is quite enough. But to that point, apparently Schoenfeld said that it had contemplated the possibility that Grunfeld might reneg on.
The Yeah, every job in the world.
Yeah, but I guess we're talking about a lot more dollar signs and like you said, lawsuits.
So yeah, it's very striking. One thing I was thinking about when I first read about the interception trade was the reason the interception trade works is that someone who is eleven months into their twelve month gardening leave is more valuable than someone who's just you know, who's got their current job and has twelve months of gardening leave to serve. And like, one way to prevent that would be if your new job gave you a non compete before starting at your new job. But I don't think
you can do it. I don't think you can sign a new non compete while you're still in the non compete from your old.
Job, right, Yeah, but maybe that kind of.
Happened here, Yeah, right where he signed the employment agreement. And so they're like, no, no, no, you can't leave to your original job because you already signed our employment agreement. It's almost like he has a non compete with his original job.
Damn not.
Really, couldn't Millennium foot to eleven million dollars?
If you're leaving a job that has restricted stock, it's fairly traditional for your new employer to make you whole. Right, couldn't Millennium foot the eleven million dollar belt sure of it? Rather than if no one has to? I don't know.
I mean, like, the argument is that he signed a binding employment agreement with an eleven million dollars liquid liquidated damages, Claus saying, if you don't show up for any reason, you have to pay US eleven million dollars to compensate for our lost opportunity here, which is not crazy, Like, it's just, you know, it's not how It's not how the world works in most employment situations, but apparently maybe it works in punch ups and that was The Money Stuff Podcast.
I'm Matt Levine and I'm Katie Greifeld.
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Amy Keen is our executive producer. Thanks for listening to The Money Stuff Podcast. We'll be back next week with more stuff.