Bloomberg Audio Studios, Podcasts, Radio News.
Hello and welcome to The Money Stuff Podcast, your weekly podcast where we talk about stuff related to money. I'm Matt Levine and I write the Money Stuff column for Bloomberg Opinion.
And I'm Katie Greifeld. I'm a reporter with Bloomberg News and an anchor for Bloomberg Television.
Katy did that offscript, and I'm sort of clutching the table as she did.
I forgot usually fret out the intro. I forgot to do that this week, but I do have a strong sense of self.
Okay, what are we talking about this week? Katie?
Great question freestyle? Yeah, T plus one. It's finally here in the US and in Canada and Mexico.
It's possible.
Maybe it's happening in India soon. We're going to talk about Elon Musk. We have a few different things to talk about with Elon Musk, but I really like the attention auction that you wrote about this week, So we're going to talk about that, and we're going to talk talk about Bill Wang. It thinks possible and there'll be we do have a mill bag. I like that you saying, and I didn't usually it's usually the other way around. T plus one. It's here. It feels like this was abrupt.
Maybe I just haven't been paying attention.
I think that if you had been reading articles for the last three months being like TE plus one settlement is coming the week after Memorial Day, you would have growen very bored. I think that's news for a long time. I think that's like news the week before, and then news the week it happens. But yeah, it's T plus one.
It's T plus one. It happened at the start of this week that we're recording the podcast in there was a beautiful day where trades from both Tuesday and Friday settled on the same day. It was like a lunar eclipse or a solar eclipse, whatever you want to call it. Seems like things are actually going fine, right.
I know, you root for chaos. I root for having funny things to write about, and so clearly it would have been more chaotic have T plus one kind of broken the financial system, But in fact things seem to be going very smoothly, and in fact, the fail rate so far it seems to be a little bit lower than the fail rate last week, meaning that if you do a security trade and it settles T plus two
last week, T plus one this week. Then like in two days, you have to deliver the stock and the other person has to deliver the money, and if you don't do that in time, it's called a fail And people keep track of the fail rate and every soft and people have conspiracy theories about naked short selling because of like the fail rate's going up or whatever, and the fail rate like last week was like two percent or whatever, and then this week, like the first day of T plus one, it.
Was like a little bit lower.
So everything's going great. I was wondering what that means, like that the fail rate is lower. Like one possibility is that they spent all this time modernizing their systems. They turn on the modernized systems and it just works better.
Right there you go.
Possibility. Another possibility is that everyone's in the office this week. If you work in settlement, you're definitely not on vacations. Yeah, you're definitely like paying total attention to making sure the failure it stays though.
Yeah, maybe the real thing to watch will be of course next week. Yeah, we do have another test coming up on Friday. The MSCI indexes are going to rebalance, so that's another potential hurdle. But yeah, definitely. The optimistic take here is that all the preparation that Bloomberg News and other outlets have been writing about that the banks and everyone else are undertaking, maybe it paid off. And this is a total y two K moment.
Y two K in the sense of it's not like that the fears were misplaced. It's just that people worked really hard to fix them and they succeeded.
We did it, guys.
Yeah, congratulations all the settlement professionals. I think probably if you're a settlement professional and you spent like the last three months complaining about this's like probably some part of you wants there to be a disaster, so you like I told you.
But yeah, I was saying to him Matt this morning that this would be a lot more fun had there been a disaster. But I guess it comes into question what's next. I know that some people talk about T plus zero. Gensler himself actually suggested that T plus evening could be a possibility, But what's the point.
Well, part of why they moved to T plus one is like the credit risk involved in waiting two days to settle a trade. And I think the big impetus was the memestock failures in twenty twenty one, when well, when a lot of brokers got the large margin calls because of the crazy volatility in the memestocks, and Robinhood had to go out and raise money, and like the lott of brokers shut off trading in game stop for a while. So all that stuff felt kind of bad
and rickety, and so they wanted to change it. But I do think another part of the impetus for this is just like there's a general sense that payments and like financial transactions should be real time. That wasn't always people's sense, right, they used to like nail a check or whatever. But now you know, you look at the Venmo sort of, you know, like people's desire to be able to make real time payments on their phone, and like people find it weird that the US banking system
doesn't be support with that and with securities transactions. I do think there's the example of crypto where crypto doesn't always move like instantly, but like a crypto trade on the blockchain settles when it happens, right, It's like it's instantaneous settlement. And people sort of are introduced to the financial world through that, and they look at stock trading they're like, why does it take two days? Or even
why does it take one day? So I think there's just like a sort of sense that like in a modern computerized age, it shouldn't take any time to settle a transaction. And I think that's like wrong. I think it's like people confuse like the computer mechanics of like moving the stuff around with the actual sort of like financial mechanics of it. Nic stock trading is like very efficient and very sort of just in time. And so when people want to buy stock, they don't have money
sitting in their account. Most people do, but big hedgephones want to buy so I don't have money just like sitting around in their account. They have to like go to their financing prime broker to like lend them the money the moment after they agree to the trade. Right, there's a lot of like you agree to a trade before you have the money sitting in the account. Sometimes you agree to the trade before you have the stock. All those sort of business processes happen after you agree
to the trade. And if you moved to like very fast settlement which I don't know exactly what very fast means, Like maybe T plus evening is still like slow enough.
I want like T plus lunchtime.
Yeah, if you move to like instantaneous settlement, then like everything changes, like you have to prefund trades, you have to have the money sitting in the account before you do the trade. And again, like in crypto, it kind of works that way. Like in crypto, you kind of prefund everything, and so people are there's like a model for that, but it's not really how the modern financial system works.
Yeah, I know I'm being dramatic when I say this, but I don't know. The notion of taking pages out of crypto infrastructure and bringing it into like the equity market feels very weird for me. This is the second time that we're sort of talking about that. Like we talked about twenty four hour trading. Yeah, a few weeks or months or years ago. At this point, I can't
remember what it feels like. But the idea that maybe stocks being able to trade twenty four to seven or twenty four to five, maybe that's a reality in the future. Crypto does it here, Instantaneous settlement crypto does it. Why not equities.
Crypto is a financial system that grew up entirely around computers and in the computer era, right, like it dates to like, you know, two thousand and nine. I think if you were just like designing a financial system from first principles, you'd be like, wow, that'll be on computers, and then I'll be like, well, we should it open at nine thirty in the morning. Now it's on a computer. The Internet is open twenty four hours a day, so
you'd sort of design a system like that. And similarly, if you're like, well, I've got a database of stocks and a database of dollars, and like when I agree a trade, we swapped the dollars to the stocks, It's like, yeah, that should happen like on a computer, like immediately. Right, if you're designing a financial system in two thousand and nine or in twenty twenty four around computers, like you'll
naturally have twenty four hour real time trades. Right. It just so happens that the actual financial system grew up over hundreds of years and wasn't built around computers, and the processes that have built up around that are very path dependent and historically determined, but some of them are good ish or like they work for humans or they work for a financial system. So with twenty four hour trading, what we talked about was in fact, in modern markets,
people like concentrated liquidity. You know, the stock markets open six and a half hours a day, but like people actually like largely traded the clothes because that's when everyone else is trading, and it's good to be able to trade when everyone else is trading. And if you spread out your trading over twenty four hours, a few people
to trade with in like three am. And similarly here it's yeah, like if everything moved instantaneously, like in some ways, that would look more efficient, but it would mean that you'd need to have the money in your account before you did a trade, and so there'd be like weird stuff. A lot of the problems that people worried about with T plus one were foreign investors having to convert currents.
If you're a foreign investor and you want to buy a US stock, you can just decide to do that and then figure out how to convert your euros into dollars later, not like much later, but like two minutes later, and an instantaneous settlement world, you wouldn't be able to do that. Now, maybe your FX transaction would also settletaneously and everything with like just in time workout, But it's like trickier.
It does seem really complicated, especially, I mean the FX piece talking about T plus one. When it comes to just domestic US equities, that's somewhat easy to wrap one's mind around, but thinking about the FX piece and the international investor piece. I was talking to someone on TV sometime this week and they said, you went from having twelve hours to source your US dollars to having like two hours.
Yeah, And like, I don't know you say that to a normal person, And it's like, how long does it take for your bank to convert your years?
And I've never thought about it, right, Like, yeah.
It should theoretically it kind of should take a millisecond.
Yeah right, Well maybe that's computer entries, but that's the world we're rapidly hurtling towards her. Maybe we're already in Can we talk about the thing I won't really want to talk about? Okay? So I cover ETFs in my day job, and I think that a lot of etf issuers do is securities lending. They lend out the securities and their portfolio it gets them a few basis points
for doing that. They make that, but you think about the expense ratios on a lot of these ETFs and they're like three basis points, So a couple of basis points is super meaningful. I don't really understand how security is lending is impacted by this move to T plus one. It seems like it would be a headache. Not just an ETFs, put mutual funds, et cetera.
It's a huge headache, I think. So here's why it works. So, like you're a mutual fund or you're an ETF, you like lend out your stocks. You know on stocks, you lend them out, then you decide to sell them right because you have outflows or because you're your indexes rebalancing or whatever, you decide to sell your stocks. So between the minute you sell the stock, the minute you'd like your sell order executes on the stock exchange, and the
settlement date, you have to get the stock right. Like you've loaned it out, you don't have it in your possession, so you have to call back the borrow. So you had two days to do that. Now you have one day to do it right. Now you call back the borrow by like you've loaned the stock out, probably through a broke who's loaned out to like a short cellar. So you call your broker and you say call the intermediary and you say, I want the stock back in.
The intermediary calls the hedge fund who borrowed it and said, we want the stock pack and the edge fund doesn't have it either. They've sold the stock, so they have to find it somewhere else right now, maybe they borrow it from some other mutual fund or some other lender, right and then they borrow it in like four hours and they deliver it to you within twenty four hours,
and then you deliver it to settle your sale. But another possibility is like they can't borrow it and they have to buy in their short but then that settles T plus one. So they're doing a trade after you that has to settle before you in order to give you the stocks that you can deliver it on your cell. So it's like very tricky, and I think that like one thing that mutual funds have been at least talking about doing to address this is calling in their borrow
before they sell their stock. You know, you're having like an index rebalanceing or whatever. Instead of hitting sell and then calling back your borrow, you call back your borrow the day before, so you make sure it settles, and
then you hit sell. Larry Tabbo Bloomberg Intelligence that has written about like the problems of that in terms of both you lose like a day of that lending income, but you also maybe tip your hand that you're going to be signing the stock because you're calling a sophisticated hedge fund and saying we need our borrow back. The hedge fund gets some information from that. They know you're selling. Yeah.
I guess from my perspective of someone who cares about the ETF and a little bit the mutual fund world, the fact that you do lose a day of that fee coming in.
And I don't think that's a big deal.
You lose a day on Also.
They have twenty basis points of earnings.
Hey, that sounds pretty good. I mean, we're talking about razor thin margins on some of these ETFs. I'm wondering if it'll make securities lending a less appealing proposition for some of these companies.
I be surprised if it moves the needle on that because it's the money. You know, if you're like an index e, you're not selling stock that often.
All right, that's everything I wanted to know about this.
That's probably everything I wanted to say.
But I guess we'll talk about it when we do move to T plus zero, because actually it surprised me to learn that we only moved to T plus two and twenty seventeen.
Oh yeah, I was there.
I was not.
I mean I was there, actually, I just was not paying attention. Yeah, yeah, no, what was that doing.
It was really twenty seventeen. Hey, I remember that. Yeah, it was T plus three for my whole career, and it was like plus five in like the sixties or something.
Yeah, we moved to T plus three, I guess in nineteen ninety three.
My favorite part is that I didn't know this still like this week it was T plus one, and like the nineteen until nineteen years, I sort of imagine that, like the reason it was T plus three or whatever, you know, I grew up in T plus three. The reason it was T plus three is because like you needed to like load the stock certificates on a horse and buggy and take them across around and count them by hand.
That was happening in the nineties.
Yeah, no, it was happening in the twenties, but like there were only so many stock certificates, so you could do all of that in one day, right, Yeah, And so it only became like a longer settlement process when there were more trades and they were not like fully computerized, and so you had you know, max that at T plus five where it was like still a pretty manual process, but there were a lot of trades, and now there are many more trades, but it's a much less manual process. Okay, there we are.
We're some buggies.
Oh boy, Elon Musk, it's been several weeks since we really really dug in.
Part of me feels like Elon Musk, it's always the same.
Story, and that is checking his phone. He just checked the time he has to want to talk about this. We are drawing closer and closer to that shareholder vote.
Yeah, so, Elon Musk, he had a huge package of options from Tesla in like twenty eighteenth. You know, everyone says it's fifty six billion dollars, it doesn't really matter. And then this year a Delaware judge said, no, we're taking those back, and in reaction to that, Tesla wants
two things. They want the shareholders to vote to give him back the options, and they want the shareholders to vote to reincorporate the company in Texas so that no Delaware judge can ever again take away Elon Musk's money. Both of those votes.
As j thirteenth, he met the targets. Yeah, that he was supposed to hit.
Like, I'm not a big ela On Musk pooster necessarily, but I feel like here in this money, yeah, like he should get the money. Maybe this is just projecting, but my impression is that the maybe like most standard view among the institutional investors in Tesla is one he should get the money. Fair is fair, and two they should not reincorporate in Texas.
Yeah, so let's attack the first point because I've been thinking about why that doesn't feel great. So, yes, fair is fair here in the money, But like, I feel like you have to kind of forget about everything that has happened in the past year or so. I mean, I'm talking pretty short term when I talk about the year to date performance of Tesla, but it's been pretty bad. We've seen a big draw down in market cap and they're facing real business problems right now.
Right When I say here in the money, I mean like he was granted this money in twenty eighteen with the goal of taking the market cap from like fifty billion to six hundred and fifty billion dollars and he did that by like twenty twenty one. Yeah, and so he earned the money and they gave him the grants and then now they've been taken away. But like since then, yeah, yeah, things have changed. It's weird. It's a very backward looking pay award, yeah, because it was a forward looking pay
award in twenty eighteen that has not been reversed. But the question is should they give him this backward looking pay award because he did accomplish all these things in the past. And I kind of think the answer is yes, that's fair. But I do think that if you're a just hyper rational investor looking at things today, it's like, is it a good idea to give him all this money given what has he done for me lately?
Yeah? Yeah, I mean Tesla has a pretty sizable retail I mean a lot of them are huge fans of Elon Musk. But I would just imagine that human psychology is going to play in as and what has he done for me lately?
Oh yeah, yeah, the retail people are there because they love Elon Musk. Yeah, the institutions, I think it's more.
I mean you have seen like Glass Lewis come out and say that they probably shouldn't vote for this.
There are few those came out against it in twenty eighteen as well.
Yeah, something that keeps coming up is and this is something you've written about, is just that he's got a lot going on. This man is the CEO of six companies. It's clear that Tesla isn't like really the only thing occupying his mind share right now. He was really into his AI startup SpaceX Scark. I forgot actually that the boring company was still in there as well.
The boring company is the one I always mentioned because it's like, I think, if you rank, how much does Elon Musk speak publicly about, pay attention to and care about his companies? Like, yeah, Tesla is really volatile and like right now Tesla maybe like having some problems of getting his attention, although the vote complicates that, But like boring companies usually toward the bottom because its name is the boring company. It digs tunnels. It's like just sort of less.
It's like the cash in the portfolio, you know, you don't really talk about it.
Sort of.
It's not literally like that because no.
Just in terms of like a small allocation that you don't really think about. Neuralink is real obviously when you look at the portfolio of his company's Twitter is the weirdest one to me, x I'm sorry.
Elon Musk is really into AI, right, Yeah, He's kind of always been into AI. He was a founder of open Ai, right is now not an affiliated and angry about and like suing open Ai. But he was like there at the beginning, and he's very into AI right now, and everyone's kind of right into AI right now. And in some ways it's like weirdly trend following for Elon Musk to be like, I also have a large language
model startup. Right, That's never been his thing. Right, He's not like, oh, I'm founding the tenth electric car company or the tenth commercial rocket company.
Right.
He's not like, you know, in fierce competition and like the tunnel digging business. Right, It's like all of his ideas have been sort of unusual and then XAI. He's like, yeah, I'll do a large luggage model. Why not? But it did seem like he had big AI plans for Twitter, and like Tessla does do a lot of not like large language models, but like a lot of AI for like the self driving cars. And it's a little strange though.
He has instead started a separate company for AI and ramped it up and has a twenty four billion dollar valuation now and is raising money and seems to be, to some extent the apple of his eye, and Tesla's maybe a little neglected.
Yeah, it does feel like that, and you think about I mean, his threat is that if he doesn't get this pay package, then hold devote his energy and time elsewhere. It seems like he's doing that already. And even if the pay package was reapproved again on June thirteenth, I believe the vote is it's not clear that would get him re excited about Tesla.
So two things. One, like glass Lewis, one of their objections to his pay package is that he has clearly not been focused on Tesla. Yeah, and Tesla put out this response that's a stockholder should care noormously about value creation and not about whether Elon's perceived focus in scare quotes was strong enough, and like, that's fair, but it depends on your time frame. And in recent months, the
value creation has maybe tracked his lack of focus. Right since the Twitter deal, like his lack of focus has been bad for now Again, this pay package is for like the work he did from twenty eighteen to twenty twenty one, so I can see approving it, but as a going forward better Yeah, you'd be worried about his lack of focus, not only because you keep reading articles about the other stuff he's doing, but also because the stick price is down and like it's izing business challenges.
The other thing I'd say is Tesla's in a weird position in terms of like how much of Elon Musk's focus it gets or it will get going forward, because it's his only public company and also it's his biggest company, and so on the one hand, that means it is
his like cash source. It is I think more important to his fortune than any of the other companies, because it's if he needs a billion dollars, he can get it by selling Tesla stock borrowing against Tesla's slock much more easily than he can from his other companies, and so he sometimes does a need for a large amounts of money, for example to buy Twitter. Yeah, and when he does that, he sells Tesla stock. So Tesla's really important to him. And if some of his other companies
like evaporated, he'd be fine. But it does evaporated, it would be a big problem. On the other hand, he hates running a public company. He's not a public company guy. It doesn't work. He goes around saying I do not respect the SEC. He gets in trouble, he gets sued by shareholders. He pushes the boundaries in a way that when you have a private company where all of the shareholders are your fans and understand that they're there to
support you, it kind of works. But in a public company where anyone can buy stock and then sue you and like a judge or the SEC can just get involved, it doesn't work that well. And he clearly hates it. He sort of tried to take Tesla private in a never deel that got him in trouble with the SEC. And he's said off and on over the years that he hates and running a public company, and will SpaceX eventually go public probably but I would love that it's
possible that it would have gone public before. Now we're not run by Elon Musk, who has had a bad experience of running public companies. So if he has some great idea, does he want to do it at Tesla where it's going to be subject to public company's scrutiny, or is he gonna want to focus on his other companies that he has much more control over.
It feels like we're heading towards a rubber meets the road moment when it comes to the shareholder vote. I mean, either it's reapproved and he's a happy man maybe, or maybe he leaves and then we as we spoke about a few weeks ago, maybe we find out what the Musk premium to Tesla actually is and we find out I don't know whether Tesla needs Elon Musk at this point, whether it would do better with a traditional auto type CEO.
When you think about I don't know the fact that EV demand is drying up for everyone, not just for Tesla. It feels like a kind of existential moment for the EV market.
Yeah, it's not clear that his skill set is what's really needed at Tesla right now, because it's like a mature auto company with auto company problems, and he's off putting wires in people's brains. Right, maybe the move is in fact for him to step back as CEO, but that's hard for thenock price. Like you get a lot of valuation premium from the retail investors who love them. I mean, that's the other thing about it being a public company is it's the only place that his retail
investors can invest with them. Yeah, you can't buy.
SpaceX, but you know what a neat solution would be taking SpaceX public closed and fun sure and invest in all the elon musk companies. We can publicly list it too, and that would be really fun to watch.
That is actually a really good idea.
Thanks that one's for free, but.
You get a commission on that one.
Bill Aang Bill Wang.
So Bill Wang is on trial for his family office, Archie's Capital Management, employed a while back and lost thirty something billion dollar fortune for him and billions of dollars for several banks, including Credit Suites, which didn't fail because of our chagoes.
But like it's not here anymore.
Yeah, it didn't didn't help. But he's on trial for kind of two things like market manipulation, bottle these stocks and pushed them way up and then they crashed when he stopped buying them, And for lying to banks, because basically he like borrowed a lot of money from banks to buy all these stocks, and had the banks known the true extent of his positions, they wouldn't have lent
him all the money. And he's on trial this week, and I have to say it seems to be kind of going okay for him in the sense that they haven't really done the market manipulation case yet, but it just sort of sounds like the evidence is like he bought a lot of these stocks, which is weird, but it is not proof of market manipulation by itself. It doesn't seem to be any smoking gun of him being like, I'm buying these stocks so that I can like artificially
inflate their price, so that I can do something. Because he didn't do something, they bottle the stocks and then they crashed and he lost all his money. He wasn't like doing it for some nefarious plan as far as I can tell. But the other thing he's on twelve for is lining to the banks, and like there was definitely some line to the banks. There's a lot of testimony that there was lying to the banks, but it wasn't from him. It's like from his employees.
Yeah, so far, we've heard from Scott Becker, for example, who was a risk manager at Archagos, and he testified that he lied. He told several banks that Archaeos was heavily invested in fang stocks like Apple, Amazon, et cetera, et cetera. In actuality, actually they were really invested in ADRs for companies like ten cents and by Do et cetera. That was a large part of the portfolio.
So that was a lie and he's but also like you know, Viacom was like yeah the company or yeah, quantities of a few, like a handful of stocks.
Yeah. But I guess what looks good for Bill Wangs so far is that it's not clear that he necessarily told those employees.
There's no email from him being like make sure to a lot of the banks, which sometimes in some cases they have that.
Yeah. Yeah, but I mean you raised the point why did they lie? Then?
I was thinking about that. There's a sort of like he was the boss, there's some sort of implicit assumption of well, if the employees are lying to the banks to keep our ke goos going. They were doing it because that's what their boss wanted to them, which, first of all, I'm not sure is enough for to be a crime. But saying I'm not sure that's true, I feel like people who have jobs are motivated to do a good job at work. It's not like they're like, I need to make this trade work at because my
boss told me to. It's I need to make this trade work out because I'm like trying to be a good employee. And like, you know, you sort of have a general create value. Yeah, you want to create value, and you're whatever, you've been at that company for a while, and you have some sense of commitment to the company in some sense of professional desire to do a good job at whatever it is you do, and what you're
doing is keeping this extremely concentrated portfolio from crashing. Then maybe you'll lie to a bank to do that, right, And maybe you're just doing it because that's in the very short term, the way to improve your own performance, and you're just trying to do a good job. So is that his fault. I don't know, it's like kind of his fault.
But so for a couple of days into testimony, it seems okay ish for bull Wang at the moment just to meditate on Scott Becker a little bit longer. He's definitely not having a great week or a great last couple of weeks. Again, testified, he did say he lied. He also apparently texted in twenty eighteen that he hoped that his boss would die in a plane crash, and then in twenty twenty, I hope that he would die
a quote slow, painful death from COVID. He said of the texts, I obviously regret that it is not.
Inconsistent with what I said before. You'd be like really motivated to do a good job and also have days when you which your boss would dine a plane crash.
I that's why I never want to get sued. I mean, for a lot of reasons. I don't want anyone to go through my text messages. They're all super clean though. But anyway, that was a fun.
Little through the outs of the Money Stuff podcast.
Exactly, Uh, we burn every recording, We'd smash it with bats. Anyway, that was a fun little detail that came out in testimony. Also coming out was the Goldman fat Finger, which wasn't previously known.
I believe it's amazing.
Yeah, it's amazing.
At the end of our Chagos, like they had like scraps of money at different banks, and like they were getting furious margin calls, and they're also trying to buy more of these stocks to prop them up, and so they were going to every bank and saying, oh, we have one hundred million dollars at your bank, send us one hundred million dollars. And some banks were doing it even though they were like a day away from bankruptcy.
And so they did that to Golden. They're like, before it did seventy million dollars at Goldman, can you send it to us, Except they like hit the wrong button and instead of asking for ford and seventy million dollars from Golden, they sent for hundred and seventy million dollars in Golden And then they called govid Or like, hey,
can we get that money back? And Golvin was like no, I sort of they were like, oh, we need to Like yeah, they like sort of dragged their feet a little bit, and then by the time they stopped dragging their feet, like it was clear that our Kegos was busted and yeah, Golbyn kept the money.
Didn't they request a meeting with them.
Yeah, they were like, yeah, you get at the money back. Let's just talk to your chief trader to make sure everything's.
Okay, right, Like he's busy right now.
I think anyone if you get a call saying can we have all of our money back, you're like, well, I think okay. Then Goldman they were just holding four hundred and seventy million dollars for them. They were also lending them enormous amounts of money against concentrated stock positions. And if you're like, oh, our go needs money, your next thought is are all these derivatives positions that we have with them are they good for them?
Yeah?
And the answer was very much no. So Goldman cut the money.
There was testimony from a Jeffreys managing director as well, who when she got the call, her reaction was, what's the emergency? Like, we need all the money back right now?
You get a call from your customer being like I need every penny in my account wired to me immediately. If you're just their bank, maybe you'd do that, right, But you also have like an enormous loan out to them, and you're like, wait a minute.
Mail back.
On this very podcast last week, we talked about, well, we talked about several city fat.
Fingers to be a somewhat regular occurrence, but.
We talked specifically about the one where they like, they sold a ton of European stocks and crashed all the markets, and then we're like, oops, we meant to sell fifty million dollars, but we sold four hundred and forty billion dollars among us? Who among us? Indeed, because every time I write or talk about a fat figure, I get emails from people about like, yeah, here's my pad finger story. I got a good one from a reader. He said
that he's trading in his personal account. He made some money on call options, right, so he bought some call options and some stock. He sold the call options. He had one hundred thousand dollars, and he says, well, he's trying to figure out what to do with the money. He decided to put it into the bill ETF, like
a short term money market ETF. He's like one hundred thousand dollars, and he says on his brokerage screen, like when you sell an option and then you got to do another trade, it defaults to doing an options trade. And so he was like, I'm gonna put a hundred thousand dollars into bill and instead he bought one hundred thousand dollars of call options on the bill money market, which is like, there is no more boring investment than the billity, but there's no crazier investment than call options
on the time. Yeah, that's wild. And so he bought a lot of the He hit buy on a lot of these options, and he said that they executed like one contract and moved the market, and he noticed and canceled the rest of it and was only a few hundred dollars.
But I thought it was amazing because we were talking in relation to the city system, how it was maybe just designed poorly. And I mean, here's a great example, a real life example of a person in their personal account falling victim to maybe an unintuitive trading screen, right right.
If I were designing a trading system, I would probably make it default to trading cash, not options, every trade. So of course, if I were a retail broker, I would want to encourage as much option trading as possible, because that's how the retail brokers make money, so maybe I would, you know, maybe I would encourage.
I would want the text to be as big as possible, like a really large font size. Those always make me feel safe. Anyway, time to go.
How's the Money Stuff Podcast?
I don't have my script?
And that was the Money Stuff Podcast. I'm Matt Levian and I'm Katy Gray. We're not actually doing that, and that was the Money Stuff Podcast.
I'm Matt Levian and I'm Katie Greifeld.
You can find my work by subscribing to the money Stuff newsletter on the.
Bloomberg dot com, and you can find me on Bloomberg TV every day between ten to eleven am Eastern.
We'd love to hear from you, and you can send an email to Moneypod at Bloomberg dot net. Ask us a question and we might answer it on air.
You can also subscribe to our show wherever you're listening right now and leave us a review. It helps more people find the show.
The Money Stuff Podcast is produced by Anamasaracus and Moses on Them.
Our theme music was composed by Blake Naples.
Brandon Francis Newnham is our executive producer.
And Sage Ballman is Bloomberg's head of podcasts.
Thanks for listening to the Money Stuff podcast. We'll be back next week with more stuff.