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Hello and welcome to the Money Stuff Podcast. You're a 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, a reporter for Bloomberg News and an anchor for Bloomberg Television.
Happy New Year, Katie, Happy.
New Year, Matt Levine, twenty twenty five. It's going to be great when we're recording.
Great already. Yeah, and can you believe the news and financial markets?
Jeez, Louise, it's amazing to see what's already happens in these first few seconds. Honestly, of twenty twenty five.
It's been it's been a while. I wouldn't miss it. We're recording this on my December ninetheen.
It is December nineteenth. It is three oh two pm.
So we have powerful skills of pronuncication. What are you talking about today or in the future, Katie.
Mail bag, let's dive right in. This is a question from Mitch. Mitch wants to know how we were each introduced to the world of finance. And I appreciate Mitch because we both wanted questions about ourselves and we'll get to some like more substantive questions. But what a nice first question of twenty twenty five, Matt, how are you introduced to the world of finance?
I don't know. I have like two answers. So I was a classics manager in college. I was like the most unworldly person, Like I did not do job interviewing my senior year of college and I graduated. I was like, oh my god, I need a job. I did. I interviewed her like one kind of job, which is McKenzie like sent me a letter being like you should interview at McKenzie And so I did you know, the like on campus first try and interview at mckensey. But of course,
like I wasn't prepared and I was terrible. So I had like an incredibly unworldly college experience. And then I actually taught high school a lotin for a year after.
I love that.
It was great. It was really fun. But it turns out that a classics manager really suits you for one thing, which is going to law school. And so I went to law school. Law school. I was like, I'll be like a constitutional law professor, right, But then I went and like con social law is kind of dumb, and like contracts are really interesting, and so I was like I like contracts, and so then what do you do
with that? Well, you go, like, you know, you have like a summer associate job as an M and A lawyer, because like they write contracts, why not you know, I was getting like very unworldly. I applied to all the law firms and I was like, I want to get a job at these law firms. I don't know anything about M and A. And then they all hired me because like they don't care. And then I went and worked in an M and A law firm. I was
like I love this, it's great. And then I, like, you know, I went from there and I was an MNI layer for a brief period and an investment banker for a longer period.
And so was that one answer too, because you said there was one answer.
Okay, that's like the sort of real, sort of direct path answer. I will say, though, like the other answer is that when I was like in middle school high school, I did read Liar's Poker. I don't know why, but I liked it. And I read The Barbarians at the Gate, which is even more fun and wait, edit that out.
Michael Lewis listens, Fine, you're saying nice things. Keep that in.
I thought, this is really cool, and like there was probably like a period in like I don't know, high school, junior high school where I was like I want to do high finance M and A and that totally faded and it was not on my radar in college or whatever. But at some point I like rediscovered it and like
I was an M and A layer. I was like, oh yeah, I remember like liking this stuff as a kid, and so there was something latent in me like that was like I want to do finance stuff, and like it came out of me eventually, even though I tried to tamp it down by majoring in Greek poetry in college.
You can't deny who you are seriously anyway.
So what's your story?
So I feel like it's not what people typically expect. My dad, who's listening right now, was the CEO of Nastac for a long time. He took over when I was in fourth grade, and he stopped being CEO of NASAK after I started Bloomberg, so it was a long time. We never talked about business or finance or the market or like stock exchanges. So I ended up at Bloomberg, and I think people, especially outside sources, expected me to know a lot more than I did, and I did not.
I talked.
No. I actually I went to the market side a lot. There's pictures of me, like in my goth phase, like at like a closing like at a closing bell ceremony and stuff, which is really sweet. Yeah, I'll show no one else can see it, because like it was a pain painful, awkward phase. I talked my dad about how I was going to answer this question, and he was like, make sure they know we talked, like we did talk, just not about anything else. My dad is one of
my closest friends. I got into this world from a journalist first perspective, Like I was the editor of my college newspaper, and then I went to Columbia for journalism grad school, and then I applied for an internship at Bloomberg because I was thinking where might I make the most money as a journalist, and I was like, probably reporting on money. And then I ended up at Bloomberg and here I am, here you are, Yeah, but it
definitely was through writing. I consider myself a writer first, and then a markets person, and here.
I am a podcaster first, right.
For sure, podcaster above all else, and then somewhere in there. Anyway, that was a fun first question mail bag mail Bag. Seth wants to know why doesn't the government insider trade? And then Seth goes through his logic. The government gathers
and releases a lot of market moving information. This information is worth a lot of money in theory belongs to the American taxpayer, does it The government should establish a department of insider Trading which gets early access to all this information and is able to trade on it in order to raise revenue for the government. But why would anyone ever take the other side of the government.
Then, Right, that's one good objection to this.
Yeah, Like.
One good objection to it is it wouldn't really work that well, yeah, no, it kind of would, right, Like if you had economic data you could buy or sell SMP in tax funds or whatever, right, and like there's enough of a market for that that like you could
probably sneak in some trading. Yeah, I do think the main answer is that this is a tax, right, anything the government does to raise revenue from people who are not the government is a tax classically, like inflation is a tax, right, Like, one way for the government to raise revenue is to like never impose any taxes and just print currency to pay for all of its stuff. And the reason governments don't do that is because inflation is also a tax, and it is a worse constructed
tax than like a progressive tax system. I think that's something similar here, where it's like if you raise money for the government by trading against counterparties, one, it's like an unfair tax, right, like you're taking them from people, you know, retirement savers rather than like the broad tax base. But then too, your like undermining the capital markets to raise these taxes, and so like you're making the overall
financial system worse to raise revenue for the government. Like you can raise revenue for the government in a more neutral way by like, you know, imposing taxes. So I think that's true of like a lot of stuff like this. Like there's like a well known trade in like fixed and come arbitrage, which is like you buy off the run treasuries which tend to trade at a slight discount to on the run treasures, and you sell the on the run and they eventually converge because they eventually both
become off the run. And I've often wondered, like, why doesn't the government just buy all the off the runs and like issue new on the runs to fund it, because like they could clip that spread too. I think it's the same kind of answer, which is, like, why would they make that money at the expense of the financial markets instead of just imposing broad taxes.
Well, great questions stuff comes from Max. Why is it so difficult for small retail investors to get diversified exposure for real estate despite the fact that real estate is such a large part of many people's assets. For example, even as a broke college student, I can very easily invest in a diversified collection of stocks in almost any industry. I like, why aren't there ETFs, thank you, Max, that are, for example, a bunch of residential properties in a particular city.
I would expect these kinds of products to be very popular for homeowners to hedge their own homes and whatnot. There's definitely some intrepid etf issuers out there that agree with you and are working on it. Are there probably? Yeah, not on the record about author I mean just ah, yes, the sanctity of this small room with the micros, not like particular city ETFs. But people are trying to figure out how to fit private assets in general largely into ETFs.
Like private assets, right, assets are one thing. Houses are differently.
I know, there's like two.
Answers to question. One is like, why can't I buy a diverst fied real estate portfolio? And the other is why can't I sell a share of my house?
Right?
The diverse wide real estate portfolio is a thing that people have been working on for decades, and there didn't used to be reats. A READ is a real estate investment trust.
Right.
It's like a pool of real estate assets that you can buy a share in. Right, And that's like a relatively new that's like like the seventies or eighties is relatively new technology that people developed in order to allow retail investors on the stock exchange to buy exposure to real estate. Now most roads are not single family homes, right.
One thing that is happening is that like single family homes have become like a real investor asset class, right, Like you know, like big asset managers now own a lot of single family homes and rent them out to
people to live in them. And I think that doesn't really exist in like read or ETF form yet, but then yeah, you could spin that out like sell stakes in your like single family home portfolio, and like, I don't know, I'd imagine in like five years if investor owned single family homes are a big deal, like someone will have a reate of them, so that you can
buy diversified exposure to single family homes. What you can't buy is diversified exposure to owner occupied single family homes because the owners occupy them and so they're not selling a stake. And like that's a thing that people have
thought about for a long time too. And like financial engineers love the idea of like, okay, you own house, you sell ten percent of your home equity to me, and I put it in a pot and I sell it to investors, right because like for you, you get some form of like hedging your house pass exposure and you get cash that is arguably not debt, has like somewhat more attractive properties than debt perhaps, And for me, I get exposure to your house and then if I
pool that with a bunch of other houses, then I've created something like an investable fund of owner occupied homes and like, that's a cool product. A lot of people would like to swap where it's like, if you have one hundred thousand dollars of equity in your house, you would perhaps rather have fifty one thousand dollars of equity in your house and fifty thousand dollars of like diversified home equity like across the country or whatever, so that
you're not as invested in your single house. People try that all the time. And I wrote about a company called Point in twenty sixteen. I was doing something like this. I think it's hard in part because, like startup founders and money stuff podcast listeners love this idea, many normal people may not be that interested in it, and so like, you can't necessarily get a huge diversified pool of people who are like, oh yeah, I want to like go through the headwreich of like signing a contract to sell
ten percent of my home equity. You also have like weird dynamics where you know, a mortgage you pay back every month until it's paid off, home equity whatever, you know, selling a portion of your home equity, how does the buyer monetize it? I think the answer is like they wait until you sell the house, like that could be a long time, or it's like not an obviously cash flowing outset if it's owner archiped real estate. And so it's like a weirder dynamic of like how the market
would work, but people do keep trying it. And also the other thing I should say is people try to make derivative products. There's like a case sholl or derivative products at some point where it's like based on some like observed index and like you have futures contracts side to the index. Because people really like the idea of being able to buy diversify a single family home exposure. And I feel like no one has really corracked it yet, but people.
Are gonna keep working on They're going to keep working on.
The thing I always I also compare it to is the other like form of equity that people want to buy is like human equity, Like people want go on.
So this is like you know, college students, MBA students, minor league baseball players, Like there are people who will come to them and say, sell me ten percent of your future earnings or like you know, your future earnings over the next ten years or whatever, and I'll give you a pile of cash today, and I will sell your future earnings to some investor class And like people do this like NBA students or like the NBA students
pool and with minor league baseball players too. You get like ten players and you pool yourselves and then like one of you makes it big, then he writes a check to the other nine, and so you have like a sort of like diverseifaication benefit.
That's crazy. I've never heard of this.
Oh, people love it. It's not a huge business. It's like a thing that people are constantly per forming startups to do because like it's a great abstract idea and then like in practice it's like, oh it's a mass, but like there is more progress being made on those than on the house stuff. The house stuff seems really hard.
Thank you for the thought provoking question, Max mail Bag mail Bag, let's move on to Kevin. All men so far, but we do have a woman coming up, so stay tuned. But Kevin asks you talk a lot about how analysts think it's worth talking to management, getting on calls, et cetera. Even though management can't share MNPI because they think they can glean something from body language that helps them evaluate
the company. Do any short sellers do the same too, Like, what if you had a big short position and then gain some info from management to body language that made you rethink the short It would be good for the company too if they were able to convince a short seller to cover I just think it's funny to imagine that conversation, Hey, we sold three million of your shares in the market because we think you're bad at your jobs. Could you meet with us to help us figure out
if that's still true? I love this question. I also love to imagine, like how dramatic your body language would have to be too?
Sorry about that.
I feel like we've talked about this before.
The body language stuff in general.
Yeah, and short sellers, well.
The body language. I feel like body language is a euphemism. Yeah, Because the idea is like, right, you're going to meet with management of a company that you might invest in, and like, you have a meeting and you walk out of the meeting and you like learn something and you go buy the stock or sell the stock or whatever, and the law says that management is not allowed to give you a material non public information that isn't already public?
Can they wink?
And it's like what happened in that meeting? And like, oh if they read the body language, and it's like, no, they like said something that like doesn't quite rise to the level of disclosure, but like is useful to you, and like what you know about the company and how you like build your model and how you think about the management. So you've you've been given like information and like people say body language because then it's like, oh,
they didn't disclose anything. It's just the body language, right, So I think it's a youth wasn't.
But in any case, maybe they raised their eyebrows suggestively when they.
Were you know, you were like, how do I think about this line item in the model? And they're like, oh, well, this is everything about that's not material enough to disclose. But it's like you've learned.
Something, right, A smirk snuck onto nobody.
Language is all fake, except I will say one of my favorite stories ever is because I've been writing about this for a long time, this idea that like management is giving you something useful, and I couldn't possibly not be giving you something useful. That's why they have these meanings and there's this great paper. These like academics got a lot of access to Aberdeen the like yeah UK long only asset measure.
Didn't they take the bellels out of their name.
I think this was before they took the vowels up and now it's Aberden. But so Aberdin or Aberdeen like had a bunch of meanings with management, and like these academics studied like how they learned, like what they learned, and like how they traded, and like basically they got useful information from these managintinings. But the academics also had
access to like their notes from the meetings. There's one where they met with the chairman of this company and the analyst came back and wrote a note that included saying he was looking unfeasibly tanned for this time of year. It was like in January or whatever. Yeah, and so if you're like the chairman of this company is looking unfeasibly tanned, yeah, that's a short, right, Like you sell that stuck. And so they did, in fact on the stock and it did actually turn out to be a well time trade.
That is so funny.
It's the only case I know of like true body language or body coloring being useful financial information, but anyway, they're basically a long investor. Do short sellers meet with management to like get talked out of their shorts? Like, I think it probably happens. There are probably some companies, Like I think most like activist short sellers are interested in hearing the company's perspective before they put a lot of money into betting against the company. And I think
it's a mixed bag. You know, how often they're going to contact them, and in general, my impression is that managements don't like short sellers and so I don't always meet with them, But I bet it happens. You know, It's funny, Like I feel like I'm aware of Tesla short sellers who have like turned around and become like huge dust the bulls, And I assume that is not from like a friendly meeting with Elon Musk where he like explains his thinking and they come away per suaded.
But like, you know, somehow they like you know, get enough of a vibe from them that they change their minds. But no, I think it happens. I think I think there's like a range of things, and like you see a lot of the noisiest short sellers and a lot of the most anti short seller managers being very vocal
about hating each other. But I think, you know, there's a wider range, and particularly like you know, a lot of people who are short companies are like multi strategy hedge funds who are just making relative value bets where they don't hate the company. They're just like have to be factor neutral or whatever. And I think a lot of those people do in fact meet with the companies and have kind of rational discussions and will sometimes be long and sometimes be short, and do not put a
lot of like personal animals into it. On either side.
Well, for my own amusement, I'm going to pretend that body language is real.
No, it's real. There's the one guy with ten Yeah, that's true. But I think there's some amount of like to the extent you're evaluating managements like quality. Yeah, getting a sense of how they talk and how they look you in the eye and shake your hand or whatever is maybe like a little bit useful. But I think the body lineage is super oerrated, and that's mostly they have substance of discussions that they just all agree they don't have to disclose.
Douglas has some questions. He has some questions. We're only going to answer one of them.
Douglas asks, since there are more words than letters and more sentences than words, is there any logical limit to the number of ETFs.
I love this question.
Wait, I don't get it. I feel like ETFs are limited by the number of letters, right, I mean you've written about that.
Tickers are, Yeah, so I don't think there's any limit to the number of utfs. But there are limits to tickers because a ticker, right, you need a ticker. US exchanges have a four character limit.
I didn't realize that.
No, it's four. I mean there are some like weird exceptions. The only one I can think of actually is Google, which is g O O g L. I don't quite know the lore behind that, so maybe, yeah, I know, But like, why is it five and no other stock is think about it?
The other four character that have share classes that are five? I don't know.
I don't think so anyway. Anyway, Generally speaking, generally speaking,
four character limit and no numbers. And that's different than Europe and Asia, which can have more than four characters, and can also, at least in Asia allow numbers I think actually Europe too also allows numbers, and I've written about maybe there could be a ticker shortage when it comes, especially to the world of leverage single stock ETFs, because your ticker is already a derivative of an existing ticker, and then you only have, however, many letters to work
with month three like MST. Yeah, MST something which is which is difficult.
I have asked said the micro strategy mstrs.
Monster MicroStrategy, Nazak and II. I've asked them about it. They've both told me they're not concerned. Currently in the US there's like thirty nine hundred listed ETFs, which is a lot. I am excited for the day when there's more US listed ETFs and there are US publicly listed stocks. We're not quite at that point, but we'll see. I just love this question, and I love Douglas's phrasing. It sounds like a riddle. Matt's textings, No, I'm.
There are proxtimately four hundred and fifty thousand logically possible.
Tickers something like that. Actually, when I wrote this story, we talked through the math. Yeah, but if you knock out two of those characters, three of those characters in some cases, then obviously your universe shrinks dramatically because you're.
Talking rightly, like, yeah, yeah, I feel like I've said this on the show before. Like you could imagine a world where like the ets become like a like universal format for products. Right, Anyone who's like, oh, I want to do like, you know, call options on micro strategy, be like, oh, do an need app for it? Right? In that world, you would need to kind of revise the ticker system, right, Like you need to have some sort of like mstr slash and then I have like
a descriptive for new characters. You need to have a more organized system than just like pick four letters. Yeah, but we're probably not there yet.
But I don't know.
Maybe in five years will there be some sort of like more complex ticker system to accommodate those just absolute tour endo.
Et aps Like maybe I can't wait, I don't know, you say four to five years, perhaps in the year of twenty twenty five. Anything could happen this year?
Yeah, right, it's been it's been a wild year so far.
Mail Bag mail Bag, Kristen has a question. I'm going to read it to you. Kristin says that my sister in law was recently talking about the Martha Stewart documentary out a few months ago. She was convinced that have you seen that round? No, and now I'm gonna watch it. Have you seen it?
I've seen like ten minutes of it. I've not seen it. And then Kristen has not seen it as far as I can. So we're talking about we're like fourth hand as the documentary. This is Kristen's sister in law.
Yeah, Kristen's sister in law watched the documentary about Martha Stewart, and Kristen's sister in law was convinced that everybody just ganged up on Martha and that Martha didn't do anything wrong because she didn't know it wasn't allowed the insider trading. I personally, this is Kristen talking. Kristen personally has not kept up with any of that news and has not
watched the documentary. But Kristen's instinct was that punishment for insider trading doesn't require the defendant to be aware of the insider trading rules. Was kristin correct or incorrect? I know that's an interesting question. I mean does intent matter?
No? I mean, like intent often matters in like market monipulation and stuff. But yeah, in insider trading, the rules are, first of all, you don't have to know that it's illegal to insider trade, right.
Yeah.
In general, ignorance of the law is no excuse, right, So if you didn't know it was illegal to insider trade, you can't be like, oh, I thought it was fine, right. People do that, by the way, Yeah, like you know, now you've found on the insider trading case that I write about, it's like they're like googling how not to get caught insider trading, and then ten persons they're like, what,
I had no idea. But there's also like another mind side question, which is, let's say you were going to sell the stock anyway, okay, and then you got some bad news. Can you still sell the stock? No? I think the SEC's rule is that if you're in possession of material on public information, that counts as selling. On the basis of material in public information, it seemed pretty well established, so yeah, like even if you would have
sold it anywhere, that doesn't help you. I will say that the Martha Stewart case is more complicated than that. Like Martha Stewart didn't like get an insider stock tip, like her broker got apparently insider stock tip, and then the broker's like, hey, I think we should sell that stock, and she's like, sure, go ahead, And so arguably, you know,
it's a little more complicated than that. But I think, like my impression and a lot of people's impression of the Stewart probably wasn't really guilty of insider trading because she didn't know that she was getting a material, not public tip. She had no reason to think she was getting an illegal tip. And iif you're broker's in charger of account, you're not making decisions. That's a little hard to accuse you of insider trading. What is relevant is
that she wasn't connected of insider trading. I don't think she was charged with inside of trading.
I haven't watched the documentary, so this is all.
I have been either, but I'm familiar with this.
You took a browse of no.
I mean I used to, like honestly, like when I started at a law firm, it was the law froom that like represented Martha Stewart, Like I had nothing to do with the case, and she wasn't think they weren't her lawyers on the trail. But like we all had a various what.
What year did this happen? Because I was pretty young and I wasn't really paying attention. It happened before I got there two thousand and four.
Oh well, so right before I got there. So she was in charge of inside of trading. What happened is that the insider and her broker got investigated by the SEC, and the SEC saw that she like got a call from the broker and then he sold her stock, and so they went to her and they said, did you get a hot insider tip to sell that stock? And she said, actually, what happened is that I put in a stop loss order saying that, like, if the stock
goes below sixty dollars, you should sell it. And my broker called to say that it was below sixty dollars, so I sold it, and that wasn't true. Apparently she didn't have a stop loss order, and so she was convicted of lying to the investigators, which is its own separate crime. But like I think a lot of people think she was kind of ill treated because she was lying to know about something that wasn't actually a crime, and so they shouldn't have been investigating here.
So I don't know, it is wild that she served time, like she went to prison.
Yeah, I have not watched the documentary, but my wife was watched a documentary and we've talked about it. It's interesting, Like I think you think now of like Martha Stewart, the character she is now has awesome It was awesome and very famous. Yeah, like very beloved and like friends
with Snoop Dogg. You think about that character and like going to prison for five months or whatever is like the big part of that character, right, Like you sort of think like her time in prison has like been good for her brand, but if you look back at like what actually happened, like it was a huge catastrophe for her, Like she had a big company that like basically like went away because she was convicted of not
insider trading and sent to prisident. So it was actually like really a sort of quite harsh result for something that, first of all, in the scheme of things, was not that much money, Like she didn't make a huge profit and like she probably didn't insider trade. She probably didn't know that she was trading on inside information. Yeah, it's her workers, like saw this time. She like, fine, but she lied to the investigators.
And you do a crime, question mark, you do the time.
No. The actually cliche is the cover up is always worse than the crime.
Oh my god, true true here I should have said that Martha Stewart, though, I mean an inspiring story of rebuilding oneself. Great energy to take into twenty twenty five.
And that was The Money Stuff Podcast.
I'm Matt Levian and I'm Katie Greifeld.
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