# Horse Pilates: A Mailbag Episode

An episode of [Money Stuff: The Podcast](https://invisiblenetwork.ai/podcast/1739582836), 2 Jan 2026, 29 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/ee4336cb-155f-4488-90e0-b1400134e40e/5ccd6406-1995-4259-b9d2-b3b80105c01e/audio.mp3?utm_source=Podcast&in_playlist=77e6a3a7-290d-4a82-8164-b14001353ef2

Katie and Matt answer listener questions about performative earnings calls, hedge funds as a calling, favorite quotes, proxy advisers, ETF mechanics, sports betting market structure, 10b5-1 plans and the thrill of horse dancing. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
[0:08] Speaker 2: Here we are Friday, January second, twenty twenty, recording this, live,
[0:13] Speaker 2: recording this, live recording this on I don't know, December
[0:18] Speaker 2: seventeenth days. Wow, it's been it's been an eventful two weeks.
[0:22] Speaker 2: I know, between when we recorded this and when you're
[0:25] Speaker 2: listening to it.
[0:26] Speaker 3: Ominous, very ominous.
[0:28] Speaker 2: Yeah, I'm going to regret this so.
[0:31] Speaker 3: Much, probably just given the pace of everything that's happening
[0:34] Speaker 3: all at once. But hopefully our answers to these questions
[0:37] Speaker 3: won't have changed too much in two weeks. Hopefully, unless
[0:40] Speaker 3: something amazing happens.
[0:43] Speaker 2: Hello, and welcome to the Money Stuff Podcast here, weekly
[0:46] Speaker 2: podcasts where we talk about stuff related to money. I'm
[0:50] Speaker 2: Matt Levine, and I read the Moneys Doft column for
[0:52] Speaker 2: Bloomberg Opinion.
[0:54] Speaker 3: And I'm Katie Greifeld, a reporter for Bloomberg News and
[0:56] Speaker 3: an anchor for Bloomberg Television.
[1:00] Speaker 2: Not pretending to sing the mail bag thing, but today
[1:02] Speaker 2: is a mailbag episode.
[1:04] Speaker 1: Yeah, mail bag, Thank you, Katie, mail bag nail bag.
[1:23] Speaker 2: Yeah, let's get into it.
[1:24] Speaker 3: We've got some good ones. We're starting off strong with
[1:26] Speaker 3: a question from Christopher, who asks why do analysts ask
[1:31] Speaker 3: questions on earnings calls? I get why they ask them.
[1:33] Speaker 3: In private meetings with the company, they then get exclusive
[1:36] Speaker 3: access to body language information, but on public earnings calls
[1:41] Speaker 3: they get their information only to have it simultaneously shared
[1:44] Speaker 3: with everyone else. What do they get out of that?
[1:47] Speaker 2: It's a good question. So basically all of the questions
[1:50] Speaker 2: on earnings calls are asked by sales ad analysts whose
[1:53] Speaker 2: job is not to buy stocks that will then go
[1:55] Speaker 2: up vote, rather to publish research reports for their customers
[1:59] Speaker 2: saying what's thots will go up and so like, broadly speaking,
[2:02] Speaker 2: the research analysts are in a business of like providing
[2:06] Speaker 2: public ish goods, right, Like, they're not getting paid directly
[2:10] Speaker 2: for picking stocks. What they're doing is they're providing some
[2:14] Speaker 2: holistic set of services to investor clients that make the
[2:17] Speaker 2: investor clients think fondly about them and about their banks.
[2:21] Speaker 2: And then the investor clients, because of those fond feelings,
[2:24] Speaker 2: will either you know, in the US, they'll trade with
[2:26] Speaker 2: the banks and pay them commissions and in Europe they'll
[2:28] Speaker 2: pay directly for research. And so what that means is
[2:31] Speaker 2: that like anything that the research analyst does that like
[2:35] Speaker 2: makes investors like them is productive, and providing public goods
[2:39] Speaker 2: by asking good questions on the earnings call is reasonably productive. Also,
[2:43] Speaker 2: if you ask good questions on the earnings call, then
[2:46] Speaker 2: people will hear you and think, ooh, I like that analyst,
[2:49] Speaker 2: and that will lead to things like maybe them paying
[2:52] Speaker 2: for your research. It will also lead to maybe the
[2:55] Speaker 2: company thinking you're good and liking you, and therefore one
[3:00] Speaker 2: you know, having private meetings with you where they tell
[3:02] Speaker 2: you stuff or give you a body language that allows
[3:04] Speaker 2: you to be more informed and too.
[3:06] Speaker 3: Like.
[3:06] Speaker 2: Another job of research analysts is brokering meetings between companies
[3:10] Speaker 2: and investors, right, so they do corporate access where you know,
[3:13] Speaker 2: when a company is doing a non deal ROACHO or
[3:15] Speaker 2: a conference or whatever, they're meeting with investors and those
[3:18] Speaker 2: slots are kind of like arranged by the banks by
[3:20] Speaker 2: the research analysts, and if you are in good favor
[3:24] Speaker 2: with the company, then you get better access to those
[3:26] Speaker 2: things and you can do more for your clients. So
[3:29] Speaker 2: as part of like the broad set of services they provide,
[3:34] Speaker 2: asking good questions in a very public place on ear
[3:36] Speaker 2: news callus it's a useful thing to do.
[3:38] Speaker 3: It sounds a bit performative. But I hear it.
[3:40] Speaker 2: Yeah, it's like a market Like being a research analyst
[3:43] Speaker 2: is in some sense a marketing job, right, and so
[3:44] Speaker 2: like being good in public is good marketing, I should say,
[3:49] Speaker 2: also like it is an analytical job, and you are
[3:52] Speaker 2: building your own model, and like if you have differentiated
[3:56] Speaker 2: views or differentiated skills and you ask a good question
[3:59] Speaker 2: that informs your model, other people will get the answer
[4:01] Speaker 2: to the question, but they don't have the same model,
[4:03] Speaker 2: they don't have the same skills, right, So you could
[4:05] Speaker 2: still get differentiated information or analysis by asking a question
[4:10] Speaker 2: that everyone can hear. But a lot of what you're
[4:12] Speaker 2: doing is letting everyone here smar you are.
[4:14] Speaker 3: Yeah, you're sort of speaking to something that I was
[4:17] Speaker 3: wondering when reading this question, is whether there's satisfaction in
[4:22] Speaker 3: asking like a really good question on the earnings call
[4:26] Speaker 3: that maybe gets something more candid from the executives on
[4:30] Speaker 3: the call.
[4:31] Speaker 2: You're a television anchor, Sure you know the answer to
[4:33] Speaker 2: this question?
[4:34] Speaker 3: Well, yeah, I guess. I mean, if someone asked a
[4:36] Speaker 3: really good question on an earnings call, I would probably
[4:38] Speaker 3: highlight it and also steal it from myself.
[4:41] Speaker 2: Yeah, But also, just like, isn't there satisfaction.
[4:44] Speaker 3: In asking a really good question. Yeah, that's true. Or
[4:48] Speaker 3: like the journalists at the FED press conference, right, yeah.
[4:52] Speaker 2: Right, same thing. The journalists of the FED Press conference.
[4:55] Speaker 2: Any answer to their question. Every other journalists of that
[4:58] Speaker 2: conference can write down, right, yes, but you ask a
[5:00] Speaker 2: good question, then you're like, oh, you impress your colleagues,
[5:04] Speaker 2: you impress the FED. Yeah, you impress your readers.
[5:08] Speaker 3: Yeah about or you tick off the FED something else.
[5:12] Speaker 3: Something else I also wonder about is like whether I
[5:15] Speaker 3: wonder this too about the journalists in the room at
[5:17] Speaker 3: the FED Press conference, is whether there's any sort of
[5:20] Speaker 3: sense that, like this is a team sport, that we're
[5:23] Speaker 3: trying to get something out of these people that we
[5:27] Speaker 3: might not have otherwise, or whether everyone is asking their
[5:31] Speaker 3: own individual questions and not necessarily building on the question
[5:35] Speaker 3: that was asked before you.
[5:36] Speaker 2: I mean, surely it's some combination, right, Like, surely you
[5:39] Speaker 2: want to distinguish yourself, but also, like someone else draws
[5:42] Speaker 2: some blood, you move in for the killer. Right, Yeah,
[5:45] Speaker 2: probably somewhat similar.
[5:48] Speaker 3: Good question, Christopher. This next question, Yeah, who wants to
[5:56] Speaker 3: read it?
[5:59] Speaker 2: It?
[5:59] Speaker 1: Gover?
[6:00] Speaker 2: What idiotic book is coming from senior hedge fund leaders?
[6:03] Speaker 2: It's asset management? The entire point is to care about
[6:08] Speaker 2: making few money. The people that do get hired who
[6:11] Speaker 2: don't care about money are weirdos who create ten billion
[6:13] Speaker 2: dollars Ponzi schemes. Jane Street hiring Mathcamp weirdos rather than
[6:17] Speaker 2: the cross players is a literal criminal conspiracy. Anthropic is
[6:20] Speaker 2: a weird cult, and it's specifically because of how weird
[6:22] Speaker 2: and abnormal that the Open Ai board was that they
[6:25] Speaker 2: tried to destroy the company because it released the successful product.
[6:28] Speaker 2: We need more normal people in these companies and less
[6:30] Speaker 2: ethereal PhDs that don't care buying a house, a plane,
[6:34] Speaker 2: or a yacht, don't care about buying your household. Companies
[6:38] Speaker 2: should have corporate policies that require employees over the age
[6:40] Speaker 2: of twenty five to not have roommates. We get better
[6:43] Speaker 2: products and better corporate decisions if people aren't living in
[6:45] Speaker 2: cult houses but rather have to deal with the real
[6:48] Speaker 2: housing market and do things like buy groceries and pick furniture.
[6:51] Speaker 2: If hedge fund leadership wants to only hire socialists, then
[6:54] Speaker 2: they should go lead a university rather than managing financial assets.
[6:57] Speaker 2: For two and twenty or more. I love this question,
[7:00] Speaker 2: any of this question. I love this rant. I don't
[7:04] Speaker 2: even know what prompted it, but I have written about
[7:05] Speaker 2: this that I believe, and I think I am not
[7:08] Speaker 2: alone in this, that like a lot of the most
[7:11] Speaker 2: successful people in the financial industry are deep down motivated
[7:18] Speaker 2: by puzzle solving and intellectual curiosity rather than the pursuit
[7:22] Speaker 2: of money. And I just think that this is an
[7:26] Speaker 2: empirical fact that might not be true, but it seems
[7:29] Speaker 2: to be true, right, Like you could imagine that the
[7:31] Speaker 2: thing that would make you the best at managing hedge
[7:33] Speaker 2: fund was like really liking money a lot, But it
[7:35] Speaker 2: turns out that solving puzzles is really good for managing money.
[7:38] Speaker 2: But Graham is right that there are weirdnesses there, and
[7:43] Speaker 2: that like, if you get into this business because you
[7:46] Speaker 2: really like solving puzzles, like some number of those people
[7:49] Speaker 2: do end up committing huge frauds. And there is some
[7:53] Speaker 2: possibility that a world of nice, sociable, moderately intelligent lacrosse
[8:00] Speaker 2: players would commit less fraud and have fewer blow ups
[8:05] Speaker 2: and Ponzi schemes than one where where the weirds are
[8:10] Speaker 2: running the nuts funds. But what do you do about that? Right?
[8:12] Speaker 2: You can't. It's a fiercely competitive business, and if you
[8:16] Speaker 2: are just trying to trade stocks with like friendly sociability,
[8:22] Speaker 2: you'll get run over by the math kids. And so,
[8:25] Speaker 2: you know, the competition leads to this strange place where
[8:27] Speaker 2: the people who are less motivated by money make the
[8:29] Speaker 2: most money, and then some of them are weird. Also,
[8:31] Speaker 2: I should say, like I'm being sympathetic to his question,
[8:35] Speaker 2: but fundamentally my sympathies are with the puzzle people, right,
[8:38] Speaker 2: I mean, I love the puzzle people, and I think
[8:40] Speaker 2: it is on balance good for the world and also
[8:45] Speaker 2: very pleasing aesthetically that the puzzle people are in charge
[8:48] Speaker 2: of finance. But it's a real you know, this is
[8:50] Speaker 2: like it goes back to Liar's Poker. Right. This transition
[8:52] Speaker 2: from the sort of sociable, essentially marketing oriented people to
[8:57] Speaker 2: math puzzle people is one that has called attention on
[9:00] Speaker 2: Wall Street for decades.
[9:01] Speaker 3: H Great Graham, really good stuff. Okay, here's Sean that
[9:07] Speaker 3: seems to love certain quotes because they're graded explaining a
[9:09] Speaker 3: moment mechanism, trend, et cetera. For example, quote, it would
[9:13] Speaker 3: be wise to view any investing in open Ai Global
[9:16] Speaker 3: LLC in the spirit of a donation. End quote hidden
[9:20] Speaker 3: poorly internally labeled Fiat at account eight million?
[9:25] Speaker 2: Do you eight billion?
[9:26] Speaker 3: Eight billion?
[9:27] Speaker 2: She's a little till there.
[9:28] Speaker 3: In front of it because it.
[9:30] Speaker 2: Shan beckman Fried's famous spreadsheet famous.
[9:33] Speaker 3: Do you have an all time favorite?
[9:35] Speaker 2: Do I have an all time favorite quote? So I
[9:37] Speaker 2: almost said this in the last answer, Samuel Johnson says,
[9:40] Speaker 2: there are a few ways in which a man can
[9:41] Speaker 2: be more innocently employed than in getting money. I think
[9:45] Speaker 2: about that a lot. Yeah, people regularly get mad at
[9:50] Speaker 2: Wall Street and fanciers and people trying to make a buck,
[9:55] Speaker 2: and I often think it's better than almost all of
[9:58] Speaker 2: the alternatives. People who are motivated power or revenge or
[10:04] Speaker 2: even a sense of mission, we're often doing worse things
[10:07] Speaker 2: than the people are just out there trying to make
[10:10] Speaker 2: a buck or eight billion bucks. So that's a that's
[10:12] Speaker 2: a you know, an all time favorite quote of mine.
[10:16] Speaker 2: Another favorite quote of mine is, you know, Warren Buffett
[10:19] Speaker 2: has a lot of famous quotes and his famous shareholder letters.
[10:23] Speaker 3: Yeah, probably quoted a.
[10:24] Speaker 2: Lot of them. The one that I like them most
[10:27] Speaker 2: is at some point he's like talking trash about gold
[10:30] Speaker 2: as an investment, right, and he's like, you can invest
[10:34] Speaker 2: I think the number was like the market cap with
[10:35] Speaker 2: the SMP. He's like, you can put you know, thirty
[10:37] Speaker 2: two trillion dollars into the into the SMP. You put
[10:39] Speaker 2: it the money into the SMP, you get all the
[10:41] Speaker 2: productive capacity of America, all the companies, all the corporate profits,
[10:44] Speaker 2: all right, all the business. Or you can put that
[10:46] Speaker 2: amount of money into a cube of gold that is
[10:48] Speaker 2: like yay hi by yay long, by yay wide. And
[10:51] Speaker 2: he's like, and then it'll just sit there. You can
[10:53] Speaker 2: fundle the cube, but it will not respond.
[10:57] Speaker 3: It will not spin off any any dividends anything like that,
[11:01] Speaker 3: no cash flow.
[11:01] Speaker 2: I just think of Warren Buffett's saying, you can fundle
[11:03] Speaker 2: the cube, but it will not respond.
[11:18] Speaker 3: Okay. From ends a question on ISS slash Glass Lewis
[11:22] Speaker 3: and the voting discussion. Isn't this the easiest way for
[11:25] Speaker 3: a billionaire to gain a huge influence on companies? Buy
[11:28] Speaker 3: Iss or Glass Lewis and steal the voting in one
[11:31] Speaker 3: in the direction you want? Would this work?
[11:34] Speaker 2: I don't know, you know, and Glass Lewis people, people
[11:38] Speaker 2: are really mad at Iss, Glass List or the proxy advisory.
[11:41] Speaker 3: Firms, as discussed on this pod ages ago.
[11:45] Speaker 2: Now I speak only a few days before we recorded
[11:48] Speaker 2: this pod, Donald Trump put out an executive order basically
[11:52] Speaker 2: saying we don't like the proxy advisors. And there's this
[11:55] Speaker 2: notion that the proxy advisors are in charge of all
[11:58] Speaker 2: shareholder voting. Right, People like a conspira like this where
[12:00] Speaker 2: it's like two foreign owned companies control how all American
[12:06] Speaker 2: public companies are run. Right. The idea is that Iss
[12:08] Speaker 2: and Glass Lewis tell the shareholders how to vote, and
[12:11] Speaker 2: then the shareholders vote that way, and then the companies
[12:13] Speaker 2: have to do what they say. This is exaggerating in
[12:16] Speaker 2: a lot of ways, one of which is that like
[12:18] Speaker 2: Iss and Glass Lewis have their most influence in the
[12:20] Speaker 2: least important things like there are shareholder votes on you know,
[12:25] Speaker 2: there are hundreds a year on non binding proposals that
[12:29] Speaker 2: companies should write reports about ESG stuff or whatever, and there. Yeah,
[12:32] Speaker 2: a lot of shareholders do defer to Iss and Glass
[12:35] Speaker 2: Lewis because it just doesn't matter to them that much.
[12:37] Speaker 2: Iss and Glass Lewis have meaningful influence on things like
[12:40] Speaker 2: contested merger situations and proxy fights, where like there are
[12:43] Speaker 2: real economic stakes, but they're a lot of asset managers
[12:49] Speaker 2: are making their own decisions because they have more at stake,
[12:52] Speaker 2: whereas the stuff where the Iss and Glass Lewis have
[12:54] Speaker 2: the most impact is where people have the least at stake.
[12:57] Speaker 2: But also it's just like they have no authority. They're
[12:59] Speaker 2: just persuasive, right, They're just like useful, and if they
[13:02] Speaker 2: stop being useful, then people would stop paying attention to them.
[13:06] Speaker 2: So I think if you bought Iss and glass Lewis
[13:08] Speaker 2: and use them to advance an agenda, first of all,
[13:11] Speaker 2: you can only do so much to advance the agenda
[13:13] Speaker 2: because it's only like share all theer voting. And secondly,
[13:16] Speaker 2: if you did it too obviously, then people would get
[13:18] Speaker 2: sick of you, and it can't be that hard to
[13:20] Speaker 2: start another one.
[13:21] Speaker 3: That's the thing like in practice, if a controversial billionaires,
[13:25] Speaker 3: which is Elon Musk, bought either Iss or Glass Lewis,
[13:28] Speaker 3: I feel like like whatever recommendation they make, people just
[13:32] Speaker 3: know it's biased.
[13:33] Speaker 2: Yeah, well you know everyone's like, oh it's biased. Now
[13:35] Speaker 2: it is biased. They have some priors that happened to
[13:39] Speaker 2: more or less aligned with the views of a lot
[13:41] Speaker 2: of investment managers. Because the investment manager are the customers,
[13:47] Speaker 2: and they're trying to run a business where people pay
[13:50] Speaker 2: for their advice. But yeah, like you know, their bias
[13:55] Speaker 2: is kind of aligned with their customers, and if you
[13:57] Speaker 2: change that, then the customers would go somewhere else.
[13:59] Speaker 3: Yeah, now we have a question from it's like the
[14:04] Speaker 3: ETF segment. I don't really know how to answer this,
[14:07] Speaker 3: but Leo asks, I feel like you could just have
[14:09] Speaker 3: every buy in ETF be a creation and every cell
[14:12] Speaker 3: be a redemption routed to the issuer and remove the
[14:15] Speaker 3: possibility of ETF's trading outside of NAV. Why bother being
[14:20] Speaker 3: able to trade them with other traders directly at.
[14:22] Speaker 2: All, because they're exchange traded.
[14:24] Speaker 3: Yeah, that's the thing. They trade throughout the day.
[14:26] Speaker 2: Right. An instrument where you could only create and redeem
[14:30] Speaker 2: with the issuer is just.
[14:31] Speaker 3: The mutual fund yeah right, Yeah.
[14:33] Speaker 2: And mutual funds have a couple of disadvantages. One is
[14:37] Speaker 2: that it's just an administrative cost to the issue always
[14:40] Speaker 2: having to trade with you, rather than you can trade
[14:43] Speaker 2: on the exchange with anyone who wants to two. The
[14:46] Speaker 2: issue wants to trade with you at NAV, but the
[14:48] Speaker 2: NAV changes throughout the day, and so there's a cost
[14:51] Speaker 2: in just updating that, whereas with an ETF you're trading
[14:55] Speaker 2: at the market price, and so it just kind of
[14:58] Speaker 2: takes care of itself. Nobody takes care of itself with
[15:00] Speaker 2: arbitreasure is making sure the price is close to the
[15:02] Speaker 2: nav but like the issuer doesn't have to worry about that, Like,
[15:04] Speaker 2: it's much more administratively simple. Also though, like a lot
[15:09] Speaker 2: of the point of the ETF thing is that if
[15:13] Speaker 2: you're doing trades with the issue, the way ETFs worked
[15:16] Speaker 2: is that I gave the issuer money and it gave
[15:18] Speaker 2: me back shares. That is a taxable trade that creates
[15:23] Speaker 2: tax liabilities for the other holders of the ETF of
[15:28] Speaker 2: the fund right, because when the issue is selling stock
[15:33] Speaker 2: for cash, it creates a tax realization event. The trick
[15:39] Speaker 2: of ETFs is that they never trade.
[15:41] Speaker 3: For cash famously.
[15:43] Speaker 2: Famously, and so when I trade with you on the
[15:46] Speaker 2: exchange and we're not trading with the issure, there's no
[15:48] Speaker 2: tax realization event for the ATF. When there are creations,
[15:51] Speaker 2: they're not like me going to the ETF with cash
[15:54] Speaker 2: and getting my shares or vice versa. They're otherwise participants
[15:58] Speaker 2: handing in shares and getting back of the ETF. So
[16:01] Speaker 2: there's an in kind transaction and no tax event. Yeah,
[16:04] Speaker 2: and so it is like, really important to the ETF
[16:06] Speaker 2: is that there are no cash trades with the ETF,
[16:09] Speaker 2: so there are no taxes, and they deffer taxes for
[16:11] Speaker 2: as long as you hold the fund.
[16:13] Speaker 3: So doing this would remove all the things that make
[16:16] Speaker 3: an ets.
[16:16] Speaker 2: This is just a mutual fund.
[16:17] Speaker 3: Yeah.
[16:18] Speaker 2: The question why would you why can't you just do
[16:20] Speaker 2: every trade with the issuer? Is like, why can't an
[16:22] Speaker 2: etfpm mutual fund? And the answer is, we've discovered a
[16:25] Speaker 2: better technology.
[16:26] Speaker 3: Yeah, why can't a mule be a horse? A lot
[16:28] Speaker 3: of reasons. This is a really great question from Oscar.
[16:33] Speaker 3: Why are there no meme ETFs? We have meme stocks
[16:36] Speaker 3: and meme stock ETFs, but there is no meme ETF
[16:40] Speaker 3: in otherwise completely boring ETF holding boring assets that nevertheless
[16:44] Speaker 3: drums up huge retail excitement. It doesn't have to trade
[16:47] Speaker 3: at some dune premium, just build up a big NAV.
[16:50] Speaker 3: I read this a few times and then I understood
[16:52] Speaker 3: what Oscar was asking because my immediate reaction was, there
[16:56] Speaker 3: are ETFs that hold meme stocks, but he's talking about
[16:58] Speaker 3: why hasn't an ETF t taken off in the same
[17:01] Speaker 3: way that a meme stock has, like display meme like characteristics.
[17:06] Speaker 3: Is how I understood it.
[17:07] Speaker 2: And the answer is because of the ARP. Right. The
[17:09] Speaker 2: answer is because if I buy an ETF on the
[17:11] Speaker 2: stock exchange, I'm buying it from a market maker who
[17:14] Speaker 2: is probably selling me shares of the ETF and buying
[17:20] Speaker 2: the underlying stock, right and vice versa. If I'm selling,
[17:23] Speaker 2: they'll buy the ETF, they can sell the underlying stock,
[17:27] Speaker 2: and so if the values get out of line, then
[17:29] Speaker 2: they'll just do that arbitrage. Right. If an ETF is
[17:33] Speaker 2: trading it well above its net acid value, then market
[17:36] Speaker 2: makers are going to sell the ETF and buy the
[17:38] Speaker 2: underlying shares and close the ARP and do creations and
[17:40] Speaker 2: redemptions to close the APP. So it can't really trade
[17:43] Speaker 2: it much of a premium. And then the question is
[17:46] Speaker 2: it's not trading at a premium, it would just pull
[17:48] Speaker 2: up a big nav meme stock can be fairly small, right,
[17:52] Speaker 2: people can buy the memestock and it'll go up. And
[17:56] Speaker 2: a meme ETF that held a lot of shares would
[17:59] Speaker 2: have to push the prices of all of the shares
[18:02] Speaker 2: in order to go to the moon, right, Like, you
[18:05] Speaker 2: can't have a premium, not sustainably, and so the only
[18:09] Speaker 2: way for it to like go to the moon is
[18:10] Speaker 2: to push out the prices of all the underlying shares.
[18:12] Speaker 2: So you can imagine like a small ETF with like
[18:15] Speaker 2: small Memei stocks doing that, But it's not the.
[18:18] Speaker 3: Most obvious thing to do a giant ETF that holds
[18:21] Speaker 3: small stocks. I feel like that would kind of.
[18:23] Speaker 2: You can't have a giant Meme. Yeah, like the audience
[18:26] Speaker 2: for Meme anything, the audience for like irrationally pushing out
[18:30] Speaker 2: the price of things. It's not you know, it's not
[18:32] Speaker 2: that big.
[18:32] Speaker 3: Yeah.
[18:33] Speaker 2: I will say, like, this is an interesting question because
[18:36] Speaker 2: I feel like I've written this and said this possible
[18:39] Speaker 2: on this podcast. One of the lessons of the Meme
[18:41] Speaker 2: stock episode is that fundamental value is a floor on
[18:46] Speaker 2: stock price, because if like a stock is trading well
[18:49] Speaker 2: below it's fundamental value, then some private equity firm can
[18:52] Speaker 2: come and buy the company and you know, extract its
[18:54] Speaker 2: cash flows. But fundamental value is not a cap on
[18:58] Speaker 2: stock price. Like, if a stock trades it ten times
[19:01] Speaker 2: its fundamental life, there's nothing you can do about that.
[19:03] Speaker 2: You can short it, but you can't make it go
[19:05] Speaker 2: down to its fundamental day. There's no offsetting equivalent to
[19:08] Speaker 2: like a private equity firm buying the company and cracking
[19:11] Speaker 2: up its cash flows. And so everyone sort of thought
[19:14] Speaker 2: that fundamental value in the long run was the driver
[19:17] Speaker 2: of thought prices, and the memestock episode threw that into question.
[19:20] Speaker 2: Is like, no, you don't. It doesn't have to be. No,
[19:22] Speaker 2: with ETFs, there is a symmetrical mechanism, right, there's the
[19:25] Speaker 2: arbitrage mechanism means that the ETF kind of has to
[19:28] Speaker 2: trade its fundamental value, and if it doesn't, you can
[19:30] Speaker 2: fix that yourself. You can like extract that premium directly
[19:33] Speaker 2: by you know, genie a creation or redemption. And so
[19:37] Speaker 2: that's why there's no MEITF because you can't sustainably trade
[19:40] Speaker 2: above fair value.
[19:41] Speaker 3: I still feel like it could happen. Yeah, maybe it'll
[19:44] Speaker 3: happen in the next two weeks, and this will be
[19:46] Speaker 3: the thing that eurodically changes our answers. Chris asks thank
[20:07] Speaker 3: you for continuing to cover the amusing and somehow not
[20:10] Speaker 3: yet a legal state of prediction market quote sporting outcome commodities.
[20:15] Speaker 3: On the last podcast, it sounded like hal She could
[20:17] Speaker 3: arguably become a platform that connects betters with market makers,
[20:21] Speaker 3: which somehow seems like a bad thing for DraftKings and flutter.
[20:24] Speaker 3: But couldn't the sports books become the market makers?
[20:28] Speaker 2: Yeah? Why not? I Mean, it's unclear what actual entities
[20:33] Speaker 2: end up doing this, but I do think that one
[20:36] Speaker 2: way to think about it is that right now, there
[20:38] Speaker 2: are sports books which are in the business of trading
[20:42] Speaker 2: sports pets with retail customers essentially, and there are prediction markets,
[20:48] Speaker 2: which are public registered exchanges that are in the business
[20:51] Speaker 2: of trading sports pets with anyone who wants to show up.
[20:55] Speaker 2: And like, that's kind of how the stock market works.
[20:57] Speaker 2: Right There are retail brokerages that send their retail custom
[21:00] Speaker 2: stock orders to you know, sit at all securities or
[21:04] Speaker 2: chains trade or power or whoever, and then there's a
[21:07] Speaker 2: public stock market. And one thing that happens is that
[21:09] Speaker 2: those electronic trading firms that get the retail orders, they're
[21:12] Speaker 2: also trading on the stock exchange, and so one thing
[21:15] Speaker 2: they are doing is interacting with retail orders and then
[21:18] Speaker 2: laying off risk in the public markets. And you could
[21:20] Speaker 2: imagine something like that happening with sports books, right maybe
[21:24] Speaker 2: not the current sports books, maybe that's more like a
[21:26] Speaker 2: market maker or function, but you have people who are
[21:28] Speaker 2: interacting with retail traders and they're getting flows and they're
[21:33] Speaker 2: you know, they're getting like two sided, uninformed flows and
[21:36] Speaker 2: they're trading against it and they're making a spread and
[21:38] Speaker 2: so forth. And when they have unbalanced risk, they go
[21:41] Speaker 2: lay it off in the public markets against whatever sharp
[21:43] Speaker 2: traders they find. They're like, I think that's a very
[21:45] Speaker 2: reasonable model, and like, the way it works in the
[21:47] Speaker 2: stock market is if you're a retail trader, you get
[21:50] Speaker 2: a better customer experience and often like better pricing by
[21:53] Speaker 2: trading with an electronic wal seller through your retail broker's platform,
[21:59] Speaker 2: And like that could happen here too, or we're like,
[22:01] Speaker 2: you know, the retail sports books can offer maybe a
[22:05] Speaker 2: better user experience and so you trade with them, but
[22:07] Speaker 2: then they are trading in the public markets to lay
[22:09] Speaker 2: out their risk. There are some problems with that theory,
[22:13] Speaker 2: including about like the legal structure of commodities markets, but
[22:16] Speaker 2: it does kind of feel like that could be a
[22:18] Speaker 2: place that this ends up, where the retail traders are
[22:20] Speaker 2: trading with someone who specializes in retail trading, and then
[22:24] Speaker 2: like there's some professional institutional market.
[22:27] Speaker 3: So Chris maybe he identified the evolution.
[22:30] Speaker 2: Yeah, I don't know that the current sports books are
[22:32] Speaker 2: going to be the best situated to to do that.
[22:34] Speaker 2: But yeah, they're all kind of they're all basically hiring
[22:37] Speaker 2: the same pool of high frequency traders.
[22:39] Speaker 3: That's probably fine, all right, Dan Dan asks, I have
[22:42] Speaker 3: a question about how companies execute share repurchases and the
[22:46] Speaker 3: rules around it. I know that parenthetical back when the
[22:48] Speaker 3: SEC and Force rules insiders could use a one oh
[22:53] Speaker 3: five B one plan to try and five one ten
[22:56] Speaker 3: ten five be one plan ten.
[22:57] Speaker 2: Be five to one.
[22:59] Speaker 3: Wait did I say ten B five to one ten
[23:01] Speaker 3: five B one oh ten be five to one ten. No,
[23:04] Speaker 3: it says it.
[23:04] Speaker 2: Doesn't matter what it says. I'm telling you about it
[23:06] Speaker 2: actually is?
[23:06] Speaker 3: Okay? Sorry, sorry, down ten Wait you just said ten
[23:11] Speaker 3: B five one plan to try and protect themselves against
[23:14] Speaker 3: insigner trading allegations. Is there a similar plan for when
[23:17] Speaker 3: a company is repurchasing shares or are they allowed to
[23:20] Speaker 3: use insider information to time the repurchases? Also, how do
[23:24] Speaker 3: they do it? I assume Coca Cola doesn't open their
[23:26] Speaker 3: Robinhood account and submit a market order.
[23:30] Speaker 2: No, here's what they do. They call me, and then
[23:33] Speaker 2: they used to call me when I was a banker.
[23:35] Speaker 2: One thing I did was share repurchases, and so I
[23:38] Speaker 2: can tell you all about this. I will try to
[23:40] Speaker 2: keep it short because although it is dear to my heart,
[23:42] Speaker 2: it's not that interesting. But yeah, So ten B five
[23:45] Speaker 2: to one is like the SEC rule that basically says,
[23:48] Speaker 2: when you don't have inside information, you can set up
[23:50] Speaker 2: a plan to buy stock or sell stock. So like
[23:53] Speaker 2: corporate executives will set up a ten B five to
[23:55] Speaker 2: one plan to sell stock to pay for college, and
[23:58] Speaker 2: then later when the plans sell stock, even if they
[24:01] Speaker 2: have inside information, it doesn't matter because that the plan
[24:03] Speaker 2: is just automated. This is the theory. There are various workarounds,
[24:07] Speaker 2: but it's the same rule for companies. Companies regularly do
[24:10] Speaker 2: stock buybacks using ten to five to one plans because
[24:13] Speaker 2: they have some open window after they announce earnings where
[24:16] Speaker 2: they can set up the plan and then like the
[24:17] Speaker 2: plan can kind of go and be automated throughout the
[24:20] Speaker 2: year and they can buy stock even when they're discussing
[24:22] Speaker 2: mergers or whatever because like they have a ten to
[24:24] Speaker 2: five one plan. Sometimes companies do that, they also do
[24:28] Speaker 2: other things. It used to be that the main way
[24:30] Speaker 2: companies bought backstock was through tender offers where they made
[24:33] Speaker 2: a public announcement anyone who wants to sell stock at
[24:35] Speaker 2: this price can do it, and then they would buy
[24:37] Speaker 2: stock at a price, and this would solve all those
[24:39] Speaker 2: problems because they'd make full disclosure of everything and like
[24:43] Speaker 2: everyone would have the same information and they'd tender all
[24:45] Speaker 2: their stock at the same time. It's pretty annoying process
[24:48] Speaker 2: and companies do much less of that than they used to,
[24:50] Speaker 2: basically because the SEC relaxed the rules. Like a few
[24:53] Speaker 2: decades ago, it used to be considered that like open
[24:55] Speaker 2: market stock purchases where market manipulation, and so companies didn't
[24:59] Speaker 2: do it, and they relax those rules. This is periodically controversial,
[25:03] Speaker 2: like people are like stock buybacks are market manipulation, so
[25:06] Speaker 2: they should change the rules back and then companies would
[25:09] Speaker 2: have to do tender offers. But now they mostly do
[25:11] Speaker 2: open market purchases. The other thing they do is delightful
[25:15] Speaker 2: derivative products with their friendly local investment banker. Basically, anything
[25:19] Speaker 2: you do, you're going to call an investment bank and
[25:20] Speaker 2: they're going to do it for you. And the simple
[25:22] Speaker 2: way is they're going to do it in the open market.
[25:25] Speaker 2: Not so dissimilar from what you would do with robinhood.
[25:28] Speaker 2: They usually they'll like handle the you know, the average
[25:31] Speaker 2: over the course of the day rather than you hitting
[25:33] Speaker 2: every bye you know order. But if you want something
[25:35] Speaker 2: more complicated, like a fancy derivative product, they'd be happy
[25:38] Speaker 2: to put you into that called accelerated stock buybacks really good.
[25:42] Speaker 2: I used to sell them.
[25:43] Speaker 3: Sounds juicy.
[25:44] Speaker 2: Yeah they're good. Yeah, call me for I don't want
[25:47] Speaker 2: to actually endorse accelerate. It's like, well, have complicated feelings
[25:50] Speaker 2: about this product I used to sell. But in any case,
[25:55] Speaker 2: here's a question from Ian. Katie is mentioned on more
[25:57] Speaker 2: than one occasion that she craves adrenaline and is an
[26:00] Speaker 2: adrenaline junkie. She has also discussed her participation in the
[26:05] Speaker 2: sport of horse dancing. Are the two related? Is trissage
[26:10] Speaker 2: in activity that adrenaline junkies flock too? I want to
[26:13] Speaker 2: hear the answer to this one.
[26:14] Speaker 3: Probably no.
[26:16] Speaker 2: I feel like horseback riding in itself is like a
[26:18] Speaker 2: little bit you have has an element of.
[26:22] Speaker 3: Animal danger.
[26:23] Speaker 2: Yeah, could go fast even if during horse dancing He's.
[26:26] Speaker 3: Probably ideally they wouldn't. It's a twofold answer, because yes,
[26:32] Speaker 3: there is an element of adrenaline and riding horses. But
[26:35] Speaker 3: if you most adrenaline junkies are more into jumping, you know,
[26:40] Speaker 3: they want to go fast over jumps. Dressage often the
[26:43] Speaker 3: goal is to not go that fast. It's like horse ballet.
[26:46] Speaker 3: But I love drissage well. I love drisage just for
[26:51] Speaker 3: the training element of it. It's like horse pilates, honestly.
[26:54] Speaker 3: But when it comes to showing, I just love having
[26:57] Speaker 3: to be on. It probably takes five to ten minutes
[27:01] Speaker 3: for you to complete your test, and for those five
[27:04] Speaker 3: to ten minutes, you have to nail every part of it.
[27:07] Speaker 3: You just have to be on the entire time. So
[27:09] Speaker 3: I really enjoy that element. It's not dissimilar from television,
[27:12] Speaker 3: where the camera is on and you just have to perform,
[27:15] Speaker 3: right Like.
[27:15] Speaker 2: Any performance or competitive activity has an adrenaline competit, even yes,
[27:20] Speaker 2: even if it's.
[27:21] Speaker 3: Like, for example, obviously that's a high adrenaline sort of thing. Yes,
[27:26] Speaker 3: for yeah, if you're like in a high stakes match,
[27:30] Speaker 3: your heart is racing, but you're not obviously. In most cases,
[27:34] Speaker 3: I assume chess probably yoursage is the most similar. I
[27:39] Speaker 3: don't know, everyone go YouTube drissage in the alone?
[27:44] Speaker 2: Are there YouTube videos of Kiddie raffle.
[27:47] Speaker 3: Absolutely not, absolutely not.
[27:50] Speaker 2: Well, don't look for those though.
[27:51] Speaker 3: No, please don't. All right, Well, happy happy New Year.
[27:55] Speaker 3: I hope you all had a great time.
[28:03] Speaker 2: And that was the Money Stuff Podcast.
[28:05] Speaker 3: I'm Matt Levine and I'm Katie Greifeld.
[28:08] Speaker 2: You can find my work by subscribing to the Money
[28:10] Speaker 2: stuffnewsletter on Bloomberg.
[28:11] Speaker 3: Dot com, and you can find me on Bloomberg TV
[28:14] Speaker 3: every day on the close between three and five pm Eastern.
[28:18] Speaker 2: We'd love to hear from you. You can send an
[28:20] Speaker 2: email to Moneypod at Bloomberg dot net, ask us a
[28:24] Speaker 2: question and we might answer it on the air.
[28:26] Speaker 3: You can also subscribe to our show wherever you're listening
[28:29] Speaker 3: right now and leave us a review. It helps more
[28:31] Speaker 3: people find the show.
[28:32] Speaker 2: The Money Stuff Podcast is produced by annam Aserakis and
[28:35] Speaker 2: Moses One.
[28:36] Speaker 3: Our theme music was composed by Blake Maples.
[28:39] Speaker 2: Amy Keen is our executive producer.
[28:42] Speaker 3: And Sage Bauman is Bloomberg's head of Podcasts.
[28:46] Speaker 2: Thanks for listening to The Money Stuff Podcast. We'll be
[28:48] Speaker 2: back next week with more stuff

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