Mouth Noises: 50y, ISS, HF

Summary

Money Stuff: The Podcast

Episode: Mouth Noises: 50y, ISS, HF
Date: November 14, 2025
Hosts: Matt Levine (Bloomberg Opinion, Money Stuff Column Author), Katie Greifeld (Bloomberg News Reporter & TV Anchor)

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Episode Overview

This episode delivers Matt and Katie’s trademark blend of technical insight and dry humor, dissecting recent financial news and controversies in “mouth noises” fashion—sometimes literally. They debate the 50-year mortgage proposal (and how it’s less policy than personality politics), dissect the role and backlash against proxy advisors ISS and Glass Lewis (contextualized by the latest Tesla vote drama), and wryly analyze the ‘talent bubble’ in hedge funds, connecting labor scarcity with ancient pandemic economics. Along the way, memorable jokes, personal anecdotes, and deadpan skepticism keep things lively.

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Key Discussion Points and Insights

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1. Opening Banter & ASMR Jokes

• [01:30–02:25] Matt opens with a riff about eating Avgolemono soup on-mic, Katie riffs about podcast ASMR, poking fun at their “mouth noises” episode title.
  • "If you've ever wanted to hear this podcast is ASMR." — Matt [01:46]
  • "If you ever wanted to hear Matt Levine sort of just inhaling soup." — Katie [01:49]

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2. The 50-Year Mortgage Proposal

• [03:00–09:54]

Context & Political Theater

• Trump recently “truthed” about introducing the 50-year mortgage, prompted by housing official Bill Pulte’s Palm Beach golf pitch (with an FDR vs Trump mortgage comparison poster). [03:21–03:56]

  “FDR appeared below 30 year mortgage. And there was a photo of Trump below 50 year mortgage. And the headline was Great American Presidents.”
  — Katie [03:56]

• Derision about this “policy analysis” being driven by marketing, and intra-administration sniping at Pulte.

Stock Market Reactions

• Fannie Mae and Freddie Mac shares fell, partly due to rumors of Pulte’s falling out with Trump, showing how political drama—not substantive policy—is moving markets. [04:33–05:24]

  “It’s not like, would a 50 year mortgage be good for Fannie? Would it be bad?...For the last 10 years, people have said, oh, it can’t last forever, they have to be released...”
  — Matt [04:55]

Why the 50-Year Mortgage is a Bad Idea

• Theoretically, spreading payments drops monthly costs by ~10–15%, enticing for affordability—but at the cost of:

  • Little to no equity built for years.
  • “Double the cost” in total interest over life of the loan.
  • “Feels even less like homeownership and more like renting forever.” — Matt [06:37]

• Matt’s Key Insight: In supply-constrained markets, extra purchasing power just bids up existing house prices.

  “If you did something to make housing more affordable, you would just raise the price of houses to like, fully eliminate that affordability advantage…”
  — Matt [06:47]

• Comparison: Like with student loans and college tuition, subsidies end up flowing to sellers (colleges, homeowners), not buyers (students, first-time buyers). [07:30–08:15]

Reaction Across the Aisle

• Both left and right dislike it—Compass Point analyst called it “homeownership via an indentured servitude contract.” [08:57]

  “To your point that it probably feels like renting forever...offering ‘homeownership via an indentured servitude contract.’”
  — Katie [08:57]

• Matt: Incremental changes (30y vs 50y) aren't as transformative as politicians suggest.

Assumable & Portable Mortgages

• [10:03–12:52]

  • Assumable: New owner takes over existing mortgage.

  • Portable: Homeowner moves and keeps the same mortgage.

  • Not new, but rare in US. Would be attractive with today’s rates (e.g., Matt’s “flex” of a 3.25% mortgage rate).

    “If I could keep my three and a quarter percent mortgage, that would be nice for me.”
    — Matt [11:04]

  • Would increase mobility & inventory but complicates pricing for lenders (“prepayment option” becomes more valuable, making lending riskier and more expensive).

    “It would be really bad for mortgage investors and make mortgages much more expensive, I think, because you’d have to price that option.”
    — Matt [12:44]

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3. Proxy Advisors & the Tesla Vote

• [15:58–25:54]

What are Proxy Advisors?

• Institutional Shareholder Services (ISS) and Glass Lewis dominate; their job is to advise fund managers on proxy (shareholder) votes, usually “routine stuff.”

  “They’re in the business of telling investors how they should vote on proxy votes. And you almost never hear about it because it doesn’t matter. It’s like all these advisory proxy votes at companies you don’t care about...”
  — Matt [16:09]

Elon Musk, Tesla, and "Too Much Power"?

• Both ISS and Glass Lewis recommended against Musk’s massive compensation package; it passed anyway because Tesla’s retail base didn’t care about their advice.

• New right-wing focus on proxy advisors as “too left wing,” especially on ESG (environment/social/governance) matters.

• White House and FTC now considering curbing their influence—regulatory scrutiny framed as antitrust, though real objection is political/cultural.

  “There is a widespread now kind of right wing coded being mad at Glass Lewis and ISS because they tell people how to vote...There’s the sense that like they have too much power and they push companies to be more left wing than they otherwise would be.”
  — Matt [17:58]

Do Proxy Advisors Matter?

• Their recommendations used to matter more. Now big asset managers (BlackRock, Vanguard) create their own policies. ISS and Glass Lewis have diluted their house views.

• Their influence is greatest not on major votes, but “the mountain of routine votes” that asset managers and index funds don’t want to spend time on.

  “It is kind of irrational to pay attention to shareholder voting.”
  — Matt [28:36]

How Many Proxy Advisors Should There Be?

• Debate over the “oligopoly” with only two major players.

  “There are only two proxy advisory services that are big, but how many should there be?”
  — Matt [19:41]

• Comparison to ratings agencies.

Split Recommendations?

• Katie asks if ISS and Glass Lewis ever disagree—Matt’s sure they have, though they share governance philosophy.

  “But as I said, these people come from a professional interest in corporate governance and there are sort of standard views on what’s good governance.”
  — Matt [23:53]

Index Fund Voting

• Increasing debate over letting passive fund investors (like those in BlackRock index funds) dictate votes—mirroring “cranks” or passionate respondents who do reply, potentially making outcomes more erratic.

  “If you had to ask your investors, how would you vote and then get weird answers back, they would vote a lot more against management and it would be kind of bad for corporate managers...”
  — Matt [27:14]

• Katie notes Vanguard’s “Investor Choice” program, where fund participants pick which general priorities drive their votes. [27:20–28:25]

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4. Hedge Fund “Talent Wars” & the Great Gardening Leave Bubble

• [31:11–35:51]

The Fight for Talent

• Discussing Business Insider’s look at hedge fund talent wars. If you attract “mercenaries” with huge pay, don’t be surprised if they leave for better pay offers.

  “If you’re working at a hedge fund for $50 million, there’s a lot of reasons to assume that you’re there for the money and so you could be lured away by a higher bidder.”
  — Matt [31:49]

Gardening Leave and Labor Scarcity

• Half of all hedge fund PMs are, at any time, on paid forced sabbaticals (“gardening leave”), keeping supply tight and bidding up wages.

  “It’s like you have a career where you get paid a lot because you’re scarce, like artificially scarce. And also you get to take long vacations every couple of years.”
  — Matt [32:35]

• Matt compares this “scarcity” to the labor shortage after the Black Death (!)—but much more pleasant.

Why Can’t More Hedge Fund Talent Just Be Trained?

• Even though firms try to mold new talent, supply is slow to adjust.

  “Why can’t you teach someone to manage a hedge fund? Like, I understand it’s hard, but, you know, if you’re paying them $20 million, you get someone to do it.”
  — Matt [33:55]

• Katie jokes Matt sounds like Elle Woods: “Like, it’s hard.” [34:02]

• Comparison to the current "war for talent" in AI—a field where labor is still truly scarce because the discipline's so new:

  “It wasn’t a thing that got you paid $100 million five years ago. And now that it is...there will perhaps be less purity [of motive].”
  — Matt [35:01]

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Notable Quotes & Memorable Moments

• “Homeownership via an indentured servitude contract, calling the concept a bad idea.” — Katie citing analyst on 50-year mortgages [08:57]
• “People talk about student loans…government subsidies…what happens is not that it gets cheaper…colleges raise their tuition to fully capture that subsidy.” — Matt [07:30]
• “You set up something to attract mercenaries, but now you want loyal soldiers. It doesn’t work…” — Quoting Bradley Sykes’ source on hedge fund labor [31:23]
• “It’s like you have a career where you get paid a lot because you’re scarce…also you get to take long vacations every couple of years.” — Matt on gardening leave [32:35]
• “If you did something to make housing more affordable, you would just raise the price of houses to, like, fully eliminate that affordability advantage.” — Matt [06:47]
• “It would be really bad for mortgage investors and make mortgages much more expensive, I think, because you’d have to price that option [on prepayment].” — Matt [12:44]
• “It is kind of irrational to pay attention to shareholder voting.” — Matt [28:36]

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Timestamps for Major Segments

• Opening Banter & Soup ASMR: [01:30–02:25]
• 50-Year Mortgage Proposal: [03:00–09:54]
• Assumable & Portable Mortgage Concepts: [10:03–12:52]
• Proxy Advisors & Tesla Vote Debate: [15:58–25:54]
• Index Fund Voting & "Crank" Influence: [26:17–28:54]
• Hedge Fund Talent Wars, Gardening Leave: [31:11–35:51]

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Style & Tone

This episode is breezy but sharp—frequent dry asides, personal anecdotes (flexing low mortgage rates, humor about dead possums in Matt’s house), and a skeptical stance toward flashy finance “innovations.” The hosts’ rapport brings levity to technical explanations, making even the polysyllabic world of proxy governance and mortgage math highly listenable.

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For Listeners Who Missed It

You’ll come away understanding that the 50-year mortgage proposal is political theater masking a fundamentally bad, inflationary idea; that proxy advisors wield less practical power than their critics claim (but more annoyance); and that hedge fund salary inflation is as much about operational quirks as true “talent.” And you’ll probably crave Greek soup—or at least, more Matt and Katie banter.

Transcript

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Lewis Here My best selling book the Big Short tells the story of the buildup and burst of the US housing market back in 2008. A decade ago, the Big Short was made into an Academy Award winning movie and now I'm bringing it to you for the first time as an audiobook narrated by yours truly. The Big Short Story what it means to bet against the market and who really pays for an unchecked financial system is as relevant today as it's ever been. Get the Big Short now at Pushkin FM audiobook or wherever audiobooks are sold.

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Bloomberg Audio Studios Podcasts Radio News I'm.

[Matt Levine]

Going to eat a bowl of Avgola mono soup.

[Katie Greifeld]

Wait, what is it?

[Matt Levine]

Avgo Lomono soup. Lemon, potato and lemon.

[Katie Greifeld]

Yeah, yeah, potato and lemon. That sounds lovely. This of course from the Bloomberg Pantry.

[Matt Levine]

Ah, get that on the mic.

[Katie Greifeld]

This is asmr.

[Matt Levine]

If you've ever wanted to hear this podcast is asmr.

[Katie Greifeld]

If you ever wanted to hear Matt Levine sort of just inhaling soup.

[Matt Levine]

I want to be clear that I was exaggerating my slurping there for the mic.

[Katie Greifeld]

That's what ASMR is. You exaggerate your sounds at least. I don't know. I've never actually watched an ASMR video.

[Matt Levine]

I'm like aware of ASMR with a.

[Katie Greifeld]

I see parodies of it on TikTok, like people really clicking keyboards. But that's all I got.

[Matt Levine]

Yeah, I hope that some people get spine tingles out of this podcast. Katie just got a spine tingle.

[Katie Greifeld]

I just shuddered. Got a spine shudder.

[Matt Levine]

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.

[Katie Greifeld]

I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television. You just took a sip of water off mic and I feel like.

[Matt Levine]

Yeah, I'm not in general trying to make mouth noises throughout the podcast.

[Katie Greifeld]

That's what the podcast is, just mouth noise.

[Matt Levine]

That's the title of this episode.

[Katie Greifeld]

Perfect. All right, one thing's out of.

[Matt Levine]

Yeah, we're done here.

[Katie Greifeld]

So I don't own a home. I would really like to and maybe.

[Matt Levine]

But you're not 40 yet, which is like the median age of first time home buyers.

[Katie Greifeld]

I know. I think it's 39.

[Matt Levine]

But, you know, anyway, what would make your home more affordable is probably not a 50 year mortgage. But that's like been in the news this week.

[Katie Greifeld]

It's been in the news.

[Matt Levine]

Trump tweeted about it or truthed about it or whatever. He did.

[Katie Greifeld]

He did. Did you see the Politico story on the TikTok of how it came to.

[Matt Levine]

It's so good because it's like a Politico story that's like the Trump administration is just a snake pit. And so it's like all the people who don't like Bill Pulte, who is the head of the federal housing regulator and a real publicity hound. Bill Pulte apparently showed up to a golf game with Trump with a giant poster board saying, franklin Roosevelt invented the 30 year mortgage. Donald Trump invented the 50 year mortgage. And Trump was like, great, I'll tweet about it.

[Katie Greifeld]

I have the details. It was a Saturday evening during a golf game, but it was at President Donald Trump's Palm Beach Golf Club. It was a three by five poster board. And you're right in that. FDR appeared below 30 year mortgage. And there was a photo of Trump below 50 year mortgage. And the headline was Great American Presidents.

[Matt Levine]

Right. So that was enough for Trump to tweet about it and be like, oh, yeah, that's all the policy analysis I need to back a 50 year mortgage. And then like other people in the Trump administration went to Politico and were like, he sold POTUS a bill of goods. That wasn't necessarily accurate. And I don't know, they said a bunch of other nasty things about Pulte. Like, you know, yeah, we're quoted in Politico.

[Katie Greifeld]

Yeah, it's funny because it's showing up in the stock market. We're recording this on Thursday. And at least right now, shares of Fannie Mae and Freddie Mac, apparently they're falling in a big way because the word on the street is that Pulte is falling out of favor with the administration, which is probably, I don't know. Nothing's real until it is. But it's funny to see shares actually.

[Matt Levine]

React right and it's such like a bank shot. It's not like, would a 50 year mortgage be good for Fanny? Would it be bad for Fanny? It doesn't matter. I've written about this for literally a decade. One day Fannie and Freddie will be released from government conservatorship. But you could always make money by betting against the ding in the next year. For the last 10 years, people have said, oh, it can't last forever, they have to be released. But so there was a thesis that Pulte would be the one to crack it open and actually make it happen.

[Katie Greifeld]

Get it over the line.

[Matt Levine]

And now if both these out of favor, then I don't know. I still think one day they're going to be released.

[Katie Greifeld]

Well, it's funny because you saw such a big run up in shares on this idea and to your point that you can always make money betting against that idea, apparently shares of both have lost about 50% since their September peak. So just in the last two months or so. It's pretty amazing though that the pushback to the idea of a 50 year mortgage has been pretty bipartisan.

[Matt Levine]

Oh yeah, it's a terrible idea.

[Katie Greifeld]

Tell me why.

[Matt Levine]

Well, okay, the idea of a 50 year mortgage is that if you spread out Your payments over 50 years instead of 30 years, your payments will be lower.

[Katie Greifeld]

This sounds good.

[Matt Levine]

And like, you know, normal assumptions, people like you save like 10 or 15% on your monthly mortgage payment. And so if people think about affordability of homes as being mainly a matter of the monthly payment they could make, then cutting 15% off your monthly payment makes homes more affordable. And if people are worried about home affordability, then this is a good policy. There are various problems with that. One of which is that you have to have your mortgage for 50 years. And so like, you don't build up equity, you're spending a lot more on interest. You know, people are like, it doubles the cost of interest you pay over the life of the loan. And so it feels even less like homeownership and more like just renting forever. But to me, that's not the big problem. To me, the big problem is like, and this is biased by my experience living in and around New York.

[Katie Greifeld]

Go on.

[Matt Levine]

But like, where I live, housing is a positional good and there are only so many houses that people compete to buy them. And so if you just waved a magic wand and said houses will be 10% more affordable, then people would still compete to buy them and they would just build them up more until they stopped being 10% more affordable. Right. Like, the price of a house where I live is not determined by how much it costs to build a house. It's determined by, like, you know, there's only so many houses, it's only so much land in desirable areas. And so people bid up the price of that. And so if you did something to make housing more affordable, you would just raise the price of houses to, like, fully eliminate that affordability advantage. And so houses would be no more affordable. People like me who own homes would make money because there'd be like a windfall, one time gain. Although then you'd have to go buy, you know, if you moved, you'd have to buy a more expensive house, but, like, all of the affordability goals would be eliminated and you'd end up just having the same monthly payment but for 50 years instead of 30 years, which seems terrible. I don't think this is true everywhere. But like a lot of US housing is supply constrained. And you do, like, see this effect, right? Like, people talk about student loans, right? Like, if you have government subsidies of student loans, what happens is not that it gets cheaper to attend college, it's that colleges raise their tuition to fully capture that subsidy, and it gets to be, you know, the same price to attend college, but the government is subsidizing it. And I think you'd see that here where if the default mortgage was 50 years, you would still kind of be paying the same amount per month, but no house prices would be higher.

[Katie Greifeld]

Yeah, well, I mean, make it about myself. I would like to buy a home. Yeah, rates are really high. Yeah, I don't need.

[Matt Levine]

They'd be higher for 50.

[Katie Greifeld]

Yeah, I don't need to buy a home. So we're kind of just timing the market, waiting for rates to go down, but there has to be a bunch of people like me. And you think about, okay, rates go down, but then the people on the sidelines come in and they push up the price of the house. And I don't know, it probably ends up in the wash in terms of how much I'm saving.

[Matt Levine]

It's not fully true that, like, house prices go up as rates go down, but it is, like, kind of true that, like, you know, you'd think lower rates would lead to more housing affordability, but, like, to some extent that gets washed out by raising the prices of houses. Yeah, it's the same basic mechanism.

[Katie Greifeld]

To your point that it probably feels like renting forever, there was a note from Compass Point that was pretty crazy. The view of this analyst was that a 50 year mortgage offers, quote, homeownership via an indentured servitude contract, calling the concept a bad idea.

[Matt Levine]

Yeah, I agree with that. But I also like the difference between 30 years and 50 years. Isn't that great?

[Katie Greifeld]

That's what President Trump said.

[Matt Levine]

Yeah, it was like backing. Right. He's like, ah, it's a little thing.

[Katie Greifeld]

I don't worry about it.

[Matt Levine]

Most people don't live in their homes for 30 years. Right. Like a 30 year mortgage is a, is a way to sort of adjust the payments and ultimately you like, you sell your house after seven years and you cash out whatever the increase in the equity is. With a 50 year mortgage, you'd build in round numbers, zero equity in your first seven years. And so you'd basically be cashing out the increase in the house price rather than actually having a savings device. But it's not literal and you don't have to stay there for 50 years.

[Katie Greifeld]

I'm sure a lot of people opened this analyst's research note though, because it.

[Matt Levine]

Said indentured cert in the headline probably.

[Katie Greifeld]

Yeah, I would click on that.

[Matt Levine]

That's pretty good. I do want to talk about the other Bill Pulte ideas.

[Katie Greifeld]

Yeah, tell me about them.

[Matt Levine]

Well, so they're assumable and portable mortgages.

[Katie Greifeld]

Yes.

[Matt Levine]

He didn't invent these ideas. People have been talking about this forever and like they exist in various pockets of the world, but they're not like the norm in U.S. mortgages. But so an assumable mortgage is like, I move out of my house, you buy my house, I give you my mortgage. And a portable mortgage, I move out of my house, I buy a different house and I take my mortgage with me. Right. So like if I have a three and a quarter percent mortgage, which Katie I do, okay, flex three and a quarter percent mortgage and I want to move now, like whatever mortgage rates are, you know, six and change percent, something like that. If I wanted to move, if I could keep my three and a quarter percent mortgage, that would be nice for me. Right. And so in normal US Mortgages now you can't. But like, you know, there are places where you can. And Pulte has talked about having some version of that in the kind of like Fannie and Freddie standardized US Mortgage market.

[Katie Greifeld]

That makes sense.

[Matt Levine]

Yeah, sort of. It would be nice if you do it the Problem is there might be.

[Katie Greifeld]

More inventory because people wouldn't just sit on their houses.

[Matt Levine]

Yeah, that's true. It would like loosen up the market a little bit.

[Katie Greifeld]

Yeah.

[Matt Levine]

Problem is that like the US has a 30 year mortgage.

[Katie Greifeld]

Yes.

[Matt Levine]

Which has fascinating terms. It is a 30 year mortgage with a fixed rate, like normal, you know, people's mortgage, 30 year mortgage with a fixed rate that is pre payable at any time without penalty. And that is a like in theory a very valuable option. Right. If you borrow money for 30 years and at any point you can prepay it without penalty. Then if like market interest rates go up, you keep your mortgage and you're paying a below market rate. And if market rates go down, you prepay your mortgage and get a new mortgage and you get the lower rate. So if you're a mortgage investor, you're always on the wrong side of that. If rates go up, you hold below market paper and if rates go down, you get prepaid. And that's not really true because almost nobody optimally exercises their prepayment option because almost everybody who has a 30 year mortgage moves after seven years. And so when they move, they have to prepay their mortgage. And so it's not the case that people only prepay when rates go go down. Right. It's like people prepay kind of randomly and sometimes people who have three and a quarter percent mortgages move and prepay their mortgage and go get another 6% mortgage and grumble about it, but they have to do it because they have to move for work or whatever. Right. And if you got rid of that, then the prepayment option would be a really valuable option and that would make, it'd be really bad for mortgage investors and make mortgages much more expensive, I think, because you'd have to price that option. Right. Because people would never prepay except when rates went down. And so you'd always have kind of the wrong way interest rate risk on your mortgage.

[Katie Greifeld]

And how do you feel about assumable mortgages? It's the same story, but that's where.

[Matt Levine]

Either way, the point is that if you have a below market mortgage, someone can keep it. Right?

[Katie Greifeld]

Yeah.

[Matt Levine]

And like, you know, assumable mortgage is like you take my below market mortgage but like presumably you pay me for that. Right. So it's the same basic idea.

[Katie Greifeld]

I would like to take it without paying you.

[Matt Levine]

I understand.

[Katie Greifeld]

Okay.

[Matt Levine]

But no. Oh, I don't want my mortgage.

[Katie Greifeld]

That could have, I mean, something could have happened here anyway. I don't want to move to your house though.

[Matt Levine]

That's true.

[Katie Greifeld]

I'm sure it's great. I mean, it's got dead possums and it's fine.

[Matt Levine]

That's right. We've talked. Said only bad things about my house.

[Katie Greifeld]

Call them.

[Matt Levine]

I have a nice house.

[Katie Greifeld]

No, I see it on Instagram sometimes.

[Matt Levine]

You know what? I have a really good mortgage rate.

[Katie Greifeld]

Yeah. Yeah, that's probably. Yeah. I want to die in New Jersey, though.

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[Katie Greifeld]

What do you want to talk about now?

[Matt Levine]

I don't know. You want to talk about proxy advisors?

[Katie Greifeld]

Yeah, why not? This is a fun conversation. On the heels of, of course, the Tesla vote on Elon Musk's compensation package.

[Matt Levine]

Yeah, yeah. There's two proxy advisors. I mean, there's more than two, but there's two for practical purposes. And they're called iss, which is Institutional Shareholder Service and Glass Lewis. And they're in the business of telling investors how they should vote on proxy votes. And you almost never hear about it because it doesn't matter. It's like all these advisory proxy votes at companies you don't care about. And then every once in a while, not that infrequently, Tesla is like, we'd like to give Elon Musk a trillion dollars. What do you think shareholders? And then Glass, Lewis and ISS say no. Of course they say no, because they are professionals in the business of corporate governance and they have certain professional norms and expectations. Like they go to conferences, they talk to like minded people who are interested in corporate governance. And if you ask anyone interested in corporate governance, should we pay the CEO a trillion dollars, they'll say, no, that's not a good thing. And then Tesla is like a different kettle of fish, right? Like Tesla has investors who like Elon Musk and he's like, I want a trillion dollars. And like, great, here I have a trillion dollars. But Glass, Lewis and ISS don't want that. And so they say no. And then nobody cares because Tesla's investors, some of them follow Glass Lewis and ISS recommendations, but most of them are not. And so Tesla voted in favor of giving Elon Musk bags of money, but Elon Musk got mad at Glass, Lewis and iss. Yeah, I think there is a widespread now kind of like right wing coded being mad at Glass, Lewis and ISS because they tell people how to vote on corporate shareholder votes and corporate shareholder votes. A lot of them are about shareholder proposals. Like you should write a report about how much carbon you produce. Right? It's very like environmental and social coded. And so these firms sometimes tell shareholders you should vote in favor of writing a report on carbon emissions. So there's this perception that they're like kind of ESG ish, that they care more about environmental, social and governance issues than like you know, the Trump administration or the, you know, Republican Congress people do. And so there's the sense that like they have too much power and they push companies to be more left wing than they otherwise would be. And so there's like an effort to rein them in. And you've seen that this week with like the Wall Street Journal reporting that the Trump White House is contemplating some sort of executive order to in some way rein in the proxy advisors. And then also there's a report that the Federal Trade Commission is investigating them for antitrust problems.

[Katie Greifeld]

Yeah, basically whether they're breaking antitrust laws related to how they advise on proxy issues such as climate and social related policy.

[Matt Levine]

Yeah, it's not clear what the antitrust problem is. Yeah, there was a house hearing on, you know, antitrust and the proxy advisors a few months ago. And the kind of thrust there is that there are only two of them and they somehow stifle competition or have bought up competitors so that there's only two proxy advisors. And the world would be a better place if there was a lot of proxy advisors. I don't think that's really the problem. I think the problem that people worry about is that however many, you know, two or three or 10 proxy advisors, the proxy advisors have theoretically outsized impact because they tell shareholders of every company how to vote. Like the market is not for proxy advisory services. The market is for every public company. I also think that like there are only two proxy advisory services that are big, but how many should there be?

[Katie Greifeld]

Kind of reminds me of ratings agencies because there's three of them.

[Matt Levine]

It's very similar.

[Katie Greifeld]

Yeah, there's more than three, but there's more than three of them.

[Matt Levine]

There is more competition in ratings agencies. People worry that it's an oligopoly, but it's more competitive than in proxy advisory. And I think one reason for that is like rating.

[Katie Greifeld]

Keep that in.

[Matt Levine]

I don't even know what that was.

[Katie Greifeld]

Ratings is like the demon inside you.

[Matt Levine]

Seriously, Ratings are intuitively important.

[Katie Greifeld]

Yeah.

[Matt Levine]

Like people care about the credit worthiness of their loans and whatnot. I've written this week one reason that every investor outsources its proxy voting decisions to two proxy advisory services. This stuff doesn't matter. Like you own like 0.1% of the shares of some public company. You know, you own 500 companies, they each have like 10 share advisory shareholder proposals each year. Your vote, like one you're not going to change the outcome of the vote. And to the outcome of the vote doesn't have any practical effect. And so it's kind of crazy to spend a lot of time thinking about it. And so you outsource it to people who can think about it on behalf of everyone. And the number of people that you need to do that is not that high.

[Katie Greifeld]

Yeah, well, when you said, you know, it doesn't matter, this is like my.

[Matt Levine]

Thesis, like people care about this a lot. Yeah, but like there's very rarely a practical implication. Like mergers.

[Katie Greifeld]

Right?

[Matt Levine]

Like mergers, there's a shareholder vote and every so often it's contested. And like Glass Lewis or ISS will have a view, but often in those cases like the shares are kind of held by arbitrageurs anyway who have their own view. You know, the Elon Musk compensation every couple of years there's a meaningful vote there, but it's a lot of routine stuff. Yeah, it's not like never impactful, but it's almost never impactful.

[Katie Greifeld]

Well, that made me think of, you know, whether or not it even matters, whether their recommendations matter or not. Because you think about the experience with Tesla and Tesla is a unique beast, but I've seen stats that like 30% of their shareholder base is, is retail. Both of these proxy advisors recommended passing this package. It obviously passed regardless. So like how much do their recommendations even matter in this day and age?

[Matt Levine]

Well, so a couple of things. One is that their recommendations used to matter more and now like more big asset managers because of sort of a pressure campaign about this over the last few years. Now more big asset managers like no, no, no, we make our own decisions. We don't look at ISS or Glass Lewis. Also ISS and Glass Lewis have kind of backed away from having a house view and to get ahead of this. And yeah, like there's, you know, places like Tesla where it's a lot of retail shareholders who don't care about ISS and Glass for the most part. It's really like it's not the biggest asset managers, it's not retail, it's kind of smaller asset managers in the middle who tend to defer to Glass Lewis and ISS more. But the other thing is like they tend not to defer to them as much on huge economically meaningful decisions that affect big companies that make up big portions of their portfolios. Right. If you believe like Elon Musk is going to leave Tesla, if you vote against the package, then you will make your own decision about that. Yeah, not just do whatever ISIS says, but then you have 400 other companies where they're like, oh, we have like a shareholder proposal on our greenhouse gas emissions and usually check a box. Right. So like I think their recommendations have more impact on like lower profile votes. And there are just so many lower profile votes. And those votes are lower profile. But they also like they annoy corporations, CEOs when like 50 or 30 or 10% of their shareholders vote in favor of like having a report on greenhouse gas emissions. Like that's annoying to a CEO and so they complain to like their congressperson or to the FTC or whatever. Like ah, these guys are, you know, interfering in our business. But it's not that impactful.

[Katie Greifeld]

Yeah, that's funny. Something I wondered in all of this and I didn't take the time to look it up. Are Glass Lewis and ISS ever in conflict? Do they ever split or do they always sort of recommend as a bloc?

[Matt Levine]

I haven't looked it up either. I'm certain that they have split. It would be crazy if they never split.

[Katie Greifeld]

It would be crazy, wouldn't it?

[Matt Levine]

But as I said, these people come from a professional interest in corporate governance and there are sort of standard views on what's good governance. Right. Those standard views are not. Not everyone agrees with them. Right. It's classically good governance to, for instance, have a board chair who is not the CEO. Right. So the board has more like effective oversight over the CEO. And so ISS and Glasses pretty. Not always, but pretty regularly recommend voting in favor of splitting the board chair and CEO. But you know, you look at like, there are a lot of like, very successful CEOs who are like, no, I want to be the chair of my company because I want to. I'm the right person to run this company and I want to supervise the board too. And like, that's not like a crazy view. It's not like, quote, unquote, good governance, but it's a thing that like some shareholders and, you know, agree makes sense with some CEOs. So a lot of stuff like that where it's like, there's a classic view on good governance that is not always applicable and like, you know, ISS and Glass Lewis err a little more on the side of, you know, classic good governance rather than what shareholders want for a particular company. I want to say one other thing about. So like, this story is like a lot of it is about ISS and Glass Lewis, but not all of it. Like, there's also the very closely related issue of index fund managers like BlackRock and Vanguard, who used to defer more to ISS and Glass Lewis now kind of have their own house view, but are kind of similar in that they like, affect the votes of huge portions of every public company.

[Katie Greifeld]

Reluctantly.

[Matt Levine]

Yeah, Reluctantly. Yeah, yeah, I saw some class. Lewis too.

[Katie Greifeld]

Reluctantly.

[Matt Levine]

They want to like, collect fees for like, managing the voting process. No, it's not. It's not like they do.

[Katie Greifeld]

What else do they do?

[Matt Levine]

No, they do. It's a lot of like, administrative work. It's a lot of like, they help companies like actually do the process of voting.

[Katie Greifeld]

Right.

[Matt Levine]

So like, if they could just like flip a coin and be like, you should vote, you know, for this, or they don't care that much about the substantive recommendations they care about, like getting paid to do the sort of administrative work. And so they are backing away from doing some of the substantive recommendations and having a house sheet.

[Katie Greifeld]

I didn't mean to besmirch them. I'm sorry. ISS and Glass Lewis.

[Matt Levine]

So like BlackRock and Vanguard and State street, you know, control huge blocks of every public company famously. And vote. And people get mad at them for how they vote. And like there's this view that they're too left wing and blah, blah, blah. And so the reports about a potential executive order on this, it's not just about the proxy advisors, it's also about index fund voting.

[Katie Greifeld]

Yeah.

[Matt Levine]

And I've never heard like a great solution for what they should do. But the report that I saw like the Wall Street Journal was like, there's talk of having them mirror their voting so that they can ask their, you know, so if you're blackrock, you have, you know, thousands of clients in your index funds and you ask your clients how would you vote? And you know, 99.9% of them don't return the questionnaire. And like 0.1% say, I would vote in favor of management or whatever. And then I think the idea would be that the index fund managers would have to mirror the votes of their clients who responded. Which is kind of a crazy outcome if you think about it, because the people who respond are going to be passionate. Passionate. I was going to say cranks. Passionate is nicer. So right now people complain about BlackRock, but like the big index one's mostly vote with management. Yeah, but if they had to ask their investors, how would you vote and then get weird answers back, they would vote a lot more against management and it would be kind of bad for corporate managers and kind of good for like activist shareholders.

[Katie Greifeld]

Yeah. Well, I wrote this at the end of October. Vanguard has this program called Investor Choice. And I'm sure that blackrock and State street have similar initiatives as well. But this is recency bias because I wrote this story anyway. So basically it asks, it's people who own shares of the index funds that are in this program, basically how they would like management to vote or how they would like the fund company to vote. They don't ask them about every thing. I believe it's like a range of choices as to I want to maximize profits or I care about social issues. And then Vanguard votes. I think there's some subjectivity to that. But they vote based on what that shareholder selected.

[Matt Levine]

Yeah, but don't they vote that shareholder shares like, in other words, like, if they ask every shareholder and 99% of them don't answer, then the 1% get voted the way they want to. But the 99% Vanguard is not just mirroring the 1%. Right. Like they're making their own decisions.

[Katie Greifeld]

I think it's somewhere between them. I don't remember the exact details.

[Matt Levine]

Right. If you do full mirroring, then like the cranks get a lot of.

[Katie Greifeld]

Yeah, that's how it's impact. I do like that.

[Matt Levine]

Yeah.

[Katie Greifeld]

But maybe that's how it should be. I don't know if you're.

[Matt Levine]

Yeah, there's an argument. Right. Like if you. The people who care, who pay attention to. I just, like, I come back to like, it is kind of irrational to pay attention to shareholder voting. So it's not really how it should be. Like, you'll get the worst results if you let the people who pay attention to shareholder voting be the ones deciding the outcome. But there's not another way to do it. You need someone to pay attention to it.

[Katie Greifeld]

Yeah, that's true. And maybe you should be rewarded for you taking the time to care and answer the thing.

[Matt Levine]

Yeah, I guess.

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[Katie Greifeld]

Speaking of rewards, competition for talent, I know, it's rages on.

[Matt Levine]

Yeah. There's this great story by Bradley Sykes at Business Insider about the talent wars at the hedge funds.

[Katie Greifeld]

It's like an evergreen story.

[Matt Levine]

It's an evergreen story. He quotes someone saying, you set up something to attract mercenaries, but now you want loyal soldiers. It doesn't work because, like, if you went to work at a hedge fund because they promised you $50 million, you're probably a person who would go work at a different hedge fund if they promised you $60 million. Like probably you're there for the money. Like probably.

[Katie Greifeld]

Yeah, yeah, that's probably safe to assume. That's fine.

[Matt Levine]

If you're working at a hedge fund for $50 million, there's a lot of reasons to assume that you're there for the money and so you could be lured away by a higher bidder. And that makes it frustrating if you are the head of a hedge fund and you want to stop having constant bidding wars. I also hadn't really thought about it, but like, he makes the point that there's an artificial constraint on hedge fund talent caused by the fact that everyone has these super long gardening leaves. Basically half of all hedge fund portfolio managers are on the beach at any given time. And so the price of hedge fund managers gets bid up because you can only get so many of them because the rest are on long term gardening leaves.

[Katie Greifeld]

Yeah. It creates value.

[Matt Levine]

Yes. Artificial scarcity. And it's great because like a stylized fact of economic history is that after the Black Death in Europe, labor or like farmhand wages went up because farmhands were so scarce that they could command a much higher wage. That's a very bad way to create scarcity in the labor market. The hedge fund manager way of half of you are on vacation at any time, so the other half get paid more is like really nice. It's like you have a career where you get paid a lot because you're scarce, like artificially scarce. And also you get to Take long vacations every couple of years.

[Katie Greifeld]

Yeah. Izzy Englander called it a talent bubble that's created by, you know, you restrict supply.

[Matt Levine]

Yeah. The other thing is, like, I don't really understand why hedge fund talent is so exogenous and inelastic. Like, the article talks about it. Like, some of these big multi strategy funds have set up, you know, training academies. They hire out of college. They like, try to take unmolded clay and turn it into, you know, hedge fund managers. Like that should be possible. Like, why can't you teach someone how to manage a hedge fund? Like, I understand it's like hard, but, you know, if you're paying the $20 million, you get someone to do it.

[Katie Greifeld]

Yeah, I agree with you. You sounded a little bit like Elle woods there, so it kind of threw me for a loop.

[Matt Levine]

Okay. Oh, like it's hard. What?

[Katie Greifeld]

Like it's hard. Yeah, yeah, yeah, yeah.

[Matt Levine]

You want to pay me $20 million to manage a hedge fund? I'll do it for six months and then take two years of gardening leave.

[Katie Greifeld]

Yeah. But I feel like this story, I don't know. We talk about talent wars all the time. We talk about it when it comes to banking. We talk about it when it comes to hedge funds. Now we talk about it when it comes to AI. AI, we've talked about this before. It feels like a little bit more pure. To your point that if a hedge fund pays you $50 million to do hedge fund things, that probably you'll take an offer for $60 million. But maybe with AI, there is a little bit more of a mission statement. And I want to save the world. Yeah.

[Matt Levine]

I don't know. One thing.

[Katie Greifeld]

Destroy it.

[Matt Levine]

One thing about AI is like, hedge funds have been around in some form for a long time and like in the modern form for, you know, years, maybe decades. AI is very new. And so it's very understandable that there is a hugely constrained supply. Right. Like, the number of people who went and got AI PhDs is not that high because that was kind of a specialized thing until it became, you know.

[Katie Greifeld]

Also, if you got that PhD, how long before it's stale?

[Matt Levine]

I don't think it gets stale because I think you then work in AI and you work at the cutting edge of the field. But yeah, I mean, right. If you get that PhD and then spend 20 years doing something else, it'll get stale. But I think that, like, the market did not produce that many AI PhDs because it wasn't a thing that got you paid $100 million five years ago. And now that it is, I'm sure that 1 there be in the next 10 years there'll be more AI PhDs and 2 they will perhaps have less pure motives. Right? Because if you're a 16 year old who's good at math, instead of thinking, maybe one day I'll work at a hedge fund. Now you're like, oh, maybe one day I'll work at an AI startup and give you $100 million a year so you'll get more supply and less purity. But hedge funds have been around for a while. It should equilibrate. I don't know.

[Katie Greifeld]

Yeah. Okay. That's all I have to say. Apparently there's a rocket launch that I forgot was happening.

[Matt Levine]

I forgot to. Okay, I'm gonna just.

[Katie Greifeld]

You've got some delicious soup.

[Matt Levine]

And that was the Money Stuff Podcast. I'm Matt Levine.

[Katie Greifeld]

And I'm Katie Greifeld.

[Matt Levine]

You can find my work by subscribing to the Money stuff newsletter on bloomberg.com.

[Katie Greifeld]

And you can find me on Bloomberg TV every day on the close between between 3 and 5pm Eastern.

[Matt Levine]

We'd love to hear from you. You can send an email to moneypodlumberg.net Ask us a question and we might answer it on the air.

[Katie Greifeld]

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.

[Matt Levine]

The Monday Stuff podcast is produced by Anna Mazarakis and Moses Ondah.

[Katie Greifeld]

Our theme music was composed by Blake.

[Matt Levine]

Maples, Amy Kean is our executive producer.

[Katie Greifeld]

And Sage Bauman is Bloomberg's head of Podcasts.

[Matt Levine]

Thanks for listening to the Money Stuff podcast. We'll be back next week with more stuff.

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