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- [00:00]
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- [01:21]
Bloomberg Audio Studios
Bloomberg Audio Studios Podcasts.
- [01:25]
Matt Levine
Radio News so it's a beautiful day in New York City. I'm having real lizard thoughts. You know what I mean? Like, I want to believe.
- [01:34]
Katie Greifeld
I feel like the lizard don't know what you mean.
- [01:36]
Matt Levine
Okay, let me explain. Like I want to reptile. I want to believe. I'm more complex than, oh, the sun is shining and the air feels good. But I'm not. Because when it's nice outside the weather, I am immediately so much happier. So in that way, I kind of feel like a lizard. Just simple.
- [01:52]
Katie Greifeld
Yes. I thought we were gonna talk about the fact that you have plans to leave this podcast and go home and take your turtles out to the roof to stun themselves.
- [01:59]
Matt Levine
Yes, I have some baby turtles in my apartment that I've been taking care of. Reptile brains. I've been taking care of them over the course of the winter and they're gonna be going back outside very soon. That's where they primarily live. But anyway, it's nice to take them to the roof and feed them their mealworms in the sunshine. They tend to like that.
- [02:16]
Katie Greifeld
You and they both sunning yourselves?
- [02:18]
Matt Levine
Yeah, pretty much eating mealworms, warming our scales.
- [02:23]
Katie Greifeld
Hello and wel. 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.
- [02:33]
Matt Levine
And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.
- [02:39]
Katie Greifeld
It's another all tariffs edition of the Money Slow podcast.
- [02:42]
Matt Levine
Yeah, you know, it started as a joke and then it got really real. It's hard to talk about anything other than what is going on with the US Trade policy.
- [02:50]
Katie Greifeld
Yeah, we're gonna try. Yeah, it's not really an all tariffs.
- [02:55]
Matt Levine
But it's like, it's like at least a third tariffs, maybe half certain amount.
- [02:59]
Katie Greifeld
Of what is going on in the world.
- [03:06]
Matt Levine
I feel like we need to say what day we're recording it since it changes so much. We'll talk about whether or not that is the strategy. But we are recording this on a Thursday. It's the 24th of April.
- [03:16]
Katie Greifeld
When last I looked, the market was up today after being up yesterday.
- [03:21]
Matt Levine
Yeah. And the day before.
- [03:23]
Katie Greifeld
It's not literally a first in the last three months, but it feels like that.
- [03:27]
Matt Levine
Well, it's funny that we're rallying so hard right now because you have China on one hand insisting that the US And China are not talking, that negotiations aren't currently happening, they do not exist. And then you have President Trump saying that, no, they had a meeting this morning and then a reporter asked him the follow up, what administration officials were involved in discussions, who are you talking to? And Trump said, it doesn't matter who they is.
- [03:52]
Bloomberg Audio Studios
We may reveal it later, but they.
- [03:54]
Katie Greifeld
Had meetings this morning and we've been meeting with China.
- [03:58]
Matt Levine
So it's unclear what is actually.
- [04:01]
Katie Greifeld
This all feels very real, what is.
- [04:02]
Matt Levine
Actually going on, whether or not the US And China actually are talking. But it seems like the market just really wants the Trump administration to blink and is rallying merrily along, hoping that they have.
- [04:15]
Katie Greifeld
Right. It's so odd that the explicit statements from Trump as candidate and as president were, tariffs are great, let's have lots of them. And the market in the lead up to his inauguration clearly very heavily discounted that. And then the Liberation Day happened and the market crashed. Realizing that in fact he was serious about tariffs. And now we're right back to, nah, he can't be serious about tariffs.
- [04:42]
Matt Levine
Yeah, it feels very like first Trump administration where the sort of mantra was to take seriously, but not literally. And it feels like we're back there.
- [04:51]
Katie Greifeld
Yes. And we say the Al tariffs episode, but I feel like the other sort of big thing hanging over this week anyway is firing Jerome Powell to get rid of the Fed independence.
- [05:03]
Matt Levine
Yeah, that was pretty awesome.
- [05:03]
Katie Greifeld
That also seems to have Been walked back, but who knows?
- [05:06]
Matt Levine
Yeah. So Trump, in denying that he had any intention to fire Jerome Powell, said that the media ran away with it. But you did have Kevin Hassett, who is the top White House economist, say last Friday Trump is looking at options here when it comes to removing Jerome Powell. So it wasn't entirely just the media.
- [05:25]
Katie Greifeld
Right. Also, he's like, been truth socialing about how stupid Jerome Powell.
- [05:29]
Matt Levine
Yeah. Said he can't wait for his termination.
- [05:31]
Katie Greifeld
Yeah. Right. You combine the legal team studying ways to fire him and Trump saying how bad he is.
- [05:40]
Matt Levine
Some chances in both situations, both when it comes to trade and the possibility of removing Powell from the Fed, it kind of feels like Trump is just negotiating with the markets, like seeing how far the markets will let him go. Before long dated treasury yields skyrocket higher, which you've seen that happen, and then you see the Trump administration back off. But someone made the point today that it kind of feels like every time we see a little bit of green in the equity markets, because maybe there's hope that we're going to get to a more reasonable place on trade, that it seems like the Trump administration has felt more emboldened by that and we just enter this cycle again. But we're on the third day of the rally.
- [06:18]
Katie Greifeld
You know, people talk about the phrase the Trump put gets thrown around. You have the classic Powell put, or whatever the Fed chair is at the time, the idea that if things get bad, the federal step in to rescue the market and so there's some floor under stock prices. My impression is that people think of the Powell put as being kind of close to at the money, where if you're the Fed, you're interested in steady economic growth and any sign of wobbling in the market is a negative. The Trump put that we've maybe seen this week feels like it's quite far out of the money. It's like things have to go really off the rails to have the Trump put kick in. And also, like you just said, it's not just a floor, it's like a cap. Right. If the market gets too good, it's like, ooh, we have leeway to do weird stuff. Market gets too bad, you stop the weird stuff. It's like a card or it's like a call spread.
- [07:14]
Matt Levine
Yeah.
- [07:16]
Katie Greifeld
I don't know.
- [07:17]
Matt Levine
It's a very tactical market. It makes for some real tactical trading strategies.
- [07:23]
Katie Greifeld
I had a headline this week that was like, at least the market isn't boring. And someone wrote back to me like, yeah, it's great. If you're trading this market and it's like I got a high frequency trading frame. It's so good for some people.
- [07:36]
Matt Levine
Right.
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Katie Greifeld
If you're a degenerate gambler, if you're a market maker, probably this is great. Right. Market makers thrive on volatility. Some of them blow up on volatility, but a lot of them, it's probably great. And then if you're a manufacturing CEO trying to decide whether to build a factory or that's great.
- [07:57]
Matt Levine
Or to hire or fire people. Yeah. It's been interesting in some of the earnings reports you've seen companies, you report your numbers and you give guidance. You've had a lot of firms either downgrade their guidance, pull their guidance altogether. You've seen a few companies come out with a range of options for what could happen. Like different blueprints for different scenarios, which I think is kind of cool. One of the airlines did, and I wish I could remember, but I mean, what else can you do? It's impossible to forecast what six months from now will look like.
- [08:29]
Katie Greifeld
My intuition is that that's just bad. Right. That being able sounds so stupid. Second, being able to plan six months ahead is useful for business, right?
- [08:39]
Matt Levine
Yeah, for sure.
- [08:40]
Katie Greifeld
From like an economy wide basis, you would rather have businesses generally be able to plan basic macroeconomic building blocks six months ahead than not, right?
- [08:50]
Matt Levine
Yeah.
- [08:50]
Katie Greifeld
And so one possibility is that this is all error. Right. Like they're just like they're not doing a good job of stewarding the economy.
- [09:01]
Matt Levine
Right.
- [09:03]
Katie Greifeld
Which seems to me like probably the correct analysis. But people want there to be some sort of plan here. They want there to be some sort of explanation here that is more satisfying than they keep changing their mind or they don't really know what they're doing, or the messaging is just extremely unclear for no reason.
- [09:20]
Matt Levine
Yeah.
- [09:21]
Katie Greifeld
I don't know if that is though.
- [09:22]
Matt Levine
Yeah. The end game is a question that comes up a lot when it comes to the shifting trade winds coming out of the administration. I mean, we know that Trump loves tariffs. We know that they want to rebalance the global trade landscape. What that actually means seems to be sort of shifting goalposts.
- [09:40]
Katie Greifeld
I think I've read a few times, like one way to interpret their statements and actions is that they want America to be re industrialized. Fine. Like they say that, but also like definancialized. Right. Like shifting from having a lot of foreigners selling goods to us getting cash and investing it in US financial assets. Shifting to like investing the cash they get into us, you know, manufactured goods.
- [10:03]
Matt Levine
Right.
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Katie Greifeld
So we're selling fewer financial assets and the financial sector becomes a less important part of the American economy relative to manufacturing. Right. That's one way, I think, to interpret some of the stuff the Trump economic team does and says. But then you look at the actual effect and it's like if you work at a high frequency trading firm, you're like, this is amazing. There's so much volatility. And then if you work at a manufacturer, you're like, this is terrible. There's so much volatility.
- [10:25]
Matt Levine
Yeah. Well, also, you don't know if these tariffs are going to stick. You have no visibility into that. And there's also the very real question of what incentivizes a company to bring manufacturing back to the U.S. the Whirlpool CEO said on their earnings call this week that first of all, they think that actually they're going to benefit from tariffs. But the CEO, even with that in mind, said that 20% tariffs aren't going to move factories away from China. And you think about 145% perhaps, but you think about a lot of these pharma companies who make their drugs in Ireland, for example, they're probably not going to shift those factories to the US they're probably just going to have to accept that things cost more now. So I don't know if tariffs are the way to incentivize bringing manufacturing back versus tax breaks, for example.
- [11:18]
Katie Greifeld
One thing that is happening here is that it seems so haphazard as a way of encouraging manufacturing. Right. If you wanted to encourage manufacturing, you would do things like not impose tariffs on raw materials and intermediate goods so that you could make it easier for people to start factories here. But like, you're constantly reading stories about people who run factories here who find that their inputs have gone up because of tariffs and so they can't run their factories anymore. It's just, it's not like a industrial policy designed to support manufacturing. It's like, tariffs are good.
- [11:51]
Matt Levine
Yeah, I don't know.
- [11:53]
Katie Greifeld
People want there to be an explanation that is like very human. You know, either like clever or galaxy brain bad. One reason for the rally of the last couple of days is Scott Besant giving a speech at a closed door investor summit saying basically we're going to have a thaw in the China situation very soon.
- [12:12]
Matt Levine
People were scandalized by that.
- [12:14]
Katie Greifeld
People were scandalized by that. And it's definitely, you can definitely read takes that are like, this is corruption and the whole thing is for cronyism and to give the favored people a lot of volatility to trade and a lot of inside information about what the decisions will be, which is honestly like a more optimistic view than my view, which is that people just change their mind constantly and are not really planning that nefariously far ahead.
- [12:41]
Matt Levine
Well, the cynical take out there, too, is that Trump changes his mind based on who he last talked to. I don't know. I don't think you get notes from Neil Dutta of Renaissance Macro.
- [12:52]
Katie Greifeld
No.
- [12:53]
Matt Levine
Okay. He had a really interesting note out this week that he used the NT function on his Bloomberg terminal, which is a way to chart news trends. He found that since the beginning of March, The S&P 500 has shed a total of 719 points on days that Howard Lutnick and Peter Navarro have been the biggest story. By contrast, if Besant has been the biggest story on the day, The S&P 500 has advanced a total of 52 points. So he concludes Besant is good for about 1 percentage point up on the S&P 500. By contrast, the others are a drag of about 13.5 percentage points. Those are the dueling forces. All three of those men are dueling for Trump's attention.
- [13:35]
Katie Greifeld
Yeah. I mean, there's a story about Lutnick and Bassett actually rushing into Trump when Navarro was in the bathroom or something. Right. You might imagine someone thinking, we have the guy who's good for the economy and we have the guys who are bad for the economy. Let's turn up the dial on the guy who's good for the economy. But I don't think that's an accurate description of what's going on here.
- [13:57]
Matt Levine
Yeah, it seems like Bessant at least looking at the reporting from this week and things shift all the change. But apparently Bessen had a big hand to people familiar and talking Trump off the ledge when it comes to firing Jerome Powell. Also, like you said, there was that story that when Peter Navarro was at the White House cafeteria or something along those lines that him and Lutnik swooped in. We'll see. I don't know how to segue to this point, but I do want to make the point that Bessen is also apparently playing a leading role in trade talks with Japan. He's also expressed that he would like the US to basically make agreements with its allies on trade and then they'll all approach China as a group. But it seems like that is very much not happening because on Thursday you had two different stories drop. One was that Japan is going to resist Trump's efforts to form a trade bloc against China. And then you also had a story about how the EU and Beijing are basically in talks.
- [14:57]
Katie Greifeld
Right. Like, one analysis that I saw of the Liberation Day situation where Trump announced enormous fake reciprocal tariffs on every country.
- [15:07]
Matt Levine
Incredible. I was with my grandmother, as discussed.
- [15:10]
Katie Greifeld
And then in a fairly short time period, walked them all back, except he.
- [15:13]
Matt Levine
Raised tariffs on China 145%.
- [15:17]
Katie Greifeld
One reading of that was that if Trump had just announced giant tariffs on China and also small tariffs on the rest of the world, then everyone would have been shocked and trade would have shifted away from the US Toward China. But by instead doing it in this shocking Liberation Day way and then walking that all back, he primed people to think, oh, this could be a lot worse. And in fact, he's only targeting China, so we should make deals with the US and cut out China. And so this was a sort of shock therapy way to reorient the talks, to make it a essentially trade bloc of the rest of the world, or at least the US and its allies with China on the outside. Right. So it was a way to accomplish exactly that. Sort of like, you know, make deals with everyone else and then have the upper hand against China. And I don't know, that was a reading of what happened, but it doesn't seem to have particularly had that effect. And you have to be very optimistic to think it'll happen. You have to be like, oh, people are so relieved and so happy that the tariffs weren't as bad as we thought, that now they'll be rushing to negotiate with Donald Trump. But the ultimate alternative reading is people will be like, this was so erratic and chaotic that we should be rushing to negotiate with China. Because they're predictable.
- [16:33]
Matt Levine
Yeah, that's the thing. I mean, I could definitely see the argument for that strategy. But the narrative also exists out there that, no, the US Is just an unreliable trading partner, and who knows, if you agree to a deal that it'll stick. I mean, you think about what's going on with Canada and Mexico right now. The usmca, that was Trump's trade deal, and now apparently it's just been ripped up.
- [16:57]
Katie Greifeld
Yeah, yeah, right. And it's related to the point about insane volatility in the market. Right. Like, no one can plan ahead. This is not an administration that places any value on predictability. And in a lot of domains, predictability is really useful.
- [17:13]
Matt Levine
It's going to be interesting to see what acts as, like, this stabilization mechanism. It seems like the bond market does have some sway with Donald Trump.
- [17:20]
Katie Greifeld
So bond investors, the sample size of that is Small.
- [17:23]
Matt Levine
It's small. There was also an interesting note out from Binky and Chadha over at Deutsche Bank. So he lowered his S&P 500 target to 6150 from 7000. 6150 sounds incredible to a lot of people right now because we're like at 5500 on the S&P 500. But he said that if you start to see approval ratings drop, then that might cause an actual. I forget the word he used. But that's when you might actually see things calm down. Maybe that will be the ultimate.
- [17:52]
Katie Greifeld
First we've seen that. But secondly, I don't know why that's a mechanism.
- [17:56]
Matt Levine
I mean, the pushback to that point is that, okay, he's in his second term, he's not going to run again unless he does. That's also an open question. So who knows?
- [18:04]
Katie Greifeld
Maybe if he decides to run again, approval ratings will not be an impediment.
- [18:08]
Matt Levine
No, no, But I mean, there is some momentum building behind that idea that if you see approval ratings drop in a big way, maybe Trump would soften his stance.
- [18:17]
Katie Greifeld
I'll take the other side of that. I think I would rate the bond market above approval ratings, but I don't know. What do I know?
- [18:23]
Matt Levine
Okay, well, goodbye, everyone.
- [18:25]
Katie Greifeld
Goodbye. Oh, wait, other things.
- [18:27]
Matt Levine
Oh, right, right, right.
- [18:32]
Ryan Reynolds
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- [18:54]
Mint Mobile Representative
Of $45 for 3 month plan equivalent to $15 per month required intro rate first 3 months only, then full price plan options available, taxes and fees extra. See full terms@mintmobile.com you know, when you're.
- [19:03]
Bloomberg Audio Studios
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- [20:11]
Matt Levine
What else is there going on?
- [20:13]
Katie Greifeld
Goldman.
- [20:14]
Matt Levine
Goldman. The good thing is that David Solomon and John Waldron are going to be paid a lot of money.
- [20:20]
Katie Greifeld
What does a lot of money mean? I mean they're getting paid.
- [20:25]
Matt Levine
Go on immediately.
- [20:26]
Katie Greifeld
It means they got their $80 million special retention.
- [20:30]
Matt Levine
I gotta tell you, I was biting my nails over this one.
- [20:33]
Katie Greifeld
It was close. Both of the big shareholder advisor firms said they shouldn't get them and still.
- [20:39]
Matt Levine
They won 66% of the vote though.
- [20:41]
Katie Greifeld
That'S not that high.
- [20:43]
Matt Levine
It is down from I think it was in the 80s the last time we had this.
- [20:46]
Katie Greifeld
Normally you get 80, 90% for say on pivot.
- [20:49]
Matt Levine
Wait, I have the exact number. Kind of a loss I prepared. So I want to tell you, last year Goldman won 86% of the vote from shareholders, despite also opposition from Glass Lewis.
- [21:00]
Katie Greifeld
Yeah, these guys get paid sort of market rates for big bank CEOs. I think David Solomon got $39 million last year and Waldron got $38 million, which is comparable to a Jamie Dimon or whatever. And so getting an extra $80 million bonus just for being good guys and wanting them to stick around seems high. Right? They're getting paid market rates. Why do they need the extra bonus? And part of the answer is literally Waldron, who is the number two at Colman there's, reporting that he was approached by Apollo to come be some sort of high up executive there and offered what the article characterized as life changing money even for him. Which is like, I don't know, If I made $38 million a year, you would need a lot of money to change my life. But I think they offered him that.
- [21:51]
Matt Levine
Well, it's like I don't just want my great great grandchildren to be well off, I want their great great grandchildren to also do well.
- [21:57]
Katie Greifeld
Right. Like I don't have a conception of how your life could change above making $38 million.
- [22:03]
Matt Levine
Well, that's just a lack of imagination.
- [22:05]
Katie Greifeld
I know, I know, I know, I know, I know, I should, I should, I should be thinking bigger. But anyways, he was offered life changing money and he decided to stay because, you know, he Likes Goldman. It's a good place. Whatever.
- [22:14]
Matt Levine
Yeah.
- [22:14]
Katie Greifeld
But also because they were like, yeah, we'll find a way to get you paid more. Right. So they got him paid $80 million more.
- [22:19]
Matt Levine
Something that I find interesting is I like to imagine how, you know, the rest of Goldman feels about that. You had Mike Mayo from Wells Fargo say that this could be alienating to Goldman's workforce. He said that before the vote. And in one of the articles written by Todd Gillespie, he did write that. Under Salomon's tenure, payouts for its top brass have been a thorny issue that until now was mostly expressed by the bank's partner class. Some privately grumbled that packages for its leaders were excessive relative to the firm's performance and the awards being set aside for the rest of the staff.
- [22:50]
Katie Greifeld
Yeah. So one thing I've written about a lot over the last few years is like, Goldman has long had this partnership culture where there's a group of people who are called partners. They're not exactly like partners in the classic sense, but they are.
- [23:02]
Matt Levine
I know a few of them.
- [23:03]
Katie Greifeld
They're sort of successors to the partners. When Goldman was a private partnership, and they sort of viewed the firm as a continuation of that partnership, where the partners had a big say in running the firm. There was a sort of egalitarianism among the partners where the CEO was like sort of the managing partner, but he wasn't like the boss of all the partners or anything like that. And I think under Salomon, that has really changed and they've consolidated into being much more of a normal public company. And maybe not the most important, but one symptom of that is it used to be that gold was like a partnership run for the benefit of the partners. And so if they had a good year, the partners all got paid. Right. And now under the Solomon regime, it's a little bit more like we're going to pay a public company and sort of maximize shareholder value and not just gratuitously pay partners just because you're going to pay them based on competitive pressures. And there's sort of a walk in the opposite direction with Solomon and Waldron, where they're getting paid a lot of money, even as the partners are no longer the people divvying up the pot. So I think that the partners, on the one hand, some of them resent being relegated to a second tier status and no longer feeling that they run the firm. And on the other hand, they're like, these guys are getting paid so much money, right?
- [24:16]
Matt Levine
Yeah. Well, maybe they should Go all work at an alts manager.
- [24:19]
Katie Greifeld
Yeah. I mean, one thing that Todd Gillespie wrote is that Goldman is trying to position itself as an alts manager because that's a. You get a better multiple as an alts manager. Everyone's trying to position. We've talked about blackrock on the show trying to position itself as an alts manager because you get a higher multiple as an alts manager than as a index fund manager, but also than an investment bank.
- [24:39]
Matt Levine
It's like me trying to rebrand myself as a podcaster versus a TV anchor. It makes sense.
- [24:45]
Katie Greifeld
Hire multiple on podcasters.
- [24:47]
Matt Levine
Yeah, there you go. Goldman Sachs Asset Management, they have about $500 billion of private assets under management. Blackstone, for context, has more than $1 trillion. So, I mean, they are up there.
- [25:00]
Katie Greifeld
They're a real. I remember being. I was at Goldman, I worked at Goldman more than 15 years ago. I worked at Goldman 15 years ago, and there was a big focus on private equity as a important component of the firm. I was a fairly junior person and I experienced it as almost a recruiting thing where the cool place to work in finance was private equity. So for Goldman to be able to be like, we run private equity was good for recruiting young people, but similarly, it's good for recruiting shareholders because you're like the multiples that are given to alts managers are higher than the multiples given to investment banks. And the revenue is a little bit more stable and it's a little bit. Certainly its executives get paid more.
- [25:49]
Matt Levine
Yeah. So, I mean, to put some numbers to that, Blackstone trades at a PE of 37. Goldman's closer to 12, which is less than 37. But I mean, Blackstone, KKR, those are pure play alts managers.
- [26:04]
Katie Greifeld
I don't know what that means. They're not pure play relative to investment.
- [26:09]
Matt Levine
Bank relative to Goldman.
- [26:12]
Katie Greifeld
Yeah.
- [26:13]
Matt Levine
I mean, when I think of Goldman, my first thought isn't their alts business, obviously.
- [26:17]
Katie Greifeld
Of course. Right. No, they're not primarily an alts business, but I think of KKR as a growing capital markets business.
- [26:24]
Matt Levine
Really.
- [26:25]
Katie Greifeld
The big alts managers want to get bigger. I'd want you to get bigger is to get into some of the businesses that the Colemans of the world are in. There is a convergence, and obviously you'd rather have the multiple of being a more or less pure alts manager than being a more or less pure investment bank. But they're in a lot of overlapping businesses and the KKR people get paid more. So one thing I wrote this week is some of that is the youth of those firms. Those firms, they went public after Goldman did. They were founded way after Goldman was. We're still at the sort of closing stages of the giant private equity gold rush of the 80s and 90s and 2000s. Whereas investment banks have just been around longer. There are no founders. I mean there are founders, there are founders of investment banks who made very good money, but there are no founders of big and bulge bracket investment banks. Right. Those guys, Those banks are 100 years old.
- [27:23]
Matt Levine
They're resting peacefully.
- [27:24]
Katie Greifeld
Yeah. Some of what's happening is that the alts managers, the people who are senior executives there, took real risks getting into new businesses, whereas people who grew up as partners at Colburn were in a sort of well established business. So of course the people who took those risks to start the alts managers get paid a lot more.
- [27:45]
Matt Levine
Yeah. Took the risk to become a podcaster. Get it should be compensated for that.
- [27:50]
Katie Greifeld
This is a good analysis, right?
- [27:52]
Matt Levine
Yeah.
- [27:59]
Ryan Reynolds
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Mint Mobile Representative
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- [28:29]
Bloomberg Audio Studios
Really stressed or not feeling so great about your life or about yourself, talking to someone who understands can really help. But who is that person? How do you find them? Where do you even start? Talkspace Talkspace makes it easy to get the support you need. With Talkspace, you can go online, answer a few questions about your preferences and be matched with a therapist. And because you'll meet your therapist online, you don't have to take time off work or arrange childcare. You'll meet on your schedule wherever you feel most at ease. If you're depressed, stressed, struggling with a relationship, or if you want some counseling for you and your partner or just need a little extra one on one support, Talkspace is here for you. Plus, Talkspace works with most major insurers and most insured members have a zero dollar copay. No insurance, no problem. Now get $80 off of your first month with promo code space80 when you go to talkspace.com match with a licensed therapist today at talkspace.com save $80 with code space80@talkspace.com.
- [29:38]
Matt Levine
Reading your column, actually listening to it on my text to speech. It chiefly motivated me to find where there are still inefficiencies in the market.
- [29:49]
Katie Greifeld
Do you think it's podcasting in terms.
- [29:51]
Matt Levine
Of the media landscape? Perhaps. It certainly doesn't seem like it's linear television. But.
- [29:59]
Katie Greifeld
You know what it is?
- [30:01]
Matt Levine
What?
- [30:01]
Katie Greifeld
Email newsletters. No, it's like some horrifying fourth thing.
- [30:05]
Matt Levine
God, it's like you. But YouTube's like 20 years old.
- [30:09]
Katie Greifeld
I know. If I even said it's like TikTok, you can picture me shaking my fist at a cloud.
- [30:19]
Matt Levine
It's short.
- [30:19]
Katie Greifeld
TikTok is where the kids are. It's some short form video. It's some entirely other thing. It's like a brain implant.
- [30:25]
Matt Levine
Yeah, it's brutal out there. Maybe glasses that you put on and it's just our faces. I was going to say it seems like the inefficiency is still left to till in the market, to plow in the market. I don't know what farming metaphor I'm trying to use. Perhaps we should all just start bitcoin. Treasury companies.
- [30:41]
Katie Greifeld
I do think that so much of the crypto boom has been people from traditional finance being like, oh my God, look at the bid ask spreads here. Right. It's like crypto is so inefficient and also you could kind of get into it efficiently. So like all these people from traditional finance jumped in to capture the spreads. But yeah. So this week the amazing thing is 21.
- [31:01]
Matt Levine
21.
- [31:02]
Katie Greifeld
21, great name for a company.
- [31:03]
Matt Levine
It is.
- [31:04]
Katie Greifeld
21 is a merger between a Cantor Fitzgerald SPAC. So Cantor raised the SPAC, a special purpose acquisition company. They sold stock, sold $100 million worth of stock to public investors a while back. And they had that pot and they were looking around for some sort of operating company to merge with and take it public with the spac. And what they found was not an operating company. It was a pile of bitcoin managed by Tether and also a pile of bitcoin managed by Bitfinex, which is sort of related to Tether, and also a pile of bitcoin bitcoin managed by Softbank and also probably some other piles of bitcoin. But anyway, they mushed all these things together. So you have Kantor's hundred million dollars of cash and then all these other people's bitcoin, you mush them all together. You have a giant pot of bitcoin that is publicly listed because the SPAC has a public listing. And so they announced the merger this week. And in some ways, it's a very easy merger because everyone is just a pot, Right? And so you can be like, okay, so your pot is $100 million. You get, like, $100 million worth of stock. Your pot is $3 billion of Bitcoin, so you get $3 billion. So you allocate it based on how much stuff the different pots bring to the thing. The Cantor Fitzgerald SPAC got roughly $100 million worth of the pot, and it probably tripled in price. That suggests roughly that the stock market values the bitcoin in this pot at roughly three times the actual value of the bitcoin.
- [32:35]
Matt Levine
Yeah, it's amazing.
- [32:36]
Katie Greifeld
It's not like they invented this.
- [32:38]
Matt Levine
No.
- [32:38]
Katie Greifeld
They have this investor presentation, which is amazing and which is like, look at MicroStrategy. Or now it's called strategy.
- [32:44]
Matt Levine
Thank you.
- [32:45]
Katie Greifeld
The strategy company, which has been buying bitcoin, putting them in a pot, and selling shares for twice the value of.
- [32:51]
Matt Levine
For like, five years now.
- [32:52]
Katie Greifeld
I don't think it's literally five years, but it feels.
- [32:54]
Matt Levine
No, I think it was like 2020.
- [32:56]
Katie Greifeld
Yeah. Yeah, you're right.
- [32:58]
Matt Levine
Time flies, Matt.
- [32:59]
Katie Greifeld
God, it's been fires. But they've been doing it forever. And there's room for more.
- [33:04]
Matt Levine
Apparently. My natural reaction when I saw this headline yesterday was, how many strategies do there need to be out there? Apparently there's room, right?
- [33:15]
Katie Greifeld
They came to it from opposite directions. So strategy was like a company and its CEO got really into bitcoin. Then CEO, now chairman, and he was like, what if we bought a lot of bitcoin because that would be a good investment for our company. We should own bitcoin because it'll go up and our company will be worth more. And that metamorphosed into, like, what if we were only a buying bitcoin because people keep wanting to pay more for our stock than the bitcoin is worth? So they just did more and more buying of bitcoin. But they started from a place of, we're a public company, and we'd like to buy Bitcoin. 21 starts from the place of. I mean, I don't know how the merger conversations came together, but it essentially starts from a place of, like, we are tethered. We own some bitcoin, by the way, it's weird that Tether owns so much bitcoin because Tether is mostly in the business of selling stablecoin tokens for dollars and parking the money in dollars. But they have some legacy business of owning bitcoin. And also they've made so many profits that they invest in bitcoin. So they own a lot of bitcoin. And if you're a pot of bitcoin, if you're a crypto native owner of bitcoins and you look at strategy, you're like, wow, those guys can get incredibly cheap funding for their bitcoin because they can sell stock at 2x the value of their bitcoin. So if you're just like a bitcoin manager, how could you not be tempted to get into that business? And so they did. And they did it by essentially buying a public company, but in this case buying a SPAC to make it really clean. And so now they have a public listing for their pot of bitcoin, which is worth three times what the bitcoin is worth.
- [34:44]
Matt Levine
I do have to say I like the ticker. XXI21 get it. So Jack Maller's is going to be the CEO. He's 31, which is my age, but he made that point as a selling point that we're not a pivoting company, we're pure bitcoin. And also talking about Tether, he said that how the deal came together was just that he's known Tether for a while, that a decade ago there weren't many bitcoiners out there. And I had the same reaction to Tether is a stablecoin issuer.
- [35:12]
Katie Greifeld
Tether's relationship with bitcoin is more interesting. They're now basically in the business of taking dollars and parking those dollars in treasury bills. But the history of them producing dollars out of bitcoin is an interesting one. Right? I mean, they have been making collateralized loans against bitcoin to create more tether dollars. They're an interesting business.
- [35:31]
Matt Levine
But yeah, interesting business is pretty diplomatic. But Jack Mahlers invented seriously. But also, yes, I'm taking you at your word at face value. Tether in is an interesting business. Jack Mallers went on Bloomberg TV to talk about this deal on Wednesday. I didn't interview him. My colleagues Caroline Hyde and Ed Ludlow did. It was so fun. So he's going to be the CEO of this company. He's also going to be the CEO of Strike. And they asked him about that and he said, you can just do things. And I'm going to lead both businesses. I truly believe my purpose on this planet is to try and help bitcoin have a chance to change the world.
- [36:12]
Katie Greifeld
This is not a business, this is a part of bitcoin.
- [36:14]
Matt Levine
Well, they asked him what is your day to day going to be if.
- [36:19]
Katie Greifeld
You'Re just stroke the bitcoin?
- [36:21]
Matt Levine
If you're just accumulating bitcoin, what do you do all day? And I mean he basically said is my job and what I've dedicated to do for our shareholders is grow our bitcoin per share. That's what he's going to do. Which just means he's going to buy bitcoin anyway.
- [36:34]
Katie Greifeld
My head did explode when you said that. But let me say a couple things. So one, like growing your bitcoin per share, just buying bitcoin, but fine, whatever. Two, no, they say in their presentation that they're going to do bitcoin education and branding, including branded video media and acting as the go to content partner for major conferences, Web3 firms and FinTech institutions. Which makes sense because like, like my analysis of these things, by which I mean strategy this and there's like 40 imitators, my analysis is like you're sort of like meme stalking bitcoin. Right? Like you're sort of like finding people who are so excited by the story you're telling that they're willing to pay two or three times the value of the bitcoin in your pot for your stock. Right. So how do you sustain that? I mean one thing is you have to be very visible, right? And like strategy and Michael Saylor have done a really good job of being visible and identified with bitcoin. And these guys have a great head start because they're like tether, right? They're people who are visibly identified with bitcoin. But you can't just rest on your laurels. You got to keep producing branded video to make people think I like bitcoin. And also because I like bitcoin, I got to buy the stock of 21.
- [37:40]
Matt Levine
Yeah. So I want to read you more of this interview. I really enjoyed watching it. So he said, and I want to grow our bitcoin per share, his BPS. When you buy a share of 21, let's say our BPS is 0.05. Our intent is to be able to grow that to 0.06, et cetera. Whereas a vehicle like an ETF, your exposure is static. He said, we will never have negative bitcoin per share. At least that's our intent. How would they get there?
- [38:07]
Katie Greifeld
Negative bitcoin.
- [38:08]
Matt Levine
Yeah. Does that.
- [38:09]
Katie Greifeld
I think he means negative bitcoin per share growth. Right.
- [38:13]
Matt Levine
He said we will never have BPS negative. At least that's our intent.
- [38:17]
Katie Greifeld
He must mean negative growth.
- [38:19]
Matt Levine
I was just There I was at my desk. I was watching the interview. I was typing curiously.
- [38:25]
Katie Greifeld
I guess that's like the inverse bitcoin exchange trade.
- [38:30]
Matt Levine
Do you just sell? How would you have negative bitcoin per share? How do you get there?
- [38:35]
Katie Greifeld
Borrow a lot of money and then you sell everybody? I don't know. I don't have a great answer. I think he must be in negative growth.
- [38:41]
Matt Levine
Jack, friend of the show. Come on, tell us what you meant. Come on.
- [38:44]
Katie Greifeld
The pod. Yeah, yeah. Negative bitcoin per share. I should start that. I wonder if that would trade at a premium.
- [38:51]
Matt Levine
Why would you ever issue.
- [38:53]
Katie Greifeld
What you do is you borrow in bitcoin, then you buy bonds.
- [38:57]
Matt Levine
Yeah, well, I should do that. Great.
- [39:01]
Katie Greifeld
Because the basic theory of these bitcoin treasury companies is you borrow in dollars and you buy bitcoin. That theory isn't even true. They mostly use your stock and buy bitcoin. These things all say, oh, we're levered. They're not that levered. But no, the way you would do a negative bitcoin company is you would go to crypto firms, borrow bitcoin from them and then you'd use those bitcoin to buy treasury bonds.
- [39:28]
Matt Levine
Okay.
- [39:29]
Katie Greifeld
And you'd have negative bitcoin per share.
- [39:30]
Matt Levine
Yeah. Because the vast majority of companies have zero bitcoin per share.
- [39:37]
Katie Greifeld
Normal amount.
- [39:37]
Matt Levine
Yeah, that's the default setting.
- [39:39]
Katie Greifeld
0.05 is high. Negative would be weird, but doable and possibly worth doing. I should start this company.
- [39:46]
Matt Levine
You should. Why not?
- [39:48]
Katie Greifeld
A lot of reasons.
- [39:49]
Matt Levine
We'll see what multiple you get.
- [39:51]
Katie Greifeld
Negative multiple. It'd probably be terrible because bitcoin is very volatile and bitcoin treasury companies that I do are going to be levered. Bitcoin investments are one, not that levered and two, they're smartly levered. They do long term, non margin callable convertible debt to buy bitcoin. Right. So they're really not taking on a lot of near term leverage risk. If you borrowed bitcoin and used it to buy treasury bonds and the bitcoin went up a lot, you would get margin calls from your crypto lenders who would be not fun people to deal with necessarily. That could be you getting the margin calls. Yeah, no, never mind. We're not doing it. But someone should do it. It'd be fun. Be funny.
- [40:29]
Matt Levine
All right, well, I've got turtles to go set out in the sun.
- [40:32]
Katie Greifeld
Go enjoy your mealworms.
- [40:36]
Matt Levine
They're kind of big, so I have to actually cut them up for the turtles. I bought jumbo mealwor by accident. Okay.
- [40:46]
Katie Greifeld
I want to hear much more about the cutting up of the mealworms.
- [40:48]
Matt Levine
They're just like an inch long. And the turtles are also an inch long. Aw, it's too big to be clear. They're dead. The mealworms.
- [40:58]
Katie Greifeld
Right. Right.
- [41:00]
Matt Levine
Let's go home.
- [41:02]
Katie Greifeld
And that was the Money Slept podcast. I'm Matt Levine.
- [41:05]
Matt Levine
And I'm Katie Greifeld.
- [41:07]
Katie Greifeld
You can find my work by subscribing to the Money stuff newsletter on Bloomberg.com.
- [41:11]
Matt Levine
And you can find me on Bloomberg TV every day on Open Interest between 9 to 11am Eastern.
- [41:17]
Katie Greifeld
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 air.
- [41:24]
Matt Levine
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.
- [41:29]
Katie Greifeld
The Money Stuff podcast is produced by Anna Mazarakis and Moses Anda.
- [41:33]
Matt Levine
Our theme music was composed by Blake Maples.
- [41:36]
Katie Greifeld
Brendan Frances Newnham is our executive producer.
- [41:38]
Matt Levine
And Sage Bauman is Bloomberg's head of podcasts.
- [41:41]
Katie Greifeld
Thanks for listening to the Money Stuff podcast. We'll be back next week with more stuff.
- [41:59]
Bloomberg Audio Studios
You know, when you're really stressed or not feeling so great about your life or about yourself, talking to someone who understands can really help. But who is that person? How do you find them? Where do you even start? Talkspace. Talkspace makes it easy to get the support you need. With Talkspace, you can go online, answer a few questions about your preferences, and be matched with a therapist. And because you'll meet your therapist online, you don't have to take time off work or arrange childcare. You'll meet on your schedule wherever you feel most at ease. If you're depressed, stressed, struggling with a relationship, or if you want some counseling for you and your partner or just need a little extra one on one support, Talkspace is here for you. Plus, Talkspace works with most major insurers and most insured members have a zero dollar copay. No insurance, no problem. Now get $80 off of your first month with promo code space80 when you go to talkspace.com match with a licensed therapist today at talkspace.com save $80 with code space80@talkspace.com.