Money Stuff: The Podcast
Episode: One Horse at a Time: A Mailbag Episode
Release Date: April 18, 2025
Host/Author: Matt Levine and Katie Greifeld

Introduction: Celebrating the First Year with Mailbag

In this special one-year anniversary episode of Money Stuff: The Podcast, hosts Matt Levine and Katie Greifeld delve into a series of listener-submitted questions. This mailbag format allows the dynamic duo to address diverse financial topics, ranging from the potential IPO of law firms to the intricacies of private credit marketplaces. The episode blends Matt's deep financial expertise with Katie's insightful journalistic perspective, creating an engaging and informative experience for both regular listeners and newcomers alike.

1. The Possibility of Law Firms Going Public

Listener: Mark
Timestamp: [02:14]

Mark poses an intriguing question about the future of law firms: "Do you think we'll see a law firm do an IPO for itself in the next few years? That is, will retail investors be able to trade shares in K&L, E, or Paul Weiss in five years?"

Discussion Highlights:

• Legal Ethics and Ownership Restrictions: Matt explains that in the U.S., legal ethics historically prohibit non-lawyers from owning law firms, ensuring that lawyers maintain fiduciary duties solely to their clients. "US legal ethics suggests that it's unethical for law firms to be owned by non-lawyers." [02:33]

• Changing Landscape: Some states are beginning to allow outside ownership, hinting at a gradual shift that might make law firm IPOs feasible in the future. "That's changing a little bit. You see a few states allow outside ownership of law firms." [02:33]

• Business Model Viability: Matt discusses the unique nature of law firms, emphasizing their reliance on the expertise and continuity of their lawyers. The potential fragility of such a business structure poses challenges for public trading. "Law firms are pretty fragile businesses and if a law firm runs into trouble, it's very easy for it to break up because some law firm's main business stops working and it's not making money." [04:20]

• Comparison to Hedge Funds: Katie draws parallels between law firms and publicly listed hedge funds, noting the "key man risk" inherent in both structures. "There's a lot of key man risk there." [05:43]

Notable Quotes:

• Matt Levine: "I don't know that it's a great idea for the law firms." [06:36]
• Katie Greifeld: "I wish there were publicly listed law firms just because I think it would be interesting to see how they trade and how they move as a group." [06:25]

2. Private Credit and the Shift to Marketplaces

Listener: Will
Timestamp: [10:30]

Will raises a complex question regarding the evolution of private credit: "I have a question about private credit moving to marketplaces. It strikes me that the underlying companies with this type of debt, like private equity portfolio companies, have little interest in their debt trading."

Discussion Highlights:

• Value of Relationships in Private Credit: Matt agrees with Will, highlighting the importance of long-term relationships between borrowers and lenders in private credit. "Private credit to borrowers is you will have a long term relationship with your lenders who will be nice and won't sell your debt to distressed debt vultures." [11:12]

• Existing Structures and Challenges: Current quasi-marketplaces for LP stakes and private credit funds differ from direct debt trading. Matt mentions Apollo's initiative to set up a trading desk as an example of emerging marketplace activities. "Apollo is setting up a trading desk, right?" [12:06]

• Borrower Constraints: Borrowers often include clauses that restrict the transfer of debt, limiting the appetite for a fully open marketplace. "The borrowers have a lot of leverage, it does seem hard to be like we're going to have total free tradability where anyone can buy your loans because that is the thing that the borrowers don't want." [14:19]

Notable Quotes:

• Matt Levine: "At some level, if you go to a borrower and you say in exchange for not having a warm personal relationship with you for the rest of time, we'll charge you 50 basis points less, some borrowers will say yes to that." [13:57]
• Katie Greifeld: "We want this in your 401k." [13:55]

3. ETFs and the Economics of Selling S&P Futures

Listener: Max
Timestamp: [15:30]

Max, a molecular biologist, inquires about the feasibility of an ETF that sells S&P futures options: "This seems like a great place for an ETF. Could an ETF do this while still being liquid and tradable?"

Discussion Highlights:

• The Basis Trade Explained: Matt elucidates the basis trade related to S&P 500 futures, where entities provide funding by buying stocks and selling futures, aiming to earn high cash returns. "It's lending balance sheet to provide people with access to stocks." [15:09]

• Challenges for ETFs: The complexity and potential impermanence of such trades make it difficult to structure an ETF around them. Matt compares it to the failed Box ETF, which engaged in unconventional option trades. "It's a little weird to set up an ETF that will do this trade for years." [17:09]

• Potential for Innovation: While speculative, there’s encouragement that innovative financial products could emerge to capitalize on such trading opportunities. "It's a little tempting to be like, there should be a weird cash trade ETF." [18:12]

Notable Quotes:

• Matt Levine: "Have I said what a BDC is? It doesn't matter." [26:34]
• Katie Greifeld: "I have an answer to the question that wasn't asked. There's all these... There's been a lot of interest in Texas lately from the ETF community." [24:44]

4. Monetizing the Option to Declare Personal Bankruptcy

Listener: Sal
Timestamp: [20:30]

Sal explores the theoretical value of bankruptcy as a financial option: "What is the value of the option to declare personal bankruptcy and how would you monetize it?"

Discussion Highlights:

• Limited Value at Youth: Matt argues that bankruptcy holds minimal value for 18-year-olds due to the limited assets they possess. "The option value is very low because you can't get that much money when you're 18." [20:44]

• Risks and Legal Constraints: Utilizing bankruptcy as a strategic financial tool is fraught with legal hurdles and personal repercussions, making it an unattractive monetization strategy. "I think that it is pretty hard to monetize the option to declare personal bankruptcy." [22:12]

• Student Loans Exception: An exception exists with student loans, which are not dischargeable in bankruptcy, preventing the exploitation of bankruptcy as a safety net. "The one huge exception to that is student loans because they're not dischargeable in bankruptcy." [22:11]

Notable Quotes:

• Matt Levine: "But if you declare bankruptcy, then you don't have to pay the money back." [20:44]
• Katie Greifeld: "And we can talk about that in our next Mailbag episode, possibly, or even." [22:48]

5. Creative Naming: ETFs and Horses

Listener: John
Timestamp: [23:01]

John playfully asks about naming conventions: "Some time ago, Katie quipped that she might name a kid Xanadu someday. I feel like Katie would be more likely to name kids hers or other people's after ETF tickers. What about horses names?"

Discussion Highlights:

• Humorous Exchange: Katie and Matt engage in a light-hearted debate about the practicality and personal significance of naming children or horses after ETF tickers. "You're not going to cheat on your horse with a robot horse." [08:44]

• Alternative Suggestions: Katie suggests alternative creative names inspired by ETF discussions and regional themes, such as "YHAW for Yeehaw." [24:28]

• BDC ETF Insight: Matt mentions the existence of BDC ETFs, highlighting an example with VanEck, and discusses the broader spectrum of private credit. "I have said that BDCs are the publicly traded form of private credit." [25:44]

Notable Quotes:

• Katie Greifeld: "I have a lot of children's names that I love." [23:28]
• Matt Levine: "There's millions of them. Yeah." [26:14]

Closing Remarks: Reflecting on the Journey

As the episode draws to a close, Matt and Katie reminisce about the podcast's milestone. They acknowledge the one-year mark with a mix of nostalgia and humor, expressing gratitude to listeners for their engagement and support.

Notable Quotes:

• Katie Greifeld: "Happy anniversary. It was actually last week's episode which we recorded today." [26:55]
• Matt Levine: "We won the bet. Now it's over." [27:01]

Conclusion: A Year of Insightful Conversations

This anniversary mailbag episode of Money Stuff: The Podcast exemplifies the rich, informative, and engaging content that fans have come to expect. From dissecting complex financial instruments to entertaining discussions on creative naming, Matt Levine and Katie Greifeld offer a comprehensive exploration of money-related topics. Their ability to simplify intricate subjects while infusing humor makes this episode a must-listen for anyone interested in the multifaceted world of finance.

For more episodes and to subscribe, visit the Money Stuff newsletter on Bloomberg.com or follow Katie Greifeld on Bloomberg Television’s Open Interest.

Notable Moments in the Episode:

• [02:14] Introduction of Mark’s question about law firms IPOing.
• [10:30] Will’s inquiry into private credit marketplaces.
• [15:30] Max’s question on the viability of an ETF trading S&P futures.
• [20:30] Sal’s exploration of monetizing bankruptcy options.
• [23:01] John’s playful question on naming conventions.
• [26:55] Hosts reflect on the podcast’s first anniversary.

Note: Timestamps correspond to the podcast’s transcript and are included to highlight where notable discussions occur.