February 7, 2025 • 28 mins
Katie and Matt discuss Vanguard's big mutual fund fee cut, plans for private credit trading and the one glorious day when you could bet on the Pro Football Championship in your brokerage app.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
I'm at forty percent right now. It was really not
great doing television today.
Speaker 1 (00:13):
This is great. We have gotten I've gotten for months now,
emails from listeners being like, Bloomberg's engineers need to do
something because your voice isn't audible next to Katie's voice.
And what we have done is the Bloomberg engineers have
like tuned down Katie's voice by ten percent, so now
we are more compatible.
Speaker 2 (00:32):
They've performed surgery on me. Actually, and now this is
how I sound. It feels like I ate an ash tray.
I just feel disgusting. I need more milk.
Speaker 1 (00:41):
It's gonna be great.
Speaker 2 (00:42):
It'll be fine.
Speaker 1 (00:43):
Big week, Katie tenth anniversary of Money Stuff.
Speaker 2 (00:46):
Happy birthday.
Speaker 1 (00:47):
Birthday to the newsletter, not the podcast. The podcast is
still an infant getting mental.
Speaker 2 (00:52):
When did we get born in like April? Well, well,
you seem like you're in a good mood.
Speaker 1 (00:58):
It was touch and go to get here today, as
you know, because you're a bad late. Yeah, and we're
getting through the week.
Speaker 2 (01:05):
This is my last thing that I have to do
today because I'm going to call out sick tomorrow.
Speaker 1 (01:10):
Yeah, that's 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.
Speaker 2 (01:23):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (01:28):
Wonder who are you talking about the bay, Kat?
Speaker 2 (01:30):
We're going to talk about Vanguard and seven basis points. Yeah,
We're going to talk about Apollo, and then we're going
to talk about the big game.
Speaker 1 (01:38):
The big game, so Vanguard. I texted you this week
to say while I was on what should I say
about Vanguard? Because you wrote an article about Vanguard cutting
its fees and you never texted me back because you
were on television. Sure I never wrote about it, but
(02:00):
you did.
Speaker 2 (02:01):
So the story begin on Monday when Vanguard announced that
they were putting through their biggest ever fee cut across
eighty seven mutual funds and ETFs. It brings their average
fee on their like ten trillion dollars of assets down
to just seven basis points, which is wild. These are
wild numbers. The industry averaged roughly is forty four bases points,
(02:23):
So that tells you just how low Vanguard is, and
then we wrote a follow up story myself and Vildna
Hirich a couple days later, talking about how this really
tightens the screws on everyone else Blackrock, State Street, Invesco,
et cetera, because Vanguard has this ownership structure where basically
the fund investors own the firm, and thus everything they
(02:46):
do is just geared towards lowering fees. Other companies don't
operate that way. Blackrock doesn't operate that way. And Blackrock
actually fell, i believe, by the most since twenty twenty
two on Monday alone, both because it was a down
market with you know, the will he won't on tariffs,
but also because of this news, which was interesting.
Speaker 1 (03:02):
Yeah, this is sort of the most intuitive way for
an index fund to work, right. Like, It's like you
get a bunch of investors, they pull their money, they
hand their money to someone to perform the sort of
administrative tasks of putting it into all of the thoughts,
and they pay that someone a reasonable fee. But there's
no like outside shareholders. You don't need like pay the
(03:24):
cost of capital of some giant firm to like just
pull your money and put it into an index, right,
so it should be you know, a world of technology
and you know, a world of giant scale for these
funds that should be kind of free to invest in
in the next fund, and it kind of is. Well.
Speaker 2 (03:40):
Vanguard would be quick to tell you, including CEO Salem Ramji,
who I also interviewed on BTV on Thursday, would say that, Okay,
you think of us as just this passive index fund company,
but we're more than that, Malavine. We also have active funds,
and they care very deeply about their active funds, but
their active funds are also really cheap. Their bond funds,
(04:00):
in particular, their active bond funds charged ten basis points
on average, and they have this interesting theory that because
their fee is so low, their managers don't have to
take outsized risks in the active portfolios to like outperform
or make up the fee, and that that leads to
their outperformance over longer term horizon.
Speaker 1 (04:21):
That makes sense. Yeah, it's like an old tybee, like
how much work is it to like take my money
and invest it in bonds? Like it's active in the
sense that like you're choosing particular bonds, but.
Speaker 3 (04:30):
They they choose that bond over that but it's like
the cost of that should come down over time, and
that shouldn't be you know, like Vanguard is a mutual right,
It's like the people in the mutual fund like pay
the managers and there's no outside ownership to collect another fee.
Speaker 1 (04:45):
Makes sense what.
Speaker 2 (04:45):
I find interesting about van Garden, especially right now, so
CEO Selim Ramsey, he came from Blackrock. He used to
run the I shares line at Blackrock, which is their
ETF business. So he went from Blackrock to van Guard,
which is like, we don't get a lot of like
exciting moves like that in the ETF industry all the time.
So that was a big deal. And again, like Blackrock
(05:08):
and everyone else has to operate in this universe that
Vanguard has creative where Vanguard is just lowering fees, lowering fees,
lowering fees, and everyone else has to respond, even though
you know they actually do have to worry about their
margins and their external shareholders. But in tweeting about this story,
I got a few tweets back to the effect of,
you know, maybe they should actually stop focusing on lower
(05:30):
fees and like focus more on putting this money back
into the business and making the customer experience better.
Speaker 1 (05:37):
That's fair because I'm like, ah, you just put your
money and your own but like, in fact, it is
a corporation that has to do things like.
Speaker 2 (05:44):
Yeah, maintain a website, yeah, exactly.
Speaker 1 (05:46):
Have customer service and like yeah.
Speaker 2 (05:48):
One of the responses I got was from a woman
theoretically who says that she's a financial planner who I
didn't verify her profile or anything, but she said I
wish they would have cut their fees a little less
and instead invest in their customer facing it and user experience,
which is often disjointed and confusing to consumer's relative to
the competition, which I find kind of funny. Okay, your
(06:10):
fees are seven basis points, you're playing next to nothing,
and you have this like small subset of people saying no,
please stop lowering fees, like put this into improving my
experience as your client.
Speaker 1 (06:21):
Yeah, this is pretty reasonable man. Yeah, I would frequently
pay more for better experiences. And there are a lot
of people in the financial industry who get very sad
at the idea that the only criterion is like lowest
fees and you worry one about customer experience being sacrificed.
But then people don't those worried about performance being sacrificed too,
(06:42):
although the evidence for the higher fee managers having better
performance isn't great. The other thing I'll say is, like
you're talking about like black Rock, it seems to me
that like the move and asset management is like there's
this kind of Barbell strategy of like you know, there's
like indexy public stuff that tends to zero fees, and
(07:02):
there's hot new private credit where you can charge all
sorts of fees. Right, And so you look at black
Dot getting into private credit a big way because like
the fees on that are just a lot higher. Blueberg
lawa Benita has had an article this week about Pimco, Yeah,
not really getting into private credit. And like one thing
there is like you have a lot of competition and
(07:23):
margin compression on liquid fixed income, which is you know,
like the Vanguard, Like I have to fix I remember,
like you know, Pimco's bread and butter is like running
bond mutual funds, and that's a tough business because people
want low fees, and you get low fees and index funds,
and people want the hot new thing which is private credit,
and you can get high fees there. But like just
running an active bond fund is tough.
Speaker 2 (07:45):
Yeah, what an interesting way to think about barbelling by
fees rather than like risk, which I guess correspond to
each other.
Speaker 1 (07:51):
But I mean, like there are a lot of context
where you can make a BARRELLI decision, right, and like yeah,
here it's like your product offerings, Like there's a lot
of demand for index, there's a lot of demand for
alts in private, and like the middle is getting kind
of hollowed out. It's been a tough time for like
active mutual fund managers for a long time.
Speaker 2 (08:10):
Yeah, I mean you're seeing that in the UTF world too,
which you can't offer private yet.
Speaker 1 (08:15):
I know. But I was going to say, like the
other thing is like your article with the Vildanna, like
you talk about like in the ETF world, like there
are people who don't want to compete with yeah the
giants by cutting piece to zero, and so they're like, ooh,
here's a weird product where you can judge with higher fees,
and like we're certainly seeing and talking about a lot
of that, like the weird productized ETFs.
Speaker 2 (08:34):
Yeah exactly. I mean you think about all the silly
single stock super leveraged ETFs that are out there, all
the derivatives based ETFs. Really interesting phenomenon occurred actually in
twenty twenty four where the average fee on new ETFs
coming to the market was ticking higher. So the new
the new launches were expensive because the feeling among issuers
(08:55):
is like, I'm not going to compete in the core,
so I got to launch the silly stuff and I
can try.
Speaker 1 (09:00):
Yeah, the course is already there. You can get index
bonds like now you need like the silly stuff.
Speaker 2 (09:18):
Shall we sail long?
Speaker 1 (09:21):
So Apollo is crouching thinking about starting a private credit
trading desk.
Speaker 2 (09:29):
They are having conversations that have been highly constructive at
the highest levels about this.
Speaker 1 (09:34):
So I wrote this. I wrote, I don't really know
what private credit is, you know, And I get answers
like a bunch of people emailed to say basically something like,
if it's a registered public bond, it's public credit, and
if it's not that, then it's private credit, which is
not right. It's not how people use the term, right,
like people talk about syndicated bank loans and like loans
(09:54):
that are bought by clos like as not private credit, right,
Like that's something else People won't really say public credit,
but it's something else. Private credit is distinct from deals
done by banks, right private credit is asset managers during
direct lending. And in the past I would have followed
that by saying that they hold to maturity on their
balance sheet, but everyone kind of knew that would not
(10:17):
last forever, right, Like, eventually, if you have potentially trillions
of dollars in an asset class, like people are kind
of trade it and uh, pollow is the launching at
trading desk or talking about launching it trading desk.
Speaker 2 (10:29):
I feel like we've been talking about Apollo's trading dusk
for a while because we first started having this conversation,
especially around when they filed for an ETF with State Streets.
Speaker 1 (10:39):
Yeah, right, let me take that back. It's not that
they're launching a trading desk. It's that they're having conversations
that are consarned about.
Speaker 2 (10:44):
Highly constructive at the highest levels.
Speaker 1 (10:47):
About like a venue, about like a marketplace, where it's
not just they'll have a trading desk, but there will
be a bunch of trading desks and they'll trade with
each other, and they'll be a pricing service and some
sort of electronic platform for people to meet and trade
private credit because the trading desk that they were doing,
that they're planning and connection with the ETF was like
to do a private credit ETF, you need your assets
(11:08):
to be liquid Certainly the way you get liquidity is
by Apollo saying we'll buy the assets, right, and so
like that trading desk was a sort of like facing
a single customer, which is the ETF. But then obviously
you know if you have that, you're going to look
for other places to trade with. But here it's like
we want to all to all open venue for people
who want to trade private credit because like obviously that's
(11:30):
coming right, Like obviously you know you have enough private
credit funds, they're gonna want to start trading, and so
that's what they're putting on.
Speaker 2 (11:37):
I'm trying to think about how to think about this,
and you say marketplace for bond trading, and I think
of like a market access or a trade web. Sure
are they just trying to build that put for private credit.
Speaker 1 (11:49):
Something like that? You're so young you think of market access.
I mean like it used to be like you know,
a dozen dealers with telephones, right.
Speaker 2 (11:58):
Well, that is that just sounds bake, yeah.
Speaker 1 (12:00):
Or like a dozen dealers with Bloombergs, right, And I
think right when Pollow talks about you know, they're like
to part with banks, exchanges and fintech firms. Like exchanges
in fintech firms suggest there is like electronic marketplace, but yeah,
like there's not that for private credit because if don't
really trade and it doesn't have the electronic identifiers, right,
it's like you sign a contract, right, so you have
to like do some like technological processes to make it
(12:22):
tradable easily. But yeah, it's not that hard and they're
going to do those processes. The other thing that I
was thinking about in terms of how to think about
this is like I haven't used the word banks to
describe the golden Saxes of the world that like originate
bond deals and then have bond trading desks. But it
used to be that that business was done mostly by
(12:45):
non banks like Goldman Sachs right, which became a bank
holding company in two thousand and eight. And it used
to be that there was this world of investment banks
that use their own capital to trade securities and that
also originated and like underwrote bond deals. Committed the capital
that basically sold it on to other people. And like
those were non banks, they were investment banks, and they
(13:06):
you know, were big and had a big market niche.
And then over time, like you know, the rules were
relaxed in the US to allow banks to own them.
And then in two thousand and eight, the big independent
investment banks kind of got acquired or became bank holding companies.
But like this used to be a non bank business,
and you look at these big alternative managers and like
to some extent, they are like recreating what the big
(13:27):
investment banks used to be. Right, Like if you look
at like Apollo, like Apollo, KKR, Blackstone, like their DNA
is like their LBO shops, right yeah, but like the
thing that they're doing now is we're going to originate
loans or you originate you know, debt deals, and we're
going to run a trading desk for people to trade
debt deals. Right. They're kind of like moving into the
(13:48):
business that like Goldman Sachs was doing thirty years ago
before it became a bank. And they have some advantages
in doing that business now, like largely in terms of
just like being less regulated and also in terms of
like being the cool place to go work if you
want to work in finance, and so you can kind
of get a lot of talent that banks have a
(14:09):
harder time competing for now. Yeah, but a lot of
this is like the sort of traditional business of the
investment bank has become hard to do because the investment
banks are all banks now and they're all pretty highly regulated,
and so like the big alternative managers are kind of
stepping into do kinds of business that banks used to do.
Speaker 2 (14:26):
So does that give you any blueprint about where this
expands to? I mean, you have all these lofty projections
right now of like private credit being thirty forty trillion
dollars if they're sort of like following the blueprint of
you know what these big investment banks used to be,
Like how does this end?
Speaker 1 (14:44):
I mean how much credit is there in the world? Right? Like,
you know, like there is this long term push against
banks doing a lot of credit on their balancee Right,
this long term push through like a little bit narrower
banking where like the risk of lending is taken by
you know, equity finance investment funds, and you know, the
big private credit managers are kind of well set up
(15:06):
for that, and there's a lot of like, you know,
that's the sort of like stereotypical private credit deal is
like direct lending to finance at LBO. But like all
of these big managers are getting into structured investment CREAD stuff.
You know, a lot of them are getting into like
consumer loans, and like eventually, like why wouldn't these like
quote unquote private credit firms be like you know, holding
(15:28):
most of the mortgages or whatever. Like, I is a
real possibility that like this is like talking about like
Blackrock kind of trying to have higher fees by you know,
diversifying its dex funds with like private credit. Right, Like,
you could see the kind of the reverse happening in
private credit, where like you start with like very risky,
expensive direct LBO loans and you end up doing like
(15:52):
consumer credit for tighter spreads because you want to become
like a financial supermarket, right, Like that's a possible outcome.
Speaker 2 (15:59):
Yeah, look forward to that future. And something I was
thinking about. I mean, there was been several articles this
week that have talked about this grand convergence between private
and public, which has been going on for a while now,
as a narrative but I mean, when you think about
that convergence, is it just the private debt markets becoming
more public? Are the public debt markets going to take
(16:20):
on any characteristics of what happens in the shadows, or
is this just private becoming more public.
Speaker 1 (16:26):
I think it's mostly private becoming more public. But like
one way of private becoming more public is ets, right, Like,
if there's like liquid trading, then there will be private
credit ets, just as there are, like you know, loan ets, which,
like you know, bank loans used to not trade. Yeah,
bank loans used to be not a product that you
could buy in your retail account, and now like there's
loan ETFs, there'll be private credit ets if like this
(16:47):
gets off the ground and there's a lot of trading,
which I'm sure there.
Speaker 2 (16:50):
Eventually will be, this being apollos.
Speaker 1 (16:52):
Being someone's private credit trading venue, right, yeah, being like
just private credit trading. Right. I spent three years maybe
more writing most days the phrase people are worried about
bond market liquidity, because like people were worried about bond
market liquidity and the story was something like there are
all these like bond mutual funds, but like really bond
(17:14):
ETFs people are worried about these ETFs are so liquid
and you can just trade them on the Stock exchange
anytime you want, and if like, people will want their
money back. At the same time, these ETFs will have
effectually redemptions and they'll have to sell or someone will
have to sell all these bonds, and the bonds are
not as liquid as the ets now, and so it's
a disaster waiting to happen, and then disaster never really happened.
(17:35):
I made fun of this for a long time.
Speaker 2 (17:36):
There are those would argue that it's like real twenty
twenty stuff, you know, I want.
Speaker 1 (17:39):
To say it was earlier.
Speaker 2 (17:40):
I don't know.
Speaker 1 (17:41):
Yeah, twenty twenty is when it came to a head
because of like was when the theory was tested, but
people are worrying about it for years before that. So
I'm just really excited for like the first seventeen times
I can write people are worried about private credit liquidity
because it's just gonna happen again, right, Like, there will
be some trading and then there will be ETFs and
like trading and private credit markets will not be as
(18:01):
liquid as the easy apps, and then people are like, oh,
what happens if and it'll it'll.
Speaker 2 (18:05):
Talk about ill liquidity, doom loops. It'll be great, It'll
be great.
Speaker 1 (18:08):
And like the best part of this is that, I
want to say, Tracy Alley was who pointed to this
out to me, but our Bloomberg collegue. But in like
the sixties, people had this exact worry about equity mutual funds, right,
it was like, howint Yeah, it was like, oh, these
mutual funds, like if they all get redemptions at once,
like they'll have to sell the stocks. There's not enough
(18:29):
liquidity for that. And then like you know, they performed
relatively well and like people just forgot about that. And
it also stocks are very liquid, but it's gonna keep going,
keep moving up the capital structure to private credit.
Speaker 2 (18:39):
God, history just repeats itself. Are you excited for the
(19:01):
Pro Football Championship?
Speaker 1 (19:03):
I am looking forward to the professional football game to
be played this weekend between the Philadelphia Squadron and the
Kansas City eleven.
Speaker 2 (19:15):
Wouldn't it be really cool if you could perhaps bet
on that on the place where you also trade stocks? Alas,
doesn't that.
Speaker 1 (19:24):
Seem like a good day? It looked like it.
Speaker 2 (19:26):
Might happen one beautiful shining day in the sun.
Speaker 1 (19:29):
Yeah, Robin Hood. I love Robin Hood.
Speaker 2 (19:32):
They just like they shoot their shot.
Speaker 1 (19:36):
They do him play lawyers like good lawyers, but like
they keep years ago, they launched a thing called Robinhood
checking in savings. But they're like, it's a bank account.
And then like bank examiners are like, it's not a
bank account, You're not a bank and they pulled it
within like twenty four hours. It's so embarrassing, it's so
fun to write about. But yeah, they launched events contracts. Yes,
they launched an events contract on the Big Game. You
(19:58):
can't say bold because then you get in trouble.
Speaker 2 (20:02):
Shit, pronounce it like brook.
Speaker 1 (20:06):
They launched the contracts on the Big Game where you
could bet on Philadelphia Kansas City, not the Eagles or
the Chiefs, Philadelphia Kansas City. And they said they called
it an emerging asset class like event contracts in their announcement,
which is now deleted from their website. But they didn't
lunch football betting. They launched the event contract where you
could buy a contract that pays off a dollar if
(20:27):
Philadelphia wins the Pro Football Championship, pays off zero dollars
if Kansas City wins, or you could buy the other
contract that pays off of Kansas City wins, and that
is a football bet, but they don't call it that
because it's like there's this weird gray area where you
can launch commodity futures, and commodity sutures used to be
like futures on soybeans, and then people were like, we
(20:48):
can have financial commodity s features that are like bets
on what the ten year interest rate will be. And
then people are like, well, if you can do that,
what about bets on whether the Eagles will win the
Super Bowl? And the line between like a financial futures
contract and an events contract is a little blurry, and
there's a lot of interest in events contracts. And so
(21:09):
the CFTC, the Commodity Futures Trading Commission, which regulates commodity futures,
it's like put out rules that they're like proposed rules
that haven't been finalized and probably won't be saying like
certain things are not okay, and those things include elections.
They're like lost on that one, like the elections are
now fair game. Assassinations timely, timely, timely.
Speaker 2 (21:33):
We had several assassination attempts on President Trump.
Speaker 1 (21:36):
Yeah, we also like, in fact, I think Calshi, one
of the prediction markets, briefly listed contracts on what would
happened to Luigi, like whether Lujiman Johnny, which like Cleve,
which is like kind of an assassination contract. It's not
like it's related to assassinations. But anyway. Another thing that's
excluded is sports betting because like obviously like sports betting
is something else. Gambling is now, you know, largely legalized
(21:58):
in the US. You can like batance sports on your
sports book gap, but is that sports that a financial
futures that is allowed on your burgragee. Apparently not, because
Robinhood launched it and pulled it twenty four hours later
because the SAFTC told them to knock it off, and
they were very agreed about it. They said, we were
in regular contact with the CFTC prior to launching this product,
(22:20):
and we believe we were in full compliance with all
applicable regulations. But nonetheless they pulled it.
Speaker 2 (22:26):
Well, who knows where this will go.
Speaker 1 (22:28):
I'm pretty sure we'll go to not being able to
bet on the Big Game this weekend this particular next year.
Speaker 2 (22:35):
Yeah, Well, reading our Bloomberg News Coverage. Apparently, Robinhood said
it will continue to collaborate with the CFTC as it
works on unveiling a more comprehensive events contract platform later
this year, So their ambition is unscathed, right.
Speaker 1 (22:50):
I mean the whole trend is in the direction of
like free, lightly regulated events contract platforms, and like it's
just weird to have an events contract platform that doesn't
feature sports, right, because that's like the main event people
want to bet on.
Speaker 2 (23:04):
Yeah.
Speaker 1 (23:04):
Yeah, the CFTC also wanted to exclude like betting on
the oscars, like some point that.
Speaker 2 (23:09):
I'm not going to be able to manipulate the oscars.
Speaker 1 (23:12):
Right, I mean I don't really.
Speaker 2 (23:15):
Know why, like why they would be against it.
Speaker 1 (23:17):
Yeah, Like part of it is like when you think
about like soybean futures, they're for like farmers to hedge
their risk and for like soy sauce producers to heads
their risk. Right, Like you have natural counterparties on either
side who are like doing real economic activity and are
hedging that or like raising money to do it. Like
there's some like underlying economic activity for all the like
(23:40):
financial betting, right, And so you can be like, oh,
this commodities exchange is just like evil speculators betting, and
they can be like no, no, no, it's like supporting
real economic activity. And then betting is just betting, right,
Like no one really thinks maybe maybe I'm wrong, but
I've never heard anyone being like, oh, yeah, sports betting
is like building wealth, right, like people something to say it,
but it's it's like wells an emerging asset class. It's
(24:02):
a very cynical thing to say. Yeah, it's not an
asset class. The stock market goes up over time, not
because of magic. It goes up over time because it's
like an investment in economic activity, and like the economy
grows with like technological process and demographic growth, like the
size of the sports betting market does go up over time,
but like the outcome of the Eagles game doesn't go
up over time. Right, it's like you bad, and like
some people win and some people lose, and like that's
(24:23):
it and most people lose, right, And it's like you
negative some game for the betters. And if I were
a financial markets regulator, I would be like, look, I'll
approve a lot of stuff that is pretty tangentially related
to real economic activity. I understand that like the speculation
begets liquidity that like a lot of complicated products are
(24:45):
useful and hedging, you want to trade zero day options
on meum stocks like fine, Like that's really loosely related
to real financial activity, but like it's all in a continuum.
But then it's like sports betting is like there's nothing
this is embarrassing to a financial regulator. Now I think
probably entering an era of like unembarrassable financial regulators, and
so like yeah, they'll like whatever. You can definitely buy
(25:08):
futures contracts on the Super Bowl, but like I just
think that like turning over the financial markets purely to
gambling is kind of a scary stuff, right, Yeah, But
it's like you can understand why, right, because you look
at like the work of a sports book and the
work of like a high frequency equity trading shop is
like very similar, right, It's like similar techniques, it's similar skills,
(25:29):
it's like similar risks, Like you're really doing the same
kind of work, and there is a lot of movement
between you know, people who are market makers for stocks
and people who are book makers for sports and then
on like the retail side, Like you look at like
there's so much stuff in like retail stock markets. There's
a Bloomberg article this week about people betting on sports
and like people who got like thousands of dollars a
weekend on football, and like a lot of what they
(25:52):
say is like it's a social thing. It's like I'm
texting with my friends and like getting our bets in
and like it's my way to keep up with my
college buddies or whatever. And you see that in like
you know the memes phenomenon too, where it's like a
very social phenomenon and it's like gives people like a
sense of fun and a sense of identity. It's not
just like we expect these tacks to go up. There's
like some more social, very community based, Yeah, And it's
(26:13):
just that like one of them is like financial markets
and one of them is gambling. But like there's like
an obvious convergence like socially, and so you know, it
is a little weird for the regulators to say, no, robinhood,
you can offer some kinds of like fun gambling, but
not other kinds of fun gambling, and like eventually I
think that will erode.
Speaker 2 (26:33):
Yeah, another great convergence indeed in those Shining twenty four
hours where you could do this on robin Hood. Apparently
it had been rolled out to one percent of their customers,
so robin Hood said it will give those investors the
option to close their positions or take them to resolution.
It would be fun to talk to some of those
folks who are caught in this limbo.
Speaker 1 (26:52):
I think it's to take it to resolution. Yeah, I
guess because they.
Speaker 2 (26:55):
Are pretty cool. Yeah, Okay, everything hurts.
Speaker 1 (27:07):
And that was The Money Stuff Podcast.
Speaker 4 (27:08):
I'm Matt Levy and I'm Katie Greifeld.
Speaker 1 (27:11):
You can find my work by subscribing to the Money
Stuff newsletter on Bloomberg dot com.
Speaker 4 (27:15):
And you can find me on Bloomberg TV every day
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Speaker 1 (27:21):
We'd love to hear from you. You can send an
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You can also subscribe to our show wherever you're listening
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people find the show.
Speaker 1 (27:34):
The Money Stuff Podcast is produced by Anna Maserakus and Moses.
Speaker 4 (27:37):
Onam Our theme music was composed by Blake Maples Brandon
Francis Munimssara, executive producer and Stage Bauman is Bloomberg's head
of podcasts.
Speaker 1 (27:45):
Thanks for listening to the Money Stuff podcast. We'll be
back next week with more stuff
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
I'm at forty percent right now. It was really not
great doing television today.
Speaker 1 (00:13):
This is great. We have gotten I've gotten for months now,
emails from listeners being like, Bloomberg's engineers need to do
something because your voice isn't audible next to Katie's voice.
And what we have done is the Bloomberg engineers have
like tuned down Katie's voice by ten percent, so now
we are more compatible.
Speaker 2 (00:32):
They've performed surgery on me. Actually, and now this is
how I sound. It feels like I ate an ash tray.
I just feel disgusting. I need more milk.
Speaker 1 (00:41):
It's gonna be great.
Speaker 2 (00:42):
It'll be fine.
Speaker 1 (00:43):
Big week, Katie tenth anniversary of Money Stuff.
Speaker 2 (00:46):
Happy birthday.
Speaker 1 (00:47):
Birthday to the newsletter, not the podcast. The podcast is
still an infant getting mental.
Speaker 2 (00:52):
When did we get born in like April? Well, well,
you seem like you're in a good mood.
Speaker 1 (00:58):
It was touch and go to get here today, as
you know, because you're a bad late. Yeah, and we're
getting through the week.
Speaker 2 (01:05):
This is my last thing that I have to do
today because I'm going to call out sick tomorrow.
Speaker 1 (01:10):
Yeah, that's 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.
Speaker 2 (01:23):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (01:28):
Wonder who are you talking about the bay, Kat?
Speaker 2 (01:30):
We're going to talk about Vanguard and seven basis points. Yeah,
We're going to talk about Apollo, and then we're going
to talk about the big game.
Speaker 1 (01:38):
The big game, so Vanguard. I texted you this week
to say while I was on what should I say
about Vanguard? Because you wrote an article about Vanguard cutting
its fees and you never texted me back because you
were on television. Sure I never wrote about it, but
(02:00):
you did.
Speaker 2 (02:01):
So the story begin on Monday when Vanguard announced that
they were putting through their biggest ever fee cut across
eighty seven mutual funds and ETFs. It brings their average
fee on their like ten trillion dollars of assets down
to just seven basis points, which is wild. These are
wild numbers. The industry averaged roughly is forty four bases points,
(02:23):
So that tells you just how low Vanguard is, and
then we wrote a follow up story myself and Vildna
Hirich a couple days later, talking about how this really
tightens the screws on everyone else Blackrock, State Street, Invesco,
et cetera, because Vanguard has this ownership structure where basically
the fund investors own the firm, and thus everything they
(02:46):
do is just geared towards lowering fees. Other companies don't
operate that way. Blackrock doesn't operate that way. And Blackrock
actually fell, i believe, by the most since twenty twenty
two on Monday alone, both because it was a down
market with you know, the will he won't on tariffs,
but also because of this news, which was interesting.
Speaker 1 (03:02):
Yeah, this is sort of the most intuitive way for
an index fund to work, right. Like, It's like you
get a bunch of investors, they pull their money, they
hand their money to someone to perform the sort of
administrative tasks of putting it into all of the thoughts,
and they pay that someone a reasonable fee. But there's
no like outside shareholders. You don't need like pay the
(03:24):
cost of capital of some giant firm to like just
pull your money and put it into an index, right,
so it should be you know, a world of technology
and you know, a world of giant scale for these
funds that should be kind of free to invest in
in the next fund, and it kind of is. Well.
Speaker 2 (03:40):
Vanguard would be quick to tell you, including CEO Salem Ramji,
who I also interviewed on BTV on Thursday, would say that, Okay,
you think of us as just this passive index fund company,
but we're more than that, Malavine. We also have active funds,
and they care very deeply about their active funds, but
their active funds are also really cheap. Their bond funds,
(04:00):
in particular, their active bond funds charged ten basis points
on average, and they have this interesting theory that because
their fee is so low, their managers don't have to
take outsized risks in the active portfolios to like outperform
or make up the fee, and that that leads to
their outperformance over longer term horizon.
Speaker 1 (04:21):
That makes sense. Yeah, it's like an old tybee, like
how much work is it to like take my money
and invest it in bonds? Like it's active in the
sense that like you're choosing particular bonds, but.
Speaker 3 (04:30):
They they choose that bond over that but it's like
the cost of that should come down over time, and
that shouldn't be you know, like Vanguard is a mutual right,
It's like the people in the mutual fund like pay
the managers and there's no outside ownership to collect another fee.
Speaker 1 (04:45):
Makes sense what.
Speaker 2 (04:45):
I find interesting about van Garden, especially right now, so
CEO Selim Ramsey, he came from Blackrock. He used to
run the I shares line at Blackrock, which is their
ETF business. So he went from Blackrock to van Guard,
which is like, we don't get a lot of like
exciting moves like that in the ETF industry all the time.
So that was a big deal. And again, like Blackrock
(05:08):
and everyone else has to operate in this universe that
Vanguard has creative where Vanguard is just lowering fees, lowering fees,
lowering fees, and everyone else has to respond, even though
you know they actually do have to worry about their
margins and their external shareholders. But in tweeting about this story,
I got a few tweets back to the effect of,
you know, maybe they should actually stop focusing on lower
(05:30):
fees and like focus more on putting this money back
into the business and making the customer experience better.
Speaker 1 (05:37):
That's fair because I'm like, ah, you just put your
money and your own but like, in fact, it is
a corporation that has to do things like.
Speaker 2 (05:44):
Yeah, maintain a website, yeah, exactly.
Speaker 1 (05:46):
Have customer service and like yeah.
Speaker 2 (05:48):
One of the responses I got was from a woman
theoretically who says that she's a financial planner who I
didn't verify her profile or anything, but she said I
wish they would have cut their fees a little less
and instead invest in their customer facing it and user experience,
which is often disjointed and confusing to consumer's relative to
the competition, which I find kind of funny. Okay, your
(06:10):
fees are seven basis points, you're playing next to nothing,
and you have this like small subset of people saying no,
please stop lowering fees, like put this into improving my
experience as your client.
Speaker 1 (06:21):
Yeah, this is pretty reasonable man. Yeah, I would frequently
pay more for better experiences. And there are a lot
of people in the financial industry who get very sad
at the idea that the only criterion is like lowest
fees and you worry one about customer experience being sacrificed.
But then people don't those worried about performance being sacrificed too,
(06:42):
although the evidence for the higher fee managers having better
performance isn't great. The other thing I'll say is, like
you're talking about like black Rock, it seems to me
that like the move and asset management is like there's
this kind of Barbell strategy of like you know, there's
like indexy public stuff that tends to zero fees, and
(07:02):
there's hot new private credit where you can charge all
sorts of fees. Right, And so you look at black
Dot getting into private credit a big way because like
the fees on that are just a lot higher. Blueberg
lawa Benita has had an article this week about Pimco, Yeah,
not really getting into private credit. And like one thing
there is like you have a lot of competition and
(07:23):
margin compression on liquid fixed income, which is you know,
like the Vanguard, Like I have to fix I remember,
like you know, Pimco's bread and butter is like running
bond mutual funds, and that's a tough business because people
want low fees, and you get low fees and index funds,
and people want the hot new thing which is private credit,
and you can get high fees there. But like just
running an active bond fund is tough.
Speaker 2 (07:45):
Yeah, what an interesting way to think about barbelling by
fees rather than like risk, which I guess correspond to
each other.
Speaker 1 (07:51):
But I mean, like there are a lot of context
where you can make a BARRELLI decision, right, and like yeah,
here it's like your product offerings, Like there's a lot
of demand for index, there's a lot of demand for
alts in private, and like the middle is getting kind
of hollowed out. It's been a tough time for like
active mutual fund managers for a long time.
Speaker 2 (08:10):
Yeah, I mean you're seeing that in the UTF world too,
which you can't offer private yet.
Speaker 1 (08:15):
I know. But I was going to say, like the
other thing is like your article with the Vildanna, like
you talk about like in the ETF world, like there
are people who don't want to compete with yeah the
giants by cutting piece to zero, and so they're like, ooh,
here's a weird product where you can judge with higher fees,
and like we're certainly seeing and talking about a lot
of that, like the weird productized ETFs.
Speaker 2 (08:34):
Yeah exactly. I mean you think about all the silly
single stock super leveraged ETFs that are out there, all
the derivatives based ETFs. Really interesting phenomenon occurred actually in
twenty twenty four where the average fee on new ETFs
coming to the market was ticking higher. So the new
the new launches were expensive because the feeling among issuers
(08:55):
is like, I'm not going to compete in the core,
so I got to launch the silly stuff and I
can try.
Speaker 1 (09:00):
Yeah, the course is already there. You can get index
bonds like now you need like the silly stuff.
Speaker 2 (09:18):
Shall we sail long?
Speaker 1 (09:21):
So Apollo is crouching thinking about starting a private credit
trading desk.
Speaker 2 (09:29):
They are having conversations that have been highly constructive at
the highest levels about this.
Speaker 1 (09:34):
So I wrote this. I wrote, I don't really know
what private credit is, you know, And I get answers
like a bunch of people emailed to say basically something like,
if it's a registered public bond, it's public credit, and
if it's not that, then it's private credit, which is
not right. It's not how people use the term, right,
like people talk about syndicated bank loans and like loans
(09:54):
that are bought by clos like as not private credit, right,
Like that's something else People won't really say public credit,
but it's something else. Private credit is distinct from deals
done by banks, right private credit is asset managers during
direct lending. And in the past I would have followed
that by saying that they hold to maturity on their
balance sheet, but everyone kind of knew that would not
(10:17):
last forever, right, Like, eventually, if you have potentially trillions
of dollars in an asset class, like people are kind
of trade it and uh, pollow is the launching at
trading desk or talking about launching it trading desk.
Speaker 2 (10:29):
I feel like we've been talking about Apollo's trading dusk
for a while because we first started having this conversation,
especially around when they filed for an ETF with State Streets.
Speaker 1 (10:39):
Yeah, right, let me take that back. It's not that
they're launching a trading desk. It's that they're having conversations
that are consarned about.
Speaker 2 (10:44):
Highly constructive at the highest levels.
Speaker 1 (10:47):
About like a venue, about like a marketplace, where it's
not just they'll have a trading desk, but there will
be a bunch of trading desks and they'll trade with
each other, and they'll be a pricing service and some
sort of electronic platform for people to meet and trade
private credit because the trading desk that they were doing,
that they're planning and connection with the ETF was like
to do a private credit ETF, you need your assets
(11:08):
to be liquid Certainly the way you get liquidity is
by Apollo saying we'll buy the assets, right, and so
like that trading desk was a sort of like facing
a single customer, which is the ETF. But then obviously
you know if you have that, you're going to look
for other places to trade with. But here it's like
we want to all to all open venue for people
who want to trade private credit because like obviously that's
(11:30):
coming right, Like obviously you know you have enough private
credit funds, they're gonna want to start trading, and so
that's what they're putting on.
Speaker 2 (11:37):
I'm trying to think about how to think about this,
and you say marketplace for bond trading, and I think
of like a market access or a trade web. Sure
are they just trying to build that put for private credit.
Speaker 1 (11:49):
Something like that? You're so young you think of market access.
I mean like it used to be like you know,
a dozen dealers with telephones, right.
Speaker 2 (11:58):
Well, that is that just sounds bake, yeah.
Speaker 1 (12:00):
Or like a dozen dealers with Bloombergs, right, And I
think right when Pollow talks about you know, they're like
to part with banks, exchanges and fintech firms. Like exchanges
in fintech firms suggest there is like electronic marketplace, but yeah,
like there's not that for private credit because if don't
really trade and it doesn't have the electronic identifiers, right,
it's like you sign a contract, right, so you have
to like do some like technological processes to make it
(12:22):
tradable easily. But yeah, it's not that hard and they're
going to do those processes. The other thing that I
was thinking about in terms of how to think about
this is like I haven't used the word banks to
describe the golden Saxes of the world that like originate
bond deals and then have bond trading desks. But it
used to be that that business was done mostly by
(12:45):
non banks like Goldman Sachs right, which became a bank
holding company in two thousand and eight. And it used
to be that there was this world of investment banks
that use their own capital to trade securities and that
also originated and like underwrote bond deals. Committed the capital
that basically sold it on to other people. And like
those were non banks, they were investment banks, and they
(13:06):
you know, were big and had a big market niche.
And then over time, like you know, the rules were
relaxed in the US to allow banks to own them.
And then in two thousand and eight, the big independent
investment banks kind of got acquired or became bank holding companies.
But like this used to be a non bank business,
and you look at these big alternative managers and like
to some extent, they are like recreating what the big
(13:27):
investment banks used to be. Right, Like if you look
at like Apollo, like Apollo, KKR, Blackstone, like their DNA
is like their LBO shops, right yeah, but like the
thing that they're doing now is we're going to originate
loans or you originate you know, debt deals, and we're
going to run a trading desk for people to trade
debt deals. Right. They're kind of like moving into the
(13:48):
business that like Goldman Sachs was doing thirty years ago
before it became a bank. And they have some advantages
in doing that business now, like largely in terms of
just like being less regulated and also in terms of
like being the cool place to go work if you
want to work in finance, and so you can kind
of get a lot of talent that banks have a
(14:09):
harder time competing for now. Yeah, but a lot of
this is like the sort of traditional business of the
investment bank has become hard to do because the investment
banks are all banks now and they're all pretty highly regulated,
and so like the big alternative managers are kind of
stepping into do kinds of business that banks used to do.
Speaker 2 (14:26):
So does that give you any blueprint about where this
expands to? I mean, you have all these lofty projections
right now of like private credit being thirty forty trillion
dollars if they're sort of like following the blueprint of
you know what these big investment banks used to be,
Like how does this end?
Speaker 1 (14:44):
I mean how much credit is there in the world? Right? Like,
you know, like there is this long term push against
banks doing a lot of credit on their balancee Right,
this long term push through like a little bit narrower
banking where like the risk of lending is taken by
you know, equity finance investment funds, and you know, the
big private credit managers are kind of well set up
(15:06):
for that, and there's a lot of like, you know,
that's the sort of like stereotypical private credit deal is
like direct lending to finance at LBO. But like all
of these big managers are getting into structured investment CREAD stuff.
You know, a lot of them are getting into like
consumer loans, and like eventually, like why wouldn't these like
quote unquote private credit firms be like you know, holding
(15:28):
most of the mortgages or whatever. Like, I is a
real possibility that like this is like talking about like
Blackrock kind of trying to have higher fees by you know,
diversifying its dex funds with like private credit. Right, Like,
you could see the kind of the reverse happening in
private credit, where like you start with like very risky,
expensive direct LBO loans and you end up doing like
(15:52):
consumer credit for tighter spreads because you want to become
like a financial supermarket, right, Like that's a possible outcome.
Speaker 2 (15:59):
Yeah, look forward to that future. And something I was
thinking about. I mean, there was been several articles this
week that have talked about this grand convergence between private
and public, which has been going on for a while now,
as a narrative but I mean, when you think about
that convergence, is it just the private debt markets becoming
more public? Are the public debt markets going to take
(16:20):
on any characteristics of what happens in the shadows, or
is this just private becoming more public.
Speaker 1 (16:26):
I think it's mostly private becoming more public. But like
one way of private becoming more public is ets, right, Like,
if there's like liquid trading, then there will be private
credit ets, just as there are, like you know, loan ets, which,
like you know, bank loans used to not trade. Yeah,
bank loans used to be not a product that you
could buy in your retail account, and now like there's
loan ETFs, there'll be private credit ets if like this
(16:47):
gets off the ground and there's a lot of trading,
which I'm sure there.
Speaker 2 (16:50):
Eventually will be, this being apollos.
Speaker 1 (16:52):
Being someone's private credit trading venue, right, yeah, being like
just private credit trading. Right. I spent three years maybe
more writing most days the phrase people are worried about
bond market liquidity, because like people were worried about bond
market liquidity and the story was something like there are
all these like bond mutual funds, but like really bond
(17:14):
ETFs people are worried about these ETFs are so liquid
and you can just trade them on the Stock exchange
anytime you want, and if like, people will want their
money back. At the same time, these ETFs will have
effectually redemptions and they'll have to sell or someone will
have to sell all these bonds, and the bonds are
not as liquid as the ets now, and so it's
a disaster waiting to happen, and then disaster never really happened.
(17:35):
I made fun of this for a long time.
Speaker 2 (17:36):
There are those would argue that it's like real twenty
twenty stuff, you know, I want.
Speaker 1 (17:39):
To say it was earlier.
Speaker 2 (17:40):
I don't know.
Speaker 1 (17:41):
Yeah, twenty twenty is when it came to a head
because of like was when the theory was tested, but
people are worrying about it for years before that. So
I'm just really excited for like the first seventeen times
I can write people are worried about private credit liquidity
because it's just gonna happen again, right, Like, there will
be some trading and then there will be ETFs and
like trading and private credit markets will not be as
(18:01):
liquid as the easy apps, and then people are like, oh,
what happens if and it'll it'll.
Speaker 2 (18:05):
Talk about ill liquidity, doom loops. It'll be great, It'll
be great.
Speaker 1 (18:08):
And like the best part of this is that, I
want to say, Tracy Alley was who pointed to this
out to me, but our Bloomberg collegue. But in like
the sixties, people had this exact worry about equity mutual funds, right,
it was like, howint Yeah, it was like, oh, these
mutual funds, like if they all get redemptions at once,
like they'll have to sell the stocks. There's not enough
(18:29):
liquidity for that. And then like you know, they performed
relatively well and like people just forgot about that. And
it also stocks are very liquid, but it's gonna keep going,
keep moving up the capital structure to private credit.
Speaker 2 (18:39):
God, history just repeats itself. Are you excited for the
(19:01):
Pro Football Championship?
Speaker 1 (19:03):
I am looking forward to the professional football game to
be played this weekend between the Philadelphia Squadron and the
Kansas City eleven.
Speaker 2 (19:15):
Wouldn't it be really cool if you could perhaps bet
on that on the place where you also trade stocks? Alas,
doesn't that.
Speaker 1 (19:24):
Seem like a good day? It looked like it.
Speaker 2 (19:26):
Might happen one beautiful shining day in the sun.
Speaker 1 (19:29):
Yeah, Robin Hood. I love Robin Hood.
Speaker 2 (19:32):
They just like they shoot their shot.
Speaker 1 (19:36):
They do him play lawyers like good lawyers, but like
they keep years ago, they launched a thing called Robinhood
checking in savings. But they're like, it's a bank account.
And then like bank examiners are like, it's not a
bank account, You're not a bank and they pulled it
within like twenty four hours. It's so embarrassing, it's so
fun to write about. But yeah, they launched events contracts. Yes,
they launched an events contract on the Big Game. You
(19:58):
can't say bold because then you get in trouble.
Speaker 2 (20:02):
Shit, pronounce it like brook.
Speaker 1 (20:06):
They launched the contracts on the Big Game where you
could bet on Philadelphia Kansas City, not the Eagles or
the Chiefs, Philadelphia Kansas City. And they said they called
it an emerging asset class like event contracts in their announcement,
which is now deleted from their website. But they didn't
lunch football betting. They launched the event contract where you
could buy a contract that pays off a dollar if
(20:27):
Philadelphia wins the Pro Football Championship, pays off zero dollars
if Kansas City wins, or you could buy the other
contract that pays off of Kansas City wins, and that
is a football bet, but they don't call it that
because it's like there's this weird gray area where you
can launch commodity futures, and commodity sutures used to be
like futures on soybeans, and then people were like, we
(20:48):
can have financial commodity s features that are like bets
on what the ten year interest rate will be. And
then people are like, well, if you can do that,
what about bets on whether the Eagles will win the
Super Bowl? And the line between like a financial futures
contract and an events contract is a little blurry, and
there's a lot of interest in events contracts. And so
(21:09):
the CFTC, the Commodity Futures Trading Commission, which regulates commodity futures,
it's like put out rules that they're like proposed rules
that haven't been finalized and probably won't be saying like
certain things are not okay, and those things include elections.
They're like lost on that one, like the elections are
now fair game. Assassinations timely, timely, timely.
Speaker 2 (21:33):
We had several assassination attempts on President Trump.
Speaker 1 (21:36):
Yeah, we also like, in fact, I think Calshi, one
of the prediction markets, briefly listed contracts on what would
happened to Luigi, like whether Lujiman Johnny, which like Cleve,
which is like kind of an assassination contract. It's not
like it's related to assassinations. But anyway. Another thing that's
excluded is sports betting because like obviously like sports betting
is something else. Gambling is now, you know, largely legalized
(21:58):
in the US. You can like batance sports on your
sports book gap, but is that sports that a financial
futures that is allowed on your burgragee. Apparently not, because
Robinhood launched it and pulled it twenty four hours later
because the SAFTC told them to knock it off, and
they were very agreed about it. They said, we were
in regular contact with the CFTC prior to launching this product,
(22:20):
and we believe we were in full compliance with all
applicable regulations. But nonetheless they pulled it.
Speaker 2 (22:26):
Well, who knows where this will go.
Speaker 1 (22:28):
I'm pretty sure we'll go to not being able to
bet on the Big Game this weekend this particular next year.
Speaker 2 (22:35):
Yeah, Well, reading our Bloomberg News Coverage. Apparently, Robinhood said
it will continue to collaborate with the CFTC as it
works on unveiling a more comprehensive events contract platform later
this year, So their ambition is unscathed, right.
Speaker 1 (22:50):
I mean the whole trend is in the direction of
like free, lightly regulated events contract platforms, and like it's
just weird to have an events contract platform that doesn't
feature sports, right, because that's like the main event people
want to bet on.
Speaker 2 (23:04):
Yeah.
Speaker 1 (23:04):
Yeah, the CFTC also wanted to exclude like betting on
the oscars, like some point that.
Speaker 2 (23:09):
I'm not going to be able to manipulate the oscars.
Speaker 1 (23:12):
Right, I mean I don't really.
Speaker 2 (23:15):
Know why, like why they would be against it.
Speaker 1 (23:17):
Yeah, Like part of it is like when you think
about like soybean futures, they're for like farmers to hedge
their risk and for like soy sauce producers to heads
their risk. Right, Like you have natural counterparties on either
side who are like doing real economic activity and are
hedging that or like raising money to do it. Like
there's some like underlying economic activity for all the like
(23:40):
financial betting, right, And so you can be like, oh,
this commodities exchange is just like evil speculators betting, and
they can be like no, no, no, it's like supporting
real economic activity. And then betting is just betting, right,
Like no one really thinks maybe maybe I'm wrong, but
I've never heard anyone being like, oh, yeah, sports betting
is like building wealth, right, like people something to say it,
but it's it's like wells an emerging asset class. It's
(24:02):
a very cynical thing to say. Yeah, it's not an
asset class. The stock market goes up over time, not
because of magic. It goes up over time because it's
like an investment in economic activity, and like the economy
grows with like technological process and demographic growth, like the
size of the sports betting market does go up over time,
but like the outcome of the Eagles game doesn't go
up over time. Right, it's like you bad, and like
some people win and some people lose, and like that's
(24:23):
it and most people lose, right, And it's like you
negative some game for the betters. And if I were
a financial markets regulator, I would be like, look, I'll
approve a lot of stuff that is pretty tangentially related
to real economic activity. I understand that like the speculation
begets liquidity that like a lot of complicated products are
(24:45):
useful and hedging, you want to trade zero day options
on meum stocks like fine, Like that's really loosely related
to real financial activity, but like it's all in a continuum.
But then it's like sports betting is like there's nothing
this is embarrassing to a financial regulator. Now I think
probably entering an era of like unembarrassable financial regulators, and
so like yeah, they'll like whatever. You can definitely buy
(25:08):
futures contracts on the Super Bowl, but like I just
think that like turning over the financial markets purely to
gambling is kind of a scary stuff, right, Yeah, But
it's like you can understand why, right, because you look
at like the work of a sports book and the
work of like a high frequency equity trading shop is
like very similar, right, It's like similar techniques, it's similar skills,
(25:29):
it's like similar risks, Like you're really doing the same
kind of work, and there is a lot of movement
between you know, people who are market makers for stocks
and people who are book makers for sports and then
on like the retail side, Like you look at like
there's so much stuff in like retail stock markets. There's
a Bloomberg article this week about people betting on sports
and like people who got like thousands of dollars a
weekend on football, and like a lot of what they
(25:52):
say is like it's a social thing. It's like I'm
texting with my friends and like getting our bets in
and like it's my way to keep up with my
college buddies or whatever. And you see that in like
you know the memes phenomenon too, where it's like a
very social phenomenon and it's like gives people like a
sense of fun and a sense of identity. It's not
just like we expect these tacks to go up. There's
like some more social, very community based, Yeah, And it's
(26:13):
just that like one of them is like financial markets
and one of them is gambling. But like there's like
an obvious convergence like socially, and so you know, it
is a little weird for the regulators to say, no, robinhood,
you can offer some kinds of like fun gambling, but
not other kinds of fun gambling, and like eventually I
think that will erode.
Speaker 2 (26:33):
Yeah, another great convergence indeed in those Shining twenty four
hours where you could do this on robin Hood. Apparently
it had been rolled out to one percent of their customers,
so robin Hood said it will give those investors the
option to close their positions or take them to resolution.
It would be fun to talk to some of those
folks who are caught in this limbo.
Speaker 1 (26:52):
I think it's to take it to resolution. Yeah, I
guess because they.
Speaker 2 (26:55):
Are pretty cool. Yeah, Okay, everything hurts.
Speaker 1 (27:07):
And that was The Money Stuff Podcast.
Speaker 4 (27:08):
I'm Matt Levy and I'm Katie Greifeld.
Speaker 1 (27:11):
You can find my work by subscribing to the Money
Stuff newsletter on Bloomberg dot com.
Speaker 4 (27:15):
And you can find me on Bloomberg TV every day
on Open Interest between nine to eleven am Eastern.
Speaker 1 (27:21):
We'd love to hear from you. You can send an
email to Moneypod at Bloomberg dot net, ask us a
question and we might answer it on air.
Speaker 4 (27:28):
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.
Speaker 1 (27:34):
The Money Stuff Podcast is produced by Anna Maserakus and Moses.
Speaker 4 (27:37):
Onam Our theme music was composed by Blake Maples Brandon
Francis Munimssara, executive producer and Stage Bauman is Bloomberg's head
of podcasts.
Speaker 1 (27:45):
Thanks for listening to the Money Stuff podcast. We'll be
back next week with more stuff
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