April 12, 2024 • 31 mins
For their very first episode, Katie and Matt discuss a hot fund for private stocks, a clever/illegal DeFi trade and super users of government data. Also there's some fake Cormac McCarthy.
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Episode Transcript
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Speaker 1 (00:03):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:10):
Hello and welcome to The Money Stuff Podcast, your weekly
podcast where we talk about stuff related to money. I'm
Matt Levine, I'm the Money Stuff columnist at Bloomberg Opinion.
Speaker 1 (00:21):
And I'm Katie Greifeld. I'm a reporter for Bloomberg News
and an anchor for Bloomberg Television.
Speaker 2 (00:25):
Katie, Welcome to the Best Day of Our Lives, the
very first Money Stuff Podcast.
Speaker 1 (00:30):
It is the best day of our lives, and every
Friday will be the best day of our lives because
that's only go up from here, only going up. We're
going to talk about some stuff from your columns every
single Friday, and it's going to be fun.
Speaker 2 (00:43):
You made that sound like a threat in.
Speaker 1 (00:44):
Many ways, it is. Those are our marching orders, and
we're going to have fun.
Speaker 2 (00:48):
What are you talking about this week, Katie, What a
great question.
Speaker 1 (00:51):
We actually have a really strong first episode because we're
going to be talking about the Destiny Tech one hundred
fund close stend fund publicly listed. The stock has been
going nuts and there's a lot to say here. Yes,
and then we're going to go from Destiny to Mango,
specifically Mango markets and we're going to talk about whether
code actually is law or is law law, a lot
(01:14):
of big existential questions there, and then we're going to
talk about super users, this time related to inflation and
also the nature of insider trading and the Bureau of
Labor Statistics. Indeed, Matt, what is Destiny The.
Speaker 2 (01:34):
Destiny Tech one hundred is a publicly traded fund that
invests in private tech companies. So right now, as of
their last disclosure, they have about a fifty million dollar
portfolio of steaks in like twenty three private companies. A
lot of it is SpaceX, some of it is like
you know, plaid and stripe and all the other patterns
that are also FinTechs. So they have this pot of
stock and they sold shares in the fund to the public.
(01:56):
They like did a direct listing last month, and since
then the stock has just only gone off. It's not
even been very volatile, but it's way above where they
listed it at. And so right now that fifty million
dollar pot of private stocks has a market value of
something like five hundred million dollars, which is one thousand
percent premium to the net asset value of the fund,
(02:18):
which seems real high.
Speaker 1 (02:20):
And you and I have both spoken to the CEO.
His name is Sohail Prisad. What's remarkable is that he
doesn't seem super stressed about the premium or the volatility
of the stock. I mean I spoke to him on
Thursday morning on TV and his explanation was there in
a discovery phase. Have only been public for about two weeks,
which is fair, but I might be a little bit
(02:41):
stressed out.
Speaker 2 (02:42):
To me, it just seems like a disaster to do
this thing and have it traded one thousand percent premium.
But others would disagree, apparently including him, because to me,
like the thing you're marketing is like you can buy
exposure to these private tech companies. Never before have you
been able to buy shares of SpaceX and Stripe, And
we are giving you that exposure, which is a great pitch,
(03:03):
which is not true if you're trading at one thousand
percent pew. If you're trading a one thousand percent premium,
retail investors can only buy the premium, right Like when
they put their money in, they're getting like five dollars
worth of private tech stocks and like fifty dollars worth
of public market volatile frothy enthusiasm for the stock. The
product that he's saying is only that product if it
trades like at a round the net asset value.
Speaker 1 (03:24):
Well, you had a suggested solution for him in the
form of issuing more shares, which I don't know if
it would help the retail traders who are buying in
right now at one thousand percent premium, but it would
theoretically if they sold enough, help to collapse the premium
a little bit.
Speaker 2 (03:38):
Right. You suggested that solution to him, didn't you.
Speaker 1 (03:40):
Yeah, And he can't really talk about that, especially not
on live television, and we can we can theorize about it.
Speaker 2 (03:47):
One way to think about what he has is he's
got a fifty million dollar venture fund and there's like
a two billion dollar waiting list for that fund or
whatever I made that number up. But like the market
cap of the fund is so far above the acid
value of the fund that like a lot of people
clearly want to put their money into a thing that
gives them exposure to private textlocks. So what he can
do is he can like take names off the waiting list.
(04:08):
He can sell a bunch of stock to the public
app a huge premium to the current net asset value,
and he can take that money and invest it into
private tech startups. And if you do that over time,
probably the premium compresses because you're selling a lot of stock,
you're buying a lot of the underlying portfolio, and you
end up with a fund that is much bigger by
(04:28):
net asset value than it is today, probably bigger by
market cap. But like instead of trading at one thousand
percent premium, it trades it's something that sort of reflects
the value of the underlying private companies.
Speaker 1 (04:39):
The question of him deploying capital is also really interesting one,
and first of all, how he's actually getting these shares
in private companies. He said that it's through a combination
of private stakes, trading platforms, and investing directly. But one
of the interesting nuggets from the interview that I had
with him was that he has these private companies calling
(05:00):
him now, which is probably a result of the fact
that we all keep talking about it.
Speaker 2 (05:03):
It's brilliant. I mean you look at the disclosure of
their portfolio and also like what he said about it,
like it really like he's like scraping sticks together to
find private company stakes, right, He's like calling employees and
being like, hey, could you do a forward contract and
they're like, no, we're not allowed to. Our company will
let us, and oh, you know, maybe we can do
it under the table, right. You know, he's finding things
in the secondary market. It's like piecing together this portfolio
because he's just like a guy, you know, like that.
(05:25):
It's not true. He's the founder of forts, like, he's
got some experience in private markets, but these big tech
companies can kind of choose their investors and it's not
necessarily easy to get in. But now he's a much
higher profile because he's got this huge you know, market
cap to his fund. There's like clear pent up demand
from retail investors. He's getting a lot of press coverage
and so yeah, this is a marketing tool not only
(05:46):
to retail investors, but also to companies who might you know,
want to sell him some stuck.
Speaker 1 (05:50):
It's just really interesting that this is happening this week.
I'm really grateful because this is the first week that
we're recording the money Soff podcasts. But also I feel
like we're just at the moment in public equity markets
where the public equity market has been shrinking. You hear
about all these hot, shiny startups that the average person
can't get exposure to. And again, an interesting week to
(06:13):
be having this conversation because I actually also spoke to
Kristen Olsen from Goldman Sachs this week. She is the
global head of Alternative Capital Markets and her pitch for
why people should invest in private markets is because companies
are saying private so much longer, you're missing out on
all that growth. You know, the company that goes public,
you've already missed out on a ton of that growth,
(06:35):
which makes sense if you're pitching private markets. But I
feel like all of this sort of ties into a
general theme of there's been a dearth of IPOs, the
public market is shrinking, and it feels like all the
exciting stuff is happening outside of public markets.
Speaker 2 (06:49):
Yeah, I mean that's what everyone thinks, which is why
this thing is so popular. But of course it undermines
the mechanics of this thing, because if you're like, oh,
private companies grow so fast, so we should get in
before they go public, you get in at twenty times
their valuation, then it doesn't work anymore. Right. It's funy
to like imagine the sort of end case for this.
What if like everyone agrees with the thesis that you
should get into private companies and they should do it
(07:11):
through this fund, then that's going to bid up private valuations. Right. Yeah,
we talked earlier about how he is getting calls from companies,
right because like, one, he's like in the news companies
who want to raise money, Like, oh, here's a guy
who has money. But also he has a lot of
flexibility to pay up on valuations, right because like people
are already buying into his fund at ten times in
(07:32):
that asset value. Like if he pays twice the last
funding round for a company, like that's fine, that's easy.
Like that's a that's a good trade for him. I mean,
the one reason that private companies are cheap is that
they're young, and that one grown yet. But another reason is, like,
you know, you don't have liquidity, you don't have the
same number of investors that have access to private markets
as you have in the public markets. In one sense,
it's a way to like democratize private companies, but another way,
(07:53):
that's a way for private companies to access all those
public investors and bid up their price.
Speaker 1 (07:58):
It's interesting that he's in this position because this isn't
a new pitch the Destiny Tech one hundred funds. This
idea has been brought forward by ARC before they have
the ARC Venture Fund, and it hasn't created this moment
that this fund has. And I find it interesting that
again he is in this position.
Speaker 2 (08:16):
Well, I think they all have different structures, and I
think the ARC Venture Fund is not as exchange traded. Yes,
that really matters, right. The weird thing about this fund
is not that it's a way for public investors to
put money into a fund that invests in produate companies.
It's that it's a publicly traded way for them to
do it. So it has a market price, and it
turns out the market clearing price for that product, like
(08:37):
at this point where the product is so small, is
much much higher than the amount of money though to put.
And that's kind of wild. We live in a memestock world.
Things like that just build on themselves because you attract
attention to us thought because it's like gone way up
and it's trading way over acid value, and that just
attracts attention and more people get into it.
Speaker 1 (08:53):
Well, I feel like we're going to be talking about
this again because in declining to answer one of the
questions I asked him, which is has your net acid
value changed materially since the end of twenty twenty three
when they last provided it. He said, can't say anything
about that. Obviously, they calculate it on a quarterly basis,
but they report earnings I believe at the end of
April or the beginning of May. So it's gonna be
(09:15):
really fun to see if it's changed from that four
dollars and eighty four cents net acid value that they had.
Speaker 2 (09:20):
Yeah, but you know, I mean they owned steaks and
big private tech companies. Rights that market doubled in the
last you know it has has it ten times?
Speaker 1 (09:30):
We're going to find out. Stay tuned. I think I
have a guess. Mangoes, what is Mango markets?
Speaker 2 (09:46):
Mango Markets is a decentralized finance trading platform.
Speaker 1 (09:51):
I haven't thought about one of those in a while.
Speaker 2 (09:53):
I know, right, But this guy blew it up in
twenty twenty two, and he was arrested and he's going
on trial this week. And the question is is it
legal to blow up a DeFi trading market? That's not
really the question. The question is is code law or
is law law?
Speaker 1 (10:11):
Those are just some big heavy questions because crypto obviously
would say code is law, and I mean.
Speaker 2 (10:17):
You say that until you're a trading platform gets blown
up and then you're like, wait a minute, that was fraud. Right,
This is not how it always works.
Speaker 1 (10:23):
Right.
Speaker 2 (10:23):
You're like, as long as you're the smart one, you're like, yeah,
anything goes, you don't need regulators. But then you get
blown up and you're like, ah, where there were regulators?
Speaker 1 (10:30):
Well, explain to me briefly, what is the part of
the code that he exploited.
Speaker 2 (10:35):
Okay, So Mango Markets is like a decentralized finance trading platform.
You can trade perpetual features like sort of derivatives on
crypto tokens. Right, people love this. There's all sorts of
crypto trading platforms that allow you to speculate on other cryptotokens.
Mango Markets, as a DeFi trading platform, also had its
own token called Mango or ngo like mngo and so
I thin guy did so he set up two accounts
(10:57):
on Mango Markets. Because everything's anonymous, you know, it's not
like the way DeFi works, Like you're not like putting
down your credit card and your driver's license like you
just set up a wallet, right for sure. So he
set in two accounts on Mago markets. In one of
those accounts, he offered to sell a ton of futures
on the Mango token, and the other account he offered
to buy a ton of futures on the Mago token.
And like, no one else was trading in that minute,
so they crossed, and so he ended up long a
(11:19):
bunch of futures in one account, short a bunch of
futures in the other account. And for these days, you
have to put up some collateral, right, so he had
like he had some exposure to the Mango token, and
he had to put up collateral on both sides of
the trade. And then he went out in a third
market elsewhere and he just bought the Mango token. So
not future is not a weird drove as trade. He
just bought the Mango token. And like it turns out,
there's not that many people want to buy that many
(11:40):
Mango tokens, and so he really drove out the price
a lot, but like one thousand percent or more. And
what this meant was that his derivatives contracts. His two
accounts on the Mango trading platform, one of them had
a huge profit, you know, one hundreds of millions of dollars,
and the other one had a huge loss, hundreds of
millions of dollars. And what happened is that he took
(12:01):
the one with the profit and he went to like
the Mango you know, exchange platform, and he said, I
want to borrow against all this profit. Basically, I want
to withdraw some of my winnings. And so he withdrew
like one hundred million dollars of winnings. Meanwhile, on the
other side, he had hundred million dollars of losses and
he didn't post any collateral for those. But like there's
a there's like the moment in time where he could
(12:21):
withdraw on the winning side and ignore the losing side,
and then you know, everything collapses because he like walks
away with this hundred million dollars. The price of the
token goes back down, and Mango Markets has lost one
hundred million dollars of customer money and basically is blown up.
And then he like calls them up and says, I'll
give you back some of the money, and like they
negotiate a sort of return of some of the money
(12:43):
in exchange for them not pressing charges. By the way,
pressing charges is not really a thing if you commit
a federal crime and like your victims like I don't
want press charges, like the federal government can still go
ahead and prosecute you. And that's what happened. But anyway,
it's great because like one, it's like it's just very
like simple trade and it's like people things that are
sort of rhyme with this in like real financial markets.
(13:04):
This manipulation is like way too simple to do in
the real financial markets. But like he managed it in
a DeFi market where basically they were not careful about
structuring how people could withdraw money and like how they're
token pricing worked. Just like the mechanics of how they
did this allowed him to do this exploit. And when
he was doing it, he was posting through it. He
(13:26):
was posting on Discord. Actually I think this is before
he did it. He posted on Discord being like I've
discovered and exploit and people were like, what is it?
Is it? And then they sort of described this and
he's like yes, he said, you take a long position
and then you make number go up numbers and umba,
of course you make number go up and like, that's
what he did. He took a long position, he made
(13:46):
the number go up, and then he'd, you know, cash
that before anyone noticed that it was all kind of fake.
Speaker 1 (13:50):
I love that because it sort of gets back to
the code's law versus laws law. Like he wasn't secret
about it. He was very open and kind of proud
about it, which really speaks to the fact that, like
in his circles, in his discords, code is law.
Speaker 2 (14:04):
I mean he went on Twitter after doing it. People
are like, oh my god, there's a there's a hack
of a lot of hackets. A better word is like
exploit or manipulation, because he didn't like break into the computers.
He just did the thing that the market allowed that
was bad. But after he did it, he went on
Twitter and under his own name and said I was
involved with a team that operated a highly profitable trading strategy.
Speaker 1 (14:26):
Last Night Strategy.
Speaker 2 (14:27):
I believe all of our actions were legal, open market
actions using the protocol as designed, even if the development
team did not fully anticipate all the consequences of setting
parameters the way they are. Unfortunately, the exchanges took place
on Mengo markets became insolvent as a result with the
insurance fund being insufficient to cover all equidations. And he's
not wrong about any of that. Like he used the
(14:48):
protocol the way it was designed. It was designed badly,
and he excited a lot of money for himself.
Speaker 1 (14:52):
So that's what I was thinking about when I was
reading this. If he had been like a little less ambitious,
what if instead of what it was, like one hundred
and ten million dollars, it had been ten million dollars,
which is still a lot of money, but not collapsible money,
maybe this wouldn't have happened.
Speaker 2 (15:09):
Yeah, there's an assumption that, like a lot of markets,
like people are leaning a little bit into trades and
like you know, doing like a little bit of manipulation
around the edges in a way that doesn't get them caught.
The problem is you can't like repeatedly do that here.
You know, you're taking risk of both of going to
prison and of losing money each time you do this trade.
So it kind of makes sense that if you're going
to do this trade, you're going to do it for
(15:30):
a big score, and he did it for a big score.
I agree with you that it probably attracted him more
attention than was good for him, yeah, or.
Speaker 1 (15:37):
I don't know. Obviously, the he wanted attention, which is
why he was posting vall.
Speaker 2 (15:41):
I think he probably wanted the money, but yeah, the
attention of the money. He was not averse to the attention.
Speaker 1 (15:45):
I mean, attention is definitely a commodity.
Speaker 2 (15:47):
Yeah, but a one hundred million dollars podcast, I think
is better than the kind of attention that lends you're
in jail. Right, Yeah, perhaps he should have had less,
Like ordinarily, when you manipulate a market for one hundred
million dollars, it's nice to not mentioned that on Twitter.
I don't know.
Speaker 1 (16:01):
I don't know. Maybe I would have tweeted about it
once done it for one hundred and ten million dollars
and just walked away. But we didn't get into your
dream dichotomy world of nice versus fun markets.
Speaker 2 (16:11):
I really like that, Yeah, I mean I just think that.
Like we talked about crypto people saying code is law,
Like that's not true, Like that's kind of true. But
a lot of crypto projects are about building some sort
of future of finance or decentralized ownership or something, and
the people working on that are not necessarily like also anarchists. Right,
some of them might be, but they have nothing to
(16:32):
do with each other. Right, Like you can believe that
crypto enables something special and new in like the economic world,
and also that it should be sobjet to regulation, you
shouldn't be able to like do fraud in it, right,
And a lot of people in crypto, I think, believe that.
And then a lot of people don't. And a lot
of people in crypto really believe code is law. Regulatory
interventions are generally bad and make things worse, and you
(16:56):
should just be careful and you should design your protocol directly.
And by the way, if you design it poorly and
someone exploits it for one hundred million dollars and you
go bankrupt, then like there's an evolutionary process whereby everyone
learns that lesson and the next protocol is more robust.
Whereas like regulation makes things worse because it makes people
less careful, you know, And I think, like you see
(17:18):
that playing out here, where like it's not like everyone
in crypto thinks this is great, right, Like a lot
of people are like this is bad. Like he's manipulating
a market. He wouldn't say this, but like other people
would say, he's stealing money from other investors on that platform,
and it's a bad outcome that makes crypto less attractive
to ordinary people and therefore makes crypto adoption harder. Right, Like,
I think a lot of people in crypto find all
(17:39):
this anarchist stuff kind of distasteful. But then a lot
of people are like, look like, we're trying to build
a system that works on its own, or trying to
build a system of smart contracts, where like you don't
need to go to the court to enforce your contract,
you can just have the computer enforce your contract. And
we're undermining that when the Justice Department comes in to
bail people out of badly designed protocols.
Speaker 1 (17:58):
Yeah. And then again, the people who would like to
operate in the fun markets would probably say, we're finding
bugs in the code.
Speaker 2 (18:04):
Yeah, yeah, right, there are white hat hackers. Yeah, they're
getting a bug bounty.
Speaker 1 (18:08):
I just liked those categories because I think all the time,
and I joke with my family that there should be
like the Dope versus the Clean Olympics, where you have
all the athletes taking drugs and they all race each
other and it'd be really interesting to see who wins.
But then you should also have the clean Olympics where
all the athletes actually don't drug themselves.
Speaker 2 (18:27):
Right, And the reason you don't have the dope Olympics.
Speaker 1 (18:29):
I think, well, probably a lot of reasons.
Speaker 2 (18:31):
Is it's probably like not that healthy people to take
a lot of dope. But the nice thing about crypto is,
like Mango was just the marketplace for speculating our crypto teconds.
No one will die if Mango is a lawless market
where you can manipulate it to your heart's content. Right.
The problem here is that like some people on Mango
thought it was like not manipulated, and other people are like, oh,
what a fun place to manipulate. But like if everyone
(18:52):
had known going in, like hey, if there's any problem
with this protocol that allows someone to take all of
the money out of it, good for him. That's you're
a problem. No guarantees of anything working, No one will
rescue you. If everyone had had that expectation going in,
and if you could sort of prove that everyone had
that expectation, then like, yeah, it's fine, Yeah, who's it
like external harm?
Speaker 1 (19:11):
No one died, all right? So were two thirds done?
Speaker 2 (19:19):
Ye?
Speaker 1 (19:19):
Just gotta know we just got to bring it home.
Speaker 2 (19:21):
You know.
Speaker 1 (19:21):
The third act is the hardest, is what they say
in playwriting. I don't know, Okay, super users, super us
of inflation.
Speaker 2 (19:31):
Yeah. I feel like that's a bad headline.
Speaker 1 (19:33):
That's what the list was.
Speaker 2 (19:34):
I know that's what it's called. Right, It's a bad
headline for the people who read it.
Speaker 1 (19:38):
I think they have other worries right now, like what inflation.
Speaker 2 (19:42):
No. So, the Viereau of Labor Statistics, which releases inflation data,
released inflation data a while back and there was like
a surprising change that was methodological. Right.
Speaker 1 (19:52):
It was a big deal.
Speaker 2 (19:53):
Yeah, but it's like nothing changed, like our calculations have
changed and this is why. Right. And so a person
at the bl US emailed a bunch of people not
at the PLS to explain this change that they didn't
freak out and so that they could understand what was
going on. And the email, unfortunately began super users Yeah,
And then it got forwarded around Wall Street because like,
(20:14):
people are very interested in the inflation numbers, and then
it got forwarded to reporters and people are like, wait,
there are super users of the Bureau Labor. Just looks like,
is there a higher tier of customer where the government
tells them information about inflation that everyone else doesn't get.
How do I then it became a scandal. How do
I subcress? They became a scandal?
Speaker 1 (20:34):
Great reporting from the New York Times. And when you
think about who was actually on the list, because.
Speaker 2 (20:39):
The scandal came out a while ago, and like the
Times last week Breakfast story that this not I went off,
there really was a group of super users. There were
people emailing the guy being like, hey, how do I
get on the super users list? It was a real thing.
Speaker 1 (20:51):
Yeah, it seemed like there was a lot of engagement
on that particular distribution list. Yeah, so the New York
Times submitted a Foyer request and now we ended up
with a good idea of who was on the list.
It was you know, GP Morgan, black Rock, and then
he had a bunch of hedge funds on the list
as well. And in your column you ask the question
of how bad is this, like is this insider trading?
(21:14):
I don't know. Probably when it comes to what is
material information, the bar has come way down.
Speaker 2 (21:20):
If the story was that there's a list of super users,
and before every like CPI data release, like the day
before the BLS sends the super users the release to
be like, hey, here's a preview. That would be really
bad and people would be going to jail, right, But
that's not at all what happened, right. Like what happened
is that, as far as I can tell, they put
(21:41):
out the data every you know, periodically, and people from
all over the place email or call the people in
charge of the data at the government saying hey, can
you explain this thing? And these people who work at
the BLS work for the people, right like their government employees, Like,
their job is to help people understand on these statistics,
and so when people call them and say, hey, can
(22:02):
you explain what's happening here, they try to explain it.
And so there's this range of things where like giving
people the data early would be really bad. Yeah, Like
answering their legitimate questions seems very legitimate. And when I
wrote about this the other day, like, I got a
lot of reader email being like this is fine and
exactly what they should be doing. Yeah, someone wrote to
me saying this is very strange. The BLS has people
who are supposed to answer questions from the outside. Literally,
(22:24):
anyone can email or call them and get answers. It's
not a scandal but a public service, right, which I
think is right.
Speaker 1 (22:30):
Yeah, No, there's definitely a sympathetic reading here. And I mean,
if you look at the statement that the BLS has
given to different media organizations, I believe they gave this
one to Bloomberg. Was that to your point, the BLS
it encourages people to ask questions and makes it staff
available to engage with the public, but they start to
create equal access to the information for everyone, of course.
(22:50):
But also in the New York Times reporting, they spoke
to someone who was actually on the Super Super Loser
super User list, Omerisha Reef. He is the founder of
Inflation Insights. He also is a recipient. He said that
this was relatively new and his best guess for why
the super user list was created was just because they're
getting so many more questions than they were previously about inflation,
(23:14):
and with the volumes of questions increasing so much, the
staffing has not, so maybe they just created a master list.
Let's just answer everyone's questions at once and put them
all on this list.
Speaker 2 (23:25):
Which, when you think about it, is like the better
way to do it. Right. The thing you might worry
about is that analysts at hedge funds. One can call
the number at the BLS that anyone can call, but
two have better questions, right. They can ask really pointed
questions about things that will move the market, then get
specific answers, and then they can go trade on it
with everyone else not knowing it. If you do it
on an email list, it's a little bit fairer, right, So, like,
(23:47):
you know, the HEADEPHNT analyst emails the BLS and says,
can you explain this data point? And instead of writing
back and saying, yeah, sure, here you go, they can
send up to the whole list that wants the same explanation,
and you know, arguably can get on the list. It's
probably better than like the alternative of having one on
one conversations, yeah, about stuff that might be market moving.
(24:08):
But the whole problem here is if you're having any
form of conversations about stuff that might be market moving
and you're doing it in any way that is not public,
people are going to get upset about that, right because,
like it just is the case that some of these
hedge FOIND analysts got information that was not broadly disseminated
to the public, and that they found useful. Right, that's
why we're there.
Speaker 1 (24:25):
I have a few silly thoughts. The first thing that's
thrown into my minds as you were talking was they
should have an earnings call. That doesn't quite work because
we're talking about a company.
Speaker 2 (24:34):
No, but that's right, I mean, like right, That's what
companies do to partially address this problem. Is like they
put out the press release and their earnings release, and
then they have a call where analysts can ask questions.
But you can hear. Everyone can hear the questions, everyone
can hear the answers, and so it's a little bit
more you know, open access than the system of doing
it by private emails.
Speaker 1 (24:53):
Perhaps they could have a subreddit. A subreddit, yeah, and
this guy could be the moderator, this BLS economist who
was described as not super high ranking, but he had
been there for I know.
Speaker 2 (25:04):
It was like a really mean nag in the time.
I know. Someone suggested an other approach that a lot
of government agencies g used for other things, which is
anyone can ask questions, but instead of just answering the questions,
they like collate the questions, write the answers, and then
put all of that out publicly at the same time,
so everyone gets the answers to everyone's questions, and everyone
(25:24):
gets to see the questions at once, which is sort
of like using the super user list, only instead of
just doing it in like a reply, I'll email you
do it online or something so everyone can see it.
Speaker 1 (25:32):
Did you have any more reader comments? I feel like
you had a lot.
Speaker 2 (25:35):
Oh yeah, no, A bunch of people were all sort
of in the camp of this is all fun. Yeah,
I'm going to read you another one.
Speaker 1 (25:41):
Okay.
Speaker 2 (25:41):
Why in the world can't anyone ask a question of
their government about technical aspects of the report the government
produced with their taxes. Granted, there won't be many people
with the ability to frame such questions, much less profit
from the answers, but the technique should be freely available
to anyone, even big hedge funds.
Speaker 1 (25:57):
Seems invisible.
Speaker 2 (25:58):
Yeah, I mean it's it's good government service. By the
way I think about this, I'm like more of a
stocks guy, and I think about this by analogy to
public company insider trading all the time, right, I mean, like,
if you're a public company and someone calls you up
and it's like I'm a big investor in your company,
I'm a shareholder in your company, you work for me,
I want you to explain something about your business, Like
(26:19):
your instinct is going to be to explain your business
to them, right, Like your instinct is going to be
I work for you. This is information that you legitimately want,
I'm going to tell it to you. But you know,
there's also rules against insider trading, and there's rules against
selectively disclosing material and public information, and so companies are
constantly walking this tightrope between like we don't want to
(26:39):
like be dismissive through our shaholders and not tell them anything,
but we also don't want to tell them anything that
will get user them in trouble. And there's a lot
of thinking about that and a lot of people trying
to get that right. But it's just always strikes me
as kind of a weird balance, where like people who
know they're insider trading rules are sometimes shocked to find
out that companies talk to their investors all the time
and try to explain their companies to them. The Bureau
(27:00):
Labor said has the same problems.
Speaker 1 (27:02):
They could also be like the FED. I mean, maybe
that's a better analogy than a corporate earnings call. The
FED releases their decision at two pm, and then two
thirty Jerome pal starts speaking and the entire knee jerk
reaction unravels. Matter. Are you on the super User's list?
It sounds like you could have just emailed them and
asked to be added to the list, and you could
(27:24):
be on the list.
Speaker 2 (27:25):
I guess one question is does it still Is that
still a possibility? Like I feel like it's kind of
fraught now, And if I were to email the BLS
today and say, hey, guys, I'd love to be on
the super User List, I feel like that would be awkward.
Speaker 1 (27:35):
But maybe I feel like you'd only do that if
you want to detrol them.
Speaker 2 (27:39):
That's true of me. But the reasons for the super
User list haven't really gone away, right, They still have
to explain this stuff, And so now that it's so
well known, why shouldn't people be able to add themselves
to it.
Speaker 1 (27:50):
It's a fair question.
Speaker 2 (27:55):
I do want to talk about one reader email I
got this week.
Speaker 1 (27:59):
Oh my god, great, this is.
Speaker 2 (28:00):
Like the Money Stuff podcast nail bag section.
Speaker 1 (28:03):
Oh my gosh, let me bring it up.
Speaker 2 (28:05):
So there's this great story in the FT about renewable
investors and like d Shaw hiring sheep to mow the
lawns around their solar panels. And it's great because it's
just like it's this image of like these hedgehood investors
and like the way they hire the sheep. Apparently is
often that a solar array is being built in some
rural area and a farmer, a neighboring farmer, kind of
(28:27):
wanders over and says, hey, could you use any sheep?
And I thought that was so funny, and I wrote
that the first scene of my Cormick McCarthy influenced finance
novel would involve a hedge fund manager leaning against the fence,
chewing on a piece of straw, and a neighboring farmer
wandering over to talk about sheep. So a reader asked
the Gemini AI model to write that scene and sent
(28:50):
it to me, and I'm going to read it to you.
He shimmered off the desolate, distorting the rows of glass
panels into an alien mirage. Matt Levine, a hedge fund
refugee transplanted to this forgotten corner of North Carolina, leaned
(29:10):
against the rusting perimeter fence. His city suit, once a
symbol of power and prestige now hung on him like
a molting carapace, ill suited to the unforgiving sun. A
plume of dust announced the arrival of Silas, the neighboring farmer.
His weathered face etched with the harsh lines of a
life spent wrestling with the land, held a deep well
(29:31):
of suspicion. Silas stopped a good distance away, the silence
thick between them. Finally he spoke. His voice, a dry
rasp carried on the hot wind. Heard you needed your
fancy heater contraptions mode. Silas gestured towards the panels with
a gnarled hand. Sheep got restless with all that shade
blocking their usual path. It ends there, but I feel
(29:53):
like you get the sense of it.
Speaker 1 (29:54):
Oh my god, I was hoping he was getting going.
Speaker 2 (29:56):
Yeah, yeah, Well someone's got to write it. This person
told me that he didn't ask Gemini to name the
headphone character Matt Levine, not.
Speaker 1 (30:04):
Just it just it felt right. Yeah, I love it.
I feel like we should keep going on this. I
think there's a lot of the.
Speaker 2 (30:11):
Podcast doesn't work out, then then we'll collaborate on the novel. Maybe.
Speaker 1 (30:15):
God, your readers are fun. That is a lot, and
that was unprompted.
Speaker 2 (30:19):
I mean he prompted Gemini.
Speaker 1 (30:20):
I know he didn't write all of them. You didn't say, hey,
intrepid reader, do this for me. No, Yeah, that's what
I'm saying.
Speaker 2 (30:28):
No, I've got a lot of like people being like
I asked GPT to write like you, and this is
what it produced. And I'm always like, still safe. But
one day like GPP seven will just you know, just
do the job.
Speaker 1 (30:43):
But they can't do a.
Speaker 2 (30:44):
Podcast, I'll be reduced to podcasting. There we go, And
that was the Money Stuff Podcast.
Speaker 1 (30:54):
I'm Matt Levin and I'm Katie Greifeld.
Speaker 2 (30:56):
You can find my work by subscribing to the Money
Stuff newsletter.
Speaker 1 (30:59):
I'm Bloomberg dot and you can find me on Bloomberg
TV every day between ten and eleven am Eastern.
Speaker 2 (31:04):
We'd love to hear from you. You can send an
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Speaker 1 (31:14):
You can also subscribe to our show wherever you're listening
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people find the show.
Speaker 2 (31:19):
The Money Stuff Podcast is produced by Anna Maserakus and Moses.
Speaker 1 (31:23):
Andm Our theme music was composed by Blake Maples.
Speaker 2 (31:26):
Brendan Francis Neonan is our executive producer.
Speaker 1 (31:29):
And Sage Bauman is Bloomberg's head of podcasts.
Speaker 2 (31:31):
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 (00:10):
Hello and welcome to The Money Stuff Podcast, your weekly
podcast where we talk about stuff related to money. I'm
Matt Levine, I'm the Money Stuff columnist at Bloomberg Opinion.
Speaker 1 (00:21):
And I'm Katie Greifeld. I'm a reporter for Bloomberg News
and an anchor for Bloomberg Television.
Speaker 2 (00:25):
Katie, Welcome to the Best Day of Our Lives, the
very first Money Stuff Podcast.
Speaker 1 (00:30):
It is the best day of our lives, and every
Friday will be the best day of our lives because
that's only go up from here, only going up. We're
going to talk about some stuff from your columns every
single Friday, and it's going to be fun.
Speaker 2 (00:43):
You made that sound like a threat in.
Speaker 1 (00:44):
Many ways, it is. Those are our marching orders, and
we're going to have fun.
Speaker 2 (00:48):
What are you talking about this week, Katie, What a
great question.
Speaker 1 (00:51):
We actually have a really strong first episode because we're
going to be talking about the Destiny Tech one hundred
fund close stend fund publicly listed. The stock has been
going nuts and there's a lot to say here. Yes,
and then we're going to go from Destiny to Mango,
specifically Mango markets and we're going to talk about whether
code actually is law or is law law, a lot
(01:14):
of big existential questions there, and then we're going to
talk about super users, this time related to inflation and
also the nature of insider trading and the Bureau of
Labor Statistics. Indeed, Matt, what is Destiny The.
Speaker 2 (01:34):
Destiny Tech one hundred is a publicly traded fund that
invests in private tech companies. So right now, as of
their last disclosure, they have about a fifty million dollar
portfolio of steaks in like twenty three private companies. A
lot of it is SpaceX, some of it is like
you know, plaid and stripe and all the other patterns
that are also FinTechs. So they have this pot of
stock and they sold shares in the fund to the public.
(01:56):
They like did a direct listing last month, and since
then the stock has just only gone off. It's not
even been very volatile, but it's way above where they
listed it at. And so right now that fifty million
dollar pot of private stocks has a market value of
something like five hundred million dollars, which is one thousand
percent premium to the net asset value of the fund,
(02:18):
which seems real high.
Speaker 1 (02:20):
And you and I have both spoken to the CEO.
His name is Sohail Prisad. What's remarkable is that he
doesn't seem super stressed about the premium or the volatility
of the stock. I mean I spoke to him on
Thursday morning on TV and his explanation was there in
a discovery phase. Have only been public for about two weeks,
which is fair, but I might be a little bit
(02:41):
stressed out.
Speaker 2 (02:42):
To me, it just seems like a disaster to do
this thing and have it traded one thousand percent premium.
But others would disagree, apparently including him, because to me,
like the thing you're marketing is like you can buy
exposure to these private tech companies. Never before have you
been able to buy shares of SpaceX and Stripe, And
we are giving you that exposure, which is a great pitch,
(03:03):
which is not true if you're trading at one thousand
percent pew. If you're trading a one thousand percent premium,
retail investors can only buy the premium, right Like when
they put their money in, they're getting like five dollars
worth of private tech stocks and like fifty dollars worth
of public market volatile frothy enthusiasm for the stock. The
product that he's saying is only that product if it
trades like at a round the net asset value.
Speaker 1 (03:24):
Well, you had a suggested solution for him in the
form of issuing more shares, which I don't know if
it would help the retail traders who are buying in
right now at one thousand percent premium, but it would
theoretically if they sold enough, help to collapse the premium
a little bit.
Speaker 2 (03:38):
Right. You suggested that solution to him, didn't you.
Speaker 1 (03:40):
Yeah, And he can't really talk about that, especially not
on live television, and we can we can theorize about it.
Speaker 2 (03:47):
One way to think about what he has is he's
got a fifty million dollar venture fund and there's like
a two billion dollar waiting list for that fund or
whatever I made that number up. But like the market
cap of the fund is so far above the acid
value of the fund that like a lot of people
clearly want to put their money into a thing that
gives them exposure to private textlocks. So what he can
do is he can like take names off the waiting list.
(04:08):
He can sell a bunch of stock to the public
app a huge premium to the current net asset value,
and he can take that money and invest it into
private tech startups. And if you do that over time,
probably the premium compresses because you're selling a lot of stock,
you're buying a lot of the underlying portfolio, and you
end up with a fund that is much bigger by
(04:28):
net asset value than it is today, probably bigger by
market cap. But like instead of trading at one thousand
percent premium, it trades it's something that sort of reflects
the value of the underlying private companies.
Speaker 1 (04:39):
The question of him deploying capital is also really interesting one,
and first of all, how he's actually getting these shares
in private companies. He said that it's through a combination
of private stakes, trading platforms, and investing directly. But one
of the interesting nuggets from the interview that I had
with him was that he has these private companies calling
(05:00):
him now, which is probably a result of the fact
that we all keep talking about it.
Speaker 2 (05:03):
It's brilliant. I mean you look at the disclosure of
their portfolio and also like what he said about it,
like it really like he's like scraping sticks together to
find private company stakes, right, He's like calling employees and
being like, hey, could you do a forward contract and
they're like, no, we're not allowed to. Our company will
let us, and oh, you know, maybe we can do
it under the table, right. You know, he's finding things
in the secondary market. It's like piecing together this portfolio
because he's just like a guy, you know, like that.
(05:25):
It's not true. He's the founder of forts, like, he's
got some experience in private markets, but these big tech
companies can kind of choose their investors and it's not
necessarily easy to get in. But now he's a much
higher profile because he's got this huge you know, market
cap to his fund. There's like clear pent up demand
from retail investors. He's getting a lot of press coverage
and so yeah, this is a marketing tool not only
(05:46):
to retail investors, but also to companies who might you know,
want to sell him some stuck.
Speaker 1 (05:50):
It's just really interesting that this is happening this week.
I'm really grateful because this is the first week that
we're recording the money Soff podcasts. But also I feel
like we're just at the moment in public equity markets
where the public equity market has been shrinking. You hear
about all these hot, shiny startups that the average person
can't get exposure to. And again, an interesting week to
(06:13):
be having this conversation because I actually also spoke to
Kristen Olsen from Goldman Sachs this week. She is the
global head of Alternative Capital Markets and her pitch for
why people should invest in private markets is because companies
are saying private so much longer, you're missing out on
all that growth. You know, the company that goes public,
you've already missed out on a ton of that growth,
(06:35):
which makes sense if you're pitching private markets. But I
feel like all of this sort of ties into a
general theme of there's been a dearth of IPOs, the
public market is shrinking, and it feels like all the
exciting stuff is happening outside of public markets.
Speaker 2 (06:49):
Yeah, I mean that's what everyone thinks, which is why
this thing is so popular. But of course it undermines
the mechanics of this thing, because if you're like, oh,
private companies grow so fast, so we should get in
before they go public, you get in at twenty times
their valuation, then it doesn't work anymore. Right. It's funy
to like imagine the sort of end case for this.
What if like everyone agrees with the thesis that you
should get into private companies and they should do it
(07:11):
through this fund, then that's going to bid up private valuations. Right. Yeah,
we talked earlier about how he is getting calls from companies,
right because like, one, he's like in the news companies
who want to raise money, Like, oh, here's a guy
who has money. But also he has a lot of
flexibility to pay up on valuations, right because like people
are already buying into his fund at ten times in
(07:32):
that asset value. Like if he pays twice the last
funding round for a company, like that's fine, that's easy.
Like that's a that's a good trade for him. I mean,
the one reason that private companies are cheap is that
they're young, and that one grown yet. But another reason is, like,
you know, you don't have liquidity, you don't have the
same number of investors that have access to private markets
as you have in the public markets. In one sense,
it's a way to like democratize private companies, but another way,
(07:53):
that's a way for private companies to access all those
public investors and bid up their price.
Speaker 1 (07:58):
It's interesting that he's in this position because this isn't
a new pitch the Destiny Tech one hundred funds. This
idea has been brought forward by ARC before they have
the ARC Venture Fund, and it hasn't created this moment
that this fund has. And I find it interesting that
again he is in this position.
Speaker 2 (08:16):
Well, I think they all have different structures, and I
think the ARC Venture Fund is not as exchange traded. Yes,
that really matters, right. The weird thing about this fund
is not that it's a way for public investors to
put money into a fund that invests in produate companies.
It's that it's a publicly traded way for them to
do it. So it has a market price, and it
turns out the market clearing price for that product, like
(08:37):
at this point where the product is so small, is
much much higher than the amount of money though to put.
And that's kind of wild. We live in a memestock world.
Things like that just build on themselves because you attract
attention to us thought because it's like gone way up
and it's trading way over acid value, and that just
attracts attention and more people get into it.
Speaker 1 (08:53):
Well, I feel like we're going to be talking about
this again because in declining to answer one of the
questions I asked him, which is has your net acid
value changed materially since the end of twenty twenty three
when they last provided it. He said, can't say anything
about that. Obviously, they calculate it on a quarterly basis,
but they report earnings I believe at the end of
April or the beginning of May. So it's gonna be
(09:15):
really fun to see if it's changed from that four
dollars and eighty four cents net acid value that they had.
Speaker 2 (09:20):
Yeah, but you know, I mean they owned steaks and
big private tech companies. Rights that market doubled in the
last you know it has has it ten times?
Speaker 1 (09:30):
We're going to find out. Stay tuned. I think I
have a guess. Mangoes, what is Mango markets?
Speaker 2 (09:46):
Mango Markets is a decentralized finance trading platform.
Speaker 1 (09:51):
I haven't thought about one of those in a while.
Speaker 2 (09:53):
I know, right, But this guy blew it up in
twenty twenty two, and he was arrested and he's going
on trial this week. And the question is is it
legal to blow up a DeFi trading market? That's not
really the question. The question is is code law or
is law law?
Speaker 1 (10:11):
Those are just some big heavy questions because crypto obviously
would say code is law, and I mean.
Speaker 2 (10:17):
You say that until you're a trading platform gets blown
up and then you're like, wait a minute, that was fraud. Right,
This is not how it always works.
Speaker 1 (10:23):
Right.
Speaker 2 (10:23):
You're like, as long as you're the smart one, you're like, yeah,
anything goes, you don't need regulators. But then you get
blown up and you're like, ah, where there were regulators?
Speaker 1 (10:30):
Well, explain to me briefly, what is the part of
the code that he exploited.
Speaker 2 (10:35):
Okay, So Mango Markets is like a decentralized finance trading platform.
You can trade perpetual features like sort of derivatives on
crypto tokens. Right, people love this. There's all sorts of
crypto trading platforms that allow you to speculate on other cryptotokens.
Mango Markets, as a DeFi trading platform, also had its
own token called Mango or ngo like mngo and so
I thin guy did so he set up two accounts
(10:57):
on Mango Markets. Because everything's anonymous, you know, it's not
like the way DeFi works, Like you're not like putting
down your credit card and your driver's license like you
just set up a wallet, right for sure. So he
set in two accounts on Mago markets. In one of
those accounts, he offered to sell a ton of futures
on the Mango token, and the other account he offered
to buy a ton of futures on the Mago token.
And like, no one else was trading in that minute,
so they crossed, and so he ended up long a
(11:19):
bunch of futures in one account, short a bunch of
futures in the other account. And for these days, you
have to put up some collateral, right, so he had
like he had some exposure to the Mango token, and
he had to put up collateral on both sides of
the trade. And then he went out in a third
market elsewhere and he just bought the Mango token. So
not future is not a weird drove as trade. He
just bought the Mango token. And like it turns out,
there's not that many people want to buy that many
(11:40):
Mango tokens, and so he really drove out the price
a lot, but like one thousand percent or more. And
what this meant was that his derivatives contracts. His two
accounts on the Mango trading platform, one of them had
a huge profit, you know, one hundreds of millions of dollars,
and the other one had a huge loss, hundreds of
millions of dollars. And what happened is that he took
(12:01):
the one with the profit and he went to like
the Mango you know, exchange platform, and he said, I
want to borrow against all this profit. Basically, I want
to withdraw some of my winnings. And so he withdrew
like one hundred million dollars of winnings. Meanwhile, on the
other side, he had hundred million dollars of losses and
he didn't post any collateral for those. But like there's
a there's like the moment in time where he could
(12:21):
withdraw on the winning side and ignore the losing side,
and then you know, everything collapses because he like walks
away with this hundred million dollars. The price of the
token goes back down, and Mango Markets has lost one
hundred million dollars of customer money and basically is blown up.
And then he like calls them up and says, I'll
give you back some of the money, and like they
negotiate a sort of return of some of the money
(12:43):
in exchange for them not pressing charges. By the way,
pressing charges is not really a thing if you commit
a federal crime and like your victims like I don't
want press charges, like the federal government can still go
ahead and prosecute you. And that's what happened. But anyway,
it's great because like one, it's like it's just very
like simple trade and it's like people things that are
sort of rhyme with this in like real financial markets.
(13:04):
This manipulation is like way too simple to do in
the real financial markets. But like he managed it in
a DeFi market where basically they were not careful about
structuring how people could withdraw money and like how they're
token pricing worked. Just like the mechanics of how they
did this allowed him to do this exploit. And when
he was doing it, he was posting through it. He
(13:26):
was posting on Discord. Actually I think this is before
he did it. He posted on Discord being like I've
discovered and exploit and people were like, what is it?
Is it? And then they sort of described this and
he's like yes, he said, you take a long position
and then you make number go up numbers and umba,
of course you make number go up and like, that's
what he did. He took a long position, he made
(13:46):
the number go up, and then he'd, you know, cash
that before anyone noticed that it was all kind of fake.
Speaker 1 (13:50):
I love that because it sort of gets back to
the code's law versus laws law. Like he wasn't secret
about it. He was very open and kind of proud
about it, which really speaks to the fact that, like
in his circles, in his discords, code is law.
Speaker 2 (14:04):
I mean he went on Twitter after doing it. People
are like, oh my god, there's a there's a hack
of a lot of hackets. A better word is like
exploit or manipulation, because he didn't like break into the computers.
He just did the thing that the market allowed that
was bad. But after he did it, he went on
Twitter and under his own name and said I was
involved with a team that operated a highly profitable trading strategy.
Speaker 1 (14:26):
Last Night Strategy.
Speaker 2 (14:27):
I believe all of our actions were legal, open market
actions using the protocol as designed, even if the development
team did not fully anticipate all the consequences of setting
parameters the way they are. Unfortunately, the exchanges took place
on Mengo markets became insolvent as a result with the
insurance fund being insufficient to cover all equidations. And he's
not wrong about any of that. Like he used the
(14:48):
protocol the way it was designed. It was designed badly,
and he excited a lot of money for himself.
Speaker 1 (14:52):
So that's what I was thinking about when I was
reading this. If he had been like a little less ambitious,
what if instead of what it was, like one hundred
and ten million dollars, it had been ten million dollars,
which is still a lot of money, but not collapsible money,
maybe this wouldn't have happened.
Speaker 2 (15:09):
Yeah, there's an assumption that, like a lot of markets,
like people are leaning a little bit into trades and
like you know, doing like a little bit of manipulation
around the edges in a way that doesn't get them caught.
The problem is you can't like repeatedly do that here.
You know, you're taking risk of both of going to
prison and of losing money each time you do this trade.
So it kind of makes sense that if you're going
to do this trade, you're going to do it for
(15:30):
a big score, and he did it for a big score.
I agree with you that it probably attracted him more
attention than was good for him, yeah, or.
Speaker 1 (15:37):
I don't know. Obviously, the he wanted attention, which is
why he was posting vall.
Speaker 2 (15:41):
I think he probably wanted the money, but yeah, the
attention of the money. He was not averse to the attention.
Speaker 1 (15:45):
I mean, attention is definitely a commodity.
Speaker 2 (15:47):
Yeah, but a one hundred million dollars podcast, I think
is better than the kind of attention that lends you're
in jail. Right, Yeah, perhaps he should have had less,
Like ordinarily, when you manipulate a market for one hundred
million dollars, it's nice to not mentioned that on Twitter.
I don't know.
Speaker 1 (16:01):
I don't know. Maybe I would have tweeted about it
once done it for one hundred and ten million dollars
and just walked away. But we didn't get into your
dream dichotomy world of nice versus fun markets.
Speaker 2 (16:11):
I really like that, Yeah, I mean I just think that.
Like we talked about crypto people saying code is law,
Like that's not true, Like that's kind of true. But
a lot of crypto projects are about building some sort
of future of finance or decentralized ownership or something, and
the people working on that are not necessarily like also anarchists. Right,
some of them might be, but they have nothing to
(16:32):
do with each other. Right, Like you can believe that
crypto enables something special and new in like the economic world,
and also that it should be sobjet to regulation, you
shouldn't be able to like do fraud in it, right,
And a lot of people in crypto, I think, believe that.
And then a lot of people don't. And a lot
of people in crypto really believe code is law. Regulatory
interventions are generally bad and make things worse, and you
(16:56):
should just be careful and you should design your protocol directly.
And by the way, if you design it poorly and
someone exploits it for one hundred million dollars and you
go bankrupt, then like there's an evolutionary process whereby everyone
learns that lesson and the next protocol is more robust.
Whereas like regulation makes things worse because it makes people
less careful, you know, And I think, like you see
(17:18):
that playing out here, where like it's not like everyone
in crypto thinks this is great, right, Like a lot
of people are like this is bad. Like he's manipulating
a market. He wouldn't say this, but like other people
would say, he's stealing money from other investors on that platform,
and it's a bad outcome that makes crypto less attractive
to ordinary people and therefore makes crypto adoption harder. Right, Like,
I think a lot of people in crypto find all
(17:39):
this anarchist stuff kind of distasteful. But then a lot
of people are like, look like, we're trying to build
a system that works on its own, or trying to
build a system of smart contracts, where like you don't
need to go to the court to enforce your contract,
you can just have the computer enforce your contract. And
we're undermining that when the Justice Department comes in to
bail people out of badly designed protocols.
Speaker 1 (17:58):
Yeah. And then again, the people who would like to
operate in the fun markets would probably say, we're finding
bugs in the code.
Speaker 2 (18:04):
Yeah, yeah, right, there are white hat hackers. Yeah, they're
getting a bug bounty.
Speaker 1 (18:08):
I just liked those categories because I think all the time,
and I joke with my family that there should be
like the Dope versus the Clean Olympics, where you have
all the athletes taking drugs and they all race each
other and it'd be really interesting to see who wins.
But then you should also have the clean Olympics where
all the athletes actually don't drug themselves.
Speaker 2 (18:27):
Right, And the reason you don't have the dope Olympics.
Speaker 1 (18:29):
I think, well, probably a lot of reasons.
Speaker 2 (18:31):
Is it's probably like not that healthy people to take
a lot of dope. But the nice thing about crypto is,
like Mango was just the marketplace for speculating our crypto teconds.
No one will die if Mango is a lawless market
where you can manipulate it to your heart's content. Right.
The problem here is that like some people on Mango
thought it was like not manipulated, and other people are like, oh,
what a fun place to manipulate. But like if everyone
(18:52):
had known going in, like hey, if there's any problem
with this protocol that allows someone to take all of
the money out of it, good for him. That's you're
a problem. No guarantees of anything working, No one will
rescue you. If everyone had had that expectation going in,
and if you could sort of prove that everyone had
that expectation, then like, yeah, it's fine, Yeah, who's it
like external harm?
Speaker 1 (19:11):
No one died, all right? So were two thirds done?
Speaker 2 (19:19):
Ye?
Speaker 1 (19:19):
Just gotta know we just got to bring it home.
Speaker 2 (19:21):
You know.
Speaker 1 (19:21):
The third act is the hardest, is what they say
in playwriting. I don't know, Okay, super users, super us
of inflation.
Speaker 2 (19:31):
Yeah. I feel like that's a bad headline.
Speaker 1 (19:33):
That's what the list was.
Speaker 2 (19:34):
I know that's what it's called. Right, It's a bad
headline for the people who read it.
Speaker 1 (19:38):
I think they have other worries right now, like what inflation.
Speaker 2 (19:42):
No. So, the Viereau of Labor Statistics, which releases inflation data,
released inflation data a while back and there was like
a surprising change that was methodological. Right.
Speaker 1 (19:52):
It was a big deal.
Speaker 2 (19:53):
Yeah, but it's like nothing changed, like our calculations have
changed and this is why. Right. And so a person
at the bl US emailed a bunch of people not
at the PLS to explain this change that they didn't
freak out and so that they could understand what was
going on. And the email, unfortunately began super users Yeah,
And then it got forwarded around Wall Street because like,
(20:14):
people are very interested in the inflation numbers, and then
it got forwarded to reporters and people are like, wait,
there are super users of the Bureau Labor. Just looks like,
is there a higher tier of customer where the government
tells them information about inflation that everyone else doesn't get.
How do I then it became a scandal. How do
I subcress? They became a scandal?
Speaker 1 (20:34):
Great reporting from the New York Times. And when you
think about who was actually on the list, because.
Speaker 2 (20:39):
The scandal came out a while ago, and like the
Times last week Breakfast story that this not I went off,
there really was a group of super users. There were
people emailing the guy being like, hey, how do I
get on the super users list? It was a real thing.
Speaker 1 (20:51):
Yeah, it seemed like there was a lot of engagement
on that particular distribution list. Yeah, so the New York
Times submitted a Foyer request and now we ended up
with a good idea of who was on the list.
It was you know, GP Morgan, black Rock, and then
he had a bunch of hedge funds on the list
as well. And in your column you ask the question
of how bad is this, like is this insider trading?
(21:14):
I don't know. Probably when it comes to what is
material information, the bar has come way down.
Speaker 2 (21:20):
If the story was that there's a list of super users,
and before every like CPI data release, like the day
before the BLS sends the super users the release to
be like, hey, here's a preview. That would be really
bad and people would be going to jail, right, But
that's not at all what happened, right. Like what happened
is that, as far as I can tell, they put
(21:41):
out the data every you know, periodically, and people from
all over the place email or call the people in
charge of the data at the government saying hey, can
you explain this thing? And these people who work at
the BLS work for the people, right like their government employees, Like,
their job is to help people understand on these statistics,
and so when people call them and say, hey, can
(22:02):
you explain what's happening here, they try to explain it.
And so there's this range of things where like giving
people the data early would be really bad. Yeah, Like
answering their legitimate questions seems very legitimate. And when I
wrote about this the other day, like, I got a
lot of reader email being like this is fine and
exactly what they should be doing. Yeah, someone wrote to
me saying this is very strange. The BLS has people
who are supposed to answer questions from the outside. Literally,
(22:24):
anyone can email or call them and get answers. It's
not a scandal but a public service, right, which I
think is right.
Speaker 1 (22:30):
Yeah, No, there's definitely a sympathetic reading here. And I mean,
if you look at the statement that the BLS has
given to different media organizations, I believe they gave this
one to Bloomberg. Was that to your point, the BLS
it encourages people to ask questions and makes it staff
available to engage with the public, but they start to
create equal access to the information for everyone, of course.
(22:50):
But also in the New York Times reporting, they spoke
to someone who was actually on the Super Super Loser
super User list, Omerisha Reef. He is the founder of
Inflation Insights. He also is a recipient. He said that
this was relatively new and his best guess for why
the super user list was created was just because they're
getting so many more questions than they were previously about inflation,
(23:14):
and with the volumes of questions increasing so much, the
staffing has not, so maybe they just created a master list.
Let's just answer everyone's questions at once and put them
all on this list.
Speaker 2 (23:25):
Which, when you think about it, is like the better
way to do it. Right. The thing you might worry
about is that analysts at hedge funds. One can call
the number at the BLS that anyone can call, but
two have better questions, right. They can ask really pointed
questions about things that will move the market, then get
specific answers, and then they can go trade on it
with everyone else not knowing it. If you do it
on an email list, it's a little bit fairer, right, So, like,
(23:47):
you know, the HEADEPHNT analyst emails the BLS and says,
can you explain this data point? And instead of writing
back and saying, yeah, sure, here you go, they can
send up to the whole list that wants the same explanation,
and you know, arguably can get on the list. It's
probably better than like the alternative of having one on
one conversations, yeah, about stuff that might be market moving.
(24:08):
But the whole problem here is if you're having any
form of conversations about stuff that might be market moving
and you're doing it in any way that is not public,
people are going to get upset about that, right because,
like it just is the case that some of these
hedge FOIND analysts got information that was not broadly disseminated
to the public, and that they found useful. Right, that's
why we're there.
Speaker 1 (24:25):
I have a few silly thoughts. The first thing that's
thrown into my minds as you were talking was they
should have an earnings call. That doesn't quite work because
we're talking about a company.
Speaker 2 (24:34):
No, but that's right, I mean, like right, That's what
companies do to partially address this problem. Is like they
put out the press release and their earnings release, and
then they have a call where analysts can ask questions.
But you can hear. Everyone can hear the questions, everyone
can hear the answers, and so it's a little bit
more you know, open access than the system of doing
it by private emails.
Speaker 1 (24:53):
Perhaps they could have a subreddit. A subreddit, yeah, and
this guy could be the moderator, this BLS economist who
was described as not super high ranking, but he had
been there for I know.
Speaker 2 (25:04):
It was like a really mean nag in the time.
I know. Someone suggested an other approach that a lot
of government agencies g used for other things, which is
anyone can ask questions, but instead of just answering the questions,
they like collate the questions, write the answers, and then
put all of that out publicly at the same time,
so everyone gets the answers to everyone's questions, and everyone
(25:24):
gets to see the questions at once, which is sort
of like using the super user list, only instead of
just doing it in like a reply, I'll email you
do it online or something so everyone can see it.
Speaker 1 (25:32):
Did you have any more reader comments? I feel like
you had a lot.
Speaker 2 (25:35):
Oh yeah, no, A bunch of people were all sort
of in the camp of this is all fun. Yeah,
I'm going to read you another one.
Speaker 1 (25:41):
Okay.
Speaker 2 (25:41):
Why in the world can't anyone ask a question of
their government about technical aspects of the report the government
produced with their taxes. Granted, there won't be many people
with the ability to frame such questions, much less profit
from the answers, but the technique should be freely available
to anyone, even big hedge funds.
Speaker 1 (25:57):
Seems invisible.
Speaker 2 (25:58):
Yeah, I mean it's it's good government service. By the
way I think about this, I'm like more of a
stocks guy, and I think about this by analogy to
public company insider trading all the time, right, I mean, like,
if you're a public company and someone calls you up
and it's like I'm a big investor in your company,
I'm a shareholder in your company, you work for me,
I want you to explain something about your business, Like
(26:19):
your instinct is going to be to explain your business
to them, right, Like your instinct is going to be
I work for you. This is information that you legitimately want,
I'm going to tell it to you. But you know,
there's also rules against insider trading, and there's rules against
selectively disclosing material and public information, and so companies are
constantly walking this tightrope between like we don't want to
(26:39):
like be dismissive through our shaholders and not tell them anything,
but we also don't want to tell them anything that
will get user them in trouble. And there's a lot
of thinking about that and a lot of people trying
to get that right. But it's just always strikes me
as kind of a weird balance, where like people who
know they're insider trading rules are sometimes shocked to find
out that companies talk to their investors all the time
and try to explain their companies to them. The Bureau
(27:00):
Labor said has the same problems.
Speaker 1 (27:02):
They could also be like the FED. I mean, maybe
that's a better analogy than a corporate earnings call. The
FED releases their decision at two pm, and then two
thirty Jerome pal starts speaking and the entire knee jerk
reaction unravels. Matter. Are you on the super User's list?
It sounds like you could have just emailed them and
asked to be added to the list, and you could
(27:24):
be on the list.
Speaker 2 (27:25):
I guess one question is does it still Is that
still a possibility? Like I feel like it's kind of
fraught now, And if I were to email the BLS
today and say, hey, guys, I'd love to be on
the super User List, I feel like that would be awkward.
Speaker 1 (27:35):
But maybe I feel like you'd only do that if
you want to detrol them.
Speaker 2 (27:39):
That's true of me. But the reasons for the super
User list haven't really gone away, right, They still have
to explain this stuff, And so now that it's so
well known, why shouldn't people be able to add themselves
to it.
Speaker 1 (27:50):
It's a fair question.
Speaker 2 (27:55):
I do want to talk about one reader email I
got this week.
Speaker 1 (27:59):
Oh my god, great, this is.
Speaker 2 (28:00):
Like the Money Stuff podcast nail bag section.
Speaker 1 (28:03):
Oh my gosh, let me bring it up.
Speaker 2 (28:05):
So there's this great story in the FT about renewable
investors and like d Shaw hiring sheep to mow the
lawns around their solar panels. And it's great because it's
just like it's this image of like these hedgehood investors
and like the way they hire the sheep. Apparently is
often that a solar array is being built in some
rural area and a farmer, a neighboring farmer, kind of
(28:27):
wanders over and says, hey, could you use any sheep?
And I thought that was so funny, and I wrote
that the first scene of my Cormick McCarthy influenced finance
novel would involve a hedge fund manager leaning against the fence,
chewing on a piece of straw, and a neighboring farmer
wandering over to talk about sheep. So a reader asked
the Gemini AI model to write that scene and sent
(28:50):
it to me, and I'm going to read it to you.
He shimmered off the desolate, distorting the rows of glass
panels into an alien mirage. Matt Levine, a hedge fund
refugee transplanted to this forgotten corner of North Carolina, leaned
(29:10):
against the rusting perimeter fence. His city suit, once a
symbol of power and prestige now hung on him like
a molting carapace, ill suited to the unforgiving sun. A
plume of dust announced the arrival of Silas, the neighboring farmer.
His weathered face etched with the harsh lines of a
life spent wrestling with the land, held a deep well
(29:31):
of suspicion. Silas stopped a good distance away, the silence
thick between them. Finally he spoke. His voice, a dry
rasp carried on the hot wind. Heard you needed your
fancy heater contraptions mode. Silas gestured towards the panels with
a gnarled hand. Sheep got restless with all that shade
blocking their usual path. It ends there, but I feel
(29:53):
like you get the sense of it.
Speaker 1 (29:54):
Oh my god, I was hoping he was getting going.
Speaker 2 (29:56):
Yeah, yeah, Well someone's got to write it. This person
told me that he didn't ask Gemini to name the
headphone character Matt Levine, not.
Speaker 1 (30:04):
Just it just it felt right. Yeah, I love it.
I feel like we should keep going on this. I
think there's a lot of the.
Speaker 2 (30:11):
Podcast doesn't work out, then then we'll collaborate on the novel. Maybe.
Speaker 1 (30:15):
God, your readers are fun. That is a lot, and
that was unprompted.
Speaker 2 (30:19):
I mean he prompted Gemini.
Speaker 1 (30:20):
I know he didn't write all of them. You didn't say, hey,
intrepid reader, do this for me. No, Yeah, that's what
I'm saying.
Speaker 2 (30:28):
No, I've got a lot of like people being like
I asked GPT to write like you, and this is
what it produced. And I'm always like, still safe. But
one day like GPP seven will just you know, just
do the job.
Speaker 1 (30:43):
But they can't do a.
Speaker 2 (30:44):
Podcast, I'll be reduced to podcasting. There we go, And
that was the Money Stuff Podcast.
Speaker 1 (30:54):
I'm Matt Levin and I'm Katie Greifeld.
Speaker 2 (30:56):
You can find my work by subscribing to the Money
Stuff newsletter.
Speaker 1 (30:59):
I'm Bloomberg dot and you can find me on Bloomberg
TV every day between ten and eleven am Eastern.
Speaker 2 (31:04):
We'd love to hear from you. You can send an
email to Moneypod at Bloomberg dot net, ask us a question,
or write us a short story, and we might answer
it or quote it on air.
Speaker 1 (31:14):
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 2 (31:19):
The Money Stuff Podcast is produced by Anna Maserakus and Moses.
Speaker 1 (31:23):
Andm Our theme music was composed by Blake Maples.
Speaker 2 (31:26):
Brendan Francis Neonan is our executive producer.
Speaker 1 (31:29):
And Sage Bauman is Bloomberg's head of podcasts.
Speaker 2 (31:31):
Thanks for listening to the Money Stuff podcast. We'll be
back next week with more stuff
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