Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. I have another piece
of information that can't be used on the podcast.
Speaker 2 (00:11):
We'll say it in front of the microphone.
Speaker 1 (00:16):
There's a dead possible in my backyard, and I'm trying
to pretend that I haven't noticed that that I.
Speaker 2 (00:20):
Have to Matt. That gets worse by the hour.
Speaker 1 (00:24):
I know.
Speaker 2 (00:26):
The thing is, wait, we can't put this in the
pod well.
Speaker 1 (00:29):
Because then my wife would hear it?
Speaker 2 (00:31):
Now, did she listen? Sometimes that's cute.
Speaker 1 (00:34):
So one day I noticed the dead scroll in my yard,
and I and then like, I forgot about and I
came back the next day and I was gone, there's
like a fairy number of birds of prey in my yeah.
And I was like, ah, good job birds of prey.
Speaker 2 (00:48):
So he's just hoping one of them gets the job done.
Speaker 1 (00:50):
But this problem is now past this expission day.
Speaker 2 (00:54):
Birds of prey, you most only mean vultures, because I
don't think like a hawk would eat.
Speaker 1 (00:58):
Okay, there's loads of vultures in my neighborhood, right, but no,
we see bald eagles a fair amount, and the bald
eagle famously a scavenger.
Speaker 2 (01:09):
You know, I feel like I did know that actually,
but I have.
Speaker 1 (01:12):
It's like Ben Franklin's whole thing, like he wanted the
national bird of America to be the turkey because the
turkey is a noble bird in the bald eagle as
a scavenger.
Speaker 2 (01:20):
It kind of reminds me of when my cat vomits
in my apartment and I pretend not to notice it
until my husband does and then he cleans it up.
Speaker 1 (01:30):
Hello, and welcome to the Money Stuff Podcast. You're a
weekly podcast where we talk about stuff relate it to money.
I'm Matt Levine and I write the Money Stuff column
for Bloomberg Opinion.
Speaker 2 (01:41):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (01:46):
Speaking of dead thing, ah, the.
Speaker 2 (01:57):
Death of a multi strat.
Speaker 1 (01:59):
Yeah, so yeah, there's a big story this week about
Edward Eisler's multi strategy hedge fund, which is called something like.
Speaker 2 (02:07):
Strategy edge fund some only along those lines.
Speaker 1 (02:09):
Is winding down because it's hard out there for a
multi strategy hedge fund that is not one of the
big four multi strategy edge funds.
Speaker 2 (02:17):
Yeah, this is a great scoop from Bloomberg. I did
enjoy also the post mortem written by Sarah Butcher over
at E Financial Careers, which spoke to a bunch of
people who had worked there or were familiar with it,
And I don't know, you add the two articles together,
it seems like a lot of this just comes down
to costs. Also, returns weren't great.
Speaker 1 (02:38):
Yeah, the hedgehod market has gotten so much more efficient
in like my time, it used to be that if
you wanted to start a hedgehund, you start a hedge fund,
and you got capital based on your track record, but
also your ability to appeal to LP's and what was
in style and what institutional investors are looking for. And
now increasingly the hedge fund business is dominated by these
(03:00):
big multi strategy funds like Millennium and set It All
and zero point seventy two. And if you are a
person who wants to run money, you probably end up
guiding to work for those guys rather than going off
on your own. And to run money for those guys,
you don't have to be good or telps, you don't
have to be necessarily in style. You're just doing a
job at a big firm. And so as the market
(03:21):
gets more efficient, like the people who are good at
those firms get handed huge piles of capital the trade,
and it's just harder and harder to work outside of
those institutions. In particular, it seems really hard to run
a multi strategy fund.
Speaker 2 (03:36):
Yeah, I feel like just the story of Eisler in
general is a sign of the times in two different ways,
because it didn't start as a multi strategy. It started
as just a single manager fund. Then it pivoted to
become a multi strat in like twenty twenty one, and
now it's winding down because it's not Millennium or Citadel
to simplify it.
Speaker 1 (03:58):
Right, when are my reader is about to be like,
his mistake was pivoting to being a multi strategy fund.
Like when you're a single manager fund, you have his
own skill, which is what allowed him to launch a
hedge fund, and you have much more ability to evaluate
the people you're hiring because you're kind of hiring them
to assist you in making calls that you have a
good understanding of, rather than hiring them to stand up
an entirely new business under your umbrella. My headline about
(04:20):
this was something like hedge funds have to be big,
and that's not really true right, there's still a market
niche for like people running single manager specialized hedge funds.
But it's probably true that multi strategy hedge funds have
to be big, right, So if you're going to pivot
from being a single manager fund to being a platform
for a lot of portfolio managers, you have to be
a big platform because otherwise they'll go to somewhere that
(04:42):
can give them more capital and more money. I don't
know why he pivoted, right, And clearly like there is
some pressure to pivot. Even if you run a single
manager or fund that has like a good track record
and is really good at its specialty, you're still going
to feel kind of like squeezed by the big multi
strategy funds that have more resources and are like an
(05:04):
easier check for big allocators to write. It's harder to
compete with them, and so you might think, well, the
best way to compete with them is to be a
multi manager fund myself. But that's a big bet. You
have to become a giant multi strategy fund, yeah, to
really compete.
Speaker 2 (05:16):
Instead of getting even better at your thing, Yeah, you
spread out across all the things.
Speaker 1 (05:22):
Almost like by the way, all the people who run
the big multi strategy funds like did kind of start
as you know, hedgehund managers and then they became managers
of hedgehome managers. Right, So there's a path, right, It's
just it's likely how many people can follow it anymore.
Speaker 2 (05:35):
Yeah, I don't know if I would pivot my hedge
funds that I run to become a multi manager fund
in this day and age. I do want to talk
about fees because that's a recurring theme here, is that
the pass through expenses at Isler were really high and
they were trying to bring them down and are passed
through fees unique to the multi strategy dynamic.
Speaker 1 (05:58):
Yeah, the modern multi strategy funds are somewhere between a
hedge fund and a fund of funds. They're kind of
like their business is to hire portfolio managers, allocate capital
to them, and sort of pay them like hedge fund managers,
and then collect fees from the ultimate investors. And so yeah,
(06:18):
the past three fees are traditionally a hallmark of modern
pod shops because they go to pass through fee is
I mean, it's like paying for rent and Bloomberg terminals
and stuff, But really what it is is paying performance
fees to the individual portfolio managers regardless of the performance
of the overall fund. Right, So like when you're hiring
(06:41):
portfolio managers, you can pay them incentive compensation on their
own performance. And I think in the current market you
pay them like accelerated performance compensation on their own performance.
So you pay them like a bigger chunk if the
going rate is they get twenty percent of their profits,
like you might pay them thirty percent for their first year,
(07:01):
so that they like have an incentive to join you,
because it's like a really hot market for hedge fund talent.
And if you're doing that and you run a big fund,
you have some economies of scale and you have some offsetting,
Like you have the ability to like aggregate a lot
of good portfolio managers into something with like high and
uncorrelated returns. But you have a big expense base, and
(07:23):
if you are a smaller fund, it is harder to
spread that expense base over a lot of winning bets.
Speaker 2 (07:29):
Well, you think about some of the figures that Nishan
Kumar wrote about. So the firm charge clients two hundred
and forty four million dollars in pass through fees in
twenty twenty three, it was about two hundred million in
twenty twenty two. They had a restructuring earlier this year,
and we're trying to bring their pass through fees down
to twenty twenty two levels. But then you pair that
(07:50):
with the Sara Butcher article and there are some snarky
quotes from people who used to work there about how
a lot of their real risk takers had left, like
their hotshot, and they just had this is a direct quote.
They had far too many junior people who didn't know
how to take risks. So it seems like their costs
were really high for at least what's being described in
(08:12):
this article is subper talent.
Speaker 1 (08:14):
Well, this is just the efficiency of the market. Like
this is what Kapi Palaoligo said to us on the
podcast that the funds that he works at are sieves
for talent, right like you have. The big funds are
pretty good at identifying talent, pretty good at firing people
they don't think are talented, and so they end up
with a lot of the good portfolio managers. And if
(08:36):
you're a good portfolio manager at a multi strategy fund,
your name's not on the door. You're kind of doing it.
For the money, right, Like, if someone is like, we'll
allocate you more money and give you more of your
performance as a fee, then you know you end up
at the bigger places they can allocate you more money.
(08:57):
And if the bigger places are really good at identifying talent,
that's how the talent stive works, and that makes it
really hard for someone who runs a smaller place to
keep the best talent.
Speaker 2 (09:06):
There was something in the article about how a lot
of the meeting rooms after this letter went out were
filled with people calling headhunters, et cetera. Apparently some insiders
know that Issler's more mediocre portfolio managers will now simply
fan out across the industry and dilute returns elsewhere. It's just.
Speaker 1 (09:26):
I don't know why that would be true. I mean, well,
I don't know. I wish the best to all mediocre
portfolio managers. But it's the talent sive, right. No one's like, oh,
let's scoop up the mediocre portfolio was right, They're trying
to find the people who have good returns.
Speaker 2 (10:01):
A lot of these Eisler employees were calling headhunters at
the start of the week. They could have been calling
actually their new agent.
Speaker 1 (10:09):
Okay, so there's this most of your journal story about
this guy, Ryan wallshoe Is, I think, has styled themselves
as the first talent agent for hedgphund managers or portfolio managers.
Speaker 2 (10:20):
I've certainly never heard of one before.
Speaker 1 (10:22):
Haven't you, though, Because you've heard of recruiters.
Speaker 2 (10:24):
I've heard of recruiters. I've heard.
Speaker 1 (10:26):
Are they different?
Speaker 2 (10:27):
They're a little bit different in terms of who's paying.
Speaker 1 (10:30):
Yeah, okay, I said it, Yeah, all right.
Speaker 2 (10:33):
Do you think they're not different?
Speaker 1 (10:35):
Do you think they're different?
Speaker 2 (10:36):
I think they're a little bit different.
Speaker 1 (10:38):
Yeah, they're a little bit different. You could call a
headhunter the headitor will one try to find your job
at a hedge fund, and two try to get you
the best possible compensation package because probably they get a
cut of it, you know.
Speaker 2 (10:55):
True, now, but that cut isn't coming from your past, all.
Speaker 1 (10:59):
Right, It's coming from the hedge fund, which is so
so right. Traditional headhunter is probably more aligned with the employer,
whereas an agent is more aligned with the employee.
Speaker 2 (11:12):
They should be, there should be, But of.
Speaker 1 (11:15):
Them are mostly interested in burgering.
Speaker 2 (11:16):
A deal rather than like we're all trying to eat
you know.
Speaker 1 (11:18):
Yeah, So I don't know. My friend is that like
a hedge found agent is not so different from a
hedge fund recruiter. It's a little different.
Speaker 2 (11:25):
There's nuance, there's nuance.
Speaker 1 (11:26):
And this guy is apparently the first edge fund agent
but possibly the first one to have a work of
art featuring Ari Gold, the agent from Entourage, on his walls.
Speaker 2 (11:39):
Yeah, you know you.
Speaker 1 (11:40):
Like watch Like you know, some number of people are
like watching Entourage, like, oh, I could be an agent
for hedge funds. I don't understand, but so this is
what I think about hedgephund agents, Like you think about
like agents classically. It's like sports actors, television anchors think
of this nature. It's it's like traditionally people whose day
(12:03):
job is not financial negotiation and like possibly somewhat unworldly, right,
Like you think about like a quarterback is not like
a business person. They're like, you know, they're throwing a football.
They're not like thinking about business all day. It's funny
to have an agent for like a hedge fund manager, who,
like I would think that if you're a portfolio manager
(12:25):
at a hedge fund, you actually do have a pretty
good sense of the market. For portfolio managers at hedge
ones in a way.
Speaker 2 (12:31):
That's true.
Speaker 1 (12:32):
You know, a novelist might not.
Speaker 2 (12:35):
That's true.
Speaker 1 (12:36):
It just sort of like as a matter of temperament
and personality, you'd pay attention to those things, and you'd
like be able to discuss the value of getting a
higher percentage of your profit sources and upfront. You know,
like you'd think about related topics all day and you'd
be keenly interested in this, So you would probably have
less new information. But as the guy points out, like
you do have a demanding day job, and so you
probably aren't closely tracking the market for portfolio managers, and
(12:59):
like the market is not super transparent, so like you're
relying on rumor and aneko to know what people are
getting paid elsewhere. And so if there's an agent who
collates all of that information is going to provide value
to you.
Speaker 2 (13:13):
Also, the idea of someone negotiating on your behalf and like, so.
Speaker 1 (13:18):
Again, yes, I agree, I would want someone to negotiate
it on my behalf. It's possible that a lot of
run portfolio managers are happy to negotiate. I don't know,
you're really good a stressed guy. You're like, yeah, I'll
curse at my boss.
Speaker 2 (13:34):
Maybe you just want to sit in front of your
Bloomberg terminal or whatever and think your big thoughts.
Speaker 1 (13:39):
No, I agree. I think there's a range of people,
and there certainly a lot of people who have killer
instinct as like electronic traders, but don't want to negotiate
with their boss for more money. Yeah, and so they
can hire an agent. Reading this article else I thought about, like,
you know who really should have agents?
Speaker 2 (13:54):
Tell me.
Speaker 1 (13:55):
AI researchers. They check all the boxes. First of all,
they get like an order of magnitude more than hedge
fund portfolio managers, which is crazy. Second, they are like
stereotypically kind of unworldly, and like they've been like articles
about like oh, like these twenty three year old AI
researchers are consulting with their friends really see what to
see whether they should take a two hundred and fifty
(14:16):
million dollars offer from Marketucker work. They should have an agent. Yeah,
I should be it. I mean I shouldn't be, because
I mean all aspects of that.
Speaker 2 (14:24):
Job, you'd probably be slightly better than that twenty three
year old.
Speaker 1 (14:30):
That's truly, that's right, because like, ultimately the job is
to like appeal to Mark zucker work that maybe he
likes the twenty three year old. That's right, like an agent.
Speaker 2 (14:38):
It's not even like cold calling. Your only call is
to Mark Zuckerberg and trying to write.
Speaker 1 (14:43):
It's it's just a degenerate market. It's not like it's
not like, oh, this is what all the rates are.
It's like that this is Mark.
Speaker 2 (14:50):
It is funny that the Wall Street Journal article mentioned
that their business is dependent on the scale and proliferation
of multi manager head funds and could dry up if
funds suffer a run of poor performance or redemptions. And
of course we're talking about the death spiral of Isler,
and it's almost similar to the AI researcher. You know,
(15:12):
you're calling up Mark Zuckerberg, or you're calling up is
the Englander or Ken Griffin. It's a slightly bigger pool.
Speaker 1 (15:20):
Obviously, it's an interesting question. Like this world that we
live in of these like mult these strategy pod shops
paying a lot of money and sort of dominating the
hedgeh on space is relatively new world, and right, it's
possible that it's a blip and all this will dry
up and something new will replace it. But it does
kind of feel like, this is the correct organizing model
(15:41):
for the hedgehund world, where you have like these big
institutions that can allocate a lot of capital to investors
and measure their skill really carefully and maximize the fees
they can charge their limited partners. It feels like it's
a sort of correct and efficient organization of the industry.
And in that correct and efficient world, like agents will thrive.
(16:04):
Right if like all these multimager funds blew up and
we went back to a world of like single manager
funds with the manager's name on the door, then you
wouldn't need an agent, right, Yeah, it could be a
different thing, Like you'd be these headshend managers would need
capital introduction, right, they'd need like to meet with LP's,
but they wouldn't need to get hired by big firms.
But I think the world we live in now where
(16:28):
the big firms hire the portfolio manager feels kind of robust.
It's not like just an accident that it's organized that way.
Speaker 2 (16:34):
Yeah. No, it feels like it's a ripe space for
agents to be in. And I'm kind of surprised that
this is the first recruiters. Yeah, that's true. Well, it's
cool that you know, he struck out on his own
and stalled himself as an agent versus just another headhunter.
Speaker 1 (16:53):
Yeah, I mean you see the appeal of a headhunter,
which is the headhunter cold calls you at your current
job and it's like, I'd like to get you a
new job where you get more money and I will
take zero percent of it. And this guy calls you,
he's like, I'll take a single digit percent of it.
Speaker 2 (17:05):
Yeah. Well, apparently he's doing well. Yeah.
Speaker 1 (17:08):
Well, the pitch if I will take a single digit
percent when the number is very large, is actually pretty appealing, right, Like,
I'll negotiat on your behalf. I'll work for you, not
for the hedge fund. Like, I don't know, that's an
appealing pitch if the numbers are large enough.
Speaker 2 (17:20):
Yeah. Also single digit not bad.
Speaker 1 (17:24):
Yeah.
Speaker 2 (17:24):
So he founded this shop. According to LinkedIn and this
article a year ago October twenty twenty four, he's helped
twelve clients land jobs in deals worth a combined one
hundred and eighty million dollars since launching. So it's so
not the.
Speaker 1 (17:40):
Top of the top end where like individual deals are
fifty or one hundred million dollars, but like pretty good.
Pretty good. It's like fifteen million average time, and.
Speaker 2 (17:47):
Maybe those people will you know, their next jobs will
be bigger. Yeah, good, onya Ryan Walsh, I love football,
(18:13):
and so do folks on the prediction market that is Calcie.
Speaker 1 (18:18):
I do love that CALSHI, which is simultaneously a sports
book and not a sports book. The advertising you need
to there simultaneously a sports book and not a sports book. Yeah,
they like advertise on Instagram like, you know, the only
legal sports gambling in all fifty states, and then they're like,
we don't do gambling. This has nothing to do with gambling.
Speaker 2 (18:41):
Yeah.
Speaker 1 (18:41):
The other thing that makes them unlike a sports book
is that they don't license like the NFL's trademarks. So like,
you can bet on the Super Bowl, but it's called
the Pro Football.
Speaker 2 (18:51):
Championship Big Game. They can call the Big Game the.
Speaker 1 (18:55):
Big Game is controversial. I think it's some point the
NFL tried to trademark. It's great. In any case, CALSHI
will allow you to bet on the pro football competitions.
And the latest news in CALSHI is that they are
now offering same game parlays. We talked about this on
the mailbag off so prediction markets come out of this
like high minded idea of like, we're going to have
(19:16):
these prediction markets that produce information about geopolitically important events. Right,
We're going to allow people to predict events. That's going
to provide more information for the market, and it's going
to be great, and it's going to allow people to
hedge the results of elections, right.
Speaker 2 (19:30):
Yeah.
Speaker 1 (19:30):
And it turns out that the demand for that is
you know, like every four years you want to bet
on a presidential election, but otherwise it's just not that hot.
Speaker 2 (19:38):
The Olympics. Yeah, you care about track and field once
every four years and then you move on unless.
Speaker 1 (19:43):
You're kidding Greyfeld, but all dresslage and track and field that.
Speaker 2 (19:47):
You're at esoteric sports.
Speaker 1 (19:49):
But it turns out that when you have a prediction market,
one thing people like to predict is sporting events, and
those happen all the time, and people are really addicted
gambler who put a lot of money into predicting sporting events.
And so if you can have your prediction market predict
suporting events, then that's a big business. And everybody thought
all of the time until this January that that would
(20:13):
be crazy. And then obviously you couldn't have sports gambling
in your prediction market, but now you can. So now
CALSI does. And we've talked about like the regulatory drama
where like the States all try to stop them from
doing this, but cal she has so far succeeded in
telling the States to buzz off. But anyway, so now
they're offering same game parlay as everyone who talks about
(20:35):
this sounds insane, right, So like Robinhood is like we're
democratizing access to emerging asset classes like sports predictions. But
it's like the emerging asset class here is same game parlays,
which is just like a product for gamblers, like no
socially beneficial information is created by people betting on like
(20:58):
the joint odds of like a football team winning and
hitting the over and like someone scoring a touchdown. To
self certify these contracts to like allow CALCI to do this,
they don't have to get approval from the CFTC, but
they have to like file a form with the CFTC
being like we're doing this, and with the forum they
have to say what the purpose of it is, like
with the hedging or like price discovery, purpose of it
(21:20):
is They don't have to publish that, so they've confidentially
told the CFTC like, yeah, someone somewhere is hedging some
economic risk by betting same game parlay as in a
football game, but seems like a pretty marginal use.
Speaker 2 (21:33):
There's like certain people in the world that I want
to sit down with and like give them truths hereum
and ask them specific questions. And one of those people
is probably Vlad ten Of, and I want him, under
truths herem to tell me, like, what do you truly
see in this prediction market that's different from just sports
(21:55):
gambling or the founders of CALCI. Those are questions that
I would like to I know, but we can't give
them truths here.
Speaker 1 (22:03):
They'd be pretty honest about it.
Speaker 2 (22:04):
But I want to know if they truly truly believe
that there is a real substantial difference between a prediction
market where you can offer single game parlays versus just
sports betting. Okay one, no, yeah, two, But I know
that you think that too.
Speaker 1 (22:25):
I think then what people have historically said about this
is that there's a big difference between sports books and
prediction markets, and that difference is that a sports book
is on the other side of the bet from you, right,
and a prediction market is just a platform where people
can bet against each.
Speaker 2 (22:44):
Other, faceless, emotionless.
Speaker 1 (22:45):
No, it's not faceless, motionless. It's a peer to peer platform.
It's a place where I want to predict that the
Bills will win. You want to predict the Patriots will win.
We bet against each other. Kelshi brings us together. They
provide a platform for us to bet, but they're not
the bookmaker, not setting the odds. They're not taking the
other side of it. They don't want you to lose.
They don't care. They're just like intermediate between people on
(23:09):
one side people on the other side. They don't want
anyone to lose. They're not trying to trick anyone. They're
not trying to limit winning betters. They're just bringing people together.
Whereas a sports book is betting against you, so they
want you to lose. They want you to bet a
lot of money and lose, and if you bet and win,
they will limit you so that you can't win too
much money from them because they're taking the other side
(23:29):
of every bet. I've always found this distinction overstated because
like the way, for instance, robinhood works when you're traade
stocks is nominally like you can buy yourselves stocks, Robinhood
is not on the other side of you. But like
practically your orders are going to a market maker, right,
Like modern markets have market makers who are taking the
(23:50):
other side of you and they want, loosely speaking, to win.
And in prediction markets, it's a mixed bag. Like it
is clearly the case that like small dollar prediction markets
on like local elections, like Jane Street is not taking
the other side of your bet on that right, like
(24:10):
they're clearly they really are a peer to peer, right,
like some people are more professional than others, some people
have more capital than others, but like, ultimately their prediction
market is a is just a platform for people to
bet against each other with sports, It's not clear that's true, right,
Like you have like some of the big market makers,
Susqueahanna has a big sports betting business. Now the big
market makers will like support sportsbooks or trade on sportsbooks,
(24:32):
and like, it seems clear that some big market makers,
you know, if there's a big enough demand to trade
sports bets on prediction markets, they'll be on the other
side of the sports bets.
Speaker 2 (24:43):
Right.
Speaker 1 (24:44):
So again, there's a market you can take either side,
but like a market maker will sit in between and
try to take the winning side of the bet right.
And this is especially true with parlays because like the
way a parlay works is like there's no natural person
on the other side. Like if I pick, like, here
are the six things that I think will happen in
this football game, and if I hit all of them correct,
I win a lot of money, and if I miss
(25:04):
even one, I get nothing. Like no one, no person
is taking the other side of that, no individual retail
gambler is like I want to predict that one of
these six things will not come true, and if they
all come true, I'll pay a lot of money, and
if none come true, then I'll make a little money.
Like it's not a retail gambling bet. The person on
the other side of the parlay has to be a
market maker. And it's like not entirely clear exactly what
(25:25):
the mechanics are, but like it seems like the mechanics
are Like there's a market maker with a pricing model,
and like, if you pick up parlay, you can get
it sent to the market maker, who will fill it
for you at like a price that the market maker
sets and So that's different from everything else on Calshi. Right,
It's different from the story of like we're just a
(25:47):
neutral platform where people could try it. This is clearly
a story of like you are trading with a market maker.
It's not Calhi. Calshy isn't directly bidding against you, but
someone is directly betting against you. Who has partnered with
Calshi to provide this service? Yeah, or maybe it's more
than one somebody. Right, there were a bunch of market
makers who are providing the prices. But that's like pretty
different and like much much much, much much closer, not
(26:10):
only in the product, but in like the structure to
traditional sports betting.
Speaker 2 (26:14):
So I see how obviously from the perspective of Calshi,
that is a really substantial and meaningful difference.
Speaker 1 (26:22):
But I'm saying they're getting rid of that difference by
doing the parlays.
Speaker 2 (26:25):
Well, I was going to say, like, if I'm an
investor or a better a trader on Calshi versus a
gambler on fan duel, like, is my experience any different?
Speaker 1 (26:37):
Uh?
Speaker 2 (26:39):
Probably not?
Speaker 1 (26:40):
Well, it's different in various ways. The news this week
of Calshi offering parlay is like caused the big drop
in the stocks of the traditional sports books. Yeah, they
both went down like ten percent, like Vando and Flutter,
But Calshi is still like a teeny tiny fraction of
the size of them, because like they offer more bets
and a better user experience and everything. But like that's
that's converging. But is your experience different? Yeah, Like I mean,
(27:02):
like the buttons you push and like the sort of
layout of the thing is different. But like I don't
know how big a difference it is that they're a
platform and other places are sports books, because I do
think that like in either case you're kind of facing
ultimately some algorithmic price center, some professional who sets the
(27:23):
prices and tries to tries to set the market the prices,
so that like the market is just like any other
market maker. Like you want to have a relatively balanced book, right,
you don't want to be facing a huge risk of
you know, you don't want to betting all on one
side so that if you lose, you lose a lot
of money. But like you take some risk. You're not
looking for a perfectly balanced book, right, You're like looking
(27:44):
to have some bets where you think the odds are
in your paper.
Speaker 2 (27:47):
Yeah, the fact that you did have those shares drop
meant that sell side analysts had to react to the news,
and there was an article by the Wall Street Journal
quoting this Benchmark analyst Mike Hickey, who made the same
point that this is small. Until its scales or becomes
more robust, it doesn't appear competitive, and it seems like
(28:09):
DraftKings and fan duels still have an edge. He also
mentioned that the strategy by Calshie to make themselves look
just like a sports book certainly comes with some risks,
which is interesting. I mean, you made the point that
there's all this legal drama, but then the calendar flipped
and it was January of this year and now you're
in Trump's America.
Speaker 1 (28:30):
Yeah. I don't think they think it comes with that
much Rusk. Yeah, there's risk their court cases are still
on appeal, Like, there's still some risk that it will
turn out that they're subject to state gaming regulation and
then basically this kind of goes away. Yeah, like not entirely,
but it kind of goes away. But well, I think
they're very strongly betting on in Trump's CFTC, they can
(28:50):
do whatever they want and no one will stop them.
Speaker 2 (28:52):
It's funny because DraftKings, the CEO apparently has specifically cited
Calshi's legal troubles as part of the reason why that
they they steered clear prediction markets. But I think they
should fight back. They should launch their own prediction markets
and go for it, or they should offer stock trading.
Speaker 1 (29:08):
Why not offering stock trading is actually a separate set
of questions right where their prediction markets are are gambling.
I think if like Calshi ultimately ends up a really
big competitor to Fandel and DraftKings and the legal stuff
has all resolved in favor of like you can offer
(29:29):
whatever bets you want on a prediction market, then Calshi
has a huge advantage. They're legal in fifty states and
it's not free from that, but they seem to get
a better tax treatment and so there. Yeah, I think
Fandel and DraftKings flip into funding a prediction market, right.
I think it's hard, right they have to like register
at the CFTC, but it's like, yeah, there's a path
that's doing it.
Speaker 2 (29:49):
Fandil did it and apparently sort.
Speaker 1 (29:50):
Of then they partnered with CME for like, yeah.
Speaker 2 (29:53):
Yeah, I've written go on.
Speaker 1 (29:57):
This will be of interest. Yeah. Within the next two years,
we're going to see a football dot ETF You're right,
I commended here. Yeah, and that was the Money Stuff Podcast.
Speaker 2 (30:13):
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