August 1, 2025 • 26 mins
Katie and Matt discuss retail private assets, offsetting unicorn closed-end funds, Matt’s infrequent trading in his personal account, FX derivatives, unsophisticated clients, limited upside with unlimited downside, hurricanes, never-pay insurance policies and a call for mailbag questions.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News. Katie, it is ominous
out there.
Speaker 2 (00:11):
The skies are darkening as we speak.
Speaker 1 (00:13):
It's Thursday at two o'clock and change. And will I
get home?
Speaker 2 (00:19):
Will you get home?
Speaker 1 (00:20):
Will you get home?
Speaker 2 (00:21):
Gosh? I hope so one or more reversed, that's true.
There are bodies of water to ford.
Speaker 1 (00:29):
Hello, and welcome to the Money Stuff Podcast. You're a
weekly podcast where we talk about stuff related to money.
I'm Matt Levine and I write the Money Stuff column
for Bloomberg Opinion.
Speaker 2 (00:40):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (00:46):
I feel like we got feedback last week that people
are like, please more ETF stuff, which is unusual for us.
Speaker 2 (00:51):
I feel like maybe the people who leave comments are
actually just contrarians. Like message.
Speaker 1 (00:57):
They know that the default view is nowhere.
Speaker 2 (01:00):
Yeah, And we messaged so heavily that people don't like
this that they were compelled to write, actually we like this,
and here are our thoughtful thoughts on them. But we're
not talking about utfs.
Speaker 1 (01:09):
No, No, we're talking about funds, which are really ETF
is a term of art. But is it a fun
The treads on expan uar. But yeah, we talk a
lot about I read a lot about people who are
trying to jam private stuff into retail investors. The people
(01:30):
doing most of the jamming are the people doing like
private credit funds. But the thing that the retail investors
want the most is probably like SpaceX and Mai, right, Like.
Speaker 2 (01:40):
I don't want private bonds, just give me SpaceX.
Speaker 1 (01:43):
Yeah, private credit is like sold by financial advisors, but
like SpaceX has bought and it's hard because you need
to like go find shares of that. And I think
a lot of people have, in various ways had the thought,
what if we didn't find shares? Right, what if we
just did naked derivatives on SpaceX or open ai stock
(02:04):
or whatever. Right. And the idea is you find someone
who wants to be short open Ai, and they run
a contract saying I'll give you the returns on open
Ai and package that into a box and you sell
it to retail investors, and then the retail investors get
long open Ai, and whoever wants to be short it
gets short open Aya.
Speaker 2 (02:21):
Yeah, you're just only exposed to the price action theoretically, and.
Speaker 1 (02:26):
A certain amount of categorty risks.
Speaker 2 (02:27):
Right right, right right.
Speaker 1 (02:29):
I've written about We've tied about people who do like
various tokenizations, various things. And I wrote this week about
River North doing these paired clothed un funds, which is
like really the way to do this, Like ultimately it's
a paired clothed un fund and it's on this index
of it's like the Prime Unicorn Index, which is sort
of an index of big private companies sort of sort
(02:52):
of sort of, there's some public companies in there too.
To keep it on.
Speaker 2 (02:54):
Two of its top ten holdings are public companies.
Speaker 1 (02:57):
They don't update that frequently or something.
Speaker 2 (02:59):
This is July sixteenth. No, no, no, but like oh they
don't rebalance.
Speaker 1 (03:03):
Yeah yeah, like you know you have some unicorns in
your index they go public?
Speaker 2 (03:07):
Yeah sure sure.
Speaker 1 (03:08):
But right, so it's got like SpaceX, it's got some
anthropic it's got some of the heads. And what they're
doing is they are writing cash settled swaps on that index. Right.
The index measures let's say, the value of these private
stocks and public stocks. Right, there's some questions about how
you measure the value of private stacks for these companies.
There's like secondary trading. There's funding rounds all the time.
(03:31):
It's fine. You can like get a value and then
they have the index, so they have the price and
they have just cash settled swaps on that index. And
you can go long or short. So there's a long
fund that gives you exposure to this unicorn index, and
there's a short fund that gives you negative exposure to
this unicorn index. And the obvious trick is they completely offset,
(03:54):
so net nothing happens, right net. It's like if someone
wants to go along and someone wants to go short,
the issues to each of them and bof we have
both a way to invest in private companies and a
way to short private companies. Some people want right, some
people think it's a bubble et cetera. And so you
get two delightful products the Selta retail without doing any
(04:16):
economic activity outside of it.
Speaker 2 (04:18):
Right.
Speaker 1 (04:18):
You don't have to buy shares, you don't have to
do anything, just offset retail bets against each other.
Speaker 2 (04:24):
So typically when we talk about closed end funds on
this podcast, we talk.
Speaker 1 (04:27):
About you do what you do?
Speaker 2 (04:29):
We do? You know, we dabble. We often talk about
how they trade a discounts. Does that matter at all
here that these are going to launch and then probably
trade it a discount.
Speaker 1 (04:37):
I have no idea how they'll trade. In fact, there
is a history of unicorny closed end funds trading at huge.
Speaker 2 (04:44):
Premiums, right, right, So they'll trade at some dislocation.
Speaker 1 (04:46):
Maybe it's not a discount, right if you look at
the structure of this, there's like some stuff that suggests
it shouldn't be too dislocated. So one one thing is
like they are termed cash settled swaps, so settles in
twenty twenty seven. I think the termination date is not clear,
but it's twenty twenty seven is in the name. So
this is the thing that like you buy it and
(05:08):
in two years you get a payoff, So only so
much discount you should really demand because you'll hopefully get
you'll get your cash back in two years. And then
the other thing that is interesting for discounts and premiums
is like there are these two offsetting funds, right, so
like if they both traded at a discount, you could
(05:29):
buy both of them, and then you have a really
interesting instrument. Right if you buy the long fund and
you buy the short fund both at a discount, then
you basically have captured the discount, but you have two
years of counterparty risk weirdness risk, yeah, swabs risk, but
like you know, fundamentally no market risk. I think probably
this is not investment advice.
Speaker 2 (05:49):
I hope these lunch I mean, and.
Speaker 1 (05:51):
If they do trade at a discount like my first
PA trade and twenty years, will be buying.
Speaker 2 (05:59):
Both of them, don't yourself.
Speaker 1 (06:02):
I will definitely not do that, And it's not investment advice.
I might do that. I might do that just for
just for giggles. Last weeking about auction rate securities, which
is like my only PA trade ever was when I
was a banker, and like the auction rate securities market
got dislocated, and so I bought one lot of auction
rate securities. Yeah you did not like a seven percent
yield as a look at me living dangerously?
Speaker 2 (06:24):
God that did work out for you though?
Speaker 1 (06:26):
Oh yeah, I made seven percent for a week.
Speaker 2 (06:28):
All right, that's pretty good. Half a thought I had
because I live in etf Land. Is you know, we
talk about inverse single stock ETFs and there's some element
of volatility drag there and if you hold these long
term then it could be painful. Is there any funkiness
that could happen on the short side.
Speaker 1 (06:46):
Here the inverse ETF problem, the volatility drag problem comes
from rebalancing. Yeah, the rebalancing exists because every day you
are offering the ETF to people, and you want to
give them down from today, right, and so you're rebalancing
to get the right amount of exposure with this thing.
(07:07):
It's just swaps. It's a little easier. They're not leveraged,
and you are not giving them like down from today,
you're giving them like, you know, the total return over
the period. So I don't think there's too much in
the way of volatility drag. There's some possibility that's something
you can get funky if like the index goes up
a lot, there's like a cap on returns. Like there's
some possibility of weirdness where if you buy the thing
(07:28):
in six months, you're not getting quite the negative one
times exposure you wanted, which is like the opposite of volatility.
The volatility drag exists because every day you're getting exactly
the same proposition, which is like negative one or two
times or whatever the ETFs exposure, And like here there's
not that here, there's just like there's a term to swap,
and you can buy it at any time to the swap,
(07:51):
or even you can't buy it anytime. It's a little
close and fund so they don't have to continuous offering.
But no, it's very simple, and you know, like it's
based on this index. Yeah, I think in large part
because it's nice to have a third party calculated index
for your cash settled swaps, so you can be like, oh,
the things settle that whatever the price of the indexes today,
(08:13):
like and someone else is doing the index. But if
this works, you could do it for single names. You
could do it for open air. You could have the
inverse open AI fund and the yes open AI fund,
and you should offer that to people with no financials.
I don't know. It seems like a stretch, but we're
in a brave new world of like it's not clear
(08:33):
what securities regulations apply to anything anymore. And if you
wanted to do a single stock closed end fund, that's
just like betting on and against a private company. Could
you do that? I mean, I mean two years ago
I would have said no. Now I'm like, yeah, I
don't know.
Speaker 2 (08:49):
Maybe these closed un funds do seem like a stepping
stone to that reality. So yeah, I mean we talked
about X Y Z right or the Destiny type.
Speaker 1 (08:58):
Yeah, that's the close in fund. The trays has private
companies and trades are a huge premium.
Speaker 2 (09:02):
And we talked about how like Stripe for example, or
some of these private companies would not love this, So
I would imagine that they would also theoretically not love
this either, even though we're talking about swaps here.
Speaker 1 (09:14):
I mean with Destiny, like.
Speaker 2 (09:15):
Are they using forwards?
Speaker 1 (09:16):
They owned various cats and dogs, but like one thing
they owned is like forwards on stock, which is like
those forwards are physically settled, right. Those forwards are basically
someone who owns strip stock signs of contracts saying I
will give Destiny my Stripe stock as soon as I'm
allowed to, right, and when Stripe goes public, And the
reason they do that rather than just selling the shares
is because Stripe doesn't let them sell their shares, right,
(09:38):
they have some transfer restrictions. Stripe and probably every private
company that transfer restricts that shares probably says you can't
do a forward contract, right, Like forwards are to Stripe
no better than selling the shares right now. And so
it's not clear whether these forward contracts are valid, and
if they're not valid, then bad things could happen, like
(09:58):
Stripe saying no, we get that stock instead of it
going to destiny. When you know, Stripe goes public and
they settle the forward. Here there's like Stripe gets no,
say that's RCT. The private companies getting no says they're
not involved at all. There's no contract on their stock.
Nobody has to own their stock at any point. It's
just purely a cash settled side back between two people
that don't involve the private company. So there's not a
(10:19):
lot they can do.
Speaker 2 (10:20):
Yeah, and that's sort of what I was getting.
Speaker 1 (10:21):
You put out a statement being like we're not involved
and shouldn't do it, but they can't stop it.
Speaker 2 (10:25):
It might be like an annoyance rather Yeah.
Speaker 1 (10:28):
I mean, they're not going to change their lives at
Stripper or whatever.
Speaker 2 (10:31):
But I did like that. You make the point though,
that if you're buying into this closing fund, you're not
funding a private company. You're not giving your money and
put it. Yeah, exactly, it's just the price. Yeah, that's
truly the reality that we're stepping towards.
Speaker 1 (10:47):
I mean, it very much is and people want to
gamble on private companies.
Speaker 2 (10:53):
God blessom you know who doesn't want to gamble UVS
(11:14):
clients on range target profit.
Speaker 1 (11:17):
Forward, you don't know because they lost.
Speaker 2 (11:19):
That's true bigly. Apparently the ft has really owned this story.
Speaker 1 (11:23):
Yeah, so UVS. I don't know. I don't want to
blame VS. As a former derivative salesperson, I said withouts,
banks sell derivative products, right, Like you work in FX, right,
and like the thing you do is like clients come
to you and are like, I would like to change
my Swiss francs for dollars. Sure, You're like okay, and
they'll be like how much will that be? And you'll
be like zero points zero zero zero one basis pins
(11:45):
or whatever. Right, you've charged them. The teen's not you me,
And so you spend all day in the lab cooking
up things that can be more expensive, right. You're like
what if? And you try to like give them a
product that sounds cool, and there's only so many products
I can time cool. But like what they were doing
is I don't know, it's got names. It's like a
conditional target redemption forward or a range target profit.
Speaker 2 (12:06):
Forward all yess yeah, whatever anyway household name.
Speaker 1 (12:10):
The thing they were doing is basically like, we will
sell you dollars. It seems to have been like European
whatever client's buying dollars, right, So UBS is like, we
will sell you dollars at like three tens of percent
below the like forward price, so you're getting a bargain.
But if the actual price in a month or whatever
goes below that target price, we will sell it to
(12:30):
you at that target price. So you'll get not a bargain,
you'll get like a bad deal. You'll be buying above market,
and we'll sell you twice as much in that situation
as in the good situation. So basically like we will
sell you dollars at a better than market price most
of the time, and then some of the time will
sell you many more dollars at a much worse on
(12:51):
the market price.
Speaker 2 (12:51):
Right.
Speaker 1 (12:52):
So basically, the clients get a good deal in like
eighty or ninety percent of scenarios, so you have a
good thing to sell them. You're like, oh, look, you're
getting a good deal.
Speaker 2 (13:00):
I want to go.
Speaker 1 (13:00):
Scenarios, and then they get a terrible deal. They get
like really hosed in like ten percent of scenarios, and
unfortunately the bad scenario came true and all the clients
were like, we didn't know what were signing up for.
And UVS is sad and sorry and has made apparently
the after you reported, made more than one hundred good
will payments, yeah, which basically is like a refund of
(13:22):
the money they lost or we're so.
Speaker 2 (13:24):
Sorry, please don't leave us, we won't do it again.
Speaker 1 (13:27):
It's not just the money. It's like the UVS banker
has to go to the client and like the internet
client is like, you didn't even bring any materials. Like
it's like they just go and like look you in
the eye and like very sincerely sorry, and they're like,
we're not even pitching a different derivative today. Today, we're
here to just talk about how sorry we are. It's
a really like touching moment. Yeah. And they also have
(13:48):
internal trainings where they're like being told not to scam
clients and.
Speaker 2 (13:52):
Also role playing like how these meetings should go from
now on when you're pitching.
Speaker 1 (13:56):
Right, it's this great tension in investment banking where obviously
you want the client who when you come to them
with some crazy derivative, they're like, Okay, sure sounds good,
and they don't like bit it out to get the
price down or like model it up themselves or just
like sure you would, I trust you, right, But like
(14:16):
those people are really good clients and they make you
a lot of money until something goes wrong and then
like it looks bad in court. You know, Yeah, the
client who really trusted you, the client who was not
sophisticated at modeling you know FX volatility, like, those are
not the clients that you want to go to court with.
So it's a delicate balancing act where two years ago, yes,
(14:39):
I was probably rewarding the people who were.
Speaker 2 (14:40):
Out in the Yeah, definitely gated.
Speaker 1 (14:42):
Clients and large size, and now it's like no more
of that.
Speaker 2 (14:45):
Well, the FT gave some great examples of the harm
that was wrought by some of these trades really kind
of blowing up. One client lost more than three million
Swiss franc which equates to like three point seven million dollars.
Another person said that they lost fifteen percent of their assets.
They also asked the bank to exit the investment a
few days after Trump's Liberation Day, and apparently, according to
(15:10):
FT reporting, UVS sold these products to customers with the
equivalent of fewer than eight hundred thousand dollars or so.
So I don't know. It's just a weird trade in general.
To put on like this sounds like something like if
you were a big business trying to hedge your currency exposure,
maybe this would make sense. But selling it to even
(15:33):
like very wealthy individuals is weird.
Speaker 1 (15:35):
Yeah.
Speaker 2 (15:36):
Like the way that the Ft describes it is that
these products offer limited upside but exposed clients to potentially
unlimited losses.
Speaker 1 (15:44):
It's everything that's like accumulators. It's like everything, right, It's
like the trade is.
Speaker 2 (15:48):
Everything except buffer ETFs.
Speaker 1 (15:49):
Maybe I know, but like for so many wealthy clients,
the trade is like you can get two percent more
on your money by like taking some black hole of risk,
and then you know you have the meat, and they're like,
but what do you think the chances are of that
black hole frisk happening?
Speaker 2 (16:03):
Right?
Speaker 1 (16:04):
And the clans like, oh, it sounds good, right, and
they buy it and they get two percent extra yield
and then like the black hole happens and they're very up.
Speaker 2 (16:10):
Yeah, hear the.
Speaker 1 (16:10):
Black hole with libation day tars and the dollar plunging.
Speaker 2 (16:14):
I will say, you were talking about the sympathy that
you feel towards you know, these bankers who make these
derivative products. I don't know. I think that's cool and aesome.
Speaker 1 (16:26):
But I was one of them. I only saw this
investigated clients right for sure of them got their faces
I'm not even kidding really, no, well I'm kidding a little,
but like none of them got their faces. True.
Speaker 2 (16:34):
Wow, someone's going to write in and say, Matt.
Speaker 1 (16:37):
Levine face off, but I really didn't. I was also
very ineffectual, so it's fine.
Speaker 2 (16:43):
My first beat at Bloomberg was covering FX as a
little baby journalist, and the period that I was covering FX,
there was no volatility in currency markets. You had to
beg people to read your stories and also like really
scrape the bottom of the barrel to find stuff to
write about. I joined Bloomberg in like twin sixteen and
stop covering currencies in twenty nineteen. So President Trump's first
(17:04):
term actually gave us something to write about. But you know,
this trade probably wasn't as risky, like it probably really
was fine ninety percent of the time because the type
of volatility that we saw in you know, the Swiss
franc dollar exchange rate on Liberation Day, Like that wasn't
happening for a long time. Like, I mean you saw
(17:25):
it a cross as cyclasses.
Speaker 1 (17:26):
It's like what did that tell you, right? I mean
like if this trade had been perfectly explained to like
clients who were not professional effects traders but were smart
and sophisticated you know, financial people, this trade had been
perfectly explained, Like the perfect explanation is in the ballpark
of like you will get some extra you know, the
older profit or whatever most of the time. But if
(17:48):
the dollar plunges like it does not usually plunge, then
you will get your face ripped off. Yeah, And like
some people would have been like, okay, I'll take that
bet and then the dollar plunge and then got their
faces ripped off. Yeah. It's like I've read about this before,
Like there are clearly some customers who did not understand
what they're getting into, and Naudio ubs to solve them
(18:09):
something they didn't understand. But also like probably some people
were like, I will make the bet that the dollar
will not be super volatile, and the dollar is super.
Speaker 2 (18:15):
Valatle yeah yeah.
Speaker 1 (18:17):
But like look, everyone else is getting a good will payment.
I actually get a good will payment too.
Speaker 2 (18:21):
Yeah, I mean you would think that they would happen
potentially across asset classes, like every asset class had an
outsized move on Liberation Day.
Speaker 1 (18:29):
Right, And there's something about FCX where people people smaller
customers get sold weirder stuff like I mean, they're definitely
equity trades like this, right, Like we've talked about like
is it the cocumulator. We've talked about like structured note
trades that kind of have this shape, right, Yeah, but
I don't know. In FX, it does seem like people
take more random gambles. And also like people don't expect
(18:50):
as much as relativity and then you know, they get volatility.
Speaker 2 (18:52):
Like they're very strange market. It was a fun trip
being there for like two and a half years.
Speaker 1 (18:58):
Right. If you're in I think the business of selling equities,
there's a lot of like you know, you do puppers
and stuff, but there's a lot of just like oh,
by open a eye, it's a good stuck. Right, here's
the business fax Like you're kind of instantly going to
where de rods.
Speaker 2 (19:12):
Yeah yeah, book which is just too insurance.
Speaker 1 (19:32):
Insurance sometimes blows up too.
Speaker 2 (19:33):
Yeah, well, trying to get us to hurricanes somehow, but
I can't quite make the oracle jump. So anyway, ten minutes.
Speaker 1 (19:42):
I'm going to make a literal jump into the hurricane. Here.
Speaker 2 (19:46):
It's raining in New York.
Speaker 1 (19:47):
New York, and like they've already preamptively shut down.
Speaker 2 (19:52):
Well, all the subways keep breaking, right, I have to take.
Speaker 1 (19:55):
A subway and then a train. It's gonna be bad.
Speaker 2 (19:58):
My dad is picking me up today, so I'm happy.
Speaker 1 (20:01):
Okay, So Florida, Florida. So there are a lot of
houses in hurricane zones. It's hard and expensive to buy
insurance on your house if it's in a hurricane zone.
There is people have jumped into the gap to meet
that market of failure. Conceptually, the way you do it
(20:21):
is you start an insurance company and you don't have
any money, and you start selling insurance policies to raise money. Right,
And if you do this for twenty years without a hurricane,
you'll have so much money that you can pay off
any claims. Right. But if you do it for one
year and then there's a hurricane, you will not have
so much money they can pay it any claims. And
so there's a risk in starting a new I'm derradically
(20:44):
oversimplifying and in fact, insurance companies are supposed to be
well capitalized. But yeah, conceptually, you start a new insurance company,
you've raised money by selling premiums, and then if there's
no hurricanes, you're great, and if there's lots of hurricanes,
you go to zero. And that's hard to do because
insurance companies have to be rated. There's a couple of
like big ratings agencies, and there have been a number
(21:05):
of stories or something. There's one in the Wall Street
Journal this week, and read about it last year. There's
a ratings agency it's like a mom and pop operation
called Demo Tech that rates a lot of smaller, less
well capitalized insurance companies and it gives a lot of
them A ratings and they have a higher incidence of
their A rated companies becoming insolvent with them, you know,
(21:25):
there is a period of.
Speaker 2 (21:26):
Time thirty times more likely, thirty times more.
Speaker 1 (21:28):
Likely than the other ratings agencies that use more traditional
methods mean And it's like why does this exist? Well, well, well,
people want to buy insurance. Someone sent me there's a
there's a Monty Python skit where like a reverend comes
into the insurance office and says like, why aren't you
paying my claim? And he's like, oh, you see, you
bought the never pay policy, which never pays off. It's
(21:49):
a great policy if you don't have a claim, but
if you have a claim, it never pays. It seems
like people want to never pay policy. Yeah, you know,
I've written a little bit about why, and like it's
an interesting, like stemic answer, which the answer is that
these insurance companies have enough money that if you like
burn your house time by accident, they'll pay your claim.
(22:12):
Have that kind of money, Yeah, what they don't have
is the money to pay off everyone's claim if there's
a big hurricane.
Speaker 2 (22:18):
It's like a town is wiped out.
Speaker 1 (22:20):
And why would you want to buy insurance that protects
against you accidentally burning your house time but not a hurricane.
The answer I think is that you probably correctly believe
that there's some sort of bailout coming if your time
gets whipped up. Yeah, and like an insurance like this
is really quite literal where there's like state guarantee funds
(22:42):
that basically will step in to cover wiped out insurers.
So if you're a homeowner, you can buy the bad
insurance policy figuring you know, either it'll pay out or
if it doesn't pay out, someone else will step in
to pay it out. And then like there's a question
of why do states allow this, like the state's fund
the guarantee funds, and like, you know, they're on the
(23:03):
hook of this insured doesn't pay out. Yeah, I think
the answer is that's a problem for another day, and
right now, it's nice to have insurance, right So, if
you're like a Florida politician and people can't get insurance
to buy houses in Florida, that's really bad.
Speaker 2 (23:17):
For you, right, Yeah.
Speaker 1 (23:18):
And if they can get insurance, that's good for you.
And if the insurance doesn't pay out and the state
government has to step in to guarantee the insurance, that's
a problem for later. Yeah. And so there's a certain
amount of short sighted it's where regulators politicians are all
happy to go with the system where you know, the
insurers are not necessarily all that well capitalized, because that's
a problem for someone else to figure out later on.
Speaker 2 (23:39):
Yeah, this is not the same thing, but it kind
of reminded me of the conversation we were having about
Egan Jones a couple of months ago. That is the
ratings agency that basically gives pretty high ratings to private
credit investments and has a track record of a lot
of those private credit investments not going so well or
(24:01):
you know, you think about it. Gave pretty good ratings
to Chicken Soup for the Soul. It gave good ratings
to Red Box and those went belly up. But there
is a space for these rating agencies.
Speaker 1 (24:13):
Yeah, it's a similar dynamic in that, like ratings are
not really for the consumer of the ratings, right, Like
you're not getting insurance from an A rated insurance company
because you want insurance from an aerrated insurance company. There's
some sort of like regulatory backdrop, and so if ratings
are kind of generous, like a lot of people are
very happy to have generous ratings, and so there's a
(24:34):
market niche for people who are willing to provide generous ratings.
Speaker 2 (24:37):
Yeah, and I mean it's all just future problems to
deal with.
Speaker 1 (24:40):
So, yeah, everything is a rated now. Yeah, it hasn't
defaulted yet. Yeah, who knows what'll happen.
Speaker 2 (24:49):
Hey, So this episode is coming out on August first,
and in August, people including Matt Levine take vacation, So
We're going to do another mail bag episode, so make
sure you send us your cool questions money Pod at
Bloomberg dot net, and there's a pretty high likelihood that
will answer some of them.
Speaker 1 (25:10):
Matt, I might do a mail bag episode, Weser.
Speaker 2 (25:13):
If your questions are good enough, Gons. If your questions
are good enough, we will do a mail bag So
it's up to you.
Speaker 1 (25:21):
Yeah, sure, yeah, it's alrighty on you. And that was
the Money Stuff Podcast.
Speaker 2 (25:29):
I'm Matt Leuvian and I'm Katie Greifeld.
Speaker 1 (25:31):
You can find my work by subscribing to the money
Stuff newsletter on Bloomberg.
Speaker 2 (25:35):
Dot com, and you can find me on Bloomberg TV
every day on Open Interest between nine to eleven am Eastern.
Speaker 1 (25:41):
We'd love to hear from you. You can send an
email to money Pod at Bloomberg dot net.
Speaker 2 (25:46):
You can also subscribe to our show wherever you're listening
right now and leave us a review. It helps more
people find the show.
Speaker 1 (25:52):
The Money Stuff Podcast is produced by Anna Masarakus and
Moses onam Our.
Speaker 2 (25:56):
Theme music was composed by Blake Maples and Stage Bauman
is Bloomberg's had of podcasts.
Speaker 1 (26:00):
Thanks for listening to the Muney Stuff Podcast. We'll be
back next week with more stuff.
Bloomberg Audio Studios, Podcasts, Radio News. Katie, it is ominous
out there.
Speaker 2 (00:11):
The skies are darkening as we speak.
Speaker 1 (00:13):
It's Thursday at two o'clock and change. And will I
get home?
Speaker 2 (00:19):
Will you get home?
Speaker 1 (00:20):
Will you get home?
Speaker 2 (00:21):
Gosh? I hope so one or more reversed, that's true.
There are bodies of water to ford.
Speaker 1 (00:29):
Hello, and welcome to the Money Stuff Podcast. You're a
weekly podcast where we talk about stuff related to money.
I'm Matt Levine and I write the Money Stuff column
for Bloomberg Opinion.
Speaker 2 (00:40):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (00:46):
I feel like we got feedback last week that people
are like, please more ETF stuff, which is unusual for us.
Speaker 2 (00:51):
I feel like maybe the people who leave comments are
actually just contrarians. Like message.
Speaker 1 (00:57):
They know that the default view is nowhere.
Speaker 2 (01:00):
Yeah, And we messaged so heavily that people don't like
this that they were compelled to write, actually we like this,
and here are our thoughtful thoughts on them. But we're
not talking about utfs.
Speaker 1 (01:09):
No, No, we're talking about funds, which are really ETF
is a term of art. But is it a fun
The treads on expan uar. But yeah, we talk a
lot about I read a lot about people who are
trying to jam private stuff into retail investors. The people
(01:30):
doing most of the jamming are the people doing like
private credit funds. But the thing that the retail investors
want the most is probably like SpaceX and Mai, right, Like.
Speaker 2 (01:40):
I don't want private bonds, just give me SpaceX.
Speaker 1 (01:43):
Yeah, private credit is like sold by financial advisors, but
like SpaceX has bought and it's hard because you need
to like go find shares of that. And I think
a lot of people have, in various ways had the thought,
what if we didn't find shares? Right, what if we
just did naked derivatives on SpaceX or open ai stock
(02:04):
or whatever. Right. And the idea is you find someone
who wants to be short open Ai, and they run
a contract saying I'll give you the returns on open
Ai and package that into a box and you sell
it to retail investors, and then the retail investors get
long open Ai, and whoever wants to be short it
gets short open Aya.
Speaker 2 (02:21):
Yeah, you're just only exposed to the price action theoretically, and.
Speaker 1 (02:26):
A certain amount of categorty risks.
Speaker 2 (02:27):
Right right, right right.
Speaker 1 (02:29):
I've written about We've tied about people who do like
various tokenizations, various things. And I wrote this week about
River North doing these paired clothed un funds, which is
like really the way to do this, Like ultimately it's
a paired clothed un fund and it's on this index
of it's like the Prime Unicorn Index, which is sort
of an index of big private companies sort of sort
(02:52):
of sort of, there's some public companies in there too.
To keep it on.
Speaker 2 (02:54):
Two of its top ten holdings are public companies.
Speaker 1 (02:57):
They don't update that frequently or something.
Speaker 2 (02:59):
This is July sixteenth. No, no, no, but like oh they
don't rebalance.
Speaker 1 (03:03):
Yeah yeah, like you know you have some unicorns in
your index they go public?
Speaker 2 (03:07):
Yeah sure sure.
Speaker 1 (03:08):
But right, so it's got like SpaceX, it's got some
anthropic it's got some of the heads. And what they're
doing is they are writing cash settled swaps on that index. Right.
The index measures let's say, the value of these private
stocks and public stocks. Right, there's some questions about how
you measure the value of private stacks for these companies.
There's like secondary trading. There's funding rounds all the time.
(03:31):
It's fine. You can like get a value and then
they have the index, so they have the price and
they have just cash settled swaps on that index. And
you can go long or short. So there's a long
fund that gives you exposure to this unicorn index, and
there's a short fund that gives you negative exposure to
this unicorn index. And the obvious trick is they completely offset,
(03:54):
so net nothing happens, right net. It's like if someone
wants to go along and someone wants to go short,
the issues to each of them and bof we have
both a way to invest in private companies and a
way to short private companies. Some people want right, some
people think it's a bubble et cetera. And so you
get two delightful products the Selta retail without doing any
(04:16):
economic activity outside of it.
Speaker 2 (04:18):
Right.
Speaker 1 (04:18):
You don't have to buy shares, you don't have to
do anything, just offset retail bets against each other.
Speaker 2 (04:24):
So typically when we talk about closed end funds on
this podcast, we talk.
Speaker 1 (04:27):
About you do what you do?
Speaker 2 (04:29):
We do? You know, we dabble. We often talk about
how they trade a discounts. Does that matter at all
here that these are going to launch and then probably
trade it a discount.
Speaker 1 (04:37):
I have no idea how they'll trade. In fact, there
is a history of unicorny closed end funds trading at huge.
Speaker 2 (04:44):
Premiums, right, right, So they'll trade at some dislocation.
Speaker 1 (04:46):
Maybe it's not a discount, right if you look at
the structure of this, there's like some stuff that suggests
it shouldn't be too dislocated. So one one thing is
like they are termed cash settled swaps, so settles in
twenty twenty seven. I think the termination date is not clear,
but it's twenty twenty seven is in the name. So
this is the thing that like you buy it and
(05:08):
in two years you get a payoff, So only so
much discount you should really demand because you'll hopefully get
you'll get your cash back in two years. And then
the other thing that is interesting for discounts and premiums
is like there are these two offsetting funds, right, so
like if they both traded at a discount, you could
(05:29):
buy both of them, and then you have a really
interesting instrument. Right if you buy the long fund and
you buy the short fund both at a discount, then
you basically have captured the discount, but you have two
years of counterparty risk weirdness risk, yeah, swabs risk, but
like you know, fundamentally no market risk. I think probably
this is not investment advice.
Speaker 2 (05:49):
I hope these lunch I mean, and.
Speaker 1 (05:51):
If they do trade at a discount like my first
PA trade and twenty years, will be buying.
Speaker 2 (05:59):
Both of them, don't yourself.
Speaker 1 (06:02):
I will definitely not do that, And it's not investment advice.
I might do that. I might do that just for
just for giggles. Last weeking about auction rate securities, which
is like my only PA trade ever was when I
was a banker, and like the auction rate securities market
got dislocated, and so I bought one lot of auction
rate securities. Yeah you did not like a seven percent
yield as a look at me living dangerously?
Speaker 2 (06:24):
God that did work out for you though?
Speaker 1 (06:26):
Oh yeah, I made seven percent for a week.
Speaker 2 (06:28):
All right, that's pretty good. Half a thought I had
because I live in etf Land. Is you know, we
talk about inverse single stock ETFs and there's some element
of volatility drag there and if you hold these long
term then it could be painful. Is there any funkiness
that could happen on the short side.
Speaker 1 (06:46):
Here the inverse ETF problem, the volatility drag problem comes
from rebalancing. Yeah, the rebalancing exists because every day you
are offering the ETF to people, and you want to
give them down from today, right, and so you're rebalancing
to get the right amount of exposure with this thing.
(07:07):
It's just swaps. It's a little easier. They're not leveraged,
and you are not giving them like down from today,
you're giving them like, you know, the total return over
the period. So I don't think there's too much in
the way of volatility drag. There's some possibility that's something
you can get funky if like the index goes up
a lot, there's like a cap on returns. Like there's
some possibility of weirdness where if you buy the thing
(07:28):
in six months, you're not getting quite the negative one
times exposure you wanted, which is like the opposite of volatility.
The volatility drag exists because every day you're getting exactly
the same proposition, which is like negative one or two
times or whatever the ETFs exposure, And like here there's
not that here, there's just like there's a term to swap,
and you can buy it at any time to the swap,
(07:51):
or even you can't buy it anytime. It's a little
close and fund so they don't have to continuous offering.
But no, it's very simple, and you know, like it's
based on this index. Yeah, I think in large part
because it's nice to have a third party calculated index
for your cash settled swaps, so you can be like, oh,
the things settle that whatever the price of the indexes today,
(08:13):
like and someone else is doing the index. But if
this works, you could do it for single names. You
could do it for open air. You could have the
inverse open AI fund and the yes open AI fund,
and you should offer that to people with no financials.
I don't know. It seems like a stretch, but we're
in a brave new world of like it's not clear
(08:33):
what securities regulations apply to anything anymore. And if you
wanted to do a single stock closed end fund, that's
just like betting on and against a private company. Could
you do that? I mean, I mean two years ago
I would have said no. Now I'm like, yeah, I
don't know.
Speaker 2 (08:49):
Maybe these closed un funds do seem like a stepping
stone to that reality. So yeah, I mean we talked
about X Y Z right or the Destiny type.
Speaker 1 (08:58):
Yeah, that's the close in fund. The trays has private
companies and trades are a huge premium.
Speaker 2 (09:02):
And we talked about how like Stripe for example, or
some of these private companies would not love this, So
I would imagine that they would also theoretically not love
this either, even though we're talking about swaps here.
Speaker 1 (09:14):
I mean with Destiny, like.
Speaker 2 (09:15):
Are they using forwards?
Speaker 1 (09:16):
They owned various cats and dogs, but like one thing
they owned is like forwards on stock, which is like
those forwards are physically settled, right. Those forwards are basically
someone who owns strip stock signs of contracts saying I
will give Destiny my Stripe stock as soon as I'm
allowed to, right, and when Stripe goes public, And the
reason they do that rather than just selling the shares
is because Stripe doesn't let them sell their shares, right,
(09:38):
they have some transfer restrictions. Stripe and probably every private
company that transfer restricts that shares probably says you can't
do a forward contract, right, Like forwards are to Stripe
no better than selling the shares right now. And so
it's not clear whether these forward contracts are valid, and
if they're not valid, then bad things could happen, like
(09:58):
Stripe saying no, we get that stock instead of it
going to destiny. When you know, Stripe goes public and
they settle the forward. Here there's like Stripe gets no,
say that's RCT. The private companies getting no says they're
not involved at all. There's no contract on their stock.
Nobody has to own their stock at any point. It's
just purely a cash settled side back between two people
that don't involve the private company. So there's not a
(10:19):
lot they can do.
Speaker 2 (10:20):
Yeah, and that's sort of what I was getting.
Speaker 1 (10:21):
You put out a statement being like we're not involved
and shouldn't do it, but they can't stop it.
Speaker 2 (10:25):
It might be like an annoyance rather Yeah.
Speaker 1 (10:28):
I mean, they're not going to change their lives at
Stripper or whatever.
Speaker 2 (10:31):
But I did like that. You make the point though,
that if you're buying into this closing fund, you're not
funding a private company. You're not giving your money and
put it. Yeah, exactly, it's just the price. Yeah, that's
truly the reality that we're stepping towards.
Speaker 1 (10:47):
I mean, it very much is and people want to
gamble on private companies.
Speaker 2 (10:53):
God blessom you know who doesn't want to gamble UVS
(11:14):
clients on range target profit.
Speaker 1 (11:17):
Forward, you don't know because they lost.
Speaker 2 (11:19):
That's true bigly. Apparently the ft has really owned this story.
Speaker 1 (11:23):
Yeah, so UVS. I don't know. I don't want to
blame VS. As a former derivative salesperson, I said withouts,
banks sell derivative products, right, Like you work in FX, right,
and like the thing you do is like clients come
to you and are like, I would like to change
my Swiss francs for dollars. Sure, You're like okay, and
they'll be like how much will that be? And you'll
be like zero points zero zero zero one basis pins
(11:45):
or whatever. Right, you've charged them. The teen's not you me,
And so you spend all day in the lab cooking
up things that can be more expensive, right. You're like
what if? And you try to like give them a
product that sounds cool, and there's only so many products
I can time cool. But like what they were doing
is I don't know, it's got names. It's like a
conditional target redemption forward or a range target profit.
Speaker 2 (12:06):
Forward all yess yeah, whatever anyway household name.
Speaker 1 (12:10):
The thing they were doing is basically like, we will
sell you dollars. It seems to have been like European
whatever client's buying dollars, right, So UBS is like, we
will sell you dollars at like three tens of percent
below the like forward price, so you're getting a bargain.
But if the actual price in a month or whatever
goes below that target price, we will sell it to
(12:30):
you at that target price. So you'll get not a bargain,
you'll get like a bad deal. You'll be buying above market,
and we'll sell you twice as much in that situation
as in the good situation. So basically like we will
sell you dollars at a better than market price most
of the time, and then some of the time will
sell you many more dollars at a much worse on
(12:51):
the market price.
Speaker 2 (12:51):
Right.
Speaker 1 (12:52):
So basically, the clients get a good deal in like
eighty or ninety percent of scenarios, so you have a
good thing to sell them. You're like, oh, look, you're
getting a good deal.
Speaker 2 (13:00):
I want to go.
Speaker 1 (13:00):
Scenarios, and then they get a terrible deal. They get
like really hosed in like ten percent of scenarios, and
unfortunately the bad scenario came true and all the clients
were like, we didn't know what were signing up for.
And UVS is sad and sorry and has made apparently
the after you reported, made more than one hundred good
will payments, yeah, which basically is like a refund of
(13:22):
the money they lost or we're so.
Speaker 2 (13:24):
Sorry, please don't leave us, we won't do it again.
Speaker 1 (13:27):
It's not just the money. It's like the UVS banker
has to go to the client and like the internet
client is like, you didn't even bring any materials. Like
it's like they just go and like look you in
the eye and like very sincerely sorry, and they're like,
we're not even pitching a different derivative today. Today, we're
here to just talk about how sorry we are. It's
a really like touching moment. Yeah. And they also have
(13:48):
internal trainings where they're like being told not to scam
clients and.
Speaker 2 (13:52):
Also role playing like how these meetings should go from
now on when you're pitching.
Speaker 1 (13:56):
Right, it's this great tension in investment banking where obviously
you want the client who when you come to them
with some crazy derivative, they're like, Okay, sure sounds good,
and they don't like bit it out to get the
price down or like model it up themselves or just
like sure you would, I trust you, right, But like
(14:16):
those people are really good clients and they make you
a lot of money until something goes wrong and then
like it looks bad in court. You know, Yeah, the
client who really trusted you, the client who was not
sophisticated at modeling you know FX volatility, like, those are
not the clients that you want to go to court with.
So it's a delicate balancing act where two years ago, yes,
(14:39):
I was probably rewarding the people who were.
Speaker 2 (14:40):
Out in the Yeah, definitely gated.
Speaker 1 (14:42):
Clients and large size, and now it's like no more
of that.
Speaker 2 (14:45):
Well, the FT gave some great examples of the harm
that was wrought by some of these trades really kind
of blowing up. One client lost more than three million
Swiss franc which equates to like three point seven million dollars.
Another person said that they lost fifteen percent of their assets.
They also asked the bank to exit the investment a
few days after Trump's Liberation Day, and apparently, according to
(15:10):
FT reporting, UVS sold these products to customers with the
equivalent of fewer than eight hundred thousand dollars or so.
So I don't know. It's just a weird trade in general.
To put on like this sounds like something like if
you were a big business trying to hedge your currency exposure,
maybe this would make sense. But selling it to even
(15:33):
like very wealthy individuals is weird.
Speaker 1 (15:35):
Yeah.
Speaker 2 (15:36):
Like the way that the Ft describes it is that
these products offer limited upside but exposed clients to potentially
unlimited losses.
Speaker 1 (15:44):
It's everything that's like accumulators. It's like everything, right, It's
like the trade is.
Speaker 2 (15:48):
Everything except buffer ETFs.
Speaker 1 (15:49):
Maybe I know, but like for so many wealthy clients,
the trade is like you can get two percent more
on your money by like taking some black hole of risk,
and then you know you have the meat, and they're like,
but what do you think the chances are of that
black hole frisk happening?
Speaker 2 (16:03):
Right?
Speaker 1 (16:04):
And the clans like, oh, it sounds good, right, and
they buy it and they get two percent extra yield
and then like the black hole happens and they're very up.
Speaker 2 (16:10):
Yeah, hear the.
Speaker 1 (16:10):
Black hole with libation day tars and the dollar plunging.
Speaker 2 (16:14):
I will say, you were talking about the sympathy that
you feel towards you know, these bankers who make these
derivative products. I don't know. I think that's cool and aesome.
Speaker 1 (16:26):
But I was one of them. I only saw this
investigated clients right for sure of them got their faces
I'm not even kidding really, no, well I'm kidding a little,
but like none of them got their faces. True.
Speaker 2 (16:34):
Wow, someone's going to write in and say, Matt.
Speaker 1 (16:37):
Levine face off, but I really didn't. I was also
very ineffectual, so it's fine.
Speaker 2 (16:43):
My first beat at Bloomberg was covering FX as a
little baby journalist, and the period that I was covering FX,
there was no volatility in currency markets. You had to
beg people to read your stories and also like really
scrape the bottom of the barrel to find stuff to
write about. I joined Bloomberg in like twin sixteen and
stop covering currencies in twenty nineteen. So President Trump's first
(17:04):
term actually gave us something to write about. But you know,
this trade probably wasn't as risky, like it probably really
was fine ninety percent of the time because the type
of volatility that we saw in you know, the Swiss
franc dollar exchange rate on Liberation Day, Like that wasn't
happening for a long time. Like, I mean you saw
(17:25):
it a cross as cyclasses.
Speaker 1 (17:26):
It's like what did that tell you, right? I mean
like if this trade had been perfectly explained to like
clients who were not professional effects traders but were smart
and sophisticated you know, financial people, this trade had been
perfectly explained, Like the perfect explanation is in the ballpark
of like you will get some extra you know, the
older profit or whatever most of the time. But if
(17:48):
the dollar plunges like it does not usually plunge, then
you will get your face ripped off. Yeah, And like
some people would have been like, okay, I'll take that
bet and then the dollar plunge and then got their
faces ripped off. Yeah. It's like I've read about this before,
Like there are clearly some customers who did not understand
what they're getting into, and Naudio ubs to solve them
(18:09):
something they didn't understand. But also like probably some people
were like, I will make the bet that the dollar
will not be super volatile, and the dollar is super.
Speaker 2 (18:15):
Valatle yeah yeah.
Speaker 1 (18:17):
But like look, everyone else is getting a good will payment.
I actually get a good will payment too.
Speaker 2 (18:21):
Yeah, I mean you would think that they would happen
potentially across asset classes, like every asset class had an
outsized move on Liberation Day.
Speaker 1 (18:29):
Right, And there's something about FCX where people people smaller
customers get sold weirder stuff like I mean, they're definitely
equity trades like this, right, Like we've talked about like
is it the cocumulator. We've talked about like structured note
trades that kind of have this shape, right, Yeah, but
I don't know. In FX, it does seem like people
take more random gambles. And also like people don't expect
(18:50):
as much as relativity and then you know, they get volatility.
Speaker 2 (18:52):
Like they're very strange market. It was a fun trip
being there for like two and a half years.
Speaker 1 (18:58):
Right. If you're in I think the business of selling equities,
there's a lot of like you know, you do puppers
and stuff, but there's a lot of just like oh,
by open a eye, it's a good stuck. Right, here's
the business fax Like you're kind of instantly going to
where de rods.
Speaker 2 (19:12):
Yeah yeah, book which is just too insurance.
Speaker 1 (19:32):
Insurance sometimes blows up too.
Speaker 2 (19:33):
Yeah, well, trying to get us to hurricanes somehow, but
I can't quite make the oracle jump. So anyway, ten minutes.
Speaker 1 (19:42):
I'm going to make a literal jump into the hurricane. Here.
Speaker 2 (19:46):
It's raining in New York.
Speaker 1 (19:47):
New York, and like they've already preamptively shut down.
Speaker 2 (19:52):
Well, all the subways keep breaking, right, I have to take.
Speaker 1 (19:55):
A subway and then a train. It's gonna be bad.
Speaker 2 (19:58):
My dad is picking me up today, so I'm happy.
Speaker 1 (20:01):
Okay, So Florida, Florida. So there are a lot of
houses in hurricane zones. It's hard and expensive to buy
insurance on your house if it's in a hurricane zone.
There is people have jumped into the gap to meet
that market of failure. Conceptually, the way you do it
(20:21):
is you start an insurance company and you don't have
any money, and you start selling insurance policies to raise money. Right,
And if you do this for twenty years without a hurricane,
you'll have so much money that you can pay off
any claims. Right. But if you do it for one
year and then there's a hurricane, you will not have
so much money they can pay it any claims. And
so there's a risk in starting a new I'm derradically
(20:44):
oversimplifying and in fact, insurance companies are supposed to be
well capitalized. But yeah, conceptually, you start a new insurance company,
you've raised money by selling premiums, and then if there's
no hurricanes, you're great, and if there's lots of hurricanes,
you go to zero. And that's hard to do because
insurance companies have to be rated. There's a couple of
like big ratings agencies, and there have been a number
(21:05):
of stories or something. There's one in the Wall Street
Journal this week, and read about it last year. There's
a ratings agency it's like a mom and pop operation
called Demo Tech that rates a lot of smaller, less
well capitalized insurance companies and it gives a lot of
them A ratings and they have a higher incidence of
their A rated companies becoming insolvent with them, you know,
(21:25):
there is a period of.
Speaker 2 (21:26):
Time thirty times more likely, thirty times more.
Speaker 1 (21:28):
Likely than the other ratings agencies that use more traditional
methods mean And it's like why does this exist? Well, well, well,
people want to buy insurance. Someone sent me there's a
there's a Monty Python skit where like a reverend comes
into the insurance office and says like, why aren't you
paying my claim? And he's like, oh, you see, you
bought the never pay policy, which never pays off. It's
(21:49):
a great policy if you don't have a claim, but
if you have a claim, it never pays. It seems
like people want to never pay policy. Yeah, you know,
I've written a little bit about why, and like it's
an interesting, like stemic answer, which the answer is that
these insurance companies have enough money that if you like
burn your house time by accident, they'll pay your claim.
(22:12):
Have that kind of money, Yeah, what they don't have
is the money to pay off everyone's claim if there's
a big hurricane.
Speaker 2 (22:18):
It's like a town is wiped out.
Speaker 1 (22:20):
And why would you want to buy insurance that protects
against you accidentally burning your house time but not a hurricane.
The answer I think is that you probably correctly believe
that there's some sort of bailout coming if your time
gets whipped up. Yeah, and like an insurance like this
is really quite literal where there's like state guarantee funds
(22:42):
that basically will step in to cover wiped out insurers.
So if you're a homeowner, you can buy the bad
insurance policy figuring you know, either it'll pay out or
if it doesn't pay out, someone else will step in
to pay it out. And then like there's a question
of why do states allow this, like the state's fund
the guarantee funds, and like, you know, they're on the
(23:03):
hook of this insured doesn't pay out. Yeah, I think
the answer is that's a problem for another day, and
right now, it's nice to have insurance, right So, if
you're like a Florida politician and people can't get insurance
to buy houses in Florida, that's really bad.
Speaker 2 (23:17):
For you, right, Yeah.
Speaker 1 (23:18):
And if they can get insurance, that's good for you.
And if the insurance doesn't pay out and the state
government has to step in to guarantee the insurance, that's
a problem for later. Yeah. And so there's a certain
amount of short sighted it's where regulators politicians are all
happy to go with the system where you know, the
insurers are not necessarily all that well capitalized, because that's
a problem for someone else to figure out later on.
Speaker 2 (23:39):
Yeah, this is not the same thing, but it kind
of reminded me of the conversation we were having about
Egan Jones a couple of months ago. That is the
ratings agency that basically gives pretty high ratings to private
credit investments and has a track record of a lot
of those private credit investments not going so well or
(24:01):
you know, you think about it. Gave pretty good ratings
to Chicken Soup for the Soul. It gave good ratings
to Red Box and those went belly up. But there
is a space for these rating agencies.
Speaker 1 (24:13):
Yeah, it's a similar dynamic in that, like ratings are
not really for the consumer of the ratings, right, Like
you're not getting insurance from an A rated insurance company
because you want insurance from an aerrated insurance company. There's
some sort of like regulatory backdrop, and so if ratings
are kind of generous, like a lot of people are
very happy to have generous ratings, and so there's a
(24:34):
market niche for people who are willing to provide generous ratings.
Speaker 2 (24:37):
Yeah, and I mean it's all just future problems to
deal with.
Speaker 1 (24:40):
So, yeah, everything is a rated now. Yeah, it hasn't
defaulted yet. Yeah, who knows what'll happen.
Speaker 2 (24:49):
Hey, So this episode is coming out on August first,
and in August, people including Matt Levine take vacation, So
We're going to do another mail bag episode, so make
sure you send us your cool questions money Pod at
Bloomberg dot net, and there's a pretty high likelihood that
will answer some of them.
Speaker 1 (25:10):
Matt, I might do a mail bag episode, Weser.
Speaker 2 (25:13):
If your questions are good enough, Gons. If your questions
are good enough, we will do a mail bag So
it's up to you.
Speaker 1 (25:21):
Yeah, sure, yeah, it's alrighty on you. And that was
the Money Stuff Podcast.
Speaker 2 (25:29):
I'm Matt Leuvian and I'm Katie Greifeld.
Speaker 1 (25:31):
You can find my work by subscribing to the money
Stuff newsletter on Bloomberg.
Speaker 2 (25:35):
Dot com, and you can find me on Bloomberg TV
every day on Open Interest between nine to eleven am Eastern.
Speaker 1 (25:41):
We'd love to hear from you. You can send an
email to money Pod at Bloomberg dot net.
Speaker 2 (25:46):
You can also subscribe to our show wherever you're listening
right now and leave us a review. It helps more
people find the show.
Speaker 1 (25:52):
The Money Stuff Podcast is produced by Anna Masarakus and
Moses onam Our.
Speaker 2 (25:56):
Theme music was composed by Blake Maples and Stage Bauman
is Bloomberg's had of podcasts.
Speaker 1 (26:00):
Thanks for listening to the Muney Stuff Podcast. We'll be
back next week with more stuff.
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