November 14, 2025 • 31 mins
Katie and Matt discuss ASMR, 50-year mortgages, Fannie and Freddie, housing as a positional good, indentured servitude, assumable and/or portable mortgages, Matt’s mortgage rate, optimal exercise of prepayment options, proxy adviser competition, shareholder proposals, good governance, index fund voting, hedge fund talent constraints, gardening leave, the Black Death and the AI Ph.D. pipeline.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. I'm gonna eat a bowl.
I go the Mono soup.
Speaker 2 (00:11):
Wait, what is it?
Speaker 1 (00:12):
I've got the Mono soup Potato and lemon.
Speaker 2 (00:15):
Yea potato and lemon. That sounds lovely. This, of course
from the Bloomberg Pantry.
Speaker 1 (00:21):
Get that on the mic.
Speaker 2 (00:22):
This is ASMR. If you've ever wanted to if you
ever want to hear Malvine just inhaling soup.
Speaker 1 (00:30):
I want to be clear that I was exaggerating my
slurping there for the mic.
Speaker 2 (00:33):
That's what ASMR is, to exaggerate your sounds. At least
I don't know. I've never actually watched an a SMR video.
Speaker 1 (00:40):
I'm like aware of the SMR with us.
Speaker 2 (00:41):
I see parodies of it on TikTok, like people really
clicking keyboards. But that's all I got.
Speaker 1 (00:52):
Yeah, I hope that some people get spine tingles out
of this podcast.
Speaker 2 (00:59):
I just shuddered, got a spine shudder.
Speaker 1 (01:02):
Hello and welcome to the Money Stuff Podcast, your weekly
podcast where we talked about stuff related to money. I'm
Matt Levine and I write the Money Stuff column for
Bloomberg Opinion.
Speaker 2 (01:14):
And I'm Katie greifeld a reporter for Bloomberg News and
an anchor for Bloomberg Television. You just took a sip
of water off mic, and I.
Speaker 1 (01:22):
Feel like, yeah, I'm not, in general trying to make
mouth poises throughout the podcast.
Speaker 2 (01:26):
That's what the podcast is, just mouth.
Speaker 1 (01:30):
That's the title.
Speaker 2 (01:31):
All right, one thing, We're done here. So I don't
own a home. I would really like to and maybe.
Speaker 1 (01:42):
But you're not forty yet, which is like the median
age of.
Speaker 2 (01:45):
I know, I know, I think it's thirty nine.
Speaker 1 (01:48):
But you know, anyway, what would make your home more affordable.
It's probably not a fifty year mortgage. But that's like
been in the news this week.
Speaker 2 (01:57):
It's been in the news.
Speaker 1 (01:58):
Trump tweeted about our about it or whatever he.
Speaker 2 (02:01):
Did he did. Did you see the Politico story on
the TikTok of how it came to be?
Speaker 1 (02:05):
It's so good. It's because it's like a political story
that's like the Trump administration is just a snake pit.
And so it's like all the people who don't like
Bill Poulty, who is the head of the Federal Housing
Regulator and a real you know, publicity hound, Bill Bulting
like apparently shut up to a golf game with Trump
with like a giant poster board saying like Franklin Roosevelt
(02:29):
invented the thirty year mortgage, Donald Trump invented the fifty
year mortgage. And Trump was like, great, I'll tweet about it.
Speaker 2 (02:34):
I have the details. It was a Saturday evening, it
was not during a golf game, but it was at
President Donald Trump's Palm Beach golf club. It was a
three x five poster board. Sure, and you're right in
that FDR appeared below thirty year mortgage and there was
a photo of Trump below fifty year mortgage and the
headline was great American President. Right.
Speaker 1 (02:54):
So that was enough for Trump to tweet about it
and be like, oh, yeah, that's all the policy analysays
I needed to back a fifty year mortgage. And then,
like other people in Tromp administration, went to political and
are like he sold potus a bill of goods that
wasn't necessarily accurate, and I don't know, they said about
your other nasty things about Pulty, like you know, yeah,
recorded in Politico.
Speaker 2 (03:11):
Yeah, it's funny because it's showing up in the stock market.
We're recording this on Thursday and at least right now,
shares of Fanny May and Freddie Mack apparently they're falling
in a big way because the word on the street
is that Pulty is falling out of favor with the administration,
which is probably I don't know nothing's real until it is.
But it's funny to see shares actually.
Speaker 1 (03:33):
React, right, And it's such like a bank shot. It's
not like would a fifty year mortgage be good for Fanny?
Would it be bad for Fanny? It doesn't matter. Like
I've written about this for literally a decade, one day
Fanny and Freddie will be released from government conservatorship. But
you could always make money by betting against the being
in the next year. Like for the last ten years
(03:54):
people said, oh, it can't last forever, they have to
be released. But so like there was like a thesis
that Pulty would be the one to crack it open
and actually.
Speaker 2 (04:01):
Make it happen over the line.
Speaker 1 (04:02):
And now if both out of favor, then I don't know,
I still think one day they're going to be released.
Speaker 2 (04:07):
Well, it's funny because you saw such a big run
up and shares on this idea, and to your point
that you can always make money betting against that idea. Apparently,
shares of both have lost about fifty percent since their
September peak, so just in the last two months or so.
It's pretty amazing, though, that the pushback to the idea
of a fifty year mortgage has been pretty bipartisan. Oh yeah,
(04:28):
it's a terribly tell me why.
Speaker 1 (04:31):
Well, Okay, the idea of fifty year mortgage is that
if you spread out your payments over fifty years instead
of thirty years, your payments will be lower.
Speaker 2 (04:39):
This sounds good and.
Speaker 1 (04:40):
Like, you know, a normal assumption to like you'd save
like ten or fifteen percent on your monthly mortgage payment.
And so if people think about affordability of homes as
being mainly a matter of the monthly payment they could make,
then cutting fifteen percent off your monthly payment makes homes
more affordable. Yeah, and if people are worried about home affordability,
the is a good policy. There are various problems with that,
(05:03):
one of which is that you have to have your
mortgage for fifty years, and so, like you don't build
up equity, you're spending a lot more on interest. You know,
people are like it doubles the cost of interest you
pay over the life of the one and so it
feels even less like home ownership and more like just
renting forever. But to me, that's not the big problem.
To me, the big problem is like, and this is
biased by my experience living in and around New York,
(05:25):
but like where I live, housing is a positional good,
and there are only so many houses, and people compete
to buy them. And so if you just waved a
magic wand and said houses will be ten percent more affordable,
that people would still compete to buy them, and they
would just bid them up more until they stopped being
ten percent more affordable. Right, Like, the price of a
house where I live is not determined by how much
(05:47):
it costs to build a house. It's determined by, like
you know, there's only so many houses, there's only so
much land in desirable areas, and so people bid up
the price of that. And so if you did something
to make housing more affordable, you would just raise the
price of houses till fully eliminate that affordability advantage, and
so houses would be no more affordable. People like mey
who own homes would make money because there'd be like
(06:08):
a windfall one time gain, although then you'd have to
go buy it. You know, if you moved, you'd have
to buy a more expensive house, but like all of
the affordability goals would be eliminated and you'd end up
just having the same monthly payment but for fifty years
instead of thirty years, which seems terrible. I think it's
true everywhere, but like a lot of us housing is
supply constrained, and you do like see this effect, right,
(06:29):
Like people talk about student loans, right, Like, if you
have government subsidies of student loans, what happens is not
that it gets cheaper to attend college. It's that colleges
raise their tuition to fully capture that subsidy, and it
gets to be, you know, the same price to attend college,
but the government is subsidizing it. And I think you'd
see that here where if the default mortgage was fifty years,
you would still kind of be paying the same amount
(06:50):
per month, but nomeral house prizes will be higher.
Speaker 2 (06:52):
Yeah. Well, I mean make it about myself. I would
like to buy a home. Rates are really high.
Speaker 1 (06:57):
I don't need they'd be higher for to your markets.
Speaker 2 (07:01):
Yeah, I don't need to buy a home, So we're
kind of just timing the market waiting for rates to
go down, but there has to be a bunch of
people like me and do you think about Okay, rates
go down, but then the people on the sidelines come
in and they push up the price of the house,
and I don't know, it probably ends up in the
wash in terms of yeah, and how much of saving.
Speaker 1 (07:19):
It's not fully true that like house prices go up
as rates go down, but it is like kind of
true that, like, you know, you'd think lower rates would
lead to more housing affordability, but like the summits that
that gets washed out by raising the prices of houses. Yeah,
it's the same basic mechanism.
Speaker 2 (07:35):
To your point that it probably feels like renting forever.
There's a note from Compass point that was pretty crazy.
The view of this analyst was that a fifty year
mortgage offers quote home ownership via an indentured servitude contract,
calling the concept a bad idea.
Speaker 1 (07:51):
Yeah, I agree with that, but I also like the
difference in thirty ars and fifty years and that great like.
Speaker 2 (07:56):
Most that's what President Trump said, Yeah, just.
Speaker 1 (07:59):
Like back to use. It's a little thing I don't
Most people don't live in their homes for thirty years, right,
Like a thirty year MORTGAGEES is a way to sort
of adjust the payments and ultimately, like you saw your
house after seven years and you you know, cash out
whatever the increase in the equity is. With a fifty
year mortgage, you'd build the in round numbers zero equity
(08:19):
in your first you know, seven years, and so you'd
basically be cashing out the increase in the house price
rather than you know, actually having a savings device. But
it's not literal, and you know you don't you don't
have to stay.
Speaker 2 (08:30):
There for fifty years. I'm sure a lot of people
opened this analyst's research note though.
Speaker 1 (08:36):
So because it's said indentured it's hurt in the headline.
Speaker 2 (08:39):
Yeah, I would click on that.
Speaker 1 (08:40):
It's pretty good. I Do you want to talk about
the other Bill Pulty ideas?
Speaker 2 (08:44):
Yeah, tell me about them.
Speaker 1 (08:45):
Well, so they're assumable and portable mortgages. Yes, you didn't
about these ideas. People have been talking about this forever
and like they exist in various pockets of the world,
but they're not like the norm in US mortgages. But
so in an assumable mortgage is like I move out
of my house, you buy my house, I give you
my mortgage and a portal mortrorgage. I move out of
my house, I buy a different house, and I take
(09:07):
my mortgage with me. Right, So, like if I have
a three and a quarter percent mortgage, which.
Speaker 2 (09:12):
Katie, I do, okay less.
Speaker 1 (09:15):
With three and a quarter percent mortgage, and I want
to move now, like whatever mortgage rates are, you know,
six and change percent.
Speaker 2 (09:21):
Something like that.
Speaker 1 (09:21):
If I wanted to move, if I could keep my
three and a quarter percent mortgage, that would be nice
for me, right, And so in normal US mortgages now
you can't, but like you know, there are places where
you can't, and both He has talked about having some
version of that in the kind of like Fanny and
Freddie standardized US mortgage market.
Speaker 2 (09:41):
That makes sense, Yeah, sort of.
Speaker 1 (09:45):
It would be nice if you do it. The problem is.
Speaker 2 (09:48):
There might be more inventory because people wouldn't just sit
on their houses for.
Speaker 1 (09:52):
Ye, that's true. It would like loosen up the market
a little bit.
Speaker 2 (09:54):
Yeah.
Speaker 1 (09:54):
Problem is that, like the US has a thirty year mortgage, yes,
which has fast terms. It is a thirty year mortgage
with a fixed rate. Normal you know people's mortgage thirty
your mortgage with a fixed rate that is prepayable at
any time without penalty, and that is a like in theory,
a very valuable option. Right, if you borrow money for
(10:15):
thirty years and at any point you can prepay it
without penalty, then if like market insru's rates go up,
you keep your mortgage and you're paying a low market rate.
And if market rates go down, you prepay your mortgage
and get a new mortgage and you get the lower rate.
So if you're a mortgage investor, you're always on the
wrong side of that. If rates go up, you hold
a low market paper and if rates go down, you
(10:37):
get you know, prepaid. And that's not really true because
almost nobody optimally exercises their prepayment option because almost everybody
who is a thirty year mortgage moves after like seven years,
and so when they move, they have to prepay their mortgage.
And so it's not the case that people only prepay
when rates go down, right, It's like people prepay kind
(11:00):
of randomly, And sometimes people who have three and a
quarter percent mortgages move and prepay their mortgage and go
get another six percent mortgage and grumble about it, but
they have to do it. Let the move for work,
or whatever, right, and if you got rid of that,
then the prepayment option would be a really valuable option,
and that would make it would be really bad for
mortgage investors and make mortgages much more expensive, I think,
because you'd have to price that option right, because people
(11:23):
would never prepay except when rates went down, and so
you'd always have kind of the wrong way interest rate
risk on your mortgage.
Speaker 2 (11:30):
And how do you feel about assumable mortgages.
Speaker 1 (11:33):
It's the same story, but either way, the point is
that if you have a below market mortgage, someone can
keep it right. Yeah, And like you know, assumable mortgage
is like you take my blow market mortgage, but like
presumably you pay me for that, right, So it's the
same basic idea.
Speaker 2 (11:47):
I would like to take it without paying you.
Speaker 1 (11:51):
I understand.
Speaker 2 (11:52):
Okay, that could have I mean, something could have happened
to here anyway. I don't want to move to your house, though,
I'm sure it's great. It's not dead possums.
Speaker 1 (12:04):
And that's right, we've talked. Its only bad things about
my house.
Speaker 2 (12:09):
No, I see it on Instagram sometimes.
Speaker 1 (12:11):
You know what, I have a have a really good
mortgage rate.
Speaker 2 (12:14):
Yeah, yeah, that's probably Yeah, I want to die in
New Jersey. Though, what do you want to talk about now?
Speaker 1 (12:34):
I don't know, you talk about proxy advisors?
Speaker 2 (12:36):
Yeah, why not? This is a fun conversation on the
heels of, of course, the Tesla vote Elon Musk's compensation package.
Speaker 1 (12:43):
Yeah, there's two praxy advisors. I mean there's more than two,
but there's two for practical purposes, and they're called ISS
IS in Distitutional Shareholders Service and Glass Lewis, and they're
in the business of telling investors how they should vote
on proxy vote and you almost never hear about it
because it doesn't matter. It's like all these like advisory
(13:05):
practice votes at companies you don't care about. And then
every once in a while, not that infrequently, Tesla's like,
we'd like to give Elon Musk at trillion dollars, what
do you think shareholders? And then Glass Lewis and ISS
say no. Of course they say no because, like they
are professionals in the business of corporate governance, and they
(13:27):
have certain professional norms and expectations, Like they go to conferences,
they talk to like minded people who are interested in
corporate governance. And if you ask anyone interested in corporate
governance should we pay the CEO at trillion dollars. They'll say, no,
that's not a good thing. And then Tesla is like
a different kettle of fish. Right, Like, Tesla has investors
who like Elon Musk, and he's like, I want a
(13:47):
trillion dollars. I'm like, great, here, I have a trillion dollars.
But Class Lewis and I as us don't want that,
and so they say no, and then nobody cares because
Tesla's investors some of them follow Glass Lewis and Is
as recommendations, but most of them are And so Tesla
voted in favor of giving Elms bags of money, but
el Ms got mad.
Speaker 2 (14:07):
Yeah.
Speaker 1 (14:07):
I think there's a widespread you know, kind of like
right wing coded being mad at Glass Lewis and Iss
because they tell people how to vote on corporate shareholder votes.
And corporate shareholder votes, a lot of them are about
shareholder proposals, like you should write a report about how
(14:27):
much carbon you produce. Right, It's very like environmental and
social coded, and so these firms sometimes tell shareholders you
should vote in favor of writing a report on carbonations.
So there's this perception that they're like kind of esg
ish that they care more about environmental, social, and governance
issues than like, you know, the Trump administration or the
(14:51):
Republican Congress people do. And so there's the sense that
like they have too much power and they push companies
to be more left wing than they otherwise would be.
So there's like an effort to rain them in, and
you've seen that this week with like the Wall Street
Journal reporting that the Trump White House is contemplating some
sort of executive order too in some way rein in
the proxy advisors, right, and then also there's a report
(15:13):
that the Federal Trade Commission is investigating them for anti
trust problems.
Speaker 2 (15:18):
Yeah, basically whether they're breaking anti trust laws related to
how they advise on proxy issues such as climate and
social related policy.
Speaker 1 (15:26):
Yeah, it's not clear what the anti trust problem is. Yeah,
there was a House hearing on you know, anti trust
in the proxy advisors a few months ago. And the
kind of thrust there is that there are only two
of them, and they somehow stifle competition or have bought
up competitors so that there's only two proxy advisors. And
the world would be a better place if there was
a lot of proxy advisors. I don't think that's really
(15:50):
the problem. I think the problem that people worry about
is that, however many you know, two or three or
ten proxy advisors, the proxy advisors have theoretically outside impact
because they tell shareholders of every company how to vote. Like,
the market is not for proxy advisory services, the market
is for every public company. I also think that, like,
(16:11):
there are only two proxy advisory services that are big,
but how many should there be?
Speaker 2 (16:16):
Kind of reminds me of ratings agencies, because there's three
of them.
Speaker 1 (16:21):
It's very similar.
Speaker 2 (16:22):
Yeah, yeah, there's more than three, but there.
Speaker 1 (16:26):
Is more competition in ratings agency. People worry that it's
an olocopoly, but it's more competitive than in proxy advisory
And I think one reason for that is, like.
Speaker 2 (16:36):
Ratings keep it in.
Speaker 1 (16:40):
I don't even know what that was. Ratings is ratings
are intuitively important. People care about the credit worthiness of
their loans and whatnot. I've written this week one reason
that every investor a sources it's proxy voting decisions to
(17:04):
to proxy advisory services. The stuff doesn't matter. Like, you
know you own like zero point one percent of the
shares of some public company, you know you own five
hundred companies. They each have like ten share advisory shareholder
proposals each year, your vote like one, you're not going
to change the outcome of the vote, and to the
outcome of the vote doesn't have any practical effect, and
(17:24):
so it's kind of crazy to spend a lot of
time thinking about it, and so you outsource it to
people who can think about it on behalf of everyone,
and the number of people that you need to do
that is the high.
Speaker 2 (17:37):
Yeah. Well, when you said it doesn't matter.
Speaker 1 (17:41):
This is like my thesis, like people care about this
a lot.
Speaker 2 (17:45):
Yeah, but like there's very rarely a.
Speaker 1 (17:46):
Practical implication like mergers. Right, Like mergers, there's a shareholder
vote and every so often it's contested and like class
lewists or iss will have a view, but often in
those cases, like the shares are kind of held by arbitration.
As anyway, who have there view? You know the Elin
Muss compensation. Every couple of years, there's a meaningful we'll
be here, got there, But it's a lot of routine stuff. Yeah,
(18:09):
it's not like never impactful, but it's almost never impactful.
Speaker 2 (18:12):
Well that made me think of, you know, whether or
not it even matters whether their recommendations matter or not
because you think about the experience with Tesla, and Tesla
is a unique beast. But I've seen stats that like
thirty percent of their shareholder base is retail. Both of
these proxy advisors recommended passing this package. It obviously passed regardless,
(18:34):
So like how much do their recommendations even matter in
this day and age.
Speaker 1 (18:38):
Well, so a couple of things. One is that their
recommendations used to matter more, and now like more big
asset managers because of sort of a pressure campaign about
this over the last few years. Now more big asset
managers like no, no, no, we make our own decisions.
We don't look at ISS our Glass list. Also, ISS
and Glass Lewis have kind of backed away from having
a house view and to get ahead of this. And yeah,
like there's you know, places like Tesla where it's a
(18:58):
lot of retail shaholders who don't care abouts and classes.
For the most part, it's really like it's not the
biggest asset managers, it's not retail. It's kind of smaller
asset managers in the middle who tend to defer to
class Lewis and as more. But the other thing is
like they tend not to defer to them as much
on huge economically meaningful decisions that affect big companies that
(19:20):
make up big portions of their portfolios. Right, if you believe,
like Elon Musk is gonna leave Tesla, if you vote
against the package, then you will make your own decision
about that. Yeah, not just do whatever iss is. But
you have four hundred other companies where they're like, oh,
we have like a shareholder proposal on our greenhouse gas emissions,
and you just like check a box. Right, So, like
(19:40):
I think their recommendations have more impact on like lower
profile votes, and there are just so many lower profile
votes and those boots are lower profile. But they also
like they annoy corporate CEOs when like fifty or thirty
or ten percent of their shareholders vote in favor of
like having a report on greenhouse gas emissions. Like that's
annoying to a CEO, and so they complain to like
their Congress per Center, to the FTC or whatever, like, ah,
(20:02):
these guys are, you know, interfering in our business, but
it's not that impactful.
Speaker 2 (20:06):
Yeah, that's funny. Something I wondered in all of this,
and I didn't take the time to look it up.
Are Glass Lewis and Iss ever in conflict, Like do
they ever split or do they always sort of recommend
as a block.
Speaker 1 (20:21):
I haven't looked at up you there. I'm certain that
they have split. Yeah, it would be crazy if they
never split.
Speaker 2 (20:26):
It would be crazy, wouldn't it.
Speaker 1 (20:28):
But as I said, like these people come from a
professional interest in corporate governance, and there are sort of
like standard views on what's good governance. Right, I think
those standard views are not like not everyone agrees with them, right,
Like it's classically good governance too. For instance, have a
board chair who is not the CEO, right, so the
board has more like effective oversight over the CEO, and
(20:50):
so ISAs in Glass Lives, pretty not always, but pretty
regularly recommend voting in favor of splitting the board chair.
And see, yeah, but you know, you look at like
there are a lot of like various six us whole CEOs.
We're like, no, I want to be the chair of
my company because I want to I'm the right person
to run this company, and I want to supervise the
board too, And like that's not like a crazy view,
it's not like quote unquote good governance, but it's a
thing that like some shareholders and you know, agree makes
(21:13):
sense with some CEOs. So a lot of stuff like
that where it's like there's a classic view on good
governance that is not always applicable and like you know,
Iss and glass Lewis or a little more on the
side of you know, classic good governance rather than what
shareholders want for a particular company. I want to say
one other thing about so, like this story is like
(21:33):
a lot of it is about Iss and glass Lewis,
but not all of it. Like there's also the very
closely related issue of index fund managers like black Rock
and Vanguard, who used to defer more to Iss and
Glass Lewis now kind of have their own house views
but are kind of similar in that they like affect
the votes of huge portions of every public company. Yeah reluctantly, Yeah,
(21:57):
I sas and Glass Lewis too, reluctantly know it collect
views for like managing voting. No, it's not, it's not
like they do it.
Speaker 2 (22:04):
They do.
Speaker 1 (22:05):
It's a lot of like administrative work. It's a lot
of like they help companies like actually do the process
of voting. Right, So like if they could just like
flip a coin and be like you should vote, you know,
for this, or they don't care that much about the
substantive recommendations. They care about like getting paid to do
the sort of administrative work, and so they are backing
away from doing some of the substantive recommendations and having
(22:25):
a house sept.
Speaker 2 (22:26):
I didn't mean to smirch them. I'm sorry.
Speaker 1 (22:29):
It's so like black Rock and Vanguard and State Street,
you know, control huge blocks of every public company famously
and vote, and people get mad at them for how
they vote, and like there's this view that they're too
left wing and blah blah blah. And so the reports
about a potential executive order on this, it's not just
about the proxy advisors, it's also about index line voting. Yeah,
(22:52):
and I've never heard like a great solution for what
they should do. But the report that I saw, like
the Wall Street Journal, like there's talk of having them
mirror their voting so that they can ask their you know,
so if you're a black Rock, you have you know,
thousands of clients and your index funds, and you ask
your clients how would you vote? And you know, ninety
(23:13):
nine point nine percent of them don't return the questionnaire,
and like zero point one percent say I would vote
in favorite management or whatever, and then I think the
idea would be that the Index one managers would have
to mirror the votes of their clients who responded, which
is kind of a crazy outcome if you think about it,
because the people who respond are going to be passionate, passionate.
(23:37):
I was going to say cranks, passionate and nicer. So
right now people complain about Black Rock, but black like
the big index ones, mostly vote with management. Yeah, but
if they had to ask their investors how would you
vote and then get weird answers back, they would vote
a lot more against management, and it would be kind
of bad for corporate managers and kind of good for
like activists shareholders.
Speaker 2 (23:55):
Yeah. Well, I wrote this at the end of October.
Vanguard has this called Investor Choice, and I'm sure that
Black Crock and State Street have similar initiatives as well.
But this is recency biased because I wrote this story anyway.
So basically it asks it's people who own shares of
the index funds that are in this program, basically how
(24:18):
they would like management to vote or how they would
like the fun company to vote. They don't ask them
about every thing. I believe it's like a range of
choices as to you know, I want to maximize profits
or I care about social issues, and then Vanguard votes.
I think there's some subjectivity to that, but they vote
based on what that shareholder selected.
Speaker 1 (24:41):
Yeah, but don't they vote that shareholder shares like in
other words, like if they ask every shareholder and ninety
nine percent of them don't answer, then the one percent
get voted the way they want to. But the ninety
nine percent Vanguard is not just mirroring the one percent, right,
Like they're making their own decisions.
Speaker 2 (24:57):
I think it's somewhere between them. I don't remember the
exact details.
Speaker 1 (25:00):
If you do full mirroring, then like the cranks get
a lot.
Speaker 2 (25:03):
Of Yeah, I do like that. Yeah, but maybe that's
how it should be. I don't know if you're.
Speaker 1 (25:11):
Argument right, like if you the people who care who
pay attention to share I just like I come back
to like, it is kind of irrational to pay attention
to shareholder voting, so it's not really how it should be.
To get the worst results if you let the people
who pay attention to shareolder voting be the ones, this
lad in the outcome. But there's not another way to
do it. You need someone to pay attention to do it.
Speaker 2 (25:29):
Yeah, that's true, and maybe you should be rewarded for
you taking the time to Karen answer the thing. Speaking
(25:50):
of rewards, competition for talent reaches on.
Speaker 1 (25:55):
Yeah, this is a great story about Bradley Sacks that
Business Insider about the talent wars at the hedge funds.
Speaker 2 (26:02):
It's like an evergreen story.
Speaker 1 (26:03):
It's an evergreen story. He quotes someone saying, you set
up something to attract mercenaries, but now you want loyal soldiers.
It doesn't work because, like, if you went to work
at a hedgehund because they promised you fifty million dollars,
you're probably a person who would go work at a
different hedge fund if they promised you sixty million dollars, right, Like,
probably you're there for the money, Like.
Speaker 2 (26:24):
Probably, yeah, yeah, that's really safe. That's fine.
Speaker 1 (26:27):
If you're working at a hedgehund for fifty million dollars,
a lot of reasons to assume that you're there for
the money, and so you could be lured away by
a higher bidder. And that makes it frustrating. If you
are the head of a hedge fund and you want
to stop having constant bidding wars. I also, I hadn't
really thought about it, but like he makes the point that,
(26:49):
like there's an artificial constraint on hedge fund talent caused
by the fact that everyone has these like super long
gardening leaves. Yeah, and so basically like half of all
hedge fund portfolio managers are on the beach at any
given time, and so the price of hedgemen managers gets
bid up because you can only get so many of
them because the rest are on long term gardening leaves.
Speaker 3 (27:10):
Yeah, it's great, creates value, yes, artificial scarcity, and it's
great because like like a stylized the fact of economic
history is that after the Black Death in Europe, you know,
labor or like farm hand wages went up because farmhands
were so scarce that they could command a much higher wage.
Speaker 1 (27:34):
That's a very bad way to create scarcity in the
labor market. The hedgemund manager way of half of you
are on vacation at any time so the other half
get paid more is like really nice. It's like you
have a career where you get paid a lot because
you're scarce, like artificially scarce, and also you get to
take long vacations every couple of years.
Speaker 2 (27:53):
Yeah, I is. The Englander called it a talent bubble
that's created by you know, you restrict supply.
Speaker 1 (28:01):
The other thing is like, I don't really understand why
hedge fund talent is so exogenous and and elastic, like
the article talks about it. Like some of these big
multi strategy funds have set up you know, training academies
they hire out of college. They like try to take
(28:21):
unmolded clay and turn it into you know, hedge fund managers,
like that should be possible. Why can't you teach someone
how to manage a hedge fund? They can understand it's
like hard, but you know, if you're paying the twenty
million dollars, you get someone to do it.
Speaker 2 (28:33):
Yeah, I agree with you. You sounded a little bit like
Elwood's there. So it kind of threw me for a loop. Okay,
like it's hard, Like it's hard. Yeah, Yeah, I'm.
Speaker 1 (28:43):
Paying me twenty million dollars to manage a hedge fund.
I'll do it for six months and then take two years.
Speaker 2 (28:46):
Regardingly, Yeah, but I feel like this story, I don't know.
We talk about talent wars all the time. We talk
about it when it comes to banking, we talk about it.
When it comes to hedge funds, talk about it when
it comes to AI. AI. We've talked about this before.
It feels like a little bit more pure to your
point that if a hedge fund pays you fifty million
dollars to do hedge fund things, that probably you'll take
(29:09):
an offer for sixty million dollars. But maybe with AI
there is a little bit more of a mission statement
and I want to save the world. Yeah, I don't
know one thing that destroy it.
Speaker 1 (29:17):
One thing about AI is like hedge funds have been
around and some before them for a long time, and
like in the modern form for you know, years, maybe decades.
AI is very new, and so it's very understandable that
there is a hugely constrained to supply. Right, Like the
number of people who went and got aiphds is not
that high because that was kind of a specialized thing
(29:38):
until it became you know.
Speaker 2 (29:40):
Also, if you got that PhD, how long before it's stale.
Speaker 1 (29:44):
I don't think it gets stale because I think you
then work in AI and you would like work at
the cutting edge of the field. But yeah, I mean, like, right,
if you if you get that PhD and then spend
twenty years, you know, doing something else. I'll get stuff.
But I think that like the market did not produce
that many aiphds because it wasn't a thing that got
you paid hundred million dollars five years ago, and now
that it is, I'm sure that one there will be
(30:04):
you know, in the next ten years, there'll be more
AI paches, and two they will perhaps have less pure motives,
right because if you're you know, if you're a sixteen
year old who's good at math, instead of thinking maybe
one day or at a hedgehot now you're likeeah, maybe
one day or at an AI start up and one
hundred million dollars a year, So you'll get more supply
(30:25):
and less purity. But like hedgehunts, they've been around for
a while, Like you should it should equilibrate. I don't know.
Speaker 2 (30:29):
Yeah, Okay, that's foe all I have to say. Apparently
there's a rocket launch that I forgot was happening. I forgot.
Speaker 1 (30:35):
Okay, I'm gonna just have some delicious And that was
the Money Stuff podcast.
Speaker 2 (30:46):
I'm Matt Levine and I'm Katie Greifeld.
Speaker 1 (30:49):
You can find my work by subscribing to the Money Stuff.
Speaker 2 (30:51):
Newsletter Bloomberg, and you can find me on Bloomberg TV
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Speaker 1 (31:00):
To hear from you, you can send an email to
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You can also subscribe to our show wherever you're listening
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Speaker 1 (31:13):
The Money Stuff Podcast is produced by annam Aserakis and
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Speaker 2 (31:17):
Our theme music was composed by Blake.
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Maples Amy keen as our executive producer.
Speaker 2 (31:22):
And Sage Bauman is Bloomberg's head of Podcasts.
Speaker 1 (31:26):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff.
Bloomberg Audio Studios, Podcasts, radio News. I'm gonna eat a bowl.
I go the Mono soup.
Speaker 2 (00:11):
Wait, what is it?
Speaker 1 (00:12):
I've got the Mono soup Potato and lemon.
Speaker 2 (00:15):
Yea potato and lemon. That sounds lovely. This, of course
from the Bloomberg Pantry.
Speaker 1 (00:21):
Get that on the mic.
Speaker 2 (00:22):
This is ASMR. If you've ever wanted to if you
ever want to hear Malvine just inhaling soup.
Speaker 1 (00:30):
I want to be clear that I was exaggerating my
slurping there for the mic.
Speaker 2 (00:33):
That's what ASMR is, to exaggerate your sounds. At least
I don't know. I've never actually watched an a SMR video.
Speaker 1 (00:40):
I'm like aware of the SMR with us.
Speaker 2 (00:41):
I see parodies of it on TikTok, like people really
clicking keyboards. But that's all I got.
Speaker 1 (00:52):
Yeah, I hope that some people get spine tingles out
of this podcast.
Speaker 2 (00:59):
I just shuddered, got a spine shudder.
Speaker 1 (01:02):
Hello and welcome to the Money Stuff Podcast, your weekly
podcast where we talked about stuff related to money. I'm
Matt Levine and I write the Money Stuff column for
Bloomberg Opinion.
Speaker 2 (01:14):
And I'm Katie greifeld a reporter for Bloomberg News and
an anchor for Bloomberg Television. You just took a sip
of water off mic, and I.
Speaker 1 (01:22):
Feel like, yeah, I'm not, in general trying to make
mouth poises throughout the podcast.
Speaker 2 (01:26):
That's what the podcast is, just mouth.
Speaker 1 (01:30):
That's the title.
Speaker 2 (01:31):
All right, one thing, We're done here. So I don't
own a home. I would really like to and maybe.
Speaker 1 (01:42):
But you're not forty yet, which is like the median
age of.
Speaker 2 (01:45):
I know, I know, I think it's thirty nine.
Speaker 1 (01:48):
But you know, anyway, what would make your home more affordable.
It's probably not a fifty year mortgage. But that's like
been in the news this week.
Speaker 2 (01:57):
It's been in the news.
Speaker 1 (01:58):
Trump tweeted about our about it or whatever he.
Speaker 2 (02:01):
Did he did. Did you see the Politico story on
the TikTok of how it came to be?
Speaker 1 (02:05):
It's so good. It's because it's like a political story
that's like the Trump administration is just a snake pit.
And so it's like all the people who don't like
Bill Poulty, who is the head of the Federal Housing
Regulator and a real you know, publicity hound, Bill Bulting
like apparently shut up to a golf game with Trump
with like a giant poster board saying like Franklin Roosevelt
(02:29):
invented the thirty year mortgage, Donald Trump invented the fifty
year mortgage. And Trump was like, great, I'll tweet about it.
Speaker 2 (02:34):
I have the details. It was a Saturday evening, it
was not during a golf game, but it was at
President Donald Trump's Palm Beach golf club. It was a
three x five poster board. Sure, and you're right in
that FDR appeared below thirty year mortgage and there was
a photo of Trump below fifty year mortgage and the
headline was great American President. Right.
Speaker 1 (02:54):
So that was enough for Trump to tweet about it
and be like, oh, yeah, that's all the policy analysays
I needed to back a fifty year mortgage. And then,
like other people in Tromp administration, went to political and
are like he sold potus a bill of goods that
wasn't necessarily accurate, and I don't know, they said about
your other nasty things about Pulty, like you know, yeah,
recorded in Politico.
Speaker 2 (03:11):
Yeah, it's funny because it's showing up in the stock market.
We're recording this on Thursday and at least right now,
shares of Fanny May and Freddie Mack apparently they're falling
in a big way because the word on the street
is that Pulty is falling out of favor with the administration,
which is probably I don't know nothing's real until it is.
But it's funny to see shares actually.
Speaker 1 (03:33):
React, right, And it's such like a bank shot. It's
not like would a fifty year mortgage be good for Fanny?
Would it be bad for Fanny? It doesn't matter. Like
I've written about this for literally a decade, one day
Fanny and Freddie will be released from government conservatorship. But
you could always make money by betting against the being
in the next year. Like for the last ten years
(03:54):
people said, oh, it can't last forever, they have to
be released. But so like there was like a thesis
that Pulty would be the one to crack it open
and actually.
Speaker 2 (04:01):
Make it happen over the line.
Speaker 1 (04:02):
And now if both out of favor, then I don't know,
I still think one day they're going to be released.
Speaker 2 (04:07):
Well, it's funny because you saw such a big run
up and shares on this idea, and to your point
that you can always make money betting against that idea. Apparently,
shares of both have lost about fifty percent since their
September peak, so just in the last two months or so.
It's pretty amazing, though, that the pushback to the idea
of a fifty year mortgage has been pretty bipartisan. Oh yeah,
(04:28):
it's a terribly tell me why.
Speaker 1 (04:31):
Well, Okay, the idea of fifty year mortgage is that
if you spread out your payments over fifty years instead
of thirty years, your payments will be lower.
Speaker 2 (04:39):
This sounds good and.
Speaker 1 (04:40):
Like, you know, a normal assumption to like you'd save
like ten or fifteen percent on your monthly mortgage payment.
And so if people think about affordability of homes as
being mainly a matter of the monthly payment they could make,
then cutting fifteen percent off your monthly payment makes homes
more affordable. Yeah, and if people are worried about home affordability,
the is a good policy. There are various problems with that,
(05:03):
one of which is that you have to have your
mortgage for fifty years, and so, like you don't build
up equity, you're spending a lot more on interest. You know,
people are like it doubles the cost of interest you
pay over the life of the one and so it
feels even less like home ownership and more like just
renting forever. But to me, that's not the big problem.
To me, the big problem is like, and this is
biased by my experience living in and around New York,
(05:25):
but like where I live, housing is a positional good,
and there are only so many houses, and people compete
to buy them. And so if you just waved a
magic wand and said houses will be ten percent more affordable,
that people would still compete to buy them, and they
would just bid them up more until they stopped being
ten percent more affordable. Right, Like, the price of a
house where I live is not determined by how much
(05:47):
it costs to build a house. It's determined by, like
you know, there's only so many houses, there's only so
much land in desirable areas, and so people bid up
the price of that. And so if you did something
to make housing more affordable, you would just raise the
price of houses till fully eliminate that affordability advantage, and
so houses would be no more affordable. People like mey
who own homes would make money because there'd be like
(06:08):
a windfall one time gain, although then you'd have to
go buy it. You know, if you moved, you'd have
to buy a more expensive house, but like all of
the affordability goals would be eliminated and you'd end up
just having the same monthly payment but for fifty years
instead of thirty years, which seems terrible. I think it's
true everywhere, but like a lot of us housing is
supply constrained, and you do like see this effect, right,
(06:29):
Like people talk about student loans, right, Like, if you
have government subsidies of student loans, what happens is not
that it gets cheaper to attend college. It's that colleges
raise their tuition to fully capture that subsidy, and it
gets to be, you know, the same price to attend college,
but the government is subsidizing it. And I think you'd
see that here where if the default mortgage was fifty years,
you would still kind of be paying the same amount
(06:50):
per month, but nomeral house prizes will be higher.
Speaker 2 (06:52):
Yeah. Well, I mean make it about myself. I would
like to buy a home. Rates are really high.
Speaker 1 (06:57):
I don't need they'd be higher for to your markets.
Speaker 2 (07:01):
Yeah, I don't need to buy a home, So we're
kind of just timing the market waiting for rates to
go down, but there has to be a bunch of
people like me and do you think about Okay, rates
go down, but then the people on the sidelines come
in and they push up the price of the house,
and I don't know, it probably ends up in the
wash in terms of yeah, and how much of saving.
Speaker 1 (07:19):
It's not fully true that like house prices go up
as rates go down, but it is like kind of
true that, like, you know, you'd think lower rates would
lead to more housing affordability, but like the summits that
that gets washed out by raising the prices of houses. Yeah,
it's the same basic mechanism.
Speaker 2 (07:35):
To your point that it probably feels like renting forever.
There's a note from Compass point that was pretty crazy.
The view of this analyst was that a fifty year
mortgage offers quote home ownership via an indentured servitude contract,
calling the concept a bad idea.
Speaker 1 (07:51):
Yeah, I agree with that, but I also like the
difference in thirty ars and fifty years and that great like.
Speaker 2 (07:56):
Most that's what President Trump said, Yeah, just.
Speaker 1 (07:59):
Like back to use. It's a little thing I don't
Most people don't live in their homes for thirty years, right,
Like a thirty year MORTGAGEES is a way to sort
of adjust the payments and ultimately, like you saw your
house after seven years and you you know, cash out
whatever the increase in the equity is. With a fifty
year mortgage, you'd build the in round numbers zero equity
(08:19):
in your first you know, seven years, and so you'd
basically be cashing out the increase in the house price
rather than you know, actually having a savings device. But
it's not literal, and you know you don't you don't
have to stay.
Speaker 2 (08:30):
There for fifty years. I'm sure a lot of people
opened this analyst's research note though.
Speaker 1 (08:36):
So because it's said indentured it's hurt in the headline.
Speaker 2 (08:39):
Yeah, I would click on that.
Speaker 1 (08:40):
It's pretty good. I Do you want to talk about
the other Bill Pulty ideas?
Speaker 2 (08:44):
Yeah, tell me about them.
Speaker 1 (08:45):
Well, so they're assumable and portable mortgages. Yes, you didn't
about these ideas. People have been talking about this forever
and like they exist in various pockets of the world,
but they're not like the norm in US mortgages. But
so in an assumable mortgage is like I move out
of my house, you buy my house, I give you
my mortgage and a portal mortrorgage. I move out of
my house, I buy a different house, and I take
(09:07):
my mortgage with me. Right, So, like if I have
a three and a quarter percent mortgage, which.
Speaker 2 (09:12):
Katie, I do, okay less.
Speaker 1 (09:15):
With three and a quarter percent mortgage, and I want
to move now, like whatever mortgage rates are, you know,
six and change percent.
Speaker 2 (09:21):
Something like that.
Speaker 1 (09:21):
If I wanted to move, if I could keep my
three and a quarter percent mortgage, that would be nice
for me, right, And so in normal US mortgages now
you can't, but like you know, there are places where
you can't, and both He has talked about having some
version of that in the kind of like Fanny and
Freddie standardized US mortgage market.
Speaker 2 (09:41):
That makes sense, Yeah, sort of.
Speaker 1 (09:45):
It would be nice if you do it. The problem is.
Speaker 2 (09:48):
There might be more inventory because people wouldn't just sit
on their houses for.
Speaker 1 (09:52):
Ye, that's true. It would like loosen up the market
a little bit.
Speaker 2 (09:54):
Yeah.
Speaker 1 (09:54):
Problem is that, like the US has a thirty year mortgage, yes,
which has fast terms. It is a thirty year mortgage
with a fixed rate. Normal you know people's mortgage thirty
your mortgage with a fixed rate that is prepayable at
any time without penalty, and that is a like in theory,
a very valuable option. Right, if you borrow money for
(10:15):
thirty years and at any point you can prepay it
without penalty, then if like market insru's rates go up,
you keep your mortgage and you're paying a low market rate.
And if market rates go down, you prepay your mortgage
and get a new mortgage and you get the lower rate.
So if you're a mortgage investor, you're always on the
wrong side of that. If rates go up, you hold
a low market paper and if rates go down, you
(10:37):
get you know, prepaid. And that's not really true because
almost nobody optimally exercises their prepayment option because almost everybody
who is a thirty year mortgage moves after like seven years,
and so when they move, they have to prepay their mortgage.
And so it's not the case that people only prepay
when rates go down, right, It's like people prepay kind
(11:00):
of randomly, And sometimes people who have three and a
quarter percent mortgages move and prepay their mortgage and go
get another six percent mortgage and grumble about it, but
they have to do it. Let the move for work,
or whatever, right, and if you got rid of that,
then the prepayment option would be a really valuable option,
and that would make it would be really bad for
mortgage investors and make mortgages much more expensive, I think,
because you'd have to price that option right, because people
(11:23):
would never prepay except when rates went down, and so
you'd always have kind of the wrong way interest rate
risk on your mortgage.
Speaker 2 (11:30):
And how do you feel about assumable mortgages.
Speaker 1 (11:33):
It's the same story, but either way, the point is
that if you have a below market mortgage, someone can
keep it right. Yeah, And like you know, assumable mortgage
is like you take my blow market mortgage, but like
presumably you pay me for that, right, So it's the
same basic idea.
Speaker 2 (11:47):
I would like to take it without paying you.
Speaker 1 (11:51):
I understand.
Speaker 2 (11:52):
Okay, that could have I mean, something could have happened
to here anyway. I don't want to move to your house, though,
I'm sure it's great. It's not dead possums.
Speaker 1 (12:04):
And that's right, we've talked. Its only bad things about
my house.
Speaker 2 (12:09):
No, I see it on Instagram sometimes.
Speaker 1 (12:11):
You know what, I have a have a really good
mortgage rate.
Speaker 2 (12:14):
Yeah, yeah, that's probably Yeah, I want to die in
New Jersey. Though, what do you want to talk about now?
Speaker 1 (12:34):
I don't know, you talk about proxy advisors?
Speaker 2 (12:36):
Yeah, why not? This is a fun conversation on the
heels of, of course, the Tesla vote Elon Musk's compensation package.
Speaker 1 (12:43):
Yeah, there's two praxy advisors. I mean there's more than two,
but there's two for practical purposes, and they're called ISS
IS in Distitutional Shareholders Service and Glass Lewis, and they're
in the business of telling investors how they should vote
on proxy vote and you almost never hear about it
because it doesn't matter. It's like all these like advisory
(13:05):
practice votes at companies you don't care about. And then
every once in a while, not that infrequently, Tesla's like,
we'd like to give Elon Musk at trillion dollars, what
do you think shareholders? And then Glass Lewis and ISS
say no. Of course they say no because, like they
are professionals in the business of corporate governance, and they
(13:27):
have certain professional norms and expectations, Like they go to conferences,
they talk to like minded people who are interested in
corporate governance. And if you ask anyone interested in corporate
governance should we pay the CEO at trillion dollars. They'll say, no,
that's not a good thing. And then Tesla is like
a different kettle of fish. Right, Like, Tesla has investors
who like Elon Musk, and he's like, I want a
(13:47):
trillion dollars. I'm like, great, here, I have a trillion dollars.
But Class Lewis and I as us don't want that,
and so they say no, and then nobody cares because
Tesla's investors some of them follow Glass Lewis and Is
as recommendations, but most of them are And so Tesla
voted in favor of giving Elms bags of money, but
el Ms got mad.
Speaker 2 (14:07):
Yeah.
Speaker 1 (14:07):
I think there's a widespread you know, kind of like
right wing coded being mad at Glass Lewis and Iss
because they tell people how to vote on corporate shareholder votes.
And corporate shareholder votes, a lot of them are about
shareholder proposals, like you should write a report about how
(14:27):
much carbon you produce. Right, It's very like environmental and
social coded, and so these firms sometimes tell shareholders you
should vote in favor of writing a report on carbonations.
So there's this perception that they're like kind of esg
ish that they care more about environmental, social, and governance
issues than like, you know, the Trump administration or the
(14:51):
Republican Congress people do. And so there's the sense that
like they have too much power and they push companies
to be more left wing than they otherwise would be.
So there's like an effort to rain them in, and
you've seen that this week with like the Wall Street
Journal reporting that the Trump White House is contemplating some
sort of executive order too in some way rein in
the proxy advisors, right, and then also there's a report
(15:13):
that the Federal Trade Commission is investigating them for anti
trust problems.
Speaker 2 (15:18):
Yeah, basically whether they're breaking anti trust laws related to
how they advise on proxy issues such as climate and
social related policy.
Speaker 1 (15:26):
Yeah, it's not clear what the anti trust problem is. Yeah,
there was a House hearing on you know, anti trust
in the proxy advisors a few months ago. And the
kind of thrust there is that there are only two
of them, and they somehow stifle competition or have bought
up competitors so that there's only two proxy advisors. And
the world would be a better place if there was
a lot of proxy advisors. I don't think that's really
(15:50):
the problem. I think the problem that people worry about
is that, however many you know, two or three or
ten proxy advisors, the proxy advisors have theoretically outside impact
because they tell shareholders of every company how to vote. Like,
the market is not for proxy advisory services, the market
is for every public company. I also think that, like,
(16:11):
there are only two proxy advisory services that are big,
but how many should there be?
Speaker 2 (16:16):
Kind of reminds me of ratings agencies, because there's three
of them.
Speaker 1 (16:21):
It's very similar.
Speaker 2 (16:22):
Yeah, yeah, there's more than three, but there.
Speaker 1 (16:26):
Is more competition in ratings agency. People worry that it's
an olocopoly, but it's more competitive than in proxy advisory
And I think one reason for that is, like.
Speaker 2 (16:36):
Ratings keep it in.
Speaker 1 (16:40):
I don't even know what that was. Ratings is ratings
are intuitively important. People care about the credit worthiness of
their loans and whatnot. I've written this week one reason
that every investor a sources it's proxy voting decisions to
(17:04):
to proxy advisory services. The stuff doesn't matter. Like, you
know you own like zero point one percent of the
shares of some public company, you know you own five
hundred companies. They each have like ten share advisory shareholder
proposals each year, your vote like one, you're not going
to change the outcome of the vote, and to the
outcome of the vote doesn't have any practical effect, and
(17:24):
so it's kind of crazy to spend a lot of
time thinking about it, and so you outsource it to
people who can think about it on behalf of everyone,
and the number of people that you need to do
that is the high.
Speaker 2 (17:37):
Yeah. Well, when you said it doesn't matter.
Speaker 1 (17:41):
This is like my thesis, like people care about this
a lot.
Speaker 2 (17:45):
Yeah, but like there's very rarely a.
Speaker 1 (17:46):
Practical implication like mergers. Right, Like mergers, there's a shareholder
vote and every so often it's contested and like class
lewists or iss will have a view, but often in
those cases, like the shares are kind of held by arbitration.
As anyway, who have there view? You know the Elin
Muss compensation. Every couple of years, there's a meaningful we'll
be here, got there, But it's a lot of routine stuff. Yeah,
(18:09):
it's not like never impactful, but it's almost never impactful.
Speaker 2 (18:12):
Well that made me think of, you know, whether or
not it even matters whether their recommendations matter or not
because you think about the experience with Tesla, and Tesla
is a unique beast. But I've seen stats that like
thirty percent of their shareholder base is retail. Both of
these proxy advisors recommended passing this package. It obviously passed regardless,
(18:34):
So like how much do their recommendations even matter in
this day and age.
Speaker 1 (18:38):
Well, so a couple of things. One is that their
recommendations used to matter more, and now like more big
asset managers because of sort of a pressure campaign about
this over the last few years. Now more big asset
managers like no, no, no, we make our own decisions.
We don't look at ISS our Glass list. Also, ISS
and Glass Lewis have kind of backed away from having
a house view and to get ahead of this. And yeah,
like there's you know, places like Tesla where it's a
(18:58):
lot of retail shaholders who don't care abouts and classes.
For the most part, it's really like it's not the
biggest asset managers, it's not retail. It's kind of smaller
asset managers in the middle who tend to defer to
class Lewis and as more. But the other thing is
like they tend not to defer to them as much
on huge economically meaningful decisions that affect big companies that
(19:20):
make up big portions of their portfolios. Right, if you believe,
like Elon Musk is gonna leave Tesla, if you vote
against the package, then you will make your own decision
about that. Yeah, not just do whatever iss is. But
you have four hundred other companies where they're like, oh,
we have like a shareholder proposal on our greenhouse gas emissions,
and you just like check a box. Right, So, like
(19:40):
I think their recommendations have more impact on like lower
profile votes, and there are just so many lower profile
votes and those boots are lower profile. But they also
like they annoy corporate CEOs when like fifty or thirty
or ten percent of their shareholders vote in favor of
like having a report on greenhouse gas emissions. Like that's
annoying to a CEO, and so they complain to like
their Congress per Center, to the FTC or whatever, like, ah,
(20:02):
these guys are, you know, interfering in our business, but
it's not that impactful.
Speaker 2 (20:06):
Yeah, that's funny. Something I wondered in all of this,
and I didn't take the time to look it up.
Are Glass Lewis and Iss ever in conflict, Like do
they ever split or do they always sort of recommend
as a block.
Speaker 1 (20:21):
I haven't looked at up you there. I'm certain that
they have split. Yeah, it would be crazy if they
never split.
Speaker 2 (20:26):
It would be crazy, wouldn't it.
Speaker 1 (20:28):
But as I said, like these people come from a
professional interest in corporate governance, and there are sort of
like standard views on what's good governance. Right, I think
those standard views are not like not everyone agrees with them, right,
Like it's classically good governance too. For instance, have a
board chair who is not the CEO, right, so the
board has more like effective oversight over the CEO, and
(20:50):
so ISAs in Glass Lives, pretty not always, but pretty
regularly recommend voting in favor of splitting the board chair.
And see, yeah, but you know, you look at like
there are a lot of like various six us whole CEOs.
We're like, no, I want to be the chair of
my company because I want to I'm the right person
to run this company, and I want to supervise the
board too, And like that's not like a crazy view,
it's not like quote unquote good governance, but it's a
thing that like some shareholders and you know, agree makes
(21:13):
sense with some CEOs. So a lot of stuff like
that where it's like there's a classic view on good
governance that is not always applicable and like you know,
Iss and glass Lewis or a little more on the
side of you know, classic good governance rather than what
shareholders want for a particular company. I want to say
one other thing about so, like this story is like
(21:33):
a lot of it is about Iss and glass Lewis,
but not all of it. Like there's also the very
closely related issue of index fund managers like black Rock
and Vanguard, who used to defer more to Iss and
Glass Lewis now kind of have their own house views
but are kind of similar in that they like affect
the votes of huge portions of every public company. Yeah reluctantly, Yeah,
(21:57):
I sas and Glass Lewis too, reluctantly know it collect
views for like managing voting. No, it's not, it's not
like they do it.
Speaker 2 (22:04):
They do.
Speaker 1 (22:05):
It's a lot of like administrative work. It's a lot
of like they help companies like actually do the process
of voting. Right, So like if they could just like
flip a coin and be like you should vote, you know,
for this, or they don't care that much about the
substantive recommendations. They care about like getting paid to do
the sort of administrative work, and so they are backing
away from doing some of the substantive recommendations and having
(22:25):
a house sept.
Speaker 2 (22:26):
I didn't mean to smirch them. I'm sorry.
Speaker 1 (22:29):
It's so like black Rock and Vanguard and State Street,
you know, control huge blocks of every public company famously
and vote, and people get mad at them for how
they vote, and like there's this view that they're too
left wing and blah blah blah. And so the reports
about a potential executive order on this, it's not just
about the proxy advisors, it's also about index line voting. Yeah,
(22:52):
and I've never heard like a great solution for what
they should do. But the report that I saw, like
the Wall Street Journal, like there's talk of having them
mirror their voting so that they can ask their you know,
so if you're a black Rock, you have you know,
thousands of clients and your index funds, and you ask
your clients how would you vote? And you know, ninety
(23:13):
nine point nine percent of them don't return the questionnaire,
and like zero point one percent say I would vote
in favorite management or whatever, and then I think the
idea would be that the Index one managers would have
to mirror the votes of their clients who responded, which
is kind of a crazy outcome if you think about it,
because the people who respond are going to be passionate, passionate.
(23:37):
I was going to say cranks, passionate and nicer. So
right now people complain about Black Rock, but black like
the big index ones, mostly vote with management. Yeah, but
if they had to ask their investors how would you
vote and then get weird answers back, they would vote
a lot more against management, and it would be kind
of bad for corporate managers and kind of good for
like activists shareholders.
Speaker 2 (23:55):
Yeah. Well, I wrote this at the end of October.
Vanguard has this called Investor Choice, and I'm sure that
Black Crock and State Street have similar initiatives as well.
But this is recency biased because I wrote this story anyway.
So basically it asks it's people who own shares of
the index funds that are in this program, basically how
(24:18):
they would like management to vote or how they would
like the fun company to vote. They don't ask them
about every thing. I believe it's like a range of
choices as to you know, I want to maximize profits
or I care about social issues, and then Vanguard votes.
I think there's some subjectivity to that, but they vote
based on what that shareholder selected.
Speaker 1 (24:41):
Yeah, but don't they vote that shareholder shares like in
other words, like if they ask every shareholder and ninety
nine percent of them don't answer, then the one percent
get voted the way they want to. But the ninety
nine percent Vanguard is not just mirroring the one percent, right,
Like they're making their own decisions.
Speaker 2 (24:57):
I think it's somewhere between them. I don't remember the
exact details.
Speaker 1 (25:00):
If you do full mirroring, then like the cranks get
a lot.
Speaker 2 (25:03):
Of Yeah, I do like that. Yeah, but maybe that's
how it should be. I don't know if you're.
Speaker 1 (25:11):
Argument right, like if you the people who care who
pay attention to share I just like I come back
to like, it is kind of irrational to pay attention
to shareholder voting, so it's not really how it should be.
To get the worst results if you let the people
who pay attention to shareolder voting be the ones, this
lad in the outcome. But there's not another way to
do it. You need someone to pay attention to do it.
Speaker 2 (25:29):
Yeah, that's true, and maybe you should be rewarded for
you taking the time to Karen answer the thing. Speaking
(25:50):
of rewards, competition for talent reaches on.
Speaker 1 (25:55):
Yeah, this is a great story about Bradley Sacks that
Business Insider about the talent wars at the hedge funds.
Speaker 2 (26:02):
It's like an evergreen story.
Speaker 1 (26:03):
It's an evergreen story. He quotes someone saying, you set
up something to attract mercenaries, but now you want loyal soldiers.
It doesn't work because, like, if you went to work
at a hedgehund because they promised you fifty million dollars,
you're probably a person who would go work at a
different hedge fund if they promised you sixty million dollars, right, Like,
probably you're there for the money, Like.
Speaker 2 (26:24):
Probably, yeah, yeah, that's really safe. That's fine.
Speaker 1 (26:27):
If you're working at a hedgehund for fifty million dollars,
a lot of reasons to assume that you're there for
the money, and so you could be lured away by
a higher bidder. And that makes it frustrating. If you
are the head of a hedge fund and you want
to stop having constant bidding wars. I also, I hadn't
really thought about it, but like he makes the point that,
(26:49):
like there's an artificial constraint on hedge fund talent caused
by the fact that everyone has these like super long
gardening leaves. Yeah, and so basically like half of all
hedge fund portfolio managers are on the beach at any
given time, and so the price of hedgemen managers gets
bid up because you can only get so many of
them because the rest are on long term gardening leaves.
Speaker 3 (27:10):
Yeah, it's great, creates value, yes, artificial scarcity, and it's
great because like like a stylized the fact of economic
history is that after the Black Death in Europe, you know,
labor or like farm hand wages went up because farmhands
were so scarce that they could command a much higher wage.
Speaker 1 (27:34):
That's a very bad way to create scarcity in the
labor market. The hedgemund manager way of half of you
are on vacation at any time so the other half
get paid more is like really nice. It's like you
have a career where you get paid a lot because
you're scarce, like artificially scarce, and also you get to
take long vacations every couple of years.
Speaker 2 (27:53):
Yeah, I is. The Englander called it a talent bubble
that's created by you know, you restrict supply.
Speaker 1 (28:01):
The other thing is like, I don't really understand why
hedge fund talent is so exogenous and and elastic, like
the article talks about it. Like some of these big
multi strategy funds have set up you know, training academies
they hire out of college. They like try to take
(28:21):
unmolded clay and turn it into you know, hedge fund managers,
like that should be possible. Why can't you teach someone
how to manage a hedge fund? They can understand it's
like hard, but you know, if you're paying the twenty
million dollars, you get someone to do it.
Speaker 2 (28:33):
Yeah, I agree with you. You sounded a little bit like
Elwood's there. So it kind of threw me for a loop. Okay,
like it's hard, Like it's hard. Yeah, Yeah, I'm.
Speaker 1 (28:43):
Paying me twenty million dollars to manage a hedge fund.
I'll do it for six months and then take two years.
Speaker 2 (28:46):
Regardingly, Yeah, but I feel like this story, I don't know.
We talk about talent wars all the time. We talk
about it when it comes to banking, we talk about it.
When it comes to hedge funds, talk about it when
it comes to AI. AI. We've talked about this before.
It feels like a little bit more pure to your
point that if a hedge fund pays you fifty million
dollars to do hedge fund things, that probably you'll take
(29:09):
an offer for sixty million dollars. But maybe with AI
there is a little bit more of a mission statement
and I want to save the world. Yeah, I don't
know one thing that destroy it.
Speaker 1 (29:17):
One thing about AI is like hedge funds have been
around and some before them for a long time, and
like in the modern form for you know, years, maybe decades.
AI is very new, and so it's very understandable that
there is a hugely constrained to supply. Right, Like the
number of people who went and got aiphds is not
that high because that was kind of a specialized thing
(29:38):
until it became you know.
Speaker 2 (29:40):
Also, if you got that PhD, how long before it's stale.
Speaker 1 (29:44):
I don't think it gets stale because I think you
then work in AI and you would like work at
the cutting edge of the field. But yeah, I mean, like, right,
if you if you get that PhD and then spend
twenty years, you know, doing something else. I'll get stuff.
But I think that like the market did not produce
that many aiphds because it wasn't a thing that got
you paid hundred million dollars five years ago, and now
that it is, I'm sure that one there will be
(30:04):
you know, in the next ten years, there'll be more
AI paches, and two they will perhaps have less pure motives,
right because if you're you know, if you're a sixteen
year old who's good at math, instead of thinking maybe
one day or at a hedgehot now you're likeeah, maybe
one day or at an AI start up and one
hundred million dollars a year, So you'll get more supply
(30:25):
and less purity. But like hedgehunts, they've been around for
a while, Like you should it should equilibrate. I don't know.
Speaker 2 (30:29):
Yeah, Okay, that's foe all I have to say. Apparently
there's a rocket launch that I forgot was happening. I forgot.
Speaker 1 (30:35):
Okay, I'm gonna just have some delicious And that was
the Money Stuff podcast.
Speaker 2 (30:46):
I'm Matt Levine and I'm Katie Greifeld.
Speaker 1 (30:49):
You can find my work by subscribing to the Money Stuff.
Speaker 2 (30:51):
Newsletter Bloomberg, and you can find me on Bloomberg TV
every day on the Clothes between three and five pm Eastern.
Speaker 1 (31:00):
To hear from you, you can send an email to
Moneypod at Bloomberg dot net. Ask us a question and
we might answer it on the air.
Speaker 2 (31:07):
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 (31:13):
The Money Stuff Podcast is produced by annam Aserakis and
rosas Onda.
Speaker 2 (31:17):
Our theme music was composed by Blake.
Speaker 1 (31:19):
Maples Amy keen as our executive producer.
Speaker 2 (31:22):
And Sage Bauman is Bloomberg's head of Podcasts.
Speaker 1 (31:26):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff.
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