July 25, 2025 • 35 mins
Katie and Matt discuss bird gender reveal parties, meme stocks, short squeezes, AI as a distillation of human wisdom, dispersion trades, ETF tax efficiency, heartbeats, everything will be a tokenized ETF, the Qs, ETF marketing budgets and the rule against perpetuities.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
I do have a bird update.
Speaker 1 (00:09):
I was gonna say, you texted me a picture of
your bird. Yeah, and you just like, without any sense
of irony, You're like, Fatspa's teen feathers are coming in.
Speaker 2 (00:18):
So she's just foughts ban I think so, I mean see.
Speaker 1 (00:21):
Thoughts, but like for purposes of this podcast, or do
you call him that? Like to your parents and in the.
Speaker 2 (00:27):
Halls and walls of the Greifeld house, he is just bird.
And also we're saying he as if he's a boy,
but we don't know that.
Speaker 1 (00:34):
But this front of the show Lackman.
Speaker 2 (00:36):
Yeah, to the rest of the world, he's Fatspa front
of the show Bill Lackman. But I haven't explained the
joke to my parents.
Speaker 1 (00:42):
Yet, so we explained it to the bird quietly.
Speaker 2 (00:45):
I think I have said to him, your name is Bilackman,
but I don't think he's internalized that that was the
update though, that his teenage feathers are coming in.
Speaker 1 (00:54):
Good him.
Speaker 2 (00:55):
Yeah, it's super interesting. Hopefully I'm not the only one
who thinks so. And Starling's are juveniles when they first
grow their feathers, they're super brown. And kind of boring.
But in the later stages of being a juvenile, he's
still not an adult he or she, but they get
this like interesting polka dot pattern on their chest and
(01:15):
so it's growing in and patches the polka dots on
his chest. Yeah, he's super cute.
Speaker 1 (01:21):
Yeah, so you'll know his gender because like they have
different plumage on their adults.
Speaker 2 (01:25):
Yes, So hopefully in the next couple months we should
know it'll be a gender reveal.
Speaker 1 (01:32):
Are you gonna have a bird gender reveal party?
Speaker 2 (01:34):
I think it's more he or she is throwing the
party for us, and the party is just very solely
overtime the feathers change.
Speaker 1 (01:43):
This is making me realize I have another question, which is,
what will thoughts but romantic life be, like.
Speaker 2 (01:49):
You know, none or I think right now it's none.
I would like to.
Speaker 1 (01:55):
I'm settled down at a nice lady bird of us.
Speaker 2 (01:57):
Yeah, exactly, you know, I don't know. I was thinking
it would be nice for thoughts but to have a
friend where my parents live in New Jersey. Unfortunately, it's
not that uncommon to find stranded baby birds, so maybe
that'll happen in the next few years.
Speaker 1 (02:13):
Right, I assume like there's no prospect of like visiting
wild starlings chatting with thoughts like.
Speaker 2 (02:22):
Setting him up with a wild bird. I don't know.
I don't know logistically how that would work. I don't
think there are like any starling stud farms either.
Speaker 1 (02:32):
But hey, just run around the backyard right like indoor
bird or I don't know if.
Speaker 2 (02:38):
He would come back, And I worry about him being
able to feed himself. He is. Oh another update. I
sort of got this one as interesting too. So I
was talking about how he only wants to land on humans.
So because he's in this largish half outdoor half indoor room,
and he had been in the cage and then we
would let him out for free flight, I made the
executive decision, let's just have him out all the time.
(03:02):
The cage doors are open. He can go in and
out as he pleases, because there's a hose and a
drain in the floor in that room, so we can
just clean it down whenever we need to.
Speaker 1 (03:11):
With I need a like that.
Speaker 2 (03:12):
With the introduction of free flight, he is much more
confident about perching on things other than humans.
Speaker 1 (03:20):
Yeah. Yeah, he's like flying around all day and needs.
Speaker 2 (03:24):
Sometimes That's there's not always a human in the room
with him, So now he's more comfortable with the idea
that other objects are suitable purchase.
Speaker 1 (03:32):
Hello, and welcome to the Money's Love Podcast, your podcast
where you're talking about stuff related to money. I'm Matt
Levine and I read the money Stopt column for Bloomberg Opinion.
Speaker 2 (03:42):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (03:48):
If that's he's going to be all burned updates, it's
just gonna be Yeah, but he's going to get a.
Speaker 2 (03:52):
Microphone and he's just squawks. He does have different squawks
for different things, Like you can tell when he's talking
about atfs when you talk about ETFs, you know, or
memes for that matter.
Speaker 1 (04:06):
Yeah, memes, memestocks are back.
Speaker 2 (04:09):
We're back in twenty twenty one, the helcyon days.
Speaker 1 (04:16):
I have to say, yeah, I'm not feeling it. Are
there people feeling it? Am I just old? Like? Are
the people on the internet like, oh yeah, this is
just as good as it was in twenty twenty one.
Speaker 2 (04:26):
It kind of reminds me of Crypto, how Crypto had
this resurgence and we're back at all time highs and
then some and it just feels like way less people care.
And it feels kind of that way with the meme
frenzy that we're seeing right now.
Speaker 1 (04:39):
Crypto is weirder because Crypto has a lot of different
like streams, like memestocks kind of have you know, one
stream which is people on the internet doing memes. That's true,
it just feels like less.
Speaker 2 (04:49):
Yeah, I don't know, Well, we've seen it before.
Speaker 1 (04:52):
You know, you've seen it before.
Speaker 2 (04:53):
It was novel the first time.
Speaker 1 (04:56):
Right, I mean, you know the point at memes Dice
is like people are on the internet talking about them
and then too they go up a lot, right, and
you really need the going up a lot to make
it that fun. And I feel like we're not quite there.
I mean, the Novelty in twenty twenty one was so
you know, like millions of people came to Wall Street
(05:17):
Bets for the first time, like it was creating millions
of accounts a day. Yeah, and that doesn't seem to
be happening here because like everyone who was going to
get into it get into it. I mean now that
fully realized. The first time I knew it, but I
didn't like fully internalize it. How much memes dogs are?
Can I do with short squeezes? It's so important to
every memestock thesis, like oh, the evil shorts are getting
(05:37):
squeezed right, Like it's it's like such a central part
of the story. And like one thing is that there
were learnings from twenty twenty one hedge funds, like don't
short a ton of crummy consumer focused stocks because you
might get carried out. And so if all the shorts
are like less short, then uh, you know, Bernhower was
(05:59):
writing about this newsletter that the shorts are going to
have smaller positions in this conference. So what that suggests
is like one, it's easier to do a short squeeze,
like you'll get kind of the meme stock pop because
as soon as a stock starts meming, all the shortsellers
are going to cover their positions. But then two, it's
not going to be as long lasting or as big
because they all just cover their positions immediately and there
(06:20):
won't be like the games up there with like months
where people were like, oh, it's going to be the
mother of all short squeze is the shorts still haven't
enforced that, and like that's just it's instantaneous now. Yeah.
Speaker 2 (06:29):
It still does though, seem like maybe it's not sophisticated
hedge funds who are short in these stocks, like most
of the ones that went crazy this week, or Real
least Coals, which kind of led the meme frenzy this
specific week. I think it's forty eight percent of its
float was shorted. Yeah, I mean, well, I was thinking
about that list that you asked chat gibt for or
(06:51):
the chat GBT produced for you, and one of it was,
you know, the company needs to be unloved or not appreciated.
Speaker 1 (06:58):
Yeah, right, So I asked chat gbt like it's the
next caravan and it's the next hundred bagger, and it
gave me this kind of memi answer. Yeah, it was
like it needs to have a heavy short interest and
be like unloved or underappreciated by the market. And that
is kind of that's it.
Speaker 2 (07:13):
That's like it felt like that was the most important thing.
Speaker 1 (07:18):
Or it's a sense of resentment. You need to be
like mad at you need to have.
Speaker 2 (07:21):
A chip on your shoulder. Yeah, so that goes hand
in hand with the you know, heavy short interest that
this is you're going to put them in the same line.
Speaker 1 (07:31):
Yeah. Yeah, it's like there's like technical reasons that everyone
could hate US stock and it could not be heavily
shorted because it's like really hard to borrow. But now
in general, that's those are the same thing.
Speaker 2 (07:40):
Something that I appreciated though, about the fact that we're
having this conversation in twenty twenty five was that it
dispelled at least two myths that were part of the
conversation in twenty twenty one. The first being that the
activity that we saw back then was all fueled by
stimulus checks, you know, the stimulus checks that the govern
and had helicopter across everyone.
Speaker 1 (08:02):
Yeah, I know. That totally dispels that met I mean,
like some of the stuff I've read about this meme
stock thing is like there's been enough of a stock
rally to create kind of a wealth effect, and like
the snameuless checks are another form of that.
Speaker 2 (08:14):
But yeah, I agree, Like, yeah, that could have been
true in any time. That's right, except for I guess
twenty twenty two and everyone.
Speaker 1 (08:21):
But yeah, I mean, no, you're right, it's not the
stimulus checks, and.
Speaker 2 (08:24):
The wealth effect I think has somewhat been eroded by inflation.
The fact that Okay, stocks have gone up, but it
so have the prices on everything else. I was in
a grocery store and Hoboken and there were these like
probably looking college kids and they were complaining about the
price of like produce. I was like, that's so interesting,
Like it's just so much in just everyday conversations that
(08:47):
you stumble across people complaining about how expensive everything is.
So I think the wealth effect is out there, but
I think it's less so. The other myth that it
dispelled was that the me mania was just a byproduct
of zero interest rates. That is very much not the
case right now.
Speaker 1 (09:04):
Yeah, that's fair, right. Another thing that you were just
learning it was like, it's not an isolated phenomenon, right,
It's not just like it has happened once and then
people like learned from it. Like I think that what
people learn from it is like it works, right, It's
like a good game.
Speaker 2 (09:18):
It's a good game.
Speaker 1 (09:19):
Why not make a stock triple? And you know the
course of a few days.
Speaker 2 (09:24):
Also, I know you explicitly said it's not investment advice,
but I know that so many people after reading your
column must have for fun, gone to chat GBT and
asked what the next carbon is?
Speaker 1 (09:35):
Yeah, I mean, like right, I wrote, like a reader
emailed me to be like I aske chat GPT and
that carbon I was, and it told me open Door,
So I bought open Door and look at me right.
And I don't get the sense that what has happened
in the last week or two is mainly or like
largely AI driven, Yeah, but it does feel like in
(09:56):
twenty twenty one there was this like coordination mechanism where
people who wanted to buy Mimi stocks and like have
stocks that go up a lot, like would go to
you know, social media, so they'd Reddit mostly right Wall
Street paths, and they'd like meet their friends there and
their friends would talk about what stocks would go up,
and they'd all kind of like coordinate around the stocks
(10:17):
that they wanted to go up. And like, in some
ways it feels like AI, which is like trained on Reddit,
you know, has like found a way to abstract that
where now, if you want to find the next to
Mimi stock that will go up a lot, your instinct
might not be to go to Reddit and ask the
people there. Your instinct might be to go to chat
chapt and ask chat chapt and chat GPT might tell you, right,
(10:37):
it might tell you something that's kind of similar to
a reddit or would tell you I think that's an interesting,
like new vector for meme stocks to happen. And yeah,
it's like you don't need anyone else on Reddit pumping
the stock because like our AI tools have now been
trained on that kind of meme stock, thinking.
Speaker 2 (10:54):
Yeah, I hadn't heard the idea that lllm's are just
a blurry jpeg of the Internet.
Speaker 1 (11:00):
That's a ten Chang's headline that I love that.
Speaker 2 (11:02):
I love that I hadn't read that piece. I will say,
reading your music's on that just made me more existentially
worried about humanity because I don't think that people should
be taking advice from Reddit or the blurry sess thing
that's produced Reddit, right.
Speaker 1 (11:22):
I mean Alex balk used to say the first rule
of the Internet is the things you hate about the
Internet or the things you hate about people. When you
say people shouldn't be taking advice from Reddit, you're saying
people shouldn't be taking advice from people like AI is
a distillation of Yes, the wisdom and the foibles of
people right of the masses, Yeah, of something of some
(11:44):
subset of people. Yeah, the people who are on Reddit,
not only but also them. Yeah. Right, Like used to
write this, Like if you had asked someone one hundred
years ago what stocks should I buy? Or like how
do stocks go up? They probably have said something like
stock go up because a lot of people want to
buy them. It's like fairly straightforward. I think if you
(12:04):
ask people fifty years ago what stocks will go up,
they would say things like stocks reflect the expected value
of future cash flows and true stocks that will go
up are the ones that have good businesses that are
undervalued by the market or something right.
Speaker 2 (12:17):
Makes sense, And I think if you asked.
Speaker 1 (12:19):
Today, the answer is the stocks that people want to
buy are the ones that go up. Right. Yeah, there's
this like pseudo science of investing based on fundamental analysis
that kind of ruled for fifty for you know, seventy
five years, and that now like has received a little
bit and been replaced by ah, whatever people want to do,
what they're going to do, right, And like, in some
ways we've had like new technologies to distill and like
(12:40):
amplify whatever people want to do they're going to do,
and those technologies include the Internet and now AI. But
like In some ways it's frustrating because things don't have reasons,
but in other ways it's like that's how it should be.
It's just like investing is an empirical science. Like if
the stocks go up, it's because the stocks went up.
There's not like some axiomatic that will tell you why
(13:01):
thyes will go up. It's like you have to sort
of know what people are thinking.
Speaker 2 (13:04):
I do kind of love that. Every time this happens.
You know, there's a set of serious people who have
to engage with it and like try.
Speaker 1 (13:12):
To Am I one of them? Not really, No, No,
I'm talking more about like I lost my mind the
last night that happened, but now I have like zen.
Speaker 2 (13:20):
I'm talking about more about like cell side sure, and
like you know, single.
Speaker 1 (13:24):
Stock anlysts, you really like live in an ecosystem of
like stocks reflect the present value of their future cash.
Speaker 2 (13:31):
Yeah, that's your bible. Yeah, your whole job is predicated
on that.
Speaker 1 (13:36):
You have like a little fundamental model.
Speaker 2 (13:38):
It's really right, It's precious. There was a note from
Barclay's talking about how to engage with it. They said
that one way you can hedge is like through a
dispersion trade of sorts, in this case, using options to
bet on a basket of meme stocks that will continue
to be far more vital than the s and P
five hundred. Those wanting to take a more directional bet
(13:59):
on the frothiest company they can buy puts that would
benefit if he shares reverse course, which I don't know.
I just feel like the safest thing that anyone could
do is just not short.
Speaker 1 (14:09):
Things, right, I mean, like, I think the idea of
buying putsas like you capped your Yes, you could lose
that much money, but no more.
Speaker 2 (14:17):
Your losses aren't infinite.
Speaker 1 (14:19):
Right, It's the safest way to short meme stacks. But no,
I agree with you, Like I would not personally wake
up and see a memestack mania and be like, oh
I gotta betty ends these. That's on that good use
of my time. But I'm not a professional investor and
I'm not a research channelist or.
Speaker 2 (14:34):
Even before you get to that point, you know, if
you don't want to get your face ripped off on
a company that you were shorting, maybe just don't short it, right, Yeah,
no investment advice.
Speaker 1 (14:44):
No, I wouldn't. But I you know some people, some
people you know their job is to make correct market calls,
and other people their job and I symbolize with the
research channeists, because other people their job is to create
relevant markets related content. And when there's a memestock behavior,
you're like, well, what memestock content am I going to produce?
(15:04):
And I know that I know that difficulty. Well, sympathize
with anyone else who has to create memes like related content.
Speaker 2 (15:25):
I want everyone to know that this was your idea.
Speaker 1 (15:29):
I know. I keep pushing ETFs, I know, and I
keep sayings, I.
Speaker 2 (15:33):
Don't know if anyone wants to listen to it. This
was Matt's idea.
Speaker 1 (15:36):
I love these ETFs.
Speaker 2 (15:37):
Yeah, three five three five one ETFs three fifty one's yeah.
Speaker 1 (15:45):
So one way to understand exchange traded funds is that
they're exchange traded funds and they have nice like liquidity properties.
But the real way to understand ETFs is that they
are tages. Yes, and in particular, I learned that if
you buy a mutual fund like you annually pay capital
gains taxes on like the funds trading activity as whereas
(16:07):
if you buy an ETF you do not. Because ets
have found a way to make all of their trading
both the meet redemptions and to like change their positions.
They found a way to make all of their trading
not a tax realization event. And this involves like in
kind creations and redemptions. That involves like doing big heartbeat
trades with like authorized participants. It's a whole ecosystem. But
(16:30):
the way it works is the result of it is
that you don't pay taxes.
Speaker 2 (16:33):
Well, you get to decide one you want to take
the tax hit.
Speaker 1 (16:36):
Yeah, if you buy an ETF, this is not one
hundred percent try, but this is you know, largely true direction.
If you buy an ETF, you do not pay any
taxes until you sell the ETF, which is not true
of mutual funds. Are mutual funds you pay tax every
year and the older forever. But with an ETF, you
don't pay taxes until you sell the ETF shares and
then gets wrapped up in the ecosystem of like you
buy an asset, you defer taxes forever. You bar against
(16:59):
the asset if you need to. Eventually you die, your
airs get stepped out basis and like no one ever
pays the tax, but at least you defer the tax.
So even if you saw you might have to. If
you sell the thing, eventually you pay taxes, and so
that's really good. And it's like, you know, if you
own like an S and P five hundred ETF, it's
a little bit more tax efficient than if you own
an SMP five hundred mutual fund because they're trading your
redemptions whatever. But like, like whatever, it's not a huge
(17:21):
impact on your life to pay those capital in sizes.
Where it's really interesting is if you can use that
to wrap other stuff. And so I think and so
we're talking about like the Bloomberg's just teamed to lead
you write a big article about these these three but
like directionally, the idea is you worked at like a
(17:41):
tech company, you got a lot of stock early on,
and so your stock has a basis of roughly zero
and it's now worth roughly one hundred million dollars. Does
seem like some of these trades are for like one
hundred million dollars, And so you have a lot of
the stock and if you sell it, you'll have tens
of billions of dollars with capital against taxes. And what
you do is someone comes to you and like I
(18:02):
will build an ETF for you, and you PLoP your
stock into the CTF that it is custom built for you,
and then the ETF does trades to get of that
stock and replace it with like, you know, the S
and P five hundred, and then you are left with
S and P five hundred and you don't pay any
taxes deferred taxes. You have zero basis in the S
(18:23):
and P five hundred, but you've deferred taxes. You've sold
out of your giant concentrated position in your employer stock
and replaced it with like a nice diversified index fund
without paying taxes, which is a really neat trick. Yes,
I'm like oversimplifying. There's actually like rules about the original
contribution has to be kind of diversified, so you can't
just literally PLoP all of your employers stock and nothing
else into it. But you can do it.
Speaker 2 (18:45):
We've talked about swap funds on this.
Speaker 1 (18:48):
This is like a better swap fund. You don't need
other people, you just do it with your stuff. Historically,
a swap fund was like ten people get together and
they PLoP their stock in and then.
Speaker 2 (18:56):
Like I don't know, ten people.
Speaker 1 (18:57):
Firstified pool of like each other stocks. This is like
we just boot boom. You're into the S and P
five hundred so much clean. It is like a swap fund.
It's a similar idea.
Speaker 2 (19:07):
So this kind of blows.
Speaker 1 (19:10):
INTF form because you get the ability to diversify by
doing heart beats. In the article, someone calls it a
black hole for capital gain size perfect.
Speaker 2 (19:17):
It's like descriptions.
Speaker 1 (19:18):
It's just it's just like a solution. You don't have
to it's legal. It's legal.
Speaker 2 (19:23):
Sure, it's legal, and I want to. I think it
was a lawyer that Justina interviewed for the piece who
said that he's worked on hundreds of these or something
of that magnitude, right, and like.
Speaker 1 (19:35):
It's hundreds, it's not millions. Yeah, because like you need
a certain amount of money to make this work. This
is not free. You need some advisor. Do you need
an ETF issuer to do a white label ETF for you?
So it's expensive. If you have one hundred million dollars
of zero basis stock in your employer, like it's worth
(19:57):
it because you're saving twenty million dollars with capital inside.
If you have like you know, you bought some Tesla
a few years ago and now you have a million
dollar Tesla position with like a basis of like five
hundred thousand dollars, you're probably not going to do this.
But one thing that I have talked about on this.
Speaker 2 (20:13):
Podcast is I think have I also talked about it.
Speaker 1 (20:16):
We've talked about it, right, I have like advocated that
like eventually everything will be an eaty, Like everything, every
product will be etfized, and like one thing that means
is like there will be automation and costs will come
down so that if you're just like I want to
do an ETF of this thing, like you'll push a
button and it'll charge you like ninety five dollars and
(20:38):
you'll get the ATF. And like when that happens, no
one will have to pay capital gains taxes on their
stock because everyone will be able to do this.
Speaker 2 (20:45):
And then we'll find out some way that this is illegal,
Like it'll become.
Speaker 1 (20:49):
One will be like, well we should stop that. It's
not like obviously this should work, right, I mean yeah,
So the trade that they do is called a heartbeat, right,
Like the idea is that you're an ETF, you want
some concentrated stock, you don't pay taxes on in kind
creations and redemptions. So if someone brings you a basket
of your stock, if they bring you a basket of
the underlying shares and you give them ETF shares, that's
(21:10):
not a taxable transaction or vice versa. And so what
they do is they have special baskets where basically, you know,
a Jane Street or a bank or somebody will go
to an ETF. They'll bring in the stuff the ETF wants.
They'll give them the S and P. Five hundred, they'll
get back ETF shares. They'll wait like a day, and
then the next day they'll hand back the ETF shares
and take out whatever the ETF doesn't want. So it's like,
(21:31):
these are not taxable transactions. Yeah, but they're weird transactions.
They're not in the full underlying basket of the ETF.
They're in like the specific stuff that ETF does he
doesn't want, And they're not done because the counterparty wants
to be an investor in the ETF. They're done because
you know, the ETF is a just thing. It's training.
(21:51):
I first learned about this in twenty nineteen when Bloomberg
had a big article about heart beats and.
Speaker 2 (21:57):
A seminal piece or a.
Speaker 1 (21:58):
Seminal piece, and they were sort of like this really
be legal, and you know, my view was like, sure
it should be legal. ETFs doesn't pay taxes. But now
it's like people have like learned from this mechanism that
they can just get rid of all taxes. And then
it's like, yeah, you know, someone might look at this
and say, hey, we should close that loophole.
Speaker 2 (22:15):
That's the thing, Like the notion of a heartbeat is
pretty well socialized at this point, but like these individualized
heartbeat ETFs. The fact that these ETFs only exist to
do this because you see heartbeat trades once a quarter
in some of the biggest CTFs out.
Speaker 1 (22:32):
There, right because they're index funds. The index changes, and
so they have to get rid of some stocks and
get those talks and like you heartbeat that away so
you don't pay taxes. It's not obvious that ETF holders
shouldn't have to pay taxes on their index rebalancing, but
like everyone's fine with that.
Speaker 2 (22:44):
It's fine, Yeah, this is this is this is the
only purpose of the CTF.
Speaker 1 (22:50):
I mean, who can say with the only bet who
can say?
Speaker 2 (22:52):
But so this leading anecdote that just you know, opened
with was talking about the Twin Oak Active Opportunities ETF
and and the thing about ETF, So this one has
nearly four hundred and fifty million dollars in assets that
could theoretically be all one person.
Speaker 1 (23:09):
It could My impression was that it was like a
bunch of like SMP and stuff. But then it was
like three sort of nearly one hundred million dollar positions
and like three text talks, which no, say, day a
dog suggests it was roughly three people who like this
is pure speculation, but like it could have been three
people who were really employees at those companies or were
(23:31):
like granture capital investors in those companies and who have
like very low basis thok in those companies.
Speaker 2 (23:36):
Well, theoretically, if they are still holding onto the CTF
and invested in the CTF in some way and they're
big enough, we should be able in like forty five
days or something to see who they are sure, which
is interesting to me. So you lose yes early the.
Speaker 1 (23:53):
Judge of that it does you don't know, right, I
don't know worked at a company.
Speaker 2 (23:57):
You use the anonymity that you would get in the
traditional swap funds.
Speaker 1 (24:01):
Yeah. The other thing that was interesting. The article is
like you lose that and you're even in a more regulated,
more public vehicle. One thing about it is in the
ETF trades on the exchange, so anyone can buy it.
Next to the other thing, no one would. They don't
market it, and like it's not even clear that anyone
could because you might own all of it and just
not sell it. But but like you know, but they can.
They can buy from authelized participants. Like in theory someone
(24:23):
could buy the ETF. Well, and so you have like
these weird obligations where you have like fiducial duties to
run the ETF in the right way.
Speaker 2 (24:30):
Well, going back to the name, the twin Oak Active
Opportunities ETF, which builds itself, is seeking long term capital appreciation.
I could be poking around at my brokerage account somehow
come across that and be like, yeah, you could click buy.
I want to see capital appreciate. That sounds good. So
that's cool too, right.
Speaker 1 (24:48):
It's a like weird family office trade that in theory
anyone could free ride on. But like the whole juice
in the trade is in the first like three days,
so you're not like getting the a super exciting product
if you just buy it on the exchange, because like
the whole point of it was to say with the
people taxes.
Speaker 2 (25:06):
Sometimes I wonder slash worry about what's going to happen
to the ETF industry. As a reporter, I don't have
any feelings, but it feels like every ETF. I track
ETF filings very closely, but every ETF filing nowadays is
like triple leverage quantum computing stock with an income strategy overlay.
(25:28):
It's just crazy. It's like all of this like spaghetti
sauce that's being thrown at the wall, and then maybe
these will become more popular, and then what does the
industry turn into. I don't know.
Speaker 1 (25:37):
It's just like it turns into everything. It's it's so
I've written about like tokenization mm hmm, and I think
it like tokenization of securities is being largely like people
trying to find sneaky rays around securities laws and like
pretend that it's about technology. But someone asks you, like
what do you think is like the good case? Like
where are like useful things that can be done with
the organization? And I look at this stuff and I'm like,
(26:00):
this is gonna be token. Like this is like a
whole product set that will be turned into APIs that
will be turned into like, if you want et F,
there will be like a series of buttons you can
push and the ETF will come out and will be
like exactly the et F you want, and it will
just exist as an ETF. And you want to have
to like sit at a meeting with a wealth manager
(26:23):
or like go to a white label ETF firm, you'll
just like the computer will give you the ETF that
you want, and it will heartbeat away whatever you don't want.
Speaker 2 (26:31):
I feel like that is change traded everything, yea, not
just funds.
Speaker 1 (26:36):
Any portfolio, any trade, any like combination of wins.
Speaker 2 (26:41):
Yeah, any desire that I might feel.
Speaker 1 (26:44):
About to hold. Yeah, yeah, any desire.
Speaker 2 (26:50):
Well we have to talk about Invesco.
Speaker 1 (27:08):
Yes, that's your idea, okay.
Speaker 2 (27:10):
Also in ETF land. This one actually was my idea.
But really interesting filing last week. I should stop saying interesting.
Let me just state of fact. There was a filing
last week from Invesco. Here's something that not a lot
of people know or care about.
Speaker 1 (27:32):
I mean to step out of the room. You have fun.
Speaker 2 (27:34):
The queues. The queues it's an ETF the tracks the
NASAQ one hundred, so it's pretty big, pretty huge, three
hundred and fifty three hundred and sixty billion dollars depending
on the day. Started in the nineties, really from the
dawn of the ETF, one of the oldest still existing ETFs.
It's actually a unit investment trust. And that's interesting. My
(27:56):
mind is blown because Invesco doesn't make any money off
of the queues. The way that the fee breakdown as
it stands right now, they charge twenty basis points. A
bunch goes to Nasdaq, from which they license the index.
A bunch goes to B and Y because they're the trustee.
That does leave some for Invesco. But it is written
(28:16):
into the que's prospectus that Invesco has to spend that
on marketing, which is why the cues are like the
official ETF of the NCAA and why every big marketing exactly.
But it's an enormous marketing budget. But I wrote about
this in August twenty twenty three because it's one of
my favorite quirks in just the investing landscape that the
(28:40):
queues are the most profitable ETF because you're charging twenty
basis points on three hundred and fifty billion dollars of
assets that spins off over seven hundred million dollars of
fee revenue a year and investco. It's just this piggy
bank that they can't break. But they're now trying to
convert the cues into an open ended ETF from a
(29:02):
unit investment trust. But to do that, they need shareholders
to approve it. They need holders of the cues to
approve it, which is a gargantuan task because they need
fifty percent quorum on this vote, and there's tens of
thousands of queues holders at this point. So it's like
the ultimate exercise in herding cats. And I'm really fascinated
(29:24):
to see how this goes.
Speaker 1 (29:25):
Well, let me ask you this question. Can they use
their enormous marketing budget to like send personal mailings to
eat shareholder and like I don't think sor and like
please vote?
Speaker 2 (29:35):
I don't think so it's marketing. I mean, in a sense,
it's not just like marketing the product to buy the product, though,
it's like trying to rally shareholders for this specific purpose.
Speaker 1 (29:46):
Please buy cues to vote to change it into an ETF.
Speaker 2 (29:50):
Well, they are offering a carrot of sorts. They will
lower the fee to eighteen basis points.
Speaker 1 (29:56):
Eighteen basis points for an index ETF seems still high,
stordinarily high.
Speaker 2 (30:00):
It is very high. You're right about that, But I
mean a lot of these holders are locked in. They've
been holding this forever and they don't want to take
the capital gains head. But if they are able to
convert it, they'll theoretically be able to change the revenue breakdown.
So even by lowering the feet, they're still making so
much more money than they were before.
Speaker 1 (30:21):
They won't have to pay NASDAC.
Speaker 2 (30:22):
And So, because it's a natural question posed by my editors,
who loses out here? And it seems like who loses
out are the advertisers?
Speaker 1 (30:35):
You mean the recipient of the advertising?
Speaker 2 (30:37):
Yes, exactly. So the thinking seems to be that Nasdaq
will still get their eight basis points. There are eight
basis points of flesh.
Speaker 1 (30:48):
Bony for an index, because like you get, I believe.
Speaker 2 (30:55):
It's exclusive though, like I don't think anyone, Yeah, I know, yeah.
Speaker 1 (31:00):
Okay, that makes sense.
Speaker 2 (31:01):
So NASAK will still get paid a licensing fee, which
is pretty hefty. VONI will have some sort of role
not trustee. I believe that Invesco is asking shareholders to
improve Investco to be the trustee as well. Bloomberg Intelligence
estimates that right now Invesco spends eight basis points on marketing,
(31:22):
which is so much money. Invesco estimates that'll be reduced
to two to three two to three basis points to start,
which translates into something like one hundred and fifty million
dollars in annual revenue that Investco would unlock with pretty
much no incremental spend to get it right. So you've
(31:43):
seen Investco shares go absolutely bananas. I mean, it still
needs to be approved. The vote is on October twenty fourth,
and it's just going to be so hard to get
all those people.
Speaker 1 (31:53):
Any I love the difficulty of getting redown investors to
it or anything like it comes up occasionally in corporate Yeah,
and although not that much because corporates usually have mostly
institutional shareholders unless when their means ducks. But yeah, intf Land,
it seems hard.
Speaker 2 (32:09):
It does seem hard. I think that's interesting. I hope
that listeners agree, and please tell me if you don't.
The other part of the story that I'll tell you
about the only other unit investment trust of really meaningful
size out there is Spy Sure, which is also from
the nineties, born in nineteen ninety three, such as myself sure, and.
Speaker 1 (32:29):
Also famously has there's like some other children born around
that time. Whoever in the.
Speaker 2 (32:35):
Perspectus, yeah, exactly, like all of these really old ETFs
have these funky perspectuses.
Speaker 1 (32:41):
Yeah, they really against perpetuity problems, where like, yeah, their
trusts and so they can't last past, you know, seventy
five years past the life of some living person, and
so they name a bunch of babies as like their
reference lives for their early against perpetuities.
Speaker 2 (32:54):
If you ever really bored, it's worth poking around in
the perspectus of ETFs that were born in the nineties.
Speaker 1 (33:00):
I have I hope you going to say I've never
been that word. I'm pretty sure I've looked at the
spy perspective, so might I have been that word?
Speaker 2 (33:06):
I asked an Apaglia of State Street Investment Management on
Monday whether or not State Street was going to try
something similar with Spy, and she said that filing to
us is interesting, we are going to learn from it.
And I never say never. Do you know if we
learn something that we like from this proxy, we will
think about it, which I heard as if Invesco is
(33:28):
able to pull this off, maybe we'll do it with SPY.
Speaker 1 (33:31):
The spy have the same economic structure. Yes, eonomic money
from spy.
Speaker 2 (33:36):
So some money stays in the door because State Street
is currently the trustee on SPY, but they also have
to spend a boatload of money on marketing as mandated
by the perspectives.
Speaker 1 (33:48):
Okay, what's the charge for a spy?
Speaker 2 (33:51):
I think spy has nine basis points? I know, Well,
they can't lower it that much because they have to
give money to their index. They have to give money
to the trustee, which is them, and then they have
to spend money on marketing with the index.
Speaker 1 (34:08):
Like I'm aware of SMP funds that charge.
Speaker 2 (34:11):
That's true too, or your bass.
Speaker 1 (34:14):
Yeah, the index can't be that expensive.
Speaker 2 (34:16):
Definitely less so when it comes to the S and
P five hundred. Sorry for all the ETF talk, but
half of it was Matt's idea. The other half that
was all me.
Speaker 1 (34:25):
Please write in and let us know, Please, Darren, No, I.
Speaker 2 (34:29):
Always want to hear I read it. I read every comment,
so keep them coming. Please don't hurt my feelings.
Speaker 1 (34:37):
Go ahead and hurt badlines. And that was the Money
Stuff Podcast.
Speaker 2 (34:46):
I'm Matt Leuvian and I'm Katie Greifeld.
Speaker 1 (34:48):
You can find my work by subscribing to The Money
Stuff newsletter on Bloomberg dot com, and you.
Speaker 2 (34:53):
Can find me on Bloomberg TV every day on Open
Interest between nine to eleven am Eastern.
Speaker 1 (34:58):
We'd love to hear from you. You can send an
email to money Pod at Bloomberg dot net, ask us
a question and we might answer it on air.
Speaker 2 (35:05):
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 (35:11):
The Money Stuff Podcast is produced by Anna Maserakis and
Moses One.
Speaker 2 (35:15):
Our theme music was composed by Blake Maples and Stage
Bauman is Bloomberg's head of Podcasts.
Speaker 1 (35:19):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
I do have a bird update.
Speaker 1 (00:09):
I was gonna say, you texted me a picture of
your bird. Yeah, and you just like, without any sense
of irony, You're like, Fatspa's teen feathers are coming in.
Speaker 2 (00:18):
So she's just foughts ban I think so, I mean see.
Speaker 1 (00:21):
Thoughts, but like for purposes of this podcast, or do
you call him that? Like to your parents and in the.
Speaker 2 (00:27):
Halls and walls of the Greifeld house, he is just bird.
And also we're saying he as if he's a boy,
but we don't know that.
Speaker 1 (00:34):
But this front of the show Lackman.
Speaker 2 (00:36):
Yeah, to the rest of the world, he's Fatspa front
of the show Bill Lackman. But I haven't explained the
joke to my parents.
Speaker 1 (00:42):
Yet, so we explained it to the bird quietly.
Speaker 2 (00:45):
I think I have said to him, your name is Bilackman,
but I don't think he's internalized that that was the
update though, that his teenage feathers are coming in.
Speaker 1 (00:54):
Good him.
Speaker 2 (00:55):
Yeah, it's super interesting. Hopefully I'm not the only one
who thinks so. And Starling's are juveniles when they first
grow their feathers, they're super brown. And kind of boring.
But in the later stages of being a juvenile, he's
still not an adult he or she, but they get
this like interesting polka dot pattern on their chest and
(01:15):
so it's growing in and patches the polka dots on
his chest. Yeah, he's super cute.
Speaker 1 (01:21):
Yeah, so you'll know his gender because like they have
different plumage on their adults.
Speaker 2 (01:25):
Yes, So hopefully in the next couple months we should
know it'll be a gender reveal.
Speaker 1 (01:32):
Are you gonna have a bird gender reveal party?
Speaker 2 (01:34):
I think it's more he or she is throwing the
party for us, and the party is just very solely
overtime the feathers change.
Speaker 1 (01:43):
This is making me realize I have another question, which is,
what will thoughts but romantic life be, like.
Speaker 2 (01:49):
You know, none or I think right now it's none.
I would like to.
Speaker 1 (01:55):
I'm settled down at a nice lady bird of us.
Speaker 2 (01:57):
Yeah, exactly, you know, I don't know. I was thinking
it would be nice for thoughts but to have a
friend where my parents live in New Jersey. Unfortunately, it's
not that uncommon to find stranded baby birds, so maybe
that'll happen in the next few years.
Speaker 1 (02:13):
Right, I assume like there's no prospect of like visiting
wild starlings chatting with thoughts like.
Speaker 2 (02:22):
Setting him up with a wild bird. I don't know.
I don't know logistically how that would work. I don't
think there are like any starling stud farms either.
Speaker 1 (02:32):
But hey, just run around the backyard right like indoor
bird or I don't know if.
Speaker 2 (02:38):
He would come back, And I worry about him being
able to feed himself. He is. Oh another update. I
sort of got this one as interesting too. So I
was talking about how he only wants to land on humans.
So because he's in this largish half outdoor half indoor room,
and he had been in the cage and then we
would let him out for free flight, I made the
executive decision, let's just have him out all the time.
(03:02):
The cage doors are open. He can go in and
out as he pleases, because there's a hose and a
drain in the floor in that room, so we can
just clean it down whenever we need to.
Speaker 1 (03:11):
With I need a like that.
Speaker 2 (03:12):
With the introduction of free flight, he is much more
confident about perching on things other than humans.
Speaker 1 (03:20):
Yeah. Yeah, he's like flying around all day and needs.
Speaker 2 (03:24):
Sometimes That's there's not always a human in the room
with him, So now he's more comfortable with the idea
that other objects are suitable purchase.
Speaker 1 (03:32):
Hello, and welcome to the Money's Love Podcast, your podcast
where you're talking about stuff related to money. I'm Matt
Levine and I read the money Stopt column for Bloomberg Opinion.
Speaker 2 (03:42):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (03:48):
If that's he's going to be all burned updates, it's
just gonna be Yeah, but he's going to get a.
Speaker 2 (03:52):
Microphone and he's just squawks. He does have different squawks
for different things, Like you can tell when he's talking
about atfs when you talk about ETFs, you know, or
memes for that matter.
Speaker 1 (04:06):
Yeah, memes, memestocks are back.
Speaker 2 (04:09):
We're back in twenty twenty one, the helcyon days.
Speaker 1 (04:16):
I have to say, yeah, I'm not feeling it. Are
there people feeling it? Am I just old? Like? Are
the people on the internet like, oh yeah, this is
just as good as it was in twenty twenty one.
Speaker 2 (04:26):
It kind of reminds me of Crypto, how Crypto had
this resurgence and we're back at all time highs and
then some and it just feels like way less people care.
And it feels kind of that way with the meme
frenzy that we're seeing right now.
Speaker 1 (04:39):
Crypto is weirder because Crypto has a lot of different
like streams, like memestocks kind of have you know, one
stream which is people on the internet doing memes. That's true,
it just feels like less.
Speaker 2 (04:49):
Yeah, I don't know, Well, we've seen it before.
Speaker 1 (04:52):
You know, you've seen it before.
Speaker 2 (04:53):
It was novel the first time.
Speaker 1 (04:56):
Right, I mean, you know the point at memes Dice
is like people are on the internet talking about them
and then too they go up a lot, right, and
you really need the going up a lot to make
it that fun. And I feel like we're not quite there.
I mean, the Novelty in twenty twenty one was so
you know, like millions of people came to Wall Street
(05:17):
Bets for the first time, like it was creating millions
of accounts a day. Yeah, and that doesn't seem to
be happening here because like everyone who was going to
get into it get into it. I mean now that
fully realized. The first time I knew it, but I
didn't like fully internalize it. How much memes dogs are?
Can I do with short squeezes? It's so important to
every memestock thesis, like oh, the evil shorts are getting
(05:37):
squeezed right, Like it's it's like such a central part
of the story. And like one thing is that there
were learnings from twenty twenty one hedge funds, like don't
short a ton of crummy consumer focused stocks because you
might get carried out. And so if all the shorts
are like less short, then uh, you know, Bernhower was
(05:59):
writing about this newsletter that the shorts are going to
have smaller positions in this conference. So what that suggests
is like one, it's easier to do a short squeeze,
like you'll get kind of the meme stock pop because
as soon as a stock starts meming, all the shortsellers
are going to cover their positions. But then two, it's
not going to be as long lasting or as big
because they all just cover their positions immediately and there
(06:20):
won't be like the games up there with like months
where people were like, oh, it's going to be the
mother of all short squeze is the shorts still haven't
enforced that, and like that's just it's instantaneous now. Yeah.
Speaker 2 (06:29):
It still does though, seem like maybe it's not sophisticated
hedge funds who are short in these stocks, like most
of the ones that went crazy this week, or Real
least Coals, which kind of led the meme frenzy this
specific week. I think it's forty eight percent of its
float was shorted. Yeah, I mean, well, I was thinking
about that list that you asked chat gibt for or
(06:51):
the chat GBT produced for you, and one of it was,
you know, the company needs to be unloved or not appreciated.
Speaker 1 (06:58):
Yeah, right, So I asked chat gbt like it's the
next caravan and it's the next hundred bagger, and it
gave me this kind of memi answer. Yeah, it was
like it needs to have a heavy short interest and
be like unloved or underappreciated by the market. And that
is kind of that's it.
Speaker 2 (07:13):
That's like it felt like that was the most important thing.
Speaker 1 (07:18):
Or it's a sense of resentment. You need to be
like mad at you need to have.
Speaker 2 (07:21):
A chip on your shoulder. Yeah, so that goes hand
in hand with the you know, heavy short interest that
this is you're going to put them in the same line.
Speaker 1 (07:31):
Yeah. Yeah, it's like there's like technical reasons that everyone
could hate US stock and it could not be heavily
shorted because it's like really hard to borrow. But now
in general, that's those are the same thing.
Speaker 2 (07:40):
Something that I appreciated though, about the fact that we're
having this conversation in twenty twenty five was that it
dispelled at least two myths that were part of the
conversation in twenty twenty one. The first being that the
activity that we saw back then was all fueled by
stimulus checks, you know, the stimulus checks that the govern
and had helicopter across everyone.
Speaker 1 (08:02):
Yeah, I know. That totally dispels that met I mean,
like some of the stuff I've read about this meme
stock thing is like there's been enough of a stock
rally to create kind of a wealth effect, and like
the snameuless checks are another form of that.
Speaker 2 (08:14):
But yeah, I agree, Like, yeah, that could have been
true in any time. That's right, except for I guess
twenty twenty two and everyone.
Speaker 1 (08:21):
But yeah, I mean, no, you're right, it's not the
stimulus checks, and.
Speaker 2 (08:24):
The wealth effect I think has somewhat been eroded by inflation.
The fact that Okay, stocks have gone up, but it
so have the prices on everything else. I was in
a grocery store and Hoboken and there were these like
probably looking college kids and they were complaining about the
price of like produce. I was like, that's so interesting,
Like it's just so much in just everyday conversations that
(08:47):
you stumble across people complaining about how expensive everything is.
So I think the wealth effect is out there, but
I think it's less so. The other myth that it
dispelled was that the me mania was just a byproduct
of zero interest rates. That is very much not the
case right now.
Speaker 1 (09:04):
Yeah, that's fair, right. Another thing that you were just
learning it was like, it's not an isolated phenomenon, right,
It's not just like it has happened once and then
people like learned from it. Like I think that what
people learn from it is like it works, right, It's
like a good game.
Speaker 2 (09:18):
It's a good game.
Speaker 1 (09:19):
Why not make a stock triple? And you know the
course of a few days.
Speaker 2 (09:24):
Also, I know you explicitly said it's not investment advice,
but I know that so many people after reading your
column must have for fun, gone to chat GBT and
asked what the next carbon is?
Speaker 1 (09:35):
Yeah, I mean, like right, I wrote, like a reader
emailed me to be like I aske chat GPT and
that carbon I was, and it told me open Door,
So I bought open Door and look at me right.
And I don't get the sense that what has happened
in the last week or two is mainly or like
largely AI driven, Yeah, but it does feel like in
(09:56):
twenty twenty one there was this like coordination mechanism where
people who wanted to buy Mimi stocks and like have
stocks that go up a lot, like would go to
you know, social media, so they'd Reddit mostly right Wall
Street paths, and they'd like meet their friends there and
their friends would talk about what stocks would go up,
and they'd all kind of like coordinate around the stocks
(10:17):
that they wanted to go up. And like, in some
ways it feels like AI, which is like trained on Reddit,
you know, has like found a way to abstract that
where now, if you want to find the next to
Mimi stock that will go up a lot, your instinct
might not be to go to Reddit and ask the
people there. Your instinct might be to go to chat
chapt and ask chat chapt and chat GPT might tell you, right,
(10:37):
it might tell you something that's kind of similar to
a reddit or would tell you I think that's an interesting,
like new vector for meme stocks to happen. And yeah,
it's like you don't need anyone else on Reddit pumping
the stock because like our AI tools have now been
trained on that kind of meme stock, thinking.
Speaker 2 (10:54):
Yeah, I hadn't heard the idea that lllm's are just
a blurry jpeg of the Internet.
Speaker 1 (11:00):
That's a ten Chang's headline that I love that.
Speaker 2 (11:02):
I love that I hadn't read that piece. I will say,
reading your music's on that just made me more existentially
worried about humanity because I don't think that people should
be taking advice from Reddit or the blurry sess thing
that's produced Reddit, right.
Speaker 1 (11:22):
I mean Alex balk used to say the first rule
of the Internet is the things you hate about the
Internet or the things you hate about people. When you
say people shouldn't be taking advice from Reddit, you're saying
people shouldn't be taking advice from people like AI is
a distillation of Yes, the wisdom and the foibles of
people right of the masses, Yeah, of something of some
(11:44):
subset of people. Yeah, the people who are on Reddit,
not only but also them. Yeah. Right, Like used to
write this, Like if you had asked someone one hundred
years ago what stocks should I buy? Or like how
do stocks go up? They probably have said something like
stock go up because a lot of people want to
buy them. It's like fairly straightforward. I think if you
(12:04):
ask people fifty years ago what stocks will go up,
they would say things like stocks reflect the expected value
of future cash flows and true stocks that will go
up are the ones that have good businesses that are
undervalued by the market or something right.
Speaker 2 (12:17):
Makes sense, And I think if you asked.
Speaker 1 (12:19):
Today, the answer is the stocks that people want to
buy are the ones that go up. Right. Yeah, there's
this like pseudo science of investing based on fundamental analysis
that kind of ruled for fifty for you know, seventy
five years, and that now like has received a little
bit and been replaced by ah, whatever people want to do,
what they're going to do, right, And like, in some
ways we've had like new technologies to distill and like
(12:40):
amplify whatever people want to do they're going to do,
and those technologies include the Internet and now AI. But
like In some ways it's frustrating because things don't have reasons,
but in other ways it's like that's how it should be.
It's just like investing is an empirical science. Like if
the stocks go up, it's because the stocks went up.
There's not like some axiomatic that will tell you why
(13:01):
thyes will go up. It's like you have to sort
of know what people are thinking.
Speaker 2 (13:04):
I do kind of love that. Every time this happens.
You know, there's a set of serious people who have
to engage with it and like try.
Speaker 1 (13:12):
To Am I one of them? Not really, No, No,
I'm talking more about like I lost my mind the
last night that happened, but now I have like zen.
Speaker 2 (13:20):
I'm talking about more about like cell side sure, and
like you know, single.
Speaker 1 (13:24):
Stock anlysts, you really like live in an ecosystem of
like stocks reflect the present value of their future cash.
Speaker 2 (13:31):
Yeah, that's your bible. Yeah, your whole job is predicated
on that.
Speaker 1 (13:36):
You have like a little fundamental model.
Speaker 2 (13:38):
It's really right, It's precious. There was a note from
Barclay's talking about how to engage with it. They said
that one way you can hedge is like through a
dispersion trade of sorts, in this case, using options to
bet on a basket of meme stocks that will continue
to be far more vital than the s and P
five hundred. Those wanting to take a more directional bet
(13:59):
on the frothiest company they can buy puts that would
benefit if he shares reverse course, which I don't know.
I just feel like the safest thing that anyone could
do is just not short.
Speaker 1 (14:09):
Things, right, I mean, like, I think the idea of
buying putsas like you capped your Yes, you could lose
that much money, but no more.
Speaker 2 (14:17):
Your losses aren't infinite.
Speaker 1 (14:19):
Right, It's the safest way to short meme stacks. But no,
I agree with you, Like I would not personally wake
up and see a memestack mania and be like, oh
I gotta betty ends these. That's on that good use
of my time. But I'm not a professional investor and
I'm not a research channelist or.
Speaker 2 (14:34):
Even before you get to that point, you know, if
you don't want to get your face ripped off on
a company that you were shorting, maybe just don't short it, right, Yeah,
no investment advice.
Speaker 1 (14:44):
No, I wouldn't. But I you know some people, some
people you know their job is to make correct market calls,
and other people their job and I symbolize with the
research channeists, because other people their job is to create
relevant markets related content. And when there's a memestock behavior,
you're like, well, what memestock content am I going to produce?
(15:04):
And I know that I know that difficulty. Well, sympathize
with anyone else who has to create memes like related content.
Speaker 2 (15:25):
I want everyone to know that this was your idea.
Speaker 1 (15:29):
I know. I keep pushing ETFs, I know, and I
keep sayings, I.
Speaker 2 (15:33):
Don't know if anyone wants to listen to it. This
was Matt's idea.
Speaker 1 (15:36):
I love these ETFs.
Speaker 2 (15:37):
Yeah, three five three five one ETFs three fifty one's yeah.
Speaker 1 (15:45):
So one way to understand exchange traded funds is that
they're exchange traded funds and they have nice like liquidity properties.
But the real way to understand ETFs is that they
are tages. Yes, and in particular, I learned that if
you buy a mutual fund like you annually pay capital
gains taxes on like the funds trading activity as whereas
(16:07):
if you buy an ETF you do not. Because ets
have found a way to make all of their trading
both the meet redemptions and to like change their positions.
They found a way to make all of their trading
not a tax realization event. And this involves like in
kind creations and redemptions. That involves like doing big heartbeat
trades with like authorized participants. It's a whole ecosystem. But
(16:30):
the way it works is the result of it is
that you don't pay taxes.
Speaker 2 (16:33):
Well, you get to decide one you want to take
the tax hit.
Speaker 1 (16:36):
Yeah, if you buy an ETF, this is not one
hundred percent try, but this is you know, largely true direction.
If you buy an ETF, you do not pay any
taxes until you sell the ETF, which is not true
of mutual funds. Are mutual funds you pay tax every
year and the older forever. But with an ETF, you
don't pay taxes until you sell the ETF shares and
then gets wrapped up in the ecosystem of like you
buy an asset, you defer taxes forever. You bar against
(16:59):
the asset if you need to. Eventually you die, your
airs get stepped out basis and like no one ever
pays the tax, but at least you defer the tax.
So even if you saw you might have to. If
you sell the thing, eventually you pay taxes, and so
that's really good. And it's like, you know, if you
own like an S and P five hundred ETF, it's
a little bit more tax efficient than if you own
an SMP five hundred mutual fund because they're trading your
redemptions whatever. But like, like whatever, it's not a huge
(17:21):
impact on your life to pay those capital in sizes.
Where it's really interesting is if you can use that
to wrap other stuff. And so I think and so
we're talking about like the Bloomberg's just teamed to lead
you write a big article about these these three but
like directionally, the idea is you worked at like a
(17:41):
tech company, you got a lot of stock early on,
and so your stock has a basis of roughly zero
and it's now worth roughly one hundred million dollars. Does
seem like some of these trades are for like one
hundred million dollars, And so you have a lot of
the stock and if you sell it, you'll have tens
of billions of dollars with capital against taxes. And what
you do is someone comes to you and like I
(18:02):
will build an ETF for you, and you PLoP your
stock into the CTF that it is custom built for you,
and then the ETF does trades to get of that
stock and replace it with like, you know, the S
and P five hundred, and then you are left with
S and P five hundred and you don't pay any
taxes deferred taxes. You have zero basis in the S
(18:23):
and P five hundred, but you've deferred taxes. You've sold
out of your giant concentrated position in your employer stock
and replaced it with like a nice diversified index fund
without paying taxes, which is a really neat trick. Yes,
I'm like oversimplifying. There's actually like rules about the original
contribution has to be kind of diversified, so you can't
just literally PLoP all of your employers stock and nothing
else into it. But you can do it.
Speaker 2 (18:45):
We've talked about swap funds on this.
Speaker 1 (18:48):
This is like a better swap fund. You don't need
other people, you just do it with your stuff. Historically,
a swap fund was like ten people get together and
they PLoP their stock in and then.
Speaker 2 (18:56):
Like I don't know, ten people.
Speaker 1 (18:57):
Firstified pool of like each other stocks. This is like
we just boot boom. You're into the S and P
five hundred so much clean. It is like a swap fund.
It's a similar idea.
Speaker 2 (19:07):
So this kind of blows.
Speaker 1 (19:10):
INTF form because you get the ability to diversify by
doing heart beats. In the article, someone calls it a
black hole for capital gain size perfect.
Speaker 2 (19:17):
It's like descriptions.
Speaker 1 (19:18):
It's just it's just like a solution. You don't have
to it's legal. It's legal.
Speaker 2 (19:23):
Sure, it's legal, and I want to. I think it
was a lawyer that Justina interviewed for the piece who
said that he's worked on hundreds of these or something
of that magnitude, right, and like.
Speaker 1 (19:35):
It's hundreds, it's not millions. Yeah, because like you need
a certain amount of money to make this work. This
is not free. You need some advisor. Do you need
an ETF issuer to do a white label ETF for you?
So it's expensive. If you have one hundred million dollars
of zero basis stock in your employer, like it's worth
(19:57):
it because you're saving twenty million dollars with capital inside.
If you have like you know, you bought some Tesla
a few years ago and now you have a million
dollar Tesla position with like a basis of like five
hundred thousand dollars, you're probably not going to do this.
But one thing that I have talked about on this.
Speaker 2 (20:13):
Podcast is I think have I also talked about it.
Speaker 1 (20:16):
We've talked about it, right, I have like advocated that
like eventually everything will be an eaty, Like everything, every
product will be etfized, and like one thing that means
is like there will be automation and costs will come
down so that if you're just like I want to
do an ETF of this thing, like you'll push a
button and it'll charge you like ninety five dollars and
(20:38):
you'll get the ATF. And like when that happens, no
one will have to pay capital gains taxes on their
stock because everyone will be able to do this.
Speaker 2 (20:45):
And then we'll find out some way that this is illegal,
Like it'll become.
Speaker 1 (20:49):
One will be like, well we should stop that. It's
not like obviously this should work, right, I mean yeah,
So the trade that they do is called a heartbeat, right,
Like the idea is that you're an ETF, you want
some concentrated stock, you don't pay taxes on in kind
creations and redemptions. So if someone brings you a basket
of your stock, if they bring you a basket of
the underlying shares and you give them ETF shares, that's
(21:10):
not a taxable transaction or vice versa. And so what
they do is they have special baskets where basically, you know,
a Jane Street or a bank or somebody will go
to an ETF. They'll bring in the stuff the ETF wants.
They'll give them the S and P. Five hundred, they'll
get back ETF shares. They'll wait like a day, and
then the next day they'll hand back the ETF shares
and take out whatever the ETF doesn't want. So it's like,
(21:31):
these are not taxable transactions. Yeah, but they're weird transactions.
They're not in the full underlying basket of the ETF.
They're in like the specific stuff that ETF does he
doesn't want, And they're not done because the counterparty wants
to be an investor in the ETF. They're done because
you know, the ETF is a just thing. It's training.
(21:51):
I first learned about this in twenty nineteen when Bloomberg
had a big article about heart beats and.
Speaker 2 (21:57):
A seminal piece or a.
Speaker 1 (21:58):
Seminal piece, and they were sort of like this really
be legal, and you know, my view was like, sure
it should be legal. ETFs doesn't pay taxes. But now
it's like people have like learned from this mechanism that
they can just get rid of all taxes. And then
it's like, yeah, you know, someone might look at this
and say, hey, we should close that loophole.
Speaker 2 (22:15):
That's the thing, Like the notion of a heartbeat is
pretty well socialized at this point, but like these individualized
heartbeat ETFs. The fact that these ETFs only exist to
do this because you see heartbeat trades once a quarter
in some of the biggest CTFs out.
Speaker 1 (22:32):
There, right because they're index funds. The index changes, and
so they have to get rid of some stocks and
get those talks and like you heartbeat that away so
you don't pay taxes. It's not obvious that ETF holders
shouldn't have to pay taxes on their index rebalancing, but
like everyone's fine with that.
Speaker 2 (22:44):
It's fine, Yeah, this is this is this is the
only purpose of the CTF.
Speaker 1 (22:50):
I mean, who can say with the only bet who
can say?
Speaker 2 (22:52):
But so this leading anecdote that just you know, opened
with was talking about the Twin Oak Active Opportunities ETF
and and the thing about ETF, So this one has
nearly four hundred and fifty million dollars in assets that
could theoretically be all one person.
Speaker 1 (23:09):
It could My impression was that it was like a
bunch of like SMP and stuff. But then it was
like three sort of nearly one hundred million dollar positions
and like three text talks, which no, say, day a
dog suggests it was roughly three people who like this
is pure speculation, but like it could have been three
people who were really employees at those companies or were
(23:31):
like granture capital investors in those companies and who have
like very low basis thok in those companies.
Speaker 2 (23:36):
Well, theoretically, if they are still holding onto the CTF
and invested in the CTF in some way and they're
big enough, we should be able in like forty five
days or something to see who they are sure, which
is interesting to me. So you lose yes early the.
Speaker 1 (23:53):
Judge of that it does you don't know, right, I
don't know worked at a company.
Speaker 2 (23:57):
You use the anonymity that you would get in the
traditional swap funds.
Speaker 1 (24:01):
Yeah. The other thing that was interesting. The article is
like you lose that and you're even in a more regulated,
more public vehicle. One thing about it is in the
ETF trades on the exchange, so anyone can buy it.
Next to the other thing, no one would. They don't
market it, and like it's not even clear that anyone
could because you might own all of it and just
not sell it. But but like you know, but they can.
They can buy from authelized participants. Like in theory someone
(24:23):
could buy the ETF. Well, and so you have like
these weird obligations where you have like fiducial duties to
run the ETF in the right way.
Speaker 2 (24:30):
Well, going back to the name, the twin Oak Active
Opportunities ETF, which builds itself, is seeking long term capital appreciation.
I could be poking around at my brokerage account somehow
come across that and be like, yeah, you could click buy.
I want to see capital appreciate. That sounds good. So
that's cool too, right.
Speaker 1 (24:48):
It's a like weird family office trade that in theory
anyone could free ride on. But like the whole juice
in the trade is in the first like three days,
so you're not like getting the a super exciting product
if you just buy it on the exchange, because like
the whole point of it was to say with the
people taxes.
Speaker 2 (25:06):
Sometimes I wonder slash worry about what's going to happen
to the ETF industry. As a reporter, I don't have
any feelings, but it feels like every ETF. I track
ETF filings very closely, but every ETF filing nowadays is
like triple leverage quantum computing stock with an income strategy overlay.
(25:28):
It's just crazy. It's like all of this like spaghetti
sauce that's being thrown at the wall, and then maybe
these will become more popular, and then what does the
industry turn into. I don't know.
Speaker 1 (25:37):
It's just like it turns into everything. It's it's so
I've written about like tokenization mm hmm, and I think
it like tokenization of securities is being largely like people
trying to find sneaky rays around securities laws and like
pretend that it's about technology. But someone asks you, like
what do you think is like the good case? Like
where are like useful things that can be done with
the organization? And I look at this stuff and I'm like,
(26:00):
this is gonna be token. Like this is like a
whole product set that will be turned into APIs that
will be turned into like, if you want et F,
there will be like a series of buttons you can
push and the ETF will come out and will be
like exactly the et F you want, and it will
just exist as an ETF. And you want to have
to like sit at a meeting with a wealth manager
(26:23):
or like go to a white label ETF firm, you'll
just like the computer will give you the ETF that
you want, and it will heartbeat away whatever you don't want.
Speaker 2 (26:31):
I feel like that is change traded everything, yea, not
just funds.
Speaker 1 (26:36):
Any portfolio, any trade, any like combination of wins.
Speaker 2 (26:41):
Yeah, any desire that I might feel.
Speaker 1 (26:44):
About to hold. Yeah, yeah, any desire.
Speaker 2 (26:50):
Well we have to talk about Invesco.
Speaker 1 (27:08):
Yes, that's your idea, okay.
Speaker 2 (27:10):
Also in ETF land. This one actually was my idea.
But really interesting filing last week. I should stop saying interesting.
Let me just state of fact. There was a filing
last week from Invesco. Here's something that not a lot
of people know or care about.
Speaker 1 (27:32):
I mean to step out of the room. You have fun.
Speaker 2 (27:34):
The queues. The queues it's an ETF the tracks the
NASAQ one hundred, so it's pretty big, pretty huge, three
hundred and fifty three hundred and sixty billion dollars depending
on the day. Started in the nineties, really from the
dawn of the ETF, one of the oldest still existing ETFs.
It's actually a unit investment trust. And that's interesting. My
(27:56):
mind is blown because Invesco doesn't make any money off
of the queues. The way that the fee breakdown as
it stands right now, they charge twenty basis points. A
bunch goes to Nasdaq, from which they license the index.
A bunch goes to B and Y because they're the trustee.
That does leave some for Invesco. But it is written
(28:16):
into the que's prospectus that Invesco has to spend that
on marketing, which is why the cues are like the
official ETF of the NCAA and why every big marketing exactly.
But it's an enormous marketing budget. But I wrote about
this in August twenty twenty three because it's one of
my favorite quirks in just the investing landscape that the
(28:40):
queues are the most profitable ETF because you're charging twenty
basis points on three hundred and fifty billion dollars of
assets that spins off over seven hundred million dollars of
fee revenue a year and investco. It's just this piggy
bank that they can't break. But they're now trying to
convert the cues into an open ended ETF from a
(29:02):
unit investment trust. But to do that, they need shareholders
to approve it. They need holders of the cues to
approve it, which is a gargantuan task because they need
fifty percent quorum on this vote, and there's tens of
thousands of queues holders at this point. So it's like
the ultimate exercise in herding cats. And I'm really fascinated
(29:24):
to see how this goes.
Speaker 1 (29:25):
Well, let me ask you this question. Can they use
their enormous marketing budget to like send personal mailings to
eat shareholder and like I don't think sor and like
please vote?
Speaker 2 (29:35):
I don't think so it's marketing. I mean, in a sense,
it's not just like marketing the product to buy the product, though,
it's like trying to rally shareholders for this specific purpose.
Speaker 1 (29:46):
Please buy cues to vote to change it into an ETF.
Speaker 2 (29:50):
Well, they are offering a carrot of sorts. They will
lower the fee to eighteen basis points.
Speaker 1 (29:56):
Eighteen basis points for an index ETF seems still high,
stordinarily high.
Speaker 2 (30:00):
It is very high. You're right about that, But I
mean a lot of these holders are locked in. They've
been holding this forever and they don't want to take
the capital gains head. But if they are able to
convert it, they'll theoretically be able to change the revenue breakdown.
So even by lowering the feet, they're still making so
much more money than they were before.
Speaker 1 (30:21):
They won't have to pay NASDAC.
Speaker 2 (30:22):
And So, because it's a natural question posed by my editors,
who loses out here? And it seems like who loses
out are the advertisers?
Speaker 1 (30:35):
You mean the recipient of the advertising?
Speaker 2 (30:37):
Yes, exactly. So the thinking seems to be that Nasdaq
will still get their eight basis points. There are eight
basis points of flesh.
Speaker 1 (30:48):
Bony for an index, because like you get, I believe.
Speaker 2 (30:55):
It's exclusive though, like I don't think anyone, Yeah, I know, yeah.
Speaker 1 (31:00):
Okay, that makes sense.
Speaker 2 (31:01):
So NASAK will still get paid a licensing fee, which
is pretty hefty. VONI will have some sort of role
not trustee. I believe that Invesco is asking shareholders to
improve Investco to be the trustee as well. Bloomberg Intelligence
estimates that right now Invesco spends eight basis points on marketing,
(31:22):
which is so much money. Invesco estimates that'll be reduced
to two to three two to three basis points to start,
which translates into something like one hundred and fifty million
dollars in annual revenue that Investco would unlock with pretty
much no incremental spend to get it right. So you've
(31:43):
seen Investco shares go absolutely bananas. I mean, it still
needs to be approved. The vote is on October twenty fourth,
and it's just going to be so hard to get
all those people.
Speaker 1 (31:53):
Any I love the difficulty of getting redown investors to
it or anything like it comes up occasionally in corporate Yeah,
and although not that much because corporates usually have mostly
institutional shareholders unless when their means ducks. But yeah, intf Land,
it seems hard.
Speaker 2 (32:09):
It does seem hard. I think that's interesting. I hope
that listeners agree, and please tell me if you don't.
The other part of the story that I'll tell you
about the only other unit investment trust of really meaningful
size out there is Spy Sure, which is also from
the nineties, born in nineteen ninety three, such as myself sure, and.
Speaker 1 (32:29):
Also famously has there's like some other children born around
that time. Whoever in the.
Speaker 2 (32:35):
Perspectus, yeah, exactly, like all of these really old ETFs
have these funky perspectuses.
Speaker 1 (32:41):
Yeah, they really against perpetuity problems, where like, yeah, their
trusts and so they can't last past, you know, seventy
five years past the life of some living person, and
so they name a bunch of babies as like their
reference lives for their early against perpetuities.
Speaker 2 (32:54):
If you ever really bored, it's worth poking around in
the perspectus of ETFs that were born in the nineties.
Speaker 1 (33:00):
I have I hope you going to say I've never
been that word. I'm pretty sure I've looked at the
spy perspective, so might I have been that word?
Speaker 2 (33:06):
I asked an Apaglia of State Street Investment Management on
Monday whether or not State Street was going to try
something similar with Spy, and she said that filing to
us is interesting, we are going to learn from it.
And I never say never. Do you know if we
learn something that we like from this proxy, we will
think about it, which I heard as if Invesco is
(33:28):
able to pull this off, maybe we'll do it with SPY.
Speaker 1 (33:31):
The spy have the same economic structure. Yes, eonomic money
from spy.
Speaker 2 (33:36):
So some money stays in the door because State Street
is currently the trustee on SPY, but they also have
to spend a boatload of money on marketing as mandated
by the perspectives.
Speaker 1 (33:48):
Okay, what's the charge for a spy?
Speaker 2 (33:51):
I think spy has nine basis points? I know, Well,
they can't lower it that much because they have to
give money to their index. They have to give money
to the trustee, which is them, and then they have
to spend money on marketing with the index.
Speaker 1 (34:08):
Like I'm aware of SMP funds that charge.
Speaker 2 (34:11):
That's true too, or your bass.
Speaker 1 (34:14):
Yeah, the index can't be that expensive.
Speaker 2 (34:16):
Definitely less so when it comes to the S and
P five hundred. Sorry for all the ETF talk, but
half of it was Matt's idea. The other half that
was all me.
Speaker 1 (34:25):
Please write in and let us know, Please, Darren, No, I.
Speaker 2 (34:29):
Always want to hear I read it. I read every comment,
so keep them coming. Please don't hurt my feelings.
Speaker 1 (34:37):
Go ahead and hurt badlines. And that was the Money
Stuff Podcast.
Speaker 2 (34:46):
I'm Matt Leuvian and I'm Katie Greifeld.
Speaker 1 (34:48):
You can find my work by subscribing to The Money
Stuff newsletter on Bloomberg dot com, and you.
Speaker 2 (34:53):
Can find me on Bloomberg TV every day on Open
Interest between nine to eleven am Eastern.
Speaker 1 (34:58):
We'd love to hear from you. You can send an
email to money Pod at Bloomberg dot net, ask us
a question and we might answer it on air.
Speaker 2 (35:05):
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 (35:11):
The Money Stuff Podcast is produced by Anna Maserakis and
Moses One.
Speaker 2 (35:15):
Our theme music was composed by Blake Maples and Stage
Bauman is Bloomberg's head of Podcasts.
Speaker 1 (35:19):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Special Summer Offer: Exclusively on Apple Podcasts, try our Dateline Premium subscription completely free for one month! With Dateline Premium, you get every episode ad-free plus exclusive bonus content.
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.