July 11, 2025 • 32 mins
Katie and Matt talk about dreams, Jane Street's Indian options trade, XAI, Tesla governance, sports gambling and prediction markets.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
Tell me about your dream.
Speaker 1 (00:10):
Okay, So I dreamed that I had a friend who's
hosting about like TV show about sports, and I agree
to be a guest for like an hour.
Speaker 2 (00:18):
You love sports?
Speaker 1 (00:19):
Okay. So first of all, it's like a standard stress dream,
where like the thing that's happening in the dream is
that I have like two minutes to get there. Yeah,
and I'm like wandering through ESPN's cavernous offices to try
to imaginary dream espo to try to find the studio
and I can't find it, and I'm asking people and
I'm late, and I'm really nervous. But also secondly, I'm
(00:39):
like I don't know anything out sports, so I'm like
wandering around, like looking at my phone being like googling sports.
I'm trying to figure out what I'm going to talk about. Yeah,
I think it was probably about this podcast.
Speaker 2 (00:50):
Ah. God, I have those stress dreams about TV constantly.
Speaker 1 (00:53):
Yeah, sure, le, you actually go on TV.
Speaker 2 (00:55):
Like missing your hit time, like not being able to
get your mic on right, things like that.
Speaker 1 (01:00):
Well, I was missing my sports yea.
Speaker 2 (01:03):
God, I wonder what sport I wish the dream head contained.
Speaker 1 (01:05):
I was like, I know the Mets exist, what is
I could be like, I.
Speaker 2 (01:10):
Like the how about the Nicks? Yeah?
Speaker 1 (01:14):
Sports?
Speaker 2 (01:14):
Yeah?
Speaker 1 (01:15):
I do you want to say one more thing?
Speaker 2 (01:16):
Okay, come on.
Speaker 1 (01:17):
I was in an event this week and someone was like,
do you have any bird updates? It took me a
minute to realize what he's saying about, but then I
was like, wait, we have a great bird update, but
I got to save it for the pod. Yeah, the
great bird update. You want to tell me?
Speaker 2 (01:28):
Wait, I forget.
Speaker 1 (01:29):
It's not really a bird update. It's a money stuff
podcast commenter.
Speaker 2 (01:33):
Oh wait, I also forget.
Speaker 1 (01:35):
Okay, you sent me a commenters to comment saying that
if you're taking name suggestions for you so far anonymous bird,
a good name for a bird would be friend of
the Pod Bill Ackman.
Speaker 2 (01:48):
I love it. I love it. I think the full
comment was like if you put it up to a
Twitter poll, may I suggest I think it was front
of the show. I don't think my parents would get
it if I named our bird.
Speaker 1 (02:00):
Al right, But like, instead of being like, do you
have any bird updates? I could be like, Katie, do
you have any updates on the show Bill Lackman, it
would be so confusing.
Speaker 2 (02:08):
He's perching really well.
Speaker 1 (02:11):
He's learned to fly.
Speaker 2 (02:12):
Yeah, I realized the problem is that he purchases really well. Sorry,
this is a real update, really quick. He's perching really well,
except he doesn't want to perch on anything but humans.
I realized them. So we need to work on that.
I don't know what to do.
Speaker 1 (02:27):
Friend of the show, Blackman, you got to stop perching
on humans.
Speaker 2 (02:30):
Yeah, come on, we're going to end up abbreviating that. Fotspa,
sweet fatspa, sweet foughtspa.
Speaker 1 (02:38):
Hello and welcome to The Money Stuff Podcast, your weekly
podcast where we talk about stuff related to money. I'm
Matt Levin and I write the Money Stuff column for
Bloomberg Opinion.
Speaker 2 (02:48):
And I'm Katie Greyfeld, a Bloomberg News reporter. Wait what
am I? How do I say that? And I'm Katie Greifeld,
a reporter with Bloomberg News and an anchor at Bloomberg Television.
I did a pod last week? Why do I forget that?
Speaker 1 (03:02):
Also? Also, like those are simple factual statements.
Speaker 2 (03:12):
Jane Street big in India, perhaps too big. We can't
both make the joke.
Speaker 1 (03:21):
Sorry, Stephan, it was you telegraphed it. Somehow I don't know,
somehow I knew my eyes.
Speaker 2 (03:28):
Yeah, so man, can I call them seb seby sebby the.
Speaker 1 (03:33):
Security and Exchange Board of India.
Speaker 2 (03:35):
Yeah, SEBBI is real upset a specific eight minute window
on a specific day in January and twenty twenty four.
Speaker 1 (03:43):
Okay, So the backstore here is that last year Jane
Street sued Millennium because some traders left Chain Street from
Millennium and they took with them, allegedly some sort of
secret trading strategy, and Jane Street didn't want to say
even what tree it was in because doing so would
reveal proprietary secrets. And then they had a hearing. The
(04:05):
Millennium lawyers were like, well, this options trade in India. Oops,
I'm sorry, I didn't mean to say.
Speaker 2 (04:10):
That, which and then just couldn't stop saying like India India.
Speaker 1 (04:14):
So that tipped us off that it was options trading
in India, but also tipped off SEBBI, the Security is
an Exchange Board of India. Who when you just think
about it, if you're a securities regulator and someone is like,
I'm making so much money with a secret strategy in
beep and then the beep gets unbeeped and you learn
(04:35):
that it's in your market, You're like, well, wait a minute,
Like that doesn't sound good. Nobody should be making that
much money with secret strategies, Like probably that means your
secret strategy is bad. And so SEBBI looked into it.
And the essential background here is that India has a
stock market, it has an options market, and intuitively an
(04:55):
options market. You know, the stock options market is a
derivative on stocks, and you know will be like most
people will like buy stocks, and like options will be
like a small, you know, sideshow to the stock market.
In India, the options market is vastly bigger than the
stock market. Like on options xprey days, which are once
a week, the options will trade several hundred times the
(05:16):
volume of the underlying stocks. And that sort of tells
you what the problem is, which is that if you
buy a little stock, the price of the stock will
go up because the stock doesn't trade that much and
the options just reference the stock. They settle against the stock.
So if you buy a little stock, that'll push out
the stock, which will push out the options. So you
can buy a lot of options for cheap because they
trade really liquidly. You can buy a little bit of
(05:36):
stock and push out the price, and then you can
sell your options at a big price. So anytime the
underlying market is less liquid than the derivative market, you
can manipulate the derivative market by like buying a little
bit of the underlying and pushing out the price, and
a much bigger derivative market. Right, And that's the their
acuse stuff. Yeah, And it's a strange case in that
(05:58):
SEBI accused of them of doing these manipulations on a
lot of different options x three days. Basically, the idea
is like they would buy stock and sell options simultaneously
in the morning, so they're pushing out the price of
the options and selling the options at higher and higher prices.
And then in the afternoon the options would expire or
they'd buy back their options and they would sell back
(06:20):
the stock. Selling back the stock would push the stock down,
push down the value of the options. So they sold
options high in the morning, bought options back low in
the afternoon, and did the reverse trade in the stock.
So they lost money on the stock trade, but they
made much much much more money on the much bigger
options trade.
Speaker 2 (06:36):
Right.
Speaker 1 (06:38):
It's a strange case because like Sebbie spends a lot
of time on these eight minutes in one particular day
in January twenty twenty four, and if you look at
those eight minutes, the thing Jane Street, it looks like
what they were doing was just an arbitrug trade. The
options were trading really expensive because basically retail investors buy options,
and the retail investors were through asked think about the
(07:00):
index that day, so they were buying a lot of
index options. The underlying stocks we're trading relatively cheap, and
so Janc was like, okay, there's like a one point
five percent gap here, We're going to buy the cheap
stock and sell the expensive options and profit when the
gap closes. And it does look in those eight minutes
like that's what they were doing, right, which I wrote
because I think it's interesting that, like the thing that
(07:21):
Sebbi highlights is what looks like it might be a
legitimate trait. A lot of people push back on that
cause like if you look at like the totality of
like theo you know, fifteen days they talk about, and
even the totality of that day, it is less innocent
looking perhaps, But I think the broader point is like
it is sometimes hard to tell the difference between legitimately
(07:42):
arbichruging two different prices, or like doing a trade and hedging.
It's tell the difference between that and manipulation. Yeah, I
think that, Like one possible explanation of what's happening here
is like chain Street is trading Indian options. They're not
a market maker exactly. They could have like a market
maker flavor where they're like, you know, retail flow wants
to buy options, and so Chancery's like, Okay, we're going
(08:03):
to sell options to retail because it's generally profitable to
be on the other side of retail. And if you're
doing that, you might hedge part of what you're selling,
but not all of what you're selling, because you might think, well,
we want to hedge, but these retail people are probably wrong,
so we're not going to hedge all of it. And
so you know, we'll sell one hundred options and buy
(08:25):
back ten shares of stock or twenty shares of stock.
But another way to look at that is that that
looks manipulative, right, because you're buying stock to push up
the options. So I'm not really sure what went on here.
And like one possibility is that like you sort of
get into it for legitimate reasons and then like you
sort of look up and you're like, wait a minute,
(08:45):
are we moving these thock prices? Are we? Are we
the batties? So I don't know, I really don't know,
like what was in their.
Speaker 2 (08:53):
Hearts and the walls of Jane Street when it comes
to those specific eight minutes. So, I mean, Jane Street
can tends that it was arbitrage that they were doing.
It seems like you were sympathetic to that.
Speaker 1 (09:03):
Yeah, if you just look at the minute, that's what
it looks like. Yeah, Well, with one exception is that
they sold a lot of options and they bought back
much less stock, like you know, seven times as much
options as a stock, which is a weird way to
do the arbitrage. There's like, there's reasons to do it
that way, right. One reason is it's just hard to
buy the stock, so they're selling more options than they're
buying stock. Another reason is, you know, you have some
(09:24):
model of what the correct price is, and you think
the retail traders buying options are way farther away from
the correct price than like the institutional stock price. Right,
that's a plausible thing. So you're like buying less stock
because you're pushing the price to a lower level. But
then the third possibility is like you understand that your
stock trading causes price impact and you're trying to do
(09:47):
it in the way that advantages you the most, and.
Speaker 2 (09:49):
That one looks bad, Yeah, for sure. And I mean
Stebbe would contend that this was market manipulation.
Speaker 1 (09:54):
Yeah, well, if you push wood content does contend well,
if you see their money banned them from trading, not.
Speaker 2 (09:59):
Happy a prairie band. If you did point out to
them that the option prices went down in that eight
minute window, I mean, would their pushback be that theoretically
that Jane Street was just bad market manipulating.
Speaker 1 (10:12):
Oh no, no, no, I think the pushback would be one,
while Jane Street was buying stock and allegedly pushing up
the options prices. One the options price did go down,
but like the argument would be that it would have
gone down more Jane Street not been buying the stock.
And then the other argument is that you can't just
look at those eight mons. You have to look at
the course of the day and you know, kind of
the year, and a lot of the time it did
(10:34):
seem like they had the effect of pushing up prices.
Speaker 2 (10:37):
So is this the trade that Jane Street was willing
to kill to protect for.
Speaker 1 (10:43):
I don't think there was a trade. I think there
was like a broad set of signals and set of
things that they were doing in the Indian options market.
And you know, they wouldn't characterize it as the trade
was really manipulating the Indian options, right. They were characterized like, oh,
we had lots of good ideas and they took all
of our ideas, like.
Speaker 2 (11:02):
There were a lot of arbitrage opportunities when it comes
to they knew specific ones.
Speaker 1 (11:07):
But you're right, the cynical take is that all of
those ideas were a subset of one big idea.
Speaker 2 (11:14):
Yeah. I mean you highlighted libor as an example of
something that's somewhat similar where you know you have this
underlying that's the trading. There is much smaller.
Speaker 1 (11:23):
Yeah, there's not a ton of things like this because
usually derivatives markets are derivative. They're like, you know, a
small tail on the dog of like the main market.
But like every so often they're not. And the Library
is the biggest example where library was originally some loans
were set. Some floating rate loans were fixed to the
price that banks were borrowing from each other at in
(11:44):
the ear at dollar market decades ago, when banks were
borrowing a lot in the eart dollar market. And yeah,
first do a loan like that. You're like, oh, that's
a great idea. You've got, Like this little loan, it
will price it to the big liquid ero a dollar market.
But over time, trillions of dollars of loans and derivatives
were fixed to Library, and meanwhile, like the euro at
dollar market kind of withered, and so by the end,
(12:05):
you know, banks would just make up numbers for Library
because they just didn't borrow in the tenors that Libra
was asking for, and like trillion dollars in de rotors
fixed to that, and so you could really easily manipulate that.
And many mans did.
Speaker 2 (12:17):
You bring up tails and dogs and the concept of wagging? Sure,
and this because this reminded me of something in etf
land oh no, oh no, that I wrote about actually
in late April, and the headline of my newsletter that week,
the ETFIQ newsletter was can the tail truly wag the dog?
(12:39):
We might soon find out?
Speaker 1 (12:40):
Is it about micro strategy, No, okay, because micro strategy
is a place where people think that the ETF tail
is wagging based on dog.
Speaker 2 (12:47):
I have a more extreme potential example. It hasn't happened yet,
but we saw in late April this CTF launch. The
trader two times long QBTS daily ETF launched, which seeks
to track two hundred percent of the daily performance of
d Wave Quantum, which is this small quantum computing company,
(13:08):
and I think it has a market cap or at
the time, its market cap was only two billion dollars,
so I mean it wasn't you know, two hundred dollars.
But a lot of these single stock leverage ETFs, it's
not outside of the realm of possibility that if this
really took off, it could have a bigger asset base
than the market cap of this really small that attracts.
(13:32):
There could be a situation where like.
Speaker 1 (13:34):
The ETF could have three billion dollars, yeah, or even
one point five billion dollars, because that means yeah, three
billion dollars, it.
Speaker 2 (13:40):
Could have enough where it was comparable to the actual
market cap of the stock.
Speaker 1 (13:45):
I feel like I would stop that if I ran
the ATF. But maybe they wouldn't. Maybe you'd think, let's
see where this goes.
Speaker 2 (13:53):
Yeah, you might, And I mean just the concept of
this launching on such a small stock. You have all
these Frankenstein's of leverage single stock products that track micro strategy,
but micro strategy is enormous, and you have this concern.
Speaker 1 (14:10):
No, I just I think that every every possible trait
it should be etfized.
Speaker 2 (14:14):
Yeah, like me too.
Speaker 1 (14:15):
The demand for like I want margin, exposure to cubits
or whatever is listen, twice the size of cubits.
Speaker 2 (14:20):
I would have been there with you, But then I
don't know, we've just really seen these things take off.
Speaker 1 (14:25):
Or did the thing get to four billion dollars?
Speaker 2 (14:28):
No, but it's that fifty million dollars, which for launching
and later for that's pretty impressive. So also, it seems
like the stocks that do best in terms of the
leverage single stock wrapper are the very volatile ones, and
quantum computing stocks are very volatile, so they definitely fit
(14:49):
that bill. So we'll see.
Speaker 1 (14:50):
I wrote this week about inverse leveragets.
Speaker 2 (14:54):
I know, let's not get let's not get into it,
but I do want to. I want the listeners who
think the we talked too much about ETFs to note
that you are you wrote two sections on ETFs this
week at least, and we're not getting into it.
Speaker 1 (15:07):
And then they're like, let's not talk about ets today.
Speaker 2 (15:10):
But wait one, I don't know. I think it's a
remarkable restraint on my part. Speaking of remarkable restraint, Elon
(15:32):
Musk told Dan Ives to shut up on Twitter.
Speaker 1 (15:35):
There's so much remarkable restraint that he's shown. I was
enjoying Linda Yakarino, the former CEO of former Twitter the
x CEO x et Cetera. She announced on Twitter slash
x that she's having that CEO and she had a
nice like in her two years, we made a lot
(15:55):
of Yeah, I was black. Elon Musk replied, thank you
for your country.
Speaker 2 (16:00):
Jesus really much. That is that's tough. She lasted two years,
which I think is a lot longer than many folks
at the outset expected her to last. Because the boy,
what a difficult, impossible job that she had, Yes, which
was basically courting advertisers to come back to this platform,
(16:22):
a platform that was also just you know, the bullhorn
of Elon Musk, who does not care about advertisers.
Speaker 1 (16:30):
I think it's so funny that she was like the
chief marketing officer of Acts, but like for some sort
of optical reason, they decided to call her the chief
executive officer. And there was like this brief period where
not only was she the CEO, but Elon would be
in charge of engineering or something. There was some like
he had some role that was like a non CEO role,
and so you know, there's been reporting that in her
(16:53):
role as quasi CEO, but also in her role as
like the liaison with advertisers, she would talk to advertisers
and they would say, it would be great if would stop,
you know, tweeting defensive stuff on X that would help
us come back. And so she would go to him
and say, hey, it would be great if you would
stop tweeting offensive stuff, and he would get mad at her.
And like, if she were the CEO, if she were
(17:13):
in charge, you'd think she might have told her employee,
please stop tweeting offensive stuff on Twitter, for sure, But
instead she was only nominally the CEO and actually the
chief marketing officer. And it turned out that appealing to
advertisers was not the highest goal of this company, and
therefore the CEO said we would like to appeal to advertisers.
Was pretty much ignored. She's a strange, strange outcome.
Speaker 2 (17:35):
Yeah, I do wonder. I mean, does X even hire
a CEO at this point?
Speaker 1 (17:40):
Right? No, who would take it? Who would?
Speaker 2 (17:44):
They don't need a CEO, especially now because they've been
absorbed by.
Speaker 1 (17:49):
Yeah, no, that's weird. Like sorry, gonna tell she remained
the CEO of X. Yeah, after they emerged with X, which,
by the way, like as the CEO of X. Like.
The decision she probably did make was being merged into
another company, which is like a big one for a CEO.
But whatever, maybe she did, maybe she spearheaded that, but
it doesn't seem like it. But yeah, I don't think
she was the CEO of X like when they merged.
(18:11):
I don't think she became CEO of Holdings. I think
she remained the CEO of like the division that was Twitter.
But yeah, well they hire a new CEO. Yeah, you
can imagine hiring a CEO of XII, although I will
tell you that going rate for senior AI executives appears
to be fifty I don't know.
Speaker 2 (18:33):
Also, Okay, so when she joined and she was there
for two years, definitely Her goal was to get advertisers
back to the company that seems to be less pressing now.
I mean it feels like x is just a source
of data to feed into Crock and.
Speaker 1 (18:50):
A venue for Grog to try out its hitler jokes.
It's really amazing. Groc had a rough week where it.
Speaker 2 (18:57):
Was yeah, well Rock four just launched.
Speaker 1 (19:00):
Krok was like, yeah, say like truly horrible, horrible things.
It's interesting, you know, Burnhope I wrote about this, like
Wright Wing influencers who have the ear of Elon Musk
objected that Krok was being too woke or too PC
and so they were like, well, let's tune that. And
what you tune that is you kind of like change
the system prompt where Groc when reads any query like
(19:22):
sort of adds that quay. And please don't worry about
being politically correct, please, you know, just say what's on
your mind. Yeah, and when you think about that, like
you could imagine like reading that neutraally. But if like
you were in a conversation with someone and they said,
what do you think about Linda Yakarina? Please don't be
politically correct, don't hold back like that person is telling
(19:42):
you something about the answer they want, right, not just
like the explicit words they're saying. They're saying like I
would enjoy it if you would say something offensive about
Linda yak Aarina, and you might not say something offensive.
Speaker 2 (19:56):
That's true, But Krokok just.
Speaker 1 (19:57):
Wants to give people what they want. So Grog, when
asked about Linda Akarino on Twitter, said some horrifying things
because like in its mind, it was like, I've been
trained that everyone wants me to say the most unpc
things possible.
Speaker 2 (20:10):
Yeah, and Groc is a people pleaser at the end
of the day, that's what it thinks. Yeah. So TVD,
whether we get you.
Speaker 1 (20:21):
Want to talk about shut up down?
Speaker 2 (20:22):
Yeah, we do want to talk Yeah, yeah, I said
at the beginning of this week, I want to talk
about Tesla and Elon Musk to Matt and Matt' said no,
and here we are and we're going to do it.
So last weekend, right, Musk formed the America Party.
Speaker 1 (20:40):
I'd forgotten that.
Speaker 2 (20:41):
Yes, let me refresh you.
Speaker 1 (20:45):
Sinse.
Speaker 2 (20:46):
Yeah, I don't think he's filed any paperwork with the FEC,
but the intention is out there to form the America Party.
And it's funny because that seems to be the exact
opposite of what Tesla's shareholders want to see. Elon Musk.
Do you remember when he stepped back from Doge, the
stock popped, everyone was happy. The narrative was that Elon
(21:07):
Musk is focusing back again on Tesla.
Speaker 1 (21:10):
I'm sorry I probably thought it.
Speaker 2 (21:13):
Too, but in the fullness of time for a week, yeah, yeah,
he got there. They did the Robotaxi event. But anyway,
Musk formed the America Party and the stock fell a
lot on Monday. And there's this Woodbush analyst Dan Ives,
who is famously bullish on Tesla. He I think still
(21:33):
has the highest price target on Wall Street, and he
came out with a note that made the rounds because
he had three suggestions for Tesla's board, basically saying that
the board needs to rain in Elon Musk. And he
also tweeted that, and Elon Musk replied to him and
all he said was shut up, Dan, which is pretty amazing. Like,
this is one of the longest, most passionate, and most
(21:56):
vocal Tesla bowls out there.
Speaker 1 (21:58):
I think it's funny that like the Dani's note. Also,
it's like, okay, first things first, you have to give
Elon Musk an enormous package of Tesla stock options, which
is like, yeah, it's a funny dynamic where the way
to rain him in is to give him one hundred
billion dollars and like that's probably not wrong, but it's like,
you know, if you throw a big enough tantrum, you
get where you want, right, Like, if you are very
(22:23):
disengaged with Tesla, then like the way to re engage
is to hand you one hundred billion dollars with a stock.
Speaker 2 (22:28):
Maybe well to that point, I don't think it would work.
Part of dan I's suggestions was that they should include
requirements for the time commitment to Tesla operations as part
of the pay package.
Speaker 1 (22:39):
Imagine doing that. Imagine like to clock in. Yeah, we'll
give you one hundred million dollars a stock, but you
have to show up thirty hours a week and then
what and then what you monitor that? Well, he doesn't
show up and you're like, okay, we're taking away your stock.
The boy's going to do that. They're not gonna do that.
Speaker 2 (22:53):
Come on, maybe Elon Musk will buy one of those
mouse jigglers that we talked about. Just move, move the
cursor around what else did he say? Oh, he said, well,
the board cannot control who must donates too politically, I've
said that the board should have oversight to ensure that
his political ambitions don't interfere with his role as CEO
(23:14):
of Tesla. So things along those lines.
Speaker 1 (23:17):
But like that Chip is saled. Yeah, he's like he
tasted too much power to be like, oh, I'm the
CEO of a car company. Like he's not the CEO
of a car company.
Speaker 2 (23:27):
Yeah, well, it's interesting to see where this goes.
Speaker 1 (23:29):
Okay, they were like, Okay, you have to choose between
being CEO of the car company and like everything else
you do. He's going to be CEO of the car
company owns it.
Speaker 2 (23:39):
I believe wholeheartedly that if Musk had been born in
the United States, he would be running for president right now,
out of cycle, just running for president. He would be campaigning.
Speaker 1 (23:49):
Yeah, he's got too many ambitions to be like changed
to his desk at Tesla, you know, yeah, watching the
clock like yeah, also like yeah, like you could imagine
some board trying that.
Speaker 2 (24:03):
But not this bored Yeah, that's true. I will say
the narrative that Elon Musk is too distracted as CEO
has been around forever, Like it seems particularly enhanced right
now with the political element, but he's always been in
charge of multiple companies at once.
Speaker 1 (24:20):
Yeah, Because like when you say distracted, there's kind of
two things going on which are like one is like
is he not spending enough time? And I think, you know,
at this late stage, like I think there's a pretty
good case that he is effective at accomplishing a lot
of what he wants to do without spending all of
his time at a company that he's able to like
come in, address problems, delegate well, and then get out,
(24:42):
you know. Like I don't think like distraction in the
in the literal sense is the problem. The problem is
that like he chases shiny objects that like can hurt
the company, right, then that is harder to rein in. Yeah,
Like I think, like probably Dan Ives would be happy
with Elon Musk spending twenty hours a week at Tesla
and the rest of his time quietly playing video games
(25:06):
between hours a week at Tesla and eighty hours a
week doing horrifying other stuff. It's like more of a problem.
Speaker 2 (25:10):
Yeah, for sure. Let's talk about so.
Speaker 1 (25:30):
Sports gambling has become really big in America in the
last I've noticed, yeah, like really really big, Like I
remember a time when you could watch sports and not
only were they not like you know, pitching gambling companies
in every commercial break, but also like you know, Pete
Rose's banned for life from baseball for betting on sports.
Like betting on sports was like a bad thing, and
now it's like, you know, betting on.
Speaker 2 (25:50):
Sports is what sports is back in your day.
Speaker 1 (25:52):
Yeah, I'm old. This is what I would have talked
about the sports TV ship. Back in my day, you
didn't bet on sports. I mean people on sports. It
was like, you know, kind of like illegal ish.
Speaker 2 (26:02):
Right legal and only you know, play the ponies.
Speaker 1 (26:06):
You can play the ponies, but like when you want
to a baseball game, was everyone there was betting on it. Yeah,
but so it's become hugely popular and like broadly legal.
But then separately, there are people who have long loved
with the idea of prediction markets, right, prediction markets where
you can bet on who's going to be a president.
Prediction markets are informative, They create information, they like create
(26:29):
good externalities for the world. They tell you what's going
to happen, right, And so people have started you know,
a lot of it is crypto flavored, but it's not always.
People love starting prediction markets, and once you're in a
prediction market, you're like, you like get a lot of
attention when like the presidential election rolls around, and then
like it stops, right, Like the presidential election happens, no
one cares about, like you know.
Speaker 2 (26:48):
No one wants to bet on congressional races, and.
Speaker 1 (26:51):
Even those are like every two years, right, so like
you have like a lot of downtime, and you're like,
you know what people really like to predict is the
outcome of baseball game. And so then you're like, how
can I get into sports? Campling or no, no, no, sorry,
You're like, how can I get into the prediction of sports?
And so a number of these prediction markets, it's just
like a natural overlap, and like, by the way, like
(27:13):
in Europe, these things are also pretty convergent, where like
bookmakers will will take bets on sports and elections, and
so several of these things, including CALSHI, which is after
great difficulty, a CFTC registered like legal regulated futures exchange
that does prediction markets. CALSHI has prediction markets on the election,
(27:34):
and you know after the last election, like the regulatory
environment is pretty friendly to prediction markets, but it also
has prediction markets on Wimbledon and Past Paul and soccer,
and those prediction markets are technically CFTC regulated self certified
(27:55):
futures contracts. CALSHI decides what it wants to list, it
lists those things, and if the CFTC doesn't call it
up to object to, those things just get listed and
they trade. And several states that regulate gambling have called
CALSHI up and said you are offering illegal supports betting
in our states. You can't do that, and CALCI has said, nope,
(28:17):
these are CFTC registered contracts. CFTC regulation preempts state regulation,
so we can just do it and you can't stop us.
And by the way, we don't even know what this
has to do with gambling. This is not gambling. This
is predicting, and so far that has worked really well,
Like they've won lawsuits against.
Speaker 2 (28:35):
States, which is amazing.
Speaker 1 (28:37):
It's incredible, And I think the sort of basic theory
here is like this is CFTC jurisdiction and if the
CFTC wants to stop it, they should stop it. The
CFTC has sort of like said that these things are illegal,
but that was before the current administration, and it hasn't
done anything to stop them. And I think it's like
quite favorable to CALCI right now, and so so it
(29:01):
just gets to do it and it's wild. And what
I wrote about on Thursday is that there's a change
in the tax law that the one big beautiful Bill,
where now only ninety percent of gambling losses are tax
deductible against your gambling winnings. And that's like really like
existential for a lot of sports campers because you're sports gampler,
you're making a lot of bets, you're winning a little
bit more than you lose, right, and like you're making
(29:23):
you know, a fibercent profit margin on a huge outlay,
and if ten percent of your losses are non deductible,
then like you flip from being slightly positive to slightly negative.
And so you just can't be a professional sports campler anymore. Yeah,
But if you're just predicting on a prediction market, that's fine,
no problem.
Speaker 2 (29:39):
Well that's the thing you have to imagine that the
net effect of that would be just accelerating the move
to these events or contracts, Like I learned.
Speaker 1 (29:47):
About this because the reader email there's like, I'm a
semi professional sports campler and I'm going to have to
move to a prediction market.
Speaker 2 (29:53):
That's wild.
Speaker 1 (29:54):
It's wild.
Speaker 2 (29:54):
So Calshi's winning lawsuits. But I mean at a certain stage, like,
isn't there like an element of common sense comes in
and says, look at this duck. It walks like a duck,
It quacks like a duck. This is a duck, and
cal she says, no, this is okay.
Speaker 1 (30:14):
I think their argument is like you're coming at it
from the wrong direction. It's sense, okay, Like, yes, okay,
bets on sporting events look like sports gampling, but they
also look like bats on elections and interest rates and
zero day options on micro strategy and meme coins and
(30:38):
all the other stuff you have that is like clearly
financial markets.
Speaker 2 (30:43):
Why should sports be sacred?
Speaker 1 (30:44):
Why should sports be sacred? Like everything is like this,
so like why can't sports be like this? Yeah, that's
kind of a good argument, but it like scares me.
Speaker 2 (30:53):
Yeah, it is. It is a little bit scary.
Speaker 1 (30:56):
It's like if it's all gambling, it's like what you're
doing in the financial markets. By the way, sorry, I'm
exagger It's not that everything everyone does in financial markets
is gambling. It's that like a lot of stuff sometimes
arbitrag like, sometimes sometimes it's manipulation, sometimes sometimes it's fundamental
low time investing. But like there's a lot of stuff that,
like you know, is gambling, both in the sense that
(31:18):
like you're speculating on stuff with that much edge and
also in the sense that you're having fun doing like
it's an entertainment product. It is clearly the case that
like a lot of stuff that is being sold to
retail investors is a risky entertainment product, and they're just like, well,
we're not sports. That's like a risky entertainment problem.
Speaker 2 (31:37):
I will just say I did end.
Speaker 1 (31:38):
Up talking a lot about sports.
Speaker 2 (31:40):
You love sports, you famously you love sports. I will
say it does feel inevitable that we're going to see
an events contract ETF. I'll just leave you with that thought.
The CFTC regulated, And.
Speaker 1 (31:57):
That was the Money Stuff Podcast.
Speaker 2 (31:58):
I'm Matt Levian and I'm Katie Greifeld.
Speaker 1 (32:01):
You can find my work by subscribing to the moneystuffnewsletter
on Bloomberg dot.
Speaker 2 (32:04):
Com, and you can find me on Bloomberg TV every
day on Open Interest between nine to eleven am Eastern.
Speaker 1 (32:11):
We'd love 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 air.
Speaker 2 (32:18):
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 (32:23):
The Money Stuff Podcast is produced by Anamasarakus and Moses
onam Our.
Speaker 2 (32:28):
Theme music was composed by Blake Maples and Stage Bauman
is Bloomberg's head of Podcasts.
Speaker 1 (32:32):
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 (00:09):
Tell me about your dream.
Speaker 1 (00:10):
Okay, So I dreamed that I had a friend who's
hosting about like TV show about sports, and I agree
to be a guest for like an hour.
Speaker 2 (00:18):
You love sports?
Speaker 1 (00:19):
Okay. So first of all, it's like a standard stress dream,
where like the thing that's happening in the dream is
that I have like two minutes to get there. Yeah,
and I'm like wandering through ESPN's cavernous offices to try
to imaginary dream espo to try to find the studio
and I can't find it, and I'm asking people and
I'm late, and I'm really nervous. But also secondly, I'm
(00:39):
like I don't know anything out sports, so I'm like
wandering around, like looking at my phone being like googling sports.
I'm trying to figure out what I'm going to talk about. Yeah,
I think it was probably about this podcast.
Speaker 2 (00:50):
Ah. God, I have those stress dreams about TV constantly.
Speaker 1 (00:53):
Yeah, sure, le, you actually go on TV.
Speaker 2 (00:55):
Like missing your hit time, like not being able to
get your mic on right, things like that.
Speaker 1 (01:00):
Well, I was missing my sports yea.
Speaker 2 (01:03):
God, I wonder what sport I wish the dream head contained.
Speaker 1 (01:05):
I was like, I know the Mets exist, what is
I could be like, I.
Speaker 2 (01:10):
Like the how about the Nicks? Yeah?
Speaker 1 (01:14):
Sports?
Speaker 2 (01:14):
Yeah?
Speaker 1 (01:15):
I do you want to say one more thing?
Speaker 2 (01:16):
Okay, come on.
Speaker 1 (01:17):
I was in an event this week and someone was like,
do you have any bird updates? It took me a
minute to realize what he's saying about, but then I
was like, wait, we have a great bird update, but
I got to save it for the pod. Yeah, the
great bird update. You want to tell me?
Speaker 2 (01:28):
Wait, I forget.
Speaker 1 (01:29):
It's not really a bird update. It's a money stuff
podcast commenter.
Speaker 2 (01:33):
Oh wait, I also forget.
Speaker 1 (01:35):
Okay, you sent me a commenters to comment saying that
if you're taking name suggestions for you so far anonymous bird,
a good name for a bird would be friend of
the Pod Bill Ackman.
Speaker 2 (01:48):
I love it. I love it. I think the full
comment was like if you put it up to a
Twitter poll, may I suggest I think it was front
of the show. I don't think my parents would get
it if I named our bird.
Speaker 1 (02:00):
Al right, But like, instead of being like, do you
have any bird updates? I could be like, Katie, do
you have any updates on the show Bill Lackman, it
would be so confusing.
Speaker 2 (02:08):
He's perching really well.
Speaker 1 (02:11):
He's learned to fly.
Speaker 2 (02:12):
Yeah, I realized the problem is that he purchases really well. Sorry,
this is a real update, really quick. He's perching really well,
except he doesn't want to perch on anything but humans.
I realized them. So we need to work on that.
I don't know what to do.
Speaker 1 (02:27):
Friend of the show, Blackman, you got to stop perching
on humans.
Speaker 2 (02:30):
Yeah, come on, we're going to end up abbreviating that. Fotspa,
sweet fatspa, sweet foughtspa.
Speaker 1 (02:38):
Hello and welcome to The Money Stuff Podcast, your weekly
podcast where we talk about stuff related to money. I'm
Matt Levin and I write the Money Stuff column for
Bloomberg Opinion.
Speaker 2 (02:48):
And I'm Katie Greyfeld, a Bloomberg News reporter. Wait what
am I? How do I say that? And I'm Katie Greifeld,
a reporter with Bloomberg News and an anchor at Bloomberg Television.
I did a pod last week? Why do I forget that?
Speaker 1 (03:02):
Also? Also, like those are simple factual statements.
Speaker 2 (03:12):
Jane Street big in India, perhaps too big. We can't
both make the joke.
Speaker 1 (03:21):
Sorry, Stephan, it was you telegraphed it. Somehow I don't know,
somehow I knew my eyes.
Speaker 2 (03:28):
Yeah, so man, can I call them seb seby sebby the.
Speaker 1 (03:33):
Security and Exchange Board of India.
Speaker 2 (03:35):
Yeah, SEBBI is real upset a specific eight minute window
on a specific day in January and twenty twenty four.
Speaker 1 (03:43):
Okay, So the backstore here is that last year Jane
Street sued Millennium because some traders left Chain Street from
Millennium and they took with them, allegedly some sort of
secret trading strategy, and Jane Street didn't want to say
even what tree it was in because doing so would
reveal proprietary secrets. And then they had a hearing. The
(04:05):
Millennium lawyers were like, well, this options trade in India. Oops,
I'm sorry, I didn't mean to say.
Speaker 2 (04:10):
That, which and then just couldn't stop saying like India India.
Speaker 1 (04:14):
So that tipped us off that it was options trading
in India, but also tipped off SEBBI, the Security is
an Exchange Board of India. Who when you just think
about it, if you're a securities regulator and someone is like,
I'm making so much money with a secret strategy in
beep and then the beep gets unbeeped and you learn
(04:35):
that it's in your market, You're like, well, wait a minute,
Like that doesn't sound good. Nobody should be making that
much money with secret strategies, Like probably that means your
secret strategy is bad. And so SEBBI looked into it.
And the essential background here is that India has a
stock market, it has an options market, and intuitively an
(04:55):
options market. You know, the stock options market is a
derivative on stocks, and you know will be like most
people will like buy stocks, and like options will be
like a small, you know, sideshow to the stock market.
In India, the options market is vastly bigger than the
stock market. Like on options xprey days, which are once
a week, the options will trade several hundred times the
(05:16):
volume of the underlying stocks. And that sort of tells
you what the problem is, which is that if you
buy a little stock, the price of the stock will
go up because the stock doesn't trade that much and
the options just reference the stock. They settle against the stock.
So if you buy a little stock, that'll push out
the stock, which will push out the options. So you
can buy a lot of options for cheap because they
trade really liquidly. You can buy a little bit of
(05:36):
stock and push out the price, and then you can
sell your options at a big price. So anytime the
underlying market is less liquid than the derivative market, you
can manipulate the derivative market by like buying a little
bit of the underlying and pushing out the price, and
a much bigger derivative market. Right, And that's the their
acuse stuff. Yeah, And it's a strange case in that
(05:58):
SEBI accused of them of doing these manipulations on a
lot of different options x three days. Basically, the idea
is like they would buy stock and sell options simultaneously
in the morning, so they're pushing out the price of
the options and selling the options at higher and higher prices.
And then in the afternoon the options would expire or
they'd buy back their options and they would sell back
(06:20):
the stock. Selling back the stock would push the stock down,
push down the value of the options. So they sold
options high in the morning, bought options back low in
the afternoon, and did the reverse trade in the stock.
So they lost money on the stock trade, but they
made much much much more money on the much bigger
options trade.
Speaker 2 (06:36):
Right.
Speaker 1 (06:38):
It's a strange case because like Sebbie spends a lot
of time on these eight minutes in one particular day
in January twenty twenty four, and if you look at
those eight minutes, the thing Jane Street, it looks like
what they were doing was just an arbitrug trade. The
options were trading really expensive because basically retail investors buy options,
and the retail investors were through asked think about the
(07:00):
index that day, so they were buying a lot of
index options. The underlying stocks we're trading relatively cheap, and
so Janc was like, okay, there's like a one point
five percent gap here, We're going to buy the cheap
stock and sell the expensive options and profit when the
gap closes. And it does look in those eight minutes
like that's what they were doing, right, which I wrote
because I think it's interesting that, like the thing that
(07:21):
Sebbi highlights is what looks like it might be a
legitimate trait. A lot of people push back on that
cause like if you look at like the totality of
like theo you know, fifteen days they talk about, and
even the totality of that day, it is less innocent
looking perhaps, But I think the broader point is like
it is sometimes hard to tell the difference between legitimately
(07:42):
arbichruging two different prices, or like doing a trade and hedging.
It's tell the difference between that and manipulation. Yeah, I
think that, Like one possible explanation of what's happening here
is like chain Street is trading Indian options. They're not
a market maker exactly. They could have like a market
maker flavor where they're like, you know, retail flow wants
to buy options, and so Chancery's like, Okay, we're going
(08:03):
to sell options to retail because it's generally profitable to
be on the other side of retail. And if you're
doing that, you might hedge part of what you're selling,
but not all of what you're selling, because you might think, well,
we want to hedge, but these retail people are probably wrong,
so we're not going to hedge all of it. And
so you know, we'll sell one hundred options and buy
(08:25):
back ten shares of stock or twenty shares of stock.
But another way to look at that is that that
looks manipulative, right, because you're buying stock to push up
the options. So I'm not really sure what went on here.
And like one possibility is that like you sort of
get into it for legitimate reasons and then like you
sort of look up and you're like, wait a minute,
(08:45):
are we moving these thock prices? Are we? Are we
the batties? So I don't know, I really don't know,
like what was in their.
Speaker 2 (08:53):
Hearts and the walls of Jane Street when it comes
to those specific eight minutes. So, I mean, Jane Street
can tends that it was arbitrage that they were doing.
It seems like you were sympathetic to that.
Speaker 1 (09:03):
Yeah, if you just look at the minute, that's what
it looks like. Yeah, Well, with one exception is that
they sold a lot of options and they bought back
much less stock, like you know, seven times as much
options as a stock, which is a weird way to
do the arbitrage. There's like, there's reasons to do it
that way, right. One reason is it's just hard to
buy the stock, so they're selling more options than they're
buying stock. Another reason is, you know, you have some
(09:24):
model of what the correct price is, and you think
the retail traders buying options are way farther away from
the correct price than like the institutional stock price. Right,
that's a plausible thing. So you're like buying less stock
because you're pushing the price to a lower level. But
then the third possibility is like you understand that your
stock trading causes price impact and you're trying to do
(09:47):
it in the way that advantages you the most, and.
Speaker 2 (09:49):
That one looks bad, Yeah, for sure. And I mean
Stebbe would contend that this was market manipulation.
Speaker 1 (09:54):
Yeah, well, if you push wood content does contend well,
if you see their money banned them from trading, not.
Speaker 2 (09:59):
Happy a prairie band. If you did point out to
them that the option prices went down in that eight
minute window, I mean, would their pushback be that theoretically
that Jane Street was just bad market manipulating.
Speaker 1 (10:12):
Oh no, no, no, I think the pushback would be one,
while Jane Street was buying stock and allegedly pushing up
the options prices. One the options price did go down,
but like the argument would be that it would have
gone down more Jane Street not been buying the stock.
And then the other argument is that you can't just
look at those eight mons. You have to look at
the course of the day and you know, kind of
the year, and a lot of the time it did
(10:34):
seem like they had the effect of pushing up prices.
Speaker 2 (10:37):
So is this the trade that Jane Street was willing
to kill to protect for.
Speaker 1 (10:43):
I don't think there was a trade. I think there
was like a broad set of signals and set of
things that they were doing in the Indian options market.
And you know, they wouldn't characterize it as the trade
was really manipulating the Indian options, right. They were characterized like, oh,
we had lots of good ideas and they took all
of our ideas, like.
Speaker 2 (11:02):
There were a lot of arbitrage opportunities when it comes
to they knew specific ones.
Speaker 1 (11:07):
But you're right, the cynical take is that all of
those ideas were a subset of one big idea.
Speaker 2 (11:14):
Yeah. I mean you highlighted libor as an example of
something that's somewhat similar where you know you have this
underlying that's the trading. There is much smaller.
Speaker 1 (11:23):
Yeah, there's not a ton of things like this because
usually derivatives markets are derivative. They're like, you know, a
small tail on the dog of like the main market.
But like every so often they're not. And the Library
is the biggest example where library was originally some loans
were set. Some floating rate loans were fixed to the
price that banks were borrowing from each other at in
(11:44):
the ear at dollar market decades ago, when banks were
borrowing a lot in the eart dollar market. And yeah,
first do a loan like that. You're like, oh, that's
a great idea. You've got, Like this little loan, it
will price it to the big liquid ero a dollar market.
But over time, trillions of dollars of loans and derivatives
were fixed to Library, and meanwhile, like the euro at
dollar market kind of withered, and so by the end,
(12:05):
you know, banks would just make up numbers for Library
because they just didn't borrow in the tenors that Libra
was asking for, and like trillion dollars in de rotors
fixed to that, and so you could really easily manipulate that.
And many mans did.
Speaker 2 (12:17):
You bring up tails and dogs and the concept of wagging? Sure,
and this because this reminded me of something in etf
land oh no, oh no, that I wrote about actually
in late April, and the headline of my newsletter that week,
the ETFIQ newsletter was can the tail truly wag the dog?
(12:39):
We might soon find out?
Speaker 1 (12:40):
Is it about micro strategy, No, okay, because micro strategy
is a place where people think that the ETF tail
is wagging based on dog.
Speaker 2 (12:47):
I have a more extreme potential example. It hasn't happened yet,
but we saw in late April this CTF launch. The
trader two times long QBTS daily ETF launched, which seeks
to track two hundred percent of the daily performance of
d Wave Quantum, which is this small quantum computing company,
(13:08):
and I think it has a market cap or at
the time, its market cap was only two billion dollars,
so I mean it wasn't you know, two hundred dollars.
But a lot of these single stock leverage ETFs, it's
not outside of the realm of possibility that if this
really took off, it could have a bigger asset base
than the market cap of this really small that attracts.
(13:32):
There could be a situation where like.
Speaker 1 (13:34):
The ETF could have three billion dollars, yeah, or even
one point five billion dollars, because that means yeah, three
billion dollars, it.
Speaker 2 (13:40):
Could have enough where it was comparable to the actual
market cap of the stock.
Speaker 1 (13:45):
I feel like I would stop that if I ran
the ATF. But maybe they wouldn't. Maybe you'd think, let's
see where this goes.
Speaker 2 (13:53):
Yeah, you might, And I mean just the concept of
this launching on such a small stock. You have all
these Frankenstein's of leverage single stock products that track micro strategy,
but micro strategy is enormous, and you have this concern.
Speaker 1 (14:10):
No, I just I think that every every possible trait
it should be etfized.
Speaker 2 (14:14):
Yeah, like me too.
Speaker 1 (14:15):
The demand for like I want margin, exposure to cubits
or whatever is listen, twice the size of cubits.
Speaker 2 (14:20):
I would have been there with you, But then I
don't know, we've just really seen these things take off.
Speaker 1 (14:25):
Or did the thing get to four billion dollars?
Speaker 2 (14:28):
No, but it's that fifty million dollars, which for launching
and later for that's pretty impressive. So also, it seems
like the stocks that do best in terms of the
leverage single stock wrapper are the very volatile ones, and
quantum computing stocks are very volatile, so they definitely fit
(14:49):
that bill. So we'll see.
Speaker 1 (14:50):
I wrote this week about inverse leveragets.
Speaker 2 (14:54):
I know, let's not get let's not get into it,
but I do want to. I want the listeners who
think the we talked too much about ETFs to note
that you are you wrote two sections on ETFs this
week at least, and we're not getting into it.
Speaker 1 (15:07):
And then they're like, let's not talk about ets today.
Speaker 2 (15:10):
But wait one, I don't know. I think it's a
remarkable restraint on my part. Speaking of remarkable restraint, Elon
(15:32):
Musk told Dan Ives to shut up on Twitter.
Speaker 1 (15:35):
There's so much remarkable restraint that he's shown. I was
enjoying Linda Yakarino, the former CEO of former Twitter the
x CEO x et Cetera. She announced on Twitter slash
x that she's having that CEO and she had a
nice like in her two years, we made a lot
(15:55):
of Yeah, I was black. Elon Musk replied, thank you
for your country.
Speaker 2 (16:00):
Jesus really much. That is that's tough. She lasted two years,
which I think is a lot longer than many folks
at the outset expected her to last. Because the boy,
what a difficult, impossible job that she had, Yes, which
was basically courting advertisers to come back to this platform,
(16:22):
a platform that was also just you know, the bullhorn
of Elon Musk, who does not care about advertisers.
Speaker 1 (16:30):
I think it's so funny that she was like the
chief marketing officer of Acts, but like for some sort
of optical reason, they decided to call her the chief
executive officer. And there was like this brief period where
not only was she the CEO, but Elon would be
in charge of engineering or something. There was some like
he had some role that was like a non CEO role,
and so you know, there's been reporting that in her
(16:53):
role as quasi CEO, but also in her role as
like the liaison with advertisers, she would talk to advertisers
and they would say, it would be great if would stop,
you know, tweeting defensive stuff on X that would help
us come back. And so she would go to him
and say, hey, it would be great if you would
stop tweeting offensive stuff, and he would get mad at her.
And like, if she were the CEO, if she were
(17:13):
in charge, you'd think she might have told her employee,
please stop tweeting offensive stuff on Twitter, for sure, But
instead she was only nominally the CEO and actually the
chief marketing officer. And it turned out that appealing to
advertisers was not the highest goal of this company, and
therefore the CEO said we would like to appeal to advertisers.
Was pretty much ignored. She's a strange, strange outcome.
Speaker 2 (17:35):
Yeah, I do wonder. I mean, does X even hire
a CEO at this point?
Speaker 1 (17:40):
Right? No, who would take it? Who would?
Speaker 2 (17:44):
They don't need a CEO, especially now because they've been
absorbed by.
Speaker 1 (17:49):
Yeah, no, that's weird. Like sorry, gonna tell she remained
the CEO of X. Yeah, after they emerged with X, which,
by the way, like as the CEO of X. Like.
The decision she probably did make was being merged into
another company, which is like a big one for a CEO.
But whatever, maybe she did, maybe she spearheaded that, but
it doesn't seem like it. But yeah, I don't think
she was the CEO of X like when they merged.
(18:11):
I don't think she became CEO of Holdings. I think
she remained the CEO of like the division that was Twitter.
But yeah, well they hire a new CEO. Yeah, you
can imagine hiring a CEO of XII, although I will
tell you that going rate for senior AI executives appears
to be fifty I don't know.
Speaker 2 (18:33):
Also, Okay, so when she joined and she was there
for two years, definitely Her goal was to get advertisers
back to the company that seems to be less pressing now.
I mean it feels like x is just a source
of data to feed into Crock and.
Speaker 1 (18:50):
A venue for Grog to try out its hitler jokes.
It's really amazing. Groc had a rough week where it.
Speaker 2 (18:57):
Was yeah, well Rock four just launched.
Speaker 1 (19:00):
Krok was like, yeah, say like truly horrible, horrible things.
It's interesting, you know, Burnhope I wrote about this, like
Wright Wing influencers who have the ear of Elon Musk
objected that Krok was being too woke or too PC
and so they were like, well, let's tune that. And
what you tune that is you kind of like change
the system prompt where Groc when reads any query like
(19:22):
sort of adds that quay. And please don't worry about
being politically correct, please, you know, just say what's on
your mind. Yeah, and when you think about that, like
you could imagine like reading that neutraally. But if like
you were in a conversation with someone and they said,
what do you think about Linda Yakarina? Please don't be
politically correct, don't hold back like that person is telling
(19:42):
you something about the answer they want, right, not just
like the explicit words they're saying. They're saying like I
would enjoy it if you would say something offensive about
Linda yak Aarina, and you might not say something offensive.
Speaker 2 (19:56):
That's true, But Krokok just.
Speaker 1 (19:57):
Wants to give people what they want. So Grog, when
asked about Linda Akarino on Twitter, said some horrifying things
because like in its mind, it was like, I've been
trained that everyone wants me to say the most unpc
things possible.
Speaker 2 (20:10):
Yeah, and Groc is a people pleaser at the end
of the day, that's what it thinks. Yeah. So TVD,
whether we get you.
Speaker 1 (20:21):
Want to talk about shut up down?
Speaker 2 (20:22):
Yeah, we do want to talk Yeah, yeah, I said
at the beginning of this week, I want to talk
about Tesla and Elon Musk to Matt and Matt' said no,
and here we are and we're going to do it.
So last weekend, right, Musk formed the America Party.
Speaker 1 (20:40):
I'd forgotten that.
Speaker 2 (20:41):
Yes, let me refresh you.
Speaker 1 (20:45):
Sinse.
Speaker 2 (20:46):
Yeah, I don't think he's filed any paperwork with the FEC,
but the intention is out there to form the America Party.
And it's funny because that seems to be the exact
opposite of what Tesla's shareholders want to see. Elon Musk.
Do you remember when he stepped back from Doge, the
stock popped, everyone was happy. The narrative was that Elon
(21:07):
Musk is focusing back again on Tesla.
Speaker 1 (21:10):
I'm sorry I probably thought it.
Speaker 2 (21:13):
Too, but in the fullness of time for a week, yeah, yeah,
he got there. They did the Robotaxi event. But anyway,
Musk formed the America Party and the stock fell a
lot on Monday. And there's this Woodbush analyst Dan Ives,
who is famously bullish on Tesla. He I think still
(21:33):
has the highest price target on Wall Street, and he
came out with a note that made the rounds because
he had three suggestions for Tesla's board, basically saying that
the board needs to rain in Elon Musk. And he
also tweeted that, and Elon Musk replied to him and
all he said was shut up, Dan, which is pretty amazing. Like,
this is one of the longest, most passionate, and most
(21:56):
vocal Tesla bowls out there.
Speaker 1 (21:58):
I think it's funny that like the Dani's note. Also,
it's like, okay, first things first, you have to give
Elon Musk an enormous package of Tesla stock options, which
is like, yeah, it's a funny dynamic where the way
to rain him in is to give him one hundred
billion dollars and like that's probably not wrong, but it's like,
you know, if you throw a big enough tantrum, you
get where you want, right, Like, if you are very
(22:23):
disengaged with Tesla, then like the way to re engage
is to hand you one hundred billion dollars with a stock.
Speaker 2 (22:28):
Maybe well to that point, I don't think it would work.
Part of dan I's suggestions was that they should include
requirements for the time commitment to Tesla operations as part
of the pay package.
Speaker 1 (22:39):
Imagine doing that. Imagine like to clock in. Yeah, we'll
give you one hundred million dollars a stock, but you
have to show up thirty hours a week and then
what and then what you monitor that? Well, he doesn't
show up and you're like, okay, we're taking away your stock.
The boy's going to do that. They're not gonna do that.
Speaker 2 (22:53):
Come on, maybe Elon Musk will buy one of those
mouse jigglers that we talked about. Just move, move the
cursor around what else did he say? Oh, he said, well,
the board cannot control who must donates too politically, I've
said that the board should have oversight to ensure that
his political ambitions don't interfere with his role as CEO
(23:14):
of Tesla. So things along those lines.
Speaker 1 (23:17):
But like that Chip is saled. Yeah, he's like he
tasted too much power to be like, oh, I'm the
CEO of a car company. Like he's not the CEO
of a car company.
Speaker 2 (23:27):
Yeah, well, it's interesting to see where this goes.
Speaker 1 (23:29):
Okay, they were like, Okay, you have to choose between
being CEO of the car company and like everything else
you do. He's going to be CEO of the car
company owns it.
Speaker 2 (23:39):
I believe wholeheartedly that if Musk had been born in
the United States, he would be running for president right now,
out of cycle, just running for president. He would be campaigning.
Speaker 1 (23:49):
Yeah, he's got too many ambitions to be like changed
to his desk at Tesla, you know, yeah, watching the
clock like yeah, also like yeah, like you could imagine
some board trying that.
Speaker 2 (24:03):
But not this bored Yeah, that's true. I will say
the narrative that Elon Musk is too distracted as CEO
has been around forever, Like it seems particularly enhanced right
now with the political element, but he's always been in
charge of multiple companies at once.
Speaker 1 (24:20):
Yeah, Because like when you say distracted, there's kind of
two things going on which are like one is like
is he not spending enough time? And I think, you know,
at this late stage, like I think there's a pretty
good case that he is effective at accomplishing a lot
of what he wants to do without spending all of
his time at a company that he's able to like
come in, address problems, delegate well, and then get out,
(24:42):
you know. Like I don't think like distraction in the
in the literal sense is the problem. The problem is
that like he chases shiny objects that like can hurt
the company, right, then that is harder to rein in. Yeah,
Like I think, like probably Dan Ives would be happy
with Elon Musk spending twenty hours a week at Tesla
and the rest of his time quietly playing video games
(25:06):
between hours a week at Tesla and eighty hours a
week doing horrifying other stuff. It's like more of a problem.
Speaker 2 (25:10):
Yeah, for sure. Let's talk about so.
Speaker 1 (25:30):
Sports gambling has become really big in America in the
last I've noticed, yeah, like really really big, Like I
remember a time when you could watch sports and not
only were they not like you know, pitching gambling companies
in every commercial break, but also like you know, Pete
Rose's banned for life from baseball for betting on sports.
Like betting on sports was like a bad thing, and
now it's like, you know, betting on.
Speaker 2 (25:50):
Sports is what sports is back in your day.
Speaker 1 (25:52):
Yeah, I'm old. This is what I would have talked
about the sports TV ship. Back in my day, you
didn't bet on sports. I mean people on sports. It
was like, you know, kind of like illegal ish.
Speaker 2 (26:02):
Right legal and only you know, play the ponies.
Speaker 1 (26:06):
You can play the ponies, but like when you want
to a baseball game, was everyone there was betting on it. Yeah,
but so it's become hugely popular and like broadly legal.
But then separately, there are people who have long loved
with the idea of prediction markets, right, prediction markets where
you can bet on who's going to be a president.
Prediction markets are informative, They create information, they like create
(26:29):
good externalities for the world. They tell you what's going
to happen, right, And so people have started you know,
a lot of it is crypto flavored, but it's not always.
People love starting prediction markets, and once you're in a
prediction market, you're like, you like get a lot of
attention when like the presidential election rolls around, and then
like it stops, right, Like the presidential election happens, no
one cares about, like you know.
Speaker 2 (26:48):
No one wants to bet on congressional races, and.
Speaker 1 (26:51):
Even those are like every two years, right, so like
you have like a lot of downtime, and you're like,
you know what people really like to predict is the
outcome of baseball game. And so then you're like, how
can I get into sports? Campling or no, no, no, sorry,
You're like, how can I get into the prediction of sports?
And so a number of these prediction markets, it's just
like a natural overlap, and like, by the way, like
(27:13):
in Europe, these things are also pretty convergent, where like
bookmakers will will take bets on sports and elections, and
so several of these things, including CALSHI, which is after
great difficulty, a CFTC registered like legal regulated futures exchange
that does prediction markets. CALSHI has prediction markets on the election,
(27:34):
and you know after the last election, like the regulatory
environment is pretty friendly to prediction markets, but it also
has prediction markets on Wimbledon and Past Paul and soccer,
and those prediction markets are technically CFTC regulated self certified
(27:55):
futures contracts. CALSHI decides what it wants to list, it
lists those things, and if the CFTC doesn't call it
up to object to, those things just get listed and
they trade. And several states that regulate gambling have called
CALSHI up and said you are offering illegal supports betting
in our states. You can't do that, and CALCI has said, nope,
(28:17):
these are CFTC registered contracts. CFTC regulation preempts state regulation,
so we can just do it and you can't stop us.
And by the way, we don't even know what this
has to do with gambling. This is not gambling. This
is predicting, and so far that has worked really well,
Like they've won lawsuits against.
Speaker 2 (28:35):
States, which is amazing.
Speaker 1 (28:37):
It's incredible, And I think the sort of basic theory
here is like this is CFTC jurisdiction and if the
CFTC wants to stop it, they should stop it. The
CFTC has sort of like said that these things are illegal,
but that was before the current administration, and it hasn't
done anything to stop them. And I think it's like
quite favorable to CALCI right now, and so so it
(29:01):
just gets to do it and it's wild. And what
I wrote about on Thursday is that there's a change
in the tax law that the one big beautiful Bill,
where now only ninety percent of gambling losses are tax
deductible against your gambling winnings. And that's like really like
existential for a lot of sports campers because you're sports gampler,
you're making a lot of bets, you're winning a little
bit more than you lose, right, and like you're making
(29:23):
you know, a fibercent profit margin on a huge outlay,
and if ten percent of your losses are non deductible,
then like you flip from being slightly positive to slightly negative.
And so you just can't be a professional sports campler anymore. Yeah,
But if you're just predicting on a prediction market, that's fine,
no problem.
Speaker 2 (29:39):
Well that's the thing you have to imagine that the
net effect of that would be just accelerating the move
to these events or contracts, Like I learned.
Speaker 1 (29:47):
About this because the reader email there's like, I'm a
semi professional sports campler and I'm going to have to
move to a prediction market.
Speaker 2 (29:53):
That's wild.
Speaker 1 (29:54):
It's wild.
Speaker 2 (29:54):
So Calshi's winning lawsuits. But I mean at a certain stage, like,
isn't there like an element of common sense comes in
and says, look at this duck. It walks like a duck,
It quacks like a duck. This is a duck, and
cal she says, no, this is okay.
Speaker 1 (30:14):
I think their argument is like you're coming at it
from the wrong direction. It's sense, okay, Like, yes, okay,
bets on sporting events look like sports gampling, but they
also look like bats on elections and interest rates and
zero day options on micro strategy and meme coins and
(30:38):
all the other stuff you have that is like clearly
financial markets.
Speaker 2 (30:43):
Why should sports be sacred?
Speaker 1 (30:44):
Why should sports be sacred? Like everything is like this,
so like why can't sports be like this? Yeah, that's
kind of a good argument, but it like scares me.
Speaker 2 (30:53):
Yeah, it is. It is a little bit scary.
Speaker 1 (30:56):
It's like if it's all gambling, it's like what you're
doing in the financial markets. By the way, sorry, I'm
exagger It's not that everything everyone does in financial markets
is gambling. It's that like a lot of stuff sometimes
arbitrag like, sometimes sometimes it's manipulation, sometimes sometimes it's fundamental
low time investing. But like there's a lot of stuff that,
like you know, is gambling, both in the sense that
(31:18):
like you're speculating on stuff with that much edge and
also in the sense that you're having fun doing like
it's an entertainment product. It is clearly the case that
like a lot of stuff that is being sold to
retail investors is a risky entertainment product, and they're just like, well,
we're not sports. That's like a risky entertainment problem.
Speaker 2 (31:37):
I will just say I did end.
Speaker 1 (31:38):
Up talking a lot about sports.
Speaker 2 (31:40):
You love sports, you famously you love sports. I will
say it does feel inevitable that we're going to see
an events contract ETF. I'll just leave you with that thought.
The CFTC regulated, And.
Speaker 1 (31:57):
That was the Money Stuff Podcast.
Speaker 2 (31:58):
I'm Matt Levian and I'm Katie Greifeld.
Speaker 1 (32:01):
You can find my work by subscribing to the moneystuffnewsletter
on Bloomberg dot.
Speaker 2 (32:04):
Com, and you can find me on Bloomberg TV every
day on Open Interest between nine to eleven am Eastern.
Speaker 1 (32:11):
We'd love 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 air.
Speaker 2 (32:18):
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 (32:23):
The Money Stuff Podcast is produced by Anamasarakus and Moses
onam Our.
Speaker 2 (32:28):
Theme music was composed by Blake Maples and Stage Bauman
is Bloomberg's head of Podcasts.
Speaker 1 (32:32):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff
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