August 8, 2025 • 33 mins
Katie and Matt discuss Matt's vacation plans, Elon Musk's propensity to ruin them, Musk's new good-faith payment from Tesla, his work schedule, Tesla as a car company vs. Tesla as the future of life, Regulation FD, tone and body language, hedge funds vs. long-only investors, retail corporate access, on-cycle recruiting and the heat death of the universe.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
I'm really jealous that you're taking two weeks off.
Speaker 1 (00:10):
Yeah, I'm pretty you're already.
Speaker 2 (00:13):
I was going to say that, but I was going
to say you're already pretty tan. Yeah, I feel like
so I'm excited to see you after two weeks.
Speaker 1 (00:21):
I'm gonna work very rigorously.
Speaker 2 (00:23):
On my good I mean, were SPF please do it responsible.
Speaker 1 (00:28):
You come back and be like the colorless table for.
Speaker 2 (00:31):
Those table listening at home. It's a handsome mahogany o.
Speaker 1 (00:39):
Plastic.
Speaker 2 (00:40):
It's not real wood.
Speaker 1 (00:41):
It's maybe it is, I don't know what. But yeah,
So I'm out for the next two weeks.
Speaker 2 (00:48):
I'll be here.
Speaker 1 (00:50):
Yeah, keep me up to date on the gossip.
Speaker 2 (00:53):
Yeah, plenty of tea. I'll keep the tea flowing.
Speaker 1 (00:56):
So this episode is coming on this Friday. You will
have a mail bag.
Speaker 2 (01:01):
Mail bag.
Speaker 1 (01:03):
I'm gonna say we're gonna have a mail bag the
following week.
Speaker 2 (01:05):
We're recording it directly after this episode, so it's actually
still up in the air. Good to see if we.
Speaker 1 (01:11):
Right, we'll cut the enjoy it potentially, but like probably
we're gonna have this episode out on August eighth and
the mail bag out on August fifteenth, and then on
August twenty second, you'll be alone with your thoughts.
Speaker 2 (01:21):
Money Stuff will go dark, but it'll be okay. I
think we all need that.
Speaker 1 (01:25):
Recent twenty second.
Speaker 2 (01:27):
Yeah, you know. Actually I won't even be on air
that day because it'll be our chick, our jackson Hole special.
So let's all just enjoy jackson Hole together. You know,
take a look at some central bankers in front of mountaintops.
And we don't need to listen to a podcast that day.
Speaker 1 (01:44):
But you do need to listen to a podcast.
Speaker 2 (01:47):
Today, and we're going to really try hard to make
this one good.
Speaker 1 (01:52):
You might Hello, and welcome to the Money Stuff Podcast,
your weekly podcast where we talk about stuff related to money.
I'm Matt Levian, and I write the Moneys Doff column
for Bloomberg Opinion.
Speaker 2 (02:04):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (02:10):
Kitty. I feel like I follow Elon must pay more
than he does more than I don't think that's true.
Way I believe you must pay. It is rumor that
he follows my vacation schedule schedules his most insane activities
for when I'm supposed to be on vacations that I
have to write about them. I don't think this is true.
(02:32):
I don't think he consciously going to find out, but
we're gonna find out here. I am talking on a
podcast about taking two weeks off. So if Elon does
something really egregious in the next two weeks, you'll know why.
Speaker 2 (02:45):
Well, he should be happy or right now he got out?
Speaker 1 (02:50):
Or do you think thirty billion dollars makes him happy?
I'm fine, it's.
Speaker 2 (02:56):
You know, I have to imagine. Maybe he's not completely happy,
but he he's a degree happier than he was perhaps.
Speaker 1 (03:03):
So the news is that Tesla's board announced that it's
going to give Elon Musk an interim award of twenty
eight billion dollars worth of I was going to say
stock options slightly Morgan's like restricted stock units with a
strike price, but it's stock options whatever. They also giving
him that as basically a good faith payment, because, as
we've talked about on this pot a lot, he was
(03:23):
awarded a bunch of options in twenty eighteen. They were
all contingent on him making Tesla the giant company. He
made Tesla the giant company he got the options. They're
worth something like eighty seven billion dollars today, and then
last year at Della Recurt said, no, those weren't valid.
They go away. And so now Tesla's in this weird bind.
(03:44):
They're like appealing the decision and stuff. They're trying to
get him back that money, but there are various governance
and tax and accounting and legal complications around getting him
back that money, and they're still kind of figuring out
how to do it. But as a good faith down
payment on there desire to give him back those options,
they gave him back twenty eight billion dollars of them
(04:05):
this week. So you're asked if that made him happy.
One thing I wonder is was it a surprise, because
like the previous set of options, like he sort of
negotiated with the board, you know, in twenty eighteen, and
like there was obviously like you know, this is an
incentive package that you know, we're giving you these targets
that are super ambitious, but you know you think you
can meet them. So that was like an employment deal
(04:27):
that he struck with the board. Right, this is like
this could have just been like surprise some of your
money back. It's possible the board did it without him,
which would be kind of funny. If he just woke
up one day and, like, you know, at a twenty
eight billion dollar transfer in his bank account, that'd be
pretty cool.
Speaker 2 (04:41):
Why twenty eight billion? Why not just make it eighty
seven billion.
Speaker 1 (04:45):
Part of it is like they're still figuring out what's happening, right,
So this is like a down payment on figuring out
the whole answer to this question. Right. If they win
the appeal, this award goes away, and it's really easier
to have given him less while they're on appeal. I
think it's possible that part of the answer is that
(05:06):
funny that this is to say that Tesla's board of
directors and the special committee that gave him this award
are independent and are thinking about their friduciary duty to
Tesla's minority sholders or outside shoolders, and are thinking not
only what would be nice for Elon, but also how
do we motivate him to maximize the value of the company.
(05:29):
And it's possible that giving him all of the options
right now is not the answer to that question. It's
possible that, like the ultimate structure they'll come to is
something like, you get thirty billion dollars of this stuff
and a new award with new targets that requires you
to do new stuff. But for now, they give him
this award and it has essentially two contingencies. One is
(05:51):
that he has to say there for two years, which
who knows, and the other one is that it goes away.
If they win the appeal, he gets all the previous
options back.
Speaker 2 (06:01):
He doesn't get these options twenty eighteen options.
Speaker 1 (06:03):
Yeah, so if he gets that, like nineteen thirty seven
billion dollars, this is not additive to that.
Speaker 2 (06:08):
Like, so no double dipping, no double dipping. Isa, you
talk about this a little bit in your column that Okay,
it has these strings attached. It's contingent on him staying
there for two years.
Speaker 1 (06:19):
Very few strings. Well, like, sure he has to say
there for two years, but it's like a fourteen billion
dollars a year payback.
Speaker 2 (06:25):
But isn't I don't know. Isn't a little weird that, Okay,
you have to stay here another two years, but also
this is making good on our promise for things you
already Yeah, I.
Speaker 1 (06:34):
Agree with you. It's a little weird if their mentality
is truly like we owe you this and we're giving
it to you no matter what. Then you're right, he
shouldn't have this there for two years. But I don't
think they can really do that. I think they really
have to be like in a posture of like, we
are maximizing value for the shareholders, and we have to
get something going forward from it. And if we're just
(06:55):
giving Elon Musk twenty eight billion dollars on his way
out the door, then that is not a good use
of shareholder resources, even if it's in some sense fair true.
Also like it doesn't seem like that big an ask
like years, it's like, you know, his main source of
wealth more or less. And also like it's not that
(07:17):
big an asking in the sense that, like you and I,
if we got like a great job opportunity, we would
have to sadly quit this job to pursue that great job.
That is not a problem for Elon Musk. He can
have as many jobs as he wants. Like, they're not
requiring him to only work at Tesla for two it's
just like to have it.
Speaker 2 (07:35):
You know, have his name on the door for continuously
right intermittently.
Speaker 1 (07:41):
Yeah, an alternate two days so I think it's fine.
I think he's like not a big ass, right, Like
he can spend one hundred percent of his time elsewhere
for two years and still be the CEO of Tesla.
Speaker 2 (07:51):
So yeah, which is so would argue that's what's been happening.
Speaker 1 (07:57):
Many would argue.
Speaker 3 (08:00):
Quo.
Speaker 1 (08:00):
And I think, you know, again, like the board, like
they're doing two things right. They're trying to be fair
to Elon, which I think is like a legitimate concern.
Like I think the board things and Elon things. I
think they have a real point that he earned this
eighty seven billion dollars of options, and so you should
get them and just retroactively, he should get them for
his prior work. Right, So they're trying to be fair,
But they're also trying to you know, do good things
(08:21):
for the company and situate the company well going forward.
And so you know, their announcement is not just like
literally like yes, I have a name there for two
more years. It's like we need him to focus on
building AI and like attracting talent to this company because
we're in an arms race for AI and Tesla is
an AI company. You know, Kittie's rolling rys. It's reasonable
(08:43):
because like Elmos does have an AI company that's not Tesla.
Speaker 2 (08:46):
Yeah, but like Tesla is, you know, it's valued like
an AI.
Speaker 1 (08:50):
It's not valued like a car company that sells as
many cars as itself. Right, It's valued like the future
of life, robotics, AI something, some thing something, And so
to you know, live up to that valuation, they need
to keep him around to be their futurist in residence.
Speaker 2 (09:07):
Yeah. I anchor a television show with Matt Miller. Yeah,
and he's a car guy, So talking about Tesla makes,
you know, smoke come out of his ears. When we
talk about the fact that it's a trillion dollar company,
you add up the market caps of the big three Stilantis, Ford,
and GM and it comes out to less than one
hundred and fifty billion dollars, which shocked me. Actually, I
(09:28):
didn't realize it was that low. So a trillion dollars, Yeah,
I wanted to talk a little bit more about the
fact that, Okay, if we're talking about this options package,
the thirty billion dollar one, so Tesl would take an
enormous tax hit if this happens.
Speaker 1 (09:45):
Well, Elon Muss would take a tax hit.
Speaker 2 (09:47):
Elon Muss would take a tax hit, Tesla would take
a hit to their earnings.
Speaker 3 (09:51):
Correct.
Speaker 1 (09:51):
Yeah. Basically, the way it works is that when they
granted the options in twenty eighteen, they were, for accounting purposes,
kind of worthless because they were at the money, so
they were not like a gift of stock that day.
And because they had these really aggressive conditions where you know,
it's like a sixty billion dollar company, you would have
to grow it into a six hundred and fifty billion
dollar company to get all the options, and so you
(10:12):
can go to your accounts and say, that's not very
likely to happen. So the value of this grant day
one is not very much. When they do it retroactively, now,
the value of the grant day one is kind of
twenty eight billion dollars. But they apparently this is a
disclosure and it's at a little unclear while though I
have my assumptions. They apparently went to the accounts and
(10:35):
said it's very unlikely that he'll get these options, and
so they're worth nothing, and the accounts a great and
so they say right now that they plan to not
incur any expense for the options because it's unlikely that
the performance conditions of the options will be met, but
there are no performance conditions. So we talked about the
two conditions, which are one he has to say that
for two years, and two these go away if he
(10:55):
gets back the previous charge, like basically, if they win on.
Speaker 2 (10:57):
Appeal court case, it's a Delaware decision is overturned returned.
Speaker 1 (11:01):
Yeah, And so what I think they're saying is that
there is a less than like twenty five percent chance
of both of those conditions being met. That is, either
they're very confident that the Delaware decision will be overturned,
or they're very confident that he lends going to quit
in the next two years, or they believe like the
(11:23):
joint probability of neither of those things happening is very low, right,
Like they think if the decision is not overturned, hell
quit something like that. So this is a funny little
like I don't know what those conversations with their accountants
were like, but I found it amusing that, Yeah, they
would not have a high degree of confidence of him
meeting these very limited performance.
Speaker 2 (11:43):
Conditions, but it seems like, I don't know, listening to that,
that they seem somewhat confident that the Delaware decision.
Speaker 1 (11:50):
Beeve weird to go to your accountant and be like,
this one hundred page opinion by the Delaware chancellor is
obviously wrong in the accounts, Like, yeah, it's obviously wrong.
That's going to be overturned. Like, you know, I don't
think they got a legal opinion saying this is definitely
going to be overturned. Maybe they did. I don't think
it's crazy, by the way, Like it's kind of a
weird opinion. It's kind of a weird outcome. Like there's
this weird political environment where Delaware is losing companies. You
(12:13):
could imagine it being there's the reasons it would be overturned,
but it's not like, oh, it's definitely going to be overturned.
Speaker 2 (12:20):
History in real time and we are chronicling it.
Speaker 1 (12:24):
Not for the next two weeks or not that's true.
Speaker 2 (12:26):
Who knows. I didn't say anything about his political activities,
Like you think about the the serious overhand over the stock.
Speaker 1 (12:34):
No, you're the Tesla board and you're like, OKAYLN, in
order to get your twenty eight billion dollars of options,
you have to not do a list of bad things, right,
we're the list of bad things, Like Okay, sure it
starts with like enraging customers by doing political activities and
then go out to like Ketamane and like, you know,
running seven other companies. Like no, he would much rather
have his complete freedom to do whatever he wants. And
(12:56):
then twenty eight billion dollars. I mean, I'm speculating that.
Speaker 2 (13:02):
I talked to him this morning.
Speaker 1 (13:03):
I don't know, Like it's easy for me.
Speaker 2 (13:08):
We're just talking about plenty of money at this point.
Speaker 1 (13:10):
Right, He's like, right, we are talking about funny money. Yeah,
Like he lives in a state in which if he
wanted any number of dollars to do anything, he could
snap his fingers and it would like magically appear. So
like there is a sense of fairness. There is a
sense of like, you know, wanting to have a certain
ownership of Tesla. There's all this stuff that goes into
(13:31):
him wanting to have tens of billions of dollars of
Tesla actions. But if he needs money to do something,
he'll find money to do something.
Speaker 2 (13:38):
He's going to be all right, Gus, he wants to
be okay, how about corporate actions?
Speaker 1 (13:59):
About corporate access?
Speaker 2 (14:01):
Bradley Sacks over a business insider Bloomberg along great peace
out about.
Speaker 1 (14:07):
Like the big hedge funds and corporate access. I love
corporate access because it's like it makes no sense, No,
it makes total sense, but like it makes people insane.
Corporate access is like investors largely big you know, institutional investors, hedgehunds,
and like mutual fund matters. Investors like to meet with
the companies who shares they own and the companies who
(14:28):
shares their considering buying. And they will sit down with
the CEO and be like, so, how's business, And they
learn things in these meetings. Theoretically, No, theoretically they don't,
right because, like you know, the US has rules saying
that regulation FD says that companies can't disclosed material and
public information to some investors without disclosing it publicly to everyone.
(14:50):
And yet these meetings happen, and you know that they
learn something because one they keep doing the meetings, right. Sure,
you know, people don't waste their time for no reason, right,
Like they think they're learning something. And then it's like
a little hard to study. But there are some empirical
studies where academics like look at these meetings and they
find that investors who have meetings with management then make
more informed trading decisions than they do if they don't
(15:12):
have the meetings. So it's clear that these meetings have
some value. And you know, it's like this gray intermediate
area between. They can't get material on public information, right,
Like the company can't be like, oh, our earnings are
going to be really good next quarter if they haven't
already given guidance on the earnings. They can't be like, oh,
we're getting acquired next week.
Speaker 2 (15:29):
Right.
Speaker 1 (15:29):
They can't give like big material information, but they can
talk about how they think about the business. They can like,
you know, talk through the model. They can do a
lot of helpful stuff for the investors where the investors
come away learning something without being spoon fed next quarter's earnings.
Speaker 3 (15:45):
Yeah.
Speaker 1 (15:46):
The thing that people always say about this to make
themselves feel better is that the investors can get a
read on the executive's tone and body language. On its face, absurd, yes,
but people keep saying it. They're like, oh, yeah, they
don't say anything that they haven't already said, but the
(16:07):
body language tells you something.
Speaker 2 (16:08):
So I can tell you it probably lost its edge
during the pandemic when you were all on zoom. And
it's a lot harder to see.
Speaker 1 (16:14):
Oh, that's an interesting question. I feel like there are
studies and I don't know them, because like that would
tell you something, right, Yeah, if it in fact lost
its edge on the pandemic, then that would tell you
that tone and body language mattered a lot. Yeah, and
when people are only getting zoom calls, they got less information,
whereas my thesis is that in fact they're being told
information and tone in body language is just a euphemism.
(16:38):
And so in the pandemic, as you get on a
zoom call and you're like, so, walk me through how
you're thinking about strategy, and the executive tells you they're like,
still informative.
Speaker 2 (16:46):
Yeah, someone should do that. I guess I come at
it from a skeptical lens as a journalist who talks
to a lot of CEOs. Not to besmirch any CEOs,
but a lot of them just follow the script. And
I mean you listen to them speak at conferences, and
you know, it's hard to get new news out of
(17:06):
someone in the C.
Speaker 1 (17:07):
Suite maybe three answers that one you don't five percent
of their stock. It's possible that a conversation with an
investor is a different framework from a conversation at a
conference with a journalist, right, Like, they're media trained, but
they're trained differently to talk to investors. Right. Two, you
do not have CIA interrogators to understand their body language.
(17:28):
Apparently some edge ones that do. And then did I
have a third?
Speaker 2 (17:33):
You said you had three, so you got to think
of something. Okay, I'm reading your body language right now,
and it seems like you're really trying to think. Okay.
Speaker 1 (17:45):
The third point is like you could imagine the investors
asking different questions because they're not trying to make news.
That's like like they're trying to make very incremental news, right,
They're trying to find out like like update their model.
Speaker 2 (17:57):
Well, that was part of the piece. Bradley wrote a
out how one of the complaints is that the questions
that are being asked or like becoming so niche to
the point that they're not useful anymore.
Speaker 1 (18:08):
Oh, I know what my third point was. Okay, My
third point was that actually in this piece, several investors
complain that in fact, they have the same point you do,
which is that the CEOs are now so scripted that
these meetings have become less useful than it used to be. Yeah,
not just because the questions are very granular, which is
like their questions are granular because hedge funds are competing
to like add extremely granular information to like the information set,
(18:31):
and so they have very detailed questions, which sometimes annoy
CEOs who want to talk about like the big pictures.
Speaker 2 (18:36):
Make sure, come on, here's my strategy. Isn't it great?
Speaker 1 (18:39):
Right? I mean the THESS Like the point of this
piece and what I read about it is that like
in my role, do you think of like the prestige
and importance of investment firms and like right now, the
big four multi strategy hedge funds like the Citadel Millennium
point seventy two vali Asnis of the world are really
like on the ascendant, Like they're really prestigious, really sort
(19:00):
of top employers and the asset management business. But when
you think about what a CEO wants, they don't want
to meet with those guys. They want to meet with
Fidelity and Wellington. They want to meet with long arming
managers for a number of reasons, one of which is
that the long only managers have longer tenure, both like
they hold the stock for decades and also like the
(19:23):
portfolio managers for decades, whereas like you know, the big
hedge funds, they're constantly churning through portfolio managers, and they're
constantly turning through stocks, and so like if you talk
to Citadel because they own your stock this week, they
made it own it next week or maybe a different person.
But there are other reasons, one of which is that
the hedge funds have these really granular questions, like they're
really interested in, like what's going to drive the stock
(19:43):
in the next couple of weeks, and so they're not
going to ask you about your strategy. And if you're
the CEO and you're like want to pontificate about the
big picture for a while, you'd much rather talk to
a long term, long only investor than to a hedge
fund who has like very specific questions about margins. And
then the other reason that they're all twenty seven and
wearing T shirts and the people at Fidelity know how
to dress.
Speaker 2 (20:03):
To meet with the CEO just amazing.
Speaker 1 (20:05):
Yeah, it's like literally true that like point seventy two
now mandates blazers because like they were having trouble booking meetings.
Speaker 2 (20:12):
Because they twenty seven year olds and whatever. Yeah, that
was a fun to bit. I also, and this was
partly addressed in the article and in your column, I
feel like part of the reason that these meetings are
in such high demand is just because time is finite,
you know, and anything that's scarce is going to be valued,
(20:33):
and time is scarce, and time with these CEOs is scarce. Yeah,
so even if it doesn't add that much of an edge,
you still have it right.
Speaker 1 (20:40):
I think there's an enormous culture in finance and business
generally of like, if you think that doing a thing
has a one percent chance of adding one percent to
your returns, you're just like hardcore and you do it anyway.
Speaker 2 (20:53):
I gotta get it right, Like.
Speaker 1 (20:55):
I have transcended that. But like, you know, you're in
that seat because you work really hard and like sort
of do everything you possibly can to get edge. And
so even though the meeting will probably be worth less,
peel got it anyway. But the other thing about scarcity
is that at these firms, you know, like the big
hedge ones have multiple teams trading the same sector, and
so you know, if you're the CEO and you book
(21:17):
a meeting with Citadel, there's like five pms at Citadel,
who are fighting each other tooth and nail to be
the one in the meeting or like the two in
the meeting.
Speaker 2 (21:23):
You know, honestly, it reminded me so much of working
in a large newsroom.
Speaker 1 (21:27):
I know, I was gonna see right yeah, right.
Speaker 2 (21:29):
Like it's very you have a beat, and you're pretty
protective of your beat, and it's funny to read about
it becoming like part of a recruiting perk is that
you're the only person covering this. You don't have to
fight for your lane. This is only your lane, or
it's even worse.
Speaker 1 (21:46):
It's like Bradley Sacks writes that like the most tenured
pms will often get the best meetings. Like you know,
if Citadel has a meeting with a company, they'll be like,
the guy's been here the longest and like does the
best work gets to have the meeting. But like sometimes
they'll hire someone and like the new guy gets the
meeting because that's like a recruiting perk, and then the
(22:06):
long tenured person doesn't get that good at the meeting.
And it's it's just like there's a lot of parallels, right, no, right,
Like I've been in meetings with like many other journalists
where one it's competitive to get into the meeting, and
then too everyone's like, you know, it's competitive to get
your question answered.
Speaker 2 (22:21):
Yeah, and it seems.
Speaker 1 (22:22):
Similar in this case.
Speaker 2 (22:23):
That's so funny.
Speaker 1 (22:24):
The other thing I wanted to say, yeah, because I
wrote about this, and I wrote about broadly speaking, CEOs
would rather meet with like Fidelity or Wellington than with
State a point seventy two. And then it's a throw
I was like, and they probably won't meet with you, know,
if you want a hundred shares and you're a retail industrial,
they probably won't be with you. And I found the
academic paper I wrote about Wednesday where they basically tested
(22:46):
that out by sending cold emails to a lot of
investor relations departments. And the cold emails, some of them
were from like a Yahoo dot commumail address like like
a high I'm an individual investor, I'd like to buy
your stock? Could you meet with me? And some of
them are from fake investment firms like like I work
at Blue Willow Capital and I'd like to meet with you.
Speaker 2 (23:08):
It sounds right.
Speaker 1 (23:09):
Yeah. They found, first of all, that about sixteen percent
of these messages resulted in meetings, which is higher than
I would have thought. Not bad, right, And second, well,
there's no distinction between retail investor and Blue Weellow capital,
Like retail people could get the meetings just blue. Well
they did find racial discrimination though.
Speaker 2 (23:26):
Yeah, don't love that. This reminds me. We were talking
about Hymns and HER's earnings on air this week, and
the Hymns and Her CEO has made sort of a
big show of like giving questions in the earnings call
to retail investors.
Speaker 1 (23:41):
Yeah, right, Like my perception of it being hard for
retail is kind of an old school perception, and now
with like memeslags, it's a different game.
Speaker 3 (23:47):
Yeah.
Speaker 2 (23:48):
Also somewhat related to this, I was talking to a
CEO who reported earnings this week, and the CEO said that, Okay,
if you're report in the afternoon, then you do the
earnings call. But then this CEO was answering questions from
analysts until like ten pm that night. Like, you have
the earnings call and they asked the questions and the
(24:09):
transcript goes out and you can see it is public.
But then like the real questions come after the earnings call.
So you have the earnings call and then you have
all your individual calls.
Speaker 1 (24:17):
This is the thing that people naively think regulation FD prevents, right,
everything has to be public, But no, And you see
it on like public earnings called transcripts. You know, people
ask questions and the CFI will be like, follow up
with me afterwards and we'll walk through that, right, and like,
you know, like obviously the case that companies talk to
analysts and investors outside of the you know, one hour
(24:38):
public earnings call, and it seems to be obviously the
case that those conversations are useful, but they exist in
this weird regulatory limbo.
Speaker 2 (24:46):
I find that frustrating because as a journalist, I'm not
allowed to sit in on those one on one leadings.
Speaker 3 (24:52):
Yeah.
Speaker 2 (25:08):
Should we check in on the state of on cycle recruiting.
Let's check in Bank of America. Yeah, well, Bank of America,
the news came out this week, written by Catherine Doherty
that their junior bankers face reassignment if they accept other jobs.
Just the latest in a string of the big banks
pushing back against on cycle recruiting. Right, so the busy summer.
Speaker 1 (25:32):
One thing I wonder about is like why are they
pushing back?
Speaker 2 (25:34):
Why are they pushing back in general, like the dynamics.
Speaker 1 (25:37):
Here are like JP Morgan led the charge of saying
we're not going to allow recruiting, we're mad about it,
we'll fire you, and then a number of big private
equity firms announced they would wait to do on cycle.
Speaker 2 (25:51):
Recruiting led by Apollo. It feels like.
Speaker 1 (25:53):
Most banks did not join in saying where we're going
to fire you, and most private acuity firms did not
announce we're not going to do encycle recruiting for two years,
but also didn't happen. Like everyone is like quietly tacitly
going along with this process started by JP Morgan, and
it's like a two side like the banks and the
priority from every seems like to have. There's like a
(26:16):
possibly fragile equilibrium where they're not doing the recruiting, and
so there's not really a need I don't think for
the banks to say we'll fire you if you do it,
because it's not happening. But you know, you got to
get ahead of it. So some of the banks are
joining in, and so this week Bank of America said
except an offer elsewhere, you'll be reassigned, which is very
(26:36):
ominous because they don't say where, and like, well, Bank
of America has tellers a lot of possibilities.
Speaker 2 (26:46):
Yeah, that was more tired than I was thinking I do,
I don't say yeah.
Speaker 1 (26:51):
And it's you know, like the idea of on cycle
recruiting is so strange, right, but it essentially it's you
will at the beginning of your investment making analyst job
except an offer at a private equity job. But that
private equity job is contingent on you spending two years
being an investment banking analyst, because you do need to
learn the stuff that you do as an investment banking
analyst to be an effective private equity associate. And so
(27:15):
you have two years of working in you know, an
industry group or an m and A group or a
Leffin group at a bank where you like learn enough
to become a useful associate at a PE firm. And
if you get fired at your bank, the PE firm
will probably rescind your offer because you haven't done the
training that they require, And if you'd reassigned to being
a teller, then like also not the training they would
(27:38):
have wanted.
Speaker 2 (27:39):
Yeah, you can kind of feel for these analysts because
also they're probably not having a lot of fun in general, sure.
Speaker 1 (27:45):
And like one thing reassigned could mean is like if
you work in the tech group and you get a
job at like a tech focused private equity firm, then
Bank of America will say, Okay, we're gonna reassign you
because there's conflict of theventswers there, so we're going to
move you to like the natural resources group. Like that
(28:06):
would be like appairly benign interpretation that this one doesn't
get the sense that's what's happening, right, You get the
sense that it's like a punitive reassignment.
Speaker 2 (28:13):
Yeah, going by what the story said, this is according
to people familiar with the matter, junior bankers are being
asked by their managers to divulge whether they have a
new employment opportunity and if future offers are accepted, those
individuals will likely be moved to another area within the bank.
So searching for detail there. But they have a week.
Apparently those who fail to disclose accepted offers within a
(28:36):
week would be deemed in violation. It's interesting to see
how different banks are approaching this. Apparently Goldman has you right,
Goldman has.
Speaker 1 (28:45):
The chart approach where they're like most are they do have.
Speaker 2 (28:48):
Well, you have to restate your loyalty every three months
or something.
Speaker 1 (28:51):
Yeah, every three months you have to say you haven't
taken a job elsewhere. Yeah, But they also have like
you know, there's like three tiers of prestige. Right, there's
like private equity, and then there's investment banking, and then
there's like operations back office tellers. Right, and Goldman says,
if you stay here for two years, we're going to
try to move you into our own I was gonna
say private equity division. Yeah, their own like alts division, Yeah,
(29:14):
private area is. And then Man of America says, if
you don't stay here for two years, we're going to
move you into being a teller.
Speaker 2 (29:19):
So yeah. So Jamie Diamond, it feels like he started
this all off a couple months ago. I do wonder
like if it had been Wells Fargo who led the charge,
would we be seeing this cascade of other banks lining
up and saying we're also not okay with this, this
is what we're gonna do. Or is it uniquely like
Jamie Diamond and JP Morgan are doing this and all
(29:41):
the other big banks feel pressure to follow.
Speaker 1 (29:43):
I think Jamie Diamond has a lot of like moral
leadership I don't even know about the other banks feeling
pressure to follow. Yeah, the other banks feel cover to follow, right,
because like this is a competitive market. And if one
bank says, and this has happened before, if one bank
says we're going to fire you if you take a
private equity job too early, and no other bank says that,
then people won't go to work at that bank because
(30:05):
they will want their private equity job. But JP Morgan says,
Abymary is pretty big, and so you have cover. But
the other thing is like, also like the people who
run private equity firms care about what Jamie Diamond thinks. Yeah,
not even like as a market's and competitive matterage. So
they're like, oh yeah, they respect that guy, and so
when he says it, they're like, oh yeah, he's right
because probably everyone knows he's right. Like it's not super controversial,
Like no one's like that up said about it. And
(30:27):
I think if you, like, if you're talking to private
ay people, they are not thrilled with the current process.
The current process does not do a good job like
the old process, the process where they you know, interview
before people started banks does not do a good job
of finding people who are knowledgeable does not do a
good job of finding people who are really motivated because
(30:49):
you don't know anything yet they worked as bankers yet, Yeah,
if you interview them after a year and a half
in banking and they're like dead eyed and have both
a thousand models, like, it's easy to find out who
really wants to be there, who's really interested, who's like
learned a lot, and so it's a better system for them.
And then the other thing is we live in a
very uncertain world about the hiring needs of private equity
(31:11):
firms two years out.
Speaker 2 (31:13):
That's true. Robots are coming, Robots are coming, the death
of the universe, the.
Speaker 1 (31:18):
Deal flow situation is, and there's less need for associates
right now than people might have predicted two years ago.
And so why why predict two years out? You can
just wait and if everyone can wait, then everyone can wait.
Speaker 2 (31:31):
So you called it the old system, and that I'm.
Speaker 1 (31:33):
Sorry, the system as of six months ago.
Speaker 3 (31:37):
Right.
Speaker 2 (31:37):
Well, I was going to ask, do you think that
this changes anything? Like have we seen the end of
this cycle? Is this a lasting fragile what did you
call it? I liked that fragile equilibrium.
Speaker 1 (31:49):
I think that between the AI stuff and the relative
slowdown pe no one is desperate to hire the best
possible twenty two year olds to start in two years.
Those are separate points from like Jamie Diamond's moral authority.
I think in five years. In two years, if private
(32:12):
equity is booming and they're desperate for people to do
deals and the A thing was just the hype, and
they think, how do I get the best possible forty
bodies and seats, they'll be interviewing earlier. These things always
break down.
Speaker 2 (32:26):
But I guess that's what it's psychled does because.
Speaker 1 (32:28):
Of competitive pressures, right, And if there are no competitive
pressures for them to break down, they won't break down.
So I don't know when that'll be.
Speaker 2 (32:34):
So watch this space, all right, comebey, Okay, all right, Matt.
Speaker 3 (32:39):
Bye.
Speaker 1 (32:42):
And that was the Money Stuff Podcast.
Speaker 2 (32:44):
I'm Matt Livian and I'm Katie Greifeld.
Speaker 1 (32:46):
You can find my work by subscribing to the Money
Stuff newsletter on Bloomberg dot com.
Speaker 2 (32:51):
And you can find me on Bloomberg TV every day
on Open Interest between nine to eleven am Eastern.
Speaker 1 (32:57):
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 (33:03):
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 (33:09):
The Money Stuff podcast that is produced by Ana Mazerakus
and Moses Ondon.
Speaker 2 (33:13):
Our theme music was composed by Blake Maples and Sage
Bauman is Bloomberg's head of Podcasts.
Speaker 1 (33:18):
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'm really jealous that you're taking two weeks off.
Speaker 1 (00:10):
Yeah, I'm pretty you're already.
Speaker 2 (00:13):
I was going to say that, but I was going
to say you're already pretty tan. Yeah, I feel like
so I'm excited to see you after two weeks.
Speaker 1 (00:21):
I'm gonna work very rigorously.
Speaker 2 (00:23):
On my good I mean, were SPF please do it responsible.
Speaker 1 (00:28):
You come back and be like the colorless table for.
Speaker 2 (00:31):
Those table listening at home. It's a handsome mahogany o.
Speaker 1 (00:39):
Plastic.
Speaker 2 (00:40):
It's not real wood.
Speaker 1 (00:41):
It's maybe it is, I don't know what. But yeah,
So I'm out for the next two weeks.
Speaker 2 (00:48):
I'll be here.
Speaker 1 (00:50):
Yeah, keep me up to date on the gossip.
Speaker 2 (00:53):
Yeah, plenty of tea. I'll keep the tea flowing.
Speaker 1 (00:56):
So this episode is coming on this Friday. You will
have a mail bag.
Speaker 2 (01:01):
Mail bag.
Speaker 1 (01:03):
I'm gonna say we're gonna have a mail bag the
following week.
Speaker 2 (01:05):
We're recording it directly after this episode, so it's actually
still up in the air. Good to see if we.
Speaker 1 (01:11):
Right, we'll cut the enjoy it potentially, but like probably
we're gonna have this episode out on August eighth and
the mail bag out on August fifteenth, and then on
August twenty second, you'll be alone with your thoughts.
Speaker 2 (01:21):
Money Stuff will go dark, but it'll be okay. I
think we all need that.
Speaker 1 (01:25):
Recent twenty second.
Speaker 2 (01:27):
Yeah, you know. Actually I won't even be on air
that day because it'll be our chick, our jackson Hole special.
So let's all just enjoy jackson Hole together. You know,
take a look at some central bankers in front of mountaintops.
And we don't need to listen to a podcast that day.
Speaker 1 (01:44):
But you do need to listen to a podcast.
Speaker 2 (01:47):
Today, and we're going to really try hard to make
this one good.
Speaker 1 (01:52):
You might Hello, and welcome to the Money Stuff Podcast,
your weekly podcast where we talk about stuff related to money.
I'm Matt Levian, and I write the Moneys Doff column
for Bloomberg Opinion.
Speaker 2 (02:04):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (02:10):
Kitty. I feel like I follow Elon must pay more
than he does more than I don't think that's true.
Way I believe you must pay. It is rumor that
he follows my vacation schedule schedules his most insane activities
for when I'm supposed to be on vacations that I
have to write about them. I don't think this is true.
(02:32):
I don't think he consciously going to find out, but
we're gonna find out here. I am talking on a
podcast about taking two weeks off. So if Elon does
something really egregious in the next two weeks, you'll know why.
Speaker 2 (02:45):
Well, he should be happy or right now he got out?
Speaker 1 (02:50):
Or do you think thirty billion dollars makes him happy?
I'm fine, it's.
Speaker 2 (02:56):
You know, I have to imagine. Maybe he's not completely happy,
but he he's a degree happier than he was perhaps.
Speaker 1 (03:03):
So the news is that Tesla's board announced that it's
going to give Elon Musk an interim award of twenty
eight billion dollars worth of I was going to say
stock options slightly Morgan's like restricted stock units with a
strike price, but it's stock options whatever. They also giving
him that as basically a good faith payment, because, as
we've talked about on this pot a lot, he was
(03:23):
awarded a bunch of options in twenty eighteen. They were
all contingent on him making Tesla the giant company. He
made Tesla the giant company he got the options. They're
worth something like eighty seven billion dollars today, and then
last year at Della Recurt said, no, those weren't valid.
They go away. And so now Tesla's in this weird bind.
(03:44):
They're like appealing the decision and stuff. They're trying to
get him back that money, but there are various governance
and tax and accounting and legal complications around getting him
back that money, and they're still kind of figuring out
how to do it. But as a good faith down
payment on there desire to give him back those options,
they gave him back twenty eight billion dollars of them
(04:05):
this week. So you're asked if that made him happy.
One thing I wonder is was it a surprise, because
like the previous set of options, like he sort of
negotiated with the board, you know, in twenty eighteen, and
like there was obviously like you know, this is an
incentive package that you know, we're giving you these targets
that are super ambitious, but you know you think you
can meet them. So that was like an employment deal
(04:27):
that he struck with the board. Right, this is like
this could have just been like surprise some of your
money back. It's possible the board did it without him,
which would be kind of funny. If he just woke
up one day and, like, you know, at a twenty
eight billion dollar transfer in his bank account, that'd be
pretty cool.
Speaker 2 (04:41):
Why twenty eight billion? Why not just make it eighty
seven billion.
Speaker 1 (04:45):
Part of it is like they're still figuring out what's happening, right,
So this is like a down payment on figuring out
the whole answer to this question. Right. If they win
the appeal, this award goes away, and it's really easier
to have given him less while they're on appeal. I
think it's possible that part of the answer is that
(05:06):
funny that this is to say that Tesla's board of
directors and the special committee that gave him this award
are independent and are thinking about their friduciary duty to
Tesla's minority sholders or outside shoolders, and are thinking not
only what would be nice for Elon, but also how
do we motivate him to maximize the value of the company.
(05:29):
And it's possible that giving him all of the options
right now is not the answer to that question. It's
possible that, like the ultimate structure they'll come to is
something like, you get thirty billion dollars of this stuff
and a new award with new targets that requires you
to do new stuff. But for now, they give him
this award and it has essentially two contingencies. One is
(05:51):
that he has to say there for two years, which
who knows, and the other one is that it goes away.
If they win the appeal, he gets all the previous
options back.
Speaker 2 (06:01):
He doesn't get these options twenty eighteen options.
Speaker 1 (06:03):
Yeah, so if he gets that, like nineteen thirty seven
billion dollars, this is not additive to that.
Speaker 2 (06:08):
Like, so no double dipping, no double dipping. Isa, you
talk about this a little bit in your column that Okay,
it has these strings attached. It's contingent on him staying
there for two years.
Speaker 1 (06:19):
Very few strings. Well, like, sure he has to say
there for two years, but it's like a fourteen billion
dollars a year payback.
Speaker 2 (06:25):
But isn't I don't know. Isn't a little weird that, Okay,
you have to stay here another two years, but also
this is making good on our promise for things you
already Yeah, I.
Speaker 1 (06:34):
Agree with you. It's a little weird if their mentality
is truly like we owe you this and we're giving
it to you no matter what. Then you're right, he
shouldn't have this there for two years. But I don't
think they can really do that. I think they really
have to be like in a posture of like, we
are maximizing value for the shareholders, and we have to
get something going forward from it. And if we're just
(06:55):
giving Elon Musk twenty eight billion dollars on his way
out the door, then that is not a good use
of shareholder resources, even if it's in some sense fair true.
Also like it doesn't seem like that big an ask
like years, it's like, you know, his main source of
wealth more or less. And also like it's not that
(07:17):
big an asking in the sense that, like you and I,
if we got like a great job opportunity, we would
have to sadly quit this job to pursue that great job.
That is not a problem for Elon Musk. He can
have as many jobs as he wants. Like, they're not
requiring him to only work at Tesla for two it's
just like to have it.
Speaker 2 (07:35):
You know, have his name on the door for continuously
right intermittently.
Speaker 1 (07:41):
Yeah, an alternate two days so I think it's fine.
I think he's like not a big ass, right, Like
he can spend one hundred percent of his time elsewhere
for two years and still be the CEO of Tesla.
Speaker 2 (07:51):
So yeah, which is so would argue that's what's been happening.
Speaker 1 (07:57):
Many would argue.
Speaker 3 (08:00):
Quo.
Speaker 1 (08:00):
And I think, you know, again, like the board, like
they're doing two things right. They're trying to be fair
to Elon, which I think is like a legitimate concern.
Like I think the board things and Elon things. I
think they have a real point that he earned this
eighty seven billion dollars of options, and so you should
get them and just retroactively, he should get them for
his prior work. Right, So they're trying to be fair,
But they're also trying to you know, do good things
(08:21):
for the company and situate the company well going forward.
And so you know, their announcement is not just like
literally like yes, I have a name there for two
more years. It's like we need him to focus on
building AI and like attracting talent to this company because
we're in an arms race for AI and Tesla is
an AI company. You know, Kittie's rolling rys. It's reasonable
(08:43):
because like Elmos does have an AI company that's not Tesla.
Speaker 2 (08:46):
Yeah, but like Tesla is, you know, it's valued like
an AI.
Speaker 1 (08:50):
It's not valued like a car company that sells as
many cars as itself. Right, It's valued like the future
of life, robotics, AI something, some thing something, And so
to you know, live up to that valuation, they need
to keep him around to be their futurist in residence.
Speaker 2 (09:07):
Yeah. I anchor a television show with Matt Miller. Yeah,
and he's a car guy, So talking about Tesla makes,
you know, smoke come out of his ears. When we
talk about the fact that it's a trillion dollar company,
you add up the market caps of the big three Stilantis, Ford,
and GM and it comes out to less than one
hundred and fifty billion dollars, which shocked me. Actually, I
(09:28):
didn't realize it was that low. So a trillion dollars, Yeah,
I wanted to talk a little bit more about the
fact that, Okay, if we're talking about this options package,
the thirty billion dollar one, so Tesl would take an
enormous tax hit if this happens.
Speaker 1 (09:45):
Well, Elon Muss would take a tax hit.
Speaker 2 (09:47):
Elon Muss would take a tax hit, Tesla would take
a hit to their earnings.
Speaker 3 (09:51):
Correct.
Speaker 1 (09:51):
Yeah. Basically, the way it works is that when they
granted the options in twenty eighteen, they were, for accounting purposes,
kind of worthless because they were at the money, so
they were not like a gift of stock that day.
And because they had these really aggressive conditions where you know,
it's like a sixty billion dollar company, you would have
to grow it into a six hundred and fifty billion
dollar company to get all the options, and so you
(10:12):
can go to your accounts and say, that's not very
likely to happen. So the value of this grant day
one is not very much. When they do it retroactively, now,
the value of the grant day one is kind of
twenty eight billion dollars. But they apparently this is a
disclosure and it's at a little unclear while though I
have my assumptions. They apparently went to the accounts and
(10:35):
said it's very unlikely that he'll get these options, and
so they're worth nothing, and the accounts a great and
so they say right now that they plan to not
incur any expense for the options because it's unlikely that
the performance conditions of the options will be met, but
there are no performance conditions. So we talked about the
two conditions, which are one he has to say that
for two years, and two these go away if he
(10:55):
gets back the previous charge, like basically, if they win on.
Speaker 2 (10:57):
Appeal court case, it's a Delaware decision is overturned returned.
Speaker 1 (11:01):
Yeah, And so what I think they're saying is that
there is a less than like twenty five percent chance
of both of those conditions being met. That is, either
they're very confident that the Delaware decision will be overturned,
or they're very confident that he lends going to quit
in the next two years, or they believe like the
(11:23):
joint probability of neither of those things happening is very low, right,
Like they think if the decision is not overturned, hell
quit something like that. So this is a funny little
like I don't know what those conversations with their accountants
were like, but I found it amusing that, Yeah, they
would not have a high degree of confidence of him
meeting these very limited performance.
Speaker 2 (11:43):
Conditions, but it seems like, I don't know, listening to that,
that they seem somewhat confident that the Delaware decision.
Speaker 1 (11:50):
Beeve weird to go to your accountant and be like,
this one hundred page opinion by the Delaware chancellor is
obviously wrong in the accounts, Like, yeah, it's obviously wrong.
That's going to be overturned. Like, you know, I don't
think they got a legal opinion saying this is definitely
going to be overturned. Maybe they did. I don't think
it's crazy, by the way, Like it's kind of a
weird opinion. It's kind of a weird outcome. Like there's
this weird political environment where Delaware is losing companies. You
(12:13):
could imagine it being there's the reasons it would be overturned,
but it's not like, oh, it's definitely going to be overturned.
Speaker 2 (12:20):
History in real time and we are chronicling it.
Speaker 1 (12:24):
Not for the next two weeks or not that's true.
Speaker 2 (12:26):
Who knows. I didn't say anything about his political activities,
Like you think about the the serious overhand over the stock.
Speaker 1 (12:34):
No, you're the Tesla board and you're like, OKAYLN, in
order to get your twenty eight billion dollars of options,
you have to not do a list of bad things, right,
we're the list of bad things, Like Okay, sure it
starts with like enraging customers by doing political activities and
then go out to like Ketamane and like, you know,
running seven other companies. Like no, he would much rather
have his complete freedom to do whatever he wants. And
(12:56):
then twenty eight billion dollars. I mean, I'm speculating that.
Speaker 2 (13:02):
I talked to him this morning.
Speaker 1 (13:03):
I don't know, Like it's easy for me.
Speaker 2 (13:08):
We're just talking about plenty of money at this point.
Speaker 1 (13:10):
Right, He's like, right, we are talking about funny money. Yeah,
Like he lives in a state in which if he
wanted any number of dollars to do anything, he could
snap his fingers and it would like magically appear. So
like there is a sense of fairness. There is a
sense of like, you know, wanting to have a certain
ownership of Tesla. There's all this stuff that goes into
(13:31):
him wanting to have tens of billions of dollars of
Tesla actions. But if he needs money to do something,
he'll find money to do something.
Speaker 2 (13:38):
He's going to be all right, Gus, he wants to
be okay, how about corporate actions?
Speaker 1 (13:59):
About corporate access?
Speaker 2 (14:01):
Bradley Sacks over a business insider Bloomberg along great peace
out about.
Speaker 1 (14:07):
Like the big hedge funds and corporate access. I love
corporate access because it's like it makes no sense, No,
it makes total sense, but like it makes people insane.
Corporate access is like investors largely big you know, institutional investors, hedgehunds,
and like mutual fund matters. Investors like to meet with
the companies who shares they own and the companies who
(14:28):
shares their considering buying. And they will sit down with
the CEO and be like, so, how's business, And they
learn things in these meetings. Theoretically, No, theoretically they don't,
right because, like you know, the US has rules saying
that regulation FD says that companies can't disclosed material and
public information to some investors without disclosing it publicly to everyone.
(14:50):
And yet these meetings happen, and you know that they
learn something because one they keep doing the meetings, right. Sure,
you know, people don't waste their time for no reason, right,
Like they think they're learning something. And then it's like
a little hard to study. But there are some empirical
studies where academics like look at these meetings and they
find that investors who have meetings with management then make
more informed trading decisions than they do if they don't
(15:12):
have the meetings. So it's clear that these meetings have
some value. And you know, it's like this gray intermediate
area between. They can't get material on public information, right,
Like the company can't be like, oh, our earnings are
going to be really good next quarter if they haven't
already given guidance on the earnings. They can't be like, oh,
we're getting acquired next week.
Speaker 2 (15:29):
Right.
Speaker 1 (15:29):
They can't give like big material information, but they can
talk about how they think about the business. They can like,
you know, talk through the model. They can do a
lot of helpful stuff for the investors where the investors
come away learning something without being spoon fed next quarter's earnings.
Speaker 3 (15:45):
Yeah.
Speaker 1 (15:46):
The thing that people always say about this to make
themselves feel better is that the investors can get a
read on the executive's tone and body language. On its face, absurd, yes,
but people keep saying it. They're like, oh, yeah, they
don't say anything that they haven't already said, but the
(16:07):
body language tells you something.
Speaker 2 (16:08):
So I can tell you it probably lost its edge
during the pandemic when you were all on zoom. And
it's a lot harder to see.
Speaker 1 (16:14):
Oh, that's an interesting question. I feel like there are
studies and I don't know them, because like that would
tell you something, right, Yeah, if it in fact lost
its edge on the pandemic, then that would tell you
that tone and body language mattered a lot. Yeah, and
when people are only getting zoom calls, they got less information,
whereas my thesis is that in fact they're being told
information and tone in body language is just a euphemism.
(16:38):
And so in the pandemic, as you get on a
zoom call and you're like, so, walk me through how
you're thinking about strategy, and the executive tells you they're like,
still informative.
Speaker 2 (16:46):
Yeah, someone should do that. I guess I come at
it from a skeptical lens as a journalist who talks
to a lot of CEOs. Not to besmirch any CEOs,
but a lot of them just follow the script. And
I mean you listen to them speak at conferences, and
you know, it's hard to get new news out of
(17:06):
someone in the C.
Speaker 1 (17:07):
Suite maybe three answers that one you don't five percent
of their stock. It's possible that a conversation with an
investor is a different framework from a conversation at a
conference with a journalist, right, Like, they're media trained, but
they're trained differently to talk to investors. Right. Two, you
do not have CIA interrogators to understand their body language.
(17:28):
Apparently some edge ones that do. And then did I
have a third?
Speaker 2 (17:33):
You said you had three, so you got to think
of something. Okay, I'm reading your body language right now,
and it seems like you're really trying to think. Okay.
Speaker 1 (17:45):
The third point is like you could imagine the investors
asking different questions because they're not trying to make news.
That's like like they're trying to make very incremental news, right,
They're trying to find out like like update their model.
Speaker 2 (17:57):
Well, that was part of the piece. Bradley wrote a
out how one of the complaints is that the questions
that are being asked or like becoming so niche to
the point that they're not useful anymore.
Speaker 1 (18:08):
Oh, I know what my third point was. Okay, My
third point was that actually in this piece, several investors
complain that in fact, they have the same point you do,
which is that the CEOs are now so scripted that
these meetings have become less useful than it used to be. Yeah,
not just because the questions are very granular, which is
like their questions are granular because hedge funds are competing
to like add extremely granular information to like the information set,
(18:31):
and so they have very detailed questions, which sometimes annoy
CEOs who want to talk about like the big pictures.
Speaker 2 (18:36):
Make sure, come on, here's my strategy. Isn't it great?
Speaker 1 (18:39):
Right? I mean the THESS Like the point of this
piece and what I read about it is that like
in my role, do you think of like the prestige
and importance of investment firms and like right now, the
big four multi strategy hedge funds like the Citadel Millennium
point seventy two vali Asnis of the world are really
like on the ascendant, Like they're really prestigious, really sort
(19:00):
of top employers and the asset management business. But when
you think about what a CEO wants, they don't want
to meet with those guys. They want to meet with
Fidelity and Wellington. They want to meet with long arming
managers for a number of reasons, one of which is
that the long only managers have longer tenure, both like
they hold the stock for decades and also like the
(19:23):
portfolio managers for decades, whereas like you know, the big
hedge funds, they're constantly churning through portfolio managers, and they're
constantly turning through stocks, and so like if you talk
to Citadel because they own your stock this week, they
made it own it next week or maybe a different person.
But there are other reasons, one of which is that
the hedge funds have these really granular questions, like they're
really interested in, like what's going to drive the stock
(19:43):
in the next couple of weeks, and so they're not
going to ask you about your strategy. And if you're
the CEO and you're like want to pontificate about the
big picture for a while, you'd much rather talk to
a long term, long only investor than to a hedge
fund who has like very specific questions about margins. And
then the other reason that they're all twenty seven and
wearing T shirts and the people at Fidelity know how
to dress.
Speaker 2 (20:03):
To meet with the CEO just amazing.
Speaker 1 (20:05):
Yeah, it's like literally true that like point seventy two
now mandates blazers because like they were having trouble booking meetings.
Speaker 2 (20:12):
Because they twenty seven year olds and whatever. Yeah, that
was a fun to bit. I also, and this was
partly addressed in the article and in your column, I
feel like part of the reason that these meetings are
in such high demand is just because time is finite,
you know, and anything that's scarce is going to be valued,
(20:33):
and time is scarce, and time with these CEOs is scarce. Yeah,
so even if it doesn't add that much of an edge,
you still have it right.
Speaker 1 (20:40):
I think there's an enormous culture in finance and business
generally of like, if you think that doing a thing
has a one percent chance of adding one percent to
your returns, you're just like hardcore and you do it anyway.
Speaker 2 (20:53):
I gotta get it right, Like.
Speaker 1 (20:55):
I have transcended that. But like, you know, you're in
that seat because you work really hard and like sort
of do everything you possibly can to get edge. And
so even though the meeting will probably be worth less,
peel got it anyway. But the other thing about scarcity
is that at these firms, you know, like the big
hedge ones have multiple teams trading the same sector, and
so you know, if you're the CEO and you book
(21:17):
a meeting with Citadel, there's like five pms at Citadel,
who are fighting each other tooth and nail to be
the one in the meeting or like the two in
the meeting.
Speaker 2 (21:23):
You know, honestly, it reminded me so much of working
in a large newsroom.
Speaker 1 (21:27):
I know, I was gonna see right yeah, right.
Speaker 2 (21:29):
Like it's very you have a beat, and you're pretty
protective of your beat, and it's funny to read about
it becoming like part of a recruiting perk is that
you're the only person covering this. You don't have to
fight for your lane. This is only your lane, or
it's even worse.
Speaker 1 (21:46):
It's like Bradley Sacks writes that like the most tenured
pms will often get the best meetings. Like you know,
if Citadel has a meeting with a company, they'll be like,
the guy's been here the longest and like does the
best work gets to have the meeting. But like sometimes
they'll hire someone and like the new guy gets the
meeting because that's like a recruiting perk, and then the
(22:06):
long tenured person doesn't get that good at the meeting.
And it's it's just like there's a lot of parallels, right, no, right,
Like I've been in meetings with like many other journalists
where one it's competitive to get into the meeting, and
then too everyone's like, you know, it's competitive to get
your question answered.
Speaker 2 (22:21):
Yeah, and it seems.
Speaker 1 (22:22):
Similar in this case.
Speaker 2 (22:23):
That's so funny.
Speaker 1 (22:24):
The other thing I wanted to say, yeah, because I
wrote about this, and I wrote about broadly speaking, CEOs
would rather meet with like Fidelity or Wellington than with
State a point seventy two. And then it's a throw
I was like, and they probably won't meet with you, know,
if you want a hundred shares and you're a retail industrial,
they probably won't be with you. And I found the
academic paper I wrote about Wednesday where they basically tested
(22:46):
that out by sending cold emails to a lot of
investor relations departments. And the cold emails, some of them
were from like a Yahoo dot commumail address like like
a high I'm an individual investor, I'd like to buy
your stock? Could you meet with me? And some of
them are from fake investment firms like like I work
at Blue Willow Capital and I'd like to meet with you.
Speaker 2 (23:08):
It sounds right.
Speaker 1 (23:09):
Yeah. They found, first of all, that about sixteen percent
of these messages resulted in meetings, which is higher than
I would have thought. Not bad, right, And second, well,
there's no distinction between retail investor and Blue Weellow capital,
Like retail people could get the meetings just blue. Well
they did find racial discrimination though.
Speaker 2 (23:26):
Yeah, don't love that. This reminds me. We were talking
about Hymns and HER's earnings on air this week, and
the Hymns and Her CEO has made sort of a
big show of like giving questions in the earnings call
to retail investors.
Speaker 1 (23:41):
Yeah, right, Like my perception of it being hard for
retail is kind of an old school perception, and now
with like memeslags, it's a different game.
Speaker 3 (23:47):
Yeah.
Speaker 2 (23:48):
Also somewhat related to this, I was talking to a
CEO who reported earnings this week, and the CEO said that, Okay,
if you're report in the afternoon, then you do the
earnings call. But then this CEO was answering questions from
analysts until like ten pm that night. Like, you have
the earnings call and they asked the questions and the
(24:09):
transcript goes out and you can see it is public.
But then like the real questions come after the earnings call.
So you have the earnings call and then you have
all your individual calls.
Speaker 1 (24:17):
This is the thing that people naively think regulation FD prevents, right,
everything has to be public, But no, And you see
it on like public earnings called transcripts. You know, people
ask questions and the CFI will be like, follow up
with me afterwards and we'll walk through that, right, and like,
you know, like obviously the case that companies talk to
analysts and investors outside of the you know, one hour
(24:38):
public earnings call, and it seems to be obviously the
case that those conversations are useful, but they exist in
this weird regulatory limbo.
Speaker 2 (24:46):
I find that frustrating because as a journalist, I'm not
allowed to sit in on those one on one leadings.
Speaker 3 (24:52):
Yeah.
Speaker 2 (25:08):
Should we check in on the state of on cycle recruiting.
Let's check in Bank of America. Yeah, well, Bank of America,
the news came out this week, written by Catherine Doherty
that their junior bankers face reassignment if they accept other jobs.
Just the latest in a string of the big banks
pushing back against on cycle recruiting. Right, so the busy summer.
Speaker 1 (25:32):
One thing I wonder about is like why are they
pushing back?
Speaker 2 (25:34):
Why are they pushing back in general, like the dynamics.
Speaker 1 (25:37):
Here are like JP Morgan led the charge of saying
we're not going to allow recruiting, we're mad about it,
we'll fire you, and then a number of big private
equity firms announced they would wait to do on cycle.
Speaker 2 (25:51):
Recruiting led by Apollo. It feels like.
Speaker 1 (25:53):
Most banks did not join in saying where we're going
to fire you, and most private acuity firms did not
announce we're not going to do encycle recruiting for two years,
but also didn't happen. Like everyone is like quietly tacitly
going along with this process started by JP Morgan, and
it's like a two side like the banks and the
priority from every seems like to have. There's like a
(26:16):
possibly fragile equilibrium where they're not doing the recruiting, and
so there's not really a need I don't think for
the banks to say we'll fire you if you do it,
because it's not happening. But you know, you got to
get ahead of it. So some of the banks are
joining in, and so this week Bank of America said
except an offer elsewhere, you'll be reassigned, which is very
(26:36):
ominous because they don't say where, and like, well, Bank
of America has tellers a lot of possibilities.
Speaker 2 (26:46):
Yeah, that was more tired than I was thinking I do,
I don't say yeah.
Speaker 1 (26:51):
And it's you know, like the idea of on cycle
recruiting is so strange, right, but it essentially it's you
will at the beginning of your investment making analyst job
except an offer at a private equity job. But that
private equity job is contingent on you spending two years
being an investment banking analyst, because you do need to
learn the stuff that you do as an investment banking
analyst to be an effective private equity associate. And so
(27:15):
you have two years of working in you know, an
industry group or an m and A group or a
Leffin group at a bank where you like learn enough
to become a useful associate at a PE firm. And
if you get fired at your bank, the PE firm
will probably rescind your offer because you haven't done the
training that they require, And if you'd reassigned to being
a teller, then like also not the training they would
(27:38):
have wanted.
Speaker 2 (27:39):
Yeah, you can kind of feel for these analysts because
also they're probably not having a lot of fun in general, sure.
Speaker 1 (27:45):
And like one thing reassigned could mean is like if
you work in the tech group and you get a
job at like a tech focused private equity firm, then
Bank of America will say, Okay, we're gonna reassign you
because there's conflict of theventswers there, so we're going to
move you to like the natural resources group. Like that
(28:06):
would be like appairly benign interpretation that this one doesn't
get the sense that's what's happening, right, You get the
sense that it's like a punitive reassignment.
Speaker 2 (28:13):
Yeah, going by what the story said, this is according
to people familiar with the matter, junior bankers are being
asked by their managers to divulge whether they have a
new employment opportunity and if future offers are accepted, those
individuals will likely be moved to another area within the bank.
So searching for detail there. But they have a week.
Apparently those who fail to disclose accepted offers within a
(28:36):
week would be deemed in violation. It's interesting to see
how different banks are approaching this. Apparently Goldman has you right,
Goldman has.
Speaker 1 (28:45):
The chart approach where they're like most are they do have.
Speaker 2 (28:48):
Well, you have to restate your loyalty every three months
or something.
Speaker 1 (28:51):
Yeah, every three months you have to say you haven't
taken a job elsewhere. Yeah, But they also have like
you know, there's like three tiers of prestige. Right, there's
like private equity, and then there's investment banking, and then
there's like operations back office tellers. Right, and Goldman says,
if you stay here for two years, we're going to
try to move you into our own I was gonna
say private equity division. Yeah, their own like alts division, Yeah,
(29:14):
private area is. And then Man of America says, if
you don't stay here for two years, we're going to
move you into being a teller.
Speaker 2 (29:19):
So yeah. So Jamie Diamond, it feels like he started
this all off a couple months ago. I do wonder
like if it had been Wells Fargo who led the charge,
would we be seeing this cascade of other banks lining
up and saying we're also not okay with this, this
is what we're gonna do. Or is it uniquely like
Jamie Diamond and JP Morgan are doing this and all
(29:41):
the other big banks feel pressure to follow.
Speaker 1 (29:43):
I think Jamie Diamond has a lot of like moral
leadership I don't even know about the other banks feeling
pressure to follow. Yeah, the other banks feel cover to follow, right,
because like this is a competitive market. And if one
bank says, and this has happened before, if one bank
says we're going to fire you if you take a
private equity job too early, and no other bank says that,
then people won't go to work at that bank because
(30:05):
they will want their private equity job. But JP Morgan says,
Abymary is pretty big, and so you have cover. But
the other thing is like, also like the people who
run private equity firms care about what Jamie Diamond thinks. Yeah,
not even like as a market's and competitive matterage. So
they're like, oh yeah, they respect that guy, and so
when he says it, they're like, oh yeah, he's right
because probably everyone knows he's right. Like it's not super controversial,
Like no one's like that up said about it. And
(30:27):
I think if you, like, if you're talking to private
ay people, they are not thrilled with the current process.
The current process does not do a good job like
the old process, the process where they you know, interview
before people started banks does not do a good job
of finding people who are knowledgeable does not do a
good job of finding people who are really motivated because
(30:49):
you don't know anything yet they worked as bankers yet, Yeah,
if you interview them after a year and a half
in banking and they're like dead eyed and have both
a thousand models, like, it's easy to find out who
really wants to be there, who's really interested, who's like
learned a lot, and so it's a better system for them.
And then the other thing is we live in a
very uncertain world about the hiring needs of private equity
(31:11):
firms two years out.
Speaker 2 (31:13):
That's true. Robots are coming, Robots are coming, the death
of the universe, the.
Speaker 1 (31:18):
Deal flow situation is, and there's less need for associates
right now than people might have predicted two years ago.
And so why why predict two years out? You can
just wait and if everyone can wait, then everyone can wait.
Speaker 2 (31:31):
So you called it the old system, and that I'm.
Speaker 1 (31:33):
Sorry, the system as of six months ago.
Speaker 3 (31:37):
Right.
Speaker 2 (31:37):
Well, I was going to ask, do you think that
this changes anything? Like have we seen the end of
this cycle? Is this a lasting fragile what did you
call it? I liked that fragile equilibrium.
Speaker 1 (31:49):
I think that between the AI stuff and the relative
slowdown pe no one is desperate to hire the best
possible twenty two year olds to start in two years.
Those are separate points from like Jamie Diamond's moral authority.
I think in five years. In two years, if private
(32:12):
equity is booming and they're desperate for people to do
deals and the A thing was just the hype, and
they think, how do I get the best possible forty
bodies and seats, they'll be interviewing earlier. These things always
break down.
Speaker 2 (32:26):
But I guess that's what it's psychled does because.
Speaker 1 (32:28):
Of competitive pressures, right, And if there are no competitive
pressures for them to break down, they won't break down.
So I don't know when that'll be.
Speaker 2 (32:34):
So watch this space, all right, comebey, Okay, all right, Matt.
Speaker 3 (32:39):
Bye.
Speaker 1 (32:42):
And that was the Money Stuff Podcast.
Speaker 2 (32:44):
I'm Matt Livian and I'm Katie Greifeld.
Speaker 1 (32:46):
You can find my work by subscribing to the Money
Stuff newsletter on Bloomberg dot com.
Speaker 2 (32:51):
And you can find me on Bloomberg TV every day
on Open Interest between nine to eleven am Eastern.
Speaker 1 (32:57):
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 (33:03):
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 (33:09):
The Money Stuff podcast that is produced by Ana Mazerakus
and Moses Ondon.
Speaker 2 (33:13):
Our theme music was composed by Blake Maples and Sage
Bauman is Bloomberg's head of Podcasts.
Speaker 1 (33:18):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff
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