September 26, 2025 • 31 mins
Matt and Katie discuss reader mail about tungsten cubes, monthly financial reporting, long-term levered ETFs, the shrinking public markets, betting on onion prices, betting on stock prices, limiting sharp bets, missing expectations and bonds being stupid.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. On my desk yesterday
I arrived a tungsten cube on the tungsten cube is engraved.
This is weird. It arrives in a box with no note.
I was not expecting a tungsten cube.
Speaker 2 (00:22):
Was it checked for anthrax first? Was it dustin?
Speaker 1 (00:26):
I want to give any ideas, but I assume that
Bloomberg mellroom is quite comprehensive and it's anthex tusting, I hope,
so I didn't even think about it. I was just like, ah,
it's come through the Bloomberg mellroom. It's fine. Anyway, I
have this tungsten cube now. So have anyone sent me
a tungsten cube that says this is weird? Be in touch?
That's fun. I have to say that, first of all,
a tungsten cube with this is weird and groat on
(00:46):
it is very much my jam. And secondly, sending that
with no note and thereby making it weird is kind
of a good joke. So I have no complaints, but
I wouldn't mind hearing from whoever was said that to me.
Speaker 2 (00:58):
I didn't realize that this weird was engraved on it
when you posted it. On Instagram. I thought that you
added the text on.
Speaker 1 (01:05):
The no no, no, yeah, I posted on my close
Friends stories. But I'm also holding it up to the
camera in our zoom another way that you can't see it.
Speaker 2 (01:14):
That is a pretty good gag.
Speaker 1 (01:16):
Yeah, yeah, yeah, this is my life.
Speaker 2 (01:18):
It's pretty good. You have a little bit of a collection.
Speaker 1 (01:20):
Now, I do have my I have my money Stuff
ten year anniversary collection. I'm now holding both of them
up to the camera and again no one can see it.
Speaking of things that come in the mail.
Speaker 2 (01:34):
Oh good one.
Speaker 1 (01:38):
Mail if it's also transition I've ever done on this podcast,
It's a mail bag episode that was smooth.
Speaker 2 (01:43):
I wasn't even expecting it.
Speaker 1 (01:45):
I know, right when you at least expected a transition,
We've got some pretty good ones this week.
Speaker 2 (01:49):
Mail Bag mail Bag.
Speaker 1 (01:53):
Hello and welcome to the Money Stuff Podcast. You're a
weekly podcast where we talk about stuff related to money.
I'm Matt Levian and I write the Money Stuff 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):
And today we're doing a mailbag sud Effect.
Speaker 2 (02:19):
Mail Bag mail Bag great questions. Thank you for everyone
for setting them in. Let's just dive right in. We
got a great one out of the gates from broad
he asks, why not more frequent reporting. As a CFO
of a small but private equity owned business, I close
our books monthly and report out our financial results each month.
(02:41):
Every public company in the world is doing the same.
It's no additional cost to release those results publicly in
some form, even if not a full ten Q. This
was interesting.
Speaker 1 (02:52):
The ostensible purpose of financial reporting is to give investors
the same financial data that management is using to manage
its business, so that the investors can have sit in
the shoes of management. Everyone knows that's not true, but like,
that's sort of like the ostensible That's why there's a
you know, in your ten K you have to have
a management discussion and analysis where you sort of say what
management is thinking about the financial results. Rod is surely
(03:12):
right that every public company closes its books every month
and has some sense of the financial results for that month.
And if they had private equity investors, they would just
send over the spreadsheet and the private equity investors be like,
thanks this selfhul But they have public investors which means
primarily that they have people that can sue them. Everything
(03:33):
that happens in US financial regulation and especially US financial disclosure,
is in the shadow of litigation. Right, So if you
put out a ten Q and your numbers are wrong,
you will get sued and you will be like, yep,
our numbers are wrong. Here is some money plaintiffs layers,
and I think that's a lot of what is going
on here, Like when you put out a ten Q,
(03:54):
Like a ten Q does not have audited financials, but
you like spend three days with your auditor going through
the ten and making sure that you have utited or
comfort on every number in the financials because if they're wrong,
you'll get very sued. And so that I think is
why companies do not put out more frequent disclosure, because sure,
you have those numbers, but the task of turning those
(04:16):
numbers into something you could give to shareholders and not
worry about getting sued over is monumental. People like understand
that this is like not great, right, Like this is
why periodically the SEC tries to have some reform that
tries to make it harder for shareholders to sue public companies.
But you know, I always say everything is security is
for it. I think the arc of the universe spends
(04:37):
towards it, making it easier to sue public companies.
Speaker 2 (04:40):
This question did make me think a little bit about
how occasionally you will see companies pre announce their earnings,
even though they're wedded to quarterly updates. They will go
early sometimes, but usually it's for bad news. Also, that's
not monthly.
Speaker 1 (04:55):
Yeah, people pronounced for operatings or for bad news. But
right to have a monthly schedule of putting out financial
information no matter what would be three times as stressful
as doing it quarterly.
Speaker 2 (05:08):
Yeah. But in all these conversations, I feel like, you know,
as we continue to bat around like quarterly versus semi annual,
I just feel like when it comes to shareholder reaction
in terms of how the stock actually performs, it just
needs to be consistent, you know, whether you announced monthly
or every three months or every six months. I feel
like switching around between the different timeframes is what really
(05:30):
matters for investors trying to make decisions.
Speaker 1 (05:33):
Yeah, I mean, I think Rod points out that like
monthly reporting would smooth a lot of volatility and just
you know, make things more predictable. And investors could have
more information and not react as strongly to every three
month announcements. But yeah, I think like the disconnect here
is between the burden of actually doing the financials and
the burden of like public company reporting, which is an
entirely different beast. Kitty is wiping her screen.
Speaker 2 (05:57):
There's like a beam of like.
Speaker 1 (05:59):
She's trying wipe me off her screen. Is as you
might know if you've been listening closely or listened last
week closely. Katie is recording.
Speaker 2 (06:08):
This from Colorado, Colorado.
Speaker 1 (06:10):
I'm recording this from my house, so it's the somewhat
unusual but not unheard of remote money stuff podcast recording.
Speaker 2 (06:17):
Yeah, it's always a little bit worse. So thanks for listening.
All right, great question, Rod.
Speaker 3 (06:25):
Mail mail back.
Speaker 2 (06:27):
Let's see we have another one from Josh, and this
one is about ETFs and Josh wants to know about them.
He says, you've done a great job covering the flaws
of levered equity ETFs, especially how daily resets make them
diverge from long term leveraged exposure. Do you see potential
for retail products that actually deliver true long term levered
equity performance. Suppose you think Corporate America is too conservative
(06:51):
with their use of leverage. But simply buying on margin
is too costly for the ordinary retail investor. But an
ETF sponsor could implement leverage far more efficiently. Is there
a path for this to exist?
Speaker 1 (07:03):
Great question, so, Josh, I think that has been ETF
builded by Katie. So we've talked about like levered ETF's
ordinarily rebalance every day to give you two times or
three times the daily returns of a stock, and that
creates this weird volatility drag. And if you wanted to
have like two times the returns of a company for
(07:24):
like a year, there's not really a product that will
give you that other than buying the stock on margin
and waiting a year. But there's no rely ETF product.
Since we started talking about this, trader did like a
weekly and monthly rebel ETF which gives you a month
of two times the returns I think for like the
S and P. But it is very hard to do
(07:45):
an ETF that is like, we'll give you leverage return
on a stock for five years. Because the whole point
of an ETF is it has daily liquidity and so
people can buy into the ETF each day, and you're
giving them a different proposition each day. If you're giving them,
you know, five years return starting on September twenty fifth,
instead of saying we'll giving you daily leverage returns. But
(08:07):
there's no reason that if the thing that you want
is long term levered exposure to a company or an
index or whatever, there's no reason that you should get
that in the forum of a daily liquidity ETF that
you can get out of at any time, right, Like,
there are other ways to build that product. Now, the
classic way to build that product is something like a
(08:27):
private equity firm which buys companies, levers them up, and
takes investors. And as we talk about a lot around here,
it is getting easier and easier to put private equity
into your retail brokerage account and so one day in
the not too distant future, you'll just like, you know,
get a KKR fund and your brokerage account and that'll
(08:48):
be that. But otherwise, yeah, I mean, like it is
hard because the sort of classic retail products are mutual funds,
whether or not they're ETFs, and mutual funds have leverage limits,
and so it is a little hard to invest in
a retail product that gives you two x the exposure
to Corporate America other than that retail product being your
own margin account. But you know, watch this space. In
(09:11):
like a year, it's just going to be private equity
funds in your prohne.
Speaker 2 (09:14):
Okay, I'm glad you brought up the trader ETFs. I
have some sad news. A bunch of them actually shut down.
Speaker 1 (09:20):
I'm not surprised. It's a super niche product, right to
Like I want two times the monthly return on the
SMB why yeah, Like two times the daily returns is
a fun gambling product, right, and two times the long
term returns is maybe for like a month? Like why
a month?
Speaker 2 (09:38):
Yeah? I think at least one of them still exists.
They did on the Queues spy and also the Philadelphia's
Semiconductor Index. Sure, and the Monthly Cues reset ETF still exists.
But I mean it's small. It just seems like the
demand isn't there. It's sixty one million, but.
Speaker 1 (09:58):
Still there's two trades here. There's like what Jo asked
about is like if you think that Corporate America is
too conservative with their use of leverage, right, so like
you can think that the capital structure of the S
and P is under levered, and you want to back
lever at yourself, and you can't do that through a
margin account because like you can't get good margin terms,
(10:20):
but you wish some investment advisor would do it for you.
That's a sort of set of corporate financedcs that are reasonable.
The other one is like, if you enjoy gambling, you'll
enjoy a double gamble twice as much. And that I think,
I think is a levered bet on a semiconductor index.
Like I don't know, I don't know, but I think
you're coming to that being like from the perspective of like, ah,
(10:41):
the semi industry is too under levered. I need to
synthetically lever up that industry. I think you're like, ooh,
these talks will go up a lot. Why don't make
them go up twice as much?
Speaker 2 (10:51):
Yeah, Josh, great question.
Speaker 3 (10:56):
Mail bag, mail bag.
Speaker 2 (10:58):
Another j name Justin asks. According to a recent op
ed in The New York Times, the number of publicly
traded companies has decreased by fifty percent over the last
thirty years. Companies are choosing to remain private to avoid
the additional regulatory requirements but also because of the evolution
in the funding models for promising tech startups, how will
(11:18):
this impact the investment options available to individual investors. Well,
four oh one K investors in the future have to
allocate some portion of their investment portfolio to private capital
funds with management fees that are much higher than standard
equity index funds.
Speaker 3 (11:33):
Yeah.
Speaker 1 (11:34):
I just feel like the answer is yes, right, Like
it's not a first best state of affairs, right, Like
the first best state of affairs I think. I think
in the abstract is like somehow it gets easier to
go public, and companies like feel some sense of like
patriotic obligation to go public, and they're like, you know,
we're a good company. We want mom and pop investors
to be able to participate in our growth. And so
(11:54):
all the little companies go public, and we make it
really cheap and easy, and you know, we don't get
sued when you go public. And so all the companies
go public, and like the big, fun, fast growing companies
are available to mom and pop investors they're available, and
index funds they're available, and like standard low fee equity
mutual funds, and life is great. Right, the second best
(12:16):
outcome is like all the companies stay private and big
institutional investors have access to their private shares, and those
big institutional investors get bigger and bigger and bigger, and
they tap out all of the available institutional capital and
they're like, hey, there's a lot of money in four
oh and ks, and then they lobby the president to
(12:36):
let them take four roh and K money, and everyone's like, oh, yeah,
it'd be great to put individual retail investors into private
investments because those are the ones that go up a lot.
And then the alternative asset managers are like, great, so
we'll just charge like two and twenty for that, and
then that's the equilibrium you end up in. I think
that's like clearly happening, and it's not how anyone would
design a financial system from like first principles, right, because
(12:59):
like the you know you have is like historically what
you have is like a lot of companies that want
a lot of money are public and they're available to everyone,
including retail investors, and then like a smaller number of
companies that don't need as much money are private and
they don't have access to retail investors. But like it's
fine because it's like they're the smaller companies, the weirder companies,
or the companies that don't need capital. And now we've
(13:20):
moved to a model where like the big companies that
do need a lot of capital can get it in
private markets, but the private market capital providers are like, hey,
we could really use some retail money. And so you
have this like second layer of intermediation where you can
just charge people a lot higher fees for investing in
companies that would have been public twenty years ago.
Speaker 2 (13:38):
So the answer is yes, yes.
Speaker 1 (13:41):
Yeah, right, I got it.
Speaker 2 (13:44):
Prove me wrong.
Speaker 1 (13:44):
I'd love to be wrong. It just it's right.
Speaker 2 (14:00):
This is really interesting to just me. But we have
another question from another j name. This one comes from Jordan.
It'd be funny, okay, Jordan. Jordan asks one of the
recurring trends across both betting markets and crypto is that
things that were previously illegal are now legal if you
(14:22):
go through these venues not legal advice. Does there exist
a way to get around the Onion Futures Act of
nineteen fifty eight by creating a betting market on poly
market on the price of onions. Gosh, this question was
written just for you.
Speaker 1 (14:35):
I feel like the answer is no. Okay. So we've
talked about the Onion Futures Act of nineteen fifty eight
in the past. Basically in the United States there are
regulated commodity futures trading markets except for onions, because onions
are specifically it's specifically illegal to trade onion futures. And
the reason for that is, like someone cornered the onion
market in the fifties and they were like so mad
(14:56):
that they said, nowhere onion futures also motion picture receipts.
Don't actually know why that is, but like the Onion
Features Act also says it's illegal to trade futures on
motion picture receipts, but otherwise you can trade futures on
any commodity, which like people used to understand to mean
like wheat and corn and metals and whatnot. And then
(15:16):
in like the seventies they started to understand it to
mean like treasury rates and stock indexes and stuff like that.
And from there we have very recently expanded into a
brave new world for commodities include who will win the
football game tonight and who will win the election, And
so now we have this brave new world where like
almost everything is by default with many objections, with many complaints,
(15:41):
with like many people believing this is wrong. But almost
everything is currently legal to trade as a commodity futures
contract on Calshie, Like if you can think of a proposition,
you can make it into a commodity's future contract on Calshi.
But there are a few exceptions, and one of them
is onions, because onions are actually the statute. They say
you can trade commodity features on everything but onions. So
(16:03):
everything includes sports, includes elections, that doesn't include onions.
Speaker 3 (16:08):
Mail bag, mail back.
Speaker 1 (16:10):
I'm going to read the next question because it's segueyed
directly from that. It's from Jamas, I mean Thomas Thomas right,
say syllogism. One, gambling is legal if it is a
commodities trade. True. Two, stock movement can be gambled on
well true. Three company can insider trade on a commodity
which it directly deals with, except onions of course, nice callback.
(16:30):
So is insider trading of a company's own stock legal
if it happens on a prediction market aka a commodities exchange.
So I think the other exception to like everything is
a commodity that can be traded on commodity exchange. The
other exception is stock, because stock is a security and
there are details complicated I do not pretend to fully understand,
(16:52):
but there are rules about securities based swaps, so like
there are commodities features which are regulated by the Commodity
Futures Trading Commission, and are you know, traded on commodities exchanges.
And then there are stock derivatives which are regulated by
the SEC and have a more or less completely separate
set of rules that apply to them. So if you
(17:13):
were to try to list stocks on a prediction market
just like stocks, or I think like binary options on stocks,
I think questions like will Tesla be up or down today?
Is I think a securities based swap, and I think
you could not list that on a commodities exchange like calcio.
This is not legal advice, and people are pushing the
(17:34):
boundaries of this every day, so I don't feel confident
that this will always be true, But for right now,
I think it is the case that you can't just
have straight up stock bets on prediction markets. Now, I
went and looked at polymarket and calshiy, and there's some stuff.
There's some like what will be the biggest AI company
at the end of the year. There's stuff where you're like,
that's a little bit like a securities based swap, but
(17:55):
it's like far enough away that people don't think of
it as betting on stocks. I know the answer to
the question. I mean, I think if you think that
like pretty straightforward bets on stocks will end up existing
on these prediction markets. I don't know the answer to
the question. Would it be legal for the company to
gamble on its own stock. I feel like the intuitively
correct answer is no, but the like the tracing through
(18:17):
the commodities rules might be yes. But in any case,
I wouldn't worry about it because like, these contracts are
never going to be that liquid, and like, no one,
you know, Tesla's not going to go around and be
like I can make forty dollars betting my stock will
be up today.
Speaker 2 (18:30):
I feel like a company just has to do it
so we can find out the answer.
Speaker 1 (18:33):
Once there's a series of things you have to do,
which include getting some sort of bet on your stock
listed on a prediction market, which is you know, that's
your first problem right there by the way. I do
think that more of that happens in Europe, like, you
can have bets on stocks on prediction markets, but instort
of treating rules and commodities rules are different.
Speaker 2 (18:51):
There. That was a good one to two punch of questions.
Speaker 1 (18:54):
Onions and stocks, the two things that are not legal
to trade, and commodities features.
Speaker 3 (18:59):
We mail back.
Speaker 2 (19:02):
I'm really pleased to say that. The next question comes
from another Josh, so we're back to the Jay names,
which is interesting anyway. This Josh asks sports betting apps
regularly ban or limit so called sharp betters, gamblers that
have a history of winning a high percent of the time.
This has always seemed weird or kind of unfair to me,
But whatever, If these apps and other prediction type markets
(19:24):
begin allowing bets on equities, can they legally do the
same thing. If I'm consistently winning bets on if the
SMP will go up or down on a specific day,
can they ban me from making that bet? I love
this question. I have no idea, but boys, it fun
to think about.
Speaker 1 (19:40):
So a couple wins one is As we just said,
I think it's going to be hard for these prediction
markets to list stock trades because I think that's the
securities based on now there isn't. The exception is indexes
for some reason trade on commodities exchanges like stock indexas,
So you can probably probably have a better on the SMP,
(20:00):
whereas you can't on like Tesla or en video. So
like it is plausible that like consistently winning bets on
the s and P on your prediction market app is
the thing that could happen, and then the question is
can they ban you. So in traditional sports betting, you
like have an account with a sports book that takes
the other side of your bets, and the sports book
(20:22):
doesn't want to lose, and so it will think about
are you going to be a winning better? And it
has various data to you know, evaluate that, including your
track record and you know at the time of day
that you make bets and things like that, and if
it concludes you're going to be a winning better, it
will probably limit how much you can bet, or even
cut you off entirely because it doesn't want to lose
(20:43):
big bets to you because it's taking the other side
of your traits. A commodities exchange can't really do that.
A commodity exchange has to have some sort of like
fair open access and so if you are betting on
a commodities exchange, it can't limit your cut you off. Now,
the other thing that's true about a commodities exchange is
it isn't taking the other side of your bets. It's
(21:04):
just an exchange. Like in a classic sports book, the
person facing you is like both like the people providing
the interface and the people taking the other side of
the bets are the same, or the book maker. In
a commodities exchange, there's the exchange that provides the venue
for the bets, and then the person taking the other
side of your bet is just another better it's probably
a market maker in like these prediction markets, that's probably
(21:27):
a professional or semi professional market maker who is like
in the business of taking the other side of bets.
If you like look at actual US equity market structure,
it's not quite the case that like, if you're good
at you know, trading stocks, they will cut you off
or limit you because you know, equities markets have a
higher standard of fairness and openness than like sports books.
(21:51):
But it's not entirely not the case either. Like one
thing that happens is that like the stock exchanges have
programs separate venues to segregate retail and institutional orders, because
you know, in this world, the institutions are the sharps,
and the retail orders are the you know, like noise gamblers,
(22:12):
and so market makers, who are the equivalent of bookmakers,
want to trade on the other side of retail, and
they don't want to trade on the other side of sharps.
And so you have ways to segregate the order flow.
So like the exchanges do some of it where they
have like retail execution facilities, where like you can trade
with only retail on the exchange. But the main way
this happens in the US equity market is payment for orderflow,
where you know, Robinhood will route stock orders to market
(22:35):
makers because those market makers want to interact only with
retail orders. So most retail is noise traders, and it's
fun for a market maker and to interact with them.
But some retail is sharps. And I have heard anecdotally
that market makers do limit the sharps, and that if
you are really really really good at trading stocks in
(22:56):
a particular way, like if you're picking off quotes, or
if you're like if you have like really good like
short term alpha, possibly because you have like some weird algorithm,
possibly because you're spoofing, which some retail traders do, or
possibly because you're incredibly smart and you're doing that on
your Robinhoo account, and Robinhood is routing your orders to
some market maker. That market maker might notice and it
might call Robinhood up and say, hey, we don't want
(23:18):
these orders anymore. Right, there's some possibility of, like if
you're too sharp, you will get limited in some way
in the equity market, although I think it's much more
like unclear and uncertain than it is in the sports
betting world. I don't think that any of that is
in the near future for like Calshi, but in the
far future, when you know, sports betting on commodities exchanges
(23:42):
is a huge business. Will bookmakers pay like app providers
to route orders directly to the bookmakers? And will the
bookmakers say I don't want these orders because they're too sharp, Like, yeah,
maybe I don't know.
Speaker 2 (23:57):
So maybe we revisited this question and like ten years,
I would.
Speaker 1 (24:01):
Just say there's a continuum of how much a market
maker can limit sharps, and like bookmakers do it like
most clearly and explicitly, but like in the rest of
the financial world, there's a little bit of it. I
think in professional institutional bond trading you see a certain
amount of this, where like if you continue to like
(24:22):
pick off your brokers, your brokers will stop answering their calls, right,
I mean, like there's a lot of If you're too sharp,
people will notice and you'll get less ability to trade.
Speaker 2 (24:44):
Mike asks During earning season, a company missus beats or
hits expectations, but the reality is that earnings are what
they are. It's the analysts who hit or miss or
come close in their predictions. When a Category five hurricane
drops to a Category fourlogists don't say the hurricane underperformed. Instead,
they say it took a different path, et cetera. Shouldn't
(25:06):
the hit or miss burden be on the analysts rather
than the company? So I think this is interesting, But
I also feel like it is on the company because
they're in pretty regular communication with the cell side and
are in the business of managing expectations.
Speaker 1 (25:22):
Yeah, like, no one wants to hear that, but that's
the answer, right, I mean, like, yeah, earnings expectations are
not like analysts like putting their finger in the wind
and say, ah, I think those guys will go up.
You know, earnings expectations are analysts talking to the companies,
and it's sort of seeping out through the analysts. So, right,
if you miss expectations, like you have done a poor
job of managing your analysts.
Speaker 2 (25:44):
Yeah, this is.
Speaker 1 (25:45):
A common complaint. And it's like, no, the analysts were wrong,
not the company. And it's like that's fine, Like you
can say that, but like the point is that when you, Katie,
go on television and you say the company missed expectations,
what you're doing is explaining why the stock has gone down, right, Yeah,
And like the stock went down because people did have expectations, right,
(26:07):
and when the company underperformed those expectations or the expectations
overperformed the company in any case, like what happens next
the stock goes that, And so it is natural for
the investors to feel disappointed, right, Yeah, this company disappointed us,
Like I don't know, like it does feel like the
company is the one that is the immediate cause of
the disappointment. And so I think it's completely fair to
(26:29):
say they missed expectations.
Speaker 2 (26:31):
It's in some way similar to the lead up to
big FED decisions, Like the FED doesn't like to surprise
the market. The FED is almost certainly going to tell
you without telling you what exactly it's going to do.
At their policy decision, they do have a blackout period,
so you see like a real parade of FED speakers
get in what they're going to say before the blackout period. Like,
(26:52):
no big FED decision should be that big of a surprise.
You have like a range of possibilities, and I feel
like it's the same at the micro level with all
these companies as well.
Speaker 1 (27:02):
It is, and like I think that like there are
some you know, regulatory concerns about like the mechanism that
you and I have just positive of, Like companies managed
their analysts pretty closely. No one would quite say that,
like it's a little awkward. You're not supposed to disclose
material non public information to the analysts without disclosing it
to everyone.
Speaker 2 (27:19):
But like yeah, you know, thanks, but we're on a podcast,
so we can say it.
Speaker 1 (27:24):
We can say it. It's like the truth is somewhere
to be trained. But right, if you're in a company
and it's like two weeks before earnings and analysts expect
you to make two dollars a share, and you're gonna
make one dollar a share, like, it's too late to
make the extra dollar a share.
Speaker 2 (27:37):
Like.
Speaker 1 (27:37):
What you're trying to do is figure out a way
to communicate to the market that the market is going
to be disappointed. Yeah, and if you fail to do that,
then you missed expectations.
Speaker 2 (27:44):
Man, or you could pre announce it. Good question, though, Mike,
we appreciate it.
Speaker 3 (27:49):
Mail Bag, mail Bag Charlie.
Speaker 2 (27:53):
I really like this question from Charlie. Charlie asks you
both seem to hold primarily orthodox spin to it views parentheses.
It is good to buy low cost index funds. Elon
is wild but makes the number go up. M two
graphs are not a useful way to consider price, et cetera.
Do either of you hold any heterodox opinions in this area.
I'll let you go first.
Speaker 1 (28:14):
I hold no heterox opinion. I probably hold some heterot
ex opinions. I have like tried to start fights on
fin Twitter because I think that comparing stocks and flows
is completely normal and happens every day and the word
for it is valuation. And like for a long time
on finance Twitter there is like a stocks and flows
police where people would see that like Apple is worth
(28:34):
more than the GDP of Kazakhstan, and they'd be like,
that's a stock and flow. You can never compare stocks
and flow, And that's right. This is a very minor
heterox opinion. And for the most part, I hold only
orthodox opinions, and I think often that my job is
just to explain recent financial events in terms of like
corporate finance one oh one, and the most orthodox and
(28:55):
normal corporate finance theories remain counterintuitor to a lot of people,
and so it's fun to just explain them.
Speaker 2 (29:02):
Again, I would say, the heterodox opinion that I hold
about investing, and this is not investing advice, et cetera.
I don't know, fixed income and bond seem kind of
stupid to me, Like I don't. It just seems dumb.
Speaker 1 (29:17):
Like that's really I love that, you know, I like
come from an equities background, right, I was a convertible
bomb guy, and so like, I do have a bit
of like grievance that, like everyone thinks that equities are dumb,
but I appreciate that you're that you think fixed and
given is umb.
Speaker 2 (29:36):
Money market funds, sure that, but that's basically cash. But
why on earth would anyone buy like even the belly
of the treasury curve and especially out from there, They're
unreliable as a hedge. And also I don't get that
excited about the yield. But that's not investing advice. That
is just a heterodox opinion that perhaps.
Speaker 1 (29:58):
I hold answered. No, can't believe you, so then I know.
Speaker 2 (30:02):
I'm sorry.
Speaker 1 (30:04):
All right, that was a mail bag.
Speaker 2 (30:05):
That was a meal bag. Thanks for the great questions.
Speaker 1 (30:07):
Thanks for joining us from your vacation.
Speaker 2 (30:09):
Yeah, I'm really eager to sign off, so I'm going
to do it.
Speaker 1 (30:13):
All right, goodbye, And that was the Money Stuff Podcast.
Speaker 2 (30:21):
I'm Matt Levine and I'm Katie Greifeld.
Speaker 1 (30:23):
You can find my work by subscribing to the Money
stuffnuletter on Bloomberg dot.
Speaker 2 (30:27):
Com, and you can find me on Bloomberg TV every
day on the Clothes between three and five pm Eastern.
Speaker 1 (30:34):
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 the air.
Speaker 2 (30:42):
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 (30:48):
The Money Stuff Podcast is produced by Anamazerakis and Moses Ona.
Speaker 2 (30:52):
Our theme music was composed by Blake Maples.
Speaker 1 (30:55):
Amy Keen is our executive producer.
Speaker 2 (30:58):
And Sage Baalman is Bloomberg's head of Podcasts.
Speaker 1 (31:01):
Thanks for listening to The Money Stuff Podcast that we'll
be back next week with more stuff.
Bloomberg Audio Studios, podcasts, radio news. On my desk yesterday
I arrived a tungsten cube on the tungsten cube is engraved.
This is weird. It arrives in a box with no note.
I was not expecting a tungsten cube.
Speaker 2 (00:22):
Was it checked for anthrax first? Was it dustin?
Speaker 1 (00:26):
I want to give any ideas, but I assume that
Bloomberg mellroom is quite comprehensive and it's anthex tusting, I hope,
so I didn't even think about it. I was just like, ah,
it's come through the Bloomberg mellroom. It's fine. Anyway, I
have this tungsten cube now. So have anyone sent me
a tungsten cube that says this is weird? Be in touch?
That's fun. I have to say that, first of all,
a tungsten cube with this is weird and groat on
(00:46):
it is very much my jam. And secondly, sending that
with no note and thereby making it weird is kind
of a good joke. So I have no complaints, but
I wouldn't mind hearing from whoever was said that to me.
Speaker 2 (00:58):
I didn't realize that this weird was engraved on it
when you posted it. On Instagram. I thought that you
added the text on.
Speaker 1 (01:05):
The no no, no, yeah, I posted on my close
Friends stories. But I'm also holding it up to the
camera in our zoom another way that you can't see it.
Speaker 2 (01:14):
That is a pretty good gag.
Speaker 1 (01:16):
Yeah, yeah, yeah, this is my life.
Speaker 2 (01:18):
It's pretty good. You have a little bit of a collection.
Speaker 1 (01:20):
Now, I do have my I have my money Stuff
ten year anniversary collection. I'm now holding both of them
up to the camera and again no one can see it.
Speaking of things that come in the mail.
Speaker 2 (01:34):
Oh good one.
Speaker 1 (01:38):
Mail if it's also transition I've ever done on this podcast,
It's a mail bag episode that was smooth.
Speaker 2 (01:43):
I wasn't even expecting it.
Speaker 1 (01:45):
I know, right when you at least expected a transition,
We've got some pretty good ones this week.
Speaker 2 (01:49):
Mail Bag mail Bag.
Speaker 1 (01:53):
Hello and welcome to the Money Stuff Podcast. You're a
weekly podcast where we talk about stuff related to money.
I'm Matt Levian and I write the Money Stuff 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):
And today we're doing a mailbag sud Effect.
Speaker 2 (02:19):
Mail Bag mail Bag great questions. Thank you for everyone
for setting them in. Let's just dive right in. We
got a great one out of the gates from broad
he asks, why not more frequent reporting. As a CFO
of a small but private equity owned business, I close
our books monthly and report out our financial results each month.
(02:41):
Every public company in the world is doing the same.
It's no additional cost to release those results publicly in
some form, even if not a full ten Q. This
was interesting.
Speaker 1 (02:52):
The ostensible purpose of financial reporting is to give investors
the same financial data that management is using to manage
its business, so that the investors can have sit in
the shoes of management. Everyone knows that's not true, but like,
that's sort of like the ostensible That's why there's a
you know, in your ten K you have to have
a management discussion and analysis where you sort of say what
management is thinking about the financial results. Rod is surely
(03:12):
right that every public company closes its books every month
and has some sense of the financial results for that month.
And if they had private equity investors, they would just
send over the spreadsheet and the private equity investors be like,
thanks this selfhul But they have public investors which means
primarily that they have people that can sue them. Everything
(03:33):
that happens in US financial regulation and especially US financial disclosure,
is in the shadow of litigation. Right, So if you
put out a ten Q and your numbers are wrong,
you will get sued and you will be like, yep,
our numbers are wrong. Here is some money plaintiffs layers,
and I think that's a lot of what is going
on here, Like when you put out a ten Q,
(03:54):
Like a ten Q does not have audited financials, but
you like spend three days with your auditor going through
the ten and making sure that you have utited or
comfort on every number in the financials because if they're wrong,
you'll get very sued. And so that I think is
why companies do not put out more frequent disclosure, because sure,
you have those numbers, but the task of turning those
(04:16):
numbers into something you could give to shareholders and not
worry about getting sued over is monumental. People like understand
that this is like not great, right, Like this is
why periodically the SEC tries to have some reform that
tries to make it harder for shareholders to sue public companies.
But you know, I always say everything is security is
for it. I think the arc of the universe spends
(04:37):
towards it, making it easier to sue public companies.
Speaker 2 (04:40):
This question did make me think a little bit about
how occasionally you will see companies pre announce their earnings,
even though they're wedded to quarterly updates. They will go
early sometimes, but usually it's for bad news. Also, that's
not monthly.
Speaker 1 (04:55):
Yeah, people pronounced for operatings or for bad news. But
right to have a monthly schedule of putting out financial
information no matter what would be three times as stressful
as doing it quarterly.
Speaker 2 (05:08):
Yeah. But in all these conversations, I feel like, you know,
as we continue to bat around like quarterly versus semi annual,
I just feel like when it comes to shareholder reaction
in terms of how the stock actually performs, it just
needs to be consistent, you know, whether you announced monthly
or every three months or every six months. I feel
like switching around between the different timeframes is what really
(05:30):
matters for investors trying to make decisions.
Speaker 1 (05:33):
Yeah, I mean, I think Rod points out that like
monthly reporting would smooth a lot of volatility and just
you know, make things more predictable. And investors could have
more information and not react as strongly to every three
month announcements. But yeah, I think like the disconnect here
is between the burden of actually doing the financials and
the burden of like public company reporting, which is an
entirely different beast. Kitty is wiping her screen.
Speaker 2 (05:57):
There's like a beam of like.
Speaker 1 (05:59):
She's trying wipe me off her screen. Is as you
might know if you've been listening closely or listened last
week closely. Katie is recording.
Speaker 2 (06:08):
This from Colorado, Colorado.
Speaker 1 (06:10):
I'm recording this from my house, so it's the somewhat
unusual but not unheard of remote money stuff podcast recording.
Speaker 2 (06:17):
Yeah, it's always a little bit worse. So thanks for listening.
All right, great question, Rod.
Speaker 3 (06:25):
Mail mail back.
Speaker 2 (06:27):
Let's see we have another one from Josh, and this
one is about ETFs and Josh wants to know about them.
He says, you've done a great job covering the flaws
of levered equity ETFs, especially how daily resets make them
diverge from long term leveraged exposure. Do you see potential
for retail products that actually deliver true long term levered
equity performance. Suppose you think Corporate America is too conservative
(06:51):
with their use of leverage. But simply buying on margin
is too costly for the ordinary retail investor. But an
ETF sponsor could implement leverage far more efficiently. Is there
a path for this to exist?
Speaker 1 (07:03):
Great question, so, Josh, I think that has been ETF
builded by Katie. So we've talked about like levered ETF's
ordinarily rebalance every day to give you two times or
three times the daily returns of a stock, and that
creates this weird volatility drag. And if you wanted to
have like two times the returns of a company for
(07:24):
like a year, there's not really a product that will
give you that other than buying the stock on margin
and waiting a year. But there's no rely ETF product.
Since we started talking about this, trader did like a
weekly and monthly rebel ETF which gives you a month
of two times the returns I think for like the
S and P. But it is very hard to do
(07:45):
an ETF that is like, we'll give you leverage return
on a stock for five years. Because the whole point
of an ETF is it has daily liquidity and so
people can buy into the ETF each day, and you're
giving them a different proposition each day. If you're giving them,
you know, five years return starting on September twenty fifth,
instead of saying we'll giving you daily leverage returns. But
(08:07):
there's no reason that if the thing that you want
is long term levered exposure to a company or an
index or whatever, there's no reason that you should get
that in the forum of a daily liquidity ETF that
you can get out of at any time, right, Like,
there are other ways to build that product. Now, the
classic way to build that product is something like a
(08:27):
private equity firm which buys companies, levers them up, and
takes investors. And as we talk about a lot around here,
it is getting easier and easier to put private equity
into your retail brokerage account and so one day in
the not too distant future, you'll just like, you know,
get a KKR fund and your brokerage account and that'll
(08:48):
be that. But otherwise, yeah, I mean, like it is
hard because the sort of classic retail products are mutual funds,
whether or not they're ETFs, and mutual funds have leverage limits,
and so it is a little hard to invest in
a retail product that gives you two x the exposure
to Corporate America other than that retail product being your
own margin account. But you know, watch this space. In
(09:11):
like a year, it's just going to be private equity
funds in your prohne.
Speaker 2 (09:14):
Okay, I'm glad you brought up the trader ETFs. I
have some sad news. A bunch of them actually shut down.
Speaker 1 (09:20):
I'm not surprised. It's a super niche product, right to
Like I want two times the monthly return on the
SMB why yeah, Like two times the daily returns is
a fun gambling product, right, and two times the long
term returns is maybe for like a month? Like why
a month?
Speaker 2 (09:38):
Yeah? I think at least one of them still exists.
They did on the Queues spy and also the Philadelphia's
Semiconductor Index. Sure, and the Monthly Cues reset ETF still exists.
But I mean it's small. It just seems like the
demand isn't there. It's sixty one million, but.
Speaker 1 (09:58):
Still there's two trades here. There's like what Jo asked
about is like if you think that Corporate America is
too conservative with their use of leverage, right, so like
you can think that the capital structure of the S
and P is under levered, and you want to back
lever at yourself, and you can't do that through a
margin account because like you can't get good margin terms,
(10:20):
but you wish some investment advisor would do it for you.
That's a sort of set of corporate financedcs that are reasonable.
The other one is like, if you enjoy gambling, you'll
enjoy a double gamble twice as much. And that I think,
I think is a levered bet on a semiconductor index.
Like I don't know, I don't know, but I think
you're coming to that being like from the perspective of like, ah,
(10:41):
the semi industry is too under levered. I need to
synthetically lever up that industry. I think you're like, ooh,
these talks will go up a lot. Why don't make
them go up twice as much?
Speaker 2 (10:51):
Yeah, Josh, great question.
Speaker 3 (10:56):
Mail bag, mail bag.
Speaker 2 (10:58):
Another j name Justin asks. According to a recent op
ed in The New York Times, the number of publicly
traded companies has decreased by fifty percent over the last
thirty years. Companies are choosing to remain private to avoid
the additional regulatory requirements but also because of the evolution
in the funding models for promising tech startups, how will
(11:18):
this impact the investment options available to individual investors. Well,
four oh one K investors in the future have to
allocate some portion of their investment portfolio to private capital
funds with management fees that are much higher than standard
equity index funds.
Speaker 3 (11:33):
Yeah.
Speaker 1 (11:34):
I just feel like the answer is yes, right, Like
it's not a first best state of affairs, right, Like
the first best state of affairs I think. I think
in the abstract is like somehow it gets easier to
go public, and companies like feel some sense of like
patriotic obligation to go public, and they're like, you know,
we're a good company. We want mom and pop investors
to be able to participate in our growth. And so
(11:54):
all the little companies go public, and we make it
really cheap and easy, and you know, we don't get
sued when you go public. And so all the companies
go public, and like the big, fun, fast growing companies
are available to mom and pop investors they're available, and
index funds they're available, and like standard low fee equity
mutual funds, and life is great. Right, the second best
(12:16):
outcome is like all the companies stay private and big
institutional investors have access to their private shares, and those
big institutional investors get bigger and bigger and bigger, and
they tap out all of the available institutional capital and
they're like, hey, there's a lot of money in four
oh and ks, and then they lobby the president to
(12:36):
let them take four roh and K money, and everyone's like, oh, yeah,
it'd be great to put individual retail investors into private
investments because those are the ones that go up a lot.
And then the alternative asset managers are like, great, so
we'll just charge like two and twenty for that, and
then that's the equilibrium you end up in. I think
that's like clearly happening, and it's not how anyone would
design a financial system from like first principles, right, because
(12:59):
like the you know you have is like historically what
you have is like a lot of companies that want
a lot of money are public and they're available to everyone,
including retail investors, and then like a smaller number of
companies that don't need as much money are private and
they don't have access to retail investors. But like it's
fine because it's like they're the smaller companies, the weirder companies,
or the companies that don't need capital. And now we've
(13:20):
moved to a model where like the big companies that
do need a lot of capital can get it in
private markets, but the private market capital providers are like, hey,
we could really use some retail money. And so you
have this like second layer of intermediation where you can
just charge people a lot higher fees for investing in
companies that would have been public twenty years ago.
Speaker 2 (13:38):
So the answer is yes, yes.
Speaker 1 (13:41):
Yeah, right, I got it.
Speaker 2 (13:44):
Prove me wrong.
Speaker 1 (13:44):
I'd love to be wrong. It just it's right.
Speaker 2 (14:00):
This is really interesting to just me. But we have
another question from another j name. This one comes from Jordan.
It'd be funny, okay, Jordan. Jordan asks one of the
recurring trends across both betting markets and crypto is that
things that were previously illegal are now legal if you
(14:22):
go through these venues not legal advice. Does there exist
a way to get around the Onion Futures Act of
nineteen fifty eight by creating a betting market on poly
market on the price of onions. Gosh, this question was
written just for you.
Speaker 1 (14:35):
I feel like the answer is no. Okay. So we've
talked about the Onion Futures Act of nineteen fifty eight
in the past. Basically in the United States there are
regulated commodity futures trading markets except for onions, because onions
are specifically it's specifically illegal to trade onion futures. And
the reason for that is, like someone cornered the onion
market in the fifties and they were like so mad
(14:56):
that they said, nowhere onion futures also motion picture receipts.
Don't actually know why that is, but like the Onion
Features Act also says it's illegal to trade futures on
motion picture receipts, but otherwise you can trade futures on
any commodity, which like people used to understand to mean
like wheat and corn and metals and whatnot. And then
(15:16):
in like the seventies they started to understand it to
mean like treasury rates and stock indexes and stuff like that.
And from there we have very recently expanded into a
brave new world for commodities include who will win the
football game tonight and who will win the election, And
so now we have this brave new world where like
almost everything is by default with many objections, with many complaints,
(15:41):
with like many people believing this is wrong. But almost
everything is currently legal to trade as a commodity futures
contract on Calshie, Like if you can think of a proposition,
you can make it into a commodity's future contract on Calshi.
But there are a few exceptions, and one of them
is onions, because onions are actually the statute. They say
you can trade commodity features on everything but onions. So
(16:03):
everything includes sports, includes elections, that doesn't include onions.
Speaker 3 (16:08):
Mail bag, mail back.
Speaker 1 (16:10):
I'm going to read the next question because it's segueyed
directly from that. It's from Jamas, I mean Thomas Thomas right,
say syllogism. One, gambling is legal if it is a
commodities trade. True. Two, stock movement can be gambled on
well true. Three company can insider trade on a commodity
which it directly deals with, except onions of course, nice callback.
(16:30):
So is insider trading of a company's own stock legal
if it happens on a prediction market aka a commodities exchange.
So I think the other exception to like everything is
a commodity that can be traded on commodity exchange. The
other exception is stock, because stock is a security and
there are details complicated I do not pretend to fully understand,
(16:52):
but there are rules about securities based swaps, so like
there are commodities features which are regulated by the Commodity
Futures Trading Commission, and are you know, traded on commodities exchanges.
And then there are stock derivatives which are regulated by
the SEC and have a more or less completely separate
set of rules that apply to them. So if you
(17:13):
were to try to list stocks on a prediction market
just like stocks, or I think like binary options on stocks,
I think questions like will Tesla be up or down today?
Is I think a securities based swap, and I think
you could not list that on a commodities exchange like calcio.
This is not legal advice, and people are pushing the
(17:34):
boundaries of this every day, so I don't feel confident
that this will always be true, But for right now,
I think it is the case that you can't just
have straight up stock bets on prediction markets. Now, I
went and looked at polymarket and calshiy, and there's some stuff.
There's some like what will be the biggest AI company
at the end of the year. There's stuff where you're like,
that's a little bit like a securities based swap, but
(17:55):
it's like far enough away that people don't think of
it as betting on stocks. I know the answer to
the question. I mean, I think if you think that
like pretty straightforward bets on stocks will end up existing
on these prediction markets. I don't know the answer to
the question. Would it be legal for the company to
gamble on its own stock. I feel like the intuitively
correct answer is no, but the like the tracing through
(18:17):
the commodities rules might be yes. But in any case,
I wouldn't worry about it because like, these contracts are
never going to be that liquid, and like, no one,
you know, Tesla's not going to go around and be
like I can make forty dollars betting my stock will
be up today.
Speaker 2 (18:30):
I feel like a company just has to do it
so we can find out the answer.
Speaker 1 (18:33):
Once there's a series of things you have to do,
which include getting some sort of bet on your stock
listed on a prediction market, which is you know, that's
your first problem right there by the way. I do
think that more of that happens in Europe, like, you
can have bets on stocks on prediction markets, but instort
of treating rules and commodities rules are different.
Speaker 2 (18:51):
There. That was a good one to two punch of questions.
Speaker 1 (18:54):
Onions and stocks, the two things that are not legal
to trade, and commodities features.
Speaker 3 (18:59):
We mail back.
Speaker 2 (19:02):
I'm really pleased to say that. The next question comes
from another Josh, so we're back to the Jay names,
which is interesting anyway. This Josh asks sports betting apps
regularly ban or limit so called sharp betters, gamblers that
have a history of winning a high percent of the time.
This has always seemed weird or kind of unfair to me,
But whatever, If these apps and other prediction type markets
(19:24):
begin allowing bets on equities, can they legally do the
same thing. If I'm consistently winning bets on if the
SMP will go up or down on a specific day,
can they ban me from making that bet? I love
this question. I have no idea, but boys, it fun
to think about.
Speaker 1 (19:40):
So a couple wins one is As we just said,
I think it's going to be hard for these prediction
markets to list stock trades because I think that's the
securities based on now there isn't. The exception is indexes
for some reason trade on commodities exchanges like stock indexas,
So you can probably probably have a better on the SMP,
(20:00):
whereas you can't on like Tesla or en video. So
like it is plausible that like consistently winning bets on
the s and P on your prediction market app is
the thing that could happen, and then the question is
can they ban you. So in traditional sports betting, you
like have an account with a sports book that takes
the other side of your bets, and the sports book
(20:22):
doesn't want to lose, and so it will think about
are you going to be a winning better? And it
has various data to you know, evaluate that, including your
track record and you know at the time of day
that you make bets and things like that, and if
it concludes you're going to be a winning better, it
will probably limit how much you can bet, or even
cut you off entirely because it doesn't want to lose
(20:43):
big bets to you because it's taking the other side
of your traits. A commodities exchange can't really do that.
A commodity exchange has to have some sort of like
fair open access and so if you are betting on
a commodities exchange, it can't limit your cut you off. Now,
the other thing that's true about a commodities exchange is
it isn't taking the other side of your bets. It's
(21:04):
just an exchange. Like in a classic sports book, the
person facing you is like both like the people providing
the interface and the people taking the other side of
the bets are the same, or the book maker. In
a commodities exchange, there's the exchange that provides the venue
for the bets, and then the person taking the other
side of your bet is just another better it's probably
a market maker in like these prediction markets, that's probably
(21:27):
a professional or semi professional market maker who is like
in the business of taking the other side of bets.
If you like look at actual US equity market structure,
it's not quite the case that like, if you're good
at you know, trading stocks, they will cut you off
or limit you because you know, equities markets have a
higher standard of fairness and openness than like sports books.
(21:51):
But it's not entirely not the case either. Like one
thing that happens is that like the stock exchanges have
programs separate venues to segregate retail and institutional orders, because
you know, in this world, the institutions are the sharps,
and the retail orders are the you know, like noise gamblers,
(22:12):
and so market makers, who are the equivalent of bookmakers,
want to trade on the other side of retail, and
they don't want to trade on the other side of sharps.
And so you have ways to segregate the order flow.
So like the exchanges do some of it where they
have like retail execution facilities, where like you can trade
with only retail on the exchange. But the main way
this happens in the US equity market is payment for orderflow,
where you know, Robinhood will route stock orders to market
(22:35):
makers because those market makers want to interact only with
retail orders. So most retail is noise traders, and it's
fun for a market maker and to interact with them.
But some retail is sharps. And I have heard anecdotally
that market makers do limit the sharps, and that if
you are really really really good at trading stocks in
(22:56):
a particular way, like if you're picking off quotes, or
if you're like if you have like really good like
short term alpha, possibly because you have like some weird algorithm,
possibly because you're spoofing, which some retail traders do, or
possibly because you're incredibly smart and you're doing that on
your Robinhoo account, and Robinhood is routing your orders to
some market maker. That market maker might notice and it
might call Robinhood up and say, hey, we don't want
(23:18):
these orders anymore. Right, there's some possibility of, like if
you're too sharp, you will get limited in some way
in the equity market, although I think it's much more
like unclear and uncertain than it is in the sports
betting world. I don't think that any of that is
in the near future for like Calshi, but in the
far future, when you know, sports betting on commodities exchanges
(23:42):
is a huge business. Will bookmakers pay like app providers
to route orders directly to the bookmakers? And will the
bookmakers say I don't want these orders because they're too sharp, Like, yeah,
maybe I don't know.
Speaker 2 (23:57):
So maybe we revisited this question and like ten years,
I would.
Speaker 1 (24:01):
Just say there's a continuum of how much a market
maker can limit sharps, and like bookmakers do it like
most clearly and explicitly, but like in the rest of
the financial world, there's a little bit of it. I
think in professional institutional bond trading you see a certain
amount of this, where like if you continue to like
(24:22):
pick off your brokers, your brokers will stop answering their calls, right,
I mean, like there's a lot of If you're too sharp,
people will notice and you'll get less ability to trade.
Speaker 2 (24:44):
Mike asks During earning season, a company missus beats or
hits expectations, but the reality is that earnings are what
they are. It's the analysts who hit or miss or
come close in their predictions. When a Category five hurricane
drops to a Category fourlogists don't say the hurricane underperformed. Instead,
they say it took a different path, et cetera. Shouldn't
(25:06):
the hit or miss burden be on the analysts rather
than the company? So I think this is interesting, But
I also feel like it is on the company because
they're in pretty regular communication with the cell side and
are in the business of managing expectations.
Speaker 1 (25:22):
Yeah, like, no one wants to hear that, but that's
the answer, right, I mean, like, yeah, earnings expectations are
not like analysts like putting their finger in the wind
and say, ah, I think those guys will go up.
You know, earnings expectations are analysts talking to the companies,
and it's sort of seeping out through the analysts. So, right,
if you miss expectations, like you have done a poor
job of managing your analysts.
Speaker 2 (25:44):
Yeah, this is.
Speaker 1 (25:45):
A common complaint. And it's like, no, the analysts were wrong,
not the company. And it's like that's fine, Like you
can say that, but like the point is that when you, Katie,
go on television and you say the company missed expectations,
what you're doing is explaining why the stock has gone down, right, Yeah,
And like the stock went down because people did have expectations, right,
(26:07):
and when the company underperformed those expectations or the expectations
overperformed the company in any case, like what happens next
the stock goes that, And so it is natural for
the investors to feel disappointed, right, Yeah, this company disappointed us,
Like I don't know, like it does feel like the
company is the one that is the immediate cause of
the disappointment. And so I think it's completely fair to
(26:29):
say they missed expectations.
Speaker 2 (26:31):
It's in some way similar to the lead up to
big FED decisions, Like the FED doesn't like to surprise
the market. The FED is almost certainly going to tell
you without telling you what exactly it's going to do.
At their policy decision, they do have a blackout period,
so you see like a real parade of FED speakers
get in what they're going to say before the blackout period. Like,
(26:52):
no big FED decision should be that big of a surprise.
You have like a range of possibilities, and I feel
like it's the same at the micro level with all
these companies as well.
Speaker 1 (27:02):
It is, and like I think that like there are
some you know, regulatory concerns about like the mechanism that
you and I have just positive of, Like companies managed
their analysts pretty closely. No one would quite say that,
like it's a little awkward. You're not supposed to disclose
material non public information to the analysts without disclosing it
to everyone.
Speaker 2 (27:19):
But like yeah, you know, thanks, but we're on a podcast,
so we can say it.
Speaker 1 (27:24):
We can say it. It's like the truth is somewhere
to be trained. But right, if you're in a company
and it's like two weeks before earnings and analysts expect
you to make two dollars a share, and you're gonna
make one dollar a share, like, it's too late to
make the extra dollar a share.
Speaker 2 (27:37):
Like.
Speaker 1 (27:37):
What you're trying to do is figure out a way
to communicate to the market that the market is going
to be disappointed. Yeah, and if you fail to do that,
then you missed expectations.
Speaker 2 (27:44):
Man, or you could pre announce it. Good question, though, Mike,
we appreciate it.
Speaker 3 (27:49):
Mail Bag, mail Bag Charlie.
Speaker 2 (27:53):
I really like this question from Charlie. Charlie asks you
both seem to hold primarily orthodox spin to it views parentheses.
It is good to buy low cost index funds. Elon
is wild but makes the number go up. M two
graphs are not a useful way to consider price, et cetera.
Do either of you hold any heterodox opinions in this area.
I'll let you go first.
Speaker 1 (28:14):
I hold no heterox opinion. I probably hold some heterot
ex opinions. I have like tried to start fights on
fin Twitter because I think that comparing stocks and flows
is completely normal and happens every day and the word
for it is valuation. And like for a long time
on finance Twitter there is like a stocks and flows
police where people would see that like Apple is worth
(28:34):
more than the GDP of Kazakhstan, and they'd be like,
that's a stock and flow. You can never compare stocks
and flow, And that's right. This is a very minor
heterox opinion. And for the most part, I hold only
orthodox opinions, and I think often that my job is
just to explain recent financial events in terms of like
corporate finance one oh one, and the most orthodox and
(28:55):
normal corporate finance theories remain counterintuitor to a lot of people,
and so it's fun to just explain them.
Speaker 2 (29:02):
Again, I would say, the heterodox opinion that I hold
about investing, and this is not investing advice, et cetera.
I don't know, fixed income and bond seem kind of
stupid to me, Like I don't. It just seems dumb.
Speaker 1 (29:17):
Like that's really I love that, you know, I like
come from an equities background, right, I was a convertible
bomb guy, and so like, I do have a bit
of like grievance that, like everyone thinks that equities are dumb,
but I appreciate that you're that you think fixed and
given is umb.
Speaker 2 (29:36):
Money market funds, sure that, but that's basically cash. But
why on earth would anyone buy like even the belly
of the treasury curve and especially out from there, They're
unreliable as a hedge. And also I don't get that
excited about the yield. But that's not investing advice. That
is just a heterodox opinion that perhaps.
Speaker 1 (29:58):
I hold answered. No, can't believe you, so then I know.
Speaker 2 (30:02):
I'm sorry.
Speaker 1 (30:04):
All right, that was a mail bag.
Speaker 2 (30:05):
That was a meal bag. Thanks for the great questions.
Speaker 1 (30:07):
Thanks for joining us from your vacation.
Speaker 2 (30:09):
Yeah, I'm really eager to sign off, so I'm going
to do it.
Speaker 1 (30:13):
All right, goodbye, And that was the Money Stuff Podcast.
Speaker 2 (30:21):
I'm Matt Levine and I'm Katie Greifeld.
Speaker 1 (30:23):
You can find my work by subscribing to the Money
stuffnuletter on Bloomberg dot.
Speaker 2 (30:27):
Com, and you can find me on Bloomberg TV every
day on the Clothes between three and five pm Eastern.
Speaker 1 (30:34):
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 the air.
Speaker 2 (30:42):
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 (30:48):
The Money Stuff Podcast is produced by Anamazerakis and Moses Ona.
Speaker 2 (30:52):
Our theme music was composed by Blake Maples.
Speaker 1 (30:55):
Amy Keen is our executive producer.
Speaker 2 (30:58):
And Sage Baalman is Bloomberg's head of Podcasts.
Speaker 1 (31:01):
Thanks for listening to The Money Stuff Podcast that we'll
be back next week with more stuff.
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