August 25, 2023 • 36 mins
Matt Levine, a columnist for Bloomberg Opinion who writes the Bloomberg newsletter Money Stuff, joined the What Goes Up podcast to discuss some of the hot finance topics he’s been covering and what he means when he says “everything is securities fraud.”
“I have a genre of stories called ‘everything is securities fraud,’ which is where public companies do random bad things and people sue them for securities fraud,” Levine says. “It’s indicative of this really big, interesting trend in American securities laws where everything gets sort of reflected—all conduct gets reflected—through the notion of securities fraud because it’s easy to bring cases and the damages can be really large. And so you can like litigate, you can fight over, all sorts of political and social issues by calling them securities fraud.”
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Episode Transcript
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Speaker 1 (00:13):
Hello, and welcome to What Goes Up, a weekly markets podcast.
My name is Mike Reagan. I'm a senior editor at Bloomberg.
Speaker 2 (00:20):
Now Meldonna Hirich across asset reporter with Bloomberg.
Speaker 1 (00:23):
And this week on the show, Well Weil Donna. You
know what I always say, one of the best perks
of being a journalist is that you get to meet
these very smart people and ask these very smart people
some dumb questions. Yes, one of the being a journalist,
and what's great about working at Bloomberg is we have
(00:43):
so many very smart people just sitting a few rows away.
Speaker 2 (00:48):
Yeah, and we can chitchat with them whenever we feel
like it.
Speaker 1 (00:50):
And ask them dumb questions.
Speaker 2 (00:52):
So many dumb questions, and they give us smart answer
smart answers.
Speaker 1 (00:55):
That's right. There are no dumb answers, just dumb questions.
I don't know.
Speaker 2 (01:00):
Just for me and you, I think, yeah, yeah.
Speaker 1 (01:02):
Well you can have a smart answer to a dumb
question if I've learned anything from Mad magazine.
Speaker 2 (01:06):
Yeah.
Speaker 1 (01:07):
But anyway, I think, as you're talking about our guests, right,
I am talking about our Yes, yes.
Speaker 2 (01:12):
I'm so happy to have him he is. Can I
say he's famous in our circles. Absolutely, yeah, Yeah, he's
a big deal our guest this week. He is famous
in our circles. We all talk about him in the
nicest possible ways.
Speaker 1 (01:25):
The suspense.
Speaker 2 (01:26):
I know, I'm dragging this out, like I want people
at home listening to be like, who is it? It's
no other than Matt Levine, our colleague and Bloomberg opinion columnists.
And I'm so happy to have him on the show.
Thank you so much for joining us, Thanks for having me. Okay,
The New York Times famously wrote about you a couple
of years ago. They don't typically profile financial newsletter writers.
(01:49):
I don't think so it was a big deal. But
maybe we can just start with you telling us like
how did you become a columnist at Bloomberg.
Speaker 3 (01:58):
Well, I was a lawyer a long time prior to that.
I left law for investment banking because it was two
thousand and seven and if you were a corporate lawyer,
it felt like the sort of right thing to do
is to get into finance. And I didn't really know
much about like the financial industry, like what people did
all day. Someone offered me a job at Goldman and
I was like, well that seems like it can't hurt.
And I did it for like four years, like structuring
(02:20):
equity derivatives for corporate clients, and I learned a lot
and like it was fun and interesting, but over time
you like learn less and become more of a like
just salesperson, like at senior levels. The job is like
you get on planes and fly around to clients and
make small talk and try to convince them to do deals.
And I was much less good at that, and so
(02:42):
I was kind of tired of it, and I wanted
to get out. And I'd always vaguely imagined being a
writer without ever doing anything about it, and so I
wanted to leave Goldman at the same time that a
job was opening up a deal Breaker, which is this
small like finance and comedy blog that I was reading religiously,
as was everyone on Wall Street two thousand and eleven
when I was leaving, and so I applied and they
(03:04):
hired me, and I sort of took a leap of
faith and went to do that. And I did that
for a couple of years, and then eventually Bloomberg.
Speaker 2 (03:10):
Noticed me, and thank god they noticed you.
Speaker 1 (03:13):
Well, it does give you such a unique perspective both
the law background and the sort of derivatives background at Goldman,
It really puts you in a great position to do
what you do and analyze basically the news flow. But Matt,
my first question for you is what is the total
market value of pepperoni in the United States in any
(03:36):
given year?
Speaker 3 (03:37):
So I read about this the other day because this
guy like did this cacamami calculation for his consulting firm,
which I thought was so wonderful because this is a
stereotypical question, like there's some like just random thing and
that you get to a consulting interviewer, like you've asked
some random question about like how many washing machines there
are in the United States. Right, They just like to
try to like judge your thought process.
Speaker 1 (03:57):
It was an intern, right, wasn't an intern?
Speaker 3 (03:59):
Yeah? He was an inn.
Speaker 1 (04:00):
Anyway.
Speaker 3 (04:00):
He had like heard somewhere like a Pepperoni CEO saying
we sell enough pepperoni to blanket the entire US and
in a thin layer of pepperoni, And so he did
that math. And if you do that math, you get
like the market for pepperoni is larger than entire economy
of the world for the entire history of the world,
Like more pepperoni is sold in a year than all
(04:20):
goods and services sold in the world in all of
human history.
Speaker 2 (04:24):
It's probably true, right, I don't know.
Speaker 3 (04:28):
You can go to the Domino's website and probably get
most of what you need to know. Yeah, it's like
two dollars that pepperoni to a pizza and they sell
like a million pizzas a day, and then you're kind
of in the ballpack.
Speaker 1 (04:37):
Or Hormel's earnings transcripts. Maybe I don't know.
Speaker 2 (04:39):
I like who sells pepperoni.
Speaker 1 (04:40):
I don't even know, Like figure Hormel I think is
the main But I like computing the entire square inch
the United.
Speaker 3 (04:48):
States, Right, that's just like if you think about that
for a moment, like the United States has not covered
wall to wall and cows or anything like it, Like
not even one percent of the land in the US
is covered by gues and so like you'd really need
to like squish kas pretty thin to make that much pepperoni.
Speaker 1 (05:04):
Anyway, I don't know. Anyway, I forgot a lot about this.
For one, I know you did. That's why I forget.
I think it was two quadrillion dollars. Was the addressable. Yeah, right,
But I bring it up because that is That's what
Matt's so good at, is like finding some random financial
news story and really dissecting it and unpacking.
Speaker 2 (05:23):
It and u and teaching us all how things work
or how they were done, or how the calculations.
Speaker 1 (05:31):
Happened, how the pepperoni's made.
Speaker 2 (05:32):
Okay, but I'm so interested. As Mike said, that's a
really good example of a recent story that you did
that was really fun and fun for people to read.
Your entire column every day is some dissecting some very
very interesting story or aspect of something that's happening in markets.
I'm curious about your process, like what do you do?
(05:54):
Where do you look for these stories? Do people send
them to you? I've always been so curious about how
this worked, and I'm obviously trying to rip you off.
Speaker 3 (06:02):
I go to a little website I like to call
Bloomberg dot com. No, I mean, like I don't know,
like probably seventy five percent of what I write about
is stuff that is kind of recognizably in the financial news.
Stuff that's like on the front page of Bloomberg or
the Wall Street Journal or the Ft or Delburg are
(06:23):
often all of them, and so like there's no like
particularly interesting process for finding like the big stories people
sent me stuff, and there's there's stuff that I'm just
like attuned to. Like I have a genre of stories
called everything is securities fraud, which is where public companies
do like random bad things and people sue them for
securities fraud, like anything from like sexual harassment to like
(06:44):
animal welfare stuff to pollution to it. Now there's a
lot of like anti Dei backlash where Republicans have gotten
into the game of suing companies for securities fraud because
they like use transgender influencers in advertising and all that
stuff gets a certain amount of media coverage. But to me,
it's like indicative of this like really big interesting trend
(07:06):
in like American securities laws, where like all conduct gets
reflected through through like the notion of securities fraud because
it is easy to bring cases and like the damages
can be really large and so you can like litigate,
you can fight over all sorts of like political and
social issues by calling them securities fraud. I think that's
like really weird and interesting, and so each individual case
(07:27):
might be kind of dumb, but like the theme is
big and interesting, so you do get some of that.
Occasionally people will be like, I'm sure at this company
you should write about how they're bad, and like sometimes
that's annoying and ignore it. And sometimes it's like, oh,
this is a really funny company. I tell people that
my favorite email to gain or my favorite like IB
messages to gat is you will enjoy this eight K
(07:49):
because like that has like one hundred percent hit rate
because like someone who sends me that message one knows
what an eight K is. So if someone sends me
an aking it's a funny AK, it's probably funny EK,
and I will probably enjoy it. I am a columnist
and I don't do a lot of like you know,
breaking of news, and so when someone's like, oh you
should look into this company they're really scammy, I'm like, yeah, okay,
(08:11):
but like who I got a call to confirm that, right.
Whereas like if someone's like, look at this ak, like
the funny thing is like there in the public domain,
publicly filed, it's sort of right in my wheelhouse to.
Speaker 2 (08:20):
Write about, Yeah, what's the funniest AK you ever read?
Speaker 3 (08:23):
It's not an eight K, but there's this public company
that was like this sort of like tiny, shallow of
public company was run by like one guy and he
filed like, I don't know, thirty ten cues and ten
k's like periodic reports all at once, Like he was
way behind on the on the annual filings for his company,
(08:43):
and so he filed them all at once. And they
were just like complaining about how hardy was working, like
all of this stuff was like mister so and so
it gets no support and he's doing all these ten
cues by hand, and they were very like there's a
range of public companies and most of their filings are
sort of carefully loyal, lured and sensible, and then at
the far tael there's a lot of very weird stuff.
Speaker 1 (09:02):
What I find fascinating is, you know, you've always kind
of focused on some of the absurdities of finance and
the markets, but I feel like the markets are getting
more and more absurd and more more and more Matt
Levine esque as as the years go on. And I'll
give you an example. You know, you're talking about securities fraud.
One of my favorite columns of years recently was about
(09:24):
Ryan Cohen, who is the meme stock He basically he
was long bed, Bath and beyond, right, and uh to
some big amount of dollar amount. And they tweeted. Someone
tweeted something about bad, Bath and Beyond, and he replied
with a funny quip and he included the moon face emoji,
(09:46):
which I'm that and to your point, Matt, I think
in the commn I've never even seen that emoji before.
I don't think it translates to every device.
Speaker 3 (09:53):
Like everyone who was calling it the moon face the emotion,
and I looked at it, like it's a smiley face.
Apparently it's a moon.
Speaker 2 (09:58):
I thought it was a smiley face too.
Speaker 3 (09:59):
Actually it's just a smiley face. But like there's like
if you like hover over it, it says it's a muonomiji. Anyway, Yeah,
he treated this moon emigi, which I guess in like
the code of memestacks means that the stock will go
to the moon. And then he sold the stock like
the next day, basically like two days later. Yeah, And
so they sued him for securities for i'd saying that
he was telling people to buy even as he was telling.
Speaker 1 (10:20):
You know, it's all funny and it's absurd and it's
fun to talk about because that. But I feel like
there's a bigger issue. Let me just read a couple
of lines from your column. You said, back in the
olden days, I learned that securities fraud meant lying about
things that would be material to quote a reasonable investor.
But in the world of memestocks, there are no reasonable investors.
(10:41):
What matters is not cash flows or business plans, but
memes and influencers, and so the standards for fraud are
perhaps different.
Speaker 3 (10:48):
You know, I think it's reasonable to say, to a
large extent, the memestock was a phenomenon of a particular
macroeconomic and also social environment where like people were stuck
at home. They were Yeah, Robinhood had sort of recently,
like relatively reasonally come on the scene and like built
a good product for gamifying stock trading, and like people
are getting stimulus checks. There are a lot of factors
(11:10):
combined to allow like a bunch of retail traders to
get really into sort of irrational trading. And I don't
think that's like the main factor that is driving like
the price of Nvidia or whatever, or like of treasury bills. Yeah,
like that's the thing, Like, and absolutely I've spent more
time writing about dumber stuff than I would have five
years ago, and that dumber stuff is often the meme
(11:32):
stocks are crypto.
Speaker 1 (11:40):
I'm curious how you think about that. I mean crypto
obviously it's a very similar storyline. But a regulator's kind
of a sleep at the switch on policing this stuff.
Or should it be up to these PLANEFFS attorneys. Should
we just allow the markets to have this sort of
absurd element to them without really doing anything to correct it.
Speaker 3 (12:00):
Think that regulators are not in the business for the
most part of like correcting mistakes in financial markets, right, Like,
if you think that people are buying stocks for irrational reasons, like,
there's not so much you can do about it, right,
And it's hard because like the regulatory paradigm has always
been in the US about disclosure, and so when you
know they're in sort of the early days of memestocks,
(12:23):
some memestocks, I think it was kind of this is
more or less true of Game Stop. We're nervous about
their sock had gone up ten ten x and they
needed money, and they were a little nervous about raising
money because they're like, our stock is at really weird
prices and it's gonna it just feels like fraud to
raise money, and then other memestocks were like, great, people
want to buy a stock, We're going to sell it
to them, right, And that was like AMC was big
(12:45):
on that. But also like Hurts were bankrupt and their
stock got mamed up, and they're like, Okay, we're selling stock.
I think they shut that down. Didn't shut that down? Yeah,
but it turns out you would have done well buying
the stock. But anyways, in response to the SEC basically
said you need to put out more disclosure, like if
you're if you are selling stock because you're a memestock,
and they phrase it differently, you know what they mean.
(13:07):
Then you have to put out in your perspectives like
we don't know why our stock is trading this high.
It's probably for no good reason. You probably shouldn't buy it, right,
And so like companies would do that, they like put
out a perspective saying, our stock is trading at random
prices for no reason. We don't understand it either, but
like nobody reads that. Like the whole disclosure regime just
(13:28):
sort of falls apart in the face of like the
memestock phenomenon because you can say whatever you want in
this perspective, but nobody is reading it or deterred by it,
and like that's the bullet that the SEC has and
after that, like, Okay, you want to buy it, you
buy it.
Speaker 1 (13:41):
Yeah.
Speaker 3 (13:42):
I think it's really hard, and I think they feel
obligated to say stuff and do stuff and commission reports
and like testify it in front of Congress and like
creat the impression they're doing stuff. To the extent you
diagnose the memestock phenomenon as like a bunch of people
online decided to be fine to buy stocks at really
high prices. It's just not something the SEC has any
(14:04):
any like authority to stop, right, And so they go
to after they talk about things that are ancillary to that.
There's a lot of talk about payment for order flow
and market structure and somehow you think if you change
how the stock market orders get routed, that will somehow
solve the memes. But it's had nothing to do with it, right,
It's just some people get mad about online or they
like the SEC has looked into short selling rules because
(14:29):
some of the early name stock phenomenon was about trying
to squeeze short sellers. But regulating short selling more harshly
is a strange response to that, because like the short
sellers weren't really the they were the victims there as
it were. They looked into a little bit like is
there some sort of collusive market manipulation here? And I
just think the answer is clearly no. Right, it's people
online saying I like the stock, so there's not a
(14:51):
lot they can do. And I think they're keenly aware
that it's embarrassing. Right if you want your capital markets
to look sophisticated and professional and driven by fundamentals, and
then when they're just meming around, you feel embarrassed about
it is it's not a it's not something they can fix.
Speaker 1 (15:07):
But you know, I mean, there is this cohort of
people posting on Reddit these wild conspiracy theories to help
pump up the stock. But even with that, I'm not
sure there's a lot they can do about that.
Speaker 3 (15:20):
And they regularly go after like true pumping numbers. Yeah,
people who are who are pumping stocks while they're selling them,
men who are lying about the fundamentals of the business.
But I think in a lot of the memestock stuff
in some combination of people who seem to be genuinely
and often like pretty well informed believers in the business,
plus like just the random enthusiasts and like they're not lying.
(15:42):
They're just like to the moon. It's not a lie,
there's nothing, there's nothing deceptive about that, And so it's
just hard, hard to police that.
Speaker 2 (15:48):
When I went to see the Barbie movie, they played
the preview for the Game Stop movie. Did you know
it's coming out?
Speaker 1 (15:55):
I knew there was one.
Speaker 2 (15:56):
I don't even want to see it. What I love
when I read your column, and I read them every day.
I'm your number one reader. I think we Mike probably
can't say the same about himself. I read all of
them every day. I read you read all the way
through thenoe bottom, oh yeah, just in case, because sometimes
(16:16):
he saves like the funniest stuff for the last.
Speaker 1 (16:20):
Yeah.
Speaker 3 (16:20):
Often people would tell me they.
Speaker 2 (16:22):
Read it and reverse, Oh, that's not a bad idea.
I might start doing so I can get a good
laughing At first.
Speaker 1 (16:28):
I usually go in and make sure he's not making
fun of me for something.
Speaker 2 (16:32):
Oh searched, Yeah, when if my yeah, you sometimes mentioned
my articles and my heart stops. I'm like, oh no,
did I do this calculation correctly? But anyway, what I
love is that you do have these recurring themes. So one,
like we were just talking about his memes talks everything
is security is fraud. Another one is proximity to Elon Musk.
Speaker 3 (16:55):
I don't talk about that one so much because like
that magic has gone away a little bit. Like for
a while I was saying that the most important factor
in financial markets was not cash flows, but proximity to
Elon Musk. And what that meant is like when he
would like tweet about a word a company who's stock,
the company whose name was nearer to that word would
(17:16):
stock would go up, like fans of Elon Musk would
buy stuff he tweeted about. And so he really did
have the ability to manipulate the prices of things like
doage coin and to some extent Bitcoin and to a
larger extent the price of Tesla stock and a lot
of other stuff. And I thought that was fascinating in
(17:38):
part just because like I would like to have that power,
I would use it to make money. Doesn't it's not
clear that he ever did use it to make money.
He just sort of wanted to.
Speaker 2 (17:45):
That would be securities fraud.
Speaker 3 (17:47):
That would probably be securities for it that it depends,
but Yeah, that has dissipated a little bit. I think
partly because that's just a memes stock phenomenon, right, and
people who are less bored and don't have stimulus strikes
are just less interested in throwing money at whatever Elon
Musk mentions, And then partly because a lot of those
trades have not gone particularly well. He pumped doge coron
and didn't do that great for people, and he did
(18:10):
this ridiculous Twitter acquisition that I think went terribly for him,
and so he might be less inclined to just invest
with everything he's tweeting about. But I think most of like,
I don't think people were buying dogecoin because they thought
he had a genius investing idea in doge grain. I
think they were buying it because he was like a
meme king and they liked participating in the meme. And
(18:30):
I think that whole phenomenon has just lessened.
Speaker 2 (18:34):
But what does keep happening is every time you go
on vacation, he does have like the biggest news of
the year, and then you are full time.
Speaker 3 (18:42):
I was out last week and he did only a
few crazy things, including he did tweet that he was
going to drive from Mark Zuckerberg's house and beat him up,
which is pretty crazy, but not like core financial news
that I felt obligated to cover in previous vacations. He's
done things like by Twitter, and so like those I
have to write about even from vacation.
Speaker 1 (19:03):
Yeah, well, Mett, one of your perennial themes that I've
always enjoyed. It used to be anyway, people are worried
about bond market liquidity. I don't know how many stories
we've all seen about people worried about bond market liquidity,
and then sure enough, last year we have the worst
bond market of any of our lifetimes, bear market in
(19:24):
all manner of bonds. I don't think I heard liquidity
blamed ones for any of it. Are those worries over?
Speaker 3 (19:31):
I hope that I embarrassed people out of writing something,
But also I do think that like the theories, and
there's like two veins of bond market people are worried
about bomb market liquidity. One is just like worried about
bomb market liquidity. It's just there's a story of like
pre two thousand and eight, banks had a lot of
balance sheet to commit to market making and bonds, and
they did that by like absorbing losses and making tight
(19:55):
markets and generally making it so that if you wanted
to move a lot of bonds even into following you
could do so efficiently. And post two thousand and eight,
with higher capital requirements and more regulation of prop trading
and just less risk mapnite from banks, there's no shock
observers anymore. And now if you want to sell a
lot of bonds, you'll drive down the price by twenty
(20:15):
percent and it'll be a bloodbath. And like, I think,
like there's truth to that at some margin, right, But
like it used to be fairly cheap to trade bonds,
like investors were subsidized by essentially banks underpricing liquidity risk,
and like that led to two thousand and eight, right,
And now it's like a little bit more expensive to
trade bonds because banks don't under underprice liquidity provision as much.
Speaker 1 (20:34):
And you know, it's.
Speaker 3 (20:35):
Fine, Like it's not like the worry was not it
would be like ten bases points more expensive to trade bonds.
The worry was that like bond markets would seize up
if like rates went up or if their credit problems,
and like no one would be able to sell and
it would be a blood bath, and it just never happened, right,
Like grades went up, and it's that worry never really
came true. The other worry was that like bond ETFs
for some reason, was ETFs not mutual funds. The ETFs
(20:57):
created a liquidity illusion where people could day trade, you know,
in and out of the ETF, but like the underlying
bonds were less liquid and in a scenario where everyone
wanted out of the ETF, the liquidity would dry up
and it would be a disaster. And I think, like
in some of the dislocations around COVID, there was like
(21:18):
a little truth to that, Like there was a little
bit of like dislocations between ETF prices and bond prices,
but not in a way that caused the big crisis.
And I think the sort of latest research is that
ETFs actually contribute to the liquidity of the underlying bonds.
Speaker 2 (21:34):
I love ETFs, so I'm happy to hear that, yeah
you hate bonds. When you said bond market liquidity, I
tuned out. I can't believe how long we've gone without
really doing a deeper dive into crypto, which I feel
like is a very much recurring topic for you on
a weekly basis, because there's so much news in crypto
(21:57):
worth examining further, I guess writing about how do you choose,
even given everything that's going on in crypto, how do
you choose what to focus on, the answer.
Speaker 3 (22:09):
To how do I choose is really simple. I'm not
that interested in crypto except that it is an amazing,
amazing laboratory for understanding real finance, because it's just like
people rebuild like these schematic versions of stuff that exists
in the world. Like they're like, what if we had
margin lending, Let's build it in a really dumb way,
and then you just see how it breaks, and it's
(22:30):
so fun, and they do that so much, and so
like I'm interested in crypto stories that are like that,
like illuminate, like good or bad financial market intuitions, and
there's so many of those. I mean, frankly, like what
I often write about in crypto is the sort of
big headline legal battles over whether it's legal in the US,
which I don't think is that interesting, which I think
is important, and which like I have kind of stayed
(22:53):
at a position there where like everyone in crypto thinks
that the SEC is like wildly overreaching in saying that
crypto most tokens or securities, and I think the SEC
is clearly right, and I think most crypto is not entirely,
but in the meaningful part a way to try to
get around the securities laws that have existed in the
(23:13):
US for one hundred years that are designed to prevent
people from going out and raising a lot of money
from the public by selling shares of their business project
without certain disclosures. And I think most crypto tokens are
clearly people raising money for their business projects without those disclosures,
and the SEC thinks that, and most people in crypto
I think that's crazy. So I find myself getting involved
(23:36):
in those debates and running about that a lot. But
I don't think it's that interesting, right.
Speaker 1 (23:54):
Given all the enforcement actions we've seen, coinbase Finance, the
Ripple lawsuit, are you any more comfortable with saying what
the SEC considers as a security and what isn't right now?
Do you think that clarity is there yet or is
it still.
Speaker 3 (24:09):
There's been there for years? They think they think every
cryptotoken is a security except Bitcoin, and like they're not
gonna say e theory it is, although they think it is,
and this is totally clear. Like there's no lack of
clarity there. It's like just people are mad about it.
And by the way, like the SEC could well be wrong.
I think they're kind of right, but like they've had
a mixed record in court and they had one big
(24:30):
loss in some other cases where like they've won, but
it's like a little the language is bad for them.
But no, I think like the SEC's position is really
really really clear. They've been a little slow and enforcing
that position, but that's changing. But like the action right
now is whether courts will agree with the SEC and
also whether Congress will will.
Speaker 2 (24:49):
Ruin them in the loss you're talking about is is
the Ripple case?
Speaker 3 (24:52):
Right, sorry, the loss of the Rippel case.
Speaker 2 (24:54):
Yes, so that's excerpt. So is XRPA security. That's a
Ripple token excerpt.
Speaker 3 (24:58):
I mean, I don't know O is going to be appeal.
I mean the finding in court was incoherent, but I
mean it's kind of that XRP is not a security,
and it's kind of that it's sometimes a security when
it's sold to institutional investors, but not when it's sold
to retail investors, which is not really the way the security.
Speaker 1 (25:14):
Yeah, that's that doesn't seem like that that will stand.
I feel like that is too weird of a judgment.
I don't know, Like, do you see that getting overturned? Ultimately?
Where do you where do you see it all going?
Do you think Congress is going to sort of finally
get on the ball and and codify what is and
what isn't? Where is that? Is that wishful thinking that
(25:35):
that's going to happen?
Speaker 3 (25:36):
Do you think there is a good chance Congress will
do that? Which I think is very weird because like
to me two years ago, one year ago, Crypto was
this like industry, like hot industry that had a huge
lobbying presence, and people could sort of align themselves with
it as the wave of the future. And I think
if you look at it today, much smaller than it was.
(25:57):
The way the future is AI now not Crypto. Every
VC has pivoted from CRYPTOIII, And a lot of the
prominent crypto founders who were posing for panshakes with senators
are at least their project has gone bankrupt when they're
suing each other, and like sometimes they're in prison, right
and so like, I don't know if I were a
Congress like I feel this as just someone who wrote
(26:19):
about crypto, like I feel burned by crypto. I'm like,
I'm not going to give these guys the benefit of
the data anymore. I'm not gonna advocate for them anymore,
because like they're all in prison. I think if I
were a congressman, I would be like, man, I pose
shaking hands with a lot of people who are now
in jail, and I don't want to do that again.
So I'm not going to introduce the bill to like
make crypto more illegal. But that's not apparently what the
(26:41):
congressmen think. And there continues to be a lot of
support for crypto in Congress that I find to me,
it just seems like a strange political calculation, and maybe
some of it is like their remains lobbying money in crypto.
Six months ago, I would have been incredibly pessimistic about
Congress doing anything to regular crypto, just because like it
seemed after the Class of FTX, it just seemed so dead.
(27:03):
And now I have more optimistic that Congress will will
do stuff. There's also like away from the crypto industry,
there's just like the political dynamics of like Gary Gensler
at the SEC is a very aggressive regulator. There's a
strong deregulatory movement in the Republican Party in Congress and
(27:23):
also in the courts, and so away from the substance
of crypto, like there might be just a move to
limit the SEC's power and like limit just the effect
of regulation, and the crypto might be a sort of
like accidental beneficiary of that.
Speaker 1 (27:37):
Matt Levine of Bloomberg Opinion, such a treat to catch
up with you. Just for the record, I did find
a research report from twenty twenty one the global pepperoni
market two billion dollars a year. That sounds low to me.
Speaker 2 (27:50):
That's way too lowly, too low.
Speaker 1 (27:52):
I think it's too quadrillion. It was the right answer. Well,
now we can't let you go just yet though, with
abbutrition on this podcast where we all share the craziest
things we've seen in markets. I'll confess your column is
often a very good source of the craziest things.
Speaker 2 (28:05):
Which is why the bar is high for you.
Speaker 1 (28:07):
The bar is high. But when do you get us started?
Speaker 2 (28:10):
Okay? I have a story from the Wall Street Journal.
It says job hunters are invading dating apps, so people
looking for jobs they'll use dating apps, they'll connect with
people at companies they want to work for work at,
and when they get romantic messages, they'll feel ikey about it.
Speaker 1 (28:31):
They'll send their resume back.
Speaker 2 (28:33):
Yeah exactly, no, but they'll feel ikey about the romantic messages.
But they're really looking to network and hopefully get a job.
Placement is so interesting?
Speaker 1 (28:43):
Is it working for any of them?
Speaker 2 (28:45):
There's a couple of examples in the story, and it
says like this one moment, she didn't end up at
the company where she was like chatting this guy up.
I guess yeah, but it helped with the networking and
ultimately shehanded up with her job.
Speaker 1 (28:59):
Huh, how do you know? They're not all the guy
Matt wrote about who was pumping up options for what
was the name of that club, the so House the guy.
Speaker 2 (29:09):
Oh that was a good story.
Speaker 1 (29:10):
Yeah, what did what did the guy do? He said
he created a bunch of fake female profile and then
he would match with guys and tell them.
Speaker 2 (29:22):
To meet it so yes, so they would have to
buy the membership.
Speaker 1 (29:25):
Yeah, that's a brilliant scheme. I don't know securities fraud, Matt.
Speaker 3 (29:31):
I read the common to find out.
Speaker 2 (29:34):
I didn't.
Speaker 3 (29:34):
I don't even know if it was a joke. I
think like he clearly wasn't doing it. But yeah, yeah,
did he meme up the stock?
Speaker 1 (29:42):
I don't know. Yeah, if he didn't do it, I
don't know. It sounds like right, yeah, yeah, all right, Matt,
how about you see anything crazy this week?
Speaker 3 (29:52):
Not to cheat and time I call him, but I've
a I'm fascinated by the situation with Sculptor Capital Management.
Sculpture is this like publicly traded hedge fund firm and
it's got a you know, a hedge fund manager who
runs it, and it's trying to go private. It is
agreed to sell itself to another firm that would keep
(30:13):
that manager in place, and like a bunch of other
hedge fund guys have just lobbed in a topping bid
saying no, no, we should buy it, we should kick
out that guy, and we should take over this fund.
It's such a it's like you you wonder why it
doesn't happen more often. An answer is basically because there
are not a lot of publicly traded hedge fund firms.
But it's such a like aggressive move of these guys
(30:36):
wanting to buy a hedge fund firm because they think
they do a better job of running the hedge fund
than the guy who's running the hedge fund. And it's
also it's weird because it's like it's a bunch of them.
It's like Boas Weinstein and Bill Ackman and Mark Lazary
who are all big hedge fund managers teaming up together
to go in on this other hedge fund, and they're
doing it in their personal accounts, like they're not like
they all run hedge fund firms, but those firms are
not buying or not trying to buy the sculptor. They're
(30:57):
just they're doing it with their own money, I guess
because as like their hedgehund managers and their day job,
but they want to run a want to manage a
different hedge fund as a hobby. I just think it's
so wild and it's going to be like a contested
mn A situation, and like there's all sorts of accusations
and just like the under like the just the basic
gist of these hedge fund guys trying to steal hedge
(31:17):
funds from each other is just is very unusual.
Speaker 1 (31:20):
That is a great story, all right, I'll give you mine.
I'm always fascinated. I don't know about you guys. I
assume we all take public transportation to work, right, So
I've never been a big car guy.
Speaker 2 (31:30):
I take a helicopter.
Speaker 1 (31:31):
Oh of course you do. Yeah, I've never been a
big car guy. And especially people that buy these vintage
cars for a lot of money. That never quite got that.
But it's great for crazy things. I'll give you this
story from the BBC. This wasn't like a car. It
was the burnt out shell of an old Ferrari. It
(31:55):
was from nineteen the nineteen fifties. It was a five
hundred Mandu Spider Series one, if that means anything to anyone,
one of thirteen made. It was driven by Ferrari's first
like official race car driver, Franco quotes, who I doesn't
sound like he was that very good at being a
race car driver. Even he finished fourteenth in this thousand
(32:18):
mile race across Italy. He crashed the car a bunch
of times. Anyway, someone bought the remnants of this carb
Why wasn't burned out? I guess because he would crash
and much fire. But then it was. It was in
a big warehouse fire at some point and so finally
what was left was basically a big heap of scrap metal.
(32:39):
All right, but it is the scrap metal of this
famous old school Ferrari racing car. Someone stuck it in
a barn in Florida and it just sat there with
these other busted up Ferraris for years and years, and
then hurricane comes along in a two thousand and four
blows the roof off of the barn and they discover
these Ferraris, and then it's been a hot collector's.
Speaker 2 (33:00):
Items, like frosty Ferraris rusty.
Speaker 1 (33:03):
This isn't even like it's just basically the shell, like
the outer body of it, and it's no color. It's
like a gray and it's burnout. And you know they're
saying theoretically could refurbish it. I am highly doubtful of that.
I wish I could show you the picture on the podcast,
but I cannot. But you know what time it is, Yes,
(33:26):
it's I'm sorry to inform you, Matt, but you're now
a contestant on our game show. Here the price is precise.
What do you think At Sotheby's, the winning bid was,
We're basically a hunk of scrap metal that used to
be a Ferrari race car in the nineteen fifties.
Speaker 2 (33:42):
How much does a regular Ferrari cost? Oh, I should
know because I own so many.
Speaker 1 (33:48):
That is a good question. I don't know, dis guessing
they're probably half a million. Now, I don't have no idea.
Speaker 2 (33:54):
Why are they? Yeah, so this would be more.
Speaker 3 (33:56):
I think the vintage Ferrari is like a like a
real classic Ferrari.
Speaker 1 (34:00):
Yeah, more right, right in the collector's market. Now, No, I'm.
Speaker 2 (34:04):
Going with one point two million.
Speaker 1 (34:06):
I'm going with one okay, one point one nine million,
and you said.
Speaker 2 (34:10):
More one point two I was gonna go, MAT's.
Speaker 1 (34:13):
Watch the prices right before two million dollars two million?
Speaker 2 (34:17):
I win?
Speaker 1 (34:18):
You win?
Speaker 2 (34:18):
Yeah, Oh my gosh, I beat Matt Levine.
Speaker 1 (34:22):
Wait, though, I'm questioning your strategy there. One point one
nine human one dollar.
Speaker 3 (34:29):
Yeah, you're right, and that's not actually prices right.
Speaker 1 (34:32):
Over.
Speaker 3 (34:33):
But I just want to be closest. Yeah, and as
close to that being because there's only two of us,
I figured it was less than that.
Speaker 1 (34:39):
True. Well, yeah, you would have won if it was
less than that's that's fine.
Speaker 2 (34:42):
It was two million.
Speaker 1 (34:42):
I would have a worded him two million. Yeah, for
scrap a bunch of five hundred mondy Old Spider series one,
one of thirteen, never made two million.
Speaker 2 (34:52):
No comments million.
Speaker 1 (34:55):
Maybe they'll make an n F two out of it. Yeah, anyway,
Matt Levine, thanks so much for your time. Always just
a pleasure to hear your thoughts about if we would
cover all the most absurd topics. I think really appreciate it. Matt,
Thank you, Eric, thank you, thank you man.
Speaker 2 (35:19):
What Goes Up. We'll be back next week. Until then,
you can find us on the Bloomberg Terminal website and app,
or wherever you get your podcasts. We'd love it if
you took the time to rate and review the show
so more listeners can find us. You can find us
on Twitter, follow me at Wildona Hirich. Mike Reagan is
at Reaganonymous. You can also follow Bloomberg Podcasts at podcasts.
(35:44):
What Goes Up is produced by Stacey Wong and our
head of podcasts is Stage Bauman. Thanks for listening.
Speaker 4 (35:50):
We'll see you next week.
Speaker 1 (35:54):
Thanks
Hello, and welcome to What Goes Up, a weekly markets podcast.
My name is Mike Reagan. I'm a senior editor at Bloomberg.
Speaker 2 (00:20):
Now Meldonna Hirich across asset reporter with Bloomberg.
Speaker 1 (00:23):
And this week on the show, Well Weil Donna. You
know what I always say, one of the best perks
of being a journalist is that you get to meet
these very smart people and ask these very smart people
some dumb questions. Yes, one of the being a journalist,
and what's great about working at Bloomberg is we have
(00:43):
so many very smart people just sitting a few rows away.
Speaker 2 (00:48):
Yeah, and we can chitchat with them whenever we feel
like it.
Speaker 1 (00:50):
And ask them dumb questions.
Speaker 2 (00:52):
So many dumb questions, and they give us smart answer
smart answers.
Speaker 1 (00:55):
That's right. There are no dumb answers, just dumb questions.
I don't know.
Speaker 2 (01:00):
Just for me and you, I think, yeah, yeah.
Speaker 1 (01:02):
Well you can have a smart answer to a dumb
question if I've learned anything from Mad magazine.
Speaker 2 (01:06):
Yeah.
Speaker 1 (01:07):
But anyway, I think, as you're talking about our guests, right,
I am talking about our Yes, yes.
Speaker 2 (01:12):
I'm so happy to have him he is. Can I
say he's famous in our circles. Absolutely, yeah, Yeah, he's
a big deal our guest this week. He is famous
in our circles. We all talk about him in the
nicest possible ways.
Speaker 1 (01:25):
The suspense.
Speaker 2 (01:26):
I know, I'm dragging this out, like I want people
at home listening to be like, who is it? It's
no other than Matt Levine, our colleague and Bloomberg opinion columnists.
And I'm so happy to have him on the show.
Thank you so much for joining us, Thanks for having me. Okay,
The New York Times famously wrote about you a couple
of years ago. They don't typically profile financial newsletter writers.
(01:49):
I don't think so it was a big deal. But
maybe we can just start with you telling us like
how did you become a columnist at Bloomberg.
Speaker 3 (01:58):
Well, I was a lawyer a long time prior to that.
I left law for investment banking because it was two
thousand and seven and if you were a corporate lawyer,
it felt like the sort of right thing to do
is to get into finance. And I didn't really know
much about like the financial industry, like what people did
all day. Someone offered me a job at Goldman and
I was like, well that seems like it can't hurt.
And I did it for like four years, like structuring
(02:20):
equity derivatives for corporate clients, and I learned a lot
and like it was fun and interesting, but over time
you like learn less and become more of a like
just salesperson, like at senior levels. The job is like
you get on planes and fly around to clients and
make small talk and try to convince them to do deals.
And I was much less good at that, and so
(02:42):
I was kind of tired of it, and I wanted
to get out. And I'd always vaguely imagined being a
writer without ever doing anything about it, and so I
wanted to leave Goldman at the same time that a
job was opening up a deal Breaker, which is this
small like finance and comedy blog that I was reading religiously,
as was everyone on Wall Street two thousand and eleven
when I was leaving, and so I applied and they
(03:04):
hired me, and I sort of took a leap of
faith and went to do that. And I did that
for a couple of years, and then eventually Bloomberg.
Speaker 2 (03:10):
Noticed me, and thank god they noticed you.
Speaker 1 (03:13):
Well, it does give you such a unique perspective both
the law background and the sort of derivatives background at Goldman,
It really puts you in a great position to do
what you do and analyze basically the news flow. But Matt,
my first question for you is what is the total
market value of pepperoni in the United States in any
(03:36):
given year?
Speaker 3 (03:37):
So I read about this the other day because this
guy like did this cacamami calculation for his consulting firm,
which I thought was so wonderful because this is a
stereotypical question, like there's some like just random thing and
that you get to a consulting interviewer, like you've asked
some random question about like how many washing machines there
are in the United States. Right, They just like to
try to like judge your thought process.
Speaker 1 (03:57):
It was an intern, right, wasn't an intern?
Speaker 3 (03:59):
Yeah? He was an inn.
Speaker 1 (04:00):
Anyway.
Speaker 3 (04:00):
He had like heard somewhere like a Pepperoni CEO saying
we sell enough pepperoni to blanket the entire US and
in a thin layer of pepperoni, And so he did
that math. And if you do that math, you get
like the market for pepperoni is larger than entire economy
of the world for the entire history of the world,
Like more pepperoni is sold in a year than all
(04:20):
goods and services sold in the world in all of
human history.
Speaker 2 (04:24):
It's probably true, right, I don't know.
Speaker 3 (04:28):
You can go to the Domino's website and probably get
most of what you need to know. Yeah, it's like
two dollars that pepperoni to a pizza and they sell
like a million pizzas a day, and then you're kind
of in the ballpack.
Speaker 1 (04:37):
Or Hormel's earnings transcripts. Maybe I don't know.
Speaker 2 (04:39):
I like who sells pepperoni.
Speaker 1 (04:40):
I don't even know, Like figure Hormel I think is
the main But I like computing the entire square inch
the United.
Speaker 3 (04:48):
States, Right, that's just like if you think about that
for a moment, like the United States has not covered
wall to wall and cows or anything like it, Like
not even one percent of the land in the US
is covered by gues and so like you'd really need
to like squish kas pretty thin to make that much pepperoni.
Speaker 1 (05:04):
Anyway, I don't know. Anyway, I forgot a lot about this.
For one, I know you did. That's why I forget.
I think it was two quadrillion dollars. Was the addressable. Yeah, right,
But I bring it up because that is That's what
Matt's so good at, is like finding some random financial
news story and really dissecting it and unpacking.
Speaker 2 (05:23):
It and u and teaching us all how things work
or how they were done, or how the calculations.
Speaker 1 (05:31):
Happened, how the pepperoni's made.
Speaker 2 (05:32):
Okay, but I'm so interested. As Mike said, that's a
really good example of a recent story that you did
that was really fun and fun for people to read.
Your entire column every day is some dissecting some very
very interesting story or aspect of something that's happening in markets.
I'm curious about your process, like what do you do?
(05:54):
Where do you look for these stories? Do people send
them to you? I've always been so curious about how
this worked, and I'm obviously trying to rip you off.
Speaker 3 (06:02):
I go to a little website I like to call
Bloomberg dot com. No, I mean, like I don't know,
like probably seventy five percent of what I write about
is stuff that is kind of recognizably in the financial news.
Stuff that's like on the front page of Bloomberg or
the Wall Street Journal or the Ft or Delburg are
(06:23):
often all of them, and so like there's no like
particularly interesting process for finding like the big stories people
sent me stuff, and there's there's stuff that I'm just
like attuned to. Like I have a genre of stories
called everything is securities fraud, which is where public companies
do like random bad things and people sue them for
securities fraud, like anything from like sexual harassment to like
(06:44):
animal welfare stuff to pollution to it. Now there's a
lot of like anti Dei backlash where Republicans have gotten
into the game of suing companies for securities fraud because
they like use transgender influencers in advertising and all that
stuff gets a certain amount of media coverage. But to me,
it's like indicative of this like really big interesting trend
(07:06):
in like American securities laws, where like all conduct gets
reflected through through like the notion of securities fraud because
it is easy to bring cases and like the damages
can be really large and so you can like litigate,
you can fight over all sorts of like political and
social issues by calling them securities fraud. I think that's
like really weird and interesting, and so each individual case
(07:27):
might be kind of dumb, but like the theme is
big and interesting, so you do get some of that.
Occasionally people will be like, I'm sure at this company
you should write about how they're bad, and like sometimes
that's annoying and ignore it. And sometimes it's like, oh,
this is a really funny company. I tell people that
my favorite email to gain or my favorite like IB
messages to gat is you will enjoy this eight K
(07:49):
because like that has like one hundred percent hit rate
because like someone who sends me that message one knows
what an eight K is. So if someone sends me
an aking it's a funny AK, it's probably funny EK,
and I will probably enjoy it. I am a columnist
and I don't do a lot of like you know,
breaking of news, and so when someone's like, oh you
should look into this company they're really scammy, I'm like, yeah, okay,
(08:11):
but like who I got a call to confirm that, right.
Whereas like if someone's like, look at this ak, like
the funny thing is like there in the public domain,
publicly filed, it's sort of right in my wheelhouse to.
Speaker 2 (08:20):
Write about, Yeah, what's the funniest AK you ever read?
Speaker 3 (08:23):
It's not an eight K, but there's this public company
that was like this sort of like tiny, shallow of
public company was run by like one guy and he
filed like, I don't know, thirty ten cues and ten
k's like periodic reports all at once, Like he was
way behind on the on the annual filings for his company,
(08:43):
and so he filed them all at once. And they
were just like complaining about how hardy was working, like
all of this stuff was like mister so and so
it gets no support and he's doing all these ten
cues by hand, and they were very like there's a
range of public companies and most of their filings are
sort of carefully loyal, lured and sensible, and then at
the far tael there's a lot of very weird stuff.
Speaker 1 (09:02):
What I find fascinating is, you know, you've always kind
of focused on some of the absurdities of finance and
the markets, but I feel like the markets are getting
more and more absurd and more more and more Matt
Levine esque as as the years go on. And I'll
give you an example. You know, you're talking about securities fraud.
One of my favorite columns of years recently was about
(09:24):
Ryan Cohen, who is the meme stock He basically he
was long bed, Bath and beyond, right, and uh to
some big amount of dollar amount. And they tweeted. Someone
tweeted something about bad, Bath and Beyond, and he replied
with a funny quip and he included the moon face emoji,
(09:46):
which I'm that and to your point, Matt, I think
in the commn I've never even seen that emoji before.
I don't think it translates to every device.
Speaker 3 (09:53):
Like everyone who was calling it the moon face the emotion,
and I looked at it, like it's a smiley face.
Apparently it's a moon.
Speaker 2 (09:58):
I thought it was a smiley face too.
Speaker 3 (09:59):
Actually it's just a smiley face. But like there's like
if you like hover over it, it says it's a muonomiji. Anyway, Yeah,
he treated this moon emigi, which I guess in like
the code of memestacks means that the stock will go
to the moon. And then he sold the stock like
the next day, basically like two days later. Yeah, And
so they sued him for securities for i'd saying that
he was telling people to buy even as he was telling.
Speaker 1 (10:20):
You know, it's all funny and it's absurd and it's
fun to talk about because that. But I feel like
there's a bigger issue. Let me just read a couple
of lines from your column. You said, back in the
olden days, I learned that securities fraud meant lying about
things that would be material to quote a reasonable investor.
But in the world of memestocks, there are no reasonable investors.
(10:41):
What matters is not cash flows or business plans, but
memes and influencers, and so the standards for fraud are
perhaps different.
Speaker 3 (10:48):
You know, I think it's reasonable to say, to a
large extent, the memestock was a phenomenon of a particular
macroeconomic and also social environment where like people were stuck
at home. They were Yeah, Robinhood had sort of recently,
like relatively reasonally come on the scene and like built
a good product for gamifying stock trading, and like people
are getting stimulus checks. There are a lot of factors
(11:10):
combined to allow like a bunch of retail traders to
get really into sort of irrational trading. And I don't
think that's like the main factor that is driving like
the price of Nvidia or whatever, or like of treasury bills. Yeah,
like that's the thing, Like, and absolutely I've spent more
time writing about dumber stuff than I would have five
years ago, and that dumber stuff is often the meme
(11:32):
stocks are crypto.
Speaker 1 (11:40):
I'm curious how you think about that. I mean crypto
obviously it's a very similar storyline. But a regulator's kind
of a sleep at the switch on policing this stuff.
Or should it be up to these PLANEFFS attorneys. Should
we just allow the markets to have this sort of
absurd element to them without really doing anything to correct it.
Speaker 3 (12:00):
Think that regulators are not in the business for the
most part of like correcting mistakes in financial markets, right, Like,
if you think that people are buying stocks for irrational reasons, like,
there's not so much you can do about it, right,
And it's hard because like the regulatory paradigm has always
been in the US about disclosure, and so when you
know they're in sort of the early days of memestocks,
(12:23):
some memestocks, I think it was kind of this is
more or less true of Game Stop. We're nervous about
their sock had gone up ten ten x and they
needed money, and they were a little nervous about raising
money because they're like, our stock is at really weird
prices and it's gonna it just feels like fraud to
raise money, and then other memestocks were like, great, people
want to buy a stock, We're going to sell it
to them, right, And that was like AMC was big
(12:45):
on that. But also like Hurts were bankrupt and their
stock got mamed up, and they're like, Okay, we're selling stock.
I think they shut that down. Didn't shut that down? Yeah,
but it turns out you would have done well buying
the stock. But anyways, in response to the SEC basically
said you need to put out more disclosure, like if
you're if you are selling stock because you're a memestock,
and they phrase it differently, you know what they mean.
(13:07):
Then you have to put out in your perspectives like
we don't know why our stock is trading this high.
It's probably for no good reason. You probably shouldn't buy it, right,
And so like companies would do that, they like put
out a perspective saying, our stock is trading at random
prices for no reason. We don't understand it either, but
like nobody reads that. Like the whole disclosure regime just
(13:28):
sort of falls apart in the face of like the
memestock phenomenon because you can say whatever you want in
this perspective, but nobody is reading it or deterred by it,
and like that's the bullet that the SEC has and
after that, like, Okay, you want to buy it, you
buy it.
Speaker 1 (13:41):
Yeah.
Speaker 3 (13:42):
I think it's really hard, and I think they feel
obligated to say stuff and do stuff and commission reports
and like testify it in front of Congress and like
creat the impression they're doing stuff. To the extent you
diagnose the memestock phenomenon as like a bunch of people
online decided to be fine to buy stocks at really
high prices. It's just not something the SEC has any
(14:04):
any like authority to stop, right, And so they go
to after they talk about things that are ancillary to that.
There's a lot of talk about payment for order flow
and market structure and somehow you think if you change
how the stock market orders get routed, that will somehow
solve the memes. But it's had nothing to do with it, right,
It's just some people get mad about online or they
like the SEC has looked into short selling rules because
(14:29):
some of the early name stock phenomenon was about trying
to squeeze short sellers. But regulating short selling more harshly
is a strange response to that, because like the short
sellers weren't really the they were the victims there as
it were. They looked into a little bit like is
there some sort of collusive market manipulation here? And I
just think the answer is clearly no. Right, it's people
online saying I like the stock, so there's not a
(14:51):
lot they can do. And I think they're keenly aware
that it's embarrassing. Right if you want your capital markets
to look sophisticated and professional and driven by fundamentals, and
then when they're just meming around, you feel embarrassed about
it is it's not a it's not something they can fix.
Speaker 1 (15:07):
But you know, I mean, there is this cohort of
people posting on Reddit these wild conspiracy theories to help
pump up the stock. But even with that, I'm not
sure there's a lot they can do about that.
Speaker 3 (15:20):
And they regularly go after like true pumping numbers. Yeah,
people who are who are pumping stocks while they're selling them,
men who are lying about the fundamentals of the business.
But I think in a lot of the memestock stuff
in some combination of people who seem to be genuinely
and often like pretty well informed believers in the business,
plus like just the random enthusiasts and like they're not lying.
(15:42):
They're just like to the moon. It's not a lie,
there's nothing, there's nothing deceptive about that, And so it's
just hard, hard to police that.
Speaker 2 (15:48):
When I went to see the Barbie movie, they played
the preview for the Game Stop movie. Did you know
it's coming out?
Speaker 1 (15:55):
I knew there was one.
Speaker 2 (15:56):
I don't even want to see it. What I love
when I read your column, and I read them every day.
I'm your number one reader. I think we Mike probably
can't say the same about himself. I read all of
them every day. I read you read all the way
through thenoe bottom, oh yeah, just in case, because sometimes
(16:16):
he saves like the funniest stuff for the last.
Speaker 1 (16:20):
Yeah.
Speaker 3 (16:20):
Often people would tell me they.
Speaker 2 (16:22):
Read it and reverse, Oh, that's not a bad idea.
I might start doing so I can get a good
laughing At first.
Speaker 1 (16:28):
I usually go in and make sure he's not making
fun of me for something.
Speaker 2 (16:32):
Oh searched, Yeah, when if my yeah, you sometimes mentioned
my articles and my heart stops. I'm like, oh no,
did I do this calculation correctly? But anyway, what I
love is that you do have these recurring themes. So one,
like we were just talking about his memes talks everything
is security is fraud. Another one is proximity to Elon Musk.
Speaker 3 (16:55):
I don't talk about that one so much because like
that magic has gone away a little bit. Like for
a while I was saying that the most important factor
in financial markets was not cash flows, but proximity to
Elon Musk. And what that meant is like when he
would like tweet about a word a company who's stock,
the company whose name was nearer to that word would
(17:16):
stock would go up, like fans of Elon Musk would
buy stuff he tweeted about. And so he really did
have the ability to manipulate the prices of things like
doage coin and to some extent Bitcoin and to a
larger extent the price of Tesla stock and a lot
of other stuff. And I thought that was fascinating in
(17:38):
part just because like I would like to have that power,
I would use it to make money. Doesn't it's not
clear that he ever did use it to make money.
He just sort of wanted to.
Speaker 2 (17:45):
That would be securities fraud.
Speaker 3 (17:47):
That would probably be securities for it that it depends,
but Yeah, that has dissipated a little bit. I think
partly because that's just a memes stock phenomenon, right, and
people who are less bored and don't have stimulus strikes
are just less interested in throwing money at whatever Elon
Musk mentions, And then partly because a lot of those
trades have not gone particularly well. He pumped doge coron
and didn't do that great for people, and he did
(18:10):
this ridiculous Twitter acquisition that I think went terribly for him,
and so he might be less inclined to just invest
with everything he's tweeting about. But I think most of like,
I don't think people were buying dogecoin because they thought
he had a genius investing idea in doge grain. I
think they were buying it because he was like a
meme king and they liked participating in the meme. And
(18:30):
I think that whole phenomenon has just lessened.
Speaker 2 (18:34):
But what does keep happening is every time you go
on vacation, he does have like the biggest news of
the year, and then you are full time.
Speaker 3 (18:42):
I was out last week and he did only a
few crazy things, including he did tweet that he was
going to drive from Mark Zuckerberg's house and beat him up,
which is pretty crazy, but not like core financial news
that I felt obligated to cover in previous vacations. He's
done things like by Twitter, and so like those I
have to write about even from vacation.
Speaker 1 (19:03):
Yeah, well, Mett, one of your perennial themes that I've
always enjoyed. It used to be anyway, people are worried
about bond market liquidity. I don't know how many stories
we've all seen about people worried about bond market liquidity,
and then sure enough, last year we have the worst
bond market of any of our lifetimes, bear market in
(19:24):
all manner of bonds. I don't think I heard liquidity
blamed ones for any of it. Are those worries over?
Speaker 3 (19:31):
I hope that I embarrassed people out of writing something,
But also I do think that like the theories, and
there's like two veins of bond market people are worried
about bomb market liquidity. One is just like worried about
bomb market liquidity. It's just there's a story of like
pre two thousand and eight, banks had a lot of
balance sheet to commit to market making and bonds, and
they did that by like absorbing losses and making tight
(19:55):
markets and generally making it so that if you wanted
to move a lot of bonds even into following you
could do so efficiently. And post two thousand and eight,
with higher capital requirements and more regulation of prop trading
and just less risk mapnite from banks, there's no shock
observers anymore. And now if you want to sell a
lot of bonds, you'll drive down the price by twenty
(20:15):
percent and it'll be a bloodbath. And like, I think,
like there's truth to that at some margin, right, But
like it used to be fairly cheap to trade bonds,
like investors were subsidized by essentially banks underpricing liquidity risk,
and like that led to two thousand and eight, right,
And now it's like a little bit more expensive to
trade bonds because banks don't under underprice liquidity provision as much.
Speaker 1 (20:34):
And you know, it's.
Speaker 3 (20:35):
Fine, Like it's not like the worry was not it
would be like ten bases points more expensive to trade bonds.
The worry was that like bond markets would seize up
if like rates went up or if their credit problems,
and like no one would be able to sell and
it would be a blood bath, and it just never happened, right,
Like grades went up, and it's that worry never really
came true. The other worry was that like bond ETFs
for some reason, was ETFs not mutual funds. The ETFs
(20:57):
created a liquidity illusion where people could day trade, you know,
in and out of the ETF, but like the underlying
bonds were less liquid and in a scenario where everyone
wanted out of the ETF, the liquidity would dry up
and it would be a disaster. And I think, like
in some of the dislocations around COVID, there was like
(21:18):
a little truth to that, Like there was a little
bit of like dislocations between ETF prices and bond prices,
but not in a way that caused the big crisis.
And I think the sort of latest research is that
ETFs actually contribute to the liquidity of the underlying bonds.
Speaker 2 (21:34):
I love ETFs, so I'm happy to hear that, yeah
you hate bonds. When you said bond market liquidity, I
tuned out. I can't believe how long we've gone without
really doing a deeper dive into crypto, which I feel
like is a very much recurring topic for you on
a weekly basis, because there's so much news in crypto
(21:57):
worth examining further, I guess writing about how do you choose,
even given everything that's going on in crypto, how do
you choose what to focus on, the answer.
Speaker 3 (22:09):
To how do I choose is really simple. I'm not
that interested in crypto except that it is an amazing,
amazing laboratory for understanding real finance, because it's just like
people rebuild like these schematic versions of stuff that exists
in the world. Like they're like, what if we had
margin lending, Let's build it in a really dumb way,
and then you just see how it breaks, and it's
(22:30):
so fun, and they do that so much, and so
like I'm interested in crypto stories that are like that,
like illuminate, like good or bad financial market intuitions, and
there's so many of those. I mean, frankly, like what
I often write about in crypto is the sort of
big headline legal battles over whether it's legal in the US,
which I don't think is that interesting, which I think
is important, and which like I have kind of stayed
(22:53):
at a position there where like everyone in crypto thinks
that the SEC is like wildly overreaching in saying that
crypto most tokens or securities, and I think the SEC
is clearly right, and I think most crypto is not entirely,
but in the meaningful part a way to try to
get around the securities laws that have existed in the
(23:13):
US for one hundred years that are designed to prevent
people from going out and raising a lot of money
from the public by selling shares of their business project
without certain disclosures. And I think most crypto tokens are
clearly people raising money for their business projects without those disclosures,
and the SEC thinks that, and most people in crypto
I think that's crazy. So I find myself getting involved
(23:36):
in those debates and running about that a lot. But
I don't think it's that interesting, right.
Speaker 1 (23:54):
Given all the enforcement actions we've seen, coinbase Finance, the
Ripple lawsuit, are you any more comfortable with saying what
the SEC considers as a security and what isn't right now?
Do you think that clarity is there yet or is
it still.
Speaker 3 (24:09):
There's been there for years? They think they think every
cryptotoken is a security except Bitcoin, and like they're not
gonna say e theory it is, although they think it is,
and this is totally clear. Like there's no lack of
clarity there. It's like just people are mad about it.
And by the way, like the SEC could well be wrong.
I think they're kind of right, but like they've had
a mixed record in court and they had one big
(24:30):
loss in some other cases where like they've won, but
it's like a little the language is bad for them.
But no, I think like the SEC's position is really
really really clear. They've been a little slow and enforcing
that position, but that's changing. But like the action right
now is whether courts will agree with the SEC and
also whether Congress will will.
Speaker 2 (24:49):
Ruin them in the loss you're talking about is is
the Ripple case?
Speaker 3 (24:52):
Right, sorry, the loss of the Rippel case.
Speaker 2 (24:54):
Yes, so that's excerpt. So is XRPA security. That's a
Ripple token excerpt.
Speaker 3 (24:58):
I mean, I don't know O is going to be appeal.
I mean the finding in court was incoherent, but I
mean it's kind of that XRP is not a security,
and it's kind of that it's sometimes a security when
it's sold to institutional investors, but not when it's sold
to retail investors, which is not really the way the security.
Speaker 1 (25:14):
Yeah, that's that doesn't seem like that that will stand.
I feel like that is too weird of a judgment.
I don't know, Like, do you see that getting overturned? Ultimately?
Where do you where do you see it all going?
Do you think Congress is going to sort of finally
get on the ball and and codify what is and
what isn't? Where is that? Is that wishful thinking that
(25:35):
that's going to happen?
Speaker 3 (25:36):
Do you think there is a good chance Congress will
do that? Which I think is very weird because like
to me two years ago, one year ago, Crypto was
this like industry, like hot industry that had a huge
lobbying presence, and people could sort of align themselves with
it as the wave of the future. And I think
if you look at it today, much smaller than it was.
(25:57):
The way the future is AI now not Crypto. Every
VC has pivoted from CRYPTOIII, And a lot of the
prominent crypto founders who were posing for panshakes with senators
are at least their project has gone bankrupt when they're
suing each other, and like sometimes they're in prison, right
and so like, I don't know if I were a
Congress like I feel this as just someone who wrote
(26:19):
about crypto, like I feel burned by crypto. I'm like,
I'm not going to give these guys the benefit of
the data anymore. I'm not gonna advocate for them anymore,
because like they're all in prison. I think if I
were a congressman, I would be like, man, I pose
shaking hands with a lot of people who are now
in jail, and I don't want to do that again.
So I'm not going to introduce the bill to like
make crypto more illegal. But that's not apparently what the
(26:41):
congressmen think. And there continues to be a lot of
support for crypto in Congress that I find to me,
it just seems like a strange political calculation, and maybe
some of it is like their remains lobbying money in crypto.
Six months ago, I would have been incredibly pessimistic about
Congress doing anything to regular crypto, just because like it
seemed after the Class of FTX, it just seemed so dead.
(27:03):
And now I have more optimistic that Congress will will
do stuff. There's also like away from the crypto industry,
there's just like the political dynamics of like Gary Gensler
at the SEC is a very aggressive regulator. There's a
strong deregulatory movement in the Republican Party in Congress and
(27:23):
also in the courts, and so away from the substance
of crypto, like there might be just a move to
limit the SEC's power and like limit just the effect
of regulation, and the crypto might be a sort of
like accidental beneficiary of that.
Speaker 1 (27:37):
Matt Levine of Bloomberg Opinion, such a treat to catch
up with you. Just for the record, I did find
a research report from twenty twenty one the global pepperoni
market two billion dollars a year. That sounds low to me.
Speaker 2 (27:50):
That's way too lowly, too low.
Speaker 1 (27:52):
I think it's too quadrillion. It was the right answer. Well,
now we can't let you go just yet though, with
abbutrition on this podcast where we all share the craziest
things we've seen in markets. I'll confess your column is
often a very good source of the craziest things.
Speaker 2 (28:05):
Which is why the bar is high for you.
Speaker 1 (28:07):
The bar is high. But when do you get us started?
Speaker 2 (28:10):
Okay? I have a story from the Wall Street Journal.
It says job hunters are invading dating apps, so people
looking for jobs they'll use dating apps, they'll connect with
people at companies they want to work for work at,
and when they get romantic messages, they'll feel ikey about it.
Speaker 1 (28:31):
They'll send their resume back.
Speaker 2 (28:33):
Yeah exactly, no, but they'll feel ikey about the romantic messages.
But they're really looking to network and hopefully get a job.
Placement is so interesting?
Speaker 1 (28:43):
Is it working for any of them?
Speaker 2 (28:45):
There's a couple of examples in the story, and it
says like this one moment, she didn't end up at
the company where she was like chatting this guy up.
I guess yeah, but it helped with the networking and
ultimately shehanded up with her job.
Speaker 1 (28:59):
Huh, how do you know? They're not all the guy
Matt wrote about who was pumping up options for what
was the name of that club, the so House the guy.
Speaker 2 (29:09):
Oh that was a good story.
Speaker 1 (29:10):
Yeah, what did what did the guy do? He said
he created a bunch of fake female profile and then
he would match with guys and tell them.
Speaker 2 (29:22):
To meet it so yes, so they would have to
buy the membership.
Speaker 1 (29:25):
Yeah, that's a brilliant scheme. I don't know securities fraud, Matt.
Speaker 3 (29:31):
I read the common to find out.
Speaker 2 (29:34):
I didn't.
Speaker 3 (29:34):
I don't even know if it was a joke. I
think like he clearly wasn't doing it. But yeah, yeah,
did he meme up the stock?
Speaker 1 (29:42):
I don't know. Yeah, if he didn't do it, I
don't know. It sounds like right, yeah, yeah, all right, Matt,
how about you see anything crazy this week?
Speaker 3 (29:52):
Not to cheat and time I call him, but I've
a I'm fascinated by the situation with Sculptor Capital Management.
Sculpture is this like publicly traded hedge fund firm and
it's got a you know, a hedge fund manager who
runs it, and it's trying to go private. It is
agreed to sell itself to another firm that would keep
(30:13):
that manager in place, and like a bunch of other
hedge fund guys have just lobbed in a topping bid
saying no, no, we should buy it, we should kick
out that guy, and we should take over this fund.
It's such a it's like you you wonder why it
doesn't happen more often. An answer is basically because there
are not a lot of publicly traded hedge fund firms.
But it's such a like aggressive move of these guys
(30:36):
wanting to buy a hedge fund firm because they think
they do a better job of running the hedge fund
than the guy who's running the hedge fund. And it's
also it's weird because it's like it's a bunch of them.
It's like Boas Weinstein and Bill Ackman and Mark Lazary
who are all big hedge fund managers teaming up together
to go in on this other hedge fund, and they're
doing it in their personal accounts, like they're not like
they all run hedge fund firms, but those firms are
not buying or not trying to buy the sculptor. They're
(30:57):
just they're doing it with their own money, I guess
because as like their hedgehund managers and their day job,
but they want to run a want to manage a
different hedge fund as a hobby. I just think it's
so wild and it's going to be like a contested
mn A situation, and like there's all sorts of accusations
and just like the under like the just the basic
gist of these hedge fund guys trying to steal hedge
(31:17):
funds from each other is just is very unusual.
Speaker 1 (31:20):
That is a great story, all right, I'll give you mine.
I'm always fascinated. I don't know about you guys. I
assume we all take public transportation to work, right, So
I've never been a big car guy.
Speaker 2 (31:30):
I take a helicopter.
Speaker 1 (31:31):
Oh of course you do. Yeah, I've never been a
big car guy. And especially people that buy these vintage
cars for a lot of money. That never quite got that.
But it's great for crazy things. I'll give you this
story from the BBC. This wasn't like a car. It
was the burnt out shell of an old Ferrari. It
(31:55):
was from nineteen the nineteen fifties. It was a five
hundred Mandu Spider Series one, if that means anything to anyone,
one of thirteen made. It was driven by Ferrari's first
like official race car driver, Franco quotes, who I doesn't
sound like he was that very good at being a
race car driver. Even he finished fourteenth in this thousand
(32:18):
mile race across Italy. He crashed the car a bunch
of times. Anyway, someone bought the remnants of this carb
Why wasn't burned out? I guess because he would crash
and much fire. But then it was. It was in
a big warehouse fire at some point and so finally
what was left was basically a big heap of scrap metal.
(32:39):
All right, but it is the scrap metal of this
famous old school Ferrari racing car. Someone stuck it in
a barn in Florida and it just sat there with
these other busted up Ferraris for years and years, and
then hurricane comes along in a two thousand and four
blows the roof off of the barn and they discover
these Ferraris, and then it's been a hot collector's.
Speaker 2 (33:00):
Items, like frosty Ferraris rusty.
Speaker 1 (33:03):
This isn't even like it's just basically the shell, like
the outer body of it, and it's no color. It's
like a gray and it's burnout. And you know they're
saying theoretically could refurbish it. I am highly doubtful of that.
I wish I could show you the picture on the podcast,
but I cannot. But you know what time it is, Yes,
(33:26):
it's I'm sorry to inform you, Matt, but you're now
a contestant on our game show. Here the price is precise.
What do you think At Sotheby's, the winning bid was,
We're basically a hunk of scrap metal that used to
be a Ferrari race car in the nineteen fifties.
Speaker 2 (33:42):
How much does a regular Ferrari cost? Oh, I should
know because I own so many.
Speaker 1 (33:48):
That is a good question. I don't know, dis guessing
they're probably half a million. Now, I don't have no idea.
Speaker 2 (33:54):
Why are they? Yeah, so this would be more.
Speaker 3 (33:56):
I think the vintage Ferrari is like a like a
real classic Ferrari.
Speaker 1 (34:00):
Yeah, more right, right in the collector's market. Now, No, I'm.
Speaker 2 (34:04):
Going with one point two million.
Speaker 1 (34:06):
I'm going with one okay, one point one nine million,
and you said.
Speaker 2 (34:10):
More one point two I was gonna go, MAT's.
Speaker 1 (34:13):
Watch the prices right before two million dollars two million?
Speaker 2 (34:17):
I win?
Speaker 1 (34:18):
You win?
Speaker 2 (34:18):
Yeah, Oh my gosh, I beat Matt Levine.
Speaker 1 (34:22):
Wait, though, I'm questioning your strategy there. One point one
nine human one dollar.
Speaker 3 (34:29):
Yeah, you're right, and that's not actually prices right.
Speaker 1 (34:32):
Over.
Speaker 3 (34:33):
But I just want to be closest. Yeah, and as
close to that being because there's only two of us,
I figured it was less than that.
Speaker 1 (34:39):
True. Well, yeah, you would have won if it was
less than that's that's fine.
Speaker 2 (34:42):
It was two million.
Speaker 1 (34:42):
I would have a worded him two million. Yeah, for
scrap a bunch of five hundred mondy Old Spider series one,
one of thirteen, never made two million.
Speaker 2 (34:52):
No comments million.
Speaker 1 (34:55):
Maybe they'll make an n F two out of it. Yeah, anyway,
Matt Levine, thanks so much for your time. Always just
a pleasure to hear your thoughts about if we would
cover all the most absurd topics. I think really appreciate it. Matt,
Thank you, Eric, thank you, thank you man.
Speaker 2 (35:19):
What Goes Up. We'll be back next week. Until then,
you can find us on the Bloomberg Terminal website and app,
or wherever you get your podcasts. We'd love it if
you took the time to rate and review the show
so more listeners can find us. You can find us
on Twitter, follow me at Wildona Hirich. Mike Reagan is
at Reaganonymous. You can also follow Bloomberg Podcasts at podcasts.
(35:44):
What Goes Up is produced by Stacey Wong and our
head of podcasts is Stage Bauman. Thanks for listening.
Speaker 4 (35:50):
We'll see you next week.
Speaker 1 (35:54):
Thanks
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