Bespokeness: AI, Passthrough, UST

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Podcasts, radio, news.

Maybe we should talk about the voice thing.

I mean, it'll become apparent once I start talking.

I feel like you're closer to normal Katie voice than to last week's swallowed and hashtag voice.

I'm doing better.

I'm pretty sure I had the flu last week.

Right.

I think a few people missed that.

I actually was sick last week, and it wasn't that engineers turned my voice down.

I joke about engineers turning your voice down.

People took literally.

That was just Mother Nature at work.

I'm doing a bit better.

And people did not like your new voice.

No, they didn't like it.

I was thinking that it would improve the audibility of this podcast, but no.

No.

You just have to turn me up.

I just have to inhale helium before every podcast.

I got a text from one of my PR friends who I think is maybe listening right now, and he was like, wow, you sound really awful in the latest version of Money Stuff.

What do you say to that?

Yeah, we didn't get an email saying that I sounded comparatively better.

Yeah, next we have to try, you know, you taking some helium and getting you up to my level.

Oh, yeah, right.

That seems right.

Should I do the open?

Yes.

In a falsetto?

No.

Certainly not.

I didn't like that at all.

No, that was terrible.

Yeah.

Hello, and welcome to the Money Stuff Podcast, your weekly podcast where we talk about stuff related to money.

I'm Matt Levine, and I write the Money Stuff column for Bloomberg Opinion.

And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.

What are we talking about today, Katie?

We're going to talk about a hostile takeover.

Sure.

We're going to talk about exorbitant pass-through fees.

Exorbitant, okay.

And then we're going to talk about an interesting, humble thought experiment.

Do we ever talk about anything else?

All right.

Open AI.

The girlies are fighting is a tweet that I saw on this situation, which I thought was funny.

So I saw a tweet that was like

Sam Altman versus Elon Musk is like Kendrick versus Drake if both of them were Drake.

Yes.

It's so funny.

No one's performing at the Super Bowl here.

No one's won a Grammy.

Yeah.

So Elon Musk wants to do a hostile takeover of Open AI, which I wrote something like, there's probably never been a $97 billion hostel takeover of a nonprofit before.

And people are like, well, in hospitals, like there are some like unsolicited bids for nonprofit hospitals, right?

Like the model for this, arguably, is like a lot of hospitals are nonprofits.

They do a lot of for-profit conversions.

And so there is some like kind of law and practice around how you convert from a nonprofit to a for-profit.

But this is still pretty weird, right?

So like OpenAI is trying to convert from a nonprofit to a for-profit.

To do that, they need to pay out.

the nonprofit for its control of the business.

Their plan to do that is to give out, you know, a chunk of the shares of the new business or the newly for-profit business.

And Elon Musk came into great problems by saying, I'll give you $97 billion in cash for it, which is more than you'd get from the for-profit business.

And so you should sell it to me to preserve fair value, which is like everyone sort of assumes it's not a serious bid, that it's a way to make life more difficult for OpenAI.

I also assume that.

Yeah, so two points there.

One being, if you only read headlines, which is how a lot of people consume news, this was probably pretty confusing because the bid $97.4 billion.

You know, I think a few weeks before that, we got some headline from the Wall Street Journal that OpenAI is in talks to raise $40 billion at a $340 billion valuation.

The nuance being that they're bidding for the nonprofit, which owns a stake in the for-profit.

They're not even really bidding for the nonprofit.

It's a fun thing to say that he's trying to take over the nonprofit, but actually he's bidding for the stake.

Yeah.

The nonprofit has like a set of rights over the for-profit business, and he wants to buy that from them for $97 billion,

the alternative is they would sell that set of rights to the for-profit business in exchange for some stock in the for-profit business, which like

the numbers I've seen people say like the nonprofit would get like 25% of the business, which at a $300 billion valuation is worth $75 billion.

$97 billion is more than $75 billion.

I think you could argue that a 25% stake in OpenAI OpenAI is, in the long run, worth more than $97 billion.

But, you know, Musk is saying you got to get at least this much.

Yeah.

But right, he's not offering to take over the whole thing for $97 billion, which is less than the current market mark on it.

Except he sort of is, right?

Because like right now, the nonprofit controls

the thing, the business.

The nonprofit has final say over it.

And so the people putting in money at a $300 billion valuation, the nonprofit board doesn't technically owe them any fiduciary duties.

Their fundraising documents used to say it would be good to consider your investment in the form of a donation, right?

So it's like people are sort of making assumptions about the future path of the business.

And the assumptions they're making are like, you know, Sam Altman is like a money-making guy.

And like they know they need to raise a lot of money.

And so they will do the right thing for shareholders.

And so it's worth a $300 billion valuation.

But in theory, if Elon Musk bought the control rights from the nonprofit,

what does that do to

the non-controlling investors who have weird catch profit interests in the company?

I don't know.

I think he gets more than 25% of the company for his $97 billion.

I think he gets control over the company for his $97 billion.

And that control for him a guy who runs a competing AI company and runs a bunch of other companies and runs the the US government, that control is pretty valuable to him in a way that it's not to the nonprofit board.

So

if they said yes to him, if they're like, sure, Elon, here's our stake, it would be a huge bargain for him.

Yeah.

Well, that's what I was wondering.

So your position, it sounds like, is that Musk is trolling?

Well, he doesn't think they're going to say yes.

You know, the other thing I wrote is like, like, $97 billion is a lot of money, right?

Like, if they were like, sure, Elon, here you go, like, he could raise $97 billion to do it because it's a good deal.

But it's not like he has $97 billion committed, right?

That's true.

That's a lot of money.

That is a lot of money.

But, I mean, if we go down into hypothetical land and the board did take this seriously and they did say yes, what does that look like?

I don't know.

It's a great question because it's not like they own 40% of the company.

It's not like they own...

10%, but they have like a super voting shares, right?

What they have is like there is this weird quasi-for-profit subsidiary of the nonprofit and it has sold stuff to investors and that stuff is like this like waterfall of profit interest every investor has like a different deal it's like not really shares it's profit interest and they're capped so like even knowing what percentage of the company the nonprofit owns and could transfer to Elon Musk is like it's kind of uncertain right like you can like

build a model that converts these water flows of cash flows into like some percentage of the equity, but it's like a little debatable.

And then the other thing that it has is like it has the board.

The nonprofit gets to make decisions for the company and like says explicitly to investors, like, we don't make these decisions out of a fiduciary duty to investors.

We make these decisions for the benefit of mankind.

The nonprofit controls the company, but it's not just like Sherry Redstone controlling Paramount, right?

It's not like...

a person with super voting shares.

It's like a nonprofit with a social mission controls the company.

So if Elon Musk buys that, does he get to just control the company however he wants?

Or does he like take over the social mission?

And I think in his like offer letter, he's like, we will continue the social mission.

I don't know.

Yeah.

So I think it's really unclear what he would buy, right?

But like there is some package of rights that the nonprofit OpenAI is hoping to give up to the for-profit OpenAI in exchange for stock.

And he's just saying, whatever that package of rights is, I'll buy it for cash.

Yeah.

Like if you take that seriously, that package of rights is really valuable and like arguably more valuable in the hands of the world's richest person than it is in the hands of a nonprofit looking out for the benefit of humanity.

Well, if you ask Sam Altman, which Bloomberg TV did, I got an interview with him on the sidelines of this AI summit in Paris.

Sam Altman says that, I mean, he's not taking this seriously, obviously.

He had some hostile words about Elon Musk.

Did you see this?

Yeah.

It was really personal.

I mean, he said, of course, he thinks Elon Musk is just trying to slow us down.

He's obviously a competitor.

I wish he would just compete by building a better product, etc.

But he also said...

Probably his whole life is from a position of insecurity, I feel for the guy.

I don't think he's like a happy person.

I do feel for him.

I mean, this gets back to the girlies are fighting.

And I don't know, it's pretty personal.

It's also playing out in court and filings, obviously.

Right, because Musk is also suing

to make them be more non-profit.

And this is all in the context of he owns a for-profit AI firm, right?

So one assumes he's not going to buy open OpenAI, right?

Not that he doesn't want to, just that they're not going to.

I feel like it even goes deeper than that, though.

Like this comes back to the blood feud of him and Altman founded OpenAI together, blah, blah, blah.

Right.

I know, I agree with you and with Sam Altman that this is all largely about petty personal vindictiveness on a grand scale.

But it's also like OpenAI is

probably the leading, you know, LLM company.

Yeah.

I don't think that's controversial.

XAI is

has

somewhere in the pack.

OpenAI has made it very clear that it's doing this conversion because it needs to raise like $40 billion, right?

Yeah.

It's so expensive to run an LLM company and to scale it.

And to raise that much money, they think they need to offer investors normal stock and not, I think they use the word structural bespokeness, which is a great word, bespokeness.

And so they need to be a for-profit to raise the amount of money that they need to raise to continue to be competitive.

And

this might stop them.

Yeah.

And if it stops them, then like, you know, this is an opening for XII.

And so how would this stop them?

Like, Elon Musk offered to drop his bid if they agreed to stay a nonprofit.

So that's like one way to stop them, right?

If they just agree to stay a nonprofit.

But even if they say no to him, you can't quite ignore him.

They have to at least sort of wave in the direction of, no, actually, we're getting more value for the nonprofit

from OpenAI, like internally, than we would from Elon Musk.

And I think most people think that means essentially the nonprofit needs to get a bigger stake in the for-profit company than it was planning, right?

It was planning, like, let's say 25%.

It needs to get a stake that it can credibly say is worth more than $100 billion, right?

Yeah.

And that just makes it a little bit harder to raise money, right?

Because you're giving more of the stake to the more of the company to the nonprofit.

You're cutting back the shares of like Microsoft and SoftBank and everyone else.

And so it just makes it harder for them to raise money and creates uncertainty and, you know, puts them in a little bit worse competitive position to raise a lot of money and kind of stay ahead of XAI.

Yeah, which is interesting in the context of Stargate or whatever, that this very ugly public feud is paying out and makes things a little bit more challenging for OpenAI, but we'll see.

Right.

I mean, one thing I've written is like,

from the outside, it seems to be pretty easy for OpenAI to raise money.

They've got, you know, like the sexiest product in the sexiest industry in the world.

They've got Sam Altman, who is an incredible salesman.

They've got a lot of advantages.

And, you know, they're raising a lot of this money from SoftBank, who is not like

notorious for driving a hard bargain.

Right.

It's weird to be like,

this bid from Elon Musk is going to prevent them from raising the money they need to scale.

Like, I don't know, man.

Like, it's open AI.

They'll be fine.

But I don't know.

Yeah.

All right.

They'll be fine.

They'll be fine.

Let's just put a pin in it for now.

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Let's talk about pass-through fees at multi-strategy hedge funds.

This was a great Bloomberg big take that went out this week.

Reading it, it really feels like rage bait.

Well, it is, right?

I mean, like,

it quotes a guy saying, pass-throughs are wild.

You are paying for everything, including the copyright paper.

Beautiful.

And it's true that traditionally the way you think of hedge funds is like investors put in money.

The hedge fund invests the money for them.

the hedge fund charges them 2% of the money and 20% of the profits, right?

Like those are the stereotypical numbers.

And the stuff that the hedge fund keeps, the 2 and 20, pays for its managers' salaries, their bonuses,

their photocopier paper, their lunches, you know, whatever.

Like the expenses are covered by the fees, right?

And the multi-strategy model, the modern big multi-strategy model is just not that at all, right?

The modern multi-strategy model is you give us money.

we use the money to do investing.

We also use the money to pay all of the expenses, and what's left over, you get some of it, we get some of it, right?

Which is like, as I wrote this week, it's exactly the same model as

a company generally or like an investment bank in particular, right?

Like an investment bank, the shareholders pay for the photocopier paper, right?

All of the expenses of the investment bank are taken out before net income, and then the shareholders get some of the net income and like the rest of it goes to bonuses.

Or rather, the shareholders get the net income after the expenses and the the bonuses to the to the employees and that's how like companies work it's how investment banks work how modern like corporate investment banks work and the multi-strategy model is that right it's like the investors are capital providers we pay for all of our expenses out of the investor's money yeah and the investors get some of what's left over right yeah

and

that is a model that these firms can sell to investors But if you're just like outside of it, you're like, what, they're paying for photocopiers?

Like, it's very annoying.

Like, I am not an LP to a multi-strategy hedge fund, but I mean, reading this story, I hear the parallels that you're making with an investment bank, but I have to imagine that maybe I'm wrong.

I probably am.

That if I'm an LP, a potential LP to a multi-strategy hedge fund, I'm thinking about I am giving my money to a hedge fund for return.

So I'm not investing in an investment bank model.

I'm just coming at this.

It's, you know, what is my money going to return?

Yeah.

And like, their pitch to you is

we return more than our cost of capital through the cycle.

Their pitch to you is like, we can give you a pretty stable high teens return on your money, and that's what you're getting, and you're not getting like 80% of the money we make.

That's an irrelevant metric.

What you're getting is like a sort of expected high teens return, and like, we'll pay for the photocopiers out of your money.

It's actually low teens.

Yeah.

There's this, this is.

There's a lot of like, a lot of, you know, I'm used to the investment banking world where there's like a thing called the target return on equity.

And you're not supposed to get to the target return on equity.

It's just like a number that's in the present pitch.

Yeah, I don't know.

This gets back to a broader question that we talk about this all the time on the television show that I have open interest.

But why would you ever give money to a hedge fund?

I understand the pitch.

Diversification, you're supposed to get starter returns of about 12% with few downswings.

But I mean, you look at the SP 500,

you can pay three basis points for the SP 500.

Over the last decade, you've got an annualized annualized return of 13%

with three down years.

And I mean, thinking about these multi-strategy hedge fund fees that make 2 and 20 look cheap, it just reinforces that notion.

You get pretty high returns with lower volatility and with hopefully no correlation to the broad market.

Yeah, the returns are going to be a good idea.

You're a giant endowment, right?

And like, you have a lot of money in the S ⁇ P and you want some uncorrelated components that doesn't pay like treasury rates, pays like two or three times treasury rates.

It's a pitch that works to a lot of sophisticated endowments.

And this is the multi-strategy pitch is the one that works, which is like, we give you very low volatility, pretty high returns, no correlation to the S P.

It's diversifying your investments.

It's allowing you to put more money into the S P essentially because you have like this diversified

I know it works, but I don't really understand why it works.

And I go back to ETFs, I'm sorry.

Where you have this race to the bottom in fees.

This race to the bottom doesn't seem to exist in the hedge fund world.

And there is a recent example.

I think it's the University of Connecticut endowment that just said, actually, we're doing away with hedge funds.

We're going to put all of our money in buffer ETFs, which guarantee safety.

Buffer ETFs.

Yeah, exactly.

How much capacity is there in buffer ETFs?

I guess how much capacity is there in hedge funds?

No, I mean, like, if you put all of your money into equities

and there's like a big drawdown in equities, you have like a really bad year.

And you can't spend on your programs, you know, if you're an endowment.

And if if you put some of your money into like a, it's like a diversification, it's like steady returns.

It's like, you don't start from it thinking about the fees, right?

You start from it thinking about like, do they provide steady returns after fees?

And if the answer is yes, then like the fees are none of your business.

It's like investing in Goldman, right?

It's like, you know, if the equity returns a lot, then like, it doesn't matter that the people are getting bonuses, right?

Yeah.

And like, much as with a public company,

the job is to earn the cost of capital over some medium period of time.

And so like the Big Take article starts with Baleasny charging a lot of money in like a relatively down year, right?

And Baleasney's like, well, you know, it's an anomalous down year and usually we return our cost of capital, but like we have this one down year and you like point to it.

And it's like, yes, in a down year, it is embarrassing to pay tens of millions of dollars to your traders because like they didn't make money for the investors.

But it's like, that's not the right way to look at it.

The right way to look at it is like you're investing in a business over the long term and the business needs to pay money for traders.

Yeah.

I guess I just don't find it compelling.

But you know what?

I'm not in charge of an endowment.

I'm sure if I was, perhaps I would have a different perspective.

The great like sort of, you know, hedge fund pitch of like 20 years ago is like, I will take your money.

I will make 100% returns.

Wow.

I'll take 30% of it, right?

Like, there's like the sort of swing for the fences hedge fund model where like, yeah, you could like make big bets and

which I do find compelling.

Yeah, right.

I think, I think it's like much more intuitively compelling, right?

Yeah.

And the multi-strat model is like, you're not like, oh, I put all my money onto like Fannie Mae, right?

I put all my money into like a series of like short-term bets that are like essentially like liquidity provision and arbitrage trades.

And they can't really tell you about any of them and they're not that exciting and they're on for one day and they're all uncorrelated and hedged to a variety of factors.

And so it's just like, I mean, the thing I think about is like the high-frequency trading model where like your job is to make money every day.

And

that's a little bit like the job of these firms.

It's not literally to make money every day, but it's to like be very neutral to market factors and to just sort of make steady returns doing fairly safe but highly levered trades and like that's the thing they're pitching and i think that resonates with a lot of like yeah people

in that it seems

real and sustainable in a way that like i'm going to put all the money on fannie may is not right right if you're just like taking big swings like you're going to miss and then like you know you'll lose money whereas like these guys are like we're incredibly conscious of risk and we try to be very neutral to a lot of factors so that we're just giving you pure alpha which is in some sense like

alpha here means something like getting paid for providing a service right it means like we're doing something for the market and we're getting paid for it yeah and

that's more reliable than like

a model of like we're going to make bets on stocks and hope those bets work out.

Yeah.

Whether or not an individual pot is quants, like it's a very quanty like sort of model of thinking about the world, which is like making individual bets on stocks has like a pretty high probability of going wrong.

And so you're making a lot of diversified bets with like a little bit of edge on each one.

Right.

And like

you tell that model to an institutional allocator, like, yes, this makes sense.

This like feels plausible and sustainable.

Whereas when you come in and you're like, I'm just really good at picking stocks, it seems bad.

Yeah.

I don't know.

I mean, I hear what you're saying.

I still am surprised that there isn't fee pressure here.

It just feels like in every part of the asset management industry, there is fee pressure, and that fee pressure doesn't apply to these multi-strout hedge funds.

Well, I think there's a reason it's done as pastors, right?

Because if you were like, we're going to charge seven and seven,

it would be bad, right?

But if you're like, look, the going rate for a portfolio manager is $50 million.

What do you want us to not hire a portfolio manager?

Like, you know, like pass through the $50 million.

Got him in the wrong business.

Seriously.

Going rich for a newsletter writer.

Jesus Christ.

So in clicking around in preparation for this conversation, did you see Ken Griffin?

I know you did, like a month or two ago saying that he thinks the boom in multi-strategy hedge funds is over.

I do think that if you run a multi-strategy hedge fund, the pricing pressure that you feel is probably more about hiring portfolio managers than it is about your LPs.

And so for him to be like, oh, it's over is a way to drive down the prices of portfolio managers more than it it is to like signal to LPs.

So he doesn't need their money, right?

Like he's like, the boom is not really over for him.

The other signal you're sending is the boom is over for potential competitors, right?

Yeah.

Which might be true, right?

But I don't think that like Ken Griffin is worried about being poor in a year.

No, I don't think so.

Though apparently, according to Goldman, assets managed by multistrats did drop slightly in 2024, which was the first decline since 2016.

So I don't know.

We'll see.

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Let's talk about this humble thought experiment that was put on by Double En.

I wrote about it.

It's pretty interesting.

It's a paper that was released this month.

They basically sized up Microsoft as an issuer versus the U.S.

government as an issuer of debt.

They didn't reach a conclusion.

They wanted to leave it up to the reader, but it seemed like they were leaning towards Microsoft.

It's a strange thought experiment.

Yeah.

Because they basically look at Microsoft's capacity to serve its debt based on its cash flows, and they compare it to the U.S.

government's capacity to service its debt based on its stock of debt and cash flows.

Yeah.

And it's like, well, the U.S.

government takes in less than it spends, and Microsoft takes in more than it spends.

And so Microsoft is a better credit.

Okay.

Like, I have a lot of sympathy for their conclusion, right?

If I were doing this analysis, I would think things like Microsoft is run by professionals who, one,

believe that they should repay their debt and two,

want continued access to capital markets and also has a lot of cash flow, right?

And so when their debt comes due, they will pay it.

They certainly will.

Barring some sort of tail risk catastrophe.

The U.S.

government is not, for instance, is run by a president who

has boasted about his use of bankruptcy.

I heard about this the other day.

It's just wild.

Like, people can get him to say anything, and he was talking about Elon Musk going through the payment system and funding irregularities, right?

Like in the treasury.

No one says what the irregularities are, but there's all this fraud, right?

And so Donald Trump said, There could be a problem.

You've been reading about that with treasuries.

And that could be an interesting problem because it could be that a lot of those things don't count.

In other words, that some of that stuff that we're finding is very fraudulent.

Therefore, maybe we have less debt than we thought of.

Think of that.

Therefore, maybe we have less debt than we thought of, right?

That was amazing.

That landed like during the Super Bowl.

Yeah, so like some treasuries might not count.

Who knows which treasuries don't count?

Who knows why?

Like they might be from fraud, right?

Maybe your treasuries were fraud.

Yeah.

I don't like place a high probability on that happening, but like, you know, the guys going around talking about, like, yeah, some treasuries don't count.

Microsoft doesn't say that.

No, no, Microsoft would not say that.

And what was interesting about Trump saying that over the weekends was, first of all, it took a little bit.

There was a lag between when he said that and when someone from the administration clarified that he wasn't talking about treasury bonds or whatever.

But there wasn't,

there wasn't totally a reaction in the treasury market, which, I don't know, maybe points to maybe Trump losing some of his juice here that he could suggest that maybe we wouldn't count some of the treasuries and the market just totally looked past it.

I'm not saying that the U.S.

government is no longer interested in paying.

I'm just saying like you look at the management of Microsoft, you look at the management of

every other million.

So it sounds like you would end up, even though maybe you're looking at different factors in your own analysis.

Very different factors.

But you end up in kind of the same position.

Oh, yes, very much so.

Yeah.

I mean,

not investment advice, but like,

I appreciate the thought experiment.

I should note that double line, this truly is a thought experiment because they don't own Microsoft debt.

The reason being that there's just better value to be found elsewhere, obviously, because Microsoft trades

do they own?

It's a good question, too.

I don't know.

But Microsoft, I mean, you look at their 30-year debt and it trades very similarly to Treasury.

Well, they said it traded like 49 basis points over Treasuries, which is like a meaningful premium if you think it's safer.

No, I mean, it's slim compared to high-yield bonds, but it's a lot compared to

if you think it should be negative, right?

If you think it should be, you know, that's a good trade.

I mean, they do point out that if you do, you know, end up on the side of Microsoft debt is safer, then there's some income opportunity there.

But they're personally not exploiting that.

Their analysis, though, just to put some numbers behind what we've been talking about.

So, Microsoft can pay its annual interest expenses more than 50 times over.

It is expected to generate nearly $48 billion of free cash flow in fiscal 2025.

It also has a higher rating from the credit agencies than the U.S.

government, which is pretty funny.

Whereas you compare that to the U.S.

government, our country's receipts to interest expense has declined to 5.2 times as of 2023.

Also, we've run a deficit since 2002.

So those are some of the factors that went into what Double Line is looking at.

I mean, first of all, the traditional analysis is the U.S.

government can always pay back its debt because it can print the full faith in credit.

Because it can print money.

Yeah.

So in the worst case, the U.S.

government prints money and inflates away the debt.

And that's just as bad for Microsoft's debt as it is for U.S.

government debt, right?

I was reading like, you know, there's like a traditional theory of the sovereign ceiling where like people use that more for like emerging markets bonds, where it's like the idea is that you can't have a better credit rating or a lower yield for a corporate in an emerging market than for the sovereign because like

It's not clear why, but it's like, you know, there's some theory that like, you know, first of all, like the economic conditions that affect the sovereign would affect the corporate as well.

And secondly, like in a catastrophe for the sovereign, is the sovereign going to seize the assets of the corporate?

You know, like, so you have the sovereign ceiling, but it's like a sort of soft ceiling.

And there's like history of ratings agencies occasionally rating corporates in Argentina higher than the sovereign.

Microsoft can't print dollars, but it can come pretty close.

And I think that like, if I were trying to like think about like my credit risk as a creditor of the U.S.

government, I would worry a lot more about like government shutdowns, debt ceiling breaches, Elon Musk deleting the database, you know, like all that stuff than I would about like cash flow.

Yeah.

Because like cash flow can be solved by printing currency, right?

But like all that other stuff, like you, you might get like, you know, a delay on your payments, right?

Yeah.

So I think that stuff is like

idiosyncratic to the current U.S.

government and wouldn't apply to like the highest rated corporates in the U.S.

Yeah.

And I mean, we're talking about 49 basis points in terms of the spread.

You keep saying that's small.

That seems big.

That seems like.

So you're saying, I don't, I don't know.

Maybe you should go buy some.

I don't know how to buy it.

This isn't investment advice, as Matt said.

But I mean, in EM, it's not unheard of to see corporates trade through the sovereign, which is cool.

Also, I got some interesting feedback on this one.

A terminal client wrote in, and I liked this email a lot, not talking about EM, but this person said, I'd certainly rather own L'Oreal bonds than French bonds, which I I found amusing.

So there's other examples you could use, but yeah, there's like, you know, like the big companies are sort of multinational and like arguably have less exposure to some of the conditions in their countries than the sovereign does.

Yeah.

So I asked Bloomberg Intelligence about this, and I thought this was a fun stat as well.

Microsoft has a 0.06%

five-year cumulative default risk, which is pretty stinking close to the U.S.

government's risk-free alternative.

So, Microsoft, I don't know.

I don't know what that number meant.

I think that they just have a really low chance of defaulting.

Sorry, 0.06%?

Yeah.

Cumulative.

What do you think is the chance of Microsoft of the U.S.

government missing a payment on its debt in the next four years?

Maybe zero.

Is it bigger than 0.06%?

I was going to answer 0.06%.

Okay.

Yeah.

What's your, what, I mean.

0.08%.

Okay.

There you go.

Then

you could have written this paper.

Exactly.

Programming note.

We're taking next week off.

I'll see you in two weeks.

And that was the Money Stuff Podcast.

I'm Matt Levieu.

And I'm Katie Greyfeld.

You can find my work by subscribing to the Money Stuff newsletter on bloomberg.com.

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