Unfeasibly Tanned for This Time of Year: A Mailbag Episode

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Podcasts, radio, news.

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 Greif, a reporter for Bloomberg News and an anchor for Bloomberg Television.

Happy New Year, Katie.

Happy New Year, Matt Levine, 2025.

It's going to be great.

When we're recording it.

It's great already.

Yeah.

And can you believe the news in financial markets?

Jeez, Louise.

It's amazing to see what's already happened in these first few seconds, honestly, of 2025.

No, it's been wild.

I wouldn't miss it.

We're recording this on like December 19th.

It is December 19th.

It is 3:02 p.m.

But we have powerful skills of prognostication.

What are we talking about today or in the future, Katie?

Mailbag.

Mailbag.

Let's dive right in.

This is a question from Mitch.

Mitch wants to know how we were each introduced to the world of finance.

And I appreciate Mitch because we both wanted questions about ourselves.

And we'll get to some like more substantive questions.

But what a nice first question of 2025.

Matt, how were you introduced to the world of finance?

I don't know.

I have like two answers.

So I was a classics major in college.

I was like the most unworldly person.

Like I did not do job interviewing in my senior year of college and I graduated and I was like, oh my God, I need a job.

I interviewed for like one kind of job, which is McKinsey sent me a letter being like, you should interview at McKinsey.

And so I did, you know, the like on-campus first-round interview at McKinsey.

But of course, like, I wasn't prepared.

I was terrible.

So I had like an incredibly unworldly college experience.

And I actually taught high school Latin for a year after.

I love that.

It was great.

It was really fun.

But it turns out that a classics major really suits you for one thing, which is going to law school.

And so I went to law school.

And in law school, I was like, oh, I'll be like a constitutional law professor, right?

But then I went and like, constitutional law is kind of dumb.

And like contracts are really interesting.

And so I was like, I like contracts.

And so then what do you do with that?

Well, you go like, you know, you have like a summer associate job as an M ⁇ A lawyer because like they write contracts.

Why not?

You know, I was getting like very unworldly.

I applied to all the law firms and I was like, I don't want to get a job at these law firms.

I don't know anything about M ⁇ A.

And then they all hired me because like they don't care.

And then I went and worked in an M ⁇ A law firm.

I was like, I love this.

It's great.

And then I went from there.

And I was an MNA lawyer for a brief period and an investment banker for a longer period.

And it was fun.

So was that one answer or two?

Because you said there were a lot of things.

That's one answer.

Okay.

What's the other one?

That's like the sort of real sort of direct path answer.

I will say, though, the other answer is that when I was in middle school, high school, I did read Lyrus Poker.

I don't know why, but I liked it.

And I read Barbarians at the Gate, which is even more fun.

And wait, edit that out.

Michael Lewis listens.

It's fine.

You're saying nice things.

Keep that in.

I thought, this is really cool.

And like, there was probably like a period in like, I don't know, high school, junior high school, where I was like, I want to do high finance MA.

And then that totally faded.

And like, it was not on my radar in college or whatever.

But at some point, I like rediscovered it.

And like, I was an MA lawyer.

I was like, oh, yeah, I remember like liking this stuff as a kid.

And so there was something latent in me that was like, I want to do finance stuff.

And it came out of me eventually, even though I tried to tamp it down by majoring in Greek poetry in college.

You can't deny who you are.

Yeah, seriously.

Anyway, so what's your story?

Is it horses?

I feel like it's not what people typically expect.

My dad, who's listening right now, was the CEO of NASDAQ for a long time.

He took over when I was in fourth grade, and he stopped being CEO of NASDAQ after I started at Bloomberg.

So it was a long time.

We never talked about

business or finance or the market or like stock exchanges.

So I ended up at Bloomberg.

And I think people, especially outside sources, expected me to know a lot more than I did.

And I did not.

I talked about it.

Did you not like?

I was going to say, go to the trading floor and go to NASDAQ.

No, I actually, I went to the market site a lot.

There's pictures of me like in my goth phase.

At like a closing bell.

At the closing bell.

Like at a closing bell ceremony and stuff, which is really sweet.

Did you guys see this?

Yeah, I'll show it.

No one else can see it because it was a painful phone.

It's a

little bit more.

It was a painful

episode.

It was a painful, awkward phase.

I talked to my dad about how I was going to answer this question, and he was like, make sure they know we talked.

Like, we did talk, just not about anything else.

My dad is one of my closest friends.

I got into

this

world from a journalist first perspective.

Like, I was the editor of my college newspaper, and then I went to Columbia for journalism grad school.

And then I applied for an internship at Bloomberg because I was thinking, where might I make the most money as a journalist?

And I was like, probably reporting on money.

And then I ended up at Bloomberg, and here I am.

Here you are.

Yeah.

But it definitely was through writing.

I consider myself a writer first and then a markets person.

And here I am.

Well, a podcaster first.

Right, for sure.

Podcaster above all else.

And then somewhere in there.

All right.

Anyway, that was a fun first question.

Mailbag.

Mailbag.

Seth wants to know: why doesn't the government insider trade?

And then Seth goes through his logic.

The government gathers and releases a lot of market-moving information.

This information is worth a lot of money.

In theory, it belongs to the American taxpayer.

Does it?

The government should establish a department of insider trading, which gets early access to all this information and is able to trade on it in order to raise revenue for the government.

But why would anyone ever take the other side of the government then?

Right.

That's one good objection to this.

Yeah.

One good objection to it is it wouldn't really work that well.

Yeah.

No, it kind of would, right?

Like if you had economic data, you could buy or sell S ⁇ P index funds or whatever, right?

And like there's enough of a market for that that like you could probably sneak in some trading.

Yeah.

I do think the main answer is that this is a tax, right?

Anything the government does to raise revenue from people people who are not the government is a tax.

Classically, like inflation is a tax, right?

Like one way for the government to raise revenue is to like never impose any taxes and just print currency to pay for all of its stuff.

And the reason governments don't do that is because inflation is also a tax and it is a worse constructed tax than like a progressive tax system.

I think it's something similar here, where it's like, if you raise money for the government by trading against counterparties, one, it's like an unfair tax, right?

Like you're taking the money from people, you know, retirement savers rather than like the broad tax base.

But then two, you're like undermining the capital markets to raise these taxes.

And so like you're making the overall financial system worse to raise revenue for the government.

Like you can raise revenue for the government in a more neutral way by like, you know, imposing taxes.

So I think that's true of like a lot of stuff like this.

Like there's like a well-known trade in like fixed income arbitrage, which is like you buy off-the-run treasuries, which tend to trade at a slight discount to on-the-run treasuries, and you sell the on-the-run and they eventually converge because they eventually both become off-the-run.

And I've often wondered like why doesn't the government just buy all the off-the-runs and like issue new on-the-runs to fund it because like they could clip that spread too.

I think it's the same kind of answer.

It's just like why would they make that money at the expense of the financial markets instead of just imposing product taxes?

Well great question Seth.

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This comes from Max.

Why is it so difficult for small retail investors to get diversified exposure for real estate, despite the fact that real estate is such a large part of many people's assets.

For example, even as a broke college student, I can very easily invest in a diversified collection of stocks in almost any industry I like.

Why aren't there ETFs, thank you, Max, that are, for example, a bunch of residential properties in a particular city?

I would expect these kinds of products to be very popular for homeowners to hedge their own homes and whatnot.

There's definitely some intrepid ETF issuers out there that agree with you and are working on it.

Are there?

Probably, yeah.

But do they talk to you about it?

Not on the record.

Did I talk to you about author?

I mean, just

the sanctity of this podcast.

Ah, yes, the sanctity of this small room with a mic in front of me.

Not like particular city ETFs, but people are trying to figure out how to fit private assets in general, largely, into ETFs.

Oh, man, you're trying to get to like private assets.

Private assets are one thing.

I know.

Houses are a different account.

I know.

There's like two answers to the question.

One is like, why can't I buy a diversified real estate portfolio?

And the other is, why can't I sell a share of my house, right?

The diversified diversified real estate portfolio is a thing that people have been working on for decades.

And there didn't used to be REITs, right?

A REIT is a real estate investment trust, right?

It's like a pool of real estate assets that you can buy a share in, right?

And that's like a relatively new, that's like the 70s or 80s, is relatively new technology that people developed in order to allow retail investors on the stock exchange to buy exposure to real estate.

Now, most REITs are not single-family homes.

Right.

One thing that is happening is that like single-family homes have become like a real investor asset class, right?

Like, you know, like big asset managers now own a lot of single-family homes and rent them out to people to live in them.

And I think that doesn't really exist in like REIT or ETF form yet, but like, yeah, you could spin that out.

You can like sell stakes in your like single-family home portfolio.

And like, I don't know, I'd imagine in like five years, if like investor-owned single-family homes are a big deal, like someone will have a REIT of them so that you can buy diversified exposure to single-family homes.

What you can't buy is diversified exposure to owner-occupied single-family homes because the owners occupy them and so they're not selling a stake.

And like, that's a thing that people have thought about for a long time too.

And like financial engineers love the idea of like, okay, you own a house, you sell 10% of your home equity to me and I put it in a pot and I sell it to investors, right?

Because like for you,

you get some form of like hedging your house price exposure and you get cash that is arguably not debt, has like somewhat more attractive properties than debt, perhaps.

And for me, I get exposure to your house.

And then if I pool that with a bunch of other houses, then I've created something like an investable fund of owner-occupied homes.

And like that's a cool product.

A lot of people would like to swap where it's like, if you have $100,000 of equity in your house, you would perhaps rather have $50,000 of equity in your house and $50,000 of like diversified.

home equity like across the country or whatever so that you're not as invested in your single house.

People try try that all the time.

And I wrote about a company called Point in 2016 that was doing something like this.

I think it's hard in part because like startup founders and Money Stuff podcast listeners love this idea.

Many normal people may not be that interested in it.

And so like you can't necessarily get a huge diversified pool of people who are like, oh yeah, I want to like go through the header of like signing a contract to sell 10% of my home equity.

You also have like weird dynamics where, you know, a mortgage, you pay back every month until it's paid off.

A home equity, whatever, you know, selling a portion of your home equity, how does the buyer monetize it?

I think the answer is like, they wait until you sell the house, but like that could be a long time.

It's like not an obviously cash-flowing asset if it's owner-occupied real estate.

And so it's like a weirder dynamic of like how the market would work.

But people do keep trying it.

And also, the other thing I should say is people try to make derivative products.

There's like a case sheller derivative product at some point where it's like based on some like observed index and like you have futures contracts tied to to the index because people really like the idea of being able to buy diversified single-family home exposure and I feel like no one has really cracked it yet but people are gonna keep working on it they're gonna keep working on it

the thing I always I also compare it to is the other like form of equity that people want to buy is

like human equity like people want go on so this is like you know college students, MBA students, minor league baseball players, like there are people who will come to them and say, sell me 10% of your future earnings or like, you know, your future earnings over the next 10 years or whatever, and I'll give you a pile of cash today and I will sell your future earnings to some investor class.

And like people do this with like NBA students or like the NBA students pool and with minor league baseball players too.

You get like 10 players and you pool yourselves and then like if one of you makes it big, then he writes a check to the other nine.

And so you have like a sort of like diversification benefit.

That's crazy.

I've never heard of this.

Oh, people love it.

It's not a huge business.

It's like a thing that people are constantly forming startups to do because like it's a great abstract idea.

And then in practice, it's always a mess.

But there is more progress been made on those than on the house stuff.

The house stuff seems really hard.

Thank you for the thought-provoking question, Max.

Mailbag.

Mailbag.

Let's move on to Kevin.

All men so far, but we do have a woman coming up, so stay tuned.

But Kevin asks, you talk a lot about how analysts think it's worth talking to management, getting on calls, et cetera, even though management can't share MNPI because they think they can glean something from body language that helps them evaluate the company.

Do any short sellers do the same too?

Like, what if you had a big short position and then gained some info from management's body language that made you rethink the short?

It would be good for the company too if they were able to convince a short seller to cover.

I just think it's funny to imagine that conversation: hey, we sold 3 million of your shares into the market because we think you're bad at your jobs.

Could you meet with us to help us figure out if that's still true?

I love this question.

I also love to imagine how dramatic your body language would have to be to

I feel like we've talked about this before.

The body language stuff in general?

Yeah, and short sellers.

Well, the body language, I feel like body language is a euphemism.

Yeah.

Because the idea is like, right, you go into meet with management of a company that you might invest in, and like you have a meeting, and you walk out of the meeting and you like learn something and you go buy the stock or sell the stock or whatever.

And the law says that management is not allowed to give you material non-public information that isn't already public.

Can they link?

And it's like, what happened in that meeting?

And they're like, oh, they read the body language.

And it's like, no, they said something that doesn't quite rise to the level of disclosure, but is useful to you and what you know about the company and how you build your model and how you think about the management.

So you've been given information and people say body language because then it's like, oh, they didn't disclose anything.

It's just the body language.

So I think it's a euphemism.

But in any case.

Maybe they raised their eyebrows suggestively when they were.

No, you were like, how do I think about this line item in the model?

And they're like, oh, well, this is how we think about it.

That's not material enough to disclose, but it's like, you've learned something, right?

A smirk snuck onto their face.

No body language is all fake.

Except, I will say, one of my favorite stories ever is, so I've been writing about this for a long time, this idea that management is giving you something useful, and it couldn't possibly not be giving you something useful.

So that's why they have these meetings.

And there's this great paper.

These academics got a lot of access to Aberdeen, the like.

Yeah.

UK long-on-life asset manager.

Didn't they take the vowels out of their name?

I think this was before they took the vowels out, but now it's Aberdeen.

But so Aberdeen or Aberdeen had a bunch of meetings with management.

And these academics studied how they learned, like what they learned, and how they traded.

And basically, they got useful information from these management meetings.

But the academics also had access to their notes from the meetings.

There's one where they met with the chairman of this company.

And the analyst came back and wrote a note that included saying he was looking unfeasibly tanned for this time of year.

It was like in January or whatever.

Yeah.

And so if you're like, the chairman of this company is looking unfeasibly tanned, that's a short, short, right?

Like you sell that stock.

And so they did, in fact, dump the stock, and it did actually turn out to be a well-timed trade.

That is so funny.

That's the only case I know of of like true body language or just body color being useful financial information.

But anyway, they're basically a long investor.

Do short sellers meet with management to like get talked out of their shorts?

Like, I think it probably happens.

There are probably some companies.

I think most like activist short sellers are interested in hearing the company's perspective before they put a lot of money into betting against the company.

And I think it's a mixed bag, you know, how often they're going to contact them.

And in general, my impression is that managements don't like short sellers and so don't always meet with them, but I bet it happens.

You know, it's funny, like, I feel like I'm aware of Tesla short sellers who have like turned around and become like huge Tesla bulls.

And I assume that is not from like a friendly meeting with Elon Musk where he like explains his thinking and they come away persuaded.

But like, you know, somehow they like, you know, get enough of a vibe from him that they change their minds.

But no, I think it happens.

I think there's like a range of things.

And like you see a lot of the noisiest short sellers and a lot of the most anti-short seller managers being very vocal about hating each other.

But I think, you know, there's a wider range.

And particularly, a lot of people who are short companies are like multi-strategy hedge funds who are just making relative value bets where they don't hate the company.

They're just like have to be factor neutral or whatever.

And I think a lot of those people do, in fact, meet with the companies and have kind of rational discussions and will sometimes be long and sometimes be short and do not put a lot of like personal animus into it on either side.

Well, for my own amusement, I'm going to pretend that body language is real.

No, it's real.

There's the one guy with 10.

Yeah.

That's true.

And I think there's some amount of like, to the extent you're evaluating management's

quality,

getting a sense of how they talk and how they look at you in the eye and shake your hand or whatever is maybe a little bit useful.

But I think the body language is super overrated and it's mostly they have substantive discussions that they just all agree they don't have to disclose.

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douglas has some questions he has some questions we're only going to answer one of them

douglas asks since there are more words than letters and more sentences than words is there any logical limit to the number of etfs

i love this question i mean I don't get it.

I feel like ETFs are limited by the number of letters, right?

I mean, he's written about that.

Tickers are.

Yeah.

So I don't think there's any limit to the number of ETFs, but there are limits to tickers because U.S.

U.S.

exchanges have a four-character limit.

I didn't realize that.

I thought it was five.

No, it's four.

I mean, there are some weird exceptions.

The only one I can think of actually is Google, which is G-O-O-G-L.

I don't quite know the lore behind that.

Yeah, I know, but like, why is it five?

And no other stock is.

Think about it.

Are there not other four-character ones that have share classes that are five?

I don't know.

I don't know.

I don't think so.

Anyway.

Anyway, generally speaking.

Generally speaking, four-character limit and no numbers.

And that's different than Europe and Asia, which can have more than four characters and can also, at least in Asia, allow numbers.

I think actually Europe too also allows numbers.

And I've written about

maybe

there could be a ticker shortage when it comes, especially to the world of leveraged single-stock ETFs, because your ticker is already a derivative of an existing ticker.

And then you only have however many letters to work with.

Right.

All the monster ETFs are like MST.

Yeah, MST something,

which is difficult.

I have asked.

I said monster.

All the microstrategy ETFs are MSTRs.

MST something.

Monster MicroStrategy.

NASDAQ and NYZE, I've asked them about it.

They've both told me they're not concerned.

Currently, in the U.S., there's like 3,900 listed ETFs, which is a lot.

I am excited for the day when there's more U.S.

listed ETFs than there are U.S.

publicly listed stocks.

We're not quite at that point, but we'll see.

I just love this question.

And I love Douglas's phrasing.

It sounds like a riddle.

Matt's texting.

No, I'm...

There are approximately 450,000 logically possible tickers.

Something like that.

Actually, when I wrote this story, we talked through the math.

450,000.

Yeah.

But if you knock out two of those characters, three of those characters in some cases, then obviously your universe shrinks dramatically.

Not going to because you're talking about like

one stock.

Yeah.

Yeah.

I feel like I've said this on the show before.

Like you could imagine a world where like the ETFs become like a like

universal format for products, right?

Anyone who's like, oh, I want to do like, you know, call options on micro strategies, you'll be like, oh, do an ETF for it, right?

In that world, you would need to kind of revise the ticker system, right?

Like, you'd need to have some sort of like MSTR/slash and then have like a descriptive for new characters.

You need to have a more organized system than just like pick four letters.

Yeah.

But we're probably not there yet.

I don't know.

Maybe in four, in five years, will there be some sort of like more complex ticker system to accommodate the just absolute torrent of ETFs?

Like, maybe.

I can't wait.

Yeah.

I don't know.

You say four to five years, perhaps in the year of 2025.

Anything could happen this year.

Yeah, right.

It's been a wild year so far.

Mailbag.

Mailbag.

Kristen has a question.

I'm going to read it to you.

Kristen says that my sister-in-law was recently talking about the Martha Stewart documentary out a few months ago.

She was convinced that.

Have you seen this documentary?

No, and now I'm going to watch it.

Have you seen it?

I've seen like 10 minutes of it.

I've not seen it.

And then Kristen has not seen it, as far as I can tell from this question.

So we're talking about

fourth hand documentary.

This is Kristen's sister-in-law.

Yeah, Kristen's sister-in-law watched a documentary about Martha Stewart, and Kristen's sister-in-law was convinced that everybody just ganged up on Martha and that Martha didn't do anything wrong because she didn't know it wasn't allowed, the insider trading.

I personally, this is Kristen talking, Kristen personally has not kept up with any of that news and has not watched the documentary.

But Kristen's instinct was that punishment for insider trading doesn't require the defendant to be aware of the insider trading rules was kristen correct or incorrect i know that's an interesting question i mean does intent matter no i mean like intent often matters in like market manipulation and stuff but yeah in insider trading the rules are first of all you don't have to know that it's illegal to insider trade right yeah in general ignorance of the law is no excuse right so if you didn't know it was illegal to insider trade you can't be like oh i thought it was fine right people do that by the way yeah like you know 90 of the insider trading cases that I write about, it's like they're like Googling how not to get caught insider trading.

And then 10% are like, what?

I had no idea.

But there's also like another mindset question, which is, let's say you were going to sell the stock anyway.

Okay.

And then you heard some bad news.

Can you still sell the stock?

No.

I think the SEC's rule is that if you're in possession of material non-public information, that counts as selling on the basis of material non-public information.

Seems pretty well established.

So yeah, like even if you would have sold it anyway, that doesn't help you.

I will say that the Martha Stewart case is more complicated than that.

Like Martha Stewart didn't like get an insider stock tip.

Like her broker got apparently an insider stock tip.

And then her broker was like, hey, I think we should sell that stock.

And she's like, sure, go ahead.

And so arguably, you know, it's a little more complicated than that.

But I think like my impression, and a lot of people's impression, is that Martha Stewart probably wasn't really guilty of insider trading because she didn't know that she was getting a material non-public tip.

She had no reason to think she was getting an illegal tip.

And if your broker is in charge of your account and you're not making decisions, it's a little hard to accuse you of insider trading.

What is relevant is that she wasn't convicted of insider trading.

I don't think she was charged with insider trading.

I haven't watched the documentary, so this is all.

I haven't either, but I'm familiar with this.

You took a browse of.

No, I mean, I used to, like, honestly, like, when I started at a law firm, it was the law firm that represented Martha Stewart.

Like, I had nothing to do with that case, and she wasn't, like, there weren't her lawyers on the trial, but like

we all had a various what year did this happen

because I was pretty young young and I wasn't really paying attention.

It happened before I got there.

2004?

Oh, wow.

So right before I got there.

So she was in charge of insider trading.

What happened is that the insider and her broker got investigated by the SEC and the SEC saw that she got a call from the broker and then he sold her stock.

And so they went to her and they said, did you get a hot insider tip to sell that stock?

And she said, actually, what happened is that I put in a stop-loss order saying that like if the stock goes below $60, you should sell it.

And my broker called to say that it was below $60, so I I sold it.

And that wasn't true.

Apparently, she didn't have a stop loss order.

And so she was convicted of lying to the investigators, which is its own separate crime.

But I think a lot of people think she was kind of ill-treated because she was lying to them about something that wasn't actually a crime.

And so they shouldn't have been investigating her.

So I don't know.

It is wild that she served time.

Like she went to prison.

Yeah.

I've not watched the documentary, but my wife has watched the documentary, and we've talked about it.

It's interesting, like, I think you think now of like Martha Stewart, the character she is now, who is awesome, by the way, who's awesome and very famous, yeah, and like very beloved and like friends with Snoop Dogg.

And you think about that character and like going to prison for five months or whatever is like a big part of that character, right?

Like you sort of think like her time in prison has like been good for her brand.

But if you look back at like what actually happened, like it was a huge catastrophe for her.

Like she had a big company that like basically went away because she was convicted of not insider trading and sent to prison.

So it was actually like really a sort of quite harsh result for something that, first of all, in the scheme of things, was not that much money.

Like she didn't make a huge profit.

And like she probably didn't insider trade.

She probably didn't know that she was trading on insider information.

Yeah.

Her worker's like, oh, it's all this time.

She's like, fine.

But she lied to the investigators.

You do

a crime question mark.

You do the time.

No, the actual cliche is the cover-up is always worse than the crime question.

Oh my God, true.

I should have said that.

Martha Stewart, though, I mean, an an inspiring story of rebuilding oneself.

Great energy to take into 2025.

Oh, yeah.

And that was the Money Stuff Podcast.

I'm Matt Levine.

And I'm Katie Greifel.

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