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Bloomberg Audio Studios.

Podcasts, radio, news.

If you watched our video podcast, you saw us in the fancy studio, but now we're in the other studio.

Yeah, we're in the little box on the fourth floor of Bloomberg.

The women's wardrobe room is right there, and I often play music to myself because I usually have time alone in there.

And sometimes I think there's probably people recording a podcast right next door.

Yeah, we're definitely in the partially soundproofed recording state.

It could

be.

You would think being soundproof is binary.

Oh, I would never think that.

I would, I mean, ideally, it would be.

This room is not soundproof-ish.

No, it has a lot of padding on the walls, but a lot of sirens in the background.

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.

I feel like people get mad at me because I am not very good at like sitting at the right distance from the mic and I end up like yo-yoing around and so I get closer and further from the mic.

But this mic is really vibrating toward and away from me.

So

this one time it's not entirely my fault.

Yeah, we're not familiar with these mics.

The mic is on a pendulum.

Yeah, it does feel like it is shaking a little bit, but that's fine.

You know, maybe it'll add a little vibrato.

Maybe the audience will appreciate that.

They do love vibrato.

But you know what the U.S.

Court of Appeals for the Federal Circuit on Friday does not necessarily love?

Yeah, tariffs.

They're still illegal, as you laid out.

Yeah.

They're staying in place, though.

Right.

We live in a weird world where, like,

the government does a lot of stuff that's illegal, and the courts are like, well, this is illegal, but we can't stop you.

So I don't know.

It's very depressing.

The The district court a while back ruled that the broad Trump tariffs are illegal because, as I've written a number of times, the U.S.

Constitution is really clear that Congress has the power to impose taxes.

For sure.

The president doesn't.

That's like a really core part of the Constitution.

And so when the President announces sweeping new taxes without any legislation,

it does seem very illegal.

And the court found it illegal.

And the government appealed.

And this week, the Appeals Court, the Court for the Federal Circuit, agreed that those tariffs remain illegal.

And the way it works is that the government's position is that there's a statute called AIPA, the International Emergency Economic Powers Act.

Yes, nailed it.

Got it.

And AIPA gives the president some powers to deal with unusual and extraordinary threats from abroad by doing any number of things, including regulate importation.

And

the government argued, well, if the president can regulate importation, that means he can impose tariffs on imports.

And because trade deficits are an emergency, he can declare an emergency and impose tariffs to stop trade deficits.

And there are a lot of holes in that argument.

One of which is that, as the appeals court wrote, saying that you can regulate importation does not actually mean that you can impose taxes.

And as they point out, the SEC, the Securities and Exchange Commission, has the power to regulate financial market activity, but that doesn't give it the power to make up new taxes because that's part of financial markets.

Yeah.

Like the SEC has regulatory power, but not tax inventing power.

And so similarly here, the president doesn't have the power to invent new taxes, or so the appeals court held, but it also stayed its ruling because it's going to get appealed to the Supreme Court.

And nobody knows what will happen there.

Yeah.

I mean, President Trump did say this week that they're going to ask the Supreme Court for an expedited ruling, so we'll see there.

There's a pretty consistent situation where the president loses in lower courts because the lower courts follow precedent and say this is illegal.

And then he gets to the Supreme Court, and the Supreme Court is a more flexible view of precedents.

So they tend to let him do what he wants.

So we'll see.

We'll see.

Anyway, the scope here, this covers most of President Trump's tariffs.

There are some specific sections that he's used, which are a little bit more cumbersome.

Yeah, Congress has a long history of delegating tariff power to the president.

There are specific statutes doing that, saying, you know, for particular industries or for particular reasons, you you can impose tariffs.

And usually there's like an administrative process where they have to like go through some sort of review and fact-finding before imposing tariffs.

And so the Trump administration has done a little of that, and that stuff is fine.

But most of their tariffs,

what they call reciprocal tariffs, which are not reciprocal tariffs, but whatever.

Most of that is imposed with no kind of fact-finding or review based on IEPA.

And IEPA pretty clearly doesn't give them the power to impose tariffs.

Yeah.

Yeah.

So the tariffs are staying in place now.

We'll see what the Supreme Court does.

But it is fun to game plan what would happen if the majority of the tariffs had to be rolled back.

I mean, you think about where that would leave the U.S.

First of all, when it comes to negotiating trade deals, et cetera, obviously that would put the U.S.

in a worse position.

Sort of, right?

I mean, like, it depends on what you think is worse or better.

You don't need a stick.

To negotiate

free trade like we did, you know, a year ago.

I don't think that that's necessarily the goal of this administration.

That's not the goal of this administration.

If they're trying to pursue

their world.

If you're trying to pursue no free trade, then yeah, and by the way, like there's still some, you know, as you said, there's other statutes that give him some tariffing power.

And frankly, there's a lot of

possibility of going to Congress and asking for tariffs.

That's true.

Like it's a Republican-controlled Congress, and you could imagine Trump saying tariffs are good and getting Congress to fulfill its constitutional role of passing tariffs, right?

Yeah.

The problem that probably the Oval Office sees with all of that is that that it would just take more time.

It's not as easy as sending a truth social post.

Of course, of course.

Yeah.

That's the problem that the Oval Office sees with it.

Many people would say it's good to have a rule of law.

But anyway, whatever.

Anyway, we'll see what the Supreme Court does.

Yeah, there's a lot of stuff.

To me,

the interesting gaming out what would happen is

if they agree with the lower courts that the tariffs are illegal, does that make them refundable?

Because they're in place now.

The government is collecting tens of billions of dollars dollars a month from

lots of lots you know lots of boats coming in and thirty billion dollars in July actually and like what happens if those tariffs were all illegal do they have to pay the money back yeah that's a good question right it seems very hard and in fact I wrote about this on Thursday there are you can go to the prediction markets you can go to calcium polymarket and they give odds for the Supreme Court upholding the tariffs.

And those odds are like 50-50, which seems right, right?

It's quite awesome.

But the odds of the chances of the tariffs being refunded are lower than that.

They're lower than 50-50.

Because there's some sense that even if the tariffs are illegal, it's like kind of hard to unscramble that egg and just say, okay, going forward, no more tariffs, but like you don't have to refund them.

But if you do have to refund them.

To me, one of the really interesting questions is if you are an importer who paid tariffs and you somehow passed those tariffs along, right?

Like you charged your customers or you like didn't explicitly charge them, but you raised prices.

Like, do you have to refund them?

If you're like just a company that raised prices to consumers because of tariffs and then like you get all the tariffs back, like are consumers going to be mad?

Are you going to have to refund them the money?

It's like an interesting

downstream tariff effect is like, is hard to unscramble, even if you refund the actual tariffs.

Yeah.

I mean, you could say, I've already raised my prices.

I might have told just keep them here.

Oh, yeah.

Yeah.

Right.

Yeah.

Right.

It is interesting to think about some of that.

There was an interesting column from former New York Fed president Bill Dudley on the terminal sometime this week saying that, you know, if you do game plan out this scenario, the tariffs are illegal, et cetera, what does that mean for companies?

His view is that companies are going to be slower to pass on their cost increases if we do have this wildly swinging pendulum.

And what that means for the Federal Reserve is a fun thought exercise.

Is inflation transitory?

Once again, it seems like a difficult environment to make policy in, but probably not any more difficult than it is right now.

I was going to say there's a really distinct lack of clarity on tariffs, both in terms of their legality and in terms of what the negotiated rights will be.

Yeah.

And I was going to say that if the Supreme Court definitively rules that the AHIPA tariffs are illegal, then you get more clarity.

But that's not really true, right?

Because then they go back and use other statutes, and it's like

a longer, more drawn-out, more complicated process with further legal challenges.

And

I I talked myself out of that.

Sounds all pretty grim.

Yeah, it is pretty grim.

It's also grim just for the U.S.

government and the fiscal outlook.

Sort of.

Well, Scott Besson, Treasury Secretary Scott Besson, has projected that tariffs are supposed to bring in like $500 billion in a year in annual income.

They would have a hole there.

Yeah.

But like, the U.S.

fiscal outlook is a long-term outlook.

And

if you think, as most economists still seem to think, that tariffs are bad for the U.S.

economy, which is separate from the legality question.

But again, most economists think that, not Scott Besant, not Donald Trump, but most economists think that tariffs are not really helping economic growth.

If you think that, then

getting rid of the tariffs is good for fiscal sustainability, right?

Because in the long run,

fiscal sustainability is driven by the economy's capacity rather than the particular tax rate on

imports.

Aaron Ross Powell, just in terms of, though, bringing down the budget deficit, it does hurt there.

This was part of the pillars that U.S.

Treasury Secretary Scott Besson put in place.

Yeah.

Plans have been built around this revenue coming in to the government's coffers and taking that out would, I don't know.

Oh, yeah.

No, it's like super disruptive.

Yeah.

Right.

Like on the one hand, you could imagine a court, somewhat unconstrained by precedent and law,

saying it would be so disruptive to the government to take away this $30 billion a month revenue source that we're just going to bend over backwards not to do it.

On the other hand, it really is what the Constitution says, is that Congress has to impose taxes, right?

It's a really important part of the constitutional structure.

And it's like, you know, there's hundreds of years of history of like kings and executives wanting to raise taxes, and the only constraint on them being the legislature's power to raise taxes.

And so for the Supreme Court to say, ah, it's like too important for the president to be able to impose whatever taxes he wants is like really a shocking change in the constitutional structure.

But here we are.

Maybe the government can make up what they're not making in tariff revenue from their stakes in U.S.

companies.

Maybe that's the future we're rattling towards.

How did this get more depressing?

It is true that the Trump administration has found many new revenue sources, like owning 10% of Intel.

This is a real tangent, but I do think that one model that people have is that the U.S.

government has a 20% stake in every company because it taxes 20% of their earnings.

If you take an additional 10% stake in Intel, then that's kind of an additional tax, but whatever.

That's not really a tax.

It's fine.

But right.

I mean, the other

truly novel revenue source that the Trump administration has found, not for the government, but for Trump personally, is crypto shenanigans.

And like, you could probably make $30 billion a month selling U.S.

government crypto.

That's true.

I thought you were going to bring up the revenue share that has been floated with AMD and NVIDIA.

But that's, you know,

the crypto shenanigans is probably a much more sure thing.

I don't think that the Trump family is giving that to me.

When you look at like Intel and AMD and NVIDIA, it's like, how long have we talked about this on the podcast?

I don't write about it.

It's not that fun.

But like, these are all like voluntary taxes.

They're like voluntary taxes, right?

They're like, Donald Trump goes to NVIDIA and is like, hey, you want to give me 10% of your revenue?

No.

And they're like,

yes.

No.

Well, no, they, I mean, right.

Like, they're thinking, no, I don't want to give you 10% of my revenue, but, like,

you know, there's like a certain like nice chip company here, shame if anything were to happen to it, right?

Like, if you replace the tariffs with voluntary tariffs, like, how much revenue would you collect?

Like, not none.

Yeah.

If it's like voluntary, but like, nudge-nudge.

I don't know enough about AMD's situation to opine on it too confidently, but at least NVIDIA, Bloomberg had an interview with NVIDIA CFO last week, and she said something along the lines of, I haven't seen anything.

I haven't signed anything.

We're not giving up 15% of our Chinese chip revenue yet.

So,

I might be editorializing.

I don't know if she said it with that much passion.

We have

shame if anything were to happen to that.

Chinese chip revenue.

Well, I don't know, even if Chinese companies are going to be able to continue buying it.

Apparently, the Chinese government reportedly has encouraged companies not to buy American chips.

But anyway, shall we move swiftly along

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What tickles your fancy to talk about second this week?

My old haunts, Goldman.

Goldman.

I am excited to talk about this.

This is a weird one.

Yeah.

Sort of.

It's not that weird.

It's like,

it's weird in detail, but like effectively, every week on this podcast, we talk about some sort of deal where a big traditional asset manager is buying like an alternative asset manager, like a private market manager.

Or just partnering.

Or a private manager is buying a traditional manager, or a private manager and a traditional manager are partnering to do like an ETF or whatever.

And this week, it is Goldman partnering with T-Row Price.

And no one's buying each other.

Goldman's buying a little T-Row.

Yeah.

They're buying a billion dollars of T-Row

in the open market.

To be clear, the weird part, at least from where I'm sitting, is that Goldman will make a series of open market purchases to amass up to 3.5% of T-Row's stock.

That's as much as $1 billion.

That would make them, I think, one of the top five biggest shareholders in T-Row.

Why do they have to go through all that?

Why can't they just do a little JV, a partnership?

I don't know.

We are in a moment where there's a lot of momentum behind alts managers by alts managers.

I mean, you know, KKR, Apollo, you know, Blackstone, but also, and I think we've talked about this on the pod and I've certainly written about it.

Like, Goldman is very much, very much wants to be an alts manager.

Oh, we've talked about it.

And, you know, look, it is, right?

Like, it runs alternative assets,

you know, it manages its assets.

Well, didn't it use that to justify the pay packages for David Solman and John Waldron?

Yeah.

Like, Goldman is an investment bank, and it's also, it manages a lot of money for institutions that it invests in alternative assets.

And it's been a big alts business for a long time.

So it's not quite the same as KKR, but it's, you know, it's like they think that they can.

Well, I was going to ask, who is the alts manager in this scenario?

That's Goldman.

And it's funny, right?

Because like Ti-Row actually owns a private credit manager, O'Kill.

But if you read the press release on this deal, it's like, it kind of says, we're bringing Goldman's alts assets to T-Row's retail and retirement distribution.

And then O'Kill is like, we're here too.

Is I think how I read that.

But right, so Goldman is, I think, the alts manager here.

And that they do, you know, they raise a lot of money to invest in alts.

And, you know, know they do that from institutions and they do that from their private wealth clients but the the story in private credit and private equity these days is like trying to find

like true retail distribution trying to sell through financial advisors and in particular trying to sell to 401k plans yeah and t-ro has a lot of 401k business and like they do target dated funds for 401ks right and if you can put private assets into target data funds like that's a no-brainer right it's like it's exactly the liquidity profile you want And you're selling alts assets to your giant pool of retirement savers.

Yeah.

I guess Tiro is like very much classic.

Like, okay, well, they have some alts, but like they're very much a classic traditional long-only actively managed mutual fund manager.

And that is a tough business, right?

I mean, the Bloomberg article about this tie-out mentions that Tiro has had like $200 billion of client outflows.

Yeah.

Their stock is down 50% from where it was in 2021.

It's a tough business to be in.

And you know, everyone in that business is like looking around and being like, how can we get into Privates?

Because the fees are better.

Yeah.

Well, that's the thing.

I guess I'm surprised that this search led them to T-Row, which isn't entirely fair.

The Bloomberg News article does also point out that two-thirds of T-Row's assets are in retirement funds.

They're one of the largest firms in that part of the market.

Everyone in Privates wants retail distribution.

This gets back to your question about why do they have to buy 3.5%.

Yeah.

Is it just because the stock was on sale, to your point?

point?

I think it's the stock was on sale, but I think a lot of it is like, if you're T-Row, you know, you're like, every alts manager wants to distribute through every 401k channel.

And we want a real partnership with Goldman rather than just like

letting them stuff their funds into our clients, right?

And what does a real partnership mean?

Well, I think it means like giving Goldman some

incentive to have, you know, some upside in T-Row's stock so that Goldman has some incentive incentive to actually skin in the game.

Yeah, actually,

not just use Tiro as a dumping ground for its products, but try to be a real partnership.

So I think that's like, it makes sense to say you should buy some stock.

Yeah.

It is interesting because I mean, you think about some of the other partnerships that we've talked about on the show.

You have Vanguard and Wellington with Blackstone.

That's just partnering on funds.

State Street has partnered with Apollo.

Vanguard and State Street are not in the same position as the traditional active management firms.

Wellington?

Wellington.

Fair, fair, fair, fair.

Yeah.

Come on, man.

I was saying Vanguard and State Street.

Yeah, yeah.

Yeah, yeah.

But right.

I mean, like, I think of it as, like, the investment world now is, like, focused on alts and index funds.

And, like, if you're a traditional active manager, it's really hard.

And so you can get into indexing, but that's, like, you know, that's tough business to get into.

Yeah.

And so you get into alts.

Yeah.

I'm interested to see how this turns out.

To see this sort of transaction, too, caught my my eye.

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Deal contingent hedges.

Are we only talking about currency hedges here?

You can do deal contingent rates hedges.

Okay.

Yeah.

Spiritually similar.

It's possible that someone somewhere has done a deal contingent oil hedge.

Yeah,

maybe.

Yeah.

But no, I mean, it's mostly currency and occasionally rates, right?

Like you're a company, you're buying another company.

I'm a business man.

You're buying another company.

You sign a deal to buy the company and it's closing in like six months.

And if it's in a foreign country, you might have to get a lot of foreign currency and you want to lock in your currency rates a day.

But if the deal doesn't close, you don't want to have liability for that currency.

Similarly, like you might lock in your borrowing costs today, right?

Like you might hedge with treasuries to hedge your, you know, interest rates in six months.

But if the deal doesn't close, you don't need that interest rate hedge anymore.

And so there's a longtime banking product of deal contingent hedges where you go to your investment bank that did the merger for you and you say, I would like to hedge my currency risk or my rates risk or whatever, but I want to lock in my rate today.

And if the deal doesn't close, I want to tear up the contract and not owe you anything, right?

And for some some price, the bank will do that.

And historically, this was like what banks did, right?

Banks had big balance sheets and they were good at pricing complicated risks and they were in a client service business.

So, you know, as their merger client, if you wanted that sort of hedge, that was a nice thing for them to sell you, right?

Help them win merger business.

And it's also very risky because it's easy to do a foreign currency hedge, right?

Like you

just buy the right delta in the spotlight.

I could do that right now.

Right.

But like a foreign currency hedge that is torn up when a deal falls apart is very difficult to hedge.

And banks sometimes get it wrong or get surprised by deals falling apart and lose $100 million on a deal.

And so there have been a series of IFR articles, like International Financing Review articles about how hedge funds are getting into the deal contention hedge business,

where

there's an article last year that I wrote about where...

Basically, a number of banks will do these deals with their clients.

Like they'll do a deal with a corporate client saying, well, hedge your foreign currency risk and tear it up if the deal falls apart.

And then they'll go to a big hedge fund and buy the offsetting trade.

And the hedge fund will price the merger risk and give them the trade.

And the bank will collect a little fee for setting up the deal, but the hedge fund will take the risk.

Right.

And I thought of this as like an interesting story about how like banks don't have the risk appetite and balance sheet that they used to.

And like the big hedge funds are becoming that.

They're becoming the

like

source of risk capital.

But then this last month, there was an IFR article about how the hedge funds are taking the next logical step and just going directly to the clients and saying, hey, we'll do the hedge for you.

You don't need to go to your bank at all.

Yeah.

One thing that's interesting, you know, when I was a banker, like I thought of like bankers as covering companies, large corporates related to deals.

But increasingly,

the main client of investment banking is private equity, right?

Like a lot of deals are done by private equity.

And so particularly deal contention hedges, it's a lot of private equity firms saying, we're going to buy this foreign company.

The deal is going to close in six to nine months.

We want to hedge our currency arrest today.

And we're interested in structure.

So we're happy to do a deal contingent hedge.

And the good and bad thing with private equity firms as a client for a bank is like, there's like 12 of them instead of thousands.

And so if you're a hedge fund and banks are constantly coming to you to do deal contingent hedges, And they're all for like three private equity firms, you're like, why don't I just call those three private equity firms myself?

Why do I need the bank at all?

Right.

like if banks have thousands of corporate clients like their client relationships are important and hard to replicate right a hedge fund is not going to get into that business but if they have like 12 private equity clients you can do that you can cover those 12.

my first thought reading this was wouldn't it be inefficient to you know try to take a guess of which of the private equity clients are bound to do cross-border deal but putting it like that i know right because like they've done the deals right like yeah like if you do a deal contingent hedge like regardless of whether the bank tells you who's on the other side of it, like, it's contingent on a particular merger, so you can tell who's doing the merger, right?

Yeah.

And if you do three deals for one private equity firm, you're like, hey,

I should get to know that.

Yeah.

So I understand

I can put myself in the shoes of the banks being upset about this.

I can put myself in the shoes of the hedge funds who are doing this.

But I think it's also interesting to think about the private equity firms.

And the article does ask the question: should it really matter to the client who is the back end?

And it raises good points that you could get worried about the possibility of leaks surrounding M ⁇ A.

There's potential conflicts of interest here.

It'd be interesting to hear from the perspective of the private equity clients how they feel about this.

Yeah, I always assume you could do these hedges the day after you sign the deal rather than the day before.

Maybe that's wrong.

But if you do it the day after, you don't have to care about leaks.

Yeah, I guess you'd worry about credit.

The nice thing of doing this trade with a big bank is you're facing the big bank and they probably won't default.

Whereas if you're facing a hedge fund, you have to have some counterparty.

So some diligence on how

the hedge fund is.

But I don't know.

If I were a big private equity firm, I would find it cool to like diversify my pool of counterparties and do some deals with DHI or whatever instead of with the bank.

It seems fun.

Well, that's actually all I have to say.

I guess there's more deals happening, so this will I always thought of this like a really niche, like unusual business, and now it's like a thing.

It's weird.

But yeah, there's more deals happening.

Yeah.

Sort of.

There's no more private equity actual acquisitions.

That's true.

Though apparently August was the best month for dealmaking since 2021 or something along those lines.

Yeah.

Good news.

Good news.

Yeah.

We're back everyone.

We're back.

And that was the Money Stuff Podcast.

I'm Matt Livian.

And I'm Katie Greifeld.

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

And you can find me on Bloomberg TV every day on the close between 3 and 5 p.m.

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The Money Stuff Podcast is produced by Anna Mazarakis and Moses Hondong.

And special thanks this week to Julia Press.

Our theme music was composed by Blake Maples, and Sage Bauman is Bloomberg's head of podcasts.

Thanks for listening to the Money Stuff Podcast.

We'll be back next week with more stuff.

How many vendors does it take to meet all your organization's food needs?

Just one.

EasyCater, the workplace food platform that lets teams order from a huge variety of restaurants, over 100,000 nationwide, all through a single vendor.

In addition to all that variety, Easy also gives you full visibility of your organization's food spend with invoicing, centralized reporting, and seamless integration with expense management systems, all on one platform.

EasyCater, your business tool for food.

To learn more, visit easycater.com slash podcast.

Hiscock Small Business Insurance knows there is no business like your business.

Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection.

Find flexible coverage that adapts to the needs of your small business with a fast, easy online quote at Hiscox.com.

That's HISCOX.com.

There's no business like small business.

Hiscocks Small Business Insurance.

Fall is the time to plan ahead and ensure your brand shows up in ways that matter.

4Imprint offers promotional products built for real business impact.

From premium apparel and drinkwear to bags and high-tech, you'll find thousands of options to fit your strategy and budget with quality options at every price point.

And with their 360-degree guarantee, you can be 4imprint certain your order will be done right on time.

Explore more at 4imprint.com.

For imprint for certain.