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I got a haircut.

That was actually that's the first thing I said to you, though, after I told you that, I didn't want you to watch me yogurt.

But in other news, you got a neck tattoo.

Yeah, I got a neck tattoo last Friday.

It's a Batman.

Yeah, it's the bat signal, the bat signal.

Yeah, it's a bat tat on my neck.

It's my first tattoo.

A little intense to get it on the neck.

You can't realize this tattoo, like having only one tattoo and having apian neck tattoo is pretty good.

The tattoo artist asked me that as well.

The thing is, I got the tattoo for my late pony Batman.

I'd had him since I was eleven.

He passed away in May, the day before my birthday.

Also intense.

I knew I was going to get this tattoo when he did leave us.

So my answer to that question is when my cat does get another tattoo.

I wasn't expecting my TV producers to be as into it as they were.

We have this thing called the.

Tattoo is news, I know, but I thought.

That, you know, we are a buttoned up financial news network.

I thought that they wouldn't be thrilled about it, but they really wanted to do an on air reveal, so we did.

We had a man with a steady cam, which is just a handheld camera essentially, come in and zoom in on it at one point during one day show.

Thankfully, it wasn't scabbing yet, so it still looked kind of good.

It's in like a little yeah.

Yeah, I think it's healing nicely.

It was really painful.

Are you going to get a tattoo?

No?

No, no, I've missed.

I don't think you've had.

Had a tattoott man.

I was kind of thinking about that that my first tattoo was at thirty two years old.

It's still I don't know.

I feel like age, I'm too old for tattoo.

But I feel like if you want a tattoo, you probably get it in your teens twenties.

No, I feel like a lot of people enter a new phase of life from their thirties and become tattoo people.

Yeah.

Maybe yes.

I saw it on Instagram on Friday and I said to my wife, Oh, Katie got a neck tattoo, and I was like, what, I'm like, Katy is not just a financial news anchor, She's also an emo girl.

Yeah.

At heart, I'm just trying to get back to my roots.

You know.

Hello, and welcome to the Money Stuff Podcast.

You're a 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.

Do you know what a lu booo is?

I do?

Are there impossible to escape?

Did you know what a little boo boo was?

Prior to this week?

I'm definitely aware of the booboos as an important cultural force.

Yeah, do I.

Know what they are?

Even now?

I couldn't pick them out of a lineup.

I really hate them.

Sure, there's a print out of a little Boo Boo between us on the table right now.

And I like free creatures that they're freaky.

They're freaky little things.

Now you can trade derivatives of them.

Kind of them?

Yes, absolutely, yeah, you can trade binary options on the boo boos.

It's so good.

Yeah, through enthusiasm.

I really I don't get it.

This is one of the first cultural phenomenons where I just I feel like I can't get into the headspace to pay sure.

Yeah, this is like the four hundredth for me.

Really, yeah, that's true.

See I'm still getting neck tattoos.

This is my limit though, so Calshi and stock x our partner, so that there's going to be event contracts tied to many things.

Ye, here's the Boo Boo's a third category of h and also some trading cards.

Trading cards.

Yes, I don't understand this because I have my mind dropped around what stock x does.

And you know, there's other alternative asset market places where you know, you can buy shares of collectible items.

I don't know how you turn that into an events contract, right, this.

Is what I've been writing about.

It's a weird mechanism.

Yeah.

What you can do is you can buy a yes no contract that pays off a dollar if, like, you know, the price of some box of the Boo Boos is over one hundred and twenty dollars and it pays off zero dollars if the price of that box of the booos is less than one hundred you know, like you can turn any continuous variable into a binary.

Right.

You can say, if the price of Tesla is above four hundred dollars, then you get a dollar, and if it's below four hundred dollars, you don't get a dollar.

Right.

But it's not the most natural no product.

It seems not fun, but that's.

It's lot fun.

But I don't know, it's like kind of interesting, right.

I don't know the reason for this, but I speculated on some reasons, the simplest of which is, like, CALSHI is an event contract marketplace, right.

I think that's what it does.

It lets your bet on whether or not some event will happen.

And if that's your lens, then like you could turn anything in the world into a yes no event, Right, And if you get money for trading, then you want to turn everything in the world into a yes no event.

And so you sort of look around and say what products can we trade?

And it's like, well sneakers, I was like, well sneakers are not really yes no events, but if you have to, you can make them into yes no events and you can trade them.

You know, convolute the question in such a way that it becomes and it's not like.

A crazy convolution, but it's like a little crazy it is.

Yeah, it's a little crazy.

Like I was looking at their charts, you know, and like they have like prices some sneaker and like there's a chart and the chart is like four different lines for the probabilities of different like price levels, because you want the chart to be just like the price.

Right, there's an intuitive chart of a sneaker price, and they don't show that into ay, so it's a strange mechanism.

Maybe this is just like a publicity stunt, but I've enjoyed writing about it because like one thing that is going on here is that there is a belief, possibly a money motivated belief among people like who are in prediction markets and who work at like big exchanges and who are partnering with prediction markets that this is like the path to be in everything exchange, which is like the term that coinbase has used, like this is the way that you can sort of suck everything in the world into financial markets.

And one point I've been making this wee because it's like kind of a rickety way.

Why does it have to be a prediction market like this?

But it is something that people are pretty enthusiastic about, because at the end of the day, if you're running a financial market, like one big category of what you're doing is offering people more opportunities to bet, let's say, on more things.

And this is the most general purpose way that people have found to let people bet on things.

Yeah.

I get the betting argument.

People like to bet, and.

I don't know why they would run a bet on like the yesterday.

That's the thing.

It has to be fun, right, and it doesn't seem as fun versus like I'm going to buy shares of a meme stock and hope it goes to the moon versus I'm going to hope the price of the box of the La Boo Boos goes above this certain threshold.

Yeah.

I do wonder if this is like a baby step on the way to some more moonworthy financial market.

Yeah.

One thing I've written is that the essential thing here is that these are contracts with someone on either side of them, right, Like you're betting against someone else, and if you have a contract that can go to a million dollars, then the person on the either side of that has to put up collateral and could have to put up a million dollars of collateral.

Right, so you have like a really complicated and risky margining system if you're having bets that can go continuously as far as you want in either direction.

Yeah, Whereas like traditional prediction markets, the bets are like you get a dollar or you don't get a dollar.

So the collateral and the margining is a lot easier and the risk is a lot lower.

So these are like not super risky exchanges.

The exchange itself not a particular riskue proposition as compared to oh, say, certain crypto exchanges we've talked about.

And so going from that system to a system where the price can be whatever the price is is like a you know, risky and complicated set of decisions, but possibly something that is in the future if you want to be at everything exchange.

Yeah, I do wonder how this can be manipulated this, right, I mean events, contracts on.

You know.

The answer I think is very clearly that it can't be because go on, who is trading this.

The way to the way to manipulate this is like there's a contract on like the average price of some sneaker, and I go and buy a bunch of the sneaker to push out the average price, right, and then I win on my prediction market contract.

But I assume that however big the market for the sneaker is, it's probably not that big like treasury bounds.

However the market for the sneaker is, presumably the prediction market is like orders of magnitude smaller, because like, some people buy sneakers because they want to wear the sneakers weird, But like, how many people are going to want to buy the contract that's like, oh, for the sneaker, price will be about one hundred and twenty dollars.

So I think that it's going to be very hard to manipulate because it is, at this point, two days in or whatever, a very small derivative on top of a yeah, moderately larger market.

But in the long run, sure, Like you know, you have an event contract that is a binary, right, it pays zero or one, and it's on some underlying thing.

And the event contract gets big enough and it's like trading a penny below the threshold, You'll buy some of the underlying thing to push it up about the threshold, and you make a lot of money on the contract.

It's like very easy to manipulate in concept.

It's probably very hard to manipulate right now in reality, but like, you know, give it time, get more things.

I get it sea legs first.

And the other thing is, you know, I think about this all the time.

Like the CFTC, the US Commodity's Futures Trading Commission, regulates commodities futures.

It doesn't like really regulate the market for wheat, you know, but it does regulate, like, you can't manipulate the wheat market if it's going to affect commodity futures.

So the CFTC has some like anti manipulation powers.

And if you put everything onto prediction markets, then everything becomes a commodity.

And like the CFTC has to think about like were you buying those sneakers to push out the price of sneaker futures?

And then it's like, yeah, it's going to be interesting to see how just the prediction market space matures, because this I think is firmly silly season and I think we can put it in that bucket.

Yeah.

I think there are two paths for it maturing.

Yeah.

One is like what everyone says, which is like it's somehow like becomes a market for everything, and it's like becomes like the way that companies and like real people think about having risk and like predicting the future and like understanding probabilities and potentialities to the future.

And then the other way is it's like a giant legalized sports book, right, yeah, and that's kind of where my money is.

But who knows, who knows?

Well, I was speaking to the CEO of CBO sure last week.

Probably not in the legal live sports book.

No, no, So Cibo doesn't have their own prediction markets outfit yet, but they're going to roll something twenty five minutes.

Well, they're going to roll it out in the next few months, which is interesting because there's kind of a land grab going on right now.

I have to imagine that the exchanges think about this all the time.

They should've been.

During commodity futures for years, and now it's like it turns out they were running a sports book and they didn't know it.

Right.

No sports, Cibo specifically is not going into sports at least, that's that's what the CEO said mid November twenty five.

So we have the receipts and like that.

Makes sense because like if you're like Calshier polymarket and you're like a little hobbyist prediction site.

And then like sports is it's like enormous gusher of money.

And then you go into sports right if you're seabow, like you know, if you have like treasury, Yeah, like you know, there's like more money in sports books than there is is in like traditional prediction markets.

There's more money in real financial markets than there's in sports books.

Yeah, exactly.

So they're focusing on economic and financial prediction markets for the next forty five minutes.

Synergies there with interest rates and whatnot.

Yeah, for sure.

Booze from La Boo boos to owls, owls the blue cones.

One interesting week.

We've said of this before, but like you yes, your first love besides your horse is ETFs.

You love an ETF.

So we've talked about private credit.

We've talked a lot about retel private credit and like ETFs for private credit, which is like a category that kind of sort of.

Exists, trying to make it make trying to make it thing.

And whenever we talk about that, I always say, there is a retail exchange traded fund category for private credit, and it is called a BDC or business development company, which is a terrible name because it makes it sound like it's a business development company, and that is not what it is.

I don't know what a business development company would be, but it sounds like a company that develops businesses, right, But in fact, a BDC is just a private credit fund.

It's just a pot into which a manager like Blue Owl puts private credit investments.

And it's publicly traded.

It's totally traded, and so investors can buy shares a traded BDC.

Not all some are like private like not traded, yes, but like a listed BDC is just a stock on the stock market.

You can buy shares.

Anyone can buy shares.

You can sell shares in the market.

It's a little bit like you need tof with one really important distinction.

Go on.

You can't redeem like you can sell your shares in the market.

And so what that means is that the price of the shares is the price of the shares.

There's no mechanism to make sure that the price of the shares is in line with NAV, whereas like an ETF, like you know, if like the shares are trading below NAV, then like you buy some shares and you pop them out of you know, pop the assets out of the fund, and you get stuff at a Navy.

In authorized participant.

Whatever.

With BDC's that's not necessarily the case, and it's therefore not actually the case for whatever reason.

And I feel like we got another lesson in that this week with Blue Owl having to call off the merger between one of its publicly listed BDCs and then a private fund.

Yeah.

So it has a thing called OBDC, which is like the Blue Al Business Development Company, which is a publicly traded PDC, and it has a thing called OBDC two, which is a private BDC.

So private BDC is like they sell it to you know, investors.

It doesn't trade on the market.

And so if you're an investor in OBDC two, the private one, you can't get your money back by just selling on the stock market.

And so the way it works is that they have a redemption mechanism where like every quarter they'll buy up to a certain amount of the shares back if you want to, right, so they'll offer to buy shares back and you can tender or not.

And in recent months there's been a little tension.

Yes, they have bought back anyone's shares who's wanted to sell.

But there's like been a little bit more redemptions than they'd like, and there's like, you know, a widespread sense that if it continued at that pace, they would eventually get redemptions speak, which they're allowed to do, right, Like, they can sort of buy back as much as they want.

And so to get out ahead of that, they announced that they were going to merge these two funds.

So if you had shares of ABC two, the private company, you'd get shares of OBDC, the public company, and then you could sell those whenever you wanted, no problem, you don't have to redeem anymore.

And that caused some unhappiness because OBDC won the publicly traded one happens to traded a about a twenty percent discount and net asset value, and so instead of being able to get back one hundred cents on the dollar, you can get back eighty cents on the dollar if you sell your public shares.

No one wanted that, Yeah, so they ultimately called off the merger.

Yeah.

Specifically, when it comes to redemptions.

In the third quarter, they approved about sixty million dollars worth that was already exceeding their pre set limit.

Here the discount they've been trying to address that, they've been doing, you know, a bunch of share repurchases.

They have a two hundred million dollar program.

But I could see how that would cause some indigestion.

Yeah, yeah, right, yeah, So now they're evaluating how to go forward.

Yeah, it's hard because like the publicly traded product seems kind of like a better product for the manager and getting people out of the private product into the public product.

The public product, for the manager's perspective is permanent capital, right, Like they never have to redeem any of it.

Yeah, they can if they want to, and they have been right, they've been doing buybacks, which you can think of a buyback as like a way to address the discount and make shareholders happy, or you can think of it as like just an opportunistic trade where like they can buy one hundred cents worth of stuff at eighty cents on the dollar.

Right.

But with the private company, it's like people complaining when they don't get liquidity.

You have asking for liquidity, so you have to pay up money when you don't necessarily want to.

It's a less good product, but it is hard.

To get people out when the public product trades at a discount.

Yeah, The other question that one might ask is why does the public product trade at a discount?

And some of the answer for that is, like everything trades at a discount, like clothes on funds trading at a discount, and like the traditional reason for that is, like you capitalize future fees in the discount, and so like you know, yeah, you'd rather own one hundred cents worth of loans than one hundred cents of worth of loans plus like the fees you have to pay Blue Howel for the rest of time, but in November of twenty twenty five.

The other reason that there might be a discount is that there are some people who believe you may not believe this, for some people who believe that some private credit loans aren't worth as much as private credit managers think they're.

Yeah, that seems to be a more and more pervasive view.

It's a you you Jamie Diamond said some word about cockroaches, et.

Cetera, et cetera, and so Jeffrey Gunlock.

Everyone not everyone.

I shouldn't say that.

Mark Lipschels, Yeah, this is not like necessarily correct, but it is a you that people have.

And so one reason that a publicly traded pot of private credit loans might trade at eighty cents on the dollar is that some of the people trading it don't really believe that the pot of loans is worth the dollar.

Yeah, and so if that's the case, then, like one, this merger is awkward.

But too, the awkwardness around this merger calls awkward attention to people's worries about valuation.

Yeah, I mean you can also see this just in shares of blue Owl Proper, which are down like forty something percent this year.

They're at their lowest since twenty twenty three.

A lot of that decline happened before we got into any drama with the fund merger.

Yeah, it's like a little you know, blue Owl as a management company, Right, you don't get a pure sense of like the valuation of the portfolio, but.

People viewed as approximy I understand.

Right, the price of blue Owl shares tells you something about what people think about the future cash flows of the private credit business.

The price of OBDC shares tells you what people think about what the current loans are currently worth.

Right, And like there's slightly different.

Questions, slightly different.

Right.

The price of the Blue Owl shares going down suggests that people think that the private credit party is over coming to an end, not as good as it used to be.

That right, Yeah, the price of the business developed company is possibly suggests cockroaches.

Yeah.

Possibly.

Well, it's going to be interesting to see what happens here.

According to Bloomberg News, they have until April to find a solution or will consider liquidating or dissolving the vehicle.

According to filings, typically there's you know, some wiggle room around those deadlines.

I will say pudating is like not a terrible outcome for the childers because it's like, then you get one hundred cents on the dollar.

Yeah, assuming she's the loans one.

Hundred and something better than eighty for sure.

Yeah.

Probably there's an incredible brain controversy.

Let's say about Charlie.

Javis another one.

So, she was the founder and c of a company called Frank that like helped students fill out financial informs basically, and she sold it to JP Morgan for one hundred and seventy million dollars.

And the allegations are that she sold it to them on the basis of like having millions of devoted customers.

And then it turned out that all of the customer email addresses and her database were fake, and they sent out, you know, like JP Morgan is not really in the business of providing financialate advice, Like JP Morgan bought Frank to get like access to this like devoted young customer base, and then they sent out an email to all of Frank's customers being like, hey, sign up for JP Morgan credit card or whatever, and like all the emails bounced in there like wait a minute, and so they sued her for fraud and then ultimately got referred to prosecutors and she was arrested in charged with fraud and tried and convicted and sentenced to seven years in person.

And she's now I'm trying to find the title that JP Morgan gave her because it was pretty good.

But anyway, go on.

She was like, yeah, they bought Frank and she was like made a managing director and head of Frank or whatever, and it was.

Like head of students something.

Yeah, and then like they'd send out this email and it all bounced and they're like wait a minute, and they put her on leave and fired her and so forth.

But because she was a Japy Morgan employee and because she had a merger agreement where she's old Frank, they had agreed to indemnify her for legal expenses and pay her defense costs and and legal cases including it turns out and they litigated this but they lost.

They were on the hook to pay for her criminal defense, which is like, seems a little weird that, like, she defrauded them allegedly and now convictedly and they had to pay for her legal defense.

But it's not that weird, Like that's actually like a thing that happens somewhat regularly is that you know, you agree to and then the fire your employees, even against charges that they stole from you.

But what has also happened is that she has racked up astonishing, amazing, incredible legal bills, to the point that people keep saying the legal bills might approach the amount the one hundred and seventy million dollars that she defrauded from David Morgan.

The legal bills are now nine digits, according.

To The Wall Street Journal, between her and her co executive's legal defense to already cost more than one hundred and forty two million dollars, So they're pretty dang close incredible, Yeah, clean, just kidding.

If the government to send you to prison and someone else will pay for your lawyers, you might as well hire all of the best lawyers and leave no stone unturned in your defense, which I think is what happened.

Like she hired really fancy lawyers, and they put in a lot of hours and they reviewed a lot of documents, and like from where I set, that doesn't seem all that useful, Like, you know, they she had a lot of emails being like, let's do fraud, right, That's not true.

There is there is more of a defense of her actions that I'm whatever.

I mean, like, it's pretty bad fraud, but if it's not your money, you might as well spend as much as you can to take any shot of kind of prism.

But the other thing is that and this is like at the Times, Ron Lever wrote about this last week, like JP Morgan is trying to claw back some of this money and like stop paying for it.

And one thing they're accusing her is like you know, enormous wasteful, unconscionable spending on legal bulls.

But The other thing is they're like, she spent money on salulate butter.

Yeah, I'd never heard of it.

Okay, I'm interested.

And I don't exactly know why JP Morgan, in paying her legal bills, would have paid her salulated better bills.

But I have a guess which I read about, which is that law firms will serve you lunch.

Like you know, I used to work at a law firm and like, so I once worked on a deal where like we had a client and like their negotiating meurger with some other client, and the other client had another law firm and we were meeting at that other law firm's offices, and our client was like, let's go to Walktell's offices.

They have better food.

And so we went to our offices, and we had better food, and it's much nicer to be at our offices, Like you have like a sort of negotiating advantage when it's at your office, right, And I was like, yeah, that's so nice.

We got a real advantage by having better food.

And we didn't cook the food, you know, we ordered in, but like we ordered in nice food.

Like, on the one hand, it's nice that we're doing this nice thing for the client, but we're billing it to the client, like the client pays for all of this eventually, And so there's a lot of stuff like that, where like, if you're a client and you're at the law firm and you're paying the law firm an enormous bill, and you ask the law firm to do anything at all for you, like buy you a change of clothes because you've been there overnight, really anything, they'll just do it for you, but then they'll put it on your bill, right, Yeah, And so I think that one thing that might be happening here is that Jamie Wagen is not only paying the law firms bills.

They're paying the law firms expenses, and the law firm's expenses could pay some stuff for Charlie Jovis.

Yeah.

Well, according to the Wall Street Journal, lawyers were billing for twenty hours of work in a single day.

Sure, so maybe there were day shift and night shift lawyers working around the clock.

No, that's that's no, that's individual.

That's the same I've worked at a law firm.

Yeah, that's awesome.

Luxury hotel of grades, fine, the cellulite butter.

Again, I'm very interested in that.

But we should probably say that.

A spokesperson for Charlie Avis says that Charlie says she has nothing to do with that, and it's a ridiculous allegation.

No, it's not obvious that they could have bought the cell that had better for themselves.

That's like you're on a work trip.

You're like, yeah, it's very it.

You got it, Like you build enough hours, you work enough hours.

You're like, I'm going to expense everything on this work trip.

It is very heteronormative that we assumed it was for.

Charlie Well, right, because like JP Morgan is sort of accusing her of wasting their money.

Yeah, but it could have been the law.

The law lawyers, right, the lawyers brack up whatever experences they rack angels.

Yeah, this is amazing And I didn't fully appreciate that.

I would have just thought she's very expensive lawyers.

But I'm glad that so many different news outlets have tackled this.

Do you think that JP Morgan is going to be able to stop paying for her legal defense?

Maybe?

I don't know.

When does it start to impact their earnings?

Like when do we see analysts ask.

Questions about this million dollar appeal?

Someone asked Jamie Diamond next earnings call.

Yeah, it's true, it's true, it's true.

I think sometimes about like the level of like mistake that you have to make it a bank to be like asked about on the earning call, and like to be fair, the one hundred and seventy five million dollar acquisition of Frank definitely got raised on some calls, right, Like Jamie Diamond has addressed this, I think more than once.

Yeah, with like analysts and reporters, people be like, yeah, could you do such bad due diligence and spent one hundred and sef you have a million dollars in this company that you know just have fay Gmail addresses.

But now we're getting to that level, getting to be a double dime.

Christ had Charlie Javis is exactly my age.

She was born in March of nineteen ninety three.

She said, so much, what have I done?

God?

What a whirlwind that must have been.

Yeah, and by the time she gets out of prison, when she eventually goes, I mean she'll still be a relatively young woman.

Yeah, early forties, a lot to live for.

She could still get a tattoo.

And that was the Money Stuff podcast I'm Matt.

Levine and I'm Katie Greifeld.

You can find my work by subscribing to The Money Stuffnoletter on Bloomberg.

Dot com, and you can find me on Bloomberg TV every day on the close between three and five pm Eastern.

We'd love to hear from you.

You can send an email to Moneypod at Bloomberg dot net, ask us a question and we might answer it on the air.

You can also subscribe to our show wherever you're listening right now and leave us a review.

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The Money Stuff Podcast is produced by Anamazerakis and Moses ondem Our.

Theme music was composed by Blake Maples.

Amy Keen is our executive producer.

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.