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If you watched our video podcast, you saw us in the fancy studio of it.

Now we're in the other studio.

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

The women's order 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 studio.

It could it could be you think being soundproof is binary.

Oh, I would never think that.

I I mean, ideally it would be.

This room is not soundproofish.

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

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 Blomberg 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 it because one time it's not entirely my fault.

Yeah, we're not familiar with these mics.

Mike is on a pendulum.

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

You know, maybe the lad a little new vibrato.

Maybe the audience will appreciate that.

They do love vibrada.

But you know what, the US Court of Appeals for the Federal Circuit on Friday does not necessarily love.

They're still illegal, as you laid out.

Yeah, they're saying 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.

District Court a while back ruled that the broad Trump tariffs are illegal because, as I've written a number of times, the US Constitution is really clear that Congress has the power to impose taxes.

Doesn't like, that's like a really core part of the Constitution, And so when the president announces swooping new taxes without any legislation 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, like the government's position is that there's a statute called AEPA, the International Emergency Economic Powers Act, Yes, 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 Securitiest 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 yea.

And so similarly here, the president doesn't have the power to invent new taxes or so the appeals Court held, but it also state its ruling because it's kind of got appealed to the Supreme Court and nobody knows it'll happen there.

Yeah, I mean President Trump didcide 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 a precedent inside this is illegal, and then he gets the Supreme Court, and the Supreme Court is the more flexible you have precedents, so they tend to let him duty once.

So we'll see.

We'll see.

Anyway, the scope period 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 can impose tariffs, and usually there's like an administrative process where they have to like go through some sort of review in 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 though, you know what they call reciprocal tarffs tariffs, but whatever, most of that is opposed with no kind of fact finding.

A review based on AIPA and IEPA pretty clearly doesn't give them the power tom post tars.

Yeah.

Yeah, so the terrorists are saying 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 US, first all, when it comes to negotiating trade deals, et cetera.

Obviously, that would put the US in a worse position.

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

Stick if you can't a stick to.

Trade like we did, you know, a year.

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

If they're trying to pursue you know, the world.

You're trying to pursue no free trade.

And by the way, like there's still some you know, as you said, there's other statutes that I give him some tariffing and frankly there's you know, but those are the possibility of going to Congress and asking for tarifs, like it's a Republican controlled Congress and like you could imagine Trump saying tariffs are good and getting Congress to fulfill its constitutional role of passing terrors.

Yeah.

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

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

Posts of course, of course.

Yeah, that's the problem that the Oval Office is with it.

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

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

Yeah, there's a lot of stuff.

Like to me, like 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 you know they're in place now.

The government is collecting tens of billions of dollars a month from Yeah, lots, you know, lots of boats coming.

In and thirty billion dollars in July.

Actually, and like what happens if those tariffs are all illegal?

Do they have to pay them money back?

Yeah, that's a good question, right, it seems very hard.

And in fact I read about this on Thursday.

There are you can go to the prediction markets, you know, to Calshier polymarket, and they give odds for the Supreme Court upholding the tariffs, and then they're like fifty to fifty, which seems right, right Court, But the odds of the chans of the tariffs being refunded are lower than that.

They're lower than fifty to fifty because there's some sense that even if the tariffs are illegal, it's like kind of hard to unscramble that egg.

And yeah, just say okay, going forward, no more tariffs, but like you don't have to refund them, yeah, if you do have to refund them to be one of the really interesting questions is if you are an importer who paid tariffs and you somehow pass 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 the company that raised prices to consumers because of tariffs, and then like you got all the tariffs back, Like, are consumer is going to be mad?

Are you going to have to refund them the money?

It's like an interesting tariff effect is like it 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 as well just keep them here.

Oh yeah, yeah, yeah.

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 tariffstary, 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, 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 tireffs, both in terms of their legality and in terms of what the negotiated rights will be.

Yeah, and I was going to say that at the Supreme Court definitively rules that the AJEPA 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 it just takes a more drawn out, more complicated process with further legal challenges.

And yeah, yeah myself, out of that sounds it's all pretty grim.

Yeah, it is pretty grim.

It's also grim just for the US government and the fiscal outlook sort of well, Scott Vesson, Treasury Secretary Scott Besson has projected that tariffs are supposed to bring in like five hundred billion dollars in a year in annual income.

They would have a hole there.

Yeah, But like the US fiscal outlook is a long term outlook, and if you think as most economists still seem to think that tariffs are bad for the US economy, which is a separate from the legality question.

But again, most economists think that not Scott Bessant, 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 like in the long run, right, like fiscal sustainability is driven by like the economist's capacity rather than like the particular text rate on.

Yeah.

Just in terms of though bringing down the budget deficit, it does hurt there.

This was part of the pillars that US treasure Secretary Scott Best and put in place, Like, yeah, plants have been built around this revenue coming in to the government's coffers and taking that out would I don't know.

Yeah, no, it's it's like super disruptive, yeah, right, Like on the one hand, you could imagine a court somewhat unconstrained by precedent on law saying it would be so disruptive to the government to take away this thirty billion dollars a month of revenue source that we're just gonna benever backwards not to do it.

It really is what the constitution says, is said Congress system post 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 in 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, eh, it's like too important for the president to be able to impost whatever taxes he wants.

It's like really a shocking change in the constitutional structure.

But here we are.

Maybe the government can make up what they're not making a terror revenue from their stakes in US companies.

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

How did this get more depressing?

It's true that the Trump administration has found many new revenue sources, like owning ten percent of Intel.

This is a real tangent, But like, I do think that one model that people have is that, like the US government has a twenty percent stake in every company because it taxes twenty percent of their earnings.

If you take an additional ten percent stake and Intel, then that's like kind of an additional tax, but whatever, that's not really a tax.

It's fine, but right.

I mean, the other like truly novel revenue source that the Trump administration has found, not for the government but for Trump personally is cryptos shitandingg it and like you could probably make thirty billion dollars a month telling US government crypto that's true.

I thought you were gonna bring up the revenue share that has been floated with AMD in video, but that's you know, the crypto she innigans is probably a much more short thing.

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

You like Intel and AMD and video.

It's like 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 taxating.

They're like voluntary taxes, right, they're like, yeah, Talald Trump goes to like in video and it's like, hey, you give you ten percent 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 ten percent of my revenue.

But like, yeah, you know there's like a certain like nice chip company here, anything were to happen to it, right, Like if you replaced the tariffs of voluntary tariffs, like how much revenue would you collect?

Like not none?

Yeah, it's like voluntary like nudge nudge.

I don't know enough about a MD's situation to pine on it too confidently, but at least in video Bloomberg had an interview with Invidia 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 fifteen percent of our Chinese chip revenue yet, so I might be editorializing.

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

Happened to that Chinee.

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, Charlie move long, what tickles your fancy to talk about?

Second?

This week my old haunts Coldman Goldman.

I am excited to talk about this.

This is a weird one.

Yeah, it's sort of.

It's not that way, it's like it seems weird.

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 alterative asset manager, like a private markets are just partnering, or a private manager is buying a traditional manager or a private manager and a traditional manager or partnering to do like an ETF or whatever.

And this week it is Goldman partnering with Tierro Price and no one's buying each other.

Golden's buying a little too.

Yeah, they're buying a billion dollars of Tiro in the inn 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 a mass up to three point five percent of TIRO stock.

That's as much as one billion dollars.

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

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 altimage.

We've talked about it, and you know.

Look it is right, it like it runs alternative assets fun, you know, it manages assets well.

Didn't it use that to justify the pay packages for David Suleman and John Waldron.

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 business for a long time.

So it's not quite the same as like 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?

And it's funny, right because like Tiro actually owns a private credit manager.

Yeah.

Cool, But if you read the press release in this deal, it's like it kind of says we're bringing goldbn's ALTS assets to Tiro's retail and retirement distribution.

And then Okayill is like we're here too, because 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 they do that from institutions and they do that from their private wealth clients.

Yeah.

The story and private credit and private equity these days is like trying to find like true retail distribution, trying to sell through financial advisors and in particularly trying to sell to fore own K plans.

Yeah, And Tiro has a lot of furrow and K business, and like they do target dated funds for own case, right, And if you can put private assets into target date 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 mean Tiro is like very much classic Like, Okay, they have some alts, but like they're very much a classic traditional long only activity manage mutual fund manager.

And that is a tough business, right, I mean the Bloomberg article about this tie up mentions that Tiro has had like two hundred billion dollars of client outflows.

Yeah, their stock is down fifty from where it wasn't twenty twenty one.

It's a tough business to beg in.

And you know everyone in that business is like looking around and me 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 Tiro, which isn't entirely fair.

The Bloomberg News article does also point out that two thirds of Tiro'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 three point five?

Yeah, is it just because the stock was on sale?

To your point, I think it's the stock was on self.

But I think a lot of it is like if you're Tiro, you know, you're like every alt manager wants to distribute through every four O, one K channel, and we want a real partnership with Goldlan 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 Golden some incentive of to have, you know, some upside in Tiro stock, so that Golvin has some incentives.

To actually skin in the game.

Yeah.

Actually, you know, not just like used to as a dumping ground for its products, but like try to you know, be a real partnership.

Yeah.

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 this show.

You have Vanguard and Wellington with Blackstone that's just partnering on fun.

State Street has partnered with Apollo.

Like Van Garden.

State Street are not in the same position as like the traditional active management firms Wellington.

Well, yeah, come on, I was saying, yeah, yeah, right, I mean, like I think of it as like the investment world now is like focused on alts and index ones, and 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 stuff, isn't it get into Yeah, and so you get into get adults.

Yeah, I'm interested to see how this turns out, to see this sort of transaction to.

Call my eye, deal contingent hedges.

Are we only talking about currency hudges here?

You can do deal contingent rates hudges?

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 rate.

So like you're a company, you're buying another company.

I'm a business man.

You buy 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 rate today, but if the deal doesn't close, you don't want to have liability for that currency.

Similarly like you might lock in your bar in cost today, right, like you might hedge with treasuries to hadge your you know, interest rates in some months, but if the deal doesn't closed, you don't need that interest rate hedge anymore.

And so there's a long time 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 rates today, and if the deal doesn't close, I want to tear up the contract to not owe you anything, right, and for 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 like it's easy to do a foreign currency hedge right, like you you know, just buy the right delta in the spot link.

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 you one hundred million dollars on a deal.

And so there've been a series of IFI articles, like International Financing Review articles about how hedge funds are getting into the deal contention hedge business, where you know, there's an article last year that I read 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, you know, 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 is 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 the source of risk capital.

But then this last month there's an IFI 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, then that's interesting.

You know, when I was a banker, like I thought of like bankers as covering companies, large corporate right, I did 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 contentionent hedges.

It's a lot of private equity firms saying we're going to buy this foreign company, the deal's going to close in sixty nine months, we want to have your currency arrest today, and we're interested in structure, so we're happy to do a deal contentionent hedge.

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

Yeah.

And so if you're a hedge fund and banks are constantly coming to you to do deal contentionent hedges and they're all for like three private equity firms, You're like, why do not 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 they're client relationships are important and hard to replicate, right, HAG fund is not going to get into that business.

But if they have like twelve private equity clients, you could do that.

You can cover twelve.

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 you no, right, because like they've done the deals right, Like yeah, Like, if you do a deal contingent heads like regardless of whether the bank tells you who's on the other side of it, like it's continuent 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 ends?

And it raises good points that you know, you could get worried about the possibility of leaks surrounding M and 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 like if you do the day after, you don't have to car about leaks.

Yeah, I guess you'd worry about credit.

Like the nice thing of doing this trade with like a big bank is like you're facing the big bank and they probably went to Faull, Whereas if you're facing a hedge fund, you.

Have to have some counterparty, yes.

Some diligence on how well 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 like decent deals with DJA or whatever instead of with a bank.

Yeah.

Well that's actually all I have to say.

I guess there's more deals happening, so this will.

I always thought this is like a really niche, like unusual business, and now it's like a thing.

It's weird, but uh, yeah, the smart deal's happening.

Yeah, sort of.

There's no private equity actual acquisition, so that's true.

Though apparently August was the best month for deal making since twenty twenty one or something along those lines.

Yeah, good news, we're back.

We're back.

And that was the Money Stuff Podcast.

I'm Matt Levian and I'm Katie Greifeld.

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