Funniest Levine Quips

Yep—I’m a fanboy…

NY Times 2020 Profile of Matt

10/26/2021

Good Advice

I do think that the concept of limited corporate liability is a bit porous if you’re a Chinese billionaire. In America, if you run a company with $300 billion in debt, and it can’t pay that debt, and you have $8 billion sitting in your personal bank account, you say “ah I wish I could do something for all of my company’s creditors but unfortunately my deep commitment to our capitalist economic system prevents me from paying debts that aren’t mine, my hands are really tied here.” That is so deeply the American way that Donald Trump did it repeatedly and was elected president for his troubles.

In China, if you run a company with $300 billion of debt, and it can’t pay that debt, and you have $8 billion sitting in your personal bank account, and the government calls you up to say “hey spend down your bank account to pay that debt,” the only possible answer is “yes, that’s what I was already doing, of course, I would never take $8 billion and run and leave my creditors holding the bag.” Whether or not you signed a personal guarantee, you signed a personal guarantee.

10/5/2021

Ozy

This is a sequence of corporate governance moves that is honestly new to me:

Do some stuff that is, let us say, arguably fraud-adjacent.
Get caught, in an enormously public and embarrassing way.
Announce that your board has hired a high-powered law firm to conduct a review of what you did.
Announce that actually you are just shutting down the business.
Obviously you don’t need the board investigation or the fancy law firm.
You don’t even need a board.
Bye everyone!
Announce that you changed your mind and are not shutting down.
Come back to work with no board investigation and no board.

Does that work? Is that anything? Sort of a board cleanse? What do you have at the end of that process? I truly do not know, like I said, this is all pretty new to me. But I think a lot about questions of who controls a company. In some theoretical sense, the board of directors controls the company; it has the ultimate decision-making authority and can hire and fire executives. Traditionally, if the executives do a very bad thing they might expect to get fired.

This is less true of startups where the chief executive officer is also the founder and largest shareholder and public face of the company, and where the board mostly serves to advise the founder-CEO, but it is still somewhat true of them. Both Uber Technologies Inc.’s and WeWork’s boards managed to fire their founder-controller-CEOs over various embarrassments. Even where the CEO is the biggest shareholder and controls the board, the board has some independent fiduciary duty to do right by the other shareholders and stakeholders of the company; in times of crisis it has an obligation to exercise control.

But what I am asking here is, is there some level of crisis that is so complete and so embarrassing that the board will skip right past crisis management to “flee for your lives”? “Well, there’s nothing really to save here, we’re getting out and we never want to hear about this again”? “We can’t fire you, we quit”? If so is that … good? It’s not good, but is it something? If you are the founder-CEO, do you at least get total control of your company back, free from the interference of a board that would otherwise feel some obligation to investigate and make changes?

Here’s more on the wildest media story, and due diligence story, and corporate-governance story, of the last few weeks:

Ozy Media said it wouldn’t shut down after all, days after its board said the embattled digital-media startup was ceasing operations amid growing questions over the company’s business practices.
Ozy Media Chief Executive Carlos Watson said on NBC’s “Today” show Monday morning that the company would resume operations, calling it Ozy Media’s “Lazarus moment,” a reference to a follower of Jesus who is raised from the dead in the biblical Gospel of John. …
Ozy Media’s board said last week it had hired the law firm Paul, Weiss, Rifkind, Wharton and Garrison LLP to “conduct a review of the company’s business activities.” That investigation is no longer ongoing, according to a person familiar with the matter.

Not because the board decided the investigation was unnecessary, but because the board members decided that they were unnecessary. As of Friday there were two board members, Watson and Michael Moe, and:

On Monday, a person with knowledge of the matter said that the Paul, Weiss investigation of Ozy will not go forward, because the Ozy board members who commissioned the law firm are no longer with the company.

In general if you are the CEO of a company it is bad when the board is unhappy enough to commission a fancy law firm to “conduct a review of the company’s business activities.” One approach might be to try to make the board happier. But possibly the better approach is to make the board unhappier, so they say “never mind, I’ve seen enough” and you don’t have to do the review? We are talking about making the best of a bad situation here and this is definitely a creative solution.

Also here’s a wild anecdote about Watson allegedly throwing a book at an employee:

One anonymous staffer told me Watson literally threw a book across the room at her. The book was The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers.

Good throwing book! Hardcover, 304 pages, about a pound, intellectually hefty. When you clonk someone on the head with “The Hard Thing About Hard Things,” they know that you are serious about building a transformative business and willing to make difficult managerial decisions, like the decision to throw a book at them.

10/4/2021

Body Language

One topic in finance that fascinates me is “body language.” Here is the problem:

Big institutional investors often meet one-on-one with the executives of the public companies whose shares they own.
These meetings appear to be desirable and informative, to the point that investors will pay banks for setting them up, and investors seem to make market-beating trades after these meetings.
However, it is illegal for companies to give the investors “material nonpublic information” in these meetings.
So what do they talk about?
One theory is that the company tells investors information that is found in its public filings, and they chat about the weather and stuff, but the investors observe the executives’ “body language” during these meetings and use it to inform their investing decisions.
Like, the executives say “as we said in our earnings release, we had 14% gross margins this quarter,” and that is in fact in the earnings release so it’s not news. But if they say it confidently in a power pose the investors buy more, and if they say it nervously while looking to the side the investors sell everything. Body language.
One assumes (why?) that this “body language” is not itself material nonpublic information, so there is no legal problem with the company giving the investors access to it.

I don’t want to discount this theory entirely; I wrote once about a big investor that dumped all its stock of a public company because its chairman was too tan, which makes sense and was in fact a good call. (The company went bankrupt.) Still I do wonder about it sometimes. I assume “body language” is often a polite way to say “well sure they say a few things that aren’t in the public filings, but not important things.” It is easier to draw a bright line of “telling us earnings in advance is bad, but seeing body language is fine” than it is to say “telling us earnings in advance is bad, but helping us with some technical questions about how we should think about drivers of margin in our earnings model is fine.” And no one’s in the meeting with you, so for all anyone knows it’s just body language.

Anyway here’s a story about “Why Wall Street bankers are hitting the road again” that contains this amazing claim about body language:

During in-person meetings, Knee, who previously worked at Morgan Stanley and Goldman Sachs, pays attention to body language and looks out for subtle clues.
When he asks tough questions about sensitive subjects, including compensation and sales targets, he is interested in the answers, of course, but he also wants to see how an executive reacts to the interrogation.
“You can do that on Zoom,” Knee says. “But it’s very hard to see the sweat dripping down their forehead.”

I have to say I went to a lot of in-person meetings as an investment banker and at no point, ever, did I ask the client a question and see the sweat dripping down their forehead? What? “And I see revenue is up 4% quarter-on-quarter is that right?” “Umm, umm, umm [looks around nervously] umm, umm, umm [breaks out in sweat] umm, umm, umm [tugs nervously at shirt collar] umm, umm, umm yes, yes our revenue is doing great, up 4% quarter-on-quarter, yes it sure is, nothing wrong with that, no siree, look over there a bird!”

I assume that the main advantage of in-person meetings over emails and phone calls and Zoom is that if you sit in a room with a person you are more likely to feel like you’re in it together, whatever it is. There you are, in a room, being people together. There is no technology intervening (or recording you for prosecutors to look at later). It is fun to gossip about people who aren’t there! When I was a banker I sometimes went to meetings in person while colleagues from other groups dialed in on a speakerphone, and there was always a sense that those of us in the room — bankers and clients — were making fun of the people who dialed in, rolling our eyes at their communication lags and slowness at picking up jokes, that we were the in crowd and they weren’t part of the club. This was nonsense — often the people who dialed in were coverage bankers who knew the client well, while I was some random guy from a product group who had just met them — but the in-person dynamics were powerful. I can see why bankers would want to get back to that.

7/14/20201

Saudi! Arabia! Green! Bond!

Saudi Arabia green bond!

Saudi Arabia’s Public Investment Fund (PIF) is considering its first issuance of green bonds by the fourth quarter of 2021, CNBC Arabia reported, citing banking sources.
The issuance comes as part of the fund’s plan of shifting towards injecting liquidity into environment-friendly investments, the sources said.
They added that the fund is set to hire global investment banks to set the framework for its move towards green investment.

Saudi Arabia green bond! Look! I am sure you can do green projects in Saudi Arabia. They have a lot of land and sunshine, solar panels, why not. I am sure that the Saudi government — or its government-controlled Public Investment Fund — can do those green projects. I am sure that there are bond investors who are looking for both (1) Saudi Arabia exposure (a good credit, due to all its oil wealth!) and also (2) green-bond exposure. I am sure they will buy Saudi Arabian green bonds. And why not? It’s a good story, right? “Anyone can buy green bonds of countries without massive oil resources, but by buying Saudi Arabian green bonds we are actually pushing a major oil producer in the direction of sustainability, of drilling less oil and installing more solar panels,” you can tell yourself, why not, why not, why not. I am sure oil companies issue green bonds, why not, why not, why not.

Environmental, social and governance investing is amazing. I feel like the first thing you learn about stock investing is that it is not sufficient to buy good companies and avoid bad companies; everything is judged not in absolute terms but relative to market expectations. You want to buy bad companies that are better than everyone thinks, and sell good companies that aren’t as good as everyone thinks, etc. The business of investing is necessarily contrarian; everything you do is about figuring out where your views differ from market consensus.

None of that quite makes sense if you apply it to ESG investing, but if you get enough people whose entire business is about contrarianism, about avoiding obvious trades and looking for undervalued diamonds in the rough, I guess some of them will buy Saudi green bonds?

Also I have not even mentioned how Saudi Arabia’s absolute rulers sometimes kidnap their critics abroad, torture them to death and then dismember them, which probably costs it some ESG points. But not that many ESG points!

6/29/2021

And by literally advertising literally free money, they were able to sign up a bunch of customers, which (1) you might think would be easy but (2) was apparently hard enough that no one else did it. And then they partnered with banks to get PPP loans for the customers, and they took vast chunks of the banks’ fees for themselves, and now their founders are dynastically wealthy from spending one year shoveling government money to small businesses. I hope the founders use their billions to fund libertarian think tanks and seasteads and cryptocurrency projects. “As self-made tech billionaires,” they can say, “we understand the importance of entrepreneurship and cutting through government regulation and red tape, and we are concerned about America’s embrace of socialism.”

2/17/2021

GameStop hearing

Mark your calendars I guess, ugh:

[Friday], Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, announced the following witnesses for the February 18 full Committee virtual hearing entitled: “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide.” 

Vlad Tenev, Chief Executive Officer, Robinhood Markets, Inc.  
Kenneth C. Griffin, Chief Executive Officer, Citadel LLC 
Gabriel Plotkin, Chief Executive Officer, Melvin Capital Management LP
Steve Huffman, Chief Executive Officer, Co-Founder, Reddit
Keith Gill

The virtual hearing will be held on February 18 at 12:00 PM ET. Additional witnesses may be named.

Keith Gill is just “Keith Gill.” Not “Keith Gill, Former Financial Wellness Educator, MassMutual.” Not “Keith Gill, aka ‘Roaring Kitty’ on YouTube, aka ‘Deep Value,’ But With an Extra Bad Word Inserted, on r/WallStreetBets.” Not “Keith Gill, Renowned Trader and Possessor of Diamond Hands.” I wonder how often people get called to congressional hearings just by their name, with no title or descriptor. That is fame. “Oh hey Ken Griffin, I feel like I’ve heard that name, lemme look at your name tag, oh you run Citadel, that’s cool. Me? I’m Keith Gill. Yeah, the Keith Gill.”

I am going to go for a nice walk in the park when this thing happens on Wednesday. Imagine a less edifying hearing than this. “Mr. Griffin, isn’t it true that you are front-running Robinhood’s orders? Mr. Plotkin, isn’t it true that short selling is evil and risky and un-American? Mr. Tenev, isn’t it true that Mr. Griffin is front-running your orders? Mr. Gill, isn’t it … are you wearing a headband? How did you get a plate of chicken tenders into this hearing room?”

1/26/2021

It is sort of a perverse badge of honor on Wall Street to get absolutely killed on a huge trade. I’m sure that now Plotkin can get into the exclusive clubs where, like, the guys from Long-Term Capital Management hang out and tell war stories. “I can see by your scars that you took a bailout from Ken Griffin,” one of them will say, lighting a cigarette with a faraway look in his eye. “I took a bailout once. It was the Russian crisis of ‘98 that did me in. What got you?” And Plotkin will have to say “well see there’s this subreddit.”

—

At the same time … what? Why was Epstein, who was not a lawyer or an accountant or a college graduate for that matter, so good at tax? I actually don’t have too much trouble believing this—in my experience, some people are just born with a natural gift for tax structuring, and need surprisingly little formal training to achieve their potential—but it is fascinating. Black would go his lawyers and say “hey my guy found this way to save a billion dollars in taxes, is it legal,” and the fancy lawyers in the Paul Weiss tax department would say “wow, sure is, this is amazing, why didn’t we think of this, this guy is a Michelangelo of tax minimization”? I don’t know, it’s just a weird niche. Also what did Black actually do to save all those taxes?

1/25/2021

Here is a YOLO story, a story of utter nihilism. You know this story. This story is perhaps best told with a series of rocket emojis, but let’s try words instead. The people on the WallStreetBets subreddit sometimes all get into a stock at once. This is fun, a nice social outing in an age of social distancing, a risky but potentially lucrative collective entertainment. Recently they decided to do GameStop. Because, I don’t know, they’re gamers, or because it’s a little comical to pump the stock of a chain of mall video-game stores during a pandemic, or because a lot of professional investors are short GameStop and they thought it’d be funny to mess with them. Or, especially, because their friends on Reddit were buying GameStop and they figured they’d join in the fun. Or all of those things in different combinations. Take one person who’s long for fundamental reasons, add 100 people who are long for personal-amusement reasons like “lol gaming” or “let’s mess with the shorts,” and then add thousands more who are long because they see everyone else long, and the stock moves:

1/22/2021

I have said this before, but I cannot get over how good the recent trend to cut banks out of initial public offerings has been, for the banks. It is one of the great accidental scams of modern finance. People got mad that investment banks get big fees for taking companies public, so they said “what if we found a new way to go public, one that reduced the power of the banks?” And the banks put on trench coats and fake mustaches and went to companies and whispered “you could do a direct listing, or go public by merging with a special purpose acquisition company; that’ll show those evil banks!” And then companies started doing that,[3] and the banks laughed uncontrollably and raked in so, so, so much money:

1/16/2021

That is the classic, traditional answer: “It would be a red flag for investors if a corporation bought financial assets for speculation purposes unrelated to their core business.” It is an answer grounded in financial theory about how efficient markets work. Investors, in this theory, buy a stock because they want exposure to a particular business; if they want diversification it is more efficient for them to diversify directly (by buying different stocks, or by buying Bitcoin) than for companies to do it for them (by becoming conglomerates, or by buying Bitcoin). If your company’s proposition is “we make widgets and also own Bitcoin,” people who like widgets and hate Bitcoin will stay away; if it’s “we just make widgets,” people who like widgets and love Bitcoin can buy your stock and also buy Bitcoin. Also: “A basket of options is worth more than an option on a basket”; a company is more valuable to the extent it’s a specific bet rather than a jumble of unrelated things.

Now, this is in part a theory about what investors should prefer: They can probably diversify more efficiently than corporations can, so they should do their own Bitcoin buying. But you could also express it as a theory about what investors doprefer: Public companies are owned by big sophisticated institutions who can do their own diversification and have internalized this theory, and who want companies to do what it says on the tin. If corporate managers go off and make crazy side bets, their big institutional shareholders will be upset. They will call the managers up and yell at them and maybe vote them out. Also they will sell the stock, the stock will go down, the managers’ options will be worth less and everyone will be sad.

What if thatversion of the theory is wrong? What if you start, not from the efficient markets hypothesis, but from the boredom markets hypothesis? What if you are a corporate CFO and you say: “Look, my marginal investor is not a sophisticated institution looking for a specific combination of pure exposures, but a bored 23-year-old putting her $600 stimulus check to work on Robinhood”? Surely the way to appeal to her is to put your money into as many weird fun trendy things as possible, and talk about them all the time. “We are going to put a quarter of our corporate cash into Bitcoin, a quarter into Tesla stock, a quarter into SPACs and a quarter into daily fantasy sports.” Do whatever you can to attract the attention of the Robinhood traders, they’ll buy your stock, it will go up, your options will be worth more, and your big sophisticated institutional investors will be like “well this is dumb but the stock is up so whatever.”[4]

1/15/2021

Financial backing from a hedge fund! Imagine those pitch meetings, wandering around Mayfair trying to get hedge funds to agree to sift through acres of garbage to find some Bitcoins. “You’ll want our special situations team.” If anyone has a copy of his pitch deck for this trade, I need it desperately.[6] I assume it would lay out the plan for digging up the garbage, and the sources and uses of funds. There’d be a financial model showing that, even accounting for paying off the local council and discounting for the possibility that the hard drive has rotted away, you’ll make at least a 30% expected return on your investment. There’d be a page on the capital structure and payment waterfall. You’d need a deep dive into the landfill’s record-keeping system, with aerial maps showing the grid and schematic diagrams of the cross-section. Then a technical section on how you put a rusted garbage-covered hard drive into a computer to get the Bitcoins off of it. At the back of the deck you’d have a page on “The Team,” with little pictures and bios of the guys who are going to dig up the garbage. If no one sends me this pitch book I might have to make it myself. It should be taught in business schools. If you took a class on “Blockchain and Crypto for Finance” and there was no case study on digging up landfills for hard drives, you should demand your tuition back.

I assume the disk will eventually disintegrate under its blanket of garbage, but you never know. In another decade, when Bitcoin has become the world’s main store of value and 90% of it has been misplaced, this will be a trillion-dollar rubbish dump and Wales’s main industry will be combing through it looking for that hard drive. Elon Musk’s Boring Company will open a factory in Wales and design special drilling equipment to mine (the rubbish dump) for Bitcoins (on that hard drive). The future of finance is amazing.

1/5/2021

But usually it is not a big deal? You call up the people who got the money and say “hey we didn’t mean to give you that $900 million can we have it back,” and the people say “oh right here you go,” and that is that. They can’t keep the $900 million if they have no right to it, just because you wired it by mistake, and the sorts of people who get accidental $900 million wires from banks are not usually the sorts of people who would immediately go to an ATM, take out the $900 million in cash, stuff it in a thousand suitcases and flee to a non-extradition country. They’re usually big institutions with longstanding banking relationships and careful compliance officers. They tease you a little and then they give the money back.

8/6/2020

The executives failed “to disclose that these so-called ‘solutions’ centered on the illicit campaign to corrupt high-profile state legislators in order to secure favorable legislation,” Sloan complained.

I have to say that if I read a company talking about “legislative solutions” for its troubled nuclear business, I would pretty much assume they were bribing legislators in order to secure favorable legislation? I might assume they were doing it in a legal way, and be disappointed that in fact they were doing it in an illegal way, but these are matters of degree.

8/4/2020

Illegal! And:

“Right now they don’t have any rights unless we give it to them, so if we’re going to give them the rights then it has to come into this country.”

Look I am not unsympathetic to the idea that property is a social construct, that property rights do not exist as a matter of external reality or natural law but are created by government and social structure, but I tend to expect those views from socialists, you know? Not Republican U.S. presidents. Back in President Trump’s second week of office I made the modest suggestion that the rule of law is good for business, and that a president who doesn’t believe in it might turn out to be bad for business. Honestly he has mostly been better for business than I expected, but still, I bet Microsoft would be happier right now if it had rights. “America: We will expropriate the assets of foreign companies if someone pays us a big enough bribe” is a rule that might maximize short-term revenue, but there are problems in the long run.

7/14/20

Though chop-hostage crises have long been a source of corporate drama in China, the sudden spate of high-profile cases has prompted a number of companies to seek out legal advice and custodianship over their seals, says Vivian Mao, a partner at professional services firm Dezan Shira & Associates, whose offices across China include special “chop rooms” where the prized rubber stamps are kept under lock and key.

It is the modern equivalent of a magic amulet. If you control a company, you do so as a purely social fact: A bunch of people who work there will treat you as the boss, a bunch of customers will treat you as their counterparty, the legal system will treat you as a controller. Everything that you think gives you control—share certificates and board resolutions and a big desk—is just a symbol of those intangible social facts. But if you concentrate enough symbolism in one more or less arbitrary physical object, that physical object will become almost as good as the social fact itself, and you’ll end up sleeping with it under your pillow.

Radical transparency

I don’t know why I love Bridgewater Associates gossip so much but I am pretty sure it is their fault. Their whole self-presentation, as a firm, is that they spend all of their time talking about each other. They wouldn’t call it gossip, because they talk about each other to each other’s faces; they’d call it “radical transparency” and critical self-examination. Still! James Comey once investigated a Bridgewater executive for saying that she had typed an email that her assistant actually typed, and “videos of the interrogations were edited and later rolled out in a serialized fashion, a Bridgewater version of a reality TV show.” I like workplace gossip as much as the next person, maybe more, but I cannot imagine that level of commitment. It is wild stuff.

Speaking of wild stuff:

Bridgewater Associates, the world’s largest hedge fund, was found to have “manufactured false evidence” by a panel of arbitrators in its attempt to prove that former employees had stolen its trade secrets.

According to court documents made public on Monday that quote findings from a panel of three arbitrators, Bridgewater was found to have “filed its claims in reckless disregard of its own internal records, and in order to support its allegations of access to trade secrets, manufactured false evidence”.

You know, if it was any other hedge fund I’d be like “sure whatever it’s a cutthroat business,” but this is Bridgewater! And, disappointingly, in a confidential arbitration! At the very least, there needs to be a public show trial in which the entire management committee of Bridgewater is interrogated by a former FBI director about what they knew when about this allegedly manufactured evidence. If there wasn’t a pandemic they should do the show trial at Carnegie Hall, but in any case it should be videotaped and made available to everyone forever. I will serialize it in Money Stuff. I don’t mean that a court or the arbitrators or whoever should order this trial, by the way, I mean that Bridgewater should just volunteer to do it themselves, out of their commitment to radical transparency and embarrassing people as much as possible.

5/12/2020

Oh Elon

“‘It would be a sad day if the Fremont police walked into Tesla and arrested Elon Musk,’ said Scott Haggerty, the county supervisor for the district in Alameda where Tesla’s Fremont plant is located,” incorrectly. Obviously it would be a hilarious day if the Fremont police walked into Tesla Inc.’s car factory and arrested Elon Musk for reopening it in violation of county health orders during a pandemic. “I will be on the line with everyone else,” Musk tweeted yesterday. “If anyone is arrested, I ask that it only be me.” Honestly someone should run for president, or at least district attorney, on that platform. Not about the Tesla factory reopening, just in general. “When I am in charge, nobody will be arrested, except Elon Musk, who will be arrested a lot.” Who could object to that?

A running feature of this column has been, basically, “How Close Is Elon Musk To Being Arrested?” It probably peaked last February, when Musk was at risk of being held in contempt of court for sending tweets that violated a settlement with the Securities and Exchange Commission, and of course if you had to guess what will ultimately send Musk to prison the best guess will always be “bad tweets.” Also though he was illegally distributing flamethrowers for a while, that seems like the sort of thing that could land a non-billionaire in jail. Now this factory reopening. Sure.

My general approach to Elon Musk’s legal adventures involves a heavy dose of legal realism: The way to think about law is not to engage in a sterile examination of the words of statutes and rules, but to think about what actors in the legal system might actually do. (Here, arresting Musk would give him what he wants—publicity, grievance, targets for abuse—and not actually achieve anything public officials want, so I’d say the odds of it are low.) I once imagined a dialogue between Musk and his lawyer:

Musk: Well are they going to put me in jail for sending these tweets?

[Lawyer]: I mean, probably not, no.

Musk: I have a big drill you know.

[Lawyer]: I know.

Musk: That’s a kind of legal realism too.

It is! He does! He’s got a big drill! If you put Elon Musk in jail, he will tunnel his way out and escape on a rocket ship to Mars! That is the whole premise of Elon Musk, not just a generic comic-book supervillain vibe but the specificcomic-book supervillain tools he’d need to escape from prison for violating plague quarantine orders or sending bad tweets or both. He’s been preparing for this his whole life; the Alameda County health authorities will have a hard time catching up.

By the way Elon Musk has an 8-day-old baby.

4/23/2020

Imagine running one of the more than 10% of new shale wells that are still being brought online. Imagine your sense of urgency. “Gotta get this well running smoothly so it can produce oil so we can pay someone to take it.” Think how much more profitable your company would be every day you stayed home to play video games instead of finishing that well.

4/7/2020

Meanwhile at Goldman Sachs, working from home gives people new opportunities to be weirdly hardcore:

One senior trader at Goldman Sachs said she’s been writing emails while sitting on a yoga ball, and doing pull-ups on bathroom breaks. When she has to go back in the office, she said, she’ll miss doing burpees, a type of squat thrust, while listening to conference calls.

Oh I don’t know I bet she will just keep doing burpees on conference calls once she’s back at the office. Honestly what is the point of doing burpees on conference calls unless everyone knows about it?

4/6/2020

Even if the virus quieted over the summer, it would likely be back in the fall. Oct. 1 was their deadline for a process that usually takes years.

The 58-year-old tried to deliver the same rallying cry in person at a Massachusetts plant that churns out Pfizer’s blood-clotting drugs. The plant manager told him he was nonessential and deactivated his pass.

What you want in business is to work for a company where the plant manager cares enough about worker safety, and is empowered enough to make good decisions, that, when the CEO shows up to make an inspirational speech during a highly infectious pandemic, the manager reads a draft and is like “meh this is fine but not worth risking lives over, you can’t come in.”

4/2/2020

Here’s a good, uh, story of late capitalism or whatever:

Citadel Securities this week opened an office in Florida to help ensure billionaire Ken Griffin’s giant trading firm can continue at full capacity during the coronavirus pandemic — and cope with the explosion in volume the illness has spurred.

The firm opened a new, temporary trading floor in Palm Beach on Monday with 24 people, according to a memo from the firm to employees seen by Bloomberg. The market maker debuted the facility two days before Florida’s governor announced a stay-at-home order for the state of 21.5 million.

The site — with capacity for 50 — is part of a hotel property that’s closed to the public, and the staff, who have been dispatched from Chicago and New York, will work and sleep there, according to the firm.

I want to read a dystopian novel about this, or maybe a Borges story. An apocalyptic plague has made it dangerous to go outside, and so a shadowy team of elite capitalists have gathered in an out-of-the-way hotel property, closed to the public, to live together 24/7 and continue to control the world’s financial markets. Someone needs to chronicle their lives and loves and hopes and fears and, I don’t know, descent into madness or decision to abandon financial capitalism and form a new society or whatever. What if the lockdown lasts for years, and whole generations of Citadel traders are born and brought up in its closed society, a remote high priesthood of financial markets keeping the flame alive for the rest of us?

2/3/2020

Anyway here’s a Wall Street Journal article about Bridgewater, Dalio, his plans to hand control over to successors, and his clashes with executives and successors, including departing co-chief executive officer Eileen Murray. It features this amazing sentence:

Ms. Murray suggested Mr. Dalio revamp the investment team, focusing more on merit rather than whom Mr. Dalio personally liked, according to the person in whom she confided.

Imagine going up to Ray Dalio, the author of “Principles,” the celebrity guru of “ idea meritocracy” and “radical transparency,” and saying “hey Ray have you ever considered promoting people based on merit rather than personal fondness”! I am not sure I can think of a worse thing to say to him; I want desperately to watch Bridgewater’s video of that confrontation.

1/16/2020

See, when you want scrappy underdogs with a need to prove themselves against the Goldmans and the Morgans, what you do is hire non-traditional people who you’d never expect to find in the financial industry, people like the sons of multinational public-company CEO-owners who went to Dartmouth and Harvard Business School.

1/15/2020

Here’s the letter, which, I want to emphasize, (1) “raises a number of troubling national security questions” and (2) was sent to the SEC. If you think that the actions of the president endanger national security, by recklessly risking war or by recklessly disclosing classified information that could be used by the enemy, you ask the SEC to look into it. This is not because the SEC has any special expertise in or authority over national security—the word “securities” in its name is just a coincidence; that means “stocks and bonds”—but because, in our postmodern world, the securities regulator is the meta-regulator of everything. Pollution and global warming and sexual harassment and animal cruelty and air safetyand computer security and corporate lobbying and many other issues of public policy are, surprisingly, under the SEC’s jurisdiction. If a thing is bad, then it is also securities fraud. If you are unhappy about anything at all, the solution is to write to the SEC about it.

12/16/2019

“in our view, further highlight the need for certainty around the question to whether Mr. Cotten is in fact deceased.”

“Representative Counsel respectfully requests that this process be completed by Spring of 2020, given decomposition concerns,” said Miller Thomson in the letter.

Also maybe the private keys are laser-etched in his tibia! It is all terrible on more levels than I can keep track of. When people tell you that cryptocurrency will enable smart contracts on the blockchain that supersede traditional court systems and automate trust, allowing frictionless commerce with no need for archaic subjective state justice systems, remember the time people asked the police to dig up a corpse to ask it who stole their Bitcoins!

9/26/2019

Mr. Potato Chip

As I mentioned yesterday, the U.S. Securities and Exchange Commission has been bringing a deluge of enforcement actions recently to close out its fiscal year, and all I want to do is write about them. So let’s do that. Here are some things that the SEC has to say about James Wallace Nall, III:

Over the last 15 years, Nall has developed close personal and business relationships with a group of individuals residing in or near Thomaston, Alabama, a rural, 400-person, “one-traffic-light” town located in southwestern Alabama. …

Nall’s public persona in Thomaston was closely associated with Golden Enterprises. Nall openly discussed, and all of the defendants were aware of, his father’s role with the company. More generally, Nall was known throughout Thomaston as “Mr. Potato Chip.”

Here is one thing that the SEC has to say about Nall’s father, whose name is James Wallace Nall, IV, in what is perhaps my favorite footnote in the history of SEC enforcement actions:

It is unusual in this matter that Nall III is the son, while Nall IV is his elder father.

It is unusual! You probably know where this is going; when the SEC writes Southern Gothic it always ends up being about insider trading. I kind of wish it wasn’t. I kind of wish that the SEC enforcement lawyers, confronted with the “Mr. Potato Chip” of small-town Alabama and his possibly time-traveling father, had just abandoned their insider trading case and moved to Thomaston to record alongform podcast series examining the town’s quirky characters and dark secrets.

But, no, insider trading. Golden Enterprises Inc. was a publicly traded potato chip manufacturer, which you might know from its Golden Flake brand of chips. In 2016 it was acquired by Utz Quality Foods LLC, another potato chip manufacturer, which you might know from its Utz brand of chips. Nall IV sat on the board of directors of Golden Enterprises and learned of the merger well before it was announced. He told Nall III, for good and legitimate reasons: Nalls III and IV had a family business that owned Golden Enterprises shares, and Nall IV wanted to discuss the potential tax consequences with his partners, including Nall III. He “specifically informed the three men that the information was highly confidential, and that they should not engage in any trading in Golden Enterprises stock,” and “further admonished that ‘nobody that we know can buy any stock, period.’”

And then Nall III, who had a reputation as “Mr. Potato Chip” to live up to, allegedly went and told some of his friends, who traded on his tips and made money when the merger was announced. Neither Nall traded for their own accounts. The SEC sued Nall III and his friends who traded.

Notice that Nall IV told Nall III about the merger and didn’t trade, and Nall III allegedly told his friends about the merger and didn’t trade, but the SEC is going after III and not IV, because IV had a good reason for telling III and swore him to secrecy, while III had no good reason for telling his friends and allegedly expected them to trade. All of insider trading law turns on subtle distinctions like this: If you tell someone about a merger and expect them to keep it secret you’re fine; if you tell them and expect them to trade then you’re in trouble. This makes sense, sure, but it can be a little hard to prove one way or the other years after the fact.

Connoisseurs of insider trading law know that it is also generally important for the authorities to prove that you received some “ personal benefit” for tipping the people who traded. This has its own legal rationale, but it is also very useful as a way to demonstrate your intent. If you tell someone about a merger, and they trade, and then they hand you a paper bag full of cash as your cut of the profits, it is hard for you to argue that you didn’t expect them to trade.

Let’s see what personal benefit Nall III allegedly got for his tips:

Shortly after Nall learned of the proposed sale of Golden Enterprises (and tipped Hale Smith), Nall and Hale Smith developed a plan to help revitalize Thomaston’s “dying” downtown by purchasing and renovating an old “general store” and potentially using it as a deer-hunting museum.

Immediately before Tutt began trading in Golden Enterprises stock, he agreed to relocate his real estate business to the top floor of that building.

See, the case will turn on whether Hale Smith agreed to support a deer-hunting museum out of genuine civic pride or as a disguised kickback for merger tips. Insider trading law is amazing. The alleged tippees all settled without admitting or denying guilt. Nall IV, who allegedly told Nall III about the merger in confidence, is not accused of any wrongdoing. Nall III has not settled, and the SEC does not seem to have much in the way of smoking-gun evidence against him. If this case goes to trial I … might have to go watch? I might have to make this podcast myself, and the trial is as good a place as any to start.

9/16/2019

Musk hates short sellers almost as much as Byrne does, and once tweeted “oh and uh short burn of the century coming soon.” That was shortly before his fake going-private deal, and was used as evidence that the going-private tweets were intended to be manipulative. But Byrne found a much more effective way to mess with short sellers: Just pay a dividend in some weird hard-to-find currency, and short sellers will be forced to buy back your stock because they can’t pay out the dividend. If, instead of selling flamethrowers to raise money, Musk had paid a dividend in flamethrowers that could not be shipped across state lines, it would have given short sellers a lot of trouble and pushed up Tesla’s stock price.

Toilet theft

Can’t argue with any of this:

A fully functioning, solid gold toilet that was part of an art exhibition was stolen from the home where British leader Winston Churchill was born. The toilet, which was valued at around 1 million pounds ($1.25 million), by Italian artist Maurizio Cattelan had been installed at Blenheim Palace. The toilet, which was titled “America” and visitors were invited to use, was stolen early Thursday by a group of thieves that used at least two cars.

One car for the lid, or … ? A couple of years ago thieves broke into a German museum and stole a 221-pound gold coin worth millions of dollars, and I wrote: “If you ever find yourself in a position where you are considering committing a financial crime, I want you to ask yourself: Is this financial crime as cool as stealing a 221-pound million-dollar gold coin? If the answer is no, give it a miss.” Stealing a solid-gold art toilet named “America” from Blenheim Palace indisputably qualifies, nice work everyone.

9/10/2019

9/3/2019

Aaaaaaaaaagggggggggghhhhhhhhhh!

Aaaaaaaaaagggggggggghhhhhhhhhh! Right now, at Bridgewater Associates LP, hundreds of brilliant hardworking people are carrying around iPads with a proprietary app that allows them to rate each others’ credibility in real time. And then there’s that!

I would like to … well, look, I would like to go back to bed and forget that this ever happened … but failing that, I would like to read more about how Ray Dalio acquired that outfit. (Dalio is not the one in the black jeans and T-shirt. He’s the other one.) Did he go to his usual tailor and say “bit of a different assignment this time”? Does he have a personal shopper whom he called up one day to say “hey remember the early 1970s, bring me all of it, but trimmed in blue fur”? Did he walk into a shop? What shop? Did they recognize him? Did he bring the shopping bags back to his desk to finish the rest of the workday? Did his colleagues stop by and notice the bags and say “hey Ray what’s that” and he said “oh those are my groovy threads for the playa, man” and their iPads spontaneously exploded?

Separately, my impression is that Bridgewater’s recruiting process is fairly structured and intense, but I am constantly reading about other hedge fund managers who take a shine to their tennis coaches or their sons’ camp counselors and hire them as portfolio managers, and I hold out some hope that Bridgewater’s next chief investment officer will be a guy who offered Dalio a hit of molly outside the orgy dome. You never know what hedge fund networking opportunities you might come across at Burning Man!

5/24/2019

Fraud

There seem to be two basic approaches to financial fraud. One approach is to pretend to do a real thing as accurately as possible, with the minimum necessary tweaks to make it a fraud. You run a real company and come to work every day doing real stuff, but then you quietly change a few numbers in the financial reports to get yourself a bigger bonus. You set up a hedge fund and tell people that it will do some real strategy in which you can plausibly claim expertise, you give them sensible-looking account statements showing their money growing at an impressive but realistic rate, and then you steal it all. The implicit theory here is that people know what the real thing looks like, and if you can make your fake thing look exactly like the real thing then you will be able to steal a lot of money and not get caught.

The other, opposite approach is just to accumulate fantasy. You set up a hedge fund that will use quantum algorithms based on astrology to trade prime bank certificates on the Ruritanian Exchange, and that promises a risk-free return of 100% per month, over the blockchain, and the portfolio manager is Elvis. And then you steal the money and tell your investors that aliens took it. The theory here is harder to pin down. One possibility is the sort of Nigerian-scammer-typo theory: You make the scheme implausible to attract only the most gullible victims, the ones who have no idea what the real thing looks like and who will give you all of their money. Another possibility is that, you know, not all scammers are entirely right in the head themselves, and many have only a sketchy knowledge of what is plausible in legitimate business.

My favorite explanation, though, is that people just like fantasy. If you sell them a Ponzi scheme with risk-free 100% returns, all you are offering them is money. If you sell them a Ponzi scheme that achieves its risk-free 100% returns by infiltrating an international cabal of central bankers and taking back power for the people by using the magic of math, or whatever, then that’s a story. That’s something they can get excited about investing in, not only for the promise of money, but also for the feeling of being part of something bigger than themselves, something stranger and more magical than they get in their daily lives. The point is not for the scam to be financially plausible; the point is for it to be psychologically evocative.

This is part of why I am skeptical about “financial literacy.” Sure, fine, teach classes in school about budgeting and compound interest and whatever. But your students have read, or at least watched, “Harry Potter”; they have felt the power of believing that there is a secret group of people with special powers who control the world. That is what you are up against, not just people who invest in scams because they can’t do the math, but people who invest in scams because they want to be part of something more exciting than what they learned in their high-school financial literacy class.

Anyway here’s a Securities and Exchange Commission case against an alleged pyramid scheme that was also an alleged illegal offering of crypto tokens, sure:

Pacheco conducted a fraudulent, unregistered offering of securities through two California-based companies he controls, IPro Solutions LLC and IPro Network LLC (collectively, “IPro”). IPro raised more than $26 million from investors by selling instructional packages that provided lessons on e-commerce. Investors also received “points” that could be converted into a digital asset known as PRO Currency. Investors who contributed additional funds could earn a mixture of cash commissions and additional convertible points by recruiting new investors into the IPro network. As alleged in the complaint, however, IPro was a fraudulent pyramid scheme.

It’s just such a lovely sludge of words. It’s multilevel marketing where the product that you’re marketing is instructions on how to do marketing! But also with crypto! Here’s the defendant talking in a marketing video:

Now the binary bonus. Now, folks, I love the binary. I’ve been in the binary since day one, and I absolutely love the binary and here’s the reason why … You can earn from you down to infinity with no levels to qualify. You get to override every single person’s volume in your organization, including spillover, including the volume that I get just for being in a good, strong team where people are placing people below me even though I didn’t put them there. And so that is huge because you get to override everything and 10 percent of your weaker team volume is what you’re going to get … Now I’ve been – I made seven figures – multiple companies, multiple times in this industry because of the binary.

To be fair, if you are an expert in multi-level marketing this probably sounds like perfectly reasonable technical terminology, but it is hilarious gibberish to me. Of course the SEC alleges that “IPro’s inevitable collapse was hastened by Pacheco’s fraudulent use of investor funds, which included, among other things, the all-cash purchase of a $2.5 million home and a Rolls Royce.”

ANZ

We have talked a few times about allegations of interest rate manipulation at Australian banks, which are a lot like the allegations of Libor manipulation at U.S. and European and Asian banks, except that the Australians’ trader-chat slang was even funnier than everyone else’s. Here is a story about “the scandal inside ANZ,” the Autralia & New Zealand Banking Group Ltd., and while it doesn’t add much either to the pile of sweary trader chats or to the financial story of how and why Australian interest rates were manipulated, it is quite a story about banking culture. Here’s a description of an ANZ executive:

In London, according to one newspaper report, he’d gotten into a trading room brawl that left him with a black eye.

He had also reportedly rented out Richard Branson’s Caribbean island at a cost of $40,000 a day for his wedding. His 40th birthday was said to have lasted three weeks.

He was successful at his job. He loved money and he was good at making it.

The 48-year-old returned to Australia and was hired to lead ANZ’s global markets team.

Trips to strip clubs were not uncommon under Bellotti’s leadership, former traders from ANZ have told the ABC.

One club became known as “The Boardroom”, because, according to one employee, you were more likely to get one-on-one time with your boss there than in the office.

Now, I know, you are yawning. “Ooh, violent hair-trigger traders, expensive parties, team meetings at strip clubs, whatever, I have heard this before, this is every stereotype of the financial industry in a few paragraphs,” you say. Yes! True! The amazing thing is the self-awareness. “It felt a little bit like the Wild West,” says one former trader; “it felt a little bit like a caricature of investment banking with all the excesses, but none of the substance.” What a sentence! If there is one textbook that every young investment banker and trader has read, it is not “Security Analysis” or “Principles of Corporate Finance,” it is “Liar’s Poker.” The thing that unites the industry is not the substance but the stereotypes.

2/25/2019

2/22/2019

Minotaurs

One of these days we are going to need a new Linnaeus to clean up startup cryptozoology. Start with “unicorn,” the now-completely-standard term for a private technology company with a valuation of $1 billion or more. This became jargon in 2013, but it was just an extension of the common usage of “unicorn” to refer to any sort of rare, desirable thing. In 2013, billion-dollar startups were rare and desirable; now they are common and a lot of them seem kind of terrible. A good term these days for a startup with a $1 billion valuation might be “startup.” At some point, a big and dingy flock of unicorns just starts to look like a bunch of horses.

Meanwhile a billion dollars isn’t cool, you know what is cool, some round number that is larger than a billion dollars. But this leads to etymological and anatomical difficulties, because the word “unicorn” comes from the Latin words for “one” and “horn,” but people who use it to describe startups seem to think that it comes from the Latin words for “one” and “billion dollars.” And so a startup with a $10 billion valuation is, with some frequency, referred to as a “decacorn.” If a unicorn is a rare, elegant and desirable horse with one horn, is a decacorn a rarer, more elegant and more desirable horse with 10 horns? Would that be elegant and desirable? Where do the horns … go? How does it work? Please do not send me a drawing of a decacorn.

I am pretty sure that I coined the term “quinquagintacorn” for Uber (50 horns!), but now it seems to be a thing.

On the other hand, a $100 million startup is, not a decicorn (one-tenth of a horn, in SI units), but a … centaur? I mean, I don’t know if that is a particularly common usage, but here it is in Fortune so at least someone has said it once. The idea here might be that a centaur (a mythological half-man-half-horse) is midway between a merely human early-stage startup and the equine elegance of a unicorn. But I worry that “centaur” might instead be formed from the Latinate prefix “cent-,” meaning “hundred,” and “aur,” which means “million dollars” in the same hypothetical language in which “corn” means “billion dollars.”

But there are further extensions of the menagerie that abandon numerical notions entirely and are just like “hey, here’s a mythological thing, let’s call some startups it.” For instance, it is relatively easy to achieve a $1 billion valuation—if I give you a dollar for a 1/1,000,000,000 stake in your company, congratulations, now it’s a unicorn—but (somewhat!) harder to actually raise $1 billion in cash. So here’s Felix Salmon at Axios:

Meet the minotaurs — our term for the companies that would be worth more than $1 billion even if the only thing they did was to take the cash that they have raised and put it in a checking account. …

Axios has found 55 minotaurs as of early 2019. That’s more than the 39 unicorns found by venture capitalist Aileen Lee when she invented the concept just over 5 years ago. (There are well over 300 unicorns today.) …

The rise of the minotaur reflects a new form of investing, epitomized by Japan’s SoftBank, and a new form of company-building, dubbed “blitzscaling” by entrepreneurs Reid Hoffman and Chris Yeh. … It’s a deliberate attempt to build a monopoly that can’t be competed against unless you have pockets that are billions of dollars deep.

It’s the promise of monopoly rents in the future that makes billion-dollar investments attractive in the present.

On the one hand, there is nothing in the term “minotaur” that suggests raising a lot of cash, or anything having to do with a billion dollars, or a genetic resemblance to unicorns. On the other hand, if you are worried about the rise of instant monopolies, then I suppose “minotaur” does capture the notion of something that is rare and mythical like a unicorn, but scarier. “I know that I am accused of arrogance and perhaps of misanthropy, and perhaps even of madness,” says Borges’s minotaur, which might as well be a critique of blitzscaling.

Incidentally I feel like I have seen this concept—a company that has raised a billion dollars—described before under a different mythological name. Here is a claim that a company that has raised a billion dollars in a single round is called a “dragon.” Here, on the other hand, is a claim that “A dragon is a company that returns an entire fund — a ‘fund maker.’” Meanwhile a “pegasus” is either (1) a decacorn, (2) “a unicorn that has grown its wings and actualized its value” (that is, sold or went public at a billion-dollar valuation), or (3) um a lifestyle startup I think?

The point is that there is absolutely no science to any of this taxonomy, no hierarchical classification, and really almost no set of terms with agreed-upon meanings that allow conversations to happen efficiently at a deeper and more technical level. It’s just a series of funny words that you can say onstage at conferences so that everyone feels vaguely good about the chirpy cute ecosystem that they’re investing in. Look at all the adorable horsies! How could anyone object to all the horsies.

1/7/2019

12/8/2017

1/4/2018

Here is a charming dumb story of investor relations: A guy on Twitter tweeted “Shorted @ocado and @boohoo again today … both overvalued,” meaning that he had sold grocery-delivery company Ocado Group Plc’s stock short, and Ocado’s customer-service Twitter replied “Oh no! We’re sorry to hear this Mark. Please kindly DM us the email address and postcode on your account, in order for us to look into this further.” It turns out Ocado’s social-media team was just confused — they thought he meant that he had been shorted, that is, that some items were missing from his delivery order — but really that is a perfectly coherent response to his actual meaning. If someone tweets that he is short a company, why shouldn’t the company (1) say “We’re sorry to hear this” and then (2) ask for his home address? It’s a nice mix of responding sympathetically to his concerns and being ever-so-slightly menacing.

2/6/2018

Meanwhile Nathaniel Popper looks at the cryptocurrency industry in the light of the Bitcoin crash and does not like what he sees: “Signs of trouble have appeared at nearly every level of the industry, from the biggest exchanges to the news sites and chat rooms where the investment frenzy has been discussed.” This is perhaps the best crypto anecdote I’ve seen yet:

A new virtual currency, Proof of Weak Hands Coin, whose creators referred to it as a Ponzi scheme on Twitter and use a pyramid as a website logo, raised $800,000 before hackers got into its systems last week and drained its funds.

A crypto Ponzi scheme got hacked. It’s like a Guy Ritchie movie. They openly advertised to investors that it was a Ponzi scheme, and the investors invested anyway, and then they got something worse than a Ponzi scheme. Eventually there’s going to be a fraudulent crypto Ponzi scheme: Like, the promoters will advertise that it’s a Ponzi scheme, but they will actually just steal the money and not even bother to Ponzi it, and then — I hope — regulators will bring charges saying that investors didn’t get the Ponzi scheme they were promised. Honestly! If you sign up for a Ponzi scheme and your money gets stolen by hackers, you need to re-evaluate every aspect of your life.

Uber.

Here are some notes taken by John Bares, then the head of Uber Technologies Inc.’s autonomous vehicle group, at his meeting with Travis Kalanick, then the CEO of Uber, in December 2015 to discuss what Uber hoped to gain by acquiring Otto, an autonomous-vehicle company started by former Alphabet Inc. engineer Anthony Levandowski:

TK what we want
source
all of their data
Tagging
road map
pound of flesh
IP

Alphabet’s Waymo unit is now suing Uber, claiming that it hired Levandowski in order to steal Waymo’s trade secrets, and Waymo introduced those notes on the first day of the trial yesterday. I suppose they are good evidence that Uber hired Levandowski to steal, you know, Waymo’s source code and all of its data and its intellectual property? Since … that’s what … Kalanick … told Bares to do? But not a pound of flesh. Levandowski did not, so far as I have heard, walk out of Waymo with a pound of human flesh in a jar.

The problem is that when you get sued a lot, and you have a CEO who speaks in exaggerated metaphors, and you take written notes, then you have to explain a lot of awkward stuff to a jury. “The golden time is over. It is war time,” Kalanick said, in another set of Bares’s notes. And: “Cheat codes. Find them. Use them.” “We’re bringing this case because Uber is cheating,” said Waymo’s lawyer in his opening statement, and it is convenient for him that Uber’s own documents called for cheating. Oh no they didn’t, of course not, Kalanick no doubt meant “cheat code” as a more general term of approbation than as a specific call for cheating. It is just, you gotta be careful with your words if they’re going to end up in court.

2/7/2018

Elsewhere: “Meet ‘The Wolf of Crypto Street,’ an Ohio teenager who used his entire savings to become a cryptocurrency millionaire.” I will pass on that, thank you, but you are welcome to meet Mr. Wolf if you’d like. (Skimming the article I see four pictures of him in front of cars and one picture of him in front of a painting of him with a car, so he is that particular kind of online investing teen.) I must say though that:

Wall Street is a street; Crypto Street is not a street.
“Wolf of Wall Street” alliterates; “Wolf of Crypto Street” does not.

You want to be the Coyote of Crypto Valley? The Badger of Blockchain? The Baboon of Bitcoin? The Eagle of Ethereum? The Bactrian Camel of Bitcoin Cash? The Dog of Dogecoin? The Kangaroo of KodakCoin? Fine, whatever, knock yourself out. But “the Wolf of Crypto Street” tells me you’re not even trying.

2/23/2018

Kardashian MNPI.

I don’t really understand Snapchat. I sort of understood it for five minutes back when Snap Inc. went public and its prospectus explained how to use it — turns out, the way I learn best is by having things explained to me by securities lawyers — but apparently since then the product has been revamped and now nothing is where it used to be. But my limited understanding is that the basic point of Snapchat is that you open up the app and somehow a Kardashian is there, and then you consume Kardashian content in some way, and your life is, one assumes, better for it. Now however the Kardashians might be leaving?

Snap Inc.’s flagship platform has lost some luster, at least according to one social-media influencer in the Kardashian-Jenner clan.

Shares of the Snapchat parent company sank 6.1 percent on Thursday, wiping out $1.3 billion in market value, on the heels of a tweet on Wednesday from Kylie Jenner, who said she doesn’t open the app anymore.

Yes well right, when you lose one of your biggest … customers? suppliers? products? … you should expect that to hurt your business. The result of that tweet — “sooo does anyone else not open Snapchat anymore,” asked Jenner, “Or is it just me” — strikes me as entirely reasonable and predictable.

Hmm … predictable. Reader Jianchi Chen emailed to ask a great question: “Would it be insider trading for Kylie Jenner to buy short term out of money put options on Snap and tweet out that she’s no longer using Snap?” Insider trading, as I am constantly saying around here, is not about fairness; it is about theft. It is not illegal to trade on your own nonpublic knowledge of your own intentions. Warren Buffett can buy stocks before he announces that he’s bought them, even though that announcement will predictably make the stocks go up. Activist short sellers can, and normally do, short a stock and then go public with their objections — which can drive down the price of the stock.

So I am inclined to allow it, though I am of course neither your nor Kylie Jenner’s lawyer. But as a way to profit from celebrity, shorting a company’s stock and then being mean about its products on social media seems pretty easy, and the markets would be more amusing if someone tried it. Social media companies profit because their users provide content for free; I like the idea of the users profiting by deciding to stop.

(Chen adds a twist though: “Some social/video platforms have revenue sharing agreement with their biggest content producers, and they constantly make accommodations to retain them.” Snap says “we enter into strategic relationships with a variety of partners that contribute to several aspects of our business, including partners that create content for our platform,” though I have no reason to think that Jenner has any actual business relationship with Snap. If she did, would that make this illegal? I still don’t think so. It might create a “relationship of trust and confidence” — or it might include an explicit nondisclosure agreement — but in our hypothetical Jenner isn’t trading on any information from Snap. She’s hypothetically trading on information about her own habits.)

Of course if Jenner had sold Snap stock short, drove its price down with a tweet, and then covered her shorts for a quick profit, that would probably rub some people the wrong way. It is not insider trading, but is it … a vague word that is often thrown around, particularly about short sellers, is “manipulation.” Would it be illegal manipulation for Jenner to trash the stock when she’s short? Again I do not think so, as long as her trashing is honest. Conceivably if she shorted Snap, tweeted about how she never opens Snapchat, and was secretly feverishly checking Snapchat right that minute, then that would look like manipulation. But a short sale plus an honest tweet about her social-media consumption habits seems fine.

On the other hand there are Federal Trade Commission rules requiring social-media influencers to “clearly and conspicuously disclose their relationships to brands when promoting or endorsing products through social media.” If Snap handed Jenner a bunch of its stock, and she tweeted about how she uses Snapchat all the time without disclosing that relationship, then that might run afoul of those rules. But if she just bought the stock herself then that seems fine? And if she shorted the stock herself and then tweeted about how she never uses Snap, then that seems even more fine?

Anyway none of this is legal advice but if you are a law professor and you manage to get a Kylie Jenner Snap-trading scenario into your securities regulation final exam please do let me know.

4/10/2018

The Cravath Walk.

Here are some claims about Cravath, Swaine & Moore LLP, the white-shoe law firm:

For those who stay the course to become Cravath partners, it is a lifetime career that comes with a guaranteed annual salary of several million dollars. Underscoring the “lifetime” part are traditions such as the Cravath Walk: every partner is entitled to a procession of past and present partners at their funeral, after which the assembled lawyers chant: “The partner is dead, the firm lives.”

“Entitled”? Would you … want … that? You’d be dead, of course, so you wouldn’t care, but why would the families allow it? “Next up in the service: Harry’s work buddies are gonna chant ominously for a while.” It’s like John Grisham meets Dan Brown. I hope they wear hooded robes for their chant.

4/16/2018

8-10-2018:

Oops!

Yesterday I formulated a Ninth Law of Insider Trading, which is “if you are already under a federal ethics investigation about your ownership or promotion of a stock, don’t insider trade that stock.” But I had forgotten, as I sometimes do, that I had already formulated a Ninth Law, back in October 2017. That one was “If you are going to insider trade, do it in a company that is far away from a Securities and Exchange Commission office. Like, physically.” So I guess the one about ethics is the Tenth Law. This was pointed out to me by reader Mike Peattie, who emailed:

In today’s Money Stuff you document a new Ninth Insider Trading Law, but since I often forget them, I’ve documented past Laws in a Google Doc.

So, one, great idea, I hope all of my readers keep spreadsheets of the important Money Stuff highlights, even the ones that are not legal advice. (None of them are legal advice.) Two, obviously I should be doing this; it’s particularly embarrassing when I can’t keep track of these laws. They are my laws, after all. In any case, here are all the Laws in one place:

Don’t do it.
Don’t do it by buying short-dated out-of-the-money call options on merger targets.
Don’t text or email about it.
Don’t do it in your mother’s account.
Don’t do it by planting bombs at a company and shorting its stock.
Don’t do it while employed at the Securities and Exchange Commission.
Don’t Google “how to insider trade without getting caught” before doing it.
If you didn’t insider trade, don’t forget and accidentally confess to insider trading.
If you are going to insider trade, do it in a company that is far away from a Securities and Exchange Commission office. Like, physically.
If you are already under a federal ethics investigation about your ownership or promotion of a stock, don’t insider trade that stock.

Also though Mike Peattie’s email suggests one more Law:

The Eleventh Law of Insider Trading is that if you are planning to insider trade, probably don’t keep a Google Doc spreadsheet of the Money Stuff Laws of Insider Trading. That will definitely show up in the SEC’s complaint against you. If you’re gonna insider trade, you have to keep track of these rules in your head, even at the risk of forgetting a few now and then.

I said it above but it bears repeating: None of this is legal advice. Probably put that at the top of your spreadsheet.

9/4/2018

In recent months, however, executives within the investment-bank division, which is known as Wells Fargo Securities, learned that some employees regularly placed dinner orders through delivery services like Grubhub Inc.’s Seamless or Square Inc.’s Caviar earlier than the policy allowed, the people said. Later, employees allegedly altered the time stamps on emailed receipts to make their meals eligible for reimbursement, these people added.

Honestly it’s the worst financial scandal I’ve ever heard of. If you get fired from a bank for a compliance violation, at least make it a good one, you know? “I did billions of dollars of rogue trading and eventually got caught and fired”: Yes, fine, high five. “I got fired for ordering a burrito at 6:15”: Come on, man! The horror here is not just that these bankers forged documents in order to illicitly enrich themselves, but that they forged documents in order to illicitly enrich themselves by like twenty bucks. The financial industry always holds out the possibility of redemption for people who are bold and stupid, but meek and stupid is fatal.

11/29/2018