this thread is for posting matt levine quotes in

JPMorgan made money that it did not, you would have to say, "deserve" to make

Probably what *this* should be called.
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Re: this thread is for posting matt levine quotes in

Post by Rylinks » Wed Feb 03, 2021 8:36 pm

“Sure, Derek Schmeinhorn lost us a lot of money, but we appreciate his commitment to quarterly liquidity,” investors never say after withdrawing from money-losing hedge funds. If your investors are complaining to the press about how onerous your liquidity terms are, you made the right call on the liquidity terms. If they were less onerous, your investors would be gone.

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Post by Rylinks » Mon Feb 08, 2021 5:59 pm

Maddeningly, people continue to think that it is somehow illegal insider trading? “You bought a thing without telling anyone, and then you told people that you liked the thing and it went up, that’s illegal.” I don’t even understand that intuition. No! You can trade when you know your own intentions, even when nobody else does! Also, man, it’s Bitcoin, there’s no such thing as insider trading. This footnote is especially not legal advice.

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Post by Ashenai » Tue Feb 09, 2021 6:34 pm

“You can sell garbage to the public as long as you say to the public, ‘This is garbage and you’d be an idiot to buy it, but would you like to buy it?’” said Harvey Pitt, a former SEC chairman.

What appears to have happened in recent weeks is that a massive wave of retail investors answered, “Yes,” to that question, current and former policy makers say.

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Post by Ashenai » Tue Feb 09, 2021 6:40 pm

On the other hand nothing in financial comedy can compare to SoftBank Group Corp.’s quarterly earnings presentations. Here’s yesterday’s. “What is SoftBank Group?,” asks the first slide, in approximately three different fonts. The second slide is just a picture of a goose. You know you are in good hands, at that point. “Yes, this is the stuff,” you say to yourself, looking at that goose.

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Post by Ashenai » Wed Feb 17, 2021 7:25 pm

I wonder how many Highly Regulated Excel Spreadsheets there are in the financial industry. Thousands, surely. There you are, doing your job, in your Highly Regulated Excel Spreadsheet. And you get some result you don’t like and you say, well, I dunno, I’ll just multiply everything by 1.02, that seems fine. And then years later regulators are like, no no no, that was a Highly Regulated Excel Spreadsheet, the column labels were sacrosanct, you can’t just type whatever you want there. But of course you could just type whatever you wanted there, because it was in Excel and that’s how Excel works.

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Post by Rylinks » Wed Feb 24, 2021 10:26 pm

How did fractional-reserve banking start? I don’t know, but I am going to tell you a stylized story that I made up because it’s funny. In medieval times, people would leave their gold with goldsmiths, and the goldsmiths would hang on to it for them, as a favor or a marketing device or whatever, and give it back when they asked for it. (This part is true-ish.)

And then one day a local farmer came to a goldsmith and said, look, you’ve got all this gold lying around, can I borrow some of it to buy a horse and plow? Then I’ll plow my field and make lots of money at next spring’s harvest, and I’ll pay you back the gold I borrowed with interest. You can keep the interest, and you’ll be richer. And the people who left their gold with you will be none the wiser, because what are the odds that they’ll all want their gold back at the same time between now and spring?

And the goldsmith said, no, absolutely not, that’s so dumb, how can I trust that you’ll pay me back? And if everyone did want their money back at the same time I’d be ruined and, like, beheaded, because remember we are in medieval times. And so fractional-reserve banking did not start.

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Post by Jeb Bush 2012 » Thu Feb 25, 2021 1:06 am

See, this is the difference between professional and amateur payers of bribes. Amateurs hide their bribes and refer to them by cute euphemisms; when they are caught, the fact that they called their bribes “chickens” or whatever makes it obvious that they knew what they were doing was wrong. Professionals are matter-of-fact about their bribes and refer to them by business-y euphemisms like “success fees” or “consultancy charges” or “goodwill payments” or “commissions.” And then they deduct them on their tax returns. This serves two purposes:

1. If later you are criticized for the bribes, you can say “no, see, these were just normal commissions, it’s totally fine, you can tell because we reported them on our tax returns. We wouldn’t have done that if they were illegal bribes, would we?”
2. Lower taxes!

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Post by Khaos » Thu Feb 25, 2021 5:18 am

speaking fees

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Post by Doug » Thu Feb 25, 2021 1:52 pm

We need to create a commission to study this, and pay everybody on the commission the maximum allowable salary
It's your turn in Cthulhu Wars
It's your turn in Squirrel Wars
It's your turn in Demon Wars
It's your turn in Wall Street Wars

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Post by Khaos » Thu Feb 25, 2021 6:51 pm

Doug wrote:We need to create a commission to study this, and pay everybody on the commission the maximum allowable salary
you know, my son has years of experience working on commissions. he's basically an expert

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Post by Rylinks » Tue Mar 02, 2021 6:32 pm

A major challenge in asset management is naming things. If you are starting a new investment vehicle, you want to give it a name that is unique and memorable and that conveys something about your aspirations. For instance if you’re starting a hedge fund you will probably name it after some figure of classical mythology (to convey “I have read books”) or Elvish mythology (to convey “specifically, I have read the appendices to ‘The Lord of the Rings’”)

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Post by Rylinks » Wed Mar 03, 2021 5:23 pm

As a former lawyer I am tempted to say, sure, fine, whatever, counterintuitive old doctrines are what make law school fun and keep lawyers employed. “Citi just sent us money by mistake, do we have to give it back,” the hedge fund analyst asks, and instead of saying “of course duh we live in society,” the portfolio manager replies “hang on, let me consult with a lawyer,” and the lawyer says “hang on, let me consult with my firm’s specialist in Finders Keepers Law,” and the Finders Keepers specialist consults some dusty old tomes of arcane lore and says “lemme tell you about the doctrine of discharge for value.” And she bills the hedge fund $2,000 an hour and is absolutely worth it. We live in a particular kind of society.

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Post by Ashenai » Wed Mar 03, 2021 5:43 pm

“Hi, we are bankrupt, would you like to buy some worthless stock from us,” Hertz asked its retail investors, and they said “heck yes here’s our money,” and they got back stock and it was worthless. The whole story is as simple and dumb as can be; it resists analysis totally.

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Post by Jeb Bush 2012 » Thu Mar 11, 2021 3:27 pm

Yeah, I don’t know, if anyone is going to go against the march of history it might be Monolithic Power Systems? “What kind of monolithic power systems do you offer?” “Well, we have this nice system that will power your electric lights; also the patriarchy, that’s a real monolithic power system.”

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Post by Doug » Thu Mar 11, 2021 3:48 pm

Rylinks wrote:
Wed Mar 03, 2021 5:23 pm
As a former lawyer I am tempted to say, sure, fine, whatever, counterintuitive old doctrines are what make law school fun and keep lawyers employed. “Citi just sent us money by mistake, do we have to give it back,” the hedge fund analyst asks, and instead of saying “of course duh we live in society,” the portfolio manager replies “hang on, let me consult with a lawyer,” and the lawyer says “hang on, let me consult with my firm’s specialist in Finders Keepers Law,” and the Finders Keepers specialist consults some dusty old tomes of arcane lore and says “lemme tell you about the doctrine of discharge for value.” And she bills the hedge fund $2,000 an hour and is absolutely worth it. We live in a particular kind of society.
The best part is that whether our investors make money, or lose money, Duke & Duke still get the commissions
It's your turn in Cthulhu Wars
It's your turn in Squirrel Wars
It's your turn in Demon Wars
It's your turn in Wall Street Wars

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Post by Rylinks » Thu Mar 18, 2021 11:07 pm

If you want to risk your money on hyped speculative companies, it’s really easy, and you don’t have to bother with penny stocks. Penny stocks are for the people who really know what they want.

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Post by Shiny Days » Thu Mar 18, 2021 11:09 pm

is it pennies

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Post by Rylinks » Thu Mar 18, 2021 11:11 pm

Perhaps you could tell a story in 2018 about how millions of everyday Americans had become convinced of the transformative power of legalized cannabis and wanted to invest their live savings in speculative bets on tiny pre-revenue cannabis companies, I don’t know. But in 2021 I think the story has to be “people are bored and gambling is fun, and some fraction of the gambling market has been captured by self-consciously stupid penny-stock speculation.” (Other fractions have been captured by crypto, NFTs, meme stocks, etc.) Penny-stock scammers are not (just) running “schemes to part newbie traders from their cash”; they are also providing those newbie traders (and experienced traders) with entertainment in exchange for their cash. Penny stocks are a casino; sure your expectation is negative, but (1) you might win! and (2) the goal is to enjoy yourself, have fun with your friends, and exercise and develop your gambling skills, while losing. Are casinos a scheme to part gamblers from their cash? Yes, sure, of course they are, but they are also entertainment, and most gamblers understand that.

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Post by Ashenai » Mon Apr 05, 2021 7:18 pm

I don’t think Musk ever got into much securities-fraud-type trouble for tweeting material false statements about Tesla on April Fools’ Day, because (1) he was pretty obviously kidding and (2) he was too busy getting into securities-fraud-type trouble for tweeting other material false statements about Tesla on other days.

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Post by Jeb Bush 2012 » Mon Apr 05, 2021 7:57 pm

The guy called up Christie’s and was like “Hi, I have tens of millions of dollars that I’d like to spend on nothing; if I gave you $20 million would you sell me a digital receipt entitling me to nothing?” And “the team in China was clever enough” to sell him a Picasso instead. Like, “Oh yes, we appreciate your sophisticated taste in nothing, but we are fresh out of nothing; have you considered that tens of millions of dollars will buy you actual paintings by famous artists? Perhaps you have heard of literally Picasso?”

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Post by Rylinks » Wed Apr 07, 2021 4:59 pm

Again, if you work in prime brokerage or equity swaps at a big bank, you are just not in the business of holding billions of dollars of stock, unhedged, for long periods through huge mark-to-market losses. You have $10 billion of stock, it goes to $5 billion, you have a $5 billion mark-to-market loss, the chief executive officer calls you up and asks what on earth you think you’re doing, you say “oh it’s fine, I just found myself long $10 billion of stock and decided to hang onto it, we gotta wait for it to recover,” and the CEO instantly and publicly fires you.[7]

7: Even if you can convince the CEO that you know what you’re doing, regulators and supervisors and politicians and shareholders and depositors and really everyone are not going to be happy about a giant prop position with giant losses.

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Post by Ashenai » Mon Apr 12, 2021 6:13 pm

People are out there running Ponzi schemes, concocting elaborate fake financial statements and business deals to get suckers to send them money. Or they are making non-fungible tokens and talking about the value of immutable blah blah blah on the blockchain. But Mistress Marley has it right: She has tapped into suckers’ pure desire to send her money; she has dispensed with all of the pseudo-financial trappings and reduced it to “you don’t deserve this money, you worm, so send it to me.” Honestly an investment bank should try that move.

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Post by Rylinks » Tue Apr 20, 2021 5:45 pm

You form a Committee on Good and Bad Lending, and it starts writing down a list — no guns, no coal, yes racial and gender diversity, no billionaires with dubious ties to corrupt governments, no insurrection against democracy, etc. — and after writing down, like, the 50 hottest topics, you might feel pretty good about yourself. But then a banker comes to the committee with a proposal to finance a new soccer league. Soccer seems fun! There are no guns. Soccer teams travel, but really it’s no worse for the environment than most businesses. Let’s assume (counterfactually!) that there are no issues of racism or political corruption in international soccer, hahaha. Also it generates piles of cash. So, sure, wave it in.

But you have not counted on the fact that the soccer league is very bad, for soccer, and that billions of soccer fans have extremely strong moral, ethical and aesthetic views about the goodness of soccer:

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Post by Rylinks » Wed Apr 28, 2021 11:17 pm

I think that, if you can reliably do that — if you are Elon Musk and you can make Bitcoin go up by tweeting about it — you almost have an obligation to do it? Perhaps a fiduciary obligation to your shareholders, but at least a sort of aesthetic obligation to comedy

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Post by Rylinks » Wed May 12, 2021 5:37 pm

But the other thing to remember about Hertz is that Hertz, looking at all these enthusiastic buyers of its stock, decided to do something about it. It decided to sell them stock. To raise money, to fund its business and pay off its creditors and maybe emerge from bankruptcy with some value intact. It warned investors that, by any conventional standards, they were being foolish; its prospectus said “we expect that common stock holders would not receive a recovery through any plan” unless there was “a significant and rapid and currently unanticipated improvement in business conditions to pre-COVID-19 or close to pre-COVID-19 levels.” And then there was a significant and rapid improvement in conditions, and the shareholders did get a recovery.

But before Hertz could sell much stock, the U.S. Securities and Exchange Commission shut down the offering. It never really said why. Well, there was this:
“We have let the company know that we have comments on their disclosure,” SEC Chairman Jay Clayton said in a CNBC interview Wednesday. “In most cases when you let a company know that the SEC has comments on their disclosure, they do not go forward until those comments are resolved.”
But it’s not clear what the comments were, and, again, it’s not like Hertz didn’t warn investors that it was bankrupt and their investment would probably be worthless. It was “ fraud in plain sight,” as one lawyer called it. The problem surely was not disclosure; it was that the SEC thought — as I thought, and William Cohan thought, and everyone thought — the investors were throwing away their money, and it seemed wrong to let Hertz take that money.

But we were all wrong! They were right! If they had been able to give Hertz their money, Hertz might have exited bankruptcy more quickly and efficiently and preserved more value, and those shareholders would have made money. The people who did buy in the offering, before the SEC shut it down, paid about $2.08 per share, meaning that they are sitting on more than a 100% profit over about 11 months. More investors could have gotten that deal, but the SEC said no.

The core idea of U.S. securities law is disclosure: Companies should accurately and completely disclose their situations to investors, and then investors get to make up their own minds about what stocks to buy and how much to pay. In weird and bubbly and meme-y times, that idea makes people nervous: “Sure sure sure you have disclosed all your financial information, but you are bankrupt, how can you sell stock to people? How can they buy it?” And so there is a temptation to meddle, to restrict trades even with full disclosure, to protect investors from their own fully informed but apparently crazy decisions. With Hertz, that happens to have been a mistake.

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Post by Crunchums » Wed May 12, 2021 6:29 pm

SEC: "that's a nice [anything] you've got there... would be a shame if some securities fraud happened to it"
this post was made by Crunchums; beware the [ai] tag

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Post by Ashenai » Thu May 13, 2021 4:57 pm

And when Elon Musk announces a decision on Twitter, he will often stick with that decision for hours, sometimes even days at a time. Surely by next week he’ll be tweeting, like, “we are building a giant battery in the desert to mine Bitcoin, Bitcoin is good again, you can use it to pay for Teslas,” and the price will shoot back up, and I’ll once again hit the button that auto-generates this column.

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Post by Rylinks » Thu May 13, 2021 5:18 pm

Anyway, since Musk is looking for alternatives, I have a coin that uses <1% of Bitcoin’s energy per transaction! It is called ExcelCoin.[4] Instead of relying on proof-of-work, burning tons of energy to mine coins to reward people for keeping track of the ledger of transactions, as Bitcoin does, ExcelCoin relies on me keeping track of the list of transactions in Microsoft Excel. If you want to buy ExcelCoins, you just wire me money and I add some ExcelCoins to the line with your name on it, in my Excel spreadsheet. If you want to buy a Tesla with ExcelCoins, you send me an email saying “send my ExcelCoins to Tesla,” I deduct the ExcelCoins from your line in Excel and add them to Tesla’s line, and I send Tesla an email saying “you’ve got the ExcelCoins, hand over the car.” If you want to redeem your ExcelCoins for dollars, well, well, well, well, well, well, let’s discuss that some other time.

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Re: this thread is for posting matt levine quotes in

Post by Jeb Bush 2012 » Thu May 13, 2021 5:54 pm

the footnote about tesla's return policy for cars bought with BTC is amazing

rapidly revising my opinions about elon musk as I learn about his enthusiasm for owning crypto enthusiasts as hard as possible

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Re: this thread is for posting matt levine quotes in

Post by Blissful » Fri May 14, 2021 11:05 am

Jeb Bush 2012 wrote:
Thu May 13, 2021 5:54 pm
the footnote about tesla's return policy for cars bought with BTC is amazing

rapidly revising my opinions about elon musk as I learn about his enthusiasm for owning crypto enthusiasts as hard as possible
whats the footnote

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