To: Hidden Recipient Date: Thu, 05 Feb 2026 18:59:26 +0000 Content-Type: multipart/alternative; boundary="_----ts02OnGsHo9WuPwL4iR3rA===_AC/41-36624-E88E4896" MIME-Version: 1.0 Subject: =?utf-8?B?TW9uZXkgU3R1ZmY6IEZpdmUgQmFuYW5hcyBXb27igJl0IFBheSB0?= =?utf-8?B?aGUgUmVudA==?= From: "Matt Levine" X-Hiring: We are hiring, reach out at header-hacker@emailshot.io X-EmailShot-Signature: ZA12oDZfds1ekosPQ4QtBXh7uBIjqmM44rjMCOmkrRQySW5FwzPxwEWktK5RIth7aabvjBgJzEv7N9Fl8rLdUw== --_----ts02OnGsHo9WuPwL4iR3rA===_AC/41-36624-E88E4896 Content-Transfer-Encoding: quoted-printable Content-Type: text/plain; charset="UTF-8" Money Stuff =0A Bilt, indexes, Kalshi, Bitcoin. =0A=0AView in browser =0A =0A=0A =0A=0A =0A=0A=0A=0A=0ABilt=0A=0AA helpful rule = of thumb is: =E2=80=9CYou always find =0Aproduct= market fit when your product is giving away money.=E2=80=9D [1] <> We ta= lked =0Alast month about =E2=80=9Cthe MoviePass = economy,=E2=80=9D the =0Aglorious period in the 2010s when venture capitali= sts subsidized money-losing =0Aconsumer businesses so they could grow as fa= st as possible. The theory was that =0Aif a company =E2=80=94 Uber or WeWor= k or even MoviePass =E2=80=94 could sell its product below =0Acost, a lot o= f people would use it and it would quickly become popular. And =0Athen one = of four things would happen:=0A=0A * The company=E2=80=99s costs would go d= own, because of economies of scale, so it =0Awould become profitable; =0A *= The product would be so valuable, because of network effects or monopoly = =0Apower, that it could raise its prices and become profitable; =0A * The c= ompany=E2=80=99s user base would be so big and valuable that it could get = =0Aancillary revenue by, like, selling data or advertising, and become prof= itable; =0Aor =0A * Hilarious bankruptcy. =0AWeWork and MoviePass ended up = in the last category, but this was not a bad =0Atheory; Uber is big and pro= fitable now. It is just atricky theory. If you have =0Arapid user growth an= d enthusiastic reviews and are giving away money, how do =0Ayou know that p= eople like the underlying product=3F How do you know they=E2=80=99re not = =0Ajust in it for the free money=3F If you turn off the free money, will th= ey stop =0Ausing the product=3F=0A=0AToday Bloomberg=E2=80=99s Paige Smith = writes about Bilt Technologies Inc. =0A, whose f= ounder, Ankur Jain, =E2=80=9Cinitially envisioned =0Athe company as an elec= tronic system for paying rent and getting rewarded for =0Ait.=E2=80=9D Peop= le did not quite want that, though: =E2=80=9CLandlords proved hesitant to = =0Aadopt Bilt=E2=80=99s payments software until they knew customers would a= ctually use =0Ait.=E2=80=9D So Bilt pivoted ever so slightly:=0A=0AHis solu= tion: Add a credit card with a rewards program so generous that =0Apoint-ma= xxing renters would demand that their landlords adopt Bilt=E2=80=99s paymen= t =0Aplatform. Renters could finally earn points for their biggest outlay e= ach =0Amonth=E2=80=94one which had previously been off-limits for credit ca= rd rewards=E2=80=94along =0Awith anything else they charged. =E2=80=A6=0A= =0AThe credit card took off; so did Bilt=E2=80=99s clout among landlords. S= ome 5.5 =0Amillion Americans now pay for their housing via Bilt=E2=80=99s s= ystem. The company says =0Ait has relationships with 70% of the country=E2= =80=99s top 100 property managers. One =0Areason they like it, Jain says: P= roperty owners using the software see a 12% =0Adecrease in delinquency and = a 30% boost in on-time payments.=0A=0AWe talked in 2024 about the economics of Bilt, and =0Athere was another, possibly mo= re important reason that landlords like Bilt. =0ATypically merchants pay a = fee =E2=80=94 sometimes called =E2=80=9Cinterchange=E2=80=9D =E2=80=94 for = accepting =0Acredit cards. If you sell a product for $100, and the customer= pays with a =0Acredit card, you might only get $98; the other $2 is an int= erchange fee that =0Agoes to the credit card banks and network. Many mercha= nts accept credit cards =0Abecause doing so increases transaction volume = =E2=80=94 most people pay for most stuff =0Awith credit cards =E2=80=94 and= 2% is a small price to pay for getting more customers. =0AIt=E2=80=99s a f= orm of marketing spend.=0A=0AFor a landlord, though, this makes no sense. T= he rent is high, so 2% of it is =0Aa lot of money. And most of your tenants= already live there, so you don=E2=80=99t need =0Ato attract them by taking= credit cards; it=E2=80=99s not like they=E2=80=99ll move out if they =0Aca= n=E2=80=99t pay by credit card. And so, before Bilt, it was hard to put ren= t on a =0Acredit card. Or if you could, the landlord would charge you a fee= to cover the =0Ainterchange.=0A=0ABilt solved this problem by not charging= anyone the fees. It partnered with =0AWells Fargo & Co. to issue the credi= t cards, and, as the Wall Street Journal =0Areported in 2024 :=0A=0AThere is a reason why credit cards hadn=E2=80=99t gaine= d traction in the rent sector =0Auntil Bilt came along. Most landlords didn= =E2=80=99t accept them because they refuse to =0Apay card fees that get poc= keted by the banks issuing them and often run between =0A2% and 3%.=0A=0ABi= lt structured the card so landlords won=E2=80=99t incur the fees. Wells ins= tead eats =0Amuch of that.=0A=0ARight, great. The way rewards credit cards = generally work is that I buy =0Asomething from you, I pay $100, you get $98= , and my credit card company gets $2.=0A[2] <> Some of that $2 goes to the= bank=E2=80=99s expenses (marketing the card, =0Aprocessing the transaction= , credit losses, etc.), but some of it =E2=80=94 say $1 =E2=80=94 is =0Alef= t over and can fund rewards. So I get $1 of cash back or airline rewards or= =0Awhatever from this $100 transaction. So I feel great: I got a little bo= nus at =0Athe expense of, ultimately, the merchant who got $98 for a $100 s= ale.=0A=0ABut the way Bilt=E2=80=99s rent credit card worked was that I ren= ted an apartment from =0Ayou, I paid $3,000, you got $3,000, andWells Fargo= paid me $30 of rewards. Why=3F =0AWell, the theory must have been somethin= g like this:=0A=0A * I spend $10,000 on my credit card every month. =0A * O= f that, $3,000 goes to rent, where Wells Fargo collects $0 of interchange, = =0Abut $7,000 goes to other stuff, where Wells Fargo collects $140 of inter= change. =0A * I get $100 of rewards (1% of my total spending, including ren= t). =0A * Wells Fargo keeps $40, just enough to cover its costs. =0A * Even= tually this gets mass adoption, everyone has a Bilt credit card and =0Auses= it for everything, Wells Fargo=E2=80=99s revenue goes up, the costs go dow= n, and =0Aperhaps there is some pricing power. Perhaps eventually you can m= ake the =0Alandlords pay interchange fees. =0AThese numbers are fake and st= ylized, although they=E2=80=99re in the right ballpark; =0Athe Journal repo= rted that =E2=80=9Cthe bank assumed around 65% of card-purchase volume =0Aw= ould be nonrent, generating interchange-fee revenue.=E2=80=9D But the theor= y was =0Awrong: Actually people mostly used the cards to pay rent, and Well= s Fargo ate =0Athe cost. Smith writes :=0A=0AWhil= e the company=E2=80=99s card rewards program became very popular, it also p= roved =0Aunsustainable. Card issuer Wells Fargo & Co. was losing as much as= $10 million =0Aa month on the Bilt partnership, according to a 2024Wall St= reet Journal article =0A. In the wake of a public= breakup with Wells, =0Aannounced last July, Bilttouted what was supposed to =0Abe a fresh start, with new banking and fina= ncial-technology partners. The card =0Arevamp, unveiled in January, was als= o intended to close some loopholes =0Acustomers had exploited, including an= internet-famous one in which cardholders, =0Arequired to make five transac= tions each month to fully activate their rent =0Apoints, would pay rent and= then go out and buy four individual bananas.=0A=0AEveryone knew that if cu= stomers used their Bilt cards only to pay rent, Bilt =0Aand its card partne= r would get fleeced. So you only got rewards if you used =0Ayour Bilt card = for rent and also a reasonable amount of other stuff. But =E2=80=9Ca =0Area= sonable amount of other stuff=E2=80=9D is a fuzzy concept, and for a while = Bilt =0Adefined it as five monthly credit-card transactions. This requireme= nt became =0Aknown as =E2=80=9Cfive bananas ,=E2= =80=9D and buying five bananas is =0Anot going to cover the bank=E2=80=99s = costs.=0A=0ASo Bilt pivoted, and people got mad, because (1) they had been = getting free =0Amoney and (2) now they weren=E2=80=99t:=0A=0AThe rollout ha= dn=E2=80=99t gone quite as planned. In the days after unveiling the =0Arepl= acement cards, Jain found himself on an apology tour as customers =0Athreat= ened to abandon Bilt en masse over changes to how its much-loved rent =0Are= wards would be calculated=E2=80=94a complex web of new multipliers and =E2= =80=9CBilt Cash=E2=80=9D =0Apayouts that confounded customers. Cardholders = swarmed Reddit and YouTube to =0Aroast the program as =E2=80=9Ca complicate= d math problem=E2=80=9D and =E2=80=9Ca trap.=E2=80=9D As one =0Acommenter p= ut it, =E2=80=9CThe fact that I=E2=80=99ve read this four times and still d= on=E2=80=99t =0Aunderstand what the hell it=E2=80=99s actually saying is en= ough for me to know I=E2=80=99ll =0Ajust be closing the card.=E2=80=9D The = critical response was a jolt=E2=80=94especially for =0AJain, who says he gi= ves all Bilt customers his personal email. =E2=80=9CThey get my =0Ainbox, a= nd I respond to as many of them as I possibly can. People send me their =0A= hate mail, their love mail.=E2=80=9D Within days of the digital dragging, B= ilt =0Aannounced it would tweak the new card structure again, including let= ting =0Acustomers choose between two different points-accrual calculations.= =0A=0ARight but like =E2=80=A6 this is not a problem of customer service. T= his is a problem =0Aofarithmetic. If the customers only use their cards to = pay for rent, the math =0Adoesn=E2=80=99t work. Butsomething worked:=0A=0AT= he big question now is whether Bilt cardholders will stick with the company= =0Aconsidering its updated cards look a lot like other rewards cards on th= e =0Amarket. On one hand, irked customers have been complaining (loudly) th= at what =0Amade Bilt=E2=80=99s card special is no more. But most consumers = aren=E2=80=99t likely to ditch =0ABilt outright, as credit cards are notori= ously sticky, and the company says =0Ait=E2=80=99s been getting a record nu= mber of applications for the new cards. In the =0Afinal two weeks of Januar= y, 83% of Bilt=E2=80=99s active cardholders requested one of =0Athe new car= ds, the company says. Adding to Bilt=E2=80=99s stickiness: Its =0Arent-proc= essing software, Jain=E2=80=99s original vision, is now used in 25% of US = =0Aapartment buildings.=0A=0ABilt wanted to create an electronic system for= paying rent, but landlords =0Adidn=E2=80=99t want that system unless it ha= d customers. So it gave away free money to =0Aget customers, and now landlo= rds use its electronic system for paying rent, so =0Ait can stop giving awa= y free money.=0A=0A =0A=0A=0A =0A= =0A=0AFast track=0A=0ARight now, something close to 100% of SpaceX=E2=80=99= s stock is held by Elon Musk, =0ASpaceX employees, and big venture-capital-= type early investors. [3] <> This =0Atime next year, something like 22% of that stock =E2=80=94 =0A$330 billion worth, at = SpaceX=E2=80=99s hypothetical $1.5 trillionIPO valuation =0A =E2=80=94 will be held by index funds. You know that, I know = =0Athat, Elon Musk knows that, his bankers know that, SpaceX=E2=80=99s priv= ate investors =0Aknow that and the index funds know that.=0A=0AThey could d= o a trade=3F The index funds could give SpaceX orders to buy stock, =0Aand = the employees and private investors could give SpaceX orders to sell stock,= =0Aand SpaceX could arrange the trade. SpaceX does trades like that with s= ome =0Aregularity, =E2=80=9Cemployee tenders =E2= =80=9D where outside =0A(private) investors buy and current investors sell = in bulk transactions =0Aarranged by SpaceX. [4] <> Very tidy.=0A=0ABut wha= t will actually happen, between now and a year from now, is less tidy. =0AI= t=E2=80=99s more like this:=0A=0A * SpaceX will arrange a trade in which th= e company itself will sell, say, $50 =0Abillion of stock to public investor= s. This is called an =E2=80=9Cinitial public =0Aoffering.=E2=80=9D Maybe th= e existing early investors will sell a little bit of their =0Astock in the = IPO, though maybe not; the IPO=E2=80=99s purpose seems to be mostly to =0Ar= aise funding for SpaceX (and xAI), not to cash out early investors. And the= =0Apublic investors who buy stock in the IPO will not be index funds; they= will be =0Amutual funds, hedge funds, other public institutional investors= and, probably, =0Aretail investors . =0A * Then = that $50 billion of stock will start trading publicly, and anyone who =0Awa= nts to buy it will be able to, at the market-clearing price. The price of t= he =0Astock will reflect demand for SpaceX, a trillion-dollar-plus company.= And it =0Awill reflect $50 billion of supply. It would not be especially s= urprising if the=0A stock went up : Lots of peopl= e want to own SpaceX, =0Abut they=E2=80=99ll only be able to get $50 billio= n of it. =0A * Six months later, the =E2=80=9CIPO lockup=E2=80=9D will expi= re, and all of those private =0Ainvestors =E2=80=94 employees, venture capi= tal investors, Musk =E2=80=94 will be able to sell =0Atheir stock at the ma= rket-clearing price. Some won=E2=80=99t, but some will, and the =0Astock pr= ice will now reflect hundreds of billions of dollars of new supply. It =0Aw= ould not be especially surprising if the stock went down. =0A * At some poi= nt, SpaceX will be added to the S&P 500 index, and index funds =0Awill buy = the stock. And the price will reflect hundreds of billions of dollars =0Aof= new demand. It would not be especially surprising if the stock went up =0A= . =0ADoesn=E2=80=99t it sound like that would cre= ate a lot of volatility=3F You start by =0Aselling a little bit of stock in= to a lot of demand. Then, when things have =0Asettled down a bit, you sell = a lot more stock. And then at some random other =0Apoint, index funds have = to go buy a lot of stock. Everyone knows all of this, =0Aand the market doe= s a decent job of anticipating it: The IPO price in Step 1 =0Areflects the = anticipated public demand in Step 2, the price before the lockup =0Aexpiry = will reflect the anticipated supply in Step 3, index arbitrageurs will =0Ab= uy stock to anticipate the index demand in Step 4. But it would be tidier i= f =0Aeverything just lined up. Even if just Steps 3 and 4 lined up =E2=80= =94 if SpaceX got =0Aadded to the S&P 500 index the same day the lockup exp= ired, so all the early =0Ainvestors could sell directly to the index funds = =E2=80=94 that would avoid a lot of =0Ainefficient trading.=0A=0AWe talked= yesterday about how it would be nice if =0ASpac= eX could sell to index fundsin the IPO, but the real issue is the lockup = =0Aexpiry, when all of SpaceX=E2=80=99s private investors finally get their= chance to =0Asell. If they could sell to index funds, that would avoid a l= ot of heartache =0Aand volatility. TheWall Street Journal reports :=0A=0AAdvisers for the company, which recently merged wit= h xAI, have reached out to =0Amajor index providers, including Nasdaq, to d= iscuss how SpaceX and this year=E2=80=99s =0Aother hot startups might join = key indexes sooner than normal, according to =0Apeople familiar with the ma= tter.=0A=0ACompanies typically must wait several months or a year after the= ir public =0Adebut before gaining inclusion in a major index such as the S&= P 500 or the =0ANasdaq-100. Inclusion unlocks access to retail and institut= ional capital from =0Afunds, particularly those mimicking the performance o= f indexes that have to =0Ahold the companies in the index.=0A=0AThe traditi= onal waiting period is intended to give the companies time to =0Ademonstrat= e that they are stable and liquid enough to handle extensive buying =0Afrom= index funds.=0A=0ASpaceX hopes to skirt traditional rules in an effort to = bring liquidity to its =0Ashareholders sooner as part of its planned IPO. = =E2=80=A6=0A=0AInvestors and advisers to companies planning to go public th= is year are =0Aconcerned not only about initial trading, but also that the = standard six-month =0Alockup period=E2=80=94which prevents early investors,= executives and employees from =0Aselling their stock=E2=80=94might prompt = significant selling that pressures shares. =0AAfter Meta went public in 201= 2, shares sank when early investors unloaded all =0Aat once.=0A=0ASpaceX is= exploring ways to better balance supply and demand to avoid that =0Aoutcom= e, some of the people said.=0A=0AObviously one could have a cynical view of= this. (I wrote on Tuesday =0A, not about SpaceX= , that =E2=80=9CIf you are really ambitious =0Aat pumping and dumping, the = ultimate buyer of last resort =E2=80=94 the final dumping =0Aplace for your= stock =E2=80=94 is an index fund.=E2=80=9D) But SpaceX has a point! Lining= up =0Athe buyers and the sellers really would be tidier.=0A=0A=0AKalshi su= rveillance=0A=0AOne interesting question is: How much undetected insider tr= ading is there=3F I =0Awrite a lot aboutdetected insider trading, because t= he US Securities and =0AExchange Commission brings a lot of cases, and ofte= n they are dumb. Often the =0Apeople doing the insider trading are pretty o= bvious about it, and of course =0Athey get caught. And so you might think = =E2=80=9Coh wow insider traders are dumb.=E2=80=9D But =0Aof course that pr= oves nothing. Maybe 99% of insider traders are very smart and =0Anever get = caught, so I never write about them. I only write about the dumb =0Aminorit= y.=0A=0AMy guess is that this is mostly wrong, but I don=E2=80=99t know. Pe= rhaps there are a =0Alot of sophisticated insider traders out there who hav= e taken the compliance =0Atrainings and read Money Stuff and know all the p= itfalls, so they insider trade =0Ain ways that avoid the pitfalls and never= get caught. Perhaps this knowledge is =0Aslowly spreading, and the frequen= cy of dumb insider trading =E2=80=94 of insider =0Atrading that gets caught= =E2=80=94 will decline over time.=0A=0AHow much undetected insider trading= is there in prediction markets=3F Well, a =0Afew points:=0A=0A * The legal= status of insider trading in prediction markets is at least =0Asomewhat le= ss obvious than it is in the stock market, so sophisticated hedge =0Afund m= anagers can go around saying in public that =0Ap= rediction market insider trading is totally legal. (Not legal advice!) =0A = * But actually it=E2=80=99s probably illegal in the US. (Not legal advice!)= =0A * Prediction markets are regulated by the US Commodity Futures Trading= =0ACommission, not the SEC, and the CFTC is smaller and maybe less aggress= ive =0Aabout bringing cases. =0A * There are so many more things that you c= an predict than there are public =0Acompanies. If a public company announce= s a merger, the SEC can ask it who knew =0Aabout the merger and cross-check= the list against trading records. Butthe front =0Apage of Kalshi this morning had questions like =0A=E2=80=9CWhich brands = will advertise during the [Super Bowl],=E2=80=9D [5] <> =E2=80=9C[Super Bo= wl] =0AChampionship: Seattle vs New England,=E2=80=9D =E2=80=9CAli Khamenei= out as Supreme Leader,=E2=80=9D =0A=E2=80=9C2028 Democratic nominee for Pr= esident,=E2=80=9D =E2=80=9CWill Timoth=C3=A9e Chalamet and Kylie =0AJenner = be engaged this year=E2=80=9D and =E2=80=9CWhat will Logan Paul=E2=80=99s P= ikachu Illustrator go =0Afor at auction=3F=E2=80=9D It=E2=80=99s not that t= he CFTCcouldn=E2=80=99t ask the Patriots who knew about =0ADrake Maye=E2=80= =99s injury status, or that it couldn=E2=80=99t ask Timoth=C3=A9e Chalamet = about his =0Aintentions, or that it couldn=E2=80=99t ask Logan Paul what a = Pikachu Illustrator is, =0Aand then cross-check the answers against trading= records. It=E2=80=99s that every day =0Athere=E2=80=99s some entirely new = thing to worry about, and =E2=80=94 unlike public companies =0Aand the SEC = =E2=80=94 the new thing is probably not already deeply engaged with the =0A= CFTC. Timoth=C3=A9e Chalamet might not pick up their call. Ali Khamenei def= initely =0Awon=E2=80=99t. =0A * The amount of money that you can make in mo= st prediction markets, other =0Athan sports, is mostly pretty small, so the= incentives to insider trade aren=E2=80=99t =0Areally there yet. =0A * But = that might be changing as they get more popular. =0AI think it is reasonabl= e to look at the situation and conclude:=0A=0A * There=E2=80=99s probably n= ot that much insider trading in prediction markets yet, =0Abut that will gr= ow rapidly as the markets do. =0A * The insider trading will probably be qu= ite sloppy, because there is not the =0Asame widespread understanding that = it is illegal that there is in the =0Asecurities markets. =0A * The sloppy = insider trading might nonetheless be hard to catch, because the =0Asurface = area is so large and because deep down the regulators might not care. =0AAn= yway here=E2=80=99s an announcement from Kalshi := =0A=0APrediction market platform Kalshi today announced a major expansion o= f its =0Amarket surveillance and enforcement framework. The company has for= med an =0Aindependent surveillance advisory committee and new trading surve= illance =0Apartnerships with Solidus Labs and the Director of the Wharton F= orensic =0AAnalytics Lab, Daniel Taylor. These initiatives further strength= en Kalshi=E2=80=99s =0Amarket surveillance and compliance programs, solidif= ying its position as the =0Aleading federally regulated prediction market= =E2=80=A6.=0A=0ABeing federally regulated means that Kalshi bans market man= ipulation, insider =0Atrading, has limits on the types of markets it lists,= runs Know-Your-Customer =0A(KYC) and Anti-Money Laundering (AML) checks on= every user before they can =0Atrade, and publicly reports all trades to th= e CFTC daily. Kalshi also spent =0Ayears building custom prediction market = trade surveillance and enforcement =0Asystems that are similar to those use= d in the stock market.=0A=0AI just feel like the first, you know, 20 people= to get arrested for insider =0Atrading on Kalshi will be very surprised. = =E2=80=9CWait, was I not allowed to do that=3F =0AI thought that was the wh= ole point.=E2=80=9D=0A=0A=0ABitcoin=0A=0AI mean the way the world works is = that there=E2=80=99s some stock, and it trades at =0A$100, and some people = own it on margin, and then it falls to $90 and they get =0Amargin calls, an= d some of them sell it to meet the margin calls, and then it =0Afalls to $8= 0 and some more people get margin calls, and they sell more stock to =0Amee= t margin calls, and then it falls to $70 and some more people get margin = =0Acalls, but then some deep value investors are like =E2=80=9Cwait a minut= e this has gone =0Aon too long. This company has a good business and steady= cash flows that are =0Aworth at least $75 per share. Sure the market is sc= ary, sure there are a lot of =0Aforced liquidations, sure the technicals ar= e bad, but in the medium term this =0Astock is worth at least $75, so I wil= l buy it now when it is on sale.=E2=80=9D And the =0Aspiral stops.=0A=0ANot= always, of course; some companies are worth zero, and get there. And of = =0Acourse this process is messy and uncertain and will tend to overshoot. B= ut =0Abroadly speaking, a stock=E2=80=99s price in the short term will refl= ect things like =0Aforced sales by its owners, but its price in the long te= rm should reflect =0Amarket expectations of the present value of its future= cash flows. There=E2=80=99s =0Ausuallysomebody with some spare cash lookin= g for a bargain, and when a stock=E2=80=99s =0Aprice falls too far below it= s fundamental value they will buy it.=0A=0AIn other news, Bloomberg=E2=80= =99s Emily Nicolle, Vildana Hajric and David Pan write =0Aabout Bitcoin=E2= =80=99s slide :=0A=0ABitcoin tumbled below $70,00= 0 as the unwinding of leveraged bets and broader =0Amarket turbulence deepe= ned a selloff that has wiped out all of the gains since =0APresident Donald= Trump=E2=80=99s election set off a speculative rush into =0Acryptocurrenci= es.=0A=0AThe token fell as much as 10% Thursday to $65,344, the lowest sinc= e October =0A2024. =E2=80=A6=0A=0AThe market started cracking this month as= rising geopolitical tensions sent =0Atremors across global financial marke= ts and curbed risk taking. That sparked =0ABitcoin=E2=80=99s precipitous de= cline from mid-January and set off a self-reinforcing =0Acycle of selling a= s funds liquidated assets to meet redemptions and unwind =0Aleveraged bets.= =0A=0AYes, fine, but eventually the fundamentals will, uh, you know what, n= ever =0Amind, let=E2=80=99s let them continue:=0A=0AThis time, Bitcoin and = other cryptocurrencies are also seeing competition from =0Aother forms of s= peculation, like legalized sport gambling and prediction-market =0Awagering= on everything from politics to entertainment. At the same time, retail =0A= flow continues to chase zero-day options in equities and higher-yield crypt= o =0Aplays across decentralized exchanges.=0A=0AThe latest drop comes as di= gital assets face continued doubts about their =0Areal-world use, as well. = Once touted as an inflation hedge or a rival to gold =0Aor the US dollar as= a stable store of value, Bitcoin has continued to trade =0Amore like a hig= h-risk asset and has failed to serve as a haven during times of =0Afinancia= l market stress.=0A=0AI love that you can describe Bitcoin as both =E2=80= =9Ca haven during times of =0Afinancial market stress=E2=80=9D and also a c= ompetitor for sports gambling.=0A=0A=0AThings happen=0A=0ANovo Shares Fall = As Hims & Hers Offers $49 Wegovy Copycat =0A. Op= enAI Unveils Platform to Help Companies Deploy =E2=80=98 =0AAI Coworkers .=E2=80=99 Divorce, Hedge-Fund Style: Inside the = =0ABreakup at Two Sigma . Patrick Drahi shifts as= sets =0Aworth billionsaway from creditors . Rio T= into =0AAbandons Glencore Talks to Form World= =E2=80=99s Biggest =0AMiner. UBS Investment Bank Units to See Bonus Pools <= https://bloom.bg/4ahkKMM> =0AJump by Up To 20%. Senators AccuseEquifax of =0A=E2=80=98Price-Gouging=E2=80=99 Medicaid Progr= ams. New York=E2=80=99s Pension Funds Scrutinize Palantir =0A Over ICE Contract. Epstein=E2=80=99s Fondness for Elite =0AL= awyer Ends in Downfall. Kirkland & Ellis lawyer = =0Asoughtuse of Epstein helicopter after securin= g plea. =0A=E2=80=9CGoldman Sachs general counsel Kathy Ruemmler appeared t= o ask Jeffrey Epstein =0Aif he planned to =E2=80=98trade one of your Russia= ns for my comp =0A=E2=80=99 in an email exchange = about her negotiating a =0Apotential job at hedge fund Citadel.=E2=80=9D=0A= =0AIf you'd like to get Money Stuff in handy email form, right in your inbo= x, =0Apleasesubscribe at this link . Or you can s= ubscribe =0Ato Money Stuff and other great Bloomberg newslettershere =0A. Thanks!=0A=0A[1] I get that from this Medium post = by Tony =0AStubblebine, who attributes it to Bry= ce Roberts.=0A=0A[2] No, no, the numbers are more variable than that, and t= he credit-card =0Anetwork and your accepting bank get some of the money, bu= t let=E2=80=99s keep things =0Asimple.=0A=0A[3] That=E2=80=99s a guess. Obv= iously there is secondary trading, and there are various=0A retail vehicles= , etc., but that stuff all seems =0Arelatively s= mall.=0A=0A[4] SpaceX seems to be a buyer in the recent tenders, so it=E2= =80=99s not clear how =0Amuch of it is outside investor money.=0A=0A[5] Shh= h, they=E2=80=99re not allowed to say =E2=80=9C= Super Bowl.=E2=80=9D=0A=0A=0A =0A=0AFollow Us <= https://bloom.bg/4nqVBoU> =0A Get the newsletter =0A=0A=0ALike get= ting this newsletter=3F Subscribe to Bloomberg.com =0A=0A for unlimit= ed access to trusted, data-driven journalism and subscriber-only =0Ainsight= s.=0A=0ABefore it=E2=80=99s here, it=E2=80=99s on the Bloomberg Terminal. F= ind out more about how the =0ATerminal delivers information and analysis th= at financial professionals can=E2=80=99t =0Afind anywhere else.Learn more = =0A=0A.=0A=0AWant to sponsor this news= letter=3F Get in touch here =0A=0A.= =0A=0A You received this message because you are subscribed to Bloomberg's = Money =0AStuff newsletter. =0AUnsubscribe =0A=0A |Bloomberg.com = | Contact Us =0A =0A= =0A | =0ABloomberg = L.P. 731 Lexington, New York, NY, 10022 =0A --_----ts02OnGsHo9WuPwL4iR3rA===_AC/41-36624-E88E4896 Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="UTF-8" Money Stuff =0D=0A
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Bilt, indexes, Kalshi, Bitcoin.
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Bilt

A helpful=C2=A0rule of thumb is: = =E2=80=9CYou always find product market fit when your product is giving awa= y money.=E2=80=9D [1] =C2=A0We talked last month about =E2=80=9Cthe MoviePass econo= my,=E2=80=9D the glorious period in the 2010s when venture capitalists subs= idized money-losing consumer businesses so they could grow as fast as possi= ble. The theory was that if a company =E2=80=94 Uber or WeWork or even Movi= ePass =E2=80=94 could sell its product below cost, a lot of people would us= e it and it would quickly become popular. And then one of four things would= happen:

  1. The company=E2=80=99s cost= s would go down, because of economies of scale, so it would become profitab= le;
  2. The product would be so valuable= , because of network effects or monopoly power, that it could raise its pri= ces and become profitable;
  3. The compa= ny=E2=80=99s user base would be so big and valuable that it could get ancil= lary revenue by, like, selling data or advertising, and become profitable; = or
  4. Hilarious bankruptcy.
=

WeWork and MoviePass ended up in the last=C2= =A0category, but this was not a=C2=A0bad=C2=A0theory; Uber is big = and profitable now. It is just a tricky=C2=A0theory. If you have r= apid user growth and enthusiastic reviews and are giving away money, how do= you know that people like the underlying product=3F How do you know they= =E2=80=99re not just in it for the free money=3F If you turn off the free m= oney, will they stop using the product=3F

= Today Bloomberg=E2=80=99s Paige Smith writes abou= t Bilt Technologies Inc., whose founder, Ankur Jain, =E2=80=9Cinitially= envisioned the company as an electronic system for paying rent and getting= rewarded for it.=E2=80=9D People did not quite want that, though: =E2=80= =9CLandlords proved hesitant to adopt Bilt=E2=80=99s payments software unti= l they knew customers would actually use it.=E2=80=9D So Bilt pivoted ever = so slightly:

His solution: Ad= d a credit card with a rewards program so generous that point-maxxing rente= rs would demand that their landlords adopt Bilt=E2=80=99s payment platform.= Renters could finally earn points for their biggest outlay each month=E2= =80=94one which had previously been off-limits for credit card rewards=E2= =80=94along with anything else they charged. =E2=80=A6

The credit card took off; so did Bilt=E2=80=99s clout among la= ndlords. Some 5.5 million Americans now pay for their housing via Bilt=E2= =80=99s system. The company says it has relationships with 70% of the count= ry=E2=80=99s top 100 property managers. One reason they like it, Jain says:= Property owners using the software see a 12% decrease in delinquency and a= 30% boost in on-time payments.

We talked in 2024 about the economics of = Bilt, and there was another, possibly more important reason that landlords = like Bilt. Typically merchants pay a fee =E2=80=94=C2=A0sometimes called = =E2=80=9Cinterchange=E2=80=9D =E2=80=94=C2=A0for accepting credit cards. If= you sell a product for $100, and the customer pays with a credit card, you= might only get $98; the other $2 is an interchange fee that goes to the cr= edit card banks and network. Many merchants accept credit cards because doi= ng so increases transaction volume =E2=80=94=C2=A0most people pay for most = stuff with credit cards =E2=80=94=C2=A0and 2% is a small price to pay for g= etting more customers. It=E2=80=99s a form of marketing spend.

For a landlord, though, this makes no sense. The rent = is high, so 2% of it is a lot of money. And most of your tenants already li= ve there, so you don=E2=80=99t need to attract them by taking credit cards;= it=E2=80=99s not like they=E2=80=99ll move out if they can=E2=80=99t pay b= y credit card. And so, before Bilt, it was hard to put rent on a credit car= d. Or if you could, the landlord would charge you a fee to cover the interc= hange.

Bilt solved this problem by=C2=A0not charging anyone the fees. It partnered with Wells Fargo & Co= . to issue the credit cards, and, as the Wall Street Journal reported in 2024:

There is a reason why credit cards hadn=E2=80=99t gained traction in= the rent sector until Bilt came along. Most landlords didn=E2=80=99t accep= t them because they refuse to pay card fees that get pocketed by the banks = issuing them and often run between 2% and 3%.

Bilt structured the card so landlords won=E2=80=99t incur the fees. Wel= ls instead eats much of that.=C2=A0

Right, great. The way rewards credit cards generally work is that I= buy something from you, I pay $100, you get $98, and my credit card compan= y gets $2. [2] =C2=A0Some of that $2 goe= s to the bank=E2=80=99s expenses (marketing the card, processing the transa= ction, credit losses, etc.), but some of it =E2=80=94=C2=A0say $1 =E2=80=94= =C2=A0is left over and can fund rewards. So I get $1 of cash back or airlin= e rewards or whatever from this $100 transaction. So I feel great: I got a = little bonus at the expense of, ultimately, the merchant who got $98 for a = $100 sale.

But the way Bilt=E2=80=99s rent= credit card worked=C2=A0was that I rented an apartment from you, I paid $3= ,000, you got $3,000, and=C2=A0Wells Fargo=C2=A0paid me $30 of rew= ards. Why=3F Well, the theory must have been something like this:

  • I spend $10,000 on my credit card every month.<= /li>
  • Of that, $3,000 goes to rent, where = Wells Fargo collects $0 of interchange, but $7,000 goes to other stuff, whe= re Wells Fargo collects $140 of interchange.
  • I get $100 of rewards (1% of my total spending, including rent).
  • Wells Fargo keeps $40, just enough to= cover its costs.
  • Eventually this ge= ts mass adoption, everyone has a Bilt credit card and uses it for everythin= g, Wells Fargo=E2=80=99s revenue goes up, the costs go down, and perhaps th= ere is some pricing power. Perhaps eventually you can make the landlords pa= y interchange fees.

These numbers a= re fake and stylized, although they=E2=80=99re in the right ballpark; the J= ournal reported that =E2=80=9Cthe bank assumed around 65% of card-purchase = volume would be nonrent, generating interchange-fee revenue.=E2=80=9D=C2=A0= But the theory was wrong: Actually people mostly used the cards to pay ren= t, and Wells Fargo ate the cost. Smith writes:

While the company=E2=80=99= s card rewards program became very popular, it also proved unsustainable. C= ard issuer=C2=A0Wells Fargo & Co.=C2=A0was losing as much as $10 millio= n a month on the=C2=A0Bilt partnership, according to a 2024=C2=A0Wall S= treet Journal=C2=A0article. In the wake of a public breakup with Wells, annou= nced last July, Bilt=C2=A0touted=C2=A0wh= at was supposed to be a fresh start, with new banking and financial-technol= ogy partners. The card revamp, unveiled in January, was also intended to cl= ose some loopholes customers had exploited, including an internet-famous on= e in which cardholders, required to make five transactions each month to fu= lly activate their rent points, would pay rent and then go out and buy four= individual bananas.

Everyone= knew that if customers used their Bilt cards=C2=A0only=C2=A0to pa= y rent, Bilt and its card partner would get fleeced. So you only got reward= s if you used your Bilt card for rent and also a reasonable amount of other= stuff. But =E2=80=9Ca reasonable amount of other stuff=E2=80=9D is a fuzzy= concept, and for a while Bilt defined it as five monthly credit-card trans= actions. This requirement became known as =E2=80=9Cfive bananas,=E2=80=9D and buying five bananas is not going to cover= the bank=E2=80=99s costs.

So Bilt pivoted= , and people got mad, because (1) they had been getting free money and (2) = now they weren=E2=80=99t:

The = rollout hadn=E2=80=99t gone quite as planned. In the days after unveiling t= he replacement cards, Jain found himself on an apology tour as customers th= reatened to abandon Bilt en masse over changes to how its much-loved rent r= ewards would be calculated=E2=80=94a complex web of new multipliers and =E2= =80=9CBilt Cash=E2=80=9D payouts that confounded customers. Cardholders swa= rmed Reddit and YouTube to roast the program as =E2=80=9Ca complicated math= problem=E2=80=9D and =E2=80=9Ca trap.=E2=80=9D As one commenter put it, = =E2=80=9CThe fact that I=E2=80=99ve read this four times and still don=E2= =80=99t understand what the hell it=E2=80=99s actually saying is enough for= me to know I=E2=80=99ll just be closing the card.=E2=80=9D The critical re= sponse was a jolt=E2=80=94especially for Jain, who says he gives all Bilt c= ustomers his personal email. =E2=80=9CThey get my inbox, and I respond to a= s many of them as I possibly can. People send me their hate mail, their lov= e mail.=E2=80=9D Within days of the digital dragging, Bilt announced it wou= ld tweak the new card structure again, including letting customers choose b= etween two different points-accrual calculations.

Right but like =E2=80=A6 this is not a problem of=C2= =A0customer service. This is a problem of=C2=A0arithmetic= . If the customers only use their cards to pay for rent, the math doesn=E2= =80=99t work.=C2=A0But=C2=A0something=C2=A0worked:

The big question now is whether Bilt cardhold= ers will stick with the company considering its updated cards look a lot li= ke other rewards cards on the market. On one hand, irked customers have bee= n complaining (loudly) that what made Bilt=E2=80=99s card special is no mor= e. But most consumers aren=E2=80=99t likely to ditch Bilt outright, as cred= it cards are notoriously sticky, and the company says it=E2=80=99s been get= ting a record number of applications for the new cards. In the final two we= eks of January, 83% of Bilt=E2=80=99s active cardholders requested one of t= he new cards, the company says. Adding to Bilt=E2=80=99s stickiness: Its re= nt-processing software, Jain=E2=80=99s original vision, is now used in 25% = of US apartment buildings.

Bi= lt wanted to create an electronic system for paying rent, but landlords did= n=E2=80=99t want that system unless it had customers. So it gave away free = money to get customers, and now landlords use its electronic system for pay= ing rent, so it can stop giving away free money.

Fast track

Right now, something close t= o 100% of SpaceX=E2=80=99s stock is held by Elon Musk, SpaceX employees, an= d big venture-capital-type early investors. [3] =C2=A0This time next year, something like 22% of that stock =E2=80=94=C2=A0$330 billion worth, at SpaceX=E2=80= =99s hypothetical $1.5 trillion IPO valuation= =E2=80=94=C2=A0will be held by index funds. You know that, I know that, El= on=C2=A0 Musk knows that, his bankers know that, SpaceX=E2=80=99s private i= nvestors know that and the index funds know that.

They could do a trade=3F The index funds could give SpaceX orders t= o buy stock, and the employees and private investors could give SpaceX orde= rs to sell stock, and SpaceX could arrange the trade. SpaceX does trades li= ke that with some regularity, =E2=80=9Cemployee t= enders=E2=80=9D where outside (private) investors buy and current inves= tors sell in bulk transactions arranged by SpaceX. = [4] =C2=A0Very tidy.

But what w= ill actually happen, between now and a year from now, is less tidy. It=E2= =80=99s more like this:

  1. SpaceX = will arrange a trade in which the company itself will sell, say, $50 b= illion of stock to public investors. This is called an =E2=80=9Cinitial pub= lic offering.=E2=80=9D Maybe the existing early investors will sell a littl= e bit of their stock in the IPO, though maybe not; the IPO=E2=80=99s purpos= e seems to be mostly to raise funding for SpaceX (and xAI), not to cash out= early investors. And the public investors who buy stock in the IPO will no= t be index funds; they will be mutual funds, hedge funds, other public inst= itutional investors and, probably, retail invest= ors.
  2. Then that $50 billion of st= ock will start trading publicly, and anyone who wants to buy it will be abl= e to, at the market-clearing price. The price of the stock will reflect dem= and for SpaceX, a trillion-dollar-plus company. And it will reflect $50 bil= lion of supply. It would not be especially surprising if the stock went up: Lots of people want to own SpaceX, but the= y=E2=80=99ll only be able to get $50 billion of it.
  3. Six months later, the =E2=80=9CIPO lockup=E2=80=9D will exp= ire, and all of those private investors =E2=80=94=C2=A0employees, venture c= apital investors, Musk =E2=80=94=C2=A0will be able to sell their stock at t= he market-clearing price. Some won=E2=80=99t, but some will, and the stock = price will now reflect hundreds of billions of dollars of new supply. It wo= uld not be especially surprising if the stock went down.
  4. At some point, SpaceX will be added to the S&P 500= index, and index funds will buy the stock. And the price will reflect hund= reds of billions of dollars of new demand. It would not be especially surpr= ising if the stock went up.

Doesn=E2=80=99t it=C2=A0sound=C2=A0like th= at would create a lot of volatility=3F You start by selling a little bit of= stock into a lot of demand. Then, when things have settled down a bit, you= sell a lot more stock. And then at some random other point, index funds ha= ve to go buy a lot of stock. Everyone knows all of this, and the market doe= s a decent job of anticipating it: The IPO price in Step 1 reflects the ant= icipated public demand in Step 2, the price before the lockup expiry will r= eflect the anticipated supply in Step 3, index arbitrageurs will buy stock = to anticipate the index demand in Step 4. But it would be tidier if everyth= ing just lined up. Even if just Steps 3 and 4 lined up =E2=80=94=C2=A0if Sp= aceX got added to the S&P 500 index the same day the lockup expired, so= all the early investors could sell directly to the index funds =E2=80=94= =C2=A0that would avoid a lot of inefficient trading.

We talked yesterday about how it = would be nice if SpaceX could sell to index funds=C2=A0in the IPO,= but the real issue is the lockup expiry, when all of SpaceX=E2=80=99s priv= ate investors finally get their chance to sell. If they could sell to index= funds, that would avoid a lot of heartache and volatility. The Wall Street Journal reports:

Advisers for the company, which recently merged with x= AI, have reached out to major index providers, including Nasdaq, to discuss= how SpaceX and this year=E2=80=99s other hot startups might join key index= es sooner than normal, according to people familiar with the matter.=C2=A0<= /p>

Companies typically must wait several mont= hs or a year after their public debut before gaining inclusion in a major i= ndex such as the S&P 500 or the Nasdaq-100. Inclusion unlocks access to= retail and institutional capital from funds, particularly those mimicking = the performance of indexes that have to hold the companies in the index.

The traditional waiting period is intended t= o give the companies time to demonstrate that they are stable and liquid en= ough to handle extensive buying from index funds.

SpaceX hopes to skirt traditional rules in an effort to bring liqui= dity to its shareholders sooner as part of its planned IPO. =E2=80=A6

<= p style=3D"margin: 16px 0;">Investors and advisers to companies planning to= go public this year are concerned not only about initial trading, but also= that the standard six-month lockup period=E2=80=94which prevents early inv= estors, executives and employees from selling their stock=E2=80=94might pro= mpt significant selling that pressures shares. After Meta went public in 20= 12, shares sank when early investors unloaded all at once.

SpaceX is exploring ways to better balance supply and dema= nd to avoid that outcome, some of the people said.=C2=A0

=

Obviously one could have a cynical view of thi= s. (I wrote on Tuesday, not about S= paceX, that =E2=80=9CIf you are really ambitious at pumping and dumping, th= e ultimate buyer of last resort =E2=80=94 the final dumping place for your = stock =E2=80=94 is an index fund.=E2=80=9D) But SpaceX has a point! Lining = up the buyers and the sellers really would be tidier.=C2=A0

Kalshi surveillance

One interesting question is: How much undetected insider trading = is there=3F I write a lot about=C2=A0detected=C2=A0insider trading= , because the US Securities and Exchange Commission brings a lot of cases, = and often they are dumb. Often the people doing the insider trading are pre= tty obvious about it, and of course they get caught. And so you might think= =E2=80=9Coh wow insider traders are dumb.=E2=80=9D But of course that prov= es nothing. Maybe 99% of insider traders are very smart and never get caugh= t, so I never write about them. I only write about the dumb minority.

<= p style=3D"margin: 16px 0;">My guess is that this is mostly wrong, but I do= n=E2=80=99t know. Perhaps there are a lot of sophisticated insider traders = out there who have taken the compliance trainings and read Money Stuff and = know all the pitfalls, so they insider trade in ways that avoid the pitfall= s and never get caught. Perhaps this knowledge is slowly spreading, and the= frequency of dumb insider trading =E2=80=94=C2=A0of insider trading that g= ets caught =E2=80=94=C2=A0will decline over time.

How much undetected insider trading is there in=C2=A0prediction= markets=3F Well, a few points:

  • T= he legal status of insider trading in prediction markets is at least somewh= at less obvious than it is in the stock market, so sophisticated hedge fund= managers can go around saying in public th= at prediction market insider trading is totally legal. (Not legal advice!)<= /li>
  • But actually it=E2=80=99s probably i= llegal in the US. (Not legal advice!)
  • There are so many = more=C2=A0things that you can predict=C2=A0than there are=C2=A0public companies. If a public company announces a merger, the SEC can= ask it who knew about the merger and cross-check the list against trading = records. But the front page of Kalshi this mo= rning had questions like =E2=80=9CWhich brands will advertise during the [S= uper Bowl],=E2=80=9D [5] =C2=A0=E2=80=9C= [Super Bowl] Championship: Seattle vs New England,=E2=80=9D =E2=80=9CAli Kh= amenei out as Supreme Leader,=E2=80=9D =E2=80=9C2028 Democratic nominee for= President,=E2=80=9D =E2=80=9CWill Timoth=C3=A9e Chalamet and Kylie Jenner = be engaged this year=E2=80=9D and =E2=80=9CWhat will Logan Paul=E2=80=99s P= ikachu Illustrator go for at auction=3F=E2=80=9D It=E2=80=99s not that the = CFTC couldn=E2=80=99t=C2=A0ask the Patriots who knew about Drake M= aye=E2=80=99s injury status, or that it couldn=E2=80=99t ask Timoth=C3=A9e = Chalamet about his intentions, or that it couldn=E2=80=99t ask Logan Paul w= hat a Pikachu Illustrator is, and then cross-check the answers against trad= ing records. It=E2=80=99s that every day there=E2=80=99s some entirely new = thing to worry about, and =E2=80=94=C2=A0unlike public companies and the SE= C =E2=80=94=C2=A0the new thing is probably not already deeply engaged with = the CFTC. Timoth=C3=A9e Chalamet might not pick up their call. Ali Khamenei= definitely=C2=A0won=E2=80=99t.
  • The = amount of money that you can make in most prediction markets, other than sp= orts, is mostly pretty small, so the incentives to insider trade aren=E2=80= =99t really there yet.
  • But that migh= t be changing as they get more popular.

I think it is reasonable to look at the situation and conclude:

=
  • There=E2=80=99s probably not that much in= sider trading in prediction markets yet, but that will grow rapidly as the = markets do.
  • The insider trading will= probably be=C2=A0quite sloppy, because there is not the same wide= spread understanding that it is illegal that there is in the securities mar= kets.
  • The sloppy insider trading mig= ht nonetheless be hard to catch, because the surface area is so large and b= ecause deep down the regulators might not care.

    • Anyway here=E2=80=99s an announcemen= t from Kalshi:

    Prediction= market platform Kalshi today announced a major expansion of its market sur= veillance and enforcement framework. The company has formed an independent = surveillance advisory committee and new trading surveillance partnerships w= ith Solidus Labs and the Director of the Wharton Forensic Analytics Lab, Da= niel Taylor. These initiatives further strengthen Kalshi=E2=80=99s market s= urveillance and compliance programs, solidifying its position as the leadin= g federally regulated prediction market=E2=80=A6.

    Being federally regulated means that Kalshi bans market manipulatio= n, insider trading, has limits on the types of markets it lists, runs Know-= Your-Customer (KYC) and Anti-Money Laundering (AML) checks on every user be= fore they can trade, and publicly reports all trades to the CFTC daily. Kal= shi also spent years building custom prediction market trade surveillance a= nd enforcement systems that are similar to those used in the stock market.<= /p>

    I just feel like the first, = you know, 20 people to get arrested for insider trading on Kalshi will be v= ery surprised. =E2=80=9CWait, was I not allowed to do that=3F I thought tha= t was the whole point.=E2=80=9D

    =

    Bitcoin

    I mean the way the world works= is that there=E2=80=99s some stock, and it trades at $100, and some people= own it on margin, and then it falls to $90 and they get margin calls, and = some of them sell it to meet the margin calls, and then it falls to $80 and= some more people get margin calls, and they sell more stock to meet margin= calls, and then it falls to $70 and some more people get margin calls, but= then some deep value investors are like =E2=80=9Cwait a minute this has go= ne on too long. This company has a good business and steady cash flows that= are worth at least $75 per share. Sure the market is scary, sure there are= a lot of forced liquidations, sure the technicals are bad, but in the medi= um term this stock is worth at least $75, so I will buy it now when it is o= n sale.=E2=80=9D And the spiral stops.

    Not= always, of course; some companies are worth zero, and get there. And of co= urse this process is messy and uncertain and will tend to overshoot.=C2=A0B= ut broadly speaking, a stock=E2=80=99s price in the short term will reflect= things like forced sales by its owners, but its price in the long term sho= uld reflect market expectations of the present value of its future cash flo= ws. There=E2=80=99s usually=C2=A0somebody=C2=A0with some spare cas= h looking for a bargain, and when a stock=E2=80=99s price falls too far bel= ow its fundamental value they will buy it.

    In other news, Bloomberg=E2=80=99s Emily Nicolle, Vildana Hajric and David= Pan write about Bitcoin=E2=80=99s slide:

    Bitcoin tumbled below $70,000 a= s the unwinding of leveraged bets and broader market turbulence deepened a = selloff that has wiped out all of the gains since President Donald Trump=E2= =80=99s election set off a speculative rush into cryptocurrencies.

    The token fell as much as 10% Thursday to $65,344,= the lowest since October 2024.=C2=A0=E2=80=A6

    The market started cracking this month as rising geopolitical tensions= sent tremors across global financial markets and curbed risk taking. That = sparked Bitcoin=E2=80=99s precipitous decline from mid-January and set off = a self-reinforcing cycle of selling as funds liquidated assets to meet rede= mptions and unwind leveraged bets.

    Yes, fine, but eventually the fundamentals will, uh, you know what, = never mind, let=E2=80=99s let them continue:

    This time, Bitcoin and other cryptocurrencies are also seei= ng competition from other forms of speculation, like legalized sport gambli= ng and prediction-market wagering on everything from politics to entertainm= ent. At the same time, retail flow continues to chase zero-day options in e= quities and higher-yield crypto plays across decentralized exchanges.

    <= p style=3D"margin: 16px 0;">The latest drop comes as digital assets face co= ntinued doubts about their real-world use, as well. Once touted as an infla= tion hedge or a rival to gold or the US dollar as a stable store of value, = Bitcoin has continued to trade more like a high-risk asset and has failed t= o serve as a haven during times of financial market stress.

    I love that you can describe Bitcoin as bot= h =E2=80=9Ca haven during times of financial market stress=E2=80=9D and als= o a competitor for sports gambling.

    Things happen<= /h2>

    Novo Shares Fall As = Hims & Hers Offers $49 Wegovy Copycat. O= penAI Unveils Platform to Help Companies Deploy =E2=80=98 AI Coworkers.=E2=80=99 Divorce, Hedge-Fund Style: Inside the B= reakup at Two Sigma. Patrick Drahi shifts as= sets worth billions away from creditors. Rio = Tinto Abandons Glencore Talks to Form World= =E2=80=99s Biggest Miner. UBS Investment Bank Units to See Bonus Pools Jump by Up To 20%. Senators Accuse Equifax of =E2=80=98Price-Gouging=E2=80=99 Medicaid Progra= ms.=C2=A0New York=E2=80=99s Pension Funds Scrutinize Palantir Over ICE Contract. Epstein=E2=80=99s Fondness for Elite Lawyer Ends in Downfall. Kirkland & Ellis= lawyer sought use of Epstein helicopter afte= r securing plea. =E2=80=9CGoldman Sachs general counsel Kathy Ruemmler appe= ared to ask Jeffrey Epstein if he planned to =E2=80=98trade one of your Russians for my comp=E2=80=99 in an email exchan= ge about her negotiating a potential job at hedge fund Citadel.=E2=80=9D

    If you'd like to get=C2=A0Money=C2= =A0Stuff=C2=A0in handy email form, right in your inbox, please=C2=A0subscribe at this link. = Or you can subscribe to Money Stuff and other great Bloomberg newsletters <= a href=3D"https://links.message.bloomberg.com/s/c/Fky_5N0IRItfcdE81YDHQKtgk= lVC0x10lemAaoZwoNqdmzgqTV53MEw7axTtuuT7wzCxHzkvRp0nv44jrqFt5TSFBjZ1trqavnJe= i2jLfsPRgalSUP5wyLOwCcOKR7N-0n_FHsjBATo8IRNS1mfRKdu5ktwglTjeMT1HKg8NgKVEgZP= oiY_P03zbn7qYfRtuqYaofyOK1tHxR-GzAirP6jLLfWKhi-asmLnmVEY8qHMtg93fBSLyXl6Qf-= gLZ4V02hWNrJkGYdxoKeGoGROonrgExehlf-eXcm2FPv3v6hmP_pe7MClQO2le0yhLzl32kO3YP= CYQ-pZAr1XuPa9zjYRSBKzfWfk-Vpl6dVv6RCysxZTbLdMdJJ-MsD0/K1LHBWmlKgXAi87PHqjv= p3lUfXgBwOuP/17" itemprop=3D"StoryLink" itemscope=3D"itemscope" style=3D"co= lor: #000000; text-decoration: none !important; border-bottom-width: 1px; b= order-bottom-color: #000000; border-bottom-style: solid; background-color: = #ccc;">here. Thanks!

    [1] I get that from this Medium post by Tony Stubblebine, who attribute= s it to Bryce Roberts.

    [2] No, no, the numbers are more = variable than that, and the credit-card network and your accepting bank get= some of the money, but let=E2=80=99s keep things simple.

    retail vehicles, etc., but th= at stuff all seems relatively small.

    [4] SpaceX seems to= be a buyer in the recent tenders, so it=E2=80=99s not clear how much of it= is outside investor money.

    [5] Shhh, they=E2=80=99re not allowed to say =E2=80=9CSuper Bowl.=E2=80= =9D
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