Get a Beer and COVID-19

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S1: This ad free podcast is part of your Slate plus membership.

S2: And welcome to the Get a Beer and Cauvin 19 episode of Slate Money Guide to the Business and Finance News of the Week. This is a reference, of course, to what has been going on in Texas and Florida. People have been going out for beers. They’ve been getting covered. The number of cases is spiking. We’re going to talk about what that means for the American economy. I am Felix Salmon of Axios. I came to New York twenty three years ago on an H-1B visa. I then moved when I visa. All of this past history has given me an insight into the alphabet soup of visas. This is going to be helpful in the second part of this show when we talk about visas and immigration. Emily Peck of Dufault. Hello. Have you any immigrants in your life?

S3: All of my grandparents came here from elsewhere. Yes. So that’s my thing.

S2: Anna SHYMANSKY, you according to this show, because we thought you were going to have been here so long. You have no entrepreneurial spirit.

S1: That’s true. That’s very true.

S2: Although I do have a lot of immigrants in my life in other ways and has a good job working for Breakingviews. If she were entrepreneurial, she would probably start up a German fintech. We are going to talk about why. Which is a crazy German fintech which just went bust. And just how long it took to go bust. That is coming up. And I really hope that you are a slate plus member, because if you are, you will get to know what happens when you combine all of the great tastes of Speck’s and tontines. And Bill Ackmann all into one. What would you call it? Emily is your your squiggling, your nose.

S3: Hannah called it a Sunday, sprinkled with bill tears. That would sound so gross.

S2: All of that coming up on Slate money. So eight thousand nine hundred and forty two cases of Cauvin in Florida in one day. This is a single day record. We just saw. What on earth? Emily is going on. That second wave seems to have hit us before the first wave even ended.

S3: Yeah. I mean, we’re seeing covered come on. Really strong in the states that opened earlier. I mean, we’re seeing it, Texas and Florida in particular. We know Texas basically reopens, I think, only 28 days after it closed or something like that. And now hospitals in Houston are nearing capacity in and their ICU use. And we’re seeing these records of new cases every day. And I guess President Trump and Vice President Pence have tried to argue that the increase in cases is just because of more testing. But that’s not really what the data is showing. We’re seeing coronavirus is still here with us. We may have succeeded in flattening the curve here in New York, but in other places, you know, the curve is just still rising. And so the question now for Slate money, I think really is what is this going to mean for the economy? We know that the extra unemployment benefits are set to run out in July, which is, you know, in a few days.

S2: Well, at the end of July. At the end of July. Right. So July 26, I think, is the last week that people will get that 600 dollar extra check. So that’s a month away. But it does seem clear that if the six hundred dollar checks were designed to get us through the crisis to the point at which we could, you know, reopen again, we are not going to be through a crisis come July 26. Given the fact that the 9000 cases we saw in one day in Florida, for instance, are going to turn into a whole number of hospitalizations and then hundreds of deaths down the road, those deaths are going to be coming in July and the shutdown. We’ve already seen in Texas a re shut down like the second shutdown are backtracking. And I’m sure that will not be the last of the re shutdowns. So given that we are acutely aware of the economic effects of shutdowns and given that the necessity for shutdowns in most of the country seems to be greater now than it was in March, because the crisis is worse in most of the country now than it was in March, it seems pretty obvious to me that the economic effects are going to be, what, nearly as bad?

S1: I mean, I would say first, on the one hand, you could potentially make the argument that this will make it more likely that the government will offer more stimulus in the same way that a few weeks ago and we had better than expected unemployment numbers, we kind of said, oh, no, maybe that I mean, the government won’t act. So I think you can kind of use the same logic now and say maybe the government will. So I think that’s one thing. I also think that while you may have a number of states kind of halt, they’re reopening. I don’t necessarily think you’re going to have a bunch of states that are going to really start locking down again. I don’t think that’s a good thing. But I think it’s unlikely.

S3: I don’t know. I mean, as we were taping on Friday, both Florida and Texas announced they’re going to shut down bars. Right. And that would obviously have an impact on unemployment. And I could see them doing more shutdowns, which would have more of an impact on unemployment. Plus, just the ambient vibe of an increase in cases is going to leave people wanting to stay home, which would have an effect on unemployment also. So all that seems to be signaling to me that, like, unemployment may have gone down a little bit, but is still an credibly high. And now there’s pressure to increase unemployment. You know, in their states.

S1: Oh, no, I agree. I’m not I’m not saying that. I think it isn’t going to. This isn’t gonna have an effect. I certainly think I just don’t think you’re necessarily going to have, like, the same level of effect. Right. That you had in March. That’s why I’m saying.

S2: So my question is like or the way I put this in my news earlier this week, are we going w or are we going reverse radical? This is a reverse radical for those of you who aren’t experts on glyph names. A radical is basically that weird shape that you think of as the square root sign. So think of that sort of backwards in terms of a large drop down and then a small jump up, which we have seen. There has been a recovery and May was surprisingly good. We just got some pretty good retail sales numbers from May. And personal consumption numbers from May. So we had a uptick in May. But then I think the question is what happens when these secondary restrictions start getting put in place, when the buyers start getting locked down again? When people start getting afraid to leave their houses again? When people start canceling holidays again, do we see a flattening of the recovery, which is what’s known as reverse? Radical or do we see a second dip? Which was what started as a W shaped recovery? Which one is more likely to happen?

S3: You can’t discount the effect of the stimulus and the Caires Act on kind of boosting people’s income and helping make a recovery even somewhat possible. But we know that poverty rates were reduced. We know that personal income went up because of all that. I think if you combine if the federal government pulls the rug out from that stuff at the same time, people are more scared of going out because of a resurgence in cases, I think. I think it’s w esq time.

S1: I agree that. I mean, I think if you had a kind of double whammy of, you know, the government acting very stupidly, which is entirely possible, then. Yeah, I mean, I think that that would be really, really bad. I mean, honestly, I think even if you didn’t have a resurgence in cases and the government just completely pulled and didn’t replace that kind of increased unemployment with anything else, I think you would have seen really like a negative impact in jobs numbers in terms of what I think is most likely. I mean, I do think it’s so hard to make predictions when everything is changing so quickly. But, you know, I think it’s really it’s it’s going to depend on the government in action. And it’s also going to depend on. Like, I just know, like talking to people in California, it seems like the desire of people to be locked down has decreased so much that I watch it again and say, this is good. In fact, it’s probably bad. But I just wonder if we’re going to see the same type of just complete reduction in economic activity that we saw previously. That’s a good point.

S3: And I also think we know more now about how Colvard spreads to be smarter about the shutdowns, like shutting down bars is a no brainer from everything we know. Like that is are you. That is where you basically go to get a beer and covered 19 because everyone’s all tightly packed into nonsocial social distances. You’re drinking so you know, you’re more chummy. And I mean, it’s it’s bad. But like other things we know aren’t as bad like here at the park household. We don’t wipe down our groceries anymore because, you know, we were going literally insane trying to do that. And we know, like, I, I go running outside now masc free because I don’t live in the city and there’s like no one around we know, like outdoor dining is probably OK. Like there’s just you can be a little more free now because there is you know, people know more and we know masks are really effective. But what of course is worrisome. And maybe people have already seen the videos of the people in Florida saying like just like bonkers stuff about why they can’t wear masks that I won’t repeat because I don’t know.

S2: Felix looks confused, but it’s I mean, I was looking at it earlier from this guy who is explaining that if you wear a mask, what that means is your breathing in your own CO2 and that causes kov symptoms and so really needs the masks that are causing the COGAT.

S1: Yeah. So that apparently was going to stops God’s breath or something. There was there was something there, something about its freedom.

S3: Its black it something about freedom. I don’t know. But anyway, I mean if people could get on the mask bandwagon that would help too and then we could have more stuff open. I think at least while it’s well it’s really hot in the places where the cases are surging, it’s hot and people are going inside. So that’s a little tricky too.

S2: I feel like that collective decisions of thousands and thousands of school districts around the country are going to be one of the strongest determinants of economic activity because as we know, it’s very hard to get work done or to leave the house when you have to look after small children. There is an enormous demand, certainly from teachers. If younger kids to say, like even if I manage to talk to them electronically, once I got to know them at the end of the school year, there’s no way I can introduce myself to a new class at the beginning of the school year. But obviously, by the same token, if those kids are all getting each other diseases and then bringing those diseases back to their homes and then spreading the disease that way, that’s not going to be great for anyone.

S3: There’s so much to say about the school thing, because I think if schools don’t open like they would normally open in September, I think the shutdown will have been career wrecking for like a generation of mostly female workers. I mean, I think women around the country are like at a breaking point right now. I mean, parents all are about. But I think women in particular. So that’s like one aspect. And I think you see in the unemployment numbers, you see female unemployment higher than male unemployment. And we don’t like definitively we can’t definitively say it’s because, like, schools aren’t you know, we’re close, but there’s definitely. I’ve spoken to people anecdotally who could be working but can’t work. So there’s that. Then there’s just like kids, like really losing out academically and disproportionally affecting minority kids and poor children. And that’s just pretty devastating, like long term effect. And I think there has been like some child care centers have been open this whole time and there hasn’t been any spread like it’s been pretty responsible. So that’s kind of in courage, I guess. I don’t know if the schools are open in the fall. I think it’s a disaster.

S2: The one tiny little bit of good news so far. If there is any good news going on, Kovik related right now, it’s that the number of deaths is continuing to decline nationwide. The number of cases is going up, but the number of deaths is going down. And we don’t know whether that will last and whether the spike in the number of cases will cause a spike in the number of deaths on this sort of lagging basis, which seems like it easily could. But it’s also possible, I think, that there is a little bit of an indication there that we have got better at making sure on some level that the people who get the disease and not the people who are most likely to die from it. And that would be positive.

S3: Is that also because the people getting out now are tending to be younger and younger people?

S2: Well, that’s the point. Yes, exactly. That that the the older people who died in the first wave often had never even heard of covered. By the time they contracted it. Now, anyone who’s immunocompromised or elderly or anything like that is well aware of the precautions that they need to take. And there’s a good chance they are taking those precautions. And while that doesn’t provide 100 percent protection, it certainly provides more protection than they had when they were just going about their lives normally.

S3: That feels hopeful. One thing I was you raised, I think, in your newsletter, Felix, was long term, like as we see the case rate go down in Europe and like the U.S. is like this pariah now, you know, they’re going to not let Europeans come here this summer, like long term. What are the effects going to be for the U.S.? Of the fact that we really haven’t contained coronavirus? You know, are are we? Is this like a long term problem for us?

S2: You know, so there’s definitely a medium to serve. Let’s say it’s gonna be a year and a half, two years until there’s so many Americans have been vaccinated that there’s effective herd immunity and the rest of the world is comfortable with having Americans come visit. What I’m seeing is it is like expanding bubbles around the world. So there’s a lot of talk. I think it’s already beginning to happen now about travel being allowed just between New Zealand and Australia on the basis that neither of those countries really have much. So they can start mingling together more. The shaggin group and in fact, the entire European Union is beginning to sort of do the same thing, saying, well, all of us have basically got countries more or less under control at this point. And now we cannot allow travel within Europe. And then the way that the Europeans are talking about reopening on July the 1st is to say, if you’re coming from a country which has less Kovik than the EU, then that’s OK. So that would be Vietnam or China, certain other countries. We will let travellers in from there. And then I think, oh, certainly Australia and New Zealand. Right. And so you’re going to see these bubbles sort of expand and the low Kofod countries are going to create something approaching an international economy between themselves and the United States is going to be excluded from that international economy. And the United States is going to be one of the infectious outliers, along with Brazil and probably India, which the rest of the world will shun and where it’s going to be very difficult for Americans to travel on business or to travel for tourism or to travel at all internationally. And that’s going to be extremely harmful for the economies of those countries that are left out of this, you know, recent economic recovery.

S1: Yeah, I mean, I think this one maybe potentially kind of lead us into another segment where we’re going to talk about visas. But I just think that, you know, what we’re seeing now is this somewhat breaking down of globalization. We’re seeing trade numbers declining. We’re seeing immigration declining, all of these things. And in the U.S., you know, if what we’re doing continues, you could potentially see that kind of hypercharged. Like nobody wants to come in here. It’s it’s harder for us to do so many of the things that have enabled. Our economy to grow for so long.

S2: So let’s do that. Let’s have a segment on visas, because we have news this week that the Trump administration has decided there will be zero new visas going to foreigners under three. Well, more than three. The three main categories, J.s, h.s, and El’s and I am not going to go into the gory details about the differences between James is. But suffice to say, they go mostly to people from Mexico, India and China. And Donald Trump issued a proclamation basically saying all of these people who would normally come to the United States on one of these visas with the intention of working. Well, that’s her job. And Americans need those jobs. So we’re going to ban those people from coming to America, after all. And then Americans can get jobs instead. And let’s keep America great. Emily, do you want to explain why that logic is utterly backwards?

S3: I’ll try. One of the reasons America is great is because we have immigrants who get to come to this country and help us be great. So and especially in some of these, each one, I don’t know. But yes, the H-1B visa allowing smart people to come to this country and help us innovate stuff is a net positive for the country. Keeping those people from coming here. And maybe they’ll go to Canada or somewhere else is good for Canada or somewhere else. And like a net negative for our country. Immigration is good for innovation is good for entrepreneurship. It is good for our taxpayers. It is good. It is good.

S2: It is good for job creation. Lane, it’s a game. Immigration creates jobs. And so that that’s the main fallacy there. But as you as Ana pointed out, it’s not clear that that many people even wanted to come to Kofod Central USA right now. Right.

S3: Anyway, we are seeing this insularity and the pretext that the Trump administration is using this time around, though it’s been trying to do this since the beginning, is that it’s because of corona virus to keep us safe, which is just a joke because the Trump administration has done almost very, very little, let’s say, to keep us safe this whole time.

S2: So what’s the one thing further Donald Trump claims that he did to protect the USA from coronaviruses, banned flights from China, which obviously had very little practical effect, but. We are still banning flights in China. If you’re if you want to fly from China to the United States, basically you can’t. If you want to fly from Europe to the United States, basically you can’t. Those bans don’t seem to be going away anytime soon. And while there are definitely strong cases to be made for the existence of travel bans, you’re absolutely right. The it’s the one thing that the Trump pest’s really like because it aligns with their prior desires and anything else that you might want to do, like, say, contact tracing. They’d have no sort of ability to implement.

S1: Yeah. I mean, I still feel like everything the Trump administration does is for their re-election. And clearly, Trump thinks that the winning thing he had in 2016 was his anti-immigration stance. And so that is why essentially everything we’ve seen the last four years, his solution to every single problem is to ban immigrants, essentially. And when we’re thinking about job creation, I think sometimes what people will think of it is like, oh, we’ll have a smart person here and they’ll work at Google and that’s great, they’ll make Google better. But it’s also like they’ll also create Google like I mean, it’s not just like it. This is how we create new companies know look at our largest, most successful companies. They’re all first and second generation immigrants. Yeah. And it’s not like we have all of these engineers were just sitting around the sidelines because, you know, like Google’s deciding to hire them from another country. Like, we actually don’t have people with the skills that a lot of these companies need. And that is why they use these visas.

S2: And that’s actually a really good point. It’s not just the immigrants who are coming in and starting jobs and creating companies like Zoome, which was created by a Chinese immigrant and has created lots of jobs in America. But they’re also having kids who start companies like Google and Apple, you know, which were both started by children of immigrants. And that entrepreneurial spirit really does seem to align, quite astonishingly, with immigration trends.

S1: It makes sense. I mean, like if you’re if you’re gonna take the risk of going to another country, like you probably are someone who is, you know, more aligned to be an entrepreneur was like, once you get to my generation, I feel like we’re like, hey, whatever. Just worked for a company called Portugal AC.

S3: Also, I just wanted to underline, like one of the groups of people blocked by the Trump’s new whatever demand is au pairs, which is crazy because we’re already like dealing with childcare issues in this crisis and is blocking these people from coming over that could help working parents have some childcare at home. So that’s just wild to me.

S2: The J visas, the J visas get much less press than the H visas because the H visas have large lobbying firms fighting for them. But there were very few large lobbying firms fighting for J visas. But they’re in fact, in many ways, as you say, even more important.

S3: There’s no apair lobby.

S2: The really crazy wake up here is the L visas are literally just corporate executives who need to move from Munich to New York or whatever for any reason. It’s not like there’s an opening in New York which someone else could fill, like some American could fill. It’s just that one person who already works for the company needs to move to a different office to do some job. And those are being put on the list as well. It makes no sense to me.

S3: And this hasn’t gone into effect yet, though. It’s going to be fought over. So it’s not officially going to happen.

S2: So there will be a fight over it. You’re right. But on the other hand, it kind of has been in effect since March. Like, no visas have been issued since March. All of the consulates and embassies have been closed down. It seems very unlikely that the State Department will allow those consulates and embassies to reopen and start issuing visas, even if the courts decide that this executive order is illegal or whatever. I just can’t see those consulates and embassies around the world opening their doors and saying, hey, come and get your age wannabe’s.

S3: It just doesn’t strike me as very likely, just another way that the Trump administration is screwing up our economy long term in the name of.

S2: I don’t understand what keeping America great. Emily.

S3: Right. Seems great, doesn’t it?

S1: Great.

S2: I do believe the the nativism and racism that Donald Trump ran on in 2016, this idea that America is being overrun by Mexicans and that what we need to do is build a wall to stop the Mexicans coming in. Just it feels such a long time ago, and I just feel like he doesn’t have the same resonance today that it did four years ago, and I don’t think that it’s very, very hard for me to imagine a bunch of Americans going out shouting, build the wall, build the wall is like a major political campaign issue. You know, it feels like that was so long ago. And I feel it’s kind of weird if that’s the best he has in 2020. I don’t think that bodes well for his campaign. But let’s talk about why our card. Because this is the craziest and most fascinating story which has finally come to an end. We really haven’t covered why a card on slate money, which is amazing because the history of the wild card scandal is more or less as long as the history of slate money. This goes back to 2015, when a great Financial Times reporter named Dan McCrum started writing about why a card for the Financial Times and talking about how it looked like a bit of a fraud, to be honest. And it was always a very sketchy company and its origins were kind of shady. There was a lot of like laundering money for gambling and pornography and that kind of stuff in this business. But it wound up growing into one of Germany’s largest companies. It joined the DAX. Third, he was one of the, you know, companies in the flagship German stock index. It replaced Deutsche Bank. I think when Deutsche Bank followed, it became worth more than Deutsche Bank. Not that that’s difficult, given how little worth more than Deutsche Bank, actually. And all the time there was the steady drumbeat from the Financial Times and Reuters and various other places saying, look, we’re looking into this company. It makes no sense. They were short seller reports. They would go to all of these international locations where wild card had big business and massive profits and find that the addresses were just kind of some guy, you know, with a chicken. And there was nothing there. And all these reports have come out. And the amazing thing was that the German financial regulators said, oh, that’s big news. We should crack down on those reporters and the bank analysts at places like Comments Bank would say that fake news and why Eckhard has exonerated itself with this report that it just broke. And the stock price would just go up. And for those of us in the journalism industry, we all knew that this is going to sort of end with wild card going to zero at some point, which it now has. And the CEO is in jail and all of fraud has been finally revealed. But what’s fascinating to me is how long it took and how the authorities, both in terms of the finance world and in terms of the financial regulators, the government in Germany were willfully blind to what is going on. And I genuinely don’t understand this as a journalist. I just can’t put myself in those shoes and see myself saying, oh, yeah, Financial Times is probably just completely false.

S3: Well, maybe this is a way we can just rewind for a second and talk about what Wild Card Dead are purported to do. Like what it’s actual business wise of digital payments, because in reading up on it, it seems like the thing was it was the only, quote unquote, digital payments company in Germany and therefore, like, really important. La, la, la, la. And that’s why Germany was, you know, essentially propping it up by going after the short sellers who tried to alert everyone to the fraud. So can one of you tell me in the plainest of English, because I read like that they even had an illustration at the Wall Street Journal of what wire card does and illustration really doesn’t make sense.

S2: Yeah. It was incredibly credibly complex. And at one point, they bought a bank. So they became a bank at some point. So that makes it even more confusing in the broadest terms. They were international financial services and payments and banking and that kind of stuff, which means anything, if nothing more. Specifically, what they did is they processed payments to companies and they actually did have a core business, which was real, which is, you know, if you are a German and you go on the Internet and you buy a plane ticket, then you pay with some kind of mechanism, whether it’s a bank transfer or a credit card or a debit card or something. And that money needs to get moved from your bank account to the airlines bank account and all those. Tubes, the money moves through between your bank account and the airlines bank account. That was basically Workout’s business was moving that money down those tubes to go back to, like, why this was allowed to go on for so long.

S1: And, you know, the kind of willful blindness. I honestly doesn’t surprise me at all because Germany has been like really, really intent on trying to develop an actual tech sector and trying to create new companies. And so they’re kind of fintech sector is very like loosely regulated, you know, really, really encouraged. So, you know, that’s kind of number one. And then number two. I mean, Germany is not actually the world’s greatest actor when it comes to a lot of their economic policies. I mean, I think there’s this kind of myth that Germany is like, oh, you know, they just have this incredibly productive export economy and that’s why they have this massive current account surplus and they’re just so thrifty. That’s why, you know, they’re the good people in Europe. And it’s nonsense. I mean, if you if you actually look at their policies that they have the past 20 years, it’s essentially to allow their own population and the rest of Europe to subsidize their industries. And so, honestly, like, I’m not at all surprised that when you had a large German company, that kind of the government and the regulators were turn a blind eye. That doesn’t that doesn’t shock me at all. But what about the investors?

S2: How did the stock price go up, like when Dan McCrum started writing about this? It was like 20 euros a share. And then went up to like 150 or something. Over the course of scandal after scandal after scandal, like sometimes he would write a piece on the stock price would go down. I mean, come the beginning of 2019. Things started getting like really obvious. But against this steady drumbeat of stories and saying there’s no there there. What was it that drove the stock price up so much?

S1: I mean, that’s a good question. Partly it’s because a lot of investors are stupid. Partly it’s from just like basic momentum trading. Partly it’s because, you know, you have Ernst and Young out there being like, oh, no, this company is fine, even though apparently they haven’t looked at their, you know, like a lot of their documents for years. You know, you have all of these in theory. You have the German government, you have the regulators, you have the you know, there are other lenders. You have all of these people saying, oh, no, I’m sure that the Financial Times is just colluding with short sellers. I mean, yes, it’s completely illogical, but I can also see why people are like, well, this thing does just keep going up. So all these people tell us it’s fine. It must be fine.

S2: But also, like and there’s really no evidence that the FTC was colluding with. Sure. So now it looks like it’s ridiculous. It’s actually were. It’s not bad. Like this is one of the weird things that you hear quite a lot is that, you know, say, you know, Bethany McLean getting a whole bunch of information from short sellers when she exposed what happened to anyone that was good. Working with short sellers is not in and of itself a sign that you are in any way corrupt to reporting anything untrue. I mean, most of the time when Jelly’s what we show others is because the short sellers have true facts and the journalists are in the business of getting true facts out into the world.

S1: The thing with investors is that once they have decided, especially once a portfolio manager has decided, that they want this investment, it literally does not matter what happens. It doesn’t matter what you show them, it does matter. They have decided in their mind that this is a good investment and so they will choose to believe the information that justifies their previous argument. All these investors will tell you they’re contrarian investors and oh, they’re so data driven and it’s nonsense like. And so I think that’s probably part of this, too.

S3: People should go and listen to this podcast, Invisibility. In a recent episode, Hannah Rosen interviews a short seller who was short wild card. And, you know, as publishing reports being like, hello, this is fraud. And wire card basically hired investigators to think the word is. This guy, like they published false information about him and rumors he they took like photographs of him in his home. He he moved houses and he went to the police. He lives in London to complain about it. No one did anything. And he was just basically being spied on. And I mean, it’s really wild stuff that this company was doing. Like if he didn’t already think that there was fraud going on, the fact that they like sick these like dodgy P.I. eyes on him would be like kind of a red flag.

S2: That’s also something that, you know, is in the news right now. Another story in the news this week is eBay.

S1: What did eBay do? eBay, if I’m not mistaken, like hired people to go after, like some people who just, like, made some comments online. They didn’t even do it themselves. They didn’t even higher any third party.

S2: That’s right. That’s right. It was six eBay employees who decided they were going to embark upon this insane campaign against a woman who ran a newsletter that was critical of eBay. And they started sending her cockroaches in the mail. They started sending pornography in her name to her neighbors addresses. They started sending like pigs, fetuses, they started sending books to the house about how to deal with the death of a spouse. It was really horrible. They tried to put a tracking device on their car. And this is eBay. And, you know, we all read the Susan Fowler book about what happened to her when everyone started following her and taking photographs. And she started being critical of Uber. So it is definitely true that what Weich did was completely bonkers. But it’s also definitely true that this is something that happens over and over again in corporate America. And I’m fascinated by the mechanism by which that happens, like in the eBay example. It all seems to go back to late one text message from the CEO to his communications chief saying, oh, come on, this is ridiculous. We’ve really got to, you know, put a stop to this, you know, or something like that. And then that one text message snowballed into this insanely crazy, illegal campaign of harassment.

S1: How does that happen? That I just find shocking, number one. I’d like where do you get a pig’s feet like I have now? That seems odd, but like also like how much company loyalty does one have to to, like, do this? Like, it just does it. Yeah. That that seems insane to me, unless it seems like there has to be something more going out there that can’t just a ban like a few employees are like, we really, really love eBay.

S3: If I’m an investor and the company does something like that, then I say to myself, bad company like no, like well-run company with like a bright future is doing any of that stuff like Uber did. That’s after Susan Fowler, you know, flying her around and whatever. And I don’t think they’re doing that well. And now I have bad views about eBay, too. So I don’t know, maybe that’s an investing strategy to avoid bad companies.

S1: Avoid bad companies. That’s so private.

S2: I just it doesn’t seem to Venus’s to like come full circle here, though. I mean, this is really why short selling is such a horrible, nasty, terrible business to be in. If you looked at work, you saw that it was a fraud. You knew that it was a fraud. And then you went short. When you discovered that it was a fraud, you would probably have lost money. The stock just went up and you would have had to cover that show and you would have lost money. And then at one point, the Germans actually banned short selling and work. They like what you have to cover. We’re not even giving you any choice to make money from short selling. You not only need to uncover frauds, you also need to have a really clear thesis for exactly when and how that fraud is going to result in the stock going to zero. And the way cardstock did go to zero, it just went to zero five years after all, the short sellers realized how bad it was.

S3: But they’re still getting a better payoff, probably than the FTE journalist who wrote about it, right?

S2: Oh, Dan’s doing fine. Let’s have a numbers round. Do you have a number?

S1: I do. My number is seven point one trillion. That is the size of the Fed’s balance sheet. And I’m actually saying this because it went. It actually has gotten smaller for two weeks in a row. And I think this is kind of interesting because, you know, what we’ve really seen with the Fed is that the Fed’s words are even more important than anything it does, that a lot of the kind of firepower at all these facilities that it set up, has he actually had to use that much? It just even kind of started on like buying, you know, some corporate bonds. And I just think it’s interesting. That’s kind of like just magical ability.

S2: The Fed has to speak and then the market acts as though the Fed had actually acted, mind them, but is six million and 10. Six zero zero zero zero one zero is the number of dollars that a chap named Peter Friedman spent on the guitar that was used by Kurt Cobain in his MTV Unplugged performance, which is a new record for the price of a guitar. Guitars and now worth six million in ten dollars, apparently.

S1: Why 10 like Christmas had come over the string.

S2: I was kind of confused how how like in an auction you are allowed to put bids in with ten dollar increments when you are six million. But evidently, presumably, there was an unknown under bidder who bid six million. Is it all about six million instead to. Emily, what’s your number?

S3: My number is one point four billion dollars. That is the amount of money that the Treasury send out in stimulus checks to dead people. And, you know, The Washington Post in The New York Times both got into a frenzy about this really hyperventilating, about the fact that the Treasury Department sent these checks to people who died after they filed taxes in 2019 or 2018. But it’s really just as Jordan Weisman wrote in Slate and my colleague Igor Roaded, Huff Post and other people pointed out, it’s like not a big deal. Like they were trying to get the money out really fast, though, of one point four billion, though. Sounds like a big number, but it was only point four percent of the total amount of stimulus money sent out. And it’s sort of like a rounding error in the name of getting the money out faster and getting the money out faster. We know, as I said earlier, kept people like from starving to death and kept them out of poverty and stimulated the economy, yada, yada, yada. So it’s like no big deal. Don’t worry about it. But the fact that this is like a big news story is kind of worrying and troublesome and would make Stephanie Kelton upset.

S2: I think it speaks to the fact that no one really understands big numbers. You know, there’s like one point four billion dollars is a huge amount of money. Six hundred billion dollars is a huge amount of money and then very different amounts of money. But they they’re both just big. At some point we are in a world where we have multi trillion dollar deficits and it’s basically impossible to comprehend how big a trillion dollars is, let alone two trillion or three trillion. It’s the numbers are so big that everything just says big amount of money. And so a big amount of money went to dead people. A big amount of money is how much the annual deficit is. And even though they are, you know, probably five orders of magnitude apart, like there’s just big amounts.

S3: Yeah. Journalists love. I mean, when you hear a blank went to a dead person, you’re just like, what story? And a news alert. But it’s not it’s not that exciting. We need to stop.

S2: Okay. Well, I think that’s it for this week. Thank you all for listening. Thank you, gentlemen. Mollie, for producing.

S4: And thank you for sending the e-mails in. Sleep. Money. Sleep, dotcom. We read them more. We love them. Do keep them coming and we will talk to you next week. Sleep money.

S2: Emily, can you tell me what a tontine is?

S3: I can’t tell you what any of this is. I Googled it and it was like, as we all know, sparks are a thing and they’re very popular once again and blah, blah. And I was like, you know what? I’m just gonna listen to Felix and Anna talk about this, and you’re going to explain all of it to me.

S2: So this is to two great tastes that go great together. There are sparks and there are tontines. And I’m not sure which one is better. But they’re both glorious. And so we can just bring them both together into into a into a, you know, ice cream sundae concoction. Yes. A Bill Ackmann flavor Bill. Bill AGYEMAN, favorite ice cream sundae. So so it’s sprinkled with tears. Spack stands for a special purpose acquisition company, which is basically you buy a bunch of stock in some random dead company on the stock exchange, which is still technically trading but isn’t worth anything. But you put like billions of dollars into it. And the person who’s in control of this company, in this case, Bill Ackmann, you trust him to spend that money wisely. And then the idea is he then goes ahead and uses that money to buy what? Well, he he says he’s looking for a mature unicorn. I have no idea what a mature unicorn is. In any case, this is now going to be a tontine and flavored mature unicorn spack, which just brings so many things together. Then the idea is that you actually own a company or shares in a company that is real because you trust that the Lachlan has been able to use your money to buy something good. It’s this weird way of getting a stock market listing without going public one. There’s been a couple of high profile companies that have done this recently. One of them is the electric truck company called Niccola, because obviously if Tesla works out as a good name for an electric car company, then Nicola will work out and it worked out great for them. The other one company that has basically no revenue, no revenue, but with a billion dollars and the other one is Virgin Galactic did this to go public as well. So who knows? That is one curious, bizarre thing that is happening in the capital market. This is viable and boring. You put billions of dollars of money into a company that does nothing, and it’s just a shell in the hope that eventually that shell, like a kind of hermit crab, will wind up housing something valuable.

S3: So it’s like I buy an like a rug store that doesn’t sell rugs anymore and just sit in it and then.

S2: And then. And then you fill it with and then you and then you fill it with money and then you use the money to buy either rugs or ice cream or something like that. And then you have an ice cream store.

S1: Yeah. I mean sparks are often like, yeah, it’s like you’re literally like you’re creating a spark to raise money. It’s a blank check. That’s what it is to acquire a private company. That private company goes public by being part of this back. It does have to go through the IPO process, but you don’t then do the private company part. Could you just get all the money and just sit on it? No, you have to give it back. In a sense, that’s a lovely way of the tontine comes in.

S2: So, yes, the the tontine is a wonderful old fashioned form of life insurance, basically, where everyone would pay into a fund and then they could get the income from the fund. But in order to get the income from the fund, you needed to be alive. So when you died, you stopped getting the income from the fund. But that’s OK because you’re dead. You don’t need it. And the people who live the longest wind up getting the income from the fund gone. They wind up getting a lot of income towards the end because they’re the only people who are still alive. It’s kind of clever, but with some very perverse incentive. It does kind of give you an incentive to kill off all of the other people in the tontine, which is why no one uses tontines, it turns out.

S1: Yeah. So it’s actually really interesting. This is one of the things about the ACMS back is that it’s not just that it’s the biggest of all Sfax, it’s that he actually slightly restructured it to actually kind of make it a little bit better in a in a few ways. Like number one, the way traditional Sfax work is, if you’re like the backor, you get 20 percent equity in the company that they acquire. So you have an incentive to do any deal, even if the crappy deal. And then on top of that, if I’m an investor into this back, I get these shares in this back. I get these warrants that I can use later. And normally you just get all of them at one time. Right. So then there’s a lot of incentive to just kind of like quickly flip things. The way that this SPAC was designed is number one. And this is kind of where the tontine part comes in. You only get a third of the warrants at the beginning. And then if you leave before, like the acquisition is actually done and all your warrants are vested, you lose all those unvested warrants. So those who stay in the longest will then get all of their warrants and they won’t have the dilution from the other ones. So that’s part of the whole Tontine idea there. And instead of the 20 percent part for the BACKOR, they actually get these less dilutive warrants that pay out when the share price goes up, which gives the backer’s them more incentive to get a good deal.

S3: Why is it better than just like taking one of these mature unicorns public, like, you know, fresh start?

S1: Good question. It’s actually really because we have now seen this kind of really kind of growth in Sfax recently. And partly it’s because we’ve had a lot of kind of like lousy IPO is recently. So you potentially have firms being nervous about that. So that’s one thing. Also, some private funding that would normally go to these types of mature unicorns has been kind of drying up. One of them, obviously, like Softbank, the vision fund, you know, they’re not just shelling out money now.

S2: So can we just point out because we didn’t manage to do this in the workout segment. Of course, Softbank was involved in way occurred. I mean, how could it be?

S1: Of course it’s sure. That’s. Yeah. And then the last thing I’ll say, while you’re probably saying this a bit now too, is that because of coronavirus, it’s really hard to get M&A deals. So just having another company acquire and also regulations are tough with that. So this is this is part of why people think it’s becoming a bit more popular.

S3: Could I do it? Can I buy some, like, penny stock? Bankrupt company. Hurts or some? Sure. Yeah.

S2: And the thing did you have a yes vote? Do you have. Do you have steely eyes? Blue eyes?

S1: Yes. I had a gray hair.

S3: Mm hmm. That’s. I can do that. I just get a wig or something. I’m very responsible with money.