Tice Brown

0:02 Bloomberg Audio Studios. Podcasts.

0:06 Radio. News. Hello and welcome to the Money Stuff Podcast. I'm Matt Levine. I wrote the Money Stuff column for Bloomberg Opinion. We have a guest today, Tice Brown. Why don't you say what your deal is?

0:20 My name's Tyce Brown. I'm the managing member of a group of single-member LLCs that we call, in collection, Woodmont Partners.

0:27 Okay.

0:27 But it's a family office. I'm just a guy. And your title, Money Stuff, actually gives me a huge amount of cover. Because all the time, like, my wife's parents, who are, like, well-credentialed and coastal, say, what does Tyce do? Oh, yeah, he does investing stuff. And, like, people get that. You don't have to invest in stuff. I do things that drive my curiosity, and we try to make money. I didn't come from money. My dad's a community college teacher in Arkansas, and my mom's a county doctor. I've tried to access leverage in intelligent ways, and we have a grab bag of a lot of weird assets that I can talk about.

1:06 I would like that. You send me really good emails. I sometimes do talks, and people are like, what are your ideas? I sometimes get good emails from people, and I try to describe the characteristics of a good email, and I got an email from Tice in February that is now on the record in the court case saying, I'd like to liquidate a Bitcoin treasury company. I'd like to speak publicly about it. And it's one of those things where like, I'm just going along my day and that email comes in and I'm like, why have I never thought about liquidating a Bitcoin treasury company? But you had.

1:41 Tell me about it.

1:43 So there was... A long period of time, months, you know, six, eight, 12 months when there was a fad in the U.S. capital markets to raise cash through a pipe in small public clean shells, usually on the NASDAQ and the New York Stock Exchange, although not exclusively. And you'd raise like $ 500 billion and a lot of them would trade at a significant premium to crypto they bought. We can use Bitcoin as an example. These guys would raise $ 500 million, buy $ 500 million of Bitcoin, and it would trade for a huge premium, say a billion. And they could issue more shares, buy more crypto, and go to infinity, free money.

2:25 And the most famous one was MicroStrategy.

2:26 We've talked a lot about MicroStrategy.

2:28 It's just an infinite money machine.

2:29 Without a pipe. Well, I mean, whatever.

2:31 They had an ATM.

2:34 Yeah. Right.

2:35 Imprey did a pipe. I participated in the pipe. Right.

2:37 So I was going to say, like, strategy is like, there's a weird guy around a public company and he's like, I'm going to start putting our cash into Bitcoin.

2:43 But there were dozens of copycat pipes.

2:45 But yeah, the pipes, like, that's an interesting reason. So a pipe is like, you have a promoter, you have a small kind of cleanish shell public company, and you have a set of target investors who will invest privately in transforming the shell into Into a Bitcoin treasury company, or they call it a DAT now, a digital asset treasury company. Exactly. And you're one of those investors. Like, who are these investors? Like, how do they find, because I assume at that time, like you could round up $ 500 million for a DAT pipe in like a week.

3:16 I'm an intellectually curious guy. We have a lot of capital looking for weird stuff to do.

3:21 Sure.

3:22 The idea of investing in a shell and having a trade at a premium, which maybe we did. for a band that was really interesting to me. And we wrote a couple million dollar check to see if that was a phenomenon that would continue. In this case, it didn't.

3:39 Is it a lot of like crypto focused hedge funds?

3:42 No, no, no. If you look at the list of the people that invest in the pipes, it's like major hedge funds, top 10 pod shops, like each will write a $ 2 million, $ 5 million check to a bunch of these guys. And they're I mean, I think seen as intelligent investors and they were doing a bunch of these.

3:58 Were they hedged? Like were they?

4:00 I don't talk to him. I'm one guy sitting at home alone and I'm looking for weird stuff to do.

4:05 Were you hedged?

4:07 At which point, right? So I've owned this for a year and a half. And like this changed over time.

4:14 By hedged, I mean. Short Bitcoin. These are things that for a while. The trade was that they traded at 100% premium to their net asset value. So you could capture that premium by buying the DAT shares at $ 100 and selling $ 50 worth of Bitcoin. And then you weren't levered to Bitcoin prices. You just had the premium.

4:32 There's a more important word that you haven't said yet, which is MNAV. Do you know what MNAV is?

4:39 MNAV is, okay. Why don't you explain what MNAV is? Because you've explained it.

4:42 So it's the assets in crypto compared to the enterprise value, total enterprise value of a public company. Which leads to some really wonky math. And I think it was invented by strategy to show off how many Bitcoin they had, because they have an extraordinarily convoluted capital structure.

4:58 Yeah, they have everything.

4:59 And they've got a complex structure. So if you're comparing, can I give an illustrative example? Imagine two companies that each have, for super simple math, a billion dollars of Bitcoin at T1. A billion, a billion. And imagine one of them is totally equity funded. It has no debt. And it's It trades at 96% MNAV. People love that.

5:22 This is what percent MNAV. It trades at 0.96 MNAV. So it trades for $ 960 million, a billion dollars of Bitcoin. Not a huge discount. You could imagine, there's a hypothetical, but you could imagine a company with a billion dollars of Bitcoin and $ 900 million of margin or other debt, fixed obligations, that also traded at 96% of MNAV. what does its market cap on a PB basis, price to book basis, look like?

5:49 Is MNAV.

5:50 On the EV? So if it had $ 900 million of US dollar debt.

5:54 So it's really at 96% of.

5:56 We're getting to the AMV.

5:56 So it's like at a 40% discount on equity, right?

5:59 On a PB basis, it'd be at 60%, right? And so that's just an illustrative example that played into the Ampreet situation over the year because they used debt-funded buybacks, which was not super crazy, depending on what you thought would happen to the price of Bitcoin, right? So it's hedged at first when Bitcoin was at $ 117, 000. We had to disclose all our trading and all the subsequent lawsuits and 13D and everything. So we had some short. And as the price of Bitcoin went down, we removed the short.

6:28 We bought more stock. You could imagine it as a way to get a significant amount of non-cross-collateralized leverage of the price of Bitcoin. Do you see? Yeah. How if you think... that billion dollars of Bitcoin is at $ 70, 000 of Bitcoin, and you believe it will return to $ 117, 000. Buying that at 96% MNV even might be really, really attractive because you're buying it 60% of PV. That's not the fun bit. The fun bit is if Bitcoin goes from $ 70, 000 Bitcoin to $ 117, 000 Bitcoin, your $ 960 million of fixed obligation stays flat, and your book value multiplies, and that You know, silly example is what occurred here or what I was.

7:10 Hoping to occur here. So then you eventually wanted to liquidate it. So like.

7:15 That was after awkward conflict with management. I was originally a 13G slyler.

7:20 Because like when I wrote about this after getting your email, I was like, there's a trade that was in huge vogue, which is you can take $ 100 worth of Bitcoin and sell it for $ 200 in the stock exchange. And now that trade has flipped.

7:32 Five months later. So now we're past wearing a head. You've gone from August 2025. to January, 2026, when all of these went from 200% MNAV to, in this case, I can't remember, it's like in the 70s on an MNAV basis, but on this PB, let's go back to that, it got down to 57% PB. And I think Bitcoin is an interesting gambling proxy. Like the intrinsic value is based on the discounted cash flows that you'll receive in the future from Asda. But we do a good business in art. We do a good business in a bunch of non-cash flowing real estate, I think there's a human desire, clearly, to seek gambling. And I think Bitcoin has been a gambling proxy that's been out-competed by Cal Street and PolyMarket and a bunch of other things. But I think it's

8:18 an interesting gambling proxy that might return. And if you can get this non-recourse leverage on it, non-cross-collateralized leverage on it, you could achieve extraordinary outcomes if Bitcoin returned to even where it had been before, much less a higher number.

8:30 So when I got an email from you being like, I want to liquidate it, I was like, oh, of course. If it's trading at a discount, it's just the same trade in reverse. You buy shares for 80 cents and you liquidate the Bitcoin for 100 cents. Of course. But you were still like, I mean, by the time you emailed me, you changed your mind. But for a long time, you're like, this discount is great because it's a way for me to have like a very levered upside bet on Bitcoin gambling.

8:53 It wasn't a long time. I mean, a lot of the money was deployed in a short period of time. There was a day when the stock was down 23%, the trading price of stock. So if you have something that was already trading at some discount and the stock falls 20 plus percent a day that's a day you're gonna buy a bunch and i did and so then you run into the securities law obligation of i sit down with security attorney and talk through my conversations i've had with management or anybody and we follow 13g and then i asked the management to get a cheeseburger and it's been messy yeah it was messy after that named in some lawsuits yeah that was the name i was asked to be a witness and And some lawsuits. And

9:34 my name was in the lawsuits. That doesn't mean you're named in the lawsuits.

9:38 I felt named. I'm sorry. Yeah. Like one problem with the dad trade is that it was the Vogue trade of like, you know, a year and a half ago. Sure. And now there's a new Vogue trade, which is pivoting to AI. And they have done that. Have they? Well, they've announced that.

9:55 They've announced intent to. I don't have any further information about.

9:59 Are they like less? correlated to Bitcoin now? Yes.

10:01 My understanding is they have, I mean, just relying on the public disclosures, quite a bit of cash, and a contracted agreement to invest in a data center, and they have an electrical investment they've already made, and still some Bitcoin, but much less correlated than they were. But I wanted correlation to Bitcoin at a certain discount. And I wanted the leverage they had at a certain amount. And honestly, we have a bunch of different investments. And the more dislocated they get, the more you allocate to that. And we allocated a good bit to this because it was interesting dislocated. And for a while, they were buying back a lot of stock.

10:38 Like at some point you were like, they should be buying back all the stock and closing the discount.

10:41 They did a bunch of buybacks. They did a bunch of buybacks. But why does closing the discount matter to you?

10:45 I guess it doesn't. It matters to me if I think about like the entry at the trade being, which it wasn't for you. But if you think about the entry being like you see a debt trading at a discount, you're like, I'm going to buy it at a discount, hedge the Bitcoin and just try to capture that spread. But you're like, that's small potatoes for you.

11:01 Imagine if something traded at 57% of just cash. Forget the Bitcoin debt, but imagine something was trading. And you were able to buy in, and they did successfully for a while, half a percent of shares outstanding a day. You're increasing now by 25 bips a day or something, 20 bips a day. Like there's 250.

11:19 Trading days in a year. 1.0025 raised to the 250th is like a huge return. I'm not a math guy, but NAV would go up a lot. Yeah, right. So it is the reverse of the classic micro-strategy.

11:41 It's exactly.

11:42 They called it accretive dilution, where they would sell stock at a premium, and that would increase the NAV. And then here it's like they're buying stock at a discount, so it increases the NAV.

11:51 I mean, micro-strategy is trading at a premium to MNEV again.

11:55 A bunch of them are.

11:56 Yeah, I guess. I don't know. This is the only one I've been in.

12:01 Is it the only one you were in the pipe for?

12:04 It's the only pipe I've been in. We had some other exposures, some other ones, but nothing significant.

12:08 Who calls you about the dot pipes?

12:10 It was on the lawsuit. I spent all day talking to people, right? I spent all day talking. Have you read Ari Emanuel's book yet? No. Roll the calls. That's all I do. I just call, call, call. I go through my battery of my phone two or three times a day and I find places to walk. I walk around Tompkins Square Park or I sit in my home and I talk on the phone all day. And we do, I don't know, 20 investments a year or something. We just talk all the time. I'm taking a call. Before I walked in here from a piece of art we're.

12:37 Working on buying.

12:37 So it's fun.

12:39 You do art as an investment?

12:41 I have an art dealership.

12:42 Yeah. Yeah.

12:43 We've got maybe Tempstion, our capital in fine arts.

12:46 Yeah.

12:46 Mostly impressionists, but we have a bunch of other stuff. We have some dinosaur fossils. and an old master on negotiating.

12:52 That's a good business these days, right? Like dinosaur fossils?

12:54 I'm chasing the hype.

12:55 Oh, okay. So you like read the Bloomberg article about dinosaur fossils?

13:00 Sotheby's has an extraordinary paleontology or like fossils team. Let's go back further. So I accidentally stumbled into an auction at Christie's last year and a half and recognized that there was a lot of other activity happening, not just people waving paddles. And so I made friends with a bunch of the people within Christie's and within Sotheby's and tried to figure out the economics behind what was going on.

13:21 And that's been a huge, that's a significant profit center for my business is buying and selling art in the last couple of years. The spread between bid and ask is very wide.

13:31 I have written them. Not a very transparent market.

13:36 All of my stuff's at auction or post-auction or almost entirely. I don't think people actually do a whole lot of digging. We have bought and sold a seven-figure piece of art this year, bought in February and sold in October and made seven times the price or six times the price from significant pieces with significant artists, significant auction houses. It's a weird market, man.

13:59 What is the one-sentence explanation for Did the market for that artist's art go up 600% or is it like people are weird?

14:05 The bid-ask spread is really wide and there is simple quantitative exercises.

14:10 What does bid-ask spread mean when you're buying and selling at like open options?

14:13 An estate sale.

14:14 Okay, you buy it.

14:15 You can see that it's an estate sale. You can offer really, really low and see if it sells or not. And you don't get hit very often. And then you love them and hang them on the wall and you write them up. I've written up little paragraphs about each one. So my house is full of pretty pictures.

14:28 That's good.

14:28 I've got a Picasso in my daughter's room. There's a Piet Mondrian in the playroom. There's a T-Rex call over for my son's crib. It's fun.

14:35 And you write little, like, wall talkers?

14:36 Yeah, I've got big paragraphs describing the significance of them. I have the first dollars, the St. Joachimthal dollar. We have a bunch of crazy stuff. I've had Van Goghs and Renoirs and Degas.

14:47 We should be filming this in your apartment.

14:50 Come down. My car's up front. Let's go. It's been fun.

14:53 Anyway, sorry.

14:54 So the Bed-Ess road is very wide, and you can get a little bit of financing, not as much as I'd like. And you don't have to hold them in long as you'd think. And you can do quantitative analysis on the per square inch basis. It's just like real estate. And you can bid 20% of what you think it's worth.

15:08 Is it like linear in square inches?

15:13 It's not a straight line. There's a curve to it because people don't like the smallest. Although there's been like little Raphael that sold for $ 50 million. And the big, big ones are really hard. I got this VR that was like six feet by six feet that was like really hard versus the value of it. So there's like a frown to the end of the line. But we just tried out what it should be worth. And you look at things of similar format, be it wall and canvas or paper and same arrow or same subject matter.

15:38 And we do a little quantitative analysis, super simply, but really low. And we bought a bunch of fun stuff.

15:43 So you're running like a quant art fund. Okay. I like.

15:46 That's like 10% of the capital.

15:47 Yeah, sure.

15:48 And then we're mostly real estate.

15:50 Right.

15:50 We have real estate in like 12 states, and that's the majority of the capital. And then we do some public stuff, the art.

16:08 Another great email that you sent me. I've written a couple of times about electronic arts. I have this great fight, like they went private. Yeah. they have a, you know, 101 put on their bonds and they're like, no, no, no, we're going to defuse our bonds. And they're super long dated. They're issued in like a low rate environment. And so like the defusance is like 60 cents on the dollar, 70 cents on the dollar. And the bondholders thought they were getting 101 and they're really mad and they're suing.

16:30 But so I wrote about this and you emailed me, I've also defused like $ 200 million of weirdo bonds, which is another email designed to pique my interest.

16:41 But you and I do the same thing. You just write about it. I go like, Sure. Get in trouble chasing weird situations.

16:48 We both have fun our way. But so you defused $ 200 million of weirdo bonds, which you told me was like six different bonds.

16:53 I had six bonds, yeah.

16:54 What does that mean that you defused them? Like you were the... Equity owner. You were the equity owner. Equity owner of like, this is like in the real estate business?

17:02 Yeah, pretty sure it was that. You don't like the real estate business?

17:04 No, no, it's fine.

17:04 It doesn't matter what the asset is. Imagine any asset that's securitized by, or that's encumbered by a bond.

17:10 Okay.

17:10 And you put bonds in a trust. that match every month their U.S. Treasury obligation.

17:16 So you have a bond outstanding. Yeah. And you sort of get rid of the obligation of a bond.

17:20 The only way you can get a release of a mortgage is if you match monthly payments the next 20 years frequently with U.S. government obligations or Penny Friday or Tennessee Valley Authority. And there's firms that do this. Right.

17:34 Like someone will sell you a package of like Treasury strips or something that match all the payments or whatever.

17:38 You have to have the attorneys and accountants on the bond salesman. And it's, Gnarly, and I don't think risky, but difficult, right? We have very low return on brain damage on a lot of stuff we do. And it's pretty good ROE. So we find assets that are in this... He bought a building in 1977 for a million dollars in the Lower East Side or whatever. And he's 87, and he sells it this year for $ 100 million. And he can pay New York taxes, city, state, federal.

18:10 Or.

18:10 He could do a 1031 exchange into a piece of real estate with a long lease on it with a pay down, re-advance mortgage. You ever heard of these? No. It's a mortgage that you can 1031 into and have all that $ 99 million of cash equity. Pay down a mortgage as long as there's a dollar left. And then 30 days in, it will re-advance. It's the pay down and the re-advance. And the re-advance is a borrowing against an asset. So it's tax-free. So you're able to enjoy that $ 99 million of equity, of gain, tax-free, and he's 87.

18:44 If he dies in 10 years and there's 10 years left.

18:46 So he sells an asset with $ 99 million of gain. Sure. He buys a $ 100 million asset to get the 1031 treatment, and then he borrows $ 99 million against that.

18:55 It's pre-baked. Right. The $ 99 comes out 30 days out.

18:58 Right. Exactly.

18:59 So it's pre-baked. And then he hopefully lives a long time. But when he passes, his heirs receive. An equity interest and a piece of property that is not cash flowing because frequently that mortgage will exactly match every lease payment every month. And so markets without cash flows, like if you have a cash flowing piece of real estate, it's not going to sell for a 50 cap. It's not going to sell for a 50 bps cap rate, right?

19:26 There's like, it bounds reasonability of price. But if you have non-cash flowing equity interest in a building, like People's eyes glaze over. It's hard to.

19:35 Figure out what it's worth. So you can buy that at like a 50 cap?

19:39 No. You can buy it at a discount to the unlevered value after you defease the loan. So you go through all this trouble defeasing the loan. And sometimes weird stuff happens. I had a corporate lease with one of these zero cash flows that I won't name the lessor, but the location had been taken over by an MS-13 affiliate in an American inner city.

20:02 I'll leave it at that.

20:04 They sent the police in. They shot the police. They sent a SWAT team in. They shot the SWAT team. This was national news. And it was part of a package of an estate sale of zero cash flow assets. And they didn't want to think about this. They were mourning the passage of their father and wanted to get cash.

20:21 So I stepped in. We stepped in.

20:22 Woodmont did.

20:24 And it had a ground lease, too. So we had to engage in like a four-way negotiation with the lender, the tenant, the ground lease. and finagle, and I think we made like a five X return or something on buying and finagling for two months on a six figure amount. So my job is like extremely gnarly, messy, painful stuff that you make real returns off of. And the loan was non cross collateralized. So if the whole thing is zero, you lose the equity. But that's what I'm always seeking is non cross collateralized leverage, which is the same thing that happened with the other situation.

21:02 What is the role of the fees? They're basically like you're buying the thing.

21:04 People don't want to think about it. If it's a bank loan with an amount that they say right at $ 700, 000 check and it goes away, people understand that. If it's like you've got to hire all these service providers and it moves around every day what you'd get paid, it's a nightmare.

21:19 But so like you buy a thing for like $ 100 and it has an $ 80 loan, and so they sell it to you at $ 20, but you can defuse the $ 80 loan for $ 60, and so you make money.

21:27 It's more like you have a thing worth $ 100 and you have an $ 80 loan because of where your interest rates are. You could pay 20 and the loan is actually at 60 now or something. So you can make a return from the headache of the thing.

21:40 So you can instead of paying off the loan at 80, you pay it off at 60 by defeasance. Exactly.

21:44 The defeasance is less of a part of it than I might have. It's more like headache than defeasance. The EA defeasance is kind of interesting because it's not that different from the Waters situation where the borrower's argument is going to be, you're still getting your payments every month. The defeasance is still going to pay them every month.

22:02 the 60 cents on the dollar you said, the payments are exactly identical. That's what a defeasance is.

22:06 Yes. So where EA is, is they issued these bonds at like, I forget, but like very low rates because it was like in a super low rate environment and they were investment grade. And they issued these 30-year bonds, which as rates went up, traded like, I don't know, 60, 70 cents on the dollar. And then they got bought out in an LBO. And so the bondholders are like, well, you got bought out in an LBO, you got downgraded, probably.

22:26 And so that triggers a 101 put. So instead of getting These like bonds that are now worth like 60 or whatever, we get 101 right now. And EA says, no, you get defeased.

22:38 So you get the exact same. Exactly.

22:40 You get the exact payments you're contracted to.

22:42 How can you complain if you're getting the exact same payments?

22:44 So my understanding is there's two lines of complaint. Most people I talk to think that EA wins, but I really don't know. One line of complaint is that the 101 put is like you get the put if there's a change of control and the company is downgraded or the bonds are downgraded. And EA, part of what they're trying is to not get the bonds downgraded by going to the ratings agencies and saying, look, they're defused. They're like AAA credit.

23:07 U.S.

23:07 Government obligations. AA now.

23:09 AA, yeah.

23:10 But I don't know that that's going to work because... Why wouldn't it?

23:13 In equity, why wouldn't it? If you're going to get the same payments, should there be a windfall? A 40 cent windfall?

23:19 So this is what I think about. I think a lot of financial instruments in the world are priced because they have some windfall value, right? So, like, I used to do equity derivatives. Where was it, Matt? And there's this trade called the call spread. It's not a call spread. It's called the call options overlay. You do, like, companies issue convertible bonds. They essentially buy back the conversion option, the convertible bond, sell a higher strike call option. And it's like, you know, it's a multi-hundred million dollar transaction. And, you know, it's often competitive and it's priced at a fairly tight rate. And sometimes banks will sell it to you at, like, scratch, like at very, very, very tight

23:55 rates because... The way it works is that if the company is acquired in a merger, the bank gets a ridiculous windfall. And, like, there have been lawsuits over it. I think that the windfalls have been reduced. But, like, there's this ridiculous windfall. And so if you have a portfolio of calls.

24:12 The portfolio should be cheaper because there's some windfalls throughout.

24:14 And so you can be like, well, if I, you know, and people don't literally do this, but you can be like, I'll sell 20 call spreads. I'll price them all at scratch. I'll make all my money on the one company that gets taken out. And I have to imagine that, like, there's just a teeny element of that. in bond investing, right?

24:28 We're like- But don't you think they're also hedging the interest rates, like the broad interest rates? Because what happened to the spreads on EA bonds? So if broad interest rates went up.

24:38 Their spreads, like, I mean, it's hard to say what happened to the spreads because it's all in the– but, like, their spreads should have gotten wider because they got LBO'd. But then they should go narrow again because they're getting defused.

24:48 The windfall comes from the fact that rates– Yeah, sure, sure, sure.

24:51 It's just a windfall. It's like windfalls go from windfalls.

24:53 We're allocating the windfall.

24:54 Yeah, we're allocating the windfall. I don't know if the bondholders had rates, right? I mean, like, it's a– you know, it's a long-only investor. It's like they buy these bonds. Rates go up. They lose a lot of money on the bonds. And then, whoops, you get 101 back.

25:08 You thought EA wins? You think the defeasance holds?

25:11 I don't want to speculate on it because I truly don't know. But my gut and what most people tell me is probably EA wins.

25:20 Can't you imagine a trial like your honor? They're getting all the payments.

25:24 If the U.S.

25:24 Government still pays dollars on treasury bonds, they're going to get all the payments. Where's the damage? I'm not saying that's a winning argument.

25:29 That's not how bonds work. Because it's not an equity, right? I know. I know.

25:33 It's a contract.

25:33 Whatever it says. And sometimes you can get windfalls. I know.

25:37 I didn't go to Yale Law School, but I know that.

25:39 Where did you go to law school? Do you remember? I do not.

25:42 I went to Harvard Law School. I didn't ever take the bar. I'm a lawyer, but not an attorney.

25:45 Isn't that what we have to say now? I've never believed that that is a real distinction, but people do. I don't know. I don't know which one's which or whatever.

25:52 I've said that for a decade since I never took the bar.

25:55 For all I know, that's the correct distinction.

25:57 I don't know if it's the correct distinction.

26:00 Do you think that your legal training is useful to you in your current job, or was it strictly recreational? Hesitating a disappointingly long time for law schools.

26:16 I was looking for weirdo investment work in 2009. It was a really hard time to look for work. I graduated in 2010 and had a chemistry degree. You had a classic degree, so you understand having a little bit off the beaten path.

26:30 And so this is reminding me that one of my bosses at Goldman years later, I had lunch with him and he was like a partner at Goldman and made a lot of money and was like in his fifties. He was like, I'm thinking about going.

26:39 To law school.

26:40 Yeah.

26:41 Well, my boss asked him, I'm going to take the bar now. Like I was like, no, no, it's worked out. It was my least dirty shirt. After graduating with a chemistry degree, like I took the GRE, I took the GMAT, I took the LSAT. I got a whole bunch of business schools. I got a bunch of law schools. Harvard Law School sounds nice. It's right across the street. So it's right next to the chemistry department.

27:05 This is what you do with a classics degree is you.

27:07 Go to law school. Same with the chemistry degree unless you want to get a PhD, which I thought about.

27:10 I thought about the classics PhD.

27:13 I worked for a Nobel laureate in undergrad. I washed dishes for a Nobel laureate for $ 100 an hour. That's how I paid my way to Harvard undergrad.

27:19 Can't do that in classics. Wait, do you want to talk about Mark Walter, Todd Boley?

27:35 It's interesting.

27:37 Like these guys, this is like the business model.

27:40 Of Berkshire Hathaway.

27:43 Yes. Like I've mentioned the Berkshire Hathaway business model of like, there are people in the world, Warren Buffett, Todd Boley, Mark Walter, the guys who run Apollo who are like, we're really good investors. And one side of that is finding good investments, and the other side of it is finding good funding. And there's no better funding than life insurance liabilities.

28:03 I think there's one important difference. Berkshire and National Divinity are based in– do you know what state they're all based in and under the insurance regulation of?

28:12 I was assuming it was Nebraska. Yes, Nebraska.

28:14 And there's a bunch of insurance companies in Nebraska. These other insurance companies– Berkshire.

28:18 Is not like– Like there's huge property and casualty, which is like a different.

28:22 It is very different business model. But there's an important thing. You have the float in Nebraska. I believe you can invest the float in equities. And that's allowed and blessed and fine.

28:34 Buy shares of Coke.

28:35 Yeah, Coca-Cola or any other thing and buy shares of a chocolate company, any other thing. What Mark Walters and the guy today, what's his name? Todd Bowley.

28:44 I read about it today. We were doing it on Wednesday. Yeah, yeah.

28:48 What they did was set up an insurer, issue a bunch of annuities, which Apollo also, Athene, also got deep into annuities, which I'm interested in why they both picked annuities and how bad some of the annuities turned out for the annuitants. But then they borrowed money from the insurer, right? The insurer had an asset and liability of the annuities, but it had an asset of a loan. That's different, right?

29:12 That's inherently different than having the equity investment and the upside of the float, isn't it?

29:18 Yeah, sure.

29:19 Because you can duration match. I think that's really the main point is you can duration match, right? But because you can duration match, there's this game you could play with length of the loan, right? Yeah. If you make little bitty loans, then you don't have to have very much capital held against it because it rolls off in three months.

29:36 Right.

29:36 But if it's to the boss, the guy that owns it, isn't going to keep rolling.

29:39 I read about it the other day. There's one part of Mark Walter's insurance empire is that he was making– or these insurance companies were making these short-term loans that rolled every six months. That turned out to be affiliate transactions. And so you wonder like.

29:53 Why– Because they got a lower capital charge, right?

29:55 Yes. I mean the answer is– I definitely have lenders.

29:59 I have thought about that. We have a bunch of different loans against a bunch of assets. That's the thing that's come up repeatedly is if they're short-term loans, yeah, we'll roll them, we'll roll them, but it has a lower capital charge for them if it's short-term loans.

30:10 So a lender says to you, I would rather be on you this money for six months than five years.

30:14 And don't worry about it.

30:15 We'll roll it. Don't worry about it. We'll roll it. Yeah, yeah.

30:17 I mean, I don't have that. You have that over the phone, right?

30:20 Right. No, I've read about this. There's the Greensill, the supply chain finance guys. They were making these receivables loans to companies that didn't have the receivables.

30:29 They were like, one day we'll make a sale.

30:32 And the borrower- When Greensill collapsed, the state was like, all right, pay those loans. And the borrower was like, no, no, no.

30:38 We didn't even have revenue.

30:40 You told me you'd roll these forever. No, they wouldn't roll them forever.

30:43 You can't rely on that. I'm not saying I've relied on it. I'm saying that's a conversation that's come up before.

30:47 That's interesting. Do other people rely? It must be.

30:50 Sure. This guy did.

30:52 Yeah.

30:53 So just to be clear, so Nebraska is really good from an insurance perspective because they allow you to invest in equities, and especially I think microcap equities as the float. in a way that Buffett couldn't get margin loans or any other financing. And insurance served as leverage, as effectively fixed-rate leverage, because you could look at what the combined ratio was, and it served as fixed-rate leverage for investing in microcap equities. I'm not from Nebraska. I'm from Arkansas.

31:19 And Arkansas has really entrepreneurial lending rules. The banking rules in Arkansas are exciting. I'm from a town of 10,000 people. There's five banks headquartered in my hometown. And I have a Harvard Law degree. And you walk in and shake the hand and look in the eye of the CEO or chief lending officer. Anybody that has a $ 5 million net worth will set up a bank because they can borrow 20 to 1 commercial deposits against it and make higher rate loans against. That's when I started this business.

31:46 I didn't have any money. I started this business with $ 8, 000. And we were borrowed from intelligent, entrepreneurial chief lending officers of these small banks in Arkansas to do weirdo real estate investments. And we were able to get 90, 97% LTV loans against busted weird real estate because they charged me out the nose and because they have the ability to effectively write high-field, personally guaranteed loans from the Arkansas banks.

32:12 You don't do it with 70% of your equity capital if you're the bank.

32:16 They do it with some.

32:17 That's how I started, though.

32:18 So, like, I think of, like, Warren Buffett and Mark Waltz. Like, these are, like.

32:22 They're from different states.

32:22 Big operators.

32:23 They're not from Arkansas.

32:24 But, like, these Arkansas guys are, like... These are people... Made some money in dentistry? Farmers. Farmers, okay. They made some money in farming.

32:31 They could still be quite sophisticated. It wouldn't be insane if you had a diversified loan portfolio from a lending officer to make some weirdo loans. And if you're going to make some weirdo loans to raise the overall ROA of your bank, pick the poor, hungry, determined. Or it's a PhD, poor, hungry, driven. 25-year-old Harvard, Harvard guy from a town of 160 down the road and ride him alone to do some weird stuff.

32:54 So you did like a little like barn swimming tour of Arkansas banks to raise money for your weirdo real estate? I still do. Yeah.

32:58 All the time. They're great guys.

33:00 So that's your like funding?

33:01 It was originally. Now we've gotten big enough that we have non-recourse national and international letters on a lot of things.

33:07 Not all.

33:08 Mostly.

33:09 It's mostly real estate that you're not like.

33:11 Majority of our stuff is real estate.

33:12 Do you have like prime brokerage at Goldman?

33:15 Not at Goldman. I have several prime brokerage. We do a bunch of public market stuff. So it's always something.

33:23 What else are we talking about?

33:26 Are we talking about SpaceX merging with Tesla?

33:28 Oh, yeah.

33:29 Flying cars.

33:30 Flying cars. With SpaceX, what do you think?

33:32 I'm too dumb to have an opinion, but it's interesting to see. You have like a very, very controlled thing merging with like a pretty well-controlled thing. From a corporate governance perspective, it's like a mess. isn't it?

33:43 Yeah. I mean, the thing I wrote is that it's a mess anyway. Like it's a mess to have the two companies. Like it's less messy to have one company because like if you just wave a wand, have one company, then this guy who is clearly the decision maker of the company gets to decide on strategy and he gets to decide on capital allocation. He gets to decide on like what the priorities are and then just turn the company in that direction. And when you have two companies, When he's deciding, like, this is how we're going to pursue AI, that means one company loses out.

34:13 But didn't we have a problem with SolarCity with the correct allocation of economics?

34:17 No, sure, sure, sure. The actual, like, the merger is a nightmare. Except it's not really. So SolarCity is tough because, like, Tesla acquired SolarCity, which was, like, another Elon Musk company. And the Musks owned different amounts of, so there's, like, a conflict there. But it's also, like, there were allegations that SolarCity was, like, on its way to bankruptcy.

34:35 Weren't they in financial distress? I didn't have a position.

34:38 So that was like a really fraught one. This is like these two giant public companies, right? Like you could just like pick a day, look at the market caps. That's your exchange ratio. It's easy. I know that you can't actually do that. You need to like have a special committee and have a fairness opinion, but it's like fine.

34:53 It's fine.

34:53 Are you arguing that the price of Tesla and the price of SpaceX are efficient?

34:58 I guess you are.

34:59 You're assuming that.

35:01 I would say that there is a large cloud of uncertainty around both of them and there's no A prior reason to think that like one is high and one is low, right? Like maybe they're both high, maybe they're both low, but like the idea that like the market systematically overvalues Tesla and undervalues SpaceX or vice versa. It's like, yeah, why? Okay.

35:20 I like that. I've read your article.

35:21 And by the way, like, I think like, like if you're like an index fund and you own a lot of Tesla and you own zero SpaceX, you'll complain, right? Like you could have it, but like if you're like a, you know, Elon Musk retail shareholder, it's great. It's fine. Whatever. We've been in it at a par exchange ratio. That's fine.

35:39 How does it work for my queues? You don't want to talk about the queues?

35:42 What about the queues? They're cheap. It's interesting. Queues are cheap. I feel like this is not that kind of podcast.

35:47 Scratch it.

35:49 Move on. Why are the queues cheap? Tell me.

35:50 So if you had a stock or the market generally that fell 40%, it'd be on the cover of the newspaper every day. There's a crash. Everyone's freaking out. People are jumping out of windows, right? Since July. The P of the Qs has gone down 40%. That's weird. It's growing really fast. It sure looks like it's going to go fast next year if all the numbers are right, but who knows?

36:15 The P has gone down 40%, meaning the E has gone up a lot. Yeah.

36:18 P's gone up a little. E's gone up a lot.

36:20 Yeah.

36:21 Is that not like a flavor of a crash? Why does it matter the nominal price declining to call it, and rates are up. The 10-year and 30-year have gone from four to five and a half. So you got to price some of that. Okay.

36:37 It has the flavor. But like, I mean, the E is like, there's like, yeah, like people are putting a broader like cloud of uncertainty around the earnings, right? Because like.

36:46 40% is a lot, man.

36:49 Yeah. Okay.

36:50 28 to 20. I'm not smart enough to have an opinion about those. Sorry.

36:52 I hear you on it having the flavor of a crash, but that doesn't make it cheap.

36:57 I'll give you both of those.

36:58 Yeah. Yeah. That's right. It does.

36:59 Maybe cheap sounds right. Remarkable.

37:01 Yeah, but it's like remarkable times, right? I mean, like the earnings growth is remarkable.

37:04 It's really weird, right? Like Q3 over Q3 for the S & P 500 CPS is up like, what, 40% or something.

37:11 By the way, the other thing I'll say about that is like, so some of the E is like moving up enormous quantities of CapEx or whatever, but some of it is- It's.

37:18 Just borrowing and moving everything forward, right?

37:20 Some of it is valuation increases of holdings, right?

37:23 You've got to count those out. Don't look at the Anthropic increasing the E of Google. It's like after you correct that.

37:29 Okay, after you correct that. You've got to correct that. That's not.

37:31 I can't correct that. In, like, 1989, I was, like, 11 years old.

37:35 Sure.

37:36 Is this what it felt like? What year did you graduate?

37:38 I was in college. I was a classics major. I was not following the math back.

37:44 You taught, then, while I was, then, walked out of Goldman. So you didn't start at Goldman until, like, what?

37:51 Oh, seven.

37:52 Oh, wow.

37:53 It was great. That's a great time.

37:54 It was great.

37:55 It was great. Here's why it was great. One, I didn't get fired. And I was like, well, I'm safe because like, if I was going to get fired, I'd have been fired by now. And two, and it wasn't that great, but in retrospect, I was fascinated by it. Like I didn't do anything for six months. Like, From September 08 to, like, March 09, like, we did no deals.

38:14 We did nothing. And I don't know what I did all day.

38:16 You can't find something smart to do when everything's falling apart? It's really that capital markets driven?

38:21 It was corporate equity. So, like, I'm sure, like, the flow people were trading options. But, like, I was doing, like, equity derivatives is a different word. Like, it's really, like, oriented around the convertible bond market. And the convertible bond market was shut. And we did kind of reopen it. We, like … It's such a weird trade. Like, the convertible bond market shot for a while for reasons including, like, some hedge funds lost their shirts. There were, like, laws against short selling, so, like, convertible arbitrage.

38:46 Oh, wow. I didn't think about that. That applied to convertible arbitrage?

38:48 Yeah, yeah. It's nuts. Nuts. Okay. Like, truly nuts. But so, like, the convert market was in real bad shape for a while. And one thing that reopened it is that TARP, you know, the financial bailouts, warren buffett did a few trades that were like we buy preferred stocks and we get warrants and then like tarp did the same thing and so there's this template of investors meaning like the government or warren buffett or rescue answers would buy preferred stock with warrants as a thing that could still go on even in the depths of the crisis and so like we did one or two trades like that like in 09 where it's like oh we'll sell you preferred stock and warrants and like you did no no like we did public ones we did a public one and i think

39:31 there's like more than one of them i think like people were like oh like preferred stock and warrants is a thing so we'll uh we'll do some of those trades.

39:39 You can't remember i never had a job so every day when i get up and there's nothing to do i had a deputy income for like five months in 2013. I was looking for something weird to go do, which is I, you know, look at these pipes or go to an art fair or try to figure something out.

39:55 Don't get me wrong. When I spent six months never doing a trade at Goldman, like we weren't.

40:00 What'd you do all day?

40:01 I don't remember.

40:02 You read Bloomberg.

40:03 No, like we like worked frantically to try to do it.

40:06 I don't know. I don't know.

40:07 We like made lists. We like called people. We like did a bunch of frantic nonsense that went nowhere. Or like, you know, we like sat around in the lab being like, what can we do? To sell convertible bonds when all the hedge funds blew up and there's no short selling. I like that. I don't remember. It was not a restful time. We probably took a few long lunches, but not very many, considering there were six months of doing no business.

40:27 Must have been so much fun you decided to go do a blog.

40:32 Yeah.

40:33 Can't tell you a good thing?

40:34 Yeah.

40:34 I subscribed to the Bloomberg Terminal today for the first time. Yeah, I signed up.

40:39 I have a commission.

40:40 Yeah.

40:41 You told me I'd get it.

40:42 Free if I came on the podcast. No, kidding, kidding, kidding.

40:45 You subscribed for the vast quantity of data.

40:49 Data, yeah. We kept having to recreate things, and we are busy enough, and my Chief Joseph Officer's time is valuable enough now.

40:58 Chief Joseph Officer.

40:59 If all the Josephs, he's number one.

41:02 Just one. I hired a guy out of Brooke.

41:04 He's really good. And then I have an EA and we called an analyst, but now he's a business manager. His time is too valuable to continue to like crunch numbers. When I mean, the Bloomberg is.

41:15 That's great.

41:15 It's underpriced. We were looking at that and we were like, I can pay that much and save this much of his time. And we try to price his time and try to price my time on all the things we do. And like, if Ty's going to budget two hours on a thing, what's that worth? So it's not worth the enterprise. Hey, Joseph's got a budget. Three hours to the thing. What's that worth to Enterprise? And we looked at the Bloomberg.

41:35 Wait, so you say you have a low return on brain damage. A little bit of conflict there. But you carefully calculate the value of your time. Yeah. And so people call you up with weird trades and you're like, nope, not worth it to think about it. That's not true. You think about it.

41:49 Yeah, that's fun. That's the fun part. Sit in the hot tub, sit on the roof, think about the fun stuff.

41:53 That's good. So your time for doing administrative or number crunching work is highly valuable, but your time for thinking about weird trades is?

42:02 But that's where the money came from. So I'd rather just sit around and think about things. It's been interesting.

42:07 It's a good life. I also like to sit around and think about weird dreads, but it's a different economic model.

42:13 It doesn't have to be, man. Come do fun stuff.

42:15 I have fun now. You do.

42:19 You have the most fun of anyone I know.

42:21 Is that true? Absolutely.

42:23 You look at a bunch of different fascinating things. You get to pick what fascinates you. Does someone feed you the things to do you don't think?

42:29 No, I mean.

42:30 top down within Bloomberg. You seem to do the things that fascinate you. And the things you write fascinate me. It fascinates everybody. That's a good thing. It's a good show. I don't mean to toot your horn. It's a good show.

42:40 I think we're going to end it there. Let's end it. Tyce Brown, thanks for coming on to the Money Stuff Podcast.

42:47 Thank you for having me, Matt. It's been an honor.

42:48 Do you want to, like, you don't have any socials. You don't care. No one needs to contact you.

42:52 I'm just a guy. Please don't contact me.

42:56 And that was the Money Stuff Podcast. I'm Matt Levine. You can find my work by subscribing to the Money Stuff newsletter on Bloomberg.com. We'd love to hear from you. You can send an email to moneypod at Bloomberg.net. Ask us a question and we might answer it on the air. You can also subscribe to our show wherever you're listening right now and leave us a review. It helps more people find the show. The Money Stuff podcast is produced by Anna Masarakis and Moses Andam. Our theme music was composed by Blake Maples. Amy Keene is our executive producer and Cheryl Brumley is Bloomberg's head of podcasts. Thanks for listening to the Money Stuff Podcast. We'll be back next week with more stuff.