DORKs Are Cool Again

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2:06Hello! And welcome to Slate Money, your guide to the business and finance news of the week. I'm Felix Hammond, and I'm joined by Elizabeth Spires of New York Times, right here in the Slate Money studio. I'm joined by Emily Peck of Axios.

2:25Felix Salmon: Hello, hello. We are going to talk about meme stocks. Remember meme stocks from 2021? They're back. We are memeing again, people. YOLO, jump in, make lots of money, buy Krispy Kreme stock instead of Krispy Kreme donuts. You might go bust, but at least won't get fat. We are going to talk about Polymarket. Well, we kind of touch on Polymarket. But mainly we talk about crypto more generally and how it seems to be in a regulatory zone which allows it to do whatever it wants and whether that has the potential to cause some kind of monster financial crisis. We are going to talk about the cancellation of the late show with Stephen Colbert and whether it was political or not.

3:15We have a Slate Plus segment on Beach Reads. It's all coming up on Slate Money.

3:28Okay, let's start by talking about dorks. I can spell dork, D-O-R-K. Emily, what does it mean?

3:39Felix Salmon: Well, it means kind of nerdy. You're not familiar? No, it means, it's an acronym, and it stands for four different stocks. Okay, D stands for the Krispy Kreme stock, which is their ticker symbol is D-N-U-T. Donut, get it? O is for Open Door Technologies, a real estate company that will buy your house from you. The R is Rocket Companies, which is a mortgage platform. And the K is for Kohl's. Kohl's Cash, anyone? Department store, always doing perennially badly. That's dork. These are the four sort of new meme stocks of the week. The Four Horsemen of the meme stock apocalypse? Yes, yes. They're not the only ones, but they make the best acronym, DORC, which I saw on Sherwood and thought was fun.

4:33It is fun. And the leader of these Four Horsemen is clearly Opendoor, a company that was left for dead after it suffered a double whammy of not only did it lose money on every house it bought or on average, it lost money on every house it bought. But also, it wasn't buying any houses, because as we all know, no one's buying and selling houses right now, because interest rates are too high, and everyone is locked into their 3 % mortgages. So it hasn't made a profit in living memory. Its stock was languishing at about 50 cents. It was about to get delisted from the Russell 2000. And that was part of the short thesis in the stock, which was that when it lost its inclusion in the Russell 2000, it would need to get sold by all of those fund managers who indexed the Russell 2000.

5:30And on top of that, there was talk that it might have to get delisted from the NASDAQ stock exchange and not even be a properly listed stock at all, because its share price was under a dollar. And so they were talking about doing something called reverse share split. Now it seems they don't need to do a reverse share split because its share price is well over a dollar and the Reddit crowd has discovered it.

5:55Elizabeth Spiers: This seems to just be a function of Reddit crowd plus a random fund manager named Eric Jackson made a post on X saying that he was taking a position in Opendoor, which I think gave it some... He's not entirely random. He is famous for having made a similar bet on Carvana and made an absolute fortune. That was what they call a hundred bagger. The stock went up a hundred times from where he bought it. And so he has, you know, prior form on this. And he gave a really interesting interview to Sherwood where he talked about things like the observer effect. And he's very open about this. He's like the immediate catalyst for the stock going up is the stock going up.

6:41And because the stock is going up, everyone is buying it. And what we really want, he said, is for like Chamath or the board members or the CEO or other people to all also start committing to buying the stock and saying that they're buying the stock. Because then, you know, as is kind of common sense, if everyone is buying the stock, and especially if they're doing it in large quantities, it goes up. I like this theory. If you buy a stock, it goes up.

7:08Felix Salmon: it's true until it's not true i think the stock has since come down since it got really bubbly and frothy earlier in the week and then i didn't check i should have checked but uh that the line went up and then went went went down so the line just to be clear went up significantly from 50 cents it did not hit the 30 plus dollar levels that it was trading at back in 2021 during the first meme stock craziness when it wasn't a meme stock when it actually was a kind of hot technology company that looked like it had a bright future thanks to number one Zerp which meant it didn't need to pay any interest when it was holding houses and waiting for them to get sold and number two a booming housing market that meant it made money on every house it sold because the only all you needed to do to make money was just hold the house for a minute and then it went up in value.

8:06So it looked really good at the time. And in fact, it looked so good at the time that various other companies, including Zillow, decided they needed to do this kind of thing as well. And in principle, there are lots of good reasons why people would like to avail themselves of this kind of a service, both on the buy side and the sell side. On the sell side, people, you know, who often pay 6 % in broker fees can just be like, yeah, we are going to just sell a house without paying a broker. It'll be much quicker. It'll be maybe a tiny discount, but it'll happen immediately. And then we'll have all of the cash we need to buy another house in cash.

8:45Everything becomes easier. On the sell side, you have big companies like Blackstone who want to build up portfolios of houses that they can rent out and have a nice income stream from. And trying to do that one at a time, it's very hard. But if you just go along to Open Door and say, do you have a job lot of 20 ,000 homes you can sell me, then suddenly, they start getting interested. So in theory, it works. It's just that in practice, the market hasn't been the kind of place where it works for the past couple of years. And a company can't just go on forever losing money waiting for the market to change.

9:22Yeah.

9:23Felix Salmon: And I mean, it is a really appealing business, at least if you're a home seller because selling a home is not, and we've discussed it on the pod before, I think, selling home is not easy beyond the cost that you have to pay to the broker that come to your house. They're like, okay, well, this is, you need to fix this. You need to do this. You need to get it ready to sell. It's like a whole process. You need to show it to people, decide how much this huge asset, what it should be priced at. It's a whole to do. So if you can create a company that comes in and is just like, I'll pay you this much and you deal with the rest and you don't have to do any of that other stuff.

9:58Felix Salmon: It makes the market so much more efficient. But I think the way Open Door and those Zillow knockoffs and the other firms tried to do it was through algorithms and without humans. And I think that's not a safe game to play when you're buying and selling individual homes in the United States, right? You can't trust the algorithm necessarily.

10:20Elizabeth Spiers: Well, I think it was mostly just bad timing for them. They didn't actually shut down their iBuying business. They just sort of paused it. Right. Zillow or Opendoor? Zillow. Yeah. But I think you're right about the algorithms because they find themselves vulnerable to what economists like to talk about as adverse selection, which is basically, let's say for the sake of argument, that everyone who is about to put their house on the market at least throws it up on the Opendoor website just to see what the bid is, right? Because there's no harm in seeing if Opendoor will pay you what you want. And so the percentage of houses that Opendoor actually buys is a percentage of the ones that it bids on is tiny.

11:05It's like less than 1%, I think. And what that means is that if sellers only accept your bid 1 % of the time, those sellers are likely to be the people who know something that you don't about why their house is not worth as much as your offering.

11:22Felix Salmon: Yes. So yeah, that makes sense. So then you're scooping up all the bad deals. Exactly. It's the winner's curse or a variation thereof. And I should say I looked it up. The stock is up 35 % over the past few days, but it was up in triple digits earlier in the week, I think. So it's kind of come down off the frenzy, but still up. And then more broadly, there does seem to be this kind of flight to shit in the stock market. I believe someone said something along those lines, where, you know, there was a lot of months and possibly even years there where people were like, if I want to buy the high flying stocks, I'm just going to buy the Magnificent Seven, I'm going to buy the Megacat tech stocks.

12:03Now, that trade seems to have played itself out a bit. And they're like, where's the YOLO returns, where's the 10 baggers, where can I get the massive returns? I know by buying complete shit and hoping that it goes up. And frankly, buying complete shit and hoping that goes up has been a really good trade over the past couple of months.

12:24Elizabeth Spiers: I feel like this is a kind of a rehash of the day trading trend in the early aughts. It feels like because there are so many stories about outlier situations with meme stocks and things like that, people are more inclined to take that kind of risk without really evaluating it? Well, I mean, the classic day trading boom was 2021. That dwarfed anything that happened in the early 2000s, partly because in 2021, we had free trading of stocks. In the early 2000s, you still had to pay like$15 every trade. So we now have a situation where retail investors comprise a significant proportion of total volume on the stock market.

13:05This is new. This is something that institutional investors are still sort of getting their arms around. And it's something that they often forget when they do things like short open door because it's about to drop out of the Russell 2000. They don't think to themselves, ah, I'm at risk of a Reddit instigated short squeeze. But they are.

13:24Elizabeth Spiers: If you're Eric Jackson and you are taking a position in open door because you do on some level believe in the fundamentals, is it good for you or bad for you that a bunch of retailer or investors are flooding to the stock. Spectacular. It is all your wildest dreams coming true. It is long. Yeah. What you want is a million people with diamond hands coming along and bidding up the stock and bidding it further and making your holding go up in value. Yeah, that's only good.

13:52Felix Salmon: Okay, so the reasons this is happening, first we should say meme stocks are maybe back, but not to the levels of GameStop or 2021 or anything like that. But then second, it's like, okay, well, why is this happening? So, you know, I've read a bunch of pieces that are like, this is just a sign that we're in a frothy market and FOMO and buying things that are going up is like a key part of a bull market, a late stage bull market, whatever that means. Well, I know what it means. It means people are bullish or excited about stocks and they think they're going to keep going up. And so they're buying more and they're buying stuff that's crazy because everyone's just super excited about the market.

14:30Felix Salmon: And then the other thing I read that I thought was kind of interesting and dubious is a theory that Americans need something to do with their money slash nest eggs because it's not a good time to buy a house. So you have like a little pot of savings hanging around. You can't buy a house right now because mortgage rates are too high or homes are too high or home prices are too high rather. So you take your little extra savings and you plow it into dork stocks. Yeah, I don't buy that one at all, especially not given that the Fed has been very slow to cut interest rates and that therefore you can still find savings accounts paying like 4 % risk free on your nest egg.

15:14So like, yeah. Right.

15:15Felix Salmon: There's other steps to take. It's not like buy a house or invest in Krispy Kreme, which is another one of the meme stocks. That's a very Zerpy argument. And we're not in a Zerp environment right now. And it's not like now is some obvious time to rotate your cash out of your savings account and into meme stocks. Like, why would that doesn't make any sense either. So why is this happening now? Like we know why it was happening in 2021. It was like everyone was home, everyone was online, the stimulus checks. People were bored. Like those were all the reasons. But now 2025, people are back in the office mostly.

15:52Felix Salmon: I guess they're still online. Inflation is high. So what? It's just part of the culture now?

15:59Elizabeth Spiers: I wonder if it's just very recent FOMO where people who bought the dip when everybody thought tariffs were going to blow up the economy made a lot of money. And now people are looking at the stock market. Speculative retail investors are looking at it because they maybe have some regrets about not doing that. I like that. I think the astonishing health of the broad stock market of the S &P 500 has basically convinced the day trading crowds that the, you know, greybeards are just you can't trust anything they say. you know they were all saying that the crash in april was entirely justified and could get much worse and in fact there was this you know quite violent bounce back and they're like yeah let's just ignore everything in the real world and just trade the market as a kind of like whatever's cheap and shorted let's just trade that and have some fun and yeah maybe maybe it's just like a summer of I want to have some fun.

17:05I want to do some gambling. Maybe there's not a lot of like exciting sports ball to be gambling on right now. So I'll just throw my money into Krispy Kreme.

17:13Felix Salmon: I buy that. I buy it. I do. It's just like the stock market's going up. Let's get in. Like that's that's all it is. It's just that simple. And nothing Trump can do can stop it. So screw it. Let's do it. That's the important question, right? Which is that Trump has claimed that a whole slew of tariffs are going to go into effect on August the 1st. If that turns out to be the case, and certainly the stock market isn't trying to stop him, it's not like, you know, tanking in anticipation of tariffs or anything like that. Could the imposition of those tariffs cause another massive 20 % plunge in the stock market, just like we saw in April?

17:57Felix Salmon: No, because I think Trump, he reset everyone's expectations in such a way that when extreme things happen now, they're not viewed as extreme. Like he threatened Japan with 20 % tariffs and now, or he threatened them with 25 % tariffs. I think he threatened them with 50%. No, that was Brazil, wasn't it? It was 50%. Yeah, it's hard to keep up. He threatened such high numbers that when these new tariff announcements come and they're less than what he threatened, the market's like, oh, great. Whereas that once upon a time, 15, 20 % tariff on Japan would have been insane and would have tanked the market.

18:31Felix Salmon: Now, and I'm not the first to say this. I think Neil Irwin wrote this in Axios this week. But now, the announcement comes out and everyone breathes a sigh of relief because he's managed to change everyone's psychology. And I think the most important thing you need to understand about markets and why they fall in particular, it doesn't quite explain why they rise as much, but it definitely explains precipitous falls, some precipitous falls, many, not all, is they hate negative surprises. and so that's why something like argentina defaulting that was a big negative thing but it was massively telegraphed years in advance and everyone knew was about to happen didn't cause a ripple in the markets because everyone it was priced and everyone expected it it's also why the original if you look at what happened on april the 2nd when the tariffs were announced when everyone thought that the tariffs were going to be like across the board 10 percent the stock market was like yeah this is kind of what donald trump promised on the campaign trail it's what we're expecting so the market didn't move and then he gives this batshit press conference he starts on you know announcing 65 percent tariffs on penguins or whatever and then everyone's like shit, this is not what we expected at all.

19:55And the market fell out of bed. At this point, no one is expecting nothing. It's not like a complete taco is priced in. It's just people have managed to get used to the idea that tariffs are going to be part of what happens and that the United States government is going to go around in circles and move the tariffs up and move the tariffs down and people are going to get hurt and people are going to lose money and make money. And eventually we'll come out the other end of the second Trump administration in three and a half years time. And we will be in a place that, you know, maybe better or worse than we are right now.

20:33But like it's it doesn't feel existential, especially to the stock market, because stocks, remember, people complain about how short term they are, but they are permanent capital. And, you know, most of the earnings that are priced into share prices are 4, 5, 10, 20, 30 years in the future. So, like, what happens over the next year with tariff chaos shouldn't necessarily be a massive driver of share prices.

21:01Elizabeth Spiers: Also, don't you think that a lot of the perception of how well the market is doing is really dominated by the magnificent seven and how much value they create? I think not, weirdly. I think that was true until April. But one of the interesting things about the market rally post-April 2nd is that it has not been led by the Magnificent Seven. And in fact, you are seeing a whole bunch of shit stocks like Krispy Kreme and Opendoor that are driving a lot of the gains. Now, it hasn't been the meme stocks up until now, but there has been this kind of phenomenon over the last couple of months that the sort of, call it, you know, S &P 493, you know, all of the S &P 500 that isn't the Magnificent Seven, has actually been sort of outperforming and doing quite well.

21:52And the thing that people were worried about when people complained about stock market concentration was if those magnificent seven implode, then that will take the entire stock market down with it. What actually happened was that the other 493 stocks, the rest of the stock market, started slowly getting re-rated up to those levels. And that has been really what has kept the S &P 500 hitting you all-time highs.

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25:57That's code slate money at im8health.com slash slate money. Code slate money at im8health.com slash slate money. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure or prevent any disease. We can move on to our second segment, which is also sort of government related in a way which is the re-banking of crypto, the legitimization of polymarket, and basically the way in which if you are a crypto-based entrepreneur, all of the regulatory obstacles that you faced a year ago have evaporated into thin air. And although technically many of the laws might still be on the books.

26:55The regulators have made it clear that they're not going to enforce any of them. And a whole bunch of companies are springing up, often with dumb names that you've never heard of, to basically say, I will fill that vacuum. I will do the thing that is officially against the law, according to what regulators say. But given that the regulators have made it clear they're not going to enforce it, I'm just going to do it anyway and make lots of money. And so that's what they're doing.

27:23Elizabeth Spiers: These are basically fintech companies that sit on top of regular banks, though, right? We're talking about companies like Meow. Meow, exactly. Meow. Like, who the hell? Like, the idea that a company called Meow is actually a bank. No, I don't think a company called Meow is ever going to get a banking license. But yeah, it has... Only a Gen Z entrepreneur would call a fintech company Meow.

27:44Felix Salmon: I love it. Meow, Mercury, Brex. These are the the fintech names that are willing to bank the crypto companies. And of course they should, this is, this feels good and right. Then to Felix's point, the law has not changed as far. I mean, there was just a new law path. It was a stable coin, but this has nothing to do with banking. So the law really hasn't changed, but the vibe, the vibe has really changed. So now all these crypto companies are able to get bank accounts from, from meow. I, I don't know. I guess laws are are more every day in this new administration, you find out that laws are just they're just words on paper, you know?

28:28Elizabeth Spiers: Well, let's let's. There are some some steps toward, you know, regulating this area of banking, though. And on the Republican side, you know, they have a bill up called the Firm Act that basically allows banks to interact with businesses that might cause reputational risk. And historically, those are things like cannabis businesses or porn or things like that. But crypto has been lumped in there, too. And this bill hasn't passed. It probably will. But, you know, the idea that reputational risk-oriented businesses are no longer being treated the same way by banks because they don't see any downside anymore in banking these companies.

29:09Elizabeth Spiers: This is happening a little bit in cannabis, too, I think is. Yeah, I feel like the reason why banks, like big established normal banks, not banks called Meow, don't bank crypto companies and don't bank cannabis companies has absolutely nothing to do with we are worried about our reputation if it comes out that we're banking those people. Well, I mean, it's term of art, reputational risk, not colloquially, you know, like we are worried about our brand. It's a term of art for a certain kind of risk that's built into a business that isn't fully regulated or is parts of it are considered illegal. I don't mean it in the colloquial sense.

29:50Well, so let's just be clear about how we mean it, because that does explain why banks don't bank like firearms companies, for instance. They're like, we don't want to be associated with those people. with cannabis the reason they don't do it is because dealing in cannabis is illegal under federal law and if you're a bank you don't want to bank companies who do illegal things like that is pretty high up there on the list of don'ts that you get taught in your first day at you know banking regulator school um with crypto it's not so much that it's illegal but it's that there has been a huge amount of illegal activity in the crypto world as we know there has been a lot of fraud there's been a lot of money laundering there has been you know people taking out hits on other people and you know all manner of stuff and as a result did you just i'm sorry people taking

30:39Felix Salmon: out hits on other people did he just say that silk road silk road yeah that's what um you know who didn't he just get pardoned the silk road guy didn't trump just pardon him i can't remember this is back when everyone thought that bitcoin transactions were anonymous but um but in any case you know it is impossible to go a week without reading about another crypto scam somewhere true so there is a lot of bad shit to use the technical term that goes on in the crypto world and as a result of that that what the regulators say is if you want to bank a crypto company, fine. But do this thing called EDD, enhanced due diligence, make sure that this company is genuinely legit.

31:22And then if you do the EDD, and they turn out to be genuinely legit, then by all means, go ahead and bank them. The problem is that banking a crypto company is not a massively profitable business to be in. While doing enhanced due diligence on a company is a very expensive thing to do so you don't get paid back for all of that investment you make in the edd from the profits on the checking account so you just kind of say no and what historically happened and this long predates trump is that there was one bank in particular that was like we will do the edd we will bring you on onto our platform we will take all of that risk with the regulators and we will bank you even if no one else will that bank was called silvergate and it went bust in may 2023 when we had that little banking crisis and one of the things that transpired in the wake of silvergate going bust was that for all that it claimed to be doing enhanced due diligence on all of its customers it really wasn't and it was really just taking absolutely anyone and allowing clear fraud to happen under its nose.

32:41Silvergate was a multi-billion dollar bank, listed bank on the stock exchange with a huge market cap and a really relatively good reputation. It wasn't meow, right? And I'm just going to come out and say that if Silvergate was slipping on the enhanced due diligence, I have zero faith that meow is getting it absolutely right.

33:04Elizabeth Spiers: Well, does it matter if Trump is systematically both failing to staff the government and eroding the agencies that would ostensibly enforce this kind of thing? And I think that's exactly right. I think that what the meows of this world have done is they've just basically said, you know what, we're going to obviously do our best to EDD these companies, whatever their best is. They'll probably go to some EDD as a service company and sign them up and say, great, now I've done that thing. And if things slip, they have made the bet that the regulators aren't going to come down on them like a ton of bricks because the regulators have made it very clear that they love crypto everything and that they want to encourage it rather than crush it.

33:50Elizabeth Spiers: I just imagine that they came up with the name Meow while a couple of 30, you know, late 20-something entrepreneurs were in a room completely stoned. And so I sort of imagine them responding to regulators in much the same fashion where it's like, yeah, sure. We'll do extra due diligence here. We got it.

34:09Felix Salmon: We can handle it. One question I had, Felix, this Wired story is why we're talking about this. The great crypto rebanking has begun. They start their story off with an anecdote because they have words, word count available to them as writers. And also they probably went to journalism school and were taught that anecdotal leads for a lovely thing to have? So their lead anecdote is about a crypto entrepreneur called Azeem Khan. And it says he had just raised$19 million for his startup, Morph. So not meow, but also starts with an M, Morph. And needed somewhere to keep it. So my question is, like literally, so he had like$19 million in checks and he needed somewhere to keep it?

34:54Felix Salmon: I don't really understand the anecdote, actually. like what is that how seed funding works you get a check or something or a promise and then you have to go find a bank and then you take the money like i already have a bank so historically speaking um like 19 million dollars sounds to me like a series a right okay yeah sure and historically speaking when you do a series a what you do is you you get like a silicon valley law firm, Wilson Sonsini or someone like that. And they will put together the term sheet and they will send it out to all of the VCs and the VCs will sign the whatsits. And as part of that whole, and then the VCs will be like, I'm not just here to write a check.

35:37I'm here to help you every step of the way. And so, and they're like, well, one of the things you do say the VCs, one of the ways we add value is I will introduce you to my friend Fred at Silicon Valley bank. And he's really good at banking people like you. And so let me set you up with him and he will look after you. And so you open up a bank account with Silicon Valley Bank because they, you know, because you've been introduced to them by the VCs. And then the VCs just wire all of their money straight into your SVB bank account. Post SVB implosion, things have got a little bit messier. And so, yeah, you need a bank account for them to wire money into.

36:14And if you don't have a bank account for them to wire money into. Various different possibilities present themselves. One of them, which is what Sam Backman-Fried did, was basically just open up bank accounts under his own name, just personal bank accounts to just say, like, pay me the money. And everyone was like, you're a genius, of course, I'll just pay you. You're trustworthy. We trust you, Sam. What's going on? But another thing you can do is just have the whole thing in sort of limbo, where it's just like one wire transfer away from closing, and you're just awaiting a routing number, basically, for the money to go into before it officially closes.

36:54Elizabeth Spiers: What Felix is describing is exactly how I ended up with an SVB account. I was dealing with a billionaire tech guy who introduced us to Wilson Sincini, who then set up our SVB account. But if you didn't have an account to wire the money into, I think another route is that people will just create accounts in the Caymans or whatever. It makes it still much harder to do business in the U.S. in terms of just everyday operations and paying vendors. But I think that is the route that a lot of crypto entrepreneurs have gone.

37:30Felix Salmon: That's what it's in the piece too, yeah. Switzerland and the Caymans. Yeah, what crypto entrepreneurs do, and crypto entrepreneurs often do weird projects that don't involve old-fashioned raising equity. But when they do do old-fashioned raising equity and they're raising money like this, often they're like, they're just like, well, send me stablecoins. You know, send me$17 million in Tether or USDC or something, and that will do it. And then they can just hold those stablecoins in their crypto wallet. And that serves the same purpose. And so long as most of what they're doing is in the cryptoverse rather than in the real world, it works.

38:06It's a little bit harder for making payroll. But then again, if your employees are all crypto true believers, you can be like, we will pay you in stable coins and then leave it up to you to convert those stable coins into dollars.

38:18Elizabeth Spiers: Well, another thing, though, is if you're taking venture money from large VCs, they typically want you to keep the cash in interest-bearing accounts, things that are a little bit stable. Stable coins pay 4 % now, is what I'm told. This is all part of the crazy reason why Coinbase seems to be making more money off USDC than Circle is.

38:37Felix Salmon: It does seem like, so this great crypto rebanking is happening because fintechs and these smaller banks that the fintechs use are less worried about getting in trouble and, you know, they'll do what they can maybe for their EDD. So it's like deregulation by benign neglect. And it's not just happening in crypto with re-banking, which you could argue is like a good thing or whatever, but it's happening like across the financial industry. This push for deregulation either by benign neglect or by like firing or pushing out all the regulators. Which you might call malign neglect. Malign neglect. Yeah.

39:21Felix Salmon: It just seems like we've been down this road before. Like when you deregulate too much, things get out of hand pretty quickly in the finance industry. Are you old enough to remember Graham Leach Bliley? No. That was the big deregulatory push under Clinton. Yes. Oh, yes, yes, yes. Talk about that. Which was spearheaded by friend of the pod, Larry Summers, and which ultimately in large part led to the 2008 financial crisis because it deregulated a whole bunch of financial activity to the point at which everyone took way too much risk and everything wound up blowing up. so yeah i think the financial world in general is highly attuned to the risks of too much deregulation attuned but not where like there's excitement i see the press releases you know from the the banking industry trade groups and and they're they're super excited about it they like it but and this is a very interesting question which is is there a real risk that the current wave of deregulation that's surrounding crypto and is spilling over into other things will end up having a similar you know blow-up effect like ram leach bliley did and is there a risk yes is there a large risk i'm gonna say probably not because the banks and i know you're right that the banking industry loves looser regulation.

41:04But the banks are still operating. And as we've seen, the big banks, you know, the actual real banks where 99 % of the money in the country is held, like they are not out there banking crypto, they are not meow, you know. If meow goes bust, meow goes bust, it's fine, right? That is not systemically dangerous. and we have much safer banks now than we did pre-crisis, which has caused a bunch of risk to move into other bits of the financial system, the non-banks, the private credit people, the hedge funds, you know, and so on and so forth. And all of these places can blow up and a hedge fund blowing up can be systemically dangerous, as we saw with LTCM.

41:45But I don't think it's systemically dangerous to the point of like causing a financial crisis. The thing that I worry about is the dream of the cryptoverse is that everything becomes crypto and everything becomes tokenized. So instead of buying a stock, you buy a crypto token that represents the stock. And then instead of buying a money market fund, you buy a crypto token that represents the money market fund. And those tokens are much less regulated than the underlying securities. and if we reach that sort of crypto nirvana and it really takes on to the point at which most people own the tokens rather than the underlying securities, that's the point at which I start getting worried.

42:27Elizabeth Spiers: Well, one thing that's happening and maybe this is not entirely a bad thing, the current SEC commissioner seems more willing to give guidance to crypto companies than Gary Gensler was. And Gensler was super hostile to crypto, but I think most of the guidance really emerged from enforcement and it seems like you know this sec commissioner is more willing to communicate and say you know give people parameters around what they can and can't do i i was i was on a panel with a very large bank a few months ago one of the big four talking about you know tokenization of money market funds and other things and this was at a big crypto conference and at one point the flag for the bank basically said you have to promise me that you won't use the word crypto otherwise we'll have to pull our representative from the panel.

43:15What? And I just laughed. But like the banks are still clearly very nervous. And I think as long as the banks remain nervous, that's a good sign. I suppose.

43:25Felix Salmon: I mean, there was just this week news about JP Morgan considering looking at people's crypto holdings to evaluate. Lending against them? Lending against crypto. And the FHFA, which oversees Fannie and Freddie, has also said it's looking into mortgage lending based on crypto. plus talking about what you're talking about when the tokens are so popular and the underlying asset is regulated but the token isn't regulated. Is that kind of what's happening with stable coins a little bit? Like they just made stable coins legal. If you buy stable coins, they're not FDIC insured the way, you know, if you're holding the dollars.

44:05But thanks to the Genius Act being signed into law, Like now there is actually pretty robust regulation surrounding stablecoins. And yeah, there's no FDIC insurance. But I, for one, am relatively satisfied that USDC and other coins that are regulated under the Genius Act are in fact safe and do in fact have an actual dollar backing up every single stablecoin. Of all the things I'm worried about that could blow up, like that USDC is very, very low down. list and in terms of considering crypto to be part of someone's wealth that you can lend money against a la jp morgan like yeah that's the world we live in now you know i i sit on my co-op board and every so often we get people sending in financial packages saying like i would like to buy into this building as part of their financial package they have to tell us all of their wealth.

45:08And increasingly, a significant chunk of that wealth is crypto. And one of the things we need to do as a board is kind of think to ourselves, is this crypto wealth real money, or do we just ignore it? And the answer is somewhere in between. And you wind up doing what JP Morgan is probably going to be doing, which is you basically treat crypto wealth as being worth 50 cents on the dollar or something like that.

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47:10Felix Salmon: Thank you.

47:36Felix Salmon: wherever they are, here's the wild part. Record yourself for just 15 seconds, and Hey Jen builds an AI avatar that makes professional videos for you on demand. So you can post everywhere your audience is, as yourself, without filming every time. Your first three videos are free at heyjen.com slash pod. That's H-E-Y-G-E-N dot com slash P-O-D. okay let's move on to paramount cbs skydance all of these big media companies the news of the week elizabeth is that someone somewhere technically the head of cbs because skydance still doesn't control cbs decided that this season will be the last season of the late show that is currently hosted by Stephen Colbert, and that it is losing too much money, it's losing$40 million a year, or so we're told, and bye-bye, late show.

48:43On the one hand, it seems pretty obvious that if something is losing$40 million a year, and it's not easy to see a way to it making money, it kind of makes sense to cancel it. On the other hand, there has been a huge amount of talk about how Stephen Colbert was a big critic of President Trump and CBS and Paramount are trying to ingratiate themselves with President Trump, as we saw recently with their$16 million payment to the president to settle a completely baseless case that he brought about an interview with Kamala Harris. And obviously, this was a political decision. So what do you think? Do you think it was financial or political or both?

49:24Elizabeth Spiers: I think it was mostly political. I do think the late night category is suffering because people are not watching broadcast TV very much anymore. And the genre of show has declined in the last decade. But that said, within the genre and for the time slot, Stephen Colbert's show was the highest rated show. And the timing just doesn't look great. So it sort of strains credulity. that so it was the highest rated show of the three big ones but also the one with the lowest ad revenue like it turns out the ratings don't translate directly into money and you can chase ratings and that's all well and good but you still need advertisers to advertise on your show and the advertisers were happier to go with the jimmies instead of steven colbert even if steven colbert could deliver a larger audience to me though that that points to a problem on the business side not the you know person who's doing the show it's sort of the media you have the sort of business side and then whoever's doing the product the editorial you know if cobert is tasked with getting the highest ratings he can the biggest audience he can and cbs is struggling to monetize it is that Colbert's fault or is that the fault of the people who should be selling more ads against it?

50:50Well, I mean, I think everyone who's ever worked in journalism has felt that, you know, like I've done my part of the bargain. Why can't you sell ads against it? But ultimately, if you can't sell ads against it, you lose your job. Emily, we talk a lot about salaries on this here podcast so can you explain to me how it is that someone who oversees or fronts a show that loses 40 million dollars a year can somehow negotiate himself a 20 million dollar a year salary because that's apparently what he's being paid

51:24Felix Salmon: well yeah i mean his contract is apparently is is out is done this year and it was time to renegotiate the contract. So I believe that at the time he negotiated the contract, the$20 million a year paycheck, that the show was not losing$40 million a year, right? So presumably the negotiations would have been hairy if they had decided to re-up the show. Maybe he wouldn't have gotten that$20 million. Also, media companies losing money, but networks still paying for them is not a new story, right? Like it's always been like flagship news programs aren't really the moneymaker, but they bring in viewers, they bring prestige for a network, especially a network like CBS.

52:13Like it's not just a money consideration

52:16Felix Salmon: when listening to some of the more knowledgeable people talk about the Colbert story. They talked about how the Jimmies, they don't just host their shows. they also provide these they make these clips that go viral they have a lot of youtube followers and they also serve as like spokesmen for their network so like nbc is like trotting out jimmy fallon to do other stuff besides his show you know he appears on other things and serves as like the face of the network in a way that i guess colbert really didn't so all of it to say is like there's other considerations for these talk show hosts besides literally like how much money they're losing my feeling is that much as it pains me to say so i think probably mostly this is a financial decision and the reason i say that is because you look at what paramount did at exactly the same time coming to a deal with the south park guys and paying the south South Park guy is like$1.5 billion, upon which they immediately released an episode just ripping Trump to bits.

53:26And surely Paramount knew that was going to happen. But so long as they're getting the money that they need from South Park being on the air, they really don't.

53:36Elizabeth Spiers: I don't think Paramount knew that was going to happen because I think South Park is kind of generally perceived as, you know, they don't really have sacred cows. but in the last few years they've gone a lot after what they consider things that are too woke. And so it didn't surprise me that they would go after Trump, but I know there are a lot of media executives who think of them as being ideologically slightly to the right. I think they are. I think the South Park guys are not liberal. I think they do lean libertarian, but they're definitely not Trumpy. I feel like they haven't gone after Trump.

54:12Elizabeth Spiers: Their premiere episode that just came out was almost entirely about Trump, and it skewered Paramount, too. And it was done at such the last minute. You know, they really do those shows pretty quickly that it was newspegged when it came out. And there was a line in it that said something about, you know, they had a Jesus Christ figure who was advising the town of South Park, which was being sued by Donald Trump because South Park kids had too much Jesus in their school. And so Christ comes to the school and advises the residents of South Park to just settle with Trump. And there's a line that says, you know, you don't want what happened to Colbert to happen to you.

54:57Elizabeth Spiers: It's a good line.

54:59Felix Salmon: I mean, the optics are really bad and it really, it's hard to believe. Like Trump has been trashing Colbert for at least the past year. It was like a year ago already. He was because Colbert called him boring. And that really upset the president of the United States to be called boring. So he said at that point, and this was 2024, that Colbert should be forced out. And we know that the FCC, we know that the Trump administration likes to pick winners and losers with deals.

55:28Elizabeth Spiers: it come on also let's let's assume that you know the it is an honest argument that the show is losing money and that was the reason to cancel it what are they going to put in that time slot that's going to be better because the whole reason why late night is increasingly not performing is because it's first of all late night and people can watch things sort of on demand whenever they want to uh so what else goes in that time slot for them well i think time slots in general are losing importance in an era where people watch less and less linear tv the idea that you know this is a seven o 'clock show this is an eight o 'clock show this is an 11 o 'clock show yeah i mean the olds might still watch tv in that fashion but mostly people don't anymore and people watch whatever show they want to watch when they want to watch it.

56:27And so that whole...

56:28Elizabeth Spiers: That's my point. That's because of that. You know, if your ad team is selling specific slots for, you know, that time period, what are they going to put in that time period that's going to increase advertising revenue for them? Right. No, I think they've given up on that. So I think they've thrown in the town and they're like, we're not going to increase advertising revenue. Advertising revenue for Linear TV is going down and to the right and will do for the foreseeable future. So we just need to, if we're going to make brand new TV for that time slot, which is not by any means a given, but if we are, we're not going to spend$100 million a year doing so.

57:07Because there's no way we're going to be able to make$100 million a year in ads in that time slot.

57:12Felix Salmon: So to zoom back out, basically Paramount owns CBS and David Ellison, who owns Skydance, wants to buy Paramount. And I only understood all of this last night, I swear. I've been paying only half attention to all of this. So David Ellison owns Skydance, which is a company that made the Top Gun remake. But David Ellison's dad is Larry Ellison, who is a friend of Trump's, right? And who Donald Trump has said maybe could buy TikTok, maybe. Larry Ellison, super rich guy. He's the one with the Hawaiian island. Oh my God, the TikTok thing is still going on. This is the story that refuses to die. Still floating out there.

57:51Felix Salmon: Still unresolved. But we still, we soldier on, we look at TikToks. I'm using the royal weave in that case because I look at TikToks. anyways if you're about to have your company be sold you're gonna about to do a big deal is isn't it unusual that you would like cancel one of your flagship contents like wouldn't you wait on that to see what the new ownership wants to do rather than yeah i mean it doesn't it doesn't quite rise to the level of materiality you know the late show is big ish for cbs it's not huge cbs is big ish for paramount it's not huge so if you're selling paramount to skydance then you know it's a big ish part of a big ish part of the company and i think you can get away with doing the cancellation the allison angle is interesting though and by all accounts he was not consulted on this decision because he doesn't own or control david david allison yeah wasn't consulted he said the deal hasn't closed so he can't tell anyone what to do and he wasn't asked because that would actually be illegal for various different reasons but he's already started musing about what he will do with CBS in the probable eventuality that he ends up buying it.

59:17And one of the musings that we've been reading about this week, hey, guess what? We're the Business and Finance News of the Week. We get to talk about this, is that he might buy the free press for$200 million and install Barry Weiss as some kind of editorial gadfly, making sure that CBS doesn't get too woke so i think if you're looking for a political agenda and people prosecuting a political agenda and you know sucking up to trump in various ways to get what they want you can definitely see that in sherry redstone settling with the doj or whoever she settled with in order to make or Trump in order to make the lawsuit against CBS go away.

1:00:11You can definitely see that if it happens in the Skydance acquisition of the free press. And it's very natural in the wake of those two things or in the vicinity of those two things to say, well, cancelling Colbert is a little bit like that, though. So that's obviously a political decision, too. And I'm not saying that it's Clearly not. But I do think that if they did want to make it political, they wouldn't have it continue until May. They would just like, kill it tonight.

1:00:43Felix Salmon: Both things can be true, right? They may have wanted to cancel Colbert. His contract was expiring. He was losing money, and they're like, we're going to do this. And then it's like, oh, and we get to show the Trump administration who can kill this deal if they don't like it, we get to show them that we are getting rid of someone they don't like. It's just like an extra bonus. And CBS has to be savvy enough to understand what the optics were going to be. Like on Colbert's show just days before he got canceled, he called that 60 Minutes settlement a big fat bribe. So these are smart people on the communication staff of Paramount, right?

1:01:25Felix Salmon: They understand before they announce publicly what they're going to do. They understand what it is going to look like. they say in their communications, this is absolutely nothing to do with that. Definitely nothing. This is about money. Like, believe us, please believe us. But I mean, the perception was going to be there. They had to know that they did it anyway. If they really cared about that perception, maybe they would have waited a couple of months after. I think that's right. And I think that probably at the margin, the perception that this is a political decision is not actually bad for them.

1:02:00Elizabeth Spiers: I don't think they actually care that much about the perception because, you know, if they are doing it to sort of please Trump, then the perception was some slight, you know. They want the perception, actually. If Trump ends up thinking that they did that to please him, then so much the better. That's just icing on the cake. That's like the playbook for, you know, dealing with the administration.

1:02:22Felix Salmon: I have a story about this, I think, that's coming out later this week. But like the playbook for companies is like, do things that you think the administration's going to like where possible. Credit them with it. Where not possible, at least do things that the administration's going to like. Look for ways to give them wins. This would be a perfect way to give them a win. It's a thing you were going to do anyway. And you know that they're going to like it, you know. I think I think that's probably right. I think that the fact that there was a political valence to this decision probably only made the decision easier to make.

1:02:55I should mention that we love Summer Fridays here at Slate Money. And so this episode was recorded on Thursday afternoon, which was after the release of the South Park episode on Paramount that skewered Donald Trump. But before the FCC officially approved Skydance's acquisition of Paramount in a decision that was not unanimous, the Democratic Commissioner objected.

1:03:34We should have a numbers round. And I'm going to launch straight in with my 200 million number because it segues nicely from what we were just talking about. 200 million is the number of dollars that Columbia University is paying the Trump administration to make all of the anti-Columbia Meshuggah's go away. On the face of it, it's not a terrible deal for Colombia. They get their$1.4 billion per year in various bits of pieces of federal funding back. They get to retain academic freedom in terms of appointments and publishing and stuff like that. They only have to pay the $200 million over three years.

1:04:16Friend of the pod, Larry Summers, thought it was a good deal.

1:04:20Elizabeth Spiers: so obviously this was great right i think so far caving to trump has not really bought anybody anything you know columbia caved to him initially on student protests and then uh he doubled down on them like i i don't you know i feel like he might come back again and say actually you need to do more or i'm yanking your funding again yeah yeah i mean that is absolutely possible I would probably take the under. I feel like at this point he's had his fight with Colombia and he's going to move on. But Emily, what do you think?

1:04:52Felix Salmon: Yeah, I think that probably the administration's moving on. It's very much mission accomplished. Like they've brought universities to heel. Colleges, universities are going to think twice about doing diversity programs, about just allowing protests, making public statements about diversity. related subjects, all of that. Like that's all, the message has been sent and the chill has been chilled. The sector has been chilled. And inevitably we're going to see a series of similar settlements from, who else is on the list? Johns Hopkins, Harvard, obviously. Yeah, it's just going to be like, you know, the bank fines after the financial crisis.

1:05:33You know, they'll just kind of go down the list, tick, tick, tick. You pay this much, you pay that much. And it does seem to be that if you go first, you pay a lower fine. I would expect that Harvard, if and when it settles will pay more than 200 million.

1:05:45Elizabeth Spiers: Yeah, that makes sense. Elizabeth, what's your number? My number is 50, and that's pounds. And this was a... As in British pounds or pounds of weight? British pounds. British pounds. There's a company called Jet2 Holidays, which is Britain's largest store operator, that offered, had an ad about this time last year, maybe like a little bit further back, where they offered 50 pounds off of a specific deal package. and this ad didn't go anywhere you know it sort of did what the ad was supposed to do but it nobody was really talking about it and now the tiktokers have revived the audio for this ad

1:06:20Felix Salmon: which has a woman saying nothing beats a jet to holiday and they're basically running that audio

1:06:28Elizabeth Spiers: over disastrous scenes like there was one where the new york city subway platform was flooding last week 28th street one train platform yeah apparently that's where jet two will send you i'm not quite sure how how poor jet two got associated with like the worst things that can happen in the world but at least it's getting its brand out there what do you think hamiley is

1:06:52Felix Salmon: this good or bad for the jet two brand i think there's no such thing almost no such thing as bad publicity like even that company astronomer we all know we've all heard of it i still have no idea what it does. It's like AI, blah, blah, blah. It's AI, blah, blah, blah, something. Yeah. I just read a press release about how a bunch of our former colleagues, including friend of the genuine friend of the pod, Bethany McLean, are setting up a comms shop to advise AI companies on differentiating themselves because no one knows what they all do. Sounds right. Emily, what's your number? My number is 122.

1:07:28Felix Salmon: Okay, that's an index. It is consumer sentiment in the US among people who make over$100 ,000. That's pretty positive, 122. This is consumer sentiment measured by Morning Consult. And that compares to an index of 89 for people who make under$50 ,000. So the gap between them is almost 33 points. It is blowing out, as they say, because high-income people are feeling really good lately because of what we talked about. The stock market's doing great. And that makes people feel really good, have money in the stock market. But people who don't have money in the stock market are feeling worse and worse.

1:08:06And the gap, the distance between

1:08:07Felix Salmon: these two lines is getting wider and wider. And that is concerning. So it's now at 33. And it's normally what, half that? Yeah, it's normally half that. That sounds right. I'm just looking at my chart. I didn't calculate it. But I like it when I pull a number out of my ass, and it turns out to be correct. I feel like that's validating. It's not incorrect. And when the pandemic hit, the gap was almost nil, no gap. When there was big inflation in 2022 and the stock market went down, again, like almost no gap. So now that there is a gap, I think that is a worrying sign. It's better if everyone's feeling the same way than if there's big differences.

1:08:45Felix Salmon: I think that is bad for social cohesion. Oh, social cohesion. If only the rich and the poor could agree, then we'd have social cohesion. You know, that's what happened in 2020, right? For a brief shining moment, you gotta believe me. For a brief shining moment, we were all miserable. Yes. On which note, I think we will wrap up this here podcast. Many thanks to Jessamyn Molly and Shana Roth for producing. Many thanks to all of you for listening and sending in your emails to slatemoneyatslate.com. we are going to have a slate plus segment about beach reads please listen to that if you're a plus member which you should be and other than that we'll be back next week with more slate money

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