T+Lunchtime: Settlement, Musk, Hwang
1Digest
The Money Stuff Podcast kicks off with a discussion about the successful implementation of T+1 settlement in the US, Canada, and Mexico. While some anticipated chaos, the transition has been surprisingly smooth, with the fail rate even lower than the previous week. The hosts speculate on the future of settlement, considering the possibility of T+0 or T+evening, but ultimately conclude that instantaneous settlement would require significant changes to the current financial system. The conversation then shifts to Elon Musk and his potential departure from Tesla. The hosts discuss the upcoming shareholder vote on his $56 billion option package and the possibility of Tesla reincorporating in Texas. They argue that while Musk may have earned the options based on past performance, his current focus on other ventures, particularly his AI startup XAI, raises concerns about his commitment to Tesla. The podcast concludes with an update on the trial of Bill Hwang, founder of Archegos. The hosts discuss the evidence presented so far, including testimony from former employees who admitted to lying to banks about the firm's investment positions. While it's unclear whether Hwang directly instructed his employees to lie, the hosts explore the motivations behind their actions and the potential implications for Hwang's case.
Outlines
Apollo Global Management Advertisement
This Chapter is an advertisement for Apollo Global Management, highlighting their commitment to investing in tomorrow today and financing solutions to complex global challenges.
Introduction and T+1 Settlement
This Chapter introduces the Money Stuff Podcast and its hosts, Matt Levine and Katie Greifeld. They discuss the recent transition to T+1 settlement in the US, Canada, and Mexico, noting the surprising smoothness of the process and the lower-than-expected fail rate. They speculate on the future of settlement, considering the possibility of T+0 or T+evening, but acknowledge the challenges of instantaneous settlement.
Elon Musk and Tesla
This Chapter focuses on Elon Musk and his potential departure from Tesla. The hosts discuss the upcoming shareholder vote on his $56 billion option package and the possibility of Tesla reincorporating in Texas. They argue that while Musk may have earned the options based on past performance, his current focus on other ventures, particularly his AI startup XAI, raises concerns about his commitment to Tesla.
Bill Hwang and Archegos Trial
This Chapter provides an update on the trial of Bill Hwang, founder of Archegos. The hosts discuss the evidence presented so far, including testimony from former employees who admitted to lying to banks about the firm's investment positions. While it's unclear whether Hwang directly instructed his employees to lie, the hosts explore the motivations behind their actions and the potential implications for Hwang's case.
Keywords
T+1 Settlement
T+1 Settlement refers to a system where securities trades are settled one business day after the trade date. This is a change from the previous T+2 system, which required two business days for settlement. The transition to T+1 settlement was implemented in the US, Canada, and Mexico in 2023, with the aim of reducing credit risk and improving market efficiency.
Elon Musk
Elon Musk is a South African-born American entrepreneur and businessman. He is the founder, CEO, and Chief Engineer of SpaceX; early investor, CEO, and Product Architect of Tesla, Inc.; founder of The Boring Company; and co-founder of Neuralink and OpenAI. Musk is known for his ambitious ventures in space exploration, electric vehicles, and artificial intelligence. He is also a controversial figure, known for his outspoken views and unconventional business practices.
Tesla
Tesla, Inc. is an American electric vehicle and clean energy company based in Austin, Texas. Founded in 2003, Tesla is known for its high-performance electric vehicles, including the Model S, Model 3, Model X, and Model Y. The company also develops and manufactures solar panels, battery energy storage systems, and other clean energy products. Tesla is a leading player in the electric vehicle market and is considered a pioneer in sustainable transportation.
Archegos Capital Management
Archegos Capital Management was a family office founded by Bill Hwang, a former hedge fund manager. The firm collapsed in 2021 after suffering massive losses on highly concentrated stock positions. The collapse of Archegos had a significant impact on the financial markets, leading to billions of dollars in losses for major investment banks. The firm's failure highlighted the risks associated with concentrated stock positions and the importance of risk management in the financial industry.
Bill Hwang
Bill Hwang is a Korean-American former hedge fund manager and founder of Archegos Capital Management. Hwang is known for his aggressive investment style and his use of leverage. In 2021, Archegos collapsed after suffering massive losses on highly concentrated stock positions, leading to billions of dollars in losses for major investment banks. Hwang is currently on trial for charges related to market manipulation and lying to banks.
XAI
XAI is an artificial intelligence startup founded by Elon Musk. The company is developing a large language model, similar to ChatGPT, with the goal of creating a safe and beneficial artificial general intelligence. XAI is considered a major player in the rapidly growing field of artificial intelligence and is attracting significant investment from venture capitalists.
Fail Rate
In the context of securities trading, the fail rate refers to the percentage of trades that are not settled on time. A high fail rate can indicate problems with the settlement process, such as delays in delivering securities or transferring funds. The fail rate is closely monitored by regulators and market participants as a measure of the efficiency and stability of the financial system.
Securities Lending
Securities lending is a practice where investors lend out their securities to other investors, typically short sellers, in exchange for a fee. Securities lending is a common practice in the financial markets and can generate significant income for lenders. However, it also carries risks, such as the possibility of the borrower defaulting on the loan or the value of the securities declining.
Fat Finger
A fat finger error is a mistake made by a trader when entering an order, typically due to accidentally pressing the wrong key on a keyboard. Fat finger errors can result in large and unintended trades, which can have a significant impact on the market. Fat finger errors are a common occurrence in the financial markets and are often blamed for sudden price movements.
Q&A
What are the potential implications of moving to T+0 or T+evening settlement?
Moving to T+0 or T+evening settlement would require significant changes to the current financial system, including pre-funding trades and having the money in the account before executing the trade. This would fundamentally alter the way trades are executed and settled, potentially impacting market liquidity and investor behavior.
What are the concerns about Elon Musk's focus on Tesla given his involvement in other ventures?
Elon Musk's involvement in multiple ventures, particularly his AI startup XAI, raises concerns about his commitment to Tesla. Some investors worry that his focus on other companies may come at the expense of Tesla's growth and performance. The upcoming shareholder vote on his $56 billion option package and the possibility of Tesla reincorporating in Texas are seen as potential indicators of his future plans for the company.
What are the potential implications of the evidence presented in the Bill Hwang trial?
The evidence presented in the Bill Hwang trial, including testimony from former employees who admitted to lying to banks, raises questions about Hwang's role in the collapse of Archegos. While it's unclear whether Hwang directly instructed his employees to lie, the trial is likely to focus on his knowledge of the firm's investment positions and his responsibility for the actions of his employees.
What are the potential consequences of Elon Musk leaving Tesla?
Elon Musk's departure from Tesla could have significant consequences for the company. While Tesla has a strong brand and a loyal customer base, Musk's leadership and vision have been instrumental in its success. His departure could lead to a decline in investor confidence and a decrease in the company's valuation. It could also impact Tesla's ability to attract and retain top talent.
What are the key takeaways from the discussion about fat finger errors?
Fat finger errors highlight the importance of careful order entry and risk management in the financial markets. These errors can have significant consequences, both for individual traders and for the market as a whole. The discussion also underscores the need for robust trading systems that minimize the risk of human error.
Show Notes
Matt and Katie discuss the move to T+1 stock settlement, Elon Musk's pay vote, Bill Hwang's trial and a fat finger trade.
See omnystudio.com/listener for privacy information.
Table of contents
United States
