Bloomberg Audio Studios podcasts radio

news.

Stacy

>> Max,

>> I've got something that I need to show

you. It's very important to me on a

personal level and and I believe

important on a societal level as well.

MIAMI

Baseball Classic.

>> That was a clip of the World Baseball

Classic. Team Italy beating Puerto Rico

in a huge upset in the semi-finals. I

bring this up right now because baseball

season is having a moment. The MLB

season, the Major League Baseball season

starting as we record. And Stacy, we're

gonna talk with Bloomberg's Randall

Williams about how this epic sports

comeback happened and why baseball in

particular is sort of recession proof.

>> I am very curious to hear about that and

how it is recession proof. And speaking

Max, of recessions, [laughter]

I think 2008 has been on everyone's mind

a little bit lately because of one

phrase that has been all over financial

news.

>> Private credit. Private credit. Private

credit.

>> Private credit. private credit.

>> You're bringing me down, Stacy.

>> Yes, private credit brings everyone

down, although it can be a little

confusing what exactly it is and what

exactly the problem is and how big it

is.

>> And we're going to have OddLots co-host

Tracy Aloway here to kind of talk us

through this potential financial crisis.

Or maybe it's just an exciting new asset

class that will be with us for a long

time. We'll find out.

>> Are we doomed? In short,

This is Everybody's Business. I'm Max

Chaffkin.

>> And I'm Stacy [music] Vanick Smith.

>> Grab your Cracker Jacks and your

favorite distressed assets. We are going

out to the ballpark.

>> I'm in. I don't care if I never come

back. [laughter]

[music]

>> How do you all feel like the economy is

going right now?

>> I feel like it's not going well.

Everyone's talking about inflation. And

I don't drive a car in New York, but I

am noticing gas prices.

>> I guess it's struggling as much as our

economy in London. It It's not great.

>> A disaster. Nobody knows what's going

on. Nobody has a plan, a sense of what's

going to happen. We are all living month

by month.

>> We just went out to breakfast. We had

pancakes and an omelette. And with the

tip, it came to $77.

>> I think it more than doubled.

>> Yeah. More than double.

>> Can't even wake up and get some eggs,

baby. No sense of security anywhere.

A lot of lies. I think everybody is

struggling in different ways. Where do

we find support among ourselves but not

from the government?

>> And there's not really a future for

people our age to buy a house or

anything like that as she said.

>> Do any of you know what private credit

is?

>> No, I do not.

>> No. Maybe. I don't know. Oh, no. No, I'm

not aware.

>> That was our producer Jasmine JT Green

talking to people in Manhattan. And Max,

as you can tell, a lot of people are not

feeling great about the economy. Also,

maybe not a thousand% sure what private

credit is.

>> Not me, Stacy. I got it 100%.

>> I know you do, and as do I. We know

everything about private credit, but

some of our listeners might not. We

should be cognizant. And and if I'm

being honest, [laughter] there may be a

few little bits that I'm a hazy on.

>> We're very lucky to have someone who

does understand private credit here in

the studio with us. Tracy Aloway, host

of the OddLotss podcast, fellow

Bloombergian. Welcome, Tracy.

>> Thank you so much. Thanks for having me.

>> First of all, what do you think of what

people were saying about the economy?

What was your reaction to that?

>> Yeah, I mean, that tends to be what you

hear nowadays. In fact, it tends to be

what you've been hearing for a couple of

years, which I think is why people are

kind of uncertain about what it mean

what sentiment means right now. Because

you'll remember in 2022 2023, if you

looked at all the consumer sentiment

surveys, everyone was basically saying

things are terrible. Yes. And yet, if

you look at the headline numbers of the

economy, it was kind of chugging along

for a while. So, there was a lot of

introspection about whether the surveys

weren't just not working anymore. Fast

forward to today and it seems thing

people feel worse about things than ever

really. But the big question mark is

still are you going to see that actually

show up in the economic numbers.

>> All right, Tracy. Stacy and I are

professional business journalists. We

have been both doing this for a very

long time. We follow news closely. So,

of course, we know what private credit

is and why people are so worried about

it. But just in case hypothetically

if we weren't [laughter] a 100% sure

what this conversation is because there

have been a lot of headlines. There have

been headlines about redemptions blue

owl like there's a lot of stuff a lot of

people are anxious. Can you just lay out

what this asset class is and why it has

gotten so big over the last few years?

>> Sure. So let me reframe this with a

question to you guys. If I said, "What's

shadow banking?" Do you think you'd have

a better handle on what shadow banking

is versus private credit? [laughter]

>> I feel like it sounds much more ominous.

>> Unregulated lending.

>> Yeah. All right. We're getting at

something here. Okay. So, when I first

started covering this space, we called

it shadow banking. And when I first

started covering it was in the aftermath

of the 2008 financial crisis. you had

all these new bank regulations coming in

which basically made it either harder or

impossible or more expensive for banks

to make certain loans and investments.

And so all that activity started

migrating away from the regulated banks

to non-bank players. And if you think

back to 2008, that makes a lot of sense,

right? We just experienced this terrible

financial crisis where all the big banks

basically had to be bailed out by the

government. Regulators, policy makers,

government officials were saying, "We

never want to do that ever again." And

so we want all that risky activity to be

pushed away from the banks to entities

that aren't important enough to be

bailed out if things get wrong. But the

idea was that you're going to move stuff

out of the regulated banking system so

that you're not going to end up with a

systemic crisis. the way you saw with

mortgages, right? Banks made a bunch of

bad mortgages, those went south. You had

all this leverage that was built onto

the mortgages. And when people stopped

paying their mortgages, suddenly all of

that was in doubt and the entire banking

system basically collapsed. So we never

want to see that again. And this is when

you started to see new credit entities,

new fund managers. They all had

different names back then. Broadly, we

referred to them as the shadow banking

system. So, I used to be at the

Financial Times and I remember 2012 2013

writing about the rise of the shadow

banking system and

>> do they just rebrand to private credit?

>> Yes. This is [laughter] what I'm getting

at. I had this realization. I can't

believe it didn't like it took me a

while to get it. I was like, "Oh,

private credit. We're actually just

talking about shadow banking." I

>> junk bonds sometimes get called high

yield bonds cuz if you're selling them,

you don't want to say buy my junk bonds.

>> That's exactly right. And we should talk

about the impact on the junk bond market

as well from private credit. But this is

exactly what happened. You had these

companies called business development

companies who were in a very similar

business to the banks. They were

extending credit to companies, usually

smaller or riskier companies that banks

no longer could or wanted to lend to.

And they really started to take off in

the aftermath of the financial crisis.

You got the rebrand around private

credit. It was pitched as this like

juicy yield generating investment. It's

not as safe as investing in what we call

an investment grade or blue chip bond,

like something issued by a really safe

company, but it was still supposed to be

secured lending. So, if the company went

belly up, there were some assets that

you could supposedly get in a default

scenario and you would have some

recovery of your original investment,

but in the meantime, you were earning

yields of 9%. Which was great. That's

private credit. Now it's the loans that

have been pushed out of the regulated

banking system and have now been

funneled into business development

companies, BDC's into certain

securizations and then also into massive

funds whose whole raise on Dutch is to

extend private credit to other

investors. Okay. Trouble started here

like last year that we started to see I

I feel like I started to see more and

more headlines. What started to go

wrong? So I think the real trouble

started late last year. You started to

see some investors in private credit

vehicles, but they started to want to

get their money out. So the thinking was

like growth is maybe slowing. Maybe some

of these private credit investments are

looking a little bit bubbly. Again, I

think it's really important to emphasize

how much money went into the space. So

we're talking about a private credit

market that's now estimated to be $1.8 8

trillion, which is not that big actually

in the grand scheme of investments,

[laughter] but just to put it into

context, it's bigger than the junk bond

market now. And that's happened in just

a couple years. The junk bond market

started in like the 1970s with Mike

Milin. And now the private credit market

has managed to eclipse it in basically 5

years or so. That's enormous amounts of

growth. And so it's understandable that

people are starting to say, "Wait a

second, like that money has grown so

fast. There's been so much money pouring

into the space. Do we actually know if

those loans are high quality? If we're

investing to good companies?" The other

thing about private credit is the clue

is in the name, right? It's very

private. It's very opaque. If you're an

investor who wants to invest in a

company, you have a bunch of different

choices for doing that. You can buy the

stock, right? or you can buy a bond

issued by the company in the public

market. This is what we call public

credit, basically syndicated bonds and

loans. When a company sells a bond in

the public market, there's a lot of

documentation and red tape that gets

attached to that. They usually have

financials that get released very

regularly. You can see how the company

is doing, what the company's assets look

like. If you have a company that is

investing or selling a private loan or

private bond, you don't really get that.

It's not rated by the rating agencies

for the most part. So, you're sort of

relying on the dealmakers around that

particular structure to get it right.

And so, it's not that surprising that

when things start to look a little

wobbly on the economic front that people

are going, "Wait a second. What actually

is all this private credit?"

It seems to me that there are two

concerns going on. One is about this

asset class. Are these companies that

have been making these loans, are they

going to be okay? A lot of investors are

worried. I think so far what the private

credit executives have said is our loans

are still fine. We're still okay.

>> There is like a second question which is

could this somehow spill over into the

larger economy? could this line you you

talked about at the top Tracy that we

tried to draw a line between the banking

we were okay with and banking we weren't

okay with and I'm curious what you think

of both of those questions like first

the asset class but then the risk of

some broader contagion.

>> Yeah. Okay. Two very big topics and

excellent questions. So on the first one

on the marks the one of the defining

features of private credit and one of

the reasons that people were interested

in it in addition to the yield is that

it doesn't actually get marked to market

that frequently.

>> What does that mean?

>> So that means it doesn't get reassessed

as frequently as mark as stuff in the

public market. So if you have a

syndicated loan, a loan that was

publicly issued and is trading, that

thing gets re-evaluated. It gets

repriced on a pretty regular basis. It

varies depending on what type of loan it

is. But if you have a private credit

loan, that gets reassessed. I think it's

on a quarterly basis for most BDC's. And

so you don't really know what your

ultimate selling price is going to be if

there's a a fire sale basically in the

market. And so one of the concerns we're

seeing now is when people start to pull

their money out of private credit

vehicles,

if the funds actually have to rush to

sell their portfolio to meet those

redemption requests, how much money are

they actually going to be able to get

for those loans? Especially if everyone

is having to sell at the same time. And

that's why you've seen a bunch of

private credit funds start to reinforce

gates that are actually in the

documentation. So, we've had just in the

past week, Apollo and Aries say that

we've had a bunch of investors asking

for their money back, but the difference

is because we wanted this to be

different from the regulated banking

system, we put up gates on those funds.

So, we can say or the fund managers can

say we're only going to let you take out

5% of the money at any given time. You

said in the beginning that when you were

starting out as a reporter, you were

covering the after effects of the

financial crisis, the housing crisis. Is

this shaping up to be that?

>> Yeah. Okay. Well, this goes back to M

question.

>> Aka, are we doomed?

>> And how doomed?

>> Yeah, this one's tough for me because

when I look at some of the stuff that's

happening, a lot of the behavioral stuff

seems very 2008esque. So you have Jeff,

which has been one of the more

aggressive private credit players, is

their stock has fallen by 40 or 50%.

They're now pitching themselves to a

Japanese bank as a takeover target,

which feels very like 2007, 2008 to me.

You have these all hands on deck calls

that, you know, Aries and Apollo are

doing with their employees. You have

some banks that are starting to publish

their own exposure to private credit

which again think back to 2007208 you

had all the banks going this is our

subprime exposure stuff like that makes

me nervous

however it's difficult to see that there

is that much leverage attached to

private credit but at the same time this

is where I also start to get worried

because we know for instance that one of

the major investors in private credit

has been the insurance companies. We

know that banks have also partnered with

private credit firms in some of this

lending, which to get back to the

original start of this conversation

seems kind of insane if you're thinking

that all of this was supposed to get

that riskier activity away from the

banking system. Some of it supposedly

has been used in what's known as the

repo market as collateral, which again

has 2008 connotations. So there are

little linkages in the system that worry

me and because the space tends to be so

opaque and because it's still relatively

new, it's really hard to track some of

those linkages. So I would say, you

know, broadly 1.8 trillion sounds like a

lot. It's probably not in the grand

scheme of things, but just as in the

financial crisis, you don't tend to find

out about these added layers of leverage

until the losses start materializing. So

it doesn't sound like you are

completely buying into the panic. You

are concerned but you're not like

>> yeah I think red okay

>> I think that's a fair way to be at the

moment but again there are a lot of

unknowns here and one thing I would

emphasize is again this is a new asset

class that grew really really quickly.

It's never been through a down cycle.

And so we're about to find out what that

down cycle actually looks like. And

potentially we're about to find out in a

down cycle that is unlike many other

down cycles in history. So we have

worries over AI and the threat to a lot

of companies. I should have mentioned

earlier, but a lot of private credit has

been extended to software companies who

now basically face an existential

question mark over their business. And

then we have the whole Iran situation

where we're talking about the closure of

the straight of Hormuz which is a

scenario that oil analysts have worried

about for years and years and years with

ripple effects into everything that we

buy. You think about energy,

transportation,

plastic packaging on your food that has

the potential to push up inflation which

presumably would lead to higher interest

rates. So you could get this big

economic slowing right when the Fed

starts raising interest rates and

raising the cost of capital for

companies. That's a pretty bad mix for

private credit, I would argue. All

right, Tracy Aloway, OddLots, thank you

so much. [music] Thank you so much for

having me.

Stacy, we have reached the seventh

inning stretch of this podcast. So,

we're gonna move on to to a topic that

is close to my heart and I would argue

close to everyone's heart. Baseball,

Major League Baseball is perfect. The

season starts today and I would argue

that this is a really interesting

business story because you go back about

a decade and there were all of these

kind of like obituaries written about

baseball and its decline or apparent

decline. You know, ratings were falling,

the fans were getting old.

>> They were long games.

>> The games were really long. You also had

the NBA was having a moment. The

National Basketball Association and the

NFL had far and away surpassed everyone.

We've talked about this.

>> But baseball is having a little bit of a

cultural moment. The ratings have been

going up for two years in a row.

Attendance is up. The average age of the

fan has fallen dramatically over the

last six years. So yeah, the it wasn't

>> like from what to what

>> from 50.

>> I'm skeptical. I feel like we need to

bring in an expert.

>> And we've got one Randall Williams,

Bloomberg Sports reporter. He is here

with us now. Randall, how are you?

>> I'm doing all right. It's interesting to

hear the way you all talk about

baseball.

>> All right, Randall hater. I don't know

why.

>> I'm a hater. I'm just wondering.

>> I think America's biggest pastime has

definitely gotten younger. Oh,

>> okay.

>> I think even going to the games,

watching the games, it's pulled me to

the screen. When I was younger and I

used to play MLB the show, which is

baseball's video game, one of the issues

that I have was that it wasn't

fast-paced enough for my 10 or 11 year

old mind. And now even I'm tuning in for

the World Baseball Classic on TV, which

is a bigger time commitment than any

video game could ever be.

>> Randall brought up the World Baseball

Classic. That is this international

tournament. We heard a clip at the top

of the show, Team Italy. Randall, I'm

sure you were a Team Italy guy.

>> Absolutely. [laughter]

>> Team Italy overperformed. The ratings

for this thing were really good. The

World Baseball Classic Final averaged 11

million viewers in the US. That's like a

a basketball finals game. You know, like

maybe not a big game, but that's a good

rating. The World Series ratings were

really high.

>> Incredibly high.

>> So, there's a lot going on. And I wanted

to just take this kind of step by step.

Rand, you brought up the rule changes

that I think have been a big part of

driving this turnaround. Can you just

explain why that happened and how it's

happened? the games were going on too

long. There was too much space between

when a pitcher was throwing the ball and

when a batter was swinging and just the

time period. I mean, that's why it was a

pastime is because you could go to a

baseball game and not care about the

baseball and just literally explore

around the park and then come sit down

and, you know, maybe it's might still be

the inning of which you got up and left

from. Nowadays, an inning can be over

very quickly because of the pitch clock.

And we saw this sort of in the World

Series where Shi Atani pitched in game

seven and you had Toronto's manager

who's telling them like, listen, I know

he needs to get warmed up, but I don't

want to give him too much time to where

now he's fully warmed. Let's get this

expedited. And so that's one of the

biggest rule changes. And then of

course, like it helps to have a dynasty.

It helps to have the Los Angeles Dodgers

who have a bunch of superstar players

outside of show and they're performing

really well. And from a viewership

perspective, you either love it or you

absolutely hate it, but you want to

watch it.

>> Yeah. About three years ago, Rob

Manfred, the commissioner, you you

mentioned him earlier, did a bunch of

things, not just the baseball, like the

franchise,

>> the guy who runs baseball. So, one of

the things that had happened, Randall

brought it up, the games had gotten

longer. So, you were sort of losing

people and there were teams that were

taking advantage of this. And so, they

they instituted essentially a shot clock

for pitching. you get penalized if you

don't throw the pitch within a certain

amount of time. They also changed a

bunch of the rules to create more

action.

>> Sports as a business cannot thrive if

all they're attracting is sports fans.

You have to be good with com.

>> They made the bases bigger so that it

would be easier to steal bases. And they

changed a couple of the rules around

runners on base to encourage base

stealing. They basically wanted to have

more stuff happening. Yeah, that makes

sense.

>> But I think the rule change have

basically worked.

>> Yeah, absolutely. And we see leagues

experiment with rule changes. Like this

isn't the first time, but for baseball,

it has changed things drastically and it

it's had a huge impact. On top of that,

you have to have a good product as well.

You have to have teams perform well. You

have to have a compelling show,

compelling entertainment

>> and maybe [clears throat] superstars.

>> Show going from the Angels to the

Dodgers and he was almost a Blue Jay as

well. that it it captivated audiences

for sure. Not just here, but around the

world.

>> Yeah. I've said this before on the

podcast. I mean, show is like the Babe

Ruth. He's like arguably the best

baseball player in a hundred years. And

as Randall's saying,

>> is that right?

>> Yeah. There's a legitimate argument.

They call this the greatest baseball

game ever played where he struck out 10

people and hit three home runs in the

same game.

>> Simply doesn't happen. He plays for the

biggest team, the LA Dodgers, in the

second biggest city in the United

States. And he is the biggest star in

Japan. He's Japanese. And Japanese

baseball is a big thing. The sort of MLB

Japan connection has grown tremendously

over the last I don't know since Joe has

been here. And even going back before

then, there's baseball is promoting

itself in Japan with this wonderful

advertisement that was like going around

on Twitter. I don't know if you saw it,

Randall, but it's all these Japanese

people watching the games in the middle

of the night because and getting really

excited and being like super into into

this sport and you it you know it shows

up in the ratings. Baseball, Major

League Baseball has started releasing

its ratings combining Canada, US and

Japan because Japan is so big.

>> So Randall, give us like in the spectrum

of sports that you cover, where does

baseball fall? cuz one thing I did

notice was that apparently Netflix just

cut a deal with Major League Baseball

and we had you on talking about Netflix

cutting a deal for football and that's

made it into this big kind of musty

event. Is baseball in that same track?

Is this a very different

>> So I'll give you the top three and the

top three have always been the NFL, the

MLB and the NBA. And for many years, I'd

say for the past 15, it's been NFL, NBA,

MLB, but I would say at this current

juncture, the MLB has overtaken the NBA

really in terms of interest. And the

reason for that is it's a multitude of

things. We've talked about the rule

changes, but also there is the dynasty

effect of the Dodgers. Like they have

dozens of it feels like they have a

Justice League team. And that helps

because not only do they have incredible

superstars, they're in the second

biggest media market. and people are

going to watch that. On top of that, of

course, when you have the second biggest

media market, people with ratings are

then going to tune in and say like,

okay, with game seven, you have the

greatest World Series of all time. And

that's my opinion, of course, but it was

a really compelling game in which the

Dodgers were outscored that series. I

believe it was 26 to 34 and somehow

still came out victorious. And then they

go into free agency, reload, and now

we're getting ready to start another

season again. All right. So, I want to

bring up a couple other possible

explanations. One is

>> is this going to be conspiracy?

>> Okay. This one is borderline conspiracy,

but but you see it showing up in I'd say

maybe the conservative corners of sports

media. This narrative that like the NBA

has lost a step because it's too woke

and that baseball is like uh perfectly

tuned to the Trump moment or something

like that. You know, in polls, there was

a poll that would kind of went viral a

couple weeks ago showing that baseball

players are the most Republican of

sports athletes. I don't know how I

don't know how seriously we should take

this, but I believe the NHL is number

two. Do you put any stock in that? Cuz

you really do see this argument show up

that sports have suffered by engaging

too much politically. I I would argue

that baseball has not been as

politically engaged as some of the other

sports like the NBA. Do you think

there's anything to that or is it

>> No, not not necessarily. I think the NBA

specifically is in this new era that I

would call the parody era where you've

had seven different champions. You've

had I believe it's six or seven

different international MVPs and they

are typically the dynasty sport. You

think of the Lakers, you think of the

Warriors, you think of the LeBron era,

you think of the Bulls and the and the

Celtics. Of course, that's been them for

50 years. When you have seven different

champions, and we're not talking about

the Lakers being one of them, that

happened in 2020. We had the Warriors,

but since then it's been Celtics,

Denver, and last year Oklahoma City

against the Pacers. These are middlesiz

markets, of which sometimes the

storytelling isn't always there. I do

think that the NBA could do a better job

of marketing its superstars, but the

product is going to catch up. It's

always catches up. Now, what does that

look like long term if Oklahoma City's

dynasty continues or if they do start a

dynasty? If the Spurs with Victor

Wanyama or even if the Knicks show up or

or Anthony Edwards and the Timberwolves,

there can be a sudden surge and at the

same time the Dodgers can fall off a

cliff even with all of these superstars.

>> When you say it sounds like having a

dynasty is good.

>> Yes.

>> But it seems like having different teams

from all over the place win would

actually be good for audiences, but it

sounds like not so much.

>> So

>> why is that? It's very fascinating to me

because in the NFL parody has existed

for a long time. Like we've lived in

this era of the Patriots for 20 years

and now the Chiefs, but we've seen

different teams win in between there as

well and different teams go to the

playoffs and things like that. In the

NBA, it really hasn't been like that.

Like if you go back 10 years to 2016, it

was Cavs Warriors and then of course you

have Warriors Raptors, right? But again,

like

>> the season is so long and when you think

about people who are tuning into these

games, there's an argument that not all

of these NBA games matter. And so when

it is finally time to get to the

pinnacle of the NBA finals, there are

some viewers who are like, "H, you know,

I'm so used to watching LeBron and Steph

that if they're not there, I'm not pl

I'm not going to watch." Whereas with

baseball and with all of these sports

really, people watch brands. And so you

think of the biggest brands in the NBA,

Knicks, Warriors, Celtics, Lakers, you

think of them in the NFL, Patriots,

Cowboys, I'd say Chiefs as well, and

then you could throw a couple more in

there. When those teams aren't showing

up, and it is the Pacers, and it is the

Thunder, then there's going to be a

slight down tick, but it'll catch up

eventually. I can't believe I'm the one

bringing this up, but because this is

much more up Stacy's alley than mine,

but I think another argument you could

make is that baseball is more suited to

this moment because it's cheaper. It's

more affordable. There are studies,

sports in general hold up pretty well

during economic downturns. Baseball,

there's some research suggesting that

baseball holds up even better than some

of the other sports. I'm not sure why

that is, but the games are definitely

cheaper. And I was thinking back to the

sort of height of the NBA, that kind of

Steph Curry era, 2016, 2017. That was

also the ZERP era, you know, like people

had a lot of money. You could you could

splash out and go and sit courtside at a

game. And NBA tickets are really

expensive. Baseball tickets, because

there's so many games, because the

stadiums are bigger, they're just

cheaper. The economics around the two

leagues are different. And you're right.

I do think that basketball and

especially football are becoming luxury

experiences. Like the get- in price,

whether you want to sit at a mid-level

or upper level, is going to cost you a

couple hundred bucks. Gone are the days

where if you have a family of four, you

can just decide on a Thursday that, oh,

we're going to go to a Packers game. And

I said the Packers for a reason because

they're based in Green Bay. Imagine what

that's going to look like for a Knicks

game or a Giants game. It might cost a

vacation to wherever you want to go. It

could very easily cost you $1,500,

$1,600.

>> You definitely can go to a Brewers game

if you're in [laughter] Wiscon because

there's so many games.

>> Yeah.

>> But I'll leave you all with this and you

brought up a good point about season

length. What the NFL is trying to do

right now is get one more game for a

multitude of reasons because the fact

that the biggest one is that they can

sell one more game. The MLB, the

argument with the fans is to bring the

number of games down so that these games

can matter more. But of course, there is

med there's a media conversation around

that. And will NBA owners and NBA

players want to lose money long term in

order to gain money or lose money

short-term in order to gain money long

term? The MLB is going to have to have a

similar conversation. And the reality is

these billionaire owners, millionaire

players are going to have to decide, do

we want to shrink the season in order in

order for the next generation of owners

and players to make money? And I think

the answer to that question is going to

be no. They're not going to cut games

because they're all too rich right now

in order to be like, why would I care

about the player and owner 20 years? I

want to be rich now. The NFL, I think,

will eventually add an 18th game, but I

think that's where they'll stop.

>> Randall, you brought up these kind of

long-term risks, and we haven't talked

about the big one for baseball, which is

the labor dispute. There is a very good

chance. I'm trying to soak up this

>> I think I know. It's like the players,

right? The players. the owners are very

likely to lock the players out at the

beginning of next year or as soon as

this season ends. And it's over the

question of a salary cap. Baseball is

the only major sport, Randall, correct

me if I'm wrong, where where there isn't

a salary cap that's a sort of a top

level that teams can spend.

>> There's like an amount the team can

spend, right? And and they have to divvy

it up.

>> Now, in baseball, you can spend as much

as you want,

>> which is why the Dodgers have the

superstars that they do there. I had an

agent tell me some time ago that if you

are a very good baseball player, you

might not be top 25, but if you're top

50 and you start your free agency,

there's one conversation you need to

have and it's with the Dodgers because

they're going to set your market and the

Dodgers are willing to spend $700

million on show Otani and if

>> that's what he makes. Wow.

>> That's that's his contract over a long

period of time. But an incredible amount

of money and we're and 700 million is

top, but imagine like these guys are

trying to get anywhere between 150 and

maybe $250 million. Max, go ahead.

>> I just was going to ask you, Randall,

where do you think it's going to go? I

mean, like, as a fan, I am trying to

soak in this season because we may not

have a baseball season next year, which

is like super sad. And it does feel like

baseball has made all of this progress.

And it's like, you're kidding me. You're

going to blow all that up over a salary

dispute? and it seems like they might.

>> So, here's the reality is that if you

were watching the WNBA this season,

there was a collective bargaining

negotiation between the players and the

owners that everyone was like, "This is

ugly. There might not be a season." But

the WNBA had one big advantage and they

had time. Like, the season starts in the

WNBA around April and they had at least

six to seven months and I'm sure that

they had many different collective

bargaining sessions over the course of a

year. like the when they opted out it

was November 24. They negotiated for

over a year. Baseball does not

necessarily have that time on their

side. And you brought up the point of

salary cap versus a minimum spending

limit because the players are going to

say you have owners who are okay with

not winning, who are okay with not

competing because of the fact that these

media deals are paying x amount of

dollars and they're not selling their

teams. And I think that is a problem.

And you again, you should soak up this

season because I don't know if you're

the players, you cannot give up a salary

cap. That is a losing conversation. Now,

I do think in terms of competitive

equity, it would help, but is it going

to help more than having a minimum

requirement that owners have to spend on

players? I I don't know. And would what

would I rather see? Would I rather see

the Dodgers build a Justice League squad

or would I rather see the Pittsburgh

Pirates essentially don't care about

probably the best pitcher in baseball

and not build around him just because

he's going to pack out the stadium by

himself? I personally would rather see a

minimum requirement, but we're going to

find out how it's all going to play out

over the course of many months.

>> Okay, Randall, I always ask you the kind

of sports question at the end of these

conversations, but who do you

>> who do you have this year? Who which are

the rooting for? I'll tell you what I'm

rooting for. I'm rooting for Dodgers

Yankees. And the reason for that is God.

I'm sorry. Like most annoying.

>> I'm sorry. I'm not a purist. I'm someone

Dodgers Mets.

>> I'm someone who roots for the matter of

fact, I'll give you two. I'm rooting for

Dodgers Yankees or I'm rooting for Mets

Yankees. And the reason for that is

because I root for the business of

sports. And I do think that those type

of matchups and I would even go a

rematch from last year with Dodgers,

Blue Jays. Those type of matchups bring

people to the screen. And ultimately, we

all want this business to grow. We don't

want baseball to be in a bad spot as it

was 10 years ago. And I think if this is

going to be a swan song season for

however many months and years that

they're going to be,

>> go out with a bang.

>> Go out with a bang. Let's I I think

that's best. But also, we'll see. I love

an underdog story. But those three would

be my matchups. I would like to see

Dodgers Yankees, Yankees Mets, or

Dodgers Blue Jays all over again.

>> Randall Williams, thanks for being here.

>> Thank you all for having me.

>> Thanks, Randall. [music]

All

right, Max, we have spent a lot of the

last few months talking about prediction

markets.

>> So much time, Stacy, that we decided we

needed a little theme song every time we

talk about this topic.

>> I think that's fair.

>> I bring you a new segment, everybody's

business listeners. It's called This

Week in Prediction Markets.

>> [music]

>> What do you think?

>> That's awesome. I think it's great. I

feel very excited to hear the latest

development in prediction markets.

>> All right. So, the big news in this

world is backlash. It's it, you know,

>> the end of prediction markets,

>> the end [laughter]

of prediction markets. Remember our last

the last time we talked about this on

the live show with Robert Smith and

Jacob Goldstein and we sort of kept

circling around all the kind of

uncomfortable things about this world.

The fact that you could bet on the

return of his Lord and Savior Jesus

Christ or or that you [laughter] could

um

>> or war or people dying.

>> There's been insider trading. There's

been all sorts of stuff and I think

regulators and even people are starting

to catch up. So, let me just run you

down a couple of things that have

happened super recently. One, one is

that the state of Arizona charged Cali

criminally with operating a sports book,

an illegal sports book.

>> Sports betting is, I am guessing,

illegal in Arizona.

>> No, but it's it's regulated under a

separate regime. And so, and and so this

is coming up in a couple of states.

Basically what they're saying is that

Koshi and Poly Market, which remember

you can bet on elections, you can bet on

war, you can bet on anything, but a lot

of what people actually bet on is

sports. And what they're saying is that

this is a backdoor to unregulated sports

betting. And I think anyone who uses

these sites, and we've talked about this

on the podcast before, there's some

truth to that because there is not a

huge difference between placing a bet on

DraftKings and placing a bet on Poly

Market, at least from the point of view

of most [snorts] people who are

gambling. There are some technical

differences, but you know, you're you're

ultimately risking money on a the

outcome of a sports sports game of a

sports ball match. How big of a deal is

it for Calcium Poly Market if they can't

do sports bets?

>> I think it would be really really bad.

The volume numbers

>> is like most of their business.

>> I think it's the majority of at least

Koshi's business. I don't know that we

know for sure what Poly Markets uh

volumes look like, but they're huge. You

know, the the numbers have spiked during

the Super Bowl. If you go on one of

these sites, you know, right now, you'll

see that

>> didn't Poly Market just cut a deal with

Major League Baseball.

>> Poly Market cut a deal with Major League

Baseball. And that gets me to another

point, which is that when they cut this

deal, AOC Alexandria Okasio Cortez,

potential Democratic presidential

contender, uh, congresswoman, tweeted

basically saying, "Let me read this

comment because I think it's indicative

of a vibe shift. This is sad regarding

the Polymarket MLB deal. I know as a

politician these companies are going to

spend a billion dollars against me for

saying it, but shruggy emoji. Pervasive

gambling is not good for society. It

turns life into a casino, traps people

in addiction and debt, surges domestic

violence, and fosters manipulation. And

what's what's interesting about this is

you saw a lot of people in kind of AOC's

camp cheering along, but also a lot of

Republicans. Bill O'Reilly, who I I

didn't realize is still around, but he

still hosts his own, you know,

conservative talk show, had a headline

that was like, "Shocker. I agree with

AOC." I saw a lot of that on social

media. Just a lot of sort of politicians

getting mad. And this is showing up in

some bills. There's actually a bill in

the House right now to stop sports

gambling on prediction markets and then

a Senate bill which was is about to be

introduced today, I believe, according

to Axios. But there are a lot of other

places to bet on sports. So it's not

like sports betting would go away. It's

just these particular sites would not

allow it.

>> Yeah. And if that happened, it would be

very bad for these sites, these

prediction market sites.

>> There's March Madness happening in our

office right now. I've never understood

what that means.

>> Is that just

>> I don't know about brackets. I've never

I don't know what a bracket means. I

don't I've done stories on it. I don't

know what a bracket means.

>> All right. We'll have Tracy Aloway next

week to explain. put together. We can

walk through brackets. That [music]

would I would appreciate that.

>> This has been [laughter] This Week in

Prediction Markets.

This show is produced by Jasmine JT

Green and Stacy Wong. Magnus Hendrickson

is our supervising producer. Sam [music]

Rogich handles engineering and Dave

Purcell fact checks. Special thanks to

Jeff Muskus, Julia Rubin, and Maria

Ling. If you have a minute, please rate

and review the show. It'll mean a lot to

us. And if [music] you have a story that

should be our business or a sports bet

you want to suggest that we make, email

us at everybody's bloomberg.net. [music]

That's everybody with an s at

bloomberg.net. Thank you for listening

and we'll see you next week.