Bat Tat: Labubu, OBDC, Frank

Michael Lewis discusses his bestselling book, *The Big Short*, which examines the 2008 housing market crisis and its ongoing relevance. Katie Greifeld shares her experience of getting a neck tattoo, a bat signal in memory of her late pet, Batman, and mentions the enthusiasm of her TV producers during an on-air reveal. They discuss how many people in their thirties get tattoos as they transition into new life phases, while Matt Levine expresses that he feels it's too late for him to get one.

The conversation shifts to "lulububus," a cultural phenomenon that both Katie and Matt find challenging to appreciate. They mention that derivatives of lulububus can now be traded through Kalshi, which is partnering with StockX to create event contracts related to collectibles like sneakers and trading cards. Matt expresses confusion about how alternative asset marketplaces can transform collectibles into event contracts, which involve unique financial mechanisms like yes-no contracts. These contracts pay off based on whether a specified price exceeds a certain threshold, allowing for the conversion of continuous variables into binary outcomes.

The discussion touches on the potential for an "everything exchange" in prediction markets, where anything can be turned into a yes-no event for trading. The appeal of betting on engaging products, such as meme stocks, is contrasted with the less exciting nature of betting on specific price thresholds. The complexities and risks of high-stakes contracts are emphasized, along with the need for collateral. Traditional prediction markets are viewed as less risky due to simpler collateral systems, but there are concerns about potential manipulation, particularly in sneaker price contracts.

Speculation about the future of prediction markets suggests two possible paths: one leading to a market for everything that aids in risk hedging and future predictions, and the other evolving into a legalized sports book. A conversation with the CEO of Cibo reveals that they are not entering the sports betting market but will introduce prediction markets soon. The discussion highlights the competitive landscape of exchanges and the greater financial opportunities in economic and financial prediction markets compared to sports betting.

The podcast discusses private credit and retail private credit ETFs, focusing on Business Development Companies (BDCs) as a key category. BDCs are publicly traded private credit funds, allowing investors to buy and sell shares, but they do not permit share redemption, which can lead to discrepancies between share price and net asset value (NAV). Recent developments involve Blue Owl, which operates a publicly traded BDC (OBDC) and a private BDC (OBDC2). OBDC2 has a quarterly redemption mechanism, but this has resulted in increased redemptions. To mitigate these pressures, Blue Owl announced a merger between OBDC and OBDC2, enabling private investors to convert to public shares. However, this merger has caused dissatisfaction among investors, as OBDC is trading at a 20% discount to NAV.

In Q3, Blue Owl approved $60 million in redemptions, surpassing their limit, and initiated a $200 million share repurchase program to address the discount. The company is weighing the benefits of permanent capital from the public product against the liquidity demands of private investors. The public product's discount complicates attracting new investors, and skepticism is growing regarding the valuation of private credit loans, with concerns voiced by figures like Jamie Dimon and Jeffrey Gundlach. The merger raises further questions about loan valuations, as Blue Owl shares have significantly declined, reflecting market concerns about future cash flows.

The podcast also covers the controversy surrounding Charlotte Javis, founder of Frank, which was sold to JP Morgan for $171 million. Allegations of fraud emerged due to fake customer email addresses, leading to a lawsuit and Javis's conviction and sentencing to seven years in prison. Despite the accusations, JP Morgan is obligated to cover Javis's legal expenses under an indemnity agreement, which has reportedly led to legal bills exceeding $142 million. The discussion highlights the strategy of hiring top lawyers in serious legal challenges, as well as JP Morgan's attempts to recover costs related to Javis's excessive spending, including personal items.

The conversation raises questions about JP Morgan's financial responsibilities in relation to Javis's legal defense and when these legal costs might start affecting the bank's earnings. The $175 million acquisition of Frank is also a focal point, with Jamie Dimon addressing concerns about due diligence during earnings calls. There is a recurring mention of the possibility of Charlie getting a tattoo upon her release, adding a personal touch to the discussion.