The Trade War That Never Was
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Hello. Welcome to Slate Money, your guide to the business and finance news of the week. And these days, the weeks last a long time. I'm Felix Ammon of Axios. I'm here with Elizabeth Spires. Hello. With Emily Peck of Axios. Hi. And we are talking this week about stuff that happened yesterday.

on Monday, and it feels like it was a year ago. But we do need to mention that a bunch of crazy happened on the trade tariff front. So we're going to talk about that. We are going to talk about another crazy thing that happened in the middle of all the crazy that you might not have noticed that Donald Trump said that he's going to start up a sovereign wealth fund. We're going to talk about whether that makes any sense. Spoiler alert, no, it doesn't. We're going to talk about the Super Bowl. It's the thing that's happening this weekend. People will watch it.

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This is one of those occasions where the business and finance news of the week feels like it was a million years ago, but it was actually this week that

The trade war didn't happen. And it is rare for something not happening to be news. But in this case, I think it is news. And I think it is important. And I think it is worth talking about because, well, can you explain? Sure.

About a week ago, after we taped last week's Slate Money, the trade war was set to begin. The president said that the U.S. would levy 25% tariffs on goods imported from Mexico and Canada. And then there followed over the weekend a news cycle freakout where everyone was writing stories and explaining why this is going to be really bad, especially for Canada and Mexico and those countries. That's

Yeah.

Then I think by around noon on Monday, the president of Mexico announced, no, no, no, we're postponing this. And we were like, is that even true? And then, yes, it turns out to be true. She promised something to President Trump, like we'll send some troops to the border to protect against

the invasion or whatever. So those are off. And then we're all eyes turned north to Canada. What's Justin going to do? And Justin was like, I will put a fentanyl czar in place and also send troops. And President Trump was like, I have one. And the trade war

was basically off. Although China was also going to get new tariffs placed on Chinese imports, and those are happening. That isn't over. But the real fear over this North American trade breakdown and the auto industry basically going out of business, none of that has transpired. This is such a Trumpian move to set the house on fire and so that he can applaud himself for putting it out.

And I don't think this is the last time that he threatens a trade war. I think he views it as a tool that he can pull out of his back pocket at any point. So we may be dealing with this again in a few weeks. It's in his front pocket. Like these tariffs technically will go into effect on March the 1st. I think at this point, everyone expects that they won't. Yet again, Trump...

Trump will have an emergency phone call at the last minute with Claudia and Justin, and they will say, I have painted the streets yellow, and he'll be like, it's a win! I did it! In Mexico's case, she basically promised something they were already doing. Mexico and Canada both promised things they had already announced. The only thing that had not already been announced was that Canada decided to name someone a czar, because that sounds czarist. But no, but like, it's...

I believe the technical term is fucked up, right? That you could threaten the completely integrated North American trade system and supply chains by

for basically nothing. These tariffs were enormous. Like it's very hard to overstate how enormous 25% is. 25% tariffs is something you hesitate to impose on your worst enemy, let alone your friends and neighbors. And the stated reason for imposing the tariffs was obviously completely spurious, like trade and fentanyl are completely unrelated. And then the

Similarly, the stated reason for postponing the tariffs and saying that everything is fine again was even more spurious. And none of this makes sense except for just in terms of Trump needs to be in the headlines all the time and he's a chaos monkey. He's sort of incapable of understanding data points or how any of this works. And so...

If at any point during the negotiations, Mexico had said, okay, we're going to send 15,000 troops to the border. If he even understood the issue, he would know that they already have those people there. Actually, she promised to send 10,000 troops, which is actually less than what

They had already planned to sin. But it sort of doesn't matter because a lot of this is just driven by Trump's pettiness, especially vis-a-vis Trudeau, who he doesn't like on a very personal basis. I'm going to push back.

I'm going to take Trump's side for a second. I think he and a lot of people, some Republicans, some Democrats, a lot of people think that NAFTA was very bad for the United States. And it was a mistake and want to make changes to beef up U.S. manufacturing and reverse the bad effects of the free trade agreement to U.S. manufacturing, to U.S. workers, to jobs that went elsewhere, etc., etc., etc.

And I think behind sort of Trump's scattershot and chaotic attempt at tariffs, some people in his circle and some of his supporters are

that's what they're looking to do. And I was thinking about this because I somehow got on the White House's media mailing list. So I get like all their press releases. And one of their press releases was calling out the Wall Street Journal around the time of the trade war, because the Wall Street Journal editorial page was like, what Trump is doing is super bad and free trade is good. And

The press release basically said, like, the Wall Street Journal editorial page has been wrong about NAFTA and wrong about trade for the past 25 years. Like, NAFTA was bad. We don't want it anymore. It didn't work.

So I do think that's like maybe in a really good faith way of looking at this is what's going on. This is a really important point, right? Which is that we are in this post neoliberal world where, you know, liberalization of international trade, which was this sort of grand Washington consensus religion for many years, no one will stand up for it on either side of the aisle anymore.

But the point is that, and if you look at the press release that Sean Fain of the United Auto Workers put out after these tariffs were announced, the point is that if it's a bad deal,

The thing to do is replace it with a good deal. And this is exactly what Trump did the first time around, right? He said that NAFTA was a terrible deal. So he renegotiated it. He created this new thing called USMCA. NAFTA does not exist anymore. It's now USMCA. NAFTA, to be clear, was negotiated by Bill Clinton with this very kind of Washington consensus neoliberal concept of we want the whole continent to do really well.

And NAFTA was, to be clear, very good for both Canada and Mexico and especially for Mexico. And Clinton thought that was great. And, you know, it's really good if Mexico does well. It does great for the hemisphere, yada, yada, yada, right? USMCA was...

done with much more sort of America first mindset of we don't care whether this is good for Mexico, we just want what's best for America. And so that's what Bob Lighthizer does in in Trump 1.0, the trade rep first time around, and he negotiates this new deal, which is much more of

America driving a hard bargain and saying like, what we need is a more America first deal that is going to be good for American manufacturing. And we don't care what happens so much to Mexican manufacturing or Canadian manufacturing. That is a big change. That is a profound change. But this new thing,

of ripping up USMCA entirely. And to be clear, if you impose these tariffs unilaterally, like Trump was going to do, that completely invalidates everything in USMCA and the whole trade deal is off. Ripping the whole thing up entirely and replacing it with across the board tariffs is not a trade deal. It is a fucking disaster.

Well, another factor is that I think the thinking about what NAFTA is supposed to do has changed. Trump still hates it because he thinks that it destroys American manufacturing jobs. But if you look at what's really killed manufacturing jobs here, it's really been changes in technology and productivity and stuff like that. In fact, I'm looking at a data point now that says from 2000 to 2010, while jobs were being lost, total manufacturing output actually increased dramatically.

over $800 billion. Yeah, U.S. manufacturing is highly productive, and yeah, it has been going up over the whole time. Yeah, while employment has been going down, for sure. I mean...

So manufacturing jobs aren't, and I've said this before in the podcast, they're not inherently good jobs. They were good jobs because a lot of people fought really hard to unionize, not something that the Trump administration has prioritized at all. Like there's no reason manufacturing jobs have to be good jobs. That always irks me when they say, well, let's get manufacturing back here and get people into good jobs.

That's not a given. Any job can be a good job. It's not the exclusive province of manufacturing. But like, just to give an example, which I wrote about of how completely insane these tariffs were, no one's entirely done the sums on this because it's basically impossible to do it. But the way that North American auto manufacturing supply chains work is that even like one tiny little capacitor can cross the international border between, you know, on either of the two borders and

six, seven, eight times before final manufacture. Many cars have the final manufacture in Mexico and are then imported into the United States. And those cars would be hit by a 25% tariff. And people are like, oh, well, that would make that car 25% more expensive and it would be

What people don't realize is that every single car has so many components that go back and forth so many times. If you add up the tariffs on all of the components, even if the final assembly is in the United States, the effective tariff can wind up being hundreds or even like a thousand percent. It can be way, way more. It's almost inevitably going to be way, way higher.

than the tariffs that we place on imported cars from Europe or Japan or Korea, or even the 137% tariffs that we have on cars from China, which aren't imported. Typically, when things are going back and forth, they get exceptions, right?

Right. Or exemptions. So you would assume that would happen. No, because very explicitly in the executive order, he was like, that doesn't happen. Oh, damn. There's no like netting out. There's no sort of like we're only doing it on the value add or anything like that. He was like, we are going to tariff the full value of every single component of the supply chain every single time it crosses the border.

which was batshit, you know? So this didn't happen. But it is important to talk about because even though the tariffs didn't happen, something did happen, which is the United States showed itself to be an unreliable trading partner. And that can have long-lasting consequences. We don't just get a free pass on that every time we threaten to do stuff like that. If you are building a supply chain, if you're in the manufacturing world,

And you are putting together factories and supply chains and contracts and hiring people on jobs, which are in where you expect to pay them for years and years into the future and hiring managers and all the rest of it. What you want is predictability. What you want to know is that you know what the world is going to look like for the next 20 years, because that's the time horizon that you have for making all of these investments.

If your time horizon is one month and you have no idea what's going to happen on March the 1st, you can't make any kind of long-term investments at all. This is another personality quirk of Trump's. You know, he has this logic that when he does stuff like this, if he's unpredictable, he's keeping people on their toes and it gives him some level of power. And he doesn't understand the effect of certainty that you're talking about. I don't think that he...

is really capable of internalizing that. His last trade war, would it be accurate to say weakened trust in the United States? Or did the four years of Biden sort of fix that? What was fascinating about that, right, is that the last trade war, the Trump 1.0 trade war, at least in terms of tariffs, not in terms of USMCA, was very focused on China. And he imposed a bunch of tariffs on Chinese imports,

And Janet Yellen, among many others, was like, this is going to be very bad for trade. And then Janet Yellen becomes Treasury Secretary and she keeps the tariffs.

And so basically what we learned from the Biden administration is that there are no neoliberals anymore. There are no free traders anymore. And the United States is, as our colleague Neil Irwin puts it, it's very close to an autarky. We're not reliant on imports like many smaller countries are. There are certain things that we import and are reliant on. But the United States actually winds up producing a lot more of what it consumes than most countries do.

You know, we'll import the iPhone that we're using. We'll import some of the, you know, lumber that we're using to build our houses. Don't forget the chips. But it's not nearly as big as, say, where I come from in the United Kingdom, where like everything gets imported. So the United States, when it enters into a trade war, always has...

superior position, right? Because our imports, I don't know, say like our imports from Canada, 3% of GDP, while Canadian exports to the United States, like 25% of GDP or something. It's very unequal. So we can absorb the pain much more easily than they can. And he loves that natural negotiating leverage the United States has. And it is inconceivable that he won't continue to use it. He just views it as a display of dominance.

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But talking of displays of dominance, we should talk about his other great idea from this week, which was that the United States should have a sovereign wealth fund. He put out an executive order. The Treasury Secretary, Scott Besant, said, oh, yeah, we're definitely going to have this within 12 months. I feel like the markets believe this even less than they believe the tariffs are.

It seems to be impossible. No one has a clue how you could possibly have a sovereign wealth fund without getting Congress to pass a bill creating one. And Congress, the one thing that Congress really loves is the fact that they get to determine what gets spent on what. So it is, look, nothing is impossible, but...

The idea is that, as Trump has explained, he has seen the sovereign wealth funds from other countries, especially from Saudi Arabia, and said to himself, wow, this is amazing. Saudi Arabia can throw around a whole bunch of money and give it to Massasson or give it to Jared Kushner or give it to anyone that they want to carry favor with. And that is a powerful tool that MBS has. And I want that too, because if MBS can do it, then I should be able to do it too.

And so then he's like, give me a sovereign wealth fund and no one can ever say no to Trump. So now everyone is running around trying to persuade themselves that it makes sense to have a sovereign wealth fund, which to be very clear, it makes no sense at all.

Why don't you first tell the listeners, explain what a sovereign wealth fund is and how Norway's, for example, differs from Saudi Arabia's or maybe they're the same. They're basically the same. I mean, they're different in their implementation. But conceptually speaking, Norway and Saudi Arabia both have massive oil revenues that are going to run out at some point.

And it's silly for them to just spend all of the money now because their domestic economies are not particularly big. And so they don't even really have the capacity to absorb all of that spending.

And it would just be inflationary. And in any case, you know, if you are a farsighted leader of one of these countries, you care about your future citizens as well as the present ones. And so you're like, I want to build up a long term strength of this country and its citizens. So I'm going to create this fund, which exists to help support the country for hundreds of years into the future, even after all of the oil runs out.

And so right now, the Norwegian sovereign wealth fund, I'm not sure exactly. I think it's like $400,000 per Norwegian or something like that. And the Norwegians aren't really getting any benefit from it right now. What Norway is doing is the classic sensible Gen X type thing, which is they're basically just putting it all in S&P 500 index funds. They're buying a whole bunch of public equities from around the world and bonds and other stuff. And they're just...

putting it in the markets and it's growing. And that is, it's like, it's a rainy day fund for their future population. They don't spend the money at all. They don't give back like a check to Norwegians because doesn't Alaska have something similar and they send out a check? Yeah. Alaska is the exact opposite pretty much. It's the Alaska just takes the oil surplus and gives it out as a dividend. And

Saudi Arabia also has a sovereign wealth fund and it uses it a little bit more strategically. They're like, we have this money and so we're going to start making strategic bets and strategic investments in like technology, in sustainable energy, in AI.

in fucking Neom or whatever their latest bright idea is. And this is all of these things are going to basically put us on a solid footing going forwards when the oil runs out. We're going to have like an AI based economy or a green sustainable economy or something that we'll be able to keep on going even when we don't have all of this oil money rushing in every day from all of the millions of barrels of oil we pump every day. Of course, you know,

Saudi Arabia is an absolute monarchy. And what that means is that these monies are very prone to sort of cronyism and malinvestment. And I don't think anyone really thinks that the Saudi public investment fund

is a masterpiece of smart investment. You know, there are better ones. Singapore has a sovereign wealth fund, right, called Temasek. And that one, it's a bit like Norway's in that it invests in a whole bunch of international assets, but it's unlike Norway's in that it invests in a lot of alternative assets, like hedge funds and venture capital and that kind of stuff, rather than just in public.

equities and stuff. But the point here is that all of this is done when you have this luxury problem. If I have too much money and I need to work out what to do with it. And nearly all of the time, if you are Norway or Singapore or someone sensible, you invest it abroad in order to like not unbalance your domestic economy.

And what Trump is suggesting ticks neither of those boxes. As we all know, the United States is not running a surplus. It's running a massive deficit of 6% of GDP. We have a $36 trillion national debt. Any money that could be put into a wealth fund could be put into paying down the debt instead. So what you are doing by creating this wealth fund is effectively making the national debt even higher.

which does not make sense. Trump in his executive order said like, this is going to help the national debt. No, it's not. And he also wants to invest it all domestically in like weird sort of strategic investments, like perhaps,

TikTok, which makes no sense also. But basically, he just wants his own slash fund. And he wants to be like MBS. And he wants to have his own little pool of money that he can throw around as he wishes. Are you suggesting that Donald J. Trump is primarily interested in having a sovereign wealth fund so that he can corrupt it? I mean, what I'm suggesting is that Donald Trump wants a sovereign wealth fund so that he can direct it.

Cronyism is legal. When MBS gives Jared Kushner $2 billion out of his sovereign wealth fund, that is not illegal. That is not corrupt.

And, you know, as always in these things, the scandal isn't what's illegal or corrupt. The scandal is what's legal and perfectly licit. And so, yeah, if Donald Trump wants to take a sovereign wealth fund and spend the money on TikTok, like he might have weird, selfish reasons for doing that. But I wouldn't necessarily say that that was corrupt. It's just

It's what he wants to do and he wants to be able to do whatever he wants to do. Well, I think it's of a piece of him not really understanding how pieces of the government work again, because he has repeatedly said that he wanted to use the sovereign wealth fund to fund what he calls great national endeavors. And mostly then he points to infrastructure projects that historically we already have other mechanisms for funding. Do you remember infrastructure week? The first time? Never ending infrastructure week. Never ending infrastructure week. One thing.

you said at the beginning, Felix, and I think as important as you said, Congress doesn't want to so easily give up its power of the purse or whatever, but we're seeing unfold in front of us right now. Congress is

Giving up the power of its purse as Trump and Elon Musk set out to do massive job cuts and get rid of federal agencies that Congress has, you know, funded and isn't really doing so far anything to stop it. So I think that's two slightly different things.

Like there is going to be a budget. Like the thing that Congress does is it passes a budget and the budget that it passes and the allocations it makes in terms of what money goes where are very carefully negotiated and hashed out. Right. Once that money has been funded and it goes to the various agencies, it's

then at that point, the executive branch does have a certain amount of discretion in terms of like, do we actually spend it? How much like there's obviously a lot of very cogent argument that what the Trump Musk axis is doing in many of these agencies is illegal. And the spending has been mandated by Congress, and they can't just stop it without going through Congress first.

And so, yeah, it is possible to what is indeed quite likely that what is happening is illegal. And the Congress, in fact, has already done what you are saying they should do, which is mandate this money be spent. Here's the difference. So Congress has mandated certain money should be spent. And under the law, the Impoundment Control Act passed because of Richard Nixon. Under the law, the president can't not spend it. You can like

temporarily suspend the spending and take a look at it. You can pause it, but you have to spend it. That's the law because Nixon used to do a similar thing. But with the sovereign wealth fund, it's not about, oh my God, so many negatives. The sovereign wealth fund is about

spending the money versus what's happening now is not spending the money. And maybe it's a little easier to break the law and not spend the money than to break the law and just like spend the money, find the money to spend. The money has to come from somewhere. This is the point. Yeah. And Donald Trump, for all of his

awesome power still doesn't have the ability to just magic money out of nowhere right he can't just come up with the money and so congress would need to pass a bill to give him that money right which isn't such a far-fetched thing right now because his party does control congress and he it will presumably do what he says so it's not crazy to think the sovereign wealth fund could happen it

happen? It's possible, but it counts as government spending, right? It counts as government spending a whole bunch of money on a thing. The thing that it's spending money on is the sovereign wealth fund. And the majorities in Congress are slim enough. And the fights in Congress about spending versus tax cuts and all the rest of it are already so fraught that passing anything is going to be hard enough. And

Ultimately, I do think that this sovereign wealth fund is going to be like some kind of a bargaining chip that the White House gives up and says, okay, we'll give up our sovereign wealth fund if you give us something else. One more thing I wanted to ask. We got an email to Axios Markets and it was clearly like a Trump supporter who was like, since when do you guys care about the deficit? I never heard anything about the deficit during the Biden administration. Now you're so worried about expanding the deficit. What gives?

Well, it's not so much me. It's a perfectly good question. First of all, let me just veer a little, just a tiny, tiny, like one degree off topic and say,

What does Stephanie Kelton think? Right? The sort of grand avatar of modern monetary theory who says that the government never needs to worry about where the money is going to come from because the government can produce as much money as it likes. And that's what governments do. And if it needs the money for, yeah, it can do it. She wrote a piece saying the U.S. government needs a sovereign wealth fund like a fish needs a bicycle. Even like Stephanie Kelton thinks this makes no sense.

Not for like, it will increase the deficit reasons, but for a whole bunch of other reasons that we don't need to go into. But the point is that you don't need to be a deficit hawk to oppose a sovereign wealth fund. My point about the deficit is really just that Congress and specifically Republicans in Congress are priding themselves on being deficit hawks. Scott Besant is saying that he wants to get the budget deficit down to 3% of GDP.

It is, frankly, mathematically impossible that he's going to be able to do that at all. But there's no way he can do that by increasing spending. Right? Okay. So it's like, do I care about the deficit and the debt? I think it is an interesting dynamic. And I do think that the amount of money that the U.S. is spending on debt service is...

creating a certain number of like dislocations in the economy. Like this is at this point, you know, trillions of dollars going to treasury bondholders in ways that weren't entirely intended.

So, yeah, I mean, there's a whole bunch of conversations we can have about the long-term sustainability of Medicare and Medicaid and Social Security if they're not funded by taxes and if they're just funded by borrowing, right? That is a long and wonkish conversation and not for right now. But just for our purposes, what matters is just the electoral dynamics of Congress, basically. And the more deficit hawks you have...

And there are a lot of them, especially on the Republican side in Congress. The harder it becomes to do anything that increases the deficit. I'm so sorry. I have one more question. Isn't the point of the sovereign wealth fund to make money? You invest the money, you spend it, but then you make money. So why would it increase the deficit? Wouldn't it be a source of revenue? I don't know any sovereign wealth fund in the world that is a source of revenue for a government. No.

It's a pool of assets, and that pool of assets can go up in value. But just because the government owns an asset that goes up in value does not have any effect on the deficit or the debt. It's not like money coming in. If you own a bunch of Nvidia stock and it goes up 10x in value, like that and...

$2.90 will get you on the subway. You have to sell the stock and take the... Exactly. You would need to not only sell the stock, but you would need to sell the stock and then take it out of the fund and use the proceeds from that fund to reduce the deficit. There's no indication that anyone wants to do that. It makes sense if you're running a surplus. It does not make sense if you're running a deficit. In any country that is running a deficit,

by definition, has to fund the sovereign wealth fund through debt, which kind of defeats the purpose of a sovereign wealth fund. There was one counter

one country that decided to stand up a sovereign wealth fund that was funded by debt. Emily, do you want to remind us which country that was? That was Malaysia. And the fund was 1MDB. We have a whole episode about it from several years ago. And that was, to sum it up in a word, a disaster. They borrowed money and the government just used it to enrich itself. They borrowed billions of dollars and they just stole all the money, basically. They borrowed the money, then they spent it on themselves.

But hey, a bunch of it went into making The Wolf of Wall Street, so at least we got that out. I mean, if we could get a movie out of this, that would be nice. Slate Money is sponsored this week by Lumen.com.

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Let's move on to the superb owl, which is happening on Sunday. Emily, you are going to be pouring what onto your French fries? Cheese and salsa. I'm going to experiment and try to make something called frachos, which is French fried nachos. I'll report back if anyone's interested. Write to me. Let me know if you're interested in this experiment. It's like a loaded fries, but with like this nacho twist. This

We're talking about the Super Bowl in case people didn't follow his mispronunciation. The reason I ask is because as far as I can make out, and I am definitely the befuddled foreigner when it comes to this bizarre holiday, there are three things that people care about on Super Bowl Sunday. One of them is food. One of them is ads on the telly. And one of them is sports ball. Accurate. Yeah.

And so, Emily, let me ask you, since you obviously are caring about the food, are you also caring about either the ads on the telly or the sports pool? I don't really care about the ads on the telly. I mean, I'd like them to be entertaining, but I'm not. Like long ago, as a business editor, I was like, we should write about some of the ads. And now I'm kind of like, let's not do that. Let's never do that. But if they're entertaining, like I'll enjoy them. Like if Ben Affleck and Matt Damon come back with a new Duncan commercial, yeah, I'll

I'm going to be entertained by it. Sure. Are you going to make deviled eggs in our economy? No.

What am I, a millionaire? Okay, so that leaves the big game, I believe it's called. And a lot of Americans really care about this game and which team gets the most points and therefore wins. And billions of dollars are bet on this. And historically speaking, most of those bets were illegal and were placed like either just bilaterally between people or with like illegal underground bookies and that kind of stuff. And there was a couple of...

legal sports books in Las Vegas, but unless you're in Las Vegas, you basically couldn't bet on such things. Then over the past few years, there's been this massive wave of legalization of sports betting across most of America. And so now all of these billions of dollars are going into legal bets on places like DraftKings or whatever, you know, these lots of bets all over the place. And

Yet there are holdouts, Texas being the most prominent among them, saying you can't do that in our state. We won't let you. Enter CalShe, which is an online platform.

company that allows you to make bets on things like the outcome of the U S presidential election or how much snow is going to fall in New York this weekend or any number of other things. And they're like, well, our reading of the law is that if we just offer contracts that are tied to the outcome of the Superbowl,

That is legal. It's not sports betting. And everyone who's looked at this at the Commodities and Futures Trading Commission seems to think, wait, what? But Kaoshi is basically making the bet that in this deregulatory environment, the CFTC isn't actually going to sue them or fine them or anything. So they are offering these bets. And these bets are available nationwide and specifically in Texas and in all of the other states where sports betting is not legal. And so this seems like a dumb workaround.

And is everything legal now? Is this just... Where do you think this is going to end up? Well...

Robinhood tried to team up with Kaoshi and offer this betting capability to its customers. And the CFTC did wake up and say, no, no, no, we're not doing this. So not everything is legal now, right? Yeah, so the Robinhood thing is very weird, right? Because Robinhood teamed up with Kaoshi. The CFTC phoned up Robinhood and said, can you not do that? And Robinhood was like, well, okay, our regulator is telling us not to do it. We'll not do it.

But they didn't say it was illegal. And Calci, as I say, is continuing to offer the contract. So you can't buy the Calci contract on your Robinhood app, but you can buy it on your Calci app. I believe Robinhood had already sold some of the contracts, though. Oh, yeah, yeah. They were live for like a hot minute. So I had some questions because you may not understand the super... What do you call it? The super owl? The superb owl. The superb owl. But you do understand betting, so...

Yeah, my questions are, why is it okay for Kalshi but not Robinhood? Robinhood had elections trading. Why was that okay? But sports betting isn't okay. So, okay, let me address that one, which is that, well, initially it was Polymarket and then Kalshi came along offering election betting. And the argument they made for election betting was, this is not illegal, therefore it's legal, basically. Yeah.

And they were saying there are certain things that the law says you cannot offer contracts on. Like you cannot offer futures or derivatives contracts on onions. Do not ask me why, but for some reason, you know, there's lots of futures on cocoa and on eggs and on pork bellies, but not on onions. And so if the law says you can't do it, you can't do it. And one of the things that the law says you can't do is you

sports betting and sports results. And so it's clearly one of the things that you are not allowed to do. Now, the argument for the political betting was there was no actual law saying you can't do politics betting. And so they basically said, well, if there's no law against it, we should be able to do it.

In this case, like, it really does look like there is a law against it. At least in Texas, but not in other states. To be clear, what we're talking about is offering futures contracts and forwards, right? So the thing that is legal in individual states is betting. It's going into a store, whether virtual or real, and, like, placing a bet like you would in a casino. It's gambling. Okay. And—

States have the ability to regulate gambling and to make certain forms of gambling legal and certain forms of gambling illegal. That's one sort of regulatory regime.

Another regulatory regime, which is the CFTC, is the financial markets. It's options and forwards and futures. You can offer them on lots of things. You can't offer them on onions and you can't offer them on sports. And so that's the weird thing, right? Like options and forwards and futures have not existed in any state on sports at all. Not even in Minnesota or New York or anywhere that it's legal to do the betting.

So if I want to buy like coffee futures, which we had a story on this week, what am I doing? I'm betting that the price of coffee is going to be X at a future date. Yeah. And so what Kalshi is offering is basically a form of Fugi. It's a contract that is worth $1 if the 49ers win and $0 if they don't. Okay. Right. And.

I think the 49ers are not actually in the Super Bowl. No, they're not. No. Which means that that contract is guaranteed to expire at zero. But if you could sell it at like 10 cents, then that would be a great trade because you know it's going to expire at zero because the 49ers are not going to win the Super Bowl. We could sell it to you because you wouldn't know.

Oh, you can say that to me because I wouldn't know. Exactly. So let's say that there's just one contract for every team in the NFL saying it will expire at $1 if the team wins the Super Bowl and at $0 if it doesn't. At this point, basically, all of those contracts are worth zero except for two because there's only two teams left. And then at the end of the game, all of the contracts are worth zero except for one. And then that one for the team that

one is worth a dollar and so you can buy and sell that contract over the course of the game like before the game and during the game and right up until like you know one minute before the final bell or whatever happens at the end and you can bet on on the fortunes of the game basically

But this is very different from an event contract that really has no underlying value. And part of the problem with Robinhood offering products like this is that it sort of implies that the event contracts are on par with buying commodity futures as if they're a legitimate financial instrument. It's basically a cash settled future. It's the same thing. Commodity futures are zero sum bets, just like stock.

sports futures. You have a willing buyer and a willing seller at a certain price and one person wins and the other person loses. I'm not sure what distinction you're making. Are you saying coffee beans and lumber have value and the sports game doesn't have value? Right. So like a physically settled future, it's like, you know, gives you the right to accept the

an actual physical shipment of whatever, coffee or lumber or whatever. And that is something that you can use if you're in the industry and you want to lock in how much you're going to pay for lumber in the future. But 99% of the

derivatives trades that are traded in Chicago and around the world are cash settled. They're not physically settled. It's just a bet. So how do you distinguish between gambling and betting on an event contract? Just by looking at who the regulator is, right? If it's the state gambling regulator, then it's gambling. And if it's the CFTC, then it's an event contract. Is one better for the gambler? Like if you're putting a bet like at DraftKings or something or in a casino where the house always wins?

For gamblers, is it better to do the futures contract betting? If you are a smart gambler, if you are a good sports bettor who thinks you have an edge...

then it is probably better to go the calci route than the sportsbook route because the sportsbooks know who you are. And if you are particularly good at winning, they will limit the amount you can bet. And they will sometimes just prevent you from making bets at all.

You know, and one of the great difficulties of betting on sports is precisely that it's hard for a good bettor to actually find a sports book to take the other side of the bets they want to make. Whereas with a freely traded futures contract, you know, the price is the price and it moves around much more quickly than the price on a sports book.

But, you know, if you buy a bunch, then the price will go up. If you sell a bunch, then the price will go down. And then you're just trading. There are different protections for consumers if you're doing futures trading versus sports betting. And we've talked about this on the show before, but sports betting is maybe has more deleterious effects than other types of gambling. So what are the protections for consumers?

Well, because they are, as you pointed out, they're regulated by different agencies. So futures trading is subject to, I think, far more regulation than sports betting. Any type of stricter regulation is inherently a protection in terms of controlling risk for especially retail investors.

I don't think there's any particular risk controls. If you are going into your options trading account on Robinhood and you're trading Nvidia options, like zero-day options in single stocks or whatever, the amount of risk you're taking on there is vastly more than the amount of risk that most sports bettors take. You can lose all of your money very quickly. The only real protection you have is

And this is not even protection that is enforced by regulators so much as it's just the sensible speed limits put in by the brokerages because they don't want to lose money, is that they will sort of stop you out if you lose more than you have in your account. So you can't like wind up with a negative balance very easily.

Well, they also have more of a duty to educate the customer. And when Robinhood first introduced options trading, it was a little bit controversial because there were people who were arguing that most Robinhood investors were not sophisticated enough to trade options and that, you know, you would have people losing money because they didn't know what they were doing. Which they do. Yeah. And if you look at Robinhood's P&L, almost none of it comes from stock trading. All of their profits are coming from options and crypto.

Why shouldn't it be legal to do sports betting on Kalshi then? I mean, it doesn't seem like a big deal to me. So I think in a world where sports betting is legal in most states, then at that point, it becomes a bit of a no harm, no foul thing, except for in Texas, where like the Texans, you can forgive the Texans for saying, look, we have deliberately made this illegal.

You can't just like call it a future and suddenly it's legal. Okay, that's fair. And it's surprising that Texas doesn't allow sports betting, isn't it? Like, it seems like... It is not a libertarian state. It really is. I mean, it is for guns, but it's not for like... You're not allowed to watch porn in Texas. Interesting. I'm Leon Nafok, and I'm the host of Slow Burn Watergate. Before I started working on this show...

Everything I knew about Watergate came from the movie All the President's Men. Do you remember how it ends? Woodward and Bernstein are sitting with their typewriters, clacking away. And then there's this rapid montage of newspaper stories about campaign aides and White House officials getting convicted of crimes, about audio tapes coming out that prove Nixon's involvement in the cover-up. The last story we see is Nixon resigns. It takes a little over a minute in the movie. In real life, it took about two years.

Five men were arrested early Saturday while trying to install eavesdropping equipment. It's known as the Watergate incident. What was it like to experience those two years in real time? What were people thinking and feeling as the break-in at Democratic Party headquarters went from a weird little caper to a constitutional crisis that brought down the president? The downfall of Richard Nixon was stranger, wilder, and more exciting than you can imagine. Over the course of eight episodes, this show is going to capture what it was like to live through the greatest political scandal of the 20th century.

With today's headlines once again full of corruption, collusion, and dirty tricks, it's time for another look at the gate that started it all. Subscribe to Slow Burn now, wherever you get your podcasts. I think we should probably just have a numbers round. Elizabeth, do you have a number? Yes, my number is a million, and that's dollars. And this is a package that a nightclub called Lily's Club is offering for people who want to attend the F1 Monaco races today.

And this is just sort of another data point in our long list of rich people things. But a million dollar table package includes caviar, bottle service, Grand Prix victory party, a week of accommodations, a private chef, and a round trip private jet transfer. Okay, so this isn't just a nightclub. You get like a hotel room and a private jet for that.

Yeah. And presumably you get to, you know, the hotel room will overlook the Grand Prix circuit or something like that. Well, just by comparison, you know, Super Bowl tickets and luxury packages around that don't quite meet that threshold. But they're selling for around at the lowest price point, $7,000 right now for individual tickets to the Super Bowl. No way. Like the cheapest ticket to the Super Bowl is $7,000? Yeah, that's what it is.

Well, that's what I read this morning. It's very expensive. That's wild. I mean, there's like 100,000 people in this stadium. It's the biggest sporting event in America, though, Felix. It's huge. I don't think a lot of regular people go to the Super Bowl. Well, not if they have to pay $7,000 for a ticket. Yeah.

Really? $7,000 for the cheapest ticket? Up in the nosebleed seats where you can barely even see anything is $7,000? Well, that's the price right now because a lot of people have already bought tickets, but it is bonkers expensive to go to the Super Bowl. That's more expensive than Taylor Swift. Yes, take that in. Take it in. She'll probably be there. Oh, is she dating one of the players? Come on, Felix. Come on.

Can we cut that? I feel embarrassed for you. I don't know who's in this Super Bowl. How do you not know that? She's dating Travis Kelsey Felix.

Okay, I know that she's dating an American football player. He's an American football player. I don't know what team he plays for. He's a fellow podcaster. He's just like us. He's just like us. He plays for the Kansas City Chiefs. And they're in the Super Bowl. They're in the Super Bowl for the third year in a row. That's why in our newsletter on Friday, we talked about their potential. We didn't really... We didn't even explain it because so many people know about it, but there might...

They might three-peat, win it three times in a row. And Pat Riley has trademarked that phrase. So this guy who's dating Taylor Swift has already won it twice in a row. And now if he wins it again, he'll win it three times in a row? Correct. Yes. Yes. Okay. I cannot overestimate the coverage that their pairing received. More last year than this year. But it was like... I'm...

I'm fully aware that she is dating an American football player. I knew that much. I just didn't know that he was one of the players who was in the Super Bowl. I mean, statistically speaking, he's probably not, right? Statistically speaking, most American football players are not in the Super Bowl. That's correct. So like the balance of probabilities, if you don't know who he plays for, is that he's not. Yeah.

Yeah, it's like a safe guess. It's wild that you don't know who he plays for because people who don't even watch football know who he is now. And like have opinions about him and stuff. I know he has a beard. Yeah, there you go. Yeah, I know things, people. Do you know a number? Yeah, my number is three. And we mentioned last week on the pod that...

There was a huge amount of volume in Nvidia shares on the 27th of January. And in fact, it almost reached $100 billion. And I was like, whoa, is that a record? Has any stock ever traded $100 billion in one day? So turns out the answer is yes. And the number of

stock tickers that have ever managed to achieve that level of $100 billion of volume in one day is free. And yes, NVIDIA is one of those three. What are the other two? The other one you will not be surprised to hear is Tesla. I think the highest Tesla volume was the day that it joined the S&P 500.

And that was over $100 billion. Want to take a wild guess what the third one is? GameStop? Not even close. Not even close. The only other sticker that has ever reached $100 billion is not even really a company at all. It's SPY. It's the S&P 500 index fund. Oh.

But that's it. Those are the only things that ever see that kind of volume. Wow. NVIDIA is something special. All right. Emily, what's your number? Well, I blew my number, which was also going to be three because I wasn't talking about the three-peat thing, but I already talked about that. So I'll give you a number I just confirmed today, which is 14.4. That's a percent, 14.4%. That is, and I'm going to laugh when I say it, and I'm sorry for being a child, the current duty...

Applied to Canadian lumber imports. That's right. Even without Trump's tariffs of 25% on Canadian goods, we are already putting a duty of 14.4% on Canadian lumber imports. This is why you need to be English, Emily. You say duty and then you don't laugh. Yes. I'm sure I could say it without laughing. I'm

I'm sure. I'm sure. Definitely I could. Anyways, there's been a dispute between Canada and the U.S. over lumber going back to the 1980s, apparently, because...

Canada and the US have completely different kinds of lumber markets. Ours in the US is private and Canada's is pretty much government owned and subsidized and a way of making sure people have jobs in places where there are not a lot of other jobs. So the US private industry has been kind of like fighting with the Canadian industry and they're like, don't dump your cheap lumber here. The housing market is slow. Stop flooding the market with more lumber. And so they've had this dispute and

And this like trade agreement where they come up with this duty and yeah. And right now it's 14.4%, but it's about to be renegotiated and there's a whole process who knew. And I spoke to the U S lumber guy today and he said, it's possible that the duty could even be doubled a double duty. Yeah.

coming up on February 20th. And so that's something to look out for. And when I said, what do you think about the tariffs? He said, we don't take a position. That is my report on lumber. Lumber watch. But if he's the U.S. lumber person, he wants the duty on Canadian lumber to be high so that his U.S. lumber is more competitive, right? Yes. Well, he said he just wants the Canadians to play fairly. And if they did, then there wouldn't need to be a duty. That's what he said. That's what I say to that. I say,

All right. I think we've had more than enough Slate Money this week. It's been an epic one. Many thanks for listening. Many thanks for writing in on SlateMoneyAtSlate.com. Many thanks to Merit Jacob and Jessamyn Molly for producing. Many thanks to Shaina Roth, not only for producing, but also for basically taking over the Slate Plus segment this week and talking about eggs. So do listen to that.

It's awesome. It really is a great segment. It is worth paying for Slate Plus for. And then we'll be back next week with more Slate money.