Goblin Hours: 24/7, FTC, Gold

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I'm Maria Konnikova. And I'm Nate Silver. And our new podcast, Risky Business, is a show about making better decisions. We're both journalists whom we light as poker players. And that's the lens we're going to use to approach this entire show.

Podcasts.

Radio. News.

Hello and welcome to the Money Stuff Podcast, your weekly podcast where we talk about stuff related to money. I'm Matt Levine. I write the Money Stuff column for Bloomberg Opinion.

And I'm Katie Greifeld. I'm a reporter for Bloomberg News and an anchor for Bloomberg Television.

Katie, what do we got today?

We have a meaty show we're going to talk about.

Oh, it's about time.

24-7 stock trading, potentially. What that world might look like. Then we're going to talk about the FTC and non-competes. The FTC continuing to be aggressive on a multitude of topics. Then we're going to talk about gold bars, which I'm quite excited about.

My readers love an arbitrage.

Well, there's 24-7, and then there's the possibility that there's around-the-clock trading just on weekdays, which is.

A little more humane.

Yes, exactly. I was actually exactly going to say humane, but maybe we should set the scene that this comes from a Financial Times article that NYSE took a survey.

They're like, hey, if we had 24-7 trading, would you trade 24-7 or 24-5?

Yeah.

It was like 24 hours a day, seven days a week, both, neither.

And I don't believe that we have the results of that survey, which feel key.

I mean, it's not a public survey. It's for their own information. But the reason they're doing it is because there is pressure on it, right? Someone started a thing called the 24 Exchange. that's meant to be a 24-hour.

Yeah, and I guess that kind of answers the question of who would this be for? And it would be for pajama traders, retail folks.

I think it would be for a lot of pajama trading retail folks. The crypto market has been 24-7.. Part of what is causing this is like crypto is 24-7 and people are like, oh yeah, 24-7 trading can work. And you look at crypto, right, there are like peaks when Asian markets wake up and when European markets wake up. So I think some of this might be for like news happens in Asia, in like the U.S.

I was going to say, and who am I, but I feel like the crypto market, is that where we should be taking our cues from in terms of 24-7 trading?

I mean, I'm not sure that crypto has necessarily provided great lessons for like real financial markets. Real financial markets have patterns that come from technology of 200 years ago. And sometimes it takes a sort of brand new market to cast aside that technology and say, wait a minute, we have the computers to trade 24-7, so let's just do it.

Thinking about the effects that this could have, again, in this hypothetical scenario where there's 24-5 or 24-7 trading, what the effects on liquidity might be are really interesting, because in normal market hours in the U.

I suspect the answer is the open and the close. I suspect, by the way, like NYSE and other exchanges offer extended hour trading and it's part structural, but it's in part, just like tradition. Like people know, that 9.30 and 4 are the times when everyone trades. And so there are auctions then, and that's when liquidity clusters and you can trade 10 minutes before the opening auction or 10 minutes after, but the opening auction does collect liquidity. I suspect that it won't be a crypto exchange where we just turn it on and it goes forever.

I root for chaos in general. I'm interested to see what 3 a.m. would look like on a 24-5 exchange. What shenanigans would happen around that time?

Presumably it's mostly pajama trading retail traders interacting with one or two very nervous electronic market makers. And then, like every so often, a catastrophe happens overnight and, like big traders, rush to sell and the stock crashes because there's no deep liquidity provision. You'll see a lot more flash crashes because, like fewer people are going to be putting quotes at 3 a.m.

So the charts will get super fun.

Even like one big retail trader could crash the stock. Although you say that the charts, like. even now, if you look at like the Bloomberg charts, they are the 9.30 to 4 o'clock session. There's trading after hours, but everyone kind of understands that it doesn't count. You root for chaos.

That would be a fun effect if it worked out that way.

It would be. I got an email from a reader suggesting that there should just be one auction a day. Everyone could put in their bids in the auction and, like you'd clear the stock at whatever the clearing price of the auction was, and then you'd try it again tomorrow. Beautiful. That is very appealing to me, because it would give people a lot more free time, right?

There are your two extremes.

Those are your two extremes. and the modern retail stock trading boom, the meme stock boom, people are so mad at the Citadel Securities of the world. They're so mad at the high-frequency traders, but they also want to trade stock at 3 a.m. The meme stock boom has been great for those high-frequency traders because they're getting all of this order flow to trade with, while all these retail traders are so mad at Citadel Securities. This is the same thing, where it's like this thing that caters to retail traders, I think will be very good for the electronic market makers.

So they need each other.

Yeah. I think some of the meme stock traders have a somewhat faulty understanding of how Citadel Securities makes money. I think that if you have 24-hour trading, it's going to be really good for those guys. If you don't like those guys, if you think that it's bad that these intermediaries make so much money trading stocks, which I don't really think, but a lot of people do, then collapsing it to one single point of trading would be good for making trading cheaper.

But then what would the financial television anchors talk about all day?

I was going to say maybe the same thing, but of course, corporate earnings.

Let's just talk about the bond market more.

Oh, yeah. The bond market could do it to one auction a day. Corporate earnings.

Yeah. It raises the question. You think about what happened with, what? was it, Lyft? Last earnings cycle, with the typo in their release, and things went crazy, but it was after hours.

Yeah. I think that's a really troubling possibility. about 24-7 trading. If you had real 24-7 trading where it wasn't like, oh, it's fake and deprecated, but it's like the market is just open all the time, then when would companies put out news?

Yeah. And the government too.

Right now, there's this norm of six and a half hours of market hours. And during market hours, you try not to put out market-moving news because, one, if you get it wrong, the stakes are horrible, are really high, but two, if you put out news at 10, a.m., someone's going to see it first. Someone's going to trade on it ahead of someone else. And the person who sees it first is going to be someone who is paying for the fastest data connections to the exchanges. It's systematically going to be not the retail trader, right?

I have an idea. What? Companies should release their earnings at 3 a.m., and if you really care, you're going to be up. And we can still have normal-ish hours, agree that it'll still be 9.30, and 4 p.m. is when most of the trading happens.

But if you're like a hedge fund, you're awake in goblin hours and like someone's winning and someone's losing. That's great. Not for them.

I know, but no, you have goblin hours and it'll be subverted where you have all the professionals, all the hedge funds. They're trading in the overnight session and then the normal session will just be kind of boring in retail.

Look, I mean, news happens right now and some people react to the news faster than others, but it is not the case that there is a race to react to every piece of corporate earnings news, right? Or every economic data point, because most of those things come out outside of market hours and you can't really have that race, right? If you have true market hours, 24 hours a day, then, like you do, have that race every time news comes out. And it's a socially wasteful race, right? If you ask hedge funds, like what socially valuable thing do you do, they're like, oh, we make prices more efficient.

I wish that I had the Financial Times article pulled up because wasn't. one of the questions that was asked in the survey was, would the time you spend thinking about overnight trading be better spent thinking about trading during normal hours?

Yeah, I think it was like, I think it was something like, should we stop asking you about this? I think it was like, would the time that NYSE spends thinking about overnight trading be better spent on something else? If trading was one second a day, hedge funds would still have incentives to understand companies and understand what might move their prices and incorporate all the information into their one trade a day. But at 24-7 trading, it's like you're spending a lot of time optimizing, like when you're waking up. You're thinking about things other than the fundamentals.

Again, I root for chaos, but I feel like at least this conversation has talked me into. maybe we should just stick to normal hours, or maybe we should just be open for half an hour a day.

I feel like I haven't adequately emphasized the main benefit of half an hour a day, which is like everyone would get to relax more and spend more time with their families.

Or like watch financial TV.

Well, I mean, when I say everyone, I include financial news anchors in that. You would also have less to do in a nice way.

Yeah, maybe.

This podcast is supported by Apollo Global Management. When it comes to building and financing stronger businesses, Apollo turns some of the world's most complex challenges into growth opportunities. Apollo's customized capital solutions help drive innovation and growth, turning the great businesses of today into leaders of tomorrow. As one of the world's largest alternative asset managers, Apollo is helping to fuel the real economy by generating investment grade credit, helping to fill gaps in America's financial ecosystem and providing greater access to more resilient and diverse pools of capital. By providing companies with access to flexible financing solutions and partnering with management teams to help grow their businesses, Apollo is there every step of the way to drive positive outcomes for companies and power economic growth.

I'm Maria Konnikova and I'm Nate Silver, and our new podcast, Risky Business, is a show about making better decisions. We're both journalists who moonlight as poker players, and that's the lens we're going to use to approach this entire show. We're going to be discussing everything from high stakes poker to personal questions like whether I should call a plumber or fix my shower myself. And, of course, we'll be talking about the election to listen to Risky Business wherever you get your podcasts.

Non-competes, so we talked last week about how I did not take full advantage of my.

gardening, and now, maybe you never will, ever again.

Now, maybe no one will ever get gardening leave again.

God, yeah, the FTC. Interesting move here about basically eradicating non-competes.

Yes.

Except for senior executives.

Only barely.

Yeah.

Basically, the FTC voted this week to ban all non-competes forever. If you're a senior executive and you currently have a non-compete, it's enforceable. But otherwise, they voted to get rid of non-competes. One important thing here is there's a good chance this doesn't ever happen, right? The FTC voted to do it.

I mean, I am interested in that because my first reaction was like, why? And also, why the FTC? And why is the FTC focusing on this? Shouldn't they be like trying to stop tapestry from buying Capri and other things?

The FTC is in the business of stopping unfair methods of competition, right? Like we mostly think of it as antitrust, right? But it's also like false advertising and like other kinds of fraud. And they think that non-competes are an unfair method of competition. And you can see why, right?

So some pretty big question marks over authority here. And maybe this won't even happen. But, I mean, this was a good reminder that at least I almost exclusively think about non-competes in the context of the financial industry. But if you take a look at some of the examples that the FTC used, you wrote about the power washer, who said, all I know is power washing. These business owners all want me to sign a non-compete clause.

There have been like media reports about non-competes in the fast food industry. It's really, it is pretty widespread.

Yeah. The FTC had some numbers there, too, that nearly 20 percent of workers are subject to non-competes today. And their estimates is that it would increase U.S. earnings by at least $400 billion over the next 10 years to abolish non-competes. A lot of readers emailed in about PE non-competes, PE purchase non-competes.

I got like a couple of emails from readers being like, I work in private equity and we buy companies. And a lot of the companies that private equity buys are like, it's, like asset, like some guy operating a business, right? And so when you buy that business, you're sort of buying the person. And if you pay that person $20 million to take over his business and then he leaves and sets up another business, he'll probably take all the customers with him because it's like it's him. Yeah.

enforceable. So rest easy.

And you don't even have to be the owner of the business. You know, if you have like a 20 person company, like, all the people in the company can sign a non-compete and it's still enforceable because, you know, what you're selling is the people in the business. So there you go. Rest easy. I want to say one other thing.

But guard and leave. I know that you had a bad experience. That also sounds really nice.

A lot of people in normal jobs think non-competes are bad because they just restrict their ability to get a new job. But in finance, you're like, oh, no, I have to spend six months not working and getting paid for me. Like in finance, people are like, I kind of like the non-compete status quo. I was trying to figure out what happens to that in finance. Like, what tools do you have as a financial firm to prevent people from competing?

That's interesting to hear, because I mean, reading your column and the description of notice period, I was like, oh, well, then, we'll just do that.

Yeah, I think that might be where it shakes out, but I'm not totally sure. I think it might be harder to enforce that if people really want to leave without their gardening leave. Now, you can imagine everyone having the sort of gentleman's agreement of we're all going to take our gardening leave. The real hard chargers don't always want to take the gardening leave.

Well, it sort of reminds me this discussion very loosely about, like paternity leave. Maybe we can cut this, but like if you can get some alpha by not taking your paternity leave and like showing how hardcore and dedicated you are, maybe the gardening leave will kind of turn into that. I'm so dedicated and I'm so eager to just get going. I'm not going to take. gardening leave will become a thing.

Nobody says to their new employer, I'm taking gardening leave. I'll see you in six months. Everyone always conveys the impression that they're so sorry about the gardening leave and they'd really like to get started right away. And then they like go home and sit on the couch and are happy. But I think if it became possible to not take the gardening leave, then I think that would become the requirement.

Like life is just hurtling towards relentlessly just being on all the time.

I think that that is certainly the message of 24-7 trading. And, like my impression is that there are a minority of people in finance who have gotten really good at optimizing for gardening. leave. You quit your job, spend six months on gardening leave, start your new job. You're like, oh, I got to go back to that other job.

Sounds so good. I mean, you linked to that tweet about that LinkedIn profile. The guy did that and his descriptions were so funny. It was winter while he was gardening leaving. So he just sat on his couch and read books, which came from trees.

It's a nice benefit of the financial career. You get the occasional sabbatical in the form of gardening leave. And it would be sad, I think, for a lot of people if it went away.

Not. the only way to get a lot of time off is to have a child.

Spoken like someone who does not have children. I don't think most people think of parental leave as time off.

Yeah, maybe.

This podcast is supported by Apollo Global Management. When it comes to building and financing stronger businesses, Apollo turns some of the world's most complex challenges into growth opportunities. Apollo's customized capital solutions help drive innovation and growth, turning the great businesses of today into leaders of tomorrow. As one of the world's largest alternative asset managers, Apollo is helping to fuel the real economy by generating investment grade credit, helping to fill gaps in America's financial ecosystem and providing greater access to more resilient and diverse pools of capital. By providing companies with access to flexible financing solutions and partnering with management teams to help grow their businesses, Apollo is there every step of the way to drive positive outcomes for companies and power economic growth.

I'm Maria Konnikova and I'm Nate Silver, and our new podcast, Risky Business, is a show about making better decisions. We're both journalists whom we light as poker players, and that's the lens we're going to use to approach this entire show. We're going to be discussing everything from high stakes poker to personal questions like whether I should call a plumber or fix my shower myself. And, of course, we'll be talking about the election to listen to Risky Business wherever you get your podcasts.

Did you know, according to Wells Fargo, Costco shoppers spend $200 million a month on gold. That is crazy.

Some of that must be because they want to have gold, right?

Yeah, for sure. Some of it, I guess. Also, gold has gotten a lot more expensive.

Yeah, right. Some of it is like gold hoarding, for whatever reason. Some of it is correct financial speculation.

They should just be buying ETFs, but whatever.

Well, you know, something about holding an actual gold bar instead of just an ETF.

You can't beat that feeling.

If you want gold, you want gold. You don't want an ETF.

You're actually tapping into a very real tension.

Absolutely. Yeah. Absolutely.

Sounds like it's a tension you're familiar with.

Oh, I've encountered people who want to buy gold, but some people who buy gold from Costco are doing it for credit card reward points.

Or trying.

Or trying. They're doing it for credit card reward points. But, um, I wrote about this because the Wall Street Journal had an article about Costco gold, and it started with this guy who bought a lot of gold from Costco for credit card points. And then he tried to resell it and he got less than he paid for it. And he was like, Oh, my margins.

But yeah,

you know, I think the mint was like losing money on each transaction, right? Cause I would imagine that they were credit card rewards. work is that the seller pays a fee of one and a half percent to the credit card company. And so here the mint is paying one and a half percent to the credit card company, which is giving it back to you in the form of airline miles. The mint is losing one and a half cents on every dollar coin.

Yeah.

So eventually they shut that down.

I will say like reading the wall street journal article and then your column, I was thinking, I don't know, maybe these people are just trying to flip it too fast. I mean, gold prices.

Well, right. With gold, you're not buying a dollar coin, right? With gold, you're buying a thing that could go up.

Yeah. It's been going up quite a bit over the past few months. But then I read, there was an anecdote in the wall street journal article about Luke Greib. I hope I'm pronouncing his name, right? He's of Southeast Michigan.

I feel like if you bought the S&P, you'd have done better. Yeah, exactly. And you wouldn't have had to carry on the gold bar. Yeah.

It's a lot of thinking. I would just buy an ETF.

With a credit card?

Yeah. I don't know.

I do want to mention another credit card reward story.

As you should.

Somebody reminded me of this. I actually wrote about it in the past. There's this guy who's a experimental physicist and who was like, how can I build a perpetual motion machine? So he had an Amex. Amex.

$310,000.

$310,000 of profit. And then we know about this because the IRS wanted him to pay taxes on his gains from this trade. And he was like, no, longstanding IRS rules. are that credit card, cash back or just the discount. They're not income.

that sounds more worth it than less than a thousand dollars over 10 years.

Sure. Cold is in some way an inefficient way to do it, because it's heavy, right? Gift cards are lighter, right? And so a lot of people find ways to buy cash equivalents on credit cards and then max that out as much as possible before the credit card company shuts it down.

I have two points here, specifically on gold, not on credit cards. You make the point that gold is heavy and it is heavy. And actually, in one of the articles, according to JM Bullion, shipping fees can be as much as $40 for an ounce of gold. So it is expensive to ship it around. And then insurance on the shipping, that's another $40..

Gold is heavy, but an ounce of gold, I think, weighs an ounce.

Yeah.

So that's not that heavy.

I know. But if you're shipping more than one ounce of gold, it's going to add up there. Sure. The other point is that we were talking about ETFs and gold ETFs. The largest gold ETF is GLD and it's bad.

Okay. Interesting.

Yeah. But there are a lot. I remember actually how we got there was because GLD skyrocketed in assets at one point during the pandemic. Everyone wanted it. And it just grew so much.

Sure.

But it's in London underground, but you can't go to the vault. None of us can go to the vault.

You hear how suspicious this sounds.

I know.

People are buying gold bars at Costco rather than GLD.

It makes sense.

Then you have it.

Do you trust State Street? Apparently, a lot of people didn't.

I do because my life is integrated into the modern financial system. If I didn't trust the modern financial system and I wanted to own gold instead, I wouldn't want to own gold through State Street in a vault that, like crack reporter Katie Greifeld, couldn't even get into.

I did ask a stupid question at the time because assets in this ETF were going crazy. So they were having to buy a lot of gold. Well, I said, is there enough room in the vault? They were like, yes, of course. Like, gold is pretty small, a gold bar.

It's like a room this size. And it's just like a little pile in the corner.

I just always thought of Gringotts, and that's what I had in my mind.

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Thanks for listening to the Money Stuff Podcast. We'll be back next week with more stuff.

I'm Maria Konnikova. And I'm Nate Silver. And our new podcast, Risky Business, is a show about making better decisions. We're both journalists whom we light as poker players. And that's the lens we're going to use to approach this entire show.

questions.

Like whether I should call a plumber or fix my shower myself. And of course, we'll be talking about the election, too. Listen to Risky Business wherever you get your podcasts.