Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: I'm just saying, like something could like happen, right, something
Speaker 2: crazy could happen, right, Something crazy could happen while we're
Speaker 2: recording this and I have to go talk about it
Speaker 2: in like fifty two minutes.
Speaker 1: Is that exciting? Like you come in here an hour
Speaker 1: before you go on television, and like you turn off
Speaker 1: your phone. Obviously your phone is sitting right in front
Speaker 1: of you, but like, let's pretend you turn off your
Speaker 1: phone and focus entirely on the Money Stuff podcast, And
Speaker 1: like what if something crazy happens and you get out
Speaker 1: of if you're at like two fifty nine and you
Speaker 1: go on air and they're like something crazy happening and
Speaker 1: you're like yeah.
Speaker 2: They're like Katie, quick break this headline about the asteroid
Speaker 2: that took out California, and I'm like, we're receiving reports
Speaker 2: or something like that.
Speaker 1: I think you keep your life exciting.
Speaker 2: I do love adrenaline, like I crave adrenaline, but you know,
Speaker 2: sometimes I get tired.
Speaker 1: Yeah, I'm pretty tired. I was out to a dinner
Speaker 1: until like midnight last nightly six hours later than my
Speaker 1: usual bedtime. So I'm in bad shape.
Speaker 2: Yeah, that's crazy pants. Matt came over at nine in
Speaker 2: the morning with a smile on his face, and I
Speaker 2: was like, how are you upright?
Speaker 1: I had a fun dinner last night, but it was
Speaker 1: way past my bedtime. So now I'm going to do
Speaker 1: this and then collapse.
Speaker 2: No, then you're going to go watch the clothes on
Speaker 2: Bloomberg Television.
Speaker 1: Our body batteries are turning in different directions. You are
Speaker 1: going to you're adrenaline filled asteroid reporting, and I'm going
Speaker 1: to nap. I did go over to you yesterday and
Speaker 1: asked if you knew where the nap rooms.
Speaker 2: At bloom I can't tell you.
Speaker 1: If there's bloom no naprooms at Bloomer.
Speaker 2: If there's Bloomberg people listening, they don't exist.
Speaker 1: No nap rooms. Hello, and welcome to the Money Stuff Podcast.
Speaker 1: You're a weekly podcast where we talked about stuff really
Speaker 1: to money. I'm Matt Levine. Am I right? The Money
Speaker 1: Stuff column for Bloomber opens.
Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 2: an anchor for Boomberg Television.
Speaker 1: Like we're in the like pest control season of the podcast.
Speaker 2: We're talking about book.
Speaker 1: There are like two hundred Bloomberg headlines on the last
Speaker 1: three days about cockroaches.
Speaker 2: Yeah, I feel like the jokes over. We've squeezed as
Speaker 2: much Series a J cockroach as we can, so let's
Speaker 2: give it a rest. It's been like in the title,
Speaker 2: so many newsletters that I've gotten over the past four hours.
Speaker 1: Yes, it will not be in the title of this podcast.
Speaker 1: Un last week screw up. They're right. So Jamie Diamond
Speaker 1: on the Jape Morion Earnings call used the very conventional metaphors. Yeah,
Speaker 1: but when you see one cockroaches, there probably more. He's
Speaker 1: talking about the First Brands and Tricolor bankruptcys failures. Yeah,
Speaker 1: credit bad things, kabooms, kabooms actually the real word that
Speaker 1: I love. And Mark Rowan said this, he said, it
Speaker 1: does not surprise me that we were seeing late cycle accidents.
Speaker 1: Accident is what you call this. Like the word for
Speaker 1: what happened with First Brands and Tracklor was accident. Yeah,
Speaker 1: you made some loans, you didn't get paid.
Speaker 2: Back, Oops, you spilled the milk.
Speaker 1: Just it's like accident is the term. But yeah, so
Speaker 1: there have been some pretty big accidents in the credit space,
Speaker 1: and one dumb thing that is happening is that there
Speaker 1: is a dispute about whether they exist in the private
Speaker 1: credit space or the public credit space. But I don't
Speaker 1: think it's at all interesting, like at all. But basically
Speaker 1: JP Diamond got on a call and it was like,
Speaker 1: you see the problems with private credit because these you know,
Speaker 1: companies on a bankround and then all the private credit
Speaker 1: guys are like those are like publicly financed banks led
Speaker 1: their deals, Like those are not and like they're not
Speaker 1: like private credit private credit. They're not like direct loans
Speaker 1: from like the classic. They're not like LBO, you know,
Speaker 1: like the core of private credit. Like I don't know,
Speaker 1: they were funded by funds, Like are they private credit
Speaker 1: in some loose sense sure? Or some of them bank
Speaker 1: led and like you know with their bonds Like yeah,
Speaker 1: I don't know whatever. But the point is it's not
Speaker 1: like JP Morgan making bank loans on its packs, and
Speaker 1: it's not like core you know, direct credit.
Speaker 2: Yeah. A funny detail in all of this is that
Speaker 2: Jamie Diamond didn't specifically call out private credit.
Speaker 1: Yeah, though he did talk about like BDC's.
Speaker 2: Being yeah yeah, yeah, I know, but like it's not
Speaker 2: like he said, like, oh, these guys made bad loans,
Speaker 2: blah blah blah. He did talk a little bit about
Speaker 2: you know, BDC's trading at a discount to their NAV
Speaker 2: but I think.
Speaker 1: It's just such as the efficient markets way.
Speaker 2: I'm saying they made right, right, right, But it did
Speaker 2: so happen that Mark Lipschultz of Blue Out was asked
Speaker 2: about his comments and appears that he took them personally,
Speaker 2: and that's where he told, of course JP Morgan to
Speaker 2: look inwards and the banks to look inwards at their loans.
Speaker 2: So it is this fun blame game that has played
Speaker 2: out this week. I feel like we wouldn't be talking
Speaker 2: about it so much had Jamie Diamond not said cockroaches.
Speaker 2: I feel like that game is defin a good like
Speaker 2: tangible illustration for us to all seize upon.
Speaker 1: But it is like taking a step back, like it
Speaker 1: is the case that like these accidents, as Mark running
Speaker 1: call them, are like true like bubbly signs like you
Speaker 1: don't make loans to like people who are double or
Speaker 1: triple or one hundred times pledging their assets, which like
Speaker 1: there are some allegation that no one really knows. There's
Speaker 1: some allegations Tray Color and or First Brands were maybe
Speaker 1: you know a little loose with collateral. You don't make
Speaker 1: those loans unless you're really trying hard to make loans, right,
Speaker 1: Like I wrote about, like one thing that I think
Speaker 1: is interesting about first brands is like the people who
Speaker 1: had a lot of exposure. You know, there's like this
Speaker 1: Jefferis run fund. There's this like trade finance origination platform.
Speaker 1: They have like enormous amounts of exposure specifically to first brands.
Speaker 1: Like what does that mean? It means like you're running
Speaker 1: a fund and you're like, you know, ideally you'd like
Speaker 1: to have diversified you know, trade finance receivables or whatever,
Speaker 1: but like you just need to find paper to put
Speaker 1: into the fund. And if someone is like I'm going
Speaker 1: to generate a lot of paper for you, then like
Speaker 1: you'd love to deal with that person, right, Like you'd
Speaker 1: love to deal with the first bend if they're like,
Speaker 1: we can you know, sell you as much as you need,
Speaker 1: And so it create some that is for people to
Speaker 1: sell you as much paper as you need, which means
Speaker 1: either becoming very overlevered to generate paper for you, or
Speaker 1: just like writing fake paper or like you know, triple
Speaker 1: pledging things so that they can like sell you more
Speaker 1: stuff because they sell your stuff and you get the money,
Speaker 1: and like that's you know, that's the trade they're in.
Speaker 1: So it does feel very toppy. Yeah, like Mark Owen said,
Speaker 1: accidents but also late cycle accidents, and like this is
Speaker 1: a private credit thing, just the credit generally these days,
Speaker 1: Like there's a lot of people going around being like, yeah,
Speaker 1: it feels toffee. Yeah, we're going to keep doing it. Yeah,
Speaker 1: you know. I think one of the most insightful things
Speaker 1: ever said about finance was when Chuck Prince in two
Speaker 1: thousand and seven said, as long as the music is playing,
Speaker 1: you've got to get up and dance. Like that's what
Speaker 1: it is, man.
Speaker 2: We all know we're coming to the end of the song.
Speaker 1: Like, if you're in the business of making loans, you
Speaker 1: can't be like we're not making loans. Yeah, too many
Speaker 1: loans are too frisky right now, We're not going to
Speaker 1: do it.
Speaker 2: Yeah, you can't do that yet. A dance, Yeah, got
Speaker 2: a dance, even if it's slate cycle and you know
Speaker 2: everyone's tired. It is interesting. I mean this has been
Speaker 2: held up as an example of we are in a
Speaker 2: toppy environment. So too, I said, we weren't going to
Speaker 2: talk about open Ai, but the open Ai Walmart deal.
Speaker 2: That has been a lot of hay has been made
Speaker 2: on social media about how truly we've reached the top or.
Speaker 1: Someone like the headline and something like, of course it's
Speaker 1: a bubble.
Speaker 2: Of course are here, we are in a bubble. I
Speaker 2: do want to talk a little bit more about this
Speaker 2: other comment that Mark Lipschultz said, because it seems like
Speaker 2: he did take this very personally. One of the things
Speaker 2: he said, when it comes to market caps, there are
Speaker 2: people who have meaningful interests in the industry not continuing
Speaker 2: to grow and succeed. Blackstone's market cap exceeds the market
Speaker 2: cap of most financial institutions in the world today. It's
Speaker 2: not as if that's not coming from someone, and of
Speaker 2: course there are people who don't like it. Which is
Speaker 2: interesting that he use Blackstone specifically and not Blue asl
Speaker 2: But Blue Aule has a market cap of about twenty
Speaker 2: five billion dollars. Blackstone is somewhere closer to two hundred
Speaker 2: billion JP Morgan is over eight hundred billion. But this
Speaker 2: is the point we've spoken about before, is how the
Speaker 2: stock market values some of these private credit players even
Speaker 2: though their assets are much smaller than like a traditional
Speaker 2: asset manager or even the asset management arms of these banks.
Speaker 1: Yeah. I think the point he's making is like when
Speaker 1: he says that that market cup has to be coming
Speaker 1: from somewhere, it's not like a comparison to the aum
Speaker 1: of banks. It's a comparison to like their lending business. Right,
Speaker 1: It's like, yeah, you know, I think he's making more broadly,
Speaker 1: the point that like the business of making a lot
Speaker 1: of categories of loans is shifting from being a thing
Speaker 1: that banks, yeah, at least intermediate and under it, to
Speaker 1: being a thing that is kind of being led and
Speaker 1: originated and held in the balance sheets of private credit firms. Yeah, which,
Speaker 1: again I don't know how interesting it is to like
Speaker 1: debate about whether the problems you're seeing or like private
Speaker 1: credit problems or bank problems. But like, on the one hand,
Speaker 1: I think the private credit people make a good point, Like,
Speaker 1: for I say this a lot, but like the funding
Speaker 1: model of private credit is a lot more systemically stable
Speaker 1: than the funding model of banks. Right, instead of having deposits,
Speaker 1: you have long term equity capital. That seems good. The
Speaker 1: private credit people will also argue that like they have
Speaker 1: better underwriting incentives because they hold it on their books,
Speaker 1: whereas banks obviously hold a lot of loans on their books,
Speaker 1: but you think about a lot of what they do
Speaker 1: is originate the distribute model, where they maybe have less
Speaker 1: skin in the game on their underwriting. On the other hand,
Speaker 1: thanks are regulated, and you do get the sense that
Speaker 1: it is such a good fundraising environment for private credit firms,
Speaker 1: such a frothy like if you want to sell your
Speaker 1: private credit firm a lot of like traditional asset measures,
Speaker 1: but it's like you do have some pressures to put
Speaker 1: all this gusher of money to work, and that might
Speaker 1: looseen your underwriting standards as well.
Speaker 2: Can I say one more thing about cockroaches? By all means,
Speaker 2: this is so gross, Yeah, Jamie Diamond. So first of all,
Speaker 2: exactly what he said on the call was my antenna
Speaker 2: goes up when things like this happens. And my first
Speaker 2: reaction was, like an antenna like that on a cockroach.
Speaker 1: You're saying he feels for the cockroaches, Well, it's just
Speaker 1: he can put himself in the shoes of both the
Speaker 1: lender and then he's gonna say the shoes of the cockroaches.
Speaker 2: But perhaps he tipped his hands there. I don't know,
Speaker 2: but cockroaches do have antennas, and so does Jamie Diamond.
Speaker 2: What's a second on your priority list? Yeah, all right,
Speaker 2: I didn't win again. Well, someone won the Nobel Peace Prize,
Speaker 2: but also the Insider Trading Prize, but it wasn't inside
Speaker 2: did somebody?
Speaker 1: Somebody won the Nobel Peace Prize was Maria Corinam, a
Speaker 1: shadow Venezuela and democracyativist. And also somebody won an amount
Speaker 1: of money on polymarket some some Yeah, the sum appears
Speaker 1: to be had fifty thousand dollars, which is like depends.
Speaker 2: On your like, I could find something to do it.
Speaker 1: It's not a bad payday for someone hanging out on polymarket.
Speaker 1: It's not like institutional grade. You know, you can't like
Speaker 1: run a hedge fund by like occasionally by once every
Speaker 1: year making fifty thousand dollars on the Nobel Peace Prize winner.
Speaker 1: But it's something, right, It's like, it's true, it's a
Speaker 1: nice individual person's bet it. But anyway, there were some
Speaker 1: suggestions that it was inside of treading because it was
Speaker 1: done kind of right before the announcement, like in the
Speaker 1: in the you know, hours later ampter then announcement and
Speaker 1: in fact, a spokesman for the Norwegian No Balance Dude said,
Speaker 1: we have noticed that some have made significant financial gains
Speaker 1: by placing bets on this year's prize. We will investigate
Speaker 1: whether this means that someone has unlawfully obtained information from us,
Speaker 1: because presumably they knew before they announced it, right, And
Speaker 1: so if like someone in the circle of trust that
Speaker 1: the Norwegian Nobel Institute went and like placed an anonymous
Speaker 1: crypto trade on polymarket, then would.
Speaker 2: It have been amazing for what it's worth. Oh yeah,
Speaker 2: real sign of the times anyway.
Speaker 1: A real sign of the times. And then that's what
Speaker 1: they seem to have thought happened, But it probably turns
Speaker 1: out one never knows, because these things are all like
Speaker 1: somewhat anonymous. But like, you know, there's an interview of
Speaker 1: the guy who like allegedly did it, and he's like,
Speaker 1: you know, you can look to the there's all this
Speaker 1: public stuff basically like when they hit the button on
Speaker 1: the announcement, Like there's a lot of assets on the website,
Speaker 1: like there's a picture of my shadow for sure, and
Speaker 1: they upload those assets before they hit the button, before
Speaker 1: they like put out the actual press relief. And so
Speaker 1: if you're like scraping the folder on the website that
Speaker 1: has all the assets. You can see like you know,
Speaker 1: something with her name in the web page, and then
Speaker 1: you can make an informed pat and so that maybe
Speaker 1: what happened.
Speaker 2: Here that is really funny. Also to your point that
Speaker 2: fifty grand is an institutional money, I have to imagine
Speaker 2: that next year this inefficiency in the market won't exist,
Speaker 2: Like maybe they'll hit the button and then they'll upload
Speaker 2: the photo.
Speaker 1: Yeah, there's some of this, like like this is a
Speaker 1: trade that occasionally exists in US public company earnings. Yeah,
Speaker 1: because you can, like, if you know, like the URL
Speaker 1: of like last quarter's earnings, you can just like change
Speaker 1: Q two to Q three in that URL and just
Speaker 1: refresh that page until something pops up, which might be
Speaker 1: before they officially announced earnings. Yeah, and so this is
Speaker 1: like a well known enough trade that companies are a
Speaker 1: little better about not doing that now. So right, you
Speaker 1: think that like they will be a little bit more
Speaker 1: information secure next year, or they won't. I don't know.
Speaker 2: I mean maybe they're not that bothered, but I just
Speaker 2: feel like that that body who.
Speaker 1: Actually, like if you're the Nobel Institute and it turns
Speaker 1: out that some junior staffer was using your information to
Speaker 1: make fifty grand, you'll be annoyed with them. If it
Speaker 1: turns out that someone on the committee that selects the
Speaker 1: winner was betting on it, then you'll be really.
Speaker 2: Annoyed bad because that's like, don't like that.
Speaker 1: That's not insider trading. That's like you know market.
Speaker 2: Right, that's like rigging the game.
Speaker 1: That's rigging the game. It's like instead of betting on
Speaker 1: who's going to win the Nobel Peace Prize, you're like
Speaker 1: giving the Nobel Peace Prize to the person you bet on.
Speaker 1: It seems really really bad. No allegation to that happened.
Speaker 1: But if it's just like someone script your website, like
Speaker 1: who cares? Give them the money?
Speaker 2: Who cares? That's a very Kathy would out of referencing,
Speaker 2: of course, last week's podcast No right.
Speaker 1: No. I know people time out prediction markets. You know,
Speaker 1: I've quoted chain Complain saying it's like their goal is
Speaker 1: to help people understand and price the future, and people
Speaker 1: really want prediction markets to create incentives to make the
Speaker 1: world more informed, and it's like the ideal is like,
Speaker 1: you know, you have a bet. I'm like, will Russia
Speaker 1: invade Ukraine or whatever, right, and like you have people
Speaker 1: who are really informed geopolitical analysts making bets, and then
Speaker 1: you have like a Russian general making bets, and then
Speaker 1: like you actually know right, and then like the market
Speaker 1: implied odds are really informative, and so people can make
Speaker 1: economic decisions based on this like probability that exists in
Speaker 1: a prediction market. Like that's kind of an interesting ideal
Speaker 1: and would be useful in a lot of purposes. And
Speaker 1: you know, as we've talked about here, the problem with
Speaker 1: that is like it's not clear. There is a lot
Speaker 1: of dumb money on like yeah, the market of like, well,
Speaker 1: Russia invade at Ukraine, and so it's hard to make
Speaker 1: a lot of money. It's hard to be institutional grade,
Speaker 1: and so like if you're a Russian general, you might
Speaker 1: be like, well I can make ten thousand dollars and
Speaker 1: possibly be shot, so I won't do it right. So
Speaker 1: it's like it's like hard to incorporate information. And then
Speaker 1: like you have examples like this where it's like whoever
Speaker 1: this is like put a lot of work into figuring
Speaker 1: out who was going to win the Nobel Prize twelve
Speaker 1: hours early, and like one is that the sort of
Speaker 1: fact that will inform anyone's economic decisions about like the
Speaker 1: one's hedging who's going to win the Nobel Prize right.
Speaker 1: Two is knowing it twelve hours early? That useful? And
Speaker 1: then three like the reaction might be that they just
Speaker 1: stop putting these assets on the web twelve hours early,
Speaker 1: and then it's like.
Speaker 2: Well, okay, yeah, the trade is something like you haven't.
Speaker 1: Made anyone more informed about anything in any useful way.
Speaker 1: It's just yeah, you get the money.
Speaker 2: Yeah, well to that point, I mean you write in
Speaker 2: your newsletter that the point is that the Nobel Peace
Speaker 2: Prize prediction market is working the way it is supposed to.
Speaker 2: It incentivizes people to find out information and incorporate it
Speaker 2: into prices, which I agree with, but it feels kind
Speaker 2: of unsatisfying because you think about the example of you know,
Speaker 2: equity markets and a hedge fund analyst scraping a website
Speaker 2: for earnings. Makes that market a little bit more efficient,
Speaker 2: and then it informs how companies invest capital and allocate capital,
Speaker 2: whereas here it's just someone now knows this early and
Speaker 2: like there's no follow through on that, which is satisfying.
Speaker 1: People care about who in the Nobel Prize, but it
Speaker 1: doesn't have like economic consequences. They're not a lot of hedgers.
Speaker 1: Yeah right, yeah, but you know this is like what
Speaker 1: I've said about sports campling too. Right. It's like, if
Speaker 1: you like create an ecosystem where people professional and like
Speaker 1: semi professional and like just hardworking and smart people are
Speaker 1: dabbling in prediction markets, then like there's possible spillover to
Speaker 1: like economically meaningful prediction markets. Right, There's some possibility that
Speaker 1: the people who spend eight hours building some scraping tools
Speaker 1: to predict the novel PCE prize will then go on
Speaker 1: to spend sixteen hours building scraping tools to predict the
Speaker 1: next Russian invasion, right, because like the similarish skill sets. Maybe, yeah, maybe,
Speaker 1: like maybe Russia's uploading its battle plans to a website.
Speaker 1: Who knows. There's some notion that if prediction markets get
Speaker 1: bigger and attract capital and skill, then ultimately the thing
Speaker 1: you really want, which is that they inform people about
Speaker 1: the probabilities of economically meaningful future events. Some possibly that
Speaker 1: will come true. And like it's not in a straightforward
Speaker 1: linear way where it's we start with the most important
Speaker 1: markets and get really sos they get people to really
Speaker 1: get predictions of the most important markets. It's we start
Speaker 1: with places where you can make money, and then that
Speaker 1: attracts money, and then that attracts more sophistication.
Speaker 2: It probably also informs your behavior in other markets. Like
Speaker 2: if the prediction market for who is Russia going to
Speaker 2: invade next gets really informative and liquid, and you could
Speaker 2: imagine watching that and then going and buying a bunch
Speaker 2: of calls on oil.
Speaker 1: Oh absolutely, although I mean right now, surely the oil
Speaker 1: market is more predictive of geopolitical events. No, you know,
Speaker 1: most prediction markets, but I don't know.
Speaker 2: The frustrating thing about oil, it's my least favorite commodity
Speaker 2: to talk about. It never prices in a sustainable risk premium.
Speaker 2: So maybe you wouldn't buy calls on oil, or maybe
Speaker 2: you would, I don't know, buy treasuries.
Speaker 1: Right This is one of the arguments for prediction markets.
Speaker 1: There's a lot of ways to implement predictions about future
Speaker 1: geopolitical events. And what that means is that you can't
Speaker 1: look at the price of oil or the price of
Speaker 1: treasuries and read out a prediction about future events because
Speaker 1: they kind of reflect a lot of different possible events. Yeah,
Speaker 1: whereas if there's just like a contract, will Russia invade wherever,
Speaker 1: then you can look at that contract and read off
Speaker 1: the probability. Yeah.
Speaker 2: It's like very pure pleasure. Yeah right, congratulations to.
Speaker 1: Yeah, fifty grand probably less than the Nobel Peace Prize price.
Speaker 2: How much is it?
Speaker 1: I don't know. You get a gold medal.
Speaker 2: That's pretty good. Yeah, A look at the satisfaction.
Speaker 1: Yeah, it's pretty good.
Speaker 2: Yeah.
Speaker 1: I feel like winning the Nobel Piece prisence is in
Speaker 1: some ways the worst. It's like, there's a decent chance
Speaker 1: that you're like imprisoned or exiled.
Speaker 2: That's true. But in the event that you're not, imagine
Speaker 2: all the speaking engagements and fees that you can command.
Speaker 1: That's okay, that's fair, that's fair, lucrative business winning a
Speaker 1: piece press.
Speaker 2: Okay, Well, a bunch of people are going to write
Speaker 2: in and tell you how much.
Speaker 1: Yeah, of course change. I think it's.
Speaker 2: It's fun because we could google it. We're not going
Speaker 2: to do that, right, just yeah, staring at me.
Speaker 1: We're up to eighteen five stock trading.
Speaker 2: Eighteen five, baby, but you know in twenty twenty six,
Speaker 2: eventually we'll get to twenty three five?
Speaker 1: Is a thing called the twenty four X Exchange, the
Speaker 1: twenty four Exchange twenty four X National Exchange. The intuition
Speaker 1: is that we want to trade stocks twenty four hours
Speaker 1: a day, but like you can't do that because you
Speaker 1: have to like restart the computers, so they're more modest.
Speaker 1: Target is trading slacks twenty three hours a day, five
Speaker 1: days a week, and their progress starts that as they
Speaker 1: launched eighteen hour a day trading five days a week,
Speaker 1: which is I feel like.
Speaker 2: Their name should be twenty.
Speaker 1: Three rec No, that's the thing, like if you're twenty
Speaker 1: four twenty four, that's the number of hours in a day.
Speaker 2: If you say twenty three, I feel like what I know,
Speaker 2: But it's disingenuous.
Speaker 1: Yes, that's why it's funny. Yeah, but like you know,
Speaker 1: you're allowed to be funny anyway, though. But they're now
Speaker 1: to eighteen hours, which is like, you know, kind of
Speaker 1: like extended hours.
Speaker 2: Really all you need.
Speaker 1: I don't know, it's all I need. I as we've
Speaker 1: established good about at six o'clock. But if you're, for instance,
Speaker 1: in Japan and you want to trade American stocks, it
Speaker 1: is convenient to be able to do it in the
Speaker 1: middle of your day.
Speaker 2: Yeah, I guess like it's a global market, yeah.
Speaker 1: For American stocks and slacks generally, and so it does
Speaker 1: kind of make sense that everyone should be able to
Speaker 1: trade all the time.
Speaker 2: Also, you know, maybe you're in Japan, maybe you're just
Speaker 2: up at three in the morning.
Speaker 1: Right, I try to be generous, like twenty four x
Speaker 1: Exchange actually says, you know, this is for you know,
Speaker 1: investors worldwide. And I don't really think that the paradigmatic
Speaker 1: user of twenty four hour trading is someone drunk on
Speaker 1: their computer at three am. But I kind of think
Speaker 1: that I think about that person a lot. I think
Speaker 1: that's a fun. Yeah, I'm not going to do it justice.
Speaker 1: There's a famous great pit in like hedgehund market Wizards
Speaker 1: the Jack Schueger book, where he interviews one hedgehund manager
Speaker 1: who says, I want to hire people who wake up
Speaker 1: early on Sunday morning and log in to poker sites
Speaker 1: to pick off the drunks coming home in another time zone. Nice,
Speaker 1: because what you're doing there is understanding where you have
Speaker 1: the most edge and then just exploiting your edge, doing
Speaker 1: it somewhat inconveniently for yourself in a just a cold
Speaker 1: bloodedly rational way anyway, Right, there's some people in a
Speaker 1: world of twenty four R trading who would come home
Speaker 1: drunk from the bar at three am and be like,
Speaker 1: all right, fire up Robin.
Speaker 2: Hood's options, my single triple leverage EUTF now.
Speaker 1: Yeah, and again, I don't think that's the main use
Speaker 1: case for twenty four R trading, but it's the funniest
Speaker 1: use case. Yeah.
Speaker 2: Well, hopefully, you know, as this gets online, we'll figure
Speaker 2: out who exactly the players at three am Eastern are.
Speaker 2: It might be Japanese retail players. It might be people
Speaker 2: drunk coming home from the barn. It might almost said barn,
Speaker 2: I say that a lot more often than bar.
Speaker 1: You come home from the barn more often than the bar.
Speaker 2: Or it might be you know, sophisticated US investors looking
Speaker 2: to pick off Japanese retail investors. I don't know.
Speaker 1: Well, yeah, I mean. The other thing, like, the thing
Speaker 1: that I think is interesting is we have this ecosystem
Speaker 1: where a lot of news gets disclosed outside of regular
Speaker 1: market hours because you don't want to be Traditionally, you
Speaker 1: don't want to be in the situation of disclosing a
Speaker 1: merger at ten am and everyone reacting to that sequentially
Speaker 1: and like reading the press release and saying, oh, I
Speaker 1: should buy the stock, and some people not having gotten
Speaker 1: the press release yet and like selling it outdated prices.
Speaker 1: It's just a mess. And so what everyone does is
Speaker 1: they announce earnings at seven am or four or five pm,
Speaker 1: so people have time to digest the earnings before the
Speaker 1: stock opens for trading next And the purpose of after
Speaker 1: hours trading really is to let people react to news
Speaker 1: as it happens. So instead of, you know, if a
Speaker 1: hurricane hits at midnight, instead of waiting until the next
Speaker 1: day to dump your stocks, you can dump your stocks
Speaker 1: at twelve oh one. And when you say that, I
Speaker 1: think it's intuitively appealing to a lot of people. Oh
Speaker 1: I can trade as soon as the thing happens. But
Speaker 1: I think it's like kind of bad for retail investors. Yeah,
Speaker 1: what it means is that instead of everyone reacting to
Speaker 1: news at the same time, because you have a buffer
Speaker 1: between when it's announced and when it can be traded,
Speaker 1: you have people reacting to news as they get it,
Speaker 1: as they analyze it, and so you're gonna have a
Speaker 1: lot of people trading at wrong prices. And I do
Speaker 1: think that's the point where that's the appeal of after
Speaker 1: hours trading is like you'll just get more volatility, you'll
Speaker 1: get more wrong prices. If you think you're skilled and
Speaker 1: you enjoy a gamble or a game of skill, you'll
Speaker 1: have more opportunities to log on at nine o'clock and
Speaker 1: be like, I know what this news means, I'm going
Speaker 1: to trade on it. I actually wrote this week about
Speaker 1: the Meme ETF. Yeah, the Roundtole Meme Slack ETF that
Speaker 1: was closed and then revived this week, and you know,
Speaker 1: it was revived at the very small like the first
Speaker 1: day of trading had it very small, Yeah, thousand dollars
Speaker 1: a couple hundred thousand dollars on it, and it traded
Speaker 1: kind of normally during the day, and then in the
Speaker 1: after our session it shot up because like you know,
Speaker 1: there's a few retail investors who are buying it, and
Speaker 1: the marketmakers all went home because it was after I
Speaker 1: was trading in this tiny little ETF, and so there's
Speaker 1: no arbitrage mechanism, and so people are just buying it
Speaker 1: at crazy premiums to nav which should not happen in
Speaker 1: the ETF, but does if no professionals are awake. And
Speaker 1: I think if you have like more twenty four hours trading,
Speaker 1: there's gonna have more trading where no professionals are awake,
Speaker 1: and things trading at wrong prices, and like people want
Speaker 1: to trade it wrong.
Speaker 2: Prices, You're gonna have uglier charts. Basically, Yeah, if.
Speaker 1: You ugly tart means someone like made a very bad
Speaker 1: trade and someone else made a very good trade. Yeah.
Speaker 2: Well you touched on something that I think we've talked
Speaker 2: about before. It is like, Okay, a world where you
Speaker 2: do have twenty four or twenty three hour trading five
Speaker 2: days a week, is whether or not you'd still get
Speaker 2: like these windows around the open and the clothes where
Speaker 2: everyone is sort of trained to trade the most.
Speaker 1: I think you would, because professionals have a rhythm to
Speaker 1: their day where they want to stop trading at the close.
Speaker 2: You know, yeah, not all but like you know in
Speaker 2: tix ones it's clinton time.
Speaker 1: Yeah not even like to go home, but because like
Speaker 1: you need a benchmark to mark against. And then also
Speaker 1: just because of that like timing tradition, there is so
Speaker 1: much concentrated liquidity there and so if you're a huge
Speaker 1: investor who needs to move a lot of shares doing
Speaker 1: that at the close is really useful. I do wonder,
Speaker 1: you know, I never fully understood how crypto closes work
Speaker 1: because crypto just sort of from day one as a
Speaker 1: twenty four to seven market, and so.
Speaker 2: For traditional currencies as well.
Speaker 1: Yeah, that's right. Yeah, there's no like clothes, right, and
Speaker 1: like in stocks, there's very clearly a close and a
Speaker 1: lot of apparatus, you know, index funds and mutual fund
Speaker 1: withdrawals and redemptions and benchmarks and everything are all kind
Speaker 1: of organized around the clothes. And if you did move
Speaker 1: to twenty four to seven training, if you just did
Speaker 1: it in a natural, like nonpath dependent way, you'd be like, well,
Speaker 1: when is the clothes? Yeah, I don't think that's ever
Speaker 1: going to happen. I think it's always going to be
Speaker 1: the main exchanges will have a close at four, And
Speaker 1: even if the main exchanges offer you know, seventeen hours
Speaker 1: of extended hours and everything is kind of technologically the
Speaker 1: same during the regular session and the extended session, I
Speaker 1: think there will still be a close that everyone can
Speaker 1: point to and where a lot of liquidity will be concentrated.
Speaker 2: Yeah. I feel that way too, Like I do struggle
Speaker 2: to imagine a world where this is the norm.
Speaker 1: It's just continuous, twenty four hour day, like nothing, no clothes. Yeah,
Speaker 1: I don't.
Speaker 2: That doesn't seem feels like it goes against just the
Speaker 2: rhythm of being a human.
Speaker 1: Yeah it does. It goes against like the stock markets rhythm.
Speaker 1: I mean, you say the rhythm of being a human,
Speaker 1: and I hear you. But like stock market, you can
Speaker 1: buy an Amazon anytime you want, you know.
Speaker 2: Yeah, I was going to say, I mean humans did
Speaker 2: make the stock market, right, yeah.
Speaker 1: Sure, yeah, no, right, right right. There is a human
Speaker 1: rhythm and there is a computer rhythm, and like humans
Speaker 1: have become adapted to the computer. And the stock market
Speaker 1: is from a time of you show up there and
Speaker 1: you leave to go have dinner, right, whereas like you know,
Speaker 1: Amazon is from a time of computers and you log
Speaker 1: in at midnight and buy something, right, And crypto is
Speaker 1: from a time of computers, and so you log in
Speaker 1: at midnight and buy a crypto. Yeah, And I think
Speaker 1: that is creeping into the stock market, but I think
Speaker 1: we're a long away from it entirely taking over the
Speaker 1: stock market.
Speaker 2: I did want to point out one thing that you
Speaker 2: wrote which actually made me grateful for the environment that
Speaker 2: we live in right now. You talk about how a
Speaker 2: decade ago it was possible to think that investing would
Speaker 2: gradually become doller and more efficient and more automated, and
Speaker 2: that people would just let robots and professionals manage their
Speaker 2: retirements and basically we wouldn't have any of the silliness
Speaker 2: that we do now.
Speaker 1: That was like when I said it was possible to
Speaker 1: think that, Like I linked to something I wrote kind
Speaker 1: of predicting that. So that was dumb.
Speaker 2: That's fine, you called yourself out, But I occasionally get tired.
Speaker 2: As discussed, we all get tired of the silliness and
Speaker 2: the headlines. But I think that the world that you
Speaker 2: described sounds a lot more tiresome.
Speaker 1: So well, you say that as a person who goes
Speaker 1: on TV to talk about financial news every day for
Speaker 1: several hours.
Speaker 2: Yeah, but you write about it.
Speaker 1: Oh yeah, I agree. I agree, like all this dumb stuff.
Speaker 1: You know, once every five times I write about memestocks
Speaker 1: or crypti or whatever, I roll my asthm, like I
Speaker 1: hate writing about this. Yeah, clearly, I was like, Wow,
Speaker 1: at least that's something right about No, I agree. I
Speaker 1: think it's a person as an investor, if you stopped
Speaker 1: thinking about memestocks and like just you know, had like
Speaker 1: robots perfectly investors, like reasonably perfectly investors stock and you
Speaker 1: didn't worry about it. You could spend more time like
Speaker 1: reading books.
Speaker 2: Yeah right maybe right, Like it's a better world.
Speaker 1: But it's works for you know, making jokes in a
Speaker 1: financial new letter.
Speaker 2: That's true.
Speaker 1: That's what we're all here for.
Speaker 2: I have to go talk about all the silly things
Speaker 2: on the television, how fun and the asteroid if it
Speaker 2: hit yet?
Speaker 1: Luck with that? And that was the Money Stuff Podcast.
Speaker 2: I'm Matt Levine and I'm Katie Greifeld.
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