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Speaker 1: Hello, it's Monday, four December. Welcome to another edition of

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Speaker 1: the Odd Lots Podcast. I'm Joe Wisn'tall, Managing editor of

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Speaker 1: Bloomberg Markets, and I'm Tracy Alloway, Executive editor of Bloomberg Markets.

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Speaker 1: So today I'm really excited because we're gonna talk a

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Speaker 1: lot about the trading business and Tracy, you and I

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Speaker 1: we sit in front of the Bloomberg terminals all day,

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Speaker 1: basically staring at these streams of data and headlines and

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Speaker 1: economic information and charts, lots of numbers like tronic things. Yeah,

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Speaker 1: and I think, like what people, including myself, think of

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Speaker 1: what a trader does. They imagine a similar environment, wouldn't

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Speaker 1: you say? Yeah, I think they think of that, or

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Speaker 1: you know, the New York Stock Exchange for even though

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Speaker 1: there's no one actually on it anymore. But basically, this

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Speaker 1: idea is that a trader looks at a lot of

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Speaker 1: numbers and spots things that they see it's undervalued and

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Speaker 1: things it's overvalued. Maybe they use a spreadsheet, maybe they

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Speaker 1: use algorithms, but it's just this very digital type of thing, Yeah,

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Speaker 1: a very abstract set of numbers and an abstract kind

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Speaker 1: of activity. Yeah, but obviously trading hasn't always been like that,

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Speaker 1: and today we're going to be talking about a very

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Speaker 1: different style of trading. Here is an audio hint of

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Speaker 1: what we're gonna be talking about. Hey, dollar to biotic

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Speaker 1: to dollar dollar tims. I have painted dollar ladd to

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Speaker 1: day time time told Gotti Alla bail. So that kind

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Speaker 1: of sounds like auctioneering to me pretty much. That's almost

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Speaker 1: exactly right. So we're gonna be talking about mule trading,

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Speaker 1: and specifically a guy who made his fortune trading mules

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Speaker 1: in the early nineteen hundreds in Mississippi. Jo, you have

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Speaker 1: to tell me it was mule trading a big thing

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Speaker 1: back then, So I wouldn't have guessed this. I mean,

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Speaker 1: it makes sense, I guess because mules were horton for

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Speaker 1: farms and other activities and no one had cars. Right,

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Speaker 1: are a few people have cars? So yes, mules were

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Speaker 1: a big thing. A few years ago, I was visiting

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Speaker 1: my wife's grandmother down in northern Mississippi, and I walked

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Speaker 1: into a bookstore in Oxford, Mississippi, and I saw this

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Speaker 1: book on the shelf called Mule Trader, and I didn't

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Speaker 1: even need to open it. I'm a very big believer

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Speaker 1: in judging a book by the title or the cover,

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Speaker 1: and that it was called Mule Trader. So I had

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Speaker 1: to buy no idea. You were so attracted to mules. Well,

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Speaker 1: I'm attracted to mule trading, and uh, it's a fantastic

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Speaker 1: book by this guy, William Ferris. He's a professor currently

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Speaker 1: at the University of North Carolina, and it's about this

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Speaker 1: guy ray Lum. The full title is Mule Trader ray

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Speaker 1: Lum's Tales of Horses, Mules and Men. And the idea is,

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Speaker 1: there's this guy who grew up in northern Mississippi and

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Speaker 1: at the age of thirteen he did his first mule

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Speaker 1: trade and then he bought more mules, and he had

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Speaker 1: a really good sense for what mules were valued, and

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Speaker 1: he started trading all over the south of the Southwest,

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Speaker 1: in Texas and Tennessee and everywhere, and he became a

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Speaker 1: huge deal eventually, more than in just mules, but in cattle, horses,

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Speaker 1: livestock in general. Was he like the citadel of mule trading?

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Speaker 1: I think so. I think one of the things is

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Speaker 1: that there's a lot of interesting parallels and things that

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Speaker 1: we can learn about what he did and trading today.

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Speaker 1: For example, he engaged in interstate arbitrage, buying mules in

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Speaker 1: one stays selling them elsewhere. He also engaged in warehousing,

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Speaker 1: so he had these huge stables that he bought, and

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Speaker 1: then when other farmers needed a place to store their mules,

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Speaker 1: he made a lot of money for them. Well, this

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Speaker 1: sounds awesome. I'm really excited. Yeah. And one other thing,

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Speaker 1: I mean, you know something we've been watching in the

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Speaker 1: markets all out lately, especially you, is sort of this

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Speaker 1: illiquidity in certain areas of the market. Are mules a

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Speaker 1: liquid very much so, and so to the point where

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Speaker 1: like there was very poor price discovery. Again, they didn't

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Speaker 1: have mule Bloomberg's back then, so they you couldn't just

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Speaker 1: look up a price. You could sometimes buy a mule

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Speaker 1: and sell it for twice as much that very same day.

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Speaker 1: All right, I'm very intrigued on that point. I want

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Speaker 1: to bring in the author of the book, William R. Ferris,

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Speaker 1: a history professor at the University of North Carolina. Bill,

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Speaker 1: thank you so much for joining us. It's my pleasure.

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Speaker 1: Who was Ray Lum and why was his story worth telling?

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Speaker 1: Was a legendary trader of horses, mules, livestock who was

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Speaker 1: equally famous for his storytelling ability, and he lived into

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Speaker 1: his eighties, long after horses and mules had ceased to

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Speaker 1: be a central part of the South and of America.

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Speaker 1: But he kept those worlds alive through his stories. And

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Speaker 1: I was lucky enough to be able to record many

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Speaker 1: hours of his nails. How big was the mule trade?

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Speaker 1: How big of a deal were mules? And how big

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Speaker 1: was this whole industry? The mules were the backbone of life,

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Speaker 1: not only in the South, but in our nation. Uh.

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Speaker 1: It's been said that America was built by the mule.

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Speaker 1: The first mule bread was bread about George Washington, and

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Speaker 1: it said that the father of our country was the

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Speaker 1: father of the mule. And the travel across the country,

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Speaker 1: the farming, the moving of heavy loads, everything that this

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Speaker 1: country did for several centuries was done on the back

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Speaker 1: of a mule. Why why mules? Why not just donkeys

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Speaker 1: or horses? What was the actual benefit of having this

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Speaker 1: crust hybrid? It's read, uh, with a cross between a

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Speaker 1: horse and a donkey, And it's stronger than either of

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Speaker 1: the parents, and it has much better judgment. A horse

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Speaker 1: will work itself to death. A mule if it's too

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Speaker 1: hot and tired will simply stop. So Bill, let's talk

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Speaker 1: about Ray. How did he get his start? He made

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Speaker 1: his first mule trade at the age of thirteen, right,

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Speaker 1: that's right. He really had trading in his d n A.

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Speaker 1: He was working for a merchant and just as a lark.

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Speaker 1: One day he bought a horse for something like ten

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Speaker 1: dollars and sold it for fifteen and he told his

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Speaker 1: boss what he had done. The boss said, Ray, I

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Speaker 1: think you can make more money trading horses and you

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Speaker 1: can working here in my grocery. And that's exactly what

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Speaker 1: he did. He made really millions of dollars over his

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Speaker 1: lifetime trading horses and mules. A few days later another

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Speaker 1: come up with the halts. I bought him and give

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Speaker 1: fifteen for him halters with cheap then the little halters

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Speaker 1: of sin. But he'd been young, so I gave him

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Speaker 1: fifteen dollars for him tied him at the point Mrs

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Speaker 1: Fish and Ray. He said, don't you think you could

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Speaker 1: make more money out of trading? And you could? Yea all?

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Speaker 1: I said, I don't know me to George, but I'll

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Speaker 1: try it. Well, I haven't been without a halt, said

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Speaker 1: do you think the way he interacted with people was

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Speaker 1: the key to his success as a trader. Or I

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Speaker 1: guess what I'm getting at is what made him so

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Speaker 1: good at trading? Well, I think he just loved the exchange.

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Speaker 1: And it's like a card player in a poker game.

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Speaker 1: You never know what hand you'll be dealt. But he

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Speaker 1: learned to. I can say if a horse was blind

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Speaker 1: and he bought a horse or traded for a blind

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Speaker 1: or a lame horse, he learned how to take that

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Speaker 1: animal and trade it to the next person and and

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Speaker 1: stay afloat as a broker, so to speak. But he

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Speaker 1: made a big deal. In the book, he talks about

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Speaker 1: the importance of honesty, that he didn't want to lie

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Speaker 1: about the quality of his mules. How do you trade

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Speaker 1: a blind mule while also being honest with everyone. Well,

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Speaker 1: he was very clear that he never told a lie.

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Speaker 1: But when he traded with other traders, you're dealing with

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Speaker 1: people who are in the business as opposed to trading

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Speaker 1: with a child or someone who was not a trader.

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Speaker 1: So you would use special language. You would say he's

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Speaker 1: a little dim and the peeper's which meant to another trader,

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Speaker 1: he's blind. Or he would say he's only hitting on three,

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Speaker 1: which means only three of his legs are are good

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Speaker 1: and he's lame in the fourth. You have to tell

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Speaker 1: us how did mules actually trade back then, because I

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Speaker 1: imagine it wasn't on an electronic exchange or anything like that.

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Speaker 1: Right now, this is pre internet. You had basically road traders.

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Speaker 1: Like when he began, he would take a string of

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Speaker 1: mules and horses on a rope and ride them up

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Speaker 1: into the Mississippi Delta and he would sell and trade

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Speaker 1: the animals to plantation owners who would then use them

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Speaker 1: to raise cotton. And so that's the first sort of trading.

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Speaker 1: And then he began to work with livestock auction barns,

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Speaker 1: where you would have thousands of animals that would pass

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Speaker 1: through in a day and be traded. So one thing

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Speaker 1: I find interesting about this is that in addition to

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Speaker 1: looking at an animal and sizing up its value and

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Speaker 1: what you might be able to sell it for, you

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Speaker 1: also have to take into account the costs of transporting

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Speaker 1: a living thing and warehousing it, I guess, and feeding

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Speaker 1: it and taking care of it. That's right on. One

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Speaker 1: of his biggest trades, he bought eighty thousand horses and

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Speaker 1: La Plant South Dakota, and and mules. And he gathered

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Speaker 1: them and shipped them by train to New Orleans, where

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Speaker 1: he sold them two Italian merchants. And as he said,

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Speaker 1: the horses were wild. They had never seen a human being,

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Speaker 1: and the Italians had never seen a horse. And after

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Speaker 1: he sold them, his ringman said, let's go get dinner.

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Speaker 1: And Mr. Lump said, I want to stay and see

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Speaker 1: the show. And he said what show? And he said,

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Speaker 1: I want to see how the people had bought these horses.

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Speaker 1: Are going to get them home. And that was quite

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Speaker 1: a drama. They had ropes on their feet of the horses,

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Speaker 1: and they were pulling him through the streets and some

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Speaker 1: of them got loose, and we're running in the streets

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Speaker 1: of New Orleans. It was a Faulknerian kind of scene.

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Speaker 1: You mentioned some of the lingo that he used to

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Speaker 1: describe a mule. What are some of the other terms.

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Speaker 1: I loved. One of the terms that in the book

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Speaker 1: is if he made one percent on the trade, that

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Speaker 1: was actually meant he made a hundred percent on the trade,

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Speaker 1: or a two percent gain actually meant two on the trade.

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Speaker 1: What were some of the other lingo the traders used

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Speaker 1: to talk back then. Well, he often would use language

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Speaker 1: associated with livestock for people. He would describe a person

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Speaker 1: by saying his bread is not done, which means he's

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Speaker 1: not fully there, or he's not as sharp as he

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Speaker 1: should be. And if he made if he bought a

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Speaker 1: horse for a hundred dollars and sold it for two hundred,

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Speaker 1: as you said, he would say, I made one one day.

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Speaker 1: I've got to come along with a little halt, and

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Speaker 1: I bought it a little hall given to over the

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Speaker 1: hair point, tied him over that of the post. Well

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Speaker 1: before night came long tame, and I've told him to

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Speaker 1: him for twenty made one percent of the Dutchman says.

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Speaker 1: One of the ways that he made money he owned

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Speaker 1: some huge storage facilities, right um, And so there was

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Speaker 1: a part in the book that mentioned there was a

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Speaker 1: big flood, a lot of flooding, and some of the

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Speaker 1: local farmers had to store their mules and his facilities

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Speaker 1: and he made money on that. And it made me

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Speaker 1: think about sort of modern trading and how the people

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Speaker 1: who owned the storage facilities for various commodities often can

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Speaker 1: make money on a warehousing fees. That's right. It's interesting

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Speaker 1: the country really he was built on livestock and trading,

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Speaker 1: and as that passed out, the language horsepower for cars

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Speaker 1: and stock where it's stock originally referred to livestock, but

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Speaker 1: today it refers to commodities and trading stock in a

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Speaker 1: capitalist world in which you buy and sell stock, which

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Speaker 1: gives you partial ownership of a company. But the same

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Speaker 1: mindset of trading and buying your way into wealth applied

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Speaker 1: to both ray Lum's world and to the world's today.

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Speaker 1: And Ross Pierrot, in writing about his first trades, says

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Speaker 1: that they were horse trades. He would buy a horse

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Speaker 1: in the morning and sell it for a profit in

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Speaker 1: the afternoon, which he said they called in that time

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Speaker 1: a day trader. Well, that phrase continues today on the

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Speaker 1: New York Stock Exchange. Absolutely, and Ross Perot traded at

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Speaker 1: the famous fort Worth Stockyards, and ray Lum, a generation earlier,

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Speaker 1: was also a major player in the fort Worth Stockyards market.

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Speaker 1: Is that correct? That is absolutely correct. Mr Lum spent

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Speaker 1: many of his most productive years as a trader in Texas,

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Speaker 1: and he introduced what they called night sales because it

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Speaker 1: was cooler at night, and both the livestock and the

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Speaker 1: buyers were more comfortable and he would go uh. He

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Speaker 1: was based in fort Worth with the Owen brothers, but

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Speaker 1: he would go into the small communities and have livestock

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Speaker 1: auctions right at the doorstep of the farmers there. What

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Speaker 1: was fort Worth like the lifestyle back in the day

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Speaker 1: was it sort of a lot of gambling and drinking?

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Speaker 1: What was what was it like? It was very much

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Speaker 1: a frontier world and Mr Lum understood that the way

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Speaker 1: to a lot of the buyer's hearts was whiskey. And

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Speaker 1: he would before a big sale the next day with

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Speaker 1: the corps of engineers, he would invite the colonels who

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Speaker 1: were buying his mules to come by. He said, I've

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Speaker 1: got a case of tea in the car well. The

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Speaker 1: tea was bourbon, and they would order up stakes and

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Speaker 1: for out bourbon, and they had quite an evening. And

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Speaker 1: the next day these military buyers would buy everything he

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Speaker 1: had with a smile. I can see a lot of

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Speaker 1: parallels with trading back then and trading as it's done today.

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Speaker 1: We still use the term day trader. Obviously, brokers still

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Speaker 1: take their client, so I go the expensive dinners right

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Speaker 1: to get that to sell their products. You have like

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Speaker 1: a mutual fun company, take out broker with a steak

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Speaker 1: and alcohol. But there's one thing where I think there

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Speaker 1: is a big difference, and that's in price transparency. The

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Speaker 1: idea that raylm was making a hundred or two markup,

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Speaker 1: I'd find that hard to believe in today's market. Well,

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Speaker 1: those were the stories he told. He's certainly trades where

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Speaker 1: he lost, you know, he simply, you know, kept going

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Speaker 1: and stayed afloat because he was a good trader. My

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Speaker 1: father was a farmer and he traded with ray Lum,

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Speaker 1: and he told me the only way not to get

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Speaker 1: beaten in a trade with ray Lum is not to

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Speaker 1: trade with him. So why were you know everybody knew

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Speaker 1: who ray Lum was. He became this huge legendary figure.

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Speaker 1: If the only way to beat him was to not

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Speaker 1: trade with him, why did people continue to trade with him? Well,

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Speaker 1: you didn't necessarily beat him, But if you needed if

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Speaker 1: you had an old mule that was tired and unable

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Speaker 1: to plow, and you needed a good young mule, you

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Speaker 1: would trade with him and he would give you the

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Speaker 1: younger mule, and you would pay the difference that was

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Speaker 1: called the tall you would you would pay you a

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Speaker 1: little money, and then you would be able to continue farming,

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Speaker 1: and you would leave with a smile because he would

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Speaker 1: tell all the stories, and he had a kind of banter.

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Speaker 1: He would say, this horse is so slick, a fly

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Speaker 1: of a light on him and slip off and break

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Speaker 1: his legs. He just had a way with words. Spill

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Speaker 1: do you think do you think what Ray provided as

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Speaker 1: a trader was a service that was valuable to the

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Speaker 1: rest of society? Absolutely? Uh. It's said that the trader

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Speaker 1: is the poet of capitalism. Uh. You've bought things with

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Speaker 1: a smile, and he in the encounter and the exchange,

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Speaker 1: it was as though you were hearing poetry. Trader has

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Speaker 1: a band of trades in everything, and a real trader

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Speaker 1: don't never find nothing that he can't use. If he's

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Speaker 1: a trader, he'll trade for anything you've got. He can

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Speaker 1: use it. If he gave use it, he'll find somebody

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Speaker 1: else a ten. That's his business. A good trader have

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Speaker 1: lots of people, and he makes the money for himself.

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Speaker 1: I always considered that I was a very good trader.

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Speaker 1: The closest thing to that today is probably the used

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Speaker 1: car salesman who when you have an old car that's

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Speaker 1: worn out and you want a new one or a

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Speaker 1: better one. Then you go in and you you make

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Speaker 1: a trade on the parking lot. And many of the

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Speaker 1: old traders, when horses and mules were no longer being traded,

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Speaker 1: they instinctively moved to the automobile. And uh, many of

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Speaker 1: the old livestock barns were used as automobile. Yeah, I

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Speaker 1: wanted to ask you that specifically. So obviously, Ray Loan

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Speaker 1: was born in the nineties. He lived over eighty years,

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Speaker 1: So tell us quickly how he dealt with the economic

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Speaker 1: transition which was massive that he saw during his lifetime.

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Speaker 1: Well as he as he said, he lived from the

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Speaker 1: time when horses and mules were the most valuable things

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Speaker 1: there until they were finally sold for dog food, which

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Speaker 1: really broke his heart. But he was a survivor and

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Speaker 1: he kept those those worlds alive through his stories. But

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Speaker 1: he also moved on and he began to u Instead

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Speaker 1: of selling horses and mudles to farmers who had tractors,

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Speaker 1: he would focus on children and find a pony, uh

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Speaker 1: and sell a new saddle to people who enjoyed riding.

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Speaker 1: But he scaled back his operation and essentially had a

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Speaker 1: livestock barn that would handle buying and selling of cattle,

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Speaker 1: but it was on a far smaller scale than what

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Speaker 1: he had seen as a young man. Bill Ferris, thank

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Speaker 1: you so much for joining us. I love this, I

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Speaker 1: love the parallels to the modern day, and I really

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Speaker 1: appreciate you talking to us about the life of Raylon Well.

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Speaker 1: It's my pleasure and I appreciate your interest in all

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Speaker 1: of this. Thank you for having me go to Matches

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Speaker 1: that I remember when it wasn't too many automobiles around.

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Speaker 1: Talking was about a dollar a pound At that time,

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Speaker 1: money was easy to get. People love tald that they

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Speaker 1: wanted talking about. I went to Memphis and I went

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Speaker 1: to uh So, Tracy, what what did you learn? Uh?

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Speaker 1: I learned a lot um. I think even more than

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Speaker 1: what I learned, I really just enjoyed listening to that

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Speaker 1: tale of a sort of bygone era that's full of

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Speaker 1: nostalgia and the idea of you know, people taking horses

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Speaker 1: on trains down to New Orleans and selling them to

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Speaker 1: Italian Yeah. I love I love like the salesmanship that

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Speaker 1: was involved. I love the idea that because he was

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Speaker 1: a good storyteller, that really helped him. Although again It

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Speaker 1: kind of reminds me of today, where some of the

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Speaker 1: most famous investors and fund managers also happened to be

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Speaker 1: great stories and they can, you know, spin you a

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Speaker 1: great yarn about what they're investing in. Yeah, I mean,

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Speaker 1: I guess there are some pockets in investing in trading

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Speaker 1: nowadays where there is still a human element that's really important.

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Speaker 1: But the thing that all of this reminds me of,

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Speaker 1: as we were talking about earlier, is just how electronified

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Speaker 1: our markets are nowadays. And on the one hand, that

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Speaker 1: can be kind of bad because we lose those sort

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Speaker 1: of human emotional connections to trading. But on the other hand,

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Speaker 1: you could make a strong argument that markets are more efficient.

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Speaker 1: I doubt I don't think that's not a tough argument

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Speaker 1: to make when someone could sell a mule for twice

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Speaker 1: what they bought it the same day, right, But then

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Speaker 1: on the other hand, you know mules, I guess we're

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Speaker 1: such idiosyncratic things that really required a lot of expertise

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Speaker 1: to price. Again, maybe that was a big service to market.

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Speaker 1: I love that point about service, the idea that you know,

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Speaker 1: even though he was the better trader, and if you're

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Speaker 1: traded with him, his speculation, you're probably going to lose.

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Speaker 1: But if you're a farmer that needed a new mule

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Speaker 1: or you know, trade in your old bum mule, that

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Speaker 1: essentially he was like sort of providing liquidity. There was

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Speaker 1: nobody else who would give you anything for that mule.

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Speaker 1: Probably right, And I think the liquidity point is a

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Speaker 1: big one because, as you and I both know, one

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Speaker 1: of the main discussions in financial mark kits right now

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Speaker 1: is about liquidity and whether or not investors need to

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Speaker 1: pay up for the service of liquidity, and you know,

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Speaker 1: whether or not they should expect that liquidity to always

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Speaker 1: be there. Again, there are no easy answers, but it's

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Speaker 1: certainly interesting to look back at a bygone era and yeah,

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Speaker 1: and cool to think of a very clear example where

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Speaker 1: someone who can provide that liquidity is clearly providing a

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Speaker 1: service to people and it's compensated for it exactly. All right, Well,

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Speaker 1: thank you very much for joining us on another edition

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Speaker 1: of Odd Lots. I'm Joe Wisenthal. You can find me

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Speaker 1: on Twitter at the Stalwart and I'm Tracy Alloway. I'm

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Speaker 1: on Twitter at Tracy Alloway. Thanks for listening, and we'll

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Speaker 1: be back here next week. Time changes all thing. It

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Speaker 1: changes off the fast. We actually haven't changed. How did

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Speaker 1: it being that had happened? You look at it it out.

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Speaker 1: I've tried to bard and think about things that will

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Speaker 1: happen hdyear keep trying to look into the future and

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Speaker 1: think of what's going to happen. I'm trying to pick

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Speaker 1: up what's the borrow. Joe and I are very proud

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Speaker 1: of our new podcast, Odd Lots, but we are also

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Speaker 1: very proud of Bloomberg's other growing suite of original podcast

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Speaker 1: all designed to help you navigate the complexities of business,

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Speaker 1: financial markets, and the global economy. So in addition to

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Speaker 1: our own podcast, please don't miss Benchmark with Dan Moss,

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Speaker 1: Tory Stillwell and Aki Edo and informative jargon free look

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Speaker 1: at the inner workings of the global economy. Then there's

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Speaker 1: Deal of the Week with our M and A reporter

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