WEBVTT - Goblin Hours: 24/7, FTC, Gold 0:00:03.120 --> 0:00:10.120 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:10.880 --> 0:00:13.200 Hello and welcome to the Money Stuff Podcast. You're a 0:00:13.200 --> 0:00:17.239 weekly podcast where we talk about stuff related to money. 0:00:17.480 --> 0:00:19.480 I'm Matt Levian, I write the Money Stuff column for 0:00:19.520 --> 0:00:20.320 Bloomberg Opinion. 0:00:20.480 --> 0:00:22.919 And I'm Katie Greifeld. I'm a reporter for Bloomberg News 0:00:22.920 --> 0:00:24.440 and an anchor for Bloomberg Television. 0:00:26.840 --> 0:00:28.640 Katie, what do you got today? 0:00:28.960 --> 0:00:31.720 We have a meaty show. We're going to talk about, oh, 0:00:31.880 --> 0:00:37.239 it's a twenty four to seven stock trading potentially what 0:00:37.280 --> 0:00:39.720 that world might look like. Then we're going to talk 0:00:39.720 --> 0:00:42.960 about the FTC and non competes, the FTC continuing to 0:00:43.000 --> 0:00:47.199 be aggressive on a multitude of topics. Then we're going 0:00:47.240 --> 0:00:49.920 to talk about gold bars, which I'm quite excited about, 0:00:49.960 --> 0:00:52.239 and the arbitrage opportunities that don't exist. 0:00:52.800 --> 0:01:02.600 My readers love in arbitrave twenty four seven stock trading. 0:01:02.880 --> 0:01:05.000 Well, there's twenty four to seven, and then there's the 0:01:05.040 --> 0:01:08.440 possibility that there's around the clock trading just on weekdays, which. 0:01:08.280 --> 0:01:09.360 Is a little more humane. 0:01:09.440 --> 0:01:12.080 Yes, exactly, I was actually exactly going to say humane, 0:01:12.160 --> 0:01:14.919 but maybe we should set the scene that this comes 0:01:14.920 --> 0:01:19.800 from a Financial Times article that Nise took a survey. 0:01:20.240 --> 0:01:23.280 They're like, hey, if we had twenty four seven trading, 0:01:23.319 --> 0:01:25.360 would you trade twenty four seven or twenty four five. 0:01:25.800 --> 0:01:27.759 I think the survey had a bunch of options. Yeah, 0:01:27.800 --> 0:01:31.039 it's like twenty four hours a day, seven days a week. 0:01:31.160 --> 0:01:32.240 Both neither and. 0:01:32.240 --> 0:01:34.720 I don't believe that we have the results of that survey, 0:01:34.760 --> 0:01:35.680 which feel key. 0:01:35.800 --> 0:01:37.600 I mean, it's not a public survey, it's for their 0:01:37.600 --> 0:01:39.960 own information. But the reason they're doing it is because 0:01:40.000 --> 0:01:43.360 there is pressure on it. Right. Someone started to think 0:01:43.400 --> 0:01:45.920 called the twenty four exchange, that's meant to be a 0:01:45.920 --> 0:01:47.920 twenty four hour I think it's actually twenty three hours 0:01:47.920 --> 0:01:51.280 a day, And all the retail brokerages are moving to 0:01:51.320 --> 0:01:56.000 offer extended hour overnight trading because a lot of robin 0:01:56.000 --> 0:01:58.200 Hood customers would really like to be able to trade 0:01:58.240 --> 0:01:59.200 stocks at three am. 0:01:59.520 --> 0:01:59.800 Yeah. 0:02:00.080 --> 0:02:03.240 So Nice sees where the market is going and is 0:02:03.280 --> 0:02:04.480 asking its customers about it. 0:02:04.640 --> 0:02:06.320 Yeah, and I guess that kind of answers the question 0:02:06.400 --> 0:02:09.239 of who would this before, and it would be for 0:02:09.400 --> 0:02:11.720 pajame traders, retail folks. 0:02:12.080 --> 0:02:13.880 I think it would be for a lot of pajama 0:02:13.919 --> 0:02:16.440 trating retail folks. The crypto market has been twenty four 0:02:16.440 --> 0:02:18.520 to seven. Part of what's causing this is like crypto 0:02:18.600 --> 0:02:20.079 is twenty four to seven, and people like, oh yeah, 0:02:20.160 --> 0:02:23.280 twenty four seven trading can work. And you look at crypto, right, 0:02:23.320 --> 0:02:25.680 they're like peaks when Asian markets wake up and when 0:02:25.680 --> 0:02:27.640 European markets wake up. So I think some of this 0:02:27.800 --> 0:02:31.360 might be for like news happens in Asia in like 0:02:31.440 --> 0:02:35.480 the US overnight and people can go and trade American stocks. 0:02:36.120 --> 0:02:37.560 A lot of it is for pajama traders. 0:02:37.919 --> 0:02:39.760 I was gonna say, and who am I, But I 0:02:39.800 --> 0:02:41.880 feel like the crypto market is that where we should 0:02:41.919 --> 0:02:44.000 be taking our cues from in terms of twenty four 0:02:44.000 --> 0:02:44.680 to seven trading. 0:02:45.160 --> 0:02:49.440 I mean, I'm not sure that crypto has necessarily provided 0:02:49.440 --> 0:02:52.520 great lessons for like real financial markets. Real financial markets 0:02:52.639 --> 0:02:56.280 have patterns that come from technology of two hundred years ago, 0:02:56.760 --> 0:02:59.560 and sometimes it takes a sort of brand new market 0:02:59.680 --> 0:03:02.280 to cast aside that technology and say, wait a minute, 0:03:02.200 --> 0:03:04.200 we have the computers to trade twenty four seven, so 0:03:04.360 --> 0:03:05.000 let's just do it. 0:03:05.160 --> 0:03:08.120 Thinking about the effects that this could have. Again, in 0:03:08.200 --> 0:03:11.120 this hypothetical scenario where there's twenty four to five or 0:03:11.120 --> 0:03:13.920 twenty four to seven trading, what the effects on liquidity 0:03:14.120 --> 0:03:18.000 might be are really interesting because in normal market hours 0:03:18.000 --> 0:03:20.280 in the US, it's the open and the close is 0:03:20.320 --> 0:03:22.880 when you get the most volume. But if there's not 0:03:23.000 --> 0:03:26.200 an open and there's not a close, where are the 0:03:26.320 --> 0:03:27.480 liquidity clusters? 0:03:27.840 --> 0:03:29.919 I suspect the answer is the open and the close. 0:03:30.320 --> 0:03:32.960 I suspect, By the way, like Nicey and Ethic exchanges 0:03:33.000 --> 0:03:35.720 offer extended hour trading, and it starts structural, but it's 0:03:35.720 --> 0:03:37.520 in part just like tradition, like people know that nine 0:03:37.560 --> 0:03:39.960 thirty and four are the times when everyone trades, and 0:03:40.000 --> 0:03:42.840 so there are auctions then, and that's when liquidity clusters, 0:03:42.880 --> 0:03:45.280 and you can trade ten minutes before the opening auction 0:03:45.680 --> 0:03:48.520 or ten minutes after what the opening auction does collect liquidity. 0:03:48.800 --> 0:03:50.880 I suspect that it won't be a crypto exchange where 0:03:50.880 --> 0:03:52.800 it's we just turn it on and it goes forever. Yeah, 0:03:52.800 --> 0:03:55.120 it'll be like Nicey, where there's a nine to thirty 0:03:55.520 --> 0:03:58.520 auction and a four o'clock auction and trading during the 0:03:58.600 --> 0:04:01.360 day and then after hour there's some other thing that's 0:04:01.360 --> 0:04:04.240 like the overnight session, but it's like a little deprecated 0:04:04.240 --> 0:04:06.720 so people understand where the main sources of liquidity are. 0:04:06.920 --> 0:04:09.800 I root for chaos in general. I'm interested to see 0:04:09.880 --> 0:04:12.840 what three am would look like on a twenty four 0:04:12.920 --> 0:04:16.880 to five exchange, what shenanigans would happen around that time. 0:04:17.320 --> 0:04:23.040 Presumably it's mostly pajama trading, retail traders interacting with one 0:04:23.080 --> 0:04:26.080 or two very nervous electronic market makers. And then, like 0:04:26.120 --> 0:04:29.080 every so often, the catastrophe happens overnight and like big 0:04:29.160 --> 0:04:32.640 traders rushed to sell and the stock crashes because there's 0:04:32.680 --> 0:04:35.520 no deep liquidity provision. Yeah, you'll see a lot more 0:04:35.560 --> 0:04:37.600 flash crashes because like fewer people are going to be 0:04:37.600 --> 0:04:39.240 putting in quotes at three am, so. 0:04:39.160 --> 0:04:41.400 The charts will get super fun, even. 0:04:41.240 --> 0:04:44.279 Like one big retail trader could crash the slack. Although 0:04:44.320 --> 0:04:46.240 you say that the charts like even now, if you 0:04:46.279 --> 0:04:48.240 look at like the Bloomberg charts, they are the nine 0:04:48.360 --> 0:04:51.520 thirty to four o'clock session. There's trading after hours, but 0:04:51.600 --> 0:04:54.160 everyone kind of understands that it doesn't count. You root 0:04:54.200 --> 0:04:57.080 for chaos. I've been advocating for years that the stock 0:04:57.120 --> 0:04:59.279 market should move to half an hour a day. The 0:04:59.400 --> 0:05:01.920 large bulk professional trading occurs at the opening in the close. 0:05:01.920 --> 0:05:03.880 If you don't have any like particular reason, right if 0:05:03.920 --> 0:05:05.920 you're just like if you're a mutual fund with outflows 0:05:06.000 --> 0:05:07.960 or whatever, Like you did try to get the closing 0:05:08.000 --> 0:05:10.039 print right. You're looking to trade where there's the most 0:05:10.080 --> 0:05:14.240 liquidity if you don't have any special information, and if 0:05:14.279 --> 0:05:16.440 you concentrate all the liquidity at one time, you get 0:05:16.520 --> 0:05:19.960 more efficient prices. If you've spread the liquidity over twenty 0:05:19.960 --> 0:05:22.120 four hours, it like all gets worse. One thing I 0:05:22.120 --> 0:05:23.560 was thinking about is if you do go to twenty 0:05:23.600 --> 0:05:26.560 four hour trading, that probably moves some liquidity away from 0:05:26.600 --> 0:05:29.200 like two pm right right, and so then it has 0:05:29.240 --> 0:05:32.560 the effect of possibly concentrating even more trading at the 0:05:32.600 --> 0:05:35.320 open end close, because people are like, oh, there's twenty 0:05:35.320 --> 0:05:37.599 four hours of trading in the day, there's two real events, 0:05:37.800 --> 0:05:39.640 and everything else is like a ghost town. So I 0:05:39.720 --> 0:05:41.800 might as well only trade at the open up the close. 0:05:42.120 --> 0:05:44.280 That would be a fun effect if it worked out 0:05:44.279 --> 0:05:44.839 that way. 0:05:45.080 --> 0:05:47.240 It would be even from a reader suggesting that there 0:05:47.240 --> 0:05:49.360 should just be one auction a day. Everyone could put 0:05:49.400 --> 0:05:51.440 in their bids in the auction and like you'd clear 0:05:51.520 --> 0:05:54.160 the stock at whatever the clearing price of the auction was, 0:05:54.200 --> 0:05:55.600 and then you'd try it again tomorrow. 0:05:55.640 --> 0:05:56.120 Beautiful. 0:05:57.000 --> 0:05:59.560 That is very appealing to me because it would give 0:05:59.600 --> 0:06:02.000 people up free time, right, you wouldn't have to trade 0:06:02.040 --> 0:06:04.000 all the time. The other advantage of that is it 0:06:04.000 --> 0:06:07.280 cuts down on the cost of intermediation. I'm not sure, 0:06:07.279 --> 0:06:08.680 but I think that if you go to twenty four 0:06:08.720 --> 0:06:12.120 hour trading, then the high frequency trading firms of the 0:06:12.120 --> 0:06:14.880 world are going to make more money because they're going 0:06:14.920 --> 0:06:17.839 to be trading with retail traders at three am, and 0:06:18.600 --> 0:06:22.160 in the aggregate that'll be noise trading, but liquidity will 0:06:22.200 --> 0:06:24.360 be very thin, and they'll charge a lot for spreads, right, 0:06:24.360 --> 0:06:26.479 I mean, like the point of a high frequency trader 0:06:26.600 --> 0:06:28.120 is that there are a lot of people want to 0:06:28.120 --> 0:06:29.920 buy stock. There a lot of people want to sell stock. 0:06:30.920 --> 0:06:33.479 They don't come to the market at exactly the same time, 0:06:33.760 --> 0:06:36.040 and so some electronic market maker is buying from the 0:06:36.040 --> 0:06:38.680 people who want to sell, holding the stock for a 0:06:38.760 --> 0:06:40.880 second or a minute or an hour, and then selling 0:06:40.880 --> 0:06:42.479 it to people who want to buy. If you spread 0:06:42.480 --> 0:06:44.359 out the trading, there's just more of that. There's like 0:06:44.400 --> 0:06:46.880 more people coming in at different times, and more money 0:06:46.880 --> 0:06:49.479 for high frequency traders to make because they are doing 0:06:49.520 --> 0:06:52.120 more of that intermediaty trades in time, whereas if you 0:06:52.160 --> 0:06:54.039 put all of the trading in one auction, then all 0:06:54.080 --> 0:06:55.520 the people want to buy, all of the people want 0:06:55.520 --> 0:06:58.120 to sell meat at that one second, and you don't 0:06:58.120 --> 0:07:00.479 have any need for like electronic and mediation. 0:07:00.680 --> 0:07:01.800 There are your two extremes. 0:07:01.880 --> 0:07:04.120 Those are your two extremes. And like the modern like 0:07:04.200 --> 0:07:07.360 retail stock trading boom, the like meme stock boom. Yeah, 0:07:07.400 --> 0:07:10.240 people are so mad at the Citadel Securities of the world. 0:07:10.240 --> 0:07:12.640 They're so mad at the hyper concy traders, but they 0:07:12.680 --> 0:07:14.640 also want to trade stock at three. Yeah. The memestock 0:07:14.680 --> 0:07:17.000 boom has been great for those hyper concut traders, right 0:07:17.000 --> 0:07:19.280 because they're getting all this order flow to trade with, 0:07:19.800 --> 0:07:21.840 while all these retail traders are so mad at at 0:07:21.840 --> 0:07:24.320 Ceditel Securities. This is the same thing where it's like 0:07:24.320 --> 0:07:27.040 this thing that caters to retail traders, I think will 0:07:27.040 --> 0:07:29.720 be very good for the electronic market makers. 0:07:30.040 --> 0:07:31.000 So they need each other. 0:07:31.280 --> 0:07:34.640 Yeah. I think some of the memestock traders have a 0:07:34.680 --> 0:07:38.440 somewhat faulty understanding of how Citital Securities makes money. I 0:07:38.520 --> 0:07:41.760 think that if you have twenty four hour trading, it's 0:07:41.760 --> 0:07:43.920 gonna be really good for those guys. And if you 0:07:43.960 --> 0:07:46.160 don't like those Guys, if you think that it's bad 0:07:46.720 --> 0:07:50.960 that these intermediaries make so much money trading stocks, which 0:07:50.960 --> 0:07:52.600 I don't really think but like a lot of people do, 0:07:53.120 --> 0:07:55.440 then collapsing it to one single point of trading would 0:07:55.440 --> 0:07:56.840 be good for making traders. 0:07:56.840 --> 0:08:00.880 Then what would the financial television anchors talk about all day? 0:08:00.960 --> 0:08:02.520 I was going to say maybe the same thing, but 0:08:02.680 --> 0:08:03.280 of course. 0:08:03.200 --> 0:08:05.120 I just talk about it market more. 0:08:05.280 --> 0:08:08.120 Oh yeah, Bomberker could do it to one auction a day. 0:08:08.320 --> 0:08:09.200 Corporate earnings. 0:08:09.320 --> 0:08:12.240 Yeah, it raises the question. I mean you think about 0:08:12.280 --> 0:08:15.800 what happened with what was it left last earnings cycle 0:08:15.840 --> 0:08:19.480 with the typo in their release and things went crazy, 0:08:19.520 --> 0:08:22.120 but it was after hours, so the charts were still clean. 0:08:22.400 --> 0:08:25.000 Yeah. I mean, it's like a really traveling possibility about 0:08:25.000 --> 0:08:27.000 twenty four seven trading is like if you had real 0:08:27.040 --> 0:08:28.840 twenty four seven trading where I was like, oh, it's 0:08:28.880 --> 0:08:31.280 like fake and deprecated, but it's like the market is 0:08:31.320 --> 0:08:33.600 just open all the time. Then like when would companies 0:08:33.640 --> 0:08:34.360 put out news? 0:08:34.559 --> 0:08:36.000 Yeah, and the government too. 0:08:36.520 --> 0:08:38.439 Right now, there's this norm of like six and a 0:08:38.480 --> 0:08:43.200 half hours of market hours, and during market hours you 0:08:43.280 --> 0:08:46.839 try not to put out market moving news because one 0:08:46.880 --> 0:08:49.080 if you get it wrong. The stakes are horrible or 0:08:49.080 --> 0:08:51.520 really high. But like two, if you put out news 0:08:51.920 --> 0:08:54.880 at ten am, someone's going to see it first. Someone's 0:08:54.920 --> 0:08:57.000 going to trade on it ahead of someone else. And 0:08:57.080 --> 0:08:59.000 like the person who sees at first is going to 0:08:59.080 --> 0:09:02.440 be someone who is paying for like the fastest data 0:09:02.440 --> 0:09:06.320 connections to the exchanges. It's systematically going to be not 0:09:06.400 --> 0:09:07.160 the retail trader. 0:09:07.240 --> 0:09:09.760 Right. I have an idea, Well, companies should release their 0:09:09.800 --> 0:09:12.199 earnings at three am, and if you really care, you're 0:09:12.240 --> 0:09:14.640 going to be up and we can still have normal 0:09:14.760 --> 0:09:18.040 ish hours. Agree that it'll still be nine thirty and 0:09:18.240 --> 0:09:20.720 four pm is when most of the trading happens. But 0:09:20.760 --> 0:09:22.079 then you have goblin hours. 0:09:22.320 --> 0:09:24.679 But if you're like a hedge fund, you're you're awake 0:09:24.679 --> 0:09:27.559 in goblin hours and like someone's winning and someone's losing. 0:09:27.679 --> 0:09:30.280 That's great, not for them, I know, but no, you 0:09:30.320 --> 0:09:32.960 have goblin hours, and it'll be subverted where you have 0:09:33.080 --> 0:09:36.160 all the professionals, all the hedge funds, they're trading in 0:09:36.200 --> 0:09:38.600 the overnight session, and then the normal session will just 0:09:38.600 --> 0:09:39.760 be kind of boring in retail. 0:09:39.960 --> 0:09:41.920 Look, I mean, news happens right now and some people 0:09:41.920 --> 0:09:43.480 react to and the it is faster than others. But 0:09:43.520 --> 0:09:46.240 it is not the case that there's a race to 0:09:46.280 --> 0:09:48.920 react to every piece of corporate earnings news, right or 0:09:48.960 --> 0:09:51.319 every economic data point, because most of those things come 0:09:51.360 --> 0:09:53.760 out outside of market hours, and you can't really have 0:09:53.760 --> 0:09:58.200 that race, right if you have true market hours twenty 0:09:58.200 --> 0:09:59.680 four hours a day, then like you do have that 0:09:59.760 --> 0:10:02.880 race every time news comes out, and it's a socially 0:10:02.960 --> 0:10:05.760 wasteful race, right. If you ask hedge funds like, what 0:10:06.000 --> 0:10:07.800 socially valuable thing do you do, They're like, oh, we 0:10:07.840 --> 0:10:10.600 make prices more efficient. It's like, yeah, understanding earnings news 0:10:10.600 --> 0:10:13.000 and buying stocks that are undervalued is like a good thing, 0:10:13.000 --> 0:10:15.120 but racing to do that at three am, one second 0:10:15.120 --> 0:10:17.040 ahead of another hedge fund is like you should just 0:10:17.080 --> 0:10:18.640 go to bed and wake up at nine thirty and 0:10:18.679 --> 0:10:18.920 do it. 0:10:19.040 --> 0:10:22.880 I wish that I had the Financial Times article pulled up, 0:10:22.920 --> 0:10:25.280 because wasn't it one of the questions that was asked 0:10:25.280 --> 0:10:29.240 in the survey was would the time you spend thinking 0:10:29.240 --> 0:10:33.080 about overnight trading be better spent thinking about trading during 0:10:33.120 --> 0:10:34.240 normal hours or yeah? 0:10:34.280 --> 0:10:35.480 I think it was like I think it was something 0:10:35.520 --> 0:10:37.000 like should we stop asking you about this? 0:10:37.120 --> 0:10:37.320 Yeah? 0:10:37.320 --> 0:10:39.360 It was like with the time that nicey spends thinking 0:10:39.360 --> 0:10:41.560 about overnight try to be better spent on something else. 0:10:41.720 --> 0:10:44.720 If trading was one second to day, hedge funds would 0:10:44.720 --> 0:10:49.280 still have incentives to understand companies and understand what might 0:10:49.320 --> 0:10:52.400 move their prices and incorporate all the information into their 0:10:52.440 --> 0:10:55.280 one trade a day. But at twenty four to seven trading, 0:10:55.320 --> 0:10:57.720 it's like you're spending a lot of time optimizing, Like 0:10:57.760 --> 0:10:59.600 when you're waking up, you're thinking about things other than 0:10:59.640 --> 0:10:59.920 the fund. 0:11:00.080 --> 0:11:02.480 Mental Again, I root for chaos, but I feel like 0:11:02.720 --> 0:11:05.160 at least this conversation has talked me into maybe we 0:11:05.200 --> 0:11:07.400 should just stick to normal hours, or maybe we should 0:11:07.440 --> 0:11:09.800 just be open for half an hour a day. 0:11:09.960 --> 0:11:12.640 I feel like I haven't adequately emphasized the main benefit 0:11:12.640 --> 0:11:15.160 of half an hour day, which is like everyone would 0:11:15.200 --> 0:11:17.760 get to relax more and spend more time with their families. 0:11:18.120 --> 0:11:19.800 We like watch financial TV. 0:11:20.520 --> 0:11:23.280 Well, I mean when I say everyone, I include financial 0:11:23.360 --> 0:11:25.640 news anchors, and that you would also. 0:11:25.440 --> 0:11:42.800 Have less to do in a nice Yeah, maybe non competes. 0:11:43.400 --> 0:11:46.400 So we talked about last week about how I did 0:11:46.400 --> 0:11:48.760 not take full advantage of my gardening. 0:11:48.840 --> 0:11:50.880 And now maybe you never will ever again. 0:11:51.000 --> 0:11:53.360 Now, maybe no one will ever get gardening leave again. 0:11:53.480 --> 0:11:59.960 God. Yeah. The FTC. Interesting move here about basically erratic 0:12:00.720 --> 0:12:04.920 non competes. Yes, except for senior executives only barely. 0:12:05.160 --> 0:12:08.719 Yeah. Basically, the FTC voted this week to ban all 0:12:08.720 --> 0:12:12.040 non competes forever. If you're a senior executive you currently 0:12:12.080 --> 0:12:14.600 have a non compete, it's enforceable. But otherwise they voted 0:12:14.640 --> 0:12:16.760 to get rid of non competes. One important thing here 0:12:16.840 --> 0:12:19.000 is it's a good chance this doesn't ever happen. Right, 0:12:19.040 --> 0:12:21.400 the FDC voted to do it. It goes into effect 0:12:21.440 --> 0:12:23.760 in about six months, but there are already like multiple 0:12:23.800 --> 0:12:26.480 lawsuits against it, and even the FTC. There are five 0:12:26.600 --> 0:12:29.440 FTC commissioners. Two of them voted against it, and they 0:12:29.440 --> 0:12:31.200 both said in their votes against that this is not 0:12:31.240 --> 0:12:34.079 going to pass muster with the courts, and we can 0:12:34.080 --> 0:12:35.880 talk about the FDC's authority for it. 0:12:36.000 --> 0:12:39.160 I mean, I am interested in that because my first 0:12:39.160 --> 0:12:42.160 reaction was like why, and also why the FTC and 0:12:42.160 --> 0:12:44.160 why is the FTC focusing on this? Shouldn't they be 0:12:44.200 --> 0:12:48.160 like trying to stop Tapestry from buying Capri and other things. 0:12:48.280 --> 0:12:52.000 The FTC was in the business of stopping unfair methods 0:12:52.000 --> 0:12:54.200 of competition. Right, Like, we mostly think of it as 0:12:54.200 --> 0:12:57.040 anti trust, right, but it's also like false advertising and 0:12:57.080 --> 0:13:00.680 like other kinds of fraud. And they think that non 0:13:00.720 --> 0:13:04.800 competes are an unfair method of competition, and you can 0:13:04.880 --> 0:13:06.920 see why, right. I mean, like one thing that they 0:13:07.000 --> 0:13:09.439 talk about in the rule and in the public statements 0:13:09.480 --> 0:13:12.240 is non competes can stop people from leaving a company 0:13:12.240 --> 0:13:13.880 to start a new business. So it's like a very 0:13:13.880 --> 0:13:16.600 direct way for a company to prevent new businesses coming 0:13:16.600 --> 0:13:17.480 out to compete with them. 0:13:17.679 --> 0:13:17.880 Right. 0:13:17.960 --> 0:13:20.880 The rule really mentions doctors a lot, Like doctors are 0:13:21.120 --> 0:13:24.160 an important case. Doctors will often have non competes, and 0:13:24.760 --> 0:13:26.640 if you're a doctor and you leave your practice, you 0:13:26.640 --> 0:13:28.640 have to like sometimes move to a different state to 0:13:28.679 --> 0:13:32.560 continue practicing medicine, and like to the extent the FTC 0:13:32.679 --> 0:13:35.400 is in the business of protecting consumer choice and lowering 0:13:35.440 --> 0:13:37.600 consumer prices. That seems like it would be bad for 0:13:37.640 --> 0:13:39.640 consumers that they can't get a doctor because the doctor 0:13:39.679 --> 0:13:42.439 had to move away, So it makes sense that it's 0:13:42.480 --> 0:13:45.840 the FTC. Yeah, the FDC, this is not something they've 0:13:45.840 --> 0:13:48.160 done before, and their authority for it is a little unclear, 0:13:48.360 --> 0:13:51.520 and their ability to make rules about it is unclear. Yeah, 0:13:51.559 --> 0:13:55.319 and you know, we live in a judicial climate where 0:13:56.240 --> 0:13:58.960 when agencies are like, we're going to make new rules 0:13:58.960 --> 0:14:01.640 to regulate things we've never regulated before, it's hard to 0:14:01.679 --> 0:14:04.800 imagine the current Supreme Court saying Okay, great, sounds good. 0:14:04.920 --> 0:14:05.079 Right. 0:14:05.160 --> 0:14:07.160 It just feels like that's the sort of thing that 0:14:07.200 --> 0:14:08.200 modern courts don't like. 0:14:08.559 --> 0:14:11.679 So some pretty big question marks over authority here. And 0:14:11.960 --> 0:14:14.000 maybe this won't even happen, But I mean, this was 0:14:14.040 --> 0:14:17.959 a good reminder that at least I almost exclusively think 0:14:17.960 --> 0:14:21.960 about non competes in the context of the financial industry. 0:14:22.360 --> 0:14:24.720 But if you take a look at some of the 0:14:24.760 --> 0:14:28.479 examples that the FDC used. You wrote about the powerwasher 0:14:28.920 --> 0:14:31.560 who said, all I know is powerwashing. These business owners 0:14:31.600 --> 0:14:33.560 all want me to sign a non compete clause. They 0:14:33.560 --> 0:14:38.520 also cited someone who works in the asphalt industry, a bartender, 0:14:39.040 --> 0:14:44.160 and as you were saying, a physician in rural underserved Appalasia. 0:14:44.360 --> 0:14:46.120 So I don't know, that was a nice reminder. 0:14:46.240 --> 0:14:48.760 They've been like media reports about non competes in the 0:14:48.800 --> 0:14:52.000 fast food industry. It's really it is pretty widespread. 0:14:52.440 --> 0:14:55.600 Yeah, the FTC had some numbers there too that nearly 0:14:55.680 --> 0:14:59.000 twenty percent of workers are subject to non competes today, 0:14:59.080 --> 0:15:02.160 and their estimate is that it would increase US earnings 0:15:02.160 --> 0:15:05.640 by at least four hundred billion dollars over the next 0:15:05.640 --> 0:15:09.440 ten years to abolish non competes. A lot of readers 0:15:09.520 --> 0:15:13.920 emailed in about PE non competes, PE purchase non competes. 0:15:14.080 --> 0:15:16.360 I got like a couple of emails from readers being like, 0:15:17.280 --> 0:15:22.440 I work in private equity and we buy companies, and 0:15:22.520 --> 0:15:25.320 a lot of the companies that private equity buyers are like, 0:15:25.720 --> 0:15:28.360 it's like asset lights, some guy operating in business, right, 0:15:28.680 --> 0:15:30.760 And so when you buy that business, you're sort of 0:15:30.840 --> 0:15:34.680 buying the person. And if you pay that person twenty 0:15:34.680 --> 0:15:38.640 million dollars to take over his business and then he 0:15:38.760 --> 0:15:42.720 leaves and sets up another business, he'll probably take all 0:15:42.720 --> 0:15:45.200 the customers with him, because it's like it's just him, yeah, 0:15:45.240 --> 0:15:48.080 and you're out twenty million dollars for nothing. And so 0:15:49.400 --> 0:15:51.920 seeing the headline of like FTC bands on competes, people 0:15:52.000 --> 0:15:54.160 got really worried that would make it impossible to buy 0:15:54.160 --> 0:15:57.760 and sell sort of one person small businesses. But there 0:15:57.800 --> 0:16:00.280 is an exception for that, like the if you're signing 0:16:00.280 --> 0:16:02.280 a non compete in connection with the sale of a business, 0:16:02.320 --> 0:16:03.280 then that's enforceable. 0:16:03.760 --> 0:16:04.760 So rest easy. 0:16:05.000 --> 0:16:06.240 And you don't even have to be the owner of 0:16:06.240 --> 0:16:07.600 the business. You know, if you have like a twenty 0:16:07.640 --> 0:16:09.840 person company, like all the people in the company can 0:16:09.920 --> 0:16:12.280 sign a non compete and it's still unforceable because you know, 0:16:12.320 --> 0:16:15.160 what you're selling is the people in the business. So 0:16:15.240 --> 0:16:18.160 there you go. Rest easy. I want to say one other. 0:16:18.040 --> 0:16:19.080 Thing, yeah, and you should. 0:16:19.240 --> 0:16:21.280 So the way it works is like they banned future 0:16:21.360 --> 0:16:23.760 non competes, but they also say all current non competes 0:16:23.760 --> 0:16:27.120 don't work, they're not enforceable. And so one thing in 0:16:27.160 --> 0:16:28.760 the rule is that if you're a company that has 0:16:28.800 --> 0:16:31.080 non competes, you have to send a notice to all 0:16:31.120 --> 0:16:34.040 of your workers saying your non competes are no longer enforceable, 0:16:34.080 --> 0:16:35.720 and like they actually have like language and the rule 0:16:35.720 --> 0:16:37.160 of like this is what you have to put in 0:16:37.240 --> 0:16:39.320 the email. My impression is that there are a lot 0:16:39.320 --> 0:16:42.640 of non competes that are already illegal. In most states, 0:16:42.680 --> 0:16:44.680 non competes are allowed, but they have to be reasonable, 0:16:44.720 --> 0:16:47.520 and a lot of people sign unreasonable non competes. And 0:16:48.800 --> 0:16:53.120 my impression is that companies write these illegal non competes 0:16:53.360 --> 0:16:56.440 because they figure everyone sees this contract, and they're scared 0:16:56.480 --> 0:16:58.040 and they're not going to go work for a competitor 0:16:58.120 --> 0:17:00.280 because they don't want to get sued, and they don't 0:17:00.320 --> 0:17:01.920 know enough about the law. They don't know if that 0:17:02.000 --> 0:17:04.800 the non compete is illegal, And so you can get 0:17:04.840 --> 0:17:06.479 a lot of mileage out of a non compete as 0:17:06.480 --> 0:17:08.640 a company by just writing it down and like never 0:17:08.960 --> 0:17:11.480 trying to enforce it. Even if it's not enforceable. You 0:17:11.520 --> 0:17:13.720 can just say you can't compete, and then most people won't. 0:17:14.240 --> 0:17:16.359 So the FDC wants to solve that problem by saying 0:17:16.600 --> 0:17:19.399 you have to send all of your employees a letter 0:17:19.480 --> 0:17:22.680 saying your non compute is unenforceable. Go ahead and compete, 0:17:22.960 --> 0:17:23.720 but garden leave. 0:17:23.840 --> 0:17:25.360 I know that you had a bad experience. That also 0:17:25.440 --> 0:17:26.400 sounds really nice. 0:17:26.640 --> 0:17:31.520 A lot of people in normal jobs think non competes 0:17:31.560 --> 0:17:33.879 are bad because they just restrict their ability to get 0:17:33.920 --> 0:17:36.480 a new job. But in finance you're like, oh, no, 0:17:37.040 --> 0:17:39.520 I have to spend six months not working and getting 0:17:39.560 --> 0:17:43.119 paid for me I can Finance people are like, I 0:17:43.200 --> 0:17:45.480 kind of like the I like the noncompete status quo. 0:17:45.880 --> 0:17:49.560 I was trying to figure out what happens to that. 0:17:49.760 --> 0:17:51.439 In finance, it's like what tools do you have as 0:17:51.480 --> 0:17:53.880 a financial firm to prevent people from competing. So one 0:17:53.960 --> 0:17:56.200 is like you have a noncompete, which is maybe now illegal, 0:17:56.680 --> 0:17:59.560 but I think the way that things normally work currently 0:17:59.680 --> 0:18:04.879