April 26, 2024 • 30 mins
Katie and Matt discuss waking up at 3 a.m. to trade stocks, the possible end of gardening leave, and buying gold at Costco with your credit card.
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Speaker 1 (00:03):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:10):
Hello and welcome to the Money Stuff Podcast. You're a
weekly podcast where we talk about stuff related to money.
I'm Matt Levian, I write the Money Stuff column for
Bloomberg Opinion.
Speaker 1 (00:20):
And I'm Katie Greifeld. I'm a reporter for Bloomberg News
and an anchor for Bloomberg Television.
Speaker 2 (00:26):
Katie, what do you got today?
Speaker 1 (00:28):
We have a meaty show. We're going to talk about, oh,
it's a twenty four to seven stock trading potentially what
that world might look like. Then we're going to talk
about the FTC and non competes, the FTC continuing to
be aggressive on a multitude of topics. Then we're going
to talk about gold bars, which I'm quite excited about,
(00:49):
and the arbitrage opportunities that don't exist.
Speaker 2 (00:52):
My readers love in arbitrave twenty four seven stock trading.
Speaker 1 (01:02):
Well, there's twenty four to seven, and then there's the
possibility that there's around the clock trading just on weekdays, which.
Speaker 2 (01:08):
Is a little more humane.
Speaker 1 (01:09):
Yes, exactly, I was actually exactly going to say humane,
but maybe we should set the scene that this comes
from a Financial Times article that Nise took a survey.
Speaker 2 (01:20):
They're like, hey, if we had twenty four seven trading,
would you trade twenty four seven or twenty four five.
I think the survey had a bunch of options. Yeah,
it's like twenty four hours a day, seven days a week.
Both neither and.
Speaker 1 (01:32):
I don't believe that we have the results of that survey,
which feel key.
Speaker 2 (01:35):
I mean, it's not a public survey, it's for their
own information. But the reason they're doing it is because
there is pressure on it. Right. Someone started to think
called the twenty four exchange, that's meant to be a
twenty four hour I think it's actually twenty three hours
a day, And all the retail brokerages are moving to
offer extended hour overnight trading because a lot of robin
(01:56):
Hood customers would really like to be able to trade
stocks at three am.
Speaker 1 (01:59):
Yeah.
Speaker 2 (02:00):
So Nice sees where the market is going and is
asking its customers about it.
Speaker 1 (02:04):
Yeah, and I guess that kind of answers the question
of who would this before, and it would be for
pajame traders, retail folks.
Speaker 2 (02:12):
I think it would be for a lot of pajama
trating retail folks. The crypto market has been twenty four
to seven. Part of what's causing this is like crypto
is twenty four to seven, and people like, oh yeah,
twenty four seven trading can work. And you look at crypto, right,
they're like peaks when Asian markets wake up and when
European markets wake up. So I think some of this
might be for like news happens in Asia in like
the US overnight and people can go and trade American stocks.
(02:36):
A lot of it is for pajama traders.
Speaker 1 (02:37):
I was gonna say, and who am I, But I
feel like the crypto market is that where we should
be taking our cues from in terms of twenty four
to seven trading.
Speaker 2 (02:45):
I mean, I'm not sure that crypto has necessarily provided
great lessons for like real financial markets. Real financial markets
have patterns that come from technology of two hundred years ago,
and sometimes it takes a sort of brand new market
to cast aside that technology and say, wait a minute,
we have the computers to trade twenty four seven, so
let's just do it.
Speaker 1 (03:05):
Thinking about the effects that this could have. Again, in
this hypothetical scenario where there's twenty four to five or
twenty four to seven trading, what the effects on liquidity
might be are really interesting because in normal market hours
in the US, it's the open and the close is
when you get the most volume. But if there's not
an open and there's not a close, where are the
(03:26):
liquidity clusters?
Speaker 2 (03:27):
I suspect the answer is the open and the close.
I suspect, By the way, like Nicey and Ethic exchanges
offer extended hour trading, and it starts structural, but it's
in part just like tradition, like people know that nine
thirty and four are the times when everyone trades, and
so there are auctions then, and that's when liquidity clusters,
and you can trade ten minutes before the opening auction
or ten minutes after what the opening auction does collect liquidity.
(03:48):
I suspect that it won't be a crypto exchange where
it's we just turn it on and it goes forever. Yeah,
it'll be like Nicey, where there's a nine to thirty
auction and a four o'clock auction and trading during the
day and then after hour there's some other thing that's
like the overnight session, but it's like a little deprecated
so people understand where the main sources of liquidity are.
Speaker 1 (04:06):
I root for chaos in general. I'm interested to see
what three am would look like on a twenty four
to five exchange, what shenanigans would happen around that time.
Speaker 2 (04:17):
Presumably it's mostly pajama trading, retail traders interacting with one
or two very nervous electronic market makers. And then, like
every so often, the catastrophe happens overnight and like big
traders rushed to sell and the stock crashes because there's
no deep liquidity provision. Yeah, you'll see a lot more
flash crashes because like fewer people are going to be
(04:37):
putting in quotes at three am, so.
Speaker 1 (04:39):
The charts will get super fun, even.
Speaker 2 (04:41):
Like one big retail trader could crash the slack. Although
you say that the charts like even now, if you
look at like the Bloomberg charts, they are the nine
thirty to four o'clock session. There's trading after hours, but
everyone kind of understands that it doesn't count. You root
for chaos. I've been advocating for years that the stock
market should move to half an hour a day. The
large bulk professional trading occurs at the opening in the close.
(05:01):
If you don't have any like particular reason, right if
you're just like if you're a mutual fund with outflows
or whatever, Like you did try to get the closing
print right. You're looking to trade where there's the most
liquidity if you don't have any special information, and if
you concentrate all the liquidity at one time, you get
more efficient prices. If you've spread the liquidity over twenty
four hours, it like all gets worse. One thing I
(05:22):
was thinking about is if you do go to twenty
four hour trading, that probably moves some liquidity away from
like two pm right right, and so then it has
the effect of possibly concentrating even more trading at the
open end close, because people are like, oh, there's twenty
four hours of trading in the day, there's two real events,
and everything else is like a ghost town. So I
might as well only trade at the open up the close.
Speaker 1 (05:42):
That would be a fun effect if it worked out
that way.
Speaker 2 (05:45):
It would be even from a reader suggesting that there
should just be one auction a day. Everyone could put
in their bids in the auction and like you'd clear
the stock at whatever the clearing price of the auction was,
and then you'd try it again tomorrow.
Speaker 1 (05:55):
Beautiful.
Speaker 2 (05:57):
That is very appealing to me because it would give
people up free time, right, you wouldn't have to trade
all the time. The other advantage of that is it
cuts down on the cost of intermediation. I'm not sure,
but I think that if you go to twenty four
hour trading, then the high frequency trading firms of the
world are going to make more money because they're going
to be trading with retail traders at three am, and
(06:18):
in the aggregate that'll be noise trading, but liquidity will
be very thin, and they'll charge a lot for spreads, right,
I mean, like the point of a high frequency trader
is that there are a lot of people want to
buy stock. There a lot of people want to sell stock.
They don't come to the market at exactly the same time,
and so some electronic market maker is buying from the
people who want to sell, holding the stock for a
(06:38):
second or a minute or an hour, and then selling
it to people who want to buy. If you spread
out the trading, there's just more of that. There's like
more people coming in at different times, and more money
for high frequency traders to make because they are doing
more of that intermediaty trades in time, whereas if you
put all of the trading in one auction, then all
the people want to buy, all of the people want
to sell meat at that one second, and you don't
have any need for like electronic and mediation.
Speaker 1 (07:00):
There are your two extremes.
Speaker 2 (07:01):
Those are your two extremes. And like the modern like
retail stock trading boom, the like meme stock boom. Yeah,
people are so mad at the Citadel Securities of the world.
They're so mad at the hyper concy traders, but they
also want to trade stock at three. Yeah. The memestock
boom has been great for those hyper concut traders, right
because they're getting all this order flow to trade with,
while all these retail traders are so mad at at
Ceditel Securities. This is the same thing where it's like
(07:24):
this thing that caters to retail traders, I think will
be very good for the electronic market makers.
Speaker 1 (07:30):
So they need each other.
Speaker 2 (07:31):
Yeah. I think some of the memestock traders have a
somewhat faulty understanding of how Citital Securities makes money. I
think that if you have twenty four hour trading, it's
gonna be really good for those guys. And if you
don't like those Guys, if you think that it's bad
that these intermediaries make so much money trading stocks, which
I don't really think but like a lot of people do,
(07:53):
then collapsing it to one single point of trading would
be good for making traders.
Speaker 1 (07:56):
Then what would the financial television anchors talk about all day?
Speaker 2 (08:00):
I was going to say maybe the same thing, but
of course.
Speaker 1 (08:03):
I just talk about it market more.
Speaker 2 (08:05):
Oh yeah, Bomberker could do it to one auction a day.
Corporate earnings.
Speaker 1 (08:09):
Yeah, it raises the question. I mean you think about
what happened with what was it left last earnings cycle
with the typo in their release and things went crazy,
but it was after hours, so the charts were still clean.
Speaker 2 (08:22):
Yeah. I mean, it's like a really traveling possibility about
twenty four seven trading is like if you had real
twenty four seven trading where I was like, oh, it's
like fake and deprecated, but it's like the market is
just open all the time. Then like when would companies
put out news?
Speaker 1 (08:34):
Yeah, and the government too.
Speaker 2 (08:36):
Right now, there's this norm of like six and a
half hours of market hours, and during market hours you
try not to put out market moving news because one
if you get it wrong. The stakes are horrible or
really high. But like two, if you put out news
at ten am, someone's going to see it first. Someone's
going to trade on it ahead of someone else. And
(08:57):
like the person who sees at first is going to
be someone who is paying for like the fastest data
connections to the exchanges. It's systematically going to be not
the retail trader.
Speaker 1 (09:07):
Right. I have an idea, Well, companies should release their
earnings at three am, and if you really care, you're
going to be up and we can still have normal
ish hours. Agree that it'll still be nine thirty and
four pm is when most of the trading happens. But
then you have goblin hours.
Speaker 2 (09:22):
But if you're like a hedge fund, you're you're awake
in goblin hours and like someone's winning and someone's losing.
Speaker 1 (09:27):
That's great, not for them, I know, but no, you
have goblin hours, and it'll be subverted where you have
all the professionals, all the hedge funds, they're trading in
the overnight session, and then the normal session will just
be kind of boring in retail.
Speaker 2 (09:39):
Look, I mean, news happens right now and some people
react to and the it is faster than others. But
it is not the case that there's a race to
react to every piece of corporate earnings news, right or
every economic data point, because most of those things come
out outside of market hours, and you can't really have
that race, right if you have true market hours twenty
four hours a day, then like you do have that
race every time news comes out, and it's a socially
(10:02):
wasteful race, right. If you ask hedge funds like, what
socially valuable thing do you do, They're like, oh, we
make prices more efficient. It's like, yeah, understanding earnings news
and buying stocks that are undervalued is like a good thing,
but racing to do that at three am, one second
ahead of another hedge fund is like you should just
go to bed and wake up at nine thirty and
do it.
Speaker 1 (10:19):
I wish that I had the Financial Times article pulled up,
because wasn't it one of the questions that was asked
in the survey was would the time you spend thinking
about overnight trading be better spent thinking about trading during
normal hours or yeah?
Speaker 2 (10:34):
I think it was like I think it was something
like should we stop asking you about this?
Speaker 1 (10:37):
Yeah?
Speaker 2 (10:37):
It was like with the time that nicey spends thinking
about overnight try to be better spent on something else.
If trading was one second to day, hedge funds would
still have incentives to understand companies and understand what might
move their prices and incorporate all the information into their
one trade a day. But at twenty four to seven trading,
it's like you're spending a lot of time optimizing, Like
(10:57):
when you're waking up, you're thinking about things other than
the fund.
Speaker 1 (11:00):
Mental Again, I root for chaos, but I feel like
at least this conversation has talked me into maybe we
should just stick to normal hours, or maybe we should
just be open for half an hour a day.
Speaker 2 (11:09):
I feel like I haven't adequately emphasized the main benefit
of half an hour day, which is like everyone would
get to relax more and spend more time with their families.
Speaker 1 (11:18):
We like watch financial TV.
Speaker 2 (11:20):
Well, I mean when I say everyone, I include financial
news anchors, and that you would also.
Speaker 3 (11:25):
Have less to do in a nice Yeah, maybe non competes.
Speaker 2 (11:43):
So we talked about last week about how I did
not take full advantage of my gardening.
Speaker 1 (11:48):
And now maybe you never will ever again.
Speaker 2 (11:51):
Now, maybe no one will ever get gardening leave again.
Speaker 1 (11:53):
God. Yeah. The FTC. Interesting move here about basically erratic
non competes. Yes, except for senior executives only barely.
Speaker 2 (12:05):
Yeah. Basically, the FTC voted this week to ban all
non competes forever. If you're a senior executive you currently
have a non compete, it's enforceable. But otherwise they voted
to get rid of non competes. One important thing here
is it's a good chance this doesn't ever happen. Right,
the FDC voted to do it. It goes into effect
in about six months, but there are already like multiple
lawsuits against it, and even the FTC. There are five
(12:26):
FTC commissioners. Two of them voted against it, and they
both said in their votes against that this is not
going to pass muster with the courts, and we can
talk about the FDC's authority for it.
Speaker 1 (12:36):
I mean, I am interested in that because my first
reaction was like why, and also why the FTC and
why is the FTC focusing on this? Shouldn't they be
like trying to stop Tapestry from buying Capri and other things.
Speaker 2 (12:48):
The FTC was in the business of stopping unfair methods
of competition. Right, Like, we mostly think of it as
anti trust, right, but it's also like false advertising and
like other kinds of fraud. And they think that non
competes are an unfair method of competition, and you can
see why, right. I mean, like one thing that they
talk about in the rule and in the public statements
(13:09):
is non competes can stop people from leaving a company
to start a new business. So it's like a very
direct way for a company to prevent new businesses coming
out to compete with them.
Speaker 1 (13:17):
Right.
Speaker 2 (13:17):
The rule really mentions doctors a lot, Like doctors are
an important case. Doctors will often have non competes, and
if you're a doctor and you leave your practice, you
have to like sometimes move to a different state to
continue practicing medicine, and like to the extent the FTC
is in the business of protecting consumer choice and lowering
consumer prices. That seems like it would be bad for
consumers that they can't get a doctor because the doctor
(13:39):
had to move away, So it makes sense that it's
the FTC. Yeah, the FDC, this is not something they've
done before, and their authority for it is a little unclear,
and their ability to make rules about it is unclear. Yeah,
and you know, we live in a judicial climate where
when agencies are like, we're going to make new rules
to regulate things we've never regulated before, it's hard to
(14:01):
imagine the current Supreme Court saying Okay, great, sounds good.
Speaker 1 (14:04):
Right.
Speaker 2 (14:05):
It just feels like that's the sort of thing that
modern courts don't like.
Speaker 1 (14:08):
So some pretty big question marks over authority here. And
maybe this won't even happen, But I mean, this was
a good reminder that at least I almost exclusively think
about non competes in the context of the financial industry.
But if you take a look at some of the
examples that the FDC used. You wrote about the powerwasher
(14:28):
who said, all I know is powerwashing. These business owners
all want me to sign a non compete clause. They
also cited someone who works in the asphalt industry, a bartender,
and as you were saying, a physician in rural underserved Appalasia.
So I don't know, that was a nice reminder.
Speaker 2 (14:46):
They've been like media reports about non competes in the
fast food industry. It's really it is pretty widespread.
Speaker 1 (14:52):
Yeah, the FTC had some numbers there too that nearly
twenty percent of workers are subject to non competes today,
and their estimate is that it would increase US earnings
by at least four hundred billion dollars over the next
ten years to abolish non competes. A lot of readers
emailed in about PE non competes, PE purchase non competes.
Speaker 2 (15:14):
I got like a couple of emails from readers being like,
I work in private equity and we buy companies, and
a lot of the companies that private equity buyers are like,
it's like asset lights, some guy operating in business, right,
And so when you buy that business, you're sort of
buying the person. And if you pay that person twenty
(15:34):
million dollars to take over his business and then he
leaves and sets up another business, he'll probably take all
the customers with him, because it's like it's just him, yeah,
and you're out twenty million dollars for nothing. And so
seeing the headline of like FTC bands on competes, people
got really worried that would make it impossible to buy
and sell sort of one person small businesses. But there
(15:57):
is an exception for that, like the if you're signing
a non compete in connection with the sale of a business,
then that's enforceable.
Speaker 1 (16:03):
So rest easy.
Speaker 2 (16:05):
And you don't even have to be the owner of
the business. You know, if you have like a twenty
person company, like all the people in the company can
sign a non compete and it's still unforceable because you know,
what you're selling is the people in the business. So
there you go. Rest easy. I want to say one other.
Speaker 1 (16:18):
Thing, yeah, and you should.
Speaker 2 (16:19):
So the way it works is like they banned future
non competes, but they also say all current non competes
don't work, they're not enforceable. And so one thing in
the rule is that if you're a company that has
non competes, you have to send a notice to all
of your workers saying your non competes are no longer enforceable,
and like they actually have like language and the rule
of like this is what you have to put in
the email. My impression is that there are a lot
(16:39):
of non competes that are already illegal. In most states,
non competes are allowed, but they have to be reasonable,
and a lot of people sign unreasonable non competes. And
my impression is that companies write these illegal non competes
because they figure everyone sees this contract, and they're scared
and they're not going to go work for a competitor
because they don't want to get sued, and they don't
(17:00):
know enough about the law. They don't know if that
the non compete is illegal, And so you can get
a lot of mileage out of a non compete as
a company by just writing it down and like never
trying to enforce it. Even if it's not enforceable. You
can just say you can't compete, and then most people won't.
So the FDC wants to solve that problem by saying
you have to send all of your employees a letter
saying your non compute is unenforceable. Go ahead and compete,
(17:22):
but garden leave.
Speaker 1 (17:23):
I know that you had a bad experience. That also
sounds really nice.
Speaker 2 (17:26):
A lot of people in normal jobs think non competes
are bad because they just restrict their ability to get
a new job. But in finance you're like, oh, no,
I have to spend six months not working and getting
paid for me I can Finance people are like, I
kind of like the I like the noncompete status quo.
I was trying to figure out what happens to that.
(17:49):
In finance, it's like what tools do you have as
a financial firm to prevent people from competing. So one
is like you have a noncompete, which is maybe now illegal,
but I think the way that things normally work currently
is that like you have gardening leave, which is normally structured.
I think as you continue to be employed at the firm,
and they pay you your base salary, and you stay
(18:12):
there for some period, not going into work, not having
access to like the email system, getting pay your base salary,
and then eventually you leave. There's a litt unclear how
you would actually force that because I think that the
way finance works is that you have a non compete,
and so when you quit, you say I'm quitting, and
they're like, stay for your six month notice period and
(18:33):
will pay you. And if you say no, I don't
want to do that, they say, we have a non compete.
So you can't actually leave at the other firm anyway.
So it's like both like the employment terms and the
non compute. If the non compete goes away, it's not
totally clear to me that you could enforce the gardening
leave because you can be like, oh, you need to
provide six months notice to quit, and then someone is like,
I quit, I have at will employment in New York.
(18:55):
I'm quitting with no notice. And it's not clear how
much they can force you to stick to your six
month notice period if you don't want to get paid,
if you want to go to your new firm, which
if that became the norm, your new firm would insist
on it, then you wouldn't be able to get your
gardening leaf. Yeah, so I think you can do it.
I think you can write employment contracts. Let's say you
have to give six month notice. But it's a little
trickier than having the non compete as well.
Speaker 1 (19:16):
That's interesting to hear because I mean, reading your column
and the description of notice period, I was like, oh, well,
then we'll just do that.
Speaker 2 (19:23):
Yeah. I think that might be where it shakes that,
but I'm not totally sure. I think it might be
harder to enforce that if people really want to leave
without their gardening leave. Now you can imagine everyone having
this sort of gentleman's agreement of we're all going to
take our gardening leaf. The real hard chargers don't always
want to take the gardening leave.
Speaker 1 (19:39):
Well, it sort of reminds me this discussion very loosely
about like the eternity leave. Maybe we can cut this.
But like, if you can get some alpha by not
taking your paternity leave and like showing how hardcore and
dedicated you are, maybe the gardening leave will kind of
turn into that I'm so dedicated and I'm so eager
to just get going, I'm not going to take gardening leave.
(20:01):
Will become a thing.
Speaker 2 (20:03):
Nobody says to their new employer, I'm taking gardening leave.
I'll see you in six months. Everyone always conveys the
impression that they're so sorry about the gardening leave and
they'd really like to get started right away, and then
they like go home and you know, sit on the
couch and are happy. But I think if it became
possible to not take the gardening leave, then I think
that would become the requirement. Yes, this ties into the
(20:25):
twenty four seven trading, right. You need a certain amount
of rests from your financial job. Gardening, believe is a
nice way.
Speaker 1 (20:31):
To get that. Like life is just hurtling towards relentlessly
just being on all the time.
Speaker 2 (20:37):
I think that that is certainly the message of twenty
four seven trading. And like my impression is that there
are a minority of people in finance who've gotten really
good at optimizing for gardening leave. You like, quit your job,
spend six months on gardening leave, you start your new job,
you're like, ah, I gotta go back to that other job.
Speaker 1 (20:53):
Yeah.
Speaker 2 (20:53):
Quit After a month, you get like nine months of
gardening leave.
Speaker 1 (20:56):
It can be like so good. I mean you linked
to that tweet about LinkedIn profile. The guy did that
and his descriptions were so funny. It was winter while
he was gardening leaving, so he just saw on his
couch and read books which came from trees, so it
was still a form of gardening.
Speaker 2 (21:11):
It's a nice benefit of the financial career. You get
the occasional sabbatical in the form of gardening leave, and
it would be sad I think for a lot of
people if it went away.
Speaker 1 (21:19):
Not The only way to get a lot of time
off is to have a child.
Speaker 2 (21:23):
Spoken like someone just not a children. I don't think
most people think of ford to leave us time off.
Speaker 1 (21:30):
Yeah. Maybe, did you know Accornable's fargo costco shoppers spend
(21:51):
two hundred million dollars a month on gold. That is crazy.
Speaker 2 (21:55):
Some of that must be because they want.
Speaker 1 (21:57):
To go Yeah, right. Some of it also, gold has
gone a lot more expensive, yeah, right.
Speaker 2 (22:03):
Some of it is like gold hoarding for whatever reason.
Some of it is correct financial speculation should just.
Speaker 1 (22:10):
Be buying ETFs.
Speaker 2 (22:11):
But you know something something about holding an actual gold.
Speaker 1 (22:16):
Bar instead of.
Speaker 2 (22:19):
If you want like gold, you want gold, you don't
want ants, you're.
Speaker 1 (22:23):
Actually tapping into like a very real tension.
Speaker 2 (22:26):
Absolutely, yeah, absolutely.
Speaker 1 (22:27):
Sounds like it's attention you're familiar with.
Speaker 2 (22:30):
Oh, I've I've encountered people who want to buy gold,
but some people who buy gold from Costco are doing
it for credit card.
Speaker 1 (22:37):
Reward points and we're trying.
Speaker 2 (22:40):
Or trying they're doing it for credit card reward points.
But I wrote about this because the Most Journal had
an article about Costco gold and it started with this
guy who bought a lot of gold from Costco for
credit card points and then he tried to resell it
and he got less than he paid for it, and
I hate he was like, oh my Margins. You know,
he was very sad, And I wrote in general, the
(23:03):
great consumer financial arbitrage is like if you can buy
a thing that you can resell for the same price
you paid for it, and if you can put it
on your credit card, then like you can get your
credit card points, and you know, you have a sort
of a perpetual motion machine where you can like manufacture
credit card points without spending any money. And I said
something like this is the great consumer financial arbitrage. But
(23:24):
it's hard to do because credit card companies are aware
of this, right, and they try to crack down on it.
And of course, my readers, is that something like a
shudder to think of all the creddits that must all
the subreddits that must exist about buying costco cold for
credit card points. I got so many emails people are like,
people like, this is how I manufacture credit card points.
Like a lot of people pointed out that in like
(23:45):
twenty ten, the US Mint really wanted people to start
using dollar coins because the dollar coin is like more
cost effactor for the Mint than the dollar bill, and
so they were like, we're going to be like Europe
and transition to the dollar coin. And so they were
like trying to encourage people to get and use dollar coins.
And one way they did that was they let you
buy dollar coins like sacks of dollar coins for a
(24:06):
dollar each with free shipping, which is they're heavy and
you could do it on your credit card, and so
people are like, I'm gonna buy one thousand dollar coins
on my credit card. I'm gonna get ten dollars or
twenty dollars of credit card rewards. They're gonna arrive at
my house. I'm gonna put them directly in the card,
drive them to the bank to positive in the bank,
paying my credit card bill with that. And so the
US Mint did not get what it wanted, which was
(24:29):
like circulating use of the dollar coins, because everyone was
just taking them to the bank to pay their credit
card bills. People got a lot of airline miles out
of it. Eventually they shut it down.
Speaker 1 (24:38):
But yeah, you know, and I.
Speaker 2 (24:39):
Think the Mint was like losing money on each transaction.
Speaker 1 (24:41):
Right because they I would imagine that they were.
Speaker 2 (24:43):
The way credit card rewards work is that the seller
pays a fee of one and a half percent to
the credit card company. And so here the MINT is
paying one and a half percent to the credit card company,
which is giving it back to you in the form
of airline models, and the Mint is losing one and
a half cents on every dollar coin. Yeah, so eventually
they shut that.
Speaker 1 (25:00):
I will say, like reading the Wall Street Journal, article
and then your column. I was thinking, I don't know,
maybe these people just trying to flip it too fast.
I mean gold prices, well, right.
Speaker 2 (25:08):
With gold, you're not buying a dollar quint. Right with gold,
you're buying a thing that could go up.
Speaker 1 (25:12):
Yeah, it's been going up quite a bit over the
past few months. But then I read there was an
anecdote in the Wall Street Journal article about Luke Gribe.
I hope I'm pronouncing his name right. He's of Southeast Michigan.
He waited almost a decade to make a profit on
his gold bar. He sold his one ounce credit sweet
bar for twenty three hundred and fifty dollars in April.
(25:34):
Not bad. That's after he paid fifteen hundred dollars for
back in twenty fifteen. Was it worth it?
Speaker 2 (25:41):
I feel like if you bought the smp'd have done.
But yeah, the cold bar.
Speaker 1 (25:46):
Yeah, it's a lot of thinking. I would just buy
an ETF with a credit card. I don't know.
Speaker 2 (25:53):
I do want to mention another credit card awards story, which,
as you should somewhere you reminded of this. I actually
wrote about it in the past. There's this I who's
a experimental physicist and who was like, how can I
build a perpetual motion machine? So he hit an Amex
ames a lot of these credit cards. The way it
works is like they pay like one percent cash back,
but they give you like extra bonuses on certain categories
(26:14):
of spending to like encourage you to use their card more.
And so Amex was giving him five percent cash back
at grocery stores. So he'd get a grocery stores. He
would buy gift card like Visa prepaid gift cards at
the grocery stores, and he would get his five percent
cash back on these Visa prepaid gift cards. He would
take the gift cards and buy money orders. He would
take the money orders and deposit them in his bank.
(26:37):
He use the money in the bank to pay his
credit card bills. So it was just like a sort
of like closed loop of exchanging money for money for
money beautiful. And he got five percent on the credit
card transactions. He had to pay a little bit for
the gift card, he had to pay a little bit
for the money orders, but all in all he made
like three percent millions and millions and millions of dollars
worth of prepaid gift cards. Like every time he went
(26:57):
to the grocery store, he bought like all their gift cards.
He made I think three hundred thousand dollars of profit
three hundred three hundred ten thousand dollars of profit. And
then we know about this because the IRS wanted him
to pay taxes in his games for this trade. And
he was like, no, long standing IRS rules are that
(27:20):
credit card cash back or just the discount. They're not income,
they're just like reducing your expenses, and so you don't
have to pay taxes on them. And he actually won
in tax card. So he had this like three hundred
thousand dollars of arbitrage income that he didn't have to
pay taxes on.
Speaker 1 (27:32):
See that sounds more worth it than less than a
thousand dollars over ten years.
Speaker 2 (27:37):
Sure, cold is in some way and an efficient way
to do it, because it's heavy, right. Gift cards are lighter, right,
And so a lot of people find ways to buy
cash equivalents on credit cards and then max that out
as much as possible before the credit card company shuts
it down.
Speaker 1 (27:50):
I have two points here specifically on gold, not on
credit cards. Okay, you make the point that gold is heavy,
and it is heavy and actually in one of the articles,
according to j M bullion, shipping fees can be as
much as forty dollars for an ounce of gold, so
it is expensive to ship it around, and then insurance
on the shipping that's another forty dollars.
Speaker 2 (28:10):
Gold is heavy, but an ounce of gold I think
weighs an ounce.
Speaker 1 (28:13):
Yeah, I know, but if you're shipping more than one
ounce of gold, it's going to add up there.
Speaker 2 (28:19):
Sure.
Speaker 1 (28:19):
The other point is that we were talking about ETFs
and gold ETFs. The largest gold etf is GLD, and
it's been shipping fees, no shipping fees for gold ETFs.
But the gold is in a vault underground in London,
which I'm fascinated by. I would like to go to
the vault, but you can't go to the vault as
(28:42):
a journalist.
Speaker 2 (28:43):
Okay, interesting, Yeah, but.
Speaker 1 (28:45):
There are a lot I remember. Actually how we got
there was because GLD skyrocketed and assets at one point
during the pandemic. Everyone wanted it and it just grew
so much, and there were a ton of conspiracy theories
out there, probably on Reddit too, about whether they actually
had the gold to back it up. Sure, but it's
in London. Underground. But you can't go to the vault.
(29:05):
None of us can go to the vault.
Speaker 2 (29:07):
You here, how suspicious this ound. I know white people
are buying gold bars at Costco rather than GLD.
Speaker 1 (29:12):
It makes sense.
Speaker 2 (29:14):
Then you have it.
Speaker 1 (29:15):
Do you trust State Street? Apparently a lot of people didn't.
Speaker 2 (29:18):
I do, because my life is integrated into the modern
financial system. If I didn't trust the modern financial system
and I wanted to own gold instead, I wouldn't want
to own gold through State Street in a vault that,
like crack reporter Katie Graefel couldn't even get into.
Speaker 1 (29:32):
I did ask a stupid question at the time because
assets in the CTF were going crazy, so they were
having to buy a lot of gold. Well, I said,
is there enough room in the vault? We're like, yes,
of course, Like gold.
Speaker 2 (29:44):
Is right, gold bar right.
Speaker 1 (29:47):
So there's plenty of room in this spot.
Speaker 2 (29:49):
It's like it's like a room this size, and it's
just like a little pile on the corner.
Speaker 1 (29:54):
I just always thought of greenots, and that's what I
had in my mind.
Speaker 2 (30:01):
That was the Money Stuff podcast.
Speaker 1 (30:02):
I'm Matt Levin and I'm Katie Greifeld.
Speaker 2 (30:05):
You can find my work by subscribing to The Money
Stuff newsletter on Bloomberg dot.
Speaker 1 (30:08):
Com, and you can find me on Bloomberg TV every
day between ten and eleven am Eastern.
Speaker 2 (30:13):
We'd love to hear from you. You can send an
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Speaker 1 (30:20):
You can also subscribe to our show wherever you're listening
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people find the show.
Speaker 2 (30:27):
The Money Stuff Podcast is produced by Anamsarakus and Moses
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Speaker 1 (30:31):
Our theme music was composed by Blake Maples.
Speaker 2 (30:33):
Brandon Francis Nannim is our executive producer, and.
Speaker 1 (30:36):
Sage Bauman is Bloomberg's head of Podcasts.
Speaker 2 (30:39):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff.
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:10):
Hello and welcome to the Money Stuff Podcast. You're a
weekly podcast where we talk about stuff related to money.
I'm Matt Levian, I write the Money Stuff column for
Bloomberg Opinion.
Speaker 1 (00:20):
And I'm Katie Greifeld. I'm a reporter for Bloomberg News
and an anchor for Bloomberg Television.
Speaker 2 (00:26):
Katie, what do you got today?
Speaker 1 (00:28):
We have a meaty show. We're going to talk about, oh,
it's a twenty four to seven stock trading potentially what
that world might look like. Then we're going to talk
about the FTC and non competes, the FTC continuing to
be aggressive on a multitude of topics. Then we're going
to talk about gold bars, which I'm quite excited about,
(00:49):
and the arbitrage opportunities that don't exist.
Speaker 2 (00:52):
My readers love in arbitrave twenty four seven stock trading.
Speaker 1 (01:02):
Well, there's twenty four to seven, and then there's the
possibility that there's around the clock trading just on weekdays, which.
Speaker 2 (01:08):
Is a little more humane.
Speaker 1 (01:09):
Yes, exactly, I was actually exactly going to say humane,
but maybe we should set the scene that this comes
from a Financial Times article that Nise took a survey.
Speaker 2 (01:20):
They're like, hey, if we had twenty four seven trading,
would you trade twenty four seven or twenty four five.
I think the survey had a bunch of options. Yeah,
it's like twenty four hours a day, seven days a week.
Both neither and.
Speaker 1 (01:32):
I don't believe that we have the results of that survey,
which feel key.
Speaker 2 (01:35):
I mean, it's not a public survey, it's for their
own information. But the reason they're doing it is because
there is pressure on it. Right. Someone started to think
called the twenty four exchange, that's meant to be a
twenty four hour I think it's actually twenty three hours
a day, And all the retail brokerages are moving to
offer extended hour overnight trading because a lot of robin
(01:56):
Hood customers would really like to be able to trade
stocks at three am.
Speaker 1 (01:59):
Yeah.
Speaker 2 (02:00):
So Nice sees where the market is going and is
asking its customers about it.
Speaker 1 (02:04):
Yeah, and I guess that kind of answers the question
of who would this before, and it would be for
pajame traders, retail folks.
Speaker 2 (02:12):
I think it would be for a lot of pajama
trating retail folks. The crypto market has been twenty four
to seven. Part of what's causing this is like crypto
is twenty four to seven, and people like, oh yeah,
twenty four seven trading can work. And you look at crypto, right,
they're like peaks when Asian markets wake up and when
European markets wake up. So I think some of this
might be for like news happens in Asia in like
the US overnight and people can go and trade American stocks.
(02:36):
A lot of it is for pajama traders.
Speaker 1 (02:37):
I was gonna say, and who am I, But I
feel like the crypto market is that where we should
be taking our cues from in terms of twenty four
to seven trading.
Speaker 2 (02:45):
I mean, I'm not sure that crypto has necessarily provided
great lessons for like real financial markets. Real financial markets
have patterns that come from technology of two hundred years ago,
and sometimes it takes a sort of brand new market
to cast aside that technology and say, wait a minute,
we have the computers to trade twenty four seven, so
let's just do it.
Speaker 1 (03:05):
Thinking about the effects that this could have. Again, in
this hypothetical scenario where there's twenty four to five or
twenty four to seven trading, what the effects on liquidity
might be are really interesting because in normal market hours
in the US, it's the open and the close is
when you get the most volume. But if there's not
an open and there's not a close, where are the
(03:26):
liquidity clusters?
Speaker 2 (03:27):
I suspect the answer is the open and the close.
I suspect, By the way, like Nicey and Ethic exchanges
offer extended hour trading, and it starts structural, but it's
in part just like tradition, like people know that nine
thirty and four are the times when everyone trades, and
so there are auctions then, and that's when liquidity clusters,
and you can trade ten minutes before the opening auction
or ten minutes after what the opening auction does collect liquidity.
(03:48):
I suspect that it won't be a crypto exchange where
it's we just turn it on and it goes forever. Yeah,
it'll be like Nicey, where there's a nine to thirty
auction and a four o'clock auction and trading during the
day and then after hour there's some other thing that's
like the overnight session, but it's like a little deprecated
so people understand where the main sources of liquidity are.
Speaker 1 (04:06):
I root for chaos in general. I'm interested to see
what three am would look like on a twenty four
to five exchange, what shenanigans would happen around that time.
Speaker 2 (04:17):
Presumably it's mostly pajama trading, retail traders interacting with one
or two very nervous electronic market makers. And then, like
every so often, the catastrophe happens overnight and like big
traders rushed to sell and the stock crashes because there's
no deep liquidity provision. Yeah, you'll see a lot more
flash crashes because like fewer people are going to be
(04:37):
putting in quotes at three am, so.
Speaker 1 (04:39):
The charts will get super fun, even.
Speaker 2 (04:41):
Like one big retail trader could crash the slack. Although
you say that the charts like even now, if you
look at like the Bloomberg charts, they are the nine
thirty to four o'clock session. There's trading after hours, but
everyone kind of understands that it doesn't count. You root
for chaos. I've been advocating for years that the stock
market should move to half an hour a day. The
large bulk professional trading occurs at the opening in the close.
(05:01):
If you don't have any like particular reason, right if
you're just like if you're a mutual fund with outflows
or whatever, Like you did try to get the closing
print right. You're looking to trade where there's the most
liquidity if you don't have any special information, and if
you concentrate all the liquidity at one time, you get
more efficient prices. If you've spread the liquidity over twenty
four hours, it like all gets worse. One thing I
(05:22):
was thinking about is if you do go to twenty
four hour trading, that probably moves some liquidity away from
like two pm right right, and so then it has
the effect of possibly concentrating even more trading at the
open end close, because people are like, oh, there's twenty
four hours of trading in the day, there's two real events,
and everything else is like a ghost town. So I
might as well only trade at the open up the close.
Speaker 1 (05:42):
That would be a fun effect if it worked out
that way.
Speaker 2 (05:45):
It would be even from a reader suggesting that there
should just be one auction a day. Everyone could put
in their bids in the auction and like you'd clear
the stock at whatever the clearing price of the auction was,
and then you'd try it again tomorrow.
Speaker 1 (05:55):
Beautiful.
Speaker 2 (05:57):
That is very appealing to me because it would give
people up free time, right, you wouldn't have to trade
all the time. The other advantage of that is it
cuts down on the cost of intermediation. I'm not sure,
but I think that if you go to twenty four
hour trading, then the high frequency trading firms of the
world are going to make more money because they're going
to be trading with retail traders at three am, and
(06:18):
in the aggregate that'll be noise trading, but liquidity will
be very thin, and they'll charge a lot for spreads, right,
I mean, like the point of a high frequency trader
is that there are a lot of people want to
buy stock. There a lot of people want to sell stock.
They don't come to the market at exactly the same time,
and so some electronic market maker is buying from the
people who want to sell, holding the stock for a
(06:38):
second or a minute or an hour, and then selling
it to people who want to buy. If you spread
out the trading, there's just more of that. There's like
more people coming in at different times, and more money
for high frequency traders to make because they are doing
more of that intermediaty trades in time, whereas if you
put all of the trading in one auction, then all
the people want to buy, all of the people want
to sell meat at that one second, and you don't
have any need for like electronic and mediation.
Speaker 1 (07:00):
There are your two extremes.
Speaker 2 (07:01):
Those are your two extremes. And like the modern like
retail stock trading boom, the like meme stock boom. Yeah,
people are so mad at the Citadel Securities of the world.
They're so mad at the hyper concy traders, but they
also want to trade stock at three. Yeah. The memestock
boom has been great for those hyper concut traders, right
because they're getting all this order flow to trade with,
while all these retail traders are so mad at at
Ceditel Securities. This is the same thing where it's like
(07:24):
this thing that caters to retail traders, I think will
be very good for the electronic market makers.
Speaker 1 (07:30):
So they need each other.
Speaker 2 (07:31):
Yeah. I think some of the memestock traders have a
somewhat faulty understanding of how Citital Securities makes money. I
think that if you have twenty four hour trading, it's
gonna be really good for those guys. And if you
don't like those Guys, if you think that it's bad
that these intermediaries make so much money trading stocks, which
I don't really think but like a lot of people do,
(07:53):
then collapsing it to one single point of trading would
be good for making traders.
Speaker 1 (07:56):
Then what would the financial television anchors talk about all day?
Speaker 2 (08:00):
I was going to say maybe the same thing, but
of course.
Speaker 1 (08:03):
I just talk about it market more.
Speaker 2 (08:05):
Oh yeah, Bomberker could do it to one auction a day.
Corporate earnings.
Speaker 1 (08:09):
Yeah, it raises the question. I mean you think about
what happened with what was it left last earnings cycle
with the typo in their release and things went crazy,
but it was after hours, so the charts were still clean.
Speaker 2 (08:22):
Yeah. I mean, it's like a really traveling possibility about
twenty four seven trading is like if you had real
twenty four seven trading where I was like, oh, it's
like fake and deprecated, but it's like the market is
just open all the time. Then like when would companies
put out news?
Speaker 1 (08:34):
Yeah, and the government too.
Speaker 2 (08:36):
Right now, there's this norm of like six and a
half hours of market hours, and during market hours you
try not to put out market moving news because one
if you get it wrong. The stakes are horrible or
really high. But like two, if you put out news
at ten am, someone's going to see it first. Someone's
going to trade on it ahead of someone else. And
(08:57):
like the person who sees at first is going to
be someone who is paying for like the fastest data
connections to the exchanges. It's systematically going to be not
the retail trader.
Speaker 1 (09:07):
Right. I have an idea, Well, companies should release their
earnings at three am, and if you really care, you're
going to be up and we can still have normal
ish hours. Agree that it'll still be nine thirty and
four pm is when most of the trading happens. But
then you have goblin hours.
Speaker 2 (09:22):
But if you're like a hedge fund, you're you're awake
in goblin hours and like someone's winning and someone's losing.
Speaker 1 (09:27):
That's great, not for them, I know, but no, you
have goblin hours, and it'll be subverted where you have
all the professionals, all the hedge funds, they're trading in
the overnight session, and then the normal session will just
be kind of boring in retail.
Speaker 2 (09:39):
Look, I mean, news happens right now and some people
react to and the it is faster than others. But
it is not the case that there's a race to
react to every piece of corporate earnings news, right or
every economic data point, because most of those things come
out outside of market hours, and you can't really have
that race, right if you have true market hours twenty
four hours a day, then like you do have that
race every time news comes out, and it's a socially
(10:02):
wasteful race, right. If you ask hedge funds like, what
socially valuable thing do you do, They're like, oh, we
make prices more efficient. It's like, yeah, understanding earnings news
and buying stocks that are undervalued is like a good thing,
but racing to do that at three am, one second
ahead of another hedge fund is like you should just
go to bed and wake up at nine thirty and
do it.
Speaker 1 (10:19):
I wish that I had the Financial Times article pulled up,
because wasn't it one of the questions that was asked
in the survey was would the time you spend thinking
about overnight trading be better spent thinking about trading during
normal hours or yeah?
Speaker 2 (10:34):
I think it was like I think it was something
like should we stop asking you about this?
Speaker 1 (10:37):
Yeah?
Speaker 2 (10:37):
It was like with the time that nicey spends thinking
about overnight try to be better spent on something else.
If trading was one second to day, hedge funds would
still have incentives to understand companies and understand what might
move their prices and incorporate all the information into their
one trade a day. But at twenty four to seven trading,
it's like you're spending a lot of time optimizing, Like
(10:57):
when you're waking up, you're thinking about things other than
the fund.
Speaker 1 (11:00):
Mental Again, I root for chaos, but I feel like
at least this conversation has talked me into maybe we
should just stick to normal hours, or maybe we should
just be open for half an hour a day.
Speaker 2 (11:09):
I feel like I haven't adequately emphasized the main benefit
of half an hour day, which is like everyone would
get to relax more and spend more time with their families.
Speaker 1 (11:18):
We like watch financial TV.
Speaker 2 (11:20):
Well, I mean when I say everyone, I include financial
news anchors, and that you would also.
Speaker 3 (11:25):
Have less to do in a nice Yeah, maybe non competes.
Speaker 2 (11:43):
So we talked about last week about how I did
not take full advantage of my gardening.
Speaker 1 (11:48):
And now maybe you never will ever again.
Speaker 2 (11:51):
Now, maybe no one will ever get gardening leave again.
Speaker 1 (11:53):
God. Yeah. The FTC. Interesting move here about basically erratic
non competes. Yes, except for senior executives only barely.
Speaker 2 (12:05):
Yeah. Basically, the FTC voted this week to ban all
non competes forever. If you're a senior executive you currently
have a non compete, it's enforceable. But otherwise they voted
to get rid of non competes. One important thing here
is it's a good chance this doesn't ever happen. Right,
the FDC voted to do it. It goes into effect
in about six months, but there are already like multiple
lawsuits against it, and even the FTC. There are five
(12:26):
FTC commissioners. Two of them voted against it, and they
both said in their votes against that this is not
going to pass muster with the courts, and we can
talk about the FDC's authority for it.
Speaker 1 (12:36):
I mean, I am interested in that because my first
reaction was like why, and also why the FTC and
why is the FTC focusing on this? Shouldn't they be
like trying to stop Tapestry from buying Capri and other things.
Speaker 2 (12:48):
The FTC was in the business of stopping unfair methods
of competition. Right, Like, we mostly think of it as
anti trust, right, but it's also like false advertising and
like other kinds of fraud. And they think that non
competes are an unfair method of competition, and you can
see why, right. I mean, like one thing that they
talk about in the rule and in the public statements
(13:09):
is non competes can stop people from leaving a company
to start a new business. So it's like a very
direct way for a company to prevent new businesses coming
out to compete with them.
Speaker 1 (13:17):
Right.
Speaker 2 (13:17):
The rule really mentions doctors a lot, Like doctors are
an important case. Doctors will often have non competes, and
if you're a doctor and you leave your practice, you
have to like sometimes move to a different state to
continue practicing medicine, and like to the extent the FTC
is in the business of protecting consumer choice and lowering
consumer prices. That seems like it would be bad for
consumers that they can't get a doctor because the doctor
(13:39):
had to move away, So it makes sense that it's
the FTC. Yeah, the FDC, this is not something they've
done before, and their authority for it is a little unclear,
and their ability to make rules about it is unclear. Yeah,
and you know, we live in a judicial climate where
when agencies are like, we're going to make new rules
to regulate things we've never regulated before, it's hard to
(14:01):
imagine the current Supreme Court saying Okay, great, sounds good.
Speaker 1 (14:04):
Right.
Speaker 2 (14:05):
It just feels like that's the sort of thing that
modern courts don't like.
Speaker 1 (14:08):
So some pretty big question marks over authority here. And
maybe this won't even happen, But I mean, this was
a good reminder that at least I almost exclusively think
about non competes in the context of the financial industry.
But if you take a look at some of the
examples that the FDC used. You wrote about the powerwasher
(14:28):
who said, all I know is powerwashing. These business owners
all want me to sign a non compete clause. They
also cited someone who works in the asphalt industry, a bartender,
and as you were saying, a physician in rural underserved Appalasia.
So I don't know, that was a nice reminder.
Speaker 2 (14:46):
They've been like media reports about non competes in the
fast food industry. It's really it is pretty widespread.
Speaker 1 (14:52):
Yeah, the FTC had some numbers there too that nearly
twenty percent of workers are subject to non competes today,
and their estimate is that it would increase US earnings
by at least four hundred billion dollars over the next
ten years to abolish non competes. A lot of readers
emailed in about PE non competes, PE purchase non competes.
Speaker 2 (15:14):
I got like a couple of emails from readers being like,
I work in private equity and we buy companies, and
a lot of the companies that private equity buyers are like,
it's like asset lights, some guy operating in business, right,
And so when you buy that business, you're sort of
buying the person. And if you pay that person twenty
(15:34):
million dollars to take over his business and then he
leaves and sets up another business, he'll probably take all
the customers with him, because it's like it's just him, yeah,
and you're out twenty million dollars for nothing. And so
seeing the headline of like FTC bands on competes, people
got really worried that would make it impossible to buy
and sell sort of one person small businesses. But there
(15:57):
is an exception for that, like the if you're signing
a non compete in connection with the sale of a business,
then that's enforceable.
Speaker 1 (16:03):
So rest easy.
Speaker 2 (16:05):
And you don't even have to be the owner of
the business. You know, if you have like a twenty
person company, like all the people in the company can
sign a non compete and it's still unforceable because you know,
what you're selling is the people in the business. So
there you go. Rest easy. I want to say one other.
Speaker 1 (16:18):
Thing, yeah, and you should.
Speaker 2 (16:19):
So the way it works is like they banned future
non competes, but they also say all current non competes
don't work, they're not enforceable. And so one thing in
the rule is that if you're a company that has
non competes, you have to send a notice to all
of your workers saying your non competes are no longer enforceable,
and like they actually have like language and the rule
of like this is what you have to put in
the email. My impression is that there are a lot
(16:39):
of non competes that are already illegal. In most states,
non competes are allowed, but they have to be reasonable,
and a lot of people sign unreasonable non competes. And
my impression is that companies write these illegal non competes
because they figure everyone sees this contract, and they're scared
and they're not going to go work for a competitor
because they don't want to get sued, and they don't
(17:00):
know enough about the law. They don't know if that
the non compete is illegal, And so you can get
a lot of mileage out of a non compete as
a company by just writing it down and like never
trying to enforce it. Even if it's not enforceable. You
can just say you can't compete, and then most people won't.
So the FDC wants to solve that problem by saying
you have to send all of your employees a letter
saying your non compute is unenforceable. Go ahead and compete,
(17:22):
but garden leave.
Speaker 1 (17:23):
I know that you had a bad experience. That also
sounds really nice.
Speaker 2 (17:26):
A lot of people in normal jobs think non competes
are bad because they just restrict their ability to get
a new job. But in finance you're like, oh, no,
I have to spend six months not working and getting
paid for me I can Finance people are like, I
kind of like the I like the noncompete status quo.
I was trying to figure out what happens to that.
(17:49):
In finance, it's like what tools do you have as
a financial firm to prevent people from competing. So one
is like you have a noncompete, which is maybe now illegal,
but I think the way that things normally work currently
is that like you have gardening leave, which is normally structured.
I think as you continue to be employed at the firm,
and they pay you your base salary, and you stay
(18:12):
there for some period, not going into work, not having
access to like the email system, getting pay your base salary,
and then eventually you leave. There's a litt unclear how
you would actually force that because I think that the
way finance works is that you have a non compete,
and so when you quit, you say I'm quitting, and
they're like, stay for your six month notice period and
(18:33):
will pay you. And if you say no, I don't
want to do that, they say, we have a non compete.
So you can't actually leave at the other firm anyway.
So it's like both like the employment terms and the
non compute. If the non compete goes away, it's not
totally clear to me that you could enforce the gardening
leave because you can be like, oh, you need to
provide six months notice to quit, and then someone is like,
I quit, I have at will employment in New York.
(18:55):
I'm quitting with no notice. And it's not clear how
much they can force you to stick to your six
month notice period if you don't want to get paid,
if you want to go to your new firm, which
if that became the norm, your new firm would insist
on it, then you wouldn't be able to get your
gardening leaf. Yeah, so I think you can do it.
I think you can write employment contracts. Let's say you
have to give six month notice. But it's a little
trickier than having the non compete as well.
Speaker 1 (19:16):
That's interesting to hear because I mean, reading your column
and the description of notice period, I was like, oh, well,
then we'll just do that.
Speaker 2 (19:23):
Yeah. I think that might be where it shakes that,
but I'm not totally sure. I think it might be
harder to enforce that if people really want to leave
without their gardening leave. Now you can imagine everyone having
this sort of gentleman's agreement of we're all going to
take our gardening leaf. The real hard chargers don't always
want to take the gardening leave.
Speaker 1 (19:39):
Well, it sort of reminds me this discussion very loosely
about like the eternity leave. Maybe we can cut this.
But like, if you can get some alpha by not
taking your paternity leave and like showing how hardcore and
dedicated you are, maybe the gardening leave will kind of
turn into that I'm so dedicated and I'm so eager
to just get going, I'm not going to take gardening leave.
(20:01):
Will become a thing.
Speaker 2 (20:03):
Nobody says to their new employer, I'm taking gardening leave.
I'll see you in six months. Everyone always conveys the
impression that they're so sorry about the gardening leave and
they'd really like to get started right away, and then
they like go home and you know, sit on the
couch and are happy. But I think if it became
possible to not take the gardening leave, then I think
that would become the requirement. Yes, this ties into the
(20:25):
twenty four seven trading, right. You need a certain amount
of rests from your financial job. Gardening, believe is a
nice way.
Speaker 1 (20:31):
To get that. Like life is just hurtling towards relentlessly
just being on all the time.
Speaker 2 (20:37):
I think that that is certainly the message of twenty
four seven trading. And like my impression is that there
are a minority of people in finance who've gotten really
good at optimizing for gardening leave. You like, quit your job,
spend six months on gardening leave, you start your new job,
you're like, ah, I gotta go back to that other job.
Speaker 1 (20:53):
Yeah.
Speaker 2 (20:53):
Quit After a month, you get like nine months of
gardening leave.
Speaker 1 (20:56):
It can be like so good. I mean you linked
to that tweet about LinkedIn profile. The guy did that
and his descriptions were so funny. It was winter while
he was gardening leaving, so he just saw on his
couch and read books which came from trees, so it
was still a form of gardening.
Speaker 2 (21:11):
It's a nice benefit of the financial career. You get
the occasional sabbatical in the form of gardening leave, and
it would be sad I think for a lot of
people if it went away.
Speaker 1 (21:19):
Not The only way to get a lot of time
off is to have a child.
Speaker 2 (21:23):
Spoken like someone just not a children. I don't think
most people think of ford to leave us time off.
Speaker 1 (21:30):
Yeah. Maybe, did you know Accornable's fargo costco shoppers spend
(21:51):
two hundred million dollars a month on gold. That is crazy.
Speaker 2 (21:55):
Some of that must be because they want.
Speaker 1 (21:57):
To go Yeah, right. Some of it also, gold has
gone a lot more expensive, yeah, right.
Speaker 2 (22:03):
Some of it is like gold hoarding for whatever reason.
Some of it is correct financial speculation should just.
Speaker 1 (22:10):
Be buying ETFs.
Speaker 2 (22:11):
But you know something something about holding an actual gold.
Speaker 1 (22:16):
Bar instead of.
Speaker 2 (22:19):
If you want like gold, you want gold, you don't
want ants, you're.
Speaker 1 (22:23):
Actually tapping into like a very real tension.
Speaker 2 (22:26):
Absolutely, yeah, absolutely.
Speaker 1 (22:27):
Sounds like it's attention you're familiar with.
Speaker 2 (22:30):
Oh, I've I've encountered people who want to buy gold,
but some people who buy gold from Costco are doing
it for credit card.
Speaker 1 (22:37):
Reward points and we're trying.
Speaker 2 (22:40):
Or trying they're doing it for credit card reward points.
But I wrote about this because the Most Journal had
an article about Costco gold and it started with this
guy who bought a lot of gold from Costco for
credit card points and then he tried to resell it
and he got less than he paid for it, and
I hate he was like, oh my Margins. You know,
he was very sad, And I wrote in general, the
(23:03):
great consumer financial arbitrage is like if you can buy
a thing that you can resell for the same price
you paid for it, and if you can put it
on your credit card, then like you can get your
credit card points, and you know, you have a sort
of a perpetual motion machine where you can like manufacture
credit card points without spending any money. And I said
something like this is the great consumer financial arbitrage. But
(23:24):
it's hard to do because credit card companies are aware
of this, right, and they try to crack down on it.
And of course, my readers, is that something like a
shudder to think of all the creddits that must all
the subreddits that must exist about buying costco cold for
credit card points. I got so many emails people are like,
people like, this is how I manufacture credit card points.
Like a lot of people pointed out that in like
(23:45):
twenty ten, the US Mint really wanted people to start
using dollar coins because the dollar coin is like more
cost effactor for the Mint than the dollar bill, and
so they were like, we're going to be like Europe
and transition to the dollar coin. And so they were
like trying to encourage people to get and use dollar coins.
And one way they did that was they let you
buy dollar coins like sacks of dollar coins for a
(24:06):
dollar each with free shipping, which is they're heavy and
you could do it on your credit card, and so
people are like, I'm gonna buy one thousand dollar coins
on my credit card. I'm gonna get ten dollars or
twenty dollars of credit card rewards. They're gonna arrive at
my house. I'm gonna put them directly in the card,
drive them to the bank to positive in the bank,
paying my credit card bill with that. And so the
US Mint did not get what it wanted, which was
(24:29):
like circulating use of the dollar coins, because everyone was
just taking them to the bank to pay their credit
card bills. People got a lot of airline miles out
of it. Eventually they shut it down.
Speaker 1 (24:38):
But yeah, you know, and I.
Speaker 2 (24:39):
Think the Mint was like losing money on each transaction.
Speaker 1 (24:41):
Right because they I would imagine that they were.
Speaker 2 (24:43):
The way credit card rewards work is that the seller
pays a fee of one and a half percent to
the credit card company. And so here the MINT is
paying one and a half percent to the credit card company,
which is giving it back to you in the form
of airline models, and the Mint is losing one and
a half cents on every dollar coin. Yeah, so eventually
they shut that.
Speaker 1 (25:00):
I will say, like reading the Wall Street Journal, article
and then your column. I was thinking, I don't know,
maybe these people just trying to flip it too fast.
I mean gold prices, well, right.
Speaker 2 (25:08):
With gold, you're not buying a dollar quint. Right with gold,
you're buying a thing that could go up.
Speaker 1 (25:12):
Yeah, it's been going up quite a bit over the
past few months. But then I read there was an
anecdote in the Wall Street Journal article about Luke Gribe.
I hope I'm pronouncing his name right. He's of Southeast Michigan.
He waited almost a decade to make a profit on
his gold bar. He sold his one ounce credit sweet
bar for twenty three hundred and fifty dollars in April.
(25:34):
Not bad. That's after he paid fifteen hundred dollars for
back in twenty fifteen. Was it worth it?
Speaker 2 (25:41):
I feel like if you bought the smp'd have done.
But yeah, the cold bar.
Speaker 1 (25:46):
Yeah, it's a lot of thinking. I would just buy
an ETF with a credit card. I don't know.
Speaker 2 (25:53):
I do want to mention another credit card awards story, which,
as you should somewhere you reminded of this. I actually
wrote about it in the past. There's this I who's
a experimental physicist and who was like, how can I
build a perpetual motion machine? So he hit an Amex
ames a lot of these credit cards. The way it
works is like they pay like one percent cash back,
but they give you like extra bonuses on certain categories
(26:14):
of spending to like encourage you to use their card more.
And so Amex was giving him five percent cash back
at grocery stores. So he'd get a grocery stores. He
would buy gift card like Visa prepaid gift cards at
the grocery stores, and he would get his five percent
cash back on these Visa prepaid gift cards. He would
take the gift cards and buy money orders. He would
take the money orders and deposit them in his bank.
(26:37):
He use the money in the bank to pay his
credit card bills. So it was just like a sort
of like closed loop of exchanging money for money for
money beautiful. And he got five percent on the credit
card transactions. He had to pay a little bit for
the gift card, he had to pay a little bit
for the money orders, but all in all he made
like three percent millions and millions and millions of dollars
worth of prepaid gift cards. Like every time he went
(26:57):
to the grocery store, he bought like all their gift cards.
He made I think three hundred thousand dollars of profit
three hundred three hundred ten thousand dollars of profit. And
then we know about this because the IRS wanted him
to pay taxes in his games for this trade. And
he was like, no, long standing IRS rules are that
(27:20):
credit card cash back or just the discount. They're not income,
they're just like reducing your expenses, and so you don't
have to pay taxes on them. And he actually won
in tax card. So he had this like three hundred
thousand dollars of arbitrage income that he didn't have to
pay taxes on.
Speaker 1 (27:32):
See that sounds more worth it than less than a
thousand dollars over ten years.
Speaker 2 (27:37):
Sure, cold is in some way and an efficient way
to do it, because it's heavy, right. Gift cards are lighter, right,
And so a lot of people find ways to buy
cash equivalents on credit cards and then max that out
as much as possible before the credit card company shuts
it down.
Speaker 1 (27:50):
I have two points here specifically on gold, not on
credit cards. Okay, you make the point that gold is heavy,
and it is heavy and actually in one of the articles,
according to j M bullion, shipping fees can be as
much as forty dollars for an ounce of gold, so
it is expensive to ship it around, and then insurance
on the shipping that's another forty dollars.
Speaker 2 (28:10):
Gold is heavy, but an ounce of gold I think
weighs an ounce.
Speaker 1 (28:13):
Yeah, I know, but if you're shipping more than one
ounce of gold, it's going to add up there.
Speaker 2 (28:19):
Sure.
Speaker 1 (28:19):
The other point is that we were talking about ETFs
and gold ETFs. The largest gold etf is GLD, and
it's been shipping fees, no shipping fees for gold ETFs.
But the gold is in a vault underground in London,
which I'm fascinated by. I would like to go to
the vault, but you can't go to the vault as
(28:42):
a journalist.
Speaker 2 (28:43):
Okay, interesting, Yeah, but.
Speaker 1 (28:45):
There are a lot I remember. Actually how we got
there was because GLD skyrocketed and assets at one point
during the pandemic. Everyone wanted it and it just grew
so much, and there were a ton of conspiracy theories
out there, probably on Reddit too, about whether they actually
had the gold to back it up. Sure, but it's
in London. Underground. But you can't go to the vault.
(29:05):
None of us can go to the vault.
Speaker 2 (29:07):
You here, how suspicious this ound. I know white people
are buying gold bars at Costco rather than GLD.
Speaker 1 (29:12):
It makes sense.
Speaker 2 (29:14):
Then you have it.
Speaker 1 (29:15):
Do you trust State Street? Apparently a lot of people didn't.
Speaker 2 (29:18):
I do, because my life is integrated into the modern
financial system. If I didn't trust the modern financial system
and I wanted to own gold instead, I wouldn't want
to own gold through State Street in a vault that,
like crack reporter Katie Graefel couldn't even get into.
Speaker 1 (29:32):
I did ask a stupid question at the time because
assets in the CTF were going crazy, so they were
having to buy a lot of gold. Well, I said,
is there enough room in the vault? We're like, yes,
of course, Like gold.
Speaker 2 (29:44):
Is right, gold bar right.
Speaker 1 (29:47):
So there's plenty of room in this spot.
Speaker 2 (29:49):
It's like it's like a room this size, and it's
just like a little pile on the corner.
Speaker 1 (29:54):
I just always thought of greenots, and that's what I
had in my mind.
Speaker 2 (30:01):
That was the Money Stuff podcast.
Speaker 1 (30:02):
I'm Matt Levin and I'm Katie Greifeld.
Speaker 2 (30:05):
You can find my work by subscribing to The Money
Stuff newsletter on Bloomberg dot.
Speaker 1 (30:08):
Com, and you can find me on Bloomberg TV every
day between ten and eleven am Eastern.
Speaker 2 (30:13):
We'd love to hear from you. You can send an
email to Moneypod at Bloomberg dot net, ask us a
question and we might answer it on air.
Speaker 1 (30:20):
You can also subscribe to our show wherever you're listening
right now and leave us a review. It helps more
people find the show.
Speaker 2 (30:27):
The Money Stuff Podcast is produced by Anamsarakus and Moses
and am.
Speaker 1 (30:31):
Our theme music was composed by Blake Maples.
Speaker 2 (30:33):
Brandon Francis Nannim is our executive producer, and.
Speaker 1 (30:36):
Sage Bauman is Bloomberg's head of Podcasts.
Speaker 2 (30:39):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff.
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