We're back with another edition of The Federalist Radio Hour. I'm Emily Dashinsky,
culture editor here at the Federalist. As always, you can email the show
at radio at the Federalist dot com, follow us on Twitter at fdr LST.
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Today we are joined by commodities trader author, columnist, musician Brad Shaefer,
who's out with a new book. It's called Life in the Pits,
My Time as a trader on the rough and tumble exchange floors. Brad,
thank you so much for joining us. Thank you for having me appreciate it.
Yeah, of course. Now the book gets into a lot of your
background, and people should go buy the book. But for the purposes of
this conversation, Braud, since it's your first time on the show, if
you could tell us a little bit about your background actually how you ended up
in the pits, that would be great. Sure. Actually, that's the
second chapter of the book sort of takes you there. Because the people who
arrived in the trading floors back in the days would say didn't often get there
through conventional means. So, like my particular story is, I grew up
in Chicago area, the town called Barrington, about forty five miles northwest of
it. I went to University of Illinois, who I just majored in speech
communication. I didn't really know what I wanted to do when I came out
of college, and so I just kind of pointed the car north from Champagne
and headed back home to see what happened. And I originally was an artist
for an ad agency. I was like a junior artist because I had done
some artwork in college. Even though I didn't have an official portfolio, I
just always kind of had a nap for it. And so through a friend
of mine, I was able to and the job as an artist. But
I discovered a couple of things. One was that once you start being asked
to be creative and have it done by five or else, it loses its
luster, you know. For me, art was an escape and I didn't
want to be a job. But then more importantly was my brother By,
who was featured in the book a Lot. He was about five years older
than me. He was a trader on the Chicago Mercanti Exchange he traded in
Euro dollar options, and he basically said, why don't you you know you're
good with numbers, you know you're you'll like the energy. Why don't you
come over and just see what I do? And so one day he took
me to the floor of the Chicago Merchants Exchange. I walked into the you
know, I walked through the doors, those tinted doors, and pushed you
know, the heavy glass doors that he had to push through. I got
hit by the just the cacopneust sound and colors and just the energy was just
overflowing in there, and I was like, this is the place I want
to be. And so where he had already arranged for me to speak to
the guy who owned his company, and from there I got a job as
a clerk on the floor. It's an art clerk, one of those guys
who stood like pond Brian around the sides of the exchange with the yellow coats,
the size of the pits, with the yellow coats on, lashing hands
signals. And eventually from there I went to New York to help my boss
start a crude lel trading group. And I got there just in time as
the golf war started, so the timing was very propitious. Plus I got
to see a lot, and then I was rewarded with the sea in the
exchange when I returned. And so by age twenty two, I think it
was I was standing there making markets on euro dollar options that I had not
even heard of for years before. So it happens that fast and sort of,
as they say, the rest is history. And I've been in the
commodities business really since nineteen eighty nine, and it's a fascinating business to me.
So and I must be doing something right because I'm still here. Well,
I want to put a pin in nineteen eighty nine and then when you
ended up in New York, because the timing there is so interesting, and
I know you have a lot to say about it. I'm first really struck
by it. I mean, you're also an acclaimed novelist and you write so
much, and you're speaking of art. You're also a musician, sort of
a renaissance man, Brad. But there's a check of a master of none.
I think I doubt master of none is an accurate descriptor, Brad.
But I will say I think, at least when I think of people that
are you know on the on the floor that are interested in the world of
finance. They are numbers people. And you mentioned your brother said that you
were good with numbers, but you also were, you were doing art,
you were you've since written a novel and you've you're a writer. That seems
unusual to me, And maybe I'm wrong, but it does seem unusual to
me that somebody who is really good with numbers it also has this kind of
artistic side to them, such as they're there's the old left brain, right
brain false dichotomy. But tell us just a little bit about you know,
as somebody who looks at the world through a really creative lens. What interested
you? You had a great description earlier, But when you stepped on the
floor and you saw in Chicago originally how things were going, what sort of
piqued your interest there? Well, I think, first of all, is
a lot of people who tend to be creative tend to be a little bit
iconic, plastic, you know. They I was never a student tie sitting
in an office guy like that had originally thought I wanted to be an attorney,
But just the idea of putting on a suit and tie every day and
you know, going into an office and just wasn't really for me. So
the first thing that I was attracted attracting me to the place was the uniqueness
of the working environment. I mean, they're really you know, they're going
now. But there were no there was no other place comparable to work as
as there wasn't an exchange for number one. But I also think, like,
I'm not good with numbers in the sense that if you ask me,
you know, what's the square word of three eighty seven, I can come
up with it. You know, there were guys I stood next to who
could. There were there were true savant numbers guys. But what I'm doing
at is identifying patterns. And also, you know, a lot of trading
has to do with uh, with human nature as well. Markets. One
of the one of the the ideas that put forward from the book is that
markets and this is a common this is not my you know, revelation.
I mean you can find this in many books. Does that markets tend to
be human constructs. Yes, they have a foundation of numbers underneath them,
but they're really driven by people and that becomes psychological and you know, and
I think I was able to somehow plug into that and from a creative standpoint.
You know, there's a lot of creativity in mathematics. You know,
when people talk about theories in that they talk about an elegant theory, for
example, and an elegant theory the way I read it is something that makes
sense, something that can distill down to the essence of of of what you're
trying to accomplish, you know, whether it's I don't know whether whether you're
doing glow mechanics or quantum physics, whatever it is. And so I believe,
you know, like, for instance, I think that the great musicians,
if of like the Baroque period, especially like the Box or the Telemons
or the Heidens. I think these guys were musicians because there was no jet
propulsion lab available to them, right, There was no there were no Goldman
saxes that they could go work in or you know, or you know,
a millennium fund or something like that. For them. Their their mathematical outlet
was music, and they and the patients of the arts were there were patients
of the arts, right, The science just hadn't been as developed, I
mean, you know, I mean thinking about these guys had never even didn't
even know how many planets there were or anything like that, yet, you
know. And so for them that was where the mathematicians of the world expressed
it to music. And if you listen, there's actually a very good book
I forget the author. It is called Girtle Escher Bach, and what it
really does is they tried to take me the mathematics of Girdle, those famous
drawings of Escher you know, these stairways that never end, you know,
and Bach and kind of takes those three different disciplines of art, music and
mathematics and it shows how there's a common thread between them all. So I
don't think it was that much of a stretch for me to go from the
art world to finance. And for example, like Michael just used like authors
as an example. Michael Crichton was an accomplished doctor, but he began writing,
you know, Jurassic Park and all that, and he took that knowledge
and he he fused it into his writing. So I do think there's a
place for both sides of the brand in the finance world. And I think
some of the more creative people UH tend to understand that what you're really looking
at these numbers are really just expressions of emotion. They're expressions of opinion.
They're in a way, they're they're like you know, they're they're like I
said, they tend you know, you see momentum trading happen a lot,
and that's really a function of her mentality. And you know, we have
express you know, there's expressions in trading. One of them is by their
rumor to sell the fact, the rumor being the height, the fact being
the actual, you know, the the actual with the data finally tells you.
But what I also do like about commodities trading is that there is a
right and wrong answer compared to art. Like there's not such thing as what's
a great song, it's in the eye of the butt. There's such thing
as a great trade. If you bought someone to get nine and sold it
at twelve, that's a way. If you bought it nine solder at seven,
it's a loser, and the rest just it doesn't really matter. So
I don't know, Maybe that was a long way of getting to the point
that there there's room from both sides of the brain in the market. No
I suspected you would have a great answer to that question. Brett and it
did not disappoint. And lots of patterns of course of music and art,
and that's a really interesting way to look at it. Now, tell us
about those early years in Chicago, in New York, the political atmosphere on
Wall Street at that time. I mean, that is perhaps the most interesting
period in the history of finance. It's just a fascinating time to be involved.
The geopolitics are fascinating. It's a fascinating moment in geopolitics. And on
top of that, the technology. And maybe we can get to this in
a second question. Maybe this is something different altogether. But things were just
evolving really quickly. What can you tell us about sort of the culture of
the business when you first stepped into it. Well, you know, I
can't speak to what we call over the count or anything like that at the
time. I mean, remember, I think when people don't understand about the
trading for you know, when they would look down at these things, or
when they would see them on the news or whatever, where you know,
people would you know some I know some finance reporters like to report from the
trading floor as if they're like on the inside, getting some inside info.
The one thing that was interesting is that we on the floor were often the
last to know about anything, right We would we would sit there and all
of a sudden the market would just move, and we wouldn't know why until
later. Right, So we were more reactionary than we were the makers per
se. We made prices, but the macro trends were beyond their control.
Right. But when I got there, I think like I was very fortunate.
And part of the reason I wrote the book is that I feel like
the eighties and nineties, you know, were the pinnacle of the trading floor.
It was where it had kind of reached It's it's zeen it in terms
of importance, in terms of influence, in terms of culture as well,
you know. I mean there were movies coming out, like trading places.
There was a movie prob Limit Up that came out. Even in the movie
excuse me, in the movie Ferris Bueller's Day Off, they're actually watching the
year dollar futures pit. That's I'm sitting there, going I know those guys.
You know. So from a political standpoint, it was very I think
people down on the floor were just interested in making money. You know.
I didn't hear many political discussions going on, per se if that's what you're
asking about. But we really, you know, we did follow politics because
you know, as elections moved, it often moved the markets. And you
know, like one little thing that we learned is that the FED tends to
cut interest rates before an election to try and help the incumbent or whatnot.
You know. But the real politics that I saw, the real was global.
And that was when I went to the floor of the New York Merketingtail
Exchange. I had been sent there by my boss really to do him a
solid, you know, and because he would he had just opened up a
group I group. There was one guy over there who was an excellent trader.
By the way, I mentioned in the book. You know, everybody
in the book a suit NaNs for the most part because out of my embarrassing
anybody earth. But if he's listening, he knows who he was. He
was a fantastic trader, a very nice guy to a very very decent man.
I just knew his stuff right, and so I was fortunate that I
was able to click for him. And when I went to the floor,
and I would say, within a month or two that I got there,
if I'm if my timing is if I remember, right, Saddam was saying
invaded Kuwaid and at the time, right, crude oil at the time,
there were you know, the global consumption prudo, if I would fall,
was in the sixty million barrels a day range, and when he moved in,
he basically took out between like four and five million barrels a day out
of the market, right, and the market started and the market went blisted,
you know, the crude oil market was and they hinged on every word.
Saddam Hussain was same. Remember during the whole summer and into the fall
of nineteen ninety I think it was he I got my dates, right,
he you know, George Bush was building up this massive force to push these
guys out of Kuwait. And Kuwait was basically the epicenter of krudo of production
in the Middle East. So this was like for a commodities trader, you
know, we make money on volatility. You One big myth that people have
is that commodities traders lean long, you know, like so someone when I
used to trade krudo off for tex because somebody would say to me, oh,
you know, oil is up, you had a good day today.
I mean no, actually, I was short, you know, and commodities
traders, we're not investors, right. We thrive on volatility. We thrive
on being able to builose, sell high, sell higher by law. And
when you have when you have two armies one four hundred thousand men, one
seven hundred thousand men, shifts and everything sitting right on top of the world's
uh, you know, of the main spigure of the world's crudeoi production.
Not to mention that the straits of poor mouse coming out of the entire version
volved you. I had wild swings in the market and and I literally sat
there as a clerk and watched fortunes being made before my eyes. And I
remember one trader. You know, I say, it's rough and tumble.
Because a lot of these guys, and I'll get into this in a second,
because this is one of the essences of the book. A lot of
these guys were you know, they were not harder brands, they were not
you know, they didn't come out of work in Nbas. All of these
guys were like me. You know, I came out Illinois with communication degree.
Next thing I know that I'm I'm trading, you know, notional one
hundred you know, millions of dollars in ear dollars. I'm like, how
did this happen? You know, I'm you know, I'm still living at
home with my mom, you know, whatever is. And so these guys,
you know, for them, this was their chance to really make a
lot of money in ways that are now closed to them. And I remember
one guy we would watch Saddam hus Sting. You come out with some bellicose
announcement every day, like the Infidels will be destroyed or whatever it was,
and this guy just I'll clean it up for the radio. But just got
to go to me and goes, I freaking love this guy. You know,
they and you know, and so to me. So that's where I
really saw the politics of the world come into play. And that's kind of
where I decided I wanted to trade energy because energy is a volatile As a
volatile product, it's always changing. You know. Natural gas was a new
product that then relatively now it's a you know, now it's a benchmark of
energy trading. So that's really where I saw the politics coming. Was more
geopolitical at that point, and for us it meant it usually tended to mean
the more, the more instability there was. The sounds parasitical. But the
more instability there was, the more money there was to be made. So
that's how we be alerted, you know, right, and it would be
hard not to and right, money, right, you try not to think
too hard about it now. I came from a military family, so I
remember thinking, you know, while about guys were high five in each other,
they're saying, this is great. I remember thinking to myself, you
know, there's a bunch of soldiers over there, you know, men and
women who are getting ready to go into combat. And for these guys and
girls, you know, this isn't you know, this is not a game
to them, you know there as we didn't know it would be such a
one sided victory at the time, you know, but we actually lost more
people from friendly fire and accidents than we lost from National ANEMI combat. But
you know, so that was the only thing going through in my head.
Because my father was a marine career and my brother was a helicopter pilot for
the Navy. We were just just gotten out. So I was like,
you know, let's not be too happy about all this because you know there,
yes, their pain is our game, but you know, these you
were talking about real lives too. They were about to be destroyed and unfortunately
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ten thirty. And there have been some sobering moments, I imagine in the
industry over the last few decades, even since then. But you know,
to that point about where your mind goes when you're focused on the work,
and where your mind maybe could go or should go. Has that culture amidst
all of these bigger kind of cultural questions, especially in the last ten years,
even as the sort of moral question not just of markets but of everything
everybody does has become front and center, has the culture of the industry changed
much or is it still you know, sort of fueled by those you know,
those same motivations at the end of the day. Well, I mean,
you know, if you talk to an investment banker or you talk to
a trader, they're primarily focused on making money to the point where they can
be quite a moral about it. For me personally, like the culture that
I've seen changed is the way people view Wall Street. You know, it
went from being you know, just greedy guys like the Gordon Geckoes of the
world to something a little bit more nefarious because what we saw in two thousand
and eight was was serious neglige on the part of a lot of people that
caused that crash. I mean, Michael Lewis wrote a great book about it,
you know, the Big Shorts, where only a few people actually saw
the mismanagement that was going on. And I think what sticks and people's crawl
about Wall Street isn't so much much the culture of making money, but it
seems like there's a trend. And this is political because of who donates and
who makes the laws. Is that you know, you've heard the expression before
the new profits are privatized, the losses are public. You know, the
losses are the public. You know, So a bank makes a fortune for
years and credit to false swaps. Basically, you know, doing the equivalent
of picking up pennies in front of a steamroller. You know, like basically
the equivalent of just shorting options or you know, writing fire insurance. You're
writing home insurance on a fault line and just and then once their earthquake hits,
they don't go out of business. They run to Congress, they run
the FED chairman, they run to the Treasury Secretary, and they bail them
out. And they bailed them out because I mean, I actually wrote an
article when I used to write, when I used to write with David Crumbs
from Forum, I actually wrote an article defending Tart, not because I thought
it was the right thing to do, but just because because I knew that
in the end, the guys on Wall Street, the Dick Folds of the
world. You know, he's not a bad guy, you know, I'm
not. I'm just picking him at random that I'm not picking on him per
se. I don't know enough about what happened to Lena beat and comment on
it. But uh, these guys will be fine regardless, you know.
I even say in the book Wall Street is the only place where you can
go and lose a fortune and get paid a fortune for your troubles, you
know, And I think that really bothers me. And the reason I supported
SPARK back then was because I felt like that Main Street was going to suffer
the most. And I felt like, you know, as much as I
believe in capitalism, as much as I believe in you know, winners and
losers, it's not a suicide pact. And I thought it was so serious
that only the federal was, only the US government could stabilize the market,
you know, and a lot of people were going to get hurt. And
we kind of saw what it would have looked like with the you know,
from a different angle with the COVID lockdown. Now, imagine that came instead
of from instead of artificially from the government shutting everything down, but that just
came from an economic collapse that two thousand and eight really could have been.
And so you see the pain that that would have caused. So from a
political standpoint, I think Wall Street and d C. There's there's a direct
pipeline back and forth. And you know, I mean think about the FED
chairman. The chairman the Treasury Secretary during two thousand and eight was a former
Goldman stacks president, right. I mean, so there's an incestuousness and I
think people on the outside looking in are wondering, you know, what,
what's going on with that? So you're not that But again, you know,
we on the you know we're in the trading for are a little bit
releasing that that's more boardroom stuff and that's more lobby stuff. You know,
we just but all we knew was that, you know, the market's doing
some weird stuff and we should probably take advantage of this and we'll figure out
why later. A boost to blame and all that very much in the moment
when you're trading out. I use in the book, I use a lot
of uh of wart of combat metaphors, you know, and because a combat
soldier, now that I have a was one, but I lived with one.
My father was one. He was actually wounded in action. So he
was the real he was the real deal. And he uh, he just
said, you know, you're just focused on what's in front of you.
You don't know if the flanks are being turned, you don't know if there's
an order. All you know is that you got your body, so you're
left and your right, and there's a bunch of Chinese communists coming at you.
He was in Korea, and you just want to make sure that when
they're when the attack over, you and your buddy's are still there. Then
you'll worry about what the strategy was and tactics and what true you and all
that stuff. So that was kind of we had a very parochial attitude ourselves,
but it doesn't mean we're immune from politics and just didn't have time to
think so much on it. So the you're described earlier those years as the
pinnacle, and I just wanted to ask, and this is a big part
of the book. I wanted to ask why you see that time in that
sense? And I think you've you've talked about it a fair amount already,
but pinnacle is such an interesting word, and thinking about on those years,
I'm just curious as if you could go into more about why you see them
that way. Well, yeah, I mean it's for two reasons. Number
one is that the economy had grown in leaps and bounds by then. You
know, from the nineteen eighties to two thousand was a period of unprecedented economic
room, but it was so you had the economy is the biggest it had
been up to that point, but you had not yet had the advent of
electronic trading, right, So by two thousand or so, electronic trading.
The economy continues to grow. But now electronic trading has taken bay, has
taken over the business, you know. And I remember, I think the
first trade again, it's in my book somewhere. The first trade was a
Globex trade on the currency which was the Chicago market to exchanges over the counter
platform, it's electronic platform. First trade I think was nineteen ninety three.
So and I liken it too. All of us were on the Titanic and
we felt the shutter of the iceberg, but it really didn't We didn't know
the ship was sinking, you know, we didn't really realize or I mean,
actually some of us, I shouldn't say that, some of us did,
like my boss did. And so because he did, I thought it
because I worshiped this guy, you know, I thought he was one of
the best paracters I've ever seen. You know, I've worshiped his work,
ethic and his intellect and all that. And so he said, hey,
the end of the trading floor is nigh. Back in nineteen ninety three,
when it's the most pact it's ever been and the record volumes, so it
was kind of weird. It was like the ship hit the iceberg, but
it kept sailing for a while, but it was starting to take in water.
And then the dramatic change in the business when you consider that trading toys
were around since the eighteen forties. Was the first futures exchanged, so you
know, thirteen years before the Civil War. Was one of the first uses,
you know, was Chicago Board of Trade when that opened up, So
that was you know, several you know, over one hundred and fifty years
ago, within fifteen years. Realistically, the trading fur just was gone as
a you know, it existed still until I think twenty seventeen. Again you
just trying to remember the dates you can verify them, but you know,
so that that was like the last period where you had the biggest economy we've
had and we were right there and there was no other place to trade this
stuff yet. So that's where I think why it was why. I think
it was the height of the market, and I think that's why people were
so fascinated by it. Now people were people in the eighties were getting very
interested in trading there, you know, I mean shrub and these new you
know Maria trade uh, you know, I forget some of these some of
these trading accounts were opening up and people were starting to get more and more
invested in for one ks and all that. So I think the people were
more interested in markets, and so naturally, what better expression of pure capitalism
than a bunch of you know, red faced you know, alphas screaming at
each other in funny coats, you know, and making hand stignals and stuff.
So, but it didn't last, you know, it repeat, and
then it came down pretty quickly, and I think a lot of people were
surprised by have quickly before no pun intended, before it was pulled out from
under them. Well, could you actually explain when you say the shift to
electronic trading was kind of already emotion, could you actually explain for people who
aren't super familiar with the way that physically things functioned before that technology, could
you just explain a little bit about like how trades physically were made, and
then what the differences in the world of electronic trading. You know, I
will yeah, and I'll just use I'll just use energy, since that's what
I trade. As an example, right, if you want to trade a
natural gas features contract right back in the nineteen nineties or to back in the
nineteen nineties, you would call up your broker. The broker would call down
to the trading floor. A guy would pick up. The broker would say,
hey, you know, buy me the one natural gas contract best you
can, you know, wherever the market is, all right. This guy
would write down the order, stamp it, time, stamp it so you
have a record when it was received. He would then turn around and look
into the trading pit. He would flash the order using hand signals to a
clerk. The clerk would then turn around and tell the broker, hey,
buy one natural gas contract. The broker would scream into the mob where it's
natural gas. Somebody might say out at your three twenty five whatever it was,
and whatever that means, and he would go, hey, buy one
contract, buy one at three twenty five. He'd turn around to the clerk
and say you're filled at three twenty five. The clerk would then flash,
you're filler three twenty five. The brooker would then on the phone would then
tell me, hey, you bought one to three twenty five. That's the
way he used to be. Now, if I want to do that,
I just go on to the Intercontinental Exchange or the glow Vets or the which
close the glowbex Exchange. I just move my my mouse point and click boom
done and gets downloaded through the straight what they call straight through processing, right
into my account and the immediately it so as you can see, it's a
more it's more efficient now, but that that's the way back then, that
was the only way you could do it to you For listeners who aren't familiar
with commodities, you can use stock as an example too. Right. You
used to call up your broker at a Schwab or wherever. He would call
down to the floor. A guy would pick up the phone, same thing,
say buy a thousand shares at Philip Morris. He go over to a
bunch of guys standing around the Philip Morris post and goes whereas Philip Morris would
be like forty dollars a share, okay, buy a thousand. He walked
back over, call your back up and go, hey, you bought it.
Now, I can just now anybody who trades, you know now my
son trades TDM ROR trade. You know, my college son. He just
and he can trade quicker with more efficiency than anybody else. So it was
inevitable that was going to happen. Mark you, it's just what Moore's Law
says. That technology was it developed, was it grows exponentially, right.
I think I forget the point like doubles every year or something like that.
I forget the actual formula. But and you saw that happen very quickly.
Went from one contract traded on the globex in the nineteen ninety three currencies to
basically to like ninety I think within twenty years, ninety nine percent of exchange
volume was done on platforms. You know, they still have these pits around
just in case, but that was really just to give the traders time to
get their ducks in a run and get out, and they'd shut them all
down. Now there was really what prompted the book was my article in the
Wall Street Journal in twenty sixteen. They said, I'll miss the trading floor
because they're all gone there like they they've gone away the data that they do
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America loves b E E T S dot com. I just watched Dumb Money,
which is a new sort of Hollywood rendering of the It's based on a
book about the game stop situation. But the psychological there's something going from the
physical. I was going to say gamification of you know, money, business,
people's livelihoods, people's lives, but there's actually more of like a video
gamification because when you were describing the hand signals, you know, it's like
baseball. So there's always that element of gamification, but the video gamification.
I'm just really curious about how you think psychologically it's different to sort of be
on the floor with that physicality involved, as opposed to clicking a mouse and
you know, looking at a screen and moving things around. Is there something
psychologically you think that is better? You said more efficient? Is there something
that's worse? Is there something that makes it easier to make mistakes? How
does that affect I mean us, the mental the mental task when you're you
know, training, commodities, stocks, whatever it is. Well, they're
two different. There really are two different animals. And I think that's why
a lot of guys. A lot of guys couldn't adapt to uh when the
trading flots closed. You know, we just have an expression that a lot
of you guys would be flipping hamburgers if it wasn't for the floor. When
you go over the counter, you have to view the world totally different.
You do have to view it more like a you know, like right now,
as I'm talking to you, I'm also looking at a grap of a
certain I'm looking at chart of a certain position that I have right, and
it moves back and forth, and I can see how it gets up to
certain levels of resistance where it doesn't seem to want to break a price point,
and it comes off and you kind of learn how to play that game.
But you know, whereas on the floor, I think the physicality gave
everything a sense of immediacy. And also a lot of guys on the floor
were trading. They weren't speculus. But the reason you were on the trading
floor, and I think this is an important just to explain really why guys
would pay ten thousand dollars a month for at least to be on the floor,
right, The reason was because what the floor provided was liquidity and price
discovery, Right, So what do I mean by that? So let's say
if somebody says, you know, hey, I want to buy a thousand
dollars of crude oil, which is one few one crude oil contract. Right,
where's the market Somebody would say, I'll pay seventy dollars for it,
and I'll sell it to you seventy dollars and five cents or whatever. Right,
that was the market. Right. The value might be seventy dollars and
a quarter, right, based on based on models that you have and whatnot.
So what we're paying for was somebody to sell you, sell you at
the bid, or pay for the offer. That was really the only reason
why the trading floor existed. And so the way we made money was we
bought undervalued and sold over value. That's what we did all day long.
Whereas once you get over the counter as we call it, or you know,
upstairs as the vernacular for it, like the guys who are trading game
stuff, was like, I'm kiddy whatever, right, it's something kiddy.
Yeah. Yeah, he was a big game stop cheerlider. Right, that's
becomes a totally different mindset. You're not buying, you know, I mean
people were selling game Stop because they felt it was overvalued. But you could
see how if you get a group of people together, they can really muscle
a market, you know, And you couldn't really do that on the floor.
You couldn't get thirty guys together and go, hey, let's all start
buying ryall features. It just didn't work that way. Because I remember one
time I asked my boss, I said, you know, what do you
think? He said, what do you think we're going to be up or
down today? He goes, look, you know, I don't pay ten
thousand a month for seat leads to just to speculate on direction, because I
care what the bid is and what the offer is right, And that's what
I think about. People don't understand of the trading. Four day's real function
was to provide liquidity in the price discovery, and now that function has moved
over the counter, but the thought process that goes into that price discovery is
different. Now. Those people buying game Stop, they weren't buying it because
they thought it was worth ninety ninety dollars and so they could buy for eighty
five. Otherwise they'd have been selling it at ninety five dollars. Right.
They bought it because they thought the great they thought somebody else is going to
pay one hundred for it, you know, so you see the greater full
theory a lot more over the counter than you did on the floor. And
again, you know, that's I tried to explain the book. That's how
we made our money. And so guys do make markets now over the counter.
You call them up and go, hey, what's the market on this,
and they'll still make it for you. But with so much of the
public involved in the trading world now certainly inequities, I start to see a
lot of hard mentality kick in. And there was just no place for that
on the floor. You didn't have, you know, it just wouldn't have
worked. I mean, I want to use the term collusion like with game
stop, because that has negative connotations or illegal connotations. But clearly a bunch
of people got together and decided that this thing, we're going to try and
do a short squeeze. Basically, you know, guys were going to try
and push me but out of the market. And there's nothing fundamental analysis about
that, or there's nothing about buying low and selling and high and that that's
just that is gamesmanship. So I think when you're you actually touched on an
interesting point I've not really thought about it before, which is that this generation
today, I'm fifty six, but this generation today is a gaming generation.
They grew up with games. My son used to play video games with his
friends. He'd got his headphones on a snowy day and they'd all be playing
together. So I think they view this as a video game. And I
think what happens is people don't realize, as one of my favorite traders used
to say, this is real money. And I think some of these I
think some people are setting themselves up to get hurt by treating this at a
casino. It's not and you can lose a lot of money if you're not
careful. And I don't know how some of these guys didn't game stuff.
I know some of them got shut out because of robin Hood shut down or
something like that. They couldn't get out, So I don't know. Question,
No, it does. That's interesting because I feel like when something looks
physically like a video game, it's the same it's on a screen, it's
on your phone, it's the same sort of mouse clicks or finger taps,
there's just something so different about being physically on a floor that you know you,
and you're you're moving your body, you're making calls, you're talking to
people. It's just easier to feel the stakes and the weight of those decisions.
Even though people might look back on that and watching a Wolf of Wall
Street or Wall Street and whatever it is and say they clearly didn't feel the
weight of the stakes of you know, war, whatever it is. Now
it seems to me it's even more difficult to psychologically keep in mind the sort
of the weight and the stakes of every sort of thumb tap. You know,
if you're well, you have to remember when the way you physically did
it on the trading floor is you had a bunch of trading cards and you
would take a pen in the paper and you would actually write down the right
down the trade you did. You know, a d Z three, you're
a dollars nineteen ninety three, ninety two fifty four buy of twenty cars.
We call them cars on the floor, it was changed, right, And
so as you're writing this down, your first instinct is to look up to
see where the price is now, and you're taling in your head already.
You know it's twenty five dollars a tick. We're up you know, I
just bought a ten lot. We're up a penny, We're up a ticks.
So I've already made two hundred and fifty dollars, you know. And
and I think what the four allowed you to do is you're always looking to
say, okay, where you know, what is my wrong point on this?
And when you're right down there, you're not caught by surprise for the
most part, Like you can sit there and say, Okay, this market
is a lot. I just bought this thing in ninety two twenty seven.
Now it's treating ninety two twenty three. You know, Now, maybe I
should get out of this to start over. And you do that, whereas
I give you, if you're look at it on a video game, it's
like, okay, I bought it here, but you know it'll come back
out or whatever. I don't know. I don't think. I think when
you view it as a video game, I understand what you're trying to say.
There's a psychological difference that almost makes it not feel as real. When
you're on the trading floor, it felt real because you often it was your
own money or it was somebody, you know, like somebody who was backing
you, who you knew personally and was your friend or something like that.
So you tried to be very you try to be disciplined. I think when
you I think a lot of people who are not professional traders don't have discipline.
And I think the gaming aspect just you know, anything that makes it
easier to get to put yourself at a financial risk is a double leged sword.
And I think a lot of people don't quite under you know, and
especially in the last twenty five to thirty years, if you just bought stocks
and held on or whatever, you'd be fine. Or you know, if
you're in game stop if you buy it at ninety and it went up to
three hundred or whatever. You know, you think that's the way it always
is, and it's not. You know, I think people are people.
I think trade it there they should trade it their own risk. It is,
I know what you're trying to say, because it's a because you know,
looking at it from a you know, it's funny. I haven't really
thought about that aspect of it, but that's actually fascinating. I'm like supported
that a little bit more about the games version of it, right, they're
like in their gaming chairs. It's very it's it's straight from trading game stop.
It's straight from game culture. Yeah, I mean, I mean you
could actually look at those gaming tournaments where they all play, and you could
very easily say they're all trading stocks and it would and it would look the
same, and the emotions would probably be the same. You know. The
difference is, you know, if you lose in this, you know,
you don't just have a fake light that's destroyed. You know, in call
of duty. You know, you don't pay your mortgage. You got to
be really careful, right. I don't think people understand how easy it is
to lose money if you're not careful. Right. Gaming doesn't really help as
it just makes it that much more playful and fun, and trading shouldn't be
fun, it should be serious business. This has just been fascinating, Brad.
Everyone can read more about Brad's life in the Pits again. The book
is called Life in the Pits, My Time as a Trader on the Rough
and Tumble Exchange Floors. It's out on December fifth, Bred. Thank you
so much for coming here and sharing some of your thoughts and experiences. I
really appreciate it. Oh, thank you for having me. I love talking
about the subjects, so of course, all right, well, you've been
listening to another edition of the Federalist Radio Hour. I'm Emilee Tashinski, culture
editor here at the Federalist. We'll be back soon with more. Until then,
be lovers of freedom and anxious for the fray.