1 00:00:17,039 --> 00:00:20,960 We're back with another edition of The Federalist Radio Hour. I'm Emily Dashinsky, 2 00:00:21,000 --> 00:00:23,679 culture editor here at the Federalist. As always, you can email the show 3 00:00:23,719 --> 00:00:27,600 at radio at the Federalist dot com, follow us on Twitter at fdr LST. 4 00:00:27,800 --> 00:00:31,079 Make sure to subscribe wherever you download your podcast, and of course to 5 00:00:31,120 --> 00:00:34,520 the premium version of our website if you want to support our work as well. 6 00:00:34,759 --> 00:00:40,880 Today we are joined by commodities trader author, columnist, musician Brad Shaefer, 7 00:00:40,920 --> 00:00:44,840 who's out with a new book. It's called Life in the Pits, 8 00:00:44,920 --> 00:00:49,039 My Time as a trader on the rough and tumble exchange floors. Brad, 9 00:00:49,079 --> 00:00:52,439 thank you so much for joining us. Thank you for having me appreciate it. 10 00:00:53,119 --> 00:00:56,039 Yeah, of course. Now the book gets into a lot of your 11 00:00:56,200 --> 00:00:59,679 background, and people should go buy the book. But for the purposes of 12 00:00:59,719 --> 00:01:02,159 this conversation, Braud, since it's your first time on the show, if 13 00:01:02,200 --> 00:01:06,000 you could tell us a little bit about your background actually how you ended up 14 00:01:06,159 --> 00:01:08,840 in the pits, that would be great. Sure. Actually, that's the 15 00:01:10,000 --> 00:01:15,040 second chapter of the book sort of takes you there. Because the people who 16 00:01:15,159 --> 00:01:19,799 arrived in the trading floors back in the days would say didn't often get there 17 00:01:19,799 --> 00:01:23,079 through conventional means. So, like my particular story is, I grew up 18 00:01:23,120 --> 00:01:27,200 in Chicago area, the town called Barrington, about forty five miles northwest of 19 00:01:27,239 --> 00:01:30,640 it. I went to University of Illinois, who I just majored in speech 20 00:01:30,640 --> 00:01:34,239 communication. I didn't really know what I wanted to do when I came out 21 00:01:34,280 --> 00:01:40,359 of college, and so I just kind of pointed the car north from Champagne 22 00:01:40,359 --> 00:01:45,319 and headed back home to see what happened. And I originally was an artist 23 00:01:45,519 --> 00:01:49,040 for an ad agency. I was like a junior artist because I had done 24 00:01:49,040 --> 00:01:55,040 some artwork in college. Even though I didn't have an official portfolio, I 25 00:01:55,200 --> 00:01:57,599 just always kind of had a nap for it. And so through a friend 26 00:01:57,599 --> 00:02:00,799 of mine, I was able to and the job as an artist. But 27 00:02:02,040 --> 00:02:07,080 I discovered a couple of things. One was that once you start being asked 28 00:02:07,080 --> 00:02:12,800 to be creative and have it done by five or else, it loses its 29 00:02:12,879 --> 00:02:15,039 luster, you know. For me, art was an escape and I didn't 30 00:02:15,039 --> 00:02:17,800 want to be a job. But then more importantly was my brother By, 31 00:02:19,080 --> 00:02:22,560 who was featured in the book a Lot. He was about five years older 32 00:02:22,639 --> 00:02:27,039 than me. He was a trader on the Chicago Mercanti Exchange he traded in 33 00:02:27,080 --> 00:02:30,879 Euro dollar options, and he basically said, why don't you you know you're 34 00:02:30,879 --> 00:02:34,240 good with numbers, you know you're you'll like the energy. Why don't you 35 00:02:34,280 --> 00:02:37,319 come over and just see what I do? And so one day he took 36 00:02:37,360 --> 00:02:40,199 me to the floor of the Chicago Merchants Exchange. I walked into the you 37 00:02:40,240 --> 00:02:44,360 know, I walked through the doors, those tinted doors, and pushed you 38 00:02:44,360 --> 00:02:47,159 know, the heavy glass doors that he had to push through. I got 39 00:02:47,240 --> 00:02:54,280 hit by the just the cacopneust sound and colors and just the energy was just 40 00:02:54,360 --> 00:02:57,680 overflowing in there, and I was like, this is the place I want 41 00:02:57,719 --> 00:03:01,240 to be. And so where he had already arranged for me to speak to 42 00:03:01,360 --> 00:03:06,360 the guy who owned his company, and from there I got a job as 43 00:03:06,360 --> 00:03:08,039 a clerk on the floor. It's an art clerk, one of those guys 44 00:03:08,039 --> 00:03:15,439 who stood like pond Brian around the sides of the exchange with the yellow coats, 45 00:03:15,759 --> 00:03:17,599 the size of the pits, with the yellow coats on, lashing hands 46 00:03:17,599 --> 00:03:23,879 signals. And eventually from there I went to New York to help my boss 47 00:03:23,879 --> 00:03:27,960 start a crude lel trading group. And I got there just in time as 48 00:03:27,960 --> 00:03:30,879 the golf war started, so the timing was very propitious. Plus I got 49 00:03:30,879 --> 00:03:34,479 to see a lot, and then I was rewarded with the sea in the 50 00:03:34,520 --> 00:03:38,520 exchange when I returned. And so by age twenty two, I think it 51 00:03:38,599 --> 00:03:43,360 was I was standing there making markets on euro dollar options that I had not 52 00:03:43,560 --> 00:03:47,520 even heard of for years before. So it happens that fast and sort of, 53 00:03:47,520 --> 00:03:50,199 as they say, the rest is history. And I've been in the 54 00:03:50,199 --> 00:03:55,280 commodities business really since nineteen eighty nine, and it's a fascinating business to me. 55 00:03:55,439 --> 00:04:00,719 So and I must be doing something right because I'm still here. Well, 56 00:04:00,960 --> 00:04:04,680 I want to put a pin in nineteen eighty nine and then when you 57 00:04:05,000 --> 00:04:08,759 ended up in New York, because the timing there is so interesting, and 58 00:04:08,800 --> 00:04:12,080 I know you have a lot to say about it. I'm first really struck 59 00:04:12,159 --> 00:04:14,960 by it. I mean, you're also an acclaimed novelist and you write so 60 00:04:15,080 --> 00:04:17,519 much, and you're speaking of art. You're also a musician, sort of 61 00:04:17,560 --> 00:04:23,399 a renaissance man, Brad. But there's a check of a master of none. 62 00:04:23,480 --> 00:04:31,759 I think I doubt master of none is an accurate descriptor, Brad. 63 00:04:31,800 --> 00:04:35,959 But I will say I think, at least when I think of people that 64 00:04:36,160 --> 00:04:41,560 are you know on the on the floor that are interested in the world of 65 00:04:41,600 --> 00:04:45,360 finance. They are numbers people. And you mentioned your brother said that you 66 00:04:45,399 --> 00:04:48,279 were good with numbers, but you also were, you were doing art, 67 00:04:48,360 --> 00:04:55,639 you were you've since written a novel and you've you're a writer. That seems 68 00:04:55,680 --> 00:04:59,319 unusual to me, And maybe I'm wrong, but it does seem unusual to 69 00:04:59,319 --> 00:05:01,959 me that somebody who is really good with numbers it also has this kind of 70 00:05:02,079 --> 00:05:05,800 artistic side to them, such as they're there's the old left brain, right 71 00:05:05,839 --> 00:05:11,959 brain false dichotomy. But tell us just a little bit about you know, 72 00:05:12,040 --> 00:05:15,399 as somebody who looks at the world through a really creative lens. What interested 73 00:05:15,480 --> 00:05:19,279 you? You had a great description earlier, But when you stepped on the 74 00:05:19,319 --> 00:05:25,439 floor and you saw in Chicago originally how things were going, what sort of 75 00:05:25,439 --> 00:05:29,399 piqued your interest there? Well, I think, first of all, is 76 00:05:29,920 --> 00:05:33,079 a lot of people who tend to be creative tend to be a little bit 77 00:05:33,279 --> 00:05:39,360 iconic, plastic, you know. They I was never a student tie sitting 78 00:05:39,360 --> 00:05:42,560 in an office guy like that had originally thought I wanted to be an attorney, 79 00:05:43,079 --> 00:05:46,240 But just the idea of putting on a suit and tie every day and 80 00:05:46,439 --> 00:05:50,920 you know, going into an office and just wasn't really for me. So 81 00:05:53,079 --> 00:05:58,120 the first thing that I was attracted attracting me to the place was the uniqueness 82 00:05:58,160 --> 00:06:00,600 of the working environment. I mean, they're really you know, they're going 83 00:06:00,759 --> 00:06:06,800 now. But there were no there was no other place comparable to work as 84 00:06:08,160 --> 00:06:12,399 as there wasn't an exchange for number one. But I also think, like, 85 00:06:12,800 --> 00:06:15,319 I'm not good with numbers in the sense that if you ask me, 86 00:06:15,360 --> 00:06:17,360 you know, what's the square word of three eighty seven, I can come 87 00:06:17,439 --> 00:06:19,519 up with it. You know, there were guys I stood next to who 88 00:06:19,560 --> 00:06:24,199 could. There were there were true savant numbers guys. But what I'm doing 89 00:06:24,240 --> 00:06:29,680 at is identifying patterns. And also, you know, a lot of trading 90 00:06:30,120 --> 00:06:33,439 has to do with uh, with human nature as well. Markets. One 91 00:06:33,439 --> 00:06:38,839 of the one of the the ideas that put forward from the book is that 92 00:06:39,000 --> 00:06:42,240 markets and this is a common this is not my you know, revelation. 93 00:06:42,319 --> 00:06:45,279 I mean you can find this in many books. Does that markets tend to 94 00:06:45,279 --> 00:06:48,759 be human constructs. Yes, they have a foundation of numbers underneath them, 95 00:06:49,079 --> 00:06:55,360 but they're really driven by people and that becomes psychological and you know, and 96 00:06:55,399 --> 00:06:59,560 I think I was able to somehow plug into that and from a creative standpoint. 97 00:07:00,000 --> 00:07:01,680 You know, there's a lot of creativity in mathematics. You know, 98 00:07:01,759 --> 00:07:06,040 when people talk about theories in that they talk about an elegant theory, for 99 00:07:06,160 --> 00:07:11,759 example, and an elegant theory the way I read it is something that makes 100 00:07:11,800 --> 00:07:15,639 sense, something that can distill down to the essence of of of what you're 101 00:07:15,639 --> 00:07:18,959 trying to accomplish, you know, whether it's I don't know whether whether you're 102 00:07:18,959 --> 00:07:26,199 doing glow mechanics or quantum physics, whatever it is. And so I believe, 103 00:07:26,480 --> 00:07:30,560 you know, like, for instance, I think that the great musicians, 104 00:07:30,040 --> 00:07:35,959 if of like the Baroque period, especially like the Box or the Telemons 105 00:07:36,040 --> 00:07:42,279 or the Heidens. I think these guys were musicians because there was no jet 106 00:07:42,319 --> 00:07:46,879 propulsion lab available to them, right, There was no there were no Goldman 107 00:07:46,959 --> 00:07:49,920 saxes that they could go work in or you know, or you know, 108 00:07:50,120 --> 00:07:55,480 a millennium fund or something like that. For them. Their their mathematical outlet 109 00:07:55,759 --> 00:08:00,519 was music, and they and the patients of the arts were there were patients 110 00:08:00,519 --> 00:08:03,040 of the arts, right, The science just hadn't been as developed, I 111 00:08:03,040 --> 00:08:05,279 mean, you know, I mean thinking about these guys had never even didn't 112 00:08:05,279 --> 00:08:09,800 even know how many planets there were or anything like that, yet, you 113 00:08:09,839 --> 00:08:15,279 know. And so for them that was where the mathematicians of the world expressed 114 00:08:15,279 --> 00:08:16,959 it to music. And if you listen, there's actually a very good book 115 00:08:18,079 --> 00:08:20,759 I forget the author. It is called Girtle Escher Bach, and what it 116 00:08:20,800 --> 00:08:26,240 really does is they tried to take me the mathematics of Girdle, those famous 117 00:08:26,319 --> 00:08:30,800 drawings of Escher you know, these stairways that never end, you know, 118 00:08:30,920 --> 00:08:35,399 and Bach and kind of takes those three different disciplines of art, music and 119 00:08:35,440 --> 00:08:41,080 mathematics and it shows how there's a common thread between them all. So I 120 00:08:41,080 --> 00:08:43,600 don't think it was that much of a stretch for me to go from the 121 00:08:43,720 --> 00:08:48,440 art world to finance. And for example, like Michael just used like authors 122 00:08:48,440 --> 00:08:54,159 as an example. Michael Crichton was an accomplished doctor, but he began writing, 123 00:08:54,279 --> 00:08:56,679 you know, Jurassic Park and all that, and he took that knowledge 124 00:08:56,720 --> 00:09:00,120 and he he fused it into his writing. So I do think there's a 125 00:09:00,159 --> 00:09:03,720 place for both sides of the brand in the finance world. And I think 126 00:09:03,720 --> 00:09:09,039 some of the more creative people UH tend to understand that what you're really looking 127 00:09:09,120 --> 00:09:13,399 at these numbers are really just expressions of emotion. They're expressions of opinion. 128 00:09:13,879 --> 00:09:18,279 They're in a way, they're they're like you know, they're they're like I 129 00:09:18,279 --> 00:09:20,200 said, they tend you know, you see momentum trading happen a lot, 130 00:09:20,240 --> 00:09:24,840 and that's really a function of her mentality. And you know, we have 131 00:09:24,879 --> 00:09:28,279 express you know, there's expressions in trading. One of them is by their 132 00:09:28,320 --> 00:09:31,559 rumor to sell the fact, the rumor being the height, the fact being 133 00:09:31,720 --> 00:09:35,799 the actual, you know, the the actual with the data finally tells you. 134 00:09:35,879 --> 00:09:41,159 But what I also do like about commodities trading is that there is a 135 00:09:41,279 --> 00:09:43,840 right and wrong answer compared to art. Like there's not such thing as what's 136 00:09:43,879 --> 00:09:46,600 a great song, it's in the eye of the butt. There's such thing 137 00:09:46,600 --> 00:09:50,039 as a great trade. If you bought someone to get nine and sold it 138 00:09:50,080 --> 00:09:52,600 at twelve, that's a way. If you bought it nine solder at seven, 139 00:09:52,639 --> 00:09:56,159 it's a loser, and the rest just it doesn't really matter. So 140 00:09:56,840 --> 00:10:00,360 I don't know, Maybe that was a long way of getting to the point 141 00:10:00,399 --> 00:10:03,720 that there there's room from both sides of the brain in the market. No 142 00:10:03,840 --> 00:10:05,480 I suspected you would have a great answer to that question. Brett and it 143 00:10:05,519 --> 00:10:09,279 did not disappoint. And lots of patterns of course of music and art, 144 00:10:09,320 --> 00:10:13,039 and that's a really interesting way to look at it. Now, tell us 145 00:10:13,039 --> 00:10:20,639 about those early years in Chicago, in New York, the political atmosphere on 146 00:10:20,720 --> 00:10:24,000 Wall Street at that time. I mean, that is perhaps the most interesting 147 00:10:24,080 --> 00:10:30,440 period in the history of finance. It's just a fascinating time to be involved. 148 00:10:30,679 --> 00:10:35,320 The geopolitics are fascinating. It's a fascinating moment in geopolitics. And on 149 00:10:35,360 --> 00:10:37,559 top of that, the technology. And maybe we can get to this in 150 00:10:37,600 --> 00:10:41,399 a second question. Maybe this is something different altogether. But things were just 151 00:10:41,440 --> 00:10:45,919 evolving really quickly. What can you tell us about sort of the culture of 152 00:10:45,919 --> 00:10:48,120 the business when you first stepped into it. Well, you know, I 153 00:10:48,159 --> 00:10:52,639 can't speak to what we call over the count or anything like that at the 154 00:10:52,639 --> 00:10:56,519 time. I mean, remember, I think when people don't understand about the 155 00:10:56,600 --> 00:11:00,279 trading for you know, when they would look down at these things, or 156 00:11:00,279 --> 00:11:01,960 when they would see them on the news or whatever, where you know, 157 00:11:01,960 --> 00:11:07,240 people would you know some I know some finance reporters like to report from the 158 00:11:07,279 --> 00:11:11,840 trading floor as if they're like on the inside, getting some inside info. 159 00:11:11,840 --> 00:11:15,240 The one thing that was interesting is that we on the floor were often the 160 00:11:15,320 --> 00:11:18,200 last to know about anything, right We would we would sit there and all 161 00:11:18,240 --> 00:11:22,799 of a sudden the market would just move, and we wouldn't know why until 162 00:11:22,919 --> 00:11:28,240 later. Right, So we were more reactionary than we were the makers per 163 00:11:28,320 --> 00:11:33,000 se. We made prices, but the macro trends were beyond their control. 164 00:11:33,080 --> 00:11:37,320 Right. But when I got there, I think like I was very fortunate. 165 00:11:37,360 --> 00:11:39,360 And part of the reason I wrote the book is that I feel like 166 00:11:39,440 --> 00:11:43,639 the eighties and nineties, you know, were the pinnacle of the trading floor. 167 00:11:45,200 --> 00:11:48,240 It was where it had kind of reached It's it's zeen it in terms 168 00:11:48,240 --> 00:11:52,720 of importance, in terms of influence, in terms of culture as well, 169 00:11:54,039 --> 00:11:56,480 you know. I mean there were movies coming out, like trading places. 170 00:11:56,519 --> 00:11:58,519 There was a movie prob Limit Up that came out. Even in the movie 171 00:12:00,000 --> 00:12:03,720 excuse me, in the movie Ferris Bueller's Day Off, they're actually watching the 172 00:12:03,759 --> 00:12:07,120 year dollar futures pit. That's I'm sitting there, going I know those guys. 173 00:12:07,159 --> 00:12:11,879 You know. So from a political standpoint, it was very I think 174 00:12:11,919 --> 00:12:15,679 people down on the floor were just interested in making money. You know. 175 00:12:15,759 --> 00:12:18,960 I didn't hear many political discussions going on, per se if that's what you're 176 00:12:18,960 --> 00:12:24,080 asking about. But we really, you know, we did follow politics because 177 00:12:24,120 --> 00:12:26,960 you know, as elections moved, it often moved the markets. And you 178 00:12:28,000 --> 00:12:31,480 know, like one little thing that we learned is that the FED tends to 179 00:12:31,519 --> 00:12:35,000 cut interest rates before an election to try and help the incumbent or whatnot. 180 00:12:35,039 --> 00:12:41,080 You know. But the real politics that I saw, the real was global. 181 00:12:41,200 --> 00:12:43,200 And that was when I went to the floor of the New York Merketingtail 182 00:12:43,240 --> 00:12:48,159 Exchange. I had been sent there by my boss really to do him a 183 00:12:48,240 --> 00:12:50,600 solid, you know, and because he would he had just opened up a 184 00:12:50,679 --> 00:12:56,840 group I group. There was one guy over there who was an excellent trader. 185 00:12:56,879 --> 00:12:58,159 By the way, I mentioned in the book. You know, everybody 186 00:12:58,200 --> 00:13:01,000 in the book a suit NaNs for the most part because out of my embarrassing 187 00:13:01,000 --> 00:13:05,519 anybody earth. But if he's listening, he knows who he was. He 188 00:13:05,559 --> 00:13:09,240 was a fantastic trader, a very nice guy to a very very decent man. 189 00:13:11,720 --> 00:13:13,120 I just knew his stuff right, and so I was fortunate that I 190 00:13:13,159 --> 00:13:16,679 was able to click for him. And when I went to the floor, 191 00:13:16,720 --> 00:13:20,000 and I would say, within a month or two that I got there, 192 00:13:22,039 --> 00:13:24,480 if I'm if my timing is if I remember, right, Saddam was saying 193 00:13:24,960 --> 00:13:31,679 invaded Kuwaid and at the time, right, crude oil at the time, 194 00:13:31,799 --> 00:13:33,799 there were you know, the global consumption prudo, if I would fall, 195 00:13:33,919 --> 00:13:39,080 was in the sixty million barrels a day range, and when he moved in, 196 00:13:39,200 --> 00:13:43,240 he basically took out between like four and five million barrels a day out 197 00:13:43,279 --> 00:13:48,440 of the market, right, and the market started and the market went blisted, 198 00:13:48,559 --> 00:13:52,919 you know, the crude oil market was and they hinged on every word. 199 00:13:54,039 --> 00:13:56,200 Saddam Hussain was same. Remember during the whole summer and into the fall 200 00:13:56,279 --> 00:14:01,919 of nineteen ninety I think it was he I got my dates, right, 201 00:14:01,320 --> 00:14:09,000 he you know, George Bush was building up this massive force to push these 202 00:14:09,000 --> 00:14:13,559 guys out of Kuwait. And Kuwait was basically the epicenter of krudo of production 203 00:14:13,679 --> 00:14:18,600 in the Middle East. So this was like for a commodities trader, you 204 00:14:18,600 --> 00:14:22,120 know, we make money on volatility. You One big myth that people have 205 00:14:22,279 --> 00:14:26,279 is that commodities traders lean long, you know, like so someone when I 206 00:14:26,320 --> 00:14:28,480 used to trade krudo off for tex because somebody would say to me, oh, 207 00:14:28,639 --> 00:14:31,360 you know, oil is up, you had a good day today. 208 00:14:31,360 --> 00:14:33,519 I mean no, actually, I was short, you know, and commodities 209 00:14:33,559 --> 00:14:39,039 traders, we're not investors, right. We thrive on volatility. We thrive 210 00:14:39,080 --> 00:14:41,320 on being able to builose, sell high, sell higher by law. And 211 00:14:41,480 --> 00:14:46,279 when you have when you have two armies one four hundred thousand men, one 212 00:14:46,320 --> 00:14:50,879 seven hundred thousand men, shifts and everything sitting right on top of the world's 213 00:14:52,320 --> 00:14:54,120 uh, you know, of the main spigure of the world's crudeoi production. 214 00:14:54,200 --> 00:14:58,799 Not to mention that the straits of poor mouse coming out of the entire version 215 00:14:58,879 --> 00:15:03,840 volved you. I had wild swings in the market and and I literally sat 216 00:15:03,840 --> 00:15:07,919 there as a clerk and watched fortunes being made before my eyes. And I 217 00:15:07,960 --> 00:15:11,360 remember one trader. You know, I say, it's rough and tumble. 218 00:15:11,399 --> 00:15:13,639 Because a lot of these guys, and I'll get into this in a second, 219 00:15:13,639 --> 00:15:16,080 because this is one of the essences of the book. A lot of 220 00:15:16,080 --> 00:15:20,039 these guys were you know, they were not harder brands, they were not 221 00:15:20,440 --> 00:15:22,440 you know, they didn't come out of work in Nbas. All of these 222 00:15:22,440 --> 00:15:26,559 guys were like me. You know, I came out Illinois with communication degree. 223 00:15:26,600 --> 00:15:28,960 Next thing I know that I'm I'm trading, you know, notional one 224 00:15:30,000 --> 00:15:31,840 hundred you know, millions of dollars in ear dollars. I'm like, how 225 00:15:31,879 --> 00:15:35,480 did this happen? You know, I'm you know, I'm still living at 226 00:15:35,480 --> 00:15:39,279 home with my mom, you know, whatever is. And so these guys, 227 00:15:39,440 --> 00:15:43,000 you know, for them, this was their chance to really make a 228 00:15:43,039 --> 00:15:46,279 lot of money in ways that are now closed to them. And I remember 229 00:15:46,279 --> 00:15:50,879 one guy we would watch Saddam hus Sting. You come out with some bellicose 230 00:15:50,919 --> 00:15:54,759 announcement every day, like the Infidels will be destroyed or whatever it was, 231 00:15:54,000 --> 00:15:58,120 and this guy just I'll clean it up for the radio. But just got 232 00:15:58,120 --> 00:16:00,480 to go to me and goes, I freaking love this guy. You know, 233 00:16:00,879 --> 00:16:04,519 they and you know, and so to me. So that's where I 234 00:16:04,519 --> 00:16:07,919 really saw the politics of the world come into play. And that's kind of 235 00:16:07,919 --> 00:16:14,000 where I decided I wanted to trade energy because energy is a volatile As a 236 00:16:14,039 --> 00:16:18,080 volatile product, it's always changing. You know. Natural gas was a new 237 00:16:18,120 --> 00:16:21,879 product that then relatively now it's a you know, now it's a benchmark of 238 00:16:22,159 --> 00:16:26,679 energy trading. So that's really where I saw the politics coming. Was more 239 00:16:26,679 --> 00:16:33,480 geopolitical at that point, and for us it meant it usually tended to mean 240 00:16:33,759 --> 00:16:37,039 the more, the more instability there was. The sounds parasitical. But the 241 00:16:37,039 --> 00:16:41,480 more instability there was, the more money there was to be made. So 242 00:16:41,480 --> 00:16:45,039 that's how we be alerted, you know, right, and it would be 243 00:16:45,080 --> 00:16:52,679 hard not to and right, money, right, you try not to think 244 00:16:52,720 --> 00:16:55,600 too hard about it now. I came from a military family, so I 245 00:16:55,600 --> 00:17:00,000 remember thinking, you know, while about guys were high five in each other, 246 00:17:00,039 --> 00:17:02,080 they're saying, this is great. I remember thinking to myself, you 247 00:17:02,080 --> 00:17:04,000 know, there's a bunch of soldiers over there, you know, men and 248 00:17:04,000 --> 00:17:08,039 women who are getting ready to go into combat. And for these guys and 249 00:17:08,359 --> 00:17:11,839 girls, you know, this isn't you know, this is not a game 250 00:17:11,880 --> 00:17:15,960 to them, you know there as we didn't know it would be such a 251 00:17:15,960 --> 00:17:19,279 one sided victory at the time, you know, but we actually lost more 252 00:17:19,319 --> 00:17:25,240 people from friendly fire and accidents than we lost from National ANEMI combat. But 253 00:17:26,799 --> 00:17:27,960 you know, so that was the only thing going through in my head. 254 00:17:29,000 --> 00:17:32,480 Because my father was a marine career and my brother was a helicopter pilot for 255 00:17:32,640 --> 00:17:34,720 the Navy. We were just just gotten out. So I was like, 256 00:17:34,839 --> 00:17:38,640 you know, let's not be too happy about all this because you know there, 257 00:17:40,119 --> 00:17:41,559 yes, their pain is our game, but you know, these you 258 00:17:41,599 --> 00:17:45,240 were talking about real lives too. 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That's 279 00:19:22,480 --> 00:19:26,559 gold code dot com slash Federalist. Or call eight five five six one eight 280 00:19:26,839 --> 00:19:36,119 ten thirty. And there have been some sobering moments, I imagine in the 281 00:19:36,200 --> 00:19:40,759 industry over the last few decades, even since then. But you know, 282 00:19:41,000 --> 00:19:45,200 to that point about where your mind goes when you're focused on the work, 283 00:19:45,240 --> 00:19:51,079 and where your mind maybe could go or should go. Has that culture amidst 284 00:19:51,119 --> 00:19:55,960 all of these bigger kind of cultural questions, especially in the last ten years, 285 00:19:56,000 --> 00:20:00,640 even as the sort of moral question not just of markets but of everything 286 00:20:00,680 --> 00:20:04,200 everybody does has become front and center, has the culture of the industry changed 287 00:20:04,880 --> 00:20:11,000 much or is it still you know, sort of fueled by those you know, 288 00:20:11,240 --> 00:20:14,039 those same motivations at the end of the day. Well, I mean, 289 00:20:14,079 --> 00:20:15,759 you know, if you talk to an investment banker or you talk to 290 00:20:15,799 --> 00:20:21,720 a trader, they're primarily focused on making money to the point where they can 291 00:20:21,799 --> 00:20:26,200 be quite a moral about it. For me personally, like the culture that 292 00:20:26,480 --> 00:20:30,359 I've seen changed is the way people view Wall Street. You know, it 293 00:20:32,400 --> 00:20:36,119 went from being you know, just greedy guys like the Gordon Geckoes of the 294 00:20:36,119 --> 00:20:38,279 world to something a little bit more nefarious because what we saw in two thousand 295 00:20:38,319 --> 00:20:42,279 and eight was was serious neglige on the part of a lot of people that 296 00:20:42,359 --> 00:20:47,480 caused that crash. I mean, Michael Lewis wrote a great book about it, 297 00:20:47,480 --> 00:20:51,920 you know, the Big Shorts, where only a few people actually saw 298 00:20:52,039 --> 00:20:57,400 the mismanagement that was going on. And I think what sticks and people's crawl 299 00:20:57,519 --> 00:21:02,440 about Wall Street isn't so much much the culture of making money, but it 300 00:21:02,559 --> 00:21:07,160 seems like there's a trend. And this is political because of who donates and 301 00:21:07,200 --> 00:21:11,599 who makes the laws. Is that you know, you've heard the expression before 302 00:21:11,640 --> 00:21:15,240 the new profits are privatized, the losses are public. You know, the 303 00:21:15,279 --> 00:21:18,079 losses are the public. You know, So a bank makes a fortune for 304 00:21:18,400 --> 00:21:23,400 years and credit to false swaps. Basically, you know, doing the equivalent 305 00:21:23,440 --> 00:21:26,799 of picking up pennies in front of a steamroller. You know, like basically 306 00:21:26,799 --> 00:21:32,000 the equivalent of just shorting options or you know, writing fire insurance. You're 307 00:21:32,319 --> 00:21:37,000 writing home insurance on a fault line and just and then once their earthquake hits, 308 00:21:37,960 --> 00:21:40,720 they don't go out of business. They run to Congress, they run 309 00:21:40,799 --> 00:21:42,839 the FED chairman, they run to the Treasury Secretary, and they bail them 310 00:21:42,880 --> 00:21:47,119 out. And they bailed them out because I mean, I actually wrote an 311 00:21:47,160 --> 00:21:48,680 article when I used to write, when I used to write with David Crumbs 312 00:21:49,119 --> 00:21:52,960 from Forum, I actually wrote an article defending Tart, not because I thought 313 00:21:52,960 --> 00:21:56,799 it was the right thing to do, but just because because I knew that 314 00:21:56,160 --> 00:21:59,559 in the end, the guys on Wall Street, the Dick Folds of the 315 00:21:59,559 --> 00:22:02,160 world. You know, he's not a bad guy, you know, I'm 316 00:22:02,160 --> 00:22:04,240 not. I'm just picking him at random that I'm not picking on him per 317 00:22:04,240 --> 00:22:07,960 se. I don't know enough about what happened to Lena beat and comment on 318 00:22:07,000 --> 00:22:12,000 it. But uh, these guys will be fine regardless, you know. 319 00:22:12,200 --> 00:22:15,279 I even say in the book Wall Street is the only place where you can 320 00:22:15,319 --> 00:22:19,480 go and lose a fortune and get paid a fortune for your troubles, you 321 00:22:19,519 --> 00:22:22,680 know, And I think that really bothers me. And the reason I supported 322 00:22:22,680 --> 00:22:26,799 SPARK back then was because I felt like that Main Street was going to suffer 323 00:22:26,880 --> 00:22:30,440 the most. And I felt like, you know, as much as I 324 00:22:30,480 --> 00:22:33,480 believe in capitalism, as much as I believe in you know, winners and 325 00:22:33,519 --> 00:22:37,480 losers, it's not a suicide pact. And I thought it was so serious 326 00:22:37,519 --> 00:22:41,559 that only the federal was, only the US government could stabilize the market, 327 00:22:41,640 --> 00:22:44,759 you know, and a lot of people were going to get hurt. And 328 00:22:44,759 --> 00:22:47,400 we kind of saw what it would have looked like with the you know, 329 00:22:47,440 --> 00:22:51,759 from a different angle with the COVID lockdown. Now, imagine that came instead 330 00:22:51,759 --> 00:22:55,240 of from instead of artificially from the government shutting everything down, but that just 331 00:22:55,240 --> 00:22:59,160 came from an economic collapse that two thousand and eight really could have been. 332 00:23:00,359 --> 00:23:03,920 And so you see the pain that that would have caused. So from a 333 00:23:03,920 --> 00:23:10,839 political standpoint, I think Wall Street and d C. There's there's a direct 334 00:23:10,920 --> 00:23:14,759 pipeline back and forth. And you know, I mean think about the FED 335 00:23:14,839 --> 00:23:18,920 chairman. The chairman the Treasury Secretary during two thousand and eight was a former 336 00:23:18,960 --> 00:23:23,119 Goldman stacks president, right. I mean, so there's an incestuousness and I 337 00:23:23,160 --> 00:23:26,759 think people on the outside looking in are wondering, you know, what, 338 00:23:26,759 --> 00:23:30,519 what's going on with that? So you're not that But again, you know, 339 00:23:30,559 --> 00:23:33,839 we on the you know we're in the trading for are a little bit 340 00:23:33,880 --> 00:23:37,160 releasing that that's more boardroom stuff and that's more lobby stuff. You know, 341 00:23:37,240 --> 00:23:41,279 we just but all we knew was that, you know, the market's doing 342 00:23:41,319 --> 00:23:45,519 some weird stuff and we should probably take advantage of this and we'll figure out 343 00:23:45,519 --> 00:23:48,480 why later. A boost to blame and all that very much in the moment 344 00:23:48,720 --> 00:23:52,680 when you're trading out. I use in the book, I use a lot 345 00:23:52,759 --> 00:23:57,759 of uh of wart of combat metaphors, you know, and because a combat 346 00:23:57,839 --> 00:24:00,440 soldier, now that I have a was one, but I lived with one. 347 00:24:00,480 --> 00:24:03,200 My father was one. He was actually wounded in action. So he 348 00:24:03,279 --> 00:24:07,160 was the real he was the real deal. And he uh, he just 349 00:24:07,160 --> 00:24:10,279 said, you know, you're just focused on what's in front of you. 350 00:24:10,279 --> 00:24:12,960 You don't know if the flanks are being turned, you don't know if there's 351 00:24:12,960 --> 00:24:15,400 an order. All you know is that you got your body, so you're 352 00:24:15,440 --> 00:24:18,759 left and your right, and there's a bunch of Chinese communists coming at you. 353 00:24:18,839 --> 00:24:22,160 He was in Korea, and you just want to make sure that when 354 00:24:22,160 --> 00:24:25,640 they're when the attack over, you and your buddy's are still there. Then 355 00:24:25,680 --> 00:24:30,519 you'll worry about what the strategy was and tactics and what true you and all 356 00:24:30,559 --> 00:24:33,519 that stuff. So that was kind of we had a very parochial attitude ourselves, 357 00:24:33,559 --> 00:24:37,200 but it doesn't mean we're immune from politics and just didn't have time to 358 00:24:37,240 --> 00:24:45,240 think so much on it. So the you're described earlier those years as the 359 00:24:45,279 --> 00:24:48,319 pinnacle, and I just wanted to ask, and this is a big part 360 00:24:48,319 --> 00:24:52,559 of the book. I wanted to ask why you see that time in that 361 00:24:52,880 --> 00:24:56,000 sense? And I think you've you've talked about it a fair amount already, 362 00:24:56,000 --> 00:25:00,759 but pinnacle is such an interesting word, and thinking about on those years, 363 00:25:00,799 --> 00:25:04,559 I'm just curious as if you could go into more about why you see them 364 00:25:04,559 --> 00:25:08,279 that way. Well, yeah, I mean it's for two reasons. Number 365 00:25:08,279 --> 00:25:15,440 one is that the economy had grown in leaps and bounds by then. You 366 00:25:15,440 --> 00:25:19,440 know, from the nineteen eighties to two thousand was a period of unprecedented economic 367 00:25:19,599 --> 00:25:25,680 room, but it was so you had the economy is the biggest it had 368 00:25:25,720 --> 00:25:29,559 been up to that point, but you had not yet had the advent of 369 00:25:29,759 --> 00:25:34,440 electronic trading, right, So by two thousand or so, electronic trading. 370 00:25:34,720 --> 00:25:40,200 The economy continues to grow. But now electronic trading has taken bay, has 371 00:25:40,359 --> 00:25:44,359 taken over the business, you know. And I remember, I think the 372 00:25:44,400 --> 00:25:47,559 first trade again, it's in my book somewhere. The first trade was a 373 00:25:47,559 --> 00:25:52,720 Globex trade on the currency which was the Chicago market to exchanges over the counter 374 00:25:52,759 --> 00:25:56,079 platform, it's electronic platform. First trade I think was nineteen ninety three. 375 00:25:56,920 --> 00:26:02,599 So and I liken it too. All of us were on the Titanic and 376 00:26:02,680 --> 00:26:06,200 we felt the shutter of the iceberg, but it really didn't We didn't know 377 00:26:06,240 --> 00:26:10,119 the ship was sinking, you know, we didn't really realize or I mean, 378 00:26:10,160 --> 00:26:11,240 actually some of us, I shouldn't say that, some of us did, 379 00:26:11,240 --> 00:26:15,279 like my boss did. And so because he did, I thought it 380 00:26:15,279 --> 00:26:17,759 because I worshiped this guy, you know, I thought he was one of 381 00:26:17,759 --> 00:26:19,400 the best paracters I've ever seen. You know, I've worshiped his work, 382 00:26:19,400 --> 00:26:22,759 ethic and his intellect and all that. And so he said, hey, 383 00:26:22,839 --> 00:26:26,039 the end of the trading floor is nigh. Back in nineteen ninety three, 384 00:26:26,160 --> 00:26:30,880 when it's the most pact it's ever been and the record volumes, so it 385 00:26:30,920 --> 00:26:33,720 was kind of weird. It was like the ship hit the iceberg, but 386 00:26:33,759 --> 00:26:37,960 it kept sailing for a while, but it was starting to take in water. 387 00:26:37,119 --> 00:26:44,079 And then the dramatic change in the business when you consider that trading toys 388 00:26:44,079 --> 00:26:47,960 were around since the eighteen forties. Was the first futures exchanged, so you 389 00:26:47,960 --> 00:26:51,279 know, thirteen years before the Civil War. Was one of the first uses, 390 00:26:51,440 --> 00:26:53,359 you know, was Chicago Board of Trade when that opened up, So 391 00:26:53,440 --> 00:26:56,079 that was you know, several you know, over one hundred and fifty years 392 00:26:56,119 --> 00:27:03,319 ago, within fifteen years. Realistically, the trading fur just was gone as 393 00:27:03,359 --> 00:27:07,160 a you know, it existed still until I think twenty seventeen. Again you 394 00:27:07,400 --> 00:27:11,279 just trying to remember the dates you can verify them, but you know, 395 00:27:11,400 --> 00:27:15,599 so that that was like the last period where you had the biggest economy we've 396 00:27:15,640 --> 00:27:21,079 had and we were right there and there was no other place to trade this 397 00:27:21,119 --> 00:27:25,680 stuff yet. So that's where I think why it was why. I think 398 00:27:25,720 --> 00:27:29,000 it was the height of the market, and I think that's why people were 399 00:27:29,000 --> 00:27:30,920 so fascinated by it. Now people were people in the eighties were getting very 400 00:27:30,920 --> 00:27:36,599 interested in trading there, you know, I mean shrub and these new you 401 00:27:36,599 --> 00:27:41,079 know Maria trade uh, you know, I forget some of these some of 402 00:27:41,079 --> 00:27:44,799 these trading accounts were opening up and people were starting to get more and more 403 00:27:44,839 --> 00:27:47,480 invested in for one ks and all that. So I think the people were 404 00:27:47,480 --> 00:27:53,680 more interested in markets, and so naturally, what better expression of pure capitalism 405 00:27:53,799 --> 00:27:59,440 than a bunch of you know, red faced you know, alphas screaming at 406 00:27:59,440 --> 00:28:02,880 each other in funny coats, you know, and making hand stignals and stuff. 407 00:28:02,920 --> 00:28:07,680 So, but it didn't last, you know, it repeat, and 408 00:28:07,720 --> 00:28:10,720 then it came down pretty quickly, and I think a lot of people were 409 00:28:10,720 --> 00:28:14,640 surprised by have quickly before no pun intended, before it was pulled out from 410 00:28:14,680 --> 00:28:18,640 under them. Well, could you actually explain when you say the shift to 411 00:28:18,839 --> 00:28:22,880 electronic trading was kind of already emotion, could you actually explain for people who 412 00:28:22,640 --> 00:28:29,160 aren't super familiar with the way that physically things functioned before that technology, could 413 00:28:29,200 --> 00:28:32,839 you just explain a little bit about like how trades physically were made, and 414 00:28:32,880 --> 00:28:36,920 then what the differences in the world of electronic trading. You know, I 415 00:28:36,960 --> 00:28:41,039 will yeah, and I'll just use I'll just use energy, since that's what 416 00:28:41,119 --> 00:28:45,559 I trade. As an example, right, if you want to trade a 417 00:28:45,680 --> 00:28:52,039 natural gas features contract right back in the nineteen nineties or to back in the 418 00:28:52,079 --> 00:28:56,119 nineteen nineties, you would call up your broker. The broker would call down 419 00:28:56,160 --> 00:29:02,039 to the trading floor. A guy would pick up. The broker would say, 420 00:29:02,039 --> 00:29:03,599 hey, you know, buy me the one natural gas contract best you 421 00:29:03,680 --> 00:29:07,720 can, you know, wherever the market is, all right. This guy 422 00:29:07,799 --> 00:29:10,839 would write down the order, stamp it, time, stamp it so you 423 00:29:10,839 --> 00:29:15,640 have a record when it was received. He would then turn around and look 424 00:29:15,759 --> 00:29:18,799 into the trading pit. He would flash the order using hand signals to a 425 00:29:18,880 --> 00:29:23,079 clerk. The clerk would then turn around and tell the broker, hey, 426 00:29:23,519 --> 00:29:27,200 buy one natural gas contract. The broker would scream into the mob where it's 427 00:29:27,279 --> 00:29:32,680 natural gas. Somebody might say out at your three twenty five whatever it was, 428 00:29:32,720 --> 00:29:34,799 and whatever that means, and he would go, hey, buy one 429 00:29:34,839 --> 00:29:38,759 contract, buy one at three twenty five. He'd turn around to the clerk 430 00:29:38,759 --> 00:29:41,599 and say you're filled at three twenty five. The clerk would then flash, 431 00:29:41,799 --> 00:29:45,119 you're filler three twenty five. The brooker would then on the phone would then 432 00:29:45,240 --> 00:29:48,559 tell me, hey, you bought one to three twenty five. That's the 433 00:29:48,559 --> 00:29:52,000 way he used to be. Now, if I want to do that, 434 00:29:52,160 --> 00:29:56,119 I just go on to the Intercontinental Exchange or the glow Vets or the which 435 00:29:56,160 --> 00:30:02,079 close the glowbex Exchange. I just move my my mouse point and click boom 436 00:30:02,200 --> 00:30:07,079 done and gets downloaded through the straight what they call straight through processing, right 437 00:30:07,119 --> 00:30:11,920 into my account and the immediately it so as you can see, it's a 438 00:30:11,920 --> 00:30:15,559 more it's more efficient now, but that that's the way back then, that 439 00:30:15,640 --> 00:30:18,880 was the only way you could do it to you For listeners who aren't familiar 440 00:30:18,880 --> 00:30:22,799 with commodities, you can use stock as an example too. Right. You 441 00:30:22,960 --> 00:30:27,319 used to call up your broker at a Schwab or wherever. He would call 442 00:30:27,359 --> 00:30:30,880 down to the floor. A guy would pick up the phone, same thing, 443 00:30:30,480 --> 00:30:34,480 say buy a thousand shares at Philip Morris. He go over to a 444 00:30:34,480 --> 00:30:37,920 bunch of guys standing around the Philip Morris post and goes whereas Philip Morris would 445 00:30:37,920 --> 00:30:41,799 be like forty dollars a share, okay, buy a thousand. He walked 446 00:30:41,799 --> 00:30:42,720 back over, call your back up and go, hey, you bought it. 447 00:30:44,119 --> 00:30:47,160 Now, I can just now anybody who trades, you know now my 448 00:30:47,279 --> 00:30:49,799 son trades TDM ROR trade. You know, my college son. He just 449 00:30:51,240 --> 00:30:55,880 and he can trade quicker with more efficiency than anybody else. So it was 450 00:30:55,880 --> 00:31:00,559 inevitable that was going to happen. Mark you, it's just what Moore's Law 451 00:31:00,640 --> 00:31:06,039 says. That technology was it developed, was it grows exponentially, right. 452 00:31:06,039 --> 00:31:10,000 I think I forget the point like doubles every year or something like that. 453 00:31:10,039 --> 00:31:12,240 I forget the actual formula. But and you saw that happen very quickly. 454 00:31:12,319 --> 00:31:17,440 Went from one contract traded on the globex in the nineteen ninety three currencies to 455 00:31:17,599 --> 00:31:23,799 basically to like ninety I think within twenty years, ninety nine percent of exchange 456 00:31:23,839 --> 00:31:29,880 volume was done on platforms. You know, they still have these pits around 457 00:31:29,960 --> 00:31:33,240 just in case, but that was really just to give the traders time to 458 00:31:33,559 --> 00:31:36,480 get their ducks in a run and get out, and they'd shut them all 459 00:31:36,519 --> 00:31:40,839 down. Now there was really what prompted the book was my article in the 460 00:31:40,880 --> 00:31:42,640 Wall Street Journal in twenty sixteen. They said, I'll miss the trading floor 461 00:31:42,720 --> 00:31:48,960 because they're all gone there like they they've gone away the data that they do 462 00:31:48,079 --> 00:31:55,319 not exist. A Hey, y'all, this is Sarah from the Sarah Carter 463 00:31:55,400 --> 00:31:59,599 Show. Thanks for listening to the Federalist Radio Hour. We could all benefit 464 00:31:59,680 --> 00:32:02,559 from heart healthy energy, especially in this busy time of the year. One 465 00:32:02,559 --> 00:32:07,039 of the best ways to do that is to support your blood pressure in circulation 466 00:32:07,240 --> 00:32:12,200 with super Beats heart shoes paired with a healthy lifestyle. 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I was going to say gamification of you know, money, business, 483 00:33:23,559 --> 00:33:28,759 people's livelihoods, people's lives, but there's actually more of like a video 484 00:33:28,839 --> 00:33:31,000 gamification because when you were describing the hand signals, you know, it's like 485 00:33:31,039 --> 00:33:36,279 baseball. So there's always that element of gamification, but the video gamification. 486 00:33:36,960 --> 00:33:40,319 I'm just really curious about how you think psychologically it's different to sort of be 487 00:33:40,640 --> 00:33:45,720 on the floor with that physicality involved, as opposed to clicking a mouse and 488 00:33:45,839 --> 00:33:49,640 you know, looking at a screen and moving things around. Is there something 489 00:33:50,240 --> 00:33:53,240 psychologically you think that is better? You said more efficient? Is there something 490 00:33:53,279 --> 00:33:58,960 that's worse? Is there something that makes it easier to make mistakes? How 491 00:33:59,000 --> 00:34:04,039 does that affect I mean us, the mental the mental task when you're you 492 00:34:04,079 --> 00:34:07,160 know, training, commodities, stocks, whatever it is. Well, they're 493 00:34:07,160 --> 00:34:09,159 two different. There really are two different animals. And I think that's why 494 00:34:09,159 --> 00:34:15,400 a lot of guys. A lot of guys couldn't adapt to uh when the 495 00:34:15,440 --> 00:34:17,719 trading flots closed. You know, we just have an expression that a lot 496 00:34:17,719 --> 00:34:22,199 of you guys would be flipping hamburgers if it wasn't for the floor. When 497 00:34:22,239 --> 00:34:24,079 you go over the counter, you have to view the world totally different. 498 00:34:24,880 --> 00:34:29,079 You do have to view it more like a you know, like right now, 499 00:34:29,119 --> 00:34:30,760 as I'm talking to you, I'm also looking at a grap of a 500 00:34:30,800 --> 00:34:35,599 certain I'm looking at chart of a certain position that I have right, and 501 00:34:35,599 --> 00:34:37,000 it moves back and forth, and I can see how it gets up to 502 00:34:37,039 --> 00:34:40,920 certain levels of resistance where it doesn't seem to want to break a price point, 503 00:34:40,960 --> 00:34:45,639 and it comes off and you kind of learn how to play that game. 504 00:34:45,679 --> 00:34:50,679 But you know, whereas on the floor, I think the physicality gave 505 00:34:50,719 --> 00:34:53,440 everything a sense of immediacy. And also a lot of guys on the floor 506 00:34:53,519 --> 00:34:58,000 were trading. They weren't speculus. But the reason you were on the trading 507 00:34:58,039 --> 00:35:01,840 floor, and I think this is an important just to explain really why guys 508 00:35:02,320 --> 00:35:06,719 would pay ten thousand dollars a month for at least to be on the floor, 509 00:35:07,239 --> 00:35:12,800 right, The reason was because what the floor provided was liquidity and price 510 00:35:12,880 --> 00:35:15,880 discovery, Right, So what do I mean by that? So let's say 511 00:35:15,880 --> 00:35:17,719 if somebody says, you know, hey, I want to buy a thousand 512 00:35:17,719 --> 00:35:22,000 dollars of crude oil, which is one few one crude oil contract. Right, 513 00:35:22,199 --> 00:35:24,920 where's the market Somebody would say, I'll pay seventy dollars for it, 514 00:35:24,960 --> 00:35:29,000 and I'll sell it to you seventy dollars and five cents or whatever. Right, 515 00:35:29,519 --> 00:35:31,400 that was the market. Right. The value might be seventy dollars and 516 00:35:31,480 --> 00:35:35,800 a quarter, right, based on based on models that you have and whatnot. 517 00:35:35,880 --> 00:35:38,880 So what we're paying for was somebody to sell you, sell you at 518 00:35:38,880 --> 00:35:43,760 the bid, or pay for the offer. That was really the only reason 519 00:35:43,800 --> 00:35:47,119 why the trading floor existed. And so the way we made money was we 520 00:35:47,199 --> 00:35:52,079 bought undervalued and sold over value. That's what we did all day long. 521 00:35:52,119 --> 00:35:54,400 Whereas once you get over the counter as we call it, or you know, 522 00:35:54,480 --> 00:35:59,679 upstairs as the vernacular for it, like the guys who are trading game 523 00:35:59,719 --> 00:36:04,920 stuff, was like, I'm kiddy whatever, right, it's something kiddy. 524 00:36:04,159 --> 00:36:07,199 Yeah. Yeah, he was a big game stop cheerlider. Right, that's 525 00:36:07,280 --> 00:36:12,760 becomes a totally different mindset. You're not buying, you know, I mean 526 00:36:13,360 --> 00:36:16,760 people were selling game Stop because they felt it was overvalued. But you could 527 00:36:16,800 --> 00:36:22,119 see how if you get a group of people together, they can really muscle 528 00:36:22,119 --> 00:36:23,480 a market, you know, And you couldn't really do that on the floor. 529 00:36:23,519 --> 00:36:27,480 You couldn't get thirty guys together and go, hey, let's all start 530 00:36:27,519 --> 00:36:30,000 buying ryall features. It just didn't work that way. Because I remember one 531 00:36:30,000 --> 00:36:32,280 time I asked my boss, I said, you know, what do you 532 00:36:32,320 --> 00:36:36,119 think? He said, what do you think we're going to be up or 533 00:36:36,119 --> 00:36:37,960 down today? He goes, look, you know, I don't pay ten 534 00:36:37,000 --> 00:36:42,599 thousand a month for seat leads to just to speculate on direction, because I 535 00:36:42,639 --> 00:36:45,519 care what the bid is and what the offer is right, And that's what 536 00:36:45,559 --> 00:36:47,360 I think about. People don't understand of the trading. Four day's real function 537 00:36:49,000 --> 00:36:52,840 was to provide liquidity in the price discovery, and now that function has moved 538 00:36:52,840 --> 00:36:57,199 over the counter, but the thought process that goes into that price discovery is 539 00:36:57,239 --> 00:37:00,199 different. Now. Those people buying game Stop, they weren't buying it because 540 00:37:00,280 --> 00:37:05,880 they thought it was worth ninety ninety dollars and so they could buy for eighty 541 00:37:05,920 --> 00:37:07,960 five. Otherwise they'd have been selling it at ninety five dollars. Right. 542 00:37:08,000 --> 00:37:13,000 They bought it because they thought the great they thought somebody else is going to 543 00:37:13,039 --> 00:37:15,880 pay one hundred for it, you know, so you see the greater full 544 00:37:15,960 --> 00:37:19,800 theory a lot more over the counter than you did on the floor. And 545 00:37:19,840 --> 00:37:22,760 again, you know, that's I tried to explain the book. That's how 546 00:37:22,800 --> 00:37:27,800 we made our money. And so guys do make markets now over the counter. 547 00:37:27,880 --> 00:37:29,840 You call them up and go, hey, what's the market on this, 548 00:37:29,920 --> 00:37:32,159 and they'll still make it for you. But with so much of the 549 00:37:32,199 --> 00:37:38,000 public involved in the trading world now certainly inequities, I start to see a 550 00:37:38,039 --> 00:37:42,880 lot of hard mentality kick in. And there was just no place for that 551 00:37:42,960 --> 00:37:45,559 on the floor. You didn't have, you know, it just wouldn't have 552 00:37:45,599 --> 00:37:47,400 worked. I mean, I want to use the term collusion like with game 553 00:37:47,480 --> 00:37:52,960 stop, because that has negative connotations or illegal connotations. But clearly a bunch 554 00:37:52,960 --> 00:37:55,519 of people got together and decided that this thing, we're going to try and 555 00:37:55,599 --> 00:37:59,559 do a short squeeze. Basically, you know, guys were going to try 556 00:37:59,599 --> 00:38:04,760 and push me but out of the market. And there's nothing fundamental analysis about 557 00:38:04,800 --> 00:38:07,880 that, or there's nothing about buying low and selling and high and that that's 558 00:38:07,960 --> 00:38:12,880 just that is gamesmanship. So I think when you're you actually touched on an 559 00:38:12,880 --> 00:38:16,599 interesting point I've not really thought about it before, which is that this generation 560 00:38:16,719 --> 00:38:21,360 today, I'm fifty six, but this generation today is a gaming generation. 561 00:38:21,920 --> 00:38:25,639 They grew up with games. My son used to play video games with his 562 00:38:25,719 --> 00:38:30,320 friends. He'd got his headphones on a snowy day and they'd all be playing 563 00:38:30,320 --> 00:38:35,199 together. So I think they view this as a video game. And I 564 00:38:35,239 --> 00:38:39,559 think what happens is people don't realize, as one of my favorite traders used 565 00:38:39,559 --> 00:38:43,840 to say, this is real money. And I think some of these I 566 00:38:43,840 --> 00:38:45,760 think some people are setting themselves up to get hurt by treating this at a 567 00:38:45,840 --> 00:38:50,920 casino. It's not and you can lose a lot of money if you're not 568 00:38:51,000 --> 00:38:52,719 careful. And I don't know how some of these guys didn't game stuff. 569 00:38:52,760 --> 00:38:57,559 I know some of them got shut out because of robin Hood shut down or 570 00:38:57,559 --> 00:39:04,159 something like that. They couldn't get out, So I don't know. Question, 571 00:39:04,880 --> 00:39:07,599 No, it does. That's interesting because I feel like when something looks 572 00:39:07,440 --> 00:39:12,159 physically like a video game, it's the same it's on a screen, it's 573 00:39:12,199 --> 00:39:15,239 on your phone, it's the same sort of mouse clicks or finger taps, 574 00:39:15,719 --> 00:39:22,039 there's just something so different about being physically on a floor that you know you, 575 00:39:22,159 --> 00:39:23,960 and you're you're moving your body, you're making calls, you're talking to 576 00:39:23,960 --> 00:39:30,719 people. It's just easier to feel the stakes and the weight of those decisions. 577 00:39:30,760 --> 00:39:32,880 Even though people might look back on that and watching a Wolf of Wall 578 00:39:32,880 --> 00:39:37,639 Street or Wall Street and whatever it is and say they clearly didn't feel the 579 00:39:37,639 --> 00:39:40,159 weight of the stakes of you know, war, whatever it is. Now 580 00:39:40,239 --> 00:39:45,480 it seems to me it's even more difficult to psychologically keep in mind the sort 581 00:39:45,480 --> 00:39:50,320 of the weight and the stakes of every sort of thumb tap. You know, 582 00:39:50,360 --> 00:39:53,519 if you're well, you have to remember when the way you physically did 583 00:39:53,519 --> 00:39:57,880 it on the trading floor is you had a bunch of trading cards and you 584 00:39:57,920 --> 00:40:00,960 would take a pen in the paper and you would actually write down the right 585 00:40:00,039 --> 00:40:04,519 down the trade you did. You know, a d Z three, you're 586 00:40:04,559 --> 00:40:07,719 a dollars nineteen ninety three, ninety two fifty four buy of twenty cars. 587 00:40:07,719 --> 00:40:10,400 We call them cars on the floor, it was changed, right, And 588 00:40:10,480 --> 00:40:14,440 so as you're writing this down, your first instinct is to look up to 589 00:40:14,480 --> 00:40:16,559 see where the price is now, and you're taling in your head already. 590 00:40:16,599 --> 00:40:20,599 You know it's twenty five dollars a tick. We're up you know, I 591 00:40:20,719 --> 00:40:22,400 just bought a ten lot. We're up a penny, We're up a ticks. 592 00:40:22,440 --> 00:40:27,599 So I've already made two hundred and fifty dollars, you know. And 593 00:40:27,599 --> 00:40:32,119 and I think what the four allowed you to do is you're always looking to 594 00:40:32,239 --> 00:40:37,559 say, okay, where you know, what is my wrong point on this? 595 00:40:37,760 --> 00:40:40,280 And when you're right down there, you're not caught by surprise for the 596 00:40:40,320 --> 00:40:43,519 most part, Like you can sit there and say, Okay, this market 597 00:40:43,599 --> 00:40:45,199 is a lot. I just bought this thing in ninety two twenty seven. 598 00:40:45,280 --> 00:40:50,719 Now it's treating ninety two twenty three. You know, Now, maybe I 599 00:40:50,719 --> 00:40:52,159 should get out of this to start over. And you do that, whereas 600 00:40:52,159 --> 00:40:54,480 I give you, if you're look at it on a video game, it's 601 00:40:54,519 --> 00:40:58,840 like, okay, I bought it here, but you know it'll come back 602 00:40:58,840 --> 00:41:02,480 out or whatever. I don't know. I don't think. I think when 603 00:41:02,480 --> 00:41:05,639 you view it as a video game, I understand what you're trying to say. 604 00:41:05,639 --> 00:41:09,840 There's a psychological difference that almost makes it not feel as real. When 605 00:41:09,880 --> 00:41:14,559 you're on the trading floor, it felt real because you often it was your 606 00:41:14,559 --> 00:41:17,079 own money or it was somebody, you know, like somebody who was backing 607 00:41:17,119 --> 00:41:22,079 you, who you knew personally and was your friend or something like that. 608 00:41:22,360 --> 00:41:24,519 So you tried to be very you try to be disciplined. I think when 609 00:41:24,519 --> 00:41:30,039 you I think a lot of people who are not professional traders don't have discipline. 610 00:41:30,719 --> 00:41:35,239 And I think the gaming aspect just you know, anything that makes it 611 00:41:35,280 --> 00:41:38,760 easier to get to put yourself at a financial risk is a double leged sword. 612 00:41:39,519 --> 00:41:43,239 And I think a lot of people don't quite under you know, and 613 00:41:43,360 --> 00:41:46,639 especially in the last twenty five to thirty years, if you just bought stocks 614 00:41:46,679 --> 00:41:50,320 and held on or whatever, you'd be fine. Or you know, if 615 00:41:50,320 --> 00:41:52,800 you're in game stop if you buy it at ninety and it went up to 616 00:41:52,880 --> 00:41:54,599 three hundred or whatever. You know, you think that's the way it always 617 00:41:54,760 --> 00:42:00,760 is, and it's not. You know, I think people are people. 618 00:42:00,920 --> 00:42:05,320 I think trade it there they should trade it their own risk. It is, 619 00:42:06,000 --> 00:42:08,960 I know what you're trying to say, because it's a because you know, 620 00:42:09,039 --> 00:42:12,719 looking at it from a you know, it's funny. I haven't really 621 00:42:12,719 --> 00:42:15,599 thought about that aspect of it, but that's actually fascinating. I'm like supported 622 00:42:15,679 --> 00:42:20,559 that a little bit more about the games version of it, right, they're 623 00:42:20,559 --> 00:42:23,400 like in their gaming chairs. It's very it's it's straight from trading game stop. 624 00:42:23,440 --> 00:42:28,519 It's straight from game culture. Yeah, I mean, I mean you 625 00:42:28,519 --> 00:42:32,639 could actually look at those gaming tournaments where they all play, and you could 626 00:42:32,719 --> 00:42:37,639 very easily say they're all trading stocks and it would and it would look the 627 00:42:37,639 --> 00:42:40,000 same, and the emotions would probably be the same. You know. The 628 00:42:40,000 --> 00:42:43,639 difference is, you know, if you lose in this, you know, 629 00:42:44,000 --> 00:42:46,400 you don't just have a fake light that's destroyed. You know, in call 630 00:42:46,440 --> 00:42:51,119 of duty. You know, you don't pay your mortgage. You got to 631 00:42:51,159 --> 00:42:55,519 be really careful, right. I don't think people understand how easy it is 632 00:42:55,559 --> 00:43:00,760 to lose money if you're not careful. Right. Gaming doesn't really help as 633 00:43:00,800 --> 00:43:05,360 it just makes it that much more playful and fun, and trading shouldn't be 634 00:43:05,400 --> 00:43:10,440 fun, it should be serious business. This has just been fascinating, Brad. 635 00:43:10,679 --> 00:43:15,559 Everyone can read more about Brad's life in the Pits again. The book 636 00:43:15,599 --> 00:43:17,440 is called Life in the Pits, My Time as a Trader on the Rough 637 00:43:17,480 --> 00:43:22,519 and Tumble Exchange Floors. It's out on December fifth, Bred. Thank you 638 00:43:22,599 --> 00:43:24,719 so much for coming here and sharing some of your thoughts and experiences. I 639 00:43:24,760 --> 00:43:29,559 really appreciate it. Oh, thank you for having me. I love talking 640 00:43:29,559 --> 00:43:32,320 about the subjects, so of course, all right, well, you've been 641 00:43:32,360 --> 00:43:36,840 listening to another edition of the Federalist Radio Hour. I'm Emilee Tashinski, culture 642 00:43:36,920 --> 00:43:38,679 editor here at the Federalist. We'll be back soon with more. Until then, 643 00:43:38,840 --> 00:43:53,199 be lovers of freedom and anxious for the fray.