Some notes on 24/7 markets and the future of trading, direct home sales, and the future of transportation and home ownership...
Open markets
- October 7, 2020 6:58 AM
- it's strange that in 2020 the market still opens and closes
- I wondered if there would ever be a time when the market trades 24/7.
- at first i thought the answer was no, there always has to be a time for the market to be open and to close, to provide a set time for major liquidity
- but then i thought, never say never
- in the future, perhaps all trading will be done by artificial intelligence
- and most of the money made will be in yields
- DeFi projects may be at the forefront of this (See There’s no such thing as a decentralized exchange for a great article on what DeFi is)
- think of it as more opportunities to shift your assets to greater yield products at higher levels of risk
- and even that can be set algorithmically, so that all you are responsible for is the level of risk that you're comfortable with, and how it matches up with your financial goals
- perhaps you don't even have to know much detail about risk and only have to focus on your financial goals... i want to take a cruise, or i want to visit Paris for a month. how much do i have to save to do so? when is the earliest that I can do that? what if I want to do that next year? how will it affect me financially?
- you can pose your questions to the algorithm (just another name for the AI) and it can give you options, which you can choose
- so the computer now does the heavy lifting, and you set the parameters
- let's say you want to retire early. you're 20 years old and want to retire at 50.
- you tell that to the AI and ask at what level you should live at for the next 30 years.
- maybe you're comfortable living the next 10 years on a shoestring budget... live with friends, buy a house and rent it (although assets like that may change in this new world too, more on that below). Or maybe you don't even have to be that specific, the AI will tell you, if you eat ramen noodles for 5 years and rent with friends, or buy a house that you rent to friends, and you save X amount, you'll be able to save Y and retire at 50...
- But your health algo/AI will tell you how eating ramen noodles for 5 years will affect your health, and may have other recommendations
- You can say you want to relax these harsh standards when you get married, and it will
- you can put in how many kids you want to have and the algo/ai will take that into consideration and make recommendations too
- the algo mines history from google/facebook/amazon/apple to tell you the historical data of your potential choices
- then it projects what these will be like in the future
- There may or may not be accounting for risks... like another global pandemic, war, a massive fire, flood, or storm, or some other act of God. Maybe you can add those in too
Housing in the future
- with the rise of direct home sales sites like redfin, opendoor, and zillow, buying and selling a house has never been easier.
- These platforms have removed the mystery of buying and selling your home
- perhaps in the future buying and selling your primary home will be as quick and easy as flipping a property
- and less risky
- but even more disruptive, why buy a home anyway? why not lease?
- and not a traditional lease, but lease like an owner?
- like leasing a car (it may not be an accurate comparison. what I mean is leasing a car is closer to owning it than renting it)
- for all intents and purposes, you own the home, but it's much easier for you to leave
- like airbnb for home ownership
- similarly, cars in the future may not be owned and all cars will become public transportation vehicles a la westworld ('Westworld' Creator on Season 3's Self-Driving Cars: "That Is Absolutely the Future"). If this comes to pass, perhaps homes will become just as fungible
- of course, the ultra rich will always be able to own their own assets, but will they even do so? perhaps they'll just lease for greater privileges at a higher valuation
- for example, instead of using any car in the street like everyone else, the rich may prefer to pay up for vehicles restricted only for their use
- likewise with homes.
- they may pay up for homes with limited ownership
- the value of homes in desired places like the hollywood hills and new york will still be high, because the rich will still pay up for them
- but some may open up for anyone to use
References
Open markets (continued)
- going back to 24/7 markets, we already have this and have had it in the past
- most index funds are 24/7 (gld, iwm, qqq, spy, tlt)
- but the liquidity in the us stock market is still concentrated during open hours, weekdays from 9:30-4.
- what i'm projecting is that liquidity will rise as algorithmic/ai trading becomes the majority of trading in the markets.
- not to say that algo trading isn't the predominant form already, but people still trade the markets manually, meaning, they buy and sell with online brokers. fund managers still buy and sell (i'm guessing) and there is human participation in the market (although I could be fooling myself)
- it would be useful to get some data on the ratio of algorithmic to human trading in the markets
- even without that data, my projection is that eventually the market will be traded 24/7 at a uniform liquidity, with high volume based on events, like the futures markets
- for the most part, liquidity will be uniform, unless there are major news events to shock markets
- and the news events will be released and reacted to quicker.
- even though reactions to news seem instantaneous now, I think it could be quicker. For example, there seems to be some waiting around until the market opens to react to news from the previous day (although that could be manipulation)
- and there are the options markets, which are not open 24/7.
- if derivatives traded 24/7, perhaps we wouldn't see such a delay in market reaction to news events outside of trading hours
- but going back to the algo/human trading ratio, i think in the future, human trading will be as arcane as trading on the floor of the stock exchange, and your yield will depend on the price you pay for the algos you use to trade with, or some form of cybernetics. but perhaps that's a topic for another post... (see neuralink & Elon Musk’s Neuralink is neuroscience theater)
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