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There are concepts in our lives that trouble me. One of them is our inability to really establish a price (value) for anything. I am already getting a headache writing about this. We have arrived at a time when the price of many things has become dynamic. And, I am not thinking about inflation now, although that increases the challenge. From movie tickets to airline seats, the price of a head of lettuce, the cost of one share of VTI, gasoline, etc. prices float.
At least, right now, the NYSE closes each trading day, and for a few minutes, for some securities that are not traded in the after-market, I can get an idea of what the value of my portfolio might be, maybe. With the possibility of 24-hour trading over the near horizon, we face a future in which you can never know, with any precision, your net worth. You can know what it used to be at some time in the past probably at a particular minute in time, but you cannot know what it is worth now. With 24-hour trading, you could go to sleep at ten pm and when the market crashes at 2:39 am you won’t know until the morning.
What will mutual fund managers do? With no fixed closing price will they use the price at the time they actually process your order, the price at the time you placed the order, or some arbitrary time/price. Will you be satisfied with a price that is lower than that when you placed your order?
I am sure that some readers will say that it doesn’t matter;that you don’t have to have precise values because everyone knows that prices fluctuate, Well, how satisfying can it be when you have been aiming to cross the million dollar portfolio value threshold, when all that you can say is, “ I might be a millionaire now”? “It kinda depends”. Or, “ I am a millionaire now, plus or minus $10k”.
I can see the day coming when dynamic pricing might trickle down to floating prices at the gas pump, produce at the grocery store, lumber at Lowe’s. Does anyone like living this way? Perhaps we can blame all this on quantum mechanics in which just the act of observation changes the results.
Thanks for the interesting article.
I feel for you, it sounds exhausting to be worried about pricing all the time.
I have a different take on things, which I’m not saying is right, just how I see the world. I always go back to “anything is worth what the market will pay for it”. So I’m OK with the principle of dynamic pricing. When demand is high and supply is fixed, I can understand that enough people will be willing to pay a higher price. But I also get that it feels like dynamic pricing sucks – I paid this much yesterday, then more today!
With regards 24 hour trading, my personal remedy is to remember that I’m a long term investor, not a day trader. I’m more concerned with 10 years from now, rather than today.
I don’t want to see 24 hour trading, but why? Is it because down time gives me a chance to see how I did over the last 6.5 hours, or is it because I’m old and don’t like change? I’m really not sure, however, when 24 hour trading arrives, I’m sure I will adapt.
Dynamic pricing sucks. Sorry, that’s just how I feel. There was a recent post about dynamic pricing for theater tickets; ridiculous price gouging in my opinion.
I personally don’t see an issue with the proposed expansion to full 24-hour US equity trading. This change would simply formalize the price discovery process that already happens informally through extended hours and global markets. Just like an end-of-year business financial statement, your portfolio balance is already just a snapshot in time.
While I am not a fan of dynamic retail pricing, the concept is quite familiar to me. I worked in a business-to-business (B2B) sales environment where pricing was always dynamic and based on the value we thought possible to extract from each transaction, but even then, market dynamics constrained excessive profit taking. Retail dynamics will have the same effect.
Dynamic pricing, in effect, is a form of price discovery, just as it is in financial markets. In reality, retail businesses are highly conscious of brand loyalty and perception, which will presents a significant barrier for them to fully implement this model. Customers will walk if they feel manipulated; I don’t think the airline, theatre, and Uber models will transfer well.
I am deeply troubled, too. I feel like I am in an economic panopticon. We are all being algorithmically observed (or not…we never really know) through our phones and online presence. Vendors can see our every move before we make it, calculate instantaneously our net worth, and adjust prices accordingly. It strikes me as a rigged capitalism.