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My Time at Lehman

nickchirls.com

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Re: My Time at Lehman

#71

Post by tomkarlo »

rayiner wrote: post #9

"Which, it turns out, is a trader’s field day. What this meant, in its simplest form, is that these traders (or salespeople) could buy bonds at the "market" price from intelligent hedge fund managers in NYC and sell this same crap at much higher levels to unsophisticated (but legally considered "sophisticated") pension funds and insurance companies in middle America. What I discovered, quite starkly, is that the part…

This would be all fair and good if the risk they took along the way actually accrued back to Wall STreet. But the upsetting pattern that's in place is private profits, public losses. Wall Street isn't so much an engine for extracting value in the way you described as extracting value from the American public: take huge risks, keep the upside in the good years, and ask for a bailout when things go wrong.

I've seen some analysis that says that if you back out government interventions, investment banks have basically been net zero / net negative for their equity holders since they stopped being partnerships and started going public.

Re: My Time at Lehman

#72

Post by pc86 »

jwb119 wrote: post #57
nchirls wrote: post #55

Earlier quoted context omitted.

One more point regarding the bonus question. I don't believe that Wall Street properly accounts for the amount of risk traders take. Should that trader receive 10% of the money he made for the bank that year? No, absolutely not. Because he or she could lose just as much or more the next year. The time horizons are skewed and people on Wall Street are compensated based on short time horizons when the risk in fact is s…

Yes, exactly. This nails the fundamental problem with the street in my view: unlimited upside, limited downside. You risk everything and have a great year you are rolling in cash. You aim high and fail miserably you probably get fired and maybe even picked up at another bank. This doesn't even get started on the lack of criminal enforcement for fraud, etc. Right on.

Where is the fraud in as you put ti "aim[ing] high and fail[ing] miserably?"

Re: My Time at Lehman

#73

Post by rwmj »

crazygringo wrote: post #24
rayiner wrote: post #9

"Which, it turns out, is a trader’s field day. What this meant, in its simplest form, is that these traders (or salespeople) could buy bonds at the "market" price from intelligent hedge fund managers in NYC and sell this same crap at much higher levels to unsophisticated (but legally considered "sophisticated") pension funds and insurance companies in middle America. What I discovered, quite starkly, is that the part…

> simply transferring wealth from the less sophisticated investors often teachers’ pension funds and factory workers’ retirement accounts, to the more sophisticated investors... Exactly. Wall street and investment have wonderful effects -- funneling money towards companies that can use it in amazingly productive ways. It provides an incredibly valuable service. But the flip side is exactly this, that pension funds, o…

I think the flip side is that engineering companies don't get to hire the best of the best.

Re: My Time at Lehman

#74

Post by GFischer »

patrickgzill wrote: post #7
plg wrote: post #6

some will read this and think: "disgusting. thanks for the honest appraisal of what it's like... and it's disgusting." Others will read this and think: "holy crap man, the people that are screwed by the company still make just under a million! I totally want to work on wall street. I'll be rich" It's a jungle out there

When Michael Lewis wrote Liar's Poker he was shocked over the number of people who contacted him, asking for advice on how to get into investment banking.

I read Liar's Poker, and the above article.

I probably wouldn't like the environment at such bank. But yet, making U$ 20.000 a year, a million dollars is the stuff of dreams - 50 years at my current salary.

The freaking lottery here in Uruguay doesn't give a million dollars !! (the current Cinco de Oro pool is U$ 125.000)

PD: Yes, I'm quitting as soon as I get something else that pays the bills. I neglected to stay up to date in tech and am struggling to get a good job on the open market.

Re: My Time at Lehman

#75

Post by jwb119 »

pc86 wrote: post #72
jwb119 wrote: post #57

Earlier quoted context omitted.

Yes, exactly. This nails the fundamental problem with the street in my view: unlimited upside, limited downside. You risk everything and have a great year you are rolling in cash. You aim high and fail miserably you probably get fired and maybe even picked up at another bank. This doesn't even get started on the lack of criminal enforcement for fraud, etc. Right on.

Where is the fraud in as you put ti "aim[ing] high and fail[ing] miserably?"

Oh, I didn't mean to imply that there is fraud in the vast majority of cases. Just that there is some subset of that behavior that produces fraudulent activity.

Re: My Time at Lehman

#76

Post by penny500 »

neilk wrote: post #27
rayiner wrote: post #9

"Which, it turns out, is a trader’s field day. What this meant, in its simplest form, is that these traders (or salespeople) could buy bonds at the "market" price from intelligent hedge fund managers in NYC and sell this same crap at much higher levels to unsophisticated (but legally considered "sophisticated") pension funds and insurance companies in middle America. What I discovered, quite starkly, is that the part…

Free-market believers assume there must be somebody in the system with the incentives to help those less sophisticated investors. Or that the market will eliminate con artists, because their investments must be weak. That's how you get Alan Greenspan, thought by some to be a sophisticated thinker, flabbergasted that the events of 2006-2008 were even possible.

Mainstream economists believe in free markets, and they also understand market failures and moral hazard. Government failure also exists.

Re: My Time at Lehman

#77

Post by vijayr »

ap22213 wrote: post #29
rayiner wrote: post #9

"Which, it turns out, is a trader’s field day. What this meant, in its simplest form, is that these traders (or salespeople) could buy bonds at the "market" price from intelligent hedge fund managers in NYC and sell this same crap at much higher levels to unsophisticated (but legally considered "sophisticated") pension funds and insurance companies in middle America. What I discovered, quite starkly, is that the part…

I know several people who make a lot of money in trading, and I hear the liquidity argument constantly as the justification for their behavior. They describe the millions that they make as payment for all the 'value' that they've given to everyone; But, as an ignorant, I can't see how those millions could have come from anywhere than other (less informed) peoples' pockets. To me, the worst part (again, as an ignorant…

I am more ignorant than anyone on this subject, I too have similar questions on the stock market as a whole, not just traders. Originally, stock market was created to raise large amounts of capital for big projects/companies. Once the IPO is done, people keep buying and selling stocks - how does it benefit anyone other than the seller who makes a profit? It doesn't add extra capital to the company, doesn't "create" anything (physical, digital or otherwise). Maybe this question is really dumb, but I really can't understand why traders (and other wall streeters) are paid so much

Re: My Time at Lehman

#78

Post by marssaxman »

harryh wrote: post #30
crazygringo wrote: post #24

Earlier quoted context omitted.

> simply transferring wealth from the less sophisticated investors often teachers’ pension funds and factory workers’ retirement accounts, to the more sophisticated investors... Exactly. Wall street and investment have wonderful effects -- funneling money towards companies that can use it in amazingly productive ways. It provides an incredibly valuable service. But the flip side is exactly this, that pension funds, o…

If you're investing over the long term and can afford to ride out the shocks then historically speaking stocks have always out performed bonds. That's not gambling. It's not a zero sum game between you & Goldman. In a growing economy everyone can win by investing.

Goldman sure acts like they think it's a zero sum game.

Re: My Time at Lehman

#79

Post by penny500 »

nissimk wrote: post #41
harryh wrote: post #30

Earlier quoted context omitted.

If you're investing over the long term and can afford to ride out the shocks then historically speaking stocks have always out performed bonds. That's not gambling. It's not a zero sum game between you & Goldman. In a growing economy everyone can win by investing.

While cash securities markets (i.e. stocks and bonds) are not a zero sum game, derivatives markets (i.e. futures, options and all kinds of swaps) are zero or negative sum by definition. Also, derivatives markets are far larger in size [1]. There are always 2 parties to each transaction and one makes the money that the other one loses. The additional transaction fees that go to the banks and various other operations p…

"There are always 2 parties to each transaction and one makes the money that the other one loses."

Completely false. Wealth is not fixed. There can be two winners, which often happens.

Re: My Time at Lehman

#80

Post by dragonwriter »

vijayr wrote: post #77
ap22213 wrote: post #29

Earlier quoted context omitted.

I know several people who make a lot of money in trading, and I hear the liquidity argument constantly as the justification for their behavior. They describe the millions that they make as payment for all the 'value' that they've given to everyone; But, as an ignorant, I can't see how those millions could have come from anywhere than other (less informed) peoples' pockets. To me, the worst part (again, as an ignorant…

I am more ignorant than anyone on this subject, I too have similar questions on the stock market as a whole, not just traders. Originally, stock market was created to raise large amounts of capital for big projects/companies. Once the IPO is done, people keep buying and selling stocks - how does it benefit anyone other than the seller who makes a profit? It doesn't add extra capital to the company, doesn't "create" a…

> Once the IPO is done, people keep buying and selling stocks - how does it benefit anyone other than the seller who makes a profit?

The IPO (initial public offering), isn't necessarily the stocks only public offering, so the trade of stock on the market provides the firm the capacity to raise additional capital via further public offerings. (The demonstrated ability of the firm to do this may also influence its ability to raise money through other financing means.)

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