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For the Love of Money

nytimes.com

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Re: For the Love of Money

#31

Post by ItendToDisagree »

anigbrowl wrote: post #29
ItendToDisagree wrote: post #5

Earlier quoted context omitted.

Yes, I was sharp, good with numbers. I had marketable talents. But in the end I didn’t really do anything. I was a derivatives trader, and it occurred to me the world would hardly change at all if credit derivatives ceased to exist. Hits the nail on the head for me. In the end these people make incredible amounts of money for doing what amounts to a job that is worthless to the society at large.

It's not worthless - derivates have an important function in reducing volatility. But the rewards for being a merely competent derivatives trader are wildly disproportionate to the rewards for being competent in some other challenging field (eg nursing, as mentioned int he article). It's a classic example of rent-seeking.

I think history (2008 in particular) has shown many times over that they do anything BUT reduce volatility... Shielding or obfuscating possibly, but reduction in the long term, has not been their strong point.

Re: For the Love of Money

#32

Post by ItendToDisagree »

jaredsohn wrote: post #22
ItendToDisagree wrote: post #15

Earlier quoted context omitted.

Exactly, they do not provide loans, or determine availability of said loans (beyond insulating risk allowing an institution to make more risky investments which as we've seen can be a catastrophic practice). I would venture that none of these things benefit the 'average' person. Not saying its a bad thing, but the great amount of money dumped into this area of the economy, does not equate to their usefulness to socie…

If you're an average person who was going to lose your home, derivatives enabled the bank to give you a loan. Therefore, derivatives have provided value to average people. However, the 2008 financial crisis showed that when tested, derivatives don't provide much of the value that they were supposed to (shifting risk to those who want it and will quietly suffer the consequences of failure without having spillover effe…

I fully agree. With the exception that the derivatives market allowed them to make a more risky loan to you (IE one you may likely have not been able to pay off and they knew it). I would say the value to society at large is very observable as a negative. Getting a low percentage loan that is unstable or even totally illusory is not value. At least not in my opinion.

Re: For the Love of Money

#33

Post by eshvk »

ItendToDisagree wrote: post #5
yetanotherphd wrote: post #2

I think the author has suffered from a lot of psychological pain stemming from his childhood, and I can sympathize a lot with that. I think he really did have a wealth addiction, like he describes. However, that doesn't generalize to the entire industry. People (especially men) like money and power because of the benefits they brings. It doesn't have to be an addiction. Furthermore, the idea that it would take an add…

Yes, I was sharp, good with numbers. I had marketable talents. But in the end I didn’t really do anything. I was a derivatives trader, and it occurred to me the world would hardly change at all if credit derivatives ceased to exist. Hits the nail on the head for me. In the end these people make incredible amounts of money for doing what amounts to a job that is worthless to the society at large.

> Hits the nail on the head for me. In the end these people make incredible amounts of money for doing what amounts to a job that is worthless to the society at large.

As opposed to making incredibly amounts of money finding ways of getting Random Joe to click on ads? The only difference between him and most 20 something kids working their asses off in SV is a million dollars.

Re: For the Love of Money

#34

Post by ItendToDisagree »

aianus wrote: post #26
ItendToDisagree wrote: post #14

Earlier quoted context omitted.

I would say they provide little to no value to the average person no. Please clarify what they provide to society at large (meaning most people and not just large portfolios or predatory credit companies)? Greater security and insulation against bad investments? (which to be clear the vast majority of people do not have enough money to make in the first place.) Seems a lot like playing odds at a Casino, to use your e…

They make it so the interest on your mortgage is 3% instead of maybe 3.5%. That's a lot of money that you and many other normal people get to save because they do the work of connecting you to institutional investors via packaging your debt. They might take a cut and it may look big in nominal terms but barring fraud everyone is better off.

Actually that has shown not to be true over and over throughout the history of the derivatives trading market. Nominally and in a perfect world that would be true. But as we have seen that is not the functional reality. It keeps happening that derivatives are used to hide risk rather than actually predict or insulate against it. To quote a famous politician:

"There's an old saying in Tennessee—I know it's in Texas, probably in Tennessee—that says, 'Fool me once, shame on...shame on you. Fool me — you can't get fooled again.'"

And to quote a head of a self-regulatory body in charge of such things:

In the context of a 2010 examination of the ICE Trust, an industry self-regulatory body, Gary Gensler, the chairman of the Commodity Futures Trading Commission which regulates most derivatives, was quoted saying that the derivatives marketplace as it functions now "adds up to higher costs to all Americans."

Re: For the Love of Money

#35

Post by ItendToDisagree »

eshvk wrote: post #33
ItendToDisagree wrote: post #5

Earlier quoted context omitted.

Yes, I was sharp, good with numbers. I had marketable talents. But in the end I didn’t really do anything. I was a derivatives trader, and it occurred to me the world would hardly change at all if credit derivatives ceased to exist. Hits the nail on the head for me. In the end these people make incredible amounts of money for doing what amounts to a job that is worthless to the society at large.

> Hits the nail on the head for me. In the end these people make incredible amounts of money for doing what amounts to a job that is worthless to the society at large. As opposed to making incredibly amounts of money finding ways of getting Random Joe to click on ads? The only difference between him and most 20 something kids working their asses off in SV is a million dollars.

And the ability of the industry in question to crash an economy , requiring extensive public bailout... (at least so far!) :)

Edit: Also this article isn't about that sort of occupation. I was focusing on the topic at hand.

Re: For the Love of Money

#36

Post by ItendToDisagree »

gjm11 wrote: post #25
philosophus wrote: post #7

Earlier quoted context omitted.

If it is "worthless to the society at large" then why do people pay for it? Are they insane? It's popular to beat up on the financial industry, but they do actually do something: finance loans. Without them, good luck getting a mortgage, car loan, or a loan to start a business.

Imagine a world where some magic firehose of money gives everyone $100k/year for free. And now suppose you have the skill of redirecting that firehose a bit, with the result that you can make one lucky person get $200k/year instead, while 11 other people get $90k/year instead of $100k/year. Then your firehose-manipulation skills are worthless to society at large -- they reduce the net influx of money by $10k/year whe…

I love your analogy! That is a pretty vivid way of illustrating it.

Re: For the Love of Money

#37

Post by yodsanklai »

"I recently got an email from a hedge-fund trader who said that though he was making millions every year, he felt trapped and empty, but couldn’t summon the courage to leave."

I don't find it surprising. Many people feel that way about their job. It must take a lot of courage to leave such a lucrative career.

Re: For the Love of Money

#38

Post by untog »

pbhjpbhj wrote: post #17
michaelochurch wrote: post #8

I've worked in finance. There are all types. Sure, there are asshole alpha traders who whine about $2 million bonuses. Those guys are pretty uncommon, they're disliked even in spite of their P&L, and no one helps them when they get unlucky. There are also people who don't think or live very differently from respectable professors-- except who have $12 million in their bank account instead of $12. There some pathologi…

Class in the UK is not solely about money. You can be upper class and living in a homeless hostel, doesn't happen much but possible. You can be working class and be a multi-millionaire. It's about heritage and social [inter]actions as much as it's about money. Class doesn't really feature in how much "better" you're perceived to be either. Some Lords are highly benevolent, clued in and useful members of society that…

I'm pretty sure that's what the OP was saying. That in the UK money and 'class' are separate, wheras in the US they are all bundled into one.

Re: For the Love of Money

#39

Post by cperciva »

tkiley wrote: post #24
ItendToDisagree wrote: post #20

Earlier quoted context omitted.

It is debatable if derivatives do more harm than good. Just look at the 2008 financial crisis... From Jaredsohn's link further in the thread: http://en.wikipedia.org/wiki/Derivative_(finance)#Economic_f... . In the context of a 2010 examination of the ICE Trust, an industry self-regulatory body, Gary Gensler, the chairman of the Commodity Futures Trading Commission which regulates most derivatives, was quoted saying…

Best case, what is the societal function of derivatives? As a relatively ignorant layperson, my guess is that derivatives allow productive businesses to hedge against uncontrollable risks. A business with less risks requires less capital buffer, which encourages & allows for more capital investment and profit-taking. In a nutshell, derivatives allow businesses to run and grow on less capital, by reducing the amount o…

Is there some other way in which derivatives serve an ostensibly positive function in society?

I think the largest benefit is for organizations like pension funds which are required to minimize risk. Being able to hedge against specific types of risk (e.g., via a "longevity swap") allows pension funds to allocate their limited "risk budget" in ways which yield higher returns (thereby allowing them to pay out higher pension values).

Re: For the Love of Money

#40

Post by [deleted] »

aianus wrote: post #26
ItendToDisagree wrote: post #14

Earlier quoted context omitted.

I would say they provide little to no value to the average person no. Please clarify what they provide to society at large (meaning most people and not just large portfolios or predatory credit companies)? Greater security and insulation against bad investments? (which to be clear the vast majority of people do not have enough money to make in the first place.) Seems a lot like playing odds at a Casino, to use your e…

They make it so the interest on your mortgage is 3% instead of maybe 3.5%. That's a lot of money that you and many other normal people get to save because they do the work of connecting you to institutional investors via packaging your debt. They might take a cut and it may look big in nominal terms but barring fraud everyone is better off.

[deleted]
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