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For the Love of Money

nytimes.com

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Re: For the Love of Money

#41

Post by [deleted] »

ItendToDisagree wrote: post #20
tkiley wrote: post #16

I was a derivatives trader, and it occurred to me the world would hardly change at all if credit derivatives ceased to exist. Not so nurse practitioners. Is this statement (from the article) true? I'm under the impression that financial innovations throughout history have generally spurred capital investment. Innovations like fractional-reserve lending have made bankers&investors wealthy, but also spurred spending on…

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…

[deleted]

Re: For the Love of Money

#42

Post by ItendToDisagree »

cperciva wrote: post #39
tkiley wrote: post #24

Earlier quoted context omitted.

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 p…

This is a good point and can be true. As long as the market isn't manipulated this sort of thing can happen. Or even if the manipulation is minimal and there isn't a crash caused by hidden information.

Re: For the Love of Money

#44

Post by tessierashpool »

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…

> There's less mobility in social class

quick point of fact, this used to be true but is no longer the case.

http://www.nytimes.com/2012/01/05/us/harder-for-americans-to...

Re: For the Love of Money

#45

Post by gjm11 »

mindcrime wrote: post #28

Yay, more villifying "Wall Street" and fueling the "Wall Street vs. Main Street" fire, and suggesting that it's somehow noble or good to not want to be rich. I think everybody should want to be rich. I've tried poverty and in my opinion - it sucks. It sucks big, steaming donkey balls. The desire to make more money, to improve one's "lot in life" and to succeed, this is a Good Thing. Because a few assholes go too far…

I don't really disagree, but: You write as if the only options are "rich" and "poor". It's possible for the following two things both to be true: (1) Being poor sucks big, steaming donkey balls. (2) Being rich (as opposed to not-poor) is, for one reason or another, not a wise thing to aim for.

As it happens, I think #2 isn't correct, because given the way the world is (a) being rich is the only way to be reasonably well assured of never being poor, and (b) there are a whole lot of people in the world who are desperately poor, and if you care at all about them then you have a use for an unlimited quantity of money, namely sending it their way.

But in a less messed-up world, I think it would be eminently reasonable not to have a strong preference for being rich over merely comfortably off, and if the former takes a lot more work or risk than the latter then it would be reasonable not to bother.

Re: For the Love of Money

#46

Post by ItendToDisagree »

mindcrime wrote: post #28

Yay, more villifying "Wall Street" and fueling the "Wall Street vs. Main Street" fire, and suggesting that it's somehow noble or good to not want to be rich. I think everybody should want to be rich. I've tried poverty and in my opinion - it sucks. It sucks big, steaming donkey balls. The desire to make more money, to improve one's "lot in life" and to succeed, this is a Good Thing. Because a few assholes go too far…

As has been stated... The derivatives trading business was a prime culprit for the crash of 2008 so I think it is fair to say that some lying, cheating, stealing went on and the subsection of finance the author was involved in was complacent in it.

Also being rich vs poor, and Wall St vs Main Street, are not the same thing by any stretch of the imagination. You can become rich without working in finance. And you can hate Wall St's culture and also be rich.

I don't think that all the people who are pissed about the financial crisis are poor or that they think being poor is noble. That seems like a pretty false dichotomy. Being poor does truly suck!

I think the main issue the author is pointing out is how ignoble it is to be unhappy with a 2mil bonus for a job that really isn't that important in the big scheme of things. 2mil is a lot of money for the vast majority of people and bitching about it just makes you out to be an asshole. If that is a cultural issue with that section of finance then that seems like a legitimate concern.

Re: For the Love of Money

#47

Post by sbierwagen »

phillmv wrote: post #23
tkiley wrote: post #16

I was a derivatives trader, and it occurred to me the world would hardly change at all if credit derivatives ceased to exist. Not so nurse practitioners. Is this statement (from the article) true? I'm under the impression that financial innovations throughout history have generally spurred capital investment. Innovations like fractional-reserve lending have made bankers&investors wealthy, but also spurred spending on…

It's sorta up for debate. My understanding, which is tiny and very limited, is that you can think of the role of finance operators as "liquidity providers". They're the grease in the wheels of capitalism; by either providing access to capital (via loans, or investment) or by matching buyers with sellers. A classical example is you're a farmer that wants to hedge the risk that your crop will fail due to random weather…

  HFT people will argue that they provide more liquidity in 
  the market - it's easier to sell your stocks because HF 
  traders increase the overall volume, etc.
A problem with their argument, (one of many) is that HFTs are not regulated market makers.

http://en.wikipedia.org/wiki/Market_maker

HFTs provide liquidity when the market's good, but you always have plenty of liquidity when the market's good. You only really need liquidity during a price crash, which is precisely the moment all the HFTs head for the exits, and the exchange seizes up.

HFTs are essentially a tax on stock transactions, and if you actually wanted that, why not have a legislative tax, rather than giving 5% to whatever stock trader has the shortest fiber optic cable to the exchange?

Re: For the Love of Money

#48

Post by gjm11 »

chroem wrote: post #4
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…

There was an article a while back that discussed how most people's perception of what is "enough" wealth is always ~30% more than what they currently have, be it thousands or millions of dollars. Unfortunately I can't find the article at the moment, but the point still stands that, to a certain extent, wealth addiction has become embedded in our culture and we are taught to seek it from a young age. So to say that th…

I'm sure there are a lot of people in the finance industry who constantly think that "enough" is 30% more than they currently have (or maybe rather more than that -- someone well placed in finance can accumulate wealth pretty fast).

I wonder, though, how much of what's gone wrong with finance is because of that. The spectacular cockups and conspiracies that have become public seem to be more about seriously pathological greed than about ordinary garden-variety wanting-a-bit-more.

(Also, I offer myself as a counterexample to the strongest versions of the enough-is-30%-more theory: my current estimate of how much is "enough" is lower than it was 10 years ago, even though I have a lot more money now than I had then. However, I am not in the finance industry and I'm only one person :-).)

Re: For the Love of Money

#49

Post by ItendToDisagree »

[deleted] wrote: post #40
aianus wrote: post #26

Earlier quoted context omitted.

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]

What country? I'd like that sort of interest rate! :)

Re: For the Love of Money

#50

Post by mbillie1 »

logicallee wrote: post #9

I like how after all that, he ends with an ask for a quarter of his readers' bonuses to start a fund for his philanthropy old habits die hard :)

> an ask

Can this new idiom be stricken from our collective lexicon? I've heard this a lot lately in the tech community (although mostly from manager types) and it's a linguistic abomination. "...he ends by asking..."

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