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For the Love of Money

nytimes.com

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Re: For the Love of Money

#61

Post by vladimirralev »

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…

Don't you just transfer the risk to some other party this way? So that other party will now have to either have the bigger buffer or transfer it to someone else. At the end there will be no net effect on the larger scale. The cycle probably continues until somebody stupid enough to dismiss the risk buys into it at loss.

Re: For the Love of Money

#62

Post by michaelochurch »

tessierashpool wrote: post #44
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...

Income and class mobility aren't the same thing.

In the UK, you can be born middle-class and become rich, and that's easier than in the US, but you'll still be considered "middle class". Upper is something you're born into. But the flip side is that almost no one cares about "upper class".

My point is that the UK arrangement is better. The well-connected, the powerful, the wealthy and the hereditary upper class are different sets of people. In the US, they're the same set and it's a disaster.

Re: For the Love of Money

#63

Post by frogpelt »

This is the ugly underbelly of capitalism: that people aren't paid based upon their "importance". They are simply paid based upon their "value" to the market. Is it important for Clayton Kershaw to pitch for the Dodgers? No, but it is demanded.

While I understand the sentiment of wanting to help the poorest of the poor, if it's true that money isn't the be-all, end-all then does it really matter that a trader makes millions while a nurse practitioner only makes $100k? The money isn't what's important, right? And the poorest of the poor in this country are rich compared to the poor from previous generations.

Re: For the Love of Money

#64

Post by iaskwhy »

ItendToDisagree wrote: post #49
[deleted] wrote: post #40

Earlier quoted context omitted.

[deleted]

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

Sorry, I deleted my comment. I decided to explain here why because it's sort of funny! So I have been helping a friend of mine with all the math around his new adventure, buying his first flat. Usually he just gives me the numbers directly from the bank and I work with them without questioning much because, although I have worked in finance before, I know jack about mortgages. Still, I had the bank simulation with myself so I deeply believed 0.16%, the interest the bank put on his simulation, would be around the same for everybody else.

As you can guess, it's not even close. That's why I deleted my previous comment, sorry. So why did he have such a nice interest rate? Well, it seems like there's a bunch of discounts on the banking system in Europe for mortgages. For example, there's a really big discount for disabled people, they will only pay, on a variable rate, 65% of the 3m EURIBOR thus 0.16%. No spread whatsoever. Interesting, isn't it?

Re: For the Love of Money

#65

Post by tommydiaz »

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 think the problem being addressed in the article is not about wanting to be rich, but rather the question "how much is enough?"

For example, in the movie "Wallstreet", Gordon Gecko gets asked this same question, but he can never truly answer it. If a man who gets to his position, makes millions of dollars, and has the mental capacity to make a ton of business decisions daily, can't answer this simple question- that's definitely a problem.

Surely, for the average person $1.5 million is considered "rich". To keep making money for the sake of making money, is clearly an addiction, which (as mentioned in the article) is supported by our culture of excess.

Re: For the Love of Money

#66

Post by tracker1 »

rwissmann wrote: post #59
sbierwagen wrote: post #47

Earlier quoted context omitted.

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…

HFTs are not any more a tax on stock transactions than previous market makers. In many settings they actually do lower transaction costs. Just ask other market participants such as L/S hedge funds, systematic traders, mutual funds etc. In particular, HFTs drove many of the old school manual market makers out of business, or at the very least reduced their margins significantly. The non-populist argument these days se…

Any stock trade where the buy vs. sell of a stock is under 3 months is not investment.. In under a day, even more so. It will not be felt by the company in question in any meaningful way, and is simply a newer form of gambling. By taxing any income made from trades where ownership is less than a month at 100% we can create a more honest trading environment, where sane investment becomes a norm.

The fact is that would never happen. I'm all for investment.. hell, I'm all for gambling, sex, drugs and rock and roll for that matter. I don't think most things should be illegal... but labeling the stock trade and wall street as investment companies is ludicrous.

Re: For the Love of Money

#67

Post by [deleted] »

mbillie1 wrote: post #50
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 ..."

[deleted]

Re: For the Love of Money

#68

Post by mseebach »

vladimirralev wrote: post #61
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…

Don't you just transfer the risk to some other party this way? So that other party will now have to either have the bigger buffer or transfer it to someone else. At the end there will be no net effect on the larger scale. The cycle probably continues until somebody stupid enough to dismiss the risk buys into it at loss.

It's risk, not a certain loss. And you don't "transfer" it, you sell it to a party that wants higher risk (for a fee).

Derivatives are nice, in that sometimes its possible to separate the risk out from the asset. Consider a $50k loan at 5% with a 1% risk of default.

A pension fund and a hedge fund both have capital, but the pension fund have extremely conservative investors and the hedge fund have extremely risk hungry investors. That loan is not a good investment for either.

So a derivative is created: the hedge fund agrees to make the pension fund good if the loan-taker defaults for a one-time fee of $550 (the cash-value of the 1% risk + a $50 fee). The pension fund now has a $49,450 loan (actually, it will be booked as a $50k load both paying a bit less that 5% interest - the exact amount depends on the running time of the loan) and a $0 risk budget and the hedge fund just made $50 + a 99% chance of $500 more. All are happy, including the loan-taker who might have struggled to get someone to load him money.

(Numbers pulled from thin air for illustrative purposes and lots of details omitted)

Re: For the Love of Money

#69

Post by read »

What stood out for me was this sentence:

From a distance I can see what I couldn’t see then

Why is it that when you are close you're unable to see something for what it is?

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