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For the Love of Money

nytimes.com

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Re: For the Love of Money

#81

Post by w_t_payne »

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…

There is already regulation governing the minimum pricing increment ("tick size") for financial instruments.

It would not take to great a stretch of the imagination to imagine regulation covering the maximum frequency at which trades could occur.

We would have to decide what sort of delay we consider tolerable, then (perhaps) hold auctions at that frequency - perhaps once per millisecond, perhaps once per minute, maybe even once every 10 minutes?

Re: For the Love of Money

#82

Post by [deleted] »

bonemachine wrote: post #79
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…

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 infrastructure in a way that could be a win-win for society as a whole. The point the author was trying to get at was not that finance geeks don't provide any social utility. Just that in any rati…

[deleted]

Re: For the Love of Money

#83

Post by 31reasons »

I am just wondering, are these Wall Street traders smarter than an average techie working in Silicon Valley ? Are they so irreplaceable that they are offered so much salary and bonuses ? It just doesn't seem right. I am afraid to even ask for 150k salary in SV for the same amount of cerebral work.

Re: For the Love of Money

#84

Post by adaml_623 »

ricardobeat wrote: post #71
yodsanklai wrote: post #58

“I don’t have the brain capacity to think about the system as a whole. All I’m concerned with is how this affects our company.” I wonder how many people really understand the system as whole. From the outside, it looks like a complex natural phenomenon that we don't really understand and don't control.

That's not to be taken literally, you can be pretty sure the head of a hedge fund understands the system very well. He was just stating his priorities.

A large number of hedge funds lost a lot of money in the crash. This is proof of a sort that their heads did in fact not understand the system well.

Re: For the Love of Money

#85

Post by dllthomas »

sbierwagen wrote: post #47
phillmv wrote: post #23

Earlier quoted context omitted.

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…

"[Y]ou always have plenty of liquidity when the market's good."

There are a lot of products, especially outside equities, where that's not at all true.

Re: For the Love of Money

#86

Post by bonemachine »

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…

Again, yes "liquidity providing" might have some value, maybe. But it's just really hard to see it having anywhere near the social (or simply wealth + capital-generating) power, of say, nurses/medtechs, schoolteachers, effective policing, sane environmental management etc.

That was the original author's point (give or take a few work categories, which I'm taking the liberty of throwing in for the sake of illustration).

Re: For the Love of Money

#87

Post by w_t_payne »

tracker1 wrote: post #66
rwissmann wrote: post #59

Earlier quoted context omitted.

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…

For a sensible and mature owner-manager partnership to flourish, investor holding periods need to be aligned with business planning horizons. Many significant projects need between 6 months and 5 years to come to maturity, and holding periods should reflect this pattern (according to the needs and nature of the business).

I would argue that investors with a 3 month holding period are actually exerting a pretty corrosive influence on businesses: emphasising a focus on the next quarter's results at all costs.

Re: For the Love of Money

#88

Post by dllthomas »

tracker1 wrote: post #66
rwissmann wrote: post #59

Earlier quoted context omitted.

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…

It's not investment, but it may be legitimate market making. If the only people in the market are investors, it is significantly harder for me to liquidate my stock when I need to and significantly harder for me to buy stock when I want to.

Re: For the Love of Money

#89

Post by JasonPunyon »

dllthomas wrote: post #85
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…

"[Y]ou always have plenty of liquidity when the market's good." There are a lot of products, especially outside equities, where that's not at all true.

But HFT's don't play much in those products, so they don't provide liquidity or make markets there either.

Re: For the Love of Money

#90

Post by aridiculous »

mindcrime wrote: post #72
king_jester wrote: post #54

Earlier quoted context omitted.

> The desire to make more money, to improve one's "lot in life" and to succeed, this is a Good Thing. One of the key points of this essay is that making more money doesn't necessarily improve one's quality of life. The author clearly talks about at age 25 being financially secure and wealthy, so his pursuit of additional wealth wasn't really about an increase in quality of life. > You can be rich and unhappy, or poor…

Is it even possible to be a billionaire without exploiting others? Why wouldn't it be? Wealth is created, and if you can create a billion dollars in wealth, then so be it. Even if so, is it right that you can be a billionaire while there are more empty homes each night in the US than the homeless population? Depends on what you mean by "right". Is that a troubling, even disturbing situation? Yes, I would find it to b…

>>>"But is any particular billionaire (or any other particular individual at all) somehow obligated to fix the homelessness problem? No."

As you get wealthier, your ability to affect society expands. I'd argue that, in the same way one can feel responsible for members of your family, society is your larger family. Humanity, an even larger one. Perhaps a wealthier individual should feel as though more of society is their 'family' as he/she gets wealthier — and treat them as kin.

Instead, what you often find is self-involved individuals becoming more and more distant from their society as they get wealthier (large households with gigantic yards, vacation homes, remote travel).

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