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What are hedge funds, and what social functions do they serve?

danwang.co

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Re: What are hedge funds, and what social functions do they serve?

#61

Post by damoncali »

samdb wrote: post #44
jackgavigan wrote: post #33

If you're interested in reading some more about the collapse of LTCM, I recommend When Genius Failed by Roger Lowenstein (for a fuller appreciation, read Liar's Poker by Michael Lewis first). If you're interested in reading an excellent account of a startup HFT/hedge fund, it's worth ordering a secondhand copy of The Predictors by Thomas Bass (for a fuller appreciation, read Chaos by James Gleick first).

Another Lewis book, The Big Short, is also a good introduction to the events leading up to the 2008 crash.

This one is also great - mostly because it was written right before the collapse, and it nails everything (at least as far as causes go - his solutions are debatable). Very smart book.

http://www.amazon.com/The-Trillion-Dollar-Meltdown-Rollers/d...

Edit: also, this version, updated in early 2009:

http://www.amazon.com/The-Two-Trillion-Dollar-Meltdown/dp/15...

Re: What are hedge funds, and what social functions do they serve?

#62

Post by spindritf »

atmosx wrote: post #58
m52go wrote: post #42

Earlier quoted context omitted.

You're conflating 'social' with 'moral'. Everything you mentioned is morally questionable, not socially harmful.

Geez we all enjoy the benefits of the 2008 financial crisis. Society was never happier.

The 2008 financial crisis was not brought on by people avoiding taxes. I don't think any crisis can be caused this way because the US government can easily borrow money when it needs and clamp down on tax avoidance or raise taxes later.

Re: What are hedge funds, and what social functions do they serve?

#63

Post by scott_s »

tptacek wrote: post #43
jackgavigan wrote: post #33

If you're interested in reading some more about the collapse of LTCM, I recommend When Genius Failed by Roger Lowenstein (for a fuller appreciation, read Liar's Poker by Michael Lewis first). If you're interested in reading an excellent account of a startup HFT/hedge fund, it's worth ordering a secondhand copy of The Predictors by Thomas Bass (for a fuller appreciation, read Chaos by James Gleick first).

_When Genius Failed_ is a freaking fantastic book; even after the 2008 crisis, still one of the all-time best pieces of financial narrative journalism ever. I'm not sure _Liar's Poker_ sets it up that well. Go ahead and read Lowenstein first. In fact, it might even work better the other way around, because Lewis' narrative is really fragmented and Lowenstein's isn't.

Agreed on "Liar's Poker". I read it after "The Big Short", and I was surprised at how disjointed it was. It was Lewis' first book after leaving finance, and it showed. But I just added "When Genius Failed" to my wish list, based on your all's recommendation.

Re: What are hedge funds, and what social functions do they serve?

#64

Post by damoncali »

guelo wrote: post #51

CalPERS, the largest pension fund, is pulling out of hedge funds entirely due to weak returns and high fees. http://www.forbes.com/sites/jonhartley/2014/09/22/why-calper... What pisses me off the most about hedge funds is that they are a powerful center of political corruption, as evidenced by the inability of Washington to close the disgusting "carried interest" tax loophole.

If you untangle the carried interest taxes, it gets more complicated than that. To close that "loophole" is basically to get rid of sweat equity. When you put it that way, it doesn't sound quite as appealing. I'm not saying it's not a debatable issue, but it has nothing to do with corrupt hedge fund managers.

Re: What are hedge funds, and what social functions do they serve?

#65

Post by bjelkeman-again »

bedhead wrote: post #32

Disclaimer: I am a hedge fund manager. Here's the definition of a hedge fund: an investment firm with extremely high fees whose investment strategy probably falls outside the scope of the vast majority of accessible investment funds. Most criticisms of hedge funds are so weak that they border on straw man arguments. There are fair criticisms for sure, but mostly those complaints are centered around the fees being too…

Saying that objectivity I missing from someone that wonders about a social function in an economic vehicle, is IMO a straw man argument. It isn't like the current capitalist economic model is the only true and objectively correct path for society.

Re: What are hedge funds, and what social functions do they serve?

#66

Post by m52go »

atmosx wrote: post #58
m52go wrote: post #42

Earlier quoted context omitted.

You're conflating 'social' with 'moral'. Everything you mentioned is morally questionable, not socially harmful.

Geez we all enjoy the benefits of the 2008 financial crisis. Society was never happier.

That was almost entirely caused by an institution known as the BANK.

Banks and hedge funds are totally different things. Likening one to the other is like saying Google and Square are both evil just because they're technology companies.

You seem to lack a fundamental understanding of the financial system.

Re: What are hedge funds, and what social functions do they serve?

#67

Post by frandroid »

onetimeusename wrote: post #52
lmg643 wrote: post #39

What social functions do hedge funds provide, indeed? Renaissance Technologies avoided $6bn in taxes by using derivatives to pretend their ultra-high frequency trading profits were actually long-term capital gains. http://www.bloomberg.com/news/2014-07-21/renaissance-avoided... Renaissance is one of the biggest and most successful hedge funds of all time. SAC was another of the most successful hedge funds of all time…

There was no dishonest or misleading tactic that Renaissance tech used. They held on to options and used that legal tax structure. Options for a basket of stocks and the basket of stocks themselves are completely different things and have different risks and payouts. That they are using derivatives to avoid taxes is just drama that politicians are inventing.

So what is the social function of Renaissance not paying $6B in taxes? How does this benefit society?

Re: What are hedge funds, and what social functions do they serve?

#68

Post by bksenior »

m52go wrote: post #42
lmg643 wrote: post #39

What social functions do hedge funds provide, indeed? Renaissance Technologies avoided $6bn in taxes by using derivatives to pretend their ultra-high frequency trading profits were actually long-term capital gains. http://www.bloomberg.com/news/2014-07-21/renaissance-avoided... Renaissance is one of the biggest and most successful hedge funds of all time. SAC was another of the most successful hedge funds of all time…

You're conflating 'social' with 'moral'. Everything you mentioned is morally questionable, not socially harmful.

No, you are conflating 'social' with 'legal.'

Re: What are hedge funds, and what social functions do they serve?

#69

Post by [deleted] »

frandroid wrote: post #67
onetimeusename wrote: post #52

Earlier quoted context omitted.

There was no dishonest or misleading tactic that Renaissance tech used. They held on to options and used that legal tax structure. Options for a basket of stocks and the basket of stocks themselves are completely different things and have different risks and payouts. That they are using derivatives to avoid taxes is just drama that politicians are inventing.

So what is the social function of Renaissance not paying $6B in taxes? How does this benefit society?

[deleted]

Re: What are hedge funds, and what social functions do they serve?

#70

Post by m52go »

bksenior wrote: post #68
m52go wrote: post #42

Earlier quoted context omitted.

You're conflating 'social' with 'moral'. Everything you mentioned is morally questionable, not socially harmful.

No, you are conflating 'social' with 'legal.'

I should have said moral AND legal. Those companies' actions are morally wrong and legally wrong. Social good is totally different.

Are you assuming money paid in taxes is socially good?

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