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For the Love of Money

nytimes.com

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Re: For the Love of Money

#161

Post by kamaal »

peterpathname wrote: post #148
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…

I don't think it's possible. We live in a finite world. All my wealth comes from someone else's poverty.

That's true and false at the same time.

False because, wealth can be added to any economy every time you build/sell some thing other people want.

True because, though wealth can be added over a period of time at any given time the current net circulation is still a static constant number.

Re: For the Love of Money

#163

Post by dclowd9901 »

JDulin wrote: post #123
31reasons wrote: post #114

Earlier quoted context omitted.

So it seems you are better off working in a profession with a very clear quantifiable performance metrics. Software development is not one of them unless you work for your own company. I am curious about making a list of professions that have quantifiable performance metrics. 1.Sales and Marketing 2.SEO 3.Bloggers 4 ..

As always, there's an old and insightful pg essay on these economics: http://www.paulgraham.com/wealth.html The trivial conclusion is that starting your own company is how to be accurately rewarded for your work. But that assumes there's no way to better measure employee performance. It seems like measuring it for engineers and programmers is an impossibly hard problem (At least, that's implied from all of the well-r…

It's not a hard problem at all. We just need a way to measure code against the money it generates/loses. This should actually be a relatively trivial problem to solve. We have static analyzers, funneling metrics and code coverage tools; this just seems like an extension of that.

Re: For the Love of Money

#164

Post by D_Alex »

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…

>If today's financial wizards went away, would we feel a surprising amount of ripple impact, or would they really just not matter?

1. There would be a substantial impact... for the better. You and I would see the benefit as lower spread between cost of production and price of purchase of goods and services (the spread is where the "financial wizards" take must come from).

There is a huge benefit from proper distribution of resources - which used to be the job of financiers and brokers. But now, they work not on "proper distribution", but rather on "distribution which is the most profitable for themselves".

2. And if the "financial wizards" did not go "away", but instead into professions where their intellect could be used for good instead of for evil (e.g.: science), that would be even better.

Re: For the Love of Money

#165

Post by kamaal »

adaml_623 wrote: post #84
ricardobeat wrote: post #71

Earlier quoted context omitted.

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.

There isn't much incentive or motivation to think of the larger system, when you are being paid $12 million an year bonus to think only of your own benefit.

Re: For the Love of Money

#166

Post by harryh »

wbl wrote: post #137
w_t_payne wrote: post #87

Earlier quoted context omitted.

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 corros…

A company isn't affected by who holds the stock. If I decide that I don't want to hold a stock in a company building a bridge across a river, and sell it to Jack, why does that change the company's desire to finish the bridge?

Because if Jack does't want to build the bridge and he holds enough of the company then he gets to say "stop building the bridge."

Re: For the Love of Money

#167

Post by harryh »

panarky wrote: post #129
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…

Charlie Munger, vice chairman of Berkshire Hathaway, argues that high-frequency trading is "legalized front-running". I think it is very stupid to allow a system to evolve where half the trading is a bunch of short-term people trying to get information one-millionth of a nano-second ahead of somebody else. It’s legalized front-running; I think it’s basically evil and it should never have been able to reach the size t…

Charlie, as a guy who regularly buys and sells large volumes of stock, is just talking his book. It would be great for him if he could make large transactions without the stock price responding quickly to this new information. But it would be bad for everyone he transacted with.

To make this concrete:

Say Charlie & Warren wake up one day and decide Company X is undervalued and that they want to by 5% of it. They start buying stock. In the old pre HFT days it would take a while for the market to notice all this new demand so they could get a lower price. But now HFTs are really good at noticing this so the price rises faster.

But wait you say! This is the "front-running" that Charlie is complaining about and that's bad! He's getting screwed!

But what if you were one of the people selling to Charlie. Before HFTs made the price faster you were the one getting screwed! There was all this new demand and you didn't know about it yet so you weren't getting as good of a price as you otherwise could have.

HFTs aren't front running. They just move the stock to it's true price faster than the humans doing the job before could.

Re: For the Love of Money

#168

Post by pyrrhotech »

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 agree with you, I just don't think it's fair that these assholes on wall street can make 4 million dollar bonuses at age 30 for getting lucky with gambling other people's money.

I think it's great for everyone to have the desire for wealth, as long as you are making your money in an honest, value-producing way. I don't think derivatives hedge fund gamblers are honestly earning their pay.

The only thing that can stop them is financial education of the public. The stats show, year after year, that the vast majority of hedge funds lag the market---and get paid massive fees to do so. Someone has to be paying for these bonuses, and that someone is you--if you buy mutual funds or other high-fee actively managed funds.

That's why I boycott even my 401k as there aren't any passive index funds for me to choose.

Re: For the Love of Money

#169

Post by blazespin »

The fundamental problem with HFT is not HFT itself, but rather that there is massive intellectual capital playing tug a war with itself while it could be working on huge problems in genetics, AI, software, physics, etc.

Re: For the Love of Money

#170

Post by harryh »

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…

How, precisely, does an HFT tax a stock transaction that I make?
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