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For the Love of Money

nytimes.com

231–240 of 291 posts

Re: For the Love of Money

#231
post #167

Earlier quoted context omitted.

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 star…

The large investment banks actually have a code they can append to their orders so they can jump to the top of the order cue.

That is the definition of "front running".

I'd like to see a 1 cent tax per share per transaction. That'd dramatically limit HFT.

Re: For the Love of Money

#232

I personally find the comments here, written by so-called "hackers", truly depressing. Instead of tinkering about how the system can be made more just, viable, etc., instead of "hacking", the only "idea" that comes to the minds of so-called "innovators" is: how can i become THAT rich ?, where do i have to sign ?. Sad, depressing, disgusting, predictable.

Sorry to break it to you, it's called "human nature".

Re: For the Love of Money

#233
post #164
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 distribut…

Do you think the same is true of property and casualty insurance?

If not, why do you believe insurance mechanisms are damaging in finance?

Re: For the Love of Money

#234
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…

Wow. Fractional reserve lending is "innovative"? That is hilarious, absurd, and unnerving at the same time. An entity literally creates money out of thin air, and then loans that made up nothing at interest? That is "innovative"? More like criminal.

Oh right, and then said entity can't actually allow 10% of all withdraws on itself else it is called a "run" on the banks and they close their doors.

What sort of innovation do you see here other than a banking cartel that completely controls the money supply?

Comments like yours make me sick because it shows the brainwashing the banking cartel has implemented is complete from the bottom up and unifying; you now have people like you strutting around calling criminal activity innovative.

When banks create money it is innovative, when the little guy creates money, it is counterfeiting. Pull your head out of the banking cartels ass for a second, and take a breath of fresh air.

Re: For the Love of Money

#235

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.

Some forms of wealth we can produce more of: food, clothes, shelter, electronic doodads.

Some we can't: land (including natural resources), social status, political power.

We should aim for a society that produces plenty of the first type of wealth, and aims for fair distribution of the second.

Re: For the Love of Money

#236

I personally find the comments here, written by so-called "hackers", truly depressing. Instead of tinkering about how the system can be made more just, viable, etc., instead of "hacking", the only "idea" that comes to the minds of so-called "innovators" is: how can i become THAT rich ?, where do i have to sign ?. Sad, depressing, disgusting, predictable.

Sorry to break it to you, it's called "human nature".

Actually calling something "human nature" is lazy, inaccurate and harmful. It's giving up on the issue, it's simplifying psychology, it's encouraging inertia and the status quo. It's saying "Sorry, nothing can be done, it's biology".

This goes for many things, not just the desire to have lots of money.

Re: For the Love of Money

#237
post #208

Earlier quoted context omitted.

>If he doesn't feel like working hard, he could probably use his VC connections as a cash cow... Actually, if he doesn't feel like working hard, it sounds like he could retire on a comfortable 6-figure income for the rest of his life. Without interest, naively $6m will yield $100k a year for 60 years, which is more than enough to raise a large family in a nice neighborhood anywhere in the states - especially if the h…

Without interest, 100k/year now is a lot, but in 60 years will be very, very little. Have a look at average salaries now compared to 60 years ago - from memory it's a little over a factor of 10 difference.

I think that he left out any interest just to make the statement simple, obvious, and to avoid contest.

I'd be willing to bet that somebody from a background in Wall Street and derivatives markets is not going to stuff their cash under the mattress.

If you want a complex statement that can be challenged, 10%/year on that $3.6mln last bonus would result in $360k pre tax.

Re: For the Love of Money

#238
post #167

Earlier quoted context omitted.

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 star…

The large investment banks actually have a code they can append to their orders so they can jump to the top of the order cue. That is the definition of "front running". I'd like to see a 1 cent tax per share per transaction. That'd dramatically limit HFT.

> The large investment banks actually have a code they can append to their orders so they can jump to the top of the order cue.

Source? I believe you but I'd like to be able to quote an authority if I'm telling someone else about this. I've gotten into this HFT debate with colleagues, and I'm pretty sure none of us knew about this nifty trick.

Re: For the Love of Money

#239
post #223

Earlier quoted context omitted.

You're still not getting it. You send your messages on a private link to the exchange. Then the exchange processes them (either puts an order in the order book) or matches a trade, and only then publishes that this has happened on the public market feed. At which point other participants can react. This: "So one way of jumping in on the order is being, say, a few thousand km closer to the exchange than some other tra…

Actually, it seems that it is in fact possible for HFTs to jump the queue: http://online.wsj.com/news/articles/SB1000087239639044398920... Relevant quote: "He became convinced exchanges were providing such an edge after he says he was offered one himself when he ran a high-speed trading firm—a way to place orders that can be filled ahead of others placed earlier. The key: a kind of order called "Hide Not Slide." Whet…

Bodek is a failed trader, and one who apparently can't read exchange API manuals (here's BATS explaining it for him: https://www.batstrading.com/resources/features/bats_exchange...). Now he's trying to make money from sensationalism and poorly written books.

That aside, Hide not Slide orders are an interesting case. They exist only in US equity markets, and they're a great study in unintended consequences. US equities are quite fragmented (the same security can be traded on several different exchanges), so well intentioned US regulators introduced something called the NBBO (National Best Bid Offer), ostensibly to "protect investors" from getting a worse price on one exchange. What this meant is that different exchanges trading in the same product could never be "locked" - you could never have one exchange showing say 101 on the bid when another has 101 on the ask (because in theory then they are crossed and should trade). Pretend the tick size is 1 for following discussion...

This leads to a situation where every equity exchange in the US may be trading 100/102 (with an empty tick in the middle), but as long as one remaining exchange is trading 100/101, you aren't allowed to insert a bid at 101 on the other exchanges (since the interpretation of the rule is that this would be unfair on the resting 101 offer). But HFTs are all very keen to be the first to fill that 100/102 gap in the spread - to be the first on that new queue is an advantage since you get filled first. And obviously that one holdout exchange will soon get filled and the price will tick up. But the other exchanges legally can't accept a bid at 101 yet.

So exchanges started to either reject orders or "slide" them - you submit that 101 Buy and they slide it down to a 100 Buy. Which leads to this:

10 SUBMIT BUY@101

20 IF RESPONSE = "SLIDE TO 100" THEN DELETE, GOTO 10

All of a sudden the exchanges are being flooded with messages, as algos are pinging the exchange constantly wanting to put that 101 bid in. Which leads us to 'Hide not slide' - the exchanges promise to sit on your order until the NBBO ticks up and put it in the queue then. The problem is that these order types, while documented and available to all who are connected to the exchange directly, aren't usually going to be available to someone who is trading through an intermediary - a broker or some retail trading platform. So that's the story of how a well intentioned bit of regulation ended up disadvantaging US investors.

US equity markets are full of weird quirks like this, the NBBO needs to be done away with.

Re: For the Love of Money

#240
post #238

Earlier quoted context omitted.

The large investment banks actually have a code they can append to their orders so they can jump to the top of the order cue. That is the definition of "front running". I'd like to see a 1 cent tax per share per transaction. That'd dramatically limit HFT.

> The large investment banks actually have a code they can append to their orders so they can jump to the top of the order cue. Source? I believe you but I'd like to be able to quote an authority if I'm telling someone else about this. I've gotten into this HFT debate with colleagues, and I'm pretty sure none of us knew about this nifty trick.

This is where I read about it.

http://online.wsj.com/news/articles/SB1000087239639044481270...

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