291–300 of 328 posts
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Hundreds of millions of people have been brought out of poverty, outside the United States.
That's due to technology; not capitalism, they aren't the same thing. A huge amount of R&D happens in academia which isn't capitalism; but then is monetised by capitalism (but doesn't reinvest it back into the academia)
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Faster networks. Arista exists because hft was a big target market and now everyone using networks with Arista switches in them has benefited.
Faster networks would come for other more useful endeavors too, like high quality video conferencing/telepresence stuff. People say how important it is to be working in the same place because conferencing is "just not the same", not realizing it's mostly a technical problem, shitty ISPs, slow routes with high jitter or loss, and insufficient mics, speakers, and software.
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The sector exists because people willingly give it money in exchange for services. If you can’t imagine why that’s happening, maybe read up on why people pay for financial services rather than assuming something as stupid as most of financial services not providing benefit to society.
No one's confused why it's happening. It's legal to make money through financial services, and it reliably makes money. The investments into fintech that divert more cash one way or another until others catch up also provide very little and ever diminishing value, mostly just sideways and upward redistribution of wealth. The actual value generating sectors of the economy are always getting more anemic, and they're du…
No, you’re misunderstanding me. People are willingly using the services offered by the financial services sector. It’s the reason companies can quickly raise billions through IPOs, the reason you can get a million dollars for a mortgage and pay it back over 30 years, etc. Market participants that enable better price discovery and subsequently narrow bid/ask spreads provide immense value to society.
An average of just a quarter percent lower interest on mortgages is billions of dollars kept in people’s pockets. More efficient markets enable that and it’s these traders you loath that are making it more efficient. If it were just up to the banks they would love nice slow markets with huge spreads so they can line their pockets with your money.
>The actual value generating sectors of the economy
Sigh, that statement makes no sense already because finance generates massive value. It’s the reason people can retire. It’s the reason normal people can buy houses. It’s the reason normal people can start capital intensive businesses.
Efficient allocation of capital is one of the largest force multipliers of any modern economy. You lament that other sectors are anemic, but many could not even exist if it weren’t for financial instruments that allow them to control costs, raise capital, etc.
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I agree with your comment but am curious on how far this analogy goes. What do you suppose defines the Nyquist frequency in a market?
To stretch the analogy a little further, to take an observation of the market, you have to buy or sell which in turn affects the price. It's very much like the effect of measuring a quantum particle, the impact of a photon is enough to change to observation so you have an inherent uncertainty to everything. Because of this, I don't think you can ever distinguish between noise and meaningful trading with respect to a…
In other words, Warren Buffet buying a huge portion of a penny stock will drive past that frequency tipping point easily while lil ol' me buying a few shares of an index fund will have effectively little to no impact?
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100 years after Communism burst on the scene, we currently look at that development with disgust. Right now most people have access to abundant food, cellphone in every pocket, access to a wealth of information, access to transportation, incredible medical advances. I can't imagine that the progress we've made would be scorned. Like other market driven forces, bad players will not be rewarded as information about the…
"What we have now is the bad kind of capitalism! There's a different, good kind of capitalism which in theory does all these great things!" is essentially the "communism works great in theory" argument. 100%, both systems are great theories. However, the last few hundred years of actually trying to implement capitalism has "most people have access to abundant food, cellphone in every pocket, access to a wealth of inf…
I agree that "No true Capitalism" is just as bad a fallacy as "No true Communism". But our real life imperfect Capitalism has still had incredible results whereas real life imperfect communism has lagged significantly and failed more brutally.
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The theory sounds great. But why then, our streets are lined with homeless, and our nations are stricken with poverty? Could it be that the only real aim and motivation of market traders is to earn money? One day, maybe.... when these are replaced with DAOs on the blockchain. But until then it's the Wolf of Wall Street.
Because having homeless people lining our streets on our commutes to/from our jobs is a daily reminder that if we don't work hard enough to increase corporate profits, then our bosses might lay us off and we'll end up like them. That or moral apathy. At some point in the 80s we decided that markets driven by business profits should dictate every aspect of society. I imagine 100 years from now they'll look back at tod…
Ultimately "Corporate Profits" produce the economic value that people desperately want, and participating in the creation of something people want _should_ be a prerequisite for getting economic value in return.
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Is there any empirical evidence that these perceived benefits to society actually ever materialize? It's clear that there is a benefit to a trader from knowing something milliseconds before the rest of the market (otherwise Goldman wouldn't be doing this), but it's not clear at all to me that it helps the rest of us.
We know, empirically, that a lack of liquidity increases trading costs, which in turn is directly channeled to the prices of goods and services that rely on this liquidity (more or less everything in the world, even more indirectly ones like education). It's difficult to say 'things would be X% more expensive' because of the interconnected complexity the GP was talking about, but there is definitely a very apparent b…
Sure, that's almost tautologically true, but that does not mean that the benefits to society materialise:
* Traders getting faster access to an exchange have an advantage against other traders (and might make more money), but that does not imply at all that the market will be more liquid.
* The volume of actual utilitarian trades (investing, borrowing, asset exchanging, hedging) is relatively small compared to overall trading activity. A pension fund investing, someone taking out a mortgage, people exchanging currency for the holidays, the often cited farmer hedging his crop - they trade infrequently, and certainly don't care about some milliseconds.
* The dynamics are those of an arms race. Arms races are wasteful, by and large. Building a "straighter" fibre glass connection between NY and Chicago, and then building a series of micro wave towers (because the speed of light in the air is greater than in the fibre) - how does that benefit society? Just postulating higher liquidity and lower costs is not enough to justify it, I think.
(I am reminded of the earlier discussion about advertising - once Cola does it, Pepsi has to do it, too. Are we thus better off, or would we get cheaper sodas if both didn't?)
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I think the question is at what point does liquidity have diminishing returns? If a security could only be traded once per 10 years then it's obvious that its lack of liquidity would make it less valuable. Holding it would tie up your capital quite significantly. However, if you had a turn-based market where every trade got cleared at the top of the minute it's not clear to me at all whether that would effectively be…
> However, if you had a turn-based market where every trade got cleared at the top of the minute it's not clear to me at all whether that would effectively be less liquid than what we have now. The primary problem with that is that it pools order flow into a homogenous, undistinguished pool. HFT heavily rely on profiling order flow into the informed and uninformed. A typical uninformed trader is Joe Sixpack who's reb…
However, you postulate that the introduction of a turn-based system would effectively transfer money from Joe Sixpack (who'd face higher costs) to hotshot hedge fund manager (who'd face even lower costs).
Maybe, though, we'd see HFT shops go out of business (and not building micro wave towers between Chicago and NY anymore), and see a transfer from HFT shops to hotshot hedge fund manager and Joe Sixpack, both facing lower costs.
How do you know it's not this second scenario?
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If you're holding for a pension, wouldn't a wider spread affect you less than any single other market participant? Like a 1 cent different due to spread isn't going to matter in 30 years?
If I'm holding a pension, I'm paying in regularly to a fund that's managed over a long period of time. If they manage it actively and trade it a lot over 30 years, 1 cent a time will add up.
Spreads used to be much higher, sure, but that was not because there were no HFT shops around back then.