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My Time at Lehman

nickchirls.com

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Re: My Time at Lehman

#61

Post by penny500 »

pyoung wrote: post #42
jwb119 wrote: post #16

Earlier quoted context omitted.

> the financial sector has disproportionate lobbying power. I'm not sure that's true. If Wall Street really had some super lobbying power Dodd-Frank and Sarbanes-Oxley wouldn't have passed in their current forms. Regulating Wall Street is a pretty easy position to take if you're a politician.

The reaction to SOX by Wall Street was fairly mixed, some liked it because it meant the could put more trust in corporate financial statements. Some did not support the bill because of the usual straw man argument that 'regulation makes us less competitive'. Regardless, the passage of the bill does not say anything about the lobbying power of Wall Street, because WS was fairly mixed on it to begin with. Regarding Dod…

How is "regulation makes us less competitive" a straw man argument? If your Singaporean or European competitors operate under a set of different and less stringent rules, that wouldn't increase your costs to doing business (and in effect making you less competitive relative to foreign competitors)? Even the regulators know about the costs of Dodd-Frank.

Re: My Time at Lehman

#62

Post by hkmurakami »

crazygringo wrote: post #24
rayiner wrote: post #9

"Which, it turns out, is a trader’s field day. What this meant, in its simplest form, is that these traders (or salespeople) could buy bonds at the "market" price from intelligent hedge fund managers in NYC and sell this same crap at much higher levels to unsophisticated (but legally considered "sophisticated") pension funds and insurance companies in middle America. What I discovered, quite starkly, is that the part…

> simply transferring wealth from the less sophisticated investors often teachers’ pension funds and factory workers’ retirement accounts, to the more sophisticated investors... Exactly. Wall street and investment have wonderful effects -- funneling money towards companies that can use it in amazingly productive ways. It provides an incredibly valuable service. But the flip side is exactly this, that pension funds, o…

>Why should retirement accounts get invested in anything but government bonds and index funds?

Step 1: Pension return rates get "set" during boom time highs.

Step 2: Boom times end, the pension fund is grossly under funded, and the manager needs to find ways to get excess return beyond what the typical fixed income and equity products can offer.

Step 3: Pension Managers reach for "alternative investments", hoping for higher returns that can offset lackluster market returns.

Re: My Time at Lehman

#63

Post by hkmurakami »

edw519 wrote: post #14
ig1 wrote: post #12

Earlier quoted context omitted.

This. "Caveat emptor" applies heavily in b2b transactions be they financial or otherwise. If you're buying a product then you need to spend money to hire sophisticated buyers, because if your buyers are dumber than the sales-people you're buying from they're going to be fleeced. This is true if your buying a financial asset, a car or an enterprise software licence. Just because Oracle sells into companies that could…

Just because Oracle sells into companies that could just as well have used postgres that doesn't mean that Oracle aren't producing anything of value,.. Oracle doesn't sell software. They sell risk reduction. Someone to sue or blame. Once you understand that, you see how brilliantly they've achieved product/market fit in a way many people here can only dream of.

Oracle doesn't sell software. They sell risk reduction. Someone to sue or blame.

Interesting. I've heard the exact same description for Red Hat.

Re: My Time at Lehman

#64

Post by hkmurakami »

np422 wrote: post #28
edw519 wrote: post #14

Earlier quoted context omitted.

Just because Oracle sells into companies that could just as well have used postgres that doesn't mean that Oracle aren't producing anything of value,.. Oracle doesn't sell software. They sell risk reduction. Someone to sue or blame. Once you understand that, you see how brilliantly they've achieved product/market fit in a way many people here can only dream of.

Have you ever read an eula? Have you ever heard of someone winning a lawsuit against a software vendor? Have you even heard of someone getting any kind of monetary compensation for mishaps caused by software bugs? The suing part is purely fictional.

It's like the saying, "No one's ever gotten fired for buying IBM (either the stock, or their equipment)".

It's safety for the middle manager who can point a finger when his boss comes screaming down the hall when the servers go down.

Re: My Time at Lehman

#65

Post by ap22213 »

ig1 wrote: post #43
ap22213 wrote: post #29

Earlier quoted context omitted.

I know several people who make a lot of money in trading, and I hear the liquidity argument constantly as the justification for their behavior. They describe the millions that they make as payment for all the 'value' that they've given to everyone; But, as an ignorant, I can't see how those millions could have come from anywhere than other (less informed) peoples' pockets. To me, the worst part (again, as an ignorant…

It's vastly testable, there are thousands of different markets with different sets of regulations. But your talking about two different issues, the liquidity issue mainly applies to exchange traded assets while more complex instruments tend to be OTC (i.e. custom agreements). With liquidity you can be a sophisticated buyer and still be willing to pay for it. For example look at when MtGox was lagging by 600 seconds w…

Ok - but, here's where I get lost...

Some of these people are high-net-worth individuals. I sometimes ask them why, instead of trading, they don't take that money and invest it in new research or technology or product development or services. At least then, there would be jobs created, technological progress, more money exchanging hands. But, to them, it doesn't make sense to do that; they make much higher returns, more quickly through trading.

To me, a lot of this money seems to be 'locked up' in liquidity trading, that would otherwise be doing good things for the economy and human progress. Right now, it doesn't seem like the traders have incentive to do other things with the money.

When a friend of mine 'clicks a button' and makes a few million from a trade, how is that adding equivalent 'value' to the overall economy than if he would have taken that money and invested it in a new start-up? Again, this is my total ignorance, but something doesn't seem right. To an ignorant person like me, it just seems like wealth exchanging hands, but how is clicking a button better than employing hundreds of people?

Re: My Time at Lehman

#66

Post by penny500 »

danielweber wrote: post #32
jwb119 wrote: post #16

Earlier quoted context omitted.

> the financial sector has disproportionate lobbying power. I'm not sure that's true. If Wall Street really had some super lobbying power Dodd-Frank and Sarbanes-Oxley wouldn't have passed in their current forms. Regulating Wall Street is a pretty easy position to take if you're a politician.

The sophisticated firms just see those regulations as another challenge. I usually don't call for increased salaries for government workers, but the people regulating Wall Street probably need to be making near-mid-six-figure salaries. Otherwise the ones who are good at their job will just get hired away by Wall Street.

Well, you'd have to increase the salaries of Congress to that level, and that is probably politically unfeasible.

Re: My Time at Lehman

#67

Post by nissimk »

skywalk wrote: post #52
nissimk wrote: post #41

Earlier quoted context omitted.

While cash securities markets (i.e. stocks and bonds) are not a zero sum game, derivatives markets (i.e. futures, options and all kinds of swaps) are zero or negative sum by definition. Also, derivatives markets are far larger in size [1]. There are always 2 parties to each transaction and one makes the money that the other one loses. The additional transaction fees that go to the banks and various other operations p…

Can we stop quoting the underlying notional size when comparing size to equity markets? If you know how a derivative works, it's well understood that quoting the notional to represent size just doesn't make sense. To put it simpler, a terminated CDS contract does not mean there is a loss of wealth equal to its notional, whereas a stock price going to zero in the equities market literally means you just lost the compl…

That's certainly true for interest rate swaps, but credit default swaps are actually quite similar to stocks. For example when Lehman filed and the stock went to 0, the CDS settled at 91.375 [1] meaning that the protection seller had to send 91.375% of the notional value to the protection buyer. Yes, in most cases there is no credit event and even in many credit events the impairment to the debt is much less than 90%, but also most stocks don't go to 0. This case is a good example because the maximum market cap of Lehman stock was 60 bln [2], but the CDS market moved 270 bln in the credit event (see [1]).

[1] http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a...

[2] http://www.investopedia.com/articles/economics/09/lehman-bro...

Re: My Time at Lehman

#68

Post by samstave »

rayiner wrote: post #49
samstave wrote: post #40

Earlier quoted context omitted.

I think you're misinterpreting my comment. The statement was that "We like the idea of letting everyone transact freely, but we are uncomfortable with the "winner take all" implication of that policy" But this is not true. We are not uncomfortable with free transactions resulting in winning - we are uncomfortable with "free" being the state of the system whereby the winner is able to do so because there is no oversig…

Is having superior information and data not consistent with a level playing field? What about hiring up a significant portion of all the top college graduates and having them work around the clock to give you every possible advantage? Is that consistent with a level playing field? My point is that there are a lot of things short of fraud that we consider "meritocracy" (and having superior information and superior ana…

I think we are in perpendicular agreement. I agree with your statement. I also believe that the system as it is currently regulated, implemented and used is based on a system that is actively working to protect itself and its advantage and that the actions taken by wall street to get/maintain/hide the data/advantage they have is what is illegal.

I am not saying that using or having a better position of data or information is wrong or illegal. I am saying that how they got there in the first place, and what they have done to ensure its perpetuity for them is what is illegal/wrong/exploitative and abused.

The worst criminals of the bunch are those in supposed positions of regulatory authority that are really there to protect the interests of big money.

This includes GS employees setup as Obama's economic advisory.

(Note: often people make the mistake of saying "well do you expect him not to hire/appoint people with intimate knowledge of how the financial system works?" -- No, I expect him to hire/appoint people with express knowledge of how the system works and how it is exploited and abused so that they can identify and go after criminal fraudulent activity.

When you hire/appoint those BENEFITING from the actions of the industry - it protects the criminal/exploitative activity!)

Re: My Time at Lehman

#69

Post by malandrew »

danielna wrote: post #5

I have a strange sense of sadness for my friends who are "stuck" on Wall Street. Strange because it's weird to feel sad for someone making $250k+ per year, but I've heard their first hand accounts of how much they hate their jobs. If you're the type of person who can step back from the ego-driven culture of investment banking I feel like everyone reaches the same meta-conclusions that Nick did. It's just unbelievably…

One of the hardest parts about leaving is that after a few years all the friends in the world that you have are in finance because they are the only ones that can afford the restaurants, bars and activities as you. Then when you decide to leave it means giving up all those friends because after leaving you no longer will be able to afford hanging out with your friends from finance. It's surreal to have friends that you can only maintain via your current job.

Re: My Time at Lehman

#70

Post by penny500 »

rayiner wrote: post #49
samstave wrote: post #40

Earlier quoted context omitted.

I think you're misinterpreting my comment. The statement was that "We like the idea of letting everyone transact freely, but we are uncomfortable with the "winner take all" implication of that policy" But this is not true. We are not uncomfortable with free transactions resulting in winning - we are uncomfortable with "free" being the state of the system whereby the winner is able to do so because there is no oversig…

Is having superior information and data not consistent with a level playing field? What about hiring up a significant portion of all the top college graduates and having them work around the clock to give you every possible advantage? Is that consistent with a level playing field? My point is that there are a lot of things short of fraud that we consider "meritocracy" (and having superior information and superior ana…

Because for Wall Street to succeed, Main Street must fail? Why would Main Street transact with them at all if that were the case?
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