Duray, w/r/t your previous statement: what "laws" were "written" by "underwriters"?
[I]t is a well known fact that the investment banking industry has had a long and well deserved reputation for over-paying its help. You may chose to disagree, I expect you will.
People being paid "too much" is an opinion, not a "well known fact."
Well, I disagree, but not from the perspective you probably expected that I would. You probably thought - and correct me if I'm wrong - that I'd say that for investment professionals, particularly those at the upper levels and/or whom work for the big houses, taking home immense six- and seven-figure packages, deserve what they make because they put deals together, aid in the consummation of large corporate transactions, facilitate capital market growth, etc.?
Well, no. I do think that there are folks out there on Wall Street whose work doesn't justify the cash they stash. Most of these folks, IMO, fall into the category of analysts or, in a few cases, senior executives.
However, at the same time, I think the concept of being overpaid - "overpaid" - is an insidious, ideologically slippery slope towards a newfangled socialism. Who would I be, or anyone, to say what "too much" pay is? That's a decision for shareholders, BODs, or general partners/managing members. And, if the market will bear a seven figure salary, well...good for them, I don't fault or begrudge them their experience/skills, superior powers of negotitation, or ability to blind compensation committees with bullcrap - whichever applies in the particular case ;-)
But I don't join in the sour grape-tinged, folksy Main Street hobby of whining about other people's pay, whether they're athletes, attorneys, CEOs, entertainers, or doctors.
All of this secrecy and compulsive trading (gambling) is no way to run a national economy.
In your opinion, right? Or is that, too, a "well known fact" :)
To the extent that you're elucidating two separate segments of the market above - professionals and daytraders, well, it's a causal relationship: the secrecy in implementing institutional trading strategies and selections is essential, lest the compulsive gamblers frontrun them.
I personally find tinkering with the market the way you've indicated that you're a proponent of...curbs, and the like...as well as central bank pegging/capping currencies, for example...a far more dangerous form of gambling, and one that is supposed to carries with it the "comfort" of being enacted in the name of some brand of regulatory wisdom.
The houses certainly are trading, and they are trading for their own benefit...
And you know this...how?
If you mean trading for their own benefit, i.e., getting paid, yes, absolutely. It's a business and compensation, whether in the form of commissions, mark-ups, etc., is just good business. Would you expect your mechanic, doctor, or barber to work for free?
If you mean that they're trading proprietarily, well, yup, they're doing that too.
And, we continue...
...[n]ot for the benefit of the widow & orphan type of customers you enumerate.
401K holders, widows, and orphans were your example.
And unless you're stating that 401Ks, state investment bodies, and the like are somehow not financial institutions, not invested to some extent in the stock market, or somehow not paying benefits to the above categories of beneficiaries or the trustees of the above...this statement makes absolutely no sense. If, on the other hand, this is the next leg of your conspiracy theory, by all means - expound.
The trader must make money for the firm in order to secure his bonus.
It's far more complex than your admittedly, and understandably, limited knowledge permits. Like any business, there's a value proposition that must be maintained.
First and foremost, the clients order must be executed in ways that safeguard both the integrity of the plan being implemented and the identity of the client. If it is executed late, clumsily, or not in accordance with the customer's stipulations, the call is potentially lost to another firm.
That's yet another reason, besides confidentiality, that DVP accounts are used: such that, with a custodian/prime broker and away accounts all over the Street, a large firm not only can split up orders, but need not open and close accounts to shift business around - they simply hit a different speed dial number.
The trader executes orders within client, desk, or firm constraints in order to implement institutional client's investment management decisions. If constraints are not met - which, with decimals and lower volume, lately, is an increasingly difficult trick with a very short learning curve to boot - the client always has the option (and from what I've seen are often willing to exercise said option) to move at least part of their call elsewhere. On top of that, competitors are usually willing to bend over backwards (financially and technologically) to get new, high volume or large-sized calls into their desk.
Customers leaving a firm, and the resulting decrease in net income, is a pretty detrimental to the potential yield of a bonus pool, wouldn't you think? So, trading performance - implementation skill - is the operant factor. And, you'd better believe that at times you take a hit for a customer's order.
So it's far more than just plowing orders into the market for a customer and collecting a paycheck. At times you get burned, too, once in awhile large enough that a whole desk is affected. Not always, not regularly, but it happens: it's not a risk-free proposition, and everyone involved is...or better be, LOL...aware of that.
It's that cut and dried.
Nothing in life, at one level or another, is cut and dried, Duray. Yours is the promotion of the conspiracy theory, a dangerous skeletal determinism which twists and folds facts to fit the theory, unlike sounder deductive methods. One - for you, in particular, and as per your PM confession - is blissfully free of the burdens presented by logic, experience, or evidence.
Moreover, one for which - as you proved last night - any assertion to the contrary is, of course, part of the conspiracy itself.
Watch this guy, folks. Duray is the kind of guy in whom there's a Shake 'N Bake dictator just waiting to spring forth. Someone who's ready to tell you what secret organizations and orders (that only he knows about) are doing to you - while admitting that he has little, and demonstrating no, knowledge of what's going on.
The would-be liberator from a proposed tyranny who's simultaneously... and suspiciously...more than willing to decree how much pay, revenue, or profit is "right;" what a "good" versus "bad" fall in the markets is, and has the audacity to ordain exactly how a market should be structured. Most importantly, who'll tell you and that things are, quite simply - as he wills them - "cut and dried."
Be aware, and beware. Some of the worst periods of the last millenium were borne of lines more subtle than these.
BTW: just kidding, Duray. :-)
Whether or not the customer makes anything is highly irrelevant to the activities of a trader at a Wall Street firm.
Wow. That's among the more patently absurd statements yet.
The whole art and science surrounding TCA (Transaction Cost Analysis) in the course of handling institutionally-sized orders orbits around the very fact that poor quality executions lead to incrementally poorer returns.
So, to the extent that the quality of implementation might lead to information leakage, slippage, runaways, etc., all of which have a detrimental effect on selectrion performance, the outcome is quite relevant.
One sloppy trade of a clients order, and you can lose a call. If it's a big enough call, word may get around and you could lose others shortly thereafter. Lose enough calls, and you're in big trouble.
Now, you may have meant this, in which case you're correct; as for adverse selection, no: the executing firm obviously has no responsibility for the actual picks by its' retail or institutional customers. Nor should they. So, from that perspective, no - the executing firm doesn't particularly care how good or bad a client's picks are.
Fool me once, shame on you. Fool me twice, shame on me.
Absolutely, I agree. I utilize this same line, both in speech and practice.
My question is, in closing (on top of once again reminding you that I'd love to see the text or link to one of the "laws" that an "underwriter" "wrote"): if you believe in the philosophy behind that saying - which indicates that making the same mistake twice is inherently the fault of the theoretically wronged and not the theoretical wrongdoer - how do you reconcile that with your supposition that it's Wall Street, and not the blind, greedy herd, always seemingly willing to throw away every hard-won, painful lesson of the past for a few uncertain bucks - who are at fault?
LP. |
