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I think your comment is missing the point here: their actions themselves have consequence for the market. Indeed, their existence and their practices have an ef

I think your comment is missing the point here: their actions themselves have consequence for the market. Indeed, their existence and their practices have an effect on the market even if they don't act. Their existence and expectations do that alone. 'If I don't do it, somebody else will', which is a poor selfish excuse for sociopathic values.

WalterBright 10y ago
Hedge funcs, i.e. betting against the herd, has a moderating influence, not a destabilizing one.
- nostrademons 10y ago
  If they actually did bet against the herd. "Hedge fund" used to mean a fund that actually hedged their bets, but there's no law that says they have to, and a number of them just bet. What seems to happen is that during boom times, a lot of unskilled and unaware of it money managers get into the market, and they tend to bet with the crowd. We get a big bubble as a result, the bubble pops, and all the shitty fund managers get flushed out of the market. Then we get several years of stability as the prudent money managers who thought for themselves rule the show, until their performance attracts new entrants who don't know what they're doing, and the cycle repeats. I actually think that we're in one of those prudent periods right now - most securities seem fairly valued, at least now that the unicorn bubble is deflating. But in 05-08? I worked in financial software then, and a number of my peers (straight out of college!) were hedge fund managers. There were some good ones, but many of them had no business being near anyone's retirement fund.
totalZero 10y ago
On the contrary, I think you don't know what the point is in the first place. Like it or not, if there is a difference between the value of something and the price at which it can trade, eventually someone will come along and trade it until either the price moves back in line, or the value changes. Hedge fund managers, the ones who abide by the law at least, spend a lot of time trying to find these inefficiencies. That's the nature of the job. Nothing sociopathic about it. In fact, there are many benefits to having a liquid market where (often universally discoverable) pricing reflects the current state of the world. How do you think airlines hedge their fuel cost and get a sense for the future cost of fuel? How do pension funds determine when they should buy protection for their investments due to high expectations of volatility? They look at the market. There are institutional traders and investors who manipulate stocks and trade on insider information, sure. They are lawbreakers and their counterparties often report them to the relevant authorities. But even the market manipulators generally have to be somewhat correct, because if not then there is always someone with equal or greater capital willing to take the opposite, better side of the trade. And the further a security's price is impacted, the juicier the opposite side's payday if the first guy gets it wrong. No offense but I sense that you have a small amount of exposure to the function of the market as a whole, who the participants are, and how they do business. You can't just run around with a label maker that only prints the word "sociopathic" and expect to understand everything.
- intellegacy 10y ago
  This entire comment is dismissible because it operates under the naive delusion that the majority of Hedge Fund managers abide by the law.
  - turar 10y ago
    If you have evidence that it's not the case, especially for the majority, in other words, you have enough evidence to accuse thousands of people of crime, why are you not in touch with the police yet?
    - intellegacy 10y ago
      Obviously I don't have evidence, but it's just common sense. They have huge incentives to cheat, very few incentives to play it safe. And it's very hard to get evidence and prove guilt. Do you really think people gambling with billions of dollars are doing so without an edge? Think about it.
      - totalZero 10y ago
        If I saw countless examples of cheaters getting caught, losing everything, and going to jail, I would be pretty disinclined to cheat.
  - deleted 10y ago
    [deleted]

WalterBright 10y ago

Hedge funcs, i.e. betting against the herd, has a moderating influence, not a destabilizing one.

nostrademons 10y ago
If they actually did bet against the herd. "Hedge fund" used to mean a fund that actually hedged their bets, but there's no law that says they have to, and a number of them just bet. What seems to happen is that during boom times, a lot of unskilled and unaware of it money managers get into the market, and they tend to bet with the crowd. We get a big bubble as a result, the bubble pops, and all the shitty fund managers get flushed out of the market. Then we get several years of stability as the prudent money managers who thought for themselves rule the show, until their performance attracts new entrants who don't know what they're doing, and the cycle repeats. I actually think that we're in one of those prudent periods right now - most securities seem fairly valued, at least now that the unicorn bubble is deflating. But in 05-08? I worked in financial software then, and a number of my peers (straight out of college!) were hedge fund managers. There were some good ones, but many of them had no business being near anyone's retirement fund.

totalZero 10y ago

On the contrary, I think you don't know what the point is in the first place. Like it or not, if there is a difference between the value of something and the price at which it can trade, eventually someone will come along and trade it until either the price moves back in line, or the value changes. Hedge fund managers, the ones who abide by the law at least, spend a lot of time trying to find these inefficiencies. That's the nature of the job. Nothing sociopathic about it. In fact, there are many benefits to having a liquid market where (often universally discoverable) pricing reflects the current state of the world. How do you think airlines hedge their fuel cost and get a sense for the future cost of fuel? How do pension funds determine when they should buy protection for their investments due to high expectations of volatility? They look at the market. There are institutional traders and investors who manipulate stocks and trade on insider information, sure. They are lawbreakers and their counterparties often report them to the relevant authorities. But even the market manipulators generally have to be somewhat correct, because if not then there is always someone with equal or greater capital willing to take the opposite, better side of the trade. And the further a security's price is impacted, the juicier the opposite side's payday if the first guy gets it wrong. No offense but I sense that you have a small amount of exposure to the function of the market as a whole, who the participants are, and how they do business. You can't just run around with a label maker that only prints the word "sociopathic" and expect to understand everything.

intellegacy 10y ago
This entire comment is dismissible because it operates under the naive delusion that the majority of Hedge Fund managers abide by the law.
- turar 10y ago
  If you have evidence that it's not the case, especially for the majority, in other words, you have enough evidence to accuse thousands of people of crime, why are you not in touch with the police yet?
  - intellegacy 10y ago
    Obviously I don't have evidence, but it's just common sense. They have huge incentives to cheat, very few incentives to play it safe. And it's very hard to get evidence and prove guilt. Do you really think people gambling with billions of dollars are doing so without an edge? Think about it.
    - totalZero 10y ago
      If I saw countless examples of cheaters getting caught, losing everything, and going to jail, I would be pretty disinclined to cheat.
- deleted 10y ago
  [deleted]