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The "only" problem with your theory is that the "sucker funds" have to lose 100 billion, which won't go unnoticed by the "suckers"
by SirLJ 7y ago
The "only" problem with your theory is that the "sucker funds" have to lose 100 billion, which won't go unnoticed by the "suckers"
- ceejayoz 7y agoDo they have to lose $100B, or just underperform? People have accepted 2% fees on managed funds despite underperforming an index fund for decades.
- SirLJ 7y ago100B is what Medallion made during those years, the money have to come from somewhere...
- femto113 7y agoIf you layer credit into the wormhole it seems like you don't even need "losses" in the sucker funds. In essence Medallion establishes that it is "low risk", it is then able to borrow money more cheaply than other parties. Through the wormhole it can then indirectly "reloan" that money to higher risk sucker funds at higher rates. The sucker fund can still win, but it pays Medallion back more in interest than Medallion pays to the original source of money. Medallion's capacity is constrained by the amount borrowed by the sucker funds and the margin between what it can borrow vs lend at.
- SirLJ 7y agoI think we already went to deep into the hole on this :-)
- thoughtstheseus 7y ago100% agree. A highly overcollateraled position (not drawn capital so it doesn't show up) can be used to magnify returns. If you're playing in marketable assets you can even have the lender hold the assets themselves while you trade.
- elliekelly 7y agoPeople who are looking to launder significant amounts of money would gladly sign up to be the "sucker" in this hypothetical scenario.
- opportune 7y agoThis would be embezzlement, not laundering right? Because you can’t exactly put $20B of dirty money into a sucker fund but you can easily do it with a fund that you control but don’t own (eg a pension fund)
- james-imitative 7y ago1000000%