3 ms·

1) Pretty sure you're misinformed on this point. The hedge fund sector that has gotten attention and partial blame for this meltdown is the risk-parity segment

1) Pretty sure you're misinformed on this point. The hedge fund sector that has gotten attention and partial blame for this meltdown is the risk-parity segment of hedge funds. These funds target a specific range of volatility, so when the market becomes wildly volatile they are forced to reduce their overall holdings. The entire risk-parity segment of the market is at most $400bn and they are levered 2-3x on average. In the grand scheme of things, this is pennies when compared to broader money flow. 2) Stock buybacks are simply a more tax-efficient way of distributing profits to shareholders. Redistribution of profit to shareholders is a fundamental trait of capitalism, so you can't really blame the CEO for doing this. You seem to be blaming CEO's for not preparing for a black swan event. If CEO's are forced to prepare for every possible black swan event, their companies would go nowhere.

ccktlmazeltov 7y ago
> Stock buybacks are simply a more tax-efficient way of distributing profits to shareholders This is: 1. irresponsible, due to so called black swan events 2. price manipulation, don't forget this
OGWhales 7y ago
As for your last point, there appears to be a black swan event quite regularly. It seems logical to prepare for this. Secondly, stock buy backs are often performed at horrible times simply because CEOs want to boost their own salary. This has repeatedly bitten them in the ass. This is what happens when short term gains are prioritized over long term strategy. So my question is, when do we learn?
- sojournerc 7y ago
  If it's regular, by definition it is not a black swan. What other events are you referring to?
ivalm 7y ago
I can accept viewpoint only if we ALSO allow all unprepared companies to fail. This will then inform the next generation of CEOs to prepare more. If we socialize losses while privatizing gains we create wrong incentives. I think the general sentiment is that we cannot just organically let most companies fail, so we are forced to bail out. But if we are breaking capitalism by bailing companies out, we should at least try to incetivize them to learn from mistakes rather than learn that they can do whatever when the times are good and get bailed out when the times are bad.

ccktlmazeltov 7y ago

> Stock buybacks are simply a more tax-efficient way of distributing profits to shareholders This is: 1. irresponsible, due to so called black swan events 2. price manipulation, don't forget this

OGWhales 7y ago

As for your last point, there appears to be a black swan event quite regularly. It seems logical to prepare for this. Secondly, stock buy backs are often performed at horrible times simply because CEOs want to boost their own salary. This has repeatedly bitten them in the ass. This is what happens when short term gains are prioritized over long term strategy. So my question is, when do we learn?

sojournerc 7y ago
If it's regular, by definition it is not a black swan. What other events are you referring to?

ivalm 7y ago

I can accept viewpoint only if we ALSO allow all unprepared companies to fail. This will then inform the next generation of CEOs to prepare more. If we socialize losses while privatizing gains we create wrong incentives. I think the general sentiment is that we cannot just organically let most companies fail, so we are forced to bail out. But if we are breaking capitalism by bailing companies out, we should at least try to incetivize them to learn from mistakes rather than learn that they can do whatever when the times are good and get bailed out when the times are bad.