6 ms·

The CEO of Alameda said "we tend not to have stop losses... I'm trying to think of a good example of a trade where I've lost a ton of money... I probably don't

by memish 4y ago

The CEO of Alameda said "we tend not to have stop losses... I'm trying to think of a good example of a trade where I've lost a ton of money... I probably don't want to go into specifics with that" https://twitter.com/ApeDurden/status/1590912098871435265 https://twitter.com/ApeDurden/status/1590912098871435265 Now how did this place end up managing billions of dollars and SBF the darling of politicians? The picture is starting to come into focus. SBF used customer funds to become one of the top political donors. He donated $40M and was planning up to $1B. His parents are Stanford Professors who are well connected in the political world. Caroline, Alameda's CEO, also said "My advice for college is that classes don't matter that much and friends and networking are really important. Probably the most valuable thing you can do in college is find the coolest people you can and spend lots of time hanging out with them". Apparently so. Her dad is the Department Head of Economics at MIT. Prior to getting appointed to the SEC, Gary Gensler was a Professor for the Practice of Global Economics & Management at MIT. The CEO of GoldmanSachs met with SBF to help FTX get regulatory approval. From a congressman yesterday, "Gary Gensler runs to the media while reports to my office allege he was helping SBF and FTX work on legal loopholes to obtain a regulatory monopoly. We're looking into this." https://twitter.com/RepTomEmmer/status/1590717374801809409 https://twitter.com/RepTomEmmer/status/1590717374801809409 Senators are still going forward with an SBF-backed bill https://www.theblock.co/post/185746/senators-moving-forward-with-sbf-backed-bill-after-ftx-collapse https://www.theblock.co/post/185746/senators-moving-forward-... It looks like Enron or Theranos 2.0. The kids of the elite were being elevated into positions way outside their ability and supported at high levels with no scrutiny. The fallout from this is going to be astronomical.

throwup 4y ago
"Risk management? You mean that's a thing people actually do?"
europeanguy 4y ago
I guess the way it works is before they blow up people go "clearly they're doing great, they know something we don't. You think they need stop losses, but that's because you just don't get it. Stop asking questions". That's how.
deleted 4y ago
[deleted]
altacc 4y ago
The same way fiat finance builds up and then collapses: most people have no idea what's going on or what any of it means. There's a lot of accounting smoke & mirrors to make everything look successful, until it's put to the test. At least with traditional finance there is occasional some effort to reign things in, or at least cover consumer checking accounts. But even there the finance companies employ more lawyers, accountants and experts than the regulators can and so the regulators are usually playing catch up after the collapse. In crypto there's no regulators, just other companies hoping they don't get found out.
SilverBirch 4y ago
To be fair I heard from a few places that you really don't want to do stop losses on crypto exactly because of companies like FTX - since the traders and the exchange are really the same people, it's possible that there isn't a good enough chinese wall between them - when that happens the traders can see your stop losses which is like holding a massive sign saying "Here, take my crypto for cheap".
- jddil 4y ago
  I hope people read this and really understand what it says. It Crypto had any intrinsic value this paragraph would be ridiculous ... but it's not. At least tulips were pretty to look at.
  - madamelic 4y ago
    The only reason big banks doesn't do this openly is because they actually have regulators breathing down their neck so they have to either hide it well or find ways around. The problem isn't crypto, it's the lack of accountability.
    - super256 4y ago
      > The only reason big banks doesn't do this openly is because they actually have regulators breathing down their neck so they have to either hide it well or find ways around. I thought that's what the whole PFOF debate in the US was about? That e.g. Citadel is allegedly using SL and order book information to hunt stops on thin volumes. Not from the US and I didn't follow it too closely, maybe I got it wrong.
ldjkfkdsjnv 4y ago
This is actually generally how finance works though. The whole industry is built on the illusion of superior competence. "Prestige" is a determining factor in someones ability get a job running a hedge fund/financial asset management. Generally they need to have gone to the right school, worked at the right bank, then at the right hedge fund. Each should show a good amount of tenure ( > 3-5 years ). A major asset manager that I won't mention hires PhDs from Harvard as a way to get people to invest in their fund. Behind the scenes, away from all the quant marketing nonsense, is some guy you've never heard of making gut based trades on the market.
- pmoriarty 4y ago
  "This is actually generally how finance works though. The whole industry is built on the illusion of superior competence. "Prestige" is a determining factor in someones ability get a job running a hedge fund/financial asset management" It's not just finance, people everywhere are impressed by a prestigious background, and assume if you can drop certain names on your resume you must be great. Such names will open all sorts of doors for you that are firmly shut against the riffraff. Of course, conmen have used such patinas of prestige to their advantage since the dawn of time.
  - whimsicalism 4y ago
    It's bigger in fields where you need to get rich people to hire you: ie. consulting & finance. Fields like tech are nominally more meritocratic.
  - jasonwatkinspdx 4y ago
    There's also the irony of the fancy office. If you're a customer of a professional and walk into a very luxurious office, you know ultimately you're the one paying for that. If it were a separate surcharge to meet in the fancy office vs something basic would you chose to pay it? Yet psychologically we all feel more confident in the fancy office.
- ljlolel 4y ago
  I saw this at Bridgewater. Hired only ivy league, smart people actually. But their total discretionary control was a tiny % of fund. Hedge funds are mostly marketing. When 2008 financial crisis happened, Dalio was making the big trades in the control room himself on gut feel.
hn_throwaway_99 4y ago
> Now how did this place end up managing billions of dollars and SBF the darling of politicians? It's not that hard to be the darling of politicians in this day of extreme polarization - you just tell them what they want to hear. SBF made a good safe bet that coming off as "pro-regulation" would be a winning strategy in the current climate. Heck, it was probably a good bet regardless of whether Democrats or Republicans are in power, because even though Republicans are nominally anti-regulation, being against "Silicon Valley billionaires" is basically the one thing that gets bipartisan support these days, so flattering politicians with "we need you to regulate us" was probably a good strategy.
- shapefrog 4y ago
  It's not that hard to be the darling of politicians - give them money.
lancesells 4y ago
The more I read and learn about all this it feels like the work of a criminal mind more than just plain greed or hubris.
- tartoran 4y ago
  https://en.m.wikipedia.org/wiki/Hanlon%27s_razor https://en.m.wikipedia.org/wiki/Hanlon%27s_razor
  - salawat 4y ago
    How many times are we going to allow someone to slice us with weaponized stupidity before we realize that willful ignorance is actually a powerful tool in the malicious actor's/white collar toolkit? On the street, the cops/court'll beat you with "ignorance of the law is not an excuse". In the board room, the corporation can do no wrong, here's your settlement, chapter 11 plox.
  - lancesells 4y ago
    My point is this doesn't feel like stupidity or some confluence of mistakes. It feels more like someone realizing they can get people to invest in their house of cards while knowing it's a house of cards.
tremarley 4y ago
This makes a lot of sense. Stop Losses suck
- mywaifuismeta 4y ago
  Time to start a hedge fund with this trick. Let's see if Sequoia wants in.
- dlubarov 4y ago
  Yeah, it's funny to see Alameda called out for this, when most hedge funds don't use stop losses. It's pretty reasonable not to want their assets liquidated at a bad price in their sleep, in response to a price movement which might have been an artificial blip.
frontman1988 4y ago
drumhead 4y ago
Is this how it always is and has been in Silicon Valley or Tech in the US. Startups started by well connected or well off kids, with backgrounds at elite Universities. Background and connections count for so much in that industry, it makes you wonder how much has been lost or how much potential was lost because people didnt go to the right schools.
- mistrial9 4y ago
  no, this is not true. The reality of Silicon Valley since the mid-1970s is an explosive and unpredictable mix of institutional money, their cohorts and practices; defense industry, their cohorts and money (these fit your hypothesis somewhat); dramatic and overlapping physical inventions using silicon parts, the people that build and promote those, their investor and insiders; marketing success more like Hollywood of old, their cohorts and practices; non-USA money and investment systems, their cohorts and practices; international Fortune 500, their cohorts and practices.. and more I am leaving out..
gringoDan 4y ago
> Caroline, Alameda's CEO, also said "My advice for college is that class don't matter that much and friends and networking are really important. Probably the most valuable thing you can do in college is find the coolest people you can and spend lots of time hanging out with them". This is mainstream advice if you're at an Ivy, Stanford, etc. You're learning the same material as the people who go to a state university. The advantage is the proximity to power, the people you rub elbows with who can help your career down the line. This is the entire premise of elite business schools – nobody is dropping $100k/year for the content that you can get on YouTube for free.
- deleted 4y ago
  [deleted]
- endtime 4y ago
  > You're learning the same material as the people who go to a state university. The advantage is the proximity to power, the people you rub elbows with who can help your career down the line. I got my MS CS from Stanford and this is completely false. I did my BS CS at Georgetown, and even between the two there was a huge difference being at Stanford. The course material pushed me way harder, there were more resources (e.g. robots), a much wider selection of electives, and more consistently brilliant peers. I never felt behind at Georgetown; I certainly had those moments at Stanford, even though I did very well there in the end.
  - gringoDan 4y ago
    The original comment applies more to humanities and business school than to hard sciences. But it's still relevant in STEM. > I got my MS CS from Stanford and this is completely false. I did my BS CS at Georgetown, and even between the two there was a huge difference being at Stanford. Stanford is probably the best-known school in the world for Computer Science. Georgetown (while a great school) is known for its international relations. So I'm not surprised that Stanford had more CS electives, resources, etc. But the fair comparison here is a school like UC Berkeley, University of Illinois, or [insert flagship state university here]. Is the quality of education really that different vs. Stanford? Or is the Stanford name brand on the resume the differentiator? Also, a masters program should be harder and more competitive than an undergrad program! > and more consistently brilliant peers Exactly. At Stanford, your "consistently more brilliant peers" will be in positions of power down the road. They'll be hiring managers at Google and Apple in <5 years.
throwaway4good 4y ago
It is not Theranos 2.0; it is straight up theft to use client funds sitting in an exchange to cover losses in a hedge fund.
- ethanbond 4y ago
  Theranos was straight up fraudulent lab reports and a tale of numerous people who should've known better getting duped
  - throwaway4good 4y ago
    I think stealing beats a fudged lab report.
deleted 4y ago
[deleted]
adamsmith143 4y ago
It's completely unsurprising that "successful" kids have well connected and successful families.
whimsicalism 4y ago
This is a silly post. It's easy to draw a 3rd degree connection from anyone who went to an elite school and important politicians. You're saying: SBF's coworker's dad's former coworker is now the SEC head and that is the trick? Getting hired by a firm like Jane St is a pretty strong signal that you are likely capable.
willio58 4y ago
Seems like the bill’s aim is to have more oversight in crypto companies.
bmitc 4y ago
This stuff just worries me so much. These people are looked up to as some gods of business, insight, or whatever. Even I have been guilty of getting caught up and being jealous of these younger people with so much apparent success. But then you find out, in gory detail, about just how much bullshit it all is, and that these people are just from elite circles who got handed keys to the Lamborghini after just playing with a Tonka truck. I mean, just hearing these people speak is cringe. They don’t understand how anything actual works. I can’t believe that something that literally stops your losses is not an effective risk management tool. This is what you find with kids from the elite class. They can take on mind blowing risk because they can fall back on their parents when it fails. People from lower socioeconomic levels cannot do that. Our government sets back and let criminal actions go unpunished, letting people truly treat life as a Monopoly game.
kgwgk 4y ago
I'm sure they have many things on their plates now but they really should think about deleting their twitter profiles. "nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is" https://twitter.com/carolinecapital/status/1379036346300305408 https://twitter.com/carolinecapital/status/13790363463003054... SBF should delete twitter mostly to stop publishing increasingly ridiculous "I’m really sorry, again" messages: "Hopefully things can find a way to recover. Hopefully this can bring some amount of transparency, trust, and governance to them. Ultimately hopefully it can be better for customers."

by memish 4y ago

throwup 4y ago

"Risk management? You mean that's a thing people actually do?"

europeanguy 4y ago

I guess the way it works is before they blow up people go "clearly they're doing great, they know something we don't. You think they need stop losses, but that's because you just don't get it. Stop asking questions". That's how.

deleted 4y ago

[deleted]

altacc 4y ago

The same way fiat finance builds up and then collapses: most people have no idea what's going on or what any of it means. There's a lot of accounting smoke & mirrors to make everything look successful, until it's put to the test. At least with traditional finance there is occasional some effort to reign things in, or at least cover consumer checking accounts. But even there the finance companies employ more lawyers, accountants and experts than the regulators can and so the regulators are usually playing catch up after the collapse. In crypto there's no regulators, just other companies hoping they don't get found out.

SilverBirch 4y ago

To be fair I heard from a few places that you really don't want to do stop losses on crypto exactly because of companies like FTX - since the traders and the exchange are really the same people, it's possible that there isn't a good enough chinese wall between them - when that happens the traders can see your stop losses which is like holding a massive sign saying "Here, take my crypto for cheap".

jddil 4y ago
I hope people read this and really understand what it says. It Crypto had any intrinsic value this paragraph would be ridiculous ... but it's not. At least tulips were pretty to look at.
- madamelic 4y ago
  The only reason big banks doesn't do this openly is because they actually have regulators breathing down their neck so they have to either hide it well or find ways around. The problem isn't crypto, it's the lack of accountability.
  - super256 4y ago
    > The only reason big banks doesn't do this openly is because they actually have regulators breathing down their neck so they have to either hide it well or find ways around. I thought that's what the whole PFOF debate in the US was about? That e.g. Citadel is allegedly using SL and order book information to hunt stops on thin volumes. Not from the US and I didn't follow it too closely, maybe I got it wrong.

ldjkfkdsjnv 4y ago

This is actually generally how finance works though. The whole industry is built on the illusion of superior competence. "Prestige" is a determining factor in someones ability get a job running a hedge fund/financial asset management. Generally they need to have gone to the right school, worked at the right bank, then at the right hedge fund. Each should show a good amount of tenure ( > 3-5 years ). A major asset manager that I won't mention hires PhDs from Harvard as a way to get people to invest in their fund. Behind the scenes, away from all the quant marketing nonsense, is some guy you've never heard of making gut based trades on the market.

pmoriarty 4y ago
"This is actually generally how finance works though. The whole industry is built on the illusion of superior competence. "Prestige" is a determining factor in someones ability get a job running a hedge fund/financial asset management" It's not just finance, people everywhere are impressed by a prestigious background, and assume if you can drop certain names on your resume you must be great. Such names will open all sorts of doors for you that are firmly shut against the riffraff. Of course, conmen have used such patinas of prestige to their advantage since the dawn of time.
- whimsicalism 4y ago
  It's bigger in fields where you need to get rich people to hire you: ie. consulting & finance. Fields like tech are nominally more meritocratic.
- jasonwatkinspdx 4y ago
  There's also the irony of the fancy office. If you're a customer of a professional and walk into a very luxurious office, you know ultimately you're the one paying for that. If it were a separate surcharge to meet in the fancy office vs something basic would you chose to pay it? Yet psychologically we all feel more confident in the fancy office.
ljlolel 4y ago
I saw this at Bridgewater. Hired only ivy league, smart people actually. But their total discretionary control was a tiny % of fund. Hedge funds are mostly marketing. When 2008 financial crisis happened, Dalio was making the big trades in the control room himself on gut feel.

hn_throwaway_99 4y ago

> Now how did this place end up managing billions of dollars and SBF the darling of politicians? It's not that hard to be the darling of politicians in this day of extreme polarization - you just tell them what they want to hear. SBF made a good safe bet that coming off as "pro-regulation" would be a winning strategy in the current climate. Heck, it was probably a good bet regardless of whether Democrats or Republicans are in power, because even though Republicans are nominally anti-regulation, being against "Silicon Valley billionaires" is basically the one thing that gets bipartisan support these days, so flattering politicians with "we need you to regulate us" was probably a good strategy.

shapefrog 4y ago
It's not that hard to be the darling of politicians - give them money.

lancesells 4y ago

The more I read and learn about all this it feels like the work of a criminal mind more than just plain greed or hubris.

tartoran 4y ago
https://en.m.wikipedia.org/wiki/Hanlon%27s_razor https://en.m.wikipedia.org/wiki/Hanlon%27s_razor
- salawat 4y ago
  How many times are we going to allow someone to slice us with weaponized stupidity before we realize that willful ignorance is actually a powerful tool in the malicious actor's/white collar toolkit? On the street, the cops/court'll beat you with "ignorance of the law is not an excuse". In the board room, the corporation can do no wrong, here's your settlement, chapter 11 plox.
- lancesells 4y ago
  My point is this doesn't feel like stupidity or some confluence of mistakes. It feels more like someone realizing they can get people to invest in their house of cards while knowing it's a house of cards.

tremarley 4y ago

This makes a lot of sense. Stop Losses suck

mywaifuismeta 4y ago
Time to start a hedge fund with this trick. Let's see if Sequoia wants in.
dlubarov 4y ago
Yeah, it's funny to see Alameda called out for this, when most hedge funds don't use stop losses. It's pretty reasonable not to want their assets liquidated at a bad price in their sleep, in response to a price movement which might have been an artificial blip.

frontman1988 4y ago

drumhead 4y ago

Is this how it always is and has been in Silicon Valley or Tech in the US. Startups started by well connected or well off kids, with backgrounds at elite Universities. Background and connections count for so much in that industry, it makes you wonder how much has been lost or how much potential was lost because people didnt go to the right schools.

mistrial9 4y ago
no, this is not true. The reality of Silicon Valley since the mid-1970s is an explosive and unpredictable mix of institutional money, their cohorts and practices; defense industry, their cohorts and money (these fit your hypothesis somewhat); dramatic and overlapping physical inventions using silicon parts, the people that build and promote those, their investor and insiders; marketing success more like Hollywood of old, their cohorts and practices; non-USA money and investment systems, their cohorts and practices; international Fortune 500, their cohorts and practices.. and more I am leaving out..

gringoDan 4y ago

> Caroline, Alameda's CEO, also said "My advice for college is that class don't matter that much and friends and networking are really important. Probably the most valuable thing you can do in college is find the coolest people you can and spend lots of time hanging out with them". This is mainstream advice if you're at an Ivy, Stanford, etc. You're learning the same material as the people who go to a state university. The advantage is the proximity to power, the people you rub elbows with who can help your career down the line. This is the entire premise of elite business schools – nobody is dropping $100k/year for the content that you can get on YouTube for free.

deleted 4y ago
[deleted]
endtime 4y ago
> You're learning the same material as the people who go to a state university. The advantage is the proximity to power, the people you rub elbows with who can help your career down the line. I got my MS CS from Stanford and this is completely false. I did my BS CS at Georgetown, and even between the two there was a huge difference being at Stanford. The course material pushed me way harder, there were more resources (e.g. robots), a much wider selection of electives, and more consistently brilliant peers. I never felt behind at Georgetown; I certainly had those moments at Stanford, even though I did very well there in the end.
- gringoDan 4y ago
  The original comment applies more to humanities and business school than to hard sciences. But it's still relevant in STEM. > I got my MS CS from Stanford and this is completely false. I did my BS CS at Georgetown, and even between the two there was a huge difference being at Stanford. Stanford is probably the best-known school in the world for Computer Science. Georgetown (while a great school) is known for its international relations. So I'm not surprised that Stanford had more CS electives, resources, etc. But the fair comparison here is a school like UC Berkeley, University of Illinois, or [insert flagship state university here]. Is the quality of education really that different vs. Stanford? Or is the Stanford name brand on the resume the differentiator? Also, a masters program should be harder and more competitive than an undergrad program! > and more consistently brilliant peers Exactly. At Stanford, your "consistently more brilliant peers" will be in positions of power down the road. They'll be hiring managers at Google and Apple in <5 years.

throwaway4good 4y ago

It is not Theranos 2.0; it is straight up theft to use client funds sitting in an exchange to cover losses in a hedge fund.

ethanbond 4y ago
Theranos was straight up fraudulent lab reports and a tale of numerous people who should've known better getting duped
- throwaway4good 4y ago
  I think stealing beats a fudged lab report.

deleted 4y ago

[deleted]

adamsmith143 4y ago

It's completely unsurprising that "successful" kids have well connected and successful families.

whimsicalism 4y ago

This is a silly post. It's easy to draw a 3rd degree connection from anyone who went to an elite school and important politicians. You're saying: SBF's coworker's dad's former coworker is now the SEC head and that is the trick? Getting hired by a firm like Jane St is a pretty strong signal that you are likely capable.

willio58 4y ago

Seems like the bill’s aim is to have more oversight in crypto companies.

bmitc 4y ago

This stuff just worries me so much. These people are looked up to as some gods of business, insight, or whatever. Even I have been guilty of getting caught up and being jealous of these younger people with so much apparent success. But then you find out, in gory detail, about just how much bullshit it all is, and that these people are just from elite circles who got handed keys to the Lamborghini after just playing with a Tonka truck. I mean, just hearing these people speak is cringe. They don’t understand how anything actual works. I can’t believe that something that literally stops your losses is not an effective risk management tool. This is what you find with kids from the elite class. They can take on mind blowing risk because they can fall back on their parents when it fails. People from lower socioeconomic levels cannot do that. Our government sets back and let criminal actions go unpunished, letting people truly treat life as a Monopoly game.

kgwgk 4y ago

I'm sure they have many things on their plates now but they really should think about deleting their twitter profiles. "nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is" https://twitter.com/carolinecapital/status/1379036346300305408 https://twitter.com/carolinecapital/status/13790363463003054... SBF should delete twitter mostly to stop publishing increasingly ridiculous "I’m really sorry, again" messages: "Hopefully things can find a way to recover. Hopefully this can bring some amount of transparency, trust, and governance to them. Ultimately hopefully it can be better for customers."