Wall St. whistleblower documentary

Interesting talk!

Part 1/9


2/9


3/9


4/9


5/9


6/9


7/9


8/9


9/9

Food prices- what the hell!

Year to year food price changes according to National Inflation Association,

"
* Fresh and dry vegetables up 56.1%
* Fresh fruits and melons up 28.8%
* Eggs for fresh use up 33.6%
* Beef and veal up 10.7%
* Dairy products up 9.7%

"

OK, so your little buy & hold "portfolio" has made a net gain the last year, yet it probably made a loss factoring in the actual rate of inflation. More importantly, did your financial advisor really deserve to get paid?

This has been mentioned in the article on risks of long term buy & hold schemes, mainly that the stock markets don't do much but adjust with the ACTUALl rate of inflation!

A need for Screening Tests

A number of industries could become so much more "genuine", i.e. with some "screening tests".

Let's look at the academic level, if Business Schools advocate high probability (60%) of finding executive level employment for graduates, then a screening test could be something along the lines of "OK, then let's do a contract where if the grad doesn't get employed, the school would refund 60% of the tuition...".

Or in the financial industry. The currently popular management + incentive fees are not feasible for the average investor. With the fixed management fee, no management team has any incentive to actually perform for the investor(s), they could simply take opposite directions for half of the investors for 1 time step, then vice versa, and still make a guaranteed management fee income while investors bleed to death.

Screening Test for an investment firm (Mutual funds, hedge funds... etc.)

How about this, having an incentive fee ONLY, and if the fund suffers from a loss, then the management shares that loss with the investors. This little step could immediately filter out the snake oil salesmen, who we all know are rampant in the industry.

Quant skills

Let's look at some skills in demand today at Quant Finance Jobs. The employers are mostly hedge funds and the average salary: $200K USD + %PnL (Percentage of Profit/Loss).

"
1) Quant Trading Analyst-Algorithmic Trading Team-London

London, United Kingdom

Interested candidates should have extensive experience in the following;
• Time Series Econometrics
• Alpha Construction
• Bayesian Statistics
• Transaction Cost Modelling
• Black Litterman modelling
• Portfolio optimisation

2) Ultra high frequency Statistical Arbitrage Trader

New York, United States of America

Requirements:-

Candidates will have a background in the high frequency trading space, with experience creating and managing strategies with a high Sharpe Ratio, high ROC and holding little to no overnight positions.
3+ years experience of researching, back testing and deploying systematic trading strategies straddling multiple asset classes including equity index, currency, fixed income and commodities. Futures experience would be ideal.
Ivy League calibre PhD in a hard science

Strong to expert programming skills in C++.
Candidates should be innovative and analytical thinkers with strong communication skills.

3) High Frequency Quant Trader

New York or London, United States of America

Required Skills and experience
PhD from a top tier University in Computer Science, Mathematics, Statistics, Engineering or related subject
Strong hands on programming experience in C++
Experience with analytical packages such as Mathematica, Matlab, PyLab or R
Between 1-3 years experience of developing, implementing and trading high frequency trading strategies across any asset class.
Strong quantitative skills and experience
Passion for solving complex problems and drive to success

"
We can see that strong mathematics is a must, and computer science a close 2nd, or an ivy league PhD in a "Hard Science" (I'm thinking physics, statistics). So knowing what the hedge funds possess and utilize, how does the average private trader compete and survive, profitably?

Just some ideas

• Invest time and energy to gain necessary skills to level the playing field
  
• Find ways to quantify institutional buying/selling pressure (but risk being always a bit behind)
  
• Raise enough money to influence and exploit the markets like Soros or Buffet
  
• Hire a quant...

About the $100 Bill Auction

OK so I'm going through Games People Play: Game Theory in Life, Business, and Beyond, and it mentions a game involving hundreds of (allegedly elite) Wall Streeter groups that resulted disastrously. Yeah, I'm talking about the $100 Bill Auction.

Basic rules: Everyone bids for the $100 bill, and the highest bidder pays the bid, and gets the bill. The catch: the 2nd highest bidder must pay the bid, and get nothing.

The average winning bid: $400 (where the top bidder loses $300, and 2nd top bidder $395~)

Attempting to "win", these "titans of Wall Street" ended up taking huge losses. As a corollary, why are these people managing other people's money? Who the heck's managing your KiwiSaver account (New Zealand version of 401k)? The level of incompetence is scary within the industry.