Managed Funds Man Vs Machine

Discussion in 'Shares & Funds' started by Tropo, 16th Apr, 2012.

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  1. Tropo

    Tropo Well-Known Member

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    Quote:

    Man Vs Machine

    I work in Wall Street and work in hedge fund analysis. I’m the only person in my office who supports OWS (Occupy WallStreet).
    It’s important to know how exactly the hedge funds, along with the financial markets are destroying the 99%.
    Hedge funds. These guys are basically the vehicles of choice for ultra-rich people to get into the financial markets, besides family offices and private wealth managers. What are hedge funds? They are funds that have a 1-5 million deposit minimum, cater to the mega-rich, and can invest in anything without regulatory restrictions, use leverage to pump up their exposure by 15x, and pretty much eat up a vast majority of the industry’s profits.
    These guys invest in EVERYTHING. Instruments you’ve heard of – stocks, bonds, forwards, futures, currencies, and instruments that you, me, or anyone else have never even heard of, much less know anything about: commodity future swaptions, FRA/OIS swaps, CLOs, exotic future options, p-notes, index/commodity/equity exposures, and a huge array of OTC (over-the-counter) instruments that no regular investor would ever have access to.
    Why I bring this up: the financial markets are rigged. 99% of the investing public has access to services such as basic brokerages, 401k/IRA’s, mutual funds, pension plans, etc. Some of these services, especially pension funds, will invest into hedge funds, who take an additional 2 and 20 (meaning 2% of assets plus 20% of capital gains).
    What this means is that if you go any of the traditional retail routes, you are utterly screwed facing off against the hedge funds.
    First, you are paying exorbitant fees. Commissions on every stock trade. Mutual fund managers taking a cut – an annual % cut, as well as a % per profit cut. If these managers (i.e. pension plans) invest in another fund, that fund is also taking another % cut. You’re down 2% the minute you invest your money.
    Next, if you’re doing the investing yourself, you’re paying ridiculous spreads. The bid/ask spread of a stock will cause you to be down another 2-3% the minute you buy the stock. For example, if you’re buying a share of company at $4.25, you can sell back at only $4.15.
    Furthermore, you have absolutely no chance in terms of access to the best services. Hedge funds have a direct line to investment bank’s institutional brokerage teams – these are the guys that spend day and night sucking up to hedge funds, trying to get them the best deals at the cheapest rates. This means that while you’re buying stocks and bonds, hedge funds are getting special rights, warrants, sweetheart deals, private placement deals, options, bigger discounts on bonds, and much better bulk commission rates and lower spreads on stocks. If you’re paying 4.25$ for a 4.15$ stock, they are paying something like 4.16$. And they are eating alive your profits because when the stock goes up to $4.30, they can activate another warrant to purchase 20m shares at $4.25, diluting the value of your shares.
    Next, you lack information and exposure. You have no idea what is going on in the market besides what you see on the news – while hedge funds have analysts working around the clock and a bunch of service providers who give minute-by-minute analysis of their portfolio opportunities and weaknesses in all markets with exposures to nearly everything. Meaning, if there is an opportunity in the real estate market (i.e. legislation), it might take you weeks to get in – hedge funds will have gotten in the minute the legislation was passed. Furthermore, when IPOs come out for companies, hedge funds get top billing on the primary market shares – which means investment banks are selling directly to them. Once the secondary market becomes available, hedge funds are up 15-20% on these investments, sometimes within hours.
    Finally, you have no capital compared to these hedge funds. The people who invest in these hedge funds are not just the 1%, they are the 0.1%. These are the guys with 500million dollar bank accounts and the ability to do whatever the **** they want. Hedge funds know this, and they invest without having to care about whether their clients can pay the rent or send their kids to college. All of that is irrelevant. Their sole purpose is to earn money, not to mitigate risk.
    What does this all mean? It means the hedge fund industry is making a gigantic proportion of the profits. The top .1% is earning nearly half of the profits in the industry, through not just hedge funds, but other similar vehicles.
    The finance industry is a complete scam, designed to funnel money from the 99% investing public into the hands of the top .1%. Sure, some of you will make good money, but stastically, the rest of us will lose, and who is feeding off us? Hedge funds, and the .1%. You have better odds going to a casino and playing slots, the worst-paying game in the house, but still better than the stock market.
    Also, the government is in bed with the financial industry. Tax loopholes give hedge funds and other top players the ability to write off losses and not pay taxes on gains for years at a time. For income they derive from the hedge fund (profits), they pay only 15%, rather than the 35% income tax charged to most people earning 80k and above. Meanwhile, you have to pay taxes for not just your own income but also capital gains.
    The worst part by far is that the government “encourages” you to put your money into your 401k through ‘tax exemptions’, which basically puts your money with the lowest tier of the financial industry – pension funds, retail wealth managers, and retail asset managers. These guys have **** strategies like long-only or domestic equity (which means they only invest in American stocks), and have nowhere near the capability and reach of hedge funds. These guys are even more likely to lose your money than you are, and even worse is they will take a 2.35% cut while doing so. And you get penalized when you try to take your money out early. How ****** up is that.
    In other words, if you aren’t in the .1%, you have no access to the derivatives markets, you have no access to the special deals that hedge funds and other wealthy investors get, and you have no access to the resources, information, strategic services, tax exemptions, and capital that the top .1% is getting.
    If you have any questions about what some of the concepts above mean, ask and I will try my best to answer. I’m a first-year analyst on wall street, and based on what I see day in and day out, I support the OWS movement 100%.
    tl;dr: The finance industry funnels money from the masses to the ultra rich, through vehicles like hedge funds which dominate all of the financial markets.
     
  2. wdongli

    wdongli Well-Known Member

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    All in all the author said hedge funds and Wall Street are devils who deliberately work to make profit for themselves at the cost of public.

    Do you agree with the arguments raised by this author?

    1. If yes, could you stop putting the money into the market?
    2. if yes, could you stop the devils and how to stop them?
    3. if yes, do you want to help the devils or become devils?

    More questions you need to ask:

    1. why do you put the money into the market?
    2. why could you not do the same thing as the hedge funds and donate the money for poor or better you beat the hedge funds down?
    3. could you close the Wall Street and the corresponding financial systems to save the poor?
    4. do you think the author was bullshi* and twisted something he could not deal with?
    5. what solutions could you get to make the poor rich and the rich richer?
    6. what for if no solution? Self promotion for name or shed the tears in desperation!

    All in all the author seemed want to get a perfect life but have no ideas how to do! Education could make people feel good but useless. He should try to be an radical politician at his age: if he could not destroy the devils he should be destroyed.

    I do wonder why he still works in Financial section and believe he should resign to refuse the bad money into his pocket.
     
    Last edited by a moderator: 16th Apr, 2012