Originally written by Jacek K. on October 16, 2009 7:49 PM The Wall Street Journal reports that the good times are rolling again: Major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year — a record high that shows compensation is rebounding despite regulatory scrutiny of Wall Street's pay culture.

Since the "top one-third" of the graduating class, who otherwise would have been "physics postgrads", are now into the roaring financials, we can't expect them to be easily satisfied when they can see that they are possibly still much poorer and can't even afford to own an Airbus 380 equipped with sauna on board. With that threshold in compensation where the exponential (almost J-shaped) reward kicks in only the more the fund performs above the benchmark, you can probably expect more of the V-shaped type of boom and bust as the incentives are all there.

How can you have a mushroom going up without reaching a critical mass? The physicists know that.

Originally written by Nanna Mercer on October 17, 2009 11:43 AM One of America’s wealthiest men was among six hedge fund managers and corporate executives arrested Friday in a hedge fund insider trading case

Frankly, I don't know how you can possibly be a profitable hedge fund manager and one of America’s wealthiest men without relying on inside information...

Originally written by Jacek K. on October 17, 2009 2:15 PM Originally written by Nanna Mercer on October 17, 2009 11:43 AM One of America’s wealthiest men was among six hedge fund managers and corporate executives arrested Friday in a hedge fund insider trading case Frankly, I don't know how you can possibly be a profitable hedge fund manager and one of America’s wealthiest men without relying on inside information...

I see! Would you say that 'profitable hedge fund manager' is an oxymoron?

Originally written by Nanna Mercer on October 17, 2009 2:48 PM Would you say that 'profitable hedge fund manager' is an oxymoron?

Not at all if you look beyond the meaning

'profitable hedge fund manager' = the manager of a profitable hedge fund (here, you are right, since that hedge fund will not be profitable for you as customer, it is an oxymoron  )

How about

'profitable hedge fund manager' = a profitable manager of a hedge fund (here, the hedge fund is just a cover for replenishing the management's coffers which is what this game is all about anyway so it cannot be called an oxymoron   ) 

Originally written by Nanna Mercer on October 17, 2009 11:43 AM So if you've made more than $20 million in charitable donations it's always okay to cheat and therefore a valid excuse for obtaining leniency in the courts?

No, the price of that is $200 million. From the relevant commentary at http://www.nytimes.com/2009/10/18/opinion/18rich.html?em:


 

Goldman is this century’s octopus — almost literally so. The most-quoted sentence in financial journalism this year, by Matt Taibbi of Rolling Stone, describes the company as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” ...

It seems to me that there is an unhealthy preoccupation with the number of zeros whenever something happens. Zeros are dying and zeros are being born almost continuously. Isn't it time to stop making a big deal about the tenuous association between a particular event and the number of zeros that evaporated coincidentally? The bad news is that a lot of zeros died, the good news is that there are plenty more available just like them.

So now, optimistically looking to the future:

Who Will Be the Next Carlos Slim?

First, obviously nothing can stop Goldman Sachs and JP Morgan. With unfettered access to the Federal Reserve and no effective controls on their ability to take risk, they are in the catbird seat. The weakness of other big banks is further icing on their cake. GS and JPM are symbols will loom large over the national and international economy for a long time to come, with the main threat (to them) coming from their rather too blatant market share in many products.

Second, the surviving big hedge funds will do very well (partial list). They can move fast, they have no regard for anything other than profit, and they will not be effectively regulated. Their access to credit runs through the biggest banks and this can be a double-edged sword--expect more instability in the future from hedge fund-bank dynamics (as Morgan Stanley found out last fall). http://www.tnr.com/blog/the-plank/who-will-be-the-next-carlos-slim

And that's the good news for today, folks. You just carry on.

Jacek

Originally written by Jacek K. on October 21, 2009 12:22 PM So now, optimistically looking to the future: First, obviously nothing can stop Goldman Sachs and JP Morgan. With unfettered access to the Federal Reserve and no effective controls on their ability to take risk, they are in the catbird seat.  And that's the good news for today, folks. You just carry on.

Thanks, and to help celebrate the carrying on just mosey on over to Post #187337 where the piper ...

Originally written by Jacek K. on October 20, 2009 3:31 PM “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

 

The Vampire Squid from Hell is Coming

From http://www.nytimes.com/2009/10/20/opinion/20herbert.html?em:

[snip] Call it déjà voodoo. I wrote a column that ran three days before Christmas in 2007 that focused on the deeply disturbing disconnect between Wall Streeters harvesting a record crop of bonuses — billions on top of billions — while working families were having a very hard time making ends meet.

We would later learn that December 2007 was the very month that the Great Recession began. I wrote in that column: “Even as the Wall Streeters are high-fiving and ordering up record shipments of Champagne and caviar, the American dream is on life support.”

So we had an orgy of bonuses just as the recession was taking hold and now another orgy (with taxpayers as the enablers) that is nothing short of an arrogantly pointed finger in the eye of everyone who suffered, and continues to suffer, in this downturn. ...

We cannot continue transferring the nation’s wealth to those at the apex of the economic pyramid — which is what we have been doing for the past three decades or so — while hoping that someday, maybe, the benefits of that transfer will trickle down in the form of steady employment and improved living standards for the many millions of families struggling to make it from day to day.

That money is never going to trickle down. It’s a fairy tale. We’re crazy to continue believing it.

Originally written by Jacek K. on October 21, 2009 5:52 PM From http://www.nytimes.com/2009/10/20/opinion/20herbert.html?em: We cannot continue transferring the nation’s wealth to those at the apex of the economic pyramid — which is what we have been doing for the past three decades or so —

No! You don't say, and who is going to gainsay you? Not those at the apex. Of course you can continue channeling the wealth to the wealthy - what else should we do we it. Give it to the poor, who will drink it up, or go to the race tracks, or whore around town or take drugs and buy expensive cars and flashy clothes, all because they don't have the intelligence to know any better? 

That's just inopportune and not the way to create more wealth. How on earth will the poor create any way for that money to trickle-up? It's a fairy-tale...

Nanna