'Twas just curious. 
No. I actually work for a Chicago firm that focuses on equities rather than futures. I’ve never even been down to the pits. Though, I do listen to an audio feed of the S&P pit sometimes when I’m bored.
As delicately as possible.
There is a huge amount of effort that goes into minimizing market impact by large traders. There are firms that specialize in finding liquidity through a variety of sources. As a random example - Jones Trading.They might utilize sophisticaed algorithms that react to the public markets and makes thousands of different 100 to 1000 share buys as opportunities present themselves. Dark pools were also created with the goal of providing a way to move large amounts of stock anonymously without moving the market. This is a pretty good explanation.
Does your firm, overall, beat the market? Do you personally? By a lot?
What do you think will happen to our ability to finance our deficits if we devalue or “print money?”
I assume you’re bullish on gold? Is this true?
Are you equally bullish on other commodities?
Your mid-term/ long-term view on residential real estate?
Who do you think inflation harms the most? Helps the most?
Do you short?
What industries would you be shorting now?
You’ve mentioned derivatives…what’s your take on the claim that misuse of derivatives and related financial instruments were largely responsible for the current downturn in world financial markets? I realize that the world recession has a large and complex set of causes, but what part do you think derivatives played?
Does your firm have any purpose beyond buying and selling to earn money for the capital holders?
The image I have right now is that a group of wealthy people have pooled their resources and hired you and your coworkers to make more money for them. Day trading on a large scale as it were.
I have no problem with this scenario, I just want to make sure I’ve got the right picture.
And on the day trading line, how long do you normally hold a stock? Do you have a targeted flip time when you’re trading?
And an open question to all the traders. How accessable is information for insider trading? Is it somthing you have to actively avoid? Or would you have to make an effort to be in violation?
It would be quite hard for me to come by legitimate insider info.
What is your opinion of investment bankers?
Yes. We were up in 2007/2008/2009 nicely. The environment where we usually lag the market is when it is up huge (20+% in a year). In that environment we usually lag a bit. But it’s more than made up for the fact that we haven’t had a down year (down quarters, certainly) since I have been here.
Yes, I am extremely bullish on gold. Extremely. Extremely.
I think the currency devaulation argument is good for all commodities - however, most other commodities have separate supply/demand issues that could impact their prices. For example, if we enter into another recession, the decline in demand for oil could put downward pressure on prices. Gold is unique that it has no real industrial applications and is really best analyzed as a currency that has a finite supply.
Mid term, residential real estate is plagued by massive supply (unsold homes, homes in forclosure, etc). Until that supply is absorbed, you won’t see significant price gains. Long term, I think housing prices should keep up with inflation, but not more. The increase in housing prices we all lived through in the last decade was a result of excess credit in the economy. It’s unlikely we will see action like that again.
This is an easy one - inflation helps debtors and owners of real assets but hurts savers. If you owe a ton of money at a low fixed rate, inflation is your friend. If you have cash sitting in a bank account, inflation is the enemy. If you own real assets (gold, land, etc) you are hedged in that your real asset should hold its value, regardless of inflation.
Yes, I short alot. I typically don’t make industry calls, but if I had to be short anything I would be short US treasuries.
?
Oof - this is a big question, probably outside the scope of this thread. Yes, derivatives played a part in the meltdown, but were not the cause. The cause of the crisis was excessive leverage (ie debt). This problem still exists, except now the risk has been transfered away from the private sector and it is now the balance sheet of sovereign nations.
Derivatives played a part in that unregulated derivatives (like those at AIG) effectively allowed institutions to increase their leverage without posting adequate capital to protect against their bets not working out.
As a simple summation, I would say derivatives exacerbated the problem, especially at certain firms (LEH, AIG) but the problem existed regardless.
No - as my boss told me when I first started working here, “We’re not here to save the whales.” The sole purpose of this firm is capital appreciation for the capital partners (of which I am one).
Your rough picture is correct - except for the term ‘day trading’. Some people do trade daily, but our actions include other activities such as risk arb, adr arb, special situations, commodity trading, futures, rates, etc. We mirror the proprietary trading desks at the large banks, but without any conflict of interests.
Personally I will hold stocks anywhere from 10 minutes to 6 months. It all depends on the situation and what I’m trying to achieve.
As far as insider trading, it’s not that common. Anytime I do get information I would consider potentially ‘insider’ I try to steer as far away from it as I can. There are plenty of ways to make money without risking my career.
I think investment bankers work harder than almost anyone else I know. (At least in the first 10-15 years) Seriously - as much grief as these guys get in the press, those guys work their absolute tails off and sacrifice friends/family for work. Yes the rewards are there, but the personal costs are very very high.
I know I would never be willing to make those sacrifices, regardless of the payoff.
An apparently common problem at hedge funds before the Great Recession was people employing so-called “quant” techniques created by people like this guy, but without really understanding how to properly use them.
Have you observed this problem?
We don’t use quant techniques so I’m not personally familiar with them outside of knowing when they blow up.
How long did it take for you to make partner? What proportion of the staff has equity in the firm? Also, are the founding partners involved in day-to-day strategy/trading decisions, or are they basically passive clients?
[quote=“The_Truculent_Gentleman, post:18, topic:528468”]
About 1/3 of the firm are people that started working here right out of college as junior/assistant traders./QUOTE]
What degree do the junior traders typically have?