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slatestarcodex's profile
Scott Alexander
Scott Alexander
Scott Alexander
@slatestarcodex

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Scott Alexander

@slatestarcodex

I have a place where I say complicated things about philosophy and science. That place is my blog. This is where I make terrible puns.

slatestarcodex.com
Joined June 2013

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    1. Scott Alexander‏ @slatestarcodex 12 May 2017
      Replying to @mattyglesias @binarybits

      I don't think I said anything bad about Wall Street except that when they screw up it causes recessions.

      1 reply 1 retweet 3 likes
    2. Scott Alexander‏ @slatestarcodex 12 May 2017
      Replying to @slatestarcodex @mattyglesias @binarybits

      I'm not an expert in econ but I'm not sure to what degree Wall Street creates values. The existence of some kind of loan-giving...

      1 reply 0 retweets 4 likes
    3. Scott Alexander‏ @slatestarcodex 12 May 2017
      Replying to @slatestarcodex @mattyglesias @binarybits

      ...institution seems good, but I don't know how much hedge funds and weird derivatives add to that in a non-zero-sum way.

      1 reply 0 retweets 7 likes
    4. Scott Alexander‏ @slatestarcodex 12 May 2017
      Replying to @slatestarcodex @mattyglesias @binarybits

      And I mean "don't know" literally - if some smart economist wants to tell me it's a lot, I'll consider believing them.

      1 reply 0 retweets 10 likes
    5. Peter Favaloro‏ @PeterFavaloro 12 May 2017
      Replying to @slatestarcodex @mattyglesias @binarybits

      So the standard defense of hedge funds etc. involves a discussion of price signals as conveying useful info across parts of the economy. 1/

      1 reply 0 retweets 1 like
    6. Peter Favaloro‏ @PeterFavaloro 12 May 2017
      Replying to @PeterFavaloro @slatestarcodex and

      For example, consider a fund trading oil derivatives. Say they notice something that's going to cause Brazil to consume more oil next year

      1 reply 0 retweets 0 likes
    7. Peter Favaloro‏ @PeterFavaloro 12 May 2017
      Replying to @PeterFavaloro @slatestarcodex and

      The firm bids up oil price futures, causing oil companies to invest more in production and oil consumers to plan to reduce consumption. 3/

      2 replies 0 retweets 1 like
    8. Peter Favaloro‏ @PeterFavaloro 12 May 2017
      Replying to @PeterFavaloro @slatestarcodex and

      That seems kinda useful. Theorists will tell you same applies to derivatives on currencies, interest rates, mortgage risk. At some point: 🤔

      1 reply 0 retweets 1 like
    9. Scott Alexander‏ @slatestarcodex 12 May 2017
      Replying to @PeterFavaloro @mattyglesias @binarybits

      I agree that seems potentially useful, but is there any reason to think the right amount of resources are being allocated there?

      1 reply 0 retweets 1 like
      Scott Alexander‏ @slatestarcodex 12 May 2017
      Replying to @slatestarcodex @PeterFavaloro and

      EG I've heard hedge funds don't outperform the market even though the people who run them make lots of money.

      2:59 PM - 12 May 2017
      • 3 Likes
      • Easton Smith Merry Kralizec Suprabhat Mondal
      3 replies 0 retweets 3 likes
        1. New conversation
        2. Scott Alexander‏ @slatestarcodex 12 May 2017
          Replying to @slatestarcodex @PeterFavaloro and

          Also heard there are weird arbitrage opportunities via eg neutrino-based signals (see http://www.nature.com/news/physics-in-finance-trading-at-the-speed-of-light-1.16872 … ) You could get ...

          1 reply 0 retweets 1 like
        3. Scott Alexander‏ @slatestarcodex 12 May 2017
          Replying to @slatestarcodex @PeterFavaloro and

          ...really rich off of this kind of thing, but it's unclear how doing that creates value. Is this the exception, or the rule?

          1 reply 0 retweets 0 likes
        4. Peter Favaloro‏ @PeterFavaloro 12 May 2017
          Replying to @slatestarcodex @mattyglesias @binarybits

          Yep that's one critique of the price-signals-create-value theory: it's hard to say where the economic rents end and the social value begins

          1 reply 0 retweets 3 likes
        5. Peter Favaloro‏ @PeterFavaloro 12 May 2017
          Replying to @PeterFavaloro @slatestarcodex and

          Sure it's good that demand in NYC affects supply in Chicago, but is it really way better for that to happen a few ms faster?

          2 replies 0 retweets 1 like
        6. Peter Favaloro‏ @PeterFavaloro 12 May 2017
          Replying to @PeterFavaloro @slatestarcodex and

          I'd note that there's all sorts of theory on this sub-question that I'm not well versed in

          0 replies 0 retweets 1 like
        7. End of conversation
        1. New conversation
        2. Salim Furth‏ @salimfurth 12 May 2017
          Replying to @slatestarcodex @PeterFavaloro and

          This is sort of a silly argument. @slatestarcodex's point that Wall St can do a lot of damage when it messes up doesn't mean "Wall St Bad".

          1 reply 0 retweets 0 likes
        3. Peter Favaloro‏ @PeterFavaloro 12 May 2017
          Replying to @salimfurth @slatestarcodex and

          I don't think it's an argument; we're just discussing what social value finance does and doesn't create. :-)

          1 reply 0 retweets 1 like
        4. Peter Favaloro‏ @PeterFavaloro 12 May 2017
          Replying to @PeterFavaloro @salimfurth and

          Peter Favaloro Retweeted Peter Favaloro

          See also mis-threaded tweets:https://twitter.com/PeterFavaloro/status/863118867169550336 …

          Peter Favaloro added,

          Peter Favaloro @PeterFavaloro
          Replying to @PeterFavaloro @slatestarcodex and 2 others
          It's not that there's zero social value, it's that -- as you say -- when we screw up the results are really bad. 5/7
          0 replies 0 retweets 0 likes
        5. End of conversation
        1. New conversation
        2. Jake Baker‏ @bakerjake 12 May 2017
          Replying to @slatestarcodex @PeterFavaloro and

          Two ways to make money on a hedge fund as the manager -- raise enough money to charge a ton of management fees or 1/

          1 reply 0 retweets 0 likes
        3. Jake Baker‏ @bakerjake 12 May 2017
          Replying to @bakerjake @slatestarcodex and

          In any given year outperform in a way that triggers a share of success fees or carry (often 20% of profits above a threshold) 2/

          1 reply 0 retweets 0 likes
        4. Jake Baker‏ @bakerjake 12 May 2017
          Replying to @bakerjake @slatestarcodex and

          Hedge funds as a category may not typically outperform but individual funds can make very large profits in any given year 3/

          1 reply 0 retweets 0 likes
        5. Jake Baker‏ @bakerjake 12 May 2017
          Replying to @bakerjake @slatestarcodex and

          Think for example the people featured in the Big Short - they had an investment that made a ton of money on one particular trade 4/

          1 reply 0 retweets 0 likes
        6. Jake Baker‏ @bakerjake 12 May 2017
          Replying to @bakerjake @slatestarcodex and

          But that has no basis or implication for future success. Often the manager can then raise a ton of money and charge fees on it 5/

          1 reply 0 retweets 0 likes
        7. Jake Baker‏ @bakerjake 12 May 2017
          Replying to @bakerjake @slatestarcodex and

          See for example @matt_levine writing recently about John Paulson 6/pic.twitter.com/AZuOYYt5qe

          1 reply 0 retweets 0 likes
        8. Jake Baker‏ @bakerjake 12 May 2017
          Replying to @bakerjake @slatestarcodex and

          The broader point is the most successful hedge fund managers usuallyhave some big success that allowed them to raise a ton of money /end

          0 replies 0 retweets 0 likes
        9. End of conversation

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