I suppose in like 1985 there were people who worked on Wall Street and un-self-consciously ate cheeseburgers for breakfast, got shoeshines at their desks, went to strip clubs every night, and slammed down their phones hard enough to break them, but my assumption is that in 2013 any remaining “stereotypical Wall Street behavior” is mediated through popular culture. Some people go into finance with the goal of having a memoir that reads exactly like Liar’s Poker,1 and no one wears contrast-collar shirts because they look good. You wear them – if you do (do you?) – because you saw them in that movie.
Former Diamondback Capital analyst and insider trader Jesse Tortora actually wrote this:
In 2009, Tortora e-mailed a group that included Abbasi and Adondakis: “Rule number one about email list, there is no email list, fight club reference. Rule number two, only data points can be sent, no sarcastic comments. Enjoy. Your performance will now go up by 100 percent in 09 and your boss will love you. Game theory, look it up.”
Look it up, yo. That’s also from Bryan Burrough and Bethany McLean’s amazing Vanity Fair article on the endless pursuit of Steve Cohen, and while the fact that Tortora and his crew of cheeseballs called themselves “Fight Club” has been reported before, the fact that Tortora had to remind them of it BY SAYING “FIGHT CLUB REFERENCE” AFTER HIS FIGHT CLUB REFERENCES is new to me and makes me ashamed to be a human.
Why did these tools insider trade? Read more »
“The only way to finance a big European-style state is to have it paid for by massive taxation of everyone, mostly the middle class. Right now, we are avoiding honest debate on this fact…The first truth is that the current tax rates cannot support the promises made to middle-class Americans. The most unaffordable items in fiscal projections are Social Security for everyone and government-sponsored health care for the middle class. You cannot preserve these even with Draconian slashing of military, infrastructure, welfare, education, and other expenditures. The second truth is that you cannot pay for the Life of Julia, or any vision of a cradle-to-grave welfare state, without massive and increasingly regressive middle-class taxes. The poor don’t have the money to pay for a European-style welfare state, and the rich, rich as they are, don’t have anywhere near enough. Not only that, it’s easy to tax middle-class assets and transactions — things like payrolls, sales, and real estate — but soaking the rich means taxing investments. Investments are complicated and can be restructured to minimize taxes. Also, investments are the lifeblood of economic growth. Raising significantly more taxes from the rich also requires higher marginal tax rates — and their rates are already quite high. High marginal rates distort the economy and yield less revenue than anticipated because they increase the rewards for legal and illegal tax avoidance…to achieve anything like the European-style entitlement state they advocate, we need to tax everyone a lot more, not just the 1 percent. Despite all the drum circles protesting the inequitable distribution of resources, the wealthy just don’t have enough. The middle class and even the poor must step up to carry more of the burden if this is our desired endgame.” [The American via Heidi Moore, related]
Do you want to invest like Warren Buffett? Sure you do. You know who will tell you how? Strangely, some guys at AQR:*
[W]e create a portfolio that tracks Buffett’s market exposure and active stock-selection themes, leveraged to the same active risk as Berkshire. We find that this systematic Buffett-style portfolio performs comparably to Berkshire Hathaway.
They acknowledge that Robo-Buffett doesn’t incur transaction costs that flesh-Buffett does (because R.-B. is as of yet just a simulation) but, that aside, “comparably” is an understatement:
Whee! Go Robo-Buffett! Who, intriguingly, looks a lot like … AQR: Read more »
Something you may or may not know about Cliff Asness is that by day, he is a hedge fund manager but by night he is the second coming of his hero, Captain America. Like the Captain, the AQR founder believes his duty is to defend America, only instead of fighting Axis Powers, Asness’s enemies are liberal Commie Socialists hell-bent on destroying this country. Because his shield has been in the shop for repairs for the past couple years, Cliff has been forced to use other weapons to pummel his foes, namely writing amazingly witty1 emails to his friends and colleagues about how much Obama et al suck. Most recently, Captain Asness circulated “Some Useful Definitions to Understand Our Modern Progressive World,” a little glossary of unalphabetized terms he put together sure to cut his adversaries deeply. (The Captain also helpfully pointed out in a footnote that many of the definitions were “written sarcastically as a faux left-winger, [while] some [are] just conservative/libertarian interpretations of what the left really means,” in case that was lost on his audience.) They include: Read more »
Earlier today, Politico ran a story titled “Can Chuck Schumer win back Wall St. for Democrats?” Apparently the New York Senator recently “embarked on a fence-mending campaign with senior Wall Street executives, many of whom have grown furious with the Democratic party,” in a charm offensive that has included “holding private dinners [including one put on by Pershing Square manager Bill Ackman], organizing high-end fundraisers for Democratic candidates and quietly pressing for super PAC donations.” According to Politico, “the outreach appears to be working: Hedge fund and private-equity executives have held six different fundraisers for Democratic challengers and senators at Schumer’s request, sources say.” Some financial services employees, however, are not so easy. Take Cliff Asness for example. The AQR manager happened to read the piece and here’s what he had to say about it: Read more »
Robert C. Jones is also a devoted practitioner of transcendental meditation. Now that he has his own firm, System Two Advisors L.P, he’ll promote “TM” among his employees, and fellow quants. “‘This would be good for you,’ he told me. He knows I’m kind of tightly wound,” says Mr. Asness, who’s known for tantrums involving smashed computer screens, and who says he would consider meditation if it could be done competitively, like investing. [WSJ, related]
There are those who think that Warren Buffett’s days of being an awesome value investor are behind him. Those people are crowing a little today after his recent darling Bank of America crossed $5 in the wrong direction, which I guess is a big deal. Here, however, is probably a thing not to think about that:
Yes, Bank of America’s stock swoon is dragging down America’s wisest investor, Warren Buffett, who now is about $1.5 billion underwater on his BofA common-stock warrants.
Disagree! I happen to have a model for that right here (earlier/caveats), and I have him very roughly breaking even (you’ll care about H24, which shows him up $52mm on his $5bn investment). This uses a 45% vol (vs. 62% mid on Jan-14 $7 calls, 77%ish for their A warrants struck north of $13, 58% 1-year realized) and 8.75% discount rate on the pref (around where I eyeball the Is and Js); you can dispute those assumptions and get a different smallish positive or negative number* but the important point is: Warren Buffett didn’t lose $1.5bn on his $5bn investment. If you’d invested $5bn in BAC common stock at around $7, when Buffett did, you’d have lost $1.5bn in round numbers. But you’re not Warren Buffett. (He is!)
Some people think that this is pretty crap – along the lines of “I’d be a great investor too if I could just get every financial firm to give me a sweetheart deal for lending them my Cherry Coke-encrusted halo” – but, of course, you can. A share of BRK/B is, like, 74 bucks. All that warranty goodness accrues to Berkshire Hathaway, not (just) Buffett.
Now, if there’s one investing strategy that I understand even less than “give my money to Bank of America to do what they will with it, what could possibly go wrong,” it’s “momentum investing,” where you buy stocks that have been going up because past results are a guarantee of future performance.** So I found this Fortune article about Cliff Asness’s new momentum-based retail mutual funds utterly baffling, and not only because a close reading suggests that these new funds were launched in 2009. Read more »
He’s got 100-large for whoever delivers AQR the right stuff. Read more »
Real superheroes deliver real alpha. And real alpha doesn’t come cheap:
Read more »
So you’re Cliff Asness, and you’re in Washington for dinner with a couple of buddies, one of whom happens to be Republican congressman Paul Ryan. Just you, some bros, a nice meal, a little chat about monetary policy and the debt ceiling negotiations.
And you’re feeling pretty good, maybe because you just saw the Atlas Shrugged movie for the fifth time and bought the special John Galt action figure, so you splurge on a couple of bottles of the best wine you can get your hands on. Unfortunately you’re in D.C., so you’re stuck with the Jayer-Gilles 2004 Échezeaux, not a slouch exactly but kind of unsubtle and maybe a bit too young to drink. (Burghound: 89-92, drink 2012+, “Strongly reduced, however the big, rich, generous and powerful full-bodied flavors are deep, well-muscled and extremely long, all wrapped in an impeccably well-balanced finish. This definitely has the best material of any wine in the range and if it can add more complexity over time, it could surprise to the upside as it is definitely impressive.”)
So NBD right? You’d think so. But then some possibly drunk lady, who turns out to be Rutgers business professor Susan Feinberg (she teaches a course called “Love and Money”), starts snooping on your table. She sees the label and consults the wine list, where she finds out that it runs $350 a bottle. And then she breaks out her Ph.D.-level math skills:
Read more »
I will tell you the stimulus was wasteful and politicized, and the American people, not being idiots, know they will have to pay for it eventually…I will also tell you Dodd-Frank, with its enshrining of too big to fail and its large regulatory costs, is an albatross. I will add that ObamaCare’s gigantic new entitlement has hurt. I will throw in that massive additional regulatory costs being foisted upon business is an extra drain on the economy. I would definitely say that the disregard for law during the auto-company “bankruptcies” has long-lasting negative effects. I’d even throw in that the president’s demonization of business has been harmful. Finally, I’d say the expected tax increases, even if only on the “super rich”—defined as anyone still gainfully employed—weigh upon us. [WSJ]