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The Nerds Have Won: Wall Street Edition

Get ready to report to the kind of people whose heads you used to stick in toilets.
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See page for author [Public domain], via Wikimedia Commons

See page for author [Public domain], via Wikimedia Commons

Alec Litowitz had the perfect pedigree for Wall Street: Not only did he have a math degree from MIT and a Chicago MBA, but he was a jock: the first-ever All-American squash player in MIT history, a veteran of Ironman and endurance mountain-biking competitions, chairman of the board of a charity that gives disabled people the chance to be jocks, too. But six years ago, the Magnetar Capital chief realized that the trading world wasn’t all about brawn and instinctive risk-taking. It was about crunching the numbers. And even an athletic sort with an MIT math pedigree like himself couldn’t crunch them as fast as the shy, scrawny, retiring types studying computer science with whom he once shared a campus.

Magnetar is pouring tens of millions of dollars annually into researching new techniques for investing. One-fifth of the firm’s 260-person staff now works in technology. A stand-alone Minneapolis office houses quantitative researchers who produce sometimes counterintuitive advice….

“Everybody in this industry is suddenly saying: ‘Couldn’t a robot do that?’” said Sean McGould, president of Lighthouse Investment Partners, which puts client money with Magnetar.

Worse, Magnetar's not alone. This is all very bad news for the captain of the Harvard football team, past, present and future. As trading floors wither and more and more trading is done by machines programmed by the sort of people for whom sports is mostly about putting together a fantasy team based on a quantitative model, the athletically-built and asthma-free types who used to run the place are feeling some new feelings: marginalization, disrespect, self-doubt. Just ask former Columbia wrestling capital Michael Savini, who recently gave up on equity sales.

If college athletes asked him for advice in pursuing a career on the trading floor, he said, his message would be a simple one.

Don’t.

“The business is changing,” he said. “It’s all going electronic.”

It’s not that all hope is lost, according to 1986 national college football champion and current Weeden & Co. CEO Lance Lonergan. Just most of it.

Today, Mr. Lonergan talks to college athletes regularly. He says some have relayed their fears of being unable to break into the finance industry without a math or science background. Others are concerned that it appears the hunt for jobs must begin even before they finish their freshman year.

He cautions them not to abandon Wall Street completely, and that there is still a place for them.

“The core attributes of athletes are well-suited for the trading floor,” said Mr. Lonergan.

Wall Street’s Endangered Species: The Ivy League Jock [WSJ]
This Old School Hedge Fund Is Going Quant [WSJ]

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Apavlo at the English language Wikipedia [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], via Wikimedia Commons

Wall Street Playing The Hunger Games: College Endowment Edition

May the odds be ever in your favor (to score those fees).

How Can Wall Street Feel Alive Again?

As some of you may recall, there was a time not too long ago when you could work on Wall Street and be compensated in a way that made you feel special. Appreciated. Loved. Eight, nine, ten-figures of love. Now, obviously, not so much. But that is not what's eating the industry's most fragile spirits of late. They are fine taking pay cuts. They could care less about the money. What they're not fine with is having the rush, the intensity, the adrenaline-pumping fear that comes with, say, putting on a trade in which maybe the firm will make $1 billion or maybe it'll lose $10 billion, WHO KNOWS, IT'S ALL RELATIVE, I CAN'T FEEL MY LEGS, THAT'S WHAT MAKES IT SO EXCITING taken away from them. Take Sean George. He used to spend his days destroying company property and now, thanks to financial regulation, has had to get his kicks elsewhere. Sean George kneeled in the Church of St. Paul the Apostle in Manhattan. He wasn’t praying. A gash below his right brow bled into his eye and down his nose before a knee to his groin sent him to the floor. George, 39, head of credit-derivatives trading at Jefferies, was making his Muay Thai debut at the church June 22 in a sport that allows kicking, elbowing and kneeing. His eye was swelling shut by the time he lost in a split decision. It was the happiest he’s been all year, he said. “Right now at work I’m making less risk decisions -- and I enjoy taking risks,” George, who headed investment-grade credit-default-swap trading at Deutsche Bank AG before he joined Jefferies last year, said in an interview. “If you’re in it for the game and the fight, the game’s over and the fight’s over.” Risk is what drew George and the colleagues he respects to Wall Street, he said. He could bring in millions of dollars in a single month at his peak, and trading was so intense that during one credit-default-swap deal he smashed a phone against his desk, sending part of it three rows away, “one of the records for the best break,” he said. Ethan Garber's lost that tingly feeling in his plums. “There’s no sexiness, there’s no fun, there’s no intellectual intrigue, either,” said Ethan Garber, who ran proprietary credit-arbitrage portfolios for Credit Suisse Group AG and Bear Stearns Cos. “A lot of my friends who actually lingered for the last four years are all now getting fired anyway,” said Garber, 45, currently CEO of IdleAir, a Knoxville, Tennessee-based firm that provides electricity at truck stops. “The air is taken out.” Robert McTamaney has been reduced to doing his best impression of a whiskey-swilling, cigar-chomping newspaper man from the 1940's, who we assume addressed Bloomberg's Max Abelson as "toots" here. “The socks are higher, the skirts are longer,” said McTamaney, who helped run Goldman Sachs’s equities- trading business in Asia. “It’s like styles: They change, and you’ve got to change with it or be left behind.” Former King Street Capital and Bank of America trader Sam Polk isn't gonna lie, the worst part of Wall Street 2.0 is not being able to feel like a god by dropping $10,000 for bottle service on Wednesday nights, and sometimes even Thursdays. “You could be a 20-something trader three years out of school, able to go to any restaurant or club or ballgame on any night that you wanted, and it was totally paid for,” he said. “It was a tremendous feeling of power.” Michael Meyer is dying a slow, painful death. “The light at the end of the tunnel is dim,” said Meyer, now co-head of sales and trading at New York investment bank Seaport Group. Clearly, it's not pretty. But here at Dealbreaker we're about offering solutions, not whining about problems. How can these guys and girls replicate the feelings they once got by taking on risk on the job, if, unlike Sean George, getting kicked in the balls is not their thing? Drinking the carton of milk in the break room that's been sitting out for two days, telling the boss's wife it looks like she's gained a couple pounds, having unprotected sex with a junkie, shouting "You go girl!" at yourself in spin class after being kindly told to "Shut the fuck up" or else, and leaving dirty dishes in the sink all seem like good jumping off points but we can do better. These people need our help. Bloodied Trader Pines For Risk As Wall Street Retreats [Bloomberg]

The Less-Colorful Eliot Spitzer Strikes Again

[caption id="attachment_99794" align="alignleft" width="260"] No jurisdiction can hold me.[/caption] Hedge fund manager Phil Goldstein once said that when Massachusetts Secretary of the Commonwealth Bill Galvin looks in the mirror in the morning, he sees Eliot Spitzer. Granted, he said this before certain aspects of Client Number Nine's private life hit the front pages, but the point was made. And while Spitzer moves from one failed media venture to another—undoubtedly paying very close attention to a certain South Carolina House race—Galvin still carries the torch and a copy of the Bay State's securities law. That law must be unusually broad, because he's used it to fine a German bank $17.5 million for naughtiness related to a CDO created with an Illinois-based hedge fund.

Druck.Mnuchin

Old Men Yell At Nerds To Get Off Their Lawn

Stan Druckenmiller and Steve Mncuhin wish quants would stop ruining everything with their algorithmic bullsh!t.