Financial markets

Descriptive engagement with reality of


Actually existing financialism. How promising businesses access funds to do what they need to do. How promising crime lords launder their dirty dollars.

High frequency trading

Does HFT do anything overall? If so, what? Should we resign ourselves to it and just try to make cash out of it, since we know that HFT markets ain’t going away.

For alternative finance ideas, see finance. Actual trading strategies, if I ever devise any, will be filed under hedging and portfolio theory.

Why did we get the bloated finance industry of today instead of the lean and efficient Wal-Mart? Finance has obviously benefited from the IT revolution and this has certainly lowered the cost of retail finance. Yet, even accounting for all the financial assets created in the US, the cost of intermediation appears to have increased. So why is the non-financial sector transferring so much income to the financial sector?

  • The HFT arms race

    But what if HFT consumes liquidity instead of increasing it? Theory suggests that if HFT consists of a bunch of algorithms trying increasingly hard to beat each other to the punch, then liquidity will go down, and the resources spent on HFT will just be a waste. Now, via Johannes Breckenfelder of Stockholm’s Institute for Financial Research, we have evidence to back up the theory.

“That last recession? That was practically fucking victory condition. We teeter on the brink of world financial ruin and a return to the days of trading fucking seashells for food, every fucking day. […] It’s a runaway process. The absolute best thing anyone can do is grab desperately at the throttle.

But they don’t. Because it’s a speeding death kaleidoscope made out of tits. ”It just dangles tits out everywhere. And tits will hypnotize a man. He’ll just grab at them and suck. Unless,” he reflected, “they like cocks. In which case just imagine a whirling thresher of cocks. Tasty ones. People just want a taste. And when they’ve had it, they want more, and bugger tending or directing the machine after that. They just crawl over the thing, trying to drain it of its juices”. […]

“Did you know […] that more than half of the top nought point one percent […] of the highest paid people in America are financial professionals? Tits. I’m telling you. Draining the brake fluid out of a spinning machine that’s going to shred the planet. I’m an economist, me”

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Financial stability

See financial stability.

Venture capital

A Tim O’Reilly interview

So many things that VCs have created are really financial instruments like those CDOs. They aren’t really thinking about whether this is a company that could survive on revenue from its customers. Deals are designed entirely around an exit. As long as you can get some sucker to take them, \[you’re good\]. So many acquisitions fail, for example, but the VCs are happy because— guess what?— they got their exit.

But now, because funds are raised so quickly, VCs have to show much more traction, which is where things like blitzscaling come in.

Just the way you’re describing it. Can’t you hear what’s wrong with that? It’s for the benefit of the VCs, the VCs have to show, not the entrepreneurs have to show.

Aren’t the LPs addicted to that crack? Don’t they want to see that quick financial traction?

Yeah, but you know that VC returns have actually lagged public markets for four decades now. It’s a little bit like the lottery. The only sure winners are the VCs because the VCs who don’t return their fund get their management fees every year.