Share dealing/trading seminars

BillJones

Thrugelmir wrote: »

Easy when you're using other peoples money......;)

As to this point, you are of course right. This is why banks don't worry about who they recruit, and just pay traders minimum wage. After all, we can smply replace people with someone from the job centre if they leave.

It'd be wonderful if the job required numeracy, training, and a rare enough set of skills that we could aspire to decent earnings one day, but sadly, for anything this easy, we can never expect to take muc hhome.

gadgetmind

BillJones wrote: »

Every year for twenty years now.

Well done. No seriously, I mean it, as most traders very much don't manage this, hence the whole "casino banking" reputation and then need for government bailouts when the wheels fall off.

This is why the risk-taking side of banks need to be fully isolated from retail banking. This way, when it all goes pear shaped in future, the shareholders and bond holders can take the losses rather than the tax payer.

BillJones

gadgetmind wrote: »

This is why the risk-taking side of banks need to be fully isolated from retail banking. This way, when it all goes pear shaped in future, the shareholders and bond holders can take the losses rather than the tax payer.

I partially agree with this, but would point out that if an investment banking arm is well run, with good risk management, then it is a good fit alongside a retail bank, who have capital that they'd like to allocate somewhere with a higher return than their own core activities can generate.

In terms of "casino" banking, too, most traders are employed to keep risks low, not to take them on. You only enter into a position that carries risk if a customer pays you to do so, and then the trader's job is how to best mitigate that risk without paying away everything that they received for getting into it.

Looked at in this way, we are being paid to reduce risk, not to create it.

Edited to add, the trick, of course, is to keep as much of the spread as possible. Given that we may only deal one one hundredth of one percent from "fair" and that "fair" can move more than that in a few seconds, it's not a simple task to achieve.

The image of us choosing to buy and sell things because we expect them to go up (or down) is not really an accurate one.

gadgetmind

BillJones wrote: »

I partially agree with this, but would point out that if an investment banking arm is well run, with good risk management, then it is a good fit alongside a retail bank

Sadly, things haven't worked out that way in reality. Risk management proved to be lax and/or ineffective in many cases.

who have capital that they'd like to allocate somewhere with a higher return than their own core activities can generate.

Fine if it's their capital, they can risk that however they choose. Not fine if it's deposits from savings that people have specifically chosen to invest at low/zero risk.

Looked at in this way, we are being paid to reduce risk, not to create it.

Yet large amounts of risk have clearly been taken on, levels of risk that have destroyed many investment banks, and the people paid to specifically avoid this have kept the money.

The image of us choosing to buy and sell things because we expect them to go up (or down) is not really an accurate one.

I'd like to imagine a world in which people choose to use their capital to make long term investments in productive companies, but I guess the fundamental principles of capitalism have been somewhat eroded over recent decades.

BillJones

gadgetmind wrote: »

Yet large amounts of risk have clearly been taken on, levels of risk that have destroyed many investment banks, and the people paid to specifically avoid this have kept the money.

How so? Those who did their jobs badly lost them (I can't guarantee that every bad performer was let go, but the vast majority were), and likely lost their deferred bonuses.

You also seem to want to conflate poor calculations made by some of them with malfeasance. Some jobs are inherently risky. As I said above, traders are employed to try to juggle risk with profitability. It is not a clear decision as to how much of the former that you can hold to make the latter, but I can see very little evidence that anyone could or should have known that levels were wrong in 2006/7

I genuinely feel that your arguments can only be fuelled by a lack of information about how the business works, and what it is that we do. This idea that we want to take on risk that you seem to suggest to be the case, why do you think that?

It's like claiming that a racing driver wants to crash, when the fact is instead that they can't do their job well if they reduce the risk of a crash to zero. It's the same in banking; you know that risk can't be zero, but you try to walk the right side of the line. In 2008 it turned out that people got it wrong, and the economy took a bit of a wobble. It had only been doing as well as it had because of the benefits the banks had provided in the good years. Ignoring the benefits, and complaining when the people who gave you them took a small stumble makes little sense.

gadgetmind

BillJones wrote: »

How so? Those who did their jobs badly lost them (I can't guarantee that every bad performer was let go, but the vast majority were), and likely lost their deferred bonuses.

But kept all of their bonuses from the good times. Once you reward risky behaviour that pays off, but don't punish risky behaviour when it ends in disaster, you've created a moral hazard.

I can see very little evidence that anyone could or should have known that levels were wrong in 2006/7

I can see little evidence that they even cared nor that they learned anything from what transpired.

I genuinely feel that your arguments can only be fuelled by a lack of information about how the business works

I know how business works, you know, creating a real product that people need. As for investment banking, I do have to work with these guys as part of my M&A role, so can claim a few insights but no deep knowledge.

This idea that we want to take on risk that you seem to suggest to be the case, why do you think that?

Because those in investment banking are gambling with other people's money. It's like the racing driver racing a fly-by-wire drone.

In 2008 it turned out that people got it wrong, and the economy took a bit of a wobble. It had only been doing as well as it had because of the benefits the banks had provided in the good years.

What benefits would those be?

bigadaj

It's interesting to describe 2008 as a wobble, after we were a few hours from the complete meltdown of teh financial system.

Even if you work for a bank that hasn't benefitted from actual governemnt help there is the conscious underwriting of the whole banking system that has caused so many problems in terms of government debt and the wider economy.

It's not a particular go at the banking industry it's just that so many people in banking still fail to see how the consequences of the actions of some of their colleagues has led to such hardship for the many people in the wider economy.

The point about risk is interesting as that was the one obvious failure that came out with the gfc. The traders may have recognised this but the managers and senior managers within their banks didn't, and neither did the regulators. It's very difficult to say that things are too risky when that risk is leading to short term profits, and particularly when everyone is remunerated on those short term profits.

Bill, you may be much more talented than your peers, but you're still subject to counter party risk which again has been underwritten by governments, why should that be the case when a widget manufacturer whose customer goes bust has to suck up the default?