The most fascinating blog on the planet is Zero Hedge. It is the equivalent of a conversation about low level source code but in the world of capital markets. It is the closest to the operational minds of the traders and financial types that work The City, Wall Street, etc. that I have ever been. I thought I was getting close with Tom Keene, but baby this stuff is dynamite.
I can't parse half of it, and the volume is substantial. Fifty odd posts a day from a cat named Tyler Durden. Hmm, that name sounds familiar. You can catch the flavor of the complications, though.
When I got into computing, it was never so much about the science of it. But when I finally figured out the kind of work I expected to do - for Executive Information Systems, as it was called in the 80s, I reckoned that I was working the most sophisticated financial software anywhere except for Wall Street. What I didn't realize was how much more complex and sophisticated the financial software is for what traders and brokers and banks parse than goes on in the realm we call Enterprise Computing. It is a source of constant embarrassment for me that I'm not working with those big dogs, but I'm coming around.
There is, somewhere I intend to locate, some management package for software that tracks the life of a hedge fund. Something that allows you to create an instrument, split it into tranches, track buys and sells in and out, tracks real time mark to market (or mark to fiction) valuations and all that. That's something I want running on my Mac.
I understand that high frequency trading is one of the many corruptions of capital markets that churn money out of transaction fees and bleed investors like a swarm of vampiric gnats. But the systems that do them are not evil, the designers of such systems that make their operation integral to the profit of banks are the bloodsuckers. The levers of the real economy are not so rapidly switched, but the problem here is that systems have created vaporous value - a bps here a bps there adds up to the only kind of money these traders know how to make. That's not banking. That's not managing risk for the purpose of real business investment, that's betting on strikes and balls with more money than the gate for the baseball game.
I'm really fascinated by how long it will be before the slanderous yet complicit oafs in the Obama administration knock heads with the opportunistic snakes on Wall Street to bloody the face of capitalism itself, which is obviously not what's being practiced at either end of the pitch. How many real industries are going to tank before we can find some bankers we can trust? Right now, nobody seems to know, although we all need to care. This is the most important question in the world.
Today's Zero Hedge reveals a memorandum of understanding between a private firm and the government of Greece. Apparently, Greece turned down a low interest loan (LIBOR + 125bps) in February because it insisted on having no hedges against it. You know, the kind of stuff our Senate wants to make into law - that nobody wins if somebody else fails. The Senate wants to outlaw the zero sum game for the entire US because Obama's got a grudge (that he publicly disclaims) against people who make money on Wall Street in ways he can't immediately fathom and bless. Bottom line, Greece lost out on an opportunity to get the money it needed without the austerity measures imposed by the IMF because it couldn't stomach the idea that people might bet against their ability to repay. Now when the people of Greece find out, they're going to freak. More blood in the streets, with any luck, will bring this sort of question to the next level which is what you see when people who are owed prepare themselves to whack people who default, and people who owe have decided never to pay and start saying words like 'over my dead body'.
Rights are the privilege of the strong. Liquidity is the privilege of the creditworthy. But there are times when rights are no longer defended and liquidity is simply withdrawn. These are worlds without honor and places honorable men generally avoid. The dearth of honor is spreading darkly in 2010. Pray for a movement in the light. That movement requires an honorable hedge. Otherwise, by definition, there is no exit, no quarter given. Dog eat dog.