Quotes of the day

One reason the Berlin Wall fell was because it once seemed so likely to endure. And one reason China's Communist Party has endured is that it once seemed so certain to fail.--Jeffrey Wasserstrom

You need to be a little bit delusional to be an individual day-trader, paying substantial sums for information, technology, and trading spreads every day and yet somehow reckoning that by zooming in and out of highly-levered ETFs you can not so much beat as utterly obliterate broader market returns. All day-traders think they’re above-average; they have to, otherwise they wouldn’t have the hubris necessary to do it in the first place.--Felix Salmon

Notwithstanding what legions of indignant and self-righteous commentators contend, the incentive system currently in place operates exactly as most of them propose: a large portion of banker pay is deferred for years and is tightly tied to the overall health and success of the firm. Bankers are not incentivized to print huge risky trades and run away after they collect their bonus at the end of the year. In fact, they are more closely tied to the long-term health of the firm and its stock price than any other stakeholder. They just can't do anything about it. Unfortunately for them and for us, such a system does not seem to have prevented anything. Perhaps a solution could be structured which balances all of the competing pressures and strains that the modern investment bank encounters. It would be complicated, involve multiple variables, and require constant monitoring, adjustment, and correction to adapt to ever changing market conditions. It sounds like a fun project for Larry Summers and crew. Sadly, they never taught multivariate optimization techniques on the savannah when I was coming up in the business. I guess I'll just sit here, gnawing a wildebeest bone, until somebody tells me what to do.--Epicurean Dealmaker