Here is another fascinating passage from Lewis' book, GOING INFINITE. In this passage, chapter five, Lewis is telling his story through the eyes of Caroline Ellison. For those of you new to the subject: Ellison was Samuel Bankman-Fried's sort-of love interest, and at this point in our story she had joined his project to create a crypto oriented hedge fund. (This project evolved into the FTX exchange and an affiliated hedge fund, but we aren't there yet.) One more preliminary note: an "EA" is an "effective altruist," a member of a group of usually quite bright people committed to a very long-range sort of utilitarianism which produces some counter-intuitive results. We don't need to get further into it than that. Anyway, the passage: " In late March [2018] she started the job. The situation inside Alameda Research wasn't anything like Sam had led her to expect. He'd recruited twenty or so EAs, most of them in their twenties, all but o...
Posts
As I mentioned a few days ago, I have been looking forward to the receipt of Michael Lewis's latest book, on cryptocurrency and the downfall of Sam Bankman-Fried. This will be the first in a series of three posts that will discuss passages in the book that stand out for me. None of these posts will constitute a review of the book, nor will they add up to one, I now have it in my hot little hands. With some synchronicity, SBF took the stand in a courtroom on Thursday, Oct. 26, on his own behalf as a criminal defendant. This already tells you that the trial had not been going his way: defense counsel would have gone to a great deal of trouble to keep him OFF the stand were it not time for a desperate Hail Mary sort of play. But today's task is to quote a passage in the Lewis book about him that stands out. And here is one, from chapter three. Lewis gives an example of what is known in finance as "market making." Market making is not the same as "running an exchang...
Last week I said a few words about private equity and private debt. My interest was in the investment funds that go by those two names. My chief point was that there is a trend that consists of mergers between PE and PD at one extreme, mere "alliances" among dyads of a PD and a PE fund on the other extreme. Creative contracting can create a lot of way-stations between those two extremes, but I won't go into that today. What I'd like to do is to offer an answer to an obvious question: what does this matter? To those of you who aren't in the asset-management world, nor yet in the world of reporting thereon: should you care? Well,you might want to care IF you worry about efficiencies in either of the corresponding public markets. If those markets (stock exchanges, and the bond trading of government issuances or of the issuances of companies that have equity on stock exchanges) were as efficient as they could be there wouldn't be a pressing need for vigorous pri...
I generally ask myself at this time of year what were the biggest stories of the past twelve months in business/financial news. Of course, I choose the ones I do largely because they illustrate an important theme, and in the list below I'll spell out and italicize the theme. Yet the theme itself isn't the story. In terms of regional mix, with this line-up I've got two Asian stories (Feb., April), four European stories (January, June, October, December) and six North America (March, May, July, August, September, Nov.). A nice thematic point: I both begin and end with Russia. All that said, here is this year's list. January 2014: Russian oligarchs. The Supreme Court of Russia releases Platon Lebedev, formerly of NFO Menatep, and a man who had spent more than a decade in lock-up. Russia has two oligarch problems: the oligarchs have a stranglehold on key parts of the economy, and the govt., when it does try to break that stranglehold, is ham-fisted an...
Temasek, an investment company managing Singapore's surplus revenues, has bought a significant stake in a high-tech trading company: that is, 10% of Virtu. Here's what Reuters said about the deal on Sunday . Virtu's CEO is happy about this. "Temasek is an ideal partner for Virtu," etc. Why? Because Virtu is expanding "into new asset classes and geographies." But what comes to my mind is that Virtu is the kind of operation that serves as the missing 'bad guy' in Michael Lewis' book, Flash Boys. Lewis' book plays up the market distortions, the "rigging" of markets in his term, that can be accomplished through contemporary electronic/algorithmic wizardry. When the emphasis is on the speed for the wizardly machinations, this is called "high-frequency trading," though speed itself may not be quite as 'of the essence' as that term suggests. One feature of Lewis' book that many readers found odd was tha...
My erudite readers are surely aware by now that Michael Lewis has a new book out, Flash Boys: A Wall Street Revolt. It concerns high-frequency trading (HFT), especially as used as part of a process of scalping, or lawful front-running. Here's the amazon page . CNBC has on Lewis, and Brad Katsuyama, a man flatteringly profiled in his book, as well as one of the bad guys in the book's story, William O'Brien of BATS. They looked like they were about to start punching each other now and then. If you haven't seen it: here it is . Felix Salmon has reviewed the book for Slate, here. But Salmon was writing about the book before he wrote that piece, even (by his own admission) before he had finished it. Salmon, and many other people at that stage of the brouhaha, were reacting as much or more to the 60 Minutes roll-out of the book as to the book itself. For the informed reactions of Ginger Szala, a veteran financial markets reporter, go here . And for m...