Why Are 25 Hedge Fund Managers Worth 658,000 Teachers?

[Hannah Bell]

That is the question Les Leopold asks in this Huffington Post entry.
Each hedge fund manager was, according to Leopold, worth 26,320 beginning teachers:

"In 2009, the worst economic year for working people since the Great Depression, the top 25 hedge fund managers walked off with an average of $1 billion each. With the money those 25 people "earned," we could have hired 658,000 entry level teachers....

The wealthy will have placed an estimated $2 trillion into hedge funds by the end of this year...$6,500 for every man, woman and child in the U.S...This year rather than hiring hundreds of thousands of new teachers to teach our young, the future of this nation, schools will be laying off tens of thousands of teachers, increasing class sizes, dropping electives, eliminating support services...

But in time of major financial crisis for the entire nation, the super rich continue to get rich..."

And you and I paid for it.

"The $1 billion each those 25 hedge fund managers netted (for themselves) was impressive -- but doing it in the year 2009 was also slap in the face of struggling Americans. That's because hedge funds would have earned little or no money at all in 2009 had the government not bailed out the financial sector with trillions in loans, asset guarantees and other forms of financial assistance. It was, in effect, a generous gift from we the taxpayers. Much of that money was "earned" by betting that the government would not let the financial sector collapse. Smart bet."

http://educationpolicyblog.blogspot.com/2010/04/why-are-25-hedge-fund-managers-worth.html

[NYC_SKP]

1. No, hedge fund managers are worth far, far less than that many teachers.

They produce nothing, nothing of value.

:patriot:

[MrMickeysMom]

11. Abso (fucking) lutely, NYC_SKP

Not one thing. Just betting on failure, and that's sure nothing.

On the other hand, teachers exponentially matter. We could continue to hone in how good the benefits of education, but we keep fucking with it... kind of like the Treasury Dept does with letting banks behave the way they do and looking the other way when hedge fund managers make more money than countries do.

Indeed. What the fuck is this?

[midnight]

2. Good post.

[havocmom]

3. They aren't. People are just too lazy to call the economic system on this crap

[jotsy]

4. They are not.

Until more of us excommunicate ourselves from the church of monetary might, that's a truth not enough of us will see in time.

[paulsby]

5. extremely misleading, but typical article

the top 25 hedge funds always make a lot of money

by definition

that's why they are the top 25 hedge funds

see: selection bias

many (and i mean a LOT ) of hedge funds go broke each other.

managers lose all or a substantial part of their net worth

many hedge funds play in the futures and options markets. those markets are zero sum. (unlike the stock markets)

hedge funds managers place money AT RISK. some lose, some win.

it's not free money. as a trader myself, i KNOW that

and anybody could have made money the same way the hedgies did by (for example) buying some nice LEAPS on financial stuff

[Mind_your_head]

6. How do you sleep at night? Do you, or any of your trader 'pals' add any actual VALUE

to this place/space in time we all live?

hedge funds managers place money AT RISK. some lose, some win.

it's not free money. as a trader myself, i KNOW that

:rofl:

[paulsby]

13. we most definitely do

among other things, we add liquidity, which helps price discovery.

[Zynx]

20. There's diminishing returns to society on that.

Price discovery for a large cap stock is not materially aided by the volume increasing from 6,000,000 to 10,000,000 shares a day. Now, 10,000 versus 6,000,000, there is a big difference. However, average daily volume is substantially higher today than it was 10 years ago and I don't see the improvement in market efficiency.

[paulsby]

22. most of the hedgies i know

and when i am trading, trade in smaller cap stuff.

why? because it's easier to find an edge.

there are bots and major institutions in the large cap stuff. the book gets ground to mincemeat and you are NOT going to compete with the major market makers and win

edges are hard to find

in the smaller stuff, there is much less efficiency. the less efficient a market, the greater an edge you can find

by participating in these smaller issues, we smooth out their books, add liquidity, etc.

[Mind_your_head]

25. What is "price discovery"?

Please tell me what that means to YOU.

TIA,
M_Y_H

[change_notfinetuning]

7. But it is gambling, and the rest of us shouldn't ever have to bail out those who

choose to gamble, and lose their shirts. And if we are forced to back up the bets, we should have a say on where we place the chips. For me, it's on doctors, nurses, policemen, firemen, college tuition, medical researchers, mental health workers, necessities for the needy, job creation and training, etc. You know, things that are a bit more beneficial to society than a casino.

[paulsby]

14. the zero sum markets are gambling

although gambling WITH AN EDGE is a very good thing (i say as a very successful poker player)

i agree. if you lose your money doing so, nobody should bail you out

[Zynx]

21. Equity markets are only not zero sum because the underlying fundamentals allow for it.

It is not a function of the skill of traders. The underlying fundamentals support a steady rise in equity prices over time. Whether or not hedge fund managers exist is irrelevant to the long term appreciation of equities.

[paulsby]

24. that's entirely correct

regardless, i differentiate the zero sum markets from the ones that aren't for obvious reasons.

theoretically, it is possible on any given day for every single investor and trader in equities to lose money (theoretically)

whereas in a zero sum market like futures, the only possibility is that the EXACT same amount of money is won vs. the amount lost (discounting commissions of course)

[Canuckistanian]

9. The way you describe it

It sounds exactly like Roulette.

Nothing substantial is being created, nobody is being employed.

I see very few people in society befitting from this.

[amborin]

10. hedge funds charge ridiculously high fees, yet they can't beat index funds

[paulsby]

15. most can't

many do

many of the best have a minimum investment of 100k (at least)

and limit the max # of investors due to the fact that many investment/.trading strategies can only work if you stay (relatively) small and nimble

that's true for me

i have often found an edge trading small cap stocks that would not be available for a large trader, let alone somebody like buffett.

many peoople have made HUGE returns in index funds. others have lost their shirts.

more leverage, more risk, etc.

[appal_jack]

12. So why don't the top 25 teachers earn that much too?

The top 25 teachers in the nation are entrusted with educating the best and brightest minds of America's next generation. Yet, I would be surprised if their collective salaries topped $2 million.

The 'top' hedge fund managers do not take home the salaries the do because of some natural law or order of things. They take home such exorbitant amounts of cash because the past 50 years of American economics have privileged the FIRE/fake-economy (Finance, Insurance, and Real Estate) over any productive sector (including, especially, education).

It is raw power (backed by the state's military and police forces) and naked theft (covered by a mainstream media that fawns over unearned wealth) by the elite speculative capitalists that facilitates this imbalance. Nothing more.

-app

[paulsby]

18. because if you want to make big money, you don't become a cop, firefighter, or teacher

lots of "elite speculative capitalists" LOSE

that's my point

by only looking at the top 25, the impression is that "omg all these guys clean up"

the REALITY is that many go broke.

"sell mortimer! sell!"

[Zynx]

19. I strongly disagree with the idea that the more established managers put it all on the line.

They don't. That's pure fallacy.

[Zynx]

17. I can't name very many top flight hedge fund managers that put all of their money on the line.

They invest some in their own funds, sure, but certainly not all. That is bull crap.

[Hippo_Tron]

8. Because capitalism undervalues certain services that benefit society, education among them

[demodonkey]

16. Damn hedge fund managers couldn't even read their damn spreadsheets if it weren't for teachers...

...but who cares. These parasites will continue to get what they get and teachers will continue to get screwed.

[taught_me_patience]

23. Supply and Demand

Top hedge fund managers are extremely rare and generate hundreds of billions in profits for their clients. Teachers... not so much.