The Truth About Traders
We are less than 100 days into the Obama administration and his press secretary has picked a fight with Rick Santelli over his remarks on CNBC. That debate is well on its way, but it would behoove everyone in America to understand the environment in which Santelli works.
The trading floor is a slice of Americana. Santelli descried it as a cross section of America, and it is. No matter which floor you walk on — the NYSE, CME, CBOT, or CBOE — you will see people of all skin colors, all economic classes, and from all walks of life. Democrats and Republicans. It’s a place where you can see a Harvard MBA rub elbows and fight for a trade with a person that barely graduated high school.
Traders are a very unique breed. They are an independent bunch, because most speculate with their own money. There are many misconceptions about traders. We are all very wealthy. We are all conservative Republicans. We are short-tempered aggressive people. We live wild lifestyles. Surely, some of these stereotypes have a grain of truth to them. You can find many stories about various antics that have happened with traders. Some actually are pretty funny. However, most traders are just like everyone else. They go to work, then go home and coach soccer and participate in their family life. They go to religious services, and they lead normal lives like most Americans.
Here is what is very different about traders and most Americans. Traders live in a very risky environment. They make decisions very quickly that will make or lose a lot of money. They have extremely high stressful jobs, and there is no guarantee that they will have their jobs tomorrow. Traders are pretty confident and humble all at the same time. Things happen on a trading floor in seconds, and those seconds mean the difference between success and failure. It’s really living life on the edge of a razor in the most competitive environment organized by mankind.
At a loss for words?
The issue is not whether traders are gamblers. We need a certain number of them for an effective society. We also need alot of other types of people. We need to find a way to cultivate what is decent for many types of people. Finding a way to stabilize people’s lives who also contribute to the society in other ways is important and not a “moral hazard.”
Maybe it is just on my computer but page 2 is unformatted and difficult to read. What I can make out I agree with.
Good article. It used to be that all of America appreciated the idea of “high risk, high reward”. Now, everyone wants the reward, but no one wants the risk. How is that possible you ask? By taking money out of the pockets of those who succeed at the high risk, high reward endeavor and “sharing the wealth”. Sorry, but that’s an unsustainable model.
Or, people imagine that things that are actually high risk, like buying a house you can’t afford on the speculation that it will go up in value, are low risk and then when the risk goes against them, they want the government to come in and rescue them. Again, unsustainable.
And before someone brings up the tired mantra of “Wall Street got their bailout, now it’s time for Main Street”, please look at the fine print. Wall Street handed over part-ownership of their companies to the government in return for capital. Main Street is just being given a handout. There is a significant difference, for anyone with half a brain.
As for trading losses, I’ve had my fair share in the past, as much or more than many of the people who lost money on their homes have lost. Did I ever try to get a bailout? No, I just wrote them off on my taxes like the law allows, tightened my belt and studied the markets even more than before to figure out how to beat them. That’s a sustainable model for a society. Get knocked down, pick yourself up, figure out where you went wrong, and go back out there and do your best.
Is this rebuttal to Sec. Gibbs accurate and effective?:
http://www.youtube.com/watch?v=fmKHUUkhkzM&eurl=http://moonbattery.com/
Hat tip to AlC and Van Helsing at moonbattery.com
It is nice to see that Santelli got some air-time for his point – which he is spot-on right about, btw.
Apparently, he got his wish – Obama was ‘listening’ – at least listening in the way that he ‘listens’ to Sean Hannity – in other words, allow no discontent or negative points of view without a response.
For instance, after Santelli’s ‘rant’, White House Press Secretary Robert Gibbs came out and said that Santelli doesn’t know what he’s talking about.
Why do Obama and his ‘team’ have such thin skin? The modus operandi of the Obama team is to try to belittle the messenger, rather than address the issues that were raised.
Here is another view that agrees with both Rick, Jeff and I:
http://www.usnews.com/blogs/mary-kate-cary/2009/02/23/rick-santelli-rant-on-unjust-democrat-bailouts-hit-the-nail-on-the-head.html
“We are all conservative Republicans.”…is this really true? There are an awful lot of high-profile people in the finance industry who are Democrats, many pretty far to the left…you sure some of your trader pals don’t think the same way?
David:
Jeff Carter was addressing the stereotypes, some true, others untrue, when he said:
>>There are many misconceptions about traders. We are all very wealthy. We are all conservative Republicans. We are short-tempered aggressive people. We live wild lifestyles.
Great article. You nailed who we are–I’d write more, but I got to get the boys to hockey practice and then meet my wife at church.
It is not only the “Traders” that represent the Freedom of America. I was a Manufacturers Representative, lived and died by my ability to sell, 100% Comission. Just my own Money and selling ability. Winner take all. No Money for finishing second on a project.
Every successful Representative I have ever met, is full of self confidence and hard working. Traveled 3-5 days every week for 35 years. Loved every minute of being my own Boss and selling High Tech Manufacturing Machinery.
Only in America. Rick Santelli and Jeff Carter speak for a lot of us “A” Type guys.
Here’s my gripe. Santelli is a trader I assume or oversees traders. First there is video of him claiming 50% of his traders were supporting the $800,000,000 dollar bank bailout. No rebellion for a Tea Party then. But when 1/10th as much help is offered to middle class Americans its time for a Tea-party?
And second didn’t traders or guys like Santelli trade MBD’s and such? Didn’t guys like him participate in the process of picking up these “losers” loans and repackaging them into something even more toxic and selling them off into our 401K’s? Ultimately creating the crash and conditions to which our politicians are responding with all these bailouts. Wall Streeters break the vas into a thousand pieces and because the government doesn’t know how to piece it back together its the governments fault and time for a rebellion?
3rd to make money one should provide something of value. I’m not convinced that timing markets to milliseconds and using complicated computer programs to turn our finance sector into a casino actually helps markets in the long run. In the old days you invested in companies for the long term and if the company did good you got return based on something of real value. In the old days bankers held their loans and made sure they were responsible. Derivatives, CDO’s and MBS’s traded over milliseconds seem to have short circuited the basic functions of markets and I’m fairly convinced that worth and value have lost all relation to one and other.
Just like some here may not care how or why some families are losing their homes I don’t care if a transaction tax puts you out of business if you truly are not creating wealth but are actually extracting wealth.
#14 Muirgeo – You make some very good points, especially the one where he may be for bailouts that favor him.
I have a different outlook. I’m a good little conservative. I’m against all bailouts, period. Let them fail. And don’t anyone give me the Lib line of how we’re all in this together. Bull. Let them fail. It’ll all sort itself out in short order, and we’ll be better off for it. In fact, we’ll see some well-deserved “claw-backs”.
3rd to make money one should provide something of value. I’m not convinced that timing markets to milliseconds and using complicated computer programs to turn our finance sector into a casino actually helps markets in the long run.
Well, I’m sure there are a lot of things that are true but your not convinced of them, so I don’t think I’ll be using that as a criterion for decided who is and isn’t providing value in the economy.
The value traders provide is a little something called “liquidity”. Quite valuable, in fact.
Madoff owned a trading company….guess what after appearing on millions of trading screens over the years, we come to find out, there is no proof madoff made any trades at all.
The market has become a cesspool of counterfeit shares being spent by broker dealers to hack prices lower. Just like the SEC failed to recognize Madoff as the threat to financial markets he was, they are continuing to allow Naked short selling and desking to be the operative mo of what wall street and its protectors do best.
Since 2003 the hedge funds have been short the market by using off shore counterfeiting operations, most of the gloom and dooom expressed by the media today, is purposed to allow the cabals traders to cover.
The media mouthpiece are functioning to churn investors out of their investments transferring all value to the scam that is…. today.
I am one of the people who make a living buying and selling futures everyday. I am also one of the people who despise ewhat the government has done the last six months, but not for the reasons you may think. I am fiscally conservative and socially liberal. I grew up in a single family home, the youngest of 5, on welfare. I found my way to an the CME after college, which I paid for. I was a very good trader. I made alot of money. I lost alot of money. I saw many many people smarter than me, wade into the pit and be gone in less than a month. Infinitely more fail than suceed in the trading realm, as I still trade, I may end up as well being one of the ones who fail. My problem with the bailouts is not that the rich are getting their ass pulled out of the fire. My problem is that If I would have done the same thing as an independant trader, lever myself 40 to 1 and fail, that I would have been tried and put away so fast. I cannot tolerate that the people who screwed up the system so badly are not being punitively punished. They are being rewarded with untold billions. Capitalism thrives on the failure of the biggest. If the biggest are not allowed to fail, the competition are never allowed a fair chance to take over market share. Capitalism in the financial sector is dead. It is socialism, which I fear will leech its way into my everyday life.
Please do not rip Santelli for speaking his mind. He is a market analyst and he never touted any of these bailouts. Mr Gibbs snide retort to Mr Santelli was at bset childish. Nearly 80% of AMericans agree with Mr Santelli. As do I. What happens if more people show up in Grant Park for the tea party than showed up for Mr. Obamas acceptance speech? Could happen. Whose speak of change would resonate deeper if this were the case? Whose speak of change would actually has illicited a response from the populous. I did not vote for Mr. Obama, I support him now as he is my President. I did not vote for Bush either, yet I supported him as he also was our President. Mr Santelli has IMO the same outlook.
Chl
Hi everyone,
I have been a member of the CME since 1986 and have been blessed with more good years than bad. I have both filled orders for 16 years and traded independently for 23 years. My main market is the sp 500 futures, and I have also seen more guys/girls try to become successful traders in the pit than probably any other pit. I feel that the market is completely oversold also, and that now, when things look doom and gloom, is a good time to buy some cheap stocks and mutual funds. As I said earlier, I’m impressed that Amazon has doubled since November.
Well said: Jeff.. Being a trader for the past 37 years I echo your thoughts..The fact that we are bailing out companies and people will weaken our backbone as a country..Our auto industry needs to go bankrupt before it gets better.In the past several years the Japanese automakers are building more plants in the U.S.A as American automakers are closing them.
Santelli has it RIGHT..Why are we helping those that bought a house they could not afford and bailing out the people who sold them the mortgages?We are not doing anything to better the lives of those that could afford to pay their mortgages but possibly Raise their taxes!
To complement Jefferey Carter’s well thought remarks on this issue I’ll paste bellow an RCP pick from TownHall:
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Obama’s Schadenfreude/By Heather Higgins/February 24, 2009
The seeming indifference of this Administration to the steady and precipitous decline of the market since President Obama’s election should surprise no one. One has only to look at the President’s past to gauge the prism through which he sees the present… and the future.
Many on Wall Street and Main Street voted for Obama hoping that he would be bipartisan, above politics, and, for many, rein in spending and deficits. They thought his left-wing associations and votes were purely the artifact of necessity and political ambition. When the credit and liquidity crunch hit, they thought Obama would be smart enough to fix it (which presumes, of course, that it can be “fixed”).
But this was a triumph of hope over observation. We have elected a president who has no real business or investment experience. His only notable for-profit venture was selling his book; as a law professor, community organizer, and legislator, he operated in redistributionist worlds where wealth, garnered from contributions or taxes, is received and redistributed. In those spheres there’s a seemingly bottomless well of funds, but unlike the for-profit world there can be a disjunction between your customers and your funding. At a non-profit, revenue comes from cajoling funders (who care about students or community residents, but who are not themselves the users of the non-profit’s services); in government, revenue is derived by forcing taxpayers – many of whom are not that legislator’s voters – to pay more.
In those worlds, wealth isn’t created; it’s seen as a fixed pie, and some slice is taken from those who have and given to those who haven’t.
The mentality inherent in “social justice” activism is also revealing. Created by radical leftist and union organizer Saul Alinsky, community organizing tends to eschew the hard work of helping individual lives with such boring bourgeois approaches as better education, development of job skills, encouragement of marriage, and the engagement of fathers in their children’s lives. Instead, social justice is about co-opting existing institutions and instilling collective grievance and victimhood. Practitioners of “social justice” encourage beliefs as that if the utility bills are too high it’s because “the system” is deliberately oppressive, or if there’s not more employment of members of the community it’s because employers are racist.
That’s the same mentality that doesn’t care “what some derivatives trader” on the Chicago Mercantile Exchange worries about – which was the response of the White House to CNBC’s Rick Santelli calling out the unfairness and moral hazard in the Administration’s mortgage plain. To the social justice mindset, this is not viewed as fellow American’s suffering, but with schadenfreude: traders are part of the system that is to be blamed, and if they suffer, it’s due and owing.
There’s another Alinsky principle that many of his adherents appreciate: issues and events are not so much important in and of themselves, but for the way they allow you to grow and strengthen your organization, broaden your membership, and leave you better positioned for the next fight.
That is exactly what the Democrat’s recent, rushed, massive, partisan, unread, and barely stimulating “stimulus” bill accomplished: they gained more money for their organization, expanded their dependent constituencies, and used the “crisis” to push through proposals that with daylight would have slunk back under the rocks from whence they came.
Continuing that crisis will allow them to do more of the same. It may be that President Obama is talking down any recovery and loving that word “crisis” to buy himself lowered expectations and time. But it may also be that the more people are told that markets (rather than congressional interference in mandating the making of bad loans) are to blame for the mortgage mess, and experience continued uncertainty, the better positioned those with activist agendas will be. As Alinsky wrote in Rules for Radicals, for revolutionary change to take place:
“There’s another reason for working inside the system… Any revolutionary change must be preceded by a passive, affirmative, non-challenging attitude toward change among the mass of our people. They must feel so frustrated, so defeated, so lost, so futureless in the prevailing system that they are willing to let go of the past and change the future. This acceptance is the reformation essential to any revolution.”
We don’t have a credit problem or a liquidity problem – those are only symptoms. We have a severe confidence problem, one which is being exacerbated into a crisis by every move Washington makes. Confidence will only be restored and the recession bottom when the market is allowed to value those bad debts which are unknowns, but the current powers that be on Wall Street and Washington, each have their own reasons for not going there. Those who thought they were electing a savior may soon realize that not only is President Obama no messiah for the American economy, but he wouldn’t want to be a savior even if he could be. It’s time to prepare for a long and ugly ride.”
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Heather Higgins is president and director of The Randolph Foundation in New York City and serves on the boards of the Independent Women’s Forum (as chairman) and The Philanthropy Roundtable (as vice chairman).
As a Democrat that recognizes the fallibility of free markets, I recognize that Jeff makes some excellent points. The markets he creates provide value to the economy and society, and they should be rigorously cherished and protected. His perspective is valuable and his points are well made. Traders are much closer to being pure econs that the rests of us flawed humans who do not always act in our best interests.
While what Jeff states about trading is likely right on target, the same is not always true in the broader society and the government has a role. As a business executive, I rely on the government to bring me a healthy and well-educated work force. They also need to enable commerce with powerful infrastructure. In those areas, government has a role. Much of this can be done through the idea of choice architecture proposed by Thaler. Bailing out banks is likely not where they should help our society and the moral hazards it is creating need to end.
Mr. Carter,
Though I’m an atheist, I’ll borrow the religionists language here and say: bless you.
You are just one of many unsung Atlases that keeps the economy thriving under circumstances that are difficult in the best of times. You should be honored for what you do, not made to bear more and more and suffer the insults of Federal parasites who neither know nor care about what you do and how valuable it is to all of us.
My sincere gratitude.
Respectfully,
Jeff Perren
well said! money’s we the taxpayers are being required to give to pay for the automakers mistakes is futile. why keep propping up these companies who have proven they can’t cut it. the taxpayers need to wake up to the closeness of socialism. once we cross that 50% mark it’ll be very tough to cross back over that line!
Jeff as you know I have spent most of my working life as a trader and working for my father who was a trader before that. This is what we have with the Banks,GM,and every other irresponsible company that is out there, I call it gotcha economics. The Bankers and loan officers got their fees and bonus and did not care who had to clean up the mess. They knew if it was a big enough problem someone would clean it up, unfortunately it is now are children who are the slaves. Your right no tag days for me, every time I have mad a bad or untimely trade, and it has been many times for very large money, I had to pay. Now I and my children must pay for very very irresponsible lending on the part of the banks, plain stupid Business practises by GM, and poor oversight by our government. America is a free country and I am proud to live in it, but we need to do better. YOUR ARTICLE WAS DEAD ON THANK YOU AND HOPE TO HEAR MUCH MORE FROM YOU!
I spoke with Rick Santelli this morning and thanked him for giving voice to a great many people, not just traders. Jeff echos those sentiments with his missive here. There are a lot of us who bought used cars and ate bag lunches and rented until we could afford to put money down on a house. We didn’t over-extend ourselves and lived within our means. Now we’re being asked to not only bailout home buyers, but a multitude of mis-managed corporations as well.
Not being as eloquent as Jeff or Rick, I will state things a little more bluntly regarding this bailout: You cannot hold up a market artificially. It must be allowed to flow freely up and down. The market forces will impose themselves on the ecomomy sooner or later, no matter what you do. The poorly run companies must be allowed to fail, and others will spring up to take their place. This is not being over-simplistic, it is simply capitalism.
I don’t generally comment on my own articles, but thank everyone for theirs. I received this link in my email today, and thought you would appreciate being made aware. Toward the end of the article, I mentioned a transaction tax. It would destroy the stock, option and futures industry in America.
Here is a link to the proposed tax: http://www.rallycongress.com/no2tradertax/1536/
Please write your elected representatives and tell them to vote against the tax.
BTW Mr. NotAnEconRobot, I have read Nudge and met Mr. Thayler. Choice Architecture is an appealing concept, although we would have to talk a much greater depth to understand exactly what you mean. Generally, free markets work. School vouchers and choice are a free market for education. If the US were bold enough to do that, and change immigration laws for talented highly skilled people, you would have a better trained and productive workforce. Thanks for your comment.