Reverse commuters

For some reason, I am intrigued by this NY Times article about hedge fund employees who "reverse commute":

The center of power in finance has shifted in recent years, and in one sense that shift is geographical. Some of the most powerful traders in the market can be found miles away from Wall Street, in Greenwich, Stamford, and Westport, Conn.

“If you look up and down the train line in Connecticut you will see all the hedge funds concentrated right along the line,” said Thomas Torelli, a corporate real estate agent in Greenwich.

Those funds are there because their founders and top managers live nearby. But thousands of their employees do not and as result do what to the rest of Wall Street is a reverse commute.

(1) As usual, bosses get to do what's convenient for them and not what's convenient for their employees.

(2) Manhattan is such a great place that people will put up with a long reverse commute in order to live here.

(3) The hardest part of running a hedge fund is getting people to invest. After that it's easy money. Do hedge fund managers actually add any value to the economy?

Comments

[mvpy]

"Do hedge fund managers actually add any value to the economy?"

It can be argued that they drive market prices to their fundamental values (eg if they think the dollar is overvalued, theyll short it etc), which makes market signals clearer.

However, Long Term Capital Management infamously nearly brought down the economy till the FED stepped in. Not quite "adding value", I guess.

[Peter]

Reverse commuting from Manhattan to Greenwich/Stamford is in some ways easier than the far more common practice of commuting into the city. Metro North runs enough trains to allow for reasonable scheduling of one's work hours, the trains are less crowded than those travelling in peak directions, and best of all the fares are significantly lower.

[beowulf]

Hedge funds, now that's a great racket.

I wish the Feds required them to publish performance numbers, they can't all be above average. I'm sure some (most?) of the investors would just be better off putting their cash in an index fund (and Fidelity won't take 20% of the profits off the top).

My favorite are the "fund of funds". You don't actually have to pick any stocks! You spend your time selecting other funds to put your clients' money in-- and of course you're well compensated for their efforts. Good way for someone with high net worth connections but no quantitive skills to cash in.

Japan and China put their money into manufacturing and infrastructure and we put ours into real estate and finance. A securities transaction tax is not the worst idea in the world. Even one low enough not to diminish market liquidity (say a fraction of 1%) would raises tens of billions of dollars.

[SFG]

"A securities transaction tax is not the worst idea in the world. Even one low enough not to diminish market liquidity (say a fraction of 1%) would raises tens of billions of dollars."

And I wonder what the financiers with their cash going to BOTH PARTIES (unlike entertainment or oil) would say... Which doesn't make it a terrible idea.

You know, I've read somewhere that the process of converting the economy from manufacturing to financial services-'financialization'- is a harbinger of the end of the empire doing it. Can anyone give me the reference for this?

[michael vassar]

I would say that it depends on the hedge strategy. Funds that move prices towards fundamentals add value. Certainly Buffett and Milken created massive economic value. OTOH, "market neutral" funds like LTCM are basically trying to pick up money lying on the ground. Even if they are successful, a-la leading Ct fund Bridgewater, they are successful in a zero sum game. Their investors get gains that would have gone to other investors but investment isn't rationalized.

[beowulf]

SFG,

Check out Kevin Phillips' Wealth And Democracy, before opening his customary can of whoop ass on the Bush clan, he traces the rise and decline of previous empires--- Spanish, Dutch and British in particular. A common denominator is an empire in decline sees its wealth shift from manufacturing to finance-- often by bankrolling the expansion of its successor great empire.

In each declining empire Phillips studied, there were Cassandras who saw what was coming, correctly diagnosing both the problem and proposing the right solution, and were ignored.

[jult52]

Beowulf: "A common denominator is an empire in decline sees its wealth shift from manufacturing to finance-- often by bankrolling the expansion of its successor great empire."

I call b******t. Spain, the Netherlands and the UK have had radically different economic histories. I think it's debatable whether the Netherlands have ever experienced a "decline" either. If this comes straight from Phillips, it's yet another example of his poorly-understood marshalling of facts to support his axe grinding.

[beowulf]

Re: the Netherlands, there's a reason the city isn't still called New Amsterdam. Phillips seems to make a pretty solid case, check out the book and decide for yourself.