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Comment by eries | Hacker News Reader

I get that you're just being snarky here, but I've often wondered about comments like this. When did being virtuous become an insult? I actually think the ancient view of virtue is due for a bit of a comeback. Increasingly, investors and employees both want to know which companies are actually purpose- and mission-driven and which ones are not. I don't see the harm in giving them a way to signal that, as long as it's real.

I also don't understand the "liquidity" part of your comment either. LTSE is a participant in something called the National Market System which guarantees that every stock listed on every National Securities Exchange has the exact same level of access to liquidity.

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> When did being virtuous become an insult?

Because pretending to be virtuous for personal gain is not in fact virtuous. Companies will push social issues while its in vogue and convenient and when its not they will abruptly stop - or at least that's what many seem to believe.

Virtue is not 'virtue signaling'.

Investing in green energy for your corp is virtuous(some would argue).

Running ads about how you support BLM/LGBT/etc(no real cost to this) while pretending not to know about the environmental destruction and human rights abuses your products create around the world(would require actual action) is virtue signaling.

From what I’ve been able to gather, Liquidity just means being able to get out of a bad decision at little to no cost.

Basically no one wants to hold risk anymore, but still have growth… which is the fundamental flaw in the markets that continues to rear its ugly head in exotic derivatives

Liquidity only eliminates the type of risk that is associated with liquidity. Having less liquidity risk does not in any way mean you're more likely to lose money in general.

Less liquidity means there's a larger bid-ask spread: if you're in a rush to either buy or sell, there's a chance you'll pay a premium for a quick trade. If you're not in a rush, you probably won't pay this premium at all.

Saying that liquidity reduces is a fallacy that was believed quite heavily pre-2007.

Liquidity does not reduce risk, it has no effect on risk because it has no effect on outcomes. If you invest in a stock that goes bankrupt, there is no way to get out of that decision with no cost.

Equally, someone is only willing to supply that liquidity if they get something in return. So in those worst cases, you will usually not have the liquidity that you think because someone needs a return for taking the elevated risk in those situations (and again, that risk doesn't go anywhere, liquidity just shifts that risk to someone else).

Look at the market, is there really a deficit of risk-taking? I think there is a deficit of understanding of the risks but there is a massive excess of risk-taking in pretty much every asset class.

I also wouldn't associate illiquidity with return either, that is quite wrong. The decentralized market-making model that we have minimises costs and maximises liquidity but this is just a net gain for investors (due to the clear demarcation of types of risk-taking within the system). There is no real illiquidity premium, and the societal gain from higher liquidity is just a pure gain for the system (again, I am not saying it reduces risk, it does not but it does reduce costs, increase transparency, and produces a system that is robust relative to bank-led financing systems common in Europe, for example).

> Look at the market, is there really a deficit of risk-taking? I think there is a deficit of understanding of the risks but there is a massive excess of risk-taking in pretty much every asset class.

There's a deficit of risk-taking in a crisis (and maybe an excess of risk-taking in "normal" times). In the old days crises would be softened by market makers who were willing to act as de facto prop traders and buy at the bottom for their own account - an extremely risky trade ("falling knife") but an extremely lucrative one if you get it right. Nowadays the algorithmic herd just exits the market when times go bad, and if you did do the trade and make a killing then you'd get your trades broken ("clearly erroneous") and have to fight a lawsuit and it just wouldn't be worth it.

> liquidity just shifts that risk to someone else

This. This!

Shifting risk is not productive — it may be in some “economic” model, but by the hand of the market it is waste heat - and only compounds the probability of edge cases.

People shave off a return for holding the hot potato! Not one factory is built, not one wage increases, and not one investment made save for the HFT yacht.

This gets at my problem with the secondary market in general and why I believe dividends should be the only repayment terms for equity… it would align with the tax favors bestowed in our current market

Virtue signaling is not virtuous. This isn’t insulting being virtuous.

Pretending you have virtue is not being virtuous. It is the opposite of virtuous. The "ancient view of virtue" was concerned with the internal, not external. Whether you say something is true, whether you say are virtuous has no bearing on reality. The ancients did not know about performativity.

And the suspicion here is well earned. Being purpose and mission driven is usually just code for: the CEO likes to take big piles of your money, set it on fire, and then hop on CNBC and tell people how setting fire to your money makes them virtuous. Anyone who feels they need to signal their virtue, to me and use that as a pretext for getting my money, is likely someone who I should not trust with my money (so far, as someone who saw this over and over working in the investment business, this suspicion has never been unfounded). It is far easier to work with someone who says they will act in their own self-interest than someone who claims they have no interests at all (and btw, this is where things mostly go wrong: managers who say and believe there are disinterested whilst only following their own self-interest...something like LTSE sounds very much another mechanism for managers to shed accountability).

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