HiLo

Can you link to something elaborating on this? This seems pretty odd to me.

No, you haven't really shown me how it's predatory, although I do know that does happen (as it does in all large lending markets).

I'm not sure what your point is about the largest debt collector having contracts with the DOE. Of course they do, that's almost a definitional thing. Pretty much the largest of anything has some kind of government contract.

Defaults are on the rise from a low base, and the securitized portfolios of these loans haven't really taken much of a hit, so it doesn't "sound familiar" because I don't see the same balance sheet risk as 2008 subprime, even though there are undoubtedly subprime elements to this. (For the sake of clarity, I'm referring to the subprime credit ratings and category, not the 2008 era).

I guess what I'm asking is, from what base is all this happening? Predatory lending is on the rise... from .5% of loans to 1%? 1% to 5%? 5% to 10%? Same with the others.

I guess what I'm trying to get out of this thread, is:

1. What novel insight is being presented here that invalidates huge amounts of sophisticated due diligence by incentivized, professional firms?

2. If none, what channel or mechanism is perpetuating something that everybody knows is a bad deal?

3. If everybody knows it's a bad deal, but there is something simply keeping it prodding along, this would not pass even the first level of risk management at these institutions, which really stresses the idea of #2.

Good points, actually, but can you clarify on what you mean with the government being the only buyer of student loans? All those other needs are permanent, too. "Roads" will permanently be under constructions somewhere, just as "loans" will always be outstanding somewhere. Fuel will always be needed, just in different grades, locations, and quantities.

Just to be clear on my point, it's not very hard to go and buy a portfolio of student loans for yourself (assuming you'd want them...)

Primary thought: I think this is really great news. Mine tailings are really nasty, so hopefully this type of thing could also work on other legacy industrial projects or future contamination.

Secondary thought: This is a long shot, but if anybody here studies this type of thing, could this ever be used to isolate and concentrate the contaminants in the tailings? For example, could we pull out and concentrate all the mercury, REE, and so on and recycle them?

I actually personally agree with you, I was just trying to note the inconsistencies in that argument.

More intellectual laziness in this thread. To start, what definition of bubble are you using? Where no plausible scenario can justify forward valuations? Where there is evidence people are doing transactions for the sole reason to flip the assets at a higher price?

Because even if you don't think it's "likely," I can think of plenty of cases where student loan data makes "sense" or is "logical," and you've provided no evidence (of which there is usually at least online anecdotal evidence, see: Dotcom Crash, Bitcoin) that people are making these loans solely to flip them. If you try to argue that the Loan-to-Originate model leads to this behavior, you may have to reconcile a lot of things in this paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2700179

For the same reason the government hires construction firms to build roads, for the same reason the government hires contractors to build bases, the same reason the Federal Reserve uses primary banks as intermediaries, the same reason the military gets their fuel from tender offers and not their own refineries...

Plus, I can only imagine what would happen to the GOP/austerity/small government types if you started suggesting they move all those (necessary) function in house. Oh man that would be a fun debate to watch.

This is an intellectually lazy response. Why does our government always use contractors? You won't let them spend more internally to grow their departments, but you also want them to be able to handle an ever-growing mountain of job functions? You can't have your cake and eat it, too.

Can you provide evidence that it is a bubble? Can you provide evidence that it will burst, or a potential catalyst?

You're getting downvoted, but I have to agree to an extent. To be fair, many business/founder types also have a total lack of understanding of what it takes to get a startup off the ground.

The irony is, I guess, that most people involved in a startup don't know what it takes to actually get it off the ground, because the formula they've been sold doesn't really actually work, and they don't have the business (or technical!) savvy to correct course.

This really resonates with me. Without ranting, I kind of think a lot of wannabe's have been sold a dream and a formula, and when it doesn't work, they blame the dream (it's always been 1 in 1,000,000 odds!), or the formula (as per above), rather than the fact they don't have any business or technical savvy.

A coherent, baseline platform that ratchets up in intensity every 5 years and forces the hand of domestic politics (rather than simply allowing them to block intnl agreements) seems like a positive, I'm not sure why everybody is so entirely cynical.

Sorry to piggyback on your point and rip off Matt Levine a little bit, but most of the cage rattling seems to ultimately come from people who are mad that it's harder to slip in their huge orders without having a price impact like it should.

Sorry, I'm on my phone, but you could start with "Trading and Exchanges" which is available on Amazon (really, any of the highly rated books on market microstructure are pretty good IMO). Also IMO, It would be helpful to use traditional market makers as a baseline when making any kind of comparison to HFT, and asking if it's really worse. For example, total HFT profits have declined from like $5 billion to a little over $1 billion per year, whereas vanguards fees alone allow savers to keep roughly $40 billion per year. There are also a multitude of interviews with large, institutional investors who are extremely sophisticated and who are arguably the main people affected by HFT activities, for example this interview with cliff asness of AQR, which manages $100 billion ++ in quant strategies. https://soundcloud.com/bloombergview/masters-in-business-aqr... I think he starts talking about it around the 30min mark.

Also, my own experience working on a trade floor as a source.

>there are heaps of evidence

>links to zerohedge

credibility = destroyed

I stopped at "Perhaps the best description of the rigged game HFT’s play comes from the book..."

Just because they aren't guaranteeing your execution price when you trade in larger size blocks doesn't mean the game is rigged. This has been discussed to death. Sure, a few bad apples used the technology for frontrunning, but then we have a frontrunning problem, not an HFT problem.

Furthermore, just like the stat arb strategies of the past that eventually expanded beyond Wall St into everyday retail and online analytics, HFT strategies may be hard to understand but it's not like this is some mafia forcing you to pay a toll to trade... it's far, far more nuanced.

Some of those things have been for things that weren't even illegal. The dance between Wall St and regulators is a delicate one, and shouldn't really be viewed in the same way as your everyday civil case.

This is a good point. Professional firms where the company is really tons of smaller companies sharing a balance sheet are always tough to wrap your head around in general.

Nobody is saying it works perfectly, but finding a good risk adjusted price is the point.

I would take the most talented from Wall Street over the most talented from Silicon Valley any day of the week. Furthermore, while SV has its VCs, their AUM and returns are laughable compared with almost any other strategy. Cold hard truth is most Wall St types see SV as a backup, not something to aspire to.

I'd also like to point out that DE Shaw has essentially been using machine learning and advanced statistical analysis applied to markets for a long, long time. I wonder where Bezos got the idea :)

How is deliberately lying about your incentives and hiding your source of funding under oath testifying to Congress even remotely ok? How are you rationalizing this? What kind of message does it send if we let people lie under oath about what could potentially be so catastrophic? What if they did the same thing about nukes, what's the difference right?

Are you just assuming an equity crowdfunding investor (retail investor) has the resources or sophistication to do proper due diligence on hundreds of investments?

Maybe the interest rates are lower on these for borrowers because the cost of due diligence isn't included. Not maybe, actually.

Thank you for stating what the literature on this topic actually suggests.

Yes, I'm sure GWB staffed his cabinet with "experts." Yes.

Hey, did you know that's 95% of the private sector, too?

The legal structure has nothing to do with the principal here, stop obfuscating the argument.

Just curious, by extension are you saying nobody/nothing forces people to accept the wages they're given?

Sorry for throwing terms around loosely. What I meant was the network of creators that made it what it is. Facebook would still be at Harvard or the Ivy Leagues if Zuck decided he didn't need anyone else...

Again, not true. The Federal Reserve can step in and buy bonds at any point, giving Treasury the ability to pay.

>revenue sources with which to pay them

Can you show me where Treasury says fiscal outlays are funded by tax receipts, or solely through payments from primary dealers? The government doesn't work like a business in this case.

Actually, the Treasury funds itself by issuing bonds to the dealer banks or the Fed, where its account is then credited.

Taxes are used as inflation control or to incentivize certain activities.

What you're suggesting is that Treasury would have a cash flow problem if people payed less taxes, which isn't the case. Although you could start to see an inflation problem.