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bullero


Total Posts: 39
Joined: Feb 2018
 
Posted: 2019-05-11 15:47
I left uni not too long ago and my feeling was that trading was already quite dead as a career goal among my colleagues back then. This was two years ago. I knew 2-3 student colleagues who really did pursue sales and trading internships - really the wast majority applied to consulting and the rest of the folks who wanted to do finance went to old fashioned pin stripe IB. Why this is the case? I think there are many factors contributing to this decrease in activity. The structural decline in the industry in general might be the strongest but In my opinion there are another factors in play which are more opaque.

Trading is a multidisciplinary field and is becoming more and more demanding every day. You need to have strong understanding of the fundamentals and practicalities, understand the theory behind pricing and have strong technical skills to be useful on the trading floor. My feeling is that if we ignore the few outlier schools these skills are not being taught at the required level in average institutions. Then, I have noticed that people are not really willing to do the extra work to acquire these skills. It is much easier to go with the other career alternatives where the skill requirements are less demanding.

Strange


Total Posts: 1551
Joined: Jun 2004
 
Posted: 2019-05-11 18:27
Maybe we should have an administrated chat instead? I'd be happy to organize it

I don't interest myself in 'why?'. I think more often in terms of 'when?'...sometimes 'where?'. And always how much?'

chiral3
Founding Member

Total Posts: 5079
Joined: Mar 2004
 
Posted: 2019-05-11 19:45
I think there was an expectation, reasonable or not, that there'd be some reversion to a mean that was conditioned on the previous three decades. There's just a ton of people and ever more regulation. If I square this with the ever larger hype machine that's facilitated by the internet, consulting, the race to the bottom in publishing, and consider that career paths are highly sensitive to initial conditions, you're left with a large and less experienced crowd fumbling around for opportunity in a highly competitive and confusing environment. The top 1% of thinkers and innovators will never have a problem, but the 99% largely flounders. Nobody knew this credit cycle would be so protracted, nor did they know that there'd be such a strong current towards more reg-lite private equity. Nobody knew that regulation would hamper sales and trading so much and for so long - both from a regulatory perspective and also from the perspective of low rates, low vol, low liquidity; that buy-backs and passive investing and generally low fee dumb money would be such a disproportionate contributor to cash levels. If you told s&t ten years ago that today they'd be trying to double dip in retail structured and institutional just to supplement a dwindling flow business, talking to lawyers and marketing firms, they probably wouldn't have believed it.

Over-hyped bubbles popped up in the interim causing, what was more often than not, a perceived flight to quality opportunity. More senior people that didn't get wiped out in the crisis held onto their deck chairs as long as they could. People with track records were able to separate from the complex and attract money... for a time. Some people left the over-developed and over-regulated markets for less developed and less regulated markets, and they are largely unaware of the daily noise from major markets that people condition themselves on over years to develop a feel. Their ability to reenter those markets, even if they wanted to, is probably diminished.

Speculative avenues are choked away and laying off risk, despite there being so much more of a buffer, is much simpler. Jobs are automated. The world is much more 4th and 6th moment dominated; really everywhere, whether in markets or crime or geo-political, .... things tend to hang around the mean with very little variance, until they don't, and then stray deeply and wildly into the tails. The psychological effect of this is huge. Like plane crashes people erroneously cite probability of crash statistics when it's really an expected loss calculation the mind does. An exceedingly small number times an infinite number creates infinite restraint in risk taking, and without the risk taking there's no juice in the pipes to manage, and the opportunity isn't there.

Hard problems have been solved and coded up for the masses. When I started I had to solve problems and adapt solutions. Like today when a young person opens an IDE, installs a toolbox, acquires data someone else curated, and runs code against it: they didn't have to come up with any of that. It may be GIGO, and they are hopefully good at understanding the benefits and limitations of the results, but they have results built on math and tech that a decade ago was someone's job, a job that isn't needed anymore.

I think things will open up some when credit starts to cycle and we pick rates up off the ground, but the good old days are gone forever.

Nonius is Satoshi Nakamoto. 物の哀れ

Rashomon


Total Posts: 198
Joined: Mar 2011
 
Posted: 2019-05-11 21:13
@nikol for my time, Eugenio Culurciello’s blog is the best on NN.




@strange I already made a slack channel with some good people on it. We had a few events including this. filthy drove down. Mail *****sdforg for a key.

I’m busy atm but next year want to host Matt Hurd talking about his book. We did google hangouts previously, which was nice because it created a private youtube that can be viewed afterwards. It also allowed for typed-chat questions. I think google hangouts has shuttered.

Our slack is reasonably active. filthy also made one, marketchat.slack.com.




added Banking has declined, of course. But very early NP posts indicate that being a good “trader” is just as much about sussing out where opportunity is, and agility. That can extend outside of banking, and perhaps so can even some intuitions gained from extremely well-defined marketplaces, apply to other stuff. Those who read this post and are into ReLu, one of the main members in my slack last week switched to full time on his ReLu BigDog-type startup. I’d appreciate getting some more capable hands on his project, particularly those who also have enough money to float for a while, when the opportunity is to work with brilliant people. Move with the times, or ideally move a little ahead of the times (so, no bitwallets). You can see for yourself that WorldQuant, SALT, Terrappinn, and so on are the hangers-on of a trend that is well over. Figure out or create what’s next. /added



***** isomorphisms

nikol


Total Posts: 712
Joined: Jun 2005
 
Posted: 2019-05-11 21:52
@Rashomon

Thank you, I will take a look.

Recovering old knowledge by doing (aha, uhu) I had to start from the beginnig already 2 times.
Reading someone else's blog is useful after your own experiments and asking right questions.
Most important with NN is to get confidence with results you see.

Like - the fact you see nothing is because there is nothing or because you did something wrong.


About marketplaces: everything in internet is transaction.

Osiris2


Total Posts: 27
Joined: Sep 2017
 
Posted: 2019-05-16 00:24
Between 2008-2009, I think it was pretty well understood by people with at least 10 years experience in the market that the party was over for a good long while. Took roughly 10 years to build that shit storm, so not crazy that it would take about 10 years to get out. If you look closely, you can see the shoots and saplings coming up now that will grow into hard to value exotics and over-engineered structures. Whether they reach maturity is subject to some randomness or exogenous shocks, but eventually everything comes full cycle. The good old days are not gone forever, but they are gone for long enough that it will be new generation who re-discovers them and thinks that they are doing all this stuff for the first time.

When I look at the people I worked with between 2004-08, I'd say it breaks down like:
Those who made a lot of money either started their own shops to buy distressed components of the housing market, OR just left the business entirely.
Those who were talented but not rich ended up either in the shallower waters of asset management, or in something that is not primarily finance focused.
Those who were neither talented nor rich ended up holding onto their seats until the bitter end, surviving on a diminishing but not insubstantial stream of bonuses. Some of them are lawyers.
Those who were decent sales people are still decent sales people.

FDAXHunter
Founding Member

Total Posts: 8372
Joined: Mar 2004
 
Posted: 2019-05-22 13:55
I think generally the interest in quantitative finance has diminished.

For starters, after the rise of really exotic (and toxic) products in late 2000s came to a more or less complete halt after the credit crisis (which is where a lot of the quantitative modelling went, in terms of number of quant man hours spent globally).

There's still a lot of quantitative stuff happening, but it's less complicated (and certainly less exciting).

The Figs Protocol.

frolloos


Total Posts: 69
Joined: Dec 2007
 
Posted: 2019-05-22 16:07
Not sure why the interest in quantitative finance has diminished actually. The humble smile statics and dynamics is still not fully understood yet afaik, don't need to go to exotic products.

nikol


Total Posts: 712
Joined: Jun 2005
 
Posted: 2019-05-22 16:47
Finance is about finance.
Simply said, there is much less money thrown to the field so it is less attractive.
Especially today, when Brexit uncertainty blocks so many projects.

Maggette


Total Posts: 1118
Joined: Jun 2007
 
Posted: 2019-05-23 12:29
Beeing uninformed, ignorant and stupid, I will make the following heretic statement:
ignoring some few exceptions, fancy derivative pricing math never made any money or added any value! Sales did!

Now flame me:).

I wrote my thesis on derivative pricing in incomplete markets, trying to implement Bochaud and Potters stuff. I dove deep into Rama Conts book back then and came to the conclusion, that lot's of the pricing math is elegant but almost as bad mathematical modelling as much of macro-economic theory. Not taht I have a better way to do it...I can't cure cancer but I still have a judgement that homeopathic globules probably won't help

I don't think I could have landend a job in the pricing world if I had tried though, since the market was heavily overcrowded and I am not that smart.

After a short stint in logistics (which I enjoyed very much) I enden up in commodities trading for a couple of years doing more classical OR/statistical modellling as software/data engineering and was a perfect fit for me.

There might be a lot of challenging and interesting problems in practical finance ( I don't academic stuff like the equity premium puzzle) and I wouln't mind work on them...but this also holds true for pharmaceutics, logistics, aeorspace engineering etc..

I think I am wired like a lot of people on this board: I am fascinated by the world and love to model it using math, data and computers. Finance is just one of many domains. It happend to be the one that paid the most for some time. And that changed....so the other domains are claiming back their place amongst the NP guys.

Ich kam hierher und sah dich und deine Leute lächeln, und sagte mir: Maggette, scheiss auf den small talk, lass lieber deine Fäuste sprechen...

ronin


Total Posts: 454
Joined: May 2006
 
Posted: 2019-05-23 15:22
> ignoring some few exceptions, fancy derivative pricing math never made any money or added any value!


Well, the job of derivative pricing was never to make money. Money was made on sales and structuring. Quants and traders had just one job - to not lose money.

Incomplete markets stuff is nonsense. When you had to sell something that couldn't be hedged, you priced it like normal stuff plus a f***ton of reserve. And that was OK, because you were the only guy in the market crazy enough to even show a price. Except for some idiot who showed a crazy aggressive price. The idiot won the trade, and he then lost a ton of money trying to hedge it. He was soon gone, but some other idiot took his place to bid for the next trade.

Good old days.




"There is a SIX am?" -- Arthur

NeroTulip


Total Posts: 1024
Joined: May 2004
 
Posted: 2019-05-23 16:13
@ronin: spot on!

Also, often the poor schmuck who won the trade was just yielding to the pressure from his "Global Head of Sales", because he had to be "competitive" / "a risk taker" to please the bank's "Best Client".

My old job consisted in saying no 90% of the time in various ways, some more polite than others.

Good old days, indeed.

"Earth: some bacteria and basic life forms, no sign of intelligent life" (Message from a type III civilization probe sent to the solar system circa 2016)

nikol


Total Posts: 712
Joined: Jun 2005
 
Posted: 2019-05-23 16:58
That's what I mean.

Major principle of capitalism:
If sales see making money on product X, it will invest into quants, (expensive) maintenance of regulatory framework, infrastructure. Otherwise, 'no money for quants'.

chiral3
Founding Member

Total Posts: 5079
Joined: Mar 2004
 
Posted: 2019-05-23 18:10
> ignoring some few exceptions, fancy derivative pricing math never made any money or added any value!

This is semantic tail or nose stuff, though. The sales and trading was facilitated by much of it, esp the next gen crap we traded in 00’s.

Incidentally, I have exceptionally low turnover on my team, but just lost a huge young talent to an EdTech down the street that just got their series A. He wants to do more impactful work... sign of the times.

Nonius is Satoshi Nakamoto. 物の哀れ

ronin


Total Posts: 454
Joined: May 2006
 
Posted: 2019-05-23 22:10
@nero,

And of course, there were the moments when you are the idiot. The scariest words in the English language are not "this time it's different" - they are "wow, that's aggressive! All yours."

@nikol,

Actually sales are / were just monkeys with a phone. They never get to say who spends money on what.

"There is a SIX am?" -- Arthur

doomanx


Total Posts: 23
Joined: Jul 2018
 
Posted: 2019-05-23 22:55
@Ronin very generous to compare them to Monkeys in my experience. The worst is if you price OTC and they go out promising choice prices to all your clients, then kick up a fuss when clients complain spreads aren't tight enough.

nikol


Total Posts: 712
Joined: Jun 2005
 
Posted: 2019-05-24 00:17
@ronin

not those, of course, however, they needed some talent.

main designers are still doing very well... becoming phylanthropists.

HitmanH


Total Posts: 478
Joined: Apr 2005
 
Posted: 2019-05-24 02:54
RE: sales as monkeys with a phone - a college flatmate is a partner @ GS in sales - and from analyst class he's understand this better than anyone I know (and admits it openly). The biggest problem is when the sales guys think that they have some kind of insight, or that they do something more profound. The very best know what their role is

(and that is not disrespectful, i have immense respect. without clients we've nothing)

frolloos


Total Posts: 69
Joined: Dec 2007
 
Posted: 2019-05-24 11:14
The best sales are those that understand the client. You'd say "duh!", but it's amazing how much irrelevant BS I sometimes received when I was buy-side PM.

Several years back I had to work with this crappy system where we couldn't even book a forward (had to be booked as C - P, imagine..), explained our infra limitations to sales guys, but still received sales pitches to trade compo to EUR barriers as Solvency II capital hedge and the likes.

It's fine to try sell exotics to HFs and sophisticated funds, but not to asset management arms of eg insurance firms.

That was long ago though. The sales guys I've worked with recently are really quite good and more aware of their client needs and limitations.


ronin


Total Posts: 454
Joined: May 2006
 
Posted: 2019-05-24 13:09
Looks like I have increased the forum activities with that "monkeys with a phone" thing...

It was a reference to that graphic that was popular at the time, "what x think about y" with traders, sales and quants. I can't find it any more.

For the record, I have over the years worked with sales ranging from those who knew the product better than the traders and structurers, to those who didn't mind if they were selling exotic structured notes or vacuum cleaners, and couldn't tell the difference if their life depended on it.

The latter win hands down, no contest. At least in my experience.

So giving your best sales the budget to build a desk would have been ridiculous. They would just go out and spend it on fine dining and/or strippers.

"There is a SIX am?" -- Arthur

NeroTulip


Total Posts: 1024
Joined: May 2004
 
Posted: 2019-05-24 15:54
While we are talking about monkeys with a phone, there was always this tendency to treat inter dealer brokers like crap. And sure, most of them were brainless cokeheads. But I have immense respect for some of the top brokers I worked with. They would have thought you made a dodgy porn reference if you mentioned Brownian motion, but they had street smarts, amazing people skills and an infinite ability to take crap and stay positive. It is a different skill set from a trader’s, but a rare and valuable one nonetheless.

Probably a controversial opinion to share on a quant forum though 😀

"Earth: some bacteria and basic life forms, no sign of intelligent life" (Message from a type III civilization probe sent to the solar system circa 2016)

doomanx


Total Posts: 23
Joined: Jul 2018
 
Posted: 2019-05-24 19:28
In all seriousness there are some decent people in sales, the best in my experience have been those who try to involve themselves as little as possible in matters that aren't sales and only sell what they have in front of them. They're diamonds in a rough of futbol lads and michelin star cokeheads with names like Elvis and Dazza, but such is life.

nikol


Total Posts: 712
Joined: Jun 2005
 
Posted: 2019-05-26 22:32
Once again looked "Tin Men" from Barry Levinson. Together with "Glengarry Glen Ross" it makes best pair of movies about sales.

All those "Boiler room", "Wolf of Wall Street" or something do not fascinate me.

Strange


Total Posts: 1551
Joined: Jun 2004
 
Posted: 2019-05-27 00:33
" sales ... who knew the product better than the traders and structurers "
My experience is that this apparent knowledge is usually a carefully maintained illusion. Just like the strategies and trade ideas pushed by the strategy teams usually turn out to have no alpha, the knowledge of the product presented by the "technical" sales invariably falls apart once you dig deeper.

IMHO it's better to be covered by a sales that does not pretend to have any insight. It's also reasonable to think that every word that a sales says is a lie and that he's lying to both their clients and their traders.

I don't interest myself in 'why?'. I think more often in terms of 'when?'...sometimes 'where?'. And always how much?'

ronin


Total Posts: 454
Joined: May 2006
 
Posted: 2019-05-30 21:13
>" sales ... who knew the product better than the traders and structurers "
>My experience is that this apparent knowledge is usually a carefully maintained illusion. Just like the >strategies and trade ideas pushed by the strategy teams usually turn out to have no alpha, the >knowledge of the product presented by the "technical" sales invariably falls apart once you dig deeper.

That wasn't buyside me talking about sales who cover me. It was (former) sellside me talking about sales I worked with.

There has always been a steady trickle of traders and quants into sales, and there still is. Those guys (let's face it, it is always guys) are as knowledgeable as you would expect them to be. Why did you never meet them, you are probably thinking. Well, they tend to disproportionately suck at sales. They don't last long.

"There is a SIX am?" -- Arthur
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