Hi all,One of the thoughts, which bothered me recently is - suppose you're a trader or a quant or whatever position you hold in the world of finance - what is the product of your work you actually get your salary (very high compared to other jobs) for?What I mean is - suppose you work as a janitor - you get your money for cleaning toilets etc., if you are an engineer - you get it for designing something useful for customers, if you are a pure scientist - you get it for advancing the mankind's knowledge (grand words but nevertheless true).What do people in finance get their money for (leaving alone very useful hedging etc.)? The question arose because the only product I see is money for a company you work for obtained from pure speculation or being more accurate in pricing something - no useful things both materialistically and mentally(spiritually) for the rest of the world.Anybody had the same thought?

Speculators provide liquidity to the market. If every long-term investor had to wait for another long-term investor to appear, then it would be difficult to buy and sell. (Look at the U.S. corporate bond market for an example of a barely functional secondary market).Enabling the ability to easily sell something people no longer want (or buy something they do) provides peace of mind and service (respectively) to long-term investors.

Presumably, by pure speculation you create much needed liquidity in the financial markets, which allows others to be able to hedge their risk, which in turn (albeit indirectly) helps build better companies, products, services, cure cancer, save the manatees, etc, etc... which, if you have not noticed already is just a bunch of horse shit. You make money at the expense of somebody else, and if anything unregulated wild speculation causes real economic harm. People go in this business for simple reasons. It's mentally challenging and you make shit loads of money. And there is absolutely nothing wrong with that.Edit: Xposted with Traden4alpha. I also apologize for the pornographic use of language above, hopefully the forum administrator does not delete my post

ok..Let me add my 2 cents here...I was an engineer..money wasn't all bad...what I did wasn't so "satifactory"...too many morons in the corporate world..the Dilbert's stereotype althought not 100% true..does have some truth in it....a lot of incompent managers...more interestes in office politics than doing a good job...Now, I do more, earn more, have more inteligent people around (bigger egos, yes)...

QuoteOriginally posted by: gardener3Presumably, by pure speculation you create much needed liquidity in the financial markets, which allows others to be able to hedge their risk, which in turn (albeit indirectly) helps build better companies, products, services, cure cancer, save the manatees, etc, etc... which, if you have not noticed already is just a bunch of horse shit. You make money at the expense of somebody else, and if anything unregulated wild speculation causes real economic harm. People go in this business for simple reasons. It's mentally challenging and you make shit loads of money. And there is absolutely nothing wrong with that.Edit: Xposted with Traden4alpha. I also apologize for the pornographic use of language above, hopefully the forum administrator does not delete my post I agree that it's mentally challenging and very high paid for but my thought and question (or thought) was - don't you guys (experts presumably) think sometimes that you're paid for doing nothing useful to the mankind (grand words again) but just for your intellect?

And is it intellectually satisfying?

QuoteOriginally posted by: ShyurikWhat do people in finance get their money for (leaving alone very useful hedging etc.)? The question arose because the only product I see is money for a company you work for obtained from pure speculation or being more accurate in pricing something - no useful things both materialistically and mentally(spiritually) for the rest of the world.Anybody had the same thought?i assume that u exclude regular banking from "finance", that seems to be obviously "useful" to people.ok, imagine a country where there's no finance( hegde funds, speculation, arbitrage... ). somehow those countries r not doing so well.

QuoteOriginally posted by: jawabeanQuoteOriginally posted by: ShyurikWhat do people in finance get their money for (leaving alone very useful hedging etc.)? The question arose because the only product I see is money for a company you work for obtained from pure speculation or being more accurate in pricing something - no useful things both materialistically and mentally(spiritually) for the rest of the world.Anybody had the same thought?i assume that u exclude regular banking from "finance", that seems to be obviously "useful" to people.ok, imagine a country where there's no finance( hegde funds, speculation, arbitrage... ). somehow those countries r not doing so well.For example? Russia has none of the above and is doing pretty well in terms of budget. Ordinary people don't even know that such things exist. In fact it's only western world feature, so once gain going back to the question. What are you paid for?

Over complicating it...Very simple - if you work in as a toilet cleaner you get free very easy access to toilets. If you work for a carpet manufacturer you get cheap carpets. If you work in a bank you get cheap money. This is the reason why people who work for the Civil service are so uptight - there is no hidden perk in their jobs.

QuoteOriginally posted by: ShyurikFor example? Russia has none of the above and is doing pretty well in terms of budget. Ordinary people don't even know that such things exist.Russia is doing well because of high OIL prices. banking and finance is developing rapidly there too, they're not developed as well as in west, but getting there, mortgages , credit cards etc.ordinary people are getting paid electronically, buying houses with mortgages and so on. so, Russia is actually a counter-example. it was not doing as well in the past when finance was worse, and it's still not as good as Germany or UK.

No matter what business you work in (except some non-profit stuff), you get money for making money. Pure and simple. In finance, the by-product is a more efficient capital allocation for the economy.

Finance:= $$$$ + abracadabra => $$$$$^$$$$$ incredible isn't it.... I'll call adorable old Karl Marx, I think he had things to say on that abracadabra....

QuoteOriginally posted by: jawabeanQuoteOriginally posted by: ShyurikWhat do people in finance get their money for (leaving alone very useful hedging etc.)? The question arose because the only product I see is money for a company you work for obtained from pure speculation or being more accurate in pricing something - no useful things both materialistically and mentally(spiritually) for the rest of the world.Anybody had the same thought?i assume that u exclude regular banking from "finance", that seems to be obviously "useful" to people.ok, imagine a country where there's no finance( hegde funds, speculation, arbitrage... ). somehow those countries r not doing so well.This does not mean that the causality runs that way. Economic growth, wealth and stable legal system -> developed financial system. Not the other way around.

We in finance earn a lof of money in exchange for our services mainly because our services add a lot of value to society. We facilitate the financing of entrepreneurial projects; we allocate capital to where it adds most value; we put a fair price on assets thereby making exchanges of capital more efficient ; we help entrepreneurs get rid of risks they have no desire to take on or no skills to manage. Failures and successes of our services have dramatic impacts on the outcomes of entrepreneurial projects. We are the oil in the capitalist machine.

You help the capitalism mechanism work Or pretend that you do it.If we consider the perfect world (no arbitrage, perfect forecasts etc), we can expect zero profits for speculators.If we consider a bit less perfect world, we can expect speculators making profits by shifting the markt closer to the equilibrium = fair prices.However, in our world I think not all of the speculators' activities make the world better..