Citadel Breaks Records With $16 Billion Profit 71
Ken Griffin's Citadel made $16bn profit for investors last year, the biggest dollar gain by a hedge fund in history and a haul that establishes his company as the most successful of all time. Financial Times: Citadel, which manages $54bn in assets, made a 38.1 per cent return in its main hedge fund and strong gains in other products last year, equating to a record $16bn profit for investors after fees, according to research by LCH Investments, run by Edmond de Rothschild. The profit, which was driven by bets across a range of asset classes including bonds and equities, surpasses the roughly $15.6bn made by John Paulson in 2007 through his bet against subprime. Last year's huge sell-off in government bonds provided a highly attractive trade for many macro managers, helping them to their biggest gains since the onset of the global financial crisis.
Citadel, which Griffin set up in 1990, made a total gross trading profit of about $28bn last year, meaning that it charged its investors -- one-fifth of whom are its own employees -- roughly $12bn in expenses and performance fees. The huge fee highlights how many investors tolerate hefty so-called pass through expenses -- variable charges covering a range of items including trader pay, technology and rent -- if net returns are high. Such charges tend to be higher during periods of strong returns because traders' pay is linked to performance.
Citadel, which Griffin set up in 1990, made a total gross trading profit of about $28bn last year, meaning that it charged its investors -- one-fifth of whom are its own employees -- roughly $12bn in expenses and performance fees. The huge fee highlights how many investors tolerate hefty so-called pass through expenses -- variable charges covering a range of items including trader pay, technology and rent -- if net returns are high. Such charges tend to be higher during periods of strong returns because traders' pay is linked to performance.
But inflation is absolutely caused (Score:3, Interesting)
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You need to work on your timing.
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Yes it is. Actually the more money companies like Citadel suck up, probably the more inflation slows.
Its quite literally pulling the cash off of main street where it competes for under supplied but less elastic goods driving prices up and moves it wall street where it inflates asset values. Now it might end up propping up real-estate, but most of the other investments are either relatively synthetic or actually represent real economic expansion, money to lend to someone starting a new business that did no
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Why would we want it to end? It seems to me like the real problem is that wages aren't keeping up, which would only get worse in your two solutions.
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1. Wages will basically always trail price growth
2. Most of us want to do things like retire someday, that means saving. Saving means progressively lower risk tolerance as you age, which generally means lower return. If the value of money declines to fast your savings are destroyed.
The people out there saying inflation is 'good' are dopes. I'll give some creedence to the idea that stable slow price growth like 1-3% might be needed to keep the economy moving and keep all the money from going to the side line
What if capital wants to rent forever anyway? (Score:2)
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well, I don't think being born into a wealthy family qualifies you to allocate economic resources for the rest of us, but the rsilverguns of the world haven't really made a compelling argument as to why they should be the ones doing it instead.
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What you are describing is socialism. A small oligarchy will control all the necessities of life. They will say something like to each according to his need. The ones who are the most needy or said the wrong thing to the wrong person just so happen to get assigned the worst most dangerous work. Everyone gets fed a lot of bullshit about how 'the people own it all' but interestingly the people are never permitted exercise any choice about how it gets used and who gets what. That role always goes to some dista
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What you are describing is communism.
Socialism includes many things including communism.
Socialism include things like the goverment building roads for people to drive on.
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What if I like beans and cheese?
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Most middle class folks have more debt than savings due to their mortgages. Around half of Americans overall have more credit card debt than savings.
1. Wages will basically always trail price growth
Right, so like I said, lets do something about it.
Most of us want to do things like retire someday,
If you want to avoid volatility and inflation: Buy inflation protected bonds [treasurydirect.gov], its not rocket science.
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It does not work that way. You are only interested in so many eggs and so many gallons of gas. Does not matter how wealthy you are.
At some point your demand for gasoline actually goes negative, you'd not want to deal with finding out how to store it even if someone offered it to you for free.
We saw this with the asset bubbles of the past decades. The very wealthy have their demands completely met for the things main street buys. That STOPS upward price pressure from them at that point. The money ends up on
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Those are the alternatives, or whatever road between you like. However the latter is really the better choice because I strongly suspect society is nearing an inflection point where the wealthgap is so large we will soon find ourselves back to a defacto feudal system. Its really better the let the FED put rsilvergun out of work. Even he will be better off in the long run.
Some would argue we're already back in a defacto feudal system today, just with enough window-dressing that most don't realize it's happening. It's honestly kinda maddening for those of us paying attention to hear everyone from government officials to public sector analysts claim the best way to keep the economy moving "properly" is to make sure those on the bottom and in the middle become even more destitute than they are now, so that those at the top may either stay the same or gain value. At some point t
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Not probably, it does. Rich people buy about the same number of bananas as poor people. Their excess wealth mostly goes into investment, which increases supply, which decreases inflation. Whatever's left is siphoned off into luxuries which might cause inflation in the luxuries markets but don't really affect ordinary stuff much.
Oh Jesus Christ (Score:2)
Ask yourself this, how is it that anyone in the history of the human race has ever earned more in inflation adjusted dollars? Answer that question first. And please try answering it without working backwards from your conclusion again...
Hint: Increased per worker productivity combined with increased worker bargaining power.
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It is simple -
but its not "wages go up, inflation goes up"
"Its inflation goes up, wages go up a lot less for middle earners, and little less for the bottom rung, inflation goes up again"
The middle gets poorer, the poor tread water if they are very very very lucky. Wealth concentrates upward.
Want to actually see the wealth gap shrink? - SWIFT and VIOLENT deflation is the answer, note this also radically reorganizes who is 'wealthy' and who isn't at the same time and yes lowers the mean standard of living..
Re: But inflation is absolutely caused (Score:1)
tax them (Score:1)
Can you say windfall tax?
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This is a stupid comment
Taxes do not disincentivize anyone from trying to get rich. People will get rich, regardless of taxes. You are dumb
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Things you want less of, you tax.
Things you want more of, you subsidize.
It's not that hard.
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Who says we want EVs and don't want ICE? I have one of each. My ICE cost more than my Tesla but it does things the Tesla can't do. They're just different. Oh wait, I did get a big tax credit on my Tesla and had to pay a $3500 or so gas guzzler tax on my sports car.
So yes those things are in place and the credit/penalties are enough that some people can afford the Tesla or not the sports car. As the numbers become bigger there'll be more people who can afford or not afford.
If you want to be 100% EV then
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Things you want less of, you tax.
Things you want more of, you subsidize.
It's not that hard.
It's not zero-sum. You can tax things you want to subsidise things you also want.
Things you really don't want, you regulate or make illegal.
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I'm not saying it is zero sum. It is a sliding scale. Tax something at 100% and you won't get any of it. Give something away that people want to have and you'll get lots of it. Scaling down to the natural market value as you adjust numbers away from the extremes to no government interference.
Regulations don't necessarily reduce or eliminate things, btw. We regulate driving. You need to pass a test and get insurance, etc. at face this reduces the total number of drivers as the tiny number who can't pa
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And you did a great job explaining how it isn't true with so many facts, details, urls and hard cold logic.
Oh, no, wait, you didn't do any of those things.
You only said, "You're wrong and you're a stupid head!" like some child. Congratulations, you have met the slashdot echo chamber debate minimum standard.
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"I know you are but what am I?" would have been just as good a reply. AC was a good idea and put down the bong, too.
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Things you want less of, you tax.
Things you want more of, you subsidize.
Now the US subsidizing rich bastards and taxing the living daylights out of poor people starts to make sense.
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You mean taxes like removing benefits that make it so anyone who does something ends up behind the people who don't?
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Can you say windfall tax?
Capitalism depends on people willing to make risky investments.
Nobody is going to do that if they are expected to absorb losses while gains are taxed away.
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Losses are offset against tax too, and can be carried forward for several years.
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3k/year isn't much. Helps the small investors but not exactly economy driving.
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Can you say windfall tax?
Capitalism depends on people willing to make risky investments.
Nobody is going to do that if they are expected to absorb losses while gains are taxed away.
If that was the deal. But it's not. These guys will not absorb losses, they'll declare bankruptcy and walk away.
There's some sort of break point where the scale of these gambles no longer matches the risk.
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What? The first part is literally part of capitalism. You take a risk and if that risk fails, you absorb the loss. Are you shilling for Wall Street who gets bailed out any time things get rough?
As for the second, the IRS rule is income derived from any source. That includes capital gains. The most you'll pay on capital gains is 20%, which, if you're half decent at math, means you still have 80% of what
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Capitalism depends on people willing to make investments. And yeah, I'd love to. Alas, there isn't anything worthwhile to invest in.
To invest into something, there needs to be someone willing and able to produce and sell goods and services. Because of course I want my investment to return money, and that in turn only works if whatever I invest in successfully produces something and sells it at a profit. That in turn only works if there is someone to sell to. And that is the problem our economy has now.
There
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Our economy sure as fuck doesn't lack money on the supply side, we lack the money on the demand side. The lack of investment doesn't stem from there being too little capital to invest, but that nobody has the dough to buy your crap. No money on the demand side means no sales, no sales means no profit, no profit means no viable investment opportunities.
Bernie Madoff 2.0 (Score:3)
In no other industry could you sell 65 billion of anything and not deliver it.
Re: Bernie Madoff 2.0 (Score:2)
Didn't he have consistent 5% returns, not huge ones?
This is nothing like him.
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Re: Bernie Madoff 2.0 (Score:2)
He crushed the market, but it was 5ish percent returns (market was down 30 something).
His deal, and why he got away with it for so long was to find institutional investors and never go down while not beating the market in the long term.
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What they don't mention is... (Score:1)
Most dangerous company in the US markets (Score:5, Informative)
They are not just a hedge fund, they are a dark pool provider and a market maker. That allows them to be on every side of a transaction. The level of manipulation they and Virtu (similar situation AFAIK) can accomplish is beyond Bernie Madoff's dreams.
* When you buy and sell at most brokerages, your order is routed to providers like them (MM + Dark Pool side of Citadel) via "Payment For Order Flow."
* Using the SEC's garbage "liquidity" rules they can legally get away with handing out IOUs instead of real shares while they hunt for a better price.
* Using their dark pool, they can move trades off market, settle them and control price action by delaying the delivery buy order information while immediately reporting sell orders.
And note that everything about Citadel, Virtu and similar players is **known to regulators**. All of this clucking about how we have "regulated, orderly markets" outside of crypto is absolute garbage. The SEC has functionally legalized massive market manipulation.
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This is why everyone puts all their money in real estate and one of the main reasons owning a home for living in is broken now because they are basically all just an overused type investment now (never mind the REITs).
People running out of places to put money. Market is rigged. Real estate is saturated. Crypto is even more rigged than the market. All those squirrels looking to put their nuts into gold silver etc... Just keep cash and let the ever increasing inflation eat it?
Anyway rant.
Winner today, loser next year (Score:3)
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I've been following but not investing with Kathy.
Basically she followed tech up and is now following it down.
When tech goes back up again in however many years she'll be a genius again with her long term foresight blah blah blah.
If her main tech fund drops a bit more I'll toss in a few bucks and check it in 3-4 years.
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While I see a lot of talk about "Yeah, Bernie Madoff made money (supposedly) in down years too", I can tell you that a lot of investing is just luck.
Yes. It's just a casino. It literally is nothing else unless your investing in your own business.
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What's really interesting (Score:2)
What's really interesting is that this company doesn't create any actual goods or services. It just makes profit off arbitrage - the difference between buying financial products low, and selling them for higher prices.
Warren Buffett never produced a good or service in his life yet became the world's richest man. Remarkable.
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That crossed my mind while watching the new "Game of Thrones" show - the original had some characters that produced something for a living, but the new one is just the gentry: all they know how to do is kill people who don't obey. No food, clothing, shelter, nothing. Utter parasites.
The new nobility say they are performing a very useful service, providing financial stability and order, as the old feudals provided physical security and order. But at some point, you realize you could get all that a lot
Because he is ABSOLUTELY drowining in liabilities (Score:1)
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The 65 billion is repuchase agreements , its most likely short term government bonds put up for collateral ; its not 65 billion of stock.
Exactly, it is essentially a short term loan where they sell the securities and agree to rebuy them at a higher price, which is the imputed interest rate for the loan.
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