More news about Wall Street bonuses

[Darth Wong]

Bullshit. It's completely relevant to your ridiculous argument, in which anything which you can call "a skill" is assumed to be relevant to performance.

I've been very specific about the skills for which these bankers are being paid. There are essentially three: crisis management, corporate communications, and client outreach.

So, risk management and the ability to keep the company solvent are NOT important skills for a banker?

"Plan"? I'm simply questioning your claim that obscene and irrational compensation schemes necessarily attract the best personnel. You have thus far provided zero evidence for it.

It's a question of demand. The company that offers millions is going to attract labor from the company that pays in tens of thousands.

If somebody offered you millions for the work you currently did, and leaving your current place of work didn't also require that you uproot your family, you'd be a fool to hold out on principle.

Still not seeing any evidence. You're just repeating your beliefs.

Very nice. I like the way you quietly changed the goal from "effective managers who run the bank responsibly and competently" to "top movers and shakers in the field", as if this is some kind of celebrity schmoozing contest. But of course, that's precisely what it is, isn't it? And you don't seem to think that's a problem.

All companies seek top talent. Some can afford only mid-range talent. Some can afford none at all. Those that can pay, do.

Still not seeing any evidence that these guys are "top talent". You're just repeating your beliefs.

I'm not implying it. I'm saying it, and referencing the OP which shows that this is precisely the case. Their "performance pay" is in no way tied to performance.

No, you're saying it, and referencing an article that talks about specific bad decisions at major financial institutions. Where do you keep your money, Mike? A mattress? No. You keep it in a bank. And either that bank is reasonably sound, or you're being irresponsible with your family's future. Which is it?

I keep it at a Canadian bank that was run much more competently than any of the banks we're talking about, by a CEO who was paid much less than the CEOs at the banks we're talking about.

You just quoted the whole post without even attempting to say which part of it backs up your claim. Nowhere do I say I envy them and wish to join their ranks, you lying little asshole. Back up your claim right now.

You just claimed that you'd be able to get the same results, given the same responsibilities. That's a bald-faced lie, but speaks clearly to the source of your anger: that somebody is doing a job you think you could do with your eyes closed, and getting handsomely rewarded in the process.

More worthless armchair psychoanalysis. I never said any of this nonsense, and you have not backed up your claims. Either back them up or suck them up, you lying sack of shit. You put words in peoples' mouths based on your ridiculous assumption that any expression of contempt must be sour grapes as if by definition, and you refuse to concede that this is not a logical deduction. When challenged on ANY of your claims, you simply repeat them, without offering a shred of evidence.

You then went on to insist that all bankers do no work, but instead somehow burn up money. Finally, you've complained that nobody can legitimate question whether you could do the same work as an "effective" banker because none of the bankers mentioned in the article did good work. No True Scotsman Fallacy.

It's a "no true Scotsman fallacy" to say that a truly effective CEO keeps his company from going bankrupt or suffering financial collapse? Are you retarded?

[Axis Kast]

Bite me. You claimed that those banking execs required special skills, charisma, and all that other special hard to find crap.
That video shows that it's clearly false.

Banking obviously requires special skills. Your every criticism turns precisely on Paulson's lack thereof.

You're a special kind of stupid aren't you? You got tens to hundreds of thousands of banking execs, and they all managed to lose money in a equity, bond, and commodity market runup. Everything except currency is up right now compared to the beginning of the year, and they all lost money. Yeah, you're right, it's hard to find people who are that fucking stupid and incompetant.

Once again, you have attempted to shift the goalposts, either misconstruing this as a misconstruing this as a discussion about failed executives - as if banks prepare compensation based on the expectation or requirement that they receive bad service - or pretending, speciously, that it is one.

The obvious conclusion after a statement like, "In their tens and hundreds of thousands, they failed..." is, "Then the task must be a hard one," not, "Anybody could do this work!" As you point out in your very next post, there are, in fact, meaningful differences in performance within the trade: Canadian banking executives may have weathered the financial storm - perhaps for reasons having to do with the structure (read: regulation) of the Canadian markets.

The strategy isn't full-proof, and I never suggested that it was. Was the stock market collapse marking the Great Depression also evidence that not a single competent banker existed anywhere in the world? No, it was most certainly not.

If I lived in the US I would have a minimal amount of money in the bank, the vast majority would be parked in T-bills, commodities, and FRNs in pillowcases. Because the banks are fucking broke and so's the FDIC.

All of which would still be worthless if the financial sector were well and truly suffering from an absolute want of anybody, anywhere, with talent.

Uh-huh. So that's why the largest banks, meaning those with the most money and the ability to pay the highest salary and hire the "best" people, are the ones which are losing the most money on a gross and percentage basis. WaMu, Wachovia, and Countrywide are history, JPM, Bank of America, Wells-Fargo and Citigroup are all taking massive losses and if their assets were marked at fair market value they'd be in the hole by $500 billion or so. Hell, take the 20 largest banks in the US and they're all insolvent if we use fair market value GAAP accounting on them.

The strategy isn't full-proof, and I never suggested that it was.

Clearly, Axis Kast believes this article word for word, and doesn't realize it's a satire.

Clearly, you are taking shots from the peanut gallery without offering any substantive argument whatsoever.

From what I gather, banking, investment and such is a mixture of ruthlessness and luck. Actual "skill" in these matters wouldn't be required on the level of say, a doctor, and there are negligent doctors found out every year. Doctors have clinical assessment, i.e. quality control, what do bankers have? A load of them may just be there on luck, fortuitous economic conditions having prevented their competition from getting there first, rather than getting there because they're better than anyone else. Mix this in with a "moral hazard" like giving bonuses to people regardless of how well they do... my God, what are you doing?!

Your powers of perception indicate that you are mentally deficient.

So, risk management and the ability to keep the company solvent are NOT important skills for a banker?

Risk management and managerial capability are absolutely important stills for a banker. However, the massive differentials in pay between small bankers and large can chiefly be explained by the belief of large firms that they are buying themselves one or more of the three types of expertise that I have mentioned.

Still not seeing any evidence. You're just repeating your beliefs.

Let us perform a thought experiment. We take a group of people, who are self-interested. We establish two hypothetical firms, one offering 100 utiles of value for a certain kind of work, and the other offering 1,000 utiles of value for essentially the same work. Which is more likely to "capture" the desired talent? The sound money is on the higher-paying firm.

I keep it at a Canadian bank that was run much more competently than any of the banks we're talking about, by a CEO who was paid much less than the CEOs at the banks we're talking about.

Clearly, then, bankers do not, by definition, shovel money into deep, dark holes from which it can never be retrieved.

More worthless armchair psychoanalysis. I never said any of this nonsense, and you have not backed up your claims. Either back them up or suck them up, you lying sack of shit. You put words in peoples' mouths based on your ridiculous assumption that any expression of contempt must be sour grapes as if by definition, and you refuse to concede that this is not a logical deduction. When challenged on ANY of your claims, you simply repeat them, without offering a shred of evidence.

Your instant reply of, "But I could do this work!" is certainly indicative to me. If you wish to dismiss it as "armchair psychoanalysis," you are free to do so. I of course thankfully have no way inside your mind.

[J]

You're a special kind of stupid aren't you? You got tens to hundreds of thousands of banking execs, and they all managed to lose money in a equity, bond, and commodity market runup. Everything except currency is up right now compared to the beginning of the year, and they all lost money. Yeah, you're right, it's hard to find people who are that fucking stupid and incompetant.

The obvious conclusion after a statement like, "In their tens and hundreds of thousands, they failed..." is, "Then the task must be a hard one," not, "Anybody could do this work!"

Wow, are you really this stupid? Do you even understand how capital markets work? Apparently not. When every single market goes up and the banks still lose money on their investments, it's a crystal clear indication of gross incompetence. When bonds, equity, and commodities are all rising it's trivially easy to make a positive return on investments; just buy into any broad-based market index (eg. S&P 500, ^TNX) and hold.

As you point out in your very next post, there are, in fact, meaningful differences in performance within the trade: Canadian banking executives may have weathered the financial storm - perhaps for reasons having to do with the structure (read: regulation) of the Canadian markets.

But we're not talking about the Canadian banks are we? Any discussion of markets besides the US, which is the subject of the article, is irrelevant. The article discusses the US banking system, its senior executives, and their bonuses. Period. And the bottom line there is their results were horrid. Not only did they underperform the market, they had negative returns during the largest market rally in years. Negative.

If I lived in the US I would have a minimal amount of money in the bank, the vast majority would be parked in T-bills, commodities, and FRNs in pillowcases. Because the banks are fucking broke and so's the FDIC.

All of which would still be worthless if the financial sector were well and truly suffering from an absolute want of anybody, anywhere, with talent.

I'm sorry, what? Even if the entire financial system collapses and we're reduced to bartering for goods in small local communities, the commodities will still have value. A bar of gold will never become worthless, nor will a piece of silver or a barrel of gasoline. It's called intrinsic value. Look it up someday.

Clearly, then, bankers do not, by definition, shovel money into deep, dark holes from which it can never be retrieved.

Actually, they do. All of them. Banking by definition and in practice is the business of acting as the middleman in holding & moving money from one party to another. As with all middlemen they take a slice from the pie, a slice which will never be seen again.

[Stark]

I have to ask.

Axi, have you ever worked in the corporate world? You appear to be display a gross ignorance of how people reach and hold high positions in large corporations.

[ArmorPierce]

You're a special kind of stupid aren't you? You got tens to hundreds of thousands of banking execs, and they all managed to lose money in a equity, bond, and commodity market runup. Everything except currency is up right now compared to the beginning of the year, and they all lost money. Yeah, you're right, it's hard to find people who are that fucking stupid and incompetant.

The obvious conclusion after a statement like, "In their tens and hundreds of thousands, they failed..." is, "Then the task must be a hard one," not, "Anybody could do this work!"

lol, actually anyone can get better returns than these actively manged portfolios. Simply diversify your portfolio and let it sit with minor changes once in a while. Or you could get involved in a index fund if you don't want to check your stocks every once. These methods of investing have been proven to make better returns than these supposed financial wizards.

[Akhlut]

Uh-huh. So that's why the largest banks, meaning those with the most money and the ability to pay the highest salary and hire the "best" people, are the ones which are losing the most money on a gross and percentage basis. WaMu, Wachovia, and Countrywide are history, JPM, Bank of America, Wells-Fargo and Citigroup are all taking massive losses and if their assets were marked at fair market value they'd be in the hole by $500 billion or so. Hell, take the 20 largest banks in the US and they're all insolvent if we use fair market value GAAP accounting on them.

The strategy isn't full-proof, and I never suggested that it was.

So, can you explain why not even one of them is solvent, if they could attract the best talent with enormous, ridiculous bonuses? That might be a bit of an indictment against such enormous bonuses if they clearly don't work for attracting talent that can at least keep a bank running even, much less going so deeply into debt as to require gargantuan infusions of capital from the government (meaning that we are funding their bonuses for failing so catastrophically as to ruin the global economy).

So, please, tell me why there shouldn't be some sort of bonus cap or some other mechanism in place to prevent such bonuses when the companies are receiving federal funds or the like.

[Twoyboy]

Let us perform a thought experiment. We take a group of people, who are self-interested. We establish two hypothetical firms, one offering 100 utiles of value for a certain kind of work, and the other offering 1,000 utiles of value for essentially the same work. Which is more likely to "capture" the desired talent? The sound money is on the higher-paying firm.

In my mind everyone would apply for the same company and it would be up to the people hiring to determine the talent from the schmoes. It tells us nothing about how they go about determining that or how they measure the ongoing performance of their staff.

But it does prove that in your mind it is an ASSUMPTION that higher pay means more talented staff. An assumption which the evidence does not seem to support. No wonder it's so difficult to change your mind here.

[Axis Kast]

Wow, are you really this stupid? Do you even understand how capital markets work? Apparently not. When every single market goes up and the banks still lose money on their investments, it's a crystal clear indication of gross incompetence. When bonds, equity, and commodities are all rising it's trivially easy to make a positive return on investments; just buy into any broad-based market index (eg. S&P 500, ^TNX) and hold.

When hundreds of thousands of people fail to do something effectively, despite the fact that many have had formal training, and all are supported by enormous analytic engines, the case for gross incompetence is far from open-and-shut.

But we're not talking about the Canadian banks are we? Any discussion of markets besides the US, which is the subject of the article, is irrelevant. The article discusses the US banking system, its senior executives, and their bonuses. Period. And the bottom line there is their results were horrid. Not only did they underperform the market, they had negative returns during the largest market rally in years. Negative.

We're talking about the jobs that bankers do, so as to establish their intended function, because there has been a pernicious and absolutely bankrupt attempt to suggest, for purposes of argument, that bankers in all cases do no work, except the losing of money.

I'm sorry, what? Even if the entire financial system collapses and we're reduced to bartering for goods in small local communities, the commodities will still have value. A bar of gold will never become worthless, nor will a piece of silver or a barrel of gasoline. It's called intrinsic value. Look it up someday.

In a society hungry for basic goods, the intrinsic value of gold and silver is immaterial. It is their assigned value that matters. When the apocalypse comes, I hope I am not left holding a gold ingot.

Actually, they do. All of them. Banking by definition and in practice is the business of acting as the middleman in holding & moving money from one party to another. As with all middlemen they take a slice from the pie, a slice which will never be seen again.

But when I put my money in the bank, I expect some return. I do not put my money in the bank confident that it will disappear by drips and drabs as bankers "go to work."

lol, actually anyone can get better returns than these actively manged portfolios. Simply diversify your portfolio and let it sit with minor changes once in a while. Or you could get involved in a index fund if you don't want to check your stocks every once. These methods of investing have been proven to make better returns than these supposed financial wizards.

And at which bank are you on the executive fast-track?

In my mind everyone would apply for the same company and it would be up to the people hiring to determine the talent from the schmoes. It tells us nothing about how they go about determining that or how they measure the ongoing performance of their staff.

But it does prove that in your mind it is an ASSUMPTION that higher pay means more talented staff. An assumption which the evidence does not seem to support. No wonder it's so difficult to change your mind here.

If all else is equal, the firm making the higher offer will have the greater run of resumes and hiring options. Yes, there is also an assumption that the hiring and validation process will be a sound one.

[K. A. Pital]

When hundreds of thousands of people fail to do something effectively, despite the fact that many have had formal training, and all are supported by enormous analytic engines, the case for gross incompetence is far from open-and-shut.

Really? And what is it, fairy-tale magic? Kast, your idea that individuals have no responsibility for their job performance is not new... and it's still not really logical at all.

[Axis Kast]

Really? And what is it, fairy-tale magic? Kast, your idea that individuals have no responsibility for their job performance is not new... and it's still not really logical at all.

I said nothing of the sort. Kindly learn to read before barging into a discussion and letting loose with baseless accusations.

You, and all the rest, are invited - not for the first time - to explain how financial executives in their tens of thousands, most of whom are supported by analytical engines that employ in-house and contract economists, are all making bad decisions when, as many here would have us believe, "my dog could do it."

[Fingolfin_Noldor]

You, and all the rest, are invited - not for the first time - to explain how financial executives in their tens of thousands, most of whom are supported by analytical engines that employ in-house and contract economists, are all making bad decisions when, as many here would have us believe, "my dog could do it."

Kindly then explain to me how some physical concepts have fucking any relevance to the financial world because that's why they hire physicists and mathematicians to be quants for. If you cannot even so much as explain that, then your entire sentence has absolutely no grounding beyond blind faith.

[Axis Kast]

Kindly then explain to me how some physical concepts have fucking any relevance to the financial world because that's why they hire physicists and mathematicians to be quants for. If you cannot even so much as explain that, then your entire sentence has absolutely no grounding beyond blind faith.

In English, man.

The point is that rank stupidity and ineptitude are much less likely across whole populations, particularly when all of those individuals are receiving advice from people with qualifications in finance far superior to what can be drummed up on this board. If it's so easy that anybody can do it, then why isn't it being done? "Clear as the light of day" arguments always suffer from that vulnerability: if it is so damnably obvious, then how did tens of thousands, if not hundreds of thousands, of people miss it all so horribly? "All of them were morons!" is not a sensible answer - especially because the qualification for moron being offered on this forum is, "Didn't do what I think they should've done."

[mr friendly guy]

A firm that can offer more money can play headhunter. It will also get more consideration when an individual contemplates career options.

The argument is perfectly sound, and works by the same logic which dictates that larger schools that can afford to hold mass try-outs for a single team will tend to perform better than smaller institutions that must play every child out of desperation - most of the time.

What an awesome job these guys did right? Companies losing billions, going bust etc etc. Hey, they obviously managed to pick up great talent.

Not surprisingly you can't actually provide evidence for something which is "perfectly sound". Hey, I guess when theory and reality conflict, reality must be wrong. Thats the Axis Kast motto.

[K. A. Pital]

"All of them were morons!" is not a sensible answer

Ignorance or malevolence, or a combination of both in varying degrees are most of the time enough to explain 99% of bad outcomes in human history. Both ignorance and malevolence mean culpability for their bearer; ignorance a lesser one, malevolence a greater one. Bernie Madoff was an example of malevolence, for example. Many others who were engaging in various forms of legal, but risky activity, were examples of ignorant.

[ArmorPierce]

Wow, are you really this stupid? Do you even understand how capital markets work? Apparently not. When every single market goes up and the banks still lose money on their investments, it's a crystal clear indication of gross incompetence. When bonds, equity, and commodities are all rising it's trivially easy to make a positive return on investments; just buy into any broad-based market index (eg. S&P 500, ^TNX) and hold.

When hundreds of thousands of people fail to do something effectively, despite the fact that many have had formal training, and all are supported by enormous analytic engines, the case for gross incompetence is far from open-and-shut.

As I have said, the method has been proven by research and data. It is simple enough that anyone and their dog can do it. The reason they messed up is that they are taking on too much risk because they are rewarded for large returns but not punished for losses. Then there's also the thinking that they are better than everyone else and they thinking that they can time the market better than everyone else which research has shown that it's impossible to do consistently and creates further losses.

[Steel]

The point is that rank stupidity and ineptitude are much less likely across whole populations...

...unless the entire population was selected according to some bogus criteria that was not actually relevant to the job they were supposed to do. Suppose you offer a huge salary at your building firm for the position of bricklayer and recruit the people who are the most articulate and have qualifications in interior design, but haven't ever actually touched a shovel. Think the houses you build will be structurally sound?

Its almost as if the massive salaries just attracted the people best able to bullshit and most inclined to take big risks for short term gains with the least ability to actually assess whether it was a good idea in the long run or not!

I dont think its a coincidence that my banker/trader friends are: not retarded, good at maths and not losing money.

[Twoyboy]

In my mind everyone would apply for the same company and it would be up to the people hiring to determine the talent from the schmoes. It tells us nothing about how they go about determining that or how they measure the ongoing performance of their staff.

But it does prove that in your mind it is an ASSUMPTION that higher pay means more talented staff. An assumption which the evidence does not seem to support. No wonder it's so difficult to change your mind here.

If all else is equal, the firm making the higher offer will have the greater run of resumes and hiring options. Yes, there is also an assumption that the hiring and validation process will be a sound one.

I would challenge that assumption. After all, it's not a job where people can be given a simple test to determine their competence (like say, engineering, where several of the top companies will administer testing on potential candidates). The only way to distinguish candidates would be to check track records... but this doesn't eliminate those who get by on lucky breaks and insider trading, and surely every investment banker had a fantastic track record through the five years to October 2008... or to take it on a personal judgment, in which case...

Its almost as if the massive salaries just attracted the people best able to bullshit and most inclined to take big risks for short term gains with the least ability to actually assess whether it was a good idea in the long run or not!

...this seems much more likely.

However, for the sake of fairness, lets do another thought experiment. We have two companies. Company A pays $1M/year, regardless of performance. Company B pays $50,000/year, with a $1M/year performance bonus. Which one of these will people confident in their abilities apply for? Which one will get more hack applications from those with no real talent trying to bullshit their way into a good job?

[Darth Wong]

So, risk management and the ability to keep the company solvent are NOT important skills for a banker?

Risk management and managerial capability are absolutely important stills for a banker. However, the massive differentials in pay between small bankers and large can chiefly be explained by the belief of large firms that they are buying themselves one or more of the three types of expertise that I have mentioned.

And yet you have failed to show why those particular types of interpersonal expertise make someone "top talent" for running a bank. If anything, they only make someone "top talent" for convincing people to give him a huge salary, which is the gigantic hole in your theory. You are operating under the assumption that monster salaries with ridiculous golden parachutes necessarily attract the best personnel. But you have a nebulous definition of what "best" means, and for good reason: the problem here is that monster salaries attract everyone equally, and the winners will be the ones who are best able to convince the board to hire them, not necessarily the ones who will run the bank most effectively.

In fact, a monster salary with a correspondingly huge penalty for lousy performance would actually attract better personnel than a monster salary with a huge golden parachute. The former condition would attract someone who knows what he is doing to the point that he is confident he won't screw up, while the latter condition will just attract any sufficiently charismatic, dishonest asshole.

Still not seeing any evidence. You're just repeating your beliefs.

Let us perform a thought experiment. We take a group of people, who are self-interested. We establish two hypothetical firms, one offering 100 utiles of value for a certain kind of work, and the other offering 1,000 utiles of value for essentially the same work. Which is more likely to "capture" the desired talent? The sound money is on the higher-paying firm.

See above. And note: you have still not provided a shred of evidence. In fact, you have neither logic or evidence to support your theory.

Your problem is much like the central problem of free-market ideology in the first place: you think all of the traits of an individual or company can be summarized on a scale from "worst" to "best" for both the individual himself and for his customers, as if they necessarily have identical interests. It doesn't work that way. Just as the free-market model selects the "best" company for itself rather than society, the irrational-compensation model acquires employees who are best at securing it, not necessarily best for the company.

I keep it at a Canadian bank that was run much more competently than any of the banks we're talking about, by a CEO who was paid much less than the CEOs at the banks we're talking about.

Clearly, then, bankers do not, by definition, shovel money into deep, dark holes from which it can never be retrieved.

Yes they do. It's called "overhead expenses", which include executive salaries and bonuses. Are you honestly this clueless? Even if we totally ignore the wisdom of their investing decisions, their salaries represent what an engineer would describe as process inefficiency.

More worthless armchair psychoanalysis. I never said any of this nonsense, and you have not backed up your claims. Either back them up or suck them up, you lying sack of shit. You put words in peoples' mouths based on your ridiculous assumption that any expression of contempt must be sour grapes as if by definition, and you refuse to concede that this is not a logical deduction. When challenged on ANY of your claims, you simply repeat them, without offering a shred of evidence.

Your instant reply of, "But I could do this work!" is certainly indicative to me. If you wish to dismiss it as "armchair psychoanalysis," you are free to do so. I of course thankfully have no way inside your mind.

No, I said "ANYONE could do this work", you stupid asshole. I even explicitly included my dog in that. Does this mean I wish my dog could be an executive and I'm crying sour grapes because he can't be one?

You're a pitiful fucktard. You have absolutely no evidence. You have no logical foundation for your bullshit theory that irrational compensation (including golden parachutes) necessarily acquires the best personnel. All you have is this ridiculous armchair psychoanalysis nonsense, which you aren't even doing competently; it's an incredibly obvious red-herring, and anyone can see that you're simply seizing on one particular (flimsy) interpretation of peoples' arguments and ignoring all of the other possible ones (including the straightforward interpretation that they are saying precisely what they claim to be saying).

Every now and then, people like you remind me of precisely why it would be nice if the world were run only by people with scientific aptitude and training. You have repeatedly betrayed your inability to hew to the basic rules of logic throughout this debate, in such a manner that you have made it painfully clear that you are simply not accustomed to producing a logical argument or objective evidence.

[Darth Wong]

Obviously, after a week of silence, no response is forthcoming. I suppose I could be charitable and assume Kast just forgot or got busy or something, but I have a strong suspicion he just doesn't like to see his pet assumptions about executive compensation challenged. Anyone who defends golden parachutes as a necessary incentive for "top talent" even though they make the entire compensation scheme irrational by definition (ie- huge rewards even for abject failure) is clearly not being rational about this.

[bobalot]

It isn't executive compensation alone, it's the entire corporate culture. Bullshitters get hired into the better jobs. Ever met some arsehole a few levels above you and ever wondered "Why has this guy have this job? He is fucking incompetent!"? You are probably met some guy who was able to bullshit his way through the interview.

I have seen guys claim credit for work done by the teams under them without ever contributing in a meaningful way, make ridiculous rules that are unworkable in the field, blame their staff when these unworkable rules cause delays and extra costs, literally have no idea how sections actually do their work (luckily for them, these sections were able to take care of themselves), etc. but these guys keep getting promoted. It's fucking amazing.

[Darth Wong]

And naturally, those same Peter Principle douchebags are usually the first people to buy into this unfounded "the higher the pay, the better the man" axiom that Kast is peddling as unassailable truth. They're taking a reasonable statement that "higher pay attracts the best personnel" and assuming it means "higher pay selects the best personnel", which it doesn't because it's not an exclusive statement. Higher pay also attracts everyone else.

[aerius]

Obviously, after a week of silence, no response is forthcoming. I suppose I could be charitable and assume Kast just forgot or got busy or something, but I have a strong suspicion he just doesn't like to see his pet assumptions about executive compensation challenged. Anyone who defends golden parachutes as a necessary incentive for "top talent" even though they make the entire compensation scheme irrational by definition (ie- huge rewards even for abject failure) is clearly not being rational about this.

Or to put it another way: Good pay, no consequences for failure, and a guaranteed golden retirement.
Is it just me or does this sound like unionized government labour?

[ArmorPierce]

Just saw that Axis Kast had replied to an earlier post of mine

lol, actually anyone can get better returns than these actively manged portfolios. Simply diversify your portfolio and let it sit with minor changes once in a while. Or you could get involved in a index fund if you don't want to check your stocks every once. These methods of investing have been proven to make better returns than these supposed financial wizards.

And at which bank are you on the executive fast-track?

I like how you just dismiss a argument with really nothing but stating I'm not being paid a grossly inflated salary, thus they must know something that everyone else doesn't because otherwise they wouldn't be paid for it.

His response is basically: Academic research? That means nothing.

http://www.dfaus.com/library/articles/a ... s_passive/

Debate about active management vs. passive management began in earnest in the early 1970s. Already by then, researchers had uncovered considerable evidence that past prices were of little benefit in forecasting future prices in ways that would earn excess profits; that fundamental data was too quickly reflected in prices to allow such data to be used for beat-the-market purposes; and, most importantly for us, that professional money managers could simply not outperform markets in any meaningful sense. The latter tests are most pertinent for us, and of these, there is not one major published study that successfully claims that managers beat markets by more than one would expect by chance.

Several recent studies deserve brief mention. In the first major study of bond market performance, Blake, Elton and Gruber examine as many as 361 bond funds for the period starting in 1977. They compare the various active funds to simple index strategy alternatives. The authors find that the active funds, on average, underperform the index strategies by 85 basis points a year. Depending on the benchmark, between 65 and 80 percent of the funds generate excess performance that is negative.

In a study of equity mutual funds, Elton, Gruber, Hlavka and Das examine all funds that existed for the period of 1965-1984, 143 funds in all. These funds are compared to the set of index funds—big stocks, small stocks and fixed income—that most closely correspond to the actual investment choices made by the mutual funds. The result: on average these funds underperform the index funds by a whopping 159 basis points a year. Not a single fund generated positive performance that was statistically significant. In the most recent and comprehensive study done to date, a dissertation at the University of Chicago, Mark Carhart studies a total of 1,892 funds that existed any time between 1961 and 1993. After adjusting for the common factors in returns, an equal-weighted portfolio of the funds underperformed by 1.8% per year.

Now, can you please make a response that is more deep than "You are just jealous lawls" and "they get paid the big bucks, they must have such a rare talent in investing!"