If a senate report causes issues for you, I don't think it's exactly crap. But I understand your point :) It also keeps mentioning Reg T which I agree is not relevant here. I was wrong to say that RenTech used illegal amounts of leverage, thanks for explaining that. I'm still not convinced it's wrong to say that RenTech worked with BDs to bypass rules that would have stopped them from using the leverage they did in the manner they did.
Was the leverage in the non-lending category though? Isn't that like saying their gains were long-term? That's the whole point of this, no? They used some different terminology to reclassify loans and taxes, in order to use more leverage and pay less tax than they normally would have.
I guess another way to put it: would there have been a way for RenTech to hold the same portfolio, using the same leverage, with the same payout characteristics, that no government agency would have issues with? Maybe the answer is yes, but I doubt it.
But there are laws preventing a broker from lending you that money. The hearing cites the SEC net capital rules which Rentech and DB worked together to bypass. There are pages dedicated to how RenTech DB and Barclays knowingly and purposefully circumvented rules with some changing of terminology. Starts on page 79 [0].
I definitely should have been more clear with my original statements. Maybe something more along the lines of: at rentech's scale, using a margin account at a prime broker, you cannot leverage your firm 16x.
They weren't in violation of Reg T. They were in violation of Reg U and Reg X. You are right that there is no law saying you can't use more than x leverage, but there are absolutely regulations governing loans in margin accounts and using securities as collateral for leverage. And The government believes Rentech was in violation of them.
It was never about returns exceeding borrowing costs. Rentech is probably the greatest money manager of all time. They can make returns that exceed the borrow costs.
It was always about the amount of borrow available, and the tax paid on the gains. The (illegal) strategies they used allowed for much larger borrow amounts, as well as only paying long term capital gains, when in reality there were millions of trades.
The simple setup: Rentech pays the bank $1B for a call option. The call option is on a $10B pot of money. The bank then hires Rentech to invest the pot of money for them. After a year or two, Rentech then exercises it's call option, which gives it everything in the pot except the bank's $9B plus a fee. The banks loved this fee. And since this was a year long call option, all gains are taxed as long term. They avoided $6B in taxes doing this.
Not me, The IRA thinks it's illegal. There are limits on how much leverage you are legally allowed to use, and Renaissance has made a name for itself by trying to bypass those laws in every tricky way possible.
Most of what we know about Rentech's strategies comes from Senate hearings regarding the sketchy things they do. The common theme is that they find strategies with fairly low returns (~3%), and very low risk. They then use massive (and illegal) amounts of leverage, as high as 16x, to turn those low risk, low return strategies into outstanding returns. James Simons and Robert Mercer are among the largest donors ever to both political parties, so it isn't much of a surprise that these hearings haven't really gone anywhere.
Of course it isn't just that simple. Leveraging a strategy should increase it's downside risk along with it's returns. But somehow Rentech does it while never actually experiencing that downside risk. That's their mathematical genius. And the fact that they employ so many brilliant mathematical minds leads me to believe that part may be real.
I guess everything you wrote is correct, but it seems like a very white-middle-class perspective. Legal segregation in America only ended a generation or two ago. That's just one of many examples which meant that for many Americans, since the founding of the country, there was never a hill. More like a ditch they couldn't leave.
Of course it's a massive issue, but it always amuses me when people look back to how "great" it used to be. For a white male, the 50's seemed pretty great. If I was anything else I'm pretty sure I would choose 2019.
These articles are silly, and don't understand alcoholism. They give a few examples of successful ways that people have quit on their own, and since lots of people did it that way, then it must be more effective than treatment.
They miss the blindingly obvious point that every single person in treatment has already tried and failed those "self-help" ways. Treatment is a final, desperate, step for alcoholics, once all those self treatment methods have failed. You can't compare the two, and the first treatment has already failed for the second group.
It's like saying Tylenol is a more effective treatment than going to the hospital, because more people get better that way. Of course they do - because they have a less serious problem.
These statements and studies show how little the average person, even a doctor, understands about alcoholics. Anyone who's attended an AA meeting or worked with alcoholics can easily tell you what's so crazy about these types of studies:
AA is full of people who, by definition, cannot quit on their own. Other than some court-ordered cases, every single person in AA has already tried and failed to quit on their own. It's a nonsense comparison.
You are comparing a group of people who have never tried quitting before, with those who have already spent years failing to quit on their own. Of course the first group does better! The second group is filled with more serious conditions. If they were able to quit on their own they would have never tried AA.
> I showed them it is statistically very unlikely they would find a better candidate
So I get where you are coming from, but not having the 1/20 requirement is a much easier excuse than explaining why they don't want someone who thinks it's ok to do this.
I realize this doesn't actually matter and I feel weird defending Renaissance... but Virtu is a public company and hasn't been doing that well, and returns from Citadel's various funds are not hard to find. Also, I don't know how to compare a fund's returns to that of a private business. But Medallion has been around since before HFT was really a thing, and I'm not aware of any HFT places that have been growing at 70% a year for 20 years.
> the rituals embedded in the doctor-patient encounter that he thinks are fundamental to the placebo effect
> “Medical care is a moral act,” he says, in which a suffering person puts his or her fate in the hands of a trusted healer.
I have a friend who is a naturopath, and this is basically what she believes her job to be. Almost more of a therapist at times, a friendly ear to confide in.
The average experience with doctors isn't always that pleasant. It feels clinical and rushed, and very non personal. They are concerned with symptoms, not the actual person in front of them. They don't really listen, as a therapist would. And it's not their job too.
Contrast that with an alternative healer. They will sit and talk and listen and empathize with you for an hour. For a person in pain, it might be the first time they have ever felt like someone actually understands and cares. It's not surprising that they feel better afterwards. I think that goes a long way to explain the popularity of fake medicine.
Non of those things are helpful for gaining strength or building muscle. Do a basic barbell program and eat 6000 calories every single day and I guarantee you that you will see results.
Bloomberg is also one of the most valuable tech companies in the world. Their entire business model revolves around providing accurate financial information. We happily pay $2k per month per person for it, partly because it is such a trusted source.
Some reporters may be dumb, but if it has the Bloomberg name attached to it, and has far reaching effects in financial markets, you can be pretty confident that this wasn't just the work of some clueless reporter.
As an engineer who hadn't studied that type of math in quite a while, Elements was pretty tough and I was getting stuck a lot.
ISLR introduces you to many of the same topics in a less rigorous way. Once I was familiar with the topics and had worked through the exercises, Elements became much easier to learn from.
Was the leverage in the non-lending category though? Isn't that like saying their gains were long-term? That's the whole point of this, no? They used some different terminology to reclassify loans and taxes, in order to use more leverage and pay less tax than they normally would have.
I guess another way to put it: would there have been a way for RenTech to hold the same portfolio, using the same leverage, with the same payout characteristics, that no government agency would have issues with? Maybe the answer is yes, but I doubt it.