Evaporation

Tom Wolfe wrote the novel The Bonfire of the Vanities included a look at the top of Wall Street. Wolfe has now written a history of the real people at the top for Newsweek. Much of it is a description of the Masters of the Universe -- the traders who, because they can easily earn $50K in fees for a transaction that takes only a few minutes, feel that everyone else is contemptibly beneath them. But the Masters were overtaken by the Quants, quantitative analysts, who figured out another way to make money. Quants don't invest, they look for minor discrepancies between buy and sell prices and take advantage of it. As Wolfe puts it, they diddle the market. Some 75% of today's trades are because of this diddling. To make money at it (and some make lots) the trades must happen in milliseconds, which means what the Quants are doing is writing algorithms so computers can find and execute these deals.

A long time ago a factory manager owned the factory. He cared a great deal about how successful it is, sometimes putting his life on the line. The next step was stock ownership, the evaporation of capital. As we've seen from stories of Romney and Bain Capital, the stock owner doesn't care about the factory. If things don't go his way, he sells the stock (or the factory), end of problem. Quants take that another level, evaporation of investment. They can diddle any stock. The fate of any particular stock is of no interest to them. And all that money is part of the transfer from poor to rich.