HedgefundLIVE.com– Over the weekend, the New York Times published an article by Paul Krugman entitled Degrees and Dollars. The article begins with an anecdote from President Obama’s recent speech in Florida where he proclaimed “If we want more good news on the jobs front then we’ve got to make more investments in education.” Krugman refutes this notion by stating how an influx of technologies have been slowly replacing “white collar” jobs for years. He states “More broadly, the idea that modern technology eliminates only menial jobs, that well-educated workers are clear winners, may dominate popular discussion, but it’s actually decades out of date.”
This argument is particularly salient for the Wall Street community. In 2009, it was estimated that 73% of all US equities orders were placed electronically. The advent of algorithmic execution has had a profound impact on market action and has eliminated the need for many trading positions. Why would a portfolio manager hire an execution trader when he or she could simply run a VWAP. Or better yet, that same manager could pay a team of programmers to build an elegant model that accounts for market participation, time, velocity, and an array of technical and fundamental figures. The only thing left to do is sit back and ring the register. Even some of the most successful, employed day traders have been unable to adapt to the changing market environment and find themselves digging at the bottom of an empty bag of tricks. How many times have you heard the guy next to you say “This market is just impossible, day trading is dead!” So while education and self improvement will always be the pillars of growth, they are not necessarily the pillars of success. Perhaps we should add two new courses to the modern college curriculum: Lowered Expectations and Robot Construction.COME JOIN OUR LIVE BROADCAST MON-FRI 8AM – 5PM AT HEDGEFUNDLIVE.COM. PICK A CHANNEL AND GET CONNECTED.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.