Yes, hedge funds get better info flow and deal terms. That doesn't mean they're guaranteed to be winners. Just look at Paulson, who killed it on RE shorting but is now having a very rough go of it. Money is fickle in that world and it's very difficult to keep significant assets for the long haul.

The bigger issue is that the US got spoiled by sizable asset gains in RE and equities from 1982 to 2000. Now things have been treading water or down and most don't want to accept that their only chance for saving and wealth accumulation is from their salaries. Sorry, but that is the way it is. When rates eventually go up, RE will feel more pain and stocks will likely stay volatile for some time. No free lunch anywhere...

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3. Easy. All the things you mentioned are tangibles. I can't hold or really see what the financial system does. I can see though the products of tech, property being sold, food items, and transportation.

5. They were all making over 100k a year well before Obama came to office.

1) OWS has no cohesive message.
2) There are many more hedge fund people that are struggling than are wealthy, as with 8000+ hedge funds, the top 5% gets most the assets. 300-1000 go under each year. Its really a mom and pop business, some make it, many others don't.
100% get no bailout money from the Government,
2.5) Congress can do insider trading, NO one else can, (maybe Goldman) ask Raj Rajaratnam.
3) Why do smart people in other fields get passes for being rich? Technology, real-estate, agricultural, rail-roads..etc..
4) I know hedge funds better than most.
5) OWS should ask how many more folks in DC are making over 100k, since BHO snuck in the White House.
6) Fannie Mae bonuses are on us!
Good Night to all 99 & top 1.

The OP used some scary terms to pretend the smart and connected folks playing in the financial casino had the game rigged to leech off the 99% into the coffers of the 1%. To me, that's just oversimplification to support some of OWS's points. Yes, bigger money players get better deals on stuff - but that is simple capitalism. The more I buy the bigger my discount.

Why pension funds and 401k can't use the "smart plays" like the long/short strategies of the hedge funds? Well it's down to one word. RISK. Lehmans, Jon Corzine, John Paulson are recent examples of big prop trading funds that gambled big and lost. They used leverage, created complex trading strategies, and their arrogance overrode their risk management.

401ks, Pension Funds and the like are investment vehicles designed to protect capital (your savings), and avoid RISKY investments. By law they can't invest in the financial instruments of mass destruction that bankrupted Lehman and Corzine's MF Global.

I was hoping the OP would respond to some of my questions on his/her post - but it looks like they simply cut-and-pasted a OWS post from someone else. So much for a real dialogue on this thread...

Google turns up http://www.reddit.com/r/occupywallstr ... _wall_street_and_work_in/

Mind posting the link from reddit?

1. Indirectly individual investors have exposure to funds through pension and retirement plans.

2. You do not have to pick individual stocks, you in fact can by index funds that perform close to market.

3. Some of the HF stuff, mostly the OTC is nothing but mathematical gamemanship. The smarter guy walks home with the 25 mil bonus. The dummer walks away with 1 mil.

4. The funny thing is that during the real estate boom, there were proposals to hedge real estate prices through derivatives based on some general index (case shiller). Since the market was booming, nobody was interested then. And now, nobody wants to get into since the general sense is negative.

5. Otherwise, op and follow-ups is tend to be accurate.

I have to agree about the idea of NOT allowing people to trade in derivatives, especially the unregulated ones, seems like dooming the 99% further....
As for these companies making a profit tomorrow by harvesting the web today let me have a little laugh please. Everyone knows that the 1% are making a killing through their special slots in trading data center. I think I heard about a location in parsippany once, if right this is where OWS should demonstrate. If you make a profit through milliseconds curve analysis avantage, I am sorry, this is not investing, this is parasitism. Tax rates should def be higher than 35% for that kind of "hard work" which doesn't benefit society at all. This is not about providing "liquidity" to the economy.

the original post was littered with inconsistencies, but i'll attack just a few of the basic ones

- the bid/ask spread is not nearly this high for the vast majority of stocks you'll ever buy. stocks maintain high liquidity (a very large number of people buying/selling at any given time). the only time you see large bid ask spreads are when there is an absence of liquidity

- companies just don't sell stocks with warrants like that all the time since it negatively impacts shareholders (especially the CEO and executives, who usually have large stock positions). they'll only do this if they really have to

- when athletes train, they hire trainers and nutrition experts to make sure they are stronger and faster than their opponents. some take illegal drugs to boost their performance even more.

this is similar to the finance industry; they hire the smartest grads, from prestigious colleges and MBA programs, and pay them large salaries so that they can have a competitive edge. sometimes, they engage in illicit activities (like insider trading), but most of what they do is legitimate. a big part of what they do is scouring the web and the newspapers looking for information that will impact stock prices TOMORROW, and acting on it TODAY in order to make a profit.

- finally, the original poster laments the fact that everyone doesn't have access to derivatives trading, swaps, etc. After watching the housing market collapse because people too stupid to be able to tie their shoes, let alone own a house, defaulted on their loans, do we REALLY want these people trading exotic derivatives? come on man

Explain why you're so F'in arrogant

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Explain volatility
Explain Black Swan
Explain tail risk
Explain the rules under which 401ks and pension funds have to operate
Explain why most of the hedge fund industry operates outside the US
Explain why you don't think Dodd-Frank won't protect individual investors from this abuse
Explain why 1 year in the industry makes you an expert
Explain why you're still there if it's so morally corrupt?

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This is exactly the problem with this kind of thinking. The reason the rich can invest in these types of investments is because they can afford to lose the money. The 99% can't.

Wow. Thanks, I think... I wonder if my NYC Government Pension or 457K invests in these funds? I doubt it, since they seem to be loosing value slowly and steadily LOL. Seriously, I appreciate the background, but should I go out an join OWS, as opposed to just support it, as I do? Here is a question for you:
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Is this inherently bad/problematic/etc. for the larger economy, or should the 99.9% of us be trying to put our investments into these types of funds?

P.S. - you sound like you know your stuff! What are you doing in JC, instead of living in Greenwich Village with the rest of hedgefund set? LOL

From Reddit: I work in Wall Street and work in hedge fund analysis. I'm the only person in my office who supports OWS

This is a self-post, so I'm not trying to karma-whore or anything. I have a message I want to share with anyone who's interested.

I'm writing this in hopes that the OWS movement can have a better understanding of the hedge fund industry and the financial markets. With OWS being the zeitgeist of current politics, I think it's important to know how exactly the hedge funds, along with the financial markets are destroying the 99%.

Hedge funds. These guys are basically the vehicles of choice for ultra-rich people to get into the financial markets, besides family offices and private wealth managers. What are hedge funds? They are funds that have a 1-5 million deposit minimum, cater to the mega-rich, and can invest in anything without regulatory restrictions, use leverage to pump up their exposure by 15x, and pretty much eat up a vast majority of the industry's profits.

These guys invest in EVERYTHING. Instruments you've heard of - stocks, bonds, forwards, futures, currencies, and instruments that you, me, or anyone else have never even heard of, much less know anything about: commodity future swaptions, FRA/OIS swaps, CLOs, exotic future options, p-notes, index/commodity/equity exposures, and a huge array of OTC (over-the-counter) instruments that no regular investor would ever have access to.

Why I bring this up: the financial markets are rigged. 99% of the investing public has access to services such as basic brokerages, 401k/IRA's, mutual funds, pension plans, etc. Some of these services, especially pension funds, will invest into hedge funds, who take an additional 2 and 20 (meaning 2% of assets plus 20% of capital gains).

What this means is that if you go any of the traditional retail routes, you are utterly screwed facing off against the hedge funds.

First, you are paying exorbitant fees. Commissions on every stock trade. Mutual fund managers taking a cut - an annual % cut, as well as a % per profit cut. If these managers (i.e. pension plans) invest in another fund, that fund is also taking another % cut. You're down 2% the minute you invest your money.

Next, if you're doing the investing yourself, you're paying ridiculous spreads. The bid/ask spread of a stock will cause you to be down another 2-3% the minute you buy the stock. For example, if you're buying a share of company at $4.25, you can sell back at only $4.15.

Furthermore, you have absolutely no chance in terms of access to the best services. Hedge funds have a direct line to investment bank's institutional brokerage teams - these are the guys that spend day and night sucking up to hedge funds, trying to get them the best deals at the cheapest rates. This means that while you're buying stocks and bonds, hedge funds are getting special rights, warrants, sweetheart deals, private placement deals, options, bigger discounts on bonds, and much better bulk commission rates and lower spreads on stocks. If you're paying 4.25$ for a 4.15$ stock, they are paying something like 4.16$. And they are eating alive your profits because when the stock goes up to $4.30, they can activate another warrant to purchase 20m shares at $4.25, diluting the value of your shares.

Next, you lack information and exposure. You have no idea what is going on in the market besides what you see on the news - while hedge funds have analysts working around the clock and a bunch of service providers who give minute-by-minute analysis of their portfolio opportunities and weaknesses in all markets with exposures to nearly everything. Meaning, if there is an opportunity in the real estate market (i.e. legislation), it might take you weeks to get in - hedge funds will have gotten in the minute the legislation was passed. Furthermore, when IPOs come out for companies, hedge funds get top billing on the primary market shares - which means investment banks are selling directly to them. Once the secondary market becomes available, hedge funds are up 15-20% on these investments, sometimes within hours.

Finally, you have no capital compared to these hedge funds. The people who invest in these hedge funds are not just the 1%, they are the 0.1%. These are the guys with 500million dollar bank accounts and the ability to do whatever the #OOPS# they want. Hedge funds know this, and they invest without having to care about whether their clients can pay the rent or send their kids to college. All of that is irrelevant. Their sole purpose is to earn money, not to mitigate risk.

What does this all mean? It means the hedge fund industry is making a gigantic proportion of the profits. The top .1% is earning nearly half of the profits in the industry, through not just hedge funds, but other similar vehicles.

The finance industry is a complete scam, designed to funnel money from the 99% investing public into the hands of the top .1%. Sure, some of you will make good money, but stastically, the rest of us will lose, and who is feeding off us? Hedge funds, and the .1%. You have better odds going to a casino and playing slots, the worst-paying game in the house, but still better than the stock market.

Also, the government is in bed with the financial industry. Tax loopholes give hedge funds and other top players the ability to write off losses and not pay taxes on gains for years at a time. For income they derive from the hedge fund (profits), they pay only 15%, rather than the 35% income tax charged to most people earning 80k and above. Meanwhile, you have to pay taxes for not just your own income but also capital gains.

The worst part by far is that the government "encourages" you to put your money into your 401k through 'tax exemptions', which basically puts your money with the lowest tier of the financial industry - pension funds, retail wealth managers, and retail asset managers. These guys have shit strategies like long-only or domestic equity (which means they only invest in American stocks), and have nowhere near the capability and reach of hedge funds. These guys are even more likely to lose your money than you are, and even worse is they will take a 2.35% cut while doing so. And you get penalized when you try to take your money out early. How f***ed up is that.

In other words, if you aren't in the .1%, you have no access to the derivatives markets, you have no access to the special deals that hedge funds and other wealthy investors get, and you have no access to the resources, information, strategic services, tax exemptions, and capital that the top .1% is getting.

If you have any questions about what some of the concepts above mean, ask and I will try my best to answer. I'm a first-year analyst on wall street, and based on what I see day in and day out, I support the OWS movement 100%.

tl;dr: The finance industry funnels money from the masses to the ultra rich, through vehicles like hedge funds which dominate all of the financial markets.

h/t Scott