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Banking is necessary; banks are not.
There was a period of remorse and apology for banks and I think that period needs to be over.
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity, but to their self-love.
Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.
If the story of the past quarter of a century has a one-line plot summary, it is the rediscovery of the power of market capitalism.
These capitalists generally act harmoniously and in concert to fleece the people, and now that they have got into a quarrel with themselves, we are called upon to appropriate the people’s money to settle the quarrel.
I have friends who keep telling me how much it costs them to keep me in poverty.
I sometimes wonder why people still use the Black-Scholes formula, since it is based on such simple assumptions - unrealistically simple assumptions.
Derivatives are the most sophisticated of financial instruments, the most intricate, the most arcane, even the most risky. Very 1990s and to many people a dirty word.
Speaking philosophically, interpreting something as a derivative depends on one’s point of view. (…) Whether or not it pays to make this interpretation depends on the particular purpose at hand.
Derivatives need to be well-controlled and understood. We believe that we do that here.
It’s just that so much more is known now and so many things have been pretty well solved, that the scale of the problems remaining, in what you could call pure derivatives technology, isn’t of the same order that it once was.
Don’t focus on derivatives. One of the most dangerous activities of banking is lending.
In an efficient market, competition among the many intelligent participants leads to a situation where, at any point in time, actual prices of individual securities already reflect the effects of information based both on events that have already occurred and on events which, as of now, the market expects to take place in the future.
Investing in a market where people believe in efficiency, is like playing bridge with someone who has been told it doesn’t do any good to look at the cards.
In markets as efficient as the financial markets, attempts to out predict the market are unlikely to be successful. Because forecasting is thus a very unreliable means of eliminating risk, a remaining alternative is to manage the risks.
Every forecast is a probability distribution
The only function of economic forecasting is to make astrology look respectable
Prediction is very difficult, especially about the future
If I have seen further it is by standing on the shoulders of giants.
The most influential development in terms of impact on finance practice was the Black-Scholes model for option pricing.
The major impulses to successful innovations over the past twenty years have come, I am saddened to have to say, from regulation and taxes.
Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.
Financial markets exist to sell product.
We are in the midst of a financial crisis the likes of which has not been seen since the Great Depression of the 1930s. It is not business as usual, but the end of an era.
When the allocation of capital is the by-product of the activities of a casino, the job is likely to be ill-done.
T'is against some men’s principle to pay interest, and seems against others’ interest to pay the principal.
You only find out who is swimming naked when the tide goes out.
The most powerful force in the universe is compound interest.
All models are wrong, but some models are useful.
Value-at-Risk is pure charlatanism.
The Sharpe ratio is oversold. I take the point that Sharpe ratios can give a false sense of precision and lead people to make predictions unwisely.
It is unfortunate that many market practitioners still base their analysis of the relationship between markets on the very limited concept of correlation. Trying to model the complex interdependencies between financial assets with so restrictive a tool is like trying to surf the Internet with an IBM AT.
A disordered currency is one of the greatest political evils.
There is no sphere of human thought in which it is easier to show superficial cleverness and the appearance of superior wisdom than discussing questions of currency and exchange.
The word ‘risk’ derives from the early Italian risicare, which means ‘to dare’. In this sense, risk is a choice rather than a fate.
Most major banking problems have been either explicitly or indirectly due to weaknesses in credit risk management.
We are still living in the dark ages of financial risk management, where financial apothecaries face each new crisis with leeches, blood-letting, mumbo-jumbo, or simple blind faith in the markets.
A lot of people approach risk as if it’s the enemy when it’s really fortune’s accomplice.
Risk comes from not knowing what you are doing.
Major failures of regulation and supervision, plus reckless and irresponsible risk-taking by banks and other financial institutions, created dangerous financial fragilities that contributed significantly to the current crisis.
Markets can remain irrational longer than you can remain solvent.
The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.
For the typical retail investor, day trading isn’t investing, it’s gambling. If you want to gamble, go to Las Vegas; the food is better.
A fool and his money are lucky enough to get together in the first place.