The New Yorker On The Social Worth Of Wall Street

by TKOEd • Tuesday, Nov 23, 2010 • no responses - be the first

What Good Is Wall Street?: Much of what investment bankers do is socially worthless.

This is an epic article. It’s a must read of the highest order if you care at all about what’s happened to our country not just over the last few years, but over the last 30.

Giełda na Wall Street

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Here’s an excerpt where the writer, John Cassidy, is talking to an ex finance insider, Paul Woolley:

At first, like most economists, he believed that trading drove market prices to levels justified by economic fundamentals. If an energy company struck oil, or an entertainment firm created a new movie franchise, investors would pour money into its stock, but the price would remain tethered to reality. The dotcom bubble of the late nineteen-nineties changed his opinion. GMO is a “value investor” that seeks out stocks on the basis of earnings and cash flows. When the Nasdaq took off, Woolley and his colleagues couldn’t justify buying high-priced Internet stocks, and their funds lagged behind rivals that shifted more of their money into tech. Between June, 1998, and March, 2000, Woolley recalled, the clients of GMO—pension funds and charitable endowments, mostly—withdrew forty per cent of their money. During the ensuing five years, the bubble burst, value stocks fared a lot better than tech stocks, and the clients who had left missed more than a sixty-per-cent gain relative to the market as a whole. After going through that experience, Woolley had an epiphany: financial institutions that react to market incentives in a competitive setting often end up making a mess of things. “I realized we were acting rationally and optimally,” he said. “The clients were acting rationally and optimally. And the outcome was a complete Horlicks.” Financial markets, far from being efficient, as most economists and policymakers at the time believed, were grossly inefficient. “And once you recognize that markets are inefficient a lot of things change.”

Woolley is also quoted making statements like this: “Why on earth should finance be the biggest and most highly paid industry when it’s just a utility, like sewage or gas?”, and: “It is like a cancer that is growing to infinite size, until it takes over the entire body.”

I encourage you to read the whole thing. It shed light on some things without the use of much finance jargon.

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Liberal Decalogue

by TKOEd • Friday, Nov 19, 2010 • no responses - be the first

Via @LoveMySkip comes this from Agnostic Universe:

Bertrand Russell (1951)

1. Do not feel absolutely certain of anything.

2. Do not think it worth while to proceed by concealing evidence, for the evidence is sure to come to light.

3. Never try to discourage thinking for you are sure to succeed.

4. When you meet with opposition, even if it should be from your husband or your children, endeavor to overcome it by argument and not by authority, for a victory dependent upon authority is unreal and illusory.

5. Have no respect for the authority of others, for there are always contrary authorities to be found.

6. Do not use power to suppress opinions you think pernicious, for if you do the opinions will suppress you.

7. Do not fear to be eccentric in opinion, for every opinion now accepted was once eccentric.

8. Find more pleasure in intelligent dissent than in passive agreement, for, if you value intelligence as you should, the former implies a deeper agreement than the latter.

9. Be scrupulously truthful, even if the truth is inconvenient, for it is more inconvenient when you try to conceal it.

10. Do not feel envious of the happiness of those who live in a fool’s paradise, for only a fool will think that it is happiness.

 

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