Monday, May 3, 2010

The Fun of Risk: Funny and Occasionally Insightful Financial Quotes

1. "The fact that our econometric models at the Fed, the best in the world, have been wrong for 14 straight quarters does not mean they will not be right in the 15th quarter."

Alan Greenspan

2. “You take hundreds of drunks staggering down the street, and you make them put their arms under each other's shoulders and lock hands. Then you rely on the fact that they are falling in different directions”

Anonymous investment banker on the modern idea of diversification quoted by John Cassidy in "How Markets Fail"

3. “We go about managing risk and market activity every day at this company.
It is what our clients pay us to do and, as you know, we are pretty good at it.”

Stan O’Neill former CEO of Merrill Lynch

4. “We will administer a little coup de whiskey to the market”

Ben Strong Head of New York Fed in 1927 of lowering the cost of money to fuel the markets

5. "Stock prices have reached what looks like a permanently high plateau."
Irving Fisher on October 21 1929, just a few days before the 1929 Crash

6. “Every time there's been a fire, these guys (derivative traders) have been around it."
Nicholas Brady, Secretary of Treasure of Treasury under R.Reagan and G. Bush

7. “Thus the professional investor is forced to concern himself with the anticipation of impending changes, in the news or in the atmosphere, of the kind by which experience shows that the mass psychology of the market is most influenced. This is the inevitable result of investment markets organised with a view to so-called “liquidity”. Of the maxims of orthodox finance none, surely, is more anti-social than the fetish of liquidity, the doctrine that it is a positive virtue on the part of investment institutions to concentrate their resources upon the holding of “liquid” securities. It forgets that there is no such thing as liquidity of investment for the community as a whole. The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelop our future. The actual, private object of the most skilled investment to-day is “to beat the gun”, as the Americans so well express it, to outwit the crowd, and to pass the bad, or depreciating, half-crown to the other fellow.”
John Maynard Keynes

8. “Indeed, the typical graduate macroeconomics and monetary economics training received at Anglo-American universities during the past 30 years or so, may have set back by decades serious investigations of aggregate economic behaviour and economic policy-relevant understanding. It was a privately and socially costly waste of time and other resources.”

William Buiter, Professor of European Political Economy, London School of Economics and Political Science; former chief economist of the EBRD, former external member of the MPC

9. “The most important financial innovation that I have seen in the past 20 years is the automatic teller machine, that really helps people and prevents visits to the bank and it is a real convenience.”
Paul Volcker

10. “Chariman Greenspan might wax lyrical about the unbundling of risks, but we spend most of our waking hours rebundling the risks and stuffing them down the throats of any investors we can find”
Satyajit Das, Derivatives Expert

11. “When I think that I had some input into the creation of this product(…the type of thing which you invent telling yourself: 'well, what if we created a 'thing', which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price?") it sickens the heart to see it shot down in mid-flight...It's a little like Frankenstein turning against his own inventor ;)”

Fabrice Tourre, Goldman Sachs Executive Director

12. "I managed to sell a few abacus bonds to widows and orphans that I ran into at the airport, apparently these Belgians adore synthetic abs cdo2,"

Fabrice Tourre, Goldman Sachs Executive Director

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