
The End of Wall Street (Liar's Poker author) - alecco
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom?tid=true
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randrews
Joel Spolsky, or maybe Steve Yegge (or maybe both), wrote an article once
about how you should always understand your business at a level of abstraction
_lower_ than what you actually deal in. If you write in C, know what a C
compiler does. If you sell clothes, know something about your distributors.
And so on.

Does anyone else think this may have all been avoided if investors had
followed that rule? If you trade C.D.O.s, know what they're made of; if you
trade mortgages, know who they're sold to?

Or maybe nobody knew this because it was deliberately hidden. I'm just
assuming that on this vast a scale, it's more likely incompetence than
corruption.

~~~
kirubakaran
Sufficiently advanced incompetence is indistinguishable from corruption.

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kirubakaran
Insane and hilarious:

 _He called Standard & Poor’s and asked what would happen to default rates if
real estate prices fell. The man at S&P couldn’t say; its model for home
prices had no ability to accept a negative number._

~~~
time_management
I find that almost impossible to believe.

~~~
mixmax
From an intellectual point of view I do too.

When I read the news I'm sure it's true.

~~~
litewulf
I mean, what if there's a sqrt or something like that in the model. Imaginary
numbers are fun to pay off, but no fun to receive :)

Also: perhaps the model was built up using empirical data and they just never
really had a chance to update the model when home prices were going down... I
don't find it all that weird for them to produce data-driven forecasts ;)

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jeroen
Single-page link: [http://www.portfolio.com/news-markets/national-
news/portfoli...](http://www.portfolio.com/news-markets/national-
news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom?tid=true&print=true)

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nazgulnarsil
_The public lynchings of Gutfreund and junk-bond king Michael Milken were
excuses not to deal with the disturbing forces underpinning their rise. Ditto
the cleaning up of Wall Street’s trading culture. The surface rippled, but
down below, in the depths, the bonus pool remained undisturbed_

and the exact same thing will happen again. symptoms will be treated, root
causes ignored.

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fallentimes
Michael Lewis is one of my favorite writers and this article exemplifies why.

I highly recommend _Liar's Poker_ even if you only have a passing interest in
finance. My favorite exchange from the book went something like this:

 _> Boss: I thought you said you spoke French

>Lewis: No, that's just something I put on my resume._

The slayed Bull picture alone was worth the click.

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sethg
It seems to me that when you make money by investing, you can never really
know if you are lucky or smart. But of course, we'd rather see ourselves as
smart, and the ones who see themselves as lucky are not going to want full-
time jobs on Wall Street.

So if a bunch of people make investment decisions over and over again and get
rich (or make their employers rich), they will see themselves as very very
smart. When the market reverses and wipes them out, most of them will see
themselves as very very smart people who just had a little bit of bad luck.

Thus, one damn bubble after another.

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jimbokun
I recommend that Barack Obama give Steve Eisman a role in his team of economic
advisers.

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dunk010
This is really very good, especially if you read Liar's Poker (makes me want
to re-read it). He even meets up with Gutfreund which makes for interesting
reading.

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hooande
I'm very glad that I read this. It put the financial crisis into a narrative
that was easy to understand and interesting

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misterbwong
Great read. I too recommend Liar's Poker if only for its inside look at how
Lewis Ranieri created the mortgage backed security market that fueled our
economic downturn.

It isn't explained in depth but it's interesting to see how Ranieri fought for
it from within Solomon Bros.

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tptacek
Man I wish I could write like Michael Lewis.

~~~
fallentimes
Read all his books :)

~~~
tptacek
I have; even the painfully dated "Next: The Future Just Happened"; Lewis is
even worth reading when he's writing about Marillion, the UK's answer to Kenny
Loggins.

If you're an entrepreneur and you haven't read Moneyball, [insert snark here].

I was disappointed by The Blind Side, his football book, but it was at least
well-written and enjoyable.

I even have a huge bound volume of classic econ texts with his commentary in
it. I will probably never really finish it, but I'm a huge fan and a
completeist, so, he got me.

~~~
fallentimes
Really? I liked The Blind Side. Wasn't a fan of Coach.

~~~
tptacek
I liked The Blind Side, but found it more entertaining than insightful, and I
think he papers over the most interesting conflict in the story --- whether
Michael Oher's benefactors were in fact gaming the college football
recruitment system.

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Dilpil
Great article, not sure about the title though. A classic story of Wall Street
channeling money from rich idiots to smart young people though.

~~~
Prrometheus
Well, it's the end of the independent Wall Street Investment Bank. They're all
gone.

~~~
icey
The avenue may be gone, but there will always be rich idiots and smart young
people to take their money.

~~~
netcan
Smart young people keen to become rich idiots?

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gruseom
Great article... just what I didn't need to be spending time reading this
morning! Lewis does anecdote journalism in a riveting way.

~~~
alecco
Indeed. I apologize for posting this. It consumed a good 2h reading for me if
you include the jumps to searching and reading about concepts or names I
wasn't familiar with. :)

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nazgulnarsil
the problem was a feedback loop. everyone thought of course these guys knew
what they were doing, otherwise why would people give them money? and promptly
give them some money...etc. getting one big client is hard, getting the next
ten is much much easier.

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zandorg
Sounds like an excerpt from his next book, Panic, due December.

~~~
kqr2
[http://www.amazon.com/Panic-Story-Modern-Financial-
Insanity/...](http://www.amazon.com/Panic-Story-Modern-Financial-
Insanity/dp/0393065146/)

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zandorg
Is it reasonabe to say that extensive arbitrage made no holes left to exploit?

~~~
nazgulnarsil
arbitrage failing to fix a hole is a sure sign of wrongful government
intervention. for example: the yen carry trade that made and is now breaking
iceland. in a real free market the arbitrage between yen interest rates and
ISK interest rates would have eventually closed. instead, governments forcibly
controlled interest rates.

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aagnihot
superb!!

