"Fooled By Randomness: The Hidden Role of Chance In Life and in the Markets"
A book that Wall Street loves because it arbitrarily ascribes all risks as "random" regardless of how obvious or asinine.
To paraphrase:
"Clever dunces are hired straight out of Ivy League business schools during bull markets. They soon learn the 'intricate' ins and outs of gambling with other people's money (OPM) using 10x leverage. One fat year-end bonus leads to the next bigger one."
"Success leads to promotion and more OPM to play with. They take more risk and garner fatter rewards. They soon come to believe that they are invincible."
"The bull market ends and they blow their clients up. They keep the bonus money and a new generation of clever dunces is hired out of Harvard for the next bull market. The end."
ZH: May 29, 2015
"Two thirds of Wall Street traders have never seen a Fed tightening cycle"
Throughout this charade, everyone pretends that all risks are "random" and uncorrelated. One day's risks are "discrete", bearing absolutely zero correlation to any events of the past, such as the steady accumulation of leverage and derivative risk.
Without this fundamental assumption, no risk committee could possibly sanction the amount of risk taken every day by every major investment bank.
According to the Federal Reserve, Financial "stress" (blue line) is somehow lowest at the top and highest at the bottom:
Using their upside down models, the Federal Reserve turns a blind eye to the aggregate amount of risk accumulating every day leading to ever greater asinine amounts of systemic risk. All of which ends very suddenly and "unpredictably" in the usual "Black Swan" event.
ZH: August 8th, 2013:
Janet Yellen on the Financial Crisis:
"I didn't see any of that coming until it happened"
"Her startled interviewers noted that almost none of the officials who testified had offered a similar acknowledgment of an almost universal failure"
In other words, no one manages systemic/Lehman risk.
Taxpayers are handed the bill after-the-fact.
