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How a Doctor beat Wall Street

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Re: How a Doctor beat Wall Street

#21

Post by dkarl »

greenlblue wrote: post #10
tlack wrote: post #9

Earlier quoted context omitted.

Those pension funds and states should not have invested in dangerous securities. Let's face it: the money seemed easy and these guys took very dangerous investments, with money that was not safe to play with.

That doesn't justify what he did. The right thing to do would have been to let people know of what was happening. Just because the financial system rewards greed/selfishness does not mean people shouldn't act ethically when the consequences of their actions could mean the loss of hard earned money by honest hard working people with families, medical expenses, college loans, etc. Then again the guy has Asperger's synd…

He had no prestige, no mouthpiece, and no people skills. What was he supposed to do, stand on the sidewalk with a sign saying, "The sky is falling?" He made a crapload of money seeing through the hype while everyone else thought the only way to make money was to ride the bubble even if they didn't believe in it. He set an excellent example. Next time, if there are more people like him, the bubble won't grow so far out of proportion with reality.

Re: How a Doctor beat Wall Street

#22

Post by dwwoelfel »

greenlblue wrote: post #20
dwwoelfel wrote: post #17

Earlier quoted context omitted.

The people you should be mad at are the ones that actually created the problem in the first place. These problems wouldn't have existed without the Federal Reserve's low interest rates and politicians like Barney Frank who enabled the GSEs. You should be outraged at the arrogance of those people who think that they can make decisions for the entire country that should be made by millions of informed individuals.

The financial system is so convoluted and complicated that it does not matter how many informed individuals are making choices, there are bound to be loopholes. It's taking advantage of these loopholes that screws millions of people in the process that I find unjustifiable.

The point I am trying to make is that the Federal Reserve can never determine the "right" interest rate. It is a decision that has to be made by the individuals on the market, precisely because the financial system is so complicated. Similarly, Barney Frank and George W. Bush shouldn't be able to decide that Americans all need to own their own home. These two factors combined to give us the housing bubble. Too much money combined with a distortion of supply and demand in the housing market.

For more information see this talk on The Morality of Investing and Financial Markets: http://vimeo.com/9182745

Re: How a Doctor beat Wall Street

#23

Post by owinebarger »

One of the best parts of this story is how crude a model can be and yet yield tremendous value. A dozen metrics on the underlying loans of the security and "most ARMs reset in two years" giving 3 years as the window for the market to fully recognize how bad the loans were.

Re: How a Doctor beat Wall Street

#24

Post by philk »

greenlblue wrote: post #7

It's great that this guy has a gift but let's call what he does for what it is: exploitation. Countless pension funds and state budgets are in shambles because of people like him.

Wrong. He was simply betting that subprime loans were a huge risk that was going to go bust. If you need to blame someone, go for the people who made these loans in the first place, or the ratings companies for failing to spot the disaster.

Re: How a Doctor beat Wall Street

#25

Post by oconnore »

greenlblue wrote: post #7

It's great that this guy has a gift but let's call what he does for what it is: exploitation. Countless pension funds and state budgets are in shambles because of people like him.

I don't think this should be down voted, because it represents a fairly common (and therefore interesting) opinion. Also, the replies are enlightening.

Re: How a Doctor beat Wall Street

#26

Post by sirrocco »

philk wrote: post #24
greenlblue wrote: post #7

It's great that this guy has a gift but let's call what he does for what it is: exploitation. Countless pension funds and state budgets are in shambles because of people like him.

Wrong. He was simply betting that subprime loans were a huge risk that was going to go bust. If you need to blame someone, go for the people who made these loans in the first place, or the ratings companies for failing to spot the disaster.

If by "failing to spot the disaster" you mean : "this thing's gonna crash, now shut up and make some money by saying it won't" - then I agree :) .

Re: How a Doctor beat Wall Street

#27

Post by philk »

owinebarger wrote: post #23

One of the best parts of this story is how crude a model can be and yet yield tremendous value. A dozen metrics on the underlying loans of the security and "most ARMs reset in two years" giving 3 years as the window for the market to fully recognize how bad the loans were.

The complicated part is all the crude models that don't do much at all that you have to trudge through to get the few worthwhile models.

Re: How a Doctor beat Wall Street

#28

Post by nsoonhui »

Survivor bias: If I let hell loose on enough monkeys to bet on financial market before the bubble bursted, some of them would eventually "beat the wall street" and "forsee the burst" and earned themselves interviews, book deals and recognition.

The monkeys could have a chance to talked about their models then.

Re: How a Doctor beat Wall Street

#29

Post by rjprins »

nsoonhui wrote: post #28

Survivor bias: If I let hell loose on enough monkeys to bet on financial market before the bubble bursted, some of them would eventually "beat the wall street" and "forsee the burst" and earned themselves interviews, book deals and recognition. The monkeys could have a chance to talked about their models then.

Did you even read the article?

Re: How a Doctor beat Wall Street

#30

Post by miked »

jakarta wrote: post #3
bpick wrote: post #2

The article was good, but the personal life stuff was a waste of time. The message is clear - don't be afraid to see what others are blind to.

I don't know if I quite agree with that. If you look at a lot of value investors / contrarians, you will see that a good number of them were exposed early on to the kinds of irrational thinking that can occur with crowds. I think these experiences make it much easier to take the approach where you go buy something that everyone else hates. Buffett grew up when the Great Depression was still fresh in people's minds. C…

George Soros had to hide from Nazis as a child.

I hardly blame him for having to hide, but did he have to go out and help confiscate the property of his fellow jews? Couldn't he have stayed home? Not to mention that he's been convicted of insider trading.

http://www.google.com/search?client=safari&rls=en&q=...

KROFT: (Voiceover) You're a Hungarian Jew...

Mr. SOROS: (Voiceover) Mm-hmm.

KROFT: (Voiceover) ...who escaped the Holocaust...

(Vintage footage of women walking by train)

Mr. SOROS: (Voiceover) Mm-hmm.

(Vintage footage of people getting on train)

KROFT: (Voiceover) ... by -- by posing as a Christian.

Mr. SOROS: (Voiceover) Right.

(Vintage footage of women helping each other get on train; train door closing with people in boxcar)

KROFT: (Voiceover) And you watched lots of people get shipped off to the death camps.

Mr. SOROS: Right. I was 14 years old. And I would say that that's when my character was made.

KROFT: In what way?

Mr. SOROS: That one should think ahead. One should understand and -- and anticipate events and when -- when one is threatened. It was a tremendous threat of evil. I mean, it was a -- a very personal experience of evil.

KROFT: My understanding is that you went out with this protector of yours who swore that you were his adopted godson.

Mr. SOROS: Yes. Yes.

KROFT: Went out, in fact, and helped in the confiscation of property from the Jews.

Mr. SOROS: Yes. That's right. Yes.

KROFT: I mean, that's -- that sounds like an experience that would send lots of people to the psychiatric couch for many, many years. Was it difficult?

Mr. SOROS: Not -- not at all. Not at all. Maybe as a child you don't -- you don't see the connection. But it was -- it created no -- no problem at all.

KROFT: No feeling of guilt?

Mr. SOROS: No.

KROFT: For example that, 'I'm Jewish and here I am, watching these people go. I could just as easily be there. I should be there.' None of that?

Mr. SOROS: Well, of course I c -- I could be on the other side or I could be the one from whom the thing is being taken away. But there was no sense that I shouldn't be there, because that was -- well, actually, in a funny way, it's just like in markets -- that if I weren't there -- of course, I wasn't doing it, but somebody else would -- would -- would be taking it away anyhow. And it was the -- whether I was there or not, I was only a spectator, the property was being taken away. So the -- I had no role in taking away that property. So I had no sense of guilt.

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