Risk Management

It is rather interesting that a couple little books came out in 2001 and 2004 that turned all conventional risk models Wall Street were using on their head. Unfortunately no one read them. At least no one interested in believing that their methods of risk analysis may be wrong even though they had failed Wall Street time and time again.

via Bear Stearns: The ‘Immaculate Calamity’ | The Daily Capitalist.

It’s refreshing to a level of analysis that doesn’t blame the financial crisis on a sudden onset of greed. Any serious analysis must conclude that it was the Fed’s interest rate policy that was the root cause, exacerbated by government housing policy (Washington) and faulty risk management models (Wall Street). Human nature is a constant and our problems are not the result of “wombat spirits” (or animal spirits generally).
As Jeff says:

Money flows into opportunity and a lot of money, a lot of easy money, will mask risk with rising prices and cause malinvestment.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: