tag:blogger.com,1999:blog-7905515.post8172096792776685882..comments2024-03-14T11:09:32.759-05:00Comments on Falkenblog: Crash Casualty: DiversificationEric Falkensteinhttp://www.blogger.com/profile/07243687157322033496noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-7905515.post-89099888842364583102011-03-13T03:23:20.607-05:002011-03-13T03:23:20.607-05:00No single person can make a pencil if you insist t...No single person can make a pencil if you insist that it must satisfy lots of non-functional requirements, e.g. it must be painted yellow.<br /><br />However, just about anyone can make a crude writing device that functions like a pencil by charring a pointed stick.<br /><br />A lot depends on functional requirements.Rickhttp://occultrick.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-42464004449551866942011-03-11T09:38:59.221-06:002011-03-11T09:38:59.221-06:00Mercury: Wachovia is an interesting case. They ac...Mercury: Wachovia is an interesting case. They actually had better than average risk management, I knew some of them when I was a risk manager. But they bought a California Sub-prime company at exactly the wrong time--an error by the Board in corporate strategy that probably had very little real input from their risk management experts. But, in general, increasing the scope of one's functions is necessary for any competing firm, so, with hindsight Wachovia make a mistake, but in general firms must do these kinds of things.Eric Falkensteinhttps://www.blogger.com/profile/07243687157322033496noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-77946231366082498752011-03-11T09:18:12.641-06:002011-03-11T09:18:12.641-06:00Actually I support the Talebesque (eeek!) argument...Actually I support the Talebesque (eeek!) argument that we would be better served by smaller, utilitarion, much less levered banks that pretty much stick to their knitting. Some things in life really do increase risk at a greater rate than they create value as they become more complex and I would welcome a more extensive treatment of this topic as it pertains to banking and finance.<br /><br />While I agree that civilization advances as a function of complexity and specialization generally, the implication that say, the experts and specialists in Wachovia management knew what they were doing in the sub-prime mortgage space is a joke.Mercurynoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-26500103065634919802011-03-10T16:12:17.137-06:002011-03-10T16:12:17.137-06:00"To think that Joe Sixpack should understand ..."To think that Joe Sixpack should understand all financial instruments, and how they maximize social welfare, is naive atavism"<br /><br />To think that most financial instruments work to maximize social welfare is naive optimism bordering on delusional.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-75527163439899565292011-03-10T10:17:55.600-06:002011-03-10T10:17:55.600-06:00Diversification doesn't protect you from endog...Diversification doesn't protect you from endogenous risk. Seemingly foolproof diversification schemes can blow up in a liquidation spiral.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-79208694419108908152011-03-10T09:38:21.581-06:002011-03-10T09:38:21.581-06:00Eric ,
just a thank you note..
Your thoughts are...Eric ,<br /><br />just a thank you note..<br /><br />Your thoughts are totally the clearest expression of intelligent life on this planet as seen on the net( rough approximation thru a prop algo I crawled the net put you impossibly close to the 100th percentile..100 being a synthetic intelligent designer) <br /><br />..and that's how I found your blog. ;)<br /><br />Many,many thanks for putting your thoughts up.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-25382673053524449212011-03-10T06:10:59.345-06:002011-03-10T06:10:59.345-06:001. I think the key problem with diversification is...1. I think the key problem with diversification is that it has to be diverse, i.e. if everyone's diversifying the same way you do, it will not save you when a crisis hits.<br /><br />2. The house prices were rising and banks lending because they could, and if you can, that means you have to or you will lose market share, all enabled by the cheap money (dancing as long as the music plays) imho.Anonymousnoreply@blogger.com