- Michael Milken:
between perception and reality there is a gap
- herd instincts: investors are constrained by appearance. A manager of a respectable financial institution will shun "fallen angels" so as to avoid appearing imprudent to his colleagues
- forces wishing to keep a large company afloat are far greater than those that wish to see it perish
- credit rating systems are flawed. It focuses on the past instead of the future. Ignore large fortune 500 companies in favor of ones with no credit standings to find a good deal.
- The market which may be quick to digest earnings data was grossly inefficient in valuing everything.
- Lessons from Solomon brother traders
I don't pat myself in the back, because the next sensation is a sharp kick lower down
- those who say don't know, those who know don't say
- Despite the valuable lessons history can offer us, its shown that man does not learn any of these valuable lessons.
- Benjamin Graham: The more elaborate the mathematics, the more uncertain and speculative the outcome. Avoid substituting experience with theory.
- Key historic events:
1933 Glass Steagall act: separation of investment banking and retail banking
- July 1944 Bretton wood systems: World currencies agree to a fix exchange rate against the USD, USD agree to fix exchange rate with Gold.
- 1971 Collapse of the Bretton Wood systems: US, faced with increasing pressure to maintain the USD gold exchange rates as its foreign reserves were depleted by a extended Vietnam war, went off the gold standard to prevent a run.
- 6th October 1979 The Volcker Act : money supply will be fixed, interest rates would float
- 12th Nov 1999: repeal of the Glass Steagall act: banks can now take use consumer deposits for investment purposes.
Related references
- [*The Trouble with Markets*, Roger Bootle](https://garyteh.com/2020/04/the-trouble-with-markets-by-roger-bootle/)
- [*Predator's ball*, Connie Bruck](https://garyteh.com/?p=4431&preview=true)