Tag: Finance

Perhaps the most difficult of investment lessons is that inaction is often the best action.

The notion that private companies can extract indiscriminate, industry- wide support from the public for the benefit of their investors by threatening that their weaker members will collapse is intolerable in any sector.

The public interest does not require taxpayer support of financial institutions: indeed it requires that some of them make substantial losses in this crisis. Only then will credit risk begin to be priced appropriately and lenders do their diligence.

Financial market liberalisation cannot be undertaken on only one side of the balance sheet. If there is freedom to lend, then there must be freedom to lose money on lending.

That investment style of being in touch with the market but distant from it has impressive antecedents and performance.

Risk markets are based more on imperfections of information and understanding than on differences in attitude to risk. And with this, financial follies repeat themselves in each generation.

The anthropomorphic metaphor of the market is too relativist, the view of the market as a voting machine is too rationalist: to take either too seriously leads to error.

For fundamentalists, the value of an asset is the sum of the returns it will yield over its life. For fellow travellers, an asset is worth what someone else is willing to pay for it.

The company headquarters should be the place from which the business can best be run. Location decisions often involve proximity to necessary resources. For banks, this nowadays means access to political and commercial capital.

Models are only as good as the correspondence between the model and the world, and this is where problems begin.