What happens when they abdicate decision making to an algorithm? And then cram the algorithm with imaginary data because no one has the authority or guts to expose it as nonsense? The capitalist understands free markets as an arena for the contending judgments of free men. The ideologues of modern finance dreamed of efficient markets as a replacement for that judgment and almost a replacement for the men. Under the influence of contemporary financial theory, bankers and regulators abandoned basic tools of financial analysis and judgment for elaborate, statistically based insurance schemes and a blind faith in the efficiency of modern securities markets. The result: it became impossible for either executives or regulators to fully understand the financial condition of any great modern bank.
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What happens when they abdicate decision making to an algorithm? And then cram the algorithm with imaginary data because no one has the authority or guts to expose it as nonsense? The capitalist understands free markets as an arena for the contending judgments of free men. The ideologues of modern finance dreamed of efficient markets as a replacement for that judgment and almost a replacement for the men. Under the influence of contemporary financial theory, bankers and regulators abandoned basic tools of financial analysis and judgment for elaborate, statistically based insurance schemes and a blind faith in the efficiency of modern securities markets.
The result: it became impossible for either executives or regulators to fully understand the financial condition of any great modern bank.
Believing that financial systems could transcend the need for human judgment the bankers and regulators combined to create financial institutions with balance sheets no one could judge. Redleaf and Vigilante guide the reader through the history of the crash with wisdom and wit, presenting a refreshingly commonsense approach to understanding how markets actually work.
Panic makes sense of a nonsensical moment in market history and reveals why booms and busts have become so common in recent decades, and what we can do about it. Celebrated by the New York Times and others for predicting the mortgage crisis long before the event, Redleaf's monthly client letter is avidly read and quoted not only on "the Street" but in the financial press.
He has served as editorial director of Regnery Publishing and as an editor of National Review. Read more Enter your mobile number or email address below and we'll send you a link to download the free Kindle App. Then you can start reading Kindle books on your smartphone, tablet, or computer - no Kindle device required. Would you like to tell us about a lower price? If you are a seller for this product, would you like to suggest updates through seller support? Explores the origins and history of the economic crash with wit and wisdom, explaining how markets actually work, revealing why market booms and busts have become so common in recent years and outlining what can be done about it.
Read more Read less. Save Extra with 4 offers. Review "'Sometime in the next 12 to 18 months, there is going to be a panic in credit markets,' Andy Redleaf, a year-old hedge fund manager, wrote to investors in December . Whitebox Advisors, Mr. Redleaf's family of hedge funds, was not the only one to bet against subprime. But it did so with searing and amusing insight, a trademark of the founder and the firm.
Okun Professor of Economics, Yale University, and author of Irrational Exuberance "Panic vividly traces the causes of our current economic woes. The authors take you on a tour of pinhead intellectuals, politically protected bankers, and calamitous government policymakers. Panic is vital to understanding how we got here, and how we might get out.
PANIC is a tour de force! Read more. Enter your mobile number or email address below and we'll send you a link to download the free Kindle App. To get the free app, enter mobile phone number. See all free Kindle reading apps. Tell the Publisher! I'd like to read this book on Kindle Don't have a Kindle? Customer reviews. How does Amazon calculate star ratings? Amazon calculates a product's star ratings based on a machine learned model instead of a raw data average. The model takes into account factors including the age of a rating, whether the ratings are from verified purchasers and factors that establish reviewer trustworthiness.
Review this product Share your thoughts with other customers. Write a product review. Top international reviews. Verified Purchase. Previously I thought I had a decent handle on what's been going on financially and economically these last couple of decades. Along with some vague though strongly felt beliefs about how markets and economies work, this book will require me to read it a second time because it challenged many of these thoughts, ideas and beliefs, and added a level of depth and detail I didn't have before.
I like reading great books a second time, though with 'Panic' it a necessity because I'm certain I missed many key points because my head was spinning a bit. Once I hit the midpoint of the book, my frustrations with how messed up things have become with no clear path to fix things let alone make them worse caused me much distraction because many of the villains are still around with seemingly no lessons learned.
The book is very well written, not complicated or technical, and makes its arguments and points succinctly with intelligence and wit. My only little criticism is one of the authors manages a hedge fund and sometimes he was flying the flag a bit too much for brilliance of hedge funds and though they were probably minor players overall to the collapse, some of them did play a roll and it certainly can be said that the pay structure of hedge funds helped to create the huge greed that was also central to the bubble and then collapse.
This is a minor nitpick, and overall the book was great and worth reading. One person found this helpful. Thank you for your feedback. Sorry, we failed to record your vote. Please try again. This book is a superb example of "thinking outside the box"--or, in this case, thinking outside modern portfolio models used by large institutional investors--models that have not produced good returns.
I've never understood the "efficient market theory" EMT --the idea that the stock market, for example, at any given moment prices in all available information and so cannot be beaten in the long run.
EMT is often attributed to Milton Friedman. But, as the authors point out, Friedman actually said this about the currency markets after World War II, his point being that no one has all the necessary information to price a currency at its appropriate level, and so markets should do it.
EMT does not explain satisfactorily how the Dow can be at 14, in October and thousands of points below that in early The book makes you think--and suspect what passes for thinking on Wall Street and in the federal government.
A must read, everyone. One of the most compelling books on investing I have read in a long time and far and away the best overview of the financial meltdown published so far. Redleaf and Vigilante do a superb job of dismantling the reigning paradigms that dominate institutional investing today from the Efficient Market Theory to Modern Portfolio Theory to the Capital Allocation Portfolio Model and explain the role these paradigms played in setting the table for the calamity that unfolded the past 3 years.
This is must reading for investors and political junkies as well. Neither the Democrats or the Republicans escape the wrath of the authors in their scathing attack of crony capitalists and their crucial role in devastating Main Street America. Investors who don't read this book are taking a knife to a gun fight. Save our Nation! Tbis book tells the story that Washington and Wall Street don't want you to hear: how the financial crisis was created by misguided government policies and Crony Capitalism, and how the "solutions" to the crisis are only making things worse.
Redleaf and Vigilante know what they're talking about - Redleaf predicted the financial crisis back in Their book is written with insight and style, respecting the reader's inteliigence and explaining often complicated issues in clear terms. The Crony Capitalists want you to think that the financial system is too complex for you to even bother thinking about.
Leave it to them, let the experts make all the decisions for you. Redleaf and Vigilante demonstrate how this elitist thinking is what got us in this mess in the first place. It's time for Americans to take back their economy from the elites who have nearly bankrupted it. If enough people read this book before election day , we can save our nation from becoming a banana republic.
After a major disaster people ask, "Who, or what, did this to us, and why? Please do not forget that Greenspan claimed that financial markets are self-regulating.
He warned that, government regulation only impedes innovation, and induces innovative firms to go abroad. In this reviewer's opinion, the explanation is dubious, to say the least. The critical review notwithstanding, I recommend the book to the public and to undergraduate business students. It complements other books and explains clearly some things that other books do not cover. There is much more to the book than its diatribe against the EMH. This reviewer is an economics professor; however, he does not write to defend the EMH.
The EMH is bankrupt and indefensible. See e. Mea culpas are difficult; scapegoats are easy. At his trial, the chainsaw murderer only remembers that the Devil told him to do it; now he has found God and he is no longer a danger to society.
In the subprime disaster, the EMH serves the same purpose. Upon regaining his wits, after the knockout delivered by the market, the hedge fund manager dusts himself off and starts anew. Surely, his clients will forgive the ruinous loss and blame instead the economics professors. They charge that the glorification of market mechanics over human judgment was crucial in producing the mortgage crisis. The crux of the argument is that the EMH's dictum that the "price is right" frees market agents of the need to exercise diligence and critical judgment.
It is not manna from heaven, or the result of physical laws or market mechanics. In theory, market value and intrinsic value tend to remain in proximity to each other because of the frenzied search for abnormal returns by well-informed market agents. The EMH prescribes that individuals need not pay for investment advice. They can sidestep company-specific risk and minimize transactions costs by investing in index funds.
Obviously, this prescription is anathema to hedge funds and to the large number of actively-managed mutual funds. Their research departments spend millions of dollars each year developing and refining analytical techniques. They also devote vast resources to security selection and to devising trading strategies. They would do none of this if they believed in the EMH. We assume that such anomalies are almost certain to be more powerful and profitable for some sets of securities than for others.
We look into the nooks and crannies of the market for trends that we can exploit profitably with some securities for now.
BOOK REVIEW: Andrew Redleaf & Richard Vigilante's Panic
It's one of life's truisms that after any big event myriad individuals raise their hands to say that they astutely predicted what just passed. The financial crisis was no exception in this regard, though in the case of multi-billion dollar hedge fund manager Andrew Redleaf, he in fact alerted clients in December of to the coming credit troubles. As he put it in a client newsletter nearly four years ago, "Sometime in the next twelve to eighteen months there is going to be a panic in the credit markets. So true in so many ways, and note how the authors don't buy into the absurd notion that the media elite, politicians, and even some on the right embrace about the crisis having been fathered by too much in the way of deregulation. And for those who presume that the authors' regulatory point-of-view signals some kind of right-wing polemic, they needn't worry. Though both are "staunch Republicans who believe Ronald Reagan was the greatest president in our lifetimes", Panic is in no way partisan. To Redleaf and Vigilante the crisis was authored by both parties, or, in their articulate prose, "Crony capitalists on the right and socialists on the left united as always behind their most fundamental belief, that wealth is to be captured by power and pull rather than created in the minds of men.
Panic : The Betrayal of Capitalism by Wall Street and Washington