3 ms·

> how "markets" will prevent the peg from going out of whack. One only needs to read about Long-Term Capital Management to see how flawed this is.

pjmorris 9y ago
If anyone is looking for books to read during holiday down time, they could do worse than 'Liar's Poker' [0], followed by 'When Genius Failed' [1], following the career of John Meriwether and the rise and fall of LTCM. [0] 'Liar's Poker', Michael Lewis [1] 'When Genius Failed', Roger Lowenstein For a 'light reading intro to finance' trilogy, add 'A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation', by Richard Bookstaber.
- coliveira 9y ago
  Complementing this good list, if you really want to understand what the stock market is (despite all the advertisement), read Frenzied Finance: The Crime of Amalgamated. In this book, a participant of the early markets in the 20th century explain what they really do under the covers. The laws changed a lot from that time, but the goals didn't.
- CamelCaseName 9y ago
  JWMP is the successor to LTCM, built using the same models with less leverage. They also blew up in 2007-2009. It's cool, I just submitted a paper on LTCM yesterday. AMA?
  - pjmorris 9y ago
    Will you be writing the third book in the Meriwether trilogy? :)
goialoq 9y ago
"_Long-Term_ Capital Management": established 1994, collapsed 1998. It's like the "_People's_ _Republic_ of China" or the "Union of Soviet _Socialist_ _Republics_" of "fake it till you make it" names.
dnautics 9y ago
Isn't ltcm an example of markets keeping a dumb, dumb, dumb trading model ungrounded in reality from going out of whack?
- antishatter 9y ago
  It was an example of what happened when everyone believes the so called "smartest people in the room" without questioning. It also represents what happens when the market adjusts to what you're doing but you fail to adjust and also the nature of tail risk. Was their model dumb? Tough to say, they did win a nobel prize in economics for it. I think warren buffet has some quote about how they were "risking a million to make a nickel".
  - dnautics 9y ago
    Well given that their model was predicated on price movements being normally distributed and for around 100 years price movements have been known to be levy alpha distributed (alpha ~1.6 for the most volatile and usually ~1.8), I'd say it was dumb.

pjmorris 9y ago

If anyone is looking for books to read during holiday down time, they could do worse than 'Liar's Poker' [0], followed by 'When Genius Failed' [1], following the career of John Meriwether and the rise and fall of LTCM. [0] 'Liar's Poker', Michael Lewis [1] 'When Genius Failed', Roger Lowenstein For a 'light reading intro to finance' trilogy, add 'A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation', by Richard Bookstaber.

coliveira 9y ago
Complementing this good list, if you really want to understand what the stock market is (despite all the advertisement), read Frenzied Finance: The Crime of Amalgamated. In this book, a participant of the early markets in the 20th century explain what they really do under the covers. The laws changed a lot from that time, but the goals didn't.
CamelCaseName 9y ago
JWMP is the successor to LTCM, built using the same models with less leverage. They also blew up in 2007-2009. It's cool, I just submitted a paper on LTCM yesterday. AMA?
- pjmorris 9y ago
  Will you be writing the third book in the Meriwether trilogy? :)

goialoq 9y ago

"_Long-Term_ Capital Management": established 1994, collapsed 1998. It's like the "_People's_ _Republic_ of China" or the "Union of Soviet _Socialist_ _Republics_" of "fake it till you make it" names.

dnautics 9y ago

Isn't ltcm an example of markets keeping a dumb, dumb, dumb trading model ungrounded in reality from going out of whack?

antishatter 9y ago
It was an example of what happened when everyone believes the so called "smartest people in the room" without questioning. It also represents what happens when the market adjusts to what you're doing but you fail to adjust and also the nature of tail risk. Was their model dumb? Tough to say, they did win a nobel prize in economics for it. I think warren buffet has some quote about how they were "risking a million to make a nickel".
- dnautics 9y ago
  Well given that their model was predicated on price movements being normally distributed and for around 100 years price movements have been known to be levy alpha distributed (alpha ~1.6 for the most volatile and usually ~1.8), I'd say it was dumb.