5 ms·

And even if you did find something, how would you know if they were just lucky or truly prescient ? Folks are constantly predicting gloom and doom. Some have e

by mayukh 9y ago

And even if you did find something, how would you know if they were just lucky or truly prescient ? Folks are constantly predicting gloom and doom. Some have even made successful careers out of it, their low probability of predicting such catastrophes not withstanding. Relatedly there were several economists predicting bad things. https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp082705 https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp0827... Its easier to say bad things will happen and be right eventually, the much much much harder part is to get the timing right.

lucozade 9y ago
That's my point. The paper didn't predict bad things happening. It specifically said that banks were holding higher level tranches of CDOs. Because they're MTM accounted they could suddenly drop in value if default rates increase. This, in turn, could cause other banks to suspect their creditworthiness and pull their funding lines. In other words, it was very specific about what it thought a collapse mechanism was and it turned out to be spot on. I don't believe they were either lucky or prescient. I think that they were well informed and joined the dots in a way that few others had.