Quote for the Week
When I shifted my focus from beating gambling games to analyzing the stock market, I naively thought that I was leaving a world where cheating at cards was then problematic and entering an arena where regulation and the rule of law gave investors a fair playing field. Instead, I learned that bigger stakes attracted bigger thieves. Madoff’s Ponzi scheme was only the largest of the many that were exposed in 2008 and 2009, with others ranging from eight billion (a “bank”) through hundreds of millions (including several hedge funds), to multimillion dollar real estate, mortgage and annuity scams. I speculate that the size of swindles likely follows a simple mathematical “power law,” like the distribution of high incomes and top wealth discussed in previous columns, with their number increasing as their economic size decreases…
The flood of almost daily frauds, swindles and hoaxes reported in the financial press has continued during my entire investment career and I expect that when you read this months, years or decades later, you’ll find your own profusion of examples. Hoaxes, frauds, manias and other large scale financial irrationalities have been with us from the beginnings of the markets in the seventeenth century, long before the Internet. — Ed Thorp (source)
From the Archives
Last Call
- Founding Father Finance – Owenomics
- Buyers Beware: 7 Red Flags That Signal a Private Market Reckoning – M. Higgins
- Practical Thought about Practical Thought? – C. Munger
- A Winning Strategy Sitting Right Under Your Nose (If You Can Hold It) – J. Ptak
- The Integration of Factors Advantage – L. Swedroe
- The Jevons Paradox – Humble Dollar
- Why We Think Only Others Get It Wrong – Critical Thinker
- When Two Things Seem Linked (But aren’t): Understanding Correlations – Clearer Thinking
- 34 Lessons From Writing Every Day for Two Decades – R. Holiday
- How Do Scientists Calculate the Probability an Asteroid Could Hit Earth? – Conversation