How many prospective homeowners would have approached a Bank on their own initiative to offer a novel deal by which they would pay no principal right now, interest only, but it would all come out right in the end. My guess is very few, but when the Banks started offering interest-only loans as a package, borrowers jumped at it.

How many corporate CFOs would have approached their CEOs with the bright idea of buying insurance on other companies’ bonds, and how many CEOs would have fired them on the spot if they had, but let a CDS market get created, with standard boilerplate contracts that anyone can buy, and it took off like a rocket.

Of course, package-ization is sometimes a healthy thing. A few decades ago trading options was a bespoke business that only a tiny number of boutique operations carried out, and today it’s routine retail business. A solid healthy business with no counter-party risk – that we know of.

It makes me wonder if maybe the Dutch tulip growers let the public into their market – to, you know, improve its liquidity, and give everyone a chance to profit – just before the whole thing blew up.

Yes, accountants are all total villains, but maybe just the act of making it easy to speculate should bear some of the blame.

Value investing is very hard, and the reason it is makes me doubt the efficacy of so-called “counter-cyclical” policies.

“the malfeasance and silliness, the triggering events for today’s crisis, were much greater and more widespread”

I agree with this, but also believe that it goes against arguments such as Winkler’s view that:

“Asset managers are more or less forced to seek higher interest rates through riskier investments.”

No one is forced into malfeasance and silliness. They are embraced by human beings for their own reasons and desires.

Don the libertarian Democrat

"Then was there again spoken unto me without voice: "Thou must yet become a child, and be without shame.

The pride of youth is still upon thee; late hast thou become young: but he who would become a child must surmount even his youth."

And I considered a long while, and trembled. At last, however, did I say what I had said at first. "I will not."

Then did a laughing take place all around me. Alas, how that laughing lacerated my bowels and cut into my heart!

And there was spoken unto me for the last time: "O Zarathustra, thy fruits are ripe, but thou art not ripe for thy fruits!

So must thou go again into solitude: for thou shalt yet become mellow."

>> "The Stillest Hour"

"Behold, Zarathustra! Even the people learn from thee, and acquire faith in thy teaching: but for them to believe fully in thee, one thing is still needful–thou must first of all convince us cripples! Here hast thou now a fine selection, and verily, an opportunity with more than one forelock! The blind canst thou heal, and make the lame run; and from him who hath too much behind, couldst thou well, also, take away a little;–that, I think, would be the right method to make the cripples believe in Zarathustra!"
Zarathustra, however, answered thus unto him who so spake: When one taketh his hump from the hunchback, then doth one take from him his spirit–so do the people teach. And when one giveth the blind man eyes, then doth he see too many bad things on the earth: so that he curseth him who healed him. He, however, who maketh the lame man run, inflicteth upon him the greatest injury; for hardly can he run, when his vices run away with him–so do the people teach concerning cripples. And why should not Zarathustra also learn from the people, when the people learn from Zarathustra?
It is, however, the smallest thing unto me since I have been amongst men, to see one person lacking an eye, another an ear, and a third a leg, and that others have lost the tongue, or the nose, or the head.
I see and have seen worse things, and divers things so hideous, that I should neither like to speak of all matters, nor even keep silent about some of them: namely, men who lack everything, except that they have too much of one thing–men who are nothing more than a big eye, or a big mouth, or a big belly, or something else big,–reversed cripples, I call such men.

Also see: "Break, bleed, thou heart! Wander, thou leg! Thou wing, fly! Onward! upward! thou pain!" Well! Cheer up! O mine old heart: WOE SAITH: "HENCE! GO!"

Then see: —Here, however, Zarathustra could no longer restrain himself; he took his staff and struck the wailer with all his might. “Stop this,” cried he to him with wrathful laughter, “stop this, thou stage–player! Thou false coiner! Thou liar from the very heart! I know thee well!
I will soon make warm legs to thee, thou evil magician: I know well how— to make it hot for such as thou!”
—”Leave off,” said the old man, and sprang up from the ground, “strike me no more, O Zarathustra! I did it only for amusement!

> So why was it that Munger went along with having $30+ Billion in Goodwill accounting with Warren, which was obviously Level lll trash? The thing I dislike about this dude is that he speaks about honesty and ethics and then works at a company that has engaged in fraud — but that is a difficult concept, as I'm sure Spitzer can attest to!

http://www.law.stanford.edu/publications/stanford_lawyer/issues/80/pdfs/sl80_munger.pdf

Big Accounting was already beyond dysfunctional twenty years ago. The S & L Crisis could never have gotten the traction it did if the accountants had blown whistles—but they didn't. That's what ten years of Republican moonshine does fer yah, then, in my opinion. Big Four = overconcentration. This is yet another reason why keeping participants in industries numerous, small, and diverse is good. Which takes regulation.

I agree with Munger on his concerns with the fictionalization of major corporate accounting. Think about almost anything during dot.bomb, and at the bottom of it were funny financials.

Neo-standard accounting/risk assessment reminds me of collage students thinking up NEW AND IMPROVED drinking games in order to keep binge drinking fun.

skippy…pass the SIV beer bong please, before reality sets back in.

Here’s some of what he wrote about what he called the “inverse cripples” (Thus Spoke Zarathustra Part 2, “On Redemption”):

There are people who have too little of everything and too much of one thing..
They are nothing but a big eye or a big mouth or a big belly or anything at all that is big. Inverse cripples I call them.
…The people, however, told me that this great ear was not only a human being but a great one, a genius. But I never believed the people when they spoke of great men.