I once described this book as the most frightening book in finance. Watch this video to see why:
It is astonishing and beyond belief that the financial “geniuses” of the world turned something like a “crash” in the housing and stocks markets into the most unlikely thing that could ever happen!
As John Lanchester explains in his book “Whoops! Why Everyone Owes Everyone and No one Can Pay“, financial institutions had expressed a crash as a “25 sigma” event. Sigma is a measure of how unlikely something is. A 1 sigma event is more likely but a 25 sigma event would be almost impossible!
What are your own thoughts on this subject? Why do you think the crash of 2008 was considered to be such an unlikely event? Leave me your comments below.
Link to this post!
The big short by Michael Lewis is another favourite book of mine. Interesting how the big banks got it so wrong. I wonder if history will remember this.
Excellent interview Alessio. I specially liked listening to Shabbir’s thoughts about the situation and financial crisis.
Fascinating analysis of the financial crisis. As the saying goes, he who does not learn from history is doomed to repeat it.
It just shows how insane these bankers are. 25 sigma event is exactly the opposite. You can’t have a banking system based on inflating bubbles going on to perpetuity.
i, for one. look forward to your emails. If you continue to send me boring, monotonous, rehashing of greed like this video, that will happen again then I as others will choose not to receive your emails. this is constructive criticism no one who will receive this can do anything about this. I want to learn to make obscene amounts of money. Nothing more,
Thanks,
Great video, Alessio! It is like the recent latest scientific talk about a sixth mass extinction on the planet. The event is only significant to those it would likely and eventually affect. But to the universe it is not even a blip on the radar.
I think all the bankers living in denial of a crash are thinking in the time frame of the universe. They think they have all the time in the world to make money. They don’t think the crash is something that would likely happen in their lifetime.
How wrong they are as histprically 1997, 2000, especially 2008, and 2010 proved. They were significant ones I especially paid attention to first hand, survived, and remembered. Quite a few crashes actually happened in my lifetime. But the years mentioned were memorable because they significantly affected progress in all my investments.
http://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets
Denial is not a river in Egypt. Sigma 25 indeed.
Good to see that this critical economic point in humans time line is being more and more openly discussed. Hopefully more people will be informed of this dire reality before its too late.
For all the Aussie’s pls visit fsi dot gov dot au/consultation/submissions/ click ‘stability-too big to fail’ to submit your opinion regarding the proposed ‘Bail-In’ laws that are in draft form as we speak for Australians. Or visit cecaust dot com dot au.
Thx
The game of real life Monopoly, fake money included, with deliberate intent to destroy demand for absolute control and whomever has the most money wins mentality created by a heinous fraternity of “families” with direct and premeditated disregard for their fellow man, worshipped by the financially ignorant whom they set out to deliberately con, rob and starve for their deranged entertainment under the sinister guise of insincere benevolence for all mankind. The big sting, suckers, marks, innocents destroyed for kicks….
Was that a green screen bookcase? 🙂
To say that ‘the people’ are jointly responsible for their actions is just deflecting the blame from the people in control of the funds. That’s like saying if a small child wanders off from it’s guardian and crosses a busy road without looking only to get run over it’s the child’s fault. It’s the guardians (banks) fault for not shouldering his responsibility and advising the child (borrower).
It’s all an irrelevant argument in any case, because I believe this so called crisis was completely engineered.
I stopped appearing on Press TV after the sham Iranian election a year or two back. Jihadi funders.
#bringbackcapitalism #banbankbailouts #banQE #prosecutebankgenerals #letmktsetrates
A 25-sigma event! It makes you realise how out of touch with reality these bankers were, and the public and business were entrusting them with their money! They simply were too big to fail. Banks, multinational businesses and the political elite all in bed together and there was no way any of these groups were going to be accountable for their actions.
The Bankers knew what they are doing and what the risks were and they are still focussed on making money so that they stay employed and get their bonuses.
If they are not held accountable and are able to play with other people’s money without responsibility then they will naturally continue to take greater and greater risks to achieve larger and larger returns. It is inevitable that that if you do that eventually things will go wrong.
The Bankers are supposed to be looking at risk v reward but whilst they are able to leverage to maximise returns with less attention to managing that risk they will always take chances to maximise the gains.
@Jonathan Davies … lol @ “Jihadi Funders” ? what, more than the US CIA, Saudi, Qatar etc?
@Alessio, I think we all know that they are eager to apportion blame to an impossible-to-predict lightening strike and would like us all to believe it “can never happen again”, while the facts suggest that it is INEVITABLE and MUST happen again.
No problem for banks and bankers. They are the new rulers!
Look for example in Eurozone. Banks go bankrupt and governments create a good bank and a bad bank. The good bank cleared of all the trash (bad loans, debt etc) continues its glorious business and the bad bank filled with all the trash goes on the back of the tax payers!!!
Great to watch this second time around and get just as much from it. You hit the nail on the head about the business models used by so-called experts which are the framework for decision making by the average person wanting a loan or mortgage… who then took so much blame. Like you said, it’s 95/5% balance.
Great point too about how those who contribute to the GDP via public service do not get bonuses. I do wonder about whether this is because there is a predominance of women in lower echelons in public service, whilst the guys at the top are ok, thanks Jackie!
Bonuses for bankers are obscene and still it goes on… Politicians are in their pocket, so it will be another generation until this is addressed. By then, as Rico, above points out, the Universe will have tilted by then, as perhaps environmental and human catastrophies will have got so beyond our current comprehension that finally notions of GDP and growth are no longer tenable.
The financial superstructure is crucial to the fall out for the little guy… Marx had this right, I think (albeit a simplification). I dream of dramatic revolution in economic and financial world views of those who hold the power. I fear, however, that given the greed and corruption of the 1% that they are intractable …. Worse to come is inevitable…
Thanks for the thought provoking re-share x
Are you surprised that we cannot even receive Press TV in the UK?
I’m not……
I dont know if im thinking right here according to this video, but if you think about trading you can leverage the amount you borrowing. 1:50, 1:200 … and so on. In my opinion, you trade with paperless money. If every trader in this world get profit of their trade, the bank have big problem to payout. So the trade in it self is high risk for the bank. But sice 90 % of the traders lose their money, the risk is almost 0% on the bank site. The trader has now the risk, and that is why we get the disclaimer in our “face” when we trader trades, isnt it?
Hi Alan. Thanks for your great feedback and I am glad to hear you look forward to our emails. I understand that today’s video was not about a money-making strategy, and not like the usual videos about markets. BUT, I always believe that the key to making money is NOT to lose it either. And this video shows the mistakes that we make – whether we are ordinary folks or professional traders – that can cause devastating losses. It’s worth considering historical mistakes so we can learn from them. In any case, I thank you for your feedback and we’ll resume with our regular emails and videos as per usual.
Regards
Alessio
Alessio, nothing has changed since the Great Recession started(its not over). Hillary Clinton, conveniently married to the President who repealed the Glass Steagall Act back in 1994, is probably going to be the next POTUS. She is also rumored to be running around Wall St raising campaign money & distancing herself from Pres Obamas current policies towards Wall St. Surprise!!!
And NO, most individuals cannot share ANY blame for what happened. There are some who gamed the system, but most have been innocent victims.
Agree with you Alessio. Nothing has changed since 2008, these banks continue wrecking the financial system. The US needs to return to the Glass Steagall Act before everything collapses. What has happened in the financial markets is not the fault of the people, but was caused by the thieves who gamed the system and continue to do so everyday. The government has been a complete failure in dealing with these problems.
More like 1% common man, 33% Bankers, 33% corrupt& incompetent Regulators, corrupt& incompetent politicians.
Thanks Alessio, I’m wondering how will this time be different? It is obvious that the central banks have decided on a sort of ‘global QE’. Stock/bond correlation is breaking down. And a lot of traders are becoming more and more informed on both the fundamental and technical analysis of trading. So where is the weak spot? What does the smart money think can be inflated and crashed before the general public can realize it?…because that is basically their job description. Everyone is ready to flee stocks but a lot of people have learned it’s expensive to proclaim that the FED is wearing no clothes.
The banks have robbed the herds and nothing can really be done.
The herds can never work and join as one force in this situation and stand up for themselves.
The government are GOING TO DO VERY LITTLE, and are being held over a barrel with there connections with banks.
There is no answer to the mess
Allesio! Thanks for the tip. You’ve already mentioned about that book long ago. I read it. Good… no, great text!
But, why won’t you reccomend sth different, but absolutely in accordance with what you said about GS few years ago? I mean the book by chineese economist Song Hongbing, which as I know is very difficult to get in english. Some say it’s forbidden in UK and US. The book about real banksters, which include GS…
Alessio,
Always a eye opening learning experience with these videos you post. No Bonus, No Theft! Should be a rallying cry to get the common folk like me to wake up to this obscene transfer of wealth, with no criminal consequences of such theft.
Not in my lifetime.
And truly it all goes hand in hand with the VCs and angel investors of Silicon Valley, et al.
Be well,
Laurence