"History is a wonderful thing, if only it was true"

Friday, March 12, 2010

The problem for this decade

We take them out of the hands of the folks on Wall Street, and put them in Washington.
I'll try to stay local ...

For the rest - the ability to think is critical.

Q&A with Wilbur Ross: Mr. Distress is ready to buy - Mar. 9, 2010:

"What are the big challenges for investors now?

Government intervention is one. Washington, D.C. is the new Wall Street. No significant financial transaction of any consequence occurs without it. About 90% of all mortgages are granted through Washington. Health-care reform would mean another 16% of the economy under more government supervision.

But there is no evidence that more regulation makes things better. The most highly regulated industry in America is commercial banking, and that didn't save those institutions from making terrible decisions.

The relationship between information and decision-making is a challenge. Everyone gets the same information at basically the same time, so the value of information has gone to zero. And there has not been proportionate growth in the investment community's ability to sort through it all. People spend so much time absorbing that they don't have time to understand what it means. This creates volatility.

For example, people suddenly decide Greece is the problem, and whack, the market is down 10%. If weeks from now people decide California is the problem, markets will move again. Everyone has known for over a year that both places are troubled. Why do we care now? How do we know that the problems of Greece or rescuing that country will make a difference in the economic landscape one way or the other?

That's why the value of expertise and the ability to interpret information will someday go to infinity. "

No comments: