And then at the end of the day, the most important thing is how good are you at risk control. Ninety-percent of any great trader is going to be the risk control.
I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit.
Anything can happen anytime in markets. And no advisor, economist, or TV commentator-and definitely not Charlie nor I-can tell you when chaos will occur. Market forecasters will fill your ear but will never fill your wallet.
Briefly speaking, our conclusion is that stochastic volatility does not make a huge difference as far as the pricing is concerned if you get the average volatility right. It makes a big difference as far as hedging is concerned.
The average American thinks billionaire investors are going to be right based on some talking head. They invest and they have no backup plan. Americans think these guys are giant risk-takers. The truth is they believe in taking as little risk as humanly possible, for the maximum amount of upside. They're looking for that spread of disproportionate risk-reward.
Today's stock market actually hates technology, as shown by all-time low price/earnings ratios for major public technology companies.
I've always said, the key organ here isn't the brain, it's the stomach. When things start to decline - there are bad headlines in the papers and on television - will you have the stomach for the market volatility and the broad-based pessimism that tends to come with it?
I believe, in the stock market - that's one of my fields - that most people are irrational. And to be irrational, you can be irrational in so many different ways that, practically, the result is indeterminate.
There is little room for complacency, and it is important to guard against sporadic volatility in financial markets.
The investor should be aware that even though safety of its principal and interest may be unquestioned, a long term bond could vary widely in market price in response to changes in interest rates.
One thing on psychology, which we've always known, is that every investor says they're long-term - and they are until the market takes a hit.
Stock market corrections, although painful at the time, are actually a very healthy part of the whole mechanism, because there are always speculative excesses that develop, particularly during the long bull market.
One of the things Goldman teaches you is, don't be the first guy through the door because you're going to get all the arrows.
Listen to market strategists, and a word that comes up a lot these days is 'volatility.'
Equity is the cushion that protects financial institutions from unexpected changes in the value of their assets. The greater the leverage, the smaller the losses required to wipe out a company's equity, leaving it without enough money to repay the people who hold its debt.
It's hard to tell which assets will be toxic. The best way to ensure that only shareholders and banks feel it is have adequate capital.
There has to be a large number of people and routes that are lined up together. One part is liquidity and the other part is product - there's a lot that can go wrong.
Investment banks manage to go bankrupt through their investment-banking activities, commercial banks manage to go bankrupt through their commercial-banking activities.
The markets don't like instability and they don't like uncertainty.
In the long run, a portfolio of well chosen stocks and/or equity mutual funds will always outperform a portfolio of bonds or a money-market account. In the long run, a portfolio of poorly chosen stocks won't outperform the money left under the mattress.
We should probably stop trading derivatives, anything more complex than regular options ... I am an options trader, and I don't understand options. How do you want a regulator to understand them?
Get inside information from the president and you will probably lose half your money. If you get it from the chairman of the board, you will lose all of your money.
Risk managers and investment bankers and actually, all kinds of investors took on more risk than they expected. So there was a failure of risk management. There was a failure to recognize how much risk there was in some of these securities that people bought.
Markets love volatility.
Consciously paying more for a stock than its calculated value - in the hope that it can soon be sold for a still-higher price - should be labelled speculation
