When is The Right Time to Enter the Stock Market to Enjoy the Rally? »
Posted By WikiMap 5 months, 1 week ago in NewsHow long does the average person mourn the loss of a loved one? It seems that the time period runs from eleven to fourteen months on average. How long does one mourn the losses in the stock market? Can I measure that?
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jimdoze5 months, 1 week ago
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Back-tested Risk and Behavior Models work... until they don't.
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Professional risk and behavior models missed what was, in retrospect, a very simple and very obvious piece of information that ultimately proved near-catastrophic in the recent crash.
The information harkens to the essence of markets, e.g. a market is an equilibrium between greed and fear. For over 50 years, the federal government had, through various programs, progressively removed fear from the Real Estate/Mortgage market equilibrium. This is why charts of real estate prices showed a continuing and progressive divergence from the prices of everything else. Because of that progressive divergence, the general population, and not just a few brilliant investors, were possessed of fundamental belief that there was relative safety in real estate.
Financial institutions back-tested their risk models for 50 years and found "all was well". What they didn't see was that government programs had progressively removed the perception of risk from the equation. In the absence of risk, greed eventually overwhelms... in any market. And there is no amount of regulatory oversight that will prevent that. Regulatory oversight can and does delay it, but it will not prevent it.-
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bigG5 months, 1 week ago
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"In the absence of risk, greed eventually overwhelms... in any market. And there is no amount of regulatory oversight that will prevent that. Regulatory oversight can and does delay it, but it will not prevent it."
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I disagree - with regulation of the credit default swaps and mortgage backed securities the present problem would not have happened. Repeal of Glass-Steagall in its' entirety was also a contributor.
People need to realize that these types of laws were enacted to prevent previous problems from recurring.
Greed is a totally different issue. It exists moreso in the absence of regulation than with it.
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