February 20, 2008
Systematically Irrational Behavior
What Was I Thinking? by Elizabeth Kolbert
“The real mystery, it could be argued, isn’t why we make so many poor economic choices but why we persist in accepting economic theory … faced with certain options, people will consistently make the wrong choice. Therefore people should be offered options that work with, rather than against, their unreasoning tendencies. These foolish-proof choices are labeled ‘nudges.’
Instead of having to make the trip to the benefits office to opt into a retirement plan, employees should have to make that trip only if they want to opt out … To discourage credit-card debt, cardholders receive annual statements detailing how much they have already squandered in late fees and interest … To encourage energy conservation, new cars should come with stickers showing how many dollars’ worth of gasoline they are likely to burn through in five years of driving.”
Only nitwits need a nudge, no?
February 20th, 2008 at 7:46 pm
SG probably booked that profit in Q4 by mark to market.
February 21st, 2008 at 5:44 am
Brian: I thought Jerome faked entries which offset every position so everything was always hidden, until it all blew up in mid-January.
February 21st, 2008 at 1:00 pm
Jerome’s faked entries could have be done such that the real positions appeared to be delta neutral and profitable. For example, real long at 100, fake short at 101. SG would have booked a mark to market gain of 1.
Can’t wait to see SG’s full report.
February 21st, 2008 at 2:28 pm
Brian: Yes, but then he’d have to be putting on huge positions to get a $2.1 billion gain and someone should have noticed, hey, how is this kid taking trades this size? I was willing to give his managers the benefit of the doubt (presumption of innocence) but this kind of thing strains credulity. The independent auditor’s report should be fascinating, though I wonder if it will be made public.
February 22nd, 2008 at 6:39 am
Did anyone seem the CNBC interview with Meredith Whitney?
Financials are facing a 15-50% drop and Citi still has billions to write down as well as a dividend cut.
February 22nd, 2008 at 7:09 am
igor: Don’t believe everything you hear on the Boob Tube.
February 22nd, 2008 at 7:35 am
Alternatively, don’t disbelieve everything you hear either. Typically, CNBC is very bullish, so I thought this inteview was somewhat remarkable.
Also, Whitney made some good points — and she was correct with her initial prediction last year.
It’s worth a listen.
February 22nd, 2008 at 8:01 am
igor: Everyone out there is talking her book … I try to shut it *all* out.