On systematic dangers:
"When an economic system is overleveraged, with leverage that is layered, such that a domino effect can occur, small failures can have disproportionate results. It is almost like the economic system during the bull phase self-organizes for the largest possible failure. (Note: self-organizing systems do not always optimize for the long term. Think: what other ideas could that invalidate?)"
On thinking harder:
"Now, I am not a disciple of Dr. Shiller, I disagree with him on many issues, Trills for an example. When Shiller talks, odds are 50-50 that I agree, which makes him interesting to me, unlike Bernanke and Krugman who I almost always disagree with, and James Grant and Caroline Baum, who I almost always agree with. Someone who agrees with me and disagrees with me equally is interesting, because he makes me think harder."
On genuine expertise:
"A large part of what makes hedge fund managers successful is their willingness to limit their activity to areas where they have genuine expertise. They gain insight beyond most into areas where they are experts in discerning value."
The trouble is this: during boom times, it is virtually impossible to get regulators to oppose politicians who are being lobbied by financial services organizations when they are making gobs of money, and it all seems riskless, as the bubble expands. This is endemic to human nature; it is politically impossible to oppose booms. I for one wrote extensively about the coming housing bust, but all I received was derision. I wrote about the blowup coming in subprime residential mortgage bonds, but all I got was a yawn.
So, unless we get a new set of regulators that are willing to be junkyard dogs, I don’t care what laws we put in place. Laws are only as good as those that are willing to enforce them.