The first thing you learn on the trading floor is that when large numbers of people are after the same commodity, be it a stock, a bond, or a job, the commodity quickly becomes overvalued.
The markets in the long run are no doubt driven by fundamental economic laws—if the United States runs a persistent trade deficit, the dollar will eventually plummet—but in the short run money flows less rationally. Fear and, to a lesser extent, greed are what make money move.
“There is a magic moment, during which a man has surrendered a treasure, and during which the man who is about to receive it has not yet done so. An alert lawyer [read bond trader] will make that moment his own, possessing the treasure for a magic microsecond, taking a little of it, passing it on.”
The astute investor Warren Buffett is fond of saying that any player unaware of the fool in the market probably is the fool in the market.
What Milken was saying was that the entire American credit-rating system was flawed. It focused on the past when it should have focused on the future, and it was burdened by a phony sense of prudence.
It was striking how little control we had of events, particularly in view of how assiduously we cultivated the appearance of being in charge by smoking big cigars and saying fuck all the time.
The only thing history teaches us, a wise man once said, is that history doesn’t teach us anything.
“Those who say don’t know, and those who know don’t say.”
Knowing about markets is knowing about other people’s weaknesses.
I don’t do favors. I accumulate debts.