Comments on: The Real Cause of the Financial Crisis: An MIT Blackjack Team Perspective http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/ Analysis and Commentary on Finance and Freedom in America Today... Mon, 23 Nov 2009 03:53:47 +0000 http://wordpress.com/ hourly 1 By: AIG Casino and Financial Services Company « The Long Run Blog http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-5221 AIG Casino and Financial Services Company « The Long Run Blog Fri, 03 Apr 2009 01:52:38 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-5221 [...] anymore. Semyon Dukach, one of the members of the MIT team, wrote an interesting piece called The Real Cause of the Financial Crisis: An MIT Blackjack Team Perspective. He argues that how we manage money needs to be radically altered and describes the desired [...] [...] anymore. Semyon Dukach, one of the members of the MIT team, wrote an interesting piece called The Real Cause of the Financial Crisis: An MIT Blackjack Team Perspective. He argues that how we manage money needs to be radically altered and describes the desired [...]

]]> By: The Real Cause of the Financial Crisis: An MIT Blackjack Team… | Velt http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-3449 The Real Cause of the Financial Crisis: An MIT Blackjack Team… | Velt Sat, 21 Mar 2009 05:29:19 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-3449 [...] Real Cause of the Financial Crisis: An MIT Blackjack Team… March 21st, 2009 | Tags: A fellow blogger wrote a fantastic post today on “The Real Cause of the Financial Crisis: An MIT Blackjack [...] [...] Real Cause of the Financial Crisis: An MIT Blackjack Team… March 21st, 2009 | Tags: A fellow blogger wrote a fantastic post today on “The Real Cause of the Financial Crisis: An MIT Blackjack [...]

]]> By: dewealthification.com » Blog Archive http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1687 dewealthification.com » Blog Archive Tue, 24 Feb 2009 07:31:53 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1687 [...] The Real Cause of the Financial Crisis: An MIT Blackjack Team Perspective [...] [...] The Real Cause of the Financial Crisis: An MIT Blackjack Team Perspective [...]

]]> By: dewealthification.com » Blog Archive » Personal Blog http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1580 dewealthification.com » Blog Archive » Personal Blog Mon, 02 Feb 2009 02:02:08 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1580 [...] The Real Cause of the Financial Crisis: An MIT Blackjack Team Perspective [...] [...] The Real Cause of the Financial Crisis: An MIT Blackjack Team Perspective [...]

]]> By: John Perkins http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1539 John Perkins Mon, 19 Jan 2009 23:28:11 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1539 I wish someone would realize what is causing this whole crisis comes down to a multitude of moments where the consumer, eager to buy a car, a stereo, a widget, looks for the least priced version and purchases it, without realizing or caring it was made in China, who we have a 5 trillion dollar debt to already. The pigeons have come to roost for their decision to pay for cheap labor produced products, they have given themselves a giant paycut that was delayed by 25 years. And the companies of America are required to move overseas to compete, and so on and so on but it all starts with the I wish someone would realize what is causing this whole crisis comes down to a multitude of moments where the consumer, eager to buy a car, a stereo, a widget, looks for the least priced version and purchases it, without realizing or caring it was made in China, who we have a 5 trillion dollar debt to already. The pigeons have come to roost for their decision to pay for cheap labor produced products, they have given themselves a giant paycut that was delayed by 25 years. And the companies of America are required to move overseas to compete, and so on and so on but it all starts with the

]]> By: Robert B. http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1534 Robert B. Sat, 17 Jan 2009 23:05:20 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1534 The author's presumption that there is such a thing as "strategy of sound fundamental analysis " when attempting to gauge market entry points for put options to enhance returns is, by definition, a lose-lose proposition. The recent implosion of the stock market and the massive losses for investors using classic fundamental analysis is a case in point. Fundamental analysis is not a market-timing" tool and never has been. An investor without a clue about the direction of price action in a particular stock is not only well advised to stay clear of the market, but is certainly advised to stay away from put options. That's unless he has a serious financial death wish.... The author’s presumption that there is such a thing as “strategy of sound fundamental analysis ” when attempting to gauge market entry points for put options to enhance returns is, by definition, a lose-lose proposition. The recent implosion of the stock market and the massive losses for investors using classic fundamental analysis is a case in point. Fundamental analysis is not a market-timing” tool and never has been.

An investor without a clue about the direction of price action in a particular stock is not only well advised to stay clear of the market, but is certainly advised to stay away from put options.

That’s unless he has a serious financial death wish….

]]> By: moneycreation http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1533 moneycreation Sat, 17 Jan 2009 17:49:39 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1533 Great article! I actually think the problem is an unavoidable part of the debt based monetary system. The core of the problem is the way money is created leading to the necessity of pyramid scheme since the money system by it self is a pyramid scheme. I explain this an why the system need to have bubbles in my blog using simple animations : “The whole credit system is an "emperor's new clothes" trick where we are fooled into thinking that "no money" (credit) in the form of digital ones and zeros is money. The whole illusion is based on the fact that we accept that the phony money banks make up by debt, binding everything and everyone , really exists and that we can withdraw them as cash when ever we want. To make us keep the money in the banks' fantasy world in the form of credits, we need to be tricked into believing that the money is "growing" . “ Please read the rest and I would very much appreciate your thoughts (I would also very much appreciate some help improving the text since English is not my native language) http://moneycreation.wordpress.com/2009/01/16/3/#comment-7 Great article!
I actually think the problem is an unavoidable part of the debt based monetary system. The core of the problem is the way money is created leading to the necessity of pyramid scheme since the money system by it self is a pyramid scheme. I explain this an why the system need to have bubbles in my blog using simple animations :

“The whole credit system is an “emperor’s new clothes” trick where we are fooled into thinking that “no money” (credit) in the form of digital ones and zeros is money. The whole illusion is based on the fact that we accept that the phony money banks make up by debt, binding everything and everyone , really exists and that we can withdraw them as cash when ever we want.

To make us keep the money in the banks’ fantasy world in the form of credits, we need to be tricked into believing that the money is “growing” . “

Please read the rest and I would very much appreciate your thoughts (I would also very much appreciate some help improving the text since English is not my native language)

http://moneycreation.wordpress.com/2009/01/16/3/#comment-7

]]> By: Dicebucket http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1531 Dicebucket Sat, 17 Jan 2009 06:09:15 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1531 Blaming the greedy folks in our financial institutions for the current financial mess is like blaming the maggots for the death of the dear on the side of the road. The opportunity was presented to them by the REAL culprits in this matter. Here's the whole story, dating from 1999!!: 1999: Early Warning --New York Times: http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260 2003 - 2005: Calls call for more regulations; opponents poo-poo risk of any harm from sub-prime lending. “Sub-prime loans are virtually riskless”: Franklin Raines, Fanny CEO http://www.breitbart.tv/?p=184743 2005: Fannie Mae/Congressional Black Caucus relationship http://www.youtube.com/watch?v=usvG-s_Ssb0&eurl=http://www.americanthinker.com/blog/2008/09/fannie_mae_and_congressional_d.html 2008: Wrap-up: Continuous warnings ignored, opponents block new regulations, culminating in bailout: http://uk.youtube.com/watch?v=JsfMicOgufA We should share this info with everybody who'll pay attention!!! Blaming the greedy folks in our financial institutions for the current financial mess is like blaming the maggots for the death of the dear on the side of the road. The opportunity was presented to them by the REAL culprits in this matter.

Here’s the whole story, dating from 1999!!:

1999: Early Warning –New York Times:
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260

2003 – 2005: Calls call for more regulations; opponents poo-poo risk of any harm from sub-prime lending. “Sub-prime loans are virtually riskless”: Franklin Raines, Fanny CEO
http://www.breitbart.tv/?p=184743

2005: Fannie Mae/Congressional Black Caucus relationship
http://www.youtube.com/watch?v=usvG-s_Ssb0&eurl=http://www.americanthinker.com/blog/2008/09/fannie_mae_and_congressional_d.html

2008: Wrap-up: Continuous warnings ignored, opponents block new regulations, culminating in bailout:
http://uk.youtube.com/watch?v=JsfMicOgufA

We should share this info with everybody who’ll pay attention!!!

]]> By: councillorjackbrody http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1530 councillorjackbrody Fri, 16 Jan 2009 21:56:58 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1530 You'd get my vote! Why don't the bankers and politicians understand this, or do they understand it all too well??? You’d get my vote! Why don’t the bankers and politicians understand this, or do they understand it all too well???

]]> By: Jamie http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1529 Jamie Fri, 16 Jan 2009 21:04:18 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1529 My only point of contention here is the use of the term, intuition. Many successful traders use a bit of intuition, in sifting through both the technical analysis and the fundamentals, in determining enter and exit levels for their positions. The whole "going with the gut" works great, if sound money management practices are already in place. The whole double down mentality is that of a gambler's folly than that of a long term successful trader. It's important to recognize when one's system isn't producing and to re-tool periodically. All and all, most people go with the herd. The idea that real estate only goes up was echoed by millions of home owners, bankers, and real estate agents for the past decade, yet, there's been numerous boom/bust cycles in RE, throughout our history, including Los Angeles, a century ago where even the RE fundamentals, that LA would in the future be one of the nation's largest cities came to fruition nearly ~70 years later, was proven to not predict the short term RE boom, followed by bust, of that time period. My only point of contention here is the use of the term, intuition. Many successful traders use a bit of intuition, in sifting through both the technical analysis and the fundamentals, in determining enter and exit levels for their positions.

The whole “going with the gut” works great, if sound money management practices are already in place. The whole double down mentality is that of a gambler’s folly than that of a long term successful trader. It’s important to recognize when one’s system isn’t producing and to re-tool periodically.

All and all, most people go with the herd. The idea that real estate only goes up was echoed by millions of home owners, bankers, and real estate agents for the past decade, yet, there’s been numerous boom/bust cycles in RE, throughout our history, including Los Angeles, a century ago where even the RE fundamentals, that LA would in the future be one of the nation’s largest cities came to fruition nearly ~70 years later, was proven to not predict the short term RE boom, followed by bust, of that time period.

]]> By: Tom http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1526 Tom Fri, 16 Jan 2009 14:38:10 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1526 This is a bit of a simplistic argument (although at least partially correct.) Banking leverage and lack of controls were a major part of this crisis - again - like many before it. This is a bit of a simplistic argument (although at least partially correct.) Banking leverage and lack of controls were a major part of this crisis – again – like many before it.

]]> By: Bigbuilder http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1524 Bigbuilder Fri, 16 Jan 2009 13:04:47 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1524 Great analysis. Greed is indeed the root of the problem, but greed is a human trait that will never go away. The challenge is to structure both our government and the economy in ways that preclude making Martingale bets with money that is insured by the government. People lend to banks at an artificially low rate since their deposits are insured. Banks lend to hedge funds because there is a short term gain in earnings on the spread. If deposits were not federally insured, the fuel for the fire would be less and there would be more care by the banks. Milton Friedman had it figured out: There should be two types of banks: One that invests only in U. S. Government bonds and for which deposits are fully insured to any level. The other which can lend or invest in any way but for which there is no insurance. An additional subsidy by the Government is the false sense of security provided by the Securities laws and other regulations that apply to financial institutions. The average joe assumes a degree of regulatory skill that is simply not possible and makes investments based in part on that assumption. If the Government said: "Hey, you are on your own...don't rely on us to protect your investments!" the result would be a very different system of managing risk. Great analysis. Greed is indeed the root of the problem, but greed is a human trait that will never go away. The challenge is to structure both our government and the economy in ways that preclude making Martingale bets with money that is insured by the government. People lend to banks at an artificially low rate since their deposits are insured. Banks lend to hedge funds because there is a short term gain in earnings on the spread. If deposits were not federally insured, the fuel for the fire would be less and there would be more care by the banks.

Milton Friedman had it figured out: There should be two types of banks: One that invests only in U. S. Government bonds and for which deposits are fully insured to any level. The other which can lend or invest in any way but for which there is no insurance.

An additional subsidy by the Government is the false sense of security provided by the Securities laws and other regulations that apply to financial institutions. The average joe assumes a degree of regulatory skill that is simply not possible and makes investments based in part on that assumption. If the Government said: “Hey, you are on your own…don’t rely on us to protect your investments!” the result would be a very different system of managing risk.

]]> By: Zombix (The Chronicles of…) » Bailout http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1523 Zombix (The Chronicles of…) » Bailout Fri, 16 Jan 2009 08:29:06 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1523 [...] The Real Cause of the Financial Crisis: An MIT Blackjack Team Perspective [...] [...] The Real Cause of the Financial Crisis: An MIT Blackjack Team Perspective [...]

]]> By: Amitabh http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1522 Amitabh Fri, 16 Jan 2009 04:33:56 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1522 Semyon Dukach, thank you for the lucid explanation of the past and present (and most probably future) financial crisis. Iteventually boils down to greed, doesn't it? But why blame just the fund manager alone. It is a vicious cycle where the investors look for better and better returns in shorter and shorted time. They - we - are the ones who push the fund managers to play Martingale. Your post above echos what Nassim Nicholas Taleb has so wonderfully put in his book The Black Swan. (I am pretty impressed by Taleb and many of my own blogs are inspired by his books!) Semyon Dukach, thank you for the lucid explanation of the past and present (and most probably future) financial crisis.
Iteventually boils down to greed, doesn’t it? But why blame just the fund manager alone. It is a vicious cycle where the investors look for better and better returns in shorter and shorted time. They – we – are the ones who push the fund managers to play Martingale.
Your post above echos what Nassim Nicholas Taleb has so wonderfully put in his book The Black Swan. (I am pretty impressed by Taleb and many of my own blogs are inspired by his books!)

]]> By: Harry Tran http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1519 Harry Tran Fri, 16 Jan 2009 02:03:18 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1519 This is always going to happen when you let a bunch of hedge fund managers invest in anything they please in order to get the highest rate of return for their portfolios. And they know one thing that many of the average investors don't which is information, and these days information is key to any transaction and it is a force that makes one party stronger than the other party. Which allows them to take advantage of the misinformed. This is always going to happen when you let a bunch of hedge fund managers invest in anything they please in order to get the highest rate of return for their portfolios. And they know one thing that many of the average investors don’t which is information, and these days information is key to any transaction and it is a force that makes one party stronger than the other party. Which allows them to take advantage of the misinformed.

]]> By: Tom http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1518 Tom Fri, 16 Jan 2009 01:28:19 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1518 Regarding the MIT Blackjack team, the made-for-t.v.-special "Making Millions" said you guys improved on Dr. Edward O. Thorp's formula. Uhm, that is news to me. How did you improve on it exactly?? Using a Big Player and spreading out bets with a larger bank roll was covered in his original book, Beat the Dealer. Although your story is a neat & sexy one, he did not get the credit he deserved when the movie "21" was produced. Kevin Spacy, shame on you. Regarding the MIT Blackjack team, the made-for-t.v.-special “Making Millions” said you guys improved on Dr. Edward O. Thorp’s formula. Uhm, that is news to me. How did you improve on it exactly?? Using a Big Player and spreading out bets with a larger bank roll was covered in his original book, Beat the Dealer. Although your story is a neat & sexy one, he did not get the credit he deserved when the movie “21″ was produced. Kevin Spacy, shame on you.

]]> By: DeedInLieu http://yourmortgageoryourlife.wordpress.com/2009/01/15/the-real-cause-of-the-financial-crisis-an-mit-blackjack-team-perspective/#comment-1517 DeedInLieu Fri, 16 Jan 2009 00:53:54 +0000 http://yourmortgageoryourlife.wordpress.com/?p=3082#comment-1517 Thank you Semyon Dukach for sharing what many of us have realized is happening with this “bailout” garbage being forced onto the American taxpayer all in the name of saving the economy, or the joke about maintaining the “faith” in the economy. I quote from the article: "Among the false systems that intuitively feel right, there is none as insidious and deadly as the Martingale, where a player doubles his bet after every loss. In the 80’s the emerging Martingales were called junk bonds and LBO’s. In more recent times they are known as mortgage backed securities and credit default swaps". How can there be faith in the economy if the same people who cased this mess are now in charge of fixing it, all they are doing is “doubling down” and praying for a miricle. Thank you Semyon Dukach for sharing what many of us have realized is happening with this “bailout” garbage being forced onto the American taxpayer all in the name of saving the economy, or the joke about maintaining the “faith” in the economy. I quote from the article:

“Among the false systems that intuitively feel right, there is none as insidious and deadly as the Martingale, where a player doubles his bet after every loss.
In the 80’s the emerging Martingales were called junk bonds and LBO’s. In more recent times they are known as mortgage backed securities and credit default swaps”.

How can there be faith in the economy if the same people who cased this mess are now in charge of fixing it, all they are doing is “doubling down” and praying for a miricle.

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