Black Monday: stock market crash in 1987

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Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market Into a Casino by Jim McTague

Alan Greenspan, algorithmic trading, automated trading system, Bear Stearns, Bernie Madoff, Bernie Sanders, Black Monday: stock market crash in 1987, Bretton Woods, buttonwood tree, buy and hold, computerized trading, corporate raider, creative destruction, credit crunch, Credit Default Swap, financial innovation, fixed income, Flash crash, High speed trading, housing crisis, index arbitrage, junk bonds, locking in a profit, Long Term Capital Management, machine readable, margin call, market bubble, market fragmentation, market fundamentalism, Myron Scholes, naked short selling, Nixon triggered the end of the Bretton Woods system, pattern recognition, Ponzi scheme, proprietary trading, quantitative trading / quantitative finance, Renaissance Technologies, Ronald Reagan, Sergey Aleynikov, short selling, Small Order Execution System, statistical arbitrage, technology bubble, transaction costs, uptick rule, Vanguard fund, Y2K

Within 9 weeks, the Brady Commission performed a remarkable autopsy of the complicated chain of events responsible for the Black Monday 1987 crash and made recommendations to Congress that would have helped to prevent the 2010 event had they been followed. But the recommended reforms were never enacted because the Reagan administration, the Congress, and the regulators all had vested interests in maintaining the inadequate status quo. Then, as now, the markets were not artfully integrated. Separate rules for the separate exchanges resulted in disconnects between the cash market, the equity market, the futures market, and the stock index future market. As in the 2010 Flash Crash, on Black Monday 1987 there were cases in which one exchange would try to slow trading in the face of a cascade of selling while other exchanges did not, so that the selling pressure washed from one market to another.

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., 113-122 Murphy, Eddie, 29 mutual funds, ETFs (exchange-traded funds) versus, 232 N Nagy, Chris, 8, 225 naked puts, 127-128 naked short selling, banning, 47-59 naked sponsored access, 226 Nanex, 200 Narang, Manoj, 152-156 NASD (National Assocation of Securities Dealers), 102 regulation after Black Monday (October 19, 1987), 136-137 NASDAQ on Black Monday (October 19, 1987), 133 initial public offerings (IPOs), 142-144 investigation of price fixing, 139 modernization of, 33 Regulation NMS changes to, 21 regulation of ATSs (Automatic Trading Systems), 139-144 SOES (Small Order Execution System), 136-138 National Association of Securities Dealers.

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EDT occurred one of the most bizarre and mysterious meltdowns in stock market history, an event destined to become known as the Flash Crash.7 The DJIA plunged more than 700 points in ten minutes, its largest one-day fall ever. Then in the next ten minutes, it began to recover. The speed at which the event transpired was both stunning and alarming. There had been other one-day market plunges, most notably Black Monday in October 1987. But the regulators supposedly had fixed the markets after that staggering event so that nothing like it could ever happen again. This infamous day on May 6 showed investors that the equities market had become explosively volatile and that they could be wiped out in a matter of seconds.

The Ascent of Money: A Financial History of the World by Niall Ferguson

Admiral Zheng, Alan Greenspan, An Inconvenient Truth, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Bear Stearns, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, classic study, collateralized debt obligation, colonial exploitation, commoditize, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, equity risk premium, financial engineering, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, Future Shock, German hyperinflation, Greenspan put, Herman Kahn, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, iterative process, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", John Meriwether, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour mobility, Landlord’s Game, liberal capitalism, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, Naomi Klein, National Debt Clock, negative equity, Nelson Mandela, Nick Bostrom, Nick Leeson, Northern Rock, Parag Khanna, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, risk free rate, Robert Shiller, rolling blackouts, Ronald Reagan, Savings and loan crisis, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, stocks for the long run, structural adjustment programs, subprime mortgage crisis, tail risk, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus, Thorstein Veblen, tontine, too big to fail, transaction costs, two and twenty, undersea cable, value at risk, W. E. B. Du Bois, Washington Consensus, Yom Kippur War

(‘free of capture and seizure’) 203 Federal Emergency Management Agency (FEMA) 178 Federal Home Loan Bank Board 250 Federal Home Loan Mortgage Corporation see Freddie Mac Federal Housing Administration (FHA) 248-50 Federal National Mortgage Association see Fannie Mae Federal Open Market Committee 166-7 Federal Reserve Bank of New York 161 Federal Reserve System: and 1990s euphoria 167-8 and Black Monday (1987) 165-6 criticisms of 161-3 founding of 57 increases in short-term rates 116 and Long Term Capital bail-out 327 and mortgages 266 Rothschilds’ alleged influence on 86 target rate 9 and Wall Street Crash/Great Depression 161-4 Federal Savings and Loan Insurance Corporation (FSLIC) 258 Fermat, Pierre de 188 Fermat Capital 227 feudalism 341 FHA see Federal Housing Administration Fibonacci (Leonardo of Pisa) 32-3 fiction 195 fiduciary note issues 55 financial crises 2 ‘American crisis’/credit crunch 8. Asian see Asia ‘Black Monday’ (1987) 159 escaping investors’ memory-span 332 and fiscal deficits 313 frequency and unpredictability of 2 financial crises - cont.

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But page 1 also features at least four reports on the atrocious gales that had battered the Eastern seaboard the previous day.80 Maybe historians should blame bad weather for the Wall Street crash. (That might not be such a far-fetched proposition. Many veterans of the City of London still remember that Black Monday - 19 October 1987 - came after the hurricane-force winds that had unexpectedly swept the south-east of England the previous Friday.) Contemporaries sensed that there was a psychological dimension to the crisis. In his inaugural address, President Franklin Roosevelt argued that all that Americans had to fear was ‘fear itself’.

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If stock market movements followed the ‘normal distribution’ or bell curve, like human heights, an annual drop of 10 per cent or more would happen only once every 500 years, whereas on the Dow Jones it has happened about once every five years.95 And stock market plunges of 20 per cent or more would be unheard of - rather like people just a foot tall - whereas in fact there have been nine such crashes in the past century. On ‘Black Monday’, 19 October 1987, the Dow fell by a terrifying 23 per cent, one of just four days when the index has fallen by more than 10 per cent in a single trading session. The New York Times’s front page the next morning said it all when it asked ‘Does 1987 Equal 1929?’ From peak to trough, the fall was of nearly one third, a loss in the value of American stocks of close to a trillion dollars.

Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis by Scott Patterson

"World Economic Forum" Davos, 2021 United States Capitol attack, 4chan, Alan Greenspan, Albert Einstein, asset allocation, backtesting, Bear Stearns, beat the dealer, behavioural economics, Benoit Mandelbrot, Bernie Madoff, Bernie Sanders, bitcoin, Bitcoin "FTX", Black Lives Matter, Black Monday: stock market crash in 1987, Black Swan, Black Swan Protection Protocol, Black-Scholes formula, blockchain, Bob Litterman, Boris Johnson, Brownian motion, butterfly effect, carbon footprint, carbon tax, Carl Icahn, centre right, clean tech, clean water, collapse of Lehman Brothers, Colonization of Mars, commodity super cycle, complexity theory, contact tracing, coronavirus, correlation does not imply causation, COVID-19, Credit Default Swap, cryptocurrency, Daniel Kahneman / Amos Tversky, decarbonisation, disinformation, diversification, Donald Trump, Doomsday Clock, Edward Lloyd's coffeehouse, effective altruism, Elliott wave, Elon Musk, energy transition, Eugene Fama: efficient market hypothesis, Extinction Rebellion, fear index, financial engineering, fixed income, Flash crash, Gail Bradbrook, George Floyd, global pandemic, global supply chain, Gordon Gekko, Greenspan put, Greta Thunberg, hindsight bias, index fund, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Jeff Bezos, Jeffrey Epstein, Joan Didion, John von Neumann, junk bonds, Just-in-time delivery, lockdown, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, Mark Spitznagel, Mark Zuckerberg, market fundamentalism, mass immigration, megacity, Mikhail Gorbachev, Mohammed Bouazizi, money market fund, moral hazard, Murray Gell-Mann, Nick Bostrom, off-the-grid, panic early, Pershing Square Capital Management, Peter Singer: altruism, Ponzi scheme, power law, precautionary principle, prediction markets, proprietary trading, public intellectual, QAnon, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Nader, Ralph Nelson Elliott, random walk, Renaissance Technologies, rewilding, Richard Thaler, risk/return, road to serfdom, Ronald Reagan, Ronald Reagan: Tear down this wall, Rory Sutherland, Rupert Read, Sam Bankman-Fried, Silicon Valley, six sigma, smart contracts, social distancing, sovereign wealth fund, statistical arbitrage, statistical model, stem cell, Stephen Hawking, Steve Jobs, Steven Pinker, Stewart Brand, systematic trading, tail risk, technoutopianism, The Chicago School, The Great Moderation, the scientific method, too big to fail, transaction costs, University of East Anglia, value at risk, Vanguard fund, We are as Gods, Whole Earth Catalog

When Empirica was launched, he was an obscure professor of quantitative finance at New York University with a background in trading complex financial instruments known as derivatives. He had grown convinced that financial markets and institutions had become far riskier than many realized. He’d made a killing on Black Monday in October 1987, when the Dow fell 22.6 percent in a single day. Like Spitznagel, he’d witnessed all the blowups of the nineties—the 1994 bankruptcy of Orange County, California; the Asian Contagion of 1997 triggered by currency devaluations; the 1998 collapse of the giant hedge fund Long-Term Capital Management after it made wildly misguided bets on Russian debt (among other things).

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Sornette agreed that, most of the time, the random walk theory holds for markets. But there are times, he said, when it is possible to predict what will occur. The most important time: when it’s in a bubble. He called these events “pockets of predictability.” Standard models fail to capture the extreme movements seen in crashes, such as Black Monday of October 1987. The models typically claim that the chance of such crashes is statistically impossible, occurring once in a billion years (or more). That means the models, while fine for most trading days, don’t work in crashes. “If the largest drawdowns are outliers, we must consider the possibility that they may possess a higher degree of predictability than the smaller market movements,” Sornette wrote in Why Stock Markets Crash.

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Ackman, Bill, 1–7, 114, 176 Adhanom, Tedros, 2 Aérospatiale, 84 Allianz Global Investors, 168–69, 260 Allianz SE, 168 Alpha Futures, 42–43, 44 Amaranth Advisors, 68 Amundi Group, 224 Antifragile (Taleb), 12, 16, 32, 143, 190, 192, 207, 218 Aon PLC, 266 Appaloosa Management, 140 AQR Asset Management, 172–77, 227 Arab Spring, 204 Ariane rockets, rupture analysis of, 84, 85, 86, 87, 202 arXiv database, 131, 208 Asian Contagion (1997), 13 Asness, Cliff, 172, 173–74, 176–77, 228–29 Atwood, Margaret, 244 Austrian School of Economics, 120–21, 136 Bachelier, Louis, 74–75 Baggesen, Eric, 153, 157, 158, 159–60 Baldwin, Thomas (Tom), 46–47, 48, 49 Bankers Trust, 55 Bank for International Settlements, 224 Bankman-Fried, Sam, 280–81, 282, 284 Bank of America, 153, 250 Bank of England, 111 Banque de France, 224 Barclays Capital, 127, 128 Baron, Ron, 178 Barron’s, 147, 155, 273 Bar-Yam, Yaneer, 18, 19, 20–23, 36, 164, 193, 196 Bayer, 215 Beckstead, Nick, 283 Bear market fund, 13 Bear Stearns, 98, 261 Bed of Procrustes, The (Taleb), 218 behavioral finance, 79 Bendell, Jem, 245–46, 248 Berenson, Alex, 79–80 Berkshire Hathaway, 2–3, 4, 156 Bernanke, Ben, 34–35, 99, 120, 122 Bezos, Jeff, 104, 124, 281 Biden, Joe, 33–34, 238, 249–50, 251, 255, 280, 285, 287, 290 bitcoin, 105, 179, 280 Black, Fischer, 227–28 Black Monday (1987), 13, 15, 20, 38 Black Swan, The (Taleb), 12, 16, 19, 76, 82, 91, 103–4, 106, 107, 124, 129, 144, 218, 261 Black Swan funds, 24, 113, 130, 134 Black Swan Protection Protocol, 14, 15, 154–55 Black Swan Protection Protocol Fund CalPERS’s investment in, 157–58 global market response to Covid-19 spread and, 12, 14–15 investor initial reaction to, 98–99, 100, 108 Spitznagel’s founding of, 12 success of, 110, 112, 155 trading strategy of, 14, 15, 98–99, 110, 154–55 Black Swans definition of, 13 Empirica’s trading strategy and, 13 global market response to Covid-19 spread as, 14 Lloyd’s of London’s interest in, 266–67 Mandelbrot’s influence on theory of, 76 March 2020 events and, 14, 169 pandemics and, 16, 20 precautionary principle and, 37 Sornette’s criticism of, 91, 132, 144–45, 146, 288 Taleb’s coining of term, 13 Universa’s trading strategy against, 14, 25–26, 97, 274 Bloomberg, 108, 134, 165, 175, 232, 287 BNP Paribas, 58 Bob Rubin trade, 141–42, 218 Bohn, Jeffrey, 32–33 Bostrom, Nick, 281–82, 283, 284 Bouazizi, Mohamed, 204 Bouchaud, Jean-Philippe, 85 Bourqui, Elisabeth, 157, 158 Boyd, Ian, 216 Bradbrook, Gail, 187, 188 Brand, Stewart, 124, 193–94, 212, 217 Bremmer, Ian, 252 Bridgewater Associates, 250 Brin, Sergey, 124 Brockman, John, 123–24, 190, 193 Bronson, Rachel, 235–36 Brookings Institution, 252 Brown, Aaron, 15, 23, 68, 96, 106, 217 Brown, Margaret, 171–72 Buchanan, Patrick, 42 Buckley, William, 41, 42 Buffett, Warren, 2–3, 41, 66, 121, 155–56, 176, 274, 275 Bulletin of Atomic Scientists, 163–64, 235–36, 285 Burry, Michael, 113–14 Bush, George W., 72, 78, 102, 107, 179, 204 California Public Employees’ Retirement System (CalPERS), 232 investment in Universa by, 151–54, 156–58 Meng’s review of Universa’s tail-hedge strategy with, 158–59, 175 Meng’s strategy for, 171–73 termination of Universa’s management of, 159–60, 171–72, 175–76 Callan, Trevor, 111 Cantor Fitzgerald, 64 Capital Fund Management, 85 Carbon Engineering, 251 Carbon Tracker, 241 Case, Greg, 266 CBOE Volatility Index (the VIX), 110, 154, 163, 167, 168 CBOT.

Licence to be Bad by Jonathan Aldred

"Friedman doctrine" OR "shareholder theory", Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, availability heuristic, Ayatollah Khomeini, behavioural economics, Benoit Mandelbrot, Berlin Wall, Black Monday: stock market crash in 1987, Black Swan, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, Charles Babbage, clean water, cognitive dissonance, corporate governance, correlation does not imply causation, cuban missile crisis, Daniel Kahneman / Amos Tversky, Donald Trump, Douglas Engelbart, Douglas Engelbart, Dr. Strangelove, Edward Snowden, fake news, Fall of the Berlin Wall, falling living standards, feminist movement, framing effect, Frederick Winslow Taylor, From Mathematics to the Technologies of Life and Death, full employment, Gary Kildall, George Akerlof, glass ceiling, Glass-Steagall Act, Herman Kahn, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jeff Bezos, John Nash: game theory, John von Neumann, Linda problem, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, meta-analysis, Mont Pelerin Society, mutually assured destruction, Myron Scholes, Nash equilibrium, Norbert Wiener, nudge unit, obamacare, offshore financial centre, Pareto efficiency, Paul Samuelson, plutocrats, positional goods, power law, precautionary principle, profit maximization, profit motive, race to the bottom, RAND corporation, rent-seeking, Richard Thaler, ride hailing / ride sharing, risk tolerance, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, scientific management, Skinner box, Skype, Social Responsibility of Business Is to Increase Its Profits, spectrum auction, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tragedy of the Commons, transaction costs, trickle-down economics, Vilfredo Pareto, wealth creators, zero-sum game

When one came along in the shape of a major default and devaluation by the Russian government, LTCM went bust. That was 1998 – just a year after Merton and Scholes had won the Nobel Prize. Alas, regarding their blindness to the problems of orthodox thinking about uncertainty, most financial economists and bankers are serial offenders. In recent history the orthodoxy has been challenged by Black Monday in 1987, the collapse of LTCM, the dot.com bubble and the financial crisis beginning in 2007 (to name the most obvious challenges). In each case the main response has been silence, or the argument that, since such events are black swans, no one could be expected to see them coming. There has been little admission that we need new thinking about uncertainty which explicitly incorporates the possibility of black swans and – since there is inherently no hope of predicting them – the importance of taking precautions to help cope with their unexpected arrival.

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., 19, 20, 231 Ellsberg, Daniel, 182–4, 187, 197–8 Ellsberg Paradox, 184, 199–200 and the ‘Pentagon Papers’, 200 probability experiment (1961), 182–4, 187, 197, 198–200 ‘Risk, Ambiguity and the Savage Axioms’ (paper, 1961), 198–9, 200 Engelbart, Douglas, 222–3 Engels, Friedrich, 223 English, Bill, 222–3 Enlightenment thinking, 11, 185 Epstein, Richard, 127 ethics and morality and autonomy, 164, 165–6, 168, 169–70, 180 bad behaviour redefined as rational, 12 and blame for accidents, 55, 60–61 and Coase Theorem, 46–7, 54–5, 56–7, 61, 63–6 Coasean worldview on pollution, 66–7, 68 as conditioned and limited by economics, 3, 10, 15, 43, 55, 60–61, 64–5, 179, 204–5, 218, 247 cooperative behaviour in game theory, 29, 30–32 core principles of current economic orthodoxy, 253 distinction between values and tastes, 136–8 economists’ language on virtuous behaviour, 112 inequality as moral issue, 242–3 influence of recent economic ideas, 1–3, 15–16 Keynes on economics as moral science, 252–3 law and economics movement, 40, 55, 56–63, 64–7 moral disengagement, 162, 163, 164, 166 morally wrong/corrupting incentives, 168–9 and Nash program, 25 Nudge economists, 173–4, 251 Posner’s wealth-maximization principle, 57–63, 64–7, 137 Puzzle of the Harmless Torturers, 118–19 Ramsey Rule on discounting, 208–9, 212 sale of body parts, 123, 124, 145, 147–8 sidelined by economic imperialism, 125–9, 135–8, 141–5, 146–7, 148–9, 151–2, 207 small contributions as important, 110, 114–15, 122 Smith’s enlightened self-interest, 11 value of human life (‘statistical lives’), 141–5, 207 see also altruism; free-riding behaviour European Commission, 96 Facebook UK, 99 fairness, 1, 149, 218, 228, 253 and Coase, 54, 55 and free-riding behaviour, 107 and game theory, 43 and incentives, 177, 179 and lucky geniuses, 221–3 and Posner’s wealth-maximization principle, 60, 61, 62 see also inequality family life, 127–8, 130–31, 133, 156 famine relief, 99, 114–15 Farmer, Roger, 259 Federal Communications Commission (FCC), 48–9 Ferdinand, Archduke Franz, 185 financial crisis, global (2007–10) Becker on, 128–9 and bell curve thinking, 192, 193–4, 196, 257 ‘blame the regulators’ argument, 1–2 and financial economists, 9, 88, 260–61 persuasive power of extreme numbers, 181–2 and Posner’s wealth-maximization principle, 57 underlying maths of, 194, 195–6 financial markets Bachelier’s theory of speculation, 193 bell curve thinking, 192, 193–4, 195, 196–7, 201, 203–4, 257 benchmarking against the market, 204 Black Monday (1987), 192 deregulation of US banks, 194 derivatives, 253 dot.com bubble, 192, 201 East Asian crisis (1997), 192 and economic theory, 9, 12–13, 182, 253 economists’ ignorance of, 260–61 and First World War, 185 and fractals (scale-invariance), 194, 195–6, 201 orthodox decision theory, 190–91, 193–4, 201 persuasive power of extreme numbers, 181–2, 191, 192 and rent-seekers, 230, 238 rigged pay-for-performance contracts, 229–30, 238 First World War, 185, 210, 211–12 Fisher, Antony, 6–8 Forster, E.

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objection, 107, 119–20 Friedman, Milton, 4–5, 56, 69, 84, 88, 126, 189 awarded Nobel Prize, 132 and business responsibility, 2, 152 debate with Coase at Director’s house, 50, 132 as dominant Chicago thinker, 50, 132 on fairness and justice, 60 flawed arguments of, 132–3 influence on modern economics, 131–2 and monetarism, 87, 132, 232 at Mont Pèlerin, 5, 132 rejects need for realistic assumptions, 132–3 Sheraton Hall address (December 1967), 132 ‘The Methodology of Positive Economics’ (essay, 1953), 132–3 ‘The Social Responsibility of Business is to Increase Its Profits’ (article, 1970), 2, 152 Frost, Gerald, Antony Fisher: Champion of Liberty (2002), 7* Galbraith, John Kenneth, 242–3 game theory assumptions of ‘rational behaviour’, 18, 28, 29–32, 35–8, 41–3, 70, 124 Axelrod’s law of the instrument, 41 backward induction procedure, 36–7, 38 and Cold War nuclear strategy, 18, 20, 21–2, 24, 27, 33–4, 35, 70, 73, 198 focus on consequences alone, 43 as form of zombie science, 41 and human awareness, 21–3, 24–32 and interdependence, 23 limitations of, 32, 33–4, 37–40, 41–3 minimax solution, 22 multiplicity problem, 33–4, 35–7, 38 Nash equilibrium, 22–3, 24, 25, 27–8, 33–4, 41–2 the Nash program, 25 and nature of trust, 28–31, 41 the Prisoner’s Dilemma, 26–8, 29–32, 42–3 real world as problem for, 21–2, 24–5, 29, 31–2, 37–8, 39–40, 41–3 rise of in economics, 40–41 and Russell’s Chicken, 33–4 and Schelling, 138–9 and spectrum auctions, 39–40 theory of repeated games, 29–30, 35 tit-for-tat, 30–31 and trust, 29, 30–31, 32, 41 uses of, 23–4, 34, 38–9 view of humanity as non-cooperative/distrustful, 18, 21–2, 25–32, 36–8, 41–3 Von Neumann as father of, 18, 19, 20–22, 25, 26, 28, 30, 34, 41 zero-sum games, 21–2 Gates, Bill, 221–2 Geithner, Tim, 105 gender, 127–8, 130–31, 133, 156 General Electric, 159 General Motors (GM), 215–16 George, Prince of Cambridge, 98 Glass–Steagall Act, repeal of, 194 globalization, 215, 220 Goldman Sachs, 182, 184, 192 Google, 105 Gore, Al, 39 Great Reform Act (1832), 120 greed, 1–2, 196, 197, 204, 229, 238 Greenspan, Alan, 57, 203 Gruber, Jonathan, 245 Haifa, Israel, 158, 161 Harper, ‘Baldy’, 7 Harsanyi, John, 34–5, 40 Harvard Business Review, 153 Hayek, Friedrich and Arrow’s framework, 78–9 economics as all of life, 8 and Antony Fisher, 6–7 influence on Thatcher, 6, 7 and Keynesian economics, 5–6 and legal frameworks, 7* at LSE, 4 at Mont Pèlerin, 4, 5, 6, 15 and Olson’s analysis, 104 and public choice theory, 89 rejection of incentive schemes, 156 ‘spontaneous order’ idea, 30 The Road to Serfdom (1944), 4, 5, 6, 78–9, 94 healthcare, 91–2, 93, 178, 230, 236 hedge funds, 201, 219, 243–4 Heilbroner, Robert, The Worldly Philosophers, 252 Heller, Joseph, Catch-22, 98, 107, 243–4 Helmsley, Leona, 105 hero myths, 221–3, 224 Hewlett-Packard, 159 hippie countercultural, 100 Hoffman, Abbie, Steal This Book, 100 Holmström, Bengt, 229–30 homo economicus, 9, 10, 12, 140, 156–7 and Gary Becker, 126, 129, 133, 136 and behaviour of real people, 15, 136, 144–5, 171, 172, 173, 250–51 and behavioural economics, 170, 171, 172, 255 long shadow cast by, 248 and Nudge economists, 13, 172, 173, 174–5, 177 Hooke, Robert, 223 housing market, 128–9, 196, 240–41 separate doors for poor people, 243 Hume, David, 111 Huxley, Thomas, 114 IBM, 181, 222 identity, 32, 165–6, 168, 180 Illinois, state of, 46–7 immigration, 125, 146 Impossibility Theorem, 72, 73–4, 75, 89, 97 Arrow’s assumptions, 80, 81, 82 and Duncan Black, 77–8 and free marketeers, 78–9, 82 as misunderstood and misrepresented, 76–7, 79–82 ‘paradox of voting’, 75–7 as readily solved, 76–7, 79–80 Sen’s mathematical framework, 80–81 incentives adverse effect on autonomy, 164, 165–6, 168, 169–70, 180 authority figure–autonomy contradiction, 180 and behavioural economics, 171, 175, 176–7 cash and non-cash gifts, 161–2 context and culture, 175–6 contrast with rewards and punishments, 176–7 ‘crowding in’, 176 crowding out of prior motives, 160–61, 162–3, 164, 165–6, 171, 176 impact of economists’ ideas, 156–7, 178–80 and intrinsic motivations, 158–60, 161–3, 164, 165–6, 176 and moral disengagement, 162, 163, 164, 166 morally wrong/corrupting, 168–9 origins in behaviourism, 154 and orthodox theory of motivation, 157–8, 164, 166–7, 168–70, 178–9 payments to blood donors, 162–3, 164, 169, 176 as pervasive in modern era, 155–6 respectful use of, 175, 177–8 successful, 159–60 as tools of control/power, 155–7, 158–60, 161, 164, 167, 178 Indecent Proposal (film, 1993), 168 India, 123, 175 individualism, 82, 117 and Becker, 134, 135–8 see also freedom, individual Industrial Revolution, 223 inequality and access to lifeboats, 150–51 and climate change, 207–9 correlation with low social mobility, 227–8, 243 and demand for positional goods, 239–41 and economic imperialism, 145–7, 148, 151, 207 and efficiency wages, 237–8 entrenched self-deluding justifications for, 242–3 and executive pay, 215–16, 219, 224, 228–30, 234, 238 as falling in 1940–80 period, 215, 216 Great Gatsby Curve, 227–8, 243 hero myths, 221–3, 224 increases in as self-perpetuating, 227–8, 230–31, 243 as increasing since 1970s, 2–3, 215–16, 220–21 and lower growth levels, 239 mainstream political consensus on, 216, 217, 218, 219–21 marginal productivity theory, 223–4, 228 new doctrine on taxation since 1970s, 232–5 and Pareto, 217, 218–19, 220 poverty as waste of productive capacity, 238–9 public attitudes to, 221, 226–8 rises in as not inevitable, 220, 221, 242 role of luck downplayed, 222, 224–6, 243 scale-invariant nature of, 219, 220 ‘socialism for the rich’, 230 Thatcher’s praise of, 216 and top-rate tax cuts, 231, 233–5, 239 trickle-down economics, 232–3 US and European attitudes to, 226–7 ‘you deserve what you get’ belief, 223–6, 227–8, 236, 243 innovation, 222–3, 242 Inside Job (documentary, 2010), 88 Institute of Economic Affairs, 7–8, 15, 162–3 intellectual property law, 57, 68, 236 Ishiguro, Kazuo, Never Let Me Go, 148 Jensen, Michael, 229 Journal of Law and Economics, 49 justice, 1, 55, 57–62, 125, 137 Kahn, Herman, 18, 33 Kahneman, Daniel, 170–72, 173, 179, 202–3, 212, 226 Kennedy, President John, 139–40 Keynes, John Maynard, 11, 21, 162, 186, 204 and Buchanan’s ideology, 87 dentistry comparison, 258–9, 261 on economics as moral science, 252–3 Friedman’s challenge to orthodoxy of, 132 Hayek’s view of, 5–6 massive influence of, 3–4, 5–6 on power of economic ideas, 15 and probability, 185, 186–7, 188–9, 190, 210 vision of the ideal economist, 20 General Theory (1936), 15, 188–9 Khomeini, Ayatollah, 128 Khrushchev, Nikita, 139–40, 181 Kilburn Grammar School, 48 Kildall, Gary, 222 Kissinger, Henry, 184 Knight, Frank, 185–6, 212 Krugman, Paul, 248 Kubrick, Stanley, 35*, 139 labour child labour, 124, 146 and efficiency wages, 237–8 labour-intensive services, 90, 92–3 lumpenproletariat, 237 Olson’s hostility to unions, 104 Adam Smith’s ‘division of labour’ concept, 128 Laffer, Arthur, 232–3, 234 Lancet (medical journal), 257 Larkin, Philip, 67 law and economics movement, 40, 55, 56–63, 64–7 Lazear, Edward, ‘Economic Imperialism’, 246 legal system, 7* and blame for accidents, 55, 60–61 and Chicago School, 49, 50–52, 55 and Coase Theorem, 47, 49, 50–55, 63–6 criminal responsibility, 111, 137, 152 economic imperialist view of, 137 law and economics movement, 40, 55, 56–63, 64–7 ‘mimic the market’ approach, 61–3, 65 Posner’s wealth-maximization principle, 57–63, 64–7, 137 precautionary principle, 211–12, 214 transaction costs, 51–3, 54–5, 61, 62, 63–4, 68 Lehmann Brothers, 194 Lexecon, 58, 68 Linda Problem, 202–3 LineStanding.com, 123 Little Zheng, 123, 124 Lloyd Webber, Andrew, 234–5, 236 lobbying, 7, 8, 88, 115, 123, 125, 146, 230, 231, 238 loft-insulation schemes, 172–3 logic, mathematical, 74–5 The Logic of Life (Tim Harford, 2008), 130 London School of Economics (LSE), 4, 48 Long-Term Capital Management (LTCM), 201, 257 Machiavelli, Niccoló, 89, 94 Mafia, 30 malaria treatments, 125, 149 management science, 153–4, 155 Mandelbrot, Benoît, 195, 196, 201 Mankiw, Greg, 11 marginal productivity theory, 223–4 Markowitz, Harry, 196–7, 201, 213 Marx, Karl, 11, 101, 102, 104, 111, 223 lumpenproletariat, 237 mathematics, 9–10, 17–18, 19, 21–4, 26, 247, 248, 255, 259 of 2007 financial crash, 194, 195–6 and Ken Arrow, 71, 72, 73–5, 76–7, 82–3, 97 axioms (abstract assumptions), 198 fractals (scale-invariance), 194, 195–6, 201, 219 and orthodox decision theory, 190–91, 214 Ramsey Rule on discounting, 208–9, 212 and Savage, 189–90, 193, 197, 198, 199, 205 and Schelling, 139 Sen’s framework on voting systems, 80–81 standard deviation, 182, 192, 194 and stock market statistics, 190–91, 195–6 use of for military ends, 71–2 maximizing behaviour and Becker, 129–31, 133–4, 147 and catastrophe, 211 and Coase, 47, 55, 59, 61, 63–9 economic imperialism, 124–5, 129–31, 133–4, 147, 148–9 Posner’s wealth-maximization principle, 57–63, 64–7, 137 profit-maximizing firms, 228 see also wealth-maximization principle; welfare maximization McCluskey, Kirsty, 194 McNamara, Robert, 138 median voter theorem, 77, 95–6 Merton, Robert, 201 Meucci, Antonio, 222 microeconomics, 9, 232, 259 Microsoft, 222 Miles, David, 258 Mill, John Stuart, 102, 111, 243 minimum wage, national, 96 mobility, economic and social correlation with inequality, 226–8, 243 as low in UK, 227 as low in USA, 226–7 US–Europe comparisons, 226–7 Modern Times (Chaplin film, 1936), 154 modernism, 67 Moivre, Abraham de, 193 monetarism, 87, 89, 132, 232 monopolies and cartels, 101, 102, 103–4 public sector, 48–9, 50–51, 93–4 Mont Pèlerin Society, 3–9, 13, 15, 132 Morgenstern, Oskar, 20–22, 24–5, 28, 35, 124, 129, 189, 190 Mozart, Wolfgang Amadeus, 91, 92–3 Murphy, Kevin, 229 Mussolini, Benito, 216, 219 Nash equilibrium, 22–3, 24, 25, 27–8, 33–4, 41–2 Nash, John, 17–18, 22–3, 24, 25–6, 27–8, 33–4, 41–2 awarded Nobel Prize, 34–5, 38, 39, 40 mental health problems, 25, 26, 34 National Health Service, 106, 162 ‘neoliberalism’, avoidance of term, 3* Neumann, John von ambition to make economics a science, 20–21, 24–5, 26, 35, 125, 151, 189 as Cold War warrior, 20, 26, 138 and expansion of scope of economics, 124–5 as father of game theory, 18, 19, 20–22, 25, 26, 28, 30, 34, 41 final illness and death of, 19, 34, 35, 43–4 genius of, 19–20 as inspiration for Dr Strangelove, 19 and Nash’s equilibrium, 22–3, 25, 38* simplistic view of humanity, 28 theory of decision-making, 189, 190, 203 neuroscience, 14 New Deal, US, 4, 194, 231 Newton, Isaac, 223 Newtonian mechanics, 21, 24–5 Nixon, Richard, 56, 184, 200 NORAD, Colorado Springs, 181 nuclear weapons, 18–19, 20, 22, 27, 181 and Ellsberg, 200 and game theory, 18, 20, 21–2, 24, 27, 33–4, 35, 70, 73, 198 MAD (Mutually Assured Destruction), 35, 138 and Russell’s Chicken, 33–4 and Schelling, 138, 139 Nudge economists, 13, 171–5, 177–8, 179, 180, 251 Oaten, Mark, 121 Obama, Barack, 110, 121, 157, 172, 180 Olson, Mancur, 103, 108, 109, 119–20, 122 The Logic of Collective Action (1965), 103–4 On the Waterfront (Kazan film, 1954), 165 online invisibility, 100* organs, human, trade in, 65, 123, 124, 145, 147–8 Orwell, George, Nineteen Eighty-Four, 42–3 Osborne, George, 233–4 Packard, David, 159 Paine, Tom, 243 Pareto, Vilfredo 80/20 rule’ 218 and inequality, 217, 218–19, 220 life and background of, 216–17 Pareto efficiency, 217–18, 256* Paul the octopus (World Cup predictor, 2010), 133 pensions, workplace, 172, 174 physics envy, 9, 20–21, 41, 116, 175–6, 212, 247 Piketty, Thomas, 234, 235 plastic shopping bag tax, 159–60 Plato’s Republic, 100–101, 122 political scientists and Duncan Black, 78, 95–6 Black’s median voter theorem, 95–6 Buchanan’s ideology, 84–5 crises of the 1970s, 85–6 influence of Arrow, 72, 81–2, 83 see also public choice theory; social choice theory Posner, Richard, 54, 56–63, 137 ‘mimic the market’ approach, 61–3, 65 ‘The Economics of the Baby Shortage’ (1978), 61 precautionary principle, 211–12, 214 price-fixing, 101, 102, 103–4 Princeton University, 17, 19–20 Prisoner’s Dilemma, 26–8, 29–32, 42–3 prisons, cell upgrades in, 123 privatization, 50, 54, 88, 93–4 probability, 182–4 and Keynes, 185, 186–7, 188–9, 210 Linda Problem, 202–3 modern ideas of, 184–5 Ramsey’s personal probabilities (beliefs as probabilities), 187–8, 190, 197, 198, 199, 204–5 and Savage, 190, 193, 197, 198, 199, 203, 205 ‘Truth and Probability’ (Ramsey paper), 186–8, 189, 190 see also risk and uncertainty Proceedings of the National Academy of Sciences, 22 productivity Baumol’s cost disease, 90–92, 93, 94 and efficiency wages, 237–8 improvement in labour-intensive services, 92–3 labour input, 92 protectionism, 246, 255 psychology availability heuristic, 226 behaviourism, 154–8, 237 and behavioural economics, 12, 170–71 cognitive dissonance, 113–14 and financial incentives, 156–7, 158–60, 163–4, 171 framing effects, 170–71, 259 of free-riding, 113–14, 115 intrinsic motivations, 158–60, 161–3, 164, 165–6, 176 irrational behaviour, 12, 15, 171 learning of social behaviour, 163–4 moral disengagement, 162, 163, 164, 166 motivated beliefs, 227 ‘self-command’ strategies, 140 view of in game theory, 26–31 view of in public choice theory, 85–6 and welfare maximization, 149 ‘you deserve what you get’ belief, 223–6, 227–8, 236, 243 public choice theory as consensus view, 84–5 and crises of the 1970s, 85–6 foolish voter assumption, 86–8 ‘paradox of voter turnout’, 88–9, 95–6, 115–16 partial/self-contradictory application of, 86, 87–9 ‘political overload’ argument, 85, 86–7 ‘public bad, private good’ mantra, 93–4, 97 and resistance to tax rises, 94, 241 self-fulfilling prophecies, 95–7 and selfishness, 85–6, 87–8, 89, 94, 95–7 as time-bomb waiting to explode, 85 public expenditure in 1970s and ’80s, 89 Baumol’s cost disease, 90–92, 93, 94 and Keynesian economics, 4 and public choice theory, 85–8, 89, 241 and tax rises, 241–2 public-sector monopolies, 48–9, 50–51, 93–4 Puzzle of the Harmless Torturers, 118–19 queue-jumping, 123, 124 QWERTY layout, 42 racial discrimination, 126–7, 133, 136, 140 Ramsey, Frank, 186–8, 189, 190, 205, 208 Ramsey Rule, 208–9, 212 RAND Corporation, 17, 41, 103, 138, 139 and Ken Arrow, 70–71, 72–3, 74, 75–6, 77, 78 and behaviourism, 154 and Cold War military strategy, 18, 20, 21–2, 24, 27, 33–4, 70, 73, 75–6, 141, 200, 213 and Ellsberg, 182–4, 187, 197–8, 200 and Russell’s Chicken, 33 Santa Monica offices of, 18 self-image as defender of freedom, 78 rational behaviour assumptions in game theory, 18, 28, 29–32, 35–8, 41–3, 70, 124 axioms (abstract mathematical assumptions), 198 Becker’s version of, 128–9, 135, 140, 151 behavioural economics/Nudge view of, 173, 174–5 distinction between values and tastes, 136–8 economic imperialist view of, 135, 136–8, 140, 151 and free-riding theory, 100–101, 102, 103–4, 107–8, 109–10, 115–16 and orthodox decision theory, 198, 199 public choice theory relates selfishness to, 86 term as scientific-sounding cover, 12 see also homo economicus Reader’s Digest, 5, 6 Reagan, Ronald, 2, 87–8, 89, 104, 132 election of as turning point, 6, 216, 220–21 and top-rate tax cuts, 231, 233 regulators, 1–2 Chicago view of, 40 Reinhart, Carmen, 258 religion, decline of in modern societies, 15, 185 renewable energy, 116 rent-seeking, 230, 238 ‘right to recline’, 63–4 risk and uncertainty bell curve distribution, 191–4, 195, 196–7, 201, 203–4, 257 catastrophes, 181–2, 191, 192, 201, 203–4, 211–12 delusions of quantitative ‘risk management’, 196, 213 Ellsberg’s experiment (1961), 182–4, 187, 197, 198–200 errors in conventional thinking about, 191–2, 193–4, 195–7, 204–5, 213 financial orthodoxy on risk, 196–7, 201–2 and First World War, 185 and fractals (scale-invariance), 194, 195–6, 201 hasard and fortuit, 185* ‘making sense’ of through stories, 202–3 ‘measurable’ and ‘unmeasurable’ distinction, 185–6, 187–9, 190, 210–11, 212–13 measurement in numerical terms, 181–4, 187, 189, 190–94, 196–7, 201–2, 203–5, 212–13 orthodox decision theory, 183–4, 185–6, 189–91, 193–4, 201–2, 203–5, 211, 212–14 our contemporary orthodoxy, 189–91 personal probabilities (beliefs as probabilities), 187–8, 190, 197, 198, 199, 204–5 precautionary principle, 211–12, 214 pure uncertainty, 182–3, 185–6, 187–9, 190, 197, 198–9, 210, 211, 212, 214, 251 redefined as ‘volatility’, 197, 213 the Savage orthodoxy, 190–91, 197, 198–200, 203, 205 scenario planning as crucial, 251 Taleb’s black swans, 192, 194, 201, 203–4 ‘Truth and Probability’ (Ramsey paper), 186–8, 189, 190 urge to actuarial alchemy, 190–91, 197, 201 value of human life (‘statistical lives’), 141–5, 207 see also probability Robertson, Dennis, 13–14 Robinson, Joan, 260 Rodrik, Dani, 255, 260–61 Rogoff, Ken, 258 Rothko, Mark, 4–5 Rumsfeld, Donald, 232–3 Russell, Bertrand, 33–4, 74, 97, 186, 188 Ryanair, 106 Sachs, Jeffrey, 257 Santa Monica, California, 18 Sargent, Tom, 257–8 Savage, Leonard ‘Jimmie’, 189–90, 193, 203, 205scale-invariance, 194, 195–6, 201, 219 Scandinavian countries, 103, 149 Schelling, Thomas, 35* on access to lifeboats, 150–51 awarded Nobel Prize, 138–9 and Cold War nuclear strategy, 138, 139–40 and economic imperialism, 141–5 and game theory, 138–9 and Washington–Moscow hotline, 139–40 work on value of human life, 141–5, 207 ‘The Intimate Contest for Self-command’ (essay, 1980), 140, 145 ‘The Life You Save May be Your Own’ (essay, 1968), 142–5, 207 Schiphol Airport, Amsterdam, 172 Schmidt, Eric, 105 Scholes, Myron, 201 Schwarzman, Stephen, 235 Second World War, 3, 189, 210 selfishness, 41–3, 178–9 and Becker, 129–30 and defence of inequality, 242–3 as free marketeers’ starting point, 10–12, 13–14, 41, 86, 178–9 and game theory, 18 and public choice theory, 85–6, 87–8, 89, 94, 95–7 Selten, Reinhard, 34–5, 36, 38, 40 Sen, Amartya, 29, 80–81 service sector, 90–93, 94 Shakespeare, William, Measure for Measure, 169 Shaw, George Bernard, 101 Shiller, Robert, 247 Simon, Herbert, 223 Skinner, Burrhus, 154–5, 158 Smith, Adam, 101, 111, 122 The Wealth of Nations (1776), 10–11, 188–9 snowflakes, 195 social choice theory, 72 and Ken Arrow, 71–83, 89, 95, 97, 124–5, 129 and Duncan Black, 78, 95 and free marketeers, 79, 82 Sen’s mathematical framework, 80–81 social media, 100* solar panels, 116 Solow, Bob, 163, 223 Sorites paradox, 117–18, 119 sovereign fantasy, 116–17 Soviet Union, 20, 22, 70, 73, 82, 101, 104, 167, 237 spectrum auctions, 39–40, 47, 49 Stalin, Joseph, 70, 73, 101 the state anti-government attitudes in USA, 83–5 antitrust regulation, 56–8 dismissal of almost any role for, 94, 135, 235–6, 241 duty over full employment, 5 economic imperialist arguments for ‘small government’, 135 increased economic role from 1940s, 3–4, 5 interventions over ‘inefficient’ outcomes, 53 and monetarism, 87, 89 and Mont Pèlerin Society, 3, 4, 5 and privatization, 50, 54, 88, 93–4 public-sector monopolies, 48–50, 93–4 replacing of with markets, 79 vital role of, 236 statistical lives, 141–5, 207 Stern, Nick, 206, 209–10 Stigler, George, 50, 51, 56, 69, 88 De Gustibus Non Est Disputandum (with Becker, 1977), 135–6 Stiglitz, Joseph, 237 stock markets ‘Black Monday’ (1987), 192 and fractals (scale-invariance), 194, 195–6, 201 orthodox decision theory, 190–91, 193–4, 201 Strittmatter, Father, 43–4 Summers, Larry, 10, 14 Sunstein, Cass, 173 Nudge (with Richard Thaler, 2008), 171–2, 175 Taleb, Nassim, 192 Tarski, Alfred, 74–5 taxation and Baumol’s cost disease, 94 and demand for positional goods, 239–41 as good thing, 231, 241–2, 243 Laffer curve, 232–3, 234 new doctrine of since 1970s, 232–4 property rights as interdependent with, 235–6 public resistance to tax rises, 94, 239, 241–2 and public spending, 241–2 revenue-maximizing top tax rate, 233–4, 235 tax avoidance and evasion, 99, 105–6, 112–13, 175, 215 ‘tax revolt’ campaigns (1970s USA), 87 ‘tax as theft’ culture, 235–6 top-rate cuts and inequality, 231, 233–5, 239 whines from the super-rich, 234–5, 243 Taylor, Frederick Winslow, 153–4, 155, 167, 178, 237 Thaler, Richard, 13 Nudge (with Cass Sunstein, 2008), 171–2, 175 Thatcher, Margaret, 2, 88, 89, 104, 132 election of as turning point, 6, 216, 220–21 and Hayek, 6, 7 and inequality, 216, 227 privatization programme, 93–4 and top-rate tax cuts, 231 Theory of Games and Economic Behavior (Von Neumann and Morgenstern, 1944), 20, 21, 25, 189 Titanic, sinking of (1912), 150 Titmuss, Richard, The Gift Relationship, 162–3 tobacco-industry lobbyists, 8 totalitarian regimes, 4, 82, 167–8, 216, 219 see also Soviet Union trade union movement, 104 Tragedy of the Commons, 27 Truman, Harry, 20, 237 Trump, Donald, 233 Tucker, Albert, 26–7 Tversky, Amos, 170–72, 173, 202–3, 212, 226 Twitter, 100* Uber, 257 uncertainty see risk and uncertainty The Undercover Economist (Tim Harford, 2005), 130 unemployment and Coase Theorem, 45–7, 64 during Great Depression, 3–4 and Keynesian economics, 4, 5 United Nations, 96 universities auctioning of places, 124, 149–50 incentivization as pervasive, 156 Vietnam War, 56, 198, 200, 249 Villari, Pasquale, 30 Vinci, Leonardo da, 186 Viniar, David, 182, 192 Volkswagen scandal (2016), 2, 151–2 Vonnegut, Kurt, 243–4 voting systems, 72–4, 77, 80, 97 Arrow’s ‘Independence of Irrelevant Alternatives’, 81, 82 Arrow’s ‘Universal Domain’, 81, 82 and free marketeers, 79 ‘hanging chads’ in Florida (2000), 121 recount process in UK, 121 Sen’s mathematical framework, 80–81 Waldfogel, Joel, 161* Wanniski, Jude, 232 Watertown Arsenal, Massachusetts, 153–4 Watson Jr, Thomas J., 181 wealth-maximization principle, 57–63 and Coase, 47, 55, 59, 63–9 as core principle of current economics, 253 created markets, 65–7 extension of scope of, 124–5 and justice, 55, 57–62, 137 and knee space on planes, 63–4 practical problems with negotiations, 62–3 and values more important than efficiency, 64–5, 66–7 welfare maximization, 124–5, 129–31, 133–4, 148–9, 176 behavioural economics/Nudge view of, 173 and vulnerable/powerless people, 146–7, 150 welfare state, 4, 162 Wilson, Charlie, 215 Wittgenstein, Ludwig, 186, 188 Wolfenschiessen (Swiss village), 158, 166–7 Woolf, Virginia, 67 World Bank, 96 World Cup football tournament (2010), 133 World Health Organization, 207 Yale Saturday Evening Pest, 4–5 Yellen, Janet, 237 THE BEGINNING Let the conversation begin … Follow the Penguin twitter.com/penguinukbooks Keep up-to-date with all our stories youtube.com/penguinbooks Pin ‘Penguin Books’ to your pinterest.com/penguinukbooks Like ‘Penguin Books’ on facebook.com/penguinbooks Listen to Penguin at soundcloud.com/penguin-books Find out more about the author and discover more stories like this at penguin.co.uk ALLEN LANE UK | USA | Canada | Ireland | Australia India | New Zealand | South Africa Allen Lane is part of the Penguin Random House group of companies whose addresses can be found at global.penguinrandomhouse.com First published 2019 Copyright © Jonathan Aldred, 2019 The moral right of the author has been asserted Jacket photograph © Getty Images ISBN: 978-0-241-32544-5 This ebook is copyright 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Why Aren't They Shouting?: A Banker’s Tale of Change, Computers and Perpetual Crisis by Kevin Rodgers

Alan Greenspan, algorithmic trading, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black-Scholes formula, buy and hold, buy low sell high, call centre, capital asset pricing model, collapse of Lehman Brothers, Credit Default Swap, currency peg, currency risk, diversification, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, fixed income, Flash crash, Francis Fukuyama: the end of history, Glass-Steagall Act, Hyman Minsky, implied volatility, index fund, interest rate derivative, interest rate swap, invisible hand, John Meriwether, latency arbitrage, law of one price, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, Minsky moment, money market fund, Myron Scholes, Northern Rock, Panopticon Jeremy Bentham, Ponzi scheme, prisoner's dilemma, proprietary trading, quantitative easing, race to the bottom, risk tolerance, risk-adjusted returns, Silicon Valley, systems thinking, technology bubble, The Myth of the Rational Market, The Wisdom of Crowds, Tobin tax, too big to fail, value at risk, vertical integration, Y2K, zero-coupon bond, zero-sum game

A Ackermann, Josef, 226 Admati, Anat, 211 ‘agency’ model, 7 agency-like risk, 119, 127 aggressive prices, 14–15 AIG, 90, 174 algorithms, 58, 71, 72, 73, 76, 77, 78, 79, 192–4, 195 Alpari, 83 alternative assets, 146–7 American Home Mortgage Investment Corporation, 89 amputation analogy, 128, 129 analytic formula, 106 Apple, 234 Application Program Interfaces (APIs), 59–60, 66, 71, 78 arbitrage, 31–2, 42, 44, 54, 70, 72, 91, 133, 142, 152 Asia, 3, 37–8, 56, 58, 106, 114, 117–18, 135–7, 146, 228 Financial Crisis (1997), xi, 114, 135–7, 139, 146, 228 Asian options, 106 assets, 6, 89, 92–5, 97, 104, 108, 112–14, 116, 117, 123, 136, 146, 147, 149, 150, 154–7, 160, 166–74, 203, 211, 223, 228, 233 alternative, 146–7 risk-weighted assets (RWA), 124–31, 134, 166, 208, 211 Atom Bank, 233 atomic bomb, see nuclear bomb Australia, 30, 65 dollars, 28, 75 Autobahn, 48–51, 53, 64, 68, 69–70, 78, 225 Automated Risk Manager (ARM), 53–5, 56–9, 64, 67, 70–1, 72, 73, 76, 79, 101, 129, 169 B back testing, 149 BaFin, 200, 202 bandwidth, 71 ‘banging the close’, 190 Bank for International Settlements (BIS), 73, 77, 80, 208 Bank of America, 174 Bank of England, 32, 173, 182, 233 bank runs, 89 bank tax, 216 Bankers Trust, xi–xii, 3–6, 24, 29–37, 40, 44, 46, 48, 65, 68, 103–14, 116–35, 137–143, 149, 166, 168, 169 carry trade, 108–10 Deutsche Bank takeover, 29–30, 34–5, 37, 46, 48, 166, 168 Emerging Markets, xi, 29–30, 116–17, 130–1, 143 Engine, 127–31, 135, 139, 157, 167, 169 exotic derivatives, 105–11, 127 Gibson Greetings suing, 109 Monte Carlo pricing, 111–14, 150 Procter and Gamble suing, 109 quantitative analysis, 103–8, 110–14, 126, 150 Risk Management, 122–31 risk-adjusted return on capital (RAROC), 126–7, 131 rouble-denominated bonds (GKOs), 118–32, 134, 138–43, 149, 152, 158, 159, 173 Russian Financial Crisis (1998), 115–16, 124, 137–143 Spreadsheet Solutions Framework (SSF), 111, 121, 138, 153 value at risk (VaR), 127–31, 135, 139, 169 Barcelona, Spain 87–9, 151, 159, 171, 172 Barclays, 63–6, 67, 68, 167, 186–7, 197 barrier products, 104, 107, 108 BARX, 64, 65 Basel Accords, 124, 125, 130, 166, 207–9, 211, 217, 231 basis points, 12 basis risk, 152 Bear Stearns, 88–9, 90, 172, 230 Bentham, Jeremy, 199 Berlin Wall, 204 Bernanke, Ben, 90 bid-offer spreads, see spread ‘Big Are Getting Bigger, The’, 41, 145 Big Bang (1986), 201 big figure, 13 binomial tree, 112–14 Bitcoin, 234 Black Monday (1987), 108, 138, 204, 207 Black–Scholes formula, 94–5, 97, 99, 105, 128, 219 Black, Fischer, 94–5, 97, 134, 135 BlackBerries, 169 Blackpool, England, 33 Blair, Tony, 120 Bloomberg, 9, 22–3, 142, 187, 189, 191, 197 Bohr, Niels, 43 bonds, xiv, 8, 23, 28, 33, 38, 89, 108–10, 118–43, 146–7, 151, 154–64, 170–2, 174, 192, 197, 211, 224–5 carry trade, 108–10 collateralised debt obligations (CDOs), xiv, 154–64, 170–2, 174, 192, 224–5 credit default swaps (CDSs), 151 mortgage-backed, xiv, 197 rouble-denominated (GKOs), 118–32, 134, 138–43, 149, 152, 158, 159, 173 total return swaps (TRSs), 119–20, 136, 152 US government, 119, 129, 133, 147 bonuses, 5, 117, 161, 210, 216 boxes and arrows, 159 Brazil, 167, 231 Breuer, Rolf, 42 Bristol, England, x British Bankers Association (BBA), 182, 187 British pound, 9, 13, 28, 53, 184 Bruno, Philip, 234 BTAnalytics, 107, 108, 112, 134, 150 Businessweek, 170 C Cable, 9, 13, 28 California, United States, 234 calls, 19–21, 23, 27, 51, 53, 98, 99 Cambios, 21, 123 Cambridge University, 165 Canada, 88, 172 dollars, 28 Cannes, France, 35, 41, 44, 46, 55, 64, 65, 77 carry trade, 108–10 Case–Schiller index, 163, 170 cash settlement, 109 ‘CDO-squared’, 161 central banking, 79, 102–3, 187, 193, 220 Central Counterparties (CCPs), 209, 213–15, 229 chain of command, 224–6 Chase Manhattan, 51, 168, 169 Chemical Bank, 168, 169 Chicago Mercantile Exchange (CME), 193, 209 China, 78, 149, 229 Chopin, Frédéric, 61 circuit breakers, 80 Citigroup, 23, 27, 36–7, 47, 51, 68, 167, 216, 226, 229 Clackatron, 32–3, 54, 91 Cold War, 204 collateralised debt obligations (CDOs), xiv, 154–64, 170–2, 174, 192, 224–5 multi-sector CDOs, 155 risk 154, 156, 158–63 sub-prime mortgages, 159–60, 170–2 synthetic, 163–4 tranches, 154–9, 161, 174, 208 colocation, 71 colonial currencies, 28 commodities, viii, xii, 144–50, 153–4, 157, 174, 223, 231–2 commodities indexes, 147–50, 153–4, 157, 163 commoditisation, 110–11 Commodity Futures Trading Commission (CFTC), 202 commodity futures, 92 Communism, 199 complex risk, 159, 222 complexity, 90, 100, 103–14, 121, 127, 130, 134, 136, 143, 157, 196, 200–1, 218–24, 225, 228, 229 Comprehensive Capital Analysis and Review (CCAR), 212 computers, ix–x, xii–xv, 6, 21–8, 32–55, 56–84, 89–90, 99–114, 116, 121, 127, 130, 134, 136, 138, 143, 144, 147, 150, 157, 160, 161, 164, 167, 169–70, 172, 190–200, 209, 213, 218–24, 225, 228, 231–5 algorithms, 58, 71, 72, 73, 76, 77, 78, 79, 192–4, 195 Autobahn, 48–51, 53, 64, 68, 69–70, 78, 225 Application Program Interfaces (APIs), 59–60, 66, 71, 78 Automated Risk Manager (ARM), 53–5, 56–9, 64, 67, 70–1, 72, 73, 76, 79, 101, 129, 169 BARX, 64, 65 BTAnalytics, 107, 108, 112, 134, 150 Clackatron, 32–3, 54, 91 complexity, 90, 100, 103–14, 121, 127, 130, 134, 136, 143, 157, 196, 200–1, 218–24, 225, 228, 229 DBAnalytics, 150, 153 decimalisation, 63–6, 67, 73, 77 decentralisation, 232–5 efficiency improvements, 169–70 Electronic Broking Services (EBS), 24–8, 31, 32–3, 42, 45, 46, 48, 50, 59–60, 63, 69–70, 71, 72, 73, 77, 83, 188 Electronic Communication Networks (ECNs), 59, 61, 66, 193 Engine, 127–31, 135, 139, 157, 167, 169 FX-fixing scandal (2013), 190–2 OPTICS, 101, 103, 131, 153, 170 options trade automation, 27, 33, 38–47 Piranha, 48 prime brokerage (PB), 61–3, 66, 120, 209 regulation, 209, 213 Revolutionary Application Program Interface Development (RAPID), 56–9, 77, 101 Reuters Dealing machines, 23, 25–8, 31, 32, 50, 59, 73 rogue systems, 79–80 screen scraping, 32–3, 50, 59 simplification, 231–2 spoofing, 192–3 spot trade automation, 23–8, 31–3, 42, 48–55, 56–84, 111, 199, 201 spreads, 80–3 concentration risk, 213 Conservative Party (UK), 201 correlation, 14, 79, 129–30, 142, 156–8, 160, 163 cost–benefit analysis, 41 Costello, Elvis, 140 counterparty credit risk, 141–2, 172, 201, 209 Countrywide, 90 credit default swaps (CDSs), xiv, 150–3, 157, 158, 164, 225 credit risk, 7, 8, 62–3, 123, 125–6, 130, 141, 151, 209 counterparty, 141–2, 172, 201, 202–3, 209 Credit Suisse, 140, 198 credit trading, 146–7, 150–63, 166, 175, 224 crowd-funding, 235 currency pairs, 9, 12, 14, 46, 53, 75, 80 Currenex, 59 CVIX, 74 D D:Ream, 120, 121 daisy-chaining, xiv DBAnalytics, 150, 153 decentralisation, 232–5 decimalisation, 63–6, 67, 73, 77 delta hedging, 97 ‘dentists, the’, 82–3 deposits, 124 derivatives, xi, xii, xiv, 44–5, 87, 91–114, 118, 119, 121, 127, 132, 134, 138–43, 144–5, 150–74, 182–6, 189, 196, 209, 210, 214, 218–25, 231 Asian options, 106 barrier products, 104, 107, 108 carry trade, 108–10 collateralised debt obligations (CDOs), xiv, 154–64, 170–2, 174, 192, 224–5 commoditisation, 110–11 credit default swaps (CDSs), xiv, 150–3, 157, 158, 164, 225 delta hedging, 97 democratisation, 108, 219 double knockouts, 107 exotics, 105–11, 127 foreign exchange, 10, 13, 20, 23, 27, 33–4, 38, 43–7, 49, 77, 95–114, 222–3 forward rate agreements (FRAs), 182 gamma, 97–8, 100 Greeks, 98, 99, 101, 105, 107, 110, 111, 112, 114, 127, 129, 150, 157, 158, 182, 219 interest rate derivatives, 8, 92, 104, 132, 182–6, 214 lattice methods, 112, 150, 157 lookbacks, 107 over-the-counter (OTC) market, 96, 209 power options, 107 pricing, 91–5, 107, 111–14, 128, 133, 150 range trades, 107, 108 rho, 98 risk-weighted assets (RWA), 124–31, 134, 166, 208, 211 spoofing, 99, 192–3 strike price, 94, 95, 104, 113, 218 swaps, 8, 92, 119–20, 121, 125, 126, 132, 134, 136, 141, 148, 149, 152, 173 theta, 98, 140 time decay, 98 total return swaps (TRSs), 119–20, 136, 152 tree approach, 112–14 vega, 98 volatility, 94, 98, 128–9 weather, 144–5, 146 zero coupon bonds, 118–31, 134, 138–43, 149, 152, 158, 173 desk real estate, 25 Deutsche Bank, vii–x, xii–xiii, 12, 21, 23, 28, 29–30, 33–55, 56–80, 84, 87, 101, 122, 144–74, 179–80, 187, 190, 195–6, 199, 200, 201, 209–10, 212–13, 216, 222, 224–6, 231 Autobahn, 48–51, 53, 64, 68, 69–70, 78, 225 Automated Risk Manager (ARM), 53–5, 56–9, 64, 67, 70–1, 72, 73, 76, 79, 101, 129, 169 BaFin audits, 200, 202 Bankers Trust acquisition, 29–30, 34–5, 37, 46, 48, 166, 168 Barcelona Conference, 87–9, 151, 159, 171, 172 Commodities, 144–50, 153–4, 157, 165, 175, 223, 231–2 Complex Risk, 159, 222 Compliance, 195, 196 Corporate and Investment Banking division, 166 Credit Trading, 146–7, 150–63, 166, 175, 224 CVIX, 74 DBAnalytics, 150, 153 e-trading, 55, 57, 67–73, 75, 84, 122 Foreign Exchange, vii–x, xii–xiii, 12, 21, 23, 28, 29–30, 33–55, 56–80, 84, 87, 101, 122, 165, 175, 210, 212–13, 224, 225 FX-fixing scandal (2013), 187, 190 Global Currencies and Commodities, 165–6 Great Financial Crisis (2007–8), 174–5 Liquid Commodity Index (DBLCI), 148, 149 market share, 36, 41, 48, 51–2, 54, 55, 56, 57, 64, 66–8, 70, 77 MortgageIT acquisition, 160 offsites, 35–41, 46, 55, 64, 65, 77 options trade automation, 27, 33, 38–47 Plankton Strategy, 38, 40, 55, 58 production credits, 49, 50 regulation, 200, 202, 209–10, 212–13 Revolutionary Application Program Interface Development (RAPID), 56–9, 77, 101 Risk Management, 175, 206–7, 209, 226 risk-weighted assets (RWA), 124–31, 134, 166 simplification, 231–2 small deals team, 52, 55 spot trade automation, 48–55, 56–77 video messaging system, 71 weather derivatives, 144–5, 146 Deutschmark, 9, 96, 97, 99, 100, 104 Dewar, Sally, 197 Dickens, Charles, 162 Digital Reasoning Systems Inc., 197–8 dividends, 91, 147, 212 Dodd–Frank Act (2010), 209, 230 Dostoyevsky, Fyodor, 30 dot-com boom (1997–2000), 37, 146, 207 double knockouts, 107 Dow Jones, 79, 138, 147 Dresdner Bank, 20, 48 drive-bys, 17, 20, 68, 132 E e-trading, 55, 57, 67–73, 75, 84, 122 efficiency improvements, 169–70 efficient market theory, 203 Electronic Broking Services (EBS), 24–8, 31, 32–3, 42, 45, 46, 48, 50, 59–60, 63, 69–70, 71, 72, 73, 77, 83, 188 Electronic Communication Networks (ECNs), 59, 61, 66, 193 elephant deals, 38 email, 169, 191, 195, 197, 199 emerging markets, xi, 6, 29–30, 116–43, 147, 228 Empire State Building, New York, 130 ‘Engine’, 127–31, 135, 139, 157, 167, 169 engineering, x–xi, 10 Enron, 156 equities, viii, 23, 50, 66, 71, 74, 80, 89, 95, 146, 193, 207, 211, 235 circuit breakers, 80 colocation, 71 sales-traders, 50, 78 euro, 22, 28, 31, 37, 53, 69, 80, 81–3, 189 Euromoney, 36, 41, 47, 51–2, 54, 55, 56, 57, 64, 66–8, 70, 77, 81, 233 Europe, Middle Eastern and African (EMEA) markets, 117–18 European Union (EU), 102, 196, 201, 203, 207, 210, 212, 230 Exchange Rate Mechanism (ERM), xi, 22, 102–3, 106, 123, 130, 136, 207, 224 Liikanen Report (2012), 230 Maastricht Treaty (1992), 102 Market Infrastructure Regulation (EMIR), 209 ‘Every Day I Write the Book’ (Elvis Costello), 140 Excel, 107, 221 exchange rates, 9, 11–13, 14, 17, 32, 100 exotic derivatives, 105–11, 127 F ‘F9 monkeys’, 221 Fannie Mae, 90 Federal Reserve, xii, 90, 109, 143, 187, 202–6, 212 Federal Reserve Bank of Chicago, 193 fibre-optic cables, 77, 84 FIFA (Fédération Internationale de Football Association), 167 Financial Conduct Authority (FCA), 190 Financial Services Act (2013), 210 Financial Stability Board (FSB), 212, 214, 216 Financial Times, 116, 187 financial transactions tax, 216 fines, 181, 190, 196 First Chicago, 168 Fitch, 155 fixings, 181, 187–92, 198 Flannery, Mark, 215 Flash Crash (2010), 79–80, 193 Florence, Italy, 78 Florida, United States, 116 football, 10–11, 43, 83, 117, 167, 195 Forbes, 234 foreign direct investment (FDI), 136 foreign exchange (FX), viii, xi, xii, xiv, 3–28, 29–55, 56–84, 89, 90–1, 95–114, 115–44, 145, 158–9, 165, 174, 175, 180, 181–94, 196–7, 210, 213, 222–3, 224, 225, 233 aggressive prices, 14–15 Application Program Interfaces (APIs), 59–60, 66, 71, 78 Autobahn, 48–51, 53, 64, 68, 69–70, 78, 225 Automated Risk Manager (ARM), 53–5, 56–9, 64, 67, 70–1, 72, 73, 76, 79, 101, 129, 169 banging the close, 190 BARX, 64, 65 bidirectional flows, 69 calls, 19–21, 23, 27, 51, 53, 98, 99 carry trade, 108–10 Clackatron, 32–3, 54, 91 colocation, 71 complex risk, 159, 222 corporations, 9, 36, 61, 76, 96, 109–10 costs, 42 currency pairs, 9, 12, 14, 46, 53, 75, 80 decimalisation, 63–6, 67, 73, 77 drive-bys, 17, 20, 68, 132 Electronic Broking Services (EBS), 24–8, 31, 32–3, 42, 45, 46, 48, 50, 59–60, 63, 69–70, 71, 72, 73, 77, 83, 188 Electronic Communication Networks (ECNs), 59, 61, 66, 193 elephant deals, 38 emerging markets, xi, 6, 29–30, 116–43 Engine, 127–31, 135, 139, 157, 167, 169 fixings, 181, 187–92, 198 forwards trades, 10, 52, 77, 92, 121 hedge funds, 9, 29, 36, 57, 61, 66, 69–74, 77, 81, 120, 123, 131–5, 141–3 hedging, 97, 108, 117–18, 190, 225 high frequency trading (HFT), 57, 63, 73, 74, 75, 76, 77, 80, 84, 180, 194 LIBOR scandal (2012), 181–7, 188, 189, 190, 197, 198 liquidity, 18–19, 21, 27, 80–1, 83, 233 making rates, 13–21, 27, 38–9, 50, 96 market makers, 18–19, 21, 83 market shares, 41, 48, 51–2, 54, 55, 65, 66–8, 70, 77, 81, 169 ‘mine-and-yours’, 15–16, 18, 19, 192 Monte Carlo pricing, 111–14 off system trades, 111 OPTICS, 101, 103, 131, 153, 170 options trade, 10, 13, 20, 23, 27, 33–4, 38, 43–7, 49, 77, 95–114, 222–3 over-the-counter (OTC) market, 96, 209 passive v. active strategies, 17–19 pay, 43 pension funds, 9, 61, 76, 96 pips, 13, 18, 41, 65, 73, 77 Piranha, 48 pre-deal services, 8 prime brokerage (PB), 61–3, 66, 120, 209 production credits, 49–50 proprietary trading, 22, 31, 39, 46–7, 125 relative value trades, 72–3 retail trade, retail aggregators, 21, 61, 66, 74, 75, 79, 82–3 Reuters Dealing machines, 23, 25–8, 31, 32, 50, 59, 73 Revolutionary Application Program Interface Development (RAPID), 56–9, 77, 101 risk, 15, 16, 19, 20–1, 24, 29, 31, 38, 39, 40, 44–5, 49, 51, 53, 62, 77, 95, 96, 98, 99, 101–8, 110–14, 121–31, 135, 192 risk management systems, 24, 40, 44–5, 53–5, 56–9, 64, 67, 70–1, 72, 73, 76, 77, 79, 99, 101–8, 110–14, 121–31, 135 rogue systems, 79–80 salespeople, 8–9, 11, 13–15, 20, 24, 28, 29, 33, 35, 37, 46, 47–52, 68, 96, 120 settlements, 5, 24, 40, 44, 51, 61, 101, 209 screen scraping, 32–3, 50, 59 skewed prices, 18, 19, 73, 96, 98 slippage, 188–9 speculation, 21, 31, 102–14 spot, 3–28, 33–4, 42–4, 46, 48–55, 67, 76, 77, 91, 96, 97, 98–9, 108, 111, 118, 122, 159, 165, 169, 188, 189, 199, 201, 222 spread, 12, 14–15, 16, 18, 19, 31, 41–2, 44, 45, 53, 55, 61, 64, 68, 69, 75, 80, 96, 225 traders, 3–28, 33, 35, 38, 41, 43, 46, 50, 52–4, 67, 73, 76, 78, 96, 99, 122, 189 Triangle arbitrage, 31–2, 42, 54, 91, 122 two-way pricing, 11–21, 23, 99 volatility, 14, 26, 46–7, 74–5, 80, 98, 137 wallet, 40 window, 118, 137, 188 WM/R, 187–8 zero coupon bonds, 118–32, 134, 138–43, 149, 152, 158, 159, 173 forward rate agreements (FRAs), 182 forwards trades, 10, 52, 77, 92, 121 Four Seasons, The, 3–5, 9 France, 6–7, 35, 37, 41, 46, 55, 64, 65, 77, 102, 140, 159, 207 Freddie Mac, 90 free market economics, 202–6 FTSE 100, 147 Fuld, Dick, 226 FX All, 59, 78 FX-fixing scandal (2013), 181, 187–92, 198 FXCM, 82–3 G G20 nations, 209, 212, 216 gambling, 31, 102–14 gamma, 97–8, 100 Gaussian copula, 158 geekiness, x, 10, 43, 223 geopolitics, 229 Germany, vii–x, xii, xiii, 16, 28, 36, 44, 54, 75, 144–5, 159, 167, 180, 200, 204 mark, 9, 96, 97, 99, 100, 104 Gibson Greetings, 109 GKOs (rouble-denominated bonds), 118–32, 134, 138–43, 149, 152, 158, 159, 173 Glass–Steagall Act (1933), 168, 201, 230 globally systemically important banks (G-SIBs), 216 Goldman Sachs, 23, 146, 198, 216, 230 Commodity Index (GSCI), 148 Google, 78, 234 GQ, 141 Gramm–Leach–Bliley Act (1999), 168, 201 Great Depression (1929–39), 168 Great Financial Crisis (2007–8), xiii, xiv–xv, 74–5, 87–90, 114, 124, 163, 172–5, 179–80, 196, 204–6, 207, 217, 219, 220, 223, 227–8 Greece, 82, 92, 181 Greeks, 98, 99, 101, 105, 107, 110, 111, 112, 114, 127, 129, 150, 157, 158, 182, 219 Greenspan, Alan, 202–6 GSA, 233 Gulf War (1990–1), xi, 22, 95 Gulliver, Stuart, 231 H ‘haircuts’, 132 Haldane, Andrew, 173 hand signals, 16 Hang Seng, 137 Harrison, William, 168 Harrow School, London, 149 Harvard University, 166 La Haye Sainte, Belgium, 10 hedge funds, xi, 9, 29, 36, 57, 61, 66, 69–74, 77, 81, 97, 114, 116, 122, 123, 131–5, 141–2, 164, 171, 172, 201, 229, 233 hedging, 94, 95, 97, 108, 117–18, 144, 145–6, 157, 190, 225, 226 delta hedging, 97 Hellwig, Martin, 211 Henry, John, 28 Herrhausen, Alfred, 226 high frequency trading (HFT), 57, 63, 73, 74, 75, 76, 77, 80, 84, 180, 194 Hodgkin, Howard, 195 Holder, Noddy, 232 Hong Kong, 137 Hotspot, 59 Hounslow, London, 193 HSBC, 216, 229, 231 Hussein, Saddam, 22, 95 I ICAP, 73 Iceland, 167, 174 identity theft insurance, 231 Immendorff, Jörg, 56 indexes, 147–50, 153–4, 157, 163, 190 India, 149 Indonesia, 135, 137, 139 IndyMac, 90 initial margin, 120, 132 insurance, 93, 151, 164, 168, 172, 174, 229 Intelligent Flow Monster, 146 interest rates, viii, 7, 10, 92, 108–10, 135, 225 carry trade, 108–10 derivatives, 104, 132, 182–6, 214 futures, 182 LIBOR (London Interbank Offered Rate), 109, 181–7, 188, 189, 190, 197, 198 swaps, 8, 92, 182–4 International Monetary Fund (IMF), 132, 135, 140, 211, 214, 230 International Swap Dealers Association (ISDA), 152, 153 Internet, xii, 5, 42, 76, 78, 169, 191–2, 195, 197, 199, 228, 233–5 investment banking, 36, 87, 110, 133, 145–6, 151, 158, 165–8, 229–30 iPhone, 5, 228 Iran, 181–2 Iraq, xi, 22, 95 Israel, 29, 138 Italy, 10, 13, 22, 78, 115–16, 141 lira, 22, 102–3, 123 iTraxx, 153 J Jagger, Mick, 87 Japan, 61, 72, 79, 159 yen, 9, 14, 17, 28, 71–2, 75, 79, 80, 136, 184 JPMorgan Chase, 131, 150, 158, 163, 168, 182, 197, 216, 229, 231, 23 J.

…

(Frankie Valli and the Four Seasons), 3–5, 9 oil, 139, 148, 149–50, 220 Oktoberfest, 144–5 one-stop shop, 145, 160, 168, 230 online banking, 233–4 OPTICS, 101, 103, 131, 153, 170 option-based recapitalisation charge (OBRC), 217–18 options, 10, 13, 20, 23, 27, 33–4, 38, 43–7, 49, 77, 91–114, 121, 128, 134, 137, 140, 141, 149, 150, 218, 222–3 Asian options, 106 barrier products, 104, 107, 108 carry trade, 108–10 commoditisation, 110–11 delta hedging, 97 double knockouts, 107 exotics, 105–11, 127 foreign exchange, 10, 13, 20, 23, 27, 33–4, 38, 43–7, 49, 77, 95–114, 222–3 gamma, 97–8, 100 Greeks, 98, 99, 101, 105, 107, 110, 111, 112, 114, 127, 129, 150, 157, 158, 182, 219 lattice methods, 112 lookbacks, 107 over-the-counter (OTC) market, 96, 209 power options, 107 pricing of, 91–5, 107, 111–14, 128, 133, 150 range trades, 107, 108 rho, 98 risk-weighted assets (RWA), 124–31, 134, 166, 211 spoofing, 99, 192–3 strike price, 94, 95, 104, 113, 218 theta, 98, 140 time decay, 98 tree approach, 112–14 vega, 98 volatility, 94, 98, 128–9 Organisation for Economic Co-operation and Development (OECD), 124–5, 139, 207 over-the-counter (OTC) market, 96, 209 P Panopticon, 199 Patton, George Smith, 84 pay, 43, 161–3, 210, 216 PayPal, 233 peer-to-peer, 234 pension funds, 9, 61, 76, 96 Philippines, 137 ‘pipes’, 71, 72 ‘pips’, 13, 18, 41, 65, 73, 77 Piranha, 48 Pittsburgh, Pennsylvania, 209 Plankton Strategy, 38, 40, 55, 58 Poland, 117, 167 Ponzi schemes, 205–6 Portugal, 173 power options, 107 Prebon Yamane, 28 Precision Pricing, 65 prime brokerage (PB), 61–3, 66, 120, 209 principal model, 7–8 principles-based regulation (PBR), 201–2 Prisoners’ Dilemma, 84, 186, 197, 201 Procter and Gamble, 109, 136, 155 production credits, 49, 50 proprietary trading, 22, 31, 39, 46–7, 125 Prosper, 234 Pushkin, Alexander, 30 Q quadratic equations, 105–6 quantitative analysis, xiv, 100–1, 103–8, 110–14, 126, 150, 158 quantitative easing, 82 R Rand, Ayn, 202 range trades, 107 ratings agencies, 155–8, 208, 219 rational markets, 202–6 recapitalisation, 217 recovery value, 151, 157, 160 regulation, 73, 80, 131, 148, 152, 168, 174, 180, 186–7, 191–6, 198–9, 200–18, 229, 231, 232 BaFin, 200, 202 bank tax, 216 Basel Accords, 124, 125, 130, 166, 207–9, 211, 217, 231 Big Bang (1986), 201 Central Counterparties (CCPs), 209, 213–15, 229 Commodity Futures Trading Commission (CFTC), 202 computers, 209, 213 ‘cops on the beat’, 215 Dodd–Frank Act (2010), 209, 230 European Banking Authority (EBA), 211–12 Financial Services (Banking Reform) Act (2013), 210 Financial Stability Board (FSB), 212, 214, 216 Glass–Steagall Act (1933), 168, 201, 230 Gramm–Leach–Bliley Act (1999), 168, 201 option-based recapitalisation charge (OBRC), 217–18 principles-based regulation (PBR), 201–2 rational markets, 6, 202–6 Riegle–Neal Act (1994), 168 shadow banking, 214–15 surveillance, 110, 190, 195–9 trade repositories, 209–10 relative value trades, 72–3 repo markets, 171 request for quote (RFQ), 50, 51 retail banking, 169, 229–30, 233 retail FX, retail aggregators, 21, 61, 66, 74, 75, 79, 82–3 Reuters, 9, 22–3, 188 Reuters Dealing machines, 23, 25–8, 31, 32, 50, 59, 73 Revolutionary Application Program Interface Development (RAPID), 56–9, 77, 101 rho, 98 Riegle–Neal Act (1994), 168 risk, risk management, 15, 16, 19, 20–1, 24, 29, 31, 38–9, 40, 44–5, 53–5, 56–9, 64, 67, 70–1, 72, 73, 76, 77, 79, 99, 101–8, 110–14, 121–31, 135–6, 139, 142, 144, 150, 152, 157–63, 166– 7, 169–70, 172, 174, 200–1, 206–7, 209, 213, 219, 221, 224–7, 233 agency-like approach, 119, 127 Automated Risk Manager (ARM), 53–5, 56–9, 64, 67, 70–1, 72, 73, 76, 79, 101, 129, 169 BTAnalytics, 107, 108, 112, 134, 150 collateralised debt obligations (CDOs), 154, 156, 158–63 complex risk, 159 concentration, 213 counterparty credit risk, 141–2, 172, 201, 202–3, 209 credit default swaps (CDSs), 151–3, 157, 158, 164, 225 credit risk, 7, 8, 62–3, 123, 125–6, 130, 141, 151, 209 DBAnalytics, 150, 153 foreign exchange, 15, 16, 19, 20–1, 24, 29, 31, 38, 39, 40, 44–5, 49, 51, 53, 62, 77, 192 market risk, 7, 62, 123, 126, 130, 167 model dopes, 221–2 OPTICS, 101, 103, 131, 153, 170 perception gap, 220, 224 quantitative analysis, xiv, 100–1, 103–8, 110–14, 126, 150, 158 Revolutionary Application Program Interface Development (RAPID), 56–9, 77, 101 risk-adjusted return on capital (RAROC), 126–7, 131, 144, 219 risk-weighted assets (RWA), 124–31, 134, 166, 208, 211 shares, 92 Spreadsheet Solutions Framework (SSF), 111, 121, 138, 153 value at risk (VaR), 127–31, 135–6, 139, 142, 157, 158, 169, 170, 172, 174, 204, 207, 219, 226, 227 RiskMetrics, 131 rogue systems, 79–80 Rolling Stones, 87, 89, 151, 171, 172 Royal Bank of Scotland (RBS), 48, 217, 233 ‘Rule 575 – Disruptive Practices Prohibited’, 193 Russia, 30, 33, 38, 76, 114–32, 137–42, 146, 148, 150, 151, 152, 163, 172, 175, 199, 202, 204, 207, 221, 224, 228 Financial Crisis (1998), xi–xii, 29, 114, 115–16, 118–22, 124, 137–43, 146, 163, 172, 175, 202, 207, 221, 224, 228 rouble, 115–16, 118–22, 131, 137, 138, 139 rouble-denominated bonds (GKOs), 118–32, 134, 138–43, 149, 152, 158, 159, 173 S sales-traders, 50, 78 salespeople, 8–9, 11, 13–15, 20, 24, 28, 29, 33, 35, 37, 46, 47–52, 68, 96, 120 Salomon Brothers, 122, 133–4 Sanford, Charlie, 35, 126 Sarao, Navinder Singh, 193 Scholes, Myron, 94–5, 97 screen scraping, 32–3, 50, 59 Securities and Exchange Commission, 215 securities, 91, 145, 155 September 11 attacks (2001), 52, 146, 147 settlements, 5, 24, 40, 44, 51, 61, 101, 209 shadow banking, 214–15 shareholders, 25, 35, 47, 73, 84, 90, 124, 169, 172, 205 shares, 50, 60, 91, 113, 128, 212, 217 forward trades, 91–4, 133, 152 recapitalisation, 217 tree approach, 113 volatility, 94, 128–9 short-dated deposits, 8 Silicon Valley, 234 Singapore, 37, 137, 211 skewed prices, 18, 19, 73, 96, 98 slippage, 188–9 smartphones, 233 Soros, George, 24 South Africa, xvi Soviet Union (1922–91), 22, 64, 199, 204 Spain 87–9, 151, 159, 171, 172 ‘special purpose vehicle’, 154 spoofing, 99, 192–3 spot, 3–28, 33–4, 42–4, 46, 48–55, 67, 76, 77, 91, 96, 97, 98–9, 108, 111, 118, 122, 159, 165, 169, 188, 189, 199, 201, 222 automation, 23–8, 31–3, 42, 48–55, 56–84, 111, 199, 201 brokers, 3–28, 33, 43, 63, 192 traders, 3–31, 33, 35, 38, 41, 43, 46, 50, 52–4, 67–8, 73, 76, 78, 96, 99, 122, 189 voice traders, 54, 67, 76, 122 spread, 12, 14–15, 16, 18, 19, 31, 41–2, 44, 45, 53, 55, 61, 64, 68, 69, 75, 80, 96, 225 spread crossing, 18, 19 Spreadsheet Solutions Framework (SSF), 111, 121, 138, 153 spreadsheets, 33, 38, 40, 107, 111, 219 Standard and Poor’s (S&P), 155, 157, 160 Stanford University, 211 stocks, 50, 60, 79, 89, 117, 129, 133, 136, 138, 147–8, 203–4 indexes, 147–8 streamlining, 230–2 Stress VaR, 207, 211 strike price, 94, 95, 104, 113, 218 structured products, 44 structuring, 153, 219 student loans, 155, 231 sub-prime mortgages, 74, 88–90, 159–61, 170–2, 207, 227 suits, 132, 140–1, 149 surveillance, 110, 190, 195–9 swaps, 8, 92, 119–20, 121, 125, 126, 132, 134, 136, 141, 148, 149, 152, 173 Sweden, 148, 167 SWIFT, 23 Switzerland, 10, 81–3, 120, 211 franc, 9, 20, 31, 81–3 Swiss National Bank, 81–3 T Telerate, 9 ‘ten sigma event’, 135 Thailand, 135, 136, 139 theta, 98 ‘Things Can Only Get Better’ (D:Ream), 120, 121 time decay, 98 Tobin Tax, 216 Tokyo, Japan, 72 Tolstoy, Leo, 30 ‘too big to fail’, 90, 217 total return swaps (TRSs), 119–20, 136, 152 tracker funds, 147–8 trade repositories, 209–10 tranches, 154–9, 161, 174, 208 transparency, 141, 143, 151, 170, 212, 219 ‘tree approach’, 112–14 ‘trial by meeting’, 45, 52 triangle arbitrage, 31–2, 42, 54, 91, 122 Triangle Man, 31–2, 42, 54, 91, 122 Triple I High Risk Opportunities Fund, 116, 141 Troubled Asset Relief Program (TARP), 174, 175 Truth and Reconciliation, xvi Turkey, 231 Tuscany, Italy, 78, 115–16, 141 two-way pricing, 11–21, 23, 99 U UBS, 48, 52, 55, 59, 65, 68, 167, 197, 227 Ulster Bank, 233 United Kingdom, 22, 48, 89, 117, 120, 145, 163, 190, 200, 201–2, 203, 210, 233–4 Big Bang (1986), 201 Exchange Rate Mechanism Crisis (1992), xi, 22, 102–3 Financial Services Act (2013), 210 Flash Crash (2010), 79–80, 193 FX-fixing scandal (2013), 190 general election (1997), 120 LIBOR scandal (2012), 181–7, 188, 189, 190, 197, 198 London, England, vii–x, xi, 3, 9, 15, 35, 69, 72, 76, 79, 91, 120, 121, 137, 140, 193, 199, 202, 209 Northern Rock crisis (2007), 89, 163 pound, 9, 13, 28, 53, 184 principles-based regulation (PBR), 201–2 RBS recapitalisation (2008), 217 RBS/Ulster Bank system failure (2012), 233 Vickers Report (2013), 211, 230 United States, vii, xi, 9, 52, 56, 64, 69, 72, 74, 88–90, 108, 120, 143, 159–60, 168, 170–2, 196, 200, 203–6, 207, 209, 210, 212 Black Monday (1987), 108, 138, 204, 207 Comprehensive Capital Analysis and Review (CCAR), 212 Congress, 202, 205 Dodd–Frank Act (2010), 209, 230 dollar, 9, 12, 14, 17–18, 23, 28, 31, 53, 69, 71–2, 73, 79, 88, 96, 97, 99, 100, 104, 118, 119, 135, 136, 140, 184–6, 189 Federal Reserve, xii, 90, 109, 143, 187, 202–6, 212 Flash Crash (2010), 79–80, 193 Glass–Steagall Act (1933), 168, 201, 230 Gramm–Leach–Bliley Act (1999), 168, 201 Lehman Brothers bankruptcy (2008), 75, 89, 172–4, 179, 180, 217, 226, 230, 232 New York, 9, 35, 71, 72, 79, 88, 109, 169, 202 Riegle–Neal Act (1994), 168 September 11 attacks (2001), 52, 146, 147 Subprime Crisis (2007), 74, 88–90, 160–1, 170–2, 207, 227 Treasury bills, 119, 129, 133, 147 Vietnam War (1955–75), 181 Wall Street Crash (1929), 168 universal banking model, 230 V Valli, Frankie, 3–5, 9 value at risk (VaR), 127–31, 135–6, 139, 142, 157, 158, 169, 170, 172, 174, 204, 207, 219, 226, 227 Stress VaR, 207, 211 variation margin, 120, 141 vega, 98 Vickers Report (2013), 211, 230 voice traders, 54, 67, 76, 122 volatility, 14, 26, 46–7, 74–5, 80, 94, 98, 128–9, 137 Volker, Paul, 230 W Wall Street Crash (1929), 168 ‘Watanabe, Mrs’, 61, 75, 79, 82 weather derivatives, 144–5, 146 Wendt, Froukelien, 214 West Texas Intermediate, 139 Wheatley Report (2012), 184, 188 ‘window, the’ 118, 137, 188 ‘wisdom of crowds’, 204 WM/R, 187–8 World Cup 1998 France, 140 2014 Brazil, 195 World War I (1914–18), 207 X XTX, 233 Y Yale University, 110 ‘yours-and-mine’, 15–16, 18, 19, 192 Z zero coupon bonds, 118–32, 134, 138–43, 149, 152, 158, 159, 173 Zombanakis, Minos, 181–2 Zopa, 234 This ebook is copyright material and must not be copied, reproduced, transferred, distributed, leased, licensed or publicly performed or used in any way except as specifically permitted in writing by the publishers, as allowed under the terms and conditions under which it was purchased or as strictly permitted by applicable copyright law.

Capitalism: Money, Morals and Markets by John Plender

activist fund / activist shareholder / activist investor, Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , bonus culture, Bretton Woods, business climate, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, Cornelius Vanderbilt, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, Glass-Steagall Act, God and Mammon, Golden arches theory, Gordon Gekko, greed is good, Hyman Minsky, income inequality, industrial research laboratory, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, labour market flexibility, liberal capitalism, light touch regulation, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, mass immigration, means of production, Menlo Park, money market fund, moral hazard, moveable type in China, Myron Scholes, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Paul Samuelson, plutocrats, price stability, principal–agent problem, profit motive, proprietary trading, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, Veblen good, We are the 99%, Wolfgang Streeck, zero-sum game

By the 1990s, around 5 per cent was the norm.40 When the crisis erupted, some big banks were operating with as little as 2 or 3 per cent. In other words, the banks’ assets had only to fall in value by 2 or 3 per cent for the bank to be wiped out. In a world where the stock market can fall by around 20 per cent or more in a day, as it did on Black Monday in 1987, that is an absurdly fragile base on which to maintain a financial system. While capital was shrinking, bankers’ pay was soaring. In 1989, chief executives of the largest US banks earned 100 times the median US household income. By 2007, the multiple was 500.41 Nothing in the operating performance of the banks had taken place to justify this stratospheric increase.

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Wilson) 1, 2 Alberti, Leon Battista 1 Alessandri, Piergiorgio 1 Allen, Maurice 1 Ambassadors, The (Henry James) 1 Americans for Tax Reform 1 Anatomy of Change-Alley (Daniel Defoe) 1 Angell, Norman 1 Anglosphere 1, 2 Arab Spring 1 Aramaic 1 arbitrage 1 Argentina 1 Aristotle 1, 2, 3, 4, 5, 6, 7, 8, 9 art 1 Asian Tiger economies 1 Atlas Shrugged (Ayn Rand) 1 Austen, Jane 1 Austrian school 1 aviation 1 Babbitt (Sinclair Lewis) 1 Bair, Sheila 1 Balloon Dog (Orange) (sculpture) 1 Balzac 1 Bank for International Settlements 1, 2, 3, 4, 5, 6 Bank of England 1, 2, 3, 4, 5 bank runs 1 bankers 1, 2 bankruptcy laws 1, 2 Banks, Joseph 1 Banksy 1 Barbon, Nicholas 1, 2, 3 Bardi family 1 Barings 1 Baruch, Bernard 1, 2 base metal, transmutation into gold 1 Basel regulatory regime 1, 2, 3 Baudelaire, Charles 1 Baum, Frank 1 behavioural finance 1 Belgium 1, 2 Bell, Alexander Graham 1 Benjamin, Walter 1 Bernanke, Ben 1, 2, 3 Bi Sheng 1 Bible 1 bimetallism 1 Bismarck, Otto von 1 Black Monday (1987) 1 black swans 1 Blake William 1, 2, 3 Bloch, Marcel 1 Bloomsbury group 1, 2 Boccaccio 1 bond market 1 bonus culture 1 Bootle, Roger 1 Boston Tea Party 1 Boswell, James 1 Boulton, Matthew 1 Bowra, Maurice 1 Brandeis, Louis 1 Bretton Woods conference 1 British Land (property company) 1 British Rail pension fund 1 Brookhart, Smith 1, 2 Brunner, Karl 1 Bryan, William Jennings 1 Bubble Act (Britain 1720) 1 bubbles 1, 2, 3 Buchanan, James 1 Buffett, Warren 1, 2, 3 Buiter, Willem 1 Burdett, Francis 1 van Buren, Martin 1 Burke, Edmund 1, 2 Burns, Robert 1 Bush, George W. 1, 2 Butler, Samuel 1 Candide (Voltaire) 1 Carlyle, Thomas 1, 2, 3 Carnegie, Andrew 1 Carville, James 1 cash nexus 1 Cash Nexus, The (Niall Ferguson) 1 Cassel, Ernest 1, 2 Catholic Church 1, 2, 3 Cecchetti, Stephen 1 Centre for the Study of Capital Market Dysfunctionality, (London School of Economics) 1 central bankers 1 Cervantes 1 Chamberlain, Joseph 1 Chancellor, Edward 1 Chapter 11 bankruptcy 1 Charles I of England 1, 2 Charles II of England 1 Chaucer 1 Cheney, Dick 1 Chernow, Ron 1 Chicago school 1, 2 Child & Co. 1 China 1, 2 American dependence on 1, 2 industrialisation 1, 2, 3 manufacturing 1 paper currency 1 Christianity 1, 2, 3, 4, 5 Churchill, Winston 1 Cicero 1, 2 Citizens United case 1 Cleveland, Grover 1 Clyde, Lord (British judge) 1 Cobden, Richard 1, 2, 3, 4 Coggan, Philip 1 Cohen, Steven 1 Colbert, Jean-Baptiste 1, 2 Cold War 1 Columbus, Christopher 1 commodity futures 1 Companies Act (Britain 1862) 1 Condition of the Working Class in England (Engels) 1 Confucianism 1, 2, 3 conquistadores 1 Constitution of Liberty, The (Friedrich Hayek) 1 Coolidge, Calvin 1, 2, 3 Cooper, Robert 1 copyright 1 Cort, Cornelis 1 Cosimo the Elder 1 crash of 1907 1 crash of 1929 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 creative destruction 1, 2 credit crunch (2007) 1, 2, 3 cum privilegio 1 Cyprus 1, 2 Dale, Richard 1, 2 Dante 1 Darwin, Erasmus 1 Das Kapital (Karl Marx) 1 Dassault, Marcel 1 Daunton, Martin 1 Davenant, Charles 1, 2, 3 Davies, Howard 1 debt 1 debt slavery 1 Decameron (Boccaccio) 1 Defoe, Daniel 1, 2, 3, 4, 5, 6, 7, 8 Dell, Michael 1 Deng Xiaoping 1, 2 derivatives 1 Deserted Village, The (Oliver Goldsmith) 1, 2, 3 Devil Take the Hindmost (Edward Chancellor) 1 Dickens, Charles 1, 2, 3, 4, 5, 6, 7, 8, 9 portentously named companies 1 Die Juden und das Wirtschaftsleben (Werner Sombart) 1 A Discourse of Trade (Nicholas Barbon) 1 Ding Gang 1 direct taxes 1, 2 Discorsi (Machiavelli) 1 diversification 1 Dodd–Frank Act (US 2010) 1, 2, 3 ‘dog and frisbee’ speech 1 dot.com bubble 1, 2, 3, 4 Drayton, Harley 1 Dumas, Charles 1, 2 Dürer, Albrecht 1 Duret, Théodore 1, 2 Dutch East India Company 1 Duttweiler, Gottlieb 1 Dye, Tony 1 East of Eden (film version) 1 Economic Consequences of the Peace (Keynes) 1, 2 Edison, Thomas 1, 2 efficient market hypothesis 1 electricity 1 Eliot, T.

Trillion Dollar Triage: How Jay Powell and the Fed Battled a President and a Pandemic---And Prevented Economic Disaster by Nick Timiraos

"World Economic Forum" Davos, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Bernie Sanders, bitcoin, Black Monday: stock market crash in 1987, Bonfire of the Vanities, break the buck, central bank independence, collapse of Lehman Brothers, collective bargaining, coronavirus, corporate raider, COVID-19, credit crunch, cryptocurrency, Donald Trump, fear index, financial innovation, financial intermediation, full employment, George Akerlof, George Floyd, global pandemic, global supply chain, Greta Thunberg, implied volatility, income inequality, inflation targeting, inverted yield curve, junk bonds, lockdown, Long Term Capital Management, low interest rates, managed futures, margin call, meme stock, money market fund, moral hazard, non-fungible token, oil shock, Phillips curve, price stability, pushing on a string, quantitative easing, Rishi Sunak, risk tolerance, rolodex, Ronald Reagan, Savings and loan crisis, secular stagnation, Skype, social distancing, subprime mortgage crisis, Tesla Model S, too big to fail, unorthodox policies, Y2K, yield curve

A few months later, Dillon Read found itself defending the petroleum exporter Unocal Corporation in a takeover bid from T. Boone Pickens, the corporate raider. Brady called Powell down to Washington to accompany him on meetings with top officials at the Treasury, White House, and Congress. President Ronald Reagan tapped Brady to chair a task force that reviewed the Black Monday stock market crash of 1987, then named him Treasury secretary a few months before Brady’s friend, George H. W. Bush, became president. It seemed like a plum opportunity for Powell, but to his disappointment, Brady had agreed not to bring anyone from his firm down to DC. Two years later, a partner at Dillon Read leaned into Powell’s office to tell him Brady was looking for a new assistant secretary: “Nick wants someone who’s like a carbon copy of Jay Powell.”

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After conferring again with Clarida and Williams, they concluded it should say, in effect, “We are awake to what’s happening.” He began calling reserve-bank presidents to give them a heads-up. Nearly all supported it. At 2:30 p.m. the Fed released Powell’s terse, four-sentence policy statement. This had happened only once before—following the stock-market crash on Black Monday in October 1987. Although the fundamentals of the economy remain strong, “the coronavirus poses evolving risks to economic activity,” the statement read. “We will use our tools and act as appropriate to support the economy.” There they were again—the words act as appropriate. The prior June, Powell had used those three words to put rate cuts on the table.

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The pan-European Stoxx 600 index fell 11 percent on Thursday, its worst one-day drop ever. By the end of Thursday, March 12, 2020, the Dow Jones Industrial Average had fallen 10 percent, or 2,352.6 points, a bigger drop than any of the worst days of the 2008 financial crisis. The index had posted larger losses only three other times: on Black Monday in 1987 and on October 28 and 29, 1929, during the crash that would usher in the Great Depression. More ominously, the prior day’s pattern of falling bond and stock prices continued, rippling out to other asset classes. The economic scenario unfolding forced investors to confront a calamity worse than 2008, one verging on the 1930s.

Built on a Lie: The Rise and Fall of Neil Woodford and the Fate of Middle England’s Money by Owen Walker

activist fund / activist shareholder / activist investor, bank run, banking crisis, barriers to entry, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Brexit referendum, British Empire, buy and hold, call centre, carbon footprint, clean water, coronavirus, corporate governance, COVID-19, fixed income, G4S, Kickstarter, knowledge economy, liquidity trap, lockdown, mass affluent, popular capitalism, profit motive, regulatory arbitrage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, stem cell, Steve Jobs, Winter of Discontent

Bell Bell, Sir John 133 Benevolent AI 132, 150, 153, 156, 164–5, 166, 167, 194, 196, 218 best-buy lists 16, 159–60, 161, 170, 173, 177, 181, 192, 202, 213–14 Bestinvest 90, 161, 214 Big Bang deregulation, City of London (1986) 27 Bilton, Anton 8, 151, 165, 188 biomass 75, 80, 84 biotech industry 68–73, 121–3, 131–2, 135, 144, 154, 184, 224 see also individual company names Black, Conrad 47 Black Monday market crash (1987) 30, 36 BlackRock 190, 198, 203, 206 Block, Carson 194 Bloomberg 131 Bolton, Anthony 41, 68 Brady, Charles 50, 52, 53, 54–5, 56, 58, 60 Brennan, David 73 Brewin Dolphin 90 Brexit 2, 3, 6, 136–7, 163–4, 175, 206, 209 British American Tobacco 26, 44, 82, 119, 136 British Biotech 68–9 British Gas 27, 28, 81 British Telecom 27, 83, 119, 132 Broadgate Mainland 97, 110, 111 Brown, Gordon 17 Brown, Scott 130 Brunt, Peter 172–3 BTG Management Services 131 Buffett, Warren 23, 111, 131, 216 Burford Capital 178, 194 Business, Innovation and Skills Select Committee, Parliament 77 Cable, Vince 14, 77, 181 Cameron, David 14, 17, 133 Capita 2, 90, 102, 119, 122, 144 Capita Asset Services 102–3, 108–9, 141, 148, 151 see also Link Fund Solutions Capital Economics 137 Carney, Mark 176, 185, 187–8, 205, 208, 210 Carrick Therapeutics 162 Causer, Paul 60 Cell Medica 162 Cenkos 71, 122 Centrica 81 CGNU 53 Channel Islands Stock Exchange 151 Charles Stanley Direct 155, 214 Chase Bank 53 Chatfeild-Roberts, John 112–13, 145–6 Chelsea Financial Services 90 China Construction Bank 206 Chu, Steven 84 Circassia Pharmaceuticals 130, 135–6, 178, 196 Citicorp 53 Citizens and Southern Bank 50 City of London 7, 22, 23, 27, 31, 32, 35, 37, 48, 57, 70, 71, 110, 113, 121–2, 138, 185, 203, 205, 224 Big Bang (1986) 27–9 Black Monday (1987) 30, 36 electronic trading introduced 27 Financial Services Act (1986) 28 Citywire 98, 144–5, 166, 224 Clarke, Ken 17 Clarke, Simon 186 coalition government, UK (2005–10) 77, 81 Cofunds 113–14 Conservative Party 22, 25, 26, 28, 29, 45, 50, 81, 180, 181, 186, 205, 206, 212 Cornick, Roger 34, 38, 39, 44, 50, 51 Crazy Bear, Stadhampton 116, 156 Croft, Andrew 215 Cunningham, Raymond 59 Daily Mirror 24 Daily Telegraph 18, 94, 110, 111 Dale, Simon 105–6, 108, 113, 121 Dampier, Mark 212 dotcom bubble, keeps faith with Woodford during 52 Equity Income and Income Focus removal from Hargreaves Lansdowne Wealth 150 list and 177 Hargreaves Lansdowne addition of Woodford IM to Wealth 150 list, endorsement of 115 Hargreaves Lansdowne discounted deal with Woodford IM and 114 Hargreaves Lansdowne, joins 15–16 Invesco Perpetual and 57, 68, 90 press investigate role in Woodford downfall 180–81 reservations about Woodford’s investment performance while still recommending funds 159–61, 164, 170–71, 202, 213, 215 Sanlam report and 83 sells shares in Hargreaves Lansdowne in days leading up to Equity Income suspension 171, 180–81, 202, 213 Treasury Select Committee investigation of Hargreaves Lansdowne and 213 visits headquarters of Woodford IM 124–5 wealth 180 ‘Woodford groupie’ 42 Darden, Thomas 127–8 Davies, Gareth 133 Davies, Peter 146 Day, Philip 155 Deer, Will 2, 5, 7, 8, 94, 105–6, 107, 108, 121, 170, 189 Deloitte 98 Department for Business, Energy and Industrial Strategy 133 Diageo 136 disposition effect 150 Dominion 22–3, 24, 26 dotcom bubble/crash (1997–2003) 51–2, 56, 64, 74, 77, 136, 145, 216, 220 Drax Group 90 Dubens, Peter 92, 93 Duff & Phelps 126, 140–41, 163, 194 Duffield, John 58 Duke of York (Prince Andrew) 50 EADS 73 Eagle Star 26, 28, 205 Eagle Star Asset Management 28–31, 205 Edinburgh Investment Trust 83, 90 Elizabeth II, Queen 49, 76, 82 Elphicke, Charlie 187 Emba 125 Energy Catalyzer (E-Cat) 128 Ennis Lad (horse) 148 Equity & Law 35 Equity Income fund see Woodford IM e-Therapeutics 72, 120 euro 80 European Medicines Evaluation Agency 69 European Union 3, 129, 136–7, 175, 206 Eve Sleep 123, 178 Evofem 123–4, 190 Farrow, Paul 94, 110, 111 Ferguson, Iain 155 Fidelity Investments 41, 68, 97, 106–8 financial advisers, independent see independent financial advisers (IFAs) Financial Conduct Authority (FCA) 7, 88–9, 93, 94–5, 197, 198, 202–3 Arch Cru affair and 102–3 Bailey and see Bailey, Andrew belated attempts at showing control of Woodford situation 204–5 best-buy lists and 187, 214 Brexit referendum and 209–10 Capita, imposes as ACD on Woodford IM 208, 210–11 central database to monitor when funds suspend trading, lack of 209 Equity Income fund breach of trash ratio limit on unquoted holdings and 149–52, 209, 210, 211 Equity Income fund International Stock Exchange (Guernsey) listings and 151, 165–7, 171, 180, 186, 209, 210, 211 Equity Income fund suspension, investigation into 185–6, 187, 195, 204–5, 208, 209, 210–11 Hamilton and Smith departures from Woodford IM and 127, 209 Hargreaves Lansdowne best-buy lists, investigates 187 Invesco Perpetual, investigation into 88–9, 93, 112, 208 Link, monthly discussions with over liquidity in Equity Income fund 152, 163, 165–7 Link, outsources regulatory oversight to 208–9 Link, probe into role in Woodford downfall 195 London Capital & Finance collapse and 185, 208 Patient Capital equity swaps with Equity Income and 163 Provident Financial investigation 143 report into the series of suspensions of UK property funds immediately following the Brexit referendum 209–10 Treasury Select Committee investigates role in Woodford downfall 183, 185–7, 195, 209, 210, 213 Woodford IM collapse, overview of role in 208–12 Woodford IM launch and 94–6, 98, 99–103, 108–9, 112, 127, 129 Woodford IM valuation process and 140–41 financial crisis (2008) 4, 12, 63–4, 74, 77, 79, 102, 136, 175, 216, 220 Financial Services Act (1986) 28 Financial Services Authority (FSA) 89 Financial Times 7, 23, 34, 47, 68, 69, 72, 77, 86, 99, 110, 117, 130, 147, 158, 163, 164, 173–4, 177, 181, 192, 193, 196, 200, 202, 203, 207, 209, 214 First Allianz 26 Flanagan, Martin 61, 78, 87 Food and Drug Administration, US 143 Foreign & Colonial 22, 53 4D Pharma 144 Franklin Templeton 61 Fraser-Jones, Mitchell 94 FTI Consulting 190 FTSE All-Share Index 56, 74, 131, 139, 140l, 153, 168 100 13, 15, 30, 36, 63, 73, 81, 119, 134, 143, 177, 1987, 213 250 80, 162, 190, 196 fund supermarkets (investment platforms) 9, 14–15, 16, 107–8, 113–14, 147, 153, 159, 161, 177, 179, 181, 183, 212 see also individual fund supermarket names Fundscape 214 FundsNetwork 107 Gardhouse, Lee 113, 160, 170, 171, 212, 213 Genomics and Mission Therapeutics 150 G4S 90 Gigaclear 125, 153 GlaxoSmithKline 21, 47–8, 82, 90, 119, 132 Glaxo Wellcome 47 Glitnir 3–4 Goldman Sachs 68 Grant Thornton 179 Green, Paul 94 Griffiths, George 19 Grote, Daniel 166, 224 Guernsey stock exchange see International Stock Exchange (Guernsey) Halo-Source 144 Hamilton, Nick 61, 93–4, 95, 96, 98, 101, 103, 117, 125–6, 127, 134, 209 Hammond, Philip 17, 134 Hargreaves Lansdown 9, 151, 153, 204 best-buy lists 16, 159–60, 161, 170, 173, 177–8, 179, 181, 183, 187, 192, 202, 213–14 Dampier and see Dampier, Mark discount negotiated with Woodford IM for clients of 114, 182–3, 192, 212, 214 dotcom bubble, keeps faith with Woodford during 52 Equity Income fund, customers trapped in 186, 191–2, 202, 212–14 FCA investigate 183, 187, 204, 214 Income Focus fund, drops from multi-manager range 201–2 Invesco Perpetual and 57, 68, 83, 88, 90 Newman reaction to questions raised by representatives of 148, 170 origins of 15, 213 platform fees, waives 179 press investigate failings of 180–81 reservations about Woodford’s performance within while still recommending investment 159–61, 163, 166, 170–71, 173, 180–81, 213 Sanlam report and 83 share price hit by suspension of Equity Income 177–8, 180, 202 shares sold by Dampier and Gardhouse in days leading up to Equity Income suspension 171, 180–81, 202, 213 Treasury Select Committee investigates 182–3, 186, 187, 191–2, 213 unquoted holdings in Woodford funds, concerns over 159, 160–61, 163, 166, 170–71 Wealth 50 best-buy list, Equity Income and Income Focus removed from 177 Wealth 150 list, adds Equity Income fund to 114–15 Wealth Shortlist 214 Woodford IM, early backing for 107, 113, 114–15, 120, 124–5, 134 Woodford IM, unhealthily intertwined with 159–61, 212 Hargreaves, Peter 15, 212 Harris, Steven 130, 196 Heartwood Wealth Managers 90 hedge funds 56, 59, 92, 143, 146, 182, 185, 188, 194 Helphire 81 Henderson 97 Heritable 3–4 Heseltine, Michael 50 Heywood, Sir Jeremy 133 High Pay Centre 139 Hill, Chris 181, 182–3, 191–2 Hirsch, Glyn 165, 188 Hiscock, Fred 10–11, 12, 13, 14, 15, 17, 220–221 Hiscox 106 Hobbs, David 114 Hodges, Paul 43 Hogwood, Nick 190 Horizon Discovery 188 Host Capital 101 House of Lords Science and Technology Select Committee 69, 141 HSBC 63 Hymans Robertson 106 IHS Markit 194 Immunocore 166, 184, 206 Imperial College London 70, 130 Imperial Innovations 70, 119, 133, 135, 144 Imperial Tobacco 82–3, 90, 119, 136, 143, 167 Income Focus fund see Woodford IM income funds 36–7, 39–40, 60, 63 see also individual income fund names Independent/Independent on Sunday 47, 83, 124–5 independent financial advisers (IFAs) 10, 15, 16, 197–8 Arch Cru scandal and 102 dotcom bubble, lose faith with Woodford during 51, 52 Equity Income fund launch and 120 Invesco Perpetual and 54, 56–7, 60, 67, 74, 78, 79, 82, 83, 90, 97–8, 216 Perpetual and 34, 35, 39, 42–3, 44–5 Sanlam report and 82, 83 saver and, relationship between 9, 11–13 star fund managers and 42, 54–5 Woodford downfall, role in 180–81, 215–16 Woodford IM investment team, question due diligence of 135 Woodford IM launch and 96, 101, 104, 105, 107, 110, 119 Woodford’s ardent following of 43, 74, 216 see also Dampier, Mark Industrial Heat 127–8, 156, 165, 167, 194–5, 204 in-specie transfer 174 institutional investors 4, 76, 106, 147, 172, 219 Interactive Investor 192 International Stock Exchange (Guernsey) 6, 151, 165–7, 171, 180, 186, 188, 194, 209, 210, 211, 218, 224 cancels listings of Woodford IM holdings 194 FCA and Woodford IM listings on 151, 165–7, 171, 180, 186, 209, 210, 211 Link oversight of Woodford IM listings on 151, 165–7, 211 listings of previously unquoted Woodford IM holdings 6, 151, 165–7, 171, 180, 186 suspends listings of Woodford IM holdings 167, 171, 180, 186, 188, 194, 209, 211 Invesco 51, 54–5, 56, 58–60, 62–3, 67 Invesco Perpetual 4–5, 13, 54–91, 100, 116, 119, 120, 123, 124, 131, 140, 150–51, 178, 205, 214, 215, 216, 217, 219 American management, Woodford clashes with 78–80 birth of/Invesco Perpetual merger 54–8 Financial Conduct Authority investigates rule violations at 88–90, 93, 94, 112, 208 financial crisis and 63–4 Kent County Council investment in 4–5, 8, 106 Leadsom at 65–6, 78 Newman at 66–8, 79, 80, 85–7 private or unquoted companies, Woodford develops appetite for stakes in 71–3, 83–5, 87, 94, 96, 126 Sanlam report and 82–3 SJP and 83–4, 85–6, 88, 90–91, 103–5, 111–12, 115, 214–15 Woodford departs 13, 78, 86–91, 92, 93, 94, 97–8, 99, 101, 103–4, 105, 106, 107, 108, 109, 110, 111–13, 115, 142, 191 Woodford interest in small, science-based companies 68–71 Woodford IM launch and 112–13 Woodford private interventions and public outbursts while at 73–4, 80–82 Woodford team at 61–3, 65–7, 78–80, 94, 146, 153, 161, 189 Investment Association 153, 177 investment sector 16–17, 55, 114–15, 176, 224 Investors Chronicle 33 IP Group 70, 133, 146–7 ISAs 40, 49, 51, 51, 108, 115 Jenkin, Bernard 65 Jobs, Laurene Powell 128, 204 JPMorgan 53, 115 Jupiter 57, 58, 97, 112–13, 145, 146, 147 Kay, John 77 Kay Review 77–8, 81 Kent County Council 1–9, 86, 106, 169, 173–4, 182, 183–4, 187, 189, 211–12 Kier 174–5, 178, 179 King, Ian 73–4 Labour Party 24, 26, 49, 81, 202 Ladbrokes 33 Lamacraft, Paul 94, 116, 123 Lamacraft, Ross 94, 184 Lamacraft, Stephen 94, 98, 116, 123 Lamb, David 104, 142–3, 173, 178 Lamont, Norman 17 Landsbanki 3–4 Langan’s Brasserie, Mayfair 115 Lansdowne Partners 146, 147 Lansdown, Stephen 15, 151 Lawson, Nigel 17, 26, 28, 40 Leadsom, Andrea 65–6, 78 Legal & General 113–14 Legg Mason’s Capital Market Value Trust 41 Lehman Brothers 64 Le Poidevin, Fiona 180 Link Fund Solutions 152, 156, 192 Equity Income and Patient Capital asset swap deals and 162–3, 211 Equity Income investors, fees charged to 179 Equity Income, plans to replace Woodford as manager of 189–90 Equity Income, suspends trading in 8–9, 174–5, 176–7, 182, 184, 188, 194, 195, 196–7, 211, 212 Equity Income, winds down and lines up PJT and BlackRock to sell assets 197–9, 200, 201, 203, 206–7, 218–19 FCA investigation into suspension of Equity Income and 185, 186, 187, 195, 204–5, 208, 209, 210–11 FCA monthly discussions with over liquidity of Equity Income fund 152, 165–7 Income Focus fund, hands over to Standard Life Aberdeen 205 Income Focus fund, suspends trading in 201–2 Industrial Heat, valuation of 194–5, 204 International Stock Exchange (Guernsey), Woodford IM investment listings and 151, 165–7, 211 Patient Capital board orders to revalue unquoted assets 184, 194–5, 204 Project Oak (plan to package up unquoted Equity Income holdings and sell them) 185, 195 see also Capita Lloyds Bank 63 local authority pension funds 1–9, 86, 106, 169, 173–4, 182, 183–4, 187, 189, 211–12 London Business School 25 London Capital & Finance 185, 208 Lynch, Peter 41 Mackie, Terry 202 Magellan fund 41 Maidenhead Grammar School 19–21, 25, 219 Maidenhead RFC 25 Major, John 17 Makin, Louise 130–31 M&G 49, 52, 100, 153 Marimastat 69 market timing scandal 59–60, 90 Maxwell, Robert 24–5, 55 May, Theresa 65, 134 McDonnell, John 202–3 McGlashan, Scott 35, 57 Medoff, Marshall 84–5 Mercer 106 Mercury Asset Management 61 Merrill Lynch 53 Midl, Karl 174, 175, 189, 190, 197, 198 Miliband, Ed 81–2 Millar, Andrew 68–9 Miller, Bill 41 Mirror Group Newspapers 24, 55 Mishcon de Reya 93 mis-selling scandals 15 Morgan, John Pierpont 115 see also JPMorgan Morgan, Nicky 180, 181, 182–3, 186–7, 191, 192 Morningstar 88, 172–3 Mullen, Mark 191 Mustoe, Nick 78–9, 87 Myners, Paul 138–9 Neptune 97 New Labour 49 Newman, Craig 66–7, 79, 80, 85–7, 93, 94, 95, 96, 98–9, 106, 113, 114, 116, 117, 121, 126–7, 134, 137, 138, 159, 170, 189, 211, 217 bonuses, decision to scrap within Woodford IM and 138, 139 character 66–7, 126, 148 childhood 66–7 comeback plans 206, 219 direct relationship with investors in Equity Income fund, envisages 147–8 Invesco Perpetual career 66–7, 79, 80, 85–7 money, obsession with 66–7, 139, 182 Oakley and 93 pay/dividend payments 139, 142, 154–5, 168, 193–4, 201, 207–8, 217 property projects 154–5, 193 Rudd and 181–2 sales staff bonuses and 121 Smith/Hamilton warnings over Woodford investments, reaction to 125, 126, 127 suspension of Equity Income fund and 195, 196, 197 ‘violent transparency’, commitment to 119, 150, 152, 182 winding down of Equity Income fund and 197, 198, 200, 205 Woodford departure from Invesco Perpetual and 79, 80, 85–7 Woodford, ingratiates himself with 67–8 Woodford IM origins/launch and 93, 94, 95, 96, 97, 98, 99, 101, 103, 104, 106, 108–9, 113, 114, 116, 117–18, 119 Woodford Patient Capital Trust and 129–30 NewRiver Reit 163, 167, 178, 188 New Star 58 Newton 57 NEX exchange 164 Nexeon 130–31 N.

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Bell Bell, Sir John 133 Benevolent AI 132, 150, 153, 156, 164–5, 166, 167, 194, 196, 218 best-buy lists 16, 159–60, 161, 170, 173, 177, 181, 192, 202, 213–14 Bestinvest 90, 161, 214 Big Bang deregulation, City of London (1986) 27 Bilton, Anton 8, 151, 165, 188 biomass 75, 80, 84 biotech industry 68–73, 121–3, 131–2, 135, 144, 154, 184, 224 see also individual company names Black, Conrad 47 Black Monday market crash (1987) 30, 36 BlackRock 190, 198, 203, 206 Block, Carson 194 Bloomberg 131 Bolton, Anthony 41, 68 Brady, Charles 50, 52, 53, 54–5, 56, 58, 60 Brennan, David 73 Brewin Dolphin 90 Brexit 2, 3, 6, 136–7, 163–4, 175, 206, 209 British American Tobacco 26, 44, 82, 119, 136 British Biotech 68–9 British Gas 27, 28, 81 British Telecom 27, 83, 119, 132 Broadgate Mainland 97, 110, 111 Brown, Gordon 17 Brown, Scott 130 Brunt, Peter 172–3 BTG Management Services 131 Buffett, Warren 23, 111, 131, 216 Burford Capital 178, 194 Business, Innovation and Skills Select Committee, Parliament 77 Cable, Vince 14, 77, 181 Cameron, David 14, 17, 133 Capita 2, 90, 102, 119, 122, 144 Capita Asset Services 102–3, 108–9, 141, 148, 151 see also Link Fund Solutions Capital Economics 137 Carney, Mark 176, 185, 187–8, 205, 208, 210 Carrick Therapeutics 162 Causer, Paul 60 Cell Medica 162 Cenkos 71, 122 Centrica 81 CGNU 53 Channel Islands Stock Exchange 151 Charles Stanley Direct 155, 214 Chase Bank 53 Chatfeild-Roberts, John 112–13, 145–6 Chelsea Financial Services 90 China Construction Bank 206 Chu, Steven 84 Circassia Pharmaceuticals 130, 135–6, 178, 196 Citicorp 53 Citizens and Southern Bank 50 City of London 7, 22, 23, 27, 31, 32, 35, 37, 48, 57, 70, 71, 110, 113, 121–2, 138, 185, 203, 205, 224 Big Bang (1986) 27–9 Black Monday (1987) 30, 36 electronic trading introduced 27 Financial Services Act (1986) 28 Citywire 98, 144–5, 166, 224 Clarke, Ken 17 Clarke, Simon 186 coalition government, UK (2005–10) 77, 81 Cofunds 113–14 Conservative Party 22, 25, 26, 28, 29, 45, 50, 81, 180, 181, 186, 205, 206, 212 Cornick, Roger 34, 38, 39, 44, 50, 51 Crazy Bear, Stadhampton 116, 156 Croft, Andrew 215 Cunningham, Raymond 59 Daily Mirror 24 Daily Telegraph 18, 94, 110, 111 Dale, Simon 105–6, 108, 113, 121 Dampier, Mark 212 dotcom bubble, keeps faith with Woodford during 52 Equity Income and Income Focus removal from Hargreaves Lansdowne Wealth 150 list and 177 Hargreaves Lansdowne addition of Woodford IM to Wealth 150 list, endorsement of 115 Hargreaves Lansdowne discounted deal with Woodford IM and 114 Hargreaves Lansdowne, joins 15–16 Invesco Perpetual and 57, 68, 90 press investigate role in Woodford downfall 180–81 reservations about Woodford’s investment performance while still recommending funds 159–61, 164, 170–71, 202, 213, 215 Sanlam report and 83 sells shares in Hargreaves Lansdowne in days leading up to Equity Income suspension 171, 180–81, 202, 213 Treasury Select Committee investigation of Hargreaves Lansdowne and 213 visits headquarters of Woodford IM 124–5 wealth 180 ‘Woodford groupie’ 42 Darden, Thomas 127–8 Davies, Gareth 133 Davies, Peter 146 Day, Philip 155 Deer, Will 2, 5, 7, 8, 94, 105–6, 107, 108, 121, 170, 189 Deloitte 98 Department for Business, Energy and Industrial Strategy 133 Diageo 136 disposition effect 150 Dominion 22–3, 24, 26 dotcom bubble/crash (1997–2003) 51–2, 56, 64, 74, 77, 136, 145, 216, 220 Drax Group 90 Dubens, Peter 92, 93 Duff & Phelps 126, 140–41, 163, 194 Duffield, John 58 Duke of York (Prince Andrew) 50 EADS 73 Eagle Star 26, 28, 205 Eagle Star Asset Management 28–31, 205 Edinburgh Investment Trust 83, 90 Elizabeth II, Queen 49, 76, 82 Elphicke, Charlie 187 Emba 125 Energy Catalyzer (E-Cat) 128 Ennis Lad (horse) 148 Equity & Law 35 Equity Income fund see Woodford IM e-Therapeutics 72, 120 euro 80 European Medicines Evaluation Agency 69 European Union 3, 129, 136–7, 175, 206 Eve Sleep 123, 178 Evofem 123–4, 190 Farrow, Paul 94, 110, 111 Ferguson, Iain 155 Fidelity Investments 41, 68, 97, 106–8 financial advisers, independent see independent financial advisers (IFAs) Financial Conduct Authority (FCA) 7, 88–9, 93, 94–5, 197, 198, 202–3 Arch Cru affair and 102–3 Bailey and see Bailey, Andrew belated attempts at showing control of Woodford situation 204–5 best-buy lists and 187, 214 Brexit referendum and 209–10 Capita, imposes as ACD on Woodford IM 208, 210–11 central database to monitor when funds suspend trading, lack of 209 Equity Income fund breach of trash ratio limit on unquoted holdings and 149–52, 209, 210, 211 Equity Income fund International Stock Exchange (Guernsey) listings and 151, 165–7, 171, 180, 186, 209, 210, 211 Equity Income fund suspension, investigation into 185–6, 187, 195, 204–5, 208, 209, 210–11 Hamilton and Smith departures from Woodford IM and 127, 209 Hargreaves Lansdowne best-buy lists, investigates 187 Invesco Perpetual, investigation into 88–9, 93, 112, 208 Link, monthly discussions with over liquidity in Equity Income fund 152, 163, 165–7 Link, outsources regulatory oversight to 208–9 Link, probe into role in Woodford downfall 195 London Capital & Finance collapse and 185, 208 Patient Capital equity swaps with Equity Income and 163 Provident Financial investigation 143 report into the series of suspensions of UK property funds immediately following the Brexit referendum 209–10 Treasury Select Committee investigates role in Woodford downfall 183, 185–7, 195, 209, 210, 213 Woodford IM collapse, overview of role in 208–12 Woodford IM launch and 94–6, 98, 99–103, 108–9, 112, 127, 129 Woodford IM valuation process and 140–41 financial crisis (2008) 4, 12, 63–4, 74, 77, 79, 102, 136, 175, 216, 220 Financial Services Act (1986) 28 Financial Services Authority (FSA) 89 Financial Times 7, 23, 34, 47, 68, 69, 72, 77, 86, 99, 110, 117, 130, 147, 158, 163, 164, 173–4, 177, 181, 192, 193, 196, 200, 202, 203, 207, 209, 214 First Allianz 26 Flanagan, Martin 61, 78, 87 Food and Drug Administration, US 143 Foreign & Colonial 22, 53 4D Pharma 144 Franklin Templeton 61 Fraser-Jones, Mitchell 94 FTI Consulting 190 FTSE All-Share Index 56, 74, 131, 139, 140l, 153, 168 100 13, 15, 30, 36, 63, 73, 81, 119, 134, 143, 177, 1987, 213 250 80, 162, 190, 196 fund supermarkets (investment platforms) 9, 14–15, 16, 107–8, 113–14, 147, 153, 159, 161, 177, 179, 181, 183, 212 see also individual fund supermarket names Fundscape 214 FundsNetwork 107 Gardhouse, Lee 113, 160, 170, 171, 212, 213 Genomics and Mission Therapeutics 150 G4S 90 Gigaclear 125, 153 GlaxoSmithKline 21, 47–8, 82, 90, 119, 132 Glaxo Wellcome 47 Glitnir 3–4 Goldman Sachs 68 Grant Thornton 179 Green, Paul 94 Griffiths, George 19 Grote, Daniel 166, 224 Guernsey stock exchange see International Stock Exchange (Guernsey) Halo-Source 144 Hamilton, Nick 61, 93–4, 95, 96, 98, 101, 103, 117, 125–6, 127, 134, 209 Hammond, Philip 17, 134 Hargreaves Lansdown 9, 151, 153, 204 best-buy lists 16, 159–60, 161, 170, 173, 177–8, 179, 181, 183, 187, 192, 202, 213–14 Dampier and see Dampier, Mark discount negotiated with Woodford IM for clients of 114, 182–3, 192, 212, 214 dotcom bubble, keeps faith with Woodford during 52 Equity Income fund, customers trapped in 186, 191–2, 202, 212–14 FCA investigate 183, 187, 204, 214 Income Focus fund, drops from multi-manager range 201–2 Invesco Perpetual and 57, 68, 83, 88, 90 Newman reaction to questions raised by representatives of 148, 170 origins of 15, 213 platform fees, waives 179 press investigate failings of 180–81 reservations about Woodford’s performance within while still recommending investment 159–61, 163, 166, 170–71, 173, 180–81, 213 Sanlam report and 83 share price hit by suspension of Equity Income 177–8, 180, 202 shares sold by Dampier and Gardhouse in days leading up to Equity Income suspension 171, 180–81, 202, 213 Treasury Select Committee investigates 182–3, 186, 187, 191–2, 213 unquoted holdings in Woodford funds, concerns over 159, 160–61, 163, 166, 170–71 Wealth 50 best-buy list, Equity Income and Income Focus removed from 177 Wealth 150 list, adds Equity Income fund to 114–15 Wealth Shortlist 214 Woodford IM, early backing for 107, 113, 114–15, 120, 124–5, 134 Woodford IM, unhealthily intertwined with 159–61, 212 Hargreaves, Peter 15, 212 Harris, Steven 130, 196 Heartwood Wealth Managers 90 hedge funds 56, 59, 92, 143, 146, 182, 185, 188, 194 Helphire 81 Henderson 97 Heritable 3–4 Heseltine, Michael 50 Heywood, Sir Jeremy 133 High Pay Centre 139 Hill, Chris 181, 182–3, 191–2 Hirsch, Glyn 165, 188 Hiscock, Fred 10–11, 12, 13, 14, 15, 17, 220–221 Hiscox 106 Hobbs, David 114 Hodges, Paul 43 Hogwood, Nick 190 Horizon Discovery 188 Host Capital 101 House of Lords Science and Technology Select Committee 69, 141 HSBC 63 Hymans Robertson 106 IHS Markit 194 Immunocore 166, 184, 206 Imperial College London 70, 130 Imperial Innovations 70, 119, 133, 135, 144 Imperial Tobacco 82–3, 90, 119, 136, 143, 167 Income Focus fund see Woodford IM income funds 36–7, 39–40, 60, 63 see also individual income fund names Independent/Independent on Sunday 47, 83, 124–5 independent financial advisers (IFAs) 10, 15, 16, 197–8 Arch Cru scandal and 102 dotcom bubble, lose faith with Woodford during 51, 52 Equity Income fund launch and 120 Invesco Perpetual and 54, 56–7, 60, 67, 74, 78, 79, 82, 83, 90, 97–8, 216 Perpetual and 34, 35, 39, 42–3, 44–5 Sanlam report and 82, 83 saver and, relationship between 9, 11–13 star fund managers and 42, 54–5 Woodford downfall, role in 180–81, 215–16 Woodford IM investment team, question due diligence of 135 Woodford IM launch and 96, 101, 104, 105, 107, 110, 119 Woodford’s ardent following of 43, 74, 216 see also Dampier, Mark Industrial Heat 127–8, 156, 165, 167, 194–5, 204 in-specie transfer 174 institutional investors 4, 76, 106, 147, 172, 219 Interactive Investor 192 International Stock Exchange (Guernsey) 6, 151, 165–7, 171, 180, 186, 188, 194, 209, 210, 211, 218, 224 cancels listings of Woodford IM holdings 194 FCA and Woodford IM listings on 151, 165–7, 171, 180, 186, 209, 210, 211 Link oversight of Woodford IM listings on 151, 165–7, 211 listings of previously unquoted Woodford IM holdings 6, 151, 165–7, 171, 180, 186 suspends listings of Woodford IM holdings 167, 171, 180, 186, 188, 194, 209, 211 Invesco 51, 54–5, 56, 58–60, 62–3, 67 Invesco Perpetual 4–5, 13, 54–91, 100, 116, 119, 120, 123, 124, 131, 140, 150–51, 178, 205, 214, 215, 216, 217, 219 American management, Woodford clashes with 78–80 birth of/Invesco Perpetual merger 54–8 Financial Conduct Authority investigates rule violations at 88–90, 93, 94, 112, 208 financial crisis and 63–4 Kent County Council investment in 4–5, 8, 106 Leadsom at 65–6, 78 Newman at 66–8, 79, 80, 85–7 private or unquoted companies, Woodford develops appetite for stakes in 71–3, 83–5, 87, 94, 96, 126 Sanlam report and 82–3 SJP and 83–4, 85–6, 88, 90–91, 103–5, 111–12, 115, 214–15 Woodford departs 13, 78, 86–91, 92, 93, 94, 97–8, 99, 101, 103–4, 105, 106, 107, 108, 109, 110, 111–13, 115, 142, 191 Woodford interest in small, science-based companies 68–71 Woodford IM launch and 112–13 Woodford private interventions and public outbursts while at 73–4, 80–82 Woodford team at 61–3, 65–7, 78–80, 94, 146, 153, 161, 189 Investment Association 153, 177 investment sector 16–17, 55, 114–15, 176, 224 Investors Chronicle 33 IP Group 70, 133, 146–7 ISAs 40, 49, 51, 51, 108, 115 Jenkin, Bernard 65 Jobs, Laurene Powell 128, 204 JPMorgan 53, 115 Jupiter 57, 58, 97, 112–13, 145, 146, 147 Kay, John 77 Kay Review 77–8, 81 Kent County Council 1–9, 86, 106, 169, 173–4, 182, 183–4, 187, 189, 211–12 Kier 174–5, 178, 179 King, Ian 73–4 Labour Party 24, 26, 49, 81, 202 Ladbrokes 33 Lamacraft, Paul 94, 116, 123 Lamacraft, Ross 94, 184 Lamacraft, Stephen 94, 98, 116, 123 Lamb, David 104, 142–3, 173, 178 Lamont, Norman 17 Landsbanki 3–4 Langan’s Brasserie, Mayfair 115 Lansdowne Partners 146, 147 Lansdown, Stephen 15, 151 Lawson, Nigel 17, 26, 28, 40 Leadsom, Andrea 65–6, 78 Legal & General 113–14 Legg Mason’s Capital Market Value Trust 41 Lehman Brothers 64 Le Poidevin, Fiona 180 Link Fund Solutions 152, 156, 192 Equity Income and Patient Capital asset swap deals and 162–3, 211 Equity Income investors, fees charged to 179 Equity Income, plans to replace Woodford as manager of 189–90 Equity Income, suspends trading in 8–9, 174–5, 176–7, 182, 184, 188, 194, 195, 196–7, 211, 212 Equity Income, winds down and lines up PJT and BlackRock to sell assets 197–9, 200, 201, 203, 206–7, 218–19 FCA investigation into suspension of Equity Income and 185, 186, 187, 195, 204–5, 208, 209, 210–11 FCA monthly discussions with over liquidity of Equity Income fund 152, 165–7 Income Focus fund, hands over to Standard Life Aberdeen 205 Income Focus fund, suspends trading in 201–2 Industrial Heat, valuation of 194–5, 204 International Stock Exchange (Guernsey), Woodford IM investment listings and 151, 165–7, 211 Patient Capital board orders to revalue unquoted assets 184, 194–5, 204 Project Oak (plan to package up unquoted Equity Income holdings and sell them) 185, 195 see also Capita Lloyds Bank 63 local authority pension funds 1–9, 86, 106, 169, 173–4, 182, 183–4, 187, 189, 211–12 London Business School 25 London Capital & Finance 185, 208 Lynch, Peter 41 Mackie, Terry 202 Magellan fund 41 Maidenhead Grammar School 19–21, 25, 219 Maidenhead RFC 25 Major, John 17 Makin, Louise 130–31 M&G 49, 52, 100, 153 Marimastat 69 market timing scandal 59–60, 90 Maxwell, Robert 24–5, 55 May, Theresa 65, 134 McDonnell, John 202–3 McGlashan, Scott 35, 57 Medoff, Marshall 84–5 Mercer 106 Mercury Asset Management 61 Merrill Lynch 53 Midl, Karl 174, 175, 189, 190, 197, 198 Miliband, Ed 81–2 Millar, Andrew 68–9 Miller, Bill 41 Mirror Group Newspapers 24, 55 Mishcon de Reya 93 mis-selling scandals 15 Morgan, John Pierpont 115 see also JPMorgan Morgan, Nicky 180, 181, 182–3, 186–7, 191, 192 Morningstar 88, 172–3 Mullen, Mark 191 Mustoe, Nick 78–9, 87 Myners, Paul 138–9 Neptune 97 New Labour 49 Newman, Craig 66–7, 79, 80, 85–7, 93, 94, 95, 96, 98–9, 106, 113, 114, 116, 117, 121, 126–7, 134, 137, 138, 159, 170, 189, 211, 217 bonuses, decision to scrap within Woodford IM and 138, 139 character 66–7, 126, 148 childhood 66–7 comeback plans 206, 219 direct relationship with investors in Equity Income fund, envisages 147–8 Invesco Perpetual career 66–7, 79, 80, 85–7 money, obsession with 66–7, 139, 182 Oakley and 93 pay/dividend payments 139, 142, 154–5, 168, 193–4, 201, 207–8, 217 property projects 154–5, 193 Rudd and 181–2 sales staff bonuses and 121 Smith/Hamilton warnings over Woodford investments, reaction to 125, 126, 127 suspension of Equity Income fund and 195, 196, 197 ‘violent transparency’, commitment to 119, 150, 152, 182 winding down of Equity Income fund and 197, 198, 200, 205 Woodford departure from Invesco Perpetual and 79, 80, 85–7 Woodford, ingratiates himself with 67–8 Woodford IM origins/launch and 93, 94, 95, 96, 97, 98, 99, 101, 103, 104, 106, 108–9, 113, 114, 116, 117–18, 119 Woodford Patient Capital Trust and 129–30 NewRiver Reit 163, 167, 178, 188 New Star 58 Newton 57 NEX exchange 164 Nexeon 130–31 N.

A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History by Diana B. Henriques

Alan Greenspan, asset allocation, bank run, banking crisis, Bear Stearns, behavioural economics, Bernie Madoff, Black Monday: stock market crash in 1987, break the buck, buttonwood tree, buy and hold, buy low sell high, call centre, Carl Icahn, centralized clearinghouse, computerized trading, Cornelius Vanderbilt, corporate governance, corporate raider, Credit Default Swap, cuban missile crisis, Dennis Tito, Edward Thorp, Elliott wave, financial deregulation, financial engineering, financial innovation, Flash crash, friendly fire, Glass-Steagall Act, index arbitrage, index fund, intangible asset, interest rate swap, It's morning again in America, junk bonds, laissez-faire capitalism, locking in a profit, Long Term Capital Management, margin call, Michael Milken, money market fund, Myron Scholes, plutocrats, Ponzi scheme, pre–internet, price stability, proprietary trading, quantitative trading / quantitative finance, random walk, Ronald Reagan, Savings and loan crisis, short selling, Silicon Valley, stock buybacks, The Chicago School, The Myth of the Rational Market, the payments system, tulip mania, uptick rule, Vanguard fund, web of trust

Surprisingly, no one questioned whether the scandal’s revelations about the flawed audit trail in Chicago cast doubt on the reliability of the trade data used in the various studies exonerating the futures markets after Black Monday. The crash seemed too distant to be relevant to the hot new scandal. In reality, the carnage from the crash had still not been repaired by January 1989. The S&P 500 index would not regain its pre-crash peak until July 1989, fully six hundred days after Black Monday. If you bought stocks in August 1987, your portfolio did not move back into the black for almost two years. By every measure, the markets were still languishing a year after the crash. Despite those facts, though, the myth of a “crash without consequences” was already taking shape. * * * PRESIDENT GEORGE H. W.

…

The argument was far from over: Ibid. something of a legislative plaything: Ibid., p. 1118. the concern quickly spread to other financial markets: Robert A. Bennett, “A Growing Case of Market Jitters,” New York Times, May 25, 1984, p. D1. A savvy Paine Webber executive on the NYSE trading floor: Tim Metz, Black Monday: The Stock Market Catastrophe of 1987 … and Beyond (New York: William and Morrow, 1988), pp. 69–71. The trader was Arthur D. Cashin Jr., who was also an NYSE floor governor. Cashin called his booklet “A Layman’s Guide to Program Trading” and boasted (according to Metz, on p. 70) that it became “the most copied document on Wall Street for four months” after he started circulating copies of it in December 1984.

…

When Ruder presented the SEC’s immense report on Black Monday to the Senate Banking Committee on February 3, 1988, Senator Gramm was in rare form: “Anybody’s that’s got a staff that could write that [report] does not have too small a staff. In fact, I would argue that that would be a fertile area to look at staff reduction. Also, a 26-page executive summary? Maybe you need a chief executive summary that summarizes the summary. [Laughter.]” (See “‘Black Monday’: The Stock Market Crash of October 19, 1987,” Hearings Before the Senate Committee on Banking, Housing, and Urban Affairs, 100th Congress, 2nd Sess., February 2–5, 1988, p. 133.) “we’re trying to put some thoughts out on the table”: Nash, “A Chill over the Hot New ‘Hybrids.’” The harshest rebuttals came from Gramm’s fellow regulators: Harris, “The CFTC and Derivative Products,” pp. 1126, 61ff.

Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market by Scott Patterson

Alan Greenspan, algorithmic trading, automated trading system, banking crisis, bash_history, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, butterfly effect, buttonwood tree, buy and hold, Chuck Templeton: OpenTable:, cloud computing, collapse of Lehman Brothers, computerized trading, creative destruction, Donald Trump, financial engineering, fixed income, Flash crash, Ford Model T, Francisco Pizarro, Gordon Gekko, Hibernia Atlantic: Project Express, High speed trading, information security, Jim Simons, Joseph Schumpeter, junk bonds, latency arbitrage, Long Term Capital Management, machine readable, Mark Zuckerberg, market design, market microstructure, Michael Milken, military-industrial complex, pattern recognition, payment for order flow, pets.com, Ponzi scheme, popular electronics, prediction markets, quantitative hedge fund, Ray Kurzweil, Renaissance Technologies, seminal paper, Sergey Aleynikov, Small Order Execution System, South China Sea, Spread Networks laid a new fibre optics cable between New York and Chicago, stealth mode startup, stochastic process, three-martini lunch, Tragedy of the Commons, transaction costs, uptick rule, Watson beat the top human players on Jeopardy!, zero-sum game

Maschler and his band of no-holds-barred traders forcibly ground out markets for the small stocks and started sending through hundreds, then thousands of orders a day. Everything was running smoothly. Maschler’s aggressive tactics worked well as the market rocketed higher in the late summer and fall of 1987. Then, disaster struck. Black Monday: October 19, 1987, the worst one-day collapse in the history of the U.S. stock market. Firms such as Datek were left flapping in the wind as the stocks they traded plunged in value. As the market imploded, Maschler and his traders tried to salvage their positions, repeatedly picking up the phone to call Nasdaq dealers and unload their stocks.

…

EVEN while Nasdaq’s old guard stuck their heads in the sand, a number of younger Nasdaq employees could see the world shifting beneath their feet. The ECNs were there to stay. In a scramble to prepare, Nasdaq organized a group of experts to study the impact the new rules—slated to go live January 10, 1997—would have on its business. An economist named Dean Furbush led the group. Ever since Black Monday in 1987, when he was an economist at the SEC, Furbush had been knee-deep in arcane market structure issues. After leaving government work in the early 1990s, he’d spent three years at Economist Inc., a Washington, D.C., think tank. One of his first jobs was to consult for Nasdaq on the Christie-Schultz study.

…

The NYSE for years had boasted of huge investments in technology as it struggled to keep pace with competitors. But as Archipelago’s computer experts dug into the spaghetti tangle of the Big Board’s computers, they found a complete mess. A Rube Goldberg machine stood behind the world’s most famous stock exchange. The latest software was running on computers installed around the time of Black Monday in 1987. The New York Stock Exchange is held together by chicken wire and bubblegum, Putnam’s team thought. Putnam and his partner Paul Adcock, along with Archipelago’s top tech specialists, poured themselves into the job, working on the integration even before the merger was finalized in early March 2006.

Cashing Out: Win the Wealth Game by Walking Away by Julien Saunders, Kiersten Saunders

barriers to entry, basic income, Big Tech, Black Monday: stock market crash in 1987, blockchain, COVID-19, cryptocurrency, death from overwork, digital divide, diversification, do what you love, Donald Trump, estate planning, financial independence, follow your passion, future of work, gig economy, glass ceiling, global pandemic, index fund, job automation, job-hopping, karōshi / gwarosa / guolaosi, lifestyle creep, Lyft, microaggression, multilevel marketing, non-fungible token, off-the-grid, passive income, passive investing, performance metric, ride hailing / ride sharing, risk tolerance, Salesforce, side hustle, TaskRabbit, TED Talk, Uber and Lyft, uber lyft, universal basic income, upwardly mobile, Vanguard fund, work culture , young professional

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z A Abrams, Stacey, 133 acorns.com, 131 actively managed funds, 160, 166, 171 advertising, exposure to, 210 affiliate marketing, 124, 136 Ally Bank, 167 Amazon, 137 Amazon Fresh, 131 American Dream, 128, 211 American Psychological Association (APA), 199 anticipation of rewards, 194 arbitrage (flipping goods), 134–35 The Art of the Sale (Broughton), 138 attunement, emotional and conversations about debt, 195, 196 as dance (interactive pattern), 189–90 dynamic state of, 198 and pause button in conversations, 203 and reframing practice of saving, 193 and scheduling conversations, 202 See also couples audiobooks, 127 “Automation and the Future of the African American Workforce” (McKinsey), 126 automation as threat to employment, 125–26, 128 avalanche method of paying off debt, 79, 80 B Bach, David, 155 Baldwin, James, 36 bankbonus.com, 131 banks and the Black tax, 40 cash bonuses from, 130–31 co-signing for loans from, 196 paying off loans from, 82 rounding-up programs at, 118–19 Barnes, Kendra, 83–85, 86–87, 95 basic needs, meeting, 56–60 bear markets, 173–74 belief in a better life, 48 belongings, identities tied to, 59 Betterment, 167 Big 3 (housing, transportation, food), 57, 59–60, 72 blackfreelance.com, 133 Black individuals and families and automation threat to employment, 126, 128 and Black American Dream, 12 and Black buying power, 52–55 and Black excellence, 20, 21, 29 and Black tax, 39–40 declining net worth of, 54 and degrees earned by Black women, 76 and depictions of wealth, 33–34 and inequality in the workplace, 10, 24, 31 lack of advancement opportunities for, 24, 28–29, 31 median wealth prediction for, 3, 53–54 millionaires among, 29 student loan debt of, 76–77 technological literacy among, 128 untangling religious faith from civic faith, 36–37 Black Monday (1987), 173 blockchain technology, 129 blogs and blogging, 6, 108–9, 143, 145 Bogle, Jack, 167 bond index funds, 168 books/ebooks, 64, 127, 136 brokerage accounts. See investment/brokerage accounts Broughton, Philip Delves, 138 Browning, Chris, 218 budgeting, importance of, 16 Buffett, Warren, 163 Bureau of Labor Statistics, 59 burnout, 31–33 Business Insider, 32, 76 Butler, Jason, 135 buying power, Black, 52–55 C cable television, 64 CampFI, 37–38, 212, 219 car dealerships, 61 career, fifteen-year, 74–102 caveats regarding, 75–76 rules and richuals for, 82, 89–90, 95, 101–2 and skeptics, 99–100 years 1–5: paying off debt, 76–82 years 6–10: building an income portfolio, 83–90 years 11–15: building an escape hatch, 90–95 “The Case Against Tokenism’ ” (King), 41 cash bonuses from banks, 130–31 Center for American Progress, 165 certainty in financial markets, lack of, 111, 114–16 children and childcare costs, 30 and fifteen-year careers, 75, 76 and 529 plans, 168, 205 funding investment accounts for, 94 choices, right to make own, 100 churches, Black, 36 civil institutions, faith in, 36–37 Clahar, Erica “Umi,” 221–22 community, time to dedicate to, 25 comparison, avoiding trap of, 224 compound interest and author’s early investments, 155 and investment fees, 172 power of, 67–68, 140, 172 confidence and the “Dwayne Johnson Effect,” 112–13 and FI community, 209 and identifying strengths, 89–90 and investing expertise, 116 conflict in relationships avoidance/fear of, 170, 195 from competing objectives, 42 as a constant, 198, 199 in couples, 11, 189–90, 190 and 51 percent rule, 198 and fighting about money, 198, 199 normalizing, 189 as opportunity for growth, 15 connectedness, false sense of, 25 consumerism and spending as addiction/compulsion, 44–45, 210 and authors’ first conversation about money, 179–88 and Black buying power, 52–55 breaking the cycle of, 45 and budgeting, 16 conversations about, 190–93 in excess of income, 210 and Fast Spenders personality type, 48–50, 51, 52, 61, 69 and identities tied to belongings, 59 and labeling people as “spenders,” 191 and “lifestyle inflation,” 39, 61 and living below your means, 72 of Middle personality type, 50–51 and purpose of income, 51–52 and stealth wealth, 38, 39 See also expenses; frugality content creators, 141–45 conversations about money about debt, 195–96 about future plans, 193–94 about saving, 193–94 about spending, 190–93 authors’ first, 11, 179–88 and constraints of labels, 191–92 exercising curiosity in, 192 and normalizing conflict, 189 pause button in, 202–3 scheduling short but frequent, 202 using “I” statements in, 194 using “tell me more” prompt in, 196–97 couples, 179–203 authors’ first conversation about money, 11, 179–88 and backgrounds of individuals, 180–81, 184–85, 187, 188 challenges faced by, 201 conversations about debt, 195–96 conversations about future plans, 193–94 conversations about saving, 193–94 conversations about spending, 190–93 and divorces, 75, 199, 201, 234 emotional attunement in, 189–90, 193, 195, 196, 202 and expectations for happiness, 200–201, 202 and 51 percent rule, 200–201, 202, 231 and fighting about money, 189, 198, 199 interaction patterns in, 189 and money-related conflicts, 189 rules and richuals for, 202–3 shared goals of, 192–93 courage to accelerate your income, 139 and the “Dwayne Johnson Effect,” 112–14 and making financial progress, 108, 111 and paying yourself first, 118 small acts of, 117–18 courses, digital, 135–37 COVID-19 pandemic changes brought by, 228–29 and FI community, 231–33 lessons learned from, 15, 229–31 and Umi Feeds (nonprofit), 222 unknown financial impact on Black America, 54 Craigslist, 134 credit cards and authors’ first conversation about money, 182–83, 186 cash bonuses from, 131 debt from, 4 high balances on, 45 and Jannese’s success story, 123, 124 paying off, 6, 82 credit scoring, 3 cryptocurrency, 114, 129, 174 curiosity, 116, 192, 196–97 D debt and authors’ first conversation about money, 179–88, 195, 197 authors’ freedom from, 6, 11 avalanche method of paying off, 79, 80 conversations about, 195–96 of couples, 195–96 and living paycheck to paycheck, 77–78 paying off, 6, 76–82, 99, 195–96 and rewarding yourself, 81–82 snowball method to paying off, 80–81, 81 student loans, 4, 6, 59, 76–77, 123, 124, 210 treated like moral failing, 195 See also credit cards Delish D’Lites, 123–24 Deutsche Bank, 128 digital divide, 128.

Fed Up!: Success, Excess and Crisis Through the Eyes of a Hedge Fund Macro Trader by Colin Lancaster

"World Economic Forum" Davos, Adam Neumann (WeWork), Airbnb, Alan Greenspan, always be closing, asset-backed security, beat the dealer, Ben Bernanke: helicopter money, Bernie Sanders, Big Tech, Black Monday: stock market crash in 1987, bond market vigilante , Bonfire of the Vanities, Boris Johnson, Bretton Woods, business cycle, buy the rumour, sell the news, Carmen Reinhart, Chuck Templeton: OpenTable:, collateralized debt obligation, coronavirus, COVID-19, creative destruction, credit crunch, currency manipulation / currency intervention, deal flow, Donald Trump, Edward Thorp, family office, fear index, fiat currency, fixed income, Flash crash, George Floyd, global macro, global pandemic, global supply chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Growth in a Time of Debt, housing crisis, index arbitrage, inverted yield curve, Jeff Bezos, Jim Simons, junk bonds, Kenneth Rogoff, liquidity trap, lockdown, Long Term Capital Management, low interest rates, low skilled workers, margin call, market bubble, Masayoshi Son, Michael Milken, Mikhail Gorbachev, Minsky moment, Modern Monetary Theory, moral hazard, National Debt Clock, Nixon triggered the end of the Bretton Woods system, Northern Rock, oil shock, pets.com, Ponzi scheme, price stability, proprietary trading, quantitative easing, Reminiscences of a Stock Operator, reserve currency, Ronald Reagan, Ronald Reagan: Tear down this wall, Sharpe ratio, short selling, short squeeze, social distancing, SoftBank, statistical arbitrage, stock buybacks, The Great Moderation, TikTok, too big to fail, trickle-down economics, two and twenty, value at risk, Vision Fund, WeWork, yield curve, zero-sum game

You have to be patient. When bubbles burst, it’s complete insanity: Prices plunge, liquidity disappears, markets break, and regulators step in with crazy rules. Then, margin calls, bankruptcies, suicides…. * The markets are still plummeting. We have now had the fastest sell-off since Black Monday in 1987. Black Monday was the largest one-day percentage drop in history. The Dow fell 508 points, which was over 22%. Back in ‘87, I was still in Detroit, just getting out of high school. I didn’t understand what a 22% crash meant. We didn’t talk much of central banks back then. I couldn’t even imagine a million dollars, let alone trillions and trillions.

Retire Before Mom and Dad by Rob Berger

Airbnb, Albert Einstein, Apollo 13, asset allocation, Black Monday: stock market crash in 1987, buy and hold, car-free, cuban missile crisis, discovery of DNA, diversification, diversified portfolio, en.wikipedia.org, fixed income, hedonic treadmill, index fund, John Bogle, junk bonds, mortgage debt, Mr. Money Mustache, passive investing, Ralph Waldo Emerson, robo advisor, The 4% rule, the rule of 72, transaction costs, Vanguard fund, William Bengen, Yogi Berra, Zipcar

Yet as bad as things were, let’s put 2007-2009 into perspective. The stock market has seen some really tough times: The stock market crash of 1929 The Great Depression WWII The Korean War The Bay of Pigs and the Cuban Missile Crisis The Vietnam War The Oil Embargo Interest rates near 20% (1980-1982) Black Monday (1987—market crashes 22.6% in one day) Dot-Com Bubble 9/11 Here’s the point. We don’t know what the next crisis will be. We also don’t know when it will occur. But we know one thing for sure. There will be a next one. And a next one. And a next one. So how do we prepare mentally and emotionally to stand our ground during the next stock market free-fall?

Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition by Kindleberger, Charles P., Robert Z., Aliber

active measures, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bonfire of the Vanities, break the buck, Bretton Woods, British Empire, business cycle, buy and hold, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, Corn Laws, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-border payments, currency peg, currency risk, death of newspapers, debt deflation, Deng Xiaoping, disintermediation, diversification, diversified portfolio, edge city, financial deregulation, financial innovation, Financial Instability Hypothesis, financial repression, fixed income, floating exchange rates, George Akerlof, German hyperinflation, Glass-Steagall Act, Herman Kahn, Honoré de Balzac, Hyman Minsky, index fund, inflation targeting, information asymmetry, invisible hand, Isaac Newton, Japanese asset price bubble, joint-stock company, junk bonds, large denomination, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Mary Meeker, Michael Milken, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, price stability, railway mania, Richard Thaler, riskless arbitrage, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, special drawing rights, Suez canal 1869, telemarketer, The Chicago School, the market place, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, very high income, Washington Consensus, Y2K, Yogi Berra, Yom Kippur War

The technique was designed to hide the large losses of a few banks since the fear was that accurate news would further reduce depositor confidence.36 Some commodity and financial markets set daily limits on the maximum change in prices; when the limit is reached, trading is suspended for the rest of the day. Specialists in individual stocks have often taken a ‘time out’ whenever the imbalance between the buy orders and the sell orders has been exceptionally large. This ‘circuit breaker’ was recommended for US stock markets after the meltdown of Black Monday, 19 October 1987. The proposal for the New York Stock Exchange was to postpone trading for a stated interval – such as twenty minutes – in those stocks whose prices increased above or declined below the limit. Time has been gained by moratoriums on payment of all debts or on particular types of obligations, such as bills of exchange that have less than two weeks to run.

…

They enabled the New York banks to take over the call loans of out-of-town banks but at the cost of reducing the amount of credit available for purchases of stocks, commodities, and real estate, which led to declines in their prices and unleashed the depression.79 The timing of the Federal Reserve Board under the chairmanship of Alan Greenspan in the Black Monday crash of October 1987 was impeccable, as was the help for the US capital market when Long-Term Capital Management collapsed in September 1998. Timing presents a special problem. As the boom mounts to a crescendo, it must be slowed without precipitating a panic. After a crash has occurred, it is important to wait long enough for the insolvent firms to fail, but not so long as to let the crisis spread to the solvent firms that need liquidity – ‘delaying the death of the strong swimmers’, as Clapham put it.80 In a speech during the debate on the indemnity bill on 4 December 1857, Disraeli quoted the leader of an unnamed ‘greatest discount house in Lombard Street’ who said that ‘had it not been for some private information which reached him, to the effect that in case of extreme pressure there would be an interference on the part of the Government, he should at that moment have given up the idea of struggling any further, and [that] it was only on that tacit understanding that he went on with his business.’81 Questions could be raised about the equity of private information and of tacit understandings for insiders but not outsiders.

…

Schaaffhausen Bank, Cologne 162–4, 218 ABN-AMBRO 120–1 accommodation (finance) bills 52, 62, 72, 73, 226 Wisselruiti 62, 66, 159 accountancy firms (CPAs) 120, 149–50 adaptive expectations theory 39 Adelphia Communications 20, 119, 134–5, 144 adjustable-rate mortgages (ARMs) 259 AIG 24, 87, 121, 185 Åkerman, Johan 158, 161, 162, 164–5 Albania 52, 109, 264, 268–9 Aldrich Commission, 1910 (US) 219 Alliance Capital 137 Allied Irish Bank 124 Alsace, 1827–28 crisis 161, 204 American Civil War, 1861–65 124, 164 see also United States American Express 144 Ames, Oakes 139 Amsterdam 152, 159–60, 163, 224 1772 crisis 159–60 1799 crisis 210–11 see also Bank of Amsterdam; Holland Arthur Andersen 22–3, 120, 131, 139 André, Alfred 165 Andréadès, A. 50, 226, 306n44 Angelis, Tino De 122 arbitrage/arbitrageurs 21, 31, 155 Argentina 21, 24, 278 1980s crisis 98–9, 234 2001 crisis 156, 233 Baring crisis, 1890 and 100, 166, 207 art, as an investment 12, 20 Arthur Andersen 22, 23, 120, 131–2 Ashton, T.S. 58, 72, 214 Asian Financial Crisis, 1997 1, 3, 4, 8, 27–8, 85, 170, 184, 186, 223, 233, 278 IMF and 104, 234 asset-backed securities (ABS) 74, 149 asset price bubbles 2, 56, 108, 170–1, 173, 177, 178, 183, 187–8, 229, 285 1985–89 (Japan) see Japan 1985–89 (Nordic countries) 1, 5, 27, 157 1990s (United States) see United States 1997 Asian Financial Crisis see Asian Financial Crisis international contagion of 154ff in NASDAQ stocks see United States, 1990s asset price bubble see also bubbles asset prices 2, 13, 14, 15, 25, 30, 88, 109, 112, 115 economic activity and 107–8 monetary policy and 115–16 see also real estate prices Australia 37, 124, 164, 168, 307n54 gold discoveries 60, 164 Austria (Austria-Hungary) 21, 63 1869 crisis 165 1873 crisis (krach) 82, 151, 165–6 1931 crisis 168, 252, 253 Baubanken 63 Austrian National Bank 82 Ayr Bank 58, 81, 96, 142 Babson, Roger 90 Bagehot, Walter 41, 67, 84, 214, 216, 239–40, 263, 304–5n22, 327n41 on lenders of last resort 223, 224, 225, 226, 227, 228, 235, 243, 253 on Malthus 51 Baker, James 256 Ball, Sir John 73 Balzac, Honoré de 55, 141, 144 Banca d’Italia 167 Bank Act 1844 (England and Wales) 81, 82, 91, 102, 206 Bank Act 1845 (Scotland) 81 Bank of America 4, 86, 132, 195, 262–3 Bank of Amsterdam 66 Bank of Credit and Commerce International (BCCI) 124–5 Bank of England 16, 66, 72, 77, 83, 142, 211 1763 crisis 235 1772 crisis 96, 224, 226, 235 1836–39 crisis 82, 236 1890 Baring crisis and 100–1, 166, 206–7, 208, 238 1995 Baring crisis and 16, 123–4 and Northern Rock 86 discount rates 82, 102, 103, 196, 216, 225, 226, 234 East India Company and 159 as lender of last resort 214, 217, 235 South Sea Bubble and 104, 200–1 ‘W banks’ and 103, 226 bank failures 3, 4, 168–9, 232, 278 Bank of France 51, 89, 91, 92, 93, 204, 217, 218, 225, 235–6, 241, 245, 246, 249 Bank of England, loans to 105, 162, 236, 237, 238–9 bank holidays 23, 191–3, 201, 202 Bank for International Settlements (BIS) 242, 243, 244, 249–50, 251, 252, 254 Bank of Japan 22, 36, 102, 113, 114, 115, 173, 176, 188, 284, 285, 289 Bank of Lending, Amsterdam 66 Bank of Mexico 5, 6, 179, 253, 285–6 Bank of New York 82, 150 Bank of Thailand 6, 180, 286 Bank of the United States 44, 219, 224 Bankers Trust Co. 150 Banking School, on money supply 65ff, 92, 102, 215–16 banking system 78, 80, 198 central banks 15, 19, 44, 64, 77–8, 81–2, 83, 90, 115, 178, 191 clearing-houses 63, 203–4 investment banks 4, 9, 23, 56, 71, 74, 86, 119, 130, 149–51, 182, 183, 194, 257ff, 300–1 swindles/fraud and 117ff see also individual banks bankruptcies 15, 16, 59, 85–6, 105, 133, 148, 151, 157, 162, 164, 180 Banque Adam, Paris 168 Banque de Crédit Maritime, Trieste 76 Banque Générale (Banque Royale) 62 Banque du Havre 217 Banque de Lyon et de la Loire 75, 76, 146, 311n38 Banque Oustric, Paris 168 Banque de Paris et des Pays Bas (Paribas) 77 Banque de Savoie 218 Baring Brothers 236 Baring crisis, 1890 21, 100, 166, 200 Baring crisis, 1995 16, 123–4 Baring loan, 1819 55 Baruch, Bernard 100 Basel Agreement, 1961 249 Baubanken (Austria) 63 Bear Stearns 25, 85ff, 121, 192, 222, 262, 263, 267, 297 Belmont, Auguste 235 Benedict, Ruth 59 Bernanke, Ben 222, 223 Bernard, Samuel 159 Beyen, J.W. 53 Biddle, Nicholas 162 bills of exchange 19, 62, 63, 64, 66, 71ff, 78, 202, 224, 235, 310n21 bimetallism 19, 54 Black Friday, 1745 201 Black Friday, 1866 165 Black Friday, 1869 41 Black Monday 1987 202, 227 Black Thursday, 1929 see Great Depression Blanqué, Pascal 81 Bleichröder, Gerson von 144 Blodgett, Henry 22, 119, 137–8, 151 Blunt, Charles 151 Blunt, John 142, 143, 144 Boesky, Ivan 152 Böhme, Helmut 237 bonds 1, 5, 20, 45, 50, 57, 89, 95, 98, 100, 130 Brady 177, 178, 189, 285 junk 20, 45, 70–1, 128, 129 Panama Canal 219 Bonelli, Franco 167, 222, 240 Bontoux, Eugène 74–5, 76, 100 Bouchard, Charles 151 Boutwell, George S. 219 Bouvier, Jean 75 Brady Bonds 177, 178, 189, 285 Braine, G.T. 226 Braudel, Fernand 41 Brazil 45, 48, 96, 156, 160, 253 1982 crisis 94, 157 1998 depreciation 98 Brennan, Robert B. 47, 138 Bretton Woods system 171, 187, 246ff, 250, 256, 283 brewery companies 49 Brunswick Bank 55 Bubble Act 1720 (GB) 53, 57, 88 bubbles 59, 74, 84ff, 96, 102, 108, 111, 113, 121, 126, 142–8, 170ff, 185ff asset price see asset price bubbles Mississippi Bubble, 1720 57, 158ff South Sea see South Sea Bubble, 1720 see also crises; manias bucket/boiler shops 46–7, 144 Buenos Aires Drainage and Waterworks Company 100 Burj Dubai 107 Caldwell, Rogers 44 call money 63, 69, 74–5, 80 canals 11, 28, 55, 58, 62 Canary Capital 137 capital flows 31, 162, 247–8 cross-border 2, 157, 170, 186, 187, 190, 230, 231, 248, 276, 277, 279, 280, 281, 282, 290 venture capital 12, 56, 181, 182, 183 see also money movements Carswell, John 47 Cassenscheine (Austria) 63 central banks 19, 21, 64, 77–8, 81–2, 83, 90, 115, 191, 224, 226 cooperation between 193, 243 and the ‘Bagehot doctrine’ 263 and Basel Agreement 249 and the ‘lender of last resort’ 213ff, 276 and international money flows 249, 250 see also individual banks certificates of deposit (CDs) 63, 65, 138 Chalmers, George 159 Chicago 46 real estate booms 111–12 Chicago Mercantile Exchange 77 Chicago School see monetarists China 62–3, 85, 229, 285 Citibank/Citicorp/Citigroup 43, 138, 151, 193 City of Glasgow Bank 155 Clapham, Sir John 41, 48, 142, 164, 211, 225, 226, 227, 235, 236, 238 Clark, Edward 197 clearing-house certificates 203ff Clifford & Co. 58 cobweb model 48 Cole, Arthur H. 320n21 collateralized mortgage obligations (CMOs) 258–9 commodity prices copper 43, 51 increases in 3, 8, 21, 31, 50 oil 3, 4, 13, 125, 251 stability of 98–9 volatility in 1, 3, 50, 51 Compagnie des Indes 158 Compagnie d’Occident 142 Comptoir d’Escompte (France) 51, 166, 218 conditionality 252 condominiums, investment in 12, 45 consumption theory 49 contagion domestic 20 international 1, 20–1, 154ff; of asset price bubbles 170ff transmission mechanisms 156ff Continental Illinois Bank 16, 94, 103, 210 Cooke, Jay 21, 44, 50, 165–6 copper prices 43, 51 Corn Laws (GB) 100, 164 corn prices 100 corruption see swindles/fraud corso forzoso (Italy) 165 cotton 155–6 CPAs (certified public accountants) 149–50 crashes see crises Crédit Agricole (France) 164 Credit Anstalt, Vienna 55, 142, 168, 243 credit-default swaps (CDSs) 121, 264 credit expansion 62ff, 69 destabilization and 82–3, 84–5 Great Depression and 78–80 impact of 290–4 manias and 12, 13, 14, 28, 33–5, 46 new bases for 62ff swindles/fraud and 117–53 Crédit Foncier (France) 164 Credit Foncier and Mobilier (GB) 97 Crédit Lyonnais 3, 218 Crédit Mobilier (France) 164 credit-rating agencies 149–50, 260 Credit Suisse First Boston 152 Crimean War, 1854–56 50–1, 164 crises 1–8 1763 54, 58, 62, 66, 73, 96, 152, 159–60, 196 1772 58, 96, 142, 160, 224 1808–9 48, 101 1816 160–1 1825 16, 58, 83, 88, 92, 102, 105, 161, 196, 199–200, 217 1836–39 102, 103, 155, 161–2, 206, 226 1847 58–9, 91, 92, 96–7, 100, 161, 162, 195, 196–7, 215, 225 1857 51, 73, 82, 89, 92, 101, 105–6, 142, 145, 147–8, 164, 197, 203, 205–6, 219, 226, 227–8, 239 1864–66 82, 97, 164 1873 21, 52, 82, 89, 97, 101, 112, 139, 144, 165–6, 197–8, 202, 220, 228, 238 1884 198 1907 21, 63, 82–3, 97, 167, 202 1929 see Great Depression 1980s 1, 3, 4, 7, 34, 98 1987 (Black Monday) 202, 227 1990s/2000 1–3, 4, 5–6, 7, 24, 85, 170–1 2006–2009 1, 7–8, 9, 10, 85, 86, 108, 116, 120, 170, 191, 200, 210, 222, 257–72, 286–8, 297–8, 299, 301 causes of 21, 27, 32–3, 53, 99–104, 154–6, 157–8 currency crises 4, 11, 231; see also individual countries as cyclical 26 development of 84 financial distress and 84–5, 90–4 historical survey 234–9 international contagion of 1, 21, 154–6 Minsky model of 18–19, 26–36 modern prevalence of 233–4, 273ff policy implications 15–18 warnings of 84–6 see also bubbles; manias; panics crisis management 15–18, 191–212 by central banks 191, 235–9 domestic 23–4, 213ff interventionist 199–212 by lender of last resort 198–9 domestic 213ff international 229ff monetarist view on 19, 199–200 non-interference 191–3 crony capitalism 126, 253 Countrywide Financial 4, 86, 262–3, 270 currency board arrangements 98 currency crises 4, 11, 231 see also individual countries Currency School on money supply 19, 65ff Currie & Co. 207 Darmstäder und Nationalbank (Danatbank) 142, 168, 244 Davillier, J.

The Revolt of the Public and the Crisis of Authority in the New Millennium by Martin Gurri

Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, anti-communist, Arthur Eddington, Ayatollah Khomeini, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Burning Man, business cycle, citizen journalism, Climategate, Climatic Research Unit, collective bargaining, creative destruction, crowdsourcing, currency manipulation / currency intervention, dark matter, David Graeber, death of newspapers, disinformation, Eddington experiment, en.wikipedia.org, Erik Brynjolfsson, facts on the ground, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, Great Leap Forward, housing crisis, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of writing, job-hopping, military-industrial complex, Mohammed Bouazizi, Nate Silver, Occupy movement, Port of Oakland, Republic of Letters, Ronald Reagan, scientific management, Skype, Steve Jobs, the scientific method, The Signal and the Noise by Nate Silver, too big to fail, traveling salesman, University of East Anglia, urban renewal, War on Poverty, We are the 99%, WikiLeaks, Yochai Benkler, young professional

Greenspan’s appointment came in August. Two months later, on Black Monday, October 19, 1987, the stock market dropped over 500 points. A trillion dollars of held wealth disappeared overnight. The 22 percent one-day decline was the largest in history – by comparison, the stock market crash which preceded the Great Depression had amounted to less than 12 percent. On the following day – “Terrible Tuesday” – stocks of many famous companies stopped trading on the New York Stock Exchange. They could not find buyers. 6.2 Big dip: Black Monday, 1987[117] No one, inside the Fed or out, had any idea why the markets had tumbled.

The Quants by Scott Patterson

Alan Greenspan, Albert Einstein, AOL-Time Warner, asset allocation, automated trading system, Bear Stearns, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Bernie Sanders, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, Blythe Masters, Bonfire of the Vanities, book value, Brownian motion, buttonwood tree, buy and hold, buy low sell high, capital asset pricing model, Carl Icahn, centralized clearinghouse, Claude Shannon: information theory, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, Doomsday Clock, Dr. Strangelove, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial engineering, Financial Modelers Manifesto, fixed income, Glass-Steagall Act, global macro, Gordon Gekko, greed is good, Haight Ashbury, I will remember that I didn’t make the world, and it doesn’t satisfy my equations, index fund, invention of the telegraph, invisible hand, Isaac Newton, Jim Simons, job automation, John Meriwether, John Nash: game theory, junk bonds, Kickstarter, law of one price, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, Mark Spitznagel, merger arbitrage, Michael Milken, military-industrial complex, money market fund, Myron Scholes, NetJets, new economy, offshore financial centre, old-boy network, Paul Lévy, Paul Samuelson, Ponzi scheme, proprietary trading, quantitative hedge fund, quantitative trading / quantitative finance, race to the bottom, random walk, Renaissance Technologies, risk-adjusted returns, Robert Mercer, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Savings and loan crisis, Sergey Aleynikov, short selling, short squeeze, South Sea Bubble, speech recognition, statistical arbitrage, The Chicago School, The Great Moderation, The Predators' Ball, too big to fail, transaction costs, value at risk, volatility smile, yield curve, éminence grise

After a few minutes, Smelcer was back. “Leo, we’re okay. Tom said go ahead. You’ve got your money.” It was 7:17 A.M., three minutes before the opening of the Merc’s currency markets. The world had little idea how close the financial system had come to a catastrophic seizure. The critical factor behind the crash of Black Monday on October 19, 1987, can be traced to a restless finance professor’s sleepless night more than a decade earlier. The result of that night would be a feat of financial engineering called portfolio insurance. Based on the Black-Scholes formula, portfolio insurance would scramble the inner workings of the stock market and set the stage for the single largest one-day market collapse in history.

…

The Japanese yen, which quant funds liked to short due to extremely low interest rates in Japan, surged against the dollar and the euro—an example of more short covering by quant funds as the carry trade fell apart. But the dollar rose against most other currencies as investors snapped it up in a panicked flight to safe, liquid assets, just as they had during Black Monday in October 1987 and in August 1998 when LTCM imploded. On Friday morning, Muller came into the office early. The plan was to deleverage like mad before everything was wiped out. But before he gave the thumbs-up on the plan, Muller wanted to see what happened at the opening bell. You never know, he thought.

…

“To call this a dislocation doesn’t go anywhere near the enormity of what we’ve seen,” he said. “What have we seen here? We have seen the near-collapse of the world’s banking system.” Beeson described the impact the powerful deleveraging was having on Citadel’s positions. Just as investors plowed into cash or Treasury bonds during Black Monday in 1987 and the collapse of Long-Term Capital in 1998, a torrent of money had flowed into highly liquid assets following Lehman’s collapse. At the same time, investors dumped less-safe assets such as corporate bonds like a panicked mob fleeing a burning building. Normally Citadel wouldn’t have even been singed too severely by such a move.

Capital Ideas: The Improbable Origins of Modern Wall Street by Peter L. Bernstein

Albert Einstein, asset allocation, backtesting, Benoit Mandelbrot, Black Monday: stock market crash in 1987, Black-Scholes formula, Bonfire of the Vanities, Brownian motion, business cycle, buy and hold, buy low sell high, capital asset pricing model, corporate raider, debt deflation, diversified portfolio, Eugene Fama: efficient market hypothesis, financial innovation, financial intermediation, fixed income, full employment, Glass-Steagall Act, Great Leap Forward, guns versus butter model, implied volatility, index arbitrage, index fund, interest rate swap, invisible hand, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Arrow, law of one price, linear programming, Louis Bachelier, mandelbrot fractal, martingale, means of production, Michael Milken, money market fund, Myron Scholes, new economy, New Journalism, Paul Samuelson, Performance of Mutual Funds in the Period, profit maximization, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk free rate, risk/return, Robert Shiller, Robert Solow, Ronald Reagan, stochastic process, Thales and the olive presses, the market place, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, transfer pricing, zero-coupon bond, zero-sum game

Financial assets now change hands with dizzying speed. Daily trading on the New York Stock Exchange averages over 150 million shares, more than ten times the daily average of 1974, five times the average in the highest year of the 1970s, and 100 times the average in the early 1950s. On Black Monday of October 1987, 604 million shares were traded. Millions of additional shares are traded directly across computers, bypassing the organized exchanges altogether. The volume of shares traded in the markets for futures and options often exceeds the volume traded on the organized exchanges. Trading in Tokyo is ten times what it was in 1982, in Frankfurt twelve times, and in London thirty times.

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See also Diversification Associated Press averages Associates in Finance Avon Balance sheets Bank Administration Institute Bankers Trust Bank of New York Bankruptcy Bank trust departments. See also Wells Fargo Bank Barr Rosenberg Associates (BARRA) Battle for Investment Survival, The (Loeb) “Behavior of Stock Prices, The” (Fama) Bell Journal Bell Laboratories Beta: see Risk, systematic “Beta Revolution: Learning to Live with Risk” Black Monday (October, 1987, crash) Black/Scholes formula Block trading Boeing Bond(s) convertible discount rates and government high-grade interest rates international junk liquidity maturity risk treasury: see Bond(s), government zero-coupon Bond market Boston Company Brokerage commissions. See also Transaction costs Brownian motion “Brownian Motion in the Stock Market” (Osborne) Butterfly swaps Buy and hold strategy California Public Employees Retirement System Calls: see Options Capital cost of optimal structure of preserving strategy “Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk” (Sharpe) Capital Asset Pricing Model (CAPM) non-stock applicability risk/return ratio in time analysis and Capital gains tax Capital Guardian Capital markets theory competition and corporate investment and debt/equity ratios and research CAPM: see Capital Asset Pricing Model CDs CEIR Center for Research in Security Prices (CRSP).

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See also Capital Asset Pricing Model; Random price fluctuations; specific types of securities arbitrage Black/Scholes formula of: see Black/Scholes formula earnings ratio efficient markets and future of growth stocks information and interest rates and intrinsic value and manipulation risk and security analysis and shadow transfer trends value differentiation zero downside limit on “Price Movements in Speculative Markets: Trends or Random Walks” (Alexander) “Pricing of Options and Corporate Liabilities, The” (Black/Scholes) Probability theory Procter & Gamble Profit maximization Program trading Prospective yield “Proposal for a Smog Tax, A” (Sharpe) Puts: see Options Railroads RAND Random Character of Stock Prices, The (Cootner) “Random Difference Series for Use in the Analysis of Time Series, A” (Working) Random price fluctuations/random walks selection of securities and “Random Walks in Stock Market Prices” (Fama) Rational Expectations Hypothesis “Rational Theory of Warrant Pricing” (Samuelson) Regulation of markets Return analysis: see Risk/return ratios Review of Economics and Statistics Review of Economic Studies, The “RHM Warrant and Low-Price Stock Survey, The” Risk arbitrage calculations diversification and dominant expected return and minimalization portfolio premium return ratios Rosenberg’s model stock prices and of stocks vs. bonds systematic (beta) trade-offs valuation of assets and “Risk and the Evaluation of Pension Fund Performance” (Fama) Risk-free assets Rosenberg Institutional Equity Management (RIEM) “Safety First and the Holding of Assets” (Roy) Samsonite Savings rates Scott Paper Securities analysis Securities and Exchange Commission Security Analysis (Graham/Dodd) Security selection Separation Theorem Shadow prices “Simplified Model for Portfolio Analysis, A” (Sharpe) Singer Manufacturing Company Single-index model Sloan School of Management Standard & Poor’s 500 index “State of the Art in Our Profession, The” (Vertin) Stock(s) cash ratios common expected return on growth income international legal restrictions on market value variance volatility Stock market (general discussion) Black Monday (October, 1987, crash) “Stock Market ‘Patterns’ and Financial Analysis” (Roberts) Supply and demand theory Swaps Tactical asset allocation theory Tampax Taxes. See also Capital gains tax Texas Instruments “Theoretical Valuation Formula for Options, Warrants, and Other Securities, A” (Black/Scholes) Theory of Interest, The (I.

Automate This: How Algorithms Came to Rule Our World by Christopher Steiner

23andMe, Ada Lovelace, airport security, Al Roth, algorithmic trading, Apollo 13, backtesting, Bear Stearns, big-box store, Black Monday: stock market crash in 1987, Black-Scholes formula, call centre, Charles Babbage, cloud computing, collateralized debt obligation, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, Donald Trump, Douglas Hofstadter, dumpster diving, financial engineering, Flash crash, G4S, Gödel, Escher, Bach, Hacker News, High speed trading, Howard Rheingold, index fund, Isaac Newton, Jim Simons, John Markoff, John Maynard Keynes: technological unemployment, knowledge economy, late fees, machine translation, Marc Andreessen, Mark Zuckerberg, market bubble, Max Levchin, medical residency, money market fund, Myron Scholes, Narrative Science, PageRank, pattern recognition, Paul Graham, Pierre-Simon Laplace, prediction markets, proprietary trading, quantitative hedge fund, Renaissance Technologies, ride hailing / ride sharing, risk tolerance, Robert Mercer, Sergey Aleynikov, side project, Silicon Valley, Skype, speech recognition, Spread Networks laid a new fibre optics cable between New York and Chicago, transaction costs, upwardly mobile, Watson beat the top human players on Jeopardy!, Y Combinator

Wall Street fortunes have been made betting on Gaussian distributions—and just as many have been lost on algorithms that embrace Gaussian outcomes but don’t account for fat tails. It’s easier to write algorithms to fit normal distributions. And despite history showing us repeatedly that human behavior is anything but normal, some hackers choose to account for only normal distribution. Using this assumption can make money 100 out of 100 days. But it’s day 101, the Black Monday of 1987, the Russian debt default of 1998, the Flash Crash of 2010, that can ruin those banking on algorithms designed purely around Gaussian distributions. Even Gauss, more than two hundred years ago, warned that errors of any magnitude are possible within a normal distribution.26 The introduction of normal distributions changed humankind and ushered in the modern field of statistics, which allows for the easy purchase of things like life insurance, the building of better bridges, and even, though not as important, betting on basketball games.

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., 168–70 AirStrip, 158–59 Aisle50, 9 Alberta, University of, Computer Poker Research Group at, 132 algebra: Boolean, 71, 73 Gauss’s proof of fundamental theory of, 65 origins of, 55 Algeria, 56 algorithms: all-knowing, 121 ancient, 54, 55 battling, 48–52, 112 Black-Scholes as basis for, 23 chaos theory and, 71 complex, 73 complicated from simple, 58, 71 coordinated, 5 creativity by, 76–77 as decision trees, 25–26 definition of, 5–6, 55 earliest, 55 Euclidean, 55 hardware and, 119 history of, 53–74 inputs and outputs in, 54 job loss to, 217–18 machine-learning, 100 for market direction, 67–68 multitiered, 63 predictive, 54, 61, 62–65 Pythagorean, 64 randomness mimicked by, 50, 94 to resolve arguments, 59 rogue, 51–52 sellers’, 1–2 simple beginnings for, 25 in speech recognition programs, 54 speed of, 24, 48, 51, 112–25 stealth technology in, 50–51 and stock market unpredictability, 48–50 traders as proxies for, 34–35, 36, 39 trading decisions by, 21, 54, 66, 113–14, 189, 202 visual shape of, 68–71 Wall Street taken over by, 22, 42–43, 46, 48–52, 62, 184–86 widening boundaries of, 6 alkaline phosphatase, 162 Al-Khwarizmi, Abu Abdullah Muhammad ibn Musa, 54–55, 56–57 Al-Kitab al-Mukhtasar fi Hisab al-Jabr wa l-Muqabala (The Compendious Book on Calculation by Completion and Balancing) (Al-Khwarizmi), 55 Allied Fiber, 119 Altfest, Lewis, 143–44 Amazon.com, used book prices on, 1–2, 5 American League West Division, 141 American Pharmacists Association, 155 American Stock Exchange (AMEX), 28–39, 40 amplitude, 93, 106 Analytical Engine, 73 Andorra, 80 Andre 3000, 102 Andreessen, Marc, 116, 188 Annie (algorithm), 77, 100–102 annuities, 66 anorexia, 154–55 AOL, 117, 188 Apollo 13, 165–67, 175 Apple, 4, 50 golden mean in, 56 price swings for, 48–49 Arab Spring, 140 Aranyi, Janos, 20 Aranyi Associates, 20 arbitrage, 31, 42, 113 Peterffy’s discovery of, 18 Archimedes, 64 architecture, golden mean in, 56 artificial intelligence, 97 Leibniz on, 58 Asia, algorithmic trading in, 49 astronomy, golden mean in, 56 AT&T, 178, 182, 194–95 AT&T Wireless, 116 Atlantic, 201 Atrium Music Group, 87 attention deficit hyperactivity disorder (ADHD), 195 Australia, 159 Babbage, Charles, 73 Babylon, algorithms in, 54 Bach, Johann Sebastian, 77, 89 algorithm programmed in style of, 93–97, 99, 103 Backstreet Boys, 89 Baghdad, 55 banking, rise of modern, 56 Bank of America, 46, 191, 192 Barcelona, 79–80 1992 Summer Olympics in, 81 Barksdale, David, 117 Barksdale, James, 116–20 Barron’s, 48 Barry, Lorraine, 85 baseball: probability theory in, 67 statistics algorithms in, 141–42 talent scouts in, 84 Basel, University of, 69 basketball, statistics and algorithms in, 142–43 bass guitar, 107 Bates, Renae, 159–60 BBC, 77, 79, 110 BD, 153 Beane, Billy, 141 Bear Stearns, 128, 191, 192, 202 Beatles, 70, 82, 103–11 beats, 82, 86, 87 Beethoven, Ludwig van, 89, 90, 96, 99 Begleiter, Steven, 128 bell curves, 63 Bennett, Bill, 10 Berger, Jonathan, 97 Berlinski, David, 60 Bernoulli, Daniel, 69, 105 Bernoulli, Jacob, 67–68, 69 Bernoulli, Johann, 69 Bernoulli’s law, 67 Best Buy, 83 Big Board, 41 Big Short, The (Lewis), 202 Big Ten Network, 218 binary decision trees, 26, 171 binary language, Leibniz and, 57–58, 60–61, 71, 73 bin Laden, Osama, 168 biology, golden mean in, 56 Black, Fischer, 23, 62, 105–6 blackjack, 128 Black Monday (October 19, 1987), 46, 64, 188 Black-Scholes formula, 23, 24, 30 Blackstone Discovery, 217 Blankfein, Lloyd, 119 Bloomberg, news service for trading bots by, 48 bluffing, 129–30, 132 Boeing, 142 Bon Jovi, 89 books: prices for used, 1–2, 5 publishing of, 84 Boole, George, 71–74 Boole, John, 72 Boolean algebra, 73 Boolean logic, 53 Boolean operators, 74 “Born to Be Wild,” 78 Boston Red Sox, 142 botany, golden mean in, 56 bots, 10, 54 algorithmic, 20, 48, 184 decoy trades by, 50–51 news services tailored to, 48 Botz, Tommy, 87 box office gross, 75 Brahms, Johannes, 77 Brazil, 218 breast cancer, 154 Bridgewater, 207 Britain, 121 broadband, 120 Broad Institute, 160 brokers, algorithms and bankrupting of, 51 Brown, Dan, 57 Brown, Jason, 103–11 Brown, Peter, 178–80 “Brown Sugar,” 86 browser cookies, 213 Brunswick, Duke of, 65 Brussels, 122 Bryant, Kobe, 143 Brynjolfson, Eric, 217–18 Buckwalter, Galen, 144 Budapest, 18 Bueno de Mesquita, Bruce, 136–38, 140 Buffett, Warren, 191 bulimia, 155 Burckhardt, Jacob, 69 Burnett, Erin, 3, 4 Bush, George H.

Smart Money: How High-Stakes Financial Innovation Is Reshaping Our WorldÑFor the Better by Andrew Palmer

Affordable Care Act / Obamacare, Alan Greenspan, algorithmic trading, Andrei Shleifer, asset-backed security, availability heuristic, bank run, banking crisis, behavioural economics, Black Monday: stock market crash in 1987, Black-Scholes formula, bonus culture, break the buck, Bretton Woods, call centre, Carmen Reinhart, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Graeber, diversification, diversified portfolio, Edmond Halley, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, family office, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, Google Glasses, Gordon Gekko, high net worth, housing crisis, Hyman Minsky, impact investing, implied volatility, income inequality, index fund, information asymmetry, Innovator's Dilemma, interest rate swap, Kenneth Rogoff, Kickstarter, late fees, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, low interest rates, margin call, Mark Zuckerberg, McMansion, Minsky moment, money market fund, mortgage debt, mortgage tax deduction, Myron Scholes, negative equity, Network effects, Northern Rock, obamacare, payday loans, peer-to-peer lending, Peter Thiel, principal–agent problem, profit maximization, quantitative trading / quantitative finance, railway mania, randomized controlled trial, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Savings and loan crisis, short selling, Silicon Valley, Silicon Valley startup, Skype, South Sea Bubble, sovereign wealth fund, statistical model, subprime mortgage crisis, tail risk, Thales of Miletus, the long tail, transaction costs, Tunguska event, unbanked and underbanked, underbanked, Vanguard fund, web application

The old system was deeply flawed. The problem with HFT is, rather, that the unchecked logic of competition has increased the risk and potential severity of sudden market crashes. It is true that the biggest one-day fall in the history of the Dow Jones Industrial Average—a drop of almost 23 percent—happened way back on Black Monday in October 1987. But the speed with which things can go wrong is new and frightening. The flash crash is the most obvious example of how quickly the market can spiral out of control when algorithms interact. Self-interest ought to ensure that the HFTs and other algorithmic traders manage risk robustly.

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Index AAA credit ratings, 49–51, 233–236 AARP Public Policy Institute, report on home ownership by, 139 Abacus, 235 Accenture, 54, 56 Adaptive-market hypothesis, 115–116 Adelino, Manuel, 49 Adoption, SIB program for, 97 Adverse selection, 21, 174, 175, 182 AIG (American International Group), 65 AIR Worldwide, 222, 225 Alabama, land boom in, 74–75 Algorithms, 53–54, 56–57, 62–63, 113, 202, 216–217 Alibaba.com, 219 Allia, 108 Alzheimer’s disease, megafund for, 122 Amazon, 162, 216–217, 219 American Diabetes Association, 102 American Dream Downpayment Act of 2003, 78 American International Group (AIG), 65 American Railroad Journal, 24 American Research and Development Corporation, 150 Amsterdam Stock Exchange, 14–15, 24, 38 Anchoring effect, 137–138 Annuities, 20–22, 139 Apax Partners, 91 Aristotle, 10 Asian debt crisis (1990s), x, 30 Asian Development Bank, 27 Auto-enrollment in pension schemes, 135 Auto-escalation, 135–136 Availability heuristic, 73 Baby boomers, retirement rate of, 125 Bailouts, xi, 35, 65 Bank, derivation of word, 12 Bank deregulation, effect of on college enrollments, 171 Bank for International Settlements (BIS), 224, 226 Bank of America, 98 Banks advantages of, 192–193 bailouts of, xi commercial paper, use of, 185 competition, response to, 193–194 crisis, episodes of, 35–36 in Dark Ages, 11 deposits, xiv, 12–13 equity, 186–187 innovator’s dilemma, 189 leverage, 50, 70–71, 80, 186, 188 liquidity and, 12–14, 185–186, 193 operating expenses, 188 profits of, ix property and, xiv, 69, 75–80 public attitudes toward, ix, xi purpose of, 11–14 raising returns in, 51 repurchase “repo” markets, 15, 185 runs on, x, 13, 185 secured lending, xiv unbanked households, 200 Barbon, Nicholas, 16–17 Basel accords, 77 Basildon, England, 52–53, 58 Bass, Oren, 166, 168 Behavioral finance, 132–138, 208–214 Belinsky, Michael, 103 Benartzi, Shlomo, 136 Benitez-Silva, Hugo, 73 Bernoulli, Jacob, 18 Betting on Lives (Clark), 144 Bid-ask spreads, 55 Big data, xviii, 22, 47, 199, 201, 218, 236 Big Society Capital, 95 Biotechnology, decline in investment in, xii-xiii, 114–115 Black, Fischer, 31, 123–124 Black Monday, October, 1987, 62 BlackRock, 132 Black-Scholes equation, 31, 32, 124 Blackstone, 85 Blood donation, experiment with, 110 Bloomberg, Michael, 98 Bonds attractiveness to investors, 120 catastrophe, 224–227 income, 25 inflation protected, 26 samurai, 27 Book of Calculation (Fibonacci), 19 Bottomry, 8 Brain, reaction of to monetary rewards, 116 Brazil, financial liberalization of, 34 Breslow, Noah, 216, 219 Bretton Woods system, 30 Bridges Ventures, 93 Britain average age of first-time home buyer, 84 average house price, 74 banking crisis, 69 equity-crowdfunding, 154 government spending, 99 life expectancy, 125 peer-to-peer lending, 181 social-impact bonds (SIB), 95–97 student indebtedness, 171 total residential property value, 69–70 Brown, Gordon, 93 Bucket price (okenedan), 40 Bullae (early financial contracts), 5 Bush, George W., 78 Byng, John, 143 Call options, 9–10, 131 Calment, Jeanne, 144 Cameron, David, 95 Cancer megafund.

MONEY Master the Game: 7 Simple Steps to Financial Freedom by Tony Robbins

"World Economic Forum" Davos, 3D printing, active measures, activist fund / activist shareholder / activist investor, addicted to oil, affirmative action, Affordable Care Act / Obamacare, Albert Einstein, asset allocation, backtesting, Bear Stearns, behavioural economics, bitcoin, Black Monday: stock market crash in 1987, buy and hold, Carl Icahn, clean water, cloud computing, corporate governance, corporate raider, correlation does not imply causation, Credit Default Swap, currency risk, Dean Kamen, declining real wages, diversification, diversified portfolio, Donald Trump, estate planning, fear of failure, fiat currency, financial independence, fixed income, forensic accounting, high net worth, index fund, Internet of things, invention of the wheel, it is difficult to get a man to understand something, when his salary depends on his not understanding it, Jeff Bezos, John Bogle, junk bonds, Kenneth Rogoff, lake wobegon effect, Lao Tzu, London Interbank Offered Rate, low interest rates, Marc Benioff, market bubble, Michael Milken, money market fund, mortgage debt, Neil Armstrong, new economy, obamacare, offshore financial centre, oil shock, optical character recognition, Own Your Own Home, passive investing, profit motive, Ralph Waldo Emerson, random walk, Ray Kurzweil, Richard Thaler, risk free rate, risk tolerance, riskless arbitrage, Robert Shiller, Salesforce, San Francisco homelessness, self-driving car, shareholder value, Silicon Valley, Skype, Snapchat, sovereign wealth fund, stem cell, Steve Jobs, subscription business, survivorship bias, tail risk, TED Talk, telerobotics, The 4% rule, The future is already here, the rule of 72, thinkpad, tontine, transaction costs, Upton Sinclair, Vanguard fund, World Values Survey, X Prize, Yogi Berra, young professional, zero-sum game

The reality was that my friend and client Paul Tudor Jones had been warning me about what was happening in the markets almost a year in advance of the crisis. He is one of those unicorns who can actually time the markets on a fairly consistent basis. It’s part of what made him not only one of the most successful investors in history but a legendary figure. He predicted the Black Monday crash of 1987, and when everyone else was freaking out, he helped his clients make a 60% monthly return and 200% for the year. So you can bet I was grateful for Paul’s insights! In early 2008 he told me a stock market and real estate crash was coming, and soon. I was so concerned that I reached out to my Platinum Partners, an exclusive group of my clients who I work with three to four times a year in intimate, intensive sessions to transform their relationships, businesses, and finances.

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Ray doesn’t buy those answers (which is why he predicted the 2008 global financial crisis and made money in 2008). Make no mistake, what Ray calls “surprises” will always look different from the time before. The Great Depression, the 1973 oil crisis, the rapid inflation of the late ’70s, the British sterling crisis of 1976, Black Monday in 1987, the dot-com bubble of 2000, the housing bust in 2008, the 28% drop in gold prices in 2013—all of these surprises caught most investments professionals way off guard. And the next surprise will have them on their heels again. That we can be sure of. But in 2009, once the smoke had cleared and the market started to bounce back, very few money managers stopped to ask if their conventional approach to asset allocation and risk management might have been wrong to begin with.

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CHAPTER 6.5 PAUL TUDOR JONES: A MODERN-DAY ROBIN HOOD * * * Founder, Tudor Investment Corporation; Founder, Robin Hood Foundation One of the most successful traders of all times, Paul Tudor Jones started his own firm at the age of 26, after cutting his teeth trading cotton in the commodity “pits.” Paul has defied gravity, having produced 28 straight full years of wins. He is legendary for predicting Black Monday, the 1987 stock market crash that saw a 22% drop in a single day (still the largest percentage stock market drop in any day in history). At a time when the rest of the world was experiencing a meltdown, Paul and his clients captured a 60% monthly return and a nearly 200% return for the year! Paul is one of my closest friends and personal heroes.

The Age of Turbulence: Adventures in a New World (Hardback) - Common by Alan Greenspan

addicted to oil, air freight, airline deregulation, Alan Greenspan, Albert Einstein, asset-backed security, bank run, Berlin Wall, Black Monday: stock market crash in 1987, Bretton Woods, business cycle, business process, buy and hold, call centre, capital controls, carbon tax, central bank independence, collateralized debt obligation, collective bargaining, compensation consultant, conceptual framework, Corn Laws, corporate governance, corporate raider, correlation coefficient, cotton gin, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, currency risk, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Glass-Steagall Act, Hernando de Soto, income inequality, income per capita, information security, invisible hand, Joseph Schumpeter, junk bonds, labor-force participation, laissez-faire capitalism, land reform, Long Term Capital Management, low interest rates, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, Myron Scholes, Nelson Mandela, new economy, North Sea oil, oil shock, open economy, open immigration, Pearl River Delta, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, Reminiscences of a Stock Operator, reserve currency, Right to Buy, risk tolerance, Robert Solow, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, special economic zone, stock buybacks, stocks for the long run, Suez crisis 1956, the payments system, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tipper Gore, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, We are all Keynesians now, working-age population, Y2K, zero-sum game

Suddenly investors began to picture an oil-induced inflationary spiral leading to breakdowns in trade, a global recession, or even worse. All this started to happen while Volcker was at an IMF meeting in Belgrade, where he had gone to make a speech. He cut his trip short—much as I would do years later on Black Monday, 1987, when the stock market crashed—and rushed 84 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. PRIVATE CITIZEN back to convene an emergency Saturday-morning meeting of the Federal Open Market Committee.

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., 6, 3 1 , 35, 215-24, 2 3 3 ^ 3 , 428, 463, 493 in election of 2000, 206, 208, 215, 233 Social Security reform and, 217 tax cuts and, 54, 215, 218-24, 233, 234, 236, 238-39, 242 2004 budget plan of, 2 3 8 - 3 9 Bush, Prescott, 3 1 , 118 business, 82, 106, 175 costs of, 172,381 globalization advantages of, 396-97 investment of, 385 savings of, 385-86 spending of, 66 U.S. current account and, 353-60 economic ruin exposed by, 130-31, 382 Bhumibol Adulyadej, king of Thailand, 312-13 bin Laden, Osama, 227 black markets, 132, 138, 139, 303, 331, 460n Black Monday (1987), 84, 105-6, 109, 390 blacks, 230, 468 Blair, Tony, 2 8 3 , 4 9 9 Boehner, John, 184,243 Boeing, 397 Bohemian Grove, 312 bonds, 14, 44, 104, 144, 166, 193, 217, 237, 467, 488 junk, 115,485 long-term, 83, 84 of Mexico, 380 treasury, 191, 1 9 5 , 2 2 8 , 2 3 7 yields on, 378, 485 boo.com, 197 Boskin, Michael, 113, 118,121 Boston College, Lynch School of Education at, 399 Bowery Savings, 100 BP, 4 5 1 , 457 Brady, Dorothy, 269-70 Brady, Kitty, 119 Brady, Nicholas, 113, 116, 118-22, 135 Branden, Nathaniel, 40 Brazil, 157, 193, 278n, 446, 459 currency devaluation in, 380 inflation in, 83, 334, 340, 341, 380 514 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright.

Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever by Robin Wigglesworth

Albert Einstein, algorithmic trading, asset allocation, Bear Stearns, behavioural economics, Benoit Mandelbrot, Big Tech, Black Monday: stock market crash in 1987, Blitzscaling, Brownian motion, buy and hold, California gold rush, capital asset pricing model, Carl Icahn, cloud computing, commoditize, coronavirus, corporate governance, corporate raider, COVID-19, data science, diversification, diversified portfolio, Donald Trump, Elon Musk, Eugene Fama: efficient market hypothesis, fear index, financial engineering, fixed income, Glass-Steagall Act, Henri Poincaré, index fund, industrial robot, invention of the wheel, Japanese asset price bubble, Jeff Bezos, Johannes Kepler, John Bogle, John von Neumann, Kenneth Arrow, lockdown, Louis Bachelier, machine readable, money market fund, Myron Scholes, New Journalism, passive investing, Paul Samuelson, Paul Volcker talking about ATMs, Performance of Mutual Funds in the Period, Peter Thiel, pre–internet, RAND corporation, random walk, risk-adjusted returns, road to serfdom, Robert Shiller, rolodex, seminal paper, Sharpe ratio, short selling, Silicon Valley, sovereign wealth fund, subprime mortgage crisis, the scientific method, transaction costs, uptick rule, Upton Sinclair, Vanguard fund

In the 1980s, the Amex successfully seized on derivatives as a way to resurrect its fortunes, yet remained in dire straits. It desperately needed something—anything—to resuscitate its flagging fortunes. As luck would have it, the worst day of wealth destruction Wall Street has ever witnessed provided Most and the Amex with exactly the break they needed. * * * ♦ THE BLACK MONDAY CRASH ON October 19, 1987, ended careers, bankrupted thousands, and rippled through the global economy. A market swoon of this severity and abruptness demanded investigation, and the following February the Securities and Exchange Commission published its autopsy. The financial watchdog’s report mostly blamed a nascent automated, algorithmic trading strategy called “portfolio insurance” for the severity of the tumble.

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By the second half of the 1980s, it was growing rapidly, transforming the fortunes of the company. What was once a lame dog began looking like a sleek greyhound. Because index fund fees are so low, they need a certain scale to cover their costs. But once that hurdle is overcome, the costs do not increase significantly with size, and extra revenues become clean profits. Even the Black Monday crash of 1987 didn’t slow WFIA’s growth, despite its being a big player in the “portfolio insurance” strategy pioneered by LOR.* In 1988, WFIA made a profit of $13.5 million3—a far cry from its long streak of seemingly unending losses. Grauer had managed to turn an organization of wayward academics who loved Socratic debate and often impractical ideas into something at least slightly more commercially oriented.

…

See Barclays Global Investors biblical ETFs, 236–39 biblically responsible investing, 237–39 “bid,” 268–69 Billions (TV series), 17, 218 Binney & Smith, 148 bionic betas, 153 Bird, Larry, 136 Black, Fischer, 70–71, 74–75, 147, 152–53 Black Bart (Charles E. Boles), 185 Black Monday of 1987, 123, 125, 170–73, 177, 178, 189, 189n, 209 BlackRock Financial Management, 17, 209–21 BGI acquisition, 203, 204–6, 215–16, 221, 222–34 climate change and, 290–93 financial crisis and, 219–21 founding of, 209–12 “Giant Three” scenario, 297–99 gun stock boycott, 285–87 Icahn on, 271 IPO, 214–15 MLIM acquisition, 217–19 naming of, 213–14 SSR acquisition, 216 Black-Scholes-Merton model, 71, 147, 152–53 Blackstone Financial Management (BFM), 210–14 Blair Academy, 89–90 BLES Inspire Global Hope ETF, 238–39 blitzscaling, 200, 239–40 Bloom, Steven, xii, 171–72, 173–74, 177, 178 Bloomberg, Michael, 78n, 149 Bloomberg Barclays Aggregate, 17 BM Personal Computer, 145 Boening & Company, 92 Bogle, David Caldwell, 89 Bogle, Eve Sherrerd, 13, 93–94 Bogle, John “Jack,” ix, 86–105, 244, 276, 296, 302 assistants of, 108, 125, 126–30 background of, 87–88 at Berkshire meeting of 2017, 12–14, 19 billion-dollar milestones of Vanguard, 119–20, 121 corporate governance and public policy, 287 “cost matters hypothesis,” 108, 280 CRSP seminars, 53, 146 DFA and Booth, 146 dinners, 127–28 early finance career of, 86–88, 92–96 early life of, 88–90 education of, 89–92 eighty-eighth birthday of, 12–13, 14 ETFs, 166–68, 239 founding of Vanguard, 11–12, 104–10, 104n free-rider problem, 279 funeral of, 134–35 on “Giant Three” scenario, 299 growing pains at Vanguard, 124, 125, 126 gun stocks and, 286 heart attacks of, 93–94 heart transplant of, 12, 130–31 media and press, 120–21 nickname of “Saint Jack,” 120, 132, 303 personality of, 125 126–27 on Purdey shotgun, 239 schism with Brennan, 130–34 setting up first FIIT (“Bogle’s Folly”), 107–17 “strategy follows structure,” 107 at Wellington Management, 53, 88, 92–104, 130 Bogle, Josephine Lorraine, 88–89, 90–91 Bogle, William Yates, Jr., 88–89, 90–91 Bogle, William Yates, III “Bud,” 88–89, 90, 130, 133 Bogle Financial Markets Research Center, 132–33 Bogleheads, 15, 132 “Bogleisms,” 127–28 Bohr, Niels, 301 bond ETFs, 248, 271–73 bond funds, 275n bond indices, 259–62 Booth, David Gilbert, xii, 138, 139–46 at AG Becker, 141–43, 146 background of, 139–40 at Chicago, 50, 140–41 at DFA, 138, 144–51, 159–60, 162–63 Klotz’s departure, 156–59 at Wells Fargo, 70–71, 75, 138 Booth, Gilbert, 139 Booth School of Business, 157–58 Boston Celtics, 136 Boston Chicken, 137 Boston Globe, 114 Box, George, 51–52 Braham, Lewis, 89, 98n Branson, Richard, 295 Breakfast Club, The (film), 227 Breeden, Richard, 179–80 Brennan, Frank, 128–29 Brennan, Jack, xi, 120–21, 123, 125, 128–34, 240 background of, 128–29 schism with Bogle, 130–34 British East India Company, 300 Brooklyn Bridge, 150 Brown, Robert, 25 Bryn Mawr Presbyterian Church, 134–35 Buffett, Warren, ix, 83, 133, 267n Bogle and, 12–14, 19 on coin flips, 6–7 ESG push and, 294 on hedge funds, 1–3 on pension fund investing, 4–5, 7, 8 on professional fund managers, 4–8, 16–17 wager with Seides, 1–2, 3–4, 6, 9–11, 15–17, 267n bull markets, 5–6, 119, 121, 144–45 Burkart, David, 194n BusinessWeek, 35, 119 Butler, Dave, 136–48 background of, 136–37 at DFA, 137–39, 144–48, 163 California Golden Bears, 136 California Gold Rush, 57, 75 California State University, 206 Campbell, Gordon, 64–65 CANSLIM, 137, 152 “Can Stock Market Forecasters Forecast?”

The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution by Gregory Zuckerman

affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, Andrew Wiles, automated trading system, backtesting, Bayesian statistics, Bear Stearns, beat the dealer, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, blockchain, book value, Brownian motion, butter production in bangladesh, buy and hold, buy low sell high, Cambridge Analytica, Carl Icahn, Claude Shannon: information theory, computer age, computerized trading, Credit Default Swap, Daniel Kahneman / Amos Tversky, data science, diversified portfolio, Donald Trump, Edward Thorp, Elon Musk, Emanuel Derman, endowment effect, financial engineering, Flash crash, George Gilder, Gordon Gekko, illegal immigration, index card, index fund, Isaac Newton, Jim Simons, John Meriwether, John Nash: game theory, John von Neumann, junk bonds, Loma Prieta earthquake, Long Term Capital Management, loss aversion, Louis Bachelier, mandelbrot fractal, margin call, Mark Zuckerberg, Michael Milken, Monty Hall problem, More Guns, Less Crime, Myron Scholes, Naomi Klein, natural language processing, Neil Armstrong, obamacare, off-the-grid, p-value, pattern recognition, Peter Thiel, Ponzi scheme, prediction markets, proprietary trading, quantitative hedge fund, quantitative trading / quantitative finance, random walk, Renaissance Technologies, Richard Thaler, Robert Mercer, Ronald Reagan, self-driving car, Sharpe ratio, Silicon Valley, sovereign wealth fund, speech recognition, statistical arbitrage, statistical model, Steve Bannon, Steve Jobs, stochastic process, the scientific method, Thomas Bayes, transaction costs, Turing machine, Two Sigma

See Statistical arbitrage Archimedes (yacht), 267, 320 Armstrong, Neil, 170 Artin, Emil, 69 Asness, Clifford, 256–57 Association for Computing Machinery (ACM), 37 astrology, 121–22 autism, xviii, 268, 287, 323–24 Automated Proprietary Trading (APT), 131–32, 133 AWK, 233–34 Ax, Frances, 98 Ax, James, xi, 37, 68–69, 324 at Axcom Limited, 78–83 backgammon, 69, 76–77 background of, 68–69 at Berkeley, 68–69 Berlekamp and, 95–102 conspiracy theories of, 77–78, 99 at Cornell, 69, 70–71 death of, 103 focus on mathematics, 69–70 at Monemetrics, 51–52, 72–73 personality of, 68, 70, 71–72, 98–99 Simons and, 34, 68–69, 99–103, 107 at Stony Brook, 34, 71–72 trading models, 73, 74–75, 77–78, 81–86, 95–101, 107 Axcom Limited, 78–83 disbanding of, 118 trading models, 95–101, 107–18 Ax-Kochen theorem, 69, 70, 103 Bachelier, Louis, 128 backgammon, 69, 76–77 backtesting, 3 Bacon, Louis, 140 Baker House, 15–16 Baltimore City Fire and Police Employees’ Retirement System, 299–300 Bamberger, Gerry, 129–30 BankAmerica Corporation, 212 Bannon, Steve, 279, 280, 280n break with Mercers, 304 at Breitbart, 278–79, 299–300, 301–2 midterm elections of 2018, 304 presidential election of 2016, xviii, 281–82, 284–85, 288–90, 293, 294–95 Barclays Bank, 225, 259 bars, 143–44 Barton, Elizabeth, 272 basket options, 225–27 Baum, Julia Lieberman, 46, 48, 50, 62–63, 65 Baum, Leonard “Lenny,” xi, 45–46, 63–66 background of, 46 currency trading, 28–29, 49–53, 54–60, 62–64, 73 death of, 66 at Harvard, 46 at IDA, 25, 28–29, 46–49, 81 at Monemetrics, 45, 49–60, 63–65 move to Bermuda, 64–65 rift with Simons, 63–65 trading debacle of 1984, 65, 66 Baum, Morris, 46 Baum, Stefi, 48, 62, 63 Baum–Welch algorithm, 47–48, 174, 179 Bayes, Thomas, 174 Bayesian probability, 148, 174 Beane, Billy, 308 Beat the Dealer (Thorp), 127, 163 Beautiful Mind, A (Nasar), 90 behavioral economics, 152, 153 Bell Laboratories, 91–92 Belopolsky, Alexander, 233, 238, 241, 242, 252–54 Bent, Bruce, 173 Berkeley Quantitative, 118 Berkshire Hathaway, 265, 309, 333 Berlekamp, Elwyn, xi at Axcom, 94–97, 102–3, 105–18 background of, 87–90 at Bell Labs, 91–92 at Berkeley, 92–93, 95, 115, 118, 272 at Berkeley Quantitative, 118 death of, 118 at IDA, 93–94 Kelly formula and, 91–92, 96, 127 at MIT, 89–91 Simons and, 2–3, 4, 93–95, 109–10, 113–14, 116–18, 124 trading models and strategies, 2–3, 4, 95–98, 106–18, 317 Berlekamp, Jennifer Wilson, 92 Berlekamp, Waldo, 87–88 Berlin Wall, 164 Bermuda, 64–65, 254 Bernard L. Madoff Investment Securities, 198 betting algorithm, 144, 167 Bezos, Jeffrey, 134 Bezos, MacKenzie, 134 Big Bang, 324–25 Big Bang Theory, The (TV show), 254 Big Bounce, 325 black box investing, 137 Black Monday (1987), 97, 126, 256 Boesky, Ivan, 106 Bolton, John, 305 Bombieri, Enrico, 28 bond trading, 53, 55 bonuses, 200–201 Bookstaber, Richard, 314–15 Bossie, David, 284, 285, 289 Botlo, Michael, 154–55 Box, George, 245 Bozell, Brent, 304 Breakfast Club, The (movie), 183 breakout signals, 83–84 Breck’s (Newton, MA), 9–10 Breitbart, Andrew, 278 Breitbart News, 278, 280–81, 289–90, 295, 299–300, 301–2 Brexit, xviii, 280–81 Bridgewater Associates, 310 British pound, 40, 52, 79, 165 Brookhaven National Laboratory, 154 Brown, Aaron, 171 Brown, Henry, 172–73 Brown, Margaret, 176, 179–80, 229 Brown, Peter, xi background of, 172–73 education of, 187 at IBM, 5, 173–81, 187–88 Brown, Peter, at Renaissance client presentations, 249–50, 251 equity stake, 201 financial crisis and, 257–61 Magerman and, 181–82, 191–95, 241, 294, 296, 297, 299, 318 management, 208–9, 230–31, 232–33, 237, 241–43, 254–55, 275, 289–90, 319, 320 Mercer and political blowback, 296, 297, 299, 319 recruitment of, 169, 179–80 statistical-arbitrage trading system, 187–91, 193–95, 197–99, 204, 205–8, 213–14, 223, 224–27, 229–32, 255 tech bubble, 215–17 Brown University, 103 Buffett, Warren, xvi, 96, 161, 265, 309 Bush, John Ellis “Jeb,” 279 C++, 155, 191–92 Caddell, Patrick, 279–80 Café (movie), 270 Calhoun, Anthony, 299–300 California Institute of Technology, 53–54 Cambridge Analytica, 279, 280–81, 303 Cambridge Junior College, 22 Candide (Voltaire), 230 candlestick pattern, 122 Carlson, Tucker, 285 Carmona, René, 40, 81–86, 96, 98–99 Carnegie Mellon University, 173, 178 Celanese Corporation, 19 “Characteristic Forms and Geometric Invariants” (Chern and Simons), 38 Charlap, Leonard, 33, 36, 71–72, 141 Cheeger, Jeff, 39 Chern, Shiing-Shen, 17–18, 38 Chern–Simons theory, 17–18, 38 chess, 50, 147, 178 Chevron, 79 Chhabra, Ashvin, 308 Chicago Board of Trade, 113–14, 125 Christie, Chris, 285 Chrysler, 251 CIA (Central Intelligence Agency), 208 Citadel Investment Group, 256, 310–11 Citigroup, 123 Citizens United v.

The Money Machine: How the City Works by Philip Coggan

activist fund / activist shareholder / activist investor, algorithmic trading, asset-backed security, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, bond market vigilante , bonus culture, Bretton Woods, call centre, capital controls, carried interest, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, disintermediation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, endowment effect, financial deregulation, financial independence, floating exchange rates, foreign exchange controls, Glass-Steagall Act, guns versus butter model, Hyman Minsky, index fund, intangible asset, interest rate swap, inverted yield curve, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", joint-stock company, junk bonds, labour market flexibility, large denomination, London Interbank Offered Rate, Long Term Capital Management, low interest rates, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, negative equity, Nick Leeson, Northern Rock, pattern recognition, proprietary trading, purchasing power parity, quantitative easing, reserve currency, Right to Buy, Ronald Reagan, shareholder value, South Sea Bubble, sovereign wealth fund, technology bubble, time value of money, too big to fail, tulip mania, Washington Consensus, yield curve, zero-coupon bond

The rules for floating on AIM are much less stringent than for the main market, and depend heavily on the advisers, or sponsors, who bring the company to the market. After some early disasters, a review of sponsors led to some leaving the market. The name of the sponsoring house may be very important in ensuring investors’ confidence in the issue. The sponsor will also advise on the timing and the terms of the issue. After Black Monday in 1987, for example, several companies withdrew their issues, on advice from their banks or brokers, until the stock market was more settled. When they returned, they were able to raise less money than they had originally planned. There are a variety of methods by which a company can join the market.

Why Stock Markets Crash: Critical Events in Complex Financial Systems by Didier Sornette

Alan Greenspan, Asian financial crisis, asset allocation, behavioural economics, Berlin Wall, Black Monday: stock market crash in 1987, Bretton Woods, Brownian motion, business cycle, buy and hold, buy the rumour, sell the news, capital asset pricing model, capital controls, continuous double auction, currency peg, Deng Xiaoping, discrete time, diversified portfolio, Elliott wave, Erdős number, experimental economics, financial engineering, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, global village, implied volatility, index fund, information asymmetry, intangible asset, invisible hand, John von Neumann, joint-stock company, law of one price, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, market design, market fundamentalism, mental accounting, moral hazard, Network effects, new economy, oil shock, open economy, pattern recognition, Paul Erdős, Paul Samuelson, power law, quantitative trading / quantitative finance, random walk, risk/return, Ronald Reagan, Schrödinger's Cat, selection bias, short selling, Silicon Valley, South Sea Bubble, statistical model, stochastic process, stocks for the long run, Tacoma Narrows Bridge, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, Tobin tax, total factor productivity, transaction costs, tulip mania, VA Linux, Y2K, yield curve

Taking the example of the crash that occurred on October 19, 1987, this figure shows three drawdowns corresponding to cumulative losses from the last maximum to the next minimum of the price. The largest drawdown of a total loss of −307% is made of four successive daily drops: on October 14, 1987 (1987.786 in decimal years), the DJIA index is down by 38%; on October 15, the market is down 61%; on October 16, the market is down 104%. The weekend passes and the drop on Black Monday October 19, 1987 leads to a cumulative loss or drawdown of 307%. In terms of consecutive daily losses, this correspond to the series 38%, 24%, 46%, and 226% (note that returns are not exactly additive, since they are price variations normalized by the price, which itself varies). any structure in the distribution of drawdowns absent in that of price variations.

…

Reproduced from [220]. 61 finan cial crashe s a r e “o u t l i e r s” Table 3.2 Characteristics of the 14 largest drawdowns of the DJIA in the twentieth century Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Starting time Index value Duration (days) Loss 87786 14579 29818 33549 32249 29852 29835 32630 3193 32694 74719 30444 31735 98649 250816 767 30122 10867 7715 23819 27351 675 9014 7654 67405 23969 10986 860265 4 2 3 4 8 4 2 1 7 3 11 4 5 4 −307% −288% −236% −186% −185% −166% −166% −148% −143 −139% −133% −124% −129 −124% The starting dates are given in decimal years. Reproduced from [220]. fourth day by 307%. In terms of consecutive losses, this corresponds to 38%, 24%, 46%, and then 226% on what is known as the Black Monday of October 1987. The observation of large successive drops is suggestive of the existence of a transient correlation, as we already pointed out. For the Dow Jones, this reasoning can be adapted as follows. We use a simple functional form for the distribution of daily losses, namely an exponential distribution with decay rate 1/063% obtained by a fit to the distribution of drawdowns shown in Figure 3.4.

…

This was still below the 22% annualized standard deviation of return calculated during 1974, the most volatile recent year before 1987, and significantly below the autopsy of major c r a s h e s 229 46% recorded on Monday, October 19, 1987, and the 88% recorded on Monday, October 26, 1987. As we shall show in Figure 7.4, during November 1987, market volatility as measured by the implied annual return standard deviation fell to about 30%, which was still much higher than the highest implied risk value observed immediately prior to Black Monday [174]. The October 19, 1987, stock-market crash stunned Wall Street professionals, hacked about $1 trillion off the value of all U.S. stocks, and elicited predictions of another Great Depression. On Black Monday, the Dow Jones industrial average plummeted 508 points, or 22.6%, to 1,738.74. It was the largest one-day point and percentage loss ever for the blue-chip index.

Warnings by Richard A. Clarke

"Hurricane Katrina" Superdome, active measures, Albert Einstein, algorithmic trading, anti-communist, artificial general intelligence, Asilomar, Asilomar Conference on Recombinant DNA, Bear Stearns, behavioural economics, Bernie Madoff, Black Monday: stock market crash in 1987, carbon tax, cognitive bias, collateralized debt obligation, complexity theory, corporate governance, CRISPR, cuban missile crisis, data acquisition, deep learning, DeepMind, discovery of penicillin, double helix, Elon Musk, failed state, financial thriller, fixed income, Flash crash, forensic accounting, friendly AI, Hacker News, Intergovernmental Panel on Climate Change (IPCC), Internet of things, James Watt: steam engine, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge worker, Maui Hawaii, megacity, Mikhail Gorbachev, money market fund, mouse model, Nate Silver, new economy, Nicholas Carr, Nick Bostrom, nuclear winter, OpenAI, pattern recognition, personalized medicine, phenotype, Ponzi scheme, Ray Kurzweil, Recombinant DNA, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Ronald Reagan, Sam Altman, Search for Extraterrestrial Intelligence, self-driving car, Silicon Valley, smart grid, statistical model, Stephen Hawking, Stuxnet, subprime mortgage crisis, tacit knowledge, technological singularity, The Future of Employment, the scientific method, The Signal and the Noise by Nate Silver, Tunguska event, uranium enrichment, Vernor Vinge, WarGames: Global Thermonuclear War, Watson beat the top human players on Jeopardy!, women in the workforce, Y2K

Madoff Investment Securities, 101, 104, 107–8 Betrayal of Trust (Garrett), 232 Bettencourt, Liliane, 101 Bezos, Jeff, 202 Big data, 16, 184 Big Short, The (Lewis), 145–46, 162–63 Bikini Atoll, 373n Bikini Boot Camp, 158 Bilton, Nick, 294 Bin Laden, Osama, 69, 269 Biological Weapons Convention (BWC), 218 Birth control, 192, 193 BitSight, 295 BlackEnergy, 285, 288 Black Monday (1987), 146 Blankenship, Don, 139–40 Bloomberg, 145, 155–59 Boeing KC-135 Stratotankers, 28 Boisjoly, Roger, 11–13 Borlaug, Norman, 193 Boston, sea-level-rise in, 256–57 Bostrom, Nick, 203, 380n, 381n Botnets, 296, 297 Bove, Dick, 163 Bowen, Mark, 258–59 Bowen, Richard M., III, 155, 157, 162, 163 Brain, 13, 14–15, 34–35 Brimstone missiles, 214 Brooks, Mel, 186 Brown, George, 312, 313, 315 Brown, Michael, 54 Brown University, 151, 152, 153 Bubiyan, 27–30 Buffett, Warren, 147 Burry, Michael, 149 Bush, George H.

The Misbehavior of Markets: A Fractal View of Financial Turbulence by Benoit Mandelbrot, Richard L. Hudson

Alan Greenspan, Albert Einstein, asset allocation, Augustin-Louis Cauchy, behavioural economics, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black-Scholes formula, British Empire, Brownian motion, business cycle, buy and hold, buy low sell high, capital asset pricing model, carbon-based life, discounted cash flows, diversification, double helix, Edward Lorenz: Chaos theory, electricity market, Elliott wave, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, Fellow of the Royal Society, financial engineering, full employment, Georg Cantor, Henri Poincaré, implied volatility, index fund, informal economy, invisible hand, John Meriwether, John von Neumann, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, market bubble, market microstructure, Myron Scholes, new economy, paper trading, passive investing, Paul Lévy, Paul Samuelson, plutocrats, power law, price mechanism, quantitative trading / quantitative finance, Ralph Nelson Elliott, RAND corporation, random walk, risk free rate, risk tolerance, Robert Shiller, short selling, statistical arbitrage, statistical model, Steve Ballmer, stochastic volatility, transfer pricing, value at risk, Vilfredo Pareto, volatility smile

The likes of Merrill Lynch, Goldman Sachs, and Morgan Stanley made it a part of intricate trading strategies. They tried tuning investment portfolios to different frequencies of risk and reward, as one might tune a radio. But the financial bumps and lurches of the 1980s and 1990s have forced a rethink, among financiers as well as among economists. Black Monday of 1987, the Asian economic crisis of 1997, the Russian summer of 1998, and the bear market of 2001 to 2003—surely, many now realize, something is not right. If reward and risk make a ratio, the standard arithmetic must be wrong. The denominator, risk, is bigger than generally acknowledged; and so the outcome is bound to disappoint.

…

It let banks devise new and ever-fancier financial products. It even allowed “portfolio insurance,” a precisely calculated number of options designed to rise in value if your main stock portfolio falls. It seemed to be financial engineering of the highest form. It had abolished risk. Of course, the truth was re-discovered on Black Monday, October 19, 1987, when a sudden drop in stock prices was turned into a rout by a wall of insurance options crashing down on the market. A fundamental problem is the Black-Scholes assumption of constant volatility—in essence, that the world does not change. Normally, to calculate an options price, you plug in a few numbers, including your estimate of how much the underlying stock price or currency rate fluctuated in the past; the suggested price falls out the back end of the formula.

Financial Fiasco: How America's Infatuation With Homeownership and Easy Money Created the Economic Crisis by Johan Norberg

accounting loophole / creative accounting, Alan Greenspan, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, business cycle, capital controls, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Brooks, diversification, financial deregulation, financial innovation, Greenspan put, helicopter parent, Home mortgage interest deduction, housing crisis, Howard Zinn, Hyman Minsky, Isaac Newton, Joseph Schumpeter, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, Mexican peso crisis / tequila crisis, millennium bug, money market fund, moral hazard, mortgage tax deduction, Naomi Klein, National Debt Clock, new economy, Northern Rock, Own Your Own Home, precautionary principle, price stability, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, The Wealth of Nations by Adam Smith, too big to fail

Index ABN AMRO acquisition, 119 constant-proportion debt obligation, 59-60 accounting, 141 mark-to-market, 91-94 ACORN (Association of Community Organizations for Reform Now), 28, 34 adjustable-rate mortgages, 7, 71 AIG (American Insurance Group), 56, 82, 88-91, 136 retreats and other exclusive trips, 91 "Alt-A" loans, 42 "American Dream Commitment" of Fannie Mae, 33 Andrukonis, David, 40-41, 77 Apgar, William, 32, 35 Asian crisis of 1997, 16, 21 asset bubbles consumer prices and, 11-12 economic crises and, 21 Federal Reserve and, 13 laws of, 69 the "Three Is" and, 58 Atkins, Paul, 79, 145 Auerbach, Alan, 153 bailouts, 14, 91, 99-100, 141-42 arbitrariness of the dollar figure, 118 failed, 85-86 of Fannie Mae and Freddie Mac, 78-79 housing industry, 127 Troubled Assets Relief Program, 99, 100, 113, 115-16, 118-28 See also crisis management Baker, Richard, 39 Bank of America Countrywide and, 72 Merrill Lynch and, 82-83, 85-86 banks and banking industry bank mergers, 27, 28 bank runs, 49-50, 70-75 capital requirements, 49, 51-54, 133, 141 conduits, 52 overconcentration, 104 preventing banking crises, 50, 51 recapitalizing, 118-28 securitization of mortgages, 49-55 shadow banking sector, 52-53, 70-75, 133 structured investment vehicles, 52 Barclays, 82-83 Bartlett, Bruce, 20-21 Basel banking standards and rules, 49, 51-54,135,145-46 Bayers, Betsy, 72 Bear Stearns, 57, 85 hedge funds collapse, 72, 80-81, 113 oversubscribed securitized mortgages, 27 "Bear Stearns Precedent," 82 Bennett, Richard, 40 Berlusconi, Silvio, 119 Bernanke, Ben, 4, 78, 99, 100, 116-17, 121, 149 "Bernanke put," 13, 14-15 on Friedman and Schwartz, 123 "savings glut," 15-16 shorting and, 110 Bernholz, Peter, 143-44 Big Three automakers, 125 Black Monday (October 19, 1987), 2, 13, 14 The Black Swan, 43 Blankfein, Lloyd, 88-89 BNC Mortgage, 55 BNP Paribas, 74 borrowers, "subprime" behind in payments and defaulting, 71-72 definitions, 29-30, 41 early repayment penalties, 34 previously defaulting borrowers, 31 See also subprime mortgages Brown, Gordon, 98, 120, 149, 154 Buffett, Warren, 58, 74-75, 140 bugs in rating software, 59-60 Bush, George H.

The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History by David Enrich

Bear Stearns, Bernie Sanders, Black Monday: stock market crash in 1987, call centre, centralized clearinghouse, computerized trading, Credit Default Swap, Downton Abbey, eat what you kill, electricity market, Flash crash, Glass-Steagall Act, Goldman Sachs: Vampire Squid, information asymmetry, interest rate derivative, interest rate swap, London Interbank Offered Rate, London Whale, Long Term Capital Management, Michael Milken, Navinder Sarao, Nick Leeson, Northern Rock, Occupy movement, performance metric, profit maximization, proprietary trading, Savings and loan crisis, tulip mania, work culture , zero-sum game

See British Bankers’ Association Bear Stearns, 152, 186–87 Beck, Alison, 412–13, 428 Belfast, HMS, 439 Bere, Scott, 246, 246n Bermingham, David, 373–74 Bernanke, Ben, 195 BGC Partners, 51, 122, 379, 407 “Big Bang,” 70 Bird, Stephen, 281 Bishopsgate Police Station, 364, 387 black garbage bags, 87, 87n Black Monday (1987), 33 Blair, Tony, 15, 332 Blankfein, Lloyd, 248 Blind Side, The (movie), 154 BNP Paribas, 85–86, 138–39, 149, 429 Boesky, Ivan, 311 Bolivia, 289 Bond, Tim, 193–94 Bond University, 89 Born, Brooksley, 248 Brackenbury Primary School, 9 Brady, Nicholas, 33 Brand, Danny, xii, 104, 129, 299, 398 Breuer, Lanny, 267, 268–69 Brevan Howard, 315, 349 British Bankers’ Association (BBA), xii, 68–70, 75–80, 446 false Libor submissions, 79–80, 181–83, 192–94, 195–96 introduction of Libor, 69–70 Libor improvements, 203–4 Libor investigation, 205–7, 244, 257, 271–72 licensing fees for Libor, 76–77 brokers, 41–42 “entertainment” and commissions, 50–53 broking, 42–43 Brown, David, 13–14, 411 Brown, Gordon, 10, 15, 30, 358 Bubor, 92 Bulgaria, 360 bumblebee socks, 103–4, 398, 401 bunching phenomenon, 251–52 Bush, George W., 266–67 butterflies, 353 CaesarsBingo.com, 409 California State Teachers’ Retirement System (CalSTRS), 114 call reports, 250, 251 Caltech, 21 Cameron, David, 50, 358, 395, 445 Caplin, David “Mustard,” xii, 122 employee conduct, 117–18 Libor investigation, 334, 407 nickname of, 44 RP Martin culture, 44–45, 46, 117 sale of RP Martin, 407 switch trades, 172–73 year-end bonuses, 314–15 Carroll, John, 311–12 Cars (movie), 409 Carter-Stephenson, George, xiii, 395–96, 410 Casterton, David, xi, 49, 128, 132, 132n, 135, 395, 445 Cayne, Jimmy, 152 Cecere, Chris, x application to join Tibor, 270, 276 at Brevan Howard, 315, 349 Hayes and Bank of America reference, 320 Hayes and Libor investigation, 296–301, 315 Hayes and “spider network,” 349 Hayes job offer and hire, 229–30, 260 at Japanese getaway, 1–3 Libor submissions, 281–82, 283–84, 291 Pieri and Hayes, 293–94 resignation of, 315–16 risk-taking mandate of, 2 update on, 445 Cecere, Megan, 230, 306 Celtik, Burak, x, 245–46, 276, 294–95, 298, 445 CFTC.

Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street by William Poundstone

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", Albert Einstein, anti-communist, asset allocation, Bear Stearns, beat the dealer, Benoit Mandelbrot, Black Monday: stock market crash in 1987, Black-Scholes formula, Bletchley Park, Brownian motion, buy and hold, buy low sell high, capital asset pricing model, Claude Shannon: information theory, computer age, correlation coefficient, diversified portfolio, Edward Thorp, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial engineering, Henry Singleton, high net worth, index fund, interest rate swap, Isaac Newton, Johann Wolfgang von Goethe, John Meriwether, John von Neumann, junk bonds, Kenneth Arrow, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Michael Milken, Myron Scholes, New Journalism, Norbert Wiener, offshore financial centre, Paul Samuelson, publish or perish, quantitative trading / quantitative finance, random walk, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Ronald Reagan, Rubik’s Cube, short selling, speech recognition, statistical arbitrage, Teledyne, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, traveling salesman, value at risk, zero-coupon bond, zero-sum game

Anyone who puts all her assets in stocks is going to have to accept large dips in wealth. This fact has weighed heavily on the critics of Kelly investing. For Thorp and his hedge fund, it was largely irrelevant. An acid test of Princeton-Newport’s market neutrality came in the Black Monday crash of October 19, 1987. The Dow Jones index lost 23 percent of its value in a single day, the biggest single-day drop ever. Princeton-Newport’s $600 million portfolio shed only about $2 million in the crash. Thorp’s computer immediately began alerting him to rich opportunities in the panicked valuations.

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LTCM’s people were well aware that multiplying profits through leverage also multiplies risk of ruin. They told investors that they had risk under control through their financial engineering. LTCM used a sophisticated form of the industry standard risk reporting system, VaR or “Value at Risk.” After the Black Monday crash of 1987, investment bank J. P. Morgan became concerned with getting a handle on risk. Derivatives, interest rate swaps, and repurchase agreements had changed the financial landscape so much that it was no longer a simple thing for a bank executive (much less a client) to understand what risks the people in the firm were taking.

A Wealth of Common Sense: Why Simplicity Trumps Complexity in Any Investment Plan by Ben Carlson

Albert Einstein, asset allocation, backtesting, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, book value, business cycle, buy and hold, buy low sell high, commodity super cycle, corporate governance, delayed gratification, discounted cash flows, diversification, diversified portfolio, do what you love, endowment effect, family office, financial independence, fixed income, Gordon Gekko, high net worth, index fund, John Bogle, junk bonds, loss aversion, market bubble, medical residency, Occam's razor, paper trading, passive investing, Ponzi scheme, price anchoring, Reminiscences of a Stock Operator, Richard Thaler, risk tolerance, Robert Shiller, robo advisor, South Sea Bubble, sovereign wealth fund, stocks for the long run, technology bubble, Ted Nelson, transaction costs, Vanguard fund, Vilfredo Pareto

Table 4.2 Bob's Mistiming of Market Peaks Date of Investment Amount Invested Subsequent Crash December 1972 $6,000 –48% August 1987 $46,000 –34% December 1999 $68,000 –55% October 2007 $64,000 –57% Luckily, while Bob couldn't time his buys, he never sold out of the market even once. He didn't sell after the bear market of 1973–1974, or the Black Monday crash in 1987, or the technology bust in 2000, or the financial crisis of 2007–2009. He never sold a single share. So how did he do? Even though he only bought at the very top of the market, Bob still ended up a millionaire with $1.1 million. How could that be you might ask? First of all Bob was a diligent saver and planned out his savings in advance.

The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America—and How to Undo His Legacy by David Gelles

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 3D printing, accounting loophole / creative accounting, Adam Neumann (WeWork), air traffic controllers' union, Alan Greenspan, Andrei Shleifer, Bear Stearns, benefit corporation, Bernie Sanders, Big Tech, big-box store, Black Monday: stock market crash in 1987, Boeing 737 MAX, call centre, carbon footprint, Carl Icahn, collateralized debt obligation, Colonization of Mars, company town, coronavirus, corporate governance, corporate raider, corporate social responsibility, COVID-19, Credit Default Swap, credit default swaps / collateralized debt obligations, disinformation, Donald Trump, financial deregulation, financial engineering, fulfillment center, gig economy, global supply chain, Gordon Gekko, greed is good, income inequality, inventory management, It's morning again in America, Jeff Bezos, junk bonds, Kaizen: continuous improvement, Kickstarter, Lean Startup, low interest rates, Lyft, manufacturing employment, Mark Zuckerberg, Michael Milken, Neil Armstrong, new economy, operational security, profit maximization, profit motive, public intellectual, QAnon, race to the bottom, Ralph Nader, remote working, Robert Bork, Ronald Reagan, Rutger Bregman, self-driving car, shareholder value, side hustle, Silicon Valley, six sigma, Social Responsibility of Business Is to Increase Its Profits, Steve Ballmer, stock buybacks, subprime mortgage crisis, TaskRabbit, technoutopianism, Travis Kalanick, Uber and Lyft, uber lyft, warehouse robotics, Watson beat the top human players on Jeopardy!, We are the 99%, WeWork, women in the workforce

Instead, Welch wanted to create a new revenue stream by licensing out the NBC brand to independent producers and other TV stations, and believed the network could save money by firing much of the top on-air talent. Just how powerful NBC could be was not lost on him though, and at times Welch tried to meddle with coverage. When the stock market crashed on Black Monday, October 19, 1987, Tom Brokaw issued an ominous report on the NBC Nightly News, warning of further economic carnage to come. Welch thought Brokaw was being too negative and called Lawrence Grossman, the head of the news division, to complain. “You’re killing all the stocks!” he burst out. “This is not an appropriate discussion to be having,” Grossman replied.

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., 79–80, 176–78, 219 in stakeholder capitalism, 219 Antitrust Paradox, The (Bork), 38 Apple, 214 Apprentice, The (NBC TV program), 121, 135, 195 Arctic Cat, 77 Armco, 66–67 Armstrong, Neil, 22 Arpey, Gerard, 153 Arthur Andersen, 124 AT&T, 71, 169, 175–76, 177, 182, 221, 223 Avakian, Stephanie, 225 Baker, George Fisher, 184 Baldwin, Alec, 140 Ballmer, Steve, 102, 171 Bank of America, 144, 149, 214 Barra, Mary, 199 B Corp movement, 212–13 Bear Stearns, 67, 143–44 Beasley, Jane, 118–20 Belichick, Bill, 221 Bennett, Steve, 105–6 Bennett, William, 95 Bennis, Warren, 132 Bergers, David, 147–48 Berkshire Hathaway, 222 Berle, Adolf A., Jr., 24–25, 212 Bertelsmann, 51 Bethlehem Steel, 165 Bezos, Jeff, 134, 171–74, 184, 185, 222–23 Bezos Academy, 134 Bill and Melinda Gates Foundation, 133–34 Bin Hussain, Muath, 135 Black Monday (October 19, 1987), 53 BlackRock, 213–14 Blitzer, Wolf, 90–91 Bloomberg, Michael, 132–33 Blumenthal, Richard, 82 Blystone, John, 105 Boeing, 9, 75, 77, 86–90, 126–30, 137, 186–94, 203 bailout, 224 Business Jet Project, 102, 119 Dave Calhoun as CEO, 189, 190–94, 224 Congressional investigations of 737 Max, 156, 189, 194 Covid-19 pandemic and, 224 Ethiopian Airlines Flight 302 crash (2019), 187–89, 190, 194 headquarters relocation to Chicago, 88–89, 219 Leadership Center (near St.

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, buy and hold, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, Cornelius Vanderbilt, corporate governance, Credit Default Swap, cross-subsidies, currency risk, dematerialisation, disinformation, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, Ida Tarbell, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jim Simons, John Meriwether, junk bonds, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, M-Pesa, market design, Mary Meeker, megaproject, Michael Milken, millennium bug, mittelstand, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, Paul Volcker talking about ATMs, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, reality distortion field, regulatory arbitrage, Renaissance Technologies, rent control, risk free rate, risk tolerance, road to serfdom, Robert Shiller, Ronald Reagan, Schrödinger's Cat, seminal paper, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, vertical integration, Washington Consensus, We are the 99%, Yom Kippur War

The assumption of full employment which had been characteristic of the 1950s and 1960s had already gone: the measures of the early 1980s broke expectations of continuing and accelerating inflation. In the two decades that followed, interest rates and inflation steadily declined, and corporate profits and asset prices increased rapidly. That was the macroeconomic background against which Greenspan moved to centre-stage. Within two months his intentions would be tested. On ‘Black Monday’, 19 October 1987, the major US stock indexes fell by around 20 per cent on a single day. Before trading resumed the following morning, a statement was issued that ‘The Federal Reserve, consistent with its responsibilities as the nation’s central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system.’3 According to Greenspan, ‘telephone calls placed by officials of the Federal Reserve Bank of New York to senior management of the major New York City banks helped to assure a continuing supply of credit to the clearinghouse members, which enabled those members to make the necessary margin payments’.4 What this meant in practice was elucidated by Citigroup’s John Reed: ‘his bank’s lending to securities firms soared to $1.4 billion on October 20, from a normal level of $200 million to $400 million, after he received a telephone call from E.

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.: ‘The Fall of Rome’ 119 Augar, Philip 114–15 Australian central bank 243 automobile manufacture 44 AXA 27, 200 B Bagehot, Walter 244 bail-outs 75, 138, 150, 260, 268, 271 balance sheets 221 Bank of England 245 derivatives 193 Deutsche Bank 191, 192, 192, 222 Federal Reserve System 245 financial institutions’ claims against each other 190 Halifax 140, 164, 190 Japanese banks 221 of large US banks 38 of Fannie Mae and Freddie Mac 75 need for new capital 137 removal of debt from the public-sector balance sheet 158 value of securities 41 Baltic Exchange 17 Bank for International Settlements (BIS) 221 ‘bank levy’ 266 Bank of America 113, 135, 150, 185, 186, 193, 300 Bank of England 98, 139, 247, 260, 264 advocacy of City of London interests 20 balance sheet 245 central bank for the UK 183 and Diamond 35 direct funding to HBoS and RBS 135 Eurodollar market 20 nationalised (1946) 243 and Overend, Gurney & Co. 31 saves Scottish banks 26 and Soros 23 Bank of Italy 243 Bank of Japan 221 Bank of New York (now incorporated into BNY Mellon) 24 Bank of Scotland 11, 12, 14, 24, 26, 34, 78, 124, 125, 129, 135, 139 Bank of Spain 183 banking annualised shareholder returns of major banks 134 assets 91 bank managers 11–12, 27, 84, 125, 129, 197, 198, 281 banking crises (1800–2010) 37 Basel rules on bank lending 21, 151, 220–25 career in 11–12 cartelised 219 co-operative banks 169 complexity 276–7 conglomerate banks 133, 136, 137 deposit and investment channels 25–6 deposit-taking banks 259–60, 288–9, 290 equity in 282 inter-bank lending 244 long history of banking institutions 24 nationalisation 301 retail banks 33, 185, 198, 220, 284, 290, 291 ‘reverse-engineering’ products 21 run on bank 90 savings banks 169 size in 276 transformation of investment banking 15 universal banks 220 zombie banks 38, 39, 219 ‘banking book’ 320n20 Banque de France 243 Barclays Bank 24, 34, 35, 113, 135, 139, 166, 185, 186, 261, 266, 267 Barings Bank 31, 130, 134 Basel agreements 21, 151, 220–25, 234, 270, 298 Bausparkassen 149, 154 BBC 58 Bear Stearns 48, 90, 135 Berkshire Hathaway 107–8, 203, 212, 282 Berle, Adolf 51 Berlin financial centre 26 Bernanke, Ben 40, 57, 58, 73, 104 beta (β) parameter 206 beta-blockers 47 bezzle 127, 128, 132, 136, 176, 177, 190, 201, 244, 280 bias to action 203–8, 211, 273, 291 ‘Big Bang’ (1986) 28 ‘Big Dig’ tunnel, Boston 158 biotechnology 168 bitcoin 187 Black, Fischer 19, 69 Black, James 47 ‘Black Monday’ (19 October 1987) 242 ‘black swans’ 67 Black-Scholes model 20, 69 BlackRock 200, 207, 213, 253 Blair, Tony 262 Blankfein, Lloyd 14–15, 143, 160, 300 Blodget, Henry 199, 293 Bloomberg 281, 302 Bloomingdale’s department store 46 BMW 170 BNP Paribas 33, 50, 193, 200 BNY Mellon 200 Bogle, Jack 207 Bolton, Anthony 108, 109 bond trading 20 bonus culture 50–52 Born, Brooksley 57 Bovis 158 Bowie, David 21 Bradford and Bingley 135 Brandeis, Louis: Other People’s Money 114 Brecht, Bertolt: Happy End 188 Bretton Woods conference (1944) 17, 18, 36, 221 Britain assets and liabilities of British banks 1 English law 263 failure of UK banking sector (2008) 276–7 and FISIM 264 global dominance of the finance industry 218, 265 housing 149, 174 British Telecom sale 158, 250 Brittan, Samuel 58, 70 Brokaw, Tom 258 broker-dealer 29, 84, 117, 198 brokers 29–30 Brooke, Rupert 95 ‘Heaven’ 87 Brooks, Rebekah 292, 295 Brown, Gordon 24, 231, 235, 262 Browning, Robert: ‘A Toccata of Galuppi’s’ 262 BTR 45 Buffett, Warren 69–70, 100, 107, 108, 109, 112–13, 124, 127, 131, 132, 192, 203, 205, 212, 267, 268, 282 building societies 25, 149, 150, 151, 154, 290 Building Societies Act (1986) 150–51 Bundesbank 243 Burke, Edmund: Letters on a Regicide Peace 173 Burrough, Bryan and Helyar, John: Barbarians at the Gate: The Fall of RJR Nabisco 46, 164, 204 Burroughs, William S. 259 Bush, George W. 58, 255 buy-outs 166 buy-side analysts 199 Byng, Admiral 71[?

Capital Ideas Evolving by Peter L. Bernstein

Albert Einstein, algorithmic trading, Andrei Shleifer, asset allocation, behavioural economics, Black Monday: stock market crash in 1987, Bob Litterman, book value, business cycle, buy and hold, buy low sell high, capital asset pricing model, commodity trading advisor, computerized trading, creative destruction, currency risk, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, diversification, diversified portfolio, endowment effect, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, fixed income, high net worth, hiring and firing, index fund, invisible hand, Isaac Newton, John Meriwether, John von Neumann, Joseph Schumpeter, Kenneth Arrow, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, market bubble, mental accounting, money market fund, Myron Scholes, paper trading, passive investing, Paul Samuelson, Performance of Mutual Funds in the Period, price anchoring, price stability, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, seminal paper, Sharpe ratio, short selling, short squeeze, Silicon Valley, South Sea Bubble, statistical model, survivorship bias, systematic trading, tail risk, technology bubble, The Wealth of Nations by Adam Smith, transaction costs, yield curve, Yogi Berra, zero-sum game

We shall return to this phenomenon from a different perspective in Chapter 6. These widely separated but memorable demonstrations of market inefficiency are seared into memory: the 50 percent rise in stock prices from the middle of 1928 to October 1929; the subsequent plummet of 85 percent to the low of June 1932; Black Monday of October 19, 1987, when stocks lost over 20 percent of their value in one day; the Long-Term Capital Management crisis of the summer of 1998 when the imminent failure of this hedge fund nearly pulled down the whole bern_c02.qxd 3/23/07 8:53 AM Page 29 The Strange Paradox of Behavioral Finance 29 financial system; the 140 percent boom from the end of 1995 to October 2000, and the subsequent 44 percent bust in February 2003.

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Little (consulting f irm), 152, 166 Asimov, Isaac, 59, 60 Asness, Cliff, 216 AQR Capital Management, 216 Global Alpha Fund, 216 Asset allocation asset allocation goes 2x strategy, 190 –191 Asset Trust platform strategy for, 191–192 considering beta risks in, 173 Leibowitz’s risk/return trade-off for, 211–212 Markowitz’s observations about, 159 Assets f inancial market transactions of, 113–114 Litterman on shifting to portfolio from individual, 228–229 managed by Barclays Global Investors ( BGI), 129–130 risk transfer and liquidity of, 118 Sharpe’s algebraic specif ication of CAPM on pricing, 167–168 Treynor on valuation of, 167 Asset Trust platform strategy, 191–192, 193–194 Asymmetric Returns: The Future of Active Asset Management ( Ineichen), 173 AXA Rosenberg, 11 Bachelier, Louis, 240 Bank of Japan, 119 Barber, Brad, 13, 56 Barclays Bank of London, 130, 137 Barclays Global Investors ( BGI) Active Portfolio Management: Quantitative Theory and Applications (Grinold and Kahn) followed by, 137–138 approach to creating alpha by, 139–141 assets/index funds managed by, 129–130, 170 Asset Trust platform strategy used by, 191–192, 193–194 basic personnel policies of, 141–143 basic philosophy of, 145 Behavioral Finance application by, 147 enhancing indexing at, 140 –141 ETFs (exchange-traded funds) issued by, 142 impact of high-tech bubble (1990s) on, 145–147 Information Ratios ( IR) used by, 138–139 iPath ETNs issued by, 142 portfolio performance of, 129–130, 140 –141, 142–143, 146 role of basic f inance theory in strategies of, 143–145 transformation of WFIA into, 136–137 See also Wells Fargo Investment Advisors ( WFIA) BARRA, 137 Behavioral Finance arbitrage issue of, 25–28 behavioral anamolies are where alpha is born, 31–32 BGI application of, 147 bern_z04bindex.qxd 4/3/07 8:20 AM Page 265 Index contributions to understanding investors by, 30 –32 on decisions and choices by investors, 19, 40 def inition of, 4, 39 examining possibilities of, 10 –11 as good description of reality, 13–14 Grossman on, 144 impact on Capital Ideas by, 30 –31, 32 Kahneman on, 30, 31 Kahneman-Tversky inf luence on, 10 Miller’s quip about, 30 paradox of, 32–33 practical implications of, 6 Samuelson on, 39 using simulations of, 102 survey conducted on, 5 Swensen on, 164 Taylor’s work on, 15 See also Finance theories; Sellers Benartzi, Sholomo, 9 Benchmarks def inition of, 38 LIBOR ( London Interbank Offered Rate), 111 long and short portfolios by eliminating the, 230 Policy Portfolio as, 211 S&P 500, 38, 107, 140, 148–149, 160, 186 Wilshire 5000, 160 Bernoulli, Jacob, 64 Berra, Yogi, 11 Beta (systematic risk) asset allocation and factor of, 173 asset allocation goes 2x for alpha and, 190 –191 265 Asset Trust platform for separating alpha from, 191–192, 193–194 Damsma’s separation of alpha and, 184 –191 def inition of, 38, 92, 168–169 distinction between alpha and, 173–177 Leibowitz on bond funding and role of, 206 Litterman on allocation between alpha and, 219–223 Scholes’ exclusion of, 112 stock volatility and, 168, 172 strategies for separating alpha bets from, 177–178, 190 –192, 193–194, 238 See also Alphas ( beating the market); Risk; Valuation Biggs, John, 200 Black, Fischer Black-Litterman model by, 215, 216, 220, 224 –228, 229, 233–234 Black-Scholes-Merton options pricing model of, 52, 67, 85, 110, 195 on CAPM return discrepancy, 132 controversy between Fouse and, 133 equilibrium goal of, 215, 216, 220, 224 –228, 244 “How to Use Security Analysis to Improve Portfolio Selection” (Treynor and Black) by, 175 on increasingly f ierce competition, 234 inf luence on BGI by, 143 bern_z04bindex.qxd 266 4/3/07 8:20 AM Page 266 INDEX Black, Fischer (Continued) MIT classes taught by, 59 on noise trading, 19, 20 on optimal portfolio selection, 185 on putting trust in logic and theory, 94 quip on arrivals in New York by, 214 on search for alpha, 174 –175 Stagecoach Fund designed by, 128, 133 “The Trouble with Econometric Models” by, 215 Black-Litterman model active management approach of, 224 –228, 229, 233–234 described, 215 equilibrium goal of, 215, 216, 220, 224 –228, 244 market eff iciency foundation of, 220 as mean/variance optimization solution, 225–228 See also Goldman Sachs Black Monday (October 19, 1987), 28 Black-Scholes-Merton options pricing model, 52, 67, 85, 110, 195 Blodget, Henry, 245 Blue noise, 41 Bodie, Zvi Functional and Structural Finance (Merton and Bodie) by, 50 on institutional innovation process, 50 –55 The Bond King, 179 BondsPLUS, 180 –182, 195 Bonds. See U.S. bonds Bounded rationality, 15–16 BP-Amoco, 185–186, 195 Brainard, William, 150, 151 Bronx School of Science, 58, 59 Brown, Keith, 22 Brunnermeier, Markus, 29 Bubbles high-tech (1990s), 145–147, 245 as macro-inefficiency of markets, 41 NASDAQ bubble (1998–2000), 29–30 See also Stocks Buffett, Warren, 170 Buyers f inancial market transactions by, 113–114 rational-agent model on, 4 –5, 6, 10, 15–16, 30, 71 See also Behavioral Finance; Capital Ideas; Investor behavior/choices CalPERS, 176 Campbell, John, 6, 70, 172 “Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk” (Sharpe), 91 Capital Asset Pricing Model (CAPM) alpha representation of predictions of, 38 current investor opinion about, 172–173, 177 difference between reality and idealized, 10 estimating, 92 on expected returns, 92–93 inf luence on BGI strategies by, 143–144 bern_z04bindex.qxd 4/3/07 8:20 AM Page 267 Index informed manner of investment in, 19 Leibowitz’s work on, 196–197, 206–207 market ineff iciency explanation of discrepancy of, 132 Markowitz’s examination of assumptions of, 104 –108 origins and development of, 100, 171–172 portable alpha development of, 176, 182–195 rational expectations similarities to, 67 Sharpe’s algebraic specif ication of, 167–168 Sharpe’s views on, 91–96 Sharpe-Treynor-Lintner-Mossin original, 165 Shiller on market portfolio mandated by, 84, 87 Treynor’s pioneering work on, 24 unworldly nature of, 48 See also Finance theories Capital Ideas arbitrage issue of, 25–28 Behavioral Finance impact on, 30 –31, 32 continuing evolution and impact of, 238–239, 246 described, 3–4 liquid markets focus of, 158 Lo’s work on, 240 –241 LTCM’s revelations about, 78–79 Merton’s work/comments on, 43, 47–48, 56, 240 Notes on Usage, xxii overriding assumption of, 4 rational model supporting, 10 267 Sharpe’s characterization of, 93–94 Shiller’s analytical framework using, 43, 65– 66, 240 –241 Swensen’s application of, 154 –164 See also Buyers; Finance theories; Neoclassical theory; Sellers Capital Ideas ( Bernstein) on America’s financial markets, 241 CAPM described in, 165 on eff icient markets, 154 f inancial market transformation since, 48–49, 238–239 on Leibowitz’s celebration of Sharpe, 212–213 on market eff iciency, 220 Merton interviewed for, 47 on noise traders, 19 rational-agent model failures impact on, 6, 30 risk management applications discussed in, 237 Samuelson on lack of easy pickings in, 38 Capital market.

Damsel in Distressed: My Life in the Golden Age of Hedge Funds by Dominique Mielle

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", activist fund / activist shareholder / activist investor, airline deregulation, Alan Greenspan, banking crisis, Bear Stearns, Black Monday: stock market crash in 1987, blood diamond, Boris Johnson, British Empire, call centre, capital asset pricing model, Carl Icahn, centre right, collateralized debt obligation, Cornelius Vanderbilt, coronavirus, COVID-19, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, Elon Musk, Eugene Fama: efficient market hypothesis, family office, fear of failure, financial innovation, fixed income, full employment, glass ceiling, high net worth, hockey-stick growth, index fund, intangible asset, interest rate swap, John Meriwether, junk bonds, Larry Ellison, lateral thinking, Long Term Capital Management, low interest rates, managed futures, mega-rich, merger arbitrage, Michael Milken, Myron Scholes, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, offshore financial centre, Paul Samuelson, profit maximization, Reminiscences of a Stock Operator, risk free rate, risk tolerance, risk-adjusted returns, satellite internet, Savings and loan crisis, Sharpe ratio, Sheryl Sandberg, SoftBank, survivorship bias, Tesla Model S, too big to fail, tulip mania, union organizing

The first two conditions that you find at the heart of virtually all asset price bubbles are leverage (too much debt) and speculation (too much greed). The Tulip mania of 1637, the first record of a speculative bubble, when prices of tulips in Holland soared and then collapsed for reasons still uncertain today; the Great Depression of 1929; Black Monday in 1987; the dot-com bubble in 2000—they all had the same root causes. One of the oldest books about Wall Street, Reminiscences of a Stock Operator by Edwin Lefèvre, which recounts the life of stock trader Jesse Livermore around 1890 to 1920, said it categorically a hundred years ago: “There is nothing new on Wall Street.

Bernie Madoff, the Wizard of Lies: Inside the Infamous $65 Billion Swindle by Diana B. Henriques

accounting loophole / creative accounting, airport security, Albert Einstein, AOL-Time Warner, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, break the buck, British Empire, buy and hold, centralized clearinghouse, collapse of Lehman Brothers, computerized trading, corporate raider, diversified portfolio, Donald Trump, dumpster diving, Edward Thorp, financial deregulation, financial engineering, financial thriller, fixed income, forensic accounting, Gordon Gekko, index fund, locking in a profit, low interest rates, mail merge, merger arbitrage, messenger bag, money market fund, payment for order flow, plutocrats, Ponzi scheme, Potemkin village, proprietary trading, random walk, Renaissance Technologies, riskless arbitrage, Ronald Reagan, Savings and loan crisis, short selling, short squeeze, Small Order Execution System, source of truth, sovereign wealth fund, too big to fail, transaction costs, traveling salesman

Between January and July 1987, the market climbed almost straight up—the S&P 500 gained more than 30 percent in just seven months. It stumbled in the remaining months of the summer—an overdue correction, analysts said—but it still eked out a gain for the first nine months of the year. Then came Black Monday, October 19, 1987, when the bottom simply fell out. A record-cracking 600 million shares were traded on the Big Board that day, as the Dow Jones Industrial Average plummeted 508 points—a 22.6 percent fall, more than twice the damage inflicted on the worst day of the historic 1929 crash. The S&P 500 dropped almost as far, just as fast.

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The topic was the possibility of building an electronic link between their markets similar to the one the NASD maintained with the London Stock Exchange. 82 “Madoff’s sole proprietorship, founded 26 years ago”: The article also reported, incorrectly, that Madoff “did, however, found North Shore Hospital in Manhasset, Long Island, near one of his three homes.” According to the hospital’s successor institution, he played no role in the hospital’s founding, although his friend Sonny Cohn was a substantial benefactor to the hospital for many years. 83 The OTC market was “in shambles”: Tim Metz, Black Monday: The Catastrophe of October 19, 1987 . . . and Beyond (New York: William Morrow, 1988), p. 198. 83 “This added to the confusion and panic in the markets”: General Accounting Office, “Financial Markets: Preliminary Observations on the October 1987 Crash,” GAO/GGD-88–38, p. 6. 83 “We’re scared. Of course we’re scared”: As quoted in Metz, Black Monday, p. 199.

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.; Madoff Securities International, Ltd; Madoff victims; Securities and Exchange Commission; and specific employees, family members, feeder accounts, and investors appearance of prosperity, 137–38 arrest of Madoff and takeover of, 1, 10–12, 17–18, 21–23, 209, 222 assets frozen and sold, 245–46 audits of, 89, 254–55 automation of, 43–44, 47, 49, 68, 86–87, 92 automation of, and Ponzi records, 103, 119–20 Avellino & Bienes and, 38, 51, 77–78 back-office manager, 43 Black Monday of 1987 and, 84–85 bull market of 1980s and, 80 Christmas parties, 10–12, 182 Cohmad and, 73–74 early arbitrage by, 38–41 early investors and feeder funds and, 58–69, 89 early offices of, 43, 47 employees, 81, 182 employees, after arrest, 223, 259 employees, clawbacks and arrests of, 309–10, 314–15 founding and early years of, 25–27, 34–35 front-running accusations, 143 hidden investment operation and, 92–94 legitimate trading of, 17, 22, 49, 92, 136, 143, 152–53, 157–58, 160, 178, 186 Lipstick Building offices of, 2, 72, 81, 90, 103, 112, 120 Lipstick Building seventeenth floor, 2–3, 7–8, 11, 14, 17, 22–23, 72, 103, 136, 139, 150, 160, 181–82, 195, 199, 205, 223–24, 246, 309, 315 liquidation of, 216–24, 234–37, 239–40, 242–47, 259–66 Madoff as sole owner of, 286 Madoff sons join, 82–83, 286 market-making profits of, 178 NASDAQ bid-rigging scandal and, 107–8 net worth of, in 1980s, 80, 82 net worth of, in 2004, 138 Primex and, 118 regional brokerage firms and, 66–67 regulatory compliance and, 49–51 SEC investigation of 1992, 94–102 SEC investigation of 2001–4, 138, 140, 145–46 SEC investigation of 2005, 139–46, 151 SEC investigation of late 2005–6, 153–59, 162–66, 172, 227, 271–72 September 11, 2001, attacks and, 125 SIPC and, 44, 221 third market and, 49, 108 victims fund and, 245 Web site of, 296 Bernfeld, Ellen, 232 Bharara, Preet, 328–29 Bienes, Emily Picower, 64 Bienes, Michael, 37–38, 46, 50–53, 55–56, 77–78, 102, 254 lawsuit vs., 320–21 marriage of, 64, 132 SEC investigation and, 95–98 blue-chip stocks, 24–25, 53, 85, 93 Blumenfeld, Ed, 3 BNP Paribas, 212 Boesky, Ivan, 133, 333 bonds, 39, 130 Bongiorno, Annette, 14, 81, 179, 310–11, 315 Bonventre, Daniel, 81, 150, 152–53, 158, 160, 314–15 Boston Security Analysts Society, 122 Boston Stock Exchange, 39 Braman, Norman, 4, 212 Brazil, 89, 105, 212 Breeden, Richard, 327 Brighton Company, 58–59 British Petroleum, 265 brokerage firms bankruptcy and, 44, 65 crackdown of 1960s, 35–36 fixed commissions and, 65–66 paper crunch and, 42 top, of 1950s, 33 Brown, Matthew C., 109 Buffett, Warren, 60 bull spread strategy, 75 Bunker Ramo, 46 Butner Federal Correctional Complex, xviii–xx, 332, 333, 344 Cacioppi, Ted, 12–14, 248, 250 Calamari, Andrew, 17, 21–22 California state pension funds, 129 Cannon Mills, 25 Caribbean, 48, 109, 169, 265, 319 Carnegie Hall, 114 Carolan, Kate, 232–33 Casale, Nick, 227 Cayman Islands, xxiii, 1, 171, 245 Cédille, Jean-Michel, 74–75 Ceretti, Federico, 130, 169 Chais, Pamela, 57, 58–59 Chais, Stanley, 3, 57–60, 68–69, 74, 86, 89, 92, 117, 137, 200–201, 214, 335, 341 clawback suit, 257 SEC suit vs., 301 Chais family trust funds, 58, 60 Chais foundation, 211 Chaitman, Helen Davis, 260–62, 268–69, 306–8 Chapman, Peter, 48 charities and endowments, 110–11, 117, 133–34, 214–16, 276, 320, 340 Chase Manhattan Bank, 174 Chavkin, Peter, 248, 274–75, 288–89 Chemical Bank, 55, 105 cherry-picking, 144 Cheung, Meaghan, 155–56, 162–63 Chicago Board Options Exchange, 128 Chin, Denny, 248–53, 273, 275, 277, 279–80, 288, 332 Cincinnati Stock Exchange, 68, 86 Citibank, 175 clawback lawsuits, 257–58, 266–68, 313–15, 318–22, 325, 328, 330 Club No One Wanted to Join, The (essay collection), 311 Cohmad Securities, 3–4, 71–75, 92, 117, 137, 149, 186, 198, 257, 300–301 Cohn, Delaire & Kaufman, 71 Cohn, Marcia Beth, 72, 74, 77, 137, 186–87, 257 Cohn, Maurice “Sonny,” 3–4, 14, 70–74, 76–77, 137, 167, 257, 300 Congressional Research Service, 172 Contrafund, 106 convertible securities, 39–41, 53, 59, 62 Cotellessa-Pitz, Enrica, 314 Cowen & Company, 72 Cox, Christopher, 227–28 Creditanstalt, 169 credit markets, 181, 266, 302 Credit Suisse, 105, 131, 138, 141 criminal forfeiture laws, 274 Cross & Brown, 62–63 Crupi, JoAnn “Jodi,” 208–9, 315 De Bello, Nicole, 16, 19–20, 224, 270 de la Villehuchet, René-Thierry Magon, 170–71, 233–34, 318 Della Schiava, Yanko, 109, 202 demand notes, 56 Denver, John, 212 Depository Trust & Clearing Corporation (DTCC, or DTC), 119–20, 150–51, 159, 164, 245, 255, 272, 296 deregulation, 79–80, 86, 121–22, 176, 228 derivatives, xxiv, 131, 155, 173–76, 194–95, 201–2, 319 DiPascali, Frank, 3, 11, 153, 160, 195–96, 199–200, 205, 207–9, 272 arrest of, 225, 252, 297–99, 301, 309, 315, 326 false records and, 98–100, 102–3, 106–7, 119–20, 136, 150–51, 157, 298, 309–10 history of, with firm, 81–82 income of, 178–79 Madoff arrest and, 14, 18, 22, 223 Picower and, 133 SEC investigations and, 99–100, 139, 142–43, 145, 158, 272 disclosure requirements, 73 Dodger Sporting Goods, 31, 33 Donaldson, William H., 126 Donghia, Angelo, 81 Donnelly, Shannon, 183–84 Douglas, Michael, 212 Dow Jones Industrial Average, 25, 83, 186 Dreier, Marc S., 19 Dreyfus, Jack, 35 Dubai, 171, 204, 212 Dutch, 1, 171, 212 Eaton, Douglas, 19, 225–26, 237 Ebel, Maureen, 252, 275 Echenique Gordillo, Rodrigo, 206 Echevarria, Manuel, 178 E.F.

Spike: The Virus vs The People - The Inside Story by Jeremy Farrar, Anjana Ahuja

"World Economic Forum" Davos, bioinformatics, Black Monday: stock market crash in 1987, Boris Johnson, Brexit referendum, contact tracing, coronavirus, COVID-19, crowdsourcing, dark matter, data science, DeepMind, Demis Hassabis, disinformation, Dominic Cummings, Donald Trump, double helix, dual-use technology, Future Shock, game design, global pandemic, Kickstarter, lab leak, lockdown, machine translation, nudge unit, open economy, pattern recognition, precautionary principle, side project, social distancing, the scientific method, Tim Cook: Apple, zoonotic diseases

That had happened across the Channel: the French countryside was fizzing with discontent at the influx of potentially infected Parisians. Number 10 also feared that a London lockdown would cause the stock market to crash. On 12 March 2020, the FTSE 100 index had seen the biggest one-day fall since Black Monday in 1987, dwarfing the loss of confidence caused by the 2008 financial crisis. The idea of quarantining the capital was abandoned: more than half the UK cases were already outside London anyway, having been strewn across the country by travellers returning from Europe. The modelling, reprising the messages from the SAGE meetings on 13 and 16 March, showed that, to avert the horrendous tally of deaths coming our way, the country needed to do more than simply getting the vulnerable to shield, the infected to quarantine and affected households to isolate.

Market Sense and Nonsense by Jack D. Schwager

3Com Palm IPO, asset allocation, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Brownian motion, buy and hold, collateralized debt obligation, commodity trading advisor, computerized trading, conceptual framework, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, diversified portfolio, fixed income, global macro, high net worth, implied volatility, index arbitrage, index fund, Jim Simons, junk bonds, London Interbank Offered Rate, Long Term Capital Management, low interest rates, managed futures, margin call, market bubble, market fundamentalism, Market Wizards by Jack D. Schwager, merger arbitrage, negative equity, pattern recognition, performance metric, pets.com, Ponzi scheme, proprietary trading, quantitative trading / quantitative finance, random walk, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, selection bias, Sharpe ratio, short selling, statistical arbitrage, statistical model, subprime mortgage crisis, survivorship bias, tail risk, transaction costs, two-sided market, value at risk, yield curve

Index Adjustable-rate mortgages (ARMs) Allocation bias Allocation decisions, future AMEX Internet Index Arbitrage Arbitrary investment rules ARM subprime mortgages Asness, Clifford Automatic selling Automatic trading Average maximum retracement (AMR) Average pair correlation Average return Back-adjusted return measures gain-to-pain ratio (GPR) MAR and Calmar ratios return retracement ratio (RRR) risk-adjusted return performance measures Sharpe ratio Sortino ratio strategy comparison symmetric downside-risk (SDR) Sharpe ratio tail ratio Backfilling bias Backwardation Bankrupt stocks Bear market of 2008 Bear market returns Bear markets vulnerability Behavioral biases Bernanke, Ben Best strategy risk for standard deviation Beta and correlation quantitative measures Black Monday (October 19, 1987) Black Tuesday (October 29, 1920) Bottoms-up allocation Brady commission Bubbles and crashes emotion-driven housing (mid-2000s) Internet market price tech timing and level Bubbles and crashes Bull market Bull market of 2009 Burn rate Calls Calmar ratio and MAR ratio Capital gains Capital losses Capital structure arbitrage Carve-out portfolio Catastrophe insurance Cause-and-effect relationship Church, George J.

Army of None: Autonomous Weapons and the Future of War by Paul Scharre

"World Economic Forum" Davos, active measures, Air France Flight 447, air gap, algorithmic trading, AlphaGo, Apollo 13, artificial general intelligence, augmented reality, automated trading system, autonomous vehicles, basic income, Black Monday: stock market crash in 1987, brain emulation, Brian Krebs, cognitive bias, computer vision, cuban missile crisis, dark matter, DARPA: Urban Challenge, data science, deep learning, DeepMind, DevOps, Dr. Strangelove, drone strike, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, facts on the ground, fail fast, fault tolerance, Flash crash, Freestyle chess, friendly fire, Herman Kahn, IFF: identification friend or foe, ImageNet competition, information security, Internet of things, Jeff Hawkins, Johann Wolfgang von Goethe, John Markoff, Kevin Kelly, Korean Air Lines Flight 007, Loebner Prize, loose coupling, Mark Zuckerberg, military-industrial complex, moral hazard, move 37, mutually assured destruction, Nate Silver, Nick Bostrom, PalmPilot, paperclip maximiser, pattern recognition, Rodney Brooks, Rubik’s Cube, self-driving car, sensor fusion, South China Sea, speech recognition, Stanislav Petrov, Stephen Hawking, Steve Ballmer, Steve Wozniak, Strategic Defense Initiative, Stuxnet, superintelligent machines, Tesla Model S, The Signal and the Noise by Nate Silver, theory of mind, Turing test, Tyler Cowen, universal basic income, Valery Gerasimov, Wall-E, warehouse robotics, William Langewiesche, Y2K, zero day

., 50 and jammed communication channels, 15–16 limits to, 23–25 and personnel costs, 16 and swarming, 17–23 task dimension of, 28 theoretical basics, 26–34 B-52 bomber, 174 B-59 (Soviet submarine), 311, 318 BAE Systems, 108–9 ballistic missiles, 40–41, 139, 141–43 Ballmer, Steve, 241 Bandar Abbas airport (Iran), 169 bandwidth, 327–28 Barksdale Air Force Base, 174 Basic Ai Drives, The (Omohundro), 237–38 Bat radar-guided anti-ship bomb, 96 battle damage assessment (BDA), 55 battle network, 43–44 Battlestar Galactica (film), 223 Belfiore, Michael, 76 Berman, Greg, 207 Biological Weapons Convention (BWC), 344 Black Monday market crash (1987), 199, 206 Blade Runner (film), 234 bombing raids, aerial, 275–76, 278, 341–42 Boomerang shot detection system, 113 bordeebook (online bookseller), 205 Borrie, John on incidents of mass lethality, 193 on risks of autonomous weapons, 150–51, 158 on system accidents, 189 on unanticipated failures, 154 on unintended lethal effects, 351 Bostrom, Nick, 237, 239 botnets, 212 Boyd, John, 23–24 Breakout (video game), 248 Brimstone missile, 105–8, 117, 326, 353 Bringsjord, Selmer, 245 brinksmanship, 207–8 brittleness, 145–47 and accidents, 155 and adversary innovation, 177–78 and counter-autonomy, 221 in neural networks, 182 in stock trading algorithms, 204 Brizzolara, Bob, 22 Brumley, David, 217, 219–22 on dangers of AI, 246 on ecosystem of autonomous systems, 247 on fear of AI, 241 on future of U.S. cybersecurity, 226–27 on introspective systems, 226 Brzezinski, Zbigniew, 173 bullets, expanding, 343 Bush, George H.

I.O.U.: Why Everyone Owes Everyone and No One Can Pay by John Lanchester

Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, Celtic Tiger, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, fixed income, George Akerlof, Glass-Steagall Act, greed is good, Greenspan put, hedonic treadmill, hindsight bias, housing crisis, Hyman Minsky, intangible asset, interest rate swap, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, junk bonds, Kickstarter, laissez-faire capitalism, light touch regulation, liquidity trap, Long Term Capital Management, loss aversion, low interest rates, Martin Wolf, money market fund, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, negative equity, new economy, Nick Leeson, Norman Mailer, Northern Rock, off-the-grid, Own Your Own Home, Ponzi scheme, quantitative easing, reserve currency, Right to Buy, risk-adjusted returns, Robert Shiller, Ronald Reagan, Savings and loan crisis, shareholder value, South Sea Bubble, statistical model, Tax Reform Act of 1986, The Great Moderation, the payments system, too big to fail, tulip mania, Tyler Cowen, value at risk

RAROC offered a numerical analysis of risk and added to it a measure of the impact of that risk on a business’s profitability; just as portfolio management provided a way of assessing and optimizing the risk of a set of share holdings, RAROC did the same for a company’s or bank’s range of businesses. In time, however, the industry came to prefer a newer model of risk, called value at risk, or VAR. This was a statistical technique which really took off in the later 1980s, as a response to the Black Monday stock market crash of October 1987. On that occasion, many players were appalled by the speed and severity of their losses—losses which, it’s now thought, were in large part caused by computer programs running “portfolio insurance.” That was yet another invention, the brainchild of a young California academic named Hayne Leland, who worked out that thanks to the Black-Scholes equation and subsequent takeoff of the options industry, options could now be used to create a form of insurance against share prices dropping, not just one by one but across an entire investment portfolio.

…

It’s a useful measure of how widely spread any data are, and it’s also a useful measure of probability. A “3-sigma event” is something that is supposed to happen only 0.3 percent of the time, i.e., about once every three thousand times something is measured. Quants use these measures of probability all the time. According to the models in use by the quants, the Black Monday crash of 1987 was a ten-sigma event. Translated into English, that meant that, in the words of Roger Lowenstein’s book When Genius Failed: The Rise and Fall of Long-Term Capital Management: Economists later figured that, on the basis of the market’s historical volatility, had the market been open every day since the creation of the Universe, the odds would still have been against its falling that much in a single day.

Den of Thieves by James B. Stewart

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", Bear Stearns, Black Monday: stock market crash in 1987, book value, Carl Icahn, corporate raider, creative destruction, deal flow, discounted cash flows, diversified portfolio, fixed income, fudge factor, George Gilder, index arbitrage, Internet Archive, Irwin Jacobs, junk bonds, margin call, Michael Milken, money market fund, Oscar Wyatt, Ponzi scheme, rolodex, Ronald Reagan, Savings and loan crisis, shareholder value, South Sea Bubble, Tax Reform Act of 1986, The Predators' Ball, walking around money, zero-coupon bond

The market itself came close to breakdown, especially on Tuesday, October 20, when it plunged again before rallying in the afternoon. Many market-makers on the New York Stock Exchange lacked the capital to absorb the selling onslaught. The Federal Reserve had to flood the system with cash to stave off disaster. Unlike the great crash of 1929, Black Monday 1987 didn't usher in a nationwide recession. It was a psychological breakdown, rather than an economic one. Corporate earnings remained strong. Main Street America continued spending. And even the shaken market itself began an extended rally from its new lows. Junk bonds, after plunging initially in a widespread flight to safer treasury bonds, recovered even faster, in part because of Milken's tireless proselytizing that they remained sound investments.

The Great Stagnation by Tyler Cowen

Asian financial crisis, Bernie Madoff, Black Monday: stock market crash in 1987, confounding variable, en.wikipedia.org, endogenous growth, financial innovation, Flynn Effect, income inequality, indoor plumbing, life extension, liquidity trap, Long Term Capital Management, Mark Zuckerberg, meta-analysis, Peter Thiel, RAND corporation, Savings and loan crisis, school choice, scientific management, Tyler Cowen, Tyler Cowen: Great Stagnation, urban renewal

Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History by Liam Vaughan

algorithmic trading, backtesting, bank run, barriers to entry, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, Bob Geldof, centre right, collapse of Lehman Brothers, data science, Donald Trump, Elliott wave, eurozone crisis, family office, financial engineering, Flash crash, Great Grain Robbery, high net worth, High speed trading, information asymmetry, Jeff Bezos, Kickstarter, land bank, margin call, market design, market microstructure, Market Wizards by Jack D. Schwager, Navinder Sarao, Nick Leeson, offshore financial centre, pattern recognition, Ponzi scheme, proprietary trading, Ralph Nelson Elliott, Reminiscences of a Stock Operator, Ronald Reagan, selling pickaxes during a gold rush, sovereign wealth fund, spectrum auction, Stephen Hawking, the market place, Timothy McVeigh, Tobin tax, tulip mania, yield curve, zero-sum game

* * * — AT THE Chicago Board of Trade, where it was an unwritten law that everyone had to have a nickname, they used to call Bill Braman “White Cornbread,” then just Cornbread, a riff on his polite “aw, shucks” demeanor and the WCB initials on his name badge. Braman, who is tall and lean with a shaved head, joined the Treasury pit from college just before Black Monday in 1987, and stayed there until the summer before 9/11, when he started trading on a screen. The transition was tough, and many of his friends fell by the wayside, but Braman was a quick, determined learner and before long he was earning more money than he ever had. “I had the best years of my life because I knew how to trade and the banks and the smart people hadn’t figured out the electronic side of it yet,” he recalls.

The Long Good Buy: Analysing Cycles in Markets by Peter Oppenheimer

Alan Greenspan, asset allocation, banking crisis, banks create money, barriers to entry, behavioural economics, benefit corporation, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, book value, Bretton Woods, business cycle, buy and hold, Cass Sunstein, central bank independence, collective bargaining, computer age, credit crunch, data science, debt deflation, decarbonisation, diversification, dividend-yielding stocks, equity premium, equity risk premium, Fall of the Berlin Wall, financial engineering, financial innovation, fixed income, Flash crash, foreign exchange controls, forward guidance, Francis Fukuyama: the end of history, general purpose technology, gentrification, geopolitical risk, George Akerlof, Glass-Steagall Act, household responsibility system, housing crisis, index fund, invention of the printing press, inverted yield curve, Isaac Newton, James Watt: steam engine, Japanese asset price bubble, joint-stock company, Joseph Schumpeter, Kickstarter, Kondratiev cycle, liberal capitalism, light touch regulation, liquidity trap, Live Aid, low interest rates, market bubble, Mikhail Gorbachev, mortgage debt, negative equity, Network effects, new economy, Nikolai Kondratiev, Nixon shock, Nixon triggered the end of the Bretton Woods system, oil shock, open economy, Phillips curve, price stability, private sector deleveraging, Productivity paradox, quantitative easing, railway mania, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Shenzhen special economic zone , Simon Kuznets, South Sea Bubble, special economic zone, stocks for the long run, tail risk, Tax Reform Act of 1986, technology bubble, The Great Moderation, too big to fail, total factor productivity, trade route, tulip mania, yield curve

Microsoft's president Brad Smith recently signalled that ‘this decade will end with almost 25 times as much digital data as when it began’.3 Over the same period, there have been three major recessions (in most economies) and several financial crises, including the US Savings & Loan crisis of 1986, the Black Monday stock market crash of 1987, the Japanese asset bubble and collapse between 1986 and 1992, the Mexican crisis of 1984, the Emerging Market crises of the 1990s (Asia in 1997, Russia in 1998 and Argentina in 1998–2002), the ERM currency crisis of 1992, the technology collapse in 2000 and, of course, the most recent global financial crisis, starting with the subprime mortgage and US housing declines of 2007, and the European sovereign debt crisis of 2010/2011.

The Volatility Smile by Emanuel Derman,Michael B.Miller

Albert Einstein, Asian financial crisis, Benoit Mandelbrot, Black Monday: stock market crash in 1987, book value, Brownian motion, capital asset pricing model, collateralized debt obligation, continuous integration, Credit Default Swap, credit default swaps / collateralized debt obligations, discrete time, diversified portfolio, dividend-yielding stocks, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial engineering, fixed income, implied volatility, incomplete markets, law of one price, London Whale, mandelbrot fractal, market bubble, market friction, Myron Scholes, prediction markets, quantitative trading / quantitative finance, risk tolerance, riskless arbitrage, Sharpe ratio, statistical arbitrage, stochastic process, stochastic volatility, transaction costs, volatility arbitrage, volatility smile, Wiener process, yield curve, zero-coupon bond

A QUICK LOOK AT THE IMPLIED VOLATILITY SMILE The BSM model assumes that a stock’s future return volatility is constant, independent of the strike and time to expiration of any option on that stock. Were the model correct, a plot of the implied BSM volatilities for options with the same expiration over a range of strikes would be a flat line. Figure 1.1 shows what three-month equity index implied volatilities looked like before the Black Monday stock market crash of 1987. 4 THE VOLATILITY SMILE 25% Volatility 20% 15% 10% 5% 0% 0.90 FIGURE 1.1 0.95 1.00 Strike/Index 1.05 1.10 Representative S&P 500 Implied Volatilities prior to 1987 Prior to the crash, therefore, the BSM model seemed to describe the option market rather well, at least with respect to variation in strikes.

…

Andersen and Andreasen (2000) claim that a jump-diffusion model can be fitted to the S&P 500 skew with a diffusion volatility of approximately 17.7%, a jump frequency of 𝜆 = 0.089 jumps per year, an expected jump size of 45%, and a variance of the jump size of 4.7%. A jump this size and with 410 THE VOLATILITY SMILE this probability seems excessive when compared to real markets. The worst one-day loss ever for the S&P 500, Black Monday in 1987, was only −20%. This suggests that option buyers are paying a risk premium for protection against crashes. A SIMPLIFIED TREATMENT OF JUMP-DIFFUSION WITH A SMALL PROBABILITY OF A LARGE SINGLE JUMP It’s enlightening to examine the way a simple mixing model for jumps captures crucial features of the equity index option smile.

The City on the Thames by Simon Jenkins

Ascot racecourse, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Boris Johnson, bread and circuses, Brexit referendum, British Empire, clean water, computerized trading, congestion charging, Corn Laws, cross-subsidies, Crossrail, deindustrialization, estate planning, Frank Gehry, gentrification, housing crisis, informal economy, Isaac Newton, Jane Jacobs, John Snow's cholera map, light touch regulation, Louis Blériot, negative equity, new economy, New Urbanism, Northern Rock, Peace of Westphalia, place-making, railway mania, Richard Florida, Right to Buy, South Sea Bubble, sovereign wealth fund, strikebreaker, the built environment, The Death and Life of Great American Cities, the market place, Traffic in Towns by Colin Buchanan, upwardly mobile, urban renewal, Winter of Discontent, women in the workforce

., High Rise 301 Baltic Exchange 131, 215; bombing (1992) 290 Bangladeshi immigrants 275 Bank of England 162, 175, 214; buildings 146, 221, 290; foundation 92, 93 bank holidays, introduction of 182 Bank station 167, 194, 236, 295 banking and financial services industry 92–3, 98, 115, 175, 239, 275, 293–7, 306, 315 Bankside power station 284, 303 Banqueting House (Whitehall) 59, 66, 85, 86 Baptists 66, 84, 136 Barbican 11, 13, 243; estate 253–5, 269, 280, 283, 307, 310; see also Museum of London Barbon, Nicholas 84–5 Barbon, Praise-God 84 Barkers of Kensington (department store) 181 Barking 206, 270 Barlow Commission 232, 240 Barnard’s Inn Hall (Holborn) 49 Barnes 210, 276 Barnett, Dame Henrietta 209 Barons’ War (13th century) 29, 30, 31 baroque architecture 81, 95, 105, 198; revival 198, 199–200, 221–2 Barratt, Nick, Greater London 242 Barry, Sir Charles 146, 153–4 Bartholomew Fair 37 Bart’s see St Bartholomew’s Hospital Basildon 300 Bath House 147 baths and washhouses, public: 19th century 189; 20th century 201, 213; Roman era 11, 12, 13–14, 338 Battersea 8, 17, 136, 165, 272; Arding & Hobbs (department store) 181; power station 284, 327–8 Battersea Fields/Park 183 Bauhaus 232 Baynard’s Castle 26–7 Bayswater 141, 165, 181, 194, 250; Leinster Terrace 141; Porchester Terrace 141; see also Lancaster Gate Bayswater Road 249 Bazalgette, Sir Joseph 164, 168, 176, 177 BBC 299, 329, 334; Broadcasting House 222; Bush House 221 Beatles (band) 261 Beck, Harry 229 Becontree housing estate 223, 228, 252, 269 Bede the Venerable, St 15 Bedford, John Russell, 1st Earl of 45 Bedford, Francis Russell, 4th Earl of 61–2, 70, 83 Bedford, John Russell, 6th Duke of 139 Bedford, Herbrand Russell, 11th Duke of 220 Bedford estate 100, 101, 139, 178, 227, 250, 282 Bedford Park 179 Bedford Square 103, 123 beer see brewing and beer Beijing (Peking) 173, 174 Belgravia 72, 100–101, 139–41, 156; Belgrave Square 73, 230; Chester Square 140, 153; churches 137, 153; Eaton Square 137, 153; Wilton Crescent 140; Wilton Place 153 Belsize Park 142 Bentham, Jeremy 145 Bentinck, Hans Willem (later 1st Earl of Portland) 89, 103 Berkeley, George, 1st Earl of 84, 100, 103 Berkeley, Randal, 8th Earl of 220 Berkeley Square 73, 103–4, 123, 220–21, 259, 334 Berkhamsted 24 Berlin 3, 193, 240, 241, 313 Bermondsey 17, 95, 137, 185, 206, 216, 225, 307, 339; abbey 28, 42, 46; see also Shard Bermuda 94 Berners estate 102 Besant, Annie 177 Besant, Sir Walter 2–3, 207–8, 208 Bethnal Green 137, 151, 185, 219, 305; council housing estates 202, 223, 265–6 Betjeman, Sir John 81, 231–2 Bevan, Aneurin 240 Beveridge, William, 1st Baron, report on welfare reform (1942) 240 Bevis Marks (street) 67 Bexley 230 bicycles see cycling Biddle, Martin 15 Big Bang (financial markets deregulation) 293–4, 295–6 Big Ben (bell/clock tower) 154, 179 Bill, Peter 310 Bill Haley and the Comets (band) 248 Bill of Rights (1689) 91 Billingsgate 14, 39, 81; market 163, 284 Birch, John 78 birching (corporal punishment), outlawing 260 Birdcage Walk 197 Birmingham 148, 149, 161, 188, 190, 270, 278, 318; railways 156, 157, 165, 168; town hall 188 Birt, William 209 bishopric of London 17–18 Bishopsgate 11, 27, 49, 310; Pinnacle (22 Bishopsgate) 310, 312 Bismarck, Otto von 176 Black Death (14th-century plague) 33–4, 35, 40, 66 Black Monday (stock market crash, 1987) 296 black population 118, 261, 271, 275, 299 Blackfriars 11, 177; Apothecaries Hall 337; Black Friar pub 27; monastery 27; station 165, 166, 167; theatres 52, 57 Blackfriars Bridge 114, 120 Blackheath 39, 68, 183, 210 Blackwall Docks 131 Blackwall Tunnel 280 Blair, Tony 302–6, 308, 314, 316 Blemond, William de 72 Blériot, Louis 200 Blitz (1940–41) 3, 77, 227, 234–8, 239, 245, 262 Bloomberg Centre (office building) 10, 14 Bloomsbury 72, 100, 101, 123, 139, 172, 250, 284; Bedford Square 103, 123; Bloomsbury Square 72, 100, 139; Brunswick Centre 268; Brunswick Square 125; Friends Meeting House 230; Gordon Square 139; Gower Street 178; Mecklenburgh Square 125; Russell Square 139, 179; St George’s Church 111; Tavistock Square 139; Torrington Square 284; University of London 227, 234, 250, 284; Woburn Square 284; see also British Museum Blore, Edward 146 Blow Up (film) 261 blue plaques scheme 265 Blue Stockings Society 103, 124 Boateng, Paul, Baron 299 Boccaccio, Giovanni 36 Boer War 195 Boleyn, Anne, Queen Consort 44, 46–7 bombing: Great War 216–17; Second World War 3, 77, 227, 234–8, 239, 245, 262; terrorism 290–91, 304–5 Bon, Christoph see Chamberlin, Powell and Bon (architectural practice) Bond, Sir Thomas 84 Bond Street 126, 199, 261, 339 Boodle’s (club) 137 Booth, Charles 184, 187, 208, 334 Boots (chemist) 277 Borough High Street 51, 311 Borough Market 257, 332 boroughs, establishment of 192, 201, 263, 264 Boston (Lincolnshire) 32 Boston (Massachusetts) 118 Boswell, James 107, 126–7 Bosworth Field, Battle of (1485) 39, 40 Boudicca (Celtic queen) 2, 10 Bovis (construction company) 269 Bow 171, 191, 251, 307; Abbey Mills pumping station 164; Bryant & May match factory 189 Bow Street, court 110 Bow Street Runners 112, 148 Bowen, Elizabeth 236 Boyle, Robert 70 Bracknell 251 Bradley, Mary Anne 132 Bradley, Simon 80, 179 Bradwell-on-Sea, St Cedd’s Monastery 18 Bramante, Donato 40 Brasilia 174 Breda, Declaration of (1660) 67 Brentford 125, 206 Brewer Street 338 brewing and beer 42, 96, 112, 206 Brexit (British exit from European Union) 13, 330–31 Brick Lane 261 Bridewell Palace 46, 55 bridges see Albert Bridge; Blackfriars Bridge; Hammersmith Bridge; London Bridge; Putney Bridge; Southwark Bridge; Tower Bridge; Vauxhall Bridge; Waterloo Bridge; Westminster Bridge Bridgewater House 147 Brighton 217; Grand Hotel bombing (1984) 290 Brighton Rock (film) 248 Bristol 40, 57, 131, 278, 318 Britain, Battle of (1940) 234 Britannia (Roman province) 10, 12–13 British Library 145, 250 British Museum 101, 104, 145, 172, 241, 250, 284 British Rail 283, 329 Brixham 89 Brixton 191, 208, 275; Loughborough estate 253; prison 219 Broadgate development 296 Broadwick Street 163 Bromley 230 Brompton Road 256 Bronze Age 8 Brown, George (later Baron George-Brown) 263 Brown, Gordon 314, 315 Brown, Lancelot ‘Capability’ 133 Brown’s Hotel 200 Brummell, Beau 138 Brunel, Isambard Kingdom 165, 175, 194 Brunelleschi, Filippo 40 Brunswick Centre 268 Brunswick Square 125 Brussels 26, 275, 296, 320 Brutus (legendary founder of London) 8 Brydges Place 338 Brydon, John 198, 199, 283 Brythonic people 16–17 Buchanan, Sir Colin, Traffic in Towns report 278–9, 280, 316 Bucharest 174, 326 Buckingham, George Villiers, 2nd Duke of 84–5 Buckingham and Normanby, John Sheffield, 1st Duke of 85 Buckingham House/Palace 84, 85, 97, 139, 144, 145, 146, 166, 196–7, 304 Buckingham Palace Road 199 Bucklersbury House (office building) 14 Buenos Aires 174 Building Act (1774) 121–2, 123, 135, 159, 188, 211 Bulstrode Park 103 Burbage, James 52 Burbage, Richard 52 Burdett-Coutts, Angela, 1st Baroness 187 Burghley, William Cecil, 1st Baron 47, 48 Burke, Edmund 118, 129, 130 Burlington, Richard Boyle, 1st Earl of 84, 102 Burlington, Richard Boyle, 3rd Earl of 105–6, 122 Burnham, Daniel 200 Burns, John 191 Burton, Decimus 135, 138 Burton, James 125, 135 Burton, Sir Montague 245 bus lanes 281 buses 144, 167, 177, 204, 205, 309, 317; double-decker 205, 309, 317; fares 288, 309; routes 23, 205 Bush, George W. 304 Bush, Irving T. 221 Bush House 221 Bute, John Stuart, 3rd Earl of 115–16 Byron, George, 6th Baron 127, 183 Byzantium 16, 21 CABE (Commission for Architecture and the Built Environment) 314 cable car (cross-Thames) 316 Cable Street 42, 131 Cadogan, Charles, 2nd Baron 104 Cadogan estate 104, 140 Cadogan Square 179 Cadwgan ap Elystan (Welsh warlord) 104 Calcutta 37 California 48, 320; gold rush 158; see also Los Angeles; San Francisco Callaghan, James, Baron Callaghan of Cardiff 276 Camberwell 125, 143, 171, 201, 210, 272 Cambridge University 266 Camden, Charles Pratt, 1st Baron 124, 125, 143 Camden, Borough of 264, 270, 330; council housing 268, 272 Camden Lock 330 Camden Town 143, 157, 160, 230, 257 Camelford House 220 Cameron, David 315, 319, 330 Campaign for Nuclear Disarmament (CND) 262, 291 Campbell, Colen 97, 103, 105 Canaletto 99, 206 Canary Wharf 293–5, 329, 338 cannabis 276–7, 305, 318 Cannes, MIPIM construction industry fair 313 Canning Town 313; Ronan Point 267, 273, 323 Cannon Street 7–8; station 7, 165 Canonbury 143 Canova, Antonio 145 Canterbury 17, 18, 35 Carausius (Roman military commander) 12 Carlton Club 192 Carlton House 132, 133, 134, 144 Carlton House Terrace 144, 283 Carnaby Street 261, 338–9 Caroline of Ansbach, Queen Consort 128 Carpaccio, Vittore, ‘Miracle of the True Cross’ 37–8 cars, motor 205, 211, 228, 239, 242, 278; accident rates 205; see also congestion charge zone; dual-carriage way roads; motorways Carshalton 8 Carter Lane 8, 337 Casanova, Giacomo 108, 110, 127, 206 Cassivellaunus (tribal chief) 9 Castlereagh, Robert Stewart, Viscount (later 2nd Marquess of Londonderry) 137 Catford 208, 230, 240 Catherine of Aragon, Queen Consort 42, 43, 44 Catherine of Braganza, Queen Consort 69, 87 Catherine of Medici, Queen Consort of France 48 Catholicism 17, 38, 44, 45, 47, 48, 61, 88–9, 105, 117; see also papacy Cavendish, Lady Margaret (later Duchess of Newcastle) 102 Cavendish Square 73, 102, 103, 123, 134 Caxton, William 41 Cecil Court 60 Cecil Hotel 177, 221 Cedd, Bishop of London 18 Celts 10, 16–17; language 7, 8, 17 censorship 98, 129, 260 Central Line 194, 204 Centre Point (New Oxford Street; skyscraper) 255–6, 257, 258, 265, 325 Chadwick, Sir Edwin 154–5, 156, 162, 163, 164, 166 Chalcot estate 142–3 Chamberlain, Joseph 190, 224 Chamberlain, Neville 223–4, 226, 232, 234, 240 Chamberlin, Powell and Bon (architectural practice) 253, 254 Chambers, Sir William 122, 123 Chandos, James Brydges, 1st Duke of 102, 106 Charing Cross 84; station 146, 165, 166, 203, 216 Charing Cross Road 177, 256 Charlemagne, Holy Roman Emperor 18, 24 Charles I, King 60–64, 65, 68; execution 66 Charles II, King 67–70, 73–4, 77, 78, 79–80, 81, 85–6, 87–8, 132 Charles V, Holy Roman Emperor 44 Charles, Prince of Wales 299 Charlotte Street 207; Schmidt’s restaurant 207 Charterhouse 45, 46 Chartists 161–2, 175, 192 Chatham, William Pitt, 1st Earl of 115, 116, 118 Chaucer, Geoffrey 36–8, 75, 106, 332; The Canterbury Tales 36–7 Cheapside 19, 31, 37, 51, 82, 126; St Mary-le-Bow Church 39, 161 Chelmsford 251, 300 Chelsea 171, 179; Albert Bridge 284; Cheyne Row 104; Cheyne Walk 104; King’s Road 140, 261, 323; Lots Road Power Station 203; Peter Jones (department store) 181; town hall 201; see also Kensington and Chelsea, Royal Borough of Chengdu 326 Chester Square 140; St Michael’s Church 153 Chesterfield, Philip Stanhope, 5th Earl of 126 Chesterfield House 126, 220 Chesterton, G.

The End of Alchemy: Money, Banking and the Future of the Global Economy by Mervyn King

Alan Greenspan, Andrei Shleifer, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, behavioural economics, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, classic study, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crowdsourcing, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Doha Development Round, Edmond Halley, Fall of the Berlin Wall, falling living standards, fiat currency, financial engineering, financial innovation, financial intermediation, floating exchange rates, foreign exchange controls, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, German hyperinflation, Glass-Steagall Act, Great Leap Forward, Hyman Minsky, inflation targeting, invisible hand, Japanese asset price bubble, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labour market flexibility, large denomination, lateral thinking, liquidity trap, Long Term Capital Management, low interest rates, manufacturing employment, market clearing, Martin Wolf, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Nick Leeson, no-fly zone, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open economy, paradox of thrift, Paul Samuelson, Ponzi scheme, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Solow, Satoshi Nakamoto, savings glut, secular stagnation, seigniorage, stem cell, Steve Jobs, The Great Moderation, the payments system, The Rise and Fall of American Growth, Thomas Malthus, too big to fail, transaction costs, Tyler Cowen: Great Stagnation, yield curve, Yom Kippur War, zero-sum game

Abe, Shinzo, 363 ABN Amro, 118 Acheson, Dean, 368 Ahmed, Liaquat, The Lords of Finance, 158 AIG, 142, 162 alchemy, financial, 5, 8, 10, 40, 50, 91, 191–2, 257, 261, 263–5, 367, 369; illusion of liquidity, 149–55, 253–5; maturity and risk transformation, 104–15, 117–19, 250–1, 254–5; pawnbroker for all seasons (PFAS) approach, 270–81, 288, 368 Ardant, Henri, 219 Arrow, Kenneth, 79–80, 295 Asian financial crisis (1990s), 28, 349, 350 Asian Infrastructure Investment Bank, 349–50 Australia, 74, 259, 275, 348 Austria, 340, 341 Austro-Hungarian Empire, 216 Bagehot, Walter, 212, 218, 335; Lombard Street (1873), 94–5, 114–15, 188, 189, 190, 191–2, 202, 208, 251, 269 Bank for International Settlements, 31, 255, 276, 324 Bank of America, 103–4, 257 Bank of England, 169, 217, 275, 280, 320–1; Bank Charter Act (1844), 160, 198; during crisis, 36, 37–8, 64, 65, 76, 118, 181–3, 184, 205, 206; Financial Policy Committee, 173; garden at, 73–4; gold reserves, 74, 75, 77, 198; governors of, 6, 12–13, 52–3, 175–6, 178; granting of independence to (1997), 7, 166, 186; history of, 92, 94, 156–7, 159, 160, 180–1, 186, 188–201, 206, 335; inflation targeting policy, 7, 167, 170, 322; Monetary Policy Committee (MPC), 173, 329–31; as Old Lady of Threadneedle Street, 75; weather vane on roof, 181 bank runs, 37–8, 93, 105–8, 187–92, 253–4, 262 Bankia (Spanish bank), 257–8 banking sector: balance sheets, 31, 103–4; capital requirements, 137–9, 255–6, 258, 280; commercial and investment separation, 23, 98, 256, 257; creation of money by, 8, 59–63, 86–7, 91, 161, 253, 263; as dangerous and fragile, 8, 23, 33, 34, 36–7, 91–2, 105, 111, 119, 323–4; deposit insurance, 62, 107–8, 137, 254–5, 328; European universal banks, 23–4; and ‘good collateral’, 188, 190, 202–3, 207, 269; history of, 4–5, 18–19, 59–60, 94–5, 187–202, 206–7; implicit taxpayer subsidy for, 96–7, 107, 116–17, 191–2, 207, 254–5, 263–4, 265–6, 267–8, 269–71, 277; interconnected functions of, 95–6, 111–12, 114–15; levels of equity finance, 103, 105, 109, 112, 137–9, 173, 202, 254–9, 263, 268, 280, 368 see also leverage ratios (total assets to equity capital); liquidity support stigma, 205–7; misconduct scandals, 91, 100, 118, 151, 256; narrow and wide banks, 263–5, 266–7, 279; political influence of, 3, 6, 288–9; recapitalisation of (October 2008), 37–8, 201; taxpayer bailouts during crisis, 4, 38, 41, 43, 93, 94, 106, 118, 162, 243, 247, 261, 267–8; ‘too important to fail’ (TITF), 96–7, 99, 116–17, 118, 254–5, 263–4, 279–80; vast expansion of, 23–4, 31–3, 92–4, 95, 96–9, 115–18; visibility of, 92–3, 94; see also alchemy, financial; central banks; liquidity; regulation Banque de France, 159 Barclays, 95 Barings Bank, 137, 193 ‘behavioural economics’, 132–4, 308, 310 Belgium, 201, 216, 340 Benes, Jaromir, 262 Bergsten, Fred, 234 Berlusconi, Silvio, 225 Bernanke, Ben, 28, 44, 91, 158, 175–6, 183, 188, 287 bills of exchange, 197–8, 199 bitcoins, 282–3 Black, Joseph, 56 Blackett, Basil, 195–6 Blair, Tony, 186 Blakey, Robert, The Political Pilgrim’s Progress (1839), 251–3 Blinder, Alan, 164 BNP Paribas, 35 Brazil, 38 Brecht, Bertolt, The Threepenny Opera (1928), 88, 93 Bremer, Paul, 241 Bretton Woods system, 20–1, 350, 352 British Empire, 216, 217 Bryan, William Jennings, 76, 86–7 Buffett, Warren, 102, 143 building societies, 98 Bunyan, John, Pilgrim’s Progress (1678), 251 Cabaret (film, 1972), 52, 83 Cambodia, 246 Cambridge University, 12, 83, 292–3, 302 Campbell, Mrs Patrick, 220 Campbell-Geddes, Sir Eric, 346 Canada, 116, 167, 170 capitalism, 2, 5, 8, 16–21, 42, 155, 366; as best way to create wealth, 17, 365–6, 369; and end of Cold War, 26–7, 365; money and banking as Achilles heel, 5, 16–17, 23–6, 32–9, 40–1, 50, 369–70; Schumpeter’s ‘creative destruction’, 152; see also market economy Carlyle, Thomas, 16 Carney, Mark, 176 Caruana, Jaime, 324 central banks, 156–9; accountability and transparency, 158, 168, 169–70, 175–6, 178–80, 186, 208; and ‘constrained discretion’, 169–70, 186; creation of ‘emergency money’, 48, 65–6, 71, 86, 172, 182–3, 189, 196–7, 201–7, 247, 275; during crisis, 36–9, 64, 65, 76, 113, 118, 158, 159, 162, 181–4, 205, 206, 335; and disequilibrium, 46–7, 171–2, 175, 208, 329–32; exclusive right to issue paper money, 160, 165, 283; and expectations, 28, 176–8, 304; forecasting by, 179–80, 304–5; future of, 207–10; gold reserves, 74–5, 77, 198; history of, 159–60, 161–2, 180–1; independence of, 5–6, 7, 22, 71, 165–7, 169–70, 185–6, 209–10, 357; industry of private sector watchers, 178; integrated policy framework, 187, 208–9, 288; as ‘lenders of last resort’ (LOLR), 94–5, 109–10, 163, 187–97, 202–7, 208, 259, 268, 269–70, 274–5, 288; and ‘macro-prudential policies’, 173–5, 187; monetary policy rules, 168–9; and money supply, 63, 65–6, 76, 86–7, 162, 163, 180–4, 192, 196–201; pawnbroker for all seasons (PFAS) approach, 270–81, 288, 368; in post-crisis period, 43–4, 63, 76, 162–3, 168–9, 173, 175, 179–80, 183–6; printing of electronic money by, 43, 52, 359; proper role of, 163, 172, 174–5, 287; and swap agreements, 353; see also Bank of England; European Central Bank (ECB); Federal Reserve central planning, 20, 27, 141 Chiang Mai Initiative, 349 ‘Chicago Plan’ (1933), 261–4, 268, 273, 274, 277–8 China, 2–3, 22, 34, 77, 306, 322, 338, 357, 362–3, 364; banking sector, 92, 93; export-led growth strategy, 27–8, 319, 321, 323–4, 356; falling growth rates, 43–4, 324, 363; medieval, 57, 68, 74; one child policy in, 28; problems in financial system, 43–4, 337, 362–3; savings levels in, 27–8, 29, 34; trade surpluses in, 27–8, 46, 49, 319, 321, 329, 364 Chou Enlai, 2 Churchill, Winston, 211, 366 Citigroup, 90, 99, 257 Clark, Kenneth, 193 Clinton, President Bill, 157 Cobbett, William, 71–2 Cochrane, John, 262 Coinage Act, US (1792), 215 Cold War, 26–7, 68, 81–2, 350, 365 Colley, Linda, 213–14 communism, 19, 20, 27 Confucius, 10 Cunliffe, Lord, 178, 193 currencies: break-up of sterling area, 216; dollarisation, 70, 246, 287; ‘fiat’, 57, 283; during government crises, 68–9; monetary unions, 212–18, 238–49 see also European Monetary Union (EMU, euro area); optimal currency areas, 212–13, 215, 217, 248; ‘sterlingisation’ and Scotland, 244–7, 248; US dollar-gold link abandoned (1971), 73; virtual/digital, 282–3; see also exchange rates cybercrime, 282 Cyprus, 363–4 Czech Republic, 216 Debreu, Gerard, 79–80, 295 debt, 140; bailouts as not only response, 343–4; as consequence not cause of crisis, 324–5; forgiveness, 339–40, 346–7; haircut on pledged collateral, 203, 204, 266, 269, 271–2, 275, 277–8, 280; household, 23, 31, 33–4, 35; importance of for real economy, 265–6; as likely trigger for future crisis, 337–8; and low interest rates, 337; quantitative controls on credit, 173, 174–5; rise in external imbalances, 22–3, 24–5, 27–31, 33–4, 45–7, 48–9, 236, 306–7, 319–24, 329–30, 338, 364; and rising asset prices, 23, 24, 31–2; role of collateral, 266–7, 269–81; see also sovereign debt decolonisation process, 215 deflation, 66, 76, 159, 164, 165 demand, aggregate: ‘asymmetric shocks’ to, 213; disequilibrium, 45–9, 316, 319–24, 325–7, 329–32, 335, 358–9; in EMU, 221, 222–3, 229, 230, 236; during Great Stability, 319–24; and Keynesianism, 5, 20, 41, 293, 294–302, 315–16, 325–6, 327, 356; and monetary policy, 30, 41–9, 167, 184–5, 212–13, 221, 229–31, 291–2, 294–302, 319–24, 329–32, 335, 358; nature of, 45, 325; pessimism over future levels, 356, 357–60; price and wage rigidities, 167; and radical uncertainty, 316; rebalancing of, 357, 362–3, 364; saving as source of future demand, 11, 46, 84–5, 185, 325–6, 356; as weak post-crisis, 38–9, 41–2, 44–5, 184–5, 291–2, 337, 350, 356–60 democracy, 26–7, 168, 174, 210, 222, 318, 348, 351; and euro area crisis, 224–5, 231, 234–5, 237–8, 344; and paper money, 68, 77; rise of non-mainstream parties in Europe, 234–5, 238, 344, 352 demographic factors, 354, 355, 362 Denmark, 216–17, 335 derivative instruments, 32–3, 35–6, 90, 93–4, 97–8, 100, 101, 117, 141–5; desert island parable, 145–8 Dickens, Charles, 1, 13–14, 233 disequilibrium: and aggregate demand, 45–9, 316, 319–24, 325–7, 329–32, 335, 358–9; alternative strategies for pre-crisis period, 328–33; and central banks, 11–12, 46–7, 171–2, 175, 208, 329–32; continuing, 42, 45–8, 49, 171–2, 291, 334–5, 347, 353, 356–70; coordinated move to new equilibrium, 347, 357, 359–65; definition of, 8–9; euro area at heart of, 248, 337; and exchange rates, 319, 322–3, 329, 331, 364; high- and low-saving countries (external imbalances), 22–3, 24–5, 27–31, 33–4, 45–7, 48–9, 236, 307, 319–24, 329–30, 338, 364; in internal saving and spending, 45–8, 49, 313–16, 319–21, 324, 325–6, 329–30, 356; and ‘New Keynesian’ models, 306; the next crisis, 334–5, 336–8, 353, 370; and paradox of policy, 48, 326, 328, 333, 357, 358; and stability heuristic, 312–14, 319–21, 323, 331, 332; suggested reform programme, 359–65 division of labour (specialisation), 18, 54–5 Doha Round, 361 Domesday Book, 54, 85 dotcom crash, 35 ‘double coincidence of wants’, 55, 80, 82 Douglas, Paul, 262 Draghi, Mario, 225, 227, 228 Dyson, Ben, 262 econometric modelling, 90, 125, 305–6 economic growth: conventional analysis, 44–5, 47; as low since crisis, 11, 43–4, 290–2, 293, 324, 348, 353–7; origins of, 17–21; pessimism over future levels, 353–7; in pre-crisis period, 329, 330–1, 351–2; slowing of in China, 43–4, 324, 362; stability in post-war period, 317–18 economic history, 4–5, 15–21, 54–62, 67–77, 107–9, 158–62, 180–1, 206–7, 215–17, 317–18; 1797 crisis in UK, 75; 1907 crisis in US, 159, 161, 196, 197, 198, 201; 1914 crisis, 192–201, 206, 307, 368; 1920-1 depression, 326–7; 1931 crisis, 41; ‘Black Monday’ (19 October 1987), 149; Finnish and Swedish crises (early 1990s), 279; German hyperinflation (early 1920s), 52, 68, 69, 86, 158–9, 190; Latin American debt crisis (1980s), 339; London banking crises (1825-66), 92, 188–90, 191–2, 198, 201; panic of 1792 in US, 188; see also Great Depression (early 1930s) The Economist magazine, 108–9 economists, 78–80, 128–31, 132–4, 212, 311; 1960s evolution of macroeconomics, 12, 16; forecasting models, 3–4, 7, 122–3, 179–80, 208, 305–6; Keynes on, 158, 289; see also Keynesian economics; neoclassical economics Ecuador, 246, 287 Egypt, ancient, 56, 72 Eliot, T.S., Four Quartets, 120, 290 emerging economies, 39, 43, 337, 338, 361; export-led growth strategy, 27–8, 30, 34, 319, 321, 324, 349, 356; new institutions in Asia, 349–50; savings levels in, 22–3, 27–8, 29, 30; ‘uphill’ flows of capital from, 30–1, 40, 319; US dollar reserves, 28, 34, 349 ‘emotional finance’ theory, 133–4 Engels, Friedrich, 19 Enron, 117 equity finance, 36, 102, 103, 140, 141, 143, 266, 280; and ‘bail-inable’ bonds, 112; in banking sector, 103, 105, 109, 112, 137–9, 173, 202, 254–9, 263, 268, 280, 368 see also leverage ratios (total assets to equity capital); and limited liability, 107, 108, 109 European Central Bank (ECB), 137, 162, 166, 232, 339; and euro area crisis, 203–4, 218, 224–5, 227–8, 229, 231, 322; and political decisions, 218, 224–5, 227–8, 231–2, 235, 344; sovereign debt purchases, 162, 190, 227–8, 231 European Monetary Union (EMU, euro area), 62, 217–38, 337–40, 342–9, 363–4; creditor and debtor split, 49, 222–3, 230–1, 232–7, 338, 339–40, 342–4, 363–4; crisis in (from 2009), 138, 203–4, 218, 223–31, 237–8, 276, 338, 339–40, 3512, 368; disillusionment with, 234–5, 236, 238, 3444; divergences in competitiveness, 221–3, 228, 231, 232–3, 234; fiscal union proposals (2015), 344; at heart of world disequilibrium, 248, 337; inflation, 70, 221–2, 232, 237; interest rate, 221–2, 232, 237, 335; launch of (1999), 22, 24–5, 218, 221, 306; main lessons from, 237; and political union issues, 218, 220, 235, 237–8, 248–9, 344, 348–9; ‘progress through crisis’ doctrine, 234; prospects for, 232–3, 345–6; sovereign debt in, 162, 190, 224, 226–8, 229–31, 258, 338, 339–40, 342–4; transfer union proposal, 224, 230, 231, 233, 234, 235, 237, 344; unemployment in, 45, 226, 228, 229–30, 232, 234, 345; value of euro, 43, 228–9, 231, 232, 322 European Stability Mechanism (ESM), 228 European Union, 40, 235–6, 237–8, 247, 248–9, 348–9; no-bailout clause in Treaty (Article 125), 228, 235–6; Stability and Growth Pact (SGP), 235, 236 Exchange Rate Mechanism (ERM), 219, 220 exchange rates: and disequilibrium, 319, 322–3, 329, 331, 364; and EMU, 222, 228–9, 338–9, 363–4; exchange controls, 21, 339; fixed, 20–1, 22–3, 24–5, 72–3, 75–6, 339, 352, 353, 361; floating, 21, 338, 353, 361–2; and ‘gold standard’, 72–3, 75–6; risk of ‘currency wars’, 348; and wage/price changes, 213 Federal Deposit Insurance Corporation (FDIC), 62, 137, 328 Federal Open Market Committee, 179 Federal Reserve, 45, 65, 74, 137, 157–8, 162, 168–70, 175, 178–9, 320; in 1920s/30s, 192, 326–7, 328, 349; during crisis, 39, 76, 107, 113, 183, 184; discount window, 206; dual mandate of, 167–8; opening of (1914), 60, 62, 159–60, 194–5, 196, 197 Ferrer, Gaspar, 193 Field, Alexander, 355 Financial Conduct Authority, UK, 260 financial crises, 11–12, 34; and demand for liquidity, 65–6, 76–7, 86, 106, 110, 119, 148, 182, 187–92, 194, 201–7, 253–4, 367; differing causes of, 307, 316–17, 327–8; frequency of, 2, 4, 20, 92, 111, 316–17; and ‘gold standard’, 75, 165, 195; and Minsky’s theory, 307–8, 323; narrative revision downturns, 328, 332–3, 356, 357, 58–9, 364; the next crisis, 334–5, 336–8, 353, 370; as test beds for new ideas, 49–50; see also economic history financial crisis (from 2007): articles and books, 1–2, 6; central banks during, 36–9, 64, 65, 76, 113, 118, 158, 159, 162, 181–4, 205, 206, 335; desire to blame individuals, 3, 89–90; effects on ordinary citizens, 6, 13, 41; the Great Panic, 37–8; interest rates during, 150–1, 181, 335; LIBOR during, 150–1; liquidity crisis (2007-8), 35–8, 64–5, 76, 110; money supply during, 181–3; parallels with earlier events, 90–2, 193; post-crisis output gap, 42, 291, 337; short-term Keynesian response, 39, 41, 48, 118–19, 326, 328, 356; ‘small’ event precipitating, 34–5, 323; unanswered questions, 39–43; underlying causes, 16–17, 24–5, 26–39, 40, 307, 319–26, 328; weak recovery from, 43–4, 48, 291–2, 293, 324, 337, 355, 364, 366 financial markets, 64–5, 113, 117–18, 141–5, 149, 184, 199–200, 314–15; basic financial contracts, 140–1; desert island parable, 145–8; and radical uncertainty, 140, 143, 144–5, 149–55; ‘real-time’ trading, 153–4, 284; see also derivative instruments; financial products and instruments; trading, financial financial products and instruments, 24, 35–6, 64, 99–100, 114, 117, 136–7, 258, 278, 288; see also derivative instruments Finland, 159, 279 First World War, 88–9, 153, 164, 178, 200–2, 307; financial crisis on outbreak of, 192–201; reparations after, 340–2, 343, 345–6 fiscal policy, 45, 184, 347–8, 352, 358; and Keynesianism, 78, 181, 292, 300, 356; in monetary unions, 222–3, 235; short-term stimulus during crisis, 39, 118–19, 356 Fisher, Irving, 163, 261 fractional reserve banking, 261 France, 93, 201, 216, 219, 221, 236, 248, 348, 364; and euro area crisis, 228–9, 231, 236, 322; occupation of Ruhr (1923), 340; overseas territories during WW2, 242; revolutionary period, 68, 75, 159 Franklin, Benjamin, 58, 127 Friedman, Milton, 78, 130, 163, 182, 192, 262, 328 Fuld, Dick, 89 futures contracts, 142, 240–1, 295–6 G20 group, 39, 255, 256, 351 G7 group, 37–8, 351 Garrett, Scott, 168–9 Geithner, Timothy, 267 George, Eddie, 176, 330 Germany, 93, 161, 162, 184, 219, 322, 341, 357; Bundesbank, 166, 219, 228, 232; and EMU, 219–22, 224, 227, 228, 230, 231–2, 234–6, 248, 338, 340, 342–3, 345; export-led growth strategy, 222, 319, 363–4; hyperinflation (early 1920s), 52, 68, 69, 86, 158–9, 190; Notgeld in, 201–2, 287; reunification, 219, 342; trade surpluses in, 46, 49, 222, 236, 319, 321, 356, 363–4; WW1 reparations, 340–2, 343, 346 Gibbon, Edward, 63, 164 Gigerenzer, Professor Gerd, 123, 135 Gillray, James, 75 global economy, 349–54, 361; capital flows, 20–1, 22, 28, 29, 30–1, 40, 319, 323; rise in external imbalances, 22–3, 24–5, 27–31, 33–4, 45–7, 48–9, 236, 307, 319–24, 329–30, 338, 364; see also currencies; exchange rates; trade surpluses and deficits Goethe, Johann Wolfgang von, Faust, 85–6 ‘gold standard’, 72–3, 75–6, 86, 165, 195, 200–1, 216–17, 348, 352 Goldman Sachs, 98, 109, 123, 257 Goodwin, Fred, 37, 89 Grant, James, 327 Great Depression (early 1930s), 5, 16, 20, 158, 160, 226, 348, 355; dramatic effect on politics and economics, 41; Friedman and Schwartz on, 78, 192, 328; and ‘gold standard’, 73, 76; US banking crisis during, 90–1, 108, 116, 201 Great Recession (from 2008), 6, 38–9, 163, 290–2, 326 Great Stability (or Great Moderation), 6, 22, 45–7, 71, 162, 208, 305, 313–14, 318–24, 325–6; alternative strategies for pre-crisis period, 328–33; monetary policies during, 22, 25, 46–7, 315 Greece, 216, 221, 222, 225–31, 338–40, 364; agreement with creditors (13 July 2015), 230–1, 346; crisis in euro area, 223–4, 225–7, 229, 230–1, 236, 258, 338–40; debt restructured (2012), 226–7, 229, 236, 339, 343–4, 346; national referendum (July 2015), 230; sovereign debt, 224, 226–7, 339–40, 342–4, 346–7; Syriza led government, 229, 235 Greenspan, Alan, 157–8, 164, 175, 317 Gulf War, First (1991), 238 Hahn, Frank, 79 Halifax Bank of Scotland (HBoS), 37, 118, 206, 243 Halley, Edmund, 122 Hamilton, Alexander, 188, 202, 215 Hankey, Thomas, 191–2 Hansen, Alvin, Full Recovery or Stagnation?

Principles of Corporate Finance by Richard A. Brealey, Stewart C. Myers, Franklin Allen

3Com Palm IPO, accelerated depreciation, accounting loophole / creative accounting, Airbus A320, Alan Greenspan, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, banking crisis, Bear Stearns, Bernie Madoff, big-box store, Black Monday: stock market crash in 1987, Black-Scholes formula, Boeing 747, book value, break the buck, Brownian motion, business cycle, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, capital controls, Carl Icahn, Carmen Reinhart, carried interest, collateralized debt obligation, compound rate of return, computerized trading, conceptual framework, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, cross-subsidies, currency risk, discounted cash flows, disintermediation, diversified portfolio, Dutch auction, equity premium, equity risk premium, eurozone crisis, fear index, financial engineering, financial innovation, financial intermediation, fixed income, frictionless, fudge factor, German hyperinflation, implied volatility, index fund, information asymmetry, intangible asset, interest rate swap, inventory management, Iridium satellite, James Webb Space Telescope, junk bonds, Kenneth Rogoff, Larry Ellison, law of one price, linear programming, Livingstone, I presume, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, market bubble, market friction, money market fund, moral hazard, Myron Scholes, new economy, Nick Leeson, Northern Rock, offshore financial centre, PalmPilot, Ponzi scheme, prediction markets, price discrimination, principal–agent problem, profit maximization, purchasing power parity, QR code, quantitative trading / quantitative finance, random walk, Real Time Gross Settlement, risk free rate, risk tolerance, risk/return, Robert Shiller, Scaled Composites, shareholder value, Sharpe ratio, short selling, short squeeze, Silicon Valley, Skype, SpaceShipOne, Steve Jobs, subprime mortgage crisis, sunk-cost fallacy, systematic bias, Tax Reform Act of 1986, The Nature of the Firm, the payments system, the rule of 72, time value of money, too big to fail, transaction costs, University of East Anglia, urban renewal, VA Linux, value at risk, Vanguard fund, vertical integration, yield curve, zero-coupon bond, zero-sum game, Zipcar

Four years later, in the financial crisis, the standard deviation had tripled at over 30%. By early 2012 it had dropped back to 18%.21 FIGURE 7.8 Annualized standard deviation of the preceding 52 weekly changes in the Dow Jones Industrial Average, 1900–2011. Market turbulence over shorter daily, weekly, or monthly periods can be amazingly high. On Black Monday, October 19, 1987, the U.S. market fell by 23% on a single day. The market standard deviation for the week surrounding Black Monday was equivalent to 89% per year. Fortunately volatility dropped back to normal levels within a few weeks after the crash. How Diversification Reduces Risk We can calculate our measures of variability equally well for individual securities and portfolios of securities.

…

., 573 Binomial method of option pricing, 540–545 Black-Scholes model and, 549 decision trees and, 544–545 defined, 540 general binomial method, 543–544 two-step, 541–543 Biomet, 845–846 Bizjak, J. M., 304n BK Vision, 353 Black, B., 374n Black, Fischer, 201n, 202n, 203n, 209, 536, 536n, 545–551, 546n, 555 Black Monday (1987), 171 Black-Scholes option pricing model, 545–551, 576n, 882 binomial method and, 549 development of, 545–551 using, 546–548 to evaluate implied volatilities, 550–551 for executive stock options, 528, 549, 550, 551 to value portfolio insurance, 550 to value warrants, 549–550 Blackstone Group, 837, 845–848 “Black swans,” 191n Blitzen Computer, 512 Blue-sky laws, 378 BNP, 812 BNP Paribas, 379, 623n Board of directors compensation committee, 303–304 connections with CEO, 298–299, 301–302 control rights and, 348, 352, 865–876 European, 867–869 mergers and, 847–850 role of, 5, 298–299, 303–304 voting procedures and, 352–354 Boatmen’s Bancshares, 812 Bodie, Zvi, 312n Boeing, 3, 135, 258–259 Bohr, Niels, 13 Bolton, P., 878 Bond(s).

Heads I Win, Tails I Win by Spencer Jakab

Alan Greenspan, Asian financial crisis, asset allocation, backtesting, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, book value, business cycle, buy and hold, collapse of Lehman Brothers, correlation coefficient, crowdsourcing, Daniel Kahneman / Amos Tversky, diversification, dividend-yielding stocks, dogs of the Dow, Elliott wave, equity risk premium, estate planning, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, fear index, fixed income, geopolitical risk, government statistician, index fund, Isaac Newton, John Bogle, John Meriwether, Long Term Capital Management, low interest rates, Market Wizards by Jack D. Schwager, Mexican peso crisis / tequila crisis, money market fund, Myron Scholes, PalmPilot, passive investing, Paul Samuelson, pets.com, price anchoring, proprietary trading, Ralph Nelson Elliott, random walk, Reminiscences of a Stock Operator, risk tolerance, risk-adjusted returns, Robert Shiller, robo advisor, Savings and loan crisis, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, subprime mortgage crisis, survivorship bias, technology bubble, transaction costs, two and twenty, VA Linux, Vanguard fund, zero-coupon bond, zero-sum game

The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance by Ron Chernow

Alan Greenspan, always be closing, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Bolshevik threat, book value, Boycotts of Israel, Bretton Woods, British Empire, buy and hold, California gold rush, capital controls, Carl Icahn, Charles Lindbergh, collective bargaining, Cornelius Vanderbilt, corporate raider, death from overwork, Dutch auction, Etonian, financial deregulation, financial engineering, fixed income, German hyperinflation, Glass-Steagall Act, index arbitrage, interest rate swap, junk bonds, low interest rates, margin call, Michael Milken, military-industrial complex, money market fund, Monroe Doctrine, North Sea oil, oil shale / tar sands, old-boy network, paper trading, plutocrats, Robert Gordon, Ronald Reagan, short selling, stock buybacks, strikebreaker, Suez canal 1869, Suez crisis 1956, the market place, the payments system, too big to fail, transcontinental railway, undersea cable, Yom Kippur War, young professional

Morgan’s subsidiary bank, Morgan Guaranty, was America’s only major bank to boast a triple-A rating. For most of the 1980s, it had the highest return on equity of any bank, often ranking second in profits only to Citicorp and with only half its assets. As the nation’s premier trust bank, it managed $65 billion in securities on Black Monday 1987. It has been praised as “first in quality by about any measure you can think of” and “for many the perfect bank.”1 Although a fair share of blunders and isolated scandals have undercut the hyperbole, the judgments remain generally valid. At least until it swept into hostile takeovers in the late 1980s, Morgan Guaranty best retained the historic Morgan culture of gentlemanly propriety and conservative dealings.

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Seventy percent of stock trading was now done by institutions—mutual funds, pension funds, and the like—which were averse to theatrics and tracked the market on computer screens. Depression, migraine headaches, even sexual impotence were later reported among investors, but no aerial artistry as in 1929. Aside from a somewhat longer visitors’ queue at the New York Stock Exchange, the Corner betrayed little sense of calamity on this Black Monday. The Morgan houses were actually less remote from the 1987 crash than they’d been from the one in 1929. All the banks and brokerage houses were now trading operations. And Morgan Stanley was a major practitioner of stock-index arbitrage—computer-driven trades that exploited small price discrepancies between stocks in New York and stock-index futures in Chicago.

The Behavioral Investor by Daniel Crosby

affirmative action, Asian financial crisis, asset allocation, availability heuristic, backtesting, bank run, behavioural economics, Black Monday: stock market crash in 1987, Black Swan, book value, buy and hold, cognitive dissonance, colonial rule, compound rate of return, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, disinformation, diversification, diversified portfolio, Donald Trump, Dunning–Kruger effect, endowment effect, equity risk premium, fake news, feminist movement, Flash crash, haute cuisine, hedonic treadmill, housing crisis, IKEA effect, impact investing, impulse control, index fund, Isaac Newton, Japanese asset price bubble, job automation, longitudinal study, loss aversion, market bubble, market fundamentalism, mental accounting, meta-analysis, Milgram experiment, moral panic, Murray Gell-Mann, Nate Silver, neurotypical, Nick Bostrom, passive investing, pattern recognition, Pepsi Challenge, Ponzi scheme, prediction markets, random walk, Reminiscences of a Stock Operator, Richard Feynman, Richard Thaler, risk tolerance, Robert Shiller, science of happiness, Shai Danziger, short selling, South Sea Bubble, Stanford prison experiment, Stephen Hawking, Steve Jobs, stocks for the long run, sunk-cost fallacy, systems thinking, TED Talk, Thales of Miletus, The Signal and the Noise by Nate Silver, Tragedy of the Commons, trolley problem, tulip mania, Vanguard fund, When a measure becomes a target

List of some notable manias, panics and crashes Tulip mania (Netherlands) – 1637 South Sea Bubble (UK) – 1720 Bengal Bubble (UK) – 1769 Credit Crisis of 1772 (UK) Financial Crisis of 1791 (US) Panic of 1796–7 (US) Panic of 1819 (US) Panic of 1825 (UK) Panic of 1837 (US) Panic of 1847 (UK) Panic of 1857 (US) Panic of 1866 (UK) Black Friday (US) – 1869 Paris Bourse crash of 1882 (France) “Encilhamento” (Brazil) – 1890 Panic of 1893 (US) Panic of 1896 (US) Panic of 1901 (US) Panic of 1907 (US) Great Depression (US) – 1929 Recession of 1937–8 (US) Brazilian Market Crash of 1971 British Market Crash of 1973–4 Souk Al-Manakh Crash (Kuwait) – 1982 Black Monday (US) – 1987 Rio de Janeiro Stock Exchange Crash – 1989 Japanese Asset Price Bubble – 1991 Black Wednesday (UK) – 1992 Asian Financial Crisis – 1997 Russian Financial Crisis – 1998 dot.com Bubble (US) – 2000 Chinese Stock Bubble – 2007 Great Recession of 2007–9 (US) European Sovereign Debt Crisis (2010) Flash Crash of 2010 (US) Notes 114 L.

When More Is Not Better: Overcoming America's Obsession With Economic Efficiency by Roger L. Martin

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, autism spectrum disorder, banking crisis, Black Monday: stock market crash in 1987, butterfly effect, call centre, cloud computing, complexity theory, coronavirus, COVID-19, David Ricardo: comparative advantage, do what you love, Edward Lorenz: Chaos theory, financial engineering, Frederick Winslow Taylor, Glass-Steagall Act, High speed trading, income inequality, industrial cluster, inflation targeting, Internet of things, invisible hand, Lean Startup, low interest rates, Lyft, Mark Zuckerberg, means of production, Network effects, new economy, obamacare, open economy, Phillips curve, Pluto: dwarf planet, power law, Renaissance Technologies, Richard Florida, Ronald Reagan, scientific management, shareholder value, Silicon Valley, Snapchat, Spread Networks laid a new fibre optics cable between New York and Chicago, Tax Reform Act of 1986, The future is already here, the map is not the territory, The Wealth of Nations by Adam Smith, Tobin tax, Toyota Production System, transaction costs, trickle-down economics, two-sided market, uber lyft, very high income, Vilfredo Pareto, zero-sum game

The shareholders, who were supposed to be better off, were worse off because the only thing they got more of was volatility in their stock, not appreciation of it. The absurdity of treating a company’s highly volatile stock price as a true representation of its value is not lost on everyone. Li Ka-shing is one of the world’s richest people and Hong Kong’s richest with a net worth of approximately $32 billion.6 The day after Black Monday, October 19, 1987, when stock markets around the world—including Hong Kong’s—plummeted, reporters asked Li how he felt suffering the single biggest one-day loss in wealth in Hong Kong’s history. Li responded that he hadn’t suffered any loss in wealth. The reporters begged to differ, giving as proof the diminution in value of his various public company stakes.

A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers by Lawrence G. Mcdonald, Patrick Robinson

"World Economic Forum" Davos, Alan Greenspan, AOL-Time Warner, asset-backed security, bank run, Bear Stearns, Black Monday: stock market crash in 1987, book value, business cycle, Carl Icahn, collateralized debt obligation, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, diversification, fixed income, Glass-Steagall Act, high net worth, hiring and firing, if you build it, they will come, it's over 9,000, junk bonds, London Interbank Offered Rate, Long Term Capital Management, margin call, money market fund, moral hazard, mortgage debt, naked short selling, negative equity, new economy, Ronald Reagan, Savings and loan crisis, short selling, sovereign wealth fund, value at risk

Historically the TED spread hovers between 10 and 50 basis points (that’s 0.1 percent and 0.5 percent)—a tiny difference, and a very dull little chart, occasionally worth checking. The day after AIG crashed, however, the TED spread went into orbit, shooting up 300 basis points. It broke the record set after the Black Monday collapse of 1987. Visions of the Great Depression of the 1930s danced before Hank Paulson’s eyes. According to this chart, the banks had slammed an enormous interest rate on every dollar they loaned. Reason: they did not want to lend, and this explosion on the TED spread signified they were not joking.

How Markets Fail: The Logic of Economic Calamities by John Cassidy

Abraham Wald, Alan Greenspan, Albert Einstein, An Inconvenient Truth, Andrei Shleifer, anti-communist, AOL-Time Warner, asset allocation, asset-backed security, availability heuristic, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, book value, Bretton Woods, British Empire, business cycle, capital asset pricing model, carbon tax, Carl Icahn, centralized clearinghouse, collateralized debt obligation, Columbine, conceptual framework, Corn Laws, corporate raider, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Daniel Kahneman / Amos Tversky, debt deflation, different worldview, diversification, Elliott wave, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, George Akerlof, Glass-Steagall Act, global supply chain, Gunnar Myrdal, Haight Ashbury, hiring and firing, Hyman Minsky, income per capita, incomplete markets, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kickstarter, laissez-faire capitalism, Landlord’s Game, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, Mikhail Gorbachev, military-industrial complex, Minsky moment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, Naomi Klein, negative equity, Network effects, Nick Leeson, Nixon triggered the end of the Bretton Woods system, Northern Rock, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, precautionary principle, price discrimination, price stability, principal–agent problem, profit maximization, proprietary trading, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, RAND corporation, random walk, Renaissance Technologies, rent control, Richard Thaler, risk tolerance, risk-adjusted returns, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, subprime mortgage crisis, tail risk, Tax Reform Act of 1986, technology bubble, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, too big to fail, Tragedy of the Commons, transaction costs, Two Sigma, unorthodox policies, value at risk, Vanguard fund, Vilfredo Pareto, wealth creators, zero-sum game

Attlee, Clement Australia Axelrod, Robert Aylwin, Patricio Bachelier, Louis Bagehot, Walter Baker, James Bank of America Bank of England Monetary Policy Committee Bankers’ Panic (1907) Bankers Trust Bank for International Settlements Baran, Paul Barclays Bank Barings Bank Barone, Enrico Barro, Robert Barron’s Bartlett, Bruce Bator, Francis Baumol, William Bayh-Dole Act (1984) B&C lending Bear Stearns Beatles Beauty Contest theory Bebchuk, Lucian Becker, Gary behavioral economics Bell Laboratories Beneficial Finance Bennett, Alan Bentham, Jeremy Berkshire Hathaway Inc. Berlin Wall, fall of Bernanke, Ben Friedman lauded by response to market meltdown of subprime crisis underestimated by Beveridge, William Biggs, Barton Bikhchandani, Sushil Bill and Melinda Gates Foundation Binmore, Ken Black, Fischer Black Monday crash of 1987 Black Panther Party Black-Scholes option pricing formula Blackstone Group Blair, Tony Blankfein, Lloyd C. Blaug, Mark Blinder, Alan bliss point Bloomberg News BNP Paribas Bank Boeing Bohr, Niels Bolsheviks Book-of-the-Month Club Born, Brooksley E.

The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life by J L Collins

asset allocation, Bernie Madoff, Black Monday: stock market crash in 1987, buy and hold, compound rate of return, currency risk, diversification, financial independence, full employment, German hyperinflation, index fund, inverted yield curve, John Bogle, lifestyle creep, low interest rates, money market fund, Mr. Money Mustache, nuclear winter, passive income, payday loans, risk tolerance, side hustle, The 4% rule, Vanguard fund, yield curve

How We Got Here: A Slightly Irreverent History of Technology and Markets by Andy Kessler

Albert Einstein, Andy Kessler, animal electricity, automated trading system, bank run, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Bletchley Park, Bob Noyce, Bretton Woods, British Empire, buttonwood tree, Charles Babbage, Claude Shannon: information theory, Corn Laws, cotton gin, Dennis Ritchie, Douglas Engelbart, Edward Lloyd's coffeehouse, Fairchild Semiconductor, fiat currency, fixed income, floating exchange rates, flying shuttle, Fractional reserve banking, full employment, GPS: selective availability, Grace Hopper, invention of the steam engine, invention of the telephone, invisible hand, Isaac Newton, Jacquard loom, James Hargreaves, James Watt: steam engine, John von Neumann, joint-stock company, joint-stock limited liability company, Joseph-Marie Jacquard, Ken Thompson, Kickstarter, Leonard Kleinrock, Marc Andreessen, Mary Meeker, Maui Hawaii, Menlo Park, Metcalfe's law, Metcalfe’s law, military-industrial complex, Mitch Kapor, Multics, packet switching, pneumatic tube, price mechanism, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, proprietary trading, railway mania, RAND corporation, Robert Metcalfe, Silicon Valley, Small Order Execution System, South Sea Bubble, spice trade, spinning jenny, Steve Jobs, Suez canal 1869, supply-chain management, supply-chain management software, systems thinking, three-martini lunch, trade route, transatlantic slave trade, tulip mania, Turing machine, Turing test, undersea cable, UUNET, Wayback Machine, William Shockley: the traitorous eight

Then we need more rules.” *** One of the complaints was the inability of individual investors to connect with brokers or traders. Someone let slip out that there was indeed this cool system named SOES that automatically executed trades of 1000 shares or less. “Well, how did it work on Black Monday?” “Uh, it wasn’t really turned on.” In late 1987, all Wall Street firms were ordered to turn on the SOES and USE IT. As usual, the law of unintended consequences took hold. The SOES rule ended up helping very few small investors because traders just dropped trading many stocks to avoid the risk of getting picked off for 1000 shares.

Quantitative Trading: How to Build Your Own Algorithmic Trading Business by Ernie Chan

algorithmic trading, asset allocation, automated trading system, backtesting, Bear Stearns, Black Monday: stock market crash in 1987, Black Swan, book value, Brownian motion, business continuity plan, buy and hold, classic study, compound rate of return, Edward Thorp, Elliott wave, endowment effect, financial engineering, fixed income, general-purpose programming language, index fund, Jim Simons, John Markoff, Long Term Capital Management, loss aversion, p-value, paper trading, price discovery process, proprietary trading, quantitative hedge fund, quantitative trading / quantitative finance, random walk, Ray Kurzweil, Renaissance Technologies, risk free rate, risk-adjusted returns, Sharpe ratio, short selling, statistical arbitrage, statistical model, survivorship bias, systematic trading, transaction costs

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown by Simon Johnson, James Kwak

Alan Greenspan, American ideology, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Bonfire of the Vanities, bonus culture, book value, break the buck, business cycle, business logic, buy and hold, capital controls, Carmen Reinhart, central bank independence, Charles Lindbergh, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency risk, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Glass-Steagall Act, Gordon Gekko, greed is good, Greenspan put, Home mortgage interest deduction, Hyman Minsky, income per capita, information asymmetry, interest rate derivative, interest rate swap, junk bonds, Kenneth Rogoff, laissez-faire capitalism, late fees, light touch regulation, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, Martin Wolf, Michael Milken, money market fund, moral hazard, mortgage tax deduction, Myron Scholes, Paul Samuelson, Ponzi scheme, price stability, profit maximization, proprietary trading, race to the bottom, regulatory arbitrage, rent-seeking, Robert Bork, Robert Shiller, Ronald Reagan, Saturday Night Live, Satyajit Das, Savings and loan crisis, sovereign wealth fund, Tax Reform Act of 1986, The Myth of the Rational Market, too big to fail, transaction costs, Tyler Cowen, value at risk, yield curve

The future accordingly looks bright.35 Greenspan was naturally predisposed to be friendly toward the financial sector and its desire to be left alone by government. As a central banker, he first made his mark injecting liquidity into the financial system to pull the stock market out of its 23 percent fall on Black Monday, October 19, 1987. This was the first example of what came to be known as the “Greenspan put”—the idea that if trouble occurred in the markets, the Fed would come to their rescue.* Greenspan cut interest rates sharply in 1998 following the Russian crisis and in 2001 following the collapse of the Internet bubble, each time helping to cushion the impact of the downturn and arguably pumping up the next bubble.

The Signal and the Noise: Why So Many Predictions Fail-But Some Don't by Nate Silver

airport security, Alan Greenspan, Alvin Toffler, An Inconvenient Truth, availability heuristic, Bayesian statistics, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, big-box store, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, book value, Broken windows theory, business cycle, buy and hold, Carmen Reinhart, Charles Babbage, classic study, Claude Shannon: information theory, Climategate, Climatic Research Unit, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, computer age, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, Daniel Kahneman / Amos Tversky, disinformation, diversification, Donald Trump, Edmond Halley, Edward Lorenz: Chaos theory, en.wikipedia.org, equity premium, Eugene Fama: efficient market hypothesis, everywhere but in the productivity statistics, fear of failure, Fellow of the Royal Society, Ford Model T, Freestyle chess, fudge factor, Future Shock, George Akerlof, global pandemic, Goodhart's law, haute cuisine, Henri Poincaré, high batting average, housing crisis, income per capita, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, invention of the printing press, invisible hand, Isaac Newton, James Watt: steam engine, Japanese asset price bubble, John Bogle, John Nash: game theory, John von Neumann, Kenneth Rogoff, knowledge economy, Laplace demon, locking in a profit, Loma Prieta earthquake, market bubble, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, Monroe Doctrine, mortgage debt, Nate Silver, negative equity, new economy, Norbert Wiener, Oklahoma City bombing, PageRank, pattern recognition, pets.com, Phillips curve, Pierre-Simon Laplace, Plato's cave, power law, prediction markets, Productivity paradox, proprietary trading, public intellectual, random walk, Richard Thaler, Robert Shiller, Robert Solow, Rodney Brooks, Ronald Reagan, Saturday Night Live, savings glut, security theater, short selling, SimCity, Skype, statistical model, Steven Pinker, The Great Moderation, The Market for Lemons, the scientific method, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, Timothy McVeigh, too big to fail, transaction costs, transfer pricing, University of East Anglia, Watson beat the top human players on Jeopardy!, Wayback Machine, wikimedia commons

Simply looking at periods when the stock market has increased at a rate much faster than its historical average can give you some inkling of a bubble. Of the eight times in which the S&P 500 increased in value by twice its long-term average over a five-year period,43 five cases were followed by a severe and notorious crash, such as the Great Depression, the dot-com bust, or the Black Monday crash of 1987.44 A more accurate and sophisticated bubble-detection method is proposed by the Yale economist Robert J. Shiller, whose prescient work on the housing bubble I discussed in chapter 1. Shiller is best known for his book Irrational Exuberance. Published right as the NASDAQ achieved its all-time high during the dot-com bubble, the book served as an antidote to others, such as Dow 36,000, Dow 40,000 and Dow 100,00045 that promised prices would keep going up, instead warning investors that stocks were badly overpriced on the basis of the fundamentals.

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Stocks lost more than 40 percent of their value over a 14-month period as the economy went into a severe double-dip recession. 1954–59 No The early 1950s were an extremely good time to buy stocks as investors benefited from America’s postwar prosperity boom. Toward the end of the 1950s was somewhat less favorable, as stock prices were choppy throughout the 1960s. 1986–87 Yes Black Monday came on October 19, 1987, with the Dow declining by almost 23 percent in a single day. An investor who persevered through the period would have seen very good returns in the 1990s. 1989 No An investor buying in 1989 would have experienced the robust returns of the 1990s without the trauma of Black Monday.

Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America by Danielle Dimartino Booth

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, Bernie Sanders, Black Monday: stock market crash in 1987, break the buck, Bretton Woods, business cycle, central bank independence, collateralized debt obligation, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, forward guidance, full employment, George Akerlof, Glass-Steagall Act, greed is good, Greenspan put, high net worth, housing crisis, income inequality, index fund, inflation targeting, interest rate swap, invisible hand, John Meriwether, Joseph Schumpeter, junk bonds, liquidity trap, London Whale, Long Term Capital Management, low interest rates, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, moral hazard, Myron Scholes, natural language processing, Navinder Sarao, negative equity, new economy, Northern Rock, obamacare, Phillips curve, price stability, proprietary trading, pushing on a string, quantitative easing, regulatory arbitrage, Robert Shiller, Ronald Reagan, selection bias, short selling, side project, Silicon Valley, stock buybacks, tail risk, The Great Moderation, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, yield curve

While he was in the air: Donald Bernhardt and Marshall Eckblad, “Black Monday: The Stock Market Crash of 1987,” Federal Reserve Bank of Chicago, Federal Reserve History, www.federalreservehistory.org/Events/DetailView/48. “Black Monday,” when the market fell: Ibid. Investors lost about $1 trillion: Christopher Matthews, “25 Years Later: In the Crash of 1987, the Seeds of the Great Recession,” Bloomberg.com, October 22, 2012. Then the mother of all storks: Bernhardt and Eckblad, “Black Monday: The Stock Market Crash of 1987.” Sometimes, as an added bonus: Ibid. CHAPTER 7: THE MAVERICK It is not the responsibility: Ben Bernanke, The Courage to Act (New York: W.

The Plague Year: America in the Time of Covid by Lawrence Wright

"World Economic Forum" Davos, 2021 United States Capitol attack, Affordable Care Act / Obamacare, Bernie Sanders, Black Lives Matter, Black Monday: stock market crash in 1987, blockchain, business cycle, contact tracing, coronavirus, COVID-19, cryptocurrency, Donald Trump, Edward Jenner, fake news, full employment, George Floyd, global pandemic, Great Leap Forward, income inequality, jimmy wales, Kickstarter, lab leak, lockdown, Louis Pasteur, meta-analysis, mouse model, Nate Silver, opioid epidemic / opioid crisis, plutocrats, QAnon, RAND corporation, road to serfdom, Ronald Reagan, Silicon Valley, social distancing, Steve Bannon, the scientific method, TikTok, transcontinental railway, zoonotic diseases

“I was probably the first staff member to be exposed.” He was sent home and told to take his temperature every twelve hours. The patient tested negative, which no one believed. Lerner and his wife began sleeping in separate bedrooms. For many, March 12 was a moment of dismal clarity. The stock market suffered its biggest drop since the Black Monday crash of 1987. The Federal Reserve Bank of New York announced that it would generate $1.5 trillion in short-term loans to calm the financial markets. In Washington, Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin were about to conclude their negotiation of the $2.2 trillion CARES Act. It wouldn’t be nearly enough.

Scary Smart: The Future of Artificial Intelligence and How You Can Save Our World by Mo Gawdat

3D printing, accounting loophole / creative accounting, AI winter, AlphaGo, anthropic principle, artificial general intelligence, autonomous vehicles, basic income, Big Tech, Black Lives Matter, Black Monday: stock market crash in 1987, butterfly effect, call centre, carbon footprint, cloud computing, computer vision, coronavirus, COVID-19, CRISPR, cryptocurrency, deep learning, deepfake, DeepMind, Demis Hassabis, digital divide, digital map, Donald Trump, Elon Musk, fake news, fulfillment center, game design, George Floyd, global pandemic, Google Glasses, Google X / Alphabet X, Law of Accelerating Returns, lockdown, microplastics / micro fibres, Nick Bostrom, off-the-grid, OpenAI, optical character recognition, out of africa, pattern recognition, Ponzi scheme, Ray Kurzweil, recommendation engine, self-driving car, Silicon Valley, smart contracts, Stanislav Petrov, Stephen Hawking, subprime mortgage crisis, superintelligent machines, TED Talk, TikTok, Turing machine, Turing test, universal basic income, Watson beat the top human players on Jeopardy!, Y2K

Even Bill Gates experienced a blue screen in front of thousands of people during the launch presentation of Windows 98.2 Will our future machine intelligence face similar complexities that can’t be anticipated? Make no mistake, they will – but they will improvise. They won’t just shut down, even when we wish that they would. That’s what happened on Black Monday. On 19 October 1987, many wished that the machines would shut down. This was when a long-running bull market was halted by investigations of insider trading. At the time, computer trading models were already very common. These were systems that quickly initiated certain trades when certain market conditions prevailed.

Unknown Market Wizards by Jack D. Schwager

3D printing, algorithmic trading, automated trading system, backtesting, barriers to entry, Black Monday: stock market crash in 1987, Brexit referendum, buy and hold, commodity trading advisor, computerized trading, COVID-19, cryptocurrency, diversification, Donald Trump, eurozone crisis, family office, financial deregulation, fixed income, forward guidance, index fund, Jim Simons, litecoin, Long Term Capital Management, margin call, market bubble, Market Wizards by Jack D. Schwager, Nick Leeson, performance metric, placebo effect, proprietary trading, quantitative easing, Reminiscences of a Stock Operator, risk tolerance, risk-adjusted returns, Sharpe ratio, short squeeze, side project, systematic trading, tail risk, transaction costs

The Man Who Knew: The Life and Times of Alan Greenspan by Sebastian Mallaby

airline deregulation, airport security, Alan Greenspan, Alvin Toffler, Andrei Shleifer, anti-communist, Asian financial crisis, balance sheet recession, bank run, barriers to entry, Bear Stearns, behavioural economics, Benoit Mandelbrot, Black Monday: stock market crash in 1987, bond market vigilante , book value, Bretton Woods, business cycle, central bank independence, centralized clearinghouse, classic study, collateralized debt obligation, conceptual framework, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Dr. Strangelove, energy security, equity premium, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, forward guidance, full employment, Future Shock, Glass-Steagall Act, Greenspan put, Hyman Minsky, inflation targeting, information asymmetry, interest rate swap, inventory management, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", junk bonds, Kenneth Rogoff, Kickstarter, Kitchen Debate, laissez-faire capitalism, Lewis Mumford, Long Term Capital Management, low interest rates, low skilled workers, market bubble, market clearing, Martin Wolf, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, Neil Armstrong, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, Northern Rock, paper trading, paradox of thrift, Paul Samuelson, Phillips curve, plutocrats, popular capitalism, price stability, RAND corporation, Reminiscences of a Stock Operator, rent-seeking, Robert Shiller, Robert Solow, rolodex, Ronald Reagan, Saturday Night Live, Savings and loan crisis, savings glut, secular stagnation, short selling, stock buybacks, subprime mortgage crisis, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tipper Gore, too big to fail, trade liberalization, unorthodox policies, upwardly mobile, We are all Keynesians now, WikiLeaks, women in the workforce, Y2K, yield curve, zero-sum game

Far from repeat errors being unlikely in finance, each error would make the next one more likely because the incentive to avoid error would have been diluted. Despite the strong case against a rescue, Greenspan was determined to help Mexico.13 His softening line toward bailouts, evident in his response to the Continental Illinois rescue in 1984 and to Black Monday in 1987, was now confirmed for a third time. He had no interest in allowing financial disruptions on his watch; he was ready to do whatever it took to defuse them. A default by a major emerging economy such as Mexico, seen until recently as a poster child for promarket reform, could create contagion anywhere, discrediting the market model and playing into the hands of anti-globalization radicals.

A Man for All Markets by Edward O. Thorp

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", 3Com Palm IPO, Alan Greenspan, Albert Einstein, asset allocation, Bear Stearns, beat the dealer, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, book value, Brownian motion, buy and hold, buy low sell high, caloric restriction, caloric restriction, carried interest, Chuck Templeton: OpenTable:, Claude Shannon: information theory, cognitive dissonance, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Edward Thorp, Erdős number, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, Garrett Hardin, George Santayana, German hyperinflation, Glass-Steagall Act, Henri Poincaré, high net worth, High speed trading, index arbitrage, index fund, interest rate swap, invisible hand, Jarndyce and Jarndyce, Jeff Bezos, John Bogle, John Meriwether, John Nash: game theory, junk bonds, Kenneth Arrow, Livingstone, I presume, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, Mason jar, merger arbitrage, Michael Milken, Murray Gell-Mann, Myron Scholes, NetJets, Norbert Wiener, PalmPilot, passive investing, Paul Erdős, Paul Samuelson, Pluto: dwarf planet, Ponzi scheme, power law, price anchoring, publish or perish, quantitative trading / quantitative finance, race to the bottom, random walk, Renaissance Technologies, RFID, Richard Feynman, risk-adjusted returns, Robert Shiller, rolodex, Sharpe ratio, short selling, Silicon Valley, Stanford marshmallow experiment, statistical arbitrage, stem cell, stock buybacks, stocks for the long run, survivorship bias, tail risk, The Myth of the Rational Market, The Predators' Ball, the rule of 72, The Wisdom of Crowds, too big to fail, Tragedy of the Commons, uptick rule, Upton Sinclair, value at risk, Vanguard fund, Vilfredo Pareto, Works Progress Administration

It has historically moved in concert with the S&P 500, even though the two indexes are chosen by entirely different methods and the very similar price behavior of the two was not planned. To do index arbitrage, PNP developed techniques in the mid-1980s for finding baskets of stocks that did a particularly good job of tracking an index. We used this very profitably the day after “Black Monday,” October 19, 1987, to capture a spread of over 10 percent between the S&P 500 Index and the futures contracts on it. Quants have honed this to a fine art and, through their trading, generally keep the price discrepancy very small. To cut taxes, start with a tracking basket and, each time a stock drops, say, 10 percent, sell the loser and reinvest the proceeds in another stock or stocks chosen so the new basket continues to track well.

The Bank That Lived a Little: Barclays in the Age of the Very Free Market by Philip Augar

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Bonfire of the Vanities, bonus culture, book value, break the buck, business logic, call centre, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, family office, financial deregulation, financial innovation, fixed income, foreign exchange controls, Glass-Steagall Act, high net worth, hiring and firing, index card, index fund, interest rate derivative, light touch regulation, loadsamoney, Long Term Capital Management, long term incentive plan, low interest rates, Martin Wolf, money market fund, moral hazard, Nick Leeson, Northern Rock, offshore financial centre, old-boy network, out of africa, prediction markets, proprietary trading, quantitative easing, risk free rate, Ronald Reagan, shareholder value, short selling, Sloane Ranger, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, too big to fail, vertical integration, wikimedia commons, yield curve

It was the age of the yuppies and their Sloane Ranger girlfriends. They drank and they drove Flaming Ferraris. News bulletins showed agitated young men in fashionable striped shirts and braces yelling down their phones in dealing rooms the size of football fields. The action was gripping, especially at moments such as Black Monday, 19 October 1987, when after an unexpected rise in US interest rates from 8.75 to 9.75 per cent – with London paralysed after freak winds – markets fell by nearly a quarter in two days. Publicized by the government’s privatizations, the drama of volatile markets and the theatre of the dealing room, the City infiltrated popular culture.

The Death of Money: The Coming Collapse of the International Monetary System by James Rickards

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Asian financial crisis, asset allocation, Ayatollah Khomeini, bank run, banking crisis, Bear Stearns, Ben Bernanke: helicopter money, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bretton Woods, BRICs, business climate, business cycle, buy and hold, capital controls, Carmen Reinhart, central bank independence, centre right, collateralized debt obligation, collective bargaining, complexity theory, computer age, credit crunch, currency peg, David Graeber, debt deflation, Deng Xiaoping, diversification, Dr. Strangelove, Edward Snowden, eurozone crisis, fiat currency, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, G4S, George Akerlof, global macro, global reserve currency, global supply chain, Goodhart's law, Growth in a Time of Debt, guns versus butter model, Herman Kahn, high-speed rail, income inequality, inflation targeting, information asymmetry, invisible hand, jitney, John Meriwether, junk bonds, Kenneth Rogoff, labor-force participation, Lao Tzu, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, market design, megaproject, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mutually assured destruction, Nixon triggered the end of the Bretton Woods system, obamacare, offshore financial centre, oil shale / tar sands, open economy, operational security, plutocrats, Ponzi scheme, power law, price stability, public intellectual, quantitative easing, RAND corporation, reserve currency, risk-adjusted returns, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Silicon Valley startup, Skype, Solyndra, sovereign wealth fund, special drawing rights, Stuxnet, The Market for Lemons, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, trade route, undersea cable, uranium enrichment, Washington Consensus, working-age population, yield curve

They morph in the same way a caterpillar turns into a butterfly, a process physicists call “self-organized criticality.” Social systems including capital markets are characterized by such self-organized criticality. One day the stock market behaves well, and the next day it unexpectedly collapses. The 22.6 percent one-day stock market crash on Black Monday, October 19, 1987, and the 7 percent fifteen-minute “flash crash” on May 6, 2010, are both examples of the financial system self-organizing into the critical state; at that point, it takes one snowflake or one sell order to start the collapse. Of course, it is possible to go back after the fact and find a particular sell order that, supposedly, started the market crash (an example of hunting for snowflakes).

The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry by William K. Black

accounting loophole / creative accounting, affirmative action, Alan Greenspan, Andrei Shleifer, Black Monday: stock market crash in 1987, book value, business climate, cognitive dissonance, corporate governance, corporate raider, Donald Trump, fear of failure, financial deregulation, friendly fire, George Akerlof, hiring and firing, junk bonds, margin call, market bubble, Michael Milken, money market fund, moral hazard, offshore financial centre, Ponzi scheme, race to the bottom, Ronald Reagan, Savings and loan crisis, short selling, The Market for Lemons, transaction costs

Wall’s staff was in emergency meetings with the Federal Reserve to try to get large amounts of cash in order to fend off any runs that might be triggered by closing the nation’s largest S&L in a liquidity-and-solvency crisis. The FHLBSF was suddenly (and temporarily) back in Wall’s good graces. I was leading an emergency effort to prepare the legal and factual grounds for a takeover. Wall faced imminent disgrace. Then Monday came—“Black Monday,” October 19, 1987. The largest stock market loss in American history occurred that day. Frightened investors sold stocks and bought bonds, which caused interest rates to fall. American Savings did not have to meet any margin calls, and over half the losses on its interest-rate-risk gamble were made good.

Shutdown: How COVID Shook the World's Economy by Adam Tooze

2021 United States Capitol attack, air freight, algorithmic trading, Anthropocene, Asian financial crisis, asset-backed security, Ayatollah Khomeini, bank run, banking crisis, Basel III, basic income, Ben Bernanke: helicopter money, Benchmark Capital, Berlin Wall, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, Black Monday: stock market crash in 1987, blue-collar work, Bob Geldof, bond market vigilante , Boris Johnson, Bretton Woods, Brexit referendum, business cycle, business process, business process outsourcing, buy and hold, call centre, capital controls, central bank independence, centre right, clean water, cognitive dissonance, contact tracing, contact tracing app, coronavirus, COVID-19, credit crunch, Credit Default Swap, cryptocurrency, currency manipulation / currency intervention, currency peg, currency risk, decarbonisation, deindustrialization, Donald Trump, Elon Musk, energy transition, eurozone crisis, facts on the ground, failed state, fake news, Fall of the Berlin Wall, fear index, financial engineering, fixed income, floating exchange rates, friendly fire, George Floyd, gig economy, global pandemic, global supply chain, green new deal, high-speed rail, housing crisis, income inequality, inflation targeting, invisible hand, It's morning again in America, Jeremy Corbyn, junk bonds, light touch regulation, lockdown, low interest rates, margin call, Martin Wolf, mass immigration, mass incarceration, megacity, megaproject, middle-income trap, Mikhail Gorbachev, Modern Monetary Theory, moral hazard, oil shale / tar sands, Overton Window, Paris climate accords, Pearl River Delta, planetary scale, Potemkin village, price stability, Productivity paradox, purchasing power parity, QR code, quantitative easing, remote working, reserve currency, reshoring, Robinhood: mobile stock trading app, Ronald Reagan, secular stagnation, shareholder value, Silicon Valley, six sigma, social distancing, South China Sea, special drawing rights, stock buybacks, tail risk, TikTok, too big to fail, TSMC, universal basic income, Washington Consensus, women in the workforce, yield curve

They are the foundation of America’s financial might and thus of the world order as we know it. Chapter 6 “WHATEVER IT TAKES,” AGAIN On Thursday, March 12, the news from the financial markets was grim. America’s stock markets suffered losses worse than anything in 2008. Only “Black Monday” in October 1987 and the darkest days of 1929 were worse.1 That was bad, but for insiders, the stock market was not the real worry. A “correction” was in order. The world was heading into shutdown. It was to be expected that share prices would fall. The function of shares as risk-bearing capital is to act as a shock absorber in hard times.

Are Chief Executives Overpaid? by Deborah Hargreaves

banking crisis, benefit corporation, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, bonus culture, business climate, corporate governance, Donald Trump, G4S, Jeff Bezos, Jeremy Corbyn, late capitalism, loadsamoney, long term incentive plan, Mark Zuckerberg, Martin Wolf, opioid epidemic / opioid crisis, performance metric, principal–agent problem, profit maximization, Ronald Reagan, shareholder value, Snapchat, trade liberalization, trickle-down economics, wealth creators

How Will You Measure Your Life? by Christensen, Clayton M., Dillon, Karen, Allworth, James

air freight, Black Monday: stock market crash in 1987, Clayton Christensen, disruptive innovation, hiring and firing, invisible hand, Iridium satellite, job satisfaction, late fees, Mahatma Gandhi, Nick Leeson, Silicon Valley, Skype, Steve Jobs, working poor, young professional

Principles: Life and Work by Ray Dalio

Alan Greenspan, Albert Einstein, asset allocation, autonomous vehicles, backtesting, Bear Stearns, Black Monday: stock market crash in 1987, cognitive bias, currency risk, Deng Xiaoping, diversification, Dunning–Kruger effect, Elon Musk, financial engineering, follow your passion, global macro, Greenspan put, hiring and firing, iterative process, Jeff Bezos, Long Term Capital Management, margin call, Market Wizards by Jack D. Schwager, microcredit, oil shock, performance metric, planetary scale, quantitative easing, risk tolerance, Ronald Reagan, Silicon Valley, Steve Jobs, transaction costs, yield curve

Operating any other way would be unproductive and unethical. MORE BIG TWISTS AND TURNS IN THE ECONOMY AND MARKETS 1987 and 1988 were filled with more of those big twists and turns that helped shape me and my approach to life and investing. We were one of the few investment managers who were short stocks ahead of “Black Monday,” October 19, 1987, then the largest single-day percentage decline in the history of the stock market. We got a lot of attention because we were up 22 percent when most others were down a lot. The media dubbed us as among the “Heroes of October.” Naturally, I was feeling pretty good going into 1988. I had grown up in an era of high volatility and had learned that the best way to play it was to get a hold of a big move and ride it.

Triumph of the Optimists: 101 Years of Global Investment Returns by Elroy Dimson, Paul Marsh, Mike Staunton

asset allocation, banking crisis, Berlin Wall, Black Monday: stock market crash in 1987, book value, Bretton Woods, British Empire, buy and hold, capital asset pricing model, capital controls, central bank independence, classic study, colonial rule, corporate governance, correlation coefficient, cuban missile crisis, currency risk, discounted cash flows, diversification, diversified portfolio, dividend-yielding stocks, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, European colonialism, fixed income, floating exchange rates, German hyperinflation, index fund, information asymmetry, joint-stock company, junk bonds, negative equity, new economy, oil shock, passive investing, purchasing power parity, random walk, risk free rate, risk tolerance, risk/return, selection bias, shareholder value, Sharpe ratio, stocks for the long run, survivorship bias, Tax Reform Act of 1986, technology bubble, transaction costs, yield curve

Figure 4-12 provides a dramatic reminder of the risks of equity investment. The leftmost bar shows the aftershock of the terrorist attacks on New York and Washington on September 11, 2001. After a four day market closure, the Dow Jones Index fell 14 percent over the next week. The second bar depicts Black Monday, October 19, 1987. US investors lost 23 percent in one day, and the impact reverberated around the globe, with even-larger losses in many other markets. The October 1987 crash is remembered, however, for its massive one-day loss rather than its lasting effects. The third bar in the chart reminds us how far US equities fell during 2000–01 from their 24 March 2000 high.

Robot Rules: Regulating Artificial Intelligence by Jacob Turner

"World Economic Forum" Davos, Ada Lovelace, Affordable Care Act / Obamacare, AI winter, algorithmic bias, algorithmic trading, AlphaGo, artificial general intelligence, Asilomar, Asilomar Conference on Recombinant DNA, autonomous vehicles, backpropagation, Basel III, bitcoin, Black Monday: stock market crash in 1987, blockchain, brain emulation, Brexit referendum, Cambridge Analytica, Charles Babbage, Clapham omnibus, cognitive dissonance, Computing Machinery and Intelligence, corporate governance, corporate social responsibility, correlation does not imply causation, crowdsourcing, data science, deep learning, DeepMind, Demis Hassabis, distributed ledger, don't be evil, Donald Trump, driverless car, easy for humans, difficult for computers, effective altruism, Elon Musk, financial exclusion, financial innovation, friendly fire, future of work, hallucination problem, hive mind, Internet of things, iterative process, job automation, John Markoff, John von Neumann, Loebner Prize, machine readable, machine translation, medical malpractice, Nate Silver, natural language processing, Nick Bostrom, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, nudge unit, obamacare, off grid, OpenAI, paperclip maximiser, pattern recognition, Peace of Westphalia, Philippa Foot, race to the bottom, Ray Kurzweil, Recombinant DNA, Rodney Brooks, self-driving car, Silicon Valley, Stanislav Petrov, Stephen Hawking, Steve Wozniak, strong AI, technological singularity, Tesla Model S, The Coming Technological Singularity, The Future of Employment, The Signal and the Noise by Nate Silver, trolley problem, Turing test, Vernor Vinge

Fuses have been used since the late nineteenth century to protect electrical systems by cutting the energy supply in response to a power surge without the need for any human intervention. In modern times, an automatic “circuit breaker” has been used to prevent extreme volatility in securities markets. Ever since the “Black Monday” crash of 1987 when the Dow Jones Industrial Average fell by around 22%, stock exchanges have imposed trading curbs which prevent traders from buying and selling shares when the market falls or rises by a given amount over a specified period. This type of automatic shut-off is particularly important in industries where events occur so quickly as to be incapable of effective human oversight.

More: The 10,000-Year Rise of the World Economy by Philip Coggan

accounting loophole / creative accounting, Ada Lovelace, agricultural Revolution, Airbnb, airline deregulation, Alan Greenspan, Andrei Shleifer, anti-communist, Apollo 11, assortative mating, autonomous vehicles, bank run, banking crisis, banks create money, basic income, Bear Stearns, Berlin Wall, Black Monday: stock market crash in 1987, Bletchley Park, Bob Noyce, Boeing 747, bond market vigilante , Branko Milanovic, Bretton Woods, Brexit referendum, British Empire, business cycle, call centre, capital controls, carbon footprint, carbon tax, Carl Icahn, Carmen Reinhart, Celtic Tiger, central bank independence, Charles Babbage, Charles Lindbergh, clean water, collective bargaining, Columbian Exchange, Columbine, Corn Laws, cotton gin, credit crunch, Credit Default Swap, crony capitalism, cross-border payments, currency peg, currency risk, debt deflation, DeepMind, Deng Xiaoping, discovery of the americas, Donald Trump, driverless car, Easter island, Erik Brynjolfsson, European colonialism, eurozone crisis, Fairchild Semiconductor, falling living standards, financial engineering, financial innovation, financial intermediation, floating exchange rates, flying shuttle, Ford Model T, Fractional reserve banking, Frederick Winslow Taylor, full employment, general purpose technology, germ theory of disease, German hyperinflation, gig economy, Gini coefficient, Glass-Steagall Act, global supply chain, global value chain, Gordon Gekko, Great Leap Forward, greed is good, Greenspan put, guns versus butter model, Haber-Bosch Process, Hans Rosling, Hernando de Soto, hydraulic fracturing, hydroponic farming, Ignaz Semmelweis: hand washing, income inequality, income per capita, independent contractor, indoor plumbing, industrial robot, inflation targeting, Isaac Newton, James Watt: steam engine, job automation, John Snow's cholera map, joint-stock company, joint-stock limited liability company, Jon Ronson, Kenneth Arrow, Kula ring, labour market flexibility, land reform, land tenure, Lao Tzu, large denomination, Les Trente Glorieuses, liquidity trap, Long Term Capital Management, Louis Blériot, low cost airline, low interest rates, low skilled workers, lump of labour, M-Pesa, Malcom McLean invented shipping containers, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, McJob, means of production, Mikhail Gorbachev, mittelstand, Modern Monetary Theory, moral hazard, Murano, Venice glass, Myron Scholes, Nelson Mandela, Network effects, Northern Rock, oil shale / tar sands, oil shock, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, popular capitalism, popular electronics, price stability, principal–agent problem, profit maximization, purchasing power parity, quantitative easing, railway mania, Ralph Nader, regulatory arbitrage, road to serfdom, Robert Gordon, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, savings glut, scientific management, Scramble for Africa, Second Machine Age, secular stagnation, Silicon Valley, Simon Kuznets, South China Sea, South Sea Bubble, special drawing rights, spice trade, spinning jenny, Steven Pinker, Suez canal 1869, TaskRabbit, techlash, Thales and the olive presses, Thales of Miletus, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, Tragedy of the Commons, transaction costs, transatlantic slave trade, transcontinental railway, Triangle Shirtwaist Factory, universal basic income, Unsafe at Any Speed, Upton Sinclair, V2 rocket, Veblen good, War on Poverty, Washington Consensus, Watson beat the top human players on Jeopardy!, women in the workforce, world market for maybe five computers, Yom Kippur War, you are the product, zero-sum game

Western critics berated the BoJ for not cutting interest rates fast enough or reorganising the banks. But a similar crisis was building in the US and Europe. After 1982, financial markets began a long bull run as yields fell from the high levels of the inflationary era. When markets wobbled, as they did on “Black Monday” in October 1987, central banks were quick to slash rates. They were trying to avoid the mistakes of the 1930s, when they were too slow to respond to financial distress. Over time, however, the markets seemed to rely on the Fed stepping in to rescue them. Faith in the Fed’s backing was known as the “Greenspan put”, after the then Fed chairman and an option strategy that protects investors from losses.

In Pursuit of the Perfect Portfolio: The Stories, Voices, and Key Insights of the Pioneers Who Shaped the Way We Invest by Andrew W. Lo, Stephen R. Foerster

Alan Greenspan, Albert Einstein, AOL-Time Warner, asset allocation, backtesting, behavioural economics, Benoit Mandelbrot, Black Monday: stock market crash in 1987, Black-Scholes formula, Bretton Woods, Brownian motion, business cycle, buy and hold, capital asset pricing model, Charles Babbage, Charles Lindbergh, compound rate of return, corporate governance, COVID-19, credit crunch, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Donald Trump, Edward Glaeser, equity premium, equity risk premium, estate planning, Eugene Fama: efficient market hypothesis, fake news, family office, fear index, fiat currency, financial engineering, financial innovation, financial intermediation, fixed income, hiring and firing, Hyman Minsky, implied volatility, index fund, interest rate swap, Internet Archive, invention of the wheel, Isaac Newton, Jim Simons, John Bogle, John Meriwether, John von Neumann, joint-stock company, junk bonds, Kenneth Arrow, linear programming, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, managed futures, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, new economy, New Journalism, Own Your Own Home, passive investing, Paul Samuelson, Performance of Mutual Funds in the Period, prediction markets, price stability, profit maximization, quantitative trading / quantitative finance, RAND corporation, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, selection bias, seminal paper, shareholder value, Sharpe ratio, short selling, South Sea Bubble, stochastic process, stocks for the long run, survivorship bias, tail risk, Thales and the olive presses, Thales of Miletus, The Myth of the Rational Market, The Wisdom of Crowds, Thomas Bayes, time value of money, transaction costs, transfer pricing, tulip mania, Vanguard fund, yield curve, zero-coupon bond, zero-sum game

., Markowitz on, 33–34 Sprenkle, Case, 152 “Stability of a Monetary Economy with Inflationary Expectations” (Siegel), 283–84 Standard & Poor’s (S&P), 248, 251 Standard Oil of New Jersey, growth trap and, 298–99 Steinberg, Jonathan (Jono), 304 Steinberg, Saul, 304 Steinberger, Jack, 174 Stewart, Ian, 148 Stigler, George, 166 stock market: bubbles in (see bubbles); business cycles and, Siegel’s interest in, 286–88; cyclically adjusted price-to-earnings ratio and, 246–47; Fed leadership’s expression of opinions about, 237–40; irrational exuberance and, 237–39; Shiller/Siegel controversy over overvaluation of, 302–4; Trump’s election and, 301 stock market crashes: of Black Monday (October 19, 1987), 236–37; Fama on, 245; of 1929, Bogle family and, 114 Stocks for the Long Run (Siegel), 229, 281, 289, 291–95, 300, 305–6 stock splits, Fama’s research on, 90–93 Strange, Robert, 258 “Studies in the Theory of Risk Bearing” (Mossin), 71 Stulz, René, 108, 110–11 substitution swaps, 211 swaps, Leibowitz and Homer’s memorandum on, 211–12 Swensen, David, 219, 269, 270–71 target date funds, 224 Target Date Retirement Income Funds, 196, 197 taxes, 48, 322; Bogle on, 135; corporate, 1964 cut in, 260; Ellis on, 279 technical analysis, 88, 89 technology sector overvaluation, Siegel on, 295–98 terminal wealth, Scholes on, 167 Tesler, Lester, 87 Texas Instruments calculators, 161 Thaler, Richard (Dick): on equity premium, 290; on market efficiency, 245; as Nobel Prize winner, 83, 245, 290; publications of, 245; relationship with Fama, 245 Thales of Miletus, 4–5 Theiler, Max, as Nobel Prize winner, 174 The Theory of Finance (Fama and Miller), 108 The Theory of Interest, as Determined by Impatience to Spend Income and Opportunity to Invest It (Fisher), 15 The Theory of Investment Value (Williams), 15, 23, 28 “The Theory of Speculation” (Bachelier), 83 Thorndike, Doran, Paine & Lewis, 121 three-factor model, 102–5 Three P’s of Investments, 322–23 time value of money, 2 timing: achieving financial goals and, 332; market timing and, 318 Timmons, Bruce, 228 Tobin, James, 22, 39, 231 “To Get Performance, You Have to Be Organized for It” (Ellis), 261 tokens, for ancient record keeping, 2 Toronto Maple Leafs, 141 traditional index funds (TIFs), exchange-traded funds vs., 136–37 transfer prices, Sharpe’s interest in, 55 Treasury bills, Fama’s predictability study of, 105 Treasury bonds, Fama’s predictability study of, 106–7 Treasury Inflation-Protected Securities (TIPS), 193, 197, 198, 311, 322 Trente demoiselles de Geneve, 13–14 Treynor, Jack, 69–70, 347n46; “Market Value, Time, and Risk,” 69; research on option pricing, 149–50 trills, 253–54 Trump, Donald, Siegel and Shiller’s views on stock market effects of election of, 301 tulip bubble, 9–10 Tversky, Amos, 42, 83 Twain, Shania, 141 Twardowski, Jan, 127 underperformance, Ellis on, 272–73 Ur, financial district of, 3 Uspensky, J.

Dead Companies Walking by Scott Fearon

Alan Greenspan, bank run, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, book value, business cycle, Carl Icahn, corporate raider, cost per available seat-mile, creative destruction, crony capitalism, Donald Trump, Eugene Fama: efficient market hypothesis, fear of failure, Golden Gate Park, hiring and firing, housing crisis, index fund, it's over 9,000, Jeff Bezos, John Bogle, Joseph Schumpeter, Larry Ellison, late fees, legacy carrier, McMansion, moral hazard, multilevel marketing, new economy, pets.com, Ponzi scheme, Ronald Reagan, short selling, short squeeze, Silicon Valley, Snapchat, South of Market, San Francisco, Steve Jobs, survivorship bias, Upton Sinclair, Vanguard fund, young professional

He even named a time and date when Los Angeles would break off into the Pacific Ocean. Thankfully, he was as good at calling Armageddon as he was at picking stocks. Then there was Elaine Garzarelli, a hotshot young analyst at Shearson Lehman Brothers who became an instant star after she predicted the Black Monday stock market crash of 1987. She went on to make regular appearances as a commentator on television and even starred in a commercial for pantyhose. Her bosses were so eager to believe that they had found a once-in-a-lifetime genius, they handed her control of a giant mutual fund. A few years later, they had to fire her.

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis by James Rickards

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Bayesian statistics, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Benoit Mandelbrot, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, blockchain, Boeing 747, Bonfire of the Vanities, Bretton Woods, Brexit referendum, British Empire, business cycle, butterfly effect, buy and hold, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, cellular automata, cognitive bias, cognitive dissonance, complexity theory, Corn Laws, corporate governance, creative destruction, Credit Default Swap, cuban missile crisis, currency manipulation / currency intervention, currency peg, currency risk, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, disintermediation, distributed ledger, diversification, diversified portfolio, driverless car, Edward Lorenz: Chaos theory, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, fiat currency, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, Fractional reserve banking, G4S, George Akerlof, Glass-Steagall Act, global macro, global reserve currency, high net worth, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Isaac Newton, jitney, John Meriwether, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, Long Term Capital Management, low interest rates, machine readable, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, Minsky moment, Money creation, money market fund, mutually assured destruction, Myron Scholes, Naomi Klein, nuclear winter, obamacare, offshore financial centre, operational security, Paul Samuelson, Peace of Westphalia, Phillips curve, Pierre-Simon Laplace, plutocrats, prediction markets, price anchoring, price stability, proprietary trading, public intellectual, quantitative easing, RAND corporation, random walk, reserve currency, RFID, risk free rate, risk-adjusted returns, Robert Solow, Ronald Reagan, Savings and loan crisis, Silicon Valley, sovereign wealth fund, special drawing rights, stock buybacks, stocks for the long run, tech billionaire, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transfer pricing, value at risk, Washington Consensus, We are all Keynesians now, Westphalian system

DIY Investor: How to Take Control of Your Investments & Plan for a Financially Secure Future by Andy Bell

asset allocation, bank run, Bear Stearns, Black Monday: stock market crash in 1987, buy and hold, collapse of Lehman Brothers, credit crunch, currency risk, diversification, diversified portfolio, estate planning, eurozone crisis, fixed income, high net worth, hiring and firing, Isaac Newton, junk bonds, Kickstarter, lateral thinking, low interest rates, money market fund, Northern Rock, passive investing, place-making, quantitative easing, selection bias, short selling, South Sea Bubble, technology bubble, transaction costs, Vanguard fund

Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America by Greg Farrell

"World Economic Forum" Davos, Airbus A320, Apple's 1984 Super Bowl advert, bank run, banking crisis, Bear Stearns, Black Monday: stock market crash in 1987, bonus culture, call centre, Captain Sullenberger Hudson, collapse of Lehman Brothers, collateralized debt obligation, compensation consultant, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, financial engineering, financial innovation, fixed income, glass ceiling, Glass-Steagall Act, high net worth, junk bonds, Ken Thompson, Long Term Capital Management, mass affluent, Mexican peso crisis / tequila crisis, Michael Milken, Nelson Mandela, plutocrats, Ronald Reagan, six sigma, sovereign wealth fund, technology bubble, too big to fail, US Airways Flight 1549, yield curve

Regan proved to be a fiery leader of Merrill Lynch in the 1970s, railing against the club of Wall Street firms that fattened their bottom lines at the expense of the average investor. Bill Schreyer, a member of the thundering herd who moved up the management chain under Regan, took the top job after Regan’s successor, Roger Birk, stepped down for health reasons. Schreyer steered the firm through the “Black Monday” crash of 1987 and a mortgage-related loss of $387 million. When the time came for Schreyer’s retirement, the torch was passed to Dan Tully, who had served as Schreyer’s right-hand man. Tully codified the five principles of Merrill Lynch, principles on which Charlie Merrill had built the modern Merrill Lynch in the 1940s.

Bill Marriott: Success Is Never Final--His Life and the Decisions That Built a Hotel Empire by Dale van Atta

Berlin Wall, Black Monday: stock market crash in 1987, Boeing 747, book value, Carl Icahn, Charles Lindbergh, clean water, collective bargaining, corporate raider, Deng Xiaoping, Donald Trump, dumpster diving, financial innovation, Ford Model T, hiring and firing, index card, indoor plumbing, Kickstarter, Kintsugi, Maui Hawaii, medical residency, Menlo Park, Mikhail Gorbachev, mortgage debt, profit motive, Robert Bork, Ronald Reagan, shareholder value, short selling, stock buybacks, three-martini lunch, urban renewal

It read: “Happiness is a positive cash flow.”6 On the home front, when Bill ramped up his work schedule after his heart attacks, Donna urged him to get additional office help. Their son John, who had been working at headquarters in strategic planning, marketing, and financial planning, was made Bill’s executive assistant on a temporary basis to help reduce the load. Shortly after the stock market crashed on Black Monday, October 19, 1987, a Forbes writer had visited Bill in his office and found him surprisingly calm about the situation. He noticed several seascapes on the office walls by Depression-era British artist Montague Dawson. Bill’s favorite was a majestic ship plowing through a storm-tossed sea. “We’re in uncharted waters,” Bill reflected, looking at the painting.

The End of Wall Street by Roger Lowenstein

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, benefit corporation, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, break the buck, Brownian motion, Carmen Reinhart, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, fixed income, geopolitical risk, Glass-Steagall Act, Greenspan put, high net worth, Hyman Minsky, interest rate derivative, invisible hand, junk bonds, Ken Thompson, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Martin Wolf, Michael Milken, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, Ponzi scheme, profit motive, race to the bottom, risk tolerance, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, savings glut, short selling, sovereign wealth fund, statistical model, the payments system, too big to fail, tulip mania, Y2K

Stress Test: Reflections on Financial Crises by Timothy F. Geithner

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, Atul Gawande, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Bernie Sanders, Black Monday: stock market crash in 1987, break the buck, Buckminster Fuller, Carmen Reinhart, central bank independence, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency risk, David Brooks, Doomsday Book, eurozone crisis, fear index, financial engineering, financial innovation, Flash crash, Goldman Sachs: Vampire Squid, Greenspan put, housing crisis, Hyman Minsky, illegal immigration, implied volatility, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market fundamentalism, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, Nate Silver, negative equity, Northern Rock, obamacare, paradox of thrift, pets.com, price stability, profit maximization, proprietary trading, pushing on a string, quantitative easing, race to the bottom, RAND corporation, regulatory arbitrage, reserve currency, Saturday Night Live, Savings and loan crisis, savings glut, selection bias, Sheryl Sandberg, short selling, sovereign wealth fund, stock buybacks, tail risk, The Great Moderation, The Signal and the Noise by Nate Silver, Tobin tax, too big to fail, working poor

And Hank was confident they would attract enough votes to get the bill into law, the most important consideration. On Monday, though, the TARP legislation went down to a shocking defeat in the House, 228–205. Most Democrats supported it, but two-thirds of Republicans voted no. The stock market plunged almost 9 percent that day, the largest decline since the Black Monday crash of 1987, wiping out $1 trillion in wealth. Hank called me, as distraught as I had ever heard him. His voice broke as he told me how sorry he was. “Tim, I couldn’t get it across the line,” he said. In those days, I tended to be the most worried person in the room, but on this issue I was relatively confident.

The Contrarian: Peter Thiel and Silicon Valley's Pursuit of Power by Max Chafkin

3D printing, affirmative action, Airbnb, anti-communist, bank run, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, Black Monday: stock market crash in 1987, Blitzscaling, Boeing 747, borderless world, Cambridge Analytica, charter city, cloud computing, cognitive dissonance, Cornelius Vanderbilt, coronavirus, COVID-19, Credit Default Swap, cryptocurrency, David Brooks, David Graeber, DeepMind, digital capitalism, disinformation, don't be evil, Donald Trump, driverless car, Electric Kool-Aid Acid Test, Elon Musk, Ethereum, Extropian, facts on the ground, Fairchild Semiconductor, fake news, Ferguson, Missouri, Frank Gehry, Gavin Belson, global macro, Gordon Gekko, Greyball, growth hacking, guest worker program, Hacker News, Haight Ashbury, helicopter parent, hockey-stick growth, illegal immigration, immigration reform, Internet Archive, Jeff Bezos, John Markoff, Kevin Roose, Kickstarter, Larry Ellison, life extension, lockdown, low interest rates, Lyft, Marc Andreessen, Mark Zuckerberg, Maui Hawaii, Max Levchin, Menlo Park, military-industrial complex, moral panic, move fast and break things, Neal Stephenson, Nelson Mandela, Network effects, off grid, offshore financial centre, oil shale / tar sands, open borders, operational security, PalmPilot, Paris climate accords, Patri Friedman, paypal mafia, Peter Gregory, Peter Thiel, pets.com, plutocrats, Ponzi scheme, prosperity theology / prosperity gospel / gospel of success, public intellectual, QAnon, quantitative hedge fund, quantitative trading / quantitative finance, randomized controlled trial, regulatory arbitrage, Renaissance Technologies, reserve currency, ride hailing / ride sharing, risk tolerance, Robinhood: mobile stock trading app, Ronald Reagan, Sam Altman, Sand Hill Road, self-driving car, sharing economy, Sheryl Sandberg, Silicon Valley, Silicon Valley billionaire, Silicon Valley ideology, Silicon Valley startup, skunkworks, social distancing, software is eating the world, sovereign wealth fund, Steve Bannon, Steve Jobs, Steven Levy, Stewart Brand, surveillance capitalism, TaskRabbit, tech billionaire, tech worker, TechCrunch disrupt, techlash, technology bubble, technoutopianism, Ted Kaczynski, TED Talk, the new new thing, the scientific method, Tim Cook: Apple, transaction costs, Travis Kalanick, Tyler Cowen, Uber and Lyft, uber lyft, Upton Sinclair, Vitalik Buterin, We wanted flying cars, instead we got 140 characters, Whole Earth Catalog, WikiLeaks, William Shockley: the traitorous eight, Y Combinator, Y2K, yellow journalism, Zenefits

Reset: How to Restart Your Life and Get F.U. Money: The Unconventional Early Retirement Plan for Midlife Careerists Who Want to Be Happy by David Sawyer

"World Economic Forum" Davos, Abraham Maslow, Airbnb, Albert Einstein, asset allocation, beat the dealer, bitcoin, Black Monday: stock market crash in 1987, Cal Newport, cloud computing, cognitive dissonance, content marketing, crowdsourcing, cryptocurrency, currency risk, David Attenborough, David Heinemeier Hansson, Desert Island Discs, diversification, diversified portfolio, Edward Thorp, Elon Musk, fake it until you make it, fake news, financial independence, follow your passion, gig economy, Great Leap Forward, hiring and firing, imposter syndrome, index card, index fund, invention of the wheel, John Bogle, knowledge worker, loadsamoney, low skilled workers, Mahatma Gandhi, Mark Zuckerberg, meta-analysis, mortgage debt, Mr. Money Mustache, passive income, passive investing, Paul Samuelson, pension reform, risk tolerance, Robert Shiller, Ronald Reagan, Silicon Valley, Skype, smart meter, Snapchat, stakhanovite, Steve Jobs, sunk-cost fallacy, TED Talk, The 4% rule, Tim Cook: Apple, Vanguard fund, William Bengen, work culture , Y Combinator

Keeping at It: The Quest for Sound Money and Good Government by Paul Volcker, Christine Harper

Alan Greenspan, anti-communist, Ayatollah Khomeini, banking crisis, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, Bretton Woods, business cycle, central bank independence, corporate governance, Credit Default Swap, Donald Trump, fiat currency, financial engineering, financial innovation, fixed income, floating exchange rates, forensic accounting, full employment, Glass-Steagall Act, global reserve currency, income per capita, inflation targeting, liquidationism / Banker’s doctrine / the Treasury view, low interest rates, margin call, money market fund, Nixon shock, oil-for-food scandal, Paul Samuelson, price stability, proprietary trading, quantitative easing, reserve currency, Right to Buy, risk-adjusted returns, Ronald Reagan, Rosa Parks, Savings and loan crisis, secular stagnation, Sharpe ratio, Silicon Valley, special drawing rights, too big to fail, traveling salesman, urban planning

Barbarians at the Gate: The Fall of RJR Nabisco by Bryan Burrough, John Helyar

Alan Greenspan, Bear Stearns, Black Monday: stock market crash in 1987, buy and hold, buy low sell high, Carl Icahn, corporate raider, Donald Trump, financial engineering, Gordon Gekko, junk bonds, margin call, Michael Milken, Ronald Reagan, Rubik’s Cube, shareholder value, South Sea Bubble

But because Good’s raiders rarely bought anything, Shearson’s junk-bond department sat idle, atrophying. When Asher Edelman finally managed to snag a company—the steakhouse chain, Ponderosa—Shearson’s junk-bond offering was a disaster, and the firm took steep losses. Cohen steamed. Good took the blame. The final run of Shearson’s raider express began on Black Monday, October 19, 1987. As the market crashed, scores of pending takeovers unraveled, and Cohen and Sheinberg panicked. For the first time they realized that the firm could actually lose the hundreds of millions of dollars it was lending. When a buoyant Dan Good appeared before the investment committee a week later seeking approval for a Bilzerian raid on Singer, the former sewing-machine maker, he received a rude shock.

Reminiscences of a Stock Operator by Edwin Lefèvre, William J. O'Neil

activist fund / activist shareholder / activist investor, bank run, behavioural economics, Black Monday: stock market crash in 1987, book value, British Empire, business process, buttonwood tree, buy and hold, buy the rumour, sell the news, clean water, Cornelius Vanderbilt, cotton gin, Credit Default Swap, Donald Trump, fiat currency, Ford Model T, gentleman farmer, Glass-Steagall Act, Hernando de Soto, margin call, Monroe Doctrine, new economy, pattern recognition, Ponzi scheme, price stability, refrigerator car, Reminiscences of a Stock Operator, reserve currency, short selling, short squeeze, technology bubble, tontine, trade route, transcontinental railway, traveling salesman, Upton Sinclair, yellow journalism

But many popular publications of this era have passed into history, most prominently the Ticker and Investment Digest, the Magazine of Wall Street, the Kernel of Finance and Politics for Everybody, Dun’s Review, and the excellent Commercial & Financial Chronicle, which failed in the aftermath of the Black Monday crash of 1987. For years I had been the victim of an unfortunate combination of inexperience, youth and insufficient capital. But now I felt the elation of a discoverer. My new attitude toward the game explained my repeated failures to make big money in New York. But now with adequate resources, experience and confidence, I was in such a hurry to try the new key that I did not notice that there was another lock on the door—a time lock!

The Physics of Wall Street: A Brief History of Predicting the Unpredictable by James Owen Weatherall

Alan Greenspan, Albert Einstein, algorithmic trading, Antoine Gombaud: Chevalier de Méré, Apollo 11, Asian financial crisis, bank run, Bear Stearns, beat the dealer, behavioural economics, Benoit Mandelbrot, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, Bonfire of the Vanities, book value, Bretton Woods, Brownian motion, business cycle, butterfly effect, buy and hold, capital asset pricing model, Carmen Reinhart, Claude Shannon: information theory, coastline paradox / Richardson effect, collateralized debt obligation, collective bargaining, currency risk, dark matter, Edward Lorenz: Chaos theory, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, Financial Modelers Manifesto, fixed income, George Akerlof, Gerolamo Cardano, Henri Poincaré, invisible hand, Isaac Newton, iterative process, Jim Simons, John Nash: game theory, junk bonds, Kenneth Rogoff, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, Market Wizards by Jack D. Schwager, martingale, Michael Milken, military-industrial complex, Myron Scholes, Neil Armstrong, new economy, Nixon triggered the end of the Bretton Woods system, Paul Lévy, Paul Samuelson, power law, prediction markets, probability theory / Blaise Pascal / Pierre de Fermat, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk free rate, risk-adjusted returns, Robert Gordon, Robert Shiller, Ronald Coase, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, statistical arbitrage, statistical model, stochastic process, Stuart Kauffman, The Chicago School, The Myth of the Rational Market, tulip mania, Vilfredo Pareto, volatility smile

A more realistic options model, meanwhile, should account for fat tails. Mandelbrot left finance at the end of the 1960s, but he returned in the early 1990s. One of the reasons was that many financial practitioners were beginning to recognize the shortcomings of the Black-Scholes model. Instrumental in this shift was the Black Monday stock market crash of 1987, during which world financial markets fell more than 20% literally overnight. Blame for the crash fell to a novel financial product based on options and the Black-Scholes model, known as portfolio insurance. Portfolio insurance was designed, and advertised, to curtail the risk of major losses.

How I Built This: The Unexpected Paths to Success From the World's Most Inspiring Entrepreneurs by Guy Raz

Airbnb, AOL-Time Warner, Apple II, barriers to entry, Bear Stearns, Ben Horowitz, Big Tech, big-box store, Black Monday: stock market crash in 1987, Blitzscaling, business logic, call centre, Clayton Christensen, commoditize, Cornelius Vanderbilt, Credit Default Swap, crowdsourcing, data science, East Village, El Camino Real, Elon Musk, fear of failure, glass ceiling, growth hacking, housing crisis, imposter syndrome, inventory management, It's morning again in America, iterative process, James Dyson, Jeff Bezos, Justin.tv, Kickstarter, low cost airline, Lyft, Marc Andreessen, Mark Zuckerberg, move fast and break things, Nate Silver, Paul Graham, Peter Thiel, pets.com, power law, rolodex, Ronald Reagan, Ruby on Rails, Salesforce, Sam Altman, Sand Hill Road, side hustle, Silicon Valley, software as a service, South of Market, San Francisco, Steve Jobs, Steve Wozniak, subprime mortgage crisis, TED Talk, The Signal and the Noise by Nate Silver, Tony Hsieh, Uber for X, uber lyft, Y Combinator, Zipcar

Who Owns the Future? by Jaron Lanier

3D printing, 4chan, Abraham Maslow, Affordable Care Act / Obamacare, Airbnb, augmented reality, automated trading system, barriers to entry, bitcoin, Black Monday: stock market crash in 1987, book scanning, book value, Burning Man, call centre, carbon credits, carbon footprint, cloud computing, commoditize, company town, computer age, Computer Lib, crowdsourcing, data science, David Brooks, David Graeber, delayed gratification, digital capitalism, digital Maoism, digital rights, Douglas Engelbart, en.wikipedia.org, Everything should be made as simple as possible, facts on the ground, Filter Bubble, financial deregulation, Fractional reserve banking, Francis Fukuyama: the end of history, Garrett Hardin, George Akerlof, global supply chain, global village, Haight Ashbury, hive mind, if you build it, they will come, income inequality, informal economy, information asymmetry, invisible hand, Ivan Sutherland, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John Perry Barlow, Kevin Kelly, Khan Academy, Kickstarter, Kodak vs Instagram, life extension, Long Term Capital Management, machine translation, Marc Andreessen, Mark Zuckerberg, meta-analysis, Metcalfe’s law, moral hazard, mutually assured destruction, Neal Stephenson, Network effects, new economy, Norbert Wiener, obamacare, off-the-grid, packet switching, Panopticon Jeremy Bentham, Peter Thiel, place-making, plutocrats, Ponzi scheme, post-oil, pre–internet, Project Xanadu, race to the bottom, Ray Kurzweil, rent-seeking, reversible computing, Richard Feynman, Ronald Reagan, scientific worldview, self-driving car, side project, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, smart meter, stem cell, Steve Jobs, Steve Wozniak, Stewart Brand, synthetic biology, tech billionaire, technological determinism, Ted Nelson, The Market for Lemons, Thomas Malthus, too big to fail, Tragedy of the Commons, trickle-down economics, Turing test, Vannevar Bush, WikiLeaks, zero-sum game

Advanced Stochastic Models, Risk Assessment, and Portfolio Optimization: The Ideal Risk, Uncertainty, and Performance Measures by Frank J. Fabozzi

algorithmic trading, Benoit Mandelbrot, Black Monday: stock market crash in 1987, capital asset pricing model, collateralized debt obligation, correlation coefficient, distributed generation, diversified portfolio, financial engineering, fixed income, global macro, index fund, junk bonds, Louis Bachelier, Myron Scholes, p-value, power law, quantitative trading / quantitative finance, random walk, risk free rate, risk-adjusted returns, short selling, stochastic volatility, subprime mortgage crisis, Thomas Bayes, transaction costs, value at risk