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After chatting with personal finance expert Helaine Olen, Harold Pollack wrote down all the personal finance advice you’ll ever need on a 4x6 index card:
Unless you’re an insider or get particularly lucky, you’re just not going to beat this. (via ezra klein)
A Hong Kong lending company accepts luxury handbags as collateral for loans.
Yes Lady provides a loan within half an hour at 80% of the bag’s value — as long as it is from Gucci, Chanel, Hermès or Louis Vuitton. Occasionally, a Prada purse will do the trick. Secondhand classic purses and special-edition handbags often retain much of their retail prices.
A customer gets her bag back by repaying the loan at 4% monthly interest within four months. Yes Lady says almost all its clients quickly pay off their loans and reclaim their bags.
The company recently lent about US$20,600 in exchange for a Hermès Birkin bag, but Yes Lady’s purse-backed loans start at about US$200.
(via marginal revolution)
What has been the hottest IPO of the year so far? Some new-fangled technology perhaps? Or maybe a trend-setting company from one of the coasts set to take their product offering national and then global? Nope, it was a Denver-based, pasta-centric restaurant chain called Noodles & Co. The company’s IPO bucked a lot of trends (including, it seems, the war on flour). Here’s The Daily Beast on how a pasta chain punked Wall Street.
[That’s Dave Pell’s take from Nextdraft, but I have to weigh in here. I’ve eaten at Noodles & Co many times. I ate there last week, actually. The restaurants do well because the service is friendly & responsive, your order comes out quickly, and the food is remarkably good for the money you pay (like at Chipotle). No one would ever mistake the Pad Thai or Japanese Pan Noodles for the authentic thing, but they are both delicious. I like the Steak Stroganoff so much that I crave it even when surrounded by the amazing and varied food choices of NYC. No idea if Noodles & Co would do well in Manhattan, but they’d definitely have one customer. -jkottke]
Apple reported their Q4 2012 financial results yesterday and here’s what Apple CFO Jerry Seinfeld had to say about it.
OK, I need to wrap this up. But first, raise your hand if you use a computer. That’s what I thought. Have you tried doing anything without a computer lately? It’s impossible. You want money from the bank? ATM computer. You want gas for your car? Pump computer. You looking for a news story explaining why your shares dropped 5% even though our gross margin was over 40%? Computer computer.
Apple CEO George Costanza, who is also CEO and chairman of Vandelay Industries, added, “George is getting upset!”
Eliot Spitzer has a pair of suggestions related to gun control: pressure the owners of gun companies and regulate the sale of bullets.
There may be too many guns to rid the streets of guns, but there are not that many bullets, especially in the calibers needed for the types of weapons used in these shootings. Let’s create a regime that makes sale of bullets to anybody not licensed to carry a gun illegal, makes resale illegal, micro-stamps bullets so they can be traced. No Second Amendment issues here.
There is some movement on the first issue already. Cerberus, a private equity firm that owns a large gun company, is selling the company because of pressure from their investors.
The private equity firm said it had made the investments in gun manufacturers on behalf of its clients, which include pension funds and other institutional investors. Cerberus added that it was the role of legislators to shape the country’s gun policy.
“We believe that this decision allows us to meet our obligations to the investors whose interests we are entrusted to protect without being drawn into the national debate that is more properly pursued by those with the formal charter and public responsibility to do so,” Cerberus said.
This is where the phrase “passing the buck” comes from.
In an op-ed for the NY Times, Warren Buffett proposes a minimum tax on high incomes, specifically “30 percent of taxable income between $1 million and $10 million, and 35 percent on amounts above that”. He argues that higher tax rates will not curtail investment activity.
Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well. In the years from 1956 to 1969, the top marginal rate fell modestly, but was still a lofty 70 percent - and the tax rate on capital gains inched up to 27.5 percent. I was managing funds for investors then. Never did anyone mention taxes as a reason to forgo an investment opportunity that I offered.
Under those burdensome rates, moreover, both employment and the gross domestic product (a measure of the nation’s economic output) increased at a rapid clip. The middle class and the rich alike gained ground.
(via df)
From before the election, which seems like it was several months ago already, a piece from Clayton Christensen about how investors and companies should shift their thinking about allocating capital. Christensen’s gist is that efficiency is creating pools of excess capital which is not being reinvested into the types of industry that create jobs.
The Fed has been injecting more and more capital into the economy because — at least in theory — capital fuels capitalism. And yet cash hoards in the billions are sitting unused on the pristine balance sheets of Fortune 500 corporations. Billions in capital is also sitting inert and uninvested at private equity funds.
Capitalists seem almost uninterested in capitalism, even as entrepreneurs eager to start companies find that they can’t get financing. Businesses and investors sound like the Ancient Mariner, who complained of “Water, water everywhere — nor any drop to drink.”
It’s a paradox, and at its nexus is what I’ll call the Doctrine of New Finance, which is taught with increasingly religious zeal by economists, and at times even by business professors like me who have failed to challenge it. This doctrine embraces measures of profitability that guide capitalists away from investments that can create real economic growth.
Read all the way to end; Christensen offers some suggestions for shifting capital allocation.
Occupy Wall Street continues to show that it’s more than just a simple protest movement. They have been doing amazing work with Hurricane Sandy relief and now there’s Rolling Jubilee. Here’s how Rolling Jubilee works:
OWS is going to start buying distressed debt (medical bills, student loans, etc.) in order to forgive it. As a test run, we spent $500, which bought $14,000 of distressed debt. We then ERASED THAT DEBT. (If you’re a debt broker, once you own someone’s debt you can do whatever you want with it - traditionally, you hound debtors to their grave trying to collect. We’re playing a different game. A MORE AWESOME GAME.)
This is a simple, powerful way to help folks in need — to free them from heavy debt loads so they can focus on being productive, happy and healthy. As you can see from our test run, the return on investment approaches 30:1. That’s a crazy bargain!
This has my vote for idea of the year. Well, until the debt sellers catch on and either raise the price due to demand or refuse to sell to untrusted brokers.
From a site called Celebrity Net Worth (I know, blech), a list of the 25 richest people of all time, adjusted for inflation. Gates, Buffett, and Rockefeller all make the list but the big cheese is Malian emperor Mansa Musa I, with a net worth of $400 billion in today’s dollars.
Mansa Musa I of Mali is the richest human being in history with a personal net worth of $400 billion! Mansa Musa lived from 1280 - 1337 and ruled the Malian Empire which covered modern day Ghana, Timbuktu and Mali in West Africa. Mansa Musa’s shocking wealth came from his country’s vast production of more than half the world’s supply of salt and gold.
(via @DavidGrann)
Technology Review has an animated GIF originally posted by Nanex Research that shows the activity generated by trading bots on US exchanges. It’s pretty quiet for a couple years and then starts going nuts.
Algorithmic trading lets financial firms to spot and exploit market patterns at lightning speeds. This can bring a tidy profit, but it also puts computers in charge of making decisions that can cost a company millions, and that may have an unpredictable effect on the rest of the market.
If I’m reading the original source correctly, it seems like the vast majority of the activity is not trades but quotes — Nanex calls it “quote spam”. Basically the bots are asking for prices on stocks/options/etc. over and over again, looking for price advantages that they can then exploit via trades. The quote spam is swamping the communications systems:
Quote spam has exploded with no signs of stopping, while trade frequency has stalled and is actually lower than it was years ago. Each day is plotted in a separate color over the course of a trading day (9:30 to 16:00 Eastern): older data uses colors towards the violet end of the spectrum, recent data towards the red end of the spectrum. The gaps you see between color groups on the quote chart (left-side) is when system capacity was upgraded to handle the increase in traffic, and quote spam jumped to fill the new capacity that very same day.
(via @cory_arcangel)
Update: Quote spam is not about asking for prices, it’s about sending out millions of buy/sell offers hoping for a small percentage to reply…just like email spam. (thx, @falfa)
The Children’s Development Khazana is a bank staffed and patronized exclusively by children. It started in New Delhi in 2001 and has since opened up more than 200 branches in half-a-dozen countries.
The branches are run almost entirely by and for the children, with account holders electing two volunteer managers from the group every six months.
“Children who make money by begging or selling drugs are not allowed to open an account. This bank is only for children who believe in hard work,” said Karan, a 14-year-old “manager”.
During the day, Karan earns a pittance washing up at wedding banquets or other events. In the evening, he sits at his desk to collect money from his friends, update their pass books and close the bank.
“Some account holders want to withdraw their money. I ask them why and give it to them if other children approve. Everyone earns five per cent interest on their savings.”
Frontline is doing a four-hour show about the world financial crisis, which, according to many people featured on the program, is ongoing.
Since 2008, Wall Street and Washington have fought against the tide of the fiercest financial crisis since the Great Depression. What have they wrought? In a special four-hour investigation, FRONTLINE tells the inside story of the struggles to rescue and repair a shattered economy, exploring key decisions, missed opportunities, and the unprecedented and uneasy partnership between government leaders and titans of finance that affects the fortunes of millions of people around the world.
The program airs on April 24th.
Steve Denning, writing in Forbes:
In today’s paradoxical world of maximizing shareholder value, which Jack Welch himself has called “the dumbest idea in the world”, the situation is the reverse. CEOs and their top managers have massive incentives to focus most of their attentions on the expectations market, rather than the real job of running the company producing real products and services.
Denning is summarizing the ideas contained in Roger Martin’s new book, Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL.
In Fixing the Game, Roger Martin reveals the culprit behind the sorry state of American capitalism: our deep and abiding commitment to the idea that the purpose of the firm is to maximize shareholder value. This theory has led to a massive growth in stock-based compensation for executives and, through this, to a naive and wrongheaded linking of the real market — the business of designing, making, and selling products and services — with the expectations market — the business of trading stocks, options, and complex derivatives. Martin shows how this tight coupling has been engineered and lays out its results: a single-minded focus on the expectations market that will continue driving us from crisis to crisis — unless we act now.
(thx, david)
Amazon is somewhat of an unusual company for American investors because it focuses on the long-term (10- 20-year timelines) instead of the short-term (quarterly earnings).
“If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people,” Mr. Bezos told reporter Steve Levy last month in an interview in Wired. “But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue. At Amazon we like things to work in five to seven years. We’re willing to plant seeds, let them grow-and we’re very stubborn.”
Like Apple, Amazon is one of those large market cap growth stocks that investors don’t really know what to do with. Both stocks are still undervalued compared to much of the rest of the market, IMO.
An epic chart from XKCD: Money - A chart of almost all of it, where it is, and what it can do. It’s broken out into “dollars, thousands, millions, billions, trillions”…here’s just a little snippet of the billions section:
I read this the other day and didn’t link to it because I thought it would get a lot of attention elsewhere…but it didn’t, so here you go. Starbucks is starting a program to help their customers lend money to small businesses.
Here’s the idea they came up with: Americans themselves would start lending to small businesses, with Starbucks serving as the middleman. Starbucks would find financial institutions willing to loan to small businesses. Starbucks customers would be able to donate money to the effort when they bought their coffee. Those who gave $5 or more would get a red-white-and-blue wristband, which Schultz labeled “Indivisible.” “We are hoping it will bring back pride in the American dream,” he says. The tag line will read: “Americans Helping Americans.”
This should be a bigger story, shouldn’t it? Banks seem less and less interested in lending money to people as their primary business and things like Kickstarter and this Starbucks initiative are taking their place.
Michael Lewis continues his financial tour of the world with a stop in Germany. What, he asks, will the Germans do about the weakening financial situation in Europe and, more to Lewis’ point, why will they do it?
The deputy finance minister further disturbs my wild assumptions about him by speaking clearly, even recklessly, about subjects most finance ministers believe it is their job to obscure. He offers up, without much prompting, that he has just finished reading the latest unpublished report by I.M.F. investigators on the progress made by the Greek government in reforming itself.
“They have not sufficiently implemented the measures they have promised to implement,” he says simply. “And they have a massive problem still with revenue collection. Not with the tax law itself. It’s the collection which needs to be overhauled.”
Greeks are still refusing to pay their taxes, in other words. But it is only one of many Greek sins. “They are also having a problem with the structural reform. Their labor market is changing-but not as fast as it needs to,” he continues. “Due to the developments in the last 10 years, a similar job in Germany pays 55,000 euros. In Greece it is 70,000.” To get around pay restraints in the calendar year the Greek government simply paid employees a 13th and even 14th monthly salary-months that didn’t exist. “There needs to be a change of the relationship between people and the government,” he continues. “It is not a task that can be done in three months. You need time.” He couldn’t put it more bluntly: if the Greeks and the Germans are to coexist in a currency union, the Greeks need to change who they are.
Michael Lewis’ next book will be out in October; the subtitle is Travels in the New Third World. It’s a business book about the economic bubbles he’s been writing about in Ireland, Iceland, Greece, and the US.
The tsunami of cheap credit that rolled across the planet between 2002 and 2008 was more than a simple financial phenomenon: it was temptation, offering entire societies the chance to reveal aspects of their characters they could not normally afford to indulge.
Icelanders wanted to stop fishing and become investment bankers. The Greeks wanted to turn their country into a pi~nata stuffed with cash and allow as many citizens as possible to take a whack at it. The Germans wanted to be even more German; the Irish wanted to stop being Irish.
Michael Lewis’s investigation of bubbles beyond our shores is so brilliantly, sadly hilarious that it leads the American reader to a comfortable complacency: oh, those foolish foreigners. But when he turns a merciless eye on California and Washington, DC, we see that the narrative is a trap baited with humor, and we understand the reckoning that awaits the greatest and greediest of debtor nations.
No Kindle version available yet, just like last time. If you’d like to see one, click on the “I’d like to read this book on Kindle” below the cover image. (thx, brian)
Update: Just got word from Lewis’ publisher that the ebook version (including Kindle) will be available the same day as the hardcover.
James Somers noticed that his equity derivative-trading roommate was the only one of his young professional friends who comes home from work “buoyant and satisfied”, so he accompanied him to work one day to see what his job entailed. Turns out he basically plays video games all day.
A trader’s job is to be smarter than the market. He converts a mess of analysis and intuition into simple bets. He makes moves. If his predictions are better than everyone else’s, he wins money; if not, he loses it. At every moment he has a crystalline picture of his bottom line, the “P and L” (profit and loss) that determines how much of a bonus he’ll get and, more importantly, where he stands among his peers. As my friend put it, traders are “very, very, very competitive.” At the end of the day they ask each other “how did you do today?” Trading is one of the few jobs with an actual leaderboard, which, if you’ve ever been on one, or strived to get there, you’ll recognize as being perhaps the single most powerful driver of a gamer’s engagement.
That seems to be the core of it, but no doubt there are other game-like features in play here: the importance of timing and tactile dexterity; the clear presence of two abstract levels of attention and activity, one long-term and strategic, the other fiercely tactical, localized in bursts a minute or two long; the need for teams and ceaseless chatter; and so on.
Athleticism and competitiveness are often downplayed when we talk about white collar careers but are essential in many disciplines. Doctors (surgeons in particular) have both those traits, founding a startup company is definitely competitive and can be as physically demanding as running, teachers are standing or walking all day long, and even something like programming requires manual dexterity with the mouse & keyboard and the stamina to sit in a chair paying single-minded attention to a task for 10-12 hours a day. (via @tcarmody)
When actress Anne Hathaway is in the news, shares of Warren Buffett’s Berkshire Hathaway seem to go up in price.
Companies are trying to “correlate everything against everything,” he explained, and if they find something that they think will work time and again, they’ll try it out. The interesting, thing, though, is that it’s all statistics, removed from the real world. It’s not as if a hedge fund’s computers would spit the trading strategy as a sentence: “When Hathway news increases, buy Berkshire Hathaway.” In fact, traders won’t always know why their algorithms are doing what they’re doing. They just see that it’s found some correlation and it’s betting on Buffet’s company.
(via @tcarmody)
Warren Buffett’s annual letters to Berkshire Hathaway’s shareholders are always interesting to read; here’s the letter for the 2010 fiscal year.
The share price for stock in H&H Imports, Inc. went up 290% between the close of market on Friday to the end of the day today. The reason for the move? Entertainer/investor 50 Cent, who owns a portion of the tiny company, tweeted all weekend about how enthusiastic he was about the company’s success. (He also appeared on CNBC.) By one calculation, 50 made $10 million with those tweets.
From the New Yorker a week or two ago, John Cassidy has an article about the social value of what Wall Street and investment banking. It’s not a pretty picture.
Lord Adair Turner, the chairman of Britain’s top financial watchdog, the Financial Services Authority, has described much of what happens on Wall Street and in other financial centers as “socially useless activity” — a comment that suggests it could be eliminated without doing any damage to the economy. In a recent article titled “What Do Banks Do?,” which appeared in a collection of essays devoted to the future of finance, Turner pointed out that although certain financial activities were genuinely valuable, others generated revenues and profits without delivering anything of real worth — payments that economists refer to as rents. “It is possible for financial activity to extract rents from the real economy rather than to deliver economic value,” Turner wrote. “Financial innovation…may in some ways and under some circumstances foster economic value creation, but that needs to be illustrated at the level of specific effects: it cannot be asserted a priori.”
Turner’s viewpoint caused consternation in the City of London, the world’s largest financial market. A clear implication of his argument is that many people in the City and on Wall Street are the financial equivalent of slumlords or toll collectors in pin-striped suits. If they retired to their beach houses en masse, the rest of the economy would be fine, or perhaps even healthier.
I particularly enjoyed the characterization of banking as a utility:
Most people on Wall Street, not surprisingly, believe that they earn their keep, but at least one influential financier vehemently disagrees: Paul Woolley, a seventy-one-year-old Englishman who has set up an institute at the London School of Economics called the Woolley Centre for the Study of Capital Market Dysfunctionality. “Why on earth should finance be the biggest and most highly paid industry when it’s just a utility, like sewage or gas?” Woolley said to me when I met with him in London. “It is like a cancer that is growing to infinite size, until it takes over the entire body.”
p.s. Thanks to Typekit, the New Yorker’s web site now uses the same familiar typefaces that you find in the magazine. Looks great.
Of all the stories I’ve heard about the recent financial crisis — the high-risk mortgage loans, the CDOs, the credit default swaps, the Icelandic crisis — the story of the collapse of the Greek economy by Michael Lewis in the October issue of Vanity Fair is the craziest. And it’s the only one involving monks.
The tsunami of cheap credit that rolled across the planet between 2002 and 2007 has just now created a new opportunity for travel: financial-disaster tourism. The credit wasn’t just money, it was temptation. It offered entire societies the chance to reveal aspects of their characters they could not normally afford to indulge. Entire countries were told, “The lights are out, you can do whatever you want to do and no one will ever know.” What they wanted to do with money in the dark varied. Americans wanted to own homes far larger than they could afford, and to allow the strong to exploit the weak. Icelanders wanted to stop fishing and become investment bankers, and to allow their alpha males to reveal a theretofore suppressed megalomania. The Germans wanted to be even more German; the Irish wanted to stop being Irish. All these different societies were touched by the same event, but each responded to it in its own peculiar way.
As it turned out, what the Greeks wanted to do, once the lights went out and they were alone in the dark with a pile of borrowed money, was turn their government into a pinata stuffed with fantastic sums and give as many citizens as possible a whack at it. In just the past decade the wage bill of the Greek public sector has doubled, in real terms-and that number doesn’t take into account the bribes collected by public officials. The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true. “We have a railroad company which is bankrupt beyond comprehension,” Manos put it to me. “And yet there isn’t a single private company in Greece with that kind of average pay.” The Greek public-school system is the site of breathtaking inefficiency: one of the lowest-ranked systems in Europe, it nonetheless employs four times as many teachers per pupil as the highest-ranked, Finland’s. Greeks who send their children to public schools simply assume that they will need to hire private tutors to make sure they actually learn something. There are three government-owned defense companies: together they have billions of euros in debts, and mounting losses. The retirement age for Greek jobs classified as “arduous” is as early as 55 for men and 50 for women. As this is also the moment when the state begins to shovel out generous pensions, more than 600 Greek professions somehow managed to get themselves classified as arduous: hairdressers, radio announcers, waiters, musicians, and on and on and on. The Greek public health-care system spends far more on supplies than the European average-and it is not uncommon, several Greeks tell me, to see nurses and doctors leaving the job with their arms filled with paper towels and diapers and whatever else they can plunder from the supply closets.
Read the whole thing…it’s insane.
Commodity traders are following farmers on Twitter, hoping for clues about crop forecasts and such.
Last week Grisafi started receiving tweets from European farmers saying the weather was hotter and drier than weather reports indicated. He’d been short the wheat market on the assumption that prices would fall. After reading the tweets, however, he realized the commodity might be in shorter supply than the market expected and got out of his position, avoiding a loss as prices rose.
There are two ATM machines in Antarctica. They are located at McMurdo Station and operated by Wells Fargo. Here’s an interview with a Wells Fargo VP about the unique challenges of operating those machines.
You know, the other thing too that you may find interesting — I don’t know how much you know about folks that need to go down to Antarctica — it’s a huge process to do it. So when we’re preparing for the vendor visit, it’s like a ten-month process. The reason being is, they obviously go in the off-season when it’s obviously warmer because no planes fly onto the ice in their winter months. And so anybody that goes to Antarctica has to be cleared with a physical, a dental, and a psychological evaluation, because if for some reason the plane can’t get out, you’re trapped down there until the next season.
(via jimray)
Unsurprisingly finding itself on the bestseller list is a book by Kenneth Rogoff and Carmen Reinhart called This Time is Different, an economic history of the dozens of financial crises that have occurred over the past 800 years. The NY Times has a profile of the authors.
Mr. Rogoff says a senior official in the Japanese finance ministry was offended at the suggestion in “This Time Is Different” that Japan had once defaulted on its debt and sent him an angry letter demanding a retraction. Mr. Rogoff sent him a 1942 front-page article in The Times documenting the forgotten default. “Thank you,” the official wrote in apology, “for teaching the Japanese something about our own country.”
The Big Short by Michael Lewis is finally out for the Kindle (well, it came out two weeks ago, about a month after the hardcover). You might remember the hubbub about the lack of a Kindle version.
Anyway, the book is excellent; I read it pretty much nonstop until finished. Lewis cleverly recasts the story of one of the biggest financial disasters in American history as a heroic tale. Heroic!
BankSimple sounds promising…I hope they are able to deliver.
BankSimple is an easy, intuitive, and social bank for people who appreciate simple online services. Unlike other banks, we don’t trap you with confusing products nor do we charge any hidden fees. No overdraft fees. We use sophisticated analytics to help you better manage your finances by providing you an individualized service, catered to your needs and goals.
It’s a return to how banks used to make money before they started charging fees for everything: charge more for borrowing than you pay out in savings interest. From the BankSimple FAQ:
We make money from two sources: interchange and interest margin. Interest margin is the revenue earned from lending, less what they pay on deposits. For example a bank may charge a customer 12% to borrow money, but pay 5% interest on a savings account. The difference, less any defaults on the loan, is revenue to the bank. Interchange is a small revenue source that card issuing banks earn whenever that card is used at a store. Typically banks earn less than 1% for each time the card is used to make a purchase. These are both great revenue streams, but banks got greedy and started charging additional fees to bolster their revenue. Our operation is low cost, so we don’t need to rely on extraneous fee revenue.
Early Twitter employee Alex Payne recently left to co-found BankSimple. See also Square (which was also co-founded by a Twitter alum).
Charles Munger, who works with Warren Buffett as Vice-Chairman of Berkshire Hathaway, gave a talk at USC Business School in 1994 that is very much worth reading. Although the main point of Munger’s talk is how to pick stocks, he spends much of the time talking about “the art of worldly wisdom”…basically what you need to know to be a functional human being who can make informed decisions.
I have a name for people who went to the extreme efficient market theory-which is “bonkers”. It was an intellectually consistent theory that enabled them to do pretty mathematics. So I understand its seductiveness to people with large mathematical gifts. It just had a difficulty in that the fundamental assumption did not tie properly to reality. […]
The model I like — to sort of simplify the notion of what goes on in a market for common stocks — is the pari-mutuel system at the racetrack. If you stop to think about it, a pari-mutuel system is a market. Everybody goes there and bets and the odds change based on what’s bet. That’s what happens in the stock market.
Any damn fool can see that a horse carrying a light weight with a wonderful win rate and a good post position etc., etc. is way more likely to win than a horse with a terrible record and extra weight and so on and so on. But if you look at the odds, the bad horse pays 100 to 1, whereas the good horse pays 3 to 2. Then it’s not clear which is statistically the best bet using the mathematics of Fermat and Pascal. The prices have changed in such a way that it’s very hard to beat the system.
(via the browser)
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