csr_sd: You said it! Sharp, Ivy League types that have given us: RJR/Nabisco, Eastern Airlines, Long-Term Capital Management, Enron and Tyco. Uh, yeah, okay.
As to “Efficient Market Theory”, well that one has pretty much gone the way of the dodo.
Long-Term Capital Management (LTCM) probably represents the sharpest group of financiers going, back in their heyday. They employed Fischer Black and Myron Scholes (co-authors of the Black-Scholes Formula for options valuation, and Scholes went on to win the Swedish Central Bank’s prize for achievement in Economics – the finance world’s Nobel Prize). They were widely considered the “smartest guys in the room” by all of the major investment banking houses (Goldman Sachs, Bear Stearns and Lehman Bros) and went on to nearly blow up the bond world in 1998 due to an over-leveraged hedge position, necessitating a major bailout by the Federal Reserve Bank of New York, Sandy Weill and Citibank and others.
So, if you truly believe that these smart Ivy League types are helping ensure “efficient markets”, pick up a copy of “The Wall Street Journal” or “Financial Times” and read up on derivatives, options and “off book” instruments (QSPEs – Qualifying Special Purpose Entities – an old Enron standby).
