Quote from the1:
This is idiotic. They crisis was caused by reckless banks who lent money to unqualified borrowers because the banks could get the garbage off their books by packaging and selling it as Triple-A investments. Take FNM, FRE, and mortgage securitization out of the equation and this never happens. Banks had the ability to shift risk to someone else so they didn't care about the risk involved in the reckless lending.
No Nobel Prize Economist's theory caused this mess. Taleb's position is laughable.
Yes, but when you go to sell that steaming crapload, you have to have something to hide the smell. That something would be the kind of thing these Nobelistas were coming up with.
I mean, there's a model out there,
Modigliani-Miller (yes, the same Miller), that I swear to freakin gawd states* that it makes no difference if a company funds itself via debt or equity.
Who even thinks of this kind of stoopid crapola? And even better, what kind of fool believes it?
The kind of fool who'd buy a triple-A CDO, I guess.
*[size=-2]
Here's the fine print with all the assumptions. Might as well be on Mars when you're done: The ModiglianiâMiller theorem (of Franco Modigliani, Merton Miller) forms the basis for modern thinking on capital structure. The basic theorem states that, under a certain market price process (the classical random walk), in the absence of taxes, bankruptcy costs, and asymmetric information, and in an efficient market, the value of a firm is unaffected by how that firm is financed.[1] It does not matter if the firm's capital is raised by issuing stock or selling debt. It does not matter what the firm's dividend policy is. Therefore, the Modigliani-Miller theorem is also often called the capital structure irrelevance principle.
But who the freak reads footnotes anyway?[/size]
