Thesis. Chasing Returns. I've spent much of this long weekend curled up on the couch reading Too Big To Fail, Andrew Ross Sorkin's history of the financial crisis of 2008. I've wanted to read this book since it came out last year but it took me a while to get to it. I'm enjoying it very much. As I read about bank after bank waking up and smelling the coffee too late, I am reminded of the risks of chasing returns. In the case of the financial crisis of 2008, the banks were chasing returns in the mortgage markets and the related markets for CDOs and other exotic derivatives.
The scary part of the whole thing is they were chasing returns in a market they did not fully understand. I've got some fairly heavy background in mathematics. Andrew follows that quote with this observation: He was not alone. But the CEOs knew they were making billions in these markets and they pushed their firms to go farther and faster in search of more billions. The venture capital markets work well most of the time. The Epicurean Dealmaker. Quantitative Finance Collector. Analytical Finance - by Jan Röman.
Theory.