sure many of these complex structures should have never have been put together in the first place let alone rated what they were. but she has not shed light on these investments as much as she has shed alarmed prose on yellow ahem pink paper.

I am always amazed at how little knowledge is left at large firms once their cash flow is compromised.

Theorem? Well, I guess. But it’s easily proven not to be a universal truth and, therefore, it’s a false theorem. This is a perfect example why finance and, more broadly, economics is not a science. It’s weird that things as fundamental to economic relationships as existing differences in wealth, political power, control, and information access along with the ever present use of fraud are neglected so often.

If I neglected air resistance and asserted that a feather and a bowling ball dropped from some height would hit the ground at the same time in the real world, I’d be laughed at. Yet economists often neglect equally important facts and still make pronouncments on policy as if the facts were negligible. They should be laughed at too.

not my impression, and although it’s been a while since I’ve read Jensen, he also seems to do a good job of making that point. But as with any innovative technology, and anything that requires a whole lot of rules and ’structures’, the potential for bad applications, misunderstandings and mistakes seems to be infinite. Coventry desribes itself as “a niche investment bank specializing in structured finance using securitization-based financing technology” http://www.coventree.ca/template.asp?menuID=17&MIDI=17

There is a famous theorem in finance which says that there isn’t such a thing as a free lunch (”the no arbitrage theorem”). It essentially says that you can’t have more return with assuming more risk. If you want something safe, it’s yield is going to be low. If you want more yield, then you are going to have more risk. If you *think* you are getting higher yields without more risk, then you aren’t looking close enough.

Also, for a small investor (anyone with less than say $10 million), yields really don’t matter. What matters to the small investor are taxes and brokerage fees, and you end up in a far better position by looking at minimizing those than you will at looking at yields.