The Mind of Wall Street: A Legendary Financier on the Perils of Greed and the Mysteries of the Market

Good times breed laxity, laxity breeds unreliable numbers, and ultimately, unreliable numbers bring about bad times. This simple rhythm of markets is as predictable as human avarice.

In August alone, the fund lost roughly 45 percent of its capital, an event that the fund’s risk analysis predicted should happen no more than once in the history of Western civilization. It shouldn’t be unduly difficult to draw a conclusion about whether LTCM was extremely unlucky, or whether its managers misunderstood the nature of the risk.

Investors are very good at recognizing the moods of the past—for example, the Roaring Twenties, the Great Depression, the Swinging Sixties—but we tend to be oblivious to the mood of the present. When do we notice that the world has changed? Sometimes change arrives with a bang. The dropping of the atomic bomb on Hiroshima instantly and permanently

INVESTORS, we deceive ourselves a thousand different ways, both small and large. We attribute gains to acumen when they are the product of luck, and attribute losses to ill fortune when they are often the product of stupidity or inattention. We believe that the market remembers or cares about the price we paid for a stock, or that our stocks will g

Those most adept at profiting from a particular market are often least likely to notice when the game is over, and probably the least psychologically prepared to profit from the successor market.

But the market has even crueler twists. It’s not sufficient that a player figure out when the game has changed. When a market shifts, it usually requires the investor to adopt a psychological stance anathema to the precepts upon which he built his earlier success.

the proper perspective on an investment is not what you have made so far, but rather the risk and reward ratio at any given point. The price you paid for a stock is irrelevant.

We hired Milton Pollack, a brilliant lawyer who later became a distinguished federal judge. The suit unfolded slowly, and I fell into a ritual of having dinner with Pollack once a month during which he would update me on our progress and his methods. At that time he had a daughter in elementary school; he told me that before he asked any question o

Although the Oppenheimer Fund was never number one in any given year, over its first ten years, it had the best performance record of any mutual fund in the country, according to The New York Times.