<ul class="summary-list"><li><keyword id="11915967" type="UNKNOWN" weightage="60" keywordseo="warren-buffett" source="Orion">Warren Buffett</keyword> reflected on the root causes of the <keyword id="6371665" type="UNKNOWN" weightage="60" keywordseo="financial-crisis" source="Orion">financial crisis</keyword> in a 2010 interview.</li><li>The billionaire investor discussed speculation, asset bubbles, and the dangers of using leverage.</li><li>Buffett praised the Fed and Treasury for acting quickly to prevent the banking system's collapse.</li></ul><p>Warren Buffett explained how asset bubbles form, shared the key attribute he looks for in businesses, and warned against using leverage, in an <a href="https://fcic-static.law.stanford.edu/NARA.FCIC.2016-03-11/SCREENED%20Interviews/">interview</a> with the <keyword id="13059190" type="UNKNOWN" weightage="60" keywordseo="financial-crisis-inquiry-commission" source="Orion">Financial Crisis Inquiry Commission</keyword> in 2010.</p><p>The billionaire investor and <keyword id="11915968" type="UNKNOWN" weightage="60" keywordseo="berkshire-hathaway" source="Orion">Berkshire Hathaway</keyword> CEO also outlined the difference between speculating and long-term investing, and praised the Federal Reserve and Treasury for rapidly shoring up the financial system after <a href="https://www.businessinsider.com/thomas-cook-enron-lehman-the-worst-company-collapses-bankruptcies-2019-9?r=US&amp;IR=T">Lehman Brothers collapsed</a>.</p><h2>Here are Buffett's 10 best quotes from the interview, edited for length and clarity:</h2><p>1. "The single-most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you've got a terrible business. I've been in both, and I know the difference."</p><p>2. "When a management with a reputation for brilliance gets hooked up with a business with a reputation for bad economics, it's the reputation of the business that remains intact."</p><p>3. "When I buy a stock, I don't care if they close the stock market tomorrow for a couple of years, because I'm looking to the business, Coca-Cola or whatever it may be, to produce returns for me in the future. Now, if I care whether the stock market is open tomorrow, then to some extent I'm speculating, because I'm thinking about whether the price is going to go up tomorrow or not."</p><p>4. "The nature of Wall Street is that, overall, it makes a lot of money relative to the number of people involved, relative to the IQ of the people involved, and relative to the energy expended."</p><p>5. "If you don't have leverage, you don't get in trouble. That's the only way a smart person can go broke, basically. And I've always said, 'If you're smart, you don't need it; and if you're dumb, you shouldn't be using it.'"</p><p>6. "When people are getting paid $200,000 to $300,000 a year to be on a board, and they're hoping to get put on some other board so they get another $200,000 or $300,000 a year, they are not exactly going to be Doberman Pinschers in terms of policing things."</p><p>7. "The public might not understand <keyword id="11893878" type="UNKNOWN" weightage="60" keywordseo="stocks" source="Orion">stocks</keyword>, they might not understand tulip bulbs, but they understood houses. They wanted to buy one and with the financing, you could leverage up to the sky. It created a bubble like we've never seen." (Buffett added that bubbles form when people buy into a sound premise, such as 'house prices rise over time' or 'stocks outperform bonds,' but that premise becomes distorted and they end up focusing solely on price action.)</p><p>8. "The media, investors, the mortgage bankers, the American public, me, my neighbor, rating agencies, Congress — you name it — people overwhelmingly came to believe that house prices could not fall significantly. And since it was the biggest asset class in the country, and it was the easiest class to borrow against, it created probably the biggest bubble in our history."</p><p>9. "There is seldom just one cockroach in the kitchen. You turn on the light and, all of sudden, they all start scurrying around. I couldn't find the light switch, but I had seen one. (He was reflecting on his concerns about Freddie Mac arbitraging government credit.)</p><p>10. "The Treasury and the Fed remedied that very quickly by taking action. It was economic Pearl Harbor, and we sent out the fleet the next day. But we had the ships in the harbor, unfortunately, on the day Lehman failed." (Buffett was saying that authorities swiftly assuaged doubts about whether they would intervene to prevent the banking system from collapsing.)</p><p><em><strong>Read more:</strong> <a href="https://www.businessinsider.com/warren-buffett-berkshire-hathaway-apple-luxury-brands-stocks-experts-outlook-2022-1?IR=T&amp;r=US&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets&amp;utm_source=markets&amp;utm_medium=ingest&amp;utm_source=markets" target="_blank" rel="noopener">Warren Buffett is ready to deploy $80 billion if the market crashes this year. 7 experts say the investor should trim his Apple stake, acquire luxury brands, or buy some blue-chip stocks in the meantime.</a></em></p>

Warren Buffett explained how bubbles form, warned against using leverage, and shared the key thing he looks for in businesses during a 2010 interview. Here are the 10 best quotes.

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/59a6c1246eac401b008b6860-2400/455661218.jpg" alt="warren buffett" data-mce-source="Bill Pugliano/Getty Images" /><p class="source"><span>Bill Pugliano/Getty Images</span></p></div><p></p></div></div>Warren Buffett turns 87 on Wednesday.</p><p><span>In honor of his birthday, we decided to look back at one of his brilliant past insights: why a good business is one "your idiot nephew" can run.</span></p><p><span>Nowadays, high profile CEOs sometimes become synonymous with their companies.</span></p><p><span>Steve Jobs and Apple; Mark Zuckerberg and Facebook; Jeff Bezos and Amazon. It's hard to separate the man from the operation.</span></p><p><span>However, investing in a company simply based on its leadership might not be the best strategy, according to Buffett. Rather, as he said in an interview with the Financial Crisis Inquiry Commission (FCIC) in May 2010, one should instead in invest in a business that any fool can run.</span></p><p><span>The following interview comes from a <a href="http://www.archives.gov/press/press-releases/2016/nr16-45.html">document dump from the National Archives</a>, which released transcripts, meeting agendas, and confidentiality agreements from the FCIC. The group was set up by Congress in the aftermath of the to look into the causes of the event.</span></p><p><span>When asked by the FCIC what attracted him to the management of Moody's - the credit ratings agency that was at the center of the mortgage-backed securities debacle - when he made his initial investment, Buffett responded:</span></p><p style="padding-left: 60px;">"<span>I knew nothing about the management of Moody's. The - I've also said many times in reports and elsewhere that when a management with reputation for brilliance gets hooked up with a business with a reputation for bad economics, it's the reputation of the business that remains intact.</span></p><p style="padding-left: 60px;"><span>"If you've got a good enough business, if you have a monopoly newspaper, if you have a network television station - I'm talking of the past - you know, your idiot nephew could run it. And if you've got a really good business, it doesn't make any difference."</span></p><p><span>Of course, management does matter - anyone who's had a bad boss can tell you that. However, as Buffett says in the interview, a monopoly, like the only newspaper in a town, holds all the pricing power, and that's a good business that can likely take care of itself no matter who's at the helm.</span></p><p><span>He made a similar argument in the case of Moody's, noting that very few businesses had the competitive position that rating agencies like Moody's and Standard and Poor's had. And he even went as far as calling them a "natural duopoly to some extent," since both basically became the standard for regulators.</span></p><p>Tellingly, when asked whether he had ever pressed for the election of any board member, Buffett responded: "If I thought they needed me, I wouldn't have bought the stock."</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/gary-shilling-henry-blodget-stocks-expensive-treasury-bond-forecast-2017-8">GARY SHILLING: Stocks are expensive, and a 'shock' could send them plunging</a></h3>        <div>            <iframe class="bijwplayerclass" data-player="jwplayer" src="https://content.jwplatform.com/players/cAuMO7Th-xjRU7l6Z.html" width="100%" height="100%" frameborder="0" scrolling="auto" style="margin:0px;" allowfullscreen=""></iframe><script>function receiveMessage(event){ console.log(event.data.fullscreen); Android.fullscreen(event.data.fullscreen); }window.addEventListener("message", receiveMessage, false);</script>        </div>    </div>

Warren Buffett turns 87 on Wednesday - here's his explanation why a good business is one 'your idiot nephew' could run

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/590b3841fcd8eb1a008b4f90-2400/gettyimages-73562040.jpg" alt="Warren Buffett" data-mce-source="Chip Somodevilla / Getty" data-link="http://www.gettyimages.com/photos/warren-buffett?agreementtypes=ed&amp;excludenudity=true&amp;family=editorial&amp;phrase=warren%20buffett&amp;sort=mostpopular"><p class="source"><span><a href="http://www.gettyimages.com/photos/warren-buffett?agreementtypes=ed&amp;excludenudity=true&amp;family=editorial&amp;phrase=warren%20buffett&amp;sort=mostpopular">Chip Somodevilla / Getty</a></span></p></img></div><p></p></div></div>Well-educated, high profile CEOs sometimes become synonymous with their companies.</p><p><span>Steve Jobs and Apple, Mark Zuckerberg and Facebook, and Jeff Bezos and Amazon. It's hard to separate the man from the operation.</span></p><p><span>However, investing in a company simply based on its leadership might not be the best strategy, according to Warren Buffett.<br /></span></p><p><span>Rather, as he said in an interview with the Financial Crisis Inquiry Commission (FCIC) in May 2010, one should instead in invest in a business that any fool can run.</span></p><p><span>The interview comes from a <a href="http://www.archives.gov/press/press-releases/2016/nr16-45.html">document dump from the National Archives</a>, which released transcripts, meeting agendas, and confidentiality agreements from the FCIC. The group was set up by Congress in the aftermath of the to look into the causes of the event.</span></p><p>When asked by the FCIC what attracted him to the management of Moody's - the credit ratings agency that was at the center of the mortgage-backed securities debacle - when he made his initial investment, Buffett responded:</p><p style="padding-left: 60px;">"<span>I knew nothing about the management of Moody's. The - I've also said many times in reports and elsewhere that when a management with reputation for brilliance gets hooked up with a business with a reputation for bad economics, it's the reputation of the business that remains intact.</span></p><p style="padding-left: 60px;"><span>If you've got a good enough business, if you have a monopoly newspaper, if you have a network television station - I'm talking of the past - you know, your idiot nephew could run it. And if you've got a really good business, it doesn't make any difference."</span></p><p><span>Of course, there are <em>some</em> differences when it comes to management. Anyone who's had a bad boss can tell you that. However, the way Buffett is thinking about it here, as he says in the interview, is if 10 years ago someone owned the only newspaper in town, then they're the person with the pricing power - and that's a good business.</span></p><p>He said something more or less the same in the case of Moody's<span>, noting that very few businesses had the competitive position that rating agencies like Moody's and Standard and Poor's had. And he </span>even went as far as calling them a "natural duopoly to some extent," since both basically became the standard for regulators.</p><p>Tellingly, when asked whether he had ever pressed for the election of any board member, Buffett responded: "If I thought they needed me, I wouldn't have bought the stock."</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/baltimore-mr-trash-solar-powered-waterwheel-removes-rubbish-inner-harbor-maryland-2017-4">Baltimore's solar-powered water wheel has now removed 1.1 million lbs of rubbish from the river</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="gwMnd0YTE6Wvvv9KahkRWa5je8yuRmth" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'gwMnd0YTE6Wvvv9KahkRWa5je8yuRmth',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

Warren Buffett explains why a good business is one 'your idiot nephew' could run

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/56e338f891058426008b5ea6-1398-926/screen shot 2015-10-13 at 10.02.10 am.png" alt="Warren Buffett" data-mce-source="AP Images" /><p class="source"><span>AP Images</span></p><p class="caption">Warren Buffett, speculating on a future in football.</p></div><p></p></div></div>There are investors.</p><p>And then there are speculators.</p><p>The former pursue lower-risk investments based on fundamentals and analysis, <a href="http://www.investopedia.com/ask/answers/09/difference-between-investing-speculating.asp">while the latter</a> pursue high-risk investments that are sometimes borderline gambling.</p><p>So, by those definitions, many "investors" aren't actually investors.</p><p>Notably, in an interview with the FCIC, Warren Buffett outlined what he believed to be the "real test" of whether someone fell into the former category or the later.</p><p><span>The interview comes from a </span><a href="http://www.archives.gov/press/press-releases/2016/nr16-45.html">document dump from the National Archives</a><span>, which released transcripts, meeting agendas, and confidentiality agreements from the FCIC. </span><span>The group was set up in the aftermath of the crisis by Congress to look into the causes of the event.</span></p><p>As Buffett explained:</p><p style="padding-left: 60px;">"And I say, the real test of how you - what you're doing is whether you care whether the markets are open.</p><p style="padding-left: 60px;">When I buy a stock, I don't care if they close the stock market tomorrow for a couple of years because I'm looking to the business - Coca Cola, or whatever it may be, to produce returns for me in the future from the business.</p><p style="padding-left: 60px;">Now, if I care if whether the stock market is soap tomorrow, then to some extent I'm speculating because I'm thinking about whether the price is going to go up tomorrow or not. I don't know whether the price is going to go up."</p><p>The FCIC also asked Buffett how he would define the "speculation." As expected, Buffett had an interesting answer there, too.</p><p>"It's a tricky definition. You know, it's like pornography, and that famous quote on that," he told the FCIC.</p><p>(Supreme Court Justice Potter Stewart <a href="https://en.wikipedia.org/wiki/I_know_it_when_I_see_it">famously wrote that</a>, regarding whether something was pornography or not, that, "I know it when I see it.")</p><p>"Speculation, I would define as much more focused on the price action of the stock, particularly that you, or the index future, or something of the sort," Buffett continued.</p><p>"Because you are not really -- you are counting on -- for whatever factors, because you think quarterly earnings are going to be up or it's going to split, or whatever it may be, or increase the dividend -- but you are not looking to the asset itself."</p><p>In short, Buffett basically argues that what separates and investor from a speculator is the intent of the person engaging in the transaction.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/fruits-vegetables-their-ancestors-science-evolution-history-2016-2">Here's what fruits and vegetables looked like before we domesticated them</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="tnNXI5MTE6DF-rteN_pair12DcoLUga3" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'tnNXI5MTE6DF-rteN_pair12DcoLUga3',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

Warren Buffett has a simple test for separating investors from speculators

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/56016487bd86ef15008bc046-1172-879/screen shot 2015-09-22 at 10.23.17 am.png" alt="Steve Eisman" data-mce-source="Reuters/ Jessica Rinaldi" /><p class="source"><span>Reuters/ Jessica Rinaldi</span></p></div><p></p></div></div>The National Archives <a href="http://www.archives.gov/press/press-releases/2016/nr16-45.html">did a document dump on Friday</a>, releasing transcripts, meeting agendas, and confidentiality agreements from the Financial Crisis Inquiry Commission.</p><p>There are interviews with <a href="http://www.businessinsider.com/warren-buffett-on-wall-street-pay-2016-3">Warren Buffett</a>, Goldman Sachs chief executive Lloyd Blankfein and <a href="http://www.businessinsider.com/joe-cassano-on-goldman-aig-dispute-2016-3">AIG Financial Products chief Joe Cassano. </a></p><p>The best one we've found so far though is a memo on a meeting between the FCIC and Steve Eisman, then of FrontPoint.</p><p>Eisman was one of the few to call the subprime crash correctly, and he features heavily in Michael Lewis's book "The Big Short."</p><p><span>Steve Carell's character, Mark Baum, is based on Eisman in the movie adaptation. Eisman left FrontPoint in 2011.</span></p><p class="slide-title">His interview with the FCIC was especially entertaining. I've been reading out the highlights to my colleagues and we've been in stitches. Eisman said: </p><ul><li>No one the FCIC had spoken to "has a clue."</li><li>"All of CEOs are clueless" with the possible exception of Lloyd Blankfein.</li><li>The financial system's methods for measuring leverage amount to "some kind of gobbledygook."</li><li>"Alan Greenspan is the worst Chairman of the Fed in history."</li><li>Ratings agencies were told in 2003 or 2004 that their models were wrong, or "probably both years."</li><li>"Nothing here is criminal, it's just stupid. I think they're generally just stupid."</li><li>He did a CDS trade with Goldman Sachs in 2007, and was in contact with Greg Lippman, a trader who also bet on the housing bust.</li><li>He also met with Citigroup and Bank of America, "but they were pretty incompetent."</li><li>He was asked if he had documentation of his interactions with a Goldman Sachs exec., and responded "I don't do documentation, my friend." </li><li>He repeatedly said he would give the FCIC information if they promised he wouldn't have to testify. </li></ul><p>Elsewhere, he was asked to talk about the relationship between monoline insurers and the financial crisis. Here is his response:</p><p style="padding-left: 30px;">My understanding - and it's just my understanding of what happened - was that AIG was the first great seller of CDS. And when they began that, they didn't really understand that they were selling CDS on subprime paper. So the whole Street was creating CDOs and laying off the triple-A risk onto AIG. One of the more interesting aspects of the subprime securitization process - Lippman, when we met for the first time, I asked who was long, he said 'Dusseldorf.' I said later that it can't be all Dusseldorf. Then he'd say CDOs - there's no real buyer.</p><p>It is worth nothing that Lippman was also interviewed, and disputed the scenes in the book "The Big Short" where he singles out German buyers: </p><p style="padding-left: 30px;"><span>So I think that that comment where it's attributed to me that I said, "Idiots in Germany buy this," I think it's taken way out of context. It's certainly not something that I led with. I didn't go into people and say, "Well you should buy protection because idiots in Germany are selling protection." That's not how it came about ... So what I can remember from the book, that's the thing I have the most problem with.</span></p><p><span>Eisman also echoed Warren Buffett on the need for clawback in Wall Street pay. He said: </span></p><p style="padding-left: 30px;">Forcing people to have equity is not a solution - Dick Fuld owned a billion dollars. Jimmy Cayne owned a billion and smoked doobies the whole time - and that's a fact. Stock per se is not a solution. I think claw backs from people who manage balance sheet risk is where you need to go. It's something that needs to be explored.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/paul-krugman-investment-tips-2016-2">Paul Krugman gave us his top 3 investment tips</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="xudmZhMTE6S5SEv1FarlRUAQbNObnowO" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'xudmZhMTE6S5SEv1FarlRUAQbNObnowO',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

We just got our hands on a hilarious interview with hedge funder Steve Eisman from 'The Big Short'

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/56e31a5852bcd026008b5e1c-1078-808/rtr2eo7g.jpg" alt="warren buffett" data-mce-source="REUTERS/Shannon Stapleton" data-mce-caption="Warren E. Buffett (L),Chairman and Chief Executive Officer of Berkshire Hathaway, listens to the opening statements of Raymond W. McDaniel, Chairman and Chief Executive Officer of Moody's Corporation,while testifying before the Financial Crisis Inquiry Commission during a public hearing in New York, June 2, 2010. " /><p class="source"><span>REUTERS/Shannon Stapleton</span></p></div><p></p></div></div></p><p>Brilliant and well-educated CEOs and managers sometimes become synonymous with their company.</p><p>Whether it's Steve Jobs, Mark Zuckerberg, or Jeff Bezos, it's hard to separate the man from the operation.</p><p>However, investing in a company simply based on its leadership might not be the best strategy.</p><p>Rather, as Warren Buffett noted in an interview with the Financial Crisis Inquiry Commission (FCIC) in May 2010, one should instead in invest in a business that any fool can run.</p><p>The interview comes from a <a href="http://www.archives.gov/press/press-releases/2016/nr16-45.html">document dump from the National Archives</a>, which released transcripts, meeting agendas, and confidentiality agreements from the FCIC. <span>The group was set up in the aftermath of the crisis by Congress to look into the causes of the event.</span></p><p>When asked by the FCIC what attracted him to the management of Moody's - the credit ratings agency that was at the center of the mortgage-backed securities debacle - when he made his initial investment, Buffett responded:</p><p style="padding-left: 60px;">I knew nothing about the management of Moody's. The - I've also said many times in reports and elsewhere that when a management with reputation for brilliance gets hooked up with a business with a reputation for bad economics, it's the reputation of the business that remains intact.</p><p style="padding-left: 60px;">If you've got a good enough business, if you have a monopoly newspaper, if you have a network television station - I'm talking of the past - you know, your idiot nephew could run it. And if you've got a really good business, it doesn't make any difference.</p><p>Of course, there are <em>some</em> differences when it comes to management. However, the way Buffett is thinking about it here, as he says in the interview, is if ten years ago someone owned the only newspaper in town, then they're the person with the pricing power - and that's a good business.</p><p>Buffett stated something more or less the same in the case of Moody's<span>, noting that very few businesses had the competitive position that rating agencies like Moody's and Standard and Poor's had. </span></p><p><span>He</span> even went as far as calling them a "natural duopoly to some extent," especially since both basically became the standard for regulators.</p><p>So, you see how it's a "good business" in Buffett's eyes, regardless whether or not some brilliant person is running the show.</p><p>And tellingly, when asked whether he had ever pressed for the election of any board member, Buffett simply responded: "If I thought they needed me, I wouldn't have bought the stock."</p><p>In short, it might be smart to invest in the businesses that are going to do well regardless of who's running the show.</p><p>Or, as noted investor <a href="http://buffettfaq.com/">Peter Lynch once put it</a>, "<span>invest in businesses any idiot could run because someday one will."</span></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/new-boeing-jet-air-force-one-2016-2">Take a tour of the $367 million jet that will soon be called Air Force One</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="4zNWQ2dTq0SJxfj9SagVkmMxd7YoUovg" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', '4zNWQ2dTq0SJxfj9SagVkmMxd7YoUovg',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/59a6a3316eac4020008b6745-1600/warren buffett-3.jpg" alt="warren buffett" data-mce-source="Jason Reed/Reuters" /><p class="source"><span>Jason Reed/Reuters</span></p></div><p></p></div></div>Warren Buffett turns 87 on Wednesday, August 30, 2017.</p><p>In honor of his birthday, we decided to look back at one of his brilliant insights.</p><p>Back in 2010, in an interview with the Financial Crisis Inquiry Commission (FCIC), Buffett answered several questions about what he thought caused the housing and credit bubble.</p><p>The interview comes from a <a href="http://www.archives.gov/press/press-releases/2016/nr16-45.html">document dump from the National Archives</a>, which in 2016 released transcripts, meeting agendas, and confidentiality agreements from the FCIC.  The group was set up in the aftermath of the crisis by Congress to look into the causes of the event.</p><p><span>During the interview, Buffett also gave a crystal clear explanation of how bubbles are formed. </span><span>It's a great read for anyone interested in investing or, more broadly, human behavior.</span></p><p><span>Anyway, here's Buffett (emphasis ours):</span></p><p style="padding-left: 60px;">"... My former boss, Ben Graham, made an observation 50 or so years ago to me that it really stuck in my mind and now I've seen evidence of it.</p><p style="padding-left: 60px;">He said,<span> </span><strong>'You can get in a whole lot more trouble in investing with a sound premise than with a false premise.'</strong></p><p style="padding-left: 60px;">If you have some premise that the moon is made of green cheese or something, it's ridiculous on its face. If you come out with a premise that common stocks have done better than bonds [... that] became the underlying bulwark for the [1929] bubble. People thought stocks were starting to be wonderful and they forgot the limitations of the original premise [....]  So after a while, the original premise, which becomes sort of the impetus for what later turns out to be a bubble is forgotten and the price action takes over.</p><p style="padding-left: 60px;">Now, we saw the same thing in housing. It's a totally sound premise that houses will become worth more over time because the dollar becomes worth less. [...]</p><p style="padding-left: 60px;">And since 66% or 67% of the people want to own their own home and because you can borrow money on it and you're dreaming of buying a home,<span> </span><strong>if you really believe that houses are going to go up in value, you buy one as soon as you can. And that's a very sound premise. It's related, of course, though, to houses selling at something like replacement price and not far outstripping inflation.</strong></p><p style="padding-left: 60px;">So this sound premise that it's a good idea to buy a house this year because it's probably going to cost more next year and you're going to want a home, and the fact that you can finance it gets distorted over time if housing prices are going up 10 percent a year and inflation is a couple percent a year.<span> </span><strong>Soon the price action - or at some point the price action takes over, and you want to buy three houses and five houses and you want to buy it with nothing down and you want to agree to payments that you can't make and all of that sort of thing, because it doesn't make any difference: It' s going to be worth more next year</strong>.</p><p style="padding-left: 60px;">And lender feels the same way. It really doesn't make a difference if it's a liar's loan or you know what I mean? [...] Because even if they have to take it over, it's going to be worth more next year. And once that gathers momentum and it gets reinforced by price action and the original premise is forgotten, which it was in 1929.</p><p style="padding-left: 60px;">The Internet was the same thing. The Internet was going to change our lives. But it didn't mean that every company was worth $50 billion that could dream up a prospectus.</p><p style="padding-left: 60px;"><strong>And the price action becomes so important to people that it takes over the - it takes over their minds</strong>, and because housing was the largest single asset, around $22 trillion or something like that, not above household wealth of $50 trillion or $60 trillion or something like that in the United States. Such a huge asset. So understandable to the public - they might not understand stocks, they might not understand tulip bulbs, but they understood houses and they wanted to buy one anyway and the financing, and you could leverage up to the sky, it created a bubble like we've never seen."</p><p><strong><a href="http://www.archives.gov/press/press-releases/2016/nr16-45.html">You can check out the full interview with Warren Buffett at the National Archives</a>.</strong></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/gary-shilling-henry-blodget-inflation-stats-misleading-2017-8">GARY SHILLING: Stats showing high inflation can be misleading</a></h3>        <div>            <iframe class="bijwplayerclass" data-player="jwplayer" src="https://content.jwplatform.com/players/192z43eV-xjRU7l6Z.html" width="100%" height="100%" frameborder="0" scrolling="auto" style="margin:0px;" allowfullscreen=""></iframe><script>function receiveMessage(event){ console.log(event.data.fullscreen); Android.fullscreen(event.data.fullscreen); }window.addEventListener("message", receiveMessage, false);</script>        </div>    </div>

Warren Buffett turns 87 on Wednesday - here's his brilliant explanation of how bubbles are formed

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/590b33592ceae90a2a8b4c7a-1733/rtr2eo7g.jpg" alt="warren buffett" data-mce-source="REUTERS/Shannon Stapleton" data-mce-caption="Warren E. Buffett (L),Chairman and Chief Executive Officer of Berkshire Hathaway, listens to the opening statements of Raymond W. McDaniel, Chairman and Chief Executive Officer of Moody's Corporation,while testifying before the Financial Crisis Inquiry Commission during a public hearing in New York, June 2, 2010. "><p class="source"><span>REUTERS/Shannon Stapleton</span></p><p class="caption">Warren E. Buffett.</p></img></div><p></p></div></div><span>Back in 2010, </span>Warren Buffett answered several questions about what he thought caused the housing and credit bubble i<span>n an interview with the Financial Crisis Inquiry Commission (FCIC).</span></p><p>Mid-way through the interview, he also gave a clear explanation of how bubbles are formed, which we pulled and shared below.</p><p>It's a stunning read for anyone interested in investing or behavioral economics - or, more broadly, in human behavior.</p><p>The interview comes from a <a href="http://www.archives.gov/press/press-releases/2016/nr16-45.html">document dump from the National Archives</a>, which released transcripts, meeting agendas, and confidentiality agreements from the FCIC. The group was set up in the aftermath of the crisis by Congress to look into the causes of the event.</p><p>Anyway, here's Buffett (emphasis ours):</p><p style="padding-left: 60px;">"... My former boss, Ben Graham, made an observation 50 or so years ago to me that it really stuck in my mind and now I've seen evidence of it.</p><p style="padding-left: 60px;">He said, <strong>'You can get in a whole lot more trouble in investing with a sound premise than with a false premise.'</strong></p><p style="padding-left: 60px;">If you have some premise that the moon is made of green cheese or something, it's ridiculous on its face. If you come out with a premise that common stocks have done better than bonds [... that] became the underlying bulwark for the [1929] bubble. People thought stocks were starting to be wonderful and they forgot the limitations of the original premise [....]  So after a while, the original premise, which becomes sort of the impetus for what later turns out to be a bubble is forgotten and the price action takes over.</p><p style="padding-left: 60px;">Now, we saw the same thing in housing. It's a totally sound premise that houses will become worth more over time because the dollar becomes worth less. [...]</p><p style="padding-left: 60px;">And since 66% or 67% of the people want to own their own home and because you can borrow money on it and you're dreaming of buying a home, <strong>if you really believe that houses are going to go up in value, you buy one as soon as you can. And that's a very sound premise. It's related, of course, though, to houses selling at something like replacement price and not far outstripping inflation.</strong></p><p style="padding-left: 60px;">So this sound premise that it's a good idea to buy a house this year because it's probably going to cost more next year and you're going to want a home, and the fact that you can finance it gets distorted over time if housing prices are going up 10 percent a year and inflation is a couple percent a year. <strong>Soon the price action - or at some point the price action takes over, and you want to buy three houses and five houses and you want to buy it with nothing down and you want to agree to payments that you can't make and all of that sort of thing, because it doesn't make any difference: It' s going to be worth more next year</strong>.</p><p style="padding-left: 60px;">And lender feels the same way. It really doesn't make a difference if it's a liar's loan or you know what I mean? [...] Because even if they have to take it over, it's going to be worth more next year. And once that gathers momentum and it gets reinforced by price action and the original premise is forgotten, which it was in 1929.</p><p style="padding-left: 60px;">The Internet was the same thing. The Internet was going to change our lives. But it didn't mean that every company was worth $50 billion that could dream up a prospectus.</p><p style="padding-left: 60px;"><strong>And the price action becomes so important to people that it takes over the - it takes over their minds</strong>, and because housing was the largest single asset, around $22 trillion or something like that, not above household wealth of $50 trillion or $60 trillion or something like that in the United States. Such a huge asset. So understandable to the public - they might not understand stocks, they might not understand tulip bulbs, but they understood houses and they wanted to buy one anyway and the financing, and you could leverage up to the sky, it created a bubble like we've never seen."</p><p><strong><a href="http://www.archives.gov/press/press-releases/2016/nr16-45.html">You can check out the full interview with Warren Buffett at the National Archives</a>.</strong></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/map-shows-how-religion-spread-around-the-world-2017-4">This animated map shows how religion spread across the world</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="F5aHR4dTob1y4-cHP5qNzXITGcq1vPVW" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'F5aHR4dTob1y4-cHP5qNzXITGcq1vPVW',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

Warren Buffett brilliantly explains how bubbles are formed

<p><span><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/56f2bbc19105841c008b844d-3000-2250/ap060626046480.jpg" alt="warren buffett" data-mce-source="AP Images" data-mce-caption="Warren Buffett" /><p class="source"><span>AP Images</span></p><p class="caption">Warren Buffett</p></div><p></p></div></div>In an interview with the Financial Crisis Inquiry Commission (FCIC) back in 2010, Warren Buffett answered </span>several questions about what he thought caused the housing and credit bubble.</p><p><span>During the interview process, he also gave a crystal clear explanation of how bubbles are formed. </span></p><p><span>I</span>t's a great read for anyone interested in investing or behavioral economics.</p><p><span>The interview comes from a recent </span><a href="http://www.archives.gov/press/press-releases/2016/nr16-45.html">document dump from the National Archives</a><span>, which released transcripts, meeting agendas, and confidentiality agreements from the FCIC. </span><span>The group was set up in the aftermath of the crisis by Congress to look into the causes of the event.</span></p><p>Anyway, here's Buffett (emphasis ours):</p><p style="padding-left: 60px;">"... My former boss, Ben Graham, made an observation 50 or so years ago to me that it really stuck in my mind and now I've seen evidence of it.</p><p style="padding-left: 60px;">He said, <strong>'You can get in a whole lot more trouble in investing with a sound premise than with a false premise.'</strong></p><p style="padding-left: 60px;">If you have some premise that the moon is made of green cheese or something, it's ridiculous on its face. If you come out with a premise that common stocks have done better than bonds [well, economists like Edgar Lawrence Smith back in 1924 have shown that <a href="http://www.investopedia.com/articles/basics/08/stocks-bonds-performance.asp">this has been the case</a>.]</p><p style="padding-left: 60px;">That became the underlying bulwark for the [1929] bubble. People thought stocks were starting to be wonderful and they forgot the limitations of the original premise [....]  So after a while, the original premise, which becomes sort of the impetus for what later turns out to be a bubble is forgotten and the price action takes over.</p><p style="padding-left: 60px;">Now, we saw the same thing in housing. It's a totally sound premise that houses will become worth more over time because the dollar becomes worth less. [...]</p><p style="padding-left: 60px;">And since 66% or 67% of the people want to own their own home and because you can borrow money on it and you're dreaming of buying a home, <strong>if you really believe that houses are going to go up in value, you buy one as soon as you can. And that's a very sound premise. It's related, of course, though, to houses selling at something like replacement price and not far outstripping inflation.</strong></p><p style="padding-left: 60px;">So this sound premise that it's a good idea to buy a house this year because it's probably going to cost more next year and you're going to want a home, and the fact that you can finance it gets distorted over time if housing prices are going up 10 percent a year and inflation is a couple percent a year. <strong>Soon the price action - or at some point the price action takes over, and you want to buy three houses and five houses and you want to buy it with nothing down and you want to agree to payments that you can't make and all of that sort of thing, because it doesn't make any difference: It' s going to be worth more next year</strong>.</p><p style="padding-left: 60px;">And lender feels the same way. It really doesn't make a difference if it's a liar's loan or you know what I mean? [...] Because even if they have to take it over, it's going to be worth more next year. And once that gathers momentum and it gets reinforced by price action and the original premise is forgotten, which it was in 1929.</p><p style="padding-left: 60px;">The Internet was the same thing. The Internet was going to change our lives. But it didn't mean that every company was worth $50 billion that could dream up a prospectus.</p><p style="padding-left: 60px;"><strong>And the price action becomes so important to people that it takes over the - it takes over their minds</strong>, and because housing was the largest single asset, around $22 trillion or something like that, not above household wealth of $50 trillion or $60 trillion or something like that in the United States. Such a huge asset. So understandable to the public - they might not understand stocks, they might not understand tulip bulbs, but they understood houses and they wanted to buy one anyway and the financing, and you could leverage up to the sky, it created a bubble like we've never seen."</p><p><strong><a href="http://www.archives.gov/press/press-releases/2016/nr16-45.html">You can check out the full interview with Warren Buffett at the National Archives</a>.</strong></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/how-to-use-q-tips-to-clean-your-ears-2016-3">Here's why you should never put Q-Tips in your ears</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="Nrb3Q4MTE6lwnAMmIXjHfqYBHd7L6bF8" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'Nrb3Q4MTE6lwnAMmIXjHfqYBHd7L6bF8',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5724cb4091058428008c00d8-3199-2399/rtxza6y.jpg" alt="warren buffett charlie munger" data-mce-source="REUTERS/Rick Wilking" data-mce-caption="Berkshire Hathaway Chairman Warren Buffett (L) and Vice Chairman Charlie Munger arrive to begin the company's annual meeting in Omaha May 4, 2013." /><p class="source"><span>REUTERS/Rick Wilking</span></p><p class="caption">Berkshire Hathaway Chairman Warren Buffett (L) and Vice Chairman Charlie Munger arrive to begin the company's annual meeting in Omaha May 4, 2013.</p></div><p></p></div></div>Charlie Munger and Warren Buffett have often <a href="http://buffettfaq.com/">argued</a> that it's smart to "i<span>nvest in a business any fool can run, because someday a fool will."</span></p><p>Or, <a href="http://www.businessinsider.com/warren-buffett-good-business-could-be-run-by-idiot-2016-3">as Buffett explained it in more detail back in 2010 in an interview with the FCIC</a>:</p><p style="padding-left: 60px;"><span>"If you've got a good enough business, if you have a monopoly newspaper, if you have a network television station - I'm talking of the past - you know, your idiot nephew could run it. And if you've got a really good business, it doesn't make any difference."</span></p><p>Basically, the thinking here is that<span> is if ten years ago someone owned the only newspaper in town, then they're the person with the pricing power - and that's a good business. It <em>almost</em> doesn't matter who's running it, because the townspeople are still going to buy the paper.</span></p><p>But, as with every rule, this one, too, has an exception.</p><p><span>In Saturday's <a href="http://www.businessinsider.com/berkshire-hathaway-meeting-live-stream-2016-4">annual Berkshire Hathaway meeting</a>, streamed live on <a href="https://finance.yahoo.com/brklivestream">Yahoo Finance</a>, Munger and Buffett emphasized that the world has changed, and<strong> now the duo has become just as good at finding businesses with good management as they once were at finding businesses that didn't require great management to succeed</strong>.</span></p><p><span>Specifically, </span><span><span>Buffett noted that Mark Donegan, the CEO of Precision Castparts, </span></span><span><span>is "one of a kind," in part because he can concentrate on what's important for the businesses and he doesn't have to come to Omaha to make a presentation for Buffett to justify a move.</span></span></p><p><span>And Munger added that Precision Castparts, which became a subsidiary of Berkshire Hathaway in January 2016, <strong>requires superior management</strong>. </span></p><p><span>For what it's worth, several other CEOs and managers have become almost synonymous with their companies as well. Perhaps most notably nowadays: Jeff Bezos. And in cases like this, it's interesting to think about what the company would be like without the same leadership and/or with different leadership.</span></p><p>In any case, the bottom line is that although it's obviously a great idea to invest in a business that any fool can run, there are <em>some</em> differences when it comes to management - and it may be worth taking that into consideration.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/global-economy-biggest-threat-2016-4">FORMER GREEK FINANCE MINISTER: The single largest threat to the global economy</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="4wNWo1MzE6mCXkk1XHZUEjn1PYYwkNot" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', '4wNWo1MzE6mCXkk1XHZUEjn1PYYwkNot',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

Warren Buffett explains the problem with one of his favorite rules for investing

<p><div class="KonaFilter image-container float_right"><div class="image on-image"><img src="http://static3.businessinsider.com/image/51af44ed69beddbf68000001-1200-900/paul-krugman-2.jpg?maxX=480" border="0" alt="paul krugman" width="480" /><p class="source"><span>REUTERS/Brendan McDermid</span></p></div><p></p></div>Next semester, 200 lucky Princeton students will have the opportunity to take <em>The Great Recession: Causes, Consequences, and Remedies</em> with professor Paul Krugman.</p>
<p><a href="https://webspace.princeton.edu/users/pkrugman/Eco%20348%20v%201.pdf">The reading list</a> is stacked (and we can't believe that <a href="http://registrar.princeton.edu/course-offerings/course_details.xml?courseid=011648&amp;term=1144">only 178 students are currently signed up</a> to take a class with a Nobel Prize winner, according to Princeton's office of the registrar).</p>
<p><span style="line-height: 1.5em;"><span>"The course will begin by reviewing the causes of the recession that began in December 2007. It will concentrate on consumer behavior, financial markets, unemployment, and the housing sector," according to the course description. "The role of public policies in contributing to the economic crisis and in ending the crisis will be explored. The state of the recovery will be assessed and monitored."</span></span></p>
<p><span style="line-height: 1.5em;"><span></span>Regular Krugman readers will recognize many of the texts from his bloggings at the New York Times, but it's cool to see them laid out all syllabus style.</span></p>
<p><span style="line-height: 1.5em;">You can follow along at home all semester. Things get a little more free-form by April, but the midterm is on March 12, kids (<a href="https://twitter.com/ddayen/status/415229219635884032">via David Dayen</a>):</span></p>
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<h2><strong>Eco 348, The Great Recession: Readings (preliminary and incomplete)</strong></h2>
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<p><strong>Feb. 3: Overview</strong></p>
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<p><a href="http://www.voxeu.org/article/tale-two-depressions-what-do-new-data-tell-us-february-2010-update"><span>Eichengreeen and O'Rourke, "A Tale of Two Depressions" </span></a><span></span></p>
<p><span><a href="http://delong.typepad.com/sdj/2013/10/the-great-depression-from-the-perspective-of-today-and-today-from-the-perspective-of-the-great-depression.html">DeLong, "The Great Depression from the perspective of today"</a></span></p>
<p><a href="http://www.voxeu.org/article/eurozone-if-only-it-were-1930s"><span>Nick Crafts, "If only it were the 1930s"</span></a></p>
<p><a href="http://niesr.ac.uk/sites/default/files/gdp1213press.pdf"><span>NIESR</span></a></p>
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<p><strong>Feb. 5: Basic short-run macro </strong></p>
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<p><span>Hicks, "Mr. Keynes and the classics"</span></p>
<p><a href="http://krugman.blogs.nytimes.com/2011/10/09/is-lmentary/"><span> Krugman, "IS</span><span>-</span><span>LMentary"</span></a></p>
<p><a href="http://elsa.berkeley.edu/~dromer/papers/ISMP%20Text%20Graphs%202013.pdf"><span></span><span>David Romer, "Short</span><span>-</span><span>run fluctuations"</span></a></p>
<p><strong>Feb. 10: The Great Moderation </strong></p>
<p><a href="http://www.federalreserve.gov/Boarddocs/Speeches/2004/20040220/"><span>Bernanke, "The great moderation"</span></a></p>
<p><a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=277356"><span>Blanchard and Simon, "The decline in U.S. output variability"</span></a></p>
<p><strong>Feb. 12: Bubbles </strong></p>
<p><span>Shiller, "From efficient markets theory to behavioral finance" </span></p>
<p><a href="http://www.federalreserve.gov/BoardDocs/Speeches/2004/20041019/default.htm"><span>Greenspan 2004</span></a></p>
<p><a href="http://media.pimco.com/Documents/GCB%20Focus%20May%2009.pdf"><span>Minsky moment</span></a></p>
<p><span></span><a href="http://fcic.law.stanford.edu/report"><span>FCIC report,</span><span> part III </span></a></p>
<p><strong>Feb. 17: Crisis models </strong></p>
<p><a href="http://www.richmondfed.org/publications/research/economic_quarterly/2007/spring/pdf/diamond.pdf%20"><span>Diamond-Dybvig</span></a></p>
<p><span></span><a href="http://www.frbatlanta.org/news/conferen/09fmc/gorton.pdf"><span style="line-height: 1.5em;">Gorton, "Slapped in the face"</span></a></p>
<p><a href="http://www.federalreserve.gov/newsevents/speech/bernanke20131108a.htm"><span style="line-height: 1.5em;"></span><span style="line-height: 1.5em;">Bernanke, "The crisis as a classic financial panic"</span></a></p>
<p><strong>Feb. 19: The panic</strong></p>
<p><a href="http://fcic.law.stanford.edu/report"><span> FCIC report</span><span>, part IV </span></a></p>
<p><strong>Feb. 24: Bailout </strong></p>
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<p><a href="http://www.gpo.gov/fdsys/pkg/CHRG-112shrg64832/pdf/CHRG-112shrg64832.pdf"><span>TARP</span></a></p>
<p><span></span><strong>Feb. 26: Stimulus </strong></p>
<p><a href="http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdf">Romer-Bernstein Assessment</a></p>
<p><a href="http://www.cbo.gov/publication/43945">CBO on ARRA</a></p>
<p><a href="http://www.recovery.gov/Pages/default.aspx">Where the money went</a></p>
<p><strong>Mar. 3: War among the economists </strong></p>
<p><a href="http://www.nytimes.com/2009/09/06/magazine/06Economic-%20t.html?pagewanted=all&amp;_r=0"><span>Krugman on economists</span></a></p>
<p><a href="http://www.dimensional.com/famafrench/2009/01/bailouts-and-stimulus-plans.html"><span>Fama</span></a></p>
<p><span></span><a href="http://faculty.chicagobooth.edu/john.cochrane/research/Papers/fiscal2.htm"><span>Cochrane</span></a></p>
<p><span></span><a href="http://www.cfr.org/world/why-second-look-matters/p18996"><span>Lucas</span></a></p>
<p><span><strong>Mar. 5: The end of the panic</strong></span></p>
<p><span><strong></strong><a href="http://www.whitehouse.gov/sites/default/files/microsites/economic-report-president-chapter-2r2.pdf">Economic Report of the President, 2010</a></span></p>
<p><strong>Mar. 10: Global spread and stabilization</strong></p>
<p><a href="http://www.imf.org/external/pubs/ft/weo/2009/01/">IMF World Economic Outlook</a></p>
<p><a href="http://www.imf.org/external/pubs/ft/weo/2010/01/">IMF</a></p>
<p><a href="http://www.imf.org/external/pubs/ft/weo/2010/01/"></a><strong>Mar. 12: Midterm</strong></p>
<p><span><strong>Mar. 24: The euro</strong><br /> </span></p>
<p><a href="http://ec.europa.eu/economy_finance/publications/publication12682_en.pdf"><span>Euro@10</span></a></p>
<p><strong>Mar. 26: The euro crisis </strong></p>
<p><a href="http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.3.167"><span>O'Rourke and Taylor</span></a></p>
<p><a href="http://www.voxeu.org/article/mother-all-sudden-stops"><span>Eichengreen et al, "The mother of all sudden stops"</span></a></p>
<p><strong>Mar. 31: Austerity debates I: Short-run effects </strong></p>
<p><a href="http://krugman.blogs.nytimes.com/2009/05/02/liquidity-preference-loanable-funds-and-niall-ferguson-wonkish/"><span>Krugman, Liquidity preference</span></a></p>
<p><a href="http://www.nytimes.com/2010/07/02/opinion/02krugman.html?ref=paulkrugman"><span>Krugman, "Myths of austerity"</span></a></p>
<p><a href="http://www.nber.org/papers/w15438">Alesina and Ardagna</a></p>
<p><a href="http://www.imf.org/external/pubs/ft/weo/2010/02/pdf/c3.pdf">IMF I</a></p>
<p><a href="http://www.imf.org/external/pubs/ft/weo/2010/02/pdf/c3.pdf"></a><a href="http://www.imf.org/external/pubs/cat/longres.aspx?sk=40200.0">IMF II</a></p>
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<p><strong>Apr. 2: Austerity debates II: Debt </strong></p>
<p><a href="http://dss.ucsd.edu/~jhamilto/USMPF13_final.pdf"><span>Greenlaw et al, "Crunch time"</span></a></p>
<p><a href="http://www.econ.kuleuven.be/ew/academic/intecon/Degrauwe/PDG-papers/Discussion_papers/Governance-fragile-eurozone_s.pdf">De Grauwe</a></p>
<p><a href="http://www.newyorker.com/online/blogs/johncassidy/2013/04/the-rogoff-and-reinhart-controversy-a-summing-up.html"><span>Reinhart-Rogoff and all that</span></a></p>
<p><strong>Apr. 7: Monetary debates I, Inflation or deflation? </strong></p>
<p><a href="http://www.nytimes.com/2009/05/04/opinion/04meltzer.html?pagewanted=all"><span>Meltzer, "Inflation nation"</span></a></p>
<p><a href="http://economistsview.typepad.com/economistsview/2009/04/feldstein-inflation-is-looming.html"><span>Feldstein, "Inflation is looming" </span></a></p>
<p><a href="http://www.cfr.org/united-states/new-financial-deal-do-1930s-teach-reforming-todays-financial-markets/p19004">CFR symposium 2009</a></p>
<p><a href="http://krugman.blogs.nytimes.com/2011/07/22/this-age-of-hicks/"><span>Krugman</span></a></p>
<p><strong>Apr. 9: Monetary policy II, quantitative easing </strong></p>
<p><a href="http://clevelandfed.org/research/data/credit_easing/index.cfm"><span>The data</span></a></p>
<p><span></span><a href="http://www.princeton.edu/ceps/workingpapers/204blinder.pdf"><span>Blinder, a primer</span></a></p>
<p><span></span><a href="http://krugman.blogs.nytimes.com/2012/09/01/woodford-on-monetary-policy-sort-of-wonkish/"><span>Woodford on forward guidance</span></a></p>
<p><span>Abenomics, TK</span></p>
<p><strong> Apr. 14: Unemployment, structural or cyclical </strong></p>
<p><a href="http://www.kansascityfed.org/publicat/sympos/2012/el-js.pdf">Edward Lazear</a></p>
<p><a href="http://www.kansascityfed.org/publicat/sympos/2012/el-js.pdf"></a>Beveridge curve analyses TK</p>
<p><strong>Apr. 16: Hysteresis </strong></p>
<p><span><a href="http://www.brookings.edu/~/media/Projects/BPEA/Spring%202012/2012a_DeLong.pdf">DeLong and Summers</a></span></p>
<p><span></span><a href="http://www.imf.org/external/np/res/seminars/2013/arc/pdf/wilcox.pdf"><span style="line-height: 1.5em;">Reifschneider et al</span></a></p>
<p><strong>April 21: Long-run fiscal outlook Latest CBO projections </strong></p>
<p><strong>April 23: Crisis stories </strong></p>
<p><span>Blanchard on Latvia IMF on Iceland </span></p>
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<p><strong>April 28: Secular stagnation? </strong></p>
<p><span>Summers speech Krugman on Summers </span></p>
<p><strong>April 30: The new normal?</strong></p>
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Here's The Reading List For Paul Krugman's Class On The Great Recession Next Semester

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/56f427cf9105842b008b88f0-995-746/rsz_gettyimages-293027.jpg" alt="Scottie Pippen" data-mce-source="Jonathan Daniel/Getty Images" /><p class="source"><span>Jonathan Daniel/Getty Images</span></p></div><p></p></div></div></p><p><em><strong>FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.</strong></em></p><p><strong><a href="http://www.fa-mag.com/news/advisor-gets-3-years-for-cheating-chicago-bulls-player-25887.html?section=43">Scottie Pippen's ex-financial advisor got sentenced to three years in jail</a> (FA Magazine)</strong></p><p>Robert J. Lunn, a Chicago investment advisor, was sentenced to three years in federal prison for defrauding a bank, former Chicago Bulls basketball star Scottie Pippen, and venture capitalist Robert Geras, reports Karen Demasters.</p><p><span>"It is clear from the evidence that Lunn's avarice knows no bounds," Assistant U.S. Attorney Kenneth E. Yeadon and Special Assistant U.S. Attorney Richard G. Stoltz said in the government's sentencing memorandum.  "He enriched himself by taking out the fraudulent loans and went to great lengths to conceal his crime from Leaders Bank, Mr. Pippen and Mr. Geras."</span></p><p><strong><a href="http://www.investmentnews.com/article/20160323/FREE/160329966/ted-cruz-gaining-anti-trump-momentum-seen-as-friend-of-financial">Ted Cruz looks like he could be an ally to the financial industry</a> (InvestmentNews) </strong></p><p>Ted Cruz "<span>would likely be an anti-regulation ally to the financial industry and has offered a tax plan that could appeal to advisers," writes Mark Schoeff, Jr.</span></p><p><span><span>"There is little doubt in my mind that the leading players in the financial services industry would prefer Cruz over Trump," Greg Valliere, chief global strategist for Horizon Investments, told InvsetmentNews. "Philosophically, Cruz is opposed to government regulation of the industry, and Trump is a vocal critic of the industry."</span></span></p><p><span><span><span>"I think it's a pretty safe assumption that Cruz opposes the fiduciary rule and that Trump has never heard of it," Valliere added.</span></span></span></p><p><strong><a href="http://www.businessinsider.com/warren-buffett-explains-how-bubbles-are-formed-2016-3">Warren Buffett brilliantly explains how bubbles are formed</a> (Business Insider)</strong></p><p><span>In an interview with the Financial Crisis Inquiry Commission (FCIC) back in 2010, Warren Buffett <span>gave a crystal clear explanation of how bubbles are formed.</span></span></p><p><span><span>He focused on the psychology behind bubbles, and pointed to a key observation <span>Ben Graham made fifty years ago: "</span></span></span><span><span>You can get in a whole lot more trouble in investing with a sound premise than with a false premise," when that sound premise becomes overwhelmed by bubble-mania.</span></span></p><p><a href="http://www.businessinsider.com/why-you-shouldnt-worry-about-irs-audit-2016-3"></a><strong><a href="http://www.advisorperspectives.com/commentaries/20160324-franklin-templeton-investments-challenges-and-opportunities-facing-brazilian-companies">Brazil has a lot of potential, but it needs to get its 'house in order'</a> (Advisor Perspectives)</strong></p><p>"<span>The debate about whether President Dilma Rousseff should stay in office or leave continues, and there is no clear consensus on the best way forward for the country. As we've said before, Brazil has great potential to improve its economic standing, but we aren't alone in stating that many policies need to change," argued Mark Mobius of Franklin Templeton Investments.</span></p><p><span>"<span>We continue to look for investment opportunities in Brazil, and we do see many companies with the potential to navigate the current challenges. There's no question to us that once the Brazilians begin to get their house in order, investors who have lost confidence will return," he added.</span></span></p><p><span><strong><a href="http://www.thinkadvisor.com/2016/03/23/raymond-james-ceo-over-90-of-alex-brown-reps-retai?t=ibds?ref=channel-more-news">Raymond James will retain over 90% of Deutsche Bank advisors moving to their firm</a> (ThinkAdvisor)</strong></span></p><p>Raymond James' CEO Paul Reilly announced the firm will retain over 90% of Deutsche Bank advisors moving to the firm due to the purchase of the Alex. Brown wealth management group, reports Janet Levaux.</p><p>The Alex. Brown group reportedly has around 200 advisors and about $50 billion in client assets.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/skyslide-downtown-los-angeles-us-bank-tower-glass-slide-2016-3">This glass slide will wrap around the top of a skyscraper 1,000 feet above downtown Los Angeles</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="E1Y2NzMTE6SrQLU3tcd5Z0acgYNUAVMs" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'E1Y2NzMTE6SrQLU3tcd5Z0acgYNUAVMs',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

Scottie Pippen's ex-financial advisor got 3 years in jail

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5723779952bcd026008bfe16-2661-1996/gettyimages-459440190.jpg" alt="china bubble" data-mce-source="Anthony Kwan/Getty Images" /><p class="source"><span>Anthony Kwan/Getty Images</span></p></div><p></p></div></div>China's property market is staging a major turnaround as property prices in tier 1 cities have heated up quickly over the past few months.</p><p>For the first quarter, residential prices in Shenzhen are up nearly 80% year-over-year, while those in Shanghai were up by roughly 65%, according to figures cited by Capital Economics analysts.</p><p>And the surge in residential property sales throughout 2016 has been driven by the loosening of some purchase restrictions at local levels, and rate cuts, which have reduced mortgage costs by a significant amount.</p><p>In the short run, this is good for growth. Already, China's GDP breakdown showed an uptick in real estate-related services in the first quarter, as the <span>analysts at Capital Economics observed.</span></p><p>However, not everyone's jazzed about what's going on.</p><p><div class="KonaFilter image-container display-table float_right"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/57237b65910584e73c8bfae0-800-600/screen shot 2016-04-29 at 11.18.00 am.png" alt="Screen Shot 2016 04 29 at 11.18.00 AM" data-mce-source="Capital Economics" /><p class="source"><span>Capital Economics</span></p></div><p></p></div></div>"Some are concerned that the rapid pick-up in sales signals a return of speculative behaviour perhaps linked to the inflation of a property bubble," wrote Capital Economics' Mark Williams and Julian Evans-Pritchard in a recent note to clients.</p><p>"In particular, there are concerns that these rapid price gains are the result of a relaxation in lending standards that has echoes, some suggest, of the run-up to the subprime mortgage crisis in the US," they continued.</p><p>Notably, the Capital Economics duo, suggests that there is some truth to these worries.</p><p>As they explained in their research note (emphasis ours):</p><p style="padding-left: 60px;">"There have been cases of buyers skirting mortgage restrictions and borrowing to cover down-payments. What's more, prices are extremely stretched in some cities. <strong>Our calculations suggest the ratio of prices to average incomes in Shenzhen hit 76 at the end of last year, even before the latest surge in prices.</strong> This figure isn't directly comparable with equivalent ratios for other parts of the world since the data we have for China only cover sales of new property which are skewed towards the luxury end of the market. <strong>But even by the city's own standards the ratio is worryingly high at almost twice the 15-year average. A sharp correction in prices at some point seems likely.</strong>"</p><p>Moreover, interestingly, a <a href="http://www.bloomberg.com/news/articles/2016-03-02/china-s-real-estate-frenzy-is-back-as-shenzhen-prices-surge-50">report from Bloomberg News</a> from early March noted how "<span>leveraged speculators are snapping up homes in top-tier cities [in China] in hopes that prices will keep surging."</span></p><p><span><span><div class="KonaFilter image-container display-table float_right"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/57237db9910584e73c8bfaf3-800-600/screen shot 2016-04-29 at 11.28.24 am.png" alt="Screen Shot 2016 04 29 at 11.28.24 AM" data-mce-source="Capital Economics" /><p class="source"><span>Capital Economics</span></p></div><p></p></div></div>"People are a bit crazy in this market, but what can you do?" Liu <span>Yihui</span>, a 35-year-old civil engineer who took on a mortgage to buy an an apartment in Shenzhen as an investment property that he is renting out, <a href="http://www.bloomberg.com/news/articles/2016-03-02/china-s-real-estate-frenzy-is-back-as-shenzhen-prices-surge-50">told Bloomberg News</a>. </span></span><span><span>"Stock returns were terrible, so I made up my mind to put my money in real estate."</span></span></p><p><span><span>For what it's worth, <a href="http://www.businessinsider.com/warren-buffett-explains-how-bubbles-are-formed-2016-3">Warren Buffett previously explained</a> the reasonable herd-mentality behind the US' housing bubble, quoting Benjamin Graham: "You can get in a whole lot more trouble in investing with a sound premise than with a false premise."</span></span></p><p><span><span><span>"...if you really believe that houses are going to go up in value, you buy one as soon as you can," Buffett told the FCIC. "And the price action becomes so important to people that it takes over the - it takes over their minds."</span></span></span></p><p>That being said, this doesn't mean that China's on the precipice of total collapse, the Capital Economics team argued.</p><p><div class="KonaFilter image-container display-table float_right"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/57238fa79105841d008bfe19-800-600/screen shot 2016-04-29 at 12.44.53 pm.png" alt="Screen Shot 2016 04 29 at 12.44.53 PM" data-mce-source="Capital Economics" /><p class="source"><span>Capital Economics</span></p></div><p></p></div></div>For starters, prices have only risen in China's tier 1 cities - and in a couple of tier 2 cities - not in all of China. </p><p>Second, although the down-payment requirements have been eased, mortgages are still pretty hard to get, they write.</p><p>Also, somewhat interestingly, Williams and Evans-Pritchard note that even though there are differences in price spikes across the cities, there's not a whole lot of difference when it comes to demand. As such, the duo writes that the price differences seem to reflect differences in supply.</p><p><span><span>"The upshot is that while rapid prices in a few cities where supply is tight have been widely publicized, the real story for the lion's share of the country's property market is that stronger demand is helping to absorb excess supply without prices becoming a major concern," they wrote. </span></span></p><p><span><span>"That should be viewed as a positive development."</span></span></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/global-economy-biggest-threat-2016-4">FORMER GREEK FINANCE MINISTER: The single largest threat to the global economy</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="4wNWo1MzE6mCXkk1XHZUEjn1PYYwkNot" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', '4wNWo1MzE6mCXkk1XHZUEjn1PYYwkNot',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

China's housing bubble is starting to look a lot like the US in 2006

<p><span style="font-size: 15px; line-height: 1.5em;"><div class="image-container float_right" style="width:400px"><div class="image"><img src="http://static1.businessinsider.com/image/511be89aeab8eaa57300001f-632-474/sdfvsdfvscreen-shot-2013-02-13-at-2.24.33-pm-1.jpg?maxX=400" border="0" alt="toby keith red solo cup" width="400" /></div><p class="source">YouTube</p><p class="caption">Toby Keith</p></div>You have to hand it to Bart Chilton, the head of the Commodities <keyword id="47029" type="COMPANY" weightage="60" keywordseo="futures">Futures</keyword> Trading Commission, for trying to make commodities markets as colorful as possible.</span></p>
<p>He titled a recent speech that he gave at the Arkansas State University Agribusiness Conference "Red," and it's full of great charming quotes ("Can I get an Amen?")and pop culture references, like the Oscar's and most importantly, the Toby Keith song, "Red Solo Cup."</p>
<p>The speech was about the history of the futures market in the U.S., which was developed to help farmers through winter months.</p>
<p>That part is fun, but Chilton really gets into the groove when he's talking about how the futures market is changing and what caused the 2008 <keyword id="6371665" type="UNKNOWN" weightage="60" keywordseo="financial-crisis">financial crisis</keyword>.</p>
<p><a href="http://www.cftc.gov/PressRoom/SpeechesTestimony/opachilton-82">From the CFTC:</a></p>
<p style="padding-left: 30px;">So here’s the question, and I’ve heard it from many producers and commercial ag interests: Are markets continuing to fulfill those important fundamental purposes of the markets from way back in the 1850s? Are the markets still providing a place for producers and agri-businesses to appropriately hedge their risks and for fair price discovery for consumers? <strong>Well, that’s a worthy question, Grasshopper. Can I get an “amen?”</strong></p>
<p style="padding-left: 30px;">Here’s what we do know: markets have been, and are today, right this very moment, morphing. It is happening now. Look around, can ya’ smell it? They are changing and mutating. That’s not always a good thing. That mutating stuff is a little scary, right? Right! If you’ve ever seen a poisonous Giant Redheaded Centipede (Scolpendra Heros for you entomologists), and they have ‘em here in the Natural State, ya’ know what I mean. For the record,<strong> I oppose Giant Redheaded Centipede futures markets. In fact, I’m not afraid to say it, I oppose Giant Redheaded Centipedes. I’m not frightened to take a position on them—they’re nasty.</strong></p>
<p>At this point you may be wondering when Chilton is going to make his point. Don't worry, it's coming (along with the word "buckaroos"):<strong><br /></strong></p>
<p style="padding-left: 30px;"><strong>The potion in my notion, and in point of fact I actually have one, is this: markets are mutating, morphing, transforming, changing . . . whatever, what have you. But, you don’t have to take it from me—the longhaired Giant Redheaded Centipede opposing dude.</strong> In order to fully appreciate what has been going on, we need to only look to the report of the Financial Crisis Inquiry Commission, or FCIC. They sound official, right? Well, they sound like that for good reason. The Commission was comprised in the wake of the 2008 red lava economic meltdown after taxpayers had collectively gone into the red by bailing out Wall Street to the hot and tasty tune of—wait for it—more than <strong>$400 billion buckaroos</strong>. The Commission was comprised of folks who Congress asked to explain wha wha what exactly happened. How did things go so horribly wrong?</p>
<p>This is where Chilton takes a high road and blames himself for the financial crisis:</p>
<p style="padding-left: 30px;">I’ll tell ya’ what, in essence, FCIC said. There were two culprits to the calamity:</p>
<p style="padding-left: 30px;">Lax laws, rules, regulations and regulators—that’s guys like me—who weren’t paying attention; and</p>
<p style="padding-left: 30px;">The Captains of Wall Street who took advantage of the lax laws, rules and regs and the “asleep at the switch” regulators.</p>
<p>And here's where he uses plasticware and country music to explain the greatest calamity our economy has seen since the 1930s.</p>
<p style="padding-left: 30px;"><strong>You all know that great Toby Keith song, Red Solo Cup?</strong></p>
<p style="padding-left: 30px;"><strong>“Red solo cup, I fill you up. Let’s have a party, let’s have a party.”</strong></p>
<p style="padding-left: 30px;"><strong>Well, for about eight years, leading up to 2008, there was a big party on Wall Street. They proceeded to party.</strong> The high-flyers were taking speculative risks beyond anything we’d ever witnessed. Many times these were wild, casino-like financial instruments—derivatives, on say, bundles of mortgages—that wrecked our economy when they crashed. Nine million people lost their jobs—millions more their homes. Oil prices soared to near $150 a barrel and gasoline prices reached an all-time and still undefeated “champeen,” high of $4.10 per gallon in June of 2008. People had to choose between food and fuel. And as all this was going on, technology intervened in the markets like never before.</p>
<p>That's one way to describe it.</p>
<p>And in case you've never heard the song, here's the video:</p>
<p><iframe width="560" height="315" frameborder="0" src="http://www.youtube.com/embed/BKZqGJONH68"></iframe></p>
<p> </p>
<p><a href="http://www.cftc.gov/PressRoom/SpeechesTestimony/opachilton-82">Read the full speech at the CFTC website&gt;</a></p>

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