Quotes About Finance

The safest way to double your money is to fold it over twice and put it in your pocket.

At the time, BT wasn't yet known as the bank where—according to one infamous derivatives salesman—they "lure people into that calm and then just totally fuck 'em." To most of the world, this was still a secret. I had assumed that BT was in business to make as much money as it could. Had I known BT's approach to clients was to "totally fuck 'em," my favorable view of the bank might have changed. Perhaps it would have improved.

If you don't understand it right away, don't worry, you're in good company. Many fund managers and corporate CEOs had only a limited understanding of the bond and derivatives markets until very recently. Even President Clinton reportedly admitted surprise when he discovered the importance of—in his words, according to one source—a bunch of "fucking bond traders.

For example, to value a ten-year bond with a 6 percent coupon, simply calculate what each of the interest payments and the principal repayment are worth today, in terms of present value. The sum of these individual values is the bond's total value.

This was a standard Wall Street ritual. You obtained an offer from another bank, then used that offer to try to persuade your current employer to give you a raise. It's the only way to get ahead at an investment bank, and senior managers, though furious when you do this, will think you are a loser if you do not. It's not uncommon for a new salesman or trader to multiply his starting salary by as much as ten times in a few years, using such negotiating tactics.

In early 1994 Mexico was hot. The U.S. had recently passed NAFTA—the North American Free Trade Agreement—and bankers were racing south to Mexico City. The Emerging Markets Traders Association said 1993 trading volume was $1.5 trillion, double the previous year, and Latin American derivatives were the fastest growing portion of the derivatives market. Monthly trading of Latin American derivatives had increased to a face value of $25 billion in 1993 from $3 billion in 1992.

It wasn't clear what "emerging" meant, or how these markets might "emerge." Still, it sounded awfully good, and it helped cloud the fact that the emerging bond an investor bought actually was a Peruvian loan that hadn't paid any interest since the 1800s.

The sale would be treated as a transfer, merely part of a complex financing. Banamex's 20 percent ownership of the Bermuda company would allow it to avoid recognizing a sale, and Banamex could "sell" 80 percent of its Ajustabonos without generating the accounting loss it had feared.

This extra cushion of collateral became known as "overcollateralization." For example, if you started with $100 worth of Ajustabonos, the PLUS Notes would be repaid in full even the Ajustabonos dropped to $80 because Banamex ate the first $20 of losses.

steeper. In a way, the forward curve simply stretches or magnifies the shape of the current yield curve. And if you don't believe what the forward curve is predicting, then derivatives allow you to bet against the forward curve.

The downside risk made longer-maturity PERLS especially attractive to sell. Selling a five-year PERLS to a widow or orphan buyer meant you didn't have to worry about the repayment of principal for five years—an entire career on Wall Street—and even then there was a decent chance the buyer would have bet correctly and made money. Not even a widow or an orphan will complain about receiving $200 instead of $100 at maturity.

From the firm's perspective it was important to make as much money up front as possible on these trades. Take out a big fee, plant the time bomb, walk away, and wait. Of course, after the explosion the derivatives losers would sue, but as long as the firm had made enough money up front and could defend the lawsuit adequately, it would be fine. The important message I took from the disclaimers was this: The way you made money selling derivatives was by trying to blow up your clients.

The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson.

The history of the last half century is accordingly in large measure a history of financial titans, whose methods were not scrutinized with too much care and who were honored in proportion as they produced the results, irrespective of the means they used.

True regulation is for the equal benefit of the consumer and the investor, and the only man who will suffer from true regulation is the speculator or the unscrupulous promoter who levies tribute equally from the man who buys the service and from the man who invests his savings in this great industry.

Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.

The most efficient labor-saving device is still money.

An income tax form is like a laundry list -- either way you lose your shirt.

Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little.

One can't say that figures lie. But figures, as used in financial arguments, seem to have the bad habit of expressing a small part of the truth forcibly, and neglecting the other part, as do some people we know.

Dictatorships always immediately ban short selling, since it is axiomatic with them that no professional pessimists are going to be tolerated.

Admittedly, it is preposterous to suggest that stock speculation is like coin-flipping. I know that there is more skill to stock speculation. What I have never been able to determine is - how much more?

His business might be defined as the lending of money exclusively to people who have no pressing need of it.

The indignation school of writers never tires of pointing out the millions that are stolen in the Street. But while the millions are being stolen, the billions are being lost. Nothing crooked—just bad luck and bad brains met together in an effort to do something that couldn't be done in the first place.