[...] This was a year where any trade you had on that other hedge funds had on, that was a popular hedge fund trade, performed poorly because there were other hedge funds that were forced to unwind that trade. [...]

[...] bubbles create other bubbles, they’re like derivative bubbles, so to the extent that there was a bubble in credit or a bubble in the mortgage market, that created a bubble for people who could trade those products. There was just a misallocation of resources not only into mortgages, let’s say, but also into the trading of mortgages, and it sucked talent into those areas that probably should be deployed other places. And the way talent gets sucked into those places is by a price signal, the compensation going out. The pay scale for finance was just—incredibly out of whack. You had guys who were literally just a couple of years out of college, maybe they’d done a year or two at an investment bank, making several hundred thousand dollars a year doing pretty low-value-added Excel modeling tasks.

[...] In October, it was like a patient having a heart attack: the short-term credit market ceased to function. That’s the heart of our economic system; it ceased to function. The government was like the doctor. The government runs into the heart attack patient’s house, steps over the heart attack patient, goes to his refrigerator, opens it up, and says, “I have to take out all the fatty foods in the refrigerator.” Meanwhile the guy’s dying of a heart attack.

[...] The SEC tends to be focused on stuff that’s a lot more technical. They’re very focused on technical violations of insider trading laws. And, you know, what are the consequences of insider trading? I don’t know. If people believe the market is rigged, then people aren’t going to trade in the market, okay, but the kinds of violations that they go after are not going to cause the same magnitude of damage as selling really risky derivatives to a company to the point where you could blow up that company. I mean, that’s just much more disruptive. But it’s not as clear a violation of the rules as, “Okay, Joe Schmo had material nonpublic information about company X, because he was on the restructuring committee, and then he decided to sell his bonds. Even though maybe that information didn’t have a meaningful effect on the price, technically it’s material nonpublic information, and we are going to punish that guy.” It seems to me they’re focused on the wrong things. Not because they’re bad people or because they’re not intelligent people, but because if you’re a lawyer, that’s how you think.

will obviate spending down the road