Time for a sigh of relief.

Now we can get to work.

The lesson I learned in the last few years is that having one party control everything is a bad idea; we wildly over-reacted to things in the last 8 years. I hope we have learned our lesson.

We have exactly the correct president now-he seems thoughtful and calm. Exactly what we need. The other candidate showed none of those characteristics, and so he deserved to lose.

There is a sensible article on financial engineering in today’s NY Times.In Modeling Risk, the Human Factor Was Left Out – NYTimes.com

The most important paragraph is this:

Better modeling, more wisely applied, would have helped, Mr. Lindsey said, but so would have common sense in senior management. The mortgage securities markets, he noted, grew rapidly and generated high profits for a decade. “If you are making a high return, I guarantee you there is a high risk there, even if you can’t see it,” said Mr. Lindsey, a former chief economist of the Securities and Exchange Commission.

I would add the following caveat: in investing in financial securities, there is no way to make high returns without taking high risk. In investing in real physical investments, maybe you can make a case for a high return with low risk. But you need to know the economics of why you will make a high return—for example, you have a great new product with some barriers to entry so you can make high profits until the profits are competed away. The basics are always true. Generally, things make only high returns when they are in relatively scarce supply.

The more people understand that, the better off we are.

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