I discovered it only today: Yesterday, the same day as Tobias Bayer’s article “For they know not what they do” in Financial Times Deutschland, there was a comment with a similar message in Financial Times: John Kay – “The same old folly starts a new spiral of risk” (available on his website).

John also says that those banks who invest in particular risks can’t really comprehend them. Here are some quotations:

“Risk markets are driven less by different tastes for risk than by differences in information and understanding. People who know a little of what they are doing pass risks to people who know less. Since ignorance is not evenly distributed, the result may be to concentrate risk rather than spread it.”

“If trading was motivated not by differences in attitudes and preferences but by differences in information and understanding, risk would gravitate not to those best able to bear it but to those least able to comprehend it.”

I especially like his last sentence: “The most costly investment advice of all is the expert assurance that “it’s different this time”. I will keep that in mind. This insight should encourage me to trust more in my gut feeling than in some optimistic market predictions no matter how convincing the supporting arguments are.