I was at Lehman in 2007-08 and saw first-hand the firm implode. But what interests me was this statement:
"I would spend days attempting to understand the intrinsic value on structured bonds collateralized with physical jet engines or commercial real-estate scattered across various regions of the country."
Everybody bangs on about how complicated and opaque products like derivatives and asset-backed securities are... yet the most complex product of all no one bats an eyelid at: the share (or stock). The pay-off of a derivative can be modelled by a mathematical formula (and if not a closed-form solution than via a Monte Carlo distribution) but the pay-off of a stock - that's quite different. Modelling future company cash flows is not trivial.
"I would spend days attempting to understand the intrinsic value on structured bonds collateralized with physical jet engines or commercial real-estate scattered across various regions of the country."
Everybody bangs on about how complicated and opaque products like derivatives and asset-backed securities are... yet the most complex product of all no one bats an eyelid at: the share (or stock). The pay-off of a derivative can be modelled by a mathematical formula (and if not a closed-form solution than via a Monte Carlo distribution) but the pay-off of a stock - that's quite different. Modelling future company cash flows is not trivial.