[rdtsc]

> These investors took a risk. They knew they were taking a risk and they knew the risk they were taking

The point is, I don't think they really knew the risk. In other words, if the risk was so obvious and you claim that these are smart professionals, then how come so many bought the securities? It seems either the risks were not disclosed properly or these so called "the most professional in business" were really "mom and pop" type amateurs. So which one is it?

> The simple fact is that they did a poor job of assessing risk versus reward and lost a ton of money as a result.

Perhaps true, but if they didn't have the appropriate information to assess the risk because they were deceived, then that would be a serious problem. I am not arguing that's what happened, but rather, that it is hard to assess risk if you are provided with misleading data in general.

To use the McDonalds analogy, it is like them putting false nutritional information, or not disclosing important parts of the nutritional information to their buyers.

> Again, when you go into a McDonalds, nobody says, "please give me unhealthy food", but instead they say, "give me a double quarter-pounder with cheese". This person is taking the risk of heart disease versus the "reward" of enjoying a calorific sandwich.

Again, if you don't know about the amount of calories in a McDonalds, you don't really think you are taking the risk. You just think you are eating a yummy lunch.

The pension fund, didn't think it was taking a risk, it thought those securities were AAA rated. You need access to available and truthful information in order to make an informed decision about risk. I agree that investors were professional and the fact that so many didn't assess the real risk correctly, it means that something was hidden from them. That's the gist of the problem.

[gaius]

these so called "the most professional in business" were really "mom and pop" type amateurs. So which one is it?

Even today, there are an awful lot of fund managers and traders who got their jobs because they showed up to the interview wearing the "right" tie, i.e. through the Old Boys network.

Goldman Sachs, despite what it might look like from the outside, isn't really a part of this network. They started out as scrappy Jews competing with old-money white-shoe WASPs, they were the outsiders that everyone looked down on once. It's baked into their corporate DNA that these guys are prey.