QuoteOriginally posted by: torontosimpleguyQuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: torontosimpleguyQuoteOriginally posted by: Traden4AlphaWe only disagree on the implementation.I agree that, for centuries, bankers WERE concerned with their firms' survival. Banks' historical instinct for self-preservation was why Greenspan assumed things would be OK. But that historical tendency is now gone because the world is not the same.The modern mobility of capital and employees changes everything.The difference in "implementation" between us is that you are a fatalist who prefers to lie down and die quietly while I am a survivor who prefers to stand and fight for our lives.What's funny is that true survivors aren't aggressive (aggression is a risky, non-survivalist strategy). Instead, true survivors prepare for such a wide range of possible futures that they survive any crash. Moreover, if more people acted that way by investing in a wide-ranging mix of aggressive and conservative investments, then the economic system would be both less likely to have any crises and have almost no chance of severe crises. It's when too many people slosh too much capital into 100% aggressive and then into 100% conservative strategies that we blow-up the system.One deep irony of the recent crisis is that it began as a flight-to-safety response to the dot-com crash. People fled equities in 2000-2002 and started shoving all their capital into "safe" assets like housing. After all, housing prices could never drop like stock prices can drop, could they? What people discovered is that the value of the housing investments were MORE volatile than those dot-com stocks. In fact, unlike equities, homeowners' losses weren't limited to their initial investments.What you're talking about is an old school in investment -- static allocation. Now intelligent practitioners are engaged in dynamic allocation depending on the market condition. And so far IMHO theoretical finance's addressed only one aspect of dynamic allocation -- dynamic hedging.LOL! You really do want to blow up the financial system.From what I've seen of dynamic hedging and dynamic allocation, they are all but guaranteed to destabilize the markets. If you have a population of dynamic allocators that use correlated data (i.e, they tap into the same data sources) and use correlated models (i.e. they read the same quant finance journals), you will generate correlated buying and selling patterns that induce self-amplifying bubbles and busts.A financial system can have small amounts of dynamic allocation, but the assumptions behind dynamic allocation are violated by markets that are full of dynamic allocators.