Financial Risk Quotes

“Leverage is a two-edged sword. The edge that can cut you, cuts deeper.”
― Naved Abdali

“Companies should assess and mitigate financial risks because doing so safeguards their financial stability, protects investments, and ensures they are better prepared to weather economic uncertainties. By identifying and managing potential risks, businesses can reduce the likelihood of adverse financial events and maintain a strong, sustainable financial position.”
― Hendrith Vanlon Smith Jr.

“Prices are easy to understand, and it is easy to isolate or pick assets based on prices. Understanding the businesses and analyzing the risk is complex.”
― Naved Abdali

“When people hear others’ stories about becoming overnight millionaires, they act upon it and invest their life savings, their houses, and their retirement funds.”
― Naved Abdali

“Your decision to invest, or not to invest, should be based on pure economics. There is no moral obligation to invest. For moral causes, do charity, do not make investments.”
― Naved Abdali

“Cash in your bank account is as safe as the creditworthiness of your banker. No more, no less.”
― Naved Abdali

“All common investments have a great feature; the maximum amount you can lose is your capital.”
― Naved Abdali

“The combination of our natural desire to be better than our peers, our faulty assumption of dodging risk, and our flawed belief of having better chances than others, pushes us into excessive greed territory. We take more significant and sometimes fatal risks.”
― Naved Abdali

“If you are leveraged five times of your capital, a 20% move in your preferred direction can double your capital, but a similar move in the opposite direction can wipe you out.”
― Naved Abdali

“If you have a leveraged position, make sure nobody can take it away.”
― Naved Abdali

“I believe when using leverage, the following four conditions must be met. 1. Leverage must be in the general direction of a secular trend. 2. Leverage should never expire. 3. Leveraged positions should not be subject to forced sell. 4. The maximum possible loss should not be more than the invested capital.”
― Naved Abdali

“A regulator's greatest fear is the sequential collapse of hedge funds, banks, and brokerages. That process is hard to spot and even harder to stop.
...
There are two sides to every trade. In a crash there can be just as many winners as losers. The problem arises when the losers go out of business. At that point the winners can't collect so they become losers too. It's as if you were a big winner at roulette and went to the cashier to collect your winnings only to find the cashier window closed and the casino had just filed for bankruptcy. All you have left is a pocketful of worthless chips. At that point, even the market winners can fall into financial distress. Because of leverage, total losses can exceed the size of the market itself. It's like a minefield. Banks running from panic start stepping on mines.”
― James Rickards, MoneyGPT: AI and the Threat to the Global Economy

“While there's nothing new about financial panics, the role of AI/GPT is new and makes matters exponentially worse. That's not a criticism of AI which works as intended. It's a criticism of humans who don't understand the tool, over-rely on it, and allow it far too much autonomy in the trading process.”
― James Rickards, MoneyGPT: AI and the Threat to the Global Economy

“In a rising price environment, people tend to throw analysis of risks out of the window. In their mind, the only possible risk is not to join the party.”
― Naved Abdali

“People like to risk pennies to win dollars.”
― Naved Abdali

“Analyzing prices is not wrong. However, picking inflated prices as your only source of information is terrible.”
― Naved Abdali

“Investing without a clear understanding of associated risk is like a child is playing with fire. Risk assets are called risk assets for a reason.”
― Naved Abdali

“No investor can have a successful career without a sufficient understanding of fear and keeping it in check.”
― Naved Abdali

“An investment business has certain risks, and your job as an investor is not to eliminate all risks but to manage and minimize them.”
― Naved Abdali

“Don’t be fearful of risks. Understand them, and manage and minimize them to an acceptable level.”
― Naved Abdali

“No investment is without risks, and no opportunity is guaranteed. Nothing is certain. And if somebody claims it, stay away from that person.”
― Naved Abdali

“FEAR OF FAILURE IS BORN FROM THE LACK OF REQUIRED SKILLS!”
― Aryan Chaudhary, Your Last Step To Fast Financial Freedom

“In general, markets have well-known inefficiencies. One is that transactions do not take into account the effect on others who are not party to them. These so-called externalities can be huge. That is particularly so in the case of financial institutions. Their task is to take risks, and if well managed, to ensure that potential losses to themselves will be covered. To themselves. Under capitalist rules, it is not their business to consider the cost to others. Risk is underpriced, because systemic risk is not priced into decisions. That leads to repeated crisis, naturally. This inherent deficiency of markets is well known.”
― Noam Chomsky, Hopes and Prospects

“GPT surpasses all ... when it comes to conversation, research, and writing. ... creating an algo[rithm] that sells stocks based on a large training set of materials, correlations to past crises, and commonsense heuristics aimed at not being the last one out of a burning barn is trivial. The danger ... is not in the single system but in the resonance of millions of similar systems doing the same thing at the same time. No science fiction is needed.”
― James Rickards, MoneyGPT: AI and the Threat to the Global Economy

“... A bank run never involves just one bank, however large. ... Bank runs are not about capital ratios and liquidity. They're about confidence and psychology.”
― James Rickards, MoneyGPT: AI and the Threat to the Global Economy

“This ... he largest financial bailout in history ... was not just a bailout of SVB [Silicon Valley Bank]. It was a bailout of over fifty thousand SVB depositors with over $170 billion in deposits. It was a bailout of SVB's customers, it's employees, their suppliers, and the entire high-tech startup ecosystem in Silicon Valley and around the world.”
― James Rickards, MoneyGPT: AI and the Threat to the Global Economy

“This ... the largest financial bailout in history ... was not just a bailout of SVB [Silicon Valley Bank]. It was a bailout of over fifty thousand SVB depositors with over $170 billion in deposits. It was a bailout of SVB's customers, it's employees, their suppliers, and the entire high-tech startup ecosystem in Silicon Valley and around the world.”
― James Rickards, MoneyGPT: AI and the Threat to the Global Economy

“... Why do bank runs commence? The answer is psychology period some customers or counterparties come to believe a bank will not repay them so they pull their money out or close transactions as quickly as possible. They are not reassured by ... Press releases or positive comments by management. Word spreads, the withdrawals accelerate, and within days, sometimes hours, the bank closes its doors. From there it's an open issue whether the lost confidence spreads to other banks, in a process called contagion. No amount of capital or comment can stop a bank panic; it has a life of its own.”
― James Rickards, MoneyGPT: AI and the Threat to the Global Economy

“... why do bank runs commence? The answer is psychology. Some customers or counterparties come to believe a bank will not repay them so they pull their money out or close transactions as quickly as possible. They are not reassured by ... press releases or positive comments by management. Word spreads, the withdrawals accelerate, and within days, sometimes hours, the bank closes its doors. From there it's an open issue whether the lost confidence spreads to other banks, in a process called contagion. No amount of capital or comment can stop a bank panic; it has a life of its own.”
― James Rickards, MoneyGPT: AI and the Threat to the Global Economy

“If insolvency is not transparent or well understood, and if illiquidity is backstopped by the Federal Reserve, then why do bank runs commence? The answer is psychology. Some customers or counterparties come to believe a bank will not repay them so they pull their money out or close transactions as quickly as possible. They are not reassured by ... press releases or positive comments by management. Word spreads, the withdrawals accelerate, and within days, sometimes hours, the bank closes its doors. From there it's an open issue whether the lost confidence spreads to other banks, in a process called contagion. No amount of capital or comment can stop a bank panic; it has a life of its own.
...
Enter AI. The next bank run may be triggered not by human panic but by AI imitating human panic. An AI bank analysis program with deeply layered neural networks and machine learning capability (perhaps complimented by a GPT capacity to speak with human analysts) Could read millions of pages of financial data on thousands of individual banks, far more than any team of human analysts could review. It's training set of materials provides familiarity with the dynamics of bank runs, basically an emerging property of a complex dynamic system, along with historical examples, worst case scenarios, and defensive moves. Events like the gold corner of 1869, the panic of 1907, the Great Depression of the 1930s, and the S&L crisis of the 1980s would all seem as fresh as today's news. This system would reach the same conclusion as a human analyst — move first, get your money out fast, don't be the last in line.
The true danger is not that the machine thinks like a human — it's supposed to. The danger is that it can act faster and communicate with other machines.”
― James Rickards, MoneyGPT: AI and the Threat to the Global Economy