You don’t say! What I find most surprising, however, is that there actually IS a Centre for the Study of Capital Market Dysfunctionality: It was founded in 2007 by British Paul Woolley, after working several years as a stock broker, and as economist and adviser at the International Monetary Fund (IMF). Guess he knows what he’s talking about. In an interview with Spiegel Online, Britain’s new found financial guru, Dr Paul Woolley says the market stress in not only dangerous for those who work there, but also for everyone else. And he has some investment advise.
“Stop paying performance fees to managers who increase the worth of funds because it encourages gambling.”
“The developments in recent weeks have made it quite clear that the markets don’t function properly. Things are spinning out of control and are potentially dangerous for society. Only a fraternity of academic high priests connected to the finance markets is still speaking of efficient markets. Still each market participant is pursuing their own selfish interests. The market isn’t reaching equilibrium — it’s falling into chaos,” Dr. Paul Woolley says.
Here are some more highlights from the Spiegel interview:
“The finance sector can – and is – growing until it overwhelms the economy. In good years the US finance industry cashes in on more than 40 percent of all corporate profits.”
“Most fund managers follow only the newest trends and strengthen them by doing so. In the short term that leads to success, but in the long term it leads to a crash. “
“The finance industry is characterized by many innovations. Because the customers hardly understand their innovative products, banks make amazing returns. “
“The big investors are in a position to force their service providers, the banks, fund managers and bankers into better behavior. “
” Big investors should also insist that trading take place on a public market. “
Paul Woolley’s career has spanned the private sector, academia and policy-orientated institutions.
After several years of practical experience in a firm of stockbrokers, latterly as a partner in his firm, he studied Economics at the University of York (UK) receiving BA (1970) and D Phil (1976).
He held the Esmée Fairbairn Lectureship in Finance at York 1970-76, also serving as Specialist Advisor to the House of Lords Committee on the EEC 1975-6.
He then moved to the International Monetary Fund 1976-83, initially as an Economist and later as Advisor and then head of the Division responsible to the Fund’s borrowing and investment activities.
Returning to the UK, he was for four years a Partner and Director on the main board of merchant bank, Baring Brothers and its various subsidiaries.
In 1987 he co-founded, and was Managing Director of, GMO Woolley, the London affiliate of GMO, the Boston-based fund management firm. He was a Partner and served on the main GMO board (1998 – 2003).
He retired as Chairman of GMO Europe in 2006.
He returned to academic life in 2007, funding the Paul Woolley Centre for the Study of Capital Market Dysfunctionality at the London School of Economics.
He is now also Chairman of the Advisory Board for the Centre and a full-time member of the research team.
Similar centres have been set up at the University of Toulouse and at UTS in Sydney.
Mr. Woolley is an Honorary Professor of the University of York, Senior Fellow at LSE and an Adjunct Professor at UTS.
Read the full interview with Dr. Woolley at Spiegel ONLINE.