From Mr William Gamble.

Sir, The financial crisis occurred because there was – and is – a lack of information. Many of the financial products are either complex, not traded on exchanges or both. Information vacuums breed panic.

John Authers referred to these problems with a reference to the now famous black swans (The Short View, “Political risk”, September 30). I would choose another animal – termites. Market participants and even regulators relied on complex financial models that were used to calculate risk. They might have considered blacks swans but they did not consider termites.

They had enormous amounts of information but they never considered the quality or what information was not there. Everyone suspected that the structure was rotten but no one had any numbers to put into the models, so the risk that the numbers were bad was ignored. This was a gross error committed by everyone.

Information has value. Unless disclosure is purchased or required by an enforceable regulatory system, it will be retained. Without accurate, complete and timely information, markets will fail. The flaw in all financial and mathematical analysis is that information is, and always will be, qualitative. Although the quest for complete transparency is or should be the holy grail for all market regulators and participants, no set of numbers will ever be able to equate accurately to the truth.

William Gamble,
Emerging Market Strategies,
East Providence, RI, US