Prosperity Paranoia Doctrine

"There are three things I know for sure when we are in one of these cycles: 1) This period of euphoria will not last forever (neither I or any other human can accurately predict the end). 2) Humans tend to get sloppy when making money is easy. 3) Bear Stearns will not get caught up in the hysterical optimism and the people at Bear Stearns will not get careless or conceited. It is the job of your executive committee to keep all of our feet on the floor. It is the job of your Executive Committee to see that we maximize the opportunities that we are being handed."

"Whenever things go too well, I become very suspicious. This is one of those periods. Keep your guard up! Now is the time to be careful. Now is the time the dopes get knocked off. Remember the rules and remember our culture. When business is good, we become careful with our capital and try to cut expenses."

"1. The bear market will end and it can end quickly. 2. A bell will not ring to prepare you for the good times. Remember how great the world looked three months ago? The market can reverse its present course just as dramatically. 3. This market gives all of us a chance to demonstrate what we are made of. Some people go all through life and never get a chance to demonstrate their ability to lead. You are fortunate! You can help the people you work with to get through this by being a leader. Now is the time for real leaders to step up. 4. If you are going to stand tall, keep a few things in perspective. This is nothing next to Auschwitz, Buchenwald or Vietnam. 5. You are working for probably the most liquid firm in Wall Street and our firm, on a relative basis, looks stronger every day and we will keep it that way. 6. Haimchinkel Malintz Anaynikal pointed out that some people for ethnic reasons may get through this period easier than others. For example, I have never felt better or slept sounder, but I do have an advantage over some of my peers at other firms—I am the beneficiary of 5,000 years of persecution. This market will not get me down. It is just a minor challenge."