HOW THE WALK BECOMES RANDOM. Kids, note that brilliant successes such as Michael Burry’s coup with subprime mortgage CDO’s are consistent that with the proposition that the prices of securities take a random walk. Under the theory, the prices of securities incorporate all the information that people in the market have. When somebody like Burry (and those who follow him) has an intellectual breakthrough, those people make money and the new price incorporates the new information. And breakthroughs like Burry’s can be thought of as arising randomly so the securities prices that reflect the breakthroughs move randomly.

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