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It Doesn't Take a Crystal Ball

The bursting of the subprime mortgage bubble and subsequent market meltdown in the summer of 2007 vividly illustrate Karl Marx's adage that history tends to repeat itself: the first time as tragedy; the second time as farce.1 This summer's farce showcased the collapse of the subprime mortgage market, the failure of overleveraged fixed-income hedge funds, and sharp losses by quantitative hedge funds.

The bursting of the subprime mortgage bubble and subsequent market meltdown in the summer of 2007 vividly illustrate Karl Marx's adage that history tends to repeat itself: the first time as tragedy; the second time as farce.1 This summer's farce showcased the collapse of the subprime mortgage market, the failure of overleveraged fixed-income hedge funds, and sharp losses by quantitative hedge funds. The sad part: these debacles were made possible by players, both sophisticated and

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