Great moments on CNBC

You probably already saw Maria “if Medicare’s so great how come you don’t have it” Bartiromo this week. (If not, check it out.)

Every morning, while I eat my cereal and iron my shirt, I turn on CNBC for a few minutes. Yesterday I managed to catch the following interview with Paul Wilmott of wilmott.com. This guy has forgotten more about quantitative finance than I will ever know, so I stopped ironing and paid attention while he was on.

Allow me to paraphrase the exchange.

Wilmott starts by saying that nothing has really changed in the past two years, and the financial system is as vulnerable to shocks as ever, or moreso. He goes on to say that modern computerized trading decouples asset prices from underlying values, thus undermining the very purpose of markets… Or at least, he starts to say that when Kudlow interrupts him to ask for stock tips. “What does math say is undervalued?” Kudlow wants to know.

This goes back and forth a bit, with Wilmott trying to respond in a way that does not sound like “you are an idiot”, and Kudlow asking “But what’s undervalued? But what’s undervalued?”

There is an old saying that it is better to remain silent and be thought a fool than to open your mouth and remove all doubt, but apparently Trish Regan never heard it, because she tries to “help”.

“Here Larry, let me try. Mr. Wilmott, do you see anything OVERvalued?”

Finally, he actually answers the question, essentially describing an option straddle. That is, he would bet on large moves without picking a direction.

This answer sails right over the hosts’ heads. I think maybe I should switch to Bloomberg.