Market Bubble Quotes

In a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.

This practice of overstating the case is called hyperbole. Hyperbole is usually harmless, but in some cases it has been known to precipitate unnecessary wars as well as a painful gaseous condition called stock market bubbles.

This practice of overstating the case is called hyperbole. Hyperbole is usually harmless, but in some cases it has been known to precipitate unnecessary wars as well as a painful gaseous condition called stock market bubbles. For safety's sake, then, hyperbole should be used with restraint and only by those with proper literary training.

THE CORRECTION, when it finally came, was not an overnight bursting of a bubble but a much more gentle letdown, a year-long leakage of value from key financial markets, a contraction too gradual to generate headlines and too predictable to seriously hurt anybody but fools and the working poor.

Alec crossed the floor to where Magnus stood considering the whiteboard. Carefully, since Magnus was still holding a bubbling jar, Alec slid his arms around Magnus’s waist, linking his hands together over the embossed buckle of Magnus’s belt. The T-shirt Magnus was wearing had a dramatic scoop neckline, so Alec put his face down in the smooth bare expanse of skin and breathed in the smell of sandalwood and spell ingredients.

These are the bozos. They are graspers and self-promoters, shameless resume padders, people who describe themselves as “product marketing professionals,” “growth hackers,” “creative rockstar interns,” and “public speakers.

Who would appreciate such candor? No one. None of us really likes honesty. We prefer deception –but only when it is unabashedly flattering or artfully camouflaged. Groups seem to need to believe that they are superior to others and that they have a purpose greater than just passing along their genes to the next generation. Individuals seem to need similar delusions – about who they are and why they do what they do. They need heroes, however fraudulent… Studies show that people are more likely to accept the opinion of a confident con man than the cautious view of someone who actually knows what he is talking about. And professionals who form overconfident opinions on the basis of incorrect readings of the facts are more likely to succeed than their more competent peers who display greater doubt. What’s more, deception works best, according to studies by psychologists, when the person doing the deceiving is fool enough to be deceived, too; that is, when he believes his own lies. That is why incompetent leaders – who are naïve enough to fall for their own guff – are such a danger to civilized life. If they are modern leaders, they must also delude themselves into thinking they know how to make the world a better place. Invariably, the answers they propose to problems are ones that bubble up from their own vanity, the essence of which is to make the rest of the world look just like them!

Which on am I?" I drew my left eyebrow in a high, puzzled arch. "Which what?" Crack reached for her makeup kit. "Bottom or fool?" She pulled out a tiny mirror and put another layer of mascara on her giant fake lashes. She used a special oversized mascara brush for her oversized lashes, carried in a big tube. "No. Trixie, Twinkie, or Bubbles?" I asked. "Who, in the show?" She shrugged. "What ever you want, Sugar. Makes no diff to me. A name's just another kind of package. Marketing. Starts the day you're born" p.136

Vernon Smith and his colleagues have long confirmed that markets in goods and services for immediate consumption – haircuts and hamburgers – work so well that it is hard to design them so they fail to deliver efficiency and innovation; while markets in assets are so automatically prone to bubbles and crashes that it is hard to design them so they work at all.

Buffett being penalized for underperforming versus managers riding the long side of the dot-com bubble is a perfect illustration of a common investor mistake—failing to realize that often the managers with the highest returns achieve those results because they’re taking the most risk, not because they have the greatest skill.

Investors often make the mistake of equating manager performance in a given year with manager skill. In some instances, more skilled managers will underperform because they refuse to participate in market bubbles. In fact, during market bubbles, the best performers are often the most imprudent rather than the most skilled managers.

The answer as to why bubbles form,” Blodget told me, “is that it’s in everybody’s interest to keep markets going up.

the fed can print credit as long as someone will borrow it into existence... the fed cannot print product (or production)

Markets are not efficient enough; that’s why we have market peaks and bottoms now and then.

Bubbles feel like a party.

Economic conditions may differ from period to period, but human psychology is embedded among us and will not change.

Excess liquidity is the leading source of all bubbles.

When enough people believe that prices will keep rising forever, a bubble starts.

One ratio that Buffett is known to track is the total market cap to GDP. Recently, it was at 125%, which is a level approached in 1999 during the Internet bubble. Another

Every restaurant and kitchen had its own distinctive culinary perfume.

The whole edifice of modern financial theory is, as described earlier, founded on a few simplifying assumptions. It presumes that homo economicus is rational and self-interested. Wrong, suggests the experience of the irrational, mob-psychology bubble and burst of the 1990's. A further assumption: that price variations follow the bell curve. Wrong, suggests the by-now widely accepted research of me and many others since the 1960's. And now the next assumption wobble: that price variations are what statisticians call i.i.d., independently and identically distributed-like the coin game with each toss unaffected by the last. Evidence for short-term dependence has already been mounting. And now comes the increasingly accepted but still confusing evidence of long-term dependence.

To use an example frequently offered by Masters, imagine if someone continually showed up at car dealerships and asked to buy $500,000 worth of cars. This mystery person doesn’t care how many cars, mind you, he just wants a half million bucks’ worth. Eventually, someone is going to sell that guy one car for $500,000. Put enough of those people out there visiting car dealerships, your car market is going to get very weird very quickly. Soon enough, the people who are coming into the dealership looking to buy cars they actually plan on driving are going to find that they’ve been priced out of the market.

. . . the bond bubble, the tech bubble, the stock bubble, the emerging markets bubble, the housing bubble. . . One by one they had all burst, and their bursting showed that they had been temporary solutions to long-term problems, maybe evasions of those problems, distractions. With so many bubbles-so many people chasing ephemera, all at the same time-it was clear that things were fundamentally not working.

It might seem odd to emphasize this point, since we noted in the previous chapter that aggregating the judgments of multiple individuals reduces noise. But because of group dynamics, groups can add noise, too. There are “wise crowds,” whose mean judgment is close to the correct answer, but there are also crowds that follow tyrants, that fuel market bubbles, that believe in magic, or that are under the sway of a shared illusion.

In bubbles, infatuation with market momentum takes over from any notion of value and fair price, and greed (plus the pain of standing by as others make seemingly easy money) neutralises any prudence that might otherwise hold sway.

In a bubble, people demonstrate some sort of cult-like behavior. They defend their positions, not by economic logic, but by force. They do this by calling those who disagree with them dirty, and mocking people who give them prudent advice.

In contrast to Ricardo’s expectation that banking would retain its early focus on international commerce — and hence,on industrial capital formation to provide foreign markets with British exports in exchange for raw materials — banking has found real estate to be the key, along with its traditional market in creating monopolies and trusts. Some 80% of bank loans in the United States and Britain are mortgages, and consequently they account for 70% of the economy’s interest payments.

In Taipei we had oyster omelets and stinky tofu at Shilin Night Market and discovered what is arguably the world's greatest noodle soup, Taiwanese beef noodle, chewy flour noodles served with hefty chunks of stewed shank and a meaty broth so rich it's practically a gravy. In Beijing we trekked a mile in six inches of snow to eat spicy hot pot, dipping thin slivers of lamb, porous wheels of crunchy lotus root, and earthy stems of watercress into bubbling, nuclear broth packed with chiles and Sichuan peppercorns. In Shanghai we devoured towers of bamboo steamers full of soup dumplings, addicted to the taste of the savory broth gushing forth from soft, gelatinous skins. In Japan we slurped decadent tonkotsu ramen, bit cautiously into steaming takoyaki topped with dancing bonito flakes and got hammered on whisky highballs.

The more south we were, the more deep a sky it seemed, till, in the Valley of Mexico, I thought it held back an element too strong for life, and that the flamy brilliance of blue stood off this menace and sometimes, like a sheath or silk membrane, shoed the weight it held in sags. So when later he would fly high over the old craters on the plain, coaly bubbles of the underworld, dangerous red everywhere from the sun, and then coats of snow on the peak of the cones—gliding like a Satan—well, it was here the old priests, before the Spaniards, waited for Aldebaran to come into the middle of heaven to tell them whether or not life would go on for another cycle, and when they received their astronomical sign built their new fire inside the split and emptied chest of a human sacrifice. And also, hereabouts, worshipers disguised as gods and as gods in the disguise of birds, jumped from platforms fixed on long poles, and glided as they spun by the ropes—feathered serpents, and eagles too, the voladores, or fliers. There still are such plummeters, in market places, as there seem to be remnants or conversions or equivalents of all the old things. Instead of racks or pyramids of skulls still in their hair and raining down scraps of flesh there are corpses of dogs, rats, horses, asses, by the roads; the bones dug out of the rented graves are thrown on a pile when the lease is up; and there are the coffins looking like such a rough joke on the female form, sold in the open shops, black, white, gray, and in all sizes, with their heavy death fringes daubed in Sapolio silver on the black. Beggars in dog voices on the church steps enact the last feebleness for you with ancient Church Spanish, and show their old flails of stump and their sores. The burden carriers with the long lines, hemp lines they wind over their foreheads to hold the loads on their backs, lie in the garbage at siesta and give themselves the same exhibited neglect the dead are shown. Which is all to emphasize how openly death is received everywhere, in the beauty of the place, and how it is acknowledged that anyone may be roughly handled—the proudest—pinched, slapped, and set down, thrown down; for death throws even worse in men’s faces and makes it horrible and absurd that one never touched should be roughly dumped under, dumped upon.

A year earlier, no company had been accorded more faith than Enron; by late November, none was trusted less. And so, a gasping gurgle, a desperate SOS: Enron, the emblem of free markets, the champion of deregulation, reached into its depleted treasury and forked over $100,000 to each of the major political parties' campaign war chests. Then, it shuttered its online trading unit - its erstwhile gem. On November 28, Standard & Poor's downgraded Enron to junk-bond level - which triggered provisions in Enron's debt requiring it to immediately repay billions of its obligations. This it could not do. Its stock was seventy cents and falling, and, now, no gatekeepers and no credit remained. Accordingly, in the first week of December, Enron, the archetype of shareholder value, availed itself of the time-honored protection for those who have lost their credit: bankruptcy.

When kings fail to do their jobs and regulate the markets properly, it leads to loss of trust, dwindling credit and economic depression. That was the lesson taught by the Mississippi Bubble of 1719, and anyone who forgot it was reminded by the US housing bubble of 2007, and the ensuing credit crunch and recession.

irrational behavior in the markets may result precisely because individuals are responding rationally according to their incentives. So long as most traders are judged on the basis of short-term performance, bubbles involving large deviations of stock prices from their long-term values are possible—and perhaps even inevitable.

In short, the explosion in sub-prime lending was a thoroughly top–down, political project, mandated by Congress, implemented by government-sponsored enterprises, enforced by the law, encouraged by the president and monitored by pressure groups. Remember this when you hear people blame the free market for the excesses of the sub-prime bubble.

You don’t get rewarded for creating great technology, not anymore,” says a friend of mine who has worked in tech since the 1980s, a former investment banker who now advises start-ups. “It’s all about the business model. The market pays you to have a company that scales quickly. It’s all about getting big fast. Don’t be profitable, just get big.

The heartwood," Rob murmured, looking at me. "You wanted to marry me in the heart of Major Oak." I beamed at him grateful that he understood. "And Scar," he whispered. I leaned in close. "Are you wearing knives to our wedding?" Nodding, I laughed, telling him, "I was going to get you here one way or another, Hood." He laughed, a bright, merry sound. Standing in the heart of the tree, he reached again for my hand, fingers sliding over mine. Touching his hand, a rope of lightening lashed round my fingers, like it seared us together. Now, and for always. His fingers moved on mine, rubbing over my hand before capturing it tight and turning me to the priest. The priest looked over his shoulder, watching as the sun began to dip. He led us in prayer, he asked me to speak the same words I'd spoken not long past to Gisbourne, but that whole thing felt like a bad dream, like I were waking and it were fading and gone for good. "Lady Scarlet." he asked me with a smile, "known to some as Lady Marian of Huntingdon, will thou have this lord to thy wedded husband, will thou love him and honour him, keep him and obey him, in health and in sickness, as a wife should a husband, forsaking all others on account of him, so long as ye both shall live?" I looked at Robin, tears burning in my eyes. "I will," I promised. "I will, always." Rob's face were beaming back at me, his ocean eyes shimmering bright. The priest smiled. "Robin of Locksley, will thou have this lady to thy wedded wife, will thou love her and honor her, keep her and guard her, in health and in sickness, as a husband should a wife, forsaking all others on account of her, so long as ye both shall live?" the priest asked. "Yes," Rob said. "I will." "You have the rings?" the priest asked Rob. "I do," I told the priest, taking two rings from where Bess had tied them to my dress. I'd sent Godfrey out to buy them at market without Rob knowing. "I knew you weren't planning on this," I told him. Rob just grinned like a fool at me, taking the ring I handed him to put on my finger. Laughs bubbled up inside of me, and I felt like I were smiling so wide something were stuck in my cheeks and holding me open. More shy and proud than I thought I'd be, I said. "I take you as me wedded husband, Robin. And thereto I plight my troth." I pushed the ring onto his finger. He took my half hand in one of his, but the other- holding the ring- went into his pocket. "I may not have known I would marry you today Scar," he said. "But I did know I would marry you." He showed me a ring, a large ruby set in delicate gold. "This," he said to me, "was my mother's. It's the last thing I have of hers, and when I met you and loved you and realized your name was the exact colour of the stone- " He swallowed, and cleared his throat, looking at me with the blue eyes that shot right through me. "This was meant to be Scarlet. I was always meant to love you. To marry you." The priest coughed. "Say the words, my son, and you will marry her." Rob grinned and I laughed, and Rob stepped closer, cradling my hand. "I take you as my wedded wife, Scarlet. And thereto I plight my troth." He slipped the ring on my finger and it fit. "Receive the Holy Spirit," the priest said, and kissed Robin on the cheek. Rob's happy grin turned a touch wolflike as he turned back to me, hauling me against him and angling his mouth over mine. I wrapped my arms around him and my head spun- I couldn't tell if we were spinning, if I were dizzy, if my feet were on the ground anymore at all, but all I knew, all I cared for, were him, his mouth against mine, and letting the moment we became man and wife spin into eternity.

How did Japan manage to delay painful and destabilizing change? By employing the so-called Bubble Fix, a term popularized by former Morgan Stanley economist Stephen Roach, whereby central bankers and government officials soothe markets with monetary and fiscal stimulants in the short run in ways that create financial imbalances in the long run, essentially curing bubbles with new ones.

Throughout history we have believed that markets determine worth and that bubbles are eternal, despite ample evidence to the contrary. In the midst of each bubble, we believe that this time it will last forever. We have all been complicit in our own deluding.” The professor paused. “It’s all bullcrap. There is no market. The market is people, and people are dolts. Even the smartest people are moronic.

The party will go on until reckless speculation becomes unsustainable, ending with the inevitable collapse in bullish sentiment, a phenomenon called a Minsky moment, named for economist Hyman Minsky. It’s what happens when market watchers suddenly begin to wake up and worry about irrational exuberance. Once their sentiment changes, a crash is inevitable as an asset and credit bubble and boom goes into a bust.

A global financial cabal engineered a fraudulent housing and debt bubble [2008], illegally shifted vast amounts of capital out of the US; and used 'privatization' as a form of piracy - a pretext to move government assets to private investors at below-market prices and then shift private liabilities back to government at no cost to the private liability holder Clearly, there was a global financial coup d'etat underway.

The government monopoly of money leads not just to the suppression of innovation and experiment, not just to inflation and debasement, not just to financial crises, but to inequality too. As Dominic Frisby points out in his book Life After the State, opportunities in finance ripple outwards from the Treasury. The state spends money before it even exists; the privileged banks then get first access to newly minted money and can invest it before assets have increased in cost. By the time it reaches ordinary people, the money is worth less. This outward percolation is known as the Cantillon Effect – after Richard Cantillon, who noticed that the creation of paper money in the South Sea Bubble benefited those closest to the source first. Frisby argues that the process of money creation by an expansionary government effectively redistributes money from the poor to the rich. ‘This is not the free market at work, but a gross, unintended economic distortion caused by the colossal government intervention.’ The

The inflation of the 1920s had caused large asset bubbles to form in the housing and stock markets, causing an artificial rise in wages and prices. After the bubble burst, market prices sought readjustment via a drop in the value of the dollar compared to gold, and a drop in real wages and prices. The pigheadedness of deluded central planners who wanted to prevent all three from taking place paralyzed the economy: the dollar, wages, and prices were overvalued, leading to people seeking to drop their dollars for gold, as well as massive unemployment and failure of production.

By 1996 Apple’s share of the market had fallen to 4% from a high of 16% in the late 1980s. Michael Spindler, the German-born chief of Apple’s European operations who had replaced Sculley as CEO in 1993, tried to sell the company to Sun, IBM, and Hewlett-Packard. That failed, and he was ousted in February 1996 and replaced by Gil Amelio, a research engineer who was CEO of National Semiconductor. During his first year the company lost $1 billion, and the stock price, which had been $70 in 1991, fell to $14, even as the tech bubble was pushing other stocks into the stratosphere.

Note, however, the sharp correction in the Italian real estate market in 1994–1995 and the bursting of the Internet bubble in 2000–2001, which caused a particularly sharp drop in the capital/income ratio in the United States and Britain (though not as sharp as the drop in Japan ten years earlier). Note, too, that the subsequent US real estate and stock market boom continued until 2007, followed by a deep drop in the recession of 2008–2009. In two years, US private fortunes shrank from five to four years of national income, a drop of roughly the same size as the Japanese correction of 1991

You may well ask: when the bubble finally burst, why did we not let the bankers crash and burn? Why weren't they held accountable for their absurd debts? For two reasons. First because the payment system - the simple means of transferring money from one account to another and on which every transaction relies - is monopolised by the very same bankers who were making the bets. Imagine having gifted your arteries and veins to a gambler. The moment he loses big at the casino, he can blackmail you for anything you have simply by threatening to cut off your circulation. Second, because the financiers' gambles contained deep inside the title deeds to the houses of the majority. A full-scale financial market collapse could therefore lead to mass homelessness and a complete breakdown in the social contract. Don't be surprised that the high and mighty financiers of Wall Street would bother financialising the modest homes of poor people. Having borrowed as much as they could off banks and rich clients in order to place their crazy bets, they craved more since the more they bet, the more they made. So they created more debt from scratch to use as raw materials for more bets. How? By lending to impecunious blue collar worker who dreamed of the security of one day owning their own home. What if these little people could not actually afford their mortgage in the medium term? In contrast to bankers of old, the Jills and the Jacks who actually leant them the money did not care if the repayments were made because they never intended to collect. Instead, having granted the mortgage, they put it into their computerised grinder, chopped it up literally into tiny pieces of debt and repackaged them into one of their labyrinthine derivatives which they would then sell at a profit. By the time the poor homeowner had defaulted and their home was repossessed, the financier who granted the loan in the first place had long since moved on.

Finally it was time to go into the operating room, and the nurse came to wheel her away from me. My heart tightened. To ease her fears, the pediatric nurses gathered around her and created a “bubble parade,” blowing little soap bubbles as they went into the operating room. To create this fairy-tale experience, they used a wand. Specifically, a bubble wand. All the worry and fear melted from my daughter’s face as she was captivated by the magical moment. As a parent, I felt a great deal of gratitude for this small but meaningful touch. As a marketer, I was awed. I’d just witnessed my daughter’s customer experience switch from anxiety to anticipation in less than ten seconds.

A bubble starts when any group of stocks, in this case those associated with the excitement of the Internet, begin to rise. The updraft encourages more people to buy the stocks, which causes more TV and print coverage, which causes even more people to buy, which creates big profits for early Internet stockholders. The successful investors tell you at cocktail parties how easy it is to get rich, which causes the stocks to rise further, which pulls in larger and larger groups of investors. But the whole mechanism is a kind of Ponzi scheme where more and more credulous investors must be found to buy the stock from the earlier investors. Eventually, one runs out of greater fools.

One example of a high-tech company that submits to a Graham type of analysis is Amazon.com. Though it does business exclusively on the Web, Amazon is essentially a retailer, and it may be evaluated in the same way as Wal-Mart, Sears, and so forth. The question, as always, is, does the business provide an adequate margin of safety at a given market price. For much of Amazon’s short life, the stock was wildly overpriced. But when the dot-com bubble burst, its securities collapsed. Buffett himself bought Amazon’s deeply discounted bonds after the crash, when there was much fearful talk that Amazon was headed for bankruptcy. The bonds subsequently rose to par, and Buffett made a killing.

A storm. The ash tree cowers, the limestone glowers, dark and damp. I remember dropping a glass onto the patio once; it burst like a bubble, merlot flaring across the ground and flooding the veins of the stonework, black and bloody, crawling toward my feet. Sometimes, when the skies are low, I imagine myself overhead, in a plane or on a cloud, surveying the island below: the bridges spoked from its east coast; the cars sucked toward it like flies swarming a lightbulb. It's been so long since I felt the rain. Or wind - the caress of wind, I nearly said, except that sounds like something you'd read in a super-market romance. It's true though. And snow too, but snow I never want to feel again.

The most important economic resource is trust in the future, and this resource is constantly threatened by thieves and charlatans. Markets by themselves offer no protection against fraud, theft and violence. It is the job of political systems to ensure trust by legislating sanctions against cheats and to establish and support police forces, courts and jails which will enforce the law. When kings fail to do their jobs and regulate the markets properly, it leads to loss of trust, dwindling credit and economic depression. That was the lesson taught by the Mississippi Bubble of 1719, and anyone who forgot it was reminded by the US housing bubble of 2007, and the ensuing credit crunch and recession.

Mercantilists promote the view that private market activity often drives the economy into difficulties which require government to intervene and set matters back on course. They typically characterize the economy as cyclical, driven to excesses by human emotions of greed and fear, which cause “bubbles” and “crashes” and interrupt steady progress of society. Government, they say, must prevent these cycles, smooth these bubbles and crashes, so as to achieve less volatility and greater stability in economic growth. Then they persuade government to adopt policies which produce cycles, bubbles, crashes, volatility, high taxes and unemployment, and economic instability —and monstrously large, illicit gains for themselves.

In your light we see light. —Psalm 36:9 (NIV) ELENA ZELAYETA, BLIND CHEF Without warning at age thirty-six, Elena Zelayeta, pregnant with her second child, totally lost her sight. She had been the chef at a popular restaurant she and her husband owned. A sixty-seven-year-old widow now, she continued to prepare her famous Mexican dishes, marketing them with the help of her two sons, the younger of whom she’d never seen. Typical of San Francisco, it was raining when I arrived at her home. The door was opened by a very short, very broad woman with a smile like the sun. Well under five feet tall, “and wide as I am high,” she said, she led me on a fast-paced tour of the sizable house, ending in the kitchen, where pots bubbled and a frying pan sizzled. Was it possible that this woman who moved so swiftly and surely, who was now so unhesitatingly dishing up the meal she’d prepared for the two of us, really blind? She must see, dimly at least, the outlines of things. At the door to the dining room, Elena paused, half a dozen dishes balanced on her arms. “Is the light on?” she asked. No, she confirmed, not the faintest glimmer of light had she seen in thirty years. But she smiled as she said it. “I hear the rain,” she went on as she expertly carved the herb-crusted chicken, “and I’m sure it’s a gray day for the sighted. But for us blind folk, when we walk with God, the sun is always shining.” Let me walk in Your light, Lord, whatever the weather of the world. —Elizabeth Sherrill Digging Deeper: Ps 97:11; 1 Jn 1:5

Hey Pete. So why the leave from social media? You are an activist, right? It seems like this decision is counterproductive to your message and work." A: The short answer is I’m tired of the endless narcissism inherent to the medium. In the commercial society we have, coupled with the consequential sense of insecurity people feel, as they impulsively “package themselves” for public consumption, the expression most dominant in all of this - is vanity. And I find that disheartening, annoying and dangerous. It is a form of cultural violence in many respects. However, please note the difference - that I work to promote just that – a message/idea – not myself… and I honestly loath people who today just promote themselves for the sake of themselves. A sea of humans who have been conditioned into viewing who they are – as how they are seen online. Think about that for a moment. Social identity theory run amok. People have been conditioned to think “they are” how “others see them”. We live in an increasing fictional reality where people are now not only people – they are digital symbols. And those symbols become more important as a matter of “marketing” than people’s true personality. Now, one could argue that social perception has always had a communicative symbolism, even before the computer age. But nooooooothing like today. Social media has become a social prison and a strong means of social control, in fact. Beyond that, as most know, social media is literally designed like a drug. And it acts like it as people get more and more addicted to being seen and addicted to molding the way they want the world to view them – no matter how false the image (If there is any word that defines peoples’ behavior here – it is pretention). Dopamine fires upon recognition and, coupled with cell phone culture, we now have a sea of people in zombie like trances looking at their phones (literally) thousands of times a day, merging their direct, true interpersonal social reality with a virtual “social media” one. No one can read anymore... they just swipe a stream of 200 character headlines/posts/tweets. understanding the world as an aggregate of those fragmented sentences. Massive loss of comprehension happening, replaced by usually agreeable, "in-bubble" views - hence an actual loss of variety. So again, this isn’t to say non-commercial focused social media doesn’t have positive purposes, such as with activism at times. But, on the whole, it merely amplifies a general value system disorder of a “LOOK AT ME! LOOK AT HOW GREAT I AM!” – rooted in systemic insecurity. People lying to themselves, drawing meaningless satisfaction from superficial responses from a sea of avatars. And it’s no surprise. Market economics demands people self promote shamelessly, coupled with the arbitrary constructs of beauty and success that have also resulted. People see status in certain things and, directly or pathologically, use those things for their own narcissistic advantage. Think of those endless status pics of people rock climbing, or hanging out on a stunning beach or showing off their new trophy girl-friend, etc. It goes on and on and worse the general public generally likes it, seeking to imitate those images/symbols to amplify their own false status. Hence the endless feedback loop of superficiality. And people wonder why youth suicides have risen… a young woman looking at a model of perfection set by her peers, without proper knowledge of the medium, can be made to feel inferior far more dramatically than the typical body image problems associated to traditional advertising. That is just one example of the cultural violence inherent. The entire industry of social media is BASED on narcissistic status promotion and narrow self-interest. That is the emotion/intent that creates the billions and billions in revenue these platforms experience, as they in turn sell off people’s personal data to advertisers and governments. You are the product, of course.

But in its extreme form, belief in the free market is as naïve as belief in Santa Claus. There simply is no such thing as a market free of all political bias. The most important economic resource is trust in the future, and this resource is constantly threatened by thieves and charlatans. Markets by themselves offer no protection against fraud, theft and violence. It is the job of political systems to ensure trust by legislating sanctions against cheats and to establish and support police forces, courts and jails which will enforce the law. When kings fail to do their jobs and regulate the markets properly, it leads to loss of trust, dwindling credit and economic depression. That was the lesson taught by the Mississippi Bubble of 1719, and anyone who forgot it was reminded by the US housing bubble of 2007, and the ensuing credit crunch and recession.

But in its extreme form, belief in the free market is as naïve as belief in Santa Claus. There simply is no such thing as a market free of all political bias. The most important economic resource is trust in the future, and this resource is constantly threatened by thieves and charlatans. Markets by themselves offer no protection against fraud, theft and violence. It is the job of political systems to ensure trust by legislating sanctions against cheats and to establish and support police forces, courts and jails which will enforce the law. When kings fail to do their jobs and regulate the markets properly, it leads to loss of trust, dwindling credit and economic depression. That was the lesson taught by the Mississippi Bubble of 1719, and anyone who forgot it was reminded by the US housing bubble of 2007, and the ensuing credit crunch and recession. The

The last statement reveals more than may appear at first glance: it indicates that Greenspan's mistake was to expect that the lending institutions' enlightened self-interest would make them act more responsibly, more ethically, in order to avoid short-term self-propelling cycles of wild speculation which, sooner or later, burst like a bubble. In other words, his mistake concerned not the facts, the objective economic data or mechanisms; it concerned rather the ethical attitudes generated by market speculation—in particular the premise that market processes will spontaneously generate responsibility and trust, since it is in the long-term self-interest of the participants themselves to act thusly. Clearly, Greenspan's error was not only and not simply one of overestimating the rationality of market agents—that is, their ability to resist the temptation of making wild speculative gains. What he forgot to include in the equation was the financial speculators' quite rational expectation that the risks would be worth taking, since, in the event of a financial collapse, they could count on the state to cover their losses.

Why Did the Stock Market Crash? The most persuasive explanation for the 1929 stock market crash blames the Federal Reserve. Throughout the 1920s, but particularly in 1927, the Fed pumped artificial credit into the loan market, pushing down interest rates from their free-market level. Lower interest rates exaggerated the feeling of prosperity, and misled businesses and investors. In a laissez-faire market where money and banking are not disturbed by the government, the interest rate is a price that tells borrowers how much capital citizens have saved and made available to fund projects. But when the Fed adopts an “easy-money” policy by pushing down interest rates, this signal is distorted and the interest rate no longer does its job of channeling the available capital into the most deserving projects. Instead, an unsustainable boom develops, with firms hiring workers and starting production processes that will have to be discontinued once the Fed slows down its injections of new money. Many economists point to the Fed hikes in interest rates during 1928 and 1929 as the cause of the stock market crash. In a sense this is true, but the deeper point is that the crash was made inevitable by the bubble in the stock market fueled by the artificially cheap credit preceding the hikes. In other words, when the Fed stopped pumping in gobs of new money that pushed up the stock market, investors came to their senses and asset prices plunged back towards their pre-bubble level.

Once upon a time I'd left Los Angeles and been swallowed down the throat of a life in which my sole loyalty was to my tongue. My belly. Myself. My mother called me selfish and so selfish I became. From nineteen to twenty-five I was a mouth, sating. For myself I made three-day braises and chose the most marbled meats, I played loose with butter and cream. My arteries were young, my life pooling before me, and I lapped, luxurious, from it. I drank, smoked, flew cheap red-eyes around Europe, I lived in thrilling shitholes, I found pills that made nights pass in a blink or expanded time to a soap bubble, floating, luminous, warm. Time seemed infinite, then. I begged famous chefs for the chance to learn from them. I entered competitions and placed in a few. I volunteered to work brunch, turn artichokes, clean the grease trap. I flung my body at all of it: the smoke and singe of the grill station, a duck's breast split open like a geode, two hundred oysters shucked in the walk-in, sex in the walk-in, drunken rides around Paris on a rickety motorcycle and no helmet, a white truffle I stole and shaved in secret over a bowl of Kraft mac n' cheese for me, just me, as my body strummed the high taut selfish song of youth. On my twenty-fifth birthday I served black-market fugu to my guests, the neurotoxin stinging sweetly on my lips as I waited to see if I would, by eating, die. At that age I believed I knew what death was: a thrill, like brushing by a friend who might become a lover.

It's not that we're dumb. On the contrary, many millions of people have exerted great intelligence and creativity in building the modern world. It's more that we're being swept into unknown and dangerous waters by accelerating economic growth. On just one single day of the days I have spent writing this book, as much world trade was carried out as in the whole of 1949; as much scientific research was published as in the whole of 1960; as many telephone calls were made as in all of 1983; as many e-mails were sent as in 1990.11 Our natural, human, and industrial systems, which evolve slowly, are struggling to adapt. Laws and institutions that we might expect to regulate these flows have not been able to keep up. A good example is what is inaccurately described as mindless sprawl in our physical environment. We deplore the relentless spread of low-density suburbs over millions of acres of formerly virgin land. We worry about its environmental impact, about the obesity in people that it fosters, and about the other social problems that come in its wake. But nobody seems to have designed urban sprawl, it just happens-or so it appears. On closer inspection, however, urban sprawl is not mindless at all. There is nothing inevitable about its development. Sprawl is the result of zoning laws designed by legislators, low-density buildings designed by developers, marketing strategies designed by ad agencies, tax breaks designed by economists, credit lines designed by banks, geomatics designed by retailers, data-mining software designed by hamburger chains, and automobiles designed by car designers. The interactions between all these systems and human behavior are complicated and hard to understand-but the policies themselves are not the result of chance. "Out of control" is an ideology, not a fact.

Every day, the markets were driven less directly by human beings and more directly by machines. The machines were overseen by people, of course, but few of them knew how the machines worked. He knew that RBC’s machines—not the computers themselves, but the instructions to run them—were third-rate, but he had assumed it was because the company’s new electronic trading unit was bumbling and inept. As he interviewed people from the major banks on Wall Street, he came to realize that they had more in common with RBC than he had supposed. “I’d always been a trader,” he said. “And as a trader you’re kind of inside a bubble. You’re just watching your screens all day. Now I stepped back and for the first time started to watch other traders.” He had a good friend who traded stocks at a big-time hedge fund in Stamford, Connecticut, called SAC Capital. SAC Capital was famous (and soon to be infamous) for being one step ahead of the U.S. stock market. If anyone was going to know something about the market that Brad didn’t know, he figured, it would be them. One spring morning he took the train up to Stamford and spent the day watching his friend trade. Right away he saw that, even though his friend was using technology given to him by Goldman Sachs and Morgan Stanley and the other big firms, he was experiencing exactly the same problem as RBC: The market on his screens was no longer the market. His friend would hit a button to buy or sell a stock and the market would move away from him. “When I see this guy trading and he was getting screwed—I now see that it isn’t just me. My frustration is the market’s frustration. And I was like, Whoa, this is serious.” Brad’s problem wasn’t just Brad’s problem. What people saw when they looked at the U.S. stock market—the numbers on the screens of the professional traders, the ticker tape running across the bottom of the CNBC screen—was an illusion. “That’s when I realized the markets are rigged. And I knew it had to do with the technology. That the answer lay beneath the surface of the technology. I had absolutely no idea where. But that’s when the lightbulb went off that the only way I’m going to find out what’s going on is if I go beneath the surface.

growth, while slashing the national debt by more than 30 percent. Throughout most of his tenure, the nation enjoyed unparalleled prosperity, and his public service and numerous philanthropic endeavors made him a beloved national figure. As Time magazine later noted, he was widely considered the “greatest secretary of the treasury since Alexander Hamilton.” And then the stock market crashed in 1929. Mellon resigned from office in 1931, and Hoover lost reelection two years later. After taking office, Franklin Delano Roosevelt drew up a list of enemies and scapegoats. Mellon topped the list. FDR demanded that the IRS audit Mellon’s tax returns.

The average bull market runs about 165 weeks or roughly 3 years and the average gain is about 131 percent. As we can see from the charts below, this bull market is now over 260 weeks in length or the 2nd longest on record.

When the market falls again this time, the Fed will again ramp up its money-printing program. This time I feel a good candidate for the next bubble will be a commodity bubble. This could be the fuel for the fire for a new gold bubble.

What you want to achieve, when investing prudently and conservatively, is to own markets, sectors and companies at a large discount to their true value. Then your gains will be leveraged as the market realizes the true value and shoots from under-valued to over-valued.

look for beaten up cheap assets that I think will soon reflex to the upside or look to short overvalued, overpriced assets that will reflex to the downside.

IT may seem counterintuitive to use uncertainty to quell volatility. But a small amount of uncertainty surrounding short-term interest rates may act much like a vaccine immunizing the stock market against bubbles. More generally, if we view humans as embodied brains instead of disembodied minds, we can see that the risk-taking pathologies found in traders also lead chief executives, trial lawyers, oil executives and others to swing from excessive and ill-conceived risks to petrified risk aversion. It will also teach us to manage these risk takers, much as sport physiologists manage athletes, to stabilize their risk taking and to lower stress.

To quote the late John Templeton, “Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. The time to buy is at the point of maximum pessimism, the time to sell is at the point of maximum optimism.

If we understand how a person’s body influences risk taking, we can learn how to better manage risk takers. We can also recognize that mistakes governments have made have contributed to excessive risk taking. Consider the most important risk manager of them all — the Federal Reserve. Over the past 20 years, the Fed has pioneered a new technique of influencing Wall Street. Where before the Fed shrouded its activities in secrecy, it now informs the street in as clear terms as possible of what it intends to do with short-term interest rates, and when. Janet L. Yellen, the chairwoman of the Fed, declared this new transparency, called forward guidance, a revolution; Ben S. Bernanke, her predecessor, claimed it reduced uncertainty and calmed the markets. But does it really calm the markets? Or has eliminating uncertainty in policy spread complacency among the financial community and actually helped inflate market bubbles?

The price volatility within each trading day in the U.S. stock market between 2010 and 2013 was nearly 40 percent higher than the volatility between 2004 and 2006, for instance. There were days in 2011 in which volatility was higher than in the most volatile days of the dot-com bubble.

Americans do not want to endure the necessary pain to resolve their fiscal problems; so they will continue to print and spend more money. The Fed really is just subsidizing the American ego.

The adjective “efficient” in “efficient markets” refers to how investors use information. In an efficient market, every titbit of new information is processed correctly and immediately by investors. As a result, market prices react instantly and appropriately to any relevant news about the asset in question, whether it is a share of stock, a corporate bond, a derivative, or some other vehicle. As the saying goes, there are no $100 bills left on the proverbial sidewalk for latecomers to pick up, because asset prices move up or down immediately. To profit from news, you must be jackrabbit fast; otherwise, you’ll be too late. This is one rationale for the oft-cited aphorism “You can’t beat the market.” An even stronger form of efficiency holds that market prices do not react to irrelevant news. If this were so, prices would ignore will-o’-the-wisps, unfounded rumors, the madness of crowds, and other extraneous factors—focusing at every moment on the fundamentals. In that case, prices would never deviate from fundamental values; that is, market prices would always be “right.” Under that exaggerated form of market efficiency, which critics sometimes deride as “free-market fundamentalism,” there would never be asset-price bubbles. Almost no one takes the strong form of the efficient markets hypothesis (EMH) as the literal truth, just as no physicist accepts Newtonian mechanics as 100 percent accurate. But, to extend the analogy, Newtonian physics often provides excellent approximations of reality. Similarly, economists argue over how good an approximation the EMH is in particular applications. For example, the EMH fits data on widely traded stocks rather well. But thinly traded or poorly understood securities are another matter entirely. Case in point: Theoretical valuation models based on EMH-type reasoning were used by Wall Street financial engineers to devise and price all sorts of exotic derivatives. History records that some of these calculations proved wide of the mark.

o In bubbles, infatuation with market momentum takes over from any notion of value and fair price, and greed (plus the pain of standing by as others make seemingly easy money) neutralises any prudence that might otherwise hold sway.

the Japanese experience, when a conscious effort by the central bank to prick an asset bubble ended up triggering an 80 per cent stock market sell-off and a decade of economic stagnation.

When you innovate and build your business from a place of empathy and a desire to create difference for your customers, those values bubble up into everything you do.

Americans spend an average of about $7,200 a year on health care, compared with the roughly $2,900 average for the other market economies that make up the OECD (Organization for Economic Cooperation and Development), and for that greatly increased outlay we get higher infant mortality, higher obesity rates, lower longevity, fewer doctors per 1,000 people (just 2.4 per 1,000 in the United States, compared with 3.1 in OECD states), and fewer acute care hospital beds (2.7 per 1,000, compared to 3.8 per 1,000 in the OECD countries).

The entrepreneurs who stuck with Silicon Valley learned four big lessons from the dot-com crash that still guide business thinking today: 1. Make incremental advances Grand visions inflated the bubble, so they should not be indulged. Anyone who claims to be able to do something great is suspect, and anyone who wants to change the world should be more humble. Small, incremental steps are the only safe path forward. 2. Stay lean and flexible All companies must be “lean,” which is code for “unplanned.” You should not know what your business will do; planning is arrogant and inflexible. Instead you should try things out, “iterate,” and treat entrepreneurship as agnostic experimentation. 3. Improve on the competition Don’t try to create a new market prematurely. The only way to know you have a real business is to start with an already existing customer, so you should build your company by improving on recognizable products already offered by successful competitors. 4. Focus on product, not sales If your product requires advertising or salespeople to sell it, it’s not good enough: technology is primarily about product development, not distribution. Bubble-era advertising was obviously wasteful, so the only sustainable growth is viral growth.

1. Make incremental advances Grand visions inflated the bubble, so they should not be indulged. Anyone who claims to be able to do something great is suspect, and anyone who wants to change the world should be more humble. Small, incremental steps are the only safe path forward. 2. Stay lean and flexible All companies must be “lean,” which is code for “unplanned.” You should not know what your business will do; planning is arrogant and inflexible. Instead you should try things out, “iterate,” and treat entrepreneurship as agnostic experimentation. 3. Improve on the competition Don’t try to create a new market prematurely. The only way to know you have a real business is to start with an already existing customer, so you should build your company by improving on recognizable products already offered by successful competitors. 4. Focus on product, not sales If your product requires advertising or salespeople to sell it, it’s not good enough: technology is primarily about product development, not distribution. Bubble-era advertising was obviously wasteful, so the only sustainable growth is viral growth.

With such theories, economists developed a very elaborate toolkit for analyzing markets, measuring the "variance" and "betas" of different securities and classifying investment portfolios by their probability of risk. According to the theory, a fund manager can build an "efficient" portfolio to target a specific return, with a desired level of risk. It is the financial equivalent of alchemy. Want to earn more without risking too much more? Use the modern finance toolkit to alter the mix of volatile and stable stocks, or to change the ratio of stocks, bonds, and cash. Want to reward employees more without paying more? Use the toolkit to devise an employee stock-option program, with a tunable probability that the option grants will be "in the money." Indeed, the Internet bubble, fueled in part by lavish executive stock options, may not have happened without Bachelier and his heirs.

Online marketers have invented euphemisms to make the work they do sound less awful. For example, we're told that our email campaigns do not involve badgering people, or pestering them - rather, we're "nurturing" them. "Lead nurturing is a big thing in the world of online marketing.

But once on stage he seems to enjoy playing the role of inspirational speaker—a kind of nerd Tony Robbins, overly fond of touchy-feely rhetoric and vapid aphorisms. “Success,” Shah says, striding back and forth across a stage, with his head down, stroking his beard, as if impersonating a professor, “is making those who believed in you look brilliant.” Then he will pause, as if he has just said something incredibly profound and wants to give you a moment to let it sink in. Then he repeats the line, and a ballroom full of marketing people cheer.

Rarely in the history of the United States has the nation been so ill-served as during the presidency of George W. Bush. When Bush took office in 2001, the federal budget ran a surplus, the national debt stood at a generational low of 56 percent of gross domestic product (GDP), and unemployment clocked in at 4 percent—which most economists consider the practical equivalent of full employment. The government’s tax revenue amounted to $2.1 trillion annually, of which $1 trillion came from personal income taxes and another $200 billion from corporate taxes. Military spending totaled $350 billion, or 3 percent of GDP—a low not seen since the late 1940s—and not one American had been killed in combat in almost a decade. Each dollar bought 1.06 euros, or 117 yen. Gasoline cost $1.50 per gallon. Twelve years after the Berlin Wall came down, the United States stood at the pinnacle of authority: the world’s only superpower, endowed with democratic legitimacy, the credible champion of the rule of law, the exemplar of freedom and prosperity.1 Eight years later the United States found itself in two distant “wars of choice”; military spending constituted 20 percent of all federal outlays and more than 5 percent of the gross domestic product. The final Bush budget was $1.4 trillion in the red and the national debt was out of control. The nation’s GDP had increased from $10.3 trillion to $$14.2 trillion during those eight years, but a series of tax cuts that Bush introduced had reduced the government’s revenue from personal income taxes by 9 percent and corporate taxes by 33 percent. Unemployment stood at 9.3 percent and was rising; two million Americans had lost their homes when a housing bubble burst, and new construction was at a standstill. The stock market had taken a nosedive, the dollar had lost much of its former value, and gasoline sold for $3.27 a gallon.2 The United States remained the world’s only superpower, but its reputation abroad was badly tarnished.

Global finance made so much hay, not through efficient markets but by riding up and down three interlinked giant global asset bubbles using huge amounts of leverage. The first bubble began in US equities in 1987 and ran, with a dip in the dot-com era, until 2007. It was the longest equity bull market in history, and it spread out from the United States to boost stock markets all over the world. The smart cash that was being made in those equity markets looked around for a hedge and found real estate, which began its own global bubble phase in 1997 and ran until the crisis hit in 2006. The final bubble occurred in commodities, which rose sharply in 2005 and 2006, long before anyone had heard the words “quantitative easing,” and which burst quickly since these were comparatively tiny markets, too small to sustain such volumes of liquidity all hunting either safety or yield. The popping of these interlinked bubbles combined with losses in the subprime sector of the mortgage derivatives market to trigger the current crisis.

According to the media and other stock market "experts," the equities bull is forever hiding just around that next corner on Wall Street. But millions of investors who listened to the experts back in 1998-2001 about "the New Economy" get hammered in the stock market and are still trying to get back to even. The smart investor looks for opportunities to acquire value on the cheap, with one eye out for a dynamic change in the offing that might make that investment even more valuable.

The company, with a T 36 lakh turnover received a T 45 crore valuation (which in those bubble days seemed modest). A month later, the market crashed.

The company,” he says, “doesn’t need a reason to fire you. The company can do whatever it wants.” A week later, on September 2, the Tuesday after the Labor Day weekend, Trotsky forwards me an email that Cranium has sent around to everyone in the marketing department. We’re

The Securities and Exchange Commission was created in 1934, and, together with other checks and balances (including class-action suits), it helped build a sense of professional ethics among managers, auditors, and other market participants, leading to the creation of a securities market of unprecedented size, with unprecedented participation. At the peak of the market in March 2000, the market capitalization of U.S. stocks (as measured by the Wilshire index) was $17 trillion, or 1.7 times the value of American GDP. Half of all U.S. households owned equities. The world has changed a great deal, however, over the past sixty years. New forms of deception have been developed. In the go-go environment of the nineties while market values soared, human values eroded, and the playing field became terribly unlevel once again, contributing to the bubble that burst soon after the beginning of the new millennium. The

We pay double for every fee. Inflation is not my friend. Nigeria markets is almost in a state of chaos. look at the aggravated unemployment, even the employed are loosing their jobs to organizations cost-savings. Imagine the burdensome taxes, restrictions on trade and delayed Government payment to State contractors. Survival is now at its peak, as the bubble and burst game of inflation persists. In reality, this is a call to Christendom.

Creativity was channeled into manipulation rather than innovation, and the result has been a veritable parade of financial bubbles: the housing­price bubble, its partner the mortgage securities bubble, and the overall derivatives bubble.

The unprecedented bull market in Treasury bonds, supported by the belief that Treasury bonds are “insurance policies” in the case of financial collapse, could end as badly as the bull market in technology stocks did at the turn of the century. When economic growth increases, Treasury bondholders will receive the double blow of rising interest rates and loss of safe-haven status. One of the prime lessons learned from long-term analysis is that no asset class can stay permanently detached from fundamentals. Stocks had their comeuppance when the technology bubble burst and the financial system crashed. It is quite likely that bondholders will suffer a similar fate as the liquidity created by the world’s central banks turns into stronger economic growth and higher inflation.

In response to current events, people often reach for historical analogies, and this occasion was no exception. The trick is to choose the right analogy. In August 2007, the analogies that came to mind—both inside and outside the Fed—were October 1987, when the Dow Jones industrial average had plummeted nearly 23 percent in a single day, and August 1998, when the Dow had fallen 11.5 percent over three days after Russia defaulted on its foreign debts. With help from the Fed, markets had rebounded each time with little evident damage to the economy. Not everyone viewed these interventions as successful, though. In fact, some viewed the Fed’s actions in the fall of 1998—three quarter-point reductions in the federal funds rate—as an overreaction that helped fuel the growing dot-com bubble. Others derided what they perceived to be a tendency of the Fed to respond too strongly to price declines in stocks and other financial assets, which they dubbed the “Greenspan put.” (A put is an options contract that protects the buyer against loss if the price of a stock or other security declines.) Newspaper opinion columns in August 2007 were rife with speculation that Helicopter Ben would provide a similar put soon. In arguing against Fed intervention, many commentators asserted that investors had grown complacent and needed to be taught a lesson. The cure to the current mess, this line of thinking went, was a repricing of risk, meaning a painful reduction in asset prices—from stocks to bonds to mortgage-linked securities. “Credit panics are never pretty, but their virtue is that they restore some fear and humility to the marketplace,” the Wall Street Journal had editorialized, in arguing for no rate cut at the August 7 FOMC meeting.

In addition to pool installers and flower shops, our customers include people who make a living bombarding people with email offers, or gaming Google’s search algorithm, or figuring out which kind of misleading subject line is most likely to trick someone into opening a message. Online marketing is not quite as sleazy as Internet porn, but it’s not much better, either.

Men would flood the market with attention, effort, time and energy trying to find girls. Just think of all the time you would go to parties, clubs, online dating profiles, etc. etc, just to get a number back when you were 23.  Men would make themselves available as much as they possibly could. But then the bubble bursts. Men no longer go out "clubbing."  They don't log into their Match.com account as much.  And they could go to that desperate singles event, but the game is on.  And soon the supply of attention that was previously flooding the market and driving the SMV of women up, plummets, driving down the "units of attention" per woman.

The party for those addicted to markets has been the “make it rain” free-money printing game run since 1971. They may call it “Quantitavive Easing”, (QE) or “monetary policy” or “Asset purchases by the Fed”, or any number of terms which cause 99% of humans to stop listening. I urge everyone to demand better from governments, professionals and public servants. To demand real “service” from those who claim to be in this role. Right now we are letting those addicted to money, play with “self” accountability, which is creating addicts and poverty at a faster rate than our western economies can create prosperity. “Asset purchases” means the Fed printing money, to give this money to banks in exchange for some of the banks bad assets that need to be purged. How wealthy would your family be if each losing investment could simply be taken off your hands…using borrowed money that the taxpayer must then repay? How poor would your neighbors be if they did not have this money pipeline working for them? The newly printed money for asset purchases, is backed by US Treasury IOU’s, or similar notes and borrowings, for which the public must now repay through income taxes…forever. Banks thus get billions in freshly created cash, while the US public gets the bad assets, or gets stuck with the bill to pay back the money created to purchase the bad assets. I could probably refine that description a bit, but for now I am going to let it lay here. Any corrections are welcomed with gratitude. Dousing the flames of the 2008 mortgage bubble disaster, using government money issued in this manner, was said to be needed to prevent complete financial system meltdown. A better choice would have been to let those with a gambling addiction, suffer the consequences of their addiction, like we demand of every addict in Downtown LA. But the Fed is the perfect tool for dumping bank gambling losses and bad assets upon the taxpayer, and to make taxpayers pay to give the banks a clean-money start each time. The only thing left to do for the recipients of some of those newly printed billions, is to “launder it”, to get

Economies and markets cycle up and down. Whichever direction they’re going at the moment, most people come to believe that they’ll go that way forever. This thinking is a source of great danger since it poisons the markets, sends valuations to extremes, and ignites bubbles and panics that most investors find hard to resist.

Here are the most important influences: the way investors fluctuate rather than hold firmly to rational thinking and the resulting rational decisions; the tendency of investors to hold distorted views of what’s going on, engaging in selective perception and skewed interpretation; quirks like confirmation bias, which makes people accept evidence that confirms their thesis and reject that which doesn’t, and the tendency toward non-linear utility, which causes most people to value a dollar lost more highly than a dollar made (or a dollar of potential profit forgone); the gullibility that makes investors swallow tall tales of profit potential in good times, and the excessive skepticism that makes them reject all possibility of gains in bad times; the fluctuating nature of investors’ risk tolerance and risk aversion, and thus of their demands for compensatory risk premiums; the herd behavior that results from pressure to fall into line with what others are doing, and as a result the difficulty of holding non-conformist positions; the extreme discomfort that comes from watching others make money doing something you’ve rejected; thus the tendency of investors who have resisted an asset bubble to ultimately succumb to the pressure, throw in the towel and buy (even though—no, because—the asset that is the subject of the bubble has appreciated substantially); the corresponding tendency to give up on investments that are unpopular and unsuccessful, no matter how intellectually sound, and finally, the fact that investing is all about money, which introduces powerful elements such as greed for more, envy of the money others are making, and fear of loss.

In economics, disbelief in secrets leads to faith in efficient markets. But the existence of financial bubbles shows that markets can have extraordinary inefficiencies. (And the more people believe in efficiency, the bigger the bubbles get.)

Here’s the problem: analyzing markets except for the “notably rare exceptions” of bubbles and crashes is like analyzing the weather except for storms and droughts. We really do want to understand storms and droughts. We’d like to know if we will need an umbrella.

The Global Financial Crisis shows the credit cycle at the greatest extreme since the Great Depression. Debt markets historically had been marked by general conservatism, meaning excesses on the upside were limited and most bubbles took place in the equity market. Certainly it was the site of the Great Crash of 1929. But the creation of the high yield bond market in the late 1970s kicked off a liberalization of debt investing, and the generally positive economic environment of the subsequent three decades provided those who ventured in with a favorable overall experience. This combination led to a strong trend toward acceptance of low-rated and non-traditional debt instruments. There were periods of weakness in debt in 1990–91 (related to widespread bankruptcies among the highly levered buyouts of the 1980s) and in 2002 (stemming from excessive borrowing to fund overbuilding in the telecom industry, which led to prominent downgrades that coincided with several high-profile corporate accounting scandals). But the effects of these were limited because of the isolated nature of their causes. It wasn’t until 2007–08 that the financial markets witnessed the first widespread, debt-induced panic, with ramifications for the entire economy. Thus the GFC provided the ultimate example of the credit cycle’s full effect.

The Guessing Game and Keynes’ Beauty Contest can explain the interesting fact that in financial markets we observe bubbles – excessively inflated prices – even if all participants are rational. This is because of a lack of common knowledge of rationality.

Most researchers tried to solve the fat tail problem by studying the behavior of individual traders. Johnson, instead, looked at clusters. He asked what would happen if we assumed traders acted in cliques: small groups whose members all behave the same way, that is, they make the same buy or sell decisions. (The evidence for groupthink in markets, from tulip mania to the internet bubble, is strong.) The clusters need not be permanent

Most researchers tried to solve the fat tail problem by studying the behavior of individual traders. Johnson, instead, looked at clusters. He asked what would happen if we assumed traders acted in cliques: small groups whose members all behave the same way, that is, they make the same buy or sell decisions. (The evidence for groupthink in markets, from tulip mania to the internet bubble, is strong.) The clusters need not be permanent. Just like cliques in high school, members come and go, trading cliques form and dissolve, they merge with other cliques or split into two.