Ask the Experts: Kids and Money

Bank of Dad blogger Dan Kadlec joins Jill Schlesinger and Jack Otter to discuss raising financially-savvy kids.

I find it intriguing when he explains that poker is a great financial tool. Sure, mastering poker means learning risk management and statistical analysis but I won't take the risk of using poker to educate my kid about money management. I can't say I will be proud if he turns out to be a professional gambler.

In any case, it is great to get new ideas from other parents. Bringing money into conversations with kids is never the easiest task. Either they are plain not interested or they don't yet appreciate your intentions. And schools aren't doing enough about teaching personal finance.

No matter how difficult it is , parents have to try their best to jumpstart their kids' financial literacy. What have you done to educate your kids? Will you use poker as a tool?

Do You Spend Money Secretly?

Are you one of those who aren't honest with your spouse? I am not talking about adultery here but rather expenses which you have been hiding.

The Wall Street Journal has a beautiful piece asking if you are a secret spender.

It seems many people qualify as secret spenders. According to a recent American Express Spending & Saving Tracker, 27% of respondents have “misrepresented the amount of a purchase” while 30% hide purchases from their partner.

The extent of them keeping spending under wraps is rather funny and incredulous too. Check out what they did:

•burying their purchase in the backyard
•pretending that goods came from Goodwill
•hiding purchases in grocery bags to bring them home
•arranging for items to arrive while their partner was away
•sneaking out and bought an item in the middle of the night

Though I don't go to the extent of asking permission from my wife for my unbudgeted purchases (mostly gadgets), I do let her know about it. This is to encourage honesty from both parties.

She is quite a spender herself on clothes and shoes and if both of us were to conceal our expenses, it will defeat the purpose of having a household budget.

In any case, our checkbook and credit cards are open to each other and she will find out. But to avoid ugly conflicts, I find the right timing to tell her and her mood will depend on the amount which I had spent without her knowledge.

Are you guys a secret spender too? And how do you tell her wife about it?

5 Interesting Money Quotes To Ponder

1. The best way of saving money is to forget the person you borrowed it from.

2. Why did Robin Hood steal from the rich?
Because the poor didn't have any!

3. If you can count your money then you are not really a rich man.,

4. Money is better than poverty, if only for financial reasons.

5. When i was young i thought money was the most important thing in my life, now that i am old i know that it is.

Suze Orman's Advice: Pay With Cash

Suze Orman, a highly respected money guru, has recently called on Americans to start paying for purchases with cash.

She was heard saying on CNBC, "Let’s go back to the times when you literally paid cash for everything. That’s right. Cash. Stop using your credit cards altogether."



I am definitely in favor of Suze Orman's "Back to Cash" movement. It is high time we, as a nation, wean themselves off debt and live within our means.

In any case, credit card companies aren't looking out for its customers. They are adopting more aggressive tactics to boost their profits, with stricter credit-card legislation looming.

When it comes to raising interest rates, our credit scores and history of timely payments count for little. If you have low balances or periods of inactivity, your account could also be closed.

Since credit card companies are treating us like dirt, we might as well say goodbye to credit cards once and for all. Heck, just pay with cash. No more identity theft or hidden/unexpected fees to worry about.

The initial adjustment may be painful but once you start planning a household budget, your expenses will be easier to control.

Obama Pisses Away Our Money

Wow, this guy is full of hatred for President Barack Obama. Maybe he just finished work after a long day and created this video.

Anyway, he brought up a few pertinent points. It is really tragic to pay tax and see how the government screwed up its budget by wasting our hard-earned money on bailing out banks and gifting them fat bonuses.

Check out his rants, though I doubt it serves much purpose in preventing the downfall of America.

Disconnect Between Wall Street And Main Street

Wall Street have no qualms about enriching themselves and getting fat bonuses. Who cares about the struggling masses on Main Street?

Don't bother telling them your troubles... it is just too bad you have no money to organize lobby groups.

Money Quote: Money Never Made A Man Happy

“Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one.”

- Benjamin Franklin

This is the first of many money quotes which I will be discussing. Benjamin Franklin, a man of many talents (statesman, scientist, writer, philosopher and Inventor) made the above statement, which I absolutely agree.

Indeed, the more money you have, the object of interest becomes meaingless. Making money becomes merely a game to accumulate more zeros in your bank account.

At any one time, a man can only clothe himself with a shirt and pants and sleep on one bed. He needs only three meals a day for sustenance and a roof over his head to protect against the elements.

Everything else is a want and not a necessity. I am sure you are going to tire of having delicacies like abalone, lobster, caviar, wagyu beef every day of the week.

Having too much money, say from a lottery, can turn your life upside down and before long, you will be begging for the tranquility and privacy when they were average Joes.

Troubles start knocking on your door in the form of dubious friends, investment scams, vices, decadent lifestyle, breakup in marriage, fighting among your children for inheritance, etc. Many people end up poorer, financially and emotionally, after the circus came to an end.

I am contended with having just enough money to be self sufficient and not super rich.

What do you guys think of money? Do you really need more money than you can ever spend in this lifetime?

Letting Kids Earn Their Allowances

In our modern society, it is embarrassing that we consistently churn out graduates and ph.Ds by the truck loads who can drone for hours on their topics of specialisation but are utterly helpless in balancing their check book.

They don't know the difference between asset and liability and have little worries about excessive debts so long as their earnings increase every year. Their confidence stem from a mentality of entitlement - since they are so well-qualified, good jobs must be lining up for them.
Unfortunately, the world don't owe them a living. And globalisation will drive home this point further.

To prepare our kids for competitive future, I cannot stress enough about financial literacy, without which one cannot learn and develop financial responsibility and discipline. I don't have a high education, as compared to kids these days, but I thank my parents for giving me money lessons early in my life.

I feel that one of the best ways to inculcate a proper work ethic ("work equals pay") in our children is to give them the opportunity to earn pocket money from jobs that go beyond cleaning up after themselves or fulfilling family responsibilities.

From what I've noticed, kids actually get interested in money at a young age, and a parent can use that interest to teach basic concepts, including math. Giving your kids pocket money when they stretch out their hands actually cultivates an undesirable habit of taking things for granted. It is difficult to wean off even when the kids entered adulthood.

Parents are at fault for doting too much on their kids and employing maids to do their kids' bidding. They prefer their kids to play computer games, watch TV or chat online instead of doing constructive work around the house, for fear that the kids tire themselves out or suffer injuries. Well, if my dad has his way, he will say this: "Stop being so f*cking precious."

Now, that is a bit rough but I grew up fine. That is why I insist that kids must be given opportunities to earn their allowances early. Besides helping out with household chores, they can provide services to neighbors such as babysitting, painting, lawn-moving and yard work, etc. It is just a matter of getting creative.

Once they start to earn money through their own effort, they can learn to handle the money. At that stage, it's a good idea to teach them how to control expenses (entertainment, food, transportation, etc.) and save their spare money in change jars.

In addition, you can teach them to think about their desired stuff (computer games, ipod, shoes, etc) and how long it will take to accumulate enough money to buy them. This will reinforce the value of time as well as money to your kids.

I am not an ardent fan of capitalism but it is indeniable that money makes the world go round and kids need to learn how to use money responsibly. Financial lessons should begin at home and if we don't teach our kids (who else will?), their future money woes become our problems too.

If you have never considered getting your kids to earn their allowances, start off today by getting them to make their own beds, tidy their bedrooms, clean up the dining table and wash the toilets occasionally.

As parents, we also have to practice what we preach and demonstrate our responsibility in handling money. Setting the right examples will build a sturdy foundation for our kids to follow.

Investing for People With Low Incomes

In this recession where many people are either unemployed or working part time jobs, it is hard to have thousands of dollars set aside each month for investment.

Some people cannot maintain a a checking account, not to mention a fully funded retirement account, but they can still invest and grow passive income. Even investing small amounts gradually will smooth out big money events.

For those in a low-income situation, the best places to invest are low risk and easily accessible accounts. If you don't have an emergency fund (ideally 3-6 months expenses), then establishing one is the first step.

When I say emergency fund, I don't mean stashing money under your mattress or a low rate savings account. You should consider Money Market Accounts (MMAs) which offer a higher interest rate than checking or savings while its FDIC insured status gives you a peace of mind. It is also a good source of overdraft protection for checking.

Money market accounts are available in most banks and can be easily set up. You can make unlimited withdrawals and transfers without any penalties. Many MMAs are available with low to no opening requirement. In fact, some banks offer cash incentives for opening an MMA. The devil is in the details though, so read the fine print on the minimum amount and time for your money to be held in that account.

Money market accounts are also a convenient way to invest because you can set up automatic deposits. I recommend the minimum automated deposit as you can invest on a regular basis without over-drafting your regular account. Whenever you have extra money, you can invest that and grow your nest egg.

If you like to tune your investment according to interest rates, you can consider Certificates of Deposit (CDs). In periods of declining interest rates, the rate of return on a MMA will adjust downwards but a CD will hold it's value. You continue to get a fixed rate of return for the duration of the deposit.

Conversely, rising interest rates could leave you stuck with 2-3% less for the money you're investing. I recommend investing in Certificates of Deposit for a period of 6 months to 3 years so that you do not miss out on lucrative returns.

However, if you are very risk averse or an impulsive spender, you can commit to a long term Certificates of Deposit because withdrawing money involves paperwork and penalties. These hurdles should keep your temptations at bay and ensure an intact principal.

Another place to invest is in a Health Savings Account (HSA). If insurance isn't available through your employer, this is one way to keep yourself insured and invest for the future.

Health savings account have a high deductible that must be met before the plan provides any benefits. On the upside, you have a lower monthly premium and money you deposit into the account earns interest.

If you have few medical bills or go to the doctor rarely consider them as a way to both invest and take care of your health. The most important investment you can make is your health. Going without medical care is costly - most bankruptcies are caused by medical bills, not credit debt.

Once you've established an emergency fund and obtained health insurance, look at Roth IRAs as a place to put pre-tax money. These investments earn interest until you retire, at which time you make withdrawals and, presumably, pay less in tax on the money.

Finally, the most important investment advice for people with low incomes is - invest in yourself. Knowledge is priceless. Keep reading articles like this and think critically about the advice that's given. Invest time in developing your skills or acquiring new ones to increase your earning power.

How To Prevent Another Bernie Madoff Scam?

What we really want to know is how to beat the next Bernie, the next Stanford, or the next Greenwood and Walsh. Investors won't get their cash back with answers to the past. That money is gone. It's a sunk cost.

I know only one foolproof way to beat fraud: separate money management from reporting. You can hire that lights-out investment manager. But keep all your assets with a custodial bank like State Street or Pershing. They report your account value, not the money manager. It's like separating church and state.

Source: Beating Bernie

Once the financial crisis stabilizes and the economy recovers, everybody starts feeling rich. Appetite for risk increase and the fund managers will be out in force trying to promote their high-yield products. The whole cycle may repeat itself and who knows, this time, the US government may be helpless.

Ben Bernanke and Obama have spoken about regulation to protect financial institutions from themselves. This insightful article provides a new direction for the administration going forward - separate money managers from the reporting function.

This will be the cornerstone to prevent further financial scams. What do you guys think?

Big Dreams On A Small Family Budget?

Is it possible to have big dreams on a small family budget? I am not talking about charmed couples who stay in mansions and jetting off on romantic vacations to Europe every weekend.

For most married couples, their first few years are usually marked by cramped rental apartment and eating instant noodles or cheese burgers while struggling to pay their bills.

Isn't our marriage supposd to be the culmination of sweet love and courtship? But yet it seems that every dime is paying off the past or saving for the future.

Indeed, living debt-free during the "just married" moments is an immense challenge. However, we can still be financially secure by prioritizing our spending based on the three C's below:

1. Consider what matters most

Examine your activties and consider what really matters. Then explore how to have fun without breaking the piggy-bank. As an example, why do you go to the movies? If you love the atmosphere, plot or special effects, then attend an off-peak (cheaper) show. Else, just rent a DVD or borrow it from the library.

2. Cherish the simple things in life

When your neighbors are are driving a new car or buying big screen TVs, it's tempting to reach for our credit cards and improve our living standards too. Americans love instant gratification and keeping up with the Jones.

In this recession, I am humbled to learn that our wealth is actually illusory. It is the simple things in life which ought to be cherished. We should thank God for our hot showers, clean water, food on the table and cosy homes, instead of focusing on our neighbor's latest toys.

Try it out and you will be more contented with your marriage rather than lament about the meagre family budget.

3. Commit to God what's His

The Israelites gave to God the first 10 percent of everything they harvested as they trusted Him to provide the rest. The New Testament remind us that all we have is God's.

The lessons is to give generously and spend wisely. When we invest our time and money in Him, we further appreciate God's abundant provision on earth and learn to share without thinking about rewards.

Clashing Over Money In A Marriage

Appearances can be deceiving. Recently, my cousin told me that he has filed for divorce from his spouse. That is sad as he had a happy marriage, at least that was the impression we get whenever they attend family functions.

He told me that their numerous conflicts over financial issues got out of hand. To be sure, he is not alone in citing money problems for marital strife. Sometimes, arguing about money on a regular basis could be due to other issues being unresolved.


These core issues will haunt the marriage without a satisfactory solution. My own experience is that managing a marriage requires effort, it is a merger of two people with different habits and personalities. Thus, whenever there are disputes, open communication, understanding and patience are required.

Here are some questions you can ask yourself before the situation gets ugly:

1. Is there a communication breakdown?

Don't let your spouse second guess your thoughts, desires and preferences. Communicate effectively as guessing often leads to misunderstanding, and subsequently hurt feelings and even resentment.

Choosing the right timing is half the battle won. If either of of you are already upset or angry, communicating about finances is usually futile as your negative emotions spillover which usually lead to harsh exchanges of words. You should broach sensitive issues in a way that is comfortable for both of you.

Try writing down your concerns first before lashing out in an emotional manner. Be clear about what you need from your spouse - is it paying for a big ticket item, planning a family budget or balancing the check book? Set a positive tone and good results will follow.

2. Are you hurt or resentful?

Sometimes, it's easier to argue about money than to admit our hurt feelings. We may have unknowingly hurt our spouse, but because they bottled it up, we are unaware of our insensitive actions.

The result is that the hurt continues and the other party vent their resentment by over-reacting to every issues. Instead of letting such negative emotions hinder your relationship, gather the courage to deal with the hurt.

Bring it out in the open in a healthy way. Do it before tackling money issues. That way you'll be able to discuss your finances without the extra burden of emotional baggage.

3. Are you afraid of money facts?

Are you afraid to talk about money because you don't want your spouse to discover that you spent money foolishly, didn’t pay the bill when you were supposed to, or have kept other financial secrets?

Trust has to be established in a marriage before sensitive and important issues like finances can be addressed properly. However dishonesty destroys trust. As they say, once bitten twice shy; when trust is destroyed, your spouse will not rely on you for future decisions, which can leave you feeling upset, and the cycle repeats itself.

Never make a significant financial decision without talking to your spouse. If you've been hiding something, the real issue is not about finances, it's about being honest.

In order to lay a smooth foundation in marriage for you to build your financial future, try communicating in a clear and loving manner, getting rid of emotional baggage and embracing honesty today.

Millionaires Who Give Money To Help: A Rare Breed?

Since last year, I have seen so much gluttony on Wall Street (bankers taking astronomical bonuses even as they cry out for taxpayers' money...) that I have almost given up on humanity.

Have our moral standards declined so much that we have no qualms about earning money at others' expenses? To be frank, I will love to see more heartwarming tales of caring and sharing from these rich people.

Actually, there are many millionaires who give money to help people in need, like this modest guy who gave money away to strangers and left little for his family members. At Christmas time, you may find secret Santa Claus lurking around dark corners and handing out $100 bills to strangers.

Such charitable acts deserve accolades but too bad, the media do not give sufficient coverage, either because the millionaires do not wish to seek publicity or because readers are more interested in useless gossip.

In any case, I am worried that in the aftermath of this financial crisis, millionaires who give money to help could become a rare breed, if this Wall Street Journal article: "Help, We’re Running Out of Rich People," is anything to go by.

I know a lot of millionaires have their wealth destroyed as the economic recession borders on the 1920s Great Depression. Even if you have not invested in the stock market or real-estate, hardworking and fiscally responsible folks are still affected as many businesses are struggling to survive the lack of credit and demand.

With shrinking assets, President Obama is set to exacebate the woes of the rich (by his definition, people with joint income exceeding $100,000 are RICH). This group will be taxed heavily (increase to 39.6% from 35%) as Obama seeks to reduce the deficit.

Obama will also raises taxes on the investment gains of private-equity and hedge-fund chiefs and the rate for capital gains and dividends.

I think the number of rich millionaires in America are not declining, what is happening is the significant reduction of taxable income.

However, money given to charity should not be compromised. At times like these, money for the less fortunate becomes even more critical. It is up to the millionaires when and how much to give though.

Do You Keep Up With The Joneses?

Previously, I mentioned about this $50K or $100K survey. Even though the statistical sample is confined to Harvard, the results represents quite accurately the mentality in our society. Aren’t we always comparing who has the flashier car or bigger house?

My wife and I will rather have the $100,000 because we have never been interested in keeping up with the Joneses. If you can make more money than me and enjoy fine dining, shopping, staying in 5-star hotels every day, so be it.

Coming home from a hard day's work and then spending time with my wife is more important, rather than chasing for more money by taking on another sideline job. I am satisfied when my current job allows me to afford simple indulgences without going into debts.

Fortunately, we did not adopt an extravagant lifestyle, even during the rolling good times when our household income inflated. Hence, there are less drastic adjustments for us to make in this recession.

Nevertheless, the survey caused me to think deeper about money, especially in this bloody period of deleveraging and wealth destruction. Why do we crave for money? Where we do draw the line and say we have enough money for a lifetime?

For a lot of us, the more money the better. I guess this boils down to our insatiable desire for status. After all, we like to judge ourselves by what others have and not what we need.

How do you feel about money? Do you think money and status are related? Does it stoke your ego to be able to spend more money than your neighbor?

Would You Take $50K Or $100K?

There was a famous survey conducted about ten years ago by economists Sara Solnick and David Hemenway.

The results revealed that that many Harvard students (and few Harvard staff members) would rather have an income of $50,000 in a world where most people were poorer than an income of $100,000 in a world where most people were richer.

If you were to take the survey, which answer will you choose? I will reveal my answer later.

Weekly Coupons Tips #1

My family use coupons aggressively and I consider it the best thing since sliced bread when it comes to saving money. We save nearly $1,500 a year using coupons. To the rich people, that’s chump change; but to me, it’s a pretty good amount.

Though I often tout the advantages of coupons to friends and relatives, I find that they do not share the same fervor. I guess they are feeling embarrassment about using coupons.

Well, I am not and don't look like Donald Trump, so I have no qualms about using coupons. Please people, the companies made coupons available for us to use, we are not acting like thieves or cheating anybody.

If I am given a choice of having to pay full price for every items or being called a cheap stake, I will gladly accept the latter any day.

For those who are just starting out on their coupon adventures, there are a few things to take note in order to maximize your savings.

I suggest that you cultivate a habit of being organized early. Our family adopts a meticulous method of placing our coupons in envelopes which are organized by category. Once a month, we go through our coupon organizers to check for expired coupons.

If you think we are being fanatical and this is all too much trouble, just imagine these tiny slips of paper as money and you will think differently. Every coupon you need but can’t easily locate is cash slipping through your fingers.

To make the most of your coupon savings:

1. Look for double-coupon deals.

2. Sniff around for coupons of items that are already on sale or discounted.

3. Coupons are not the be-all, end-all; sometimes store brands can still be cheaper, so having a basic understanding of prices will put you in good stead.

4. Don’t disrupt your shopping list jsut because of the manufacturer’s coupons. You may end up buying unnecessary items... so what if they are cheap!

Instead, plan your regular shopping list first, and then go to your coupon wallet and see whether you have current coupons for the items you’re buying.

5. When shopping online, look for online coupon codes to save on either purchase price or on shipping/handling charges.

Just type the name of the site you’re shopping at and coupons into your favorite search engine to see what you find.

Save Money While Playing Golf

Playing golf has been my only indulgence but my wife has never understood my love for the sport. On weekends, I usually hang out with my business associates and friends while she goes on her shopping trips..

However, of late, my indulgence has been causing a bit of family rift. In good times, you don't think much about going to the golf courses weekly but in this recession, golfing has burned holes in my pocket.

As my wife is retrenched, there is now lesser income in the family. Thus I have to sacrifice a bit to balance our family budget.

Anyway, I am coping and have devised some tips to keep me on the greens and not wasting green.

1. Choose Off-Peak Hours

Many golfers schedule their tee-time on Saturdays. I don't see any reason to join the crowd, unless my business clients request for it.

Weekend play can cost you around $35-$50, depending on the golf course. I have taken to clearing weekday leave... you get the golf course all to yourself and saved a good bit of money in the process, so why not!

2. Look for Discounts

Golf courses may offer discounts at different times and to different age groups. Just make enquires at the course management office, you have a good chance if you are a senior citizen or a teenage golfer.

3. Special Deals When Business Is Slow

Like any business, golf courses have their overheads even when nobody is teeing off. So if you know when business will be slow on certain times during the week, you can ask the information desk about special deals. Check out different websites to make comparisons, we are looking for the best deals, not loyalty.

4. Get A Membership

This is for the regular golf players. Joining as a member of a course is worth it if you intend to make it your second home. A membership is more economical with larger discounts on play and equipment.

Once again, compare other clubs first before committing to a membership. The time you spend on research can save you lots of money in the long run. As a guide, monthly fees for most golf course is around $100-$400 and you get unlimited use of the golf course. Cart and practice range fees may or may not be included.

5. Try 9 holes instead of 18 holes

If you are playing golf in the evening, you will be foolish to attempt 18 holes. You are under pressure to finish the game or be out of the money when it turns dark.

Thus, you should go for 9 holes and inquire about discounts for doing that. Some courses may even accommodate a pay-per-hole request if you are short on time.

The Great Crash: 1929" Series 2

This is the second series of excerpts from the classic "The Great Crash: 1929" by John Kenneth Galbraith. See Series 1 here .

From Chapter 1: "A Year to Remember"
Opportunities for the social historian

"In the autumn of 1929 the mightiest of Americans were, for a brief time, revealed as human beings. Like most humans, most of the time, they did some very foolish things. On the while, the greater the earlier reputation for omniscience, the more serene the previous idiocy, the greater the foolishness now exposed.

Things that in other times were concealed in a heavy facade of dignity now stood exposed, for the panic suddenly, almost obscenely, snatched this facade away. We are seldom vouchsafed a glance behind this barrier; in our society the counterpart of hte Kremlin walls is the thickly stuffed shirt.

The social historian must always be alert to his opportunities, and there have been few like 1929."

Create A Household Budget To Improve Money Management

Are you often short of funds soon after collecting your pay? Does it feel like you pay and pay but yet you are nowhere near clearing your credit card debt?

Most likely, you do not have a household budget.

Ok, so what is a household budget and how does one make a budget?

To put it simply, a household budget is a money plan for you to organize and achieve your financial goals. If you are constantly out of the money and your household debts are mounting, you need to pen down a budget right away.

As parents, we have the responsibility of allocating the family’s funds and making sure there is enough to go around. If we cannot exhibit financial discipline, then it is almost impossible to impart the right money values to our children.

Below are some steps which you can adopt in formulating a practical household budget.

1. Sit down with your spouse and plan a household budget together. List down what your joint financial goals are…long term and short term.

2. Cut family overhead to the bare minimum. Do you really need the $500 romantic dinner every week and expensive coffee at Starbucks? "Keeping up with the Joneses" is not cool if the quality lifestyle is built on debts.

3. Make reasonable allocations for food, clothing, shelter, utilities and insurance. A household budget is not a financial starvation diet where you deprive yourself of basic needs.

4. Allow yourself some pampering in the household budget. This will be for your entertainment, relaxation, recreation, vacations and gifts.

Working hard all year round and not taking appropriate breaks to re-energize or buying gifts to reward yourself is too taxing. Frankly, not the kind of household family budget which I will adopt and I try hard to preach what I do.

5. If you have spare cash for investments, allocate them according to short term and retirement needs.

If you want to get organized, there are many online budget forms available. Just use any search engine and type in “free budget forms.”

I use a simple Excel spreadsheet and then check monthly how and what I did as compared to my plan. For a more detailed budget, you may want to try MS Money which can even give you your personal financial statement and analysis.

On a final note, remember that any successful household budget will require you to consider savings first before any spending. Remember “Pay now, enjoy later.” Even a small amount saved will edge you closer to your long term financial goals.

There are two major ways to increase savings. One is to actually save and scrimp on available funds, and the other is to increase your income.

Which method do you think is easier to save money?

The Great Crash: 1929" Series 1

Aren’t markets supposed to have rational decision-making from individuals who participate in them so that irrational, herd behavior can be precluded?

I wish... but the Great Housing Bubble of this decade is a perfect reminder of just how irrational and unthinking markets can be. The root of the current market demise can be traced to any number of incidents.

But we can look at the ’90s when Republicans relegated government-sponsored mortgage firms like Freddie Mac and Fannie Mae to the doghouse due to huge losses and handed banks a free reign in extending credit to low income people.

What followed was an orgy of mortgage lending by the banks that resulted in the evolution of ever-looser credit standards, a temporary home price bubble and now a corresponding revision to the mean (a bust) that is threatening to take down the North American economy.

This latest crisis is just one in a long history of periodic speculative bubbles and resulting panics: The tech bubble of 2000; the Asian Crisis in ’97; the market crash of ’87, and the S&L crisis of the ’80s. All have come and gone with remarkable consistency.

People never learn and only in bad times do we know who has been swimming naked.

I love this classic "The Great Crash: 1929" written by John Kenneth Galbraith. There is a wealth of information contained within which is worth analysing by thousands of investors now and in future.

This is the first series where we look at the sanity of people in the midst of a bubble.

From the Introduction

The people who remained sane and quiet

"Even in such a time of madness as the late twenties, a great many man in Wall Street remained quite sane. But they also remained very quiet. The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil.

Perhaps this is inherent. In a community where the primary concern is making money, one of the necessary rules is to live and let live.

To speak out against madness may be to ruin those who have succumbed to it. So the wise in Wall Street are nearly always silent. The foolish thus have the field to themselves. None rebukes them."