Mean Markets and Lizard Brains : How to Profit from the New Science of Irrationality

by Terry Burnham

• ISBN13: 9780470245248
• ISBN10: 0470245247
• Format: eBook
• Copyright: 2007-08-01
• Publisher: Wiley

Summary

Everyone from journalists to market pros are turning to behavioral finance to explain, analyze, and predict market direction. In contrast to old-school assumptions of cool-headed rationality, the new behavioral school embraces hot-blooded human irrationality as a core feature of both individuals and financial markets. The 2002 Nobel Prize in Economics was awarded to scholars of this new scientific approach to irrationality. In Mean Markets and Lizard Brains, Terry Burnham, an economist who has a proven ability to translate complex topics into everyday language, reveals the biological causes of irrationality. The human brain contains ancient structures that exert powerful and often unconscious influences on behavior. This "lizard brain" may have helped our ancestors eat and reproduce, but it wreaks havoc with our finances. Going far beyond cataloguing our financial foibles, Dr. Burnham applies this novel approach to all of today's most important financial topics: the stock market, the economy, real estate, bonds, mortgages, inflation, and savings. This broad and scholarly investigation provides an in-depth look at why manias, panics, and crashes happen, and why people are built to want to buy at irrationally high prices and sell at irrationally low prices. Most importantly, by incorporating the new science of irrationality, readers can position themselves to profit from financial markets that often seem downright mean. Mean Markets and Lizard Brains skillfully identifies the craziness that is part of human nature, helps us see it in ourselves, and then shows us how to profit from a world that doesn't always make sense.

Table of Contents

Preface to the New Edition

Preface to the First Edition

Acknowledgments

Introduction: Mean Markets and Lizard Brains

The New Science of Irrationality

Crazy People: Lizard Brains and the New Science of Irrationality

Crazy World: Mean Markets and the New Science of Irrationality

The Old Art of Macroeconomics

U.S. Economic Snapshot: America the Talented Debtor

Inflation: Rising Prices and Shrinking Dollars

Deficits and Dollars: Uncle Sam the International Beggar

Applying Science and Art to Bonds, Stocks, and Real Estate

Bonds: Are They Only for Wimps?

Stocks: For the Long Run or for Losers?

Real Estate: Live in Your Home; Make Your Money at Work

Profiting from the New Science of Irrationality

Timeless Advice: How to Shackle the Lizard Brain

Timely Advice: Investing in the Meanest of Markets

Notes

Index

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