Amnesia

Jason Zweig writes the following in “The Devil’s Financial Dictionary”:

Wall Street suffers from many ailments also, but amnesia is foremost among them. By burying the past, the financial community can disavow any responsibility to learn from its own mistakes and can minimise the odds that its clients will be able to learn from other people’s mistakes.

In the above paragraph, “Wall Street” is representative of investors at large. That is exactly why in the “Introduction” chapter of the book I have written the following words:

Our memory is short-lived. I would strongly suggest you keep reading this book every year to keep your memory refreshed. (That is why we are printing this book in hardbound format).

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Patience is not just a virtue, it’s a blessing

The willingness to delay financial gratification (actually, instant gratification) is the key to a healthy and wealthy life, research says.

Read the Wall Street Journal Blog here.

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Panic

Michael Lewis writes in the opening chapter of his book “Panic”,

The striking thing about the seemingly endless collapse of the subprime-mortgage market is how egalitarian it has been. It’s nearly impossible to draw a demographic line between the victims and the perps (perpetrators)

Millions of ordinary people ignorant of high finance have lost billions of dollars, but so have the biggest names on Wall Street …

Both underestimated the likelihood of an unlikely event: a financial panic.

In retrospect, the small army of Wall Street traders who lost tens of billions of dollars in subprime-mortgage investments looks as naïve and foolish as the man on the street.

But there’s another way of viewing this crisis.

The man on the street, for the first time, acted on the same foolish principals that have guided the behavior of sophisticated Wall Street traders for the past few decades.

“Panic” – it is not about how much money you have – panic may strike with least regard to your financial status, your social status, your position in business …

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