The McMaster University has a long list of authors who have written famous economic texts. Gustave Le Bon wrote a particularly good book on crowd psychology that I enjoyed reading and has influenced me in how I view the financial market and its behavior. A free download of the English translation of The Psychology of Crowds is available on their website.
A very well written research paper about the Financial Crisis of 2008. It offers important lessons for policy makers by understanding the complex nature of financial regulations. Free download of this 50 page document is available here.
The financial crisis of 2007 to 2008 will go down as one of the most significant events in economic history. Large financial institutions such as Bear Stearns and Lehman Brothers failed, and stock prices plummeted. This major crisis affected the real economy, culminating in the current recession, and many analysts predict a long road to economic recovery for the United States.
The severity of the current crisis raises many questions about its root causes. Any attempt to understand these root causes, however, requires the placement of policies and regulations in the appropriate context.
This paper looks at the roots of the current crisis through an analytical framework of bad bets, excessive leverage, domino effects, and 21st-century bank runs. The paper shows that broad policy areas—including housing policy, capital regulations for banks, industry structure and competition, autonomous financial innovation, and monetary policy—affected elements of this framework to varying, but important, degrees. While considering alternative points of view concerning the causes of the financial crisis, the paper concludes that bank capital regulations were the most important causal factor in the crisis and that the policy “solutions” to previous financial and economic crises sowed the seeds for this current crisis.
To fully understand the current crisis, one must account for the complex history, evolution, and integrated nature of financial regulations. Without this evolutionary history, there will be no meaningful lessons for today’s policy makers. Unless the United States comes to terms with the fact that the actions of policy makers and regulators contribute to financial fragility, it has little hope of moving in the direction of a less fragile system for the future.
Jason Kelly is pointing out a psychological effect that this stock market crash and the political reaction to it is causing in the long run. Read the full article here.
It’s possible that stocks will not be worth their trouble for another many years. We could already be in a range that holds for so long that people simply move beyond stocks as a place they consider storing their money. The stock market could become a distant report for specialists only, much the way most people view esoteric investments like cattle futures. How much does the cattle report factor into the lives of most people you know?
You have every right to be angry. This is the biggest failure of American leadership we’ve seen in our lifetimes, though few see it that way yet. This is the culmination of a growing corporate ownership of America that began after World War II and spun out of control. About one-third of US tax revenues go toward a defense establishment strong enough to wipe out the Third Reich, but impotent against a bunch of box-cutter-carrying terrorists from our oil ally, Saudi Arabia. Our response? Launch an unrelated war in Iraq that’s slated to cost $3 trillion before it winds down — and it won’t wind down until the new war in Afghanistan ramps up.
This is not a political discussion, it’s an economic discussion. Notice how much of the opposition to health care reform has centered around the inability of the country to afford it. Why is there never such consideration for military expenditures? It’s the same Treasury paying, and the same Treasury paying off banksters, too. There’s an endless supply of money for meaningless wars and bank heists, but not enough for health care. You know how much the proposed health care reform would cost? About $100 billion per year for ten years. You know how much Paulson’s Troubled Asset Relief Program (TARP) cost? $700 billion. Poof! Just like that, the banks got the dough. For health care’s smaller cost, angry mobs turned up at town hall meetings to scream “socialism” at the very idea.
Charlie Wright, Chairman of Fall River Capital, LLC:
It took me a long time to figure out that no one really understands why the market does what it does or where it’s going. It’s a delusion to think that you or any one else can know where the market is going. I have sat through hundreds of hours of seminars in which the presenter made it seem as if he or she had some secret method of divining where the markets were going. Either they were deluded or they were putting us on.
Most Elliot Wave practitioners, cycle experts, or Fibonacci time traders will try to predict when the market will move, presumably in the direction they have also predicted. I personally have not been able to figure out how to know when the market is going to move. And you know what? When I tried to predict, I was usually wrong, and I invariably missed the big move I was anticipating, because it wasn’t time.
It was when I finally concluded that I would never be able to predict when the market will move that I started to be more successful in my trading. My frustration level declined dramatically, and I was at peace knowing that it was OK not to be able to predict or understand the markets.
Marc Faber called the market bottom missing it by only a few days and now he is warning that the market has topped for 2009. Our cautious stance since this Wednesday is paying off.
Stocks may have already peaked for this year and might drop 20 percent amid renewed deflation fears, said Marc Faber, the publisher of the Gloom, Boom & Doom report.
“I wouldn’t be surprised if we’d seen the peak of the market for this year because the economic news isn’t going to improve very much,” Faber, 63, said. “The correction in the market has been overdue for quite some time.”
The investor predicted on March 9 in a Bloomberg interview that equities would rally because of government stimulus measures. The Standard & Poor’s 500 Index dropped to a 12-year low that day and has since climbed 55 percent. The MSCI World Index rallied 63 percent in that time.
Source: Bloomberg
