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Collectively, people think and act in ways that are differentfrom how they think and act as individuals. Understanding thesedifferences, says William (Bill) Bonnera longtime maverickobserver of the financial world and the vagaries of the investingpublicis vital to preserving your wealth and personaldignity. From the witch hunts of the early modern world to the waron terror, from the dot-com mania to the real estate bubble, peoplehave always been caught up in frauds, conceits, and wildguessesoften with devastating results. In Mobs, Messiahs, andMarkets, Bonner and coauthor Lila Rajiva show groupthink at work inan improbable array of instances throughout history and reveal whyswimming against the current pays. They explain why people so oftenabandon good sense and good behavior to "follow the crowd" and showyou how to avoid getting caught up in the public spectacles aroundyou.
If an investor merely recognizes the way mob sentiment works,the authors point out, he is far ahead of most others. Ordinarypeople, for example, turn over billions of dollars' worth of theirhard-earned money to brokers and mutual fund managers everydayimmediate, tangible, personal moneybelieving thatstrangers will give them back even more. Whatever would make themthink so?
Mobs, Messiahs, and Markets demonstrates that investors are infact caught between a rock and a soft placebetween theprivate world they can understand and master and the misleadingpublic spectacle of the markets. "The further away you get fromyour investments, and the less you suffer the consequences if theygo bad, the worse your performance will be," say Bonner and Rajiva."That's why 'collective' investments like index-linked funds,mutualfunds, hedge funds, insurance funds, and pension funds are usuallyso bad. The investors are too far from the factsand themanagers are too far from the consequences."
The authors' cautionary tale of the current bubble economy warnsthat the gush of credit let loose by Alan Greenspan is fraught withperils for the unwarybut their thoughtful and alwaysentertaining approach also offers some sound investing principlesfor avoiding the pitfalls of the public spectacle, thinking foryourself, and protecting your money, your sanity, and yoursoul.--This text refers to the Hardcover edition.