16. Thaler, R., A. Tversky, et al., The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test, Quarterly Journal of Economics 112, no. 2 (1997): 647-661.

17. Thaler, R., Mental Accounting and Consumer Choice, Marketing Science 4, no. 3 (1985): 199-214.

18. Homer, The Odyssey, book XII.

19. U.S. Supreme Court, Jacobellis v. Ohio, 378 U.S. 184 (1964).

Chapter 11 Timely Advice

1. Gross, B., Dow 5,000, PIMCO Investment Outlook (September 2002).

2. Prechter, R., Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression (Hoboken, NJ: John Wiley & Sons, 2002), 79.

3. Diners Club, www.dinersclub.com.

4. Investment Company Institute, www.ici.org, 2004 Fact Book, table 13, 122.

5. Barthelme, F., and S. Barthelme, Double Down: Reflections on Gambling and Loss (New York: Houghton Mifflin, 1999).

6. Eisenberger, N., M. Lieberman, et al., Does Rejection Hurt? An fMRI Study of Social Exclusion, Science 302 (2003): 290-292.

7. Flaherty, J., Buy and Forget Pays Off Big, New York Times, December 3, 2000.

8. Schweb, F., Where Are the CustomersYachts? or, A Good Hard Look at Wall Street (New York: Simon & Schuster, 1940), 26.

9. Goleman, D., Emotional Intelligence: Why It Can Matter More Than IQ (New York: Bantam Books, 1995).

Index

Adjustable rate mortgages, 216-219,

221-223 Advances in Behavioral Finance,

The Adventure of the Silver Blaze, 269

Aggregate financial position,

255-257 Allen, Woody, 11, 34 Altria, 176

American Dream (documentary), 98 Ancestral traits, 5-6, 234-237,

240-241, 267 Anchoring effect, 254 Anna Karenina, 262 Annie Hall (movie), 11 Anthropic principle, 168 Apology of Socrates (Plato), 284 Argentina loan default, 128-129 Arkhipov, Vasily, 169-170 Asch, Solomon, 57 As Good As It Gets (movie), 221 Asimov, Isaac, 271-272 AT&T Wireless, 247 Austin Powers (movie), 252, 267,

Averaging losers, 249

The Baby Boom, the Baby Bust, and the Housing Market (Mankiw and Weil), 196-197

Baby boom retirement, 276

Bachelier, Louis, 39-10

Back to the Future (movie), 169, 187

Bacteria, 178

Baker, George, 12, 128

Barbarians at the Gate, 16

Barber, Brad, 245

Barings Bank, 30

Barter economy, 90, 97

Battle of Little Big Horn, 78

Behavioral economics, 15, 25-29, 33-34

Behavioral finance, 49, 51

Bernstein, Richard, 183-184

Berra, Yogi, 101

The Black Swan (Taleb), 170

Blazing Saddles (movie), 261

Blood viscosity, 5-6

Bonds. See also Treasury bonds

bull market in, 154-157

default on, 149-150

fixed-rate debt, 157

government bonds, 140-142, 162, 171

Bonds (Continued)

inflation and, 110-112, 150, 151, 200, 201

inflation-protected bonds, 111, 112, 270

interest rates and, 141-142, 143, 154-155

investment characteristics of, 200-202

investment in, 58, 139-140

losing money with, 149-153

maturity terms, 158, 270

monetary growth and, 108

non-U.S. bonds, 134-135, 271

opportunity cost, 150-153

profitable investing in, 157-158

Reagan bonds, 143, 156

return on, 142-144, 171, 266

short-term bonds, 158, 270

taxes and, 200, 201

value of, 140-142 Borish, Peter, 25, 159, 160, 191 Borrowing money. See also Loans

Cheapskate, 115-116

current account deficits, 117-119

inflation effects on, 97

interest rates and, 158 Boys will be boys study, 245-246 Brain:

activity during ultimatum game, 28

corpus callosum, 22

lizard brain (see Lizard brain(s))

McGurk effect, 23-24

parts of, 20-22

prefrontal cortex, 11-12, 20, 21, 23-24, 34, 283

split-brain studies, 22-23

subconscious, power of, 21-22 Braniff Airlines, 163 Brecheen, Robert, 219 Bretton Woods agreement, 93, 118 A Brief History of Time (Hawking),

167-168 British pound, value of, 133 Bubbles and crashes, 44-45, 52, 282

Great Depression, 118, 163, 216

housing bubble, 203-210 1987 stock market crash, 42-14, 181, 182, 217 Buffett, Warren, 49-50, 286 Bush, George W., 146 Business investment, idle production capacity and, 74-75

Calculations, problem completing, 15-17 Canadian economy, 122-124, 125 Carnegie, Dale, 22 Carter, Jimmy, 86, 195 Cheapskate, 115-116 Chicago Bulls, 230-231 Chimpanzees, 232-234 Chinese baby problem, 16, 17 Chinese economy, 76, 133 Chinese treatment of Korean War

P.O.W.s, 21-22 Chomsky, Noam, 169-170 Churchill, Winston, 24 Cisco, 43-44, 75, 210 Cohen, Abby Joseph, 184 Coin flips, 32, 36, 50-51, 239 The Color of Money (movie), 287 The Coming Crash in the Housing

Market, 203 Communist markets, 166 Comparative advantage, 194-196 Completion bond company, 165 Compound interest, 80-81 Conformity needs, 56-58, 283 Conjunction fallacy, 14-15, 236-237 Conquer the Crash (Prechter), 273 Consumer Price Index, 162, 171 Consumer spending, 71, 72-74 Corporate profits:

growth of, 177-180

stock prices and, 180-183 Corpus callosum, 22 Cosmides, Leda, 235-236 Cosmology, 167-169 Crack addiction, 278-279 Crashes. See Bubbles and crashes