Interest rates (Continued):

real estate and, 211-213

saving money and, 158

trends in, 268 In Triumph of the Optimists (Dimson,

Marsh, and Staunton), 167 Investment choices. See also Profitable investing

analysis of decisions, 19-20

bonds (see Bonds)

cash, 3

conventional approaches to, 1-2, 10,

159-164, 266 currency prices and, 134-135 foreign investments, 134-135 mutual funds, 3 rational thought and, 4-5 real estate (see Real estate) stocks (see Stock(s)) Treasury bonds (see Treasury bonds) Invisible hand, 38

IPO (initial public offering), 246-247 I Really Didnt Say Everything I Said

(Berra), 101 Irons, William, 235 Irrational Exuberance (Shiller), 42

Japanese economy, 66-67

currency value, 133

deflation, 98, 106

growth of, 75-76 Japanese Nikkei, 251 The Jetsons, 47-18 Johnson, Ross, 16

Jones, Paul Tudor, II, 25-26, 28, 244-245, 275

Jordan, Michael, 230 Jordan Rules, 230-231 Jubilee year, 97

Kahneman, Daniel:

decision-making research, 4-5, 14-15 Heuristics and Biases, 25

individual irrationality, 33

loss aversion, 29-30, 249

United Nations experiment, 253-254 Karate Kid (movie), 3-4, 7 Keller, Mark, 184 Kennedy, John F., 169 Keynes, John Maynard, 66, 81, 82, 96,

129, 183, 273, 286 Kidney transplantation, 87-90 Kill the messenger tendency, 13 King Kong, 196 Korean War P.O.W.s, 21-22 Krainer, John, 209 Kumar, Subodh, 184 !Kung San, 239-240, 241, 242

Leahy, Dan, 95 Lee, Richard, 240, 241 Leeson, Nick, 30 Leno, Jay, 182 Leverage, 213-216

Linda-the-bank-teller question, 14-15,

236 Liu, Ken, 184 Livermore, Jesse, 247 Lizard brain(s):

ancestral traits, 5-6, 234-237,

240-241, 267 control of, 283, 286-287 defined, 2

environment and, 231, 237, 239-241 financial blind spot of, 7, 55-56, 61,

231, 237, 287 history of term, 11-12 influence on behavior, 23, 24 interest rate overconfidence, 157 patterns in random behavior, 30-33,

238-239, 268 role in financial decisions, 5-7, 10, 12,

242-243 self-control issues, 33-34 stubbornness, 25-29 testosterone levels, 28-29 Lo, Andrew, 60

Loans:

adjustable rate mortgages, 216-219,

221-223 default on, 128-130 fixed-rate loans, 110, 221-223,

housing loans, 128 Loan shark(s), 128 Lombardi, Vince, 79 Losers average losers, 248-250 Loss aversion, 29-30, 249-250 Low-risk investments:

barriers to, 277-279

as insurance, 276-277

pain of, 275-277

risk of, 271-275

steps to, 270-271

stress of, 275-276

MacBeth, 52 MacDonald, John, 23 Macroeconomics (Mankiw), 92 Malkiel, Burton, 40 Mandy (grandfather), 21 Mankiw, Gregory, 2, 92, 139, 142, 194, 196, 199

Man with the Golden Brain (Daudet),

125-126 Margin calls, 215-216 Market irrationality, 36-38

bubbles and crashes (see Bubbles and

crashes) debate on, 42 examples of, 41-42 1987 stock market crash, 42-44 profiting from, 49-50, 51-53 sentiment as predictor of future returns, 45-49 Market(s):

communist markets, 166 condition of, 78, 279 economic conditions and, 187-189 efficient market hypothesis (see Efficient market hypothesis)

mean, defined, 35

mean, profiting from, 219, 230, 268, 283-286

in other countries, 165-166, 168-169, 170

rational, 35-36

trends in, 268 Market Wizards (Schwager), 25 Marx, Groucho, 215 Mast-strapping, 260-262 Mathematical calculations, 15-17 McGraw, Phil, 182 McGurk, Harry, 23 McGurk effect, 23-24 McManus, Tom, 184 Mean Genes (Burnham and Phelan), 16, 17

Mean market(s): defined, 35

profiting from, 219, 230, 268, 283-286 Medewar, Sir Peter, 12 Melo, Fatima, 196, 197, 198, 214 Mental accounting, 255-257 Mexican economy, 124-125 Microsoft:

analysis of, 171-173

growth of, 175, 179, 183

price to earnings ratio (P/E), 199

value of dollar and, 186 The Minds Past (Gazziniga), 22 Mini bar(s), 259-260 Minsky, Marvin, 20-21, 247 A Monetary History of the United States, 1867-1960 (Friedman and Schwarz), 87

Money. See also Dollar(s)

devaluation of, 119-120, 122-125 fiat money, 93-94

government control of, 93-94, 103-105 inflation and supply of, 102-103,

106-108 mystery behind, 87 storage options for, 155 supply, growth of, 105, 107-108

Money forms: cheese, 92 fei, 92-93 gold, 92

paper, 87, 91, 113

rice and grains, 92

seashells, 94-95, 102 Money illusion, 98-100 Monty Python cheese shop game, 34 Mortgage debt, 216. See also Loans Motley Fool, 191, 250-251 Motorcycle purchase, 103-104 Motorcycle ride through game park,

224-225 Multiplication factor system, 96 Mutual funds, 3, 45

NASDAQ, 43

1987 stock market crash, 42-14, 181, 182, 217

Nixon, Richard, 93, 118 Nominal exchange rate, 121-122 No-red zone system, 262-264 Norfield, Tony, 131 Nortel, 59

Nuclear war, 169-170, 171 O

Object location memory, 241 Odean, Terrance, 47, 48, 245 The Odyssey, 260 Opportunity cost, 150-153 Oracle, 43

Organ-swapping arrangements, 88-90 Origin of Species (Darwin), 80 The Out of Towners (movie), 122 Overconfidence, 18-19

The Paper Chase, 163 Papua New Guinea, 94-95, 102 The Past Explains the Present (Tooby and Cosmides), 235-236

Patterns in random behavior, 30-33,

238-239, 268 Paycheck security, 98-100, 188-189,

P/E. See Price to earnings ratio (P/E) Personal debt, 271, 273-274 Personal savings rate, 71, 73-74 Pigeon experiment, 30-32 Pitch Black (movie), 6 Poker, 258-259

The Pope of Greenwich Village, 128 Popper, Karl, 52 Portfolio insurance, 217-218 Prechter, Robert, 273 Precious metal prices, 53-54 Predictions, making, 153-154 Prefrontal cortex, 11-12, 20, 21, 23-24, 34, 283

Pregnant women study, 58-59 Price to earnings ratio (P/E): Cisco, 210

of houses or property, 199-202, 204

Microsoft, 199

S&P 500, 200

stocks, 19, 199

Treasury bonds, 200 Probability problems, 237 Productivity of U.S. companies:

business investment, 74-75

consumer spending, 72-74

economic growth, 79-84

economic wealth, 82-83

government debt and, 274-275

growth of, 80, 273-275, 276

idle capacity, 74-75

purchasers of, 71-77 Profet, Margie, 58 Profitable investing, 55-56, 268

aggregate financial position, 255-257

anticipating future events, 242-243

in bonds, 157-158

buy what is unloved, 53-55, 58

challenging conventional wisdom, 53-55, 279-282, 283-284