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Book review: 'Mobs, Messiahs, and Markets'

Who should read it
People who still believe they can get rich quick from the housing and/or debt markets.

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Synopsis
Authors William Bonner and Lila Rajiva strive to prove that the stock market has all the trappings of a large group, or "mob" event. Throughout history, they show us examples of the detrimental effects of being part of the "madding crowd."

From the Salem witch hunts to the start of World War I, the book points out how intelligent and reasonable people were often led astray by the group. They allege the same mob mentality is present in our financial markets.

Book review
'Mobs, Messiahs, and Markets'
 
 
 

Economic bubbles are bound to happen in a cyclical economy where investors often overlook risk in search of easy money. Although this book was published in 2007, the authors rightly forecast the bursting of "the mother of the mother of all bubbles," that we are currently facing in the housing market.

The authors quote Emerson's view on economic misconduct when he says that "everything is moral," meaning there are principles that we ignore at our peril. "And, the critical element of public spectacles is that people forget this," the authors write. "They begin to think that they can get something for nothing, or do something to someone else that they wouldn't want done to them -- and not have to answer for it."

The current housing crisis seems to point to just that type of behavior.

So what's a prudent, sensible person to do? Bonner and Rajiva suggest amassing wealth the "old-fashioned way," by earning and saving. They suggest that the average investor would be much better off ignoring the financial headlines and putting money in investments they understand, and are close to, and staying away from the hottest new investment creation. This way, they can avoid being swept up in the crowd and hold on to their hard-earned cash.

Strong/weak points
This book is not an easy read. It is full of dark humor and exposes mankind's worst weaknesses. There is no happy ending here, except for those who stay away from the "madding crowd."

"Mobs, Messiahs, and Markets" gives the reader a rather lengthy history of human behavior in order to prove their theory that groupthink is a dangerous event. Although the book is well-written and entertaining, the humor is droll and sarcastic. It is not for the faint of heart, or those lacking a good vocabulary.

Takeaway
If you have survived this latest housing debacle and are doing the right thing, such as saving instead living in debt, you'll find this to be a nice pat on the back.

Bankrate.com's corrections policy
-- Posted: May 6, 2008
 
 
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