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14. Mortgage Bankers Association, www.mbaa.org.
15. Jacobs, B., Capital Ideas and Market Realities: Option Replication, Investor Behav-
ior, and Stock Market Crashes (Oxford: Blackwell, 1999).
16. Dow Jones, www.djindexes.com.
17. Mortgage Bankers Association, www.mbaa.org.
18. “Killing Hope”The Imminent Execution of Sean Sellers,” Amnesty International,
December 1, AMR 51/108/1998, 1998.
19. Federal Reserve Chairman Alan Greenspan™s prepared remarks at the Credit Union
National Association 2004 Governmental Affairs Conference, Washington, D.C.,
February 23, 2004.

Chapter 10 Timeless Advice
1. Bowlby, J., Attachment and Loss. Vol. I: Attachment (New York: Basic Books, 1969).
Bowlby, J., Attachment and Loss. Vol. II: Separation, Anxiety, and Anger (New York:
Basic Books, 1973). Wilson, E.O., Sociobiology: The New Synthesis (Cambridge,
Mass.: Belknap Press of Harvard University Press, 1975). Wilson, E.O., On Human
Nature (Cambridge: Harvard University Press, 1978). Tooby, J., and L. Cosmides,
“Evolutionary Psychology and the Generation of Culture: I. Theoretical Considera-
tions,” Ethology & Sociobiology 10 (1989): 29“49. Barkow, J.H., L. Cosmides, et al.,
Endnotes 297



The Adapted Mind: Evolutionary Psychology and the Generation of Culture (New
York: Oxford University Press, 1992). Irons, W., “Adaptively Relevant Environments
Versus the Environment of Evolutionary Adaptedness,” Evolutionary Anthropology
6, no. 6 (1998): 194“204.
2. Irons, W., “Adaptively Relevant Environments Versus the Environment of Evolution-
ary Adaptedness,” Evolutionary Anthropology 6, no. 6 (1998): 194“204.
3. Tooby, J., and L. Cosmides, “The Past Explains the Present: Emotional Adaptations
and the Structure of Ancestral Environments,” Ethology & Sociobiology 11 (1990):
375“424.
4. Gigerenzer, G., “The Bounded Rationality of Probabilistic Mental Modules,” Ratio-
nality. K.I. Manktelow and D.E. Over, eds. (London and New York: Routledge,
1993), 284“313.
5. Gigerenzer, G., “Ecological Intelligence: An Adaptation for Frequencies,” The Evo-
lution of Mind, D. Cummins and C. Allen, eds. (Oxford: Oxford University Press,
1998), 107“125.
6. Personal communication.
7. Kahneman, D., and A. Tversky, “Variants of Uncertainty,” Judgment under Uncer-
tainty: Heuristics and biases, D. Kahneman, P. Slovic, and A. Tversky, eds. (Cam-
bridge: Cambridge University Press, 1982), 512.
8. Shostak, M., Nisa, the Life and Words of a !Kung Woman (Cambridge, Mass: Harvard
University Press, 1981). Hill, K., and M. Hurtado, Ache Life History: The Ecology
and Demography of a Foraging People (New York: Aline De Gruyter, 1996).
Chagnon, N., Yanomamo, 4th ed. (New York: Harcourt Brace Jovanovich, 1992).
9. Lee, R., The Dobe Ju/™hoansi (New York: Harcourt Brace, 1993), 42.
10. Barkow, J.H., L. Cosmides, et al., The Adapted Mind: Evolutionary Psychology and
the Generation of Culture (New York: Oxford University Press, 1992).
11. Silverman, I., and M. Eals, “Sex Differences in Spatial Abilities: Evolutionary The-
ory and Data,” The Adapted Mind: Evolutionary Psychology and the Generation of
Culture. J.H. Barkow, L. Cosmides, and J. Tooby, eds. (New York: Oxford University
Press, 1992), 573.
12. Barber, B.M., and T. Odean, “Boys Will Be Boys: Gender, Overconfidence, and
Common Stock Investment,” Quarterly Journal of Economics 116, no. 1 (2001):
261“292.
13. Lefèvre, E., Reminiscences of a Stock Operator (New York: G.H. Doran, 1923).
14. Morton, F., The Rothschilds: Portrait of a Dynasty (reprint edition) (New York:
Kodansha International, 1998), 48“50.
15. Tversky, A., and D. Kahneman, “Judgment under Uncertainty: Heuristics and
Biases,” Science 185 (1974): 1124“1131.
298 Endnotes



16. Thaler, R., A. Tversky, et al., “The Effect of Myopia and Loss Aversion on Risk Tak-
ing: 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 Customers™Yachts? 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


A B
Adjustable rate mortgages, 216“219, “The Baby Boom, the Baby Bust, and
221“223 the Housing Market” (Mankiw and
Advances in Behavioral Finance, Weil), 196“197
49 Baby boom retirement, 276
The Adventure of the Silver Blaze, Bachelier, Louis, 39“40
269 Back to the Future (movie), 169, 187
Aggregate financial position, Bacteria, 178
255“257 Baker, George, 12, 128
Allen, Woody, 11, 34 Barbarians at the Gate, 16
Altria, 176 Barber, Brad, 245
American Dream (documentary), 98 Barings Bank, 30
Ancestral traits, 5“6, 234“237, Barter economy, 90, 97
240“241, 267 Battle of Little Big Horn, 78
Anchoring effect, 254 Behavioral economics, 15, 25“29,
Anna Karenina, 262 33“34
Annie Hall (movie), 11 Behavioral finance, 49, 51
Anthropic principle, 168 Bernstein, Richard, 183“184
Apology of Socrates (Plato), 284 Berra, Yogi, 101
Argentina loan default, 128“129 The Black Swan (Taleb), 170
Arkhipov, Vasily, 169“170 Blazing Saddles (movie), 261
Asch, Solomon, 57 Blood viscosity, 5“6
As Good As It Gets (movie), 221 Bonds. See also Treasury bonds
Asimov, Isaac, 271“272 bull market in, 154“157
AT&T Wireless, 247 default on, 149“150
Austin Powers (movie), 252, 267, fixed-rate debt, 157
279 government bonds, 140“142, 162,
Averaging losers, 249 171




299
300 Index



housing bubble, 203“210
Bonds (Continued)
1987 stock market crash, 42“44, 181,
inflation and, 110“112, 150, 151, 200,
182, 217
201
Buffett, Warren, 49“50, 286
inflation-protected bonds, 111, 112, 270
Bush, George W., 146
interest rates and, 141“142, 143,
Business investment, idle production
154“155
capacity and, 74“75
investment characteristics of,
200“202
C
investment in, 58, 139“140
Calculations, problem completing, 15“17
losing money with, 149“153
Canadian economy, 122“124, 125
maturity terms, 158, 270
Carnegie, Dale, 22
monetary growth and, 108
Carter, Jimmy, 86, 195
non-U.S. bonds, 134“135, 271
Cheapskate, 115“116
opportunity cost, 150“153
Chicago Bulls, 230“231
profitable investing in, 157“158
Chimpanzees, 232“234
Reagan bonds, 143, 156
Chinese baby problem, 16, 17
return on, 142“144, 171, 266
Chinese economy, 76, 133
short-term bonds, 158, 270
Chinese treatment of Korean War
taxes and, 200, 201
P.O.W.s, 21“22
value of, 140“142
Chomsky, Noam, 169“170
Borish, Peter, 25, 159, 160, 191
Churchill, Winston, 24
Borrowing money. See also Loans
Cisco, 43“44, 75, 210
Cheapskate, 115“116
Cohen, Abby Joseph, 184
current account deficits, 117“119
Coin flips, 32, 36, 50“51, 239
inflation effects on, 97
The Color of Money (movie), 287
interest rates and, 158
The Coming Crash in the Housing
Boys will be boys study, 245“246
Market, 203
Brain:
Communist markets, 166
activity during ultimatum game, 28
Comparative advantage, 194“196
corpus callosum, 22
Completion bond company, 165
lizard brain (see Lizard brain(s))
Compound interest, 80“81
McGurk effect, 23“24
Conformity needs, 56“58, 283
parts of, 20“22
Conjunction fallacy, 14“15, 236“237
prefrontal cortex, 11“12, 20, 21, 23“24,
Conquer the Crash (Prechter), 273
34, 283
Consumer Price Index, 162, 171
split-brain studies, 22“23
Consumer spending, 71, 72“74
subconscious, power of, 21“22
Corporate profits:
Braniff Airlines, 163
growth of, 177“180
Brecheen, Robert, 219
stock prices and, 180“183
Bretton Woods agreement, 93, 118
Corpus callosum, 22
A Brief History of Time (Hawking),
Cosmides, Leda, 235“236
167“168
Cosmology, 167“169
British pound, value of, 133
Crack addiction, 278“279
Bubbles and crashes, 44“45, 52, 282
Crashes. See Bubbles and crashes
Great Depression, 118, 163, 216
Index 301



value against Japanese yen, 133
Credit card debt, 273
value linked to gold, 93“94
Cripps, Richard, 184
value of, 119“120, 122“125, 133“135,
Critical self-examination, 12“14
186
Cuban Missile Crisis, 169
Dopamine, 279, 284
Currency prices. See also Dollar(s)
Double Down (Barthelme and
devaluation, 119“120, 122“125
Barthelme), 280
inflation and, 121“122
Dow Jones Industrial Average:
investment return and, 134“135
before 1987 crash, 181, 182
loan default and, 129“130
decline of, 273
nominal exchange rate, 121“122
Great Depression, 163
real exchange rate, 121
1987 stock market crash, 42
setting of, 117“118
over time, 45“46
stocks and, 185“186
Dow Jones Newswire, 184
Current account:
Drug addiction, 278“279
of Canada, 123“124, 125
Dutch tulipmania, 41“42, 52
deficit in, 116“119, 120, 125“127
defined, 116
E
imbalances, 116“119
Eals, Marion, 241
of Mexico, 124“125
East German stock investments, 165“166,
surplus, 119
171
D “The Economic Possibilities of Our
Grandchildren” (Keynes), 66, 82,
Darwin, Charles, 80“81
83
Davis, Gray, 76
Economic growth:
“Death of Equities” (BusinessWeek),
compared to stock revenues, 179“182
45“46

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