Mean Markets and Lizard Brains: How to Profit from the New Science of Irrationality

Mean Markets and Lizard Brains: How to Profit from the New Science of Irrationality

by Terry Burnham

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Overview

In Mean Markets and Lizard Brains, Terry Burnham—an economist who has a proven ability to translate complex topics into everyday language—reveals the biological causes of irrationality and its connection to the way we invest. The human brain contains ancient structures that exert powerful and often unconscious influences on behavior. This "lizard brain" may have helped our ancestors eat and reproduce, but it wreaks havoc on our finances. Going far beyond cataloguing our financial foibles, Dr. Burnham applies this novel approach to all of today's most important financial topics—the stock market, the economy, real estate, bonds, mortgages, inflation, and savings. This broad and scholarly investigation provides an in-depth look at why manias, panics, and crashes occur and how you can profit from this knowledge.

The investigation into the economic implications of the lizard brain began in the late 1970s—and led to a 2002 Nobel Prize in Economics being awarded to the scholars of this new approach—but only recently have individual investors and market professionals begun to exploit these findings to explain, analyze, and predict market direction. In contrast to old-school assumptions of cool-headed rationality, the new school embraces hot-blooded human irrationality as a core feature of both individuals and financial markets.

Mean Markets and Lizard Brains converts cutting-edge intellectual developments into practical investment steps. Filled with in-depth insights and real-world advice, this guide:

  • Provides a timeless blueprint for effective and low-stress investing through a thorough examination and explanation of the lizard brain.
  • Summarizes the key findings of the science of irrationality and reveals the biological forces that cause even the smartest of people to make systematic mistakes.
  • Sets the macroeconomic stage for choosing investments, with discussions of the economy, inflation, and the value of the U.S. dollar.
  • Evaluates investments based on understanding how the lizard brain operates in today's global macroeconomic landscape.

By understanding and taming the lizard brain, you can position yourself to prosper in financial markets that often seem downright mean. Mean Markets and Lizard Brains skillfully identifies the craziness that is part of human nature, helps us see it in ourselves, and then shows us how to profit from a world that doesn't always make sense.

Product Details

ISBN-13: 9780471602453
Publisher: Wiley
Publication date: 02/28/2005
Pages: 320
Product dimensions: 6.28(w) x 9.10(h) x 0.93(d)

About the Author

Terry Burnham is a leader in the application of biology to economics and finance. He is the Director of Economics at Acadian Asset Management LLC, and a research scientist at Harvard University. He was an economics professor at Harvard for many years, and has been an active and extremely successful participant in the financial markets for over twenty years. Dr. Burnham has a PhD in business economics from Harvard University, a master's in finance from MIT, an MS in computer science from San Diego State University, and a BS in biophysics from the University of Michigan. He is also a coauthor of the international bestseller Mean Genes: From Sex to Money to Food, Taming Our Primal Instincts.

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Table of Contents

Prefacevii
Acknowledgmentsix
Chapter 1Introduction: Mean Markets and Lizard Brains1
Part 1The New Science of Irrationality9
Chapter 2Crazy People: Lizard Brains and the New Science of Irrationality11
Cognitive confusion
Split-brains
Superstitious pigeons
Neuroeconomics
Winning
Chapter 3Crazy World: Mean Markets and the New Science of Irrationality35
Stampedes
Invisible hands
Efficient markets
Financial blind spots
Opportunity
Part 2The Old Art of Macroeconomics63
Chapter 4U.S. Economic Snapshot: America the Talented Debtor65
Profligacy & productivity
Keynes' grandchildren
Darwin's elephants
Prosperity
Chapter 5Inflation: Rising Prices and Shrinking Dollars85
Kidney barter
Rice dollars
Seashell arbitrage
Jubilee
Yogi Berra's diet
Protection
Chapter 6Deficits and Dollars: Uncle Sam the International Beggar115
Loan sharks
A golden brain squandered
Limp loonies and plummeting pesos
Escape
Part 3Applying Science and Art to Bonds, Stocks, and Real Estate137
Chapter 7Bonds: Are They Only for Wimps?139
Reagan bonds
The mother of all deficits
Social security lockbox
Squirrel savings
Profit
Chapter 8Stocks: For the Long Run or for Losers?159
Time travel
Michael Jordan
Stock speed limits
Tears and a journey
Stock picks
Chapter 9Real Estate: Live in Your Home; Make Your Money at Work193
Tiger Woods
Godzilla
Groucho Marx
Risky ARMs
Housing bubble
Advice
Part 4Profiting from the New Science of Irrationality227
Chapter 10Timeless Advice: How to Shackle the Lizard Brain229
Isiah Thomas
Humans in zoos
Lizard logic
Mast-strapping
Beware the red zone
8 timeless tips
Chapter 11Timely Advice: Investing in the Meanest of Markets265
A golden generation
Lizard brain kryptonite
B.F. Skinner
Returns without risk
Notes289
Index299

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