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Financial Planning > Behavioral Finance

The Joy of Wakefulness

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Waking up in 2012 from the nightmare of the past years’ financial crisis is a bewildering experience. Like Egypt’s Pharaoh in the Book of Genesis, did seven emaciated cows really eat seven fat cows? Do we still have two and a half lean years to go? Sitting up in our beds in a full sweat, we question — was it all just a dream? In the confusion of waking up, it’s hard to come to terms with what exactly is illusion and what is reality.

As our senses slowly return to us, though, we need to take cognizance of the fact that we are in a new era — one in which the borrowing in “advanced” economies has surpassed the $10 trillion mark, nearly twice the level reached in 2005. Sovereign debt, once thought of as safe and dull, has become a risk asset. U.S. Treasuries have recently been seen as a haven for bond investors, but it would be foolish to take pride in our comparative stability. That too is an illusion. What has happened — in Europe completely and here not so decisively yet — is we have fallen into a debt trap. A debt trap, besides making life poorer and meaner, has the baleful effect of limiting our freedom of maneuver and increasing our vulnerability to those who would strike us when we’re down.

It would have been advantageous if we had awoken a few years ago and, like Pharaoh, prepared in advance for the coming lean years. But there is good news. If we have truly awakened, we can fight every day to expand our choices, to increase our freedom and guard against future dangers. It may be a struggle, but with each little success we increase our strength.

The issue, ultimately, is not money but morality. The role we play in the marketplace – whether as consumers, financial advisors, and certainly politicians — is potentially lethal. In retrospect, selling all those mortgages to people who could not afford them (half of the 54 million mortgages in 2008 were low quality loans) was not such a good idea. Not even for the mortgage brokers! They were the richest people around a few years ago; not so much today. Without a movement toward greater personal and social responsibility, our economic nightmare will only get scarier.


It is impossible to grasp reality without some sort of critical perspective, and a more enjoyable way to get that perspective is through humor. It is therefore a distinct pleasure for me to draw attention to Gents with no Cents, Research contributor Ron DeLegge’s just released book offering a relentlessly funny analysis of Wall Street, financial regulators and the financial reality we take for granted, but shouldn’t. Ron surveys the broad sweep of financial lunacy — from GAAP accounting to mutual fund management fees, from $18 million dollar paychecks to prospectuses with pages “intentionally left blank.” This is a book you should buy (go to for the comic relief you and your clients could use in these economically challenging times.

Gil Weinreich
[email protected]


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