Investing Mania's
Compare today with the old days
pdf file this is the actual book- Extraordinary Popular Delusions and the Madness of
Crowds.
We find that whole communities suddenly fix their minds upon one object, and go mad in its
pursuit; that millions of people become simultaneously impressed with one delusion, and run
after it, till their attention is caught by some new folly more captivating than the first. (from
the introduction of Madness of Crowds- Wikipedia story
Three Steps and a stumble
Tulip bulb prices in 1637-Tulip Mania
Robert Mueller talk about fraud in 2008
1929 newspaper stories about the stock market
C.C. Julian California Story of Great Los Angeles Swindle
Swindle--One of the best book by Jules Tygiel Good book(I have read it)
Photo and a short story about Leadfield
Multi-Level Marketing
The Emperor's New Clothes
The Great Diamond Hoax of 1872
Ida M. Tarbell's exposee of Standard Oil
Scams Involving Treasury Securities
Anthony "Tough Tino" De Angelis, perpetrator of the Great Salad Oil Swindle of the 1960s.
Billie Sol Estes obtained federal agriculture loans using phantom fertilizer tanks as collateral.
Bernie Cornfeld
Robert "Fugitive Financier" Vesco
Ivan Boesky
Have you ever tried to sell a diamond?
McKesson & Robbins scandal---Role of Samuel Broad
Enron
Enron Jensen Quiz
Bob Jensen's "long" list of info -goes on forever Equity Funding scam Stock Certificate
The Great Depression
Mirage of Multilevel Marketing
Herbalife This is the story of how Herbalife works.
Truth of Fiction Hoax Index--old list that is longer active
Museum of Hoax's--list by category - better than above link
Great Civil War Gold Hoax
Real Estate authors and where they ended up Another link - this is even better.
Snopes check out odd stuff
Bernard L. Madoff
Here we go again - NY Times story Times Lists of investors --click here WSJ list (See full Madoff Client List)
(this link is still good as of 2/13/2011) This is how it shows up: KLEIN FAMILY LIMITED PTNR (KFLP) 5513 NO
MILITARY TRAIL #702 BOCA RATON, FL 33496 KLEIN FAMILY LTD PARTNERSHIP 5513 NO MILITAR TRAIL BOCA
RATON, FL 33496 KLEIN TEXAS FAMILY LTD C/O SAM KLEIN 5513 NORTH MILITARY TRAIL #702 BOCA RATON,
FL 33496 KLUFER FAMILY TRUST 720 MILTON RD N 1A RYE, NY 10580 LUFER FAMILY TRUST 238
MAMARONECK ROAD SCARSDALE, NY 10583 KMJ ASSOCIATES LLC EXECUTIVE PLAZA 3443 HIGHWAY 66
NEPTUNE, NJ 07753 KML ASSET MGMT LLC II PO BOX 1269 NO PLAINFIELD, NJ 07061 KML ASSOCIATES LLC
EXECUTIVE PLAZA 3443 HIGHWAY 66 NEPTUNE, NJ 07753 KOMMIT PARTNERS C/O RICHARD KOMMIT 342A
BOYLSTON STREET NEWTON, MA 02459 KOMMIT PARTNERS C/O RICHARD KOMMIT 19 ABBOTSFORD ROAD
BROOKLINE, MA 02446 KONDI FAMILY INVESTMENT PARTNERSHIP C/O EDWARD AND WENJA KONDI 105
VINTAGE ISLE LANE PALM BEACH GARDENS, FL 33418 KONIGSBERG & WOLF ATTN: PAUL KONIGSBERG 440
PARK 163 pages of names
List of Victims
KL Group - Another hedge fund fraud
FBI Fraud speech
A new bubble does not start just as the last one crashes
Enron-It happens in modern times. The Fall of Enron nice pdf file
Stock market in 2001
Jan +3.2%
then down 15%
March-April +21%
then down 27%
Sept-Nov + 22% then?
ZZZZ Best Company
No two financial manias are alike, but were a mania a love relationship, it'd be a multi-year affair rather than a
one-night stand.
This is not what we imagine from watching footage of the most famous mania ending, the crash of 1929, the first
such collapse captured on film (and surely not the last). Grainy black-and-white documentaries leave the
impression that the market crashed on Black Monday and soup lines formed by Friday. In fact, the market took
some three years to bottom out and many mini-rallies took place along the way to the depths of the 90% decline,
dragging down many who escaped the first wave of destruction.
The 1920s bubble was only a few years in the making. Our bubble has had nearly six years to form. It cannot be
expected to disappear like that glorious rainbow-colored orb your brother maliciously jabbed. No, wrong analogy.
The word "bubble" does not convey the financial mania dynamic faithfully into the physical world. Some manias run
for a short intense period like a fireworks show run amok, quickly burning out. Others develop in fits and starts, like
a storm rising up in great waves, falling back, then rising still higher. The current bubble is of the latter type. The
storm has been raging for years. And lately, the waves are getting pretty wild.
Every student of the markets knows psychology plays an important part in market dynamics, although no one
knows exactly how. No tools for measuring sentiment or other elements of market psychology have statistically
meaningful predictive powers. But at core, it's surprisingly simple. Humans mostly decide what to do by observing
others they perceive as similar to themselves, comparing the observed behavior to their personal normative
standard, and taking action that is an average of the two. Each individual has his or her own reference point for
what is "normal" behavior but an individual will act in ways that are very far from their personal normative
boundaries to a lesser or greater extent depending on, 1) the number of other people "like them" who are behaving
like each other and, 2) the length of time the group has been engaging in the behavior.
A financial mania, like any aberrant and self-destructive group activity, grows as new entrants and the passing of
time legitimize the activity. Much research demonstrates this dynamic of human behavior, including studies that
followed the famous case of the woman who was stabbed to death over a period of hours on a crowded New York
City street many years ago. The studies concluded that if you are attacked, you are far safer in the company of a
single witness who is likely to judge the inappropriateness of the attacker's behavior and take personal
responsibility for your rescue. In a crowd, individuals take the inaction of others as a cue that inaction is the right
course, leaving you to your unhappy fate. It is no revelation to apply this concept to group dynamics in financial
manias, for as Charles MacKay observed way back in 1841's Extraordinary Popular Delusions And The Madness
Of Crowds, "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only
recover their senses slowly, and one by one."
The individuals with the strongest will or motivation to employ their personal standards in contradiction to the
group's behavior naturally join in last. In the case of a financial mania, the most risk-averse members of society join
in when intuition misinforms them that the risk is at its lowest, because so many people are involved and the mania
has lasted so long. In fact, that's when the risk is at its highest. This is the so-called "widows and orphans" stage.
The friend whose remark launched this piece is a financial advisor in Boston. She works for a staid firm with many
rich, elderly clients. She noted last week that she was beginning to get calls from her most conservative clients,
asking why she had not recommended the purchase of Internet stocks, angry that they were missing out on the
spectacular capital gains. These are men and women who lived through the crash of 1929. This development
alarmed her. And well it should -- for it portends the final stage of this financial mania, the one that draws in the
those who can least afford to lose, those too old to make their money back. They are also the final source of new
money for the mania, indicating that the mania is about to run out of fuel.
What sets up a market crash is the anxiety that forms from cognitive dissonance. As the mania progresses, an
ever-widening gap develops between each individual's reference point of normality and the extreme behavior of the
group. An unconscious desire to close the gap by any means intensifies over time. In the latter stages of a mania a
number of influential figures in the mania step up to address these anxieties with elaborate justifications, such as
Irving Fisher's "scientific" analysis of the New Era economy that "explained" the historically unprecedented stock
prices in 1929 and, in our time, recent books such as DOW 36,000 and DOW 100,000. In spite of the analytical
acrobatics, each mania participant's normative compass remains intact and the anxiety persists, leading to the
desire for mania participants to "throw themselves from the precipice for fear of falling," in the words of Ambrose
Bierce.
What causes each individual to jump is an unpredictable event that causes an epiphany. Imagine participants in the
1920s mania viewing a film in 1930 of themselves in a soup line. Still think they'd standing in line to buy stock with
hard-earned money, or borrowed money? All this happens in the mind's eye during the epiphany. Unfortunately for
each individual, the destruction of the mania feeds on itself by the same process that caused the growth of the
mania: observed behavior of other participants. Whereas before they were all buying because they saw everyone
else buying, now they are all selling because everyone else is selling.
In my last piece, I identified the four events that will most likely trigger the mania's end: credit squeeze, bankruptcy,
fraud, or weakness in the real economy (or any combination). Since then three of these elements have developed.
Long-term interest rates have risen 250 basis points, the SEC indicted Tokyo Joe for pushing stocks he owns, and
home and SUV sales -- the bellwether consumer items of the mania -- have begun to fall significantly. So far no
high-profile bankruptcy has developed, but all that is required to create an avalanche of bankruptcies is the failure
of the Fed to quickly reflate the money supply after the next correction; if public and private capital hides for more
than a quarter or two, many unprofitable iTulip.com companies will not be able to raise new capital in the markets to
pay the bills. As these companies fail, more capital will be frightened away from the market, causing more to fail,
and so on.
The end of a mania is a sad event. So do not be impatient to see it end. For afterward, all that once seemed a
community of warmth and lightness and fun turns cold, dark and lonely.
ERIC JANSZEN
Stephan says Robin Hood is the way to go. Check out this link.
one-night stand.
This is not what we imagine from watching footage of the most famous mania ending, the crash of 1929, the first
such collapse captured on film (and surely not the last). Grainy black-and-white documentaries leave the
impression that the market crashed on Black Monday and soup lines formed by Friday. In fact, the market took
some three years to bottom out and many mini-rallies took place along the way to the depths of the 90% decline,
dragging down many who escaped the first wave of destruction.
The 1920s bubble was only a few years in the making. Our bubble has had nearly six years to form. It cannot be
expected to disappear like that glorious rainbow-colored orb your brother maliciously jabbed. No, wrong analogy.
The word "bubble" does not convey the financial mania dynamic faithfully into the physical world. Some manias run
for a short intense period like a fireworks show run amok, quickly burning out. Others develop in fits and starts, like
a storm rising up in great waves, falling back, then rising still higher. The current bubble is of the latter type. The
storm has been raging for years. And lately, the waves are getting pretty wild.
Every student of the markets knows psychology plays an important part in market dynamics, although no one
knows exactly how. No tools for measuring sentiment or other elements of market psychology have statistically
meaningful predictive powers. But at core, it's surprisingly simple. Humans mostly decide what to do by observing
others they perceive as similar to themselves, comparing the observed behavior to their personal normative
standard, and taking action that is an average of the two. Each individual has his or her own reference point for
what is "normal" behavior but an individual will act in ways that are very far from their personal normative
boundaries to a lesser or greater extent depending on, 1) the number of other people "like them" who are behaving
like each other and, 2) the length of time the group has been engaging in the behavior.
A financial mania, like any aberrant and self-destructive group activity, grows as new entrants and the passing of
time legitimize the activity. Much research demonstrates this dynamic of human behavior, including studies that
followed the famous case of the woman who was stabbed to death over a period of hours on a crowded New York
City street many years ago. The studies concluded that if you are attacked, you are far safer in the company of a
single witness who is likely to judge the inappropriateness of the attacker's behavior and take personal
responsibility for your rescue. In a crowd, individuals take the inaction of others as a cue that inaction is the right
course, leaving you to your unhappy fate. It is no revelation to apply this concept to group dynamics in financial
manias, for as Charles MacKay observed way back in 1841's Extraordinary Popular Delusions And The Madness
Of Crowds, "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only
recover their senses slowly, and one by one."
The individuals with the strongest will or motivation to employ their personal standards in contradiction to the
group's behavior naturally join in last. In the case of a financial mania, the most risk-averse members of society join
in when intuition misinforms them that the risk is at its lowest, because so many people are involved and the mania
has lasted so long. In fact, that's when the risk is at its highest. This is the so-called "widows and orphans" stage.
The friend whose remark launched this piece is a financial advisor in Boston. She works for a staid firm with many
rich, elderly clients. She noted last week that she was beginning to get calls from her most conservative clients,
asking why she had not recommended the purchase of Internet stocks, angry that they were missing out on the
spectacular capital gains. These are men and women who lived through the crash of 1929. This development
alarmed her. And well it should -- for it portends the final stage of this financial mania, the one that draws in the
those who can least afford to lose, those too old to make their money back. They are also the final source of new
money for the mania, indicating that the mania is about to run out of fuel.
What sets up a market crash is the anxiety that forms from cognitive dissonance. As the mania progresses, an
ever-widening gap develops between each individual's reference point of normality and the extreme behavior of the
group. An unconscious desire to close the gap by any means intensifies over time. In the latter stages of a mania a
number of influential figures in the mania step up to address these anxieties with elaborate justifications, such as
Irving Fisher's "scientific" analysis of the New Era economy that "explained" the historically unprecedented stock
prices in 1929 and, in our time, recent books such as DOW 36,000 and DOW 100,000. In spite of the analytical
acrobatics, each mania participant's normative compass remains intact and the anxiety persists, leading to the
desire for mania participants to "throw themselves from the precipice for fear of falling," in the words of Ambrose
Bierce.
What causes each individual to jump is an unpredictable event that causes an epiphany. Imagine participants in the
1920s mania viewing a film in 1930 of themselves in a soup line. Still think they'd standing in line to buy stock with
hard-earned money, or borrowed money? All this happens in the mind's eye during the epiphany. Unfortunately for
each individual, the destruction of the mania feeds on itself by the same process that caused the growth of the
mania: observed behavior of other participants. Whereas before they were all buying because they saw everyone
else buying, now they are all selling because everyone else is selling.
In my last piece, I identified the four events that will most likely trigger the mania's end: credit squeeze, bankruptcy,
fraud, or weakness in the real economy (or any combination). Since then three of these elements have developed.
Long-term interest rates have risen 250 basis points, the SEC indicted Tokyo Joe for pushing stocks he owns, and
home and SUV sales -- the bellwether consumer items of the mania -- have begun to fall significantly. So far no
high-profile bankruptcy has developed, but all that is required to create an avalanche of bankruptcies is the failure
of the Fed to quickly reflate the money supply after the next correction; if public and private capital hides for more
than a quarter or two, many unprofitable iTulip.com companies will not be able to raise new capital in the markets to
pay the bills. As these companies fail, more capital will be frightened away from the market, causing more to fail,
and so on.
The end of a mania is a sad event. So do not be impatient to see it end. For afterward, all that once seemed a
community of warmth and lightness and fun turns cold, dark and lonely.
ERIC JANSZEN
Stephan says Robin Hood is the way to go. Check out this link.
ZZZZ Best Company
This is a note that Barry Minkow sent me.
He was on the Oprah Winfrey Show.
Greenspan & Co.,CPA certified the numbers.
Ladenburg, Thalmann & Co., Bob Grossmann issued a
ten page research report with several interesting
statements: "...one of the largest and best financed
companies.....is among the most profitable public
companies anywhere.....$23-28 per share sometime
within the next 12-15 months and $36-48 over the next
24 months." Report dated March 9, 1987 (Plus they
made a market in the stock).
Guess what the stock is worth today??
This is a note that Barry Minkow sent me.
He was on the Oprah Winfrey Show.
Greenspan & Co.,CPA certified the numbers.
Ladenburg, Thalmann & Co., Bob Grossmann issued a
ten page research report with several interesting
statements: "...one of the largest and best financed
companies.....is among the most profitable public
companies anywhere.....$23-28 per share sometime
within the next 12-15 months and $36-48 over the next
24 months." Report dated March 9, 1987 (Plus they
made a market in the stock).
Guess what the stock is worth today??