Tuesday, April 21, 2009

No One Knows Nothing. Personal Finance Edition.

Exhibit 1.
Professor Stephen Greenspan wrote Annals of Gullibility: Why We are Duped and How to Avoid it. In his book, he analyzes the topic of financial scams and a great number of other forms of human gullibility. Why do so many people behave in a manner which exposes them to severe and predictable risks? The book was released right around the time of the Madoff scandal. And, it turns out, Professor Greenspan lost a good chunk of his retirement savings to Mr. Madoff. This becomes the starting point in his article on Ponzi schemes.

Exhibit 2.
New York Times personal finance columnist, Ron Lieber discovered that his family's financial planner was being investigated for fraud, because millions of dollars had been transferred out of clients' accounts without authorization.

If the experts get taken, what chance does that leave for us amateurs?

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