J.P. Morgan can happen to any of us

So says SmartMoney columnist Brett Arends in his latest piece.  He cites five huge mistakes that financial institutions continue to make:

• Too many people still don't understand what "risk" really is.
• They rely far too much on dangerous computer models.
• They aren't prepared for the unexpected.
• They put too much faith in "experts."
• People have all the wrong incentives.

I emphasized incentives in my previous post, but this fleshes it out a bit more.  Arends claims

The entire world of investing -- including your 401(k) -- is now being operated on pretty much the same lines as JP Morgan's "synthetic credit portfolio." And everyone is making the same mistakes, even if for most, it's on a smaller scale.

And people wonder why large companies and many individuals park their money in low interest bearing accounts?  Maybe it's because they are secure they will not lose their money.