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