Notes
CHAPTER 1—THE STOCK MARKET: CAN WE WIN AT THIS GAME?
1. “Quantitative Analysis of Investor Behavior,” www.dalbarinc.com, June 21, 2001.
2. Jason Zweig, “What Fund Investors Really Need to Know,” Money 31 (June 2002): 110–115.
3. “Retirement out of Reach,” Economic Policy Institute Briefing Paper, August 2002.
4. “Massively Confused Investors Making Conspicuously Ignorant Choices,” Journal of Finance (October 2001).
5. Burton G. Malkiel, A Random Walk down Wall Street (New York: W. W. Norton, 1985).
6. Charles Ellis, Winning the Losers Game (New York: McGraw-Hill, 1998), 5.
7. Max Isaacman, How to Be an Index Investor (New York: McGraw-Hill, 2000).
8. Jonathan Clements, “Stock Funds Just Don’t Measure Up,” Wall Street Journal, 5 October 1999, C1.
9. Jonathan Clements, “Not Everyone Can Pick Funds. Really,” Wall Street Journal, 9 November 1999, C1.
10. Peter L. Bernstein, “Where Oh Where Are the .400 Hitters of Yesteryear?” The Financial Analysts’ Journal 54 (November-December 1998): 6–14.
11.”Performance Evaluation with Transactions Data: The Stock Selection of Investment Newsletters,” Journal of Finance (October 1999): 1743–1775.
12.”A Step Beyond Index Funds,” Investment Advisor (November 2000): 151.
13. Elroy Dimson and Paul Marsh, Millennium Book II: 101 Years of Investment Returns (Princeton: Princeton University Press, 2001).
14. Michael Sivy, Michael Sivy’s Rules of Investing (New York: Warner Books, 1996).
15. Jane Bryant Quinn, Making the Most of Your Money (New York: Simon & Schuster, 1997).
16. Edward Jones, “What to Do When Bad News Hits Your Stocks,” Women in Business 53 (May/June 2001).
17. Remarks by Chairman Arthur Levitt, Securities and Exchange Commission, at NYU Center for Law and Business, New York, September 28, 1998.
18.”Enron Analysts Eerily Saw Phantom Profits,” Investment News (February 25, 2002).
19. Ben Shouse, “The Power of Napping,” ScienceNOW (May 29, 2002):14.
20. “The Psychology of Investing,” Focus Gold (February 2000).
CHAPTER 2—FAITH IN OURSELVES:
THE IRRATIONAL BEHAVIOR OF INVESTORS
1. “The Dutch Triangle: A Framework to Measure Upside Potential Relative to Downside Risk,” Journal of Portfolio Management (Fall 1999): 50.
2. “Cognitive Biases in Market Forecasts—The Frailty of Forecasting,” Journal of Portfolio Management (Fall 2000): 72.
3. Bridget O’Brian, “When It Hurts Too Much to Look,” Wal l Street Journal, 11 October 2002, C1.
4. Daniel Kahneman and Amos Tversky, “On the Psychology of Prediction,” Psychological Review 80 (July 1973): 251.
5. Peter Bernstein, Against the Gods: The Remarkable Story of Risk (New York: John Wiley & Sons, 1996).
6. Hillel J. Einhorn and Robin M. Hogarth, “Confidence in Judgment: Persistence of the Illusion of Validity,” Psychological Review 85 (September 1978): 395.
7. William J. Broad, “Data Tying Cancer to Electrical Power Found to be False,” New York Times, 24 July 1999, A1.
8. Terrance Odean, “Do Investors Trade Too Much?” American Economic Review 89 (December 1999): 1279.
9. Daniel Kadlec, “Day Trading: It’s a Brutal World,” Time 154 (August 9, 1999).
10. William O’Barr and John Conley, Fortune and Folly: The Wealth and Power of Institutional Investing (Chicago: Irwin Professional Publications, 1992).
11. Tom Lahman, “Why You Should Offer Investment Counseling,” ABA Banking Journal 89 (June 1997): 61.
www.investorhome.com/ psych.htm.
13. Robert J. Shiller, Irrational Exuberance (Princeton: Princeton University Press, 2000).
14. John Ellis, “Q: What Is the New Economics?” Fast Company (September 2001): 118.
15. Gustave Le Bon, The Crowd: A Study of the Popular Mind (Mine-ola, NY: Dover Publications, 2002).
16. Richard Swift interviews Stuart Ewen, “One Trick Pony,” New Internationalist (July 1999): 16.
17. Charles Mackay, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds (1841; New York: Farrar Straus and Giroux, 1974).
18. John Kenneth Galbraith, A Short History of Financial Euphoria (New York: Penguin, 1993).
19. Timothy L. O’Brien, Bad Bet: The Inside Story of the Glamour, Glitz, and Danger in America’s Gambling Industry (New York: NY Times Books, 1998).
20. Sally Denton, “Big Deal in Vegas,” Columbia Journalism Review 39 (Nov/Dec 2000): 46.
21. Victor A. Matheson, “When Are State Lotteries a Good Bet (Revisited)?” Eastern Economic Journal 27 (Winter 2001): 55.
22.”Look Out, Vegas,” The Economist 356 (July 15, 2000): 30.
23. Robert Goodman, The Luck Business: The Devastating Consequences and Broken Promises of America’s Gambling Explosion (New York: The Free Press, 1995).
24. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776; New York: Modern Library, 1937).
25. Jane Bryant Quinn, Making the Most of Your Money (New York: Simon & Schuster, 1997), 600–602.
26. Suze Orman, The 9 Steps to Financial Freedom (New York: Random House, 1997), 222.
CHAPTER 3—FAITH IN CORPORATIONS: TRICKS OF THE TRADE
1. “Accounting for Option Based Compensation,” E-Commerce Tax News, November 12, 2000.
2. Gretchen Morgenson, “Stock Options Are Not a Free Lunch,” Forbes 161 (May 18, 1998).
3. “Employee Stock Option Accounting Implications,” press release, Parish & Company, September 30, 1998.
4. Morgenson, “Stock Options Are Not a Free Lunch.”
5. David Henry, “The Numbers Game—Companies Use Every Trick to Pump Earnings and Fool Investors,” Business Week (May 14, 2001): 103.
6. Henry, “The Numbers Game,” 104.
7. Matthew Swibel, “Dial ‘D’ for Dummies,” Forbes 169 (March 18, 2002).
8. Henry, “The Numbers Game.”
9. “Blockbuster Takes $450 Million Write-off,” press release, Blockbuster Inc., September 10, 2001.
10. “Blockbuster Reports Strong Cash Earnings,” press release: Blockbuster Inc., July 24, 2001.
11. Lou Dobbs, “Toothless Tigers,” Money 31 (September 2002): 63.
12. Miles Maguire, “Business as Usual,” American Journalism Review 24 (October 2002): 18.
CHAPTER 4—FAITH IN PROFESSIONAL ADVICE: CONFLICTS OF INTEREST
1. Peter Elkind, “Where Mary Meeker Went Wrong,” Fortune 143 (May 14, 2001): 76.
2. Elkind, “Where Mary Meeker Went Wrong,” 78.
3. Bethany McLean, “Hear No Risk, See No Risk, Speak No Risk,” Fortune 143 (May 14, 2001).
4. David Dreman, “Fantasy Earnings,” Forbes 168 (October 1, 2001): 134.
5. “With Analysts, You Get What You Pay For,” New York Times, 7 September 2001.
6. Amy Feldman, “Sue Your Broker,” Money 30 (October 2001): 102.
7. Andy Serwer, “Wall Street Story,” Fortune 146 (July 28, 2002).
8. Alan Abelson, “Fun & Games,” Barron’s (November 12, 2001).
9. Securities & Exchange Commission, JDS Uniphase 10-Q filing, June 30, 2000.
10. Justin Wiser, “Earnings Are so Passé,” Kiplinger’s Personal Finance 55 (January 2001).
11. Andy Reinhardt, “Is JDS Uniphase Bonkers?” Business Week ( July 24, 2000): 33.
12. Donald Coxe, “Innovative Accounting,” Macleans 114, (August 20, 2001): 35.
13. Louis Lavelle, “Executive Pay,” Business Week (April 16, 2001).
14. Canadian Business (April 16, 2001): 24.
15. “How High Is Up?” Canadian Business 72 (December 10, 1999): 24.
CHAPTER 5—THE REAL WINNERS OF THE STOCK MARKET GAME
1. Institute for Policy Studies and United for a Fair Economy, “The 1990s: A Decade of Greed,” Eighth Annual Report on Executive Excess, August 28, 2001.
2. “A Corporate Bailout at Workers Expense,” Los Angeles Times, November 2001.
4. Geoffrey Colvin, “The Great CEO Pay Heist,” Fortune 143 (June 25, 2001).
www.aflcio.org, 2000.
7. Louis Lavelle, “Executive Pay,” Business Week (April 16, 2001): 79.
8. Mark Gimein, “You Bought, They Sold,” Fortune 146 (September 2, 2002).
9. Christopher Palmeri and Steven Brull, “If You’ve Got It, Spend It,” Business Week (October 16, 2000).
10. Eric L. Johnson, “Waste Not, Want Not: An Analysis of Stock Option Plans, Executive Compensation, and the Proper Standard of Waste,” Journal of Corporation Law 26 (Fall 2000): 145.
11. Steve Cocheo, “Pooling’s Demise Is Not Mourned,” ABA Banking Journal 94 (April 2002).
12.”AOL and Time Warner Will Merge to Create World’s First Internet-Age Media & Communications Company,” press release, AOL, Time Warner, January 10, 2000.
13. Shawn Tully, “Betrayal on Wall Street,” Fortune 143 (May 14, 2001): 86.
14. Tully, “Betrayal on Wall Street.”
15. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776; New York: Modern Library, 1937), 60–61.
CHAPTER 6—RISK MANAGEMENT
1. Gary Brinson, Randolph Hood, and Gilbert Beebower, “Determinants of Portfolio Performance,” The Financial Analysts’ Journal (July/August 1986): 39.
2. Harry M. Markowitz, Portfolio Selection and Efficient Diversification of Investments (New York: John Wiley & Sons, 1967).
3. Robert Esperiti and Renno Peterson, 21st Century Wealth, Essential Financial Planning Principles (Denver: Quantum Press, 2000), 73.
4. The New McClures, August 1928, author’s personal copy.
CHAPTER 7—MAINTAINING CONTROL OF OUR FINANCIAL FUTURE
1. “Social Problems on Rise, U.S. Health Check Shows,” Seattle Post-Intelligencer, 14 January 1992.
2. Betsy Morris, “Big Spenders: As a Favored Pastime Shopping Ranks High with Most Americans,” Wall Street Journal, 30 July 1987.
3. Lawrence Shames, The Hunger for More (New York: NY Times Books, 1991), 43.
4. “Would You Believe These Are the Good Old Days,” Seattle Times, 19 September 1993.
CHAPTER 8—THE MATCHING GAME: INVESTING IN THE INDEXES
1. Mindy Charski, “Following the Gospel of Indexing’s St. Jack,” U.S. News & World Report 127 (August 2, 1999).
2. “Bogle on Brokers,” On Wall Street (November 2000): 168.
3. John Bogle, John Bogle on Investing: The First 50 Years (New York: McGraw-Hill, 2001).
www.dalbarinc.com, 2001.
5. William Bernstein, The Intelligent Asset Allocator (New York: McGraw Hill, 2001).
6. Transcript from 20/20 episode, November 27, 1992.
7. Zvi Bodie, Alex Kane, Alan J. Marcus, Investments (New York: McGraw Hill-College Div., 2001).
8. William Sharpe, “The Parable of the Money Managers,” The Financial Analysts’ Journal 32 (July/August 1976).
CHAPTER 9—THE PROTECTED INVESTOR: SMARTER, SAFER WAYS TO INVEST
1. Fischer Black and Myron Scholes, “The Pricing of Options and Corporate Liabilities,” Journal of Political Economy, no. 81 (1973): 637–659.
2. Robert Cringely, “Fast Money,” Forbes ASAP (April 11, 1994): 74.
3. Steve Cocheo, “Market-Linked CDs: Hope—or Hype—for the Deposit Starved?” ABA Banking Journal 93 (May 2001): 16.
4. “Investment Strategies for Personal Retirement,” Federal Document Clearing House, congressional testimony, June 15, 1999.
5. Andrew Wahl, “What’s Yours Is Mine,” Canadian Business 73 (September 4, 2000): 9.
6. Lauren Bielski, “High Net Worth Investors Make New Choices,” ABA Banking Journal 93 (August 2001): 7.
7. Paul J. Lim, “Hybrid Investments Offer Security—But at Some Cost,” U.S. News & World Report 131 (July 2, 2001): 54.
8. Pat Regnier, “Is This Kind of Insurance Worth the Cost?” Money 27 (May 1998): 32.
9. Jean Sherman Chatzky, “A Walk on the Safe Side… Securities with Downside Protection Are Looking Good These Days,” Money 30 (August 2001): 144.
10. “Annuity Sales: Using a Layered Approach,” National Underwriter (August 7, 2000).
11. “Insurance Companies Offer Equity Index Annuities,” San Diego Business Journal (November 29, 1999): 24.
12. “Reaching for the Man on the Street,” Euromoney (November 2000).
CHAPTER 10—INVESTING FOR RETIREMENT
1. Thornton Parker, What If Boomers Can’t Retire? (San Francisco: Berrett-Koehler, 2000), 15.
2. “Possible Pension Crisis Sparks Calls for Overhaul,” Congressional Quarterly (August 9, 1997).
3. Edward N. Wolff, Retirement Insecurity (Washington D.C.: Economic Policy Institute, 2002), 27.
4. “Saving the Retirement We Earned,” Bloomberg Personal Finance (November 2002).
5. Jane Bryant Quinn, “Burned! Why We Need to Fix the 401-K,” Newsweek (August 19, 2002).
6. “Legal & Fiduciary Issues in Participant Directed 401-K Plans,” CPA Journal (November 1999).
7. Quinn, “Burned!”
CHAPTER 11—REFORMING THE SYSTEM
1. Jack L. VanDerhei, “Company Stock in 401(K) Plans: Results of a Survey of ISCEBS Members,” Employee Benefit Research Institute (January 31, 2002).
2. Jonathan Weisman, “Phony Prices May Hide Import-Export Profits from IRS,” Washington Post, 1 November 2002.
3. Michael Maiello, “Tower of Babel,” Forbes 170 (July 22, 2002).
4. “What Good Are Disclosures That Go Unread?” Business Week, March 26, 2002.
5. “NY Prosecutor Spitzer Attacks Merrill Lynch Research Unit,” Euroweek (April 12, 2002).
6. “We Were Chumps to Rely on That 401K,” Medford Mail Tribune, 15 August 2002.
7. Emanuel Hertz, Abraham Lincoln: A New Portrait (New York: Horace Liveright, 1931), 954.
APPENDIX A—USING OPTIONS TO REDUCE RISK
1. “Derivatives Revisited,” Journal of Accountancy (May 2000): 35.