Friday, February 13, 2009


In Mike's post entitled Greenspan Doesn't Understand the Subprime Market, he referred to a show that aired last night House of Cards. I watched the show. There were many lessons to be learned but one really jumped out at me.

If you don't understand it, maybe it doesn't make sense!

There was a town mayor interviewed who invested all the town's funds in Collateralized Debt Obligations (CDO's). Needless to say, they lost most of it. She learned that if it sounds too good to be true, it probably is not true.

Throughout the show, they interviewed people who said it did not make sense to them but it seemed to make sense to everyone else. Why do we think we are the only one in the room that doesn't understand? Then we hesitate to ask questions.

Why do we assume it makes sense? Then if it doesn't make sense to us, we hesitate to ask questions.

Boom markets last until they bust. Remember the S&L's, LBO's, Internet bubble, and on and on. Things make sense until they don't.

The key for each of us is to make up our own minds. The only way to do that is to ask questions. Ask questions until it makes sense to you. But most importantly, if you don't ever understand it, it probably isn't you. Maybe it doesn't make sense.

Until Next Time,

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