Reference no: EM133412378

Assignment:

When enthusiasm in the markets gets too high, there are always experts who whisper in the ear of the most enthusiastic--not so fast! We all know there are "business cycles," which is another way of saying that no party lasts forever. Of course, no one wants to be dancing when the music stops.

Hyman Minsky was one such person who described what happens when, after a time of durable prosperity, there is tightening of credit and investors then find out they are over-leveraged, i.e. they have borrowed too much money. When people are forced to sell (perfectly good) assets at a time where there are not sufficient buyers, that is a "Minsky Moment." The market then spins into a black hole with no apparent bottom. Does this remind you of the housing crisis?

Basically, our perception of the future, he says, is inappropriately influenced by our own personal experiences of past events. It is almost as if people find something impossible to believe unless they have seen it before. Do you agree?

Can you think of an example in your own lives where an event really surprised you, but in retrospect it was predictable? Does an understanding of your own weakness make you stronger, or are you going to make the same mistake over and over again?

Are you risk averse or risk tolerant? Much of this is dependent on personality share a situation where you took a risk and how you treated yourself in the case of success or failure.