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In the past, most blue-chip companies would list on the New York or London stock exchanges to gain prestige and access to capital But money is everywhere today, creating nancial hubs in places such as Dubai, Singapore, and Hong Kong As economic might shifts toward China, India, and other emerging countries, competition in nancial services has never been so intense For example, as of May 2008, Hong Kong s stock market ranked seventh largest in the world in terms of market capitalization, with over 1,200 companies listed and a market cap of nearly $25 trillion Well-positioned to capitalize on the China boom, Hong Kong is also the largest venture capital center in Asia, managing about 29 percent of the total capital pool in the region17 Newcomers Dubai and Abu Dhabi are also becoming hubs for investments, with their proximity to the wealthy major oil producers where vast wealth has been created The Economist estimates that nearly $2 trillion in investments come from the Gulf region, most of which is currently invested abroad In 2006, McKinsey estimated at least $200 billion petrodollars were invested in global equity markets, $100 billion in xed-income markets, and $40 billion in hedge funds, private equity, and other alternative investments After just a few short years of rising oil prices, this region has some of the world s deepest pockets Moreover, stricter rules for US-listed companies also have encouraged companies to list elsewhere According to McKinsey, in 2005 only one of the world s 24 largest initial public offerings (IPOs) was registered in the United States In 2007, more money was raised through IPOs in Hong Kong than either New York or London The Sarbanes-Oxley Act of 2002, which sought to clamp down on corporate malfeasance by tightening US accounting standards, may scare away foreign rms eager to list their stock on US exchanges Even a well-known foreign corporation like Nestle has been unable or unwilling to meet the requirements to list on the New York Stock Exchange18 The United States still is the perceived leader in securitization and debt markets, but legal and regulatory stringency coupled with the growth of other nancial centers means a listing on.



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In The Karate Kid, our hero soon stops waxing cars and begins competing Similarly, the focus of this book starts with irrationality, but then quickly applies the lessons to the most important issues facing investors the health of the economy, budget deficits, productivity, savings, inflation, the trade deficit, bonds, mortgages, stocks, and real estate The first section summarizes the key findings of the science of irrationality We review the evidence that even the smartest of people make systematic mistakes These individual quirks create manias and panics, and markets that are far from rational The second section is a primer on the economy, inflation, and the value of the US dollar Will US budget deficits hurt the economy Can the productivity revolution allow us to be richer and lead better lives How will the decline in the US.





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Taking the limits t + , t 0 , one obtains the parameters (R, r, , , L, l) of the S matrix, as they were introduced in (1023): S = e Ra

(1035)

r n 2s R s n! /2+ e (n 2s)!s!

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a US exchange is no longer de rigueur Who needs the red tape when there may be places to raise money One only can imagine what new US regulation inevitably will emanate from the global nancial crisis that took down such large institutions as Bear Stearns, Lehman Brothers, AIG, Freddie Mac, and Fannie Mae The United States and the G7 s ability to shape capital markets (through regulatory regimes and otherwise) has been diluted as economic power spreads across the globe, and other nations now have a say in setting the rules for international nance EM nancial market capitalization grew from approximately $1 trillion in 1990 to almost $24 trillion by mid-2008 (see Figure 27) The battle for global capital will intensify over the next few years as competing global nance centers in Asia and the Middle East become increasingly in uential The globalization of capital is facilitating the regionalization of capital markets, cross-ownership by many EM countries in exchanges, and a diversifying investor base will raise the demand for new nancial products, services, as well as regulatory frameworks19

dollar affect investors When will the dollar decline end Is the Federal Reserve creating inflation Why would anyone be worried by prices being too low In the third section, we apply our analysis to the most important investment decisions we face Are interest rates going to rise substantially Has the bull market in stocks returned, or is the early twenty-first century stock market rally a trap Is there a housing bubble Our analysis culminates in the final section that provides specific investment advice An understanding of the lizard brain provides a timeless blueprint for effective and low-stress investing Furthermore, we reach a timely and unexpected answer to Adam s question on where to invest The lizard brain will be a leading character throughout our journey.

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