Who benefits when investors are whipped into a frenzy?

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Media reports are currently full of dire predictions about the Chinese and world economies. I have read reports from otherwise credible financial industry insiders saying we should sell all our stocks, that oil prices will plummet to $10 a barrel and that the world economy will enter a deflationary spiral. Pretty scary stuff.

But, should we be scared? This is not the first time financial insiders have made extreme predictions. I remember being concerned in 2007 when the same characters predicted the Dow would go to 20,000 and oil would jump to $500 a barrel. And, being even more concerned a year later when predictions were made of a 4,000 Dow and a hyper inflationary debt spiral. Yet none of those things turned out to be true.

We tend to blame these market predictions on irrationality. However, I think the cause is…

Read the entire column at WashingtonPost.com.


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