Too Smart for Our Own Good: Ingenious Investment Strategies, Illusions of Safety, and Market Crashes

how investment strategies designed to reduce risk can increase risk for everyoneand crash markets and economies 
Financial crises are often blamed on unforeseeable events, the unforgiving nature of capital markets, or just plain bad luck. too smart for our own good argues that these crises are caused by certain alluring investment strategies that promise both high returns and safety of capital. In other words, the severe and widespread crises we have suffered in recent decades were not perfect storms. Instead, they were made by us. By understanding how and why this is so, we may be able to avoid or ameliorate future crisesand maybe even anticipate them.
One of todays leading financial thinkers, Bruce I. Jacobs, examines recent financial crisesincluding the 1987 stock market crash, the 1998 collapse of the hedge fund Long-Term Capital Management, the 20072008 credit crisis, and the European debt crisisand reveals the common threads that explain these market disruptions. In each case, investors in search of safety were drawn to novel strategies that were intended to reduce risk but actually magnified itand blew up markets. too smart for our own good takes a behind-the-curtain look at: 
The inseparable nature of investment risk and reward and the often counterproductive effects of some popular approaches for reducing riskA trading strategy known as portfolio insurance and the key role it played in the 1987 crashHow option-related trading disrupted markets in the decade following the 1987 stock market crashWhy the demise of Long-Term Capital Management in 1998 wreaked havoc on US stock and bond markets How mortgage-backed financial products, by shifting risk from one party to another, created the credit crisis of 20072008 and contributed to the subsequent European debt crisis
This broad, detailed investigation of financial crises is the most penetrating and objective look at the subject to date. In addition, Jacobs, an industry insider, offers invaluable insights into the nature of investment risk and reward, and how to manage risk.
Risk is unavoidableespecially in investingand financial markets connect us all. Until we accept these facts and manage risk in responsible ways, major crises will always be just around the bend. too smart for our own good is a big step toward smarter investingand a better financial future for everyone.