Why are CDOs bad? Why are crashes bad? I think the point that you may be missing is that there will always be booms, busts, panics, euphorias, etc. Those are

Why are CDOs bad? Why are crashes bad? I think the point that you may be missing is that there will always be booms, busts, panics, euphorias, etc. Those are byproducts of human psychology. The real problem is when people blindly expect the market to always be stable, to always increase in price, etc. Most of the people who lost money in the recent financial crisis were people who couldn't afford to lose on the bets they made or who had essentially let it all ride without understanding that sometimes share prices go down too.