Posts filed under “Cognitive Foibles”
Today’s discussion is aimed at the individual investor, though certainly the professionals might take something from our philosophical musings this morning.
The bull market that dates to March 2009 is now entering one of its more interesting — and perhaps dangerous — phases. Not hazardous, mind you, from a market perspective, but from a behavioral one. Mr. Market will do what he is going to do, and that is unknown and unpredictable.
However, what isn’t unknown and is very predictable is that YOU are going to do something very foolish and self-destructive. The only variable is whether you are going to do this sooner rather than later.
A quick explanation.
The noise box in your den (and on the wall of your trading room) has been tallying a catalog of potential crises and hazards. That parade of terribles seems to be getting longer each day. Although none of them are new, it is as if all of them have suddenly risen in unison, a chorus of noise, funk and angst. Markets are expensive, the Federal Reserve’s stimulus of quantitative easing and zero interest rates is ending, the euro is collapsing, deflation is a threat, rates are rising, residential real estate is a mess, biotech is a bubble, oil prices are plunging, Grexit will arrive any day. Forty years of darkness! Earthquakes, volcanoes…The dead rising from the grave! Human sacrifice, dogs and cats living together…mass hysteria!
For investors, it’s a perfect time to go back to the basics Barry Ritholtz Washington Post, December 21, 2014 Look around you: This is the time of year when the pages of newspapers and magazines are filled with predictions and lists and all manner of money-losing nonsense. I have pushed back against much…Read More
Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers — Jack Welch (@jack_welch) October 5, 2012 Today’s column is about stupidity. Perhaps that’s overstating it; to be more precise, it is about the conspiracy-theorist combination of bias, innumeracy and laziness, with a pinch of arrogance thrown in for…Read More
Will they never learn? Yesterday, oil rallied 4.3 percent and gold gained 3.6 percent as commodities had an up day after a long and painful fall. The fascinating aspect of the trading wasn’t the $45 pop in gold, nor the even greater percentage rally in oil, but the accompanying narrative. (As of this writing, each…Read More
The quality of our discourse is decaying. This was once a standard complaint about the tone and depth of our national political debate. Now it has spilled into the financial realm. Shall we blame Twitter, trolls or bloggers? I am unsure of the underlying reason. But as we have seen far too, financial discussions seem…Read More
We have said a good deal in this space about the futility of trying to time short-term market moves (see e.g., this, this and this). No one has demonstrated the ability to do this consistently over time. While it is possible to avoid the very largest of collapses over long periods of time using a…Read More