Posts filed under “Cognitive Foibles”

NFP, Inflation & Conspiracy Theories

 

 

 

 

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 good measure.

I am talking about the manifold ways various economic reports get misinterpreted, sometimes in a willful and ignorant manner.

That’s right, I am calling some of you ignorant (not you, but the guy next to you). There are things we all should understand about how specific data series work in the real world.  However, I want to make a distinction between legitimate criticisms of the details of any economic report and wild-eyed accusations of falsification.

Let’s start with the employment report. Long-time readers know I am not a fan of the monthly data releases, preferring instead to focus on the trend. This report is an attempt to assess the changes in a labor pool of about 150 million workers in real time, and is highly subject to revision. Like all data series based on a model, it is often wrong but useful.

Over the years, I have criticized many aspects of the models that underlie economic news releases: Business birth and death adjustments can yield a serious misreading of the labor market’s health. The tendency to ignore the broader unemployment landscape in the U6 numbers in favor of the U3, or the official unemployment rate, also misses significant trend changes. I have also written about reconciling the household and establishment series. The new home sales data series is also very noisy and unreliable. And don’t get me started on the many issues with the various inflation-modeling issues, such as hedonics and substitution. However, the MIT billion prices project shows that while the Bureau of Labor Statistics inflation data are quite imprecise, they are consistent, and therefor helpful.

Back to the foolishness that pervades the world of the conspiracy theorists.

Let’s begin with perhaps the most infamous charge, made by former General Electric Chief Executive Officer Jack Welch, the month before the 2012 election . . .

 

Continues here

 

 

Category: Bad Math, Cognitive Foibles, Data Analysis, Economy, Really, really bad calls

Once Again, the Gold Narrative Fails

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

Category: Cognitive Foibles, Gold & Precious Metals, Psychology, Really, really bad calls

Stop Making Intellectually Disingenuous Market Arguments

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

Category: Apprenticed Investor, Cognitive Foibles, Financial Press, Really, really bad calls, Weblogs

Your Brain Can’t Handle Green on the Screen

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

Category: Cognitive Foibles, Psychology, Really, really bad calls

College: The Great Unleveler

Source: Opinionator

Category: Cognitive Foibles

AAII Presentation: Brain on Stocks

The ongoing battle between you and that large, mostly under-utilized slab of grey matter resting atop your spinal cord, doing very little of anything (except keeping you alive…)   AAII Brain on Stocks Presentsation NYC 2014   Downlaod: AAII NYC 2014  

Category: Cognitive Foibles, Psychology

How Is Your Brain Interfering With Your Investing?

I am the guest speaker tonight at AAII’s NYC meeting in midtown. The subject: Why your brain is the source of nearly all of your investing errors, and what you can do about it. (Details here).   Click for more details   Should be fun!

Category: Cognitive Foibles, Investing, Psychology

What I learned after 30,000 posts . . .

After 30,000 posts, Big Picture blogger has figured a few things out Barry Ritholtz Washington Post, September 19, 2014     Sometime last week, I published my 30,000th blog post. This was no small accomplishment — I started the Big Picture blog back in 2003. Since then, I have published a stream of charts, investing…Read More

Category: Apprenticed Investor, Cognitive Foibles, Weblogs

Mauboussin: Untangling Skill and Luck

Michael Mauboussin is our Masters in Business interview this weekend.

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What role, exactly, do skill and luck play in our successes and failures? Some games, like roulette and the lottery, are pure luck. Others, like chess, exist at the other end of the spectrum, relying almost wholly on players’ skill.

In his provocative book, Michael Mauboussin untangles the intricate strands of skill and luck, defines them, and provides useful frameworks for analyzing their relative contributions. He offers concrete suggestions for how to put these insights to work to your advantage in business and other dimensions of life.

About the author:
Michael J. Mauboussin is a Managing Director and Head of Global Financial Strategies at Credit Suisse. Prior to rejoining CS in 2013, he was Chief Investment Strategist at Legg Mason Capital Management. He is also the author of three books, including More Than You Know: Finding Financial Wisdom in Unconventional Places, named in the The 100 Best Business Books of All Time by 800-CEO-Read. Michael has been an adjunct professor of finance at Columbia Business School since 1993, and received the Dean’s Award for Teaching Excellence in 2009. He is also chairman of the board of trustees of the Santa Fe Institute, a leading center for mulch-disciplinary research in complex systems theory.

Category: Cognitive Foibles, Video

Smarter and Less Smart As We Age

Academic Eric Johnson explains the impact of intelligence on finances at an Atlanta Fed Public Affairs Forum

 

 

Via Federal Reserve Bank of Atlanta

 

Category: Cognitive Foibles, Psychology, Video