Posts filed under “Cognitive Foibles”
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 to entail people arguing at cross-purposes. Bull-bear debates devolve into winning the argument at any cost. Previously, we had a true competition of ideas in the marketplace. Now, we have discussions that range between disingenuous and useless.
The hunt for the truth has been replaced by the search for bragging rights.
Price discovery, like so many other things in our society, depends on a robust and open debate. The intellectual arguments can and do sway investors about their investment postures and positions. Efficient markets eventually find their way to proper pricing, but that “eventually” can take a long time. As John Maynard Keynes observed, “Markets can remain irrational longer than you can remain solvent.”
Perhaps a few examples might illustrate the point. In discussing the debate over gold, money manager Ben Carlson observes:
Gold is down almost 40% since it peaked in 2011. But it’s still up almost 350% since 2000. Although since 1980, on an inflation-adjusted basis, it’s basically flat. However, since the early-1970s it’s up over 7% per year (or about 3.4% after inflation).
If you want to have an intellectually dishonest argument about gold, simply cherry pick the time line that supports your argument.
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
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
Michael Mauboussin is our Masters in Business interview this weekend.
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.
Last month, I spilled a considerable number of pixels explaining why Rupert Murdoch’s Time Warner bid had no significance to whether or not this is a market top. My short list included complaints of cherry picked data that somehow ignored most of Murdoch’s M&A activity over the past half century; a laughably small sample size…Read More
Michael Mauboussin began his career at Drexel Burnham Lambert in the 1980s through what he describes as a random stroke of good luck. He worked closely with Bill Miller, former chairman of Legg Mason Capital Management, and is now head of global financial strategies at Credit Suisse. He is also an adjunct at Columbia University…Read More