Posts filed under “Cognitive Foibles”
Those of you who over the many years have followed some of the thoughts and observations I jot down each morning may have noticed several themes. Prominent among them is that forecasting is folly; cognitive errors create investing mistakes; consider context when analyzing data; recency bias overemphasizes the latest data; mixing politics with investing is a costly mistake.
Which brings us to an article in the National Review that managed to combine many if not all of these themes: “2014′s Jobs Boom Wasn’t Even Much of a Boom. Does This Jobs Report Mean It’s Already Over?“
As I noted back in 2011, “When you are in the polling booth, vote however you like; but when you are reviewing your investing options, it is best to do so with a cold, dispassionate eye.”
The same is true for analyzing economic data. Those of you who zestfully pursue politics will dislike this analysis, for it points out the many errors of your ways. You are not my intended audience; rather, the people who are actual investors will find this useful (and perhaps it will save them some money).
Let’s have a look review some of these analytical errors.
Continues here: Political Bias Corrupts Economic Analysis
Using examples from vacations to colonoscopies, Nobel laureate and founder of behavioral economics Daniel Kahneman reveals how our “experiencing selves” and our “remembering selves” perceive happiness differently. This new insight has profound implications for economics, public policy — and our own self-awareness
One of the more fascinating aspects of watching finance is the never-ending stream of explanations for the market’s action. Strategists, news media and economists all engage in a series of tortured rationales for what just happened. These tend to be after-the-fact reasons that are too smug, too pat and too late to be useful, let…Read More
We are down to the Sweet 16 in the NCAA’s men’s college basketball tournament, otherwise known as March Madness, which depending upon your perspective is either the most exciting month in sports or the American collegiate plantation system writ large. As is my wont, I seek out lessons in what I see, hunting for parallels in sports, politics, et…Read More
Equity markets started off this year by falling. They rallied in February, working their way back into the green. The Standard & Poor’s 500 Index now is up about 1 percent for the year. Gold has traveled the opposite path: The yellow metal began at about $1,175 an ounce. By Jan. 23, it had rallied…Read More
Exactly six years ago today, the markets made their ultimate low following a 57% collapse of the S&P. I was fortunate to have been on the right side of that trade in both directions. What is most fascinating to me about that was the pushback from traders and investors — in each direction. It is revealing…Read More
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…Read More
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