Posts filed under “Cognitive Foibles”

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 of just two; and every statistician’s favorite foible, assuming correlation equals causation, and not a merely random outcome.

We get to revisit that exercise in debunking that silly chart this morning on the news that wily ole Rupert has withdrawn his bid for Time Warner. And just to show how serious he – that his offer is really off the table – 21st Century Fox announced a $6 billion buyback, disposing of the cash that could have used to purchase Time Warner.

Its as if he is saying: “Stop me before I acquire again!”

Forget the M&A news for a moment, and think about the arc of this takeover bid, and withdrawal relative to the claim that the bid itself was proof a top was imminent. What implications does the withdrawal of the bid have?

10 Questions Investors Should Be Asking Themselves Now

1.  Continues here

 

 

Category: Cognitive Foibles, Investing, Markets, Psychology, Really, really bad calls, Trading

Masters in Business: Michael Mauboussin

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

Category: Cognitive Foibles, Media

Cognitive Dissonance Is Hurting Your Returns

Regular readers know I enjoy discussing behavioral aspects of investing. The reasons for this are twofold: First, we can’t control the markets, but we can control our own reactions to it (at least we can try). And second, many studies have shown that investors suffer from a behavior gap between what they should garner in…Read More

Category: Cognitive Foibles, Investing, Psychology

Rupert Murdoch and The Dumbest Chart in the World

Yesterday morning, we learned of Rupert Murdoch’s bid for Time Warner for as much as $85 dollar a share, or more than $75 billion. Soon after, the annotated chart below showing the Standard & Poor’s 500 Index began circulating on trading desks and websites, suggesting Murdoch’s offer signaled a market top. Source: Financial Insyghts LLC…Read More

Category: Cognitive Foibles, Investing, M&A, UnGuru

It’s a Bubble! It’s a Recession! It’s a Crash!

When was the last time anyone got good investing advice from the front page of a newspaper or magazine or from a television pundit? That is the question I have been pondering during this market cycle. Whether it is the price of equities or the state of the economy, I have grave reservations about relying…Read More

Category: Cognitive Foibles, Financial Press, Markets, Psychology, UnGuru

What to Do in a Market Correction

Things to try in a market correction: • Respond emotionally, giving in to your lizard brain. It does a good job of keeping you alive, so you might as well hand over management of your portfolio to it. • Rely on your gut instinct to lead you out of trouble. After all, your instincts helped…Read More

Category: Cognitive Foibles, Investing, Markets, Psychology

How Not to Beat the Market

Hat tip Josh Brown   Today’s chart comes to us from Patrick O’Shaughnessy, author of the forthcoming book, “Millennial Money: How Young Investors Can Build a Fortune.” O’Shaughnessy makes the observation that investing is “almost free” and investor behavior tends to matter more than their actual investments. As an example, he cites this chart.  Continues…Read More

Category: Cognitive Foibles, Investing

I Love the 80′s: 1982 Low vs 2009 Low

click for ginormnous chart Source: The Chart Store   “I Love the ’80s” was a BBC television miniseries that examined the world through the lens of 1980s pop culture. (VH1’s riff on the show can be found here). I bring up the ’80s because of a wonderful chart from Ron Griess who runs The Chart…Read More

Category: Cognitive Foibles, Investing, Markets

Last chance to sign up for today’s MTA presentation!

MTA Presentation: Risk, Trading & Neurofinance: “This Is Your Brain On Stocks” Click through for the free registration:   MTA New York Chapter Meeting June 23, 2014 Featuring Barry Ritholtz presented by Bloomberg L.P. The New York Chapter of the MTA invites you to our next chapter meeting on Monday, June 23, 2014. We are…Read More

Category: Cognitive Foibles, Psychology, Trading

Be Wrong Like Ray Dalio

In yesterday’s column, I wrote: If you have an issue with Social Security, then fix it. The regressive taxes to fund retirement benefits top out at about $117,000 in 2014. Why not simply raise that to $250,000 next year and $500,000 during the next 20 years. Congratulations, you just made Social Security solvent for the…Read More

Category: Cognitive Foibles, Corporate Management, Hedge Funds, Psychology