Posts filed under “Psychology”

Interest Rates Aren’t Going Anywhere . . .


Source: BAML, Fiscal Times

 

 

I have been fairly agnostic on several issues related to where interest rates are heading. It has never been my job to forecast where the 10-year yield will be in six months. Not predicting and not caring are two very different things, however. Rates matter a great deal — to investors, to the economy and most of all to debtors of every kind.

You would be hard-pressed to find anyone in finance who would ever admit to believing that rates don’t matter. Despite the importance of bond yields and borrowing costs, few seem to have any idea how to analyze them in a way that provides a helpful conclusion.

And while many are quick to point out how disruptive the Federal Reserve programs of quantitative easing and zero-interest rates have been to stock and bond prices, that’s a terrible excuse. One would think that something so big, so contentious and so transparent would be easy to insert into traditional economic models. But no.

As it turns out, most of the economic community on Wall Street has gotten this terribly wrong. Some have disagreed, such as Jeff Gundlach and Gary Shilling (see this and this) but they are notable exceptions.

 There are many indicators that keep suggesting that our lowlowlow rate world is going to stay this way for a long time. Some of these are turning out to be more significant than many had expected.

First . . .

 

Continues here

 

Category: Credit, Federal Reserve, Fixed Income/Interest Rates, Psychology, Really, really bad calls, Taxes and Policy

Daniel Kahneman: The riddle of experience vs. memory

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

Category: Cognitive Foibles, Psychology, Video

Herd Behavior in Financial Markets

Herd Behavior in Financial Markets Marco Cipriani and Antonio Guarino Liberty Street Economics March 09, 2015     Over the last twenty-five years, there has been a lot of interest in herd behavior in financial markets—that is, a trader’s decision to disregard her private information to follow the behavior of the crowd. A large theoretical…Read More

Category: Markets, Psychology

Why Warren Buffett is $72 billion richer than you

Source: Fortune

Category: Digital Media, Investing, Psychology

Anniversary of Crisis Lows Is a Psychology Reminder

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

Category: Cognitive Foibles, Investing, Markets, Psychology

Screw it, I’m all in!

Source: EcPoFi

Category: Markets, Psychology

Don’t Make the Trading Gods Laugh

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

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

Empathy, Neurochemistry, and the Dramatic Arc

Narratives — specifically, the classic dramatic arc as outlined by German playwright Gustav Freytag — can evoke powerful responses, leading the brain to release the neurochemicals cortisol and oxytocin.

 

Paul Zak: Empathy, Neurochemistry, and the Dramatic Arc

 

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Category: Psychology, Science, Video

Choice Words on Behavioral Finance and Dick Fuld

Barry Ritholtz’s Choice Words on Behavioral Finance and Dick Fuld
 

The Bloomberg View columnist and investment blogger talks behavioral biases to avoid and how Lehman Brothers committed suicide (LOL Is it me, or do I look weird?)
 

 

Category: Psychology, Video

The Amazing Disconnect Between Hedge Fund Performance & AUM

Earlier this week, Greg Zuckerman of the Wall Street Journal pointed out one of the great mysteries of today’s investment landscape: Despite underperforming by a substantial margin, hedge funds keep attracting more investors and assets under management. It is almost as if (to borrow the headline on Zuckerman’s article), “Hedge Funds Keep Winning Despite Losing.”…Read More

Category: Asset Allocation, Bad Math, Hedge Funds, Investing, Psychology