Posts filed under “Psychology”

What If They Threw a Panic and No One Came?

hedge fund
Source: Bianco Research



“Its enough to give a long-term investor some hope for the future of finance.”


Here’s a bit of role reversal for you: Mom and Pop were content to ride out the market’s volatility this past month, more or less sitting tight. Meanwhile, the pros were driven to the point of near panic.

What was all the fuss about? Take your pick. Perhaps the China slowdown will cause a global recession. Maybe the Federal Reserve is going to raise rates and kill the bull market. Oil prices might fall too far, destroying emerging markets. Or the U.S. economy is about to go belly-up.

Whatever the fear was, someone was there to give it voice. The downside of the Twitter era is that everyone has a megaphone, and any lack of wisdom of insight is no a deterrent to broadcasting it. This month, that described Wall Street and not Main Street. It was the pros who lost it.

Start with hedge funds. After missing a generational rally in which the Standard & Poor’s 500 Index tripled, hedge funds finally began going long U.S. equities — just before the China trap door swung open. TheWall Street Journal reported that many funds got shellacked this month, giving up all of their year-to-date gains in a week. Bridgewater, Omega, Third Point and Pershing Square all took a beating, but only Omega seemed to be positioned to capture the bounce-back rally (note that I am not objective, as you can hear in my Masters in Business podcast with Omega founder Leon Cooperman).

Beyond the hedge funds, the algorithmic traders seemed to have run amok as well. It is a natural human response, to borrow from Daniel Kahneman’s book “Thinking, Fast and Slow,” to react emotionally first and logically second. However, no one can think faster than a machine, and the algos managed to engage in some very fast, and what looked like emotionally driven trading. As we saw this week, that sort of behavior was amply punished. My colleague Josh Brown summed it up in a post, “Computers are the new Dumb Money . . .

Continues here: Mom and Pop Outsmart Wall Street Pros



Category: ETFs, Investing, Psychology, Sentiment

How to Get People to Care About Climate Change

Remember climate change? For the first time since 1984, the issue didn’t even come up in a presidential debate. But bringing climate change back into our national conversation is as much a communications challenge as it is a scientific one. Scientist Anthony Leiserowitz, director of the Yale Project on Climate Change Communication, joins Bill to describe his efforts to do what even Hurricane Sandy couldn’t — galvanize communities over what’s arguably the greatest single threat facing humanity. Leiserowitz, who specializes in the psychology of risk perception, knows better than anyone if people are willing to change their behavior to make a difference

Anthony Leiserowitz on Making People Care About Climate Change from on Vimeo.

via Yale360

Category: Psychology, Science, Video, Weekend

Why Retail Investors Make the Same Mistakes

My interview with of Rhonda Schaffler of

Category: Cognitive Foibles, Media, Psychology, Video

As Goes Apple, So Goes the Market?

With the stock markets down almost (OMG!) 5 percent from their all-time highs, lots of folks are looking for signs that the bull is dying, if not dead. One of the more portentous omens is the recent decline and volatility of Apple’s stock. Or so it seems. For reasons too numerous to list here, Apple…Read More

Category: Corporate Management, Earnings, Economy, Psychology, Really, really bad calls

About Time . . .

Today’s column is going to wax a bit philosophical. Stay with me, its worth your effort. You do not really understand time. By “you” I mean you humans, and by “Time,” I refer to the abstract concept within which all human (excepting Billy Pilgram) structure events in a formal sequence. This has significant ramifications for…Read More

Category: Philosophy, Psychology

Investors: Time Is Your Ally, Not Your Enemy

Today’s column is going to wax a bit philosophical. Stay with me; I think it will be worth your effort. You don’t really understand time. By “you” I mean humans in general. This has great significance for investors. They often misapprehend time, are seemingly unaware of its importance, and can’t conceptualize it over the long…Read More

Category: Investing, Psychology

Which Character Strengths Are Most Predictive of Well-Being?

Source: Scientific American

Category: Data Analysis, Psychology

Interview with Richard Thaler

University of Chicago behavioral economist on stock markets, NFL drafts and the importance of trust Douglas Clement | Editor, The Region Published October 3, 2013   |  September 2013 issue Interview conducted July 17, 2013 We are rational, self-interested optimizers: Homo economicus. So the neoclassical model of economics has held for over a century. It has been a fruitful…Read More

Category: Bad Math, Cognitive Foibles, Psychology

The Recency Effect & Investors

What do gold prices, a stock-market plunge and a credit crisis have in common? The way investors tend to see them are examples of the “recency effect.“ A brief description first: In human psychology, people who are asked to recall items on a long list tend to have a sharper memory of the items toward…Read More

Category: Cognitive Foibles, Psychology, Trading

The Psychology of Risk: The Behavioral Finance Perspective

The Psychology of Risk: The Behavioral Finance Perspective by Victor Ricciardi Goucher College – Department of Business Management Abstract: Since the mid-1970s, hundreds of academic studies have been conducted in risk perception-oriented research within the social sciences (e.g., nonfinancial areas) across various branches of learning. The academic foundation pertaining to the “psychological aspects” of risk…Read More

Category: Psychology, Think Tank