Posts filed under “Psychology”

Don’t Let Bias Corrupt Your Analysis

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

 

 

 

Category: Analysts, Cognitive Foibles, Politics, Psychology, Really, really bad calls

Probability, Mean Reversion and Forecasting

We’re down to the Final Four in this year’s iteration of March Madness, also known as the national collegiate basketball tournament. Our earlier discussion of “The March Madness Theory of Investing“ didn’t sit well with some readers. The lessons we sussed out from the bracket-destroying results included home-country bias, how expert forecasts are about as good as those…Read More

Category: Apprenticed Investor, Bad Math, Psychology, Sports

Bull vs. Bear Debate: Is Biotech Is in a Bubble?

Awesome graphic:   click for ginormous graphic Source: Credit Suisse via Bloomberg    

Category: Markets, Psychology, Science

Hate Mail Rules

1. CHECK YOUR GRAMMAR No one’s going to take you seriously if you use “there” instead of “their” or “your” instead of “you’re.” Maybe you should write your missives in Word first, where there’s a grammar checker. Or maybe run your prospective words by your mother, since you want her to be proud of you….Read More

Category: Humor, Psychology, Web/Tech, Weblogs

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…Read More

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