Posts filed under “Psychology”

Once Again, the Gold Narrative Fails

Will they never learn?

Yesterday, oil rallied 4.3 percent and gold gained 3.6 percent as commodities had an up day after a long and painful fall. The fascinating aspect of the trading wasn’t the $45 pop in gold, nor the even greater percentage rally in oil, but the accompanying narrative. (As of this writing, each has giving up about half of those gains).

When it comes to speculating, especially in precious metals, it is all about storytelling. Over the years, I have tried to remind investors of the dangers of the narrative form (See this, this and this). Following a storyline is a recipe for losing money.

Why? The spoken word emerged eons ago and narration was a convenient way to pass along information from person to person, generation to generation. Your DNA is coded to love a good yarn of heroes and villains and conflicts to resolve, preferably in a way that is both exciting and memorable.

However, your genetic makeup wasn’t created with the risks and rewards of capital markets in mind. When it comes to being suckers for storytelling, I have been especially critical of the gold bugs. Since 2011, the gold narrative has been a money loser, the secular bull market for the metal clearly over.

However, gold often provides a plethora of teachable moments. I want to point out several recent gold narratives that have been dangerous to investors.

Continues here

 

 

Category: Cognitive Foibles, Gold & Precious Metals, Psychology, Really, really bad calls

Timeline of Media Scare Stories

This is fascinating stuff; more on this next week.   Click for an interactive chart. Source: Information is Beautiful

Category: Digital Media, Media, Psychology

Your Brain Can’t Handle Green on the Screen

We have said a good deal in this space about the futility of trying to time short-term market moves (see e.g., this, this and this). No one has demonstrated the ability to do this consistently over time. While it is possible to avoid the very largest of collapses over long periods of time using a…Read More

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

Common Mythconceptions

Source: Information Is Beautiful

Category: Digital Media, Psychology, Really, really bad calls, Web/Tech

The Beta In Your Life

Source: Artivest

Category: Investing, Psychology

Apparently, You CAN Buy (Some) Happiness

It looks as if you can buy happiness, after all. At least, in limited amounts, and up to a point. That seems to be the conclusion based on a recent survey by the Pew Research Center, part of the Pew Charitable Trust. Pew notes that Israel, the U.S., Germany and the U.K. have the happiest…Read More

Category: Economy, Psychology, Wages & Income

Disbelief in Equities is What is Driving Them Higher

As a fan of investor psychology, I find sentiment intriguing. Measuring it is a challenge. We can’t trust what people say because they become bullish after they buy and bearish after they sell, convincing themselves that past trades were the correct way to go. Humans are notorious liars — especially to themselves. When they are…Read More

Category: Investing, Psychology, Sentiment

Category: Psychology, Think Tank, Wages & Income

You Are Worrying About the Wrong Things

o, you are not going to die from Ebola. To quote a wag on Twitter, “More Americans have been married to Kim Kardashian than have died from Ebola.” But the latest scare does have a small positive: It provides me with yet another opportunity to lecture you about how incredibly dumb your lizard brain is. (It’s…Read More

Category: Investing, Politics, Psychology, Really, really bad calls

Nobel Prize-winning economist Robert Shiller talks with WSJ’s Jason Zweig about market valuations and investors’ expectations. (see full article WSJ)

 

Category: Psychology, Video