Posts filed under “Psychology”
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 simply trend-following approach (see Meb Faber’s “A Quantitative Approach to Tactical Asset Allocation“), the shorter the time horizon, the more difficult this becomes.
Thus, forecasting near-term market moves is an exercise in futility.
I bring this up because after a pullback of less than 10 percent in September and October, markets have powered ahead. Despite all of the crash warnings, the Standard & Poor’s 500 Index has managed an 11 percent gain this year. Yes, I know, a 1987-like crash, is imminent; I have been hearing that for five years. Like the boy who cried wolf, should a crash finally occur — and that is always a possibility — you won’t get credit for it.
In trading, early equals wrong.
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
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
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
Even if you could pick huge winners, could you hold them? Barry Ritholtz Washington Post, October 5, 2014 Let’s imagine for the moment that you are the World’s Greatest Stock Picker®. You have an uncanny talent for ferreting out “the next Microsoft” — companies that are on the sharpest edge of what’s…Read More
I am a fan of Morgan Housel, columnist at the Motley Fool. His writings evince a strong understanding of behavioral issues, and he has a gift of sifting through the nonsense to get to what really matters. Only on rare occasions do I get to disagree with him. Today is one of those times. Housel has…Read More