Article Category: Psychology

Look Beneath the Surface

The stock market is made up of millions of participants, acting on their own subsets of knowledge and emotion, pushing prices around for a variety of reasons. This group is who we typically define as the "crowd" that we must outthink in order to beat the market.

But as any good game theorist will tell you, predicting the markets is not about predicting how the crowd will behave; it's about predicting how the crowd thinks the crowd will behave.

Read more  

Posted in: Earnings Psychology Volatility

Anchoring … A Negotiating Tactic

I completed my MBA at the University of San Diego, back in 2011. Of all the interesting courses I took on finance, accounting and investing, it was actually a course on negotiations that left the biggest impression on me.

That could be because I technically "won" the course ... whatever that means. (Isn't the first rule of negotiating that there are no winners and losers?) Anyway, of all the negotiating tactics that were discussed, the one I recall most vividly is "anchoring."

Read more  

Posted in: Economy Psychology

Repatriation: No Matter What, Investors Win

With tax reform now a done deal, investors and analysts alike are scouring over what the new policies will mean, and what companies will do with all this newfound wealth. One of the major changes now allows companies to bring back the cash they've been holding overseas at a lower tax rate of 15.5%.

This process, dubbed repatriation, could have a huge impact on the bottom lines of companies. Recent estimates by Goldman Sachs suggest that American companies may be sitting on nearly a trillion dollars of overseas cash. Other estimates put that figure as high as $2.5 trillion.

Read more  

Posted in: Dividends Federal Reserve Gold Interest Rates Psychology

Statistically the Best Time to Invest

Investing is a game of probabilities, and while those probabilities are not always clearly defined, sometimes they are. Case in point: year-end rallies.

Let's say I took an oddly shaped coin out of my pocket and asked you if you'd like to play a simple betting game. You, having never seen such an irregular shaped coin before (and being a savvy investor to boot), say, "Sure, but I want to see that coin flipped a hundred times first."

Read more  

Posted in: Momentum Psychology

Economic Momentum and Virtuous Cycles

When most people hear the term momentum, they think about classical physics - the idea that an object in motion stays in motion, unless otherwise disturbed. Those who spend their lives watching prices tick are familiar with another type of momentum - price momentum.

This refers to the empirically observed tendency for rising prices to keep rising, and falling prices to keep falling. Price momentum is a very powerful driver of asset prices, with its roots in behavioral psychology. But today I want to talk about a different type of momentum - economic momentum.

Read more  

Posted in: Earnings Economy Momentum Psychology

Back to top