Article Category: Psychology

Price Corrections vs. Time Corrections

In case you've been under a rock for the last four months, we're in the midst of an ongoing correction. Well ... at least the major averages are. The market itself, as measured by breadth, has been setting new highs for the past three weeks or so.

You can see this in the charts below. The top chart shows the NYSE Advance-Decline line, and the bottom chart shows the Advance-Decline line for the Nasdaq.


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Posted in: Corrections Interest Rates Primary Trend Psychology Recessions

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.


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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."


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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.


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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."


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Posted in: Momentum Psychology

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