The Nobel prize winning work of Kahneman and Tversky featured an extensive examination of the biases we routinely committ which drive our thinking away from the purely rational economic man theorized by traditional economics. One of the more important biases they examined was the phenomenon of anchoring. We anchor when we place a higher value […]
Category: Markets
Profitable ETF Trading techniques: Understanding the importance of behavioral finance
We know that people pride themselves on their rationality and analytical skills. This is very evident in traders who invest a lot of psychological energy into their systems and personal discipline. And yet it is also very clear that psychology is extraordinarily evident in financial decisions. Time and again ,psychological pressures will over-rule rational analysis […]
Profitable ETF Trading Techniques: market classification
The very first thing I analyze when I am creating my daily trading plan is the current market classification. The reason? Because, depending on which scholar you read, the market itself contributes as much as 50% of the return of individual stock gains/losses. It makes sense to me then that the most importnt single factor […]
Effect of credit crunch on real assets and the entire business cycle
Credit crunch means available money NOT moving to buy real assets which explains the loss of value even in commodities and basic materials. No one is venturing that even the real assets can be made into products that people with buy , since businesses and investors are hoarding cash and don’t have access to the […]
A Bailout dialogue between two mice: K & M
Let’s listen in on 2 friends: K and M, discussing the bailout plan K: of all the places we jumped to, we chose 850B as the landing pad though? i think all existing mortgages should have been maintained in an escrow acct by the government then all properties auctioned off at a fire sale. then […]
We have the leadership we have earned
It was only a few short days ago as you will recall, that a truly terrible bailout bill was surprisingly defeated in the House of Representatives by a margin of 13 votes. The representatives who voted against the bailout bill were widely regarded as heroic by standing up to the face of social and political […]
Professional humility and integrity
I had a rare privilege recently to attend an off the record briefing from a very high ranking general officer from an allied nation. He was reflecting on a career that spanned some very extraordinary times. He told one story however that really captured my attention. He was describing a situation in which he saw […]
Wisdom vs Instinct
As you will recall, a pair trade is a trade that goes long one side and short the other with the idea of capturing the difference in performance. Another way to frame my current favorite pair trade is “Wisdom” vs “Emotion”. It is my hypothesis that a species’ evolutionarily successful emotional responses are codified in […]
A Pair Trading Strategy refinement: Buffett vs the mob
A pair trade strategy refinement to consider to take advantage of long term market psychology which is known to persist despite evidence that the market is changing. I was thinking of a pair trade earlier today that would capture something like the mood of the mass market psychology in practice. It would pit the wisdom […]
What makes Buffett great: the ability to take disciplined action at moments of great stress
Trim Tabs reports an extraordinary panic selloff by the masses in September, driven by fear. Banks are collapsing left and right. The public is outraged by their ostrich-like elected leaders in the House and Senate and pressure the Congress into aborting a terribly framed corporate welfare/bailout bill. Market volatility, as measured by Average True range […]