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Forecasts? I Haven't Got A Clue ...

April 16, 2018 Comments (0)

Small Worlds We predict things all the time, we can't help ourselves. And in the small world that constitutes our immediate bubble of experience those predictions may have some validity. But in the big world that we inhabit they often don't.  Which of those worlds do you think more accurately represents stockmarket investment? It's difficult for us to accept that our small world experience doesn't scale up to the big world, but it's often true. To all intents and purposes we're infants...

Cursed By Momentum

March 9, 2018 Comments (0)

Edgy Investors Although most investors have no edge on the market there's a proportion of them that persist in trading actively, the main effect of which is to enrich their brokers. There are various explanations of why this occurs, but it seems to come down to some combination of inherent overconfidence and a perverse refusal to take account of negative information.  This is particularly dangerous in calm periods such as those we’ve been experiencing in markets over the past few...

Bias In Action

February 12, 2018 Comments (0)

Myopic Urges The recent sharp correction in markets has clearly surprised a lot of investors. No doubt this is partly due to the standard myopia people seem to exhibit as soon as the last crash is out of sight, but it also seems to be connected to the fact that the seemingly inexorable rise in share prices and the continuing low interest rates on deposits has tempted new people into stocks. Faced, for the first time, with nasty losses they’re casting about for some kind of strategy to deal with...

Putting Pro-Innovation Bias on the Blockchain

April 24, 2017 Comments (0)

Blockchain Bias Over the past couple of years I've spent a lot of time listening to people wittering on about "the blockchain". They've claimed it can solve a plethora of society's ills - everything from the elimination of poverty to the overthrow of fiat currencies and the nation state. Being charitable this is evidence of pro-innovation bias in all its perverse glory. Being cynical it's evidence of people trying to scam investment funds by capitalizing on the halo effect. The blockchain is a...

A Catalog of Investing Errors

April 17, 2017 Comments (0)

Love Lists We're attracted to lists like moths to flames and netheads to clickbait. The Big List of Behavioral Biases is by some way the most popular page on this website, but it actually provides very little insight into investing successfully. Behind this, though, lies a deeper truth. Lists are processed more easily by the brain, and they're perfectly optimized for the click and go environment that is the Internet. Here I explain why. In a list. Obviously. 1. The Paradox of Choice Too much...

Unbanked But Not Unwise

April 10, 2017 Comments (0)

Tribal Finance Lisa Servon has written a clever, accessible and pin-point clear piece of ethnographic research. It looks at how an underserved and underappreciated tribe, without access to regular financial services, has developed ways and means of coping in their absence. It's also a damning indictment of the organizations that claim to offer them these services. The tribe, of course, is middle class America, and the organizations are the banks that fail to serve them. Many Prices Over here in...

Age Makes You Happier - And Poorer

April 3, 2017 Comments (0)

Avoidance Strategies As the years pass I've noticed I'm increasingly unwilling to expose myself to sources of negative information or emotional stress. So news bulletins, soap operas and anything a film critic might regard as emotionally engaging are increasingly off-limits. Frankly I'd rather watch Guardians of the Galaxy than Moonlight, no matter how worthy the latter. Slightly to my surprise it turns out that this isn't just me being more than normally antisocial, but is a commonly observed...

The Future is Made in the Bedroom, Not the Boardroom

March 27, 2017 Comments (0)

RIP Hans Rosling Hans Rosling was, if you’re a data geek like me, a hero. His life was spent not just combating fake facts and opinion based decision making but also in finding new and imaginative ways of visualising real data. And he was in demand by corporations across the world because his work showed them where to invest. So obviously Rosling wasn’t an economist: he was a population statistician who built his ideas on data, rather than models. And what his data suggests is that the future...

Idiots in Investing Echo Chambers

March 20, 2017 Comments (0)

Investing in the Dead Some people like to wander round graveyards. I get the same sort of ghoulish pleasure out of frequenting investment discussion boards. They're full of Pollyannas, forever only able to see the good in the stocks they invest in. Sadly they're almost always wrong. But it's kind of fun watching them keeping the reanimated corpses of zombie stocks moving about through the power of sheer stupidity. The Glad Game Pollyanna was the eponymous child heroine of Eleanor Porter's 1913...

Blindsided by Brexit Bias

July 4, 2016 Comments (0)

Unbalanced The result of the UK’s referendum on the EU caught markets by surprise. They’d soared the previous day in the expectation of a Remain vote and were thrown into turmoil when it turned out a majority of the British were less concerned with economic stability and more with mass immigration. The polls leading up to the referendum were finely balanced; if they were to be believed then the result was far from certain right up to the end. Yet many people took the market surge at face value...