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When Will the Rally End? S&P Euphoria, French Frailty, and the Gambler's Fallacy

Mon, 20 May 2013 14:26:47 GMT

"On August 18, 1913, at the casino in Monte Carlo, black came up a record twenty-six times in succession [in roulette]. ... [There] was a near-panicky rush to bet on red, beginning about the time black had come up a phenomenal fifteen times. In application of the maturity [of chances] doctrine, players doubled and tripled their stakes, this doctrine leading them to believe after black came up the twentieth time that there was not a chance in a million of another repeat. In the end the unusual run enriched the Casino by some millions of francs." ~ From FallacyFiles.com: Darrell Huff & Irving Geis, How to Take a Chance (1959), pp. 28-29. A precious metals bullion dealer called me last year inquiring if I’d do an interview on his radio show about the psychology of precious metals prices.  He explained that his customers are irrationally fearful of buying, and he was hoping I would soothe his listeners using something out of my psychological "bag o’ tricks." ...

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