Behavioral Economics

Gresham's Law

... the marginal price setter is “irrationally exuberant”, or dare we say it out loud? “Greedy.”

The Curious Case Of Missing The Market Boom

"I don’t want to kill your dream, and I don’t have to. The dream will kill itself. You’ll hear a monumental ‘POP’ go off, and then you’re back in reality..."

Every Single Cognitive Bias In One Infographic

The human brain is capable of incredible things, but it’s also extremely flawed at times. With dissonance seemingly at record highs across America, here is a look at how our cognitive biases can have a profound effect on our endeavors, investments, and life in general...

A Biased 2017 Forecast, Part 1

"We are prone to overestimate how much we understand about the world and to underestimate the role of chance in events..."

Investors Are Sticking With Pavlov's Dog Until Everything Breaks

Remember when “bad news is good news” first leapt into common parlance? At first it was used as a way to describe the reaction function of Fed policy-makers. It was taken as a cute turn of phrase in encapsulating the state the of the world. Over time, as Bloomberg's Richard Breslow explains, it’s morphed into an ugly and cynical way of justifying mindless investing behavior.

A Collision-Course With Crisis: Making The Wrong Choices For The Wrong Reasons

Life is full of examples where folks make bad choices for noble reasons. Not every decision is a winner: sometimes you make the right call, sometimes you don't. That's completely understandable and defensible. Fate is fickle, and no one is 100% right 100% of the time. But what's much harder to condone is when people embrace the wrong decision even when they have ample evidence and comprehension that doing so runs counter to their welfare.

Is The Market Rational After All?

This is the market we have now: dominated by delusional, irrational central planners with unlimited powers to create money out of thin air to fund their manipulations. Until the central planning madness destroys markets' ability to discover price and allocate capital. Then you end up with Venezuela: a failed state and a broken economy that can no longer feed its people despite the nation's vast oil wealth.

The Inevitability Of Unintended Consequences

Why central planning efforts will ultimately backfire - Anyone involved with managing projects, people or systems knows that the only thing that can be planned with absolute certainty is that things will never go 100% according to plan. History is full of examples where governments' best-laid plans failed in spectacular fashion, exacerbating the very problems they were intending to solve. Here are a few of our favorites...

The Statist Mindset

A libertarian mindset looks at the same results and concludes that if people are fallible, then the absolutely last thing in the world we should do is to give them sovereignty not only over themselves but over other people as well.

What If Economists Applied Their Own Theories... To Themselves

It appears that a main preoccupation of economists – the self declared “behavioral economists” prominent among them – is to show how dumb people are as consumers and in assessing risks. Drawn to logical conclusion, this implies that economists, advising benevolent dictators are the solution. In ancient Greece people flocked to oracles and sought guidance.; today, Councils of Economic Advisers, IMF, OECD, Nobel prizes sustain perceptions that "macro- strology" and much else of what economists do is "science."

Mother Yellen's Little Helper - The Rate-Hike Placebo Effect

Americans are increasingly likely to respond positively to a placebo in a drug trial – more so than other nationalities. That’s the upshot of a recently published academic paper that looked at 84 clinical trials for pain medication done between 1990 and 2013. These findings, while bad for drug researchers, does shed some light on our favorite topic: behavioral finance. Trust and confidence makes placebos work, and those attributes also play a role in the societal effectiveness of central banks. That’s what makes the Fed’s eventual move to higher rates so difficult; even if zero interest rates are more placebo than actual medicine, markets believe they work to support asset prices.