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"This Time It's Different" In Love And Stocks - Valentine's Day Edition

Tyler Durden's picture





 

It’s Valentine’s Day – a unique combination of Hallmark Holiday, celebration of romantic love, and source of self-loathing angst, all depending on your personal situation.  And in that Rorschach test located in the local drugstore’s greeting card aisle, ConvergEx's Nick Colas finds some useful lessons about investing and economic development.  Most divorced Americans remarry, for example, within four years of the end of their first marriage.  Any surprise that investors are looking to hitch up with stocks again, some six years after that messy divorce in 2007?  More scientifically, the brain functions of people in love use the same bits of the cranium as we all light up when assessing the pros and cons of a given investment.  “Don’t fall in love with your positions” is good advice.  Lastly, ETFs and online data show that technology can change something as established as investing... Or finding your better half.

ConvergEx's Nick Colas: Love, Rain on Me

Despite its reputation as a couples-only destination, Valentine’s Day is actually remarkably inclusive.  If you are happily involved in a relationship, you celebrate the life of Saint Valentine.  In his prime, sometime in the third century A.D., he was a Christian priest in Rome who had a lively trade in marrying his fellow religionists. Since Rome was still pagan at the time – and unfriendly to Christianity – this was a daring act. So we celebrate the man who risked his life so others could be joined together with the blessing of the nascent religion of Christianity.

And if you are “In between” relationships, and perhaps embittered that there is a specific day to celebrate something you don’t currently have, consider that St. Valentine got his sainthood in large part because he was gruesomely martyred.  By one version of the story, he was apprehended by the Romans for his practice of the still-illegal religion.  A charming man, he actually befriended all and sundry in authority and they were inclined to let him off with a strong warning.  And then he tried to convert them to Christianity…  Things went south for him after that, and he ended up meeting a gruesome death – beaten until not quite dead, and then slowly beheaded just outside the gates of Rome.

Love, as we know the concept today, is a bit more modern than poor Valentine and essentially dates to the Middle Ages in Europe.  The notion of ‘Courtly Love’ – aristocrats who got to pick their soul mates based on character and affinity, rather than loveless arranged marriages – was first limited to the nobility.  The typical storyline is ‘Wealthy royal woman wooed by poor but noble knight when husband away killing Muslims at a crusade.  Advances first repulsed, due to marriage to infidel-slayer.  Later, love consummated.”  Yes, things have changed a bit over the last 500 years in the ‘Ideal love’ business, but the kernels of the story – two people who share a deep emotional connection – is the bedrock of modern romance.

That concept – that people should be free to do what they want – also spilled over in the Middle Ages to matters economic as well as those of the heart.  You probably remember from high school history the ‘Guilds’ of the Middle Ages – trade groups who acted as prototypical university, fraternal order and social club – as another emblem of individual self-destiny.  If you wanted to learn a trade as a young man, you apprenticed yourself to a blacksmith, stone mason, or whatever livelihood was on offer in your town.  After a period of years, you might gain entry to the guild and be able to make a living in that profession rather than remain stuck in the agrarian countryside as a small lot farmer.

Fast forward a few centuries, and the intersection of love and commerce is still a useful waypoint to understand human behavior.  Consider the following points:

#1 – Divorced people usually remarry.  In a 2006 presentation to the American Sociological Association, a U.S. Census Bureau staffer reviewed data on the topic of the domestic population’s tendency to remarry after divorce.  While I might rightly be accused of using a survey size of one, it is not unreasonable to believe that most people who undergo the emotional strains of divorce are tempted to decline a return trip up the aisle at any price.  And yet, most eventually put on the tux or fancy dress and sign up for another stint.  In 2004, for example, 36% of marriages involved at least one person who had been previously part of another “Mr. and Mrs.” As recently as the late 1980s, half of all divorced men were remarried within five years of their divorce, and 45% of all women.  More recent data shows that second marriages end before “Death do they part” than firsts – about 65% versus 50%. And the third time is distinctly not the charm – approximately 75% of those unions end in a lawyer’s office.

 

The bottom line –or one of them, anyway – is that people work inside of their comfort zone and are happy to believe that “This time is different” even though the actual math isn’t all that promising.  In the world of investing, consider the link to the recent trend of money flows back into U.S. equity mutual funds.  Investors had a nasty divorce from this investment category back in 2007, of course.  And for the last six years they haven’t forgotten the sting of that separation, removing $610 billion in capital from these funds.  But now, it seems as if they are willing to give it another try.  January 2013 saw positive flows for the first time since April 2011.  Yes, the first week of February is a little slower – only $683 million, rather than the $3-7 billion in weekly inflows from January – but with tax refund season now hard upon us, the next few months should remain positive.

 

#2 – Love and investing use many of the same bits of the brain.  A November 2000 academic paper entitled ‘The Neural Basis of Romantic Love’ (Bartels and Zeki) reviewed what happens when you submit a person in love to an MRI exam.  The upshot is that several parts of the brain – the medial insula and the anterior cingulate cortex, the caudate nucleus, and the putamen.  What’s notable about those clusters of grey cells is that they also run the decision-making and other “Rational” parts of our lives.  The old Jimi Hendrix lyric, “Is this love baby, or is it just confusion?” is remarkably accurate.

 

How many times has someone told you “Don’t fall in love with your positions?”  Now you know part of why it is so hard to avoid that common error – the part of your brain that feels amorous emotion is way too close to the part which tries to be rational.  To get over that linkage, remember that you own a portfolio of stocks.  Remaining stubbornly loyal to an idea isn’t the modern version of ‘Courtly Love’; it’s just dumb.  And on the flip side, the portfolio approach seldom works in one’s personal life.  Diversification there (unlike in modern portfolio theory) actually increases both risk and costs.

 

#3 – Technology changes everything, at least a little.  Survey work by Reuters, PC World, the Washington Post and others (summarized here: http://www.statisticbrain.com/online-dating-statistics/) shows the power of online dating.  Match and eharmony have a total of 35 million members.  They collectively prefer blondes (32%), with women looking for “Nice guys” (38%) and men seeking “Modern Career girls” (42%).  A recent cnbc.com article notes that 5% of U.S. marriages started as an eHarmony date and over half a million unions around the world start the same way.  And if things don’t actually get to the altar, a website called “I Do, Now I Don’t” (http://www.idonowidont.com/home) will let you sell your engagement ring, wedding band, and/or dress with the same efficiency as you found your almost-spouse.

 

The world of investing is no stranger to the desire for efficiency, targeted searches and reduced discovery costs (three benefits of online data).  Exchange traded funds offer the same advantages, along with some distinctly unromantic benefits such as the ability to hold more than one in a portfolio.  Year to date flows into ETFs total $33.4 billion, with $30.6 billion into equity products.  That is over $1 billion/day so far in 2013, handily beating the one year average of $540 million/day.  There’s some seasonality there, to be sure, but there’s no doubt that investors see the utility of a prepackaged answer to their investing needs.  Just as they see the benefit to searching for a future spouse who meets their basic requirements.

By way of a quick conclusion, what I have tried to chronicle here is a central observation to a lot of the work we do in these pages: investing isn’t any different from many of the other decisions we make in our lives.  Love, heartache, winning investments, losing positions – it matters not.  Our decisions in life all filter through the same personality.

There’s an old saying: “What does every bad relationship you’ve ever had share in common?  You.”  More optimistically, all the good ones have the same feature.  And on this St. Valentine’s Day, whether you are alone or with someone, it pays to focus on that happier sentiment.

 


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Thu, 02/14/2013 - 12:25 | Link to Comment Whiteshadowmovement
Whiteshadowmovement's picture

Anybody play ALXN today? Was that a fun roller coaster or what?! Thanks algos...

Thu, 02/14/2013 - 12:26 | Link to Comment NotApplicable
NotApplicable's picture

Nothing says love quite like the guy I saw last night in Aldi's parking lot, throwing his roses into the back of his station wagon.

Thu, 02/14/2013 - 12:29 | Link to Comment Buckaroo Banzai
Buckaroo Banzai's picture

Roses from Aldi's, LOL. Those will start to wilt on February 15th, and the petals will be suitable for pressing on February 20th.

Those black-hearted, bottomless pits of need (aka women) must be appeased, however.

Thu, 02/14/2013 - 12:39 | Link to Comment redpill
redpill's picture

Wifey asked for a book light so if she wants to read at night she wouldn't keep me up <3

Thu, 02/14/2013 - 12:30 | Link to Comment Whiteshadowmovement
Whiteshadowmovement's picture

Most heartwarming holiday photo ever? This stripper at an x-mas party:

http://t.co/5YVAF9tF

Thu, 02/14/2013 - 12:32 | Link to Comment Buckaroo Banzai
Buckaroo Banzai's picture

Great place for a 3-year old. Pictures like this are going to turn me into a racist.

Oh wait. I already am.

Thu, 02/14/2013 - 12:34 | Link to Comment Whiteshadowmovement
Whiteshadowmovement's picture

Lol, look at the expression on everyones face...Its as though they were watching a kid recite a poem or something

Thu, 02/14/2013 - 12:38 | Link to Comment redpill
redpill's picture

That's just fucking wrong. And coming from me, that's saying something!

Thu, 02/14/2013 - 12:39 | Link to Comment NotApplicable
NotApplicable's picture

Dat's one shiny taint! Rudolph's got nothing on her.

Thu, 02/14/2013 - 13:06 | Link to Comment Stuffs And Stuff
Stuffs And Stuff's picture

It's a family tradition, I'm guessing.

What I want to know is what the hell is this stripper doing? It's not sexy; if you fucked her like that you'd probably break her neck.

And what the hell is a little kid doing there. She looks so confused. And you can even see the smokey atmosphere of the room. Great parenting.

Thu, 02/14/2013 - 13:35 | Link to Comment Intoxicologist
Intoxicologist's picture

I think she's instructing them:  "Yo, you slide yo SNAP card down dis slot, then I gets paid."

Thu, 02/14/2013 - 13:14 | Link to Comment adr
adr's picture

Fo shore conversation:

See baby, dat gonna be you in fifteen years, dats right my baby gonna make me mo babies, gonna get me mo money. Dat girl makin her momma proud, showin evyone what's she gots. My baby's daddy and the home bros gonna tag that bitch later on, damn. Gonna watch dat shit, cord it on my Obama phone. Yeah that's why we voted fo'em, GO OBAMA!!!!

Thu, 02/14/2013 - 13:03 | Link to Comment Iriestx
Iriestx's picture

If there's one thing I've learned from liberals, it's that anybody that doesn't support Obama is racist.

Thu, 02/14/2013 - 12:39 | Link to Comment CheapBastard
CheapBastard's picture

sorry whiteshadow, I'll stick with my Japanese Love Dolls:

 

http://nymag.com/thecut/2012/11/getting-comfortable-with-a-japanese.html...|currentSlide=00007

Thu, 02/14/2013 - 12:41 | Link to Comment Dr. Engali
Dr. Engali's picture

And we wonder why the country is headed to hell in a handbasket. That little girl doesn't have a chance in life.

Thu, 02/14/2013 - 13:09 | Link to Comment ebworthen
ebworthen's picture

I suppose Caligula and the other Romans entertained their children this way too.

Thu, 02/14/2013 - 14:16 | Link to Comment _ConanTheLibert...
_ConanTheLibertarian_'s picture

I had to giggle

Thu, 02/14/2013 - 13:51 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

How much money did you lose today Whiteshadow?

Thu, 02/14/2013 - 14:22 | Link to Comment Whiteshadowmovement
Whiteshadowmovement's picture

Lol, im actually having apretty good day

http://www.zerohedge.com/news/2013-02-14/so-who-leaked-heinz-deal#commen...

Besides most of my accts are denominated in euros so it makes me look good as the euro declined more than most markets. Immvery close to my 2013 highs.

Managed to scoop up some ALXN on the dive (round $87) to flip, might get out by the en of the day if it keeps ticking up

Thu, 02/14/2013 - 12:30 | Link to Comment Whiteshadowmovement
Whiteshadowmovement's picture

.

Thu, 02/14/2013 - 12:32 | Link to Comment Buckaroo Banzai
Buckaroo Banzai's picture

.

Thu, 02/14/2013 - 12:38 | Link to Comment Dr. Engali
Dr. Engali's picture

You both make excellent points, and I'll counter with one of my own:

 

                                    .

Thu, 02/14/2013 - 12:42 | Link to Comment redpill
redpill's picture

fucking shills for punctuation

Thu, 02/14/2013 - 12:48 | Link to Comment Whiteshadowmovement
Whiteshadowmovement's picture

Thats a fine point you make, doc

Thu, 02/14/2013 - 12:58 | Link to Comment francis_sawyer
francis_sawyer's picture

:

Thu, 02/14/2013 - 14:33 | Link to Comment Whiteshadowmovement
Whiteshadowmovement's picture

Francis, I know we dont agree on everything but you make a good counterpoint

Thu, 02/14/2013 - 15:00 | Link to Comment Intoxicologist
Intoxicologist's picture

From the looks of things above, it appears Cupid is full of down arrows today.

Thu, 02/14/2013 - 12:32 | Link to Comment Sweet Pea
Sweet Pea's picture

Stay the course!

Thu, 02/14/2013 - 12:32 | Link to Comment Troy Ounce
Troy Ounce's picture

US politicians move to put William Banzai in jail forever:

news.cnet.com/8301-17852_3-57569287-71/politician-moves-to-make-vulgar-photoshopping-illegal/

Thu, 02/14/2013 - 12:41 | Link to Comment NotApplicable
NotApplicable's picture

LOL

Priceless!

Something tells me that this man is about to discover the power of the Streisand Effect.

Thu, 02/14/2013 - 14:21 | Link to Comment Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

 

 

my god, what if the Banzai7 is unleashed?????  

 

May god have mercy on our souls.

Thu, 02/14/2013 - 12:41 | Link to Comment redpill
redpill's picture

yeah just as soon as they stop doing vulgar things to the Constitution, mkay?

Thu, 02/14/2013 - 12:39 | Link to Comment Iam Yue2
Iam Yue2's picture

“It is naively assumed that the fact that the majority of people share certain ideas and feelings proves the validity of these ideas and feelings. Nothing could be further from the truth. Consensual validation as such has no bearing on reason or mental health.”
? Erich Fromm

Thu, 02/14/2013 - 13:06 | Link to Comment ebworthen
ebworthen's picture

So Cumcast has completed it's aquisition of NBC.

Bought out GE, and now owns part of the media.

I hate Cumcast and their Zfinity.

Thu, 02/14/2013 - 13:16 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Ben Bernanke has his own way of saying "I love you" to the US economy / people.

A job for Billy B7. ?

Thu, 02/14/2013 - 13:17 | Link to Comment Laura S.
Laura S.'s picture

I am a good example of electronic dating. I met a boy from Argentina, we spent million hours chatting, then he came thanks to favourable immigration laws to Canada and we got married. We are happy and together since then (it will be one year very soon). Last time I saw my family, they told me that my decision was very rational, because he is perfect (for me). So it was maybe my rational part of my brain influencing the emotional one...

Thu, 02/14/2013 - 19:38 | Link to Comment ersatzteil
ersatzteil's picture

If you can get past the obnoxiousness that exemplifies the Argentine male and he stays with you after the whole waiting period for citizenship is over. Divorce is like prostitution; you pay no matter what.

Thu, 02/14/2013 - 13:54 | Link to Comment NEOSERF
NEOSERF's picture

Said another way, once a muppet, always a muppet.

Thu, 02/14/2013 - 14:14 | Link to Comment syntaxterror
syntaxterror's picture

I know plenty of underwater "homeowners" that spend countless hourless scanning Zillow and visiting open houses for million-dollar plus starter homes. I'm assuming they think there's more free money just waiting for them to buy ANOTHER house. Of course, it was only recently that they all swore they would never make the mistake of buying into a housing bubble again.

Thu, 02/14/2013 - 15:39 | Link to Comment TraderTimm
TraderTimm's picture

2013:

 

BTC

Jan. +55.539%

Feb. +26.095%

S&P 500 (SPY)

Jan. + 3.163%

Feb. + 1.095%

 

I <3 Bitcoin

 

Thu, 02/14/2013 - 15:42 | Link to Comment trendybull459
trendybull459's picture

have and must to see: http://trendybull777.blog.com/2013/02/14/stop-investingstart-createthink-of-mother-earth

"I love to travel,I love to be sponsored,I love things for free just because I'm a chick..."The other forms of prostitutes the Matrix try to keep going while prostitutes loosing jobs because rich corporative clients and bankers gettin hair cuts.Babies,you soon belong to the working class and taking water to home from the 10km long by step :)))))))))) Matrix should be reloaded:

http://www.travelgirls.com/ad/je03ad61/?matchtype=&creativeid=15385805065&keyword=russian%20girls%20for%20marriage&placement=www.zerohedge.com&target=&random=1909687247194328841&aceid=&adposition=none&gclid=CO7ayuvFtrUCFQpb3godmSwAAw

Do NOT follow this link or you will be banned from the site!