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Home Blog emotions

Posts Tagged ‘emotions’

The Markets are Rallying, but are you?

Thursday, July 30th, 2009

As the markets rally to make higher highs an irrational human emotion begins to impact risk taking decisions. People tend to stick to the idea that “what goes up must come down” (aka reversion to the mean).

We see this particular irrational behavior in casinos with the roulette wheel. Basically, when people see that red or black has come up several times in a row, then they think that the other color is “due.” Math tells us there is actually less than a 50% chance that Red or Black will come up on the next spin, but people weigh a greater probability on the color that has not appeared in a while as if some magical force in the universe demands equality for each color.

It would be like flipping a coin and if it comes up Heads 3 or 4 times in a row (i.e. a TREND) then a person is more likely to bet on tails on the next flip. Again, thinking that since the odds of Heads coming is 50% and the odds of Tails coming up is 50%, then it is only fair for Tails to get a chance becuase Heads just came up 4 times in a row.

This is completely IRRATIONAL risk taking behavior because the coin does not know it has landed on HEADS 4 times in a row. And the 50% thing, well that is based on infinite samples, not just the ones you are observing.

So in reality, Tails is no more or less likely to come up on the 5th flip. 

How does this relate to trading/investment decisions?

In trending markets, traders tend to FIGHT trends, get stubborn and miss money making opportunities. So…even though the markets are rallying, most traders are not because of irrational thinking and waiting for the market to come back down. Well, Tails may land eventually, but no one knows when that is going to happen.

The big takeaway is to think objectively and not emotionally.

Dr Doug

Tough Choices Have Real Consequences

Friday, April 10th, 2009

I realize what I am about to say may rub some people the right way and others the wrong way. Please understand I am only expressing my thoughts on a delicate and emotionally charged topic and with the intention of getting us to think about things differently – and certainly not to overtly offend anyone in the process.

When people get emotional in their discussions, the focus and purpose oftentimes gets lost.

I know many of you are veterans, and proud Americans. But the world has changed – at least the economic world. Growth and opportunity is now NOT exclusive to America. There is a sense of entitlement that has been reinforced over the years. Whether it was the belief that Americans are entitled to more money, better jobs, better homes, better food and better lives than others is what I am suggesting we take a careful look at rather than simply assume that it has to and should continue to be that way because that is the way it has been for the past few decades.

Again, my response here is not intended to offend anyone. I only want people to reflect and consider the possibility that what was, no longer is…or at least not in the same way it was.

Change is good. It allows people to reconnect with their purpose and with their life. Change is painful – especially at the beginning of it, which is where we are right now – at the beginning. Instead of getting mad or emotional, find inspiration. You can, I can, we all can and should.

While I am far from the expert on what being American is – I do believe that somewhere over the years, it was assumed that being American entitled a person to success. I think the real message got lost in translation – as being American, as I understand it, was and is about Life, Liberty and the Pursuit of happiness. Can you be American and live/earn your living in a different country? Of course. Just as you can be from another country and live/earn your living in America.

The painful reality in this economic time may simply be that the “best” opportunities are not exclusive to existing in America. And as painful as that is to accept, it is a reality that America helped to create.

As far as the direct question about IBM and if someone should, at their own expense, relocate to India for a job with little or no guarantees. Well, I am not the expert on what is happening with IBM or its business development but I will say that one should always be open to assessing the risk/reward in any situation, and if need be, move to where the work is. Either way, just be prepared to accept the consequences of your decisions.

Now, maybe a US based, American employee of IBM is thinking, “Forget that, I am not moving out of the US for work and leaving my friends or leaving/relocating my family. Especially if I have to pay for it out of my own pocket.” I am not here to say whether that thought process is right or wrong. Everyone is entitled to their beliefs and it is that person’s choice to move or not move.

And, again, one should be prepared to accept and deal with the consequences associated with either of those decisions.

Which one would be the best decision for that person? I have no idea. But I do know how to help that person go about the PROCESS of figuring it out as it all depends on that person’s specific goals as well as an objectified risk/reward analysis of the upside and downside that will come with either decision.

At the core of what I am trying to communicate to anyone who will listen is that we have grown to develop into a comfort zone surrounded by a sense of entitlement. Being American does not entitle one to a special existence above all other humanity. Should someone who is unable to find work in their country consider moving at their own expense to another country if their goal is to obtain work and build a better life for themselves and their loved ones – well, yes, they should consider it.

For a few hundred years now, people from countries around the world have done that and moved to America (at their own expense and with no guarantees); the difference is now Americans are forced with having to digest that potential reality and consider doing it. Why is that so distasteful? Are Americans better than people from other countries? No, I do not think so as I believe ALL people are created equal – but it is their choices in life that define them. 

In the end, we get to make our own choices and we all should understand that with those decisions come consequences. Sometimes we must accept that we are going to be forced to choose between two very unpleasant things – and then the solution lies in identifying which choice is “less worse” for our lives and futures.

I hope you all accept this post for what it is… just my opinion.

Again, I have no intention to offend – but simply to stimulate thought amongst those who are reading this.

Thanks

Dr Doug


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