Take a Walk
"I can't stand it to think my life is going so fast and I'm not really living it."
--Ernest Hemingway, The Sun Also Rises
Movement is a key part of success. We can have all the theories in the world, but we're going to have to make a decision and act on it in order to achieve anything.
For the past few weeks, I've been writing about emotional investors and their drivers. We spoke about Brigitte Madrian's recent award for behavioral finance research in the way people actually behave with their company 401(k) plans.
We looked at the "availability cascade" of nonsensical rationalization that followed the Fed's interest rate non-decision, and the stock market's subsequent sell-off in the face of good news.
We looked at "confirmation bias" and found that better decisions are, of course, made with balance.
This week, like a hand in the glove, let's look at what the white coats call "availability heuristic" or what I'll just call "thinking fast." In a nutshell, I can explain what just happened by recalling other things that happened just like it. A better but longer definition is found here.
Thinking fast saved our lives when we were fighting for our lives. It's dangerous today to think fast with our investments. Who is going to be faster than the algorithms hard-wired into the market-maker's computer network? They exacerbate their programmer's emotions.
It's easy to "think fast" and assign reasons for making money or losing money in the markets. The truth is usually vastly more complicated and found with "slow thinking." We need a little more of this, and a lot less CNBC and Marketwatch.
We need to get out and go for a walk: "The walking of which I speak has nothing in it akin to taking exercise, as it is called, as the sick take medicine at stated hours...but it is itself the enterprise and adventure of the day."
--Henry David Thoreau, Walking