Observations on
Psychology and the Markets
I recently attended the 30th annual conference for the International Federation of Technical Analysts (IFTA). The IFTA Conference is held in a different location every year, and this year's event brought us all together in beautiful Milan.
As the equity markets continue to new highs, I'm reminded of Do Something Syndrome and the dangers of impatience. When your stocks are working, and charts are going up and to the right, why are you so compelled to mess it up?....
I recently came across a 1976 interview with Ben Graham for the CFA journal. It was very interesting to hear his reflections on the financial industry in his twilight years. What struck me was his thinking on simplifying the investment process and a somewhat cynical view on the industry and its participants.
Contrarian investing has always been a fascination of mine. From the first time I read Humphrey Neill's classic book The Art of Contrary Thinking, I've been watching magazine covers, newspaper headlines (above the fold, of course) and anything else that can suggest what the masses are thinking...
I've read Shane Parrish's Farnam Street blog for years, and as a result have developed a real appreciation for Charlie Munger's approach to investing and thinking and life. I'm so glad I finally read Shane's transcript of Munger's Herb Kay Memorial Lecture from 2003. I'd encourage you to take the time to read the entire speech, as he covers so much ground with his signature mix of dry humor and healthy cynicism.
JC Parets, a very capable technician as well as fellow wine aficionado, wrote a great post on All Star Charts comparing sommeliers to technical analysts. Specifically, he discussed the methodical way in which sommeliers evaluate a wine during a tasting to the methodical way that a technical analyst reviews the weight of the evidence...
I recently listened to an interview with Rob Arnott from Research Associates entitled "Rob Arnott on Why Active Managers Fail." Despite its poorly worded title (Rob explains why some active managers do outperform, see below), it's definitely worth a six minute listen...
