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Last week, in this note, we discussed the behavioral tendency of hindsight bias and offered a couple simple models to combat it.  We believe that a pre-designed “model” is the pathway to improving decision making and avoiding the pitfalls of cognitive biases.  Models, or pre-determined actionable steps are necessary because the danger of most cognitive biases is that you cannot think yourself out of them.  After all, its tough to reason yourself out

Making decisions is tough.  Knowing how events will play out so that knowing you are taking the right course of action is impossible.  We all know that, or at least we tell each other that on a daily basis. Perhaps you may have consoled a friend who was beating herself up over a decision that did not work out.  Perhaps you told her, “You couldn’t know that things would turn out this way.

Both stocks and bonds were up this week quite comfortably.  Most strikingly, the 30 Year Treasury yield went from 2.42% last Friday to 2.32% early this afternoon, highlighting a readjustment of growth expectations after the weak Chinese economic data reported earlier this week.  Also, Jerome Powell, Chairman of the Federal Reserve, spoke at the economic club in New York.  He highlighted t

Economists and financial academics have created elegant theories about how markets and assets prices should behave.  However, any theory, and there are many, that assumes market participants are always logical and never biased, is invalid.  The reality is that investors are not strictly logical, in fact we are quite flawed, because we are human.

Ray Dalio, considered one of the all-time greatest hedge fund managers, years back set out to build a portfolio allocation designed to withstand all of the four major economic environments.  The environments as defined by him were as such:  Low Growth/Low Inflation, High Growth/Low Inflation, High Growth/High Inflation, and Low Growth/High Inflation.  He didn’t focus on determining which environment the economy was headed toward, but rather what com

We are two months away from 2020 and almost exactly one year away from another dreaded presidential election.  The election three years ago seems to have irreparably altered the political landscape of the country.  Division among Republicans and Democrats, inside Washington and on streets and neighborhoods all around the country, is at levels unseen since the Civil War nearly perished from the Earth “a nation of the people by the people and for the

This week was all about the Federal Reserve’s interest rate announcement and some heavy hitting economic data.  The Federal Open Market Committee (FOMC) decided to lower rates from 1.75% to 1.5%.  This was a widely expected action, and therefore previously priced into the market.  The FOMC also signaled that that it believes 1.5% to be the appropriate rate for the indefinite future and th

Stocks ended the week with healthy gains, propelled by better than expected earnings reports and optimism on the phase one trade deal.  This is the third straight week of gains for the major indexes.  The S&P 500 was bumping up against the old time closing high of 3026 for most of the day on Friday.

So I stepped on the scale this morning and immediately my mood collapsed.  I’d gained one pound since yesterday.  Normally this shouldn’t be a big deal, but now I’m in a competition with a friend to see who can reach his target weight soonest.  One pound is now a big deal.  Prior to entering this contest I had not weighed myself in over 8 months and, while I was periodically unhappy with my gut, the comings and goings of my weight concerned me littl

Some historians would argue that the 20^th century didn’t truly begin until August 1914.  On June 28, 1914 the Archduke Franz Ferdinand of the Austro-Hungarian Empire was assassinated in Sarajevo setting into action events that would lead to World War I five weeks later.  When the armies of Russia, Germany, France, Great Britain, and Austria-Hungary took the battlefield in August most of the citizens of these countries expected the war to