Posts Tagged ‘anchoring’

Anchoring, The Mother of Behavioral Biases

Anchoring, The Mother of Behavioral Biases

Courtesy of Tim at The Psy-Fi Blog

Anchors underwater

Behavioural Biases (5): Anchoring

Just as an anchored ship rarely strays too far away from its tethering point, a human being prefers to stick close to the references with which they feel most comfortable. Anchoring is an easy-to-demonstrate, hard-to-eradicate behavioural bias that has all sorts of nasty implications for investors, many of them not obvious. In fact, along with availability, it has the claim to be the mother of all biases.

The fundamental investment problem lies in the difficulty in deciding what something is intrinsically worth. A skilled negotiator will start from an extreme position, such as a very high price, in order to frame the subsequent discussions. Anywhere and anytime someone presents us with a number in order to start negotiations we’re being anchored. So if it really matters then you need to start from your own number or walk away.

Random Pricing

Anchoring is almost trivially easy to demonstrate and it’s been replicated many times by many researchers in many situations. Perhaps the simplest example is to use peoples’ social security numbers as a reference. As Dan Airely shows here, by simply getting people to write down the last two digits of the number and then asking them to submit mock bids it’s possible to get people with higher numbers to bid up to twice as much as their lower number companions. Unconsciously the brain sets the social security derived number as the reference point and then adjusts accordingly.

It’s worth dwelling on that. I think it’s simply astonishing and truly shocking that highly evolved, smart primates like ourselves can be fooled into utterly stupid behaviour through a trivial piece of misdirection. And it affects us all.

Anchoring is a particularly pervasive problem and occurs in all sorts of scenarios, being particularly beloved by opinion poll surveyors, real-estate agents, stockbrokers, car salesmen, supermarkets and, well, virtually everyone who wants us to buy things. Wherever and whenever anyone presents us with a number and then asks us to do something with it you can be sure we’re be tricked into behaviour that probably isn’t in our best interests.

Multiple Choice, Multi-Buys

Multiple choice surveys on some kind of sliding scale are an especially fun source of anchoring issues since people will invariably anchor


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Map: The Countries With the Most Oil Reserves

Courtesy of Jeff Desjardins, Visual Capitalist

Map: The Countries With the Most Oil Reserves

There’s little doubt that renewable energy sources will play a strategic role in powering the global economy of the future.

But for now, crude oil is still the undisputed heavyweight champion of the energy world.

In 2018, we consumed more oil than any prior year in history – about 99.3 million barrels per day on a global basis. This number is projected to rise again in 2019 to 100.8 million barrels per day.

The Most Oil Reserves by Country ...

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Zero Hedge

Map: The Countries With the Most Oil Reserves

Courtesy of Jeff Desjardins, Visual Capitalist

Map: The Countries With the Most Oil Reserves

There’s little doubt that renewable energy sources will play a strategic role in powering the global economy of the future.

But for now, crude oil is still the undisputed heavyweight champion of the energy world.

In 2018, we consumed more oil than any prior year in history – about 99.3 million barrels per day on a global basis. This number is projected to rise again in 2019 to 100.8 million barrels per day.

The Most Oil Reserves by Country ...

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Insider Scoop

4 Stocks Moving In Monday's After-Hours Session

Courtesy of Benzinga.

Gainers
  • Cadence Design Systems Inc (NASDAQ: CDNS) shares are up 5 percent after reporting a first-quarter earnings beat. Earnings came in at 54 cents per share, beating estimates by 5 cents. Sales came in at $576.742 million, beating estimates by $7.5 million. The company issued strong second-quarter and 2019 earnings and sales guidance.
  • Whirlpool Corporation (NYSE: WHR) shares are up 5 percent after reporting a first-quarter earnings beat....


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Chart School

Weekly Market Recap Apr 21, 2019

Courtesy of Blain.

This past week was the definition of “consolidation” – a period of very little movement and volatility after a large move up to work off overbought conditions.  A slight gap up Tuesday was about it in terms of excitement for the week.  Bulls remain in full control.

We are in the midst of earnings season – it is not a great one but companies have lowered the bar enough that they will “beat”, everyone will clap and cheer, and we continue on.

The first-quarter earnings outlook has improved somewhat, according to CFRA, which said consensus estimates now call for a 2.3% fall in first-quarter operating earnings a share. That is up from the call for a 3% drop ahead of the kickoff of earnings season, but down from the 4.5% increase projected at the end of last year...



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Digital Currencies

5 Cryptocurrency Tax Questions To Ask On April 15th

Courtesy of ZeroHedge. View original post here.

Authored by David Kemmerer via CoinTelegraph.com,

Depending on what country you live in, your cryptocurrency will be subject to different tax rules. The questions below address implications within the United States, but similar issues arise around the world. As always, check with a local tax professional to assess your own particular tax situation.

...



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Kimble Charting Solutions

Silver Bear Market Faces Big Price Support Test!

Courtesy of Chris Kimble.

When silver, gold, and the precious metals industry were red-hot bullish in the 2000’s, investors could do no wrong.

You could buy SILVER at just about any price and it would go higher.

In today’s chart, you can see three large green bullish ascending triangles from the 2000’s that lead to big gains. But that was the bull market before the current bear market.

The tables have turned since the 2011 price top. Silver quickly formed a bearish descending triangle and fell another 50 percent when that broke down. This sent a vicious bear mark...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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Biotech

Marijuana is a lot more than just THC - a pharmacologist looks at the untapped healing compounds

Reminder: We are available to chat with Members, comments are found below each post.

 

Marijuana is a lot more than just THC - a pharmacologist looks at the untapped healing compounds

Assorted cannabis bud strains. Roxana Gonzalez/Shutterstock.com

Courtesy of James David Adams, University of Southern California

Medical marijuana is legal in 33 states as of November 2018. Yet the federal government still insists marijuana has no legal u...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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