A Lack Of Critical Thinking and Objective Analysis

Recently I have alluded to some serious problems with the Walker Fire Department and while I am not going to get into specifics until it is over (of course it may never end) there are human behaviors at work that impede success and these behaviors can also impede investment success.

There are certain things in our lives where emotion and ego work to our detriment. Ego has no place on a wildfire. Ego often prevents investors from having the objectivity to recognize when something is wrong be it process, macro opinion or an investment selection.

An incident (fire or medical) is essentially a problem to be solved. Solving means being effective and safe. If the context of investing is some long term goal like retirement, that too is a problem to be solved and solving it means being effective and safe.

The more that emotion, ego and other insecurities encroach on these tasks the greater the likelihood that something will go wrong. One problem at the fire department and in many financial plans is the inability to understand this concept and even more difficult is having the objectivity and introspection to realize when behaviors are counter productive.

I hope to resume normal blogging tomorrow.

The picture is of the Bay Bridge from Telegraph Hill taken with my not-so-smart phone.

6 Comments

  1. Roger,

    Not sure if you saw it, but Bill Hester of Hussman Funds had an excellent note on the divergence of country performance and importance of country selection going forward which is obviously a theme you’ve reiterated:

    http://www.hussman.net/rsi/greatdivergence.htm

    “International stock markets are undergoing a new level of analysis at the country level. It’s likely that investors are beginning to price in changes in their assumptions of futures cash flows and discount rates, informed by each country’s growth prospects, debt levels, inflation risks, and fiscal battle plans. If the first decade of this century was about the convergence of economic performance, bond yields, and stock performance in developed countries, the next few years may be about the growing divergences in these characteristics. If so, country selection will begin to matter again.”

    Reply
  2. Roger,
    I am going to be critical this time and hope you do not mind. Months ago you you went out of a china stock, I think it was china mobile and went into Teva. At the time you went into the stock Teva was making the acquition of Ratio Pharm, another generic maker. Teva has had a fantastic growth. If some have not looked at Teva it has had a 23% growth conpunded on yearly basis. However, since your purchase the loss has been arount 20% in few months. What made you buy Teva at the eve of a merger, where historically the aquirer usually goes down. Would have made more sense to wait and the start purchasing Teva around these prices, arount 50’s. Could this be defined one of the times that you rushed to buy a good company at the wrong price.
    Hope you do mind my comment,
    Jeff from Milan, Italy

    Reply
  3. interesting on the country divergence.

    Jeff CHL into PTNR (which has not been a great hold so far). I bought TEVA in 2004

    Reply
  4. Roger,
    my mistake. You are correct – it was your march 12 post. However, TEVA was a great pick. Congrad.
    Jeff from Milan, Italy

    Reply
  5. It appears you are “on fire” today.

    Situations you aptly describe happen to all of us who do more than the minimum in life.

    This, too, shall pass.

    T

    Reply
  6. Emotions is one of the reasons traders fail to cut their losses short. So to get this one particular behavior out of the way, never place a trade without first determining where you will bail out if things go wrong.

    Reply

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A Lack Of Critical Thinking and Objective Analysis

Recently I have alluded to some serious problems with the Walker Fire Department and while I am not going to get into specifics until it is over (of course it may never end) there are human behaviors at work that impede success and these behaviors can also impede investment success.

There are certain things in our lives where emotion and ego work to our detriment. Ego has no place on a wildfire. Ego often prevents investors from having the objectivity to recognize when something is wrong be it process, macro opinion or an investment selection.

An incident (fire or medical) is essentially a problem to be solved. Solving means being effective and safe. If the context of investing is some long term goal like retirement, that too is a problem to be solved and solving it means being effective and safe.

The more that emotion, ego and other insecurities encroach on these tasks the greater the likelihood that something will go wrong. One problem at the fire department and in many financial plans is the inability to understand this concept and even more difficult is having the objectivity and introspection to realize when behaviors are counter productive.

I hope to resume normal blogging tomorrow.

The picture is of the Bay Bridge from Telegraph Hill taken with my not-so-smart phone.

Submit a Comment

Your email address will not be published.

WP-SpamFree by Pole Position Marketing