Mental Conditioning

by Johnny Debacle

Everyone uses the phrase killing it and the bear market version “[fill in the blank return] is the new killing it”. But I have to be honest…when I look at the market, and the S&P 500 is only down say 5 points, my mental accounting puts that in the win column. That’s tantamount to a rally, hell it’s not tantamount, it’s mount to a rally. When I hear “oh the market is up 5 points”, I think in my head “It’s only down -5 points, I barely even understand what that means” and then I freak the hell out.

The turns and spins and dives and rises of this market have been like a baptism in biasfire. I feel every single dumb bias at different points in a day. Loss aversion, mental accounting, regret minimization, anchoring, representativeness, overconfidence, everything, a veritable CFA clinic on biases. I am that clinic.

And I wonder — is this how scientologists are made? They heat up the room, assault you with information overload, starve you, break you, push all your preconceptions, tear them down, question you, make you question yourself, have Paulson or Geithner say something officially vague and stupid, make you agree with them and eventually, with Xenu. Market I agree with you! Tell me what you want! I will do it!

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