Worry? Not Me Redux

Hi Guys,

I am very pleased with the extensive response to my “Worry? Not Me” posting. You took the topic in many unanticipated directions that truly enhanced the usefulness of the exchange. Your postings contributed insightful and sometimes novel ways to explore and interpret the marketplace. I hope you profited from it as much as I did.

With so many contributors and their sub-topic interchanges, the submittals have become too cluttered, too messy. Therefore, I propose this Redux segment. It’s at least a clean sheet.

Overwhelmingly the submittals were information-based, well constructed, and generous to those taking an opposite position. We should all expect and tolerate no less. Trading markets accommodate disparate viewpoints and goals.

Unfortunately, a minority membership did not resist the temptation to toss a few ad hominem, hurtful personal bombs. Typically, these gratuitous bombs are unsupported assertions that reflect biases that are devoid of any investment wisdom or merit. Their misguided purpose is to discredit their target. They fail to focus on substance, but they do senselessly highlight personal traits and style.

Here is one blatant example that quoted George Bernard Shaw as follows: “I learned long ago, never to wrestle with a pig. You get dirty, and besides, the pig likes it." Was this really necessary?

This saying was obliquely directed at an MFOer whose opinion conflicted from that of the writer. It’s shameful if divergent investment interpretations and opinions are not tolerated without prejudice on this website. There are a few other examples that are a little less obvious but just as uncouth. Investing is never fully black or white, otherwise markets would not exist.

In many instances the root causes for these weary and unwarranted remarks are inspired by political and/or environmental ideological differences, not investment matters. That’s a fundamental mistake. Not only does it destroy relationships, but it also compromises trust and can do portfolio damage.

There is no call for such personal abuse of their targets or the misuse of the good resources of this website. It is hateful and ultimately harmful to good investment practices. Emotional behavior erodes investment performance. There is substantial academic and industry research that documents its negative impact.

Often, the personal attacks are prompted by a careless reading of the original post or a misinterpretation of its content. Alan Greenspan observed that “ I know you think you understand what you thought I said but I’m not sure you realize that what you heard is not what I meant”. Accurate communications can be troublesome, especially when Greenspan is part of the interaction.

That Greenspan quote was extracted from a Blackrock behavioral investing paper researched by Nelli Oster. I suggest that you review the following Link:

http://us.ishares.com/content/en_us/repository/resource/market_perspectives_feb_2013.pdf

This is a short 10-page report that is excellent. It provides pertinent observations and actionable options that just might improve your investing outcomes. Please take time to access it.

In March, I introduced the Army’s “Situational Awareness” concept as a positive potential investment performance enhancer when exploring the influence of Luck on investment performance. I still believe that is a worthwhile field for research. Like all resources and concepts it can be overemphasized. Too much of a good thing can do damage. The referenced Blackrock paper addresses that issue in a logical manner.

In thinking back to my March submittals (3 or 4 in number), I recalled that I did not provide a reference to an Army situational awareness document. I believe this is a peripheral issue, but for completeness, here is a Link to one of my March MFO postings, and followed by a Link to an introductory Army Field manual summary of situational awareness:

http://www.mutualfundobserver.com:80/discuss/discussion/11899/process-and-luck-over-outcome#latest

https://rdl.train.army.mil/catalog/view/100.ATSC/6C01FFE5-0DF6-415F-A13C-92ED36A708CA-1303039189337/1-02/intro.htm

Behavioral economics is now a hot subject, and much research is pursuing its impact on individual investor decision making. Here is an academic reference that was partially generated by authors who popularized the saying that “Trading is Hazardous to Your Wealth”.

http://faculty.haas.berkeley.edu/odean/papers/Repurchases/Once burned JMR.pdf

This too is a fine paper with loads of investor performance data integrated into an analysis that demonstrates investors are often too emotionally attached to earlier outcomes. These earlier outcomes either brought lasting pleasure when profitable or residual pain when nonproductive. These earlier results strongly influence our current investment decision making in a negative way. Again, please examine this recent study.

I anticipate that this post will excite and energize a few MFO contributors. Good. I welcome your continued involvement.

Best Regards.