Researchers have discovered some interesting things about investors’ perceptions of risk: 1. Fear of loss is exponential. Anxiety increases with the magnitude of the loss. 2. Happiness over a gain decreases as the size of the gain increases. Gaining your first million means much more than gaining a second million. 3. Risk is not symmetrical. Most of us hate losses much more than we love gains.
Economic Review and Market Outlook Despite an unfolding economic slowdown, a market that is long overdue for a decline, and a real estate market that continues to deteriorate, the stock markets continue to do OK. In the past few months I have come to believe that the stock markets are benefiting from investors who are fleeing real estate and need another place to put their money.
Not a Whole Lot of Inflation Going On I get a kick out of the media’s search for a reason for every movement in the stock market Knowing the numbers that are driving the markets like I do, sometimes I wonder what they have been smoking. Last Tuesday’s headline was typical: “Inflation Jitters Hit Stocks“ Most of you know me well enough to know I have
Deflation in the air? I first talked about the potential for deflation in 1998, in connection with my economic take on Y2K, and its potential for disruption of the markets. As time goes on, more and more of the economic ramifications I predicted 5 years ago have indeed happened. Large stock market decline, bonds performing strongly, and gold being something to avoid for several years (gold