Emotional Swings
A lot of decision making in life can be obscured by emotional swings. This reminds me of Ben Graham’s observation that in the long run the market’s a weighing machine, but in the short run it is a voting machine. Having said that, in the short term, the “market” is highly susceptible to opinions on something’s (any asset’s) future.
The “market” per se is a bunch of people who participate. I might be incredibly stupid and biased to say this, but I doubt the thinking of the crowd is synergistic. The “market” price is set by people from all walks of life—everyone is different in terms of “knowledge” (you know what I mean), insight, and emotionalism. Being the superior one among others does not give you more influence in the short run. As Howard Marks mentioned, the knowledge of the mass is not synergistic, but the emotion could be. As people’s emotions compound and oftentimes spiral into mass hysteria. Which ironically speaking, the market will turn out to be higher in emotionality than each participant in isolation.
That said, to understand whatever market you are participating in, mastering the technicals is the basics; in order to improve your odds of success, you need to understand psychology.
As we are living now in a much more turbulent world than before, mutual trust is fading, we witness firsthand the dearth (death) of global leadership, inevitable flare-ups in hotspot continents. The list doesn’t end here. This is a very exciting & fucked up time to live (invest) in.
When I mention investing in particular, not just capital but also in terms of time, space, & attention. The term ‘resources’ should be as comprehensible as possible, as the accumulation of ‘income’ is also not just as the accumulation of capital but also the flow of services (as per Irving Fisher).
I’ve always loved the quote “Take nothing on its looks; take everything on evidence. There’s no better rule.” When negatives (positives) accumulate, suppress your crowd mentality to overlook or understate and when it can no longer be concealed, try to minimize the tendency to react overwhelmingly.
It is also applicable when it comes to assessing someone’s ability and/or fidelity. Be aware of your & others’ emotional swings.