Spec forum: Spooky Thinking
A recent survey showing that most Americans
believe they will be ghosts after death is immensely comforting to anyone
worrying that the markets might become efficient and rational in the
foreseeable future. Is it any wonder that traders use astrology and chart
reading to guide their investments when such beliefs are widespread? Perhaps
charts and stars serve the same function of reassurance as notions of the
afterlife. Having lived in Syracuse for a while, I figure I have served my time
in the underworld. -- Brett Steenbarger (10/24/3). (Author of “The
Psychology of Trading,” Dr. Brett is associate professor of Psychiatry and
Behavioral Sciences at the SUNY Upstate Medical University in Syracuse,
NY. His primary research interest is multivariate behavioral modeling of
the stock market. Visit his blog at www.greatspeculations.com, or
e-mail him at steenbab@aol.com.)
From the
barna.org Web site: Belief in life after death, like the existence of God, is
widely embraced: 8 out of 10 Americans (81%) believe in an afterlife of some
sort. Another 9% said life after death may exist, but they were not certain.
Just one out of every ten adults (10%) contend that there is no form of life
after one dies on earth. Moreover, a large majority of Americans (79%) agreed with
the statement every person has a soul that will live forever, either in God s
presence or absence. The survey also explored peoples views of Heaven and
Hell. In all, 76% believe that Heaven exists, while nearly the same proportion
said that there is such a thing as Hell (71%). Most Americans do not
expect to experience Hell first-hand: just one-half of 1% expect to go to Hell
upon their death. Nearly two-thirds of Americans (64%) believe they will go to
Heaven. One in 20 adults (5%) claim they will come back as another life
form, while the same proportion (5%) contend they will simply cease to exist.
Comments on
"Spooky Thinking":
Roger
Arnold: What I am most interested in is the relation between
investing, empiricism, the scientific method and quantification. Does a belief
in a supernatural being also encourage belief in extra-natural powers of
manmade
institutions? Does belief in God in other words make it easier to believe that
the FED can control the business cycle? I think you know where I am going with
this. The questions are endless and I do not ask them rhetorically. I am also
not stating any preference for or against the existence of God or any
particular religion. I am simply interested in how investors deal with a
situation empirically when politics, economics and thus capital market
institutions are based on belief. Are there "Kentucky windage"
methods for adjusting for how this may affect investors' view of risk?
Example:
As the FED approaches the zero bond investors APPEAR to believe that the risks
inherent in equities and the risks to the U.S. economy decreases rather than
increases. An apparent belief that the FED can't fail or that monetarism is a
fact.
On October 2, 2003 Governor Bernanke made a presentation "Monetary Policy
and
the Stock Market: Some Empirical Results"
http://www.federalreserve.gov/boarddocs/speeches/2003/20031002/default.htm
Excerpt:
Our second question, both more interesting and more difficult, is, why do
changes in monetary policy affect stock prices? We come up with a rather
surprising answer, at least one that was surprising to us. We find that
unanticipated changes in monetary policy affect stock prices not so much by
influencing expected dividends or the risk-free real interest rate, but rather
by affecting the perceived riskiness of stocks. A tightening of monetary
policy, for example, leads investors to view stocks as riskier investments and
thus to demand a higher return to hold stocks
Cliff Roche: Let me preface this post by
saying that it wasn't written to offend anyone. When it comes to religious
beliefs, I truly feel - to each his own.
These
questions are intriguing, and bring to mind an article I read a few weeks ago
on the www.mises.org site entitled:
"The Fed as Oracle," in which Mr Greenspan is pictured as our modern
equivalent of his Delphian counterpart.
Excerpt: "So we will fill the gap and look at some of the ways in which
Greenspan and the Fed are oracles. Even admitting such a comparison, why would
it matter? It matters because it adds to the depth of our understanding about
the institution and helps explain the Fed's ongoing support from the general
populace in the face of compelling economic reasons to the contrary. Yet
Oracles do die . . ."
If 80% or so of the population believes in life after death (whether real or
imagined) they may also likely believe in In horoscopes, palm readers, and
fortune tellers (ala Mr G). They may also want to believe that a "higher
power" has things under control, and that no matter what, everything will
work out all right in the end. Yes, in a society were money is a god, I don't
find it beyond the pale to picture the Fed governors as priests and oracles.
Their job?
Possibly to create the illusion that an infallible "higher power"
(the Fed itself) is at work in controlling and directing the economy. Leading
to the conclusion that it can in fact be precisely measured and controlled -
usually by
burning appropriate amounts of sacrificial cash on the alter of monetarism.
The more things change, the more they stay the same.