Pragmatic Capitalism

Capital for Living a More Practical Life

‘Behavioral Finance’

Second Level Thinking – World Cup Edition

Jurgen Klinsmann, the coach of the US soccer team is caught in a maelstrom after deciding to leave Landon Donovan, the leading goal scorer in US Men’s National Team history off the team. But I don’t think he’s getting enough credit for the brilliance behind the move. And to me, it looks like a smart case of second level thinking.

The End of Behavioral Finance?

I don’t know what it will take for more people to take behavioral finance seriously and assimilate it into their work, but I do think that day is coming. Here’s to hoping it doesn’t take another 2008 style slap upside our economic head to get us there.

“Bad is Stronger than Good”

We humans are a fickle bunch.  If there’s one thing you can pretty much guarantee, it’s that things are never really good enough.  We seem to focus excessively on the negatives in our lives at all times.  You’ve probably heard a lot about this in recent years about how the economy is terrible, how we’re… Read More

The “Fat Pitch” Myth

I was intrigued by comments in this interview with Marc Faber of the Gloom, Boom and Doom Report.  He said: “I am hoping for the market to drop 40% so stocks will again become, from a value perspective, attractive again…I think stocks are, by and large, fully priced.” I run into this sort of thinking… Read More

Leverage Causes Fat Tails and Clustered Volatility

Good paper here via  quantivity on Twitter discussing the effect of fund managers borrowing on margin to purchase assets.  This is something I’ve discussed previously in my many posts on margin debt and why it matters (see here for a good explanation or just read on). Many analysts correctly note that margin debt is a coincident… Read More