Mind Over Money: Recent Episodes
Kevin Cook
The psychology of investing has become such an important area of research that major hedge funds are building trading strategies around human behavioral patterns. In Mind Over Money, Kevin Cook explores the crossroads where markets and brains collide, delving into the two sciences – neuroscience and behavioral finance – that show why investors are often highly irrational when faced with economic decisions, uncertainty, and risk.
Exuberance for Bitcoin, BNPL, and daytrading saw valuations soar in 2021 and now it's time to sift the wreckage
(0:30) - Rise Of FinTech: FT Partners Maps the Money Flow (7:40) - Where Are the FinTech IPOs? (14:20) - How Do Private Companies Navigate A Down Round? (20:10) - What Are VC Investors Looking for in FinTech? (30:40) - Crypto Speculation vs. Long-Term FinTech Investment Mind Over Money Archive Podcast@Zacks.com
The so-called "instant" home buyers added good liquidity and fast options that will be missed by some
(1:00) - iBuyer Impact On the Housing Market (8:00) - Are the iBuyers Over and Done? (11:35) - Home Builder Trends for Investors (23:50) - Impact of Rising Interest Rates on New Buyers/Investors? (33:15) - Finding Trends: Where Should Investors Research RE Markets? (40:45) - Where's the Housing Market Heading in 2023? Podcast@Zacks.com
Robert Farrington has been on a mission for over a decade to turn Millennials into Millionaires
(1:30) - Robert Farrington: The Millennial Money Expert
(5:10) - Learning To Invest at a Young Age: Where Should You Start?
(9:45) - How Much Do You Need To Save Per Year To Reach a Million Dollars?
(14:20) - Never Too Late To Start Investing: Balancing Now and Your Future
(19:30) - Creating a Plan That Works For You: Understanding Needs, Wants, Goals
Podcast@Zacks.com
I wish I knew a tenth of what Zechariah knows about investing when I was in my 20s
(1:30) - How Financial Advisors Guide Investors for Long-Term Planning
(8:25) - What Can Crypto Bear Markets Teach Gen Z About the Stock Market?
(12:00) - Zechariah Schaefer’s Approach to Financial Planning
(20:15) - The Fiduciary Duties of an Advice-Only Planner: Step By Step Process
(34:40) - Lessons from the Fictional Pan Ickseller (Panic Seller) on TikTok
Podcast@Zacks.com
Risk management is not a science and still fully subject to the whims of human emotion and the madness of crowds
(2:00) - Collapse Of TerraUSD & Luna: A Threat To the Blockchain?
(17:30) - Staking and Yield Farming: FinTech and DeFi Innovations
(23:40) - The Wild Wild West of Crypto: Whence Cometh Law and Order?
(28:30) - The Future of the Newest Fiat Asset Class
(33:15) - Will Michael Saylor Be Pushed Out of His Bitcoin Investment?
(38:45) - Bitcoin Bear Market Impact On Square and PayPal
Podcast@Zacks.com
In the jungle of personal finance advice, the best offense is a great set of tools that clarify and inspire action
(1:00) - Against the Gods: Probability 101
(8:30) - 3 Biggest Mistakes People Make with Their Finances
(15:15) - The Inspiration Behind The Harvest Plan
(25:30) - Power of a Comprehensive Calculation Engine for Personal Finance
(32:30) - Tools Inside The Harvest Plan: NASA for Your Retirement Horizon
(40:15) - The Evil Science of Credit Cards
Podcast@Zacks.com
Mind Over Money welcomes back portfolio manager Nathan Miller of Emles Advisors to get our investing battle plans locked and loaded
(1:00) - Getting Short Ridiculously Overvalued Companies
(7:20) - The Economic Cycle: Where Are We Currently At?
(13:45) - Emles Alpha Opportunities ETF (EOPS): Top Value Plays
(27:35) - What's the Outlook After This Correction?
Podcast@Zacks.com
Before Tech Bubble 2.0 pops, investors have a great place to grow besides cash
(1:25) - How Avoiding Technology Stocks Built a Strong Value Model
(6:35) - Imagine Buying RH at $25 and Still Seeing Growth Ahead
(14:00) - What's Driving Signet Jewelers Shares?
(17:15) - How Brick and Mortar Thrives in an E-commerce World
(22:30) - Emles Alpha Opportunities ETF: EOPS
(26:45) - The Coming Inflection Point: Tech Bubble vs. Value-Growth
(33:00) - Keeping His Shorts on a Short Leash... For Now
(37:15) - The Best Time to Invest In Defense Stocks
Podcast@Zacks.com Mind Over Money Archive
Climate science suggests that economic conditions for world's poorest countries will implode
(1:00) - Haiti’s Struggle for Stability and Economic Progress
(11:30) - Development Challenges: Bangladesh in Focus
(23:40) - Can ESG Investing Preserve the Planet?
(33:30) - Attracting Direct Investors Via Econ Dev Zones
(41:30) - Episode Roundup: Podcast@Zacks.com
Mind Over Money Archive
While I believe the F-150 Lightning is a game-changer, there are skeptics about America's readiness for quiet, efficient workhorses
(1:00) - How Disruptive are Electric Vehicles?
(8:45) - Can the Ford F-150 Lighting Outsell the Tesla Cybertruck?
(20:00) - Who Will Be The Top EV Truck Competitors?
(31:10) - Ford’s Advantage In Europe and CaaS
(39:50) - Dave Bartosiak on the Slow-Motion EV Revolution
Podcast@Zacks.com Mind Over Money Archive
Learning to fly an airplane can build an excellent structured thought process for navigating markets
(1:05) - What Could Investors Learn from Aviation?
(7:50) - Lessons from a Pilot: Preparation & Planning
(14:00) - Tribute to a Maverick
Podcast@Zacks.com
As inflation takes off, the Fed may be trapped to let it run very hot just to get employment back
(1:30) - Centrifugal Force: Markets Coil Then Jump
(9:20) - Big Move In Bonds: Financial Plumbing Pressures
(15:10) - Richly-Valued Growth Stocks Overdue to Correct
(20:40) - GameStop Stock Surges Again: How a Pro Traded It
(24:15) - Stimulus + Growth + Inflation = Commodity Prices Rising
(29:00) - Technical Targets for the Nasdaq 100
(37:00) - Good Lessons For New Investors are Everywhere
Podcast@Zacks.com Mind Over Money Archive
As more young investors take up day trading, I have an important recipe for long-term wealth creation
(0:45) - How Cathie Put the Wood to Wall Street
(10:30) - 5 Core ETFs for Long-Term Wealth Creation
(16:15) - Best Options for Investing in Biotechnology
(24:20) - How to Buy Entire Stock Market in One Trade
(27:45) - Next-Generation Nasdaq Companies
(31:15) - Zacks ETF Portfolio Trends and Winners
(38:20) - Robotics and AI: A Simple Way to Own the Future
Podcast@Zacks.com Mind Over Money Archive
E-commerce technology and behavior drive each other in a never-ending innovation feedback loop.
(1:45) - Digital Acceleration: Forever Impacts on Retail
(5:05) - Tapestry, Capri, StichFix: Learning from Tony Hsieh
(12:40) - ULTA and RH: Adapting to Their Customers
(17:50) - Shopify and BIGC Guide Brands to E-Comm Nirvana
(28:10) - Great Winter Coats... for Everybody This Season?
(32:15) - Episode Roundup: Podcast@Zacks.com
Gaming-as-a-Service (GaaS) heats up during COVID and reasserts that content is still king
(1:00) - Gaming Is Serious Business for NVDA and MSFT
(6:10) - Dave Does Disney and Was Not Amused
(9:45) - Gaming-as-a-Service Heats Up: Microsoft Buys Bethesda
(14:50) - Console Wars: Xbox and PC vs. Playstation
(23:00) - NVIDIA Launches Next-Gen Graphics Cards: 30 Series
(29:55) - Ray Tracing: Industrial Light & Magic for Games
(37:30) - The Netflix of Gaming: Satya Nadella's Vision
(44:00) - Content Communities and Exclusivity Podcast@Zacks.com Archive: Mind Over Money
The right financial advisor is conflict-free and dedicated to your investments' growth, not their commissions (1:45) - From Big Bank to Client-Centered (6:30) - Planning For Retirement: Where to Start (15:20) - Picking the Right Advisor For Your Nest Egg (20:30) - Financial Fast Food: Don’t Let It Tempt You! (26:15) - Your Investment Journey: What To Expect Along The Ride (33:10) - What Does A Financial Fiduciary Do? (39:55) - How Emotions Get In Your Way (44:00) - Stress Free Money Book Email: Podcast@Zacks.com Archive: Mind Over Money
What if I told you that willpower doesn't work? Well, take it from a guy who became a top-ranked blogger, got his PhD, and adopted 3 foster kids -- all in just 3 years!
(0:45) - Imagine These 3 Goals In 3 Years
(8:45) - Willpower and Its Discontents
(16:20) - Research On Personality and Why It's Not Permanent
(21:55) - Your Identity = Self-Image + Biographical Narrative
(31:00) - Building Blocks of Benjamin Hardy’s Success
(35:40) - Creating Your Ideal Future
(40:55) - Crucial Importance of A Strong Morning Routine Mind Over Money Archive Personality Isn’t Permanent
Are you still relying on will power to change your habits? A little neuroscience will cure that.
(1:00) - Opening the Hood on Your Brain w Dr. Jud
(7:45) - Applying Mindfulness During The Quarantine
(13:05) - The Anticipation Of Habits and Their Triggers
(18:15) - Everyday Addiction: From Your "Dumbphone" to Social Media
(26:30) - Awareness Tools: From Meditation to Experience Apps
(35:20) - The Big Debate: Role of Will Power in Behavior Change
Mind Over Money archive https://www.zacks.com/blog/archive.php?g=101
If you want to learn the #1 skill of the future, listen to the engineer of habit-forming products and apps
(0:45) - Controlling Your Attention With Nir Eyal
(6:10) - The Motivation and Research Behind Indistractable
(11:30) - Death By To-Do List and Our Ability To Multitask
(17:40) - Traction Is The Opposite Of Distraction
(29:55) - Breaking the Spell: Building A System That Works For You
(35:25) - The Hidden Super Power: Managing Discomfort Intentionally
(45:00) - Nir & Far Gifts for Choosing to Become Indistractable
Mind Over Money Archive
Your decision-making methods can be one of the most exciting and productive areas of your life and business to ignite innovation
(1:30) - Decision Traps: 10 Barriers to Overcome
(11:20) - Meta-Questions for Decision Makers
(19:45) - Could You Live on a Decision Budget?
(26:20) - Got Any Sunk Costs? Tesla vs. Big Auto
(32:30) - Could You Be Indistractable?
Mind Over Money Archive
Imagine what you could learn about running your business and your life by studying great companies.
(0:35) - lululemon vs. Under Armour: Anatomy of Success
(4:45) - The 4 Disciplines of Execution
(14:10) - Top 10 Decision Making Errors
(25:05) - LULU's Recovery from Debacles: See-Through Quality?
(30:15) - How Could Under Armour Lose at Shoes with Curry?
(38:15) - lululemon’s 3-Prong Strategic Vision
(45:00) - How Can Under Armour Drive Growth Going Forward?
(55:25) - Episode Roundup: Mind Over Money Archive
The trading game is so much tougher now with algos ripping and squeezing every edge -- except the ones you control
(2:30) - Learning From Experts and Rogues: The AlphaMind Podcast
(12:00) - Why Is Trading Such a Difficult Mental Game?
(20:10) - Comparing Nick Leeson and Bernie Madoff
(32:50) - Goldman's David Tait: Life and Trading Cannot Be Separated
(38:40) - The Emotional Challenge: Learning To Love Your Losses
(45:30) - Done Properly: The Zen of Trading Podcast@Zacks.com
``` Imagine what you could learn about running your business and your life by studying great companies.
(0:45) - Modeling Success: Learning from Top Companies
(6:30) - Thriving On Chaos: Top 8 Sources of Execution
(17:50) - The Dutch Secret of 16th Century: Credit
(30:20) - Intel’s Fateful Decision in 1985
(40:00) - Disciplines of Execution in Era of Disruptive Innovation
Podcast@Zacks.com
```
``` Investors who missed the great rallies in Apple and Microsoft have been wondering why, and wishing they listened to Dan Ives
(2:55) - The Map of Knowledge: Scholars of the Dark Ages
(13:10) - Clayton Christensen and Technology Disruption
(22:00) - Apple’s 2019 Growth Slowdown: Buy or Panic?
(25:35) - Dan Ives Calls Tech Rally, Says Much More to Come
(28:40) - What Could Push Apple To $2 Trillion?
(31:15) - 5 Big Tech Predictions for 2020: FAANG and More
(38:50) - Google Playing Catchup With Amazon and Microsoft
Podcast@Zacks.com
```
``` The current geometric rate of transmission implies that over 100,000 people could be infected by early February
(1:00) - Severe Health Crisis for China
(6:10) - A Brief History of Pandemics
(15:45) - Got DNA? Coronavirus Genome
(23:20) - In Search of a Vaccine
(32:55) - Competition: A New Science?
(43:15) - Episode Roundup: Podcast@Zacks.com
```
``` Technology ignites commerce and both are driven by our insatiable thirst for wealth, power, knowledge, and new horizons
(1:00) - A Brief History of Tribal Behavior
(11:15) - China's Empire Goals: Winner Take All?
(24:05) - The Final Frontier: Space or AI?
(30:00) - Inevitable Expeditions: AI Before Mars
(38:30) - Episode Roundup: Podcast@Zacks.com
```
While populist movements seem a step backwards, the generations growing up on innovation and fluid borders will inherit one world
(1:00) - Why Technology is Unstoppable and Changes Everything
(8:15) - What's Driving the Trends Toward Nationalism?
(15:00) - Generational Drivers of Globalization vs. Populist Movements
(21:35) - Bull Market Going Higher: What Stops It?
(32:00) - Nationalism Stops Globalization, Proving Earth Not So Flat
(38:25) - Software Eats FedEx While Semis Soar To New Highs
Podcast@Zacks.com
In 5 years, you be selling your gold and buying more companies leading the century of biology
(0:45) - The Behavior of Gold Investors
(4:35) - The Technology Super Cycle
(7:45) - The 4 Core Arguments Against Gold
(12:30) - NASA Mission To Psyche: The Fort Knox of Asteroids
(22:50) - Trade of the 2020’s: Sell Gold, Buy Biotech
The content explosion is creating massive new opportunity for advertisers and the one platform that connects everything.
(0:45) - Trade Desk Runs Box Office for the Streaming Cage Match
(6:10) - Binge Watching: The Behavioral Risks
(14:30) - Will Netflix Be Forced to Adopt Ad-Supported Platform?
(18:00) - Disney+ Storms the Battlefield
(22:15) - Amazon Prime & Apple TV: Ringside Seats and Lots of Popcorn
(28:40) - Is Comcast’s Free Box A Roku Killer?
(34:00) - Episode Roundup: Podcast@Zacks.com
Neuroscientists are proving the human sense of fear is very different than animals and why it matters
(0:45) - Twitter Discoveries: The Deep History of Ourselves
(6:00) - Awareness of Fear: Human vs. Animal Instincts
(11:30) - Acting out of Fear: Being Aware Of Your Emotions When Investing
(21:15) - Insights From Joseph LeDoux
(30:20) - Episode Roundup: Podcast@Zacks.com
We need science and math -- and STEM-savvy minds -- more than ever to help us inform decision making
(1:00) - Allergic to Algebra? Harnessing Math for Fun & Profit
(7:45) - Probability Skills Immunize Against Those Who Lie with Stats
(21:30) - Taleb's Black Swan and the Limits of Standard Deviation
(27:10) - Discovering Probability: Where Did It All Start?
(36:35) - Expected Value: A Simple Yet Powerful Equation
(41:20) - Crazy People Who Play Powerball: Visualizing The Odds
(52:25) - Episode Roundup: Podcast@Zacks.com
As we await results of NTSB and grand jury investigations, many questions linger about what went wrong
(0:45) - Boeing 737 MAX: Did Profit Motive Override Sound Design?
(8:15) - Remember the DC-10? How Consumers Handle Shocking Tragedies
(14:00) - MCAS Software Enhancement: The Right Solution, Wrongly Delivered?
(22:45) - Does The FAA Give Boeing Too Much Control?
(28:30) - What To Expect From Boeing Moving Forward
(31:05) - Episode Roundup: Podcast@zacks.com
A growing herd of unicorns and their founders and investors are finding liquidity without rushing to IPO
(0:45) - A New Marketplace for Pre-IPO Trading
(6:00) - How Forge Creates Value for Unicorns and Investors
(8:25) - Innovation with Spotify and Slack: What's a Direct Listing?
(12:15) - A Herd of Unicorns: Growth Potential for the Pre-IPO Market
(15:00) - Episode Roundup: Podcast@Zacks.com
The greatest accidental experiment in social media has a lot to teach us about taming the AI beast
(2:00) - Facebook Flopped and It’s Great!
(5:45) - Max Tegmark: Life 3.0
(10:35) - Prometheus Achieves World Domination
(16:00) - Taming the Beast that AI Could Become
(21:10) - 5 Proofs We Are Naturally Irrational
(24:20) - Driving Money Away, Keeping Bad Habits
(29:25) - Repelling Helpful People, Sabotaging Our Health
(34:15) - An Elephant in Your Brain
(42:30) - Episode Roundup: Podcast@Zacks.com
I’m not crazy about kids wasting hours playing video games, but there has to be a way to profit from it, for all of us
(0:30) - Stock-Picking: Better Than Video Games?
(4:30) - Fortnite Battle Royale: Free Viral Mania Makes Millions
(10:45) - Video Game Industry: Where $100 Billion Comes From
(14:30) - Amazon's Twitch Creates a Whole New World
(21:15) - Freemium Model: What Impact on Console Companies?
(30:00) - Future of Gaming, Augmented Reality, and Education
(33:10) - Episode Roundup: Podcast@Zacks.com
*How technology changes human behavior and social rules, but not human nature and genetics—yet.*
(0:45) - The Century of Biology
(8:00) – Wonderful Dopamine: The Attention Drug
(21:30) – Memory, Emotion and Learning Complete the Loop
(33:00) - Dopamine in the Noisy Concert of Consciousness
(39:05) - The Cerebral Symphony: Arouse, Orient, Detect, Execute
(43:10) – Find Your Flow: 5 Ways To Learn More, Better, Faster
(49:00) - Episode Roundup: Podcast@Zacks.com
How technology changes human behavior and social rules, but not human nature and genetics—yet.
(1:15) - FDA Shares Strategic Vision on Gene Therapies
(5:25) - Human Nature: New Science vs. Old Assumptions
(12:30) - Steven Pinker: Using Biology to Inform Beliefs
(17:40) - How Technology Changes Everything But Human Nature
(25:00) - Candace Pert: Your Body Is Your Subconscious Mind
(34:15) - Multi-Mind Theory: Do We Naturally Self-Sabotage?
(43:00) - “This Weather Is Crazy!”
(48:45) - Episode Roundup: Podcast@Zacks.com
Science is bringing the future to you faster every year and this requires a mind wide open
(0:45) - Zen and the Art of Motorcycle Maintenance
(5:10) - Meet the Huxleys: Evolution’s Grand Champions
(10:15) - The Chaos Theory of Learning & Unstoppable Creativity
(16:10) - Books for Minds Wide Open: Bill Nye and Richard Feynman
(23:45) - The Death of Doubt: Why We Pretend To Know It All
(28:00) - The Wrong Ways To Use Science
(31:50) - The Future Of Education
(37:30) - Episode Roundup: Podcast@Zacks.com
At the risk of over-simplifying, I crystallize my favorite principles into lessons for all future bull markets
(0:45) - Navigating the Bull Market
(6:00) - Following The Smart Money
(8:45) - Kevin’s Market Melt-Up Recipe
(11:30) - 3 Wealth-Building Rules for Bull Markets
(18:00) - A Quick Look at How Emotions Are Made: The Secret Life of the Brain
(27:50) - Episode Roundup: Podcast@Zacks.com
Why do the same bad investing decisions keep cropping up for some people?
(1:00) - Are You a Trader or Long Term Investor?
(5:00) - A Quiz on Your Psychology of Investing
(10:45) - Should You Be Listening To Everything Your Advisor Says?
(13:50) - What Should You Do With An Inheritance?
(21:15) - How To Navigate A Market Correction
(25:10).- Loss Aversion, Confirmation and Availability Bias
(35:40) - Long Term Investing vs. Short Term Trading
(41:40) - Episode Roundup: Podcast@Zacks.com
Long before anyone noticed what smartphones did to kids, a wise teacher warned us about the dangers of our devices
(0:30) - Judgement Day: Big Investors Write a Letter To Apple
(5:30) - Smartphone Addiction: How Did We Get Here?
(8:20) - Neil Postman: A Wise Teacher Ahead Of His Time
(11:00) - The Medium Is The Message
(17:30) - Perfecting Captivation: Tantalizing Television
(22:40) - Technopoly: The Dystopia That’s Not Fiction
(36:15) - Can Everything “Bad” Be Good For You?
(30:00) - Technology Can Enhance or Ensnare our Education
Podcast@Zacks.com
Resist as he might, Michael Lewis couldn’t help but write the story of the partnership that created the most exciting economic power since the invention of money
(0:30) - The Collision of Markets and Psychology
(5:30) - The Great Partnership of Kahneman and Tversky
(12:00) - CES in Vegas: What Should You Be Watching?
(20:00) - The Undeniable Force Behind The Undoing Project
(31:15) - Train Your Brain for Market Strategy with Probability
(33:35) - Episode Roundup: Podcast@Zacks.com
AI is not a replacement for stock-picking, but it will become a powerful ally against bad decision-making
(0:20) - qplum: Deep learning & AI Based Trading Strategy
(3:30) - AI Disruption On Asset Management Industry
(7:00) - Customized Portfolios: How AI Is Useful To Investors
(11:00) - Adjustment and Rebalancing Strategies of qplum
(15:30) - Tax Efficiency & qplum Integration With Brokers
(18:00) - qplum's Assets Under Management & Performance
(21:10) - How Will qplum Survive The Next Bear Market?
(25:00) - Episode Roundup: Podcast@Zacks.com
New risk management for the newest asset class is a welcome innovation, but requires different knowledge and skills than buy-and-hold
(0:45) - Bitcoin Surges Over $12,000... then $13K
(5:10) - 6 Starter Insights to Trade Bitcoin
(15:45) - How Will Large Futures Traders Impact Bitcoin?
(18:40) - What's Good About Futures Contracts?
(26:50) - The Crucial Function of the Clearing House
(30:10) - Contract Specs: CBOE & CME Bitcoin Designs
(36:00) - Futures Trading Can Be A Double-Edge Sword
(41:00) - Episode Roundup: Podcast@Zacks.com
In just 5 years, two new "exponential technologies" have been created that will dramatically change the world
(0:25) - Nothing Changes Economics and Behavior Like New Technology
(4:00) - The "Fear Of Missing Out" On Bitcoin Pushes it Over $10,000
(11:10) - 4 Thinkers Who Influence Bitcoin Mania
(18:30) - Genetic Disruption: CRISPR-Cas9
(23:00) - CRISPR Creator Becomes Its Cassandra
(28:30) - The Brave New World of Gene Editing
(32:40) - Episode Roundup: Podcast@Zacks.com
Technology is reshaping life and business so fast that intelligent adaptation could be the #1 skill of the 21st century
(0:30) - Hot Topics for Family Get-Togethers
(4:00) - Exponential Technologies: Change at the Speed of Light
(10:30) - Futurist Alvin Toffler's “Predictable” Life
(16:00) - Anti-Technology Ideology: Neo-Luddism
(21:00) - Overview of Warnings: Finding Cassandras to Stop Catastrophes
(24:45) - Jennifer Doudna: CRISPR-Cas9 Gene Editing
(33:00) - The Internet of Everything: BlackEnergy Malware
(39:00) - No Opt-Out: Handling the Speed of Change
(43:30) - Episode Roundup: Podcast@Zacks.com
Why the leading cryptocurrency has been strongly validated in the past month and dispels the bubble talk
(1:30) - Blockchain & Cryptocurrency Revolution
(12:00) - Bitcoin Volatility: The Hard Fork
(17:00) - Square Testing Integration Of Bitcoin
(22:00) - Zimbabwe Coup Spikes Bitcoin Over $13,500
(27:00) - CME Bitcoin Futures: Regulated Price Discovery & Arbitrage
(36:00) - Xbox One X and Tesla Updates
(41:30) - Episode Roundup: Podcast@Zacks.com
Jamie Dimon’s JPMorgan just launched a Blockchain platform based on a very different cryptocurrency.
(0:25) - Bitcoin Surges Past $7,000 on CME Futures Contract
(4:00) - Jamie Dimon: "Bitcoin Is A Fraud!"
(11:00) - What the Heck is a Blockchain?
(14:40) - Ethereum = Expanded Capability vs. Bitcoin
(18:20) - The Blockchain Revolution: Why Cryptocurrency Matters
(23:45) - Bitcoin = First Generation of World-Changing Idea
(32:20) - Episode Roundup: Podcast@Zacks.com
Fintech innovations are changing investing tools and behavior in powerful ways that you must begin to explore.
(0:30) - Automated Financial Management: Betterment & Wealthfront
(5:30) - Burton Malkiel: Are Markets Too Random?
(9:00) - Resources for the Deep Learning / AI Future We Face
(16:40) - qplum: Automated Investing Using AI and Data Science
(25:45) - Concerns with qplum: Will the Same Science Work for All?
(31:00) - Takeaways from qplum
(35:45) - Episode Roundup: Podcast@Zacks.com
The power of AI will take over the world with “invisible robots” making life easier, better, faster
(0:30) - AI and Deep Learning: Tools Not Tyrants
(6:00) - How DeepStack Uses Intuition in Poker
(14:45) - DeepMind’s AlphaGo ZeroDrops a Bomb
(19:30) - Psychology Meets AI: Mariano Sigman
(24:40) - The Invisible Robots Are Coming!
(35:00) - Episode Roundup: Podcast@Zacks.com
How engineers taught a computer to beat poker pros using its "intuition"
(0:30) - What Is AI?
(2:00) - An Inside Look At Nvidia
(9:00) - What Not To Do In The Stock Market: Phil Hellmuth
(14:30) - Facebook and Intel's AI Partnership
(19:00) - AI Plays Poker
(24:00) - Creating A Computer With Intuition
(31:00) - Episode Roundup:Podcast@Zacks.com
After this high-profile prize in economics, investors might just be ready to admit how irrational they can be. Please pick a time stamped topic below:
(0:45) - Richard Thaler and Daniel Kahneman
(5:45) - Active Traders Already Accept Their Irrationality
(9:30) – Psycho-Economic Thinking for Investors
(12:00) - Richard Thaler: Nobel Praise Where It’s Due
(16:45) - Dan Ariely's Nod Before Nudge
(21:30) - Save More Tomorrow: Applying Behavioral Economics
(25:00) - What To Takeaway From Richard Thaler's Work
(28:50) - Episode Roundup: Podcast@Zacks.com
In honor of the late great Let's Make a Deal host, I offer some good and fun reasons to learn more math. Please pick a time stamped topic below:
(1:00) - What The Framers Couldn't Imagine
(7:00) - Monty Hall: The Probability Brain Buster
(12:30) - Jeff Yass: The Power Of Rational Thinking
(18:30) - Breaking Down The Probability Of The Monty Hall Problem
(24:00) - Daniel Negreanu: Probability Simulation
(28:45) - Episode Roundup: Podcast@Zacks.com
Beyond a mere momentum fad, 3 of these companies are part of tech renaissance that will last decades. Please pick a time stamped topic below:
(0:30) - FANG Stocks: Momentum Fad or Millennium Fuel?
(3:30) - The 6 Exponential Technologies
(8:45) - Is Facebook an Exponential Change-Agent?
(12:30) – A Long-in-the-Tooth Bull Market: Is It Peaking?
(15:30) - 5 Secrets of This Bull Market
(21:15) - Abundance Excerpt: Igniting The Enlightenment
(26:00) - The Rising Billion: The Impact Of Automation
(29:20) - Episode Roundup: Podcast@Zacks.com
This episode is all about the risk and reward of decision-making. Sometimes we avoid making decisions, and often we never learn from our bad ones. I was fortunate that I became a high-frequency currency trader 20 years ago and learned how to make lots of decisions every hour that I could never regret, and only learn from. But that doesn’t mean I don't still fall prey to the bad habits we all have when faced with uncertainty and risk.Please pick a time stamped topic below:
(0:20) – Risk-Reward Analysis for Better Decision-Making
(2:40) - The 6 Pillars of Great Trader Behavior
(6:00) - Behavioral Finance and Neural Science: Your Brain Isn't Meant To Trade
(11:00) - Peter Diamandis and Steven Kotler's Book, Abundance
(19:30) - Biotech Stocks: Gilead Buys Kite Pharma
(24:30) - Why Kevin Sold JUNO While Its Still On The Rise
(32:00) - Episode Roundup: Podcast@Zacks.com
While "the biotech century" cures cancer, it's also tackling dozens of neurological diseases investors should learn about. Please pick a time stamped topic below:
(1:00) - Neuroscience: The 4 Theaters Of The Brain
(5:00) - Investors Train Their Brains to Trade: Assumption and Perception
(10:00) - Neurology Is The New Oncology: The Boom In Brain Sciences
(14:00) - Biotech Companies With Breakthrough Research
(21:00) - Appreciating Differences: The Story Of A Misdiagnosis
(34:00) - Episode Roundup: Podcast@Zacks.com
One analyst predicts AR/VR markets to grow to $100 billion in 4 years and diagrams 4 hardware + software waves Apple owns. Please pick a time stamped topic below:
(1:00) - Facebook Hires Regina Dugan: Former DARPA Engineer
(5:30) - Tim Merel of Digi-Capital: AR & VR Expert
(8:45) - Pokémon GO's Success
(11:45) - 5 Big Challenges for AR
(16:30) - Tim Merel's Four Waves of AR
(18:45) - Why Apple Will Own AR
(23:30) - Alibaba: The Amazon of China
(27:00) - Episode Roundup: Podcast@Zacks.com
Welcome back to Mind Over Money. I’m Kevin Cook, your field-guide and story-teller for the fascinating arena of Behavioral Economics. Please pick a time stamped topic below: (0:30) - Disruptive Technology and New Shopping Behavior
(2:10) - Google, Facebook and Alibaba Making Waves in the News
(8:30) - Facebook Ads: Creating a Revolution For Small Business
(10:00) - The E.T. Economy: It's All About Consumer Experience
(15:20) - The Gig Economy: Thumbtack, TaskRabbit, Upwork
(19:00) - Mobile Shopping: SSF Method and 8 Big Predictions for Facebook Marketing
(25:00) - How Facebook Sells $30 Billion in Advertising
(28:30) - Episode Roundup: Podcast@Zacks.com
Could automation and AI wipe out a billion jobs in the next decade and create an inequality chasm? Please pick a time stamped topic below:
(0:40) - Automation Puts a Billion Jobs in Danger
(2:00) - Big Economic Disruption: Big Data, AI and Robotics
(3:40) - Is the Industrial Revolution Coming To An End For China and India?
(6:10) - Where are the Investment Opportunities?
(10:30) - IBM and Nvidia
(13:00) - Elon Musk: Neuralink
(16:30) - Biological Evolution: 3 Must Read Books
(19:45) - Yuval Noah Harari - Homo Deus
(27:15) - Episode Roundup: Podcast@Zacks.com
While Dan Ariely’s first book offered a slightly depressing view of human behavior, Payoff may change your life for the better. Please pick a time stamped topic below:
(0:20) - Dan Ariely: Predictably Irrational
(4:10) - Do first impressions get imprinted on us?
(6:30) - Arbitrary Coherence: Why do we accept anchors?
(12:00) - Are price tags anchors?
(14:30) - Dan Ariely: Payoff
(16:40) - What gets scheduled, gets done.
Welcome back to the Mind Over Money podcast. I’m Kevin Cook, your field guide and storyteller for the fascinating arena of behavioral economics.
I’m excited about today’s topics because we are going to talk about how our brains use stories to make decisions. In fact, after I tell you a few stories about brains and stories, you’ll start to wonder which came first – brains or stories!
Please pick a time stamped topic below:
(0:30) - How Storytelling helps us make decisions: Peter Guber Article
(4:15) - How do our perceptions effect our decision making
(7:15) - Insights from neuroscientist, Michael Gazzaniga
(15:00) - Experiments done by neuroeconomist, Paul Zak
(21:50) - Molly Crockett: "Beware neruo-bunk"
Welcome back to Mind Over Money. I’m Kevin Cook, your field guide and story teller for the fascinating arena of Behavioral Economics.
Today my guest is a trading coach who once worked in the field of “threat assessment” where he dealt with bank robbers, hostage negotiations and bomb threats.
Now psychologist Andrew Menaker focuses on a pragmatic model to help traders create self-awareness, positive behavior change, and ultimately success in their chosen vocation.
And I'm really excited to talk to him because he gives powerful depth and breadth to areas of trading psychology that I have long known were extremely important but never thought could be formulated into repeatable cognitive strategies that could help so many different types of traders.
Before we meet Dr. Menaker, I want to share a short blog he posted on LinkedIn back in October. This excerpt will set up our conversation well...
Trading Psychology That Works!
You know those lists of personality traits or characteristics of ‘good traders’ – what happens after you read them? Do you get excited? Do you become hopeful? Do you become worried that maybe you don't have the right stuff? Moreover, will reading about it make you a better trader?
That’s the big question, right? Does reading that stuff help you become a better trader? For the vast majority, my bet is that it doesn’t help at all! In fact, for most traders it triggers a very personal and particular sense of worry….I don't have the right stuff….Will I ever have the right stuff? How do I get the right stuff?
Then along comes an ad, a tweet, a webinar, or blog piece that promises to show you the path. Hypnotic suggestions, meditation, affirmations, positive thinking, NLP, Tapping, ‘brain balancing’...etc. I threw in ‘brain balancing’ because I recently spoke to a trader who was very angry, telling me, “I wasted money on brain balancing.”
The list of things promising to make you a better trader seems almost endless.
Most of the people selling you that stuff are not that different from the people selling you the ‘trading edge that works’. I like to refer to them as dream merchants. They are selling you a dream, not reality.
(you can read the full blog here or listen to the podcast and hear me read the whole thing to you!)
The Most Important Market in the World
Be sure to listen to my 20-minute conversation with Dr. Menaker where he tells how he went from the "threat assessment" business to helping traders uncover their own threats to their capital -- and their mental and physical health.
His analysis of the trading psychology game is original, practical, and based on his own experience as an S&P Emini futures day trader. He teaches traders to not just become aware of their emotions but how to use them as a rich source of information about their trading and decision-making.
But he warns that it takes "psychological courage" to do the work of analyzing and understanding the most important market you trade -- your "inner market" of thoughts, beliefs, perceptions, and neurological habits.
Dr. Menaker and I strongly agree that trading is actually a great way to discover yourself if you are willing to do that work.
If you're not into that, at least he provides a framework and a pathway to becoming the trader you always wanted to. Check out today's podcast to learn more about his ideas and work.
And thanks for following Mind Over Money. If you have questions, comments, or suggestions for future topics, please email us at podcast@Zacks.com
Plus, don't hesitate to be generous with compliments! Let my boss know you want Mind Over Money to keep exposing the psychology of investing!
The Evolution of Risk-Taking
Trading is one of the hardest day jobs in the world – what drives those who succeed at it?
Welcome back to Mind Over Money, I’m Kevin Cook, your field guide and story teller for the fascinating arena of behavioral economics.
Today my guest is a PhD candidate from the University of Greenwich in London who is studying the risk-taking behavior of traders from the perspective of evolutionary psychology.
Belinda Vigors wants to know if successful traders are doing anything different when making decisions under uncertainty and stress than us mere mortals who wrestle with our cognitive biases and unknown depths of neurochemistry and neuro-circuitry that drive our emotional habits.
Before we meet Belinda, I want to give you some background for our discussion that is actually causing a rift in the field of behavioral economics, at least for those of us who apply it to markets and trading.
I have been a long-time fan of Daniel Kahneman -- who is the only psychologist ever to win a Nobel Prize -- for his work on decision making under uncertainty and risk. He practically invented the discipline of behavioral finance.
And the cognitive biases that he has discovered and named over 4 decades have given us a rich vocabulary with which to talk about people (and traders) acting stupid and irrational with money and risk.
Since I am also an eager student of neuroscience, I simply look at the two fields as different but complementary ways of describing and understanding decision making. As I like to say, the behavioral gang studies us from the OUTSIDE-IN, while the brain gang studies us from the INSIDE-OUT.
An Affinity for Randomness and Ambiguity
But Kahneman’s 2011 book Thinking Fast and Slow has caused some extra controversy in the twilight of his long career because he may be not only oversimplifying how our decision making works, but also limiting any believer’s choice of solutions or therapies.
In other words, his System #1 and System #2 for thinking -- the fast and emotional vs. the slow and rational, respectively -- don't appear to integrate with the findings of brain science very well, which would argue for much more complexity especially as emotion and neurochemistry are concerned.
Kahneman also no longer likes describing humans as “irrational.” But then how do we explain all sorts of self-sabotage regarding money, risk and long-term goals? Or, how about truly self-destructive behavior like crime and violence?
And Kahneman’s theories are not based on any clinical work in helping people or traders change their thinking and decision-making. Since I did not read Thinking Fast and Slow, in today’s podcast I share a quick review by a thoughtful investor who explains quite well why the theories may be very limiting.
Ravee Mehta, a portfolio manager and author of The Emotionally Intelligent Investor: How Self-Awareness, Empathy and Intuition Drive Performance, says that Kahneman’s systems miss much of the significant skill, discipline, and what I call an “affinity for randomness” that traders can develop when they become more aware of their emotions and intuition.
Here’s an excerpt from Mehta’s 2012 blog, “Daniel Kahneman is Wrong (at least when it comes to investing)”...
I humbly disagree with Kahneman, a Nobel laureate, and some other prominent psychologists when it comes to “fast-thinking” and investing. They argue that the stock market is too complex and random for intuition to be developed. They believe that the randomness causes people to build incorrect association biases. This argument is flawed. While the overall market may seem complex and random, there are many patterns within it that recur frequently. The best money managers recognize patterns developing ahead of most. They also can develop useful intuition because they are honest with themselves about the role luck had in their success. The intuitive decision-making that is involved with investing is much more complicated than other types of decision-making. However, that does not mean that we should abandon trying to better develop and use gut instincts when we invest.
The Evolutionary Path of Trader Brains
Cognitive biases, emotional habits, and intuition are definitely interesting. But what really gets me excited is talking about how our brains work. And that invariably leads to discussions about our evolution.
So I was really excited to bring in a young student of this complex collision between behavioral science and of one of the hardest jobs on the planet, trading.
Belinda Vigors explains how traders may be dealing with risk in terms of “need thresholds” and survival goals. She bases part of her theories about emotion on the work of psychologist Jennifer Lerner of Harvard whose research examines the distinct effects of fear, anger, and happiness on risk perception and risk preference.
Be sure to listen to the podcast to hear my full conversation with Belinda.
Kevin Cook is a Senior Stock Strategist at Zacks Investment Research where he runs the TAZR trading service.
How one of the smartest minds on Wall Street was blinded by belief and abandoned due diligence
VRX, CP, MTN, HLF, CMG
Welcome to Mind Over Money. I’m Kevin Cook, your field guide and story teller for the fascinating arena of Behavioral Economics.
I’m back after a 3-week bout with bronchitis. I’ve got a funny story about what I learned at the doctor that ties into a great neuroscience topic: how we acquire new skills. But first, let me preview our main topic for the show today...
As 2016 winds down, I want to re-cap one of the biggest stock market implosions of the past 18 months and the big name investor who last week began some tax loss selling after a 95% drop in the shares.
The stock is that of Valeant Pharmaceuticals (VRX). And the big investor is Bill Ackman of Pershing Square Capital Management. His funds have lost billions of dollars because the Valeant implosion. And the story I am going to tell you will definitely interest you if you are at all curious about how smart people make really disastrous decisions.
Okay, so what happened at the doctor? As part of my exam, they gave me a chest X-ray to check for pneumonia. The good news is that I didn’t have pneumonia. The more interesting news the doctor shared on her way out… “Oh, by the way,” she said. “You have two cracked ribs.”
Be sure to listen to today's podcast to hear where those cracked ribs came from and what it has to do with "carving" new neural pathways. I'll give you a clue: I had to retire from snowboarding at the ripe young age of 37.
The Valeant Implosion
Valeant Pharmaceuticals stock was trading around $260 per share at its peak in the summer of 2015. Today, it’s trading $15. The story of the collapse has to do with an ambitious CEO named Mike Pearson and his company’s strategy to quickly become one of the top 10 pharmaceutical corporations in the world. Buying Bausch & Lomb for over $8 billion dollars was solid proof that they were very serious.
Pearson’s stated goal was actually to get Valeant in the top 5, among the likes of Pfizer, Johnson & Johnson, Novartis, and Merck.
I know a little about this story because I was an investor in VRX in 2013 and 2014, catching several pieces of its rise from $65 to $145. The fundamental growth story, both in terms of sales and profits, was impressive. But I was also following on the coattails of some of the smartest money on Wall Street, including legendary investors like Ruane, Cunniff, and Goldfarb who ran the Sequoia fund.
In many investments, I often trust the research skills and judgement of several big investors more than my own analysis. Based on Pearson’s goal, he would have to grow Valeant from a $20 billion company, in terms of its market capitalization, to a nearly $200 billion company. That would be a 10X feat. Everything I saw showed that he might have a shot.
And the only reason I didn’t ride the stock higher in 2015 when it vaulted from $145 to $175 in a few weeks was because I was waiting for a pullback to get in.
Enter Bill Ackman who, it was revealed through SEC filings in February of 2015, was acquiring a sizable nearly 10% stake in Valeant and partnering with the company to buy another pharmaceutical firm, Allergan. Shares of VRX shot up to $200 in late February and never looked back until they peaked in August of 2015 just over $260.
So what happened? Why did Valeant, as an investment and as a company, begin to fall apart? The details of the collapse are complicated and part of a much longer story that involved accounting irregularities, egregious drug pricing practices, and questionable pharmacy partners cooperating in questionable sales reporting practices.
In the Mind Over Money podcast I share a timeline of the events of August through October by Stephen Gandel writing for Fortune magazine on October 31, 2015.
And the most interesting questions I'm trying to answer are about how Bill Ackman ignored the clues about Valeant's messy business practices and rode the stock -- with a position in the tens of millions of shares -- to stunning losses.
Not only that, even when the wolves were out, from Congress to research firm Citron, and shares were quickly collapsing to $100, all Bill could think of was massively increasing his position by buying tens of millions of dollars’ worth of options.
You can learn more about those options strategies in this video...
Synthetic Stock: How Ackman Double-Down on VRX
This whole Valeant-Ackman saga will be studied for years for its lessons in behavioral finance and decision-making. I hope I've helped you understand it better so you can see how we can all be blinded by our hope and greed.
Kevin Cook is a Senior Stock Strategist for Zacks Investment Research.
While Renaissance Technologies makes most other hedge funds look foolish, even the independent trader can copy their discipline
NFLX, PANW
Long-time followers of mine in this bull market know that every quarter I go over the holdings of hedge fund Renaissance Technologies because they were one of the early quant houses that made algo trading so successful and popular.
The founder, Jim Simons, was a mathematics professor in the 1970s who never thought about the markets much. He sort of stumbled into testing some theories on stocks, and the rest is history as he was pulled headlong into the markets and created a powerhouse with over $50 billion AUM (assets under management).
And Simons made a point of not hiring MBAs, traders, or anyone with a background in finance. He only wanted physicists, engineers and other quantitative problem-solvers to come work for him and mine the data of markets to find unique correlations, patterns and new edges.
What kind of data patterns and correlations are they after? Well, with 90 Ph.Ds. on staff, mostly math, science, and engineering types, we can only guess that they are sifting through mountains of fundamental, price, economic, weather, and consumer patterns, looking for those small anomalies between individual stocks and industries and other asset classes.
Mining Data Others Ignore
If it’s a popular, well-known correlation, they don't want anything to do with it. They hunt in the noise of tons of data for things that others can't see, or are not even looking for.
This week, Matt Levine at Bloomberg View wrote briefly about Renaissance after colleague Katherine Burton published a full story on the company and its funds and practices for the December/January issue of Bloomberg Markets magazine. Here's how Levin opens his piece, quoting data from Burton's story...
The big problem with Renaissance Technologies, the Long Island-based "pinnacle of quant investing" founded by Jim Simons, is that its Medallion fund makes too much money.
Medallion was up 21 percent for the first six months of 2016. It was up 35.6 percent last year, 39.2 percent the year before, 46.9 percent the year before that. This keeps going. The last down year was 1989. The fund had a rough few days in August 2007, but ended the year up 85.9 percent. It has returned about 40 percent per year, on average, net of fees, since it started in 1988.
Of course it can't keep compounding returns that way because of the size factor. What you can do well with a 5 billion dollars you can't necessarily as well, much less better, with 50 billion. And that's why they are forced to simply return profits to investors, who are primarily employees now since the fund was closed to new investors in 2005.
Matt Levine's piece on Bloomberg View can be found here and the full Burton story is linked above.
Can a Human Trader Copy Black Box Success?
While the computer programs that work for Renaissance are still a big mystery -- like we don't know how many strategies just trade intra-day to make money -- it's safe to say that they create a lot of turnover in stocks, exploiting new patterns or "edges" in thousands of stocks.
But doesn't that mean a lot of extra risk?
What most people miss about the success of the algos and black box trading systems is that they run through markets with big size in thousands of stocks and instruments because the risk control is automated too.
It’s not like you or I trading 100 stocks at once and going crazy trying to keep track of the risk and profits. They program the computer models to seek and destroy profit opportunities and to manage the risks in real-time too so that they are never destroyed.
So speed and continuous, instant access make the difference too, especially if the model is wrong about an opportunity. In that way, they take human emotion completely out of the decision-making equation.
With that I want to introduce you to our guest today, who is like David to the Goliath Renaissance. Jeremy Mullin is a colleague of mine at Zacks where he starts with a simple quant model built on earnings momentum – the Zacks Rank -- and then overlays his own suite of technical trading filters and what I will broadly call “behavioral analysis” because he pays attention to extreme moves in stocks that are often driven by algo trading that is exploiting investor fear and greed in the markets, which therefore sets up new opportunities for him.
Jeremy has spent the last 13 years as an equity, futures and options trader. His main focus when trading stocks is high beta equities and earnings moves. He uses technical tools when entering and exiting trading setups, but also watches order flow to get a “feel” for market direction.
Check out the Mind Over Money podcast, episode 4, to hear my interview with Jeremy.
Kevin Cook is a Senior Stock Strategist with Zacks Investment Research where he runs the Tactical Trader service.
In today's Mind Over Money podcast, I took a closer look at decision-making. Specifically, I wanted to explore what often gets in the way of good decision-making, especially when the financial landscape is shifting like it is now.
And that means we have to focus on the cognitive biases, those mental short-cuts, filters, and processes that help us make decisions faster.
Because those same short-cuts just as often short-change us from the best outcomes in everything from stock-picking -- and its twin challenges of risk and profit management -- to car shopping and job hunting.
Remember that this podcast wants to come at our “brains on risk” from 3 distinct angles:
Angle #1 is behavioral finance. This is the field of cognitive biases and heuristics that Daniel Kahneman and Amos Tversky broke big ground for in the late 1960s and 1970s. I call this way of knowing about our decision-making the OUTSIDE-IN approach because the behavioral researchers and social scientists are conducting problem-based experiments and questionnaires with thousands of people. They examine behavior in different, repeatable “decision situations” and then draw conclusions from the data patterns about what we humans tend to do and why.
Angle #2 is neuroscience. What science has discovered about our brains through advanced imaging techniques in the past two decades could fill lifetimes of research projects for the next few generations of curiosity seekers. I call this way of knowing about our decision-making the INSIDE-OUT approach because the neuroscience researchers are focused on the brain structures, functions, and biochemistry that cause our behavior.
And this reminds me to remind you about episode #2 of Mind Over Money recorded on Nov 8 where I spoke with Denise Shull of The ReThink Group. Shull earned her Masters in the Neuroscience of Emotion at the University of Chicago and then went on to become a trader and a trader’s coach, working for many top banks and funds. We had a great discussion about understanding how emotion is involved in all our decisions.
Shull’s consulting work really took off in 2003 when she combined her research with that of Antonio Damasio, Professor of Neuroscience at the University of Southern California. Damasio and his colleagues found that if emotional centers of the brain were damaged or in some way disabled, we wouldn’t be able to make decisions at all, or at least not with the ease and effectiveness we do hundreds of times during the day.
So Denise Shull trains her clients to become more aware of their emotions during trading, not to shun them. And she also started doing this in 2016 for the US Olympic Snowboarding Snowcross team. Be sure to catch episode #2 of Mind Over Money with the title “Train Your Brain for Better Trading” to hear all about her work.
How Smart Traders Re-Wire Their Brains
The third angle that I approach the collision of psychology and markets through is the investors and traders themselves, from the so-called Market Wizards, the books by Jack Schwager that interview the highly successful, to the rogues and gamblers who lose it all. This 3rd angle of knowing about our “brains on risk” was actually where I started my intellectual journey here 20-some years ago, observing traders in the commodity and futures pits of Chicago.
That’s because smart traders who’ve learned to survive in the pits or behind the screen share many common traits that the scientists would admire in terms of being aware of their biases and emotions so that they can make better decisions, more consistently, for long-run success. Short-term trading is arguably one of the most mentally-challenging occupations there is because, as I used to argue, our brains are hard-wired to make quick decisions that break the golden rule of trading.
That rule is: cut your losses short, and let your winners run. Most new traders seem to instinctively do the opposite because they are loss averse and eager to capture gains. This is the mathematical recipe for failure in trading because it guarantees that even if you are right 60% of the time, you will lose everything as you let losses pile up bigger than winners.
Ray Dalio on the Big Shift
Speaking of Market Wizards, Ray Dalio, the head of the largest hedge fund in the world, Bridgewater with nearly $200 billion AUM, put out a new investment letter today, November 15, to opine on how the global-macro investing landscape will change over the next few years after last week’s GOP election sweep. Obviously we are seeing many of these new trends already emerging in full force, like the bond bubble popping, and the US dollar rallying as inflation expectations rise, and the flood of money into domestic small-cap companies, especially Financial and Industrial/Manufacturing stocks, at the expense of big-cap Tech
Dalio suggests that these big shifts could rival the reversals of prior decades. Here’s what he said...
"...the main point we’re trying to convey is that there is a good chance that we are at one of those major reversals that last a decade (like the 1970-71 shift from the 1960s period of non-inflationary growth to the 1970s decade of stagflation, or the 1980s shift to disinflationary strong growth). To be clear, we are not saying that the future will be like any of these mentioned prior periods; we are just saying that there’s a good chance that the economy/market will shift from what we have gotten used to."
Now, when we are trying to adjust to new market conditions, this is when we need to be aware of our biases and emotions even more. Heck, the last 7 years of this steady bull market and QE and a 2% GDP economy still fooled people into following their biases and emotions instead of following the market higher by “BUYING the DIPS” with a clear, long-term investment plan.
So it’s never easy. But as I teach people both with short-term trading and long-term investing, having detailed plans of what you will do under different scenarios is the key to effectively managing any type of change or surprise. Market dips in a growing economy, for instance, become recognized as great opportunities, not sources of fear and loathing.
Most investors don't review their portfolios and make new plans for re-allocation often enough. And there are many blindspots and biases that prevent us from opening up that hood and getting a much-needed tuneup.
But now would be an especially good time to confront those obstacles and get ready for the next new trends.
Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the Tactical Trader portfolio.
Learning how to use the 90% of brain insights underneath conscious awareness
When Denise Shull earned her Masters in Neuroscience from the University of Chicago in 1995, she didn’t imagine she would become a go-to consultant and coach for world-class traders ten years later, much less for Olympic athletes this year.
But that’s what has transpired in her career as someone deeply interested in human emotion and decision-making. In this episode of Mind Over Money, I invited Denise to discuss her work and her recent joint venture with Bloomberg Tradebook to train trader brains.
Based on her many years of research on how traders make decisions and deal with emotional responses – including several years as a professional trader herself – Shull and her team at The ReThink Group developed trader training software that she’s inviting anyone to try at https://traderbrainexercise.com/
*Trader’s “Gut” in a World at “Max Algo”*
Shull’s insights about how we can tap into subconscious pattern recognition and cognitive-emotional “intuition” are powerful in a field that for decades has told traders to remove their emotions from trading.
She has been a lone voice teaching traders that it’s not only impossible to separate emotion from decision-making, but that we actually make better decisions when we are conscious of our feelings. And her hedge fund clients now recognize that the death of the high-performing trader has been greatly exaggerated in a world she believes has reached “max algorithm.”
Be sure to listen to my full interview with Denise to learn about her training and coaching work with top trading firms and with the US Snowboarding Team. She tells a great story about “emotional” snowboarders being some of the top performers of the bunch.
Kevin Cook is a Senior Stock Strategist with Zacks Investment Research where he runs the Tactical Trader portfolio.
Today marks the kick-off edition of Mind Over Money, the only podcast that exposes the psychology of investing. I’m Kevin Cook, your field-guide and story-teller for the fascinating arena known as behavioral economics, which includes the sub-field behavioral finance and also draws in the related research from neuroscience, where brain imaging “sheds light,” if you’ll pardon the pun, on how we make decisions about money, uncertainty, and risk.
Jason Zweig described these merging fields in his 2007 book Your Money & Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich.
Zweig, as you may know, wrote for Money magazine for years and was the editor of the revised edition of Benjamin Graham’s The Intelligent Investor. He now writes for the WSJ. So he wasn’t just a journalist describing an investing fad. He’s schooled in classical investing methods and knew he was on to something of enduring importance when he either coined, or at least put on the map, the term “neuroeconomics.”
He opens his book, which I consider must-reading for all students of the market, this way…
“How could I have been such an idiot?” If you’ve never yelled that sentence at yourself in a fury, you’re not an investor. There may be nothing across the entire spectrum of human endeavor that makes so many smart people feel so stupid as investing does.
But actually, I didn’t discover Jason’s book until about 5 years ago. And I had been working on the same ideas as him prior to the financial crisis. In fact, I published part of my thesis that “Your Brain Wasn’t Made to Trade” in 2008 in an industry magazine called SFO, which stood for Stocks, Futures, and Options.
My objective with Mind Over Money is to inspire you to be nearly as interested in behavioral economics, behavioral finance, and neuroscience as Mr. Zweig and I both are. And of course, we both give you plenty of other experts and resources to aid in that endeavor. That’s because so many great and dedicated researchers came before us and created the invaluable insights of these fields.
My unique contribution is that before I discovered behavioral finance or became passionately interested in brain science, I was studying great traders and terrible traders, through their successes and their failures, on the trading floors of Chicago since the mid-1990s.
This Is Your Brain on Risk
There are a lot of forces and players on Wall Street that can separate you from your money. But our greatest financial enemy is often ourselves.
Three great areas of study give us insight about this self-sabotage: behavioral finance, neuroscience, and the collective wisdom of great investors and traders who discovered through hard-won experience what those two sciences now teach us.
When we study these areas, we can become more aware and better equipped to spot how our own minds and habits either get in the way or help us make better decisions when it comes to money, uncertainty, and risk.
One group of researchers studies people from the outside-in, the behavioral finance group, who owe much to the ground-breaking work of Daniel Kahneman and Amos Tversky in the 1970s.
The other group, the neuroscientists, studies our behavior from the inside-out, as they pinpoint what brain structures and functions are involved in different types of decisions and responses.
What happens when our minds meet markets has been a passionate area of interest for me for over 20 years, ever since I first walked on the trading floors of Chicago and watched the good, the bad, and the ugly among professional speculators.
So how did I come to the conclusion that “your brain wasn’t made to trade?” It’s a bold statement. But once I show you the evidence behind it, I bet you will agree.
The Era of Rogues and Geniuses
In 1995, when my trading career was first getting started, the oldest bank in the world collapsed because of the rogue actions of one employee. Founded in 1762, Barings Bank was wiped out by trader Nick Leeson who was taking on exceptionally large trades – and losses – in Japan’s Nikkei futures market.
And he was able to hide them for a time until the risk managers finally woke up and started to notice that accounts were not balancing.
At the time, it seemed people everywhere – from journalists and regulators to traders, bankers, and the man or woman on the street – were all shocked that something like this could happen.
I started tracking stories like this, especially as they seemed to be occurring more often. In 1998, we saw the biggest hedge fund failure ever – up to that time. It is dwarfed by comparison since then.
Long-Term Capital Management had to be bailed out by 16 Wall Street investment banks, in a campaign orchestrated by the Greenspan-led Federal Reserve, because their losses in interest rate sensitive markets around the globe were viewed as threatening to financial markets.
The bailout at over $3.5 billion is considered paltry by today’s “too big to fail” standards. But the truly notable dynamic was that the fund was run by some of the smartest minds on Wall Street, like Myron Scholes who had just won a Nobel prize in Economics the year before.
I also kept track of the big blow-outs I witnessed in the trading pits in Chicago. New floor traders would always come and go on a regular basis. But the surprises came when a 20-year veteran would suddenly vanish because he took exceptional risk that went way wrong and wiped out a multi-million dollar account.
Rogues, Gamblers, and Wizards: What can we learn from them?
As I watched the rogues and the blowouts, I also read about the great traders. Jack Schwager’s books about the Market Wizards are really required reading for anyone who wants to become a full-time trader. They are in-depth interviews with big successes like George Soros, Paul Tudor Jones, Michael Steinhardt, and options wizards like Blair Hull.
As I read these dozens of interviews across 3 of Schwager’s books, I found six themes all these great traders and investors had in common. I’m going to list them for you because even before I had ever heard of behavioral finance or became interested in brain science, these “street-smart” winners had cornered the market on the principles of being in command of their own minds and trading behavior:
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Psychology: emotional decision-making was a paramount discovery
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Discipline: having lost big without them, rules became lifesavers
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Risk Management: the “golden rule” is to cut losses quickly and let winners run
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Probability: repeatable methods & mechanics of risk/reward evaluation
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Consistency: steady compounding was better than windfalls and wipeouts
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Systems: putting the first 5 together in routines of planning & preparation
When I became a professional currency trader in 1999 upon the introduction of the euro, I noticed that even bank traders were an emotional and irrational bunch. As I studied the two sciences, I concluded that our brains were “hard-wired” to break the “golden rule” of trading.
In other words, our fear-driven, excitable, and emotional brains preferred (1) to avoid losses at all costs (so we would only take them when it was almost too late) and (2) to take gains quickly. This irrational and upside-down approach to risk/ and reward was the mathematical road to insolvency.
So I started researching how to train “trader brains” and I developed a probability simulation called Masters of PROP: Probability, Risk, and Optimal Profit. That trader training never goes out of date because its subject material, human brains, remain irrational, decade after decade.
Is It All Just About Greed?
So if the Market Wizards principles of the world’s best traders and investors worked so universally, what were the rogue traders and reckless fund managers doing – just the opposite?
Well, it’s a little more complicated than that. Because while there might be a half-dozen ways to do things right, there are many dozens, if not hundreds, of ways to make our money go away.
What always gets highlighted with rogues and “geniuses” that fail is that they were just greedy. But as I put together my thesis that “Your Brain Wasn’t Made to Trade” in the early 2000s, I came up with 3 more distinct and important drivers of financial bad behavior…
#1: Ego and the desire to be seen as “the great trader.” This was evident in so many of the rogue trader stories, like John Rusnak accumulating $700 million in losses for Allied Irish bank between 1997 and 2002.
#2: Irrational or immature beliefs about money, success, self-worth, and happiness such as “I deserve it!” or “This needs to happen now!” or “Once I win this back, I’ll make everything right again.” This kind of stuff tends toward either unconscious or full-blown narcissism with lots of emotional immaturity in between.
#3: Ignorance or lack of skill with probability
The primary reason I think we gain so much from studying rogues and other reckless gamblers is because what the rogue does to a billion dollars of other people’s money, we can do to our own accounts if we are not aware of our mental habits and cognitive biases as they impact our decision-making with money and risk.
And here, I have a confession to make.
While I could be as guilty as any investor-trader of any of these faults, the one I knew I had to immediately do something about was Probability. As a trading floor clerk in the late 1990s, I realized I had to make up for my lack of understanding and skill with probability.
And since equations were not my favorite things in high school or college, I found that the stories of how probability was invented and how it was used – in the options markets, in Vegas, in sports, and in weather modeling – pulled me in and gave me a practical way to learn the math I needed to know.
I must have read the stories of how Pascal and Fermat invented modern probability theory in the 1650s a dozen times before it started to sink in and I could make sense of all the equations that came after.
But you’re probably still wondering where I get the nerve to say Your Brain Wasn’t Made to Trade?
It’s all in this week’s podcast.
And be sure to check out my weekly video where I expose the psychology of investing with behavioral and cognitive biases. My most recent gives a great example of mental accounting.
The psychology of investing has become such an important area of research that major hedge funds are building trading strategies around human behavioral patterns. In Mind Over Money, Kevin Cook explores the crossroads where markets and brains collide, delving into the two sciences – neuroscience and behavioral finance – that prove investors are often highly irrational when faced with economic decisions, uncertainty, and risk.