4aapl
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Post by 4aapl on Apr 26, 2022 7:44:33 GMT -8
This is one of the few books that I've read a second time, years later. (So far I've read Manias, Panics and Crashes 3 times over 25 years, as a great reminder of what happens once in a while as things get worked up into a bubble)
While not specific to financial decisions, this book is about behavioral psychology, pointing out some of the flaws we have, and how they are exploited.
The thing that brought me back what remembering the MIT Brew experiment. Basically they gave college kids a free beer sampling of two choices, asked which they liked better, and gave them a free one of it. But, the normal beer was just a lager like Miller Lite, whereas the other had a coupe drops per ounce of balsamic vinegar in it. Their preference all came down to when they learned that vinegar was involved. If they heard there was vinegar in one before trying any, they'd prefer the unmodified one. OTOH, if they didn't know, or found out after they made up their mind, the modified version was the overall winner. And that would be their choice for a free beer, even if they had to add the vinegar themselves.
There were lots of other studies cited, including making decisions when in a cold state of mind vs a hot one.
If you want to know where some of your blind spots are, and that things aren't always so logical, this is a great book to read. There are others that are more specific to financial decisions, but many of those cite this book multiple times.
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Dave
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"It's tough to make predictions, especially about the future." Yogi Berra
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Post by Dave on Apr 27, 2022 2:27:18 GMT -8
Thank you for sharing these three books. I’ve always been amazed at the choices that I / we make in any field of life. I guess it’s just part of our human nature. An example that comes to mind is when talking to someone about investing is the price of a companies stock. If given a choice between buying 10 shares @$100 per share of one company or 1 share @ $1000 per share and knowing that each company will provide a 10% return over the next year they will almost always pick the lower priced stock. The health of the company had little influence on their choice. Predictably Irrational.
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4aapl
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Post by 4aapl on Apr 27, 2022 5:40:40 GMT -8
Yep, pricing is a strange thing. In shopping I am somewhat immune to it, often trying to get the same quality for a lower cost, and possibly even giving preference in trying to quantify that to the lower cost item since I expect so much more of a higher cost item. Yes, it's tough getting a $15 burger, and enjoying it. At least at a nicer restaurant, there is hope. There's not much hope at a ski lift.
Anyways, they tested that in different ways. One was to give a taste of the same wine to the same people while in a machine that looked at their brain patterns. They liked the one they were told was $100 more than what they were told was $10, even though it was the same. I supposed the test there would be to have made them buy it too. (This example was from The Behavioral Investor, but Predictably Irrational has similar things)
Our brains make us do strange things. One thing is that we invested in Apple while it was the underdog, and likely at some point had an oversized amount. We even, as part of this group, held it through at least one bad time. Not only does that make us a little different than most, but the success we've gotten from it has reinforced some of those decisions. If instead things hadn't panned out, such as for other underdogs like TDFX, we'd probably feel much different about things.
Books, even more so than movies, take a while. Though I've practiced speed reading in the past, and think it would be very helpful, I read at a mostly average rate these days. And some of this heavy stuff takes some concentration. With movies these days I tend to not go with anything below a 6 on IMDB. Books are harder, and I don't really know where I get the titles from. Some have been from articles and programs, but other times it's when I am interested in a subject, search for a book, and then the library suggests other ones. Most have worked out pretty well, but occasionally there are ones that just aren't what I am looking for.
"The search for fulfillment" just wasn't fulfilling me, though it's last chapter that often she found legacy correlations when seeing happiness late in life was good to be reminded of, especially as her findings on legacy extended to just about anything that was passed on to others, including her example of a chili recipe that she got from her grandma. So while it could be about money, in general it was about spreading joy or knowledge to others, making the world just a little bit better, which brought fulfillness to yourself.
Like I said, I wasn't loving most of the book, and so skipped to just the one of five types it said I was, and then even skipped most of that since it was just a little too clinical for me at least at that moment. But the legacy section was a good reminder.
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Dave
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"It's tough to make predictions, especially about the future." Yogi Berra
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Post by Dave on Apr 28, 2022 5:07:48 GMT -8
I watched “The Edge” again last night, staring Anthony Hopkins, Alec Baldwin, Ellie McPherson and Bart the bear. The Anthony Hopkins character provided several words of wisdom throughout the movie that I believe would fit in with this thread. “People that are lost in the wilderness die from shame”. It’s the would-of, should-of, could-of thinking that prevents one from thinking of a solution to the problem. “What one man can do another man can do”. I think that are a few holes in this one as I could have never been a professional basketball star. And never let your emotions get in your way of making the correct decision and these all can be applied to investing.
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4aapl
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Post by 4aapl on Apr 28, 2022 19:38:57 GMT -8
Some movies have great thoughts and one liners, though part of it is your feeling to take in those lines. Just like many things in life, there is a bias there.
I remember watching "The Edge" way back, on VHS. An uncle of mine had a similar thing for him and a buddy, out on fire watch patrol for the forest service in Alaska. They killed the grizzly, and he gave the claws or teeth or something to my Grandma, while the other guy got the hid.
If you want an uplifting but not 10 out of 10 movie, try "The Secret". I believe it's free on Prime, where we watched it. It went a little overboard at times, but in general was the right idea that a lot has to do with how you precieve things, and what you are looking for.
FWIW, I also ended up with the book, or in this case the book on CD. It was completely different, and not what I was looking for, though I listened through the first disk and a half on a short trip.
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mark
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Post by mark on May 24, 2022 17:24:24 GMT -8
If instead things hadn't panned out, such as for other underdogs like TDFX, we'd probably feel much different about things. Funny that you mention TDFX, I rode that one down to zero including catching some knives on the way down. And it taught me something important. You might think that it taught me to "sell before it hits zero" or "don't catch falling knives" or "look for fundamentals" or "look at the chart" ... NO, neither of those. It taught me that riding things down to zero is a LOT less painful than selling too early. I'll explain. So I bought TDFX, let's say at 20 (I don't recall the real numbers anymore), it went down to 10, so I bought more, and then it hit zero. I lost 30. And I lost 30 because I didn't sell. But, on the other hand, I sold some UNH for a quick profit in Dec '08 at 25 ... that resulted, so far, in a loss of 472. And I sold some TMUS in May '15 at 35 ... that's a loss of 90 so far. And I sold some AAPL in 2008 at 92 (pre splits) ... that's a loss of (click 7 x click 4 x click 140) 3830 so far!!! What I learned is that I've "lost" far, far, FAR more by selling than by holding something that goes bad. Most things don't go bad, certainly most things that I would buy (I'm not a huge speculator on way out there things). So my bias nowadays is to hold even if it starts looking bad, after all, the most you can lose is 100% on the way down, but the most you can lose on the way up is unlimited, could be 100%, could be 500%, could be 1000% or more.
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Dave
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"It's tough to make predictions, especially about the future." Yogi Berra
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Post by Dave on May 25, 2022 5:26:05 GMT -8
Mark, through the years I’ve had my own losers as I’m sure many of us have. But the one that hurt the most was GTAT (GT Advanced Tech). I mean, what could possibly go wrong when you have Apple supporting them financially, only to discover that they were making promises that they couldn’t keep. Thankfully I didn’t ride this mistake to the very bottom, but close. That was when I quit investing in Apple suppliers. Lesson learned.
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Post by Lstream on May 25, 2022 8:19:37 GMT -8
I also avoid Apple suppliers. Just too much risk that Apple designs them out. Risk that is like looking into a thick fog.
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