a new “headwind” is born

Posted by

I don’t think I’ve ever seen a 1.8% FX move cause such global consternation.

But of course it isn’t the move itself that is causing the problem, but the implication that they can do it again with the predictable now becoming the unpredictable. It opens up the ruler and pencil cupboard to the extrapolatinists who are now free to draw future conclusions as as to where this action can lead with little other than fresh air to stop them predicting the end of the financial world. Yet this also raises the spectre of 'availability heuristic' and ‘recency' behavioural biases associated with recent events, which can be encapsulated into overestimating the probability of a recent event reoccurring and underestimating the probability of distant past events reoccurring. Earthquakes and terrorist events are good examples. The vacuum of other financial news in an August market leaves the landscape clear for these biases to propagate.

China, a peg on which to hang your bear hat. (Polemic's Pains)

So China devalued its currency a smidge. Probably better to sell now and ask questions later, no? That’s usually worked in recent history, hasn’t it?

The move by Beijing has presented investors with the newest “headwind” to toss onto the pile, now that the Greece thing has lost its ability to startle us.

As Michael Batnick explains, there has always been a good reason to sell out…

One of the biggest psychological challenges of investing is that there is alwayssomething out of the norm. Take a look at the table below which highlights different times investors had to live through and the extreme performances that accompanied them. I wonder at what point would somebody would have described the times as normal.

returns-decade1

Josh here – stocks go up and stocks go down, but “headwinds” are a constant. And in the absence of a serious one, a bullshit one will do just fine when people are in the mood to panic.

To put it another way, there’s this:

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
HowIInvestMyMoney