Author: shyam

Proximity Bias

Where an idea comes from seems to influence whether or not people think something’s a good idea. The further away that an idea comes from, the better people think that it is. Our brains are wired to assume that ideas that come from nearby are more concrete so they’re not considered as creative as the more abstract concepts that come from further away.

We are also eager to take advice from someone that sounds intelligent on TV or in an article, without vetting their predictions or doing our own research before making a purchase or sale.

Uncertainty makes people anxious and uncomfortable so we are willing to listen to those that claim they can predict the future to alleviate that tension. No one knows for sure what’s going to happen tomorrow, but it makes us feel better to believe that someone can forecast the future to make us feel better.

Source: Why We Miss Creative Ideas That Are Right Under Our Noses

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Many technical indicators boil down to a handful of unique variables

Facepalm

Dr. Brett Steenbarger at Traderfeed:

The bad news is that the many technical indicators out there really just boil down to a handful of unique variables. The good news is that, overall, these unique variables do possess statistically significant predictive validity with respect to the prospective movement of stock index prices. The challenging news is that even this significant predictive value leaves the lion’s share of the future movement of stock index prices unexplained.

Source: The Psychology of Quantitative Analysis

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Flash PMI Roundup: March 2014

Flash numbers came out yesterday, here’s a roundup.

US manufacturing output growth continues

Markit Flash U.S. Manufacturing Purchasing Managers’ Index registered 55.5 in March, the second-highest since January 2013.

US Manufacturing PMI

The Eurozone continued to grow

The flash estimate of the Markit Eurozone PMI Composite Output Index came in at 53.2, only slightly lower than February’s 32-month high of 53.3 and registering expansion for the ninth consecutive month. The periphery is staging a robust-looking recovery.

Eurozone PMI

Germany grew at a robust pace

New export work placed at manufacturers rose for an eighth month running, with China, Spain and the US mentioned as sources of growth.

France returned to growth

The Markit Flash France Composite Output Index posted 51.6, up from 47.9 in February. That was the first reading above the 50.0 no-change threshold since last October.

In the manufacturing sector, growth of new work picked up to a solid pace that was the sharpest in 34 months (partly boosted by a faster rise in new export orders).

Commentary

Eurozone unemployment remains stuck at a record high of 12%. Price measures continue to warn of deflation risk. Input prices – or the prices manufacturers pay for goods – have been dropping while output prices – or the prices they charge for what they sell – are contracting, as they have done for the past two years. (WSJ)

Investors are walking farther along the risk curve, reaching for yield. Debt investors are abandoning normal creditor protections on European leveraged buyout loans. Growing volumes of euro-denominated “covenant light” loans have now aroused the interest of European regulators, who are increasing their monitoring of lenders’ behaviour. (FT)

Germany is seeing its version of a real-estate boom, dubbed betongold or “concrete gold.” “People here don’t want to own property. But they now feel they must because there’s no interest on savings. All you can do is buy real or concrete gold.” (FT)

 

Source: Markit

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