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Today, that advice looks like it has proven correct once again.
Putting Mr. Market on the Couch
Market mavens such as Warren Buffett know that much of the “current state of the market” is one giant psychological Rorschach test.
What we see says more about us than what is actually there.
Whether you’re Goldman Sachs or Harry Dent, most of financial punditry is about shoehorning real world events into pre-existing rational explanations — and then justifying them after the fact with the benefit of 20/20 hindsight.
It’s an exercise that Nassim Nicholas Taleb, author of the classic book “The Black Swan,” calls a “narrative fallacy.”
Although investors do this on a daily basis, today we know that there is real science behind Mr. Market’s mood swings.
And it’s science that trumps even the Nobel Prize-winning intellectual tenets of modern finance.
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