Mind Tricks & Common Illusions

Magician performs magic with beauty girls in airMagicians and con-men have known for centuries how to deceive, seduce, and exploit audiences and individuals to their benefit. Francis Bacon, 16th century philosopher, scientist, and author, said, “Man prefers to believe what he prefers to be true.” We are willing victims, even active accomplices, in the regular misinterpretation of the world around us, often to our dismay and sometimes to our harm.
 
In fact, neuroscientists are just beginning to unravel the secrets of the brain – how we see the world, and how we remember details of events and environments. This can help us understand the hidden feelings that color our decisions and drive our actions, which in turn can help us make better decisions.

Decision Systems in Our Brains

The human brain is a magnificent organ, developed over hundreds of millions of years of evolution. It equals about 2% of your body weight but consumes more than 20% of your oxygen and blood flow. Research suggests that the brain functions through the more than 1,000 trillion synapses between brain cells (neurons) that are constantly growing and dying throughout life.
 
As explained in The New York Times, Dr. Daniel Kahneman, a Nobel Prize winner and author of “Thinking, Fast and Slow,” theorizes that our brains operate on two different levels or systems which he calls “Experiencing Self,” or System 1, and “Remembering Self,” or System 2. The first system operates primarily on a subconscious level: It is fast, automatic, emotional, frequently in play, and relies mostly on stereotypes. The second system is deliberate, logical, slow, infrequent, and lazy – coming into play only with effort. System 1 jumps to conclusions, while System 2 forms judgments. System 2 likes novelty, significance, and endings (the last moments of an experience).
 
Kahneman theorizes that we rely on System 1 – what writer Malcolm Gladwell in his book “Blink” calls “intuition” – for most decisions, exercising System 2 only with conscious effort and when we are aware that System 1 might be faulty. These basic cognitive processes are necessary to accurately perceive and understand the world around us. However, the tendency to over-rely on intuition – stereotypes, impressions, and distorted, even false memories – frequently leads to bad conclusions, inappropriate acts, and later regrets.
 
Read more . . .

Day Trading for a Living – Benefits and Risks

Trader Using Multiple Computer Screens While Communicating ThrouIn the days before personal computers, instantaneous communications, and sophisticated software, many Wall Street brokerage firms employed veteran traders to sit and interpret the paper tapes of stock transactions that spewed from mechanical tickers across the city. These traders, known as tape readers, would note the price and volume pattern of individual trades in the hopes that they could identify opportunities for quick profits. For example, if the latest trade of a stock differed significantly from previous trades in either price or volume, this might be interpreted as the work of insiders acting before news that could affect the company is announced. The tape readers would then act similarly, hoping their intuition was correct.

Since that time, the stock ticker has been replaced by a massive electronic network capable of analyzing and reporting trade data throughout the world. That technology has led to changes in the way the investment industry functions. One of the more unique positions in today’s landscape is that of the day trader.

Definition of Day Trading

By definition, day trading is the regular practice of buying and selling one or more security positions within a single trading day. No position, long or short, is held overnight. Day traders frequently deal in thousands of shares, often with leverage, and look for small-percentage profits on each trade – often less than $1 or $2 per share. They take positions based upon their analysis of a stock’s probable price direction within the trading period.

Popular day trading strategies include the following:

Read more . . .

Do You Know TED? A History & Criticisms of this new Public IDEA Conference

TED ConferenceImagine the opportunity to hear the late mathematician Benoit Mandelbrot, the father of fractal geometry, explain its application in fields ranging from “how galaxies cluster, how wheat prices change over time, or how mammalian brains fold as they grow.” Or MacArthur Fellow and University of Southern California law professor Elyn Saks detail her life dealing with schizophrenia on a daily basis, often imagining that she has killed “hundreds of thousands of people.”

Perhaps you would prefer watching jazz musician Herbie Hancock improvise a new version of “Watermelon Man,” or see 64-year-old long-distance swimmer Diana Nyad explain her successful fifth attempt to swim from Florida to Cuba, 110 miles through shark- and jellyfish-infested water.
Mandelbrot, Saks, Hancock, and Nyad are a small representation of the 1,416 speakers and subjects presented at annual Technology, Entertainment, Design (TED) Conferences since 1984. And they are available for free to anyone in the world who has an Internet connection and a desire for knowledge.

Read more . . .

5 Shrewd Ways to Adjust Your Portfolio As You Near Retirement

adjust portfolioLife was good at the end of 2007 for Bill and Mary. Bill, at age 60, had enjoyed a successful career with Walgreens, one of the largest retail companies in America. His career, begun 28 years previously, enabled Mary to be a stay-at-home mom, paid for their two kids’ college education, and enabled the couple to build a $1 million position in a Fidelity New Millenium Fund through constant investments over the years. During the last decade, Bill had been the beneficiary of annual stock options which he faithfully exercised, maintaining the common stock with the faith that the company would continue to grow in value. By 2007, the stock was worth more than $300,000. The couple was looking forward to Bill’s early retirement in 2010 and a year of traveling, making up all of the trips they had foregone during the early years of savings and paying for college. Then disaster struck.

With the Great Recession, the S&P 500 fell more than 800 points, a 55% decrease. While the New Millennium Fund did better than the general market average, losing only 48% of its value, the value of Bill and Mary’s portfolio dropped to slightly more than $500,000. The Walgreens stock also suffered, falling from $48 per share in September to $23 in 2009, and the options that Bill had yet to exercise were underwater. Their plans for an early retirement were no longer possible.

Read more . . .

this post first appeared on the FiveCentNickel website on December 27, 2013.