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How Overstanding/Understanding Your ‘MOODS” Leads to Better Investments

Tuesday, March 19th, 2024

How Overstanding/Understanding Your ‘MOODS” Leads to Better Investments

The more we get to know the ebbs and flows of your “MOODS” and “EMOTIONS, the more likely you are to OVERSTAND/UNDERSTAND your decision making.

Today, let’s look at how OVERSTANDING/UNDERSTANDING your “MOODS” can help with your performance and decision making – especially when it comes to your investments.

Your “EMOTIONS” and “MOODS” are DIFFERENT THINGS from DIFFERENT SYSTEMS. They interact, of course, but distinguishing their respective qualities can be helpful.

“EMOTIONS” can wash over you like waves: a wave of “GRIEF” or “SADNESS”; a wave of “JOY”; or a wave of “FEAR” or “ANGER”.

They come and go, and if you pay attention and allow them to move through – without trying to stop them or hold on tightly to them – you can use your “EMOTIONS” to learn about what you might do differently, thereby growing your “COMPETENCE” and “WISDOM”.

“MOODS”, on the other hand, tend to move more slowly and deeply – more like the rising and lowering of a tide than a wave. That tide can affect your “ENERGY”, Your “OUTLOOK” and your “EXPERIENCE” of the world in PROFOUND ways, coloring your “PERCEPTION” and “SKEWING” your “JUDGEMENT”.

There are things that tend to bring your “MOOD” down. Specifically, losing an important person or a lifestyle; feeling stuck or helpless; or pursuing goals that are beyond challenging – goals that are actually “IMPOSSIBLE” to achieve.

 

Your “HABITS” can also lower your “MOOD” and cause problems, such as irregular sleep patterns, unhealthy routines or self-destructive behavior.

Your “MOOD” will drop and your “ENERGY” will wane in response to these kinds of circumstances.

When you don’t pay attention to the lowered “MOOD” – and what may be causing it – your “MOOD” can drop further and continue to drop to the point where, eventually, you end up in a deep “DEPRESSION”.

BUT, let’s say that your mood has dropped a bit, and this time you are paying attention and catch it.

What will happen then???

Being Attuned to Your “MOOD” Signals

One of the benefits of a lowered “MOOD” is that, for a time, your ability to think analytically actually IMPROVES.

The healthy function of a lowered “MOOD”, after all, is that it alerts you to stop what you are doing and reassess to see whether there’s a better strategy.

We have all had the experience of working on a project and getting to a point where we feel “STUCK”, without a clear idea of the next step.

We’ve persevered for a reasonable amount of time, trying to push through, but it feels like we’re hitting some kind of wall. We feel “STUCK”s, and our “ENERGY” for the project wanes.

Then we take a break, go for a walk, do something different and come back to the project with fresh eyes.

We have paid attention to the signals our “MOOD” system is sending us. “It seems like you’re stuck,” it says. “Step back and reassess your situation to find another route.” Honoring that message will allow us to find the door and stop hitting the wall.

If you can catch yourself at the point where your “MOOD” is BEGINNING to drop and aim yourself toward problem-solving, you are likely to make better decisions.

 

BUT, if you ignore the initial signals and let your “MOOD” drop for too long, then your thinking begins to suffer – with a stronger tendency toward “NEGATIVITY” and even “CATASTROPHIC” thinking.

 

That’s why when you are in a mildly lower “MOOD”, it may be a good time to form an effective investment strategy or rethink what doesn’t seem to be working so well.

BUT, a more DEEPLY lowered “MOOD” can interfere with “CLEAR” thinking. You are less likely to “SEE” potential opportunities. You constrict your sense of “POSSIBILITIES” and “SEE” only the downside.

 

Because of this, you will be more “PESSIMISTIC” and less likely to take the actions you need to take.

The beauty of knowing all of this is that – since you already have a sound strategy in place – awareness of your changes in “MOOD” can help you stay the course on what you have planned. Then you can take the positive actions that your plan calls for, even when you really don’t feel like it.

Now, what about when you are in a elevated “MOOD”???

Your “MOOD” rises to enable you to joyfully celebrate wins, to give you the “ENERGY” to take “CALCULATED RISKS”, to lean into “OPPORTUNITIES… to be “BOLD” so that “MIGHTY FORCES can come to your aide.

A raised “MOOD” prepares you for “ACTION...

BUT, in firing you up to take “RISKS”, it can also “COLOR” your judgment, making it less likely that you will see the downsides of what you feel like doing.

SO, when your “MOOD” is raised, you can feel seduced by your excitement into moving away from your well-thought-out strategies and toward more impulsive, possibly foolish – and potentially very expensive – decisions.

A couple of signs that you are about to make more impulsive decisions from a raised “MOOD” are…

  • If you feel rushed to do something quickly.
  • If you avoid talking with anyone else about it.

That’s when it’s time to STEP BACK, reconnect with your long-term strategy and deliberately have a conversation or two with someone you “TRUST”. That will give you ground and give you the ”PERSPECTIVE” you need to choose “WISELY”.

NOTE: THERE ARE ALWAYS TRADE-OFFS IN LIFE!!!

 

 

To ACHIEVE ANYTHING, you have to accept a certain amount of “RISK”; to CONSERVE ANYTHING, we have to be willing to forgo a certain amount of “POTENTIAL” reward.

 

As with any long-term “GOOD” in LIFE, the “KEY” to PROFITABLE INVESTING is to know yourself.

 

In this case, the more you can OVERSTAND/UNDERSTAND how your “MOODS” affect you, the better able you will be to draw from the “STRENGTHS” of a lowered or raised “MOOD”… and avoid the pitfalls.

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

How to Become “WEALTHIER”… Instantly

Monday, March 18th, 2024

How to Become “WEALTHIER”… Instantly

Would you like to become EXPONENTIALLY “WEALTHIER” in less than four (4) minutes???

That may sound improbable – even “LUDICROUS”... BUT, you can MAKE IT HAPPEN!!!

In the process, you will also sleep better, improve your health and increase your “HAPPINESS SET POINT” by up to 25% according to analyst(s).

Skeptical??? GOOD!!!

 

BECAUSE, I am about to reveal the “TRANSFORMATIVE”, “LIFE-CHANGING”, “SCIENTIFICALLY” PROVEN BENEFITS of feeling and expressing “GRATITUDE” on a DAILY BASIS.

Many people – perhaps most – wait for “SPECIAL OCCASIONS” to feel “GRATEFUL”.

Like when they graduate, or get that raise or promotion, or finally pay off the mortgage.

That’s a MISTAKE!!! You should let “EVERYDAY” things – “SMALL” things – spark a sense of “GRATITUDE”.

The weather is “FINE”. The meal is “DELICIOUS”. That rainbow is “GLORIOUS”. The grandkids are “PRECIOUS”. That stranger was so “KIND”.

You don’t have to WAIT for an opportunity to feel “GRATEFUL”. You have the POWER to “SAVOR” the feeling “EVERY DAY”. You only need to “WAKE UP” to it.

No doubt you have problems, perhaps serious ones. Health problems. Financial problems. Relationship problems.

Welcome to the real world…

Feeling “GRATEFUL” doesn’t mean everything in your life is SWELL. It doesn’t require you to be oblivious to what’s wrong with the nation or the world.

It simply means you take three (3) or four (4) minutes every day – not just a few seconds – to contemplate what’s right with your life.

 

Look for opportunities to make a “POSITIVE ASSESSMENT”, to recognize just how “GOOD” it is to be ALIVE…

AND, say it out LOUD. Then notice the people around you nodding their heads.

After all, we have much to be “GRATEFUL” for if we only “STOP” and RECOGNIZE IT!!!

Our “ANCESTORS”, PEACE and BLESSINGS BE UPON THEM, were born into a world where “SURVIVAL” itself was a “STRUGGLE”.

They LABORED hard to find FOOD, CLOTHING, SAFETY and SHELTER from the elements. Many DIED young, usually of unnatural causes.

There are plenty of people reading this “WIZ” DAILY JOURNAL now who GRANDPARENTS grew up without ELECTRICITY, RUNNING WATER or, VACCINATIONS against deadly diseases.

Never saw prosperity???

 

We live in the “WEALTHIEST” country at the most “PROSPEROUS” time in the HIStory of the world.

 

As I have noted before, a “MIDDLE-CLASS” citizen today is better off than the richest American ever: JOHN D. ROCKEFELLER.

 

Constantly comparing what you “HAVE” with what someone else “HAS” creates an “IMPOVERISHED” state of mind.

It makes you feel “POORER”, even when you are not.

How can you become “WEALTHIER” – instantly???

 

By adopting the “OPPOSITE” MINDSET!!!

 

Dwell on your ASSETS, because they will keep your “ASS SET”…

RATHER, than your LIABILITIES, because they will have you “LYING ABOUT YOUR ABILITIES”…

Dwell on your BLESSINGS, rather than your GRIEVANCES…

Dwell on your OPPORTUNITIES rather than your PROBLEMS…

Even SETBACKS can be viewed in a “POSITIVE LIGHT” if you see them through the lens of “GRATITUDE” – and ask yourself a few questions:

  • What can I be “THANKFUL” about in this situation???
  • Could it have been “WORSE”???
  • Is there an “IMPORTANT” lesson to be learned here???
  • How can I “GROW” from this???

Keep a “GRATITUDE” journal, one where you take a few minutes each night before retiring to write down the “GOOD” things – both LARGE and SMALL – that made you “THANKFUL” that day.

 

What are the “BENEFITS”???

Studies show that “GRATEFUL” people have an easier time falling asleep and snooze longer. They enjoy a host of health “BENEFITS”, including greater resilience and longevity. “GRATITUDE” has even been shown to boost your “HAPPINESS SET POINT” – your basic “GENETICALLY” determined level of “HAPPINESS” – by up to 25%.

In short, in order to “FEEL” – and be – “WEALTHIER”, you need only “RECOGNIZE” how “WEALTHY” your LIFE already is!!!

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

“EXPERTS” Hate the Stock Market… Here’s Why

Friday, March 15th, 2024

“EXPERTS” Hate the Stock Market… Here’s Why

Rational, self-interested men and women consider the economy, interest rates, commodity prices, regulations, technological developments, pending legislation and the future prospects for various industries and incorporate all this information into share prices each day.

These investors are not just offering an “OPINION”...

They are taking “RISKS” that will result in “SIGNIFICANT” losses if they are wrong.

That is why markets are often described as “EFFICIENT”. Everything that can be known is IMMEDIATELY reflected in SHARE PRICES.

You are skeptical that “GREEDY” investors could possibly know better than highly trained scientists and policy makers???

Consider the space shuttle CHALLENGER…

At 11:38 a.m. on January 28, 1986, it lifted off its launch pad at Cape Canaveral. Seventy-four seconds later – and 10 miles higher – it BLEW UP!!!

The launch was televised “LIVE”, so the news spread QUICKLY.

Within minutes, investors began bailing out of the four major shuttle contractors: Rockwell International (ROK), which built the shuttle and its main engines; Lockheed Martin (LMT), which managed ground support; Martin Marietta (MLM), which manufactured the ship’s external fuel tank; and Morton Thiokol, which built the solid-fuel booster rockets.

All four (4) stocks were hit HARD initially.

BUT, by the end of the day, three of them were down just SLIGHTLY. Only Morton Thiokol closed SHARPLY lower…

There were no public comments that day singling out Morton Thiokol as the guilty party.

It would be six (6) more months before a Presidential commission concluded that the company’s O-ring seals were the culprit.

YET, the stock market IMMEDIATELY identified Morton Thiokol as the company responsible for the disaster.

How could investors know something that even NASA scientists did not???

Author JAMES SUROWIECKI calls it “THE WISDOM OF CROWDS”. What “ALL OF US” know is far “GREATER” than what any individual or elite group can know.

Evidence of this is all around us…

Remember the old TV show Who Wants to Be a Millionaire with Regis Philbin???

When a contestant was allowed to query an expert of his choosing, that expert gave the right answer 65% of the time.

BUT, when the contestant polled the audience – a “RANDOM” group of people with nothing better to do on a weekday afternoon than sit in a TV studio – they picked the right answer 91% of the time!!!

(This was before the advent of smartphones, of course.)

We “PRIZE” and “HONOR” the intelligence of “EXPERTS”. Yet, counterintuitive as it may seem, CROWDS ARE SMARTER!!!

“EXPERTS” don’t like that, of course.

(That’s why BILLIONAIRE money manager KEN FISHER refers to the stock market as “THE GREAT HUMILIATOR”.)

Following the GREAT RECESSION, I spent years on the lecture circuit trying – and often FAILING – to persuade investors that RISING stock prices were NOT a “DEAD CAT BOUNCE” or a “BEAR MARKET” rally but a powerful signal that the economy was on the MEND.

RISING share prices were a clear signal that the outlook was IMPROVING. BUT, people looked around or – worse – BACKWARD and concluded it was NOT.

Many of them missed the longest-running economic EXPANSION and “BULL” market of ALL TIME!!!

Don’t miss the next one…

After 27+ years as a PORTFOLIO MANAGER, RESEARCH ANALYST and, ECONOMIST, I do overstand/understand a few things about how to “READ” the stock market.

Lately it has said “LOUD and CLEAR” that the economy will “SNAP BACK” faster than most expect.

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

The Demise of “HOMO ECONOMICUS”

Thursday, March 14th, 2024

The Demise of “HOMO ECONOMICUS”

I believe that the financial markets are one giant “RORSCHACH” test – you know, the test where a psychologist asks you to make sense of an oddly shaped inkblot.

Put another way… YOU SEE WHAT YOU WANT TO SEE!!!

My view flies in the face of “CONVENTIONAL” financial theory taught by professors in business schools (B-schools) around the globe.

Contrary to Nobel Prize-winning economic theories about “RATIONAL EXPECTATIONS”, an investor is anything but “HOMO ECONOMICUS”– the perfectly rational actor you will meet in every finance textbook.

Like BIGFOOT, an “ECONOMIC HUMAN” has never been seen in real life.

Unlike you and me, “HOMO ECONOMICUS”…

  • Has perfect information for investment decisions
  • Does not feel emotions like fear and greed
  • Believes that financial crashes like the one in 1987 happen only once every billion years.

Of course, I’m hardly the only “HOMO ECONOMICUS” skeptic.

Psychologists have long confirmed that we humans suffer from “COGINITIVE BIASES” that make it difficult for us to get “P.A.I.D” from the markets.

Academics have labeled this new field “BEHAVIORAL FINANCE”.

Not surprisingly, it took psychologist DANIEL KAHNEMAN to convince economists that investors don’t act like hyper-rational automatons.

In a slap in the face to the entire economics profession, Kahneman WON the 2002 Nobel Prize in economics without ever having taken an economics course!!!

 

Putting Mr. Market on the Couch

Try telling a “STREET SMART” trader you have just learned that investors are NOT perfectly “RATIONAL”…

AND he will look at you with both “PITY” and “DISDAIN”.

After all, traders do little else than pay attention to the market’s “MOOD SWINGS”.

WARREN BUFFETT said that one of the most important lessons he learned from his mentor BENJAMIN GRAHAM was the parable of “MR. MARKET”.

Here’s how GRAHAM described “MR. MARKET” in Chapter 8 of The Intelligent Investor…

On some days, Mr. Market is euphoric. On other days, he’s very depressed. If you catch him on a good day, he wants a very high price for his shares. If he’s in a down mood, he’ll sell you his shares for a pittance.

 

“MR.MARKET” highlights the one thing you can predict with certainty about financial markets: Investors always “OVERREACT”…

OFTEN, “MR. MARKET” will shift his mood from go-go optimism to extreme pessimism for no real, discernable reason.

Now, I don’t know how WARREN BUFFETT has reacted to Mr. Market’s mood swings…

BUT, I do know how he has reacted in the past.

In August 2011, the U.S. stock market “SOLD” off sharply, much like it did recently. Investors panicked after the U.S. lost its AAA rating from Standard & Poor’s, the world’s foremost credit ratings firm.

On August 25, 2011 BUFFETT publicly announced that he was aggressively buying Bank of America (BAC) stock.

Fast-forward six (6) years to July 2017, and BUFFETTB had almost TRIPLED his money!!!

Once again, “MR. MARKET’s” mood swing proved temporary.

The lesson???

Be like BUFFETT– don’t get caught up in “MR. MARKET’s” latest “MOOD SWING”.

Instead, PAUSE, BE STILL and, REFLECT…

Take advantage of the opportunities the market pullback offers.

Here’s my prediction: The U.S. stock market will bounce back quickly from its current correction.

After that, it’ll be a stock picker’s market between now and September (2024).

In October, we’ll see the traditional fourth quarter rally in global stock markets.

By that time, “MR. MARKET’s” mood swing(s) will be a distant memory.

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

The Stock Market Is Like a “CASINO”… AND, That’s a “GOOD”

Wednesday, March 13th, 2024

The Stock Market Is Like a “CASINO” and That’s a “GOOD”

 After a vigorous pick-up game of “HOOPS”, a playing partner proceeded to tell the group why he never invested in stocks…

“The stock market is nothing but a casino,” he explained. “Sometimes you win. Sometimes you lose. But everyone is just placing their bets and gambling.”

The other four players tried to explain to him why this explanation was “OFF THE MARK”. BUT,  as a dyed-in-the-wool real estate investor – he was having none of it.

The stock market “SCARED” him AND he was convinced that success or failure was just a matter of being “LUCKY” or “UNLUCKY”!!!

This opinion is fairly common among people with no stock market experience – or with one or two bad experiences. (Surely you have known individuals who voiced much the same view.)

I generally concede that, in some ways, the stock market is like a casino, especially in the very “SHORT TERM”.

Stock price movements from HOUR to HOUR – and even DAY to DAY – are largely “RANDOM”. It is only over LONGER PERIODS that an underlying “ORDER” and “LOGIC” take hold.

Companies’ shares move up only to the extent that their EARNINGS and their PROFITS move higher. The reverse, of course, is also true

Look back through HISory and you will not find a single example of a company that INCREASED its EARNINGS quarter after quarter and year after year without the stock tagging along, no matter whether we were in a “BULL”, “BEAR” or, something in between market.

That is why WARREN BUFFETT’s mentor BENJAMIN GRAHAM famously remarked that in the SHORT TERM, the market is a “VOTING” machine.

BUT in the LONG TERM, it is a “WEIGHING” machine.

AND, what it weighs is “CORPORATE PROFITS”.

Aside from the inscrutability of stock movements in the very SHORT TERM, there is another way that “EQUITY INVESTING” resembles a CASINO.

And this analysis is based on my own experience.

I have never been much of a gambler.

I NEVER fell prey to the fatal conceit that if I gambled long enough or smartly enough – as if there were such a thing as “INTELLIGENT GAMBLING” – I would eventually win it all back… and then some.

I simply took a good look around the casino. While there were hundreds of people laughing and drinking and smiling (and frowning) at the tables… There was NO LINE whatsoever at the cashier’s window…

Clearly, I wasn’t the only one taking my lumps.

According to the American Gaming Association, gambling in the U.S. reached a record high last year (2022) as commercial casinos and online betting apps reaped more than $60 billion in gambling revenues. That broke the previous record of $53 billion set in 2021, increasing about 14% year over year.

These gamblers not only aren’t striking it “RICH”. They are paying for all those “GLITTERING” towers… AND, I don’t want to be one of them!!!

The “SMART” move is to be a casino “OWNER”… NOT A “CASINO GAMBLER”!!!

Few of us have the hundreds of millions or billions of dollars necessary to open and run a “FABULOUS” casino.

Yet that is no obstacle. You need only own a few shares of a leading “GAMING” company.

IN FACT, after that conversation with my “B-BALL” partners last week, I ran some numbers.

Here’s what I found…

Since the market bottom in March 2009, Century Casinos (CNTY) is “UP” 381%. Penn Entertainment (PENN) is up 487%. MGM Resorts (MGM) is up 1,334% and, Las Vegas Sands (LVS) is up 3,858%.

 

So yes, the stock market is like a “CASINO”...

Just be sure you are the “OWNER”… not the “GAMBLER”!!!

PEACE & BLESSINGS
Kenneth Reaves, Ph.D.

The Ask The Wiz Wealth Institute is not an investment advisor. We strive to be educational and informative community servants.
 

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