Last week there were threats of escalating tariffs on Mexico. The China "Thing" just keeps on getting uglier. Yesterday, the federal government set the groundwork for investigations of tech firms.
The stock market was getting pounded by this latest storm. Investors have been running for cover in the bond market for a while now.
Today, the stock market is booming up like nothing has happened while factory orders fall and shipments post largest drop in two years!
This is exactly the "Mr. Market" described by Warren Buffett. One day he is dour and the next he is ecstatic. When dour, he is willing to sell out at big discounts. When ecstatic, he wants the world for his holdings.
These aberrant behavioral characteristics are growing stronger in the current market. The casino is open!
It is time to review behavioral biases. The herd effect is a big one. The herd effect is getting wrapped up in the moment and "running with the pack” just because everyone else is.
Just like your mom and dad always said, just because everyone else is doing something, doesn't mean you should be doing it! It is wise to use logic and avoid emotions when tempted to "run with the pack"! After all, the pack could be headed for a cliff!
