The Bear Market ,The Bull Markets and Poorly Evolved Human
In the fight of bulls and bears, human’s biases play out in the open.
Recency -bias, Anchor-bias, evolutionary-optimism everything gets mixed up.
Unsustainable things can last years or decades longer than people think – stocks are never traded at fair value – they go to extremes on either side .
because about once a decade people forget that bubbles form and burst about once a decade.
In a bear market, expectations move slower than reality on the ground, so a lot of frustration comes from clinging to the trends of past eras.
In bull markets, we tend to forget that we are extrapolating machines in a world where nothing too good or too bad lasts indefinitely.
Optimism and pessimism always overshoot because the only way to know the boundaries of either is to go a little bit past them.
In bull markets, your expectations grow faster than your money but still you’re never happy no matter how much you accumulate so you take more risks -you risk what you need in order to gain something you merely want. And you don’t want to listen to genuine voices because past performance increases confidence ( more than ability).
Benchmarks change in every decade.
But for an individual, it is difficult to adjust his expectations to new benchmarks .
Past performance leads you to form strong opinions and that gives you comfort. Because uncertainty amid danger feels awful, so it’s comforting to have strong opinions even if you have no idea what you’re talking about.