7

Gold is useful, but the total industrial demand for it isn't that big. The primary use is as bullion or high caret jewelry as a store of value. People tend to purchase it when they are uncertain about the future or are worried about currency debasement. When anxiety and uncertainty drop, not as much is purchased. It doesn't earn any interest and there are ...


7

If the market is reasonably efficient, why wouldn't this become a self-defeating prophecy, with the eventual recovery priced in throughout the whole recession? Eventual, but when? That is a big unknown. In fact, even a recovery is not guaranteed. Japan's long deleveraging process is brought up often enough with regard to our current long and painful ...


7

Stock prices are indeed proportional to supply and demand. The greater the demand for a stock, the greater the price. If they are, would this mean that stock prices completely depend on HOW the public FEELS/THINKS about the stock instead of what it is actually worth? This is a question people have argued for decades. Literature in behavioral finance ...


6

The satisfaction from gains packs less of an emotional impact than the fear of loss. It's very difficult for many people to overcome this fear, so when prices begin to fall, many investors sell to minimize their potential loss. This causes a further drop, which can lead to more selling as other investors reach their emotional threshold for loss. This ...


5

By definition, a downturn in the business cycle will push some companies into bankruptcy. What's worse, a downturn in the business cycle will trigger "bankruptcy fears" for a LOT of companies, far more than will suffer this fate. So the prices of MANY candidates go down to levels that reflect this fear. This aggregate impact produces the "overreaction" you'...


5

The unfortunate absolute facts are Lump sums are a huge particular problem1 2 for people with spending problems 3. People with spending problems burn through lump sums instantly. People with spending problems never change. It's impossible to fix the behavioral problem.4 As OP has already stated, OP's option 2 will not happen. There are only two ...


4

How would they make money from it? They sell you the software for $100 (US example; could as easily be 100 Euros or 10,000 Japanese Yen). You use it to make recommendations on your blog. Your blog becomes rich from advertising. They sold $100 worth of software. If they spent $1 million in labor developing it, they're way behind. Another problem is ...


3

Median and mode are different It appears that there's a confusion between the different types of average. Saying "the average investor" generally means the most common type of small-scale unsophisticated investor - the mode (or possibly median) investor. However, while this class of investors is numerous, each of them has assets that are quite small ...


3

There is not a lot that you can do to force your wife to spend this money appropriately, but since divorce is one of the options on the table, it may be a good idea to contact a lawyer to write up a postnuptual agreement before the lump sum is paid. This allows your spouse to put the all of her good decisions in writing before the temptation to spend the ...


3

How is it possible for the average investor to underperform the market? The "average" investor probably makes some bad decisions. You also might need to take transaction costs into play (including borrowing on margin), so that there's a natural "erosion" of returns across the market. Meaning if transaction/borrowing costs are 1%, and the market return is 5%...


2

What would they be trying to predict? The value YNAB and Mint provide is objective truth about what you've spent. They can force you to think about the tradeoffs inherent in budgeting by showing that you've overspent one category, and making you decide where to find the money to cover it. They can call your attention to a credit card swipe that's larger ...


1

If you try to keep too much money away from her, option 3 will happen because she will feel you are imposing on her. The best thing to do now is just keep it down to a normal level, what that is you can decide with her. If she does not conform to this I would cut things off, no matter how hard it is, so that not only do your kids have a place to visit, you ...


1

I think you are mixing two different concepts here. The average investor, in the quoted reference, means an average single investor like you or like me. the average investor consistently under-performs the market. However, you then ask the question and you seem to refer to all investors as a group; individuals, institutions, investment banks, et al. ...


1

Using Black-Scholes pricing model, a $200 put has a price of $12.28, $190 strike is $7.81, and $180, $4.54. Just buying the $200 put will return, $20/$12.28 or 63%. Buying the $190 put and selling the $180 will cost a net $3.27, but return $10, for a 206% return. This is a spread trade, a bear put spread, and also caps your potential gain. But you did ...


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