stock market crash

[DimPrawn]

This thread has been a real eye-opener.

Pooper is delusional.

[Old Greg]

This thread has been a real eye-opener.

Pooper is delusional.

Best case scenario is that it's all Walter Mitty stuff and the closest he's got to investing is spaffing over a Tell Sid flyer.

[AtW]

This thread has been a real eye-opener.

Pooper is delusional.

Good laffs tho, innit?

It’s like WWE - can’t take it seriously, provides good entertainment value for money (talking of which fking BT pinched it from Sky ffs)

[AtW]

Stocks Rally on Record Home Sales Amid Virus Woes: Markets Wrap

https://www.bloomberg.com/news/artic...?sref=o1Dqf087

[Whorty]

Best case scenario is that it's all Walter Mitty stuff and the closest he's got to investing is spaffing over a Tell Sid flyer.

I believe he plays on one of those trading games. Scooty believes it's real life.

Scooty, to help us get a feel for what you have so we can really believe you, why not post up something like :

1) how much money you have invested/or you started with?
2) How much have you cashed in?
3) How much, based on current asset values, have you got currently invested?

So, if you started with £100k it would be something like ...

1) £100k
2) £40k (this is what you hold in cash now)
3) £70k (this is what the value of ALL your asset holdings are)

Of course, with your 'gains' these numbers will be low compared to your real numbers

[BlueSharp]

Wow, what a car crash this thread is turning into.

[Old Greg]

This describes the sunk cost fallacy that pooper suffers from, preventing him for making rational decisions.

From wiki

Sunk cost

costs that have already been incurred and cannot be recovered

In economics and business decision-making, a sunk cost (also known as retrospective cost) is a cost that has already been incurred and cannot be recovered. Sunk costs are contrasted with prospective costs, which are future costs that may be avoided if action is taken. In other words, a sunk cost is a sum paid in the past that is no longer relevant to decisions about the future. Even though economists argue that sunk costs are no longer relevant to future rational decision-making, in everyday life, people often take previous expenditures in situations such as repairing a car or house into their future decisions regarding those properties.


The sunk cost fallacy has also been called the "Concorde fallacy": the UK and French governments took their past expenses on the costly supersonic jet as a rationale for continuing the project, as opposed to "cutting their losses".

Bygones principle
According to classical economics and traditional microeconomic theory, only prospective (future) costs are relevant to a rational decision. At any moment in time, the best thing to do depends only on current alternatives. The only things that matter are the future consequences. Past mistakes are irrelevant. Any costs incurred prior to making the decision have already been incurred no matter what decision is made. They may be described as "water under the bridge," and making decisions on their basis may be described as "crying over spilt milk." In other words, people should not let sunk costs influence their decisions; sunk costs are irrelevant to rational decisions. This is known as the bygones principle or the marginal principle.

The bygones principle is grounded in the branch of normative decision theory known as rational choice theory, particularly in expected utility hypothesis. Expected utility theory relies on a property known as cancellation, which says that it is rational in decision-making to disregard (cancel) any state of the world that yields the same outcome regardless of one's choice. Past decisions—including sunk costs—meet that criterion.

Until a decision-maker irreversibly commits resources, the prospective cost is an avoidable future cost and is properly included in any decision-making processes. For instance, if someone is considering pre-ordering movie tickets, but has not actually purchased them yet, the cost remains avoidable.

Both retrospective and prospective costs could be either fixed costs (continuous for as long as the business is operating and unaffected by output volume) or variable costs (dependent on volume). However, many economists consider it a mistake to classify sunk costs as "fixed" or "variable." For example, if a firm sinks $400 million on an enterprise software installation, that cost is "sunk" because it was a one-time expense and cannot be recovered once spent. A "fixed" cost would be monthly payments made as part of a service contract or licensing deal with the company that set up the software. The upfront irretrievable payment for the installation should not be deemed a "fixed" cost, with its cost spread out over time. Sunk costs should be kept separate. The "variable costs" for this project might include data centre power usage, for example.

There are cases in which taking sunk costs into account in decision-making, violating the bygones principle, is rational. For example, for a manager who wishes to be perceived as persevering in the face of adversity and privately holds information about the undesirability of abandoning a project, it may be rational to display the sunk cost effect and persist with the project.

Fallacy effect
The bygones principle does not accord with real-world behavior. Sunk costs do, in fact, influence people's decisions, with people believing that investments (i.e., sunk costs) justify further expenditures. People demonstrate "a greater tendency to continue an endeavor once an investment in money, effort, or time has been made." This is the sunk cost fallacy, and such behavior may be described as "throwing good money after bad," while refusing to succumb to what may be described as "cutting one's losses".

The term "Concorde fallacy" derives from the fact that the British and French governments continued to fund the joint development of the costly Concorde supersonic airplane even after it became apparent that there was no longer an economic case for the aircraft. The British government privately regarded the project as a commercial disaster that should never have been started. However, political and legal issues made it impossible for either government to pull out.

In an everyday example, a person may purchase a ticket to a baseball game and find after several innings that they are not enjoying the game. Their options at this point are:

Accepting the waste of money on the ticket price and watching the remainder of the game without enjoyment; or
Accepting the waste of money on the ticket price and leaving to do something else.
The economist will suggest that, since the second option involves suffering in only one way (wasted money), while the first involves suffering in two (wasted money plus wasted time), option two is preferable. In either case, the ticket-buyer has paid the price of the ticket so that part of the decision should no longer affect the future. If the ticket-buyer regrets buying the ticket, the current decision should be based on whether they want to see the game at all, regardless of the price, just as if they were to go to a free baseball game.

Many people, however, would feel obliged to stay for the rest of the game despite not really wanting to, perhaps because they feel that doing otherwise would be wasting the money they spent on the ticket. They may feel they have passed the point of no return. Economists regard this behavior as irrational. It is inefficient because it misallocates resources by taking irrelevant information into account.

The idea of sunk costs is often employed when analyzing business decisions. A common example of a sunk cost for a business is the promotion of a brand name. This type of marketing incurs costs that cannot normally be recovered. It is not typically possible to later "demote" one's brand names in exchange for cash. A second example is research and development (R&D) costs. Once spent, such costs are sunk and should have no effect on future pricing decisions. So a pharmaceutical company's attempt to justify high prices because of the need to recoup R&D expenses is fallacious. The company will charge market prices whether R&D had cost one dollar or one million dollars. However, R&D costs, and the ability to recoup those costs, are a factor in deciding whether to spend the money on R&D or not.

The sunk cost effect may cause cost overrun. In business, an example of sunk costs may be an investment into a factory or research that now has a lower value or no value whatsoever. For example, $20 million has been spent on building a power plant; the value now is zero because it is incomplete (and no sale or recovery is feasible). The plant can be completed for an additional $10 million or abandoned and a different but equally valuable facility built for $5 million. Abandonment and construction of the alternative facility is the more rational decision, even though it represents a total loss of the original expenditure—the original sum invested is a sunk cost. If decision-makers are irrational or have the wrong incentives, the completion of the project may be chosen. For example, politicians or managers may have more incentive to avoid the appearance of a total loss. In practice, there is considerable ambiguity and uncertainty in such cases, and decisions may in retrospect appear irrational that were, at the time, reasonable to the economic actors involved and in the context of their incentives. A decision-maker might make rational decisions according to their incentives, outside of efficiency or profitability. This is considered to be an incentive problem and is distinct from a sunk cost problem.

[BlueSharp]

Also:

YouTube

Skip to 37 minutes.

[scooterscot]

Ok, so you think you "know" what way stocks will go?

Keeping funds invested in a position when you have other investment options you know/believe will give better returns (as you do), but not selling them because they are in a losing position, is 100% emotional investing.

The non-emotional investor will invest their funds in what they believe will give the best returns, not keep positions open because they can't admit to themselves that they are not infallible.

ha ha - no, there's no 'I think' full stop. Everything is in probability. I measure probability and trade that. My postgrad and career to date were all about measuring probability. I've just changed what I'm adding up.

Since my course I've yet to enter a trade that resulted in a loss. I know it sounds crazy, but it's the truth. Here's is a chart where I measured the probability most recently of further downside back in April. It is public record, I cannot change it, remove it. At this moment I'm up almost 350%

I'll be adding this one to my list soon, my best yet, I think..omg I used that word!

[AtW]

A better example of sunk costs - home economics lessons for Pooper - literally flushed down the drain