The human flaws that fuelled this market crash – and why they keep failing us when investing

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What we’re seeing now follows a pattern that was also present in each of the ugliest market collapses of the past three decades

, including Black Monday, the dot-com crash and the 2008-09 global financial crisis. In each and every one of those market routs, our psychological flaws played a prominent role.

Unlike classical economics, which assumes most people are rational when they make financial decisions, behavioural economics combines psychology and biology to explain our actions. One of its core findings: we can be tricked into making some pretty dumb decisions, because we are prone to character flaws such as envy and overconfidence, which cloud our judgment., there has been hardly a peep about behavioural economics during the pandemic.

It’s too late for behavioural economics to tell us whether the bubble will pop, but understanding the field can offer us some guidance as to whether this correction will drag on.to help explain To be clear, no one knows how this correction ends – and if someone tells you they do, don’t trust them. But here in Canada, we do have a precedentWhen cannabis stocks took off five years ago, their investment thesis was eerily similar to the one for pandemic tech stocks. Investors thought they were getting in on the ground floor of the future.

 

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The petrodollar is dying and the US is beyond broke. We pivot now, or crash with them.

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