Diary of a Very Bad Year by Anonymous Hedge Fund Manager

Author:Anonymous Hedge Fund Manager
Language: eng
Format: epub, mobi
Publisher: HarperCollins
Published: 2010-03-10T16:00:00+00:00

n+1: So if this is all unrealistic, and the banks have just kind of announced in a vague way that they’ve made money for a couple months, how come this makes people feel good?

HFM: If I knew that, I’d probably be a better investor.

n+1: You are a great investor!

HFM: I would be a more successful investor, because to me, you’re right, it’s kind of meaningless. But I think animal spirits are very important. You hear bad news and horror stories all day long, you become nervous, you don’t want to take risk, and you tend to sell your risky assets. If you start to hear positive chatter, even if a lot of those individual data points, when you dig down, turn out to be not well grounded, it might set your mind at ease. One of the things about investing is you’re being bombarded with information all the time, and not every piece of information can you look into closely, so part of what informs your risk tolerance is emotion, and your emotion can very much be affected by random pieces of just headlines and pieces of information that you only process in a very shallow way. And if they all sound sort of positive, that tends to put people at ease and they’re willing to take more risk. As an investor, it would be great if I could just be a robot and disregard any information except, you know, information I could be really sure was meaningful, but I’m a human being like every other investor. Other than the black boxes! They’re not human.*

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