I mentioned my Microwave Oven Theory this morning and I didn’t realize it was hard to find so here it is again:
Last Thursday, I mentioned that Jim Rogers said:
I am as confused as anybody else (about the level of bearishness on the Euro). Usually that indicates a rally… Once a technical rally starts, who knows where it can go from that.
Don’t you wish other people would be that honest with us? It’s very hard for people who give opinions for a living to stand in front of an audience and say: “I don’t know.” Somehow they seem to feel that they HAVE to know and, what’s worse, once they force themselves to make a decision, they somehow feel obligated to defend it, even if new evidence comes out to the contrary.
This is exactly what’s wrong with financial reporters and analysts, especially the clowns on TV (as well as pretty much anyone who makes a living giving you their opinion). My Members are familiar with something I’m going to share with you now. It is a Nobel Prize-worthy theory that I feel helps make me a better trader and I thought this would be a good time to share it with you:
People love to make random decisions and stick to them like they were directly given it as a commandment!
How does this relate to microwaves? Well, aside from the fact that our brains are constantly being fried by the things every day (ever drive on the highway and see one of those dishes aimed right at you? Do you know birds die if they fly too close to them?), this is what I observe:
You put something in the microwave, say pizza, and you put in a time, say 3:33 (or maybe you are a whole number person and do 3 or 4 minutes). Now, unless you are a chain store pizza buyer your pizza slice is probably not always the same size or maybe it has different toppings etc., but you probably put in the same number every time.
Theory number 1: People tend to repeat behavior, especially if it was successful in the past.
So the light goes on and the little thing spins and you are either a watcher or a walker (as you may have guessed – I hit the button and leave the room!), but either way you usually end up standing by the oven with 20 or 30 seconds to go waiting for it…
