NOBODY EXPECTS THE SPANISH INQUISITION!!!

My home page is the Yahoo! Finance page. There are two reasons I chose it: 1) If I want to check a stock price, or market action, I can do so with just one click; 2) The pre-market headlines crack me up.

Go ahead, check them out yourself one day. You will find that they are generally rendered moot/outdated/incorrect within the first hour of trading.

Look, I'm trained as a psychologist. I look at things differently. It probably makes me a "bit of an odd duck", to borrow a phrase from my father. (It's true. Ask any of my remaining friends.)

But you don't need to be the quirky type to see why this (lead) sentence from the pre-market headline article is just silly.

"The number of newly laid off workers filing claims for unemployment benefits unexpectedly rose last week as the recovery of the nation's battered labor market proceeds in fits and starts."

What's wrong with this sentence? Well for starters it notes that unemployment claims rose "unexpectedly" last week. Later on in the same sentence, it notes that the labor market "proceeds in fits and starts."

First of all, all economic forecasting is incredibly complex. Why a rise of 1% rather than a decline of 1% for one lousy week's worth of data rates as a "surprise" is beyond me. It's like standing in a rain shower and saying you got hit by a particularly unexpected raindrop. (Really? Didn't see that one coming??)

But the second clause of the sentence says the market proceeds in "fits and starts". Yes, it does. Truly. It is a point that is universally acknowledged. So how can you be suprised by a slight decrease while simultaneously noting the market proceeds in a herky jerky fashion?

For crying out loud, pick a side and stick with it!

Behavioral finance research has taught us how rarely data conform to our pre-supposed parameters. We know a coin will come up heads 50% of the time. Yet somehow we find ourselves wanting results to alternate heads/tails when we flip it. We see a run of 3 or more heads in a row, our pattern-seeking brains screams, "anomaly!"

It's not an anomaly. It is the essence of randomness.

Back to the article; if you read it in its entirety, you will see just how complex the jobs data are. You will find yourself wondering if the first paragraph still makes sense by the end of it.

The skinny: When it comes to a week's worth of economic data, market movements... the weather, don't "expect" anything.

It is sillyness that calls to mind this famous bit of sillyness .

I'm going to have my coffee now.

(Entirely too much sillyness.)

-Frank Murtha

The Value of the Time Out

In the words of Dick Vitale... "Get a T.O., Baby!!"

The value of the time out to the investor and investors plural (i.e., "the market") is hard to exaggerate.

Whether it's FDR's famous "Bank Holidays," or suspended trading, or simply going for a long walk when you're tempted to make an impulsive trade, the "time out" is a major weapon in an investor's fear-fighting aresenal.

Why? Because fear FORCES us to think short term. It's simply the way our brains are wired. There is a sound biological/evolutionary reason behind this reaction.

When you're out gathering firewood for the cave and lock eyes with a large male Smilodon (read Sabretooth Tiger) who has just emerged from the glade, your brain simply CANNOT LET you indulge in thoughts like "what to wear to Zog's birthday party?" or "should I redo the cave paintings for the harvest season (antelopes are so "early pleistocene")?"

The Sabretooth has gone the way of the Dodo, but the evolutionary function remains. Intense fear still draws our focus on the here and now. As well it should.

This is where the time out can help. The ablility to take a break and regain our bearings (to "step out of the box" as Crash Davis would say) gives our amydalas a chance to stop firing. When that happens we can engage other parts of our brain. That's when we can pull up and out of the tailspin of panic. It's neurobiology. See Rich's critically acclained tome for more information.

This is, of course, the eternal struggle for investors: To pull out of the short-term focus and think big picture.

When we do calm our brains and revisit the situation, it doesn't mean our outlook becomes rosy. It just means we've given our brains the ability to reintroduce reason to our thinking processes - and perhaps a chance to spot the fantastic opportunities such crises produce.

A few days off may be just what the doctor ordered.

In the meantime, good luck out there, everyone.

Frank