Napoleon, Central Banks And The Cost Of Boredom

Another week of central bank watching ahead, and markets will play their customary game of chicken with the U.S. Federal Reserve and the European Central Bank. Both central banks have policy meetings this week – the Fed’s concludes on Wednesday, the ECB’s on Thursday – and capital markets have been moving higher in recent days on the hope of coordinated action. For investors and traders, this sets up a classic “Buy the rumor, sell the news” pattern for the week ahead. But Nic Colas of ConvergEx asks the deeper question, and the one that will retard any lasting move to the upside, is how much central banks can do without help from fiscal policymakers.

Nic Colas, ConvergEx...

One of the overarching themes of these notes is that human history repeats because human nature does not change. We learn, yes… But the genetic coding that allowed the species to survive through the millennia is still hardwired into our decision-making processes. The best example for investors is that humans run away from danger and cluster together for safety. Great if you are facing a hungry animal, but problematic if you get scared out of a volatile market or think buying a hot new social networking company is the path to outperformance.

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