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February 26, 2008



FWIW, this is the study I just mentioned. It's from Robert Cialdini's great book "Psychology of Persuasion": "A study by a pair of psychologists uncovered something fascinating about people at the racetrack: Just after placing a bet, they are much more confident of their horse's chances of winning than they are immediately before laying down that bet. Of course, nothing about the horse's chances actually shifts; it's the same horse, on the same track, in the same field; but in the minds of those bettors, its prospects improve significantly once that ticket is purchased …The act of making a final decision - in this case, of buying a ticket, had been the critical factor. Once a stand had been taken, the need for consistency pressured these people to bring what they felt and believed into line with what they had already done …".


Thanks very much for the window into how you would express your view through position sizing and different instruments.

Your comment about how "it’s easier to be bullish than long" conjures up something I've always found interesting, how publicly broadcasting an idea psychologically compares to placing a bet on it. There's a study in psychology showing how the confidence people have in a bet increases after they place it. (Which helps the bettor maintain consistency but dangerously introduces biases in how new information is looked at.) Articulating your view to a TV and/or newsletter audience is still quite a commitment to the idea and could have a similar effect.

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  • Cody Willard is the general manager of CL Willard Capital. Find him at TheStreet.com, the Financial Times, on TV, or even playing that rock n' roll.

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