The four seasons of investing

Any serious investor should aim at learning about human nature and what underpins our decision processes and actions. E-motions are what drive actions in the stock market. Behavioural patterns and cycles have been the subject of numerous books and studies. The work of Tversky and Kahneman is the bible. The books of Montier, Thaler and many others are their gospels. The decision filters underpinning market participants‘ buy and sell orders are a complex blend of both rational utilitarian considerations, but more importantly emotions. The human brain is the computer that analyses the information and come out with a decision to act and send the electro-chemical signals that trigger a trade. At the centre of our mainframe lies the brain of a lezard. This brain makes us react fast without thinking. The emotional input received by ths brain is then refined by the cortex that produces images and other interpretations, it is then analysed more slowly by the neocort

Jogging in Zürich not long ago, I passed by the ETH, where Albert Einstein studied between 1896 and 1900 before leaving the school to become a patent clerk in Bern. Five years later, during his miracle year, he gave birth to the general theory of relativity and the most famous formula of them all: E=MC^2 The formula’s beauty lies in its simplicity. It summarizes the universe with three letters that state that the total energy of a system equals its mass times the speed of light squared.   What does it have to do with finance you may ask? Nothing and everything at the same time. For hundreds of years, there was an immutable law of physics that was never challenged: that in any reaction occurring in the Universe, mass was conserved. That no matter what you put in, what reacted, and what came out, the sum of what you began with and the sum of what you ended with would be equal. But under the laws of special relativity, mass simply couldn't be the ultimate conserved quantity,