{"version":1,"type":"rich","provider_name":"Libsyn","provider_url":"https:\/\/www.libsyn.com","height":90,"width":600,"title":"537: Markets Do Not Behave Like Saber-Toothed Tigers","description":"You know, the longer I\u2019ve been an investor, the more I realize this simple truth: the biggest threat to your wealth isn\u2019t the market\u2026 it\u2019s your own brain. We\u2019re all wired the same way\u2014with instincts that were fantastic for avoiding saber-toothed tigers but are absolutely terrible for making good financial decisions. Take something simple like a marathon. If I asked you to predict next year\u2019s top finishers, you\u2019d look at last year\u2019s results. That works. Human performance doesn\u2019t flip upside down in twelve months. The best runners tend to stay the best runners. There aren\u2019t that many variables to consider. When we try to apply that same logic to investing, it often blows up in our faces. There are way too many variables to consider when it comes to market behavior to make simple assumptions. Entire sectors rotate from darling to disaster in a heartbeat. Yet our brains keep telling us, \u201cHey, this worked last year, surely it\u2019ll work again.\u201d  In my view, nowhere is that psychological mismatch more obvious than in real estate right now. A few years ago, when real estate was on fire\u2014cheap debt, rising rents, deals getting snapped up before lunch\u2014everybody wanted in.  Fast-forward to today. We\u2019ve had a rate shock. Values have reset. Properties are selling at steep discounts. And Construction starts have fallen off a cliff. Real estate got slaughtered. But look around now. The market has reset. Assets are selling 30 percent below where they did just after Covid. Jobs and population growth in places like the Carolinas, Texas, and Arizona look fantastic, and interest rates are falling quickly. Every macro indicator you can name is pointing to a major buying opportunity\u2014one of the best in the last 15 years. So naturally\u2026 few people are paying attention. Markets that are bottomed out are not sexy. If it\u2019s not frothy, it\u2019s not newsworthy. This is human nature in a nutshell. When assets are expensive and risk is quietly rising, people feel brave. When assets are attractively priced, and future returns look great, people get scared. It\u2019s recency bias: assuming whatever just happened will keep happening. It\u2019s loss aversion: we fear losing a buck more than we enjoy making one. It\u2019s herd behavior: we\u2019d rather be wrong with the crowd than right by ourselves. And of course, it\u2019s confirmation bias\u2014where people seek out whatever headlines validate the emotions they\u2019re already feeling. It\u2019s not logical. It\u2019s not strategic. But it is human. And that\u2019s why this week\u2019s guest on Wealth Formula Podcast is of value to listen to. He\u2019s one of the leading experts in the world on investor psychology\u2014someone who can explain, with real data, why even intelligent investors consistently jump into markets late, bail out early, misread risk, and miss the best opportunities\u2026 especially the ones sitting right in front of them. If you\u2019ve ever wondered why you sometimes make brilliant decisions and other times do the financial equivalent of touching a hot stove twice, this conversation is going to hit home. Learn more about Prof. Terrance Odean: https:\/\/haas.berkeley.edu\/faculty\/terrance-odean\/ ","author_name":"Wealth Formula Podcast","author_url":"http:\/\/www.wealthformula.com\/","html":"