Tricking Your Brain into Better Investing

Have you ever heard of a false cognate?

Typically, we can trace similar words back to a common ancestral language. And so, when we notice two words in different languages that somewhat alike, it’s usually because they share the same root.

For example, the English word monetary and the French word monétaire both mean the same thing, because they have the same root — the Latin word moneta, meaning a coinage or mint.

But, every once in a while, linguists will find a false cognate — or two words that are spelled similarly and mean the same thing but have completely separate language families.

It can be bizarre.

For example, the English word dog and the Mbabaram word dog mean exactly the same thing. But Mbabaram is an ancient aboriginal language of northern Australia and has absolutely no relation to English.

Here are a few more examples of false cognates:

In Inuktitut — the language of the native peoples in northern Canada — the word kayak means the exact same thing as the Turkish word kayık. Zero connection between the languages.

In Japanese, ‘thank you’ is arigatō, and in Portuguese, it’s obrigado.

The Yana were Native Americans who lived in northern California. Their word for ‘really small’ was t’inii. Sounds a lot like the English word tiny — which of course means the same thing.

It’s not just language. Throughout history, we can find parallel ideas coming about…at about the same time…but independently of one another.

This is called the theory of multiple discovery.

For example, the crossbow was invented at about the same time by independent peoples in China, Greece, Africa, northern Canada, and the Baltics. And each of those groups had nothing to do with the others.

Or the concept of magnetism. It was discovered by scholars in Greece, India, and China completely independently of one another.

Or calculus. Developed by Isaac Newton and Gottfried Wilhelm Leibniz at exactly the same time, but it’s been determined that they figured it out without ever swapping notes.

One of the craziest cases of multiple discovery is the telephone. Both Elisha Gray and Alexander Graham Bell filed patents for the telephone on the same day.

Now, you can claim that these are all just pure coincidences. Or you can believe that humans act, think, and discover because of how we’re formed.

For example, your first words were likely mama and dada or something similar, right? And that actually holds true for people around the world. Regardless of the language, almost every baby starts off with those words.

It’s because ‘ma’ and ‘da’ are some of the simplest, earliest sounds that we can form.

Now apply this idea to the world of money.

People, regardless of language or background, tend to spend money in roughly the same way.

And, when investing, there are common tendencies that affect every investor:

  • Feeling confident and taking risks during a bull run
  • Being protective and pessimistic during a bearish period
  • Doubling down after you pick a winning stock
  • Cashing in after you lose

Look around you. Tell me you don’t see it happening today.

New Zealand is in one of the longest bull runs in its history. Property prices have skyrocketed. The stock market is at an all-time high.

And so how do most people react?

They double down!

They buy that second or third house.

They load up on stocks.

They max out their credit.

All because they feel that New Zealand has nowhere to go but up.

That’s the exact emotion that casinos use against you. They make you feel confident — nothing can get you down. And once you bet it all? The house of cards collapses, and you walk out of the casino with empty pockets and a deep sense of regret.

So, again, I ask you, what do you see when you look around?

We at Money Morning New Zealand spend a lot of time reading the market…and specifically, reading the market sentiment.

What we’ve discovered is that the best way for investors to beat the market is to fight against the mainstream emotion. To swim upstream. To look right when everyone looks left. To buy when others sell and to sell when others buy.

Billionaire investing guru Carl Icahn made a quick billion this way.

On 8 November 2016, Icahn was at a party celebrating Donald Trump’s election victory.

He was surrounded by heaps of other conservative fat cats, sipping champagne, and probably listening to Kanye West.

And, like you’d expect, he was notified as the stock market slid just after the results were announced.

In fact, Dow futures tumbled more than 800 points that night.

Icahn saw his chance.

He downed his champagne and left the party. He called his broker, and basically told him to go all-in.

It was 2am.

And, as we all now know, the market roared back to life within a few hours of opening, to hit all-time highs week after week.

According to CNBC, Icahn made a billion dollars off that play alone.

Be the tall poppy…ignore the urge to go with the flow…and you might find yourself a nice pot of gold at the end.

Best,
Taylor Kee
Editor, Money Morning New Zealand


Taylor Kee is the lead Editor at Money Morning NZ. With a background in the financial publishing industry, Taylor knows how simple, yet difficult investing can be. He has worked with a range of assets classes, and with some of the world’s most thought-provoking financial writers, including Bill Bonner, Dan Denning, Doug Casey, and more. But he’s found his niche in macroeconomics and the excitement of technology investments. And Taylor is looking forward to the opportunity to share his thoughts on where New Zealand’s economy is going next and the opportunities it presents. Taylor shares these ideas with Money Morning NZ readers each day.


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