Normalcy Bias – You Have It
The normalcy bias, or normality bias, refers to a mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster occurring – and its possible effects.
The assumption that is made in the case of the normalcy bias is that since a disaster never has occurred then it never will occur. It also results in the inability of people to cope with a disaster once it occurs. People with a normalcy bias have difficulties reacting to something they have not experienced before.
People also tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.
I continue to endure the “blind optimism” I am faced with day in day out – as the general masses do their best to bury their heads a bit deeper in the sand.
An aside…..Spain only just squeaked through 2012 by using 90% of its social security fund to buy Spanish debt. The country now has over €200 billion in new debt to issue in 2013. The EU Crisis is still very much in play – just not on your local T.V screen.
If you seriously think this thing is going up “forever” or perhaps just drunk on the “Fed’s Kool-Aid” – Normalcy Bias might be a concern.
Forex Trading with Kong 
My system turned to “risk off” today. I expect stocks to move down with increased volatility. I don’t trade currencies, but failing volatile market seems to push USD higher most of the time.
LikeLike
The correlation generally holds true yes.
LikeLike
Looks like you were spot on with your risk off calls. Did you already take usd longs or waiting?
LikeLike
I have not Nfxtrader – short of a continued / daily scalp of some JPY pairs to keep me busy.
I’m still waiting for a “blow off top” at some point to seriously think of laoding a boat short. Thus far I think we’ve seen the first couple “squiggles” here at the top – suggestive of a turn – but could just as likely see markets up +250 points tomorrow.
I will lilkely continue to poke around “the short side of risk” here in coming days – but just as likely expect a wild blast higher as things finally top out. I like to “buy on red days” in up trends – and “sell on green days” in downtrends so…..will look for a bit more green.
I assure you – we won’t miss a thing.
LikeLike
just poping in & out…. grinding the stone… little sleep….
here is what I am looking at several plays-setting up… entry will be key if at all…
usdcad – short
audusd – long
nzdusd – long
euraud – long
Cheers Schmed…
LikeLike