Str

lostinrates

fc123 wrote: »

Could be? Or just different personality types.

We can't all be the same. People view risk in different ways. No right way or wrong way, just different.
Likewise where one ends up in life, just a series of luck, good and bad decisions at the time etc.
I have read on this board before that there is no such thing as bad luck (or good) as we make our own luck.
I disagree with that as life is full of unforseen events and happenings that can have massive impact on peoples everyday lives.

I must go find Julieq's post to link up.:o

Yes, I think personality types and experience. I was pretty gung ho ten years ago, then one o those unforseen events and happenings had a massive impact. Anyway, can't dawdle tonight..... night...:)

bo_drinker

fc123 wrote: »

Could be? Or just different personality types.

We can't all be the same. People view risk in different ways. No right way or wrong way, just different.
Likewise where one ends up in life, just a series of luck, good and bad decisions at the time etc.
I have read on this board before that there is no such thing as bad luck (or good) as we make our own luck.
I disagree with that as life is full of unforseen events and happenings that can have massive impact on peoples everyday lives.

I must go find Julieq's post to link up.:o

Wogan was talking to someone the other day on roughly the same subject and said folk used to say, " if you want something bad enough you'll get it" nonsense, as you say it is down to unforseen events and happenings along the way, and of course a spot of good luck will always come in handy.

HAMISH_MCTAVISH

lostinrates wrote: »

I'm always amaed at people's confidence in their opinions. I've said so here before. I was told (maybe by mewbie?) it was a ''man thing''. I don't know.

In the case of the bulls, it's more a "being proven right" thing.:D

As for the bears, who knows.....

fc123

Found it......

Quote:
Originally Posted by Thrugelmir
If you're preparing long term business plans and forecasts. Planning investment projects and the like. Bearing potential future events in mind is essential. No you can't control them. But at least minimising the downside is essential. I remember once spending ages on a business plan to raise venture capital. The first question asked of us was can you absorb a 30% change in the exchange rate? ( Our sales were primarily in US$, we'd factored in a 15% fluctuation).

Life isn't just luck. Its absorbing information and making decisions. Rightly or wrongly.

julieqThere's no such thing as luck anyway, risk management is about probability and contingency. You can't guarantee success via a business plan, all you can really do is to show that you've thought about those downside risks which can be anticipated.

I see a bit of an absolutist attitude to risk here (in general, not from Thrugelmir, I largely agree with him). You see that in statements bears are apt to take, such as "well we saw a rapid downward movement in BOE rates, so obviously it's possible they may go upwards just as fast". That's a true statement in absolute terms, the question you have to ask yourself is how likely that the downside will materialise in that form, what circumstances would lead to that and what the implications on the underlying circumstances are generally.

And in fact fast quick rises would imply a massively overheating economy needing rapid application of the brakes. Looking at what is happening elsewhere, you have to say that there is a vanishingly small probability of that, so it can be discounted effectively. The contingency would be to use the low rates to minimise debt to reduce the effect of a large interest rate hike against hyperinflation, though in this case I wouldn't be paying off debt, I'd just ensure I was in a position where I could.

Proper risk management is about evaluating downside risks as a function of probability against upside returns as a function of probability. And it is about conserving resources that you don't run out of them while waiting for an upside to materialise.

Imagine a roulette wheel with 37 numbers, 0-37. The odds you get are 35/1 on any number, so given the true probability of any number coming up are 36/1, you would lose on average if you played one number for an infinite number of goes. If the casino offered you 40/1 you would win over time, but you'd have to ensure you won before you ran out of money, so you would bet in quantities probably 1/320 of your entire bankroll to allow headroom for the probabilities to work.

This is where the bears often get things wrong, because to them risks are subjective: if there is a risk at all, any risk, it becomes an overriding decision factor. Actually this is prevalent everywhere on MSE, this is why it's a "penny wise pound foolish" site in a lot of ways. Risk is central to return, and the one way of ensuring you get no returns at all is to defer taking the risk forever.

There are unquantified risks of house price deflation over a given period (in fact the risk is high over short period and vanishingly low over longer periods). There are unquantified risks of "mass" unemployment (in fact it isn't all that high in absolute terms). There are unquantified risks of soaring interest rates (in fact it would take a long time for them to get back to the rates before the correction). There are unquantified risks of all manner of things, and they all get mixed up in a cauldron of worry into really quite unsustainable sets of beliefs. This is why I bang on about bounding numbers against absolute limits, the mass media hates doing this because it makes often very exciting apocalyptic headlines quite dull.

I've personally become somewhat more bearish over the last week or so, but this isn't based on the housing market which I think will tick along fine and show some modest gains this time next year, it's about the rapidly forming stock market bubble. There is a recovery in business, but nowhere near enough to sustain the level of increases in the indices. The rises are now on the radar of the general public, and it's starting to feel overexuberant. But then again I'm contrarian by nature.

fc123

lostinrates wrote: »

Yes, I think personality types and experience. I was pretty gung ho ten years ago, then one o those unforseen events and happenings had a massive impact. Anyway, can't dawdle tonight..... night...:)

Night..will catch up on the viewings news tomo elswhere.

I am scared at how gung ho I was in my 20's...I thought if you wanted something, you just had to go out there, work hard and, voila, it would appear. In some things it came true, but in others, not at all.

HAMISH_MCTAVISH

Julieq

This is where the bears often get things wrong, because to them risks are subjective: if there is a risk at all, any risk, it becomes an overriding decision factor.

Actually this is prevalent everywhere on MSE, this is why it's a "penny wise pound foolish" site in a lot of ways.

Risk is central to return, and the one way of ensuring you get no returns at all is to defer taking the risk forever.

There are unquantified risks of house price deflation over a given period (in fact the risk is high over short period and vanishingly low over longer periods). There are unquantified risks of "mass" unemployment (in fact it isn't all that high in absolute terms).

There are unquantified risks of soaring interest rates (in fact it would take a long time for them to get back to the rates before the correction).

There are unquantified risks of all manner of things, and they all get mixed up in a cauldron of worry into really quite unsustainable sets of beliefs.

As always, Julie hit the nail on the head here.

It's the part of bear mentality I never understand.

fc123

HAMISH_MCTAVISH wrote: »

As always, Julie hit the nail on the head here.

It's the part of bear mentality I never understand.

For a society to work well, maybe it's best to have a blend cautious types and risk takers?
If we were all bullish and running around taking masses of risk fuelled by lots of confidence, then we would all get into a bit of a mess. In fact, isn't that what recently happened?

A blend of all types works best.

It's good manners to respect the views of the cautious as well as those of the risk takers....not insist that all the former becomne the latter overnight...or the reverse.
I wouldn't batter on at PN to take massive risk as it may not be appropriate to her, likewise, if I was ever safe and risk averse in what I do, my business would dwindle away to nothing quite quickly.

wageslave

Julieq is both right and wrong, risk can be quantified but there is such a thing as dumb luck and that is impossible to factor into any equation.

We dont get what we deserve, we get what we settle for.

Afriend_2

fc123 wrote: »

For a society to work well, maybe it's best to have a blend cautious types and risk takers?
If we were all bullish and running around taking masses of risk fuelled by lots of confidence, then we would all get into a bit of a mess. In fact, isn't that what recently happened?

A blend of all types works best.

It's good manners to respect the views of the cautious as well as those of the risk takers....not insist that all the former becomne the latter overnight...or the reverse.
I wouldn't batter on at PN to take massive risk as it may not be appropriate to her, likewise, if I was ever safe and risk averse in what I do, my business would dwindle away to nothing quite quickly.

I probably wouldn't have had access to a cheap mortgage product had it not been for risk averse savers.

sabretoothtigger

Those savers were from Asia not Britain though, 1 billion of whom live without democratic vote