FrugalJim

The stock market gurus out there like to talk about the idea of “rational market”.  It basically says that the market overall is rationally priced based on the information that is available to the public.  The one problem I have with it though, is that it assumes the people behind the market are rational.

As I walked back from the gym with rubbery legs today, I realized that I am totally not rational.  If I was, I wouldn’t have stuffed my face over the holidays and instead would be in exceptional health.  Trying to make sure I am absolutely healthy so that I live the longest most productive life I can makes the most sense over any other factor, yet when someone puts a piece of pecan pie in front of me…

In essence, there is a battle of short term rationality at conflict with a long term rationality that should obviously win, but somehow I make the wrong decision.

Is there a similarity with what’s going on in the economy?  If I keep hearing that the economy is going to hell, yet there are what seem to be good deals on stock prices out there, does the short term security of not buying stocks override the longer term benefit of making a big return?  If I could refinance my mortgage to save tens of thousands of dollars over the life of the loan, yet I’m too scared to spend the money to do so, does that make sense (directed at the wife )?

Anyways, I think that sometimes we get bogged down with what’s going on right in front of our face, instead of taking a step back and looking at the bigger picture.  I’m going to try and remember that.