Investment Psychology: Arrogance

Read about Bill Ackman (must read):

http://www.vanityfair.com/online/daily/2013/02/bill-ackman-daniel-loeb-bike-ride

Question to ponder upon:

  1. Do the fund managers who traded against Ackman do it out of their distaste against him?
  2. Did the fund managers exploit Ackman’s psychological weakness?

Background of the case (you may not read the links):

Ackman claims that Herbalife is a pyramiding scheme and shorted the stock. He bets that the US government will declare Herbalife’s business illegal and deserves a stock price of $ 0.00.

More here: http://factsaboutherbalife.com/

A good blog detailing why Ackman’s thesis is wrong:

http://brontecapital.blogspot.com/2013/01/notes-on-visiting-herbalife-nutrition.html

He argues that Ackman missed the fact that Herbalife’s business model is a support group type. This support group is what makes Herbalife products worth buying.

 

Comments:

In my opinion, an investor where he finds him/herself in an investment where he/she is to prove the other side of the trade wrong (remember the story of Bob) is an investment worth walking away. An investor need not to swing the bat if he/she finds his rational mind clouded with emotions and personal biases.

No rush in investing. 🙂

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2 thoughts on “Investment Psychology: Arrogance

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