Financial Meltdowns


Just what is a financial meltdown and how do they happen?It’s fascinating how our minds work. Place a keyword in front of your eyes, and your mind will immediately prepare your thinking for whatever it assumes will follow. Hence the title of this post. We have all heard the schoolyard trick of asking a person a series of easy questions, followed by one with the answer “silk” then asking what cows drink… The usual answer given is “milk”.

In a similar way, when we hear dramatic words in a financial context then our inner selves tend to perk up, and tune in carefully to see what is going on. This is simply how we work, and currently a topic of fascination to me. (i’ve included my current reading list at the base of this note, if you are mildly interested).

Here is an article that has just been posted to the extremely popular (in financial circles)…

I’ve posted the link in full so you can note the wording “Lehman catastrophic moment invoked as EU leaders press for crisis solution”…

If you have the time, read the full article and then come back to this note…. ….. ….. ….. …..


(that’s my way of giving you time to do so, in the virtual world…)

Now why would i bother you with this little piece of doom-and-gloom?

Aside from it being Friday, and therefore a good time to simply ponder what the week has delivered to our conscious selves, i thought it interesting that this particular note should come out. You see, we have just watched the Australian sharemarket follow its global cousins with an amazing rally. After a 20% fall over a number of months there was a 10% lift in around 4 days. THAT is pretty interesting stuff. And the volatility index (i won’t bother you with a link today but i am referring to the good ol’ VIX index that only money nerds and bored paraplanners had ever heard of prior to the GFC) has lowered considerably. So why does Bloomberg publish a doom-and-gloom? If anything, there are more reasons to be positive than there are to be negative compared to what was the case just a few weeks ago.

The reason i asked you to read that note is that our market fell dramatically soon after the publication of this note here…

The wording of this note was similarly doom-and-gloom, although it was even worse than that. Iron ore prices had held up magnificently well in the face of falling commodity prices generally, so the point of the article was completely invalid. However, BHP and RIO fell dramatically post this note, and you have to begin to wonder if there wasn’t some subtle “hidden brain” operation going on here…

i don’t like conspiracy theories, as they generally assume a higher level of intelligence than most folk who would take such action are likely to possess – but you do have to wonder about this one.

And i do, which is why i am posting this little note about the Lehman Brother’s article…

Books such as

“The Invisible Gorilla”  

“The Hidden Brain” by Shankar Vedantam

“Being Wrong”, and

“A Mind of Its Own : How Your Brain Distorts and Deceives”.


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