Wednesday, April 21, 2010

Market Shrinkology - Greatest Trade Ever

"Dr. Phil" Pearlman examines some of the important psychological trading themes at work in Greg Zuckerman's book, The Greatest Trade Ever, in this latest episode of Market Shrinkology on Stocktwits TV.

This particular episode happened to come at an interesting time, given the recent uproar over Goldman Sach's alleged impropriety in structuring and selling certain CDO deals to institutional clients, which Paulson & Co. (John Paulson is the central figure of Zuckerman's book) helped structure as a subprime vehicle they could sell short.

I think Phil does a great job of addressing not only some of the ethical questions that have cropped up around Paulson's trade in recent days, but the psychological factors (namely, "disposition effect") that were at work for investors like Paulson, Michael Burry, Andrew Lahde, and others who made their foray into this subprime short trade.

What does it take to enter and hold on to a big longer-term winning trade when almost everyone (including some of your investors) tells you you're wrong? Have a look as "(the real) Dr. Phil" deconstructs the psychology behind the Greatest Trade Ever.

Related articles and posts:

1. Interview: Greg Zuckerman (Greatest Trade Ever) - Fin. Trends.

2. Michael Burry: Betting the Blind Side - Vanity Fair.

3. FSN interview: Richard Eckert (Lahde Capital) - Finance Trends.