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In many situations, we human beings make estimates by beginning at a start value. Psychologists call this phenomenon anchoring, or the reference-point-effect. I personally prefer the “new normal” syndrome, especially when we are talking about financial markets. The history of financial markets is filled with examples. For instance, the often-praised economist Irving Fisher declared on the onset of the Great Depression that stock prices “reached what looks like a permanently high plateau.” In 2000 something similar happened, when former Fed-chairman Alan Greenspan talked about the “new economy,” an alleged era of low inflation and unprecedented increases in productivity, such that the (greatly overvalued) internet stocks were no bubble, but a rightful reflection of fundamentals. We all know how this ended at the time. Now, shortly after New Year’s Eve, we seem to pay no heed to certain crystal clear danger signals yet again. The astute investor, however, pays close attention.

The “New Normal” of 2017

The “New Normal” Is “The Same Old Song”

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