Milkshakes and Prophecy
It is really interesting when completely separate components of your life intersect. This happened to me when I read a Runner's World magazine article in which Ambry Burfoot referenced a recently published Yale Study "Mind Over Milkshakes". A non-technical summary of the study can be found at the Mother Nature Network website, but I can give you a quick synopsis.
The research was focused around how the mind and body achieves satisfaction from hunger after consuming different foods. The participants took two taste tests separated by about a week. In one test, they were asked to drink a healthy 140 calorie milkshake. In the other, they were asked to drink an "indulgent" 620 calorie shake. Before, during, and after the taste tests the researchers sampled the participant's blood and examined the protein ghrelin. When you are hungry, your ghrelin levels elevate. The less ghrelin you have, the less you desire food and your hunger is satisfied. As you might expect, after drinking the calorie rich "indulgent" shake, not only did ghrelin levels decrease but the participants reported being full and satisfied. Conversely, after consuming the healthy but lighter shake, ghrelin levels did not decrease much and the participants reported still being hungry.
Now let's get to the interesting part. There was no healthy or indulgent shake. Each time the participants were given the same 360 calorie shake. In other words, the physical manifestation of hunger was more dependent on the participant's mindset than it was of the actual nutrition the body digested! Think about this for a minute. Scientists have now documented that you can mentally regulate your hunger, and override the calorie and nutrient content of your food.
I was thinking about this article on a recent run and that is when I suddenly saw the parallel to investing. As investors we need to independently analyze data for what it is (the calorie and nutritional value) and we should not let the media or politicians "mentally regulate" our investment results. This has played out far too many times but yet we continue to fall into the same patterns… we believe what we hear in the news. For example, it is easy now to look back and see the dot-com bubble of the late 1990's was unsustainable but most of us bought in to the concept of the "new normal". Just this past couple weeks the market had a short string of bad days. In a matter of moments the pundits were on CNBC with cries of doom and a "double dip". Yet just as quickly as it started, suddenly, the markets turned around again and began to climb back up. Nothing changed, just the direction of the market. Why did the markets retreat? The markets were reacting negatively since the economy was not growing as fast "they" thought it should… but the bottom line is the economy was still growing.
Here is the lesson for both milkshakes and investing. Be aware of your mindset. The self-professing prophecy is real.