Freudian Psychology, Edward Bernays, And How Arbitrary Superstitions Influence Most Investment Decisions

The baseless conclusion presented in this article about NCTY r/https://seekingalpha.com/article/4204342-the9-see-serious-declines-ahead, written back in September of this year, are a perfect example of how arbitrary superstition can influence anything you read, anywhere, whether it be online, in a book, or a newspaper. Even the most thorough analysis can be based upon a premise that is completely false, and rooted upon superstition, rather than fact.

Back in September NCTY went up more than 50% interday on news that the CEO bought shares of the company. In the article, the writer comes to a bold conclusion (with no real evidence whatsoever) that the only reason the CEO bought shares was due to some kind of desperate attempt to prop up the share price. What makes this article so dangerous is that the writer makes some good points. He goes through the balance sheet, showing how the future operating cash flow situation was unsustainable. He seems to know what he is talking about, and honestly, he seemed right at the time. I mean, how could a company with such a poor balance sheet, and so dependent on the price of bitcoin, spontaneously be worth such an insane market cap? He goes through past earnings reports, and it looks like he did a lot of research. The problem, though, isn’t in his research, but that his core premise is based upon an arbitrary suspicion that can’t be proven.

The scientific method is defined in the dictionary as, “a method of procedure that has characterized natural science since the 17th century, consisting in systematic observation, measurement, and experiment, and the formulation, testing, and modification of hypotheses”. In terms of the human experience, this way of thinking is relatively new, and throughout almost all of human history, we have relied on our emotions to find answers to questions in which we did not have a clear answer.

According to Sigmund Freud, and later, Edward Bernays, arbitrary superstitions, rather than clearly defined and provable facts, influence almost every component of our decisions making process. This emotional thinking has even been proven to influence our purchase decisions. Sigmund Freud’s hypothesis that most our decisions were based upon animal instinct took the world by the storm. His core hypothesis was that we act based upon two key emotions: Fear and Greed. Edward Bernays later applied this hypothesis to marketing and propaganda. This theory later went on to revolutionize the world of marketing and psychology, and you can see it everywhere if you look close enough. If you have the time, you can watch these videos on youtube. One is a documentary aired on the BBC in the early 2000’s, called “The Century Of The Self” r/https://www.youtube.com/watch?v=DnPmg0R1M04. It tells the story of the evolution of Freudian psychology, and how it later went on to revolutionize sales and marketing. The other link is a short video made by a individual, like me, with way too much time on their hands lol. It’s very interesting though. He found old cigarette ads and shows how the advertisers clearly used death symbolism (fear) as a subliminal message to induce the customer into an anxious state. The goal of the marketer was to induce the subconscious into involuntarily grasping for anything that would relieve them of this fear, which of course was the cigarettes

r/https://www.youtube.com/watch?v=dcyWU3xC5vs

Now let’s apply the scientific method to that seekingalpha article, and also to the price action leading up to today.

Let's start with the claim that the share purchase plan by the CEO is a hidden ploy to maintain to the stock price. The first question we should ask ourselves is, "Can we prove this?" The answer is obviously no!! Unless we had some kind of tape recording or something, this arbitrary suspicion is baseless, and if this is the case, it should hold no weight in our assessment of the company!! If we were to only look at the facts, we would come away with two conclusions.

1. The CEO HIMSELF bought shares of the company with HIS OWN MONEY!!! That is a RARE occurrence in the small cap stratosphere!!!

2. NCTY performed a classic pre-run accumulation pattern. It spiked on two separate occasions, then established a higher mean in the $1.30 range. We saw this with NBEV back in September. You see this happen with practically every small cap, as people in the know accumulate ahead of the upcoming news.

These are the facts, plain and simple. Just because there is a small possibility that these facts could be untrue shouldn't sway our assessment of the trading environment.

The reason I'm focusing on this article isn't just because the stock price exploded today, but also because it is a good example of how important common sense is to evaluating a stock, and the potential risk/reward environment. The human mind is emotional, so we must protect ourselves from emotional decisions as much as possible. This doesn’t mean that our instincts should be completely disregarded. At times they can be very valuable, but they shouldn’t carry more weight then the FACTS!!!!

As always, goodluck, and never forget, risk aversion/capital preservation > gains

Submitted October 19, 2018 at 04:18PM by stockenthusiast https://ift.tt/2OBYsOY