Frank Ferraro

8/15/08

My Relaxing Summer

I have a radical idea. Summer should last 12 months. I’m going to propose to some government agency that summer last all year. Do you think it would be approved? All we need to do is keep the northern hemisphere of the earth tilting toward the sun. Viola, summer all the time! Of course, having something all the time is not the panacea it seems.

The reason summer is so special is because we only have 3 months to read the 14,000 books we promised ourselves that we would get to after the semester. Not to mention travelling around the world (and back), working on our tans (oh yes, you know that was on the list too), and eating more fruit. But perhaps the one number summer activity of all time has not been mentioned. Try to say it with me “I AM GOING TO… RELAX”. Now, only one thing on the planet this summer relaxed (get to that later). It was not me. No, I tried to relax. However, I was caught up in these various activities:

I decided to construct a wooded backyard playset for my son Dominic. As soon as it was completed a gigantic, apocalyptic storm rose from the plains and thoroughly obliterated it. Well, it wasn’t quite that bad but it did require major repairs. Thankfully, no one was injured and the repairing gave me an excuse to hammer nails and cut wood!

The end–of–the–world storm also ripped shingles off our roof and deposited them in many of our neighbor’s yards. I was like a father looking for a lost child. Have you seen my shingles? The neighbors would give a sorrowful nod and handed me a pile of them. I walked slowly back to the house, depressed. They were only 7 years old, so much life ahead of them. Things would get worse as we now needed insurance adjustors and roofing estimates. Not a fun way to spend the summer, but I did get to see many people that I never met walking over my roof and measuring things.

While all of this sounds like my summer was only filled with home–repair nightmares, it actually was one of the best summers ever. I watched my 5 year–old son play tee–ball and hit 6,000 homeruns (it seemed that way to me). My wife and I had an enjoyable trip to Ft. Collins, Colorado where we hiked, ate, and met a hotel cat named Oreo. And that brings me back to cats. Nothing relaxed this summer more thoroughly than our cat, Smokey. It was a common occurrence to find her curled up somewhere sleeping. That’s not a bad way to spend 3 months.

I am looking forward to the fall semester and seeing everyone again.

10/9/08

The Psychology of the Market

The biggest financial news this semester has been the absolutely dismal economic situation of the United States. So bad are things, that President Bush signed a bill last Friday allocating $700 billion dollars for economic bailout. I would like to offer a psychological perspective on the current bailout and some calming thoughts on why we should not panic.

An important lesson to learn is that economic markets fluctuate. The market goes up for periods of time, but also reverses and comes down. There are numerous reasons for stock market gains and crashes. As I am not an economist, I will only dabble in explanations that deal with the psychological realm. Some of the peaks and valleys in the economy are due to purely psychological forces. Stocks go through the roof when everyone hears that “dot com” investments will make one’s wallet bulge. Conversely, panic can set in when news media outlets report on the multitude of mortgage defaults that have occurred in the last few months. In either case, the market is being partially influenced by rumors, speculations, and group panic. Again, these factors can help increase or decrease the market, the effect goes in both directions. The key point is that all of these factors describe irrational human behavior. So, we have described the problem. Now, what can be done to ease the mind during these difficult times?

Random fluctuations in the stock market are difficult to predict and no one ultimately knows what direction it will go. So, that seems easy. It’s unpredictable, so don’t spend time worrying. However, psychological research clearly indicates that stress and worry are greatest when we have the LEAST amount of control over the situation. One way to gain control over the current situation is to remember a rule from statistics. Extreme fluctuations are difficult to maintain. The more extreme, the more difficult it is to keep the trend up. This is the notion of regression to the mean. Why can’t the Nebraska Cornhuskers win national championships every year? It’s an extreme situation, winning a championship is unusual; it takes a great team, with great coaches, just the right amount of difficulty in schedule, and of course a fair amount of luck. Over time, extreme fluctuations will even themselves out and return to a more “normal” state of affairs. The economy will regress to the mean, it has to. We don’t expect extreme events to last forever, so why expect the economy to behave any differently?

Lastly, some good actually has come out of the economic bailout bill. Many do not know, but the bill also now allows more mental health coverage for mental illness and addiction disorders. This increased mental coverage was incorporated into the bill as a result of over 12 years of diligent persistence by mental health professionals (along with support from family and friends of people with mental illness) to increase mental health benefits. That may be one of the best reasons to view this current situation differently. Don’t panic, it’s not all bad, and we will successfully sail through this storm.

FF