Markets are little changed as investors are in a very nervous wait-and-see mode as Nvidia reports tonight.  Why is this important?  Well, the market cap of this one company makes it one of the top components of the S&P500 (some sites put it at #2, others at #3) … and a report by Reuters claims there could be “… a $300 Billion Dollar swing” … based on today’s report.  How large is that?  A report on MSN calculates that it has the potential to cause “… the largest expected earnings move for any company in history.”

Yes, this could be a very big deal.

An article out this morning (and included below) mentions, based on Fidelity claims, that an historically large number of people are now millionaires … as far as their 401k balances are concerned.  And if you add the article following that one, where a majority of Americans feel they would be “financially happy” with $200,000 liquid net worth, you might understand the angst over today’s late-date earnings report … as people assess how this could hit them right where it hurts.  In the pocketbook.

For our CFA-related message of today, there is something called “loss-aversion theory” … a cognitive bias where people feel much greater pain over losing $1 than the satisfaction they feel in gaining $1.  According to theory, this is why a lot of people make quick (and sometimes irrational) investment decisions as even small declines are magnified in their minds.

Why I bring this up is the effect today’s announcement could have on portfolios … as a good report could find many investors not making any moves at all … while a bad report, and subsequent drop in price, could find quite a few retail investors selling positions as the pain they feel (if more than a mild drop) could be too much for them to accept.

On a final note, I will continue along the lines of demographics that I started on yesterday where I pointed out a large amount of money will end up in the hands of women … due to inheritance and the longevity situation in the United States.

But I figured out something that I think is really ingenious.

I read that the average woman has an expectation to live to the age of 84.

I also read that the average man expects to live to the age of 79.  So I’ve come to a decision.

When I turn 78, I am going to consider transitioning.

Have a great day,

Joseph G. Witthohn, CFA

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