Exploring the future of investment with the thoughts of today
Political risk is back with a vengeance in Italy. As the third largest global issuer of government bonds after the US and Japan, the country is too big to be allowed to fail without severe contagion to the global financial system. However, it is also too big to bail out comfortably using tried and tested mechanisms.
Evolutionary psychology highlights a Stone Age mentality hardwired into our brains and reflected in our behaviour and habits. For example, we tend to organise ourselves into groups in order to adapt more easily to different environments: behaviourally it is far less dangerous to be wrong in a group than to be right on our own. This explains the desire and impulse of an individual investor to follow the crowd.