The Marshmallow Test
In the “marshmallow test,” the psychologist Walter Mischel offered to give children one marshmallow to eat now or two if they waited 15 minutes. He found that, on average, those children who delayed gratification and banked the 100% marshmallow interest rate became more successful adults.
Today, easy-money central bank policies are throwing certain principles of human nature and finance out the window. Until recently, the zero-bound in interest rates was considered an inviolable law of finance - somewhat akin to the law of gravity. But now we read about people getting paid to take out mortgages in Denmark and about companies having to pay significant interest on bank deposits. Adjusting to a new world of all-you-can-eat marshmallows, in which investors often pay for the privilege of lending money, has been occupying much of our thought.
At a glance
- Easy-money central bank policies are throwing certain principles of human nature and finance out the window.
- Adjusting to a new world in which investors often pay for the privilege of lending money, has been occupying much of our thought.
- The Eurozone has been the recent leader of this journey into a world of negative rates, and I believe this is presenting a tactical opportunity for Eurozone assets.
- We recently took some of our successful overweight positions in the US and shifted them to the Eurozone..
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