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life | SMART Te must have (economic) trend

of the holiday season! Impress the stockings off your friends and family this year

Michael Silicz H

o ho ho – the holiday season is finally here! And you know what that means… It’s that time of year where, rather than relax with family and reconnect with old

friends, we’re likely scrambling to purchase last minute gifts for those we care about. Collectively, many of us are trying desperately to show our love to friends and family by purchas- ing this holiday season’s must have holiday trend, gadget or gizmo for them. So, what is the must have gift this

year? Is it new Star Wars memora- bilia? What about Elf on the Shelf? Or could it be organic beard balm for your hipster husband? Well, these gifts may very well

be the it gifts of the year, but as a financial guy, I really have no idea. What I do know is economics,

Be The Change

Michael Silicz

finance and policy. (Maybe this is why I am often seated at the end of the table during the holidays… hmm.) And when it “Streetnom- ics” (you know, the kind of ideas you learn in the real world on the street, as opposed to the abstract

stuff we're taught in university), the people out there can’t stop but talking about the latest craze: behavioural finance. Behavioural finance is the “it” (for economists) this holiday

season. It’s the Saint Kardashian of the economic world. It is, in terms of growing followers, the Khole of Instagram. Here’s the Coles notes of what you need to know to impress your family and friends this holiday season. First though, it’s important to be reminded quickly of last

(century’s) trend. In a nutshell, holiday pun intended, “rational expectation” economics of the past assumes that you and I are like the Architect in the Matrix, able to perfectly know what’s in our best interest all of the time. From deciding between buying a Big Mac or Teen Burger, or whether to invest in a bank stock or ETF, this theory assumes we are always making the best decision possible with all information available to us. Well friends, the coolest, hippest economists out there are

calling this theory into question. Tey believe that it’s about as real as Santa Clause. Enter behavioural economics. Out of American university thought (hence the incorrect

spelling) comes behavioural economics. It seeks to study the effects of psychological, social, cognitive, and emotional factors on the economic decisions of people and the con- sequences of them on market prices, returns, and resource allocation. Whereas traditional economic models of the past have assume markets to be efficient and always right, behav- ioural economics assumes that knowledge is imperfect, that said perfect information is not available, and that humans are ultimately bound to make mistakes. Putting it in street terms, people are not rational like machines, and will often make obvious economic mistakes that are contrary to their own self-interest.

All the latest cool gadgets like the Apple iWatch can frequently be found on people's Christmas lists. Photo courtesy of Apple Inc. Tis is big, exciting and powerful news for so many reasons!

Tis new theory argues that people are more emotional than rational, hence leading to all sort of “biases” that introduce poor decisions into our lives. Rather than think like a com- puter, in this modern day where we are overwhelmed with choice and information, this theory argues that we make emotional decisions first, and then use rationality to justify them. How cool is that? Behavioural economics has three main themes. First, people

often make decisions based on approximate rules of thumb and not strict logic. Tis means that rather than compute things like Data in Te Next Generation, people rely things they already believe that may or may not be true. Second, people “frame” their decisions through a collection of anecdotes and stereotypes that make up the mental emotional filters which they rely on to understand and respond to events. Last, and the most geeky, behavioural finance’s most important point relates to financial markets and how these biases create mis-pricings and non-rational decision making. In streetnomics, that means people in the market make all kinds of mistakes, lead-

ing to opportunities to profit. But more on that another day… Bottom line, with so much information (and more impor-

tantly, misinformation), it is impossible to be rational and hence market irrationality is introduced into the system. Go- ing back to Te Matrix Reload, to quote the Architect, “as you so adequately put, the problem is choice.” Because of choice, behavioural economics and finance is the in topic this year – aren’t you glad you’re now in the know? So, this holiday season, when you see people freaking out

for some creepy shelf elf or spending hundreds of dollars on Star Wars Lego at higher than market price, you’ll now be able to understand, using streetnomics, why they’re being so irrational! By knowing the latest and greatest (economic) trend of the 2015 holiday season, you can now relax, unwind, and be the one in the know at your next holiday gathering. Happy holidays! Michael Silicz helps people separate the signal from the noise.

He has experience in finance, law and public policy. If you have any column ideas or would like to see Michael write about a specific topic, email him at

Tips to bring out your Inner Fashionista D

ecember and all of its festivities has come to end, and another year has begun. You find your Christmas glow fading, as fast as a two week tan

in the Bahamas. January, for some means the beginning of the winter blahs, but take heart ladies, January is the best time to begin your search for those terrific deals to top off your closet. Let’s start with a nice coat.

In Vogue Ally Champagne

Tere are so many styles, col- ours, pat terns and hues to choose from this year. This may be the winter, you find your signature piece which not only looks fabulous but keeps you warm as well. I have been guilty of buying outerwear to be trendy, and finding out it was like wearing paper in our -30 C weather. Not practical

at all. Cold temperatures aside, we

do not have to look like Mrs. Michelin every time we step out of our homes. I love the large

array of winter wear which will soon be on sale. Our fall landscape is filled with browns and golden tones. You can fill winter with soft pinks, mauves, or baby blues. Too subdued for you, well then perhaps dare to try a bold azure or cobalt blue to buoy your inner goddess. Tere are so many scarf accessories to compliment your coat, from

January 2016

long, wraps to the infinity scarves, countless textures from silk, wool, and synthetics to fake fur. I have found an item this fall which transitions well to our

winter season. I love the over the knee boots which can be worn in so many different ways. Te secret is finding a pair that fits your leg, because legs come in various shapes and lengths. Once you find your perfect boots, you can dress these with so many different looks. Last weekend, I spotted a young woman wearing gor-

geous black suede boots and she looked fabulous. She had on a long sweater coat, dark grey leggings, a loose, oversized white oxford shirt, and just a few accessories to give it the WOW factor. I felt like she had just stepped out of a high fashion magazine or off a runway ramp. Tese versatile boots can be worn with a short dress or

short skirt, and look equally stunning. You can opt for black leather boots, to wear with the very trendy short leather skirts, which come in every imaginable style. When buy- ing a leather skirt, do make sure it fits well, with no visible bunching. Also take into consideration it may stretch a bit. Big knit sweaters also compliment these boots and are

the rage right now. Every fashion magazine is featuring them. Tese sweaters come in a loose fit, done in so many various knitting patterns. A few weeks ago I saw an ivory fisherman cable over-sized sweater which would be the perfect ensemble with camel leggings and a pair of brown boots designed with a large upper cuff you can wear over the knee or folded as a regular knee-high boot. So here’s to a very Happy New Year, and to investing in

Embrace the options that winter brings. Photo by Vincent von Schnauzer.

some really chic new self-defining clothes and accessories!!! Many the deals be with you...

Smart Biz 11

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