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The 1980’s classic movie “Groundhog Day” reminds me of our current economic situation. The subtle messages in this movie sparked thoughts of how Congress and Treasury Secretary Paulsen might be feeling lately.

Bill Murray stars in the movie as “Phil,” a cynical weatherman who’s forced to live the same day over and over and over again until he undergoes a psychic change.

The connection I made between the movie “Groundhog Day” and behavioral finance is that we benefit by being calmly aware and paying attention. As Marcel Proust said, “the real voyage of discovery consists not in seeking new landscapes, but in having new eyes.”

It’s not easy to be relaxed and alert at the same time, it takes practice. Lately it’s been a roller coaster ride of emotions from confident, nervous, encouraged, defeated or euphoric. But stop and ask yourself, how do you feel about the future? Do you think that going forward there will be growth and continued development in the world?

Market cycles depend as much on our emotions as they do on fundamentals. When a stock or fund you own goes up, you feel euphoric. When it goes down, you feel defeated; investment decisions based on emotional reasons instead of analytical ones may lead to costly mistakes. Are you prepared to experience all of the emotions on the roller coaster ride? Only you know the answer to this question.

Financial markets have been operating in crisis mode for about a year. The U.S. Government has moved to outline solutions. When the government bails out an industry, it gets assets in return (remember Chrysler), but there’s a big difference between buying real estate, which is what the Resolution Trust Corporation did nearly 20 years ago to resolve the S&L crisis, and buying questionable financial instruments. At the time of this writing we just don’t know what the government will be getting or how steep the bill will be for taxpayers.

Human beings operate markets; it’s not all computer driven activity yet. Prices are meant to be set by people behaving rationally and having access to information. Herd mentality can overrule all rational thought.

What’s everyone else doing? If you think your colleagues are getting rich buying a certain stock, you may want to buy it yourself. Confidence builds as the stock’s value rises and enthusiasm leads to euphoria and the price may spiral higher. The same process occurs on the way down. Fear, hope and greed are only loosely connected to the business cycle and earnings.

I came across an interesting study by John Coates, a Cambridge University biochemistry and behavior researcher, showing that market fluctuations are amplified by hormones. In a past life, Coates was a trader for Goldman Sachs and Deutsche Bank in New York.

During the dot-com boom he was stunned to see male traders “displaying classic symptoms of mania,” with symptoms of “omnipotence, raging thoughts and diminished need for sleep.” Coates left finance to explore a hunch. He took saliva swabs from 17 male traders at a London firm twice a day and looked for two hormones.

These were testosterone; associated with male aggressiveness and sexual behavior, and cortisol, supports “fight or flight” emergencies. When profitable, testosterone levels surged, contrarily cortisol rose sharply when the traders were loosing.

Cumulative testosterone exposure encourages confidence and risk-taking. This may explain winning streaks in sports teams, or male teenage behavior for that matter! On the long term, high doses actually impair judgment and encourage excessive risks.

Cortisol has a beneficial, euphoric effect in the short term. Long term exposure at high levels and the hormone can turn negative, diminishing confidence and increasing fear of risk.

Coates suggests that fund managers could be given an “endocrinal mix” on the trading floor. (Do you remember oxygen bars?) The same set of facts given to someone high on testosterone or to someone with high levels of cortisol could produce opposing conclusions. Testosterone trader could see opportunities everywhere and cortisol trader may see nothing but risks. Women and older men would add a calmer, longer perspective to the headstrong, testosterone-driven actions of young males.

How much are we influenced by our chemical make up? Each of us has a unique risk level tolerance and knowing yours is key to surviving the jungle of Wall Street. Get in touch with both your masculine and feminine sides. The answers don’t change; balance is key.

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Darcie Guerin is a financial adviser and branch manager at Raymond James & Associates Inc. at 606 Bald Eagle Drive, suite 401, Marco Island. Contact her at Darcie.Guerin@raymondjames.com, 389-1041 or toll-free (866) 343-0882.