Open Book: How Nonverbal Communication Influences Your Stock Picks

The emotions connected with content -- whether religious material, romance novels, books that hammer on the other political party -- are things that Americans are sensitive about.

Bizarre experiences are generated by thoughts and feelings of being overly concerned about what others' opinions are of you. "Political correctness" gone wild, if you will.

These thoughts and feelings literally change your behavior and they change your decisions as to the content you are going to be looking at in any moment.

The problem with all of this is that the force of influence of others in the environment combined with your own personal concerns about what others think of you reduces your field of possible information and entertainment sources.

Before we come to stock picking and portfolio selection, let's briefly look at your office.

If you're like most right-handed people, the left side of your desk is a mess and the right side is clean.

Why? How can I know that?

It turns out (as an overgeneralization) that the left brain, which is a bit more linear, computational and logical, is activated more intensely when you look to the right. Rule of thumb: the left brain doesn't like disorder.

The right side of the brain doesn't care about disorder. The right side of the brain is more of a home to emotions, feelings and "autobiography."

When right-handed people look for an extended period of say one minute, to their left, they begin to feel uneasy and experience anxiety and feelings of fear.

Now imagine that you have two prospectuses sitting on the coffee table.

One is to the right and one is to the left.

To overgeneralize, you will tend to look at the prospectus on your right (because information coming in the right eye filters more to the left brain and the left eye to the right brain), which will receive a more analytical read on your part. The prospectus on your left is more likely to receive an emotional and usually negative (because most strong emotions are negative) bias.

You'll be more likely to pick the stock that is featured in the prospectus on the right because you simply didn't feel good about the one on the left.

Your Boss

Now, let's complicate the universe. Your superior comes in and sits down opposite you. She drops five prospectuses directly onto the table in front of you.

She has a bias toward retail, while you have been strongly interested in cheap precious metals stocks (see Energy/Commodities).

She looks at precious metals stocks almost as if they aren't stocks. What looks and feels better in a portfolio, Wal-Mart (WMT - Cramer's Take - Stockpickr) or Randgold Resources (GOLD - Cramer's Take - Stockpickr)? She thinks Randgold is "scary" and Wal-Mart is "safe."

She is in control of your salary and bonus and asks for your opinion on the stocks she's just laid out in front of you.

Fact is, because of your awareness of her biases you tend to lean toward what she likes for your portfolio. Her agreement and your perception of her thinking of you as being intelligent and "making the right decisions" is more important than picking what you think the right stock is.

You pull out Macy's (M - Cramer's Take - Stockpickr) and suggest that stock.

She says, "That's what I was thinking too."

Your superior has completely influenced your decision.

Your Friend

Now imagine that you're screening stocks and come across Chevron (CVX - Cramer's Take - Stockpickr).

Sitting next to you is your rightfully-concerned environmentalist friend.

You're explaining how to buy stocks to him: "Low P/E , good earnings ..."

He ask, "What's CVX?"

"Chevron," you tell him.

"Oh, oil company."

And immediately you feel uncomfortable. You think your friend is evaluating you as a polluter of the environment and the source of global warming and ultimately the destruction of the planet.

So you skip past Chevron and move to a less "sensitive" stock.

All of this nonverbal communication -- both intrapersonal and interpersonal -- completely changes your investment strategy. And it will almost certainly cost you money.

You made all of these decisions based upon your perception of what others think of you. This is the The Secret Language of Business (my new book).