Just one more, then I have to finish packing. This relates to the earlier post of Intentional Stance.
A New Mindset
In order to be able to see these cycles of sentiment as they take place it is essential to remain outside them. Traders who are participating in a current fervor generally don’t see themselves as participating in a fervor at all; they are too deep in the forest to afford themselves a view of the trees. How do we remain outside the forest? By adopting a mindset that allows us to do just that. The following short story written by Kurt Vonnegut’s Kilgore Trout character in “Slaughterhouse Five” (you may also have seen the story referenced in “Market Wizards”) provides a good example of the mindset we’ll take:
“The Big Board
. . . It was about an Earthling man and woman who were kidnapped by extra-terrestrials. They were put on display in a zoo on a planet called Zircon-212.
These fictitious people in the zoo had a big board supposedly showing stock market quotations and commodity prices along one wall of their habitat, and a news ticker, and a telephone that was supposedly connected to a brokerage on Earth. The creatures on Zircon-212 told their captives that they had invested a million dollars for them back on Earth, and that it was up to the captives to manage it so that they would be fabulously wealthy when they were returned to Earth.
The telephone and the big board and the ticker were all fakes, of course. They were simply stimulants to make the Earthlings perform vividly for the crowds at the zoo--to make them jump up and down and cheer, or gloat, or sulk, or tear their hair, to be scared shitless or to feel as contented as babies in their mothers' arms.
The Earthlings did very well on paper. That was part of the rigging, of course. And religion got mixed up in it, too. The news ticker reminded them that the President of the United States had declared National Prayer Week, and that everybody should pray. The Earthlings had had a bad week on the market before that. They had lost a small fortune in olive oil futures. So they gave praying a whirl. It worked. Olive oil went up.” - Kurt Vonnegut
As contrarian traders, we’re going to sit back like the Zirconians and watch the other traders as if they are some kind of attraction in a human zoo. We will assume that the news is only meaningful to the extent it drives people to buy or sell and that there is no inherent reality behind it. We’ll be asking, “What are these strange beings doing and what beliefs are driving their behavior?” If you think there is a certain amount of disparagement for your fellow traders’ skill inherent in a method that includes pretending they are in a zoo, well, then you’re right. If 90% of traders lose then, unfortunately or not, you best not only avoid what they do, but also do the opposite. It’s not that there isn’t camaraderie among traders, but it’s a lot more fun when it’s with other winners. So stay out of the cage, hang with the Zirconians, and please don’t feed the traders.
A New Mindset
In order to be able to see these cycles of sentiment as they take place it is essential to remain outside them. Traders who are participating in a current fervor generally don’t see themselves as participating in a fervor at all; they are too deep in the forest to afford themselves a view of the trees. How do we remain outside the forest? By adopting a mindset that allows us to do just that. The following short story written by Kurt Vonnegut’s Kilgore Trout character in “Slaughterhouse Five” (you may also have seen the story referenced in “Market Wizards”) provides a good example of the mindset we’ll take:
“The Big Board
. . . It was about an Earthling man and woman who were kidnapped by extra-terrestrials. They were put on display in a zoo on a planet called Zircon-212.
These fictitious people in the zoo had a big board supposedly showing stock market quotations and commodity prices along one wall of their habitat, and a news ticker, and a telephone that was supposedly connected to a brokerage on Earth. The creatures on Zircon-212 told their captives that they had invested a million dollars for them back on Earth, and that it was up to the captives to manage it so that they would be fabulously wealthy when they were returned to Earth.
The telephone and the big board and the ticker were all fakes, of course. They were simply stimulants to make the Earthlings perform vividly for the crowds at the zoo--to make them jump up and down and cheer, or gloat, or sulk, or tear their hair, to be scared shitless or to feel as contented as babies in their mothers' arms.
The Earthlings did very well on paper. That was part of the rigging, of course. And religion got mixed up in it, too. The news ticker reminded them that the President of the United States had declared National Prayer Week, and that everybody should pray. The Earthlings had had a bad week on the market before that. They had lost a small fortune in olive oil futures. So they gave praying a whirl. It worked. Olive oil went up.” - Kurt Vonnegut
As contrarian traders, we’re going to sit back like the Zirconians and watch the other traders as if they are some kind of attraction in a human zoo. We will assume that the news is only meaningful to the extent it drives people to buy or sell and that there is no inherent reality behind it. We’ll be asking, “What are these strange beings doing and what beliefs are driving their behavior?” If you think there is a certain amount of disparagement for your fellow traders’ skill inherent in a method that includes pretending they are in a zoo, well, then you’re right. If 90% of traders lose then, unfortunately or not, you best not only avoid what they do, but also do the opposite. It’s not that there isn’t camaraderie among traders, but it’s a lot more fun when it’s with other winners. So stay out of the cage, hang with the Zirconians, and please don’t feed the traders.