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James Sogi

Philosopher, Juris Doctor, surfer, trader, investor, musician, black belt, sailor,
semi-centenarian. He lives on the mountain in Kona, Hawaii, with his family.

 

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12/03/2005
Blue Planet Oceans

The Blue Planet : Seas of Life: Open Ocean -- The Deep from the BBC is a fascinating DVD about the varied life in the oceans. It is a rare case of a movie being better than the book. The ocean predators eat the bait fish in dynamic and sometimes explosive activity reminiscent of the markets where it is a matter of life and death. Some live and some die, and that is their niche. Rather than characterize the feeding as aggression, survival is more apt, as there is no anger or ill will involved. Predators eat other fish to survive. The bait survive by their numbers and by the general plenitude productivity of the oceans. Like Luca Brassi the mob hit man, says in doing his job, "No hard feelings, its only business."

As in the competitive undersea world, Speculators cannot afford anger or hard feelings going about their job of providing and allocating capital. Survival must be foremost, as danger lurks for the unwary. Fish have hundreds of methods of deception to lure the unwary, to escape the dangers, decoys, specialized appendages, special eyes, techniques of hiding and hunting. Birds swim underwater, fish fly in the air. All develop niches in the ecosystem. Some fish rely on other fish, such as Ramora fish riding on sharks, or the tube worms on the volcanic vents relying on the bacteria. Some eels and prehistoric sharks wait on the seabed for the dead to float down. The animals on the sea floor out number life on the surface as the area size is so much greater under water than on land. We know less about the seabed than about the surface of the moon. Over 60% of the planet is covered in water over a mile deep. Scientists find new undiscovered Bizarre creatures and new life forms in the depths over 1-5 miles deep every hour. Some live without sunlight relying on a bacteria which fixes hydrogen sulphites from volcanic vents.

There are many ways to profit from our diverse markets, undiscovered angles, methods to distinguish the background from the profits, to lure out sources of sustenance, create unknown dangers and deceptions to trap the unwary - the bait. We can band together for mutual hunting and protection and sharing of ideas and morsels, as the porpoise and fish do.

Some market S&P mechanisms, (December Mini):

Deception. Gig gap up 11/29; then reversal hard down 2 days. A big fake out. 12/1 Big gap up and straight up.
Startling. Fed minutes, then 2 weeks straight up.
Predatory behavior. Late November run up with no down bars, no pull backs, just sold attack until they couldn't eat any more. The same effect but different group in early October drop down. If you are not feeding and eating, best to hide or run. They feed till the bait ball is gone in a frenzy.
Play dead behavior. 11/3 - 11/10, Friday 12/2.

The technique of eminent behavioral psychologist Dr. Gerald Patterson was to quantify behavior and use statistical analysis to discover causal relations rather than speculate about theories of oral fixations. He would go into homes of troubled teens and observe and count yelling, hitting, verbal demands made by parents, and mark them down and later count them. One thing he found was that parents that make the highest rate of demands on their children had the most non responsive children ... they simply cannot keep up with the high demand rate. Come here!, don't do that!, clean your room!, turn down the TV, comb your hair, tuck in your shirt, help your sister! ... etc etc. By the way, a wonderful book he wrote is called Living with Children. I give it to all my young friends with young children about raising children with a system of rewards. See also Parents and Adolescents.

This is the scientific approach that works in the markets: catalog the various market behavior types: aggression, startling, play dead, etc and place them in their proper context in the market. Quantify and test. The difficulty is that we are watching the tracks of the animals on the ocean floor, we can't see them in action in real time. It is like the Indian guide looking at the tracks of the horses and droppings who says, "Three horses passed, two days back, one without rider, riding at gallop." So we have to dig two layers deep, and interpret the action from the evidence of only the tracks. Its like the movie the Invisible Man, we just see footsteps.

A good way to bridge the gap is to consider the motivations of the actors in interpreting their tracks. In legal cases it is always good to be a step ahead of the opponent, to consider why and how the opponent would act in a given situation. What are his motivators? What in his history shows how he will act given his propensities, his normal human reactions, his specific needs. The news gives a reflection of the the reaction to the situation, and might be quantified as a variable, (good news or bad news), (trading news, market up bad news, down on good news 2x2 table), this helps anticipate. At different times in the market different groups, different types of animals, are involved, and so its good to identify who is in the markets? Who is the opponent? This is an issue that comes up in the intelligence and counter intelligence field, where it is not clear who ones opponent is and what his motivations are. See The Great Game, Hitz. Many times they are very basic motivators, money, greed, revenge.

Jim Sogi, May 2005

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