Apr

3

This has been used of late in a political context, but the Costanza Doctrine (taken from a Seinfeld episode in which George Constanza temporarily improved his fortunes by doing the opposite of what his instincts told him) would seem to offer hope to thousands of losing traders. The trick would seem to be to buy when you feel that knot of fear in the pit of your stomach, or sell when you feel the joy and excitement of a trade going your way.

George:

"Why did it all turn out like this for me? I had so much promise. I was personable. I was bright. Oh, maybe not academically speaking, but I was perceptive. I always know when someone's uncomfortable at a party. It all became very clear to me sitting out there today, that every decision I've ever made in my entire life has been wrong. My life is the complete opposite of everything I want it to be. Every instinct I have in every aspect of life, be it something to wear, something to eat… It's always wrong."

Jerry:

"If every instinct you have is wrong, then the opposite would have to be right."

Jim Sogi adds:

There is a twist to this. In the markets, and in life, there is an asymmetry of some sort that throws this equation off. How it works in life will take some thought. But in markets, long is not the exact opposite of short.

From Kevin Depew:

A funny application of the Costanza Doctrine (pre-Seinfeld) appeared in the movie "Let It Ride," which may be the closest the movies have come to real-life racetrack bettors in action. The main character, played by Richard Dreyfuss, is a degenerate gambler/loser who one afternoon mysteriously begins winning. (That the notion of winning at the track would be considered a) mysterious, and/or b) noteworthy enough for a film or book, is itself a pretty hilarious inside joke.) Anyway, in the middle of his winning streak he decides he's not even going to handicap the next race and instead walks around the track asking various degenerate gambler acquaintances of his who they like. Whichever horse they name, he scratches off the program and eliminates from contention.

When he gets to the one horse that hasn't been named, he lets his winnings ride on the unwanted horse with predictable winning results. As an aside, Robbie Coltrane has a nice turn as a dour teller. Also worth noting, the hatred emanating from his fellow degenerate gambler "friends" as his winning streak grows; everyone hates a winner; everyone loves a loser.

Interestingly, last night on the Black Donnellys (clearly, I'm watching way too much television these days), two of the Donnelly brothers are at the OTB to place a bet and hopefully recapture some money they owe to a crime boss. The "expert," Kevin, (a fictional character who nevertheless I am convinced is a direct blood relative of mine) can't decide between two horses. After much prodding from his brother, Tommy, he chooses one rather indecisively. Naturally, Tommy bets the one Kevin didn't choose, with predictable winning results.

By the way, the Black Donnellys is not a good show. The main character, Tommy, seems to have modeled his mannerisms on Tony Soprano, and the Irish stereotypes run for a full 47 minutes, laddie; may misfortune follow you the rest of your life, and never catch up. This may sounds strange, but I think I watch the show because Eisenberg's Sandwich Shop is one of the locations for filming.

Art Cooper adds: 

One of the first things taught in a first-semester computer class is that the opposite of > is not < , but rather < or = . This applies to markets as well. The opposite of "long" is not "short," but rather "short" or "flat." 


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  1. Bernd Dittmann on April 3, 2007 11:39 am

    Whereupon George takes up his courage and approaches the beautiful blonde woman at the counter who incidentally has the same salad he ordered: “Hi, my name is George, I’m unemployed and live with my parents.”, a true Costanza!

    In season 1, episode 5 (”The Stock Tip”) he and Jerry invest in a stock based on insider information. While Jerry is the typical small investor who closes out at a loss when the price wildly fluctuates, George enjoys his victory cigar when he cashed in his $8,000 profit.

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