May

17

 I wanted to comment on how some old men grow old gracefully whilst others grow old grotesquely, and to look at how this effects their take on the markets. I believe that those who age worse often exhibit worse trading symptoms! 

Ayn Rand used to talk of second-handers: those who derive their self esteem from the perceptions of others, not from objective achievements.One virulent form of second-handedness masquerades as virtue: the need to be needed. I suspect it's behind the overly chivalrous and boastful demeanor, but also behind the pessimism.

The doomsayer needs followers who feel endangered and vulnerable. The forecasts of doom make the prophet needed to get through the pending calamity. No one needs a savior if the forecast is for sunny times ahead. By undercutting the sense of security of others, the doomsayer carves out a niche for himself: I will get you through the market panic, the economic collapse, etc. The same dynamic is at work with the seemingly solicitous and chivalrous man who wants his woman dependent upon him.

I'm thinking of a couple I once saw in counseling. He refused to let her work outside the home, insisting that he must be the breadwinner. She was bright and talented and, now that the children were older, wanted to work. She took up a hobby (quilting) and became quite expert at it. Eventually her quilts became collector items and she was a hot item on the art festival circuit. He was increasingly threatened by her success and tried to derail it by belittling its importance — all the while maintaining his love for her and his willingness to provide for her.

He needed to be needed: his greatest threat was an independent woman. The doomsayer similarly needs to be needed. The confident, optimistic investor is his greatest threat. To become needed, they must make others needy. Such is their benevolence.

She divorced him, by the way, and went on to become a successful instructor of quilting and crafts, owning her own business.

And 20 years after 1987, we stand at new highs and the doomsayers continue to beat their drum. Odd how we excoriate those who encouraged people to buy stock in 2000, but say nothing about those who counseled against equity ownership for the last 10,000 Dow points. If a physician sickened his patients in order to have a steady stream of revenues, no one would hesitate to call it malpractice. But what of investment advisors who fill their clients with fear in order to sell them services and seminars?

"You need not examine a folly", Rand once wrote; "you merely need to identify what it accomplishes". Pessimism and negativity create dependency and a psychological crippling. The need to be needed is a need to undercut the certainty and security of others. That's why it's a "symptom of something worse".


Comments

Name

Email

Website

Speak your mind

4 Comments so far

  1. giovanni zibordi on May 17, 2007 12:41 pm

    I usually like to find on the web authors with an Austrian School and Ayn Rand inspiration. The Austrians and Mrs. Rand were a bit less cheerful than you

  2. jay schneider on January 10, 2008 12:42 am

    I agree with the commenter. Almost seven months ago, just after this post was originally written, I bought gold on a breakout after reading the musings of Bill Bonner and his ilk. Not too long afterward, I shorted a few financial SSFs…and here we are teetering on the brink of what some call a recession caused in part by over-enthusiastic investment sycophants, greedy corporate shills, and unbridled quant festishism. (”Optimists”, by another name perhaps.) I would not describe Bill Bonner as a second-hander, nor many of the others who are cautioning the rest of us in the current financial environment. I did pretty well listening to doomsters in the second half of 2007…and while I find all kinds of problems with the ideoligically derived pseudo-philosophy of Rand, I’ve been a big fan of the Austrian school since 1993.

    Not quite sure what this article is about, other than to not let negative emotions get in our way — but that kind of negativity is a far cry from someone arriving at the conclusion that the economy or market will take a swan dive.

  3. Independence Day Ideas | Diario BV on March 25, 2009 5:06 am

    […] * The Psychology of the Permabear - Here is my comment for Daily Speculations regarding the psychology of those who infuse their market commentary with persistent bearishness, and here is coverage of the comment from South Africa. Bearishness can make a great deal of sense as a market position; as an ongoing ideology–particularly one that flies in the face of objective reality–I question its motives. […]

  4. Second Handers | Free The Animal on September 20, 2011 11:58 pm

    […] Brett Steenbarger tries to make the case that second-handedness is behind pessimism and negativity, and I think his argument is worth considering.The doomsayer needs followers who feel endangered and vulnerable. The forecasts of doom make the prophet needed to get through the pending calamity. No one needs a savior if the forecast is for sunny times ahead. By undercutting the sense of security of others, the doomsayer carves out a niche for himself: I will get you through the market panic, the economic collapse, etc. The same dynamic is at work with the seemingly solicitous and chivalrous man who wants his woman dependent upon him. […]

Archives

Resources & Links

Search