Dec
26
Deception or Self-Deception, That is the Question, By GM Nigel Davies
December 26, 2006 |
The case for deception in markets is an interesting one, but for several reasons I hypothesize that what we are seeing may be self-deception:
Deception on such a large scale would imply that some kind of collusion is involved by market participants as no one source of participants is large enough to move a liquid market.
Let’s say that last time there was a particular memorable event a related market moved sharply in a particular direction. Those who were stung the previous occasion are likely to liquidate their positions on the basis of ‘once bitten, twice shy’. Thus they move the market in the opposite direction to last time prior to the event in question.
Steve Bal adds:
On the second point, I would add that memory is different for market participants. For some it may just be the most recent event, for some it is an average of the past events or a weighted form, or it could be the most prominent event from the entire past that has the most bias.
In either of the scenarios it would be limited to a group of traders who provide some market liquidity and not to the group as a whole. As the markets move ahead it is the group of traders who have been stung (such as this past week) who will pay a higher price to re-enter the stocks they sold. They will willingly pay more to re-enter the game than be left behind in the new year.
Investors behave as traders but consider themselves investors.
Steve Leslie adds:
In human endeavors I notice similar themes in mimicking. Bullies also try to intimidate verbally with overt threats. Scut Farkus in A Christmas Story exemplifies this mimicking behavior.
They are the ones who rant and rave, throw fits and expend massive amounts of energy in an attempt to subdue those around them in lieu of physical confrontation.
In my experience however the more boisterous someone is, the less secure they are. A case in point is North Korea today. their rhetoric is loud yet how much substance do they have behind such threats.
And in the human species it is the quiet ones you watch out for.
Every martial arts expert I have ever met has been on the quiet side. Yet when they explode it is quite terrifying and extremely lethal. Bruce Lee was a fabulous example of this.
For further edification on this I strongly suggest a short book by Joe Hyams, called Zen in the Martial Arts.
Comments
WordPress database error: [Table './dailyspeculations_com_@002d_dailywordpress/wp_comments' is marked as crashed and last (automatic?) repair failed]
SELECT * FROM wp_comments WHERE comment_post_ID = '173' AND comment_approved = '1' ORDER BY comment_date
Archives
- January 2021
- December 2020
- November 2020
- October 2020
- September 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- March 2020
- February 2020
- January 2020
- December 2019
- November 2019
- October 2019
- September 2019
- August 2019
- July 2019
- June 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016
- December 2015
- November 2015
- October 2015
- September 2015
- August 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- Older Archives
Resources & Links
- The Letters Prize
- Pre-2007 Victor Niederhoffer Posts
- Vic’s NYC Junto
- Reading List
- Programming in 60 Seconds
- The Objectivist Center
- Foundation for Economic Education
- Tigerchess
- Dick Sears' G.T. Index
- Pre-2007 Daily Speculations
- Laurel & Vics' Worldly Investor Articles