Jul

10

The Wimbledon Final between Federer and Nadal illustrates the importance of ever changing cycles in sport and the markets. Not only did each set alternate, but the break between the sets was key to a change of fortunes for the players. The first three games of the first set, which Federer won, were fatal for Nadal, as was his inferior stroke production, and how this tired him out in the end. I predict that Nadal will drop out of the top ten within the next two years as his athleticism regresses with old age.

The lessons from this match would all seem to have direct applicability to the markets:

Gravitation: If you looked through every world market as to its performance this year, you'd find the US below about 90% of them. This has been the case for the past three years, and could perhaps indicate that the hatred of the US that permeates the rest of the world carries over to investments, and leaves the US cheap relative to other countries. I hypothesize that there is a gravitational pull from all these other markets to the US.

Palindromic Lesson: People often ask me what I learned from the Palindrome during my 10 years of intimate association, aside from the value of using two cans of tennis balls in a match, being humble about your performance next year, and never admitting to a profit in the past. I would say that his idea that refuted hypotheses are the key to major market moves has much explanatory and predictive power. The most recent refuted hypothesis was that stocks couldn't go up when bonds are down. Last week bonds were down two points and stocks up 2%. Stocks are back to near their all time high, but are not there yet. I hypothesize that they need a refuted hypothesis to climb the last leg.

Death in the Woods: Much too little attention is paid to the death of companies and markets, as a prerequisite to renewed and bounteous growth in the future. A visit to Muir Woods, where fire and wind toppling a tree, leads to a profusion of new growth, from burls, roots, and stragglers, confirms the importance of this theory.

James Tar adds:

During yesterday's match coverage on NBC, there was a videotape comparison of the forehands of Borg and Federer. The strokes are frighteningly similar — the controlled loop backswing, the length and arc of the stroke, the extremely forward contact point, the angle of the racket at contact, and the follow-through just under the left shoulder. Their physiques, too, are almost identical. If you changed the hair and apparel of these players, you might have trouble identifying who was who. The real difference was the racket in each hand.

Borg's forehand was the most feared shot of its day, as is Federer's now. The point is that as technology changes, the foundations of competitive success remain constant. Nadal's strokes are completely different, even inferior. The power he generates is enhanced by the racket he uses. I recently tested the same racket. It does not favor smooth, traditional strokes. The balls flies — everywhere but into the court. Abbreviated, quick, jerky strokes, designed to create spin, must be used to harness the advanced technology in your hand. When the ability to make these incredibly timely movements diminish, so will the end result.

Barry Gitarts mentions:

One thing we can learn from Nadal is how far working harder then the next guy can take you.

Alfonso Sammassimo writes: 

Some points on the Wimbledon final:

1. Changing cycles. Just under thirty years ago one of the greatest ever baseliners won the title for the fifth consecutive occasion. Last Sunday one of the best ever all-court players in history did the same, playing predominantly baseline tennis. In between these two heroic feats, serve and volleyers have taken most of the spoils. Tennis, like markets, is a dynamic game where players discover new ways to counter present styles and tactics. It is a simple but perfect example of ever changing cycles. Greg Rusedski said it so well, "Tennis changes. If you look back in the past, they say it's too slow, then you have eras they say it's too quick. It always balances out."

2. Equipment best benefits those who best use it. While baseliners have benefited greatly from the power that comes with new racquets and strings, so too have the big servers. Nadal does indeed use a racquet that is very hard to control - the fact that he does so well is a testament to his talent, not the racquet. Roger Federer has his racquet strung at 50 pounds which is also extremely difficult to control and provides much power. They both have strings which can help generate a lot of spin. These are two superbly talented tennis players who maximize the benefits of available equipment. 'R' or a Bloomberg terminal doesn't help me trade any better unless I have the ability to utilize them expertly.

3. Speed and agility are often overlooked and under trained. From the first point the most obvious difference between this match and the lead up matches of the tournament was the speed of both players. They are in the right spot at the right time more than the other players. Not only better foot speed, but also better anticipation. Market analogy…

4. Never give up. Federer looked on the back foot for much of the match. Only one break point opportunity during the middle three sets, and down break points in two service games in the fifth. He hung in, and the opportunity came as nerves and possibly fatigue got to his opponent. He took it swiftly as a champion does.

5. Efficiency nurtures longevity. A style of compact strokes and taking the ball on the rise requires less physical effort, expends less energy, is less likely to lead to injury, and most of all can be continued for longer in a career. Agassi and Connors are examples. Fewer trades and less commission, and coming straight in after a decline might prolong my trading account. I would agree that Nadal will suffer as his athleticism regresses with age.

6. Have outs. Much advantage having an all-court game to fall back on, having something else available when you're in trouble. When he was down break points in the fifth Federer cranked out three aces in a row, so discouraging to an opponent who has to earn nearly all his points with longer rallies. It’s good to have mouse holes when in the market.

7. You have to work harder than anyone. Nadal's was an incredible effort, coming so close to winning the running double which has eluded previous champions who aspired for the Grand Slam. He is possibly the hardest worker on the tour and his obsessive and methodical approach to everything from training and practice to the placement of his water bottles might just help him maintain his place in the food chain for longer than might be expected. 


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