Oct

14

lamaAlbert Jay Nock wrote of the regular recurrences of panic, of unreasonable and debilitating fear that takes over a society. Henry Clews wrote of the regularity of panics with the regularity of the seasons. In fact, on a recent visit to New York I actually saw the very same wealthy old codgers hobbling on canes on Thursday night in the splendor of their private clubs. I don't think I will ever forget them despite my own state of panic. It happened in Orson Welles's reading of the Martian invasion, it happened in ancient Greece.

I have seen panic in the water and the unreasoning behavior it creates. In our discussions of survival, I see how panic leads to mistakes, and then the mistakes can compound and lead to death. We're in a panic, no questions. I've felt it. Everyone has. It's an unreasoning blind fear that takes control of your mind.

But as empiricists, we need to take a look at what is happening and what will happen after, and what has happened after and avoid the series of mistakes that leads to death. Rather follow the path to survival. And like in Forrest Gump, mere survival might be success.

The Dalai Lama said that compassion is the key. I might modify that to say that compassion is the key to investing. By acknowledging that other peoples feelings are the same as your own, you understand their needs. In a panic their need is to stop the pain, stop the uncertainty, and have some cash. Your job as a compassionate investor is to give them what they want, despite your own similar feelings. You should be rewarded for such altruism and compassion.

Michael Cook agrees:

I like this point of view. It suggests investing from an "enlightened" point of view, which might also include: not being obsessively attached to outcomes, rather enjoying the process; being relaxed, maintaining an expansive, embracing view of things grounded in acceptance; being mindful; and relaxing and quieting the mind thus allowing spontaneous insight to manifest itself.

This does not necessarily mean assuming the demeanor of a Zen monk, or a Bodhidharma in a cave (although that might work); I think one can be "enlightened" and also be a man (person) of action. See Chogyam Trungpa's "Meditation in Action," for instance. But the best athletes are the most relaxed, aren't they?

The idea of compassionate investing has many more suggestive connotations — thanks.

Jeff Watson remarks:

SpockWith all of the volatility in the markets of late, my protege gets very excited every time he has a trade on. His knees swing, he chews through pencils, and he has to use the bathroom a lot. He develops nervous tics, and talks just a little too fast, a result of his brain going 900 mph. Contrast that with me: I approach the screens in a slow, languid motion, sit down and relax. I look at my positions and don’t panic because of the bad ones, I eliminate them quickly without vocalization. My good positions cause me to absent-mindedly ask questions to myself and ask him about arcane scenarios that might have some value. Since I’m rather dispassionate about the whole deal, he gave me the nickname “Spock.” Whether that’s good or not, I’ll let you know after this storm blows over. He can’t ever find out if I’m mad or glad after a trade, because I do the same thing after every trade. Take a breath, and drink from a glass of water, and change whatever song is playing. I still maintain a cheerful disposition whatever the outcome, the same disposition I had when played ”Chutes and Ladders” in first grade.

Nigel Davies writes:

I'd need some convincing that balanced emotional gearing is an essential for the pursuit of excellence; I think a lot of champs just learn to channel their emotions into doing the right thing at the right time.

Thus it was OK to vent one's frustrations on the cat on Friday as long as one didn't sell.

GM Davies is the author of Play 1 e4 e5: A Complete Repertoire for Black, Everyman, 2005

Larry Williams comments:

The Dalai Lama is not a trader. There can be no compassion in trading; compassion does not make a wrong call any better.

The enlightenment is making the correct decisions, understanding and compassion are for marriage counselors, not investors. There are absolutes here; rocks are hard, water is wet, margin calls must be met.

Dr Williams is the author of How I Made One Million Dollars.. Last Year, Windsor, 1998

James Sogi adds:

I'm talking about the philosophical definition of compassion, i.e. awareness of others' emotional states, rather than the softer emotional state of kindness or pity with which the definition is mostly associated. The idea is to understand them in order to take their money, and hence some irony in the definition and its utility in speculative life. Sometimes they are willing to pay for the solace of giving up the position. Tends to be at the worst time. I know — I've done it.


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13 Comments so far

  1. Matt Johnson on October 14, 2008 9:07 pm

    Compassion is a wonderful trait, and I don’t think it has anything to do with trading, at least not in my system.
    Trading is trading, I think a lot of people try to make it bigger than it is…
    I’m a little vexed with the posts for the past few weeks, all this talk of how these markets are so different, this stuff happens every day, it’s just happening on the weekly charts instead of the 15 minute chart, and it’s in the US instead of an overseas market…

  2. Anonymous on October 15, 2008 2:51 am

    James Sogi; well you are a nice trading soldier to retreat from… Not never will. My thoughts are your hubris will soon outreach your tip.. not finding anything worthwhile about your comments. regards g  

  3. Rufus Round on October 15, 2008 2:53 am

    Enlightmenment is the acceptance that wrong calls will be made, losses incurred yet contained in an overall trading strategy with a positive payoff expectation. I guess the compassion required helps this acceptance and prevents panic - the death of any investor.

  4. the boy on October 15, 2008 7:22 am

    Williams is right, you are wrong Sogi. You are pushing your limits here and trying to look like you are a broad thinker but just digging yourself in a hole. You should be happy you tried to think of an idea like this, but if you were a real thinker you would have put it back down and found a new one.

  5. iconoclast on October 15, 2008 8:43 am

    to Mr Sogi

    id recommend he concentrate on his trading…such pontification has no rapport with what you need to do to be successful…it is a diversion, and in this instance totally unfounded and actually morally repulsive…

    it is good someone of Williams calibre (as a trader) politely says this is rubbish…and this applies to so much written on this site…however interesting it might be…

    these comments should not be interpreted by any idiots as a contarian indication regarding imminent market moves..

  6. Anton on October 15, 2008 12:50 pm

    Bernanke’s speech today at The Economic Club of NY had a much different feel when compared to his other public seeking engagements of late. His demeanor exuded a calm confidence, and his voice waver was nearly absent. My take is that he finally considers the financial time-bomb has been diffused, and inter-agency cooperation will be effective deploying TARP.

  7. reid wientge on October 15, 2008 1:24 pm

    Compassion, then, is a negotiating skill. Truly, every worthy interaction with another person is a “trade” wrapped in integrity, honesty and good will.

  8. Jeff Watson on October 15, 2008 7:12 pm

    Sogi San would probably agree with the old cliche, “After you’ve surfed big Sunset, you can handle everything life throws at you.” I suspect that Jim’s heavy Hawaiian surfing experiences have strongly affected his philosophy of trading. I know that mine have.

  9. jay on October 16, 2008 2:18 am

    Wait a minute…just trying to understand. Compassion is often defined as understanding with sympathetic action. Is this not correct? So, understanding your fellow investor/trader is key to successful tactics — i.e. taking your colleague’s money. Might we not use the word empathy as well? Understanding, identifying, yet always maintaining a detached awareness of what must be done. And, when the timing is right, snatching up that money the investor/trader is aching to give away. Effortless. And karmically sound…in a strange sort of way. I gather this is what you mean, right? Is it possible that all of these guys missed the point?

  10. Matt Johnson on October 16, 2008 2:32 am

    That sure wouldn't be my protege…

  11. Craig Bowles on October 16, 2008 7:19 am

    Compassion sounds like overbought and oversold indicators. As with all Jim Sogi's posts, he makes you think.

  12. vniederhoffer on October 16, 2008 5:17 pm

    I was with the surfing master attorney trader at the Harvard Club when he saw the old codgers with their canes quietly preparing to deploy their overplus on the next Friday at the opening. I believe that if one reads the master's post, one will find that his compassion has one of its practical outposts in relieving those who panic of their wherewithal by giving them fills in a compassionate manner with big gaps at the height of their frenzy to exit "damy my brkr ", they cry , "please whatever the price I have to sell before he automatically crosses me at the bottom for the House account ". One can only admire this manifestation of the Master's compassion. vic

  13. Martin Sewell on October 16, 2008 5:48 pm

    The key to such altruistic investing is to feel the pain first, and then inflict it upon others.

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