Dec

1

 Back when I was a freshman in college, I had to take a course in University Physics. I found the course to be most practical, and helpful in the development of my thinking. One phenomenon that we studied in that class was the concept of Parallax. A quick Wiki definition of parallax is:

"Parallax is an apparent displacement or difference of orientation of an object viewed along two different lines of sight, and is measured by the angle or semi-angle of inclination between those two lines. The term is derived from the Greek parallaxis, meaning 'alteration.'"

A person can observe in real life the effect of the parallax by measuring something, using a ruler and not looking directly over the scale. By looking at an angle other than directly over the scale will cause a measurement error due to the parallax. That error can be measured and corrected by knowing the distance from the object and the angle. One's measure of the market might be affected by an internal, mental parallax. This parallax might be a function of the time frame, or might be something else… what else I don't know. It would be interesting to see if anyone has studied or quantified this concept as related to markets.

George Zachar adds:

 Greybeard camera buffs have studied this, using twin-lens reflex (TLR) cameras. One of my prize possessions is the Voigtlander TLR my dad took with him, fleeing Europe in 1949.

Lots of info on this phenomenon in photographyland.

Don Chu writes:

 “The stars are the apexes of what wonderful triangles! What distant and different beings in the various mansions of the universe are contemplating the same one at the same moment!” (H.D. Thoureau)

Thoreau probably did not have in mind stellar parallax in relation towards distance computation, and his imagined use of triangulation is more a heartfelt outreach to find resonance with another, be it of this world or otherwise. Still, there may be something in Thoreau’s words that transcends their initial appearance and speaks more directly to Mr Watson’s musings.

Thoreau continues from the above: “Nature and human life are as various as our several constitutions. Who shall say what prospect life offers to another? Could a greater miracle take place than for us to look through each other’s eyes for an instant? We should live in all the ages of the world in an hour; ay, in all the worlds of the ages. History, Poetry, Mythology! — I know of no reading of another’s experience so startling and informing as this would be.”

Paraphrasing and taking enormous license with the inimitable Thoreau and one contemporary other, perhaps the inspiring lines above may be reduced to the more familiar and definitely modern - “a latticework of mental models.”

Mr Watson rightly postulated “internal, mental” parallaxes predicated upon by any number of possible variables. But one fears that trying to elucidate error terms in any single mental construct may necessitate recourse to never-ending phenomenological reduction and render any resulting “cognition” and perceived derivative error to be indeed, in doubt.

The unkindest and yet most impersonal a priori parallax may come from the observer himself, delivered through the remorselessly agnostic Observer Effect. In the context of the markets, presupposing that the state of a market system exists independently of its observer/participant will surely be unwise and inevitably, loss-making.

But here is a naive yet hopeful thought — perhaps singular errors from any one mental construct matters less from the perspective of the whole. If every man holds in his mind (and inherently all men do, to a greater or lesser degree), a “latticework of mental models”, then in a mind where the structural tensions and forces remain basically stable, it follows that individual mental disjoints/errors have mitigated and largely damped themselves out.

Perhaps a healthy dose of History, Poetry, Mythology! shall prove to be rather profitable…

Henry Gifford comments:

Older meters of the type used to measure electronic circuits have a speedometer type needle that moves across a numerical scale. To eliminate parallax there was a mirror mounted just above or below the numbers scale, which allowed a user who was not viewing the instrument from directly ahead to look at both the needle and its reflection, and use the reading that appeared midway between the two.

It reminds me of looking at currency values relative to other things instead of just each other.

Perhaps some prices of seemingly unrelated markets which have predictive value that could be used to trade in one or both of the seemingly unrelated markets.


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2 Comments so far

  1. iconoclast on December 1, 2008 4:36 pm

    great idea, simple, elegant analogy which seems to strike a chord…

    perhaps in psychological terms an equivalent might relate to the subjective distortions which tend to undermine the correct objective evaluations… apologies if this sounds like gibberish, i am too tired to elucidate further… (in stating the obvious)

    ideas of internal conflict or the dual voices re perception/ understanding…

    such reflections in any case for me serve in practical terms as no more than trading mementos at best.

  2. MDan on December 1, 2008 5:32 pm

    It’s a matter of perceptions.

    If you believe that markets are efficient, your belief will capture all of your mental processes and you will become unable to perceive information that does not fit into your mental framework. In other words, you perceptions become your reality.

    I think this is what the market wizards referred to when saying that one needs to remain flexible. You need to keep thinking outside of your little box, or you might miss some big opportunities.

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